United States v. Various Computers

Opinions of the United
1996 Decisions States Court of Appeals
for the Third Circuit

4-30-1996

United States v. Various Computers
Precedential or Non-Precedential:

Docket 95-3195,95-3378,95-3379

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 UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

____________________

NO. 95-3195/3378/3379
_____________________

UNITED STATES OF AMERICA,
Appellee,

v.

VARIOUS COMPUTERS AND COMPUTER EQUIPMENT,
PARIS FRANCIS LUNDIS,
Appellant.

____________________

On Appeal from the United States District Court
for the Western District of Pennsylvania
D.C. No. 94-2090
District Judge: Honorable William L. Standish

____________________

Argued March 28, 1996

Before: Greenberg, Roth, and Rosenn, Circuit Judges.
(Filed April 30, l996)
_____________________

Frederick W. Thieman, U.S. Attorney
Mary McKeen Houghton, Assistant U.S. Attorney (argued)
633 U.S. Post Office and Courthouse
Pittsburgh, PA 15219
Counsel for Appellee

Shelley Stark, Acting Federal Public Defender
W. Penn Hackney, First Asst. Federal Public Defender
Karen Sirianni Gerlach, Asst. Federal Public Defender (argued)
415 Convention Tower
960 Penn Avenue
Pittsburgh, PA 15222
Counsel for Appellant

1
 ______________________

OPINION OF THE COURT
______________________

Rosenn, Circuit Judge.
The primary, and in this circuit, novel, issue in this

appeal is whether civil forfeiture, pursuant to 18 U.S.C.

§981(a)(1)(C), constitutes punishment for double jeopardy

purposes, when a court has already sentenced a defendant to

imprisonment and the payment of restitution. Paris Francis

Lundis pled guilty in the United States District Court for the

Western District of Pennsylvania to one count of unauthorized use

and possession of credit cards in violation of 18 U.S.C.

§1029(a)(2) & (a)(3). In addition to a ten month prison sentence

and three years of supervised release, the court ordered Lundis

to pay $13,674.50 restitution, the value of several pieces of

computer equipment fraudulently obtained by Lundis. Further, the

court deemed the equipment to be proceeds of Lundis's crime, and

thus forfeitable to the United States pursuant to 18 U.S.C. § 981

(a)(1)(C). The court issued a final order of forfeiture on March

28, 1995.

We conclude that we have jurisdiction and affirm.

I.

On September 21, 1994, Lundis pled guilty to Count I of a

four count indictment charging him with unauthorized use and

2
possession of credit cards in violation of 18 U.S.C. §§1029(a)(2)

and (a)(3). Lundis admitted that he stole the cards and used

them to illegally purchase computers and computer equipment. The

trial court sentenced him to ten months imprisonment, and ordered

that he pay $13,674.50 in restitution to the store where he

obtained the computers.

At the sentencing hearing, Lundis requested that the court

allow him to keep the property in light of the court's

requirement that he pay restitution.0 The Government argued that

the computers were proceeds of Lundis's crime, and thus were

subject to civil forfeiture pursuant to 18 U.S.C. §981(a)(1)(C).0

The court denied Lundis's request for possession of the property,

stating that the computers were forfeitable "as a matter of law."

On December 9, 1994, the Government instituted civil

forfeiture proceedings in rem against the computers by filing a

verified complaint for forfeiture. The Government contends that

it personally served a warrant of arrest and complaint for

forfeiture against the computers upon Lundis at the Allegheny

County Jail on February 1, 1995. Lundis timely filed a claim to

0
Lundis contends that the computers contain personal material
such as music scores. The Government asserts that the computers
contain information on various stolen credit cards, as well as
instructions on how to "clone" a cellular phone.
0
Section 981 provides, in pertinent part, for the civil
forfeiture to the United States of:

(a)(1)(C) Any property, real or personal, which
constitutes or is derived from proceeds traceable to a
violation of Section ... 1029 ... of this title ....

18 U.S.C. § 981.

3
the computers and an answer to the Government's complaint, along

with a motion to proceed in forma pauperis and for appointment of

counsel.

