2009 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

12-4-2009

USA v. Maria Nolasco

Precedential or Non-Precedential: Non-Precedential

Docket No. 08-4872

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Recommended Citation

"USA v. Maria Nolasco" (2009). 2009 Decisions. Paper 147.

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NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

 

No. 08-4664

 

UNITED STATES OF AMERICA

v.

MARIA CAROLINA NOLASCO

FARSWISS ASSET MANAGEMENT LTD.; HARBER CORPORATION; MABON

CORPORATION; GATEX CORPORATION; PIEDADE PEDRO ALMEIDA; AVION

RESOURCES LTD; FARES BAPTISTA PINTO;

JOSE BAPTISTA PINTO NETO; TIGRUS CORPORATION;

POMPEU COSTA LIMA PINHEIRO MAIA; 

ISABEL CRISTINA DUTRA PINHEIRO MAIA,

 Appellants

Appellants pursuant to F.R.A.P. 12(a).

 

No. 08-4872

 

UNITED STATES OF AMERICA

v.

MARIA CAROLINA NOLASCO

MIDLAND FINANCIAL, INC.,

 Appellant

(Pursuant to Fed.R.App.P. 12(a))

 

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW JERSEY

(D.C. Crim. No. 04-cr-00617-001) 
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District Judge: Honorable Joseph A. Greenaway

 

Submitted Under Third Circuit LAR 34.1(a)

November 18, 2009

 

Before: RENDELL, BARRY and CHAGARES, Circuit Judges

(Opinion Filed: December 4, 2009)

 

OPINION

 

BARRY, Circuit Judge

This appeal is taken from a November 12, 2008 order of the District Court denying

appellants’ application for attorneys’ fees pursuant to 28 U.S.C. § 2465(b) (“Section

2465(b)”). We will affirm.

I.

Because we write solely for the parties’ benefit, we set forth only those facts

necessary to our analysis.

In June 2002, the Government seized more than three dozen bank accounts at

Merchants Bank (now Valley National Bank) containing more than $21 million. The

funds were seized in connection with the arrest of Maria Carolina Nolasco, a bank

employee, on tax evasion and other charges. Two years later, Nolasco pled guilty to one

count of operating a money transmitting business without a license, in violation of 18
 Two of the twenty-four petitions were dismissed. 1

 The funds became the subject of a torturous procedural labyrinth involving the 2

Manhattan District Attorney’s Office, New York state courts, the United States District

Court for the District of Columbia, Brazilian courts, and a Mutual Legal Assistance

Treaty. Those proceedings, however, are not germane to this appeal. Suffice it to say

that the funds have either been forfeited by appellants or are in the custody of the U. S.

Department of Justice. 

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U.S.C. § 1960, and four counts of filing false tax returns, in violation of 26 U.S.C. §

7201.

In December 2004, the Government commenced criminal in personam forfeiture

proceedings against Nolasco pursuant to 18 U.S.C. § 982(a) and Federal Rule of Criminal

Procedure 32.2, and the District Court filed a preliminary order of forfeiture. Twentyfour claimants, including appellants, then filed petitions under 21 U.S.C. § 853(n)

(“Section 853(n)”) asserting title superior to Nolasco in the funds.1

In June 2006, the District Court granted the Section 853(n) claimants’ motion for

summary judgment and amended the preliminary order of forfeiture. In so doing, the

Court found appellants’ interests superior to Nolasco’s because the Government offered

no evidence that Nolasco held any right, title, or interest in the property. According to the

Court, “the Government [sought] to transform this criminal forfeiture proceeding into a

tool for investigation of Brazilian crime and international financial wrongdoing. Were

this Court to comply, it would far exceed the bounds of the role assigned to it by the

criminal forfeiture statutes.” (A70.)2
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Based on the order granting summary judgment, appellants sought attorneys’ fees,

costs, and interest under Section 2465(b) as claimants who “substantially prevail[ed]” in a

“civil proceeding to forfeit property.” In the alternative, appellants sought an award of

interest from the United States. The District Court rejected those requests. 

We have jurisdiction to review the final order of the District Court pursuant to 28

U.S.C. § 1291. 

II.

A.

Our review of legal questions, including questions of statutory interpretation, is

plenary. United States v. Dees, 467 F.3d 847, 851 (3d Cir. 2006), cert. denied, 128 S. Ct.

52 (2007). When interpreting a statute, “we need to ‘discern legislative intent,’

considering first the plain meaning of the statutory text. . . . The plain meaning of the text

should be conclusive, except in the rare instance when the court determines that the plain

meaning is ambiguous.” Lawrence v. City of Phila., 527 F.3d 299, 316-17 (3d Cir.)

