USCA1 Opinion

UNITED STATES COURT OF APPEALS

UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
FOR THE FIRST CIRCUIT
____________________
No. 93-2278

UNITED STATES OF AMERICA,

Plaintiff, Appellee,

v.

REAL PROPERTY IN WATERBORO, ET AL.,

Defendants, Appellees,

v.

PATRICK CUNAN,

Claimant, Appellant.
____________________

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MAINE

[Hon. Gene Carter, U.S. District Judge]

___________________

____________________

No. 94-1599

UNITED STATES OF AMERICA,

Appellant,

v.

RICHARD J. DECATO, JR., ET AL.,

Defendants, Appellees.

___________________

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. William G. Young, U.S. District Judge]

___________________

___________________

No. 94-2036

UNITED STATES OF AMERICA,

Appellee,

v.

RICHARD J. DECATO, JR., ET AL.

Defendants, Appellants.

____________________

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. William G. Young, U.S. District Judge]

___________________

____________________

Before

Boudin, Circuit Judge,

_____________
Aldrich, Senior Circuit Judge,
____________________
and Bownes, Senior Circuit Judge.
____________________

____________________

Bruce E. Kenna, with whom Kenna, Johnston & Sharkey was on br

_______________
__________________________
for appellants.
David S. Mackey,
________________

Assistant

United States

Attorney,

with

Donald K. Stern, United States Attorney, was on brief for appellee.

_______________

____________________

September 8, 1995
____________________

BOWNES, Senior Circuit Judge.

BOWNES, Senior Circuit Judge.
_____________________

appeals involve

third-party

claims to

These

real

consolidated

properties

in

Bangor and Portland, Maine ("the Maine properties"), that the

United

States is

prosecution

trying to

in Massachusetts.

District of Massachusetts

motion to

forfeit as

The

part of

a criminal

District Court

for the

granted the third-party claimants'

dismiss the Maine properties

from the indictment.

Because we

under

find that

the third-party claims

the applicable criminal

were premature

forfeiture statute, we vacate

the order of dismissal and remand for further proceedings.

I.
__

The

the

government alleges

principal

of

that Richard

drug-dealing

and

DeCato, Jr.,

money-laundering

operation in New England, purchased the Maine properties with

the proceeds

in-law,

of drug trafficking and

Patrick Cunan,

government

filed two

as the

civil

installed his brother-

straw owner.

In

forfeiture actions

Maine properties in the District of Maine.

1990, the

against the

Not surprisingly,

Cunan was the only party to assert a claim in those actions.

The

civil forfeiture

actions were

sidetracked by

pretrial proceedings, including an

United States
_____________

and by

the

v. TWP 17 R 4, 970 F.2d 984

___________

government's pending

Massachusetts.

federal grand

appeal to this court, see

___

In 1993, while

jury in

(1st Cir. 1992),

criminal investigation

both cases

were pending,

Massachusetts charged DeCato

-33

in

and the

Cunans

(Patrick

and

including conspiracy

laundering.

alone --

Patricia)

with

various

to violate federal drug

offenses,

laws and money

Count 37 of the indictment -- which named DeCato

sought criminal forfeiture of

under 21 U.S.C.

the Maine properties

853.

Four days

after the

government moved to dismiss

indictment was

returned, the

the two civil forfeiture actions

with prejudice, in deference to the criminal forfeiture count

______________

in

Massachusetts.

Judge Carter

so dismissed

the actions.

The United States Marshal for the District of Maine continued

to hold the

the

sale of

assets at issue (including escrowed

some of

the Portland

monies from

properties) pursuant

to

instructions from the United States Attorney for the District

of Massachusetts.

Several

actions,

directing

months

after the

Cunan moved in the

the Maine

Portland assets.

dismissal of

District of Maine

Marshal to

the civil

for an order

disencumber or

release the

He argued that the dismissal with prejudice

of the civil actions barred, as a matter of res judicata, the

___ ________

criminal

forfeiture

Massachusetts.

of

Judge

those

assets in

Carter denied

the

District

the motion,

of

and Cunan

appealed the denial in Appeal No. 93-2278.

