United States District Court, Eastern District of New York
January 17, 2001
UNITED STATES OF AMERICA, PLAINTIFF,
U.S. CURRENCY IN THE AMOUNT OF $119,984, DEFENDANT.
The opinion of the court was delivered by: Sifton, Senior District Judge.
MEMORANDUM AND ORDER
This is a civil forfeiture action brought by the United States
to recover $119,984 that claimant Cesar Castro attempted to take
out of the country without properly declaring it. Presently
before this Court is the motion of claimants Castro and Maria
Ansueto to dismiss the complaint pursuant to Rule 12(b)(6) of
the Federal Rules of Civil Procedure. Alternatively, their
motion seeks judgment on the pleadings pursuant to Rule 12(c) of
the Federal Rules of Civil Procedure or summary judgment
pursuant to Rule 56 of the Federal Rules of Civil Procedure. The
United States seeks production of documents used by the Court's
probation department in preparing the presentence report in
Castro's related criminal case, CR-96-1079.
For the reasons set forth below, claimants' motion for summary
judgment is granted. The relief requested by the United States
The following facts are taken from the submissions of the
parties in connection with the instant motions and are
undisputed unless otherwise noted. On November 22, 1996,
claimant Cesar Castro was stopped by a customs inspector while
attempting to board a flight bound for the Dominican Republic at
Kennedy Airport. The customs inspector advised Castro orally of
the requirement that he declare any United States currency on
his person in excess of $10,000 and gave him a Spanish-language
form to the same effect. Although Castro stated that he had only
$2,000, a subsequent search revealed $119,984 in currency in his
On December 5, 1996, Castro was charged in a two-count
indictment of violating 31 U.S.C. § 5316 and 5322*fn1 (Count
1) and 18 U.S.C. § 1001 (Count 2). See United States v.
Castro, CR-96-1079 (CPS). On January 13, 1997, Castro entered
into a plea agreement with Assistant United States Attorney
James Tatum pursuant to which Castro would plead guilty to Count
1 of the indictment. The agreement stipulated that Castro would
plead guilty to the crime of willful failure to report currency
that was not illegal proceeds or to be used for illegal
purposes. The plea agreement calculated Castro's base offense
level at 6 points based on United States Sentencing Guidelines
("USSG") § 2S1.3(b)(2) (reducing the base offense level for a
violation of the currency reporting requirements where "(B) the
defendant did not act with the reckless disregard of the source
of the funds; (C) the funds were the proceeds of a lawful
activity; and (D) the funds were to be used for a lawful
purpose."). On January 16, 1997, Castro pled guilty to Count 1
of the indictment pursuant to this agreement.
On March 11, 1997, after conducting an investigation into the
details of Castro's case, the probation department issued a
presentence report ("PSR"). After finding that the base offense
level of Castro's violation of the currency reporting laws would
be 12 points but that "[t]he defendant has provided proof that
the funds were the proceeds of lawful activity, and they were to
be used for a lawful purpose. Pursuant to [USSG §] 2S1.3(b)(2),
the offense level is decreased to level 6." (PSR ¶ 13.) The PSR
reported that Castro explained that the currency was a loan from
Maria Ansueto, the mother-in-law of his ex-wife, to allow him to
purchase a house in Santo Domingo for his children. The PSR
further stated that Castro provided documentary evidence that
"seem[s] to support the fact that it was possible for Ms.
Ansueto to be in possession of funds in the amount allegedly
loaned to the defendant." (PSR ¶¶ 10-11.)
On March 27, 1997, Castro was sentenced by the Court. During
the sentencing, the Court inquired whether the money was going
to be forfeited. Castro's attorney informed the Court that the
forfeiture proceedings were in abeyance pending the completion
of the criminal case and that her client would likely commence a
civil proceeding seeking the return of the money. The government
stated that it had no position on forfeiture at that time.
During the sentencing proceedings, the following colloquy ensued
between the Court and Simone Monasebian, counsel for Castro in
the criminal case against him:
THE COURT: [D]id you have something else you
wanted to say?
