Filed: Nov. 05, 2019
Latest Update: Mar. 03, 2020
Summary: Case: 18-10801 Document: 00515187717 Page: 1 Date Filed: 11/05/2019 IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT United States Court of Appeals No. 18-10801 Fifth Circuit FILED November 5, 2019 UNITED STATES OF AMERICA, Lyle W. Cayce Clerk Plaintiff - Appellee v. $4,480,466.16 in funds seized from Bank of America account ending in 2653 Defendant, RETAIL READY CAREER CENTER INCORPORATED, Claimant - Appellant Appeal from the United States District Court for the Northern District of
Summary: Case: 18-10801 Document: 00515187717 Page: 1 Date Filed: 11/05/2019 IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT United States Court of Appeals No. 18-10801 Fifth Circuit FILED November 5, 2019 UNITED STATES OF AMERICA, Lyle W. Cayce Clerk Plaintiff - Appellee v. $4,480,466.16 in funds seized from Bank of America account ending in 2653 Defendant, RETAIL READY CAREER CENTER INCORPORATED, Claimant - Appellant Appeal from the United States District Court for the Northern District of T..
More
Case: 18-10801 Document: 00515187717 Page: 1 Date Filed: 11/05/2019
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
No. 18-10801
Fifth Circuit
FILED
November 5, 2019
UNITED STATES OF AMERICA, Lyle W. Cayce
Clerk
Plaintiff - Appellee
v.
$4,480,466.16 in funds seized from Bank of America account ending in 2653
Defendant,
RETAIL READY CAREER CENTER INCORPORATED,
Claimant - Appellant
Appeal from the United States District Court
for the Northern District of Texas
ON PETITION FOR PANEL REHEARING
Before ELROD, WILLETT, and DUNCAN, Circuit Judges.
STUART KYLE DUNCAN, Circuit Judge:
The petition for panel rehearing is DENIED. We withdraw the previous
opinion issued August 22, 2019, 936 F.3d 233, and substitute the following:
We address whether a claimant in a civil forfeiture proceeding may
counterclaim for constitutional tort damages against the United States. The
district court held a claimant may never file counterclaims of any kind. It
adopted the First Circuit’s reasoning that, because a forfeiture is an in rem
Case: 18-10801 Document: 00515187717 Page: 2 Date Filed: 11/05/2019
No. 18-10801
proceeding against property, there is no “claim” against a claimant that he may
“counter.” Although this reasoning has been adopted by several district courts
and recently by the Sixth Circuit, we find it unpersuasive and decline to adopt
it. We nonetheless affirm the district court’s judgment dismissing the
counterclaims for a different reason. The counterclaims here seek damages
based on alleged Fourth and Fifth Amendment violations arising from the
property seizure. The United States has not waived sovereign immunity for
either claim. We therefore affirm the district court’s judgment on the
alternative ground that the counterclaims are barred by sovereign immunity.
I.
Appellant Retail Ready Career Center (“RRCC”) was a private school in
Texas offering a six-week “boot camp style” course to train students as Heating,
Ventilation, and Air Conditioning (“HVAC”) technicians. 1 According to RRCC,
“[m]ost” students were “veterans who pa[id] for the course using their earned
GI Bill benefit,” but “courses were open to other participants” as well. In 2017,
the United States Department of Veterans Affairs (“VA”) began investigating
whether RRCC had falsely claimed to be in compliance with the “85-15” rule.
This rule prohibits the VA from approving a veteran’s enrollment in a course
“for any period during which more than 85 percent of the students enrolled in
the course are having all or part of their tuition, fees or other charges paid for
them by the educational institution or by VA[.]” 38 C.F.R. § 21.4201. The rule’s
purpose is to “minimize the risk that veterans’ benefits will be wasted on
educational programs of little value . . . and to prevent charlatans from
grabbing the veterans’ education money.” Cleland v. Nat’l Coll. of Bus., 435
U.S. 213, 219 (1978) (cleaned up).
1 We draw these facts primarily from RRCC’s verified claim, which we accept as true
for purposes of reviewing the district court’s grant of a motion to dismiss. See Masel v.
Villareal, 924 F.3d 734, 743 (5th Cir. 2019).
2
Case: 18-10801 Document: 00515187717 Page: 3 Date Filed: 11/05/2019
No. 18-10801
In September 2017, federal warrants were issued to seize the money in
RRCC’s bank accounts—amounting to over $4.6 million—as the alleged
proceeds of federal law violations. See FED. R. CIV. P., SUPPLEMENTAL RULE
(“SUPP. RULE”) G(3)(b) (“the court—on finding probable cause—must issue a
warrant” to seize movable property not in government control). 2 In October
2017, the government filed a complaint in rem seeking forfeiture of the funds
under various fraud and conspiracy statutes. 3 After receiving notice of the
forfeiture action, RRCC filed a verified claim to the seized property. See 18
U.S.C. § 983(a)(4)(A) (providing that “[a]ny person claiming an interest in the
seized property may file a claim asserting such person’s interest in the
property”); SUPP. RULE G(5)(a) (setting out claim requirements). In its verified
claim, RRCC alleged that the seizure occurred without prior notice or hearing;
caused “an immediate and devastating effect on RRCC’s business”; and forced
RRCC to “close the school,” dismiss employees without pay, and fly students
home lest they be “stranded in Texas.” RRCC also included two “constitutional
counterclaims,” which alleged the seizure violated the Fourth and Fifth
Amendments and sought “damages to compensate [RRCC] for the destruction
of its business.”
