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No. 11-35923

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT_______________________________

UNITED STATES OF AMERICA,

Plaintiff-Appellee, D.C. No. 3:10-cv-00097-MPOU.S. District Court for Oregon,Portland

vs.

$11,500 IN UNITED STATESCURRENCY, in rem, $2,971 INUNITED STATES CURRENCY, in rem,

Defendants,

and

CHARLES GUERRERO,

Claimant-Appellant

______________________________

Appeal from the United States District Court

for the District of Oregon_______________________________

REPLY BRIEF OF APPELLANT

_______________________________

Frank de la Puente, Esq.

1610 12th Street SESalem, Oregon 97302

VOICE (503) 851-1877; FAX 364.2655

Email: [email protected]

Attorney for Claimant-Appellant


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LIST OF AUTHORITIES

SUPREME COURT CASES

Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99 (1957). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Foman v. Davis, 371 U.S. 178 (1962). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5, 6

CIRCUIT COURT CASES

United States v. $ 49,000 Currency, 330 F.3d 371 (CA5 2003). . . . . . . . . . . . . . . . . . 18

United States v. $639,558 in U.S. Currency, 293 U.S. App. D.C. 384 F.2d 712 (CA

DC 1992). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

United States v. $639,558, 955 F.2d 712 (D.C. Cir.1992). . . . . . . . . . . . . . . . . . . . . . . 15

United States v. $874,938.00 in U.S. Currency, 999 F.2d 1323 (CA9 1993). . . . . . . 9

United States v. Funds in the Amount of Thirty Thousand Six Hundred Seventy

Dollars ($30,670.00), 403 F.3d 448 (CA7 2005). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

United States v. Mondragon, 313 F.3d 862 (CA 2002). . . . . . . . . . . . . . . . . . . . . . . . . 18

United States v. US Currency, $ 30,060, 39 F.3d 1039 (CA9 1994). . . . . . . . . . . . . . 15

DISTRICT COURT CASES

FEDERAL STATUTES

18 U.S.C. 983. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-10, 12

FEDERAL RULES OF CIVIL PROCEDURE

FRCP 12(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

FRCP 15. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

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Supplemental Rule of Civil Procedure G(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2, 4, 7

Supplemental Rule of Civil Procedure G(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

OTHER AUTHORITIES

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INTRODUCTION

In his opening brief Claimant Charles Guerrero argued that (1) where Claimant

properly asserted a possessory interest in his claim, he was not required to assert a

bailee interest, and accordingly the district court erred by striking Claimants motion

for failure to assert a bailee interest, (2) the court erred by not granting summary

judgment to Claimant on the issue of Art. III standing, (3) the court erred by not

ordering a return of the money to Claimant, after the court found that the government

did not provide timely notice of the seizure for forfeiture of the $11,500 and the

$2,971, and (4) the court erred by finding that the $11,500 was forfeitable to the

government.

In response, the government argues that Claimant lacked statutory standing on

the ground that Claimant was a bailee of the $11,500 and failed to assert a claim as a

bailee. The government cites no authority for its proposition that a bailee must assert

a bailee interest in his claim for standing in a forfeiture proceeding. As to the issue

of Art. III standing, the government argues that the issue is moot by the fact that the

district court found that Claimant lacked statutory standing.

The government advances an argument on the issue of timeliness of the notice

of forfeiture, viz., that the notice was timely, though the government did not appeal

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government is essentially arguing that in a transfer of possession between spouses

such as here, when a person cautions his/her spouse to keep property safe, the transfer

is a bailment in the legal sense as that of a transfer between a bank and a customer

who uses the banks safe deposit box, or between an opera house and each patron who

entrusts his coat to the coat check room for safekeeping while watching the opera, in

each instance the parties clearly understand that a return of the property is expected.

The district courts holding is in error, because the evidence showed that

Claimant Guerrero properly asserted a possessory interest in his Rule G claim. There

was no bailee-bailor relationship between Claimant and Rosalie. Even if Claimant

was a bailee in the legal sense of the term, neither the court nor the government has

cited any authority for the proposition that a claimant who obtains possession of

property as a bailee is required to plead a bailee interest.

