The opinion of the court was delivered by: Audrey B. Collins Chief United States District Judge
ORDER RECONSIDERING DENIAL OF MOTION TO INTERVENE AND PROVIDING CERTAIN RELIEF TO THE KIM CLAIMANTS' ATTORNEY
The dispute pending before the Court involves federal tax liens issued against property that the Kim Claimants' attorney argues belong to him. Through the twists and turns of this dispute, the Court previously followed the Government down the rabbit hole into the Wonderland of an Internal Revenue Code wrongful levy action.*fn1 During that journey it became clear to the Court that it had gone astray. Indeed, the Government eventually argued in the wrongful levy action that the dispute at issue should be adjudicated in this forfeiture action.
For the reasons discussed below, the Court finds that: (1) it is appropriate to reconsider its minute order denying the Kim Claimants' attorney's motion to intervene (FA Docket No. 654);*fn2 (2) the Fee Awards ordered by this Court are payable directly to the Kim Claimants' attorney; and (3) the dispute between the Kim Claimants' attorney and the Government over priority in the Seized Properties is not ripe for adjudication.
This forfeiture case arises out of a fraud and embezzlement scheme allegedly directed by Christopher "KJ" Kim ("Kim") and perpetrated against two South Korean corporations -- DAS Corporation ("DAS") and Optional Capital, Inc. ("Optional"). On April 21 and May 13, 2004, the Government filed two civil in rem forfeiture complaints against certain of the Kim Claimants'*fn3 assets -- the Martin Lane properties (CV 04-2788) and the Beverly Drive properties (CV 04-3386). On May 27, 2005, the Government filed a third in rem forfeiture complaint -- All Funds (CV 05-3910) -- against additional Kim Claimant assets.*fn4 In its complaints, the Government claims the Seized Properties were subject to forfeiture because the Kim Claimants acquired them with the proceeds of Kim's alleged fraud and embezzlement scheme. The Kim Claimants were represented in this action by Eric Honig and the Law Offices of Eric Honig, APLC ("Honig").
The Government's substantive claims have all now been finally adjudicated against it.*fn5 During the course of the litigation, this Court has issued several orders requiring the Government to pay the Kim Claimants' attorney's fees. (See FA Docket No. 440 (awarding $1,172,137.90 in fees); FA Docket No. 657 (granting $282,650 in fees).)*fn6 The Fee Awards were deposited with the Court Clerk pursuant to Federal Rule of Civil Procedure 67.
The pending dispute relates to the Government's contention that it may use the Kim Claimants' interests in the Seized Properties and Fee Awards to pay off their roughly $25,000,000 in purported tax liabilities. On the other hand, Honig contends that $2,710,000 in fees owed him from the Kim Claimants has priority over the Government's claims, and should come out of the Seized Properties and Fee Awards free of any encumbrance by the Government.
The dispute was first brought to the Court's attention when Honig filed a motion in the Forfeiture Action seeking an order recognizing the priority of his liens over the Government's liens. (See FA Docket No. 584 at 4-5.) Among other arguments raised, the Government asserted that "an in rem forfeiture proceeding is an improper action in which to bring the subject priority claim." (E.g., FA Docket No. 592 at 7 (citing, inter alia, the wrongful levy statute, 26 U.S.C. § 7426(a)(1)).) The Court ultimately denied Honig's request based in part on that concern. (FA Docket No. 603 at 3.)
Honig then filed a motion to intervene in the Forfeiture Action. The Government opposed that motion, arguing that denying intervention would not impair Honig's interest in light of the fact that he had also filed a Wrongful Levy Action (Case No. 09-7568):
(b.) Intervenor Will not be Impaired by the Disposition of this Action Absent Intervention In his Wrongful Levy Action, Intervenor demands that the IRS levies on the Defendant Assets on all prior and prospective attorneys fees awards be removed to allow him to be paid the assets and the awarded funds. As Intervenor recognizes, this is exactly what he desires to achieve by intervening in this case.
Because Intervenor already has a way to obtain all of the relief he seeks, no impairment would result to his interests if the Court were to deny intervention. The mere inconvenience of litigating a separate lawsuit is not a sufficient impairment. If the applicant for intervention would receive the same remedy from another pending action that he sought by intervening, he has failed to demonstrate that the disposition of the pending action may, as a practical matter, impair or impede his ability to protect his interest.
(FA Docket No. 648 at 12) (internal citations omitted).) The Court ultimately adopted that reasoning in denying the motion to intervene. (See FA Docket No. 654 at 2.)
The Court and the parties then proceeded to adjudicate the dispute in the Wrongful Levy Action. The parties filed cross-motions for summary judgment on whether the Government's levies were wrongful under the Internal Revenue Code. As the briefing on those motions advanced, the Government changed a number of its positions, eventually arguing that the dispute should be adjudicated in the Forfeiture Action as originally urged by Honig. (See, e.g., WLA Docket No. 49 at 2.) For example, at the May 17, 2010 hearing on the summary judgment motions, the Government argued that, "[i]f the real issue is how the proceeds are going to be distributed and the claims on that, the wrongful levy case -- the wrongful levy vehicle isn't the vehicle that should be used. It should have been in the forfeiture action, in motions for distribution, or perhaps, I suppose, even an interpleader." (WLA Docket No. 59 at 8.) The Government's arguments made clear that Honig could obtain the desired relief -- an order that his interests are superior to the Government's interests -- in the Forfeiture Action without showing that the levies were "wrongful," as is required to prevail on a wrongful levy claim. (See, e.g., WLA Docket No. 59 at 9 ("regardless of the lien ...