Opinion ID: 65776
Heading Depth: 2
Heading Rank: 1

Heading: Gregory Setser IssueReceivership Order and Search

Text: When we review the denial of a motion to suppress, factual findings are examined for clear error; whether the law enforcement action was constitutional is considered de novo. United States v. Stevens, 487 F.3d 232, 238 (5th Cir.2007). Evidence is viewed in the light most favorable to the prevailing party, which on this issue was the government. Id. There are three parts to Setser's allegations of improper conduct with regard to the Receivership Order: (1) the Receivership Order failed to comply with the Fourth Amendment's particularity requirement, making it an impermissible general warrant; (2) the receiver nonetheless exceeded his authority by seizing documents completely unrelated to the purpose for which he was appointed; and (3) the receiver was late in posting his bond.
Some Fourth Amendment protections apply to civil as well as criminal investigations. See Franks v. Smith, 717 F.2d 183, 186 (5th Cir.1983). A search warrant is to describe the place to be searched and the things to be seized with particularity. United States v. Layne, 43 F.3d 127, 132 (5th Cir.1995). Setser views the Receivership Order as the equivalent of a warrant, to which the particularity requirement must be applied. While Setser concedes that other cases have found, in his words, that a receiver may conduct a warrantless search of a premises, he argues that such cases are inapplicable here. He argues that a 1987 Supreme Court decision altered the previous understanding of receiver searches. See New York v. Burger, 482 U.S. 691, 107 S.Ct. 2636, 96 L.Ed.2d 601 (1987). In that case, the Supreme Court addressed the validity of a state regulatory scheme permitting warrantless inspections of automobile junkyards. The Court applied what it called an established exception to the requirement of warrants, which was for government inspectors to search closely regulated businesses in certain circumstances. Id. at 703, 107 S.Ct. 2636. Required was a constitutionally adequate substitute for a warrant, including giving the search a properly defined scope and limit[ing] the discretion of the inspecting officers. Id. Receivers are not like the Burger state inspectors. They, because of the nature of the regulated business, may be permitted on their own and without prior court approval to make broadly intrusive and unannounced inspections in order to assure compliance with the state's rules. A receiver takes over property only after a court has agreed with the arguments and evidence that such a takeover is necessary. The Burger requirement of a constitutionally adequate substitute for a warrant in some circumstances therefore does not add anything new to the prior rules for receivers. Two years before Burger, we held that a receiver, who has properly come into possession of property, may turn the property over to law enforcement officials without a warrant. United States v. Gray, 751 F.2d 733, 737 (5th Cir.1985). We did not discuss in Gray the breadth of authority that may validly be given a receiver to seize property. Setser alleges there are limits, and among them is something akin to the requirement that a search warrant provide specific guidance on what is and what is not within the scope of permissible search and seizure. Setser acknowledges that no court has ever held that the equivalent of a warrant must be issued in order for a receiver to be permitted to seize the property of the subject entity. One reason that particularity is not translatable to the receiver context is that once appointed, the receiver often takes possession of all property of the distressed or distrusted entity. That seizure of all assets on behalf of the court is a central purpose for the appointment of a receiver. The Setser Receivership Order was an exercise of that broad authority: This Court hereby takes exclusive jurisdiction and possession of the assets, monies, securities, claims in action, and properties, real and personal, tangible and intangible, of whatever kind and description, wherever situated, of Defendants and Relief Defendants (Receivership Assets), and the books and records of the Defendants and Relief Defendants (Receivership Record). Setser is challenging the breadth of the Receivership Order itself. We have found no statutory or judicially created limits of the nature Setser argues exist to a receiver's right to seize assets. In fact, the statutory authority of a receiver appointed by the court is as broad as this receiver order: a trustee, receiver, or manager appointed in any cause pending in any court of the United States, including a debtor in possession, shall manage and operate the property in his possession as such trustee, receiver or manager according to the requirements of the valid laws of the State in which such property is situated, in the same manner that the owner or possessor thereof would be bound to do if in possession thereof. 28 U.S.C. § 959(b). In conclusion, the receiver was authorized to seize all the named categories of assets and records of the identified defendants. Because the receiver was taking possession of everything in those categories that had been the property of the defendants for whom the receivership was authorized, further particularity would have served no purpose. After the seizure, the receiver had possession of the property only because he had been authorized by court order. We find no basis to support the argument that more was needed.
