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P r e c e de n t i al or N on-P r e c e de n t i al :

D ock e t 98-6148

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. e du/thir dc ir c uit_1998/280Filed December 21, 1998

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 98-6148

PETER YSKAMP; CIGNA CORP., in its individual capaci ty and in its capacity as subrogee to the rights and i nterest of Peter Yskamp, and in its capacity as subrogee to the rights and interest of James E. Haldan, deceased

v.

DRUG ENFORCEMENT ADMINISTRATION

CIGNA CORP.,

Petitioner

On Review of a Decision of the Drug Enforcement Agency (RI-94-0015)

Submitted Pursuant to Third Circuit LAR 34.1(a) December 14, 1998

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

(Filed December 21, 1998)

John S. Hoff Hoff & Garley Chicago, IL 60603

Attorney for Petitioner

___________________________________________________ ______________

*Hon. Louis F. Oberdorfer, United States District C ourt for the District of Columbia, sitting by designation.Robert A. Zauzmer

Office of United States Attorney Philadelphia, PA 19106

Attorney for Respondent

OPINION OF THE COURT

SLOVITER, Circuit Judge.

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

I.

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

In September 1994, DEA officers who had become suspicious of the activities of certain suspects tr acked them to the Bermuda Dunes airport in California. The sus pects unloaded luggage from a truck into Yskamp's jet. Af ter the suspects boarded the jet, the officers approached a nd requested permission to search it, which was grante d. On board, the officers found 12 pieces of luggage cont aining 300 kgs of cocaine.

2When questioned afterwards, Yskamp conceded that th is

flight and a prior one with the same suspects were odd, because the bulk of the payment was in cash, the tr avelers had significantly more luggage in one direction tha n the other, and the turn-around time was short. Addition ally, when questioned by the DEA, pilots for Yskamp state d initially (but later retracted when Yskamp was pres ent) that they had informed him of their suspicions, and that he told them to ignore these concerns.

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

Pursuant to the administrative forfeiture provision in 19 U.S.C. S 1607, the DEA mailed notices of seizure da ted October 11, 1994, to Yskamp and Haldan. The mailed
notices contained information on the first date set for public notice of the seizure, the appraised value o f the property seized ($1 million), and the federal judic ial district in which the seizure took place. The notices also e xplained that the party could post a $5000 bond and pursue j udicial forfeiture proceedings as an alternative pursuant t o the

statute.

Attorney John Scott Hoff (CIGNA's counsel here) not ified the DEA of his representation of both CIGNA and Ysk amp on October 11, 1994. Included with this notice was a petition for expedited release of the jet. The DEA then issued a notice of seizure addressed to Yskamp c/o Hoff as his attorney. CIGNA wrote to the DEA on November 15
, 1994, confirming its understanding that the DEA wou ld proceed on the petition for expedited release and s tating that CIGNA's decision whether to post bond was stil l pending.

CIGNA failed to post the judicial bond and, on Dece mber 16, the DEA administratively forfeited the jet. Sev eral days

3later, the DEA denied CIGNA's expedited release pet ition,

but agreed to treat CIGNA's submission as a petitio n for discretionary mitigation or remission and agreed to CIGNA's filing of additional documentation for that purpose

.

Following the submission of additional information, the DEA denied the mitigation or remission petition. Th e DEA concluded, inter alia, that neither Yskamp nor CIGN A had taken reasonable steps to assure that the jet was n ot used for conveying illegal drugs. CIGNA filed a petition for
reconsideration of the forfeiture based on the DEA' s failure to consider CIGNA's status as subrogee of Haldan's interest. The DEA denied that petition in August 19 96.

In September 1996, CIGNA, together with Yskamp, tim ely filed in the Court of Appeals for the Ninth Circuit a Joint
Petition for Review of the DEA's order of forfeitur e. The court dismissed the claims of Yskamp as well as tho se of CIGNA as subrogee of both Yskamp and Haldan for lac k of jurisdiction, reasoning that Yskamp was not an aggr ieved party, and that Haldan was merely an unsecured cred itor with whom CIGNA had no relationship creating subrogation. The court then transferred the remaind er of the case to this court on jurisdictional grounds pu rsuant to 28 U.S.C. S 1631. CIGNA pursues review of the forfe iture on its own behalf as owner of the jet.

