731 F.3d 189 (2nd Cir. 2013), 12-2210-cv, United States v. Sum of $185,336.07 United States Currency Seized from Citizen's Bank Account L7N01967

Docket Nº:12-2210-cv.
Citation:731 F.3d 189
Opinion Judge:JOS
Party Name:UNITED STATES of America, Plaintiff-Appellee, v. The SUM OF $185,336.07 UNITED STATES CURRENCY SEIZED FROM CITIZEN'S BANK ACCOUNT L7N01967, Defendant, Dominic Pellegrino, Claimant-Appellant.
Attorney:Donald M. Thompson, Easton Thompson Kasperek Shiffrin, LLP, Rochester, NY, for Dominic Pellegrino. Grace M. Carducci, Assistant United States Attorney, for William J. Hochul, Jr., United States Attorney for the Western District of New York, Rochester, NY, for the United States of America.
Judge Panel:Before: CALABRESI, CABRANES, and PARKER, Circuit Judges.
Case Date:September 25, 2013
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit
 
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Page 189

731 F.3d 189 (2nd Cir. 2013)

UNITED STATES of America, Plaintiff-Appellee,

v.

The SUM OF $185,336.07 UNITED STATES CURRENCY SEIZED FROM CITIZEN'S BANK ACCOUNT L7N01967, Defendant,

Dominic Pellegrino, Claimant-Appellant.

No. 12-2210-cv.

United States Court of Appeals, Second Circuit.

September 25, 2013

Argued: June 19, 2013.

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[Copyrighted Material Omitted]

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Donald M. Thompson, Easton Thompson Kasperek Shiffrin, LLP, Rochester, NY, for Dominic Pellegrino.

Grace M. Carducci, Assistant United States Attorney, for William J. Hochul, Jr., United States Attorney for the Western District of New York, Rochester, NY, for the United States of America.

Before: CALABRESI, CABRANES, and PARKER, Circuit Judges.

JOSÉ A. CABRANES, Circuit Judge:

In this appeal, we must decide whether to recognize, nostra sponte, " plain error" 1 in the legal standards applied by the District Court in concluding that certain funds of the appellant seized by the government were the product of illegal activities and therefore subject to forfeiture.

Our review of the record leads us to conclude that, although the several claims of error asserted by the appellant are without merit, the District Court's application of legal standards antedating adoption of the Civil Asset Forfeiture Reform Act of 2000 (" CAFRA" ), Pub.L. No. 106-185, 114 Stat. 202 (codified principally at 18 U.S.C. § 983) constituted plain error and affected appellant's substantial rights. Consequently, we vacate the judgment of the United States District Court for the Western District of New York (David G. Larimer, Judge ) and remand the cause for further proceedings consistent with this opinion.

I. BACKGROUND

On April 27, 2007, Dominic Pellegrino (" Pellegrino" or " appellant" ), now a 66-year-old retired deputy sheriff, was caught selling prescription drugs illegally to a confidential informant. Based on this information, law enforcement obtained a search warrant for Pellegrino's residence, where, upon executing the warrant on May 3, 2007, they found additional prescription pills— some of which contained controlled substances— and empty prescription bottles. Pellegrino was arrested on May 16, 2007 and charged in state court with having violated New York's narcotics laws. On July 11, 2008, he pleaded guilty in state court to one count of criminal possession of a controlled substance in the seventh degree, in violation of N.Y. Penal Law § 220.03. 2 Pellegrino was sentenced on September 11, 2008 to a " conditional discharge." 3

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During the search of Pellegrino's home, law enforcement also found bank statements identifying Pellegrino as the owner of a Citizens Bank brokerage account. The ensuing investigation revealed that between May 25, 2004 and April 5, 2007— the three-year period immediately preceding his arrest— Pellegrino deposited $169,000 and transferred $17,000 into the brokerage account. The documents Pellegrino had completed to open the account, however, stated that his sole source of income during this period was a Social Security disability payment of $12,000 per year. He also had not filed federal tax returns for the six-year period from 2001 through 2006. On the basis of this information, on June 20, 2007, law enforcement seized the brokerage account, which had a balance at that time of $185,336.07.

On June 30, 2008, the federal government (the " government" ) commenced the instant civil forfeiture action in the District Court pursuant to 21 U.S.C. § 881(a)(6) (" § 881(a)(6)" ),4 seeking forfeiture of the assets held in the brokerage account. The government alleged in its complaint and supporting affidavit that the entire sum of $185,336.07 constituted proceeds of illegal drug sales. That same day the District Court issued a warrant of arrest in rem. On October 23, 2009, Pellegrino filed a verified claim requesting that the currency be returned to him because it was the product of lawful activity. On August 1, 2011, following the completion of discovery, the government moved for summary judgment in the civil forfeiture proceeding, which the District Court granted in a decision and order dated May 2, 2012. See United States v. Sum of $185,336.07 U.S. Currency Seized from Citizen's Bank Account L7N-01967, 858 F.Supp.2d 246, 250 (W.D.N.Y.2012) (" Sum of $185,336.07 " ).

