United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT May 5, 2003
_________________
Charles R. Fulbruge III
No. 02-40263 Clerk
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v.
$49,000 CURRENCY, Etc.,
Defendant,
DANA W. WHITE; MICHAEL JACKSON,
Claimants - Appellants.
Appeal from the United States District Court
for the Eastern District of Texas
Before BENAVIDES, STEWART, and CLEMENT, Circuit Judges.
BENAVIDES, Circuit Judge:
This is an appeal from a default judgment. In the course of a
traffic stop the Government seized $49,000 in currency and filed a
complaint against it for forfeiture pursuant to 21 U.S.C.
§881(a)(6). Claimants-Appellants White and Jackson filed a 12(b)(6)
motion to dismiss based on the theory that the Government failed to
plead facts establishing probable cause with sufficient
particularity so as to satisfy Rule E(2)(a)of the Supplemental
Rules for Admiralty and Maritime Claims (hereinafter, Rule
1
E(2)(a)).1 The district court denied the motion to dismiss, finding
that the Government need not establish probable cause for the
seizure at the pleading stage of litigation, and in the same order,
granted the Government’s motion for Rule 37 sanctions in the form
of the entry of default judgment in the Government’s favor, thereby
terminating White’s and Jackson’s claims. Claimants-Appellants
appeal both rulings.
I.
A. The Stop and Seizure
At 2:46 a.m. on the morning of March 1, 2000, Dequilla White
was the subject of a traffic stop on I-10. The stop was executed
by Sergeant Fountain of the Jefferson County Sheriff’s Department
who averred that he initially stopped White because White
crossed onto the shoulder while driving. Upon approaching White’s
vehicle, Fountain observed that White’s passenger, Melvin
Morris, was not wearing a seatbelt, as is mandated by Texas law.
The officers obtained consent to search the vehicle and
found a pistol, a garment bag, and no other luggage. Inside the
garment bag was $49,000.00 in cash, divided into seven bundles
each bearing a small piece of paper denoting the amount. The
Government asserts that this is a common method of carrying
currency in drug-related transactions.
1
In their motion to dismiss, Claimants also charged that
the police lacked probable cause for the underlying traffic stop,
but that question is not before us.
2
When asked to explain the presence of the money, initially
White allegedly reported that it belonged to three different
people who had entrusted it to White so that he could purchase
property on their behalf in Leesville. After a narcotics dog
alerted to the presence of narcotics on the currency, White
allegedly told the officers that he had actually received the
money from one individual, Michael Jackson, in order to purchase
three pieces of real property in Leesville on Jackson’s behalf.
White asserted that he was to purchase the property at an
auction, but that the location of the auction was, at that time,
unknown to him.
Morris was questioned separately during the stop. The
officers noted discrepancies between White and Morris’s
explanation of their activities and plans. A search of Morris
turned up a slip of paper in Morris’s shoe which appeared to the
officers to be a receipt, and which contained what officers
believed to resemble calculations made based on the price of a
kilogram of cocaine.
White and Morris were read their Miranda rights and released
from the scene. The currency was seized for forfeiture
proceedings.
B. Forfeiture Action
On August 18, 2000, the government filed a complaint for
3
forfeiture against $49,000 Currency under 21 U.S.C. §881(a)(6).2
The affidavit of Officer Permenter was attached, which the
district court found contained details of the stop and seizure,
“tending to show probable cause for the Complaint.” On September
28, 2000, Dana White filed a Claim and Answer. Michael Jackson
filed his Claim and Answer on October 13, 2000.3 The Government
served a formal disclosure on Claimants on October 26, 2000, and
served a request for discovery and interrogatories on December
12, 2000.
Then began what the Government contends, and what the record
reflects, was a protracted campaign to extract discovery from
Claimants. First, after what the Government alleges were
multiple promises from Claimants’ counsel that formal
disclosures, answers to interrogatories, and requested documents
were “on the way”, the Government’s counsel agreed to travel to
Baton Rouge on February 17, 2001 to personally retrieve the
2
That section provides in pertinent part:
(a) Subject property:
The following shall be subject to forfeiture to
the United States and no property right shall exist in them:
...
(6) All moneys, negotiable instruments,
securities, or other things of value furnished or intended to be
furnished by any person in exchange for a controlled substance or
listed chemical in violation of this subchapter, all proceeds
traceable to such an exchange, and all moneys, negotiable
instruments, and securities used or intended to be used to
facilitate any violation of this subchapter.
