Opinion
01-CV-0191E(Sc)
January 22, 2003.
MEMORANDUM and ORDER
This decision may be cited in whole or in any part.
This is a civil forfeiture action brought by the United States to recover $49,766.29 that the claimant, Michael Nelson ("Nelson"), attempted to bring into the United States without properly declaring it. Presently before this Court is plaintiff's motion for summary judgment. For the reasons set forth hereinbelow, plaintiff's motion is denied.
The facts of this case are generally undisputed. On July 5, 2000 Nelson, accompanied by passengers Maria Marsha Chapman ("Chapman") and her two infant daughters, attempted to drive across the border from Canada into the United States ("U.S.") at the Lewiston Bridge Customs Station in Lewiston, NY. After immigration had cleared the subjects for entrance into the U.S., Nelson and Chapman completed Customs Form 6059(b). Each made a negative declaration to the question of whether he or she had been in possession of more than $10,000 in currency or monetary instruments. Each then signed the form and indicated with initials that they had read and fully understood the warnings contained on the back of the form. Upon inquiry by Customs officials, Nelson told them that he had approximately $1,000 in cash on his person. He also indicated that he was traveling to Miami, Fla. and Jamaica. Customs officers conducted a secondary search of Nelson's vehicle and found a plastic bag containing several bundles of U.S. and Canadian currency that was hidden in the jack compartment of the rear passenger side of his vehicle. Upon further investigation, officers found another plastic bag containing several more bundles of U.S. and Canadian currency behind the service access panel located on the rear driver's side of Nelson's vehicle. All of the individual bundles of currency had been bound with color-coded rubber bands. A total of $29,870 U.S. currency and $29,930 Canadian currency was found in the vehicle. The U.S. Customs Service seized the currency, subject to subsequent forfeiture in accordance with 31 U.S.C. § 5317(c) for failing to adhere to the reporting requirements of 31 U.S.C. § 5316. Nelson's sporty utility vehicle was also seized, pursuant to 19 U.S. § 1595a(a), and ultimately returned to its leaseholder, Ford Credit Canada Leasing Limited and Ford Motor Credit Company. During an interview, Nelson admitted to customs agents that he had failed to declare the currency, that he owned the currency found in his vehicle and he approximated the amount of the hidden currency to be $50,000. He further stated that he was going to use the money to help his mother purchase a house in Florida. When asked to explain how he obtained the money, he told them that his son's mother had given him $5,000 and that he had won $22,000 in a game that he participated in at work called "draw." He could not explain the source of the remaining amount. Nelson was then arrested and charged with violating 18 U.S.C. § 1001 and 31 U.S.C. § 5316 for failing to file a true report of the currency in his possession upon entry into the U.S. He was indicted on November 8, 2000 by a federal grand jury. Nelson and the federal prosecutor agreed to a plea agreement on November 17, 2000 pursuant to which he pled guilty to Count I of the indictment charging him with violating 31 U.S.C. § 5316. That same day, Nelson filed a claim to the seized currency. On January 24, 2001 Nelson was arrested again at the Pearson International Airport in Toronto, Canada and charged with unlawfully importing a controlled substance into Canada. According to plaintiff, Nelson admitted to Canadian law enforcement officers that he had swallowed approximately 48 pellets of cocaine and that the Royal Canadian Police's "Swallower log" revealed that Nelson excreted 34 pellets of cocaine from January 24, 2001 to January 27, 2001. At the time of his Canadian arrest, Nelson had arrived at Pearson Airport from Kingston, Jamaica, the fourth of such trips taken by him since April 2000. On February 2, 2001 Nelson was sentenced for the section 5316 violation to time served and a $100 assessment by the undersigned. See U.S. v. Nelson, No. 00-CR-0212 (W.D.N.Y. 2001). Plaintiff filed this in rem action March 16, 2001, pursuant 31 U.S.C. § 5317(c), for forfeiture of the defendant currency. Nelson filed a claim to such on April 3, 2001.
Nelson possessed airline tickets which revealed that he was to fly from Miami to Montego Bay, Jamaica on July 7, 2000 and then return to Miami on July 12, 2000.
