United States v. Douglas

• Court: Court of Appeals for the Eleventh Circuit
• Decided: June 21, 1995
• Docket: 94-8621
• Status: Published

Opinion

United States Court of Appeals,

Eleventh Circuit.

No. 94-8621.

UNITED STATES of America, Plaintiff-Appellant,

v.

Robert E. DOUGLAS, Jr., Defendant-Appellee.

Noel LUSSIER, Petitioner,

UNITED STATES of America, Respondent.

June 21, 1995.

Appeal from the United States District Court for the Middle District of Georgia. (No. CR91-4-THOM), J. Robert Elliott, Judge

Before KRAVITCH and BIRCH, Circuit Judges, and GOODWIN*, Senior Circuit Judge.

KRAVITCH, Circuit Judge:

Following the entry of a preliminary order of criminal

forfeiture under 18 U.S.C.A. § 982(a) (West Supp.1995), "[a]ny

person, other than the defendant, asserting a legal interest in

property which has been ordered forfeited to the United States" may

"petition the court for a hearing to adjudicate the validity of his

alleged interest in the property." 21 U.S.C.A. § 853(n) (West

Supp.1995).1 The question of first impression presented in this

case is whether this § 853(n) proceeding, ancillary to a criminal

forfeiture prosecution but instituted by a third-party claimant, is

* Honorable Alfred T. Goodwin, Senior U.S. Circuit Judge for the Ninth Circuit, sitting by designation. 1 The § 853(n) procedure is made expressly applicable to criminal forfeitures under § 982(a) by 18 U.S.C.A. § 982(b)(1) (West Supp.1995). a "civil action" within the meaning of an Equal Access to Justice

Act ("EAJA") provision permitting attorneys' fee awards against the

United States. See 28 U.S.C.A. § 2412(d)(1)(A) (West 1994). 2 We

hold that § 853(n) proceedings are civil actions under the EAJA.

Because the government's litigation position in this case was not

substantially justified, we AFFIRM the district court's order

awarding attorneys' fees to the third-party claimant.

I.

Noel Lussier loaned a total of $157,500 to Robert E. Douglas,

Jr., between 1985 and 1987, and reduced the debt to judgment in

1989 following Douglas's default. In August 1990, in an effort to

collect his judgment, Lussier instituted an action in the district

court against Douglas's family members and corporations controlled

by Douglas, alleging a conspiracy with Douglas to defraud

creditors. In connection with that litigation, Lussier filed

proper notices of lis pendens for affected real and personal

property. In September 1990, pursuant to a consent decree, the

disputed property was deposited with the clerk of the district

court pending resolution of the action.

In June 1991, the United States filed a criminal information

2 Section § 2412(d)(1)(A) provides, in pertinent part:

[A] court shall award to a prevailing party other than the United States [attorneys'] fees and other expenses ... incurred by that party in any civil action (other than cases sounding in tort) ... brought by or against the United States in any court having jurisdiction of that action, unless the court finds that the position of the United States was substantially justified or that special circumstances make an award unjust. against Douglas, alleging money laundering3 and mail fraud4 in connection with his insurance business. The government also sought 5 criminal forfeiture, under 18 U.S.C. § 982(a), of six items of

real and personal property. Douglas pleaded guilty and acceded to

this forfeiture demand in his plea agreement; the district court

then issued a preliminary order of forfeiture.

The forfeiture order covered three items previously placed in

the court's registry pursuant to the Lussier v. Douglas consent

decree. Lussier filed a § 853(n) petition opposing forfeiture of

these properties, demonstrating that they neither (i) were involved

in money laundering (or traceable to any involved property) within

the meaning of § 982(a)(1), nor (ii) constituted (or derived from)

proceeds of mail fraud within the meaning of § 982(a)(2).

Consequently, Lussier argued, the three properties simply were not

3 See 18 U.S.C.A. § 1957 (West Supp.1995). 4 See 18 U.S.C.A. § 1341 (West Supp.1995). 5 This section provides, in relevant part:

(1) The court, in imposing sentence on a person convicted of an offense in violation of [inter alia, 18 U.S.C. § 1957], 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....

(2) The court, in imposing sentence on a person convicted of a violation of, or a conspiracy to violate—

(A) [inter alia, 18 U.S.C. § 1341], affecting a financial institution, ...

shall order that the person forfeit to the United States any property constituting, or derived from, proceeds the person obtained directly or indirectly, as the result of such violation. forfeitable under the statute. The government's sole response to

Lussier's summary judgment motion was that the rules of civil

procedure did not apply in the criminal forfeiture context (and

summary adjudication therefore was improper); it did not challenge

Lussier's factual contentions. The district court granted summary

judgment for Lussier and modified its forfeiture order.6

Lussier then moved for attorneys' fees pursuant to 28 U.S.C.

