Acadia Technology, Inc. v. United States

United States Court of Appeals for the Federal Circuit

05-5178

ACADIA TECHNOLOGY, INC.,
and
GLOBAL WIN TECHNOLOGY, LTD.,

Plaintiffs-Appellants
v.

UNITED STATES,

Defendant-Appellee.

Mattaniah Eytan, of Corte Madera, California, argued for plaintiffs-appellants.

Marla T. Conneely, Trial Attorney, Commercial Litigation Branch, Civil Division,
United States Department of Justice, of Washington, DC, argued for defendant-appellee.
With her on the brief were Peter D. Keisler, Assistant Attorney General; David M. Cohen,
Director; and Mark A. Melnick, Assistant Director. Of counsel was Marta Whearley, Office
of Assistant Chief, U.S. Bureau of Customs and Border Protection, of San Francisco,
California.

Brian F. Burke, Baker & McKenzie LLP, of Washington, DC, for amicus curiae. With
him on the brief was Kristine E. Pirnia. Of counsel on the brief were Nancie G. Marzulla
and Roger J. Marzulla, Defenders of Property Rights, of Washington, DC.

Appealed from: United States Court of Federal Claims

Senior Judge Robert H. Hodges, Jr.
 United States Court of Appeals for the Federal Circuit

05-5178

ACADIA TECHNOLOGY, INC.,
and
GLOBAL WIN TECHNOLOGY, LTD.,

Plaintiffs-Appellants,

v.

UNITED STATES,

Defendant-Appellee.

__________________________

DECIDED: August 8, 2006
___________________________

Before BRYSON, Circuit Judge, ARCHER, Senior Circuit Judge, and GAJARSA, Circuit
Judge.

BRYSON, Circuit Judge.

The appellants, importers of computer parts, contend that their imported goods

were taken without just compensation, in violation of the Fifth Amendment, when the

government seized their goods upon importation and did not return them for a period of

more than four years. The Court of Federal Claims held that the appellants failed to

state a claim on which relief could be granted. Acadia Tech., Inc. v. United States, 65

Fed. Cl. 425 (2005). We affirm.
 I

Appellants Acadia Technology, Inc., and Global Win Technology, Ltd.,

(collectively, “Acadia”) own the property at issue in this appeal, 20,923 cooling fans for

computer central processing units. Acadia sought to import those goods into the United

States in three shipments in October 1997 and February 1998.

Underwriters Laboratories (“UL”) is a testing laboratory that examines and tests

various products for compliance with safety standards. If UL finds that a manufacturer’s

goods comply with applicable standards, UL authorizes the manufacturer to affix UL’s

certification marks to its goods. The “reverse UR” is a certification mark that UL issues

for electrical components of multi-component devices (such as computer cooling fans).

Section 42 of the Lanham Act, 15 U.S.C. § 1124, forbids importation of

merchandise “which shall copy or simulate a [registered] trademark.” Section 526(e) of

the Tariff Act of 1930, 19 U.S.C. § 1526(e), provides that any merchandise bearing a

counterfeit mark (within the meaning of 15 U.S.C. § 1127) that is imported into the

United States in violation of 15 U.S.C. § 1124 “shall be seized and, in the absence of

the written consent of the trademark owner, forfeited for violations of the customs laws.”

In October 1997, U.S. Customs and Border Protection (“Customs”), acting

pursuant to section 526(e) of the Tariff Act, detained a shipment of Acadia’s cooling

fans that bore the “reverse UR” mark. After receiving a letter from UL on October 16,

1997, stating that UL believed the use of the marks to be unauthorized and counterfeit,

Customs seized the fans. On February 2 and 3, 1998, Customs seized two more

shipments of Acadia’s cooling fans, again after receiving letters from UL stating that UL

believed that the use of the “reverse UR” mark on the fans was unauthorized and

05-5178 2
counterfeit. According to the complaint, the three shipments of cooling fans had a total

value of approximately $125,130 when they were seized.

