United States v. Couch, CRIMINAL NO. 15-0088-CG-B
| Decision Date | 15 September 2017 |
| Docket Number | CRIMINAL NO. 15-0088-CG-B |
| Parties | UNITED STATES OF AMERICA v. JOHN PATRICK COUCH, M.D., XIULU RUAN, M.D. |
| Court | U.S. District Court — Southern District of Alabama |
This action is before the Court on the motion of the United States to dismiss the petition of Ling Cui (Doc. 600), Ling Cui's amended petition (Doc. 643), Ling Cui's opposition to the motion to dismiss (Doc. 646), and the United States' reply (Doc. 676). For reasons that will be explained below, the Court finds the motion to dismiss should be granted.
The Government pursued criminal charges against John Patrick Couch and Xiulu Ruan under a Second Superseding indictment that was issued in April 2016. (Doc. 269). The Second Superseding indictment charged Couch and Ruan with RICO violations, conspiracy to commit healthcare fraud, drug charges, money laundering, and wire and mail fraud. The crimes charges were alleged to have begun in or about 2011 and continued through May 20, 2015. The earliest date specified in the Second Superseding Indictment charges a conspiracy that began on or about January 1, 2011. (Doc. 269, p. 38). On February 23, 2017, a jury convicted Defendants Couch and Ruan on 20 of 21 counts contained in the Second Superseding Indictment. (Docs. 494, 495). Ruan was found guilty on twelve of those counts and found not guilty only as to Count Ten. (Doc. 495). On March 2, 2017, preliminary orders of forfeiture were entered. (Docs. 504, 505). The United States advertised its intention to proceed with the forfeiture of certain property identified in the Second Superseding Indictment. (Doc. 548). In the advertisement, persons claiming an interest were notified that they "must file a petition within 60 days of the first date of publication (March 7, 2017)" and they were advised that:
The petition must be signed by the petitioner under penalty of perjury and shall set forth the nature and extent of the petitioner's right, title or interest in the forfeited property, the time and circumstances of the petitioner's acquisition of the right, title and interest in the forfeited property and any additional facts supporting the petitioners claim and the relief sought, pursuant to 21, U.S.C. § 853(n).
On April 20, 2017, Defendant Ruan's wife, Ling Cui, timely filed a third-party petition. (Doc. 577). The petition was signed by Ling Cui and her attorney, Michael S. McNair. (Doc. 577, pp. 17-18). However, the petition was not signed "under penalty of perjury." On May 11, 2017, the United States filed a response in opposition to Ling Cui's petition and moved to dismiss her petition. (Doc. 600). On May 25, 2017, Ling Cui filed opposition to the motion to dismiss as well as an amended petition that asserts under penalty of perjury that the petition and all assertions made therein are true and correct. (Docs. 643, 646). On that same day, Cui moved for an expansion of the time to file opposition to the motion to dismiss and to file the amended petition until May 25, 2017. (Doc. 648). The Court grantedCui's motion and deemed Cui's opposition to the motion to dismiss and Cui's amended petition to be timely filed. (Doc. 659).
Third parties claiming an interest in forfeited property must file a petition to be determined in an ancillary proceeding. 21 U.S.C. 853(n). Pursuant to § 853(n), the petition must "be signed by the petitioner under penalty of perjury" and must "set forth the nature and extent of the petitioner's right, title, or interest in the property, the time and circumstances of the petitioner's acquisition of the right, title, or interest in the property, any additional facts supporting the petitioner's claim, and the relief sought." 21 U.S.C.A. § 853(a)(3). Cui's amended petition claims that as Xiulu Ruan's spouse, she has a 50% interest in property forfeited by Ruan.1
Ruan had filed for divorce on November 11, 2011, but the divorce was not finalized as of the time Cui filed her amended § 853(n) petition. (Doc. 644). On April 28, 2017, the Circuit Court of Mobile, Alabama entered an order in the divorce case stating the following:
(Doc 645). Cui claims the state court's order gives her standing to claim a 50% interest in Ruan's forfeited property. Cui acknowledges that the order only refers to property that was in existence as marital property on November 11, 2011. (Doc. 643 ¶ 10). Cui also claims she is entitled to a 50% interest in Ruan's forfeited property on the basis that Ruan held all property in a constructive trust of which she had a 50% interest by virtue of her contribution to the marriage. Cui asserts that she provided family support and physical work in anticipation of and in the belief of her ownership interest in all assets in her spouse's name that were amassed during their marriage and prior to the criminal activity charged in this case. Cui contends there is an oral contract between her and her husband that gives her a 50% interest in the marital assets.