§ 2412(d)(1)(A). Noting that "the government apparently made no

investigation into factual background prior to seeking forfeiture,"

the district court found that the government's litigation position

with respect to the three properties was not substantially

justified, and awarded about $21,000 in attorneys' fees to Lussier.

II.

On appeal, the government contends that because a § 853(n)

proceeding is ancillary to a criminal forfeiture prosecution, it is

not a civil action within the meaning of the EAJA, and that an

attorneys' fee award against the United States consequently was

unauthorized. No appellate court has addressed this question.7

We begin by considering the nature of the § 853(n) proceeding.

Once a criminal forfeiture prosecution has been filed, third

parties are expressly barred by 21 U.S.C. § 853(k)(2) from

"commenc[ing] an action at law or equity against the United States

6 The government voluntarily dismissed its appeal from the summary judgment order. 7 But see United States v. Bachner, 877 F.Supp. 625 (S.D.Fla.1995) (holding that § 853(n) proceedings are civil actions under 28 U.S.C. § 2412(b), an EAJA attorneys' fee provision similar to § 2412(d)(1)(A)); cf. United States v. Reckmeyer, 836 F.2d 200, 209 (4th Cir.1987) (reserving question). concerning the validity of [their] alleged interest in the

property," except "as provided in [§ 853(n) ]."8 Congress

therefore viewed a § 853(n) hearing as a species of an "action at

law or equity"—a substitute for separate civil litigation against

the government.9

The mere fact that Congress viewed § 853(n) proceedings as

generally civil,10 however, does not necessarily mean that they are

civil actions within the particular meaning of the EAJA. "The

application of each statute or rule using the words "civil action'

must be decided on the basis of its [own] language, its [own]

history and its [own] purpose." In re Grand Jury Subpoena Duces

Tecum Dated January 2, 1985 (Simels), 775 F.2d 499, 503 (2nd

Cir.1985). The EAJA does not define the term "civil action," and

the statute is, on its face, ambiguous as applied to § 853(n)

proceedings. Our examination of the legislative history of the

8 Section 853(k)(1) similarly bars third-parties from intervening directly in the criminal forfeiture prosecution. 9 The legislative history of § 853(n) similarly indicates that Congress considered this ancillary proceeding to be essentially civil. See H.R.Rep. No. 1030, 98th Cong., 2d Sess. 206-07 (1984), reprinted in 1984 U.S.C.C.A.N. 3182, 3389-90 (legislative history of identically-worded RICO criminal forfeiture provision) ("[O]nce the indictment or information is filed, a third party is not to commence a civil suit against the United States; instead the third party should avail himself of the ancillary hearing procedure.... [I]t is anticipated that the new hearing procedure should provide for more expedited consideration of third party claims than would the filing of separate civil suits.") (emphasis added); see also id. at 214, reprinted in 1984 U.S.C.C.A.N. at 3397 (directing that legislative history of RICO provision be used as legislative history of § 853). 10 See also United States v. Lavin, 942 F.2d 177, 181-82 (3rd Cir.1991) (§ 853(n) proceeding is a "civil case" under Fed.R.App.P. 4(a)(1) for purposes of calculating time to appeal). EAJA, however, suggests that these proceedings are the paradigm of

a civil action under that statute.

In enacting the EAJA, Congress noted that

[f]or many citizens, the costs of securing vindication of their rights and the inability to recover attorney fees preclude resort to the adjudicatory process. When the cost of contesting a Government order, for example, exceeds the amount at stake, a party has no realistic choice and no effective remedy. In these cases, it is more practical to endure an injustice than to contest it.

H.R.Rep. No. 1418, 96th Cong., 2d Sess. 9 (1980), reprinted in 1980

U.S.C.C.A.N. 4984, 4988. Recognizing that for "certain

individuals, partnerships, corporations and labor and other

organizations ... [t]he economic deterrents to contesting

governmental action [further] are magnified in these cases by the

disparity between the resources and expertise of these individuals

and their government," Congress intended to "reduce [such]

deterrents and disparity by entitling certain prevailing parties to

recover an award of attorney fees, expert witness fees and other

expenses against the United States, unless the Government action

was substantially justified." Id. at 5-6, reprinted in 1980

U.S.C.C.A.N. at 4984.11 Failure to apply the EAJA to § 853(n) proceedings would

contravene Congress's desire to instill governmental accountability

and to level the playing field in economic disputes between the

government and its citizens. The United States generally can

11 See also H.R.Rep. No. 120, Part I, 99th Cong., 1st Sess. 4, reprinted in 1985 U.S.C.C.A.N. 132, 132-33 (reiterating purpose of EAJA). 12 choose between civil and criminal forfeiture remedies, and

