United States v. $525,695.24

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit I.O.P. 32.1(b)
File Name: 17a0193p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
UNITED STATES OF AMERICA, ┐
Plaintiff-Appellee, │
│
│
v. > No. 16-3542
│
│
$525,695.24, SEIZED FROM JPMORGAN CHASE BANK │
INVESTMENT ACCOUNT #74068415, et al., │
Defendants, │
│
OSAMA H. SALOUHA; HYS HEALTH MART, INC., │
│
Claimants-Appellants.
┘
Appeal from the United States District Court
for the Northern District of Ohio at Cleveland.
No. 1:13-cv-01455—Donald C. Nugent, District Judge.
Argued: March 7, 2017
Decided and Filed: August 23, 2017
Before: CLAY, GIBBONS, and STRANCH, Circuit Judges.
_________________
COUNSEL
ARGUED: Edmund W. Searby, BAKER & HOSTETLER LLP, Cleveland, Ohio, for
Appellants. Phillip J. Tripi, UNITED STATES ATTORNEY’S OFFICE, Cleveland, Ohio, for
Appellee. ON BRIEF: Edmund W. Searby, BAKER & HOSTETLER LLP, Cleveland, Ohio,
for Appellants. Phillip J. Tripi, UNITED STATES ATTORNEY’S OFFICE, Cleveland, Ohio,
for Appellee.
No. 16-3542 United States v. $525,695.24, et al. Page 2
_________________
OPINION
_________________
CLAY, Circuit Judge. In this civil forfeiture action, the United States filed a complaint
against numerous bank accounts, as well as three cars and various real properties, asserting that
the named properties were either used in the transportation and sale of controlled substances,
were used or intended to be used to facilitate drug trafficking, or were involved in money
laundering. The government thus asserted that the properties were subject to forfeiture pursuant
to 21 U.S.C. § 881(a)(4), (a)(6), and (a)(7), as well as 18 U.S.C. § 981. Claimant Osama
Salouha, on behalf of himself and his business, HYS Health Mart, Inc. (collectively
“Claimants”), filed a verified claim to eighteen of the assets; however, the government moved to
strike that claim based on the fugitive disentitlement statute, 28 U.S.C. § 2466. The district court
granted the government’s motion to strike Claimants’ claim and subsequently ordered the
relevant accounts forfeited. Claimants now appeal the order of forfeiture, the decision by the
district court striking their claims, and the denial of their motion for reconsideration. The
government filed a motion to dismiss the appeal based on an untimely notice of appeal. For the
reasons set forth below, we DENY the motion to dismiss the appeal and AFFIRM the district
court’s judgment.
BACKGROUND
On June 3, 2013, the government filed a civil in rem forfeiture complaint against twenty
bank accounts, two real properties, three vehicles, and $91,500 in United States currency. This
civil forfeiture action is related to the government’s investigation into Osama Salouha and Sbeih
Sbeih, the claimant in a related case. Salouha is alleged to have illegally sold prescription drugs,
including oxycodone, oxymorphone, and hydrocodone, through the two pharmacies he owns in
Ohio, in violation of 21 U.S.C. § 841. Salouha and Sbeih are alleged to have laundered the
receipts from Salouha’s illegal drug sales through their personal and business accounts, in
violation of 18 U.S.C. § 1956. The government sought forfeiture pursuant to 21 U.S.C.
§ 881(a)(4), (a)(6), and (a)(7), as well as 18 U.S.C. § 981, as the bank accounts contained
No. 16-3542 United States v. $525,695.24, et al. Page 3
proceeds from drug trafficking activities, were used to facilitate drug trafficking, or were
involved in money laundering.
On August 7, 2013, Salouha filed a verified claim to eighteen of the assets. Salouha also
filed a verified claim asserting an interest in two of the bank accounts on behalf of his pharmacy,
HYS Health Mart, Inc. The case was then stayed for a year because of the related criminal
investigation. Salouha was indicted on June 3, 2014, on forty-eight counts of, inter alia,
conspiracy to distribute controlled substances, distribution of controlled substances, false
statements, conspiracy to commit money laundering, conspiracy to defraud the Internal Revenue
Service, making and subscribing false income tax returns, and structuring transactions to evade
reporting requirements.1 When Salouha failed to appear for his arraignment on his criminal
charges, the district court issued a warrant for his arrest.
