Khudainatov et al v. United States of America

Filing 13

ORDER Denying 1 Motion for Return of Seized Property and Dismissing Case. Signed by Judge Thomas J. Whelan on 11/13/2023. (exs)

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1 2 3 4 5 6 7 8 9 10 UNITED STATES DISTRICT COURT 11 SOUTHERN DISTRICT OF CALIFORNIA 12 13 14 15 16 17 Case No.: 3:23-cv-01946-W-SBC EDUARD YURIEVICH KHUDAINATOV, et al., ORDER DENYING MOTION FOR RETURN OF PROPERTY [Doc. 1] AND DISMISSING CASE Petitioners, v. UNITED STATES OF AMERICA, Respondent. 18 19 20 On or about October 22, 2023, Petitioners initiated this case by filing a Motion for 21 Return of Seized Property Pursuant to Federal Rule of Criminal Procedure 41(g) (“Rule 22 41(g)”). (“Motion,” [Doc. 1].) On October 30, 2023, the United States (“Respondent”) 23 filed its response in opposition to the Motion (“Opposition,” [Doc. 8]) requesting the 24 Court deny the Motion and dismiss this Case. Pursuant to the Court’s previous order 25 (“Scheduling Order,” [Doc. 11]), Petitioners filed their reply (“Reply,” [Doc. 12]) to 26 Respondent’s Opposition on November 6, 2023. 27 28 1 3:23-cv-01946-W-SBC 1 The Court decides the matter on the papers submitted and without oral argument. 2 See Civ. L.R. 7.1(d)(1). For the reasons stated below, the Court DENIES the Motion and 3 ORDERS this case DISMISSED. 4 5 I. 6 BACKGROUND As alleged, in April of 2022, the Fijian authorities seized the luxury superyacht 7 Amadea in Fiji at the request of the United States. (Motion at 25 1.) The seizure was 8 executed pursuant to a warrant (“Warrant”) issued by U.S. Magistrate Judge G. Michael 9 Harvey of the United States District Court for the District of Columbia. (Motion at 25.) 10 The application for the Warrant was supported by the affidavit of Federal Bureau of 11 Investigation Special Agent Timothy Bergen—which stated that the Amadea was 12 beneficially owned by sanctioned Russian billionaire Suleiman Kerimov and that Mr. 13 Kerimov had committed numerous violations of United States sanctions laws.2 (Motion 14 at 23-25; see Opposition at 3.) After its seizure, Fijian authorities turned the Amadea 15 over to the United States and who thereafter transported it to San Diego, California— 16 where it has remained ever since. (Motion at 25.) 17 On or about October 22, 2023, Petitioners initiated this case by filing a Motion for 18 Return of Seized Property Pursuant to Federal Rule of Criminal Procedure 41(g). In the 19 Motion, Petitioners argue that they are the true owners of the Amadea, not Mr. Kerimov. 20 (Motion at 11-12.) And thus, because they are not sanctioned individuals and have not 21 engaged in any unlawful activity, Petitioners argue that the Amadea must be returned to 22 them. (Motion at 12.) On the other hand, the United States asserts that Petitioners are 23 24 25 26 27 28 1 Since Respondent’s Opposition does not contain page numbers in its footer, all citations to filings in this order are to the ECF page numbers. 2 Petitioners have not provided the Court with a copy of the Warrant, the application for the Warrant, or Special Agent Bergen’s affidavit. Accordingly, for purposes of this Order, the Court relies entirely on the Motion’s allegations regarding the content of the Warrant and its supporting documents. 2 3:23-cv-01946-W-SBC 1 merely “straw owner[s]” of the Amadea who hold it on behalf of Mr. Kerimov. (Motion 2 at 23-24; see Opposition at 3.) 3 According to Respondent, the parties entered into a formal litigation “standstill” 4 after the initial seizure of the Amadea, whereby the parties agreed they would not file any 5 actions regarding the Amadea until October 23, 2023. (Opposition at 3.) Respondent 6 asserts it informed Petitioners on October 20, 2023 that it would be “imminently” filing a 7 civil forfeiture action against the Amadea. (Opposition at 3.) Accordingly, October 23, 8 2023 (the day the litigation standstill expired), the United States filed a civil forfeiture 9 action against the Amadea in the United States District Court for the Southern District of 10 New York (the “Civil Forfeiture Action”).3 However—according to Respondent— 11 Petitioners tried to beat the United States to the punch by filing the present Motion in the 12 Southern District of California at approximately 9:05 p.m. PDT on Sunday, October 22, 13 2023. (Opposition at 3-4.) 