STATUTORY INTERPRETATION--Due Process No Match for Civil Asset Forfeiture when Playing Hide and Seek with Fugitives.

AuthorO'Neill, Colleen M.
PositionCase note

STATUTORY INTERPRETATION--Due Process No Match for Civil Asset Forfeiture when Playing Hide and Seek with Fugitives--United States v. Batato, 833 F.3d 413 (4th Cir. 2016).

In the Fifth Amendment of the United States Constitution, the Due Process Clause protects defendants by ensuring that they are not "deprived of life, liberty, or property, without due process of law." (1) The Civil Asset Forfeiture Reform Act of 2000 (CAFRA), traditionally known as the Fugitive Disentitlement Doctrine, may conflict with the Due Process Clause because its main function is to deprive defendants, who flee from criminal prosecution, of their property and from defending their rights to that property. (2) In United States v. Batato, (3) the United States Court of Appeals for the Fourth Circuit decided whether using CAFRA to disentitle the defendants from claiming their property in other countries violated their Fifth Amendment Due Process rights. (4) The Fourth Circuit held that CAFRA did not violate the defendants' Due Process rights by prohibiting them from using the United States' courts to defend their property claims when they refused to submit themselves to criminal prosecution in the United States. (5)

In September 2005, Finn Batato and his co-defendants created a website scheme that they called "Mega Conspiracy." (6)

The scheme consisted of controlling many public websites that reproduced and supplied "copies of copyrighted motion pictures, computer software, television programs, and musical recordings." (7) The defendants profited from this scheme by infringing on the copyrighted material and then laundering the money for themselves. (8) The defendants were successful in this scheme until January 5, 2012, when they were indicted for conspiracy to commit racketeering, criminal copyright infringement, aiding and abetting of copyright infringement, and conspiracy to commit money laundering. (9) After the defendants were indicted, the government discovered that the defendants had been hiding the money in New Zealand and Hong Kong, which caused the government to send restraining orders to stop the withdrawal of those assets. (10) Additionally, on January 20, 2012, the New Zealand Ministry of Foreign Affairs and Trade complied with requests from the United States to arrest the defendants in order to have them extradited, but following the arrests, the defendants were released on bail. (11)

Both Hong Kong and New Zealand approved the United States' restraining orders on the defendants' assets, but New Zealand's orders were set to expire on April 18, 2014. (12) The New Zealand Court of Appeals was allowed to extend the orders for one more year, making April 18, 2015, the new expiration date; however, under New Zealand domestic law, the orders could not be extended again. (13) Due to the impending expiration date, the United States had no other alternate recourse except to file a civil forfeiture action against the defendants, which it did with a verified complaint on July 29, 2014. (14) In response, on August 28, 2014, the defendants filed a claim to the assets in dispute and on October 10, 2014, they also filed a motion to dismiss or stay the action. (15) The government moved, on November 18, 2014, to strike the asset claims of the defendants, which the district court granted on March 13, 2015. (16) The government then asked for a default judgment on March 25, 2015, which it was awarded in the form of forfeiture orders, and the defendants filed for an appeal. (17)

The U.S. Constitution gives federal courts certain inherent powers including the power to sanction and punish certain individuals who do not respect the power and authority of the court system. (18) The power to sanction and punish these individuals arises from the belief that the federal appellate courts have a responsibility to "set reasonable procedural rules in its management of litigation." (19) While the Constitution authorizes the federal courts with these powers, it also limits them by using the Fifth Amendment's Due Process Clause, which guarantees a fair and just court hearing before "[depriving] [a defendant] of life, liberty or property." (20) There has been some debate within the court system about what the "right to a hearing" actually means; one side of the argument states that it is a right to actually be heard in front of a judge, while the other side argues that it simply means that an opportunity was presented to be heard, whether the individual took that opportunity or not. (21) The debate has intensified since Congress turned the principle of Fugitive Disentitlement into a statute allowing its use in Civil Forfeiture actions. (22)