We have jurisdiction pursuant to 21 U.S.C. S 877. W e will set aside the agency's determination only if it is arbitrary, capricious, an abuse of discretion, or otherwise no t in accordance with law. See 5 U.S.C. S 706(2); Humphre ys v. DEA, 96 F.3d 658, 660 (3d Cir. 1996). However, appe al from a petition for remission or mitigation is limi ted to assuring that the DEA complied with statutory and procedural requirements. See Schrob v. Catterson, 9 48 F.2d 1402, 1412 n.9 (3d Cir. 1991); United States v. Kra vitz, 738 F.2d 102, 105 (3d Cir. 1984) ("[T]he remission deci sion of the Attorney General is not open to judicial review ."); see also Marshall Leasing, Inc. v. United States, 893 F .2d 1096 (9th Cir. 1990) (upholding district court's jurisdi ction to
consider collateral attack on DEA's selection of administrative forfeiture). Thus, despite CIGNA's i nvitation,
we will not review de novo the merits of the DEA's
conclusion that CIGNA was not entitled to return of the jet.

4II.

The principal issue in this appeal is a pure questi on of law and depends on statutory interpretation. At iss ue is whether the DEA must use the procedures for judicia l forfeiture, rather than for administrative forfeitu re, if the value of the object seized because it was transport ing a controlled substance exceeds $500,000. To address t he issue, we briefly review the history and operation of the civil
forfeiture laws.

A.

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

S 1607. Seizure; value $10,000 or less If such value of such vessel, vehicle, merch andise, or baggage does not exceed $10,000, the appropr iate
customs officer shall cause a notice of the seizure of
such articles and the intention to forfeit a nd sell or otherwise dispose of the same according to l aw to be published for at least three successive week s in such manner as the Secretary of the Treasury may direct. For the purposes of this section and section s 1610 and 1612 of this title merchandise the importati on of which is prohibited shall be held not to exceed $1 0,000 in

value.

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

S 1610. Seizure, value more than $10,000 If the value of any vessel, vehicle, merchan dise, or baggage so seized is greater than $10,000, t he appropriate customs officer shall transmit a report of the case, with the names of available witnes ses, to the United States attorney for the district in w hich the

5seizure was made for the institution of the proper

proceedings for the condemnation of such pro perty.

19 U.S.C. S 1610 (1982).1

Thus, the statute required an agency seeking forfei ture of property to use judicial process whenever the value of the property exceeded $10,000. For property appraised a t or below $10,000, the agency could use administrative procedures, and these procedures required public no tice of the intended action. A party claiming an interest i n property that was subjected to administrative forfe iture could opt for a judicial proceeding by notifying th e seizing agency and posting a bond, both within a specified period from the date of first public notice. 19 U.S.C.S 16 08.2

The 1984 amendments reworded these sections, increased the dollar cutoff, and slightly altered t he process.3 While the dual forum approach to forfeiture remaine d, Congress added a provision directing that in additi on to the public notice already required, the interested part ies be given personal notice.

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

S 1607. Seizure; value $100,000 or less, pro hibited merchandise, transporting conveyances
(a) If--

___________________________________________________ ______________

1. The operative text for both of these statutory s ections went essentially unchanged from their first enactment in 1930 until 1984, except for increases in the threshold amount, which had starte d at $1000.

2. Section 1608 operates today essentially as it di d in 1930 except for amendments to the bond amount. Today, that bond val ue is ten percent of the property's value or $5000, whichever is less , but not less than $250. A party losing in a forfeiture proceeding als o is liable for the

costs of the proceeding.

3. Congress enacted comprehensive revisions to the relevant forfeiture laws twice that session. See Comprehensive Forfeitu re Act, Pub. L. No. 98-473, SS 311-319, 98 Stat. 2040, 2053-56 (1984); Trade and Tariff Act, Pub. L. No. 98-573, S 213, 98 Stat. 2948, 2984-88 ( 1984). Although the Comprehensive Forfeiture Act did not have a designa ted effective date, the forfeiture provisions in the Trade and Tariff A ct became effective on October 15, 1984. See S 214(e), 98 Stat. at 2989.

