Source: https://m.openjurist.org/345/f3d/49/united-states-v-br-br-and-br-and-llp
Timestamp: 2020-01-24 06:39:05
Document Index: 310699725

Matched Legal Cases: ['§ 1956', '§ 1341', '§ 1956', '§ 848', '§ 981', '§ 981', '§ 2461', '§ 1056', '§ 1056', '§ 1', '§ 984', '§ 287', '§ 981', '§ 1956', '§ 1341', '§ 981', '§ 981', '§ 981', '§ 981', '§ 1956', '§ 984', '§ 1956', '§ 984', '§ 984']

345 F3d 49 United States v. Br Br & Br & Llp | OpenJurist
345 F. 3d 49 - United States v. Br Br & Br & Llp
345 F.3d 49
All Funds Distributed to, or On Behalf of, Edward Weiss and/or Rosemary Weiss from the B.R. Ambulance Service, Inc. Pension Plan and All Monies and Properties Traceable Thereto, Defendants,
Edward Weiss, from the B.R. Ambulance Services, Inc. & Rosemary Weiss, from the B.R. Ambulance Services, Inc., Claimants-Appellees,
Pryor & Mandelup, L.L.P., Jacqueline Acampora & Internal Revenue Service, Claimants.
Docket No. 01-6232.
CAROLYN LISA MILLER, Assistant U.S. Attorney for the Eastern District of New York, (ALAN VINEGRAD, U.S. Attorney for the Eastern District of New York, VARUNI NELSON, ARTHUR P. HUI, Assistant U.S. Attorneys for the Eastern District of New York, on the brief), Brooklyn, NY, for Appellant.
F.I. Parker, Circuit Judge*.
The government acknowledges that it learned that the pension plan contained assets derived from the fraudulent Medicare claims in 1996, after BR had begun bankruptcy proceedings. However, the government did not commence its civil forfeiture action against the pension fund monies until March of 1999, when it obtained a court order authorizing the arrest and seizure of Edward and Rosemary Weiss's North Fork Bank IRA funds—the defendant property in this litigation. When the government initiated the seizure of Edward's and Rosemary's IRAs, it alleged that the funds therein were being used to commit or facilitate the commission of violations of 18 U.S.C. § 1956(a)(1)(A)(I) (money laundering) by virtue of the funds being the proceeds of, or derived from mail and/or wire fraud (18 U.S.C. §§ 1341, 1343). Mail fraud and wire fraud are predicate crimes under the money laundering statute.2 See 18 U.S.C. §§ 1956(c)(7)(C), 1961(1)(B); 21 U.S.C. § 848. The government further alleged that as a result of the foregoing, the funds were property involved in a financial transaction in violation of the money laundering statute, traceable to mail fraud and wire fraud violations, and therefore liable to forfeiture in accordance with 18 U.S.C. § 981(a)(1).3
The district court's decision to grant summary judgment in this case turned on its application of a particular forfeiture statute and the applicable statute of limitations, which is a question of law and thus also is reviewed de novo. Golden Pac. Bancorp v. F.D.I.C., 273 F.3d 509, 514 (2d Cir.2001). However, "[w]e review the district court's ruling on equitable tolling for abuse of discretion." Alli-Balogun v. United States, 281 F.3d 362, 367-68 (2d Cir.2002); see also Dixon v. Shalala, 54 F.3d 1019, 1031 (2d Cir.1995). A discretionary ruling based on an error of law is necessarily an abuse of discretion. See Monegasque De Reassurances S.A.M. v. Nak Naftogaz Of Ukraine, 311 F.3d 488, 498 (2d Cir.2002).
