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Paul J. Cambria, Jr. (NY 15873, admitted pro hac vice)

LIPSITZ GREEN SCIME CAMBRIA LLP

42 Delaware Avenue, Suite 120

Buffalo, New York 14202

Telephone: (716) 849-1333

Facsimile: (716) 855-1580

pcambria@lglaw.com

Erin E. McCampbell (NY 4480166, admitted pro hac vice)

LIPSITZ GREEN SCIME CAMBRIA LLP

42 Delaware Avenue, Suite 120

Buffalo, New York 14202

Telephone: (716) 849-1333

Facsimile: (716) 855-1580

emccampbell@lglaw.com

Attorneys for Defendant Michael Lacey

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

United States of America,

 Plaintiff,

vs.

Michael Lacey, et al., 

 

 Defendants.

NO. CR-18-00422-PHX-SPL (BSB)

DEFENDANT LACEY’S

REPLY IN FURTHER SUPPORT OF 

MOTION FOR RELEASE OF FUNDS 

UNRELATED TO BACKPAGE AND 

REQUEST FOR EXPEDITED RELIEF

(Oral argument requested)

Defendant Michael Lacey, by and through his undersigned attorney, hereby submits the 

instant reply in further support of his Motion for Release of Funds Unrelated to Backpage and 

Request for Expedited Relief (“Motion”), which was filed on November 16, 2018 (Doc. 385). 

The government filed an untimely opposition to the Motion (“Opposition”) (Doc. 412); which 

Mr. Lacey moved to strike on the basis that it was not timely submitted and the government 

offered no explanation for its failure to timely submit the Opposition or request an extension. 

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415.) To the extent this Court considersthe untimely Opposition, this Court should, nonetheless, 

grant the Motion. The government has seized assets that are not traceable to Backpage, has 

refused to consider the evidence Mr. Lacey submitted which demonstrates that assets unrelated 

to Backpage were accidentally mixed with Backpage-derived funds by an administrative 

assistant without Mr. Lacey’s knowledge. Indeed, Mr. Lacey can demonstrate that the funds 

were segregated and only an act of a third party resulted in any Backpage-related funds being 

deposited into his Republic Bank account ending in 2485. At this time, Mr. Lacey has no other 

avenue for relief than this Court’s equitable separation of the assets unrelated to Backpage. 

BACKGROUND

Recently, this Court entertained various challenges to seizure warrants directed at 

attorney IOLTA accounts. (See Emergency Motion to Stay Seizure of Attorneys’ Fees and 

Immediate Hearing (“First Motion to Stay”), Doc. 360; Emergency Motion to Stay Seizure 

(“Second Motion to Stay”), Doc. 365; Joinder in First Motion to Stay (“Joinder”), Doc. 366; 

Emergency Motion to Stay (“Third Motion to Stay”), Doc. 376.) In addition to these motions, 

Mr. Larkin filed a Supplemental Brief in Support of Defendants’ Emergency Motion to Stay

(“Supplemental Motion to Stay”). (Doc. 377.) In the Supplemental Motion to Stay, Mr. Larkin 

asserted that, in a recent communication with the government, the government claimed that two 

bank accounts that Mr. Larkin had understood to contain funds unrelated to Backpage had been 

traced to Backpage, and that use of those funds would constitute criminal conduct. (See id.) Mr. 

Larkin indicated that the government was unwilling to reveal its basis for claiming that the funds 

were traceable to Backpage and requested an immediate evidentiary hearing. (See id.) 

Then, on November 16, 2018, Mr. Lacey filed his Motion for Release of Funds Unrelated 

to Backpage and Request for Expedited Relief (“Motion”). (Doc. 385.) In the Motion, Mr. 

Lacey requested that this Court issue an order directing the government to release funds held in 

three bank accounts (Republic Bank accounts ending in 2485, 1897, and 3126) because the 

government seized those funds on the basis that Mr. Lacey had comingled funds related to 

Backpage with funds unrelated to Backpage thereby rendering all of the funds held in those 

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accounts subject to pretrial restraint under the government’s theory of the case against Backpage. 