After Customs seized the fans, it notified Acadia of the seizure and advised

Acadia that it would initiate summary forfeiture proceedings unless Acadia filed a claim

of ownership. In letters dated April 16, 1998, and July 29, 1998, Acadia requested that

Customs terminate the summary forfeiture proceedings. Acadia submitted forms in

which it requested that the matter be transferred to the Department of Justice for the

institution of a judicial civil forfeiture action.

The matter was transferred to the Department of Justice in accordance with

Acadia’s request, but a forfeiture complaint was not promptly filed. On October 8, 2002,

after a period of more than four years, the Department of Justice filed a civil forfeiture

action in the United States District Court for the Northern District of California, seeking

forfeiture of all three of Acadia’s shipments. A year later, on October 15, 2003, the

district court entered a stipulation and order of dismissal. Under the terms of the order,

the forfeiture action was dismissed. The stipulated dismissal provided that each party

was to bear its own costs. The fans were thereafter returned to Acadia. At that point,

according to Acadia’s complaint, the fans had become obsolete and their only value

was as scrap, for which purpose they were worth only about $41,000.

After the dismissal of the forfeiture action, Acadia filed this action in the Court of

Federal Claims, claiming the right to recover the difference between the value of the

fans at the time they were seized and their value when they were returned. The

government moved to dismiss the complaint for lack of subject matter jurisdiction and

for failure to state a claim upon which relief could be granted. In its opposition to the

05-5178 3
government’s motion to dismiss, Acadia conceded that the Court of Federal Claims

lacked jurisdiction over two of its claims, but it argued that the court had jurisdiction over

its claim that the government’s actions violated the Takings Clause of the Fifth

Amendment and that Acadia was entitled to recover the loss in the value of the fans as

just compensation for the taking. The Court of Federal Claims granted the

government’s motion to dismiss the takings claim for failure to state a claim, and Acadia

now appeals.

II

Acadia argues that the government’s actions constituted a taking for two

independent reasons. First, Acadia argues that the seizure of its goods was a taking

because it was not authorized by the statute under which Customs seized Acadia’s

goods. Second, Acadia argues that the government’s delay of several years in initiating

forfeiture proceedings was unreasonable and therefore constituted a taking regardless

of whether the initial seizure was lawful.

A

With respect to the lawfulness of the original seizure, Acadia contends that 19

U.S.C. § 1526(e), the statute on which Customs relied to seize the cooling fans, applies

only to counterfeit trademarks, and not to false certification marks such as the “reverse

UR” mark at issue in this case. Section 1526(e) provides that any merchandise

“bearing a counterfeit mark (within the meaning of section 1127 of title 15) imported into

the United States in violation of the provisions of section 1124 of title 15, shall be seized

and . . . forfeited for violations of the customs laws.” 19 U.S.C. § 1526(e). Section 1127

of title 15 defines a “mark” to include “any trademark, service mark, collective mark, or

05-5178 4
certification mark,” and it defines “counterfeit” as “a spurious mark, which is identical

with, or substantially indistinguishable from, a registered mark.” 15 U.S.C. § 1127.

Section 1124 of title 15 provides, in pertinent part, that “no article of imported

merchandise . . . which shall copy or simulate a trademark registered in accordance

with the provisions of [the Lanham] Act . . . shall be admitted to entry.” 15 U.S.C.

§ 1124. Acadia points to the use of the term “trademark” in section 1124 and argues

that section 1124 (and thus the seizure and forfeiture provisions of section 1526(e))

apply to trademarks, but not to certification marks. For that reason, Acadia argues, the

seizure of Acadia’s cooling fans was unlawful and therefore compensable as a taking.

