Justia.com Opinion Summary:
Petitioner appealed the district court's dismissal of her petition seeking half the proceeds of the sale of stock that was ordered forfeited in her ex-husband's conviction for mail fraud and money laundering in connection with the Thomas Petters Ponzi scheme. The court concluded that petitioner did not allege a legal interest in the stock proceeds sufficient to confer standing, and that, even if she did, her petition failed on the merits. Accordingly, the court affirmed the judgment.Receive FREE Daily Opinion Summaries by Email
Criminal case - Forfeiture. White could not use an ancillary proceeding under 18 U.S.C. Sec. 853(n) to relitigate the nexus between the criminal acts of her ex-husband and the forfeited proceeds from the sale of stock; since White claimed both a contractual and a marital interest in the stock, the court would look to Minnesota state law to determine whether she had a valid legal interest in the shares; terms of an alleged oral contract between White and her husband were too vague and indefinite to create an enforceable contractual interest in the proceeds; even if there were an oral contract, it created an interest in a sum of money equal to one-half of increased value of the shares and not in the shares themselves; any breach of the oral contract by her husband did not confer upon White a legal interest in the sale proceeds, and, as a result, White did not have standing to contest the forfeiture based on a contractual interest in the stock proceeds; under Minnesota law, White did not have a marital interest in the proceeds because she was not reasonably without cause to believe the property was subject to forfeiture at the time she filed for divorce.
United States Court of Appeals
FOR THE EIGHTH CIRCUIT
United States of America,
* Appeal from the United States
* District Court for the
Robert Dean White,
* District of Minnesota.
Submitted: November 18, 2011
Filed: April 2, 2012
Before WOLLMAN, MURPHY, and BENTON, Circuit Judges.
WOLLMAN, Circuit Judge.
Robyn White (White) appeals the district courtâs1 dismissal of her petition
seeking half the proceeds of the sale of stock that was ordered forfeited in her exhusbandâs conviction for mail fraud and money laundering in connection with the
The Honorable Richard H. Kyle, United States District Judge for the District
Thomas Petters Ponzi scheme. We conclude that White does not allege a legal
interest in the stock proceeds sufficient to confer standing, and that, even if she did,
her petition fails on the merits. Accordingly, we affirm.
Robert Dean White (Defendant) founded ZINK Imaging, LLC (ZINK)2 in
2005. Between approximately October 24, 2005, and January 19, 2006, Defendant
invested $2,550,000 in ZINK.3 Months later, in September 2006, White was hired as
a marketing consultant for ZINK. After beginning a romantic relationship with
Defendant in January 2007, White no longer received compensation for her work.
She alleges that she continued working for the company because Defendant orally
agreed to give her one-half the increase in value of his shares of ZINK stock. White
and Defendant were married on February 22, 2008.
The Federal Bureau of Investigation (FBI) conducted a raid of Thomas Pettersâ
enterprises in September 2008, and White ceased working for ZINK that same month.
On October 8, 2008, Defendant pled guilty to one count of mail fraud and one count
of money laundering for his role in the Petters scheme. Defendantâs entire investment
in ZINK was traced by a FBI forensic accountant to transfers from Petters Company,
Inc. (PCI). Defendant admitted in his plea agreement that all funds he received from
PCI were proceeds of the Petters fraud. Defendant further admitted that the fraud
spanned more than thirteen years, during which time he fabricated documents for the
purpose of defrauding third parties into loaning PCI billions of dollars.
In 2007, ZINK Imaging, LLC merged into ZINK Imaging, Inc.
In August 2007, ZINK underwent a recapitalization. The recapitalization
agreement stated that Defendantâs investments in ZINK were deemed to be in
exchange for his shares of ZINK stock.
