Opinion
Criminal Action No. 99-10371-RGS.
December 7, 2001
REPORT AND RECOMMENDATION ON MOTION FOR SUPPLEMENTAL RESTRAINING ORDER
This matter comes before the court on the Government's Motion for Supplemental Restraining Order (Docket # 264) in which this court is requested to enjoin the plaintiffs Julie Dammer (Rakes), Stippo's, Inc., and Gary W. Cruikshank, Trustee in Bankruptcy of Stephen Rakes ("Plaintiffs") from continuing to prosecute their state court action entitled Dammers v. Columbia Wine Spirits, Inc., et al, Suffolk Superior Court Civil Action No. 00-1598-H. That case is scheduled to begin trial on Monday, December 10, 2001. For the reasons detailed herein, this court recommends to the district judge to whom this case is assigned that the motion be DENIED.
Analysis
Plaintiffs' state court action is to reclaim title to real estate and a liquor store business. These assets are presently subject to criminal forfeiture proceedings under 21 U.S.C. § 853 in the actions pending in this court entitled United States v. Kevin Weeks, No. 00-CR-10245-RGS and United States v. Kevin O'Neil, No. 99-CR-10371-RGS. Although the government has been aware of the state court action since shortly after its inception on December 4, 2000, it made no efforts to stay the state court proceedings until it filed its Motion for Supplemental Restraining Order on December 4, 2001, just days before trial. Oral argument was heard on December 6, 2001, at which time Plaintiffs filed an opposition.
18 U.S.C. § 982(b)(1) incorporates the provisions of 21 U.S.C. § 853.
It is the government's position that the mere filing of the state court action was unlawful. The government's explanation for the delay in bringing its motion, namely that it has been actively attempting to broker a settlement, does not explain why it did not seek to halt the state court proceeding immediately upon its filing.
The government contends that the provisions of 21 U.S.C. § 853, in particular subsections (k) and (n), constitute the exclusive method by which a third party can establish an ownership interest in property subject to forfeiture, and that the Plaintiffs are, therefore, precluded from seeking to establish their claim in state court. 21 U.S.C. § 853(k) prohibits the filing of "an action at law or equity against the United States concerning the validity of [an] alleged interest in the property subsequent to the filing of an indictment or information alleging that the property is subject to forfeiture under this section." Subsection (n) establishes a procedure whereby persons "asserting a legal interest in property which has been ordered forfeited to the United States" can seek to establish that:
(A) the petitioner has a legal right, title, or interest in the property, and such right, title, or interest renders the order of forfeiture invalid in whole or in part because the right, title, or interest was vested in the petitioner rather than the defendant or was superior to any right, title, or interest of the defendant at the time of the commission of the acts which gave rise to the forfeiture of the property under this section; or
(B) the petitioner is a bona fide purchaser for value of the right, title, or interest in the property and was at the time of purchase reasonably without cause to believe that the property was subject to forfeiture under this section . . .21 U.S.C. § 853(n)(2) and (6). It is undisputed that the Plaintiffs commenced the state court action after the indictment alleging that the property is subject to forfeiture was filed. Plaintiffs (and some defendants in the state court action) have asserted claims in the forfeiture proceedings which are pending in this court.
The issue is whether the existence of an ownership interest needs to be decided in the federal court. All parties agree that "[s]tate law determines whether Claimants have a property interest, but federal law determines whether or not that interest can be forfeited." United States v. Hooper, 229 F.3d 818, 820 (9th Cir. 2000) (citation omitted). Additionally, all parties agree that the federal court is the appropriate forum for determining whether interests are subject to forfeiture. Where the parties differ is whether the federal court is the exclusive jurisdiction for applying state law to determine whether the Plaintiffs have any interest at all.
