Kardoh v. United States ( 2009 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
ABDUL MASIH KARDOH,  No. 07-15700
Plaintiff-Appellee,
v.  D.C. No.
CV-06-80275-VRW
UNITED STATES OF AMERICA,
OPINION
Defendant-Appellant.

Appeal from the United States District Court
for the Northern District of California
Vaughn R. Walker, Chief District Judge, Presiding
Argued and Submitted
October 24, 2008—San Francisco, California
Filed July 10, 2009
Before: Procter Hug, Jr., Glenn L. Archer*, and
Richard R. Clifton, Circuit Judges.
Opinion by Judge Clifton
*The Honorable Glenn L. Archer, Jr., United States Circuit Judge for
the Federal Circuit, sitting by designation.
8643
KARDOH v. UNITED STATES 8645
COUNSEL
Joseph P. Russoniello, U.S. Attorney, Barbara J. Valliere,
Hartley M. K. West (argued), and Stephanie M. Hinds, Assis-
tant U.S. Attorneys, San Francisco, California, for defen-
dant-appellant United States.
Erik Babcock (argued), Oakland, California, and Jonathan M.
Kaufman, San Francisco, California, for plaintiff-appellee
Abdul Masih Kardoh.
8646 KARDOH v. UNITED STATES
OPINION
CLIFTON, Circuit Judge:
Abdul Masih Kardoh, a Syrian national, obtained four alien
registration cards bearing names of persons not entitled to
enter the United States from an undercover agent posing as a
corrupt immigration official, to whom Kardoh paid $40,000
in exchange. A few minutes after the transaction, Kardoh was
arrested, still carrying the four cards. The government did not
prosecute Kardoh, but he was deported two months later. Kar-
doh then sought to recover the $40,000. After the government
declined to return the money voluntarily, Kardoh filed a
motion for return of property under Federal Rule of Criminal
Procedure 41(g). The district court concluded that the govern-
ment could not retain the money and granted Kardoh’s motion
for return of property. Concluding that Kardoh’s claim is sub-
ject to the doctrine known as in pari delicto, we reverse.
I. Background
Kardoh became the subject of an investigation by Depart-
ment of Homeland Security, Immigration and Customs
Enforcement (“ICE”) in July 2004. At that time, Kardoh was
residing unlawfully in the U.S. on an expired tourist visa. ICE
received information that he was seeking to acquire immigra-
tion documents. A few months later, he was introduced to an
undercover ICE agent posing as a corrupt immigration offi-
cial. Over the next fourteen months, on multiple occasions,
Kardoh expressed to the undercover agent his desire to pur-
chase alien registration cards to benefit himself and others. In
separate transactions, Kardoh purchased from the agent a card
with his name for $12,500 and a card for another Syrian
national also living in the U.S. unlawfully on an expired tour-
ist visa for $15,000.
Kardoh’s last meeting with the undercover agent resulted in
the transaction which is the subject of this appeal. It was
described in a declaration by the undercover agent as follows:
KARDOH v. UNITED STATES 8647
On December 12, 2005, during my last meeting with
Kardoh in my vehicle parked at the terminus of Clay
Street in San Francisco, California, I provided Kar-
doh with four Alien Registration Cards bearing the
identity of four Syrian nationals not legally entitled
to the cards nor entitled to enter the United States. In
exchange for the cards, Kardoh removed from his
person and handed me four bundles of U.S. paper
currency bound with rubber bands, shortly after
which Kardoh exited my vehicle with the four Alien
Registration Cards in his possession. Immediately
thereafter, Kardoh was arrested and the four cards
were found on his person. A subsequent count con-
firmed that the amount of money provided by Kar-
doh to me to be $40,000.
The declaration went on to state that the agent had on sev-
eral occasions spoken with Kardoh about the illegality of the
transaction and expressed the agent’s conclusion that it was
apparent that Kardoh “understood that the transactions were
illegal.” During an interview following his arrest, after sign-
ing a form which indicated that he understood his rights, Kar-
doh admitted knowing that the transaction was illegal. As
expressed in the agent’s declaration:
Kardoh admitted knowing what he did was illegal
and to being told that it was illegal. Kardoh further
admitted that his understanding of the fact that the
cards were obtained “under the table” meant that
they were obtained illegally, and that he could not
deny the fact that what he did was “one-hundred per-
cent (100%) wrong.”
Kardoh offered no declaration of his own nor any other evi-
dence to rebut the testimony contained in the agent’s declara-
tion.
8648 KARDOH v. UNITED STATES
Kardoh was deported from the United States two months
after his arrest. He was never indicted, nor did the government
ever initiate forfeiture proceedings.
