GATEX CORPORATION v. U.S.

The opinion of the court was delivered by: P. KEVIN CASTEL, District Judge

MEMORANDUM AND ORDER

The petitioners in these actions maintained bank accounts with The Merchants Bank of New York ("Merchants"), located in this District at 275 Madison Avenue. (De Almeida Pet. ¶ 6; Gatex Pet. ¶ 6; Harber Pet. ¶ 6; Mabon Pet. ¶ 6). On June 27, 2002, each of their accounts was seized in connection with the arrest of Carolina Nolasco, a Merchants employee. (De Almeida Pet. ¶ 15; Gatex Pet. ¶ 13; Harber Pet. ¶ 13; Mabon Pet. ¶ 15) Nolasco was arrested and charged with eight criminal counts in the United States District Court for the District of New Jersey, including assisting a bank customer to evade federal banking regulations. There is no contention that the petitioners engaged in criminal conduct, or were knowledgeable about or liable for any criminal activity.

The petitioners filed separate actions asserting that pursuant to its general equity jurisdiction and Rule 41(g), Fed.R. Crim. P., this Court should order the return of the petitioners' seized funds. In motion papers that are nearly identical as to each petitioner, the government moves for the dismissal of the above-captioned actions. The government contends that this Court lacks subject matter jurisdiction over these petitions because a separate, parallel avenue of relief is available to the petitioners in the District of New Jersey. For the reasons explained below, the respondent's motions are granted.

  "Federal Rule of Criminal Procedure 41(g) permits a person aggrieved by the government's unlawful seizure or deprivation of property to move for specific relief: the property's return." Adeleke v. United States, 355 F.3d 144, 149 (2d Cir. 2004). "A Rule 41(e) [now Rule 41(g)] movant or any criminal defendant `is presumptively entitled to the return of his property once it is no longer needed as evidence.'"*fn1 Viola v. United States, 2003 WL 21143078, at *2 (E.D.N.Y. Jan. 29, 2003) (quoting Lavin v. United States, 299 F.3d 123, 127 (2d Cir. 2002)). "[W]here no criminal proceedings against the movant are pending or have transpired, a motion for the return of property is treated as [a] civil equitable proceeding ? even if styled as being pursuant to Fed.R. Cr. P. 41(e)." Mora v. United States, 955 F.2d 156, 158 (2d Cir. 1992) (alteration in original; citation omitted).

  The government bases its motions on the availability of forfeiture proceedings pursuant to 21 U.S.C. § 853(n)(2). Section 982(b)(1) of Title 18 states that forfeiture proceedings "shall be governed by" 21 U.S.C. § 853. Section 853(n)(2) states: Any person, other than the defendant, asserting a legal interest in property which has been ordered forfeited to the United States pursuant to this section may, within thirty days of the final publication of notice or his receipt of notice under paragraph (1), whichever is earlier, petition the court for a hearing to adjudicate the validity of his alleged interest in the property. The hearing shall be held before the court alone, without a jury.

 Section 982(b)(1) of Title 18 states that forfeiture proceedings "shall be governed by" 21 U.S.C. § 853.

  On December 13, 2004, the Hon. Joseph A. Greenaway, U.S.D.J., issued an order captioned "Consent Judgment and Preliminary Order of Forfeiture" in the related criminal case, United States v. Nolasco, 04 Cr. 617 (D.N.J.). (attached at Mabon, D'Orazio Dec. Ex. E) The order stated that a total of $21,095,238.53 in United States currency had been seized, that "the United States is now entitled to possession of the herein described assets," and that the currency is "hereby forfeited to the United States of America for disposition in accordance with the law, subject to the provisions of 18 U.S.C. § 982." (Order at 2) The government previously entered into a plea agreement with Nolasco, dated October 1, 2004. (attached at Mabon, D'Orazio Dec. Ex. F) Therefore, the question relevant to this motion is whether the underlying criminal proceedings in the District of New Jersey and the forfeiture proceedings commenced therein affect this Court's jurisdiction over the petitioners' claims.

  Then-District Judge Miner observed in Application of Campola, 543 F. Supp. 115, 117 (N.D.N.Y. 1982), that jurisdiction under Rule 41 "`is to be exercised with great restraint and caution since it rests upon the court's supervisory power over the actions of federal law enforcement officials.'" (quoting Fifth Avenue Peace Parade Committee v. Hoover, 327 F. Supp. 238 (S.D.N.Y. 1971), aff'd, 480 F.2d 326, cert. denied, 415 U.S. 948 (1974)). Campola cautioned that Rule 41 jurisdiction should be exercised in accordance with "familiar limitations on the granting of equitable relief." Id. (quotation marks omitted).

