US v. CERTAIN FUNDS, 91-CV-3642 (DRH).
| Decision Date | 25 April 1996 |
| Docket Number | No. 91-CV-3642 (DRH).,91-CV-3642 (DRH). |
| Citation | 922 F. Supp. 761 |
| Parties | UNITED STATES of America, Plaintiff, v. CERTAIN FUNDS CONTAINED IN ACCOUNT NOS. XXX-XXXXXX-XXX, XXX-XXXXXX-XXX AND XXX-XXXXXX-XXX LOCATED AT THE HONG KONG AND SHANG HAI BANKING CORPORATION, et al., Defendants. |
| Court | U.S. District Court — Eastern District of New York |
Zachary W. Carter, United States Attorney, Eastern District of New York by Arthur P. Hui, Asst. U.S. Atty., Brooklyn, New York, for Plaintiff.
O'Neill, Lysaught & Sun by Brian A. Sun, Ellyn S. Garofalo, Santa Monica, California, Joseph W. Ryan, Uniondale, New York, for Claimants Ko Sai-Man and Chiu Kim-Chun.
Currently before the Court are objections by Plaintiff United States of America ("the Government"), pursuant to Federal Rule of Civil Procedure 72(b), to the Report and Recommendation ("Report") of Magistrate Judge, now District Judge, Allyne Ross. In the Report, Judge Ross recommended that this Court grant the motion of Claimants Ko Sai-Man and Chiu Kim-Chun (collectively, "Claimants"), made pursuant to Federal Rule of Civil Procedure 12(c), for judgment on the pleadings. This Court on September 15, 1995 issued an Order adopting that part of Judge Ross's Report that concluded that Claimants had not waived any objections to jurisdiction. The September 15 Order also requested further briefing with respect to the remaining objections, in light of the Second Circuit's decision in United States v. All Funds on Deposit in any Accounts Maintained in the Names of Heriberto Castro Meza or Esperanza Rodriguez de Castro, 63 F.3d 148 (2d Cir.1995) ("Castro Meza"), aff'g 856 F.Supp. 759 (E.D.N.Y.1994) (Weinstein, J.), petition for cert. filed, 64 U.S.L.W. 3511 (Jan. 16, 1996) (No. 95-1134). For the reasons set forth below, the Court denies the Government's remaining objections and adopts Judge Ross's Report.
The factual and procedural background of this action are presented thoroughly in Judge Ross's Report.1 For the purpose of this Order, however, the Court briefly reviews certain pertinent history. The Government instituted this action in rem against the Defendant properties in September, 1991. The Government contends that the Defendant properties, which include "various bank accounts, parcels of real property, stock, and personalty, all located in Hong Kong and valued at approximately $1.5 million, are subject to forfeiture to the United States as proceeds of narcotics activity," pursuant to 18 U.S.C. § 981(a)(1)(A). (Report at 5.) At the time this action was commenced, Claimants were not (and they are not currently) Defendants in a related criminal action in the Eastern District of New York. Further, Claimants were not present in this district, either at the time that the Complaint was filed or thereafter. Upon the filing of the Complaint, warrants in rem were issued against the Defendant properties and each Defendant in rem was served by the Royal Hong Kong Police Force. (Id. at 7.)
Claimants, through United States counsel, filed this motion for judgment on the pleadings, on the ground that the Court lacked in rem jurisdiction. Specifically, Claimants contended that this Court lacked in rem jurisdiction because the Defendant properties are located outside of the United States. In response, the Government advanced three arguments. First, the Government contended that 28 U.S.C. § 1355(b)(2), as amended subsequent to the initiation of this action, provided a jurisdictional basis for forfeiture of a res located in a foreign country, and that this section should be applied retroactively to confer in rem jurisdiction over the Defendants. Second, the Government contended that, even if the new statutory provision were not applied retroactively, the Court had jurisdiction over the action under previously existing law. Finally, the Government contended that Claimants waived any objection to jurisdiction, as they had filed claims to the Defendant properties without objecting to jurisdiction in their initial submissions to the Court.
Judge Ross concluded that Claimants had not waived any objections to jurisdiction. (See Report at 15-29.) She also concluded that "when this action began in September 1991, no federal forfeiture statute authorized in rem jurisdiction over assets located outside the territorial boundaries of the United States." (See Report at 29, 48-60.) Finally, Judge Ross rejected the Government's argument that the 1992 amendments to 28 U.S.C. § 1355 could be applied retroactively to confer in rem jurisdiction in this action, (see Report 29-48), and recommended that the Court grant Claimants' motion for judgment on the pleadings.
