United States v. Funds in the Amount of $239,400

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 14-3451
UNITED STATES OF AMERICA,
Appellee.
v.
FUNDS IN THE AMOUNT OF $239,400,
Defendant,
JOHN R. VALDES and TRACEY M. BROWN,
Claimants-Appellants.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 11 C 4448 — James B. Zagel, Judge.
____________________
ARGUED MAY 22, 2015 — DECIDED JULY 28, 2015
Before EASTERBROOK, WILLIAMS, and HAMILTON, Circuit
Judges.
HAMILTON, Circuit Judge. This appeal requires us to en-
force recent reforms in civil forfeiture law. The Civil Asset
Forfeiture Reform Act of 2000 put the burden on the gov-
ernment to prove by a preponderance of evidence that prop-
erty is forfeitable. 18 U.S.C. § 983(c). Rule G(9) of the Federal
2 No. 14-3451
Rules of Civil Procedure, adopted in 2006, entitles a claimant
of the property to a jury trial on whether assets are forfeit-
able. In this case, however, the government persuaded the
district court to require the claimants, in order to prove their
standing, to show their claims to the disputed currency are
“legitimate.” Based on this legal error, the district court held
that claimants had failed to make that showing and granted
summary judgment for the government. We reverse. By
blending standing and the merits, the district court effective-
ly nullified recent measures protecting claimants in civil for-
feiture cases.
I. Factual and Procedural Background
Claimant-appellant John Valdes was traveling from Bos-
ton to Los Angeles by train. During a layover in Chicago,
DEA agents approached Valdes because he fit their profile of
a drug courier: He was traveling on a one-way ticket for a
private sleeper car, and his ticket had been purchased just
before departure with a credit card issued to another person.
The agents searched Valdes’s luggage and found four bun-
dles of cash totaling $239,400. Each bundle had been covered
with several layers of packaging: innermost was a layer of
plastic wrap, then tin foil, and then rubber bands to hold
each bundle together. Finally, each bundle was wrapped in a
brown paper bag.
Valdes told the DEA agents that the money was his and
that he had packed it that way. He told them he was travel-
ing to California to purchase computers for his computer re-
cycling business. No drugs were found in his luggage. We
are told, however, that a drug-sniffing dog alerted to the bag
containing the currency. This alert, assuming the dog was
No. 14-3451 3
trained and functioning properly, signaled an odor of drugs
on the bag. 1
The DEA agents did not arrest Valdes. They told him that
he was free to go but seized the currency for further investi-
gation. Valdes provided his personal identification and con-
tact information to the agents. They gave him a receipt for
the seized currency.
The government then filed a civil forfeiture complaint
against the currency pursuant to 21 U.S.C. § 881(a)(6) alleg-
ing that the currency was furnished or intended to be fur-
nished for a controlled substance. Valdes filed a claim to the
currency asserting an ownership and/or possessory interest
in the property. Tracey Brown filed a claim to the currency as
well. Her claim is based on a community property and inno-
cent ownership interest she has in the property as Valdes’s
wife. Valdes and Brown also filed answers to the complaint.
After Valdes and Brown filed their claims to the property
but before they filed their answers to the complaint, the gov-
ernment served special interrogatories under Rule G(6). Rule
G is a supplement to the Federal Rules of Civil Procedure
that applies to in rem actions like this forfeiture case. Rule
G(6)(a) permits the government to “serve special interroga-
tories limited to the claimant’s identity and relationship to
the defendant property without the court’s leave at any time
1 Further details of this encounter between Valdes and the DEA
agents were the subject of dispute in the district court. The court held an
evidentiary hearing on Valdes’s motion to suppress. At the hearing Val-
des and the DEA agents offered two different versions of events as to
how the search happened. The district court rejected Valdes’s version of
events, credited the agents’ version, and denied the motion. Valdes does
not appeal that ruling.
4 No. 14-3451
after the claim is filed.” The claimants provided limited re-
sponses to the interrogatories. Valdes asserted that he is the
owner of the defendant currency and that it was in his pos-
session when it was seized. The claimants also objected to
the scope of the interrogatories.
Ultimately the government moved to strike both sets of
claims and answers, arguing that the claimants failed to re-
spond to the interrogatories, see Rule G(8)(c)(i)(A), and that
they lacked standing, see Rule G(8)(c)(i)(B). The government
also moved for summary judgment pursuant to Rule 56, ar-
guing that even if the claims were not struck, the claimants
had not produced sufficient evidence to create a genuine is-
sue of material fact regarding their standing to contest the
forfeiture. The district court said that several of the claim-
ants’ responses to the interrogatories were essentially “non-
responses.” But rather than striking the claims and answers
on that ground, the district court instead drew an adverse
inference against the claimants with respect to standing. In
its opinion granting the government’s motions, the district
court cited this adverse inference, along with credibility de-
terminations it made and circumstantial evidence the gov-
ernment presented at the evidentiary hearing on the motion
to suppress. Valdes and Brown appeal.
