USA v . Waltham, MA CV-05-302-SM 03/29/06 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
United States of America
v. Civil N o . 05-cv-302-SM Opinion N o . 2006 DNH 037 Land and Buildings Located at 99 Sheffield Road, Waltham, Massachusetts, with all Appurtenances and Improvements Thereon, Owned by Delilah Property Services, Inc., a/k/a Delilan Property Services, Inc.
REPORT AND RECOMMENDATION
In this action, the government seeks civil forfeiture of
real property identified as land and buildings located at 99
Sheffield Road, Waltham, Massachusetts, alleging that the
property is subject to forfeiture because it constitutes the
proceeds o f , or was derived from the proceeds o f , a mail fraud
scheme. The complaint was filed on August 3 1 , 2005, and the
government served the putative claimants here within 28 days of
commencing this action. No potential claimant to the property
responded to the government’s complaint until January 6, 2006
when Delilah Property Services, Inc. (“Delilah”), Amy McPherson,
Stasy Ann McPherson, Sara Rose McPherson, Beatrice Berkman and Alan William Berkman filed motions seeking leave to file verified
claims and answers nunc pro tunc. See Document Nos. 1 5 , 1 6 , 1 8 ,
2 0 , 2 2 , 24 and 26. 1 The government filed an objection to these
motions (document n o . 29) and a separate motion to strike the
putative claimants’ verified claims and answers as untimely
(document n o . 2 8 ) . With the exception of Amy McPherson, the
putative claimants filed objections to the motion to strike.
Delilah also filed a motion to amend its motion for leave to file
(document n o . 35) to which the government objects.
The above-referenced motions were referred to me for a
recommended disposition. For the reasons set forth below, I
recommend that the court deny the motions for leave to file
verified claims and answers because the putative claimants have
not shown that their failures to timely file were the result of
excusable neglect. I recommend that the court deny Delilah’s
motion to amend its motion for leave to file on the basis of
futility. And I recommend that the court find that the
government’s motion to strike is moot.
BACKGROUND
The mail fraud scheme that the government alleges in its
1 Document Nos. 16 and 18 are identical copies of the motion filed on behalf of Sara Rose McPherson.
2 complaint was allegedly perpetrated by Amy McPherson through
Delilah, a New Hampshire corporation that Amy McPherson allegedly
controlled. Delilah is the record owner of the defendant-in-rem.
The government alleges that on February 2 8 , 2005 Amy McPherson
pled guilty to multiple counts of making false statements, in
violation of 18 U.S.C. § 1001, related to her participation in a
scheme through which she obtained, in total, more than $60,000
from the U.S. Department of Housing and Urban Development, the
U.S. Department of Agriculture and the U.S. Department of Health
and Human Services that she was not entitled to receive.
Verified Compl., ¶ 17 (citing United States v . Amy McPherson, C r .
N o . 03-175-SM). The government alleges that the defendant-in-rem
is traceable to funds that Amy McPherson wrongly obtained from
those government agencies. Id., ¶ 2 0 .
The government commenced this action on August 3 1 , 2005 by
filing a verified complaint, notice of complaint and a motion for
ex parte finding and endorsement of memorandum lis pendens
pertaining to the defendant-in-rem. See Document Nos. 1-3. The
government served copies of the complaint, notice of complaint,
writ of entry and lis pendens by certified mail, return receipt
requested, on the following persons:
3 • Gary M . Lenehan, Esq., on September 6, 2005;
• Amy McPherson on September 7 , 2005;
• Beatrice Berkman on September 7 , 2005;
• Alan William Berkman on September 1 6 , 2005;
• Oscar Berkman on September 1 9 , 2005;
• Sara Rose McPherson on September 2 0 , 2005;
• Stasy Ann McPherson on September 2 8 , 2005.
See Affidavits of Service (document Nos. 6-13); see also
Declaration of Kimberly C . Cooper dated January 2 0 , 2006
(attached to document n o . 28) (describing the procedure that the
United States followed for serving persons who were determined to
potentially have an interest in the property).
On September 1 9 , 2005, the United States received a letter
from Alan Berkman requesting an extension of time to respond to
the complaint. Cooper Decl., ¶ 8 . Assistant United States
Attorney John J. Farley responded to M r . Berkman’s request in a
letter dated that same day. He addressed M r . Berkman as
Delilah’s President. See Cooper Decl., Attachment N o . 7. 2 Mr.