consequently also choose the manner in which third parties must

defend their property interests. The EAJA clearly applies to

protect successful third-party intervenors in civil forfeiture

proceedings. See, e.g., United States v. Certain Real Estate

Property Located at 4880 S.E. Dixie Highway, 838 F.2d 1558 (11th

Cir.1988). If the EAJA did not also apply to protect § 853(n)

third-party petitioners, the government would have an obvious

incentive to channel substantially unjustified forfeiture attempts

into the criminal forfeiture "safe haven" in the hope that the

amount at stake for each individual petitioner would be too small

to make litigation worthwhile. Accord Bachner, 877 F.Supp. 627

("It seems fundamentally unfair for the availability of attorneys

fees [to third parties] to hinge upon the choice of the

[government] to bring the action under the civil or criminal

forfeiture statute.").

Our analysis also is consistent with the way other courts have

classified hybrid proceedings in applying the EAJA. When brought

by persons not under criminal indictment, proceedings that are

usually ancillary to criminal prosecutions have been held to be

civil actions. See Purcell v. United States, 908 F.2d 434, 437

(9th Cir.1990) (Fed.R.Crim.P. 41(e) motion for return of property

by person under government investigation was civil action under

EAJA, as no formal criminal proceedings had been initiated); Lee

12 See United States v. Elgersma, 971 F.2d 690, 695 (11th Cir.1992) (en banc) (noting that if beyond a reasonable doubt standard were applied to § 853(a)(1) criminal forfeiture, government would invariably choose to employ civil forfeiture under 21 U.S.C. § 881). v. Johnson, 799 F.2d 31, 36-38 & n. 6 (3rd Cir.1986) (separate

action by grand jury targets, against whom no criminal charges were

pending, to quash grand jury subpoena and obtain injunctive relief

against government actors was civil action under EAJA). Section

853(n) claimants are, by definition, third parties who are not even

under investigation in connection with the pertinent criminal

forfeiture prosecution, as the ancillary proceedings are instituted

by persons "other than the [forfeiture] defendant" after the main

criminal proceedings are concluded. See 21 U.S.C. § 853(n)(2).

Consequently, the case for holding § 853(n) proceedings to be civil

under the EAJA is even stronger than that supporting the results in

Lee and Purcell.13

We recognize that because "[t]he EAJA renders the United

States liable for attorney's fees for which it would not otherwise

be liable, and thus amounts to a partial waiver of sovereign

immunity ... [the] waiver must be strictly construed in favor of

the United States." Ardestani v. INS, 502 U.S. 129, 137, 112 S.Ct.

515, 520, 116 L.Ed.2d 496 (1991). But while "the rule requiring

clear statement of waivers of sovereign immunity ... applies even

to determination of the scope of explicit waivers," it does not

"require explicit waivers to be given a meaning that is

implausible." United States v. Williams, --- U.S. ----, ----, 115

13 Furthermore, decisions holding that proceedings related to criminal prosecutions are not civil actions under the EAJA when brought by indicted or convicted criminal defendants therefore are distinguishable. See In re Simels, 775 F.2d at 502-04 (Fed.R.Crim.P. 17(c) motion by criminal defendant-intervenor to quash grand jury subpoena issued against his attorney); Ewing v. Rodgers, 826 F.2d 967, 969-71 (10th Cir.1987) (federal prisoner habeas petition); Boudin v. Thomas, 732 F.2d 1107, 1112-15 (2nd Cir.1984) (same). S.Ct. 1611, 1620, --- L.Ed.2d ---- (1995) (Scalia, J., concurring).

Accordingly, we hold that litigation between an innocent third-

party claimant and the government, ancillary to a criminal

forfeiture proceeding, is a civil action within the purview of the

EAJA.14 III.

Under § 2412(d)(1)(A), the attorneys' fee award against the

government is mandatory "unless the court finds that the position

of the United States was substantially justified or that special

circumstances make an award unjust." The government's position is

substantially justified under the EAJA when it is "justified to a

degree that would satisfy a reasonable person"—i.e. when it has a

reasonable basis in both law and fact. Pierce v. Underwood, 487

U.S. 552, 565, 108 S.Ct. 2541, 2550, 101 L.Ed.2d 490 (1988). The

district court in this case concluded that the government's

14 In Bachner, the court concluded that § 853(n) proceedings are civil under the EAJA because, under the express terms of § 853(n)(6), the third-party claimant "carrie[s] the burden of proof at trial, the burden of proof [is] by a preponderance of the evidence, and [the claimant seeks] to protect its property rights which are ordinarily protected by civil actions." Bachner, 877 F.Supp. at 627.

