Unites States v. Pokerstars, et al

Filing 91

REPLY MEMORANDUM OF LAW in Support re: 65 MOTION to Strike Document No. 37 (Claim) and Dismiss Counter Claim.. Document filed by United States Of America. (Cowley, Jason)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
- - - - - - - - - - - - - - - - - - - x
UNITED STATES OF AMERICA,
:
Plaintiff,

:
11 Civ. 2564 (LBS)

- v. -

:

POKERSTARS, et al.

:

Defendants;

:

ALL RIGHT, TITLE AND INTEREST IN THE
ASSETS OF POKERSTARS, et al.;

:
:

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

REPLY MEMORANDUM OF LAW IN FURTHER SUPPORT OF
THE GOVERNMENT’S MOTION TO STRIKE
THE CLAIM AND DISMISS THE COUNTER CLAIM OF ADAM WEBB

PREET BHARARA,
United States Attorney for the
Southern District of New York

Sharon Cohen Levin
Jason H. Cowley
Michael D. Lockard
Assistant United States Attorneys
- of counsel -

TABLE OF CONTENTS
TABLE OF AUTHORITIES. . . . . . . . . . . . . . . . . . . . .

ii

PRELIMINARY STATEMENT.. . . . . . . . . . . . . . . . . . . . . 1
BACKGROUND. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
DISCUSSION. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
I.

WEBB’S ALLEGATIONS ARE INSUFFICIENT TO ESTABLISH
.
STANDING TO FILE A CLAIM. . . . . . . . . . . . . . . 3
A.

The Law. . . . . . . . . . . . . . . . . . . . 3

B.

Claimant Is At Best A General Creditor
Who Lacks Standing.. . . . . . . . . . . . . . 5

C.

Claimant Has Failed To Allege An
Interest In Any Specific Asset Subject to
Forfeiture.. . . . . . . . . . . . . . . . .

11

THERE IS NO BASIS TO IMPOSE A CONSTRUCTIVE
TRUST.. . . . . . . . . . . . . . . . . . . . . . .

12

III. CLAIMANT’S COUNTER CLAIM SHOULD BE DISMISSED. . . .

15

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

17

II.

i

TABLE OF AUTHORITIES
FEDERAL CASES
Bertoni v. Catucci,
117 A.D.2d 892 (N.Y. App. Div. 1986).. . . . . . . . . .
Chilewich Partners v. M.V. Alligator Fortune,
853 F. Supp. 744 (S.D.N.Y.1994) . . . . . . . . . . .

14

13-14

DSI Associates, LLC v. United States,
496 F.3d 175 (2d Cir. 2007). . . . . . . . . . . . . . . . 8
In re Koreag, Controle et Revision S.A.,
961 F.2d 341 (2d Cir. 1992). . . . . . . . . . . . . . .

12

Mercado v. U.S. Customs Service,
873 F.2d 641 (2d Cir. 1989). . . . . . . . . . . . . . . . 3
New York State Assn. of Life Ins. Underwriters v.
Supt. of Insurance,
37 A.D.2d 304, 325 N.Y.S.2d 172, 175–76 (N.Y. 1971). . . .13
Peoples Westchester Sav. Bank v. FDIC,
961 F.2d 327 (2d Cir. 1992). . . . . . . . . . . . . . . . 6
United Stats v. 47 10-Ounce Gold Bars,
No. CV 03-955-MA, 2005 WL 221259
(D. Or. Jan. 28, 2005).. . . . . . . . . . . . . . . . 9, 10
United States v. 662 Boxes of Ephedrine,
590 F. Supp. 2d 703 (D.N.J. 2008). . . . . . . . . . . 16-17
United States v. 8,800 Pounds of Powdered Egg White,
04 Civ. 76 (RWS), 2007 WL 2955571
(E.D. Mo. Oct. 5, 2007) . . . . . . . . . . . . . . . . . 16
United States v. $10,000.00 in U.S. Funds,
863 F. Supp. 816 (S.D. Il. 1994).. . . . . . . . . . . .