(internal citations omitted), cert. denied, 129 S. Ct. 763 (2008).

B.

In analyzing whether appellants are entitled to attorneys’ fees, costs, and interest

under Section 2465(b), we will first place the underlying Section 853(n) proceedings in

context. We will then address the elements of a claim under Section 2465(b) and analyze

those elements in the context of an underlying Section 853(n) proceeding.
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i.

When an in personam criminal forfeiture prosecution is initiated, a third party is

barred from intervening in the criminal case and from commencing an action against the

United States concerning the validity of an alleged property interest. 21 U.S.C. § 853(k). 

A third party’s property interest, however, may be vindicated by means of Section 853(n). 

Therefore, following a finding of forfeitability and the entry of a preliminary order of

forfeiture, a third party may assert an interest in forfeited property by petitioning the court

for an ancillary proceeding in which to adjudicate the validity of that property interest. 21

U.S.C. § 853(n)(2). That proceeding “is the only avenue by which a third-party claimant

may seek to assert an interest in property that has been included in an indictment.” United

States v. Puig, 419 F.3d 700, 703 (8th Cir. 2005).

To prevail at a Section 853(n) ancillary proceeding, a claimant must demonstrate a

vested legal right, title, or interest in the property superior to the defendant’s or that the

claimant is a bona fide purchaser for value of the property interest. 21 U.S.C. §

853(n)(6)(A)-(B). In short, where “a third party’s interest in the forfeited property, at the

time of the criminal acts, [is] superior to the criminal defendant’s interest, then the interest

that the government acquires when it steps into the defendant’s shoes is subordinate to that

of the third party.” United States v. Lavin, 942 F.2d 177, 185 (3d Cir. 1991).

Should a claimant demonstrate a property interest superior to the defendant’s, the

court will amend the order of forfeiture accordingly, 21 U.S.C. § 853(n)(6), and, on
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disposition of all petitions filed under Section 853(n), may enter a final order of forfeiture,

see 21 U.S.C. § 853(n)(7).

ii.

Enacted as part of the Civil Asset Forfeiture Reform Act (“CAFRA”), Section

2465(b) provides that a claimant who “substantially prevails” in “any civil proceeding to

forfeit property under any provision of Federal law” may recover from the United States

reasonable attorneys’ fees, costs, post-judgment interest, and, in some instances, actual or

imputed pre-judgment interest. 28 U.S.C. § 2465(b)(1)(A)-(C).

Thus, for a third-party Section 853(n) claimant to recover attorneys’ fees, costs, and

interest under Section 2465(b), the claimant must establish that he or she: (1) substantially

prevailed; (2) in a civil proceeding; (3) to forfeit property. If one of those elements is not

satisfied, a claimant is not entitled to the benefits of Section 2465(b).

a.

In United States v. Lavin, in determining the timeliness of an appeal, we stated “that

a proceeding under 21 U.S.C. § 853(n) . . . is a ‘civil case’ for purposes of [Federal Rule of

Appellate Procedure 4(a)(1)].” 942 F.2d at 182. We relied on the principle that civil cases

are, broadly, any actions that are not criminal prosecutions. Id. at 181 (citing 9 J. Moore,

B. Ward, & J. Lucas, Moore’s Federal Practice para 204.08[1], at 4-29 (2d ed. 1991)). 

We further noted that proceedings related to criminal prosecutions, such as habeas corpus

petitions and actions dealing with bail bonds, are civil in nature, despite their relationship
But see United States v. Yerardi, 192 F.3d 14, 19 (1st Cir. 1999) (ancillary 3

proceeding is criminal in nature for purposes of adverse spousal testimony privilege);

United States v. Gardiner, 512 F. Supp. 2d 1270, 1272 (S.D. Fla. 2007) (finding

Section 853(n) proceeding criminal and, thereby, not covered by Section 2465(b)’s feeshifting provision).

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to a prosecution. Section 853(n) ancillary proceedings are not part of the criminal

prosecution. See Fed. R. Crim. P. 32.2(c)(4). 

Lavin is consistent with the great weight of authority. See United States v. Pease,

331 F.3d 809, 816 (11th Cir. 2003) (finding that Section 853(n) ancillary proceedings are

civil); United States v. Gilbert, 244 F.3d 888, 906-08 (11th Cir. 2001) (finding Section

853(n) civil for purposes of appellate jurisdiction); United States v. Alcaraz-Garcia, 79

F.3d 769, 772 n.4 (9th Cir. 1996) (following Lavin approach to timeliness of appeal);

United States v. Douglas, 55 F.3d 584, 585 (11th Cir. 1995) (holding that Section 853(n)

proceeding is civil action under Equal Access to Justice Act); see also David B. Smith,

Prosecution and Defense of Forfeiture Cases § 14.08[2][c], at 14-117 (2009 ed.) (“[T]he

ancillary hearing procedure is civil in nature.”). 3

Therefore, because a Section 853(n) proceeding is separate and distinct from the

prosecution itself, Section 853(n) ancillary proceedings are “civil” proceedings for

purposes of Section 2465(b).
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b.

