United States Of America v. Real Property and Improvements Located at 1419 Camellia Drive, East Palo Alto, California, Assessor's Parcel Number 063-412-010

Filing 33

ORDER by Judge Claudia Wilken DENYING 14 Plaintiff's Motion to Stay and DENYING 16 Motion to Expunge Lis Pendens (cwlc2, COURT STAFF) (Filed on 10/13/2009)

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1 2 3 4 5 6 7 8 9 10 United States District Court For the Northern District of California 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 v. REAL PROPERTY AND IMPROVEMENTS LOCATED AT 1419 CAMELLIA DRIVE, EAST PALO ALTO, CALIFORNIA, ASSESSOR'S PARCEL NUMBER 063-412-010, Defendant. / The government moves to stay this civil forfeiture action pursuant to 18 U.S.C. 981(g)(1). Monetta James opposes this UNITED STATES OF AMERICA, Plaintiff, IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA No. C 09-02577 CW ORDER DENYING PLAINTIFF'S MOTION TO STAY AND MS. JAMES'S MOTION TO EXPUNGE LIS PENDENS (Docket Nos. 14, 16) motion and moves to expunge the notice of lis pendens filed by the government on June 19, 2009. motion. The government opposes Ms. James's Having The matter was heard on September 29, 2009. considered oral argument and all of the papers submitted by the parties, the Court DENIES both the government's motion to stay and Ms. James's motion to expunge the notice of lis pendens. 1 2 3 4 5 6 7 8 9 10 United States District Court For the Northern District of California 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 BACKGROUND On March 4, 2009, a federal grand jury filed an indictment against Lowell Curtis James, Christine Ann James, Desean Gardner and thirty-four other defendants for their alleged participation in a drug trafficking conspiracy. The indictment included a criminal forfeiture allegation against the property at 1419 Camellia Drive, East Palo Alto, CA, Assessor's Parcel Number 063-412-010. Based on the indictment, the government filed a notice of lis pendens on the property in March, 2009. Ms. James filed a motion to expunge this At a May 21, 2009 hearing notice of lis pendens on April 14, 2009. on the motion before the Honorable Wayne D. Brazil, the government decided that a civil forfeiture action would be more appropriate. Judge Brazil stayed proceedings on Ms. James's motion pending the government's filing of the instant action. Thereafter, the Court adopted Judge Brazil's recommendation that Ms. James's motion be dismissed without prejudice on the condition that the government diligently prosecuted the instant civil forfeiture action. United States v. Gardner, et al., No. 09-0203 (N.D. Cal.) (Jul. 24, 2009 order adopting report and recommendation re: motion to expunge lis pendens). On June 10, 2009, the government filed the instant civil forfeiture complaint under 21 U.S.C. 881(a)(7). filed a notice of lis pendens on June 19, 2009. The government In support of its complaint, the government alleges that the above-mentioned criminal defendants used the property during their alleged conspiracy. Specifically, the complaint states that Desean Gardner conducted drug sales on or in the vicinity of the property between March 18, 2008 and December 3, 2008. The complaint also states that on 2 1 2 3 4 5 6 7 8 9 10 United States District Court For the Northern District of California 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 January 7, 2009, Desean Gardner stopped at the property to obtain drugs for later sale. Because of the common issues, the Court (Docket No. related this case to the underlying criminal case. 13.) On June 30, 2009, Ms. James claimed an interest in the property and filed an answer to the civil forfeiture complaint. (Docket Nos. 7-8.) On September 3, 2009, she filed, pursuant to (Docket No. state law, a motion to expunge the civil lis pendens. 16.) DISCUSSION I. Motion to Stay In opposing the government's motion to stay, Ms. James suggests that she will assert an innocent owner defense in this action. See Opp'n at 15; Reply at 6; James Decl. at 3-5. To assert this defense, Ms. James must show by a preponderance of the evidence that she did not know of the conduct giving rise to forfeiture or; upon learning of the conduct giving rise to the forfeiture, did all that reasonably could be expected under the circumstances to terminate such use of the property. Id. at 983(d)(2)(A)(i)-(ii). The government moves to stay this case because it asserts that any discovery here will prejudice its ability to prosecute the Gardner case. "Upon the motion of the United States, the court shall stay the civil forfeiture proceeding if the court determines that civil discovery will adversely affect . . . the prosecution of a related criminal case." 18 U.S.C. 981(g)(1). To determine whether a criminal case is related to the