United States v. Real Properties Located at 7215 Longboat Drive , 750 F.3d 968 ( 2014 )

United States Court of Appeals
For the Eighth Circuit
___________________________
No. 13-2018
___________________________
United States of America
lllllllllllllllllllll Plaintiff - Appellee
v.
Real Properties located at 7215 Longboat Drive (Lot 24), 7223 Longboat Drive
(Lot 25), Johnston, Polk County, Iowa; Real Properties Located at 8707 Friestad
Court (Lot 4), 8711 Friestad Court (Lot 3), Johnston, Polk County, Iowa
lllllllllllllllllllll Defendants
Terri Buczkowski; Dale Buczkowski; Estate of Betty Mariani
lllllllllllllllllllllClaimants - Appellants
___________________________
No. 13-2050
___________________________
United States of America
lllllllllllllllllllll Plaintiff - Appellee
v.
Real Property located at 7212 Longboat Drive, Johnston, Polk County, Iowa
lllllllllllllllllllll Defendant
Terri Buczkowski; Dale Buczkowski; Estate of Betty Mariani
lllllllllllllllllllllClaimants - Appellants
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Appeal from United States District Court
for the Southern District of Iowa - Des Moines
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Submitted: January 16, 2014
Filed: May 2, 2014
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Before WOLLMAN, BYE, and MELLOY, Circuit Judges.
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MELLOY, Circuit Judge.
The United States government filed civil forfeiture actions against five
properties in Johnston, Iowa, alleging the properties were used to manufacture illegal
drugs or were purchased with proceeds from illegal drug sales. The claimant-
appellants filed claims to the defendant properties, but the district court struck their
claims as untimely and entered forfeiture judgments in the government's favor. We
vacate the forfeiture judgments, reverse the district court's order striking two of the
claimant-appellant's claims as untimely, and remand for a merits determination on the
claims to the properties.
I. Facts, State Law Background, and Procedural History
The government filed a verified complaint in rem on October 15, 2012, alleging
that certain properties in Johnston, Iowa, were subject to forfeiture.1 According to the
1
The government's original complaint identified four properties described in the
first caption in this case. Subsequently, the government moved to forfeit another
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government, the properties were forfeitable because they were either purchased with
proceeds from a drug crime or were used to facilitate the commission of a drug crime.
See 21 U.S.C. § 881(a)(6)–(7). Richard Miller LLC once owned the properties, but
in 2011 Iowa's Secretary of State administratively dissolved the company after it
failed to deliver its biennial report (as state law requires). Under Iowa law, after an
administrative dissolution, a company "continues in existence," Iowa Code
§ 489.705(4), but "may carry on only activities necessary to wind up its activities and
liquidate its assets[.]" Id. Part of winding up a dissolved LLC requires the defunct
company—after settling its debts with creditors—to return equity interests and then
distribute remaining assets among its members. Iowa Code § 489.708(1)–(2).
The LLC's Certificate of Organization identified Betty Mariani as the LLC's
registered agent, manager, and sole member at the time the government initiated
forfeiture proceedings. Mariani died in July 2012, so Mariani's Estate (the "Estate"),
by operation of Iowa law, received all the LLC's assets, including the properties at
issue in this case. See Iowa Code §§ 489.501–04, 489.602(6)(a), 489.603, and
489.705–08. The government knew at the time it initiated forfeiture proceedings both
that Mariani was the LLC's registered agent and manager and that the LLC had been
administratively dissolved. Further, in its motion to strike claimant-appellants' claims,
the government said that it "was aware" Mariani died in July 2012 "but was unable to
find an estate opened in Illinois, where she lived." The government has not explained
what efforts, if any, it made to attempt to locate the Estate. In fact, on September 20,
2012, in LaSalle County, Illinois, an Illinois probate court determined that Terri
Buczkowski, Mariani's daughter, was the Estate's sole heir.
The government did not send notice of the pending civil forfeiture proceedings
to the Estate or Terri. Instead, on October 17, 2012, the government sent direct notice
property located at 7212 Longboat Drive in Johnston, Iowa, generating a new case file
in the process. The two cases have been consolidated for this appeal since they
contain the same underlying allegations and affect the same claimants.
