United States v. $200,000 in United States Currency, 83-1296-Civ-SMA.

• Decision Date: 10 July 1984
• Docket Number: No. 83-1296-Civ-SMA.,83-1296-Civ-SMA.
• Citation: 590 F. Supp. 866
• Parties: UNITED STATES of America, Plaintiff, v. TWO HUNDRED THOUSAND DOLLARS ($200,000) IN UNITED STATES CURRENCY, Defendant.
• Court: U.S. District Court — Southern District of Florida

590 F. Supp. 866

UNITED STATES of America, Plaintiff, v. TWO HUNDRED THOUSAND DOLLARS ($200,000) IN UNITED STATES CURRENCY, Defendant.

No. 83-1296-Civ-SMA.

United States District Court, S. D. Florida, Miami Division.

July 10, 1984.

Richard S. Friedland, Alan I. Mishael, Miami, Fla., for plaintiff.

Joseph Beeler, and Holly Skolnick, Miami, Fla., for defendant.

Robert I. Targ, Miami, Fla., for claimants.

ORDER GRANTING CLAIMANT PALZER'S MOTION TO DISMISS, WITHOUT PREJUDICE

ARONOVITZ, District Judge.

THIS CAUSE came before the Court upon the Motion to Dismiss Amended Complaint filed by Claimant LEWIS PALZER ("PALZER") in the above-styled action. The Court held a hearing on this Motion on Wednesday, March 7, 1984, and requested both parties to submit supplemental memoranda, which have been filed and accepted pursuant to extensions of time granted by the Court.

THE COURT having carefully considered and reviewed the Motion and response thereto, all memoranda of law and supplemental memoranda submitted in support of the parties' respective positions, the record including affidavits and exhibits, the oral argument of counsel at the hearing of March 7, 1984, the law, and having been otherwise advised in the premises, it is thereupon

ORDERED AND ADJUDGED that Claimant PALZER's Motion to Dismiss Amended Complaint be, and the same is hereby, GRANTED WITHOUT PREJUDICE to the Government of the United States to file a Second Amended Complaint, within TWENTY (20) DAYS HEREFROM, setting forth a cognizable claim for forfeiture in rem, if grounds for such a claim exist in accordance with the determinations hereinafter set forth, see p. 875 & n. 6 infra, and WITHOUT PREJUDICE to the Government to pursue any criminal prosecution(s) against Claimant PALZER arising from or related to the $200,000 which is the subject of the instant litigation. PALZER OR ANY OTHER CLAIMANT(S) wishing to move this Court to act further with respect to the TWO-HUNDRED THOUSAND DOLLARS ($200,000.00) at issue in this action shall file appropriate papers with the Court NOT LATER THAN TEN (10) DAYS AFTER THE GOVERNMENT files its Second Amended Complaint, if same is filed, or NOT LATER THAN THIRTY (30) DAYS HEREFROM, in the event that the Government does NOT file a Second Amended Complaint. If no Second Amended Complaint is filed within the prescribed time period, then this ORDER shall be treated as a FINAL ORDER and this action shall be DISMISSED thereon.

NATURE OF THIS ACTION

The United States Government seeks through this lawsuit the forfeiture of two hundred thousand dollars ($200,000) that was seized on August 4, 1982 by the United States Customs Department ("CUSTOMS") from Claimant PALZER at Miami International Airport. PALZER had arrived on that date from the Cayman Islands aboard a Republic Airlines flight. The Government claims that PALZER failed to satisfy his alleged obligation to fill out Customs Declaration Form 6059-B and Currency Reporting Form 4790 pursuant to the requirements of Section 232 of the Currency and Foreign Transactions Reporting Act ("Bank Secrecy Act"). See 31 U.S.C. §§ 1053, 1055 & 1101(a)(1)(B) 1981, rev'd and recodified, 31 U.S.C. §§ 321(b)(1), 5316(a) & 5318 1982, Pub.L. 97-258, 96 Stat. 998 Sept. 13, 1982. However, the requirements of the Bank Secrecy Act cannot be applied to Claimant PALZER because Customs Form 4790 was not properly promulgated in that the form is an implementing rule which should have been published in the Federal Register and should have been subject to the notice and comment procedures of the Administrative Procedure Act, 5 U.S.C. §§ 551-559 ("APA"). Form 4790 is thus a nullity with respect to Claimant PALZER, and the form is invalid unless and until it is properly published in the Federal Register pursuant to the APA requirements.