MS. MONASEBIAN: Just that the defendant provided
the proof that the funds were the proceeds of
lawful activity and they were used for lawful
purpose, and that is indicated on page 5 of the
THE COURT: Well, I'm not making a finding on that.
I will not prejudge the issue.
MS. MONASEBIAN: I understand, your Honor.
THE COURT: I mean, I don't have enough evidence
here to find that the funds were the proceeds of
or are to be used for any illegal purpose.
Well, I said that, but then I see that
actually this sentence is based on a
specific offense characteristic, which the
defendant is entitled to upon a showing that he did
not act with reckless disregard to the source of
the funds, that the funds were the proceeds of
lawful activity, and the funds were used for lawful
I have to say having read it, it doesn't make
too much sense, since if the funds were the
proceeds of lawful activity, I don't know what it
means to say that the defendant did not act with
the reckless disregard of the fact that they were
the proceeds of lawful activity.
In any event, it seems to me he's entitled to
this, if there's evidence to support that finding.
The evidence recited in the probation report, and
the government has not — is disputing — is not
offering me any evidence in this proceeding to the
contrary, Accordingly, I'm prepared to accept the
conclusion of the Probation Department that this a
case in which the offense level is appropriately
decreased to a level six.
Whatever the impact of a government's failure
to offer any proof to rebut this proffer by the
defendant in the context of a criminal sentencing
proceeding, may have in the context of a forfeiture
proceeding, I leave to the finder of fact in the
I just want clear what's going on here, whether
this will act as some kind of collateral estoppel
or res judicata, I rather doubt, since the
government's motivation in the context of
sentencing is certainly quite different than its
motivations in securing the forfeiture of money,
but [I] might be wrong. Maybe this is an estoppel
of some sort.
(Tr. of Sentence, CR-96-1079, Mar. 27, 1997, at 5-6.) The Court
sentenced Castro to two years' probation and ordered him to pay
a $2,500 fine. On March 31, 1997, judgment was entered to that
effect based on the factual findings of the PSR. On March 18,
1999, after unsuccessfully attempting to recover the currency in
question from the United States Customs Service and the
Department of Justice, Castro and Ansueto filed a motion
pursuant to Rule 41(e) seeking the return of the currency. On
April 9, 1999, the government filed a complaint in rem for
forfeiture of the currency pursuant to 31 U.S.C. § 5317. On the
same date, this Court issued a warrant of arrest in rem for the
currency. By order dated April 14, 1999, this Court converted
the Rule 41(e) motion to a civil complaint pursuant to the
Second Circuit's ruling in Onwubiko v. United States,
969 F.2d 1392
(2d Cir. 1992). On July 20, 1999, the Court dismissed,
without prejudice, the civil action, Castro and Ansueto v.
United States, CV-99-1594 (CPS), due to the commencement of the
forfeiture action. On September 9, 1999, Magistrate Judge Gold
stayed discovery in this action pending the outcome of the
motions presently before the Court.
Claimants move to dismiss pursuant to Federal Rule of Civil
Procedure 12(b)(6) or in the alternative for summary judgment
pursuant to Federal Rule of Civil Procedure 56(c).*fn2 If
material outside the pleadings is considered, a motion under
Rule 12(b)(6) may be considered a motion for summary judgment.
See Federal Rule of Civil Procedure 12(b)(6); Sellers v. M.C.
Floor Crafters, Inc., 842 F.2d 639, 642 (2d Cir. 1988). When
deciding whether summary judgment is appropriate, "[t]he
essential inquiry is whether the . . . [parties]
. . . should reasonably have recognized the possibility that
the motion might be converted into one for summary judgment or
[were] taken by surprise and deprived of a reasonable
opportunity to meet facts outside the pleadings." In Re G. & A
Books, Inc., 770 F.2d 288, 295 (2d Cir. 1985). In this case,
both parties have proceeded as though this were a motion for
summary judgment. They have submitted materials outside the
scope of the pleadings, including a statement of undisputed
material facts pursuant to Local Rule 56.1. As a result, this
motion is appropriately treated as one for summary judgment.
