Court Opinion

ID: 6341387
Source: CourtListenerOpinion
Date Created: 2022-05-17 16:00:38.026767+00
Date Added: 2024-06-11T08:47:16.007979
License: Public Domain

USCA11 Case: 21-10696    Date Filed: 05/17/2022   Page: 1 of 11

                                         [DO NOT PUBLISH]
                          In the
         United States Court of Appeals
                For the Eleventh Circuit

                  ____________________

                        No. 21-10696
                  Non-Argument Calendar
                  ____________________

UNITED STATES OF AMERICA,
                                             Plaintiff-Appellee,
versus
REAL PROPERTY LOCATED AT 55 PUBLIC SQUARE,
CLEVELAND, OHIO,

                                                    Defendant,

URIEL LABER, et al.,

                                                    Claimants,
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2                      Opinion of the Court                 21-10696

LAW OFFICES OF CLEVELAND, INC.,

                                                Claimant-Appellant.

                     ____________________

           Appeal from the United States District Court
               for the Southern District of Florida
             D.C. Docket Nos. 1:20-cv-23278-MGC,
                       1:20-cv-25313-MGC
                    ____________________

Before ROSENBAUM, JILL PRYOR, and GRANT, Circuit Judges.
PER CURIAM:
       This case arises out of an in rem civil-forfeiture action filed
by the government against an office building in Cleveland, Ohio,
allegedly bought as part of an international money-laundering
scheme. When the government filed its complaint, the building
was under contract to be sold by the building’s owners (and alleged
money-launderers) to an unaffiliated third party. The government
agreed to go forward with the sale while the forfeiture case pro-
ceeded, and it filed a motion requesting the court’s approval for an
uncontested interlocutory sale under Rule G(7)(b) of the Supple-
mental Rules for Admiralty or Maritime Claims and Asset Forfei-
ture. The court authorized the sale, which closed in February 2021,
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21-10696               Opinion of the Court                         3

and the sale proceeds were substituted for the building as the res in
the forfeiture proceeding.
       Appellant Law Offices of Cleveland (“Cleveland Law”), a
tenant at the office building and a claimant in the forfeiture case,
timely appealed the interlocutory sale order, seeking to set aside
the sale as “void” for lack of compliance with, in its view, necessary
procedural requirements. After careful review, we conclude that
Cleveland Law was not harmed by and so lacks standing to appeal
the sale order. We therefore dismiss the appeal.
                                  I.
       In December 2020, the United States filed an in rem civil-
forfeiture action against the building located at 55 Public Square in
Cleveland, Ohio. In essence, the complaint alleged that 55 Public
Square was purchased as part of a scheme to launder hundreds of
millions of dollars misappropriated from PrivatBank, a Ukrainian
bank, by two Ukrainian oligarchs, Ihor Kolomoisky and Gennadiy
Boholiubov. The government filed two other forfeiture actions
arising out of the same scheme.
       Several individuals and businesses claimed an interest in 55
Public Square. On January 19, 2021, four entities and persons al-
legedly involved in the money-laundering scheme filed claims: Op-
tima 55 Public Square LLC, the record owner of the building; Op-
tima Ventures LLC, which owned Optima 55 Public Square; and
Mordechai Korf and Uriel Laber, who partially owned Optima
Ventures (collectively, the Optima entities). On January 26, 2021,
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4                       Opinion of the Court                 21-10696

Cleveland Law, a tenant at 55 Public Square that subleases office
space to small law firms and solo practitioners, filed a claim assert-
ing a leasehold interest in the property. A few days later, several
other claimants who had been in litigation against the Optima en-
tities filed a joint claim.
         On Tuesday, February 9, 2021, the district court held a status
hearing, at which counsel for Cleveland Law was present. At the
hearing, counsel for the Optima entities stated that there was “an
anticipated closing on the sale of [55 Public Square] scheduled for .
. . this week,” and that the funds from the sale would be held pend-
ing the outcome of the litigation. The court asked the government
if it objected, and counsel for the government responded that it did
not object and would soon file a motion to approve the sale. At no
point during the hearing did counsel for Cleveland Law raise an
objection to the sale.
        Later that same day, the government filed an “Agreed Mo-
tion to Authorize Interlocutory Sale” under 18 U.S.C. § 981(a)(1)
and Supplemental Rule G(7), with supporting documentary evi-
dence. In certain circumstances, Supplemental Rule G(7) permits
the district court to authorize the sale of real property before the
forfeiture case is resolved. Supp. Rule G(7)(b). Ordinarily, such a
sale “is governed by 28 U.S.C. §[] 2001,” among other provisions,
which requires notice, a hearing, and appraisals before the court
may approve a private sale. Supp. Rule G(7)(b)(iii); 28 U.S.C.
§ 2001(b). But the court may use other procedures for the sale if
“all parties . . . agree to the sale, aspects of the sale, or different
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21-10696                Opinion of the Court                         5

