Unites States v. Pokerstars, et al

Filing 224

MEMORANDUM OF LAW in Support re: 223 MOTION to Strike Document No. 59 (Claim of Kentucky) and Dismiss Counterclaim.. Document filed by United States Of America. (Attachments: # 1 Exhibit A, # 2 Exhibit B, # 3 Exhibit C, # 4 Exhibit D, # 5 Exhibit E, # 6 Exhibit F)(Cowley, Jason)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
- - - - - - - - - - - - - - - - - -x
:
UNITED STATES OF AMERICA,
:
Plaintiff,
:
- v. :
POKERSTARS, et al.
:
Defendants;
:
ALL RIGHT, TITLE AND INTEREST IN
THE ASSETS OF POKERSTARS, et al.; :

11 Civ. 2564 (LBS)

Defendants-in-rem. :
- - - - - - - - - - - - - - - - - -x

MEMORANDUM OF LAW IN SUPPORT OF
THE GOVERNMENT’S MOTION TO STRIKE THE CLAIM AND
COUNTERCLAIM OF THE COMMONWEALTH OF KENTUCKY

PREET BHARARA,
United States Attorney for the
Southern District of New York
Sharon Cohen Levin
Michael D. Lockard
Jason H. Cowley
Assistant United States Attorneys
- of counsel -

Table of Contents
PRELIMINARY STATEMENT.. . . . . . . . . . . . . . . . . . . . . 1
BACKGROUND. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
A.

The Criminal Indictment of Isai Scheinberg and Others
for various gambling, fraud, and money laundering
offenses . . . . . . . . . . . . . . . . . . . . . . 2

B.

The In Rem Forfeiture and Civil Money Laundering
Complaint.. . . . . . . . . . . . . . . . . . . . . . 5

C.

Kentucky’s Unresolved Action in State Court.. . . . . 7

D.

Kentucky’s Claim, Answer and Counterclaim . . . . .

10

. . . . . . . . . . . . . . . . . . . . . . . . . .

11

KENTUCKY LACKS CONSTITUTIONAL STANDING TO FILE A CLAIM..

11

A.

Relevant Law. . . . . . . . . . . . . . . . . . . .

11

B.

Discussion. . . . . . . . . . . . . . . . . . . . .

14

THE COUNTERCLAIM SHOULD BE DISMISSED . . . . . . . . . .

15

CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . . .

18

ARGUMENT
I.

II.

PRELIMINARY STATEMENT
The Government respectfully submits this memorandum of
law in support of its motion, pursuant to Rule 12(b) and (c) of
the Federal Rules of Civil Procedure and Rule G(8)(c) of the
Supplemental Rules for Admiralty and Maritime Claims, to strike
the claim and counterclaim filed in this in rem forfeiture action
by the Commonwealth of Kentucky (“Kentucky” or “Claimant”).

The

defendants in rem in this matter include, among others, all right
title and interest in the assets of several online gambling
businesses, PokerStars, Absolute Poker, and Full Tilt Poker (the
“Poker Companies”).
Kentucky filed a claim on September 30, 2011, asserting
an interest in the domain names of the Poker Companies and on
October 21, 2011, Kentucky filed an answer to the in rem portion
of the Complaint as well as a counterclaim for costs and
attorneys’ fees.

Kentucky’s claim of ownership –- that it is the

“true and bona fide owner” of the domain names and “entitled to
possession” of them is based on Kentucky’s “prior seizure” of the
domain names in connection with a seizure warrant issued in
Kentucky state court proceedings.

Despite Kentucky’s assertion

of having “seized” the Poker Companies’ domain names, however, it
is uncontested that Kentucky has not obtained a judgment for the
domain names and has never even successfully executed its statecourt seizure warrant.

Indeed, the domain names were under the

complete control of the Poker Companies and used by them as

alleged in the Amended Complaint right up until this action was
commenced and the United States took possession of the domain
names by serving an Arrest Warrant in Rem issued by the Honorable
Robert W. Sweet, United States District Judge, on the domain name
registry for the domain names.