The government moved to dismiss RRCC’s counterclaims under Federal
Rule of Civil Procedure 12(b)(6). Relying principally on the First Circuit’s
2The government also seized other property not relevant to this appeal, including over
$100,000 from five other bank accounts; real property located in Dallas, Texas; and seven
luxury vehicles.
3 See, e.g., 18 U.S.C. § 981(a)(1)(C) (providing “[a]ny property, real or personal, which
constitutes or is derived from proceeds traceable to a violation of [certain federal laws]” is
“subject to forfeiture to the United States”); id. § 981(a)(1)(D) (providing “[a]ny property, real
or personal, which represents or is traceable to the gross receipts obtained, directly or
indirectly, from a violation of [federal fraud statutes]” is “subject to forfeiture to the United
States”);
id. § 982(a)(3) (providing a court shall order that a person convicted of a federal
fraud offense forfeit to the United States any property “which represents or is traceable to
the gross receipts obtained, directly or indirectly, as a result of such violation”).
3
Case: 18-10801 Document: 00515187717 Page: 4 Date Filed: 11/05/2019
No. 18-10801
decision in United States v. One Lot of U.S. Currency ($68,000), 927 F.2d 30
(1st Cir. 1991) (“$68,000”), the government argued that “claimants in civil-
forfeiture cases may not file counterclaims against the United States, as they
are merely claimants, not the party against which the suit is directed.” The
district court noted the parties had not cited “any binding Fifth Circuit
authority” on this question, but found “persuasive” the First Circuit’s
reasoning in $68,000, which had been followed by several district courts from
other circuits. 4 The district court therefore granted the government’s motion
to dismiss RRCC’s counterclaims, “hold[ing] that, as a claimant in an in rem
civil forfeiture action, RRCC cannot bring a counterclaim.”
Meanwhile, the government struggled to state an adequate claim against
RRCC’s funds under the forfeiture rules. The district court dismissed the
government’s first amended complaint, finding its allegations insufficiently
specific. The second amended complaint met the same fate. See, e.g., United
States v. $4,480,466.16 In Funds Seized, 2018 WL 4096340, at *3 (N.D. Tex.
Aug. 28, 2018) (ruling allegations in second amended complaint were
“insufficient to comply with Supp[lemental] R[ule] G(2)’s requirement that the
complaint must ‘state sufficiently detailed facts to support a reasonable belief
that the government will be able to meet its burden of proof at trial’”); SUPP.
RULE G(2)(f). The parties continue to litigate that issue below. 5
4 See United States v. 8 Luxury Vehicles, 88 F. Supp. 3d 1332, 1337 (M.D. Fla. 2015);
United States v. Funds from Fifth Third Bank Account # 0065006695,
2013 WL 5914101, at
*12 (E.D. Mich. Nov. 4, 2013); United States v. $22,832.00 in U.S. Currency,
2013 WL
4012712, at *4 (N.D. Ohio Aug. 6, 2013); United States v. $43,725.00 in U.S. Currency,
2009
WL 347475 at *1 (D.S.C. Feb. 3, 2009); United States v. 1866.75 Board Feet,
2008 WL 839792,
at *3 (E.D. Va. Mar. 25, 2008); United States v. Assorted Comput. Equip.,
2004 WL 784493,
at *2 (W.D. Tenn. Jan. 9, 2004).
5 Following RRCC’s appeal in this case, the government filed its third amended
complaint, in response to which RRCC moved for dismissal and summary judgment. The
district court has not ruled on those motions. Instead, the district court granted the
government’s motion to stay the forfeiture action for 120 days during the pendency of a
4
Case: 18-10801 Document: 00515187717 Page: 5 Date Filed: 11/05/2019
No. 18-10801
The issues before us on appeal concern only the fate of RRCC’s
counterclaims. On June 12, 2018, the district court entered a final judgment
dismissing RRCC’s counterclaims under Federal Rule of Civil Procedure 54(b),
which RRCC timely appealed. We have jurisdiction to review that Rule 54(b)
judgment. See New Amsterdam Cas. Co. v. United States, 272 F.2d 754, 756
(5th Cir. 1959) (dismissal of counterclaim, when plaintiff’s claim is still
pending, is non-appealable “absent a certificate under Rule 54(b)”).
II.
We review the district court’s judgment dismissing RRCC’s
counterclaims de novo, “‘accepting all well-pleaded facts [in RRCC’s
counterclaims] as true and viewing those facts in the light most favorable to
[RRCC].’” SGK Props., LLC v. U.S. Bank Nat’l Ass’n, 881 F.3d 933, 943 (5th
Cir. 2018) (quoting Stokes v. Gann,
498 F.3d 483, 484 (5th Cir. 2007)). We may
affirm the district court’s judgment “on any basis supported by the record.”
Total Gas & Power North Am., Inc. v. FERC,
859 F.3d 325, 332 (5th Cir. 2017)
(citing Taylor v. City of Shreveport,
798 F.3d 276, 279 (5th Cir. 2015); EEOC v.
Simbaki, Ltd.,
767 F.3d 475, 481 (5th Cir. 2014)); see also Lee v. Kemna,
534
U.S. 362, 391 (2002) (“[I]t is well settled that an appellate tribunal may affirm
a trial court’s judgment on any ground supported by the record.”).