Generally, equitable tolling is difficult to attain, as it is reserved for "extraordinary or exceptional circumstances." Smith v. McGinnis, 208 F.3d 13, 17 (2d Cir.2000). "Equitable tolling . . . permits courts to extend a statute of limitations on a case-by-case basis to prevent inequity," Chao v. Russell P. Le Frois Builder, Inc., 291 F.3d 219, 223 (2d Cir.2002) (quoting Warren v. Garvin, 219 F.3d 111, 113 (2d Cir.2000)), even when the limitations period would otherwise have expired. "We have defined equitable tolling rules as those that allow a court `under compelling circumstances, [to] make narrow exceptions to the statute of limitations in order to prevent inequity.'" M.D. v. Southington Bd. of Educ., 334 F.3d, 217, 223 (2d Cir.2003) (citing Asbestos Claimants v. U.S. Lines Reorganization Trust (In re U.S. Lines, Inc.), 318 F.3d 432, 436 (2d Cir.2003)). A party seeking to benefit from the doctrine bears the burden of proving that tolling is appropriate, see Chapman v. ChoiceCare Long Island Term Disability Plan, 288 F.3d 506, 512 (2d Cir.2002), as "[e]quitable tolling requires a party to pass with reasonable diligence through the period it seeks to have tolled," Johnson v. Nyack Hosp., 86 F.3d 8, 12 (2d Cir.1996). In this case, the question of whether equitable tolling should be granted implicates issues related to the nature of forfeiture proceedings and the protections ERISA affords to pension plans.
1. Forfeiture Requires Seizure of the "Guilty" Property
A civil forfeiture action is an in rem proceeding brought by the government as plaintiff asserting that "[a]ll right, title, and interest in [the defendant] property" has vested in "the United States upon commission of the act giving rise to forfeiture." 18 U.S.C. § 981(f). The suit is brought not against a person or corporation, but against defendant property that allegedly has been involved in criminal activity.6 "It is the property which is proceeded against, and, by resort to a legal fiction, held guilty and condemned as though it were conscious instead of inanimate and insentient." Waterloo Distilling Corp. v. United States, 282 U.S. 577, 581, 51 S.Ct. 282, 75 L.Ed. 558 (1931) (distinguishing an in rem civil forfeiture proceeding from an in personam criminal proceeding against a defendant person). Unless otherwise provided by statute, civil forfeiture actions "shall conform as near as may be to proceedings in admiralty." 28 U.S.C. § 2461(b); see also Republic Nat'l Bank of Miami v. United States, 506 U.S. 80, 84-87, 113 S.Ct. 554, 121 L.Ed.2d 474 (1992).
When a forfeiture suit is commenced against personalty, the government must seize the defendant property. "In contrast to the in personam nature of criminal actions, actions in rem have traditionally been viewed as civil proceedings, with jurisdiction dependent upon seizure of a physical object." United States v. One Assortment of 89 Firearms, 465 U.S. 354, 363, 104 S.Ct. 1099, 79 L.Ed.2d 361 (1984) (citing Calero-Toledo v. Pearson Yacht Leasing Co., 416 U.S. 663, 684, 94 S.Ct. 2080, 40 L.Ed.2d 452 (1974)); see also Mattel, Inc. v. Barbie-Club.com, 310 F.3d 293, 304 n. 13 (2d Cir.2002)(discussing "the venerable principle that in rem jurisdiction depends upon a court's initially . . . having control of the physical res."). Therefore, if the defendant personal property cannot be seized, at least constructively, the forfeiture proceeding cannot move forward, because the court will not have jurisdiction.7
The government argues that ERISA's anti-alienation provisions, see 29 U.S.C. § 1056(d)(1), prevented it from initiating the action to seize the defendant funds until the BR pension plan's dissolution had begun and disbursement of the funds was inevitable.8 The government reasons that it was prevented from filing any earlier than the beginning of the disbursement process because, without the possibility of seizure, there could be no jurisdiction.9 Therefore, in order to decide whether equitable tolling is appropriate, we must first examine the effect of ERISA on the government's ability to seize the defendant funds.
