United States v. Various Computers ( 1996 )

Opinions of the United
1996 Decisions States Court of Appeals
for the Third Circuit
4-30-1996
United States v. Various Computers
Precedential or Non-Precedential:
Docket 95-3195,95-3378,95-3379
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
____________________
NO. 95-3195/3378/3379
_____________________
UNITED STATES OF AMERICA,
Appellee,
v.
VARIOUS COMPUTERS AND COMPUTER EQUIPMENT,
PARIS FRANCIS LUNDIS,
Appellant.
____________________
On Appeal from the United States District Court
for the Western District of Pennsylvania
D.C. No. 94-2090
District Judge: Honorable William L. Standish
____________________
Argued March 28, 1996
Before: Greenberg, Roth, and Rosenn, Circuit Judges.
(Filed April 30, l996)
_____________________
Frederick W. Thieman, U.S. Attorney
Mary McKeen Houghton, Assistant U.S. Attorney (argued)
633 U.S. Post Office and Courthouse
Pittsburgh, PA 15219
Counsel for Appellee
Shelley Stark, Acting Federal Public Defender
W. Penn Hackney, First Asst. Federal Public Defender
Karen Sirianni Gerlach, Asst. Federal Public Defender (argued)
415 Convention Tower
960 Penn Avenue
Pittsburgh, PA 15222
Counsel for Appellant
1
______________________
OPINION OF THE COURT
______________________
Rosenn, Circuit Judge.
The primary, and in this circuit, novel, issue in this
appeal is whether civil forfeiture, pursuant to 18 U.S.C.
§981(a)(1)(C), constitutes punishment for double jeopardy
purposes, when a court has already sentenced a defendant to
imprisonment and the payment of restitution. Paris Francis
Lundis pled guilty in the United States District Court for the
Western District of Pennsylvania to one count of unauthorized use
and possession of credit cards in violation of 18 U.S.C.
§1029(a)(2) & (a)(3). In addition to a ten month prison sentence
and three years of supervised release, the court ordered Lundis
to pay $13,674.50 restitution, the value of several pieces of
computer equipment fraudulently obtained by Lundis. Further, the
court deemed the equipment to be proceeds of Lundis's crime, and
thus forfeitable to the United States pursuant to 18 U.S.C. § 981(a)(1)(C). The court issued a final order of forfeiture on March
28, 1995.
We conclude that we have jurisdiction and affirm.
I.
On September 21, 1994, Lundis pled guilty to Count I of a
four count indictment charging him with unauthorized use and
2
possession of credit cards in violation of 18 U.S.C. §§1029(a)(2)
and (a)(3). Lundis admitted that he stole the cards and used
them to illegally purchase computers and computer equipment. The
trial court sentenced him to ten months imprisonment, and ordered
that he pay $13,674.50 in restitution to the store where he
obtained the computers.
At the sentencing hearing, Lundis requested that the court
allow him to keep the property in light of the court's
requirement that he pay restitution.0 The Government argued that
the computers were proceeds of Lundis's crime, and thus were
subject to civil forfeiture pursuant to 18 U.S.C. §981(a)(1)(C).0
The court denied Lundis's request for possession of the property,
stating that the computers were forfeitable "as a matter of law."
On December 9, 1994, the Government instituted civil
forfeiture proceedings in rem against the computers by filing a
verified complaint for forfeiture. The Government contends that
it personally served a warrant of arrest and complaint for
forfeiture against the computers upon Lundis at the Allegheny
County Jail on February 1, 1995. Lundis timely filed a claim to
0
Lundis contends that the computers contain personal material
such as music scores. The Government asserts that the computers
contain information on various stolen credit cards, as well as
instructions on how to "clone" a cellular phone.
0
Section 981 provides, in pertinent part, for the civil
forfeiture to the United States of:
(a)(1)(C) Any property, real or personal, which
constitutes or is derived from proceeds traceable to a
violation of Section ... 1029 ... of this title ....
18 U.S.C. § 981.
3
the computers and an answer to the Government's complaint, along
with a motion to proceed in forma pauperis and for appointment of
counsel.
