Diaz v. United States

06-5301-cv
Diaz v. United States

1 UNITED STATES COURT OF APPEALS
2 FOR THE SECOND CIRCUIT
3
4 August Term, 2007
5
6
7 (Submitted: December 13, 2007 Decided: February 26, 2008)
8
9 Docket No. 06-5301-cv
10
11 - - - - - - - - - - - - - - - - - - - -X
12
13 FERNANDO HERNANDEZ DIAZ,
14
15 Plaintiff-Appellant,
16
17 - v.-
18
19 UNITED STATES OF AMERICA, DEPARTMENT OF
20 HOMELAND SECURITY, BUREAU OF
21 IMMIGRATION & CUSTOMS ENFORCEMENT, DRUG
22 ENFORCEMENT AGENCY,
23
24 Defendants-Appellees.
25
26 - - - - - - - - - - - - - - - - - - - -X
27

28 Before: JACOBS, Chief Judge, POOLER and SACK, Circuit
29 Judges.
30
31 Plaintiff appeals from the judgment of the United
32 States District Court for the Eastern District of New York
33 (Ross, J.), which dismissed his claim for the return of cash
34 that was seized and forfeited in connection with plaintiff’s
35 arrest for violating currency reporting laws. The district
36 court rejected plaintiff’s due process challenge, finding
37 that plaintiff received adequate notice of the proceedings.
38 We affirm on a different ground: the district court lacked
39 subject matter jurisdiction because the claim is barred by
40 sovereign immunity.
41
 1 FERNANDO HERNANDEZ-DIAZ, pro se,
2 Coleman, Florida.
3
4 KEISHA-ANN G. GRAY, Assistant
5 United States Attorney (Steven
6 Kim, Kathleen A. Nandan,
7 Assistant United States
8 Attorneys, of counsel), for
9 Benton J. Campbell, United
10 States Attorney for the Eastern
11 District of New York, Brooklyn,
12 New York, for Defendants-
13 Appellees.
14
15 DENNIS JACOBS, Chief Judge:

16 Fernando Hernandez Diaz seeks the return of $91,743 in

17 cash that was seized from him when he was arrested for

18 failing to declare he was transporting more than $10,000 in

19 United States currency out of the country (in violation of

20 31 U.S.C. §§ 5316(a) and 5322). Diaz appeals from a

21 judgment of the United States District Court for the Eastern

22 District of New York (Ross, J.), dismissing his claim on the

23 ground that the notice of forfeiture satisfied due process.

24 We affirm on a different ground: subject matter

25 jurisdiction is lacking because sovereign immunity bars a

26 federal court from ordering the United States to return

27 funds that have already been disbursed. See ACEquip Ltd. v.

28 American Eng’g Corp., 315 F.3d 151, 155 (2d Cir. 2003) (“Our

29 court may, of course, affirm the district court’s judgment

30 on any ground appearing in the record, even if the ground is

31 different from the one relied on by the district court.”).

2
1 BACKGROUND

2 On October 25, 1999, while Diaz was boarding a flight

3 to his native Colombia, United States Customs agents

4 arrested him and seized $91,743 in cash from his person and

5 luggage. Diaz was charged with attempting to transport

6 $10,000 or more in currency outside the United States

7 without reporting the funds. See 31 U.S.C. §§ 5316(a) and

8 5322. Diaz pled guilty and, on January 24, 2000, was

9 sentenced to the three months he had already served and a

10 fine of $5,000 to be taken from the funds seized. Diaz was

11 removed from the United States soon thereafter. He later

12 returned to the United States and is presently incarcerated

13 for a federal drug offense.

14 In November 1999, Customs sent written notice that the

15 money was seized, that it was subject to forfeiture, and

16 that Diaz had 30 days to petition for relief. The notice

17 was sent to Diaz’s prison address and to his last known

18 residence in Bogota, Colombia. On December 17, 1999, Diaz,

19 through his criminal defense attorney Salvador Cheda,

20 submitted an affidavit documenting the supposedly legitimate

21 source of the cash.

22 On March 30, 2000, Customs sent Cheda its decision

23 denying the petition because Diaz “failed to show sufficient

24 proof of legitimate source of the seized funds.” The

3
1 decision advised Cheda that Diaz had another 30 days to

2 respond by submitting further documentation or else the

3 government would commence administrative forfeiture

4 proceedings. When Diaz missed this deadline, Customs sent

5 Cheda a notice of Final Administrative Action that the cash

6 would be forfeited on June 25, 2000 if by then no claim was

7 filed. Customs also published notice of the seizure in the

8 New York Post (which erroneously gave the date of the

9 seizure as May 15, 1998 rather than October 25, 1999).