procedures.” Supp. Rule G(7)(b)(iii). Once the sale closes, the
“[s]ale proceeds are a substitute res subject to forfeiture in place of
the property that was sold.” Supp. Rule G(7)(b)(iv).
       The government’s motion sought the district court’s ap-
proval to proceed with the sale under the terms of the private pur-
chase agreement, and without regard to § 2001, by agreement of
the parties. The government’s evidence showed that, before the
forfeiture action, Optima 55 Public Square had entered into a con-
tract with KD 55 Public Square LLC to sell the office building for
approximately $17 million. At that time, the building was in fore-
closure and subject to outstanding taxes and penalties. The gov-
ernment agreed to the sale because the buyer had no affiliation
with the Optima entities and, in its view, a “prompt sale [was] the
only way to protect the value of the equity in the building.”
       According to a copy of the purchase agreement submitted
by the government, the sale included the transfer of all leases at 55
Public Square, including “any and all amendments, modifications
or supplements.” The buyer further agreed to “assume[] and . . .
be bound by and to perform and observe all of the obligations, cov-
enants, terms and conditions to be performed or observed under
the Assigned Property.” It appears, in other words, that the buyer
assumed and agreed to be bound by all existing leases without al-
teration.
        On February 10, 2021, one day after the government filed its
motion, Cleveland Law answered the forfeiture complaint. That
filing did not suggest any opposition to the sale. Rather, Cleveland
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6                           Opinion of the Court                        21-10696

Law stated that, as an “innocent owner” of a leasehold interest un-
der 18 U.S.C. § 983(d)(6), its permissible remedies included com-
pensation “to the extent of Claimant’s ownership interest once a
final order of forfeiture has been entered and the property has been
reduced to liquid assets.”
       The next day, February 11, 2021, the district court granted
the “unopposed” motion to approve the interlocutory sale accord-
ing to the terms of the purchase agreement. In the weeks that fol-
lowed, Cleveland Law did not submit any filing to prevent the sale
from occurring. Instead, after the sale closed, Cleveland Law filed
a notice of appeal of the sale order on March 1, 2021. 1
                                        II.
       Cleveland Law maintains that the private sale of 55 Public
Square was “governed by” § 2001 because “all parties” did not
“agree to the sale . . . or different procedures” under Supplemental
Rule G(7). It notes that the government never sought or obtained
its agreement to the sale, despite its status as a claimant in the

1 The parties agree, as do we, that an interlocutory order authorizing the im-
mediate sale of real property in a forfeiture case is a collateral order subject to
immediate appeal. See, e.g., United States v. Real Prop. & Residence Located
at 4816 Chaffey Lane, 699 F.3d 956, 959 (6th Cir. 2012) (exercising jurisdiction
over an interlocutory sale order in a forfeiture case under the collateral-order
doctrine). Cf. Citibank, N.A. v. Data Lease Fin. Corp., 645 F.2d 333, 336–38
(5th Cir. May 1981) (holding that “an order in a foreclosure proceeding that
directs the immediate sale of specified property is in all respects a final order
for purposes of appeal.”)
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21-10696                  Opinion of the Court                              7

forfeiture case. And it contends that the failure to comply with
§ 2001’s notice, hearing, and appraisal requirements rendered the
sale “void” under the former Fifth Circuit’s decision in Acadia Land
Co. v. Horuff, 110 F.2d 354, 355 (5th Cir. 1940) (holding that the
failure to comply with statutory notice, hearing, and appraisal re-
quirements rendered a private sale “void because the court was
lacking in jurisdiction to confirm it”). 2
        The government responds that Cleveland Law tacitly
agreed to the sale or waived the issue by failing to object below,
and that the appeal is moot because the sale to a good-faith pur-
chaser cannot be undone. It further argues that Cleveland Law was
not actually harmed by the sale order, and that the sale would have
gone forward in the same way had the government simply waited
to initiate a forfeiture case until the sale closed. Cleveland Law re-
plies that it lacked a meaningful opportunity to object and that this
Court can still grant effective relief.
                                     III.
       After this case was fully briefed, we asked the parties to sub-
mit supplemental briefs addressing Cleveland Law’s standing to ap-
peal the interlocutory sale order. Because standing implicates our
jurisdiction, “we are obliged to consider standing sua sponte,”

2 This Court adopted as binding precedent all Fifth Circuit decisions prior to
October 1, 1981. Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir.
1981) (en banc).
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8                       Opinion of the Court                 21-10696

