17 -89 8-c v

U.S. v. D augerd as UNITED STATES COURTOF APPEAL S F O R T H E S E C O N D C IR C U IT August Term, 2017 (Argued: Feb ruary 5, 2018 D ecided: June 13, 2018)

Docket No. 17-898- cv

U N I T E D S T A T E S , Appellee,

— v. — P A U L M. D A U G E R D A S , E R W I N M A Y E R, D O N N A G U E R I N , D E N I S F I E L D , R O B E R T G R E I S M A N , R A Y M O N D C R A I G B R U B A K E R, D A V I D P A R S E , BDO USA, LLP, Defendants , E L E A N O R D A U G E R D A S ,

Petitioner-Appellant

.

B e f o r e : W A L K E R, L Y N C H , and C H I N , Circuit Judges.Petiti oner-ap pellant El eanor D augerdas app eals from an orde r of the

United States District Court for the SouthernDistrict of New York (Willi am H. Pauley I II, J. ), dismi ssing her petiti on asse rting a third-party interest in certain accounts (the “Accounts”) pr elim inarilyforfeited in the under lyi ng criminal procee dings against her husban d, Paul M . Dauger das. The par ties agree that Paul init ial ly funded the Accounts, at least in part, with money he was paid by the law firm through which he conducted his fraudulent activi ties, and that he gratuitousl y transfer red owne rship of the Accounts to his wife over a period of years. Eleanor contends that the law firm irrevers ibly com mingl ed the income it rece ived from Paul ’s fraudulent-tax-she lter cli ents with untainted m oney be fore it pai d Paul, and accordingl y the funds in the Accounts canno t easily be traced to her h usband’s fr aud. Eleanor there fore as serts that the Acco unts cannot now be taken from her to satisfy her husb and’s forfe iture obligat ions; instead, she ar gues, equival ent amounts must be collected from her husb and’s own ass ets in the same manner that a judgment creditor would enforce any pe rsonal money judgment. We conclude that Eleanor’s pe tit ion does not curr ently contain suffici ent plausible al legati ons to sustain her p osition; however, at oral argument, she claim ed to be ab le to plead additional facts, and such repleading would not neces sarily be futil e. Because denying Eleanor the ab il ity t o asser t the argument she r aises her e could potential ly permit the gover nment to deprive her of her own prope rty without du e proce ss of law, we VACATE the district court’s orde r and REMAND the cas e for pr oceedings cons istent with this opinion.

A N D R E W C. A D A M S (Anna M. Skotko, on the brief ), Assistant United States Attorneys, forGeoffrey S. B erman, United States Attorney for the SouthernDistrict of New York, Ne w York, NY, for Appellee

. J A M E S R. D E V I T A , Doar Rieck D eVita Kal ey & Mack, New York, NY, for Petitioner-Appellant.

2G E R A R D E. L Y N C H , Circuit Judge :

Petiti oner-ap pellant El eanor D augerdas app eals from an orde r of the United States District Court for the SouthernDistrict of New York (Willi am H. Pauley I II, J. ), dismi ssing her petiti on asse rting a third-party interest in certain accounts (the “Accounts”) pr elim inarilyforfeited in the under lyi ng criminal procee dings against her husban d, Paul M . Dauger das. The parties agre e that 1 Paul initi all y funded the Accounts, at least in part, with money he was paid by the law firm through which he con ducted his fraudulent activi ties, and that he gratuitousl y transfer red owne rship of the Accounts to his wife over a period of years. Eleanor contends that the law firm irrevers ibly com mingl ed the income it

rece ived from Paul ’s fraudulent-tax-she lter cli ents with untainted m oney be fore it pai d Paul, and that

the funds in the Accounts ther efore cannot easily be traced to her husb and’s fraud. Eleanor theref ore as serts that the Acco unts cannot now be taken fr om her to satisfy her h usband’s for feiture obligati ons; instead, she argues, e qui valent amounts m ust be collected from her h usband’s own as sets in the same manner as a judgment creditor would enforce any pe rsonal money judgment. For simpli city and to avoi d confusion, we re fer he ncefor th to Mr. and Ms. 1 Dauger das by their first names. 3We conclude that Eleanor’s pe tit ion does not curr ently contain suffici ent

plausible al legati ons to sustain her p osition; however, at oral argument, she claim ed to be ab le to plead additional facts demonstrating that the funds in the Accounts were irrever sibly comm ingled. Because Eleanor did not have an opportunity to partici pate in the criminalprocee dings against her husban d, we conclude that if such facts exist, denying Eleanor the abilityto asser t the argument she r aises her e could potential ly permit the gover nment to deprive her of her o wn prope rty without du e proce ss of law. Accordingly, we VACATE the district court’s order and REMAND the case for further p rocee dings consistent with thi s opinion. DISCUSSION Eleanor’s ar gument turns on the complex structure of criminalforfeiture procee dings. For her position to be understood, it is necessar y to clarify certain aspects of for feiture law before discussing the facts at issue in this appeal. I. Legal Framework of Criminal F orfeiture The govern ment sought forfeiture of Paul’s proper ty pursuant to 18 U.S.C. § 981(a)(1)(C) (civil forfeiture) and § 982(a)(2)(A) (criminal forfeiture). Forfeiture 2 Pursuant to 28 U.S.C. § 2461(c), any p roper ty that i s subject to civilforfeiture as 2 a result of a violat ion of federal law may al so be s ubject to forfeiture in a feder al 4procee dings under those statutes are gover ned by 21 U.S .C. § 853 and Rule 32.2

of the Feder al Rul es of C rimi nal Procedure. See 18 U.S.C. § 982(b )(1); 28 U.S.C. § 2461(c). Unlike ci vilforfeiture, which is an in rem action, “criminalforfeiture is an in personam action i n which only the defendant’s inter est in the prope rty may be forfeited.” Fed. R. C rim. P. 32.2(b) advisory comm . notes (2000); see also United States v. Lester