The U.S. Customs Service subsequently converted the $29,930 Canadian currency into $19,896.29 U.S. currency. The total amount seized totaled $49,766.29 U.S. currency.
31 U.S.C. § 5317(c)(2) states that "[a]ny property involved in a violation of section *** 5316 *** may be seized and forfeited to the United States in accordance with the procedures governing civil forfeitures ***."
31 U.S.C. § 5316 reads in pertinent part:
"[A] person or an agent or bailee of the person shall file a report under this subsection (b) of this section when the person, agent, or bailee knowingly —
(1) transports, is about to transport, or has transported, monetary instruments of more than $10,000 at one time —
(A) from a place in the United States from or through a place outside the United States; or
(B) to a place in the United States from or through a place outside the United States; ***."
Rule 56(c) of the Federal Rules of Civil Procedure ("FRCvP") provides that summary judgment shall be entered where the movant demonstrates that there is "no genuine issue as to any material fact" and that "the moving party is entitled to judgment as a matter of law." Celotex Corp. v. Catrett, 477 U.S. 317, 322-323 (1986). A genuine issue of fact exists "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In deciding whether summary judgment is appropriate this Court must take all factual inferences in favor of the non-moving party. Adickes v. S.H. Kress Co, 398 U.S. 144, 157 (1970).
Nevertheless, the non-moving party must rebut the motion for summary judgment with more than conclusory allegations and general denials. FRCvP 56(e); see also Kerzer v. Kingly Mfg., 156 F.3d 396, 400 (2d Cir. 1998) ("Conclusory allegations, conjecture and speculation *** are insufficient to create a genuine issue of fact."). Furthermore, summary judgment is mandated "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex, at 322.
Plaintiff argues in support of its motion for summary judgment that it is undisputed that Nelson violated section 5316 and that such violation "automatically triggers forfeiture under Title 31, United States Code, Section 5317." Pl.'s Mem. Law, p. 8. Nelson argues in opposition that plaintiff has failed to show that the currency was used as an instrumentality of a crime, or that it was unlawfully possessed or that it had an illegal purpose. Accordingly, Nelson argues that such a forfeiture is in violation of the Eighth Amendment's proscription against excessive fines.
The Eighth Amendment states: "Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted." U.S. Const. amend. VII.
Initially, the Court must determine what law governs this civil forfeiture proceeding. Previously, such actions were governed by the burden-shifting framework of 19 U.S.C. § 1615, under which the government had the initial burden of establishing probable cause that the asset was subject to forfeiture and which the burden then shifted to the claimant to rebut the showing of probable cause, showing ultimately that the asset was not subject to forfeiture. See 19 U.S.C. § 1915; U.S. v. $557,933.89, 287 F.3d 66, 77 (2d Cir. 2002) (explaining the burden-shifting framework of civil forfeiture proceedings according to the statutes in effect prior to the Civil Asset Forfeiture Reform Act of 2000 ("CAFRA")). On April 25, 2000 Congress enacted CAFRA — Pub.L. 106-185, 114 Stat. 202 (2000) — which amended the procedures applicable to civil judicial forfeiture proceedings. One such provision changed the government's burden of proof by placing on it the burden of proving, by a preponderance of the evidence, its right to forfeiture of an asset. See $557,933, at 76, n. 5 (citing CAFRA and the burden of proof provision codified at 18 U.S.C. § 983(c)(1)). According to its express terms, CAFRA applies "to any forfeiture proceeding commenced on or after [August 23, 2000]." Pub.L. No. 106-85, § 21, 114 Stat. 202, 225 (emphasis added). Thus, whether CAFRA governs in this case depends on the date that this forfeiture proceeding was commenced. This proceeding was commenced on the day that the government filed its Verified Complaint with this Court — to wit, March 16, 2001. See FRCvP 3 ("A civil action is commenced by filing a complaint with the court."); see also $557,933, at 72 (2d Cir. 2002) (stating that commencement of the civil forfeiture proceeding in the district court had occurred on the day that the government had filed its verified complaint); see also U.S. v. $191,671, 207 F. Supp.2d 677, 682-683 (E.D.Mich. 2002) (rejecting the government's contention that the civil forfeiture proceeding had commenced before the filing of its verified complaint). Thus, the Court disagrees with the government's contention that this action is governed by pre-CAFRA law. See Pl.'s Mem. Law, p. 6 ("This action involves the seizure of currency which occurred on July 5, 2000, and subsequent initiation of forfeiture proceedings prior to August 23, 2000, *** thus this case is governed by pre-CAFRA law."). Accordingly, plaintiff has the initial burden, pursuant to 18 U.S.C. § 983(c)(1), to prove that the currency is subject to forfeiture. The Court finds that it has met its burden.
