Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_05-cv-00149/USCOURTS-caed-2_05-cv-00149-9/pdf.json

Nature of Suit Code: 690
Nature of Suit: Other Forfeiture and Penalty Suits
Cause of Action: 28:1345 Complaint for Forfeiture

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IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

UNITED STATES OF AMERICA 

Plaintiff,

v.

APPROXIMATELY $1,200,000 IN

U.S. CURRENCY SEIZED FROM FIRST

CALIFORNIA BANK ACCT. NO.

2005638, et. al, 

Defendants. 

 No. Civ. 05-149 DFL KJM

MEMORANDUM OF OPINION AND

ORDER

This is a civil forfeiture action in which the government

has seized funds held in three separate accounts in the amount of

$1.2 million, $225,958.84, and $177,695.11 respectively. The

government seizure rests on a claim that the funds are the

proceeds of fraud. Claimant John Hollis (“Hollis”) moves to stay

the proceeding under 18 U.S.C. 981(g)(2) because he is presently

the subject of a related criminal investigation. The government

opposes this motion and has filed a cross-motion to dismiss

Hollis’ claim. It argues that Hollis does not have Article III

standing to claim an interest in the defendant funds and that

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Hollis lacks statutory standing to seek a motion to stay because

he has not filed an answer. The government also asserts that,

even if Hollis has standing, the court should issue, at most, a

protective order rather than a stay. For the reasons stated

below, the court: (1) GRANTS the government’s motion to dismiss

Hollis’ claim as to the seizure of the $1.2 million and the

$177,695.11; (2) DENIES the government’s motion to dismiss

regarding the $225,958.84; and (3) enters a protective order that

limits discovery in the forfeiture proceeding to the issue of

Hollis’ Article III standing until the criminal investigation and

prosecution of Hollis has concluded. 

I.

On August 10, 2004, the government filed a criminal

complaint against Robert Lewis Brown, a.k.a. Matthew Schachter

(“Brown”). (Mot. to Stay at 3.) The complaint alleges that

Brown and others sold worthless insurance policies, through TriContinental Exchange, Ltd. (“TCE”) and Combined Services Ltd.

(“CSL”). (Gov’t Opp’n at 7.) The government also alleges that

Hollis represented that he was Brown’s counsel and that Hollis

transferred funds on Brown’s behalf. (Mot. to Stay at 3.) 

Between June 2001 and August 2002, Brown wired approximately

$5 million from the TCE bank account to an account at the Royal

Bank of Canada. (Gov’t Opp’n at 8.) During the summer of 2003,

the bank told Brown that it was closing his account. (Id.) 

Before the account closed, Brown transferred approximately $2.3

million to a First California Bank account held by Hollis. (Id.) 

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Six weeks later Hollis transferred $1.8 million of those funds to

an account at Jyske Bank in Gibraltar. (Id.) In mid-September

2004, about two weeks after Brown’s arrest, Jyske Bank

transferred $1.2 million back to Hollis’ First California Bank

account. (Id. at 9.) 

The government further claims that Hollis assisted Brown in

moving another $602,076.07. (Cross Mot. at 9.) Hollis allegedly

told law enforcement agents in July 2004 that TCE maintained a

reserve fund of approximately $600,000 to pay potential insurance

claims. (Id.) These funds were held by Scotiabank in the

Bahamas. (Id.) On September 15, 2004, Scotiabank wired these

funds to Hollis’ First California Bank account. (Id. at 10.) 

On September 17, 2004, a representative from First

California Bank told Hollis that the government had seized the

$1.2 million that was wired from Jyske Bank but had not yet

seized the $602,076.07 that had just arrived from Scotiabank. 

(Id.) Hollis responded, “I’ll be moving them then.” (Id.) 

Hollis wrote a $284,000 check to himself and deposited it into

his personal Bank of America account. (Id.) The government

seized $225,958.84 of these funds on September 29, 2004. (Hollis

Mot. at 4.) Hollis also wired $300,000 to the Bullivant Houser

and Bailey law firm (“Bullivant funds”). (Gov’t Mot. at 10.) 

Bullivant voluntarily turned over $177,695.11 to the government. 

(Id. at 11.) In sum, the government seized $1.2 million from

Hollis’ First California Bank account, $225,958.84 from Hollis’

Bank of America account, and $177,695.11 from the Bullivant law

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firm. These funds are the defendants in this action. 