The Government contends that Section 853(n) ancillary proceedings are not

proceedings “to forfeit property,” but rather are proceedings to quiet title and, accordingly,

are not subject to Section 2465(b). We agree.

Other courts have analogized Section 853(n) proceedings to “quiet title”

proceedings. For example, in deciding that a Section 853(n) third-party claimant did not

have a right to a jury trial, the Fourth Circuit concluded that Section 853(n) proceedings

are “most analogous to an equitable petition to quiet title.” United States v. McHan, 345

F.3d 262, 275 (4th Cir. 2003). According to the court, “[l]ike a § 853(n) proceeding, the

purpose of a quiet title action is ‘to determine which named party has superior claim to a

certain piece of property.’” Id. (quoting Cadorette v. United States, 988 F.2d 215, 223 (1st

Cir. 1993)). Although the court acknowledged differences between the proceedings,

because “the relief offered to a complainant in a quiet title action is substantially the same

relief offered to a § 853(n) petitioner,” it concluded that the claimant was not entitled to a

jury trial. Id.; cf Gilbert, 244 F.3d at 911 & n.47 (observing that ancillary hearing to

litigate third party’s property rights under analogous RICO statute “is essentially a quiet

title proceeding”). Stated somewhat differently, a Section 853(n) proceeding cannot result

in the forfeiture of a claimant’s property. Rather, the Section 853(n) proceeding merely

ensures that property belonging to a third-party claimant is not inadvertently forfeited as

part of a criminal defendant’s property.
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Ownership is the only relevant issue in a Section 853(n) ancillary proceeding. See,

e.g. United States v. Soreide, 461 F.3d 1351, 1354 (11th Cir. 2006) (“Unlike the civil

forfeiture statutes, the criminal forfeiture statutes contain no provision for an ‘innocent

owner’ defense for third parties.”). Forfeitability has already been proven, and proof of

ownership in a Section 853(n) proceeding is a complete defense. United States v.

Andrews, 530 F.3d 1232, 1236-377 (10th Cir. 2008) (“[A] third party has no right to

challenge the preliminary order’s finding of forfeitability; rather the third party is given an

opportunity during the ancillary proceeding to assert any ownership interest that would

require amendment of the order.”). That difference demonstrates that Section 853(n)

ancillary proceedings exclude property from forfeiture and do not “forfeit property” as

required by Section 2465(b).

Appellants contend that viewing Section 853(n) ancillary proceedings as quiet title

proceedings is too narrow. That argument misses the mark. If a Section 853(n)

proceeding is viewed broadly as a proceeding “to forfeit property,” then it should be

viewed in context, i.e. it should be viewed as part and parcel of the larger criminal

forfeiture proceeding. Indeed, before noting that the Federal Rules of Civil Procedure

would apply in many respects to Section 853(n) proceedings, the Advisory Committee

declined to adopt the Civil Rules in full “[b]ecause an ancillary hearing is connected to a

criminal case.” Fed. R. Crim. P. 32.2, Advisory Committee Notes on 2000 Amendment

(emphasis added). Therefore, although civil in nature, because a Section 853(n)
 The only court to find Section 853(n) claimants eligible for attorneys’ fees pursuant 4

to Section 2465(b) is the Eastern District of Virginia in United States v. D’Esclavelles,

541 F. Supp. 2d 794 (E.D. Va. 2008). That case, however, was reversed on other

grounds. United States v. Buk, 314 F. App’x 565 (4th Cir. 2009). The Fourth Circuit did

not address the issue.

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proceeding remains under the larger criminal forfeiture umbrella, application of Section

2465(b) would frustrate Congress’ intent to reform civil forfeiture proceedings. See, e.g.,

H.R. Rep. No. 106-192, available at 1999 WL 406892, at *2 (noting that CAFRA “would

create general rules relating to federal civil forfeiture proceedings designed to increase the

due process safeguards for property owners whose property has been seized”).