The Government opposed Lundis's request to proceed in forma

pauperis and his request for counsel. It also filed a motion to

dismiss Lundis's claim. In the motion to dismiss, the Government

asserted that Lundis's claim to the computers was defective

because it was not verified as required by Supplemental Rule C(6)

for Certain Admiralty and Maritime Claims ("Rule C(6)"). Lundis

timely filed a response in opposition to the Government's motion

to dismiss, admitting that his claim was neither verified nor

properly served, but asserting that the procedural defects were

due to his pro se and prison status. The district court

dismissed Lundis's claim and entered a Judgment and Final Order

of Forfeiture on March 28, 1995, in favor of the United States.

Throughout these proceedings, Lundis filed many documents

pro se with the district court, including three "Notices of

Appeal."0 Lundis filed motions for leave to appeal in forma

pauperis and for appointment of counsel with this court, and this

court granted the motions.0

II.

0
His first notice attempted to appeal from the district court's
March 20, 1995 order: (1) denying Lundis's motion for
appointment of counsel; (2) denying Lundis's motion to proceed in
forma pauperis; and (3) dismissing Lundis's claim to the
computers.
0
This court first dismissed Lundis's appeal for failure to timely
prosecute, then vacated the dismissal and reinstated the appeal.

4
 The Government raises jurisdictional issues contending that

Lundis has not appealed from the final order of forfeiture. We

have plenary review over questions of jurisdiction. See Anthuis

v. Colt Indus. Operating Corp., 971 F.2d 999, 1002 (3rd Cir.

1992).

The district court's dismissal of Lundis's claim to the

property had the effect of denying him standing, and thus barred

him from appealing the final forfeiture order. Without a

colorable claim to the computers, Lundis lacked standing to

challenge the forfeiture proceedings. Thus, as a threshold

question, we must address whether the court properly denied

Lundis's pro se motion to intervene in the forfeiture

proceedings.

A.

Rule C(6) requires a claimant to property in a civil

forfeiture to file a verified claim with the district court. The

rule provides, in relevant part:
(6) Claim and Answer; Interrogatories. The claimant of
property that is the subject of an action in rem shall
file a claim within 10 days after process has been
executed, or within such additional time as may be
allowed by the court . . . . The claim shall be
verified on oath or solemn affirmation, and shall state
the interest in the property by virtue of which the
claimant demands its restitution and the right to
defend this action.

Supplemental Rule C(6) for Certain Admiralty and Maritime Claims

(emphasis added).

5
 After the Government initiated forfeiture proceedings,

Lundis duly filed a "Claim and Cost Bond and Affidavit in forma

pauperis" in which he asserted that the computer equipment the

Government confiscated rightfully belonged to him. This claim

conformed to the rules in every respect except it lacked a

verification.

The purpose of Rule C(6) is to require claimants to come

forward as quickly as possible after the initiation of forfeiture

proceedings, so that the court may hear all interested parties

and resolve the dispute without delay. See United States v. 1982

Yukon Delta Houseboat, 774 F.2d 1432, 1436 (9th Cir. 1985). The

Rule requires claims to be verified upon oath or solemn

affirmation to minimize the danger of false claims. Id. We

understand the importance of these goals. On the facts of this

case, however, a verification by Lundis, as we note below, would

have been superfluous.

The fundament of Lundis's claim to ownership of the

computers is his obligation to make restitution to the owners of

the computer equipment. This order of restitution came from the

district court. Both the court and the Government were aware of

the source of Lundis's interest in the property and the basis for

his claim of ownership. Thus, the verification would not have

added to the authenticity of Lundis's petition. We therefore

believe that it was error under these circumstances to reject

Lundis's claim merely because of the absence of verification,

especially in light of Lundis's pro se status and his lack of any

knowledge of Rule C(6).

6
 With his colorable claim to ownership of the computers, we

believe that Lundis had standing at least to challenge the

forfeiture proceedings. See United States v. Property at 4492 S.