There is certainly nothing express in the statute which deprives state courts of their jurisdiction over purely state law matters. Moreover "[a]ny doubts as to the propriety of a federal injunction . . . should be resolved in favor of permitting the state courts to proceed. . . ." Casa Marie, Inc. v. Superior Court of Puerto Rico, 988 F.2d 252, 261 (1st Cir. 1993) (quoting Atlantic Coast Line R. Co. v. Brotherhood of Locomotive Engineers, 398 U.S. 281, 297, 90 S.Ct. 1739, 1748, 26 L.Ed.2d 234 (1970)). This court concludes that the Plaintiffs are free to proceed in state court to determine their interests, if any, in all the assets which are the subject of the state court proceeding. No title to the assets which are subject to the forfeiture proceedings can be transferred due to injunctions issued by the federal court. The federal court will have the opportunity to assess whether the Plaintiffs' interests can be forfeited. These safeguards are sufficient to insure that the state court proceeding will not "impair the federal court's flexibility and authority to decide [its] case." James v. Bellotti, 733 F.2d 989, 993 (1st Cir. 1984) quoting Atlantic Coast Line, 398 U.S. at 295, 90 S.Ct. at 1747. Such a conclusion is consistent with the "general rule that federal and state courts do not interfere with or attempt to restrain each other's proceedings." James v. Bellotti, 733 F.2d at 993 and cases cited.
The prohibition of 21 U.S.C. § 853(k) precluding the commencement of actions against the United States has no application to the present case. The United States is not named as a party in the state court action. Nowhere in the state court action do the Plaintiffs challenge the ultimate rights of the United States to acquire the assets by forfeiture: that determination will be made in the context of the forfeiture proceedings where the interests of the Plaintiffs and other claimants will be examined to determine if they meet the requirements of § 853(n)(6), and the government can present evidence, cross-examine witnesses and rely on relevant portions of the record of the criminal case. See § 853(n)(5). For the same reasons, cases on which the government relies in which a federal injunction was issued to stop a foreclosure action are irrelevant, since in those foreclosure actions the United States would be required to convey its title to the contested property. See, e.g., United States v. Phillips, 185 F.3d 183, 188 (4th Cir. 1999). In the present case, the Plaintiffs make no challenge to the government's ownership interest in the state proceedings. Plaintiffs recognize that whether they are ultimately entitled to own the assets will be decided in the forfeiture proceedings.
Pursuant to § 853(c), "[a]ll right, title and interest in property [subject to forfeiture] . . . vests in the United States upon the commission of the act giving rise to forfeiture under this section."
Allowing the state court proceeding to continue to conclusion is consistent with the Anti-Injunction Act which states that "a court of the United States may not grant an injunction to stay proceedings in a State court except as expressly authorized by Act of Congress, or where necessary in aid of its jurisdiction, or to protect or effectuate its judgments." 28 U.S.C. § 2283. The government ignores this prohibition against enjoining state actions by arguing that the injunction should just run against the plaintiffs, and need not be directed to the state court. However, as admitted at oral argument, this is a distinction without a difference in the context of this case — at issue is the federal court's power to prevent the state court from deciding the issues before it.
The Anti-Injunction Act is "an absolute prohibition against enjoining state court proceedings, unless the injunction falls within one of [the] three specifically defined exceptions." Garcia v. Bauza-Salas, 862 F.2d 905, 907 (1st Cir. 1988) (quoting Atlantic Coast Line, 398 U.S. at 286, 90 S.Ct. at 1743). The three exceptions are "narrowly construed" and require "[p]roper respect for principles of federalism and comity[.]" Casa Marie, Inc. v. Superior Court of Puerto Rico, 988 F.2d at 261, 262. The government has failed to show how its request fits into any of these exceptions, and this court is prohibited by the Act from issuing the requested injunction.
The first exception to the ban on injunctions concerns legislation that specifically empowers federal courts to halt proceedings in state courts. Such laws must create a "specific and uniquely federal right or remedy, enforceable in a federal court of equity, that could be frustrated if the federal court were not empowered to enjoin a state court proceeding." Mitchum v. Foster, 407 U.S. 225, 237, 92 S.Ct. 2151, 2159, 32 L.Ed.2d 705 (1972). As detailed above, however, the only unique federal right or remedy at issue is whether an interest can be forfeited, and allowing the state court to determine whether an interest exists at all does not frustrate the federal court's ability to resolve that issue. Thus, the terms of the criminal forfeiture statute do not allow this court to circumvent the restrictions imposed by the Anti-Injunction Act.
