Yskamp v. Drug Enforcement Admin.

• Decision Date: 14 December 1998
• Docket Number: No. 98-6148,98-6148
• Citation: 163 F.3d 767
• Parties: Peter YSKAMP; CIGNA Corp., in its individual capacity and in its capacity as subrogee to the rights and interest of Peter Yskamp, and in its capacity as subrogee to the rights and interest of James E. Haldan, deceased v. DRUG ENFORCEMENT ADMINISTRATION, CIGNA Corp., Petitioner. . Submitted Pursuant to Third Circuit LAR 34.1(a)
• Court: U.S. Court of Appeals — Third Circuit

Page 767

163 F.3d 767

Peter YSKAMP; CIGNA Corp., in its individual capacity and in its capacity as subrogee to the rights and interest of Peter Yskamp, and in its capacity as subrogee to the rights and interest of James E. Haldan, deceased v. DRUG ENFORCEMENT ADMINISTRATION CIGNA Corp., Petitioner.

No. 98-6148.

United States Court of Appeals, Third Circuit.

Submitted Pursuant to Third Circuit

LAR 34.1(a) Dec. 14, 1998.

Decided Dec. 21, 1998.

John S. Hoff, Hoff & Garley, Chicago, IL, for Petitioner.

Robert A. Zauzmer, Office of United States Attorney, Philadelphia, PA, for Respondent.

Before: SLOVITER and COWEN, Circuit Judges, and OBERDORFER, District Judge. ^*

OPINION OF THE COURT

SLOVITER, Circuit Judge.

Appellant CIGNA Corp. ("CIGNA") seeks review of the 1994 administrative forfeiture of a Lear jet by the Drug Enforcement Administration ("DEA"). CIGNA contends that because the value of the aircraft seized exceeded $500,000, it was improper for the DEA to use administrative forfeiture instead of judicial forfeiture. Additionally, CIGNA raises several constitutional grounds for reversing the forfeiture. For the reasons stated herein, we will deny CIGNA's Petition for Review.

I.

Peter Yskamp purchased the Lear jet in 1991 for use in a charter operation certified by the Federal Aviation Administration ("FAA"). James E. Haldan held a lien on the jet pursuant to a security agreement signed in August 1991, a few days before Yskamp purchased the jet, but that agreement was not filed with the FAA (as required by law) until after seizure of the plane more than three years later. CIGNA insured the jet under a standard policy which was later amended at Yskamp's request to cover losses caused by war or confiscation.

In September 1994, DEA officers who had become suspicious of the activities of certain suspects tracked them to the Bermuda Dunes airport in California. The suspects unloaded luggage from a truck into Yskamp's jet. After the suspects boarded the jet, the officers approached and requested permission to search it, which was granted. On board, the officers found 12 pieces of luggage containing 300 kgs of cocaine.

When questioned afterwards, Yskamp conceded that this flight and a prior one with the same suspects were odd, because the bulk of the payment was in cash, the travelers had significantly more luggage in one direction than the other, and the turn-around time was short. Additionally, when questioned by the DEA, pilots for Yskamp stated initially (but later retracted when Yskamp was present) that they had informed him of their suspicions, and that he told them to ignore these concerns.

Following the DEA's seizure of the jet, Yskamp filed a claim for loss with CIGNA, which CIGNA approved and paid under his amended insurance policy. As provided in the contract, CIGNA then became Yskamp's subrogee. CIGNA also paid the outstanding loan balance owed Haldan, even though Haldan was not named on the policy, and then claimed status as Haldan's subrogee, as well. Finally, by paying Yskamp's insurance claim, CIGNA became owner of the jet outright in addition to his subrogee.

Pursuant to the administrative forfeiture provision in 19 U.S.C. § 1607, the DEA mailed notices of seizure dated October 11, 1994, to Yskamp and Haldan. The mailed notices contained information on the first date set for public notice of the seizure, the appraised value of the property seized ($1 million), and the federal judicial district in which the seizure took place. The notices also explained that the party could post a $5000 bond and pursue judicial forfeiture proceedings as an alternative pursuant to the statute.

Attorney John Scott Hoff (CIGNA's counsel here) notified the DEA of his representation of both CIGNA and Yskamp on October 11, 1994. Included with this notice was a petition for expedited release of the jet. The DEA then issued a notice of seizure addressed to Yskamp c/o Hoff as his attorney. CIGNA wrote to the DEA on November 15, 1994, confirming its understanding that the DEA would proceed on the petition for expedited release and stating that CIGNA's decision whether to post bond was still pending.

CIGNA failed to post the judicial bond and, on December 16, the DEA administratively forfeited the jet. Several days later, the DEA denied CIGNA's expedited release petition, but agreed to treat CIGNA's submission as a petition for discretionary mitigation or remission and agreed to CIGNA's filing of additional documentation for that purpose.