III.
We decline to endorse the district court’s ruling that claimants in in rem
civil forfeiture proceedings are barred, always and everywhere, from filing
counterclaims. As we explain below, that broad holding relies on dubious
reasoning in a First Circuit opinion that overlooks the procedural rights of
claimants in in rem forfeiture actions and that conflicts with longstanding
related, ongoing criminal investigation. The stay expired June 6, 2019, at which point the
government moved to extend the stay for an additional 120 days. That motion is pending
before the district court.
5
Case: 18-10801 Document: 00515187717 Page: 6 Date Filed: 11/05/2019
No. 18-10801
practice in in rem admiralty cases. Nonetheless, we affirm the district court’s
judgment on the narrower ground that RRCC’s constitutional damages claims
are barred by sovereign immunity.
A.
The district court relied heavily on the First Circuit’s decision in $68,000,
which concerned an in rem forfeiture action against a cocaine-tainted Lincoln
Town Car. 927 F.2d at 31–32. The claimant, Castiello, sought to retrieve a
“portable telephone” from the car by “fil[ing] what he termed a ‘counterclaim’
for [its] return.”
Id. at 34. The First Circuit identified multiple flaws in
Castiello’s position. For instance, the court pointed out that, because the
forfeiture warrant did not even encompass the telephone, Castiello’s “personal
property claim had no place in th[e] action.”
Id. at 35. 6 But the court also laid
down this broader reason for rejecting Castiello’s “counterclaim”:
By definition, a counterclaim is a turn-the-tables response directed
by one party (“A”) at another party (“B”) in circumstances where “B”
has earlier lodged a claim in the same proceeding against “A.” A
forfeiture action is in rem, not in personam. The property is the
defendant. Since no civil claim was filed by the government against
Castiello—indeed, rather than being dragooned into the case as a
defendant, he intervened as a claimant—there was no “claim” to
“counter.” Thus, Castiello’s self-styled counterclaim was a nullity,
and the court below appropriately ignored it.
6 Had the warrant included the telephone, the court stated it was “at least arguable”
that Castiello could “replevy” it “within the contours of the government’s forfeiture action.”
Id. at 34 n.7 (citing United States v. Castro,
883 F.2d 1018 (11th Cir. 1989); Goodman v.
Lane,
48 F.2d 32 (8th Cir. 1931)). The court also pointed out that, regardless, Castiello
remained free to retrieve the phone “administratively, by a motion in [his] underlying
criminal case, or by bringing an independent civil action.”
Id. at 35 (cleaned up) (citing 19
U.S.C. § 1618; FED. R. CRIM. P. 41(e); United States v. Wilson,
540 F.2d 1100, 1104 (D.C. Cir.
1976)).
6
Case: 18-10801 Document: 00515187717 Page: 7 Date Filed: 11/05/2019
No. 18-10801
$68,000, 927 F.2d at 34. This citationless half-paragraph furnished the sole
rationale for the district court’s holding below that “a claimant in an in rem
civil forfeiture action . . . cannot bring a counterclaim.”
We readily grasp why the district court disposed of RRCC’s
counterclaims on this basis. As the court pointed out, the First Circuit’s musing
in $68,000 has metastasized to several district courts, and also recently to the
Sixth Circuit. See Zappone v. United States, 870 F.3d 551, 561 (6th Cir. 2017)
(stating that owner in civil forfeiture action may “intervene” but “may not
assert counterclaims against the United States”) (citing $68,000). And the
district court had no binding authority from our court, because we have never
squarely addressed the issue. We do so now. Examining the issue as one of first
impression, we respectfully reject the First Circuit’s broad rationale for barring
counterclaims in in rem civil forfeiture proceedings.
First, the fact that a forfeiture proceeding is “in rem, not in personam”
does not determine a claimant’s rights in the proceeding. The forfeiture rules
allow a claimant to take numerous actions respecting the seized property, even
though the proceeding is “in rem.” To begin with, a claimant may “file a claim”
to protect his interests in the property. 7 He may also file: (1) an answer to the
government’s complaint, SUPP. RULE G(5)(b); (2) a Rule 12 motion, id.;
(3) objections to government interrogatories, SUPP. RULE G(6)(b); (4) a motion
to suppress use of the seized property as evidence, SUPP. RULE G(8)(a); and
(5) a motion raising a defense under the Excessive Fines Clause of the Eighth
Amendment, SUPP. RULE G(8)(e); see also 18 U.S.C. § 983(g) (claimant may file
7 See 18 U.S.C. § 983(a)(4)(A) (providing “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”); SUPP. RULE G(5)(a)(i) (providing “[a] person who asserts
an interest in the defendant property may contest the forfeiture by filing a claim in the court
where the action is pending”).
7
Case: 18-10801 Document: 00515187717 Page: 8 Date Filed: 11/05/2019
No. 18-10801
a “petition” to “determine whether the forfeiture was constitutionally
excessive”). And the civil forfeiture statute lets claimants do other things, such
as: (1) raise and prove an “innocent owner” defense, 18 U.S.C. § 983(d); (2)
move to set aside the forfeiture for lack of notice, id. § 983(e); and (3) seek
immediate release of seized property,
id. § 983(f). 8 The point being: If a
claimant can do all this in in rem forfeiture proceedings, it cannot be that he is
barred from filing counterclaims simply because forfeitures are “in rem and not
in personam.”