Livonia Rd., Livonia, 889 F.2d 1258, 1262 (2nd Cir. 1989); see

also United States v. $38,000 in United States Currency, 816 F.2d

1538, 1544 (11th Cir. 1987) ("A claimant need not own the

property in order to have standing to contest its forfeiture; a

lessor property interest, such as a possessory interest, is

sufficient for standing."). We do not believe that we may

equitably deny Lundis standing where his actions have not

thwarted the goals of Rule C(6). See United States v. One Urban

Lot Located at 1 Street A-1, 885 F.2d 994, 1001 (1st Cir. 1989);

Property at 4492 S. Livonia, 889 F.2d at 1262; 1982 Yukon Delta

Houseboat, 774 F.2d at 1436.

To dismiss Lundis's claim for failure to include a verified

statement would "contradict[] both old-fashioned common sense and

the time-honored admiralty principle that pleadings and

procedural practices in maritime actions should be applied

liberally." One Urban Lot, 885 F.2d at 1001. Under the

extraordinary circumstances we have here, an inability to timely

appeal from the forfeiture of the disputed property because of

the erroneous denial of standing, we will allow the defendant to

appeal.

III.

Whether the forfeiture of the computers violated the Double

Jeopardy Clause is an interesting question of law subject to

7
plenary review. See United States v. Baird, 63 F.3d 1213, 1215

(3rd Cir. 1995), cert. denied, ___ U.S. ___, 116 S.Ct. 909

(1996).

Although the Double Jeopardy Clause provides that no person

"subject for the same offence to be twice put in jeopardy of life

or limb," U.S. Const. amdt. 5, the Supreme Court has explained

that the Clause "protects against three distinct abuses: a

second prosecution for the same offense after acquittal; a second

prosecution for the same offense after conviction; and multiple

punishments for the same offense." See United States v. Halper,

490 U.S. 435, 440 (1989). Lundis contends that the district

court violated the prohibition against multiple punishments by

first ordering him to pay restitution for the value of the

computers, and later, in a subsequent forfeiture proceeding,

allowing forfeiture of the computers to the United States.

The relevant inquiry for this court is whether the

forfeiture procedures under 18 U.S.C. § 981 constitute punishment

for double jeopardy purposes. See Halper, 490 U.S. at 441.

Recent Supreme Court cases note that civil sanctions may

constitute punishment in certain circumstances. See Austin v.

United States, ___U.S.___, 113 S.Ct. 2801, 2812 (1993) (civil

forfeiture pursuant to 21 U.S.C. § 881(a)(4) and (a)(7)

constitute punishment); Halper, 490 U.S. at 447 ("the labels

'criminal' and 'civil' are not of paramount importance" in

assessing the punitive character of a statute).

In Halper, the trial court sentenced the defendant, Irwin

Halper, to two years imprisonment and fined him $5,000 for

8
violating the criminal false claims statute, 18 U.S.C. § 287.

The Government later proceeded against Halper under the civil

False Claims Act, 31 U.S.C. §§ 3729-3731. The provisions of the

civil Act provided for a penalty of $2,000 for each violation of

the Act. Halper had violated the Act 65 times, and thus the

Government contended he was subject to a penalty of more than

$130,000. Halper, 490 U.S. at 438-39.

The district court in Halper refused to impose the full

$130,000 penalty, finding that the full penalty would violate the

Double Jeopardy Clause in light of Halper's previous criminal

punishment. The district court determined that the penalty would

constitute punishment unless it served a remedial purpose.

Sanctions serving a remedial purpose make the Government whole

for such costs as detection, investigation and prosecution of a

criminal. See id. at 445, 449. The court in Halper found that

the amount of the penalty was "entirely unrelated" and bore no

"rational relation" to the actual damages incurred by the

Government. Thus, it held that the $130,000 penalty would

"punish" Halper a second time in violation of the Double Jeopardy

Clause. The Supreme Court agreed. It noted that punishment

serves the "twin aims of retribution and deterrence," and

explained:
[I]t follows that a civil sanction that cannot fairly
be said solely to serve a remedial purpose, but rather
can only be explained as also serving either
retributive or deterrent purposes, is punishment, as we
have come to understand the term. . . . We therefore
hold that under the Double Jeopardy Clause a defendant
who already has been punished in a criminal prosecution
may not be subjected to an additional civil sanction to
the extent that the second sanction may not fairly be

9
 characterized as remedial, but only as a deterrent or
retribution.

