Yskamp v. Drug Enforcement Administration, Cigna Corp. ( 1998 )

Opinions of the United
1998 Decisions States Court of Appeals
for the Third Circuit
12-21-1998
Yskamp v. DEA
Precedential or Non-Precedential:
Docket 98-6148
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"Yskamp v. DEA" (1998). 1998 Decisions. Paper 280.
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Filed December 21, 1998
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 98-6148
PETER YSKAMP; CIGNA CORP., in its individual capacity
and in its capacity as subrogee to the rights and interest
of Peter Yskamp, and in its capacity as subrogee to the
rights and interest of James E. Haldan, deceased
v.
DRUG ENFORCEMENT ADMINISTRATION
CIGNA CORP.,
Petitioner
On Review of a Decision of
the Drug Enforcement Agency
(RI-94-0015)
Submitted Pursuant to Third Circuit LAR 34.1(a)
December 14, 1998
Before: SLOVITER and COWEN, Circuit Judges,
and OBERDORFER, District Judge*
(Filed December 21, 1998)
John S. Hoff
Hoff & Garley
Chicago, IL 60603
Attorney for Petitioner
_________________________________________________________________
*Hon. Louis F. Oberdorfer, United States District Court for the District
of Columbia, sitting by designation.
Robert A. Zauzmer
Office of United States Attorney
Philadelphia, PA 19106
Attorney for Respondent
OPINION OF THE COURT
SLOVITER, Circuit Judge.
Appellant CIGNA Corp. ("CIGNA") seeks review of the
1994 administrative forfeiture of a Lear jet by the Drug
Enforcement Administration ("DEA"). CIGNA contends that
because the value of the aircraft seized exceeded $500,000,
it was improper for the DEA to use administrative forfeiture
instead of judicial forfeiture. Additionally, CIGNA raises
several constitutional grounds for reversing the forfeiture.
For the reasons stated herein, we will deny CIGNA's Petition
for Review.
I.
Peter Yskamp purchased the Lear jet in 1991 for use in
a charter operation certified by the Federal Aviation
Administration ("FAA"). James E. Haldan held a lien on the
jet pursuant to a security agreement signed in August
1991, a few days before Yskamp purchased the jet, but that
agreement was not filed with the FAA (as required by law)
until after seizure of the plane more than three years later.
CIGNA insured the jet under a standard policy which was
later amended at Yskamp's request to cover losses caused
by war or confiscation.
In September 1994, DEA officers who had become
suspicious of the activities of certain suspects tracked them
to the Bermuda Dunes airport in California. The suspects
unloaded luggage from a truck into Yskamp's jet. After the
suspects boarded the jet, the officers approached and
requested permission to search it, which was granted. On
board, the officers found 12 pieces of luggage containing
300 kgs of cocaine.
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When questioned afterwards, Yskamp conceded that this
flight and a prior one with the same suspects were odd,
because the bulk of the payment was in cash, the travelers
had significantly more luggage in one direction than the
other, and the turn-around time was short. Additionally,
when questioned by the DEA, pilots for Yskamp stated
initially (but later retracted when Yskamp was present) that
they had informed him of their suspicions, and that he told
them to ignore these concerns.
Following the DEA's seizure of the jet, Yskamp filed a
claim for loss with CIGNA, which CIGNA approved and paid
under his amended insurance policy. As provided in the
contract, CIGNA then became Yskamp's subrogee. CIGNA
also paid the outstanding loan balance owed Haldan, even
though Haldan was not named on the policy, and then
claimed status as Haldan's subrogee, as well. Finally, by
paying Yskamp's insurance claim, CIGNA became owner of
the jet outright in addition to his subrogee.
Pursuant to the administrative forfeiture provision in 19
U.S.C. S 1607, the DEA mailed notices of seizure dated
October 11, 1994, to Yskamp and Haldan. The mailed
notices contained information on the first date set for
public notice of the seizure, the appraised value of the
property seized ($1 million), and the federal judicial district
in which the seizure took place. The notices also explained
that the party could post a $5000 bond and pursue judicial
forfeiture proceedings as an alternative pursuant to the
statute.
Attorney John Scott Hoff (CIGNA's counsel here) notified
the DEA of his representation of both CIGNA and Yskamp
on October 11, 1994. Included with this notice was a
petition for expedited release of the jet. The DEA then
issued a notice of seizure addressed to Yskamp c/o Hoff as
his attorney. CIGNA wrote to the DEA on November 15,
1994, confirming its understanding that the DEA would
proceed on the petition for expedited release and stating
that CIGNA's decision whether to post bond was still
pending.
