Opinion
1:21-cr-20414-DPG
07-15-2024
UNITED STATES OF AMERICA v. KYLE MELKONIAN, Defendant.
REPORT AND RECOMMENDATION
LAUREN F. LOUIS UNITED STATES MAGISTRATE JUDGE
THIS CAUSE is before the Court on Petitioner Kyle Melkonian's (“Petitioner”) Petition for Remission (ECF No. 105). This Petition follows Petitioner's conviction and sentence and the attendant Preliminary Order of Forfeiture entered in this case in 2022. In his Petition, Melkonian represents that a parcel of forfeited property was actually owned by a trust; he identifies himself as the trustee, empowered and authorized to bring this Petition for the remission of the Property to the innocent owners. The Government filed a Response and Motion to Dismiss (ECF No. 108), which asserts that Petitioner lacks constitutional or statutory authority to bring this ancillary proceeding to challenge the order of forfeiture. Petitioner filed a Response (ECF No. 112), and the Government filed a Reply (ECF No. 114). Upon consideration of the Petition, Motion, Response, Reply, a review of the record, and being otherwise fully advised in the premises, the undersigned respectfully RECOMMENDS that the Petition for Remission be DENIED and the Government's Motion to Dismiss be GRANTED.
The Petition and the Motion were referred to the undersigned by the Honorable Darrin P. Gayles, United States District Judge. (ECF Nos. 106, 113).
I. BACKGROUND
The Petitioner was convicted of theft of government funds, in violation of 18 U.S.C. § 641, and sentenced to 14 months imprisonment and three years of supervised release. (ECF No. 67 at 1-3). On October 6, 2022, the Court entered a Preliminary Order of Forfeiture, resulting in a forfeiture money judgment against the Petitioner of $284,159.97. (ECF No. 59). The forfeiture included a piece of real property located at 230 Northwest 143rd Street in Miami (“the Biscayne Gardens Property”). (Id. at 5).
At the sentencing hearing, Petitioner argued that the forfeiture violated his Eighth Amendment Rights. (ECF No. 85 at 1). The Court ruled that his claims were premature and rejected the argument. (Id.); (ECF No. 78 at 47-48). Pursuant to 21 U.S.C. § 853(n), Rule 32.2(b)(6) of the Federal Rules of Criminal Procedure, and the Preliminary Order of Forfeiture (ECF No. 59), the Government published a notice of forfeiture of the Biscayne Gardens Property on www.forfeiture.gov. See (ECF No. 91) (Declaration of Publication). Direct notice was sent to the Petitioner, Trustees, Trustee successors of the Araxi Trust, and the trust beneficiaries. See (ECF No. 108-1); (ECF No. 108 at 3 n.3).
The Petitioner filed a corrected motion to stay the forfeiture order pending his appeal. (ECF No. 85). The Court granted his motion and elaborated that the forfeiture proceedings are only stayed as to the disposition of the real property and that the ancillary proceedings of third-party rights may proceed. (ECF No. 97).
For purposes of the present Motion, a succinct history of the Property's ownership is helpful. In June of 1992, the Defendant's father, Paul Melkonian, transferred the Biscayne Gardens Property to Defendant Kyle Melkonian via a warranty deed. See (ECF No. 108-2). On December 21, 1999, Defendant transferred the property to himself as trustee of The Araxi Trust. (ECF No. 108-3). On that same day, the Petitioner granted his father a life estate of the Biscayne Gardens Property via warranty deed. (ECF No. 108-4). The Government proffers that the Petitioner has resided on the property since childhood, except for living in Tampa, Florida, from 1972 to 1978. (ECF No. 108 at 2). The Government also contends that the Petitioner lived on the property at the time of his conviction. (Id.).
On the warranty deed, the trust's name is spelled the Araxie Trust. Because both Parties refer to the trust as the Araxi Trust, the undersigned does so as well in the instant Report and Recommendations.
The Government points out that Paul Melkonian is now deceased. (ECF No. 114 at 3).
On November 29, 2023, the Clerk of Court received the Defendant's pro se Petition regarding the Biscayne Gardens Property and docketed it as a Motion for Remission. See (ECF No. 105).