3
The Claimants-Appellants assert that $9,000 of the seized
money belongs to Dana White, and the remaining $40,000 belongs to
Michael Jackson.
4
discovery. However, upon review of the documents which Claimants
rendered, the Government notified Claimants that the discovery
was inadequate, that in particular there were no disclosures, and
that the answers to interrogatories and production requests were
incomplete.4 On April 13, 2001, having received no response, the
Government filed a motion to compel, which the Court granted May
24, 2001. Claimants were ordered to produce outstanding
discovery by June 4, 2001. On June 20, 2001, having still
received nothing further from Claimants, the Government notified
Claimants’ counsel that the Government planned to file a motion
to strike Claimants’ pleadings and enter judgment for the
Government, if Claimants failed to comply with the court’s order
to compel by June 29, 2001.
On July 2, 2001, Claimants filed a motion to dismiss the
complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil
Procedure. Simultaneously, Claimants supplied the Government
with additional discovery documents which the Government deemed
incomplete and insufficient to comply with the district court’s
order of May 24, 2001. The next day the Government moved for
sanctions against Claimants for failure to comply with the order
4
It should be noted here that both White and Jackson did
provide some discovery to the Government in their original
answers and prior to the motion to compel, including answers to
interrogatories as well as some requested documents. However, the
Government articulated specific omissions and deficiencies with
respect to the original answers, and, having no success in
eliciting a response from Claimants’ counsel, filed a motion to
compel more detailed complement of answers and documents.
5
to compel discovery. Specifically, the Government’s motion
requested the Claimants’ pleading be struck and default judgment
entered in favor of the Government.
The district court conducted a combined motion hearing to
consider both Claimants’ motion to dismiss and the Government’s
motion for sanctions. On November 28, 2001, the district court
denied the motion to dismiss, granted the Governments’ motion for
sanctions, and entered a default judgment against the currency in
favor of the Government. Claimants-Appellants now appeal the
district court’s rulings.
II.
A. Points of Appeal
Claimants-Appellants present two issues for appeal. First
they protest the denial of their motion to dismiss, in which they
argued that the Government’s complaint was not pled with
sufficient particularity under Rule E(2)(a). In support of this
point, Claimants-Appellants charge that the district court
applied the wrong standard in evaluating their motion to dismiss
the complaint, and that, as a result, the district court erred in
failing to dismiss the complaint.5
Claimants-Appellants’ second point of appeal challenges the
district court’s decision to grant the Government’s motion for
5
Where predicated on questions of law, this Court reviews
the denial of a motion to dismiss de novo. Fernandez-Montes v.
Allied Pilots Ass’n, 987 F.2d 278, 284 (5th Cir. 1993).
6
Rule 37 sanctions, a decision which resulted in the termination
of their claims.6
Moreover, Claimants-Appellants synthesize and construct an
interesting interdependency between their two points of appeal,
contending that if this Court finds in their favor regarding the
motion to dismiss, the question of sanctions becomes moot. In
this, however, Claimants-Appellants are mistaken.7 We find that
the two motions were not interdependent, but instead that the
district court sanctioned Claimants-Appellants for behavior
unrelated to the sufficiency of the complaint.8 The district
6
This Court reviews the imposition of Rule 37 sanctions for
abuse of discretion. Smith v. Smith, 145 F.3d 335 (5th Cir.
1998).
7
We note that all of the violations which serve as the
basis for the district court’s sanction ruling were committed
prior to the time that the district court evaluated and ruled
upon the motion to dismiss.
8
We observe incidentally that Claimants-Appellants are
correct in their contention that the district court used the
wrong standard in evaluating the sufficiency of the Government's
complaint. In denying Claimants-Appellants’ motion to dismiss,
the district court found that, “[t]he heightened pleading
requirements in a Section 881 forfeiture case necessitate the
plaintiff adding more detail to its complaint than would
ordinarily be required under the federal rules, not that the
plaintiff must actually prove the existence of a particular
element.” U.S. v. $49,000.00 in U.S. Currency, 194 F.Supp.2d
576, 578 (E.D.Tex. 2001). The district court further observed
that:
[t]he present case is only at the pleading
stage, and therefore the Government is not
yet required to prove that probable cause
exists...this is not to say that probable
cause is unimportant in a forfeiture action,
7
but only that “[i]t is in the context of a
trial or summary judgment motions that the
government must make this showing of probable
cause.”