6(1) the value of such seized vessel, vehicl e, aircraft,

merchandise, or baggage does not exceed $100 ,000; (2) such seized merchandise is merchandise the importation of which is prohibited; or (3) such seized vessel, vehicle, or aircraf t was used to import, export, transport, or store any cont rolled substance;

the appropriate customs officer shall cause a notice of
the seizure of such articles and the intenti on to forfeit and sell or otherwise dispose of the same ac cording to law to be published for at least three succe ssive weeks in such manner as the Secretary of the Treas ury may direct. Written notice of seizure together w ith information on the applicable procedures sha ll be sent to each party who appears to have an interes t in the
seized article.

1610. Seizure; judicial forfeiture proceedin gs If any vessel, vehicle, aircraft, merchandis e, or baggage is not subject to section 1607 of this title , the appropriate customs officer shall transmit a report of the case, with the names of available witnes ses, to the United States attorney for the district in w hich the
seizure was made for the institution of the proper proceedings for the condemnation of such pro perty.

19 U.S.C. SS 1607, 1610 (1988).

The upper limit on subsection (a)(1) forfeitures wa s raised to $500,000 in 1990, and a separate monetary instru ments category (codified at S 1607(a)(4)) was added.

The 1984 amendments effected a major change in the
statute from one that authorized administrative for feiture only if the property fell below a fixed appraised v alue to one
that also authorized administrative forfeiture of c ertain categories of properties based on the type of prope rty or the reason for forfeiture regardless of the property's appraised value. In fact, the House Conference Report accompa nying the 1990 amendment, which added the monetary instruments category (a)(4), noted that the additio n of subsection (a)(4) removes the dollar limit in uncon tested cash seizures and also observed that "[t]here is no value

7limit on conveyances that contain illegal drugs." H . Conf.

Rep. No. 101-650 at 112, reprinted in 1990 U.S.C.C. A.N. 989, 1002. Thus, Congress recognized that S 1607 contained distinctly separate categories of propert y for administrative forfeiture purposes.

To summarize, the four distinct categories of prope rty subject to administrative forfeiture under the forf eiture statute are: (1) certain property valued at or unde r $500,000;4 (2) merchandise that may not be imported; (3) vehic les, aircraft, and vessels used to transport drugs; and (4) monetary instruments. Only the first category, that in S 1607(a)(1), has a dollar threshold. Judicial forf eiture is required if the property does not fall into any of the four categories. S 1610. Significantly, a party may conv ert an administrative forfeiture to a judicial proceeding by posting a relatively small bond with the agency. S 1608.5

B.

In light of this historical background, we turn to CIGNA's contentions. First, CIGNA argues that federal law r equires the DEA to use judicial forfeiture proceedings any time the value of the property seized exceeds $500,000, and that because the DEA failed to use judicial forfeiture t o seize the jet, it violated CIGNA's constitutional rights.

CIGNA relies on dictum in Marshall Leasing, Inc., 8 93 F.2d at 1102-03 n.6, which CIGNA reads to suggest t hat the 1984 amendments increasing the dollar threshold for triggering judicial forfeiture to $100,000 applies to all property. Indeed, notwithstanding that the 1984 rev ision explicitly distinguished, for purposes of administr ative forfeiture, between property seized below a fixed d ollar value and certain classes of property subject to administrative forfeiture irrespective of the dolla r value (a

___________________________________________________ ______________

4. The threshold amount applies to individual items seized, not to the aggregate value of all items seized. See In re One 1985 Nissan, 889 F.2d 1317, 1322 (4th Cir. 1989).

5. Because CIGNA failed to post the necessary $5000 bond for its $950,000 jet, it was not entitled to judicial forfe iture under 19 U.S.C.

S 1608.