By letter, Kardoh’s attorney asked the government to return
the $40,000 to him. The government declined to do so. After
it became apparent that neither an indictment nor a return of
the money was forthcoming, Kardoh filed a motion with the
district court under Rule 41(g) of the Federal Rules of Crimi-
nal Procedure, seeking an order that the $40,000 be returned.1
After conducting two hearings and receiving supplemental
briefing, the district court concluded that it could properly
exercise equitable jurisdiction over the motion and that the
money should be returned to Kardoh:
The court therefore finds that continued retention of
the $40,000 in the absence of a forfeiture proceed-
ing, investigation or prosecution is unreasonable.
The property was taken over a year ago. The govern-
ment confiscated the money as an instrumentality of
an illegal act without ever establishing the illegal act.
No charges have been filed. The government has not
provided evidence justifying a delay in filing
charges. Finally, Kardoh has had no notice and no
legal process for protecting his interest in the money.
Accordingly, equitable principles mandate that the
$40,000 be returned.
1
Rule 41(g) provides:
Motion to Return Property. A person aggrieved by an unlawful
search and seizure of property or by the deprivation of property
may move for the property’s return. The motion must be filed in
the district where the property was seized. The court must receive
evidence on any factual issue necessary to decide the motion. If
it grants the motion, the court must return the property to the
movant, but may impose reasonable conditions to protect access
to the property and its use in later proceedings.
KARDOH v. UNITED STATES 8649
The government appealed.
II. Discussion
Where no criminal proceeding is pending, a district court
has discretion to hear a motion for the return of property as
a civil equitable proceeding. United States v. Kama, 394 F.3d
1236, 1238 (9th Cir. 2005). Courts should exercise “caution
and restraint” before assuming jurisdiction over such a motion
and they must consider four specific factors to determine if
jurisdiction is warranted. Id. (quoting Ramsden v. United
States, 2 F.3d 322, 324 (9th Cir. 1993)). One of those factors
is whether “the movant has an individual interest in and need
for the property he wants returned.” Id. (quoting Ramsden, 2
F.3d at 325). If jurisdiction is warranted, a court considers
whether the government’s retention of the property would be
reasonable under all of the circumstances. Ramsden, 2 F.3d at
326. In this case, whether Kardoh was entitled to the $40,000
is dispositive of both the jurisdictional and merits issues.
The government offered multiple arguments why Kardoh
was not entitled to the money. We focus on one of them, that
the doctrine of in pari delicto prevents Kardoh from obtaining
the court’s assistance in recovering money voluntarily paid in
furtherance of an illegal contract. We agree.
[1] “It has long been ‘the settled rule that property deliv-
ered 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) (quoting Harriman v. Northern
Securities Co., 197 U.S. 244, 295 (1905)). The general rule,
in its full Latin glory, is “in pari delicto potior est conditio
defendentis,” or “[i]n case of equal fault the condition of the
party defending is the better one.” Farrell, 606 F.2d at 1348
& n.21. The D.C. Circuit restated the doctrine to be that
“[n]either party to an illegal contract will be aided by the
court, whether to enforce it or set it aside.” Id. at 1348-49.
8650 KARDOH v. UNITED STATES
[2] This principle was originally used in the context of
criminal activity to bar the return of funds used in an attempt
to bribe a public official. See Clark v. United States, 102 U.S.
332 (1880); United States v. Thomas, 75 F.2d 369 (5th Cir.
1935); United States v. Iovenelli, 403 F.2d 468 (7th Cir.
1968). The in pari delicto doctrine has previously been recog-
nized by our court in the bribery context. United States v. Wil-
son, 591 F.2d 546, 547-48 (9th Cir. 1979).
[3] In Farrell, the D.C. Circuit extended the in pari delicto
doctrine to other illegal transactions, concluding that $5,000
that had been paid to an undercover officer in an illegal trans-
action for heroin should not be returned to the claimant. 606
F.2d at 1350. Even though the government could not forfeit
the money because at that time the forfeiture statute did not
provide for the forfeiture of money paid in exchange for a
controlled substance, the Farrell court held:
[I]t 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 in pari delicto who seek the return of ille-
gally 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 gov-
ernment agent in an attempt to contract for the pur-
chase of contraband drugs.
Id. The Eighth and Third Circuits have since followed Farrell
in applying the in pari delicto doctrine to prevent the return
of money voluntarily paid to a government agent in an illegal
transaction. United States v. Smith, 659 F.2d 97, 100 (8th Cir.
1981) (applying the in pari delicto rule to prevent the return
of $25,000 which the claimant gave to an undercover agent in
an attempt to purchase hashish); Mantilla v. United States,
302 F.3d 182, 186-87 (3d Cir. 2002) (applying the doctrine to
KARDOH v. UNITED STATES 8651
decline the return of $900,000 which the claimant paid in an
undercover narcotics transaction).
