USA v. $114,700.00 in United States Currency

Filing 45

RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE, recommendation to deny Claimant's motion to dismiss (ECF #23). by Magistrate Judge Gordon P. Gallagher on 12/8/17. (ggall, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Gordon P. Gallagher, United States Magistrate Judge

Civil Action No. 17-cv-452-CMA-GPG

UNITED STATES OF AMERICA,
Plaintiff,
v.
$114,700.00 IN UNITED STATES CURRENCY,
Defendant.

RECOMMENDATION REGARDING CLAIMANT’S MOTION TO DISMISS

This matter comes before the Court on Claimant’s motion to dismiss (ECF #23) 1 (which was
referred to this Magistrate Judge (ECF #24)) 2, the United States’ response (ECF # 31), and
Claimant’s reply (ECF #38). Further, Claimant raises the same issue by way of an affirmative
defense (ECF #15, p. 8, 12th affirmative defense) and this Court originally chose not to issue a
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“(ECF #23)” is an example of the convention I use to identify the docket number assigned to a specific paper by the Court’s case
management and electronic case filing system (CM/ECF). I use this convention throughout this Recommendation.

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Be advised that all parties shall have fourteen (14) days after service hereof to serve and file any written objections in order to obtain
reconsideration by the District Judge to whom this case is assigned. Fed. R. Civ. P. 72(b). The party filing objections must specifically
identify those findings or recommendations to which the objections are being made. The District Court need not consider frivolous,
conclusive or general objections. A party’s failure to file such written objections to proposed findings and recommendations contained
in this report may bar the party from a de novo determination by the District Judge of the proposed findings and recommendations.
United States v. Raddatz, 447 U.S. 667, 676-83 (1980); 28 U.S.C. § 636(b)(1). Additionally, the failure to file written objections to the
proposed findings and recommendations within fourteen (14) days after being served with a copy may bar the aggrieved party from
appealing the factual findings of the Magistrate Judge that are accepted or adopted by the District Court. Thomas v. Arn, 474 U.S. 140,
155 (1985); Moore v. United States, 950 F.2d 656, 659 (10th Cir. 1991).

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recommendation as to the issue in that context (ECF #40, p. 4), preferring to address the matter here
where it is more fully briefed. 3 The Court has carefully reviewed each of the aforementioned
documents and any attachments. The Court has also considered the entire case file, the applicable
law, and is sufficiently advised in the premises.

Oral argument was not requested and is not

necessary to resolve this issue. For the following reasons, I respectfully recommend that Claimant’s
motion be DENIED.
The United States seeks to forfeit Defendant $114,700.00 in United States currency based on
an alleged violation of 21 U.S.C. § 801 et. seq. (ECF #1, p. 1). Claimant moves to dismiss pursuant
to Fed.R.Civ.P. 12 “on the basis that the forfeiture statute invoked by [the United States] violates his
Due Process rights.” ECF #23, p. 1. Specifically, Claimant urges the Court to find 21 U.S.C. §
881(a)(6) and 18 U.S.C. § 983(c)(1) unconstitutional. Claimant’s theory is that Justice Thomas, in
Leonard v. Texas, 137 S.Ct. 847 (2017), “in effect succinctly outlined why” the aforementioned
statutes are unconstitutional (ECF #23, p. 2) (Justice Thomas, concurring in the denial of certiorari
due to failure to raise the issue in the Texas Court of Appeals, in a matter proceeding under the Texas
Code, which does not afford a jury trial, and essentially urging “consideration [of the topic] in greater
detail.” Leonard, 137 S.Ct. at 850). Claimant goes on to argue that the forfeiture of proceeds of a
crime “punishes for that crime, so it should require the government to prove its case beyond a
reasonable doubt to comply with the Constitution.” ECF #23, p. 3. Claimant moves the Court to
“strike” the offending statutes due to the preponderance standard therein. Id. at 5. Claimant’s twelfth
affirmative defense (ECF #15, pp. 8-9) and, to some slight extent, Claimant’s reply, see ECF #38, pp.
23-24, seek the imposition of a higher burden (Claimant’s affirmative defense (4/24/17) urges a

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The Court will separately issue a Recommendation as to the motion to strike the 12th affirmative defense. See also Order adopting
and affirming recommendation (ECF #44, p. 2) reserving ruling with regard to defense 12.

