United States of America v. $4,480,466.16 in funds seized from Bank of America account ending in 2653 et al

Filing 131

MEMORANDUM OPINION AND ORDER granting 93 Sealed and/or Ex Parte Motion filed by United States of America; granting 95 Motion to Dismiss for Failure to State a Claim filed by Retail Ready Career Center Inc; granting 97 Motion to Dismiss for Failure to State a Claim, filed by Jon Davis; declining to reach 97 Motion for More Definite Statement filed by Jon Davis; granting 99 Motion to Dismiss for Failure to State a Claim filed by Lake Forest Drive Properties, Inc., Clear Con science LLC, Melissa Richey, Trades United Inc.; and granting the government 28 days from the date the Memorandum Opinion and Order is filed to file a third amended complaint. (Ordered by Judge Sidney A Fitzwater on 8/28/2018) (Judge Sidney A Fitzwater)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
UNITED STATES OF AMERICA,
Plaintiff,
VS.
$4,480,466.16 IN FUNDS SEIZED
FROM BANK OF AMERICA
ACCOUNT ENDING IN 2653, et al.,
Defendants in rem.

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§ Civil Action No. 3:17-CV-2989-D
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MEMORANDUM OPINION
AND ORDER
In this in rem civil forfeiture action, six claimants—Retail Ready Career Center, Inc.
(“RRCC”), Jonathan Davis (“Davis”), Melissa Richey (“Richey”), Lake Forrest Drive
Properties, Inc., Clear Conscience, LLC, and Trades United Inc. (collectively,
“claimants”)—move to dismiss the second amended complaint, and the government moves
to seal the affidavit filed in support of its second amended complaint (“verification
affidavit”). For the following reasons, the court grants the motions to dismiss but also grants
the government leave to file a third amended complaint, and grants the government’s motion
to seal the verification affidavit.
I
In September and October 2017 the government seized certain property (the
“defendant property”) as derived from proceeds traceable to a violation, violations, or

conspiracy to violate federal law.1 In October 2017 the government filed the instant in rem
action. After receiving notice of the action, claimants filed verified claims to the defendant
property. They then moved, in three separate motions, to dismiss the complaint and for a
more definite statement. They also moved to unseal court records.
The government later filed an amended complaint and moved to dismiss the
constitutional counterclaims of claimant RRCC. Claimants, again in three separate motions,
moved to dismiss the amended complaint and for a more definite statement. They also filed
a second motion to unseal court records.
The government then filed a motion to stay, pursuant to 18 U.S.C. § 981(g)(1),
contending that a stay was necessary to protect an ongoing criminal investigation from
expansive civil discovery. In United States v. $4,480,466.16 in Funds Seized from Bank of
America Account Ending in 2653 ($4,480,466.16 in Funds Seized I), 2018 WL 1964255
(N.D. Tex. Apr. 26, 2018) (Fitzwater, J.), the court denied the government’s motion to stay;
granted the government’s motion to dismiss RRCC’s counterclaims; denied without prejudice
as moot claimants’ motions to dismiss the complaint and for a more definite statement;

1

The government seized $4,480,466.16 in funds from a Bank of America account
ending in 2653; $146,370.00 in funds from a Bank of America account ending in 0252;
$77,437.59 in funds from a Charles Schwab account ending in 8588; $263.47 in funds from
a Wells Fargo account ending in 2092; $9,668.28 in funds from a Bank of Utah account
ending in 2251; $2,814.51 in funds from a Bank of Utah account ending in 0784; a 2014
Lamborghini Aventador; a 2016 Ferrari 488; a 2017 Bentley Continental GT V8; a 2017
Mercedes-Benz AMG S63; a 2016 Mercedes-Benz G63; a 2016 Dodge Ram 2500; a 2016
BMW Alpina; real property located at 14888 Lake Forest Drive in Dallas, Texas; and
$11,005.00 in funds from a Capital One account ending in 2713.
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granted claimants’ motions to dismiss the first amended complaint and for a more definite
statement; denied claimants’ first and second motions to unseal court records; and granted
the government leave to file a second amended complaint. See id. at *8.
Thereafter, the government filed a second amended complaint and a motion to seal
the verification affidavit filed with the second amended complaint. Claimants, in turn, filed
the three instant motions to dismiss the second amended complaint. The court now addresses
claimants’ motions to dismiss and the government’s motion to seal the verification affidavit.2
II
The court considers first claimants’ motions to dismiss the second amended complaint.
A
Pleading requirements for in rem forfeiture actions are governed by Rule G of the
Supplemental Rules of the Federal Rules of Civil Procedure. See generally Supp. R. G.
Under Supp. R. G(8)(b), “[a] claimant who establishes standing to contest forfeiture may
move to dismiss the action under Rule 12(b).”3 The sufficiency of the complaint is governed
by Supp. R. G(2), which requires, inter alia, that the verified complaint “identify the statute
under which the forfeiture action is brought; and state sufficiently detailed facts to support
a reasonable belief that the government will be able to meet its burden of proof at trial.”