On January 24, 2005, the government filed a Verified

Complaint for Forfeiture in Rem. The complaint alleges that the

funds described above “were each involved in, or traceable to,

money laundering violations and/or constitute or are derived from

the proceeds of mail fraud, or a conspiracy to commit such

offenses.” (Hollis Mot. at 4.) 

Before any claimant appeared, the action was stayed by

stipulation pending the conclusion of the criminal case against

Brown, or the expiration of six months, whichever should occur

first. In the stipulation and order staying the case, Brown

asserted that he was the owner of all the funds at issue in this

case. (5/11/2005 Stipulation & Order ¶ 2.) In addition, Hollis

asserted an interest in the funds seized from his trust and

personal accounts, including the $1.2 million seized from his

First California Bank account and the $225,958.84 seized from his

Bank of America account. (Id. ¶ 1.) Hollis also stipulated that

approximately $54,497.79 of these funds represented payment for

legal fees, costs, and expenses earned by Hollis and other legal

counsel for Brown prior to the seizure. (Id.) Hollis did not

claim an interest in the Bullivant funds. (Id.) Indeed, on

September 23, 2005, the parties stipulated that Bullivant held

the funds in trust for Brown. (9/23/2005 Stipulation & Order ¶

1-2.) 

During the period of the stay, Brown died in custody and the

government dismissed the criminal charges against him. (Id. at

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12.) On December 19, 2005, after Brown died, Hollis filed a

statement of interest in the defendant funds seized from his

personal and trust accounts ($1.2 million and $225,958.84). 

(12/19/2005 Statement of Interest at 1.) He also stated a claim

to the Bullivant funds as “trustee.” (Id. at 1-2.) 

On January 4, 2006, Hollis filed a motion to stay and an

amended statement of interest. In the amended interest

statement, Hollis asserts that he has: (1) an ownership and

possessory interest in the $225,958.84 seized from his Bank of

America account; (2) an ownership interest in the $177,695.11

Bullivant funds; and (3) a possessory interest in the $1.2

million seized from his First California Bank account because

those funds were “placed into his account in his (Hollis’)

capacity as an agent and trustee for ‘Robert Brown’.” (First Am.

Statement of Interest at 1-2.) 

On March 7, 2006, without leave of court, Hollis filed a

second amended statement of interest with his opposition to the

government’s cross-motion to dismiss. In the second amended

interest statement, Hollis asserts that his First California Bank

account is an attorney-client trust account. (Second Am.

Statement of Interest ¶ 1.) He claims that he maintained the

$1.2 million in that account on behalf of Brown, and that he “is

duly authorized and responsible to seek return of said funds.” 

(Id.) Hollis also claims an ownership interest in the

$225,958.84 seized from his personal Bank of America account

because the funds represent “legal fees that he earned as

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income.” (Id. ¶ 2.) Finally, Hollis claims an ownership

interest in the $177,695.11 seized from Bullivant. (Id. ¶ 3.) 

He asserts that he advanced the funds to Bullivant as attorney

fees. (Id.) When Bullivant terminated its representation,

Hollis claims Bullivant had a duty to return the balance of the

funds to Hollis. (Id.) 

II.

Hollis moves to stay this civil forfeiture proceeding under

18 U.S.C. § 981(g)(2): 

Upon the motion of a claimant, the court shall stay the

civil forfeiture proceeding with respect to that

claimant if the court determines that - (A) the

claimant is the subject of a related criminal

investigation or case; (B) the claimant has standing to

assert a claim in the civil forfeiture proceeding; and

(C) continuation of the forfeiture proceeding will

burden the right of the claimant against selfincrimination in the related investigation or case. 

The government stipulates that Hollis “is the subject of a

related criminal investigation or case.” (Cross Mot. at 4.) 

However, the government argues that Hollis does not have either

statutory or Article III standing to assert a claim. (Id. at 4,

25-28.) In assessing whether Hollis has standing, the government

urges the court to ignore Hollis’ second amended statement of

interest because he filed it without leave to amend, in violation

of Fed. R. Civ. P. 15(a). (Reply at 2-3.) Finally, the

government argues that, even if Hollis did have standing, he has

not shown why a protective order rather than a stay would be

insufficient. (Id.)

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A. Hollis’ Second Amended Statement of Interest

A statement of interest is a responsive pleading. Fed. R.

