US v. Bailey, 03-16445.

• Citation: 419 F.3d 1208
• Decision Date: 09 August 2005
• Docket Number: No. 03-16445.,03-16445.
• Parties: UNITED STATES of America, Plaintiff-Appellant Cross-Appellee, v. F. Lee BAILEY, Defendant-Appellee Cross-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (11th Circuit)

419 F.3d 1208

UNITED STATES of America, Plaintiff-Appellant Cross-Appellee, v. F. Lee BAILEY, Defendant-Appellee Cross-Appellant.

No. 03-16445.

United States Court of Appeals, Eleventh Circuit.

August 9, 2005.

Robert M. Loeb, Douglas N. Letter, U.S. Dept. of Justice, Civ. Div., Appellate Staff, Washington, DC, David Paul Rhodes, Tampa, FL, for U.S.

F. Lee Bailey, Lynn, MA, pro se.

Before EDMONDSON, Chief Judge, and TJOFLAT and KRAVITCH, Circuit Judges.

TJOFLAT, Circuit Judge:

I.

The instant case is a civil action for conversion and civil theft brought by the United States against F. Lee Bailey. This case has its origins in a criminal prosecution in which Bailey served as defense counsel. The facts of that case that are relevant here are recounted in our opinion in United States v. McCorkle, 321 F.3d 1292 (11th Cir.2003):

On November 4, 1998, after finding William and Chantal McCorkle guilty of laundering proceeds of a fraudulent telemarketing scheme, the jury returned a special verdict forfeiting to the United States the McCorkles' interests in various assets. Among these assets were $2 million that had been placed in trust by the McCorkles in the Cayman Islands for the payment of their lawyers' fees and transferred by trust to F. Lee Bailey, William McCorkle's attorney. At the January 25, 1999 sentencing, the district court . . . entered an order of forfeiture which conveyed such interests to the United States.

The jury, in returning its forfeiture verdict, found that Bailey was a transferee of the laundered proceeds that belonged to the United States. To defeat the Government's right to such proceeds . . . Bailey had to file a petition with the district court and prove that he had received the money as a bona fide purchaser for value without cause to believe that the money was subject to forfeiture ("BFP"). See 21 U.S.C. § 853(n)(6)(B). Bailey filed his petition on February 16, 1999.

The district court referred Bailey's petition to a magistrate judge. On March 5, 1999, the Government moved the court for an order to show cause why Bailey should not be held in civil contempt for failing to turn over the funds withdrawn from the trust. On March 30, 1999, the magistrate judge, in advance of the hearing on the merits of Bailey's . . . petition, entered a preliminary order in which he addressed the Government's motion. He ordered Bailey to either deposit $2 million into the registry of the court or, by May 3, 1999, post a $2 million bond. Bailey did neither.

Id. at 1294-95 (footnotes omitted). Apparently, Bailey "did neither" because the trust fund was nearly empty; by October 1998, Bailey had disbursed its contents to himself and the McCorkles' other lawyers as legal fees for the McCorkles' defense. Id. at 1295 n. 3; United States v. Bailey, 288 F.Supp.2d 1261, 1265 (M.D.Fla.2003).

In October 1999, the magistrate judge conducted an extensive evidentiary hearing on the merits of Bailey's petition and on Bailey's failure to comply with the preliminary order to either deposit the $2 million with the court or post bond. In January 2000, the magistrate judge recommended (1) that the district court deny Bailey's petition because Bailey had failed to establish that he was a BFP and (2) that the court require Bailey to show cause why he should not be held in civil contempt for failing to comply with the magistrate judge's preliminary order. McCorkle, 321 F.3d at 1295. "On June 29, 2000, the district court entered an order adopting the magistrate judge's recommendation that Bailey's petition be denied, thus giving the Government clear title to the $2 million trust fund earmarked for legal fees. . . ." Id. at 1295-96. However, the court also concluded that it lacked the statutory authority to order Bailey to forfeit $2 million because that trust fund was no longer available. Bailey, 288 F.Supp.2d at 1263.¹ As an alternative, the district court suggested (as did this court on appeal) that "the final determination that the Government (and not Bailey) had clear title to the trust fund assets enabled the Government to pursue a common law action against Bailey for conversion." McCorkle, 321 F.3d at 1295 n. 3.

