United States v. $11,500.00 in United States Currency , 710 F.3d 1006 ( 2013 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA , No. 11-35923
Plaintiff-Appellee,
D.C. No.
v. 3:10-cv-00097-
MO
$11,500.00 IN UNITED STATES
CURRENCY , in rem; $2,971.00 IN
UNITED STATES CURRENCY , in rem, OPINION
Defendants,
and
CHARLES GUERRERO ,
Claimant-Appellant.
Appeal from the United States District Court
for the District of Oregon
Michael W. Mosman, District Judge, Presiding
Malcolm F. Marsh, District Judge, Presiding
Submitted October 9, 2012*
Portland, Oregon
Filed March 20, 2013
*
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
2 UNITED STATES V . $ 11,500.00 IN U.S. CURRENCY
Before: Barry G. Silverman, Richard R. Clifton, and
N. Randy Smith, Circuit Judges.
Opinion by Judge Clifton;
Partial Concurrence and Partial Dissent by
Judge N.R. Smith
SUMMARY**
Civil Forfeiture
The panel affirmed in part and vacated in part the district
court’s order in a civil forfeiture action under 21 U.S.C.
§ 881.
The government sought to forfeit two bundles of currency
in the amounts of $11,500 and $2,971. The district court held
with respect to the $11,500 that the claimant failed to comply
with Supplemental Admiralty and Maritime Claims Rule
G(5)(a)(iii) (requiring a claim form filed by a bailee must
identify the bailor); and with respect to both amounts, the
district court entered summary judgment in favor of the
government because they were either the proceeds of drug
trafficking or used to facilitate drug trafficking. The panel
held that the district court’s dismissal of the claim to $11,500
– based on the claimant’s failure to identify the bailor – was
an abuse of discretion, primarily because the omission did not
prejudice the government, did not appear to be calculated,
and did not delay or extend the forfeiture proceedings. The
**
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
UNITED STATES V . $ 11,500.00 IN U.S. CURRENCY 3
panel further held that there was a genuine issue of material
fact whether the $11,500 was derived legitimately, and
therefore the district court erred in entering summary
judgment on this alternative basis. Finally, the panel held
that the government’s failure to provide timely notice of the
forfeiture to the claimant as to both amounts, pursuant to 18
U.S.C § 983(a)(1)(A)(i), did not require the government to
return the property where the government subsequently
commenced a forfeiture proceeding. The panel affirmed the
judgment forfeiting the $2,971, and vacated and remanded the
portion forfeiting the $11,500.
Judge N.R. Smith concurred in part, and dissented in part.
Judge N.R. Smith agreed that the government need not return
the seized funds for failure to give timely notice where it had
already commenced a forfeiture proceeding; and
Supplemental Rule G(5)(a)(iii) required the claimant to
identify the bailor. Judge N. Smith dissented because: he was
not convinced that the district court abused its discretion in
striking the claim for failure to comply with Supplemental
Rule G(5); and in any event, he would affirm the summary
judgment entered in favor of the government.
COUNSEL
Frank de la Puente, Attorney, Salem, Oregon, for Claimant-
Appellant.
S. Amanda Marshall, United States Attorney, Kelly A.
Zusman, Appellate Chief, and Robert D. Nesler, Assistant
United States Attorney, for Plaintiff-Appellee.
4 UNITED STATES V . $ 11,500.00 IN U.S. CURRENCY
OPINION
CLIFTON, Circuit Judge:
Civil forfeiture actions brought by the government require
compliance with certain rules by both the government and by
any claimant. In this case, the government and the only
claimant each violated one of the rules. This appeal requires
us to consider the appropriate consequences.
The government sought to forfeit two bundles of currency
in the amounts of $11,500 and $2,971. Only one contrary
claim was filed regarding both sets of currency. The district
court concluded that the claimant failed to comply with
Supplemental Admiralty and Maritime Claims Rule
G(5)(a)(iii), which requires that “[a] claim filed by a person
asserting an interest as a bailee must identify the bailor.”
Supp. Rule G(5)(a)(iii). The claim form filed here asserted a
different property interest, described by the claimant as
“possessory,” and it did not identify a bailor. The claimant’s
alleged interest in the $11,500 later came to be identified as
a bailee’s interest. Based on the failure to identify the bailor,
the district court struck the claim to the $11,500. We agree
with the district court that the requirement applied to the
claimant, even though he initially asserted a different interest.
We also conclude, however, that striking his claim based on
that transgression was not mandatory but was instead subject
to the sound exercise of discretion by the court. Under the
circumstances of this case, the dismissal of the claim to the
$11,500 for that failure was an abuse of discretion, primarily
because the omission did not prejudice the government, did
not appear to be calculated, and did not delay or extend the
forfeiture proceedings.
UNITED STATES V . $ 11,500.00 IN U.S. CURRENCY 5
The district court concluded that the government failed to
provide notice to the claimant within 60 days after the date of
the seizure of both sets of currency, as required under
18 U.S.C. § 983(a)(1)(A)(i) for a nonjudicial civil forfeiture.
Neither did the government return the money to the claimant.
Instead, the government commenced civil forfeiture
proceedings. It could properly do so, even though it had not
given timely notice, and we conclude that the government
was not required in these circumstances to return the
property.
We thus affirm the judgment in favor of the government
regarding the portion of currency amounting to $2,971. We
vacate the judgment in favor of the government as to the
$11,500 portion and remand for further proceedings.