Civ. P. Supplemental Rule C(6). Fed. R. Civ. P. 9(h) states that

amendment of such a pleading is governed by Fed. R. Civ. P. 15. 

Under Rule 15(a), a claimant may amend his statement of interest

at “any time within 20 days after it is served.” Fed. R. Civ. P.

15(a). Otherwise, he may only amend “by leave of court or by

written consent of the adverse party.” Id. 

Hollis filed his first statement of interest on December 19,

2005. (See Docket # 33.) He filed his first amended statement

within 20 days on January 4, 2006. (See Docket # 37.) However,

he did not file his second amended statement until March 7, 2006,

well beyond the 20 day limit. (See Docket # 52.) Therefore, the

second amended statement of interest is a nullity that should not

be considered by the court. See Colbert v. City of Philadelphia,

931 F.Supp. 389, 393 (E.D.Pa. 1996) (citing Fed. R. Civ. P.

15(a)) (federal district court did not consider untimely second

amended complaint because plaintiffs did not request leave to

amend). 

Even if Hollis had requested leave to amend, Hollis has not

shown why he would be entitled to such an amendment. When ruling

on a motion for leave to amend, courts consider factors such as

undue delay, bad faith or dilatory motive, futility of amendment,

and undue prejudice to the opposing party. Poling v. Morgan, 829

F.2d 882, 886 (9th Cir. 1987). Here, Hollis appears to be acting

in bad faith by attempting to amend because: (1) he contradicts

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his previous statements; and (2) he could have made these factual

allegations earlier. For instance, he now asserts for the first

time that the $225,958.84 seized from his personal Bank of

America represents “legal fees that he earned as income.” (Id. ¶

2.) He also asserts for the first time that the funds that he

advanced to Bullivant were to be used as attorneys fees, and

that, upon Brown’s death, Bullivant had a duty to return those

fees. (Second Am. Statement of Interest ¶ 3.) However, these

assertions contradict Hollis previous stipulation on May 11, 2005

that only $54,497.79 of the defendant funds represented payment

for legal fees, costs, and expenses. (5/11/2005 Stipulation &

Order ¶ 1.) Moreover, Hollis gives no reason why he could not

have claimed earlier that these funds represented legal fees and

costs. As such, it appears that Hollis has only amended his

statement of interest in a bad faith attempt to re-shape his

factual assertions to circumvent the arguments made by the

government in its motion to dismiss. 

For these reasons, the court disregards Hollis’ second

amended statement of interest. 

B. Statutory Standing

Hollis concedes that to satisfy Section 981(g)(2)(B)’s

standing requirements he must “establish standing both under Rule

C(6) of the Supplemental Rules for Certain Admiralty and Maritime

Claims (‘Rule C(6)’) and under Article III of the United States

Constitution.” (Mot. to Stay at 5-6). The government argues

that Hollis has failed to establish standing under Rule C(6)

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because he has not yet filed an answer. (Cross Mot. at 25-28.) 

To satisfy the statutory standing requirements, Hollis must

file both: (1) a verified statement within 30 days of receipt of

the government’s complaint or completed publication, and (2) an

answer within 20 days after the filing of the statement.” Fed.

R. Civ. P. Supplemental Rule C(6). The purpose behind Rule C(6)

is “to inform the court that there is a claimant to the property

who wants it back and intends to defend it.” United States v.

Real Property, 135 F.3d 1312, 1317 (9th Cir. 1998). 

The district court has discretion to allow late filing of an

answer. United States v. Real Property at 2659 Roundhill Dr.,

Alamo, Cal., 194 F.3d 1020, 1024 (9th Cir. 1999). “Although a

formal extension request is surely envisioned, the district court

has ‘discretion to overlook the failure to conform to the

requirements of Rule C(6).’” Id. (citing United States v. 2930

Greenleaf Street, 920 F.Supp. 639, 644 (E.D.Pa. 1996)). An

answer is not required for the court to grant a motion to stay. 

See United States v. 14280 NW Tradewinds Street, No. Civ. 00-

1506-FR, 2001 WL 34050118 at *1-2 (D.Or. May 17, 2001) (“Barajas

1”) (court granted motion to stay before answer was filed,

accepting claimant’s argument that he could not file an answer

without burdening his right against self-incrimination in a

related criminal case); United States v. 29.77 Acres, No. Civ.

