United States v. Finn Batato , 833 F.3d 413 ( 2016 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 15-1360
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v.
FINN BATATO; BRAM VAN DER KOLK; JULIUS BENCKO; MATHIAS
ORTMANN; SVEN ECHTERNACH; KIM DOTCOM; MEGAUPLOAD LIMITED;
MEGAPAY LIMITED; VESTOR LIMITED; MEGAMEDIA LIMITED;
MEGASTUFF LIMITED; MONA DOTCOM,
Claimants – Appellants,
and
ALL ASSETS LISTED IN ATTACHMENT A, AND ALL INTEREST,
BENEFITS, AND ASSETS TRACEABLE THERETO, in Rem,
Defendant.
-------------------------
CATO INSTITUTE; INSTITUTE FOR JUSTICE; NATIONAL ASSOCIATION
OF CRIMINAL DEFENSE LAWYERS,
Amici Supporting Appellants.
Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria. Liam O’Grady, District
Judge. (1:14-cv-00969-LO-MSN)
Argued: March 22, 2016 Decided: August 12, 2016
Before GREGORY, Chief Judge, and DUNCAN and FLOYD, Circuit
Judges.
Affirmed by published opinion. Chief Judge Gregory wrote the
majority opinion, in which Judge Duncan joined. Judge Floyd
wrote a dissenting opinion.
ARGUED: Michael S. Elkin, WINSTON & STRAWN LLP, New York, New
York, for Appellants. Jay V. Prabhu, OFFICE OF THE UNITED
STATES ATTORNEY, Alexandria, Virginia, for Appellee. ON BRIEF:
Craig C. Reilly, Alexandria, Virginia, for Appellants;
Robb C. Adkins, San Francisco, California, Steffen N. Johnson,
Christopher E. Mills, WINSTON & STRAWN LLP, Washington,
D.C., for Appellant Megaupload Limited; David B. Smith,
SMITH & ZIMMERMAN, PLLC, Alexandria, Virginia, for Appellants
Julius Bencko and Sven Echternach; Ira P. Rothken,
Jared R. Smith, ROTHKEN LAW FIRM, Novato, California,
William A. Burck, Derek L. Shaffer, Stephen M. Hauss, QUINN
EMANUEL URQUHART & SULLIVAN, Washington, D.C., for
Appellants Kim Dotcom and Megaupload Limited. Dana J. Boente,
United States Attorney, G. Wingate Grant, Assistant United
States Attorney, Karen L. Taylor, Assistant United States
Attorney, Jasmine H. Yoon, Assistant United States Attorney,
Allison B. Ickovic, Special Assistant United States Attorney,
OFFICE OF THE UNITED STATES ATTORNEY, Alexandria, Virginia;
Ryan K. Dickey, Brian L. Levine, Senior Counsel, Computer Crime
& Intellectual Property Section, UNITED STATES DEPARTMENT OF
JUSTICE, Washington, D.C., for Appellee. Darpana Sheth,
INSTITUTE FOR JUSTICE, Arlington, Virginia, Thomas K. Maher,
NORTH CAROLINA OFFICE OF INDIGENT DEFENSE SERVICES, Durham,
North Carolina, Ilya Shapiro, CATO INSTITUTE, Washington, D.C.,
for Amici Cato Institute, Institute for Justice, and National
Association of Criminal Defense Lawyers.
2
GREGORY, Chief Judge:
The claimants in this case appeal from the district court’s
entry of default judgment for the government in a civil
forfeiture action against funds deposited in the claimants’
names in banks in New Zealand and Hong Kong. Default judgment
was entered after the government successfully moved to
disentitle the claimants from defending their claims to the
defendant property under the federal fugitive disentitlement
statute, 28 U.S.C. § 2466. The claimants appeal the judgment on
several grounds, most prominent among them that the district
court lacked jurisdiction over the defendant property because it
resides in foreign countries, that fugitive disentitlement
violates constitutional due process, and that disentitlement in
this case was improper because the claimants are not fugitives
from the law. Finding these arguments unpersuasive, we affirm
the district court.
I.
On January 5, 2012, a grand jury returned an indictment
against many of the claimants in this action, charging them with
criminal copyright infringement and money laundering “with
estimated harm to copyright holders well in excess of
$500,000,000 and reported income in excess of $175,000,000.”
Gov’t Br. 4. The claimants’ alleged copyright infringement
3
scheme, dubbed the “Mega Conspiracy,” used public websites to
facilitate the illegal reproduction and distribution of
copyrighted movies, software, television programs, and music.
The government estimates that the alleged criminal conduct has
caused billions of dollars in harm to the copyright holders.
Following the indictment, the district court issued
restraining orders for assets in New Zealand and Hong Kong where
most of the remaining identified proceeds resided. The High
Court in Hong Kong responded almost immediately by issuing a
restraining order against approximately $60 million in assets,
while New Zealand first arrested several of the now-claimants,
released them on bail, and then several months later, in April,
registered restraining orders on $15 million in assets. New
Zealand also scheduled extradition hearings for August 2012, but
these hearings have been continued at least eight times at the
claimants’ request.
The New Zealand restraining orders could only remain
registered for two years, after which they could be extended for
up to one year. Recognizing that the restraints would run out
on April 18, 2014, or if extended on April 18, 2015, the United
States filed this civil forfeiture action against forty-eight
assets restrained pursuant to the criminal indictment in the
district court on July 29, 2014. Although restraining orders
froze the assets in the lead up to this action, the New Zealand
4
courts have routinely released funds to claimants for living and
legal expenses. Some of these have been very substantial,
including millions in legal fees for Kim Dotcom, and $170,000
per month for living expenses for the same claimant.
Most of the claimants in this case filed their claims
together on August 28, and Mona Dotcom filed a spousal claim on
September 1, 2014. The claimants also filed a joint waiver of
notice. The government subsequently moved to strike all the
claimants’ claims pursuant to 28 U.S.C. § 2466, the federal
fugitive disentitlement statute. On February 27, 2015, the
district court granted the motion to strike, having allowed
claimants to appear and present arguments on the motion but not
on the merits of the case. The government then moved for
default judgment, which the district court granted on March 25,
2015, issuing forfeiture orders for the assets in New Zealand
and Hong Kong. United States v. All Assets Listed in Attachment
A, 89 F. Supp. 3d 813 (E.D. Va. 2015).
Claimants timely noted this appeal.
II.
The claimants’ first challenge to the district court
judgment contests that court’s in rem jurisdiction over assets
in foreign countries. The claimants make essentially several
arguments which we will address in turn: first, the statute
5
cited by the district court as establishing its jurisdiction
speaks to venue rather than jurisdiction; second, that if that
statute is jurisdictional, the case must still be justiciable,
meaning the district court must have sufficient control over the
res to render a binding opinion effecting title; and finally,
that jurisdiction was improper because the district court did
not have sufficient minimum contacts with the defendant
property.
A.
The district court asserted in rem jurisdiction pursuant to
28 U.S.C. § 1355(b)(2). 1 There is a potential split in the
1For convenience, the relevant portions of § 1355 are
reproduced here:
(a) The district courts shall have original jurisdiction,
exclusive of the courts of the States, of any action or
proceeding for the recovery or enforcement of any fine,
penalty, or forfeiture, pecuniary or otherwise, incurred
under any Act of Congress, except matters within the
jurisdiction of the Court of International Trade under
section 1582 of this title.
(b) (1) A forfeiture action or proceeding may be brought
in--
(A) the district court for the district in which
any of the acts or omissions giving rise to the
forfeiture occurred, or
(B) any other district where venue for the
forfeiture action or proceeding is specifically
provided for in section 1395 of this title or any
other statute.
(Continued)
6
circuit courts regarding how to interpret subsection (b): the
Second Circuit has held that it merely makes venue proper in
certain courts, while the Third, Ninth, and D.C. Circuits have
held that it establishes jurisdiction in those courts. 2 The
district court adopted the majority approach, and we affirm that
decision.
(2) Whenever property subject to forfeiture under the
laws of the United States is located in a foreign
country, or has been detained or seized pursuant to
legal process or competent authority of a foreign
government, an action or proceeding for forfeiture may
be brought as provided in paragraph (1), or in the
United States District court for the District of
Columbia.
* * *
(d) Any court with jurisdiction over a forfeiture action
pursuant to subsection (b) may issue and cause to be served
in any other district such process as may be required to
bring before the court the property that is the subject of
the forfeiture action.
2 There is only a “potential” split because the Second
Circuit may have reversed itself following its decision in
United States v. All Funds on Deposit in Any Accounts Maintained
in Names of Meza or De Castro, 63 F.3d 148 (2d Cir. 1995). As
the district court noted, a year after Meza the Second Circuit
described § 1355(b) as an amendment “to provide district courts
with in rem jurisdiction over a res located in a foreign
country.” United States v. Certain Funds Contained in Account
Numbers 600-306211-006, 600-306211-011 & 600-306211-014 Located
at Hong Kong & Shanghai Banking Corp., 96 F.3d 20, 22 (2d Cir.
1996). This language appears to at least abrogate Meza in the
Second Circuit. If so, adopting the reasoning in Meza here
would actually create a split between this Court and the Second,
Third, Ninth, and D.C. Circuits.
7
“Under the traditional paradigm, ‘the court must have
actual or constructive control over the res when an in rem
forfeiture suit is initiated.’” United States v. Approximately
$1.67 Million, 513 F.3d 991, 996 (9th Cir. 2008) (quoting United
States v. James Daniel Good Real Prop., 510 U.S. 43, 58 (1993)).
