United States v. Approx. $76,261.00 in U.S. Currency ( 2024 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 UNITED STATES OF AMERICA, No. 1:23-cv-00667-TLN-CKD 12 Plaintiff, 13 v. FINDINGS & RECOMMENDATIONS 14 APPROXIMATELY $76,261.00 IN U.S. CURRENCY, 15 Defendant. 16 17 I. Introduction 18 This case was referred to the undersigned pursuant to Local Rule 302(c)(19) and 28 19 U.S.C. § 636(b)(1). The United States of America (“Government”) brings this in rem action 20 seeking forfeiture, under 21 U.S.C. § 881(a)(6), of the defendant $76,261.001 (“defendant 21 currency”) as money furnished or intended to be furnished in exchange for a controlled substance 22 or listed chemical. Pending before the court is the Government’s ex parte motion for entry of 23 default judgment (ECF No. 17), which was submitted without a hearing under Local Rule 540(d). 24 No opposition has been received. Upon review of the motion, supporting documents, and good 25 1 The Government’s ex parte motion reflects two different amounts for the defendant currency. Compare ECF No. 17 at 1, 2 (“$76,721.00”), with ECF Nos. 1; 17 at 3; 17-1 (“$76,261.00”). This 26 appears to be a typographical error given the verified complaint (ECF No. 1) and related 27 documentation consistently refers to the defendant currency as $76,261.00 (ECF Nos. 5-8). Accordingly, when referring to the defendant currency, the Court has determined $76,261.00 is 28 the correct amount. 1 cause appearing, the court now issues the following findings and recommendations. 2 II. Background 3 This case is proceeding on the verified complaint for forfeiture in rem (“complaint”) filed 4 April 27, 2023. (ECF No. 1.) The complaint makes the following factual allegations: 5 On or about December 14, 2021, the defendant currency was seized from Jose Luis 6 Gutierrez Cruz (“Cruz”) during the execution of a search warrant at 1905 Cody Court, Turlock, 7 California (“Turlock Residence”). (Id. at ¶ 2.) The defendant currency is currently in the custody 8 of the United States Marshals Service. (ECF No. 5.) 9 Specifically, on or about November 18, 2021, law enforcement surveilled an attempted 10 drug transaction involving Cruz, brokered by a drug trafficker who was working with law 11 enforcement. (ECF No. 1 at ¶ 5.) Cruz had agreed to sell 3,000 “M-30”, commonly referred to as 12 oxycodone hydrochloride, pills to the drug trafficker for $9,000. (Id.) Both had agreed to meet 13 and complete the transaction at an AM/PM located on Fulkerth Road in Turlock (“AM/PM”). 14 (Id.) 15 On November 18, 2021, law enforcement observed Cruz leave his Turlock Residence in a 16 white 2011 BMW with a California license plate number 8UVP301 (“BMW”), which was 17 confirmed by DMV records to list Cruz as the BMW’s registered owner. (Id. ¶ 6.) Then, Cruz 18 drove his BMW to a residence located on Mitchel Road in Turlock, where an unidentified 19 Hispanic male adult exited the Mitchel Road residence and entered the front passenger side of 20 Cruz’ BMW. (Id. at ¶ 7.) Cruz and the unidentified Hispanic male adult then traveled in Cruz’ 21 BMW to the AM/PM to finalize the drug transaction. (Id.) Once arriving at the AM/PM, Cruz 22 parked the BMW and walked into the AM/PM for a moment before returning to his BMW. (Id.) 23 Once back in the BMW, Cruz engaged in a series of countersurveillance maneuvers, which 24 included circling different parking lots and looking into the windows of vehicles parked in the 25 area. (Id.) 26 Law enforcement then observed Cruz’ BMW travel to a residence located on Central 27 Avenue in Ceres, California, where Cruz and the unidentified Hispanic male adult exited the 28 BMW and entered the Central Avenue residence. (Id. at ¶ 8.) The drug trafficker who was 1 cooperating with law enforcement then attempted to call Cruz several times but Cruz did not 2 answer. (Id.) 3 On December 14, 2021, law enforcement executed a search warrant at Cruz’ Turlock 4 Residence, where law enforcement observed Cruz’ BMW and a brown Hummer parked in the 5 driveway. (Id. at ¶ 9) Cruz had initially refused to allow law enforcement to enter the residence 6 but after hours of negotiation, Cruz allowed law enforcement to enter and exited the residence. 