USA v. The Contents of Wells Fargo Bank Investment Account No. 1687332 In The Name of Johanna Leal, and et al, No. 1:2009cv00007 - Document 28 (E.D. Cal. 2009)

Court Description: FINDINGS and RECOMMENDATIONS re 24 MOTION for DEFAULT JUDGMENT recommending that 1. Plaintiff's motion for default judgment be GRANTED; 2. Plaintiff is entitled to, and the Clerk be directed to enter, a judgment that: (a) The interest/s of Jor ge Leal and Johanna Leal in the Defendant property are CONDEMNED and FORFEITED to the United States of America; and (b) The right, title, and interest of all potential claimants in the Defendant property, including but not limited to Jorge Leal and J ohanna Leal, are FORFEITED to the United States of America, and are VESTED in the United States; and, (c) All persons claiming any right, title, or interest in or to the Defendant property have DEFAULTED and no longer have any right, title, or intere st in the Defendant property whatsoever; and, 3. The Clerk of Court ENTER final judgment of forfeiture for Plaintiff United States of America. Within thirty (30) days after being served with a copy, any party may file written objections with the cou rt and serve a copy on all parties. Such a document should be captioned "Objections to Magistrate Judges Findings and Recommendation." Replies to the objections shall be served and filed within ten (10) court days (plus three days if served by mail) after service of the objections. Plaintiff is directed to serve these findings and recommendations on all potential claimants and file a proof of service. The 10/30/2009 hearing date is VACATED, signed by Magistrate Judge Sandra M. Snyder on 10/26/2009. (Timken, A)

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USA v. The Contents of Wells Fargo Bank Investment Account No. 1687332 I...f Johanna Leal, and et al Doc. 28 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 UNITED STATES OF AMERICA, 1:09-cv-00007-OWW-SMS 12 ORDER VACATING HEARING ON PLAINTIFF’S MOTION FOR DEFAULT JUDGMENT AND DEEMING MATTER SUBMITTED FOR DECISION (DOC. 24) 13 14 15 16 17 ) ) Plaintiff, ) ) vs. ) ) The Contents of Wells Fargo ) Bank Investment Account No. ) 1687332 in the Name of Johanna) Leal, et al., ) ) Defendant. ) ) Vacated hearing date: October 30, 2009 Time: 9:30 a.m. FINDINGS AND RECOMMENDATIONS RE: PLAINTIFF’S MOTION FOR DEFAULT JUDGMENT (Doc. 24) 18 19 ORDER DIRECTING PLAINTIFF TO SERVE THESE FINDINGS AND RECOMMENDATIONS ON ALL POTENTIAL CLAIMANTS AND FILE A PROOF OF SERVICE 20 21 22 23 24 Plaintiff is proceeding with an action for forfeiture in 25 this Court. Pending before the Court is Plaintiff’s ex parte 26 motion for default judgment, filed on August 7, 2009, with a 27 supporting declaration of Elisa Rodriguez, which proceeds before 28 1 Dockets.Justia.com 1 a Magistrate Judge pursuant to 28 U.S.C. § 636(b) and Local Rule 2 72-302(c)(19). 3 I. Vacating the Hearing on the Motion 4 Pursuant to Rule 78-230(h) of the Local Rules of Practice 5 for the United States District Court, Eastern District of 6 California, the Court finds that the Plaintiff’s ex parte motion 7 for default judgment is a matter that may appropriately be 8 submitted upon the record and briefs, including the Plaintiffs’ 9 motion, supporting memorandum of points and authorities, and 10 declaration of Elisa Rodriguez filed on August 7, 2009. 11 Accordingly, the hearing on the motion, presently set for 12 October 30, 2009, IS VACATED, and the motion IS DEEMED SUBMITTED 13 to the Court for decision. 14 II. Service of the Findings and Recommendations 15 The remainder of this document constitutes the Court’s 16 findings and recommendations with respect to Plaintiff’s motion 17 for default judgment. 18 Plaintiff IS DIRECTED to serve the findings and 19 recommendations on all potential claimants to Defendant property, 20 including Jorge Leal and Johanna Leal, and to file proof of such 21 service no later than ten days after the date of service of this 22 order. 