2 Alan Berkman admits that he is Delilah’s President and that he was personally served with notice of this action on or about September 7 , 2005. See Affidavit of Alan Berkman dated February 2 , 2006, ¶¶ 6-7, attached to document n o . 3 0 . The government points out that the return receipt for service by certified mail on Alan Berkman is actually dated September 1 6 , 2005.
4 Farley advised M r . Berkman that if he needed an extension of time
he needed to file a request for such with the court. Id. He
further stated that under the applicable federal rules any claim
needed to be filed by October 1 7 , 2005, and that if he failed to
file a timely claim or make a timely request for an extension of
time his claim might be found to be in default. Id.
Similarly, on September 2 0 , 2005, the United States received
a letter from Stasy McPherson requesting an extension of time to
respond to the complaint. Cooper Decl., ¶ 9. In a letter dated
September 2 7 , 2005, M r . Farley responded to M s . McPherson’s
letter addressing her as Delilah’s Secretary. Cooper Decl.,
Attachment N o . 8.3 M r . Farley advised M s . McPherson that any
request for an extension of time needed to be directed to the
court, that under the applicable rules any claim to the
defendant-in-rem was required to be filed by October 1 7 , 2005,
and that if M s . McPherson did not either file a timely claim or
make a timely request for an extension of time with the court her
claim could be found to be in default. Id. The United States
3 Stasy McPherson admits that she is Delilah’s Registered Agent. See Affidavit of Stasy Ann McPherson dated February 1 , 2006, ¶ 6, attached to document n o . 3 3 . M s . McPherson further admits that she was personally served with notice of this action on or about September 2 8 , 2005. Id., ¶ 7 .
5 did not receive any further correspondence from either M r .
Berkman or M s . McPherson, see Cooper Decl., ¶¶ 8-9.
In their motions for leave to file their verified claims and
answers, all filed by the same counsel on January 6, 2006, the
putative claimants acknowledge that their verified claims should
have been filed with the court in October 2005, and that their
answers to the complaint were due on various dates in late
October and November 2005. They did not provide any reason for
the late filing of their verified claims and answers in their
motions for leave to file, but asserted that the government would
not be prejudiced by the late filing of their claims. The
government filed an objection and a motion to strike.
In response to the government’s motion to strike, Stasy
McPherson, Sara Rose McPherson, Alan Berkman and Beatrice Berkman
argue that their late filing should be excused as the result of
excusable neglect attributable to the government’s
representations. For its part, Delilah argues that the
government did not strictly comply with the applicable rules
pertaining to service of process, execution of process and return
of process as to Delilah, and therefore the filing of Delilah’s
verified claim and answer was not untimely. Delilah seeks to
6 amend its motion for leave to file to remove its acknowledgment
that its verified claim and answer is late based on its improper
service argument and its current contention that the filing of
its verified claim and answer should not be considered untimely.
See Mot. to Amend Mot. to File Verified Claim and Answer Nunc Pro
Tunc, ¶ 4 .
DISCUSSION
I. Motions for Leave to File Verified Claims and Answers
In a civil forfeiture action, the defendant is the property
subject to forfeiture. United States v . One-Sixth Share of James
J. Bulger in All Present & Future Proceeds of Mass Millions
Lottery Ticket N o . M246233, 326 F.3d 3 6 , 40 (1st Cir. 2003). A
person who claims an interest in the property must intervene in
the forfeiture proceeding in accordance with the Supplemental
Rules for Certain Admiralty and Maritime Claims (the
“Supplemental Rules”). Id.; United States v . $23,000 In U.S.
Currency, 356 F.3d 1 5 7 , 161 (1st Cir. 2004). Supplemental Rule
C(6) provides, in relevant part, that:
In an in rem forfeiture action for violation of a federal statute:
(i) a person who asserts an interest in or right against the property that is the subject of the action
7 must file a verified statement4 identifying the interest or right:
(A) within 30 days after the earlier of (1) the date of service of the Government’s complaint or (2) completed publication of notice under Rule C ( 4 ) , or
(B) within the time that the court allows.
