Court Opinion

ID: 3159295
Source: CourtListenerOpinion
Date Created: 2015-12-02 16:03:32.99709+00
Date Added: 2024-06-11T12:03:03.311811
License: Public Domain

Cite as 2015 Ark. App. 692

                 ARKANSAS COURT OF APPEALS

                                        DIVISION II
                                       No.CV-15-510

                                             Opinion Delivered:   DECEMBER 2, 2015

REGGIE MATTHEWS AND $412,890 APPEAL FROM THE MISSISSIPPI
IN UNITED STATES CURRENCY    COUNTY CIRCUIT COURT,
                   APPELLANT OSCEOLA DISTRICT [NO. CV-11-54]

V.                                           HONORABLE PAMELA HONEYCUTT,
                                             JUDGE
STATE OF ARKANSAS
                              APPELLEE AFFIRMED

                             KENNETH S. HIXSON, Judge

       Appellant Reggie Matthews appeals from an order of the Mississippi County Circuit

Court that denied his claim for the return of $412,890 seized from the trunk of his car

during a narcotics investigation involving both federal and state law enforcement. On

appeal, Mr. Matthews argues that the trial court’s decision should be reversed because it was

founded upon erroneous findings of fact and conclusions of law. We affirm.

       In 2011, the Federal Bureau of Investigation was involved in an investigation related

to Randy Caruthers and his involvement in the distribution of large amounts of cocaine and

marijuana in southeast Missouri and northeast Arkansas. Special FBI Agent Larry Bruns was

in charge of the operation. According to an affidavit of Agent Bruns, appellant Reggie

Matthews was identified as a close associate of Mr. Caruthers. Several officers of the

Arkansas Second Judicial Drug Task Force were deputized as special federal law enforcement

officers and joined in the investigation.
                                  Cite as 2015 Ark. App. 692

       Law enforcement agents obtained information that Mr. Caruthers was preparing to

deliver approximately $416,000 to his drug supplier, and Mr. Matthews was suspected to be

delivering the money. Working under the direction of FBI Agent Bruns, local police

officers stopped a car being driven by Mr. Matthews on June 2, 2011. Mr. Matthews initially

fled from the officers, but he eventually stopped the car. He was arrested and later charged

with fleeing and aggravated assault. During a search of the trunk of appellant’s car, the

police found a duffle bag containing $412,890 in vacuum-sealed packages. According to

the officers’ affidavits, Mr. Matthews disclaimed knowledge of the money and told the

police that it was not his. The currency was seized by local law enforcement officers who

had been federally deputized as agents of the Second Judicial Drug Task Force.

       Eight days later, on June 10, 2011, the State filed a petition in Mississippi County

Circuit Court to transfer the seized property to the FBI for forfeiture proceedings under

federal law. Also on June 10, 2011, the Mississippi County Circuit Court entered an order

transferring the property to the FBI pursuant to Arkansas Code Annotated section 5-64-

505(d) (Supp. 2011), which provides:

       (1)     No state or local law enforcement agency may transfer any property seized by
               the state or local agency to any federal entity for forfeiture under federal law
               unless the circuit court having jurisdiction over the property enters an order,
               upon petition by the prosecuting attorney, authorizing the property to be
               transferred to the federal entity.
       (2)     The transfer shall not be approved unless it reasonably appears that the activity
               giving rise to the investigation or seizure involves more than one (1) state or
               the nature of the investigation or seizure would be better pursued under
               federal law.

In the trial court’s transfer order (hereinafter referred to as the “initial transfer order”), the

state trial court stated that it reasonably appeared that the nature of the seizure and forfeiture

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would be better pursued under federal law, thus complying with section 5-64-505(d)(2).

The FBI thereafter obtained possession of the currency.

       Four months later, on October 14, 2011, Mr. Matthews filed in Mississippi County

Circuit Court a motion to set aside the initial transfer order. In his motion, Mr. Matthews

asserted that he was not given notice of the petition to transfer the case to federal court, and

thus that he had no opportunity to respond to the motion. Mr. Matthews argued that the

initial order transferring the property to the FBI was void, and he demanded the immediate

return of the seized currency. In response to Mr. Matthews’s motion, the State asserted

that, under the terms of Arkansas Code Annotated section 5-64-505(d), there is no

requirement that a person receive notice of a transfer petition, nor is there any requirement

that he be given an opportunity to contest the transfer. Mr. Matthews subsequently filed

several more motions with the Mississippi County Circuit Court, including a motion for

summary judgment, motion to declare Arkansas Code Annotated section 5-64-505(d)

unconstitutional, and two motions to dismiss.