The Doctrine of Fugitive Disentitlement has existed since the later half of the 19th century when the United States Supreme Court decided Smith v. United States, (23) where it held that a criminal defendant, who flees from the court's jurisdiction, was not entitled to an appeal. (24) Traditionally, the doctrine was only applied to criminal cases as is evidenced in Molinaro v. New Jersey, (25) where a criminal defendant, who was out on bail and failed to surrender, had his appeal dismissed with prejudice. (26) Following the decision in Molinaro, some Circuit Courts of Appeal would allow the extension of its rationale to civil contexts including Civil Forfeiture actions, whereas others would forbid it. (27) The Sixth Circuit was the first court to address, and subsequently decline, extension in United States v. $83,320, (28) reasoning that there could be other claimants to the property and to forfeit it would punish those innocent claimants. (29) The First Circuit and the Seventh Circuit followed this reasoning in declining to extend the Fugitive Disentitlement Doctrine to Civil Forfeiture Actions stating reasons including failure to meet the "closely related" requirement between the forfeited assets and the criminal case as well as declaring that the extension would be too broad and that it violates due process. (30) In contrast, the Second, Ninth, Eleventh, and Tenth Circuits all agreed to extend the doctrine citing that the rationale behind the doctrine logically allows for its use in Civil Forfeiture. (31)

The United States Supreme Court acknowledged that there was a need to discuss the application of the Fugitive Disentitlement Doctrine to Civil Forfeiture Actions in Degen v. United States, (32) however, it declined to answer whether disentitlement should only apply to criminal cases and whether disentitlement violates due process. (33) The Court did suggest that the legislature could take care of the application conflicts by creating a statute, which Congress did in producing CAFRA in 2000. (34) CAFRA has its roots in traditional English common law where property used in wrongdoing was surrendered to the government and either destroyed or given to charities that would make good use of it. (35) The purposes of the modern equivalent, in the form of CAFRA, are to "to take the instrumentalities of crime out of circulation," and "to take the profit out of crime" by seizing assets that have been used criminally and repurposing them to help fund law enforcement practices. (36) One of the first cases showcasing these purposes was Collazos v. United States, (37) where the Second Circuit held that CAFRA did not violate due process because the defendant waived her due process rights after refusing to re-enter the United States for her Civil Forfeiture hearing. (38)

In United States v. Batato, (39) the Fourth Circuit analyzed whether the use of CAFRA to disentitle the defendants from their property in other countries violated their Due Process rights under the Fifth Amendment. (40) Specifically, the Court defined "the right to be heard" as allowing each defendant the opportunity to be heard rather than an absolute right to actually be heard. (41) It reasoned that as long as the defendants were given the chance to benefit from a hearing, then their due process rights have been met. (42) The Court then stated that the defendants chose not to attend their hearing due to their refusal to enter the country, and therefore, they knowingly waived their rights (43) The Court explained that if the defendants were entirely innocent of the allegations against them, then they would have no problem entering the country to defend themselves (44) Furthermore, in a country where defendants are given many procedural safeguards within the court system, the fact that the defendants will not enter the country to face the charges against them gives the appearance that their defense lacks merit and that they did, in fact, obtain these assets illegally. (45)

The Fourth Circuit continued to explain that where a defendant has placed a presumption of guilt upon himself, disentitlement no longer acts as a punishment, but rather is an inevitable manifestation of trying to use the court system to acquire only benefits. (46) The Court reasoned that the defendants knew of the consequences of their actions because they continued to delay disposition of this action and persisted to rapidly spend their assets despite the restraining orders (47) The Court articulated that where the government has tried other less obstructive procedures to protect its interests in the case, these "exigent circumstances" necessitate more restrictive measures. (48) The Fourth Circuit then announced that the government had every right to bring the Civil Forfeiture Action against the defendants to prevent them from reaping the benefits of their illegal enterprise as well as to protect the government interests in the case. (49)

The Fourth Circuit in United States v. Batato, (50) was correct in holding that applying [section] 2466 of CAFRA to disentitle the defendants from their assets did not violate the Due Process Clause, however, its reasoning missed the mark. (51) It reasoned that the "right to be heard" should be strictly interpreted to mean that a mere opportunity...

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