Mantilla v. United States ( 2002 )

Opinions of the United
2002 Decisions States Court of Appeals
for the Third Circuit
9-3-2002
Mantilla v. USA
Precedential or Non-Precedential: Precedential
Docket No. 99-5923
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PRECEDENTIAL
Filed September 3, 2002
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 99-5923
EDUARDO MANTILLA,
Appellant
v.
UNITED STATES OF AMERICA;
U.S. CUSTOMS SERVICE
Appeal from the United States District Court
for the District of New Jersey
(D.C. Civil Action No. 99-cv-00287)
District Judge: Honorable John C. Lifland
Argued February 4, 2002
Before: SLOVITER, and AMBRO, Circuit Judges
POLLAK,* District Judge
(Opinion filed: September 3, 2002)
Mark H. Lynch, Esquire
Keith Noreika, Esquire (Argued)
Covington & Burling
1201 Pennsylvania Avenue, N.W.
Washington, DC 20004
Attorneys for Appellant
_________________________________________________________________
* Honorable Louis H. Pollak, Senior United States District Judge for the
Eastern District of Pennsylvania, sitting by designation.
Robert J. Cleary
United States Attorney
Colette R. Buchanan (Argued)
Assistant U.S. Attorney
Office of United States Attorney
970 Broad Street, Room 700
Newark, NJ 07102
Attorneys for Appellee
OPINION OF THE COURT
AMBRO, Circuit Judge:
Eduardo Mantilla filed this civil action seeking the return
of funds that the United States Customs Service
("Customs") obtained from him and his co-conspirators
during an undercover operation. Finding that public policy
bars the return of funds that are voluntarily exchanged
during a narcotics transaction, the United States District
Court for the District of New Jersey granted summary
judgment in favor of Customs.1
We affirm the District Court’s judgment. Mantilla lacks
standing to seek the return of one portion of the funds. As
to the remaining amount, we agree with the District Court
that an extension of the in pari delicto2 concept prevents
Mantilla from seeking its return.
I. Background
In early 1991, Customs began an undercover narcotics
investigation of Mantilla, Robert Jonas, Michael Mittenberg,
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1. Although the United States and Customs are appellees, we will refer
to both collectively as Customs.
2. Although commonly referred to as in pari delicto, the concept’s full title
is in pari delicto potior est conditio defendentis, meaning "in case of equal
fault the condition of the party defending is the better one." United States
v. Farrell, 606 F.2d 1341, 1348 & n.21 (D.C. Cir. 1979). Recognized as
a defense in both law and equity, in pari delicto dictates that "[n]either
party to an illegal contract will be aided by the court, whether to enforce
it or set it aside." Id.; see infra S V (discussing Farrell).
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and Enidio Abreu. Through negotiations with Mantilla
and/or Jonas, undercover Customs agents, posing as drug
smugglers, transported large quantities of cocaine and
marijuana from Colombia to the United States in exchange
for $9,000,000. Of this amount the agents required a
payment of $1,000,000 "up front" prior to releasing the
narcotics to Mantilla and his co-conspirators.
The parties agreed to meet at a specific location in Jersey
City, New Jersey to complete the arrangement. There,
Mantilla and his co-conspirators would deliver a truck
containing $1,000,000 to the agents. The agents would
then drive away in the truck, take the fee, and return the
truck filled with cocaine.
The transaction occurred on May 30, 1991. Abreu drove
the truck to the pre-arranged site. He parked the truck and
handed the keys to Mantilla, who in turn handed them to
an agent. The transaction continued as planned until the
agent discovered that the truck contained only $900,000.
Extensive, and presumably intense, negotiations ensued,
after which Mantilla and his co-conspirators represented
that the missing $100,000 would be available later that
day.
The parties agreed to complete the transaction at a diner
in nearby Elizabeth, New Jersey. Mittenberg and Jonas
traveled in a van and followed the agents to the location.
However, before the final transfer occurred, the agents
stopped the van and arrested both passengers. Upon
searching the vehicle the agents "found nearly all of the
missing money in a paper bag under the rear seat" --
approximately $95,500. The agents subsequently arrested
Mantilla in the diner parking lot.
On June 19, 1992, a jury sitting in the United States
District Court for the District of New Jersey found Mantilla
guilty of three counts of conspiring to import, distribute,
and/or possess with an intent to distribute, cocaine and
marijuana in violation of 21 U.S.C. SS 846 and 963.
Customs never instituted administrative forfeiture
proceedings against the money obtained from the co-
conspirators. Instead, it deposited the funds into its
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undercover operation account pursuant to 19 U.S.C.S 2081.3
The five-year statute of limitations for initiating forfeiture
proceedings lapsed after May 31, 1996. 19 U.S.C.S 1621.
