Opinion ID: 788029
Heading Depth: 2
Heading Rank: 1

Heading: The Markarians' Article III Standing

Text: 18 Article III standing must be determined as a threshold matter in every federal case. State of Nevada v. Burford, 918 F.2d 854, 856 (9th Cir.1990). In a forfeiture action, this determination turns upon whether the claimant has a sufficient interest in the property to create a case or controversy. United States v. One Lincoln Navigator 1998, 328 F.3d 1011, 1013 (8th Cir.2003). The claimant's burden under Article III is not a heavy one; the claimant need demonstrate only a colorable interest in the property, for example, by showing actual possession, control, title, or financial stake. Id. Ownership interest is determined under the law of the state in which the interest arose — here, California. See id.; Ranch Located in Young, AZ., 50 F.3d at 632. 19 The district court's ruling that the Markarians lacked Article III standing was based upon its conclusion that Anahit's transfer of the defendant property to the Markarians was fraudulent under California's UFTA. 3 In particular, the district court relied upon Cal. Civ.Code § 3439.04(a) and the Legislative Committee Comment thereto. Pursuant to these authorities, a transfer is fraudulent if it is made[w]ith actual intent to hinder, delay, or defraud any creditor of the transferor. Cal. Civ.Code § 3439.04(a). The Comment provides that while the presence of certain badges of fraud does not create a presumption of fraud, it does constitute evidence from which an inference of fraudulent intent may be drawn. 4 Cal. Civ.Code § 3439.04, cmt. 5 (1986). 20 The badges of fraud listed by the Comment include: (a) whether the transfer or obligation was to an insider; (b) whether the debtor retained possession or control of the property transferred after the transfer; (c) whether the transfer or obligation was disclosed or concealed; (d) whether the debtor was sued or threatened with suit before the transfer was made or obligation was incurred; (e) whether the transfer was of substantially all the debtor's assets; (f) whether the debtor has absconded; (g) whether the debtor removed or concealed assets; (h) whether the value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred; (i) whether the debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred; (j) whether the transfer occurred shortly before or shortly after a substantial debt was incurred; (k) whether the debtor transferred the essential assets of the business to a lienor who then transferred the assets to an insider of the debtor. Id. 21 The district court concluded that the government presented substantial evidence to support the existence of numerous badges of fraud, citing the following facts: the transfer of the defendant property was to an insider; the value of the consideration received was not reasonably equivalent to the value of the asset transferred; Anahit retained control and possession of the defendant property after the transfer, as evidenced by the fact that she continued to pay homeowner's association fees and otherwise held herself out as the owner; the transfer was not disclosed to the homeowner's association or the bank holding the first deed of trust on the property; at the time the transfer took place Anahit knew the State Controller's Office was seeking remittance of more than $300,000 in overbillings; and at the time the transfer was recorded Anahit was aware that the FBI was investigating her company. The court also cited the transcript of Anahit's sentencing hearing, during which the court found expressly that the transfer was an effort on Anahit's part to conceal assets and remove them from the reach of the government. 22 Because the government met its initial burden of presenting evidence from which a trier of fact could conclude that the transfer to the Markarians was fraudulent, the burden shifted to the Markarians to demonstrate a triable issue of material fact as to the fraudulent nature of the transfer. See Celotex Corp. v. Catrett, 477 U.S. 317, 324-25, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Fed.R.Civ.P. 56(e). The Markarians, however, failed to oppose the government's motion. Accordingly, the district court properly concluded as a matter of law that the transfer of the defendant property was fraudulent, 5 and that as a result the Markarians lacked Article III standing to contest the forfeiture action. See Ranch Located in Young, AZ., 50 F.3d at 632 (applying Arizona's UFTA to conclude that claimant lacked standing to contest forfeiture action). 23 As noted previously, a claimant need demonstrate only a colorable interest in the defendant property in order to establish Article III standing. Had the Markarians mounted any opposition to the government's motion for summary judgment, it is entirely possible that they could have met their threshold burden under Article III. However, because the government presented evidence that the transfer of the property was fraudulent under state law, and the Markarians failed to present any evidence whatsoever to the contrary, the district court properly concluded that there were no triable issues of material fact with respect to that issue. Having reached that conclusion, the district court had no alternative other than to find that the Markarians lacked Article III standing to contest the forfeiture. 24