(See id.) Mr. Lacey demonstrated to this Court, as he had to the government many months earlier

through email communications and at a meeting, that he had no knowledge of or involvement 

with the single, accidental deposit of funds related to Backpage into those three accounts, which 

did not otherwise contain funds related to Backpage. Instead, an administrative assistant made 

the erroneous transfer, immediately rectified it (nearly a year before inception of this case), and 

offered to speak with the government about the error. Mr. Lacey turned over this evidence to 

the government in a good faith effort to resolve this issue without judicial intervention, but the 

government refused to acknowledge its error or investigate. For these reasons, Mr. Lacey came 

to this Court to seek the equitable release of the funds that were unrelated to Backpage for use 

for his defense and for protection of his constitutional rights.

On November 16, 2018, this Court held a hearing on the motions that had been briefed 

by the time of the hearing which included the First, Second, and Third Motions to Stay, the 

Supplemental Motion to Stay, and related submissions. (See 11/16/18 Transcript, a true and 

correct copy of which is attached hereto as Ex. A (referring to Docs. 360, 363, 365, 366, 370, 

371, 376, 377, 379, 382).) During the hearing, there was no discussion or mention of Mr. 

Lacey’s Motion (Doc. 385). (See id.) At the conclusion of the hearing, this Court announced 

an oral decision and order on the argued motions (“Order”). (See id. at 55-60.) The Order 

indicated that it resolved the First, Second, and Third Motionsfor Stay (Doc. 360, 365, 376) and 

the Supplemental Motion for Stay (Doc. 377) and Court ruled that those motions were denied 

because there were no “persuasive reasons as to why the Court should interfere with the Central 

District of California’s issuance of the seizure warrants.” (Id. at 57 (emphasis added).). 

The Order did not mention or rule on Mr. Lacey’s Motion. (See id. (no discussion of 

Doc. 385.) The Motion is pending before this Court with an untimely Opposition (Doc. 412).1

 1 Because Mr. Lacey’s Motion remained active after issuance of the Order, the 

government’s opposition was due on November 30, 2018. However, that date passed and the 

government did not file an opposition or a request an extension of its deadline. On December 3, 

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ARGUMENT

I. This Court should strike the Government’s Opposition as untimely and grant the 

Motion as unopposed.

This reply hereby incorporates by reference the grounds for striking the Opposition as 

untimely and granting the Motion as unopposed as detailed in Mr. Lacey’s Motion to Strike 

(Doc. 415). Mr. Lacey renews his request that this Court strike the Opposition as untimely and 

grant the Motion as unopposed.

II. This Court should grant the Motion because resolution of this Motion is not 

precluded by the Order. 

This Court should grant the Motion. The government contends that this Court should 

not entertain the merits of the Motion because it is akin to the Supplemental Motion which was 

denied in the Order and the Motion should be denied for the same reasons under the doctrine of 

the law of the case. The government is wrong. The law-of-the-case doctrine, which is a 

discretionary practice, is no barrier to consideration of this distinct Motion on its merits because 

the Order did not address the issues raised in the Motion. 

The Supreme Court has explained that the “law-of-the-case doctrine generally provides 

that when a court decides upon a rule of law, that decision should continue to govern the same 

issues in subsequent stages in the same case.” Musacchio v. United States, 577 U.S. ___, 136 S. 

Ct. 709, 716 (2016) (quotations omitted). However, the law-of-the-case doctrine “acts as a bar 

only when the issue in question was actually considered and decided by the first court.” United 

States v. Cote, 51 F.3d 178, 181 (9th Cir. 1995). Further, the doctrine “clearly does not extend 

 

2018, Mr. Lacey filed a Notice of the Government’s Non-Opposition to his Motion. (Doc. 403.) 