Eventually, Mantilla filed a Freedom of Information Act
complaint, through which he received information regarding
the status of the confiscated funds. On February 10, 1997,
Mantilla filed his initial return of property complaint in the
United States District Court for the Southern District of
Florida. That Court dismissed the action for improper
venue, and the United States Court of Appeals for the
Eleventh Circuit affirmed on January 4, 1999. Mantilla v.
United States, 168 F.3d 506 (11th Cir. 1999) (unpublished
table decision).
On February 19, 1999, Mantilla filed this action, his
second return of property complaint, in the United States
District Court for the District of New Jersey. Customs
responded by filing a motion to dismiss for lack of subject
matter jurisdiction, insufficiency of service of process, and
failure to state a claim upon which relief can be granted.
Because Customs attached a supporting affidavit, the
District Court construed the pleading as a motion for
summary judgment. See Fed. R. Civ. P. 12(b) (stating that
if, on a Rule 12(b)(6) motion, "matters outside the pleading
are presented to and not excluded by the court, the motion
shall be treated as one for summary judgment and
disposed of as provided in Rule 56").
In its September 29, 1999 memorandum opinion and
order, the District Court granted summary judgment for
Customs, finding that an extension of the in pari delicto
concept prevented it from enforcing an illegal contract by
returning funds that Mantilla voluntarily delivered to
undercover Customs agents. The Court also held that
Mantilla had no viable claim under S 704 of the
Administrative Procedure Act ("APA") because the voluntary
transfer, rather than seizure, of the funds did not
constitute "agency action" necessary to trigger "the limited
abrogation of sovereign immunity provided by the APA." To
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3. Because we affirm on alternative grounds, we do not address Customs’
contention that forfeiture proceedings were unnecessary because it acted
in accordance with 19 U.S.C. S 2081.
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the extent the complaint sought equitable relief, the District
Court denied the claim as against public policy. Finally, the
District Court rejected Mantilla’s Fifth Amendment unlawful
taking and due process arguments, neither of which
Mantilla raises on appeal.
II. Jurisdiction
We reject Customs’ contention that no statutory provision
authorizes our jurisdiction over Mantilla’s claim. We have
previously held that a claimant’s "collateral[ ] attack [of] an
inadequately noticed administrative forfeiture" presents a
proper federal question, thereby conferring jurisdiction
under 28 U.S.C. S 1331. Foehl v. United States, 238 F.3d
474, 478 (3d Cir. 2001) (citation omitted); United States v.
McGlory, 202 F.3d 664, 670 (3d Cir. 2000) (en banc). Such
challenges usually arise where the Government attempted,
but failed to take all measures necessary under due
process, to give notice of forfeiture. Foehl, 238 F.3d at 478-
80; McGlory, 202 F.3d at 671-74. We agree with Mantilla
that his claim is a natural extension of these decisions.
Indeed, this case involves the most inadequate notice
possible: Customs failed to initiate forfeiture proceedings
altogether, and thus never attempted to give notice of the
funds’ status.4
III. Standing
We turn next to Mantilla’s standing, an issue that we
must address even though the District Court did not reach
it. FW/PBS, Inc. v. City of Dallas, 493 U.S. 215, 230-31
(1990). To prove standing, Mantilla must show that he has
a colorable ownership or possessory interest in the funds.
United States v. Contents of Account Nos. 3034504504 and
144-07143, 971 F.2d 974, 985 (3d Cir. 1992). Because
Customs obtained the two amounts--$900,000 and
$95,500--under distinct circumstances, Mantilla must
establish his standing as to each. See Kadonsky v. United
States, 216 F.3d 499, 508 (5th Cir. 2000).
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4. Because we recognize Mantilla’s claim as lying in equity, we do not
address whether S 704 of the APA authorizes his return of property
action.
5
As to the first amount, it is undisputed that a co-
conspirator drove the truck containing the $900,000,
parked the vehicle, and handed the keys to Mantilla.
Mantilla then handed the keys to the Customs agent. Thus,
Mantilla did possess the funds at the time of transfer.
Customs contends that Mantilla is a "straw owner" of the
funds, in which case mere possession--without"some
explanation or contextual information regarding the
claimant’s relationship to the seized property"--would be
insufficient to establish standing. United States v.
$515,060.42, 152 F.3d 491, 498 (6th Cir. 1998); see
Contents of Accounts Nos. 3034504504 and 144-07143 , 971
F.2d at 985 (expressing disapproval of "standing claims put
forward by nominal or straw owners"). Nevertheless, we
shall assume that Mantilla’s possessory interest is enough
to confer standing as to the $900,000 amount.
