United States v. Funds in the Amount of $271,080

• Decision Date: 17 March 2016
• Docket Number: No. 15–2857.,15–2857.
• Citation: 816 F.3d 903
• Parties: UNITED STATES of America, Plaintiff–Appellee, v. FUNDS IN THE AMOUNT OF $271,080, Defendant. Appeal of: Pedro Cruz–Hernandez and Abraham Cruz–Hernandez, Claimants.
• Court: U.S. Court of Appeals — Seventh Circuit

816 F.3d 903

UNITED STATES of America, Plaintiff–Appellee,

v. FUNDS IN THE AMOUNT OF $271,080, Defendant.Appeal of: Pedro Cruz–Hernandez and Abraham Cruz–Hernandez, Claimants.

No. 15–2857.

United States Court of Appeals, Seventh Circuit.

Argued Jan. 26, 2016.

Decided March 17, 2016.

Matthew S. Ebert, Attorney, Office of the United States Attorney, Chicago, IL, for Plaintiff–Appellee.

Douglas E. Zeit, Attorney, Law Offices of Douglas Zeit, Waukegan, IL, for Appellant.

Before WOOD, Chief Judge, and BAUER and POSNER, Circuit Judges.

WOOD

, Chief Judge.

When Chicago police officers searched a van registered to Pedro Cruz–Hernandez, they found $271,080 in currency. They had a warrant that was based on a drug dog's alerting to the presence of drugs in the van, but they found no drugs. The government nonetheless initiated a civil forfeiture action against the money, contending that it was derived from, or had been used to facilitate, drug trafficking. Pedro and his brother, Abraham Cruz–Hernandez, contested the forfeiture, maintaining that they had lawfully earned the money. The district court entered summary judgment in favor of the government, and the brothers have appealed. We conclude that a jury reasonably could find that the government's evidence fails to establish, even by a preponderance, that the money is substantially connected to drug trafficking. We thus vacate the judgment and remand for further proceedings.

I

Our story begins when Chicago police officers responded to an emergency call concerning a home invasion at the house where Pedro and Abraham lived with six others. In a bedroom of the house the police saw a handgun, a digital scale, and a small amount of marijuana in a baggie. A police drug dog signaled the presence of drugs in Pedro's van, which was parked outside the house. After obtaining a search warrant, the police discovered in the van a safe containing $271,080 in currency and two pages of handwritten notes including dates and numbers. The cash was bundled with rubber bands in stacks of $5,000. A second dog alerted to the safe. No drugs, however, were found in either the van or the safe.

The police interviewed Pedro after they found the money; Abraham was not present at the house that night. Pedro told them that armed intruders had broken into the house, tied up the occupants, and demanded money and drugs. After the intruders had left, Pedro decided to move his brother's safe from the basement to the van in case they returned. He said that he did not know what was inside the safe but that his brother had told him it contained "important papers." Pedro maintained that the money was not his and that he did not know whose it was.

II

The government apparently brought no criminal charges against the brothers or anyone else in the house, but it sought forfeiture of the money, see 21 U.S.C. § 881(a)(6)

, contending that it was proceeds of, or had been used or was intended to be used to facilitate, drug trafficking. Pedro and Abraham contested the forfeiture, see 18 U.S.C. § 983(a), and submitted affidavits attesting that the money is their joint savings from years of working and that they had not been involved in any criminal activity.

The government moved for summary judgment on two grounds. First, it argued that Pedro and Abraham lack the necessary ownership interest to establish standing to contest the forfeiture. See United States v. Funds in the Amount of $239,400, 795 F.3d 639, 645 (7th Cir.2015)

. The government reasoned that the claimants had disavowed ownership of the money and thus had lost the ability to demonstrate standing. In support of this contention, the government pointed to Pedro's assertion to the police that he did not know whose money it was. The government also pointed to two alleged disavowals of ownership by Abraham: (1) a record created by U.S. Immigration and Customs Enforcement (ICE) six weeks before the police seized the safe, in which Abraham had said that he did not have any "equities" in the United States, and (2) Abraham's application for cancellation of removal, filed with the assistance of immigration counsel six months after the seizure, in which he lists only $2,000 in "cash assets." The government represented that Pedro and Abraham, when deposed, had testified that they told the truth to the police and to immigration officials.

