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United States v. $8

May 28, 2003

UNITED STATES OF AMERICA
v.
$8,221,877.16 IN UNITED STATES CURRENCY REPRESENTING; $6,871,042.36 CONTAINED IN ACCOUNT NUMBER 030101107 KNOWN AS THE VENUS ACCOUNT, HELD IN THE NAME OF OR FOR THE BENEFIT OF KESTEN DEVELOPMENT CORP. AT MTB BANK; $1,345,771.64 CONTAINED IN ACCOUNT NUMBER 12108 KNOWN AS THE TADELAND ACCOUNT HELD AT FOREX ASSOCIATES WHICH MAINTAINS AN ACCOUNT AT EAB BANK; $5,063.16 CONTAINED IN ACCOUNT NUMBER 08-1641-3 IN THE NAME OF OR FOR THE BENEFIT OF RAMAL VENTURES AT ISRAELI DISCOUNT BANK KESTEN DEVELOPMENT CORP.
v.
MTB BANKING CORPORATION KESTEN DEVELOPMENT CORP., AND TURIST-CAMBIO VIAGENS E TURISMO LTDA., APPELLANTS



Appeal from the United States District Court for the District of New Jersey (D.C. Civil Nos. 00-cv-02667 and 00-cv-04982) District Court Judge: Honorable Nicholas H. Politan

Before: Becker, Chief Judge,*fn1 Rendell and Ambro, Circuit Judges.

The opinion of the court was delivered by: Rendell, Circuit Judge.

PRECEDENTIAL

Argued March 13, 2003

OPINION OF THE COURT

The controversy before us focuses on over eight million dollars in forfeited funds. Fighting over these funds are, on the one hand, the corporations that claim them, Kesten Development Corporation and its Brazilian parent company, Turist-Cambio Viagens e Turismo Ltda. (collectively, "Kesten"), and on the other, the United States government, to whom they have been forfeited. Somewhere in between lies Kesten's bank, which, Kesten claims, improperly turned over the funds to the government. We address two issues: first, whether we should exercise our appellate jurisdiction when the appeal is from an order terminating one of two consolidated cases, and second, whether the District Court erred in refusing to entertain Kesten's dismissal motion and granting judgment of forfeiture to the government early in the government-initiated proceedings. We conclude that we should exercise our jurisdiction and we will reverse the District Court's award of judgment of forfeiture and remand for further proceedings.

I. Background

Our story begins with the seizure of Kesten's funds. In January 1999, the DEA obtained warrants to seize the contents of bank accounts Kesten maintained at MTB and European American Bank. The warrants directed the agents to seize the funds within ten days. Within that time frame, the DEA seized all the existing funds in both accounts, totaling approximately $7.3 million. *fn2 The DEA then orally directed MTB to send it any funds subsequently deposited or wired into the MTB account. From January through December 1999, MTB did so, forwarding to the DEA over $800,000 in additional funds (the "after-deposited funds").

Kesten attacked the seizures on two fronts. First, Kesten brought a four-count suit against MTB in the United States District Court for the Southern District of New York claiming that MTB had breached its contractual, statutory, and common law obligations by turning over the after-deposited funds without any legal process authorizing that action (the "MTB action"). Next, Kesten filed a motion under Federal Rule of Procedure 41(e) in the United States District Court for the District of New Jersey seeking the return of all the funds seized by the DEA. In June 2000, after negotiations with Kesten broke down, the government instituted the forfeiture action by filing a civil complaint for forfeiture in the same court. *fn3

The forfeiture complaint alleged that the seized funds were involved in a drug money laundering conspiracy headed by a South American money exchanger, Markos Glikas. Glikas was arrested in April 1998 and convicted of conspiracy to commit money laundering in March 1999. As part of the conspiracy, Glikas allegedly delivered drug proceeds to Antonio Pires de Almeida ("Pires"), the former owner of Turist-Cambio, who would then launder the money through various intermediate accounts, ultimately depositing it in Kesten's account at MTB (the "Venus" account). The government claimed that the seized funds were subject to forfeiture under 18 U.S.C. §§ 981 and 984 for involvement in transactions that violated the federal money laundering statutes. Along with the complaint, the government served nearly forty pages of detailed interrogatories on Turist-Cambio and Kesten, as authorized by the rules governing forfeiture proceedings.

In July 2000, pursuant to a stipulation extending the deadline for filing a claim, Kesten filed a verified claim to the funds, over Pires's signature as its legal representative. Kesten was thus prosecuting a civil action in New York and defending a civil forfeiture action in New Jersey, both of which revolved around the funds seized from the Venus account.

