United States v. Grossi

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS FILED
FOR THE NINTH CIRCUIT DEC 18 2009
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
UNITED STATES OF AMERICA, No. 07-10272
Plaintiff - Appellee, D.C. No. CR-04-40127-DLJ
v.
MEMORANDUM *
THOMAS GROSSI, Sr.,
Defendant - Appellant.
UNITED STATES OF AMERICA, No. 07-10430
Plaintiff - Appellant, D.C. No. CR-04-40127-DLJ
v.
THOMAS GROSSI, Sr.,
Defendant - Appellee.
UNITED STATES OF AMERICA, No. 07-16627
Plaintiff - Appellant, D.C. No. CV-04-03055-DLJ
v.
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
2638 MARKET STREET, OAKLAND,
CALIFORNIA; $608,916.58 IN U.S.
CURRENCY, as substitute RES for real
property located at 2638 Market Street,
Oakland, California,
Defendants,
LAURETTA WEIMER; THOMAS
GROSSI,
Claimants - Appellees.
On Appeal from the United States District Court
for the Northern District of California
D. Lowell Jensen, District Judge, Presiding
Argued and Submitted November 3, 2009
San Francisco, California
Before: HAWKINS and THOMAS, Circuit Judges, and TRAGER, ** District
Judge.
Thomas Grossi, Sr. (“Grossi”) appeals from a criminal order of forfeiture of
property issued by the United States District Court for the Northern District of
California (“the district court”). Following a jury trial, Grossi was convicted of
maintaining the property at 2638 Market Street, Oakland, CA (“the Market Street
property”) for the manufacture of marijuana and was ordered to forfeit his entire
**
The Honorable David G. Trager, Senior United States District Judge
for the Eastern District of New York, sitting by designation.
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interest in the proceeds from the forfeiture sale of the Market Street property. The
district court calculated this amount at $345,347.28, but ultimately reduced the
forfeiture award by $87,666.80, representing the amount Grossi paid to his sister
Lauretta Weimer (“Weimer”) under a promissory note secured by the Market
Street property. Grossi asserts that the order of forfeiture is an excessive fine in
violation of the Eighth Amendment. The government cross-appeals, arguing that
the district court erred by applying the doctrine of equitable subrogation to reduce
the forfeiture award by $87,666.80.
We review de novo the district court’s interpretation of federal forfeiture
law, United States v. Casey, 444 F.3d 1071, 1073 (9th Cir. 2006), as well as its
determination of whether a forfeiture constitutes an excessive fine, United States v.
Bajakajian, 524 U.S. 321, 336 n.10 (1998). The district court’s factual findings are
reviewed for clear error, United States v. Nava, 404 F.3d 1119, 1127 n.3 (9th Cir.
2005), and its choice of equitable remedies is reviewed for abuse of discretion,
Kenney v. United States, 458 F.3d 1025, 1032 (9th Cir. 2006). We reverse the
district court’s application of equitable subrogation to reduce Grossi’s forfeiture by
$87,666.80 and affirm the district court’s order of forfeiture.
The government argues that the district court erred in reducing Grossi’s
order of forfeiture by $87,666.80, which represents the balance of the principal that
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Grossi owed to Weimer on the last date of the illegal acts. Because Grossi repaid
that amount to Weimer prior to the ancillary hearing in which she sought
compensation for her interest in the Market Street property, the district court held
that Grossi was entitled to collect that amount from the forfeiture sale proceeds.
As Weimer still had an interest in the Market Street property on the date she
filed her petition under 21 U.S.C. § 853(n), Weimer had standing to seek relief
through the ancillary hearing. See Hubbard v. 7-Eleven, Inc., 433 F. Supp. 2d
1134, 1141 (S.D. Cal. 2006) (“Standing is measured at the time the complaint is
filed.”) (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 569 n.4 (1992));
Johnson v. Bd. of Regents of Univ. Of Ga., 263 F.3d 1234, 1267 (11th Cir. 2001)
(“[A] party’s standing to sue is generally measured at the time of the complaint,
with the effect of subsequent events generally analyzed under mootness
principles.”). However, the district court erred in applying the doctrine of
equitable subrogation to allow Grossi to recover $87,666.80 from the forfeiture
proceeds. Under California law, the doctrine of equitable subrogation is only
available to those who repay a loan for which another is primarily liable. See
Caito v. United Calif. Bank, 576 P.2d 466, 471 (Cal. 1978) (equitable subrogation
requires that the “debt paid . . . be one for which the subrogee was not primarily
liable”); In re Hamada, 291 F.3d 645, 651 (9th Cir. 2002) (person claiming
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equitable subrogation “could not have been primarily liable for the debt he paid”)
(quoting Fidelity Nat’l Title Ins. Co. v. U.S. Dept. of the Treasury, 907 F.2d 868,
870 (9th Cir. 1990)). In this case, Grossi repaid a loan for which he himself was
primarily liable. Grossi was a debtor, not a subrogee, at the time he repaid
Weimer, and, therefore, cannot rely on equitable subrogation to recover $87,666.80
from the forfeiture sale proceeds. Furthermore, Weimer could not receive the
$87,666.80 because Grossi’s repayment of his loan extinguished her interest in the
Market Street property. See Alliance Mortgage Co. v. Rothwell, 900 P.2d 601, 606
(Cal. 1995) (“A security interest cannot exist without an underlying obligation, and
therefore a mortgage or deed of trust is generally extinguished by . . . payment . . .
in an amount which satisfies the lien.”).
As to Grossi’s appeal, although there is no rigid formula for determining
when a forfeiture is excessive in violation of the Eighth Amendment, United States
v. Mackby, 339 F.3d 1013, 1016 (9th Cir. 2003), we have traditionally considered
four factors: “(1) the nature and extent of the crime, (2) whether the violation was
related to other illegal activities, (3) the other penalties that may be imposed for the
violation, and (4) the extent of the harm caused.” United States v. $100,348.00 in
U.S. Currency, 354 F.3d 1110, 1121-22 (9th Cir. 2004). Here, Grossi’s offense
was clearly both serious and quite extensive. Grossi engaged in a course of
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conduct involving several co-defendants and two other large-scale marijuana grow
operations. The Market Street property yielded thousands of dollars in profits
before it was shut down, and one co-defendant anticipated that future profits would
be “in excess of $100,000 every several months.” Furthermore, the relevant
criminal statute and Sentencing Guidelines permit fines in excess of $345,347.28
for Grossi’s crime. See 21 U.S.C. § 856(b); U.S.S.G. § 5E1.2(c)(4). As such,
Grossi’s forfeiture is presumptively constitutional. See Bajakajian, 524 U.S. at
336 (“[J]udgments about the appropriate punishment for an offense belong in the
first instance to the legislature.”); United States v. Wallace, 389 F.3d 483, 486 (5th
Cir. 2004) (“[I]f the value of the forfeited property is within the range of fines
prescribed by Congress, a strong presumption arises that the forfeiture is
constitutional.”) (quoting United States v. 817 N.E. 29th Drive, 175 F.3d 1304,
1309 (11th Cir. 1999)). Therefore, Grossi’s forfeiture is upheld.
On Grossi’s appeal, AFFIRMED; on the government’s cross-appeal,
REVERSED.
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