The government does not offer any evidence of the supposed "initiation of forfeiture proceedings prior to August 23, 2000." Plaintiff provides no further analysis on the issue and the Court can only assume that its position is that this action is governed by the laws in effect before the enactment of CAFRA solely because it seized the currency before such date. However, as noted above, that argument is without merit.
It is beyond doubt that Nelson violated 31 U.S.C. § 5316 by failing to report the $49,766 that he had possessed upon his attempt to enter the United States. Nelson pleaded guilty to such a violation and admitted that he "knowingly falsified the [customs] form." See Pl.'s Statements of Facts, ¶ 18. A violation of section 5316 automatically triggers the government's right to forfeiture under section 5317 — 31 U.S.C. § 5317(c)(2); U.S. v. $83,132, 1996 WL 599725, at *4 (E.D.N.Y. 1996); see also U.S. v. $170,000, 903 F. Supp. 373, 375 (E.D.N.Y. 1995) (holding that currency was subject to forfeiture upon a showing by the government that the claimant had undisputedly violated section 5316) — and Nelson does not deny that he violated section 5316 or that his plea agreement is inaccurate. Thus, the government has carried its burden of showing that the currency is subject to forfeiture. However, under CAFRA the government may not rest on such a showing if the claimant raises a viable defense. One such defense that Nelson does assert is that forfeiture of the $49,714 would violate the Excessive Fines Clause.
Indeed, he is collaterally estopped from making such arguments. See Adames v. U.S., 171 F.3d 728, 732 (2d Cir. 1999) (finding statements that were made as part of a criminal plea allocution to be binding in the subsequent civil forfeiture action).
The government argues vigorously that this case is not subject to the Excessive Fines Clause inasmuch as it is a civil forfeiture action. Claimant disagrees and both parties cite United States v. Bajakajian, 524 U.S. 321 (1998), in support of their respective positions. However, the issue has been settled because any question remaining after Bajakajian as to whether the Excessive Fines Clause applies to civil forfeiture proceedings has been answered in the affirmative by Congress and its enactment of CAFRA. To explain, an analysis of Bajakajian is needed.
In Bajakajian, the defendant and his family had been waiting at a Los Angeles, Cal. airport to board a flight for Italy. Customs discovered $230,000 in their checked luggage. A customs inspector approached Bajakajian and his wife and informed them of the currency reporting requirements and asked them how much money they had in their possession. Bajakajian told the inspector that he had $8,000 and that his wife had $7,000, but that the family had no additional currency to declare. A subsequent search of their carry-on bags, purse, and wallet revealed more cash. The total amount of currency found and seized was $357,144. Defendant was then arrested and charged and subsequently indicted by a federal grand jury on three counts. Count I charged him with violating 31 U.S.C. § 5316, Count II charged him with making a false statement to Customs in violation of 18 U.S.C. § 1001 and Count III sought forfeiture of the $357,144 pursuant to 18 U.S.C. § 982(a)(1). Defendant subsequently pleaded guilty to Count I, Count II was dismissed and a bench trial commenced before the United States District Court for the Central District of California for the forfeiture sought in Count III. The District Court found that, although the funds were not connected to any other crime, the entire $357,144 was subject to forfeiture based on 18 U.S.C. § 982(a)(1). However, the court also concluded that such forfeiture would be "extremely harsh" and "grossly disproportionate to the offense in question," and that it would therefore violate the Excessive Fines Clause. Accordingly, despite section 982(a)(1), the court ordered forfeiture of $15,000, as well as a sentence of three years' probation and a fine of $5,000. The Ninth Circuit Court of Appeals affirmed the District Court's ruling upon appeal by the government. The Supreme Court granted certiorari and affirmed.