II. Analysis
The issue at the heart of this appeal is the boundary be-
tween standing, Article III or otherwise, and the merits in a
civil forfeiture proceeding. Before the district court the gov-
ernment argued that Valdes and Brown lack standing to
pursue their claims under Article III of the Constitution. The
district court granted summary judgment because it found
that the government had “presented considerable and com-
No. 14-3451 5
pelling circumstantial evidence” that the claimants have “no
legitimate interest” in the $239,400. On appeal the govern-
ment argues that summary judgment was appropriate be-
cause Rule G requires a claimant to demonstrate not just Ar-
ticle III standing but also legitimate ownership of the de-
fendant property.
Rule G(8)(c)(ii)(B) states that a claimant bears the “bur-
den of establishing standing by a preponderance of the evi-
dence.” At the pleading stage a plaintiff need only allege, not
prove, facts establishing standing. United States v. $196,969
U.S. Currency, 719 F.3d 644, 646 (7th Cir. 2013), citing Lujan v.
Defenders of Wildlife, 504 U.S. 555, 561–62 (1992). Beyond the
pleading stage, standing must be supported “with the man-
ner and degree of evidence required at the successive stages
of the litigation.” Lujan, 504 U.S. at 561. These principles are
accepted by all parties here. The disagreement concerns “the
manner and degree of evidence required” for a claimant to
establish standing at the summary judgment stage. We re-
view de novo the district court’s answer to this legal question.
See United States v. 5 S 351 Tuthill Rd., Naperville, Ill., 233 F.3d
1017, 1021 (7th Cir. 2000).
We have not addressed this precise question before, but
other circuits have. The Tenth Circuit, for example, has
summarized the prevailing view:
As we view it, the government cannot prevent
every person unwilling to completely explain
his relationship to property that he claims to
own, and that is found in his possession and
control, from merely contesting a forfeiture of
that property in court. It may well be that for-
feiture ultimately will prove appropriate, but
6 No. 14-3451
we find it obvious that such a claimant risks in-
jury within the meaning of Article III and thus
may have his day in court.
United States v. $148,840 in U.S. Currency, 521 F.3d 1268, 1276
(10th Cir. 2008) (reversing summary judgment for govern-
ment in civil forfeiture action); see also United States v.
$133,420 in U.S. Currency, 672 F.3d 629, 640 (9th Cir. 2012) (an
“assertion of ownership, combined with … possession of the
currency at the time it was seized, would be enough to estab-
lish … standing for purposes of a motion for summary
judgment”). 2
We agree with these decisions and hold that an assertion
of ownership combined with some evidence of ownership is
sufficient to establish standing at the summary judgment
2 The government attempts to distinguish these cases by pointing
out that in neither case had the district court held an evidentiary hearing
where it made credibility findings and otherwise decided disputed fac-
tual issues. But the district court made those findings to decide a motion
to suppress, a matter distinct from the merits of the case. To use those
factual findings to decide legitimate ownership, which goes to the heart
of the merits in a forfeiture case, would invade the province of the jury.
See United States v. One Lincoln Navigator 1998, 328 F.3d 1011, 1014 (8th
Cir. 2003). This is why the Ninth and Tenth Circuit decisions we follow
took care to separate standing from the merits. Another route to the
same result is the Eighth Circuit view that, insofar as standing is inter-
twined with legitimate ownership, at the summary judgment stage that
issue “must be decided in accordance with Rule 56 standards, viewing
the evidence in the light most favorable to” the non-movant and “leaving
credibility issues to the ultimate finder of fact.” Id.; see also DDB Technol-
ogies, L.L.C. v. MLB Advanced Media, L.P., 517 F.3d 1284, 1291 (Fed. Cir.
2008) (“the degree of intertwinement of jurisdictional facts and facts un-
derlying the substantive claim should determine the appropriate proce-
dure for resolution of those facts”); id. at 1292 n.4 (collecting cases).
No. 14-3451 7
stage of a civil forfeiture action. We also hold that possession
of currency when it was seized counts as some evidence in
this context. To explain, we discuss first Article III standing
and then the notion of “statutory standing” under Rule G.
Because we are reviewing a grant of summary judgment, we
must neither “decide which party’s version of the facts is
more likely true” nor “resolve swearing contests between
litigants.” Payne v. Pauley, 337 F.3d 767, 770 (7th Cir. 2003).
