United States v. Thomas Grossi, Sr. , 624 F. App'x 447 ( 2015 )

FILED
NOT FOR PUBLICATION JUN 23 2015
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA, No. 13-15487
Plaintiff - Appellee, D.C. Nos. 4:04-cv-03055-DLJ
4:04-cr-40127-DLJ-4
v.
THOMAS GROSSI, Sr.; et al., MEMORANDUM*
Claimants - Appellants,
and
ALBERT B. DEL MASSO,
Claimant,
and
2638 MARKET STREET, OAKLAND,
CALIFORNIA; et al.,
Defendants.
Appeal from the United States District Court
for the Northern District of California
D. Lowell Jensen, Senior District Judge, Presiding
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
Argued and Submitted May 15, 2015
San Francisco, California
Before: N.R. SMITH and OWENS, Circuit Judges, and COLLINS,** Chief
District Judge.
Thomas Grossi and Lauretta Weimer appeal from the district court’s order
denying their motion for attorneys’ fees under the Civil Asset Forfeiture Reform
Act, 28 U.S.C. § 2465. We have jurisdiction under 28 U.S.C. § 1291, and we
review the district court’s order for abuse of discretion. K.C. ex rel. Erica C. v.
Torlakson, 762 F.3d 963, 966 (9th Cir. 2014). We affirm in part, reverse in part,
and remand. Because the parties are familiar with the facts, we do not recount
them in detail here.
1. The government is correct that Weimer is not entitled to an award of
attorneys’ fees because she did not “substantially prevail[]” under CAFRA. 28
U.S.C. § 2465(b)(1). A claimant does not substantially prevail unless a court
orders the government to afford that claimant some relief. See Buckhannon Bd. &
Care Home, Inc. v. W. Va. Dep’t of Health & Human Res., 532 U.S. 598, 605
(2001); Synagogue v. United States, 482 F.3d 1058, 1063 (9th Cir. 2007). Grossi,
not the government, provided Weimer with her relief by repaying her voluntarily,
**
The Honorable Raner C. Collins, Chief District Judge for the U.S.
District Court for the District of Arizona, sitting by designation.
2 13-15487
and not by court order. We therefore affirm the denial of Weimer’s fees motion.
See Classic Media, Inc. v. Mewborn, 532 F.3d 978, 990 (9th Cir. 2008) (“Because
we can affirm on any ground supported by the record, we affirm the denial of
attorneys’ fees . . . .” (internal citation omitted)).
2. The district court denied Grossi’s fees motion because CAFRA prohibits
fee shifting in favor of a claimant whose property interest was determined to be
subject to criminal forfeiture. 28 U.S.C. § 2465(b)(2)(B). However, after Grossi
repaid Weimer, he was her successor in interest and stood in her shoes when he
continued to pursue her interest from the government. That is why a prior panel of
this court awarded Grossi $87,666 as reimbursement for “Weimer’s interest,”
notwithstanding the plain statutory language that criminally forfeited property
“shall not revert to the defendant,” 21 U.S.C. § 853(h). See United States v.
Grossi, 482 F. App’x 252, 255 (9th Cir. 2012).
Under the law of the case doctrine, we again adopt the legal fiction that once
Grossi repaid Weimer, he was her successor in interest and stood in her shoes. He
is therefore not statutorily precluded from recovering fees incurred in pursuing her
interest. Instead, to the extent that Grossi, as Weimer’s successor, substantially
prevailed in a “civil proceeding to forfeit property,” he is entitled to reasonable
attorneys’ fees and costs. 28 U.S.C. § 2465(b)(1).
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The bulk of the litigation to recover Weimer’s interest did not take place in a
“civil proceeding to forfeit property.” Id. Rather, in February 2005, the civil
proceeding to forfeit property was stayed pending resolution of the criminal action.
Subsequent to Grossi’s criminal conviction, Weimer initiated ancillary proceedings
under 21 U.S.C. § 853(n). Grossi has not identified any authority holding that
§ 853(n) proceedings are “civil proceeding[s] to forfeit property.” 28 U.S.C.
§ 2465(b)(1) (emphasis added). Plainly, they are not. See 21 U.S.C. § 853(n)
(setting forth procedures for third parties to recover interests in property subject to
forfeiture). And because § 2465(b) constitutes a waiver of sovereign immunity,
any ambiguity in whether a § 853(n) proceeding to exclude property from
forfeiture might constitute a proceeding to forfeit property under § 2465(b) would
be construed against Grossi. See Oklevueha Native Am. Church of Haw., Inc. v.
