14‐2291
Lucas v. United States
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
August Term, 2014
(Submitted: January 6, 2015 Decided: January 7, 2015)
Docket No. 14‐2291
________________
NICHOLAS M. LUCAS, as assignee of Justin Lucas,
Petitioner‐Appellant,
— v. —
UNITED STATES OF AMERICA, DRUG ENFORCEMENT ADMINISTRATION, an agency of
the United States of America,
Respondents‐Appellees.*
*
The Clerk of Court is respectfully directed to amend the official caption in
this case to conform to the caption above.
1
B e f o r e:
LYNCH and CHIN, Circuit Judges, and KOELTL, District Judge.**
__________________
Petitioner‐appellant moved to set aside a declaration of forfeiture under 18
U.S.C. § 983(e)(1), as assignee of his brother’s interest in the forfeited property.
The district court (Gary L. Sharpe, Chief Judge) denied the motion and dismissed
the petition, holding that the assignment was invalid because, at the time of the
assignment, the forfeiture had been completed and all interest in the property
had vested in the United States. Because the Civil Asset Forfeiture Reform Act
permits any person with an interest in forfeited property to file a motion to set
aside a declaration of forfeiture after the forfeiture has occurred on grounds of
lack of notice, and because the assignment of his brother’s interest to petitioner‐
appellant was valid under New York law, we VACATE the district court’s
decision and REMAND for further proceedings.
**
The Honorable John G. Koeltl, of the United States District Court for the
Southern District of New York, sitting by designation.
2
Wayne P. Smith, Schenectady, New York, for Petitioner‐Appellant.
Gwendolyn E. Carroll, Assistant United States Attorney, on behalf
of Richard S. Hartunian, United States Attorney for the Northern
District of New York, Syracuse, New York, for Respondents‐
Appellees.
PER CURIAM:
Petitioner‐appellant Nicholas Lucas was arrested for marijuana possession
in 2011. His brother, Justin Lucas, paid $50,000 in cash to bail him out of the
Otsego County Jail. However, the Drug Enforcement Administration seized the
bail money as part of a criminal investigation and Nicholas remained in jail.
After Nicholas’s case was resolved by a guilty plea, Justin assigned his interest in
the bail money to Nicholas, who attempted to retrieve it. By that time, the money
had been forfeited through an administrative forfeiture proceeding. Claiming
that neither he nor Justin had received notice of the forfeiture proceeding,
Nicholas moved to set aside the declaration of forfeiture under 18 U.S.C.
§ 983(e)(1), the exclusive remedy for seeking to overturn a declaration of
forfeiture under a civil forfeiture statute. The district court (Gary L. Sharpe, Chief
Judge) denied the motion and dismissed the petition, holding that Justin had
3
failed validly to assign his interest to Nicholas because, at the time of the
assignment, the forfeiture was already complete and therefore all right, title, and
interest in the bail money had vested in the United States. Because the Civil
Asset Forfeiture Reform Act (“CAFRA”) confers a cause of action to challenge a
forfeiture that has already been completed, and because Justin’s assignment of
that cause of action to Nicholas was valid under New York law, we vacate the
district court’s decision and remand for further proceedings.
BACKGROUND1
On January 13, 2011, Justin Lucas posted $50,000 bail with the Otsego
County Sheriff on behalf of his brother Nicholas, who had been arrested on a
charge of marijuana possession. Justin received a bail receipt, but was later told
that the money had been seized by the DEA as part of a criminal investigation.
Nicholas remained in jail. The DEA instituted administrative forfeiture
proceedings with respect to the seized bail money, and sent several notices of the
impending forfeiture to both Justin and Nicholas at addresses in Cobleskill, New
1
The facts set forth herein are taken from petitioner’s motion, and are
assumed to be true for present purposes.