Supplemental Rule C(6)(a)(i). A party who fails to assert his
interest in the subject property pursuant to the requirements of
Supplemental Rule C(6) normally lacks standing to contest
forfeiture of the property. One-Sixth Share, 326 F.3d at 4 1 ;
United States v . One Dairy Farm, 918 F.2d 3 1 0 , 311 (1st Cir.
1990); see also Ortiz-Cameron v . DEA, 139 F.3d 4 , 6 (1st Cir.
1998) (“If a putative claimant who has received proper notice
fails to file within Rule C(6)’s time limits, he or she may not
bring a future claim for the properties at issue”).
Here, each of the putative claimants acknowledged in their
motions for leave to file that they received service of the
government’s civil forfeiture complaint and related documents.
See Document Nos. 1 5 , 1 6 , 1 8 , 2 0 , 2 2 , 24 and 2 6 , ¶ 2 . And they
4 The putative claimants have filed motions seeking leave to file verified claims. The Supplemental Rules were amended in 2000 and now require the filing of a “verified statement” of interest rather than a “verified claim.” See Supplemental Rule C advisory committee’s notes on the 2000 Amendment; see also $23,000 In U.S. Currency, 356 F.3d at 161 n.3. This distinction is not material to my recommended disposition.
8 admitted that their verified claims were due in October 2005.
See id., ¶ 3 . None of the putative claimants petitioned the
court for an extension of time to assert their interest in the
property under Supplemental Rule C(6)(a)(i)(B). Accordingly, the
government argues that the court should find that the putative
claimants lack standing to challenge the forfeiture because their
filings are untimely. The legal authorities support the
government’s position. See One Dairy Farm, 918 F.2d at 312
(citing cases for the proposition that strict adherence to the
filing requirements of Rule C(6) is required in order to contest
a civil forfeiture); United States v . $10,000 in U.S. Funds, 863
F. Supp. 8 1 2 , 814 (S.D. Ill. 1994) (“courts have taken a severe
stance against a claimant who has not properly perfected his
claim in a forfeiture proceeding in a timely manner”).
As the government acknowledges, however, the courts do not
preclude untimely Rule C(6) claims in all circumstances. In One
Dairy Farm, for instance, the First Circuit recognized that
technical noncompliance with the requirements of Rule C(6) has
been excused in limited instances based upon consideration of
mitigating factors such a s : (1) whether the claimant made a good
faith attempt to file a claim on time; (2) whether the claimant
9 relied detrimentally on misinformation from a governmental
agency; or (3) whether the claimant expended considerable
resources preparing the case for trial. Id.; see also United
States v . $100,348.00 In U.S. Currency, 354 F.3d 1110, 1117-18
(9th Cir. 2004) (discussing similar lists of mitigating factors
considered by courts in the Ninth, Seventh and Fourth Circuit
Courts of Appeals in deciding whether to grant leave to file
untimely claims).
Other courts have addressed the mitigating factors in the
cases cited above within the context of determining whether a
party seeking to file a late claim under Rule C(6) could
demonstrate “excusable neglect” under Fed. R. Civ. P. 6(b). 5 See
United States v . Borromeo, 945 F.2d 7 5 0 , 753 (4th Cir. 1991);
United States v . $230,963.88 In U.S. Currency, More or Less, N o .
Civ. 00-378-B, 2000 WL 1745130 at *1 (D.N.H. Nov. 1 6 , 2000).
Rule 6(b) provides in relevant part:
When by these rules or by a notice given thereunder or by order of court an act is required or allowed to be done at or within a specified time, the court for cause shown may at any time in its discretion . . . upon motion made after the expiration of the specified
5 The Supplemental Rules provide that the general rules of the Federal Rules of Civil Procedure apply to actions in rem except to the extent that the those rules are inconsistent with the Supplemental Rules. Supplemental Rule A .
10 period permit the act to be done where the failure to act was the result of excusable neglect.
Fed. R. Civ. P. 6 ( b ) . The determination of whether excusable
neglect exists is equitable in nature. Mirpuri v . ACT Mfg.,
Inc., 212 F.3d 6 2 4 , 630 (1st Cir. 2000) (citing Pioneer Inv.
