Opinion ID: 6982208
Heading Depth: 2
Heading Rank: 3

Heading: Propriety of ex parte seizure

Text: O’Brien contends on appeal that the district court erred in granting the United States’ motions for ex parte seizure, and that the appropriate remedy is to set aside the forfeiture and dismiss the case. We review a grant of summary judgment in a forfeiture action de novo, viewing the facts in the light most favorable to the non-moving party. United States v. Certain Real Property Located at 16510 Ashton, Detroit, Wayne County, Michigan, 47 F.3d 1465, 1468-69 (6th Cir.1995)(finding violation of claimant’s right to pre-seizure hearing dispositive and declining to address remaining issues); United States v. $53,082 in United States Currency, 985 F.2d 245, 248 (6th Cir.1993). Relying upon the Supreme Court’s decision in United States v. James Daniel Good Real Property, 510 U.S. 43, 114 S.Ct. 492, 126 L.Ed.2d 490 (1993), O’Brien submits that ex parte seizure of the defendant property deprived him of due process. The September 16, 1993 seizure in this case predated the Good decision. Hence, the government acted in compliance with then-existing law by seizing the property only after obtaining a warrant of arrest in rem based on an ex parte showing of probable cause before a neutral magistrate judge. Our analysis must nevertheless address Good, as this matter was on direct appeal at the time of the Good decision. See Harper v. Virginia Dep’t of Taxation, 509 U.S. 86, 96-97, 113 S.Ct. 2510, 2517-2518, 125 L.Ed.2d 74 (1993) (new rule of law applies to pending civil eases on direct appeal); United States v. Certain Real Property Located at 16510 Ashton, 47 F.3d 1465, 1470 (6th Cir.1995)(applying Good). The Supreme Court's decision in Good concerned whether seizure of real property for purposes of civil forfeiture justifies an exception to the general rule requiring pre-deprivation notice and hearing. Good, 510 U.S. at 53, 114 S.Ct. at 501. The Court observed that whether such an exception would be warranted in the case of seizure of real property in an ex parte civil forfeiture proceeding would require examination of the competing interests at stake, along with the promptness and adequacy of later proceedings. Id. The Court employed the Mathews v. Eldridge three-part inquiry balancing (1) the private interest at stake; (2) the risk of erroneous deprivation of that interest through the procedures used and the probable value of additional safeguards; and finally, (3) the Government's interest, including the administrative burden that additional procedural requirements would impose. Id. (citing Mathews v. Eldridge, 424 U.S. 319, 335, 96 S.Ct. 893, 903, 47 L.Ed.2d 18 (1976)). Based upon the historic and continuing importance of the private interest at stake-the right to be free from governmental interference-and the absence of any convincing countervailing government needs, the Court held that, absent exigent circumstances, the Due Process clause requires the government to provide notice and a meaningful opportunity to be heard before seizing real property subject to civil forfeiture. Good, 510 U.S. at 54, 62, 114 S.Ct. at 501, 504. The circuits are not in agreement as to the appropriate remedy where an individual did not receive both pre-deprivation notice and a hearing as required by Good. See United States v. Marsh, 105 F.3d 927, 931 (4th Cir.1997); United States v. All Assets and Equipment of West Side Bldg. Corp., 58 F.3d 1181, 1193 (7th Cir.1995). O’Brien argues in his brief that the appropriate remedy for a Good violation is to set aside the forfeiture and dismiss the case with leave to file a new action if the statute of limitations has not run. 3 See United States v. One Parcel of Real Property, Located at 9638 Chicago Heights, 27 F.3d 327, 330 (8th Cir.1994); United Sates v. Property Identified as Lot 718, 20 F.Supp.2d 27, 39 (D.D.C.1998)(concluding only dismissal would afford meaningful relief when property seized is owner-occupied). The majority of circuits that have addressed this issue, however, have held that a Good violation does not invalidate forfeiture; instead, the government must pay the claimant any damages, such as lost profits or rents, that accrued during the period of the illegal seizure. See e.g., United States v. Marsh, 105 F.3d 927, 931 (4th Cir.1997); United States v. All Assets & Equipment of West Side Bldg. Corp., 58 F.3d 1181, 1193 (7th Cir.1995); United States v. 20832 Big Rock Drive, 51 F.3d 1402, 1406 (9th Cir.1995); United States v. 51 Pieces of Real Property Roswell N.M., 17 F.3d 1306, 1315-16 (10th Cir.1994); United States v. 408 Peyton Road, S.W., Atlanta, Fulton County, Georgia, 162 F.3d 644, 652 (11th Cir.1998). See also United States v. Certain Real Property Known as and Located at 1461 West 42nd Street, Miami, Florida, 998 F.Supp. 1438, 1440-41 (S.D.Fla.1998)(requiring repayment of rents or profits during period of illegal seizure when government voluntarily dismissed forfeiture action after seizing real property without notice or hearing); United States v. One 1989, 23 Foot Wellcraft Motor Vessel, 910 F.Supp. 46, 52-53 (D.Puerto Rico 1995), aff'd, 125 F.3d 842, No. 97-1220, 1997 WL 603452 (1st Cir.1997), ce rt. denied, - U.S. -, 119 S.Ct. 79, 142 L.Ed.2d 62 (1998) (adopting majority rule and requiring government to return to claimant any rents collected by