00-1505-FR, 2001 WL 34050119 at *1 (D.Or. May 22, 2001) (“Barajas

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 The government claims that these cases are too conclusory 1

to offer guidance because neither addresses the standing

requirements of Rule C(6), and neither discusses “the explicit

language of Section 981(g)(3), which evidences that Congress

intended the stay provisions in 981(g) to apply to discovery, not

pleading practice.” (Opp’n at 27-28.) However, both cases

recognize that Rule C(6) applies. See Barajas 1 at *2; Barajas 2

at *1. Moreover, section 981(g)(3) does not limit the stay

provisions to discovery. The section merely clarifies what a

court can do “with respect to the impact of civil discovery.” 18

U.S.C. § 981(g)(3) (“With respect to the impact of civil

discovery . . . the court may determine that a stay is

unnecessary if a protective order limiting discovery would

protect the interest of one party without unfairly limiting the

ability of the opposing party.”) The section does not state that

stay provisions cannot also apply to pleading practice. Finally,

the issue here is not whether a stay should enter but whether an

answer must be on file prior to seeking a stay of discovery or

opposing a motion to dismiss. 

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2”) (same).1

The court has found only one reported decision where a

claimant was dismissed for failing to file a timely answer –

United States v. $288,914 in U.S. Currency, 722 F.Supp. 267 (E.D.

La. 1989). In that case, the court chose to enforce Rule C(6)

because the claimants also failed to appear at their depositions

and demonstrated a lack of interest in pursuing their claim. Id. 

Given this case law, the court will allow Hollis to file a

late answer. Hollis filed his original statement of interest on

December 19, 2005. (Docket # 33.) Two days later, on December

21, 2005, Hollis filed a stipulation and proposed order to extend

time to respond to the complaint. (Docket # 34.) The court

signed the proposed order on December 29, 2005, giving Hollis

until February 9, 2006 to file an answer. (Docket # 36.) Five

days after that, Hollis filed the motion to stay and his first

amended statement of interest. (Docket ## 37, 38.) Hearing for

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the motion was set for February 1, 2006, before the February 9 

deadline for the answer. (Id.) However, because the government

filed a cross-motion to dismiss, the hearing date was reset for

March 29 to give the parties sufficient time to file the

necessary oppositions and replies. (Docket # 47.) 

It appears that Hollis only missed the February 9 deadline

to file an answer because of the continuance of the hearing on

the motion to stay. There is no question that Hollis “is a

claimant to the property who wants it back and intends to defend

it.” See Real Property, 135 F.3d at 1317. Moreover, Hollis has

stated that he “is prepared to file an [a]nswer if the [c]ourt

deems it necessary prior to granting the stay.” (Hollis Opp’n at

2 n.3.) For these reasons, the court will permit Hollis to file

a late answer and finds that Hollis has statutory standing to

pursue a motion to stay prior to the filing of the answer.

C. Article III Standing

“To demonstrate standing under Article III . . . a litigant

must allege a ‘distinct and palpable injury to himself’ that is

the direct result of the ‘putatively illegal conduct of the

[adverse party]’ and ‘likely to be redressed by the requested

relief.’” United States v. Cambio Exacta, S.A., 166 F.3d 522,

527 (2d Cir. 1999) (quoting Warth v. Seldin, 422 U.S. 490, 501,

95 S. Ct. 2197 (1975); Gladstone Realtors v. Village of Bellwood,

441 U.S. 91, 99, 99 S.Ct. 1601 (1979); and Simon v. Eastern Ky.

Welfare Rights Org., 426 U.S. 26, 44-45, 96 S. Ct. 1917 (1976)). 

In a forfeiture action, a claimant may establish standing by

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demonstrating an ownership or possessory interest. United States

v. $100,348.00 in U.S. Currency, 354 F.3d 1110, 1118 (9th Cir.

2004). Such interests usually establish standing because they

are “reliable indicators of injury that occurs when property is

seized.” Cambio Exacta, 166 F.3d at 527. However, “the injury

to the party . . . remains the ultimate focus.” For this reason,

courts have “denied standing to ‘straw’ owners who do indeed

‘own’ the property, but hold title to it for somebody else. Such

owners do not themselves suffer an injury when the property is

taken.” Id.; accord United States v. One Parcel of Land, 902

F.2d 1443, 1444 (9th Cir. 1990) (possession of legal title by one

who does not exercise dominion and control over the property is

insufficient to establish standing); United States v. Vacant

Land, 15 F.3d 128, 130-31 (9th Cir. 1993) (same). In addition,

“where a mere custodian has possession, it is only a ‘naked claim

of possession’ and does not thereby impart Article III standing.” 