A. Article III Standing
The “irreducible constitutional minimum of standing”
under Article III consists of three elements. Lujan, 504 U.S. at
560. First, the plaintiff must have suffered an injury in fact,
an invasion of a legally protected interest that is (a) concrete
and particularized, and (b) actual or imminent, rather than
conjectural or hypothetical. Second, there must be a causal
connection between the injury and the challenged action of
the defendant. Third, it must be likely, as opposed to merely
speculative, that the injury would be redressed by a favor-
able decision. Id. at 560–61.
“In response to a summary judgment motion” the plain-
tiff “must ‘set forth’ by affidavit or other evidence ‘specific
facts,’ which for purposes of the summary judgment motion
will be taken to be true.” Id. at 561, quoting Fed. R. Civ. P.
56(e). Here, Valdes asserted in sworn responses to the special
interrogatories that he is the owner of the defendant curren-
cy and that it was in his possession when it was seized. Fol-
lowing the Ninth and Tenth Circuits, this is sufficient evi-
dence for a claimant to establish standing at summary
judgment. See $133,420, 672 F.3d at 640; $148,840, 521 F.3d at
1276; see also Lujan, 504 U.S. at 561–62 (if the plaintiff is
“challenging the legality of government action” and is him-
8 No. 14-3451
self the “object of the action” then “there is ordinarily little
question” that the plaintiff can establish standing at sum-
mary judgment).
B. Rule G and “Statutory Standing”
The government argues that Article III standing is not
sufficient, though, because Rule G requires more than Article
III standing, and in particular it requires a claimant to estab-
lish that his or her claim to the defendant property is “legit-
imate” in order to show standing.
It is true that Rule G requires a claimant to comply with
certain procedural requirements. See United States v. Real
Property Located at 17 Coon Creek Rd., Hawkins Bar California,
787 F.3d 968, 973–74 (9th Cir. 2015). Many courts have re-
ferred to these procedural requirements as “‘statutory stand-
ing’ and have held that it is established through compliance
with Rule G.” Id.The main procedural requirements imposed by Rule G
are that “the claimant must show that he has filed a timely
claim and answer, that the claim is properly verified, and
that he has identified himself and alleged an interest in the
property.” Stefan D. Cassella, Asset Forfeiture Law in the Unit-
ed States § 9-4, 326–27 (2d ed. 2013) (footnotes omitted). The
prevailing view is that such procedural requirements are the
only unique requirements imposed by Rule G. See id. at 326
(“Most courts hold that to establish statutory standing the
claimant simply has to show that he has satisfied all of the
pleading requirements in § 983(a)(4) and Rule G(5).”). We
agree and hold that satisfying procedural requirements—not
demonstrating “legitimate” ownership—is all that Rule G
No. 14-3451 9
asks of claimants aside from showing constitutional stand-
ing.
The government argues, however, that two of our recent
decisions recognize a requirement that claimants demon-
strate “legitimate” ownership of the defendant property to
show “standing” under Rule G. See United States v. Funds in
the Amount of $574,840, 719 F.3d 648 (7th Cir. 2013); United
States v. $196,969 U.S. Currency, 719 F.3d 644 (7th Cir. 2013).
The government misreads those cases.
In both $574,840 and $196,969 we reversed judgments of
forfeiture. Both cases recognized that Rule G requires more
of claimants than mere compliance with Article III. See
$574,840, 719 F.3d at 651 (“Rule G(5) requires more, but the
more is an addition to what is required to plead Article III
standing.”); $196,969, 719 F.3d at 646 (“The government has
confused the requirement of pleading Article III standing …
with the additional requirements imposed on claimants in
civil forfeiture proceedings by Rule G(5).”). But those cases
are also clear on two points that, taken together, foreclose the
government’s interpretation of them.
First, pleading Article III standing in a civil forfeiture ac-
tion “requires no more than alleging that the government
should be ordered to turn over to the claimant money” held
by it that belongs to him. $196,969, 719 F.3d at 646. Second,
the “more” that Rule G requires beyond compliance with Ar-
ticle III is, as noted above, compliance with the simple pro-
cedural requirements listed in Rule G(5). Id. at 645–46. A
claim must be “signed under penalty of perjury.” Id. at 645. It
must be “served on the government.” Id. at 646. It must
“identify the specific property claimed” and “the claimant.”
Id., quoting Rule G(5)(a)(i)(A)–(B). The last relevant re-
10 No. 14-3451
quirement of Rule G(5), and the one at issue in $196,969, was
that the claimant must state what interest he or she has in
the property. Id.