I. Background
The currency at issue was seized when claimant Charles
Guerrero (“Guerrero”) went to a jail in Portland, Oregon, to
post bail for his wife, Rosalie Guerrero (“Rosalie”), who had
been arrested the night before for possession with intent to
distribute heroin. Guerrero did not enter the jail himself but
accompanied Virgil Wood and gave him $11,500 to post bail.
At the jail, law enforcement agents asked Wood how he had
obtained the currency. Wood eventually identified Guerrero
as the source. Finding Guerrero outside the jail, law
enforcement officers searched him and found $2,971 in his
pocket, along with several pills. Guerrero was arrested and
told the officers that the $11,500 and $2,971 were his.
The circumstances surrounding the seizure of the
currency led the government to believe that the money was
connected to drug trafficking. The officers discovered several
6 UNITED STATES V . $ 11,500.00 IN U.S. CURRENCY
grams of heroin in a black bag in the trunk of Wood’s car,
and Guerrero later pled guilty to possession of heroin. A
trained dog sniffed the currency for the odor of narcotics, and
the government contends that the dog alerted positively.
The United States initiated civil forfeiture proceedings
against the $11,500 and $2,971 under 21 U.S.C. § 881, on the
basis that the currency was either proceeds of drug trafficking
or used to facilitate drug trafficking. Guerrero filed the sole
claim to the currency. In the claim he filed with the court,
through counsel, he described his interest as “possessory.” In
a “seized asset claim form” attached to the court filing, he
provided a handwritten response to an inquiry as to his
interest: “My interest is possessory, i.e., the money belongs
to me.”
In his subsequent deposition Guerrero acknowledged that
he had sold drugs and that he had not had stable employment
for years. He maintained, however, that the seized currency
came from legitimate sources. He testified that the $2,971
was money he had saved from the sale of some furniture and
tools. With respect to the $11,500, Guerrero testified that his
wife had received the money several years earlier from an
insurance settlement and had given it to him for safekeeping.
The district court granted summary judgment to the
government with respect to the $11,500, holding that
Guerrero failed to comply with Supplemental Admiralty and
Maritime Claims Rule G(5)(a)(iii), because he failed to
identify Rosalie as his bailor on the claim form. The court
further held, in the alternative, that there was no genuine issue
of fact as to whether the $11,500 was the proceeds of or
facilitated drug trafficking. The $2,971 was forfeited after a
UNITED STATES V . $ 11,500.00 IN U.S. CURRENCY 7
jury found that it constituted proceeds of illegal drug activity
and facilitated drug trafficking. Guerrero timely appealed.
II. Bailor Identification Requirement
When the government initiates civil forfeiture
proceedings against specified property, a person may contest
the forfeiture by filing a claim in district court in accordance
with the Supplemental Rules for Admiralty and Maritime
Claims. 18 U.S.C. § 983(a)(4)(A). The claim must “identify
the claimant and state the claimant’s interest in the property.”
Supp. Rule G(5)(a)(i)(B). Among the other requirements, and
the one at issue here, is that “[a] claim filed by a person
asserting an interest as a bailee must identify the bailor.”
Supp. Rule G(5)(a)(iii). Supplemental Rule G(8)(c)
specifically provides that the government may move to strike
a claim for failure to comply with specified portions of the
Supplemental Rules, including Supplemental Rule G(5), or
because the claimant lacks standing.
The district court granted the government’s motion to
strike Guerrero’s claim to the $11,500 for failing to identify
Rosalie as the bailor of the currency on his claim form. The
court’s order noted that Guerrero “never pled the existence of
a bailment, and did not identify Rosalie Guerrero as the
bailor.” The order also noted that Guerrero did not explain
until his deposition that the money had been given to him by
his wife, and further that Guerrero never sought to amend his
claim form to identify her as the bailor.
We review a district court’s interpretation of the
Supplemental Admiralty and Maritime Claims Rules de novo.
See United States v. 2,164 Watches, 366 F.3d 767, 770 (9th
Cir. 2004). Dismissal of a forfeiture claim for failure to
8 UNITED STATES V . $ 11,500.00 IN U.S. CURRENCY
comply with procedural requirements is reviewed for abuse
of discretion. See United States v. Real Property Located at
22 Santa Barbara Drive, 264 F.3d 860, 868 (9th Cir. 2001).
A district court abuses its discretion if it does not apply the
correct legal standard, Bateman v. U.S. Postal Service,
231 F.3d 1220, 1223 (9th Cir. 2000), or if it fails to consider
the factors relevant to the exercise of its discretion. See
Bautista v. Los Angeles Cnty., 216 F.3d 837, 841–42 (9th Cir.
2000). We conclude that the district court was correct in
holding that Rule G(5)(a)(iii) applied to Guerrero, but that
striking his claim was an abuse of discretion.
As described above, Guerrero’s claim form stated that his
interest in the currency was “possessory.” It was not until
after the government moved to strike Guerrero’s claim for
lack of standing that Guerrero argued in response that he had
an ownership interest in the currency by virtue of his
marriage to Rosalie and further described his “possessory”
interest as that of a “bailee for Rosalie.” That was the first
time that Guerrero or anyone else described Guerrero’s
relationship to the currency as that of a bailee. The court
declined to strike Guerrero’s claim based on a lack of
standing, holding that there was a genuine dispute of material
fact as to whether Guerrero was a bailee of the currency. But
the court went on to strike Guerrero’s claim for failure to
identify Rosalie as the bailor.
