US v. 105,800 SHARES OF COMMON STOCK, 92 C 20289

• Decision Date: 14 June 1993
• Docket Number: No. 92 C 20289,92 C 20288 and 92 C 20290.,92 C 20289
• Citation: 825 F. Supp. 191
• Parties: UNITED STATES of America, Plaintiff, v. 105,800 SHARES OF COMMON STOCK OF FIRSTROCK BANCORP, INC., Defendant. UNITED STATES of America, Plaintiff, v. 122,942 SHARES OF COMMON STOCK OF FIRSTROCK BANCORP, INC., Defendant. UNITED STATES of America, Plaintiff, v. 49,032 SHARES OF COMMON STOCK OF FIRSTROCK BANCORP, INC., Defendant.
• Court: U.S. District Court — Northern District of Illinois

825 F. Supp. 191

UNITED STATES of America, Plaintiff, v. 105,800 SHARES OF COMMON STOCK OF FIRSTROCK BANCORP, INC., Defendant.

UNITED STATES of America, Plaintiff, v. 122,942 SHARES OF COMMON STOCK OF FIRSTROCK BANCORP, INC., Defendant.

UNITED STATES of America, Plaintiff, v. 49,032 SHARES OF COMMON STOCK OF FIRSTROCK BANCORP, INC., Defendant.

Nos. 92 C 20289, 92 C 20288 and 92 C 20290.

United States District Court, N.D. Illinois, W.D.

June 14, 1993.

Keith C. Syfert, United States Attorney's Office, Michael F. O'Brien, Clark, McGreevy, Johnson, P.C., Rockford, IL, for plaintiff in No. 92 C 20289.

Michael N. Bledsoe, Bledsoe & Tuohy, Chicago, IL, Richard D. Gaines, Holmstrom & Kennedy, Rockford, IL, George J. Murtaugh, Jr., Robert M. Stephenson, Cotsirilos, Stephenson, Tighe & Streicker, Ltd., George N. Vurdelja, Jr., Stephen A. Glickman, Chuhak & Tecson, Daniel E. Reidy, Jones, Day, Reavis & Pogue, Chicago, IL, for defendant in No. 92 C 20289.

Keith C. Syfert, U.S. Attorney's Office, Rockford, IL, for plaintiff in Nos. 92 C 20288 and 92 C 20290.

Richard D. Gaines, Gregory P. Guth, Holmstrom & Kennedy, Rockford, IL, Theodore T. Poulos, Cotsirilos, Stephenson, Tighe & Streicker, Ltd., Kevin M. Flynn, Coffield, Ungaretti & Harris, Renan Isaac Sugarman, Fishman & Merrick, P.C., Chicago, IL, Maurice H. Connelly, Bayonne, NJ, for defendant in No. 92 C 20288.

Richard D. Gaines, Holmstrom & Kennedy, Rockford, IL, Michael N. Bledsoe, Bledsoe & Tuohy, Chicago, IL, for defendant in No. 92 C 20290.

ORDER

REINHARD, District Judge.

INTRODUCTION

On October 4, 1992, the United States of America (the government) brought an action pursuant to 18 U.S.C. § 981(a)(1)(C)¹ to forfeit property which constitutes proceeds traceable to an alleged bank fraud in violation of 18 U.S.C. § 1344.² Its forfeiture action is the subject of three pending lawsuits before the court (Nos. 92 C 20288, 20289, 20290) and the defendant property comprises a total of 277,774 shares of common stock of FirstRock Bancorp, Inc. Claimant Leichter in 92 C 20288 and claimants Boosalis, Kirschner and Robinson Engineering in 92 C 20289 have moved to vacate the Magistrate Judge's October 4, 1992 ex parte seizure order and to dismiss the forfeiture actions for lack of subject matter jurisdiction pursuant to Fed.R.Civ.P. 12(b)(1).³ A hearing was held on the matter on June 9, 1993. All claimants' Rule 12(b)(1) motions to dismiss the forfeiture actions for lack of subject matter jurisdiction and to vacate the ex parte order will be addressed herein.

FACTS

The facts relevant to the motions to dismiss are as follows. Beginning in May 1992, First Federal Savings and Loan Association of Rockford, Illinois, began the process of converting to First Federal Savings Bank, B.S.B. (First Federal), a federally chartered stock savings bank owned directly by FirstRock Bancorp, Inc. (FirstRock). In its verified complaint for forfeiture, the government asserts jurisdiction is proper pursuant to 28 U.S.C. §§ 1345, 1355 and venue is proper pursuant to 28 U.S.C. § 1395(b) "in that the defendant property is found in the Western Division of the Northern District of Illinois." (Complaint ¶¶ 2, 3). The government also asserts:

The defendant property consists of a total of ____ shares of common stock ("stock") in FirstRock Bancorp, Inc. ("FirstRock"), a holding company for First Federal Savings Bank of Rockford, Illinois, issued in Rockford, Illinois on October 2, 1992, as further described in the attached "Schedule of Defendant Property" which is attached hereto and incorporated herein.