2. Alienation Restrictions of ERISA
As we have noted, "[i]n enacting ERISA, Congress clearly intended to protect workers' retirement benefits," United States v. McCarthy, 271 F.3d 387, 398 (2d Cir.2001), and the statute affords pension plans several unique protections. For example, it is well-established that under ERISA's anti-alienation provision, 29 U.S.C. § 1056(d)(1),10 pension benefits or funds may not be "assigned or alienated" while the money is held by the plan administrator. Robbins ex rel. Robbins v. DeBuono, 218 F.3d 197, 203 (2d Cir.2000). "The anti-alienation provision can be seen to bespeak a pension law protective policy of special intensity: Retirement funds shall remain inviolate until retirement." Boggs v. Boggs, 520 U.S. 833, 851, 117 S.Ct. 1754, 138 L.Ed.2d 45 (1997) (internal quotations omitted). A regulation outlining the tax implications of this statutory prohibition on assignment and alienation of undistributed ERISA plans' pensions states that "benefits provided under the plan may not be anticipated, assigned (either at law or in equity), alienated or subject to attachment, garnishment, levy, execution or other legal or equitable process." 26 C.F.R. § 1.401(a)-13(b) (2003).
The claimants assert that the government failed to pursue this forfeiture with sufficient diligence, and that notwithstanding ERISA, the government could have commenced its action in 1996, the time that the parties agree the government first learned of the pension funds and alleged money laundering offense.12 We recognize that civil forfeiture is closely related to admiralty law, and "[i]t is settled that a suit may sometimes be brought in admiralty before the cause of action accrues." The Lassell, 193 F. 539, 543 (E.D.Pa.1912); see also Patricia Hayes Assoc., Inc. v. Cammell Laird Holdings U.K., 339 F.3d 76, 82-83 (2d Cir.2003) (noting that "a district court may in some circumstances disregard the prematurity of a plaintiff's claim as a matter of discretion"); Greenwich Marine, Inc. v. S.S. Alexandra, 339 F.2d 901, 905 (2d Cir.1965) (stating that it is within a district court's "inherent power" when sitting in admiralty "to disregard the prematurity of plaintiff's claim"). However, while a district court may in some circumstances exercise its discretion to disregard the prematurity of a plaintiff's claim, such a "prematurity objection has been ignored only in isolated situations under peculiar factual circumstances." Greenwich Marine, Inc., 339 F.2d at 905. Before formal notice was filed indicating that the pension plans would be liquidated, there was no basis to allow a premature claim to proceed against funds which could not be touched, and would remain untouchable for the foreseeable future. It is technically correct that the government could have initiated a quixotic forfeiture action in 1996. However, because the defendant property could not have been seized in the foreseeable future, it likely would have been an abuse of discretion for a court to have allowed the action to proceed.
B. Applicable Civil Forfeiture Statute
In light of our decision regarding equitable tolling, the government may now proceed under 18 U.S.C. § 984(c), with its one year statute of limitations and lack of traceability requirements.13 We express no opinion about (1) whether this defendant property may or may not be traceable to a criminal offense or (2) whether as a result, section 981(a)(1)(A) might apply here.
When this action was filed, the Medicare fraud offense to which Edward Weiss pleaded guilty, making or causing false claims to be made in violation of 18 U.S.C. § 287, was not among the crimes enumerated in the relevant civil forfeiture statutes,see 18 U.S.C. §§ 981 & 984 (1994). Thus, the government alleges money laundering, in violation of 18 U.S.C. § 1956, of the proceeds of mail and wire fraud (violations of 18 U.S.C. §§ 1341, 1343). Money laundering, mail fraud and wire fraud were all listed in the applicable earlier version of section 981 as offenses which could justify forfeiture. See 18 U.S.C. § 981 (1994). Money laundering is also included as one of the offenses that made, and continues to make, forfeiture possible under section 984. See 18 U.S.C. § 981 (1994 & 2002). We note that since the commencement of this action, however, Congress passed the Civil Asset Forfeiture Reform Act ("CAFRA"), Pub.L. 106-185, 114 Stat. 202 (2000), which, inter alia, amended 18 U.S.C. § 981 to include any act or activity constituting "`specified unlawful activity,' (as defined in section 1956(c)(7) of this title)" as a sufficient offense to trigger forfeiture of guilty property that either constitutes the proceeds of, or is traceable to, such an offense. 18 U.S.C. § 981(a)(1)(C) (2003). Thus, "offense[s] involving a Federal health care offense" are now included as predicates for forfeiture under section 981. 18 U.S.C. § 1956(c)(7)(F).
