U.S. v. E-Gold, Ltd., 07-3074.

Citation521 F.3d 411
Decision Date11 April 2008
Docket NumberNo. 07-3074.,07-3074.
PartiesUNITED STATES of America, Appellee v. E-GOLD, LTD., et al., Appellants.
CourtUnited States Courts of Appeals. United States Court of Appeals (District of Columbia)

Appeal from the United States District Court for the District of Columbia (No. 07cr00109).

Lawrence S. Robbins argued the cause for appellants. With him on the briefs was Donald J. Russell. Andrew S. Ittleman and Aron U. Raskas entered appearances. Suzanne C. Nyland, Assistant U.S. Attorney, argued the cause for appellee. With her on the brief were Jeffrey A. Taylor, U.S. Attorney, Roy W. McLeese, III, Lisa H. Schertler, William R. Cowden, Assistant U.S. Attorneys, and Kimberly Kiefer Peretti, Senior Counsel, U.S. Department of Justice.

Before: SENTELLE, Chief Judge; KAVANAUGH, Circuit Judge; and WILLIAMS, Senior Circuit Judge.

Opinion for the Court filed by Chief Judge SENTELLE.

SENTELLE, Chief Judge:

Appellants are two corporate defendants and three individual defendants who are officers and/or shareholders in the corporate defendants. The originally sealed indictment against them charges, inter alia, the operation of an "unlicensed money transmitting business" in violation of 18 U.S.C. § 1960. Based on the indictment, the government obtained an ex parte seizure warrant. As a result of the execution of the warrant, the government obtained $1,481,976.38. In addition to the seizure warrant, the district court issued a post-indictment restraining order applicable to the assets and records of transactions of the corporate entity. Defendants moved to vacate the seizure warrant and to modify the restraining order, and sought an evidentiary hearing. In support of their motions, the individual appellants alleged an inability to pay for counsel of their choice in the absence of the seized assets. The district court denied the motions. Appellants brought the present appeal, arguing that the seizure warrant and restraining order without at least a post-seizure evidentiary hearing violated their due process rights and right to counsel under the Fifth and Sixth Amendments to the Constitution. For the reasons stated below, we agree with appellants and vacate the order of the district court and remand the case for further proceedings.

I. BACKGROUND

On April 24, 2007, a grand jury of the United States District Court for the District of Columbia indicted E-Gold, Ltd., operator of an alternative payment system involving online transactions; Gold and Silver Reserve, Inc. ("GSR"), the operator of E-Gold's website and a digital currency exchange service known as "Omni Pay," through which funds could be inter-exchanged with E-Gold; Douglas L. Jackson, Chairman and Chief Executive Officer of E-Gold and GSR and majority owner of GSR; Barry K. Downey, Secretary and Director of E-Gold and GSR and owner of twenty-five percent of GSR; and Reid A. Jackson, Managing Director of E-Gold and GSR and owner of three percent of GSR. The indictment alleged one count of conspiracy to operate an unlicensed money transmitting business in violation of 18 U.S.C. § 371, two counts of operation of an unlicensed money transmitting business, and one count of money transmitting without a license. On April 25, 2007, while the indictment remained sealed, the United States filed an ex parte application and a supporting affidavit with the United States District Court seeking to seize for forfeiture to the United States property held in two E-Gold digital currency accounts, one in the name of E-Gold and the other of GSR. The application alleged that the accounts constituted "property involved in an unlicensed money transmitting business" in violation of 18 U.S.C. § 1960. The district court properly issued the seizure warrant upon a finding that "there is probable cause to believe that the property at issue ... may become worthless property for purposes of its forfeitures ... and that, at this time, conversion of property valued as E-Gold into gold or funds denominated as United States currency ... is reasonable and necessary." The court further ordered GSR to "exchange/convert the E-Gold held in the E-Gold account[s] at issue into gold or into the funds denominated as United States currency ... within twenty-four (24) hours of the execution of this warrant and to provide that gold or currency through the federal law enforcement officers serving the warrant." The post-indictment restraining order also imposed restrictions on further transactions by the defendants. The government obtained $1,481,976.38 from appellants under the seizure warrant.

Appellants move to vacate the civil seizure warrant and modify the restraining order to permit, inter alia, the use of the seized assets for the purpose of retaining counsel in defense of the action. In their motion, appellants sought an evidentiary hearing as to the propriety of the seizure of assets, and specifically as to the existence of probable cause to believe that the defendants had committed an offense warranting the issuance of the seizure warrant and restraining order. In a bench ruling, reflected in a minute order, the district court denied appellants' motion, and in so doing, ruled the defendants were not entitled to a post-seizure evidentiary hearing.

