U.S. v. 37.29 Pounds of Semi-Precious Stones

• Decision Date: 12 October 1993
• Docket Number: SEMI-PRECIOUS,Nos. 92-6337,92-6338,s. 92-6337
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. 37.29 POUNDS OFSTONES; 2.45 Pounds of Semi-Precious Stones (92-6337); and .26 Pounds of Semi-Precious Stones (92-6338), Defendants, Newport U.S.A., Inc., Claimant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 480

7 F.3d 480

UNITED STATES of America, Plaintiff-Appellee, v. 37.29 POUNDS OF SEMI-PRECIOUS STONES; 2.45 Pounds of Semi-Precious Stones (92-6337); and .26 Pounds of Semi-Precious Stones (92-6338), Defendants Newport U.S.A., Inc., Claimant-Appellant.

Nos. 92-6337, 92-6338.

United States Court of Appeals Sixth Circuit.

Argued Sept. 23, 1993.

Decided Oct. 12, 1993.

Robert E. Rawlins, Asst. U.S. Atty. (argued and briefed), Karen K. Caldwell, U.S. Atty., Lexington, KY, for U.S.

David C. Trimble (argued), Don A. Pisacano (briefed), Stites & Harbison, Lexington, KY, for Newport U.S.A., Inc.

Before: MILBURN and NELSON, Circuit Judges; and GILMORE, Senior District Judge. ^*

MILBURN, Circuit Judge.

Claimant Newport U.S.A., Inc. appeals the district court's order striking Newport's claim for lack of standing to contest the forfeiture action brought by the United States against three lots of semi-precious gemstones. On appeal, the issues are (1) whether the Assignment of Claims Act, 31 U.S.C. § 3727, invalidates the assignment under which Newport claims an interest in these proceedings and, therefore, bars Newport's standing to contest the forfeiture of the gemstones; and (2) whether the common law relation back doctrine bars Newport's standing to contest the forfeiture of the gemstones. For the reasons that follow, we reverse and remand.

I.

On October 17, 1989, the United States of America initiated these actions for forfeiture in rem of three quantities of semi-precious gemstones based upon allegations that the semi-precious gemstones were introduced into the United States contrary to law. A separate lot of gemstones was represented by each of three forfeiture actions which were consolidated by the district court into two actions. This court has consolidated those two actions into one for purposes of this appeal. The United States alleges that the gemstones were imported without proper and accurate customs declaration and entry, in violation of 19 U.S.C. § 1485 and 19 C.F.R. § 141.1 et seq., which acts are the basis for forfeiture sought pursuant to 18 U.S.C. § 545. ¹

As alleged in the government's complaint, Mark Lewis was an American citizen residing in Brazil, who in November 1984 met Antonio Calvares, a Brazilian wholesale dealer and exporter of gemstones and shareholder in Embraime Corporation. Lewis began working as Calvares' and Embraime's agent, selling gemstones on a commission basis. Between January and June of 1985, Lewis entered the United States with gemstones supplied by Calvares, which the government alleges were introduced contrary to law with regard to customs declarations and which were substantially undervalued. On September 4, 1985, more than four years before the United States filed these forfeiture actions, United States Customs agents seized .26 pounds of semi-precious gemstones from claimant Elizabeth Rawlins in Lexington, Kentucky. On August 17, 1985, 2.45 pounds of gemstones were seized from a nonclaimant. Other gemstones were seized from Mark Lewis, whose present whereabouts are unknown.

On December 12, 1989, Newport U.S.A. filed verified claims in these civil forfeiture actions. Although Newport existed as a corporate entity at that time, Embraime Corporation did not assign its interest in the seized gemstones by a written document until January 17, 1990. Newport alleges that Embraime orally assigned its rights to the gemstones to Newport before Newport filed the claims. Newport paid $50,000 as consideration for the assignment. The money was paid in cash to Calvares on two separate trips to Brazil, with each Newport-affiliated traveler carrying $10,000. Newport alleges that the reason for the assignment was that Calvares did not want to enter the United States to contest the forfeiture for fear of incarceration. ² Brief of Claimant at 6.

In defense of its claims, Newport denies that the gemstones were imported illegally. The United States contests the validity of the assignment and asserts that Newport is only a front for Calvares, whom the government has investigated for illegal importation activity for a number of years. Because the government has contested Newport's standing, the district court has never determined whether the gemstones were imported illegally. On December 12, 1991, the United States filed motions to compel Newport to show cause why its claims should not be stricken for lack of standing, and on January 1, 1992, the United States restated its motions to compel. On March 3, 1992, Newport filed its response to the United States' motions. On August 7, 1992, the district court sustained the motions to compel, which the district court construed as motions to strike, and ordered that the claims of Newport be stricken from the record for lack of standing. This timely appeal followed.