, 85 F.3d 1409, 1413 (9th Cir. 1996) (“[A] criminal forfeiture is an in personam judgment against a person convicted of a crime .”) (emphasis in original ). Section 853 never theless incorpor ates into crimi nal forfeiture proce edings aspects of an in rem procee ding against property tainted by the defe ndant’s criminal conduct — inclu ding, as relevant her e, against the proce eds of that offens e — in order to effectuate Congr ess’s intent that forfeiture procee dings be used “to

recove r all of the [defendant’s] ill-gott en gains but not to seize legiti mately acqui red pr operty.” United States v. Porcelli, 865 F.2d 1352, 1365 (2d Cir. 1989). Under the “relation-back” doctrine of § 853(c), the gove rnment’s intere st in the procee ds of a fraud ves ts as soon as thos e proce eds come into existence , and is theref ore s uperior to that of any subse quent thi rd-party r ecipient of those funds

criminalprocee ding. See United States v. Capoccia , 503 F.3d 103, 115 (2d Cir. 2007). 5(unless the third party is a bona fide pur chaser for value). See United States v. 3 Kramer , No. 1:06-cr-200, 2006 WL 3545026, at *4 (E.D .N.Y. De c. 8, 2006) (obse rving that § 853’s relation-back doctrine is consistent with the “long-recognized common l aw ‘taint theory’”), citing Caplin & Drysdale, Chartered v. United States , 491 U.S. 617, 627 (1989), and United States v. Stowell , 133 U.S. 1, 16–17 (1890). As a result, a third-party claim ant must assert an interes t in the proceeds of an offens e that is superior to the defe ndant’s at the moment that offense was committ ed in order to asser t, in a subsequent forfeiture pr oceeding, an interes t in those procee ds that is superior to that of the gover nment. But where pr oceeds are unavailable because, as relevant her e, they have become “commingl ed with other prop erty which cannot be divi ded without 21 U.S.C. § 853(c) ( 2016) provides: 3 Allright, ti tle, and interest in proper ty described in

subse ction (a) [defining crim inal proceeds] ve sts in the United States upon the commission of the act giving rise to forfeiture under this section. Any such prope rty that is subsequently transfer red to a per son other than the defendan t may be the subject of a spe cial verdict of forfeiture and the reafter shall be order ed forfe ited to the United States, unless the tran sfer ee es tablishes in a hearing purs uant to subsection (n) that he is a bona fide purchase r for value of such p roper ty who at the tim e of purchase was reas onably without cause to believe that the prope rty was subject to forfe iture under this section. 6difficu lty,” § 853(p)(1)(E), “the court sh allorder the forfe iture of any other

proper ty of the defendant,” § 853(p)(2) (emphasis added), up to the value of the missing proceeds. This so-called “substitute assets” pro vision thus “gi ves the government the ab il ity t o rece ive, in essence , a gener al judg ment against the defendan t.” United States v. Voigt, 89 F.3d 1050, 1086 n.21 (3d Cir. 1996), quoting Arthur W. Leach& John G. Malcol m, Criminal Forfeiture: An Appropriate Solution to the Civil Forfeiture Debate, 10 Ga. St. U. L. Rev. 241, 295 n.164 (1994). Whether proper ty is forfeited as proce eds or as substitute assets is of particular im port her e bec ause § 853(c)’s r elation-back doctrine does not apply to substitute assets. The tex t of § 853(c) explicitl y refe rence s § 853(a), which defines procee ds, but makes no mention of § 853(p), which defines sub stitute asse ts. Cf. United States v. Gotti, 155 F.3d 144, 149 (2d Cir. 1998) (holding that the material ly simi lar RICO forfeiture pr ovision di d not permit pretrial restraint of substitute assets b ecause the relevant provision included a specific refer ence to the subse ction defining proceeds and n ot the one defining substitute assets). In the same vein, the Supr eme Cour t recen tly observed in Honeycutt v. United States , that “§ 853(c) applies to tainted prope rty only.” – U.S. –, 137 S. Ct. 1626, 1633 (2017)

. And in the absen ce of the r elation-back doctrine, the statute is less than

7clear about when the government’s inter est in substitute property ves ts. The 4 result is that, i f the prope rty is forfeited as a subs titute for offen se pr oceeds , there could be a gap betwee n the moment of the offens e conduct and the ves ting of the government’s inter est in the prope rty. A third party’s interes t could potenti all y attach during that i nterval. The two-step proc edure for completi ng a forfeiture cr eated by § 853 and Rule 32.2, however, fails to recognize that possibility. At stage one of that procedur al framework, befor e enter ing a prelim inary order of forfeiture, the court is directed to adjudicat e the gover nment’s interest vis-à-vis the defen dant “withoutregar d to any third party’s interest in the pr operty.” Rule 32.2(b)(2)(A); see also 21 U.S.C. § 853(k) (p rohibiting thi rd parties fr om intervening in the ini tial forfeiture pr oceedings of a cr iminal case). And at stage two, befor e enter ing a