[4] Like the claimants in these cases, Kardoh paid the
money at issue here in furtherance of an illegal scheme. Kar-
doh gave the $40,000 to the undercover ICE agent in
exchange for the forged alien registration cards. Indeed, it
might fairly be questioned whether the $40,000 was “seized”
by the government at all or whether Kardoh has been “de-
prived” of the $40,000, apparent requirements under the terms
of Rule 41(g) for that rule to apply. When Kardoh was
arrested, he did not have that money in his possession, since
he had already paid it over to the undercover agent in
exchange for the registration cards. Not surprisingly, he does
not seek to recover the cards which he did have in his posses-
sion when he was arrested. Those forged cards were seized
from him and retained by the government, but to request their
return would highlight the absurdity of the request. We con-
clude, in any event, that ordering the government to return the
$40,000 to Kardoh would be contrary to public policy for the
reasons expressed in Farrell.
The district court recognized the in pari delicto doctrine but
concluded that it should not apply here because Kardoh was
never convicted of a criminal offense. The court’s order
explained that “[a]djudicating Kardoh’s guilt on the basis of
this record, where Kardoh has had no opportunity to conduct
discovery and has not conceded any wrongdoing, is inconsis-
tent with Kardoh’s due process rights.” We do not agree.
[5] A conviction has not historically been required to estab-
lish the illegality of a transaction. There is no mention of a
criminal conviction in the Supreme Court’s 1880 decision in
Clark. Similarly, a conviction was specifically held not to be
necessary by the Fifth Circuit in Thomas. Thomas was
arrested for the unlawful possession and transportation of
intoxicating liquor and the attempted bribery of a customs
officer. 75 F.2d at 370. While Thomas pled guilty to the
8652 KARDOH v. UNITED STATES
unlawful possession of liquor, he was never prosecuted for
bribery. After the statute of limitation had expired, Thomas
sought the return of the $1,000, arguing that he was the lawful
owner and he was entitled to the money because of the pre-
sumption that he was innocent of the bribery charge. The
Fifth Circuit held to the contrary:
Thomas cannot avoid [presenting evidence that he
was innocent of bribery] by relying on the presump-
tion of innocence and alleging merely that the money
was received from him and retained by the customs
officers; for that is an allegation which is entirely
consistent with bribery. In order to recover [the bribe
money] he is required by statute to make full proof
of his right to the money deposited in the Treasury,
and this he cannot do without showing that he is
innocent of the charge of bribery. If he was guilty of
bribery, he could not have recovered the bribe
money back from the customs officers, and has no
better claim against the United States.
Id. at 370-71.
[6] It is to be expected that in most cases of this kind the
government will undertake criminal prosecutions or forfeiture
proceedings, but the failure to do so does not automatically
mean that a claimant’s motion for return of property must be
granted. There is no basis to conclude that the government
acted here in bad faith. If there were, that would be a factor
to consider in whether the court should exercise jurisdiction
over or grant the claimant’s motion. That the government
elected to deport Kardoh rather than to prosecute him did not
make his payment to the undercover agent any more innocent,
however, nor did it deprive him of due process.
[7] The question of the illegality of Kardoh’s payment was
properly before the district court. Because there were no crim-
inal proceedings pending, the motion should have been
KARDOH v. UNITED STATES 8653
treated as a civil complaint governed by the Federal Rules of
Civil Procedure. United States v. Ibrahim, 522 F.3d 1003,
1007 (9th Cir. 2008); United States v. Ritchie, 342 F.3d 903,
906-07 (9th Cir. 2003). The government’s opposition to Kar-
doh’s motion was the equivalent of a motion for summary
judgment under Rule 56 of the Federal Rules of Civil Proce-
dure, as to which the court should determine whether “the
government has demonstrated that there is no ‘genuine issue
as to any material fact,’ and that it is ‘entitled to judgment as
a matter of law.’ ” Ibrahim, 522 F.3d at 1008 (citing
Fed.R.Civ.P. 56(c)).
[8] In this case, the government supported its position with
the declaration of the undercover agent who met with Kardoh
multiple times and who was given the $40,000 by Kardoh.
The declaration described not only the transactions in suffi-
cient detail to make their impropriety clear but also the state-
ments by Kardoh both before and after his arrest admitting his
awareness that the transactions were illegal. Kardoh offered
no evidence to rebut the agent’s declaration.2 That is not
enough to defeat a motion for summary judgment. See
Fed.R.Civ.P. 56(e)(2). On this record, there was no genuine
issue as to any material fact and the government was entitled
to a judgment as a matter of law.
[9] Accordingly, we conclude that the district court should
not have assumed jurisdiction over and granted Kardoh’s
motion for return of the $40,000.
REVERSED.
2
Kardoh had been deported by the government and was thus not in the
United States at the time of the court proceeding. He could have submitted
evidence, including his own declaration, without being in the United
States, however, so his failure to rebut the agent’s declaration cannot be
excused by his deportation.