Richard Kress v. State of Nj , 455 F. App'x 266 ( 2011 )

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_______________
No. 11-1512
_______________
RICHARD H. KRESS,
Appellant
v.
STATE OF NEW JERSEY, PAULA DOW, ATTORNEY GENERAL OF THE
STATE OF NEW JERSEY, JOHN DOE NO. 1-10 (Names being gender neutral
and fictitious as the true identity is/are unknown to Plaintiffs), Individually and in
Their Respective Official Capacities, Jointly, Severally and Individually
_____________
On Appeal from the United States District Court
for the District of New Jersey
(No. 10-cv-00915)
District Judge: Honorable Dickinson R. Debevoise
Submitted Pursuant to Third Circuit LAR 34.1(a)
November 17, 2011
____________
Before: FUENTES and CHAGARES, Circuit Judges, and POGUE, Judge.1
(Filed: December 21, 2011)
____________
OPINION
____________
1
Honorable Donald C. Pogue, Chief Judge, United States Court of International Trade,
sitting by designation.
CHAGARES, Circuit Judge.
Richard H. Kress brought this declaratory judgment action against the State of
New Jersey, the New Jersey Attorney General Paula Dow, and John Doe No. 1-10
(collectively, ―New Jersey‖) seeking to enjoin enforcement of the New Jersey money
laundering statute, N.J. STAT. ANN. §§ 2C:21-25(a) and 2C:21-26 (2005) (―the Statute‖). 2
Kress appeals the District Court‘s grant of summary judgment in New Jersey‘s favor and
the denial of his cross-motion for summary judgment. We conclude that the District
Court‘s well-reasoned opinion reaches the correct result. We will, therefore, affirm.
I.
Because we write solely for the parties, we recite only those facts necessary for
our decision. Kress is an independent businessman who provides currency pickup,
storage, and transportation services for a fee based on the amount of currency involved
and the distance transported. He keeps no written records, maintains a confidential client
list, and does not inquire about the source of the currency or its intended use. He claims
that he does not transport currency if he knows that it was derived from or is intended to
be used for illegal activity.
Kress suspended his business operations and pursued this action because he fears
that he will be arrested and prosecuted if stopped by police while conducting a currency
2
This action was originally brought by Belarmino Amaya and Carlos Mejia, who were
criminally prosecuted for money laundering. In April 2010, they moved to amend the
complaint to add a party referred to as ―R.H.K.‖ and later revealed to be Kress. In June
2010, Amaya and Mejia voluntarily dismissed their claims because, in their state criminal
prosecution, the Superior Court of New Jersey held that the money laundering statute was
constitutional and the District Court announced that it could not move forward with the
complaint on abstention grounds.
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transfer. His concern was sparked by the arrests of his former co-plaintiffs, Belarmino
Amaya and Carlos Mejia, who were arrested for transporting a large amount of
undocumented currency. Amaya and Mejia were prosecuted under the New Jersey
money laundering statute, N.J. STAT. ANN. § 2C:21-25(a), which, in relevant part,
provides: ―A person is guilty of a crime if the person . . . transports or possesses property
known or which a reasonable person would believe to be derived from criminal
activity[.]‖ ―Property‖ is defined in the Statute as ―anything of value.‖ N.J. STAT. ANN.
§§ 2C:21-24, 2C:20-1(g). Additionally, N.J. STAT. ANN. § 2C:21-26 provides that:
For the purposes of [N.J. STAT. ANN. § 2C:21-25(a)], the requisite
knowledge may be inferred where the property is transported or possessed
in a fashion inconsistent with the ordinary or usual means of transportation
or possession of such property and where the property is discovered in the
absence of any documentation or other indicia of legitimate origin or right
to such property.
Kress brought this case pursuant to 42 U.S.C. § 1983 and the Declaratory
Judgment Act, 28 U.S.C. § 2201, seeking a declaratory judgment that the Statute is
unconstitutional and an injunction to prohibit prosecution under the Statute. He alleges
that the Statute violates the Fourth, Fifth, and Fourteenth Amendments of the United
States Constitution, is unconstitutionally vague and overbroad, imposes an impermissible
mandatory presumption that shifts the burden of proof, and violates the United States
Constitution‘s Commerce Clause.