District courts in our Circuit have come to different conclusions on that issue. 4 Compare United States v. Peterson , 820 F. Supp. 2d 576, 585 (S.D .N.Y. 2011) (vests upon returnof grand jury indictment noti cing forfeiture) , with Kramer , 2006 WL 3545026, at *6–8 (vests, at the ear li est, when de fendant is convicted) , and United States v. Jennings , No. 5:98–cr–418, 2007 WL 1834651, at *4 (N.D .N.Y. June 25, 2007) (vests upon e ntry of the or der gr anting the moti on to forfeit substitute assets); see also United States v. Egan , 654 F. App’x 520, 521 & n.1 (2d C ir. 2016) (assuming that the gover nment’s interest ves ts, “at the very latest, upon entr y of [a prelimi nary] or der of for feiture concer ning that property” but declining to decide pre cisely when vesting occurs). 8final order of forfe iture, the court res olves any third-party petitioner’s interes ts

vis-à-vis the defendant. See 21 U.S.C. § 853(n )(6)(A) (discussing whether the petiti oner’s interests ar e super ior to any interests “of the de fendant”). Fre quently, the govern ment wil l be see king to forfeit offense pr oceeds , and, accordingly, by operation of the r elation-back doctrine, the governmen t’s interest in the contested proper ty wil l be identicalto that held by the defendan t at the ti me of the offens e, such that those two steps will al so conclusively determine the third-party’s interests vis-à-vis both the govern ment and the defen dant. But in the case of substitute property, whe re the gove rnment’s intere st could have vested after the tim e of the offe nse, ther e is no proce dure for determining whether a third-par ty petiti oner’s interest, which may have bee n inferior to the defendant’s (or

nonex istent) at the mom ent of the offe nse con duct, could nevertheless b e superior to the government’s later-attaching i nteres t. This appeal concerns the consequences of that gli tch in § 853’s procedur al structure. II. Factual and Procedural History Between 1994 and 2004, Eleanor Dauge rdas’s h usband, Paul Daugerdas, was engaged in a massive consp iracy to comm it t ax fraud and tax e vasion. Paul used his positions first as a tax partner at Altheimer & Gray and subse quentlyas

9the managing shareholder and head of the tax practice at the Chicago office of

Jenkens & Gi lchrist (“J&G”), t o design, market, and implem ent elaborate b ut fraudulent tax shelters intende d to help his cli ents evade their tax obligati ons. His scheme gen erated more than $164 mil li on in crimi nal proceeds

. Paul w as 5 indict ed in June 2009 and ultim ately convicted by a jury in 2013 for his role in the scheme. Paul fu nded the Accounts at issue he re using money J&G paid himfor his work at the firm, allof which was impl icated in the scheme. Eleanor appar ently does not contes t that the funds in the Accounts are trace able to the payments Paul received from J&G, nor does s he conten d that the Accounts contained funds derived fro m any independent sour ce. Instead, as des cribed be low, both husband and wife have claimed that income from Paul’s tax-fraud cli ents was untrace ably commi ngled with other non-tainted funds of the law firm whil e stillin the law

In it s brief, the government ass erts that Paul’s scheme gene rated “at least $180 5 mil li on in crimi nal proceeds .” Appellee’s Br. at 2. It appears to dr aw that number from the sixth super seding indictm ent filed against P aul on Jul y 1, 2013. See id. , citi ng No. 1:09-cr-581, D kt. No. 644. However , in the prelimi nary orde r of forfeiture, the district court found that the govern ment had only established $164,737,500 worth of proce eds by a pr eponder ance of the e vidence at trial. App. at 103–04. We assume the latter sum is the corre ct one for the purpose s of this appeal. 10firm’s accounts, befor e money was disburs ed to him, and that such comm ingling

sever s the trace able link between Paul’s offense con duct and the Accounts. A. Paul’s Challenges to the Forfeiture Throughout his crimi nal proceedings, Paul contested the for feiture of the Accounts. Paul raised his ini tialchallenge in respons e to the gover nment’s attempt t o res train some of his assets, including the Accounts, foll owing a mistri al caused by juror misconduct. Paulmoved to vacate those re straints so that he could use the funds to ob tain counsel. He asser ted that J&G had comm ingled the fees collected from his fraudulent cl ients with non-tai nted income from other

sources befor e disbursing the money to him, and accordingly, in order to forfe it the Accounts, the gover nment would have to trace the funds ther ein to those tainted fees. The district court denied Paul’s mot ion on two alt ernative grounds : First, it held that Paulhad failed to demonstrate that he would be unable to pay his legal fees without access to the Accounts. Secon d, it held that the govern ment had carr ied its burden to show that, becaus e all of the tax shelter fee s paid to J&G “were ge nerated thr ough the criminalacts of Dauger das and his coconsp irators,” “none of [the funds at issue] would have bee n obtained but for the fr audulent

11scheme, . . . and the y are sub ject to seizure as ‘pro ceeds’ of the fraudulent scheme.” Gov’t Addendum at 5. In his sentencing proce edings, Paul reiterated his commingling argum ent. The district court agai n rejecte d that argument, concludi ng that the Accounts were f orfeited as “pr oceeds of the fraudulent sche me.” Gov’t Addendum at 18. The day after Paul’s sentenc ing hearing, the court ente red a pr elim inary order of forfeiture in the amount of $164,737,500 that incl uded, among the enumerated proper ty to be forfeited, the Accounts. In September 2016, we affirmed the entr y of that order. See United States v. Daugerdas (“ Daugerdas I”), 837 F.3d 212, 218 (2d Cir. 2016). Paul once again made his commingling argum ent, which we rejected as follows:

The J&G account from which Daugerdas was paid held only the funds rec eived by the C hicago office. The trial evidence es tablished that the entirety of the tax-she lter fee income re ceived by J&G’s Chicago office — the pool of money from which Daugerd as was paid — was gener ated by Dauger das’s criminal act s. Based onthis evidence, the district court did not clearly err in concluding that

the funds located in Daugerdas ’s various accounts were the proce eds of his fr auds. Id. (internal citat ions omit ted).