Kentucky, in other words, has no

ownership interest in the domain names; has never exercised
possession, dominion, or control over them; and thus lacks
standing to assert a claim in this action.
Additionally, Kentucky’s counterclaim for costs and
attorneys’ fees has no basis in law and is barred by sovereign
immunity.
BACKGROUND
A.

The Criminal Indictment of Isai Scheinberg and Others for
Various Gambling, Fraud, and Money Laundering Offenses
On or about March 10, 2011, a superseding indictment,

S3 10 Cr. 336 (LAK) (the “Indictment”) was filed under seal in
the Southern District of New York, charging Isai Scheinberg,
Raymond Bitar, Scott Tom, Brent Beckley, Nelson Burtnick, Paul
Tate, Ryan Lang, Bradley Franzen, Ira Rubin, Chad Elie, and John
Campos with conspiring to violate the Unlawful Internet Gambling
Enforcement Act (“UIGEA”), 31 U.S.C. § 5363, in violation of
Title 18, United States Code, 371; violating the UIGEA; operating
illegal gambling businesses, in violation of Title 18, United
States Code, Sections 1955 and 2; conspiring to commit wire fraud
and bank fraud, in violation of Title 18, United States Code,
2

Section 1349; and conspiring to launder money, in violation of
Title 18, United States Code, Section 1956(h).1
As set forth in the Indictment, from at least in or
about November 2006, the three leading internet poker companies
doing business in the United States were PokerStars, Full Tilt
Poker, and Absolute Poker/Ultimate Bet (collectively, “the Poker
Companies”).

(Ind. ¶ 1).

PokerStars, headquartered in the Isle

of Man, provided real-money gambling through its website,
pokerstars.com, to United States customers.

PokerStars did

business through several privately held corporations and other
entities.

(Ind. ¶ 4).

Full Tilt Poker, headquartered in

Ireland, provided real-money gambling through its website,
fulltiltpoker.com, to United States customers.

Full Tilt Poker

did business through several privately held corporations and
other entities.

(Ind. ¶ 5).

Absolute Poker, headquartered in

Costa Rica, provided real-money gambling through its websites,
absolutepoker.com and ultimatebet.com, to United States
customers.

Absolute Poker did business through several privately

held corporations and other entities.

1

(Ind. ¶ 6).

Defendants Bradley Franzen, Brent Beckley, Ira Rubin,
Ryan Lang, and John Campos each have pleaded guilty to offenses
arising out of the conduct alleged in the Indictment and the
Complaint. On June 28, 2012, a Superseding Indictment, S8 10 Cr.
336 (LAK), was returned charging Bitar and Burtnick with, inter
alia, defrauding Full Tilt Poker players in addition to the
offenses charged in the S3 Indictment.
3

As described in the Indictment, because internet
gambling businesses such as those operated by the Poker Companies
were illegal under United States law, internet gambling
companies, including the Poker Companies, were not permitted by
United States banks to open bank accounts in the United States to
receive proceeds from United States gamblers.

Instead, the

principals of the Poker Companies operated through various
deceptive means designed to trick United States banks and
financial institutions into processing gambling transactions on
the Poker Companies’ behalf.

(Ind. ¶ 16).

For example, as described more fully in the Indictment,
the defendants, and others, worked with and directed others to
deceive credit card issuers and to disguise poker payments made
using credit cards so that the issuing banks would process the
payments.

(Ind. ¶¶ 17-18).

These deceptive and fraudulent

practices included, for example, creating phony non-gambling
companies that the Poker Companies used to initiate the credit
card charges (Ind. ¶ 19), and creating pre-paid cards designed
for United States gamblers to use to transfer funds to the Poker
Companies and other gambling companies, with the purpose of the
cards disguised by fake internet web sites and phony consumer
“reviews” of the cards making it appear that the cards had some
other, legitimate, purpose.

