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

Filing 219

MEMORANDUM OPINION AND ORDER granting 199 MOTION to Stay Civil Forfeiture Proceeding filed by United States of America; denying without prejudice as moot 143 MOTION to Modify Scheduling Order filed by United States of America; and statistically t erminating 148 Motion to Dismiss for Failure to State a Claim filed by Retail Ready Career Center Inc; 151 MOTION to Dismiss Third Amended Complaint filed by Clear Conscience LLC; 153 MOTION to Dismiss Third Amended Complaint filed by Lake Fore st Drive Properties, Inc.; 155 MOTION to Dismiss Third Amended Complaint filed by Jon Davis; 157 MOTION to Dismiss Third Amended Complaint filed by Melissa Richey; 159 MOTION to Dismiss Third Amended Complaint filed by Trades United Inc.; [169 ] MOTION for Summary Judgment filed by Retail Ready Career Center Inc; 172 MOTION for Summary Judgment filed by Clear Conscience LLC.; 173 MOTION for Summary Judgment filed by Jon Davis; 174 MOTION for Summary Judgment filed by Lake Forest Drive Properties Inc.; 175 MOTION for Summary Judgment filed by Melissa Richey; and 176 MOTION for Summary Judgment filed by Trades United Inc. (Ordered by Senior Judge Sidney A Fitzwater on 2/6/2019) (Senior 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
The government moves under 18 U.S.C. § 981(g)(1) to stay this in rem civil forfeiture
action during the pendency of a related, ongoing criminal investigation. For the following
reasons, the court grants the motion and stays this case for a period of 120 days. In view of
the stay, the court also denies as moot or statistically terminates other pending motions in this
case.
I
This case is the subject of three memorandum opinions and orders. See United States
v. $4,480,466.16 in Funds Seized from Bank of Am. Account Ending in 2653, 2018 WL
4096340 (N.D. Tex. Aug. 28, 2018) (Fitzwater, J.) (“4,480,466.16 III”); United States v.
$4,480,466.16 in Funds Seized From Bank of Am. Account Ending in 2653, 2018 WL
2184500 (N.D. Tex. May 11, 2018) (Fitzwater, J.); and United States v. $4,480,466.16 in
Funds Seized From Bank of Am. Account Ending in 2653, 2018 WL 1964255 (N.D. Tex.

