U.S. v. $149,345 U.S. Currency, s. 83-5707

• Decision Date: 20 November 1984
• Docket Number: Nos. 83-5707,83-5881 and 83-6303,s. 83-5707
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. $149,345 UNITED STATES CURRENCY, Defendant, Andres Alonso, Jr., Intervenor-Appellant. UNITED STATES of America, Plaintiff-Appellee, v. $149,345 UNITED STATES CURRENCY, Defendant, Joan Celia Lavine, Intervenor-Counterclaimant-Appellant. UNITED STATES of America, Plaintiff/Appellee, v. $149,345 UNITED STATES CURRENCY, Defendant, Andres Alonso, Jr., Intervenor/Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1278

747 F.2d 1278

40 Fed.R.Serv.2d 835

UNITED STATES of America, Plaintiff-Appellee, v. $149,345 UNITED STATES CURRENCY, Defendant, Andres Alonso, Jr., Intervenor-Appellant.

UNITED STATES of America, Plaintiff-Appellee, v. $149,345 UNITED STATES CURRENCY, Defendant, Joan Celia Lavine, Intervenor-Counterclaimant-Appellant.

UNITED STATES of America, Plaintiff/Appellee, v. $149,345 UNITED STATES CURRENCY, Defendant, Andres Alonso, Jr., Intervenor/Appellant.

Nos. 83-5707, 83-5881 and 83-6303.

United States Court of Appeals Ninth Circuit.

Argued and Submitted April 2, 1984.

Decided Nov. 20, 1984.

Stephen D. Petersen, Los Angeles, Cal., for plaintiff-appellee.

Andres Alonso, Jr., Joan C. Lavine, Los Angeles, Cal., for intervenor-appellant.

Appeal from the United States District Court for the Central District of California.

Before KILKENNY, HUG and BOOCHEVER, Circuit Judges.

BOOCHEVER, Circuit Judge:

Andres Alonso, Jr., and Joan C. Lavine, acting on her own behalf and for the estate of Morris Lavine, appeal dismissal of their claims for funds seized under 21 U.S.C. Sec. 881(a)(6) as alleged drug proceeds. Both Alonso and Lavine are attorneys. They claimed the currency was payment for legal fees but refused to identify their clients on grounds of the attorney-client privilege. The district court struck the claims as a sanction under Fed.R.Civ.P. 37 for failure to respond to discovery as to their clients' identity and dismissed the Lavines' $5,000 counterclaim against the United States as beyond the court's jurisdiction.

Because a prior suit by Alonso was dismissed as a sanction for failure to comply with an order to identify his client, we affirm the dismissal based on res judicata.

FACTS

A. The Instant Cases

Federal narcotics agents on duty at Los Angeles International Airport (LAX) on February 12, 1982, became suspicious of Nelson Valencia, a passenger arriving from Florida. The agents approached Valencia and obtained his consent to search his briefcase. Within the briefcase the agents found two envelopes with inscriptions in Spanish indicating they were for delivery to Attorney Alonso. Valencia permitted the agents to open the envelopes; inside was the subject currency.

Valencia claimed he had been hired by two unknown men in a Miami bar to deliver "some papers" to Los Angeles. The men gave Valencia $800 cash to buy an airline ticket and instructed him to telephone Alonso when he arrived to arrange delivery.

An agent, pretending to be Valencia, telephoned Alonso and asked him to come to LAX, where he was met by the drug agents. Alonso told the agents that the money was a retainer from a client and stated that it could be any amount from $100,000 to $650,000. Alonso refused to identify the client on grounds of attorney-client privilege. The agents seized the currency. They noted that forty-seven bills had numbers written on them, seven had names and two had baggage tag numbers. In the agents' opinions, these markings might be records of drug transactions.

This is the second time that the court has reviewed the seizure of this currency. Alonso earlier sought return of the seized currency in a civil suit. Alonso v. United States, No. CV 82-0898-FW (C.D.Cal. Oct. 29, 1982), aff'd, 718 F.2d 1109 (9th Cir.1983), cert. denied, --- U.S. ----, 104 S.Ct. 3509, 82 L.Ed.2d 819 (1984) (hereinafter Alonso I ). In Alonso I, Alonso refused to divulge his client's identity, arguing that the identity was privileged because disclosure could result in prosecution of the client on the very matter for which he had sought advice. Judge Whelan, the same judge as in the instant action, held an in camera hearing, determined that the client's identity was not privileged, found the identity material to Alonso's claim for the money, and ordered Alonso to submit to discovery. Alonso refused, and the court dismissed his complaint as a sanction.

