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U.S. v. PROPERTY KNOWN AS 16 CLINTON ST.

February 14, 1990

UNITED STATES OF AMERICA, PLAINTIFF,
v.
ALL RIGHT, TITLE AND INTEREST IN REAL PROPERTY AND A BUILDING KNOWN AS 16 CLINTON STREET, NEW YORK, NEW YORK, AND LEASEHOLD INTERESTS THEREIN KNOWN AS BRUNILDA LUNA FABRIC STORE AND TTT GROCERY AND CANDY STORE, DEFENDANT-IN-REM.



The opinion of the court was delivered by: Mukasey, District Judge.

16 Clinton Street is a five-story brick building with eight apartments and two stores located on the Lower East Side of Manhattan. In 1988 and 1989, the New York City Police Department conducted an undercover investigation of narcotics activity at the building's two stores, the Brunilda Luna Fabric Store and the TTT Grocery and Candy Store. During that investigation, undercover officers purchased heroin at the Brunilda Luna Fabric Store on five separate occasions. Buyers picked up drugs at the store after paying for them at a grocery store nearby. Undercover officers also purchased cocaine three times at the TTT Grocery and Candy Store. On February 14, 1989, officers searched the Brunilda Luna Fabric Store and arrested six people. One month later, officers searched the TTT Grocery and Candy Store, and recovered more than a half ounce of cocaine, marijuana in bags and pre-marked "buy money" that had been used by undercover officers to buy the drugs.

On June 27, 1989, pursuant to a seizure warrant issued by United States Magistrate Michael H. Dolinger, who found probable cause for seizure of the property under 21 U.S.C. § 881(b), United States Marshals seized the building at 16 Clinton Street, including the leasehold interests on the first floor. On July 19, 1989, the Government filed a verified complaint against the defendant in rem, and on August 11, 1989 David and Nathan Shuchat, the owners of the property, filed a notice of claim for the return of the property.

The defendant in rem now moves to dismiss the Government's verified complaint under Fed.R.Civ.P. 12(b)(6) for failure to state a claim, or, in the alternative, for violation of the Excessive Fines Clause of the Eighth Amendment. For the reasons set forth below, defendant's motion is denied.

I.

On a motion to dismiss, the court must decide whether the complaint on its face sets forth a claim upon which relief may be granted. Fed.R.Civ.P. 12(b)(6). In forfeiture cases under 21 U.S.C. § 881, the complaint must comply with the Supplemental Rules for Certain Admiralty and Maritime Claims. 21 U.S.C. § 881(b). Under Supplemental Rule E(2)(a), a "complaint shall 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." A forfeiture complaint thus is subject to dismissal if it fails to assert specific facts supporting an inference that the property is subject to forfeiture under the statute. United States v. $39,000 in Canadian Currency, 801 F.2d 1210, 1219 (10th Cir. 1986); United States v. $38,000 in U.S. Currency, 816 F.2d 1538, 1548 (11th Cir. 1987). Section 881(a)(7) provides that real property is subject to forfeiture if it was "used or intended to be used, in any manner or part, to commit, or to facilitate the commission of, a violation of this title punishable by more than one year's imprisonment. . . ." 21 U.S.C. § 881(a)(7).

In order to state a claim, the Government need demonstrate only probable cause for a forfeiture. Under § 881, which incorporates 19 U.S.C. § 1615, once the Government makes that showing, the burden shifts to the claimant to prove that the factual predicates for forfeiture have not been met: "the burden of proof shall lie upon such claimant. . . . Provided, That probable cause shall be first shown for the institution of such suit or action." 19 U.S.C. § 1615. At this stage, the claimant "must prove either that the property was not used unlawfully . . . or that the illegal use was without the claimant's knowledge or consent." United States v. The Premises and Real Property at 4492 South Livonia Road, 889 F.2d 1258, 1267 (2d Cir. 1989) (citations omitted). To meet the probable cause requirement, the Government's grounds for bringing the complaint "must rise above the level of mere suspicion but need not amount to what has been termed 'prima facie proof.'" U.S. v. Banco Cafetero Panama, 797 F.2d 1154, 1160 (2d Cir. 1986). See United States v. One 1978 Chevrolet Impala, 614 F.2d 983, 984 (5th Cir. 1980).

In order to survive a motion to dismiss, therefore, the Government must demonstrate probable cause in its complaint that the property itself — regardless of the activities of the property's owner — was connected with narcotics activity. United States v. Banco Cafetero Panama, 797 F.2d 1154, 1160 (2d Cir. 1986); United States v. Property Known as 303 W. 116th St. New York, 710 F. Supp. 502, 505 (S.D.N. Y. 1989). Here, the Government's complaint satisfies the probable cause requirement, because it alleges in detail numerous drug transactions connecting the property with illegal narcotics activities.

Claimants here allege that the complaint does not state a claim and does not meet the particularity requirement of Rule E(2) because although it recites facts connecting the two leased stores with drug transactions, it does not link the entire building or "fee interest" with such transactions. Claimants argue that the leased stores downstairs and the residential apartments upstairs are separate property interests; thus the Government cannot seize the entire building based on acts of the downstairs tenants. Claimants' assertion that their property rights should not be curtailed because of other people's illegal acts is a valid defense to the forfeiture claim against their building. Nevertheless, because the government need show only probable cause to state a claim, this "innocent owner" defense is not relevant to a motion to dismiss.