Thus, contrary to the First Circuit’s view in $68,000, the answer to this
puzzle does not lie in the brute fact that, in a forfeiture proceeding, “[t]he
property is the defendant.” 927 F.2d at 34. That truism begs the question what
other actors in the proceeding (besides the property itself) may assert rights
arising out of the forfeiture. See, e.g., United States v. All Funds In Account
Nos. 747.034/278, 747.009/278, & 747.714/278 Banco Espanol de Credito,
Spain,
295 F.3d 23, 25 (D.C. Cir. 2002) (observing that “[c]ivil forfeiture actions
are brought against property, not people,” but that “[t]he owner of the property
may intervene to protect his interest”). The multiple procedural options given
claimants by the civil forfeiture rules sit uneasily with the notion that a
claimant can never bring counterclaims in those proceedings.
Second, the reasoning in $68,000 overlooks the rules governing
intervenors. Rule 24 allows intervention of right to “anyone” who, inter alia,
“claims an interest relating to the property . . . that is the subject of the action.”
FED. R. CIV. P. 24(a)(2). That sounds quite like the position of a claimant in a
8 See generally Stefan D. Cassella, The Civil Asset Forfeiture Reform Act of 2000:
Expanded Government Forfeiture Authority and Strict Deadlines Imposed on All Parties, 27
J. Legis. 97, 97, 125–151 (2001) (“Casella”) (summarizing “comprehensive revision” to
forfeiture procedures enacted by Civil Asset Forfeiture Reform Act of 2000 (“CAFRA”), Pub.
L. 106-185, 117 Stat. 202 (2000)).
8
Case: 18-10801 Document: 00515187717 Page: 9 Date Filed: 11/05/2019
No. 18-10801
forfeiture proceeding; indeed, the forfeiture rules treat a claimant in precisely
those terms. See 18 U.S.C. § 983(a)(4)(A) (allowing “any person claiming an
interest in the seized property” to file a claim); SUPP. RULE G(5)(a)(i) (allowing
“[a] person who asserts an interest in the defendant property” to contest the
forfeiture). Moreover, our cases have described “claimants” in forfeiture
proceedings as “intervenors.” 9 In $68,000 itself, the First Circuit said Castiello
“intervened as a claimant.” 927 F.2d at 34. Likewise here, the government
described RRCC as “an intervening party.” The kinship between “claimants”
and “intervenors” does not support a blanket rule barring claimants’
counterclaims in forfeiture proceedings. Quite the opposite. As we have
explained, “[u]nder federal law, an intervenor of right ‘is treated as he were an
original party and has equal standing with the original parties.’” Brown v.
Demco,
792 F.2d 478, 480–81 (5th Cir. 1986) (quoting Donovan v. Oil, Chem.,
and Atomic Workers Int’l Union,
718 F.2d 1341, 1350 (5th Cir. 1983)); see also
7C WRIGHT & MILLER, FED. PRAC. & PROC. § 1920 (3d ed.) (explaining an
intervenor “has equal standing with the original parties” and “is entitled to
litigate fully on the merits once intervention has been granted”) (citing Gilbert
v. Johnson,
601 F.2d 761, 768 (5th Cir. 1979) (Rubin, J., specially
concurring)). 10
9 See, e.g., United States v. An Article of Drug Consisting of 4,680 Pails, 725 F.2d 976,
981 (5th Cir. 1981) (observing, “[a]fter seizure pursuant to a warrant for arrest in rem, Pfizer
intervened as claimant and filed an answer”); United States v. 110 Bars of Silver,
508 F.2d
799, 801 (5th Cir. 1975) (per curiam) (“This forfeiture proceeding stems from intervenor’s
conviction for melting down United States coins[.]”);Westfall Oldsmobile, Inc. v. United
States,
243 F.2d 409, 411 (5th Cir. 1957) (describing owner contesting automobile forfeiture
as “claimant-intervenor”).
10 To be sure, the Supplemental Rules applicable to forfeiture actions do not expressly
provide that a claimant may file counterclaims. But “[t]he Federal Rules of Civil Procedure
also apply to [in rem forfeiture] proceedings except to the extent that they are inconsistent
with these Supplemental Rules.” SUPP. RULE A(2). We discern nothing in the Supplemental
Rules inconsistent with the general proposition that claimants may file counterclaims in
forfeiture proceedings. Relatedly, one district court has suggested that Rule 13(d) implicitly
9
Case: 18-10801 Document: 00515187717 Page: 10 Date Filed: 11/05/2019
No. 18-10801
Third and finally, adopting the First Circuit’s reasoning in $68,000
would conflict with practice in admiralty cases, which have long entertained
counterclaims (or their equivalents) in in rem proceedings. See, e.g., Superior
Derrick Services, LLC v. LONESTAR 203, 547 F. App’x. 432, 437 (5th Cir.
2013) (unpublished) (discussing merits of counterclaim asserted in in rem
proceeding); Incas & Monterey Printing and Packaging, Ltd. v. M/V Sang Jin,
747 F.2d 958, 963–964 & n.16 (5th Cir. 1984) (considering counterclaims by
time-charterer of seized vessel in in rem action); Treasure Salvors, Inc. v.