4
York, Worchester, New York, and Portland, Oregon.2 The DEA did not send a
notice, however, to the Vineyard Haven, Massachusetts, address that Justin had
provided on his bail receipt, nor to Nicholas at his then‐current residence, the
Otsego County Jail. Consequently, the forfeiture proceedings went forward
without the knowledge or participation of the Lucas brothers, and were
completed on June 21, 2011, when the DEA issued a declaration of forfeiture.
Meanwhile, Nicholas’s criminal case was resolved by a plea agreement and
he was released from jail. On July 25, 2011, Justin assigned his interest in the bail
money to Nicholas, and Nicholas retained counsel to try to retrieve the money.
He was then informed that the money had been forfeited. Nicholas thereafter
moved in the district court to set aside the declaration of forfeiture under 18
U.S.C. § 983(e)(1). The Government opposed the motion, arguing that Nicholas
had no interest in the money and therefore no standing to contest the forfeiture,
and moved to dismiss for lack of subject matter jurisdiction and failure to state a
claim.
The district court issued a Memorandum Decision and Order on May 22,
2014 dismissing Nicholas’s petition. Lucas v. United States, No. 3:13‐cv‐855
2
The agency also posted a notice in the Wall Street Journal.
5
(GLS/DEP), 2014 WL 2176612 (N.D.N.Y. May 22, 2014). The district court agreed
with the Government that Nicholas had no interest in the bail money and
therefore lacked Article III standing to challenge the forfeiture. Id. at *2.
Specifically, the district court determined that because the assignment did not
occur until after the declaration of forfeiture, “the purported assignment did not
actually convey any possessory or ownership interest in the money to Nicholas;
the forfeiture had already been completed, and therefore Justin had no interest to
assign to Nicholas, as all right, title, and interest in the money had vested in the
United States.” Id. The district court also acknowledged an argument advanced
by the Government that even if Nicholas did acquire an interest in the bail money
by way of the purported assignment, he would not be able to demonstrate that he
was a bona fide purchaser for value in order to assert an “innocent owner
defense” to the forfeiture under 18 U.S.C. § 983(d)(3)(A). Id. at *2 n.3. The
district court stated in dictum, “Although analysis of this argument is
unnecessary given the court’s conclusion . . . that Nicholas lacks standing, the
court notes that there are no allegations in the petition that Nicholas gave
anything of value for the alleged rights he acquired via the assignment.” Id.
6
Accordingly, the district court granted the Government’s motion to dismiss
Nicholas’s petition. Id. at *3.
DISCUSSION
We review de novo a district court’s grant of a motion to dismiss for lack of
subject matter jurisdiction and for failure to state a claim. See Loginovskaya v.
Batratchenko, 764 F.3d 266, 269 (2d Cir. 2014); Shabaj v. Holder, 718 F.3d 48, 50
(2d Cir. 2013).
A completed civil forfeiture is subject to reopening under very narrow
circumstances. CAFRA provides:
(1) Any person entitled to written notice in any nonjudicial civil
forfeiture proceeding under a civil forfeiture statute who does not
receive such notice may file a motion to set aside a declaration of
forfeiture with respect to that person’s interest in the property,
which motion shall be granted if–
(A) the Government knew, or reasonably should have
known, of the moving party’s interest and failed to take
reasonable steps to provide such party with notice; and
(B) the moving party did not know or have reason to
know of the seizure within sufficient time to file a
timely claim.
7
18 U.S.C. § 983(e)(1).3 A motion under § 983(e)(1) is “the exclusive remedy for
seeking to set aside a declaration of forfeiture under a civil forfeiture statute.” Id.
§ 983(e)(5). The statute also provides a time limit on filing a § 983(e)(1) motion:
such motion “may be filed not later than 5 years after the date of final publication
of notice of seizure of the property.” Id. § 983(e)(3).