16

United States v. $79,000 at Bank of New York,
No. 96 Civ. 3493 (MBM), 1996 WL 648934
(S.D.N.Y. Nov. 7, 1996). . . . . . . . . . . . . . . . . . 6
United States v. $421,090.00 in United States Currency,
No. 11–CV–00341(JG), 2011 WL 3235632
(E.D.N.Y. July 27, 2011). . . . . . . . . . . . . . . . .

ii

9

United States v. All Fund on Deposit in the Name of Khan,
955 F. Supp. 23 (E.D.N.Y. 1997). . . . . . . . . . .

passim

United States v. All Right, Title and Interest in the
Real Property and Buildings Known as 228 Blair
Avenue, Bronx, New York,
821 F. Supp. 893 (S.D.N.Y. 1993).. . . . . . . . . . . .

15

United States v. Benitez,
779 F.2d 135 (2d Cir.1985).. . . . . . . . . . . . . . .

14

United States v. Cambio Exacto, S.A.,
166 F.3d 522 (2d Cir. 1999). . . . . . . . . . . . . .

4, 8

United States v. Contents of Account Number 11671-8 in the
name of Latino Americana Express, No. 90 Civ. 8154 (MBM),
1992 WL 98840 (S.D.N.Y. May 6, 1992).. . . . . . . . . . . 6
United States v. Khan,
129 F.3d 114, 1997 WL 701366 (2d Cir. Nov. 10, 1997)
(table, unpublished). . . . . . . . . . . . . . . . .

8, 14

United States v. Khan, 497 F.3d 204, 211 (2d Cir. 2007). . . . 16
United States v. Mazza-Alaluf,
No. S1 07 Cr. 403(PKC), 2011 WL 308266
(S.D.N.Y. Jan. 27, 2011).. . . . . . . . . . . . . . . .

11

United States v. Mitchell,
445 U.S. 535 (1980). . . . . . . . . . . . . . . . . . .

16

United States v. One 1982 Porsche 928,
732 F. Supp. 447 (S.D.N.Y. 1990).. . . . . . . . . . . . . 3
United States v. One 1986 Volvo 750T,
765 F. Supp. 90 (S.D.N.Y. 1991). . . . . . . . . . . . . . 3
United States v. One-Sixth Share of James J. Bulger in All
Present and Future Proceeds of Mass Millions Lottery
Ticket M246233, 326 F.3d 36 (1st Cir. 2003). . . . . 3, 4, 5
United States v. Ribadeneira,
105 F.3d 833 (2d Cir. 1197). . . . . . . . . . . . . . .

11

United States v. Ribadeneira,
920 F. Supp. 553 (S.D.N.Y. 1996) aff’d 105 F. 3d
833 (2d Cir. 1997).. . . . . . . . . . . . . . . . . . .

11

iii

United States v. Schwimmer, 968 F.2d 1570 (2d Cir. 1992) . . . 14
Willis Management (Vermont), Ltd. v. United States,
652 F.3d 236 (2d Cir. 2011). . . . . . . . . . . . . . . .15
STATUTES
21 U.S.C. § 853.. . . . . . . . . . . . . . . . . . . . . . .

13

28 U.S.C. § 2465. . . . . . . . . . . . . . . . . . . . . . .

16

OTHER AUTHORITIES
1 Palmer, Restitution, § 2.14 . . . . . . . . . . . . . . . . .14

iv

PRELIMINARY STATEMENT
The Government respectfully submits this reply to
Claimant Adam Webb’s (“Claimant” or “Webb”) response to the
Government’s Motion to Strike his Claim and Dismiss his Counter
Claim pursuant to Rule 12(b) of the Federal Rules of Civil
Procedure and Rule G(8)(c) of the Supplemental Rules for
Admiralty and Maritime Claims.

Under well-settled law, the

general, unsecured debt that Webb contends is owed to him by
certain poker companies is not does not rise to a legal interest
in specific property subject to forfeiture and does not confer
constitutional standing on Webb to pursue a claim in this matter.
While Webb may seek to take action against the poker companies,
or, to the extent applicable, seek relief through the Attorney
General’s discretionary authority to provide forfeited funds to
crime victims through the petition and remission process, he
simply lacks constitutional standing to assert a claim in this
action.