Meanwhile, the district court lifted the stay on the civil forfeiture case and scheduled a
status conference for June 24, 2014. Claimants’ counsel sought the district court’s permission
for Salouha to attend the conference via telephone, as Salouha, along with his pregnant wife and
four children, had moved to Gaza after the seizure of the family’s assets. Salouha alleged that
the travel restrictions imposed on the Gaza strip made it difficult for him and his wife to return.
The district court denied the motion, and Salouha did not attend the conference.
On September 18, 2014, the government filed a motion to strike Claimants’ claims
pursuant to the fugitive disentitlement statute, which Claimants opposed. The district court did
not immediately rule on the motion. Instead, the district court waited to see whether the
Salouhas were able to re-enter the country with the help of the U.S. State Department. On March
24, 2015, the government refiled its motion to strike Claimants’ claims pursuant to the fugitive
disentitlement statute, asserting that Salouha was now out of Gaza and free to return to the
United States, but had still failed to do so. Although Claimants requested until April 23, 2015, to
file a response, Claimants ultimately decided not to respond to the motion. The district court
granted the government’s motion to strike Claimants’ claims on May 12, 2015. The
1
Salouha’s wife, Samah Salouha, and Sbeih were indicted at the same time.
No. 16-3542 United States v. $525,695.24, et al. Page 4
accompanying judgment only indicated that Claimants’ claims were stricken; it did not order the
forfeiture of any property.
Seven months later, on December 17, 2015, the government filed a Stipulated Settlement
Agreement and Decree of Forfeiture, asserting that the government had reached a settlement with
Salouha’s wife, Samah Salouha, whereby Mrs. Salouha withdrew her claims to all the assets
except the house and the car, in exchange for the government’s dismissal of those assets from the
complaint. The filing included a section ordering the forfeiture of the other sixteen assets. The
district court signed and approved the order. The final properties involved in the case, which had
been claimed by the Sbeihs, were ordered forfeited the following month, on January 14, 2016.
On April 1, 2016, Claimants moved to vacate the judgment and to have their property
returned or, in the alternative, to clarify the judgment entered on May 12, 2015. The government
moved to strike the motion. The district court, on May 12, 2016, denied Claimants’ motion
insofar as it sought reconsideration of Salouha’s status as a disentitled fugitive, and struck the
motion insofar as it sought reconsideration of the court’s forfeiture order. Claimants filed an
appeal the next day, which challenged the original disentitlement order and accompanying
judgment, the signed order of forfeiture, and the denial of the motion to vacate the judgment.
DISCUSSION
On appeal, Claimants argue that the district court erred in finding that Salouha was a
fugitive, meaning he was improperly prevented from defending against the civil forfeiture.
Claimants also argue that the district court erred in ordering forfeiture given that the government
never filed a motion for default judgment with respect to the relevant properties.2 In addition to
arguing the merits of the arguments raised, the government filed a motion to dismiss the appeal,
2
Claimants also argue that the order of forfeiture violated their Fifth, Sixth, and Eighth Amendment rights.
However, these arguments have been waived, as they were only raised before the district court in Claimants’ motion
to vacate the order of forfeiture, which is in essence a motion for reconsideration. See Frontier Ins. Co. v. Blaty, 454
F.3d 590, 595 (6th Cir. 2006); United States v. $23,000 in U.S. Currency, 356 F.3d 157, 165 (1st Cir. 2004).
Generally, we do not consider arguments raised for the first time in a motion for reconsideration, see Scottsdale Ins.
Co. v. Flowers, 513 F.3d 546, 553 (6th Cir. 2008) (citations omitted); Am. Meat Inst. v. Pridgeon, 724 F.2d 45, 47
(6th Cir. 1984), and we decline to do so here.
No. 16-3542 United States v. $525,695.24, et al. Page 5
contending that we lack jurisdiction because Claimants’ notice of appeal was untimely. We
address each of these issues below, beginning with the jurisdictional question.
A. Jurisdiction
“It is well-established that the federal courts are under an independent obligation to
examine their own jurisdiction.” Kusens v. Pascal Co., Inc., 448 F.3d 349, 359 (6th Cir. 2006)
(citing FW/PBS, Inc. v. City of Dallas, 493 U.S. 215, 231 (1990)). This Court “review[s] de
novo the existence of subject-matter jurisdiction.” Watson v. Cartee, 817 F.3d 299, 302 (6th Cir.
2016) (citing Ammex, Inc. v. Cox, 351 F.3d 697, 702 (6th Cir. 2003)).
