LYNWOOD SMITH, District Judge.
Plaintiff, the United States of America, asserts a civil action in rem for the forfeiture of $134,972.34 in United States currency ("the defendant currency") seized on August 20, 2014, from FNB Bank, account number-5351, pursuant to 31 U.S.C. § 5317(c)(2).
Civil asset forfeiture cases are governed by the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions. See 18 U.S.C. § 983(a)(4)(A) ("In any case in which the Government files in the appropriate United States district court a complaint for forfeiture of property, any person claiming an interest in the seized property may file a claim asserting such person's interest in the property in the manner set forth in the Supplemental Rules for Certain Admiralty and Maritime Claims, . . ."). The Supplemental Rules apply to, among other proceedings, "forfeiture actions in rem arising from a federal statute." Fed.R.Civ.P. Supp. R. A(1)(B). Further, "[a] claimant who establishes standing to contest forfeiture may move to dismiss the action under [Federal Rule of Civil Procedure] 12(b)." Fed.R.Civ.P.
Federal Rule of Civil Procedure 12(b) permits a party to move to dismiss a complaint for, among other reasons, "failure to state a claim upon which relief can be granted." Fed.R.Civ.P. 12(b)(6).
In keeping with these principles a court considering a motion to dismiss can choose to begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth. While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations. When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.
Iqbal, 556 U.S. at 678-79, 129 S.Ct. 1937 (emphasis added).
Due to the nature of this case, however, the traditional pleading rules are modified by Rule G(2) of the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions, which set out specific pleading requirements for forfeiture actions in rem. Courts are instructed to evaluate the sufficiency of a complaint seeking a forfeiture of assets by determining, among other things, whether the complaint meets that requirement of Supplemental Rule G(2) specifying that the pleading should "state sufficiently detailed facts to support a reasonable belief that the government will be able to meet its burden of proof at trial." Fed.R.Civ.P. Supp. R. G(2)(f).
In light of the requirements of Supplemental Rule G and CAFRA, it is unclear to what extent, if any, the Twombly/Iqbal "plausible claim for relief" standard applies to civil forfeiture complaints commenced
Real Property and Premises, 657 F.Supp.2d at 1065-66 (alterations in original, ellipses added).
The Supplemental Rules make clear that they "apply to . . . forfeiture actions in rem," and that the "Federal Rules of Civil Procedure also apply to the foregoing proceedings except to the extent that they are inconsistent with these Supplemental Rules." Fed.R.Civ.P. Supp. R.A. (emphasis supplied). In Twombly and Iqbal, the issue before the Supreme Court was the standard to be applied in deciding a Rule 12(b)(6) motion to dismiss for failure to state a claim, where Rule 8 governed the sufficiency of a pleading. See Iqbal, 556 U.S. at 677-79, 129 S.Ct. 1937; Twombly, 550 U.S. at 555-58, 127 S.Ct. 1955; see also American Dental Association v. Cigna Corp., 605 F.3d 1283, 1290 (11th Cir. 2010) (observing that "Iqbal explicitly held that the Twombly plausibility standard applies to all civil actions, not merely antitrust actions, because it is an interpretation of Rule 8") (citing Iqbal, 556 U.S. at 684, 129 S.Ct. 1937 (emphasis supplied)).
Thus, because Supplemental Rule G(2) governs the pleading standard for civil asset forfeiture cases, rather than Federal Rule of Civil Procedure 8, the standard enunciated and clarified in Twombly and Iqbal does not govern the sufficiency of such complaints.
In summary, therefore, when a claimant moves to dismiss a civil asset forfeiture complaint under Rule 12(b)(6) for "failure to state a claim upon which relief can be granted," the court should determine the sufficiency of the complaint by first separating the factual and conclusory allegations, and then applying the standard of Supplemental Rule G(2)(f): i.e., does the complaint "state sufficiently detailed facts to support a reasonable belief that the government will be able to meet its burden of proof at trial"?