$49,000.00 in U.S. Currency, 194 F.Supp.2d at 578 (quoting,
United States v. $19,120 in United States Currency, 700 F.Supp.
33, 34-35 (N.D.Ga.1987)).
These statements, however, do not constitute an accurate
articulation of the pleading standard imposed by Rule E(2)(a).
Rule E(2)(a) requires that the complaint:
state the circumstances from which the claim
arises with such particularity that the
defendant or claimant will be able, without
moving for a more definite statement, to
commence an investigation of the facts and to
frame a responsive pleading.
Thus, Rule E(2)(a) imposes a substantive pleading requirement,
and certainly, under Rule E(2)(a)within the context of civil
forfeiture, the Government must do more than simply provide
greater detail than it otherwise would be required to do under
Rule 8 of the Federal Rules of Civil Procedure. While the
district court concluded correctly that the Government need not
prove elements of its case at the pleading stage, the Government
is compelled by the specificity requirement of Rule E (2)(a) to
allege facts which are sufficient to support a reasonable belief
that those elements are met. See United States v. Mondragon, 313
F.3d 862,865 (4th Cir. 2002)(finding that Rule E (2)(a) requires
the Government to "allege sufficient facts to support a
reasonable belief that the property is subject to forfeiture.”).
Thus, under Rule E (2)(a), the Government must allege facts
supporting a reasonable belief that it will be able to bear its
burden at trial. See id at 865.
Nonetheless, it appears that even under the proper Rule E
(2)(a) standard, in the instant case the Government’s complaint
was plead with sufficient particularity so as to support a
reasonable belief that the government would have been able to
bear its burden at trial.
Moreover, we further note here that although the
Government’s burden at trial in civil forfeiture cases was
changed from a showing of probable cause to proof by a
preponderance of the evidence by the Civil Asset Forfeiture
Reform Act of 2000 (CAFRA), 18 U.S.C. § 983 (c), we need not
consider here whether CAFRA applies retroactively to the
proceeding at bar, as it appears that under the application of
8
court sanctioned Claimants-Appellants for failure to comply with
a court order, and Claimants-Appellants’ misconduct in failing to
comply with the court’s order was in no way related to the
sufficiency of the Government’s pleading. Therefore, regardless
of whether the complaint was sufficiently pled, Claimants-
Appellants’ noncompliance with the order remained subject to
sanction. Thus, assuming the district court did not abuse its
discretion in entering default judgment in the Government’s favor
- as we find herein that it did not - we need not reach the
question of whether the Government’s complaint was indeed
sufficient under the standard set forth by Rule E (2)(a).
Consequently, because the district court acted appropriately in
entering default judgment in the Government’s favor, we can
afford Claimants-Appellants no relief herein.
B. Rule 37 Sanction
Because we find the issue dispositive as to the appeal at
bar, we turn first to consider Claimants-Appellants’ challenge to
the district court’s sanction ruling. Claimants-Appellants
contest the district court’s decision to grant the Government’s
either trial burden, the Government’s pleading supports a
reasonable belief that the Government would be able to meet its
burden at trial. Compare, United States v. Santiago, 227 F.3d
902, 909 n.3 (7th Cir. 2000)(finding that CAFRA should not be
applied retroactively to proceedings instigated prior to August
23, 2000); United States v. Real Property in Section 9, 241 F.3d
796, 797 (6th Cir. 2001)(finding retroactive application of CAFRA
to be appropriate).
9
motion for sanctions pursuant to Rule 37(b)(2)(C). Rule 37
(b)(2)(c) authorizes the district court to strike pleadings or
render a default judgment against a party as a sanction for
failure to comply with a discovery order.9 Fed. R. Civ. P.
37(b)(2).
This Court reviews the granting of sanctions for abuse of
discretion, including those sanction rulings which result in the
entry of default judgment. Smith v. Smith, 145 F.3d 335 (5th
Cir. 1998). Generally, in the context of Rule 37 sanctions, a
9
Rule 37 (b)(2) states in pertinent part:
If a party ...fails to obey an
order to provide or permit discovery... the
court in which the action is pending may make
such orders in regard to the failure as are
just, and among others the following:
(A) An order that the matters
regarding which the order was made or any
other designated facts shall be taken to be
established for the purposes of the action in
accordance with the claim of the party
obtaining the order;
(B) An order refusing to allow the
disobedient party to support or oppose
designated claims or defenses, or prohibiting
that party from introducing designated
matters in evidence;
(C) An order striking out
pleadings or parts thereof, or staying
further proceedings until the order is
obeyed, or dismissing the action or
proceeding or any part thereof, or rendering
a judgment by default against the
disobedient party....