Apr. 26, 2018) (Fitzwater, J.). The court will therefore recount only the background facts
and procedural history that are pertinent to this decision.
The government filed this in rem civil forfeiture action on October 30, 2017, seeking
the forfeiture of certain vehicles and funds (“defendant property”) seized as part of an
ongoing investigation of claimants Jonathan Davis (“Davis”), Retail Ready Career Center,
Inc. (“RRCC”), and others, who are believed to have been involved in, or benefited from,
RRCC’s alleged scheme to defraud the U.S. Department of Veterans Affairs (“VA”).
On May 16, 2018 the court entered a scheduling order (“Scheduling Order”) that set
September 4, 2018 as the deadline for completing discovery, and October 1, 2018 as the
deadline for filing motions for summary judgment. On August 27, 2018 the government
moved to extend the Scheduling Order deadlines by 30 days. The following day, in
$4,480,466.16 III, the court dismissed the government’s second amended complaint, but
granted its request that it be given “an opportunity to address the lack of clarity in its
pleading.” $4,480,466.16 III, 2018 WL 4096340, at *4. On September 13, 2018 the court
granted the government’s August 27, 2018 motion to modify deadlines, extending the
discovery deadline until October 4, 2018 and the summary judgement deadline until
November 1, 2018.
On September 25, 2018 the government filed its third amended complaint, naming,
for the first time, two additional pieces of real property as in rem defendants. On October
2, 2018, prior to expiration of the discovery deadline, the government filed a motion to
modify the Scheduling Order, requesting a 120-day extension of all pending deadlines based
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on its addition of the two new in rem defendants. Claimants RRCC, Davis, Melissa Richey,
Lake Forrest Drive Properties, Inc., Clear Conscience LLC, and Trades United Inc.
(collectively, “claimants”) oppose the government’s motion. The court today denies the
motion to modify the Scheduling Order without prejudice as moot in view of the 120-day
stay. See infra § V.
On October 9, 2018 claimants filed motions to dismiss the government’s third
amended complaint. On November 8, 2018 claimants filed motions for summary judgment.
The court statistically terminates these motions in view of the stay. See infra § V.
On November 29, 2018, the day its summary judgment responses were due, the
government filed the instant renewed motion to stay civil forfeiture proceeding, seeking relief
under 18 U.S.C. § 981(g)(1). Claimants oppose the motion.
II
Section 981(g)(1) of title 18 provides, in pertinent part: “[u]pon the motion of the
United States, the court shall stay the civil forfeiture proceeding if the court determines that
civil discovery will adversely affect the ability of the Government to conduct a related
criminal investigation or the prosecution of a related criminal case.” 18 U.S.C. § 981(g)(1).
This language reflects an amendment by the Civil Asset Forfeiture Reform Act of 2000
(“CAFRA”) that “broadened the stay relief significantly.” United States v. All Funds
Deposited in Account No. 20008524845, 162 F.Supp.2d 1325, 1330 (D. Wyo. 2001). The
CAFRA amendment expanded the availability of a stay “to the period of investigation and
no longer requires that an indictment or information be filed, commencing formal criminal
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proceedings.” Id. The amendment also removed the requirement that the government show
good cause. Id.
In deciding whether to grant a stay, “the court must determine, first, whether a related
criminal investigation or prosecution exists and, second, whether civil discovery will
‘adversely affect’ the ability of the government to conduct that criminal investigation or
prosecution were the civil forfeiture case allowed to proceed.” United States v. All Funds
($357,311.68) Contained in N. Tr. Bank of Fla. Account No. 7240001868, 2004 WL
1834589, at *2 (N.D. Tex. 2004) (Fish, C.J.) (hereafter, “All Funds”).
III
The court begins by considering whether a related criminal investigation or
prosecution exists. In its motion, the government contends that the criminal investigation of
claimants Davis, RRCC, and others is related to this proceeding because both the criminal
investigation and the pending forfeiture complaint involve RRCC’s scheme to defraud the
VA and rely on the same evidence and witnesses. In their response, claimants do not dispute
the relatedness of the criminal investigation and civil forfeiture proceeding. Instead, they
posit that “it is doubtful that there is a pending criminal investigation that overlaps with this
case.” Claimants’ Br. 11. Claimants cite a sealed order1 entered on November 30, 2018 by

1

In their publicly-filed response to the government’s motion to stay, claimants referred
to a sealed order signed by Judge Boyle in a sealed matter. Once the court was made aware
of the disclosure of sealed information in a publicly-filed document, claimants’ response was
restricted from public view pending further order of the court. On December 26, 2018 the
government filed a motion for a protective order requesting that the claimants’ response
remain sealed and/or counsel for claimants redact the sealed information in accordance with
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Judge Boyle, and argue that because Judge Boyle found that the government used an
improper process to access and review RRCC’s privileged communications, and “[g]iven that
it would be unethical for the tainted prosecutor(s) and investigator(s) to continue the
investigation, it would be inappropriate for the Court to presume that a related investigation
is ongoing.” Id. The court rejects this argument. Nothing in Judge Boyle’s sealed order
suggests that the government cannot continue the investigation and prosecution of its
criminal case, and the court has no other basis for concluding that the criminal investigation
is no longer pending.
IV
Having concluded that a related criminal investigation exists, the court next considers
whether civil discovery will adversely affect the government’s ability to conduct its criminal
investigation were this civil forfeiture case allowed to proceed.
A
As a preliminary matter, the court addresses claimants’ contention that the court
cannot grant a stay under 18 U.S.C. § 981(g)(1) because discovery in this case has closed.
Claimants maintain that, because the deadline for completing discovery under the Scheduling
Order was September 4, 2018 (later extended to October 4, 2018), and because discovery is
now closed, “it is impossible for ‘civil discovery’ to ‘adversely affect the ability of the
Government to conduct a related criminal investigation.’” Claimants’ Br. 6 (quoting 18

