United States v. Eric Watkins

[PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT
FILED
________________________ U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
February 07, 2003
No. 02-10434 THOMAS K. KAHN
Non-Argument Calendar CLERK
________________________

D. C. Docket No. 01-00003-CR-LAC

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

versus

ERIC WATKINS,

Defendant,

JAUNNA WATKINS,
COLLIN WILLIAMS,
LINCOLN WATKINS,

Interested Parties-Appellants.

________________________

Appeals from the United States District Court
for the Northern District of Florida
_________________________
(February 7, 2003)

Before CARNES, MARCUS and WILSON, Circuit Judges.
MARCUS, Circuit Judge:

Jaunna Watkins (“Jaunna”), Collin Williams (“Collin”) and Lincoln Watkins

(“Lincoln”) appeal the district court’s dismissal of their petitions seeking the return

of certain monies that were criminally forfeited to the government by defendant

Eric Watkins (“Eric”). On appeal, these individuals assert that (1) the district court

erred by finding that they had failed to demonstrate their entitlement to these

monies under 21 U.S.C. § 853(n)(6)(A) or (B); and (2) the court deprived them of

due process as guaranteed by the Fifth Amendment by failing to provide them with

notice of the ancillary hearing at which the court entertained arguments as to the

merits of their petitions.

In the context of third-party claims to criminally forfeited property, we

review the district court’s factual findings for clear error and its legal conclusions

de novo. United States v. Kennedy, 201 F.3d 1324, 1329 (11th Cir. 2000) (citing

United States v. One Single Family Residence, 894 F.2d 1511, 1513 (11th Cir.

1990)).

Upon thorough review of the record and careful consideration of the parties’

briefs, we find no reversible error and affirm.

The relevant facts are straightforward. On May 4, 2001, Eric was convicted

under 21 U.S.C. §§ 841 and 846 of one count of conspiracy to possess with intent

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to distribute five kilograms or more of a mixture containing a detectable amount of

cocaine. Subsequently, the jury returned a special verdict of forfeiture against Eric

in the amount of $100,000. On August 2, 2001, the district court entered a final

order of forfeiture in this same amount.

On August 31, 2001, the United States filed a motion seeking the forfeiture

of $68,380 as substitute property that was found in Eric’s residence at the time of

his arrest. On the same date, Lincoln filed an ancillary petition seeking the return

of $15,000 that he allegedly gave to Eric prior to his arrest so that Eric could

purchase an automobile for Lincoln. Collin filed a similar petition on September 4,

2001, alleging that he had given Eric $14,100 for an automobile. Juanna followed

suit on October 2, 2001, claiming that she had given Eric $29,100 for business use

and that she was entitled to the rest of the funds as Eric’s wife.1 Each of these third

party claimants argued that the sum that he or she was owed constituted a portion

of the seized $68,380.

On November 5, 2001, the district court held an ancillary hearing to address

these petitions. Although neither Lincoln, Collin nor Juanna appeared at this

hearing -- which appellants argue was a consequence of the court’s failure to

provide them with notice of the proceeding -- the government asked the court to

1
It appears that Juanna argues only this second point on appeal.
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accept appellants’ factual allegations as true. The district court did so, and found

that by their own accounts Lincoln and Collin were merely unsecured creditors of

Eric, and as such were not entitled to recover any of the funds they sought. The

district court further concluded that Juanna had failed to establish that she

possessed any right to the forfeited funds that was superior to Eric’s interest in

those monies or that she was otherwise entitled to recover under 21 U.S.C. §

853(n)(6). Accordingly, on November 13, 2001 the court entered an amended final

order of forfeiture memorializing these findings and dismissing the ancillary

petitions of Lincoln, Collin and Juanna. On appeal, these individuals challenge the

correctness of the district court’s conclusions and its failure to afford them notice

of the November 5, 2001 hearing.

Section 853(n)(6) states in plain terms that a third party claimant must make

one of two showings in order to successfully assert an interest in property that is

subject to criminal forfeiture. Specifically, this section provides, in full, that:

If, after the [ancillary] hearing, the court determines that the petitioner
has established by a preponderance of the evidence that--

(A) the petitioner has a legal right, title, or interest in the
property, and such right, title, or interest renders the
order of forfeiture invalid in whole or in part because the
right, title, or interest was vested in the petitioner rather
than the defendant or was superior to any right, title, or
interest of the defendant at the time of the commission of

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 the acts which gave rise to the forfeiture of the property
under this section; or

(B) the petitioner is a bona fide purchaser for value of the
right, title, or interest in the property and was at the time
of purchase reasonably without cause to believe that the
property was subject to forfeiture under this section;

the court shall amend the order of forfeiture in accordance with its
determination.

