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U.S. v. One 1973 Rolls Royce

filed: November 25, 1994.

UNITED STATES OF AMERICA, APPELLEE
v.
ONE 1973 ROLLS ROYCE, V.I.N. SRH-16266, (BY AND THROUGH CLAIMANT OSCAR B. GOODMAN), APPELLANT NATIONAL ASSOCIATION OF CRIMINAL DEFENSE LAWYERS, AMICUS-CURIAE



On Appeal From the United States District Court For the Eastern District of Pennsylvania. (D.C. Civ. No. 90-01487).

Before: Becker, Nygaard, and Weis, Circuit Judges.

Author: Becker

Opinion OF THE COURT

BECKER, Circuit Judge.

I. INTRODUCTION AND OVERVIEW

The Comprehensive Drug Abuse Prevention and Control Act, 21 U.S.C. § 881 et. seq., provides, among other things, for civil forfeiture of illegal drug related property. Section 881 authorizes the government to seize illegal drugs, containers of illegal drugs, records associated with illegal drugs, and other property associated with or purchased with proceeds derived from the distribution of illegal drugs. Section 881 has become attractive to prosecutors because it permits them to seize property involved in drug trafficking merely upon a showing of probable cause that the property was used to help facilitate a drug transaction.

Three subsections of § 881 have emerged as far-reaching tools of the civil forfeiture scheme. Section 881(a)(4) provides for forfeiture of "conveyances" (airplanes, automobiles, boats, etc.) used or intended to be used to facilitate the transportation, sale, receipt, possession, or concealment of a controlled substance. 21 U.S.C. § 881(a)(4). Section 881(a)(6) provides for forfeiture of "all proceeds traceable" to a drug transaction. 21 U.S.C. § 881(a)(6). And § 881(a)(7) provides for forfeiture of "all real property" which is used or intended to be used to facilitate an illegal exchange of a controlled substance. 21 U.S.C. § 881(a)(7).

Congress' decision to add §§ 881(a)(4), (6), and (7) to the forfeiture scheme signalled a dramatic expansion of the government's forfeiture power. Previously, forfeiture had been limited to the illegal substances themselves and the instruments by which they were manufactured and distributed. But §§ 881(a)(4), (6) and (7) gave the government the power to seize property that by all appearances was legitimate. This development gave rise to the possibility that owners who had innocently leased or loaned property to others could lose that property in a forfeiture proceeding. For example, a landlord might forfeit an apartment complex if a tenant was caught dealing drugs from an apartment, or a father who had loaned his son the family car might lose it if the son were caught transporting drugs therein.

To ameliorate this problem, Congress engrafted an "innocent owner" defense to forfeiture under §§ 881(a)(4), (6), and (7). The "innocent owner" defenses under §§ (a)(6) and (7) are the same: no owner's interest in property may be forfeited "by reason of any act or omission established by that owner to have been committed or omitted without the knowledge or consent of that owner." 21 U.S.C. §§ 881(a)(6), (7). Congress later added the innocent owner defense of § 881(a)(4), and it has a slightly different formulation: no owner's interest in a "conveyance" shall be forfeited "by reason of any act or omission established by that owner to have been committed or omitted without the knowledge, consent, or willful blindness of the owner." 21 U.S.C. § 881(a)(4)(C) (emphasis supplied).

The overarching issue in this appeal is the extent to which the "willful blindness" language found in § 881(a)(4)(C) requires us to interpret that innocent owner defense differently from the otherwise identical defenses in §§ 881(a)(6) and (7). Specifically, we must first determine what constitutes "willful blindness" as that term is used in § 881(a)(4)(C). We must then decide whether an owner can claim innocent owner status under (a)(4)(E) by showing that he or she lacked either knowledge or consent or willful blindness, which, in turn, requires us to determine the extent to which the rule in this Circuit that an owner need only show either lack of knowledge or lack of consent to make out the innocent owner defense in the context of § 881(a)(7), see United States v. Parcel of Real Property Known As 6109 Grubb Road, 886 F.2d 618, 623-626 (3d Cir. 1989), controls our interpretation of the defense in the context of § 881(a)(4)(C).