Guerrero contends that the rule only requires the
identification of the bailor when the claimant explicitly
asserts a bailee interest on his claim form. Guerrero’s claim
form did not describe his interest as that of a bailee. The
government argues that the bailor identification requirement
did apply here.
UNITED STATES V . $ 11,500.00 IN U.S. CURRENCY 9
The rule in question, Supplemental Rule G(5)(a)(iii),
states under a subheading entitled “Filing a Claim” that “[a]
claim filed by a person asserting an interest as a bailee must
identify the bailor, and if filed on the bailor’s behalf must
state the authority to do so.” That language does not explicitly
spell out whether “asserting an interest as a bailee” refers
only to the time the claim form is filed or includes a
subsequent assertion of a bailee’s interest.
We are persuaded that the requirement to identify the
bailor applies to the assertion of a bailee’s interest at any
time, even if it is articulated after the claim form is filed. The
purpose of the requirement is to provide the government and
the court notice of the specific basis of the claim and the
source of the property. See United States v. Real Property,
135 F.3d 1312, 1317 (9th Cir. 1998) (noting that the purpose
behind forfeiture pleading requirements is “to inform the
court that there is a claimant to the property who wants it
back and intends to defend it”); United States v. $321,470.00,
U.S. Currency, 874 F.2d 298, 304 (5th Cir. 1989) (in
defending bailor identification as a standing requirement,
noting that “a courier carrying cash from an unknown owner
to an unknown recipient . . . the ideal mule for drug
traffickers, must be prepared to demonstrate that he has a
lawful possessory interest”). This purpose would be ill-served
if a claimant could avoid the bailor identification requirement
simply by describing his interest on the claim form in another
way and waiting until later to identify it as a bailee’s interest.
Therefore, we conclude that the bailor identification
requirement in Rule G(5)(a)(iii) applies to a claimant who
asserts an interest as a bailee of contested property, even if he
had not described himself as a bailee on his claim form. The
rule thus applied to Guerrero.
10 UNITED STATES V . $ 11,500.00 IN U.S. CURRENCY
Guerrero’s claim should not have been dismissed as a
result, however. The district court here did so because it
understood that “strict compliance” with the forfeiture filing
rule was necessary, citing our court’s decision in United
States v. Real Property, 135 F.3d 1312 (9th Cir. 1998). But
the claimant’s failure in that case was not like Guerrero’s
misstep here. In Real Property, the claimant received notice
of forfeiture proceedings but failed to file a timely claim of
any kind, only challenging the forfeiture proceedings one
year after receiving notice and six months after the
government received a final judgment of forfeiture. Id. at
1313–14. In holding that failure to file a claim within the
applicable time limits precluded the claimant from later
challenging the forfeiture, we noted that allowing him to
challenge a forfeiture judgment after so much time had
elapsed would “exact a significant toll on judicial resources.”
Id. at 1317. That does not mean that any deficiency in a
claim form requires dismissal of a claim.
To the contrary, we have held that courts have “discretion
to overlook the failure to conform to the requirements of
[forfeiture claim rules].” United States v. Real Property at
2659 Roundhill Dr., Alamo, Cal., 194 F.3d 1020, 1024 (9th
Cir. 1999). Among the factors relevant to the exercise of that
discretion are whether the deficiency prejudiced the
government, see United States v. 1982 Yukon Delta
Houseboat, 774 F.2d 1432, 1436 (9th Cir. 1985), and whether
it was a strategic attempt to gain some advantage. See United
States v. Real Prop. Located at 22 Santa Barbara Dr.,
264 F.3d 860, 870 (9th Cir. 2001) (refusing to excuse
noncompliance with Rule C(6) where the reason for
claimant’s failure to timely file a claim was strategic). After
reviewing these factors, we conclude that it was an abuse of
discretion to strike Guerrero’s claim.
UNITED STATES V . $ 11,500.00 IN U.S. CURRENCY 11
The failure of Guerrero’s claim form to identify a bailee’s
interest and to list Rosalie as the bailor did not prejudice the
government or delay the proceedings. The government knew
of Rosalie’s identity and took her deposition, as well as
Guerrero’s. There is no basis to conclude that the government
was unable to conduct a proper investigation. Regardless of
how Guerrero characterized his possessory interest, the
government was aware of the facts underlying Guerrero’s
possession of the currency.1
Nor was there any indication that Guerrero’s failure to
identify the bailor was a strategic attempt to gain some
advantage. There was no advantage gained. And it would not
have been clear to Guerrero that failing to identify his interest
with precise accuracy in the claim he filed would have been
fatal. Cf. United States v. $260,242.00 in U.S. Currency,
919 F.2d 686, 688 (11th Cir. 1990) (not holding claimant to
knowledge of the requirement that he name his bailor because
the Eleventh Circuit had not previously ruled on the specific
issue).
In addition, the claim was dismissed without giving him
an adequate opportunity to amend. In the dismissal order, the
district court accurately noted that Guerrero did not seek
leave to amend his claim. But the district court could have
offered that opportunity and did not do so. See Supp. Rule G
Advisory Committee Notes (“[T]he court should strike a
1
The dissenting opinion suggests, at 23–25, that the government was
prejudiced by Guerrero’s failure to identify his bailee interest, but the
government did not itself so argue. Rather, it stood, as did the district
court, on the proposition that “strict compliance” with Rule G(5) was
required. As discussed above, we conclude that the court had discretion
to overlook Guerrero’s omission.