       Almost two years later, on March 13, 2013, the Mississippi County Circuit Court

entered an order granting Mr. Matthews’s motion to set aside the initial transfer order

(hereinafter referred to as the “subsequent transfer order”), stating that a hearing shall be

granted on the petition to transfer. The trial court stated its belief that the rules of civil

procedure applied to the transfer petition, and it noted that Mr. Matthews was not given

notice and an opportunity to be heard prior to the initial transfer order being entered. While

the State had asserted that Mr. Matthews may not be the owner of the seized property and

therefore may lack standing, the trial court indicated that it could not determine that issue

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without evidence and a hearing. In the subsequent transfer order, the trial court denied

Mr. Matthews’s motion for summary judgment and also denied his motion to declare the

transfer statute unconstitutional. The trial court did not make any ruling on Mr. Matthews’s

motions to dismiss. 1

       During the period of time between when the money had been transferred to the FBI

pursuant to the initial transfer order (June 10, 2011) and the entry of the subsequent transfer

order (March 13, 2013) in state court, the $412,890 2 was in possession of federal agents and

forfeiture proceedings had commenced in federal court. On July 29, 2011, the FBI sent a

letter to Mr. Matthews informing him of the factual and legal basis for the seizure, and

advising him that if he wished to contest the seizure in federal court he must file a claim of

ownership with the FBI by September 2, 2011. On August 29, 2011, Mr. Matthews filed

with the FBI a claim of ownership, contesting the forfeiture of the currency.

       More than a year later, on December 3, 2012, the United States District Court of

the Eastern District of Missouri, Southeastern District (hereinafter referred to as the “federal

trial court”), entered a preliminary order of forfeiture in favor of the United States. The

preliminary forfeiture was based on four criminal defendants’ admissions that the currency

constituted proceeds of the offenses charged, after the four defendants entered guilty-plea

agreements forfeiting any interest they may have had in the currency. 3 On February 21,

2013, the United States Attorney sent Mr. Matthews the preliminary forfeiture order

       1
         Appellant’s dismissal motions were filed after the trial court had issued a letter
opinion on the other motions, but before the March 13, 2013 order was formally entered.
      2
        Inexplicably, the federal documents show the forfeiture amount to be $412,900.
      3
        Mr. Matthews himself was never charged with any drug offense.
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advising that Mr. Matthews had thirty days to assert a legal interest in the property by filing

a third-party petition in federal court.

       On March 22, 2013, Mr. Matthews filed in federal court a third-party petition for

return of the $412,890. Mr. Matthews asserted in his federal pleadings multiple arguments,

including that the Arkansas initial transfer order had been subsequently vacated by the

Arkansas trial court, that the initial transfer order was void, and that because the initial

transfer order was invalid the State retained jurisdiction and the federal court was without

jurisdiction over the funds. The United States Attorney filed a motion to dismiss the third-

party petition for return of the property, arguing that Mr. Matthews lacked standing to

challenge the forfeiture.

       On August 23, 2013, the United States District Court entered an order dismissing

Mr. Matthews’s third-party complaint. The federal trial court ruled that it had jurisdiction

over the matter and that the issue of the propriety of any state transfer order of the currency

was irrelevant to the federal proceeding. The federal trial court also stated that, to the extent

Mr. Matthews complained that he was losing his due-process rights to claim the property,

he was fully able to exercise those rights in the proceeding at hand. The federal trial court’s

order stated that, although mere proof of possession may give rise to the presumption of

ownership under applicable state law, as is the case in Arkansas, a claimant must also offer a

plausible explanation for that possession. It stated that, to maintain standing, a claimant must

establish that he has an ownership interest or possessory interest in the property and that his

interest is legal. Under these principles, the federal trial court ruled that Mr. Matthews had

failed to establish standing to challenge the forfeiture of the currency. On August 30, 2013,

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the federal trial court entered a final order of forfeiture declaring that the United States shall

have clear title to the seized currency.

       Mr. Matthews appealed to the Eighth Circuit Court of Appeals, arguing that the

federal district court did not have jurisdiction of his petition to return the seized currency,

and also that he did have standing to assert a claim to the currency. However, in an opinion

delivered on August 27, 2014, the federal appeals court affirmed, holding that the district

court had jurisdiction and properly ruled that Mr. Matthews had failed to state a legal interest

in the currency, thus failing to establish standing. See United States v. Caruthers, 765 F.3d
843 (8th Cir. 2014).

       Turning back to the simultaneous proceedings in state court, as previously stated, the

Mississippi County Circuit Court entered its subsequent transfer order on March 13, 2013,

wherein it set aside its initial transfer order authorizing the transfer of the funds to the federal

authorities because the appellant did not have notice of the proceeding. The State thereafter

filed a motion to vacate the subsequent transfer order, asserting that the circuit court had

lost jurisdiction to modify or vacate the order. The State later filed a motion to dismiss on

the grounds that Mr. Matthews lacked standing.

       On April 8, 2015, the Mississippi County Circuit Court entered its final order that

is now being appealed. In that final order the state trial court denied the State’s motion to

vacate its subsequent transfer order dated March 13, 2013. The state trial court also granted

Mr. Matthews’s motion to dismiss, finding that there had never been valid service on

Mr. Matthews. However, the state trial court went on to state in its final order that whether

or not its initial transfer order was valid was now a moot point because, instead of having a

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hearing on Mr. Matthews’s interest in the property, both parties asked not to hear the issue

on the merits and instead asked for a hearing on only their motions. Meanwhile, a hearing

on the merits had been held in federal court, after which the federal trial court found that

Mr. Matthews had no ownership interest in the property, but that he merely had possession.

