Opinion
Civil Action No. 04-617 (JAG).
September 25, 2008
ORDER
This matter comes before this Court on the motions for attorneys' fees and interest, pursuant to 28 U.S.C. § 2465(b)(1), by Moving Petitioners; and it appearing that this Court has reviewed the parties' submissions, and for the reasons set forth in the accompanying Opinion, and good cause appearing,
The movants include: (1) Piedade Pedro de Almeida; (2) Harber Corporation; (3) Gatex Corporation; (4) Mabon Corporation; (5) Farswiss Asset Management Ltd.; (6) Armando Pereira Reis and Jose Moacir Guimaraes; (7) Bahia Blanca Ltd.; (8) Beverly Hills Group, Inc.; (9) Bradner Investments S.A.; (10) Chettiar Business, Inc.; (11) Fausto L. Guimaraes and Helder J.S.F. Taveira; (12) Harborside Corporation; (13) Phoenix Export Import S.A.; (14) Safe Port Investment Corporation; (15) Silver Commodities Ltd.; and (16) Midland Financial, Inc. The movants shall be collectively referred to as the "Moving Petitioners."
IT IS on this 25th day of September, 2008,
ORDERED that Moving Petitioners' motion for attorneys' fees and interest (Docket Entries No. 165-177, 183) is DENIED; and it is further
ORDERED that a copy of this Order be served on all parties within seven (7) days of the date of entry of this Order.
OPINION
This matter comes before this Court on the motions for attorneys' fees and interest, pursuant to 28 U.S.C. § 2465(b)(1), by Moving Petitioners. For the reasons set forth below, this motion shall be denied.
The movants include: (1) Piedade Pedro de Almeida; (2) Harber Corporation; (3) Gatex Corporation; (4) Mabon Corporation; (5) Farswiss Asset Management Ltd.; (6) Armando Pereira Reis and Jose Moacir Guimaraes; (7) Bahia Blanca Ltd.; (8) Beverly Hills Group, Inc.; (9) Bradner Investments S.A.; (10) Chettiar Business, Inc.; (11) Fausto L. Guimaraes and Helder J.S.F. Taveira; (12) Harborside Corporation; (13) Phoenix Export Import S.A.; (14) Safe Port Investment Corporation; and (15) Silver Commodities Ltd.
On June 20, 2008, petitioner Midland Financial, Inc. ("Midland") filed a letter requesting leave to join in the applications for an award of interest, attorneys' fees and expenses. Despite the untimeliness of its request, Midland shall be granted leave to join in this motion. Midland, together with the aforementioned movants, shall be collectively referred to as the "Moving Petitioners."
On May 12, 2008, James McCarney, Esq. filed a letter requesting to join the Moving Petitioners' applications for attorneys' fees and interest. The letter was filed on behalf of "petitioners Avion Resources Ltd., Elza Xerfan Haber, Gustavo Xerfan Haber, Meg Luna Soares Haber, Michel Homci Haber, Tigrus Corporation, Pompeu Costa Lima Pinheiro Maia, Isabel Cristina Durta Pinheiro Maia, Jose Baptista Pinto Neto and Fares Baptista Pinto." At the hearing held before this Court on September 3, 2008, however, this letter-request was withdrawn.
I. BACKGROUND
Defendant Maria Nolasco ("Nolasco") was employed by Valley National Bank, where she managed a number of bank accounts. On June 27, 2002, she was arrested and later charged with, inter alia, filing false tax returns and operating a money transmitting business without a license, pursuant to 18 U.S.C. § 1960. At the same time, the United States of America (the "Government") seized over twenty-one million dollars held in approximately thirty-nine different bank accounts that Nolasco managed.On October 4, 2004, Nolasco pled guilty to tax evasion and operating an illegal money transmission business, and agreed to forfeit whatever interest she may have had in the seized funds. The Government commenced criminal forfeiture proceedings, pursuant to 18 U.S.C. § 982. On December 13, 2004, in accordance with a plea agreement, this Court entered a Consent Judgment and Preliminary Order of Forfeiture. Following publication of notice, petitions challenging the forfeiture were timely filed with this Court. The petitioners ultimately filed motions seeking summary judgment.