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“clear and convincing” standard while Claimant’s reply (9/18/17) states that a “blanket standard is
inappropriate” and requests a beyond a reasonable doubt standard if the statutes are not struck).
In relevant part, 21 U.S.C. § 881(a)(6) allows for the forfeiture of monies related to drug
crimes as defined by the subsection. The general method of proceeding and burden of proof are set
forth at 18 U.S.C. § 983. In 2003, Congress enacted the Civil Asset Forfeiture Reform Act (CAFRA)
Pub.L. No. 106–185, 114 Stat. 202 (2000) (codified principally at 18 U.S.C. § 983) (reforms include
representation (in some circumstances)), § 983(b); codifying the burden of proof at a preponderance
standard (rather than the former probable cause standard), 4 § 983(c); and adding an innocent owner
defense, § 983(d)). Additionally, a claimant has a jury trial right upon demand. See Rule G(9),
Forfeiture Actions in Rem and Fed.R.Civ.P. 38.
Claimant, who demanded a jury trial in the instant action (ECF #15), challenges the burden of
proof arguing that the forfeiture is “punish[ment] for [] crime” thus requiring proof beyond a
reasonable doubt in order to comply with the United States Constitution. ECF #23, p. 5. The issue is
whether the existing forfeiture rules and regulations, which include a preponderance standard, when
looked at as a whole, provide the “fairness and reliability” necessary to comport with due process. See
Matthews v. Eldridge, 424 U.S. 319, 343 (1976).

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Substantial debate occurred in Congress regarding the appropriate burden of proof. See, e.g., Review of Federal Asset Forfeiture
Program, Hearing before the Legislation and National Security Subcommittee of the Committee on Government Operations, U.S.
House of Representatives, 103rd Congress, pp. 44, 69, 92, 172 (6/22/1993); see also Civil Asset Forfeiture Reform Act, Hearing before
the Committee on the Judiciary, U.S. House of Representatives, 104th Congress, pp. 6, 24, 59 (7/22/1996); see also Civil Asset
Forfeiture Reform Act of 2000, 146 Cong Rec H 2040, pp. 27-28. While the issue (the appropriate burden of proof in the context of an
alleged due process violation) is certainly subject to judicial review, appropriate deference is due to Congress. See generally, Cook v.
Rumsfeld, 429 F.Supp. 2d 385 (D.Mass. 2006).

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Crime and Punishment
Claimant argues that the sought forfeiture essentially acts as a punishment. See Claimant’s
motion (ECF #23, p. 2). Case law has long recognized that “in rem civil forfeiture is a remedial civil
sanction, distinct from potentially punitive in personam civil penalties such as fines, and does not
constitute a punishment for double jeopardy purposes.” U.S. v. Ursery, 518 U.S. 267, 268 (1996)
(citation removed).

The Supreme Court, applying the two-part 89 Firearms test, definitively

proclaimed that Congress intended the civil forfeiture statutes in question (or their CAFRA
descendants) to be civil in nature. See United States v. One Assortment of 89 Firearms, 465 U.S. 354,
362-62 (1984).

“There is little doubt that Congress intended these forfeitures to be civil

proceedings.” U.S. v. Gilcrease Lane, Quincy, Fla., 656 F. Supp. 2d 87, 89 (D.C. 2009) (quoting
from Usery, 518 U.S. at 268). This is crucial, as the Supreme Court has clearly determined that
beyond a reasonable doubt is a standard reserved for criminal cases. Addington v. Texas, 441 U.S.
418, 428 (1979). “To the extent that § 881(a)(6) applies to “proceeds” of illegal drug activity, it
serves the additional nonpunitive goal of ensuring that persons do not profit from their illegal acts.”
Usery, 518 U.S. at 291; see also Austin v. United States, 113 S.Ct. 2801, 2812 (1993) (which is
inapposite to the current matter because, in determining that the forfeiture was penal, it was not
addressing the forfeiture of property under 881(a)(6) which was acquired by illegal conduct).

Leonard v. Texas
Claimant, in support of his argument that there exists a due process violation, relies heavily
upon Justice Thomas’ pronouncements in the Leonard matter. While in no way discounting the
Justice’s writing, I must keep context firmly in mind.
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As noted supra, Justice Thomas was

commenting on Texas’ forfeiture statute as opposed to CAFRA, which differ in terms of their
afforded rights and procedures. And while Justice Thomas’ comments can also be read as a more
general questioning, perhaps even condemnation “of the broad modern forfeiture practice[s] . . .”
Leonard, 137 S.Ct. at 850, they are neither a holding or dicta. Thus, I must look to those cases which
have relevant holdings when appraising the fairness of CAFRA.