Additionally, when ruling upon any motion to dismiss, the court must assume that the facts set forth in a well-pleaded complaint are true. See Anza v. Ideal Steel Supply Corp., 547 U.S. 451, 453, 126 S.Ct. 1991, 164 L.Ed.2d 720 (2006) (stating that, on a motion to dismiss, the court must "accept as true the factual allegations in the amended complaint"); Marsh v. Butler County, 268 F.3d 1014, 1023 (11th Cir. 2001) (en banc) (setting forth the facts in the case by "[a]ccepting all well-pleaded factual allegations (with reasonable inferences drawn favorably to Plaintiffs) in the complaint as true").
Accordingly, that which is set out in the following portions of this memorandum opinion as a summary of "the facts" for the purpose of ruling upon claimants' Rule 12(b)(6) motion are those factual allegations from the complaint that have been separated from conclusory allegations, and may, or may not, be the actual facts. See, e.g., Williams v. Mohawk Industries, Inc., 465 F.3d 1277, 1281 n. 1 (11th Cir.2006).
On August 1, 1987, an account numbered-5351 was opened at FNB Bank in the name of C.W.E. Enterprises, Inc., with Carlton Edwards, among others, listed as a signatory ("the bank account").
Between October 1, 2013, and May 23, 2014, Carlton Edwards made the following cash withdrawals from the bank account:
Date Day Time Amount 10/1/2013 Tuesday 1:24:00 PM $9,000.00 10/2/2013 Wednesday 1:48:00 PM $9,000.00 10/4/2013 Friday 1:11:00 PM $9,000.00 10/9/2013 Wednesday 1:57:00 PM $9,000.00 10/11/2013 Friday 1:10:00 PM $9,000.00 10/15/2013 Tuesday 1:30:00 PM $9,000.00 10/16/2013 Wednesday 3:09:00 PM $9,000.00 10/17/2013 Thursday 1:22:00 PM $9,000.00 10/21/2013 Monday 1:51:00 PM $9,000.00 10/23/2013 Wednesday 2:38:00 PM $9,000.00 10/24/2013 Thursday 1:24:00 PM $9,000.00 10/31/2013 Thursday 1:00:00 PM $9,000.00 11/1/2013 Friday 3:03:00 PM $9,000.00 11/4/2013 Monday 1:25:00 PM $9,000.00 11/8/2013 Friday 1:26:00 PM $9,000.00 11/12/2013 Tuesday 1:07:00 PM $9,000.00 11/13/2013 Wednesday 1:25:00 PM $9,000.00 11/15/2013 Friday 2:13:00 PM $9,000.00 11/18/2013 Monday 1:59:00 PM $9,000.00 11/20/2013 Wednesday 1:49:00 PM $9,000.00 11/25/2013 Monday 1:05:00 PM $9,000.00 11/26/2013 Tuesday 1:36:00 PM $8,000.00 1/29/2013 Friday 3:11:00 PM $9,000.00 12/2/2013 Monday 1:03:00 PM $9,000.00 12/5/2013 Thursday 1:41:00 PM $9,000.00 12/6/2013 Friday 12:34:00 PM $9,000.00 12/9/2013 Monday 1:19:00 PM $9,000.00 12/11/2013 Wednesday 1:57:00 PM $9,000.00 12/12/2013 Thursday 1:07:00 PM $9,000.00 12/16/2013 Monday 12:35:00 PM $9,000.00 12/17/2013 Tuesday 12:06:00 PM $9,000.00 12/20/2013 Friday 1:49:00 PM $9,000.00 12/23/2013 Monday 12:41:00 PM $9,000.00 12/26/2013 Thursday 1:47:00 PM $9,000.00 12/27/2013 Friday 2:57:00 PM $9,000.00 12/30/2013 Monday 1:58:00 PM $9,000.00 1/2/2014 Thursday 2:50:00 PM $8,000.00 1/6/2014 Monday 1:18:00 PM $9,000.00
