State ex rel. Goddard v. Gravano

• Decision Date: 17 February 2005
• Docket Number: No. 1 CA-CV 03-0512, No. 1 CA-CV 03-0822.
• Citation: 108 P.3d 251,210 Ariz. 101
• Parties: STATE of Arizona ex rel. Terry GODDARD, Plaintiff-Appellee, v. Debra GRAVANO, Defendant-Appellant, 1207 E. Secretariat Drive, Tempe, Defendants In Rem. State of Arizona ex rel. Terry Goddard, Plaintiff-Appellee, v. Debra Gravano, Defendant-Appellant,
• Court: Arizona Court of Appeals

108 P.3d 251

210 Ariz. 101

STATE of Arizona ex rel. Terry GODDARD, Plaintiff-Appellee, v. Debra GRAVANO, Defendant-Appellant,

1207 E. Secretariat Drive, Tempe, Defendants In Rem.

State of Arizona ex rel. Terry Goddard, Plaintiff-Appellee, v. Debra Gravano, Defendant-Appellant,

Nos. -0512, -0822.

Court of Appeals of Arizona, Division 1, Department C.

February 17, 2005.

Terry Goddard, Attorney General, Phoenix, by Cameron H. Holmes, Assistant Attorney General, for Plaintiff-Appellee.

Cameron A. Morgan, Scottsdale, for Defendant-Appellant.

OPINION

WEISBERG, J.

¶ 1 Debra Gravano ("Appellant") appeals the grant of partial summary judgment enabling the State of Arizona's civil forfeiture action, as well as an award of attorneys' fees and costs in favor of the State. For the following reasons, we affirm.

FACTS AND PROCEDURAL BACKGROUND

¶ 2 Appellant is the business partner and former wife of Salvatore Gravano (collectively "the Gravanos").¹ Following their divorce, she moved to Arizona and bought a home in Tempe and a restaurant in Scottsdale.

¶ 3 By 2000, Appellant was functioning as the banker for the Gravanos' family ecstacy enterprise, known as the Southwest Ecstacy Enterprise. The enterprise's members included Salvatore; their son, Gerard; their daughter, Karen; and David Seabrook, the father of Karen's baby. The enterprise and Gravanos' lavish lifestyle both halted in February 2000 with the arrests of its members.

¶ 4 In June 2000, the State of Arizona filed an in personam and in rem civil forfeiture lawsuit against the Gravanos pursuant to the Arizona Racketeering Act, Arizona Revised Statutes ("A.R.S.") § 13-2314, and the Arizona Forfeiture Reform Act, A.R.S. §§ 13-4301 to -4315 (1999), seeking approximately $933,750 of drug sale proceeds. The complaint alleged Appellant's participation in the transfer of Gambino Organized Crime Family proceeds to Arizona for the acquisition of three enterprises: Uncle Sal's Inc., doing business as Uncle Sal's Italian Ristorante; Moran Investments, Inc.; and Marathon Development, L.L.C. ("Marathon"). It further alleged that the Gravanos acquired almost $1 million from ecstacy sales in Arizona.

¶ 5 While the State and the Gravanos were negotiating a possible civil settlement in late 2000, prosecutors were at work on a criminal plea agreement. The State's most recent offer in the civil case had just expired when the Gravanos entered guilty pleas in the criminal action. Appellant pled guilty to one count of conducting a criminal enterprise in violation of A.R.S. § 13-2312(B), and received probation. No agreement was reached between Appellant and the State regarding this civil forfeiture action.

¶ 6 Following sentencing, the State moved for summary judgment in the civil forfeiture case. It asserted that Appellant's guilty plea estopped her from denying the facts of her offense, and that the State was entitled to a judgment to be satisfied from the sale of her home and other property. Concentrating on the in personam forfeiture action, Appellant cross-moved for summary judgment on the grounds that the imposition of an in personam forfeiture violated her double jeopardy rights under the United States and Arizona Constitutions, constituted an unconstitutionally excessive fine, violated her plea agreement, and violated the forfeiture of estate provision in Article 2, Section 16 of the Arizona Constitution.

¶ 7 The trial court granted partial summary judgment to the State, rejected Appellant's challenge to the in personam forfeiture action, and entered a Rule 54(b) judgment.² The court also ruled that the State was entitled to attorneys' fees and costs, which Appellant had also opposed. We have consolidated Appellant's appeals from those two rulings.

DISCUSSION

Federal Double Jeopardy

¶ 8 Appellant challenges the grant of summary judgment on the forfeiture claim. We determine de novo whether any genuine issues of material fact exist and whether the trial court erred in its application of the law. L. Harvey Concrete, Inc. v. Agro Constr. & Supply Co., 189 Ariz. 178, 180, 939 P.2d 811, 813 (App.1997). Summary judgment is appropriate "if the facts produced in support of the claim or defense have so little probative value ... that reasonable people could not agree with the conclusion advanced by the proponent of the claim or defense." Orme Sch. v. Reeves, 166 Ariz. 301, 309, 802 P.2d 1000, 1008 (1990).