23 24 25 III. Motion for Default Judgment A. Legal Standards A court has the discretion to enter a default judgment 26 against one who is not an infant, incompetent, or member of the 27 armed services where the claim is for an amount that is not 28 certain on the face of the claim and where (1) the defendant has 2 1 been served with the claim; (2) the defendant’s default has been 2 entered for failure to appear; (3) if the defendant has appeared 3 in the action, the defendant has been served with written notice 4 of the application for judgment at least three days before the 5 hearing on the application; and, (4) the court has undertaken any 6 necessary and proper investigation or hearing in order to enter 7 judgment or carry it into effect. Fed. R. Civ. P. 55(b); Alan 8 Neuman Productions, Inc. v. Albright, 862 F.2d 1388, 1392 (9th 9 Cir. 1988). Factors that may be considered by courts in 10 exercising discretion as to the entry of a default judgment and 11 as to setting aside a default include the nature and extent of 12 the delay, Draper v. Coombs, 792 F.2d 915, 924-925 (9th Cir. 13 1986); the possibility of prejudice to the plaintiff, Eitel v. 14 McCool, 782 F.2d 1470, 1471-72 (9th Cir.1986); the merits of 15 plaintiff's substantive claim, id.; the sufficiency of the 16 allegations in the complaint to support judgment, Alan Neuman 17 Productions, Inc., 862 F.2d at 1392; the amount in controversy, 18 Eitel v. McCool, 782 F.2d at 1471-1472; the possibility of a 19 dispute concerning material facts, id.; whether the default was 20 due to excusable neglect, id.; and, the strong policy underlying 21 the Federal Rules of Civil Procedure that favors decisions on the 22 merits, id. 23 With respect to default judgments in proceedings that are in 24 rem actions for forfeiture, both the general Federal Rules of 25 Civil Procedure and the Supplemental Rules for Certain Admiralty 26 and Maritime Claims (Supp. R.) apply, but the latter rules 27 prevail if there is an inconsistency. Supp. R. A(1). Supp. R. 28 G(1) provides that the rule governs a forfeiture action in rem 3 1 arising from a federal statute; to the extent that Rule G does 2 not address an issue, Supp. Rules C and E also apply. 3 Supplemental Rule G, which took effect on December 1, 2006, 4 incorporates a common-sense approach to notice grounded in 5 defined and recognized principles of due process of law. Supp. 6 Rule G, Adv. Comm. Note on 2006 Adoption. The Advisory Committee 7 Note indicates that the rule was added to bring together the 8 central procedures governing civil forfeiture actions; it also 9 states that the rule generally applies to actions governed by the 10 Civil Asset Forfeiture Reform Act of 2000 (CAFRA) as well as 11 those excluded from it; thus, the intended scope of application 12 is very broad. The rule permits flexibility as to the time of 13 service of any warrant and supplemental process. Id. The 14 provisions for notice incorporate the traditional means of 15 publication and adopt the general principle that notice should be 16 effectuated by means reasonably calculated to reach potential 17 claimants at a cost reasonable in the circumstances, and actual 18 notice precludes a challenge to the government’s failure to 19 comply with the specific requirements of the rule set forth in 20 Rule G (4)(b). Id. 21 22 23 B. The Court’s Findings 1. Notice The amended declaration of publication of Elisa Rodriguez 24 (Doc. 25) filed on August 7, 2009, establishes that a notice with 25 the contents required by Supp. R. G(4)(a) was published on the 26 official government internet site for thirty consecutive calendar 27 days as required by Supp. R. G(4)(a)(iv)(C). 28 With respect to the notice to persons reasonably appearing 4 1 to be potential claimants that is required by Supp. R. G(4)(B), 2 the verified complaint identifies Defendant currencies as money 3 or other things of value furnished or intended to be furnished in 4 exchange for a controlled substance or listed chemical, proceeds 5 traceable to such an exchange, or proceeds used or intended to be 6 used to facilitate one or more violations of 21 U.S.C. § 841 7 et seq. (Cmplt. ¶ 1.) One of the Defendant accounts is in the 8 name of Johanna Leal. The other was seized as a result of 9 investigation and surveillance of Jorge Leal and his activities 10 with respect to selling and distributing methamphetamine, Jorge 11 Leal’s instructions to Johanna Leal with respect to information 12 to be given to law enforcement concerning the source of the money 13 in Defendant accounts, and the search in August 2008 of Johanna 14 and Jorge Leal’s residences. (Cmplt. ¶¶ 1-11.) 