The relevant part of section 982(a)(1) reads: "The court, in imposing sentence on a person convicted of an offense in violation of section *** 5316, *** shall order that the person forfeit to the United States any property, real or personal, involved in such offense, or any property traceable to such property." 18 U.S.C. § 982(a)(1).
The Supreme Court first addressed whether the Excessive Fines Clause applied to section 932(a)(1) by exhaustively analyzing and comparing traditional civil in rem forfeiture actions with criminal in personam forfeiture actions. The Court concluded that the Excessive Fines Clause applied to section 932(a)(1) because the forfeiture of currency ordered by that section was a form of punishment. Bajakajian, at 327-334.
Having concluded that forfeiture under section 982(a)(1) was punitive and subject to the Excessive Fines Clause, the Court then addressed whether the forfeiture at issue — full forfeiture of the $357,144 under section 982(a)(1) — was excessive. The Court held that such a constitutional inquiry was grounded upon the principle of proportionality and stated the following test: "[A] punitive forfeiture violates the Excessive Fines Clause if it is grossly disproportionate to the gravity of a defendant's offense." Id. at 334. In analyzing the gravity of the defendant's offense, the Court reasoned that the charged crime — a violation of the reporting requirements of 31 U.S.C. § 5316 — was "solely a reporting offense" and that it was "unrelated to any other illegal activities." Id. at 337-338. In particular, the Court reasoned that the seized currency "was the proceeds of legal activity and was to be used to repay a lawful debt." Id. at 338. In addition, the Court also looked at the maximum sentence and fine that could have been imposed upon the claimant and the extent of harm caused by his actions. Id. at 339. As for the maximum sentence and fine that could have been imposed on the defendant under the Sentencing Guidelines — six months and $5,000 — the Court found that such penalties "confirm a minimal level of culpability." Ibid. Finally, the Court found that Bajakajian had caused only minimal harm in failing to report the currency. Thus, the Court concluded that full forfeiture of the $357,144 would be grossly disproportional to the gravity of the Bajakajian's offense. Id. at 339-340.
Ibid. ("There was no fraud on the United States, and respondent caused no loss to the public fisc. Had his crime gone undetected, the Government would have been deprived only of the information that $357,144 had left the country.")
The Court declined to address the constitutionality of the district court's decision to order forfeiture of $15,000 and it also refrained from approximating a sum of money that would not be grossly disproportionate in light of the gravity of Bajakajian's relatively minor offense. The sole issue before the Court was "whether the full forfeiture of [Bajakajian's] $357,144 as directed by § 982(a)(1) [was] constitutional under the Excessive Fines Clause." Bajakajian, at 337, n. 11.
The question left open after Bajakajian was whether the Excessive Fines Clause applied to civil forfeiture actions instituted by the government inasmuch as the statute at issue in that case — 18 U.S.C. § 982(a)(1) — involved forfeiture ordered by a court in a criminal forfeiture proceeding. See 18 U.S.C. § 982(a)(1). However, as mentioned previously, that issue has been erased by CAFRA which expressly authorizes a claimant in a civil forfeiture proceeding to "petition the court to determine whether the forfeiture was constitutionally excessive."
18 U.S.C. § 983(g)(1). Further, CAFRA incorporates the Bajakajian test for excessiveness — "In making [an excessiveness determination], the court shall compare the forfeiture to the gravity of the offense giving rise to the forfeiture." 18 U.S.C. § 983(g)(2). In addition, the statute places the burden on the claimant to establish "that the forfeiture is grossly disproportional by a preponderance of the evidence at a hearing conducted by the court without a jury." 18 U.S.C. § 983(g)(3). Finally, if the claimant meets his burden, the court is to "reduce or eliminate the forfeiture as necessary to avoid a violation of the Excessive Fines Clause of the Eighth Amendment of the Constitution." 18 U.S.C. § 983(g)(4).