Serv. C o . v . Brunswick Assocs. Ltd. P’ship., 507 U.S. 3 8 0 , 395
(1993)). The court must consider all of the relevant
circumstances pertaining to the movant’s failure to meet the
filing deadline including the danger of prejudice to the non-
movant, the length of the delay and its potential impact on
judicial proceedings, the reason for the delay, including whether
the delay was in the reasonable control of the movant, and
whether the movant acted in good faith. Mirpuri, 212 F.3d at
630-631; $230,963.88 In U.S. Currency, 2000 WL 1745130 at * 2 .
Standing alone, “inadvertence, ignorance of the rules, or
mistakes construing the rules do not usually constitute
‘excusable’ neglect.” Pioneer, 507 U.S. at 392. Rather, the
party seeking to file after the expiration of a specified period
“must demonstrate unique or extraordinary circumstances.”
Mirpuri, 212 F.3d at 631.
In this case, the putative claimants assert that the late
filing of their claims should be allowed because their failure to
11 timely file was the result of excusable neglect. I consider
their support for this argument next.
A. Prejudice and Delay
Since the prejudice and length of delay factors are closely
related, I consider them together. The purpose behind Rule C(6)
is “to require claimants to come forward as quickly as possible
after the initiation of forfeiture proceedings, so that the court
may hear all interested parties and resolve the dispute without
delay.” Ortiz-Cameron, 139 F.3d at 6 (quoting United States v .
Various Computers & Computer Equip., 82 F.3d 5 8 2 , 585 (3d Cir.
1996)); see also United States v . One Urban Lot Located at 1
Street A - 1 , 885 F.2d 9 9 4 , 1001 (1st Cir. 1989) (finding that the
Rule C(6) filing deadlines exist to “force claimants to come
forward as soon as possible after forfeiture proceedings have
begun and to prevent false claims”). The First Circuit has found
that the time limits in Rule C(6) are analogous to a statute of
limitations. Ortiz-Cameron, 139 F.3d at 6. Here, the putative
claimants’ verified statements were more than two months late
when they filed the instant motions for leave. Therefore, the
delay factor clearly weighs against them.
Weighing in the putative claimants’ favor is that the danger
12 of prejudice to the government at this early stage of the
proceedings is slight. The government argues that it will be
prejudiced if it is required to respond to these untimely
filings, but as the court found in $230,963.88 In U.S. Currency,
“[t]he mere likelihood that the government would not be able to
obtain an entry of default is not cognizable prejudice for
purposes of a Rule 6(b) inquiry.” 2000 WL 1745130 at *2 (citing
Pratt v . Philbrook, 109 F.3d 1 8 , 22 (1st Cir. 1997)).
B. The Reason for the Delay
Stasy McPherson, Sara Rose McPherson, Alan Berkman and
Beatrice Berkman argue that their late filing should be permitted
because the delay was the result of detrimental reliance on
comments made to them by Amy McPherson that the United States
would dismiss this civil forfeiture action upon the settlement of
a related civil false claims case. In support of their
assertions, they attach to their affidavits a copy of a draft
consent decree and order of payment dated November 2 1 , 2005. See
Document Nos. 30-33.
The government provides three persuasive reasons for
rejecting the putative claimants’ argument that the government
bears responsibility for their failure to act timely. First, the
13 putative claimants have not cited any affirmative
misrepresentations made directly to them by the government that
could have induced them to fail to file a timely verified claim.
Indeed, in responses to requests for extensions of time made by
Alan Berkman and Stasy McPherson, an Assistant United States
Attorney emphasized that they needed to either file a timely
claim or a timely request for an extension of time to file with
the court. There is no evidence in the record that the
government ever explicitly or implicitly encouraged the putative
claimants not to assert their interests in this action. Second,
while the putative claimants refer generally to conversations
that they had with Amy McPherson that caused them to believe that
this action might be dismissed, none of them state that such
conversations occurred before the expiration of their time to
assert their interest in the property. And third, while the
putative claimants suggest that they relied to their detriment on
a draft consent decree that was being negotiated by Amy McPherson
and the United States, that draft was dated November 2 1 , 2005,
which is well after the date that the putative claimants were
required to file their verified statements of interest.
Therefore, the draft consent decree could not have been the
14 reason for their failure to act timely. For all these reasons,
the putative claimants’ assertions of the government’s
responsibility for their failure to act are wholly unpersuasive.