Accordingly, his claim should be stricken.
In his opposition to the motion to dismiss, Webb

asserts a variety of new theories, not referenced in either his
claim or answer, including a bailment and a constructive trust.
Mr. Webb has put absolutely no facts before the Court supporting
either theory, either in his claim or through an affidavit.

But

even taking the unsupported factual assertions in his opposition
brief at face value, these arguments fail as a matter of law.
Webb’s assertions still show nothing more than a debt allegedly

owed to him by Full Tilt Poker and Absolute Poker, rather than
any legal interest in the specific property sought to be
forfeited.
Finally, even if Webb did have standing to file a claim
in this matter, his counter claim has no basis in law and is
barred by sovereign immunity.
BACKGROUND
On or about July 15, 2011, Webb filed a claim (the
“Claim”) (Docket Entry 37), asserting that Webb has “an interest
in the defendant funds as the owner of $58,917.90 in the
possession of Full Tilt Poker and of $36,531.73 in the possession
of Absolute Poker.”

The Claim does not identify any specific

accounts or specific funds in which Webb allegedly has an
ownership interest.

Nor does the Claim identify whether the

amounts allegedly owed represent the value of funds that he
transferred to the poker companies (through third-party payment
processors), the value of winnings from online gambling
transactions, promotions or other credits to his online gambling
accounts, or all of the above.
On or about August 4, 2011, Webb filed an answer to the
Complaint, which included allegations that he labels as
affirmative defenses and a counter claim for costs, pre- and
post-judgment interest, and attorneys’ fees.

(Docket Entry 41).

On or about October 3, 2011, the Government moved to strike

2

Webb’s claim on the ground that he lacks constitutional standing
to assert a claim and to dismiss his counter claim as barred by
sovereign immunity and lacking in legal basis.

On or about

October 17, 2011, Webb filed an opposition to the Government’s
motion to strike (the “Webb Br.”).
DISCUSSION
I.

WEBB’S ALLEGATIONS ARE INSUFFICIENT TO ESTABLISH STANDING TO
FILE A CLAIM
A.

The Law
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 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).
Webb cites United States v. One-Sixth Share of James J.
Bulger in All Present and Future Proceeds of Mass Millions
Lottery Ticket M246233, 326 F.3d 36, 41 (1st Cir. 2003)
(hereafter “One-Sixth Share”), among other cases, for the
proposition that courts apply a “very forgiving” standard in
assessing whether facts sufficient to demonstrate standing have
been alleged.

As One-Sixth Share demonstrates, however, this

standard is nevertheless real and enforced by Courts in order to
ensure that they consider only controversies properly before
them.

In One-Sixth Share, for example, the First Circuit in fact
3

affirmed the district court’s order striking the claims of
various claimants, including the claims of two claimants on the
grounds that they were, at best, unsecured general creditors of
Whitey Bulger.

One Sixth Share, 326 F.3d at 44.

Webb also relies on cases discussing the role of
economic injury in assessing constitutional standing, in
connection with the standing requirement that the alleged injury
can be “redressed by the requested relief.”

United States v.

Cambio Exacto, S.A., 166 F.3d 522, 526 (2d Cir. 1999).
misapplies the economic injury inquiry.

But Webb

The question is not

whether actions of the owner of property subject to forfeiture
have caused economic injury to the putative claimant; the
question is whether the claimant has a legal interest in property
sought to be forfeited.

In Cambio Exacto, for example, the court

noted that the claimant at issue did not allege an injury that
would be redressed by “a successful challenge to the forfeiture
of the defendants funds, which would result in their return to
[another company], not [the claimant].”

Id. at 529.

Similarly,

in this case, absent a forfeiture judgment the subject property
would remain under the control of the poker companies and payment
processors at issue, not Webb.
In reality, recognizing standing for alleged unsecured
creditors such as Webb would essentially transform this
forfeiture proceeding into something akin to a bankruptcy or

4

liquidation matter in which assets of certain companies are
transferred to creditors of those entities.

As Webb himself

concedes, this would be an improper subversion of forfeiture
actions.

Webb Br. at 16 (citing One-Sixth Share, 326 F.3d at

44).1
B.