The district court had jurisdiction over this action pursuant to 28 U.S.C. § 1345, which
provides that “district courts shall have original jurisdiction of all civil actions, suits or
proceedings commenced by the United States.” The district court also had jurisdiction pursuant
to 28 U.S.C. § 1355, as this is an action for forfeiture.
Claimants are permitted to file an appeal as of right pursuant to 28 U.S.C. § 1291, and
such an appeal “‘may be taken only by filing a notice of appeal with the district clerk within the
time allowed by Rule 4’ of the Federal Rules of Appellate Procedure.” Bonner v. Perry,
564 F.3d 424, 427 (6th Cir. 2009) (quoting Fed. R. App. P. 3(a)(1)). When one of the parties in a
civil case is the United States, “the notice of appeal may be filed by any party within 60 days
after entry of the judgment or order appealed.” Fed. R. App. P. 4(a)(1)(B). But such an appeal
may only be taken from final decisions of a district court. Bonner, 564 F.3d at 426–27. “A
judgment is final for purposes of appeal when it terminates all issues presented in the litigation
on the merits and leaves nothing to be done except to enforce by execution what has been
determined.” Donovan v. Hayden, Stone, Inc., 434 F.2d 619, 620 (6th Cir. 1970) (citations
omitted). However, an order that “does not dispose of all parties and all claims is generally not
immediately appealable unless the district court issues” a certificate under Federal Rule of Civil
Procedure 54(b). Bonner, 564 F.3d at 427.
The government originally raised the issue of this Court’s jurisdiction to hear the appeal
in a motion to dismiss the appeal as untimely. In both the motion to dismiss and in the merits
brief, the government argues that Claimants’ notice of appeal was untimely as to the original
No. 16-3542 United States v. $525,695.24, et al. Page 6
opinion and order striking Claimants’ claims based on Salouha’s status as a fugitive, the
accompanying judgment, and the district court’s order approving the forfeiture of the assets
claimed by Claimants. As the government notes, the district court originally struck Claimants’
claims on May 12, 2015. A separate judgment was entered the same day. Furthermore, the
Decree of Forfeiture, as signed by the district court, was filed on December 17, 2015. Claimants
did not file their notice of appeal until after the district court denied their motion to vacate the
forfeiture, which the district court decided on May 12, 2016. Therefore, the government argues
that the notice of appeal was timely only as to the district court’s denial of Claimants’ motion to
vacate, as the sixty-day window for filing a notice of appeal as to the other two orders had
already expired.
As stated above, an order is only final, and therefore appealable, when all the claims as to
all parties have been resolved. Bonner, 564 F.3d at 427. The final order entered by the district
court, which ordered the assets initially claimed by Sbeih Sbeih forfeited, was not entered until
January 14, 2016. Therefore, we would generally calculate the time to appeal all the orders in
this case from that date in the absence of a certification under Rule 54(b). Claimants argue that
this order, however, did not start the clock for the time to appeal, as it does not comport with the
final judgment rule of Federal Rule of Civil Procedure 58, which requires:
Every judgment and amended judgment must be set out in a separate document,
but a separate document is not required for an order disposing of a motion:
(1) for judgment under Rule 50(b);
(2) to amend or make additional findings under Rule 52(b);
(3) for attorney’s fees under Rule 54;
(4) for a new trial, or to alter or amend the judgment, under Rule 59; or
(5) for relief under Rule 60.
Fed. R. Civ. P. 58(a). When a separate judgment is required but is not entered, judgment is
deemed entered either when a separate judgment is, in fact, issued, or 150 days after the order
was filed on the docket, whichever occurs first. Id. at 58(c)(2); Fed. R. App. P. 4(a)(7)(A); see
also Gillis v. United States, 729 F.3d 641, 643 (6th Cir. 2013). The final judgment rule was
specifically enacted to help “avoid new uncertainties as to the date on which a judgment is
entered,” and thus, when the time for an appeal begins to run. United States v. Indrelunas,
No. 16-3542 United States v. $525,695.24, et al. Page 7
411 U.S. 216, 221–22 (1973), rev’d in part on other grounds, Bankers Trust Co. v. Mallis,
435 U.S. 381, 386 (1978).
An order of forfeiture is generally an order that would require a separate judgment, as it
is does not fall into any of the five exceptions enumerated in Rule 58(a). The question remains,
however, whether the district court’s order in this case qualified as a separate judgment.