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and a copy of the forfeiture complaint via certified and regular mail to Dale
Buczkowski.2 In addition, the government published notices of the pending
forfeitures on an official government website beginning on October 19 and 20, 2012,
and continuing until November 17, 2012.
On November 29, 2012, attorney David M. Michael called Maureen McGuire,
Assistant United States Attorney for the Southern District of Iowa, to discuss the
forfeiture proceedings. Mr. Michael followed up their conversation by sending an
email to Ms. McGuire that read as follows:
Thanks for the opportunity to discuss the Longboat Drive
case with me today. As I indicated, I may be representing
the estate of Betty Mariani as a claimant in the case and I
appreciate the update on the proceedings. I will advise you
as soon as I have been formally retained.
(Emphasis added). After this correspondence, the government did not send direct
notice to the Estate, to Terri, or even to Mr. Michael for that matter.
Terri, the Estate, and Dale filed verified claims to the properties on January 10,
2013. On January 14, the government moved to strike their claims as untimely. The
government argued that because Dale received direct notice, he had 35 days from
October 17 (or November 21 at the latest) to file a claim.3 As for the Estate and Terri
(herein, "Claimants"), the government conceded in its motion-to-strike brief that it did
2
Dale was noticed directly because the government in its investigation
determined that Dale was "affiliated" in some manner with the properties. While it
is not clear from the record, it appears Dale is Terri's son.
3
The case caption identifies Dale as an appellant-claimant. In their reply brief
before this court, however, claimant-appellants now state that Dale no longer wishes
to appeal the district court's judgment that he filed his claim out of time. As such, we
affirm the judgment with respect to Dale's claim.
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not send them direct notice. Notwithstanding, the government argued that, pursuant
to the publication notice provisions, see Fed. R. Civ. P., Supp. R. G(5)(a)(ii)(B),
Claimants must have filed their claims by December 18 or 19 at the latest (that is, 60
days from the first day of publication on a government forfeiture website, which was
October 19 for four of the properties and October 20 for 7212 Longboat Drive).
After Claimants filed their brief opposing the government's motion to strike, the
government used its reply brief to offer a new argument: even in the absence of direct
notice, Claimants' claims were still untimely because they received "actual notice" of
the forfeiture proceedings.4 To support its "actual notice" argument, the government
attached a copy of Mr. Michael's email to Ms. McGuire.
The district court accepted the government's position that Claimants received
"actual notice," so the court found their claims were untimely despite never having
received direct notice of the forfeiture actions. The district court reasoned as follows:
This Court finds it is unnecessary to delve into the
reasonableness of the government's actions in notifying the
claimants of the forfeiture because this Court finds that the
Estate possessed actual notice of the pending forfeiture on
or before November 29, 2012—the date attorney David
Michael contacted the government regarding the pending
forfeiture. . . . Although in his correspondence, Michael
states he "may be representing the estate of Betty Mariani
as a claimant in the case," the Estate must have had
knowledge of the pending forfeiture in order to seek out his
4
Pursuant to the Federal Rules of Civil Procedure, Supplemental Rules for
Admiralty or Maritime Claims and Asset Forfeiture Actions, Rule G(4)(b)(v), "[a]
potential claimant who had actual notice of a forfeiture action may not oppose or seek
relief from forfeiture because of the government's failure to send the required notice."
We discuss below in Part II.C whether Claimants did in fact receive "actual notice"
within the meaning of this rule.
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representation. Whether or not Michael was retained to
represent the Estate at that time is unimportant, as the only
inquiry provided for in the Rules is whether the "potential
claimant . . . had actual notice of the forfeiture action." See
Rule G(4)(b)(v). The court acknowledges that the
government could, and maybe even should, have directly
noticed Terri as the sole heir to the Estate, provided for in
Rule G(4). However, pragmatically, the notice the
government afforded to Dale served its purpose: the record
owner received notice of the pending forfeiture
proceedings. The Court finds any failure by the
government to directly notify the Estate immaterial because
the Estate nonetheless acquired actual notice of the
forfeiture.
Terri and the Estate, therefore, had actual notice of the
forfeiture action well in advance of the December 18, 2012,
deadline to file a claim set by the publication of notice.
Claimants failed to file their claims until January 10, 2013.
