Helena De Saro v. United States

[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
FILED
________________________ U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
March 22, 2006
No. 04-14308
THOMAS K. KAHN
________________________ CLERK
D. C. Docket No. 02-23102-CV-JLK
HELENA DE SARO,
Plaintiff-Appellant,
NEW ENGLAND CAPITAL
INVESTMENTS, LLC,
Plaintiff,
versus
UNITED STATES OF AMERICA,
DRUG ENFORCEMENT ADMINISTRATION,
Defendants-Appellees.
________________________
Appeal from the United States District Court
for the Southern District of Florida
_________________________
(March 22, 2006)
Before BARKETT and WILSON, Circuit Judges, and CONWAY *, District Judge.
PER CURIAM:
Appellant Helena de Saro appeals from the district court’s judgment that she
had failed to establish her ownership of two valuable paintings that the United
States seized. The paintings at issue are a 1793 Francisco Goya painting entitled
El Atraco a la Diligencia and a 1924 painting entitled Buste de Juene Femme by
Foujita that de Saro, a famous Spanish art dealer, claims to own. De Saro
estimates that the Goya is valued at $8 million and the Foujita at $2 million. The
paintings were suspected to have been involved in the drug trafficking activities of
Jose Maria Clemente, who is not a party to this case. The government originally
seized the paintings pursuant to civil forfeiture provisions found in section five of
the Civil Asset Forfeiture Reform Act of 2000 (CAFRA), 18 U.S.C. § 981(b) & 21
U.S.C. § 881(b). The United States seized the paintings on March 14, 2002,
pursuant to a seizure warrant issued by a magistrate judge in the Southern District
of Florida. At the time of the seizure, the paintings were stored at an art warehouse
and under the name New England Capital Investments (“New England”), a
corporation de Saro claimed to have formed to facilitate importing the paintings to
the United States.
*
Honorable Anne C. Conway, United States District Judge for the Middle District of
Florida, sitting by designation.
2
Following the execution of the civil seizure warrant, the government did not
file a civil forfeiture complaint or provide notice to all interested parties, as is
required under 18 U.S.C. § 983(a). Therefore, de Saro and New England
commenced a separate civil action for the return of the paintings. In the complaint,
de Saro and New England alleged violations of their Fourth and Fifth Amendment
rights and sought return of the paintings pursuant to Rule 41(g) of the Federal
Rules of Criminal Procedure, which provides that “[a] person aggrieved by an
unlawful search and seizure of property or by the deprivation of property may
move for the property’s return.”
Initially in their civil action, both de Saro and New England claimed
ownership of the paintings. Before the trial began, however, New England
relinquished its claim of ownership, explaining that it only acted as an intermediary
for the potential sale of the paintings. De Saro and New England filed a joint
motion to dismiss New England as a plaintiff in the case, which the district court
denied. The district court found that the fact that New England did not designate a
corporate representative for deposition entitled the court to infer that New England
held at least some ownership interest in the paintings. Because New England
refused discovery, the district court sanctioned New England by barring it from
presenting evidence at trial regarding its lack of ownership interest in the paintings.
3
At trial, the district court determined that the sole issue was whether de Saro
had shown by a preponderance of the evidence that she owned the paintings when
they were seized. De Saro offered testimony and documents pertaining to her
alleged ownership in the two paintings. On July 27, 2004, after a three-day bench
trial, the district court entered its final judgment granting the government’s motion
for judgment as a matter of law under Fed. R. Civ. P. 50(a)(1). After reviewing
bills of sale and related documents indicating that de Saro sold the paintings to
New England for $10 million, the district court determined that “the only
reasonable conclusion is that in August of 2001, Ms. de Saro divested herself of
whatever ownership interest she had in the paintings, and the fact that she kept the
certificates of authenticity (after surrendering the paintings) does not prove her
continued ownership.” As to the fate of the paintings, the district court said:
Ms. de Saro is not entitled to the return of the paintings in this civil
case. [The government] shall maintain custody of the paintings
pending such further forfeiture proceedings as are yet to be litigated in
the criminal case pending before Judge Martinez. Ms. de Saro may
assert whatever claim she believes she has to the paintings when (and
if) the Government obtains a criminal conviction of Mr. Clemente and
the criminal forfeiture is then ripe for ruling.
The criminal forfeiture the district court referred to was a parallel
simultaneous criminal proceeding relating to the same paintings. Although only
the civil case is currently before us, understanding the parallel action provides
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helpful context.
Following the institution of the civil forfeiture proceedings, the government
again restrained the paintings, this time pursuant to the criminal forfeiture
provisions found in 18 U.S.C. § 982 and 21 U.S.C. § 853. The criminal forfeiture
arose from the indictment of Clemente, who was charged with conspiracy to
commit money laundering, in violation of 18 U.S.C. § 1956.2 Clemente was
indicted on June 27, 2002, approximately three months after the paintings were
seized, and approximately one month after de Saro and New England initiated their
lawsuit. The indictment contained a criminal forfeiture count, listing the Goya and
Foujita paintings as personal property subject to forfeiture based on an unspecified
relationship with the charged offense. De Saro and New England were not indicted
in the criminal case against Clemente. Immediately thereafter, on July 1, 2002, the
district court granted the government’s motion for a protective restraining order
that prohibited the transfer of the paintings, pending resolution of the criminal
proceedings.