12 UNITED STATES V . $ 11,500.00 IN U.S. CURRENCY
claim or answer only if satisfied that an opportunity should
not be afforded to cure the defects under Rule 15.”).With
regard to pleadings, our general practice is to “freely give
leave [to amend] when justice so requires.” Fed. R. Civ. P.
15(a)(2); see also Eminence Capital, LLC v. Aspeon, Inc.,
316 F.3d 1048, 1051 (9th Cir. 2003) (stating that the policy
of freely granting leave to amend is “to be applied with
extreme liberality”).
That approach should apply here. Though Guerrero never
moved to amend his claim, the absence of a formal motion for
leave to amend does not preclude the district court from
granting it. Edwards v. Occidental Chem. Corp., 892 F.2d
1442, 1445 n.2 (9th Cir. 1990). It is not surprising Guerrero
did not request leave to amend his claim. The government did
not move to strike Guerrero’s claim based on the failure to
identify a bailor. Rather, the government premised its motion
to strike on the ground that Guerrero’s asserted ownership
and possessory interests were insufficient for Article III
standing.2 Even after Guerrero described himself as a bailee
in his brief opposing the motion, the government did not
argue to the district court that the claim should be struck for
violating the bailor identification requirement. Instead, the
government argued that, because Guerrero had not asserted
a bailee interest or identified a bailor on his claim form, the
court should not construe Guerrero’s claim as asserting a
2
The government has not argued on appeal that Guerrero lacked Article
III standing. Guerrero’s testimony described a bailee interest in the
currency, as we discussed above, and such an interest was sufficient for
Article III standing. See United States v. $191,910 in U.S. Currency,
16 F.3d 1051, 1057 (9th Cir. 1994) (“In order to contest a forfeiture, a
claimant need only have some type of property interest in the forfeited
items.”), superseded on other grounds by statute as stated in United States
v. $80,180.00, 303 F.3d 1182, 1184 (9th Cir. 2002).
UNITED STATES V . $ 11,500.00 IN U.S. CURRENCY 13
bailee interest. Under these circumstances, we conclude that
striking the claim because Guerrero failed to identify Rosalie
as bailor in the claim he filed was an abuse of discretion.
III. Source of the $11,500
The district court also granted summary judgment for the
government on the alternative ground that there was no
genuine dispute that the $11,500 was proceeds of or
facilitated drug trafficking. Guerrero challenges that ruling.
In reviewing the summary judgment, we must view the
evidence in the light most favorable to Guerrero and
determine whether there is any genuine issue as to whether
the currency was derived from or facilitated drug trafficking.
United States v. $133,420.00 in U.S. Currency, 672 F.3d 629,
637 (9th Cir. 2012). In a civil forfeiture action, the
government bears the burden of proving by a preponderance
of the evidence that the property is subject to forfeiture.
18 U.S.C. § 983(c)(1). Summary judgment is appropriate if
there is no genuine issue as to any material fact. Fed. R. Civ.
P. 56(a).
The government did not prove a link between the
currency and a specific act of drug trafficking, but it was not
required to do so, notwithstanding Guerrero’s arguments to
the contrary. The government may meet its burden with
sufficiently strong circumstantial evidence linking the
currency to drug trafficking in general. See United States v.
Currency, U.S. $42,500.00, 283 F.3d 977, 984 (9th Cir. 2002)
(affirming government’s motion for summary judgment in
light of substantial circumstantial evidence that currency was
connected to drug trafficking, and where claimant refused to
14 UNITED STATES V . $ 11,500.00 IN U.S. CURRENCY
disclose the source of the currency or provide any other
evidence that the source was legitimate).
In granting summary judgment, the district court
emphasized “the absence of some admissible evidence
supporting the contention that the source of the $11,500 was
the insurance settlement paid to Rosalie Guerrero two years
prior to the seizure.” (Emphasis in original.) This statement
immediately preceded the district court’s conclusion that
other evidence offered by Guerrero in support of the
insurance settlement as the source of funds (Rosalie’s
declaration and Guerrero’s deposition testimony regarding the
source of the money given to him by Rosalie) was not
admissible evidence and could not be considered.3
Guerrero did offer admissible evidence that supported that
proposition, however. In particular, he presented a
3
Guerrero also challenges the refusal of the district court to consider
two pieces of evidence tending to support claimant’s position that the
currency was legitimately derived from Rosalie’s insurance proceeds.
Because we vacate the summary judgment on substantive grounds, we
need not discuss the evidentiary rulings at length, but the exclusion of the
evidence was not an abuse of discretion. First, the court struck a
declaration by Rosalie because she later invoked the Fifth Amendment
and refused to answer questions about the source of the currency at her
deposition. W hen a witness testifies and then invokes the Fifth
Amendment to avoid adversarial testing of the truth of that testimony, a
district court may strike that testimony to avoid distortion of the truth.