The claims of Terri and the Estate are untimely, and the
Court grants the government's motion to strike these claims.
The district court also rejected Claimants' request to file untimely claims. But see
United States v. $125,938.62, 370 F.3d 1325, 1328–29 (11th Cir. 2004) (recognizing
that a district court has discretion to extend the time for filing verified claims to
potentially forfeitable property); United States v. Borromeo, 945 F.2d 750, 753–54
(4th Cir. 1991) (same). Claimants appeal.
II. Discussion
A. Standard of Review
The parties dispute what standard we apply to review the district court's
decision to strike Claimants' claims. The government argues, with some support, that
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we review a district court's grant of a motion to strike only for abuse of discretion.
See, e.g., United States v. Three Parcels of Real Prop., 43 F.3d 388, 391 (8th Cir.
1994) ("We review the district court's grant of the government's motion to strike the
claims for abuse of discretion."). On the other hand, Claimants argue that this case
requires de novo review because the district court interpreted the notice provisions in
the Federal Rules of Civil Procedure, Supplemental Rules for Admiralty or Maritime
Claims and Asset Forfeiture Actions, Rule G(4). We review such interpretations by
the district court de novo. See, e.g., United States v. Fast, 709 F.3d 712, 720 (8th Cir.
2013) (noting that a district court's statutory interpretation is reviewed de novo on
appeal); United States v. $11,500 in U.S. Currency, 710 F.3d 1006, 1010 (9th Cir.
2013) ("We review a district court's interpretation of the Supplemental Admiralty and
Maritime Claims Rules de novo."). We agree with Claimants on this issue.
The district court "acknowledge[d] that the government could, and maybe even
should, have directly noticed Terri as the sole heir to the Estate, provided for in Rule
G(4)." But the court ultimately concluded that sending direct notice to Claimants was
unnecessary because Claimants received "actual notice," as evidenced by the email
sent from attorney Mr. Michael to AUSA Ms. McGuire. Thus, the district court
necessarily had to construe both Supplemental Rules G(4)(b)(i)–(ii) (the "direct
notice" requirements) and Supplemental Rule G(4)(b)(v) (the "actual notice"
exception) in order to determine what proper notice required in this case. As such, we
will review de novo the district court's decision to strike the claims, because here, that
decision rested on an interpretation of the civil forfeiture notice provisions.
B. Direct Notice
18 U.S.C. §§ 981–87 contain various rules that govern civil and criminal
forfeiture proceedings. Section 983(a)(4)(A) establishes that
[i]n any case in which the Government files in the
appropriate United States district court a complaint for
forfeiture of property, any person claiming an interest in the
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seized property may file a claim asserting such person's
interest in the property in the manner set forth in the
Supplemental Rules for Certain Admiralty and Maritime
Claims.
Supplemental Rule G, in turn, "governs a forfeiture action in rem arising from a
federal statute." Fed. R. Civ. P., Supp. R. G(1).
The current appeal concerns Supplemental Rule G's notice requirements. For
the government to discharge its notice obligations in a civil judicial forfeiture
proceeding, among other things, the government "must send notice of the action and
a copy of the complaint to any person who reasonably appears to be a potential
claimant[.]" Fed. R. Civ. P., Supp. R. G(4)(b)(i) (emphasis added). In this case, the
government filed forfeiture complaints against the defendant properties on October
15, 2012. The complaints averred that Richard Miller LLC was the owner of the
properties and that Mariani was the LLC's "registered agent and manager." Given the
government's representations in its own complaints, it follows that the government
knew that Richard Miller LLC was a potential claimant when the government
commenced the forfeiture litigation. Supplemental Rule G(4)(b)(i) thus required the
government to send notice to Richard Miller LLC in accordance with Supplemental
Rule G(4)(b)(ii), which provides:
(ii) Content of the Notice. The notice must state:
(A) the date when the notice is sent;
(B) a deadline for filing a claim, at least 35 days after
the notice is sent;
(C) that an answer or a motion under Rule 12 must be
filed no later than 21 days after filing the claim; and
(D) the name of the government attorney to be served
with the claim and answer.