The question is whether § 1355—particularly the 1992 amendments
which added subsections (b) and (d), authorizing district courts
to issue process against property outside their districts—
effectively dispenses with this traditional requirement. In the
only circuit opinion to so hold, the Second Circuit said it does
not do so with respect to property outside the United States.
United States v. All Funds on Deposit in Any Accounts Maintained
in Names of Meza or De Castro, 63 F.3d 148, 152 (2d Cir. 1995).
The Meza court read § 1355(b) to make venue proper in cases
involving foreign property where the district court had control
over that property. Id. at 151 (“Section 1355(b) addresses
venue in forfeiture actions . . . .”). While subsection (d)
establishes legal control over property located outside the
court’s jurisdiction but inside the United States, the Meza
court held that a showing of control was still required for
property outside the United States. Id. at 152.
This interpretation fails a closer textual analysis and
runs contrary to the legislative history of the 1992 amendments.
By its own terms, § 1355(d) only applies to “[a]ny court with
8
jurisdiction over a forfeiture action pursuant to subsection
(b).” § 1355(d) (emphasis added). The plain meaning of
§ 1355(d), therefore, renders the Meza court’s finding that
“[s]ection 1355(b) addresses venue” impossible—courts may
acquire jurisdiction by operation of the provision. Although it
would be clearer still for § 1355(b) to explicitly state its own
jurisdictional nature, rather than merely saying that a
“forfeiture action or proceeding may be brought in” those
district courts it describes, the plain meaning of that language
in the context of the entire statute is unmistakable.
The Meza court’s interpretation, urged by the claimants
here, also runs contrary to the legislative history of the 1992
amendments. When the amendments were introduced in the Money
Laundering Improvements Act, Senator D’Amato included an
explanatory statement indicating that subsection (b) was
intended to provide the federal district courts with
jurisdiction over foreign property:
Subsection (b)(2) addresses a problem that arises
whenever property subject to forfeiture under the laws
of the United States is located in a foreign country.
As mentioned, under current law, it is probably no
longer necessary to base in rem jurisdiction on the
location of the property if there have been sufficient
contacts with the district in which the suit is filed.
See United States v. $10,000 in U.S. Currency[, 860
F.2d 1511 (9th Cir. 1988)]. No statute, however, says
this, and the issue has to be repeatedly litigated
whenever a foreign government is willing to give
effect to a forfeiture order issued by a United States
court and turn over seized property to the United
9
States if only the United States is able to obtain
such an order.
Subsection (b)(2) resolves this problem by providing
for jurisdiction over such property in the United
States District Court for the District of Columbia, in
the district court for the district in which any of
the acts giving rise to the forfeiture occurred, or in
any other district where venue would be appropriate
under a venue-for-forfeiture statute.
137 Cong. Rec. S16640-01 (Nov. 13, 1992) (statement of Sen.
D’Amato). The Meza court acknowledged, but did not analyze,
this evidence of legislative history, which clearly weighs in
favor of affirming the district court’s interpretation of
§ 1355.
Because the plain meaning of the statutory text and the
legislative history both support finding that 28 U.S.C.
§ 1355(b) is jurisdictional, we affirm the district court’s
holding to that effect. The district court was also correct to
find that jurisdiction would lie if any of the acts resulting in
the forfeiture action occurred within its jurisdiction. The
court noted that the civil complaint and the related criminal
indictment allege that there was a conspiracy between the
indicted parties and that they used “over 525 servers located
within the Eastern District of Virginia.” All Assets Listed in
Attachment A, 89 F. Supp. 3d at 823 (footnote omitted). The
government furthermore contends, and the claimants do not deny,
that the cost of using those servers ran into the “tens of
10
millions of dollars over a period of years.” Gov’t Br. 18.
This easily satisfies the relatively low standard set forth in
§ 1355, and so we affirm the district court’s finding that it
had jurisdiction under the statute.
B.
The claimants next argue that the district court’s
forfeiture order amounts to a nonbinding advisory opinion
because foreign sovereigns must honor that order for it to have
any effect on title to the res. The argument rests on two
overlapping but distinguishable premises. The first is that
principles of admiralty law which usually predicate in rem
jurisdiction on the court’s control of the res apply equally to
this case. This argument relies principally on our decisions in
R.M.S. Titanic, Inc. v. Haver, 171 F.3d 943 (4th Cir. 1999)
[hereinafter Titanic I], and R.M.S. Titanic, Inc. v. The Wrecked
& Abandoned Vessel, 435 F.3d 521 (4th Cir. 2006) [hereinafter
Titanic II]. The claimants’ second premise is that Article III
of the U.S. Constitution will not tolerate courts asserting in
rem jurisdiction without “exclusive custody and control” of
the res because such courts cannot “adjudicate rights . . .
binding against the world,” see Titanic I, 171 F.3d at 964, but
are instead limited to rendering advisory opinions “subject to
revision” by other governments, see Nashville, C. & St. L. Ry v.
Wallace, 288 U.S. 249, 261-62 (1933).
11
This is essentially the same “lack-of-control” attack
claimants launched against § 1355 as just discussed, but they
attempt to reframe the argument as addressing more fundamental
issues.
i.
The claimants’ first argument fails because it confuses
principles of admiralty law for principles of constitutional
law. Both Titanic I and Titanic II describe jurisdictional
principles governing admiralty courts and the law of the sea.
The two crucial distinctions between these cases and the one
before us are (1) that the Titanic cases based jurisdiction on
the common law of admiralty whereas this case relies on § 1355,
and (2) the Titanic cases involved a salvage and so no court
could assert jurisdiction through exclusive control of the res,
but here the res resides in two sovereign nations that are
cooperating with federal authorities from this country regarding
the assets in question.
The claimants fail to acknowledge the most glaring problem
with their reliance on Titanic I and Titanic II: the cases
speak explicitly in terms of the jurisdictional limits of
admiralty courts pursuant to “the common law of the seas.”
Titanic I, 171 F.3d at 960-61 (“Thus, when we say today that a
case in admiralty is governed by the general maritime law, we
speak through our own national sovereignty and thereby recognize
12
and acquiesce in the time-honored principles of the common law
of the seas.”).
“Maritime law . . . provides an established network of
rules and distinctions that are practically suited to the
necessities of the sea,” United States v. W.M. Webb, Inc., 397
U.S. 179, 191 (1970), and as one of our sister circuits has
noted, “The general statute governing forfeiture actions states
that ‘[u]nless otherwise provided by Act of Congress . . . in
cases of seizures on land the forfeiture may be enforced by a
proceeding in libel which shall conform as near as may be to
proceedings in admiralty,’” United States v. All Funds in
Account Nos. 747.034/278, 747.009/278, & 747.714/278 in Banco
Espanol de Credito, Spain, 295 F.3d 23, 26 (D.C. Cir. 2002)
(quoting 28 U.S.C. § 2461(b)). But of course, there is another
statute—§ 1355—guiding the action here, and we have just
described how that statute confers jurisdiction on the district
court. Thus, absent the amendments to § 1355, there might be
“little doubt that traditional rules of in rem jurisdiction
developed under admiralty law would apply,” id., but as things
stand there can be no doubt that § 1355 must prevail. As such,
the cooperation (or lack thereof) of foreign nations in
enforcing any of the district court’s orders “determines only
the effectiveness of the forfeiture orders of the district
13
courts, not their jurisdiction to issue those orders.” Id. at
27.
Finally, on this point, we note that admiralty cases
involving salvages on the high seas (like the Titanic cases)
necessarily involve difficult questions of previously owned
property lost in shared international waters where no nation has
sovereignty. Our opinion in Titanic I was crafted “to ensure
that the conclusion that no nation has sovereignty through the
assertion of exclusive judicial action over international waters
does not leave the high seas without enforceable law.” 171 F.3d
at 968. These questions are not at issue here and there is no
need to plumb their depths as the claimants invite us to do.
Instead, we turn to the question of justiciability which
involves related issues of control.
ii.
The claimants here argue that the district court is without
jurisdiction because, without control of the res, it can only
advise the courts of New Zealand and Hong Kong rather than
disposing of the issues presented. It is among “the oldest and
most consistent thread[s] in the federal law of justiciability
. . . that the federal courts will not give advisory opinions,”
Flast v. Cohen, 392 U.S. 83, 96 (1968) (quotations omitted), and
there are numerous cases holding that judicial decisions may not
be rendered if they would be subject to revision by another
14
branch of government, e.g., Chicago & S. Airlines Co., 333 U.S.
103, 113-14 (1948). But this principle addresses itself to
maintaining the separation of powers between the branches of our
own government, not to concerns of sovereignty or international
comity. See Courtney J. Linn, International Asset Forfeiture
and the Constitution: The Limits of Forfeiture Jurisdiction
over Foreign Assets Under 28 U.S.C. § 1355(b)(2), 31 Am. J.
Crim. L. 251, 297-98 (2004) (collecting numerous cases, all
addressing only revision by other branches of the United States
government).