Unidentified Wrecked and Abandoned Sailing Vessel,
569 F.2d 330, 335 (5th
Cir. 1978) (considering United States’ claims when it “intervened in plaintiffs’
in rem action as a party defendant and filed a counterclaim asserting a
property right in the res”); Ellis Diesel Sales & Serv., Inc. v. M/V On Strike,
488 F.2d 1095 (5th Cir. 1973) (per curiam) (considering in rem action in which
“[d]efendant filed a counterclaim alleging damages negligently caused to the
vessel”) 11; see also, e.g., Compania Naviera Vascongada v. United States,
354
F.2d 935, 940 (5th Cir. 1966) (addressing merits of “libel” and “cross-libel” in
bars claimants in forfeiture proceedings from counterclaiming against the United States. See
United States v. 8 Luxury
Vehicles, 88 F. Supp. 3d at 1334–1335, 1337 (M.D. Fla. 2015). We
disagree. Rule 13 merely confirms that allowing counterclaims does not “expand” any waivers
of sovereign immunity by the United States. See FED. R. CIV. P. 13(d) (“These rules do not
expand the right to assert a counterclaim—or to claim a credit—against the United States or
a United States officer or agency.”). We address sovereign immunity infra.
11 See also, e.g., Puerto Rico Ports Auth. v. Barge Katy-B, O.N. 606665, 427 F.3d 93,
99, 100 (1st Cir. 2005) (noting intervenor’s counterclaim for damages in in rem proceeding);
Hawkspere Shipping Co., Ltd. v. Intamex, S.A.,
330 F.3d 225, 230 (4th Cir. 2003) (considering
counterclaim by claimants in in rem proceeding for wrongful arrest of vessel); Bradford
Marine, Inc. v. M/V Sea Falcon,
64 F.3d 585, 586–587 (11th Cir. 1995) (reviewing attorney’s
fees awarded on a counterclaim in an in rem action); Teyseer Cement Co. v. Halla Maritime
Corp.,
794 F.2d 472, 478 (9th Cir. 1986) (considering whether counterclaim by intervenor in
in rem proceeding waived personal jurisdiction); Ocean Ship Supply, Ltd. v. MV Leah,
729
F.2d 971, 973 (4th Cir. 1984) (considering counterclaim for wrongful seizure and damages
incurred therein); Koch Fuels, Inc. v. Cargo of 13,000 Barrels of No. 2 Oil,
704 F.2d 1038,
1039 (8th Cir. 1983) (reviewing district court’s decision to sever counterclaims in an in rem
action for trial by jury).
10
Case: 18-10801 Document: 00515187717 Page: 11 Date Filed: 11/05/2019
No. 18-10801
in rem proceeding) 12; and see, e.g., THOMAS J. SCHOENBAUM, 2 ADMIRALTY &
MAR. LAW § 21:6 (6th ed. 2018) (“SCHOENBAUM”) (explaining that a claimant
must prove “demonstrable bad faith or malice” to succeed on a wrongful seizure
counterclaim).
Moreover, the modern procedural rules applicable to admiralty and
maritime claims plainly foresee counterclaims in in rem and quasi in rem
proceedings. For instance, Supplemental Rule E(7)—which applies to “actions
in rem and quasi in rem”—sets forth the circumstances under which a plaintiff
must furnish “security” for damages demanded in a “counterclaim.” See SUPP.
RULE E(7)(a), (b) 13; id., advisory committee notes (2000) (explaining that
“[s]ubdivision (7)(a) is amended to make it clear that a plaintiff need give
security to meet a counterclaim only when the counterclaim is asserted by a
12The older admiralty term “cross-libel” is equivalent to “counterclaim”: “With the
merger of law and admiralty in 1966, admiralty’s classic and ancient phraseology of libels
and cross-libels was replaced with the more mundane terminology of claims and
counterclaims[.]” Titan Nav., Inc. v. Timsco, Inc., 808 F.2d 400, 403 (5th Cir. 1987) (emphasis
added); see also 3A BENEDICT ON ADMIRALTY § 306 (2019) (“Rule 13, Federal Rules of Civil
Procedure which treats of counterclaims and cross-claims is the modern counterpart of the
old admiralty cross-libels. While the nomenclature has changed the admiralty practice has
basically remained the same.”).
13 Supplemental Rule E(7) provides as follows:
(7) Security on Counterclaim.
(a) When a person who has given security for damages in the original action
asserts a counterclaim that arises from the transaction or occurrence that is
the subject of the original action, a plaintiff for whose benefit the security has
been given must give security for damages demanded in the counterclaim
unless the court, for cause shown, directs otherwise. Proceedings on the
original claim must be stayed until this security is given unless the court
directs otherwise.
(b) The plaintiff is required to give security under Rule E(7)(a) when the United
States or its corporate instrumentality counterclaims and would have been
required to give security to respond in damages if a private party but is relieved
by law from giving security.
11
Case: 18-10801 Document: 00515187717 Page: 12 Date Filed: 11/05/2019
No. 18-10801
person who has given security to respond in damages in the original action”). 14
Given those textual cues in the Supplemental Rules, it would seem anomalous
to say that counterclaims are always out-of-bounds in in rem proceedings. And
yet the First Circuit’s rule would bar counterclaims in forfeiture actions
precisely because they are “in rem, not in personam” proceedings. $68,000, 927
F.2d at 34. That overbroad proposition clashes with venerable admiralty
practice and modern maritime rules, and we decline to endorse it.