Clemente was taken into custody in Spain. Even though more than three
years have passed since the government indicted Clemente, he has not been tried
2
The criminal forfeiture statute, 18 U.S.C. 982(a)(1), mandates that defendants convicted
under qualifying federal narcotics statutes, including § 1956, forfeit any property involved in
those drug offenses.
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because he is not subject to extradition. The government has conceded that it is
unlikely that it will try Clemente in the United States anytime in the foreseeable
future.
The criminal forfeiture statute, 21 U.S.C. § 853(k), prohibits any party that
claims to have an interest in property subject to forfeiture from intervening in a
trial or commencing an action against the United States concerning the validity of
the party’s alleged interest once the government has filed the indictment.3 In other
words, according to the statute, de Saro and New England could not do anything to
recover the property in the criminal proceeding, unless and until Clemente was
convicted and forfeiture proceedings commenced after his conviction. The district
court, concerned that de Saro and New England would have to wait interminably
for the resolution of the criminal case in order to assert their claim over the
paintings, nevertheless allowed de Saro and New England to proceed.
De Saro intervened as an unindicted third party and filed a motion to modify
the protective restraining order. After an evidentiary hearing, the district court
3
The criminal forfeiture statute, 21 U.S.C. § 853(k), provides that:
no party claiming an interest in property subject to forfeiture under this section may--
(1) intervene in a trial or appeal of a criminal case involving the forfeiture
of such property under this section; or
(2) commence an action at law or equity against the United States
concerning the validity of his alleged interest in the property subsequent to the
filing of an indictment or information alleging that the property is subject to
forfeiture under this section.
6
denied de Saro’s motion. De Saro appealed, and on November 9, 2004, a panel of
this Court vacated the district court’s judgment and remanded for rehearing on
several issues. United States v. Helena de Saro, 11th Cir. 2004, (No. 03-15828,
Nov. 9, 2004).
Turning back to this civil action, there are five main issues on appeal: (1)
whether § 853(k) precludes the district court’s jurisdiction; (2) whether de Saro
had standing to bring the action; (3) whether the district court erred in not
addressing whether the government met its notice obligations under CAFRA; (4)
whether the district court erred in placing the burden of proof on de Saro to prove
her ownership of the paintings and in finding that de Saro failed to meet this
burden; and (5) whether the district court erred in sanctioning New England.
The district court’s subject-matter jurisdiction is a legal question that we
review de novo. Valderrama v. United States, 417 F.3d 1189, 1194 (11th Cir.
2005). We review the district court’s standing determinations de novo. Wooden v.
Bd. of Regents of Univ. Sys. Of Ga., 247 F.3d 1262, 1271 n.9 (11th Cir. 2001).
“We review the district court’s grant of judgment as a matter of law de novo,
applying the same Rule 50(a) standard that guided the trial court.” Cook ex rel.
Estate of Tessier v. Sheriff of Monroe County, Fla., 402 F.3d 1092, 1114 (11th Cir.
2005). Finally, we review a district court’s decision to impose sanctions for an
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abuse of discretion. SCADIF, S.A. v. First Union Nat’l, 344 F.3d 1123, 1130 (11th
Cir. 2003).
On appeal, de Saro first argues that we should vacate the district court’s
judgment for lack of subject-matter jurisdiction, in light of Roberts v. United
States, 141 F.3d 1468, 1469 (11th Cir. 1998) (per curiam), in which we held that
the criminal forfeiture statute, 21 U.S.C. § 853(k), expressly bars a parallel civil
hearing, even if the indicted defendant is a fugitive who may never be brought to
trial. De Saro argues that this decision confirms that the district court was
statutorily barred from conducting a parallel civil hearing, and therefore we should
now vacate the district court’s judgment.4
Roberts does not bar this action, however, because unlike the plaintiff in
Roberts who filed suit after the return of the indictment, de Saro filed suit during
the narrow window of time after the initial seizure of the paintings but before the
return of the indictment seeking criminal forfeiture. The plain language of §
853(k)(2) forecloses parallel civil suits “subsequent to” – not before (as in de
Saro’s case) – “the filing of an indictment or information alleging that the property
is subject to forfeiture.” Therefore, we have subject-matter jurisdiction.
The government also contends that de Saro lacked standing to bring the civil
4
We are mindful of the inherent irony in de Saro claiming that we do not have subject-
matter jurisdiction to entertain a suit that she initiated.
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action. Courts have repeatedly cautioned against confusing the constitutional
standing inquiry with the determination on the merits of the forfeiture action. The
constitutional standing requirements are forgiving, and any colorable claim on the
property generally suffices. See United States v. One-sixth Share of James J.