United States v. $133,420.00 in U.S. Currency, 672 F.3d 629, 640–42 (9th
Cir. 2012). Second, Guerrero tried to offer his own testimony as to what
Rosalie told him about the currency’s source. That was hearsay and was
appropriately excluded. Guerrero argues that it should have been admitted
under the residual hearsay exception, Federal Rule of Evidence 807. But
a statement qualifying under the residual exception must have “equivalent
circumstantial guarantees of trustworthiness.” Fed. R. Evid. 807(a)(1). No
such guarantees were present here.
UNITED STATES V . $ 11,500.00 IN U.S. CURRENCY 15
declaration from the attorney who represented Rosalie in her
insurance claim. The declaration stated that Rosalie received
insurance proceeds in the amount of $12,743.75 two years
before the seizure, and an additional $11,096.05 on an
undisclosed date, as compensation for injuries sustained in a
car accident. The declaration attached and authenticated two
documents supporting that contention. The district court did
not rule that the lawyer’s evidence was inadmissible. Indeed,
the court’s order even referred to the fact of the insurance
payments to Rosalie, with citation to the attorney’s
declaration, as part of the background of the case.
The district court nonetheless concluded that “Rosalie
Guerrero’s receipt of an insurance settlement more than two
years prior to the seizure in question does not give rise to a
genuine dispute of material fact as to whether the seized
currency represented a portion of that settlement or profits
therefrom.” It is clear that there was plenty of evidence to
support an ultimate factual finding that the money came from
drug sales. Viewing the evidence in the light most favorable
to Guerrero as we must, however, we do not agree that the
evidence was so conclusive as to eliminate a genuine issue as
to the source of the $11,500.
The length of time between the insurance settlement and
the seizure of the currency, more than two years, did not
preclude a finding that the currency was legitimate. Guerrero
testified that Rosalie was unemployed at the time she gave
Guerrero the money, but there was no evidence about her
employment status the rest of the time. It is not unreasonable
to think that someone receiving a lump sum of money might
set it aside for a rainy day.
16 UNITED STATES V . $ 11,500.00 IN U.S. CURRENCY
The evidence of a positive dog sniff alert to the currency
did not conclusively prove that the currency came from drug
sales. Given that the Guerreros dealt drugs, a jury could
reasonably infer that any money they had, even if legitimately
derived, could have been exposed to drugs, such as the heroin
found in Wood’s vehicle at the scene of the forfeiture. And,
there was some ambiguity in the record as to whether the
drug dog properly alerted. In a document detailing the dog’s
training, the canine officer stated that his dog has been trained
to scratch or bite at the source of narcotics. In his notes on the
$11,500, however, he did not mention the dog scratching or
biting but wrote “sniffed intently—alerted.” That might mean
that the dog sniffed intently and then alerted, or it might
mean, as Guerrero argued, that the dog failed to scratch but
that the officer nonetheless interpreted its sniff as an alert.
While the jury could draw inferences in favor of the
government from Rosalie’s refusal to testify, her refusal was
not necessarily inconsistent with a legitimate source for the
currency. Given her own problems with the law, her attorney
may have advised her to play it safe and not answer any
questions that might require her to acknowledge illegal
activity. At her deposition, Rosalie’s attorney expressed
concern that if she answered even a seemingly innocuous
question, the government would accuse her of “picking and
choosing when to answer.”
Guerrero did not have a lot of admissible evidence on his
side, and a jury might well be persuaded by the government’s
evidence. On the $2,971 bundle of currency, the forfeiture
case went to trial, and the jury found in favor of the
government. But Guerrero mustered enough evidence to
permit a reasonable jury to conclude that the $11,500 was
derived legitimately, and that was enough to establish the
UNITED STATES V . $ 11,500.00 IN U.S. CURRENCY 17
existence of a genuine issue of material fact. The alternative
basis identified by the district court cannot sustain the grant
of summary judgment in favor of the government as to the
forfeitability of the $11,500.
IV. Timeliness of Notice
The district court held that the government failed to
provide Guerrero with timely notice of the forfeiture of both
the $11,500 and the $2,971. The government held on to the
money despite the failure to give notice, and it later
commenced this civil forfeiture proceeding. Guerrero argued
that 18 U.S.C. § 983(a)(1)(F) required that the money be
returned to him. The district court disagreed and held that the
statute did not require the return of the currency to Guerrero.
We agree with the district court’s interpretation.4
When the federal government seizes property under a
civil forfeiture statute, it must send notice to potential
claimants “in a manner to achieve proper notice as soon as
practicable, and in no case more than 60 days after the date of
the seizure.” 18 U.S.C. § 983(a)(1)(A)(i). If the government
does not send proper notice in the time allotted, the statute
provides that the government “shall return the property to [the
person from whom the property was seized] without prejudice
to the right of the Government to commence a forfeiture
proceeding at a later time.” 18 U.S.C. § 983(a)(1)(F). When
4
The government argues that it complied with the applicable notice
requirements, and urges the court to affirm on this alternative ground.
Because we conclude that the government need not return the currency
even if it failed to provide timely notice, we decline to reach the issue. W e
therefore assume, without deciding, that notice was not timely in the
remainder of the opinion.
18 UNITED STATES V . $ 11,500.00 IN U.S. CURRENCY
the government commences a civil forfeiture proceeding, it
may seize the property. See 21 U.S.C. § 881(b); 18 U.S.C.
§ 981(b)(2).
This framework arguably suggests that if the government
fails to give timely notice, it should return the property
though it could then commence forfeiture proceedings and re-
seize the property. But is the government required to return
the property even if it has in the meantime commenced
forfeiture proceedings?