14 Subsequently, Respondent filed its Opposition to the Motion in this case, arguing 15 that: (1) the pending Civil Forfeiture Action divests this Court of jurisdiction; (2) that 16 venue is improper in the Southern District of California; and (3) that the Motion fails the 17 required Ramsden factors—thus depriving the Court of equitable jurisdiction. 18 (Opposition 4-10.) 19 20 II. LEGAL STANDARD 21 When a Federal Rule of Criminal Procedure 41(g) motion is filed outside of an 22 existing criminal case, it is to be treated like a civil complaint seeking equitable relief 23 governed by the Federal Rules of Civil Procedure. E.g., United States v. Ibrahim, 522 24 F.3d 1003, 1007 (9th Cir. 2008) (“Because there were no criminal proceedings pending at 25 the time of filing, the district court properly treated the motion as a civil complaint 26 27 28 3 United States v. M/Y Amadea, 23-cv-9304 (S.D.N.Y. Oct. 23, 2023). 3 3:23-cv-01946-W-SBC 1 governed by the Federal Rules of Civil Procedure.”); United States v. Ritchie, 342 F.3d 2 903, 906–07 (9th Cir. 2003) (“If a [Rule 41(g)] motion is filed when no criminal 3 proceeding is pending, the motion is treated as a civil complaint seeking equitable 4 relief.”). In turn, courts are to treat the government’s oppositions to such motions as 5 motions to dismiss under Federal Rule of Civil Procedure 12(b). Ibrahim, 522 F.3d at 6 1008. If a court cannot dismiss the Rule 41(g) motion on the pleadings alone, it is to 7 convert the government’s opposition into a motion for summary judgment. Id. If the 8 government still cannot prevail in dismissing the case under the summary judgment 9 standard, “the court should go forward with additional proceedings consistent with the 10 11 Federal Rules of Civil Procedure.” Id. Seeing as Respondent’s Opposition asserts that this case should be dismissed 12 because: (1) the pending Civil Forfeiture Action divests this Court of jurisdiction; (2) 13 venue is improper in the Southern District of California; and (3) the Court lacks equitable 14 jurisdiction over this case because the Motion fails the required Ramsden factors 15 (Opposition at 3-4)—the Court treats the Opposition as a motion to dismiss for lack of 16 subject matter jurisdiction and improper venue. In deciding whether it has subject matter 17 jurisdiction over this case and whether venue is proper in the Southern District of 18 California, the Court must accept Petitioners’ allegations as true and draw all reasonable 19 inferences in their favor. United States v. Sperow, 2018 WL 6174706, at *3 (C.D. Cal. 20 Oct. 18, 2018) (citing Doe v. United States, 419 F.3d 1058, 1062 (9th Cir. 2005)). 21 However, Federal Rule of Evidence 201 (“Rule 201”) permits a court to take 22 judicial notice of an adjudicative fact if it is “not subject to reasonable dispute.” Fed. R. 23 Evid. 201(b). A fact is “not subject to reasonable dispute” if it is “generally known,” or 24 “can be accurately and readily determined from sources whose accuracy cannot 25 reasonably be questioned.” Fed. R. Evid. 201(b)(1)-(2). Under this rule, a court may 26 “take judicial notice of matters of public record without converting a motion to dismiss 27 into a motion for summary judgment,” but it “cannot take judicial notice of disputed facts 28 contained in such public records.” Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988, 4 3:23-cv-01946-W-SBC 1 999 (9th Cir. 2018). Under Rule 201, judicial notice of documents filed in other court 2 proceedings is appropriate. See NuCal Food, Inc. v. Quality Egg LLC, 887 F.Supp.2d 3 977, 984 (E.D. Cal. 2012) (“Courts have consistently held that courts may take judicial 4 notice of documents filed in other court proceedings.”). Accordingly, the Court takes 5 judicial notice of the existence of the Civil Forfeiture Action regarding the Amadea 6 currently pending in the United States District Court for the Southern District of New 7 York. 8 9 III. DISCUSSION 10 11 A. 12 Jurisdiction 13 Federal Rule of Criminal Procedure 41(g) states that a “person aggrieved by an The Pending Civil Forfeiture Action Deprives This Court Of 14 unlawful search and