Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_07-cv-00779/USCOURTS-caed-1_07-cv-00779-2/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 28:1341 Complaint for Forfeiture

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

UNITED STATES OF AMERICA, )

)

Plaintiff, )

v. )

)

APPROXIMATELY $228,218.65 in )

United States Currency, etc., )

)

Defendant. )

)

 )

1:07-cv-00779-LJO-SMS

FINDINGS AND RECOMMENDATION RE:

PLAINTIFF’S MOTION FOR DEFAULT

JUDGMENT (DOC. 17)

Plaintiff is proceeding with a civil action in this Court.

The matter has been referred to the undersigned Magistrate Judge

pursuant to 28 U.S.C. § 636(b) and Local Rule 72-302(c)(19). 

Pending before the Court is Plaintiff’s motion for default

judgment filed on December 11, 2007. 

By separate order, the Court vacated the hearing on the

motion, and the matter has been submitted to the Court for

decision. 

II. Default Judgment

A court has the discretion to enter a default judgment

against one who is not an infant, incompetent, or member of the

armed services where the claim is for an amount that is not

certain on the face of the claim and where (1) the defendant has

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been served with the claim; (2) the defendant’s default has been

entered for failure to appear; (3) if the defendant has appeared

in the action, the defendant has been served with written notice

of the application for judgment at least three days before the

hearing on the application; and, (4) the court has undertaken any

necessary and proper investigation or hearing in order to enter

judgment or carry it into effect. Fed. R. Civ. P. 55(b); Alan

Neuman Productions, Inc. v. Albright, 862 F.2d 1388, 1392 (9th

Cir. 1988). Factors that may be considered by courts in

exercising discretion as to the entry of a default judgment and

as to setting aside a default include the nature and extent of

the delay, Draper v. Coombs, 792 F.2d 915, 924-925 (9 Cir. th

1986); the possibility of prejudice to the plaintiff, Eitel v.

McCool, 782 F.2d 1470, 1471-72 (9th Cir.1986); the merits of

plaintiff's substantive claim, id.; the sufficiency of the

allegations in the complaint to support judgment, Alan Neuman

Productions, Inc., 862 F.2d at 1392; the amount in controversy,

Eitel v. McCool, 782 F.2d at 1471-1472; the possibility of a

dispute concerning material facts, id.; whether the default was

due to excusable neglect, id.; and, the strong policy underlying

the Federal Rules of Civil Procedure that favors decisions on the

merits, id.

With respect to default judgments in proceedings that are in

rem actions for forfeiture, both the general Federal Rules of

Civil Procedure and the Supplemental Rules for Certain Admiralty

and Maritime Claims (Supp. R.) apply, but the latter rules

prevail if there is an inconsistency. Supp. R. A(1). Supp. R.

G(1) provides that the rule governs a forfeiture action in rem

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Local Rule A-530, as amended December 1, 2007, continues to refer to 1

Supplemental Rule C; however, Supplemental Rule G took effect in December

2006. (See, www.uscourts.gov/rules/Letters-Orders.pdf, Transmittal Letters to

Congress and Supreme Court Orders, Order of April 12, 2006.) It expressly

governs a forfeiture action in rem arising from a federal statute. Supp. R.

G(1). Supplemental Rules C and E also apply, but only to the extent that Rule

G does not address an issue. Supp. R. G(1).

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arising from a federal statute; to the extent that Rule G does

not address an issue, Supp. Rules C and E also apply.

II. Notice

Here, returns of service reveal that the Defendant currency

was arrested on or about July 2, 2007. (Docs. 6, 7.) 

The publication (a single instance of publishing the notice

on July 11, 2007) ordered by the Court on May 31, 2007 (Doc. 5),

was effected in compliance with Local Rules A-530 and 83-171, and

proof thereof was filed by Plaintiff on July 24, 2007. (Doc. 8). 1

However, the publication did not comply with the requirement of

Supp. Rule G(4)(a), which was in effect at the time of the

publication and which requires notice by publication that

generally must appear once a week for three consecutive weeks. 