For a court to hear a case “it must be ‘likely,’ as opposed
to merely ‘speculative,’ that the injury will be redressed by a
favorable decision.” Lujan v. Defs. of Wildlife, 504 U.S. 555,
561 (1992) (quotations omitted). We need to not wade into the
potentially thorny issues raised by claimants because this case
meets the test articulated in Lujan—the foreign sovereigns have
cooperatively detained the res by issuing orders restraining the
defendant property pursuant to this litigation. By showing that
the res was placed in custody in New Zealand and Hong Kong based
on the district court’s order, JA 468-69, the government has
demonstrated that it is likely, rather than speculative, that
these courts will honor a forfeiture order from the United
States. While the claimants repeatedly point to foreign court
15
releases of restrained funds, these simply do not prove that an
order of forfeiture is unlikely to be honored.
The district court, also in reliance on the cooperation of
Hong Kong and New Zealand, concluded its opinion would not be
advisory and that the court is capable of redressing the issue.
We affirm that decision.
C.
The claimants next seek to challenge the district court’s
assertion of jurisdiction under the Due Process Clause of the
Fifth Amendment. They argue that, regardless of any statute
passed by Congress, a federal court cannot assert jurisdiction
unless it is established that the defendant meets the “minimum
contacts” test articulated by International Shoe v. State of
Washington, Office of Unemployment Compensation & Placement, 326
U.S. 310 (1945) and its progeny, citing Harrods Ltd. v. Sixty
Internet Domain Names, 302 F.3d 214, 224 (4th Cir. 2002). The
district court held that the statute’s requirement that this
kind of in rem action be brought in “the district court for the
district in which any of the acts or omissions giving rise to
the forfeiture occurred,” § 1355(b)(1)(A), “serve[d] much the
same function as the minimum contacts test” and therefore
analyzed only that question. J.A. 1963 n.10. While we disagree
with the district court’s analytical approach, its conclusion
that the facts supporting statutory jurisdiction also establish
16
sufficient contacts to meet due process, in this case, is
affirmed.
While Congress has substantial power to set the
jurisdiction of the federal courts, the Due Process Clause
limits that power. The exact contours of that limitation are
not entirely clear. In Shaffer v. Heitner, 433 U.S. 186 (1977),
the Supreme Court held “that all assertions of state-court
jurisdiction must be evaluated according to the standards set
forth in International Shoe and its progeny.” 433 U.S. at 212.
The Court’s insight was that “the relationship among the
defendant, the forum, and the litigation, rather than the
mutually exclusive sovereignty of the States on which the rules
of Pennoyer [v. Neff, 95 U.S. 714 (1878)] rest, [had become] the
central concern of the inquiry into personal jurisdiction,” and
that similar concerns should govern in rem jurisdiction. Id. at
204. The Court rejected the narrow theory that in rem actions
were strictly actions against property, concluding that “in
order to justify an exercise of jurisdiction in rem, the basis
for jurisdiction must be sufficient to justify exercising
jurisdiction over the interests of persons in a thing.” Id. at
207 (quotation marks omitted). Thus the appeal of applying the
minimum contacts test in in rem cases.
The Court’s decision in Shaffer, however, emerged from a
case that might be viewed as the inverse of what § 1355(b)
17
contemplates: the property at issue was stock in a Delaware
corporation that was, by virtue of state law, legally sited in
the state of Delaware, while the owners of that stock had no
other ties to the state. The Court determined that, despite the
property being legally located in the state, the owners of that
stock had insufficient contacts with Delaware for courts there
to invoke quasi in rem jurisdiction over the underlying
shareholder’s derivative suit. Id. at 213. But § 1355(b)
contemplates something completely different—a federal district
court asserting in rem jurisdiction over property (which, in
contrast to Shaffer, is central to the forfeiture action)
located outside the forum.
Given that Shaffer provides only limited guidance as to how
to proceed in this case, we assume without deciding that a
traditional, state-based minimum contacts approach is
appropriate in this case, 3 as posited by the claimants. Applying
3“Because the United States is a distinct sovereign, a
defendant may in principle be subject to the jurisdiction of the
courts of the United States but not of any particular State.
This is consistent with the premises and unique genius of our
Constitution.” J. McIntyre Mach., Ltd. v. Nicastro, 564 U.S.
873, 884 (2011). Given this principle, and based on the
interplay between Federal Rules of Civil Procedure 4(k)(1)(C)
and 4(k)(2), it has been held elsewhere that statutes expanding
a district court’s jurisdiction to the entire country may
transform the minimum contacts test into a “national contacts”
test. See Graduate Mgmt. Admission Council v. Raju, 241 F.
Supp. 2d 589, 597 (E.D. Va. 2003) (“Rule 4(k)(2) was added in
1993 to deal with a gap in federal personal jurisdiction law in
(Continued)
18
that test we find that the contacts are sufficient and due
process is not violated by the district court’s assertion of
jurisdiction.
As in other cases we have decided in which websites and web
transactions have been the asserted basis for jurisdiction, we
will analyze the minimum contacts question by applying the
factors commonly used for determining specific personal
jurisdiction: “(1) the extent to which the defendant has
purposefully availed itself of the privilege of conducting
activities in the state; (2) whether the plaintiffs’ claims
arise out of those activities directed at the state; and (3)
whether the exercise of personal jurisdiction would be
constitutionally ‘reasonable.’” Carefirst of Md., Inc. v.
Carefirst Pregnancy Ctrs., Inc., 334 F.3d 390, 397 (4th Cir.
2003).
situations where a defendant does not reside in the United
States, and lacks contacts with a single state sufficient to
justify personal jurisdiction, but has enough contacts with the
United States as a whole to satisfy the due process
requirements.”); see also Sec. Inv’r Prot. Corp. v. Vigman, 764
F.2d 1309, 1315 (9th Cir. 1985); F.T.C. v. Jim Walter Corp., 651
F.2d 251, 256 (5th Cir. 1981); cf. ESAB Grp., Inc. v. Zurich
Ins. PLC, 685 F.3d 376, 391 n.8 (4th Cir. 2012) (declining to
assess nationwide contacts pursuant to Rule 4(k)(2) because
state long-arm statute authorized jurisdiction). It may
therefore be possible for such a test to substitute in in rem
actions like this one. Finding no need to rely on this test,
however, we decline to express an opinion on the matter.
19
As already mentioned, both the forfeiture complaint and the
criminal indictment allege that 525 servers located within the
Eastern District of Virginia were used in furtherance of the
Mega Conspiracy. All Assets Listed in Attachment A, 89 F. Supp.
3d at 823. The government further alleges, and the claimants do
not dispute, that these servers were “operated and closely
controlled” by the claimants “at a cost of tens of millions of
dollars over a period of years.” Gov’t Br. 18. We find that
such contacts are sufficient to show the claimants “purposefully
availed [themselves] of the privilege of conducting activities
in the state.” See Carefirst, 334 F.3d at 397.
The claimants argue, however, that “this Court has
repeatedly dismissed ‘as “de minimis” the level of contact
created by the connection between an out-of-state defendant and
a web server located within a forum.’” Appellants’ Br. 17-18
(quoting Carefirst, 334 F.3d at 402). Besides not being a
binding rule of general applicability, the particular facts of
this case warrant a different outcome than otherwise might be
true. The quote they rely on is an unfortunate paraphrasing in
our Carefirst opinion of a discussion contained in a footnote of
another case, Christian Science Board of Directors of First
Church of Christ, Scientist v. Nolan, 259 F.3d 209 (4th Cir.
2001). In Nolan we went to some lengths to note that we were
not deciding the effect an in-forum server might have on
20
jurisdiction as the case did not present those facts—the server
involved was operated in California, not the forum state of
North Carolina. Id. at 217 n.9. The Carefirst opinion
therefore fails to adequately capture the impact of Nolan.
Carefirst also does not purport to state a rule of general
application, nor could it given that the reference is contained
in dicta—Carefirst, like Nolan, did not involve an in-forum web
server and so the Court had no opportunity to address the effect
such a server might have on the jurisdictional question.
Carefirst, 334 F.3d at 402 (“NetImpact merely facilitated the
purchase of CPC’s domain names and rented CPC space on its
servers—which in fact were located not in [the forum state of]
Maryland, but in Massachusetts.”).
More to the point, this case does not involve a single
server that happened to reside in the forum state. It involves
hundreds of servers, closely controlled by the claimants,
representing an investment of tens of millions of dollars.
Moreover, whereas Carefirst and Nolan involved conspiracies in
which a website was used to fraudulently solicit contributions
from individuals, the type of conspiracy alleged in this case
makes the servers a much more integral aspect of the crime. The
alleged Mega Conspiracy was a file-sharing scheme in which
copyrighted files were illegally transferred to users around the
world through the servers located in Ashburn, Virginia. The
21
volume of data involved, while not disclosed in briefs to this
Court, would necessarily have been orders of magnitude greater
than that involved in Carefirst and Nolan. In those cases the
defendants were alleged to be using the Internet to commit a
traditional sort of fraud, and we decided the more important
activity was “creating and updating the . . . website.” See
Nolan, 259 F.3d at 217 n.9. Here, the servers themselves held
and allowed the transfer of the copyrighted material—they were
the central conduit by which the conspiracy was conducted. The
location of a substantial number of the servers in Virginia is
clearly enough to demonstrate purposeful availment.
The second factor, whether the plaintiffs’ claims arise out
of those activities directed at the state, is easily met: the
forfeiture action before this Court arises from the alleged
illegal transfer of files conducted using the servers located in
Virginia.