According to claimant Leichter, the government mischaracterized the nature of the transaction in its verified complaint. FirstRock, the issuing entity, is a Delaware corporation. Sometime prior to October 4, 1992, FirstRock directed its stock transfer agent, First National Bank of Boston (the Boston Bank), located in Boston, Massachusetts, to print and distribute the stock certificates involved in the conversion. The Warrant of Seizure and Monition directed against the defendant property was executed by the United States Marshal on October 4, 1992, by personally serving it on FirstRock's President and Chief Executive Officer in Rockford, Illinois. Simultaneously, the U.S. Marshal served a copy of the order mandating transfer of the defendant stock and accompanying certificates. The Boston Bank printed the stock certificates representing the defendant property on October 5, 1992, and express mailed the certificates to the U.S. Marshal in Rockford, Illinois, on October 6, 1992.

Claimant Kirschner disputes the chronology of events and notes the government has offered no evidence to support its assertion that the stock certificates were printed on October 5, 1992. However, attached to claimant Boosalis' reply (which Kirschner adopted) is a letter sent from an agent of the Boston Bank to the U.S. Marshal's Office. The letter, dated October 6, 1992, lists the stock certificates ordered to be seized pursuant to the Magistrate Judge's seizure order. In addition, claimant Boosalis has attached a copy of an AirBorne Express Shipping Label from the Boston Bank to the U.S. Marshal's Office dated October 6, 1992. Presumably the Boston Bank mailed the stock certificates to the U.S. Marshal's Office on October 6, 1992. The sole remaining factual dispute is when the stock certificates were printed. During the hearing, the government noted the stocks listed by the Boston Bank in its October 6, 1992 letter are in the same order as the list of stocks attached to the government's verified complaint. Thus, the inference arises that the Boston Bank had the verified complaint in its possession when it printed the certificates. Based on the above-mentioned evidence, the court finds October 5, 1992, to be the date the Boston Bank printed the stock certificates.

CONTENTIONS

Claimants assert the res which forms the basis of this forfeiture action was not within the territorial boundaries of the court's jurisdiction on the date of seizure so that the court lacks subject matter jurisdiction over this civil forfeiture action. Claimants also assert the government did not validly serve process. The government contends the court has subject matter jurisdiction over the present dispute because the intangible shares of FirstRock stock were within this district at the time of their seizure. Alternatively, the government argues Congress' post-seizure enlargement of forfeiture jurisdiction provides jurisdiction over the defendant property. The government also asserts it complied with Illinois statutory law in executing service of process.

DISCUSSION

Claimants Leichter, Boosalis and Kirschner urge this court to follow Delaware law, which fixes the situs of all stock of a Delaware corporation to be in Delaware for all purposes other than taxation. See, e.g., Castro v. ITT Corp., 598 A.2d 674, 681 (Del. Ch.1991). However, this court declines to follow this interpretation of Delaware law in the instant case. In deciding an issue involving state law, the district court is to follow the laws of the forum state, including its choice-of-law principles. See Bagdon v. Bridgestone/Firestone, Inc., 916 F.2d 379, 382 (7th Cir.1990), cert. denied, ___ U.S. ___, 111 S.Ct. 2257, 114 L.Ed.2d 710 (1991). However, the Due Process and Full Faith and Credit Clauses of the United States Constitution are threshold restrictions on the application of forum law. Soo Line R.R. Co. v. Overton, 992 F.2d 640 (7th Cir.1993). "For the application of a state's substantive law to be constitutionally permissible, sufficient contacts with that state must exist to ensure the choice of law is `neither arbitrary nor fundamentally unfair.'" Overton, 992 F.2d 644 (quoting Allstate Ins. Co. v. Hague, 449 U.S. 302, 101 S.Ct. 633, 66 L.Ed.2d 521 (1981)). Even if Illinois' rules on conflict-of-laws dictate that Delaware law is to govern in the instant case, see Petri v. Rhein, 162 F.Supp. 834, 837-38 (N.D.Ill.1957) (validity of a stock transfer may be governed by the law of the place of incorporation or the law of the place where the certificates are transferred), aff'd, 257 F.2d 268 (7th Cir.1958), an imposition of Delaware law would not be in keeping with constitutional limitations in the instant case. See Shaffer v. Heitner, 433 U.S. 186, 97 S.Ct. 2569, 53 L.Ed.2d 683 (1977); U.S. Indus., Inc. v. Gregg, 540 F.2d 142, 147-56 (3d Cir.1976) (situs of stock in sequestration action was not a sufficient contact with Delaware to support jurisdiction over defendant when the transactions in question were unrelated to the forum), cert. denied, 433 U.S. 908, 97 S.Ct. 2972, 53 L.Ed.2d 1091 (1977).

As the government notes, the only connection Delaware has to this forfeiture action is that it is the place of incorporation of FirstRock. First Federal Savings Bank (First Federal), the federally chartered stock savings bank owned directly by FirstRock, is located in Illinois. All activity relating to the conversion occurred in Illinois. For example, First Federal received and processed all orders for purchases of FirstRock shares in Rockford, Illinois. In addition, funds for the stock purchases were deposited into First Federal accounts in Rockford. Moreover, all of the persons to whom the shares were to issue resided in Illinois. Therefore, because Illinois is the place with the most significant contacts to this forfeiture dispute, the court will apply Illinois law to determine the nature of the interests "seized."

A. Illinois statutory and case law

1. The res

In determining the situs of the stock for purposes of determining the court's subject matter jurisdiction, the court must determine what was seized on October 4, 1992. According to the affidavit of Lon Christensen attached to the verified complaint, FirstRock offered its available stock for sale until 12:00 p.m. on Thursday, September 24, 1992. (Christensen Aff. ¶ f). FirstRock's conversion closed on October 2, 1992....