2

One claimant—Davis—has filed a motion for a more definite statement. Because the
court is granting Davis’ motion to dismiss and is granting the government leave to file a third
amended complaint, it need not address whether a more definite statement should be
required.
3

The government does not contend that any claimant lacks standing.
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Supp. R. G(2)(e)-(f).4 In other words, the government must “state[] the circumstances giving
rise to the forfeiture claim with sufficient particularity” to enable a claimant to conduct a
“meaningful investigation of the facts and draft[] a responsive pleading.” United States v.
Mondragon, 313 F.3d 862, 867 (4th Cir. 2002);5 accord United States v. Sum of $70,990,605,
4 F.Supp.3d 189, 197 (D.D.C. 2014) (“Essentially, ‘[a]t the pleading stage, it suffices for the
government to simply allege enough facts so that the claimant may understand the theory of
forfeiture, file a responsive pleading, and undertake an adequate investigation.’” (quoting
United States v. One Gulfstream G-V Jet Aircraft, 941 F.Supp.2d 1, 14 (D.D.C.2013))).
B
In their motions to dismiss, claimants maintain, inter alia, that the government has not
alleged sufficiently detailed facts to support a reasonable belief that it will be able to
establish that a violation of any of the enumerated statutes occurred.
In support of its claim for civil forfeiture, the government alleges the following “facts

4

18 U.S.C. § 983(c) provides that, in a civil forfeiture suit, “the burden of proof is on
the Government to establish, by a preponderance of the evidence, that the property is subject
to forfeiture,” and that “if the Government’s theory of forfeiture is that the property was used
to commit or facilitate the commission of a criminal offense, or was involved in the
commission of a criminal offense, the Government shall establish that there was a substantial
connection between the property and the offense.” 18 U.S.C. § 983(c)(1), (3).
5

Although Mondragon predates the adoption of Supp. R. G(2), the advisory
committee’s notes explain that the new Rule expressly incorporates the Fourth Circuit’s
holding in promulgating the new pleading standard for in rem forfeiture actions. See Supp.
R. G advisory committee’s note (subdivision (2)) (“The complaint must state sufficiently
detailed facts to support a reasonable belief that the government will be able to meet its
burden of proof at trial. See [Mondragon, 313 F.3d 862]. Subdivision (2)(f) carries this
forfeiture case law forward without change.”).
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and basis for forfeiture”:
[t]he defendant property is subject to forfeiture pursuant to 18
U.S.C. § 981(a)(1)(C) because it is derived from proceeds
traceable to a violation, violations, or conspiracy to violate 18
U.S.C. § 1031, 18 U.S.C. §§ 286 and 371, 18 U.S.C. § 641, 18
U.S.C. § 1001, 18 U.S.C. § 1341, and 18 U.S.C. § 1343. This
is shown by the Verification Affidavit in Support of the United
States’ Second Amended Complaint for Forfeiture of Special
Agent Miguel Coias, filed under seal, and incorporated as
Plaintiff’s Exhibit 1, in the Appendix filed in support of this
second amended complaint.
2d Am. Compl. ¶ 8. As the court concluded in $4,480,466.16 in Funds Seized I, 2018 WL
1964255, at *5, these allegations are alone insufficient to comply with Supp. R. G(2)’s
requirement that the complaint “state sufficiently detailed facts to support a reasonable belief
that the government will be able to meet its burden of proof at trial.” Supp. R. G(2)(f). But
claimants recognize that, “[u]nlike previously, [they] are now able to view the purported
‘Verification Affidavit,’” Richey, et al. 6/7/18 Mot. Dis. Br. 3, which the government
contends provides the factual basis for its second amended complaint.
Although claimants dispute whether the verification affidavit provides a plausible
basis for the government’s requested relief, they do not contest the propriety of the court’s
considering the verification affidavit in deciding the instant motions. Indeed, courts routinely
conclude—consistent with Fed. R. Civ. P. 10(c)—that facts set out within affidavits can be
considered when determining the sufficiency of a forfeiture complaint. See, e.g., United
States v. One Parcel of Real Property, 921 F.2d 370, 376 (1st Cir. 1990) (reversing dismissal
of in rem action where, although forfeiture complaint was insufficient, government’s second

