U.S. v. Spilotro

• Decision Date: 29 June 1982
• Docket Number: No. 81-5760,81-5760
• Citation: 680 F.2d 612
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Anthony SPILOTRO, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 612

680 F.2d 612

UNITED STATES of America, Plaintiff-Appellee, v. Anthony SPILOTRO, Defendant-Appellant.

No. 81-5760.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Jan. 8, 1982.

Decided June 29, 1982.

Oscar B. Goodman, Goodman, Oshins, Brown & Singer, Chtd., Las Vegas, Nev., for defendant-appellant.

Deborah Watson, Dept. of Justice, Washington, D. C., argued, for plaintiff-appellee; Lamond R. Mills, Las Vegas, Nev., on brief.

Appeal from the United States District Court For the District of Nevada.

Before NELSON and REINHARDT, Circuit Judges, and EAST, ^* District Judge.

EAST, Senior District Judge:

I. NATURE OF THE CASE

Anthony Spilotro appeals from an order of the District Court restraining him as officer, director and sole stockholder of Gold Rush, Ltd., from selling, transferring, encumbering or otherwise disposing of any of the property of Gold Rush during the pendency of proceedings under a RICO ¹ indictment. The restraining order, which also applies to Spilotro's two RICO co-defendants and their agents and employees, provides that the defendants may engage in the lawful and ordinary course of retail business upon the posting of a $180,000 performance bond with full surety. We remand the cause for an evidentiary hearing.

II. BACKGROUND

On July 14, 1981, appellant Spilotro was named in a nine-count indictment alleging that he and three co-defendants conducted the affairs of Gold Rush, Ltd., a Nevada corporation doing business as a retail jewelry store in Las Vegas, through a pattern of racketeering activity in violation of 18 U.S.C. § 1962(c), by dealing in stolen jewelry, committing wire fraud, and conspiring to do both.

Spilotro owns all the shares of the capital stock of Gold Rush. Count IX of the indictment charges that the interests of Spilotro and his co-defendants in Gold Rush are subject to forfeiture pursuant to 18 U.S.C. § 1963(a).

On the date of the indictment, the District Court granted the Government's ex parte motion for an order restraining the defendants from disposing of any title to, assets of or interest in Gold Rush during the pendency of the criminal proceedings. The order provided that Gold Rush would be permitted to engage in the lawful and ordinary course of retail business at the Gold Rush store upon depositing an approved performance bond. The court further ordered that a hearing be held on or before August 10, 1981 to review the Government's motion for a restraining order and the establishment of a performance bond. The court appointed two appraisers to take an inventory of all the property of Gold Rush for purposes of establishing the amount of the performance bond, and ordered the defendants to make available for examination any property and documents requested by the appraisers.

The next day the District Court granted an ex parte motion of the Government requesting that the order of the previous day be amended to authorize the F.B.I. to utilize such force as was necessary to conduct the appraisal.

The appraisal was conducted on July 15. The appraisers estimated the retail value of the merchandise and fixtures at $600,000, the wholesale value at $300,000, and the liquidation value at $180,000. On July 24, the Government filed a motion requesting the court to set the amount of the performance bond at $600,000.

The defendant opposed the motion, and both parties were represented at a hearing on the matter held on August 17, 1981. Subsequent to the hearing, at which no evidence was introduced, the court, without entering formal findings of fact or conclusions of law, ordered that the performance bond be set at $180,000, the liquidation value of Gold Rush's assets.

III. DISCUSSION

A. Jurisdiction

Although interlocutory appeals are generally not permitted, there is a small class of cases "which finally determine claims of right separable from, and collateral to, rights asserted in the action, too important to be denied review and too independent of the cause itself to require that appellate consideration be deferred until the whole case is adjudicated." Cohen v. Beneficial Loan Corp., 337 U.S. 541, 546, 69 S.Ct. 1221, 1225-1226, 93 L.Ed. 1528 (1949). See also Abney v. United States, 431 U.S. 651, 97 S.Ct. 2034, 52 L.Ed.2d 651 (1977).