CIGNA failed to post the judicial bond and, on December
16, the DEA administratively forfeited the jet. Several days
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later, the DEA denied CIGNA's expedited release petition,
but agreed to treat CIGNA's submission as a petition for
discretionary mitigation or remission and agreed to CIGNA's
filing of additional documentation for that purpose.
Following the submission of additional information, the
DEA denied the mitigation or remission petition. The DEA
concluded, inter alia, that neither Yskamp nor CIGNA had
taken reasonable steps to assure that the jet was not used
for conveying illegal drugs. CIGNA filed a petition for
reconsideration of the forfeiture based on the DEA's failure
to consider CIGNA's status as subrogee of Haldan's
interest. The DEA denied that petition in August 1996.
In September 1996, CIGNA, together with Yskamp, timely
filed in the Court of Appeals for the Ninth Circuit a Joint
Petition for Review of the DEA's order of forfeiture. The
court dismissed the claims of Yskamp as well as those of
CIGNA as subrogee of both Yskamp and Haldan for lack of
jurisdiction, reasoning that Yskamp was not an aggrieved
party, and that Haldan was merely an unsecured creditor
with whom CIGNA had no relationship creating
subrogation. The court then transferred the remainder of
the case to this court on jurisdictional grounds pursuant to
28 U.S.C. S 1631. CIGNA pursues review of the forfeiture on
its own behalf as owner of the jet.
We have jurisdiction pursuant to 21 U.S.C. S 877. We will
set aside the agency's determination only if it is arbitrary,
capricious, an abuse of discretion, or otherwise not in
accordance with law. See 5 U.S.C. S 706(2); Humphreys v.
DEA, 96 F.3d 658, 660 (3d Cir. 1996). However, appeal
from a petition for remission or mitigation is limited to
assuring that the DEA complied with statutory and
procedural requirements. See Schrob v. Catterson, 948 F.2d
1402, 1412 n.9 (3d Cir. 1991); United States v. Kravitz, 738
F.2d 102, 105 (3d Cir. 1984) ("[T]he remission decision of
the Attorney General is not open to judicial review."); see
also Marshall Leasing, Inc. v. United States, 893 F.2d 1096
(9th Cir. 1990) (upholding district court's jurisdiction to
consider collateral attack on DEA's selection of
administrative forfeiture). Thus, despite CIGNA's invitation,
we will not review de novo the merits of the DEA's
conclusion that CIGNA was not entitled to return of the jet.
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II.
The principal issue in this appeal is a pure question of
law and depends on statutory interpretation. At issue is
whether the DEA must use the procedures for judicial
forfeiture, rather than for administrative forfeiture, if the
value of the object seized because it was transporting a
controlled substance exceeds $500,000. To address the
issue, we briefly review the history and operation of the civil
forfeiture laws.
A.
The statutory procedures for civil forfeiture applicable to
the DEA and other agencies, such as the Immigration and
Naturalization Service, the Customs Service, and the
Federal Bureau of Investigation, appear at 19 U.S.C.S 1606
et seq. The current provisions reflect the comprehensive
revision made to the federal forfeiture statutes in 1984.
Before the 1984 amendments, S 1607, which authorizes
administrative forfeiture, provided:
S 1607. Seizure; value $10,000 or less
If such value of such vessel, vehicle, merchandise, or
baggage does not exceed $10,000, the appropriate
customs officer shall cause a notice of the seizure of
such articles and the intention to forfeit and sell or
otherwise dispose of the same according to law to be
published for at least three successive weeks in such
manner as the Secretary of the Treasury may direct.
For the purposes of this section and sections 1610 and
1612 of this title merchandise the importation of which
is prohibited shall be held not to exceed $10,000 in
value.
19 U.S.C. S 1607 (1982). In contrast, S 1610, which
authorizes judicial forfeiture, stated:
S 1610. Seizure, value more than $10,000
If the value of any vessel, vehicle, merchandise, or
baggage so seized is greater than $10,000, the
appropriate customs officer shall transmit a report of
the case, with the names of available witnesses, to the
United States attorney for the district in which the
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seizure was made for the institution of the proper
proceedings for the condemnation of such property.
19 U.S.C. S 1610 (1982).1
Thus, the statute required an agency seeking forfeiture of
property to use judicial process whenever the value of the
property exceeded $10,000. For property appraised at or
below $10,000, the agency could use administrative
procedures, and these procedures required public notice of
the intended action. A party claiming an interest in
property that was subjected to administrative forfeiture
could opt for a judicial proceeding by notifying the seizing
agency and posting a bond, both within a specified period
from the date of first public notice. 19 U.S.C.S 1608.2
The 1984 amendments reworded these sections,
increased the dollar cutoff, and slightly altered the process.3
While the dual forum approach to forfeiture remained,
Congress added a provision directing that in addition to the
public notice already required, the interested parties be
given personal notice.