The Government opposed Lundis's request to proceed in forma
pauperis and his request for counsel. It also filed a motion to
dismiss Lundis's claim. In the motion to dismiss, the Government
asserted that Lundis's claim to the computers was defective
because it was not verified as required by Supplemental Rule C(6)
for Certain Admiralty and Maritime Claims ("Rule C(6)"). Lundis
timely filed a response in opposition to the Government's motion
to dismiss, admitting that his claim was neither verified nor
properly served, but asserting that the procedural defects were
due to his pro se and prison status. The district court
dismissed Lundis's claim and entered a Judgment and Final Order
of Forfeiture on March 28, 1995, in favor of the United States.
Throughout these proceedings, Lundis filed many documents
pro se with the district court, including three "Notices of
Appeal."0 Lundis filed motions for leave to appeal in forma
pauperis and for appointment of counsel with this court, and this
court granted the motions.0
II.
0
His first notice attempted to appeal from the district court's
March 20, 1995 order: (1) denying Lundis's motion for
appointment of counsel; (2) denying Lundis's motion to proceed in
forma pauperis; and (3) dismissing Lundis's claim to the
computers.
0
This court first dismissed Lundis's appeal for failure to timely
prosecute, then vacated the dismissal and reinstated the appeal.
4
The Government raises jurisdictional issues contending that
Lundis has not appealed from the final order of forfeiture. We
have plenary review over questions of jurisdiction. See Anthuis
v. Colt Indus. Operating Corp., 971 F.2d 999, 1002 (3rd Cir.
1992).
The district court's dismissal of Lundis's claim to the
property had the effect of denying him standing, and thus barred
him from appealing the final forfeiture order. Without a
colorable claim to the computers, Lundis lacked standing to
challenge the forfeiture proceedings. Thus, as a threshold
question, we must address whether the court properly denied
Lundis's pro se motion to intervene in the forfeiture
proceedings.
A.
Rule C(6) requires a claimant to property in a civil
forfeiture to file a verified claim with the district court. The
rule provides, in relevant part:
(6) Claim and Answer; Interrogatories. The claimant of
property that is the subject of an action in rem shall
file a claim within 10 days after process has been
executed, or within such additional time as may be
allowed by the court . . . . The claim shall be
verified on oath or solemn affirmation, and shall state
the interest in the property by virtue of which the
claimant demands its restitution and the right to
defend this action.
Supplemental Rule C(6) for Certain Admiralty and Maritime Claims
(emphasis added).
5
After the Government initiated forfeiture proceedings,
Lundis duly filed a "Claim and Cost Bond and Affidavit in forma
pauperis" in which he asserted that the computer equipment the
Government confiscated rightfully belonged to him. This claim
conformed to the rules in every respect except it lacked a
verification.
The purpose of Rule C(6) is to require claimants to come
forward as quickly as possible after the initiation of forfeiture
proceedings, so that the court may hear all interested parties
and resolve the dispute without delay. See United States v. 1982
Yukon Delta Houseboat, 774 F.2d 1432, 1436 (9th Cir. 1985). The
Rule requires claims to be verified upon oath or solemn
affirmation to minimize the danger of false claims. Id. We
understand the importance of these goals. On the facts of this
case, however, a verification by Lundis, as we note below, would
have been superfluous.
The fundament of Lundis's claim to ownership of the
computers is his obligation to make restitution to the owners of
the computer equipment. This order of restitution came from the
district court. Both the court and the Government were aware of
the source of Lundis's interest in the property and the basis for
his claim of ownership. Thus, the verification would not have
added to the authenticity of Lundis's petition. We therefore
believe that it was error under these circumstances to reject
Lundis's claim merely because of the absence of verification,
especially in light of Lundis's pro se status and his lack of any
knowledge of Rule C(6).
6
With his colorable claim to ownership of the computers, we
believe that Lundis had standing at least to challenge the
forfeiture proceedings. See United States v. Property at 4492 S.