21 U.S.C. § 853(n)(6).

As we summarized in Kennedy, section 853(n)(6) “‘protects only two

classes of petitioners, those whose legal interests in the property were superior to

the defendant[’s] at the time the interest of the United States vested through the

commission of an act giving rise to forfeiture and “bona fide purchasers for value”

without knowledge of the forfeitability of the defendant’s assets.’” 201 F.3d at

1328-29 (quoting United States v. Reckmeyer, 836 F.2d 200, 204 (4th Cir. 1987)).

In this case, even accepting appellants’ factual allegations to be true, there is

no question that under § 853(n)(6)(A) Lincoln and Collin cannot recover any funds

that they gave to Eric in exchange for a promise to procure for them automobiles.

This is so because, as appellants vigorously and explicitly concede, they gave Eric

these monies after the conclusion of the conspiracy that gave rise to the forfeiture.

See § 853(n)(6)(A) (requiring that the third party plaintiff possess a right to, or

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interest in, the forfeited property “at the time of the commission of the acts which

gave rise to the forfeiture”); Kennedy, 201 F.3d at 1331.

Moreover, it is equally evident that Lincoln and Collin were merely

unsecured creditors of Eric, as they possessed no “attached” security interest in the

funds they gave to him. See generally In re Dillard Ford, Inc., 940 F.2d 1507,

1511 (11th Cir. 1991) (noting that a “security interest must attach to the property [in

question] in order to be enforceable”). The courts of appeals are split on whether

an unsecured creditor may be considered a bona fide purchaser under §

853(n)(6)(B). The majority of courts to address this question have answered it in

the negative. See United States v. Ribadeneira, 105 F.3d 833, 836 (2d Cir. 1997)

(holding, in a case where the forfeited property was money, that general creditors

could not be considered bona fide purchasers under § 853(n)(6)(B)); United States

v. BCCI Holdings (Luxembourg), S.A., 46 F.3d 1185, 1191-92 (D.C. Cir. 1995)

(holding that general creditors cannot qualify as bona fide purchasers under 18

U.S.C. § 1963(l)(6)(B), a provision of the Racketeer Influenced and Corrupt

Organizations Act that is substantively identical to § 853(n)(6)(B));2 United States

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We have explicitly said that “§ 853(n) is ‘substantively identical’ to § 1963(l).”
United States v. Gilbert, 244 F.3d 888, 906 n.47 (11th Cir. 2001) (quoting United
States v. Ripinsky, 20 F.3d 359, 362 n.3 (9th Cir. 1994)). We further recognized in
Gilbert that “[c]ases applying one of these analogous statutes have used section 853(n)
and section 1963(l) cases interchangeably.” Id. (citing United States v. Bissell, 866
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v. Campos, 859 F.2d 1233, 1238 (6th Cir. 1988); United States v. McCorkle, 143 F.

Supp. 2d 1311, 1319-20 (M.D. Fla. 2001). However, the Fourth Circuit has held

that unsecured creditors may be considered bona fide purchasers under §

853(n)(6)(B).3 Reckmeyer, 836 F.2d at 205-06.

Although we have not previously addressed this question, we agree with the

majority view that unsecured or general creditors cannot be considered bona fide

purchasers for value within the meaning of § 853(n)(6)(B). Specifically, we share

the concern expressed by the District of Columbia Circuit that were we to hold

otherwise courts adjudicating forfeiture actions “would be converted into a

bankruptcy court[s] and would not be able to grant forfeiture to the government

until [they] determined that no general creditor would be unable to satisfy its claim

against the defendant.” BCCI Holdings, 46 F.3d at 1191-92. As the BCCI

Holdings court continued:

That result appears patently at odds with the statutory scheme, which
directs parties without an interest in specific property to seek relief
from the Attorney General, not the court adjudging the forfeiture. The

F.2d 1343, 1348 n.3 (11th Cir. 1989)).
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Specifically, the Fourth Circuit held that in cases where the debtor’s entire
estate has been forfeited to the government, concerns sounding in the deprivation of
the due process rights of the debtor’s unsecured creditors compelled the conclusion
that such creditors were eligible to recover under § 853(n)(6)(B). Reckmeyer, 836
F.2d at 205-06.
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 Attorney General has the authority to dispense confiscated funds “to
protect the rights of innocent persons,” and general creditors seem
precisely the type of innocent persons Congress had in mind.