seizure of property or by the deprivation of property may move for 15 the property’s return.” As noted above, while Rule 41(g) motions are typically filed 16 within existing criminal cases, parties may file a standalone case for the return of seized 17 property under Rule 41(g) when there is no criminal case pending and courts are to treat 18 such motions as civil complaints seeking equitable relief. Ibrahim, 522 F.3d 1003, 1007; 19 Ritchie, 342 F.3d at 906-07. The reason courts allow Rule 41(g) motions to be fashioned 20 into an equitable civil remedy in such circumstances is that when the government seizes 21 property but thereafter declines to bring criminal charges, the owner of the seized 22 property has no other adequate remedy to force the government to return the property. 23 See United States v. U.S. Currency $83,310.78, 851 F.2d 1231, 1234-35 (9th Cir. 1988). 24 The problem for Petitioners is that Ninth Circuit precedent is clear that once the 25 government initiates a civil forfeiture action regarding the seized property at issue, the 26 owners (or in this case, alleged owners) of the seized property suddenly have an adequate 27 remedy to force the return of the property and court hearing the Rule 41(g) civil case 28 loses jurisdiction. U.S. Currency $83,310.78, 851 F.2d at 1234-35 (holding that there is 5 3:23-cv-01946-W-SBC 1 no need to exercise equitable jurisdiction over [Rule 41(g) motion] when civil forfeiture 2 proceedings are subsequently initiated because once “a civil forfeiture proceeding is 3 pending, there is no need to fashion an equitable remedy to secure justice for the 4 claimant”); United States v. Bluitt, 815 F. Supp. 1314, 1316-17 (N.D. Cal. 1992) (“If [the 5 civil forfeiture proceeding] offers an adequate legal remedy, it is irrelevant that 6 [claimant] first sought the equitable jurisdiction of this Court. As soon as [an] adequate 7 remedy at law becomes available, this Court ceases to have equitable jurisdiction [over 8 the Rule 41(g) motion].”); In re Chandler, 270 F.R.D. 576, 578 (S.D. Cal. 2010) 9 (denying Rule 41(g) motions because the “forfeiture proceedings initiated by the 10 government provide [claimants] with an adequate remedy at law” even where “[t]he 11 government initiated the . . . forfeiture proceedings . . . after the instant [Rule 41(g)] 12 motions were filed.”); In re Return of Seized Prop. specifically all funds seized from 13 BoundlessRise, LLC Wells Fargo Bank Acct. No. 'XXXX, 2017 WL 4180149, at *1 (C.D. 14 Cal. Aug. 30, 2017) (“[I]f a related civil forfeiture proceeding is filed—either before or 15 after the Rule 41(g) motion was brought—the court no longer has jurisdiction to entertain 16 the Rule 41(g) motion.”); In re Seizure of One Blue Nissan Skyline Auto., 2009 WL 17 3488675, at *1 (C.D. Cal. Oct. 21, 2009) (“[A] Rule 41(g) motion is properly denied 18 once a civil forfeiture action has been filed.”). 19 Here, there is indeed a civil forfeiture action pending regarding the Amadea—the 20 Civil Forfeiture Action in the Southern District of New York. In fact, this case is exactly 21 like the Ninth Circuit case U.S. Currency $83,310.78, in that petitioners filed their Rule 22 41(g) Motion just one day before the United States filed the Civil Forfeiture Action. U.S. 23 Currency $83,310.78, 851 F.2d at 1233. The existence of the Civil Forfeiture Action 24 divests the Court of subject matter jurisdiction over this case because Petitioners now 25 have an adequate remedy to seek the Amadea’s release: intervening in the Civil 26 Forfeiture Action. A remedy Petitioners acknowledge they plan to pursue. (Reply at 8 27 [“Petitioners intend to file a claim in the forfeiture matter in New York . . . .”].) 28 6 3:23-cv-01946-W-SBC 1 Petitioners argue that the Civil Forfeiture Action does not actually provide them 2 with an adequate remedy because “that action is likely to be dismissed or transferred . . . 3 .” (Reply at 6.) From there, Petitioners cite several cases purporting to show why they 4 believe the Civil Forfeiture Action will be dismissed—including that venue is supposedly 5 improper in the Southern District of New York. (Reply at 6-8.) The Court will not 6 entertain these arguments. The issues Petitioners raise in their Reply are for the court in 7 the Civil Forfeiture Action alone to decide and Ninth Circuit authority is clear that a civil 8 forfeiture action divests other courts of jurisdiction to hear Rule 41(g) motions regarding 9 the property at issue in the forfeiture action. 