Section 984 applies to forfeiture of fungible property, and in subsection (c) provides a one year statute of limitations for such property when it is "not traceable directly to the offense." 18 U.S.C. § 984(c)(2000). Like section 981, section 984 refers to 18 U.S.C. § 1956 (money laundering) as an offense that justifies forfeiture
As Justice Thomas, writing for the majority, explained inUnited States v. Bajakajian, 524 U.S. 321, 330 n. 5, 118 S.Ct. 2028, 141 L.Ed.2d 314 (1998) (citation omitted):
Claimants citeUnited States v. James Daniel Good Real Property, 510 U.S. 43, 114 S.Ct. 492, 126 L.Ed.2d 490 (1993), for the proposition that seizure of the defendant funds prior to commencement of the forfeiture action was not necessary. However, in James Daniel Good, the Supreme Court considered whether immediate governmental seizure of a piece of real property—specifically, a person's home—was a necessary predicate to forfeiture jurisdiction and observed that "when the res is real property, rather than personal goods, the appropriate judicial forum may be determined without actual seizure." Id. at 57, 114 S.Ct. 492. Thus, James Daniel Good recognized an exception to the general rule requiring seizure, but that exception was for real property, and is therefore inapposite.
The court order authorizing seizure of the proceeds of the pension plans was issued in March of 1999 shortly after the government filed suit. Thus, the suit was commenced after the process of disbursing cash to the plan beneficiaries had begun, but before it had been completed. Because the proceeds were not released immediately, the seizure and lawsuit were delayed by several months, and did not move forward until release of the pension proceeds to the claimants' IRAs on August 19, 1999. Shortly thereafter, on September 1, 1999, those accounts were seizedSee United States v. Infelise, 159 F.3d 300, 303-04 (7th Cir.1998)(IRA accounts not insulated by ERISA from forfeiture).
Claimants argue that the government waived the argument that equitable tolling applies in the instant case. We disagree. Although the government did not fully explicate in the district court the reason why it was unable to seize the funds until the IRAs were disbursed, it did argue that equitable tolling applies. Where a party fails to marshal factual evidence in support of its equitable tolling argument, we would be inclined to hold that it failed to bear its burden of persuasion that tolling should applySee Chapman, 288 F.3d at 512. However, given that the district court abused its discretion in the instant case only in the sense that its ruling rests on a legal error, Monegasque De Reassurances S.A.M. v. Nak Naftogaz of Ukraine, 311 F.3d 488, 498 (2d Cir.2002), we find that vacatur is appropriate.
Relying onRepublic Nat'l Bank of Miami, claimants argue that the court could have established constructive control over the defendant funds, and thus gained in rem jurisdiction. See 506 U.S. at 87, 113 S.Ct. 554 ("[A] court must have actual or constructive control of the res when an in rem forfeiture suit is initiated."). Republic did not involve ERISA funds, which, as the Court established in Guidry, may not be subject to a constructive trust for purposes of establishing jurisdiction for a forfeiture proceeding. See Guidry, 493 U.S. at 376, 110 S.Ct. 680; see also, Boggs, 520 U.S. at 851, 117 S.Ct. 1754 ("[The] anti-alienation provision is mandatory and contains only two explicit exceptions . . . which are not subject to judicial expansion.").
18 U.S.C. § 984(b)(1) (2000). As we wrote in Marine Midland Bank, N.A. v. United States, 11 F.3d 1119, 1126 (2d Cir.1993), "[t]he enactment of § 984 was intended to lessen the government's burden of proof in forfeiture proceedings against fungible property." See also United States v. $8,221,877.16 in United States Currency, 330 F.3d 141, 158 (3d Cir. 2003) ("Section 984 is a `substitute asset provision' enacted to overcome . . . tracing difficulties and case the government's burden of proof in civil forfeiture proceedings involving fungible property.").