The third factor, constitutional reasonableness, is also
met. To determine constitutional reasonableness, we look at
“the burden on the defendant, the forum State’s interest in
adjudicating the dispute, the plaintiff’s interest in obtaining
convenient and effective relief, the interstate judicial
system’s interest in obtaining the most efficient resolution of
controversies, and the shared interest of the several States in
furthering fundamental substantive social policies.” Burger
22
King Corp. v. Rudzewicz, 471 U.S. 462, 477 (1985) (quoting
World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292
(1980)) (internal quotation marks omitted). This factor is
largely used to police for exploitation of jurisdictional rules
and ensure that defending a suit is not “so gravely difficult
and inconvenient that a party unfairly is at a severe
disadvantage in comparison to his opponent.” Id. at 478
(quoting The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 18
(1972)) (internal quotation marks omitted). The claimants do
not argue that Virginia is any less convenient than any other
available forum, and we perceive no evidence that the government
filed where it did for any untoward purpose.
III.
The district court ordered the claimants disentitled from
defending claims to the defendant property pursuant to the Civil
Asset Forfeiture Reform Act of 2000 (“CAFRA”), 28 U.S.C. § 2466.
The effect of the order was to prevent the claimants from using
the U.S. courts to defend their claims to the property. The
claimants argue that this application of 28 U.S.C. § 2466violates the Due Process Clause of the Fifth Amendment by
stripping them of their right to be heard. The claimants
present arguments closely tracking those rejected by the Second
Circuit in Collazos v. United States, 368 F.3d 190, 202-05 (2d
23
Cir. 2004). The district court effectively adopted the
reasoning of that case, holding that the claimants had waived
the due process rights they claimed were violated by operation
of § 2466. All Assets Listed in Attachment A, 89 F. Supp. 3d at
832 n.21. We now affirm the district court’s decision.
A.
Fugitive disentitlement began as a judicial doctrine
allowing appellate courts to dismiss appeals from criminal
fugitives who failed to surrender to authorities, holding that
such failure “disentitles the defendant to call upon the
resources of the Court for determination of his claims.” See
Molinaro v. New Jersey, 396 U.S. 365, 365-66 (1970). Prior to
1996, the courts of appeals were split on the question of
whether fugitive disentitlement would also “allow a court in a
civil forfeiture suit to enter judgment against a claimant
because he is a fugitive from, or otherwise is resisting, a
related criminal prosecution.” Degen v. United States, 517 U.S.
820, 823 (1996) (citing as examples United States v. Eng, 951
F.2d 461 (2d Cir. 1991) (extending fugitive disentitlement to
civil forfeiture); United States v. $40,877.59 in U.S. Currency,
32 F.3d 1151 (7th Cir. 1994) (declining to extend fugitive
disentitlement to civil forfeiture); and United States v.
$83,320 in U.S. Currency, 682 F.2d 573 (6th Cir. 1982) (same)).
24
In 1996, the U.S. Supreme Court struck a federal district
court’s use of disentitlement to strike a civil forfeiture
claimant’s defense on the grounds that he was a fugitive evading
related criminal charges. Id. at 828. The Court was clearly
conflicted over the interests presented by the disentitled
party, the government seeking forfeiture, and the district court
itself. It noted that “[t]he need to redress the indignity
visited upon the District Court by Degen’s absence from the
criminal proceeding, and the need to deter flight from criminal
prosecution by Degen and others” were both “substantial”
interests. Id. It also “acknowledge[d] disquiet at the
spectacle of a criminal defendant reposing in Switzerland,
beyond the reach of our criminal courts, while at the same time
mailing papers to the court in a related civil action and
expecting them to be honored.” Id. On the other hand, the
Court was even more concerned that “too free a recourse to
rules” such as disentitlement that “foreclose[e] consideration
of claims on the merits” might “disserve the dignitary purposes
for which [they are] invoked,” eroding respect for the courts.
Id. It concluded that “[a] court’s inherent power is limited by
the necessity giving rise to its exercise” and that “[t]here was
no necessity to justify the rule of disentitlement in [that]
case.” Id. at 829.
25
In the course of that opinion, the Supreme Court
acknowledged that the answer might be different if civil
disentitlement were authorized by statute. Id. at 828. The
Court expressly left open the question of such a statute’s
constitutionality. Id. It was against this backdrop that CAFRA
was enacted by Congress, and this appeal presents this Court
with its first opportunity to pass upon that open question.
B.
The claimants argue that the district court was not
constitutionally authorized to disentitle them from defending
their property claims against the government’s forfeiture
action, regardless of any statute passed by Congress. They
argue that “[t]he fundamental requirement of due process is the
opportunity to be heard,” Doolin Sec. Sav. Bank, FSB v. FDIC, 53
F.3d 1395, 1402 (4th Cir. 1995) (quotations omitted), that
disentitlement violates this precept, and that Degen confirms
their position.
To begin, much of Degen’s reasoning declaring judicial
disentitlement unconstitutional centered on balance-of-powers
concerns eliminated by the congressional authorization manifest
in § 2466. The Degen Court noted that “[p]rinciples of
deference counsel restraint in resorting to inherent power,” 517
U.S. at 820 (emphasis added), and that “[t]he extent of
[inherent judicial] powers must be delimited with care, for
26
there is a danger of overreaching when one branch of the
Government, without benefit of cooperation or correction from
the others, undertakes to define its own authority,” id. at 823.
It went on to expressly convey that were Congress or the
Executive involved, the analysis would differ: “In many
instances the inherent powers of the courts may be controlled or
overridden by statute or rule.” Id. We believe this is one
such instance.
But more to the point, the claimants’ argument fails
primarily because § 2466 does not eliminate “the opportunity to
be heard.” Id. (emphasis added). The guarantees of due process
do not mean that “the defendant in every civil case [must]
actually have a hearing on the merits.” Boddie v. Connecticut,
401 U.S. 371, 378 (1971). “What the Constitution does require
is an opportunity . . . granted at a meaningful time and in a
meaningful manner, for a hearing appropriate to the nature of
the case.” Id. (internal quotations omitted); see also James
Daniel Good, 510 U.S. at 48 (“Our precedents establish the
general rule that individuals must receive notice and an
opportunity to be heard before the Government deprives them of
property.”). A party’s failure to take advantage of that
opportunity waives the right it secures. See Boddie, 401 U.S.
at 378-79.
27
The government points out that courts regularly impose
procedural requirements that will control when and how a party
may be heard, including requiring that an appearance be made in
court. See id. (“A State, can, for example, enter a default
judgment against a defendant who, after adequate notice, fails
to make a timely appearance . . . .”). As was true of the
claimant in Collazos, the claimants here “could have secured a
hearing on [their] forfeiture claim any time . . . simply by
entering the United States.” 368 F.3d at 203. They declined to
do so.
While the claimants correctly respond that § 2466 is no
mere procedural requirement, their argument actually underscores
the justification for disentitlement pursuant to statute.
Whereas entering default judgment against a party for failure to
meet a nonsubstantive requirement might produce the same result
as in Degen, the refusal to face criminal charges that would
determine whether or not the claimants came by the property at
issue illegally supports a presumption that the property was,
indeed, so obtained. Id. at 203-04. The very logic of fugitive
disentitlement is that refusal to face and defend against
charges, particularly in criminal court where procedural rights
and the presumption of innocence favor the defendant, is “but an
admission of the want of merit in the asserted defense.” See
Hammond Packing Co. v. Arkansas, 212 U.S. 322, 351 (1909). And
28
the Supreme Court has long approved the power of the legislature
to authorize dismissal on the creation of such a presumption.
Id.The distinction is made clearer by reviewing one of two
nineteenth-century cases on which the claimants unsuccessfully
rely, Hovey v. Elliott, 167 U.S. 409 (1897). 4 In that case the
trial court used disentitlement as a punishment: it held the
defendants in contempt for failure to deposit funds in the court
registry pursuant to its order, and it punished them by striking
their answer and entering default judgment against them. Id. at
411-12. The Supreme Court reversed, noting as axiomatic that
courts must pursue and render justice rather than acting
arbitrarily and becoming “instrument[s] of wrong and
oppression.” Id. at 413-14.
But in Hammond Packing the Court distinguished the
situation in Hovey from one where a party creates an adverse
presumption against itself. 212 U.S. at 349-50. The Court held
4The claimants also rely on McVeigh v. United States, 78
U.S. 259 (1870), but that case is simply inapposite. It
involved the government’s seizure of property from a former
Confederate officer whose claim and answer were struck because,
the trial court held, he was an enemy alien and could not seek
relief in federal court. 78 U.S. at 261. But “while Mr.
McVeigh could not undo his past support for the Confederacy in
order to obtain a hearing on his confiscation claim,” Collazos,
368 F.3d at 203, claimants here have had every opportunity to
come into court and be heard.
29
that in the latter an answer may rightly be stricken and default
judgment entered because it is not an arbitrary punishment but
the inevitable result of that presumption. Id. at 350-51 (“The
proceeding here taken may therefore find its sanction in the
undoubted right of the lawmaking power to create a presumption
of fact as to the bad faith and untruth of an answer to be
gotten from the suppression or failure to produce the proof
ordered, when such proof concerned the rightful decision of the
cause.”). In such a case, “the sanction is nothing more than
the invocation of a legal presumption, or what is the same
thing, the finding of a constructive waiver.” Ins. Corp. of Ir.
v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 706 (1982).
We make two final notes in support of our decision. First,
there can be no doubt that the claimants’ waiver was knowing.