10 11 Accordingly, the Court finds that the Civil Forfeiture Action divests this Court of jurisdiction to hear the Motion. 12 13 B. 14 Petitioners Fail To Meet The Ramsden Factors 15 Additionally, the Court has no jurisdiction over this case because, as alleged, The Court Lacks Equitable Jurisdiction Over This Case Because 16 Petitioners fail to meet the Ramsden Factors—which both Petitioners and Respondent 17 agree must be met for jurisdiction to exist. (Motion at 13; Opposition at 6-7; Reply at 9- 18 10.) 19 Under Ramsden v. United States, courts should consider four factors when 20 deciding whether to exercise equitable jurisdiction over Rule 41(g) civil cases: “1) 21 whether the Government displayed a callous disregard for the constitutional rights of the 22 movant; 2) whether the movant has an individual interest in and need for the property he 23 wants returned; 3) whether the movant would be irreparably injured by denying return of 24 the property; and 4) whether the movant has an adequate remedy at law for the redress of 25 his grievance.” 2 F.3d 322, 325 (9th Cir. 1993). Typically, court’s require petitioners to 26 satisfy at least three of the four Ramsden factors before exercising equitable jurisdiction 27 over Rule 41(g) civil cases. See In re Prop. Seized from 1015 E. Cliff Drive, Santa Cruz 28 7 3:23-cv-01946-W-SBC 1 CA 95062 on May 14, 2008, 2013 WL 5568300, at *3 (N.D. Cal. Oct. 9, 2013) (citing 2 Ramsden, 2 F.3d at 326.) 3 4 5 6 i. As Alleged, The Government Has Not Displayed A Callous Disregard For Petitioners’ Constitutional Rights Petitioners assert that they meet the first Ramsden factor, because they allege that 7 the government callously disregarded their constitutional rights by obtaining the Warrant 8 via a “false and misleading” affidavit. (Motion at 29; Reply at 10.) 9 Without delving into the validity of Special Agent Bergen’s affidavit in support of 10 the Warrant, the Court notes that Petitioners’ arguments about relevance of Special Agent 11 Bergen’s affidavit to this factor appear misplaced. See Matter of Search Warrant 12 Executed, 2020 WL 5921796, at *3 (C.D. Cal. June 2, 2020) (“As to the first Ramsden 13 factor, Flaherty offers no argument that the government seizure in and of itself 14 constituted a callous disregard for his constitutional rights. Indeed, the search and seizure 15 was conducted pursuant to a duly authorized federal search warrant issued upon a 16 showing of probable cause.”); Matter of Search of Specialty Fulfillment Ctr., 2018 WL 17 785861, at *5 (D. Idaho Feb. 8, 2018) (citations omitted) (“The Government followed 18 proper procedure, obtained a warrant, and executed the warrant approved by the 19 Magistrate Judge. In contrast, the court in Ramsden found against the government 20 because no warrant was obtained. Clearly, the conduct of the Government here does not 21 rise to the level of callous disregard for Nordic's Fourth Amendment rights.”). 22 Here, the United States does not appear to have displayed a “callous disregard” for 23 Petitioners’ rights because, like in Matter of Search Warrant Executed and Matter of 24 Search of Specialty Fulfillment Ctr., Petitioners allege the Warrant to seize the Amadea 25 was duly issued by U.S. Magistrate Judge G. Michael Harvey of the United States 26 District Court for the District of Columbia upon his finding of probable cause. (Motion at 27 25.) Petitioners attempt to distinguish Matter of Search Warrant Executed and Matter of 28 Search of Specialty Fulfillment Ctr. by noting that neither case involved accusations that 8 3:23-cv-01946-W-SBC 1 the government obtained the warrants pursuant to a “false” affidavit. (Reply at 10.) 