In $196,969 the district court had held that to comply
with that last requirement of Rule G(5), a claimant must state
“how he obtained possession of the currency, including, but
not limited to, the person(s) from whom he received the cur-
rency, the date of receipt, the place of the receipt, and a de-
scription of the transaction which generated the currency.”
Id. We rejected that view. We said that a “bald assertion of
interest … would strictly comply with” Rule G(5). Id. And
we explained that no “additional requirements can be ex-
tracted from the terse and crystalline language of the subdi-
vision on which the government and the district court place
their entire reliance.” Id. at 647. There is no basis in our prec-
edents for the view that Rule G requires a claimant to
demonstrate “legitimate” ownership of the defendant prop-
erty to show standing.
The government also presents a policy argument for its
interpretation of Rule G. It argues that requiring claimants to
demonstrate legitimate ownership will discourage frivolous
claims. We assume this is true, but we explained in $196,969
that this policy concern is not a sufficient reason for us to
force claimants to “spell out” their claims under Rule G. Id.,
719 F.3d at 647 (“This is an argument for amending the rule,
which does not require ‘spelling out,’ rather than for judicial
elaboration of it.”). Our limited approach in $196,969 is simi-
lar to that adopted by the Supreme Court in a recent case
about “statutory standing.” “Just as a court cannot apply its
independent policy judgment to recognize a cause of action
that Congress has denied, it cannot limit a cause of action
No. 14-3451 11
that Congress has created merely because ‘prudence’ dic-
tates.” Lexmark Int’l, Inc. v. Static Control Components, Inc., 572
U.S. —, 134 S. Ct. 1377, 1388 (2014) (citation omitted).
In any event, the claims of Valdes and Brown in this case
are not frivolous. They may or may not succeed on the mer-
its, but that is a different matter. 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) (“Courts should not … conflate the constitu-
tional standing inquiry with the merits determination that
comes later.”); see generally Cassella, Asset Forfeiture Law
§ 10-2, 332 (explaining that “standing and ownership come
into play at different stages in the civil forfeiture case and
are governed by different bodies of law”).
This is not a case where a claimant asserts ownership of a
painting stolen from the National Gallery in Washington. See
$574,840, 719 F.3d at 653. Nor is it a case, to take a more seri-
ous concern mentioned in the cases, where a claimant gener-
ated frivolous claims by reading published forfeiture notices.
See id.; Cassella, Asset Forfeiture Law § 9-4, 325. Valdes was in
possession of the money when it was seized, and he claims
ownership. Our holding, that an assertion of ownership
combined with evidence that the claimant was in possession
of currency when it was seized is sufficient to establish
standing at the summary judgment stage of a civil forfeiture
action, will not open the floodgates to frivolous claims. 3
3 The government also argues that granting its motion to strike was
proper because claimants failed to comply with Rule G(6), requiring
them to respond to special interrogatories. The Advisory Committee
Note to Rule G(6) explains that it permits “the government to file limited
interrogatories at any time after a claim is filed to gather information that
12 No. 14-3451
The Supreme Court recently clarified and narrowed
standing doctrine. In Lexmark, the Court reminded us that
federal courts have a “virtually unflagging” obligation to de-
cide cases within their Article III jurisdiction. 134 S. Ct. at
1386, quoting Sprint Communications, Inc. v. Jacobs, 571 U.S.
—, 134 S. Ct. 584, 591 (2013). The Court also cautioned that
labels like “prudential standing” and “statutory standing”
are misleading and should be avoided. Id. at 1387 n.4. Rather
than relying on these supposed standing concepts that are
not rooted in Article III, we should ask whether Valdes falls
within the class of people whom Congress has authorized to
contest a forfeiture under Rule G. See id. at 1387. The answer
is yes.
Apart from Rule G’s textual silence on any requirement
to prove “legitimate” ownership, the most compelling rea-
son to reject such a requirement as part of the Rule G stand-
ing inquiry is that it would undermine the statutes govern-
ing civil forfeiture. The Civil Asset Forfeiture Reform Act of
2000 (CAFRA) placed the burden on the government to
prove by a preponderance of evidence that property is for-
feitable. 18 U.S.C. § 983(c). CAFRA thus shifted the burden
of proof in civil forfeiture actions by “forcing the Govern-
bears on the claimant’s standing.” While claimants objected to the scope
of the interrogatories, Valdes did assert, under oath and unequivocally,
that he owns the defendant property and that it was in his possession
when it was seized. These facts are sufficient for a claimant to establish
standing at summary judgment. Further special interrogatories and re-
sponses were not necessary to determine standing, so the district court
would have abused its discretion if it had granted the motion to strike on
this alternate ground. See United States v. $154,853 in U.S. Currency, 744
F.3d 559, 564 (8th Cir. 2014) (reversing decision to strike claim for seized
currency that claimant said he owned).