Setser next contends that even if the Receivership Order as written was valid, the Receiver exceeded even the most expansive interpretation of the authority it granted by conducting a general, exploratory search and seizure of documents unrelated and inconsequential to the receivership. He argues that many of the documents and items taken by the receiver, particularly those from various residences, exceeded the scope of the receiver's mandate. Citing the SEC's complaint, Setser alleges the receiver could only marshal, conserve, protect and hold funds and assets of the defendants. In his view, the search went beyond the boundaries of a valid warrant and was presumptively unconstitutional. E.g., Coolidge v. New Hampshire, 403 U.S. 443, 467, 91 S.Ct. 2022, 29 L.Ed.2d 564 (1971); Stanley v. Georgia, 394 U.S. 557, 569, 89 S.Ct. 1243, 22 L.Ed.2d 542 (1969). He quotes the testimony of one agent who assisted in the search to argue that the searchers were predisposed towards including, rather than excluding, documents from the search, that some documents taken were unrelated to the location or preservation of assets, and that documents were turned over to the FBI, in some cases, before anyone representing the receiver had viewed them at all. As a remedy, Setser suggests the suppression of all evidence against him because the search was conducted in flagrant disregard of the Receivership Order. See United States v. Shi Yan Liu, 239 F.3d 138, 140 (2d Cir.2000). Recognizing that this circuit has not adopted the flagrant disregard standard, he argues in the alternative that the evidence that was actually outside the scope of the Receivership Order must be suppressed. Setser does not identify the evidence that allegedly was seized outside the scope of the order and later admitted at trial. We do not rule in the abstract on questions of suppression. We must know what evidence was admitted in violation of some specifically identified right. See United States v. Freeman, 434 F.3d 369, 374 (5th Cir.2005) (must specifically delineate how the introduction of the evidence affected the claim being made). Setser's response is that the scope of the receiver's seizures and the massive amount of evidence introduced at trial made identification of specific illegal evidence impossible. He seeks a remand for hearings to determine what evidence was illegally seized. Setser alleges that the search led to seizing photographs, business brochures, videotapes, [calendars], organizational charts, credit card bills, wedding invoices and letters of recommendation, and that search team members were instructed to retrieve information about how the IPIC business was operated, putting the search beyond the parameters of simply preserving its assets. There apparently was a massive amount of evidence obtained and later introduced. Yet we find no support that the evidence was anything other than what the Receivership Order allowed to be seized, which in summary were the properties, real and personal, tangible and intangible, of the defendants and their businesses. That seizure was necessary in order that the businesses could be operated. Because of the manner in which these businesses had been operated, or at least as jurors became convinced they had been, seizure of relevant documents revealed substantial criminal activity. At least at the level of practicality, we agree with Setser that it would have been difficult to address in a pretrial motion to suppress the significant quantity of evidence that was seized and likely would be introduced. Even in this post-trial appeal, though, we are satisfied that the evidence that convicted Setser was incriminating because it reflected the criminal manner in which the businesses were operated, which also means the evidence was the kind of records and other property that the receiver had the authority to seize. Absent any showing or meaningful suggestion of what evidence was introduced that might have been improperly acquired, we do not further pursue this issue.
Setser next argues that the receiver lacked authority to enter premises and seize documents because he did not post a required bond until after he had conducted the searches. See 28 U.S.C. § 754. The government does not dispute that a bond was not timely obtained. Setser cites a district court case as his primary authority for this proposition. Warfield v. Arpe, No. 3:05-cv-1457-R, 2007 WL 549467, at -11 (N.D.Tex. Feb. 22, 2007). There, a receiver did not timely file his order of appointment in a different state, a filing that became necessary once some of the assets were found to be present there. A statute provides that the failure to file such copies in any district shall divest the receiver of jurisdiction and control over all such property in that district. 28 U.S.C. § 754. In Warfield, the court upheld a new appointment and timely filing of the necessary papers to correct the defect. 2007 WL 549467, at . The statute in question in Warfield also provides that upon giving bond as required by the court, the receiver is vested with the control of the property and a right to take possession. 28 U.S.C. § 754. Setser does not dispute the government's claim that he never raised this issue at his criminal trial. Thus, we at most review for plain error. Even when there is error, the defect must seriously affect the fairness, integrity, or public reputation of judicial proceedings. United States v. Olano, 507 U.S. 725, 732, 113 S.Ct. 1770, 123 L.Ed.2d 508 (1993) (internal quotation marks omitted). We cannot find that the purely technical defect of the late but eventual obtaining of a bond in any way affects a substantial right, as no evidence was obtained and then introduced that could not later have been obtained and introduced after correcting the defect in the bond. We therefore reject all of Setser's arguments that the search performed under the Receivership Order was invalid.