United States v. One 1998 Mercury Sable Vin: 1MEMF50U4WA621967

United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS
FIFTH CIRCUIT December 28, 2004
Charles R. Fulbruge III
Clerk
No. 03-51145
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
ONE 1998 MERCURY SABLE VIN: 1MEMF50U4WA621967; ET AL.,
Defendants,
ELYAR GASANOV,
Claimant-Appellant.
Appeal from the United States District Court
for the Western District of Texas
(EP-02-CV-56-DB)
Before BARKSDALE, GARZA, and DeMOSS, Circuit Judges.
PER CURIAM:*
Elyar Gasanov (Gasanov) contests the district court’s granting
the Government’s motion to dismiss Gasanov’s claim to three
certificates of deposit (CDs), totaling $328,069, which are part of
the assets at issue in a civil forfeiture proceeding. United
States of America v. One 1998 Mercury Sable, EP-02-CA-056-DB (W.D.
Tex. 2003) (USDC Opn.). The district court ruled that Gasanov, a
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
citizen and resident of Russia, had failed to establish the
requisite Article III and statutory standing for contesting the
forfeiture. Whether Gasanov has Article III standing should not
have been decided by a motion to dismiss; he has the requisite
statutory standing. Accordingly, the dismissal is VACATED;
judgment is RENDERED for Gasanov’s statutory standing; and this
matter is REMANDED.
I.
The forfeiture proceeding is ancillary to the criminal
prosecution of Gasanov’s brother and sister-in-law, Sardar Gasanov
and Nadira Gasanova (Sadar and Nadira Gasonov), citizens of
Uzbekistan. Sardar and Nadira Gasanov were convicted of
immigration and peonage (involuntary servitude in satisfaction of
a debt) offenses related to smuggling three Uzbek women into the
United States, who were subsequently forced, through topless
dancing, to pay off their debts. It was alleged that the women
earned more than $500,000 from January 1999 through May 2001.
The peonage offenses are considered “specified unlawful
activities” under 18 U.S.C. § 1956(c)(7)(A) (defining as a
“specified unlawful activity” any offense listed in 18 U.S.C. §
1961(1); § 1961(1) includes 18 U.S.C. §§ 1581-1591, sections
“relating to peonage, slavery and trafficking in persons”).
Therefore, the proceeds from those specified unlawful activities
are subject to civil forfeiture. See 18 U.S.C. § 981(a)(1)(C)
2
(stating “[a]ny property, real or personal, which constitutes or is
derived from proceeds traceable to ... any offense constituting [a]
‘specified unlawful activity’ ...” is subject to forfeiture to the
United States).
The forfeiture complaint was filed in February 2002, listing
two automobiles, the contents of ten bank accounts valued at
$423,978, and $6,650 in United States currency. That July, Sardar
and Nadira Gasanov each filed a notice claiming a legal or
beneficial interest in that property. That August, Gasanov filed
a notice claiming the three CDs in the amounts of $107,073,
$137,988 and $83,008, included in the ten bank accounts. He was
the titled owner of those CDs.
Shortly after filing his notice of claim, Gasanov moved to
dismiss the Government’s complaint, pursuant to FED. R. CIV. P.
12(b)(6) and Rule E(2)(a) of the Supplemental Rules for Certain
Admiralty and Maritime Claims (Supplemental Rules), for failure to
plead with particularity the statutory basis on which the complaint
was based. See 18 U.S.C. § 983(a)(4)(A) (requiring any person
claiming an interest in property subject to a complaint of
forfeiture by the Government to file his claim in accordance with
the Supplemental Rules). The Government was granted leave to
amend. After Sardar and Nadira Gasanov filed a similar motion, the
Government was again granted leave to amend. The final amended
complaint was filed in November 2002.
3
That December, the three Gasanovs filed answers to the
complaint. Gasanov did not respond, however, to the Government’s
interrogatories or document requests. The Government’s motion to
compel was denied; a new deadline was set for Gasanov to comply.
Upon Gasanov’s submitting responses to those discovery requests,
the Government again moved to compel, claiming the responses were
“non-responsive and evasive”. Gasanov responded by claiming, inter
alia: he was not able to comply with some of the requests because
he did not have documentation for the sources of the monies used to
purchase the CDs; and he had produced all documents of which he was
aware.