Fed. R. Civ. P. 37(b)(2) (emphasis added).
10
district court abuses its discretion when it makes a mistake of
fact or law. Tollett v. City of Kemah, 285 F.3d 357 (5th Cir.
2002). However, where a district court awards default judgment
as a discovery sanction, two criteria must be met. Smith, 145
F.3d at 344; Batson v. Neal Spelce Associates, Inc., 765 F.2d
511, 514 (5th Cir. 1985) (discussing the criteria to be used when
reviewing a district court’s dismissal of a claim as a Rule 37
sanction). First, the penalized party’s discovery violation must
be willful. Smith, 145 F.3d at 344; Batson, 765 F.2d at 514
(citing National Hockey League v. Metro Hockey Club, Inc., 427
U.S. 639, 640(1976)); Jones v. Louisiana State Bar Association,
602 F.2d 94, 96 (5th Cir.1979) (per curiam). Also, the drastic
measure is only to be employed where a lesser sanction would not
substantially achieve the desired deterrent effect. Smith, 145
F.3d at 344; Batson, 765 F.2d at 514 (citing Marshall v. Segona,
621 F.2d 763, 768 (5th Cir.1980)). The reviewing court may also
consider whether the discovery violation prejudiced the opposing
party’s preparation for trial, and whether the client was
blameless in the violation. Batson, 765 F.2d at 514.
Here, Claimants-Appellants do not dispute the willfulness of
their violation of the court’s order, nor do they explicitly
argue that a lesser sanction could have manufactured the
appropriate level of deterrence. Claimants-Appellants instead
confine their challenge to this ruling to the contention that the
11
district court imposed too harsh a penalty given that Claimants-
Appellants had partially complied with previous discovery
requests, and were only a “little tardy” with their final
discovery disclosures. The record, however, contradicts this
claim, and instead indicates that rather than being merely a
little tardy, Claimants-Appellants failed in several - if not all
- material respects to comply with the court’s order.
Moreover, Claimants-Appellants’ argument is predicated on
the understanding that their level of cooperation with the
Government is the central concern here, and that focus is
misplaced.10 The district court imposed sanctions for failure to
comply with a court order. In the opinion granting the motion for
sanctions, the court noted, “neither individual provided any
answer or acknowledgment of the Order until approximately thirty
10
Claimants-Appellants assert, for example, that:
[the Government] request[ed] minute
details that average people do not
continually maintain records on...[these
demands exceeded] the scop[e] of the record
keeping of the claimants....Knowing that the
discovery requests [were] responded to a day
after the agreed upon deadline between the
parties, the court reacted and responded as
though there was an abject effort not to
comply with discovery altogether.
However, the “deadline between the parties” - which,
incidentally, the record reflects was not so much an agreement as
a deadline unilaterally set by the Government as the timetable
after which the Government would seek sanctions - is not at issue
here. It is the utter failure by Claimants-Appellants to meet the
deadline set by the court which rendered Claimants-Appellants
subject to sanction.
12
days after the deadline directed by the court...they did not
communicate any problem they had encountered to the court nor
request an extension of time.” The court further stated that
“line items of discovery requests which were directed to be
answered in the court’s Order were answered to the effect that
‘the original answer was sufficient to satisfy discovery’.”
And indeed the record so reflects. In the Discovery Order,
the district court directed both Claimants-Appellants White and
Jackson to file, by June 4, complete and full disclosure as is
required by Rule 26 of the Federal Rules of Civil Procedure. See,
Fed. R. Civ. P. 26. Neither Claimant filed a Rule 26 disclosure
by June 4, or at any time subsequent to that date.
Additionally, the district court’s order directed Claimants-
Appellants to answer specific numbered interrogatories and to
comply with specific numbered document requests, as outlined in
the Government’s motion to compel.11 These specific discovery
productions, as well as all other outstanding discovery, were to
be delivered to the Government not later than June 4, 2001.
However, neither Claimant responded to the order by June 4,
nor did Claimants-Appellants petition the court for more time in
which to respond. Neither the Government nor the court received
a response from Claimants-Appellants until July 2, 2001, at which
point Claimants-Appellants’ counsel, Mr. Jack Leary, served and
11
In particular, White was directed to answer interrogatory
numbers 6, 12, 13, 14, and 16 and to produce documents in
compliance with the Government’s request numbers 2, 3, 9, 13, and
14. Jackson was directed to answer interrogatory numbers 3, 6,
15, 16, and 17 and produce documents as requested by Government
request numbers 2, 3, 10, 13, 14, 15, 16, 17, and 18.