Three basic sets of issues fact the Court on Claimant's Motion: (1) whether Customs Form 4790 is an administrative "rule," (2) whether the form is the type of "rule" that must be published in the Federal Register and/or must be given other procedural safeguards under the APA, and (3) whether the form was in some sense constructively published or otherwise adequately made known to Claimant PALZER. The same issues face the Court with respect to the currency reporting question on Customs Declaration Form 6059-B, which is addressed separately at the end of this Final Order. See pp. 874-875 infra. These issues are analyzed in the context of the Government's sought-after relief, forfeiture, which is a harsh remedy and, as such, merits a strict construction of the forfeiture provisions.¹

CUSTOMS FORM 4790 IS A "RULE" UNDER THE APA

A "rule" or a "regulation" is the product of administrative legislation. A rule is analogous to a statute in that courts are bound by rules in the same way that courts are bound by statutes; this is because a rule is promulgated pursuant to agency authority delegated by Congress. Section 551 of the Administrative Procedure Act ("APA"), 5 U.S.C., defines a "rule" as follows:

"(4) `rule' means the whole or part of an agency statement of general or particular applicability and future effect, designed to implement, interpret, or prescribe law or policy ..."

Claimant PALZER's argument that Customs Form 4790 is an implementing rule, enacted as an enforcement mechanism for the regulations of the Internal Revenue Service ("IRS") and the United States Customs Department ("CUSTOMS"), is supported by the plain language of the statute, 5 U.S.C. § 551(4). See also 36 Fed.Reg. 15449 (1971) ("these proposed forms when finally adopted will implement the reporting requirements found in the Currency and Foreign Transactions Reporting Act, title II of Public Law 91-508 (84 Stat. 1118 et seq.)"). (Emphasis added).

For an agency statement or requirement to be considered a valid "rule," three conditions must be satisfied: the "rule" must be within the agency's granted power, it must be issued pursuant to proper administrative procedures, and it must be reasonable as a matter of due process. K. Davis, ADMINISTRATIVE LAW TREATISE § 7:8 at 36 (1979 & Supp.1982). Under these criteria, the Court must first inquire as to whether Customs Form 4790 was promulgated pursuant to authority delegated to CUSTOMS by Congress; without such authority, the Secretary of the Treasury in promulgating the form could not have been engaging in rulemaking that would invoke the requirements of APA §§ 552 & 553. That CUSTOMS had the proper authority delegated to it is apparent from 31 U.S.C. § 5318 (1982),² recodifying and modifying 31 U.S.C. § 1101(a)(1)(B) 1981, which requires, inter alia, that a person transporting more than $5,000 into the United States from abroad must file a report. Section 206 of the Act then provides:

"The Secretary may make such exemptions from any requirements otherwise imposed under this title as he may deem appropriate. Any such exemption may be conditional or unconditional, by regulation, order, or licensing, or any combination thereof, and may relate to any particular transaction, to the type or amount of the transaction, to the party or parties or the classification of parties, or to any combination thereof ..."

31 U.S.C. § 1055 (1981), rev'd and recodified at 31 U.S.C. § 5318 (1982).

Construing 31 U.S.C. §§ 1051-1062, 1081-1083, 1101-1105 and 1121-1122, the Supreme Court of the United States held that the Bank Secrecy Act is not self-executing; absent action by the Secretary of the Treasury ("the Secretary"), the currency reporting requirements would bear no real significance. California Bankers Ass'n v. Shultz, 416 U.S. 21, 26, 94 S.Ct. 1494, 1500, 39 L.Ed.2d 812 (1974) ("the Act's civil and criminal penalties attach only upon regulations promulgated by the Secretary; if the Secretary were to do nothing, the Act itself would impose no penalties on anyone"). Thus, the statute delegates authority to the Secretary to promulgate regulations to implement the statute; the regulations set forth the duties and requirements authorized by Congress. However, the regulations are incomplete in this case without the forms, because the regulations do not set forth the information a traveler will be required to furnish on the forms, specifically Form 4790.

The published regulations refer to the requirement that travelers entering or leaving the United States carrying more than $5,000 "shall make a report thereof," 31 C.F.R. § 103.23(a) and that such reports "shall be on forms to be prescribed by the Secretary and all information called for in such forms shall be furnished," 31 C.F.R. § 103.25(b), but nowhere does the Federal Register provide information regarding the type or length or format of the forms or the information that will be required by them. In this respect, the regulation fails even to satisfy 5 U.S.C. § 552(a)(1)(C), which the government argues is applicable to Form 4790; that section of the APA states:

"(1) Each agency shall separately state and currently publish in the Federal Register for the guidance of the public —

(C) rules of procedure, descriptions of forms available or the places at which such forms may be obtained, and instructions as to the scope and contents of all papers, reports, or examination."

In the case of Form 4790, no description was published, no notification was given of the place at which the form could be obtained,³ and no instructions or notice were provided as to the scope or contents of the required report. Hence, even if 5 U.S.C. § 552(a)(1)(C) were applicable to Form 4790, the form would be deficient absent publication of the required information. However, Form 4790 is also a rule because, as explained above, a traveler could not possibly know what information he would be required to furnish under the regulations without being advised of the content of the form.

FORM 4790, AS A "RULE" UNDER THE APA, SHOULD HAVE BEEN PUBLISHED IN THE FEDERAL REGISTER

The APA requires that rules be published in the Federal Register...