Claimants note that the order here was a “settlement agreement between two parties replete with
provisions not found in a judgment of a court but with a signature line for the district court’s
approval.” (App. R. 11, Claimant’s Resp. to Mot. to Dismiss, at 15.) The government, in
contrast, argues that the decree of forfeiture “succinctly and mechanically listed the assets to be
forfeited” and did not include any additional explanation. (App. R. 12, Gov’t Reply, at 2.)
We agree that the January 14, 2016 order was not sufficiently self-contained to qualify as
a separate judgment. First, the title of the document did not indicate that it was meant to function
as a separate judgment, as the government called it a “Stipulated Settlement Agreement and
Decree of Forfeiture.” (R. 160, Stip. Settlement Agreement & Decree of Forfeiture, PageID
#1371.) Furthermore, numerous provisions were included in the relevant order, including the
settlement terms between the government and Mrs. Sbeih. Such terms included the agreement of
Mrs. Sbeih not to commence any actions asserting a claim against the relevant assets, as well as
her waiver of any claims, including constitutional claims and claims for attorney fees, that might
arise from the forfeiture action. Indeed, the section that addresses what typically would be in a
judgment does not begin until the bottom of the fourth page. Therefore, we conclude that the
combined settlement agreement and decree of forfeiture issued by the district court does not
qualify as a separate judgment. Because there was no separate judgment, the time to appeal the
order did not begin to run until 150 days after the order was filed. Fed. R. Civ. P. 58(c)(2); Fed.
R. App. P. 4(a)(7)(A). Claimants then had sixty days to file a notice of appeal, meaning a notice
of appeal would be untimely only if 210 days elapsed without such a filing. Fed. R. App. P.
4(a)(1)(B).
In this case, the final decree of forfeiture was entered on January 14, 2016, but no
separate judgment was filed. Claimants filed their notice of appeal on May 13, 2016. Therefore,
Claimants actually filed their notice of appeal early, as the 150 day period for the judgment to
No. 16-3542 United States v. $525,695.24, et al. Page 8
become final had not yet elapsed. However, such an early filing is of no consequence, as Federal
Rule of Appellate Procedure 4(a)(2) explains that “[a] notice of appeal filed after the court
announces a decision or order—but before the entry of the judgment or order—is treated as filed
on the date of and after the entry.” See also FirsTier Mortg. Co. v. Inv’rs Mortg. Ins. Co.,
498 U.S. 269, 272–73 (1991). We hold that the notice of appeal was timely filed, and
consequently we deny the government’s motion to dismiss the appeal.
B. Application of the Fugitive Disentitlement Statute
1. Standard of Review
This Court reviews de novo whether 28 U.S.C. § 2466 is applicable to Claimant’s case,
and “to the extent we conclude that the statute is applicable . . . , we review the district court’s
decision to order disentitlement for abuse of discretion.” United States v. Salti, 579 F.3d 656,
662–63 (6th Cir. 2009) (alteration in original) (quoting Collazos v. United States, 368 F.3d 190,
195 (2d Cir. 2004)). We review the district court’s factual findings, including the finding as to
intent, for clear error. United States v. Batato, 833 F.3d 413, 431 (4th Cir. 2016) (citation
omitted).
2. Analysis
The fugitive disentitlement statute, codified as 28 U.S.C. § 2466, states:
(a) A judicial officer may disallow a person from using the resources of the courts
of the United States in furtherance of a claim in any related civil forfeiture action
or a claim in third party proceedings in any related criminal forfeiture action upon
a finding that such person—
(1) after notice or knowledge of the fact that a warrant or process has been
issued for his apprehension, in order to avoid criminal prosecution—
(A) purposely leaves the jurisdiction of the United States;
(B) declines to enter or reenter the United States to submit to its
jurisdiction; or
(C) otherwise evades the jurisdiction of the court in which a criminal case
is pending against the person; and
(2) is not confined or held in custody in any other jurisdiction for commission
of criminal conduct in that jurisdiction.
No. 16-3542 United States v. $525,695.24, et al. Page 9
Based on the text of this statute, this Court has adopted the following five part test to determine
whether disentitlement is appropriate:
(1) a warrant or similar process must have been issued in a criminal case for the
claimant’s apprehension; (2) the claimant must have had notice or knowledge of
the warrant; (3) the criminal case must be related to the forfeiture action; (4) the
claimant must not be confined or otherwise held in custody in another
jurisdiction; and (5) the claimant must have deliberately avoided prosecution by
(A) purposefully leaving the United States, (B) declining to enter or reenter the
United States, or (C) otherwise evading the jurisdiction of a court in the United
States in which a criminal case is pending against the claimant.