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(Emphases added). Richard Miller LLC's Certificate of Organization does not identify
anyone other than Mariani as an agent, manager, or member of the LLC, so notice
should have been directed to the LLC via Mariani. As mentioned above, Mariani died
in July 2012, also something the government knew when it commenced the forfeiture
suits. Instead of sending direct notice to the Estate, however, the government chose
instead only to post notice of the forfeiture complaints on an official government
website.
The question we must answer, then, is whether the Estate "reasonably
appear[ed] to be a potential claimant on the facts known to the government before the
end of the time for filing a claim under Rule G(5)(a)(ii)(B)."5 Fed. R. Civ. P., Supp.
R. G(4)(b)(i). If the answer is yes, then the government was required to directly
notice the Estate—published notice was insufficient—and therefore Claimants' claims
have not been filed out of time because to this day they have not been served properly.
See 18 U.S.C. § 983(a)(4)(A) (requiring "any person claiming an interest in the seized
property" to file a claim "not later than 30 days after the date of service of the
Government's complaint") (emphasis added); Fed. R. Civ. P., Supp. R. G(4)(b)(i)
(notice "must" be sent to "any person who reasonably appears to be a potential
claimant").
5
Supplemental Rule G(5)(a)(ii) provides that "[u]nless the court for good cause
sets a different time, [a] claim must be filed . . . (B) if notice was published but direct
notice was not sent to the claimant or the claimant's attorney, no later than 30 days
after final publication of newspaper notice or legal notice under Rule G(4)(a) or no
later than 60 days after the first day of publication on an official internet government
forfeiture site[.]" The government published notice of civil forfeiture for four of the
properties beginning on October 19, 2012 (and October 20, 2012 for 7212 Longboat
Drive). As such, if the publication statute controls, the deadline for filing a claim to
four of the properties was 60 days from October 19, 2012, or December 19, 2012 (and
December 20, 2012 for 7212 Longboat Drive).
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On this issue, we conclude that even if the Estate did not "reasonably appear to
be a potential claimant" in the proceedings when the government first filed its
forfeiture complaint, the government knew, or at least reasonably should have known,
that the Estate was a potential claimant no later than November 29, 2012. On that day,
AUSA Maureen McGuire and attorney David M. Michael had a phone conversation.
While the exact substance of that conversation is unknown, what is known is that Mr.
Michael sent a follow-up email to Ms. McGuire telling her that he "may be
representing the estate of Betty Mariani as a claimant in the case." In sum, on
November 29, 2012—before the time for filing a claim had passed under
Supplemental Rule G(5)(a)(ii)(B)6—the government knew the following: (1) Richard
Miller LLC owned the defendant properties; (2) Mariani was the sole agent, manager,
and member of Richard Miller LLC; (3) Mariani died in July 2012; and (4) an attorney
had communicated to the government that he "may be representing the estate of Betty
Mariani as a claimant in the case." On these facts, as a matter of law, we conclude
that the Estate "reasonably appear[ed] to be a potential claimant" to the government
"before the end of the time for filing a claim." Fed. R. Civ. P., Supp. R. G(4)(b)(i).
The government was therefore required to send direct notice to the Estate with specific
details regarding the forfeiture proceedings, including, most importantly in this case,
"a deadline for filing a claim." Fed. R. Civ. P., Supp. R. G(4)(b)(ii)(B).7
Our circuit has noted that "forfeitures are not favored" in the law, United States
v. One 1980 Red Ferrari, 875 F.2d 186, 188 (8th Cir. 1989) (per curiam), and it is also
"well-established that forfeiture statutes are strictly construed against the
government," United States v. $493,850.00 in U. S. Currency, 518 F.3d 1159, 1169
6
See supra note 5.
7
While Mr. Michael's email correspondence only says that he "may" be
representing the Estate, we note that the government could have sent direct notice to
Mr. Michael under Rule G(4)(b)(iii)(B) once he was formally retained. This rule
permits notice to be sent "to the potential claimant or to the attorney representing the
potential claimant with respect to the seizure of the property[.]" (Emphasis added).
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(9th Cir. 2008) (internal quotation marks omitted). See also United States v. $38,000
in U.S. Currency, 816 F.2d 1538, 1547 (11th Cir. 1987) ("If anything, the burden on
the government to adhere to the procedural rules should be heavier than on claimants.
