United States v. James House ( 2022 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA, No. 18-10305
Plaintiff-Appellee,
D.C. No.
v. 3:14-cr-00329-
SI-1
101 HOUSECO, LLC,
Intervenor-Appellant,
JAMES HOUSE,
Defendant.
UNITED STATES OF AMERICA, No. 18-10370
Plaintiff-Appellee,
D.C. No.
v. 3:14-cr-00139-
SI-2
101 HOUSECO, LLC,
Intervenor-Appellant,
DAVID LONICH,
Defendant.
2 UNITED STATES V. 101 HOUSECO.
UNITED STATES OF AMERICA, No. 19-10043
Plaintiff-Appellee,
D.C. No.
101 HOUSECO, LLC, 3:14-cr-00139-
Intervenor-Appellant, SI-2
v.
OPINION
DAVID LONICH,
Defendant.
Appeal from the United States District Court
for the Northern District of California
Susan Illston, District Judge, Presiding
Argued and Submitted February 10, 2021
San Francisco, California
Filed January 10, 2022
Before: Andrew D. Hurwitz and Daniel A. Bress, Circuit
Judges, and Clifton L. Corker, * District Judge.
Opinion by Judge Bress
*
The Honorable Clifton L. Corker, United States District Judge for
the Eastern District of Tennessee, sitting by designation.
UNITED STATES V. 101 HOUSECO. 3
SUMMARY **
Criminal/Forfeiture
The panel affirmed the district court’s dismissal of
Intervener 101 Houseco, LLC’s ancillary petitions
challenging the district court’s forfeiture order in two
criminal cases, asserting that the criminal defendants lacked
a forfeitable interest in the property.
The panel considered whether a third party may raise
such a challenge or whether it is limited to arguing under 21
U.S.C. § 853(n)(6) that it has a superior interest in the
property or was a bona fide purchase for value. The panel
held that a third party in a criminal forfeiture proceeding may
not relitigate the antecedent forfeitability question, but is
instead restricted to the two avenues for relief that
§ 853(n)(6) confers. The panel further held that § 853(n)(6)
does not violate 101 Houseco’s procedural due process
rights. The panel explained that if 101 Houseco had a valid
interest in the property, § 853(n)(6) provided it the means to
vindicate that interest, but because 101 Houseco was created
to perpetuate a fraud, § 853(n)(6) provides it no relief.
**
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
4 UNITED STATES V. 101 HOUSECO.
COUNSEL
John D. Cline (argued), Law Office of John D. Cline, San
Francisco, California, for Intervenor-Appellant.
Francesco Valentini (argued), Trial Attorney; Matthew S.
Miner, Deputy Assistant Attorney General; Brian A.
Benczkowski, Assistant Attorney General; Criminal
Division, Appellate Section, United States Department of
Justice, Washington, D.C.; Adam A. Reeves, Robert David
Rees, and David B. Countryman, Assistant United States
Attorneys; David L. Anderson, United States Attorney;
United States Attorney’s Office, San Francisco, California;
for Plaintiff-Appellee.
OPINION
BRESS, Circuit Judge:
101 Houseco, LLC intervened in two criminal cases to
challenge the district court’s forfeiture order, asserting that
the criminal defendants lacked a forfeitable interest in the
property. The principal question we consider is whether a
third party may raise such a challenge or whether it is limited
to arguing under 21 U.S.C. § 853(n)(6) that it has a superior
interest in the property or was a bona fide purchaser for
value.
We hold—agreeing with every circuit to have considered
this question—that a third party in a criminal forfeiture
proceeding may not relitigate the antecedent forfeitability
question, but is instead restricted to the two avenues for
relief that § 853(n)(6) confers. We further hold that
§ 853(n)(6) does not violate 101 Houseco’s procedural due
UNITED STATES V. 101 HOUSECO. 5
process rights. If 101 Houseco had a valid interest in the
property, § 853(n)(6) provided it the means to vindicate that
interest. But, because 101 Houseco was created to
perpetuate a fraud, § 853(n)(6) provides it no relief. We thus
affirm the dismissal of 101 Houseco’s ancillary petitions.