While civil forfeitures have a long

history in this country, see e.g., Act of March 2, 1807, ch. 22 §§ 4, 6, 2 Stat. 426; Act of Mar. 22,
1794, ch. 11, § 1, 1 Stat. 347; and Act of Aug. 4, 1790, long usage or historical precedence does not
act as a shield from a due process challenge. See Pacific Mutual Life Ins. v. Haslip, 111 S.Ct. 1032,
1054-55 (1991).

The Matthews Test
In Matthews v. Eldridge, 424 U.S. 319 (1976), the Supreme Court set forth the following three
factors to analyze in determining whether a particular standard of proof satisfies due process: 1) the
governmental interest served by the procedure; 2) the individual interest affected by the official
action; and 3) the risk of erroneous deprivation and the probable value of additional safeguards. See
Santosky v. Kramer, 455 U.S. 745, 758 (1982) (applying the Matthews test in the context of
termination of parental rights). This is in keeping with the need to “instruct the factfinder concerning
the degree of confidence our society thinks he should have in the correctness of factual conclusions
due a particular type of adjudication.” Addington, 441 U.S. at 423.

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1. The Governmental Interest
As properly noted in the Government’s response (ECF #31, p. 3) “the government has a
legitimate interest in removing the profits obtained through crime.” See United States v. All Assets
and Equip. of W. Side Building Corp., 58 F.3d 1187 (7th Cir. 1995). Common sense dictates that, in a
business where human life and freedom seemingly have little worth to the higher-ups, perhaps
stripping away some of the profits associated with the noxious and deadly trade will have a chilling
effect. “Forfeiture of property prevents illegal uses ... by imposing an economic penalty, thereby
rendering illegal behavior unprofitable.” 89 Firearms, 465 U.S. at 364. The Government has a
significant interest in deterring the drug trade by forfeiting illegal proceeds, in making such behavior
unprofitable, dismantling criminal organizations, and hopefully deterring others who may see that
criminal conduct is not always lucrative.
Admiralty law was an early area of use for in rem civil forfeiture in the United States. See
The Palmyra, 25 U.S. 3 (1827) (Justice Story affirmed the forfeiture of the Spanish pirate ship).
Pirates were notoriously difficult to prosecute as they were often far outside the Court’s jurisdiction,
yet the loss of property, the ship, had obvious detrimental effects on the pirates’ ability to ply their
deadly trade. When piracy morphed into bootlegging as the crime de jour, forfeiture of property used
to facilitate that trade became liable for in rem forfeiture. See U.S. v. Two Bay Mules, 36 F. 84, 85
(W.D. N.C. 1888) (however, the forfeiture regime of the time did not have the innocent owner
defense enshrined in CAFRA as the court determined that the innocent owner could either try and
recoup from the malfeasor or seek government remittance). While not the only modern use of in rem
forfeiture, the war on drugs has been a significant driver of forfeitures, ultimately taking shape
legislatively in CAFRA. Similar to pirates, modern drug dealers operate the world over and are likely

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every bit as difficult to nab personally, thus justifying the chilling effect that in rem forfeiture of
proceeds, instrumentalities, etc. has on their far-flung operations.

2. The Individual Interest
The rights of individuals to hold and maintain their property free of government interference
is a firmly established Constitutional right and due process is clearly required before an individual
may be divested of property. See United States v. James Good Real Prop., 114 S.Ct. 492, 501
(1993).

However, it is axiomatic that individuals have no right to proceeds derived from drug

trafficking nor to property used to assist drug trafficking. The process and procedures set forth in 21
U.S.C. § 881 and 18 U.S.C. § 983 allow courts, and juries where applicable and requested, to
determine the legitimacy of a claimed property interest.
Claimant misguidedly argues, see Claimant’s motion to dismiss (ECF #23, p. 4), that modern
forfeiture of drug proceeds has more of a detrimental effect than the loss to a pirate of his ship. This
argument is fallacious in multiple respects. First, be it drug proceeds or pirate booty, the Government
believes it is intending to forfeit criminal proceeds. Second, in terms of relative value, perhaps even
penal effect, one cannot say that the pirate ship, the mules, or the money are more or less valuable to
their respective owners. Each is crucial to the livelihood of its respective owner, and in rem forfeiture
of any or all of them must comport with due process.