government during period of illegal seizure of real property). No panel of the Sixth Circuit has yet addressed the issue of the remedy available for and seizure of real property without pre-deprivation notice and hearing. In United States v. Real Property Known and Numbered as 429 South Main Street, New Lexington, Ohio, 906 F.Supp. 1155 (S.D.Ohio 1995), the Southern District of Ohio, on remand from the Sixth Circuit, endorsed the approaches of the Seventh and Ninth Circuits to hold that violations of the pre-deprivation notice and hearing requirement do not mandate that a forfeiture be set aside. Id. at 1159. We also are persuaded by the approach of the majority of circuits. Where, as in O’Brien’s case, the government fails to provide pre-deprivation notice and hearing, but the property is found to be subject to forfeiture after the process due has been afforded, the violation does not immunize the property from forfeiture. 408 Peyton Road, S.W., 162 F.3d at 652; see Marsh, 105 F.3d at 931-32. Rather, the government is responsible for rents and profits of which the claimant was deprived during the period of illegal seizure. 4 Whether claimant O’Brien is entitled to compensation depends upon whether he indeed suffered a Good violation. While the government undeniably seized the defendant property without providing O’Brien pre-deprivation notice or opportunity to be heard, the government contends, and the district court held, that ex parte seizure of the defendant property was warranted under the “exigent circumstances” exception recognized in Good. See Good, 510 U.S. at 62, 114 S.Ct. at 504. To demonstrate exigent circumstances, the government must show that less restrictive measures-i.e., a us pen-dens, restraining order, or bond-would not suffice to protect the Government’s interests in preventing the sale, destruction, or continued unlawful use of the real property.” Id. In Good, some four and a half years after seizing drugs and drug paraphernalia from the claimant’s home,' and after securing a guilty verdict against the claimant, the government filed an in rem action seeking to forfeit the claimant’s house and the land on which it was situated. Id. at 46-47, 114 S.Ct. at 497-98. The government sought forfeiture under 21 U.S.C. § 881(a)(7) on the ground that the property had been used to commit or facilitate the commission of a federal drug offense. Id. On August 18, 1989, the Magistrate Judge issued a warrant of arrest in rem authorizing seizure of the property, based on an affidavit recounting Good’s conviction and describing the evidence discovered in his home by the police four and a half years earlier. The Supreme Court concluded that the government made no showing of “exigency” to justify postponement of pre-seizure notice and hearing. Id. at 62, 114 S.Ct. at 505. The two cases in which this Circuit has meaningfully addressed Good violations also involved civil forfeitures under 21 U.S.C. § 881(a)(7). United States v. Certain Real Property Located at 16510 Ashton, Detroit, Wayne County, Michigan, 47 F.3d 1465 (6th Cir.1995) involved civil forfeiture proceedings against properties that a former owner allegedly used in drug transactions. The government claimed that while executing search warrants in July 1992, federal agents found drug paraphernalia on the properties. Id. at 1467. Although no criminal charges were brought against the former owner as a result of these searches, the government still sought forfeiture of the properties and seized them without giving to the owner of record either notice or an opportunity to contest the seizure. Id. at 1467-68. We reversed the district court’s summary judgment for the United States, holding that the owner of record was entitled to pre-seizure notice and hearing. Id. at 1470-72. United States v. Real Property Known and Numbered as 429 South Main Street, New Lexington, Ohio, 52 F.3d 1416 (6th Cir.1995) involved civil forfeiture proceedings against the claimant’s home, out of which on three occasions in August 1991 he sold marijuana to a confidential informant. Id. at 1417. We did not determine whether the government deprived the claimant of his rights under the Due Process clause, but rather remanded the case to the district court to determine whether the government’s filing of a lis pendens and execution of an arrest warrant and occupancy agreements effected any seizure that would have required pre-deprivation notice and hearing under Good. 5 Id. at 1421. Unlike the bank fraud and money laundering offenses at issue in the instant case, both of these prior cases involved criminal conduct comparable to the facts of Good. The claimants were suspected or convicted of narcotics offenses that incidentally occurred in or around their homes and the government then sought forfeiture of the homes. The purpose of the government in seeking forfeiture of real property is “to ensure that the property not be sold, destroyed, or used for further illegal activity prior to the forfeiture judgment.” Good, 510 U.S. at 58, 114 S.Ct. at 503. The Supreme Court observed in Good that real property “by its very nature, can be neither moved nor concealed.” Good, 510 U.S. at 53, 114 S.Ct. at 500. Therefore in the vast majority of cases, as in Good and in Certain Real Property Located at 16510 Ashton, measures short of outright seizure, such as the filing of a lis