The Court requested supplemental submissions by the

Plaintiff on this issue, and Plaintiff submitted an additional

declaration of Elisa M. Maguire in which she stated that on or

about February 1, 8, and 15, 2007, notice of the administrative

forfeiture action was published in the Wall Street Journal by the

seizing agency, the United States Postal Service; further, the

Journal was shown by a “Google” search to have a daily

circulation of more than 2,000,000 papers; the declarant had

personal knowledge that the paper was sold in local convenience

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Plaintiff admits that the information concerning the exception to the 2

governing Supplemental Rule should have been set forth in the original motion.

Local Rule 78-230(a) states that the moving party shall file copies of all

documentary evidence that the party intends to submit in support of a motion.

The Court notes that Plaintiff’s failure to comply with the local rule is the

cause of the delay in the processing of Plaintiff’s motion for default

judgment.

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stores throughout Fresno and along California State Highway 99.2

Supplemental Rule G(4)(a)(iii)(B) provides that if the

property was the subject of an administrative forfeiture, and

notice of forfeiture was published three times by the

administrative seizing agency, only one publication is necessary.

Based on the supplemental briefing, Plaintiff has established

that an exception to Rule G(4)’s requirement of several

publications applies to the instant case.

With respect to any person reasonably believed to be or

appearing to be a potential claimant, Rule G(4)(b) requires the

sending of notice. The allegations of the complaint reveal that

Martin Espana-Villasenor (Villasenor) and his wife, Maria Espana,

had deposited the currency in an account in connection with the

purchase of a laundromat franchise business, (Cmplt. ¶¶ 9-11,

15); thus, they are potential claimants.

With respect to potential claimant Maria Espana, a

stipulation for final judgment of forfeiture was entered into

between Espana and the government and was filed on December 11,

2007, in which Espana acknowledged personal receipt of actual

notice of the arrest and suit as well as the presence of

reasonable cause for the seizure and arrest of the funds,

acknowledged being sole owner and claimant to the funds, and

agreed to a final judgment of forfeiture with respect to the

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currency and any interest accruing thereon. (Doc. 18.)

With respect to potential claimant Villasenor, the complaint

and associated documents were served on Villasenor by personal

service on August 14, 2007. (Doc. 10.)

Although Local Rule A-540(d) requires at least seven court

days of notice of the proceeding for default judgment be given to

any person who has appeared, it does not appear that Villasenor

has appeared. Consequently, the ex parte nature of the proceeding

is appropriate. 

Accordingly, the Court concludes that publication in

accordance with the rules and adequate notice has been given.

III. Default 

The clerk entered the default of Villasenor on November 19,

2007, after Villasenor failed to file a claim, answer, or other

appearance in the action. (Doc. 14.) The time for filing a claim,

answer, or other appearance had passed. Supp. R. G(5). It appears

that default was appropriately entered against Villasenor.

IV. Legal Sufficiency of the Complaint

A default judgment generally bars the defaulting party from

disputing the facts alleged in the complaint, but the defaulting

party may argue that the facts as alleged do not state a claim.

Alan Neuman Productions, Inc. v. Albright, 862 F.2d 1388, 1392.

Thus, well pleaded factual allegations, except as to damages, are

taken as true; however, necessary facts not contained in the

pleadings, and claims which are legally insufficient, are not

established by default. Cripps v. Life Ins. Co. of North America,

980 F.2d 1261, 1267 (9 Cir. 1992); TeleVideo Systems, Inc. v. th

Heidenthal, 826 F.2d 915, 917 (9 Cir. 1987). th

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Here, as required by Supp. R. G(2), the complaint was

verified and stated the grounds for subject matter jurisdiction

and in rem jurisdiction as well as venue; described the property

with reasonable particularity; described the location of the

property (an account); and identified the statute under which the

forfeiture was brought, as well as stated sufficiently detailed

facts to support a reasonable belief that the government will be

able to meet its burden of proof at trial. The complaint also

detailed a complex scheme whereby unemployment insurance was

obtained by fraudulent means, including use of the mails and

identity theft. (Cmplt. pp. 2-6.) The complaint further described

in detail the earnings and financial status of the potential

claimants at the pertinent time.