7 (Id.) While executing the search warrant, law enforcement located a clear Ziploc bag containing a 8 red plastic bowl, a tin can, and a strainer with approximately 226 grams of cocaine and a clear 9 plastic bag containing 45 grams of heroin in a master bathroom drawer; a $1 bill with 45 grams of 10 methamphetamine, a clear plastic bag containing 86 grams of methamphetamine, and a clear 11 plastic bag containing 29 grams of methamphetamine in the master bathroom medicine cabinet; a 12 clear plastic bag containing 29 grams of methamphetamine on the master bathroom counter; and a 13 $1 bill with 30 grams of methamphetamine in a white shoe located in the master bathroom. (Id. at 14 ¶ 10.) Law enforcement seized in total over half a pound of cocaine, 45 grams of heroin, and 15 nearly half a pound of methamphetamine. (Id.) 16 In addition, law enforcement discovered a safe in the master bedroom closet that 17 contained a loaded semi-automatic firearm that had been reported stolen from Texas, several 18 rounds of .45 ammunition, a loaded magazine, and the defendant currency. (Id. at ¶ 11.) The 19 defendant currency was divided amongst two individual bill purses, with some loose bills, a few 20 stacks that were rubber banded, and some stacks rubber banded in the amounts of $10,000, which 21 consisted of the following denominations: 2 x $1 bills; 7 x $2 bills; 2 x $5 bills; 24 x $20 bills; 31 22 x $50 bills; and 742 x $100 bills. (Id.) 23 Law enforcement also located a motorcycle that had been reported stolen from Modesto, 24 California that was located in a shed in the backyard of the Turlock Residence; observed 25 approximately 20 pounds of processed marijuana packaged for sale in a separate bedroom in the 26 Turlock Residence; and a plastic bag containing approximately 46 grams of methamphetamine 27 and a cellular telephone in Cruz’s pockets while conducting a search. (Id. at ¶¶ 12-13.) 28 Cruz’ criminal history includes a variety of drug-related arrests including an arrest for 1 possession of cocaine for distribution and sales on February 10, 2020; and an arrest for possession 2 of narcotics for sale in December 2021. (Id. at ¶ 14.) 3 Pursuant to order of this court filed May 24, 2023, notice of this action was published on 4 the official internet government forfeiture site and ran for at least thirty 5 consecutive days, as required by Rule G(4)(a)(iv)(C) of the Supplemental Rules of Admiralty or 6 Maritime Claims and Asset Forfeiture Actions. (ECF Nos. 3 (Order for Publication) and 8 7 (Declaration of Publication).) 8 On May 26, 2023, copies of the complaint and related documents were sent by first-class 9 and certified mail to Jose Cruz, through his attorney of record, James Roberts at 1798 Technology 10 Drive, Suite 292, San Jose, CA 95110. (ECF No. 17-1 at ¶ 3, Ex. A.) The PS Form 3811 delivery 11 card was signed on June 2, 2023. (Id.) The defendant currency was arrested on June 9, 2023 by 12 the U.S. Marshals Service. (ECF Nos. 16, 17-1 at ¶ 5.) 13 To date, the deadline for filing a claim passed with no claim or answer being filed by, or 14 on behalf of, Jose Cruz, as required by Rule G(5) of the Supplemental Rules of Admiralty or 15 Maritime Claims and Asset Forfeiture Actions, to contest this action. (ECF No. 17-1 at ¶ 4.) 16 On April 15, 2024, at the Government’s request, the Clerk of Court entered default as to 17 Jose Cruz, pursuant to Fed. R. Civ. P. 55(a). (ECF No. 15.) 18 III. Legal Standard 19 “The Due Process Clause of the Fifth Amendment guarantees that ‘[n]o person 20 shall . . . be deprived of life, liberty, or property, without due process of law.’ Our precedents 21 establish the general rule that individuals must receive notice and an opportunity to be heard 22 before the Government deprives them of property.” United States v. James Daniel Good Real 23 Prop., 510 U.S. 43, 48 (1993) (citations omitted). Due process is satisfied when the Government 24 complies with the notice requirements set forth by statute and in the federal and local rules of 25 procedure. 26 Civil forfeitures of real property are governed generally by 18 U.S.C. § 985. Forfeiture 27 actions in rem arising from a federal statute are governed by the Federal Rules of Civil Procedure, 28 Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions 1 (“Supplemental Rule” or “Supp. Rule”). United States v. Real Prop., 135 F.3d 1312, 1315 (9th 2 Cir. 1998); see also Supp. Rule A(1)(B), and Supp. Rule G (setting forth specific procedural and 3 notice requirements). These rules are reflected in the Local Admiralty and In Rem Rules for the 4 U.S. District Court for the Eastern District of California (“Local Rule”), which govern all in rem 5 proceedings filed in this court. See Local Rule 500. Local Rule 540 sets forth the procedures for 6 obtaining default judgment in an action in rem. 7 IV. Analysis 8 Local Rule 540(d) provides for an ex parte hearing and entry of default judgment, without 9 further notice, at any time after the time for answer has expired, provided due notice of the action 10 has been given and no one has appeared to claim the property and give security thereof. The 11 Government has demonstrated compliance with these requirements. 