In sum, we respectfully decline to adopt the reasoning in $68,000 that,
because “the property is the defendant” in a forfeiture proceeding, a claimant
with interests in that property may never file a counterclaim. If RRCC’s
counterclaims are to be dismissed, it must be for a different reason. 15
B.
We affirm the district court’s judgment on a narrower ground. See, e.g.,
AT&T, Inc. v. United States, 629 F.3d 505, 510 (5th Cir. 2011) (“[i]t is well
14 See also, e.g., Transportes Caribe, S.A. v. M/V Trader, 860 F.2d 637 (5th Cir. 1988)
(affirming district court’s order to post countersecurity under Rule E); Titan
Nav., 808 F.2d
at 402–03 & n.2 (discussing development of Supplemental Rule E(7)); Seaboard & Carribean
Transp. Corp. v. Hafen-Dampfschiffahrt A.G. Hapag-Hadac Seebader-Dienst,
329 F.2d 538,
539–541 (5th Cir. 1964) (applying Rule E precursor, Admiralty Rule 50, to a “cross-libelant”
in a “libel in rem” proceeding); and see also SCHOENBAUM § 21:6 (explaining that “[s]ubsection
7 of [Supplemental Rule E] contemplates the filing of a counterclaim against the party
initiating the seizure”); 4 BENEDICT ON ADMIRALTY § 2.23 (2019) (illustrating how a court
may consider “whether or not a counterclaim has merit for the purposes of determining
whether or not a counterclaimant is entitled to countersecurity” under Rule E(7)).
15 In addition to rejecting its reasoning, we note that $68,000 addressed a scenario
quite different from ours. As the First Circuit observed, the forfeiture warrant in that case
did not encompass the property that was the subject of the claimant’s “counterclaim.” See 927
F.2d at 34 n.7 (“This is not a case where the claimant seeks the return of the same property
which the government seeks to forfeit.”). Had the warrant included the property, the First
Circuit acknowledged, the claimant might have sought to “replevy” the property in the
forfeiture action.
Id. The Sixth Circuit’s decision in Zappone—the only circuit case to have
adopted the First Circuit’s reasoning—is also procedurally distinguishable. That case
affirmed the dismissal of untimely “counterclaims” asserting Bivens claims against IRS
agents who seized property in a forfeiture
action. 870 F.3d at 554. But the IRS agents were
not even parties in the forfeiture proceeding, making a “counterclaim” against them
particularly tenuous.
12
Case: 18-10801 Document: 00515187717 Page: 13 Date Filed: 11/05/2019
No. 18-10801
settled” that a court of appeals may affirm “on any ground supported by the
record”) (citation omitted). On appeal, the government argues in the
alternative that the United States has not waived its sovereign immunity with
respect to the particular claims asserted in RRCC’s counterclaims—damages
claims for violations of the Fourth and Fifth Amendments—and that those
claims are therefore barred. We agree.
“It is axiomatic that the United States may not be sued without its
consent and that the existence of consent is a prerequisite for jurisdiction.”
United States v. Mitchell, 463 U.S. 206, 212 (1983) (citing United States v.
Sherwood,
312 U.S. 584, 586 (1941); 14 WRIGHT, MILLER & COOPER, FED. PRAC.
& PROC. § 3654); see also, e.g., In re Supreme Beef Processors, Inc.,
468 F.3d
248, 251–52 (5th Cir. 2006) (en banc) (“The Constitution contemplates that,
except as authorized by Congress, the federal government and its agencies are
immune from suit.”) (citing Hercules, Inc. v. United States,
516 U.S. 417, 422
(1996)). A waiver of sovereign immunity “cannot be implied but must be
unequivocally expressed,” and any waiver “will be strictly construed, in terms
of its scope, in favor of the sovereign.” Doe v. United States,
853 F.3d 792, 796
(5th Cir. 2017) (quoting United States v. Mitchell,
445 U.S. 535, 538 (1980);
Lane v. Peña,
518 U.S. 187, 192 (1996)) (internal quotation marks omitted).
The government argues that RRCC has identified no statute unequivocally
waiving the United States’ immunity for the damages claims in RRCC’s
counterclaims. Specifically, RRCC seeks damages arising from the
“unreasonable seizure” of its bank accounts in violation of the Fourth
Amendment and from the lack of “notice and hearing” in violation of the Fifth
Amendment’s Due Process Clause. The government is correct.
In its reply brief, RRCC attempts to identify the required waiver in 28
U.S.C. § 2680(c). In that provision, Congress “re-waived” the United States’
sovereign immunity under the Federal Tort Claims Act (“FTCA”) for certain
13
Case: 18-10801 Document: 00515187717 Page: 14 Date Filed: 11/05/2019
No. 18-10801
property damages claims arising out of forfeitures. 16 See, e.g., Smoke Shop,
LLC v. United States, 761 F.3d 779, 782 (7th Cir. 2014) (explaining that in the
2000 CAFRA reforms Congress “‘rewaived’ the government’s immunity” under
the FTCA “for tort actions stemming from law-enforcement detentions of
property” under specific circumstances); Foster v. United States,
522 F.3d 1071,
1075 (9th Cir. 2008) (explaining that “CAFRA . . . restored the waiver of
sovereign immunity—or ‘re-waived’ sovereign immunity—with respect to
certain forfeiture-related seizures”). What RRCC overlooks, however, is that
the FTCA’s immunity waiver does not extend to “constitutional torts” like the
Fourth and Fifth Amendment damages claims pled in RRCC’s counterclaims.