Defendant transferred his ZINK stock to his counsel, Joe Friedberg, âat about
the time of the search warrant raid on Petters Company.â Robert White Dep. 61:964:19. Shortly after taking control of the ZINK stock, Friedberg received an offer of
$3 million for the stock. ZINKâs chief executive officer told Friedberg that if he sold
the stock within the next four or five days, the purchaser would loan ZINK an
additional $5 million needed to keep the company operating. Friedberg then sold the
stock for $3 million and transferred the proceeds to the Receiver in the Petters
On September 13, 2010, the district court ordered that all of Defendantâs
property derived from or traceable to the fraud be forfeited to the United States. On
or about September 20, 2010, White filed for divorce from Defendant. In the divorce
proceeding, White sought an award of one-half the proceeds of the ZINK stock,4
alleging that the proceeds were marital property under Minnesota law.
On October 13, 2010, following the entry of a preliminary order of forfeiture,
which did not specifically forfeit the ZINK stock, White filed her initial forfeiture
petition, in which she claimed a marital interest and âan interest similar to a quantum
meruit claimâ in the forfeited proceeds of the ZINK stock. The parties agreed to stay
the district courtâs consideration of Whiteâs initial petition because the ZINK stock
had not yet been specifically forfeited.
On January 6, 2011, the district court entered an order forfeiting the $3 million
in proceeds from the sale of the ZINK stock. The district court concluded that the
government had established the requisite nexus between the fraud and the ZINK stock
proceeds to support a determination that the property was forfeitable to the United
States. Thereafter, White filed an amended third-party petition, again seeking half the
We note that White seeks half the proceeds from the sale of ZINK stock
instead of half the increase in value of the stock, as allegedly promised.
proceeds of the sale of stock in ZINK. White alleged in her amended petition both
a marital and a contractual interest in the ZINK stock proceeds.5 White also claimed
that the district court had erroneously forfeited the ZINK stock proceeds, alleging that
âthere is no nexus betweenâ the stock and âthe criminal activity upon which
[Defendant] was convicted.â Amended Pet. 2-3.
On April 5, 2011, the Hennepin County District Court entered a judgment and
decree in the Whitesâ divorce proceeding. The order adopted a stipulation between
White and Defendant that awarded White one-half the proceeds from the sale of the
ZINK stock. On April 19, 2011, the federal district court dismissed Whiteâs petition,
finding that White could not challenge the forfeiture, that White lacked standing to
claim a portion of the ZINK proceeds, and that even if she had standing, Whiteâs
petition failed on the merits. Because the divorce decree was entered after both of
Whiteâs petitions were filed, the district court did not consider the decree in its order.
On appeal, White argues that she has a right to challenge the forfeiture, that she has
standing, and that she is a bona fide purchaser for value of the ZINK stock.
We review de novo a district courtâs grant of a motion to dismiss a forfeiture
petition. See Cent. Platte Natural Res. Dist. v. U.S. Dept. of Agric., 643 F.3d 1142,
1148 (8th Cir. 2011). Federal Rule of Criminal Procedure 32.2(c)(1)(A) authorizes
the dismissal of a forfeiture petition âfor lack of standing, for failure to state a claim,
Whiteâs amended petition alleged four interests in the proceeds of the stock:
(1) beneficial and de facto ownership of one-half of Defendantâs ZINK stock; (2) a
marital interest; (3) âan interest similar to quantum meruit;â and (4) an oral
contractual interest. White did not brief her claims of de facto ownership and
quantum meruit, and so we consider only her marital and contractual interest in the
proceeds of the ZINK stock. See Carraher v. Target Corp., 503 F.3d 714, 716 n.2
(8th Cir. 2007).
or for any other lawful reason.â For the purposes of the motion to dismiss, the facts
set forth in the petition are assumed to be true. Id. âIf a third party fails to allege in
its petition all elements necessary for recovery, including those related to standing,
the court may dismiss the petition without providing a hearing.â United States v.