The Government notes that the “Petition for Remission” is incorrectly labeled. (ECF No. 108 at 1 n.1). A Petition for Remission is a separate process through which owners, lien holders, or victims can seek the return of property after a forfeiture is complete. Id. The Government contends that the Petitioner appears to bring a third-party claim before the court in an ancillary proceeding. Id.
II. LEGAL STANDARD
The Biscayne Gardens Property was forfeited to the Government under 21 U.S.C. § 853. When the Preliminary Order of Forfeiture is published, a criminal defendant loses his rights to the forfeited property. United States v. Amodeo, 916 F.3d 967, 972 (11th Cir. 2019). Only an interested third party may petition the court in an ancillary proceeding to challenge a preliminary order of forfeiture. 21 U.S.C. § 853(n)(2). They must do so within thirty days of the final publication of the notice of forfeiture or their receipt of the notice, whichever is earlier. Id. Any third-party petitioner must be a person other than the defendant and hold more than a merely nominal title. Id.; see U.S. v. Tardon, 493 F.Supp.3d 1188, 1208 (S.D. Fla. 2020). During the ancillary proceeding, the third party must show by a preponderance of the evidence that they have a legal right, title, or interest in the property that was vested in them rather than the defendant or that their right is superior to the defendants. 21 U.S.C. § 853(n)(6).
After adjudication of any third-party interests, the Preliminary Order of Forfeiture will become a Final Order of Forfeiture, addressing all interests in the property. Fed. R. Crim. P. 32.2 (c)(1)(A), (c)(2). The court will also enter a Final Order of Forfeiture if no third party promptly challenges the forfeiture. Fed. R. Crim. P. 32.2 (c)(2).
III. DISCUSSION
Petitioner asserts that his interest in the Biscayne Gardens Property while acting as a trustee is separate from his interest as a defendant. He points out that the named beneficiaries have both vested and contingent interests in the property and are subject to rights of possession. The Petitioner adds that equating his interest as a defendant to his interest as a trustee is an attack against the beneficiaries. He further claims his interest as a trustee is possessory, allowing him to petition on behalf of a third party. The Government argues the following: (1) the Petitioner lacks statutory standing as he is not a person “other than the defendant”; (2) the Petitioner's interest as a trustee is not separate from his interest as a defendant therefore he lacks constitutional standing; (3) that because the Petitioner lacks standing to assert a third-party claim, he cannot submit a claim for the forfeited property on behalf of the beneficiaries of the Araxi Trust; and (4) the Petitioner's interest as a trustee of the property is merely nominal.
The Petitioner does not cite any authority supporting his claim that his interest as a trustee is separate from his interest as a defendant. As explained below, the Petitioner lacks standing to bring a third-party claim in an ancillary proceeding.
This Court has held that statutory standing must comply with the conditions of 21 U.S.C. § 853(n)(2), namely that the petitioner must be a person other than the defendant. See Tardon, 493 F.Supp.3d at 1198, 1208. The Petitioner must also establish that they-not the defendant- have a legal right, title, or interest in the property or that their interest is superior to the defendant's. 21 U.S.C. § 853(n)(6). To have constitutional standing, a party must have an “interest in the property subject to the forfeiture because, absent an interest in that property, there is no case or controversy.” Amodeo, 916 F.3d at 971 (citing United States v. $38,000.00 in U.S. Currency, 816 F.2d 1538, 1543 (11th Cir. 1987)).
Additionally, any third party filing a petition must be more than a mere nominee owner. Tardon, 493 F.Supp.3d at 1198, 1234 (affirming the lower court's recommendation that the third-party's petition be dismissed for lacking standing because they were mere nominee owners). In determining whether a party's interest in the property is merely nominal, the Court considers who exercises complete control and dominion over the property. United States v. A Single Fam. Residence & Real Prop. Located at 900 Rio Vista Blvd., 803 F.2d 625, 629-30 (11th Cir. 1986) (dismissing an appeal of a third-party petition because the third-party claimants did not exercise dominion or control over the property and thus held bare legal title).