Claimant Is At Best A General Creditor Who Lacks
Standing
Under well-established legal principles, Webb’s

allegations are insufficient to demonstrate standing in this
matter.

By Webb’s own allegations, Full Tilt Poker and Absolute

Poker, and the deposit institutions they utilize, took possession
of the funds he refers to in his Claim, and the Claimant does not
allege that he retained any security interest in money he
transferred to Full Tilt Poker and Absolute Poker.

Even

accepting the factual assertions in Webb’s opposition as true,
any ownership interest Webb had in any particular funds that he
transferred to the poker companies was lost, as a matter of law,
when he caused the funds to be withdrawn from his account by a
payment processor, deposited into processor accounts, and then
possibly transferred to overseas accounts belonging to Full Tilt
Poker and Absolute Poker.

1

See, e.g., Docket Entry 77 (claim of putative class of U.S.
players).

5

It is well settled under the law of New York and other
states2 that once someone deposits funds in a bank or investment
account –- or an account held by another -– he or she then lacks
a particularized interest in those funds.

See Peoples

Westchester Sav. Bank v. FDIC, 961 F.2d 327, 330 (2d Cir. 1992)
(as soon as money is deposited, it is deemed to be the property
of the bank, and the relationship between the bank and the
depositor is that of debtor and creditor); United States v. All
Fund On Deposit In the Name of Khan, 955 F. Supp. 23, 26-27
(E.D.N.Y. 1997) (abbreviated title) (under New York Law, an
individual loses title to funds once the funds are deposited into
an account held in the name of a third person); United States v.
$79,000 at Bank of New York, No. 96 Civ. 3493 (MBM), 1996 WL
648934, *5 (S.D.N.Y. Nov. 7, 1996) (abbreviated title) (same).
Webb fails to allege in his Claim that he has any secured
interest in the funds he seeks.
Webb seeks to avoid this well-settled line of cases by
relying on allegations in the Amended Complaint to argue that the
poker companies at issue functioned like banks and that Webb
essentially had “bank accounts” at the poker companies in his

2

In analyzing the question of standing in a forfeiture
action, it is appropriate to look to state law to determine the
nature of the property interest involved. United States v.
Contents of Account Number 11671-8 in the Name of Latino
Americana Express, 90 Civ. 8154 (MBM), 1992 WL 98840, *3
(S.D.N.Y. May 6, 1992).
6

name.

Webb argues that he therefore has an ownership interest in

those “accounts.”3
Webb’s argument fails on several levels.

First, his

argument that Full Tilt Poker represented to players that their
funds were each kept in segregated accounts from other players’
funds is simply not accurate.

Webb Br. at 3.

The Amended

Complaint alleges that Full Tilt Poker represented that player
funds in the aggregate were kept segregated from operating funds
of the company.

See, e.g., Amended Complaint ¶ 5.

There was no

allegation that Full Tilt represented that it maintained
individually segregated deposit accounts for each player.
Second, online player gambling accounts are not the
legal equivalent of deposit accounts with a financial
institution, and a number of courts have stricken claims by
individuals who had funds or assets “on deposit” with various
types of non-bank businesses.

In Khan, federal law enforcement

officials seized multiple bank accounts held by money remitting
businesses when the owner of the money remitters was charged with
money laundering.

Clients would bring funds to the business and

have them transferred to family members and the like overseas.
Approximately 53 customers who had funds “deposited” with the
businesses asserted claims to the funds in the seized accounts.

3

The allegations Webb relies on pertain only to Full Tilt
Poker, not Absolute Poker.
7

Khan, 955 F. Supp. at 24-25.

The Court granted the Government

judgment on the pleadings and noted that the individual claimants
“retained no signatory authority over the accounts nor any sort
of authority that would have allowed them any power of the
disposition of the funds in the accounts.”

Id. at 27.

Webb placed himself in the same situation in relation
to the poker companies when he entrusted his funds with them.
While he could make requests to the companies for the return of
these funds, he had no signatory authority over the poker
companies’ bank accounts and surrendered any legal authority or
control over those funds.

As the Second Circuit explained in

upholding Khan, “the appellants all are essentially unsecured
creditors of the owner’s seized property, and as such do not have
standing to challenge the seizure.”

