United States v. Hirayama

• Decision Date: 11 January 2021
• Docket Number: CR. NO. 16-00749 JMS-RT
• Parties: UNITED STATES OF AMERICA, Plaintiff, v. YASUHIRO HIRAYAMA, (01) Defendant.
• Court: U.S. District Court — District of Hawaii

UNITED STATES OF AMERICA, Plaintiff, v. YASUHIRO HIRAYAMA, (01) Defendant.

CR. NO. 16-00749 JMS-RT

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF HAWAII

January 11, 2021

ORDER DENYING CHIKAKO OTSUKA'S APPEAL, ECF NO. 142, AND AFFIRMING AS MODIFIED THE ORDER DENYING WOULD-BE CLAIMANT CHIKAKO OTSUKA'S MOTION TO INTERVENE, ECF NO. 141

I. INTRODUCTION

Chikako Otsuka ("Otsuka") appeals Magistrate Judge Rom Trader's "Order Denying Would-Be Claimant Chikako Otsuka's Motion to Intervene" (the "October 30 Order," ECF No. 141). ECF No. 142. For the reasons discussed below, the court DENIES the appeal and AFFIRMS the October 30 Order as modified.

II. STANDARD OF REVIEW

Pursuant to 28 U.S.C. § 636(b)(1) and Criminal Local Rule 57.3(b), a party may appeal to a district judge any pretrial non-dispositive matter determined by a magistrate judge. Under 28 U.S.C. § 636(b)(1)(A), a magistrate judge's order may be reversed by the district court only if it is "clearly erroneous or contrary to law." "Pretrial orders of a magistrate under 636(b)(1)(A) are reviewable under the 'clearly erroneous and contrary to law' standard; they are not subject to de novo determination. The reviewing court may not simply substitute its judgment for that of the deciding court." Grimes v. City & Cnty. of S.F., 951 F.2d 236, 241 (9th Cir. 1991) (quotation marks and citation omitted).

The threshold of the "clearly erroneous" test is high. United States v. U.S. Gypsum Co., 333 U.S. 364, 395 (1948) ("A finding is 'clearly erroneous' when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed."); Balen v. Holland Am. Line Inc., 583 F.3d 647, 655 (9th Cir. 2009) ("Review under the clearly erroneous standard is significantly deferential, requiring a definite and firm conviction that a mistake has been committed.") (quotation marks and citation omitted). And a "decision is 'contrary to law' if it applies an incorrect legal standard or fails to consider an element of the applicable standard." Scalia v. Saakvitne, 2020 WL 7233342, at *5 (D. Haw. Dec. 8, 2020) (quotation marks and citations omitted); accord United States v. Desage, 229 F. Supp. 3d 1209, 1213 (D. Nev. 2017) ("An order is contrary to law when it fails to apply or misapplies relevant statutes, case law, or rules of procedure.") (quotation marks and citation omitted).

III. BACKGROUND

The following facts are undisputed.¹ Pursuant to a July 25, 2014 agreement executed by Defendant Yasuhiro Hirayama ("Hirayama"); Kona Lani Farms, LLC; and Otsuka, title to real property on the Island of Hawaii known as Kona Lani Farm was conveyed to Otsuka from Kona Lani Farms, LLC. See ECF No. 129-6 at PageID ## 849-50; see also ECF Nos. 129-2, -3, -4; ECF No. 130 at PageID ## 865, 868. On October 23, 2014, Koyo USA Corp. ("Koyo") recorded a lis pendens against Kona Lani Farm in connection with a separate state-court action. See ECF No. 130-5 at PageID # 919.

On December 1, 2016, Hirayama and three others were indicted in this court. ECF No. 1. On May 10, 2018, the grand jury returned a Superseding Indictment that included notice that upon conviction of counts charging wire fraud, money laundering, and conspiracy to commit wire fraud and money laundering, the Government would seek forfeiture of property traceable to those offenses including all "right, title, and interest" in Kona Lani Farm. ECF No. 34 at PageID ## 153-54, 156. On October 22, 2018, the Government filed a notice of lis pendens against Hirayama's interests in Kona Lani Farm. ECF No. 84.

Hirayama is the sole remaining defendant in this action. See ECF Nos. 112, 114, 115 (dismissing the other three defendants after they were charged and sentenced in separate actions). Hirayama was a fugitive until very recently, and is currently outside of this court's jurisdiction, thereby delaying and possibly preventing adjudication of the charges against him. See ECF No. 144 at PageID # 1148 ("Since Magistrate Judge Trader ruled, defendant Hirayama has been arrested in Japan pursuant to the United States' request for his extradition.").