Federal Rule of Civil Procedure 56(c) provides that summary
judgment must be granted if there is no genuine issue as to any
material fact and if the moving party is entitled to judgment as
a matter of law. The moving party has the burden of
demonstrating the absence of any disputed material facts, and
the court must resolve all ambiguities and draw all inferences
in favor of the party against whom summary judgment is sought.
See Thompson v. Gjivoje, 896 F.2d 716, 720 (2d Cir. 1990).
The showing needed on summary judgment reflects the burden of
proof in the underlying action. The court must consider "the
actual quantum and quality of proof" demanded by the underlying
cause of action and must consider which party must present such
proof. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 254,
106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Therefore, where the
ultimate burden of proof is on the nonmoving party, the moving
party meets his initial burden for summary judgment by
"`showing' — that is, pointing out to the district court — that
there is an absence of evidence to support the nonmoving party's
case." Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct.
2548, 91 L.Ed.2d 265 (1986). To survive the motion, the
nonmoving party must then "make a showing sufficient to
establish the existence of [the challenged] element essential to
[that party's] case." Id. at 322, 106 S.Ct. 2548. While the
court views the evidence in the light most favorable to the
nonmoving party, see O'Brien v. National Gypsum Co.,
944 F.2d 69, 72 (2d Cir. 1991), "the mere existence of some alleged
factual dispute between the parties will not defeat an otherwise
properly supported motion for summary judgment." Anderson, 477
U.S. at 247-48, 106 S.Ct. 2505. Rather, summary judgment is
appropriate "[w]hen the record taken as a whole could not lead a
rational trier of fact to find for the non-moving party."
Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp.,
475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).
In support of their motion for summary judgment, claimants
argue that litigation of the dispositive issue in this
forfeiture action is barred by the doctrine of collateral
estoppel. Specifically, claimants argue that, because this Court
has already determined that the currency in question constituted
the proceeds of lawful activity in the sentencing of Castro, the
government is collaterally estopped from relitigating this
issue. This is dispositive since currency derived from a legal
source may not be subject to forfeiture because forfeiture in
such circumstances would constitute an excessive fine under the
Eighth Amendment. See United States v. Bajakajian,
524 U.S. 321, 118 S.Ct. 2028, 141 L.Ed.2d 314 (1998) (holding that
forfeiture of entire amount of currency, not connected to
illegal activity and derived from a lawful source, seized as a
result of failure to file a currency report under
31 U.S.C. § 5316 would violate the Excessive Fines Clause). Accordingly,
claimants argue that the forfeiture action should be dismissed.
Collateral estoppel "means simply that when an issue of
ultimate fact has once been determined by a valid and final
judgment, that issue cannot again be litigated by the same
parties in a future lawsuit." Schiro v. Farley, 510 U.S. 222,
232, 114 S.Ct. 783, 127 L.Ed.2d 47 (1994). Collateral estoppel
"applies when (1) the
issues in both proceedings are identical, (2) the issue in the
prior proceeding was actually litigated and actually decided,
(3) there was [a] full and fair opportunity to litigate in the
prior proceeding, and (4) the issue previously litigated was
necessary to support a valid and final judgment on the merits."
United States v. Hussein, 178 F.3d 125, 129 (2d Cir. 1999)
(internal quotation marks omitted). The Court of Appeals for
this Circuit has noted that precluding the litigation of
findings made during sentencing preserves the integrity of the
judicial process by eliminating inconsistent results. See
Securities Exchange Commission v. Monarch Funding Corporation,
192 F.3d 295, 306 (2d Cir. 1999).
A guilty plea collaterally estops a claimant from
relitigating, in a related forfeiture action, the underlying
facts of his criminal violation. See United States v. U.S.