In an Opinion dated June 6, 2006, this Court held that the petitioners have proven, by a preponderance of the evidence, "that their right, title, or interest in the forfeited property is superior to that of Nolasco," pursuant to 21 U.S.C. § 853(n). (Docket Entry No. 153-2.) Accordingly, on June 8, 2006, this Court filed an Order amending the Preliminary Order of Forfeiture (Docket Entry No. 154). On June 28, 2006, this Court entered an Order directing the Government to return Petitioners' seized property.
21 U.S.C. § 853, which applies to criminal forfeitures, states —
Any person, other than the defendant, asserting a legal interest in property which has been ordered forfeited to the United States pursuant to this section may, within thirty days of the final publication of notice or his receipt of notice under paragraph (1), whichever is earlier, petition the court for a hearing to adjudicate the validity of his alleged interest in the property. The hearing shall be held before the court alone, without a jury.
§ 853(n)(2). To describe the hearing process, the statute provides,
At the hearing, the petitioner may testify and present evidence and witnesses on his own behalf, and cross-examine witnesses who appear at the hearing. The United States may present evidence and witnesses in rebuttal and in defense of its claim to the property and cross-examine witnesses who appear at the hearing. In addition to testimony and evidence presented at the hearing, the court shall consider the relevant portions of the record of the criminal case which resulted in the order of forfeiture.
§ 853(n)(5). The statute goes on to explain that the district court must amend the order of forfeiture if it finds,
based on a preponderance of the evidence that —
(A) the petitioner has a legal right, title, or interest in the property, and such right, title, or interest renders the order of forfeiture invalid in whole or in part because the right, title, or interest was vested in the petitioner rather than the defendant or was superior to any right, title, or interest of the defendant at the time of the commission of the acts which gave rise to the forfeiture of the property under this section; or
(B) the petitioner is a bona fide purchaser for value of the right, title, or interest in the property and was at the time of purchase reasonably without cause to believe that the property was subject to forfeiture under this section. . . .
§ 853(n)(6).
On May 12, 2008, Moving Petitioners filed the instant motions requesting that this Court award attorneys' fees and interest, pursuant to 28 U.S.C. § 2465(b).
II. ANALYSIS
Moving Petitioners request this Court to award to them attorneys' fees and interest, pursuant to 28 U.S.C. § 2465(b)(1) of the Civil Asset Forfeiture Reform Act (the "CAFRA"), which states:
(b)(1) Except as provided in paragraph (2), in any civil proceeding to forfeit property under any provision of Federal law in which the claimant substantially prevails, the United States shall be liable for
(A) reasonable attorney fees and other litigation costs reasonably incurred by the claimant;
(B) post-judgment interest, as set forth in section 1961 of this title; and
(C) in cases involving currency, other negotiable instruments, or the proceeds of an interlocutory sale —
(i) interest actually paid to the United States from the date of seizure or arrest of the property that resulted from the investment of the property in an interest-bearing account or instrument; and
(ii) an imputed amount of interest that such currency, instruments, or proceeds would have earned at the rate applicable to the 30-day Treasury Bill, for any period during which no interest was paid (not including any period when the property reasonably was in use as evidence in an official proceeding or in conducting scientific tests for the purpose of collecting evidence), commencing 15 days after the property was seized by a Federal law enforcement agency, or was turned over to a Federal law enforcement agency by a State or local law enforcement agency.28 U.S.C. § 2465(b)(1).
In order to determine whether Moving Petitioners are entitled to receive relief under the CAFRA, this Court must determine whether this action fits under the heading of "any civil proceeding to forfeit property under any provision of Federal law . . .," as set forth in § 2465(b). Moving Petitioners argue that the petitions they filed in 2005, pursuant to § 853(n), are "civil in nature," and therefore constitute a civil proceeding to forfeit property. In contrast, the Government argues, and this Court agrees, that Moving Petitioners cannot recover attorneys' fees and interest under § 2465(b)(1) because the petitions were filed ancillary to a criminal case, and therefore do not constitute civil proceedings to forfeit property.