After the government filed the forfeiture action, MTB filed a motion to have the MTB action stayed, to have the government joined as an indispensable party, or to have the action transferred to the District of New Jersey. Finding that the MTB action could have been brought in New Jersey and that transfer would serve the interests of justice because the two actions involved common questions about the propriety of the seizure, the New York District Court granted the motion for transfer. Kesten Dev. Corp. v. MTB Banking Corp., 00 Civ. 2730 (S.D.N.Y. filed Sept. 22, 2000).

At a status conference after the transfer, the Magistrate Judge overseeing discovery in the forfeiture action entered an order sua sponte consolidating the forfeiture and MTB actions "for all purposes." The Judge then ordered the MTB action "stayed for all purposes pending a decision on the motions" then before the Court in the forfeiture action.

The motions then before the Court in the forfeiture action arose out of Kesten's motion to dismiss. The government had granted Kesten additional time to "answer or otherwise respond to" the forfeiture complaint. Within the stipulated time period, Kesten filed a motion to dismiss pursuant to Federal Rule of Civil Procedure 12, based on, inter alia, the government's failure to file the complaint within the applicable statute of limitations. Rather than responding to Kesten's motion, the government cross-moved for an order directing Kesten to answer the complaint and respond to the interrogatories, arguing that the Supplemental Rule governing forfeiture pleadings was inconsistent with the relevant Federal Rule of Civil Procedure and required Kesten to answer the interrogatories before filing any dispositive motions. The District Court agreed, holding that a forfeiture claimant may not file a motion to dismiss, or any other dispositive motion, in lieu of an answer. United States v. $8,221,877.16 in U.S. Currency, 148 F. Supp. 2d 427, 434 (D.N.J. 2001). The Court then dismissed Kesten's motion to dismiss without prejudice and directed Kesten to serve its answer and respond to the interrogatories.

Faced with the prospect of responding to enormously detailed interrogatories, Kesten petitioned the Court for relief. After a hearing, the Magistrate Judge limited the scope of the interrogatories and ordered Pires to submit to a deposition in the United States. (Mag. Order of July 13, 2001) Unfortunately for Kesten, Pires declined to do so, as he was apparently in ill health and also feared that he would be arrested upon entry into the U.S. He did, however, indicate his willingness to be deposed in Brazil. Kesten responded to the remaining interrogatories but never produced Pires for the deposition.

The government then moved for discovery sanctions under Rule 37(b), asking the District Court to strike Kesten's claim. The District Court granted the government's motion, dismissed Kesten's claim to the funds, and, twelve days later, entered a final judgment of forfeiture. Kesten thus lost the funds without ever having a chance to attack the complaint.

MTB then filed a motion to dismiss the MTB action, arguing that Kesten should be barred by principles of res judicata and collateral estoppel from asserting any further interest in the funds in the MTB action, or alternatively that Kesten's civil suit should be dismissed for the same discovery violation that resulted in the dismissal of Kesten's claim to the funds because MTB was also purportedly harmed by Kesten's failure to produce Pires. A1494. That motion is still pending. *fn4

II. Jurisdiction

We exercise jurisdiction pursuant to 28 U.S.C. § 1291 over those district court orders that are final. The District Court here dismissed Kesten's claim and entered a forfeiture judgment in favor of the government that would ordinarily be considered final. See, e.g., United States v. Ten Thousand Seven Hundred Dollars & No Cents, 258 F.3d 215, 221 (3d Cir. 2001) (finding decree of forfeiture to be final, appealable order); United States v. Contents of Accounts Nos. 3034504504 & 14407143 (In re Friko Corp.), 971 F.2d 974, 978 n.3 (3d Cir. 1992) (finding order striking claim to be final, appealable order). But this is no ordinary forfeiture case. The forfeiture action from which Kesten appeals was consolidated "for all purposes" with the civil action that Kesten initiated against MTB Bank, which is still pending. Normally, under Rule 54(b), any order that disposes of "fewer than all of the claims or the rights and liability of fewer than all the parties" is not a final, appealable order unless certified as such by the district court. Fed. R. Civ. P. 54(b).

Kesten argues that we may exercise jurisdiction because the orders appealed from should be considered final notwithstanding the pendency of the bank action. *fn5 Interestingly, MTB has notified the Court that it is not a party to the case on appeal and is not directly impacted by the question of our jurisdiction over the issues presented in the forfeiture case. The government, although it recognizes that there is an issue as to our jurisdiction, also urges the Court to address the forfeiture issues before the MTB action proceeds.