0
Id. at 448-49.
In Austin, 113 S.Ct. 2901, the Court applied the Halper

analysis to the forfeiture provisions of 21 U.S.C. §§ 881(a)(4)

and (a)(7), and found that those provisions constituted

punishment for purposes of the Eighth Amendment's Excessive Fines

Clause.0 The Court noted that, historically, forfeiture was

understood to be a punishment. Further, the Court found that the

statute's emphasis on the culpability of the party indicated a

congressional intent to punish. The Court concluded that

forfeiture provisions deemed to be partially or entirely punitive

in nature constitute punishment. Id. at 2811-12.

It is important to note that Austin involved forfeiture

proceedings pursuant to 21 U.S.C. § 881(a)(4) and (a)(7). These

0
The court remanded the case to the trial court to determine "the
size of the civil sanction the Government may receive without
crossing the line between remedy and punishment." Id. at 450.
0
21 U.S.C. § 881(a)(4) and (a)(7) provide, in relevant part:

(a) The following shall be subject to forfeiture to the
United States and no property right shall exist in them:

(4) All conveyances, including aircraft, vehicles, or
vessels, which are used, or are intended for use, to
transport, or in any manner to facilitate the
transportation, sale, receipt, possession, or
concealment or [controlled substances].

. . .

(7) All real property . . . which is used, or intended
to be used, in any manner or part, to commit, or to
facilitate the commission of, a violation of this
subchapter . . . .

10
statutes involve property that facilitates illegal activity, and

thus run the danger of commanding forfeiture of items that bear a

disproportionate relationship to the government's costs.0 See

Austin, 113 S. Ct. at 2812 n.14 ("The value of the conveyances

and real property forfeitable under §§ 881 (a)(4) and (a)(7) . .

. can vary so dramatically that any relation between the

Government's actual costs and the amount of the sanction is

merely coincidental."). We believe these statutes may be

distinguished from the statute implicated in the instant case, 18

U.S.C. § 981(a)(1)(C). In Section 981(a)(1)(C), the forfeitable

property is limited to proceeds of the crime. At least two

courts of appeals have distinguished the Supreme Court's decision

in Austin as inapplicable to cases where the only property the

government seizes are direct proceeds of an illegal act. See

United States v. Salinas, 65 F.3d 551, 553 (6th Cir. 1995);

United States v. Tilley, 18 F.3d 295, 300 (5th Cir. 1994), reh'g

denied, 22 F.3d 1096 (5th Cir. 1994), cert. denied ___ U.S. ___,

115 S. Ct. 574 (1994).

Tilley involved, inter alia, a challenge to the forfeiture

provisions of 21 U.S.C. §§ 881(a)(6) and (a)(7).0 The defendants

sought dismissal of their criminal indictment for selling drugs,

0
For example, the Government invokes these statutes to confiscate
automobiles or real estate that a party may have used as a base
to make a drug sale.
0
Section 881(a)(6) provides for the forfeiture of all moneys,
securities, etc. furnished in exchange for a controlled
substance, or used to facilitate a violation of the drug laws.
Section 881(a)(7), as discussed in footnote 8, provides for the
forfeiture of real property. The court in Tilley deemed all the
property forfeited to be proceeds of the defendants' crime. See
Tilley, 18 F.3d at 297 n. 2.

11
arguing that the prior civil forfeiture of the proceeds of the

drug sales constituted punishment for double jeopardy purposes.

The Fifth Circuit court of appeals found that the forfeited

property constituted unlawful proceeds to be a crucial factor in

its analysis. Id. at 298. It noted that, unlike the fines

imposed in Halper, the forfeiture of proceeds bore a rational

relationship to the costs to the government and society of the

illegal act. Id. at 299. The Tilley court found the Supreme

Court's decision in Austin inapplicable. It noted that Austin

dealt with forfeitures under Sections 881(a)(4) (conveyances) and

(a)(7) (real estate), and that, unlike proceeds of a crime, these

provisions may have no proportional relationship to the costs to

the government. The court explained:
[A] forfeiture proceeding may constitute punishment
because it involves the extraction of lawfully derived
property from the forfeiting party. . . . When,
however, the property taken by the government was not
derived from lawful activities, the forfeiting party
loses nothing to which the law ever entitled him. . . .
[T]he forfeiture . . . does not punish the defendant
because it exacts no price in liberty or lawfully
derived property from him. The possessor of proceeds
from illegal drug sales never invested honest labor or
other lawfully derived property to obtain the
subsequently forfeited proceeds. Consequently, he has
no reasonable expectation that the law will protect,
condone, or even allow, his continued possession of
such proceeds because they have their very genesis in
illegal activity.
. . .