2 While this may be true, Petitioner’s cite no Ninth Circuit authority supporting the 3 importance of this distinction. (See Motion at 31-32; Reply at 10.) Accordingly, the first 4 Ramsden factor does not weigh in favor of the Court exercising equitable jurisdiction 5 over this case. 6 7 ii. 8 9 Petitioner’s Do Allege That They Have An Individual Interest In And Need For The Amadea Next, Petitioners argue that they meet the second Ramsden factor (that they have 10 an induvial interest in and need for the property at issue) because they are the true owners 11 of the Amadea. (Motion at 41-42; Reply at 10.) While Respondent obviously contests 12 whether Petitioners are the true owners of the Amadea (Opposition at 8-9), at this stage 13 the Court must accept Petitioners’ allegations as true. Without weighing in on the merits 14 of Petitioners’ allegations, the Court simply notes that they do allege an induvial interest 15 in and need for the Amadea. (Motion at 41-42 [“Mr. Khudainatov’s interest in the 16 property is clear: he is and always has been the [ultimate beneficial owner] of the 17 Amadea, which is owned by his company Millemarin.”].) 18 19 iii. Petitioners Have Not Alleged Irreparable Injury 20 Petitioners further argue that they meet the third Ramsden factor (that they will 21 suffer an irreparable injury if the Amadea is not returned to them) because they allege 22 that the Amadea “has likely not been properly maintained at the levels an owner would 23 maintain it, while it has been in U.S. custody.” (Motion at 43.) While the Court at this 24 stage must accept Petitioners’ allegations as true and draw all reasonable inferences in 25 their favor, the Court need not accept as true “allegations that are merely conclusory, 26 unwarranted deductions of fact, or unreasonable inferences.” In re Gilead Scis. Sec. 27 Litig., 536 F.3d 1049, 1055 (9th Cir. 2008). Here, Petitioners’ conclusory allegations that 28 the United States has “likely” not maintained the Amadea properly are insufficient to 9 3:23-cv-01946-W-SBC 1 meet the third Ramsden factor. As such, the third Ramsden factor does not weigh in 2 favor of the Court exercising equitable jurisdiction in this case. 3 4 iv. The Civil Forfeiture Action Is An Adequate Remedy At Law 5 Finally, Petitioners argue that they meet the fourth Ramsden factor (that there is no 6 adequate remedy at law) because “[since] there has been no civil forfeiture proceeding or 7 criminal indictment filed . . . Petitioners have no legal means for seeking the return of the 8 Amadea other than through this motion.” (Motion at 43.) Of course, the Civil Forfeiture 9 Action now exists, thus (by Petitioners’ own reasoning) providing Petitioners with an 10 11 adequate remedy at law. Realizing this, Petitioners assert in their Reply that the Civil Forfeiture Action does 12 not provide them with an adequate remedy at law because it will be dismissed or 13 transferred. (Reply at 9-10.) As outlined above, the Court will not entertain these 14 arguments given that they are for the court in the Civil Forfeiture Action to decide. 15 Accordingly, the Court finds once again that Petitioners have an adequate remedy at law: 16 the Civil Forfeiture Action. 17 18 Thus, the Court lacks jurisdiction to hear this case because Petitioners have failed to satisfy the necessary Ramsden factors. 19 20 C. 21 Proceeding 22 As an alternative to their arguments regarding whether the Court has jurisdiction to The Court Will Not Exercise Its “Inherent Power” To Stay The 23 hear this case, Petitioners ask the Court to stay this case while it brings a “motion to 24 dismiss and/or transfer” in the Civil Forfeiture Action. (Reply at 11.) The idea being that 25 if Petitioners are successful in dismissing the Civil Forfeiture Action, they will once 26 again lack an adequate remedy to seek the Amadea’s release. (Id.) 27 28 Indeed, district courts have “an inherent power to stay proceedings in order ‘to control the disposition of the causes on its docket with economy of time and effort for 10 3:23-cv-01946-W-SBC 1 itself, for counsel, and for litigants’” and “[a] stay may be granted pending the outcome 2 of other legal proceedings related to the case in the interests of judicial economy.” In re 3 Morning Song Bird Food Litig., 320 F.R.D. 540, 545 (S.D. Cal. 2017) (quoting Landis v. 4 North Am. Co., 299 U.S. 248, 254-55 (1936)) (citing Leyva v. Certified Grocers of Cal., 5 Ltd., 593 F.2d 857, 863-64 (9th Cir. 1979)). When deciding whether to grant a requested 6 stay, the Court must “weigh competing interests and maintain an even balance.” Id. 7 (quoting Landis, 299 U.S. at 254-55). Some of these “competing interests” include “the 8 possible damage which may result from the granting of a stay, the hardship or inequity 9 which a party may suffer in being required to go forward, and the orderly course of 10 justice measured in terms of the simplifying or complicating of issues, proof, and 11 questions of law which could be expected to result from a stay.” Id. (quoting CMAX, Inc. 12 v. Hall, 300 F.2d 265, 268 (9th Cir. 1962)). 