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United States of America v. 208 Burberry Handbags

November 1, 2012

UNITED STATES OF AMERICA, PLAINTIFF,
v.
208 BURBERRY HANDBAGS, ET AL., DEFENDANT, BRIGHTON TRADING, INC., CLAIMANT.



The opinion of the court was delivered by: Siragusa, J.

DECISION and ORDER

INTRODUCTION

This is an action in rem for forfeiture pursuant to 18 U.S.C. §§ 2323(a)(1)(A) and (a)(1)(B). Before the Court is a motion to dismiss the Government's forfeiture complaint brought by Claimant Brighton Trading, Inc. ("Brighton Trading" or "the claimant") pursuant to Federal Rule of Civil Procedure 12(b)(6), ECF No. 11, and the Government's motion to strike Brighton Trading's claim pursuant to Rule G(8)(c) of the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions ("Supplemental Rules"), ECF. No. 19.For the reasons stated below, both motions are denied.

BACKGROUND

Based upon a joint investigation conducted by U.S. Immigration and Customs Enforcement and the New York State Police, the Government has alleged that Fan Zhang ("Zhang") and her family members were involved in the sale and distribution of large quantities of counterfeit merchandise.Verified Complaint for Forfeiture ("Compl.") ¶ 6, ECF No. 1; see also Mem. of Law in Supp. of Mot. to Strike Claim at 2, ECF No. 20. The investigation included: (1) New York State and federal wire communication intercept Orders for Zhang's cellular telephone, (2) law enforcement agents and a confidential informant ("CI") making undercover purchases of counterfeit purses, (3) physical surveillance, and (4) border searches of containers imported by Zhang's suppliers. Compl.¶ 7.

As a result of the investigation, it was determined that unmarked merchandise was imported into the United States from China. Once imported, the merchandise was stored in a warehouse at Brighton Trading, located in Secaucus, New Jersey. It was later transferred to the store front of a business known as J&J Space, also known as D&K America, Inc. ("D&K"), located in New York, New York. Bing H. Huang is the owner of both D&K and Brighton Trading. Compl. ¶¶ 8--11.

Zhang, along with her husband, Deno Delregno ("Delregno") purchased the imported merchandise from D&K in New York City and transported it to their residence in Rochester, New York. Once there, Zhang and her family would allegedly affix "counterfeit tags and labels to previously unmarked merchandise in order to create a counterfeit product." Compl. ¶ 8.

Surveillance at D&K revealed that Zhang and Delregno entered the store on several occasions. Agents also observed a number of garbage bags from the store being placed in their vehicle, which were then observed being removed from the vehicle and placed inside their residence upon their return to Rochester, New York. "Furthermore, while conducting surveillance at D&K on at least two (2) occasions, agents observed a van registered to Brighton Trading, Inc. and with the name Brighton Trading, Inc. . . . printed on the side of the van, arrive at the D&K store." Mem. of Law in Supp. of Mot. to Strike Claim at 3; Compl. ¶¶ 15--18. On one such occasion, the van was followed from D&K to the Brighton Trading warehouse in Secaucus, New Jersey. Compl. ¶ 19.

Furthermore, a CI made three undercover purchases from D&K during August 2010. Compl. ¶¶ 24--27. The CI purchased a total of sixty-two purses. With each purchase, the CI received a bag of purses along with a smaller bag that contained brand name tags. Inside the store, the CI observed generic purses, without brand name tags, displayed. "The CI explained that after a customer picked out a purse[] to purchase, employees working inside D&K would tell the customer the brand name that the purse will be converted into." Compl. ¶ 25.

Finally a container consigned to D&K was inspected by U.S. Customs and Border Protection ("CBP"). The purses and tags in the container were "confusingly similar" to Dolce & Gabbana merchandise. Compl. ¶ 22. In connection with the investigation, the merchandise was allowed to be imported into the United States. Subsequently, a D&K representative picked up the shipment and transported it to the Brighton Trading warehouse in Secaucus, New Jersey. Compl. ¶ 23.

On September 29, 2010, search warrants were executed at D&K in New York, New York, and Brighton Trading in Secaucus, New Jersey, as well as at Zhang's and Delregno's residence in Rochester, New York, resulting in the seizure of large quantities of counterfeit and generic merchandise. Compl. ¶¶ 29--31 (listing the items seized). Additionally, on September 29, 2010, Zhang, Delregno and other family members were charged with conspiracy to defraud the United States pursuant to 18 U.S.C. § 371 and trafficking in counterfeit goods pursuant to 18 U.S.C. § 2320. A Federal grand jury indicted them on those charges on April 3, 2012. See Mem. of Law in Supp. of Mot. to Strike Claim at 6 (providing details of the criminal charges and indictment, including those who were charged and indicted). Bing H. Huang is the target of a pending criminal investigation in the Western District of New York. Compl. ¶ 33.