8distinction carried over to the 1990 amendments), m any

courts have continued to refer to property generall y without acknowledging that distinction. See, e.g., Weng v. United States, 137 F.3d 709, 712 (2d Cir. 1998); Ibarra v. United States, 120 F.3d 472, 474 (4th Cir. 1997); Litzenbe rger v. United States, 89 F.3d 818, 819-20 (Fed. Cir. 1996) ; United States v. Baird, 63 F.3d 1213, 1217 n.9 (3d Cir. 19 95); United States v. Giraldo, 45 F.3d 509, 510 (1st Cir . 1995); Linarez v. United States Dept. of Justice, 2 F.3d 2 08, 209 (7th Cir. 1993); Schrob, 948 F.2d at 1412 n.9. We n ote that these statements, however, are mere dicta. Several cases have recognized the statutory distinctions. See Ara ngo v. United States Department of the Treasury, 115 F.3d 922, 925 & n.4 (11th Cir. 1997) (grouping all property t ogether in text while specifying in footnote different cate gories of seizure); United States v. Idowu, 74 F.3d 387, 394 & n.10 (2d Cir. 1996) (enumerating four categories of prop erty administratively forfeitable after notice).

We rely on the plain language of the statute to hol d that S 1607 creates four distinct classes of property su bject to
administrative forfeiture. With the statute so unde rstood, it is apparent that CIGNA cannot prevail on its argume nt that SS 1607 and 1610 required the DEA to use judicial forfeiture to forfeit the airplane at issue. The DE A found 300 kgs of cocaine on the seized jet, which was bei ng used to transport the drugs. The property therefore fall s under S 1607(a)(3) as an aircraft transporting drugs, and is not subject to the $500,000 threshold. Thus, the DEA di d not abuse its discretion in using administrative forfei ture.

As an alternative argument, CIGNA asserts that the DEA's own regulations require the use of judicial proceedings. See 21 CFR S 1316.71 et seq. A review of those regulations shows that they track substantially the forfeiture statute. They define "property" generall y to mean "a controlled substance, raw material, product, con tainer, equipment, money or other asset, vessel, vehicle, o r aircraft within the scope of the Act." S 1316.71(c). The "pr operty" to be forfeited must be appraised, see S 1316.74; 19 U .S.C. S 1606 (requiring appraisal of vessels, vehicles, a ircraft, merchandise, or baggage); and if the property's "ap praised value does not exceed the [statutory] monetary amou nt . . .;

9is [a] monetary instrument . . .; or . . .[is] a co nveyance

used to . . . transport or store any controlled sub stance," then the DEA must publish a public notice, S 1316.7 5, which is a prerequisite for administrative forfeitu re under
19 U.S.C. S 1607.

CIGNA focuses on the language of S 1316.78, stating that if the appraised value exceeds "the jurisdictional limits in 1316.75(a)," the DEA must use judicial forfeiture, and the language of S 1316.77, stating that the DEA may pur sue administrative forfeiture for property that "does n ot exceed the jurisdictional limits in S 1316.75(a)." It argu es that the phrase "jurisdictional limits in S 1316.75(a)" appl ies to all categories of property set forth in the regulation' s definitional section.6 It is apparent, however, tha t by pursuing administrative forfeiture of the jet, the DEA interprets the regulation to incorporate the statut ory distinctions in S 1607, so that the "jurisdictional limits" phrase of S 1316.77 and .78 refers only to property for which S 1607 of the statute imposes a dollar thresh old. This is consistent with the congressional intent that pr operty used in transporting controlled substances be subje ct to
administrative forfeiture.

CIGNA suggests no reason why the DEA, the agency in the forefront of drug interdiction, would do any le ss than Congress. Moreover, the DEA was aware that under th e statute all that is required to invoke judicial for feiture proceedings is the posting of a bond. We are oblige d to defer to the DEA's interpretative application of th ese regulations when, as here, it is neither plainly er roneous nor inconsistent with the regulation. See Shell Oil Co. v. Babbitt, 125 F.3d 172, 175-76 (3d Cir. 1997).

In conclusion, we hold that the DEA was not obligat ed under the federal forfeiture statutes or regulation s to pursue judicial forfeiture merely because the value of the property seized pursuant to S 1607(a)(3) exceeded $500,000.

___________________________________________________ ______________

6. This interpretation is articulated in CIGNA's re ply brief, which the DEA has not had an opportunity to answer.

10III.