(Ind. ¶ 20).

4

In addition, as described more fully in the Indictment,
the defendants, and others, worked with and directed others to
develop another method of deceiving United States banks and
financial institutions into processing their respective Poker
Companies’ internet gambling transactions through fraudulent echeck processing.

(Ind. ¶ 21).

The Poker Companies used poker

processors to establish payment processing accounts at various
United States banks and disguised from the banks the fact that
the accounts would be used to process payments for internet poker
transactions by making the transactions appear to relate to phony
internet merchants.
B.

(Ind. ¶¶ 22-26).

The In Rem Forfeiture and Civil Money Laundering Complaint
On or about April 14, 2011, this action was commenced

by the filing of a sealed in rem forfeiture and civil money
laundering complaint (the “Complaint”).

The Complaint sought the

forfeiture of all right, title and interest in the assets of the
Poker Companies, including but not limited to certain specific
properties set forth in the Complaint.

As alleged in the

Complaint, the defendants-in-rem are subject to forfeiture
(1) pursuant to Title 18, United States Code, Section 1955(d), as
properties used in violation of the provisions of Section 1955;
(2) pursuant to Title 18, United States Code, Section
981(a)(1)(C), as properties constituting or derived from proceeds
traceable to violations of Section 1955; (3) pursuant to Title

5

18, United States Code, Section 981(a)(1)(C), as properties
constituting or derived from proceeds traceable to a conspiracy
to commit wire fraud and bank fraud; and (4) pursuant to Title
18, United States Code, Section 981(a)(1)(A), as properties
involved in transactions and attempted transactions in violation
of Sections 1956 and 1957, or property traceable to such
property.

The Complaint also sought civil monetary penalties for

money laundering against the Poker Companies and the entities
that operated those companies for the conduct laid out above.
On April 15, 2011, the Honorable Robert W. Sweet,
United States District Judge, issued an Arrest Warrant in Rem for
the domain names “Pokerstars.com,” “Fulltiltpoker.com,”
“Absolutepoker.com,” “Ultimatebet.com,” and “Ub.com” (the
“Defendant Domain Names”).

The Arrest Warrant in Rem (attached

as Ex. A) was served on the domain name registry (and one domain
name registrar) for the Defendant Domain Names, preventing their
further use by the Poker Companies until each of them executed a
Domain Name Use Agreement with the United States prohibiting the
use of each Poker Company’s domain name for further real-money
internet gambling in the United States.

(D.E. 10, 11, 12).

On or about September 21, 2011, before Kentucky filed
their claim, answer and counterclaim, the United States filed an
Amended Complaint in this action, adding additional fraud
allegations against Full Tilt Poker and the members of its Board

6

of Directors.
C.

Kentucky’s State Forfeiture Action
On or about September 18, 2008, the Commonwealth of

Kentucky filed an in rem Civil Action, Commonwealth of Kentucky
ex rel. J. Michael Brown, Secretary, Justice and Public Safety
Cabinet v. 141 Internet Domain Names, 08-CI-1409 (Franklin
Circuit Court, Division II) (the “Kentucky Action”), against 141
internet domain names, including the Defendant Domain Names.

A

copy of the complaint filed in the Kentucky Action is attached
hereto as Exhibit B.

The complaint in the Kentucky Action

alleges generally that the 141 internet domain names are subject
to forfeiture pursuant to Kentucky laws which prohibit online
internet gambling.
On or about September 18, 2008, a judge of the Franklin
Circuit Court issued an “Order of Seizure of Domain Names” (the
“Franklin Circuit Court Seizure Order”) authorizing the seizure
of the 141 domain names, including the Defendant Domain Names.
Attached hereto as Exhibit C is a copy of the Franklin Circuit
Court Seizure Order.