12At no point during his crim inal proceedings or on ap peal did Paulargue

that the Accounts were not forfeitable becaus e they no longer belonged to him, and neither cour t address ed whether the Accounts would be forfe itable as substitute property unde r those circumstances

. B. Eleanor’s Petition As noted above , Eleanor was bar red fr om directly interven ing in P aul’s criminalprocee dings to assert a claim t o the forfe ited property. See 21 U.S.C. § 853(k)(1). Accordingly, in Augu st 2014, while Pau l’s direct appeal was pending, Eleanor filed a petiti on for a de terminati on of her third-party claim s to the Accounts pursuant to 21 U.S.C . § 853(n). Like her h usband, Eleanor asser ted that in order to for feit the Accounts as offens e proce eds, the gove rnment was required to — and did not — trace the money in the Accounts all the way back to the income J&G received from her husband’s tax-fraud clients befor e those funds

were c ommingled with non-tai nted funds in J&G’s accounts. Eleanor did not, however , all ege that commi ngling had actual ly occurred in the law firm’s accounts; instead, she mer ely clai med that the government’s pr oof that such commi ngling had notoccurre d was incomplete. SeeApp. at 121–22, ¶ 14 (asser ting that “[t ]he gover nment has failed to sufficiently allegethat [the Accounts]

13had a nex us to the crime” because its supporting affidavi t “ does not analyzeany of

the deposits into Jenkens & Gi lchrist accounts or other disb ursements fr om these accounts”) (emphasis added). Eleanor contended that, in the abs ence of s uch an analysis, the Accounts were fo rfeitable only as substitute proper ty. Accordingly, Eleanor argued, b ecause the government is lim ited to recovering subs titute proper ty from the defendant ’s asse ts, although El eanor’s interest in the Accounts was not super ior to her husb and’s when h e commit ted his fraud, her interest in them was never theless supe rior to that of the governmen t at the ti me of the forfeiture pr oceedings. The govern ment moved to dism iss Eleanor’s pe tit ion. The district court granted the gove rnment’s motion and dismi ssed the petiti on for lack of statutory standing and fail ure to state a claim. I t obser ved that Eleanor’s pe tit ion sought to

asser t that the Accounts were s ubstitute property rathe r than the pr oceeds of Paul’s offense. It determined, however , that the previous rulings in Paul ’s underlying crimi nal proceedings had e stablished that the Accounts were forfeited as pr oceeds , and § 853(n) did not permit thi rd-party pe tit ioners suchas Eleanor to relitigat e that issue. Once the funds in the Accounts wer e deemed to be pr oceeds , pursuant to § 853(c), the gover nment’s interest ves ted at the

14moment those procee ds came into being. Because Eleanor did not assert any

interest in the funds in the Accounts at that moment, the district cou rt concluded that her pe tit ion fail ed to state a claim

. Eleanor timelyappealed. III. Analysis We re view a district

court’s legal conclusi ons re garding forfeiture de novo and its factualdeterminations for clear er ror. Daugerdas I , 837 F.3d at 231. As a pre li minary mat ter, we agr ee with the district court that El eanor’s

curre nt § 853(n) petition must be dismissed, although we arrive at that conclusion by a differen t route. Section 853(n) directs third par ties to fil e a swornpetiti on

asser ting the nature and exte nt of their interest. Rule 32.2(c) provides for the vali dity of that

petiti on to be adjudicated in a manner simi lar to a civi l case: the government may res pond with a moti on to dismi ss, Rule 32.2(c)(1)(A), and the court may either grant that moti on and dismiss the petiti on, or pe rmit the par ties to engage in discovery be fore ho ldi ng a hear ing on the merits of the petition, Rule 32.2(c)(1)(B). On a moti on to dismi ss, a § 853(n) pe tit ion is evaluated on the same standard as a c ivi l compl aint on a mot ion under Rule 12(b)(6) of the Fe deral Rules of CivilProcedure

. See United States v. Watts , 786 F.3d 152, 161 (2d Cir.

152015). Thus, we take all factu al al legati ons alleged in the petiti on to be true, Rule

32.2(c)(1)(A), but we nee d not do the same for legal conclusions, Ashcroft v. Iqbal , 556 U.S. 662, 678 (2009). In order to pr evail on her petition, Eleanor must establi sh that the Accounts are for feited only as substitute property purs uant to § 853(p)(2), rather than as proce eds of cr ime, because they contain proce eds that have b een irrevocab ly comm ingled wi th untainted property, as de scribed in § 853(p)(1)(E). But Eleanor’s petition does not include any facts indi cating that com mingl ing actuall y occurre d. Instead, she alleges only that the govern ment has not adequately establi shed that the funds in the account are pr operly traceab le to fraud proce eds. That is a legal argument, not a factu al one, and there fore is not required to be acce pted as corr ect. The petition i s thus devoid of any plausible factual al legati ons that the forfe ited property was, in fact, subs titute proper ty rather than criminalprocee ds. When pr esen ted with that poi nt at oral argument, however, couns el resp onded that Eleanor sh ould be entitled to t ry to cure the defect by pleading

16additi onal facts about the commi ngling of funds that she contends occur red. We 6 agree, b ecause, con trary to the district court’s asser tion that El eanor’s claim would be barr ed for lack of standing even if it were ade quatel y pleaded, we conclude that if such facts exist, denying Eleanor the oppor tunityto prese nt a viable petiti on would raise signifi cant due proce ss conce rns. To make clear why 7