The complaint stated that the currency constituted proceeds

involved in a conspiracy to commit, or are traceable to a

violation of, 18 U.S.C. §§ 1341 (mail fraud), §1028(a)(7)

(identity theft), and 31 U.S.C. § 5324(a) (money laundering).

(Cmplt. p. 1.) Title 18 U.S.C. § 981(a)(1)(C) provides that

property that constitutes proceeds of, or is traceable to

proceeds obtained directly or indirectly from a violation of §

1028, is subject to forfeiture to the United States. Further, 31

U.S.C. § 5317(c) provides for forfeiture of any property involved

in, or traceable to, a violation of § 5324 or any conspiracy to

commit any such violation.

Thus, the complaint adequately states a claim for forfeiture

of the currency.

V. Discretionary Considerations concerning Default Judgment

In the application for entry of default against potential

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claimant Villasenor, the paralegal stated under penalty of

perjury that to the best of her knowledge or belief, Villasenor

was not in the military service of the United States within the

meaning of the Soldier’s and Sailor’s Civil Relief Act. It thus

appears that Villasenor’s status does not preclude entry of a

default judgment.

Here, it does not appear that anyone other than the claimant

who has previously entered into a stipulation for final judgment

of forfeiture could claim an interest in the property. It does

not appear that anyone, including Villasenor, has responded to

the complaint. It does not appear that there is any risk of

mistake or excusable neglect on the part of anyone with a

potential interest in the property or of a dispute as to a

material fact essential to the government’s case. No just cause

for delay appears; the only other potential claimant has entered

into an agreement with the government pursuant to which this

proceeding for default judgment is contemplated. It is apparent

from the declarations submitted to the Court that none of the

potential claimants is an infant, incompetent, or member of the

armed services. There does not appear to be any reason why the

general policy in favor of a decision on the merits would warrant

refusing to enter the requested default judgment.

Accordingly, the Court finds that pursuant to Local Rule A540(d), Plaintiff has shown its entitlement to a default judgment

of forfeiture.

VI. Form of Judgment

With respect to the form of the judgment, Plaintiff has

established that it is entitled to a judgment against the

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property, Waterloo Distilling Corp. v. U.S., 282 U.S. 577, 581

(1931), affecting the interests of all persons in the property,

Hanson v. Denkla, 357 U.S. 235, 246 n.12 (1958).

VII. Recommendation

Accordingly, it IS RECOMMENDED that

1. Plaintiff’s motion for default judgment BE GRANTED; and

2. Plaintiff IS ENTITLED to, and the Clerk SHOULD ENTER, a

judgment that 

a) The interest/s of Martin Espana-Villasenor in the

Defendant property are condemned and forfeited to the United

States of America; and

b) The right, title, and interest of potential claimant

Martin Espana-Vilasenor in the Defendant property are forfeited

to the United States of America pursuant to 18 U.S.C. §

981(a)(1)(C) and 31 U.S.C. § 5317(c)(2), and are vested in the

United States; and

c) All persons claiming any right, title, or interest

in or to the Defendant property have defaulted and no longer have

any right, title, or interest in the Defendant property

whatsoever; and

3. The Clerk ENTER final judgment of forfeiture for

Plaintiff United States that vests in the United States of

America all right, title, and interest in the Defendant real

property. 

This report and recommendation is submitted to the United

States District Court Judge assigned to the case, pursuant to the

provisions of 28 U.S.C. § 636 (b)(1)(B) and Rule 72-304 of the

Local Rules of Practice for the United States District Court,

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Eastern District of California. Within thirty (30) days after

being served with a copy, any party may file written objections

with the court and serve a copy on all parties. Such a document

should be captioned “Objections to Magistrate Judge’s Findings

and Recommendations.” Replies to the objections shall be served

and filed within ten (10) court days (plus three days if served

by mail) after service of the objections. The Court will then

review the Magistrate Judge’s ruling pursuant to 28 U.S.C. § 636

(b)(1)(C). The parties are advised that failure to file

objections within the specified time may waive the right to

appeal the District Court’s order. Martinez v. Ylst, 951 F.2d

1153 (9th Cir. 1991).

IT IS SO ORDERED.

Dated: January 11, 2008 /s/ Sandra M. Snyder 

icido3 UNITED STATES MAGISTRATE JUDGE

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