However, we conclude that Mantilla lacks standing to
seek the return of the $95,500 amount. The facts show that
Customs agents confiscated this amount from a vehicle
that Mantilla did not own, possess, or occupy. Further,
Mantilla offers no evidence from which a reasonable trier of
fact could discern his colorable interest in this amount.5
Accordingly, Mantilla has no standing to pursue its return.
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5. We pause to address one statement cited by Mantilla as proof of his
colorable interest in the $95,500. As part of Mantilla’s Freedom of
Information Act claim, a Customs attorney filed a declaration describing
her investigation of the funds’ forfeiture status. The attorney
communicated with a paralegal in the Newark, New Jersey Customs
office, who in turn discussed Mantilla’s claim with an agent involved in
the case. As the attorney’s declaration states:"The agent verbally
informed the paralegal that the $1,000,000.00, technically, was never
seized from Eduardo Mantilla nor was it forfeited to the government
since it was turned over to United States Customs Agents by Eduardo
Mantilla as drug exchange money." Mantilla relies on this statement as
evidence that he "exercised possession and control over the entire
$1,000,000." Leaving aside our concerns regarding the statement’s
reliability--particularly where Mantilla’s Freedom of Information Act
claim arguably misled the attorney into lumping the $900,000 and
$95,500 into one amount--we find the statement of the Customs
attorney, containing thirdhand information, irrelevant. By contrast, in
our case a Customs agent with firsthand knowledge of the undercover
operation filed an affidavit that described the material facts on which we
rely. Further, Mantilla conceded the accuracy of this affidavit as to all
relevant events. In the face of such evidence, no reasonable factfinder
could find that Mantilla has standing as to the $95,500 amount.
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IV. Procedural Issues
With Mantilla’s cause of action now limited to the
$900,000 sum, we address Customs’ arguments that three
procedural hurdles--sovereign immunity, the statute of
limitations, and laches--bar his claim.
A. Sovereign Immunity
Sovereign immunity presents no barrier to Mantilla, as
Foehl dictates that he may properly assert his equitable
claim "via the waiver of sovereign immunity found in
section 702 of the Administrative Procedure Act." 238 F.3d
at 478; see also United States v. 1461 W. 42nd St., Hialeah,
Fla., 251 F.3d 1329, 1340 (11th Cir. 2001) ("[C]laims for
equitable relief, such as the return of property . .. , do not
impinge upon sovereign immunity.").
B. Statute of Limitations
28 U.S.C. S 2401 imposes a six-year statute of limitations
on Mantilla’s return of property claim. This six-year period
begins "at the close of forfeiture proceedings" or "if no
forfeiture proceedings were conducted, at the end of the
five-year limitations period during which the government is
permitted to bring a forfeiture action." Polanco v. DEA, 158
F.3d 647, 654 (2d Cir. 1998); 19 U.S.C. S 1621 (establishing
five-year statute of limitations for Customs to institute
forfeiture proceedings). The latter circumstance arose in
this case, and therefore Customs’ statute of limitations
lapsed after May 30, 1996, five years following actual
confiscation of the funds on May 30, 1991. Accordingly,
Mantilla had until May 30, 2002 to file his claim, a time bar
which his February 19, 1999 complaint easily satisfied.6
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6. Ironically, Mantilla’s claim is timely even if we measure the six-year
bar from May 30, 1991, i.e., when Customs confiscated the funds. Under
this scenario, his time to file would ordinarily lapse after May 30, 1997.
However, the proceeding in the Southern District of Florida and the
Eleventh Circuit Court of Appeals-- begun by Mantilla’s timely complaint
filed on February 10, 1997--would toll the statute of limitations. Burnett
v. New York Cent. R.R., 380 U.S. 424, 430 (1965) ("Both federal and
state jurisdictions have recognized the unfairness of barring a plaintiff ’s
action solely because a prior timely action is dismissed for improper
venue after the applicable statute of limitations has run."). The statute
7
C. Laches
Because Mantilla’s claim survives the statute of
limitations, the equitable defense of laches is presumptively
inapplicable. United States v. One Toshiba Color Television,
213 F.3d 147, 158 (3d Cir. 2000) ("[I]f a suit is brought
within the statutory period, laches would generally be
unavailable."). Further, this case does not involve
circumstances that support a laches defense. Pappan
Enter., Inc. v. Hardee’s Food Sys., Inc., 143 F.3d 800, 804
(3d Cir. 1998). The record suggests neither Mantilla’s lack
of diligence in filing his complaint nor Customs’ prejudicial
reliance on Mantilla’s delay. Id.; see United States v. Marolf,
173 F.3d 1213, 1218-19 (9th Cir. 1999) (rejecting the
Government’s laches argument where the failure to initiate
forfeiture proceedings arose from the "government’s own
carelessness," not the timing of the claimant’s return of
property complaint).
