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Cherise Touhey, On Behalf of Herself and All Others Similarly v. United States of America and Eric H. Holder

July 25, 2011

CHERISE TOUHEY, ON BEHALF OF HERSELF AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFF,
v.
UNITED STATES OF AMERICA AND ERIC H. HOLDER, JR., IN HIS OFFICIAL CAPACITY AS UNITED STATES ATTORNEY GENERAL, DEFENDANTS.



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

JS-6

ORDER GRANTING JOINT MOTION FOR FINAL APPROVAL OF CLASS ACTION SETTLEMENT [Motion filed on June 13, 2011]

Before the Court is the Joint Motion for Final Approval of Class Action Settlement ("Joint Motion") filed by Plaintiff Cherise Touhey ("Plaintiff" or "Touhey"), on behalf of herself and all others similarly situated ("Plaintiffs"), and Defendants United States of America and Eric H. Holder, Jr., in his official capacity as United States Attorney General (collectively, "Defendants" or "the government"). The parties came before the Court for the final fairness hearing on July 19, 2011. After considering all papers filed in support of the Joint Motion and the arguments put forth at the hearing, the Court GRANTS the Motion.

I. BACKGROUND

A. Factual Background

On June 21, 2007, agents from the Pomona Police Department and the Drug Enforcement Administration ("DEA") seized, among other items, $26,943.83 from a bank account in Touhey's name. (Compl. ¶ 27; Doc. No. 39 (Jan. 14, 2010, Minute Order) at 2-3.) The DEA then initiated administrative forfeiture proceedings, which Touhey contested. (Compl. ¶¶ 28-29.) On October 13, 2007, the government filed a judicial complaint against other seized property, but not against the seized $26,943.83. (Id. ¶ 30.) On January 9, 2008, the U.S. Marshals Service returned the seized funds to Touhey through her attorney by check. (Id. ¶ 31.) The check did not include any interest accrued on the funds for the seven months it was held by the government, and Touhey has not received any additional payments since that time. (Id.)

B. Procedural History

On October 14, 2008, Touhey, on behalf of herself and all others similarly situated, filed a putative classaction complaint against Defendants seeking: (1) "an 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) "an 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. (Doc. No.1.)

On August 20, 2009, the Court denied Defendants' motion to dismiss the action. (Doc. No. 21.) On January 14, 2010, the Court denied Defendants' motion for summary judgment. (Doc. No. 39.) On September 21 and October 28, 2010, the parties engaged in a settlement conference with Magistrate Judge Rosalyn M. Chapman. (Doc. Nos.50,52.)

On December 20, 2010, the parties filed a Joint Motion for Preliminary Approval of Class Action Settlement ("Preliminary Joint Motion"), requesting the Court: (1) preliminarily approve the class action settlement; (2) conditionally certify a class pursuant to Federal Rules of Civil Procedure 23(b)(1)(A) and 23(b)(2) for purposes of settlement; (3) appoint the Law Office of Eric Honig as class counsel; (4) schedule a final fairness hearing to consider final approval of the settlement; and (5) require the parties to complete theirresponsibilities as set forth in the settlement agreement prior to the final fairness hearing. (Doc. No. 53.)

On January 25, 2011, the Court: (1) denied the Preliminary Joint Motion on the grounds that Defendants had failed to meet their obligations under the Class Action Fairness Act of 2005 ("CAFA"); (2) certified the proposed class defined as "All claimants or other persons with concluded CAFRA non-judicial forfeiture cases, where no judicial complaint was filed and all of the seized currency was returned, but without interest, within the jurisdiction of the Ninth and Sixth Circuit Courts of Appeal"; and (3) appointed the Law Office of Eric Honig as class counsel ("Class Counsel"). (Doc. No. 56 (January 2011 Preliminary Approval Order).)

On January 28, 2011, the parties filed an Amended Joint Motion for Preliminary Approval of Class Action Settlement ("Amended Preliminary Joint Motion") stating the parties had since complied with the CAFA requirements. (Doc. No. 58.) On February 3, 2011, the Court: (1) granted the Amended Preliminary Joint Motion;(2) preliminarily approved the proposed settlement agreement, except for paragraphs 48 regarding the incentive payment to Touhey and paragraphs 75 through 78 regarding attorneys' fees; and (3) set a scheduling order and dates for a final fairness hearing and relateddeadlines. (Doc. No. 61 (February 2011 Preliminary Approval Order).)

The Court established June 13, 2011, as the deadline for class members to opt out of the settlement, and ordered the parties to file a motion for final approval of the settlement no later than June 13, 2011. (February 2011 Preliminary Approval Order at 3-4.)

The parties filed the Joint Motion on June 13, 2011. (Doc. No. 65.) In support of the Joint Motion, the parties submitted: (1) a declaration from Defendants' counsel Victor A. Rodgers ("Rodgers Decl."), including his declaration from the Sueoka Action*fn1 in support of final approval of that settlement (Rodgers Decl., Ex. A), and evidence of the government's compliance with the requirements of CAFA (id., Exs. B-D) (Doc Nos. 65-1--65-5); (2) a declaration from settlement implementor Jennifer Bukvics ("Bukvics Decl."), including copies of the proposed settlement notice and claim form that were sent out, published in USA Today, and posted on the website regarding the settlement (Bukvics Decl., Exs. AE) (Doc. Nos. 65-6--65-11); (3) a declaration from Class Counsel Eric Honig ("Honig Decl."), including his declaration from the Sueoka Action in support of final approval of that settlement (Honig Decl., Ex. A) (Doc. Nos. 65-12--65-13); (4) a declaration from Touhey's counsel Paul Gabbert ("Gabbert Decl.") (Doc. No. 65-14); and (5) a declaration from Touhey ("Touhey Decl.") (Doc. No. 65-15).