Section 2466 leaves the application of disentitlement to the
court’s discretion, see § 2466(a) (using “may” instead of
“shall”), and in this case, the claimants were given a full
opportunity to resist its application. Given their lengthy, and
apparently expensive, intransigence with regard to the
underlying controversy, it cannot be argued that they were
unaware of the statute’s consequences and therefore unable to
waive. Cf. United States v. Eng, 951 F.2d 461, 466 (2d Cir.
1991), abrogated by Degen, 517 U.S. 820 (“The doctrine operates
30
as a waiver by a fugitive of his due process rights in related
civil forfeiture proceedings.”).
Second, we are not certain that Degen cast as wide a net as
the claimants argue. In that decision, the Supreme Court
concluded that “[t]here was no necessity to justify the rule of
disentitlement in this case,” 517 U.S. at 829 (emphasis added),
and we have interpreted the opinion to mean only that courts
acting on inherent authority “[can]not rely on the fugitive from
justice doctrine to dismiss a civil forfeiture action merely
‘because [the party] is a fugitive from, or otherwise is
resisting, a related criminal prosecution,’” Jaffe v. Accredited
Sur. & Cas. Co., 294 F.3d 584, 596 (4th Cir. 2002) (emphasis
added) (quoting Degen, 517 U.S. at 823). These opinions appear
to leave open the possibility that different circumstances could
more readily justify disentitlement, statutory or otherwise.
In this case, the claimants readily concede that the
property at issue is being spent rapidly, despite numerous
orders attempting to restrain it. The government can therefore
show a need, in this case, to use more extreme measures. Cf.
James Daniel Good, 510 U.S. at 62 (holding that to show “exigent
circumstances” sufficient to justify seizure of real property
without notice or hearing the government must “show that less
restrictive measures—i.e., a lis pendens, restraining order, or
bond—would not suffice to protect the Government’s interests in
31
preventing the sale, destruction, or continued unlawful use of
the real property”). And the facts here are distinguishable
from those in Degen, most notably in that the property is
located outside the United States, complicating jurisdiction and
the district court’s ability to resolve these important issues.
We have no need to re-open the debate on judicial disentitlement
at this time. But these differences help demonstrate that
notions of due process are not so rigid that they cannot be
adapted in light of a party’s clear intent to use procedural
guarantees to avoid substantial justice.
As § 2466 predicates disentitlement on an allowable
presumption that a criminal fugitive lacks a meritorious defense
to a related civil forfeiture, we find it does not violate the
Due Process Clause of the Fifth Amendment and affirm the
district court’s decision.
IV.
Having established the constitutionality of § 2466, we now
proceed to review its application in this case. The claimants
principally challenge the district court’s finding that each of
them is a fugitive from law as defined by the statute. We
32
address two 5 of their arguments: first, that § 2466 defines a
fugitive as a person whose “sole” or “principal” reason for
remaining outside the United States is to avoid criminal
prosecution, and so the district court erred in adopting a lower
“specific intent” standard; and second, that even if § 2466 only
requires specific intent, the government has failed to prove the
claimants intended to avoid the United States at all.
Finding none of their arguments persuasive, we affirm the
decision of the district court.
A.
The intent standard established by § 2466 is an issue of
first impression in this Court. We review questions of
statutory interpretation de novo. United States v. Ide, 624
F.3d 666, 668 (4th Cir. 2010).
A person is a fugitive subject to disentitlement if he or
she,
(1) after notice or knowledge of the fact that a
warrant or process has been issued for his
apprehension, in order to avoid criminal prosecution--
(A) purposely leaves the jurisdiction of the
United States;
(B) declines to enter or reenter the United States
to submit to its jurisdiction; or
5
The claimants also argue that the district court abused
its discretion in deciding to disentitle them, but its brief on
this point merely repeats arguments made elsewhere and we see no
reason to repeat ourselves in response.
33
(C) otherwise evades the jurisdiction of the court
in which a criminal case is pending against the
person; and
(2) is not confined or held in custody in any other
jurisdiction for commission of criminal conduct in
that jurisdiction.
§ 2466(a). The dispute here is over the meaning of “in order to
avoid criminal prosecution,” which the claimants argue requires
a showing that the individual’s sole or primary reason for being
absent from the United States is evasion. The district court,
however, followed the reasoning of the Second and Ninth Circuits
in holding that this phrase only requires a showing of specific
intent. All Assets Listed in Attachment A, 89 F. Supp. 3d at
826 (citing United States v. Technodyne LLC, 753 F.3d 368, 383-
84 (2d Cir. 2014); United States v. $671,160.00 in U.S.
Currency, 730 F.3d 1051, 1056 n.2 (9th Cir. 2013)).
“The starting point for any issue of statutory
interpretation . . . is the language of the statute itself.”
United States v. Bly, 510 F.3d 453, 460 (4th Cir. 2007). We
have previously held that “a natural reading” of the words “in
order to obstruct justice” in the U.S. Sentencing Guidelines
meant that the conduct it modifies must have been committed
“with the specific intent” to obstruct justice. United States
v. Blount, 364 F.3d 173, 178 (4th Cir. 2004), vacated on other
grounds, Blount v. United States, 543 U.S. 1105 (2005). In
other words, “so long as the defendant had the specific purpose
34
of obstructing justice” the intent requirement is met. Id.; cf.
Specific Intent, Black’s Law Dictionary (10th ed. 2014)
(defining the term to mean “[t]he intent to accomplish the
precise criminal act that one is later charged with”).
Congressional intent also favors a specific intent
requirement. The claimants’ desired interpretation relies on
words that are not in the statute: had Congress wanted to make
§ 2466 apply only where avoiding prosecution was the “sole” or
“principal” reason for a person’s absence from the United
States, adding those modifiers to the statute would accomplish
the goal easily.
Further, Congress clearly anticipated § 2466 would apply to
individuals with no reason to come to the United States other
than to defend against criminal charges. As the Second Circuit
noted in Collazos, “Subpart B also applies to persons who,
qualifying in all four other respects for disentitlement,
decline to ‘enter’ the United States’ jurisdiction.” 368 F.3d
at 199. Because the subpart explicitly applies to both those
refusing to “enter” and those refusing to “re-enter,”
§ 2466(a)(1)(B), the court reasoned the former category could
only be those who have never before entered the United States.
Id. at 199-200 (finding the statute applies to persons who “may
have never set foot within the territorial jurisdiction of the
United States, know that warrants are outstanding for them and,
35
as a result, refuse to enter the country” (emphasis added)).
Such individuals will often be foreign nationals with no ties to
the United States other than their alleged criminal conduct and
the indictment describing it.
Because the statute must apply to people with no reason to
come to the United States other than to face charges, a “sole”
or “principal” purpose test cannot stand. The principal reason
such a person remains outside the United States will typically
be that they live elsewhere. A criminal indictment gives such a
person a reason to make the journey, and the statute is aimed at
those who resist nevertheless.
Finally, we note that this decision is consistent with the
precedent in our sister circuits who have addressed the
question. The Second and Ninth Circuits have explicitly adopted
a specific intent standard for § 2466. See Technodyne, 753 F.3d
at 384 (quoting $671,160.00, 730 F.3d at 1056 n.2, in adopting a
specific intent standard). And while claimants argue that the
D.C. and Sixth Circuits have adopted a stricter standard, we
interpret their decisions to be consistent with ours and those
of the Second and Ninth Circuits.
In United States v. $6,976,934.65, Plus Interest Deposited
into Royal Bank of Scotland International, Account No. 2029-
56141070, Held in Name of Soulbury Ltd., 554 F.3d 123 (D.C. Cir.
2009), the court held that “the district court erred in
36
concluding that the statute does not require the government to
show that avoiding prosecution is the reason Scott has failed to
enter the United States.” 554 F.3d at 132. The claimants argue
that the court’s emphasis placed on the word “the” shows it was
adopting a “sole” purpose standard. There are two problems with
this interpretation. First, placing emphasis on “the” could
simply demonstrate that the court was equating the intent
standard with but-for causation. In other words, it is at least
as likely that the Soulbury court meant that the government must
show the claimant would enter the country and face prosecution
if he did not specifically wish to avoid prosecution. Second,
in Soulbury the government’s only mens rea evidence was a
television interview demonstrating the claimant’s awareness of a
warrant for his arrest in the United States. Id. at 129-30.
This evidence was insufficient to show conclusively that
avoiding prosecution was even a reason that the claimant
remained outside the United States, and neither the district
court nor the government had actually attempted to show intent,
believing the requirement was met by showing mere “notice or
knowledge.” Id. at 132. The most that can be taken from the
Soulbury decision, then, is that the intent standard in § 2466
is more than knowledge. But the claimants are simply incorrect
to assert that the opinion weighed in on the distinction between
specific intent and sole intent at issue here—it did not.
37
The Sixth Circuit’s opinion in United States v. Salti, 579
F.3d 656 (6th Cir. 2009), is similarly not in conflict with our
own. That decision reversed disentitlement where the district
court had found the claimant’s poor health “irrelevant as a
matter of law” on the question of intent. Id. at 665. The
court said, “If Al Ammouri is indeed too sick to travel, such
that his illness is what prevents him from returning to the
United States, the Government has not shown as a matter of law
that Al Ammouri’s being in Jordan, and not the United States, is
‘in order to avoid criminal prosecution.’” Id. at 665-66(emphasis added). The court left open the possibility, however,
that while poor health might be a reason for his absence, the
government might still prove that avoiding prosecution motivated
his absence, making him a fugitive subject to disentitlement,
and so remanded the case for further proceedings. Id. at 666.
