State v. Western Union Financial Services, 1 CA-CV 07-0178.

• Decision Date: 01 July 2008
• Docket Number: No. 1 CA-CV 07-0178.,1 CA-CV 07-0178.
• Citation: 199 P.3d 592,219 Ariz. 337
• Parties: STATE of Arizona, Plaintiff/Appellant, v. WESTERN UNION FINANCIAL SERVICES, INC., Defendant/Appellee.
• Court: Arizona Court of Appeals

199 P.3d 592

219 Ariz. 337

STATE of Arizona, Plaintiff/Appellant, v. WESTERN UNION FINANCIAL SERVICES, INC., Defendant/Appellee.

No. 1 CA-CV 07-0178.

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

July 1, 2008.

Review Granted in Part December 4, 2008.

Terry Goddard, Arizona Attorney General, by Cameron H. Holmes, Assistant Attorney General, Phoenix, Attorneys for Appellant.

Steptoe & Johnson, LLP, by Francis J. Burke, Jr., Karl M. Tilleman, Charles G. Cole, admitted pro hac vice, Stacey F. Gottlieb, Phoenix, Sidley Austin, LLP, by Richard J. Grad, admitted pro hac vice, Mark E. Haddad, admitted pro hac vice, Steven A. Ellis, admitted pro hac vice, David R. Carpenter, admitted pro hac vice, Los Angeles, California, Attorneys for Appellee.

TIMMER, Presiding Judge.

¶ 1 The State of Arizona appeals the superior court's January 9, 2007 order granting the motion of Western Union Financial Services, Inc. ("WU") to quash that portion of a seizure warrant (the "Seizure Warrant" or "Warrant") authorizing the State to seize for forfeiture all monies subject to WU person-to-person wire-transfers of $500 or more sent from any of twenty-eight states, which do not include Arizona, to recipients in any of twenty-six WU agent locations in northern Sonora, Mexico, during a designated ten-day period. The State additionally contests the court's entry of a preliminary injunction regarding enforcement of the Warrant and forfeiture of funds seized prior to entry of the order.

¶ 2 The court ruled that it originally lacked jurisdiction to issue the Warrant and, additionally, that probable cause did not support the Warrant and its execution violated several constitutional principles. For the reasons that follow, and under the circumstances presented, we hold that the superior court possessed jurisdiction to issue the Seizure Warrant with respect to the funds sent to and from locations outside Arizona. Because we also reject WU's additional challenges to the Warrant, we vacate the court's order and remand for additional proceedings.

BACKGROUND

¶ 3 This appeal stems from the State's ongoing efforts to stop human-smuggling and narcotics trafficking activities across Arizona's shared border with the state of Sonora, Mexico, by seizing for civil forfeiture wire-transfer funds traceable to those endeavors. Prior to September 2006, the State successfully obtained twenty separate seizure warrants resulting in the civil forfeiture of more than 15,000 WU wire-transfers sent to and from Arizona. On September 21, 2006, the State filed a lengthy affidavit and supporting materials with the superior court to request a warrant to seize for forfeiture certain monies purportedly traceable to racketeering activities.¹ See Ariz.Rev.Stat. ("A.R.S.") § 13-2314(C) (2001) (authorizing court to issue seizure warrant prior to determination of liability for racketeering); A.R.S. § 13-2314(G)(3) (providing that proceeds traceable to racketeering subject to forfeiture); A.R.S. § 13-4310(A) (2001) (authorizing court to issue seizure warrant "prior or subsequent to the filing of a notice of pending forfeiture, complaint, indictment or information"). Specifically, the State sought to seize during a ten-day period WU money transfers that met all of the following criteria: (1) person-to-person transfers, except Quick Collect (bill paying) wires; (2) "presented for payout and/or are in the process of being paid out" at twenty-six listed locations in Sonora, Mexico; (3) in amounts of $500 or more; and (4) sent from any of twenty-nine listed states, including Arizona. Among other matters, the affidavit described the methods used to facilitate human smuggling and narcotics trafficking through Arizona, set forth data supporting the probability that WU money transfers fitting the above-described criteria were traceable to racketeering activities in Arizona, and summarized information gleaned from investigative interviews with those involved in these activities.² The affidavit did not identify any particular persons, property, or transactions that were specifically related to illegal activities in Arizona.