Along with its other arguments regarding a bailor-bailee relationship between

Rosalie Guerrero and Claimant, the governments argument that Claimants interest

was that of a bailee with Rosalie as the bailor, infers that Claimant had statutory

standing as a bailee. But, that acquiescence of Claimants standing conflicts with the

governments distorted reading of Rule G that because Claimant failed to plead a

bailees interest, Claimant does not have standing. The governments argument that

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a claimant should forfeit its property to the government on a technicality has no place

in American law regarding property rights. The government should not be permitted

to deprive someone of his interest in property on a technicality which would operate

to strike a claimants statutory claim. See Foman v. Davis, 371 U.S. 178, 181 (1962)

(it is too late in the day and entirely contrary to the spirit of the Federal Rules of Civil

Procedure for decisions on the merits to be avoided on the basis of mere

technicalities).

Claimants Rule G claim precisely and affirmatively asserted his possessory

interest and it adequately put the government on notice that Claimant had a legitimate

basis for claiming the $11,500 seized for forfeiture.

B. The governments motion to strike was moot, because the court ruled

on claimants motion to dismiss, before ruling on the motion to strike.

Rule G(8) provides under subsection (c) (Motion to Strike) that a motion to strike

must be decided before any motion by the claimant to dismiss the action. Rule

G(8)(c)(ii)(A). The procedural inference is that the government is barred from

moving to strike a claimants claim after the court rules on a claimants motion to

dismiss.

Here, on 3-15-10, Claimant filed a motion to dismiss under FRCP 12(b). ER 3;

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(# 8). [# refers to document number in the district court as indicated in the Court

Docket Sheet] On 5-21-10, the government filed its response to Claimants 12(b)

motion. ER 4; (# 17). On 7-28-10, the court ruled on Claimants 12(b) motion. ER

5; (#29).

On 10-22-10, Claimant filed a second motion under FRCP 12(b). ER 5; (# 36).

On 11-5-10, the government filed its response to Claimants 12(b) motion. ER 6; (#

41). On 12-8-10, the court ruled on Claimants 12(b) motion. ER 6; (#42). On 1-18-

11, the government filed its motion to strike. ER 6; (#45).

The government thus filed a response to each motion to dismiss, before filing its

motion to strike Claimants claim. By those responses, the government caused the

court to rule on Claimants motions to dismiss, before the governments motion to

strike. Thereafter, the government was barred from filing its motion to strike.

C. The court could have sua sponte granted leave to amend the claim.

Under FRCP 15, when a complaint is dismissed for failure to state a claim for

relief, a court has discretion to allow a plaintiff to amend his pleading. FRCP 15 has

two overall mandates that judges must follow: (1) liberally give leave, and (2) use

leave as a tool for justice. See Foman v. Davis, 371 U.S. 178 (1962). The Federal

Rules reject the approach that pleading is a game of skill in which one misstep by

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counsel may be decisive to the outcome and accept the principle that the purpose of

pleading is to facilitate a proper decision on the merits. Conley v. Gibson, 355 U.S.

41, 48, 78 S.Ct. 99, 103 (1957). The Rules themselves provide that they are to be

construed to secure the just, speedy, and inexpensive determination of every action.

Id.

Here, the district court concluded that Claimants Rule G(5) claim should be

stricken, because, according to the court, Claimant was a bailee who failed to name

a bailor. ER 25-26. At that juncture, the court should have used its discretionary

authority tosua sponte grant to Claimant leave to amend his claim. After all, the court

wrote that Claimant did not move to amend, ER 15, (# 73) (Order page 12),

inferring that the court would have granted leave to amend upon a motion by

Claimant. Procedurally, however, when the district court struck Claimants Rule G(5)

claim as to the $11,500, the court determined that Claimant had no standing as to the

$11,500. Without standing, Claimant could not move to amend his claim.

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II. ONCE THE COURT FOUND THAT THE GOVERNMENT FAILED

TO TIMELY SERVE NOTICE OF THE SEIZURE, THE COURT

WAS REQUIRED TO ORDER THE RETURN OF THE PROPERTY

TO CLAIMANT.

A. The government did not appeal the finding of untimeliness of notice.

The district court found that the government was untimely in providing to

Claimant notice of the seizure for forfeiture of the $11,500 and of the $2,791. ER 30

(# 73, Order at p. 15). In its brief, the government argues that the government timely

complied with the notice requirements of 18 U.S.C. 983 (a)(1)(A)(i) (notice of

seizure must be given within sixty (60) days of any seizure). Gov Brief pp 20-22.

However, the government did not cross-appeal the courts ruling and the appellate

panel here should leave undisturbed the district courts finding of untimely notice.