The statute therefore confers a cause of action to overturn a declaration of
forfeiture. While the completion of the forfeiture proceedings divests a person of
his interest in the subject property, that person retains a right to seek to set aside
the forfeiture with respect to his interest in the property. That right is limited to
claims of lack of adequate notice and may only be asserted within five years after
the final notice of seizure, but the statute clearly confers the right for that period
even after the forfeiture is complete. We are aware of no circuit court authority
that holds, contrary to the statute, that Article III standing to petition to set aside
a declaration of forfeiture under § 983(e)(1) is lost after the interest in the subject
3
The statute applies to all forfeitures commenced on or after 120 days from
April 25, 2000, Alli‐Balogun v. United States, 281 F.3d 362, 369 & n.6 (2d Cir.
2002), and therefore is applicable here.
8
property vests in the United States.4 Accordingly, we hold that § 983(e)(1) creates
an interest in the form of a right to challenge a forfeiture for lack of notice that
survives the issuance of the declaration of forfeiture.
The statutory scheme therefore does not support the primary rationale for
the district court’s decision. Justin retained a right to seek to overturn the
forfeiture based on lack of notice after the forfeiture was complete, and that right,
his only remaining interest in the property, was conveyed to Nicholas through
the assignment. Cf. Sprint Comms. Co., L.P. v. APCC Servs., Inc., 554 U.S. 269,
284‐85 (2008) (holding that an assignee of a legal claim for money owed has
standing to bring suit, even where the assignee has no independent interest in the
money and has promised to remit the proceeds of the litigation to the assignor).
4
Our sister circuits have instead routinely reviewed district court
determinations whether a § 983(e)(1) petitioner had adequate notice of a
forfeiture that was completed before the petition to set aside was filed. See Miller
v. DEA, 566 F. App’x 395, 397‐98 (6th Cir. 2014) (unpublished); Conrad v. United
States, 470 F. App’x 336, 339‐40 (5th Cir. 2012) (unpublished); United States v.
Huggins, 385 F. App’x 225, 226‐27 (3d Cir. 2010) (unpublished); In re Seizure of
$143,265.78 from Checking Account No. 1851349546 and $28,687.40 from
Checking Account No. 1080022185, 384 F. App’x 471, 473‐74 (6th Cir. 2010)
(unpublished); United States v. Dacre, 256 F. App’x 866, 867 (8th Cir. 2007)
(unpublished).
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Our reading of the statute also undercuts the district court’s dictum. Since
all that was left of Justin’s interest in the property after the declaration of
forfeiture was his right to move to set aside the forfeiture under § 983(e)(1), that is
all that he was able to assign to Nicholas. Consequently, if Nicholas were to
succeed in reopening the forfeiture proceedings, he could assert only claims to
the property that Justin would have been able to assert. See In re Stralem, 758
N.Y.S.2d 345, 347 (2d Dep’t 2003) (“When a valid assignment is made, the
assignee steps into the assignor’s shoes and acquires whatever rights the latter
had.”).5 He would not be able to claim an interest of his own in the property, as a
bona fide purchaser, free and clear of the Government’s claim. Nicholas is not,
5
The district court cited United States v. Stokes, 191 F. App’x 441 (7th Cir.
2006), a Seventh Circuit decision that is instructive here. In Stokes, the defendant
entered a plea agreement in which he relinquished any interest in the property
listed in the indictment. Id. at 443. After $15,000 in cash formerly belonging to
the defendant was administratively forfeited, the defendant moved to challenge
the forfeiture. Id. The Seventh Circuit held that the district court should have
treated his motion as a petition to set aside under § 983(e)(1), but that the
defendant lacked Article III standing to contest the forfeiture “because he
abandoned any interests in the property with the language in the plea,” id. at 444,
not because the administrative forfeiture was complete. Here, Justin never
abandoned his interest in the bail money; any interest that he had prior to the
forfeiture could therefore be asserted by Nicholas if Nicholas’s § 983(e)(1) motion
to set aside the declaration of forfeiture prevails and the forfeiture proceedings
are reopened.
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however, claiming any such interest in the bail money independent of Justin’s
interest. Therefore, the fact that he gave Justin nothing of value in exchange for
the assignment is irrelevant to his right to file a motion to set aside the forfeiture
under the statute.