15 With respect to Jorge Leal, the declaration of Elisa 16 Rodriguez and the Marshal’s return of service (Doc. 24-2, ¶ 4, 17 Ex. B) establish that Jorge Leal was personally served with the 18 pertinent documents on January 26, 2009. Thus, the notice to 19 Jorge Leal complied with the requirements of Supp. R. G(4)(b). 20 With respect to Johanna Leal, it does not appear that she 21 received notice amounting to service under Fed. R. Civ. P. 4. 22 However, she was given notice that complies with Supp. Rule G(4) 23 or constitutes actual notice that forecloses objection to the 24 notice given. However, the Marshal’s certificate of service 25 reflects that the appropriate documentation was delivered by the 26 Marshal to the porch of the house at the Pittman address, the 27 last-known address of Johanna Leal on January 22, 2009. (Doc. 28 10.) This notice was sent by means reasonably calculated to reach 5 1 Leal. 2 Further, the internal documentation of the United States 3 attorney’s Office and the Marshal’s Service are consistent with 4 the receipt of actual notice. The supporting declaration of Elisa 5 Rodriguez, ¶ 5, Ex. C, reflects that the government granted 6 Johanna Leal’s request for an extension of time to March 6, 2009, 7 in which to file a claim and answer in this forfeiture action. 8 The Court finds that Jorge Leal was personally served as 9 required by Local Rule A-540(a), and the other potential claimant 10 received actual notice and thus, pursuant to Supp. R. G(4)(b)(v), 11 may not oppose or seek relief from forfeiture because of a 12 failure of notice. 13 The Court concludes that Plaintiff has demonstrated that it 14 has given notice by publication and the notice required to be 15 given to potential claimants by Rule G(4). 16 2. Notice of Judgment Sought and of Motion for Default Judgment 17 a. Judgment Sought 18 The Court concludes that the notice given of the judgment 19 sought satisfied Fed. R. Civ. P. 55(d) and 54(c), which require 20 that a judgment by default shall not be different in kind from 21 the relief sought, or exceed in amount that prayed for, in the 22 demand for judgment. Plaintiff expressly sought in the complaint 23 the types of relief sought by the instant application for default 24 judgment, including a judgment of forfeiture of the Defendant 25 currency to the Plaintiff United States. (Cmplt. p. 5.) 26 b. Motion for Default Judgment 27 The application for default judgment before the Court was 28 6 1 filed on an ex parte basis and thus was not served on the 2 Defendant property or on any persons who might reasonably appear 3 to be potential claimants. 4 Here, although there was informal contact between the 5 government and potential claimant Johanna Leal, the contact 6 related only to an extension of time to file any claim or answer. 7 No claim or answer was filed, and there are no later indications 8 that Johanna or any other potential claimant sought or intended 9 to defend this action on the merits. Accordingly, no notice 10 pursuant to Fed. R. Civ. P. 55(b)(2) is necessary. See, In re 11 Roxford Foods v. Ford, 12 F.3d 875, 879-81 (9th Cir. 1993). 12 13 3. Default and Entry of Default The declarations and the Court’s docket demonstrate that no 14 person or entity made a claim or answered the complaint within 15 the requisite thirty-day period for filing a claim of 18 U.S.C. § 16 983(a)(4)(A) and Supp. R. G(5), and/or within the twenty-day 17 period set forth in Supp. R. G(5) for filing an answer 18 thereafter. Therefore, the Clerk appropriately entered the 19 defaults of Jorge and Johanna Leal on April 1, 2009. 