In

moved

the District

to restrain

forfeiture count.

all

of Massachusetts,

of the

properties

the government

in the

criminal

The Cunans moved, on res judicata grounds,

___ ________

-44

to

strike

indictment.

order,

or

dismiss

Judge

took

ultimately held

the

the

Maine

Young entered

Cunans'

that claim

motion

properties

temporary

under

preclusion

forfeiture of the Maine properties.

from

the

restraining

advisement,

barred the

and

criminal

The government moved

for reconsideration,

arguing

for the first time that the Cunans, who are third parties

to

Count 37, must wait until an order of forfeiture has actually

been

entered before

U.S.C.

they may

assert their

claim.

See 21
___

853(k) (barring third-party intervention in criminal

forfeiture action

Young denied

except as

provided in

853(n)).

Judge

reconsideration but noted that "the restraining

order already entered remains in full force and effect."

government appealed the dismissal

The

of the Maine properties in

Appeal No. 94-1599.

In

July,

1994,

DeCato

entered

written

agreement that forfeited "his legal and beneficial

in

all assets

described

in

Count

37,

including

plea

interests

cash

forfeiture

that all

in the

such

amount of

assets were

$3,000,000."

subject

He acknowledged

to forfeiture

as

"the

proceeds of unlawful drug activity . . . and/or as substitute

assets."

DeCato also agreed to testify against the Cunans at

their upcoming trial.

The government then filed a supplemental motion

restrain

the

Maine

properties,

-55

although

the

to

previous

restraining

argued

that notwithstanding any

dismissal of

forfeit

order does not appear

the civil actions,

DeCato's

interest

"substitute

assets"

in

forfeiture.

See 21 U.S.C.
___

in

place

to have been

It

preclusive effect

from the

the government was

free to

the

of

853(p).

restraining order as requested,

lifted.

Maine

the

properties

$3

million

as

cash

Judge Young entered the

which the Cunans appealed in

Appeal No. 94-2036.

II.
___

We

dismissal of

begin with

the

the

properties.

Maine

government's appeal

In

its

from

the

motion

for

reconsideration, the

government argued

barred by 21 U.S.C.

853(k) from asserting their third-party

claim

properties

to

the Maine

actually been

consider

until

ordered forfeited to

this

argument

on

denying the

court did

the properties

the United

the

merits,

government's possible waiver below,

the district

that the Cunans

not expressly

despite

rely

motion for reconsideration.

have

States.

for two reasons.

are

We

the

First,

upon waiver

in

Second, the Cunans

have not asserted waiver on appeal.1

____________________

1.

We recognize

possibly a
may

that the government's

jurisdictional one,

have barred

belated argument

to the extent

the Cunans from

raising, and

is

that Congress
the district

court from considering, their claim of ownership of the Maine

properties.

See Halleran v.
___ ________

Hoffman, 966 F.2d

_______

Cir.

("A

to

1992)

challenge

federal

45, 47 (1st

subject

matter

jurisdiction may

be raised at

first time on appeal.").

any time,

including for

We express no opinion

the

on this and

do not rely on it.

-66

The bar on third-party

intervention in 21 U.S.C.

853(k) provides:

(k)

Except as provided in subsection (n)

of this

section,

interest

in

no party
property

claiming

an

subject

to

forfeiture under this section may --

(1) intervene in a trial or appeal of a

criminal case involving the forfeiture of
such property under this subchapter; or

(2) commence an action at law or equity

against the United States
validity of his

alleged interest in

property subsequent
indictment
the

concerning the

to the filing

or information

property

is

the
of an

alleging that

subject to

forfeiture

under this section.

Section

853(n), the subsection cited in

and-see

provision:

"[f]ollowing
___________

forfeiture," the United States

of

the

order

(emphasis

to interested

added).

"Any

United

the entry

of an

order of

is required to publish notice

third

person .

interest in property which has

853(k), is a wait-

parties.

. asserting

853(n)(1)

legal

been ordered forfeited to the

States" may then "petition the court for a hearing to

adjudicate

the

property."

of

his alleged

interest

in

the

853(n)(2).

The

parties

validity

such

government argues

as

the

Cunans

that

from

853(k)

bars

participating

third

in

pre-

forfeiture proceedings under any circumstances.

We disagree.

in

statutory

exception

("Protective

orders"):

to the

bar

where the

indictment protective order

is

found

government seeks

853(e)

a pre-

against the property alleged

-77

to

be

subject

interest

to forfeiture,

in the

opportunity

"persons

property" must

for a

hearing.

be

appearing

to have

afforded notice

853(e)(1)(B).

There

an

and an

is no

suggestion that third parties are excluded from this process,

even though restraining orders necessarily precede forfeiture

orders.