Livonia Rd., Livonia, 889 F.2d 1258, 1262 (2nd Cir. 1989); see
also United States v. $38,000 in United States Currency, 816 F.2d
1538, 1544 (11th Cir. 1987) ("A claimant need not own the
property in order to have standing to contest its forfeiture; a
lessor property interest, such as a possessory interest, is
sufficient for standing."). We do not believe that we may
equitably deny Lundis standing where his actions have not
thwarted the goals of Rule C(6). See United States v. One Urban
Lot Located at 1 Street A-1, 885 F.2d 994, 1001 (1st Cir. 1989);
Property at 4492 S. Livonia, 889 F.2d at 1262; 1982 Yukon Delta
Houseboat, 774 F.2d at 1436.
To dismiss Lundis's claim for failure to include a verified
statement would "contradict[] both old-fashioned common sense and
the time-honored admiralty principle that pleadings and
procedural practices in maritime actions should be applied
liberally." One Urban Lot, 885 F.2d at 1001. Under the
extraordinary circumstances we have here, an inability to timely
appeal from the forfeiture of the disputed property because of
the erroneous denial of standing, we will allow the defendant to
appeal.
III.
Whether the forfeiture of the computers violated the Double
Jeopardy Clause is an interesting question of law subject to
7
plenary review. See United States v. Baird, 63 F.3d 1213, 1215
(3rd Cir. 1995), cert. denied, ___ U.S. ___, 116 S.Ct. 909(1996).
Although the Double Jeopardy Clause provides that no person
"subject for the same offence to be twice put in jeopardy of life
or limb," U.S. Const. amdt. 5, the Supreme Court has explained
that the Clause "protects against three distinct abuses: a
second prosecution for the same offense after acquittal; a second
prosecution for the same offense after conviction; and multiple
punishments for the same offense." See United States v. Halper,
490 U.S. 435, 440 (1989). Lundis contends that the district
court violated the prohibition against multiple punishments by
first ordering him to pay restitution for the value of the
computers, and later, in a subsequent forfeiture proceeding,
allowing forfeiture of the computers to the United States.
The relevant inquiry for this court is whether the
forfeiture procedures under 18 U.S.C. § 981 constitute punishment
for double jeopardy purposes. See Halper, 490 U.S. at 441.
Recent Supreme Court cases note that civil sanctions may
constitute punishment in certain circumstances. See Austin v.
United States, ___U.S.___, 113 S.Ct. 2801, 2812 (1993) (civil
forfeiture pursuant to 21 U.S.C. § 881(a)(4) and (a)(7)
constitute punishment); Halper, 490 U.S. at 447 ("the labels
'criminal' and 'civil' are not of paramount importance" in
assessing the punitive character of a statute).
In Halper, the trial court sentenced the defendant, Irwin
Halper, to two years imprisonment and fined him $5,000 for
8
violating the criminal false claims statute, 18 U.S.C. § 287.
The Government later proceeded against Halper under the civil
False Claims Act, 31 U.S.C. §§ 3729-3731. The provisions of the
civil Act provided for a penalty of $2,000 for each violation of
the Act. Halper had violated the Act 65 times, and thus the
Government contended he was subject to a penalty of more than
$130,000. Halper, 490 U.S. at 438-39.
The district court in Halper refused to impose the full
$130,000 penalty, finding that the full penalty would violate the
Double Jeopardy Clause in light of Halper's previous criminal
punishment. The district court determined that the penalty would
constitute punishment unless it served a remedial purpose.
Sanctions serving a remedial purpose make the Government whole
for such costs as detection, investigation and prosecution of a
criminal. See id. at 445, 449. The court in Halper found that
the amount of the penalty was "entirely unrelated" and bore no
"rational relation" to the actual damages incurred by the
Government. Thus, it held that the $130,000 penalty would
"punish" Halper a second time in violation of the Double Jeopardy
Clause. The Supreme Court agreed. It noted that punishment
serves the "twin aims of retribution and deterrence," and
explained:
[I]t follows that a civil sanction that cannot fairly
be said solely to serve a remedial purpose, but rather
can only be explained as also serving either
retributive or deterrent purposes, is punishment, as we
have come to understand the term. . . . We therefore
hold that under the Double Jeopardy Clause a defendant
who already has been punished in a criminal prosecution
may not be subjected to an additional civil sanction to
the extent that the second sanction may not fairly be
9
characterized as remedial, but only as a deterrent or
retribution.