20 21 22 4. Legal Sufficiency of the Complaint a. Legal Standards A default judgment generally bars the defaulting party from 23 disputing the facts alleged in the complaint, but the defaulting 24 party may argue that the facts as alleged do not state a claim. 25 Alan Neuman Productions, Inc. v. Albright, 862 F.2d 1388, 1392. 26 Thus, well pleaded factual allegations, except as to damages, are 27 taken as true; however, necessary facts not contained in the 28 pleadings, and claims which are legally insufficient, are not 7 1 established by default. Cripps v. Life Ins. Co. of North America, 2 980 F.2d 1261, 1267 (9th Cir. 1992); TeleVideo Systems, Inc. v. 3 Heidenthal, 826 F.2d 915, 917 (9th Cir. 1987). 4 Under the Civil Asset Forfeiture Reform Act (CAFRA), which 5 applies to this case, the government must prove by a 6 preponderance of evidence that the property is subject to 7 forfeiture. 18 U.S.C. § 983(c)(1). Further, if the government’s 8 theory of forfeiture is that the property was used to commit or 9 facilitate the commission of a criminal offense, or was involved 10 in the commission of a criminal offense, the government shall 11 establish that there was a substantial connection between the 12 property and the offense. § 983(c)(3). 13 Supp. Rule G(2) requires that the complaint in a forfeiture 14 action in rem arising from a federal statute be verified; state 15 the grounds for subject-matter jurisdiction, in rem jurisdiction 16 over the Defendant property, and venue; describe the property 17 with reasonable particularity; identify the statute under which 18 the forfeiture action is brought; and state sufficiently detailed 19 facts to support a reasonable belief that the government will be 20 able to meet its burden of proof at trial. 21 22 b. The Complaint The complaint filed in this action was verified. (Cmplt p. 23 6.) 24 The bases for jurisdiction are identified as 28 U.S.C. §§ 25 1345 and 1355 (jurisdiction of civil proceedings commenced by the 26 United States or an agency or officer thereof, and of actions to 27 recover or enforce penalties or forfeitures under acts of 28 Congress, respectively) and 21 U.S.C. § 881(a)(6) (subjecting to 8 1 forfeiture, among other things, all things of value furnished or 2 intended to be furnished by any person in exchange for a 3 controlled substance or listed chemical, and all proceeds 4 traceable to such an exchange). (Cmplt. ¶¶ 1-3.) 5 The bases of venue are identified as 28 U.S.C. § 1395 6 (placing venue for a civil forfeiture proceeding where the 7 property is found) and 21 U.S.C. § 881(j) (placing venue in the 8 place where there is found the owner of property who is charged 9 with a violation that is the basis for forfeiture of the property 10 or where the criminal prosecution is brought). (Cmplt. ¶ 4.) 11 The property is described with reasonable particularity. 12 It is stated that the Plaintiff United States proceeds 13 pursuant to 21 U.S.C. § 881(a)(6), and that the Defendant 14 properties, seized in August 2008 in Clovis, California, 15 constitute things of value furnished or intended to be furnished 16 in exchange for a controlled substance of listed chemical, 17 proceeds traceable to such an exchange, and/or things used or 18 intended to be used to facilitate one or more violations of 21 19 U.S.C. § 841 et seq. (Cmplt. ¶¶ 1-2.) 20 In the complaint there are alleged sufficiently detailed 21 facts to support a reasonable belief that the government would be 22 able to meet its burden of proof at trial. The complaint detailed 23 two controlled buys of large quantities of methamphetamine from 24 Jorge Leal at his residence in December 2007 involving $11,000.00 25 and $16,000.00 worth of crystal methamphetamine; follow-up 26 investigation and surveillance; and a search of the two 27 residences of the Leals, which revealed over seventeen grams of 28 methamphetamine and a loaded firearm at the Barstow residence, 9 1 and materials concerning manufacture of methamphetamine at the 2 Pittman Hill Road residence. (Cmplt. ¶¶ 5-12.) EDD records 3 revealed that Jorge Leal had not worked for two years, his wife, 4 Elisa, had been receiving disability compensation for the past 5 year, and daughters Johanna nor Vanessa had not worked for two 6 years; tax documents, public records, and evidence at the homes 7 revealed that the Leal family would not be able to afford luxury 8 vehicles without drug proceeds as income. (Cmplt. ¶ 13.) 