Cambio Exacta, 166 F.3d at 527. 

Standing “must be supported in the same way as any other

matter on which the plaintiff bears the burden of proof, i.e.,

with the manner and degree of evidence required at the successive

stages of the litigation.” Lujan v. Defenders of Wildlife, 504

U.S. 555, 561, 112 S.Ct. 2130 (1992). Because the parties here

are at the pleading stage, Hollis only has the burden to prove

that the facts he has alleged, if true, would entitle him to some

form of legal remedy. See Conley v. Gibson, 355 U.S. 41, 45-46

(1957). A claimant in a forfeiture proceeding is not required to

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submit additional evidence of ownership along with his claim to

establish standing. David B. Smith, Prosecution and Defense of

Forfeiture Cases ¶ 9.04[2][b] (2005); see also United States v.

$515,060.42 in U.S. Currency, 152 F.3d 491, 498 (6th Cir. 1998). 

Courts look to the state law in which the parties’ interests

arose to determine the legal sufficiency of those interests. 

United States v. Real Property Located at 5208 Los Franciscos

Way, Los Angeles, CA, 385 F.3d 1187, 1191 (9th Cir. 2004). The

parties here agree that California law applies. 

1. $1.2 million Seized from Client Trust Account

In his first amended statement of interest, Hollis asserts

that he has a possessory interest in the $1.2 million seized from

his account at First California Bank because those funds were

placed into the account in his capacity as an agent and trustee

for Brown. (First Am. Statement of Interest at 2.) The

government contends that the agency relationship between Hollis

and Brown terminated upon Brown’s death, and, therefore, Hollis’

asserted possessory interest is untenable. (Cross Mot. at 19.) 

The government is correct that the relationship of client

and attorney is one of principal and agent, Monell v. College of

Physicians and Surgeons of San Francisco, 198 Cal.App.2d 38, 51

(1962), and that a client’s death terminates the attorney’s

authority. Swartfager v. Wells, 53 Cal.App.2d 522, 527-28

(1942). However, “agency principles are not controlling when

determining the existence and scope of an attorney’s duties to a

client.” Streit v. Covington & Crowe, 82 Cal.App.4th 441, 446

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(2000). 

In California, the attorney must maintain a proper account

balance in a client trust account. Cal. Rule of Prof. Resp. 4-

100(A). Indeed, failure to maintain a sufficient balance creates

a presumption of misappropriation. Matter of Bleecker, 1 Cal.

State Bar Ct. Rptr. 113, 122-23 (Rev. Dept. 1990). This duty

continues even upon a client’s death. See Cal. State Bar Form

Opn. 1975-36. “Upon a client’s death, the attorney must notify

the client’s relatives or estate representative of possession of

client funds or property.” Paul W. Vapneck, et al., California

Practice Guide: Professional Responsibility § 9:222 (2005). If

the estate does not claim the funds within three years, the

attorney must complete procedures to have the abandoned funds

escheat to the state under the Unclaimed Property Law. Cal. Civ.

Proc. Code § 1518(a). Therefore, even though an attorney’s

authority to act on behalf of the client terminates upon a

client’s death, the attorney must still maintain the client’s

funds for the estate for up to three years. 

However, the issue here is not maintenance of the funds for

benefit of the client’s estate. There is no evidence of an

estate or any instructions from Brown’s heirs. Rather, the issue

is whether the attorney for a deceased client has the authority

or duty to undertake litigation, without instruction from a

representative of the client, to protect a deceased client’s

funds against civil forfeiture. While California law does not

directly address this issue, the law regarding an attorney’s duty

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when dealing with third-party creditors provides guidance. 

California Rule of Professional Conduct 4-100(B)(4) states

that when a client requests the funds in his client trust

account, the attorney must “[p]romptly pay or deliver . . . [the

funds] which the client is entitled to receive.” However, the

client may not be “entitled to receive” all funds in the account. 

ABA Model Rule 1.15 recognizes that:

Third parties, such as the client’s creditors, may have

just claims against funds or other property in a

lawyer’s custody. A lawyer may have a duty under

applicable law to protect such third-party claims

against wrongful interference by the client, and

accordingly may refuse to surrender the property to the

client. However, a lawyer should not unilaterally

assume to arbitrate a dispute between the client and

the third party.