¶ 4 The superior court, through Judge Brian Ishikawa, granted the State's warrant request that same day, finding "that there is probable cause to believe that conduct giving rise to forfeiture has occurred with respect to all of the property described ... and that forfeiture is authorized pursuant to A.R.S. §§ 13-2314 and 13-4301 [(2001)] et seq." The court signed the Seizure Warrant authorizing any Arizona peace officer to seize for forfeiture all money transfers as previously described. See supra ¶ 3. The Warrant was effective for ten days after the date of issuance, and it directed WU, upon a recipient's attempt to retrieve a wire transfer fitting the Warrant's description, to (1) stop payment and transfer the funds to a detention account, (2) notify the intended recipient of the detention and provide that person with information to contact the seizing agency, (3) retain the funds, except those released by the seizing agency, in the detention account for twenty-one days after the warrant expired and (4) convey any remaining detained funds to the clerk of the superior court in Maricopa County upon the expiration of the twenty-one-day period. The Warrant also directed the seizing agency to provide WU, the senders, and intended recipients with "a point of contact on a twenty-four hour, seven days each week on-call basis" to permit the seizing agency to ascertain the appropriateness of the detention and to minimize delay in releasing funds "not involved in the conduct described in the affidavit."

¶ 5 On September 22, WU filed an emergency motion to quash the Seizure Warrant. The motion to quash did not challenge that portion of the Warrant authorizing the seizure of funds sent from Arizona to Sonora, but only contested the State's ability to seize funds sent from another state for intended delivery in Sonora. WU also requested an immediate stay of the Seizure Warrant.

¶ 6 On September 25, the court transferred the case to Judge Kenneth Fields and set a stay hearing for that day. After oral argument, Judge Fields stayed the Seizure Warrant and set an evidentiary hearing on WU's motion to quash for October 16, which was ultimately reset to November 27. The court subsequently ruled that the stay order tolled the sixty-day timeframe the State has to notify the owners or interest holders of the detained funds of pending forfeiture. See A.R.S. § 13-4308(B) (2001). Before the stay became effective, the State seized more than two hundred wire-transfers totaling more than $230,000 and released more than fifty wire-transfers totaling approximately $43,000.³ WU is holding the remaining funds in a Colorado account.

¶ 7 On November 27, the court conducted an evidentiary hearing on WU's motion to quash the Seizure Warrant. At that hearing, the parties presented exhibits, affidavits, and declarations in support of their positions, but offered no live testimony. The court subsequently took the matter under advisement.

¶ 8 On January 11, 2007, the court granted WU's motion to quash the Seizure Warrant. The court found, among other things, that the wire-transfers sent from outside Arizona as described by the Seizure Warrant did not "flow through, touch or have any connection with" Arizona and were "carried out in and constitute[d] interstate and foreign commerce." The court also found that WU "has standing to bring this action" and that WU would suffer irreparable damage to its business relationships with customers and agents and present and future economic harm if the State were not "enjoined from asserting regulatory authority over and seizing money transfer funds from interstate or foreign commerce that were never sent from, passed through, or received in Arizona." The court also ruled that the State had failed to "establish in personam jurisdiction over the Customers in the Money Transfers[,] ... in rem jurisdiction over the Money Transfers [, and] ... jurisdiction over the transactions constituting the Money Transfers." Additionally, the court found that the State lacked probable cause to believe that any of WU's customers had committed crimes in Arizona. The court also ruled that the Seizure Warrant was "a prospective, general warrant." For all these reasons, the court concluded that the Seizure Warrant was "unconstitutional as applied under the Commerce Clause, Foreign Commerce Clause, Due Process Clause and the Fourth Amendment of the United States Constitution." The court therefore quashed the warrant and preliminarily enjoined the State from engaging in similar future attempts to seize wire-transfer funds on threat of contempt of court. This appeal followed.

DISCUSSION

¶ 9 The State argues the superior court erred by quashing the Seizure Warrant and entering the preliminary injunction for a myriad of reasons.⁴ We review the superior court's decision to quash the Warrant de novo as it solely involved issues of law. In re Twenty-Four Thousand Dollars ($24,000) in United States Currency ("$24,000"), 217 Ariz. 199, 202, ¶ 12, 171 P.3d 1240, 1243 (App. 2007). We review the court's entry of the preliminary injunction for an abuse of discretion. Valley Med. Specialists v. Farber, 194 Ariz. 363, 366, ¶ 9, 982 P.2d 1277, 1280 (1999). The court abused its discretion if it made a legal error in formulating its ruling. Mobilisa, Inc. v. Doe, 217 Ariz. 103, 107, ¶ 9, 170 P.3d 712, 716 (App.2007). Finally, we review issues of statutory interpretation de novo. State ex rel. Napolitano v. Gravano, 204 Ariz. 106, 116, ¶ 35, 60 P.3d 246, 256 (App. 2002).

I. Jurisdiction

A. Applicability of A.R.S. § 13-4302

¶ 10 Before addressing constitutional principles governing jurisdiction, we consider WU's contention that A.R.S. § 13-4302 (2001), part of Arizona's civil forfeiture provisions, constrains the court's jurisdiction to issue pre-forfeiture seizure warrants beyond what...