Salti, 579 F.3d at 663 (quoting Collazos, 368 F.3d at 198).
In this case, as in the related case of Sbeih (Docket No. 16-3209), Claimants only
challenged the applicability of the fifth factor—whether Salouha deliberately avoided
prosecution by declining to reenter the United States. Claimants argued that Salouha did not
return to the United States because he was unable to leave Gaza due to the travel restrictions
imposed by Egypt and Israel on Gaza residents. In support of his assertion, Claimants attached
letters and emails from the U.S. Consulate in Jerusalem and the Palestinian Authority explaining
that Salouha and his family were unable to leave Gaza. Later, Claimants submitted an additional
letter from the Palestinian Authority stating that the crossing between Gaza and Egypt was
closed indefinitely.
In a status conference, the government indicated that the U.S. State Department may be
able to help the Salouhas leave Gaza. In fact, in its second motion to strike Claimants’ claims,
the government stated the following:
On December 2, 2014, the United States received information from the
Department of State that the Consulate would be assisting Americans out of Gaza
sometime in the next few weeks and requested the names of each of the Salouha
family members so that they could be placed on a list provided to the various
authorities in the area. The United States provided a direct contact number and an
email address for Osama Salouha so that the Department of State could speak
with him directly. On December 10, 2014, the State Department representative
notified that they had spoken directly with Osama Salouha, who had not answered
the representative’s previous emails. At that time, Salouha was, according to the
Department of State, “noncommittal” about coming out of Gaza with the
aforementioned group. Again, the Department of State indicated that removal
No. 16-3542 United States v. $525,695.24, et al. Page 10
would occur within the next several weeks. On December 19, 2014, the
Department of State notified the United States that the “group” would be divided
into two groups and that the Salouha family was placed in the second group. The
first group moved out of Gaza on December 18, 2014 and indications at that time
were that the second group would not be able to move out of Gaza until sometime
in January, 2015 due to the holidays. At that time it was stated that the Israeli
government required the Department of State to take the groups to Amman, near
the Jordanian border. On February 10, 2015, the Department of State notified the
Salouhas they had been approved as members of the group to leave Gaza.
Finally, on February 24, 2015, the Department of State notified the United States
that all seven Salouha family members were taken by bus to Amman, Jordan. On
February 27, 2015, the Department of State advised that it was holding the
passports of the family members until it was provided with the Salouha’s itinerary
to return to the United States. On March 1, 2015, the Department of State
received the itinerary for all seven members of the Salouha family including
Osama Salouha. The family’s U.S. passports were returned to them by the
Department of State. After Samah Salouha returned to the United States on
March 3, 2015 with her five children, the United States attempted to locate Osama
Salouha. On March 5, 2015, the Department of State received information from
the Jordanian government that Osama Salouha departed Jordan on March 3, 2015,
en route to Egypt and that he had traveled on his Palestinian passport.
(R. 121, Gov’t’s Mot. to Strike Claims as to Osama Salouha and HYS Health Mart, Inc., PageID
#1108–09.) Claimants did not attempt to refute these assertions.
As in the accompanying case involving Sbeih, the district court granted the government’s
motion to strike Claimants’ claim after rejecting the argument that the government had to prove
that Salouha’s sole reason for staying outside the United States was to evade criminal
prosecution. The district court then offered the following as its rationale for determining that the
fifth factor was satisfied:
Mr. Salouha and Health Mart argue that although the Salouhas traveled to Gaza
after the search warrants were executed, there were no pending charges against
them at that time, the forfeiture complaint had not been filed[,] and[] they still had
their passports. The Salouhas argue that they purchased a round-trip ticket to
Jordan, demonstrating their intent to return, but that Mr. Salouha’s father was in
poor health; Mrs. Salouha was about to deliver a baby; and, ongoing violence and
the inability to obtain permission from the Palestinian Authority to leave, left
them with no other option but to remain in Gaza. As stated above, the issues
regarding the inability to leave Gaza . . . have since been resolved and the entire
Salouha family left Gaza. While Mrs. Salouha ultimately returned to the United
No. 16-3542 United States v. $525,695.24, et al. Page 11
States alone with all five children, Mr. Salouha traveled to Egypt and has not
returned.
Based on the totality of the circumstances, as related by Counsel during
the numerous status conferences held in this case, briefed repeatedly by the
Parties, and set forth above, the Court finds that Mr. Salouha has made a
conscious choice not to reenter the United States for the purpose of avoiding
prosecution.