reviewing de novo. AT&T Mobility, LLC v. Nat’l Ass’n for Stock
Car Auto Racing, Inc., 494 F.3d 1356, 1359–60 (11th Cir. 2007).
        “Litigants must establish their standing not only to bring
claims, but also to appeal judgments.” Wolff v. Cash 4 Titles, 351
F.3d 1348, 1353 (11th Cir. 2003). “To have appellate standing, a
litigant must establish that he has suffered a concrete and particu-
larized injury that is fairly traceable to the challenged conduct, and
is likely to be redressed by a favorable judicial decision.” United
States v. Pavlenko, 921 F.3d 1286, 1289 (11th Cir. 2019). The injury
requirement means that “the appealed order must affect the liti-
gant’s interests in an adverse way.” Id.; see Knight v. State, 14 F.3d
1534, 1556 (11th Cir. 1994). In other words, “[o]nly a litigant who
is aggrieved by the judgment or order may appeal.” Wolff, 351
F.3d at 1354 (cleaned up).
        Cleveland Law says it has standing because the sale order
“modified [its] ownership interest in the property,” “disrupted its
business operations,” and violated its due-process rights in the for-
feiture proceeding. It asserts that, while the sale order “purport-
edly” transferred its lease agreement, the order “fail[ed] to ensure
all lease provisions went undisturbed.” After the sale closed, ac-
cording to Cleveland Law, the buyer attempted to terminate the
lease agreement and then began converting the building to residen-
tial housing, causing significant disruption and violating a lease pro-
vision that limited use of the building to commercial purposes only.
      The government responds that Cleveland Law lacks stand-
ing because the sale order kept Cleveland Law’s rights and
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21-10696                Opinion of the Court                          9

remedies under the lease fully intact. In the government’s view,
Cleveland Law’s problems with its new landlord stem from the in-
dependent actions of a third party, not the sale order itself, and are
“outside the ambit of this case.” It notes that the court abandoned
jurisdiction over the building once the sale proceeds were substi-
tuted for the building as the res. It also contends that Cleveland
Law received due process and was not prejudiced by any proce-
dural deprivation because even if due process as Cleveland Law en-
visions it was entitled to had been afforded, the same result would
have occurred. Cleveland Law replies that the Supreme Court has
rejected similar reasoning.
       We agree with the government that Cleveland Law lacks
standing to appeal. The sale order did not adversely affect Cleve-
land Law’s leasehold interest in the property. That order permitted
the sale to go forward under the terms of the purchase agreement,
which transferred all existing leases to the buyer.
       The record contradicts Cleveland Law’s claim that the sale
order failed to incorporate addenda to its lease or to document a
few other lease provisions. Under the purchase agreement, the
lease transfer included “any and all amendments, modifications or
supplements” to leases, and the buyer “agree[d] to be bound by and
to perform and observe all of the obligations, covenants, terms and
conditions to be performed or observed.” So while Cleveland
Law’s landlord changed, its lease did not. Indeed, Cleveland Law
did not raise any objection to the sale until after it had closed, indi-
cating that its problem was with the new landlord, not the sale
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10                         Opinion of the Court                      21-10696

itself. Cleveland Law therefore has not shown that the sale order
affected its property interests in an adverse way. See Pavlenko, 921
F.3d at 1289.
        Nor are Cleveland Law’s grievances with its new landlord
sufficient to provide standing to appeal the sale order. To be sure,
Cleveland Law appears to have been injured by the new landlord’s
attempt to terminate the lease and disruptive renovations for resi-
dential housing, alleged to be in violation of a lease provision lim-
iting use of the building to commercial purposes only.
       But those injuries were caused by “the independent action
of some third party not before the court,” and are not fairly tracea-
ble to the sale order itself. See United States v. Windsor, 570 U.S.
744, 757 (2013) (“[T]he injury has to be fairly traceable to the chal-
lenged action . . . , and not the result of the independent action of
some third party not before the court.” (cleaned up)). The sale or-
der did not affect Cleveland Law’s property interest or authorize
the buyer to take the actions of which Cleveland Law complains.
And Cleveland Law’s injuries to its use and enjoyment of the prop-
erty are redressable through an action against that third party.
Cleveland Law fails to explain how undoing the sale and requiring
additional procedures under § 2001, related to ensuring a fair sale
price, would remedy these injuries. 3 See Pavlenko, 921 F.3d at
1289.

3 In its initial briefing, Cleveland Law also cited the protection of 18 U.S.C.
§ 985, which states that “the owners or occupants of the real property shall not
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21-10696                   Opinion of the Court                               11

       Finally, Cleveland Law’s alleged due-process injury is not
enough on its own to create standing to appeal. Because Cleveland
Law has not shown that the sale order adversely affected its prop-
erty interest in 55 Public Square, it likewise has not shown that it
was harmed by any procedural deficiencies in relation to that order.
       For these reasons, we conclude that Cleveland Law lacks
standing to appeal the district court’s order authorizing the inter-
locutory sale of 55 Public Square. We therefore dismiss the appeal
for lack of jurisdiction.4
        DISMISSED.

be evicted from, or otherwise deprived of the use and enjoyment of, real prop-
erty that is the subject of a pending forfeiture action.” But as the government
points out, that protection “does not apply to forfeitures of the proceeds of the
sale of [real property or interests in real property].” 18 U.S.C. § 985(f)(2). In
other words, § 985 no longer applied once the sale of the property closed and
the proceeds were substituted as the res.
4 The government’s motion for summary affirmance or to dismiss on grounds
of mootness is DENIED AS MOOT.