Forfeitures are not favored in the law; strict compliance with the letter of the law by
those seeking forfeiture must be required."). Here, the government did not comply
with the notice regime laid out in Supplemental Rule G. Accordingly, the Claimants'
verified claims filed January 10, 2013 are not untimely because the time for filing a
claim has not yet begun to run. See 18 U.S.C. § 983(a)(4)(A). We reverse the district
court's judgment to the contrary and remand for a merits determination on the Estate
and Terri's claims to the properties.
C. Actual Notice
The district court found below, and the government argues on appeal, that the
email sent from Mr. Michael to Ms. McGuire mentioning that Mr. Michael "may" be
representing the Estate constituted "actual notice" under Supplemental Rule
G(4)(b)(v). Because the Estate received "actual notice," the argument goes, direct
notice was not required on the facts of this case. We disagree.
The Supreme Court concluded in Dusenbery v. United States, 534 U.S. 161,
169 n.5 (2002), that, in general, "actual notice" means "receipt of notice." As
discussed above, Supplemental Rule G(4)(b)(ii) defines what notice requires in the
civil judicial forfeiture context. Among other things, the notice must include "a
deadline for filing a claim." Fed. R. Civ. P., Supp. R. G(4)(b)(ii)(B). Given that the
forfeiture statute expressly defines "direct notice," we hold that to satisfy the "actual
notice" exception for the purposes of Supplemental Rule G(4)(b)(v), "actual notice"
must include, at a minimum, actual knowledge of the deadline to file a claim. Such
a construction avoids constitutional deficiencies this circuit has identified in similar
forfeiture contexts. See Glasgow v. United States DEA, 12 F.3d 795, 798 (8th Cir.
1993) (holding unconstitutional attempted notice that "omitted the one piece of
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information most critical to affording [plaintiff] a reasonable opportunity to be
heard—the deadline for filing a claim").
In this case, evidence of "actual notice" consisted entirely of the email
communication quoted above. That email says nothing about what knowledge Terri
or the Estate possessed about the requisite filing deadlines. Further, Mr. Michael said
only that he "may be representing" the Estate in the email, not that he was currently
the Estate's attorney. Simply put, it is not reasonable to infer from the email
correspondence that Claimants not only actually knew of the existence of forfeiture
proceedings commenced against the properties, but also actually knew the deadlines
to file their claims.
To be clear, we express no view on the merits of Claimants' claims to the
properties. See, e.g., 18 U.S.C. § 983(d) (discussing the "innocent owner" defense).
But to impute "actual notice" to the Estate and Terri on the basis of a communication
to the government by an attorney who at the time did not represent them would work
a serious injustice and raise troubling constitutional concerns. See, e.g., Mullane v.
Cent. Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950) ("The notice must be of
such nature as reasonably to convey the required information, and it must afford a
reasonable time for those interested to make their appearance.") (Internal citation
omitted) (emphasis added). Moreover, this circuit has long preferred merits
dispositions over default judgments. See, e.g., Marshall v. Boyd, 658 F.2d 552, 554
(8th Cir. 1981) (noting that the Eighth Circuit has a "strong policy against default
judgments" (citing Assman v. Fleming, 159 F.2d 332, 336 (8th Cir. 1947)). Our
reversal of the district court reaffirms such basic principles of justice.
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III. Conclusion
We vacate the forfeiture judgments entered against the properties, and we
reverse the judgment striking the Estate and Terri's claims as untimely. We remand
the case for a merits determination on the Estate and Terri's claims to the properties.8
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8
In the government's brief before this court, it argued for the first time that
Claimants did not own the property at issue. We hold that the government waived the
argument when it failed to raise it in the district court. See Orr v. Wal-Mart Stores,
Inc., 297 F.3d 720, 725 (8th Cir. 2002) ("Ordinarily, we do not consider an argument
raised for the first time on appeal."). Further, the argument is without merit, as
Claimants attached Richard Miller LLC's Iowa Certificate of Organization in their
reply brief to respond to the government's late argument. The Certificate clearly
identifies Mariani as not simply the LLC's agent but also its sole manager and
member—i.e., the sole owner of the properties in question after the LLC's dissolution.
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