B. Federal law requires the return of the $11,500 and the $2,971.

Federal law under18 U.S.C. 983(a)(1)(A)(ii) requires the return of the money

to Claimant where the government seizes for forfeiture a persons property and fails

to give timely notice of the seizure. Federal law does not condition the return of that

property to the aggrieved person on his ability to prove that he has been prejudiced by

the governments failure to provide him with timely notice. The government reads

983(a) as providing that where notice of a seizure is untimely, the government is not

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required to return property where a claimant does not suffer any prejudice. Gov Brief

p. 22. As support for this reading of 983(a) the government cites United States v.

$874,938.00 in U.S. Currency, 999 F.2d 1323, 1325 (CA9 1993), a case decided

before CAFRA, in which the government had provided timely notice of a seizure, but

had delayed in filing a judicial forfeiture action. The Ninth Circuit employed a four-

factor due process analysis to find that the delay was occasioned by the government

and by the claimant, and did not violate due process; there was no issue about failure

to meet a statutory deadline regarding notice to potential claimants. The case does not

support the governments position that where the government seizes property for

forfeiture under CAFRA, and fails to provide notice, the government need not return

the property. The government has cited no authority for its reading of 983(a).

When it comes to potential deprivation of property, the Ninth Circuit must

enforce harshly the consequences of untimely notice in a civil forfeiture context under

CAFRA. Had Claimant failed to timely file a claim, the government would not be

as forgiving as it now asks this appellate court to be.

If the Court of Appeals affirms the district courts refusal to order the government

to return the property to Claimant, then the government will never have to comply

with 18 U.S.C. 983 (a)(1)(A)(ii) (requiring the return of the money for untimely

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noticing). The government will always be allowed to ignore the notice requirement

so long as it files its complaint for forfeiture within the time allowed by CAFRA. A

federal court must not allow that re-writing of that which Congress enacted, and this

court should order the immediate return Claimants property.

III. THE $11,500 WAS NOT PROCEEDS OF NOR TRACEABLE TO AN

EXCHANGE OF A CONTROLLED SUBSTANCE.

A. Government must prove the 983(c) substantial connection.

Section 983(c)(3) of 18 U.S.C. (General rules for civil forfeiture proceedings)

provides that if the government's theory of forfeiture is that the property was used to

commit or facilitate the commission of a criminal offense, or was involved in the

commission of a criminal offense, the government shall establish that there was a

"substantial connection" between the property and the offense. 18 U.S.C.

983(c)(3)(emphasis provided)

The spirit of 983(c) is that any property seized for forfeiture must be connected

in a substantial way to the commission of a criminal offense. It is obvious that an

allegation such as the one here that property seized for forfeiture represents proceeds

traceable to a criminal offense is an allegation that the property is substantially

connected a criminal offense. Accordingly, there is no need to specifically require

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that proceeds be substantially connected to the offense. The requirement is

understood.

Where the allegation is that the property facilitated a criminal offense, federal law

specifically requires proof of a substantial connection, because facilitate connotes

a broader and vaguer connection between the property and an offense. Without that

requirement, then under a facilitation theory of a civil forfeiture proceeding, the

danger of overreaching by the government would be present. A facilitation theory

can bring into the scope of a forfeiture proceeding property which is remotely

connected to the criminal offense. For example, in a proceeding for forfeiture of a

house, if the allegation is that the house was used as a place for an offender to eat

meals and sleep, but not to sell drugs, the government could argue that the house

facilitated the commission of the offense, but would be hard-pressed to connect the

house to the offense in a substantial way as where the offender used the house to store,

manufacture or as a place out which to sell drugs. But for 983(c), the government

would be free to seize and obtain forfeiture of property which is remotely connected

to a criminal offense. Claimant submits the above argument as the reason why

Congress may have included in 983(c) the specific requirement that the government

must prove the existence of a substantial connection when alleging that property

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subject to forfeiture facilitated the commission of an offense.

Here, at summary judgment, the court read 983(c) as requiring the government

to prove a substantial connection between the $11,500 and drug trafficking. Indeed,

the district court wrote:

The government opposes claimants motion, and moves for summary

judgment in its favor, on the basis that there is compelling evidence in the

record to refute claimants contention that the funds came from legitimate

sources--evidence which undeniably establishes the substantial connection

between the seized currency and illegal drug activity. I agree with the

governments position as to the $11,500 only. ER 32.