In June 2003, the Government moved to dismiss Gasanov’s claim,
asserting Gasanov lacked Article III standing because he had failed
to present sufficient evidence to support his ownership claim to
the three CDs; and lacked statutory standing because he had failed
to properly verify his claim pursuant to Supplemental Rule C(6)
(requiring a person asserting an interest in the property that is
the subject of the action to file a verified statement identifying
that interest). The Government supported its motion with Gasanov’s
discovery responses, which the Government contended were
insufficient to establish Article III standing. Gasanov’s response
in opposition, which cited no additional evidentiary materials,
claimed his answer and discovery responses were sufficient to
establish standing.
4
The district court denied the Government’s motion; but it did
so before the Government filed its reply to Gasanov’s opposition to
the motion. Accordingly, the Government moved to reconsider and
included that reply. The district court granted the motion on 2
September 2003 and dismissed Gasanov’s claim. The forfeiture
order, as amended, was entered on 7 October 2003.
II.
As discussed below, we review de novo the district court’s
rulings on Article III and statutory standing.
A.
No authority need be cited for standing being an element of
Article III’s “case or controversy” requirement; its lack precludes
subject matter jurisdiction. “The burden of establishing standing
to contest forfeiture is on the claimant ....” Kadonsky v. United
States, 216 F.3d 499, 508 (5th Cir. 2000). The “claimant need not
prove the merit of his underlying claim. He must, however, be able
to show at least a facially colorable interest in the proceedings
sufficient to satisfy the case-or-controversy requirement and the
prudential considerations defining and limiting the role of the
court”. Id. (emphasis added) (quoting United States v.
$9,041,598.68, 163 F.3d 238, 245 (5th Cir. 1998)). This is
consistent with our court’s having previously held “that only
‘owners’ have standing to contest a forfeiture”, but that term
should be broadly construed “to include any person with a
5
recognizable legal or equitable interest in the property seized”.
United States v. $38,570 U.S. Currency, 950 F.2d 1108, 1111-12 & n.
4 (5th Cir. 1992).
“Challenges to standing are disposed of in a number of
different ways .... Some are disposed of [by motions to dismiss]
.... [Others] are frequently resolved in summary judgment
proceedings ... or at a trial on the merits.” Barrett Computer
Services, Inc. v. PDA, Inc., 884 F.2d 214, 219 (5th Cir. 1989)
(internal citations omitted). (Along this line, the day before
originally denying the Government’s motion to dismiss concerning
Gasanov, the district court granted the Government’s summary
judgment motion against Sadar and Nadira Gasanov.) As further
discussed infra, whether the standing issue can be resolved by a
motion to dismiss depends on whether “considerations of standing
can be severed from a resolution of the merits ....” Id. at 220;
see also United States v. SCRAP, 412 U.S. 669, 689-90 (1973); Lewis
v. Knutson, 699 F.2d 230, 237 (5th Cir. 1983).
If the standing challenge is brought properly by a motion to
dismiss, the district court may conduct a preliminary hearing in
order to resolve disputed factual issues. Barrett Computer, 884
F.2d at 220. “[I]n a preliminary hearing on a jurisdictional
issue, the district court is given greater latitude and discretion
than in a summary judgment proceeding where the district court must
give deference on fact questions to the nonmovant”. Id. For
6
example, a Rule 12(b)(1) motion to dismiss for lack of “subject
matter jurisdiction[,] ... unlike summary judgment decisions, may
be made using any one of the following bases: (1) the complaint
alone; (2) the complaint supplemented by undisputed facts evidenced
in the record; or (3) the complaint supplemented by undisputed
facts plus the court’s resolution of disputed facts”. Id.
(internal quotations omitted); see also Lewis, 699 F.2d at 237;
Williamson v. Tucker, 645 F.2d 404, 413 (5th Cir.), cert. denied,
454 U.S. 897 (1981). Factual findings are reviewed only for clear
error. Williamson, 645 F.2d at 413; FED. R. CIV. P. 52(a).
“However, where issues of fact are central both to subject
matter jurisdiction and the claim on the merits, ... the trial
court must assume jurisdiction and proceed to the merits.” Montez
v. Department of Navy, ___ F.3d ___, 2004 WL 2712428, at *2 (5th
Cir. 2004). Under these circumstances, any pre-trial challenge to
the court’s jurisdiction must be brought “as a direct attack on the
merits of the ... case under either Rule 12(b)(6) or Rule 56”. Id.
(internal quotation omitted).
In granting the motion to dismiss, the district court resolved
factual issues in favor of the Government. For example, the
district court stated that the “evidence ... indicates that
[Gasanov] is merely a nominal owner, and that convicted defendant
Sardar Gasanov is the true owner”; noted that “Sardar Gasanov
comingled his money into the accounts and, through a questionable
7
power of attorney, exercised control over the accounts”; and took
“significant interest ... [in] the fact that the death
beneficiaries [for the CDs] are the children of Sardar Gasanov, not
those of Elyar Gasanov”. USDC Opn. at *3-4 (emphasis added). (The
record is silent, however, concerning whether Gasanov then had
children.)