Cal. Ethics Op. 1988-101, 1988 WL 236373 (citing ABA Model Rule

1.15.) The California State Bar Committee on Professional

Responsibility and Conduct notes that when a dispute arises

between a client and a third party, “[a]n attorney is ill-advised

to unilaterally prejudge the merits of such disputes and act in

favor of one individual or the other.” Id. Therefore, “[t]he

safest course of action . . . is to commence a civil action in

interpleader by which the attorney divests him or herself of

responsibility for the funds and leaves the resolution of the

dispute to the court.” Id. (citing Cal. Civ. Proc. Code § 386 et

seq.) 

Here, interpleader is both unnecessary and unavailable

because by the government’s seizure the funds are already within

the control of the court. See William W. Schwarzer, et. al,

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 On June 23, 2006, Hollis notified the court about the 2

recent holding in Via Mat Int’l S. Am. Ltd. v. United States, 446

F.3d 1258 (11th Cir. 2006), asserting that it is related to

whether Hollis has standing to assert an interest in the $1.2

million. In Via Mat, the government seized funds from an air

carrier who was transporting the funds on behalf of a currency

exchange house. The court held that the air carrier had standing

to contest forfeiture because it was liable to the currency

exchange house for any monies that were not returned. Via Mat

does not apply here because, unlike the air carrier, Hollis no

longer has a duty to maintain the funds for Brown or his estate. 

Therefore, Via Mat does not change the court’s conclusion

regarding Hollis’ standing. 

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California Practice Guide: Federal Civil Procedure Before Trial §

10:80 (2005) (citing Gen. Atomic Co. v. Duke Power Co., 563 F.2d

53, 56 (10th Cir. 1977)). Applying the analogy of third-partycreditor law to the situation here, it appears that Hollis has no

further professional duty with respect to the funds. The estate

of Brown, if it exists, may come forward to make a claim. But

the funds do not belong to Hollis and he has no further duty to

litigate on behalf of a deceased client. Therefore, Hollis does

not have standing to assert an interest in the $1.2 million that

was deposited in the client trust account. Accordingly, the

court GRANTS the government’s motion to dismiss regarding the

defendant $1.2 million. 

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2. $225,958.84 Seized from Hollis’ Bank of America Account

Hollis asserts in his first amended statement of interest

that he has an ownership interest in the defendant $225,958.84

because it was seized from his personal Bank of America account. 

(First Am. Statement of Interest at 1.) The government responds

by arguing that Hollis should have explained his interest more

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 The government contends that Hollis only held title for 3

Brown as a “straw man” because: (1) Hollis told agents that the

funds consisted of TCE reserves; (2) the funds were transferred

to the trust account within weeks of Brown’s arrest; and (3)

Hollis only transferred the funds to his personal account once he

learned that the government had seized the $1.2 million from the

trust account. (Cross Mot. at 24.) 

 The cases cited by the government to the contrary are 4

inapposite because standing was addressed in those cases at later

stages of litigation. See United States v. Real Property Located

at 5208 Los Franciscos Way, Los Angeles, 385 F.3d 1187 (9th Cir.

2004) (standing addressed in summary judgment motion); United

States v. One Parcel of Land, 902 F.2d 1443, 1444 (9th Cir.1990)

(court denied claim on standing grounds after full adjudication);

United States v. $515,060.42 in U.S. Currency, 152 F.3d 491, 498

& n.6 (6th Cir. 1998) (standing addressed in Rule 59 motion after

court dismissed case on eve of trial on statute of limitations

grounds).

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thoroughly, particularly given the appearance of fraud. (Reply 3

at 2.) However, at this stage of the litigation Hollis is not

required to submit additional evidence of ownership along with

his claim to establish standing. David B. Smith, Prosecution and 4

Defense of Forfeiture Cases ¶ 9.04[2][b] (2005). He can survive

a motion to dismiss so long as he makes general factual

allegations of injury. Lujan, 504 U.S. at 561. The government’s

argument that Hollis was a “straw man” is better suited to a

motion for summary judgment, where Hollis would have a greater

burden to produce evidence in support of his claim. Therefore,

the court DENIES the government’s motion to dismiss regarding the

defendant $225,958.84. 