Currency in the Amount of $145,139, 803 F. Supp. 592, 597
(E.D.N.Y. 1992); see also Adames v. United States,
171 F.3d 728, 732 (2d Cir. 1999) (holding that allocution at the time of
a criminal plea constitutes a binding admission for the purpose
of a subsequent challenge to the seizure of property). Where the
criminal conduct that resulted in the plea agreement becomes the
basis for a subsequent forfeiture proceeding, the plea of guilty
constitutes an admission of all the elements required for an in
rem forfeiture. See United States v. $359,500 in U.S.
Currency, 828 F.2d 930, 931 (2d Cir. 1987). A criminal
defendant is also precluded from retrying issues "necessary" to
his plea in a subsequent civil suit. See United States v.
Wight, 839 F.2d 193, 195-96 (4th Cir. 1987) (holding that, when
a government official pleads guilty to using his official status
to bring goods into a foreign country, he is collaterally
estopped from disputing liability for purposes of the
government's civil suit against him). Claimants argue that,
based on these precedents, the government should be estopped
from relitigating the issue of the source of the currency in
Collateral estoppel analysis begins with an analysis of
whether the issues in Castro's sentencing and in the instant
action are identical. The government argues that the issue in
the instant forfeiture action is whether the funds in question
were "unrelated to any other illegal activity," see
Bajakajian, 524 U.S. at 338, 118 S.Ct. 2028, and that the issue
decided at sentencing under USSG § 2S1.3(b)(2) was whether the
currency at issue constituted the proceeds of lawful activity
and was to be used for a lawful purpose. USSG § 2S1.3(b)(2). The
distinction is a matter of semantics, and the government has not
suggested any relevant relationship the money might have to
illegal activity apart from having such activity as its source
or being used for an illegal purpose. Accordingly, the issue in
the present case and in Castro's criminal proceeding are
identical for collateral estoppel purposes.
The government argues next that the issue of the currency's
source was not "actually litigated and decided" in Castro's
criminal case. The government bases its argument on the fact
that it took no position on the source of the currency at issue
during Castro's sentencing and that the Court stated that it
would not prejudge the issue of the currency's source for the
purposes of collateral estoppel. However, the Court simply
stated that it was leaving undecided the issue now before it,
whether Castro's plea of guilty and sentence constituted
estoppel for purposes of a later forfeiture action. The Court
did make a finding that the currency had a legal source and was
not to be used illegally for the purpose of determining the
sentence under USSG § 2S1.3(b)(2). The fact that the government
did not dispute the proffer made by the defendant and adopted by
the probation department does not mean that the issue was not
actually litigated for purposes of collateral estoppel. See
Central Hudson Gas & Elec. Corp. v. Empresa Naviera Santa S.A.,
56 F.3d 359, 369 n. 4
(2d Cir. 1995) (citing Red Lake Band v. United States, 221
Ct.Cl. 325, 607 F.2d 930, 934 (1979)) (holding that, since a
stipulation of negligence was necessary to the court's
determination of liability, the parties manifested an intent to
be bound by the stipulation, deeming the issue "actually
litigated" for collateral estoppel purposes). Thus, the issue of
the legality of the currency's source was actually litigated and
decided for collateral estoppel purposes in Castro's sentencing
The government also complains that it did not have a full and
fair opportunity to litigate the source of the currency in
question. At one level, the argument is frivolous. Given the
government's participation in the criminal sentencing of Castro,
it had a full and fair opportunity to litigate the issue of the
source of the currency. See United States v. Fatico,
579 F.2d 707 (2d Cir. 1978).
The government also argues that it did not have a full and
fair opportunity to litigate the issue of the source of the
currency based on the absence of sufficient incentive to
litigate the issue. See Parklane Hosiery Co., Inc. v. Shore,
439 U.S. 322, 330, 99 S.Ct. 645, 58 L.Ed.2d 552 (1979). On this
issue, the undersigned's initial reaction at the time of
sentence was that the government did not have the same incentive
to litigate the issue at sentencing that it has now to forfeit
the money. However, to say that the government's incentive now
and at the time of sentencing was "different" is not to say that
it did not have a substantial motivation to litigate the issue
in both contexts.*fn3 The government's desire to impose
appropriate punishment for persons who secretly export the
proceeds of illegal activity is at least as great if not greater
than the need to add $120,000 to the United States Treasury.
