United States Of America v. 1937 Packard Super 8, Vin 1063203 et al, No. 3:2011cv05603 - Document 23 (N.D. Cal. 2012)

Court Description: ORDER GRANTING MOTION FOR DEFAULT JUDGMENT by Judge William Alsup [granting 18 Motion for Default Judgment]. (whasec, COURT STAFF) (Filed on 3/29/2012)
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United States Of America v. 1937 Packard Super 8, Vin 1063203 et al Doc. 23 1 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE NORTHERN DISTRICT OF CALIFORNIA 8 9 UNITED STATES OF AMERICA, 11 For the Northern District of California United States District Court 10 12 13 14 15 16 17 18 19 20 21 22 23 Plaintiff, No. C 11-05603 WHA v. 1937 PACKARD SUPER 8, VIN 1063203; 1938 PEUGEOT 402BL ECLIPSE DECAPOTABLE, VIN 272535; VP BUGATTI, SERIAL NO. 57477; 1962 MERCEDES 220SE CABRIOLET, VIN 11102310030407; 1970 MERCEDES, VIN 1102612001226; 1949 LINCOLN, VIN 9EH56861; 1959 LINCOLN, VIN H9YC420934; 1966 AMC, VIN A6BA75Q102707; $5,504,017.57 in UNITED STATES CURRENCY FROM CHARLES SCHWAB ACCOUNT ENDING IN NO. 4213; and $1,211,696.12 in UNITED STATES CURRENCY FROM WELLS FARGO ACCOUNT ENDING IN NO. 7465, ORDER GRANTING MOTION FOR DEFAULT JUDGMENT Defendants. / INTRODUCTION In this in rem forfeiture action, plaintiff United States moves for default judgment against 24 the following defendants: (1) 1937 Packard Super 8, VIN 1063203; (2) 1938 Peugeot 402BL 25 Eclipse Decapotable, VIN 272535; (3) VP Bugatti, Serial No. 57477; (4) 1962 Mercedes 220SE 26 Cabriolet, VIN 11102310030407; (5) 1970 Mercedes, VIN 1102612001226; (6) 1949 Lincoln, 27 VIN 9EH56861; (7) 1959 Lincoln, VIN H9YC420934; (8) 1966 AMC, VIN A6BA75Q102707; 28 (9) $5,504,017.57 from Charles Schwab account ending in 4213; and (10) $1,211,696.12 from Dockets.Justia.com 1 Wells Fargo account ending in 7465, pursuant to 18 U.S.C. 981(a)(1)(A). The government’s 2 motion follows an entry of default by the clerk on February 22, 2012. To date, no claims or 3 answers have been filed in this action by any claimants. No opposition has been filed to the 4 instant motion. For the reasons set forth below, the government’s motion is GRANTED. 5 6 STATEMENT Rusal Global Management B.V. is a company registered in the Netherlands which owns 7 and exercises control over Rypotus Limited, a Cypress company. Leigh Sprague is an American 8 citizen who was employed by Rusal. At no time was Mr. Sprague authorized to handle matters 9 related to Rypotus or investments made by Rypotus. In July 2008, Rypotus entered into a written agreement with Goldman Sachs International by which Goldman would handle 11 For the Northern District of California United States District Court 10 investments by Rypotus in another company — JSC MMC Norilsk Nickel Company. 12 The agreement authorized Rypotus to liquidate portions of its investment by providing written 13 requests to Goldman. After any such request, Goldman would thereby pay Rypotus the 14 liquidated sum by depositing the funds into an account designated by Rypotus. 15 In August 2010, Mr. Sprague, without authority, exercised Rypotus’s liquidation rights. 16 Specifically, Mr. Sprague fraudulently obtained signatures of the directors of Rypotus 17 authorizing the liquidation of $10,000,000 in United States currency which was to be deposited 18 into an account held by NN International Holdings Limited. Documents reflect that Mr. Sprague 19 was the sole shareholder of NNIH. 20 Approximately $1,331,110.52 of that money was subsequently transferred to a 21 Wells Fargo account ending in number 7465 located in Malibu, California. The account 22 was held in the name of Mr. Sprague’s wife at the time, Ekaterina Nadirova. Defendant 23 $1,211,696.12 was seized from that account. An additional $5,500,000 of the $10,000,000 24 was transferred to a Charles Schwab account ending in number 4213 located in San Francisco, 25 California. The account was held in the name of both Mr. Sprague and Ms. Nadirova. 26 Defendant $5,504,017.57 was subsequently seized from that account. In addition to the funds 27 seized, the eight defendant vehicles named herein were also seized as purchases traceable to the 28 2 1 funds held in the NNIH account. All property was traced by a certified public accountant hired 2 by Rypotus (Compl. ¶¶ 18–48). 3 This in rem forfeiture action was commenced on November 18, 2011 (Dkt. No. 1). are subject to forfeiture pursuant to 18 U.S.C. 981(a)(1)(A) as property, personal or real, 6 traceable to transactions in violation of 18 U.S.C. 1956(a)(2)(B)(i), which prohibits the 7 laundering of monetary instruments in an attempt to conceal funds obtained through unlawful 8 means. Arrest warrants in rem for defendant currency and vehicles were immediately issued 9 by the clerk following the filing of the complaint (Dkt. Nos. 3–4). Two potential claimants of 10 defendant currency and vehicles have been identified by the government: (1) Leigh Sprague, 11 For the Northern District of California In its verified complaint, the government alleged that defendant currency and vehicles seized 5 United States District Court 4 and (2) Ekatarina Nadirova. 