We have squarely recognized that “[c]onstitutional torts . . . do not provide a
proper predicate for an FTCA claim.” Spotts v. United States,
613 F.3d 559, 565
n.3 (5th Cir. 2010) (citing FDIC v. Meyer,
510 U.S. 471, 478 (1994)); see also,
16 Section 2680(c) provides, in relevant part, that the FTCA immunity waiver applies
“to any claim based on the injury or loss of goods, merchandise, or other property, while in
the possession of any officer of customs or excise or any other law enforcement officer, if—
(1) the property was seized for the purpose of forfeiture under any provision of
Federal law providing for the forfeiture of property other than as a sentence
imposed upon conviction of a criminal offense;
(2) the interest of the claimant was not forfeited;
(3) the interest of the claimant was not remitted or mitigated (if the property
was subject to forfeiture); and
(4) the claimant was not convicted of a crime for which the interest of the
claimant in the property was subject to forfeiture under a Federal criminal
forfeiture law.”
28 U.S.C. § 2680(c)(1)–(4). The subsection cross-references 28 U.S.C. § 1346(b), which in
relevant part provides that federal district courts have exclusive jurisdiction over post-
January 1, 1945 money damages claims against the United States for
injury or loss of property, or personal injury or death caused by the negligent or
wrongful act or omission of any employee of the Government while acting within
the scope of his office or employment, under circumstances where the United
States, if a private person, would be liable to the claimant in accordance with
the law of the place where the act or omission occurred.
Id. § 1346(b)(1).
14
Case: 18-10801 Document: 00515187717 Page: 15 Date Filed: 11/05/2019
No. 18-10801
e.g., Coleman v. United States, 912 F.3d 824, 835 (5th Cir. 2019) (the “source
of substantive liability under the FTCA” must be the “law of the State” and not
federal law) (citing
Meyer, 510 U.S. at 478); Sanchez v. Rowe,
870 F.2d 291,
295 (5th Cir. 1989) (explaining “the FTCA does not provide a cause of action
for constitutional torts” because “by definition constitutional torts are not
based on state law”) (cleaned up). Thus, the FTCA waiver does not encompass
the constitutional damages claims in RRCC’s counterclaims, and the district
court therefore lacked jurisdiction over them. 17
RRCC also argues that the United States waives sovereign immunity
simply by “initiat[ing] an in rem proceeding.” RRCC cites no authority
supporting that grandiose proposition. It points only admiralty cases allowing
a limited cross-libel against the United States when the United States sues
another vessel for collision damages. See United States v. The Thekla, 266 U.S.
328 (1924); United States v. The Paquete Habana,
189 U.S. 453 (1903); The
Siren,
74 U.S. 152 (1868); see also, e.g., United States v. Shaw,
309 U.S. 495,
17 We do not decide whether RRCC could bring valid FTCA claims as counterclaims in
a civil forfeiture proceeding. See, e.g., Life Partners Inc. v. United States, 650 F.3d 1026, 1029–
1030 (5th Cir. 2011) (discussing administrative exhaustion requirements which are “a
prerequisite to suit under the FTCA”) (citing 28 U.S.C. § 2675(a); McAfee v. 5th Circuit
Judges,
884 F.2d 221, 222–23 (5th Cir. 1989)). We decide only that the specific claims
asserted in RRCC’s counterclaims fall outside the CAFRA re-waiver and are therefore barred
by sovereign immunity. Additionally, we note that neither the Tucker Act nor its companion,
the Little Tucker Act, waive sovereign immunity over RRCC’s claims. The Tucker Act
provides a judicial avenue for “any claim against the United States founded . . . upon the
Constitution.” 28 U.S.C. § 1491(a)(1); see also United States v. Bormes,
568 U.S. 6, 11 (2012)
(discussing Tucker Act). The waiver in the Tucker Act, however, “has been limited to apply
only to the Takings Clause . . . because only that clause contemplates payment by the federal
government.” Rothe Dev. Corp. v. U.S. Dept. of Defense,
194 F.3d 622, 625 (5th Cir. 1999).
Here, RRCC does not invoke the Tucker Act, and its Fifth Amendment claims are premised
on an alleged due process violation, not the Takings Clause. See, e.g., Bellamy v. United
States,
7 Cl. Ct. 720, 723 (1985) (explaining claims court “has no jurisdiction over claims
based upon the Due Process and Equal Protection guarantees of the Fifth Amendment,
because these constitutional provisions do not obligate the Federal Government to pay money
damages” (quoting Carruth v. United States,
224 Ct. Cl. 422, 445 (1980) (cleaned up)).
15
Case: 18-10801 Document: 00515187717 Page: 16 Date Filed: 11/05/2019
No. 18-10801
502–03 (1940) (explaining that, in such cases, “it is necessary to determine the
cross-libel as well as the original libel to reach a conclusion as to liability for
the collision”). 18 But RRCC directs us to no authority supporting the
proposition that this distinct admiralty rule waives the United States’
sovereign immunity whenever it institutes a civil forfeiture proceeding. Nor
does RRCC direct us to any unambiguous statutory waiver of the United
States’ immunity under such circumstances. 19 As we have already explained,
Congress did enact an unambiguous immunity waiver with respect to
forfeiture proceedings, see 28 U.S.C. § 2680(c)(1)–(4), but it has no application
here.