On August 14, 2020, Otsuka moved to intervene in order to file a motion to set aside the Government's lis pendens, or alternatively, to have the court conduct a hearing pursuant to Federal Rule of Civil Procedure 65² "to determine whether a . . . lis pendens is appropriate to protect the United States' interest." ECF No. 129 at PageID # 825. On October 30, 2020, Magistrate Judge Trader denied Otsuka's motion. ECF No. 141. The October 30 Order determined

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///that under the statutory scheme set forth in 21 U.S.C. §§ 853(k),³ (n)⁴ and Federal Rule of Criminal Procedure 32.2,⁵ "third parties like Otsuka may not intervene in a criminal action to protect their interests, if any, in property . . . subject to forfeiture, except by filing a claim after a preliminary order of forfeiture is entered." ECF No. 141 at PageID # 1118. The October 30 Order found that neither United States v. Crozier, 777 F.2d 1376 (9th Cir. 1985),⁶ nor Federal Rule of Civil Procedure 65(governing injunctions and restraining orders) applies to the lis pendens in this case. ECF No. 141 at PageID # 1120. And applying the framework set forth in Mathews v. Eldridge, 424 U.S. 319 (1976), the October 30 Order further determined that Otsuka's Fifth Amendment due process rights have not been infringed by the Government's ex parte notice of lis pendens. Id. at PageID ## 1123-31. For these reasons, the October 30 Order denied Otsuka's Motion to Intervene. Id. at PageID # 1131.

On November 13, 2020, Otsuka appealed the October 30 Order to this court, ECF No. 142, and on November 30, 2020, the Government filed its Opposition, ECF No. 144. For the reasons discussed below, this court DENIES Otsuka's Appeal and AFFIRMS the October 30 Order as modified.

IV. DISCUSSION

Otsuka contends that the October 30 Order "fundamentally misapprehends the nature of [her] motion." ECF No. 142-1 at PageID # 1135. Otsuka argues that her "Fifth Amendment due process rights have been infringed" not by the filing of a notice of lis pendens, but "by the inordinate delay between the [Government's] filing and recording of a lis pendens on her property in 2018and an ancillary hearing in this criminal case which may never occur" due to the need to extradite Hirayama before his prosecution can proceed. Id. at PageID ## 1135, 1137 (emphasis added). Otsuka further contends that she "is not seeking to intervene . . . in . . . Hirayama's prosecution or to litigate the merits of the criminal forfeiture of Kona Lani Farm." Id. at PageID ## 1135-36. Rather, she is seeking "the opportunity to contest the post-indictment, pre-trial restraint placed on her property." Id. at PageID # 1136. Otsuka argues that Crozier "allows third-parties to challenge the terms of a restraining order without violating the prohibitions contained in 21 U.S.C. § 853(k)," and therefore, "the Court should hold a hearing pursuant to Rule 65" requiring the Government to "establish probable cause to proceed with the criminal forfeiture." Id. at PageID ## 1137-38. The court addresses these arguments below.

A. Statutory Bar on Intervention and the Due Process Exception

The October 30 Order explains, and Otsuka concedes, that the statutory scheme set forth in 21 U.S.C. §§ 853(k), (n), and Federal Rule of Criminal Procedure 32.2 generally bars third parties from "interven[ing] in a criminal action to protect their interests, if any, in property the government alleges is subject to forfeiture, except by filing a claim after a preliminary order of forfeiture is entered." ECF No. 141 at PageID #1118; see ECF No. 142-1 at PageID # 1136 ("[U]nder 21 U.S.C. § 853(n) an ancillary proceeding is the soleremedy afforded a third-party claimant to contest the criminal forfeiture. . . . [A]n ancillary proceeding does not take place until after the defendant whose property is subject to forfeiture is convicted.").

Crozier and other courts, however, have recognized an exception to this statutory bar when the delay—between the imposition of an order restraining property subject to forfeiture and the trial or conclusion of criminal proceedings—would deprive those with a thirdparty interest in such property of their due process right to have a meaningful hearing at a meaningful time. See, e.g., Crozier, 777 F.2d at 1383-84 ("[A] hearing for parties with a third party interest which takes place months or years after a restraining order is issued . . . cannot be construed as a hearing provided at a meaningful time.") (quotation marks omitted); United States v. Holy Land, 493 F.3d 469, 475 (5th Cir. 2007) ("In some cases . . . due process will require that the district court . . . promptly hold a hearing at which the property owner can contest the restraining order, without waiting until trial to do so."); United States v. Bohn, 2011 WL 4708799, at *6-8 (W.D. Tenn. June 27, 2011) (collecting cases) (holding that the indefinite delay caused by the defendants' fugitive status triggered the due process exception to statutory bar of claimants' motions challenging restraining order imposed eleven years earlier); United States v. Petters, 2009 WL 1794799, at *3 (D. Minn. June 23, 2009) ("An exception to the bar under 21 U.S.C. § 853(k) exists, however, where a restrainingorder has been placed on a defendant's assets prior to trial, and a third party claims an interest in property which is subject to the restraining order.") (citing United States v. Waterboro, 64 F.3d 752, 755-56 (1st Cir. 1995)) (other citation omitted); cf. United States v. Lazarenko, 476 F.3d 642, 651 (9th Cir. 2007) (finding the sixteen-month period following seizure of property pursuant to § 853(f) insufficient to implicate due process concerns but recognizing that "an inordinate delay" beyond that time "could deprive constitutional rights to prompt due process notice and hearing").

Because Cr...