Finally, I consider whether collateral estoppel is
appropriate. See Monarch, 192 F.3d at 307. In Castro's
criminal case, the Court's finding about the currency's source
was legally necessary under the USSG for the sentencing level of
six points. See USSG § 2S1.3(b)(2). Preclusive effect will not
be given to findings on "a collateral issue [that], although it
may be the subject of a finding, is less likely to receive close
judicial attention and the parties may well have only limited
incentive to litigate the issue fully since it is not
determinative." Hussein, 178 F.3d at 129 (internal citations
omitted). Collateral estoppel based on findings made during
sentencing "should be applied only in those circumstances where
it is clearly fair and efficient to do so." Monarch, 192 F.3d
at 306 (allowing for the application of collateral estoppel to
findings made during sentencing at the district court's
discretion when such an application does not threaten fairness
and judicial efficiency). Castro was sentenced on March 27, 1997
and, despite his efforts to recover the currency, which included
both administrative action and a Rule 41(e) motion, the
government took no action to force a resolution on the dispute
over the currency until filing the instant action, two years
after Castro's sentencing. It is here clearly fair and efficient
to give preclusive effect to the findings with respect to the
source and use of the currency.
Accordingly, for the reasons set forth above, the government
is estopped from relitigating the source of the currency at
Excessive Fines Clause
Since the government is estopped from relitigating the source
of the currency, the Court must determine whether claimants are
entitled to summary judgment in this action based on the Supreme
holding in United States v. Bajakajian, 524 U.S. at 321, 118
S.Ct. 2028. The Supreme Court in Bajakajian considered the
question of whether a sentencing court may order a criminal
defendant who was convicted of failure to report currency,
lawful in its origin, in violation of § 5316, to forfeit the
full amount of the currency pursuant to 18 U.S.C. § 982(a)(1), a
criminal statute. In reaching its holding that the full
forfeiture of the currency in that case pursuant to § 982 would
violate the Excessive Fines Clause, the Supreme Court first
determined that the forfeiture under § 982 was a punitive,
criminal in personam forfeiture, rather than a nonpunitive,
traditional civil in rem forfeiture. Only upon concluding that
the forfeiture was punitive and thus a "fine" within the meaning
of the Excessive Fines Clause, did the Supreme Court turn to the
question of whether the forfeiture was excessive.
While the instant action involves a civil forfeiture statute,
31 U.S.C. § 5317,*fn4 the Bajakajian analysis is
applicable. For the purposes of the Excessive Fines Clause
analysis, the question is not whether the forfeiture is civil or
criminal, but whether it is punishment and, if so, whether the
punishment is excessive. See Austin v. United States,
509 U.S. 602, 610, 113 S.Ct. 2801, 125 L.Ed.2d 488 (1993); and United
States v. $359,500, 25 F. Supp.2d 140, 147-48 (W.D.N.Y. 1998);
see also United States v. $64,000, No. 97-C-5363, 1999 WL
135299 (N.D.Ill. Mar. 10, 1999).
"[F]orfeiture generally and statutory in rem forfeiture in
particular historically have been understood, at least in part,
as punishment." Austin, 509 U.S. at 618, 113 S.Ct. 2801.
Further, civil forfeiture upon a violation of the currency
reporting requirements induces discovery of unreported taxable
income and deters money laundering, see United States v.
$145,139, 803 F. Supp. at 597; such deterrence "has
traditionally been viewed as a goal of punishment."
Bajakajian, 524 U.S. at 329, 118 S.Ct. 2028. Moreover, civil
forfeiture under § 5317 "is not limited by the extent of the
government's loss (see 31 U.S.C. § 5317(c)), and it is tied to
the commission of a crime (violation of 31 U.S.C. § 5316)."
