U.S. v. 1980 Lear Jet, Model 35A, Serial Number 277, No. 92-16989

• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)
• Writing for the Court: Before CHOY, REINHARDT, and LEAVY; LEAVY
• Citation: 38 F.3d 398
• Parties: UNITED STATES of America, Plaintiff-Counterdefendant-Appellee, v. 1980 LEAR JET, MODEL 35A, SERIAL NUMBER 277, Defendant, and Learjet, Inc., a Delaware corporation, Counterclaimant-Appellant.
• Decision Date: 14 October 1994
• Docket Number: No. 92-16989

Page 398

38 F.3d 398 UNITED STATES of America, Plaintiff-Counterdefendant-Appellee,
v.
1980 LEAR JET, MODEL 35A, SERIAL NUMBER 277, Defendant,
and
Learjet, Inc., a Delaware corporation, Counterclaimant-Appellant. No. 92-16989. United States Court of Appeals,
Ninth Circuit. Argued and Submitted March 15, 1994.
Decided May 31, 1994.
As Amended on Denial of Rehearing,
October 14, 1994.

Page 399

Lawrence McDonough, Kimble, Gothreau & Nelson, Tucson, AZ, for counterclaimant-appellant.

Arthur G. Garcia, Asst. U.S. Atty., Phoenix, AZ, for plaintiff-counterdefendant-appellee.

Appeal from the United States District Court for the District of Arizona.

Page 400

Before CHOY, REINHARDT, and LEAVY, Circuit Judges.

LEAVY, Circuit Judge.

The holder of a mechanic's lien against property subject to forfeiture appeals from that portion of the district court's judgment denying costs, fees, and interest on the lien principal, arguing that the district court erred by concluding that an innocent lienholder was not entitled to interest under federal forfeiture law. For the reasons which follow, we reverse and remand.

FACTS AND PRIOR PROCEEDINGS

On April 13, 1989, Aero Servicios Ejecutivos Sinaloenses, S.A. de C.V. ("ASES"), a Mexican corporation and owner of a 1980 Lear Jet airplane ("jet"), entered into a maintenance and repair agreement with the Arizona office of Learjet, Inc. ("Learjet"), a Delaware corporation. Learjet performed the work requested and billed ASES therefor on June 12, 1989. When ASES failed to pay the $55,736.53 repair bill, Learjet placed the jet in its hangar. The federal government seized the jet on or about August 4, 1989, and filed the instant forfeiture action on February 13, 1990.

ASES, Learjet, and Mike Donahoe dba Mike Donahoe Aviation Company ("Donahoe") filed claims with the district court regarding the disposition of the jet. ASES defaulted and the district court later entered summary judgment against Donahoe. Those rulings were not challenged below, and neither ASES nor Donahoe is a party to this appeal. The district court eventually accepted the principal amount of Learjet's claim (i.e., the $55,736.53 repair bill), but rejected that portion of its claim that included costs, fees, and interest. Learjet has timely appealed from that ruling.

ANALYSIS

Standard of Review

This appeal raises the question of whether the district court correctly interpreted federal forfeiture law. A district court's interpretation of federal law is reviewed de novo. Ernst & Young v. Matsumoto (In re United Ins. Mgt., Inc.), 14 F.3d 1380, 1383 (9th Cir.1994).

Discussion

This case turns on the interpretation of two federal statutes, 18 U.S.C. Sec. 981(a)(1)(A) ¹ and 21 U.S.C. Sec. 881(a)(6), ² both of which allow the government to seize and condemn for public use any property used in, or obtained from the proceeds of, criminal acts. ³ Learjet does not challenge the government's right to seize the jet, and the government does not dispute Learjet's right to receive payment for work performed on the jet; instead, the parties disagree about whether vel non Learjet is entitled to recover, in addition to the principal amount of its claim, the value of lost interest on the principal during the three years it took for the government to resolve this matter.

The government argues that, in the absence of any explicit statutory or contractual provision entitling Learjet to sue the government for interest, the doctrine of sovereign

Page 401

immunity precludes Learjet from recovering against the government anything more than the principal amount of its claim. Learjet contends, however, that sovereign immunity is not involved here because Learjet is not actually suing the government; rather, Learjet is merely asserting its statutory right to recover the full amount of its claim, which includes interest thereon at the legal rate as compensation for delay in payment of the claim.

We have not previously faced the exact question raised in the instant appeal. However, in United States v. Real Property Located at 41741 National Trails Way, Daggett, Cal., 989 F.2d 1089 (9th Cir.1993) ("National Trails"), we hinted that the government should not be allowed to use the doctrine of sovereign immunity in a forfeiture proceeding as a means of avoiding its obligation to honor an innocent lienholder's right to recover the full amount of its compensable interest in the forfeited property. See id. at 1092 (rejecting the government's contention that an innocent lienholder could not recover more than the amount allowed by the government under its own administrative practices for remissions, based in part on the legislative history of the 1978 amendment to 21 U.S.C. Sec. 881(a)(6), which was designed to expand the rights of innocent parties). This notion of an "innocent lienholder"...