United States of America v. Eleven Million Seventy-One Thousand One Hundred and Eighty-Eight Dollars and Sixty-Four Cents ($11,071,188.64) In United States Currency

Filing 131

MEMORANDUM AND ORDER - IT IS HEREBY ORDERED that the motion of the United States to strike the claim of La Ostriches & Sons, Ltd. [Doc. # 46 ] is denied. Signed by District Judge Carol E. Jackson on 1/28/14. (KJS)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
UNITED STATES OF AMERICA,
Plaintiff,
vs.
ELEVEN MILLION SEVENTY-ONE
THOUSAND ONE HUNDRED AND
EIGHTY-EIGHT DOLLAR AND SIXTYFOUR CENTS ($11,071,188.64) IN
U.S. CURRENCY, MORE OR LESS,
SEIZED FROM LAOSTRICHES &
SONS, INC.,
Defendant-in-rem.

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No. 4:12-CV-1559 (CEJ)

MEMORANDUM AND ORDER
This matter is before the Court on the government’s motion to strike the claim
filed by LaOstriches & Sons, Ltd. Claimant filed a response to the motion and the issues
are fully briefed.
I.

Background

On December 13, 2012, the government filed an amended verified complaint for
forfeiture in rem against $11,071,188.64 in United States currency. On March 19,
2013, LaOstriches filed a notice of claim to the government’s complaint. The
government filed a motion to strike LaOstriches’ claim pursuant to Rule G(8)(c) of the
Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions. The
government argues that the claim fails to comply with the statutory and pleading
requirements of Supplemental Rule G(5) and that such a failure strips LaOstriches of
standing to assert its claim.

II.

Discussion

“The court must first address the threshold issue of standing raised by the
Government. If a court decides that a movant does not have standing, then the court
cannot proceed[.]” United States v. $153,920.00 in U.S. Currency, 2009 WL 2176052,
*3 (C.D. Ill. 2009). “A forfeiture claimant must satisfy both constitutional and statutory
standing requirements to file a verified claim properly.” U.S. v. ADT Sec. Services, Inc.,
2013 WL 2631435, *8 (11th Cir. 2013); 18 U.S.C. § 983(a)(4)(A).
To establish constitutional standing, a plaintiff must show an injury, a causal
connection between the injury and the conduct complained of, and a likelihood that the
injury will be redressed by a favorable decision. Lujan v. Defenders of Wildlife, 504
U.S. 555, 560-61 (1992). “At the pleading stage, a claimant satisfies this burden by
alleging a sufficient interest in the seized property, such as an ownership interest,
some type of lawful possessory interest, or a security interest.” United States v.
$148,840.00 in U.S. Currency, 521 F.3d 1268, 1273 (10th Cir. 2008) (emphasis
added); ADT Sec. Services, Inc., 2013 WL 2631435, at *8 (“Ownership is not required
for Article III standing; a possessory interest will suffice.”). “This is not a heavy
burden at the initial or pretrial stage of a civil forfeiture action” since it can be
demonstrated by “showing actual possession, control, title, or financial stake.” U.S. v.
$304,980 in U.S. Currency, 2013 WL 54005, *8 (S.D. Ill. Jan 3, 2013).
To establish statutory standing under Rule G(5) of the Supplemental Rules, a
“person who asserts an interest in the defendant property” must “state the claimant’s
interest in the property.” Supp. R. Fed. R. Civ. P. G(5)(a)(i)(B). “At the pleading stage,
a claimant satisfies this burden by alleging a sufficient interest in the seized
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property[.]” $148,840.00 in U.S. Currency, 521 F.3d at 1273. When a claimant asserts
a possessory interest in the defendant property, the claimant must explain how the
currency came into his or her possession. U.S. v. $29,540.00 in U.S. Currency, 2013
WL 783052, *5 (D. Mass 2013); see also United States v. United States Currency,
$81,000, 189 F.3d 28, 35 (1st Cir. 1999) (“[C]ourts have held that an allegation of
ownership and some evidence of ownership are together sufficient to establish standing
to contest a civil forfeiture.”). The Supplemental Rules minimize the danger of false
claims. United States v. $39,557.00, More or Less, in U.S. Currency, 683 F. Supp.2d
335, 339 (D.N.J. 2010). “For these reasons, the requirement is no procedural
technicality.” United States v. $487,825.00, 484 F.3d 662, 664-65 (3d Cir. 2007).
In its Notice of Claim, LaOstriches asserts a possessory interest in the defendant
currency. The Notice states that the “majority of the funds and instruments originated
from the sale of a family business Santa Rita Fishery” and that the original account was
opened “after being vetted by both the international company which advised the
owners . . . and the local government.” LaOstriches states that it “received a clean
report as to themselves and their enterprise” and believed that the individuals who
sent the funds to the account were also vetted. LaOstriches explains that the “original
funds took significant losses as a result of questionable advice and was then
transferred to the new advisors which eventually the funds were seized from.”
LaOstriches further asserts that additional funds were placed in the account and that
those funds were the proceeds of family businesses, including “one million dollars
which the family received from rentals of their farmland.” LaOstriches states that these
accounts were set up in the United States “because of the tenuous situation in their
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own country.” The accounts were “to serve as an emergency fund should the family
be forced to flee their homeland.”
At issue here is whether the Notice of Claim sufficiently identified LaOstriches’
interest in the defendant currency. The government argues that LaOstriches failed to
properly identify its interest by not including facts that relate to “the source of the
funds, why and how it obtained and retained control over the defendant funds,
independently from claimant Mrs. Laura Avila-Barraza [the President of LaOstriches],
its relationship with Timber Development Ltd., Jorge Cifuentes-Villa, and Santa Rita
Fishery, the type of business it was involved in and a description of the transaction(s)
generating the funds.” [Doc. 46, at 10].
Although the Notice of Claim does not provide all of the information that the
government argues is necessary for standing, the Court finds that the assertion of a
possessory interest by LaOstriches in the defendant currency, “together with its answer
to the [g]overnment’s complaint and the [g]overnment’s allegations of the nature of
[claimant’s] involvement with part of the seized currency, are sufficient to establish its
standing.” U.S. v. $515,060.42 in U.S. Currency, 152 F.3d 491, 499 (6th Cir. 1998).
The