In order for Section 2465(b) to apply, two conditions must be met: first, the action must constitute a "civil proceeding," and second, the proceeding must be one "to forfeit property." Moving Petitioners argue that they are entitled to attorneys' fees as well as interest under § 2465(b) because their § 853(n) petitions constitute "civil proceedings" under the CAFRA. To buttress this argument, Moving Petitioners rely heavily on an opinion issued just months ago from the United States District Court for the Eastern District of Virginia, in United States v. D'Esclavelles, 541 F. Supp. 2d 794 (E.D. Va. 2008). In that case, the court held that a third-party claimant's Section 853(n) petition constituted a "civil proceeding to forfeit property" under § 2465(b)(1). 541 F. Supp. 2d at 798. The court explained that Congress purposefully drafted the language of § 2465(b)(1) in a broad manner so as to incorporate more than just civil forfeiture proceedings. Id. at 797.
The court went on to explain that § 2465(b)(1) could not have been intended to apply only to forfeitures brought pursuant to a civil forfeiture statute. According to the court, the "applicability of the attorneys' fees provision of CAFRA turns on the status of the claimant and the nature of the proceeding for which attorneys' fees are sought, not on how the government chose to initiate the seizure — thus the phrase ` under any provision of Federal law.'" Id. (emphasis in original). "While Congress clearly did not intend to provide attorneys' fees for defendants to criminal forfeiture proceedings," the court found, "[t]here is simply nothing in the language of § 2465(b)(1) that conditions eligibility on how the government chose to seize the property."Id.
Moving Petitioners correctly characterize their 853(n) petitions as "civil." Courts have referred to § 853(n) proceedings as "civil in nature," and permit application of civil procedural rules. See United States v. Lavin, 942 F.2d 177, 181-82 (3d Cir. 1991) (holding that, under FED. R. APP. P. 4, petitioner had sixty days to appeal the district court's decision, as opposed to the ten-day time limit applied in criminal cases, because his § 853(n) petition is civil in nature); United States v. Alcaraz-Garcia, 79 F.3d 769, 772 n. 4 (9th Cir. 1996) (same); United States v. McCollum, 443 F. Supp. 2d 1154, 1165 (D. Neb. 2006) ("Although this is a criminal case, the matter before me is quasi-civil in nature and arises pursuant to 21 U.S.C. § 853(n) (criminal forfeiture and third-party interests)."); United States v. Wade, 291 F. Supp. 2d 1314, 1316-17 (M.D. Fla. 2003) (holding that petitioner is not entitled to appointment of counsel because § 853(n) petitions are civil in nature).
However, Moving Petitioners' argument, and the court's holding in D'Esclavelles, do not explain how a Section 853(n) petition satisfies the second condition expressed in § 2465(b), that the proceeding must be one "to forfeit property." The proceeding to forfeit property unequivocally refers to the criminal forfeiture proceeding brought against Nolasco. The § 853(n) petitions filed by Moving Petitioners were ancillary to this criminal forfeiture action, and, while civil in nature, did not purport to forfeit property. Instead, the § 853(n) petitions served as an attempt to intervene in and block the Government's attempt to seize the property in the criminal forfeiture proceeding it initiated. In short, neither the forfeiture proceedings commenced by the Government, nor the Moving Petitioners' § 853(n) petitions constitute a " civil proceeding to forfeit property."
A decision rendered by the United States District Court for the Southern District of Florida in United States v. Gardiner, 512 F. Supp. 2d 1270 (S.D. Fla. 2007), supports this position. InGardiner, a petitioner successfully argued, pursuant to 21 U.S.C. § 853(n), that it was entitled to recover property seized in a criminal forfeiture proceeding. 512 F. Supp. 2d at 1271. The petitioner then sought to recover attorney's fees and costs under CAFRA. Id. The court distinguished the case before it, a "criminal forfeiture proceeding," from "a civil in rem forfeiture proceeding" to hold that 28 U.S.C. § 2465(b) was not applicable.Id. at 1272. The court cited language in § 2465(b) stating that the provision "applies `in any civil proceeding to forfeit property under any provision of Federal law,'" then explained that "the attorney's fee provision in subsection (b) is applicable only in civil forfeiture proceedings." Id. (emphasis in original).