9 These facts support a reasonable inference that the moneys 10 in the Defendant accounts were subject to forfeiture as proceeds, 11 as property traceable to proceeds, or as property intended to be 12 used to facilitate other violations. The totality of the 13 circumstances reflects that a substantial connection between the 14 property and the related drug offenses (violations of 21 U.S.C. 15 §§ 841()(1) and 841(b)(1)(A)) was demonstrated. 16 5. Status of Potential Claimants and Discretionary Factors 17 Here, no one has claimed an interest in the Defendant 18 property or otherwise responded to the complaint despite adequate 19 notice. It does not appear that there is any risk of mistake or 20 excusable neglect on the part of anyone with a potential interest 21 in the property or of a dispute as to a material fact essential 22 to the government’s case. No just cause for delay appears. It is 23 apparent from the declarations submitted to the Court that none 24 of the potential claimants is an infant, incompetent, or member 25 of the armed services. There does not appear to be any reason why 26 the general policy in favor of a decision on the merits would 27 warrant refusing to enter the requested default judgment. 28 10 1 Accordingly, the Court finds that Plaintiff has shown its 2 entitlement to a default judgment of forfeiture. 3 4 6. Form of the Judgment A successful plaintiff in a forfeiture action is entitled to 5 a judgment against the property, Waterloo Distilling Corp. v. 6 U.S., 282 U.S. 577, 581 (1931), affecting the interests of all 7 persons in the property, Hanson v. Denkla, 357 U.S. 235, 246 n.12 8 (1958). 9 IV. Recommendation 10 Accordingly, it is hereby RECOMMENDED that: 11 1. Plaintiff’s motion for default judgment be GRANTED; 12 2. Plaintiff is entitled to, and the Clerk be directed to 13 enter, a judgment that: 14 (a) The interest/s of Jorge Leal and Johanna Leal in 15 the Defendant property are CONDEMNED and FORFEITED to the United 16 States of America; and 17 (b) The right, title, and interest of all potential 18 claimants in the Defendant property, including but not limited to 19 Jorge Leal and Johanna Leal, are FORFEITED to the United States 20 of America pursuant to 21 U.S.C. § 881(a)(6), and are VESTED in 21 the United States; and, 22 (c) All persons claiming any right, title, or interest 23 in or to the Defendant property have DEFAULTED and no longer have 24 any right, title, or interest in the Defendant property 25 whatsoever; and, 26 3. The Clerk of Court ENTER final judgment of forfeiture for 27 Plaintiff United States of America. 28 These findings and recommendation are submitted to the 11 1 United States District Judge assigned to the case, pursuant to 2 the provisions of 28 U.S.C. § 636 (b)(1)(B) and Rule 72-304 of 3 the Local Rules of Practice for the United States District Court, 4 Eastern District of California. Within thirty (30) days after 5 being served with a copy, any party may file written objections 6 with the court and serve a copy on all parties. Such a document 7 should be captioned “Objections to Magistrate Judge’s Findings 8 and Recommendation.” Replies to the objections shall be served 9 and filed within ten (10) court days (plus three days if served 10 by mail) after service of the objections. The Court will then 11 review the Magistrate Judge’s ruling pursuant to 28 U.S.C. § 636 12 (b)(1)(C). The parties are advised that failure to file 13 objections within the specified time may waive the right to 14 appeal the District Court’s order. Martinez v. Ylst, 951 F.2d 15 1153 (9th Cir. 1991). 16 IT IS SO ORDERED. 17 Dated: icido3 18 October 26, 2009 /s/ Sandra M. Snyder UNITED STATES MAGISTRATE JUDGE 19 20 21 22 23 24 25 26 27 28 12

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