Court Opinion

ID: 37487
Source: CourtListenerOpinion
Date Created: 2010-04-25 19:53:52+00
Date Added: 2024-06-11T17:15:42.551824
License: Public Domain

United States Court of Appeals
                                                                     Fifth Circuit
                                                                   F I L E D
                     UNITED STATES COURT OF APPEALS
                              FIFTH CIRCUIT                       December 28, 2004

                                                              Charles R. Fulbruge III
                                                                      Clerk
                               No. 03-51145

                       UNITED STATES OF AMERICA,

                                                     Plaintiff-Appellee,

                                    versus

      ONE 1998 MERCURY SABLE VIN:       1MEMF50U4WA621967; ET AL.,

                                                              Defendants,

                              ELYAR GASANOV,

                                                     Claimant-Appellant.

           Appeal from the United States District Court
                 for the Western District of Texas
                          (EP-02-CV-56-DB)

Before BARKSDALE, GARZA, and DeMOSS, Circuit Judges.

PER CURIAM:*

      Elyar Gasanov (Gasanov) contests the district court’s granting

the   Government’s   motion    to   dismiss   Gasanov’s   claim   to   three

certificates of deposit (CDs), totaling $328,069, which are part of

the assets at issue in a civil forfeiture proceeding.                  United

States of America v. One 1998 Mercury Sable, EP-02-CA-056-DB (W.D.

Tex. 2003) (USDC Opn.).       The district court ruled that Gasanov, a

      *
       Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
citizen and         resident      of     Russia,       had    failed       to   establish       the

requisite Article III and statutory standing for contesting the

forfeiture.         Whether Gasanov has Article III standing should not

have been decided by a motion to dismiss; he has the requisite

statutory      standing.           Accordingly,            the    dismissal          is   VACATED;

judgment is RENDERED for Gasanov’s statutory standing; and this

matter is REMANDED.

                                                 I.

      The   forfeiture         proceeding            is    ancillary       to    the      criminal

prosecution of Gasanov’s brother and sister-in-law, Sardar Gasanov

and   Nadira    Gasanova          (Sadar    and       Nadira      Gasonov),          citizens     of

Uzbekistan.           Sardar       and     Nadira          Gasanov    were      convicted         of

immigration and peonage (involuntary servitude in satisfaction of

a debt) offenses related to smuggling three Uzbek women into the

United   States,       who    were       subsequently            forced,    through        topless

dancing, to pay off their debts.                      It was alleged that the women

earned more than $500,000 from January 1999 through May 2001.

      The   peonage         offenses       are       considered      “specified           unlawful

activities”         under    18    U.S.C.     §       1956(c)(7)(A)         (defining        as    a

“specified unlawful activity” any offense listed in 18 U.S.C. §

1961(1); § 1961(1) includes 18 U.S.C. §§ 1581-1591, sections

“relating      to    peonage,       slavery          and    trafficking         in    persons”).

Therefore, the proceeds from those specified unlawful activities

are subject to civil forfeiture.                          See 18 U.S.C. § 981(a)(1)(C)

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(stating “[a]ny property, real or personal, which constitutes or is

derived from proceeds traceable to ... any offense constituting [a]

‘specified unlawful activity’ ...” is subject to forfeiture to the

United States).

      The forfeiture complaint was filed in February 2002, listing

two automobiles, the contents of ten bank accounts valued at

$423,978, and $6,650 in United States currency.                  That July, Sardar

and   Nadira    Gasanov   each   filed       a   notice    claiming    a   legal   or

beneficial interest in that property.              That August, Gasanov filed

a notice claiming the three CDs in the amounts of $107,073,

$137,988 and $83,008, included in the ten bank accounts.                     He was

the titled owner of those CDs.

      Shortly after filing his notice of claim, Gasanov moved to

dismiss the Government’s complaint, pursuant to FED. R. CIV. P.

12(b)(6) and Rule E(2)(a) of the Supplemental Rules for Certain

Admiralty and Maritime Claims (Supplemental Rules), for failure to

plead with particularity the statutory basis on which the complaint

was based.      See 18 U.S.C. § 983(a)(4)(A) (requiring any person

claiming   an    interest   in   property        subject    to    a   complaint    of

forfeiture by the Government to file his claim in accordance with

the Supplemental Rules).         The Government was granted leave to

amend. After Sardar and Nadira Gasanov filed a similar motion, the

Government was again granted leave to amend.                  The final amended

complaint was filed in November 2002.

                                         3
     That    December,   the   three    Gasanovs   filed   answers   to   the

complaint.    Gasanov did not respond, however, to the Government’s

interrogatories or document requests.         The Government’s motion to

compel was denied; a new deadline was set for Gasanov to comply.

Upon Gasanov’s submitting responses to those discovery requests,

the Government again moved to compel, claiming the responses were

“non-responsive and evasive”. Gasanov responded by claiming, inter

alia:    he was not able to comply with some of the requests because

he did not have documentation for the sources of the monies used to

purchase the CDs; and he had produced all documents of which he was

aware.