Id. at 1192 (quoting 18 U.S.C. § 1963(g)(1)). Notably, like § 1963(g)(1), section

853(i)(1) provides a means by which innocent third parties may petition the

Attorney General for relief from a forfeiture order. See 21 U.S.C. § 853(i)(1).

Moreover, as the Reckmeyer court correctly noted: “Unlike secured

creditors, general creditors cannot point to any one specific asset and claim that

they are entitled to payment out of the value of that specific asset. General

creditors instead enjoy a legal interest in the entire estate of the debtor.” 836 F.2d

at 206 n.3. By this very definition, unsecured creditors plainly fall outside the

scope of § 853(n)(6)(B), which pertains to “bona fide purchaser[s] for value of the

right, title or interest in the property [in question].” 21 U.S.C. § 853(n)(6)(B)

(emphasis added); see also McCorkle, 143 F. Supp. 2d at 1320 (making this

argument).

In a similar vein, we join the Sixth Circuit in noting that “unsecured

creditors do not fit the traditional definition of ‘bona fide purchasers.’” Campos,

859 F.2d at 1238. Indeed, “the term ‘bona fide purchaser’ . . . is generally

understood to mean ‘[o]ne who has purchased property for value without notice of

any defects in the title of the seller.’” In re Walter, 45 F.3d 1023, 1030 (6th Cir.

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1995) (quoting Black’s Law Dictionary 177 (6th ed. 1990)) (emphasis added).

Because their interest lies against the debtor personally as opposed to any specific

property that they purchased from the debtor, unsecured creditors simply cannot be

considered bona fide purchasers as that term is commonly defined. See Campos,

859 F.2d at 1238 (“As this is a legal term of art, we are unwilling to give the phrase

an unnatural meaning only for the purpose of subsection (n)(6)(B).”).

Thus, because we conclude that unsecured creditors cannot be considered

bona fide purchasers for value under § 853(n)(6)(B), neither Lincoln nor Collin can

recover any part of the forfeited $68,380 under this subsection.

Juanna, by contrast, argues that she is entitled to the funds as a consequence

of her marriage to Eric and their resultant status as tenants by the entirety. This

claim is easily resolved, however, because we previously have held in the

forfeiture context that “‘[t]he very nature of the tenancy by the entireties prevents

[a petitioner] from claiming that her title [to marital property] is superior to her

husband’s.’” Kennedy, 201 F.3d at 1331 (quoting United States v. Jimerson, 5

F.3d 1453, 1455 (11th Cir. 1993)). Accordingly, Juanna cannot prevail based on a

“tenancy by the entirety” theory under § 853(n)(6)(A). Moreover, because it is

undisputed that Juanna possesses no “attached” security interest in any portion of

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the $68,380, she also is (at the most) an unsecured creditor of Eric, and as such she

cannot recover under § 853(n)(6)(B) for the reasons set forth, supra.

Appellants’ due process claims sounding in the district court’s failure to

afford them notice of the November 5, 2001 hearing are similarly unavailing; even

assuming that appellants were impermissibly deprived of notice of the ancillary

hearing, this error was harmless beyond any doubt. This is so for two reasons.

First, appellants’ lack of any meritorious claim to the forfeited funds renders their

lack of notice non-prejudicial, i.e., harmless. See United States v. Gagliardi, 201

F.3d 429 (1st Cir. 1999) (unpublished table disposition) (deeming harmless the

failure to afford a defendant notice of forfeiture proceedings against him where the

defendant “utterly failed to state any grounds upon which he could contest th[e]

forfeiture on the merits”); Adames v. United States, 171 F.3d 728, 732-33 (2d Cir.

1999); see generally United States v. Fifty-Two Thousand and Eight Hundred

Dollars, 33 F.3d 1337, 1340-41 (11th Cir. 1994) (holding in a forfeiture case that

the claimants’ due process argument was unpersuasive because they had suffered

insufficient prejudice). Second, the district court uncritically accepted as true each

of the factual contentions offered by Lincoln, Collin and Juanna, thereby further

mitigating any prejudice that appellants might otherwise have suffered from their

lack of notice.

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 In sum, appellants were not entitled to recover under § 853(n)(6)(A) or (B)

any funds that they gave to Eric. This inability to prevail on the merits in this case

rendered any lack of notice of the November 5, 2001 hearing non-prejudicial, as

did the district court’s assumption at that proceeding that appellants’ factual

assertions were true. Accordingly, the court did not err in entering a final

judgment of forfeiture against the $68,380 or by dismissing appellants’ ancillary

petitions.

AFFIRMED.

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