This order authorized Kentucky to attempt

to seize the Defendant Domain Names but did not automatically
confer possession or ownership of the Defendant Domain Names.
Notwithstanding the Franklin Circuit Court Seizure Order,
Kentucky never successfully executed the order with respect to
the Defendant Domain Names or exercised any dominion or control

7

over them.

The Defendant Domain Names remained in the possession

and control of the Poker Companies for two-and-a-half years
following the issuance of the Franklin Circuit Court Seizure
Order and continued to be used for illegal activities until the
United States seized them pursuant to the Arrest Warrant in Rem.
Kentucky asserts that it is the registrant for the
Defendant Domain Names and that it exercises dominion and control
over them pursuant to the Franklin Circuit Court Seizure Order
(See D.E. 78 (“Answer”) ¶¶ 64, 76, 85, 86, 91), but also admits
that the Poker Companies continued to use the Defendant Domain
Names to conduct unlawful internet gambling in the United States
up until the filing of the original Complaint in April 2011.
(Compare Compl. ¶¶ 1, 13, 53-64 (Pokerstars.com), 65-76
(Fulltiltpoker.com), 77-84 (Absolutepoker.com), & 85-91
(Ultimatebet.com and Ub.com) with Answer ¶¶ 1, 13, 54-59 & 65,
66-72 & 77; 78-81; 87-90).
For example, Kentucky alleges with respect to
ultimatebet.com that “on September 25, 2008 the registrar,
GoDaddy.com, submitted the Registrar Certificate to the
Commonwealth for filing with the Franklin Circuit Court,
explicitly for the purpose of placing the domain
[ultimatebet.com] under the dominion and control of that Court,
where it remained as of the date of seizure by Plaintiff herein”
(Answer ¶¶ 85-86), but also admits that visitors to the website

8

affiliated with ultimatebet.com were simply rerouted to ub.com,
where they could engage in playing online poker offered by
Absolute Poker.

(Compare Compl. ¶¶ 85-89 with Answer ¶¶ 86-90).

Similarly, with respect to fulltiltpoker.com Kentucky alleges
that “the domain registration [alleged in the Complaint] should
have reflected the Commonwealth of Kentucky as the registrant for
the domain” pursuant to the Franklin Circuit Court Seizure Order.
(Answer ¶ 76).

Not only did Full Tilt Poker continue to use the

domain name, but on October 22, 2009, the Chancery Division of
the British and Wales High Court in the United Kingdom issued an
Order for an Injunction and Declaratory Relief declaring that the
United Kingdom would not recognize or enforce the Franklin
Circuit Court Seizure Order and enjoining Safenames, Ltd., the
U.K. registrar, not to transfer fulltiltpoker.com.

Pocket Kings

Ltd. v. Safenames Ltd. & Commonwealth of Kentucky, [2009] EWHC
(Ch) 2529.
On or about February 29, 2012, Kentucky moved in the
Kentucky Action for the entry of an Order of Forfeiture with
respect to 132 of the 141 internet domain names listed in the
Kentucky Action Complaint.

A copy of Kentucky’s motion is

attached hereto as Exhibit D.

Kentucky specifically excluded the

Domain Names from their motion stating, in footnote 1, that “the
Commonwealth does not move for forfeiture of . . .
pokerstars.com, fulltiltpoker.com, absolutepoker.com and

9

ultimatebet.com, seized by the United States in the Southern
District of New York.

The Commonwealth has appeared and made

claim in that matter and elects to defer disposition of those
domains at this time.”

(Ex. D at 2) (emphasis added).

On or about March 8, 2012, a judge of the Franklin
Circuit Court issued an Order of Forfeiture of Domain Defendants
(the “Kentucky Order of Forfeiture”).

The Kentucky Order of

Forfeiture does not include the Domain Names.

A copy of the

Kentucky Order of Forfeiture is attached hereto as Exhibit E.
On or about April 6, 2012, Kentucky executed a
stipulation, a copy of which is attached hereto as Exhibit F.

