United States v. Thomas ( 2003 )

Opinions of the United
2003 Decisions States Court of Appeals
for the Third Circuit
2-12-2003
USA v. Thomas
Precedential or Non-Precedential: Precedential
Docket 02-2288
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PRECEDENTIAL
Filed February 12, 2003
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 02-2288
UNITED STATES OF AMERICA
v.
LUTHER THOMAS,
Appellant
ON APPEAL FROM THE DISTRICT COURT
OF THE VIRGIN ISLANDS
District Court Judge: Honorable Thomas K. Moore
(D.C. No. 00-cr-00272)
Argued: November 13, 2002
Before: SCIRICA, ALITO, and RENDELL, Circuit Judges
(Opinion Filed: February 12, 2003)
DOUGLAS J. BEEVERS (Argued)
Assistant Federal Public Defender
PO Box 1327
St. Thomas, USVI 00804-1327
Counsel for Appellant
JOYCELYN HEWLETT (Argued)
Assistant U.S. Attorney
5500 Veterans Drive, Suite 260
Federal Building & US Courthouse
St. Thomas, USVI 00802-6424
Counsel for Appellee
OPINION OF THE COURT
ALITO, Circuit Judge:
Appellant Luther Thomas contests the administrative
forfeiture of $1,049 in cash. After unsuccessfully moving for
a return of property pursuant to Federal Rule of Criminal
Procedure 41(e), Thomas argued that the government’s
failure initially to assert jurisdiction over the res rendered
the forfeiture invalid. The District Court found no
jurisdictional deficiencies, and we affirm.
I.
On May 25, 2000, the Drug Enforcement Administration
obtained from the District Court a warrant to search
Thomas’s home. Officers seized $1,049 in cash pursuant to
that warrant and arrested Thomas for possessing a small
amount of cocaine base (crack) with intent to distribute. On
June 1, a DEA task-force agent and Virgin Islands police
officer converted the currency into a cashier’s check and
delivered the instrument to the United States Marshals’
office. The DEA initiated administrative forfeiture
proceedings on the money while Thomas awaited trial on
the drug charges.
The DEA mailed a notice of seizure to Thomas at three
different addresses and published notice in the Virgin
Islands Daily News and the Wall Street Journal. Two of the
mailed notices were returned to sender, and the DEA
delivered another notice to Thomas granting him an
additional 20 days to contest the forfeiture judicially by
filing a claim and posting bond, as required by 19 U.S.C.
S 1609(a). Thomas neglected to do so but moved the District
Court for the property’s return pursuant to Rule 41(e) of
the Federal Rules of Criminal Procedure. The Magistrate
Judge denied that motion, and the DEA declared the money
forfeited on December 7, 2000.
Thomas then attempted to seek the return of the money
administratively by petitioning the DEA for remission of
forfeiture. See 28 C.F.R. S 9.5 et seq. In his petition,
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Thomas alleged that the $1,049 represented legitimate
income from the sale of assorted knickknacks. While the
petition was pending, the jury found Thomas not guilty of
all of the criminal charges against him. On June 4, 2001,
an attorney from the DEA’s asset-forfeiture division
informed Thomas that he had "failed to provide sufficient
documentation showing a legitimate origin for the forfeited
currency." The DEA’s letter stated that a claimant alleging
forfeited money to be legitimate business proceeds must
provide "credible, verifiable documentation evidencing the
transaction, such as bills of sale."
Thomas moved for reconsideration of his motions in both
the administrative and judicial fora. Before the District
Court, Thomas emphasized a different basis for his claim,
arguing that the DEA never properly asserted in rem
jurisdiction over the seized property, thereby undermining
the forfeiture. For this argument, Thomas relied principally
on Scarabin v. DEA, 966 F.2d 989 (5th Cir. 1992). The
District Court ruled, citing United States v. McGlory, 202
F.3d 664, 670 (3d Cir. 2000), that it had no jurisdiction to
adjudicate a Rule 41(e) motion for the return of property
"once the government has initiated administrative forfeiture
proceedings and the property is no longer the subject of an
ongoing criminal proceeding." However, acknowledging
McGlory’s limited exception for a situation in which a Rule
41(e) movant alleges that the forfeiture proceedings failed to
satisfy statutory and due-process requirements, see id., the
District Court reached Thomas’s Scarabin argument. It
concluded that because the $1,049 "was at all times in the
hands of the federal government," Scarabin was inapposite,
and it therefore denied Thomas’s motion. This appeal
followed.
II.
In Scarabin, the Fifth Circuit considered a challenge to
the administrative forfeiture of $12,360 in cash. Scarabin
operated a fuel dock and marine supply business at a
marina in Plaquemines Parish, Louisiana. See Scarabin v.
DEA, 919 F.2d 337, 338 (5th Cir. 1990) (hereinafter
Scarabin I).1 Acting pursuant to a warrant issued by a
_________________________________________________________________
1. For clarity’s sake we refer to the final Scarabin decision at 966 F.2d
989 (5th Cir. 1992), on which Thomas relies in this case, simply as
Scarabin.