(R. 143, Mem. Op. & Order, PageID #1301–02 (internal citations omitted).)
Claimants now raise two challenges to the district court’s analysis on appeal. First,
Claimants make the same argument as Sbeih that evading criminal prosecution had to be the sole
purpose of remaining outside the United States. For the reasons already stated in our opinion
involving Sbeih’s claims, we reject that argument and hold that “disentitlement under § 2466 is
appropriate whenever a claimant fails to enter or reenter the United States with the intention of
avoiding prosecution, regardless of any additional purposes the claimant may have for remaining
outside the United States.” United States v. $525,695.24 Seized from JPMorgan Chase Bank
Inv. Acct #74069415, No. 16-3209, slip op. at 11 (6th Cir.).
Second, Claimants argue that the district court erred in concluding that the government
had met its burden of showing that Salouha stayed outside the United States to avoid criminal
prosecution, given that the government relied only on unsworn representations by counsel. Thus,
according to Claimants, there were disputed issues of fact as to whether Salouha was avoiding
prosecution.
We disagree. While the government did not submit any affidavits or exhibits,3 it did
represent to the district court that Salouha had been able to leave Gaza with the aid of the U.S.
3
At least one of our sister circuits has held that summary judgment is an inappropriate standard to invoke in
the context of the fugitive disentitlement statute. See U.S. v. Technodyne, 753 F.3d 368, 381–82 (2d Cir. 2014). In
support of that holding, the Second Circuit relied upon the fact that the term “summary judgment” is not mentioned
in the statute, in contrast to its inclusion in the Supplemental Rules. Id. at 381. In addition, when deciding a
summary judgment motion, a judge is prohibited from weighing facts and instead must only determine whether there
is a genuine dispute over material facts. Id. (citing Anderson v. Liberty Lobby, Inc. 477 U.S. 242, 249 (1986)
(additional citation omitted). “In contrast, the fugitive disentitlement statute provides that the ‘judicial officer’ may
disallow a person or entity from using the resources of the federal courts ‘upon a finding’ that the factual
prerequisites to disentitlement set out in that section are met.” Id. (quoting 28 U.S.C. § 2466(a)). Therefore, the
court held that, “[s]ince the judge is explicitly required to make findings of fact, determinations as to disentitlement
are not to be made under the standards governing summary judgment.” Id. at 381–82. In the context of its
No. 16-3542 United States v. $525,695.24, et al. Page 12
State Department, but that he failed to return to the United States and instead went to Egypt on
his Palestinian passport. Claimants chose not to refute any of these statements, as they did not
file a response, despite explicit authorization from the district court to do so. Furthermore, at
oral argument, Claimants’ counsel was unable or unwilling to answer our direct question asking
where Salouha was currently located. Given these unique circumstances, Claimants cannot
credibly argue that there were disputed facts about Salouha’s ability to return to the United States
to face prosecution. Moreover, the fact that Claimants had previously submitted documentation
purporting to show that Salouha was stuck in Gaza and unable to return to the United States is
irrelevant in light of the government’s uncontested representations that the entire Salouha family
was no longer in Gaza. Furthermore, Mrs. Salouha did, in fact, return to the United States with
her five children, despite the fact that she, too, was indicted in the same case as her husband and
was under the same restrictions in Gaza. We therefore hold that the district court did not commit
clear error in crediting the uncontested statements of the government, as well as relying on the
knowledge of Mrs. Salouha’s return, to conclude that Salouha was deliberately staying outside
the jurisdiction of the United States in order to avoid prosecution. Consequently, we affirm the
district court insofar as it decided that Claimants should be disentitled under § 2466 based on
Salouha’s status as a fugitive.
C. Order of Forfeiture
1. Standard of Review
This Court “treat[s] the district court’s interpretation and application of the Federal Rules
of Civil Procedure as a question of law and, as with all legal questions, review[s] this analysis de
novo.” Jalapeno Prop. Mgmt., LLC v. Dukas, 265 F.3d 506, 510 (6th Cir. 2001).
2. Analysis
Claimants argue that the district court erred by signing the proffered decree of forfeiture
without requiring the government to prove that the assets were forfeitable, based on their
connection to the criminal indictment. Claimants specifically argue that the government was
discussion, the Second Circuit also doubted that we had determined that summary judgment standards were always
appropriate in our opinion in Salti. Id. at 381. However, we need not delve into the specific holdings of Salti given
the unusual circumstances of this case.
