U.S. v. Real Property and Premises, Civ. No. 08-6437 (RHK/SRN).

• Decision Date: 23 September 2009
• Docket Number: Civ. No. 08-6437 (RHK/SRN).
• Citation: 657 F.Supp.2d 1060
• Parties: UNITED STATES of America, Plaintiff, v. REAL PROPERTY AND PREMISES Located at 216 Kenmore Avenue, Deerfield, Illinois, and 950 Bristol Drive, Deerfield, Illinois, Defendant.
• Court: U.S. District Court — District of Minnesota

657 F.Supp.2d 1060

UNITED STATES of America, Plaintiff, v. REAL PROPERTY AND PREMISES Located at 216 Kenmore Avenue, Deerfield, Illinois, and 950 Bristol Drive, Deerfield, Illinois, Defendant.

Civ. No. 08-6437 (RHK/SRN).

United States District Court, D. Minnesota.

September 23, 2009.

COPYRIGHT MATERIAL OMITTED

James S. Alexander, Assistant United States Attorney, Minneapolis, MN, for Plaintiff.

Andrew M. Luger, David J. Wallace-Jackson, Greene Espel PLLP, Minneapolis, MN, Shelly B. Kulwin, Kulwin, Masciopinto & Kulwin, LLP, Chicago, IL, for Claimants Russell and Abby Cole.

MEMORANDUM OPINION AND ORDER

RICHARD H. KYLE, District Judge.

This is an in rem forfeiture proceeding against two properties located in Deerfield, Illinois. Claimants in the properties, Russell and Abby Cole ("the Coles"), have filed a Motion to Dismiss the Amended Complaint insofar as it is alleged against one of the properties. The Government opposes the Motion and has separately moved to stay this action pending completion of related criminal proceedings against the Coles, in which forfeiture of the properties also is sought. For the reasons that follow, the Court will deny both Motions.

BACKGROUND

The relevant facts are set forth in the Affidavit of Postal Inspector Barry Bouchie, which is incorporated by reference in the Amended Complaint. (See Am. Compl. ¶ 11.) The Coles are principals in Chip Factory, Inc. ("Chip Factory"), a company that provided computer parts to Best Buy, Inc. ("Best Buy"), a Minnesota-based electronics retailer, from 2003 to 2007. (Bouchie Aff. ¶¶ 4-6.) According to the Affidavit, Robert Bossany, Best Buy's national parts buyer, conspired with the Coles and Chip Factory to defraud Best Buy out of at least $31 million. (Id. ¶ 4.)¹ During the pertinent timeframe, Chip Factory's income was derived "almost entirely" from Best Buy (id. ¶ 9), and the "vast majority" of the Coles's income during that time — nearly $14 million — came from Chip Factory (id. ¶ 10).

In September 2003, the Coles purchased a home at 950 Bristol Drive, Deerfield, Illinois, for $884,000. (Id. ¶ 15.) They later contracted with Bruce Greenberg and his company, Tailor Made Associates ("Tailor Made"), to renovate the property. (Id. ¶ 17.) Greenberg and Tailor Made were paid over $125,000 for the renovations, via checks written from Chip Factory's account at Cole Taylor Bank. (Id.) In July 2004, the Coles contracted with V & J Landscaping Service to lay a concrete driveway at the residence. (Id. ¶ 19.) At least one check issued to pay for that work came from the same Cole Taylor bank account. (Id.) Finally, from 2004 to 2007 the Coles paid nearly $70,000 in property taxes on the property. (Id. ¶ 20.) The checks to pay those property taxes were written from their personal account at LaSalle Bank. (Id.) "Virtually all of the funds deposited into [that account] . . . constitute the proceeds of fraud." (Id.)

On December 15, 2008, the Government charged Bossany by felony information with conspiring to defraud Best Buy and money laundering. Shortly thereafter, the Government commenced the instant action, alleging that the Coles' property located at 216 Kenmore Avenue, Deerfield, Illinois, is subject to forfeiture. The Government later filed an Amended Complaint alleging that both the 216 Kenmore Avenue property and the 950 Bristol Drive property are forfeitable. The Coles timely filed a Notice of Claim in the properties pursuant to Rule G(5) of the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions of the Federal Rules of Civil Procedure (the "Supplemental Rules").

On July 20, 2009, a grand jury returned a 21-count Indictment against the Coles, alleging that they conspired to commit (and did commit) mail fraud, wire fraud, and money laundering. The Indictment also seeks forfeiture of the two properties named as Defendants in this action. The criminal case remains pending in this Court before the Honorable Michael J. Davis.

Invoking Supplemental Rule G(8)(b), the Coles have now filed a Motion to Dismiss the Government's forfeiture Complaint, insofar as it is alleged against the 950 Bristol Drive property (Counts 1 and 3). The Government has filed a Memorandum in Opposition to that Motion and has separately filed a Motion to Stay. Both Motions are ripe for disposition.