an exhibit the government filed with its motion. The court is granting the motion in a
separate order filed today. The filing will therefore remain sealed.
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U.S.C. § 981(g)(1)). The court disagrees.
Claimants do not cite any authority for the proposition that the court cannot stay a case
under § 981(g)(1) if the scheduling order’s discovery deadline has expired. The purpose of
a stay under § 981(g)(1) is to prevent the target of a criminal investigation from using the
broad scope of civil discovery to obtain information that would not otherwise be available
to that person in a parallel criminal prosecution. See, e.g., United States v. $144,210.77 in
Funds Seized from Suntrust Bank Account XXX-XX-XXXX, 63 F.Supp.3d 1387, 1391 (N.D.
Ga. 2014) (“The scope of civil discovery is inherently broad and there are significant perils
associated with allowing civil discovery in light of parallel criminal prosecution or
investigation.”). In light of this purpose, the court can discern no relevant distinction
between the forced disclosure of this information through traditional civil discovery
procedures and compelling the government to disclose this same information for the purpose
pertinent here: opposing claimants’ summary judgment motions. See, e.g., United States v.
2009 Dodge Challenger, VIN 2B3LJ44V49H561559, 2011 WL 6000790, at *2 (D. Or. Nov.
30, 2011) (hereafter, “2009 Dodge Challenger”) (granting stay under § 981(g)(1) because
“[a]lthough claimants stress that they do not seek discovery, the government would be
compelled to compile and reveal information and evidence collected in support of its criminal
investigation in order to effectively oppose claimants’ motions for summary judgment,” and
“[t]he government ordinarily need not reveal all of its evidence during the course of criminal
discovery.”).

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B
The court next considers whether the government has adequately shown that civil
discovery (which, in this case, takes the form of disclosures necessary to oppose summary
judgment motions) would affect the ability of the government to conduct a related criminal
investigation.
“There is no presumption that civil discovery creates an adverse effect on the
Government’s related criminal proceeding and the Government must make an actual showing
regarding the anticipated adverse effect.” United States v. All Assets & Funds on Deposit or
Held in Offshore Inv. Account at Sun Life Fin. Invs. (Berm.), 2018 WL 4275214, at *3 (S.D.
Tex. Sept. 7, 2018) (citing All Funds, 2004 WL 1834589 at *2). A court may grant a stay
based on ex parte affidavits or other documents demonstrating that civil discovery might
threaten to reveal confidential informants or otherwise impair the criminal investigation. Id.
(citing 18 U.S.C. § 981(g)(5); United States v. Real Prop. & Premises Located at 216
Kenmore Ave., Deerfield, Ill., 657 F.Supp.2d 1060, 1064 (D. Minn. 2009)).
As permitted under 18 U.S.C. § 981(g)(5),2 the government has submitted a sealed
“Verification Affidavit in Support of Motion to Stay Civil Forfeiture Proceeding,” of Miguel
Coias, a Special Agent of the VA Office of Inspector General-Criminal Investigations