10 Neither Diaz nor Cheda responded to these notices. On June

11 26, 2000, Customs administratively forfeited the seized

12 currency. On July 27, 2000, pursuant to an asset sharing

13 agreement, Customs transferred half the currency to the

14 Queens County District Attorney’s Office and half to the

15 U.S. Treasury Forfeiture Fund.

16 More than five years later, in December 2005, Diaz pro

17 se filed this claim, arguing that the notice of the original

18 forfeiture proceeding violated his Fifth Amendment right to

19 due process, and seeking another chance to prove the funds’

20 legitimate source. Diaz styled his claim as a motion under

21 Fed. R. Crim. P. 41(g) for the return of property seized in

22 a criminal proceeding, and the district court treated it as

23 such.

24 On defendants’ motion for summary judgment, the

4
1 district court observed that it is “an open question in this

2 Circuit whether the rule that sovereign immunity bars relief

3 under Rule 41(g) where seized property is no longer

4 available applies to the seizure and subsequent

5 unavailability of fungible currency.” Notwithstanding the

6 district court’s “serious doubt as to its jurisdiction to

7 entertain the claim,” it “assume[d] arguendo that sovereign

8 immunity poses no bar” and proceeded to the merits of the

9 notice argument. Seeing no issue of material fact as to

10 whether the government provided Diaz with adequate notice,

11 the district court dismissed the claim.

12

13 DISCUSSION

14 A

15 Rule 41(g) permits “[a] person aggrieved . . . by the

16 deprivation of property [to] move for the property’s

17 return.” Fed. R. Crim. P. 41(g). A Rule 41(g) motion that

18 is brought after the criminal proceeding is over is treated

19 as a civil equitable action. See Adeleke v. United States,

20 355 F.3d 144, 149 (2d Cir. 2004); United States v.

21 Giovanelli, 998 F.2d 116, 118-119 (2d Cir. 1993). That is

22 what this is.

23 Commencement of a civil or administrative forfeiture

24 proceeding ordinarily deprives the district court of subject

5
1 matter jurisdiction to review the merits of the forfeiture

2 on a Rule 41(g) motion. See De Almeida v. United States,

3 459 F.3d 377, 382 (2d Cir. 2006); United States v. One 1987

4 Jeep Wrangler Auto. VIN # 2BCCL8132HBS12835, 972 F.2d 472,

5 479 (2d. Cir 1992). However, once the forfeiture proceeding

6 is completed, and the claimant no longer has the opportunity

7 to raise objections to the seizure in that forum, civil

8 equitable jurisdiction may be invoked to determine whether

9 proper procedural safeguards were observed. See id. at 480;

10 Polanco v. U.S. Drug Enforcement Agency, 158 F.3d 647, 651

11 (2d Cir. 1998) (finding subject matter jurisdiction in 28

12 U.S.C. § 1331, the general federal question statute, over

13 claim of procedurally deficient forfeiture); United States

14 v. McGlory, 202 F.3d 664, 670 (3d Cir. 2000) (en banc) (“[A]

15 district court has jurisdiction to consider a claim that a

16 person received inadequate notice of completed

17 administrative forfeiture proceedings, notwithstanding that

18 the claim was styled as a Rule 41[(g)] motion and filed

19 after criminal proceedings had been completed.”).

20 The threshold problem with this claim is that the

21 currency taken from Diaz was forfeited and has been

22 disbursed, so that all he can seek now is to be paid the

23 cash equivalent of the seized currency--that is, money from

6
1 the fisc. That claim is frustrated by the principle of

2 sovereign immunity which, absent a waiver, shields the

3 federal government and its agencies from suit. FDIC v.

4 Meyer, 510 U.S. 471, 475 (1994); see United States v.

5 Mitchell, 463 U.S. 206, 212 (1983) (“It is axiomatic that

6 the United States may not be sued without its consent and

7 that the existence of consent is a prerequisite for

8 jurisdiction.”). Waivers of sovereign immunity must be

9 “unequivocally expressed”; the government’s consent to be

10 sued is strictly construed and cannot arise by implication.

11 United States v. Nordic Village, Inc., 503 U.S. 30, 33-34

12 (1992).