Because the plain language of the statute, the legislative
intent, and the weight of persuasive authority all favor doing
so, we adopt a specific intent standard for § 2466 and affirm
the district court.
B.
The claimants’ next contention is that the district court’s
findings of intent with respect to each of them were erroneous.
We review these findings for clear error, for while determining
whether claimants are fugitives is a legal determination that
38
would be reviewed de novo, Collazos, 368 F.3d at 195, the issue
of claimants’ intent is a factual predicate to the legal
question, Anderson v. Bessemer City, 470 U.S. 564, 573-74 (1985)
(holding that “[b]ecause a finding of intentional discrimination
is a finding of fact,” the standard of review is “clearly
erroneous”).
The claimants’ principal argument is that the district
court impermissibly relied on the fact that each of them is
fighting extradition in finding specific intent. But the
district court did not rely solely on this evidence—it merely
considered it as a relevant part of a holistic analysis. And
the weight of persuasive authority on this question clearly
favors finding opposition to extradition relevant to the
inquiry. E.g., Soulbury, 554 F.3d at 132 (“Likewise, under the
third prong, Scott’s renunciation of his U.S. citizenship is
insufficient without some evidence that he took this action to
avoid extradition.” (emphasis added)); United States v.
$1,231,349.68 in Funds, 227 F. Supp. 2d 130, 133 (D.D.C. 2002)
(finding that the claimant was “continuing to avoid prosecution
by opposing extradition” and that this conduct represented
“precisely the type of situation that Congress intended to
address when it enacted the Civil Asset Forfeiture Reform Act of
2000”); see also United States v. Real Prop. Commonly Known as
2526 155th Place SE, No. C07-359Z, 2009 WL 667473, at *1 (W.D.
39
Wash. Mar. 12, 2009); United States v. All Funds on Deposit at
Citigroup Smith Barney Account No. 600-00338, 617 F. Supp. 2d
103 (E.D.N.Y. 2007). The claimants are unable to respond to the
government’s logical conclusion that a “three-year, multi-
million-dollar quest to oppose coming to the United States is
most surely relevant to their intent.”
Moreover, the district court did not rely solely on the
claimants’ resistance to extradition. Instead, it reviewed each
claimant and noted additional evidence of an intent to avoid
prosecution. For example, Kim Dotcom posted a message to
Twitter stating “HEY DOJ, we will go to the U.S. No need for
extradition. We want bail, funds unfrozen for lawyers & living
expenses.” All Assets Listed in Attachment A, 89 F. Supp. 3d at
827. The court rightly found this and other public statements
to strongly suggest Dotcom was resisting extradition to posture
for criminal proceedings, using the ability to avoid prosecution
as leverage. Finn Batato and Mathias Ortmann made statements in
declarations that they were “actively contesting the legal basis
on which the United States has issued the indictment.” Id. The
court found that this, combined with their opposition to
extradition and statements that they would remain in New Zealand
sufficient to show an intent to avoid prosecution. Other
claimants were shown to have made statements that they were
40
avoiding international travel to reduce their risk of
extradition and the prospect of prosecution. Id. at 829.
The claimants’ argument that they have legitimate reasons
to remain where they are, such as jobs, businesses, and families
does not disprove that avoiding prosecution is the reason they
refuse to come to the United States. As we have already
rejected their argument for a “sole intent” standard, the
existence of additional reasons to remain in one’s home country
are utterly unpersuasive because they do not contradict the
evidence relied upon by the district court. In fact, their
argument demonstrates another reason to reject that very high
standard—almost any claimant could defeat disentitlement by
merely asserting a self-serving reason to remain outside the
United States. Under the claimants’ preferred standard, the
statute might easily be rendered a nullity.
Finally, we address the evidence of intent for two
particular claimants who do not face extradition in their home
countries. Claimant Sven Echternach argues that his “absence
from Germany could lead to a default judgment, or potentially
even a German arrest warrant in proceedings related to [the U.S.
charges],” and that this is his reason for remaining there.
Appellants’ Br. 35 (internal quotations omitted). This
assertion, however, is based on the testimony of Echternach’s
own attorney, and the district court spent considerable energy
41
demonstrating that the scenario he described was highly
doubtful, particularly because his trouble with German
authorities is based on the crimes he is charged with in the
United States. Id. at 829-31. The court noted that the
attorney whose advice Echternach is following “has all but
admitted that his advice is predicated on his desire, as a
criminal defense attorney, to keep his client from traveling to
a country where he will be arrested.” Id. at 831. Moreover,
the court found that Echternach specifically fled to his home
country, stating that he refuses to leave (despite wishing to
travel internationally) because Germany does not extradite its
nationals. Id. at 830.
Claimants also argue there is no evidence Julius Bencko
returned to his home country of Slovakia, being driven across
Europe from Portugal by a Portuguese national, to avoid
prosecution. But Bencko told a third party that “he was ‘stuck
here in this post commie state . . . the sooner the USA will do
some steps the soner [sic] they will let me go.’” Id. at 831
(quoting Bencko declaration). Bencko told this person that he
would prefer not to travel outside the country but could if
necessary and stated that he faced a fifty-five-year sentence in
the United States. The district court did not abuse its
discretion in finding these statements taken together showed
intent to avoid prosecution.
42
V.
The claimants make two arguments regarding the effect of
international law on the application of § 2466, which we now
address. Both are questions of law which we review de novo.
See United States v. Al-Hamdi, 356 F.3d 564, 569 (4th Cir.
2004).
First, they argue that disentitling New Zealand residents
violates the Charming Betsy canon of interpretation which
requires courts to interpret federal statutes “consistent with
our obligations under international law,” Kofa v. INS, 60 F.3d
1084, 1090 (4th Cir. 1995) (citing Murray v. The Charming
Schooner Betsy, 6 U.S. 64, 118 (1804)), because it is
inconsistent with the United Nations Convention Against
Transnational Organized Crime (“UNTOC”).
The relevant portion of UNTOC says,
Any person whom [extradition] proceedings are being
carried out in connection with any of the offences to
which this article applies shall be guaranteed fair
treatment at all stages of the proceedings, including
enjoyment of all the rights and guarantees provided by
the domestic law of the State Party in the territory
of which that person is present.
UNTOC, art. 16, ¶ 13, Dec. 12, 2000, 2255 U.N.T.S. 209. The
claimants argue that disentitlement prevents them from
exercising their rights under New Zealand law and thereby
violates the multinational treaty to which both the United
States and New Zealand are parties.
43
None of the claimants’ rather conclusory arguments made to
this Court respond to the district court’s ruling on this issue.
It held that there was nothing inconsistent about allowing the
claimants to pursue their rights in New Zealand courts,
meanwhile subjecting them to default judgment in civil
proceedings in the United States which they refused to defend:
“That the exercise of their rights in new Zealand may cause
disadvantages for the claimants with respect to litigation
occurring in America does not mean they are being treated
unfairly or that they are denied their enjoyment of rights in
New Zealand.” All Assets Listed in Attachment A, 89 F. Supp. 3d
at 833 (emphasis added).
The claimants only answer is to misconstrue a New Zealand
court opinion as declaring disentitlement unconstitutional. The
opinion to which they refer was only deciding a motion to strike
a request that their government’s enforcement of restraining
orders on funds (issued in response to orders from the United
States district court) be made reviewable. JA 2199-200. The
case did not hold American disentitlement unconstitutional or in
violation of UNTOC, and the claimants’ selective quoting of a
passage noting the “the plaintiffs would say” that the lack of
reviewability would be unconstitutional is, obviously, not
persuasive. Compare Appellants’ Br. 37, with JA 2200.
44
The claimants also argue that claimant Echternach cannot be
disentitled pursuant to § 2466 because the Mutual Legal
Assistance Treaty between Germany and the United States (“U.S.-
German MLAT”) prohibits “any penalty” or “coercive measure” for
failure to answer a summons. See The German Mutual Legal
Assistance Treaty, Ger.-U.S., Oct. 18, 2009, T.I.A.S. No. 09-
1018 [hereinafter MLAT]. The U.S.-German MLAT was signed in
2003 and ratified in 2007, years after § 2466 was enacted in
2000. As such, claimants argue that the Supremacy Clause
dictates that the treaty trumps the statute. See Vorhees v.
Fischer & Krecke, 697 F.2d 574, 575-76 (4th Cir. 1983).
The district court expressed “serious doubts that this
treaty bars application of the fugitive disentitlement statute
against all [foreign nationals] who maintain fugitive status in
Germany.” All Assets Listed in Attachment A, 89 F. Supp. 3d at
833. The district court’s doubts were well founded. As its
title suggests, the U.S.-German MLAT adopts a framework for
making international evidentiary and witness requests between
the two countries. It is not concerned with criminal
extradition between the United States and Germany. The treaty
covers, for example, “transferring persons in custody for
testimony or other purposes,” MLAT, Art. 1(2)5., so if the
claimants were arguing that Echternach was being disentitled for
refusal to testify it might be on stronger ground respecting the
45
relevance of the treaty. But because the U.S.-German MLAT does
not restrict how the United States may act towards a criminal
fugitive, there is no need to construe § 2466 consistent with
its provisions, and the Charming Betsy canon is inapplicable.
We therefore affirm the district court’s decision.
VI.
