United States v. Thomas Grossi, Sr.

FILED
NOT FOR PUBLICATION JUN 01 2012
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U .S. C O U R T OF APPE ALS
FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA,
Plaintiff-Appellee, No. 10-17821
D.C. CR 04-40127 DLJ
v.
MEMORANDUM *
THOMAS GROSSI, Sr.,
Claimant-Appellant,
and
LAURETTA WEIMER;
ALBERT B. DEL MASSO,
Claimants,
and
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.
Appeal from the United States District Court
for the Northern District of California
D. Lowell Jensen, District Judge, Presiding
*
This disposition is not appropriate for publication and is not precedent except as
provided by 9th Cir. R. 36-3.
Argued and Submitted February 16, 2012
San Francisco, California
Before: TASHIMA and SILVERMAN, Circuit Judges, and ADELMAN, District
Judge.**
In June 2004, the government discovered that marijuana was being grown in an
Oakland warehouse owned by Thomas Grossi, Sr., and commenced a civil forfeiture
action against the property. See 18 U.S.C. § 881(a)(7). Albert Del Masso and Lauretta
Weimer asserted that they were innocent owners who had loaned Grossi $250,000 and
$100,000, respectively, and had security interests in the warehouse which the
forfeiture could not reach. The parties agreed to sell the warehouse and substitute the
purchase price, $608,916.58, for the res. In the meantime, the government charged
and convicted Grossi of using his property to cultivate marijuana, 21 U.S.C. § 856(a),
and sought a criminal forfeiture of his interest in the $608,916.58, see 21 U.S.C. §
853(a)(2). The forfeiture actions were then consolidated.
The government settled with Del Masso, agreeing that he should receive
$250,000 plus $13,569.30 in interest. The district court determined that Weimer was
an innocent owner and that the forfeiture should not apply to her interest. The court
further determined that as of June 4, 2004 (the date the property was last used for
criminal activity, see 21 U.S.C. § 853(n)(6)), Weimer’s interest was $87,666.80
**
The Honorable Lynn S. Adelman, District Judge for the United States District
Court for the Eastern District of Wisconsin, sitting by designation.
2
($100,000 less $12,333.80 that Grossi had paid back). Grossi continued to pay
Weimer back after June 4, 2004, eventually retiring the balance. The court found that,
had Grossi not paid off Weimer’s interest, Weimer would have been entitled to
$87,666.80, but because she had been fully paid, she was not entitled to any of the
proceeds of the sale of the warehouse. However, the court concluded that to allow
the government to keep the money representing her interest would produce a windfall,
and it used the doctrine of equitable subrogation to reduce Grossi’s forfeiture by
$87,666.80. Thus, the court ordered that Grossi forfeit $257,680.48.
Grossi appealed, arguing that the forfeiture violated the Eighth Amendment,
and the government cross-appealed, arguing that the district court wrongly applied the
doctrine of equitable subrogation. A panel of this court rejected Grossi’s Eighth
Amendment claim and also determined that the district court erred in applying the
equitable subrogation doctrine. On the latter issue the panel wrote:
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. 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. 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
3
interest in the Market Street property.
United States v. Grossi, 359 Fed. App’x. 830, 831-32 (9th Cir. 2009) (internal
citations omitted).
When the case returned to the district court, Grossi argued that the government
was not entitled to the $87,666.80 representing Weimer’s interest because the only
interest it had acquired in the forfeiture proceeding was his interest. The district court
concluded that based on the panel’s order it had no jurisdiction to entertain further
arguments but only to perform the ministerial task of entering the order of forfeiture.
Grossi disagrees with this decision and now appeals.
The government first argues that the mandate precluded further action by the
district court. The panel’s order and mandate did not call for further proceedings but
also did not foreclose them. And our cases hold that a reversal without a formal
remand does not necessarily bar the district court from acting when it receives the
case. See, e,g., United States v. Cote, 51 F.3d 178, 181-83 (9th Cir. 1995); Caldwell
v. Puget Sound Elec. Apprenticeship & Training Trust, 824 F.2d 765, 767 (9th Cir.
1987).
The government next argues that further consideration of the amount that
Grossi must forfeit is barred by the law of the case doctrine, which prevents a court
from revisiting an issue it has explicitly or necessarily decided. See, e.g., United States
4
v. Park Place Assoc., Ltd., 563 F.3d 907, 925 (9th Cir. 2009). The previous panel did
not either explicitly or by necessary implication address Grossi’s present argument,
that the $87,666.80 at issue was never forfeited in the first place because it was not
part of his interest. The panel’s order focused only on the remedy that the district
court employed to prevent the government from receiving an $87,666.80 windfall.
Nor did the panel implicitly decide that the government had a right to Weimer’s
$87,866.80 interest in the warehouse. The panel decided only that when Grossi paid
Weimer back, Weimer’s interest was extinguished, and that Grossi could not use
equitable subrogation to retrieve the money he had paid her.
