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Touhey v. United States


August 20, 2009


The opinion of the court was delivered by: VIRGINIA A. Phillips United States District Judge

[Motion filed on April 17, 2009]


Defendants' Motion to Dismiss came before the Court for hearing on June 15, 2009. After reviewing and considering all papers filed in support of, and in opposition to, the Motion, as well as the arguments advanced by counsel at the hearing, the Court DENIES the Motion.


A. Factual Allegations

On or about June 21, 2007, Drug Enforcement Administration ("DEA") agents seized $26,943.83 from a bank account held by Plaintiff Cherise Touhey ("Plaintiff"), as well as other money from other accounts held by Plaintiff and accounts held by other persons. (Compl. ¶¶ 27-30.) On or about August 6, 2007, Plaintiff filed a claim with DEA contesting the forfeiture of the $26,943.83. (Id. at ¶ 29.) On October 13, 2007, the government instituted a judicial forfeiture proceeding against some of the assets seized on June 21, 2007 but not against Plaintiff's $26,943.83. (Id. at ¶ 30.) The government returned Plaintiff's $26,943.83 on January 9, 2008 but "did not include the nearly seven months' interest accrued on the funds, and the [D]efendants have never returned said interest to [Plaintiff]." (Id. at ¶ 31.)

B. Procedural History

On October 14, 2008, Plaintiff, on behalf of herself and all others similarly situated, filed a putative class action Complaint against Defendants United States of America and Michael B. Mukasey seeking: (1) "[A]n injunction and/or declaratory relief ordering payment or disgorgement of interest accrued on all seized funds later returned" pursuant to 5 U.S.C. § 701, et seq.; and (2) "[A]n injunction and/or declaratory relief ordering defendants to pay interest on all returned funds as to all pending and future seizures" pursuant to 5 U.S.C. § 701, et seq.

On April 17, 2009, Defendants filed a "Motion to Dismiss Action" ("Motion") and Request for Judicial Notice ("RJN"), with six exhibits attached. Plaintiff filed Opposition on May 4, 2009. Defendants filed a Reply on May 15, 2009 and a Supplemental Request for Judicial Notice ("Supp. RJN"), attaching two additional exhibits.


Under Rule 12(b)(6), a party may bring a motion to dismiss for failure to state a claim upon which relief can be granted. As a general matter, the Federal Rules require only that a plaintiff provide "'a short and plain statement of the claim' that will give the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests." Conley v. Gibson, 355 U.S. 41, 47 (1957) (quoting Fed. R. Civ. P. 8(a)(2)); Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). In addition, the Court must accept all material allegations in the complaint - as well as any reasonable inferences to be drawn from them - as true. See Doe v. United States, 419 F.3d 1058, 1062 (9th Cir. 2005); ARC Ecology v. U.S. Dep't of Air Force, 411 F.3d 1092, 1096 (9th Cir. 2005).

"While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the 'grounds' of his 'entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atlantic, 550 U.S. at 555 (citations omitted). Rather, the allegations in the complaint "must be enough to raise a right to relief above the speculative level." Id.

In other words, the allegations must be plausible on the face of the complaint. See Ashcroft v. Iqbal, 556 U.S. __, 129 S.Ct. 1937, 1949 (2009). "The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are 'merely consistent with' a defendant's liability, it stops short of the line between possibility and plausibility of 'entitlement to relief.'" Id. (citations and internal quotations omitted).

Although the scope of review is limited to the contents of the complaint, the Court may also consider exhibits submitted with the complaint, Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1555 n.19 (9th Cir. 1990), and "take judicial notice of matters of public record outside the pleadings," Mir v. Little Co. of Mary Hosp., 844 F.2d 646, 649 (9th Cir. 1988).


Defendants move to dismiss Plaintiff's Complaint claiming: (1) Plaintiff lacks standing to bring her claims; (2) the Court has limited review of APA actions and should not review the APA's actions in this case; (3) Plaintiff has not exhausted her administrative remedies under the APA, 5 U.S.C. § 701, et seq., before filing this lawsuit; and (4) Plaintiff cannot state a claim for violation of the APA or the Little Tucker Act, 28 U.S.C. § 1346(a)(2). (See Mot. at 1-2.)

A. Standing

Defendants move the Court to dismiss Plaintiff's Complaint because Plaintiff lacks standing. (See Mot. at 13-16.) To satisfy the Court's standing requirements under Article III to the United States Constitution, a plaintiff must show: (1) injury in fact; (2) causation; and (3) redressability. See Friends of the Earth, Inc. v. Laidlaw Environmental Serv. (TCO), Inc., 528 U.S. 167, 168-69 (2000) (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992)).