13 Rule 41(g) itself, “which simply provides for the

14 return of seized property, does not waive the sovereign

15 immunity of the United States with respect to actions for

16 money damages relating to such property.” Adeleke 355 F.3d

17 at 151 (citing sister circuits that have reached the same

18 conclusion); Bertin v. United States, 478 F.3d 489, 492 (2d

19 Cir. 2007) (citing Adeleke for same). As to civil equitable

20 actions brought for the return of property after the

21 conclusion of criminal proceedings, “such equitable

22 jurisdiction does not permit courts to order the United

23 States to pay money damages when, for whatever reason,

7
1 property is not available for Rule 41(g) return.” Adeleke,

2 355 F.3d at 151. A district court “can order the return of

3 property that is in the hands of the government.” Bertin,

4 478 F.3d at 492 (footnote omitted).

5 This Circuit has not decided whether a court, under

6 Rule 41(g), can order repayment of money seized--which is

7 notionally fungible--once the bills and coins that were

8 seized have been deposited into a government account.1

9 Adeleke held that sovereign immunity barred monetary

10 damages for personal property destroyed while in the

11 government’s possession. Although the Adeleke claimant

12 originally sought return of $1,000 in cash, this aspect of

13 the claim was rendered moot when the government voluntarily

14 paid it back. Adeleke, 355 F.3d at 148. Similarly, in

1
A non-precedential order in a Rule 41(g) context
touched on the question. See Elfand v. United States, 161
F. App’x 150 (2d Cir. 2006) (unpublished). Elfand sought
return of (inter alia) a car and $28,000 cash seized by the
DEA in San Diego. The claim for the car, which had been
sold, was dismissed on the ground that sovereign immunity
bars recovery of money damages in lieu of the return of
property. Id. at 151. Avoiding any characterization of the
claim for cash as one for damages, the order observed that
Elfand was asking for the specific remedy of “‘the very
thing to which he was entitled,’” id. at 152 (quoting Bowen
v. Massachusetts, 487 U.S. 879, 895 (1988) (other internal
quotation marks omitted)), a remedy which might not be
defeated by sovereign immunity. But the issue was left open
(hence the summary disposition), because the Court
transferred venue over Elfand’s claim to the Southern
District of California.
8
1 Bertin, the claimant sought the return only of personal

2 property; because the government had already returned the

3 cash seized upon his arrest, the Court did not need to

4 “consider whether a court, under Rule 41(g), can order the

5 return of fungible cash.” Bertin, 478 F.3d at 492 n.2.

6 As our opinion in Adeleke pointed out, a useful analog

7 can be found in Nordic Village, in which a debtor in

8 bankruptcy sought to have the Internal Revenue Service

9 return an unauthorized tax payment, analogizing its claim to

10 a demand that the government return tangible property seized

11 from a debtor before it filed for bankruptcy protection.

12 See Adeleke, 355 F.3d at 150 (citing Nordic Village, 503

13 U.S. at 39). The Supreme Court held that the bankruptcy

14 court’s in rem jurisdiction did not imply a waiver of

15 sovereign immunity permitting monetary recovery: “A suit

16 for payment of funds from the Treasury is quite different

17 from a suit for the return of tangible property . . . .”

18 Nordic Village, 503 U.S. at 39. Quoting that observation,

19 Adeleke concluded that “[t]he Sovereign’s consent to be sued

20 for the latter form of relief does not imply its consent to

21 be sued for the former.” Adeleke, 355 F.3d at 150.

22 We read this precedent to say that seized currency

23 should be treated like any other seized property: if the

9
1 property is no longer available, sovereign immunity bars the

2 claimant from seeking compensation. Fungibility does not

3 furnish a counter-argument; rather it confirms that money

4 seized from Diaz, now that it is disbursed, can no longer be

5 identified or located in the coffers of the government.

6 True, the fungibility of money argues the ease and precision

7 with which compensation can be achieved; but that says

8 nothing about whether sovereign immunity has been waived to

9 allow payment from the Treasury to compensate for any

10 wrongful seizure of this one form of property. We therefore

11 join in the conclusion of the three sister circuits that

12 have issued precedential decisions on the question. See

13 Bailey v. United States, 508 F.3d 736, 740 (5th Cir. 2007)

14 (instructing district court that if the government no longer

15 possesses the seized cash, “[claimant’s] motion must be

16 denied because the government cannot return property it does

17 not possess, and the doctrine of sovereign immunity bars the

18 award of monetary damages under Rule 41(g).”); Clymore v.