I
David Lonich, James House, and others were involved
in a complex fraud scheme designed to secure title to Park
Lane Villas East (PLV East), a real-estate development in
Sonoma County, California. 1 Bijan Madjlessi, a now-
deceased real-estate developer, originally owned the
property, which was secured through a construction loan of
more than $30 million from IndyMac, a financial institution.
After Madjlessi defaulted on the IndyMac loan, he and
Lonich (Madjlessi’s lawyer) came up with a plan to regain
control of PLV East. IndyMac was in FDIC conservatorship
and the FDIC was auctioning off the loan. But FDIC rules
prohibited Madjlessi from bidding on his own defaulted
note. To get around this, Lonich and Madjlessi had a straw
buyer bid on the loan and then covertly return PLV East back
to Madjlessi’s control.
Madjlessi owed James House over $200,000 for
contracting work performed at PLV and other projects.
Madjlessi and Lonich arranged for House to act as the straw
1
In a concurrently filed opinion and memorandum disposition in
United States v. Lonich, No. 18-10298 (9th Cir. 2021), we address
challenges to three defendants’ convictions and sentences arising from
some of the same fraudulent activity at issue here. Our Lonich opinion
contains a more detailed recitation of the fraudulent schemes.
6 UNITED STATES V. 101 HOUSECO.
buyer for PLV East; in return, Madjlessi agreed to pay House
the money he owed him.
To carry out the scheme, Lonich created 101 Houseco as
an LLC with two members: House owned 80.1% and
101 Park Lane, LLC—an LLC held by House but controlled
by Lonich—owned the remaining 19.9%. Madjlessi and
Lonich then conspired with Sean Cutting and David
Melland, officers at Sonoma Valley Bank (SVB), to assist
House in securing a fraudulent loan for 101 Houseco.
Lonich arranged for House to submit false
documentation in the FDIC auction process certifying that
Madjlessi was not involved in the bid. 101 Houseco then
used the SVB loan to bid at the auction. After 101 Houseco
prevailed at the auction, it foreclosed on the Madjlessi note
and acquired clear title to PLV East.
Despite House being 101 Houseco’s owner on paper, the
101 Houseco operating agreement gave Lonich actual
control over that entity. Lonich exclusively controlled
101 Houseco’s bank accounts and any funds that PLV East
generated. Lonich also could appoint, fire, and replace
101 Houseco’s members and managers. Lonich used that
power to appoint himself 101 Houseco’s sole manager. And
even after he was convicted on federal criminal charges,
Lonich continued to receive monthly payments from
revenue generated by PLV East.
After House pleaded guilty and a jury separately
convicted Lonich, Cutting, and Melland of various federal
crimes, the district court entered a preliminary order
forfeiting PLV East. See Fed. R. Crim. P. 32.2(b). The court
ordered the government to provide sufficient public notice
of both the order and the anticipated sale of the property.
101 Houseco then filed third party petitions opposing the
UNITED STATES V. 101 HOUSECO. 7
forfeiture in both criminal proceedings, arguing that neither
Lonich nor House owned PLV East. 2
The district court rejected 101 Houseco’s petitions.
Noting that “there was considerable evidence that Lonich
and Madjlessi created 101 Houseco, LLC in order to carry
out the fraud and the money laundering,” the district court
found that House and Lonich had forfeitable interests in PLV
East because 101 Houseco was a sham entity, and its
corporate form should therefore be disregarded. The court
determined that House had a forfeitable interest through his
legal ownership of PLV East during the relevant time frame,
and that Lonich had a forfeitable interest because he
exercised control over the property.
After rejecting 101 Houseco’s ancillary petitions, the
district court entered final forfeiture orders in both cases.
101 Houseco now appeals. The district court stayed the sale
of PLV East pending the resolution of these consolidated
appeals.