Although we agree with the result in Bachner, we expressly disclaim reliance on this aspect of its reasoning. The recited factors are not necessarily determinative of whether a proceeding is a civil action under the EAJA. For example, the § 853(n) petitioner's attempt to protect her property rights may, as in Lussier's case, simply involve consideration of the same issues as those involved in the criminal forfeiture prosecution itself. See Reckmeyer, 836 F.2d at 206 (although § 853(n) petitioner usually tries to defeat forfeiture by establishing ownership of superior interest or bona fide purchaser for value status, she also may relitigate nexus between property and criminal offense established in criminal prosecution by showing "that a particular asset was not forfeitable [to begin with] under the terms of the statute"). position was not substantially justified, and that no special

circumstances were present, as "the government apparently made no

investigation into factual background prior to seeking forfeiture."

We review this determination for abuse of discretion. See Pierce,

487 U.S. at 558-63, 108 S.Ct. at 2546-49.

The government first argues that its decision to seek

forfeiture of the three properties in question must have been

substantially justified because it received the imprimatur of the

district court. The district court, the government contends, must

have found a "factual basis" for the criminal forfeitures recited

in the plea agreement when it accepted Douglas's guilty plea. See

Fed.R.Crim.P. 11(f). We disagree. In United States v. Boatner,

966 F.2d 1575, 1581 (11th Cir.1992), this court held that because

"a forfeiture provision in a Rule 11 agreement is not a plea to a

substantive charge, but [rather] a sanction to which the parties

agree as a result of the defendant's plea ... a sentencing judge is

not required under Rule 11 to determine whether there is a factual

basis for a defendant's concession to a criminal forfeiture

pursuant to his plea bargain with the government." Consequently,

in accepting the plea, the district court made no determination on

which the government was entitled to rely in its subsequent

decision to seek a preliminary order of forfeiture.

The government next contends that its position was

substantially justified because it raised a question of first

impression in opposing Lussier's summary judgment motion. After

the initial grant of summary judgment against it, the government 15 moved to alter or amend judgment, arguing, in reliance on

decisions from other circuits, that general creditors do not have

standing to bring § 853(n) petitions. See, e.g., United States v.

BCCI Holdings (Luxembourg), S.A., 46 F.3d 1185, 1191-92

(D.C.Cir.1995), petition for cert. filed, (U.S. May 2, 1995) (No.

94-1806-CFY). The district court denied the motion.

We need not consider the issues raised by decisions such as

BCCI Holdings, as these cases clearly do not apply here. 16 BCCI

Holdings explains that general creditors do not have standing

"unless they have already secured a judgment against the debtor and

perfected a lien against a particular item [among those to be

forfeited]." BCCI Holdings, 46 F.3d at 1191 (emphasis added).17

It is undisputed that Lussier had obtained a judgment against

Douglas, filed appropriate notices of lis pendens, and segregated

the affected property into the registry of the court almost a year

before the commencement of the criminal proceedings. Thus the BCCI

Holdings argument did not render the government's position

substantially justified.18

15 See Fed.R.Civ.P. 59(e). 16 The government implicitly conceded as much by not pursuing an appeal from the final summary judgment order. 17 Accord United States v. Schwimmer, 968 F.2d 1570, 1581 (2nd Cir.1992) (general creditor does not have standing "until he has obtained some judgment and secures [the relevant] asset or ... funds. At that point, he is no longer merely a general creditor."). 18 The government's Rule 59(e) motion also was untimely. It is unclear from the district court's order whether it denied this motion as untimely or reached the merits. If the motion was denied as untimely, then the BCCI Holdings argument never was properly presented to the district court, and therefore cannot count as part of the government's position in deciding whether The government's remaining arguments do not warrant

discussion. The frivolousness of its forfeiture attempt is

palpably illustrated by its initial opposition to Lussier's motion

for summary judgment on the sole ground that the rules of civil

procedure did not apply. The district court did not abuse its

discretion in finding a lack of substantial justification for the

government's position.

IV.

For the foregoing reasons, the order awarding attorneys' fees

against the United States is AFFIRMED.

that position was substantially justified. We need not decide the issue, however, as the argument was, in any event, frivolous on the merits.