19 United States, 415 F.3d 1113, 1120 (10th Cir. 2005)

20 (remanding for determination of whether the government still

21 possessed claimant’s personal property and cash, and holding

22 as to either item that “sovereign immunity bars monetary

23 relief in a Rule 41[(g)] proceeding when the government no

10
1 longer possesses the property.”); Okoro v. Callaghan, 324

2 F.3d 488, 491 (7th Cir. 2003) (affirming on other grounds,

3 but stating that “[a] suit for restitution is subject to the

4 defense of sovereign immunity when relief would require

5 disbursement of money from the treasury, even if the

6 government is merely an escrow agent holding funds owned by

7 the plaintiff.” (citations omitted)); but see Perez-Colon v.

8 Camacho, 206 F. App’x 1, 4 (1st Cir. 2006) (per curiam)

9 (non-precedential) (describing claim as one for return of

10 the very currency seized and “not damages in substitution

11 for a loss,” and ruling that recovery was not barred despite

12 “the fact that the government obviously cannot restore to

13 [appellant] the specific currency that was seized” (internal

14 quotation marks and citation omitted)).

15 Once seized currency has been disbursed and is no

16 longer available, a claim for its return is analogous to any

17 Rule 41(g) claim for the return of tangible property that is

18 no longer at hand: such claims are jurisdictionally barred

19 by the principle of sovereign immunity. Here, the seized

20 currency has been disbursed to the United States Treasury

21 and the Queens County District Attorney’s Office; it is

22 therefore unavailable for return. In the absence of an

23 express waiver of sovereign immunity, we lack jurisdiction

24 to order the United States to pay the monetary equivalent.

11
1 B

2 Although Diaz styled his claim as a Rule 41(g) motion,

3 we liberally construe his pro se submissions to “to raise

4 the strongest arguments that they suggest,” Burgos v.

5 Hopkins, 14 F.3d 787, 790 (2d Cir. 1994), and therefore

6 consider whether they state a claim under the Federal Tort

7 Claims Act (“FTCA”), 28 U.S.C. §§ 1346(b), 2671-2680. The

8 FTCA waives sovereign immunity, inter alia, for “claims

9 against the United States, for money damages . . . for . . .

10 loss of property . . . caused by the negligent or wrongful

11 act or omission of any employee of the Government while

12 acting within the scope of his office or employment.” Id.

13 § 1346(b)(1); see Adeleke, 355 F.3d at 153. This waiver,

14 however, is made subject to the detention exception,

15 § 2680(c) of the FTCA, which bars claims “arising in respect

16 of . . . the detention of any goods, merchandise, or other

17 property by any officer of customs or excise or any other

18 law enforcement officer.” 28 U.S.C. § 2680(c); see Bertin,

19 478 F.3d at 492.

20 The Civil Asset Forfeiture Reform Act of 2000, Publ L.

21 No. 106-185, 114 Stat. 202 (“CAFRA”), amended § 2680(c) to

22 create an exception to the exception, that is, to permit

23 claims against the United States for injury or loss of goods

24 or property in law enforcement custody if the claimant can

12
1 satisfy four conditions:

2 (1) the property was seized for the
3 purpose of forfeiture under any provision
4 of Federal law providing for the
5 forfeiture of property other than as a
6 sentence imposed upon conviction of a
7 criminal offense;
8
9 (2) the interest of the claimant was not
10 forfeited;
11
12 (3) the interest of the claimant was not
13 remitted or mitigated (if the property
14 was subject to forfeiture); and
15
16 (4) the claimant was not convicted of a
17 crime for which the interest of the
18 claimant in the property was subject to
19 forfeiture under a Federal criminal
20 forfeiture law.
21
22 § 2680(c)(1)-(4); see Ali v. Fed. Bureau of Prisons, 128 S.

23 Ct. 831, 837 (2008). This “re-waiver” of sovereign immunity

24 for a narrow category of forfeiture-related damages claims

25 was a safeguard created by CAFRA in response to the overly

26 enthusiastic pursuit of civil and criminal forfeiture. See

27 United States v. Khan, 497 F.3d 204, 208 (2d Cir. 2007).

28 We need not consider each of § 2680(c)’s requirements

29 in detail as it is immediately clear that Diaz cannot

30 satisfy the last one because he was convicted of the crime

31 for which his property was subject to forfeiture. 28 U.S.C.

32 § 2680(c)(4). Diaz pled guilty to violating the federal

33 currency reporting statute, for which the cash he was

34 carrying was subject to forfeiture. See 31 U.S.C. §

13
1 5317(c). Accordingly, Diaz cannot benefit from § 2680(c)’s

2 re-waiver of sovereign immunity, and there is no federal

3 jurisdiction under the FTCA to hear Diaz’s claim for return

4 of the money. See Adeleke, 355 F.3d at 154.

5

6 CONCLUSION

7 For the foregoing reasons, the judgment of the district

8 court is affirmed.

14