The consolidation of two cases does not automatically preclude the appealability of an order in one. We have consistently rejected a bright-line rule, preferring a case-by-case approach that examines the overlap among the claims, the relationship of the various parties, and the likelihood of the claims' being tried together. See Hall v. Wilkerson, 926 F.2d 311, 314 (3d Cir. 1991); Bergman v. Atlantic City, 860 F.2d 560, 567 (3d Cir. 1988). Applying this fact-specific approach to the case at hand, we conclude that the orders in the forfeiture case are final for purposes of appeal.

A close examination of our previous precedents in which we have spoken on this issue guides our reasoning and supports this result. In Bergman, our first case to address this issue, we held that an order disposing of one suit that had been consolidated for all purposes of discovery and trial with a second suit was not a final, appealable order where the second suit was still pending. Id. at 567. There, a homeowner, suing in his individual capacity and seeking to represent a class of homeowners, sued various municipal and housing authorities for amending a development plan without the consent of the homeowners. The Homeowners Association that represented the relevant homeowners filed a second suit with the same central claims. The two suits were then consolidated "for all purposes of discovery and trial." Id. at 562-63. Following consolidation, the district court granted summary judgment for the defendants against the individual homeowner. The individual homeowner appealed. Id. at 563.

We dismissed the appeal for lack of appellate jurisdiction. In coming to our conclusion that the summary judgment order in the individual homeowner's case was not a final order, we discussed our reasoning in Bogosian v. Gulf Oil Corp., 561 F.2d 434 (3d Cir. 1977), in which a similar issue of finality had been presented, but in the context of the certification of a summary judgment order in one of two consolidated cases. Bergman, 860 F.2d at 564. There, two actions had been consolidated, but not "for all purposes." We held that the two cases were not a single unit and that an order in one case could be certified under Rule 54(b). Bogosian, 561 F.2d at 441. We looked behind the consolidation label and examined the actual relationship of one case to the other. First, we noted factors mitigating against the cases' separateness: "That both plaintiffs are represented by the same attorney, the suits are filed in the same forum, are before the same judge, and the complaints and the defendants are identical." Id. However, we then noted that "the cases have not been consolidated for trial," and that it was "possible that the cases could be scheduled for trial at different times and be tried before different juries." Id. We then held that "at least absent consolidation for all purposes of cases separately filed, each civil action is to be viewed as a separate unit." Id.

In Bergman we relied on our reasoning in Bogosian and endorsed consideration of the factors we had outlined there for determining whether an order in a consolidated case was final for purposes of appeal. Bergman, 860 F.2d at 567. Rejecting a bright-line rule, we noted the relevant factors as including whether the cases were in the same forum before the same judge, whether the claims and parties were identical, and whether the cases were consolidated for trial or just for pre-trial administration. Id. We then reasoned that, because the two cases were consolidated for all purposes of discovery and trial, and the adjudication of the issues as to the individual plaintiff would necessarily affect the rights of the Homeowners Association, the order disposing of the individual's claim was not final. Id.

In our next case in which we addressed "finality" concerns in consolidated actions, we applied the Bogosian factors and found that an order disposing of one case was a final order for purposes of appeal. See Hall, 926 F.2d at 314. In Hall, we were faced with three consolidated cases: two were declaratory judgment actions requesting a determination as to whether a driver who had been in an accident was an "insured" under an insurance policy, and the third was a tort action against the driver. Id. at 312-13. After a hearing, the court entered a judgment that the driver was not an "insured." The driver appealed, even though the district court refused to certify the judgment as final. The tort action was scheduled for trial several months later. Id. at 313.

We held that the driver could appeal the order in the declaratory actions. Id. at 314. We noted that our rulings in Bergman and Bogosian had turned on whether the cases had been consolidated for trial. Id. We also emphasized that in Bergman the complaints in the two actions were "substantially similar." Id. We then applied the Bogosian factors and determined that because the claims were not the same, the parties were not identical, and it was unlikely that the actions would be tried together because trial of the insurance coverage issue before the same jury would have impermissibly introduced the issue of insurance into the tort action, the order in the declaratory action was final. Id.

Our case law thus instructs us to apply the Bogosian factors to determine whether the MTB action and the forfeiture action here are truly a single unit. When we do so, we find that, as in Hall, the orders on appeal ...


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