United States v. Khan, 129

F.3d 114, 1997 WL 701366, at *1 (2d Cir. Nov. 10, 1997) (table,
unpublished).

See also DSI Associates, LLC v. United States, 496

F.3d 175, 184 (2d Cir. 2007) (a general creditor does not possess
a “legal right, title, or interest in the property that was
forfeited as required for standing under § 853(n)(6)(A)”); Cambio
Exacto, S.A., 166 F.3d at 529 (person to whom a money transmitter
owes money lacks standing as a general creditor to contest
forfeiture of money transmitter’s account).4

4

Webb appears to cite only one case that he describes as
“analogous” to the facts at hand and as establishing that a
claimant has standing to assert a claim to a portion of seized
8

In United States v. 47 10-Ounce Gold Bars, No. CV
03-955-MA, 2005 WL 221259 (D. Or. Jan. 28, 2005), the court also
rejected standing arguments similar to ones that Webb makes in
the present matter.

In 47 10-Ounce Gold Bars, the court

addressed the forfeiture of gold bars and other items from a
company called Crowne Gold, Inc.

Id. at *1.

Crowne Gold was a

company that enabled clients to “buy, sell, store and exchange
gold and silver . . . from or to individualized Crowne Gold
accounts or to merchants who accept gold as a medium of
exchange.”

Id. (quotation omitted).

“A client making a gold or

silver purchase through Crowne Gold must wire the necessary funds
to the Crowne Gold account [at a bank].

After the receipt of the

funds has been verified, Crowne Gold will ‘load’ the client’s
account with the quantity of gold or silver purchased.”
*2.

Id. at

“The gold and silver is held by Crowne Gold at a secure

facility.

Crowne Gold keeps track of the quantity of physical

funds without being the titular owner or a secured creditor. Webb
Br. at 16 (citing United States v. $421,090.00 in United States
Currency, No. 11–CV–00341(JG), 2011 WL 3235632, at *5 (E.D.N.Y.
July 27, 2011)). That case is neither analogous or stands for
the proposition that Webb asserts. In that matter, the court
ruled that the individual from whom two suitcases full of cash
were seized could assert a claim for those funds. $421,090.00 in
United States Currency, 2011 WL 3235632, at *1-5. Webb cannot
allege possession of any funds at issue, as it is uncontested he
surrendered possession and control of his funds to poker
companies. The case he cites does not address the standing of
someone to assert a claim over funds provided to a third party
and held in bank accounts of those third parties over which the
putative claimant exercised no control.
9

gold and silver allocated to each particular client at a given
storage facility.

At the client’s request, Crowne Gold will

physically deliver the client’s gold or silver holdings.”

Id. at

*3.
Two Crowne Gold customers filed claims to seek the
return of gold and other assets that they had “on account” at
Crowne Gold.

Citing Khan, the court determined that these

claimants lacked constitutional standing to assert a claim.

The

court noted that the claimants “allowed Crowne Gold to maintain
complete control over the gold and silver in a secure location”
and that Crowne Gold’s assertion that “‘we know precisely the
quantity of physical gold and silver in each location that is
allocated to each particular client’ does not create the required
ownership rights over the specific seized funds.”

Id. at *4.

Webb puts forward many of the same arguments as the
would-be claimants in 47 10-Ounce Gold Bars and to equal effect.
Simply because the poker companies used the term “account” for
their customers does not undo the fact that Webb surrendered
possession and control of his funds to other parties, who then
deposited these funds in their own bank accounts.

Knowing how

much money or assets were owed to particular “account holders” in
context of either Crowne Gold, or the poker companies at issue,
does not confer the sort of interest sufficient for standing in a
forfeiture matter.

10

C.

Claimant Has Failed To Allege An Interest in Any
Specific Asset Subject To Forfeiture
Webb has failed to allege any particular accounts over

which he allegedly has an ownership interest.

“[A]n interest

‘in’ property must be an interest in a particular, specific
asset, as opposed to a general interest in an entire forfeited
estate or account.”