3. The Risk of Erroneous Deprivation and the Probable Value of Additional Safeguards
“[T]he minimum standard of proof tolerated by the due process requirement reflects not only
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the weight of the private and public interests affected, but also a societal judgment about how the
risk of error should be distributed between the litigants.” Santosky, 455 U.S. at 755.

“Generally speaking, the evolution of this area of the law has produced across a
continuum three standards or levels of proof for different types of cases. At one end of
the spectrum is the typical civil case involving a monetary dispute between private
parties. Since society has a minimal concern with the outcome of such private suits,
plaintiff's burden of proof is a mere preponderance of the evidence. The litigants thus
share the risk of error in roughly equal fashion. In a criminal case, on the other hand, the
interests of the defendant are of such magnitude that historically and without any explicit
constitutional requirement they have been protected by standards of proof designed to
exclude as nearly as possible the likelihood of an erroneous judgment.

Addington, 441 U.S. at 423 (with the middle ground being the clear and convincing standard). I keep
in mind the traditional uses of the various standards as well: beyond a reasonable doubt being
reserved for criminal matters, Addington, 441 U.S. at 428; clear and convincing for uses such as
termination of parental rights, Santosky, 455 U.S. at 769, deportation, Woodby v. I.N.S., 385 U.S. 276
(1966), and denaturalization, Schneiderman v. United States, 320 U.S. 118 (1943); with the
preponderance standard reserved for “mere loss of money.” Santosky, 445 U.S. at 756 (internal
quotations and citation removed).
a.
drug-trafficking)

nature of the relevant inquiry (proving the funds are proceeds derived from

The lack of records likely to exist as to funds illegally derived from drug trafficking is selfevident. Drug dealing, at least at the street level, is a cash business bereft of significant record
keeping. The clear goal of drug dealers is to turn their product into money and then frequently to find
a way of getting that money into the legitimate stream of commerce so that it becomes useful as other
than just a stock-pile of cash.

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On the other hand, most of us have some records to justify the money we possess, e.g., a pay
stub, a receipt, documents showing an inheritance, or sale of a car. This paperwork would be most
appropriately and likely in the hands of a potential claimant.

Maybe not every dollar can be

accounted for, but it seems probable that a significant amount of money, lawfully garnered, can be
justified by some documentation given time for production.
In the hide and seek world of drug proceeds, it would be hard for the Government to prove
beyond a reasonable doubt or even by a clear and convincing standard, the origin of particular funds.
Much of the proof is likely to be circumstantial. In such a situtation, it is not unreasonable nor a due
process violation to apportion the risk of an erroneous finding at the preponderance level.
b.

adequacy of existing safeguards

The existing safeguards include not only the standard of proof. I find it proper to “examine all
procedural protections offered by the [s]tate, and [to] assess the cumulative effect of such
safeguards.” Santosky, 455 U.S. at 775 (Justice Rehnquist dissenting and joined by the Chief Justice,
Justice White and Justice O’Connor) (emphasis removed). Those safeguards under CAFRA include
the right to a jury trial, shorter timeframes for filing of the civil forfeiture action, the shift in burden to
the government, an innocent owner defense, payment of attorney fees and litigation costs, a right to
counsel in some circumstances, and hardship return during the pendency of the forfeiture action. 18
U.S.C. § 983. I find that the cumulative safeguards are adequate to protect Claimant’s due process
rights.
c.

value of a heightened standard of proof

Society derives a significant benefit from removing drug proceeds and forfeiting ill-gotten
gains. Undoubtedly, raising the burden of proof to a clear and convincing standard or to beyond a
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reasonable doubt would result in fewer successful forfeiture proceedings by the Government. But at
what cost? In a system with a fairly level playing field, tipped slightly but ever so slightly towards
the claimant, the fact that the Government often has to proceed by circumstantial evidence can be
counterpoised by a claimant’s ability to provide documentary proof. Raising the standard of proof
seems likely to prevent legitimate forfeitures while not preventing a substantial number of
unwarranted attempts to forfeit. The Court does not find a significant benefit would derive to society
by heightening the standard of proof.

Congress has clearly spoken and set the burden of proof in civil forfeitures of this ilk at a
preponderance standard. When combined with the significant protections provided under CAFRA, I
am not prepared to say that Claimant is deprived of his due process rights with the standard of proof
in this action being “proof by a preponderance of the evidence” and that such a standard is
unconstitutional. For the foregoing reasons, I respectfully recommend that Defendant’s motion to
dismiss be DENIED.

Dated at Grand Junction, Colorado, this December 8, 2017.

Gordon P. Gallagher
United States Magistrate Judge

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