Holder, 676 F.3d 829, 840 (9th Cir. 2012). In short, Grossi has not carried his
burden of establishing that he is entitled to recover fees incurred in proceedings
ancillary to his criminal conviction. See Harris v. Maricopa Cnty. Superior Court,
631 F.3d 963, 971-72 (9th Cir. 2011) (“[T]he burden of establishing entitlement to
an attorneys fees award lies solely with the claimant.”).
As a result, Grossi should only be awarded those fees incurred in pursuing
Weimer’s interest in the civil forfeiture action up to the point at which that action
4 13-15487
was stayed. Because Grossi did not acquire Weimer’s interest until after the civil
forfeiture action was stayed, he is entitled—again, as her successor in interest—to
the fees that she incurred in that civil action. To be clear, we do not award Grossi
the fees that he himself incurred in the underlying forfeiture proceedings, nor do
we depart from the rule announced by our sister circuits that a third party may not
recover fees incurred in ancillary proceedings subsequent to a criminal forfeiture
judgment. We award Grossi (as Weimer) only those fees that Weimer incurred as
a claimant in the initial civil proceeding.1
3. Finally, because Grossi is entitled to recover the fees that Weimer
reasonably incurred in the civil forfeiture proceeding, he is also entitled to that
portion of the fees he reasonably incurred in pursuing civil forfeiture fees through
his fees motion below and in this appeal. See In re So. Cal. Sunbelt Developers,
Inc., 608 F.3d 456, 463 (9th Cir. 2010) (“In statutory fee cases, federal courts,
1
United States v. 92 Buena Vista Avenue, 507 U.S. 111 (1993)—a case that
preceded CAFRA’s enactment by seven years—does not, as the dissent contends,
preclude the result we reach. In that case, a plurality of the Supreme Court
reasoned that an innocent owner may retain property purchased with funds subject
to criminal forfeiture even if that innocent owner acquired the property after the
crime giving rise to forfeiture took place. Id. at 116-18, 129. The Court neither
held nor suggested that an innocent interest becomes subject to forfeiture if, as
here, it reverts to the criminal defendant. Were that the rule, this court obviously
could not have awarded Grossi recovery of Weimer’s innocent interest. See
Grossi, 482 F. App’x at 255-56.
5 13-15487
including our own, have uniformly held that time spent in establishing the
entitlement to and amount of the fee is compensable.”). We remand to the district
court to determine an appropriate fee award in light of this disposition. Grossi, but
not Weimer, is awarded costs on appeal.
AFFIRMED in part; REVERSED in part; and REMANDED.
6 13-15487
FILED
United States v. Grossi, No. 13-15487 JUN 23 2015
N.R. Smith, Circuit Judge, concurring in part and dissenting in part: MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
I respectfully dissent to parts two and three of the majority’s Memorandum
Disposition. In this case, we examine the breadth of 28 U.S.C. § 2465(b), a federal
statute waiving the government’s sovereign immunity to require the government to
pay attorney’s fees to opposing litigants in limited situations. I cannot agree with
the broad construction of 28 U.S.C. § 2465(b), erroneously concluding that it
applies in this most unusual situation.
The Civil Asset Forfeiture Reform Act of 2000 (“CAFRA”) governs civil
forfeitures to the United States. See 18 U.S.C. § 981. CAFRA provides that any
real property used, or intended to be used, in any manner or part, to commit, or to
facilitate the commission of, a felony violation of the Controlled Substances Act is
subject to forfeiture. 21 U.S.C. § 881(a)(7). If a third party claims to be an
“innocent owner” of the forfeited property, he may file a claim for return of his
interest. 18 U.S.C. § 983(d); 21 U.S.C. § 853(n)(2). The court then determines the
third party’s alleged ownership interest in the forfeited property in a separate,
ancillary proceeding. Fed. R. Crim. P. 32.2(c). CAFRA also provides that, in any
civil proceeding to forfeit property under federal law in which the claimant
substantially prevails, the United States shall be liable for reasonable attorney fees,
1
litigation costs and interest. 28 U.S.C. § 2465(b)(1)(A)-(C). However, the United
States only pays under CAFRA if: (1) the claimant is not the convicted defendant;
and (2) the government expressly waived its sovereign immunity. See 28 U.S.C.