On February 10, 2011, the District Court held that Kress had Article III standing to
challenge the Statute but granted summary judgment in New Jersey‘s favor and denied
Kress‘s cross-motion for summary judgment. Amaya v. New Jersey, 766 F. Supp. 2d
3
533 (D.N.J. 2011). Specifically, the District Court held that (1) Kress‘s overbreadth
argument failed because that doctrine is recognized only in the context of the First
Amendment and Kress did not allege any violation of his First Amendment rights, (2) the
Statute was not vague as applied to Kress‘s conduct because his conduct ―falls squarely
within the field of behavior that the New Jersey Legislature sought to criminalize,‖
(3) the Statute‘s use of the ―reasonable person would believe‖ standard does not render
the law unconstitutionally vague, (4) section 2C:21-26 creates a permissive inference that
does not violate the Due Process Clause of the Fourteenth Amendment, and (5) the
Statute does not violate the Commerce Clause. Kress appealed.
II.
The District Court exercised subject matter jurisdiction over this case pursuant to
28 U.S.C. § 1331, and we have jurisdiction over the appeal pursuant to 28 U.S.C. § 1291.
We exercise plenary review over the District Court‘s order granting summary judgment.
Kach v. Hose, 589 F.3d 626, 633 (3d Cir. 2009). In reviewing the District Court‘s ruling,
we are ―required to apply the same test the district court should have utilized initially.‖
Id. at 634 (quotation marks omitted). Summary judgment is appropriate when the Court
concludes that ―there is no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.‖ Fed. R. Civ. P. 56(a). In determining whether
such relief is warranted, ―[t]he evidence of the non-movant is to be believed, and all
justifiable inferences are to be drawn in his favor.‖ Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 255 (1986).
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III.
Before addressing the merits of Kress‘s challenge to the Statute, we must address
the question of standing. New Jersey maintains that Kress lacks Article III standing to
bring a constitutional challenge to the Statute because he cannot demonstrate a concrete
injury to a legally-protected interest. New Jersey argues that Kress‘s ―currency
transportation service‖ is virtually indistinguishable from money laundering, which is not
a legally protected interest.
Kress replies that New Jersey should be barred from raising the question of
standing on appeal because it did not cross-appeal and was not aggrieved by the District
Court‘s judgment. This Court, however, must address standing if there is any doubt as to
plaintiff‘s standing, even if it means raising the issue sua sponte. McCauley v. Univ. of
the V.I., 618 F.3d 232, 238 (3d Cir. 2010). Because standing is a matter of jurisdiction,
this Court can address standing despite the fact that New Jersey did not cross-appeal on
that issue. Constitution Party of S.D. v. Nelson, 639 F.3d 417, 420 (8th Cir. 2011)
(―Although the state did not file a cross-appeal on this issue, this failure is
inconsequential because standing is a matter of jurisdiction. We may thus consider it sua
sponte, or when raised for the first time on appeal.‖ (citations omitted)).
In order to establish Article III standing, the plaintiff must show three things: first,
that he or she suffered an ―injury in fact,‖ that is, ―an invasion of a legally protected
interest which is (a) concrete and particularized and (b) actual or imminent, not
conjectural or hypothetical[.]‖ Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992)
(citations omitted). Second, that there was ―a causal connection between the injury and
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the conduct complained of,‖ in other words, the injury was ―fairly traceable to the
challenged action of the defendant, and not the result of the independent action of some
third party not before the court.‖ Id. (corrections omitted). Third, ―it must be likely, as
opposed to merely speculative, that the injury will be redressed by a favorable decision.‖
Id. at 561 (quotation marks omitted). ―The party invoking federal jurisdiction bears the
burden of establishing these elements.‖ Id.We agree with the District Court that Kress has standing to challenge the
constitutionality of the Statute. Kress has suffered economic injury because he has
ceased his business operations due to the prosecution of others under the Statute.
Although money laundering is obviously not a legally protected interest, economic
injury, such as the inability to run one‘s business, is. See Sierra Club v. Morton, 405 U.S.
727, 733–34 (1972); Toll Bros., Inc. v. Twp. of Readington, 555 F.3d 131, 140 (3d Cir.
2009).
The District Court also correctly found that Kress‘s potential injury was ―actual or
imminent‖ and not ―conjectural or hypothetical.‖ Lujan, 504 U.S. at 560. Where a
plaintiff can show that the government‘s enforcement of the statute places the plaintiff in
imminent fear of prosecution, courts do not require the plaintiff to risk prosecution by
actually taking that action. MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 128–29
(2007) (―where threatened action by government is concerned, we do not require a
plaintiff to expose himself to liability before bringing suit to challenge the basis for the
threat—for example, the constitutionality of a law threatened to be enforced.‖ (emphasis
in original)). We agree with the District Court that the arrests and prosecution of Amaya
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and Mejia demonstrate that Kress faces an actual and imminent fear of prosecution in the
continued running of his business. Thus, we conclude that Kress has adequately shown
that he faces imminent injury to a legally protected interest and has standing to challenge
the constitutionality of the Statute. We turn, therefore, to the merits of his appeal.