Second, the government maintained that even if the brothers have standing to challenge the forfeiture, a jury could not reasonably conclude that the evidence does not establish by a preponderance that the money is substantially connected to drug trafficking. That convoluted phrasing is necessary because in a civil-forfeiture action it is the government, as plaintiff, that bears the burden of proving the money's connection to drug trafficking; claimants must establish standing but are not required to prove "legitimate" ownership. See $239,400, 795 F.3d at 646

. The government pointed to the circumstances in which the currency was found—in a safe to which a drug dog had alerted, bundled in stacks, along with the handwritten notes the government's lawyer called a "drug ledger," and near a house containing apparent drug paraphernalia. It also relied on tax records and the brothers' disclosures about their income, which the government argued was too low to permit the accumulation of such a large sum.

The brothers responded that their testimony of ownership is enough to establish standing. On the merits, they argued that the government was not entitled to summary judgment because a genuine dispute of fact exists about the connection of the money to drug trafficking. The government's attempt to base the necessary connection on the paraphernalia found in the house, they said, was undermined by the facts that three other adults (and three minors whose ages we do not know) lived in the house and that no drugs or drug paraphernalia were found in the van or the safe. They further contended that the government had no evidence to show that the drug dog's alert to the safe was reliable. Nor did the government have any evidence that the supposed "ledger" had anything to do with drugs. And in any event, they said, the facts are contested: they testified that the handwritten notes relate to money sent to Mexico to build a home there, and they pointed to evidence that they earned the money legally and were not drug traffickers.

The district court initially denied the government's motion for summary judgment. It found that the brothers had standing to oppose the forfeiture. On the merits, it thought that their affidavits stating that they had not used or intended to use the money in drug trafficking but had earned it through work over many years created a genuine dispute about a connection between the currency and drug trafficking. Yet, in some tension with those observations, the court also opined that the brothers probably lacked sufficient evidentiary support to overcome summary judgment on "the merits of their claim of ownership" because of what the court characterized as their previous disavowals of ownership. It ordered the brothers to show cause why summary judgment should not be entered for the government because of a "lack of evidentiary support for their ownership claim."

In response the brothers submitted a memo supported by two additional affidavits. Pedro explained his disavowal of ownership to the police by adding that he had given his cash savings to Abraham and had not known exactly where Abraham kept the money. Abraham swore that when he listed his "cash assets" on the application for cancellation of removal the police were in possession of the money and he did not realize that his legal claim to money he did not physically possess counted as a "cash asset."

Based on this record, the district court granted summary judgment for the government. It found that the additional affidavits submitted by the brothers were inconsistent with their prior sworn testimony. Pedro's second affidavit contradicted, in the court's view, his deposition testimony indicating that he had learned from Abraham on the night of the seizure that his money was in the safe. And because Abraham had been represented by counsel when he applied for cancellation of removal, the court discredited his affidavit testimony that when completing the application he had not understood his legal claim to the money to be a "cash asset." Invoking the "sham-affidavit" rule, see United States v. Funds in Amount of One Hundred Thousand One Hundred & Twenty Dollars ($100,120.00), 730 F.3d 711, 718 (7th Cir.2013)

, the court concluded that the affidavits did not create a genuine dispute of fact regarding the brothers' ownership. The court ended by concluding that the government had "pointed to substantial circumstantial evidence indicating that the claimants' interest in the money is not legitimate and that the money is connected to criminal activity."

III

On appeal the brothers first argue that it was error for the district court to invoke the sham-affidavit rule to discredit their second affidavits explaining their earlier statements. Relying on McCann v. Iroquois Mem'l Hosp., 622 F.3d 745, 750–51 (7th Cir.2010)

, they argue that the sham-affidavit rule applies only when a change in testimony is "incredible and unexplained." We agree with the brothers that the sham-affidavit rule was misapplied here. We have emphasized that, in light of the jury's role in weighing credibility, this rule is to be used with "great caution." Bank of Ill. v. Allied Signal Safety Restraint Sys., 75 F.3d 1162, 1169 (7th Cir.1996). The rule "is designed to avoid sham factual issues and prevent parties from taking back concessions that later prove ill-advised." McCann, 622 F.3d at 751. Changes in testimony normally affect the witness's credibility rather than the admissibility of the testimony, and thus the sham-affidavit rule applies only when a change in testimony "is incredible and unexplained," not when the change is "plausible...