We review “de novo the legal issue of whether the district
court has discretion to resolve disputed facts dispositive of
subject matter jurisdiction, applying the same standard used by the
district court”. Montez, 2004 WL 2712428, at *2. Accordingly, at
issue is whether disposition of the Article III standing issue
requires ruling on the merits of Gasanov’s claim. The district
court did not address this issue. Nor did it conduct a preliminary
hearing to resolve disputed factual issues.
In a civil forfeiture proceeding, the Government must prove by
a preponderance of the evidence that the property is subject to
forfeiture. See 18 U.S.C. § 983(c)(1). Thus, in the case at hand,
the Government must prove by a preponderance of the evidence that
the funds in question were the proceeds of “specified unlawful
activities” – the peonage offenses committed by Sardar and Nadira
Gasanov. See 18 U.S.C. §§ 1956(c)(7)(A), 1961(1).
As discussed supra, in order to satisfy his burden of
establishing standing to contest the forfeiture proceedings,
Gasanov may do so by showing at least a facially colorable claim.
8
On the other hand, an “unsupported assertion of ownership” will not
suffice, Kadonsky, 216 F.3d at 508; Gasanov must present sufficient
evidence to establish a facially colorable claim that he, not the
peonage offenses committed by Sardar and Nadira Gasanov, was the
source of the funds.
Gasanov claims the funds used to purchase the CDs, for which
he is the titled owner, were invested in that manner by his
brother, Sardar Gasanov, pursuant to a power of attorney (the
validity of which is in dispute); he explains his lack of
documentation is not unusual because it is common in Russia for
income to be undocumented; and he points out that more than
$130,000 had been invested in the CDs before the peonage offenses
occurred (the Government does not contest this). In support,
Gasanov points to (1) the deposition of the bank manager who
notarized the power of attorney; (2) his interrogatory answers and
response to the Government’s motion to dismiss, which explain the
sources of his income and asserts that it is not unusual to have
undocumented income in Russia; and (3) the Government’s complaint
for forfeiture, which asserts that $138,662 of the CDs was invested
in 1997, before any of the illegal activity occurred.
The foregoing reflects that the standing issue (whether the
funds were originally Gasanov’s) and the merits issue (whether the
source of the funds was the peonage offenses) are coextensive. The
“considerations of standing”, therefore, can not “be severed from
9
a resolution on the merits”. See Barrett Computer, 884 F.2d at
220; Clark v. Tarrant County, Texas, 798 F.2d 736, 741-42 (5th Cir.
1986). Therefore, Article III standing cannot be decided by a
motion to dismiss. Accordingly, the district court erred in
granting the Government’s motion for that issue.
B.
Gasanov’s attorney filed a verified claim on Gasanov’s behalf.
The Government contended that, in order to have statutory standing,
Gasanov was required personally to verify his claim. The district
court held: Gasanov failed to file a properly verified statement
of claim as required by Supplemental Rule C (discussed below);
therefore, he lacked statutory standing. Obviously, this issue of
law is reviewed de novo.
Supplemental Rule C(6)(a)(ii) states: “In an in rem
forfeiture action for violation of a federal statute: an agent,
bailee, or attorney must state the authority to file a statement of
interest in or right against the property on behalf of another”.
(Emphasis added.) The Government maintains this language “derives
from ancient admiralty” and, therefore, should not apply in the
modern era. The Government cites Mercado v. U.S. Customs Service,
873 F.2d 641, 645 (2d Cir. 1989), for the proposition that attorney
verification is not valid to establish statutory standing to
challenge a forfeiture. Mercado is distinguishable, however, from
the case at hand.
10
At issue in Mercado was the sufficiency of the attorney
affidavit used to verify the claim. 873 F.2d at 645. That issue
is not raised here. Moreover, Supplemental Rule C(6) has been
amended twice (2000 and 2002) since Mercado was decided (1989).
The Rule’s plain language allows attorney verification. Therefore,
the district court erred in ruling Gasanov lacked statutory
standing.
III.
For the foregoing reasons, the forfeiture order is VACATED;
judgment is RENDERED for Gasanov on his having statutory standing
to challenge the forfeiture; and this matter is REMANDED to
district court for further proceedings consistent with this
opinion.
VACATED; RENDERED IN PART; REMANDED
11