The government instituted this forfeiture action (hereinafter Alonso II ) on May 21, 1982, while the appeal in Alonso I was Alonso and Lavine again refused to divulge the identity of their client, and Alonso stated that he would continue to so refuse until the Ninth Circuit had ruled on his appeal in Alonso I. The district court declined to hold an in camera hearing on the privilege question. Instead, the court struck Alonso's claim and Lavine's answer as a sanction under Fed.R.Civ.P. 37, without issuing an order compelling disclosure, and entered judgment for the United States. The court also held that the Lavines had failed to file a proper claim under Supp.R.Civ.P. C(6), that the Lavines had no interest in the currency, and that the court lacked jurisdiction to consider the Lavines' counterclaim. Alonso and Lavine took this appeal from the district court's decision, and while this appeal was pending, another panel of this circuit affirmed the district court in Alonso I. The panel reexamined the in camera items, and agreed with the trial court that Alonso had not shown his client's identity was privileged.

                pending.  On August 4, Alonso filed a verified claim for the money.  On September 7, Joan Lavine, alleging an interest in the currency on her own behalf and for the estate of Morris Lavine, filed an unverified answer and a counterclaim for $5,000 damages.  On September 22, the United States Attorney requested Lavine to file a verified claim for the currency "by the end of this month."    Lavine submitted a handwritten verified claim on September 30, alleging that she and Morris Lavine had an agreement with Alonso to provide legal services to Alonso's clients and that in return, the Lavines were to receive one-fourth of the seized currency
                

DISCUSSION

I. Alonso Appeal

A. Dismissal Without an Order to Disclose

The trial judge in Alonso II took judicial notice of Alonso's earlier civil suit, and offered the following rationale for dismissing Alonso's claim and answer in the forfeiture suit:

In order to contest a forfeiture, a claimant must satisfy the threshold requirement that he have an interest in the seized property. The facts demonstrate that Andres Alonso, Jr. has failed to establish any interest in the property and has no standing in this action. Moreover, his refusal to submit to discovery on the question of whether he has an ownership interest reinforces the conclusion he has no interest in the property and affords an independent basis for striking his Answer and Claim as a sanction under Rule 37, Fed.R.Civ.P. It was not necessary for the plaintiff to bring a motion to compel discovery pursuant to that rule in light of Andres Alonso, Jr.'s refusal to answer in Alonso v. United States, et al. and his declared intention in this case.

The court refused to hold an in camera hearing requested by Alonso to justify his assertion of attorney-client privilege, and did not issue an order to compel discovery. See Fed.R.Civ.P. 37(a).

We must affirm the trial judge's decision for any valid reason, even if not relied upon by him. Keniston v. Roberts, 717 F.2d 1295, 1300 and n. 3 (9th Cir.1983). The trial judge was correct in dismissing Alonso's claim without an order to compel, because of the res judicata effects of Alonso I. The sanction dismissal in Alonso I is a judgment on the merits within the meaning of Fed.R.Civ.P. 41(b), and operates as res judicata to bar a second suit. Wyle v. R.J. Reynolds Industries, Inc., 709 F.2d 585, 592 (9th Cir.1983); Bierman v. Tampa Electric Co., 604 F.2d 929, 930-31 (5th Cir.1979); Papilsky v. Berndt, 466 F.2d 251, 254 (2d Cir.), cert. denied, 409 U.S. 1077, 93 S.Ct. 689, 34 L.Ed.2d 665 (1972); see Costello v. United States, 365 U.S. 265, 285-87, 81 S.Ct. 534, 544-46, 5 L.Ed.2d 551 (1961). Because Alonso's claim in Alonso II was essentially the same claim on which he lost in Alonso I, his claim was properly dismissed.

Nevertheless, we believe that the facts of this case compel us to pursue our analysis one step further. Alonso was faced While Alonso's appeal of the sanction dismissal in Alonso I was pending the government brought this forfeiture action in the district court. This placed Alonso in the position of either being dismissed from the forfeiture case, or disclosing his client's identity and thus abandoning his appeal in Alonso I. Under these circumstances, we believe that while the district court's actions were correct, it is only fair that Alonso, if he is now willing to disclose his client's identity, should have an opportunity to move under Fed.R.Civ.P. 60(b) ¹ to vacate the judgment in Alonso I, which could clear the way for him to proceed on the merits here. The District of Columbia Circuit, in like circumstances, has endorsed a similar procedure. Stebbins v. State Farm Mutual Automobile Insurance Co., 413 F.2d 1100, 1102 (D.C.Cir.), cert. denied, 396 U.S. 895, 90 S.Ct. 194, 24 L.Ed.2d 173 (1969).

                with an uncomfortable dilemma when the district court dismissed his claim in Alonso I.    He had the right to appeal to secure a definitive ruling on his privilege claim, which does not appear on its face to be frivolous.   See United States v. Liebman, 742 F.2d 807 (3d Cir.1984) (upholding attorney's refusal to disclose client's name on privilege grounds, when so much of the attorney-client relationship was already known to the government that identity alone might have incriminated client).  By appealing the sanction dismissal, however, he gave up the right to proceed on the merits if he lost.  Alternatively, he could have disclosed his client's identity and proceeded on the merits, thus giving up the privilege claim and possibly exposing his client to criminal liability.  In effect, the Hobson's choice with which he was presented denied him the right to try the case on the merits, unless he foreswore what he saw as his duty to his client.   Cf. Luben Industries, Inc. v. United States, 707 F.2d 1037, 1040 (9th Cir.1983) (refusing to give collateral estoppel effect to nonappealable interlocutory memorandum)
                

In Stebbins, the...