CIGNA raises several constitutional arguments again st the forfeiture of the jet. First, it claims that th e forfeiture is violative of the Eighth Amendment's prohibition on excessive fines. See United States v. Austin, 509 U .S. 602 (1993). In United States v. Bajakajian, 118 S. Ct. 2028 (1998), the Supreme Court analyzed whether a crimin al forfeiture of $357,144 sought by the government was grossly disproportionate to the crime and, therefor e, punitive and excessive. It stated that although a c ourt should defer to the decision of the legislature reg arding the appropriateness of the forfeiture, id. at 2037, the statute is not conclusive. Because Bajakajian's offense involv ed only a willful failure to report the export of currency in amounts at or over $10,000, see 18 U.S.C. S 982(a)(1), and was not associated with any other related crimes, such as t ax evasion, drug trafficking, or money laundering, see Bajakajian, 118 S.Ct. at 2036, 2038, the Court reje cted as excessive the government's demand for the entire am ount.

Even before the Bajakajian opinion, this court was moving toward a proportionality test for forfeiture cases, both civil and criminal. See, e.g., United States v . Sarbello, 985 F.2d 716 (3d Cir. 1993) (discussing criminal RI CO forfeiture). In United States v. Premises Known as RR #1, 14 F.3d 864 (3d Cir. 1994), there was a question wheth er the property at issue was in fact used "to facilitate" violation of the drug laws, a prerequisite for civil forfeiture. Id. at 876. We stated that if that nexus were proven, then the trier of fact would be required to look at the overall circu mstances, including seriousness of the offense and personal b enefit or culpability, to decide excessiveness. Id. at 875 (c iting Sarbello, 985 F.2d at 724).

We conclude that the forfeiture here was not excess ive. The federal statute clearly authorized the forfeitu re of aircraft used in the transportation of drugs. The a mount of cocaine to be transported in the jet was comparativ ely large for a drug case. Indeed, an offense involving 150 k gs or more of cocaine has been placed in the highest base offense level under the Sentencing Guidelines. See U.S.S.G. S 2D1.1(c). Furthermore, the DEA found CIGNA culpab le because it failed to assure that the jet was not us ed for

11improper purposes. CIGNA has not contended that it had

no duty to take reasonable precautions to prevent Y skamp's use of the airplane for illegal cargo. The DEA note d that CIGNA's insurance policy reimbursed a claimant even though the property seized was used in illegal drug trafficking, which effectively insulated criminals from the loss consequences of their crimes. Consequently, th e forfeiture of the jet does not violate the constitu tional ban
on excessive fines.

CIGNA's other constitutional arguments are equally meritless. On its Fifth Amendment claims, there is no question that CIGNA's counsel was aware of the forf eiture proceedings and could have acted to preserve the company's rights to a judicial forfeiture by submis sion of a $5,000 bond, but he failed to do so in a timely man ner. CIGNA has not pursued an argument that it must rece ive personal notice, as opposed to the notices counsel received on behalf of Yskamp and Haldan. CIGNA's reliance on United States v. James Daniel Good Real Property, 5 10 U.S. 43 (1993), for the proposition that it deserves a h earing is misplaced. That case required notice and a hearing before the government may seize real property, not persona l property. We decline to extend Good's reach in this case.

CIGNA has not challenged the use of administrative forfeitures generally, only the use of administrati ve forfeiture instead of judicial forfeiture in this c ase. Because
we have concluded that the DEA's administrative for feiture was permissible here, and authorized by statute, we need
not address CIGNA's Sixth and Seventh Amendment
arguments.

Finally, CIGNA raises, apparently for the first tim e, an argument that the jet was not subject to forfeiture because
it served as a common carrier under 21 U.S.C. S 881 (a)(4). However, even that exception requires that the owne r neither consent nor be willfully blind to the prope rty's use in transporting drugs. Id. Even were we to disregar d our precedent and consider this claim in the first inst ance, see, e.g., Southwestern Pa. Growth Alliance v. Browner, 121 F.3d 106, 111-13 (3d Cir. 1997) (declining review of iss ue not considered by agency in the first instance), which we are not inclined to do, the DEA found that CIGNA failed to

12prevent the jet's use in transporting illegal drugs , which

would render that exception inapplicable. CIGNA off ers no explanation that would overcome this finding.

IV.

In conclusion, we will deny CIGNA's Petition for Re view.

A True Copy:

Teste:

Clerk of the United States Court of Appeals
for the Third Circuit

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