government’s

amended

complaint

states

when

LaOstriches

was

incorporated, names Laura Avila-Barraza as one of the three incorporators, and
provides specific dates of wire transfers involving accounts held in the La Ostriches
name. La Ostriches’ answer to the amended complaint admits to the allegations
regarding its incorporation and to the transfer of assets, but denies that these assets
were the result of drug proceeds. Because the government’s complaint acknowledges
the claimant’s relationship to the defendant currency, LaOstriches did not have to show
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additional evidence of ownership in its Notice of Claim. U.S. v. $38,570 in U.S.
Currency, 950 F.2d 1108, 1113 (5th Cir. 1992).
Furthermore, the Notice of Claim alleges more than a mere possessory interest.
LaOstriches provides a factual account of how the currency came into its possession
in order to support its alleged interest. La Ostriches explains that the sale of Santa Rita
Fishery was the source of the original funds, that the proceeds from other family
businesses were the source of the subsequently deposited funds, that the LaOstriches
accounts were set up for the lawful purpose of preparing an emergency fund for the
Avila-Barraza family, and that the family innocently trusted their advisors. See United
States v. $421,090.00 in U.S. Currency, 2011 WL 3235632, *4 (E.D.N.Y. July 27,
2011) (While a conclusory statement of interest does not establish standing, a claimant
is not required to explain his interest in detail). Whether LaOstriches is being truthful
and whether these funds represent the proceeds of illicit activities are questions on the
merits and are irrelevant in determining the threshold issue of standing raised by the
government. See $304,980 in U.S. Currency, 2013 WL 54005, at *14 (“What the
evidence at trial establishes as to the true source and proper disposition of the
property is another issue entirely.”).
Accordingly,
IT IS HEREBY ORDERED that the motion of the United States to strike the
claim of La Ostriches & Sons, Ltd. [Doc. #46] is denied.
____________________________
CAROL E. JACKSON
UNITED STATES DISTRICT JUDGE
Dated this 28th day of January, 2014.
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