More than one week later, on December 11, 2018, the government filed its Response in 

Opposition to the Motion (“Opposition”). (Doc. 412.) The Opposition does not provide any 

excuse for why the government was unable to file an opposition or a request for an extension by 

November 30, 2018. (See id.) On December 12, 2018, Mr. Lacey moved to strike the 

government’s Opposition as untimely and to grant the Motion as unopposed (Doc. 415), which 

the government opposed (Doc. 423).

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to issues . . . [a] court did not address.” Id. at 181 (quoting Luckey v. Miller, 929 F.2d 618, 621 

(11th Cir. 1991)). For these reasons, the Ninth Circuit has recognized several exceptions to the 

doctrine: “(1) the first decision was clearly erroneous; (2) an intervening change in the law 

has occurred; (3) the evidence on remand is substantially different; (4) other changed 

circumstances exist; (5) a manifest injustice would otherwise result.” Thomas v. Bible, 983 

F.2d 152, 155 (9th Cir. 1993). 

Separate from articulation of the contours of the doctrine and its exceptions, the Supreme 

Court has made it clear that the doctrine is not a jurisdictional barrier. See Christianson v. Colt 

Indus. Oper. Corp., 486 U.S. 800, 817 (1988) (recognizing that the doctrine “merely expresses 

the practice of courts generally to refuse to reopen what has been decided, not a limit to their 

power”); Musacchio, 136 S. Ct. at 716 (describing the doctrine as a “practice” that “does not 

limit courts’ power” (quotations omitted)); see also Milgard Tempering, Inc. v. Selas Corp. of 

Am., 902 F.2d 703, 715 (9th Cir. 1990) (“Application of the doctrine is discretionary.”). Indeed, 

the Court has explained that, as a matter of jurisdiction, “[a] court has the power to revisit prior 

decisions of its own . . . in any circumstance,” even though a court should not do so absent 

“extraordinary circumstances.” Christianson, 486 U.S. at 817 (emphasis added). 

In this case, the doctrine is no barrier to this Court’s resolution of this Motion. First, this 

Motion involves consideration of substantially different facts and relief sought. For example, 

these substantial factual differences preclude application of the doctrine to the Motion: (1) Mr. 

Lacey’s Motion asserts that the government seized funds through execution of a specific search 

warrant (Doc. 385 at 8), whereas the Supplemental Motion asserts that the government 

threatened new criminal charges for use or access of funds but is unclear as to whether a seizure 

warrant was at issue (Doc. 377 at 1); (2) Mr. Lacey’s Motion indicates that he made an 

evidentiary presentation to the government to demonstrate that the funds were unrelated to 

Backpage (Doc. 385 at 10-11), whereas the Supplemental Motion does not indicate that such a 

presentation was made to the government(Doc. 377 at 2); (3) Mr. Lacey’s Motion demonstrated 

that he had no knowledge or involvement with the single, accidental deposit of funds that 

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purportedly tainted his accounts which undermined the government’s basis for restraint (Doc. 

385 at 10-11), whereas the Supplemental Motion indicates that, at the time of filing, counsel was 

not yet aware of the government’s basis for restraint because the government had not revealed it 

(Doc. 377 at 2); and (4) Mr. Lacey’s Motion indicates that the government refused to review or 

investigate Mr. Lacey’s evidence (Doc. 385 at 11), whereas the Supplemental Motion does not 

indicate that the government refused to consider evidence (Doc. 377 at 2).

More importantly, the Motion and Supplemental Motion seek entirely different relief 

from this Court. In the Motion, Mr. Lacey sought the equitable separation of assets accidentally 

combined to use those assets to fund his defense. (Doc. 385 at 16.) In contrast, the Supplemental 

Motion sought an expedited briefing schedule and an evidentiary hearing on the propriety of the 

government’s threat to bring new criminal charges. (Doc. 377 at 2.) 