On July 24, 2001, the Government filed suit against Bailey. The complaint alleged conversion and civil theft and sought the entire $2 million from the trust fund, punitive damages on the conversion count, and treble damages on the civil theft count. See Fla. Stat. § 772.11(1) ("Any person who proves by clear and convincing evidence that he or she has been injured in any fashion by civil theft has a cause of action for threefold the actual damages sustained. . . ."). Prior to trial, the district court granted partial summary judgment in favor of the Government. It concluded that as a result of the "relation-back doctrine," as codified in 21 U.S.C. § 853(c), see supra note 1, the Government acquired all right, title, and interest in the money comprising the trust fund the moment that it was laundered by the McCorkles in violation of federal law, and that Bailey, therefore, necessarily converted the fund when he disbursed it to himself and the McCorkles' other attorneys. Bailey, 288 F.Supp.2d at 1265-66. As such, it granted the Government's motion for summary judgment on the conversion claim, and that claim proceeded to trial on the issue of punitive damages only. It also ordered that the civil theft claim would go to trial only on the issue of intent, i.e., whether Bailey obtained the contents of the fund "with the felonious intent to commit a theft." Id. at 1266.

After a four-day trial, a jury awarded the Government $3 million in punitive damages on the conversion claim and also found against Bailey on the civil theft claim, which resulted in a trebled award of $6 million. Bailey then moved for reconsideration of the court's decision granting summary judgment and to set aside the punitive damage award as unconstitutional under State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 123 S.Ct. 1513, 155 L.Ed.2d 585 (2003). The court granted Bailey's motion for reconsideration, vacated its earlier order granting partial summary judgment in favor of the Government, and entered judgment as a matter of law in favor of Bailey on both of the Government's claims. Bailey, 288 F.Supp.2d at 1281-82. Its order was based on a reevaluation of its earlier ruling regarding the relation-back provision of § 853(c) and the state-law tort requirement that a plaintiff in a suit for conversion or civil theft must establish possession or a right to immediate possession at the time of the alleged conversion. Specifically, the court now held that the Government could not rely exclusively on the relation-back doctrine to establish such a possessory interest. See id. at 1267-79. "In the interests of judicial economy," the court also considered Bailey's alternative argument regarding punitive damages, id. at 1279, and held that a $3 million punitive award was unconstitutionally excessive under the Campbell due process analysis. See id. at 1279-81.

On appeal, the Government argues that the district court erred in holding that it lacked the requisite possessory interest in the legal trust fund at the time of the alleged conversion.² The Government also challenges the district court's order setting aside the jury's punitive damage award. Because we affirm the district court on the former issue, we do not address the issue of punitive damages.

II.

A.

Under Florida law, a plaintiff in an action for conversion or civil theft must establish possession or an immediate right to possession of the converted property at the time of the conversion. See infra Part II.B. The Government argues that the relation-back rule codified in 21 U.S.C. § 853(c) satisfies this requirement by retroactively granting it an immediate right of possession at the moment of the unlawful activity giving rise to the forfeiture. In this case, that would mean that the Government's right to possession arose as soon as the McCorkles laundered the funds subsequently used to create the legal trust fund. The statutory provision on which the Government relies states that

all right, title, and interest in the property . . . vests in the United States upon the commission of the act giving rise to forfeiture under this section. Any such property that is subsequently transferred to a person other than the defendant may be the subject of a special verdict of forfeiture and thereafter shall be ordered forfeited to the United States, unless the transferee establishes . . . that he is a bona fide purchaser for value of such property who at the time of purchase was reasonably without cause to believe that the property was subject to forfeiture under this section.

21 U.S.C. § 853(c).

In Caplin & Drysdale, Chartered v. United States, 491 U.S. 617, 109 S.Ct. 2646, 105 L.Ed.2d 528 (1989), the Court explained the legal effect of this provision:

As soon as the possessor of the forfeitable asset committed the violation of the internal revenue laws, the forfeiture under those laws took effect, and (though needing judicial condemnation to perfect it) operated from that time as a statutory conveyance to the United States of all the right, title and interest then remaining in the possessor; and was as valid and effectual, against all the world, as a recorded deed. The right so vested in the United States could not be defeated or impaired by any subsequent dealings of the . . . possessor.

Id. at 627, 109 S.Ct. at 2653 (quoting United States v. Stowell, 133 U.S. 1, 19, 10 S.Ct. 244, 248, 33 L.Ed. 555 (1890)) (alterations and omissions in Caplin & Drysdale). Two things are notable about this statement of the doctrine. First, the Court referred to the wrongdoer as the "possessor" of the forfeitable assets even though, by operation of the statutory relation-back provision, he had already lost all "right" and "title" in them. Second, although the Court stated that the forfeiture "took effect"...