U.S. v. Twelve Thousand, Three Hundred Ninety Dollars ($12,390.00)

• Decision Date: 10 February 1992
• Docket Number: No. 90-2071,90-2071
• Citation: 956 F.2d 801
• Parties: UNITED STATES of America, Appellee, v. TWELVE THOUSAND, THREE HUNDRED NINETY DOLLARS ($12,390.00), Willie J. Dorsey, Jr., Idell Dorsey, and Laverne Howard, Appellants.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 801

956 F.2d 801

UNITED STATES of America, Appellee, v. TWELVE THOUSAND, THREE HUNDRED NINETY DOLLARS ($12,390.00), Willie J. Dorsey, Jr., Idell Dorsey, and Laverne Howard, Appellants.

No. 90-2071.

United States Court of Appeals,

Eighth Circuit.

Submitted Sept. 9, 1991.

Decided Feb. 10, 1992.

James E. Godfrey, St. Louis, Mo., argued (Gregory G. Fenlon, on the brief), for appellant.

Raymond M. Meyer, St. Louis, Mo., argued (Stephen B. Higgins, on brief), for appellee.

Before ARNOLD, ^* JOHN R. GIBSON, and BEAM, Circuit Judges.

ARNOLD, Circuit Judge.

Claimants appeal from a decision by the District Court ¹ awarding $12,390.00, seized from their home during the execution of a search warrant, to the government. After surmounting an initial jurisdictional hurdle, we affirm.

I.

On October 10, 1986, local law-enforcement officers executed a search warrant at 3625 Aldine in the City of St. Louis. The warrant, based upon information gathered from a confidential informant and police surveillance, targeted drugs, drug paraphernalia, and money. Although no drugs or drug paraphernalia were found, the police seized five guns and $12,390.00 in currency, located at various points in the house. ² No arrests were made.

On October 15, 1986, Donald Walton, an agent with the Drug Enforcement Agency, learned of the search at 3625 Aldine through a separate confidential informant. This informant told Walton that the search produced approximately $12,000.00, at least some of which was the product of drug sales by an individual named Gary Miller. This informant also corroborated the details of the search as conducted by the police. Pursuant to 21 U.S.C. § 881, and after confirming this information with the St. Louis police, Walton "adopted" the seizure of the currency for the DEA on October 24, 1986, by taking possession of the currency and initiating administrative forfeiture proceedings.

After the administrative forfeiture proceedings had begun, the claimants filed a motion in a state court for the return of the property seized during the search. This motion was heard and granted by the state court on November 12, 1986. The government filed the present forfeiture action on April 15, 1987. Three people who lived in the house, Willie J. Dorsey, Jr., Idell Dorsey, and Laverne Howard, claimed that the money found in the house belonged to them. Determining that there was probable cause to find that the money was connected to drug transactions, however, the District Court ordered the money forfeited to the government. The Court took this action after hearing testimony offered by claimants to try to show the money had nothing to do with drugs and belonged to them. The Court did not believe this testimony. This appeal followed.

II.

As a preliminary matter, the government asserts that we lack jurisdiction to hear this appeal because the res which was the subject of the action is no longer within the jurisdiction of the District Court. After receiving the judgment of forfeiture from the District Court, the government immediately placed a portion of the money in its Asset Forfeiture Fund and distributed the remainder to the St. Louis Police Department pursuant to an "Equitable Sharing Agreement." This action, the government claims, divests us of jurisdiction to hear this matter. We disagree.

Traditional forfeiture law makes the res the principal focus of the action. The proceeding is said to be in rem as opposed to in personam. Under this analysis, if parties wish to challenge an adverse ruling through an appeal, they must act within ten days to stay the proceedings, pursuant to Federal Rule of Civil Procedure 62(a), or take other action to preserve the res. If no action is taken by the end of this ten-day automatic stay, parties awarded the property are free to dispose of it as they wish. Once the res has been distributed, in the absence of fraud, mistake, or other improper action, the court loses its jurisdiction over the res. United States v. One Lear Jet Aircraft, Serial No. 35A-280, 836 F.2d 1571, 1573 (11th Cir.) (en banc), cert. denied, 487 U.S. 1204, 108 S.Ct. 2844, 101 L.Ed.2d 881 (1988).