These distinctions make a difference. The Motion does not ask this Court to interfere 

with another court’s authorization of enforcement of a seizure warrant like the Stay Motions 

(Docs. 360, 365, 366, 376). This Motion does not ask this Court to hold a hearing on the threat 

of new criminal charges in connection with a defendant’s use of funds like the Supplemental 

Motion (Doc. 377). The seizure warrant at issue in this case was executed months ago and this 

Motion does not challenge the government’s application for that seizure warrant or the 

authorization of it by the Central District of California. For that reason, this Motion is not a 

collateral attack on an order of another court of coordinate jurisdiction as contemplated by the 

Ninth Circuit in Delson Gr., Inc. v. GSM Ass’n, 570 F. App’x 690 (9th Cir. 2014); Ord v. United 

States, 8 F. App’x 852 (9th Cir. 2001); and Treadway v. Academy of Motion Pictures Arts & 

Sciences, 783 F.2d 1418 (1986) and cited in the Order. (See Ex. C at 55.) Instead, this Motion 

challenges the continued retention of the funds held in three bank accounts in light of the fact 

that Mr. Lacey had no knowledge or involvement with the accidental transfer of Backpagerelated funds by an administrative assistant into the Republic Bank account ending in 2485 and 

asks this Court to craft an equitable remedy to a problem that the government created by refusing 

to separate non-Backpage funds combined solely as the result of a clerical error. 

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In light of these substantially different facts and relief sought, this Court should decline 

to deny the Motion under application of the doctrine of the rule of the case and resolve this 

distinct Motion on its merits. See Cote, 51 F.3d at 181 (declining application of the “law of the 

case doctrine” because the prior decision “does not indicate the court considered and decided the 

issue presented” that was now before the court). Declining to apply the doctrine to foreclose 

consideration of the Motion is the correct result even though both the Motion and the 

Supplemental Motion address, in a general sense, the government’s seizure of assets, because 

once that very general similarity is set aside, the Motion and Supplemental Motion raise distinct 

issues by different parties who seek different relief. The Ninth Circuit’s opinion in Milgard 

Tempering, Inc. is instructive. In that case, the district court interpreted a contract provision as 

allowing a furnace manufacturer to obtain attorneys’ fees if the manufacturer prevailed on a 

specific contractual defense. See Milgard Tempering, Inc., 902 F.2d at 706, 715-16. On remand, 

the manufacturer lost on the merits of the dispute, and the furnace purchaser sought attorneys’ 

fees under the same provision of the contract, asserting that the doctrine of the law of the case 

foreclosed denial of attorneys’ fees. See id. at 715-16. The Ninth Circuit explained that the 

district court’s prior interpretation of that provision as applying to the manufacturer on a specific 

defense was a separate issue from whether any party under the contract could seek attorneys’ 

fees for prevailing on any dispute under the contract. See id. For that reason, the doctrine of the 

law of the case was inapplicable. See id.

Second, a denial of the Motion under the doctrine of the law of the case would result in 

manifest injustice. In the Order, this Court explained that the other motions were denied because 

this Court did not want to undertake any actions that could be said to “interfere” with the orders 

of a court of coordinate jurisdiction. (Ex. C at 55.) Notably, the government advocated for this 

result at the November 16, 2018 hearing, indicating that defendants could litigate their challenges 

to seizure warrants in the Central District of California. In particular, the government informed 

this Court that any challenge to the pretrial restraint of defendants’ assets other than a Monsanto

hearing, including a challenge brought under Franks v. Delaware, 438 U.S. 154 (1978), should 

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be brought in the Central District of California.2 (See Ex. C at 7.) To the extent that the 

government’s statement about the availability of other venues for litigation of the pretrial 

restraint of defendants’ assets impacted the Court’s analysis in the Order, the government’s 

conduct since the hearing demonstrates that this Court should entertain this Motion on its merits

because the government will seek to avoid judicial review of its actions outside this District. 