The parties also resubmitted a number of documents from the Preliminary Joint Motion, including: (6) a second declaration from Victor A. Rodgers ("Second Rodgers Decl."), attaching a copy of the settlement agreement in this action ("Settlement Agreement") (Second Rodgers Decl., Ex. A), and a copy of the settlement agreement in the Sueoka Action ("Sueoka Settlement Agreement") (Doc. Nos. 65-16--65-18); (7) an appendix in support of the Joint Motion ("Joint Mot. App.") with a redlined comparison of the differences between the current Settlement Agreement and the Sueoka Settlement Agreement (Doc. Nos. 65-19--65-20); (8) a Request for Judicial Notice ("RJN") of three attached exhibits, all of which are orders from the Sueoka Action*fn2 (RJN, Exs. A,B, & C) (Doc. Nos. 65-21--65-24); and (9) a proposed final judgment (Doc. No. 65-25).

C. Legal Background

The Civil Asset Forfeiture Reform Act of 2000 ("CAFRA") sets forth the procedural requirements for a federal government agency when it seizes property from a person. (See 18 U.S.C. § 981; see also Joint Mot. at 2-3.) Under CAFRA, the agency must initiate administrative forfeiture proceedings within 60 days (or, in some circumstances, 90 days) of the seizure by sending written notice to any interested parties advising them of their right to contest the forfeiture. (See 18 U.S.C. § 983(a).) If the party chooses to contest the forfeiture, the matter is referred to the United States Attorney's Office ("USAO") for the USAO to decide whether to file a judicial forfeiture action against the seized property. (Joint Mot. at 3.) If the USAO fails to file a judicial forfeiture action within 90 days of the seizing agency receiving the party's claim, the government must release the property. (See 18 U.S.C. § 983(a)(3)(A) & (B); see also Joint Mot. at 3.)

Touhey bases this action on the Ninth Circuit's decision in United States v. $277,000.00 in U.S. Currency, 69 F.3d 1491 (9th Cir. 1995), which held that the principle of sovereign immunity does not bar suits against the government in cases seeking to disgorge interest earned by the government on currency seized for asset forfeiture purposes. Id. at 1498. Thirteen years later, in Carvajal v. United States, 521 F.3d 1242 (9th Cir. 2008), the Ninth Circuit upheld $277,000.00 and found that it survived the passage of CAFRA, allowing a plaintiff to sue the government for interest on money seized but never subject to a civil forfeiture proceeding. Id. at 1248-49. To date, the Sixth Circuit is the only other Circuit to adopt the holding of $277,000.00. Id. at 1249.

1. The Sueoka Litigation

On August 4, 1998, Julie Sueoka ("Sueoka") and two other class representatives initiated a putative class action against the government and a number of its officers in their official capacity challenging the same practices challenged here (the "Sueoka Action"). See Julie Sueoka, et al. v. United States of America, et al., No. CV-98-6313-MMM (RCx) (C.D. Cal. Feb. 14, 2008). In the Sueoka Action, the plaintiffs sought disgorgement of the interest earned by the government on money seized in asset forfeiture cases, as well as interest earned and allegedly improper deductions taken from cost bonds posted by plaintiffs. (See RJN, Ex. B. at 2.)

After extensive litigation in the Sueoka Action, including an appeal to the Ninth Circuit,*fn3 the parties participated in a series of settlement conferences in 2005 and 2006. (RJN, Ex. B at 5.) Following the completion of thirteen settlement conferences, the parties jointly sought to certify five subclasses of plaintiffs, which the Court, the Honorable Margaret M. Morrow presiding, certified on February 2, 2007. (RJN, Ex. A.) The Court also gave preliminary approval to the settlement agreement in May 2007, and, following notification of the class and a final fairness hearing, gave final approval to the class action settlement in October 2007. (RJN, Exs. B,C.)

The Sueoka Action is particularly relevant here because subclass A-2 in that action was almost identical to the proposed class in this case, the only difference being that the current class had their monetary assets seized after the passage of CAFRA in 2000, while Sueoka's subclass A-2 covered claimants with concluded pre-CAFRA cases. (Joint Mot. at 5, 9-10.) Additionally, the terms of the proposed settlement agreement here and the approved settlement agreement in the Sueoka Action are almost identical. (Id. at 5; see also Second Rodgers Decl. ¶¶ 3-5; Joint Mot. App., Ex. A.) The parties argue that, because the Sueoka Action was vigorously litigated over the course of nine years by the same counsel presently representing the respective sides, the parties "have had ample time to evaluate the relative strengths and weaknesses of their positions in this case." (Joint Mot. at 4.) As in the Preliminary Joint Motion, many of the documents submitted in support of the Joint Motion are nearly identical to documents used in the Sueoka Action, and the parties assert that they have drawn on their experiences in the Sueoka Action in litigating this action.

D. Settlement Terms

The Settlement Agreement defines the class as follows: "All claimants or other persons with concluded CAFRA non-judicial forfeiture cases, where no judicial complaint was filed and all of the seized currency was returned, but without interest, within the jurisdiction of the Ninth and Sixth Circuit Courts of Appeal." (Settlement Agreement ¶ 3.)

Under the Settlement Agreement, the government agrees to pay to all class members an award consisting of: (1) a base award, composed of the interest earned on the seized currency while it was held by the government, and (2) interest on the base award which would have accrued since the initial return date, calculated using compound interest rather than simple interest. (Joint Mot. at 14-16; Settlement Agreement Monetary Damage Methodology ("MDM") at 7-8.) The interest rate for the base award is determined by the actual interest earned on the currency if it was deposited in an interest-bearing government account. (MDM at 8-9.) The interest rate for the interest on the base award is ...


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