1. Injury in Fact

Plaintiff's purported injury was Defendants' return of Plaintiff's seized money without the interest it accrued during the seven months the Government held it. (See Compl. at ¶ 31.) To show injury in fact, a Plaintiff must have suffered "an invasion of a legally protected interest which is (a) concrete and particularized; and (b) actual or imminent, not conjectural or hypothetical." Lujan, 504 U.S. at 560 (internal citations and quotations omitted).

According to Defendants, Plaintiff cannot show she has suffered an injury in fact because they had no legal obligation to pay interest accrued on Plaintiff's seized money at the time they returned the money. (See Mot. at 14.) That requirement - to return accrued interest on money the Government seized improperly, even in the absence of a court order requiring them to do so - only arose after issuance of Carvajal v. United States, 521 F.3d 1242 (9th Cir. 2008); Carvajal, decided four months after the Government returned Plaintiff's money, "caused a change in the law and created a new legal obligation that had not previously existed." (Mot. at 10.)*fn1

Defendants argue the obligations imposed by Carvajal do not apply to their actions here because they returned the seized funds before the Ninth Circuit issued its decision, and therefore Plaintiff cannot show injury in fact. (Id.)

In opposition, Plaintiff argues Carvajal did not change the law, but rather recognized the continued viability of the legal obligation to return interest on improperly seized assets, announced thirteen years earlier in U.S. v. $277,000 U.S. Currency, 69 F.3d 1491 (9th Cir. 1995). (See Opp'n at 9-11.) According to Plaintiff, Defendants breached their legal obligation, existing at the time it returned Plaintiff's seized funds without any interest, thereby demonstrating her injury in fact. (Id. at 10.)

In $277,000, the government seized cash and a truck from Ramon Montes and instituted forfeiture proceedings against the property. 69 F.3d at 1492. After approximately five years, the district court ordered the government to return the property to Mr. Montes with interest. Id. The government moved to set aside the judgment, the district court denied the motion, and the government appealed. Id.

On appeal, the government argued sovereign immunity barred Mr. Montes' recovery of prejudgment interest. Id. at 1493. The Ninth Circuit recognized the rule that "interest cannot be recovered in a suit against the government in the absence of an express waiver of sovereign immunity from an award of interest." Id. (internal quotations and citation omitted). Despite the rule, the court found the case did not implicate sovereign immunity, as "[t]here [was] no element ... of forcing the government to pay for damage it ha[d] done, only [an order] that it must disgorge benefits that it ha[d] actually and calculably received from an asset that it ha[d] been holding improperly." Id. at 1498. Thus, the court affirmed the district court's denial of the government's motion. Id.

Thirteen years later, the Ninth Circuit revisited the issue in Carvajal, when it determined whether or not the holding in $277,000 remained viable after Congress passed the Civil Asset Forfeiture Reform Act ("CAFRA") in 2000. 521 F.3d at 1244. Under CAFRA, a person may recover interest accrued on improperly seized assets "when the government institutes civil forfeiture proceedings and a plaintiff substantially prevails." Carvajal, 521 F.3d at 1247; see also 28 U.S.C. § 2465(b)(1)(C).

In Carvajal, the plaintiff sought return of "accrued interest on currency that the government wrongfully seized and then returned 10 months later, without having instituted judicial foreclosure proceedings." Id. The plaintiff brought her claim for interest under $277,000, not under CAFRA.

The Ninth Circuit found "CAFRA [did not] supplant[] all pre-CAFRA forfeiture law" and, because it "did not address in any way what happens in the absence of a civil forfeiture proceeding," the holding in $277,000 remained good law and did not conflict with CAFRA. Carvajal, 521 F.3d at 1247-49. Furthermore, the court declined the government's request to "read into $277,000 ... the requirement of a court order before interest accrues on improperly seized money." Id. at 1245-46. The court found the government's own determination that it held funds improperly and decision to return the funds obviated the need for a court order. Id. Accordingly, the court found the district court improperly dismissed the plaintiff's claim for interest on her improperly seized funds. Id. at 1249.

Defendants' attempts to evade the holding of Carvajal fail. That case did not create a change in forfeiture law, but rather recognized the continued viability of $277,000 and its application in the very context presented here. In other words, when Defendants returned Plaintiff's money to her, $277,000 required the government to return interest earned on the money to Plaintiff, as the Carvajal decision later explicitly held. Carvajal, 521 F.3d at 1247-49. Defendants' failure to return the earned interest to Plaintiff constitutes Plaintiff's injury in fact. Accordingly, this prong of the standing analysis is satisfied.