ANALYSIS

I. The Motion to Stay

Invoking 18 U.S.C. § 981(g)(1), the Government seeks to stay this action pending completion of the criminal case. Section 981(g)(1) provides that "[u]pon motion of the United States, the court shall stay [a] civil forfeiture proceeding if [it] determines that civil discovery will adversely affect the ability of the government to conduct a related criminal investigation or the prosecution of a related criminal case." Hence, in order to obtain a stay, the Government must show that (1) discovery in this case will adversely affect the pending criminal action against the Coles and (2) the criminal action is "related" to this case.

The Court concludes that the Government has failed on the first prong — it has not shown that discovery in this action will adversely affect the criminal case. The Government claims it "is concerned" the Coles will obtain information through discovery in this case that they could not obtain in the criminal case. (Gov't Stay Mem. at 6 (emphasis added).) The Government also "anticipate[s]" the Coles "would assert the Fifth Amendment privilege against self-incrimination if it were to seek discovery from them." (Id. at 5 n. 1.) This is not enough. "[T]he Government's arguments do nothing more than speculate about how civil discovery will adversely affect its criminal investigation." United States v. All Funds ($357,311.68) Contained in N. Trust Bank of Fla. Account No. 7240001868, No. Civ. A. 3:04-1476, 2004 WL 1834589, at *2 (N.D.Tex. Aug. 10, 2004). The Government cannot discharge its burden by claiming that the discovery process could, theoretically, impair the criminal case. If that were true, a stay would be appropriate whenever requested by the Government in a civil-forfeiture action, since civil discovery is far broader than criminal discovery. Yet, "[t]here is no presumption that civil discovery, in itself, automatically creates an adverse affect on the government's related criminal proceeding." Id.; accord, e.g., United States v. Currency $716,502.44, No. 08-CV-11475, 2008 WL 5158291, at *4 (E.D.Mich. Dec. 5, 2008) ("Neither the fact that the Government would be subject to civil discovery, nor bare assertions of hardship by the Government, are enough to satisfy the statutory standard."). If Congress had intended such a result, it would have said so in the statute.

Nor does case law support the Government's argument. Courts that have granted stays generally fall into one of two categories. Some have done so when the parties served discovery requests before the Government sought the stay, permitting the court to assess the requests' impact on the related criminal proceeding. See, e.g., United States v. $1,730,010.00 in U.S. Currency More or Less, No. EP-06-CA-0406, 2007 WL 1164104, at *3 n. 5 (W.D.Tex. Apr. 16, 2007); United States v. GAF Fin. Servs., Inc., 335 F.Supp.2d 1371, 1373 (S.D.Fla.2004); United States v. All Funds Deposited in Account No. 200008524845, 162 F.Supp.2d 1325, 1331 (D.Wyo.2001).² Others have granted stays where the Government submitted, ex parte, affidavits or other documents demonstrating that civil discovery might threaten to reveal confidential informants or would otherwise impair the criminal investigation. See, e.g., Currency $716,502.44, 2008 WL 5158291, at *5; $1,730,010.00 in U.S. Currency, 2007 WL 1164104, at *2-3; United States v. Approximately $207,870.43 Seized from Certificates of Deposit at First Charter Bank & Shelby Sav. Bank, No. 3:07CV420, 2007 WL 4380064, at *1 (M.D.N.C. Dec. 12, 2007).³ Neither has occurred here — there is nothing in the record indicating that discovery requests have been served by the parties, and the Government has not submitted ex parte an affidavit or other document explaining how or why civil discovery might impair the criminal case. Notably, Section 981 expressly endorses the ex parte submission of materials demonstrating why a stay is appropriate. See 18 U.S.C. § 981(g)(5) ("In requesting a stay . . ., the Government may . . . submit evidence ex parte in order to avoid disclosing any matter that may adversely affect an ongoing criminal investigation or pending criminal trial."). The Government's failure to avail itself of this procedure, in the Court's view, weakens its claim that civil discovery will impair the criminal case against the Coles.

For these reasons, the Court concludes that the Government has not satisfied its burden of showing that a stay is warranted under Section 981(g)(1).

The Government also argues, however, that a stay is appropriate in order to prevent "unnecessary duplication of efforts." (Gov't Stay Mem. at 7.) Yet, the Government has cited no authority for the imposition of a stay on this basis. And even assuming that the Court enjoys the discretion to enter a stay, see Carlisle v. United States, 517 U.S. 416, 438 n. 1, 116 S.Ct. 1460, 134 L.Ed.2d 613 (1996) (district court has inherent power to stay proceedings "to control the progress of the cause so as to maintain the orderly processes of justice") (citation omitted), it would decline to exercise that discretion here. Little additional effort will be required to litigate this case beyond that expended in the criminal action, since forfeiture is sought in both cases. And because, under the Speedy Trial Act, it is likely that the criminal case will be resolved well before this action, any such additional effort will be minimal. Moreover, it is ironic that the Government seeks to avoid duplication of effort when it has chosen to proceed on two fronts, in this case and in the criminal case. The Government has an available tool to remedy this "prob...