This case arises out of the seizure of a Rolls Royce automobile owned by Oscar B. Goodman, a prominent criminal defense lawyer who represents clients throughout the country. Nicodemo Scarfo, Sr. a former client of Goodman's (and at one time the reputed head of the Philadelphia branch of La Cosa Nostra ("LCN")), gave Goodman the Rolls Royce in repayment for $16,000 that Goodman had paid to the Four Seasons Hotel in Philadelphia to cover the cost of a lavish party given by Scarfo's son and his friends at the hotel to celebrate Scarfo's acquittal at a murder trial in which Goodman was one of the defense counsel.

In 1989, the FBI seized the vehicle pursuant to § 881(a)(4). The agency contended that members of the Scarfo family had used the Rolls Royce to shuttle people to and from meetings conducted as part of the Scarfo LCN family's drug distribution activities. Goodman filed a verified claim asserting innocent ownership pursuant to § 881(a)(4)(C). Goodman alleged that he did not know about, did not consent to, and was not willfully blind to the car's use in drug transactions. After a bench trial the district court rejected Goodman's innocent owner claim and held that the Rolls Royce was subject to forfeiture.

On appeal, Goodman raises two principal challenges to the district court's decision. First, he contends that the district court incorrectly held that he had failed to prove that he lacked willful blindness. Goodman submits that, by holding that Goodman was willfully blind because he failed to exercise due care to ascertain whether the car had been used to facilitate a drug transaction, the district court improperly read willful blindness as a negligence provision. The proper standard, Goodman argues, is not an objective "due care" standard but rather requires a subjective inquiry, such as "deliberate ignorance" or "conscious avoidance."

Second, Goodman claims that the district court improperly concluded that his failure to prove lack of willful blindness, standing alone, defeated his innocent ownership defense. According to Goodman, he is entitled to innocent ownership protection even if he knew or was willfully blind to the fact that the Rolls Royce had been used to facilitate a drug transaction so long as he shows that he did not consent to its use therefor. He argues that our decision in 6109 Grubb Road, 886 F.2d at 618, which held that under § 881(a)(7) an innocent owner defense would lie if the owner showed either lack of knowledge or lack of consent, mandates such a result. He reasons that since the innocent owner provision of § 881(a)(7) is virtually identical to that in § 881(a)(4)(C), he was entitled to show that, notwithstanding his willful blindness, he was an innocent owner because he did not consent to the Rolls Royce's use in the pre-transfer drug transactions.

Goodman's first challenge to the district court's decision requires us to articulate the meaning of willful blindness under § 881(a)(4)(C). Although it is not clear from its opinion, it appears that the district court may have defined willful blindness in terms of an objective "due care" standard, i.e., the owner's failure to exercise due care to discover whether the car was tainted. To the extent that the district court applied an objective standard in determining whether Goodman was willfully blind, it erred, for we believe that the appropriate standard for willful blindness is the traditional subjective standard articulated in United States v. Caminos, 770 F.2d 361, 365 (3d Cir. 1985). Under that standard, a person is willfully blind for purposes of § 881(a)(4)(C) when he or she is aware of a high probability that the conveyance was used to facilitate a drug transaction but fails to take reasonable affirmative measures to find out whether the conveyance was in fact so used. Thus, for Goodman to escape the willful blindness prong of § 881(a)(4)(C), he needs to show either 1) that subjectively he did not recognize the high probability that the vehicle was connected to a drug transaction, or 2) that he took reasonable steps under the circumstances to learn whether the vehicle had actually been used to facilitate a drug transaction. Because we cannot be sure that the district court applied this standard, we will vacate the judgment of forfeiture and remand for reconsideration.

