U.S. v. 2,164 Watches, More or Less Bearing

• Decision Date: 28 April 2004
• Docket Number: No. 02-57014.,02-57014.
• Citation: 366 F.3d 767
• Parties: UNITED STATES of America, Plaintiff-Appellant, Able Time, Inc., Claimant-Appellee, v. 2,164 WATCHES, MORE OR LESS, BEARING A REGISTERED TRADEMARK OF GUESS?, INC.; 2,794 Watches, More or Less, Bearing a Registered Trademark of Tommy Hilfiger Licensing, Inc., Defendants.
• Court: U.S. Court of Appeals — Ninth Circuit

366 F.3d 767

UNITED STATES of America, Plaintiff-Appellant, Able Time, Inc., Claimant-Appellee, v. 2,164 WATCHES, MORE OR LESS, BEARING A REGISTERED TRADEMARK OF GUESS?, INC.; 2,794 Watches, More or Less, Bearing a Registered Trademark of Tommy Hilfiger Licensing, Inc., Defendants.

No. 02-57014.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted February 4, 2004.

Filed April 28, 2004.

COPYRIGHT MATERIAL OMITTED

John E. Lee, Assistant United States Attorney, Los Angeles, CA, for the appellant.

Elon A. Pollack, Los Angeles, CA, for the appellee.

Appeal from the United States District Court for the Central District of California; Robert M. Takasugi, District Judge, Presiding. D.C. No. CV-00-11781-RMT.

Before: REINHARDT, THOMPSON, and KIM WARDLAW, Circuit Judges.

THOMPSON, Senior Circuit Judge:

The United States appeals a judgment on the pleadings against it in this civil forfeiture case. The district court determined that it lacked subject matter jurisdiction because service of process had not been made "forthwith" as required by Supplemental Rule E(4)(a) for Certain Admiralty and Maritime Claims, and the government had not shown good cause for the delay.

We conclude that although service of process was not made "forthwith," and therefore was untimely, the district court nonetheless had subject matter jurisdiction. Consistent with its jurisdiction, the district court had discretion to determine the consequences of the government's untimely service. In exercising that discretion, the court should have taken into consideration not only the excuse proffered by the government, but also the prejudice, if any, suffered by the claimant. The prejudice inquiry might also have included consideration of whether prejudice would result by a dismissal "without" prejudice if, for example, the statute of limitations had run on the government's claims.

Procedurally, dismissal without prejudice, rather than judgment on the pleadings, would have been the appropriate action to take if the court, after considering the question of prejudice, determined that the government's untimely service of process should not be excused. See Johnson v. Meltzer, 134 F.3d 1393, 1396 (9th Cir.1998).

We vacate the district court's judgment and remand for further proceedings.

I

On two separate occasions, the Customs Service seized shipments of watches being imported by Able Time, Inc. ("Able Time") from Hong Kong to Los Angeles. The first shipment, seized on February 12, 1999, contained 2,164 watches bearing a question mark within an inverted triangle etched on the glass, similar to a trademark registered by Guess?, Inc. (the "Guess watches"). The second shipment, seized on May 7, 1999, contained 2,794 watches bearing the word "Tommy" on their faces, similar to a trademark registered by Tommy Hilfiger Licensing, Inc. (the "Tommy watches"). Shortly after each seizure, the Customs Service notified Able Time of its right to file an administrative petition for relief. Able Time chose not to seek administrative relief from seizure of the Guess watches, but submitted a petition for relief from seizure of the Tommy watches. The Customs Service denied this petition.

Over a year later, on November 3, 2000, the government filed a civil complaint for forfeiture against all of the watches. Ten days after this filing, the U.S. Attorney's Office sent Able Time a notice of the filing together with a copy of the complaint. Able Time filed its claim to all the watches on November 27, 2000, and thereby timely appeared in the proceeding.

The proceeding is an in rem forfeiture action which is governed by the Supplemental Rules for Certain Admiralty and Maritime Claims ("Supplemental Rules"). Supplemental Rule C(3) requires that the defendant res be "arrested" even though the property may already be in the possession of the government custodian. Accordingly, on the day the government filed its complaint, it caused a warrant to be issued by the district court clerk for the arrest of the seized watches.

Seventy-six days then expired before the warrant was served on the res. The government formally completed service of process shortly thereafter by publication of notice in a newspaper of general circulation. The reason for the delay was that a national budgetary crisis prevented many government agencies, including the Customs Service, from incurring expenditures from the start of the fiscal year (Oct. 1, 2000) until the budget issue was resolved (Jan. 5, 2001). During this budget crisis, the Customs Service lacked spending authority to enter into new purchase agreements with vendors, including newspapers. After the budget crisis was resolved, the warrant was served on the res on January 18, 2001, and notice was published on January 25, February 1, and February 8, 2001. No claimant other than Able Time appeared in the case.