For the reasons discussed below, the Court, like Judge Ross, finds that when this suit was commenced, no federal statute authorized the exercise of in rem jurisdiction in this action. Further, the Court agrees with Judge Ross that the 1992 amendments to 28 U.S.C. § 1355 do not apply retroactively. Moreover, the Court finds that the Second Circuit's decision in Castro Meza does not alter these conclusions.
Before turning to the merits of the Government's objections, the Court first considers the relevant standard of review.
In considering a motion for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c), the Court must "view the pleadings in the light most favorable to, and draw all inferences in favor of, the nonmoving party." Davidson v. Flynn, 32 F.3d 27, 29 (2d Cir.1994) (quoting Madonna v. United States, 878 F.2d 62, 65 (2d Cir.1989)). The Court should not dismiss the Complaint "unless it appears beyond doubt that the Plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Sheppard v. Beerman, 18 F.3d 147, 150 (2d Cir.) (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957)), cert. denied, ___ U.S. ___, 115 S.Ct. 73, 130 L.Ed.2d 28 (1994).
When a motion has been referred to a Magistrate Judge, Federal Rule of Civil Procedure 72(b) instructs the District Court to make a "de novo determination upon the record ... of any portion of the Magistrate Judge's disposition to which specific objection has been made, in accordance with this rule." Fed.R.Civ.P. 72(b). Further, the Court may accept any portion of the disposition of the Magistrate Judge to which no objection has been made, provided that there is no clear error on the face of the record. Fed.R.Civ.P. 72 advisory committee note (citing Campbell v. United States Dist. Ct., 501 F.2d 196 (9th Cir.), cert. denied, 419 U.S. 879, 95 S.Ct. 143, 42 L.Ed.2d 119 (1974)). After conducting its review, the district court may "accept, reject, or modify the recommended decision." Id.
With these standards in mind, the Court considers the Government's objections to Judge Ross's Report. For ease of reference, pertinent portions of Judge Ross's Report are set forth below. The Government's objections to the Report follow. First, the Court reviews the Government's objection to Judge Ross's finding that the governing law did not permit the Court to assert in rem jurisdiction over the Defendant assets prior to the 1992 amendments to 28 U.S.C. § 1355 ("1992 amendments"). Second, the Court considers the Government's challenge to Judge Ross's conclusion that the 1992 amendments do not operate retroactively to authorize the Court to assert in rem jurisdiction in this action. Finally, the Court addresses the submissions by the parties that address the significance of Castro Meza.
The facts of this case presented issues at the time it was commenced with which numerous district courts had struggled — namely, whether, in a civil forfeiture action, a district court could issue process in rem, and exert in rem jurisdiction over, assets located outside the territorial boundaries of the district court. (See Report at 12.) Further, Judge Ross addressed whether, even assuming a district court was authorized to issue extraterritorial process in rem and to secure in rem jurisdiction over assets located outside a district court's territorial boundaries, that authority extended to assets located outside of the United States. (Id.)
Judge Ross, in her exhaustive Report, set forth the applicable statutes and case law governing subject matter jurisdiction, venue and service of process in rem, in civil forfeiture actions before the 1992 amendments. (See Report 48-59.) Briefly put, when this action was commenced in 1991, the pertinent statutes governing civil forfeiture proceedings provided that venue in civil forfeiture proceedings was proper in the district in which: i) the property sought to be forfeited was found, see 28 U.S.C. § 1395(b); ii) a related criminal prosecution against the claimant was brought, see 18 U.S.C. § 981(h) ("Section 981(h)") and 21 U.S.C. § 881(j) ("Section 881(j)") (identical language conferring venue in civil forfeiture actions); or iii) the claimant-defendant owning such property was found.2See id.
Finally, the civil forfeiture statutes authorized service of process in rem in accordance with the Supplemental Rules Relating to Admiralty and Maritime Actions. See 21 U.S.C. § 881(b) and 18 U.S.C. § 981(b)(2). Under Supplemental Rule E(3)(a), a district court is authorized to issue process in rem to be served only in the district in which it sits. Suppl.R.Ad.M. E(3)(a). The Supplemental Rules also provide for service of process in rem pursuant to the Federal Rules of Civil Procedure, to the extent that such service would not be inconsistent with the Supplemental Rules. Suppl.R.Ad.M.A. Federal Rule of Civil Procedure 4 ("Rule 4") provides for extraterritorial and international service of process, but only where independently authorized by a state or federal statute which renders a defendant amenable to service. See ...
To continue reading
Request your trial