¶ 9 The Double Jeopardy Clause of the United States Constitution provides that no person "shall ... be subject for the same offence to be twice put in jeopardy of life or limb." U.S. Const. amend. V; see generally Ferreira v. Superior Ct., 189 Ariz. 4, 7, 938 P.2d 53, 56 (App.1996)

(Double Jeopardy Clause is enforceable against states through Fourteenth Amendment's Due Process Clause). However, the United States Supreme Court has long recognized that this clause does not prohibit the imposition of additional sanctions that could, "in common parlance," be described as punishment. United States ex rel. Marcus v. Hess, 317 U.S. 537, 549, 63 S.Ct. 379, 87 L.Ed. 443 (1943) (citation omitted). It protects only against multiple criminal punishments for the same offense in successive proceedings. Hudson v. United States, 522 U.S. 93, 99, 118 S.Ct. 488, 139 L.Ed.2d 450 (1997) (citations omitted).

¶ 10 Appellant contends that the civil judgment constitutes a second criminal punishment for her criminal offense and therefore violates the federal double jeopardy clause. We, however, disagree because this forfeiture is not a criminal punishment for double jeopardy purposes.

¶ 11 In United States v. Halper, the United States Supreme Court held that a civil sanction would constitute punishment for double jeopardy purposes if the sanction imposed were not, on its facts, rationally related to the goals of a civil action. 490 U.S. 435, 109 S.Ct. 1892, 104 L.Ed.2d 487 (1989).³ In 1997, however, in Hudson, the Supreme Court retreated from Halper, and directed a different approach. The Hudson Court first looked at the forfeiture statute at issue, and asked "whether the legislature, `in establishing the penalizing mechanism, indicated either expressly or impliedly a preference for one label or the other;'" that is, either civil or criminal. Hudson, 522 U.S. at 99, 118 S.Ct. 488. Answering that same question here, we determine that the Arizona racketeering statutes, which underpin this forfeiture action, constitute a civil sanction because they are designated as civil, carry a civil burden of proof, and are processed pursuant to the rules of civil procedure.⁴

¶ 12 The next Hudson inquiry is whether the statutory scheme is "so punitive either in purpose or effect," as to "transfor[m] what was clearly intended as a civil remedy into a criminal penalty." Id. This second question includes several factors, but prohibits the conclusion that a sanction constitutes a criminal penalty solely because of its onerous effect. The relevant factors are:

• whether the sanction involves an affirmative disability or restraint;

• whether it has historically been regarded as a punishment;

• whether it comes into play only on a finding of scienter;

• whether its operation will promote the traditional aims of punishment-retribution and deterrence;

• whether the behavior to which it applies is already a crime;

• whether an alternative purpose to which it may rationally be connected is assignable for it; and

• whether it appears excessive in relation to the alternative purpose assigned.

Id. at 99-100, 118 S.Ct. 488 (citations omitted). Furthermore, only the "clearest proof" will suffice to override the legislative intent and turn a civil remedy into a criminal penalty. Id. at 100, 118 S.Ct. 488 (citation omitted). Answering this second question, we conclude that the civil forfeiture has not been transformed into a criminal penalty.

¶ 13 The Second Circuit reached a similar conclusion in SEC v. Palmisano, 135 F.3d 860, 864-65 (2d Cir.1998), cert. denied, 525 U.S. 1023, 119 S.Ct. 555, 142 L.Ed.2d 462 (1998), when it applied the Hudson analysis to a disgorgement sanction. After the defendant pled guilty to a fraudulent Ponzi-type scheme, the court granted the SEC summary judgment and ordered that the defendant disgorge $9.2 million and pay a civil penalty of $500,000, in addition to the previous $3.8 million criminal restitution order. Id. at 863. The court rejected the defendant's double jeopardy challenge as "plainly meritless" in light of Hudson. Id. at 864. It found that, under Hudson's seven factor test, the disgorgement and the civil monetary penalty were not so punitive in purpose or effect as to override the congressional intent to provide for civil penalties. Id. at 864-66.

¶ 14 The Palmisano court noted that disgorgement has not been historically viewed as punishment, but rather, that a disgorgement order has long been recognized as civil. Id. at 865-66. The court reasoned that remedies can have a clear and rational purpose apart from punishment; and disgorgement is designed in part to ensure that defendants do not profit from illegal acts; a nonpunitive goal. Id., 135 F.3d at 866. Likewise, here, the proceeds-based forfeiture serves that same non-punitive goal and does not constitute double jeopardy. See id.; accord State v. Geotis, 187 Ariz. 521, 523, 930 P.2d 1324, 1326 (App.1996)

(holding that Arizona civil forfeiture proceedings are not criminal in nature for purposes of double jeopardy analysis).

¶ 15 In Appellant's view, however, Hudson merely created a narrow exception to Halper, applicable only when "an in personam fine is levied in response to a violation in a regulated industry." But Appellant ignores Hudson's specific disavowal of Halper for all purposes because the Halper test for punitive sanctions had proved "unworkable." Hudson, 522 U.S. at 102, 118 S.Ct. 488. Hudson recognized that all civil penalties have some deterrent effect, and if the test were whether a sanction is solely...