The Government argues on appeal that Justin’s assignment to Nicholas
was invalid in any event under New York law, because it was made without
consideration. We look to state law to determine whether a property interest
exists. Winston v. City of New York, 759 F.2d 242, 247 (2d Cir. 1985). Under the
New York General Obligations Law, “An assignment shall not be denied the
effect of irrevocably transferring the assignor’s rights because of the absence of
consideration, if such assignment is in writing and signed by the assignor, or by
his agent.” N.Y. Gen. Oblig. Law § 5‐1107; accord, Gen. Motors Acceptance Corp.
v. Scio Volunteer Fire Dep’t, 595 N.Y.S.2d 145, 146 (4th Dep’t 1993) (“[I]n cases of
assignment, a signed writing is an adequate substitute for consideration.”).
Further, New York law permits transfers – including assignments – of causes of
action, except for a cause of action for personal injury or one in contravention of
statute or public policy. See N.Y. Gen. Oblig. Law § 13‐101; see also Am. Banana
Co. v. Venezolana Internacional de Aviacion S.A. (VIASA), 411 N.Y.S.2d 889, 890
11
(1st Dep’t 1979) (assignment of a chose in action need not be supported by
consideration), aff’d, 49 N.Y.2d 848 (1980). Subsection 983(e) is silent on whether
the statutory cause of action to set aside a declaration of forfeiture, or the interest
in the forfeited property itself, can be assigned. However, the subsection
providing the “innocent owner defense” defines “owner” for the purposes of that
subsection as “a person with an ownership interest in the specific property
sought to be forfeited, including a leasehold, lien, mortgage, recorded security
interest, or valid assignment of an ownership interest.” 18 U.S.C. § 983(d)(6)(A)
(emphasis added).6 We therefore perceive nothing in CAFRA that prohibits the
transfer of an interest by assignment. Because Justin’s assignment to Nicholas
was made in writing and signed, it was valid under New York law.
The Government cites district and bankruptcy court cases holding that a
conveyance is fraudulent under New York law if made without fair
consideration. These cases7 relied on New York Debtor and Creditor Law §§ 273,
6
As the district court correctly noted, however, to be an “innocent owner”
under the statute, one must be a “bona fide purchaser or seller for value.” 18
U.S.C. § 983(d)(3)(A)(i) (emphasis added).
7
See United States v. Dupree, 919 F. Supp. 2d 254, 266 (E.D.N.Y. 2013);
Geltzer v. Artists Mktg. Corp. (In re The Cassandra Grp.), 338 B.R. 583, 594
(S.D.N.Y. 2006); Sharp Int’l Corp. v. State St. Bank & Trust Co. (In re Sharp Int’l
Corp.), 302 B.R. 760, 778 (E.D.N.Y. 2003).
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274 and 275, which forbid conveyances made by a debtor without consideration
that would render the debtor insolvent, unable to maintain sufficient capital for
transactions in which the debtor is engaged, or unable to pay debts that the
debtor intends to or believes that he will incur. There is no contention in this case
that Justin falls into any of these categories or that the United States is a creditor
that New York law seeks to protect by preventing Justin from conveying his
interest without consideration. See Weil v. Long Island Sav. Bank, FSB, 77 F.
Supp. 2d 313, 325 (E.D.N.Y. 1999) (purpose of N.Y. Debtor & Creditor Law “is to
protect creditors”).8 Accordingly, under New York law, Justin’s gratuitous
assignment of his statutory cause of action to Nicholas was valid, and Nicholas
therefore has standing to pursue a motion to set aside under § 983(e)(1). We of
course express no view on the merits of any such motion.
CONCLUSION
For the foregoing reasons, the order of the district court is VACATED and
the case is REMANDED for further proceedings consistent with this opinion.
8
The additional cases cited by the Government, Davis & Warshow, Inc. v.
S. Iser, Inc., 220 N.Y.S.2d 818 (Sup. Ct. 1961), and Mazzella v. Lupinachi, 333
N.Y.S.2d 775 (Civ. Ct. 1972), are plainly inapposite.
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