1/13/2014 Monday 1:48:00 PM $9,000.00 1/15/2014 Wednesday 1:30:00 PM $9,000.00 1/21/2014 Tuesday 2:24:00 PM $9,000.00 1/23/2014 Thursday 1:52:00 PM $9,000.00 1/24/2014 Friday 1:48:00 PM $9,000.00 1/27/2014 Monday 1:06:00 PM $9,000.00 1/30/2014 Thursday 1:51:00 PM $9,000.00 1/31/2014 Friday 1:00:00 PM $9,000.00 2/5/2014 Wednesday 2:03:00 PM $9,000.00 2/10/2014 Monday 1:42:00 PM $9,000.00 2/13/2014 Thursday 2:02:00 PM $9,000.00 2/21/2014 Friday 2:06:00 PM $9,000.00 2/26/2014 Wednesday 1:24:00 PM $9,000.00 3/6/2014 Thursday 12:06:00 PM $9,000.00 3/11/2014 Tuesday 12:46:00 PM $9,000.00 3/14/2014 Friday 1:50:00 PM $9,000.00 3/21/2014 Friday 4:27:00 PM $9,000.00 3/25/2014 Tuesday 12:38:00 PM $9,000.00 3/26/2014 Wednesday 12:19:00 PM $8,000.00 4/16/2014 Wednesday 11:27:00 AM $9,000.00 4/22/2014 Tuesday 1:09:00 PM $9,000.00 4/23/2014 Wednesday 2:21:00 PM $9,000.00 4/30/2014 Wednesday 1:14:00 PM $9,000.00 5/1/2014 Thursday 1:06:00 PM $9,000.00 5/7/2014 Wednesday 2:42:00 PM $9,000.00 5/8/2014 Thursday 12:42:00 PM $9,000.00 5/19/2014 Monday 1:22:00 PM $9,000.00 5/21/2014 Wednesday 12:36:00 PM $9,000.00 5/22/2014 Thursday 11:51:00 AM $9,000.00 5/23/2014 Friday 11:47:00 AM $9,000.00
As the table of withdrawals shows, Carlton Edwards made 68 cash withdrawals from the bank account over a 234-day period. The vast majority of the cash withdrawals were for exactly $9,000, and all were for less than $10,000. The 68 cash withdrawals totaled $603,000.
On August 20, 2014, agents of the Internal Revenue Service, Criminal Investigations ("IRS-CI"), seized the defendant currency from the bank account.
After the government filed its verified complaint for forfeiture in rem on January 5, 2015, claimants timely filed a verified claim on February 4, 2015, contesting the forfeiture action in accordance with Supplemental Rule G(5)(a).
The government's complaint is based upon that portion of 31 U.S.C. § 5317 which provides that:
31 U.S.C. § 5317(c)(2); See also 18 U.S.C. § 981(a)(1)(A) (providing that "[a]ny property, real or personal, involved in a transaction or attempted transaction in violation of section 1956, 1957 or 1960 of this title, or any property traceable to such property" is subject to forfeiture to the United States).
The government alleges that the defendant currency was "involved in or traceable to a structuring offense in violation of 31 U.S.C. § 5324," which provides that:
31 U.S.C. § 5324(a);
31 C.F.R. § 1010.100(xx).
Thus, to prove a criminal violation of § 5324(a), the government must prove "`only that a defendant had knowledge of the reporting requirements and acted to avoid them.'" United States v. Van Allen, 524 F.3d 814, 820 (7th Cir.2008) (quoting United States v. Cassano, 372 F.3d 868, 878 (7th Cir.2004)), vacated and remanded for further consideration on other grounds, 543 U.S. 1109, 125 S.Ct. 1018, 160 L.Ed.2d 1037 (2005) (citing United States v. Booker, 543 U.S. 220, 125 S.Ct. 738, 160 L.Ed.2d 621 (2005)) (in turn, quoting United States v. Jackson, 983 F.2d 757, 767 (7th Cir.1993)), vacated on other grounds, 543 U.S. 1109, 125 S.Ct. 1018, 160 L.Ed.2d 1037 (2005).
In moving to dismiss the verified complaint, claimants make two arguments.