3. $177,695.11 seized from Bullivant

Hollis asserts in his first amended statement of interest

that he has an ownership interest in the Bullivant funds. (First

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Am. Statement of Interest at 1.) The government argues that

Hollis is judicially estopped from asserting an interest in these

funds because he did not claim an interest at all in the May 2005

stipulation and only asserted an interest as a trustee for an

unnamed beneficiary in December 2005. (Cross Mot. at 20-21.) 

Not until his first amended statement of interest filed in

January 2006 did Hollis assert an ownership interest in the

funds. (Id.) The government also contends that Hollis has

failed to assert a sufficient interest in the funds.

Without reaching judicial estoppel, the court finds that

Hollis has failed adequately to allege standing as to the

Bullivant funds. 

Hollis claims that the defendant $177,695.11 funds were

originally in his attorney-client trust account, but he

transferred them to Bullivant to be used as attorneys fees. 

(Hollis Opp’n at 8.) He further asserts that when Bullivant

terminated its representation of Brown, it was obliged to return

the funds to Hollis. (Id.) From this, Hollis concludes that he

has an ownership interest in the funds. 

Hollis’ conclusion is incorrect. It is undisputed that the

funds that Hollis advanced to Bullivant were owned by Brown

because they were transferred from Brown’s Scotiabank account

into Hollis’ attorney-client trust account at First California

Bank. “Costs advanced by a nonclient third party on the client’s

behalf [such as the funds here] must . . . be held in a client

trust account because such funds are received for the client’s

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benefit.” Paul W. Vapneck, et al., California Practice Guide:

Professional Responsibility § 9:106 (2005). Upon termination of

employment, “the attorney must promptly refund to the client any

part of a fee paid in advance that has not be earned.” Id. §

10:362. Therefore, upon Bullivant’s termination of

representation, Bullivant was obliged to return the funds to

Brown, not to Hollis. Because Brown died, Brown’s estate was the

rightful owner, not Hollis. As discussed earlier, “upon a

client’s death, the attorney must notify the client’s relatives

or estate representative of possession of client funds or

property.” Vapneck, supra, § 9:222. And, as also discussed

above, if there is a claim upon the funds by a third party the

attorney may have a duty to see that the claim is resolved by a

court. But in no event would Bullivant have been justified in

giving the funds to Hollis or to any other third party. 

Therefore, the court GRANTS the government’s motion to dismiss

regarding the Bullivant funds.

III.

Because the court denies the government’s motion to dismiss

as to the $225,958.84, Hollis’ motion to stay is still relevant. 

Hollis asserts that continuing the forfeiture proceeding will

burden his right against self-incrimination in the related

criminal investigation. (Mot. to Stay at 7.) The government

asserts that the court should enter a protective order in lieu of

a stay because: (1) a protective order would adequately protect

Hollis’ right against self-incrimination; and (2) a stay would

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burden the rights of “hundreds, if not thousands, of people [who]

potentially have a stake” in this case. (Cross Mot. at 29-30.) 

The protective order envisioned by the government would allow the

government to proceed with discovery and further pretrial motions

“directed solely to whether Hollis has Article III standing to

maintain a claim.” (Cross Mot. at 31.) The court agrees with

the position of the government.

Under 18 U.S.C. § 981(g)(3), a court “may determine that a

stay is unnecessary if a protective order limiting discovery

would protect the interest of one party without unfairly limiting

the ability of the opposing party to pursue the civil case.” 

Hollis has not demonstrated how his Fifth Amendment rights would

be violated if he merely had to respond to discovery regarding

his Article III standing with respect to the $225,958.84. 

Therefore, the court issues a protective order limiting discovery

to the issue of Hollis’ Article III standing. This protective

order is subject to revision for good cause shown.

III.

For the reasons stated above, the court: (1) GRANTS the

government’s motion to dismiss Hollis’ claim for the $1.2 million

and the $177,695.11; (2) DENIES the government’s motion to

dismiss regarding the $225,958.84; and (3) enters a protective

order that limits discovery in the forfeiture proceeding to the

issue of Hollis’ Article III standing as to the $225,958.84 until

the criminal investigation and prosecution of Hollis has

concluded. 

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Hollis must file an answer as to the $225,958.84 within 21

days of the date of this order.

IT IS SO ORDERED.

Dated: July 18, 2006

 /s/ David F. Levi 

DAVID F. LEVI

United States District Judge 

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