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United States v. Real Property Known

November 21, 2006

UNITED STATES OF AMERICA, PLAINTIFF,
v.
REAL PROPERTY KNOWN AND NUMBERED AS 1731-1735 NORTH FOURTH STREET, COLUMBUS, FRANKLIN COUNTY, OHIO, DEFENDANT.



The opinion of the court was delivered by: Terence P. Kemp United States Magistrate Judge

MAGISTRATE JUDGE KEMP

REPORT AND RECOMMENDATION

This property forfeiture action is before the Court on claimant All Columbus Management, Inc.'s ("ACM") motion to set aside forfeiture. The undersigned raises sua sponte the question of whether this motion, made in a case previously referred to the Magistrate Judge pursuant to consent of the parties (but not the current movant) can be decided in the first instance by the Magistrate Judge. For the following reasons, the Court recommends that pursuant to 28 U.S.C. §636(c)(4), the Order of Reference giving this Court jurisdiction to hear the matter be withdrawn because ACM has not consented to jurisdiction. Further, the Court recommends that ACM's motion to set aside forfeiture be denied.

I.

On August 17, 2004, plaintiff United States of America filed a complaint under 18 U.S.C. §981(a)(1)(A) against the Real Property Known and Numbered as 1731-1735 North Fourth Street, Columbus, Franklin County, Ohio ("real property") alleging that the "real property was used to conduct or attempt to conduct financial transactions knowing that the transactions were designed in whole or part to conceal or disguise the nature, location, source, ownership, or control of the proceeds of the specified unlawful activity ...." (Complaint at ¶1(a).) According to the affidavit of probable cause attached to the complaint, there appears to be a series of transactions surrounding the sale of the real property involving Mr. Davidson, Lewis W. Dye and Donald E. Truss. However, the complaint states that the real property's record owner was Hubert I. Davidson.

On January 3, 2005, by the consent of both the United States of America and Mr. Truss, and pursuant to 28 U.S.C. §636(c), the case was referred to the Magistrate Judge for full disposition. On April 19, 2006, the Court, pursuant to a settlement agreement, entered a judgment and decree of forfeiture giving all rights, title and interest to the United States of America. Subsequently, on July 31, 2006, ACM filed a motion to set aside forfeiture claiming, inter alia, that the United States did not obtain jurisdiction over Mr. Davidson because the United States failed to perfect proper service of process. (Motion to Set Aside Forfeiture (doc. #25) at p. 8.) As a result, ACM claims that because it acquired fee simple title to the real property during the pendency of this forfeiture action, lis pendens never attached and ACM has an interest in the real property which takes priority over the United States' interest. (Id.)

The Court will now determine whether the Magistrate Judge can rule on the motion to set aside forfeiture or whether the Order of Reference must be withdrawn because ACM has not consented to the Court's jurisdiction under 28 U.S.C. §636(c). The Court will also examine whether ACM has standing to challenge the forfeiture action.

II.

The precise issue in this case appears to have been the subject of litigation in other circuits. For example, in United States v. Lido Motel, 5145 North Golden State Blvd., 135 F.3d 1312 (9th Cir.1998), the government initiated a civil forfeiture proceeding against the Lido Motel because there was evidence of the sale of crack cocaine on the premises. Kanubhai Patel owned and operated the Lido Motel and was subsequently arrested in connection with the criminal activity. In seeking forfeiture of the property, the government sent a copy of the complaint and summons to Mr. Patel at his place of incarceration and to Mr. Patel's criminal defense attorney, Marc Stefano. Mr. Patel claimed, however, that he never received notice of the forfeiture action.

Mr. Stefano discussed the forfeiture action with Mr. Patel's sister and brother-in-law, both of whom had a financial interest in the property. The government, Mr. Patel's sister and the brother-in-law consented to the magistrate judge's jurisdiction pursuant to 28 U.S.C. §636(c)(1). Ultimately, the government obtained a judgment of forfeiture over the property.

Several months later, Mr. Patel, who was not a named party to the forfeiture proceeding, filed a series of suits in the district court to set aside forfeiture claiming, inter alia, that he did not consent to the magistrate judge's jurisdiction and that his due process rights were violated. The magistrate judge entered judgment against Mr. Patel, and Mr. Patel appealed. The Court of Appeals affirmed, opining that Mr. Patel failed to comply with the requisite filing requirements to claim an interest in the property. The Court of Appeals stated:

The Seventh Circuit, however, has come closest to addressing the issue presented by this case. In Dodson Street, a Seventh Circuit panel found that, absent the filing of a claim to a property subject to forfeiture, a putative claimant is not a party to the action. On that basis, the court concluded that the claimant lacked standing to seek relief from a default judgment under Federal Rule of Civil Procedure 60(b). The circumstances of the present case are closely analogous. Like Federal Rule 60(b), the statute conferring authority on the magistrate judge requires the consent only of "the parties." Under the logic of Dodson Street, Patel's failure to comply with the applicable filing requirements precluded his standing as a "party" to the action and made it unnecessary to obtain his consent to the magistrate judge's jurisdiction.

The Seventh Circuit's approach is supported by precedent in other circuits and by some policy considerations. As indicated by the cases cited above, circuit courts consistently have held claimants to strict compliance with the provisions of Rule C(6). The purpose behind Rule C(6), as the Eighth Circuit has observed, is to inform the court that there is a claimant to the property who wants it back and intends to defend it. That purpose would be ill-served if any person with an ownership interest in a property were absolved of ...


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