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United States v. Real Property and Improvements Located at 2441 Mission Street

United States District Court, N.D. California

April 4, 2014

UNITED STATES OF AMERICA, Plaintiff,
v.
REAL PROPERTY AND IMPROVEMENTS LOCATED AT 2441 MISSION STREET, SAN FRANCISCO, CALIFORNIA, Defendant.

ORDER GRANTING CLAIMANT'S MOTION FOR AN ORDER CERTIFYING AN INTERLOCUTORY APPEAL PURSUANT TO 28 U.S.C. § 1292(b) AND STAYING CASE PENDING RESOLUTION OF APPEAL

SUSAN ILLSTON, District Judge.

Currently before the Court is a motion by claimant Shambala Healing Center ("SHC") and non-party Khader Al Shawa for an order certifying an interlocutory appeal pursuant to 28 U.S.C. § 1292(b) and staying the case pending resolution of that appeal. Docket No. 62. For the reasons below, the Court GRANTS SHC's motion.

BACKGROUND

This is an in rem action for forfeiture of real property pursuant to 21 U.S.C. § 881(a)(7). The United States alleges that SHC operates a marijuana store on the real property located at 2441 Mission Street, San Francisco, California, in violation of 21 U.S.C. § 841(a) and 21 U.S.C. § 856. Comp. ¶¶ 6, 18-21. As a result of this unlawful use, the United States alleges that the property is subject to forfeiture pursuant to 21 U.S.C. § 881(a)(7). Id. ¶ 21. Ebrahim and Valintin Poura are the owners of the real property at issue.[1] Id. ¶ 7. Kristine Keifer and Khader Al Shawa are the alleged proprietors of SHC, located on the Poura's property. Id. ¶¶ 9-10. On May 6, 2013, the United States filed a notice of forfeiture. Docket No. 2. Thereafter, numerous parties, including SHC, filed claims asserting interest in the property and contesting forfeiture. Docket Nos. 14, 19-25. Non-party Khader Al Shawa did not file a claim.

In November 2013, counsel for SHC and Mr. Shawa learned that the United States intended to notice the deposition of Mr. Shawa. Docket No. 51-1, Wykowski Decl. ¶ 2. Counsel for Mr. Shawa requested that the United States provide Mr. Shawa with some form of immunity because his deposition would likely implicate his Fifth Amendment privilege against self-incrimination. Id. ¶¶ 3-5. The United States stated that it would not consider any type of immunity for Mr. Shawa. Id. On December 20, 2013, SHC and Mr. Shawa filed a motion for a protective order limiting any discovery pertaining to the principals of SHC to be used solely for the purposes of conducting this litigation and not in connection with any criminal prosecution or, in the alternative, for a stay of any discovery pertaining to the principals of SHC. Docket No. 51.

On February 4, 2014, the Court denied the motion for protective order. Docket No. 56. In denying the motion, the Court noted that in light of the Fifth Amendment dilemma many claimants face in civil forfeiture proceedings, appellate courts have held that district courts should make special efforts to accommodate both the constitutional privilege against self-incrimination as well as the legislative intent behind the forfeiture provision. Id. at 3 (citing United States v. 4003-4005 5th Ave., 55 F.3d 78, 83 (2d Cir. 1995); United States v. Parcels of Land, 903 F.2d 36, 44 (1st Cir. 1990)); see also United States v. $133, 420.00 in United States Currency, 672 F.3d 629, 643 (9th Cir. 2012). The Court held, however, that it was not necessary to make an accommodation in the present case because (1) SHC, as a corporation, has no Fifth Amendment privilege against self-incrimination, and (2) although the principals of SHC possess a Fifth Amendment privilege, they have no claim to the property at issue in the case. Id. at 4. The Court recognized that the principals' assertion of their Fifth Amendment rights could hinder SHC's ability to defend itself in the action, but explained that the situation is simply the result of choosing the corporate form. Id. at 4-5. By the present motion, SHC and Mr. Al Shawa move for an order certifying the February 4, 2014 order for interlocutory appeal and staying the case pending resolution of the appeal. Docket No. 62.