Bulger in All Present and Future Proceeds of Mass Millions Lottery Ticket No.
M246233, 326 F.3d 36, 41 (1st Cir. 2003); United States v. $81,000, 189 F.3d 28,
35 (1st Cir. 1999) (“Courts do not generally deny standing to a claimant who is
either the colorable owner of the res or who has any colorable possessory interest
in it.”); United States v. Premises Known as 7725 United Ave. N., Brooklyn Park,
Minn., 294 F.3d 954, 957 (8th Cir. 2002) (“The claimant need only show a
colorable interest in the property, redressable, at least in part, by a return of the
property.”).
De Saro clearly demonstrated a legally-protected interest sufficient to meet
the requirements of standing. De Saro testified regarding her ownership of the
paintings and explained that, although she anticipated selling the paintings through
New England and executed certain documents to facilitate the sale, the sale never
took place, and she never received payment. Having presented proof that she
purchased the paintings, held them in her possession for over ten years and
continued to retain possession of the original certificates of authenticity, de Saro
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presented evidence of an interest in the case sufficient to warrant the exercise of
the district court’s jurisdiction.
Having determined that we have subject-matter jurisdiction and that de Saro
has standing to bring this suit, we vacate the district court’s judgment because the
government failed to follow CAFRA’s notice requirements under 18 U.S.C. § 983and because the district court improperly placed the burden of proof on de Saro.
Pursuant to § 983(a)(1)(A), the government was required to furnish notice to
interested parties within 60 days of the date of seizure, which the government
admittedly did not do. The person from whom the property was seized (in this
case, New England) has a statutory right under § 983(a)(1)(F) to the immediate
return of the property based on the government’s failure to fulfill its notice
obligations:
If the Government does not send notice of a seizure of property . . . to
the person from whom the property was seized, and no extension of
time is granted, the Government shall return the property to that
person without prejudice to the right of the Government to commence
a forfeiture proceeding at a later time.
18 U.S.C. § 983(a)(1)(F). We express no opinion as to whether the parallel
criminal proceeding would prevent the immediate return of the paintings. Because
of the government’s failure to follow the notice provisions, there is no bar in this
civil proceeding for the paintings to be immediately returned. According to the
10
statute, returning the paintings would not prejudice the government’s right to
initiate a civil forfeiture action, which it should have done in the first place and
finally did in the Southern District of Florida on March 2, 2006.
The district court also improperly placed the burden of proof on de Saro.
CAFRA’s clear statutory language places the burden of proof on the government:
(c) Burden of proof.–In a suit or action brought under any civil
forfeiture statute for the civil forfeiture of any property–
(1) the burden of proof is on the Government to establish, by a
preponderance of the evidence, that the property is subject to
forfeiture;
(2) the Government may use evidence gathered after the filing
of a complaint for forfeiture to establish, by a preponderance of the
evidence, that property is subject to forfeiture; and
(3) if the Government’s theory of forfeiture is that the property
was used to commit or facilitate the commission of a criminal offense,
or was involved in the commission of a criminal offense, the
Government shall establish that there was a substantial connection
between the property and the offense.
18 U.S.C. § 983(c).
Once de Saro met the threshold standing requirement, the district court
should have then placed the burden of proof on the government to prove by a
preponderance of the evidence that the paintings were subject to forfeiture. See 18
U.S.C. § 983(c)(1). However, the district court never required the government to
present evidence that Clemente had obtained or used the paintings in money-
laundering activity.
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Because we are vacating the district court’s judgment below and because the
government has recently filed its own civil forfeiture action, we note that the
district court should likely consolidate these cases into one action. Therefore, de
Saro’s argument that the district court misapplied sanctions against New England
that unfairly prejudiced her is possibly moot because, in effect, the action could be
seen as starting over on the civil side with the government’s civil forfeiture action.
Nevertheless, we note that the district court correctly found that, because New
England failed to designate a corporate representative for deposition, it was “barred
from presenting witnesses or documentary evidence at trial regarding New England
Capital’s lack of ownership interest in the paintings.” The district court further
correctly found that a reasonable inference could be drawn from New England’s
failure to participate in discovery that “New England Capital held at least some
ownership interest in the paintings.” These findings do not constitute an abuse of
discretion. New England’s refusal to produce evidence regarding the nature of its
relationship with de Saro entitled the district court to infer that the evidence would
have been adverse to its case and would have indicated that New England held at
least some ownership interest in the paintings. Cf. United States v. Johnson, 288
F.2d 40, 45 (5th Cir. 1961).
To conclude, we VACATE the district court’s judgment as a matter of law
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and REMAND the case to the district court. We note that, while the criminal court
must determine whether or not a bar exists to the immediate return of the paintings
to New England on the criminal side, there is currently no bar on the civil side. On
the civil side, this case should likely proceed below as a consolidated action with
the government’s recently filed civil forfeiture action, with the court properly
placing the initial burden of proof on the government.
VACATED AND REMANDED.
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