The relevant sections of the statute, as amended in 1984,
provided:
S 1607. Seizure; value $100,000 or less, prohibited
merchandise, transporting conveyances
(a) If--
_________________________________________________________________
1. The operative text for both of these statutory sections went
essentially
unchanged from their first enactment in 1930 until 1984, except for
increases in the threshold amount, which had started at $1000.
2. Section 1608 operates today essentially as it did in 1930 except for
amendments to the bond amount. Today, that bond value is ten percent
of the property's value or $5000, whichever is less, but not less than
$250. A party losing in a forfeiture proceeding also is liable for the
costs
of the proceeding.
3. Congress enacted comprehensive revisions to the relevant forfeiture
laws twice that session. See Comprehensive Forfeiture Act, Pub. L. No.
98-473, SS 311-319, 98 Stat. 2040, 2053-56 (1984); Trade and Tariff Act,
Pub. L. No. 98-573, S 213, 98 Stat. 2948, 2984-88 (1984). Although the
Comprehensive Forfeiture Act did not have a designated effective date,
the forfeiture provisions in the Trade and Tariff Act became effective on
October 15, 1984. See S 214(e), 98 Stat. at 2989.
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(1) the value of such seized vessel, vehicle, aircraft,
merchandise, or baggage does not exceed $100,000;
(2) such seized merchandise is merchandise the
importation of which is prohibited; or
(3) such seized vessel, vehicle, or aircraft was used to
import, export, transport, or store any controlled
substance;
the appropriate customs officer shall cause a notice of
the seizure of such articles and the intention to forfeit
and sell or otherwise dispose of the same according to
law to be published for at least three successive weeks
in such manner as the Secretary of the Treasury may
direct. Written notice of seizure together with
information on the applicable procedures shall be sent
to each party who appears to have an interest in the
seized article.
1610. Seizure; judicial forfeiture proceedings
If any vessel, vehicle, aircraft, merchandise, or baggage
is not subject to section 1607 of this title, the
appropriate customs officer shall transmit a report of
the case, with the names of available witnesses, to the
United States attorney for the district in which the
seizure was made for the institution of the proper
proceedings for the condemnation of such property.
19 U.S.C. SS 1607, 1610 (1988).
The upper limit on subsection (a)(1) forfeitures was raised
to $500,000 in 1990, and a separate monetary instruments
category (codified at S 1607(a)(4)) was added.
The 1984 amendments effected a major change in the
statute from one that authorized administrative forfeiture
only if the property fell below a fixed appraised value to one
that also authorized administrative forfeiture of certain
categories of properties based on the type of property or the
reason for forfeiture regardless of the property's appraised
value. In fact, the House Conference Report accompanying
the 1990 amendment, which added the monetary
instruments category (a)(4), noted that the addition of
subsection (a)(4) removes the dollar limit in uncontested
cash seizures and also observed that "[t]here is no value
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limit on conveyances that contain illegal drugs." H. Conf.
Rep. No. 101-650 at 112, reprinted in 1990 U.S.C.C.A.N.
989, 1002. Thus, Congress recognized that S 1607
contained distinctly separate categories of property for
administrative forfeiture purposes.
To summarize, the four distinct categories of property
subject to administrative forfeiture under the forfeiture
statute are: (1) certain property valued at or under $500,000;4
(2) merchandise that may not be imported; (3) vehicles,
aircraft, and vessels used to transport drugs; and (4)
monetary instruments. Only the first category, that in
S 1607(a)(1), has a dollar threshold. Judicial forfeiture is
required if the property does not fall into any of the four
categories. S 1610. Significantly, a party may convert an
administrative forfeiture to a judicial proceeding by posting
a relatively small bond with the agency. S 1608.5
B.
In light of this historical background, we turn to CIGNA's
contentions. First, CIGNA argues that federal law requires
the DEA to use judicial forfeiture proceedings any time the
value of the property seized exceeds $500,000, and that
because the DEA failed to use judicial forfeiture to seize the
jet, it violated CIGNA's constitutional rights.
CIGNA relies on dictum in Marshall Leasing, Inc., 893
F.2d at 1102-03 n.6, which CIGNA reads to suggest that
the 1984 amendments increasing the dollar threshold for
triggering judicial forfeiture to $100,000 applies to all
property. Indeed, notwithstanding that the 1984 revision
explicitly distinguished, for purposes of administrative
forfeiture, between property seized below a fixed dollar
value and certain classes of property subject to
administrative forfeiture irrespective of the dollar value (a
_________________________________________________________________
4. The threshold amount applies to individual items seized, not to the
aggregate value of all items seized. See In re One 1985 Nissan, 889 F.2d
1317, 1322 (4th Cir. 1989).