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Louisiana state court, personnel of the Plaquemines
Sheriff ’s Department and the Drug Enforcement
Administration (DEA) raided the marina and found two
marijuana cigarette butts on the premises but not in the
vicinity of Scarabin. Id. In addition, the Sheriff seized
$12,360 from Scarabin. Id. Scarabin was originally charged
with criminal offenses, but these charges were dismissed.
Id. The seized funds, however, were forfeited in a DEA
administrative proceeding. Id. Scarabin pursued remission
of forfeiture via administrative channels but was rebuffed
due to a technicality. Id. In an opinion issued in 1990, the
Fifth Circuit acknowledged that it lacked jurisdiction to
review the denial of remission but remanded the case to the
DEA with the following suggestion: "[This] is the perfect
case for big government to be big hearted and big enough
to return ill-gotten gains to the rightful owner rather than
unjustly enrich itself on the basis of a technical‘gotcha.’ "
Scarabin I, 919 F.2d at 339.
By the time the case returned to the Fifth Circuit in
1992, additional facts had emerged concerning the
treatment of the seized cash. Unbeknownst to the Court
during consideration of Scarabin I:
[A] mere three days after [its] search of the Parish
marina and seizure of Scarabin’s funds, the Sheriff ’s
Office bought a cashier’s check using Scarabin’s
$12,360. [It] did so without the knowledge, much less
the authority, of the state court. The cashier’s check
was then handed over to the DEA for civil forfeiture
under federal law. . . . [T]he DEA proceeded to forfeit
administratively the $12,360 from the cashier’s check
received from the Sheriff ’s Office, purporting to forfeit
the funds actually seized from Scarabin. . . . [T]he DEA
gave the Sheriff ’s Office $11,124 (or 90% of $12,360)
under a federal statute that allows the DEA to return
forfeited property to state or local law enforcement
agencies that have participated directly in the seizure
or forfeiture of that property.
Scarabin, 966 F.2d at 991.
The Fifth Circuit concluded that "[t]he administrative
forfeiture of which the DEA informed Scarabin [was] a non-
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entity." Id. at 995. The Fifth Circuit stated that it was
"astonished by the DEA’s belated revelation that it never
possessed or controlled Scarabin’s $12,360 in cash, the res
at issue in this case," and the Fifth Circuit noted that a
federal agency undertaking an administrative forfeiture
"must have physical control over the property to be forfeit."
Id. at 993. The panel then reasoned that "[a]s the DEA by
its own admission never had control over Scarabin’s
$12,360, it could not lawfully have found the property
forfeit under the rules of in rem forfeiture." Id. Moreover,
the panel held that, even if the DEA had possessed the
actual res, the DEA would still have lacked in rem
jurisdiction because "Scarabin’s $12,360 was never out of
the legal control of the state court and thus was never in
the possession of the federal government." Id . at 995. In
reaching this conclusion, the Fifth Circuit relied on a
Louisiana statute that provided as follows:
When property is seized pursuant to a search warrant,
it shall be retained under the direction of the judge. If
seized property is not to be used as evidence or is no
longer needed as evidence, it shall be disposed of
according to law, under the direction of the judge.
LA. C. CR. P. art. 167. The Court reasoned that, under this
statute, "the state court’s control terminates when, but only
when, the seized property is disposed of according to law."
Scarabin, 966 F.2d at 993. It held, accordingly, that "[a]
federal agency cannot obtain jurisdiction over the res --
and thus cannot find the res administratively forfeit --
when a state court obtains jurisdiction first and never
relinquishes that jurisdiction." Id. (citing, e.g., Penn Gen’l
Casualty Co. v. Pennsylvania, 294 U.S. 189 (1935)).
III.
The Fifth Circuit’s opinion in Scarabin may be read as
holding that the DEA lacked in rem jurisdiction over the
seized cash for two separate reasons: first, because the
state court retained jurisdiction under state law and,
second, because the DEA never actually possessed the cash
but instead merely obtained a cashier’s check from the
local sheriff. Thomas appears to rely on both propositions.
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He argues, first, that the District Court, not the DEA, had
possession of the seized cash in this case, since the cash
was seized pursuant to a warrant issued by the District
Court and, second, that possession of the res was lost
when it was converted into a cashier’s check. We address
each argument in turn.
A.
Although Thomas contends that the District Court, not
the DEA, possessed the res at issue here, he cites no legal
authority that supports this conclusion. In Scarabin, as
noted, the warrant was issued by a Louisiana state court,
and a Louisiana statute provided that the seized property
was to remain under the direction of the state court that
issued the warrant. We disagree with Thomas’s argument
that Federal Rule of Criminal Procedure 41 operates
analogously. The Rule gives a claimant some rights but
does not provide that the warrant-issuing court, as opposed
to the executive branch agency making the seizure, retains
the res. Compare FED. R. CRIM. P. 41(d), (e) with LA. C. CR.