In

the stipulation, Kentucky stipulated “that the Order of
Forfeiture applies only to the domain names listed on Exhibit A
attached to the Order of Forfeiture of Domain Defendants and
entered by the Franklin Circuit Court, Division II, on March 8,
2012.”
D.

The Defendant Domain Names are not included.

Kentucky’s Claim, Answer and Counterclaim
On or about September 30, 2011, Kentucky filed a claim

with respect to the Defendant Domain Names.
“Claim”)).

(D.E. 59 (the

The Claim asserts that Kentucky is “the true and bona

fide sole owner of the property [the Defendant Domain Names] and
entitled to possession, and that no other person is the owner of
or entitled to possession” of the Defendant Domain Names.
at 1).

(Claim

The Claim further contends that Kentucky “is the owner of

10

the domain names by virtue of its prior seizure of said domain
names, in that certain in rem civil forfeiture action [the
Kentucky Action].”

(Id. at 1-2).

On or about October 21, 2011, Kentucky filed its
Answer, which included allegations labeled affirmative defenses
and a counterclaim for costs, pre- and post-judgment interest,
and attorneys’ fees.

In its Answer, Kentucky admits that the

Domain Names were used by the Poker Companies to conduct illegal
activity from at least in or around November 2006 through in or
about April 2011, a full two-and-a-half years after the Order of
Seizure of Domain Names.

(Answer at 3).
ARGUMENT

I.

KENTUCKY LACKS CONSTITUTIONAL STANDING TO FILE A CLAIM
A. Relevant Law
“In order to contest a governmental forfeiture action,

claimants must have both standing under the statute or statutes
governing their claims and standing under Article III of the
Constitution as required for any action brought in federal
court.”

United States v. Cambio Exacto, S.A., 166 F.3d 522, 526

(2d Cir. 1999).

Standing is a threshold issue.

If the claimant

lacks standing, the court lacks jurisdiction to consider his
challenge of the forfeiture.

The burden of proof to establish

sufficient standing rests with the claimant.

Mercado v. U.S.

Customs Service, 873 F.2d 641, 644 (2d Cir. 1989); United States
11

v. One 1986 Volvo 750T, 765 F. Supp. 90, 91 (S.D.N.Y. 1991);
United States v. One 1982 Porsche 928, 732 F. Supp. 447, 451
(S.D.N.Y. 1990) (abbreviated title).

Where the claimant’s own

allegations are insufficient to demonstrate standing, a motion to
strike his claim should be granted.

See United States v. $38,570

U.S. Currency, 950 F.2d 1108, 1111-13 (5th Cir. 1992) (“Unless
claimant can first establish his standing he has no right to put
the government to its proof”).
For statutory standing, a claimant in a civil
forfeiture proceeding must comply with the procedures laid out in
Supplemental Rule G.

For Article III standing, “a litigant must

allege a ‘distinct and palpable injury to himself,’ fairly
traceable to the ‘putatively illegal conduct of the defendant,’
and likely to be redressed by the requested relief.”

Torres v.

$36,256.80, 25 F.3d 1154, 1157 (2d Cir. 1994)(quotations and
citations omitted).
In a forfeiture action, “ownership and possession
usually satisfy Article III’s standing requirement because ‘an
owner or possessor of property that has been seized necessarily
suffers an injury that can be redressed at least in part by the
return of the seized property.’”

Cambio Exacto, S.A., 166 F.3d

522 at 527 (quoting United States v. $515,060.42, 152 F.3d 491,
497 (6th Cir.1998)).

See also United States v. $321,470.00, U.S.

Currency, 874 F.2d 298, 303 (5th Cir. 1989).

12

“If the claimant

cannot show a sufficient interest in the property to give him
Article III standing there is no case or controversy, in the
constitutional sense, capable of adjudication in the federal
courts.”