Both the trial court in this case and the United States District Court for the

Northern District of California in United States v. 10,510 Packaged Computer Towers,

152 F. Supp. 2d 1189, 1194-97 (N.D. Cal. 2001), have disagreed with Acadia’s

construction of section 1526(e) and have held that the statute applies to counterfeit

certification marks as well as counterfeit trademarks. This court has never addressed

that question, and it is unnecessary for us to do so here. For purposes of determining

whether there has been a taking of Acadia’s property without just compensation, it is

unnecessary to determine whether section 1526(e) applies to the particular goods at

issue in this case. That is because a takings claim is separate from a challenge to the

lawfulness of the government’s conduct: a taking does not result simply because the

government acted unlawfully, nor does a takings claim fail simply because the

government’s conduct is subject to challenge as unlawful.

As we explained in Rith Energy, Inc. v. United States, 247 F.3d 1355 (Fed. Cir.

2001), “an uncompensated taking and an unlawful government action constitute ‘two

05-5178 5
separate wrongs that give rise to two separate causes of action.’” Id. at 1365 (quoting

Del-Rio Drilling Programs, Inc. v. United States, 146 F.3d 1358, 1364 (Fed. Cir. 1998)).

“[A] property owner is free either to sue in district court for asserted improprieties

committed in the course of the challenged action or to sue for an uncompensated taking

in the Court of Federal Claims.” Id. As such:

[I]n a takings case we assume that the underlying action was lawful and
we decide only whether the governmental action in question constituted a
taking for which compensation must be paid. [The appellant’s] complaints
about the wrongfulness of the [government action] are therefore not
properly presented in the context of its takings claim. The only question
before us is whether [the appellant] was entitled to be compensated for
the effects of that action.

Rith Energy, Inc. v. United States, 270 F.3d 1347, 1352-53 (Fed. Cir. 2001) (on petition

for rehearing); see also Lingle v. Chevron U.S.A., Inc., 544 U.S. 528, 543 (2005); Lion

Raisins, Inc. v. United States, 416 F.3d 1356, 1369 (Fed. Cir. 2005) (“We have made

clear that a claim premised on a regulatory violation does not state a claim for a

taking.”); John Corp. v. City of Houston, 214 F.3d 573, 579 n.9 (5th Cir. 2000) (citing

cases for the proposition that “the Takings Clause presupposes legitimate government

action”); Crocker v. United States, 125 F.3d 1475, 1476 (Fed. Cir. 1997) (Tucker Act

does not create jurisdiction in the Court of Federal Claims for a party contesting the

propriety of a seizure); Tabb Lakes, Ltd. v. United States, 10 F.3d 796, 802 (Fed. Cir.

1993) (“[The] claimant must concede the validity of the government action which is the

basis of the taking claim to bring suit under the Tucker Act.”); Fla. Rock Indus., Inc. v.

United States, 791 F.2d 893, 905 (Fed. Cir. 1986). Acadia’s assertion that Customs’

actions ran afoul of the Customs statutes therefore does not form the basis for a legal

claim under the Takings Clause of the Fifth Amendment. See Lion Raisins, 416 F.3d at

05-5178 6
416 (“Because Lion’s takings claim was premised on the allegations that the

[government agency] violated the statute and regulations, the Court of Federal Claims

properly dismissed the complaint.”). For takings purposes, we therefore must assume

the government conduct at issue in this case was not unlawful.

Assuming that Customs’ seizure of Acadia’s goods was lawful, the question

presented by Acadia’s first argument becomes whether the seizure of property to

enforce an intellectual property provision of the Tariff Act is the sort of “public use” of

private property for which the Takings Clause of the Fifth Amendment requires

compensation. The case law makes clear that it is not.