No. 16-3542 United States v. $525,695.24, et al. Page 13
required to move, under Federal Rule of Civil Procedure 55, for an entry of default judgment.
Claimants further argue that, had such a motion occurred, the government would have been
required to prove, by a preponderance of the evidence, that the defendant assets were subject to
forfeiture. Finally, Claimants argue that Mrs. Salouha’s release of her interest in the assets did
not establish that forfeiture was appropriate, as she had no authority under Ohio law to stipulate
to the forfeiture of assets listed in only Salouha’s or HYS Health Mart, Inc.’s name.
The government, in contrast, argues that it was not required to move for default judgment
under Rule 55, as civil in rem forfeitures are governed by the Supplemental Rules for Admiralty
or Maritime Claims and Asset Forfeiture Actions (“Supplemental Rules”), which do not
incorporate the requirements of Rule 55. In addition, Rule 55 talks in terms of seeking a default
“[w]hen a party against whom a judgment of affirmative relief is sought has failed to plead or
otherwise defend” against an action. Fed. R. Civ. P. 55(a) (emphasis added). The government
argues that the party from whom affirmative relief is sought is the defendant assets, not
Claimants, meaning Rule 55 is inapplicable. Finally, according to the government, Claimants
are not treated as defendants for purposes of civil forfeiture actions, meaning they are not entitled
to the same procedural rights. For this proposition, the government analogizes to the more
lenient notice requirements for civil forfeiture proceedings as compared to traditional civil suits.
Given that we have affirmed the district court’s disentitlement decision, Claimants no
longer have statutory standing to contest procedural mistakes in the forfeiture action. See United
States v. Real Properties & Premises, 521 F. App’x 379, 384 (6th Cir. 2013) (noting that “[t]o
contest a forfeiture action, a claimant must establish statutory standing” by timely filing a
verified claim and an answer). Indeed, to hold otherwise would render meaningless the fugitive
disentitlement statute, which was enacted to prevent
the unseemly spectacle . . . of a criminal defendant who, facing both incarceration
and forfeiture for his misdeeds, attempts to invoke from a safe distance only so
much of a United States court’s jurisdiction as might secure him the return of
alleged criminal proceeds while carefully shielding himself from the possibility of
a penal sanction.
Collazos, 368 F.3d at 200. Such has been the approach of the Ninth Circuit, in United States v.
$671,160.00 in U.S. Currency, 730 F.3d 1051 (9th Cir. 2013), where the court declined to
No. 16-3542 United States v. $525,695.24, et al. Page 14
consider the claimant’s arguments regarding “probable cause to search his vehicle, seize the
defendant funds, or initiate criminal proceedings against him” because the claimant’s claims had
properly been stricken. Id. at 1059; United States v. $6,190.00 in U.S. Currency, 581 F.3d 881,
885 (9th Cir. 2009) (“The fugitive disentitlement doctrine prohibits an individual from using the
courts to further one claim while avoiding the courts’ jurisdiction on another matter.”); see also
United States v. Technodyne LLC, 753 F.3d 368, 381 (2d Cir. 2014) (noting that the fugitive
disentitlement statute “is not meant to address a claim or defense on its merits; it provides an
ancillary basis for disallowing a claim”). Similarly, under the prior fugitive-from-justice
doctrine, which Congress adopted in enacting § 2466, fugitive claimants were barred from
arguing that the government did not establish the factual predicates for forfeiture. See United
States v. One Parcel of Real Estate at 7707 S.W. 74th Lane, Miami, 868 F.2d 1214, 1216–17
(11th Cir. 1989).
However, even if we were to consider Claimants’ procedural deficiency challenge, we
would still affirm the district court’s judgment. While it is true that the general practice, and
perhaps the best practice, is for the government to seek default and default judgment in civil in
rem forfeiture cases, see, e.g., United States v. $22,050.00 U.S. Currency, 595 F.3d 318, 324 (6th
Cir. 2010); United States v. $23,000 in U.S. Currency, 356 F.3d 157, 164 (1st Cir. 2004);
Technodyne LLC, 753 F.3d at 376, failure to do so is not fatal to the government in this case.
Indeed, “we are free to affirm the judgment on any basis supported by the record,” Angel v.
Kentucky, 314 F.3d 262, 264 (6th Cir. 2002), and such a basis is present here. Because the only
evidence in this case supports a finding that the properties seized by the government were
involved in illegal prescription drug sales and money laundering, the government would have
prevailed had it moved for default judgment.