A petition may be dismissed prior to a hearing, upon a party's motion, "for lack of standing, for failure to state a claim, or for any other lawful reason." United States v. Stone, 304 F. App'x. 334, 336 (5th Cir. 2008) (quoting FED. R. CRIM. P. 32.2(c)(1)(A)). A hearing is not required prior to ruling on a motion to dismiss where the third party fails to allege any legal right, title, or interest in the forfeited property. United States v. Salti, 579 F.3d 656, 664 n.6 (6th Cir. 2009); see also United States v. BCCI Holding (Luxembourg), S.A., 916 F.Supp. 1276, 1282 (D.D.C. 1996) () (citing United States v. Campos., 859 F.2d 1233, 1240(6th Cir. 1988)).
The United States contends that Cui's petition should be dismissed for several reasons. First, the Government assert that Cui lacks standing to claim any of the funds seized from bank accounts associated with the following corporate entities: (1) C&R Pharmacy, LLC, (2) C&R, LLC, (3) PPSA, P.C., (4) XLR Exotic Autos, LLC, (5) Ruan Companies, LLC, (6) XLR Properties, LLC, and (7) Physician's Weight Loss and Wellness, LLC. Defendants Couch and Ruan were the managing members of the first three entities and Ruan was the managing member of the latter four. "Established case law has made clear that shareholders of a corporation and members of an LLC do not have standing to challenge the forfeiture of the entity's assets." United States v. Young, 77 F. Supp. 3d 1191, 1192 (D. Utah 2014) (citing United States v. All Funds in the Account of Prop. Futures, Inc., 820 F.Supp.2d 1305, 1333 (S.D. Fla. 2011)). The United States did not forfeit Ruan's membership interest in these corporate entities. Individual members of a limited liability company have no individual vested rights in and to property owned by a limited liability company.2 Carey v. Howard, 950 So.2d 1131 (Ala. 2006); see also ALA. CODE § 10A-5A-4.02. ("A member has no interest in any specific property of a limited liability company or a series thereof."). Thus, Cui's allegation that she has an interest in property of any limited liability company based on Ruan's membership interest "is simply one level too far removed from the forfeited propertyto have an assertable legal interest." United States v. Petters, 857 F. Supp. 2d 841, 845 (D. Minn. 2012). To have standing, Cui must assert a legal interest in the forfeited property itself. Id. Cui's interest in forfeited assets claimed pursuant to the state court order in her divorce case or via an equitable interest arising from her marriage to Ruan cannot reach property of a limited liability company. The limited liability companies were not parties to the divorce action between Cui and Ruan. Accordingly, while the state court could have ordered Ruan to take certain actions regarding his membership rights, it had no jurisdiction over the limited liability companies themselves. TenEyck v. TenEyck, 885 So.2d 146, 153 (Ala. Civ. App. 2003). With regard to all forfeited properties that were held by a limited liability company or other corporate entity, the Court finds that Cui has not set forth a valid right, title or interest in those properties.3
The remaining properties in which Cui claims an interest are as follows:
A third party petitioner must establish that she is entitled to relief because her "legal right, title, or interest in the forfeited property meets the circumstances set forth in either § 853(n)(6)(A) or § 853(n)(6)(B), and therefore, [s]he must allege facts sufficient to state a claim under one of the two provisions." United States v. Preston, 123 F. Supp. 3d 108, 115 (D.D.C. 2015); see also United States v. Kennedy, 201 F.3d 1324, 1328-29 (11th Cir. 2000) (...
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