§ 2465(a)(2), (b)(2)(B); United States v. Nordic Vill. Inc., 503 U.S. 30, 33-34
(1992). The majority does not address whether Grossi satisfied both prongs before
awarding fees under CAFRA. Rather, it summarily concludes that Grossi
“substantially prevailed in a ‘civil proceeding to forfeit property,’ [and is
therefore]. . . entitled to reasonable attorneys’ fees and costs.” If we apply the law
to the facts of this case, Grossi fails to establish government liability under
CAFRA.
First, a claimant is not entitled to fees under CAFRA “if the claimant is
convicted of a crime for which the interest of the claimant in the property was
subject to forfeiture under a Federal criminal forfeiture law.” 28 U.S.C.
§ 2465(b)(2)(B). Previously, this court held that “Weimer’s interest [in the
property] was extinguished” when “Grossi paid Weimer back” in December of
2006. United States v. Grossi, 482 F. App’x 252, 255 (9th Cir. 2012). Thus,
Weimer had no interest left in the property at the conclusion of the ancillary
proceedings. See id. Even under the legal fiction imposed by this court (that
Grossi equitably was entitled to receive the amount representing Weimer’s
2
previous interest), the majority cites no support for its proposition that our imposed
legal fiction also allows Grossi to recoup fees under CAFRA. The statute clearly
states otherwise. The plain language of the statute precludes a claimant from
recovering any fees if he was “convicted of a crime for which the interest of the
claimant in the property was subject to [criminal] forfeiture under a Federal
criminal forfeiture law.” 28 U.S.C. § 2465(b)(2)(B) (emphasis added). The plain
text of CAFRA bars fee awards if the claimant is a convicted defendant. See also
21 U.S.C. § 853(h) (providing that “[a]ny property right or interest not exercisable
by, or transferable for value to, the United States shall expire and shall not revert
to the defendant, nor shall the defendant or any person acting in concert with him
or on his behalf be eligible to purchase forfeited property at any sale held by the
United States” (emphasis added)). At Grossi’s sentencing, his entire interest in the
Market Street property was ordered criminally forfeited under federal law.
After the preliminary order of forfeiture was issued herein, two claimants
asserted an innocent-owner defense as to the Market Street property (Weimer and
Del Masso). The government quickly settled with Del Masso and likely would
have settled with Weimer, had Grossi not extinguished Weimer’s “innocent
owner” interest in the property by repaying to Weimer (after the preliminary order
of forfeiture) the money she had previously loaned him to purchase the property.
3
There is no dispute that Weimer’s interest in the Market Street property was
extinguished upon receiving the full repayment of her loan. Thus, the point at
which Grossi fully repaid Weimer, Weimer’s interest in the property became
Grossi’s interest in the property. Even though this court determined that equitably
Grossi was entitled to recoup the loan payments made to Weimer, that
determination never suggested that his interest in the property (acquired after
repaying Weimer) should not be subject to the “convicted defendant” bar to
collecting fees under CAFRA. Indeed, the Supreme Court’s holding in United
States v. 92 Buena Vista Ave., 507 U.S. 111 (1993) (“Buena Vista”) insists that
ownership interests in a forfeited piece of property must be determined at the
conclusion of the ancillary proceedings, not at the time of the initial forfeiture.
In Buena Vista, the Supreme Court reasoned that neither the statutory
embodiment of the relation back doctrine nor the common law doctrine makes the
government an owner of property before forfeiture has been decreed. 507 U.S. at
124-25.1 The Court noted that the time between the preliminary order of forfeiture
and the final order of forfeiture allows a district court time to determine claims of
1
The majority correctly notes Buena Vista preceded the passage of
CAFRA. However, this is of no consequence as to our issue. In Buena Vista, the
Court established the proper application of the relation back doctrine when
determining claims of ownership and vesting of title in property subject to
forfeiture. This is still binding precedent.
4
ownership and priorities of interest vis-a-vis the government and third-party
claimants. Id; 21 U.S.C. § 853(n). The Court concluded that only when the
government obtains a judgment of forfeiture does the vesting of its title in the
property relate back to the moment of the offense. Buena Vista, 507 U.S. at 126.