civil proceeding, "the court shall 3 1 2 3 4 5 6 7 8 9 10 United States District Court For the Northern District of California 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 consider the degree of similarity between the parties, witnesses, facts, and circumstances involved in the two proceedings, without requiring an identity with respect to any one or more factors." Id. 981(g)(4). The related criminal case must also be in Id. progress at the time a stay is requested. A stay may be unnecessary "if a protective order limiting discovery would protect the interest of one party without unfairly limiting the ability of the opposing party to pursue the civil case." Id. 981(g)(3). This alternative is unavailable, however, "if the effect of such [a] protective order would be to allow one party to pursue discovery while the other party is substantially unable to do so." Id. At this stage, the government does not show the necessity of staying this case. To support its motion, the government asserts that the factual allegations underlying both cases are "nearly identical," and notes that the Court related the two cases. It further asserts that it "may need to depose" various witnesses to develop its affirmative case. Showing similarities between the cases and predicting what type of discovery may occur, however, is insufficient. Such a result would undercut Congress's intent to provide an innocent owner defense, which Ms. James asserts here, and to create "a more just . . . procedure for Federal civil forfeitures" under the Civil Asset Forfeiture Reform Act of 2000. Pub. L. No. 106-185, 114 Stat. 202. In the event that civil discovery is propounded that would intrude upon the government's criminal case, the government can move for a protective order or renew its motion to stay. The government cites United States v. $247,052.54, 2007 WL 4 1 2 3 4 5 6 7 8 9 10 United States District Court For the Northern District of California 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2009799 (N.D. Cal.). However, $247,052.54 is distinguishable. There, the court denied a criminal defendant-claimant's motion to lift an existing stay on a civil forfeiture case. Id. at *1. The criminal and civil cases had factual allegations of drug sales and distribution in common, and, as here, the government claimed that it would have to prove the same facts in the civil case as it would in the criminal case. Id. at *2. But unlike the claimant in $247,052.54, Ms. James is not a defendant in the criminal action. The $247,052.54 court was primarily concerned with the criminal defendant-claimant deposing government witnesses in the forfeiture action in advance of the criminal trial, giving the defendantclaimant insight into the government's criminal trial strategy. Id. Although Ms. James's son and daughter-in-law are defendants in the criminal trial, an appropriate protective order can be obtained if necessary. The government claims that a protective order would be insufficient. However, its arguments rest upon speculation as to Until discovery is sought, the what depositions may be noticed. Court cannot determine whether a protective order would be insufficient. The government also argues that it will not be able to complete its discovery while the criminal case is pending because the criminal defendants would assert their Fifth Amendment rights. While this is true, it does not mean that some discovery and motion practice could not proceed in the interim. denies the government's motion to stay. II. Motion to Expunge Notice of Lis Pendens Ms. James moves to expunge the notice of lis pendens, claiming 5 Accordingly, the Court 1 2 3 4 5 6 7 8 9 10 United States District Court For the Northern District of California 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 that the government cannot establish a real property claim; the claim lacks probable validity; notice has not been properly served, filed or recorded; and there is a denial of due process.1 In the alternative, Ms. James requests an undertaking of $250,000 for the government to maintain the notice. Ms. James also seeks $3,150 in attorneys' fees, in the event she prevails on this motion. Ms. James appears to assert that lis pendens is improper because a forfeiture action does not constitute a "real property claim." See James's Mem. of P&A 9-11. However, California Penal Code 186.4 requires a prosecuting agency to file a lis pendens notice in criminal forfeiture actions, thereby implying that a forfeiture claim suffices as real property claim. The Court accordingly finds the government's complaint to assert a sufficient property claim. Under California law, a notice of lis pendens is filed "to give constructive notice of an action affecting real property to persons who subsequently acquire an interest in that property, so that the judgment in the action will be binding on such persons even if they acquire their interest before the judgment is actually rendered." Bishop Creek Lodge v. Scira, 46 Cal. App. 4th 1721, This notice clouds title, "effectively preventing 1733 (1996). sale or encumbrance until the litigation is resolved or the lis pendens is expunged." Amalgamated Bank v. Superior Court, 149 Cal. Such notice is filed by the claimant App. 4th 1003, 1011 (2007). 