In fact,

the legislative

third-party intervention cautions

not

intended to preclude a

property that is

from

or may

history

of the

bar on

that "[t]his provision

third party with

be subject to

is

an interest in

a restraining

order

participating in a hearing regarding the order . . . ."

S.

Rep.

No.

225, 98th

Cong.,

2d

Sess.

206 n.42

(1983)

(explaining parallel provision of RICO statute), reprinted in

_________ __

1984 U.S.C.C.A.N. 3182, 3389

moreover, makes

no

n.42.

The legislative history,

distinction between

pre-indictment

post-indictment restraining orders; evidently,

may

"participat[e]"

proceedings.

Cf.
___

in

id. at
___

both

types

of

3386 (noting

and

third parties

restraining

order

that although

"the

post-indictment restraining order provision

853(e)(1)(A)]

does not require prior notice and opportunity for a hearing,"

the provision "does not exclude . . . the authority to hold a

hearing

subsequent to the initial

entry of the

order . . .

.").

This

exception

to

the

bar

on intervention

may

reflect

due process

concerns.

Section

special

problem for

third parties,

853(e) presents

who face

not

only the

-88

potential

forfeiture

of property

interest,

but also immediate

may be in

their control.

in

which

restraints upon

A restraining

they claim

an

property that

order directed

at

third parties

858

F.2d

is "strong medicine," United States v. Regan,

______________
_____

115, 121

(2d Cir.

1988),

whether it

is entered

before or after the indictment.

We

claiming

an

conclude that

interest

restrainable property

under

in

by Congress.

history

of

restrained

may "participat[e]" in

restraining order proceedings.

participated

853(e), third

or

parties

potentially

the associated

We now ask whether the Cunans

in those proceedings in the manner contemplated

After examining the

853(e), we

structure and legislative

hold that the

Cunans' res judicata

___ ________

argument was prematurely made.

Broadly

protective orders in

speaking,

the

two contexts:

government

can

seek

before an indictment has

been filed, or after.

order,

the government

"there is

will

To obtain

a substantial

prevail

on

853(e)(1)(B).

the

By

a pre-indictment protective

must show,

among other

probability that the

issue

of forfeiture

contrast,

under

indictment itself establishes the merits

case,

and courts

may

enter a

things, that

United States

."

853(e)(1)(A),

the

of the government's

protective

order "upon

the

filing of an indictment . . . alleging that the property with

respect to which

the order is sought would, in

-99

the event of

conviction, be subject to forfeiture . . . ."

853(e)(1)(A)

indictment

nowhere suggests that

protective

order

underlying forfeitability

an

odds

Congress'

disposition

claims."

of

both

"assure

case

and

criminal

the

That would turn

main event --

to

a post-

challenge

of the property.

desire

the

participants in

proceeding can

ancillary proceeding into the

with

The text of

a result at

more

third

orderly

party

1984 U.S.C.C.A.N. at 3390.

The legislative history

of

853(e)(1)(A) confirms

this reading, for it expressly limits

that can

853(e)

be raised

by participants in

proceeding.

restraining

indictment

"For

order, the

. .

regarding the

the scope of arguments

is

the

probable

to

be

merits of the

forfeiture is to be based."

a post-indictment

purposes

cause

of

issuing

established in

determinative

of

any

government's case on

the

issue

which the

1984 U.S.C.C.A.N. at 3386.

If

the court elects to "hold a hearing subsequent to the initial

entry of

the order . . .

the court may at

that time modify

the order or vacate an order that was clearly improper (e.g.,

____

where

information presented

property restrained was

indictment).

at the

hearing shows

not among the property

that the

named in the

However, it is stressed that at such a hearing

the court is not

to entertain challenges to the

validity of

_____________________________________________________________

the indictment."
________________

provisos were meant

Id.
___

(emphasis added).

We think

these

to apply to both criminal defendants and

-1010

third-party claimants.

proceeding, after

The

all, is

purpose of a

restraining order

to preserve at-risk

property for

trial, not to determine whether the property should have been

included in

claiming

the indictment.

an

restrainable

interest

property

Under

in

may

853(e)(1)(A), parties

restrained

not use

or

the

potentially

restraining

order

proceeding to attack the indictment itself.

That is what

judicata
________

claim states,

the Cunans

tried to do.

in essence,

that the

invalid because criminal forfeiture as a

vanished.