Some courts have held that it is – that when the
government has failed to provide timely notice, it must return
the seized property to the claimant even though it had already
commenced forfeiture proceedings. See De Saro v. United
States, 173 Fed. Appx. 760, 765–66 (11th Cir. 2006); United
States v. Assorted Jewelry with an Approximate Value of
$219,860.00, 386 F. Supp. 2d 9, 13 (D.P.R. 2005). But others
have held that the government need not return the seized
property. See, e.g., Return of Seized Property v. United States,
625 F. Supp. 2d 949, 954–55 (C.D. Cal. 2009) (reasoning that
the release of seized property would be “academic” because
the government’s initiation of forfeiture proceedings would
allow it to immediately re-seize the property), mandamus
denied, In re Jordan, 606 F.3d 1135, 1137 (9th Cir. 2010)
(holding that such an interpretation was not clear error);
United States v. $114,031.00 in U.S. Currency, No. 06-
21820-CIV, 2007 WL 2904154, at *3 (S.D. Fla. Oct. 4, 2007)
(noting that the plain language of section 983(a)(1)(F) allows
the government to bring a forfeiture proceeding after
returning seized property, but does not require the return of
property before bringing a later proceeding).
UNITED STATES V . $ 11,500.00 IN U.S. CURRENCY 19
In our view, the better and more practical interpretation of
the statutory framework is that a failure to provide timely
notice does not require the government to return the property
if it has subsequently commenced a forfeiture proceeding.
The government can still file a forfeiture action, and once it
has done so, it is empowered to seize the property. By the
time the issue was raised before the district court, the
forfeiture proceeding was under way. Requiring the return of
the property and then permitting the government to
immediately re-seize it would impose a meaningless exercise.
V. Conclusion
The portion of the judgment forfeiting the $2,971 is
affirmed, and the portion forfeiting the $11,500 is vacated.
The case is remanded for further proceedings as to the
$11,500.
AFFIRMED in part; VACATED and REMANDED in
part.
N.R. SMITH, Circuit Judge, concurring in part, dissenting in
part:
I agree that the government need not return seized funds
for failure to give timely notice where it has already
commenced a forfeiture proceeding. I also agree that
Supplemental Rule G(5)(a)(iii) required Guerrero to “identify
the bailor,” because he asserted an interest as a bailee in the
proceedings below. This is true even though he did not
describe himself as a bailee on his initial claim form.
20 UNITED STATES V . $ 11,500.00 IN U.S. CURRENCY
However, I write separately in dissent, because (1) I am
not convinced that the district court abused its discretion in
striking Guerrero’s claim for failure to comply with
Supplemental Rule G(5); and (2) in any event, I would affirm
the district court’s grant of summary judgment for the
government.
I. The district court did not abuse its discretion in
striking Guerrero’s claim.
“Civil in rem forfeitures are governed by the
Supplemental Rules for Certain Admiralty and Maritime
Claims of the Federal Rules of Civil Procedure.” United
States v. $100,348.00 in U.S. Currency, 354 F.3d 1110, 1117
(9th Cir. 2004). Supplemental Rule G(5)(a)(iii) (the rule at
issue here) provides: “A claim filed by a person asserting an
interest as a bailee must identify the bailor, and if filed on the
bailor’s behalf must state the authority to do so.”
Supplemental Rule G(8)(c) authorizes the government to
move to strike any claim that “fail[s] to comply with Rule
G(5) or (6) . . . .” Notwithstanding Supplemental Rule G(5)’s
mandatory language, the majority correctly determined that
the district court has discretion to excuse failure to comply.
The Advisory Committee Notes to Supplemental Rule G state
that “[a]s with other pleadings, the court should strike a claim
or answer only if satisfied that an opportunity should not be
afforded to cure the defects under [Federal Rule of Civil
Procedure 15].”
A district court abuses its discretion only when it applies
the wrong legal standard, or if it bases its conclusion on a
factual finding that is “illogical, implausible, or without
support in inferences that may be drawn from the facts in the
record.” United States v. Hinkson, 585 F.3d 1247, 1263 (9th
UNITED STATES V . $ 11,500.00 IN U.S. CURRENCY 21
Cir. 2009). Here, the majority misapplies this standard. The
majority overlooks ample support for the district court’s
decision to strike Guerrero’s claim and instead concludes that
the district court should have sua sponte allowed Guerrero to
amend his claim under Federal Rule of Civil Procedure 15.
Maj. Op. at 11–12. Given the ample support for the district
court’s decision, the majority’s conclusion finds no support
in Rule 15. While Rule 15 makes clear that courts should
“freely give leave” to amend, the majority allows that phrase
to swallow the district court’s discretion.1
Nothing in our cases requires the district court to sua
sponte order leave to amend after the close of discovery and
the parties’ dispositive motions. Indeed, our court and others
have upheld a district court’s discretion to deny leave to
amend at that stage of litigation. See, e.g., Lockheed Martin
Corp. v. Network Solutions, Inc., 194 F.3d 980, 986 (9th Cir.
1999) (“A need to reopen discovery and therefore delay the
proceedings supports a district court’s finding of prejudice
from a delayed motion to amend the complaint.”); Solomon
v. N. Am. Life & Cas. Ins. Co., 151 F.3d 1132, 1139 (9th Cir.
