901 F.3d 268 (5th Cir. 2018), 17-10624, United States v. Real Property Located at 1407 North Collins St.
|Docket Nº:||17-10624, 17-10626|
|Citation:||901 F.3d 268|
|Opinion Judge:||HAYNES, Circuit Judge:|
|Party Name:||UNITED STATES of America, Plaintiff-Appellee v. REAL PROPERTY LOCATED AT 1407 NORTH COLLINS STREET, ARLINGTON, TEXAS; Real Property Located at 4418 Maple Avenue, Dallas, Texas; Real Property Located at 701 East 5th Street, Austin, Texas; Real Property Located at 9515 Skillman Street, Dallas, Texas; Real Property Located at 5800 Maple Avenue, ...|
|Attorney:||Joseph Andrew Magliolo, Esq., U.S. Attorneys Office, Northern District of Texas, Dallas, TX, for Plaintiff-Appellee. Steven Leigh Kessler, Esq., Law Offices of Steven L. Kessler, New York, NY, Michael Mowla, Cedar Hill, TX, for Claimants-Appellants.|
|Judge Panel:||Before DAVIS, HAYNES, and DUNCAN, Circuit Judges.|
|Case Date:||August 16, 2018|
|Court:||United States Courts of Appeals, Court of Appeals for the Fifth Circuit|
[Copyrighted Material Omitted]
Appeals from the United States District Court for the Northern District of Texas, Barbara M. G. Lynn, Chief Judge
Joseph Andrew Magliolo, Esq., U.S. Attorneys Office, Northern District of Texas, Dallas, TX, for Plaintiff-Appellee.
Steven Leigh Kessler, Esq., Law Offices of Steven L. Kessler, New York, NY, Michael Mowla, Cedar Hill, TX, for Claimants-Appellants.
Before DAVIS, HAYNES, and DUNCAN, Circuit Judges.
HAYNES, Circuit Judge:
Claimants challenge the pretrial restraint of their property under civil forfeiture laws, arguing the Government failed to show the requisite probable cause. The district court denied Claimants motion to release their property. For the reasons set forth below, we AFFIRM.
The grand jurys indictment in this case charges a scheme to sell a designer drug known as "spice" through Gas Pipe, Inc. and Amy Lynn Inc., which has locations throughout Texas and New Mexico. The indictment accused Gerald Shults and his daughter Amy Lynn Herrig1 of conspiring to market the drug as "herbal incense," "potpourri," or "aroma therapy" and then laundering the proceeds through related businesses.
Although these products were labeled as "synthetic cannabinoid free" and "not for human consumption," the indictment alleged that they in fact contained synthetic cannabinoids that were a controlled substance or controlled substance analogues intended for human consumption.
The Government executed civil seizure warrants against Claimants accounts at UBS Financial Services. UBS froze the accounts, and the Government filed a civil forfeiture suit which, as amended, listed UBS accounts totaling more than $7 million as defendants in rem. The Government subsequently seized the UBS accounts pursuant to an arrest warrant under Federal Rule of Civil Procedure Supplemental Rule G(3)(b)(ii). The Government alleged that the defendant Claimants used the UBS accounts to receive proceeds of the spice scheme and conceal unlawful activity.
The Governments civil forfeiture suit also listed several pieces of real property as defendants in rem. The properties include Gas Pipe store locations and properties allegedly purchased with funds traceable to the charged crimes. The Government has not seized this real property, but it filed notices of lis pendens pursuant to 18 U.S.C. § 985.
Claimants filed a motion asking the district court to lift the pretrial restraints on their UBS accounts and real property, arguing the Government failed to show probable cause that the property is subject to forfeiture. The district court denied the motion, and Claimants filed this interlocutory appeal.
The parties dispute whether we have jurisdiction over this appeal. Claimants invoke 28 U.S.C. § 1292(a)(1), which
allows interlocutory appeal of orders "granting, continuing, modifying, refusing or dissolving injunctions, or refusing to dissolve or modify injunctions." The Government argues § 1292(a)(1) does not apply because no injunction is involved. We conclude that jurisdiction exists under § 1292(a)(1) because, based on the law in this circuit, the district courts order has "the practical effect" of granting or denying an injunction. See Abbott v. Perez, __ U.S. __, 138 S.Ct. 2305, 2319-20, __ L.Ed.2d __ (2018); McLaughlin v. Miss. Power Co., 376 F.3d 344, 352 (5th Cir. 2004) (per curiam) (quoting Sherri A.D. v. Kirby, 975 F.2d 193, 203 (5th Cir. 1992) ). As to the Governments seizure of the UBS accounts, we have previously relied on § 1292(a)(1) to review appeals seeking the release of assets in civil and criminal forfeiture cases. See United States v. Melrose E. Subdivision, 357 F.3d 493, 496-98 & n.2 (5th Cir. 2004) (reviewing pretrial restraining order issued under 18 U.S.C. § 983(j)(1)(A) ); United States v. Floyd, 992 F.2d 498, 499-500 (5th Cir. 1993) (reviewing pretrial restraining order issued under 21 U.S.C. § 853(e)(1)(A), stating that "pretrial asset restraining orders are appealable as injunctions under § 1292(a)(1)").2
The Government argues Floyd is distinguishable because there the order operated like an injunction by requiring the defendant to do something (i.e., to deposit money subject to forfeiture with the court). But our jurisdictional analysis in Floyd did not rely on that fact. See 992 F.2d at 500. Moreover, in Melrose, the order did not require the defendant to do anything; instead, it simply enjoined the defendant from using the frozen property. See 357 F.3d at 496-97. Yet we cited § 1292(a)(1) and Floyd in treating that order as an immediately reviewable injunction. See id. at 498 n.2. Here, the district courts order has the same effect— it enjoins Claimants from using the UBS accounts while refusing to order the Government to unfreeze them. We therefore see no principled reason to treat this order differently.3
As to the lis pendens on Claimants real property, we have invoked § 1292(a)(1) to review an order releasing real property from a lis pendens. See Beefy King Intl, Inc. v. Veigle, 464 F.2d 1102, 1104 (5th Cir. 1972) (per curiam). There, the district court lifted the lis pendens from property in a fiduciary duty suit against corporate officers, and the corporation appealed. See id. at 1103. We considered our jurisdiction and concluded that "the case should be treated in the same manner as a denial, dissolution, or modification of an injunction."
Id. at 1104 (citing, inter alia, 28 U.S.C. § 1292(a)(1) ).
Our opinion in Beefy King did not elaborate on the issue. But in discussing the separate issue of why Florida law allowed courts to discharge a notice of lis pendens in the same way courts dissolve injunctions, we observed that "the effect of a lis pendens on the owner of property ... is constraining." Id. "For all practical purposes, it would be virtually impossible to sell or mortgage the property because the interest of a purchaser or mortgagee would be subject to the eventual outcome of the lawsuit." Id.
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