United States v. New Silver Palace Restaurant, Inc.,

810 F. Supp. 440, 442 (E.D.N.Y. 1992) (internal quotation marks,
alterations, and citations omitted).
A bare legal interest, however, without actual dominion
or control of the subject property is not enough to demonstrate
standing to contest the forfeiture.

“Possession of mere legal

title by one who does not exercise dominion and control over the
property is insufficient even to establish standing to challenge
a forfeiture.”

United States v. Nava, 404 F.3d 1119, 1130 n.6

(9th Cir. 2005). See also Cambio Exacto, S.A., 166 F.3d 522 at
527 (“[w]e have, for example, denied standing to “straw” owners
who do indeed “own” the property, but hold title to it for
somebody else. Such owners do not themselves suffer an injury
when the property is taken”) (citation omitted); United States v.
Premises & Real Prop. with Bldgs., Appurtenance & Improvements at
500 Delaware St., Tonawanda, New York, 113 F.3d 310, 312 (2d Cir.
1997) (father did not have standing to contest forfeiture of home
where son grew marijuana because he was merely a straw owner who
did not exercise possession); United States v. Premises Known as
526 Liscum Drive, 866 F.2d 213, 216 (6th Cir. 1988) (“Because
claimant presented no evidence other than that title to the

13

property was in her name, the district court correctly found that
she had failed to satisfy her burden to establish standing to
challenge the forfeiture”) (abrogated by United States v. Certain
Real Prop. Located at 16510 Ashton, Detroit, Wayne County, Mich.,
47 F.3d 1465, 1471 (6th Cir. 1995) (holding that straw owners of
real property have right to pre-seizure notice and hearing in
forfeiture action, in part because real property “can be neither
moved nor concealed”) (citations omitted) (emphasis added));
United States v. One 1982 Porsche 928, Three-Door, License Plate
1986/NJ Temp./534807 (auto.), 732 F. Supp. 447, 451 (S.D.N.Y.
1990) (“While ownership may be proven by actual possession,
dominion, control, title and financial stake, the possession of
bare legal title to the res may be insufficient, absent other
evidence of control or dominion over the property”) (quotations
and citations omitted); United States v. One 1981 Datsun 280ZX,
563 F. Supp. 470, 476 (E.D. Pa. 1983) (father did not have
standing to contest forfeiture of wrongdoer’s car even though the
father held legal title to the car and kept it at his house
because the son was the only one who exercised dominion and
control over the car).
Moreover, a claimant alleging ownership cannot rest on a
conclusory assertion of their ownership interest.

“A claimant is

required to submit some additional evidence of ownership along
with his claim in order to establish standing to contest the

14

forfeiture.”

Torres, 25 F.3d at 1158 (quoting

$38,570, 950 F.2d 1108, 1113 (5th Cir.1992)).

United States v.
See also United

States v. $557,933.89, More or Less, in U.S. Funds, 287 F.3d 66,
78 (2d Cir. 2002) (“[A]n allegation of ownership and some
evidence of ownership are together sufficient to establish
standing to contest a civil forfeiture.”) (quoting Torres, 25
F.3d at 1158); United States v. 74.05 Acres of Land, 428 F. Supp.
2d 57, 63 (D. Conn. 2006) (finding that claimant had standing
because he demonstrated proof of ownership in addition to
possession) (quoting Torres, 25 F.3d at 1158).
B.

Discussion

Kentucky has not demonstrated an interest in the
Defendant Domain Names sufficient to establish constitutional
standing.

Despite its conclusory assertion of ownership,

Kentucky does not in fact have ownership of the Defendant Domain
Names and has never exercised any actual possession, dominion, or
control over the them.

As discussed above, Kentucky has filed an

action in its own courts seeking the forfeiture of the Defendant
Domain Names under Kentucky law, but has not obtained a judgment.
The Kentucky state court has also issued an order of seizure for
the Domain Names, but Kentucky has never actually seized them
and, indeed, Kentucky admits that the Poker Companies continued
to use the Defendant Domain Names as alleged in the Complaint for
more than two-and-a-half years after the issuance of the Franklin

15

Circuit Court Seizure Order.
Because Kentucky has neither an ownership interest nor
any actual possession, dominion, or control over the Defendant
Domain Names, it lacks standing.