The state trial court stated that any claim Mr. Matthews would have had regarding due

process, and a right to be heard in Arkansas, were moot because he appeared in federal court

on that issue with an attorney and actively participated in that federal proceeding. Because

Mr. Matthews had his day in federal court, and the issue of ownership and standing were

decided against him in federal court, the state trial court concluded that Mr. Matthews was

precluded by collateral estoppel and issue preclusion from asserting a valid claim to the seized

currency in the state proceeding. Therefore, the trial court dismissed the case and denied

Mr. Matthews’s claim for the return of the property.

       On appeal from the state trial court’s April 8, 2015 order, Mr. Matthews raises a

myriad of arguments challenging the underlying procedures utilized in this forfeiture case.

He contends that the currency was not subject to seizure under any of the provisions of our

forfeiture statute. Citing In Re: $3,166,199, 337 Ark. 74, 987 S.W.2d 663 (1999), appellant

further asserts that, once the currency was seized in Mississippi County by local officers,

initial jurisdiction was vested in the Mississippi County Circuit Court and any subsequent

transfer required a circuit-court order. Although the Mississippi County Circuit Court did

enter an order transferring the currency to federal agents, Mr. Matthews claims that that

transfer order was invalid because it was issued without any notice to him. Thus, appellant

argues that only the state circuit court, and not the federal court, had jurisdiction over any

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proceedings involving the seized currency. Mr. Matthews further relies on Arkansas Code

Annotated section 5-64-505(g)(3)(B), which provides in part that in no event shall a

complaint for forfeiture be filed more than 120 days after the date of the seizure. Subsection

(g)(3)(C) provides in part that if the circuit court determines that good cause has not been

established, the circuit court shall enter an order that the seized property be returned to

the owner or interest holder (assuming the owner or interest holder can be identified).

Mr. Matthews argues that because there was no complaint filed in circuit court within 120

days as required by statute, the circuit court was required to return to him the $412,890 in

currency.

       We hold that the trial court properly dismissed the case and denied Mr. Matthews’s

request for the return of the currency because Mr. Matthews’s claims before the trial court

were barred by the collateral-estoppel doctrine. In Craven v. Fulton Sanitation Serv., Inc.,

361 Ark. 390, 394, 206 S.W.3d 842, 844 (2005), our supreme court explained the collateral-

estoppel doctrine:

       Collateral estoppel, also known as issue preclusion, bars relitigation of issues of law
       or fact previously litigated, provided that the party against whom the earlier decision
       is being asserted had a full and fair opportunity to litigate the issue in question and
       that the issue was essential to the judgment. To apply collateral estoppel, the
       following elements must be present: (1) the issue sought to be precluded must be the
       same as that involved in the prior litigation; (2) the issue must have been actually
       litigated; (3) the issue must have been determined by a valid and final judgment; and
       (4) the determination must have been essential to the judgment. Collateral estoppel
       may be asserted by a stranger to the first judgment, but the party against whom it is
       asserted must have been a party to the earlier action and must have had a full and fair
       opportunity to litigate the issue in that first proceeding. (citations omitted).

       In the federal-court proceedings involving the forfeiture of the same currency,

Mr. Matthews was given notice of the proceedings and was advised of his right to assert a

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legal interest in the property. Mr. Matthews did, in fact, assert an interest and make a claim

in the federal proceedings, and he had a full and fair opportunity to litigate, with an attorney,

his claim in federal court. The federal court determined that it had jurisdiction, and it issued

a decision denying Mr. Matthews’s third-party petition on the grounds that he failed to

establish ownership or a legal interest in the property, and therefore lacked standing.

Mr. Matthews unsuccessfully appealed these rulings to the Eighth Circuit Court of Appeals.

       In the Mississippi County Circuit Court’s April 8, 2015 final order, it correctly

determined that the issues of ownership, standing, and Mr. Matthews’s claim to the currency

had been decided in federal court. Giving full faith and credit to the federal court order,

the circuit court found that Mr. Matthews could not relitigate the issue of standing and that

the funds should not be delivered to him when it had been finally determined that he had

no valid claim to them.

       The issue of Mr. Matthews’s standing to even assert an interest in the property was

decided adversely to him by the federal court’s order finding that he had failed to establish

ownership or any legal interest, and Mr. Matthews is precluded from relitigating that issue

in the state proceeding. That being so, we affirm the Mississippi County Circuit Court’s

decision denying appellant’s claim for return of the currency.

       Affirmed.

       GLOVER and HOOFMAN, JJ., agree.

       James W. Harris, for appellant.

       Leslie Rutledge, Att’y Gen., by: Rebecca Bailey Kane, Ass’t Att’y Gen., for appellee.

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