Moreover, a possessory interest as a third party in a criminal forfeiture action is sufficient to establish standing. United States v. $38,000.00 in U.S. Currency, 816 F.2d at 1544 (holding that a petitioner had statutory standing as a bailee because he had a possessory interest in the bailed currency). However, the third party asserting a possessory interest must suffer an injury from the Final Order of Forfeiture. See United States v. Devlin, No. 18-14574-EE, 2019 WL 1914230, at *1 (11th Cir. Mar. 18, 2019) (dismissing the defendant's challenge to the Final Order of Forfeiture because the Preliminary Order of Forfeiture extinguished his interest).
Lastly, the party invoking federal jurisdiction has the burden of proving standing. Bischoff v. Osceola Cnty., 222 F.3d 874, 878 (11th Cir. 2000) (citing Lujan v. Defs. of Wildlife, 504 U.S. 555, 561 (1992)). If the third-party petitioner lacks standing, this Court does not need to address the merits of their claim. See United States v. Masilotti, 510 Fed. App'x. 809, 809 n.2 (11th Cir. Feb. 22, 2013).
Here, the Petitioner's interest in the Biscayne Gardens Property was forfeited during the Preliminary Forfeiture Order. He has since failed to meet his burden of proving standing. Notably, he has failed to show that his interest as a trustee differs from that of a defendant. The Petitioner cites the Florida Land Trust Act to show that he holds certain rights to the property as a trustee. Yet, that statute states that a trustee “hold[s] title to the trust property of a land trust,” not that the trustee's interest is separate from their own personal interest. See Fla. Stat. § 689.071(2)(h). Although a trustee's interest may be possessory, the Petitioner's interest is not because his interest was extinguished by the Preliminary Forfeiture Order. In sum, the Petitioner is not a person “other than the defendant,” as required by 21 U.S.C. § 853(n)(2).
Likewise, the Petitioner has no constitutional standing to challenge this forfeiture because he has no legal right to the property. In fact, the District Court specifically ordered that the Preliminary Order of Forfeiture “is final as to the Defendant” at the time it was entered. (ECF No. 59 at 6). Thus, when the District Court completed the first phase of the forfeiture by entering the Preliminary Order of Forfeiture, the Petitioner's interest in the Biscayne Gardens Property was extinguished. See Amodeo, 916 F.3d at 972 (citing United States v. Gross, 213 F.3d 599, 600 (11th Cir. 2000)).
Furthermore, the Petitioner's interest-as a trustee for the Araxi Trust-in the Biscayne Gardens Property appears to be merely nominal. As the Government notes, the Petitioner exercises complete dominion and control over the property. Although he seems to claim that the beneficiaries have a superior interest in the property, the Petitioner has lived at the property for forty-four years and has been the sole occupant in recent years leading up to his conviction. In the Petitioner's motion to stay the forfeiture, he conspicuously fails to mention any beneficiaries that the property loss would harm. (ECF No. 85). He only asked if he could live at the property while his appeal was pending and argued that he would be irreversibly deprived of his property if the forfeiture were to proceed. Id. As such, Petitioner, in his role as a trustee, possesses bare legal title and has thus failed to establish standing. See A Single Fam. Residence & Real Prop. Located at 900 Rio Vista Blvd., 803 F.2d at 630.
The Eleventh Circuit affirmed the Petitioner's conviction, sentence, and forfeiture, notably holding that the forfeiture did not violate his Eighth Amendment rights. See United States v. Melkonian, No. 22-13543, 2023 WL 7391695, at *5 (11th Cir. Nov. 8, 2023), cert. denied, No. 23-7163, 2024 WL 2116474 (U.S. May 13, 2024).
IV. RECOMMENDATION
Accordingly, the undersigned respectfully RECOMMENDS that Petitioner's Petition for Remission be DENIED and the Government's Motion to Dismiss be GRANTED.
The Parties will have FOURTEEN (14) DAYS from the date of service of this Report and Recommendation within which to file written objections, if any, for consideration by the United States District Judge. Under Federal Rule of Criminal Procedure 59(b), Eleventh Circuit Rule 31, and accompanying Internal Operating Procedure 3, the Parties are hereby notified that failure to object in accordance with 28 U.S.C. § 636(b)(1) waives the right to challenge on appeal the District Court's order based on unobjected-to factual and legal conclusions. See Thomas v. Arn, 474 U.S. 140 (1985).
RESPECTFULLY SUBMITTED.