Consequently, instead of punishing the forfeiting
party, the forfeiture of illegal proceeds, much like
the confiscation of stolen money from a bank robber,
merely places that party in the lawfully protected
financial status quo that he enjoyed prior to launching
his illegal scheme. This is not punishment "within the
plain meaning of the word."

12
Id. at 300 (citations omitted).

We have already adopted Tilley's rationale as the
controlling law of this circuit for civil forfeiture of proceeds

under 21 U.S.C. § 881(a)(6). See United States v. $184,505.01 in

United States Currency, 72 F.3d 1160, 1168-69 (3rd Cir. 1995)

("We find the Fifth Circuit's reasoning [in Tilley] to be sound.

We therefore hold that the forfeiture under 21 U.S.C. § 881(a)(6)

of proceeds from illegal drug transactions, or proceeds traceable

to such transactions, does not constitute "punishment" within the

meaning of the Double Jeopardy Clause."). Following $184,505.01,
we find Tilley equally persuasive for civil forfeitures under 18

U.S.C. § 981(a)(1)(C).

We see no reason why our holding in $184,505.01 is not

controlling.0 First, the statute at issue in this case and the

statute at issue in $184,505.01 are parallel. Although the two

forfeiture provisions use different language, we read them to

mean the same thing. Both provide for forfeiture of proceeds.

Compare 18 U.S.C. § 981(a)(1)(C) (providing for forfeiture of any
0
At oral argument, counsel for appellant attempted to distinguish
$184,505.01 by saying it dealt only with administrative
forfeiture. This is plainly incorrect. Although the Government
initially brought an administrative forfeiture proceeding against
$14,000 and certain other property, it later converted that
proceeding to a judicial forfeiture action. See 72 F.3d at 1162-
63 ("The DEA began separate administrative forfeiture proceedings
. . . [then] referred the forfeitures to the United States
Attorney, who filed complaints for civil forfeiture"). The
forfeiture action against the $184,505.01 that formed the basis
for our double jeopardy rulings was at all times a judicial
forfeiture. See id. at 1162 n.5 ("The DEA referred the
forfeiture of the $184K to the United States Attorney for
judicial forfeiture, because its value exceeded $100,000, the
maximum allowable amount for the . . . administrative forfeiture
process.").

13
property "which constitutes or is derived from proceeds traceable

to a violation of Section . . . 1029 . . . of this title . . . .

") with 21 U.S.C. § 881(a)(6) (providing for forfeiture of all

moneys "furnished in exchange for a controlled substance").

Because our decision in $184,505.01 dealt specifically with

forfeiture of proceeds under § 881(a)(6), the additional language

in that provision dealing with forfeiture of money "used to

facilitate a violation of the drug laws" is of no moment. That

this case involves a different statute is not enough to

distinguish $184,505.01.

Second, when viewed in terms of the reasoning in Tilley,

the relationship between the forfeited property and the

underlying offense in this case is identical to that found in

$184,505.01. Just like the proceeds of drug trafficking, the

proceeds of credit card fraud vary directly with the severity of

the crime: The more items purchased with stolen credit cards,

the more property that will ultimately be forfeited to the

government. See $184,505.01, 72 F.3d at 1168 ("[T]he forfeiture

of drug proceeds will always be directly proportional to the

amount of drugs sold. The more drugs sold, the more proceeds

that will be forfeited." (quoting Tilley, 18 F.3d at 300)). The

involvement in this case of a different underlying offense is

therefore unimportant.