II
In considering ancillary criminal forfeiture proceedings,
we review “the district court’s findings of fact for clear error
and its legal conclusions de novo.” United States v. Nava,
404 F.3d 1119, 1127 n.3 (9th Cir. 2005). The district court
dismissed 101 Houseco’s petitions on the merits because it
found that House and Lonich had forfeitable interests in PLV
East. It did not address the government’s threshold
2
It is unclear who currently owns 101 Houseco. As the district court
noted, “101 Houseco has . . . been unable or unwilling to clearly identify
who presently owns” that entity.
8 UNITED STATES V. 101 HOUSECO.
argument that 101 Houseco could not challenge forfeitability
in a third party proceeding.
We may affirm the district court on any ground
supported by the record. Johnson v. Riverside Healthcare
Sys., LP, 534 F.3d 1116, 1121 (9th Cir. 2008). We do so
here, holding that 101 Houseco could only challenge the
forfeiture order on the grounds that 21 U.S.C. § 853(n)(6)
permits, namely, that 101 Houseco had either a superior or
bona fide interest in the forfeited property. As a third party
in a criminal forfeiture proceeding, 101 Houseco could not
relitigate whether the defendants had a forfeitable interest in
the property.
A
“Criminal forfeiture statutes empower the Government
to confiscate property derived from or used to facilitate
criminal activity.” Honeycutt v. United States, 137 S. Ct.
1626, 1631 (2017). For House’s and Lonich’s crimes of
conviction, the government may seek forfeiture of criminally
obtained proceeds. See 18 U.S.C. § 982. In that
circumstance, a district court “shall order that the person
forfeit to the United States any property constituting, or
derived from, proceeds the person obtained directly or
indirectly, as the result of such violation.” Id. § 982(a)(2).
Forfeitable property “vests in the United States upon the
commission of the act giving rise to forfeiture.” 21 U.S.C.
§ 853(c).
The Federal Rules of Criminal Procedure and 21 U.S.C.
§ 853 provide the procedural framework for criminal
forfeiture. See 18 U.S.C. § 982(b)(1). The district court
must first “determine what property is subject to forfeiture
under the applicable statute.” Fed. R. Crim.
P. 32.2(b)(1)(A). “If the government seeks forfeiture of
UNITED STATES V. 101 HOUSECO. 9
specific property, the court must determine whether the
government has established the requisite nexus between the
property and the offense.” Id. If the district court concludes
“that property is subject to forfeiture, it must promptly enter
a preliminary order of forfeiture.” Id. 32.2(b)(2)(A). At that
point, “the government must publish notice of the order and
send notice to any person who reasonably appears to be a
potential claimant with standing to contest the forfeiture in
the ancillary proceeding.” Id. 32.2(b)(6)(A); see also
21 U.S.C. § 853(n)(1).
A third party may not challenge the forfeiture order in
the preliminary forfeiture proceedings or through a separate
lawsuit. Under 21 U.S.C. § 853(k), and “[e]xcept as
provided in subsection (n)”—of which we will have more to
say in a moment—“no party claiming an interest in property
subject to forfeiture under this section” may “(1) intervene
in a trial or appeal of a criminal case involving the forfeiture
of such property under this section; or (2) commence an
action at law or equity against the United States concerning
the validity of his alleged interest in the property.”
Consistent with the statutory text, the Federal Rules specify
that a district court must enter its preliminary forfeiture order
“without regard to any third party’s interest in the property.”
Fed. R. Crim. P. 32.2(b)(2)(A).
A third party wishing to challenge a district court’s
criminal forfeiture order must do so in an ancillary
proceeding under 21 U.S.C. § 853(n) and Federal Rule of
Criminal Procedure 32.2(c). See United States v. Lazarenko,
476 F.3d 642, 648 (9th Cir. 2007) (“The law appears settled
that an ancillary proceeding constitutes the only avenue for
a third party claiming an interest in seized property.”). A
third party may obtain relief in such an ancillary proceeding
on limited grounds:
10 UNITED STATES V. 101 HOUSECO.
If, after [a] hearing, the court determines that
the petitioner has established by a
preponderance of the evidence that—
(A) the petitioner has a legal right, title, or
interest in the property, and such right, title,
or interest renders the order of forfeiture
invalid in whole or in part because the right,
title, or interest was vested in the petitioner
rather than the defendant or was superior to
any right, title, or interest of the defendant at
the time of the commission of the acts which
gave rise to the forfeiture of the property
under this section; or
(B) the petitioner is a bona fide purchaser for
value of the right, title, or interest in the
property and was at the time of purchase
reasonably without cause to believe that the
property was subject to forfeiture under this
section;
the court shall amend the order of forfeiture
in accordance with its determination.
21 U.S.C. § 853(n)(6). In other words, a third party may
only show it is the “‘rightful owner[]’ of forfeited assets.”
Caplin & Drysdale, Chartered v. United States, 491 U.S.
617, 629 (1989).
B
101 Houseco argues, as it did below, that House and
Lonich never sufficiently owned PLV East, so the district
court could not order the property forfeited as obtained
UNITED STATES V. 101 HOUSECO. 11
through the proceeds of their offenses. Effectively,
101 Houseco seeks to invalidate the district court’s original
forfeiture order, with the result that ownership of PLV East
would presumably remain with 101 Houseco. The problem,
however, is that this “argument is not [101 Houseco’s] to
make.” United States v. Fabian, 764 F.3d 636, 637 (6th Cir.
2014).
101 Houseco must have statutory standing to bring its
claim. The question is thus whether 101 Houseco has a right
of action—a legally recognized remedial right—to obtain
the relief it seeks. See Lexmark Int’l, Inc. v. Static Control
Components, Inc., 572 U.S. 118, 125, 127–28 & n.4 (2014).
A statute or some other source of law must give a petitioner
the right to sue to redress his claimed injury. See id. at 128–
29. Here, the only possible basis for 101 Houseco’s claim is
statutory. To answer whether 101 Houseco has statutory
standing, we therefore employ “traditional principles of
statutory interpretation” to determine whether Congress
provided 101 Houseco a right of action to challenge the
underlying forfeiture order. Id. at 128. It did not.
We read statutes (and the Federal Rules) in their most
natural sense and as parts of a broader whole. See, e.g.,
Sturgeon v. Frost, 136 S. Ct. 1061, 1070 (2016) (“It is a
fundamental canon of statutory construction that the words
of a statute must be read in their context and with a view to
their place in the overall statutory scheme.” (quoting Roberts
v. Sea-Land Servs., Inc., 566 U.S. 93, 101 (2012)); United
States v. Petri, 731 F.3d 833, 839 (9th Cir. 2013) (“Because
the Federal Rules of Criminal Procedure, once effective,
have the force and effect of law . . . we apply ‘traditional
tools of statutory construction’ to interpret them.” (citing
Beech Aircraft Corp. v. Rainey, 488 U.S. 153, 163 (1988)).
12 UNITED STATES V. 101 HOUSECO.
Here, the statutory scheme is clear, providing that a third
party may not challenge a forfeiture order “[e]xcept as
provided in subsection (n).” 21 U.S.C. § 853(k) (emphasis
added). And § 853(n) provides but two grounds under which
a third party can seek amendment of a criminal forfeiture
order: (1) the third party has a superior interest in the
property at the time of the commission of the wrongful acts;
or (2) it was a bona fide purchaser for value at the time of
the purchase. Id. § 853(n)(6). The clear design of
Congress’s scheme is that a third party may challenge a
criminal forfeiture order only on these two bases.
That is consistent with the Federal Rules of Criminal
Procedure. Those Rules similarly require the district court
to enter a preliminary forfeiture order “without regard to any
third party’s interest in the property.” Fed. R. Crim. P.
32.2(b)(2)(A). And they require that a district court’s
determination “whether a third party has such an interest
must be deferred until any third party files a claim in an
ancillary proceeding,” id., “as prescribed by statute,” Fed.