0
Id. at 448-49.
In Austin, 113 S.Ct. 2901, the Court applied the Halper
analysis to the forfeiture provisions of 21 U.S.C. §§ 881(a)(4)
and (a)(7), and found that those provisions constituted
punishment for purposes of the Eighth Amendment's Excessive Fines
Clause.0 The Court noted that, historically, forfeiture was
understood to be a punishment. Further, the Court found that the
statute's emphasis on the culpability of the party indicated a
congressional intent to punish. The Court concluded that
forfeiture provisions deemed to be partially or entirely punitive
in nature constitute punishment. Id. at 2811-12.
It is important to note that Austin involved forfeiture
proceedings pursuant to 21 U.S.C. § 881(a)(4) and (a)(7). These
0
The court remanded the case to the trial court to determine "the
size of the civil sanction the Government may receive without
crossing the line between remedy and punishment." Id. at 450.
0
21 U.S.C. § 881(a)(4) and (a)(7) provide, in relevant part:
(a) The following shall be subject to forfeiture to the
United States and no property right shall exist in them:
(4) All conveyances, including aircraft, vehicles, or
vessels, which are used, or are intended for use, to
transport, or in any manner to facilitate the
transportation, sale, receipt, possession, or
concealment or [controlled substances].
. . .
(7) All real property . . . which is used, or intended
to be used, in any manner or part, to commit, or to
facilitate the commission of, a violation of this
subchapter . . . .
10
statutes involve property that facilitates illegal activity, and
thus run the danger of commanding forfeiture of items that bear a
disproportionate relationship to the government's costs.0 See
Austin, 113 S. Ct. at 2812 n.14 ("The value of the conveyances
and real property forfeitable under §§ 881 (a)(4) and (a)(7) . .
. can vary so dramatically that any relation between the
Government's actual costs and the amount of the sanction is
merely coincidental."). We believe these statutes may be
distinguished from the statute implicated in the instant case, 18
U.S.C. § 981(a)(1)(C). In Section 981(a)(1)(C), the forfeitable
property is limited to proceeds of the crime. At least two
courts of appeals have distinguished the Supreme Court's decision
in Austin as inapplicable to cases where the only property the
government seizes are direct proceeds of an illegal act. See
United States v. Salinas, 65 F.3d 551, 553 (6th Cir. 1995);
United States v. Tilley, 18 F.3d 295, 300 (5th Cir. 1994), reh'g
denied, 22 F.3d 1096 (5th Cir. 1994), cert. denied ___ U.S. ___,
115 S. Ct. 574 (1994).
Tilley involved, inter alia, a challenge to the forfeiture
provisions of 21 U.S.C. §§ 881(a)(6) and (a)(7).0 The defendants
sought dismissal of their criminal indictment for selling drugs,
0
For example, the Government invokes these statutes to confiscate
automobiles or real estate that a party may have used as a base
to make a drug sale.
0
Section 881(a)(6) provides for the forfeiture of all moneys,
securities, etc. furnished in exchange for a controlled
substance, or used to facilitate a violation of the drug laws.
Section 881(a)(7), as discussed in footnote 8, provides for the
forfeiture of real property. The court in Tilley deemed all the
property forfeited to be proceeds of the defendants' crime. See
Tilley, 18 F.3d at 297 n. 2.
11
arguing that the prior civil forfeiture of the proceeds of the
drug sales constituted punishment for double jeopardy purposes.
The Fifth Circuit court of appeals found that the forfeited
property constituted unlawful proceeds to be a crucial factor in
its analysis. Id. at 298. It noted that, unlike the fines
imposed in Halper, the forfeiture of proceeds bore a rational
relationship to the costs to the government and society of the
illegal act. Id. at 299. The Tilley court found the Supreme
Court's decision in Austin inapplicable. It noted that Austin
dealt with forfeitures under Sections 881(a)(4) (conveyances) and
(a)(7) (real estate), and that, unlike proceeds of a crime, these
provisions may have no proportional relationship to the costs to
the government. The court explained:
[A] forfeiture proceeding may constitute punishment
because it involves the extraction of lawfully derived
property from the forfeiting party. . . . When,
however, the property taken by the government was not
derived from lawful activities, the forfeiting party
loses nothing to which the law ever entitled him. . . .