No. 14-3451 13
ment to prove that property is subject to forfeiture as op-
posed to forcing the property owner to prove his property is
not subject to forfeiture.” United States v. $125,938.62, 537
F.3d 1287, 1293 (11th Cir. 2008), quoting United States v. Bow-
man, 341 F.3d 1228, 1236 (11th Cir. 2003).
Rule G places the burden on the claimant to prove by a
preponderance of evidence that he has standing. Rule
G(8)(c)(ii)(A) adds that a motion to strike a claim because the
claimant lacks standing “must be decided before any motion
by the claimant to dismiss the action.” And Rule
G(8)(c)(ii)(B) provides that a motion to strike “may be pre-
sented … as a motion to determine after a hearing or by
summary judgment whether the claimant can carry the bur-
den of establishing standing.”
If we were to read Rule G to require a claimant to
demonstrate “legitimate” ownership, we would thus nullify
a central reform of CAFRA. Putting the pieces together from
the previous two paragraphs makes this easy to see. The
government insists that demonstrating legitimate ownership
is an indispensable part of a claimant “establishing standing
by a preponderance of the evidence.” Rule G(8)(c)(ii)(B).
Demonstrating legitimate ownership, though, is tantamount
to demonstrating that “property is not subject to forfeiture.”
$125,938.62, 537 F.3d at 1293. Any time the government
moves for summary judgment on standing in a civil forfei-
ture action, then, the claimant would have to “carry the bur-
den” of establishing by a preponderance of the evidence that
his property is not subject to forfeiture. That would effective-
ly shift the burden of proof from the government back to the
claimant, contrary to 18 U.S.C. § 983(c). E.g., United States v.
$148,840 in U.S. Currency, 521 F.3d 1268, 1274 (10th Cir. 2008)
14 No. 14-3451
(reversing summary judgment for government where dis-
trict court required proof of legitimate ownership to show
standing).
Such erroneous melding of standing and the merits in
civil forfeiture actions would undermine other legal protec-
tions for claimants, as well. Claimants would be deprived of
their right to a jury trial under Rule G(9). See generally Unit-
ed States v. One 1976 Mercedes Benz 280S, Serial No.
11602012072193, 618 F.2d 453, 466 (7th Cir. 1980) (“The con-
clusion appears inescapable that both English and American
practice prior to 1791 definitely recognized jury trial of in
rem actions at common law as the established mode of de-
termining the propriety of statutory forfeitures on land for
breach of statutory prohibitions.”). Standing is decided by
judges rather than juries. If deciding standing meant decid-
ing “legitimate” ownership, then judges would functionally
be deciding forfeitability, as discussed above. Further, if
claimants obtain discovery it would often be only by the
grace of the government. The government would rarely be
put to its proof in a civil forfeiture action unless it elected not
to file a summary judgment motion challenging standing,
and it would be the rare case indeed where a claimant could
convince a district court that he needed discovery to estab-
lish his own standing.
The procedural framework for civil forfeiture actions
makes it particularly important that standing serve a “truly
threshold” function in these cases. See United States v.
$557,933.89, More or Less, in U.S. Funds, 287 F.3d 66, 79 (2d
Cir. 2002) (Sotomayor, J.). To the extent there is overlap be-
tween a tort plaintiff proving causation as an element of his
cause of action and proving causation as an element of his
No. 14-3451 15
standing to pursue that cause of action in federal court, we
know that the “plaintiff bears the burden of proof” as to
both and must produce “the manner and degree of evidence
required at the successive stages of the litigation.” Id., quot-
ing Lujan, 504 U.S. at 561. “It must be remembered, however,
that in a civil forfeiture action the government is the plaintiff,
and it is the government’s right to forfeiture that is the sole
cause of action adjudicated.” Id. “If the government fails to
meet its burden of proof … the claimant need not produce
any evidence at all.” Id. Standing must be clearly separated
from the merits in civil forfeiture cases so that the govern-
ment is not relieved of its burden to “prove that property is
subject to forfeiture.” See $125,938.62, 537 F.3d at 1293.
Claimants Valdes and Brown have established standing
to assert their claims to the defendant currency. The claim-
ants were not required to show that their claims are “legiti-
mate.” That is a merits question, and presumably one for a
jury to decide. The judgment of the district court is
REVERSED and the case is REMANDED for proceedings
consistent with this opinion.