Critically, days after the government’s averments at the November 16, 2018 hearing, 

defendants pursued their challenge to the seizure warrants that the government obtained to seize 

the attorney IOLTA accounts at issue in this Court’s Order in the Central District of California 

by filing an Application and Motion to (1) Stay Execution of Seizure Warrants; and (2) Provide 

Notice to the Court of First Amendment and Franks Violations under the eight sealed dockets 

(18-MJ-02872, 18-MJ-02873, 18-MJ-02874, 18-MJ-02875, 18-MJ-02876, 18-MJ-02878, 18-

MJ-02880, and 18-MJ-02883). Defendants did exactly what the government told this Court they 

should do. Unsurprisingly, the government’s opposition to the Application and Motion sought 

to evade judicial review of the seizure warrants by asking the court to deny the motion as moot 

because the seizure warrants had expired by the time the Application and Motion was filed (even 

though the government was silent as to whether it would seek or had sought new seizure warrants

not yet disclosed to the parties or the courts). Given this history, the only available venue for 

this Motion is this Court. While the parties continue to litigate the Application and Motion in 

 2 Defendants found this statement to be surprising in light of the history of the parties’ 

litigation of the government’s pretrial restraint of defendants’ assets in the Central District 

of California. On August 1, 2018, Defendants filed a Motion to Vacate or Modify Seizure 

Warrants, which challenged the seizure warrants on a variety of grounds, including 

violations of Franks under the docket 18-CV-06742. The government responded by telling 

the Central District of California that the defendants’ challenges should not be heard in that 

District, but instead should be heard in the District of Arizona. Shortly thereafter, the 

government sought an ex parte stay of all litigation in the Central District of California, 

which was granted and which is on appeal to the Ninth Circuit. There is nothing about the 

way the government litigated the pretrial restraint of defendants’ assets that suggests that 

the government is receptive to judicial review of the merits of its actions in the Central 

District of California or anywhere. 

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the Central District of California, the government’s handling of that litigation demonstrates that 

this Motion should not face the same fate as the motions resolved in the Order because the 

government will make sure that there will be no opportunity to litigate this Motion in the Central 

District of California.

III. This Court should grant the equitable relief sought in the Motion—the separation 

of assets unrelated to Backpage—because there is no other avenue for Mr. Lacey 

to regain access to his innocent funds.

This Court should grant the Motion. The government contends that the Motion should 

be denied because it is a motion for release under Rule 41(g) of the Federal Rules of Criminal 

Procedure (“Rule 41(g)”) and such motions must be denied when there is a remedy at law which 

the government claims exists for this dispute. (See Opp’n at 5-6.) The government’s 

misclassification of this Motion does not support denial of the Motion and this Court has the 

inherent and equitable jurisdiction to entertain it and to grant the relief sought.

Mr. Lacey did not invoke Rule 41(g) because this Motion is not for the return of specific 

property under Rule 41(g). Quite differently, this Motion seeks the equitable separation of funds 

unrelated to Backpage from funds related to Backpage as a matter of this Court’s inherent and 

equitable jurisdiction. There is no remedy at law because in this Motion Mr. Lacey is not 

challenging the method by which the government seized his bank accounts (such as the veracity 

of the seizure warrant and warrant application). Instead, he is challenging the government’s 

continued retention of such funds and the government’s refusal to acknowledge and release 

funds that were accidentally combined through no act of Mr. Lacey. Similarly, the Motion does 

not seek relief under United States v. Monsanto, 491 U.S. 600 (1989). Although Mr. Lacey may, 

in the future pursue a Monsanto-related motion, he has not sought such relief in this Motion and 

this Court should reject the government’s attempt to shoehorn this Motion into that format. 

Instead, this Court has the inherent and equitable jurisdiction to fashion a remedy to 

resolve this Motion. See Swann v. Charlotte-Mecklenburg Bd. of Ed., 402 U.S. 1, 15 (1971) 

(“Once a right and a violation have been shown, the scope of a district court’s equitable 

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powers to remedy past wrongs is broad, for breadth and flexibility are inherent in equitable 

remedies.”); Porter v. Warner Holding Co., 328 U.S. 395, 398 (1946) (recognizing that, in the 

absence of specific statutory authority, courts still have equitable “power” which is “resident in 

the District Court”); United States v. Coca-Cola Bottling Co., 575 F.2d 222, 228 (9th Cir. 1978) 

(“The equity jurisdiction of the federal courts traditionally has permitted the fashioning of broad 

and flexible decrees molded to the necessities of the individual case.”); see also United States v. 

