U.S. v. Cunan

• Decision Date: 05 May 1998
• Docket Number: 97-1470,Nos. 96-1235,s. 96-1235
• Citation: 156 F.3d 110
• Parties: UNITED STATES of America, Appellant, v. Patrick S. CUNAN, Defendant, Appellee. UNITED STATES of America, Appellant, v. Richard J. DECATO, Jr., et al., Defendants, Appellees. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 110

156 F.3d 110

UNITED STATES of America, Appellant, v. Patrick S. CUNAN, Defendant, Appellee.

UNITED STATES of America, Appellant, v. Richard J. DECATO, Jr., et al., Defendants, Appellees.

Nos. 96-1235, 97-1470.

United States Court of Appeals First Circuit.

Heard May 5, 1998.

Decided Sept. 17, 1998.

David S. Mackey, Assistant United States Attorney, with whom Donald K. Stern, United States Attorney, was on brief for appellant.

Kevin E. Sharkey for appellees.

Before SELYA, Circuit Judge, COFFIN and BOWNES, Senior Circuit Judges.

COFFIN, Senior Circuit Judge.

This case poses an interesting problem of res judicata: does a dismissal with prejudice of a civil forfeiture action bar the subsequent criminal forfeiture of the same properties by the same sovereign? The district court ruled that a civil dismissal has preclusive effect, and it thereby rebuffed the government's attempt to confiscate nine properties otherwise forfeitable because of their connection to drug trafficking and money laundering. See 21 U.S.C. § 853; 18 U.S.C. § 982. On appeal, the government claims that the district court erroneously invoked the doctrine of res judicata. We affirm.

I. Background

The drug trafficking and money laundering activities that underlay this case have no direct significance to the appeal, and we therefore do not review the facts surrounding them in any detail. ¹ It suffices to say that a lengthy and lucrative drug business operated by Richard DeCato earned him substantial cash resources that he used to purchase real estate and other items that he usually put under the name of appellee Patrick Cunan or a Cunan-controlled company. Cunan also was involved as owner of a business in New Hampshire through which DeCato allegedly laundered drug revenues.

In late 1990 and early 1991, the United States filed three civil actions seeking forfeiture of Cunan's business, State Scale Co., and eight parcels of real estate located in Maine. ² The government's complaints alleged that the Maine real estate had been purchased with proceeds from DeCato's illegal drug trafficking and that State Scale had been used to facilitate drug trafficking and money laundering, rendering the properties forfeitable under 21 U.S.C. § 881 and 18 U.S.C. § 981, respectively. Cunan, the named owner of the properties, filed claims for all of them. ³

The civil actions were pending when, in February 1993, DeCato, Cunan, and Cunan's wife, Patricia, were indicted by a federal grand jury sitting in Boston on charges of violating federal drug laws, conspiracy and money laundering. Count 5 of the indictment, against Patrick Cunan only, sought to forfeit his interest in State Scale pursuant to 18 U.S.C. § 982, which provides for criminal forfeiture when property has been linked to money laundering. Count 37 of the indictment, against DeCato only, sought forfeiture of his interest in properties constituting proceeds, or involved in the facilitation, of illegal drug trafficking. The eight Maine properties at issue in the Maine civil proceedings were included.

Six days after the return of the criminal indictment, the United States filed motions to dismiss the two Maine civil actions. The government explained its action as follows:

The principal reason that Plaintiff seeks the dismissal is judicial economy; that is, the property which is the subject of this action is the same as that of the criminal action now pending in Massachusetts. Regardless of the outcome of this civil action, the criminal indictment in Massachusetts will go forward to trial on the merits. Continued litigation in this action is therefore a waste of the Court's time.

The United States and Cunan, the only claimant in the two Maine proceedings, agreed to a dismissal with prejudice in the northern Maine case. See Fed.R.Civ.P. 41(a)(1).

In the southern Maine proceeding, Cunan sought an opportunity to move for costs and fees before the action was dismissed. The court denied his request and dismissed the action without prejudice, finding the dismissal "to be in the best interests of justice and in accordance with consideration of judicial economy." See Fed.R.Civ.P. 41(a)(2). Cunan thereafter renewed his motion for an opportunity to request costs and fees and also asked that the dismissal be changed to "with prejudice." The government opposed the request for leave to move for costs and fees, but took no position on whether the dismissal should be granted with or without prejudice. ⁴ In April 1993, the court amended its previous order to make the dismissal "with prejudice," but declined to disturb its earlier ruling against costs and fees.