R. Crim. P. 32.2(c)(1) (emphasis added).
In harmony with the statutory provisions, the Federal
Rules thus direct that a third party is limited to those
challenges that Congress has allowed. And Congress has
allowed only two such challenges, which do not include a
claim that the property was not forfeitable in the first place.
An ancillary proceeding “does not involve relitigation of the
forfeitability of the property; its only purpose is to determine
whether any third party has a legal interest in the forfeited
property.” Fed. R. Crim. P. 32.2, Advisory Comm. Notes
(2000).
Although we have not previously addressed this precise
question, our precedents strongly forecast the conclusion. In
United States v. Hooper, 229 F.3d 818 (9th Cir. 2000), we
UNITED STATES V. 101 HOUSECO. 13
stated that “[t]he criminal forfeiture statute . . . protects only
two types of transferees of forfeitable property: bona fide
purchasers and those whose interest in the property
antedated the crime.” Id. at 822 (emphasis added). Several
years later, in United States v. Nava, 404 F.3d 1119 (9th Cir.
2005), we similarly explained that “[t]he petitioner [in an
ancillary proceeding] may prevail only upon showing, by a
preponderance of the evidence, that he possessed a vested or
superior legal right, title, or interest in the property at the
time the criminal acts took place, or that he was a bona fide
purchaser for value.” Id. at 1125 (emphasis added). Then,
in United States v. Liquidators of European Federal Credit
Bank, 630 F.3d 1139 (9th Cir. 2011), we observed that
“[m]any legal sources . . . support the government’s view”
that Ҥ 853(n)(6) provides the only theories by which a third
party may challenge the forfeiture: superior title and bona
fide purchaser.” Id. at 1147. Our holding today is in accord
with our past statements on this issue.
Our holding is also in line with the other circuits to have
addressed the question, all of which agree that § 853(n)(6)
provides the exclusive grounds by which a third party may
challenge a criminal forfeiture order. See, e.g., Fabian, 764
F.3d at 638 (explaining that § 853(n) provides “the sole
avenue for a third party to assert an interest in forfeitable
property” and that “[b]y its plain terms, therefore, § 853(n)
does not permit ‘relitigation’ of the district court’s
antecedent determination that an item of property is subject
to forfeiture” (first quoting United States v. Erpenbeck,
682 F.3d 472, 480 (6th Cir. 2012), then quoting Fed. R.
Crim. P. 32.2, Advisory Comm. Notes (2000))); United
States v. Holy Land Found. for Relief & Dev., 722 F.3d 677,
689–90 (5th Cir. 2013) (“Section 853(n) provides only two
avenues of relief in an ancillary proceeding, and both require
a party to establish an ownership interest in the forfeited
14 UNITED STATES V. 101 HOUSECO.
[property] . . . . [A] third party has no standing to challenge
a preliminary order’s finding of forfeitability.”); United
States v. Davenport, 668 F.3d 1316, 1320–21 (11th Cir.
2012) (holding that third party “lacked standing to challenge
the validity of the . . . determination of forfeitability,” as
“[h]er sole mechanism for vindicating her purported interest
in the forfeited [property] was within the context of the
ancillary proceeding described by § 853(n) and Rule
32.2(c)”); United States v. Porchay, 533 F.3d 704, 710 (8th
Cir. 2008) (explaining that “there is no provision in
§ 853(n)” allowing a third party “to relitigate the outcome”
of underlying forfeiture proceedings); United States v.
Andrews, 530 F.3d 1232, 1236 (10th Cir. 2008) (“[A] third
party has no right to challenge the preliminary order’s
finding of forfeitability . . . .”); DSI Assocs. LLC v. United
States, 496 F.3d 175, 185 (2d Cir. 2007) (explaining that
third party challenges to criminal forfeiture orders “are
forbidden by section 853(k) unless they fall within the
exception carved out by section 853(n)”). 3
Turning now to the two grounds for relief that
§ 853(n)(6) affords third parties, it is clear 101 Houseco
cannot prevail (and 101 Houseco does not argue otherwise).
