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Naylor v. United States

United States District Court, Ninth Circuit

December 27, 2013



BARRY TED MOSKOWITZ, Chief District Judge.

Pending before the Court is SLE Metals, Inc.'s Bankruptcy Trustee's ("SLE Trustee" or "Trustee") motion for the return of funds seized by the United States Secret Service ("Secret Service") in 2010. For the reasons set forth herein, the Court grants the motion.


The facts described herein are undisputed. On June 24, 2009, SLE Metals, Inc. ("the Debtor" or "SLE") filed a voluntary bankruptcy petition in the Central District of California, and Karen Naylor was appointed the Chapter 7 Trustee. Declaration of Karen Naylor ("Naylor Decl."), Ex. 1 (SLE Notice of Bankruptcy). Among the assets of the SLE estate were three federal tax refund checks dated December 29, 2009 totaling $1, 014, 484.69 issued to SLE Metals, Inc. See id., Ex. 4. On or about March 1, 2010 two Wells Fargo Bank business accounts (a commercial checking account and a savings account) were opened in San Diego in the name of "SLE Metal In" (note the conspicuously absent "c") by "Eunice Y. Fdawi." See Declaration of Carolyn G. Fuller ("Fuller Decl.") Exs. A-C. On March 2, 2009, the three checks were deposited into the SLE Metal In accounts.

On March 3, 2010, a check for $100, 000 payable to "MDS USA Inc." was drawn on the "SLE Metal In" checking account. Fuller Decl. Ex. A. The authorized signatories for the MDS Account were Euniceth Fdawi and Nidal Fdawi. Naylor Decl. ¶10-11, Ex. 4; Fuller Decl. Ex. C. Wells Fargo froze the SLE Metals In and MDS accounts, and worked with the Secret Service to investigate these suspicious transactions. Id . ¶12. The funds in the accounts were later seized by the government pursuant to a warrant issued by a Magistrate Judge. Id . ¶13.

It appears that no one has been indicted for any crime related to these transactions. Yet the funds have remained in the government's possession for over three years. The government has no further interest in retaining the funds, and it does not oppose the motion. (Doc. No. 11.) Neither Wells Fargo, the Fdawis, nor any other party has opposed the motion.


"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." Fed. R. Crim. P. 41(g). This rule applies to property unlawfully seized as well as to property lawfully seized but unreasonably retained by the government. United States v. Zambrano , 353 Fed.Appx. 227, 228 (11th Cir. 2009). When a motion for the return of property under Rule 41(g) is filed after a conviction, or where the government brings no forfeiture action, it is treated as a civil action in equity. United States v. Ibrahim , 522 F.3d 1003, 1007 (9th Cir. 2008) ("Because there were no criminal proceedings pending at the time of filing, the district court properly treated the motion as a civil complaint governed by the Federal Rules of Civil Procedure."); United States v. Lopez , 562 F.3d 1309, 1311-13 (11th Cir. 2009). To recover property, the movant must demonstrate that she has a possessory interest in the seized property. If no criminal proceedings or civil forfeiture proceedings are pending, the government must demonstrate that it has a legitimate reason to retain the property. United States v. Chambers , 192 F.3d 374, 377 (3d Cir. 1999).

There is no precise test for determining whether seized property should be returned to a particular movant. Before exercising equitable jurisdiction and reaching the merits, however, courts typically consider whether the movant will suffer irreparable injury if the property is not returned. Ramsden v. United States , 2 F.3d 322, 324-325 (9th Cir. 1993). But see Doane v. United States, 2009 U.S. Dist. LEXIS 61908, *3 (S.D.N.Y. June 5, 2009) (holding that no showing of irreparable harm is required for pre-indictment motion for return of property where the government did not argue that the returning the property would interfere with a grand jury investigation). The Court may also consider other factors such as (1) whether the Government has 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 she wants returned; and (3) whether the movant has an adequate remedy at law for the redress of her grievance. Ramsden , 2 F.3d at 325.


A. Jurisdiction

As a preliminary matter, the Court first concludes that it has jurisdiction because the funds at issue were seized from bank accounts in this district. See Naylor Decl. ¶¶5, 8, 10. See also Trinh v. Citibank, N.A. , 850 F.2d 1164, 1172 n.5 (6th Cir. 1988) ("The situs of a bank's debt on a deposit is considered to be at the branch where the deposit is carried.").

B. The SLE Trustee's Possessory Interest in the Property

The SLE Trustee has produced satisfactory evidence that the funds sub judice belong to the SLE Metals Bankruptcy Estate and that she is its proper representative. As noted above, Ms. Naylor is the Bankruptcy Trustee named on the Notice of Chapter 7 Bankruptcy in In re SLE Metals, Inc., No. 8:09-bk-16252 (C.D. Cal. June 24, 2009). Naylor Decl. ¶1, Ex. 1. The IRS provided copies of the 2006-2008 tax transcripts for SLE Metals, Inc. (Naylor Decl. ¶14, Ex. 8), which have the same Taxpayer Identification Number as the SLE Metals Inc. entity that filed for bankruptcy. Naylor Decl. ¶15, Exs. 4, 9. Moreover, the amounts of the tax refunds listed in the IRS transcripts match the amounts deposited in the SLE Metal In accounts. Compare Naylor Decl., Ex. 4 (copies of three refund checks for SLE Metal, Inc. in amounts of $339, 030, $463, 799, and $211, 655.69) with Ex. 8 (transcripts listing three refunds issued Dec. 28, 2009) and Fuller Decl. ¶5, Exs. A (March 2010 commercial checking account statement accounting for $1, 013, 984.69 in deposits posted on March 2, 2010 naming Eunice Y. Fdawi d/b/a SLE Metal In as the accountholder) and B (March 2010 high yield savings account statement showing $500 opening deposit entered March 2, 2010 also naming Eunice Y. Fdawi d/b/a SLE Metal In as the accountholder). The government agrees that movant's claims are legitimate, and nobody has come forward with contrary claims. As such, the Court finds that the movant represents the interests of the SLE Metals Estate, which, as the intended recipient of the refunds, retains an interest in the property. Cf. United States v. ...

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