In light of the foregoing, plaintiff must have shown that Nelson cannot meet his burden of establishing that forfeiture of the $49,766 would be grossly disproportionate to the gravity of his admitted section 5316 violation. The Court finds that it has not; summary judgment is therefore denied.
Several factors are relevant in assessing the gravity of Nelson's offense. They include: (1) whether his violation is related to "other illegal activities," (2) whether he is a "money launderer, a drug trafficker or a tax evader" or otherwise fits into the class of persons for whom the statute was designed, (3) the penalties that could be imposed on him and (4) the harm that he caused. Bajakajian, at 337-340. Considering such factors, a determination of excessiveness cannot be made by the Court upon the record that it has before it.
It is not clear whether Nelson's offense, in failing to report his currency, is related to other illegal activities. Initially, the Court finds relevant — as did the Bajakajian Court — the fact that Nelson's crime was solely a reporting offense. See Bajakajian, at 337. Although the government describes Nelson's activities as that of smuggling goods, such is not the case. It is permissible to bring currency into the United States so long as it is reported. The fact that Nelson knowingly failed to report the currency in his possession does not elevate his crime to that of smuggling. Second, the government's argument that Nelson's deposition testimony regarding the source of the currency "is simply unbelievable and does not warrant credibility" is without merit. It is not the role of this Court to make credibility determinations on a summary judgment motion. In fact, if anything, the Court must give credence to Nelson's testimony inasmuch as he is entitled to such favorable inferences as the nonmovant to this summary judgment motion. In any event, inasmuch as Nelson's deposition testimony reveals that he cannot fully explain the source of the defendant currency, such is not necessarily indicative that the currency was connected to illegal activities. Moreover, the government's argument is belied by statements contained within the Presentence Investigation Report submitted to this Court on January 25, 2001. In it, Probation Officer Michael J. Quarantillo declares:
See Black's Law Dictionary 1394 (7th ed. 1999) ("smuggling, n. The crime of importing or exporting illegal articles or articles on which duties have been paid.") (emphasis added). The currency that Nelson had attempted to import was neither an illegal article nor was it subject to a duty.
"It is this officer's assessment that the funds meet the criteria set forth in § 2S1.3(b)(2) in that there is no indication that they were proceeds of an unlawful activity, the defendant did not act in a reckless disregard of the source of the funds, the funds were proceeds of lawful activity and the funds were to be used for a lawful purpose." Presentence Investigation Report, No. 00-CR-0212, p. 5.
Third, facts indicating that Nelson might have been, or may be, a drug trafficker — such as the color-coded rubber bands that bound the individual bundles of currency and the fact that Nelson was arrested on January 24, 2001 in Canada and charged with unlawfully importing a controlled substance — are negated by the fact that Nelson has no significant criminal history of such activity. Finally, the Court notes that, at Nelson's sentencing, the parties agreed on an offense level of 9, with a criminal history category of I, according to the Sentencing Guidelines. Such calculations subjected him to a sentence of between four and ten months and a fine ranging from $1,000 to $10,000. U.S. Sentencing Comm. Guidelines Manual, Sentencing Table. Such a sentence shows a minimal level of culpability. See Bajakajian, at 338 (finding Bajakajian's possible maximum sentence of six months and a $5,000 fine under the Sentencing Guidelines to "confirm a minimal level of culpability"). Thus, the Court finds itself unable to conclude as a matter of law that Nelson cannot meet his burden of proving that forfeiture of the currency would be grossly disproportionate to his offense. Plaintiff's motion for summary judgment must therefore be denied.
In fact, Quarantillo calculated Nelson's criminal history at zero, which placed him in a criminal history category of I according to the Sentencing Guidelines. See Presentence Investigation Report, p. 6.
In so holding however, this Court makes no findings as to the appropriate amount of currency that should be subject to forfeiture. The Court simply finds that there are unresolved issues of material fact as to whether forfeiture of the entire $49,766 would be grossly disproportionate to Nelson's offense. Whether at a subsequent trial or at an evidentiary hearing, Nelson has the ultimate burden of proving that the forfeiture is excessive. Should he fail to do so, then the full amount will be forfeited.