BCCI Holdings (Luxembourg) S.A. (Petitions of General Creditors), 919 F. Supp. 31,
36 (D.D.C. 1996) (quoted with approval in Fed. R. Crim. P. 32.2 advisory
committeeâs note to the 2000 amendments subd. (c)). âWe may affirm on any basis
supported by the record.â Green Tree Serv., LLC v. DBSI Landmark Towers, LLC,
652 F.3d 910, 913 (8th Cir. 2011) (quoting Schoelch v. Mitchell, 625 F.3d 1041,
1046 (8th Cir. 2010)).
White contends that she has a right to relitigate the factual basis underlying the
governmentâs forfeiture of Defendantâs ZINK stock. White argues that Defendant
âobtained the subject ZINK shares prior to the infusion of said funds from PCI[.]â
Appellantâs Br. 13. She further contends that âPCI received in consideration for [the
$2.5 million transfer to ZINK], separate shares of ZINK stock.â Id. In essence,
White argues the ZINK shares of stock were not necessarily the product of
White misunderstands the nature of an ancillary hearing. An ancillary
proceeding allows White to establish her interest in the forfeited property as it
compares to the interests of the government and other petitioners; it does not allow
her to relitigate the nexus between the criminal acts of her ex-husband and the
forfeited proceeds from the sale of the ZINK stock. United States v. Moser, 586 F.3d
1089, 1095 (8th Cir. 2009). In United States v. Porchay, we concluded that âthere is
no provision in Â§ 853(n) to relitigate the outcome of [the forfeiture] proceedings.â
533 F.3d 704, 710 (8th Cir. 2008); see also Moser, 586 F.3d at 1095 (following
Porchay). As the district court indicated, the criminal proceedings trace the property
to criminal activity, and the ancillary hearing under Â§ 853(n) addresses âclaims of
ownership and priorities of interest vis-Ã -vis the government and the petitioners.â D.
Ct. Order of April 19, 2011, at 5 (quoting Moser, 586 F.3d at 1095). Thus, White
cannot challenge the district courtâs finding that the proceeds from the sale of ZINK
stock were forfeitable to the United States; she can make her claim of ownership and
priority of interest only in relation to the government and any other petitioners. See
Moser, 586 F.3d at 1095.6
White next contends that she has standing to contest the forfeiture of the ZINK
stock proceeds. âStanding in forfeiture cases has âboth constitutional and statutory
aspects.ââ United States v. Timley, 507 F.3d 1125, 1129 (8th Cir. 2007) (quoting
United States v. One-Sixth Share of James J. Bulger in All Present & Future Proceeds
of Mass Millions Lottery Ticket No. M246233, 326 F.3d 36, 40 (1st Cir. 2003)
(hereinafter Mass Millions Lottery Ticket)). To establish constitutional standing, âa
party seeking to challenge a forfeiture of property must first demonstrate an
ownership or possessory interest in the seized property . . . .â Id. (quoting Mass
Millions Lottery Ticket, 326 F.3d at 41). An ownership interest sufficient for Article
III standing âcan be shown by actual possession, control, title, and financial stake.â
United States v. Premises Known as 7725 Unity Avenue North, Brooklyn Park,
Minn., 294 F.3d 954, 956 (8th Cir. 2002). Statutory standing under Â§ 853(n) requires
that White demonstrate a legal interest in the proceeds of the ZINK stock. Timley,
507 F.3d at 1129, 1130 n.2.
We have considered and reject as inapposite, United States v. Farley, 919
F.Supp. 276 (S.D. Ohio 1996), which White cites for the proposition that she can
challenge the factual basis of the forfeiture.
âBecause a legal interest is required to bring a claim under 21 U.S.C. Â§
853(n)(2), a court must first look to the law of the jurisdiction that created the
property right to determine whether the claimant has a valid interest.â Id. at 1129-30
(citing United States v. One Lincoln Navigator 1998, 328 F.3d 1011, 1013 (8th Cir.
2003)). White claims both a contractual and a marital interest in the stock. We
therefore look to Minnesota state law to determine whether White has a valid legal
interest in the ZINK stock proceeds.7 âIf the claimant has no interest under state law,
the inquiry ends, and the claim fails for lack of standing.â Timley, 507 F.3d at 1130.