C. The Movants’ Good Faith
Finally, the court must consider whether the putative
claimants acted in good faith. I find no facts that weigh in the
putative claimant’s favor on this factor. Despite having actual
notice of this action, the putative claimants neither petitioned
the court for an extension of time, nor filed any other pleading
with the court that could be deemed a good faith attempt to
comply with Rule C(6) before filing the instant motions for leave
to file on January 6, 2006. And as discussed above, the putative
claimants’ only asserted reason for their delay, reliance on the
government’s representations, is not supported by the record. To
the extent that the putative claimants may have relied on the
hope that this action would be dismissed as part of the
settlement of a related case, such speculation cannot be
considered an adequate reason for failing to comply with the
requirements of Rule C ( 6 ) . C f . Valderrama v . United States, 326
F. Supp. 2d 1333, 1338 (S.D. Fla. 2004) (where the plaintiff
failed to timely assert his interest in property in an
15 administrative forfeiture proceeding, the court found that an
objectively reasonable person would have realized that the
government’s letters regarding the commencement of proceedings,
and not a purported settlement agreement that had never been put
in writing, established the government’s position).
D. Conclusion
The putative claimants first sought leave to assert their
interest in this action more than two months after their Rule
C(6) filings were due, they have not advanced any good reason for
their delay, and they did not make a good faith attempt to timely
comply with Rule C ( 6 ) . I find no facts that suggest that the
putative claimants’ failure to act timely resulted from unique or
extraordinary circumstances. Therefore, considering all of the
circumstances, I find that the putative claimants’ failure to
timely file their verified statements and answers should not be
deemed excusable neglect. Accordingly, I further find that the
putative claimants’ motions for leave to file should be denied
because they now lack standing to challenge the forfeiture. See
One Dairy Farm, 918 F.2d at 313 (affirming a district court’s
decision to dismiss the appellant’s claims because they failed to
file a claim or answer within the time prescribed by Rule C(6)
16 and did not advance any reason that would warrant relieving the
putative claimants from the consequences of their inaction).
II. Delilah’s Motion for Leave to Amend
Delilah argues that the government did not strictly comply
with the applicable rules pertaining to service of process,
execution of process and return of process, and therefore the
filing of Delilah’s verified claim and answer was not untimely.
Delilah seeks to amend its motion for leave to file based on its
improper service argument and its contention that the filing of
its verified claim and answer should not be considered untimely.
Delilah bases its improper service argument on the First
Circuit’s findings in United States v . Approximately Two
Thousand, Five Hundred Thirty-Eight Point Eighty-Five Shares
(2,538.85) etc., 988 F.2d 1281 (1st Cir. 1993), that:
“Process” in an in rem action consists fundamentally of the warrant for arrest of the property to be seized. “Execution” of such “process” consists of service of the arrest warrant upon the defendant property, after which the marshal files with the court proof of service.
988 F.2d at 1282. Delilah fails to recognize, however, that
there have been changes to the forfeiture law, particularly as it
17 applies to the civil forfeiture of real property,6 since the
First Circuit decided Approximately 2,538.85 Shares that
invalidate Delilah’s argument. In particular, Congress enacted
the Civil Asset Forfeiture Reform Act of 2000 (“CAFRA”), which
applies to all forfeiture proceedings commenced on or after
August 2 3 , 2000. Pub. L . N o . 106-185, § 2 1 , 114 Stat. 2 0 2 , 225;
see also One-Sixth Share, 326 F.3d at 40 n.3 (describing CAFRA as
a substantial overhaul of federal civil asset forfeiture).
“CAFRA provides for a specific procedure in all forfeiture
proceedings involving real property that overrides the more
general requirements of the Supplemental Rules.” United States
v . 630 Ardmore Drive, 178 F. Supp. 2d 5 7 2 , 578 (M.D.N.C. 2001);
see also 18 U.S.C. § 985.
Under § 985, the government initiates a civil forfeiture
action against real property by:
(A) filing a complaint of forfeiture;
6 Delilah asserts in its memorandum of law in support of its objection to the motion to strike that the government seeks the forfeiture of shares of stock of Delilah Property Services, Inc. See Document N o . 3 6 . Delilah is mistaken. In its verified complaint, the government clearly identifies the defendant-in-rem as “Land and Buildings Located at 99 Sheffield Road, Waltham, Massachusetts, with all Appurtenances and Improvements Thereon owned by Delilah Property Services, Inc., a/k/a Delilan Property Services, Inc.” See Document N o . 1 (Verified Compl. at 1 ) .