This appeal followed.

II. DISCUSSION

" We review an order granting summary judgment de novo, drawing all factual inferences in favor of the non-moving party." Viacom Int'l, Inc. v. YouTube, Inc., 676 F.3d 19, 30 (2d Cir.2012). Summary judgment is required if " there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a); see also Lyons v. Lancer Ins. Co., 681 F.3d 50, 56 (2d Cir.2012).

A.

On appeal, Pellegrino raises three arguments: (1) the District Court " abused its discretion" by failing to " accommodate" his invocation of the Fifth Amendment; (2) the District Court improperly " sanctioned" him for discovery violations by granting summary judgment; and (3) the District

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Court's decision allowing the seizure of the $185,336.07 violated the Eighth Amendment's ban on disproportionate punishment. We do not find these arguments persuasive, but we briefly discuss them before turning to the question of the correct standard for civil forfeiture proceedings. See Part B, post.

1.

Pellegrino's first argument is that the District Court " abused its discretion" by failing to " accommodate" his invocation of the Fifth Amendment right to remain silent. See In re Sims, 534 F.3d 117, 132 (2d Cir.2008) (explaining the term of art " abuse of discretion" as a ruling based on " an erroneous view of the law or on a clearly erroneous assessment of the evidence, or ... a decision that cannot be located within the range of permissible decisions." (internal quotation marks, citation, and alteration omitted)). Pellegrino did not, however, invoke his Fifth Amendment privilege until the eve of his deposition, well over three years after discovery had begun. And in those proceeding years, Pellegrino refused to respond to the government's interrogatories, document requests, and requests for admission, but never by invoking his Fifth Amendment right to silence. It was not abuse of discretion for the district court, suspicious of Pellegrino's gamesmanship, to discredit unauthenticated documents that Pellegrino first produced in opposition to summary judgment.

Moreover, Pellegrino's reliance on United States v. Certain Real Property & Premises Known As: 4003-4005 5th Ave., Brooklyn, NY, 55 F.3d 78 (2d Cir.1995), is misplaced because it requires district courts to " make special efforts to accommodate" a claimant, but only " upon [his] timely motion." Id. at 83 (internal quotation mark omitted). A district court is not required to review discovery materials— which can be voluminous, if not vast— in search of arguable privileges that have not been so much as identified by a litigant. At no point in the proceedings before Judge Larimer did Pellegrino make any motion— much less a " timely motion" based on articulable grounds of Fifth Amendment privilege— for any such " accommodation." Indeed, Pellegrino did not bring to the District Court's attention his invocation of the Fifth Amendment until the filing of his opposition to the government's motion for summary judgment, notwithstanding a conference with the magistrate judge on March 1, 2011 to discuss the status of discovery. Accordingly, in the absence of any authority requiring district courts to grant such an " accommodation" sua sponte, we conclude that Pellegrino's argument is without merit.

2.

Pellegrino next argues that, by granting summary judgment to the government, the District Court improperly " sanctioned" him for failing to comply with discovery requests and for invoking the Fifth Amendment. Yet the Court granted summary judgment, not as a penalty for a violation of the rules governing discovery, see Black's Law Dictionary 1458 (9th ed.2009) (defining a " sanction" as " [a] penalty or coercive measure that results from a failure to comply with a law, rule, or order" ), but in response to the government's motion pursuant to Rule 56 of the Federal Rules of Civil Procedure.5 The Court's holding was based on Pellegrino's supposed failure to demonstrate any genuine

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dispute of material fact and the resulting conclusion that the movant was entitled to judgment as a matter of law. Sum of $185,336.07, 858 F.Supp.2d at 247. This decision was not a " sanction."

3.

Pellegrino's final argument on appeal is that the District Court's decision, which permitted the seizure of the $185,336.07 in illegal drug sale proceeds under 21 U.S.C. § 881(a)(6), violated the Eighth Amendment's ban on disproportionate punishment. We have not spoken directly on the question of whether the Eighth Amendment's prohibition on disproportionate punishment applies to § 881(a)(6); we do so now, and hold that it does not. In Austin v. United States, 509 U.S. 602, 113 S.Ct. 2801, 125 L.Ed.2d 488 (1993), the Supreme Court held that, notwithstanding statutory language that " no property right ... exist[s]" in the property described under 21 U.S.C. § 881(a)(1)-(11), the Excessive Fines Clause of the Eighth Amendment applies to forfeitures of conveyances and real estate under 21 U.S.C. § 881(a)(4) and 21 U.S.C. § 881(a)(7). Id. at 622, 113 S.Ct. 2801. In reaching this conclusion, the Court stated that " Congress understood those provisions as serving to deter and to punish" rather than " serv[ing] solely a remedial purpose." Id.

The current case, however, deals with subsection (a)(6)— which concerns proceeds from illicit drug sales. See note 4, ante. All of our sister courts of appeal that have considered this provision have concluded that the forfeiture of " guilty property," such as illicit drug proceeds, " has...

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