Finally, our reasoning in $184,505.01 applies even if

Lundis has already paid an amount of restitution equal to the

value of the stolen computers. We noted in $184,505.01 that two

rationales were at work in Tilley, first that the forfeited

14
amounts were directly proportional to the severity of the crime,

and second that forfeiture was not punishment because of the very

nature of illegally derived property. Id. at 1168. Post-

restitution forfeiture comports with both. Under the first,

paying restitution plus forfeiture at worst forces the offender

to disgorge a total amount equal to twice the value of the

proceeds of the crime. Given the many tangible and intangible

costs of criminal activity, this is in no way disproportionate to

"the harm inflicted upon government and society by the

[offense]." Tilley, 18 F.3d at 300. Under the second rationale,

payment of restitution in no way alters the status of the

property as ill-gotten gains. Restitution operates to make the

victim of the crime whole, not to confer legal ownership on the

offender of the stolen property. As a result, Lundis's payment

of restitution prior to forfeiture makes no difference in our

double jeopardy analysis.

Following $184,505.01, we hold that forfeiture of proceeds

under § 981(a)(1)(C) is not punishment. In reaching this

outcome, we remain aware of contrary authority. Lundis urges us

to follow the Court of Appeals for the Ninth Circuit's ruling in

United States v. $405,089.23 United States Currency, 33 F.3d 1210

(9th Cir. 1994), reh'g denied and modified on other grounds, 56

F.3d 41 (9th Cir. 1995), cert. granted, ___ U.S. ___, 116 S.Ct.

762 (1996), which held that civil forfeiture under 18 U.S.C.

§981(a)(1)(A) and 21 U.S.C. § 881(a)(6) constitute punishment

barred by the Double Jeopardy Clause. See also United States v.

9844 S. Titan Court, 75 F.3d 1470 (10th Cir. 1996) (rejecting

15
reasoning of Tilley and $184,505.01, following $405,089.23). In

$184,505.01, "we reject[ed] the contrary reasoning and

conclusions of the Ninth Circuit regarding § 881(a)(6)." 72 F.3d

at 1169. With nothing to distinguish this case from $184,505.01,

we again reject the Ninth Circuit's reasoning in regards to

§981(a)(1)(C).0

Given this interpretation of 18 U.S.C. § 981(a)(1)(C), it

follows that Lundis's forfeiture of his computer equipment did

not constitute punishment for purposes of the Double Jeopardy

Clause. The district court committed no error in rejecting

Lundis's double jeopardy claim.

B.

Lundis also asserts that the forfeiture of the computers

violates the Excessive Fines Clause of the Eighth Amendment.

Constitutional interpretations are questions of law subject to

plenary review. See Epstein Family Partnership, 13 F.3d 762, 766

(3rd Cir. 1994).

The Eighth Amendment prohibits excessive bail, excessive

fines, and cruel and unusual punishment. Lundis may only succeed

in challenging the forfeiture as a violation of the Excessive

Fines Clause if the forfeiture provision constitutes a

0
Indeed, our rejection of $405,089.23 seems even more warranted
here: As discussed above, § 981(a)(1)(C) is a pure proceeds
statute. By contrast, § 981(a)(1)(A) covers property "involved
in" an offense, and § 881(a)(6) covers both proceeds and money
"used to facilitate" an offense. To the extent that our holding
rests on the unique status of proceeds, its logic applies most
strongly to § 981(a)(1)(C).

16
"punishment." See Austin, 113 S. Ct. at 2804. The computers

forfeited pursuant to 18 U.S.C. § 981(a)(1)(C) were proceeds of

Lundis's criminal activity. As discussed above, the forfeiture

provision in the instant case does not constitute "punishment."

Thus, Lundis's Excessive Fines claim has no merit.

IV.

In sum, we hold that the district court improperly

dismissed Lundis's claim to the property subject to forfeiture.

Although his claim did not contain a verification of ownership,

under the facts of this case, Lundis presented a colorable claim

to the property to grant this court jurisdiction.

On the merits, we hold that the forfeiture of the

computers, which were proceeds of Lundis's crime, and to which he

had no legal rights of ownership, did not constitute punishment.

Thus, the forfeiture did not violate the Double Jeopardy or

Excessive Fines Clauses.

Accordingly, the order of forfeiture of the district court

will be affirmed.

17