12 A. Notice 13 Supplemental Rule G(4) requires the Government to provide both general notice to the 14 public and direct notice of the forfeiture action to any known person who reasonably appears to 15 be a potential claimant. Fed. R. Civ. P. Supp. G(4)(a), (b). 16 1. Published Notice 17 Rule G(4)(a)(ii) provides that “a published notice must: (A) describe the property with 18 reasonable particularity; (B) state the times under Rule G(5) to file a claim and to answer; and 19 (C) name the government attorney to be served with a claim and answer.” Here, the Government 20 published the required notice of the Government’s Complaint on the official government internet 21 site (www.forfeiture.gov) for 30 consecutive days, beginning on May 28, 2023. (ECF No. 8 22 (Declaration of Publication).) The notice describes the amount of currency ($76,261.00), and 23 location of its seizure (Turlock, California), and states that claims and answers under Rule G(5) 24 must be brought within 60 days from the first day the notice is published. (Id.) The notice also 25 names Kevin C. Khasigian as the government attorney to be served with the claim and answer. 26 (Id.) Thus, the government has satisfied the requirements of Rule G(4)(a)(ii). 27 2. Notice to Claimants 28 Rule G(4)(b) sets forth the requirements for notice to known potential claimants. It 1 provides that “[t]he government must send notice of the action and a copy of the complaint to any 2 person who reasonably appears to be a potential claimant on the facts known to the government 3 before the end of the time for filing a claim under Rule G(5)(a)(ii)(B).” Fed. R. Civ. P. Supp. 4 G(4)(b)(i). The notice must state “(A) the date when the notice is sent; (B) a deadline for filing a 5 claim, at least 35 days after the notice is sent; (C) that an answer or a motion under Rule 12 must 6 be filed no later than 21 days after filing the claim; and (D) the name of the government attorney 7 to be served with the claim and answer.” Fed. R. Civ. P. Supp. G(4)(b)(ii). 8 Here, the government complied with this rule by sending notice of the action and a copy 9 of the complaint to the potential claimants, Jose Cruz, by first-class and certified mail on May 26, 10 2023. (ECF No. 17-1 at ¶¶ 3, Ex. A.) The mailed notices included copies of the complaint and 11 related documents. (Id. at Ex. A.) As to the sufficiency of the notices sent by the government, 12 they indicate that the notices were sent on May 26, 2023, the notices provide a 35-day deadline 13 for filing a claim and a 21-day deadline for submitting an answer or a motion under Rule 12, and 14 the notices list Kevin C. Khasigian as the government attorney to be served with the claim and 15 answer. (Id.) 16 Finally, Rule G(4)(b)(iii)(A) provides that “[t]he notice must be sent by means reasonably 17 calculated to reach the potential claimant.” Here, the certificates of service provide that the 18 Government served the complaint for civil forfeiture and notice of this forfeiture action upon Jose 19 Cruz by first-class mail and certified mail. (ECF No. 17-1 at Ex. A.) 20 In sum, the government has adhered to the procedural rules governing civil forfeiture 21 actions as required by federal statute, the Supplemental Rules for Certain Admiralty and Maritime 22 Claims, and the Admiralty Local Rules. The court now turns to whether default judgment is 23 warranted. 24 B. Entry of Default Judgment is Proper 25 Pursuant to Federal Rule of Civil Procedure 55(a), the Clerk is required to enter default 26 when the fact of default is established by affidavit or otherwise. Fed. R. Civ. P. 55(a). The 27 Clerk’s entry of default against Jose Cruz effects his admission of the factual allegations of the 28 complaint, except those relating to the amount of damages. Fed. R. Civ. P. 8(b)(6) (“An 1 allegation—other than one relating to the amount of damages—is admitted if a responsive 2 pleading is required and the allegation is not denied”); Geddes v. United Fin. Group, 559 F.2d 3 557, 560 (9th Cir. 1977). 4 The court finds that the well-pleaded allegations of the verified complaint state a claim for 5 which relief can be granted. Specifically, accepting as true the factual allegations of the verified 6 complaint, the Government has demonstrated that defendant currency was used or intended to be 7 used, in any manner or part, to commit, or to facilitate the commission of, a violation of 21 U.S.C. 8 §§ 841, et seq. (prohibiting the manufacturing, distributing, dispensing or possessing of a 9 controlled or counterfeit substance), an offense punishable by more than one year’s 10 imprisonment, and therefore subject to forfeiture to the United States pursuant to 21 U.S.C. 11 § 881(a)(7). 