U.S. v. Jarvis

• Decision Date: 28 August 2007
• Docket Number: No. 06-2264.,06-2264.
• Citation: 499 F.3d 1196
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Dana JARVIS, Defendant-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

499 F.3d 1196

UNITED STATES of America, Plaintiff-Appellee, v. Dana JARVIS, Defendant-Appellant.

No. 06-2264.

United States Court of Appeals, Tenth Circuit.

August 28, 2007.

Jody Neal-Post, Albuquerque, NM, for Defendant-Appellant.

Stephen R. Kotz, Assistant United States Attorney (Larry Gomez, Acting United States Attorney, James R.W. Braun, Assistant United States Attorney, with him on the brief), Albuquerque, NM, for Plaintiff-Appellee.

Before BRISCOE, HOLLOWAY, and MURPHY, Circuit Judges.

MURPHY, Circuit Judge.

I. INTRODUCTION

This is an interlocutory appeal from a district court order denying the motion of Defendant-Appellant Dana Jarvis to release funds. At issue is the propriety of two notices of lis pendens filed under New Mexico state law by the United States on substitute property potentially subject to criminal forfeiture under 21 U.S.C. § 853.

This court has jurisdiction pursuant to the collateral order doctrine. United States v. Musson, 802 F.2d 384, 385 (10th Cir. 1986). Applying an exception to the usual rule that issues not presented below are forfeited on appeal, this court concludes the use by the United States of the New Mexico lis pendens statute was improper. The order of the district court denying Jarvis' motion to release funds is, therefore, reversed and this case remanded to the district court with instructions to order the lis pendens notices removed.

II. BACKGROUND

Jarvis, along with twenty other defendants, was charged in initial and superceding multi-count indictments with conspiracy to distribute 1000 kilograms or more of marijuana, in violation of 21 U.S.C. § 846; conspiracy to launder money and knowing conduct of a financial transaction involving proceeds of unlawful activity, in violation of 18 U.S.C. § 1956; and engaging in a continuing criminal enterprise, in violation of 21 U.S.C. § 848 and 18 U.S.C. § 2.

The initial indictment contained a criminal forfeiture allegation stating that, upon conviction for one or more of the substantive offenses, all defendants would be jointly and severally liable for a money judgment of just over $49 million in proceeds allegedly derived from or involved in the indicted offenses. The forfeitures were to be carried out pursuant to 21 U.S.C. § 853 and 18 U.S.C. § 982. The superseding indictment contained the same criminal offense charges as the initial indictment, but named a different combination of defendants and broadened the alleged time frame of the conspiracy and continuing criminal enterprise by twelve years. As a result, the superceding indictment increased the demand for money judgment from $49 million to $158.4 million.

Bank accounts, several parcels of real property, conveyances of personal property, and a liquor license were listed in the initial and superceding indictments as "forfeitable property" connected to the defendants' criminal conduct.¹ The superceding indictment added seized United States currency as forfeitable property. Both the original and superceding indictments listed two pieces of real property titled to Jarvis among the substitute assets to be forfeited pursuant to 21 U.S.C. § 853(p) in the event other property directly connected to the alleged criminal activity was unavailable for forfeiture.² These two parcels are collectively known as the "Mora properties," located in Mora County, New Mexico.

The United States recorded notices of lis pendens on the Mora properties with the Mora County clerk, see N.M. Stat. Ann. § 38-1-14, and filed the notices with the district court. The notices include the language, "The property located in Mora County, New Mexico, was criminally indicted in this case and the United States is seeking the forfeiture of all that lot or parcel of land, together with its buildings, appurtenances, improvements, fixtures, attachments, and easements thereon." The United States did not attempt to use the criminal forfeiture statute to seek a federal protective order on the Mora properties.³

Claiming the United States' lis pendens notices on the Mora properties prevented him from liquidating these properties to pay for retained defense counsel, Jarvis moved the district court to release his property. Jarvis explained to the court that he had no other assets with which to retain counsel. He argued the Mora properties, which were purchased well before the initiation of the criminal activity charged in the indictment, were "substitute assets" within the meaning of § 853(p). Looking to the federal protective order provision of the criminal forfeiture statute, § 853(e), as well as most federal courts of appeals' interpretations of that statute, Jarvis contended there was no legal basis for the restraint of substitute assets without a conviction and forfeiture order. Because the United States' restraint of the Mora properties prevented him from hiring the counsel of his choice and deprived him of his Sixth Amendment right, Jarvis argued, a due process hearing was required before the United States could effectively freeze his assets.