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affidavit, “expressly made part of the second forfeiture complaint, alleges facts sufficient to
support a reasonable belief that the government, at trial, can make a probable cause showing
that most, if not all, of the defendant property is connected to illegal drug proceeds.”
(footnote omitted)); United States v. $40,960.00 in U.S. Currency, 831 F.Supp.2d 968, 96971 (N.D. Tex. 2011) (Means, J.) (denying motion to dismiss forfeiture complaint where
sufficient statements existed in affidavit attached to complaint); United States v. $448,163.10
in U.S. Currency, 2007 WL 4178508, at *5 (D. Conn. Nov. 20, 2007) (“Facts set forth in an
affidavit accompanying a forfeiture complaint may serve to cure a lack of specificity in the
complaint even when the affidavit was originally filed under seal.”). Accordingly, the court
will consider the verification affidavit together with the second amended complaint when
deciding whether this action should be dismissed.
C
Claimants contend that, even taking the verification affidavit into account, the second
amended complaint should be dismissed on multiple grounds.6 Having considered claimants’
motion and the second amended complaint and verification affidavit, the court concludes that
the second amended complaint is deficient and that the motions to dismiss should be granted,

6

Claimants maintain that the government’s legal theories are not statutorily permitted
grounds for civil forfeiture; the government has failed to plead a plausible claim for forfeiture
based on mail or wire fraud; the government has failed to plead a plausible claim for
forfeiture based on 18 U.S.C. § 641; and the claimed property is not an instrumentality
subject to civil forfeiture. Given the lack of clarity in the second amended complaint and
verification affidavit, the court does not reach the merits of each of the claimants’ grounds
for dismissal.
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but that the government should be permitted to file a third amended complaint.
The principal problems with the second amended complaint and verification affidavit
stem from a lack of specificity, as required by Supp. R. G, which claimants largely point out
in their motions. For example, Supp. R. G(2)(e) requires that the forfeiture complaint
“identify the statute under which the forfeiture action is brought.” The second amended
complaint asserts multiple times that violations of 18 U.S.C. §§ 286, 371, 641, 1001, 1031,
1341, and 1343 give rise to a forfeiture action under 18 U.S.C § 981(a)(1)(C). See, e.g., 2d
Am. Compl. ¶ 8; 2d Am. Compl. Ex. 1 ¶¶ 7, 8, 43, and 84. Yet, as claimants point out,
several of the criminal offenses alleged, including §§ 1001 and 1031, are decidedly not
included in the enumerated list of offenses that give rise to a forfeiture action under
§ 981(a)(1)(C).7 And when pleading the statutory bases that allegedly subject each
individual asset to forfeiture, the government only asserts that offenses constituting
“specified unlawful activity” give rise to forfeiture. See, e.g., 2d Am. Compl. Ex. 1 ¶¶ 52,
55, 59, 63, 65, 67, 69, 73, 76, and 83. It is thus unclear whether the government is overinclusive in its violation allegations in certain instances or under-inclusive in its identification