II.

Whether a claimant has standing to contest a forfeiture is a determination of law, and therefore this court reviews the district court's determination of standing de novo. See Michigan v. United States, 994 F.2d 1197, 1202 (6th Cir.1993). The district court's interpretation of the Assignment of Claims Act also involves determinations of law, and therefore is subject to de novo review by this court. See, e.g., NLRB v. Vemco, Inc., 989 F.2d 1468, 1474 (6th Cir.1993).

A person must have standing to become a claimant in a forfeiture action brought by the United States. A claimant party must prove that it possessed an interest in the seized property sufficient to satisfy standing requirements in order to permit a federal court to jurisdictionally recognize its entitlement to contest forfeiture. United States v. $364,960 in U.S. Currency, 661 F.2d 319, 326 (5th 1981). "A claimant need not prove the merit of his underlying claim, but he must be able to show at least a facially colorable interest in the proceedings sufficient to satisfy the case-or-controversy requirement." United States v. One 18th Century Colombian Monstrance, 797 F.2d 1370, 1375 (5th Cir.1986), cert. denied, 481 U.S. 1014, 107 S.Ct. 1889, 95 L.Ed.2d 496 (1987). Where the party challenging the forfeiture is not the person in possession of the property at the time it was seized, but instead purports to be an assignee of that person, the putative assignee, in order to have standing, must prove that (1) the assignor had a valid ownership interest in the property, and (2) the assignment was valid. U.S. v. $364,960, 661 F.2d at 326.

As to the first requirement, the district court held that "[q]uestions of fact regarding Embraime's [assignor's] ownership of the gemstones preclude summary determination by the Court on this issue." J.A. at 99. The district court assumed that the assignment was otherwise valid ³ but found that Newport could not satisfy the standing requirements for two reasons: (1) because the Assignment of Claims Act, 31 U.S.C. § 3727, made the assignment between Newport and Embraime unenforceable; and (2) because the relation back doctrine barred Newport's claim. However, the district court erred because neither the Assignment of Claims Act nor the relation back doctrine is applicable to the issue of whether Newport has standing to contest the forfeiture.

A.

The Assignment of Claims Act, 31 U.S.C. § 3727, provides in relevant part:

(b) An assignment [of a claim against the United States Government] may be made only after a claim is allowed, the amount of the claim is decided, and a warrant for payment of the claim has been issued....

Because Embraime's claim to the property had not been allowed or decided before the assignment to Newport, the district court found the assignment invalid. Therefore, the district court concluded that the assignment was invalid, and Newport did not satisfy the second standing requirement for assignee claimants.

The district court erred because the Assignment of Claims Act is not applicable to an assignment of a claim in an in rem forfeiture action. The Assignment of Claims Act is applicable only to "assignment[s] of any part of a claim against the United States Government or an interest in the claim." 31 U.S.C. § 3727(a)(1) (emphasis added). The claim assigned to Newport was not a "claim upon the United States, but of an interest in property adverse to the interest held by the United States." See United States v. Currency Totalling $48,318.08, 609 F.2d 210, 213 (5th Cir.1980). Therefore, the assignment to Newport did not have to comply with the requirements of the Assignment of Claims Act to be valid. See id.; United States v. $13,000 in U.S. Currency, 733 F.2d 581, 584 (8th Cir.1984).

In United States v. $13,000 in U.S. Currency, DEA agents seized a shoulder bag full of cash from a suspected cocaine dealer. The suspect later assigned his interest in the contents of the shoulder bag to his attorneys in consideration for legal services. The Eighth Circuit held that the attorneys had standing to contest the forfeiture action brought by the United States because the Assignment of Claims Act did not apply since the attorneys' claim was not against the United States. 733 F.2d at 584.

In United States v. Currency Totalling $48,318.08, the United States seized money and drugs that were transported across the border of the United States from Mexico. The person transporting the items was indicted for importing a controlled substance and transporting currency in excess of $5,000 into the United States without filing the report required by customs laws. This person then assigned his rights to some of the money to his attorney. The government argued that the attorney did not have standing to contest the forfeiture action brought by the United States against the seized money because the assignment did not comply with the Assignment of Claims Act. The Fifth Circuit held that the Assignment of Claims Act was inapplicable because the assignment "was not of a claim upon the United States, but of an interest in property adverse to the interest held by the United States." 609...