United States v. $273,969.04, 164 F.3d 462 (9th Cir. 1999);
see also Hudson v. United States, 522 U.S. 93, 99, 118 S.Ct.
488, 139 L.Ed.2d 450 (1997). Forfeiture based on failure to
comply with the currency reporting statutes "does not serve the
remedial purpose of compensating the Government for a loss."
Bajakajian, 524 U.S. at 329, 118 S.Ct. 2028. For these
reasons, I conclude that forfeiture in this case is punitive.
See Hudson, 522 U.S. at 99, 118 S.Ct. 488; see also United
States v. $359,500, 25 F. Supp.2d at 147-48.
The next question is whether forfeiture of the $119,984 is
excessive. See Bajakajian, 524 U.S. at 334, 118 S.Ct. 2028.
The applicable test under Bajakajian is whether the forfeiture
is "grossly disproportional to the gravity of a defendant's
offense." Id. Under this test, the court "must compare the
amount of the forfeiture to the gravity of the defendant's
offense." Id. at 336-37, 118 S.Ct. 2028. Where there is no
evidence indicating a relation to other crimes, as is the case
here, a simple nonreporting offense under § 5316 is not very
grave. See id.
In deciding whether the forfeiture before it was grossly
disproportional to the offense, the Bajakajian Court
considered the nature and extent of the criminal activity, its
relation to other crimes, its penalties, and the harm it caused.
Court noted that the crime at issue was "solely a reporting
offense," explaining that transporting currency out of the
country is lawful as long as the currency is reported.
Bajakajian, 524 U.S. at 337, 118 S.Ct. 2028. Second, the Court
emphasized that this "single" reporting offense, id. at 337 n.
12, 118 S.Ct. 2028, "was unrelated to any other illegal
activities" the currency was produced by and used for legal
activities. Id. at 338, 118 S.Ct. 2028. Third, the Court
focused on the penalties for the offense. It recognized that the
maximum statutory penalty (a $250,000 fine and five years'
imprisonment) was "certainly relevant evidence" of the offense's
gravity but determined that "the maximum sentence that could
have been imposed on [Bajakajian]" under the Sentencing
Guidelines (a $5,000 fine and six months' imprisonment)
"confirm[ed] a minimal level of culpability" in Bajakajian's
case. Id. at 338-39 & n. 14, 118 S.Ct. 2028. Finally, the
Court determined that the harm caused by the offense was also
Failure to report his currency affected only one
party, the Government, and in a relatively minor way.
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.
Id. at 339, 118 S.Ct. 2028. For these reasons, the Court held
that the forfeiture of $357,144 for a single reporting
violation, unrelated to any other illegal activity, and harming
only the United States "in a relatively minor way," constituted
an excessive fine in violation of the Eighth Amendment.
In this case, Castro pled guilty to a reporting offense. The
currency had a legal source and was to be used for a legal
purpose. In pleading guilty to the currency reporting offense,
Castro was subject to the same criminal liability as the
defendant in Bajakajian. See USSG §§ 2S1.3(b) & 5E1.2(c)(3).
As in Bajakajian, the harm to the government in this case was
minimal, since it was merely deprived of the information that
$119,984 had left the country.
The forfeiture of the entire $119,984 would constitute the
kind of sanction that is grossly disproportionate to the crime.
Thus, the forfeiture of the currency would constitute an
excessive fine based on the holding in Bajakajian and is
impermissible. Accordingly, summary judgment is granted to
claimants, and the complaint against the currency at issue is
The government urges that claimants' motion for summary
judgment be denied as premature, since no discovery has been
conducted in this case. The government seeks evidence relating
to the source and legitimacy of the currency at issue, an issue
that has been collaterally estopped by the sentencing findings
underlying criminal case. Accordingly, the government's motion
under Rule 56(f) is denied.
For the reasons set forth above, claimants' motion for summary
judgment is granted. Claimants are directed to settle a judgment
on notice in accordance with this opinion within thirty days of
the date hereof.
The Clerk is directed to furnish a filed copy of the within to