13
filed on White’s behalf a document captioned “Supplemental
Answers to Interrogatories,” the entire content of which
consisted of the following:
Interrogatories Nos. 6, 12, 13, 14, and 16 :
After numerous requests by counsel, Mr. Dana
White has not provided counsel with any
additional answers or documentation.12
Thus, in response to the district court’s order, White provided
no Rule 26 disclosure, no further discovery, and no explanation
for the deficiency.
Claimant Jackson, on the other hand, was more responsive to
the Discovery Order than was White. Nonetheless Jackson, too,
failed to meet several material requirements of the Order. On
July 2, Leary filed on Jackson’s behalf a “Supplemental Answer to
Interrogatories” which provided no new interrogatory answers, but
instead answered two of the five specific interrogatory requests
with the conclusory insistence that the original answers were
sufficient.13
Obviously, in directing Claimant Jackson to answer specific
interrogatories, the district court was not soliciting Jackson’s
opinion as to whether the original answers were sufficient. The
Government deemed the original answers insufficient, and
12
Similarly, in answer to the district court’s order
directing Claimant White to produce documents in accordance with
Government request numbers 2, 3, 9, 13 and 14, Claimants-
Appellants’ counsel responded that, “[a]fter numerous requests by
counsel, Mr. Dana W. White has not provided counsel with any
additional answers or documentation.”
13
Jackson responded to the remaining three interrogatories
with references to attached documents.
14
consequently filed a motion to compel. Jackson was afforded an
opportunity to brief a response to the Government’s allegations
of insufficiency, but Jackson declined to do so. Instead, Jackson
waited until nearly a month had passed from the district court’s
mandatory deadline and then, without analysis, informed the court
that no further information was required.14
Nevertheless, Claimants-Appellants urge this Court to find
that the district court abused its discretion in imposing the
sanction of default judgment. In mounting this argument,
however, Claimants-Appellants do not argue that the district
court made a mistake of fact in finding that Claimants-Appellants
had failed to comply with its May 24, 2001 order, nor do they
contend that unbeknownst to the district court, extenuating
circumstances were at play in connection to their discovery
violations.
Instead, Claimants-Appellants note that other options were
available to the district court to “coerce” them into compliance.
To some extent they could be said to be raising the claim that
the district court failed to use a less drastic sanction where
the same deterrent effect could be achieved, and if Claimants-
Appellants were correct on this point, then the imposition of
default judgment would have been inappropriate here. Smith, 145
F.3d at 344; Batson, 765 F.2d at 514.
14
In an addendum to Jackson’s July 2 “Supplemental
Answers”, Jackson did produce several of the documents requested
by the Government. However, these productions were also
incomplete.
15
However, Claimants-Appellants are not correct on this point.
In the case at bar, the district court entertained a motion to
compel brought by the Government, and Claimants-Appellants were
invited to respond to that motion. Claimants-Appellants did not
respond, and the motion was granted. Next, an amply clear order
issued from the court which directed Claimants-Appellants to
provide discovery disclosures, interrogatory answers and
outstanding document productions by June 4. Still, Claimants-
Appellants persisted in their disinclination to respond. Thus,
were we now to adopt Claimants-Appellants’ view, we would have to
surmise that at this point in the discovery fiasco, the district
court was yet required to attempt to coax Claimants-Appellants
into compliance with its order by imposing incrementally
increasing sanctions. We do not adopt such a view.
Instead, we conclude that, presumably, the order itself was
the method by which the district court chose to compel discovery
compliance. In failing to comply with the district court’s order,
Claimants-Appellants rendered themselves vulnerable to sanctions
to be administered in the district court’s discretion. Therefore,
here, in light of the record as a whole, we find that the
district court was reasonable in concluding that, “[t]he
Claimants’ dilatory actions demonstrated by their lengthy delays
and their obstructive behavior as exemplified by their evasive
and incomplete responses constituted bad faith.” Consequently,
16
the district court was well within its discretion in awarding
default judgment as a sanction, and we will not disturb that
determination.
III.
For the foregoing reasons we AFFIRM the judgment of district
court.
17
United States v. $49,000 Currency
Court: Court of Appeals for the Fifth Circuit
Date filed: 2003-05-05
Citations: 330 F.3d 371
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