1998) (affirming denial of leave to amend where motion was
filed on the “eve of the discovery deadline”); Campbell v.
1
I reject any implication that the district court demanded “strict
compliance” with Supplemental Rule G(5) and, thereby, abused its
discretion by failing to consider whether it could properly excuse
Guerrero’s non compliance. The district court analyzed the factors
relevant under Rule 15, though it did not label them as such. The district
court observed that Guerrero never requested leave to amend his claim or
offered any explanation for his failure to comply. The district court also
noted that Guerrero failed to even raise the bailor/bailee issue until after
the close of discovery and after the government’s dispositive motions.
Thus, although the district court did not use Rule 15 terms like “prejudice”
and “delay,” it is clear that it analyzed these factors.
22 UNITED STATES V . $ 11,500.00 IN U.S. CURRENCY
Emory Clinic, 166 F.3d 1157, 1162 (11th Cir. 1999)
(“Prejudice and undue delay are inherent in an amendment
asserted after the close of discovery and after dispositive
motions have been filed, briefed, and decided.”). Similarly,
the addition of a new legal theory weighs against leave to
amend under Rule 15. See Jackson v. Bank of Haw., 902 F.2d
1385, 1388 (9th Cir. 1990) (“‘Putting the defendants through
the time and expense of continued litigation on a new theory,
with the possibility of additional discovery, would be
manifestly unfair and unduly prejudicial.’” (quoting Priddy
v. Edelman, 883 F.2d 438, 447 (6th Cir. 1989)). In this case,
because Guerrero asserted the bailor/bailee claim only after
the close of discovery and the government’s dispositive
motion, the district court properly determined that these
factors weigh against leave to amend.
The majority also fails to scrutinize Guerrero’s delay in
seeking amendment (i.e., his failure to ever request
amendment from the district court). A party’s undue delay
and failure to explain the reason for the delay weigh against
leave to amend under Rule 15. See Swanson v. U.S. Forest
Serv., 87 F.3d 339, 345 (9th Cir. 1996); Texaco, Inc. v.
Ponsoldt, 939 F.3d 794, 799 (9th Cir. 1991). Here, the
majority correctly points out that our cases do not preclude
amendment, even though Guerrero never requested it. Maj.
Op. at 12. Yet, the majority fails to cite any case that even
suggests that a district court might abuse its discretion if it
fails to order leave to amend sua sponte. Given that a number
of Rule 15 factors weighed against leave to amend, the
district court’s dismissal of Guerrero’s claim did not rise to
the level of an abuse of discretion.
The majority’s analysis focuses exclusively on two
factors: prejudice and the likelihood of gamesmanship.
UNITED STATES V . $ 11,500.00 IN U.S. CURRENCY 23
While these factors may guide our review under Rule 15, the
majority fails to look at these factors through the deferential
lens that our precedent requires. This deference to the district
court requires that we affirm if these factors could plausibly
weigh against leave to amend. See Hinkson, 585 F.3d at
1263. The record makes clear that the district court could
plausibly find against Guerrero on these factors.
The majority concludes that the government suffered no
prejudice from Guerrero’s failure to identify his bailee
interest, because the government knew that the funds
belonged to Rosalie Guerrero. Maj. Op. at 11. Yet, the
majority acknowledges that revealing the identity of the
property’s owner is not the only purpose of Supplemental
Rule G(5). Rather, the purpose of the “identify the bailor”
requirement “is to provide the government and the court
notice of the specific basis of the claim and the source of the
property.” Maj. Op. at 9 (emphasis added). Similarly,
Guerrero argues that we should hold his claim only to a
notice pleading standard under Rule 8 of the Federal Rules of
Civil Procedure. I agree with Guerrero and the majority that
notice of the basis of a claim is an essential purpose of
Supplemental Rule G(5). Accordingly, the issue is not
whether the claim failed to give the government notice of
Rosalie Guerrero’s identity, but whether it failed to give the
government notice of the specific basis of Guerrero’s claim.
Guerrero’s claim alleged a vague “possessory interest”
and ownership of the $11,500. The claim failed to allege a
bailor/bailee interest as a specific basis for relief. Thus,
24 UNITED STATES V . $ 11,500.00 IN U.S. CURRENCY
Guerrero failed to give the government even Rule 8–level
notice of his intent to later assert a bailor interest.2
Based on Guerrero’s claim as pleaded, the government
moved to strike the claim—pointing to Guerrero’s lack of
ownership and lack of possession (because he had given the
funds to Wood). The majority points out that the government
did not move to strike Guerrero’s claim on the basis of his
failure to identify the bailor. However, as the government
asserts, it had no notice of this basis for the claim. Guerrero
raised the bailor/bailee issue only in response to the
government’s motion to strike. Prior to that time, Guerrero
had only argued that he had an ownership/possessory interest
in the funds. Therefore, the government was surprised by
Guerrero’s sudden assertion of a bailee interest. Were it
otherwise, the government would have needed to argue
against Guerrero’s assertion of a bailee interest in its prior
briefing.
The record supports the conclusion that the timing of
Guerrero’s assertion of a bailor/bailee interest prejudiced the
government. As discussed above, Guerrero did not assert a
bailor/bailee interest until after the close of discovery. Prior
to that time, the government’s forfeiture case was geared
toward Guerrero’s claim that he owned the funds. While the
majority notes that the government asked Guerrero about his
“safekeeping” of the funds in his deposition, Maj. Op. at 6,
2
Guerrero argues that a bailor/bailee relationship is simply a type of
“possessory interest.” I agree, and the vague assertion of a “possessory
interest” might have been enough to alert the government that Guerrero
would claim a bailor interest but for the “identify the bailor” requirement.