LEGAL STANDARD

Normally, interlocutory orders, such as orders pertaining to discovery, are not immediately appealable. James v. Price Stern Sloan, Inc., 283 F.3d 1064, 1067 n.6 (9th Cir. 2002). However, 28 U.S.C. § 1292(b) permits a district court to certify an order for interlocutory appellate review where the order involves (1) "a controlling question of law;" (2) "as to which there is substantial ground for difference of opinion;" and (3) where "an immediate appeal from the order may materially advance the ultimate termination of the litigation." 28 U.S.C. § 1292(b); accord In re Cement Antitrust Litig., 673 F.2d 1020, 1026 (9th Cir. 1981). "[T]he party pursuing the interlocutory appeal bears the burden of... demonstrating" that all three requirements have been met. Couch v. Telescope Inc., 611 F.3d 629, 633 (9th Cir. 2010). Moreover, "[c]ertification under § 1292(b) requires the district court to expressly find in writing that all three § 1292(b) requirements are met." Id.

"Section 1292(b) is a departure from the normal rule that only final judgments are appealable, and therefore must be construed narrowly." James, 283 F.3d at 1067 n.6. Accordingly, section 1292(b) is "to be used only in exceptional situations in which allowing an interlocutory appeal would avoid protracted and expensive litigation." Cement Antitrust Litig., 673 F.2d at 1026.

DISCUSSION

I. Controlling Question of Law

An issue is "controlling" if "resolution of the issue on appeal could materially affect the outcome of litigation in the district court." Cement Antitrust Litig., 673 F.2d at 1026. Here, the Court's prior order denying the requested protective order involved a controlling question of law. Specifically, the Court's prior order held that it was not required to make special efforts to accommodate SHC's or its principals' Fifth Amendment rights because SHC does not possess a Fifth Amendment privilege and its principals are not claimants in the present action. Docket No. 56 at 4-5. The United States argues that the decision to grant a protective order is discretionary and, therefore, the Court's order denying the protective order did not involve a controlling question of law. Docket No. 66 at 3-4. However, the United States fails to recognize that the Court's prior order was not resolved through an exercise of the Court's discretion. Rather, the denial of the motion for a protective order turned on the Court's legal determination that it was not required to provide an accommodation because the claimant, as a corporation, does not possess a Fifth Amendment privilege, and its principals were non-parties in the action. See Docket No. 56 at 4-5. Whether a district court applied the correct legal standard in determining whether to grant a protective order is a legal issue that is reviewed de novo by the Ninth Circuit. S ee Phillips v. GMC, 307 F.3d 1206, 1210 (9th Cir. 2002). Indeed, the Ninth Circuit has accepted interlocutory appeals from district court orders involving whether to grant a protective order. See, e.g., Rivera v. NIBCO, Inc., 364 F.3d 1057, 1063 (9th Cir. 2004). Moreover, the Supreme Court has explained that "[t]he preconditions for § 1292(b) review... are most likely to be satisfied when a privilege ruling involves a new legal question or is of special consequence, and district courts should not hesitate to certify an interlocutory appeal in such cases." Mohawk Indus. v. Carpenter, 558 U.S. 100, 110-11 (2009).

Further, resolution of this particular legal issue could materially affect the outcome of the litigation. As the Court noted in the prior order, the principals' assertion of their Fifth Amendment rights could hinder SHC's ability to effectively defendant itself in this action. See Baxter v. Palmigiano, 425 U.S. 308, 318 (1976) ("[T]he Fifth Amendment does not forbid adverse inferences against parties to civil actions when they refuse to testify in response to probative evidence offered against them...."). Indeed, the United States has recently filed a motion for summary judgment in which it argues that it is entitled to summary judgment of the claimants' affirmative defenses. In the motion, the United States argues that because the claimants have asserted the Fifth Amendment privilege against self-incrimination, they cannot present any evidence to support their alleged defenses. Docket No. 69 at 7. Therefore, whether the Court is required to ...


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