We turn first to whether White has a legal interest in the stock proceeds under
Minnesota contract law.8 White contends that she entered into a binding oral contract
with Defendant for half the increased value of the ZINK stock in exchange for her
work as a marketing consultant. Oral contracts are valid and enforceable under
Minnesota law. Mages v. Johanns, 431 F.3d 1132, 1141-42 (8th Cir. 2005) (citing
McArdle v. Williams, 258 N.W. 818, 820 (Minn. 1935)). Accepting the facts set
forth in Whiteâs amended petition as true, we assume that Defendant promised her âa
50% share in the increased value of his ZINK shares of stock.â Supplemental Aff.
of Robyn White 3.9
Only the proceeds of the sale of the stock were forfeited to the United States
government, not the stock itself.
White also claimed an interest in the stock proceeds based on promissory
estoppel. Promissory estoppel is an equitable claim under Minnesota law, Ruud v.
Great Plains Supply, Inc., 526 N.W.2d 369, 372 (Minn. 1995), and thus does not give
rise to a legal interest under Â§ 853. Timley, 507 F.3d at 1129 (defining âlegal
interestâ to exclude equitable rights). White has abandoned her claim of âan interest
similar to quantum meruit.â
Whiteâs claim that Defendant promised to pay her half the increased value of
his ZINK stock was not reflected in her first petition. The district court noted this
Under Minnesota law, â[t]he formation of a contract requires communication
of a specific and definite offer, acceptance, and consideration.â Commercial Assocs.,
Inc. v. Work Connection, Inc., 712 N.W.2d 772, 782 (Minn. Ct. App. 2006). Parties
to a contract must âagree with reasonable certainty about the same thing and on the
same terms.â Peters v. Mut. Benefit Life Ins. Co., 420 N.W.2d 908, 914
(Minn. Ct. App. 1988); see also Minneapolis Cablesystems v. City of Minneapolis,
299 N.W.2d 121, 122 (Minn. 1980) (There must be a âmeeting of the minds
concerning [the alleged agreementâs] essential elements.â). â[A]n alleged contract
which is so vague, indefinite, and uncertain as to place the meaning and intent of the
parties in the realm of speculation is void and unenforceable.â King v. Dalton
Motors, Inc., 109 N.W.2d 51, 52 (Minn. 1961). Assuming all of the facts White
alleged are true, White and Defendant did not enter into a valid contract.
Whiteâs petition alleges nothing more than that Defendant agreed to give her
one-half the increase value in his ZINK stock in exchange for her continuing to work
for the company without a salary. Importantly, no time frame or term was indicated
in Defendantâs alleged promise to White. One-half the increase in value of the ZINK
The Court must accept as true Whiteâs assertion that Defendant made
such a promise to her. Fed. R. Crim. P. 32.2(c)(1)(A). Nevertheless, the
Court notes that this promise was nowhere mentioned in Whiteâs initial
Petition; only after she amended her Petition did she claim that there
existed such an express agreement. Courts typically look askance at
belated attempts to add new or additional grounds for relief to thirdparty petitions. See, e.g., United States v. Soreide, 461 F.3d 1351, 1355
(11th Cir. 2006) (per curiam); United States v. Watson, 594 F. Supp.2d
961, 964 (W.D. Mich. 2008); United States v. Strube, 58 F. Supp. 2d
576, 585 (M.D. Pa. 1999). Nevertheless, the Court need not â and does
not â rely upon this ground to deny White relief.
D. Ct. Order of April 19, 2011, at 7 n.5.
stock is a figure subject to price fluctuations. Accordingly, the amount Defendant
promised cannot be ascertained without an agreed upon end date.10 Similarly, the
agreement between the two did not indicate a length of time or under what conditions
White was to continue working for ZINK without a salary.11 There is no way to
determine from Whiteâs allegations whether she fulfilled her end of the bargain.