7

Claimants are not correct, however, in maintaining that the statutory violations
alleged by the government “cannot even serve as a basis for civil forfeiture.” E.g., RRCC
6/7/18 Mot. Dis. Br. 13. This assertion lacks precision because, pursuant to the statutory text
of § 981, each of the government’s pleaded violations could give rise to civil forfeiture if all
elements were satisfied. See 18 U.S.C. § 981(a)(1)(C) (providing that certain property is
subject to civil forfeiture from violations of, inter alia, specified unlawful activity, such as
18 U.S.C. §§ 641, 1341, 1343, or “conspiracy to commit such offense” as otherwise
detailed); 18 U.S.C. § 981(a)(1)(D) (providing that certain property is subject to civil
forfeiture from violations of, inter alia, 18 U.S.C. §§ 1001, 1031, 1341, and 1343).
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of statutes under which it brings the instant action.
Further, Supp. R. G(2)(f) requires that the forfeiture complaint “state sufficiently
detailed facts to support a reasonable belief that the government will be able to meet its
burden of proof at trial.” Given the lack of clarity regarding the government’s theories of
forfeiture, it is difficult to assess whether the government has pleaded sufficiently detailed
facts to support a reasonable belief that the defendant property is subject to forfeiture, or to
enable claimants to file responsive pleadings or conduct meaningful discovery. See United
States v. Real Prop. Located at 5833 Coronado Ridge, El Paso, Tex., 2010 WL 5540939, at
*2 (W.D. Tex. Oct. 15, 2010) (granting motion for more definite statement in forfeiture
action where statutory connections were unclear).
Although the court is granting the motions to dismiss, the government has requested,
and the court holds that the government should be given, an opportunity to address the lack
of clarity in its pleading. See, e.g., Architettura, Inc. v. DSGN Assocs. Inc., 2017 WL
2992381, at *1 (N.D. Tex. Jan. 25, 2017) (Fitzwater, J.) (allowing plaintiff to replead in light
of challenges raised via defendant’s motion to dismiss). The fact that the court has once
granted the government an opportunity to replead does not alter the court’s conclusion in this
instance. See Reneker v. Offill, 2010 WL 1541350, at *2, *7 (N.D. Tex. Apr. 19, 2010)
(Fitzwater, C.J.) (after twice granting motions to dismiss, concluding that plaintiff’s second
amended complaint stated claim on which relief could be granted).
Accordingly, the court will not further address the sufficiency of the government’s
second amended complaint and verification affidavit. Instead, it will permit the government
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to file a third amended complaint within 28 days of the date this memorandum opinion and
order is filed.8 The third amended complaint must “identify the statute[(s)] under which the
forfeiture action is brought” and “state sufficiently detailed facts to support a reasonable
belief that the government will be able to meet its burden of proof at trial.” Supp. R. G(2)(e)(f). As before, if, after the government files its third amended complaint, claimants are still
unable to understand the theory of forfeiture, file a responsive pleading, or conduct
meaningful discovery, they may move for appropriate relief.
III
The court turns next to the government’s motion to seal the verification affidavit.
A
Each court has supervisory power over its own records and files. Nixon v. Warner
Commc’ns, Inc., 435 U.S. 589, 598 (1978). “In exercising its discretion to seal judicial
records, the court must balance the public’s common law right of access against interests
favoring nondisclosure.” S.E.C. v. Van Waeyenberghe, 990 F.2d 845, 848 (5th Cir. 1993).

8

The court recognizes that, under the scheduling order in this case, the deadline for
the parties to complete discovery is September 4, 2018, the deadline to file summary
judgment and other dispositive motions is October 1, 2018, and the deadline to file all
motions not otherwise covered is October 1, 2018. The government in fact filed on August
27, 2018 a motion to modify the scheduling order. Although claimants filed an opposition
response to that motion earlier today, the court recognizes its discretionary authority to adjust
any deadlines that are affected by granting the government leave to amend or where
adjustments are warranted for good cause.
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B
The government moves to seal the verification affidavit, contending that the facts
outlined within the affidavit pertain to an ongoing criminal investigation, contain information
about the course and scope of the investigation and its targets, and include personal
identifying information related to the claimants that is not publicly available. Claimants have
not filed an opposition response to the motion.
In balancing the competing interests—and cognizant that the affidavit may contain
information protected by the attorney-client privilege or as work product9—the court
concludes that the verification affidavit should not yet be disclosed to the public. See
Crawford v. United States, 2005 WL 8158351, at *3 (N.D. Tex. Feb. 17, 2005) (Lindsay, J.)
(granting motion to seal on balance of competing interests), aff’d sub nom. Crawford v. U.S.
Dep’t of Homeland Sec., 245 Fed. Appx. 369 (5th Cir. 2007).
Accordingly, the court grants the government’s motion to seal.
*

*

*

For the reasons explained, the court grants claimants’ motions to dismiss, declines to
reach Davis’ motion for a more definite statement,10 grants the government leave to file a

9

See $4,480,466.16 in Funds Seized I, 2018 WL 1964255, at *6.

10

Davis requests that, if the court grants his motion to dismiss, it order the defendant
property released and returned under 28 U.S.C. § 2465(a). Although the court is granting the
motion to dismiss, it is not entering “a judgment for the claimant,” within the meaning of
§ 2465(a); it is permitting the government to replead. Accordingly, Davis’ request is denied
without prejudice.
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third amended complaint within 28 days of the date this memorandum opinion and order is
filed, and grants the government’s motion to seal the verification affidavit filed with the
second amended complaint.
SO ORDERED.
August 28, 2018.

_________________________________
SIDNEY A. FITZWATER
UNITED STATES DISTRICT JUDGE

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