The legislative history of the CAFRA also serves to support the proposition that § 2465(b) was only intended to apply to civil forfeiture proceedings. A report from the House of Representatives indicates that, in its version of the bill, the House wanted to permit the appointment of counsel to third-party claimants, explaining "civil forfeiture proceedings are so punitive in nature that appointed counsel should be made available for those who are indigent, or made indigent by a seizure, in appropriate circumstances." H.R. REP. NO. 106-192, at 14 (1999).
The Senate, however, revised the bill to only allow the appointment of counsel in two discrete situations. First, courts could authorize counsel to represent an indigent claimant "if the claimant is already represented by court-appointed counsel in connection with a related federal criminal case." 106 CONG. REC. S1761 (Mar. 27, 2000) (statement of S. Leahy). Second, counsel would be appointed to indigent claimants if the government sought to forfeit their primary residence. Id. In all other circumstances, while the appointment of counsel shall not be permitted, claimants may recover "reasonable attorney fees and costs if they substantially prevail on their claim." Id. This revision demonstrates that Section 2465(b) was intended by Congress as a way to address the punitive nature of civil forfeiture proceedings, without requiring the appointment of counsel.
Having found that § 2465(b) is not available as a basis upon which to award interest and attorneys' fees to Moving Petitioners, this Court next considers whether its equitable powers permit it to award interest or attorneys' fees in the absence of statutory authority. This Court finds that such circumstances do not exist in this case. The Supreme Court has held that interest cannot be recovered in a suit against the Government unless the Government has waived its sovereign immunity from such an award by contract or statute.Library of Congress v. Shaw, 478 U.S. 310, 314 (1986). Also, the Supreme Court has held that prevailing litigants are not entitled to collect a reasonable attorneys' fee from their opposing party, unless Congress so provides through legislation. Alyeska Pipeline Service Company v. Wilderness Society, 421 U.S. 240, 247 (1975). Since Moving Petitioners have not pointed to an exception to these rules applicable in this circumstance, this Court declines to award attorneys' fees or interest to Moving Petitioners on this basis.
In Alyeska, the Court highlighted these exceptions by noting that a court may order payment of attorneys' fees in the absence of a contract or statute "for the `willful disobedience of a court order . . . as part of the file to be levied on the defendant . . . "or when the losing party has acted in bad faith, vexatiously, wantonly, or for oppressive reasons. . . ." Alyeska, 421 U.S. at 258. Likewise, in Shaw, the Supreme Court noted that the no-interest rule does not apply "where the Government has cast off the cloak of sovereignty and assumed the status of a private commercial enterprise." Shaw, 478 U.S. at 317 n. 5. However, none of these exceptions appear to be applicable here.
The Government also urged this Court to find that attorneys' fees are not an appropriate award for Moving Petitioners under 28 U.S.C. § 2412(d)(1)(A). Section 2412(d)(1)(A) states that "the prevailing party in any civil action" brought against the United States may recover reasonable attorneys' fees, unless a court finds that the position of the United States was substantially justified. See United States v. Douglas, 55 F.3d 584, 588 (11th Cir. 1995) (holding that § 853(n) proceedings are civil actions under the Equal Access to Justice Act). The Government argues that Petitioners should not recover attorneys' fees under § 2412(d)(1)(A), for two reasons: (1) Petitioners' motion for attorneys' fees, if construed as being made pursuant to the Equal Access to Justice Act (the "EAJA"), is untimely; and (2) the United States was "substantially justified" in its position; and (3) special circumstances make such an award unjust. (Gov't Br. 20-27.) However, since Petitioners' motion for attorneys' fees and interest is expressly made pursuant to § 2465(b), this Court need not decide whether Petitioners are entitled to an award for attorneys' fees under the EAJA.