Goodman's second challenge, relating to consent, raises a number of thorny issues. Our Conclusion, however, is straightforward. We conclude that the rationale of 6109 Grubb Road applies perforce to forfeitures under § 881(a)(4)(C), and that Goodman will be an innocent owner notwithstanding any knowledge or willful blindness he may have had if he did not consent to the use of the Rolls Royce in connection with drug transactions. Thus, assuming that Goodman can convince the factfinder that he did not own the Rolls Royce at the time it was used to facilitate a drug transaction, and was not otherwise in a position to prevent such a use of the car, he will have shown that he did not consent to its use to facilitate drug transactions and hence will be entitled to innocent owner status. While our Conclusion on this point is simple to state, it has far-reaching implications which raise a number of troubling issues about 6109 Grubb Road and the wording of the innocent owner defense in the forfeiture statutes. The 6109 Grubb Road approach essentially precludes forfeiture of property that is owned by persons who: 1) obtained an interest in the property after the illegal use; and 2) lacked knowledge about its illegal use at the time the illegal use occurred. Under 6109 Grubb Road, a post-illegal-act transferee who did not know about the act that created the taint at the time it occurred will be an innocent owner even if he or she knew about the taint at the time he or she received the property.

Given this result, the government asks that we decline to extend 6109 Grubb Road to forfeitures under § 881(a)(4)(C). But the government can point to no principled basis for distinguishing § 881(a)(4) from § 881(a)(7) for purposes of applying 6109 Grubb Road. Had Scarfo satisfied his debt to Goodman by giving him a house instead of a car, the nature of the problem would be the same, notwithstanding that the government would need to seek forfeiture pursuant to subsection § 881(a)(7) instead of § 881(a)(4)(C). Our comparison of the structure and language of §§ 881(a)(4) and (7) and analysis of 6109 Grubb Road lead us to conclude that the 6109 Grubb Road construction of the statute applies by analogy to § 881(a)(4)(C).

While 6109 Grubb Road (which is binding on us absent in banc reconsideration under this court's internal operating procedures) has its detractors, see United States v. Parcel of Real Property Known as 6109 Grubb Road, 890 F.2d 659 (3d Cir. 1989) (sur petition for rehearing) (Greenberg, J., Dissenting), its disjunctive approach ameliorates some of the harsh, and quite unfair, results that would occur under the alternative to its construction, i.e., a "conjunctive" construction requiring the owner show both a lack of knowledge and a lack of consent. Specifically, 6109 Grubb Road allows an owner to keep his or her property when he or she has not consented to the illegal use by taking all reasonable affirmative steps to prevent it. To discard the 6109 Grubb Road disjunctive construction in favor of a conjunctive one might prevent the problem we confront now, but it would create another one. A conjunctive construction would deprive innocent owner status to owners who know their property is being improperly used but are unable to put a stop to it despite having taken all reasonable steps to do so -- a result which could raise due process concerns. See Calero-Toledo v. Pearson Yacht Leasing Co., 416 U.S. 663, 688-90, 94 S. Ct. 2080, 2094-95, 40 L. Ed. 2d 452 (1974).

Although there is no Discussion in 6109 Grubb Road of the problem that the disjunctive construction creates when the statute is applied to post-illegal-act transferees, its absence is not surprising. At the time 6109 Grubb Road was decided, it was presumed that a post-illegal-act transferee could never raise the innocent owner defense because the relation back provision of the civil forfeiture statute, 21 U.S.C. § 881(h), vested title in the United States at the time of the illegal act, and thus a post-illegal-act transferee could never be an owner. That background presumption changed, however, when the Supreme Court held in United States v. Parcel of Land, Buildings, Appurtenances & Improvements at 92 Buena Vista Avenue, Rumson, N.J., 113 S. Ct. 1126 (1993), that § 881(h) did not deprive post-illegal-act transferees an opportunity to raise the innocent owner defense. In a sense, then, 92 Buena Vista Avenue, and not 6109 Grubb Road, creates the problem we face today.

We believe that, in the wake of 92 Buena Vista Avenue, a real ambiguity exists in the statutory language as read by 6109 Grubb Road. Because the civil forfeiture statute is punitive in nature, we rely on the rule of lenity to resolve the ambiguity in favor of the claimant. We understand that a countervailing maxim requires us to construe the statute to avoid an absurd result. But we do not think the result we reach is absurd. As we discuss in more detail in the main body of the opinion, language in 92 Buena Vista Avenue raises considerable doubt as to whether the forfeiture statutes are meant to reach post-illegal-act transferees who did not know about the act causing the taint until after it transpired.