18 (B) posting a notice of the complaint on the property; and
(C) serving notice on the property owner, along with a copy of the complaint.
18 U.S.C. § 985(c)(1). As long as the real property has been
posted in accordance with 18 U.S.C. § 985(c), and there has been
no allegation that it was not in this case, the government is not
required to obtain a summons and warrant for arrest of real
property. 18 U.S.C. § 985(c)(3); 630 Ardmore Drive, 178 F. Supp.
2d at 578. I find no support for Delilah’s contention that the
Supplemental Rules impose additional service requirements on the
government in this case.
Although Delilah has not argued in the alternative that the
government’s service of notice in this case violated its due
process rights, the facts show that any such claim would fail.
The Due Process Clause of the Fifth Amendment requires the
provision of “notice reasonably calculated, under all the
circumstances, to apprise interested parties of the pendency of
the action and afford them an opportunity to present their
objections.” Mullane v . Cent. Hanover Bank & Trust Co., 339 U.S.
306, 314 (1950); see also Dusenbery v . United States, 534 U.S.
161, 170 (2002) (finding in a forfeiture case that the government
19 may demonstrate that it satisfied the requirements of due process
even in the absence of actual notice to the claimant where the
government took steps that were reasonably certain to inform
those affected of the pendency of the action). In this case,
there is no question that the government met its burden.
Alan Berkman, Delilah’s President, and Stasy McPherson,
Delilah’s Registered Agent, both submitted affidavits
acknowledging that they received service of this action in
September 2005. Even though the notice that Alan Berkman and
Stasy McPherson received was not specifically addressed to
Delilah, I find that providing notice and a copy of the complaint
to Delilah’s President and Registered Agent satisfies the
requirements of 18 U.S.C. § 985(c)(1)(C) and Delilah’s right to
due process because such notice was reasonably calculated, under
all the circumstances, to apprise Delilah of the pendency of this
action. Furthermore, the facts demonstrate that Delilah had
actual notice of this action as evidenced by Alan Berkman’s and
Stasy McPherson’s affidavits and communications with the United
States Attorney’s Office in their corporate capacities regarding
this action before Delilah’s Rule C(6) filings were due.
Since the facts show that Delilah received adequate notice
20 of this action in September 2005, the Rule C(6) time period for
responding to the government’s complaint was triggered at that
time. Therefore, Delilah’s motion for leave to file its verified
claim and answer, submitted on January 6, 2006, is in fact
untimely. Accordingly, Delilah’s motion to amend, which seeks to
withdraw its acknowledgment that its Rule C(6) filings are late,
should be denied because it is futile.
III. The Government’s Motion To Strike
Since I recommend that the court deny the putative
claimant’s motions for leave to file verified claims and answers
nunc pro tunc, I further find that the government’s motion to
strike the putative claimants’ verified claims and answers should
be deemed moot.
CONCLUSION
For the reasons set forth above, I recommend that the
motions to file verified claims and answers nunc pro tunc
(document nos. 1 5 , 1 6 , 1 8 , 2 0 , 2 2 , 24 and 26) be denied. I
recommend that the motion to amend motion to file verified claim
and answer nunc pro tunc filed by Delilah Property Services, Inc.
(document n o . 35) be denied. I recommend that the government’s
motion to strike untimely verified claims and answers (document
21 n o . 28) be deemed moot.
Any objections to this Report and Recommendation must be
filed within ten (10) days of receipt of this notice. Failure to
file objections within the specified time waives the right to
appeal the district court’s order. See Unauthorized Practice of
Law Comm. v . Gordon, 979 F.2d 1 1 , 13-14 (1st Cir. 1992); United
States v . Valencia-Copete, 792 F.2d 4 , 6 (1st Cir. 1986).
____ /Jam ___ s R. Muirhead ited States Magistrate Judge
Date: March 2 9 , 2006
cc: John J. Farley, Esq. Rodkey Craighead, Jr., Esq.