12 It remains within the sound discretion of the district court to grant a default judgment 13 pursuant to Federal Rule of Civil Procedure 55(b). Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th 14 Cir. 1980). In making this determination, the court must consider the following factors set forth 15 in Eitel v. McCool, 782 F.2d 1470, 1471–72 (9th Cir. 1986): 16 (1) the possibility of prejudice to the plaintiff, (2) the merits of plaintiff’s substantive claim, (3) the sufficiency of the complaint, (4) 17 the sum of money at stake in the action, (5) the possibility of a dispute concerning the material facts, (6) whether the default was due to 18 excusable neglect, and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits. 19 20 The Government seeks a final judgment of forfeiture against Jose Cruz as a potential claimant of 21 the defendant currency, and against all other potential interests. This is consistent with the nature 22 of forfeiture in rem proceedings. See Hanson v. Denckla, 357 U.S. 235, 246 n.12 (1958) 23 (explaining that “[a] judgment in rem affects the interests of all persons in designated property”). 24 Application of the Eitel factors supports entry of default judgment. 25 First, the Government would be prejudiced by the denial of its motion, spending 26 additional time and effort litigating an action in which the claimant has abandoned his claim to 27 the defendant currency. Further, given that no party has attempted to oppose the complaint or 28 otherwise make a claim against the defendant currency, if the Government’s motion is not 1 granted, it will have no other opportunity to establish its right to the currency. 2 Second, the Government’s claim appears to have merit. See United States v. $22,474 in 3 U.S. Currency, 246 F.3d 1212, 1217 (9th Cir. 2001) (“Evidence of a prior drug conviction is 4 probative of probable cause.”); United States v. U.S. Currency $83,310.78, 851 F.2d 1231, 1236 5 (9th Cir. 1988) (claimant's prior arrests and convictions on drug charges “are circumstances 6 demonstrating more than mere suspicion of his connection with an illegal drug transaction.”). 7 Third, as set forth above, the Government has adhered to the procedural requirements of a 8 forfeiture action in rem, including the filing of a sufficiently verified complaint. Fourth, the 9 defendant currency that was seized and subject to forfeiture is not of such substantial value as to 10 warrant denial of the Government’s motion. Fifth, the potential claimants were properly served 11 with notice of this action and instructions on how and when to enter a claim. No claim or answer 12 has been filed. On the record before this court, there is no evidence of a genuine dispute 13 concerning the material facts. Sixth, there is no evidence that Jose Cruz’ abandonment was due 14 to excusable neglect. Seventh and finally, although merits-based decisions are always preferred, 15 Eitel, 782 F.2d at 1472, it is not practical here where the potential claimant has abandoned his 16 claim. 17 Accordingly, there is no impediment to default judgment sought by the Government and 18 the court will recommend that the motion be granted. 19 V. Conclusion 20 In accordance with the foregoing findings, IT IS HEREBY RECOMMENDED that the 21 Government’s motion for default judgment (ECF No. 17) be GRANTED, thus extinguishing any 22 right, title, or interest in defendant currency of potential claimants, including Jose Cruz. 23 These findings and recommendations are submitted to the United States District Judge 24 assigned to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(l). Within fourteen days 25 after being served with these findings and recommendations, the parties may file written 26 objections with the court and serve a copy on all parties. Such a document should be captioned 27 “Objections to Magistrate Judge’s Findings and Recommendations.” The parties are advised that 28 failure to file objections within the specified time may waive the right to appeal the District 1 |} Court’s order. Martinez v. YIst, 951 F.2d 1153 (9th Cir. 1991). 2 || Dated: September 23, 2024 ( aie } ft | / } (g—, 3 CAROLYN DELANEY? SS 4 UNITED STATES MAGISTRATE JUDGE 5 6 || 4,usa0667.23 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28