United States v. Real Property Located at 1407 North Collins Street, 081618 FED5, 17-10624

Docket Nº:17-10624, 17-10626
Opinion Judge:HAYNES, Circuit Judge.
Party Name:UNITED STATES OF AMERICA, Plaintiff-Appellee v. REAL PROPERTY LOCATED AT 1407 NORTH COLLINS STREET, ARLINGTON, TEXAS; REAL PROPERTY LOCATED AT 4418 MAPLE AVENUE, DALLAS, TEXAS; REAL PROPERTY LOCATED AT 701 EAST 5TH STREET, AUSTIN, TEXAS; REAL PROPERTY LOCATED AT 9515 SKILLMAN STREET, DALLAS, TEXAS; REAL PROPERTY LOCATED AT 5800 MAPLE AVENUE, DA...
Judge Panel:Before DAVIS, HAYNES, and DUNCAN, Circuit Judges.
Case Date:August 16, 2018
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
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UNITED STATES OF AMERICA, Plaintiff-Appellee

v.

REAL PROPERTY LOCATED AT 1407 NORTH COLLINS STREET, ARLINGTON, TEXAS; REAL PROPERTY LOCATED AT 4418 MAPLE AVENUE, DALLAS, TEXAS; REAL PROPERTY LOCATED AT 701 EAST 5TH STREET, AUSTIN, TEXAS; REAL PROPERTY LOCATED AT 9515 SKILLMAN STREET, DALLAS, TEXAS; REAL PROPERTY LOCATED AT 5800 MAPLE AVENUE, DALLAS, TEXAS; ET AL; Defendants

v.

GERALD SHULTS; GAS PIPE, INCORPORATED; AMY LYNN, INCORPORATED; RIDGLEA COMPLEX MANAGEMENT, INCORPORATED; RAPIDS CAMP LODGE, INCORPORATED; AMY LYNN HERRIG; DAN CHRISTOPHER HERRIG, Claimants-Appellants

UNITED STATES OF AMERICA, Plaintiff-Appellee

v.

GAS PIPE, INCORPORATED; AMY LYNN, INCORPORATED; GERALD SHULTS, also known as Jerry; AMY HERRIG; RAPIDS CAMP LODGE, INCORPORATED; RIDGLEA COMPLEX MANAGEMENT, INCORPORATED, Defendants-Appellants

Nos. 17-10624, 17-10626

United States Court of Appeals, Fifth Circuit

August 16, 2018

Appeals from the United States District Court for the Northern District of Texas

Before DAVIS, HAYNES, and DUNCAN, Circuit Judges.

HAYNES, Circuit Judge.

Claimants challenge the pretrial restraint of their property under civil forfeiture laws, arguing the Government failed to show the requisite probable cause. The district court denied Claimants' motion to release their property. For the reasons set forth below, we AFFIRM.

I. Background

The grand jury's indictment in this case charges a scheme to sell a designer drug known as "spice" through Gas Pipe, Inc. and Amy Lynn Inc., which has locations throughout Texas and New Mexico. The indictment accused Gerald Shults and his daughter Amy Lynn Herrig1 of conspiring to market the drug as "herbal incense," "potpourri," or "aroma therapy" and then laundering the proceeds through related businesses.

Although these products were labeled as "synthetic cannabinoid free" and "not for human consumption," the indictment alleged that they in fact contained synthetic cannabinoids that were a controlled substance or controlled substance analogues intended for human consumption.

The Government executed civil seizure warrants against Claimants' accounts at UBS Financial Services. UBS froze the accounts, and the Government filed a civil forfeiture suit which, as amended, listed UBS accounts totaling more than $7 million as defendants in rem. The Government subsequently seized the UBS accounts pursuant to an arrest warrant under Federal Rule of Civil Procedure Supplemental Rule G(3)(b)(ii). The Government alleged that the defendant Claimants used the UBS accounts to receive proceeds of the spice scheme and conceal unlawful activity.

The Government's civil forfeiture suit also listed several pieces of real property as defendants in rem. The properties include Gas Pipe store locations and properties allegedly purchased with funds traceable to the charged crimes. The Government has not seized this real property, but it filed notices of lis pendens pursuant to 18 U.S.C. § 985.

Claimants filed a motion asking the district court to lift the pretrial restraints on their UBS accounts and real property, arguing the Government failed to show probable cause that the property is subject to forfeiture. The district court denied the motion, and Claimants filed this interlocutory appeal.

II. Jurisdiction

The parties dispute whether we have jurisdiction over this appeal. Claimants invoke 28 U.S.C. § 1292(a)(1), which allows interlocutory appeal of orders "granting, continuing, modifying, refusing or dissolving injunctions, or refusing to dissolve or modify injunctions." The Government argues § 1292(a)(1) does not apply because no injunction is involved. We conclude that jurisdiction exists under § 1292(a)(1) because, based on the law in this circuit, the district court's order has "the practical effect" of granting or denying an injunction. See Abbott v. Perez, 138 S.Ct. 2305, 2319-20 (2018); McLaughlin v. Miss. Power Co., 376 F.3d 344, 352 (5th Cir. 2004) (per curiam) (quoting Sherri A.D. v. Kirby, 975 F.2d 193, 203 (5th Cir. 1992)). As to the Government's seizure of the UBS accounts, we have previously relied on § 1292(a)(1) to review appeals seeking the release of assets in civil and criminal forfeiture cases. See United States v. Melrose E. Subdivision, 357 F.3d 493, 496-98 & n.2 (5th Cir. 2004) (reviewing pretrial restraining order issued under 18 U.S.C. § 983(j)(1)(A)); United States v. Floyd, 992 F.2d 498, 499-500 (5th Cir. 1993) (reviewing pretrial restraining order issued under 21 U.S.C. § 853(e)(1)(A), stating that "pretrial asset restraining orders are appealable as 'injunctions' under § 1292(a)(1)").2

The Government argues Floyd is distinguishable because there the order operated like an injunction by requiring the defendant to do something (i.e., to deposit money subject to forfeiture with the court). But our jurisdictional analysis in Floyd did not rely on that fact. See 992 F.2d at 500. Moreover, in Melrose, the order did not require the defendant to do anything; instead, it simply enjoined the defendant from using the frozen property. See 357 F.3d at 496-97. Yet we cited § 1292(a)(1) and Floyd in treating that order as an immediately reviewable injunction. See id. at 498 n.2. Here, the district court's order has the same effect-it enjoins Claimants from using the UBS accounts while refusing to order the Government to unfreeze them. We therefore see no principled reason to treat this order differently.3

As to the lis pendens on Claimants' real property, we have invoked § 1292(a)(1) to review an order releasing real property from a lis pendens. See Beefy King Int'l, Inc. v. Veigle, 464 F.2d 1102, 1104 (5th Cir. 1972) (per curiam). There, the district court lifted the lis pendens from property in a fiduciary duty suit against corporate officers, and the corporation appealed. See id. at 1103. We considered our jurisdiction and concluded that "the case should be treated in the same manner as a denial, dissolution, or modification of an injunction." Id. at 1104 (citing, inter alia, 28 U.S.C. § 1292(a)(1)).

Our opinion in Beefy King did not elaborate on the issue. But in discussing the separate issue of why Florida law allowed courts to discharge a notice of lis pendens in the same way courts...

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