Virginia Lawyers Weekly VA Lawyers Weekly
The United States has immunity in a tort suit over property that was seized for purposes of both civil forfeiture and criminal investigation, the 4th U.S. Circuit Court of Appeals held in an issue of first impression.
The federal government seized 1,560 cartons of cigarettes during a smuggling investigation, but later offered to return them after a mistrial.
The owners refused to accept the now-expired cigarettes and sued the government for their fair market value. Immunity was “re-waived” for the negligent handling of property seized for the purpose of forfeiture, they argued.
Fourth Circuit Judge Paul V. Niemeyer, however, agreed with the government’s position and joined other federal circuits to find that the re-waiver didn’t apply here.
“In circumstances where a seizure of property was effected for both the ‘purpose of forfeiture’ and the purpose of criminal investigation, courts of appeals have concluded that the United States is still immune, construing the re-waiver provision to apply only if the property was seized solely for the purpose of forfeiture,” Niemeyer wrote.
Senior Judge Henry F. Floyd and Judge A. Marvin Quattlebaum Jr. joined Niemeyer in Myers v. Mayorkas (VLW 023-2-125).
Seized cigarettes
Reba and David Myers own “Dollar Stretcher,” a convenience store in Winchester. The Department of Homeland Security, or DHS, targeted Reba and the store after an informant said she was involved with smuggling cigarettes to New York to avoid high excise taxes.
During its investigation, DHS obtained a criminal warrant that authorized the seizure of “evidence of a crime … intended for use, or used in committing a crime.”
DHS also procured a civil seizure warrant in West Virginia, where the Myerses resided, to seize properties subject to foreclosure, specifically “[a]ll cigarette inventory” of the Dollar Stretcher. DHS executed the warrants simultaneously and seized 1,560 cartons of cigarettes.
After a mistrial, the trafficking and conspiracy charges against Reba were dismissed and the government offered to return the seized cigarettes.
Reba refused to accept them as the cigarettes’ shelf life had expired and they were worthless.
Dismissed
The Myerses sued DHS and the United States under the Federal Tort Claims Act, or FTCA, for the fair market value of the seized cigarettes, which they contend was approximately $100,000. The government moved to dismiss.
U.S. District Judge Elizabeth K. Dillon of the Western District of Virginia found that the cigarettes were “seized for the dual purpose of forfeiture and evidence,” so she applied the “sole purpose” test from Foster v. United States, a 2008 decision of the 9th U.S. Circuit Court of Appeals.
Under Foster’s sole purpose test, “the United States retains sovereign immunity unless the detained goods were seized for the sole purpose of forfeiture.”
Dillon concluded that the government was immune and dismissed the Myerses complaint. The Myerses appealed.
‘Dual purposes’
On appeal, the Myerses said the Fourth Circuit hasn’t adopted the sole purpose test and it didn’t apply to their circumstances. They said the property in Foster was initially seized for a criminal investigation purpose and the government later seized it as forfeiture.
Here, the Myerses claimed their “cigarette inventory was initially seized for the purpose of forfeiture as an innocent substitute asset, pursuant to a warrant for civil forfeiture … not for evidentiary purposes” pursuant to a criminal search warrant.
But Niemeyer pointed out that section 2680(c) of the FTCA “preserves the United States’ sovereign immunity with respect to ‘[a]ny claim arising in respect of … the detention of any goods’ [and] applies to claims ‘resulting from negligent handling or storage of detained property.’”
With the Civil Asset Forfeiture Reform Act, the judge said Congress “‘cancelled the detention of goods exception and restored the waiver of sovereign immunity — or “re-waived” sovereign immunity — with respect to certain forfeiture-related seizures.’”
The Meyeres argued that this “re-waiver” permitted their case. Niemeyer said the FTCA didn’t specifically address whether the United States is immune from suit when the same property is seized pursuant to two warrants issued for different purposes.
“Nonetheless, we conclude that so long as the property is seized and detained for a criminal investigative purpose, for which the United States did not waive its sovereign immunity, we are not free to override that immunity even if the property was also seized for a purpose to which immunity is waived,” he wrote.
Niemeyer agreed with Foster that “the re-waiver provision in § 2680(c)(1), which applies when property is seized for the purpose of forfeiture, can apply only when the property is seized solely for the purpose of forfeiture.”
In Foster, the court “held that ‘the fact that the government may have had the possibility of a forfeiture in mind when it seized Plaintiff’s property’ is insufficient if ‘criminal investigation was [also] a legitimate purpose of the initial seizure,’” the judge noted.
The Foster court also reasoned that “‘the statute’s use of the definite phrase “the purpose of forfeiture,” as opposed to an indefinite phrase “a purpose of foreclosure,” suggest[ed] that the property be seized only for the purpose of forfeiture,’” Niemeyer said.
This construction of the re-waiver gave effect to congressional objectives in creating exceptions to the FTCA, the Foster court opined. The 7th U.S. Circuit Court of Appeals later followed Foster.
Niemeyer said this reasoning was persuasive and noted the large criminal investigation here involved several stores in Virginia, not just Reba’s.
“If suits challenging seizures of property made in furtherance of this criminal investigation were permitted, even though the seizures were also made for purposes of forfeiture, the suits would interfere with the criminal investigation, a result that Congress specifically sought to avoid with the ‘detention of goods’ exception to its waiver of immunity,” the judge wrote.
Niemeyer rejected the Myerses’ argument that the criminal warrant authorized the seizure of cigarette packaging, tax stamps, boxes and cartons, but not the cigarettes themselves.
He was similarly unconvinced that the “only valid purpose of the seizure could have been for the cigarettes to serve as substitute assets” rather than contraband.
“Thus, even though the seizure of the cigarettes in this case was authorized by both a warrant issued for criminal investigative purposes and a warrant issued for civil forfeiture — dual purposes — we conclude that the United States is immune from suit,” Niemeyer concluded.