Thus, âthe terms of the purported contract are too vague and indefinite to provide a
basis for ascertaining the partiesâ rights and obligations.â Navickas v. Quilling, No.
A10-145, 2010 WL 5290552, at *6 (Minn. Ct. App. 2010) (unpublished) (finding a
writing that failed to âestablish how and when the âequityâ would be calculatedâ to
be unenforceable); see also Logan v. St. Jude Med., Inc., No. A04-124, 2004 WL
1925875, at *2 (Minn. Ct. App. 2004) (unpublished) (finding that a contract lacking
in terms to determine the valuation of stock options, âincluding the exercise price, the
expiration date, and the vesting date of the options[,]â was too vague to be
enforceable). Because White does not have an enforceable contract under Minnesota
law, she also does not have a contract-based legal interest in the proceeds of the
Even if we assume that White has pled an oral contract with definite enough
terms to be enforceable, she must also assert a legal interest in the forfeited property.
White does not allege that Defendant agreed to give her half the increased
value of his ZINK stock between the dates of January 2007 and October 2008 when
âshe was effectively ousted from her employment by the indictment of
[Defendant][.]â Appellantâs Br. 26.
White alleges that she worked from January 2007 to September 2008 without
a salary. We note that if the alleged contract could not be performed in less than one
year, it was required to be reduced to a writing to be enforceable under Minnesotaâs
statute of frauds. Minn. Stat. Â§ 513.01; but see Eklund v. Vincent Brass and
Aluminum Co., 351 N.W.2d 371, 375-76 (Minn. Ct. App. 1984) (holding that a
contract for employment âso long as he performed satisfactorilyâ did not violate the
statute of frauds where it was possible for the contract to have been fully performed
within one year). White fails to allege any type of term for her alleged oral contract.
See 21 Â§ 853(n)(2). A valid contractual interest in a sum of money equal to one-half
the increase in value of the ZINK stock is not the type of legal interest sufficient to
confer standing to contest the forfeiture of the ZINK stock proceeds. Accepting the
facts alleged in the petition as true, White had an oral contract with Defendant for a
sum of money equaling half the increased value of the ZINK shares of stock. Thus,
Whiteâs interest in payment is tied to the stockâs value but is not actually in the stock
or the proceeds thereof. See 21 U.S.C. Â§ 853(n)(2) (requiring an initial showing of
a âlegal interest in property which has been ordered forfeitedâ); see also United States
v. Ribadeneira, 105 F.3d 833, 836 (2d Cir. 1997) (per curiam) (holding that in order
to obtain standing a petitioner must have âan interest in a particular, specific assetâ).
Any breach by Defendant of the oral contract with White does not confer upon
White a legal interest in the ZINK stock proceeds. As the district court aptly noted,
Defendant did not promise to transfer fifty-percent of his shares of ZINK stock to
White. D. Ct. Order of April 19, 2011, at 7. The ZINK stock was owned by
Defendant and was held in his name. White also does not allege facts to show that
she has a legal interest in the proceeds of the sale of Defendantâs ZINK stock. The
sum of money owed to her, if the oral contract is deemed binding, could come from
any of Defendantâs assets that were not the proceeds of criminal activity.
In DSI Associates LLC v. United States, the Second Circuit held that a
purchase of shares without taking a security interest therein renders the purchaser
merely a general creditor of the seller. 496 F.3d 175, 184 (2d Cir. 2007). A general
creditor does not possess âan interest âinâ a âparticular, specific assetâ that is, or is part
of, the forfeited property,â and âdoes not meet the statutory requirements for initiating
an ancillary proceeding under section 853(n).â Id. (quoting Ribadeneira, 105 F.3d
at 835-37). We agree with this analysis and hold that a general creditor does not have
standing to claim an interest in a particular forfeited asset. Nowhere in Whiteâs
petition, amended petition, or attached affidavits does she allege that she took a
security interest in the ZINK stock or its proceeds. Thus, even assuming the
existence of an enforceable oral contract, Whiteâs petition fails to demonstrate that
she has standing to contest the forfeiture of the property based on a contractual
interest in the stock proceeds.