By letter dated January 21, 2011, Brighton Trading filed an administrative petition for relief with CBP. C.J. Erickson, Esq., letter to Rachael Yong Yow, Jan. 21, 2011, at 1--5, ECF No. 12-2. Thereafter, in a letter dated January 28, 2011, Edward P. Nagle ("Nagle"), Director, Office of Fines, Penalties, and Forfeitures for U.S. Customs and Border Protection, informed C.J. Erickson, attorney for Brighton Trading, that, "case 2010-4601-001015-01 against Brighton Trading Inc., has been accepted by the United States Attorney's Office, Western District of New York, for judicial forfeiture proceedings." ECF No. 12-2 at 18. The letter was copied to Brighton Trading, but not the U.S. Attorney for the Western District of New York. Pl's Supplemental Mem. of Law at 14, Sept. 14, 2012, ECF No. 28.

On May 3, 2011, the petition for remission package was returned to Assistant United States Attorney Mary Clare Kane ("Kane"), by Tim Virtue ("Virtue"), Deputy Chief, Asset Forfeiture and Money Laundering Section ("AFMLS"). An included notice indicated that the package was incomplete because there was no civil or judicial order of forfeiture or administrative declaration of forfeiture. Kane Aff. Ex. D, ECF No. 17-4.

On January 9, 2012, the Government filed its Verified Complaint for Forfeiture, ECF No. 1, and the Court issued an arrest warrant in rem. See Arrest Warrant In Rem, United States v. 208 Burberry Handbags, No. 12-CV-6015-CJS (W.D.N.Y. Mar. 5, 2012), ECF No. 9. On January 11, 2012, "Direct Notice of Forfeiture Action was mailed via regular and certified mail to Brighton Trading, Inc, Bing H. Huang, C.J. Erickson, Esq., and John P. Bostany, Esq." Kane Aff. in Supp't of Gov't's Mot. to Strike Claim ¶ 4, Jun. 1, 2012, ECF No. 19. "Notice of this action was [also] published on an official internet government site (www.forfeiture.gov) for 30 consecutive days[,]" beginning January 12, 2012, and ending February 10, 2012. Id. ¶ 5.

On February 9, 2012, Brighton Trading filed a claim pursuant to Supplemental Rule G(5), in which it represented that "Claimant is the owner of the above listed property." Seized Asset Claim Form, Request for Forfeiture Proceedings in Federal Court, Jan. 31, 2012, ECF No. 4. Thereafter, on April 23, 2012, Brighton Trading filed a Motion to Dismiss the Government's complaint for forfeiture pursuant to Rule 12(b)(6) for failure to state a claim upon which relief may be granted, ECF No. 11, and on June 1, 2012, the Government filed a Motion to Strike Claim, ECF No. 19. Both motions are presently before the Court. Following oral argument, the Court directed both sides to submit supplemental briefing on the question of the effect, if any, of the Nagle letter. Both sides having done so, and the Court having considered all the papers filed, now renders this decision.

STANDARD OF LAW

Motion to Strike a Claim

Under the Civil Asset Forfeiture Reform Act of 2000 ("CAFRA"), In any case in which the Government files in the appropriate United States district court a complaint for forfeiture of property, any person claiming an interest in the seized property may file a claim asserting such person's interest in the property in the manner set forth in the Supplemental Rules for Certain Admiralty and Maritime Claims, except that such claim may be filed not later than 30 days after the date of service of the Government's complaint or, as applicable, not later than 30 days after the date of final publication of notice of the filing of the complaint. 18 U.S.C. § 983(a)(4)(a) (2009). In order to assert a claim against civil forfeiture, a claimant must demonstrate both Article III constitutional standing and CAFRA statutory standing. See United States v. Cambio Exacto, S.A., 166 F.3d 522, 526 (2d Cir. 1999) ("In order to contest a governmental forfeiture action, claimants must have both standing under the statute or statutes governing their claims and standing under Article III of the Constitution as required for any action brought in a federal court."); United States v. Assets Described in Attachment A to the Verified Complaint Forfeiture in Rem, 799 F. Supp. 2d 1319, 1326 (M.D. Fla. 2011) (citing United States v. $38,000.000 in United States Currency, 816 F.2d 1538, 1543, 1545 (11th Cir. 1987).

To establish Article III standing, "a claimant must demonstrate a legally cognizable interest in the defendant property." United States v. Vehicle 2007 Mack 600 Dump Truck, VIN 1m2k189c77m036428, 680 F. Supp. 2d 816, 822-23 (E.D. Mich. 2010) (citing United States v. One 2001 Cadillac Deville Sedan, 335 F. Supp. 2d 769, 772 (E.D. Mich. 2004) (internal quotations omitted). To establish statutory standing, a claimant must comply with the requirements of 18 U.S.C. 983(a)(4)(A) and Supplemental Rules G(5) and G(6). United States v. $39,557.00, More or Less, in U.S. Currency, 683 F. Supp. 2d 335, 338 (D.N.J. 2010). The claimant has the burden of proof in establishing standing. United States v. Currency: $4,424.00 (U.S.), 91-CV-1022, 1994 WL 568594 (N.D.N.Y. Sept. 30, 1994) (citing Mercado v. United States Customs Services, 873 F.2d 641, 644-45 (2d Cir. 1989).

"Generally, courts have held claimants to strict compliance with the provisions of Rule G(5)." Vehicle 2007 Mack 600 Dump Truck, 680 F. Supp. 3d at 823 (internal citations omitted). Supplemental Rule G(5) provides that:

A person who asserts an interest in the defendant property may contest the forfeiture by filing a claim in the court where the ...


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