Finally, RRCC claims we cannot reach sovereign immunity for two
reasons. First, RRCC points out the government did not raise the issue below.
That is irrelevant: Whether the United States’ sovereign immunity has been
waived is a question of subject matter jurisdiction we can address for the first
time on appeal. See, e.g., Lewis v. Hunt, 492 F.3d 565, 568 (5th Cir. 2007)
(appellate court may consider United States’ sovereign immunity sua sponte,
“[a]lthough the parties and the district court did not raise [it]”); Bodin v.
Vagshenian,
462 F.3d 481, 484 (5th Cir. 2006) (lack of waiver of United States’
sovereign immunity under FTCA “deprives federal courts of subject matter
jurisdiction”). Second, RRCC claims that addressing sovereign immunity
would convert a without-prejudice dismissal below into a with-prejudice
18See also generally 2 AM. JUR. 2d ADMIRALTY § 44 (“Whenever the United States sues
for damage inflicted on its vessel or cargo, it impliedly waives its exemption from admiralty
jurisdiction as to cross libels or counterclaims arising from the same transaction.”) (citing
The Thekla, 266 U.S. 328; The Western Maid,
257 U.S. 419 (1922)).
19RRCC incorrectly points to the immunity waiver in 46 U.S.C. § 30903(a), but that
statute also pertains only to certain admiralty claims involving the United States. See, e.g.,
MS Tabea Schiffahrtsgesellschaft MBH & Co. KG v. United States, 636 F.3d 161, 165 n.1 (5th
Cir. 2011) (explaining that “[t]he Suits in Admiralty Act (SAA) . . . provides the appropriate
waiver for maritime tort claims against the United States”) (citing 46 U.S.C. § 30903).
16
Case: 18-10801 Document: 00515187717 Page: 17 Date Filed: 11/05/2019
No. 18-10801
dismissal on appeal, which would be inappropriate without a cross-appeal. See,
e.g., Jennings v. Stephens, 135 S. Ct. 793, 798 (2015) (explaining “an appellee
who does not cross-appeal may not ‘attack the [district court’s] decree with a
view either to enlarging his own rights thereunder or of lessening the rights of
his adversary’”) (quoting United States v. American Railway Express Co.,
265
U.S. 425, 435 (1924)). RRCC is again mistaken. Claims barred by sovereign
immunity are dismissed without prejudice, not with prejudice. See, e.g.,
Warnock v. Pecos Cty., Tex.,
88 F.3d 341, 343 (5th Cir. 1996) (explaining that
“[b]ecause sovereign immunity deprives the court of jurisdiction, the claims
barred by sovereign immunity can be dismissed only under Rule 12(b)(1) and
not with prejudice”); see also, e.g., United States v. Texas Tech Univ.,
171 F.3d
279, 285 n.9 (5th Cir. 1999) (same, citing Warnock); 9 WRIGHT & MILLER, FED.
PRAC. & PROC. § 2373 (because dismissal for lack of jurisdiction does not reach
merits, claim “must be considered to have been dismissed without prejudice.”).
Thus, we may, and do, rule that RRCC’s counterclaims are barred by sovereign
immunity. 20
IV.
Congress has provided various remedies for claimants like RRCC who
assert that the United States has wrongfully seized their property in forfeiture
proceedings. See, e.g., United States v. Khan, 497 F.3d 204, 208 (2nd Cir. 2007)
(by reforming the forfeiture laws in CAFRA, “Congress was reacting to public
outcry over the government’s too-zealous pursuit of civil and criminal
20 Because we resolve the appeal on sovereign immunity grounds, we do not address
the government’s argument that RRCC’s damages counterclaims are barred by 28 U.S.C.
§ 2465(b)(2)(A). Part of a provision addressing government liability for costs, fees, and
interest when a claimant prevails in a forfeiture proceeding, § 2465(b)(2)(A) provides that
“[t]he United States shall not be required to disgorge the value of any intangible benefits nor
make any other payments to the claimant not specifically authorized by this subsection.” 28
U.S.C. § 2465(b)(2)(A).
17
Case: 18-10801 Document: 00515187717 Page: 18 Date Filed: 11/05/2019
No. 18-10801
forfeitures”). Under certain circumstances, claimants who “substantially
prevail[ ]” in a forfeiture action may recover attorneys’ fees, costs, and interest.
See 28 U.S.C. § 2465(b)(1)(A)–(C). In some cases, they may sue the United
States for property damages under the FTCA. See 28 U.S.C. § 2680(c)(1)–(4).
What claimants may not do, however, is sue the United States for
constitutional torts arising out of the property seizure. Congress has not
waived the United States’ sovereign immunity for damages claims of that
nature. Because RRCC’s counterclaims sought precisely those kinds of
damages, we hold its counterclaims are barred by sovereign immunity.
AFFIRMED
18