The district court did not consider whether an y such commi ngling by the firm 6 would, as a mat ter of law, actuall y defeat a finding that Pau l’s law fi rm income constituted the proceeds of his crimes (although, in P aul’s case, it found as a factual m atter that such commi ngling had not occurred, and we aff irmed). The parties did not raise or b rief that issue here . Accordingly, li ke the par ties, we assume without deciding that if Pau l’s fraudulently earned legal fees wer e deposited into a firm account that also contained other, legiti mately earned income before allor part of thos e fee s were passed thr ough to Paul, the sojourn of the fraudulently obtained fees in the firm account would constitute sufficientl y irrever sible commingling t o viti ate traceability, as described in § 853(p)(1)(E). We merely note that it i s not self-evident why, if Paul’ s partne rship compensation was entirely derived fr om such fees, h is income coul d not itself be considere d the procee ds of fraud. We leave that issue to be addre ssed b y the district court i f the factual predicate for commi ngling i s adequately al leged in Eleanor’s anticipated amended pleading, and the question is properly raised b y the govern ment. Eleanor did not seek leave to r eplead from the district court, and so ordinarily 7 we would have discretion to treat that issue as forfeited. But neither the defendan ts nor the district court relied on the pleading deficiencies identifi ed by this Court as a bas is for dismissal. Instead, the district court considere d itself bound by its conclusion in Paul ’s criminalcase that the funds in the Accounts were p rocee ds of his crime. On that unders tanding, no amended factual pl eading could have permitted Eleanor to asser t her claim. El eanor thus h ad no reas on to seek to leave to amend he r petition along the lines discussed ab ove. For that reaso n, and be cause of the s ignifi cant constituti onal rights potential ly at stake 17re-pleading would not be futil e, it is necessar y to understand the p rocedur al

interests at stake.

A. Statutory Standing under § 853(n) “It i s . . . well settled that secti on 853(n) pro vides the exclusive means b y which a third party may l ay clai m to forfeited assets.” DSI Assocs. LLC v. United States , 496 F.3d 175, 183 (2d Cir. 2007). Accord ingly, w e must determine whether Eleanor could asser t her ar gument in a § 853(n) proceeding. The district court determined that she could not, and we agre e that, in the absenc e of any constituti onal concerns , the statute would not provide an avenue for h er claims, even if they wer e adequately pled. To the extent that the Accounts con stitut e proce eds of Paul’s offense , or proper ty traceably derived fro m such procee ds, the gover nment’s claimto them would cl early be s uperior to Eleanor’s interest. As discusse d above, § 853(c)’s relation-back doctrine causes the govern ment’s interest in offens e proce eds to vest as soonas they come into existence, an d that vested interes t wil l trump the

here , we exe rcise our discr etion to permit El eanor anopportunity to replead. See, e.g. , Charles Schwab Corp. v. Bank of Am. Corp. , 883 F.3d 68, 89–90 (2d Cir. 2018) (in analogous circumstances, permitti ng plainti ffs to replead who h ad not sought leave to replead be low). 18claimof ever y subsequent gratuitous transfer ee (suchas Eleanor) ther eafter. In

other wor ds, the gover nment’s interest in the offe nse pr operty “re lates back” to the time of the offense. The question of whether Eleanor can asse rt her interest in a § 853(n) procee ding becomes more complicated if she can show that the Accounts ar e not themselves proc eeds, b ut are forfe itable only as substitute proper ty. As discussed above, § 853(p)(2) dire cts that to be forfe ited, substitut e prope rty must be the proper ty “of the defendan t.” See Lester , 85 F.3d at 1412 (highli ghting that “ only the substitute ‘ property of the defendant ’ may be forfeited to the Govern ment”) (emphasis in original ); see also United States v. Surgent, No. 04-cr-364, 2009 WL 2525137, at *22 (E.D.N.Y. Aug. 17, 2009), abr ogated on other gr ounds by United States v. Awad, 598 F.3d 76, 79 (2d Cir. 2010) (“[T]he gove rnment must show that any alleged substitut e prope rty is proper ty ‘of the defendan t’ before an order forfeiting that property may be en tered.”). But be cause the r elation-back doctrine of § 853(c) does n ot apply to substitute proper ty as defined in § 853(p), there is ambigui ty as to when the gover nment’s interest in a defe ndant’s non-tainted substitute assets vests an d thereb y cuts off that defendant’s ab il ity t o transfer those ass ets gratuitously t o third parties.

19Eleanor contends that she took owner ship of the Accounts largely befor e

any event that would have even ar guably caused the govern ment’s interest in them to attach, and there fore the y cannot be taken f rom herto satisfy what 8 amounts to a personal judgment agai nst her husband. Eleanor ’s argument that

recove ry should be limi ted to the defend ant’s own untainted assets is wholly consistent with the principles that woul d be applied in ordinary civilli tigat ion. Outside of a bankruptcy pro ceeding, it is generally not permissible to sati sfy an