To prevail at trial, the government must establish that Carlton Edwards violated 31 U.S.C. § 5324(a)(3) because he had knowledge of, and acted to avoid, the statutory and regulatory reporting requirements, and that the subject currency was involved in or traceable to his violation of § 5324(a)(3). See 31 U.S.C. § 5324(a)(3); 31 U.S.C. § 5317(c)(2).
Claimants contend that "[t]he government improvidently relies on the volume of withdrawals alone to establish the requisite intent to avoid reporting."
In United States v. Nersesian, 824 F.2d 1294 (2d Cir.1987), the defendant had been convicted of conspiring to defraud the United States, and, conspiring to cause financial institutions to conceal a material fact by structuring currency transactions to prevent the filing of a currency transaction report. Id. at 1309, 1313.
Finally, in United States v. Van Allen, 524 F.3d 814 (7th Cir.2008), the defendant operated a used auto-parts business. Id. at 817. Over a two-year period he drafted more than 3,000 checks on his bank account,
In the present case, Carlton Edwards made 68 withdrawals from the bank account over a 234-day period in amounts typically of $9,000 and totaling $603,000. He never made more than one withdrawal on any given day.
Because Carlton Edwards engaged in so many transactions over that period of time, and none of the transactions exceeded $10,000, a reasonable jury could reasonably infer that he had knowledge of, and that he sought to evade, the statutory reporting requirements. Moreover, all but two of the 68 withdrawals were for exactly $9,000—conspicuously close to the $10,000 reporting threshold—and all were for less than $10,000. A reasonable jury could conclude that it was highly unlikely that an individual would need to make withdrawals in such amounts without ever needing to make a withdrawal in excess of $10,000, and that virtually every withdrawal would need to be for exactly $9,000, unless the individual knew of, and was attempting to evade, the statutory reporting requirements. See Cassano, 372 F.3d at 879 ("Finally, it is unlikely, to the point of absurdity, that it was pure coincidence that all fifty-one checks cashed by [the defendant] were in denominations under $10,000."). Moreover, Carlton Edwards frequently withdrew cash on consecutive business days. A jury could find that an individual would not undertake such a burdensome and inefficient policy unless he knew of, and sought to avoid, the reporting requirements. Thus, the complaint states sufficiently detailed facts to support a reasonable belief that the government will be able to meet its burden of proof to show that Carlton Edwards had knowledge of, and acted to avoid, the statutory reporting requirements.
Claimants contend that the defendant currency was not subject to forfeiture because the government fails to allege any scheme or facts supporting a tracing of the seized funds to the transactions at issue.
The government contends that the defendant currency is forfeitable pursuant to 18 U.S.C. § 984, which provides:
18 U.S.C. § 984(a). In other words, § 984 allows for the civil forfeiture of property, including funds deposited in an account in a financial institution, with a physical and temporal nexus to the tainted property.
Here, the cash withdrawn from the bank account by Edwards was the tainted property because it was involved in a structuring offense. Thus, the court must determine whether the defendant currency may be substitute property under § 984 because it had a physical and temporal nexus to the tainted, withdrawn cash.
The temporal nexus is met because the structuring violation occurred in October of 2013, and the defendant currency was seized in August of 2014—less than one year later. Likewise, the physical nexus is met because the defendant currency was identical property as the cash involved in the structuring offense—both are money— and seized currency was taken out of the same account from which the traceable cash was withdrawn. See U.S. v. Currency, $300,000 Seized from Bryant Bank Account No. XXX-XX-XXXX, No. 2:12-CV-2431-AKK, 2013 WL 1498972, *3 (N.D.Ala. Apr. 9, 2013) (where the property involved in or traceable to a structuring offense was originally located in a bank account, the Government can seize the identical amount of funds involved in the offense from the account).
Accordingly, the complaint states sufficiently detailed facts to support a reasonable belief that the government will able to meet its burden of proof at trial to establish that the defendant currency is forfeitable pursuant to § 984.