Thus, until a final decree of forfeiture is entered, “someone else owns the
property,” and another party may acquire an interest in the property.2 Id.In this case, it is not disputed that Weimer’s ownership interest in the Market
Street property, that existed at the time the preliminary order of forfeiture was
issued, was extinguished prior to Grossi’s sentencing and the conclusion of the
ancillary hearings. Grossi, on the other hand, during this same time period
acquired an additional interest in the Market Street property (Weimer’s). Under
the holding of Buena Vista, a court must evaluate a third party’s ownership interest
at the time the defendant is sentenced and the ancillary hearings are concluded. At
that time, regardless of whether this court classifies the acquired interest as
2
The majority argues that the “Court neither held nor suggested that an
innocent interest becomes subject to forfeiture if, as here, it reverts to the criminal
defendant.” However, the majority fails to indicate why the Court would have
even reached such a holding: such facts were not at issue in Buena Vista.
Importantly, the majority cites no statutory basis allowing a convicted defendant to
acquire any interest (including an innocent owner interest) in forfeitable property.
This court based its previous determination (that Grossi was entitled to the amount
representing Weimer’s interest) on equity.
5
Grossi’s or Weimer’s, Grossi owned it and Grossi’s entire ownership interest was
forfeited in the final order. Clearly then, Grossi is precluded from recovering fees
under CAFRA, because Grossi was “convicted of a crime for which the interest of
the claimant in the property was subject to forfeiture.” See 28 U.S.C.
§ 2465(b)(2)(B). Contrary to the plain language of the statute, the majority cites
no authority for its position that this statute does not apply to all of a convicted
defendant’s ownership interest in the property, that property acquired by a
defendant during this time period is excluded from consideration when barring a
convicted defendant from seeking fees under CAFRA, and that a convicted
defendant can be accorded innocent owner status as to an ownership interest he
acquires in the forfeitable property during this time period.
Second, “[e]xcept to the extent it has waived its immunity, the Government
is immune from claims for attorney’s fees.” Ruckelshaus v. Sierra Club, 463 U.S.
680, 685 (1983). Section 2465(b) constitutes a waiver of sovereign immunity and
“[w]aivers of the Government’s sovereign immunity, to be effective, must be
unequivocally expressed.” United States v. Nordic Vill. Inc., 503 U.S. 30, 33
(1992) (internal quotation marks omitted). Additionally, waivers must be
construed narrowly and always in favor of the sovereign. Id. at 34. In this case,
Grossi argues that, even though he voluntarily extinguished Weimer’s interest in
6
the property, he should still be able to collect fees under CAFRA. There is
absolutely no support for this position.
Indeed, our sister circuits have determined that even a prevailing third-party
in an ancillary proceeding pursuant to 21 U.S.C. § 853(n) is not entitled to fees
under CAFRA. In United States v. Moser, 586 F.3d 1089 (8th Cir. 2009), the
Eighth Circuit held that even though many of the prevailing third-party petitioner’s
arguments in favor of a fee award were persuasive, ultimately it held that “[t]he
arguments for and against permitting a prevailing § 853(n) petitioner to receive
attorneys’ fees from the government [were] too closely balanced . . . to conclude
that Congress’s waiver of sovereign immunity clearly and unequivocally applies.”
Id. at 1090. Similarly, in United States v. Nolasco, 354 F. App’x 676 (3d Cir.
2009), the Third Circuit held that, even though § 853(n) proceedings are “civil” for
purposes of § 2465(b), they are not proceedings “to forfeit property” for
fee-shifting purposes. Id. at 679-80. The Third Circuit reasoned that “Section
853(n) ancillary proceedings exclude property from forfeiture and do not ‘forfeit
property’ as required by Section 2465(b).” Id. at 680.
Thus, these cases indicate that even if Weimer were prosecuting the claim,
she would not be entitled to fees under CAFRA. The majority cannot successfully
distinguish this case from the above cases, as all involved ancillary proceedings
7
pursuant to 21 U.S.C. § 853(n). Certainly then, there is no evidence that Congress
clearly and unequivocally intended to waive the government’s sovereign immunity
as to attorney’s fees for a convicted defendant who acquires an additional interest
in the forfeited property after the issuance of the preliminary order of forfeiture.
The district court should be affirmed.
8