12 The government provided direct notice and notice by publication of this action. 13 Specifically, the government sent the Complaint for Forfeiture and related documents to 14 Mr. Sprague at a number of addresses (Br. 6 fn. 2). At the hearing, government counsel stated 15 that personal service of notice had not been accomplished due to a failure to locate the identified 16 claimants, however, on January 11, 2012, Mr. Sprague acknowledged by two emails that he had 17 received actual notice, and that he intended to enter into a settlement agreement with Rypotus 18 by which he agreed not to file a claim in the instant action. In addition, counsel for Rypotus has 19 supplied a declaration by Mr. Sprague stating the same (Dkt. No. 15 at Exh. 3, Sprague Decl. 20 ¶¶ 1–3). Ms. Nadirova, through counsel, also acknowledged receipt of notice (id. at Exh. 4 at 1). 21 Counsel for Rypotus has stated that Ms. Nadirova has agreed not to file a claim (id. at Exh. 2, 22 Martin Decl. ¶ 9). Notice was also published on an official government internet site for at least 23 thirty consecutive days, beginning on November 22, 2011, as required under FRCP 24 Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions (Dkt. 25 No. 8). No party has appeared in response to the publication. Notice of the instant motion was 26 provided as well (Dkt. No. 19). Under the local rules of this district, opposition briefs were due 27 on March 7, 2012. None have been filed. At the March 29 hearing, no claimant appeared. 28 3 1 2 ANALYSIS FRCP 55(b)(2) permits a court, following an entry of default, to enter default judgment 3 against a defendant. “The district court’s decision whether to enter a default judgment is a 4 discretionary one.” Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). Our court of appeals 5 requires a district court to consider several factors in exercising its discretion to award default 6 judgment including: 7 (1) the possibility of prejudice to the plaintiff, (2) the merits of plaintiff’s substantive claim, (3) the sufficiency of the complaint, (4) the sum of money at stake in the action; (5) the possibility of a dispute concerning material facts; (6) whether the default was due to excusable neglect, and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits. 8 9 10 allegations in the complaint regarding liability are taken as true, except as to the amount of For the Northern District of California United States District Court Eitel v. McCool, 782 F.2d 1470, 1471–72 (9th Cir. 1986). After entry of default, well-pled 11 12 damages. Fair Hous. of Marin v. Combs, 285 F.3d 899, 906 (9th Cir. 2002). 13 1. PROCEDURAL COMPLIANCE WITH CIVIL FORFEITURE RULES. 14 Any property subject to forfeiture to the United States may be seized in the manner set 15 forth in 18 U.S.C. 981(b). Under 18 U.S.C. 981(b)(2)(A), a seizure may be made without a 16 warrant if “a complaint for forfeiture has been filed in the United States district court and the 17 court issued an arrest warrant in rem pursuant to the Supplemental Rules for Certain Admiralty 18 and Maritime Claims[.]” According to FRCP Supp. AMC, the government must file a verified 19 complaint that states the grounds for jurisdiction and venue, describes the property being 20 forfeited, identifies the statute under which the forfeiture action is brought, and includes 21 sufficient factual detail to support a reasonable belief that the government will be able to meet 22 its burden of proof at trial. FRCP Supp. AMC G(2)(a)–(f). The clerk must then issue a warrant 23 to arrest the property if it is in the government’s possession, custody, or control. FRCP Supp. 24 AMC G(3)(b)(i). “[T]he court — on finding probable cause — must issue a warrant to arrest 25 the property if it is not in the government’s possession, custody, or control and is not subject to 26 a judicial restraining order[.]” FRCP Supp. AMC G(3)(b)(ii). 27 Here, the government properly filed a verified complaint for forfeiture in the United 28 States District Court for the Northern District of California and the clerk immediately issued 4 1 arrest warrants in rem to seize the defendant currency and vehicles (Dkt. Nos. 1–3). 2 The government properly set forth in sufficient factual detail the grounds for jurisdiction and 3 venue, a description of the property being forfeited, and the exact federal statutes under which 4 the forfeiture action has been brought (Compl. ¶¶ 1–17). The alleged facts support a reasonable 5 belief that the government will meet its burden of proof at trial. Furthermore, the identified 6 potentially interested parties have indicated that they will not being filing a claim. Accordingly, 7 the seizure was proper under the governing rules. 8 9 With respect to providing procedurally sufficient notice to potential claimants, FRCP Supp. AMC requires the government to publish notice of the action which, among other requirements, must state the time to file a claim and answer. FRCP Supp. AMC G(4)(a)(ii)(B). 