1 The Court asserts supplemental jurisdiction over the state law motion because it is transactionally related to the government's federal forfeiture action. See 28 U.S.C. 1367; Adams v. United States, 2008 WL 5114483, *7 (E.D. Cal.) ("[A]ny jurisdiction to consider [the] . . . motion to expunge would necessarily arise out of 28 U.S.C. 1367 . . . ."). 6 1 2 3 4 5 6 7 8 9 10 United States District Court For the Northern District of California 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 pursuing the action. Cal. Civ. Proc. Code 405.1. Here, the government is the claimant for the purposes of the expungement statutes because it filed the civil forfeiture action. After the notice is filed, a party with an interest in the real property can file a motion to expunge. Id. 405.30. The notice must be expunged "if the court finds that the claimant has not established by a preponderance of the evidence the probable validity of the real property claim." Id. 405.32. "Probable validity" exists when "it is more likely than not that the claimant will obtain a judgment . . . on the claim." Id. 405.3. The Id. burden of proof falls on a claimant to show probable validity. 405.30. A court's probable validity determination requires "a Amalgamated Bank, 149 Cal. judicial determination of the merits." App. 4th at 1012. A court shall award reasonable attorneys' fees to the party prevailing on an expungement motion, unless it finds that "the other party acted with substantial justification or that other circumstances make the imposition of attorney's fees and costs unjust." Cal. Civ. Proc. Code 405.38. The government incorrectly characterizes Ms. James's motion to expunge the lis pendens as a motion to dismiss the forfeiture action under Federal Rule of Civil Procedure 12. to Expunge at 1. See Opp'n to Mot. The government asserts that Ms. James failed to However, a identify federal authority supporting her motion. notice of lis pendens is filed in a county records office pursuant to state law. Thus, California law applies when analyzing the See, e.g., Orange County v. government's lis pendens claim. Hongkong & Shanghai Banking Corp., 52 F.3d 821, 823-24 (9th Cir. 1995) (applying California lis pendens standard); Oliver v. NDEX 7 1 2 3 4 5 6 7 8 9 10 United States District Court For the Northern District of California 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 West, LLC, 2009 WL 2486314 (E.D. Cal.); Ritchie v. Cmty. Lending Corp., 2009 WL 2486575 (C.D. Cal.); see also Cal. Civ. Proc. Code 405.5. The government must show that it meets the "probable validity" standard under California law. The government satisfies the California standard. The verified complaint contains allegations regarding criminal activity at the property. These allegations arise out of the criminal Thus, the government indictment and are verified by an FBI agent. establishes that its civil forfeiture claim has probable validity. The lis pendens notice shall not be expunged and attorneys' fees are not warranted. Ms. James alternatively requests that the Court require the government to provide an undertaking as a condition of maintaining the lis pendens. is denied. III. Evidentiary Objections Ms. James makes evidentiary objections to paragraphs eight through twenty-two of the government's civil forfeiture complaint submitted in support of its lis pendens notice. As stated above, Verified See Cal. Civ. Proc. Code 405.34. This request these are factual allegations verified by an FBI agent. allegations can serve as evidence. See Johnson v. Meltzer, 134 The Court therefore F.3d 1393, 1399-1400 (9th Cir. 1998). OVERRULES Ms. James's objections. 8 1 2 3 4 5 6 7 8 9 10 United States District Court For the Northern District of California 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Dated: 10/13/2009 IT IS SO ORDERED. CONCLUSION For the foregoing reasons, the Court DENIES the government's Motion to Stay. (Docket No. 14) If the government finds that civil discovery necessitates a protective order, it may move for one when such discovery is propounded. The Court DENIES Ms. James's Motion to Expunge Lis Pendens and alternative request for the government to provide a bond (Docket No. 16). CLAUDIA WILKEN United States District Judge 9

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