Next, the government argues that Grossi waived his present argument by not
raising it in his first appeal. This contention appears to contradict the government’s
law of the case argument; if Grossi didn’t raise his present argument, the panel could
not have implicitly rejected it. In any case, we believe that what happened here was
that in his first appeal Grossi raised a variation of his current claim, but that the panel
didn’t address it. Under these circumstances, Grossi is entitled to have the issue
determined. See, e..g., Snow-Erlin v. United States, 470 F.3d 804, 807 (9th Cir. 2006)
(stating that the district court need only respect what the higher court decided, not
what it did not decide). The law of the case doctrine is judge-made and discretionary,
allowing for the flexibility needed to obtain a fair and just result. We therefore
5
conclude that neither the district court nor we are foreclosed from considering the
merits of Grossi’s contention.
Turning to the merits of Grossi’s argument, the criminal forfeiture statute
“permits the forfeiture of the defendant’s interests only, not the property of innocent
parties.” See United States v. Nava, 404 F.3d 1119, 1124 (9th Cir. 2005). Thus, when
the defendant owns real property with innocent others, the statute may require a partial
forfeiture. See Pacheco v. Serendesky, 393 F.3d 348, 355 (2d Cir. 2004) (citing
United States v. Totaro, 345 F.3d 989, 999 (8th Cir. 2003); United States v. O'Dell,
247 F.3d 655, 680 (6th Cir. 2001); United States v. Kennedy, 201 F.3d 1324, 1329
(11th Cir. 2000); United States v. Lavin, 942 F.2d 177, 185 (3d Cir. 1991); United
States v. Certain Real Property Located at 2525 Leroy Lane, West Bloomfield,
Michigan, 910 F.2d 343, 350-51 (6th Cir. 1990)). As the Pacheco court
acknowledged, “partial forfeitures may occasionally make for strange bedfellows –
such as making the government co-owners of real property with the spouse of a
criminal defendant – [but] the alternative could give the government an undeserved
windfall and deny an innocent third party her valid property interest.” 393 F.3d at
355. In the present case, under Nava and Pacheco, the government obtained only
Grossi’s interest in the warehouse, not Weimer’s.
The government argues that § 853(h) bars Grossi’s claim. Section 853(h)
6
provides that “ property ordered forfeited under this section . . . shall not revert to the
defendant.” The government argues that returning the $87,666.80 to Grossi would
cause forfeited property to revert to him in violation of the statute. But this is wrong
because the $87,666.80 represents Weimer’s interest and, therefore, was never
properly part of the property subject to forfeiture in the first place.
Finally, equity strongly supports Grossi’s claim. To deny Grossi the
$87,666.80 would not only grant the government a windfall but penalize him for
paying his debt to Weimer rather than defaulting on it.
For the foregoing reasons, we reverse the order of the district court. The district
court previously determined that Weimer qualified as an innocent owner, and the
government does not challenge this determination. We therefore remand for entry of
a final order of forfeiture in the amount of $257,680.48, with $87,666.80 refunded to
Grossi.
REVERSED and REMANDED.
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FILED
United States v. Grossi, 10-17821 JUN 01 2012
MOLLY C. DWYER, CLERK
U .S. C O U R T OF APPE ALS
SILVERMAN, Circuit Judge, dissenting:
The district court entered a preliminary forfeiture order for the full forfeiture
sales proceeds, then entered a final forfeiture order reducing the amount by
$87,666.80. Grossi appealed the forfeiture; the government cross-appealed the
reduction. We reversed the reduction but otherwise upheld the forfeiture, and we
did so as explicitly as possible: “Grossi’s forfeiture is upheld. On Grossi’s appeal,
AFFIRMED; on the government’s cross-appeal, REVERSED.”
It is hard to imagine how an appellate ruling could have been any clearer or
more final. There was no remand, no equivocation, no directions for further
proceedings, nothing left to be resolved. The forfeiture was upheld, period, except
that the reduction in Grossi’s favor was disallowed.
When the case returned to the district court for implementation of our
mandate, and despite having lost both his appeal and the government’s cross-
appeal, Grossi took another stab at getting his $87,600 reduction. As Grossi
himself put it, “The Court left open the question of whether the $87,600 interest is
subject to forfeiture.” That is flatly wrong. There is no such opening. When our
-2-
prior panel ruled that the reduction was disallowed and the “forfeiture is upheld,”
that meant that the reduction was disallowed and the forfeiture upheld. Unless
matters are left open by the mandate, “the district court cannot give relief beyond
the scope of that mandate.” Caldwell v. Puget Sound Elec. Apprenticeship &
Training Trust, 824 F.2d 765, 767 (9th Cir. 1987).
The majority says that the previous panel did not explicitly address Grossi’s
present legal argument about the $87,600 reduction. Perhaps, but Grossi failed to
raise it the last time around even though he could have. Grossi had every right, in
responding to the government’s cross-appeal, to defend the district court’s ruling in
his favor on any ground supported by the record. See United States v. Craighead,
539 F.3d 1073, 1080 n.2 (9th Cir. 2008). He could have argued in the first appeal,
as he does now, that his claim to the $87,600 reduction was justified by some other
legal theory supposedly supported by the evidence, but he didn’t.
The district court was clearly correct in declining to do anything other than
give effect to the previous panel’s mandate. I would affirm.