The opinion of the court was delivered by: Hon. Jeffrey T. Miller United States District Judge
ORDER DENYING MOTION FOR RETURN OF PROPERTY UNDER FED.R.CRIM.P. 41(g) Doc. No. 1
Pending before the court is a motion by Account Services Corporation ("ASC") for the return of funds seized from Wells Fargo Bank ("Wells Fargo") account number 7986104185 and from Union Bank, N.A. ("Union Bank") accounts numbered 353000248 and 353000256, pursuant to Fed.R.Crim.P. 41(g). (Doc. No. 1, "Mot.") The government opposes the motion on jurisdictional grounds. (Doc. No. 9, "Opp'n.") ASC submitted a reply brief on August 14, 2009. (Doc. No. 13.) Non-party Poker Players' Alliance was granted leave to appear as amicus curiae (Doc. No. 6) and submitted a brief on ASC's behalf. (Doc. No. 11.)
The court determined the matter was suitable determination without oral argument pursuant to Civ.L.R. 7.1(d).*fn1 For the reasons set forth below, the court declines to exercise equitable jurisdiction and therefore DENIES the motion without prejudice.*fn2
Movant ASC is a San Diego-based payment processor which processes payments for internet poker players who hold real money accounts with online game operators or operator-designated third-party processors. (Mot. at 2.) According to ASC, when a player desires a payout from his online poker account, the operator or third-party processor will forward the requested funds to ASC for disbursement. (Mot. at 3.) ASC then confirms the identity of the player and issues a check for the requested amount. (Mot. at 3.) For this purpose, ASC maintains the above-mentioned bank accounts with Wells Fargo and Union Bank.
On June 2, 2009, the Office of the United States Attorney for the Southern District of New York obtained a seizure warrant for "all funds on deposit" in the Wells Fargo account. (Mot. at 3, Exh. 3.) The warrant issued based on an affidavit filed under seal by Federal Bureau of Investigation Special Agent Dana Conte, and relying on 18 U.S.C. §§ 981, 984, and 1555. (Mot. at 3-4.) On June 12, 2009, the Department of Justice notified Union Bank that exigent circumstances required freezing the two ASC accounts held there to prevent dissipation of the funds, citing U.S. v. Daccarett, 6 F.3d 37 (2d Cir. 1993). (Mot. at 4, Exh. 5.) On June 24, 2009, the government obtained a formal seizure warrant for the two Union Bank accounts. (Mot. at 4, Exh. 6.) In total, the seized funds in the three accounts exceeded $14,000,000. (Mot. at 4.) In addition to the trust funds, the accounts included ASC's operating funds and a small amount of funds unrelated to online poker. (Mot. at 4, Exh. 2.) According to ASC, at the time of the seizure, it had approximately 13,800 checks to individual players outstanding. (Mot. at 4.)
By letter served July 4, 2009, ASC requested the government return the funds within 15 days or else it would file a motion for return of property. (Opp'n at 3, Exh. 4.) The present motion was filed in this court on July 10, 2009. Thereafter, on August 5, 2009, an indictment was filed against Douglas G. Rennick, principal of ASC, in the Southern District of New York. (Opp'n at 3.) The indictment indicated the government would seek criminal forfeiture of the funds. (Opp'n at 3.) An arrest warrant for Douglas Rennick issued based on the indictment but as of August 7, 2009, he had not surrendered or been arrested. (Opp'n at 3, 7 n. 3.) //
Under Fed.R.Crim.P. 41(g):
A person aggrieved by an unlawful search and seizure of property or by the deprivation of property may move for the property's return. The motion must be filed in the district where the property was seized.
Rule 41(g) motions are governed by the criminal procedure rules when they are "used to seek the return of seized property after an indictment has been issued." Black Hills Institute of Geological Research v. U.S. Dep't of Justice, 967 F.2d 1237, 1239 (8th Cir. 1992). However, when Rule 41(g) motions are made before an indictment is filed, as here, they are properly "treated as civil equitable proceedings." Ramsden v. U.S., 2 F.3d 322, 324 (9th Cir. 1993); U.S. v. Martinson, 809 F.2d 1364, 1366-67 (9th Cir. 1987). "Though styled as a motion under a Federal Rule of Criminal Procedure, when the motion is made by a party against whom no criminal charges have been brought, such a motion is in fact a petition that the district court invoke its civil equitable jurisdiction." U.S. v. Comprehensive Drug Testing, Inc., No. 05-10067 (9th Cir. Aug. 26, 2009) (citing Ramsden, 2 F.3d at 324). Even where a particular district court has subject matter jurisdiction over the motion, the court "must exercise 'caution and restraint'" before exercising equitable jurisdiction over its merits. Ramsden, 2 F.3d at 324 (quoting Kitty's East v. U.S., 905 F.2d 1367, 1370 (10th Cir. 1990)); De Almeida v. U.S., 459 F.3d 377, 382 n. 3 ("the court correctly recognized it had subject matter jurisdiction but equitably declined to exercise that jurisdiction").
Under Ninth Circuit law, a district court should evaluate four factors when deciding whether to exercise equitable jurisdiction over a pre-indictment Rule 41(g) motion:
1) whether the Government displayed a callous disregard for the constitutional rights of the movant; 2) whether the movant has an individual interest in and need for the property he wants returned; 3) whether the movant would be irreparably injured by denying return of the property; and 4) ...