Near the end of 2001, the government moved for summary judgment and Able Time moved for judgment on the pleadings. In its motion, Able Time argued that service of process was not "forthwith" as required by Supplemental Rule E(4)(a), and thus the district court lacked subject matter jurisdiction. The district court agreed, and on September 25, 2002 entered judgment on the pleadings against the government. This appeal followed.

II

We review de novo a judgment on the pleadings. Fajardo v. County of Los Angeles, 179 F.3d 698, 699 (9th Cir.1999). We also review de novo issues of law pertaining to the question of subject matter jurisdiction, but review for clear error factual findings relevant to that determination. La Reunion Francaise SA v. Barnes, 247 F.3d 1022, 1024 (9th Cir.2001). We review de novo a district court's interpretation of the Federal Rules of Civil Procedure. Atchison, Topeka & Santa Fe Ry. Co. v. Hercules Inc., 146 F.3d 1071, 1074 (9th Cir.1998).

III

The first question is whether the Customs Service violated Supplemental Rule E(4)(a) by delaying service of process for 76 days following the filing of the forfeiture complaint and issuance and delivery of the process. Supplemental Rule E(4)(a) provides that "[u]pon issuance and delivery of the process... the marshal or other person or organization having a warrant shall forthwith execute the process ... making due and prompt return" (emphasis added).

We have not determined the contours of forthwith service of process under Supplemental Rule E(4)(a). In the Admiralty context, we have stated that forthwith service of process "connotes action which is immediate, without delay, prompt, and with reasonable dispatch."¹ Amella v United States, 732 F.2d 711, 713 (9th Cir.1984) (63-day delay in service of process "cannot be considered forthwith"); see also Barrie v. United States, 615 F.2d 829 (9th Cir.1980) (64-day delay); Owens v. United States, 541 F.2d 1386 (9th Cir.1976), cert. denied, 430 U.S. 945, 97 S.Ct. 1580, 51 L.Ed.2d 792 (1977) (58-day delay); O'Halloran v. United States, 817 F.Supp. 829, 831 (N.D.Cal.1993), aff'd 45 F.3d 436 (9th Cir.1994) (77-day delay).

Here, it is only necessary for us to determine whether "forthwith" as used in Supplemental Rule E(4)(a) may be interpreted to accommodate a delay of 76 days. We hold it may not. Regardless whether the delay in service was caused by the budgetary difficulty encountered by the Customs Service, that difficulty did not render the service of process "forthwith." Because service of process was not made forthwith, it was untimely under Supplemental Rule E(4)(a).

IV

Although the government's untimely service of process violated Supplemental Rule E(4)(a), judgment against it for lack of subject matter jurisdiction was not the appropriate response. "[T]he manner and timing of serving process are generally nonjurisdictional matters of `procedure' controlled by the Federal Rules." Henderson v. United States, 517 U.S. 654, 656, 116 S.Ct. 1638, 134 L.Ed.2d 880 (1996).

Imperfect service is said to implicate subject matter jurisdiction in in rem actions because the subject matter is the defendant res. "In an in rem admiralty action ... a vessel or other property against which the lien is asserted becomes the res or subject matter of the action.... Jurisdiction over the res is obtained by arrest under process of the court." Alyeska Pipeline Service Co. v. The Vessel Bay Ridge, 703 F.2d 381, 384 (9th Cir.1983).

Jurisdiction in this sense depends on whether the court has power over the defendant res to enforce a judgment against it. Service of process is the mechanism by which the court acquires this power. Therefore, a "failure to serve the warrant on the res leaves the court without jurisdiction over the `defendant' (i.e., the object in dispute)." United States v. Approximately 2,538.85 Shares of Stock Certificates of the Ponce Leones Baseball Club, Inc., 988 F.2d 1281, 1287 n. 8 (1st Cir.1993).

Here, service of process was effected, albeit untimely. Untimely but accomplished service of process does not leave the court powerless to render judgment as to the defendant res which is before it. Neither the Supplemental Rules nor the Federal Rules of Civil Procedure support stripping the court of jurisdiction merely because its attainment of power over the res was not timely. The district court, therefore, had subject matter jurisdiction which was not precluded by the untimely service of process.

V

Untimely service of process, however, has consequences. To determine these consequences, we turn to the Federal Rules of Civil Procedure. As noted above, civil forfeiture actions are governed by the Supplemental Rules. United States v. One 1978 Piper Cherokee Aircraft, 91 F.3d 1204, 1208 n. 4 (9th Cir.1996). Nonetheless the Rules of Civil Procedure (hereafter the "General Rules") are applicable to civil forfeiture actions except to the extent that the General Rules conflict with the Supplemental Rules. Supp. R. Adm. Mar. Cl. A. General Rule 4(m) provides a 120-day time limit for service of process. This time limit...