The Franklin Circuit Court

Seizure Order, which was not successfully executed, provides even
less basis to claim standing than bare legal title conferred
standing to the claimants in Nava, 500 Delaware St., or One 1982
Porsche 928.
Because Kentucky has failed to establish ownership or
possession of the Domain Names, it lacks Article III standing,
and the Court should strike its claim.
II.

THE COUNTERCLAIM SHOULD BE DISMISSED
Because Kentucky lacks standing to file a claim in this

matter, it is not a party to this action and its counterclaim
should also be dismissed.

But Kentucky’s counterclaim would have

to be dismissed in any event.
First, Kentucky’s counterclaim fundamentally
misapprehends the nature of this in rem proceeding.

It is the

property of the Poker Companies, among others, that constitutes
the defendants-in-rem in this action.

Kentucky is a claimant,

not a defendant, and cannot counterclaim against the United
States.2

“A counterclaim is an action brought by a defendant

2

While certain persons and entities have been named as in
personam defendants in regard to civil money allegations,
Kentucky is not among them.
16

against the plaintiff.

Whatever the claimants’ pleading is, it

is not properly a counterclaim.”

United States v. $10,000.00 in

U.S. Funds, 863 F. Supp. 812, 816 (S.D. Il. 1994); see also
United States v. “Lady with a Parrot” by Nahl, 92-C-6427, 1992 WL
293287, *1 (N.D. Ill. Oct. 13, 1992) (striking counterclaim in
forfeiture action as improper).
Second, sovereign immunity bars Kentucky’s
counterclaim.

As the court explained in United States v. All

Right, Title and Interest in the Real Property and Buildings
Known as 228 Blair Avenue, Bronx, New York:
It is well established that the United States
Government has sovereign immunity and,
consequently, can be sued only to the extent
it consents to be sued, and only in the
manner established by law. Thus,
counterclaims against the United States can
be maintained only where the Government has
consented or waived its immunity from suit on
that claim. . . . Initiation of a
forfeiture action does not constitute a
waiver of sovereign immunity.
821 F. Supp. 893, 899 (S.D.N.Y. 1993) (citing United States v.
Mitchell, 445 U.S. 535, 538 (1980)).

See also United States v.

Lockheed L-188 Aircraft, 656 F.2d 390 (9th Cir. 1979) (government
did not waive sovereign immunity in filing an in rem forfeiture
action so the district court’s dismissal of counterclaim asserted
under Tucker Act affirmed); United States v. 8,800 Pounds of
Powdered Egg White, 04 Civ. 76 (RWS), 2007 WL 2955571, *7 (E.D.
Mo. Oct. 5, 2007) (same); United States v. $10,000.00 in U.S.

17

Funds, 863 F. Supp. at 816 (S.D. Il. 1994) (court barred FTCA
counterclaim stating “that the mere fact that the government is
the plaintiff and has brought the forfeiture action does not
constitute a waiver of sovereign immunity and authorize the
bringing of a counterclaim”).
Finally, neither 18 U.S.C. § 983 nor the Supplemental
Rules for Admiralty and Maritime Claims, Rule G, provide for
counterclaims in civil forfeiture proceedings.
CONCLUSION
For the foregoing reasons, the Government respectfully
requests that the Court enter an order striking the claim and
counterclaim of Kentucky for lack of standing and also strike its
counterclaim as barred by sovereign immunity and as unauthorized
by statute.
Dated:

New York, New York
July 16, 2012
Respectfully submitted,
PREET BHARARA
United States Attorney for the
Southern District of New York
By:

/s/
Sharon Cohen Levin
Michael D. Lockard
Jason H. Cowley
Assistant United States Attorney
[phone]/2193/2479

18