Our holding is consistent with United States v. Huynh, No. 08-20541, 2009 WL

1685139 (5th Cir. June 16, 2009) (unpublished), cert. denied , 2009 WL 2969482 (2009),

which addressed an analogous issue. There, plaintiffs, who, pursuant to a proceeding

under 18 U.S.C. § 983(e), set aside the forfeiture of property, sought attorneys’ fees as

substantially prevailing parties under CAFRA. According to the court, however, Section

2465(b) “applies only to civil proceedings ‘to forfeit property,’ that is, civil forfeiture

actions initiated by the Government.” Id. at *1. Because “[p]laintiffs’ claim . . . [sought]

to set aside a forfeiture that ha[d] already occurred,” the court declined to award attorneys’

fees. Id.4
 Because we hold that Section 853(n) proceedings are not proceedings “to forfeit 5

property” and therefore not subject to CAFRA’s attorneys’ fee provisions, we need not

address whether appellants substantially prevailed.

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Similarly, because a Section 853(n) ancillary proceeding is not a proceeding “to

forfeit property,” appellants are not entitled to attorneys’ fees, costs, or interest pursuant to

Section 2465(b).5

Our holding also comports with the Eighth Circuit’s reasoning in United States v.

Moser, the only court of appeals to address this issue. No. 08-2909, – F.3d –, 2009 WL

3837292 (8th Cir. Nov. 18, 2009) (holding that successful claimant in Section 853(n)

ancillary proceeding may not recover attorneys’ fees under Section 2465(b), in part due to

government’s persuasive argument that Section 853(n) proceeding is akin to quiet title

action).

C.

Finally, we address whether appellants are entitled to an award of interest from the

United States.

In Library of Congress v. Shaw, the Supreme Court enumerated the “no-interest

rule,” holding that “[i]n the absence of express congressional consent to the award of

interest separate from a general waiver of immunity to suit, the United States is immune

from an interest award.” 478 U.S. 310, 314 (1986); accord Larson v. United States, 274

F.3d 643, 647-48 (1st Cir. 2001); United States v. $30,0006.25 in U.S. Currency, 236 F.3d
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610, 613-14 (10th Cir. 2000); United States v. $7,990.00 in U.S. Currency, 170 F.3d 843,

844-45 (8th Cir. 1999); Ikelionwu v. United States, 150 F.3d 233, 239 (2d Cir. 1998).

In the context of seized funds, however, the Sixth, Ninth, and Eleventh Circuits

permit claims of interest to proceed against the United States. See, e.g., United States v.

1461 W. 42nd St., 251 F.3d 1329, 1338 (11th Cir. 2001); United States v. $515,060.42 in

U.S. Currency, 152 F.3d 491, 504 (6th Cir. 1998). The leading minority case is United

States v. $277,000 U.S. Currency, 69 F.3d 1491 (9th Cir. 1995). There, the court found

that because the interest on seized funds “bec[a]me part of the res,” it should “be returned

with the res to the claimant.” Id. at 1496. According to the court, that result did not

require the United States “to pay for damage it has done,” but rather to “disgorge benefits

that it has actually and calculably received from an asset that it has been holding

improperly.” Id. at 1498; see also id. at 1494 (observing that “in any normal commercial

dispute over property, the disputed property would, as soon as practical, be placed in an

escrow account to earn interest that would go to whoever was the ultimate winner”). A

later Ninth Circuit opinion, Carvajal v. United States, observed that the minority view was

consistent with Congress’ intent in passing CAFRA, a statute that “ratified the outcome, if

not the rationale” of the minority perspective. 521 F.3d 1242, 1248-49 (9th Cir. 2008)

(quotation omitted).

The minority view, however, is at odds with Shaw. First, Shaw explicitly noted that

“the force of the no-interest rule cannot be avoided simply by devising a new name for an
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old institution.” 478 U.S. at 319. Thus, whether labeled as damages, loss, earned

increment, just compensation, discount, offset, penalty or any other term, the no-interest

rule remains applicable. In other words, interest by any other name is still interest. 

Second, Shaw left no doubt that “[c]ourts lack the power to award interest against

the United States on the basis of what they think is or is not sound policy.” 478 U.S. at

321; see also Larson, 274 F.3d at 647 (“[N]either fairness considerations nor rules

applicable to private disputes can alone provide grounds for abrogating sovereign

immunity.”). Thus, the minority view expressed in $277,000 in U.S. Currency (finding

private transactions instructive) and Carvajal (relying on CAFRA’s legislative history) is

in conflict with Shaw. 

We choose to follow the majority approach and hew to the letter of Shaw by

holding that, in the absence of express congressional consent to the contrary, the United

States is immune from an award of interest. Appellants point to no governing statute

entitling them to interest. Therefore, appellants may not recover interest against the

United States.

III.

For the reasons stated above, we will affirm the order of the District Court.