2. Causation

As to the causation prong, Defendants baldly argue Plaintiff "is incapable of ... alleging a causal connection between her alleged injury (the non-receipt of interest on the returned funds) and any agency action." (Mot. at 15.) According to Defendants, they relied on their interpretation of CAFRA by returning Plaintiff's money without interest. (Id.) Finally, Defendants argue Plaintiff's commencement of this lawsuit before asking them for the interest "had the effect of preventing agency action on the request, nullifying any potential causal connection." (Id. at 16.)

To satisfy the causation requirement, a plaintiff must show a "causal connection between the injury and the conduct complained of - the injury has to be 'fairly ... trace[able] to the challenged action of the defendant, and not th[e] result [of] the independent action of some third party not before the court.'" Lujan, 504 U.S. at 560 (quoting Simon v. E. Ky. Welfare Rights Org., 426 U.S. 26, 41-42 (1976)).

Defendants' arguments are not persuasive.

Plaintiff's injury - non-receipt of the interest owed her - was a direct result of Defendants returning her money without accrued interest. Whether or not Plaintiff first asked Defendants for the interest before filing her lawsuit is irrelevant to this inquiry; her injury occurred when she received her seized funds without interest. There exists a direct connection between Defendants' action and Plaintiff's injury.

3. Redressability

Defendants argue "Plaintiff cannot demonstrate a likelihood of redress for the reasons explained in these papers. The utter lack of agency action is an absolute bar to her APA claims." (Mot. at 16.)

To satisfy the redressability requirement, the plaintiff must show "it must be likely, as opposed to speculative, that the injury will be redressed by a favorable decision." Lujan, 504 U.S. at 560 (internal quotations and citation omitted).

Clearly, a judgment from this Court ordering Defendants to pay Plaintiff the interest accrued on her money while the Government held it would redress Plaintiff's injury. Thus, Plaintiff satisfies this prong.

Accordingly, the Court finds Plaintiff has established her standing to bring this lawsuit.

Furthermore, Plaintiff has stated a claim for violation of the APA by alleging facts that fall squarely under $277,000, as recognized in Carvajal.

B. APA Reviewable Agency Action & Exhaustion

Next, Defendants argue the Court does not have jurisdiction to hear this case for two reasons: (1) Plaintiff seeks judicial intervention for an agency action that was not final nor reviewable by the Court; and (2) Plaintiff did not exhaust her administrative remedies before filing this lawsuit. (See Mot. at 17-20.) In Opposition, Plaintiff argues Defendants' return of her money without interest constituted a final agency action and she had no venue in which to bring her claim besides this Court, as there were no further administrative remedies available to her. (See Opp'n at 12.)

Claims brought under the APA, as are Plaintiff's here, may be brought only to review final agency actions. See 5 U.S.C. § 704. Courts apply the exhaustion doctrine - that is, to require aggrieved persons to bring their complaint first against the agency, before seeking judicial intervention - "to allow an administrative agency to perform functions within its special competence to make a factual record, to apply its expertise, and to correct its own errors so as to moot judicial controversies." Parisi v. Davidson, 405 U.S. 34, 37 (1972).

Here, the Court is not persuaded by Defendants' argument that their return of Plaintiff's money did not constitute a final agency action for the purposes of the APA. The decision by Defendants not to institute forfeiture proceedings against Plaintiff's money and return the money to Plaintiff constituted a final decision with respect to that asset. There is no evidence before the Court to demonstrate the return of Plaintiff's money was conditional, for example. Accordingly, the Court finds Plaintiff's claims arise from a final agency action, meeting the requirements of 5 U.S.C. § 704.

Turning to Defendants' exhaustion argument, the Court finds Plaintiff has exhausted her administrative remedies. Based on the record here, there was no explicit administrative procedure within which Plaintiff could assert her claims for the interest earned on her seized money. Although Plaintiff challenges a final action by an administrative agency, the agency provided no procedure for Plaintiff to raise her claim; thus, the Court declines to dismiss Plaintiff's Complaint for her failure to comply with a non-existent administrative procedure.

C. Venue

Next, Defendants argue this Court is not the proper venue for this action and urges the Court to transfer the case to the Court of Federal Claims. (See Mot. at 28-30.) Defendants point out not all Circuits have adopted the rule of the Ninth Circuit, recognizing the duty of the government to return interest accrued on seized assets it returns; thus, certifying a nationwide class action would be improper in this case. (Id.) As Plaintiff argues in Opposition, Defendants cite no authority for this argument. Accordingly, the Court finds Defendants' position on this issue unfounded.


For the foregoing reasons, the Court DENIES Defendants' Motion to Dismiss.*fn2

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