The United States responded to Jarvis' motion by contending that a lis pendens is not a legal restraint, but merely functions as constructive notice to prospective purchasers. Even if a lis pendens were a restraint, however, the United States argued that substitute assets such as the Mora properties may be restrained consistent with the statutory scheme provided for in § 853, especially in light of the guidance in § 853(o) that the criminal forfeiture statute be liberally construed to effect its objectives.

Drawing heavily on the United States' arguments, the district court denied Jarvis' motion, concluding the filing of a lis pendens does not constitute a restraint of property within the meaning of 21 U.S.C. § 853. Based on the reasoning in United States v. Register, 182 F.3d 820, 836-37 (11th Cir. 1999), and Aronson v. City of Akron, 116 F.3d 804, 811-12 (6th Cir. 1997), and borrowing language from United States v. James Daniel Good Real Property, 510 U.S. 43, 54, 114 S.Ct. 492, 126 L.Ed.2d 490 (1993), the court determined that a lis pendens did not interfere with any legal incidents of property ownership such as "the right of sale, the right of occupancy, the right to unrestricted use and enjoyment, and the right to receive rents" and, therefore, did not constitute a property deprivation triggering due process concerns. The court also rejected Jarvis' argument that the nature of the properties as substitute assets, rather than forfeitable assets, should affect the court's analysis.

Jarvis moved the court to reconsider, again attempting to draw a distinction between forfeitable property under § 853(a) and substitute property under § 853(p). He argued that New Mexico law classifies a lis pendens as a restraint and that a restraint cannot apply to substitute property until (1) a court has issued an order of forfeiture and (2) the government is unable to satisfy the order with forfeitable § 853(a) property. He contended the lis pendens notices on the Mora properties were, therefore, a violation of state law. The United States, in response, maintained that because a lis pendens does not affect the owner's legal right to alienate his property, it is not a restraint. It again also argued that pre-trial restraint of substitute assets is permissible under the federal statutory scheme. After holding an evidentiary hearing, which included testimony by a realtor on the effect of a lis pendens notice on a seller's practical ability to alienate his land, the court rejected Jarvis' motion to reconsider, concluding in a single sentence that Jarvis had not presented any new arguments regarding his motion to release funds.

Jarvis timely appealed the district court's denial of his motion under the collateral order doctrine. See Musson, 802 F.2d at 385 (recognizing an exception to the final judgment rule in a federal criminal forfeiture case where "the disputed issues [involving the propriety of a restraining order] are collateral to and separate from the issue of the defendants' guilt or innocence"). On appeal, in addition to reviving the argument that a lis pendens constitutes an unlawful restraint on substitute assets under § 853, Jarvis introduces a theory not presented below regarding the nature of substitute assets in a criminal forfeiture proceeding. Jarvis contends that, under the New Mexico lis pendens statute, a notice of lis pendens is only proper where the underlying litigation involves a dispute affecting title to the same real property upon which the notice has been filed. He argues § 853(p) substitute property can never be the subject of such underlying litigation. Rather, he argues, the United States seeks a money judgment for the more than $158,000,000 allegedly attributable to Jarvis' criminal activities and that, under New Mexico law, a lis pendens cannot be used to secure a money judgment in an action unrelated to the property upon which the lis pendens has been placed. See Hill v. Dep't of the Air Force, 884 F.2d 1321, 1322 (10th Cir. 1989). Jarvis alleges the district court erred when ruling on his motion by concluding the threshold issue was whether a lis pendens constituted a restraint within the meaning of § 853. Instead, Jarvis argues, the court should have considered in the first instance whether the lis pendens notices were lawful as a matter of New Mexico state law.⁴

The United States responds that Jarvis' state law argument was forfeited by his failure to present this theory to the district court.⁵ On the merits, the United States asserts the lis pendens notices were proper because title to the Mora properties could be affected by Jarvis' conviction and, therefore, the criminal action against Jarvis is one affecting title to real property within the meaning of the New Mexico lis pendens statute. As to Jarvis' argument regarding the prohibition on filing of a lis pendens in anticipation of a money judgment, the government contends Hill is...