5. Because CIGNA failed to post the necessary $5000 bond for its
$950,000 jet, it was not entitled to judicial forfeiture under 19 U.S.C.
S 1608.
8
distinction carried over to the 1990 amendments), many
courts have continued to refer to property generally without
acknowledging that distinction. See, e.g., Weng v. United
States, 137 F.3d 709, 712 (2d Cir. 1998); Ibarra v. United
States, 120 F.3d 472, 474 (4th Cir. 1997); Litzenberger v.
United States, 89 F.3d 818, 819-20 (Fed. Cir. 1996); United
States v. Baird, 63 F.3d 1213, 1217 n.9 (3d Cir. 1995);
United States v. Giraldo, 45 F.3d 509, 510 (1st Cir. 1995);
Linarez v. United States Dept. of Justice, 2 F.3d 208, 209
(7th Cir. 1993); Schrob, 948 F.2d at 1412 n.9. We note that
these statements, however, are mere dicta. Several cases
have recognized the statutory distinctions. See Arango v.
United States Department of the Treasury, 115 F.3d 922,
925 & n.4 (11th Cir. 1997) (grouping all property together
in text while specifying in footnote different categories of
seizure); United States v. Idowu, 74 F.3d 387, 394 & n.10
(2d Cir. 1996) (enumerating four categories of property
administratively forfeitable after notice).
We rely on the plain language of the statute to hold that
S 1607 creates four distinct classes of property subject to
administrative forfeiture. With the statute so understood, it
is apparent that CIGNA cannot prevail on its argument that
SS 1607 and 1610 required the DEA to use judicial
forfeiture to forfeit the airplane at issue. The DEA found
300 kgs of cocaine on the seized jet, which was being used
to transport the drugs. The property therefore falls under
S 1607(a)(3) as an aircraft transporting drugs, and is not
subject to the $500,000 threshold. Thus, the DEA did not
abuse its discretion in using administrative forfeiture.
As an alternative argument, CIGNA asserts that the
DEA's own regulations require the use of judicial
proceedings. See 21 CFR S 1316.71 et seq. A review of those
regulations shows that they track substantially the
forfeiture statute. They define "property" generally to mean
"a controlled substance, raw material, product, container,
equipment, money or other asset, vessel, vehicle, or aircraft
within the scope of the Act." S 1316.71(c). The "property" to
be forfeited must be appraised, see S 1316.74; 19 U.S.C.
S 1606 (requiring appraisal of vessels, vehicles, aircraft,
merchandise, or baggage); and if the property's "appraised
value does not exceed the [statutory] monetary amount . . .;
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is [a] monetary instrument . . .; or . . .[is] a conveyance
used to . . . transport or store any controlled substance,"
then the DEA must publish a public notice, S 1316.75,
which is a prerequisite for administrative forfeiture under
19 U.S.C. S 1607.
CIGNA focuses on the language of S 1316.78, stating that
if the appraised value exceeds "the jurisdictional limits in
1316.75(a)," the DEA must use judicial forfeiture, and the
language of S 1316.77, stating that the DEA may pursue
administrative forfeiture for property that "does not exceed
the jurisdictional limits in S 1316.75(a)." It argues that the
phrase "jurisdictional limits in S 1316.75(a)" applies to all
categories of property set forth in the regulation's
definitional section.6 It is apparent, however, that by
pursuing administrative forfeiture of the jet, the DEA
interprets the regulation to incorporate the statutory
distinctions in S 1607, so that the "jurisdictional limits"
phrase of S 1316.77 and .78 refers only to property for
which S 1607 of the statute imposes a dollar threshold. This
is consistent with the congressional intent that property
used in transporting controlled substances be subject to
administrative forfeiture.
CIGNA suggests no reason why the DEA, the agency in
the forefront of drug interdiction, would do any less than
Congress. Moreover, the DEA was aware that under the
statute all that is required to invoke judicial forfeiture
proceedings is the posting of a bond. We are obliged to
defer to the DEA's interpretative application of these
regulations when, as here, it is neither plainly erroneous
nor inconsistent with the regulation. See Shell Oil Co. v.
Babbitt, 125 F.3d 172, 175-76 (3d Cir. 1997).
In conclusion, we hold that the DEA was not obligated
under the federal forfeiture statutes or regulations to
pursue judicial forfeiture merely because the value of the
property seized pursuant to S 1607(a)(3) exceeded
$500,000.