IV.
A.
Kress‘s first argument on appeal is that the Statute violates the Fourth Amendment
because the New Jersey State Police can rely on it to detain, without probable cause, a
person possessing undocumented currency who refuses to answer questions as to the
ownership or source of the currency. He argues that arresting someone after a stop of his
vehicle simply because he has undocumented currency and refuses to answer questions is
unconstitutional because it amounts to the arrest of a merely suspicious person. Kress
also contends that a currency possessor‘s Fifth Amendment privilege against self-
incrimination is violated when officers detain that person for questioning on the basis of
currency possession alone.
Although the District Court did not address these arguments in response to Kress‘s
complaint, it makes no difference because both arguments are plainly meritless. Kress‘s
Fifth Amendment argument fails because the constitutionality of police questioning turns
on the circumstances of each particular case. For instance, the court must assess whether
the defendant was in police custody, whether the questioning amounted to interrogation,
and whether the defendant‘s statements were given voluntarily. See J.D.B. v. North
Carolina, 131 S. Ct. 2394, 2410–12 (2011). It is not the kind of issue that can be resolved
7
by a declaratory judgment action challenging a statute that does not obligate a suspected
person to make a statement.
Kress‘s Fourth Amendment argument is also unconvincing. Kress cites a case in
which the Court of Appeals for the Ninth Circuit struck down a vagrancy statute as
violating the Fourth Amendment because it allowed for the questioning and arrest of
merely ―suspicious‖ persons who refused to produce identification. Lawson v. Kolender,
658 F.2d 1362, 1369 (9th Cir. 1981). The Statute is distinguishable from the statute in
Lawson, however, because it does not require the suspect to explain his or her possession
of undocumented currency. See id. Nor does the presumption created by § 2C:21-26
compel production of documentation because it is merely an inference to be used at trial
to prove intent and does not relate to questioning by police officers. Hence, Kress cannot
prevail on his facial Fourth Amendment challenge.
B.
Kress‘s next contention is that the multiple undefined terms in § 2C:21-26 —
―inconsistent fashion‖, ―ordinary or usual means‖, and ―indicia‖ — and the use of the
―reasonable person would believe‖ standard in § 2C:21-25(a) render the Statute
unconstitutionally vague.
While we need not pass on the potential merit of an as-applied challenge to the
Statute, we agree with the District Court that Kress‘s facial challenge to the Statute is
unavailing. The District Court correctly noted the Supreme Court‘s declaration that
―[o]ne to whose conduct a statute clearly applies may not successfully challenge it for
vagueness.‖ Parker v. Levy, 417 U.S. 733, 756 (1974). ―A plaintiff who engages in
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some conduct that is clearly proscribed cannot complain of the vagueness of the law as
applied to the conduct of others.‖ Village of Hoffman Estates v. Flipside, Hoffman
Estates, Inc., 455 U.S. 489, 495 (1982). The District Court held that the conduct Kress
describes is so clearly within the contours of the Statute that he cannot challenge the
Statute on vagueness grounds. We agree. While there may be ambiguities as to what
conduct is prohibited at the outer limits of the Statute‘s coverage, there is little doubt that
Kress‘s business operations fall within the prohibited conduct. See id. at 502. The
transportation of large amounts of currency without any documentation or information
about its owner or origin is, as the District Court found, highly unusual and undoubtedly
constitutes a ―fashion inconsistent with the ordinary or usual means of transportation or
possession of such property[.]‖ N.J. STAT. ANN. § 2C:21-26. Thus, Kress is clearly on
notice that his conduct is in grave danger of violating the Statute and, as such, his
vagueness challenge is meritless.
Likewise, Kress‘s overbreadth argument is unpersuasive. Kress maintains that the
Statute is overbroad because it encompasses all currency and property handling
transactions, regardless of however ordinary and non-criminal they are. He points out
that the Statute does not require the presence of drugs, weapons, or stolen property and
employs a very broad definition of ―property.‖ As explained by the District Court,
however, Kress‘s overbreadth challenge is misplaced because the overbreadth doctrine
has been recognized only in First Amendment cases. Lutz v. City of York, Pa., 899 F.2d
255, 270–71 (3d Cir. 1990).
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C.
Kress‘s third contention is that § 2C:21-26 violates the Fifth and Fourteenth
Amendments by shifting the burden of proof to the defendant with respect to mens rea.