While the restraining order here is not entirely separable from the RICO proceedings, in the sense that those proceedings will finally adjudicate the question of whether the defendants' "interest" in the enterprise is subject to forfeiture, it is separable in the sense that the question of whether the statute and the Constitution permit such an order of such scope at this stage of the proceedings will not be answered by the disposition of the pending criminal trial. Nor will the ultimate outcome of the criminal proceedings determine what kind of evidentiary burden the Government must meet before a pretrial restraining order may be granted. Further, the right to continue to operate a business during the pendency of a trial unfettered by a performance bond which is allegedly prohibitively costly is too important to await the outcome of the criminal proceedings.

In United States v. Crozier, 674 F.2d 1293, 1297 (9th Cir. 1982), this court held that a pretrial restraining order issued under the Continuing Criminal Enterprise statute, 21 U.S.C. § 848, which restrained the transfer of nearly all of the defendants' real and personal property, was an appealable interlocutory order. The court noted that a denial of interlocutory review might cause the defendants' rights to be irreparably lost or impaired because the due process challenge to the order would become moot upon final disposition of the criminal trial. The Crozier decision also noted that permitting an interlocutory appeal from the restraining order would not violate the policy of avoiding excessive delay because the fact that the issues raised on appeal are collateral to the outcome of the criminal trial permits the District Court to retain jurisdiction during the interlocutory appeal and proceed with the criminal trial. Id. at 1297. See also United States v. Leppo, 634 F.2d 101, 105 (3d Cir. 1980). These same considerations apply in this case and compel a finding that this court has jurisdiction to entertain Spilotro's appeal.

Although Gold Rush did not seek to participate in the post-seizure hearing to permit continuation of the restraining order and filed no notice of appeal, it seeks to join Spilotro's appeal as an "aggrieved party," citing United States v. Hubbard, 650 F.2d 293, 314 (D.C.Cir.1980). That case held that Federal District Courts have ancillary jurisdiction in criminal proceedings to hear claims relating to seized property, even when made by strangers to the criminal case. Hubbard went on to suggest, however, that it would be procedurally inappropriate for a stranger to a criminal case to seek relief by way of writ of mandamus in the Court of Appeals without first having sought relief in the District Court, saying: "It is the trial court and not this court that should engage in the initial consideration of the interests at stake ...." Id. at 309. ² We agree, and we decline to exercise jurisdiction over Gold Rush's appeal, although Gold Rush may seek to participate by appropriate motion in the hearing on remand.

B. Jurisdiction to Enter the Restraining Order

Spilotro presses several alternative arguments in support of his contention that the District Court erred in entering a restraining order affecting the assets of Gold Rush. First, he focuses on the language of 18 U.S.C. § 1963(b), which grants the District Court jurisdiction to enter restraining orders and to set performance bonds, "in connection with any property or other interest subject to forfeiture under this section, as it shall deem proper." Spilotro contends that property does not become "subject to forfeiture" until the defendant is convicted.

The legislative history of the Act does not support such a narrow reading. The House Report states that the purpose of § 1963(b) is to provide "for the entering of restraining orders and prohibitions and the requiring of performance bonds to prevent preconviction transfers of property to defeat the purposes of the new chapter." H.R.Rep.No.91-1549, 91st Cong. 2d Sess. 57 reprinted in (1970) U.S.Code Cong. & Admin.News, pp. 4007, 4033. (Emphasis added.) This purpose could obviously not be accomplished if restraining orders could only be entered after a defendant had been convicted.

Further, analysis of the language of paragraphs (b) and (c) of § 1963 indicates that the court is authorized to issue restraining orders prior to conviction. Paragraph (b) of § 1963 authorizes the issuance of a restraining order "in any action," while paragraph (c) authorizes the court to act only "upon conviction" of the defendant. It is clear that Congress intended to limit the District Court's authority under paragraph (c) to a particular phase of the criminal proceeding; i.e., post-conviction. But no such limitation was placed on the District Court's authority under paragraph (b); rather, the court is authorized to issue restraining orders "in any action" under § 1963. Thus, while paragraph (c) refers only to post-conviction procedures, paragraph (b) authorizes the court to issue restraining orders both prior to and after conviction.

We conclude that § 1963(b) grants District Courts jurisdiction to enter restraining orders and to require performance bonds in connection with property which will be subject to forfeiture if the defendant is convicted.

C. Adequacy of the Hearing

Spilotro next suggests that his due process rights were violated both because he was not given notice or a hearing before the initial ex parte issuance of the restraining order and because the Government made an inadequate factual showing at the subsequent hearing to permit the District Court to continue the restraining order. RICO does not itself establish a specific procedure...