     In June 2003, the Government moved to dismiss Gasanov’s claim,

asserting Gasanov lacked Article III standing because he had failed

to present sufficient evidence to support his ownership claim to

the three CDs; and lacked statutory standing because he had failed

to properly verify his claim pursuant to Supplemental Rule C(6)

(requiring a person asserting an interest in the property that is

the subject of the action to file a verified statement identifying

that interest). The Government supported its motion with Gasanov’s

discovery    responses,    which       the   Government    contended      were

insufficient to establish Article III standing. Gasanov’s response

in opposition, which cited no additional evidentiary materials,

claimed his answer and discovery responses were sufficient to

establish standing.

                                       4
     The district court denied the Government’s motion; but it did

so before the Government filed its reply to Gasanov’s opposition to

the motion.     Accordingly, the Government moved to reconsider and

included that reply.      The district court granted the motion on 2

September 2003 and dismissed Gasanov’s claim.               The forfeiture

order, as amended, was entered on 7 October 2003.

                                     II.

     As discussed below, we review de novo the district court’s

rulings on Article III and statutory standing.

                                     A.

     No authority need be cited for standing being an element of

Article III’s “case or controversy” requirement; its lack precludes

subject matter jurisdiction.      “The burden of establishing standing

to contest forfeiture is on the claimant ....”         Kadonsky v. United

States, 216 F.3d 499, 508 (5th Cir. 2000).        The “claimant need not

prove the merit of his underlying claim.       He must, however, be able

to show at least a facially colorable interest in the proceedings

sufficient to satisfy the case-or-controversy requirement and the

prudential considerations defining and limiting the role of the

court”.        Id.   (emphasis   added)    (quoting    United   States      v.

$9,041,598.68, 163 F.3d 238, 245 (5th Cir. 1998)).                   This is

consistent with our court’s having previously held “that only

‘owners’ have standing to contest a forfeiture”, but that term

should    be   broadly   construed   “to   include    any   person   with    a

                                      5
recognizable legal or equitable interest in the property seized”.

United States v. $38,570 U.S. Currency, 950 F.2d 1108, 1111-12 & n.

4 (5th Cir. 1992).

       “Challenges    to   standing   are     disposed    of    in   a    number    of

different ways .... Some are disposed of [by motions to dismiss]

....    [Others]     are   frequently       resolved   in      summary     judgment

proceedings ... or at a trial on the merits.”                   Barrett Computer

Services, Inc. v. PDA, Inc., 884 F.2d 214, 219 (5th Cir. 1989)

(internal citations omitted).           (Along this line, the day before

originally denying the Government’s motion to dismiss concerning

Gasanov,   the     district   court   granted    the     Government’s       summary

judgment motion against Sadar and Nadira Gasanov.)                       As further

discussed infra, whether the standing issue can be resolved by a

motion to dismiss depends on whether “considerations of standing

can be severed from a resolution of the merits ....”                     Id. at 220;

see also United States v. SCRAP, 412 U.S. 669, 689-90 (1973); Lewis

v. Knutson, 699 F.2d 230, 237 (5th Cir. 1983).

       If the standing challenge is brought properly by a motion to

dismiss, the district court may conduct a preliminary hearing in

order to resolve disputed factual issues.                Barrett Computer, 884
F.2d at 220.        “[I]n a preliminary hearing on a jurisdictional

issue, the district court is given greater latitude and discretion

than in a summary judgment proceeding where the district court must

give deference on fact questions to the nonmovant”.                        Id.     For

                                        6
example, a Rule 12(b)(1) motion to dismiss for lack of “subject

matter jurisdiction[,] ... unlike summary judgment decisions, may

be made using any one of the following bases:             (1) the complaint

alone; (2) the complaint supplemented by undisputed facts evidenced

in the record; or (3) the complaint supplemented by undisputed

facts    plus   the   court’s   resolution     of   disputed    facts”.     Id.

(internal quotations omitted); see also Lewis, 699 F.2d at 237;

Williamson v. Tucker, 645 F.2d 404, 413 (5th Cir.), cert. denied,

454 U.S. 897 (1981).       Factual findings are reviewed only for clear

error.     Williamson, 645 F.2d at 413; FED. R. CIV. P. 52(a).

     “However, where issues of fact are central both to subject

matter jurisdiction and the claim on the merits, ... the trial

court must assume jurisdiction and proceed to the merits.”                Montez

v.   Department of Navy, ___ F.3d ___, 2004 WL 2712428, at *2 (5th

Cir. 2004).     Under these circumstances, any pre-trial challenge to

the court’s jurisdiction must be brought “as a direct attack on the

merits of the ... case under either Rule 12(b)(6) or Rule 56”.              Id.

(internal quotation omitted).