We agree with the District Court that the inference allowed in § 2C:21-26 is permissive
and does not shift the burden of proof. In assessing the constitutionality of a jury
instruction that creates an inference or presumption, the Court must first ―determine
whether the challenged portion of the instruction creates a mandatory presumption or
merely a permissive inference.‖ Francis v. Franklin, 471 U.S. 307, 314 (1985) (citations
omitted).
A mandatory presumption instructs the jury that it must infer the presumed
fact if the State proves certain predicate facts. A permissive inference
suggests to the jury a possible conclusion to be drawn if the State proves
predicate facts, but does not require the jury to draw that conclusion.
Id.The inference created by § 2C:21-26 is evidently permissive, as it states: ―the
requisite knowledge may be inferred where . . .‖ (emphasis added). The word ―may‖
indicates that the jury can choose whether or not to apply the presumption. See Pichler v.
UNITE, 542 F.3d 380, 394 (3d Cir. 2008) (explaining that the word ―may‖ in a statutory
provision indicates its discretionary and permissive nature); Hopewell Valley Citizens‘
Grp., Inc. v. Berwind Prop. Grp. Dev. Co., 10 A.3d 211, 217 (N.J. 2011) (―The word
‗may‘ generally indicates the permissiveness of the behavior described‖). In addition, the
New Jersey Model Jury Charge for money laundering instructs: ―You may infer that the
defendant had this requisite knowledge if you find the following . . . .‖ Model Jury
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Charge, Financial Facilitation of Criminal Activity (revised June 27, 2011) (emphasis
added). The model instruction also emphasizes: ―you are never required or compelled to
draw an inference.‖ Id.Having concluded that § 2C:21-26 engenders a permissive inference, we need not
proceed any further. The Supreme Court has explicitly proclaimed that a facial challenge
to a permissive inference is unavailable: ―When reviewing this type of device, the
[Supreme] Court has required the party challenging it to demonstrate its invalidity as
applied to him.‖ Cnty. Court of Ulster Cnty., N.Y. v. Allen, 442 U.S. 140, 157 (1979).
In the absence of any trial record in this case, it would be premature for the Court to rule
on the appropriateness of giving a jury instruction on § 2C:21-26. For that reason, we
decline to rule on the constitutionality of § 2C:21-26 as applied to Kress‘s alleged
conduct.
D.
Finally, Kress asserts that the Statute excessively burdens interstate commerce in
violation of the Commerce Clause, U.S. Const. Art. 1, § 8, cl. 3. He argues that the
Statute effectively requires a person to acquire and exhibit a license or permit if they
possess ―anything of value‖ and imposes a heavy burden on interstate commerce. While
states have the power to enact laws to protect the health, safety, and welfare of its
residents, their laws may not excessively burden interstate commerce. Pike v. Bruce
Church, Inc., 397 U.S. 137, 142 (1970).
Where the statute regulates even-handedly to effectuate a legitimate local
public interest, and its effects on interstate commerce are only incidental, it
will be upheld unless the burden imposed on . . . commerce is clearly
11
excessive in relation to the putative local benefits. . . . [T]he extent of the
burden that will be tolerated will of course depend on the nature of the local
interest involved, and on whether it could be promoted as well with a lesser
impact on interstate activities.
Id.We agree with the District Court that the Statute does not violate the Commerce
Clause. The Statute does not merely prohibit the transport of undocumented property; it
prohibits the transport of such property with the knowledge or constructive knowledge
that the property was derived from criminal activity. That proscription applies to a
minimal amount of conduct in which a person is transporting property in a distinctly
unusual and suspicious manner. When it enacted the Statute, the New Jersey legislature
declared:
Despite the impressive efforts and gains of our law enforcement agencies,
individuals still profit financially from illegal organized criminal activities
and illegal trafficking of drugs, and they continue to pose a serious and
pervasive threat to the health, safety and welfare of the citizens of this State
while, at the same time, converting their illegally obtained profits into
―legitimate‖ funds with the assistance of other individuals.
N.J. STAT. ANN. § 2C:21-23d. It is apparent that the public interest in preventing money
laundering and the criminal activity that laundering facilitates justifies the Statute‘s
minimal burden on interstate commerce. Accordingly, we agree with the District Court
that the Statute does not place an impermissible burden on interstate commerce and does
not violate the Commerce Clause. We have also considered Kress‘s remaining
arguments and find that they are without merit.
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V.
For the foregoing reasons, we will affirm the well-reasoned judgment of the
District Court.
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