When property has been seized pursuant to the criminal laws or subjected to in

rem forfeiture proceedings, such deprivations are not “takings” for which the owner is

entitled to compensation. Bennis v. Michigan, 516 U.S. 442, 452-53 (1996); Calero-

Toledo v. Pearson Yacht Leasing Co., 416 U.S. 663, 680 (1974); Van Oster v. Kansas,

272 U.S. 465, 468 (1926). The same rule applies even if the property is seized as

evidence in a criminal investigation or as the suspected instrumentality of a crime, but is

ultimately returned to the owner either because the government does not pursue

forfeiture proceedings or because the owner prevails in a forfeiture action. See, e.g.,

United States v. $7,990.00 in U.S. Currency, 170 F.3d 843, 845-46 (8th Cir. 1999)

(“[T]he government’s temporary possession of seized property that it ultimately returned

to a forfeiture claimant . . . is not a ‘taking’ for Fifth Amendment purposes.”); United

States v. One 1979 Cadillac Coupe de Ville, 833 F.2d 994, 1000 (Fed. Cir. 1987);

United States v. Various Gambling Devices, 478 F.2d 1194, 1198 (5th Cir. 1973); Seay

05-5178 7
v. United States, 61 Fed. Cl. 32, 35 (2004); Crocker v. United States, 37 Fed. Cl. 191,

195-96, aff’d, 125 F.3d 1475 (Fed. Cir. 1997).

In One 1979 Cadillac, the government seized the claimant’s car and brought a

forfeiture action in district court, alleging that the car had been used in a narcotics

transaction. The jury ruled in favor of the owner of the car, and the district court ordered

the government to pay $4,050 in damages, which represented the decrease in value

over the 30 months between the initial seizure and the court’s ruling. 833 F.2d at 996.

We reversed, holding that the government’s seizure and retention of the property did not

constitute a taking. Id. at 1000-01. Similarly, in Seay, the Court of Federal Claims held

that the government did not have a duty to compensate the claimant where the

government seized property and returned it to the claimants in a damaged condition

nearly six years after the seizure. 61 Fed. Cl. at 35. The government’s seizure,

retention, and damaging of the property did not give rise to an actionable claim for a

taking, the court reasoned, because “items properly seized by the government under its

police power are not seized for ‘public use’ within the meaning of the Fifth Amendment.”

Id.

Although there is no underlying allegation of criminal conduct in the present case

as there was in One 1979 Cadillac and Seay, there is no reason to treat civil forfeitures

differently for purposes of takings analysis simply because Congress has directed that

the forfeitures be enforced through civil rather than criminal proceedings. A Customs

seizure of goods suspected of bearing counterfeit marks is a classic example of the

government’s exercise of the police power to condemn contraband or noxious goods,

an exercise that has not been regarded as a taking for public use for which

05-5178 8
compensation must be paid. See Lucas v. S.C. Coastal Council, 505 U.S. 1003, 1027-

28 (1992) (“[I]n the case of personal property, by reason of the State’s traditionally high

degree of control over commercial dealings, [the owner] ought to be aware of the

possibility that new regulation might even render his property economically worthless.”);

Andrus v. Allard, 444 U.S. 51, 66-67 (1979) (“Regulations that bar trade in certain goods

have been upheld against claims of unconstitutional taking.”); $7,990.00 in U.S.

Currency, 170 F.3d at 845 (“[T]he forfeiture of contraband is an exercise of the

government’s police power, not its eminent domain power.”); see also Lee v. City of

Chicago, 330 F.3d 456, 476 (7th Cir. 2003) (D. Wood, J., concurring) (“[I]n rem

forfeitures of property used for illicit purposes are non-compensable exercises of the

government’s police power.”). While it is insufficient to avoid the burdens imposed by

the Takings Clause simply to invoke the “police powers” of the state, regardless of the

respective benefits to the public and burdens on the property owner, the prohibition on

importing goods bearing counterfeit marks that misrepresent their quality and safety is

the kind of exercise of the police power that has repeatedly been treated as legitimate

even in the absence of compensation to the owners of the imported property. See

generally Calero-Toledo, 416 U.S. at 680 (statutory forfeiture scheme authorizing

forfeiture of a vessel used to transport marijuana does not violate the Takings Clause);

