Summary
The Second Circuit reviewed a civil forfeiture action involving approximately $4.91 million seized from accounts associated with Richard Stuart Ross. The court held that Ross lacked standing to challenge forfeiture of $3.69 million for which he filed no claim, and rejected his due process and attorney-fee arguments concerning the remaining $1.21 million. On the government's concession of error, the court vacated the certificate of reasonable cause and affirmed the judgments in all other respects.
Topics
Practice areas
Questions Presented
- Whether the district court exceeded its authority in entering partial default judgment against $3.69 million of defendants-in-rem for which Ross filed no claim.
- Whether the stay of discovery violated Ross's due process right to a timely probable cause hearing.
- Whether the dismissal without prejudice entitled Ross to attorney fees, costs, and interest under CAFRA as having 'substantially prevailed.'
- Whether the entry of a certificate of reasonable cause was warranted.
Holdings
- Ross lacked both Article III and statutory standing to contest forfeiture of the $3.69 million because he failed to file a timely claim to those monies as required by 18 U.S.C. § 983(a) and Supplemental Rule G.
- The stay of discovery did not violate due process because it was authorized by statute and reasonable under the circumstances.
- Ross did not substantially prevail under CAFRA because he obtained no judicially sanctioned relief; dismissal without prejudice does not confer prevailing party status.
- The district court did not abuse its discretion in dismissing without prejudice; Ross showed no plain legal prejudice and the Zagano factors did not compel dismissal with prejudice.
- The certificate of reasonable cause was improperly granted because it may only be issued upon entry of a judgment for the claimant, which did not occur here.
Key quotations
“No judgment having been entered for Ross as to the $1.21 million claimed by him, the district court erred in granting the government a certificate of reasonable cause for the seizure of those monies.” (39-40)
Factual background
Claimant Ross held client funds in trust in a bank account that received a fraudulent transfer of $29.6 million in October 2021, most of which was transferred out. The government seized $4.18 million from the account and later $722,327.52 recalled from domestic banks. Ross filed a claim only to $1,213,113.11, asserting some were client funds and some were proceeds from the sale of his personal residence.
Procedural history
The district court entered judgments (1) ordering forfeiture of $3,692,617.15 to the United States, (2) dismissing without prejudice forfeiture proceedings against $1,213,113.11, (3) granting a certificate of reasonable cause as to that $1.21 million, (4) denying claimant's motion for attorney fees and costs, and (5) denying reconsideration. Claimant appealed.
Remand instructions
None; the court vacated the certificate of reasonable cause and affirmed all other judgments.