The claimants’ final argument is that the district court
erred in striking the marital claims to the defendant property
asserted by Mona Dotcom, the estranged wife of claimant Kim
Dotcom. The court recognized Mrs. Dotcom’s possessory interest
in two assets—a vehicle and the house in which she resides—but
struck her claims to fifty percent of marital property affected
by this litigation, concluding she lacked standing. The
claimants argue this was error because Mrs. Dotcom only needs to
show a “colorable interest” in the property (based on New
Zealand property law) to establish Article III standing, and she
has done so. 6 Both parties acknowledge that the New Zealand
6
The Fourth Circuit uses a higher “dominion and control”
test to determine Article III standing in criminal forfeiture
cases. In re Bryson, 406 F.3d 284, 291 (4th Cir. 2005). We
have used the same test an unpublished civil forfeiture case,
United States v. 1077 Kittrell Street, 1991 WL 227792, at *1-2
(4th Cir. Nov. 7, 1991) (unpublished), and several of our
district courts appear to have done the same, e.g., United
States v. $104,250.00 in U.S. Currency, 947 F. Supp. 2d 560, 562
(D. Md. 2013). We need not resolve this issue because the
(Continued)
46
Property (Relationships) Act (1976) (“PRA”) is controlling on
the question of Mrs. Dotcom’s alleged interest.
To summarize, Mrs. Dotcom’s argument is that she and her
husband are estranged, that New Zealand law gives her the right
to assert a claim to the marital property and creates a
presumption that she is entitled to half, and that New Zealand
law also recognizes this status as establishing an actual
interest in that property. The argument is no different from
that rejected by the district court.
Article III standing requires a plaintiff to show “an
injury in fact—an invasion of a legally protected interest which
is (a) concrete and particularized and (b) actual or imminent,
not conjectural or hypothetical.” Lujan, 504 U.S. at 561. As
the district court found after a thorough analysis of New
Zealand property law, Mrs. Dotcom has failed to articulate such
an injury because she has not asserted a nonhypothetical legal
interest in the property. Instead, she is arguing that the
presumption of a fifty-percent share and the right to state a
claim for division of the marital property establishes a
“legally protected interest” in the property that is undermined
by the disentitlement of her husband. It does not.
district court correctly found Mrs. Dotcom did not even meet the
lower of the two standards.
47
Actual legal interests under the PRA vest “only in the
event of a future Court order or compromise” between the married
parties. Comm’r of Police v. Hayward (unreported) High Court,
Auckland, CIV 2011-404-002371, 10 June 2013, Venning J, at para
103 (N.Z.) (“Hayward I”). While the New Zealand Criminal
Proceeds Recovery Act (2009) (“CPRA”), which controls asset
forfeiture, statutorily defines an “interest” as including “a
right to claim,” Hayward v. Comm’r of Police [2014] NZCA 625 at
para [33] White J for the Court (N.Z.) (“Hayward II”), it is the
Article III definition of interest which controls standing.
That is, New Zealand law determines the extent of Mrs. Dotcom’s
interest in the property, and Article III determines whether
that interest is sufficient to create standing. The district
court rightly concluded that a right to state a claim “does not
rise to the level of a legal or equitable interest sufficient to
satisfy Article III.” JA 1995 (citing United States v.
Schifferli, 895 F.2d 987, 989 n.* (4th Cir. 1990))
The district court concluded, rightly, that because the
Dotcoms had neither adjudicated their rights to the marital
property nor reached a binding settlement, Mrs. Dotcom had no
actual interest in the property and had therefore failed to even
“allege that she owns the property.” Id. The claimants’
argument to the contrary is built upon two major errors. First,
they argue that a New Zealand court declared that Mrs. Dotcom
48
had an existing interest in the property, but failed to mention
that the opinion was explicitly nonprecedential and that it
recognized an interest in a claim, not an interest in property.
See JA 1994-96. Second, the claimants misrepresent the holding
in Hayward II, implying that it reversed Hayward I and broadened
the definition of a marital property interest to include
hypothetical claims to such property. It did not—it very
clearly distinguished the two statutes.
Finding the district court’s reasoning persuasive, we
affirm the decision to strike Mrs. Dotcom’s claims for lack of
standing.
VII.
For the foregoing reasons, the district court opinion is
affirmed in full.
AFFIRMED
49
FLOYD, Circuit Judge, dissenting:
The majority concludes that a district court may properly
enter a forfeiture order against property entirely outside of
the United States after barring foreign Claimants--who are also
entirely outside of the United States--from defending the
government’s forfeiture claim. I respectfully dissent because I
conclude Article III’s prohibition against advisory opinions
precludes the exercise of in rem jurisdiction over a res,
including real property, entirely outside of the United States
and beyond the control of the district court.
I.
I agree with the majority that 28 U.S.C. § 1355 is a
jurisdictional statute. In enacting § 1355, Congress intended
to fundamentally alter the law regarding in rem jurisdiction.
But see United States v. All Funds on Deposit in Any Accounts
Maintained in Names of Meza or De Castro, 63 F.3d 148, 152 (2d
Cir. 1995) (reaching the opposite conclusion, i.e., that § 1355
is a venue statute, not a jurisdictional one). Congress hoped
to abolish the traditional requirement of in rem jurisdiction
that a court have actual or constructive control over the res.
Compare 28 U.S.C. § 2461(b) (providing that “[u]nless otherwise
provided by Act of Congress . . . in cases of seizures on land
the forfeiture may be enforced by a proceeding by libel which
50
shall conform as near as may be to proceedings in admiralty” 11),
with 28 U.S.C. § 1355(a), (b)(2) (providing district courts
“original jurisdiction” over forfeiture actions concerning
property “located in a foreign country”). A congressional grant
of jurisdiction to the courts remains, however, subject to
constitutional constraints on the federal judicial power. My
objection to the ruling of the district court, and to the
holding of the majority, is not grounded in an objection to its
claim of jurisdiction over the res pursuant to Congress’s grant
of that jurisdiction, but is rather grounded in justiciability
concerns arising from Article III. 2
“The jurisdiction of federal courts is defined and limited
by Article III of the Constitution.” Flast v. Cohen, 392 U.S.
83, 94 (1968). Article III limits federal courts to deciding
“cases” and “controversies.” See U.S. Const. art. III, § 2.
1
Admiralty law indisputably requires control of the res as
a prerequisite to the exercise of jurisdiction.
2
None of the circuits to apply § 1355(b)(2) and cited by
the majority considered challenges to the exercise of in rem
jurisdiction based on Article III. The D.C. Circuit
acknowledged that application of § 1355(b)(2) must conform with
the Constitution, but declined any justiciability analysis
because no claimant raised constitutional objections. United
States v. All Funds in Account Nos. 747.034/278, 747.009/278, &
747.714/278 in Banco Espanol de Credito, Spain, 295 F.3d 23, 27
(D.C. Cir. 2002) (“Unless the Constitution commands otherwise—
and the claimant has raised no constitutional objections at all—
the statute must be enforced.”).
51
These two words “have an iceberg quality, containing beneath
their surface simplicity submerged complexities which go to the
very heart of our constitutional form of government.” Flast,
392 U.S. at 94. Courts developed concepts of justiciability to
express the limitations placed upon federal courts by Article
III’s case or controversy requirement. See id. at 95.
As one commentator cited by the majority notes, cases
brought pursuant to § 1355(b)(2) implicate two distinct but
related constitutional justiciability requirements--bindingness
and redressability. See Courtney J. Linn, International Asset
Forfeiture and the Constitution: The Limits of Forfeiture
Jurisdiction Over Foreign Assets Under 28 U.S.C. § 1355(b)(2),
31 Am. J. Crim. L. 251, 297–99 (2004). In my view, bindingness
presents the most serious problem here. 3
3 This is not to say that I am convinced by the majority’s
treatment of the redressability issue, ante, at 15-16. Lujan v.
Defenders of Wildlife requires that it be “likely” and not
“merely speculative” that an injury will be redressed by a
favorable decision of the court. 504 U.S. 555, 561 (1992)
(quotation marks omitted). Both the district court and the
majority concluded that the actions by the New Zealand and Hong
Kong courts to restrain the defendant res render it probable
that those courts will enforce a judgment of forfeiture.
Perhaps. I note, however, New Zealand’s repeated disbursement
of large amounts of the restrained assets even after the
issuance of the forfeiture judgment, the revocation (and
subsequent reimposition) of the restraining order by a Hong Kong
court, J.A. 738-39, and an order by a New Zealand court
enjoining the registration of the U.S. forfeiture judgment, J.A.
2220.
(Continued)
52
II.
The opinions of federal courts must be final and binding on
the parties. “‘[T]he oldest and most consistent thread in the
federal law of justiciability is that the federal courts will
not give advisory opinions.’” Flast, 392 U.S. at 96 (quotation
omitted). Article III courts cannot render decisions subject to
revision by another branch of government. See, e.g., Chi. & S.
Air Lines v. Waterman S. S. Corp., 333 U.S. 103, 113 (1948)
(“Judgments, within the powers vested in courts by the Judiciary
Article of the Constitution, may not lawfully be revised,
overturned or refused faith and credit by another Department of
Government.”); Hayburn’s Case, 2 Dall. 409, 410 n* (1792)
(opinion of Wilson and Blair, JJ., and Peters, D.J.)
(“[R]evision and control” of Article III judgments is “radically
inconsistent with the independence of that judicial power which
is vested in the courts”).
