Interstate Cigar Co. v. U.S.

• Decision Date: 19 March 1991
• Docket Number: No. 90-1848,90-1848
• Citation: 928 F.2d 221
• Parties: INTERSTATE CIGAR CO. and ICC Indiana Warehouse, Incorporated, Plaintiffs-Appellants, v. The UNITED STATES of America, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 221

928 F.2d 221

INTERSTATE CIGAR CO. and ICC Indiana Warehouse, Incorporated, Plaintiffs-Appellants, v. The UNITED STATES of America, Defendant-Appellee.

No. 90-1848.

United States Court of Appeals, Seventh Circuit.

Argued Jan. 18, 1991.

Decided March 19, 1991.

David J. Backer, Backer & Backer, Indianapolis, Ind., Edward M. Joffe, Peter W. Fudali, Sandler, Travis & Rosenberg, Miami, Fla., for plaintiffs-appellants.

Winfield Ong, Office of the U.S. Atty., Indianapolis, Ind., Jeffrey B. Chasnow, Dept. of Justice, Consumer Litigation, Washington, D.C., for defendant-appellee.

Before BAUER, Chief Judge, POSNER and RIPPLE, Circuit Judges.

BAUER, Chief Judge.

The Interstate Cigar Company and its subsidiary, ICC Indiana Warehouse, Inc. (collectively "Interstate"), filed a complaint in the United States District Court for the Southern District of Indiana demanding the return of seized property. This property, 6,058 bottles of the prescription drug Midrin, was taken by agents of the United States Custom Service on July 14, 1989, pursuant to a valid search warrant. Jurisdiction was based on Rule 41(e), Federal Rules of Criminal Procedure, and on the district court's general supervisory powers over federal law enforcement officers. The district court properly exercised such jurisdiction entirely on equitable grounds. ¹ Nevertheless, the district court upheld the Government's possession of the Midrin, finding as a matter of law that Interstate failed to show that no adequate remedy at law existed; i.e., Interstate could recover legal damages due to the seizure. We disagree with the district court's decision. Because we are unable to determine from the record before us whether the Government can defend its continued possession of the property, we reverse the district court and remand the case for a hearing at which the Government shall have an opportunity to provide more persuasive reasons for its action.

On June 1, 1989, Interstate, a wholesaler of health aids and pharmaceutical products, purchased a large quantity of the drug Midrin from a supplier in Louisiana. Interstate made an advance payment to the supplier by wire transfer in the amount of $146,781.25. Approximately four weeks later, 7,355 bottles of Midrin were shipped to Interstate by the supplier. On July 13, 1989, a federal magistrate issued a search warrant authorizing the seizure of the Midrin from Interstate's warehouse in Indianapolis. Probable cause for the seizure was based on an affidavit of a United States Customs agent stating that Interstate's supplier obtained the drugs by fraud. Customs agents executed the warrant the following day. The Government continues to maintain possession of the drugs even though no indictments have been obtained against anyone connected with the Midrin, nor has the Government sought the forfeiture of the drugs. The Midrin has an expiration date of April 1991, at which time the drug may lose most of its value. The Government concedes that Interstate is not a target of any criminal investigation.

The Government offers two arguments to defend its continued possession of the Midrin. First, the Government maintains that Interstate has "an obvious legal remedy" against the supplier of the pharmaceuticals that precludes the granting of equitable relief. The Government points out that Interstate holds a warranty from its supplier stating that the supplier did not acquire the property fraudulently or in violation of law. The supplier further promises that it will indemnify Interstate against any loss or expense resulting from the breach of the warranty. Thus, the Government concludes that this remedy at law, the right of Interstate to sue for damages on the warranty, justifies the district court's entry of summary judgment for the Government. Second, the Government maintains that, because the Midrin constitutes fruits and instrumentalities of the crime of wire fraud, the Government has specific interests in holding the property. The Government offers two examples of these "specific interests": the need to prevent further crimes from being committed with the Midrin, and the desire to protect the interests of the victim from whom it was fraudulently obtained.

We are not persuaded. First, an equitable remedy is appropriate here. In Mr. Lucky Messenger Service, we outlined the factors a court must consider before granting equitable relief to a party seeking the return of its seized property: "These factors are whether the plaintiff has an individual interest in and need for the material whose return it seeks; whether it would be irreparably injured by denial of the return of the property; and whether it has an adequate remedy at law for redress of its grievance." 587 F.2d at 17. There is no dispute concerning the first two factors. The district court held, and the government argues, that Interstate failed to satisfy the third factor. Both have misapplied the principles of equity.

In order to preclude the granting of relief by the equity court, "an available remedy at law must be plain, clear and certain, prompt or speedy, sufficient, full and complete, practical, efficient to the attainment of the ends of justice, and final." 27 Am.Jur.2d Equity Sec. 94 (1966) (citations omitted). It has long been a principle of equity jurisprudence that the mere existence of a possible remedy at law is not sufficient to warrant denial of equitable relief. See American Life Insurance Co. v. Stewart, 300 U.S. 203, 214, 57 S.Ct. 377, 380, 81...