Miller v. Schoene, 276 U.S. 272, 279-80 (1928) (state-ordered destruction of red cedar

trees, hosts to cedar rust, which attacks apple trees held not to be a taking for which

compensation is required: “[W]here the public interest is involved, preferment of that

interest over the property interest of the individual, to the extent even of its destruction,

is one of the distinguishing characteristics of every exercise of the police power which

05-5178 9
affects property.”); Mugler v. Kansas, 123 U.S. 623 (1887) (state law outlawing

manufacture and sale of alcoholic beverages did not constitute a taking of private

property for public use: “A prohibition simply upon the use of property for purposes that

are declared, by valid legislation, to be injurious to the health, morals, or safety of the

community, cannot, in any just sense, be deemed a taking or an appropriation of

property for the public benefit.”).1

B

Acadia’s second argument is that, regardless of the legitimacy of the initial

seizures of the cooling fans, the delay in returning the fans was unreasonable and the

unreasonable delay resulted in a compensable taking. We reject that argument as well.

As in the case of the challenge to the initial seizures, the flaw in Acadia’s argument

regarding unreasonable governmental delay is that it is predicated on the unlawfulness

of the delay. Acadia acknowledged at oral argument that if the delay in this case were

considered reasonable under the circumstances, there would be no taking requiring

compensation under the Takings Clause. Under the authorities cited above, such as

1
In Shelden v. United States, 7 F.3d 1022 (Fed. Cir. 1993), this court held
that an innocent owner of a mortgage interest in property that was subject to a criminal
forfeiture could pursue a takings claim. As we subsequently made clear in Vereda,
Ltda. v. United States, 271 F.3d 1367 (Fed. Cir. 2001), the decision in Shelden was
limited to an in personam criminal forfeiture following the criminal conviction of a third
party, in which an innocent owner-claimant sought to recover his interest in the forfeited
property. It did not involve an in rem forfeiture directed against the property itself.
Shelden and other cases involving claims of innocent third parties with respect to
property that is subject to criminal in personam forfeitures, see, e.g., Froudi v. United
States, 22 Cl. Ct. 290 (1991), are not applicable to in rem seizures and forfeiture
proceedings of the sort at issue in this case, involving alleged contraband or counterfeit
goods. We need not address in this case whether the decision in Shelden is still valid in
light of the subsequent decision of the Supreme Court in Bennis v. Michigan, supra.

05-5178 10
the Rith Energy case, that concession makes clear that the true nature of Acadia’s

action is one for damages based on unlawful conduct by the government, not on a

taking of private property for public use.

Acadia contends that if it cannot obtain compensation through a takings action

for unreasonable delay in instituting forfeiture proceedings, it will have no remedy

against governmental abuse in holding seized property indefinitely without either filing a

judicial forfeiture action against the property or returning it to its owner. In fact, the

courts have recognized a right not to have property held in such settings for an

unreasonable time and have crafted a remedy to vindicate that right. Following the

seizure of property, the owner of the property has a due process right to have the

government either return the property or initiate forfeiture proceedings without

unreasonable delay. See, e.g., United States v. Eight Thousand Eight Hundred & Fifty

Dollars, 461 U.S. 555, 564-67 (1983) (“$8850”); Fuentes v. Shevin, 407 U.S. 67, 80

(1972); United States v. $7,990.00 in U.S. Currency, 170 F.3d 843, 846 (8th Cir. 1999);

United States v. Premises Known as 608 Taylor Ave., 584 F.2d 1297, 1302-05 (3d Cir.