We turn next to Whiteâs claim of a marital interest in the ZINK stock proceeds.
White first contends that her marital interest is derived from Minnesota Statutes
section 518.54 (now Minnesota Statutes section 518.003 subdivision 3(b)), which
defines âmarital propertyâ and ânonmarital propertyâ for purposes of marital
dissolution. White also contends that the divorce decree entered in Hennepin County
District Court awarding her one-half the proceeds of the ZINK stock confers standing
upon her.12 White thus uses divorce law to claim a marital interest in the stock
proceeds.13 Assuming, without deciding, that White has standing based on a marital
interest in the ZINK stock proceeds, we need not reverse the district courtâs order
denying the hearing because White could not prevail even if one were granted. See
Timley, 507 F.3d at 1131.
White cannot prevail in the forfeiture proceeding unless she qualifies for relief
under one of the two prongs of Â§ 853(n)(6). She must either demonstrate priority of
ownership in the forfeited property or establish that she was a bona fide purchaser for
Both of Whiteâs forfeiture petitions predate the divorce decree. Thus, she
could not plead that the divorce decree conferred standing upon her in this forfeiture
proceeding, and the district court did not consider the effect of that decree.
As the district court noted, we confronted a nearly identical situation in
United States v. Cochenour, 441 F.3d 599 (8th Cir. 2006). There, we held that
â[d]ivorce law does not govern a spouseâs claimed interest in forfeited property.â Id.
at 601 (citing United States v. Totaro, 345 F.3d 989, 997-98 (8th Cir. 2003)). To the
extent that Whiteâs claim is arguably distinguishable from that alleged in Cochenour,
her petition fails on the merits.
value of the property. 21 U.S.C. Â§Â§ 853(n)(6)(A) (superior interest), (n)(6)(B) (bona
fide purchaser); Timley, 507 F.3d at 1130. White does not claim priority of
ownership under Â§ 853(n)(6)(A). She claims instead that she is a bona fide purchaser
for value of the ZINK stock proceeds and thus should prevail under Â§ 853(n)(6)(B).
To qualify as a bona fide purchaser for value, White must show: â(1) . . . a legal
interest in the property; (2) the interest was acquired as a bona fide purchaser for
value; and (3) that the interest was acquired at a time when the claimant was
reasonably without cause to believe that the property was subject to forfeiture.â
Timley, 507 F.3d at 1130-31.
Assuming she has a legal interest derived from her marriage to and subsequent
divorce from Defendant, White was not reasonably without cause to believe that the
proceeds were subject to forfeiture at the time she acquired her interest. Under
Minnesota divorce law, Whiteâs rights vested, at the earliest, when she commenced
the dissolution proceedings on September 20, 2010. Miller v. Miller, 352 N.W.2d
738, 743 (Minn. 1984). White knew of Defendantâs criminal activity and the
associated forfeiture proceedings before filing for divorce. Defendant was charged
with the fraud and pled guilty on October 8, 2008. Defendant agreed in his plea
agreement that all funds he received from PCI were proceeds of the fraud and subject
to forfeiture. In addition, the district court had ordered the forfeiture of all of
Defendantâs property traceable to the fraud one week before White filed for divorce.
White thus was not reasonably without cause to believe that the ZINK stock proceeds
were subject to forfeiture at the time she filed for divorce. Accordingly, White cannot
prevail under Â§ 853(n)(6)(B) even if she has a marital interest in the proceeds.
Because White has not alleged a legal interest in the ZINK stock proceeds, she
lacks standing to maintain this action. To the extent that White has alleged a legal
interest in the stock proceeds based on a marital interest, her petition fails on the
merits. Accordingly, the district courtâs judgment dismissing the petition and
amended petition is affirmed.