As the district court noted, 101 Houseco “does not contest”
that it “was created to perpetrate the fraud in this case.” It
therefore cannot show a superior property interest “at the
time of the commission of the acts which gave rise to the
3
While some circuits have referred to this as a “standing” issue
without further elaboration, the issue is one of statutory standing. See
Fabian, 764 F.3d at 638. It is not a question of Article III standing, and
the district court thus had subject matter jurisdiction to address
101 Houseco’s petition. See Lexmark, 572 U.S. at 128 n.4 (“[T]he
absence of a valid . . . cause of action does not implicate subject-matter
jurisdiction.” (quoting Verizon Md. Inc. v. Pub. Serv. Comm’n of Md.,
535 U.S. 635, 642–643 (2002))).
UNITED STATES V. 101 HOUSECO. 15
forfeiture of the property.” 21 U.S.C. § 853(n)(6)(A); see
also Hooper, 229 F.3d at 821–22 (observing that
§ 853(n)(6)(A) is “likely never to apply to proceeds of the
crime” because a defendant’s crimes “had to have been
committed before there could be any proceeds resulting from
them”).
Nor was 101 Houseco a bona fide purchaser. A bona
fide purchaser, at the time of the purchase, must not have
reasonable cause “to believe that the property was subject to
forfeiture.” 21 U.S.C. § 853(n)(6)(B). But 101 Houseco
clearly had such reasonable cause. Lonich had knowledge
of the fraud at the time it was perpetrated. And, as a
101 Houseco officer at the time, his knowledge is imputed
to 101 Houseco. See Salyers v. Metro. Life Ins. Co.,
871 F.3d 934, 939–40 (9th Cir. 2017) (“[A] principal is
generally charged with notice of facts that an agent knows or
has reason to know and that are material to her duties as an
agent.”).
III
101 Houseco protests that interpreting § 853(n) to
prohibit it from challenging the forfeitability of PLV East
violates its procedural due process rights under the Fifth
Amendment. That argument is unavailing.
The Supreme Court has already rejected a similar
argument. In Libretti v. United States, 516 U.S. 29 (1995),
the defendant argued that, before accepting a guilty plea, the
district court must make a factual inquiry into the basis for
the forfeiture order. Id. at 37–38. Such an inquiry, he
argued, was “essential to preserving third-party claimants’
rights” because a “defendant who has no interest in
particular assets . . . will have little if any incentive to resist
forfeiture of those assets, even if there is no statutory basis
16 UNITED STATES V. 101 HOUSECO.
for their forfeiture.” Id. at 44. The defendant further
asserted that § 853(n)’s ancillary proceedings were
“inadequate to safeguard third-party rights.” Id. In rejecting
this procedural due process argument, the Supreme Court
stressed that “Congress has determined that § 853(n) . . .
provides the means by which third-party rights must be
vindicated.” Id.
Two of our sister circuits have since held that Libretti
resolves the due process challenge that 101 Houseco raises
here. See United States v. Dong Dang Huynh, 595 F. App’x
336, 340–41 (5th Cir. 2014) (“The Supreme Court’s
rejection of a due-process argument concerning § 853
controls this case.”); United States v. McHan, 345 F.3d 262,
270 (4th Cir. 2003) (“In Libretti, the Supreme Court rejected
the defendant’s argument that a § 853(n) proceeding
inadequately protected third parties’ interests.”). But even
assuming that Libretti does not conclusively resolve the
issue, it strongly suggests that § 853(n) does not violate
101 Houseco’s procedural due process rights.
Other precedents confirm this. To show a procedural due
process violation, 101 Houseco must prove “two distinct
elements: (1) a deprivation of a constitutionally protected
liberty or property interest, and (2) a denial of adequate
procedural protections.” Brewster v. Bd. of Educ. of
Lynwood Unified Sch. Dist., 149 F.3d 971, 982 (9th Cir.
1998).