  In an opinion that considered facts similar to those here, Judge Stanton found no subject matter jurisdiction under Rule 41. The petitioner in Motion for Return of All Monies Seized from Account 710707 at American Express Bank, 1991 WL 183363, at *1 (S.D.N.Y. Sept. 11, 1991), moved pursuant to Rule 41(e) and the court's equitable powers for the return of money that the government seized from petitioner's bank accounts. After the petition was filed, the government notified the court that it had initiated administrative forfeiture proceedings, and argued that petitioner must seek relief in that proceeding, not through a Rule 41 motion. Id. "While the Second Circuit has not decided the issue, the weight of authority supports the Government's position." Id. (collecting cases). Judge Stanton was persuaded that the government commenced a forfeiture proceeding within a reasonable window of time after the seizure, and that because the "legal remedy in the forfeiture proceeding appears adequate, the equitable remedy under Rule 41(e) is not required." Id. at *2. See also Application of Herr, 473 F. Supp. 1304 (S.D.N.Y. 1979) (declining jurisdiction over Rule 41 motion brought by criminal defendant who had a case pending in Central District of California).

  True, the Second Circuit does not appear to have spoken on the existence of subject matter jurisdiction over a Rule 41 motion when a related criminal proceeding is commenced in a separate judicial district. It has, however, ruled that there is no subject matter jurisdiction when a petitioner seeks money damages from the government pursuant to Rule 41(g), Adeleke, 355 F.3d at 150-51, and when a petitioner seeks Rule 41 relief simultaneous to a parallel administrative proceeding before the United States Drug Enforcement Agency, U.S. (Drug Enforcement Agency) v. One 1987 Jeep Wrangler Automobile VIN No. 2BCCL8132HBS12835, 972 F.2d 472, 479 (2d Cir. 1992). The Second Circuit also has held that a district court "had jurisdiction to hear the Rule 41(e) motion for return of property despite its being brought on after the conclusion of criminal proceedings in a different district than that in which the property was seized." United States v. Giovanelli, 998 F.2d 116, 118 (2d Cir. 1993) (emphasis added). In addition, as noted by Judge Stanton in Motion for Return of All Monies Seized from Account 710707, the weight of authority from other circuits supports the government's position. 1991 WL 183363, at *1 (citing, inter alia, U.S. v. Price, 914 F.2d 1507, 1511 (D.C. Cir. 1990) (per curiam); Shaw v. U.S., 891 F.2d 602, 603-04 (6th Cir. 1989)).

  In the present case, Judge Greenaway has already ruled that the seized accounts are to be "forfeited to the United States of America for disposition in accordance with the law, subject to the provisions of 18 U.S.C. § 982." (Order, Dec. 13, 2004, at 2) Judge Greenaway also has set forth procedures for providing notice to those persons or entities whose property may have been seized as part of Ms. Nolasco's prosecution, and set forth certain procedures by which those persons or entities may petition for the property's return. (Id. at 2-3) An exhibit to Judge Greenaway's order sets forth certain funds seized, including $2,674,835.39 from Gatex Corporation, Account # 9008295; $1,698,878.23 from Harber Corporation, Account # 9006556; $809,953.88 from Mabon Corporation, Account # 9007663; and $475,607.10 from Piedade Pedro Almeida, Account # 8200875. (Id. at 4)

  If this Court were to retain jurisdiction over the petitioners' actions under Rule 41, it would inevitably lead to duplicative and parallel resolutions. The District of New Jersey has set forth a legal process by which these petitioners can pursue the relief that they seek in this action. While there may well be circumstances in which the equities weigh in favor of retaining jurisdiction in the District where the property, in spite of the commencement of a related criminal action elsewhere, such a circumstance cannot be found here, when Judge Greenaway has explicitly set forth a procedure through which the petitioners may attain the relief that they seek.

  Moreover, a review of the petitioners' submissions, particularly the memorandum of law submitted by the Mabon Corporation, shows that retaining jurisdiction over petitioners' claims would force this Court to review and potentially second-guess legal determinations made in the District of New Jersey. Mabon argues, among other things, that in the criminal proceeding, the government has misread 18 U.S.C. § 1960, which prohibits operating an unlicensed money-transmitting business. Mabon posits that the alleged misinterpretation of section 1960 calls into question the applicability of 18 U.S.C. § 982, the very provision that formed the ...