For assets seized by the government in connection with drug crimes, forfeiture is
appropriate if the money was offered in exchange for a controlled substance, if the money was
traceable to such an exchange, or if the money was intended to facilitate any drug crime.
21 U.S.C. § 881(a)(6). The government sought forfeiture of additional assets due to their
connection to Salouha’s money laundering scheme. Such funds are forfeitable if they are
“involved in a transaction or attempted transaction in violation of section 1956,” the money
No. 16-3542 United States v. $525,695.24, et al. Page 15
laundering statute. 18 U.S.C. § 981(a)(1)(A). The government must establish that the defendant
properties are subject to forfeiture by a preponderance of the evidence. 18 U.S.C. § 983(c)(1).
In this case, the only evidence in the record is the verified complaint filed by the
government. See Am. Civil Liberties Union of Ky. v. Grayson Cty., 591 F.3d 837, 844 n.2 (6th
Cir. 2010) (“A verified complaint carries the same weight as would an affidavit for the purposes
of summary judgment.” (internal quotation omitted)). Moreover, because Claimants’ claims and
answers were stricken from the record, those allegations remain unrebutted, and default
judgment was entered. Such a judgment “is unassailable on the merits,” but only if there was a
“sufficient basis in the pleadings for the judgment entered.” Nishimatsu Constr. Co., Ltd. v.
Houston Nat’l Bank, 515 F.2d 1200, 1206 (5th Cir. 1975). Thus, before entering judgment in
favor of the government, the district court had a duty to ensure that the allegations in the verified
complaint were sufficient. Murray v. Lene, 595 F.3d 868, 871 (8th Cir. 2010) (noting that the
district court should have “consider[ed] whether the unchallenged facts constitute a legitimate
cause of action, since a party in default does not admit mere conclusions of law” (quoting 10A C.
Wright, A. Miller & M. Kane, Federal Practice and Procedure § 2688 at 63 (3d ed. 1998))); see
also Ohio Cent. R. Co. v. Central Trust Co., 133 U.S. 83, 91 (1890) (“[A]lthough the defendant
may not be allowed, on appeal, to question the want of testimony or the insufficiency or amount
of the evidence, he is not precluded from contesting the sufficiency of the bill, or from insisting
that the averments contained in it do not justify the decree.”). While the district court appears to
have failed to meet this obligation, our review of the verified complaint reveals that it
sufficiently alleges that the defendant assets are forfeitable based on their connection to criminal
activity, rendering entry of judgment appropriate.
For example, the complaint asserts that “Salouha [was] illegally selling prescription
drugs, e.g., Oxycodone, Oxymorphone and Hydrocodone to individuals in violation of 21 U.S.C.
§ 841.” (R. 1, Complaint, PageID #5.) As part of its investigation, the government conducted an
audit of one of Salouha’s pharmacies and found that it was purchasing enormous quantities of
these pills, especially compared to what a new pharmacy of that size would be expected to order.
The circumstantial evidence thus indicates that Salouha was involved in illegal sales of
No. 16-3542 United States v. $525,695.24, et al. Page 16
controlled substances and that the money offered in exchange for these sales was forfeitable
under 21 U.S.C. § 881(a)(6).
Salouha was also charged with laundering the proceeds of his illegal drug sales through
his personal and business accounts in order to conceal the source of the illegal funds. The
forfeiture complaint alleges that funds received from the pharmacy, including the illegal drug
money, were commingled with other money in Salouha’s personal and business bank accounts.
The complaint describes how payroll deposits from the pharmacy were made to personal bank
accounts in Salouha’s name, and how proceeds from those accounts were then transferred to
other accounts held by Salouha, including his brokerage account. The complaint further alleges
that funds from Salouha’s account were transferred to accounts in the names of his children over
a three-year period, but then almost $85,000 was abruptly transferred back to Salouha’s account.
Almost all this money was then moved to another account in Salouha’s name through the course
of nine separate transactions over a ten-week period. This money was ultimately transferred out
of the country through three separate wire transfers to the Bank of Palestine Gaza and the
National Bank of Abu Dhabi. These facts are sufficient to establish a forfeiture claim against the
defendant assets based on allegations of money laundering. Therefore, were we to reach
Claimants’ argument regarding the district court’s procedural error of ordering forfeiture,
Claimants still would not be entitled to relief.
CONCLUSION
For the foregoing reasons, we DENY the government’s motion to dismiss the appeal as
untimely and AFFIRM the judgment of the district court.