Eleanor states that the b ulk of the transfers took place before Paul w as indicted; 8 however , at least three of the r elevant transactions occurr ed after the government filed a superseding indictment i ncluding the forf eiture count. The parties have not address ed whether allor part of the funds in the Accounts should be de emed to be Paul’s proper ty rather than Eleanor ’s, either b ecause of s ome defect in the conveyance to her or because of the timing of those tran sfer s, and none of the previous opinions in this case have addr esse d the issue. We note , however , that the legislat ive history of the materiall y simi lar RICO forfeiture statute evinces a clear intent that the forfeiture pr ovisions “should be construe d to deny relief to third parties acting as nominees of the defe ndant or who knowingly engage in sham or fraudulent transactions.” United States v. Morgan , 224 F.3d 339, 343 (4th Cir. 2000), quoting S. Rep. No. 98-225, at 3392 n.47 (1984). Courts h ave accordingly refused to r ecognize prop erty interes ts in sim il ar situati ons if the transfer ee ne ver e xer cised “domini on and control” over the prope rty, see United States v. Coffman ( “ Coffman II”), 612 F. App’x 278, 287 (6th Cir. 2015); Morgan , 224 F.3d at 343, or if the transfer was otherwise invalid as fraudulent, see Surgent, 2009 WL 2525137, at *28; cf. United States v. Carrell , 252 F.3d 1193, 1204 (11th Cir. 2001) (discussing the “innocent owner ” doctrine in the context of a civil forfeiture of prope rty). That issue, too, is left t o the district court to consider in the first instance if proper ly raised. 20in personam judgment agai nst one pe rson b y seizing property owne d by another ,

nor can a judgment creditor claw back prop erty that a solvent judgment debtor previously gave to third parties, even gr atuit ously, to sati sfy the judgment. But although the re lati on-back doctrine may not apply to substitute proper ty as a gener al mat ter, § 853(n) (pe rhaps as a result of Congr essional oversight) effe ctively i mposes the temporal lim itat ions of the re lati on-back doctrine evenon third-party claim s to substitute assets. That provision does not disti nguish betweencontested pr operty initi all y forfeited as offe nse pr oceeds and proper ty forfeited as subs titute assets; instead, § 853(n)( 6)(A) requires that the third party’s interest in anyforfeited prop erty must have bee n super ior to the defendan t’s “at the tim e of the commission of the acts which gave rise to the forfeiture.” 9 Section 853(n)(6)(A) pr ovides that a third-party petiti oner canshow a super ior 9 right to property sub ject to forfeiture by es tablishi ng that her intere st in the proper ty [1] was vested in the pe tit ioner rathe r than the

defendan t or [2] was super ior to any right, ti tle, or interest of the de fendant at the time of the commi ssion of the acts which gave rise to the fo rfeiture of the proper ty[.] (bracke ted numbers s upplied). 21Although the statut e does n ot define the re levant “acts,” we have

interprete d that language i n the contex t of offense procee ds to refe r to the defendan t’s offense conduct because it i s that conduct that generates the forfeiture ob li gation. See, e.g. , Watts , 786 F.3d at 166 (explaining that “a third party may prevail under § 853(n)(6)(A) only by es tablishi ng that he had a legal interest in the forfe ited property beforethe under lyi ng crime was commi tted”) (emphasis in original, internal quot ation marks omi tted). There h as bee n some

We reject Eleanor’s argument that the temporal lim itation in § 853(n)(6)(A) does not apply to both of its clauses because of the abse nce of commas setting off the secon d clause (which would have made clearer that the quali fying temporal li mit ation governs both of the alternative verbs) . Section 853(n)(6)(A) des cribes the emerge nce of bo th kinds of proper ty interests with which it is concerne d in the past tense — a right that “was vested” or an intere st that “was superior.” The use of the pas t tense verb “was ves ted” requires spe cification of some point in the past at which the vesting occurred, an d the only tim e per iod refer enced in the provision is “the tim e of the commission of the acts which gave rise to the forfeiture.” Accor dingly, as the Ninth Circuitpointed out in United States v. Hooper, “[t]o make sense of [§ 853(n)(6)(A)], it is necessar y to read the temporal requirement — ‘at the tim e of the commission of the acts which gave rise to the forfeiture’ — as ap plying t o both ‘vested in the pe tit ioner rathe r than the defendan t’ and the alternative ‘or was super ior to any right, ti tle, or interest of the defen dant.’” 229 F.3d 818, 821 (9th Cir. 2000) (drawing on both textual analysis and legisl ative history). We ourse lves have said as much in United States v. Watts , where we explained that “[t]he re qui rement that the petitioner’s interes t be evaluated ‘at the time of the commi ssion of the acts’ gover ns our analyses of both when the pr operty be came ‘vested in the petitioner’ and whenthe petiti oner's intere st became ‘supe rior to any . . . interest of the defendan t.’” 786 F.3d at 166 (emphasis added). 22qui et disagreement over whether the same definition of the relevant “acts”

applies in the context of substitute proper ty. Some have assumed that the ter m “acts” in § 853(n)(6)(A) refe rs to the de fendant’s cr iminal conduct, as it does in the context of pr oceeds , while others have ar gued that it refers to various acts of the govern ment, for example, whenthe govern ment first tried and fail ed to collect t ainted assets fr om the defendant. See, e.g. , United States v. Erpenbeck , 682 F.3d 472, 478 (6th Cir. 2012). Cour ts coming down on both sides of the question have assumed that the ans wer turns on when the government’s inter est vests, and accordingly, those courts holding that the relation-back doctrine applied to substitute property unde r § 853(n)(6)(A) have gener all y concluded that the relevant “act” is the offens e conduct, where as courts holding that the doctrine 10 does not apply have identified subsequent acts that mightcause the government’s inter est to vest. 11 See, e.g. , In re Bryson , 406 F.3d 284, 291 (4th Cir. 2005) (holding that “[b]ecause a 10 forfeiture is effe ctive at the ti me of the commi ssion of the act giving rise to the forfeiture,” the claimant was required to prove that he had a legal interest in the substitute assets when the offense conduct began) (intern al quotati on marks and alteration omi tted). See, e.g. , Erpenbeck