[T]he forfeiture . . . does not punish the defendant
because it exacts no price in liberty or lawfully
derived property from him. The possessor of proceeds
from illegal drug sales never invested honest labor or
other lawfully derived property to obtain the
subsequently forfeited proceeds. Consequently, he has
no reasonable expectation that the law will protect,
condone, or even allow, his continued possession of
such proceeds because they have their very genesis in
illegal activity.
. . .
Consequently, instead of punishing the forfeiting
party, the forfeiture of illegal proceeds, much like
the confiscation of stolen money from a bank robber,
merely places that party in the lawfully protected
financial status quo that he enjoyed prior to launching
his illegal scheme. This is not punishment "within the
plain meaning of the word."
12
Id. at 300 (citations omitted).
We have already adopted Tilley's rationale as the
controlling law of this circuit for civil forfeiture of proceeds
under 21 U.S.C. § 881(a)(6). See United States v. $184,505.01 in
United States Currency, 72 F.3d 1160, 1168-69 (3rd Cir. 1995)
("We find the Fifth Circuit's reasoning [in Tilley] to be sound.
We therefore hold that the forfeiture under 21 U.S.C. § 881(a)(6)
of proceeds from illegal drug transactions, or proceeds traceable
to such transactions, does not constitute "punishment" within the
meaning of the Double Jeopardy Clause."). Following $184,505.01,
we find Tilley equally persuasive for civil forfeitures under 18
U.S.C. § 981(a)(1)(C).
We see no reason why our holding in $184,505.01 is not
controlling.0 First, the statute at issue in this case and the
statute at issue in $184,505.01 are parallel. Although the two
forfeiture provisions use different language, we read them to
mean the same thing. Both provide for forfeiture of proceeds.
Compare 18 U.S.C. § 981(a)(1)(C) (providing for forfeiture of any
0
At oral argument, counsel for appellant attempted to distinguish
$184,505.01 by saying it dealt only with administrative
forfeiture. This is plainly incorrect. Although the Government
initially brought an administrative forfeiture proceeding against
$14,000 and certain other property, it later converted that
proceeding to a judicial forfeiture action. See 72 F.3d at 1162-
63 ("The DEA began separate administrative forfeiture proceedings
. . . [then] referred the forfeitures to the United States
Attorney, who filed complaints for civil forfeiture"). The
forfeiture action against the $184,505.01 that formed the basis
for our double jeopardy rulings was at all times a judicial
forfeiture. See id. at 1162 n.5 ("The DEA referred the
forfeiture of the $184K to the United States Attorney for
judicial forfeiture, because its value exceeded $100,000, the
maximum allowable amount for the . . . administrative forfeiture
process.").
13
property "which constitutes or is derived from proceeds traceable
to a violation of Section . . . 1029 . . . of this title . . . .
") with 21 U.S.C. § 881(a)(6) (providing for forfeiture of all
moneys "furnished in exchange for a controlled substance").
Because our decision in $184,505.01 dealt specifically with
forfeiture of proceeds under § 881(a)(6), the additional language
in that provision dealing with forfeiture of money "used to
facilitate a violation of the drug laws" is of no moment. That
this case involves a different statute is not enough to
distinguish $184,505.01.
Second, when viewed in terms of the reasoning in Tilley,
the relationship between the forfeited property and the
underlying offense in this case is identical to that found in
$184,505.01. Just like the proceeds of drug trafficking, the
proceeds of credit card fraud vary directly with the severity of
the crime: The more items purchased with stolen credit cards,
the more property that will ultimately be forfeited to the
government. See $184,505.01, 72 F.3d at 1168 ("[T]he forfeiture
of drug proceeds will always be directly proportional to the
amount of drugs sold. The more drugs sold, the more proceeds
that will be forfeited." (quoting Tilley, 18 F.3d at 300)). The
involvement in this case of a different underlying offense is
therefore unimportant.