Barrera-Moreno, 951 F.2d 1089, 1091 (9th Cir. 1991) (recognizing that courts have inherent 

“supervisory powers” to “remedy a constitutional or statutory violation; to protect judicial 

integrity by ensuring that a conviction rests on appropriate considerations validly before a 

jury; or to deter future illegal conduct”).

It is equally important to this Court’s resolution of the Motion that the government did 

not dispute a single fact set forth in the Motion. Consequently, this Court should consider the 

following undisputed facts in reaching an equitable resolution of the Motion: (1) the Republic 

Bank account ending in 2485 held funds unrelated to Backpage; (2) an administrative assistant 

accidentally transferred funds related to Backpage into that account without authorization to 

make that transfer; (3) the administrative assistant rectified that error; (4) Mr. Lacey had no 

knowledge about or involvement with the accidental transfer and only learned about it after his 

accounts were restrained; (5) Mr. Lacey investigated the transfer and presented bank records and 

a declaration from the administrative assistant to the government to demonstrate that he lacked 

the intent to consciously comingle funds; and (6) the government refused to review the evidence 

or to investigate the validity of its continued retention of funds unrelated to Backpage held in 

three separate bank accounts (Republic Bank accounts ending in 2485, 1897, and 3126). (See

Doc. 385 at 8-11.) The absence of knowing and conscious comingling by Mr. Lacey deprives 

the government of its reliance on the taint doctrine. (See Doc. 385 at 13-15.) 

Because this Court has the authority to fashion a remedy for this Motion and because the 

government does not dispute the facts presented, Mr. Lacey respectfully requests that this Court 

grant the Motion. This Court has the inherent and equitable authority to grant the relief requested

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and to fashion a remedy for the government’s unfair conduct as akin to the equitable remedies 

of a mandatory injunction, an accounting, a constructive trust, an equitable rescission, and a 

partition. Mr. Lacey is not asking for anything more than the separation of his funds unrelated 

to Backpage for his defense to the instant action. Because the government has seized nearly all 

of his assets, his financial position is tenuous and he is unable to fulfill his financial obligations, 

including funding his defense and protecting his constitutional rights. (See Doc. 385 at 12.) Mr. 

Lacey has not asked this Court to weigh in on the propriety of the seizure warrants for these 

accounts or for any other accounts. He solely request that this Court enter an order separating 

funds that are indisputably untraceable to Backpage for use for his defense to this prosecution.

CONCLUSION

For all these reasons, Mr. Lacey respectfully requests an order directing the 

government to release the funds held in Republic Bank accounts ending in 2485, 1897, and 

3126. These funds, of approximately $1.1 million, are wholly unrelated to Backpage, and are 

vital to Mr. Lacey’s ability to defend the instant action, protect his constitutional rights, and 

survive pending trial.

 RESPECTFULLY SUBMITTED this 18th day of December, 2018, 

/s/ Paul J. Cambria, Jr. 

LIPSITZ GREEN SCIME CAMBRIA LLP

Attorneys for Defendant Michael Lacey

Case 2:18-cr-00422-DJH Document 424 Filed 12/18/18 Page 11 of 12
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On December 18, 2018, a PDF version

of this document was filed with

Clerk of the Court using the CM/ECF

System for filing and for Transmittal

Of a Notice of Electronic Filing to the

Following CM/ECF registrants:

Kevin Rapp, kevin.rapp@usdoj.gov

Reginald Jones, reginald.jones4@usdoj.gov 

Peter Kozinets, peter.kozinets@usdoj.gov

John Kucera, john.kucera@usdoj.gov 

Margaret Perlmeter, margaret.perlmeter@usdoj.gov 

Patrick Reid, Patrick.Reid@usdoj.gov 

Andrew Stone, andrew.stone@usdoj.gov

Amanda Wick, Amanda.Wick@usdoj.gov

Case 2:18-cr-00422-DJH Document 424 Filed 12/18/18 Page 12 of 12