This

direct challenge

to

Their

res
___

indictment is

cause of action has

the validity

of

the

indictment cannot be heard in a restraining order proceeding.

To challenge the forfeitability

Cunans must await

petition

the entry

for a hearing under

of the Maine properties, the

of an order

of forfeiture

and

853(n)(2), at which time they

may press their claim

the

properties

853(n)(6)(A)

claimant's

vested

(noting

matter

(forfeiture

right, title,

or superior to

the acts giving

States
______

as

that they have a superior

order

or

shall

judicata.
________

be

interest in

836

the forfeiture).

F.2d

that the petitioners'

853(n) "is

res
___

amended

200,

See
___

if

the

the property

was

that of the defendant

rise to

v. Reckmeyer,
_________

of

interest in

at the time of

See also
___ ____

206 (4th

Cir.

United
______

1987)

post-forfeiture claim under

a fundamental one that . . . attacks the validity

of the forfeiture order itself").

-1111

We

cases

to

acknowledge that

establish

participation in

the

it may

proper

be difficult

limits

in some

of

third-party

restraining order proceedings.

On the one

hand, premature attacks upon the validity of the indictment -

the type

barred.

burdens of

of argument

On the

made by

the Cunans --

other, prudential arguments

restraint are

clearly permitted by

are clearly

concerning the

the statute,

which recognizes the due

by

process concerns that are triggered

judicial orders aimed at

F.2d at

third parties.

121-22 (delineating circumstances

orders should not be

entered).

neatly on

either side of

example,

the

partners included

under which

Some arguments may

the line.

third-party

Cf. Regan, 858

___ _____

In

claimant,

such

not fall

Regan itself,
_____

partnership

the criminal defendants, was

for

whose

permitted to

challenge the potential

forfeitability of partnership assets

under RICO's forfeiture

provision, albeit without

the factual allegations of the

States
______

v.

(speculating

might

be

Wu,
__

814

F.

that the

entitled

Supp.

indictment.

491,

494

third-party spouse

to

intervene

in

disputing

See also
___ ____

(E.D.

of

Va.

United
______

1993)

the defendant

restraining

order

proceeding in order to contest the breadth of the order).

At

any rate, the Cunans' res judicata argument falls well on the
___ ________

forbidden side of the line.

Our holding is limited to the arguments made by the

Cunans.

Specifically, the Cunans do not argue, and we do not

-1212

consider,

whether

require that

challenge

indictment if

forfeiture.

(4th

that

restraining

restraining

Crozier,
_______

Process

Clause

may

be given an

order,

necessary, before

on

the

the

merits

entry of

it

853(e)(1)(A) violates

authorizes

ex
__

777

of

an order

the

of

905, 929

due process to the

parte,
_____

orders without opportunity

sometimes

opportunity to

Cf. United States v. Harvey, 814 F.2d

___ ______________
______

hearing other than the

v.

Due

interested parties

Cir. 1987) (

extent

the

post-indictment

for a post-restraint

criminal trial itself); United States

_____________

F.2d

853(e)(1)(A) violates due

1376,

1382-84 (9th

process by not

parties or criminal defendants

Cir.

1985)

guaranteeing third

an opportunity to challenge a

post-indictment

restraining order until after forfeiture has

been ordered).

Here, the district court permitted the Cunans

to participate in the restraining order proceedings; in fact,

it granted the Cunans

more process than was provided

by the

statute.

III.
____

Our holding

2036

No.

moots the

(from Judge Young's

93-2278 (from

disencumber

Cunans' appeals in

entry of a

Judge Carter's

or release

No. 94-

restraining order) and

denial of

the motion

the Portland assets).

It

to

does not

matter whether Judge Carter should have granted the motion to

disencumber,

restraining

because

Judge

Young

subsequently

entered

order in the Massachusetts prosecution, and that

-1313

order cannot be challenged on the sole ground -- res judicata

___ ________

-- raised

basis

by the Cunans on

for granting the only

appeal.

That leaves

relief that the

us with no

Cunans seek in

Appeal No. 93-2278, i.e., the return of the Maine properties.

____

-1414

IV.
___

For the foregoing reasons,

we vacate the March 18,

______

1994 order of the Massachusetts District Court dismissing the

Maine properties from Count 37 of the indictment, and

the case to

opinion.

that court for proceedings

remand
______

consistent with this

-1515