In his opening brief, Claimant has argued that the district court erred in finding

that the government had established the 983(c) substantial connection. In response,

the government argues that it proved its case under its proceeds theory, i.e., that the

money seized was forfeitable because, it represent[ed] proceeds traceable to an

exchange for controlled substances. Gov Brief at p. 26. Accordingly, the

government argues under its proceeds theory the government was not required to

prove the existence of a substantial connection between the money and illegal activity.

The government is mistaken.

If the government chose to prove only its theory that the money was proceeds

traceable to an exchange for a controlled substance, then, by the above reasoning, the

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Claimant stated the insurance settlement was a result of a car accident, and that

Rosalie was a passenger in the car. ER 47. Those facts were undisputed, and squarely

controverted the governments speculation that the money represented proceeds

traceable to an exchange for a controlled substance. Speculation is not evidence.

Summary judgment should have ben granted to Claimant Guerrero.

C. Neither Nikkos sniff, claimants history of selling drugs, or

$100" bills support the governments proof.

(1) Nikko the Drug-Detection Dog

The government argues that Officer Groshong confirmed that the dog alerted to

the odor of narcotics when it sniffed the $11,500 seized from Woods trunk. Gov

Brief at P. 32. The government is wrong: Groshong confirmed that Nikko alerted;

Groshong did not write the Nikko alerted to the odor of drugs. The $11,500 was not

seized from Woods trunk; Agent Gino had Wood place the money in a bag, seized

the money and took it to the basement of the jail to have Nikko sniff it. ER 3 (# 1,

Affi SSA Gino 13-14).

At summary judgment Claimant pointed out to the court that Groshong did not

write that Nikko alerted to the odor of drugs in that Nikko did not bite and claw at the

bag containing the $11,500 as Nikkos handler had stated that Nikko would do when

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alerting to the presence of narcotics. ER 69; Gino Dec in Support of Gov MSJ (#67),

Ex. 2. In his declaration, (#67) at paragraph 4, Agent Gino stated Officer Groshong

informed me that Nikko alerted to the odor of narcotics; if offered for to prove that

Nikko had alerted to the odor of drugs, that statement was inadmissible hearsay and

the district court should have precluded it from the evidence.

The bottom line is that a jury could have found that Nikkos failure to bite or

claw at the bag containing the money was evidence in Guerreros favor that the money

was not proceeds of narcotics. The jury could have distrusted Nikkos sniff

altogether. He federal courts have considered distrust of drug-detection dog sniffs.

For example, expert testimony has been offered in other cases suggesting that between

70 and 97 percent of all bills in circulation in this country are contaminated by

cocaine. See United States v. $639,558 in U.S. Currency, 293 U.S. App. D.C. 384,

955 F.2d 712, 714 n.2 (CA DC 1992). Courts have also observed, on the basis of

expert testimony, that as many as one in three circulating bills have been involved in

a cocaine transaction. SeeUnited States v. $639,558, 955 F.2d 712, at 714 n.2 (D.C.

Cir.1992). Cocaine and other drugs attach to the oily surface of currency and as each

bill passes through cash registers, wallets and counting machines, trace amounts of

drugs pass to other bills. See United States v. US Currency, $ 30,060, 39 F.3d 1039

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at 1042-43 (CA9 1994). If, in fact, such a large percentage of bills are contaminated

with drugs, then a jury could have found that an alert by a drug-sniffing dog that

$11,500 in currency bills in a paper bag is contaminated was of limited probative

value.

(2) Claimants History is Insufficient to Support a Summary Judgment.

At his deposition Claimant testified that he made money selling drugs and in

ways other than selling drugs, e.g., Claimant testified that he sold personal property

and worked odd jobs. ER 55, 11. Rosalie was obviously legitimately employed,

else she would not have received one years worth of wage compensation under the

PIP component of the policy of the person who injured Rosalie in a traffic accident.

ER 50. Claimant is married to Rosalie Guerrero.; Rosalies income was Claimants

income.

Claimant Guerrero testified that the insurance settlement was the result of a car

accident. ER 6; Government Statement of Undisputed Facts (#47) at 28, citing

Guerrero Dep. 29:3-5, 30:6-31:7. The government did not present evidence to

controvert Claimants statements regarding the source of the $11,500 which were

consistent with the declaration of Kerry Trask, ER 50. That was enough for the court

to find that the $11,500 was not proceeds of drug-trafficking. Otherwise, had the

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government controverted Claimants evidence regarding the source of the $11,500,

the controversy would have created a genuine issue of material fact for a jury.

(3) Money in $100" Bills Evidences a Legitimate Source.