     In granting the motion to dismiss, the district court resolved

factual issues in favor of the Government.                For example, the

district   court      stated   that   the   “evidence   ...    indicates   that

[Gasanov] is merely a nominal owner, and that convicted defendant

Sardar Gasanov is the true owner”; noted that “Sardar Gasanov

comingled his money into the accounts and, through a questionable

                                        7
power of attorney, exercised control over the accounts”; and took

“significant    interest      ...     [in]    the     fact   that    the   death

beneficiaries [for the CDs] are the children of Sardar Gasanov, not

those of Elyar Gasanov”.      USDC Opn. at *3-4 (emphasis added).           (The

record is silent, however, concerning whether Gasanov then had

children.)

     We review “de novo the legal issue of whether the district

court has discretion to resolve disputed facts dispositive of

subject matter jurisdiction, applying the same standard used by the

district court”.       Montez, 2004 WL 2712428, at *2.         Accordingly, at

issue is whether disposition of the Article III standing issue

requires ruling on the merits of Gasanov’s claim.                   The district

court did not address this issue.          Nor did it conduct a preliminary

hearing to resolve disputed factual issues.

     In a civil forfeiture proceeding, the Government must prove by

a preponderance of the evidence that the property is subject to

forfeiture.    See 18 U.S.C. § 983(c)(1).           Thus, in the case at hand,

the Government must prove by a preponderance of the evidence that

the funds in question were the proceeds of “specified unlawful

activities” – the peonage offenses committed by Sardar and Nadira

Gasanov.    See 18 U.S.C. §§ 1956(c)(7)(A), 1961(1).

     As    discussed    supra,   in   order    to    satisfy   his    burden   of

establishing    standing    to   contest      the    forfeiture     proceedings,

Gasanov may do so by showing at least a facially colorable claim.

                                       8
On the other hand, an “unsupported assertion of ownership” will not

suffice, Kadonsky, 216 F.3d at 508; Gasanov must present sufficient

evidence to establish a facially colorable claim that he, not the

peonage offenses committed by Sardar and Nadira Gasanov, was the

source of the funds.

     Gasanov claims the funds used to purchase the CDs, for which

he is the titled owner, were invested in that manner by his

brother, Sardar Gasanov, pursuant to a power of attorney (the

validity   of   which   is   in   dispute);   he   explains   his   lack   of

documentation is not unusual because it is common in Russia for

income to be undocumented; and he points out that more than

$130,000 had been invested in the CDs before the peonage offenses

occurred (the Government does not contest this).               In support,

Gasanov points to (1) the deposition of the bank manager who

notarized the power of attorney; (2) his interrogatory answers and

response to the Government’s motion to dismiss, which explain the

sources of his income and asserts that it is not unusual to have

undocumented income in Russia; and (3) the Government’s complaint

for forfeiture, which asserts that $138,662 of the CDs was invested

in 1997, before any of the illegal activity occurred.

     The foregoing reflects that the standing issue (whether the

funds were originally Gasanov’s) and the merits issue (whether the

source of the funds was the peonage offenses) are coextensive. The

“considerations of standing”, therefore, can not “be severed from

                                      9
a resolution on the merits”.     See Barrett Computer, 884 F.2d at

220; Clark v. Tarrant County, Texas, 798 F.2d 736, 741-42 (5th Cir.

1986).   Therefore, Article III standing cannot be decided by a

motion to dismiss.     Accordingly, the district court erred in

granting the Government’s motion for that issue.

                                  B.

     Gasanov’s attorney filed a verified claim on Gasanov’s behalf.

The Government contended that, in order to have statutory standing,

Gasanov was required personally to verify his claim.     The district

court held:   Gasanov failed to file a properly verified statement

of claim as required by Supplemental Rule C (discussed below);

therefore, he lacked statutory standing.    Obviously, this issue of

law is reviewed de novo.

     Supplemental   Rule   C(6)(a)(ii)   states:   “In   an   in   rem

forfeiture action for violation of a federal statute:      an agent,

bailee, or attorney must state the authority to file a statement of

interest in or right against the property on behalf of another”.

(Emphasis added.)   The Government maintains this language “derives

from ancient admiralty” and, therefore, should not apply in the

modern era.   The Government cites Mercado v. U.S. Customs Service,

873 F.2d 641, 645 (2d Cir. 1989), for the proposition that attorney

verification is not valid to establish statutory standing to

challenge a forfeiture.    Mercado is distinguishable, however, from

the case at hand.

                                  10
       At issue in Mercado was the sufficiency of the attorney

affidavit used to verify the claim. 873 F.2d at 645.         That issue

is not raised here.        Moreover, Supplemental Rule C(6) has been

amended twice (2000 and 2002) since Mercado was decided (1989).

The Rule’s plain language allows attorney verification. Therefore,

the    district   court   erred   in    ruling   Gasanov      lacked   statutory

standing.

                                       III.

       For the foregoing reasons, the forfeiture order is VACATED;

judgment is RENDERED for Gasanov on his having statutory standing

to    challenge   the   forfeiture;     and   this   matter    is   REMANDED    to

district    court   for   further      proceedings    consistent       with   this

opinion.

                                  VACATED; RENDERED IN PART; REMANDED

                                        11