As a matter of policy choice, it may be that the forfeiture laws should apply differently depending on whether a claimant obtained the property before or after the events that created the taint, but the statute, as currently drafted, fails to account for the differences between the two classes of claimants. The remedy for this problem, however, should not be a schizophrenic reading of the statutory text, for policy choices are not for us to make. Rather, the remedy should be Congressional action. Until then we will apply 6109 Grubb Road, which, as we apply it today, makes the reasonable choice of protecting post-illegal-act owners from the oppressive application of the forfeiture laws.

II. FACTS AND PROCEDURAL HISTORY

A. The Rolls Royce, and Goodman's Knowledge of Its Use

In January 1976, Scarfo purchased the 1973 Rolls Royce from Cream Puff Motors in Palm Beach, Florida. The purchase price was $25,000, most of which was paid in cash, although part was paid with a trade-in of a Lincoln Continental. Scarfo had the car registered in Florida to Anthony Gregorio, an associate of Scarfo who lived in Fort Lauderdale.

Shortly after Scarfo bought the vehicle, it was used on two occasions to facilitate drug trafficking. On the first occasion, in early 1986, Gregorio drove Scarfo, Phillip Leonetti (the "underboss" of the Scarfo LCN family), and some others from Scarfo's vacation home to a nightclub in Fort Lauderdale to meet with John DiSalvo, a drug dealer from Philadelphia involved in trafficking phenyl-2-propanane, a raw material used to manufacture methamphetamine. At that meeting, DiSalvo promised to pay Scarfo $200,000 in "street taxes" so that he could operate his drug business without interference from the Scarfo LCN family. On the second occasion, in August 1986, Scarfo called a meeting of his LCN family members at either his or Gregorio's home in Fort Lauderdale. Francis Ianarella, a "capo" in the Scarfo LCN family, came to the meeting. He flew in from Philadelphia and Gregorio picked him up at the airport in the Rolls Royce and drove him to a hotel. Not only was Ianarella in Florida to attend the meeting, but he was also bringing $50,000 in "street taxes" from drug traffickers in the Philadelphia area. The $50,000 was ultimately given to Scarfo.

By 1987, the FBI had developed enough evidence against the Scarfo LCN organization to crack down on its activities. In early 1987, the government initiated a series of prosecutions relating to the Scarfo LCN family. Goodman was involved as counsel in a number of them. In the first trial, Goodman represented former Philadelphia City Councilman Leland Beloff, who was accused, along with Scarfo, of engaging in a scheme to commit extortion upon a real estate developer. See United States v. Scarfo, 850 F.2d 1015 (3d Cir.), cert. denied, 488 U.S. 910, 102 L. Ed. 2d 251, 109 S. Ct. 263 (1988). During that trial, Goodman cross-examined Thomas DelGiorno -- one of the government's key cooperating witnesses -and during that cross-examination, Goodman forced DelGiorno to admit that the Scarfo LCN family engaged in drug trafficking. The government contends that this cross-examination put Goodman on notice that the Scarfo LCN family was engaged in that activity.

Following the extortion trial, the government attacked Scarfo's organization directly, and in 1987 indicted members of the organization, including Scarfo, on federal drug charges. Goodman represented Leonetti in the ensuing trial. During the trial, DelGiorno and Nicholas Caramandi testified for the government. DelGiorno testified at length about the Scarfo organization's involvement in drugs. Caramandi stated that, although the Scarfo LCN family had a rule against trafficking in drugs, the rule was routinely broken, and that Scarfo ordered his family members to get money from drug dealers any way they could. A jury acquitted Scarfo, Leonetti, and a few others of the charges.

In May 1988, the Commonwealth of Pennsylvania began its own prosecution of Scarfo. It ultimately tried Scarfo and Leonetti for the murder of Salvatore Testa. Testa, who had been the boss of the Philadelphia LCN (Scarfo was his "consigliere" at the time), had died when a bomb exploded in his house in early 1981. Goodman and his fellow defense attorneys won an acquittal for both Scarfo and Leonetti.