In its most absurd argument, the government reasons that $11,500 seized in

$100" bills evidences that it was proceeds of drug-trafficking. The government has

argued that the amount of drugs found in Virgil Woods car was consistent with street-

level quantities of distribution, i.e., that Claimant was dealing in street-level quantities

of drugs. ER 8 (#68, plaintiffs memo in opposition to claimants second motion for

summary judgment at p. 7). It is unreasonable to believe that a street-level seller

would deal in $100" bills. It is more reasonable to believe that the $100 bills came

from a bank transaction where Rosalie presented an insurance settlement check for

cashing, and that as any other reasonable and prudent person would do when cashing

a check for even one thousand dollars, Rosalie would have requested $100" bills.

Furthermore, unlike cases in which money was found neatly stacked in bundles

and bound with rubber bands or sealed in plastic bags which is consistent with themanner in which cash is handled in the drug trade, there was nothing about the way

the cash in this case was found that would cause a belief that it represented proceeds

of drug trafficking. See, e.g., United States v. Mondragon , 313 F.3d 862, 864 (CA4

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2002) ($500,000 in cash found in professional-grade hidden compartment of an

automobile sealed in 15 plastic bags, consistent with practice in the drug trade);

United States v. $ 49,000 Currency , 330 F.3d 371, 373 (CA5 2003) (cash found inside

garment bag divided into seven bundles, each bearing a small piece of paper denoting

the amount, as is common in the drug trade); United States v. Funds in the Amount of

Thirty Thousand Six Hundred Seventy Dollars ($30,670.00), 403 F.3d 448, 450 (CA7

2005) (money found in a garment bag and stuffed in claimant's clothes in bundles

wrapped in rubber bands). By comparison, there is nothing in SSA Ginos affidavit

about the manner in which Wood was found to carry the $11,500 in cash that is

consistent with the way money is found in the drug trade.

The problem with the governments case is that it put the cart before the horse:

it seized the money on a hunch that it would be proceeds of drug trafficking, and then

went about the business of proving its hunch by finding and creating evidence, the

syllogism being: all drug-traffickers money is drug money, Guerrero is a drug-

trafficker, therefore all of Guerreros money is drug money. The falsity of the first

premise makes the conclusion false.

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CONCLUSION

For all of the above reasons, the Court of Appeals should reverse the district

courts holdings on all of the issues presented for appeal, and order entry of judgment

in favor of Claimant Charles Guerrero.

RESPECTFULLY submitted on April 13, 2012.

F. de la Puente

______________________________

Frank de la Puente, OSB 910170

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No. 11-35923

IN THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

UNITED STATES OF AMERICA, ))

Plaintiff-Appellee, ))

vs. ))

$11,500 IN UNITED STATES )CURRENCY, in rem, $2,971 IN )UNITED STATES CURRENCY, in rem, )

)Defendants, )

)and )

)CHARLES GUERRERO, )

)Claimant-Appellant )

CERTIFICATION OF RELATED CASES

I, FRANK DE LA PUENTE, counsel of record for claimant-appellant, Charles Guerrero state,

pursuant to the Ninth Circuit Court of Appeals Rule 28-2.6, that there is no case with a closely

related issue as this case and which could be deemed related.


F. de la Puente

______________________________

Frank de la Puente, OSB 910170

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No. 11-35923

IN THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

UNITED STATES OF AMERICA, ))

Plaintiff-Appellee, ))

vs. ))

$11,500 IN UNITED STATES )CURRENCY, in rem, $2,971 IN )UNITED STATES CURRENCY, in rem, )

)Defendants, )

)and )

)CHARLES GUERRERO, )

)Claimant-Appellant )

_______________________________

CERTIFICATE OF COMPLIANCEWITH NINTH CIRCUIT RULE 32(a)(7)(C)

_______________________________

Pursuant to Ninth Circuit Rule 32(a)(7)(B)(ii) and (C), I certify that Claimants reply brief is

proportionately spaced, it has text that is double spaced, has typeface of 14 points and contains less

then 7,000 words from its Jurisdictional Statement to its Conclusion.


F. de la Puente

______________________________Frank de la Puente, OSB 910170

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CERTIFICATE OF SERVICE

On April 13, 2012, I electronically filed the foregoing brief with the Clerk of the Court for the

United States Court of Appeals for the Ninth Circuit, and I caused a copy of this brief to be served

on the following counsel registered to receive electronic service.

Robert Nesler ([email protected]), (503) 727-1069

F. de la Puente

______________________________Frank de la Puente, OSB 910170

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