11 For the Northern District of California United States District Court 10 In addition to sending direct notice of the pending forfeiture action to any person who reasonably 12 appears to be a potential claimant, the government may also provide notice by publication 13 through posting a notice on an official government forfeiture website for at least thirty 14 consecutive days. FRCP Supp. AMC G(4)(a)(iv)(C), (4)(b)(i). As detailed herein, the 15 government has done both. 16 Finally, the Admiralty Local Rules of this district also govern in rem forfeiture actions. 17 See Admir. L.R. 1-2. Under these local rules, a party seeking a default judgment in an action 18 in rem must make the following two showings: (1) notice of the action and arrest of property 19 has been given as required by Admiralty Local Rule 6-1(a)(1) and (b)(1), and (2) no one has 20 filed timely and responsive pleadings. Admir. L.R. 6-2(a). As detailed herein, proper notice 21 was given by both publication and by providing direct notice to all known potential claimants. 22 This notice provided all potential claimants of defendant currency and vehicles with the 23 applicable deadlines to submit verified claims — specifically, any person or entity having 24 an interest in the defendant currency and vehicles was required to file a verified claim or 25 statement no later than 35 days after service of the complaint or within thirty days of the last date 26 of publication of notice. No claims have been filed, and as noted, the two identified interested 27 parties have expressed no intent to do so. Default was therefore properly entered on February 28 22, 2012, and the entry of default judgment is now appropriate under the Admiralty Local Rules. 5 1 In sum, this order finds that the government has properly complied with all of the 2 procedural requirements set forth by federal statute, FRCP Supp. AMC, and the Admiralty Local 3 Rules governing this forfeiture action. 4 2. THE EITEL FACTORS. 5 In light of the above discussion and the factual allegations set forth in the government’s 6 verified complaint, the Eitel factors, with one exception, weigh in favor of granting the 7 government’s motion. First, a denial of default judgment would prejudice the government in 8 that it would be required to expend further time and effort in an action where the only identified 9 claimants have indicated no intent to pursue claims. Second, the government’s claims have substantial merit, are unopposed, and as previously discussed, all procedural requirements — 11 For the Northern District of California United States District Court 10 including the filing of a sufficiently pled verified complaint — have been met. Third, there is no 12 evidence that excusable neglect is to blame for the absence of any claimants. To restate, both 13 identified claimants have indicated no intent to file claims, and no claimants appeared in 14 response to the notice by publication. Fourth, there is no genuine dispute as to any material fact. 15 Without commenting on the identified claimants’ reasoning, this order finds it persuasive that 16 both have declined to file claims in this proceeding. Fifth, although it is always preferable to 17 decide a case on its merits, when no party has appeared to oppose an action (as is the case here), 18 reaching a decision on the merits is an impractical, if not impossible, task. Finally, the one 19 factor which does weigh against the grant of default is the amount of defendant currency and 20 value of defendant vehicles. The sum is substantial. At issue is approximately 6.7 million 21 dollars in United States currency and eight vehicles with unknown value. At the hearing, the 22 government stated that it hoped to receive one million dollars from the sale of the vehicles. 23 Combined, this amount dwarfs the 2.9 million dollars at issue in Eitel, however, both claimants 24 have indicated no desire to contest the forfeiture of the defendant currency or vehicles. Based on 25 these circumstances, this order will not deny entry of default based on this factor alone. 26 For these reasons, the Eitel factors support granting the government’s motion. 27 28 6 1 2 CONCLUSION For the foregoing reasons, the government’s motion for default judgment is GRANTED. 3 Defendants (1) 1937 Packard Super 8, VIN 1063203; (2) 1938 Peugeot 402BL Eclipse 4 Decapotable, VIN 272535; (3) VP Bugatti, Serial No. 57477; (4) 1962 Mercedes 220SE 5 Cabriolet, VIN 11102310030407; (5) 1970 Mercedes, VIN 1102612001226; (6) 1949 Lincoln, 6 VIN 9EH56861; (7) 1959 Lincoln, VIN H9YC420934; (8) 1966 AMC, VIN A6BA75Q102707; 7 (9) $5,504,017.57 in United States currency from Charles Schwab account ending in 4213; 8 and (10) $1,211,696.12 in United States currency from Wells Fargo account ending in 7465, 9 are hereby condemned and forfeited to the United States, pursuant to 18 U.S.C. 981(a)(1)(A). All right, title and interest in said property is vested in the United States of America. Judgment 11 For the Northern District of California United States District Court 10 shall be entered accordingly. 12 13 IT IS SO ORDERED. 14 15 Dated: March 29, 2012. WILLIAM ALSUP UNITED STATES DISTRICT JUDGE 16 17 18 19 20 21 22 23 24 25 26 27 28 7