, 682 F.3d at 478 (holdi ng that a third party asser ted a 11 plausible cl aim t o substitute proper ty where its interes t attached before the proper ty became subject to forfe iture, which the court determined was not “until 23But § 853(n)(6)(A) discusses the r ights of a third party vis-à-vi s the

defendant, and makes no mention of the govern ment. Reading the provision to turn on when the government’s inter est vests r equires an assumption that the government’s inter est is identicalto the defendan t’s. In the context of subs titute assets, that is not the case , precisely be cause the § 853(c) r elation-back doctrine does not apply. See Erpenbeck , 682 F.3d at 478; cf. Luis v. United States, – U.S. –, 136 S. Ct. 1083, 1090–93 (2016) (plurality opi nion) (holding that the govern ment could not obtain a pretrial restraint on defe ndant’s untainted assets b ecause thos e assets s til l belonged to the defen dant, regar dless of whethe r they might subse quentlybe sub ject to forfeiture as subs titute proper ty). We there fore s ee 12

the tainted assets ex ceede d the govern ment’s grasp”); Jennings , 2007 WL 1834651, at *3 (holdi ng that to determine whether a third par ty was entitl ed to a portion of forfeited subs titute assets unde r § 853(n)(6)(A), “it is necess ary to analyze when the asse ts vested in the U.S. Gover nment”). We note, howe ver, that a prior unpublished 6th Circuit opini on appare ntly determined that the relevant act is, indeed, the offe nse con duct, regardless of the theor y under which the pr operty is forfeited. See United States v. O’Brien , 181 F.3d 105 (table), 1999 WL 357755, *2 (6th Cir. 1999). In Luis , a plurali ty of the Supre me Court also suggested that § 853(n)(6)(A) is, 12 in fact, concerne d with the government’s interes ts insofar as it stated that the provision “exempts cer tain property from for feiture when a third par ty can show a vested intere st in the proper ty that i s ‘super ior’ to that of the Government .” 136 S. Ct. at 1091 (emphasis added). As discussed above , Luis did not concern thirdparty petitions brought under § 853(n ) and we ther efore do not believe ourse lves 24no basis to conclude that the requirements of § 853(n)(6)(A) ar e to be e valuated as

of the vesting of a later-attaching interest in the government. Instead, applying standard tools of statutory interpretation to the plain text of the statute provides ample support for our con clusion that, in either the con text of offens e proce eds or substitute property, the r elevant “act” under § 853(n)(6)(A) is the underlying criminalconduct that triggers the forfe iture obligat ion. First, there is no indication i n the statutory text that we should be looking for a differe nt act in the context of substitute assets. Se ction 853(n)(6)(A) does not disti nguish betweenthird-party claim s against procee ds and such claims against substitute assets. The phr ase “acts which gave rise to the forfe iture” is writt en broadly and see ms to contemplat e a fairly attenuated chain of causati on: one could easil y conclude that the defendant’s off ense conduct is the act givi ng rise to the forfe iture of his untaint ed subs titute assets b ecause it is that act that gener ates

bound by dicta concer ning the claim s that can be r aised in those proce edings. Simi larly, i n United States v. Watts , in the course of e xplaining the effe ct of § 853(c)’s re lati on-back doctrine onthird-party claim s to procee ds, we stated that “a third party may prevail under § 853(n)(6)(A) only by estab li shing that he had a legal i nteres t in the forfeited prope rty . . . befor e the gover nment’s interest vested.” 786 F.3d at 166 (internal quotat ion marks omi tted). Because sub stitut e assets we re not at issue in that appeal, however , that assertion does n ot bind us in the prese nt case. 25the forfe iture obligat ion, notwithstanding that addit ional interven ing steps

would need to occur bef ore s ome specific untai nted prope rty was ulti mately forfeited. And, furthe r bolstering the infer ence that the s ame definiti on applies in both contexts, the statute provides no poss ible alt ernative definition of “acts” that might apply to cl aims agai nst substitute assets. Second, an d in the same vein, the statute uses sub stantial ly sim il ar language in § 853(c), which provides that the government’s intere st in proceeds vests “upon the c ommi ssion of the act giving rise to forfeiture under this section.” There is no real dispute that, in the context of § 853(c)’s re lati on-back doctrine, the re levant act is the offense conduct. See Watts , 786 F.3d at 166 (obser ving that, under § 853(c), the gover nment’s interest ves ts “upon the commi ssion of the [offe nse]”) (alteration in original, internal quot ation marks omit ted). And although that doctrine does not itself apply t o substitute assets, the in pari materia canon of statutory interpre tati on teaches that “language used in one por tion of a statut e . . . should be de emed to have the same meaning as the same language used elsewhe re in the statute.” Mertens v. Hewitt Assocs. , 508 U.S. 248, 260 (1993).

26Accordingly, we conclude that § 853(n)(6)(A) treats third-party claims

against property for feited the same, re gardless of whe ther the p roper ty was forfeited as offe nse pr oceeds or as sub stitut e asse ts. Put another way, even if it is unclear when, e xactly, the government’s intere st in substitut e prope rty vests, § 853(n)(6)(A) per mit s a third-party claimagainst a defendant’s untainted proper ty (out of which an in personam -lik e forfe iture clai m mi ght be satisfied) only if that interest aros e bef ore the offense took place. Thus, the statute does not appear to authorize Eleanor to prese nt her claim, because he r interes t concededly

arose after Paul’s offense c onduct began. If Eleanor’s inter est in Paul’s untainted proper ty neverthe less vested b efore , and is therefor e super ior to, the government’s inter est, howeve r, our inquiry cannot end there : as we discuss below, depriving her of a h earing in those circumstances would be inconsistent with the requirements of due proce ss.