2

18 U.S.C. § 981(g)(5) expressly allows the government, “in appropriate cases,” to
“submit evidence ex parte in order to avoid disclosing any matter that may adversely affect
an ongoing criminal investigation or pending criminal trial.” Having considered the
government’s sealed affidavit, the court concludes that its disclosure could adversely affect
the government’s ongoing criminal investigation and, accordingly, is properly filed ex parte
under 18 U.S.C. § 981(g)(5). See, e.g.,2009 Dodge Challenger, 2011 WL 6000790, at *1.
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Division. The court has considered the affidavit and finds that the government has shown
that the criminal investigation will be adversely affected if the government, in response to
claimants’ motions for summary judgment, is forced to disclose the identities of its
cooperating witnesses and the evidence it has gathered during the course of the ongoing
criminal investigation. See, e.g., 2009 Dodge Challenger 2011 WL 6000790, at *2 (granting
stay under § 981(g)(1) because “[a]lthough claimants stress that they do not seek discovery,
the government would be compelled to compile and reveal information and evidence
collected in support of its criminal investigation in order to effectively oppose claimants’
motions for summary judgment,” and “[t]he government ordinarily need not reveal all of its
evidence during the course of criminal discovery.”); see also, e.g., United States v. Eleven
Thousand One Hundred Thirty Nine Dollars & Ninety One Cents in U.S. Currency
($11,139.91) from Comerica Bank Account No. XXXX-XXXXXX3967, 2009 WL 541068, at
*2 (E.D. Mich. Mar. 4, 2009) (concluding, based on sealed affidavit, that “[c]ivil discovery
would compromise prospective witnesses and other evidence currently being collected by
the Government in preparation for criminal prosecutions in connection with the underlying
facts of this case,” and granting motion to stay); United States v. Real Prop. & Improvements
Located at 10 Table Bluff Rd., Loleta, 2007 WL 911849, at *2 (N.D. Cal. Mar. 23, 2007)
(granting motion to stay where“[t]he Court has reviewed the sealed evidence and determined
that the criminal investigation and this civil forfeiture case arise out of the same facts and
circumstances, and are clearly related . . . [and] civil discovery will likely adversely affect
the ability of the Government to conduct the related criminal investigation[.]”). Having
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determined that civil discovery in this case will adversely affect the ability of the government
to conduct a related criminal investigation, the court is required under 18 U.S.C. § 981(g)(1)
to grant the government’s motion. See 18 U.S.C. § 981(g)(1) (“Upon the motion of the
United States, the court shall stay the civil forfeiture proceeding if the court determines that
civil discovery will adversely affect the ability of the Government to conduct a related
criminal investigation or the prosecution of a related criminal case.” (emphasis added)).
Accordingly, the government’s motion is granted.3
C
Claimants urge the court to deny the motion for a stay, arguing that the initial seizure
of their property violated the Due Process Clause of the Fifth Amendment and that the
requested stay would “compound the due process violations by allowing the Government to
continue to unlawfully retain the property and staying the case.” Claimants’ Br. 13.
The defendant property that is the subject matter of this action was seized in
September and October of 2017, nearly 16 months ago. The government now requests a stay
of unspecified duration. “Due process of law must be reasonable, meaningful, and timely or
it has no value as a constitutional right.” United States v. Four (4) Contiguous Parcels of
Real Prop. Situated in Louisville, Jefferson Cty., Ky., 864 F. Supp. 652, 655 (W.D. Ky.
1994). The court is mindful of the burdens civil forfeiture can place on claimants. And the

3

Because the court is granting the government’s motion to stay under 18 U.S.C. §
981(g)(1), it does not address its alternative motion for a 120 day stay under Fed. R. Civ. P.
56(d).
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Supreme Court has held that indefinite stays will not be upheld. See Landis v. N. Am. Co.,
299 U.S. 248, 257 (1936) (stating “[t]he stay is immoderate and hence unlawful unless so
framed in its inception that its force will be spent within reasonable limits, so far at least as
they are susceptible of prevision and description.”). Accordingly, the current stay is for a
determinate period of time. If the government desires to extend this stay, it must satisfy the
burdens placed on it by 18 U.S.C. § 981(g). The court will continue to monitor the litigation
and ensure that it proceeds in a timely manner.
V
In light of the stay granted today, the court takes the following actions regarding the
other pending motions in this case.4
The government’s October 2, 2018 motion to modify scheduling order is denied
without prejudice as moot.
Claimants’ October 9, 2018 motions to dismiss third amended complaint and
claimants’ November 8, 2018 motions for summary judgment are statistically terminated.
Once the stay is lifted, the court will statistically reopen the motions and consider them on
the briefing already on file.

4

The court is addressing the government’s December 26, 2018 sealed motion for a
protective order and claimants’ January 3, 2019 emergency motion to lift stay or in the
alternative motion to dismiss for failure to prosecute in a separate order filed today.
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*

*

*

For the foregoing reasons, the court grants the government’s November 29, 2018
renewed motion to stay civil forfeiture proceeding. This case is stayed for 120 days from the
date this memorandum opinion and order is filed.
SO ORDERED.
February 6, 2019.

_________________________________
SIDNEY A. FITZWATER
SENIOR JUDGE

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