Finally, our reasoning in $184,505.01 applies even if
Lundis has already paid an amount of restitution equal to the
value of the stolen computers. We noted in $184,505.01 that two
rationales were at work in Tilley, first that the forfeited
14
amounts were directly proportional to the severity of the crime,
and second that forfeiture was not punishment because of the very
nature of illegally derived property. Id. at 1168. Post-
restitution forfeiture comports with both. Under the first,
paying restitution plus forfeiture at worst forces the offender
to disgorge a total amount equal to twice the value of the
proceeds of the crime. Given the many tangible and intangible
costs of criminal activity, this is in no way disproportionate to
"the harm inflicted upon government and society by the
[offense]." Tilley, 18 F.3d at 300. Under the second rationale,
payment of restitution in no way alters the status of the
property as ill-gotten gains. Restitution operates to make the
victim of the crime whole, not to confer legal ownership on the
offender of the stolen property. As a result, Lundis's payment
of restitution prior to forfeiture makes no difference in our
double jeopardy analysis.
Following $184,505.01, we hold that forfeiture of proceeds
under § 981(a)(1)(C) is not punishment. In reaching this
outcome, we remain aware of contrary authority. Lundis urges us
to follow the Court of Appeals for the Ninth Circuit's ruling in
United States v. $405,089.23 United States Currency, 33 F.3d 1210(9th Cir. 1994), reh'g denied and modified on other grounds, 56
F.3d 41 (9th Cir. 1995), cert. granted, ___ U.S. ___, 116 S.Ct.
762 (1996), which held that civil forfeiture under 18 U.S.C.
§981(a)(1)(A) and 21 U.S.C. § 881(a)(6) constitute punishment
barred by the Double Jeopardy Clause. See also United States v.
9844 S. Titan Court, 75 F.3d 1470 (10th Cir. 1996) (rejecting
15
reasoning of Tilley and $184,505.01, following $405,089.23). In
$184,505.01, "we reject[ed] the contrary reasoning and
conclusions of the Ninth Circuit regarding § 881(a)(6)." 72 F.3d
at 1169. With nothing to distinguish this case from $184,505.01,
we again reject the Ninth Circuit's reasoning in regards to
§981(a)(1)(C).0
Given this interpretation of 18 U.S.C. § 981(a)(1)(C), it
follows that Lundis's forfeiture of his computer equipment did
not constitute punishment for purposes of the Double Jeopardy
Clause. The district court committed no error in rejecting
Lundis's double jeopardy claim.
B.
Lundis also asserts that the forfeiture of the computers
violates the Excessive Fines Clause of the Eighth Amendment.
Constitutional interpretations are questions of law subject to
plenary review. See Epstein Family Partnership, 13 F.3d 762, 766
(3rd Cir. 1994).
The Eighth Amendment prohibits excessive bail, excessive
fines, and cruel and unusual punishment. Lundis may only succeed
in challenging the forfeiture as a violation of the Excessive
Fines Clause if the forfeiture provision constitutes a
0
Indeed, our rejection of $405,089.23 seems even more warranted
here: As discussed above, § 981(a)(1)(C) is a pure proceeds
statute. By contrast, § 981(a)(1)(A) covers property "involved
in" an offense, and § 881(a)(6) covers both proceeds and money
"used to facilitate" an offense. To the extent that our holding
rests on the unique status of proceeds, its logic applies most
strongly to § 981(a)(1)(C).
16
"punishment." See Austin, 113 S. Ct. at 2804. The computers
forfeited pursuant to 18 U.S.C. § 981(a)(1)(C) were proceeds of
Lundis's criminal activity. As discussed above, the forfeiture
provision in the instant case does not constitute "punishment."
Thus, Lundis's Excessive Fines claim has no merit.
IV.
In sum, we hold that the district court improperly
dismissed Lundis's claim to the property subject to forfeiture.
Although his claim did not contain a verification of ownership,
under the facts of this case, Lundis presented a colorable claim
to the property to grant this court jurisdiction.
On the merits, we hold that the forfeiture of the
computers, which were proceeds of Lundis's crime, and to which he
had no legal rights of ownership, did not constitute punishment.
Thus, the forfeiture did not violate the Double Jeopardy or
Excessive Fines Clauses.
Accordingly, the order of forfeiture of the district court
will be affirmed.
17