P. art. 167. In the absence of a statutory provision like the
one invoked in Scarabin, we decline to hold that, for
purposes of in rem jurisdiction, property seized under a
federal warrant rests within the exclusive possession of the
warrant-issuing court rather than the executive-branch
agency that executes the warrant and actually seizes the
property. See United States v. Certain Real Property, 986
F.2d 990, 994-95 (6th Cir. 1993); United States v. $12,390,
956 F.2d 801, 805-06 (8th Cir. 1992); United States v. One
1986 Chevrolet Van, 927 F.2d 39, 44-45 (1st Cir. 1991).
Scarabin is also distinguishable from the present case on
the ground that it involved a seizure by a state officer under
a state warrant. The District Court considered this
distinction dispositive when it ruled that because a federal
search warrant authorized the seizure of Thomas’s $1,049,
the DEA, as another arm of the federal government, could
properly assert jurisdiction over the res. Although we do
not rely exclusively on this ground, we agree with the
District Court that Scarabin should not be extended to
cases where property seized by a federal officer under a
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federal warrant is forfeited in a federal administrative
proceeding.
B.
We also reject Thomas’s argument that the DEA
relinquished possession of the res when it converted the
cash to a cashier’s check. In making this argument,
Thomas relies on the rule stated in The Brig Ann , 13 U.S.
(9 Cranch.) 289, 290 (1815), and reaffirmed in Republic
Nat’l Bank of Miami v. United States, 506 U.S. 80 (1992),
that judicial cognizance of a forfeiture in rem is defeated
"[i]f a seizure be completely and explicitly abandoned"
before forfeiture proceedings are instituted. Id . at 86-87
(quoting The Brig Ann, 13 U.S. at 290). Under this rule,
asserting jurisdiction over a res requires actual physical
control over the res, and an abandonment of physical
control undermines in rem jurisdiction. "The Brig Ann
stands for nothing more than this." Id. at 87. In order for
this rule to apply to the present case, the act of converting
cash to a check must constitute a "complete[ ] and explicit[ ]
abandonment" of the res. The Brig Ann, 13 U.S. at 290. To
the extent that Scarabin supports that result, however, it is
in tension with approaches to the forfeiture of cash
endorsed by other Circuits.
It behooves authorities to preserve seized money in the
form in which they seized it when they intend to use it as
physical evidence in a trial. Typical situations are when
cash traded for drugs contains trace residue of the
narcotics involved or when the serial numbers on the bills
implicate the accused. However, when no legal significance
attaches to the bills themselves, some courts favor a
departure from literal application of in rem jurisdiction. In
Madewell v. Downs, 68 F.3d 1030, 1042 n.14 (8th Cir.
1995), the Eighth Circuit refused to follow Scarabin,
holding that "[c]urrency, cashier’s checks, and bank
deposits are simply surrogates for each other, and in
modern society are certainly regarded as ‘fungible,’ when
the question is ownership of the funds each represents."
Similarly, the Ninth Circuit rejected the argument that
when "currency was exchanged for a cashier’s check, the
currency, which is the res, ‘disappeared into the banking
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system and is no longer identifiable.’ " United States v.
$46,588 in U.S. Currency and $20.00 in Canadian
Currency, 103 F.3d 902, 905 (9th Cir. 1996). Citing
Madewell, it held that "the cashier’s check was an
appropriate, fungible surrogate for the seized currency." Id.
This approach accords comfortably with the
jurisprudence of civil forfeiture. Historically, forfeiture
proceeded from the legal fiction that property used in the
commission of a crime itself offends the law. See, e.g., The
Palmyra, 25 U.S. (12 Wheat.) 1, 14 (1827). The forfeited res,
as a legal entity, is identical with the physical article when
the property is, for example, a sea vessel, an automobile, or
a firearm. Currency, however, differs substantially from
such objects. Paper currency, in the form of the Federal
Reserve Note, is defined as an "obligation[ ] of the United
States" that may be "redeemed in lawful money on
demand." 12 U.S.C. S 411 (2002). These bills are not
"money" per se but promissory notes supported by the
monetary reserves of the United States. When an individual
engages in a criminal transaction with paper currency,
although the individual certainly uses the notes to
accomplish the criminal end, the currency’s monetary value
funds the transaction and is also an appropriate target of
forfeiture. This result also follows from the fact that an
individual who uses legal documents representing
ownership of land to raise funds for a criminal purpose
renders the land itself subject to forfeiture. See United
States v. Rd 1, Box 1, Thompsontown, 952 F.2d 53 (3d Cir.
1991). It would be absurd, in that case, to suppose that
forfeiture could attach only to the document and not to the
legal interests represented by that document. We therefore
hold that the DEA did not abandon the res when it
converted the currency to a cashier’s check.
IV.
In sum, we hold that the DEA properly exercised in rem
jurisdiction over the $1,049 seized from Thomas. As the
District Court correctly recognized in citing McGlory, no
other issue that would normally go to the merits of a Rule
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41(e) motion may be considered or adjudicated at this time.
We therefore affirm the judgment of the District Court.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
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