B. Constitutional Due Process In addit ion to determining t hat Eleanor lacked statutory standing under § 853(n), the district court declared that Eleanor “has n o constituti onal right to stand in her hus band’s sh oes at this juncture and re -asser t the due proce ss claims that he has already liti gated here and in the Secon d Circuit.” App. at 200. We

27disagree. “It is a viol ation of due process for a judgment to be binding on a

li tigant who was not a party or a privy and there fore has never had an opportunity to be hear d.” Parklane Hosiery Co. v. Shore, 439 U.S. 322, 327 n.7 (1979). The Due Pr ocess C lause does not per mit us to hold that a thi rd party is precluded fr om asserting, in her own r ight, her entitlement to property she claim s is hers , on the ground that she is bound by a deter minat ion that the proper ty belonged to someone e lse, when that deter minat ion was made in a separ ate proce eding in which she was not per mit ted to participate. Accordingl y, we conclude that if El eanor canmake a plausibl e claimthat the Accounts were forfeitable as subs titute assets, r ather than as o ffense procee ds, and that the Accounts were actuall y under he r indepen dent owner ship and control befor e the government’s inter est in them vested, then the D ue Process Clause entitles her 13 to do so, and it was error for the district court to suggest otherwise.

Resolving Eleanor’s due proce ss claim m ay well requi re a de terminati on of 13 whether her inter est in the prope rty is superior to the gove rnment’s, which would i n turn re qui re an inquiry into when the government’s intere st vested in the prope rty. But because Eleanor must overcome seve ral hurdles be fore that question i s reac hed, we leave it to the district court to t ake up that inquiry in due course. 28That conclusion i s base d not merely on a theore ticalconcer n for an ab stract

right to an opportunity to be heard. Ther e are sever al reasons to think the pr ior procee dings — from which Eleanor was statutorily excluded — m ight in fact have be en inadequate to fairlydetermine her interest in the Accounts. A criminal defendan t generally wil l not have the same incentive as a third-party claim ant to argue that prope rty subject to forfeiture is not his. The def endant willnot end up with the property either way, and he might actual ly get a wi ndfall i f the money he owes is paid off wi th someone else ’s prope rty. Indeed, it is notable that, in the pres ent case, Paul never argued that the pro perty should not be f orfeited be cause it belonged to Eleanor, not to him. 14 We also reject the gove rnment’s sugges tion that a du e proce ss pr oblem wil l not arise until El eanor h as sought and be en re fused re li ef pursuan t to § 853(i). That provision grants the Attorney Gene ral discretion to “take any . . . action to protect the r ights of innocent person s which is in the interest of justice and which

Moreover, there may be a colorable argument that Rule 32.2’s bar on 14 considering third-party interes ts at the prelimi nary for feiture stage would have precluded Paul from arguing that the Accounts could not be for feited as substitute assets be cause they be longed to someone else. See, e.g. , United States v. Coffman (“ Coffman I”), 574 F. App’x 541, 563 (6th Cir. 2014) (de clining to consider the defen dant’s argument to that effect). 29is not inconsistent with the provisions of this sec tion.” 21 U.S.C. § 853(i). In DSI

Associates LLC v. United States , however , we obse rved that a party facing an imm inent deprivation of proper ty in whi ch she c lai med an interest “might be able to argue per suasively that the availabil ity of a remedy through the ex ecutive branchunder s ection 853(i) . . . [i s] insufficient to sati sfy the Due Process clause.” 496 F.3d at 187. The third-party petiti oner in DSI was not at that stage: that petiti oner was determined to be on ly a general creditor of the de fendant, and thus the exten t of its l oss, if any — that is, whether it would be able to coll ect its debt from the de fendant’s ass ets — was not yet known. In particular, we obser ved that DSI had not es tablished that the defendant had no as sets outside of the forfe iture from which DSI’s interest might be satisfied. Id. at 187 n.18. In the pres ent case, b y contrast, Eleanor con tends that she will be deprived of a ves ted proper ty interest in the Accounts as soon as the forfe iture is permitt ed to procee d. An opportunity to ask the Attorney Gener al, acti ng in her sole discretion, to return to you prope rty that you contend was yours, and s hould

never have be en taken fr om you i n the first place, is not an adequate substitute for an oppor tunityto preven t the taking by presen ting your clai m of ownership in court before it occurs.

30Accordingly, we conclude that El eanor h as a due proc ess r ight to be heard

by the district court on her claim that the Accounts ar e her proper ty and thus may not be forfeited to the gover nment as substitute assets of he r husb and Paul in order to satisfy an in personam order of forfeiture against him. We emphasize, however , that any such right to be hear d is contingent on her filing an amended petiti on plausibly al leging facts supporting the conclusion that the Accounts

were n ot forfeitable from Paul as the “proceeds ” of his criminal conduct, but only as accounts containing money that, al though in part fraudulently obtai ned, was then “commingl ed with other prop erty which cannot be divi ded without difficu lty,” 21 U.S.C. § 853(p)(1)(E). The inability of Paul, who pre sumably had inside access to the financial practices of the law firm, to dem onstrate such commi ngling, see note 5 supra , warrants s ome skepticism about whether Eleanor can do so, but as we h ave held above, s he is not bound by anadjudicat ion of that issue against himin a proceeding in which she was n ot permitted to partici pate. CONCLUSION For the r easons stated above, we V ACATE the district court’s order dismi ssing Eleanor’s pe tit ion and REMAND for fur ther pr oceedings cons istent with thi s opinion.

31