pendens, will suffice to notify third parties of the pending forfeiture proceedings and the government’s interest in the property. In Good, the Supreme Court distinguished seizures of real property from seizures of personal property by the ability of the personal property owner to frustrate forfeiture by removing, destroying, or concealing the property, which “create[sj a ‘special need for very prompt action’ that justified] the postponement of notice and hearing until after the seizure.” Good, 510 U.S. at 52, 114 S.Ct. at 500 (citations omitted). The urgency of the government’s need to exert control over the property arises from this substantial possibility of conversion. See All Assets and Equipment of West Side Bldg. Corp., 58 F.3d at 1192-93. In the instant case, the district court concluded that the government faced a similarly urgent situation — a substantial possibility that the defendant real property might somehow be “converted” or somehow placed forever beyond its reach — that justified immediate seizure without notice to the claimant. First, we note that defendant property was apparently claimant O’Brien’s residence and the government concedes that O’Brien had a significant interest in the property. Seizure of the house and land would give the government the right to prohibit sale, evict its occupants, modify the property, condition occupancy, receive rents, and supersede the owner in all rights pertaining to use, possession and enjoyment of the property. See Good, 510 U.S. at 54, 114 S.Ct. at 501. While we agree that the private interest at stake here was substantial, we also recognize that O’Brien’s interest in the property is distinguishable from the interests of the claimants in Good, Certain Real Property Located at 16510 Ashton, and Real Property Known and Numbered as 4.29 South Main Street because O’Brien actively attempted to conceal his ownership of the property by deeding it to a series of other nominal owners. The district court found that exigent circumstances existed which excused pre-seizure notice. The Supreme Court in Good held “[ujnless exigent circumstances are present, the Due Process Clause requires the Government to afford notice and a meaningful opportunity to be heard before seizing real property subject to civil forfeiture.” Good, 510 U.S. at 62, 114 S.Ct. at 505. In order to establish the existence of exigent circumstances, the government must demonstrate that means less restrictive than an ex parte seizure— including the filing of a lis pendens, restraining order, or bond — would not adequately protect the Government’s interests in preventing the sale, destruction, or continued unlawful use of the real property. See id; 408 Peyton Road S.W., 162 F.3d at 651. The government presented evidence that between 1981 and 1993, O’Brien four times orchestrated transfers of the defendant property to sham entities or involuntary trusts without Bank One’s knowledge or consent. The government showed that in 1987, he twice obtained fraudulent releases for the mortgages on the property and even recorded the mortgage releases that he had forged. The government offered testimony that O’Brien habitually forged other persons’ signatures on legal documents without their knowledge or consent. Although the defendant property itself cannot be concealed, the instant case demonstrates extraordinary lengths to which O’Brien went to conceal or obfuscate the ownership of the property. Indeed, concealing ownership of real property was at the very core of O’Brien’s crime both in this case and in the criminal case in which he pleaded guilty to fourteen counts of bank fraud, four counts of money laundering, and one count of criminal forfeiture. Given O’Brien’s demonstrated ability to forge mortgage releases, filing a lis pen-dens would have been of little practical value because such a measure would be inadequate to secure the government’s legitimate interests in the property. 6 Given O’Brien’s history of forging mortgage releases and transferring title to involuntary trusts, he could easily have forged a release of lis pendens. 7 In that event, regardless of the availability of prior notice or hearing, the government’s filing would not prevent O’Brien from transferring the property to a bona fide purchaser who could subsequently mount an innocent owner defense to forfeiture. 8 The promptness and adequacy of later proceedings also figure into our analysis. See Good, 510 U.S. at 53, 114 S.Ct. at 501. An adversary hearing was held after the fact in which probable cause to forfeit the defendant property was found. The hearing occurred over a year and a half after the seizure. To the extent O’Brien suffered any damages as a result of the duration of the seizure, however, he bears a significant portion of the blame. O’Brien himself protracted the period of time between the seizure and adversary hearing by failing to file a verified claim to the defendant property until almost a year after the seizure (despite reminders by the district court and in spite of his filing numerous other motions in the meantime), and by filing several motions to stay the proceedings. We are not persuaded that the district court erred in holding that the presence of exigent circumstances in this case was sufficient to warrant an exigent circumstance exception to the pre-seizure notice and hearing requirement.