In recent years, courts have begun to abandon the rigid structures of this traditional analysis. Spurred by Judge Vance's dissent in the One Lear Jet case, supra, the First, Second, and Fourth Circuits have all retained jurisdiction in cases like the one before us. See United States v. One Lot of $25,721.00 in Currency, 938 F.2d 1417 (1st Cir.1991); United States v. Aiello, 912 F.2d 4 (2d Cir.1990), cert. denied, --- U.S. ----, 111 S.Ct. 757, 112 L.Ed.2d 777 (1991); United States v. $95,945.18, 913 F.2d 1106 (4th Cir.1990). ³ In finding the notions of the past inapplicable to modern-day forfeiture actions, these courts focus on the unfairness of allowing the government to invoke the jurisdiction of the court and then escape appellate review of a judgment in its favor. Aiello, 912 F.2d at 7; $95,945.18, 913 F.2d at 1109; One Lot of $25,721.00, 938 F.2d at 1419-20; One Lear Jet, 836 F.2d at 1579 (Vance, J., dissenting).

In deciding to retain jurisdiction in these cases, our sister Circuits have used two separate reasons to abandon the historical treatment of these appeals. The first line of reasoning is that by initiating an action in federal court, the government has subjected itself to the court's in personam jurisdiction. Aiello, 912 F.2d at 6; $95,945.18, 913 F.2d at 1109; One Lot of $25,721.00, 938 F.2d at 1419. Under this analysis, despite the government's distribution of the res, the Court retains jurisdiction over the parties throughout the case. The alternative approach focuses on the antiquated notions of admiralty law which the government seeks to apply in denying the appellants their opportunity to appeal. In the context of government-initiated forfeiture actions, "[u]nlike the typical case where the defendant ship stealthily absconds from port and leaves the plaintiff with no res from which to collect, here the defendant res is in the possession of the United States and thus in no danger of disappearing." $95,945.18, 913 F.2d at 1109. Any sense of urgency in maintaining the res is not present in these situations. We find both of these theories to be persuasive, especially when the res is cash, which, unlike ships, is fungible.

The government's citation to Bank of New Orleans & Trust Co. v. Marine Credit Corp., 583 F.2d 1063 (8th Cir.1978), is inapposite under the present facts. In that case, the Bank initiated a forfeiture action in a district court to satisfy several ship mortgages which it held. After following all the necessary procedures, a default judgment was awarded against the res, and the res (four vessels) was sold at auction. Marine Credit, the party claiming an interest in the defaulted items, did not enter the action until after the default judgment was awarded to the Bank, and then failed to file a motion to reclaim the res until after the res had been sold. In the present action, the forfeiture of suspected narcotics proceeds was initiated by the government, and the claimants, from whom the money was seized, challenged this action in court. Thus, unlike Marine Credit, the present claimants were involved in the action from its outset. As a result, the government was aware of the appellants' claim before it distributed the money.

Secondly, the money involved in the present action, unlike the ships in Bank of New Orleans, is easily accessible to the government. A sizable portion of the money, approximately $3,700.00, was placed in the government's Asset Forfeiture Fund. In Aiello, money moved to the Asset Forfeiture Fund was considered still within the jurisdiction of the court. 912 F.2d at 7; see also United States v. $1,322,242.58, 938 F.2d 433, 438-39 (3d Cir.1991); One Lot of $25,721.00, 938 F.2d at 1419-20. Unlike Aiello and Bank of New Orleans, the remainder of the res was not sold to a bona fide purchaser, but was instead distributed to the St. Louis Police Department pursuant to an Equitable Sharing Agreement with local law enforcement. This agency can hardly be considered an innocent purchaser, as it participated in the initial seizure of the money from 3625 Aldine. Thus, should the occasion arise, the DEA could seek the return of the money from the St. Louis Police Department or, in the alternative, produce the money from its Asset Forfeiture Fund.

Furthermore, even if we agreed with the government that Bank of New Orleans applies to the present situation, we would still have jurisdiction over this particular appeal. If the removal of the res from the jurisdiction of the court is improper, traditional in rem jurisdictional analysis does not apply. Bank of New Orleans, 583 F.2d at 1068 n. 6. The government's action in the present case was improper. One day after entry of judgment by the District Court, the United States transferred the money to the Asset Forfeiture Fund. As the government concedes, Brief for Appellee 8 n. 1, this transfer should not have taken place within the ten-day automatic-stay period provided by Fed.R.Civ.P. 62(a). The government says that the claimants could have reversed the transfer within the ten-day period by seeking a stay or filing a supersedeas bond, but we are not persuaded by this argument. In the first place, an impropriety on the part of the government should not be allowed to impose on claimants the burden of action. In the second place, we do not even know that claimants were aware of this accounting transfer. Nothing in the record before us indicates that they were, and the government does not say that they were.

In short, the reasons behind the traditional in rem rules of jurisdiction do not apply to the present case, and even if they did, we would still have jurisdiction by reason of the exception for improper action. We therefore reject the government's argument that we are without jurisdiction, and turn to a discussion of the merits.

III.

Of the...