_________________________________________________________________
6. This interpretation is articulated in CIGNA's reply brief, which the
DEA has not had an opportunity to answer.
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III.
CIGNA raises several constitutional arguments against
the forfeiture of the jet. First, it claims that the forfeiture is
violative of the Eighth Amendment's prohibition on
excessive fines. See United States v. Austin, 509 U.S. 602
(1993). In United States v. Bajakajian, 118 S. Ct. 2028
(1998), the Supreme Court analyzed whether a criminal
forfeiture of $357,144 sought by the government was
grossly disproportionate to the crime and, therefore,
punitive and excessive. It stated that although a court
should defer to the decision of the legislature regarding the
appropriateness of the forfeiture, id. at 2037, the statute is
not conclusive. Because Bajakajian's offense involved only
a willful failure to report the export of currency in amounts
at or over $10,000, see 18 U.S.C. S 982(a)(1), and was not
associated with any other related crimes, such as tax
evasion, drug trafficking, or money laundering, see
Bajakajian, 118 S. Ct. at 2036, 2038, the Court rejected as
excessive the government's demand for the entire amount.
Even before the Bajakajian opinion, this court was
moving toward a proportionality test for forfeiture cases,
both civil and criminal. See, e.g., United States v. Sarbello,
985 F.2d 716 (3d Cir. 1993) (discussing criminal RICO
forfeiture). In United States v. Premises Known as RR #1, 14
F.3d 864 (3d Cir. 1994), there was a question whether the
property at issue was in fact used "to facilitate" violation of
the drug laws, a prerequisite for civil forfeiture. Id. at 876.
We stated that if that nexus were proven, then the trier of
fact would be required to look at the overall circumstances,
including seriousness of the offense and personal benefit or
culpability, to decide excessiveness. Id. at 875 (citing
Sarbello, 985 F.2d at 724).
We conclude that the forfeiture here was not excessive.
The federal statute clearly authorized the forfeiture of
aircraft used in the transportation of drugs. The amount of
cocaine to be transported in the jet was comparatively large
for a drug case. Indeed, an offense involving 150 kgs or
more of cocaine has been placed in the highest base offense
level under the Sentencing Guidelines. See U.S.S.G.
S 2D1.1(c). Furthermore, the DEA found CIGNA culpable
because it failed to assure that the jet was not used for
11
improper purposes. CIGNA has not contended that it had
no duty to take reasonable precautions to prevent Yskamp's
use of the airplane for illegal cargo. The DEA noted that
CIGNA's insurance policy reimbursed a claimant even
though the property seized was used in illegal drug
trafficking, which effectively insulated criminals from the
loss consequences of their crimes. Consequently, the
forfeiture of the jet does not violate the constitutional ban
on excessive fines.
CIGNA's other constitutional arguments are equally
meritless. On its Fifth Amendment claims, there is no
question that CIGNA's counsel was aware of the forfeiture
proceedings and could have acted to preserve the
company's rights to a judicial forfeiture by submission of a
$5,000 bond, but he failed to do so in a timely manner.
CIGNA has not pursued an argument that it must receive
personal notice, as opposed to the notices counsel received
on behalf of Yskamp and Haldan. CIGNA's reliance on
United States v. James Daniel Good Real Property, 510 U.S.
43 (1993), for the proposition that it deserves a hearing is
misplaced. That case required notice and a hearing before
the government may seize real property, not personal
property. We decline to extend Good's reach in this case.
CIGNA has not challenged the use of administrative
forfeitures generally, only the use of administrative
forfeiture instead of judicial forfeiture in this case. Because
we have concluded that the DEA's administrative forfeiture
was permissible here, and authorized by statute, we need
not address CIGNA's Sixth and Seventh Amendment
arguments.
Finally, CIGNA raises, apparently for the first time, an
argument that the jet was not subject to forfeiture because
it served as a common carrier under 21 U.S.C. S 881(a)(4).
However, even that exception requires that the owner
neither consent nor be willfully blind to the property's use
in transporting drugs. Id. Even were we to disregard our
precedent and consider this claim in the first instance, see,
e.g., Southwestern Pa. Growth Alliance v. Browner, 121 F.3d
106, 111-13 (3d Cir. 1997) (declining review of issue not
considered by agency in the first instance), which we are
not inclined to do, the DEA found that CIGNA failed to
12
prevent the jet's use in transporting illegal drugs, which
would render that exception inapplicable. CIGNA offers no
explanation that would overcome this finding.
IV.
In conclusion, we will deny CIGNA's Petition for Review.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
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