After the jury's unexpected verdict in the Testa murder case, the defendants' attorneys, friends, and family met at the Four Seasons Hotel in Philadelphia. A wild celebration ensued. According to Goodman, "nothing was spared as far as expense." For several hours "Cognac that . . . was $800 a bottle [was] imbibed by everyone there," and "$100 bottles of champagne were being shaken as if it was a World Series victory and splattered all over the wall." At the end of the evening, however, no one in Scarfo's family had the money to pay the $16,000 bill, and when Nicodemo Scarfo, Jr. approached Goodman and asked him to pay, Goodman agreed. Shortly after the Four Seasons party, Goodman accepted Scarfo Jr.'s offer to repay Goodman with the Rolls Royce and $1,500 from each of the three other attorneys present at the party.

Eventually, the federal government convinced a grand jury to indict Scarfo, Leonetti, and others in the Scarfo LCN family for RICO violations. In September 1988, a two-month RICO trial began. Goodman again represented Leonetti. This time, the jury convicted Scarfo, Leonetti, and others of RICO violations and underlying drug offenses. During this trial, on October 5, 1988, Gregorio endorsed the title to the Rolls Royce to Goodman. The transfer was never recorded on state motor vehicle records. Although it is not clear whether Gregorio delivered the title to him, Goodman did exercise some control over the car, for on March 1, 1989 he paid $4,000 to remove counter-surveillance equipment from the vehicle.

In September 1989, the FBI seized the Rolls Royce. Shortly after the seizure, Goodman came forward claiming that the car was his. The government refused to return the car, claiming that Goodman was not entitled to the Rolls Royce because it was used to facilitate drug trafficking and that Goodman knew or was at least willfully blind to that fact when he accepted the car. The car is currently impounded in Philadelphia.

B. The District Court Opinion

Following a bench trial held on February 17, 1993, the district court held that Goodman was not entitled to keep the Rolls Royce. United States v. One 1973 Rolls Royce, V.I.N. SRH-16266, 817 F. Supp. 571 (E.D. Pa. 1993). After concluding that the government had met its burden under § 881(a)(4) to show that there was probable cause for forfeiture,*fn1 the court rejected Goodman's claim that he was an innocent owner. Id. at 576. According to the court, Goodman had failed to show that he was not willfully blind to the use of the Rolls Royce to facilitate drug trafficking. Id. at 576-80.*fn2

The court recognized that the innocent owner defense of § 881(a)(4)(C) saves from forfeiture a vehicle used to facilitate drug trafficking if the owner can establish that the illegal activity was committed without the knowledge, consent, or willful blindness of the owner. Relying on two cases discussing the willful blindness standard in § 881(a)(4)(C), United States v. One 1989 Jeep Wagoneer, 976 F.2d 1172, 1175 (8th Cir. 1992), and United States v. 1977 Porsche Carrera 911, 748 F. Supp. 1180, 1186 (W.D. Tex. 1990), aff'd on other grounds, 946 F.2d 30 (5th Cir. 1991), the district court formulated the following standard for willful blindness:

Lack of willful blindness sufficient to prevail as an innocent owner under § 881(a)(4)(C) means that a claimant must show that he or she has not ignored a signal or suggestion that a vehicle might have been used to facilitate the trafficking of illegal drugs. Such a suggestion might arise from the fact that the vehicle was owned by one accused of drug trafficking. As in this case, once the claimant chooses to ignore the signal, he or she can no longer establish lack of willful blindness to the prior use of the vehicle that would subject it to forfeiture.

817 F. Supp. at 578.

Applying this standard, the district court found that Goodman had failed to prove that he was not willfully blind, i.e., that knowing what he did about Scarfo, he failed to show that he had taken any steps to determine whether the Rolls Royce facilitated drug trafficking. According to the court, Goodman's representation of Leonetti in the drug trials and his cross-examination of DelGiorno in the Beloff trial rendered his testimony that he did not think the Scarfo LCN family dealt in drugs incredible;*fn3 and Goodman's general knowledge of the Scarfo LCN family's involvement in drug trafficking was a sufficient "signal or suggestion" that the Rolls Royce had been used in connection with the trafficking of drugs. Id. at 580.*fn4 Since Goodman ...


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