V. The Farrell Rule
Finally reaching the primary basis for the District Court’s
judgment, we agree that an extension of the in pari delicto
concept prevents Mantilla from using the courts to recover
the $900,000 amount that he voluntarily transferred to
Customs agents. "It has long been the settled rule that
property delivered under an illegal contract cannot be
recovered back by any party in pari delicto." United States
v. Farrell, 606 F.2d 1341, 1348 (D.C. Cir. 1979) (citation
omitted). Courts have traditionally applied this rule to
prevent the return of funds used in an attempted bribery.
See Clark v. United States, 102 U.S. 322, 331-32 (1880).
Farrell extended the ambit of the policy to prevent the
return of funds that were voluntarily exchanged as part of
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of limitations would begin accruing again on January 4, 1999 when the
Eleventh Circuit affirmed the dismissal of the complaint for improper
venue. Presumably, Mantilla would have had almost four months--i.e.,
the time period between his February 10, 1997 filing and the initial time
bar of May 30, 1997--to refile his claim in the District of New Jersey.
Accordingly, Mantilla’s second complaint, filed February 19, 1999, would
be timely under this alternative reading of the statute of limitations.
8
a narcotics transaction. There, a claimant sought the
return of $5,000 paid to an undercover DEA agent as part
of what the claimant believed was an illegal contract to
purchase heroin. Unlike the current version of 21 U.S.C.
S 881(a)(6), the statute at that time did not provide for the
forfeiture of money furnished in exchange for a controlled
substance. Nevertheless, the D.C. Circuit held that
it is contrary to public policy to permit the courts to be
used by the wrongdoer Farrell to obtain the property he
voluntarily surrendered as part of his attempt to violate
the law. If as the cases hold it is sound public policy to
deny the use of the courts to persons [i]n pari delicto
who seek the return of illegally paid money, [a] fortiori
it is sound public policy to deny the aid of the courts
to a single violator of the law who seeks the return of
money paid to a government agent in an attempt to
contract for the purchase of contraband drugs.
Farrell, 606 F.2d at 1350.
The Eighth Circuit subsequently applied the Farrell rule
to prevent the return of $25,000 which a claimant
transferred to undercover agents in an attempt to purchase
hashish. United States v. Smith, 659 F.2d 97, 100 (8th Cir.
1981); see also Acheampong v. United States, C.A. Nos. 99
Civ. 2169, 99 Civ. 3491, 2000 WL 1262908, at *5 (S.D.N.Y.
Sept. 5, 2000) (citing Farrell with approval); United States v.
Kim, 738 F. Supp. 1002, 1004-05 (E.D. Va. 1990) (same).
We find Farrell’s reasoning persuasive and apply it here
to bar the return of the $900,000.7 Unlike the version
enacted when the D.C. Circuit decided Farrell , S 881(a) now
authorizes the forfeiture of "[a]ll moneys, negotiable
instruments, securities, or other things of value furnished
or intended to be furnished by any person in exchange for
a controlled substance." S 881(a)(6). However, we reject
Mantilla’s contention that this statutory revision
established S 881(a)(6) as the only means by which the
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7. The Farrell rule is inapplicable to the $95,500 because that money
was not voluntarily transferred to the Customs agents. Nevertheless, as
discussed above, Mantilla’s lack of standing bars his claim as to that
amount.
9
Government may retain funds intended for the purchase of
narcotics. Cf. United States v. Clymore, 245 F.3d 1195,
1200 (10th Cir. 2001) (stating that, in addition toS 881(a)’s
procedures, the Government may quiet title in seized
contraband through a criminal proceeding, a Fed. R. Civ. P.
41(e) equitable proceeding, or a "civil motion brought by
one who alleges a lawful right to possession"). Further,
S 881(a)(6)’s legislative history does not evidence
congressional intent to limit the application of common law
principles in the context of forfeiture proceedings. See
Psychotropic Substance Act of 1978, Pub. L. No. 95-633,
1978 U.S.C.C.A.N. (92 Stat. 3777) 9496, 9522-23
(discussing S 881(a)’s amendment).
Accordingly, we hold that the Farrell rule--with its
foundation lying in the long-recognized concept of in pari
delicto--remains viable and thus prevents the return of the
$900,000 sum that Mantilla voluntarily exchanged in an
undercover narcotics transaction.
* * * * *
For the foregoing reasons, we affirm the District Court’s
grant of summary judgment.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
10