Appellants filed the instant appeal, arguing that the seizure without a post-seizure evidentiary hearing violated their due process rights in violation of the Fifth Amendment. Appellants further argue the seizure violates the Sixth Amendment's right to counsel because they were unable to afford counsel of their choice without the seized assets. During the pendency of this appeal, a magistrate judge ruled that the individual defendants had made a showing of financial inability to retain counsel and were eligible for appointed counsel.

For the reasons more fully set forth below, we conclude that appellants have established that their constitutional rights are being violated by the continued seizure of their assets without a post-seizure evidentiary hearing. We therefore vacate the order of the district court and remand the case to the district court for such a hearing.

II. ANALYSIS
A. Jurisdiction

The government first asserts that this appeal should be dismissed for lack of jurisdiction. As in any appeal, this court, as a court of limited jurisdiction, must first ascertain if we have jurisdiction to entertain the controversy before us. The government argues that we do not have jurisdiction over this case.

While the government's argument is not simplistic, it rests on the simple proposition that our appellate jurisdiction in criminal cases is limited to "final decisions of the district courts." 28 U.S.C. § 1291. In the government's view, review of the court's ruling on the seizure warrant and the restraining order does not fall within our jurisdiction, as the court's ruling did not constitute a final decision. That is, we will not have jurisdiction to review the court's rulings until a trial and final judgment. The government candidly admits that there are exceptions to the rule of finality, but it argues that this case falls within none of those exceptions. Appellants assert that the restraint of their assets pending trial and judgment is reviewable on interlocutory appeal under 28 U.S.C. § 1292(a)(1). We agree.

While we have not previously passed on the jurisdiction of circuit courts to hear interlocutory appeals in cases like the one before us, other circuits have. In United States v. Kirschenbaum, 156 F.3d 784 (7th Cir.1998), the Seventh Circuit considered the same argument the government makes before us. That circuit analyzed 28 U.S.C. § 1292(a)(1), which establishes the jurisdiction of the circuit courts to hear appeals from:

Interlocutory orders of the district courts of the United States ... granting, continuing, modifying, refusing or dissolving injunctions, or refusing to dissolve or modify injunctions, except where a direct review may be had in the Supreme Court.

The Kirschenbaum court concluded that the order before it, paralleling the order under review in this case, constituted such a refusal "to dissolve or modify [an] injunction[]" and was therefore within the jurisdiction of the court to hear interlocutory appeals. Id. at 788. We agree. As the Seventh Circuit noted, there is considerable weight of authority from numerous circuits in support of this proposition. The Seventh Circuit noted the following cases to that effect:

United States v. Floyd, 992 F.2d 498, 500 (5th Cir.1993) (post-indictment pre-trial ex parte protective order under 18 U.S.C. § 982(b)(1) (seizure of property) is "injunction" covered by 28 U.S.C. § 1292(a)(1)); United States v. Ripinsky, 20 F.3d 359, 361 (9th Cir.1994) (same) (citing United States v. Roth, 912 F.2d 1131, 1132 (9th Cir.1990)) (restraining order under 21 U.S.C. § 853(e)(1)); see also United States v. Field, 62 F.3d 246, 248 (8th Cir.1995) (reviewing post-indictment ex parte restraining order under 18 U.S.C. § 982(b)(1) without discussing basis for appellate jurisdiction). And courts have reached the same conclusion regarding restraining orders under 21 U.S.C. § 853(e)(1), which 18 U.S.C. § 982(b)(1) incorporates. Roth, 912 F.2d at 1132 (postindictment ex parte restraining order under 21 U.S.C. § 853(e)(1) appealable under § 1292(a)(1)); United States v. Monsanto, 836 F.2d 74, 77 (2nd Cir.1987) (same), vacated on rehearing en banc on other grounds, 852 F.2d 1400 (2nd Cir.1988) (per curiam), and rev'd on other grounds, 491 U.S. 600, 109 S.Ct. 2657, 105 L.Ed.2d 512 (1989) (reviewing merits without addressing jurisdictional basis); cf. United States v. Estevez, 852 F.2d 239, 240 n. 3 (7th Cir.1988).

Id. Additionally, the Tenth and Third Circuits reached the same conclusion with respect to parallel forfeiture orders under other statutes. See United States v. Musson, 802 F.2d 384, 385 (10th Cir.1986) (reviewing order under RICO, 18 U.S.C. § 1963(e)(1)); In re Assets of Martin, 1 F.3d...

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