1978) (“[D]ue process . . . requires forfeiture proceedings against seized property be

brought without unreasonable delay.” (citing cases)); United States v. Ivers, 581 F.2d

1362, 1368 (9th Cir. 1978) (“Due Process requires that these proceedings be

commenced with some promptitude.”). In the case of such delay, the Supreme Court

has held that a property owner has a remedy in a United States district court that has

been recognized since the early nineteenth century:

A claimant is able to trigger rapid filing of a forfeiture action if he desires it.
First, the claimant can file an equitable action seeking an order compelling
the filing of the forfeiture action or return of the seized property. See

05-5178 11
 Slocum v. Mayberry, [15 U.S. (2 Wheat.) 1, 10 (1817)] (Marshall, C.J.).
Less formally, the claimant could simply request that the Customs Service
refer the matter to the United States Attorney. If the claimant believes that
the initial seizure was improper, he could file a motion . . . for a return of
the seized property.

$8,850, 461 U.S. at 569; see also United States v. Von Neumann, 474 U.S. 242, 244

n.3 (1986). By invoking that remedy, a property owner may force the government either

to return the property or to initiate forfeiture proceedings. If the government

commences forfeiture proceedings after an inordinate delay, the owner may file a

motion with the court requesting dismissal of the proceeding and return of his property

on the ground that the delay has violated his due process rights, even if the property

would otherwise be forfeitable. See $7,990.00 in U.S. Currency, 170 F.3d at 846;

United States v. One 1973 Buick Riviera Auto., 560 F.2d 897, 901 (8th Cir. 1977) (citing

cases); United States v. One Motor Yacht Named Mercury, 527 F.2d 1112, 1114 (1st

Cir. 1975). Such a due process violation may also give rise to a right to money

damages against individual defendants in a court with jurisdiction to grant such a

remedy. See Seguin v. Eide, 720 F.2d 1046, 1047-48 & n.2 (9th Cir. 1983); States

Marine Lines, Inc. v. Shultz, 498 F.2d 1146, 1155-57 (4th Cir. 1974). A violation of due

process rights, however, does not give rise to a claim for money damages against the

United States in the Court of Federal Claims. See James v. Caldera, 159 F.3d 573, 581

(Fed. Cir. 1998); Crocker v. United States, 125 F.3d 1475, 1476 (Fed. Cir. 1997);

LeBlanc v. United States, 50 F.3d 1025, 1028 (Fed. Cir. 1995).2

2
The Supreme Court has suggested that an owner in Acadia’s position
might be able to bring a suit under the Tucker Act for money damages under a theory of
breach of an implied-in-fact contract of bailment between the owner and Customs. See
Kosak v. United States, 465 U.S. 848, 860 n.22 (1984). That theory, however, was not

05-5178 12
 In sum, we hold that the trial court correctly dismissed Acadia’s complaint for

failure to state a claim on which relief could be granted. While the Court of Federal

Claims has jurisdiction to enter an award of damages for a violation of the Takings

Clause of the Fifth Amendment, the court correctly held that Acadia’s allegations did not

give rise to a takings claim under the governing authorities.3

AFFIRMED.

asserted in this case, and we express no opinion as to whether the facts in Acadia’s
complaint might support such a claim.
3
The government argues in the alternative that the trial court lacked
jurisdiction over Acadia’s takings claim, principally on the ground that Acadia’s remedy
was in the district court under the comprehensive statutory scheme for administrative
and judicial review of forfeitures. See Vereda, 271 F.3d at 1374-75. A principal thrust
of Acadia’s takings claim, however, was that the government engaged in unreasonable
delay before initiating forfeiture proceedings in this case and that the delay caused
Acadia’s loss. Because the statutory scheme for in rem forfeitures does not provide a
means to address pre-forfeiture delay, the forfeiture statutes do not preempt the
jurisdiction of the Court of Federal Claims over Acadia’s takings claim. In this regard,
we follow the court’s analysis in Vereda, 271 F.3d at 1376, where the court explained
that the takings claim in Shelden was not preempted because, under circumstances
such as those in Shelden and in this case, the civil forfeiture statutes did not provide the
plaintiff with “specific and comprehensive scheme for administrative and judicial review”
of its claim of a violation of its rights in the subject property.

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