Guerrero’s failure to identify Rosalie Guerrero as the bailor entitled the
government to rely on Guerrero’s non-assertion of a bailor/bailee interest.
UNITED STATES V . $ 11,500.00 IN U.S. CURRENCY 25
that question would not have alerted the government that
Guerrero would later rely on a bailor/bailee theory. Instead,
the government surely expected, after Guerrero’s deposition,
that it had won its case. After all, Guerrero had premised his
claim on his ownership of the funds and then admitted that he
did not own them. The government would not have known
that it needed to disprove Guerrero’s unpleaded bailee
interest.
On appeal, it remains unclear to what extent Guerrero
even asserts a bailee interest in the $11,500. In his Reply
Brief, Guerrero argued that the district court erred, because
Guerrero’s assertion of an unadorned “possessory interest”
was sufficient to comply with Supplemental Rule G.
Guerrero claims he did not need to identify Rosalie Guerrero
as the bailor because “[t]here was no bailee-bailor
relationship between [Guerrero] and Rosalie.” Thus, both in
the district court below and on appeal, Guerrero seems to
move fluidly between theories, claiming and disclaiming
them as convenient. This is the exact sort of moving target
that Rule G(5) aims to avoid. The majority’s holding only
serves to compound the government’s prejudice.
With respect to the gamesmanship factor, the majority
concludes that there is no indication that the decision to wait
to raise the bailee issue was strategic. Maj. Op. at 11.
However, this statement overlooks the fact that Guerrero had
to have known the facts underlying his alleged bailor/bailee
interest long before he raised the issue. Then, he raised the
issue after discovery ended and in response to a dispositive
government motion. While I stop short of accusing Guerrero
or his attorney of outright gamesmanship, these actions at
least infer such design. Such inference in the record should
force us to affirm the district court.
26 UNITED STATES V . $ 11,500.00 IN U.S. CURRENCY
II. The district court did not err when it granted the
government’s motion for summary judgment.
The district court alternatively granted the government
summary judgment. The district court is correct that there is
no genuine issue of material fact as to whether the $11,500
constitutes drug proceeds. The majority relies on one piece
of evidence to support its conclusion to the contrary: an
affidavit of Rosalie Guerrero’s personal injury attorney.
However, because the attorney has no personal knowledge of
what Rosalie Guerrero did with the insurance proceeds she
received, the affidavit establishes only that Rosalie Guerrero
received a certain amount of money at a certain time. See
Fed. R. Civ. P. 56(c)(4); see also Block v. City of L.A.,
253 F.3d 410, 419 (9th Cir. 2001) (rejecting reliance on an
affidavit to defeat summary judgment where the affidavit was
“based on inadmissible hearsay,” not personal knowledge).
It is well settled that a non-moving party must present
“more than a ‘mere . . . scintilla of evidence’ to defeat a
motion for summary judgment.” Int’l Church of Foursquare
Gospel v. City of San Leandro, 673 F.3d 1059, 1068 (9th Cir.
2011) (alteration in original) (quoting Anderson v. Liberty
Lobby, 477 U.S. 242, 252 (1986)). The scintilla of evidence
upon which the majority and Guerrero rely—the fact that
Rosalie Guerrero received insurance proceeds—does not
preclude summary judgment. Without a competent witness
to testify at trial that Rosalie Guerrero saved the funds,
Guerrero’s attorney would not even be able to argue that the
$11,500 traces back to the insurance proceeds.
No witness would be able to testify in support of this
argument. As the majority acknowledges, Rosalie Guerrero
would be unable to testify at trial, because she previously
UNITED STATES V . $ 11,500.00 IN U.S. CURRENCY 27
invoked the Fifth Amendment. See Nationwide Life Ins. Co.
v. Richards, 541 F.3d 903, 910 (9th Cir. 2008) (“Trial courts
generally will not permit a party to invoke the privilege
against self-incrimination with respect to deposition questions
and then later testify about the same subject matter at trial.”).
As noted above, Rosalie Guerrero’s attorney will not be able
to testify at trial that the $11,500 was insurance proceeds, due
to her lack of personal knowledge. Similarly, Guerrero
himself will be unable to testify of the funds’ origin.
Guerrero does not claim to have personal knowledge of the
source of the funds. To the extent he seeks to testify, based
on information Rosalie Guerrero told him, it is hearsay. As
the majority notes, the district court did not abuse its
discretion in refusing to consider these hearsay statements on
summary judgment.
Contrary to the majority’s view, the district court’s
conclusion did not require it to weigh the evidence before it.
Rather, the government is entitled to summary judgment,
because Rosalie Guerrero’s attorney’s affidavit, without
more, does not raise a genuine issue of material fact and
would not allow a jury to reasonably find in Guerrero’s favor.
See United States v. $133,420.00 in U.S. Currency, 672 F.3d
629, 638 (9th Cir. 2012) (“‘The mere existence of a scintilla
of evidence in support of the plaintiff’s position will be
insufficient; there must be evidence on which the jury could
reasonably find for the plaintiff.’” (quoting Anderson,
477 U.S. at 252)).