Under the statute, property may not be forfeited "to the extent of an interest of an owner, by reason of any act or omission established by that owner to have been committed or omitted without the knowledge or consent of that owner." 21 U.S.C. § 881(a)(7). If claimants had no knowledge of the drug activity in their building, they may assert such an"innocent owner" defense at trial. But "lack of knowledge or consent by the property owner is a defense in a forfeiture proceeding and thus is not an essential element of the government's case. . . . The plain meaning of this last clause of § 881(a)(7) clearly places the burden on the property owner to come forward at the forfeiture trial to prove his 'ignorance' defense. . . . As in any typical civil action, such a defense need not be anticipated in the complaint."*fn1 United States v. A Parcel of Real Property Commonly Known as 3400-3410 W. 16th St., Chicago, 636 F. Supp. 142, 146 (N.D.Ill. 1986). See also United States v. A Single Family Residence, 803 F.2d 625, 629 (11th Cir. 1986); United States v. 124 East North Ave., Lake Forest, Ill., 651 F. Supp. 1350 (N.D.Ill. 1987). That the Government properly states a forfeiture claim does not deprive claimants of a means to recover their property, as Congress has ensured the return of property to owners who ultimately can show lack of involvement in the illegal activities.

Claimants allege also that the government has not shown probable cause connecting the entire building with the sale of drugs, and that the Government has not stated with particularity the facts showing a connection between the entire building and the sale of drugs. The statute does not require the Government to show a connection between an entire property interest and the drug-related activities; rather, it provides for the forfeiture of property that has been used "in any manner or part" in criminal activities. Claimants' argument that a leasehold in a building is completely separate from the fee interest in the whole building, if accepted, would weaken the force of the forfeiture statute, which was designed to deter "drug transactions by attacking the profitability of crime." United States v. Property Ident. as 3120 Banneker Dr. N.E., 691 F. Supp. 497, 501 (D.D.C. 1988).

  Two lines of authority undermine claimants' assertion that
the fee interest in the building and the leasehold interests
in the stores should be treated separately under the
forfeiture statute. First, courts have allowed the forfeiture
of property based on illegal transactions involving tenants
— and not owners — of the property. See United States v. Real
Property Located at 2011 Calumet, Houston, 699 F. Supp. 108
(S.D.

Tex. 1988). Second, although the Second Circuit has declined
to resolve this issue, courts in other circuits consistently
have held that when one part of a piece of property is
connected with drug transactions, the whole property interest
is subject to forfeiture. See United States v. A Parcel of Land
With a Building Located Thereon at 40 Moon Hill Road,
884 F.2d 41, 44-45 (1st Cir. 1989); United States v. Santoro,
866 F.2d 1538, 1540 (4th Cir. 1989); United States v. Reynolds,
856 F.2d 675, 677 (4th Cir. 1988); See also United States v. Certain
Property in Auburn, Me., 711 F. Supp. 660 (D.Me. 1989); United
States v. 26.075 Acres, Located in Swift Creek Tp., 687 F. Supp. 1005
 (E.D.N.C. 1988).

Concededly, our Court of Appeals, in United States v. 4492 South Livonia Road, recently questioned the constitutionality of extending too far the forfeiture of real property. The Court was "troubled by the failure of § 881(a)(7) to place an express territorial limit on the extent of the real property that is forfeitable," because if taken to an extreme, the statute could result in forfeitures hugely disproportionate to the geographical scope of the crimes. Livonia Road, 889 F.2d at 1270. "At some point, it seems that a forfeiture would cross the line of condemning an instrumentality of crime and move into the area of punishing a defendant by depriving him of his estate." Livonia Road, 889 F.2d at 1270.

The Court of Appeals, however, declined to specify or locate that point. Instead, the Court recognized that the language of the statute itself authorizes the forfeiture of a whole fee interest based on illegal activity on just one part of the property, noting that "courts have construed the phrase 'in any manner or part' to authorize the forfeiture of the whole of the property if any 'part' was used for drugs; however, since the quoted words modify the phrase 'is used, or intended to be used,' it is possible to instead construe the statute as authorizing forfeiture if the property is partially used for drug transactions, but mostly for legitimate purposes." Livonia Road, 889 F.2d at 1270. Thus, although the Court suggested that § 881(a)(7) might be unconstitutional as applied under certain circumstances, it acknowledged that the statute itself provides for forfeiture of the entire property in cases such as the one at bar.

The Court did recognize a possible interpretation of the statute limiting forfeiture to "real estate of the size usually associated with a lot or a tract of fairly limited acreage, rather than whatever land area is encompassed within the deed by which the owner acquired title," but it added that in objecting to the territorial scope of a forfeiture, the owner "may also have the burden of showing some appropriate demarcation between what property is forfeitable and what is not." Livonia Road, 889 F.2d at 1270. However, simply because claimants here ...


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