Following the submission of additional information, the DEA denied the mitigation or remission petition. The DEA concluded, inter alia, that neither Yskamp nor CIGNA had taken reasonable steps to assure that the jet was not used for conveying illegal drugs. CIGNA filed a petition for reconsideration of the forfeiture based on the DEA's failure to consider CIGNA's status as subrogee of Haldan's interest. The DEA denied that petition in August 1996.

In September 1996, CIGNA, together with Yskamp, timely filed in the Court of Appeals for the Ninth Circuit a Joint Petition for Review of the DEA's order of forfeiture. The court dismissed the claims of Yskamp as well as those of CIGNA as subrogee of both Yskamp and Haldan for lack of jurisdiction, reasoning that Yskamp was not an aggrieved party, and that Haldan was merely an unsecured creditor with whom CIGNA had no relationship creating subrogation. The court then transferred the remainder of the case to this court on jurisdictional grounds pursuant to 28 U.S.C. § 1631. CIGNA pursues review of the forfeiture on its own behalf as owner of the jet.

We have jurisdiction pursuant to 21 U.S.C. § 877. We will set aside the agency's determination only if it is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. See 5 U.S.C. § 706(2); Humphreys v. DEA, 96 F.3d 658, 660 (3d Cir.1996). However, appeal from a petition for remission or mitigation is limited to assuring that the DEA complied with statutory and procedural requirements. See Schrob v. Catterson, 948 F.2d 1402, 1412 n. 9 (3d Cir.1991); United States v. Kravitz, 738 F.2d 102, 105 (3d Cir.1984) ("[T]he remission decision of the Attorney General is not open to judicial review."); see also Marshall Leasing, Inc. v. United States, 893 F.2d 1096 (9th Cir.1990) (upholding district court's jurisdiction to consider collateral attack on DEA's selection of administrative forfeiture). Thus, despite CIGNA's invitation, we will not review de novo the merits of the DEA's conclusion that CIGNA was not entitled to return of the jet.

II.

The principal issue in this appeal is a pure question of law and depends on statutory interpretation. At issue is whether the DEA must use the procedures for judicial forfeiture, rather than for administrative forfeiture, if the value of the object seized because it was transporting a controlled substance exceeds $500,000. To address the issue, we briefly review the history and operation of the civil forfeiture laws.

A.

The statutory procedures for civil forfeiture applicable to the DEA and other agencies, such as the Immigration and Naturalization Service, the Customs Service, and the Federal Bureau of Investigation, appear at 19 U.S.C. § 1606 et seq. The current provisions reflect the comprehensive revision made to the federal forfeiture statutes in 1984. Before the 1984 amendments, § 1607, which authorizes administrative forfeiture, provided:

§ 1607. Seizure; value $10,000 or less

If such value of such vessel, vehicle, merchandise, or baggage does not exceed $10,000, the appropriate customs officer shall cause a notice of the seizure of such articles and the intention to forfeit and sell or otherwise dispose of the same according to law to be published for at least three successive weeks in such manner as the Secretary of the Treasury may direct. For the purposes of this section and sections 1610 and 1612 of this title merchandise the importation of which is prohibited shall be held not to exceed $10,000 in value.

19 U.S.C. § 1607 (1982). In contrast, § 1610, which authorizes judicial forfeiture, stated:

§ 1610. Seizure, value more than $10,000

If the value of any vessel, vehicle, merchandise, or baggage so seized is greater than $10,000, the appropriate customs officer shall transmit a report of the case, with the names of available witnesses, to the United States attorney for the district in which the seizure was made for the institution of the proper proceedings for the condemnation of such property.

19 U.S.C. § 1610 (1982). ¹

Thus, the statute required an agency seeking forfeiture of property to use judicial process whenever the value of the property exceeded $10,000. For property appraised at or below $10,000, the agency could use administrative procedures, and these procedures required public notice of the intended action. A party claiming an interest in property that was subjected to administrative forfeiture could opt for a judicial proceeding by notifying the seizing agency and posting a bond, both within a specified period from the date of first public notice. 19 U.S.C. § 1608. ²

The 1984 amendments reworded these sections, increased the dollar cutoff, and slightly altered the process. ³ While the dual forum approach to forfeiture remained, Congress added a provision directing that in addition to the public notice already required, the interested parties be given personal notice.

The relevant sections of the statute, as amended in 1984, provided:

§ 1607. Seizure; value $100,000 or less, prohibited merchandise, transporting conveyances

(a) If--

(1) the value of such seized vessel, vehicle, aircraft, merchandise, or baggage does not exceed $100,000;

(2) such seized merchandise is merchandise the importation of which is prohibited; or

(3) such seized vessel, vehicle, or aircraft was used to import, export, transport, or store any controlled substance;

the appropriate customs officer shall cause a...