Even if 101 Houseco had a legitimate property interest
in PLV East (it did not), § 853(n) provided it with adequate
procedural safeguards. Section 853(n) permits rightful
owners in ancillary proceedings to establish their claims to
the property by showing they have superior title or are bona
fide purchasers. 21 U.S.C. § 853(n)(6). This provides
sufficient protection because “criminal forfeiture is an in
UNITED STATES V. 101 HOUSECO. 17
personam action in which only the defendant’s interest in the
property may be forfeited.” Fed. R. Crim. P. 32.2(b),
Advisory Comm. Notes (2000) (emphasis added).
Section 853(n)(6) does not raise due process concerns in the
general course because it still permits third parties to prove
their own cognizable interests in the property. See
Liquidators, 630 F.3d at 1146 (explaining that, if a third
party proves a valid interest under § 853(n)(6), it “would
prevail in the ancillary proceeding on the merits, regardless
of any possible legal challenges to the forfeitability of the
property generally”); McHan, 345 F.3d at 270(“[Section] 853(n) provides all of the process due.”).
101 Houseco could not show a valid interest in PLV East
because it was an entity created to perpetrate a fraud.
Moreover, third parties may also petition the Attorney
General for discretionary relief to mitigate, remit, or restore
a forfeited property or take “any other action to protect the
rights of innocent persons which is in the interest of justice.”
21 U.S.C. § 853(i)(1). That provides even further protection
for those claiming a legitimate interest in forfeited property.
See DLI Assocs. LLC, 496 F.3d at 186–87. 4
101 Houseco nonetheless points to two cases to argue
that § 853(n)(6)’s protections are insufficient. See United
States v. Daugerdas, 892 F.3d 545 (2d Cir. 2018); United
States v. Reckmeyer, 836 F.2d 200 (4th Cir. 1987). Both are
inapposite.
4
Indeed, 101 Houseco concedes that allegedly “innocent investors”
in 101 Houseco, who do not themselves have an ownership interest in
PLV East, have apparently been able to use § 853(i) to receive some
redress.
18 UNITED STATES V. 101 HOUSECO.
Reckmeyer dealt with the scope of “bona fide purchaser
for value” under 21 U.S.C. § 853(n)(6)(B). The court noted
that “[s]erious due process questions would be raised . . . if
third parties asserting an interest in forfeited assets were
barred from challenging the validity of the forfeiture.”
Reckmeyer, 836 F.2d at 206. So, it determined that it must
“resolve all ambiguities in the text of the statute in a manner
that will avoid this possible constitutional infirmity.” Id. In
doing so, however, the court did not expand the types of
permissible challenges under § 853(n), nor did it suggest that
a third party could assert a claim outside the grounds
§ 853(n)(6) sets forth. The court instead held that it must
interpret “‘bona fide purchaser for value’ . . . liberally to
include all persons who give value to the defendant in an
arms’-length transaction with the expectation that they
would receive equivalent value in return.” Id. at 208. But,
again, 101 Houseco does not claim it is a bona fide
purchaser. Cf. DSI Assocs. LLC, 496 F.3d at 185 n.13
(distinguishing Reckmeyer because, unlike in Reckmeyer,
the third party before it did “not assert that it has standing
under section 853(n)”).
Daugerdas likewise does not suggest that third parties
may challenge the antecedent question of whether the
property was forfeitable. It dealt with a third party’s due
process challenge for a defendant forfeiting “substitute
property,” 892 F.3d at 553–58, which involves a distinct set
of statutory provisions. See 21 U.S.C. § 853(p); see also
Daugerdas, 892 F.3d at 550, 554 (describing the particular
due process concern with substitute property as arising from
a “glitch in § 853’s procedural structure”). As to the
provisions at issue here, the Second Circuit has recognized
what we now hold: “section 853(n) provides the exclusive
means by which a third party may lay claim to forfeited
assets,” and it does not allow “relitigation of the forfeitability
UNITED STATES V. 101 HOUSECO. 19
of the property.” DSI Assocs. LLC, 496 F.3d at 185 (quoting
Fed. R. Crim. P. 32.2, Advisory Comm. Notes (2000)).
AFFIRMED.