United States v. Ribadeneira, 105 F.3d 833,

836 (2d Cir. 1997) (per curiam) (affirming United States v.
Ribadeneira, 920 F. Supp. 553, 554-55 (S.D.N.Y. 1996) (Sand, J.)
(as holders of checks drawn on seized account, as opposed to
security interests, claimants were unable to assert rights to a
particular asset or specified funds and hence lacked standing)).
Webb asserts nothing more than the debt allegedly owed
to him by Full Tilt Poker and Absolute Poker.

As this Court

recently held with language equally applicable to this matter:
The petitioners do not assert a direct nexus
between their loans and these seizures of hard
currency. Similarly, the petitioners do not
assert that their loans to [a company] had any
nexus to the [bank account] that was subject to
the preliminary forfeiture order. While the Court
is sympathetic to the petitioners’ predicament,
there is no authority to support their contention
that, as ‘defrauded investors,’ they have standing
to contest the forfeiture.
United States v. Mazza-Alaluf, No. S1 07 Cr. 403 (PKC), 2011 WL
308266 (S.D.N.Y. Jan. 27, 2011).
The Claimant has made no allegations identifying the
property in which he asserts an interest.

11

He does not point to

any particular bank account of any particular entity.

Instead,

consistent with his position as a general creditor, he alleges
only the debt he argues is owed to him.
II.

THERE IS NO BASIS TO IMPOSE A CONSTRUCTIVE TRUST
Webb seeks to avoid dismissal of his Claim by asking

the Court to recognize a constructive trust over the assets
subject to forfeiture. Under well-settled New York law,5 however,
the requisite elements for the finding of such a trust have not
been met.
Under New York law, courts should look to the following
elements when deciding whether to recognize a constructive trust:
“(1) a confidential or fiduciary relationship; (2) a promise,
express or implied; (3) a transfer made in reliance on that
promise; and (4) unjust enrichment.”

In re Koreag, Controle et

Revision S.A., 961 F.2d 341, 352 (2d Cir.1992) (collecting
cases).
Several of these elements are missing in the present
case, beginning with the lack of a confidential or fiduciary
relationship.

It is axiomatic that “[p]urely commercial

transactions do not give rise to a fiduciary relationship.”
at 353.

Id.

Webb attempts to avoid this well-settled law by

asserting that transactions with the poker companies amounted to

5

Webb seeks the imposition of a constructive trust under
New York law specifically. Webb Br. at 17.
12

bailments, creating a fiduciary relationship with these
companies.

Webb Br. at 17.

This argument has several flaws, the

first being that Webb alleges no facts supporting a bailment.
The poker companies did not undertake to hold funds transferred
to them by Webb separately from other player funds or to deliver
to Webb the same funds given to them by Webb.

Instead, those

funds were co-mingled with other player funds, and were subject
to being lost to other players, just as the funds of other
players were subject to being won by Webb.

The online poker

players surrendered not merely possession of the money they
transferred to the poker companies, but also ownership of those
funds.

While the poker companies kept an accounting of Webb’s

winnings and losses and agreed to transfer funds to him upon
request, they did not agree to give him back the specific
property he deposited.

Accordingly, the relationship is that of

creditor/debtor, rather than bailor/bailee.

See, e.g., New York

State Assn. of Life Ins. Underwriters v. Supt. of Insurance, 37
A.D.2d 304, 325 N.Y.S.2d 172, 175–76 (N.Y. 1971).
Additionally, the poker companies were not deposit
institutions.

Their own funds were kept in bank accounts with

financial institutions.

As the Second Circuit explained in Khan

when it rejected a similar argument, a bailment ends when
property is delivered to another party, such as a bank.
1997 WL 701366, at *2 (citing Chilewich Partners v. M.V.

13

Khan,

Alligator Fortune, 853 F. Supp. 744, 756 (S.D.N.Y.1994) (bailment
ends when property returned to bailor or delivered to another
party)).
It is also “hornbook law that before a constructive
trust may be imposed, a claimant to a wrongdoer’s property must
trace his own property into a product in the hands of the
wrongdoer.”

United States v. Benitez, 779 F.2d 135, 140 (2d Cir.