In November 1993, the Cunans moved in the Massachusetts criminal case to dismiss the eight Maine properties from Count 37, arguing that the voluntary dismissals with prejudice in the civil proceedings barred the United States, on the ground of res judicata, from attempting to forfeit those same assets in the criminal case. The Massachusetts district court granted their request, but this court later vacated its order as premature. See United States v. Real Property in Waterboro, 64 F.3d 752, 756 (1st Cir.1995). We held that the Cunans were obliged to wait until an order of forfeiture was entered before advancing their claim preclusion argument.

Meanwhile, the New Hampshire civil forfeiture case involving Cunan's business had taken a somewhat different course. In May 1992, the New Hampshire district court stayed the case "pending the resolution of criminal proceedings, if any, against claimant." In December 1994, the district court issued an order stating that it would not continue the stay beyond April 1995. The United States responded by filing a motion to dismiss the case without prejudice. By that time, the Massachusetts court in the criminal case had ruled that res judicata principles barred the criminal forfeiture of the Maine properties, and so the United States advised the New Hampshire court that "a dismissal of this case with prejudice will be held by the [Massachusetts] court to be res judicata ..., preventing forfeiture of State Scale, Inc. in that case." The New Hampshire court denied the motion without explanation and set the civil case for trial.

This created two problems for the government. First, the criminal trial was scheduled to begin at virtually the same time, and prosecutors thus faced two trials involving the same actors and actions in different jurisdictions. Second, Cunan filed notices in the New Hampshire civil case seeking to depose government witnesses in the Massachusetts criminal case, potentially exposing key criminal witnesses to questioning outside the criminal process. To eliminate these conflicts, the government moved to dismiss the New Hampshire case with prejudice, asserting that

[i]nasmuch as the property which the United States has sought to forfeit in the instant civil case is also sought to be forfeited in the criminal prosecution, Plaintiff has determined that continuation of the instant civil case would expend unnecessary resources of the prosecution and of this Court.

The district court granted the motion on September 5, 1995, stating: "I take no position as to the reasons for the dismissal with prejudice or the merits of any claim for attorneys' fees that may be made at some future time."

All three civil cases having been dismissed with prejudice, the scene shifted fully to the criminal proceedings in Massachusetts. DeCato pleaded guilty to various counts in the indictment, and admitted that the Maine properties listed in Count 37 were purchased with proceeds linked to his unlawful conduct and thus were forfeitable. The district court entered a forfeiture order against the eight parcels, and Cunan filed a now timely petition asserting a superior interest based on the Maine dismissals.

Similarly, following dismissal of the New Hampshire civil case, Cunan filed a motion to dismiss the entire criminal indictment in Massachusetts on the grounds of double jeopardy and res judicata /collateral estoppel. The motion was denied, the trial went forward, and the Cunans were found guilty on all counts. The jury also returned a special verdict on Count 5 forfeiting Cunan's interest in State Scale. Cunan then renewed his motion to dismiss Count 5, and this time the district court granted it, ruling in January 1996 that the final judgment in the New Hampshire case barred the criminal forfeiture. In February 1997, the district court again accepted Cunan's res judicata argument regarding the eight Maine properties and granted his petition claiming priority to the parcels.

When the dust settled, then, the government was left with successful prosecutions--DeCato having pleaded guilty and the Cunans having been convicted by a jury--and confirmation that the properties at issue in this case were forfeitable--through DeCato's admissions regarding the Maine parcels and the jury's finding on State Scale ⁵--but a ruling from the Massachusetts District Court that negated the criminal forfeitures. On appeal, the government urges us to find that the district court erred in giving preclusive effect to the civil forfeiture proceedings.

II. Discussion

We begin with a few basic principles. First, the federal doctrine of res judicata, or claim preclusion, bars a subsequent action whenever three criteria are met: (1) there is a final judgment on the merits in an earlier action; (2) "sufficient identity" exists between the parties in the earlier and later suits, and (3) "sufficient identity" exists between the causes of action in the two suits. See Porn v. National Grange Mut. Ins. Co., 93 F.3d 31, 34 (1st Cir.1996); Kale v. Combined Ins. Co. of America, 924 F.2d 1161, 1165 (1st Cir.1991).

Second, a voluntary dismissal with prejudice is ordinarily deemed a final judgment that satisfies the res judicata criterion. See Lawlor v. Nation Screen Serv. Corp., 349 U.S. 322, 327, 75 S.Ct. 865, 99 L.Ed. 1122 (1955) (judgment dismissing ...