Property eligible for forfeiture under the "involved in" language of § 982(a)(1) and, thus, also subject to forfeiture under the same language of § 5317(c)(2), includes any "`money or other property [that was actually] laundered (the corpus), any commissions or fees paid to the launderer, and any property used to facilitate the laundering offense.'" United States v. Puche, 350 F.3d 1137, 1153 (11th Cir.2003) (quoting United States v. Bornfield, 145 F.3d 1123, 1135 (10th Cir.1998)) (bracketed alteration supplied); see also United States v. $255,427.15 in United States Currency, 841 F.Supp.2d 1343, 1348 (S.D.Ga.2012) ("The Eleventh Circuit has instructed that § 5317's use of the term `involved in' permits courts to order forfeiture of property `involved in, used to commit, or used to facilitate' a violation of § 5324.") (quoting Seher, 562 F.3d at 1369). "`Facilitation occurs when the property makes the prohibited conduct less difficult or more or less free from obstruction or hindrance.'" Puche, 350 F.3d at 1153 (quoting Bornfield, 145 F.3d at 1135).
No binding precedent exists in which a court applied the facilitation theory to a currency transaction structuring offense similar to that alleged in this suit. However, the existing precedent does clarify the broad contours of the facilitation theory of forfeiture. In Seher, the court held that depositing laundered funds into a bank account causes the other funds in that account to become "involved in" the illegal money laundering because they "help disguis[e] the source of those tainted funds." Seher, 562 F.3d at 1369. Similarly, in Puche, the court held that when tainted and legitimate funds are intermingled in one account, the legitimate funds may facilitate the illegal money laundering by "acting as a `cover' and hence reduc[ing] suspicion of the . . . source [of the tainted funds]." Puche, 350 F.3d at 1154 (bracketed alteration supplied). Also, in Seher, the court held that where money was laundered through the purchase of jewelry from two stores, the entire inventory of jewelry at the stores was subject to forfeiture for facilitating the money laundering, because the "inventories made it easier. . . to launder money by giving potential
While the decision of the Southern District of Georgia in United States v. $255,427.15 in United States Currency is not binding precedent, that court confronted facts similar to those before this court. The United States sought to forfeit a sum of currency pursuant to § 5317(c)(2) on the grounds that it was traceable to or involved in the structuring of withdrawals in violation of § 5324. See id. at 1344-47. The claimants moved to dismiss the complaint for failure to state a claim, and specifically asserted that the complaint failed to show that the defendant currency was "traceable to or involved in a violation of § 5324." Id. at 1347. The claimants had made 286 cash withdrawals, all under $10,000, from three business checking accounts. Id. at 1345. The United States then seized the defendant currency, which consisted of the funds in those three accounts. Id. The claimants asserted that, "because the Defendant Currency seized was not directly deposited into the account by structuring," but rather the only alleged illegal structuring related to those accounts consisted of withdrawals, the defendant currency was "not traceable to the structuring violations and not available for seizure." Id. at 1348. The United States asserted that the defendant currency was involved in the structuring violations. Id. The court found that the "Complaint sufficiently allege[d] that the Defendant Currency was property involved in transactions structured to evade the reporting requirement," because the "structured withdrawals were made directly from the bank accounts from which the Defendant Currency was seized." Id. (bracketed alteration supplied, emphasis in original).
This court finds the reasoning of the Southern District of Georgia in United States v. $255,427.15 in United States Currency to be persuasive. When withdrawals from an account are illegally structured so as to avoid the reporting requirements, the funds in the account facilitate the illegally structured withdrawals because the illegally structured withdrawals are made possible by the existence of the funds in the account. Without the funds in the account, the illegal structured withdrawals could not be made. Thus, the existence of the funds in the account does more than just make the structuring of withdrawals less difficult, as required to establish that the funds facilitated the structuring. Instead, the funds in the account are a necessary precursor to the structured withdrawals. Additionally, where there exists an ongoing pattern of withdrawals structured to avoid the reporting requirements, the funds in the account are involved in the structuring because, unless seized, they are the next funds in line to be withdrawn through a structured withdrawal. See United States v. $83,274.51 seized from BBVA Compass Bank Account Number xxxx9194, No. 2:13-CV-153-JEO, 2013 WL 5524729, *5 (N.D.Ala. Sept. 30, 2013); United States v. $438,040.65 in United States Currency, No. 5:11-CV-984-CLS, doc. no. 12 at 24 (N.D.Ala. Mar. 16, 2012).