13 Here, the Court will not exercise its “inherent power” to stay the proceeding 14 because the relevant competing interests weigh against issuing a stay. While Petitioners 15 are correct that there does not appear to be a risk of damage to Respondent from the 16 issuance of a stay, the remaining relevant interests are either neutral or strongly disfavor a 17 stay. To wit, Petitioners argue that Respondent would not suffer any hardship or inequity 18 from a stay because the United States “obviously has nationwide resources.” (Reply at 19 7.) However, by this same logic Petitioners—who claim to own “over $1 billion in 20 megayachts alone” (Motion at 14)—would also suffer little hardship or inequity by a stay 21 not being entered. As such, this interest is neutral at best regarding whether to issue a 22 stay. Most importantly, the “orderly course of justice” interest weighs heavily against a 23 stay, and it is telling that Petitioners fail raise any arguments about how the “orderly 24 course of justice” would be served by issuing a stay. (See Reply at 11.) Indeed, the Court 25 is concerned about Petitioners’ apparent gamesmanship in rushing to file this case mere 26 hours before the United States could file the Civil Forfeiture Action and before the 27 parties’ formal litigation standstill expired. (See Opposition at 3-4.) For the sake of 28 judicial economy, the litigation regarding the fate of the Amadea should be consolidated 11 3:23-cv-01946-W-SBC 1 before one court. Entering a stay here instead of simply dismissing this case in favor of 2 the Civil Forfeiture Action would serve only to complicate the Amadea’s fate, burden 3 judicial economy, and assist Petitioners in their apparent gamesmanship. 4 Additionally, even if the Civil Forfeiture Action were to be dismissed (thereby 5 leaving Petitioners with no adequate regarding the Amadea), they would still only satisfy 6 two of the four Ramsden factors and, as explained below, venue would still be improper 7 in the Southern District of California. 8 Accordingly, the Court does not find it appropriate to stay this case. 9 10 D. 11 Rule 41(g) states that a motion to return seized property “must be filed in the Venue Is Improper In The Southern District Of California 12 district where the property was seized.” Here, the property was not seized in the 13 Southern District of California, so venue is plainly improper. (See Motion at 18-19.) 14 However, since the property was seized in Fiji, venue would not appear to be proper in 15 any district. (See id.) While it would seem absurd for venue to be improper in any 16 district 4, the Court need not reach such issue given that civil forfeiture actions may be 17 brought in a district where “any of the acts or omissions giving rise to the forfeiture 18 occurred” and the United States has alleged in the Civil Forfeiture Action that “prohibited 19 payments for the Amadea’s upkeep transmitted through” the Southern District of New 20 York. (See Opposition at 10 n.6.) And even if that Civil Forfeiture Action was not 21 pending, the United States District Courts for the District of Columbia (where the 22 Warrant was issued) and the Southern District of New York (where the United States 23 alleges the acts or omissions giving rise to the forfeiture occurred) have far more 24 substantial connections to the Amadea’s seizure than the Southern District of California 25 26 27 28 4 Neither Petitioners nor Respondent have provided the Court with any direct authority regarding where venue is proper (if anywhere) for a Rule 41(g) civil case when then property at issue was seized outside of the United States. 12 3:23-cv-01946-W-SBC

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