The advisory opinion prohibition is founded on the
principle that federal courts may only issue judgments that are
Further--although this question may safely be left for
another day--it seems to me that if a foreign sovereign were to
refuse to cooperate, the probability that a § 1355 forfeiture
judgment would redress the government’s injury might slip from
“likely” to “speculative.” Such a refusal to cooperate by a
foreign sovereign may deprive the government of standing to
pursue the forfeiture action.
53
binding and conclusive on the parties. See Waterman, 333 U.S.
at 113–14; Nashville, C. & St. L. Ry. v. Wallace, 288 U.S. 249,
261–62 (1933) (explaining that a case was justiciable when it
sought a “definitive adjudication” of a disputed right that
would not be “subject to revision by some other and more
authoritative agency”); Gordon v. United States, 69 U.S. 561,
561 (1864) (noting that the Constitution forbids federal courts
from expressing opinions on a case “where its judgment would not
be final and conclusive upon the rights of the parties”). 4 The
revision of a court’s judgment by “some other and more
authoritative agency” renders the judgment an advisory opinion
prohibited by Article III. See Wallace, 288 U.S. at 262.
The majority side-steps this concern by cabining it to the
separation of powers context. One of the basic tenets of what
constitutes a “case or controversy” cannot be elided so. The
defendant in this action--the res--is outside of the United
States and beyond the control of the district court. Absent
control, no order of the district court can be binding on the
4 The Supreme Court has similar concerns with regard to in
rem jurisdiction, observing that when a defendant ship leaves a
port and the plaintiff no longer has a res from which to
collect, courts may find the judgment to be “useless” and not
adjudicate the case based on a “traditional, theoretical
concern[] of jurisdiction: enforceability of judgments.”
Republic Nat’l Bank of Miami v. United States, 506 U.S. 80, 87
(1992).
54
res because the fate of the res is ultimately not in the hands
of the district court. Instead, the res in this case is subject
to the control of the courts of New Zealand and Hong Kong. The
district court’s forfeiture order therefore merely advises the
courts of a foreign sovereign that (in the district court’s view
under the laws of the United States) the United States should
have title to the res. Those courts, of course, with control of
the res and with the authority vested in them by their own
sovereigns, remain free to revise, overturn, or refuse
recognition to the judgment of the district court. The decision
of the district court regarding title in the res is thus subject
to a “more authoritative agency” outside of the Article III
hierarchy. Without control of the res, the district court’s
decision cannot bind the res and thus constitutes an advisory
opinion prohibited by Article III.
The risk of revision to the district court’s judgment is no
mere hypothetical. As the government notes, “[d]espite the
registration of the restraints, the New Zealand courts released”
over $5 million for legal fees and living expenses. Gov’t’s Br.
7. Additionally, even after receiving the “final” forfeiture
order from the district court, New Zealand courts granted Dotcom
monthly releases of $135,000 for living expenses. Id. at n.5.
In fact, the district court recognized that the foreign courts
“may or may not” register its order and that “New Zealand courts
55
may continue to litigate the issue of whether the assets will be
forfeited.” J.A. 1982. The government also concedes that “even
with a valid forfeiture order, the fugitive’s property may
suffer no adverse effect.” Gov’t’s Br. 20 n.13. In an in rem
action, the district court cannot issue a judgment binding the
res absent control of the res. Where, as here, a foreign
sovereign controls the res because the res is located abroad,
any in rem forfeiture order by a district court constitutes
advice to the foreign sovereign regarding how it should vest
title to the res.
III.
Our own precedent recognizes the Article III limits of in
rem jurisdiction. We explored the interplay at length in our
Titanic decisions. R.M.S. Titanic, Inc. v. Haver, 171 F.3d 943(4th Cir. 1999) (Titanic I); R.M.S. Titanic, Inc. v. The Wrecked
& Abandoned Vessel, 435 F.3d 521 (4th Cir. 2006) (Titanic II).
The Titanic cases involved disputes concerning the law of
salvage as it applied to the wreck of the British passenger
liner R.M.S. Titanic, which sank in the North Atlantic Ocean in
1912. As the majority notes, ante, at 12-14, the cases arose in
admiralty and applied maritime law, and I readily accept that
§ 1355 attempts to divorce the in rem actions it authorizes from
the traditional in rem principles of admiralty law. However, I
56
part ways with the majority because I read the Titanic cases to
contain principles both of admiralty law and of constitutional
law.
What makes in rem actions problematic from an Article III
standpoint is that “judgments in them operate against anyone in
the world claiming against that property.” Titanic I, 171 F.3d
at 957. Without control of the property, the judgment cannot
“operate against anyone in the world” claiming interest in the
defendant property. Id. “Only if the court has exclusive
custody and control over the property does it have jurisdiction
over the property so as to be able to adjudicate rights in it
that are binding against the world.” Id. at 964 (emphasis
added). When, as here, the res is not in the court’s
possession, “the court may not adjudicate rights to the res and
effectively bind others who may have possession. Consequently,
a court could not exercise in rem jurisdiction, as traditionally
understood, so as to vest rights in property outside of its
territory . . . .” Id. (citation omitted). “In rem
jurisdiction, which depends on sovereignty over property, cannot
be given effect to property beyond a nation’s boundaries of
sovereignty.” Id. at 966. Simply put, the res in this case is
beyond the United States’ sovereign territory and our courts
cannot--absent control of the res--declare rights in it that are
binding against the world.
57
Our decision in Titanic I emphasizes the importance of
sovereignty--and control--for in rem actions. In Titanic I, we
found the exercise of in rem jurisdiction proper because the
court had constructive control over the wreck because it had a
portion of the wreck in its control. The main body of the wreck
itself was located in international waters, i.e., beyond the
sovereign limits of any nation. Thus, although “the
exclusiveness of any [in rem] order could legitimately be
questioned by any other court in admiralty,” we concluded that
the court could, nonetheless, exercise an “‘imperfect’ or
‘inchoate’ in rem jurisdiction which falls short of giving the
court sovereignty over the wreck.” Id. at 967.
As Titanic II makes clear, the court’s exercise of power in
Titanic I was possible only because the wreck was outside the
territorial limits of another sovereign. In Titanic II we
announced the limits of constructive in rem jurisdiction
grounded in the boundaries imposed upon courts by territorial
sovereignty. We held that a court cannot exercise in rem or
constructive in rem jurisdiction over property within the
sovereign limits of other nations. Titanic II, 435 F.3d at 530.
We held that a party “cannot come to a court in the United
States and simply assert that the court should declare rights
against the world as to property located in a foreign country.”
58
Id. That is precisely what the government attempts to do in
this case.
The majority is correct that the Titanic cases applied the
traditional, admiralty-based law of in rem jurisdiction and is
also correct that § 1355 attempted to alter that traditional
law. What the majority fails to recognize, however, is that the
traditional limits of in rem jurisdiction are also commanded by
the Constitution’s requirement that judgments by Article III
courts be binding on the parties. Needless to say, this
requirement cannot be waived by statute. Because the res is a
party and because the judgment purports to adjudicate rights in
the res binding against the whole world, control of the res is
the sine qua non of in rem actions. Absent control, the court’s
judgment cannot bind the property but, instead, merely advises
the foreign sovereign that does control the property as to how a
United States court believes the rights in the property should
be settled.
The possible cooperation of the foreign sovereign is
irrelevant, contrary to the weight the district court and the
majority place on that variable. Unlike the question of
redressability, which is indeed a matter of probabilities, the
requirement that a judgment be binding and conclusive on the
parties is absolute. Consider the circumstances of Waterman,
which articulated bindingness as an essential requirement of
59
Article III’s judicial power. In Waterman, the court of appeals
determined that it had jurisdiction to review an order of the
Civil Aeronautics Board awarding an overseas air route. 333
U.S. at 104-05. By statute, such orders were subject to
presidential approval and the order in question had been
approved by the President. Id. at 110-11. The court of appeals
determined that even after it reviewed the Board’s order, its
review would remain subject to the approval or disapproval of
the President. Id. at 113. The Supreme Court held the judgment
of the court of appeals to be advisory: “Judgments, within the
powers vested in courts by the Judiciary Article of the
Constitution, may not lawfully be revised, overturned or refused
faith and credit by another Department of Government.” Id. I
see no valid reason why a court should be prohibited from giving
advisory opinions to domestic branches of government and yet be
permitted to issue advisory opinions to foreign sovereigns.
The Supreme Court has never given any indication that the
bindingness concerns in Waterman could be cured by a court’s
determination that the other entity was “likely” to follow its
decision. While a judgment may in fact have a higher chance of
eventually being binding on the parties where the foreign
sovereign has acted cooperatively, the U.S. judgment remains
“subject to later review or alteration by [foreign]
60
administrative action” and its bindingness remains--
impermissibly--a question of probabilities. 5 See id. at 114.
IV.
The district court in this case did not have control of the
res. The res is controlled by foreign sovereigns--New Zealand
and Hong Kong. Therefore, the district court could not in my
view issue an order as to the res which would be binding against
the world. Foundational Article III principles preclude the
court from entering a forfeiture order against the res in this
case. I would reverse the district court on this basis and deem
the other issues presented by this appeal moot.
5
It may be possible for the government to make a showing
before the district court that the foreign sovereign would be
compelled, by its own law, to give binding effect to a civil
forfeiture judgment by a U.S. court. However, the government
has made no such showing in this case sufficient to assuage
Article III concerns.
61