The second exception to the Act is no more availing to the government. Under this exception, federal courts may enjoin state proceedings where "necessary in aid of its jurisdiction." 28 U.S.C. § 2283. However, the district court's jurisdiction in the pending criminal and forfeiture matters will not be adversely affected by allowing the Plaintiffs' case to proceed: the final determination as to forfeiture remains within the province of federal court.
According to the government, the claims being tried in the state action are not identical to those the governing intends to present in the forfeiture action. Not only does the state court action involve parties who are not participating in the federal forfeiture case, but the government has indicated that it would present different legal and factual arguments in the forfeiture proceedings than would be relevant in the state proceeding. See also In re Newport Savings and Loan Assoc., 928 F.2d 472, 477 (1st Cir. 1997) ("A drug-forfeiture action is not a `quiet title action,' nor does it resemble a `quiet title' action"). These differences simply buttress the conclusion that an injunction is not "necessary in aid of [this court's] jurisdiction." The "law is clear" that the exception for injunctions "necessary in aid of its jurisdiction" "does not apply when the federal court has before it a mere in personam cause of action between two parties which has not gone to judgment." Hayes Indus., Inc. v. Caribbean Sales Assoc., Inc. 387 F.2d 498, 501 (1st Cir. 1968). The criminal forfeiture action instituted by the government under 21 U.S.C. § 853 is such an in personam action. See U.S. v. Lester, 85 F.3d 1409, 1413 (9th Cir. 1996).
The Anti-Injunction Act's third exception involves enjoining state actions to protect final judgments in federal suits. As the government itself informed the court, no final orders have been entered in the forfeiture action, and thus this exception cannot apply.
In sum, the present case does not fit into any of the exceptions to the Anti-Injunction Act. Moreover, notions of comity advise against enjoining Plaintiffs' action. This is especially true given that the state court has presided over this case for more than a year, the government knew of the state court proceeding since its inception, and yet the government seeks to stop the action quite literally on the eve of trial.
Conclusion
For these reasons, this court recommends that the Government's Motion for Supplemental Restraining Order be Denied. In view of the timing of the government's filing, I recommend that objections to this Report and Recommendation be due by close of business Friday,
The parties are hereby advised that under the provisions of Rule 3(b) of the Rules for United States Magistrates in the United States District Court for the District of Massachusetts, any party who objects to these proposed findings and recommendations must file a written objection thereto with the Clerk of this Court within 10 days of the party's receipt of this Report and Recommendation unless otherwise ordered by the court. The written objections must specifically identify the portion of the proposed findings, recommendations or report to which objection is made and the basis for such objections. The parties are further advised that the United States Court of Appeals for this Circuit has repeatedly indicated that failure to comply with this rule shall preclude further appellate review. See Keating v. Sec'y of Health Human Servs., 848 F.2d 271, 275 (1st Cir. 1988); United States v. Valencia-Copete, 792 F.2d 4 (1st Cir. 1986); Park Motor Mart, Inc. v. Ford Motor Co., 616 F.2d 603, 604-605 (1st Cir. 1980); United States v. Vega, 678 F.2d 376, 378-379 (1st Cir. 1982); Scott v. Schweiker, 702 F.2d 13, 14 (1st Cir. 1983); see also Thomas v. Arn, 474 U.S. 140, 106 S.Ct. 466 (1985). Accord Phinney v. Wentworth Douglas Hosp., 199 F.3d 1, 3-4 (1st Cir. 1999); Henley Drilling Co. v. McGee, 36 F.3d 143, 150-151 (1st Cir. 1994); Santiago v. Canon U.S.A., Inc., 138 F.3d 1, 4-5 (1st Cir. 1998).