Here, the defendant currency was seized from an account from which an alleged pattern of 68 structured withdrawals were made over a 234-day period. Thus, the complaint states sufficiently detailed facts to support a reasonable belief that the government will able to meet its burden of proof at trial to establish that the defendant currency was "involved in" the allegedly structured withdrawals.
For the foregoing reasons, this court finds that the complaint satisfies the standard of Supplemental Rule G(2)(f) because it states sufficiently detailed facts to support
Fed.R.Civ.P. 12(b).
Fed.R.Civ.P. Supp. R. G(2). Claimants only contest whether the complaint states a claim upon which relief can be granted, i.e., whether the complaint states sufficiently detailed facts to support a claim for relief, and does not contest whether the other requirements of Supplemental Rule G(2) are satisfied. See doc. no. 9 (Motion to Dismiss), at 8-12.
The elements required to establish a criminal violation of § 5324(a) have evolved over time, and, as explained below, older cases may state that a third, willfulness element must be satisfied to establish a criminal violation of § 5324(a). Courts have consistently held that the government must prove that the defendant (1) knew of the reporting requirements, and (2) acted to avoid those requirements. However, as originally enacted by the Money Laundering Control Act of 1986, 18 U.S.C. § 1956 et seq., 31 U.S.C. § 5324 prohibited structuring, but the act of structuring was made a crime by another statutory section, § 5322(a). The Tenth Circuit, in United States v. Dashney, 937 F.2d 532 (10th Cir. 1991), summarized the statutory provisions at that time as follows:
Dashney, 937 F.2d at 533 n. 1 (bracketed alterations and ellipses in original). Due to the "willfully violating" requirement of § 5322(a), courts were split as to whether a third, willfulness element—i.e., knowledge of the illegality of structuring transactions—was required to establish a criminal violation of § 5324. Compare United States v. Aversa, 984 F.2d 493, 502 (1st Cir.1993) (en banc) (holding that knowledge of the illegality of structuring is required to establish a criminal violation of § 5324), with Dashney, 937 F.2d at 537-40 (10th Cir.1991) (holding that knowledge of the illegality of structuring is not required to establish a criminal violation of § 5324). See also Ratzlaf v. United States, 510 U.S. 135, 136, 114 S.Ct. 655, 126 L.Ed.2d 615 (1994) (acknowledging the circuit split).
Then, in Ratzlaf v. United States, 510 U.S. 135, 114 S.Ct. 655, 126 L.Ed.2d 615 (1994), the Supreme Court held that to convict a person for structuring currency transactions in violation of 31 U.S.C. §§ 5324(3) and 5322(a), the government must establish that the violation was willful. Id. at 149, 114 S.Ct. 655 ("To convict [the defendant] of the [structuring currency transactions] crime with which he was charged, violation of 31 U.S.C. §§ 5322(a) and 5324(3), the jury had to find he knew the structuring in which he engaged was unlawful."). In response, Congress, through the Riegle Community Development and Regulatory Improvement Act of 1994, Pub.L. No. 103-325, amended § 5324 by adding a criminal penalty provision, so that reliance on the criminal penalty provision of § 5322(a) was no longer required to convict a person for structuring transactions in violation of § 5324. See United States v. Vazquez, 53 F.3d 1216, 1218 n. 2 (11th Cir.1995). The amended § 5324 does not require that the defendant act "willfully" and, thus, it is no longer necessary to show that a defendant knew that it was illegal to structure currency transactions in order to convict the defendant under § 5324. See 31 U.S.C. § 5324; see also Vazquez, 53 F.3d at 1218 n. 2.