1985); 1 Palmer, Restitution, § 2.14 (equitable interest must be
traced to identifiable property); see also United States v.
Schwimmer, 968 F.2d 1570, 1583 (2d Cir. 1992) (in forfeiture
proceedings, trust beneficiaries must trace property to that held
in trust).

As explained above, Claimant does not trace funds

that he caused to be transferred to the poker companies into any
particular property subject to forfeiture.
Next, “a constructive trust should not be imposed
unless it is demonstrated that a legal remedy is inadequate.”
Bertoni v. Catucci, 117 A.D.2d 892, 498 N.Y.S.2d 902, 905 (N.Y.
App. Div. 1986).

In this case, Webb can bring suit against Full

Tilt Poker, Absolute Poker, and any individuals or other entities
he chooses under a variety of theories to collect the funds he
alleges are owed to him.
Finally, the Attorney General’s discretionary authority
to remit forfeited funds to victims of crime should also be taken
into account.

While the remission process, codified at Title 21,

14

United States Code, Section 853(i)(1), is not an “adequate legal
remedy” precluding the imposition of a constructive trust, see
Willis Management (Vermont), Ltd. v. United States, 652 F.3d 236
(2d Cir. 2011); its existence nevertheless is relevant to a
determination of whether there would be unjust enrichment in the
absence of a constructive trust.

Here, the poker companies will

not be unjustly enriched, as proceeds of any illegal activity
they committed is subject to forfeiture, and the remission
program exists as a vehicle by which funds can be returned to any
crime victims.
III. CLAIMANT’S COUNTER CLAIM SHOULD BE DISMISSED
Webb’s counter claim is unauthorized by law and plainly
barred by sovereign immunity.

Indeed, Webb fails to cite a

single case or statute authorizing counterclaims against the
United States in forfeiture proceedings.

Accordingly, in the

event his claim is not stricken, his counter claim should
nevertheless be dismissed.6
This court, and others, has been clear that
“[i]nitiation of a forfeiture action does not constitute a waiver
of sovereign immunity.”

United States v. All Right, Title and

Interest in the Real Property and Buildings Known as 228 Blair
Avenue, Bronx, New York, 821 F. Supp. 893, 899 (S.D.N.Y. 1993)

6

Webb seems to at least implicitly acknowledge that if his
claim is stricken then his counter claim would also be dismissed.
Webb Br. at 19.
15

(citing United States v. Mitchell, 445 U.S. 535, 538 (1980));
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. Funds, 863 F. Supp. at 816 (S.D. Il.
1994) (court barred FTCA counter claim 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”).
Neither the Equal Access to Justice Act (“EAJA”) nor
the Civil Asset Forfeiture Reform Act (“CAFRA”) provide a basis
for a counter claim.

In his response, Webb ignores the fact that

the Second Circuit has explicitly held that “the EAJA and CAFRA
are irreconcilably at odds” and that “CAFRA is exclusive of all
other remedies.”
Cir. 2007).

United States v. Khan, 497 F.3d 204, 211 (2d

While CAFRA does include a provision providing for

attorneys’ fees and interest in cases in which a claimant is
successful, see 28 U.S.C. § 2465(b)(1), this specific
authorization is not a general waiver of sovereign immunity for
the United States to be sued – indeed, the CAFRA provision is
“exclusive.”

Khan, 497 F.3d at 211.

Moreover, despite Webb’s

contention regarding the “main thrust” of United States v. 662
Boxes of Ephedrine, 590 F. Supp. 2d 703 (D.N.J. 2008), see Webb
Br. at 24, that case specifically notes that counter claims for
attorneys’ fees and litigation costs are “superfluous because the

16

CAFRA specifically provides that a prevailing party may recover
those expenses by post-judgment motion.”

590 F. Supp. 2d at 705.

Webb’s counter claim should accordingly be dismissed
regardless of whether he is allowed to proceed on his claim.
CONCLUSION
For the foregoing reasons, the Government respectfully
requests that the Court enter an order striking the claim and
counter claim of Adam Webb for lack of standing and also strike
his counter claim as barred by sovereign immunity and
unauthorized by statute.
Dated:

New York, New York
October 31, 2011
Respectfully submitted,
PREET BHARARA
United States Attorney for the
Southern District of New York
By:

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

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