E-Alert Case Updates

U.S. District Court Examines Judiciary’s Authority to Review the Merits of Administrative Forfeiture Proceedings

John Farrace v. Bureau of Alcohol, Tobacco, Firearms and Explosives
No. 14-468 (United States District Court for the District of Delaware, May 13, 2015)
by Richard J. Medoff, Law Clerk
Semmes, Bowen & Semmes (www.semmes.com)

Available at: http://www.ded.uscourts.gov/sites/default/files/opinions/gms/2015/may/14-468.pdf

John Farrace v. Bureau of Alcohol, Tobacco, Firearms and Explosives, involved a motion to dismiss for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1). The underlying lawsuit was filed by a pawn shop owner seeking judicial review of administrative forfeiture proceedings initiated by the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”) following the ATF’s seizure of firearms from the pawn shop owner’s business. The United States District Court for the District of Delaware concluded that it lacked subject matter jurisdiction to review the ATF’s decisions. Thus, Judge Gregory M. Sleet granted Defendant ATF’s motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(1).

By way of factual background, on April 22, 2004, the ATF seized an estimated 700 firearms from Plaintiff John Farrace’s pawnshop business. The ATF subsequently took steps to initiate the administrative civil forfeiture process. On June 16, 2004, the ATF sent a notice of the seizure to Farrace explaining the procedures for filing a claim to contest the seizure, or for filing a petition for remission or mitigation. The notice provided thirty-five (35) days from June 16 to submit a claim objecting to the forfeiture. ATF also published notice in the USA Today newspaper once a week for three (3) weeks, on June 24, July 1, and July 8, 2004. Farrace executed a claim contesting the seizure after the thirty-five (35) day deadline, on August 19, 2004, and the ATF received the claim on August 26, 2004. The ATF notified Farrace that his claim was untimely and ineffective, and that the ATF would proceed with administrative forfeiture. On November 5, 2007, Farrace completed a Petition for Remission or Mitigation of Forfeiture, however, there was no record of it and the ATF never addressed it. On October 24, 2012, Farrace completed an Amended Petition for Remission or Mitigation. The ATF denied the Amended Petition on September 30, 2008. Farrace then filed a Request for Reconsideration, which the ATF also denied on March 14, 2014. On April 14, 2014, Farrace initiated the present action against the ATF, petitioning the Court for review of the ATF's denials of his Amended Petition for Remission or Mitigation of Forfeiture and Request for Reconsideration, arguing that the ATF's decisions were contrary to Constitutional and statutory law. The ATF filed a motion to dismiss for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1).

The Court began its analysis by discussing the applicable standard of review for Rule 12(b)(1) motions, explaining that unlike a motion to dismiss for failure to state a claim under Rule 12(b)(6), “the plaintiff bears the burden of establishing that jurisdiction in fact exists.” Mortensen v. First Fed. Sav. & Loan Ass 'n., 549 F .2d 884, 891 (3d Cir. 1977).

The Court further explained that “as there is no statutory direction for procedure upon an issue of jurisdiction, the mode of its determination is left to the trial court” and that “the district court is free to determine facts relevant to its jurisdiction." Id. at 891 (quoting Gibbs v. Buck, 307 U.S. 66, 71-72 (1939)).

The Court next discussed the law governing civil forfeiture, stating that property linked to criminal activity is subject to civil forfeiture based on the concept that "the property has perpetrated some wrong." See 18 U.S.C. § 981; United States v. One 1987 Jeep Wrangler Auto., 972 F.2d 472, 476 (2d Cir. 1992). The Court explained that “when the seized property is $500,000 or less, the government may use the administrative forfeiture process governed by the customs laws; this process entails no judicial involvement." United States v. McGlory, 202 F.3d 664, 669 (3d Cir. 2000) (citing 19 U.S.C. § 1607).

The Court noted, however, that the government must comply with the statutory notice requirements of 19 U.S.C. § 1607(a), which provides:

[N]otice of the seizure of such articles and the intention to forfeit and sell or otherwise dispose of the same according to law to be published for at least three successive weeks in such manner as the Secretary of the Treasury may direct. Written notice of seizure together with information on the applicable procedures shall be sent to each party who appears to have an interest in the seized article.

The Court explained that the notice requirements in 19 U.S.C. § 1607(a), “offer an opportunity for interested parties to file a ‘claim’ contesting the administrative forfeiture,” and that “procedurally proper claims automatically require judicial intervention.” McGlory, 202 F .3d at 670 ("If a claimant files a claim ... , the administrative process is halted and the seizing agency must turn the matter over to the United States Attorney to commence a judicial forfeiture proceeding .... " (citing 19 U.S.C. § 1608)). The Court noted, however, that if no claim is filed within the prescribed period, “the government can make a declaration of forfeiture and title will vest in the United States,” and that “this administrative declaration has the same effect as a final decree and order of forfeiture entered in a judicial proceeding." Id. (citing 19 U.S.C. § 1609(a), (b)); cf Ibarra v. United States, 120 F.3d 472, 475-76 (4th Cir. 1997) ("Once the Government initiates forfeiture proceedings, the district court is divested of jurisdiction. The court remains without jurisdiction during the pendency of the proceeding unless the claimant timely files a claim.").

Turning to the facts of the case, the Court noted that Farrace did not dispute that the ATF complied with the statutory notice requirements under 19 U .S.C. § 1607(a), or that he had failed to submit a timely claim. Instead, the Court noted that Farrace, having failed to submit a proper claim, submitted to the ATF a Petition for Remission or Mitigation of Forfeiture. The Court explained that "a petition for remission or mitigation does not serve to contest the forfeiture, but rather is a request for an executive pardon of the property based on the petitioner's innocence." Ibarra, 120 F.3d at 475. The Court further explained that courts “do not have jurisdiction to review an agency's decision concerning such a petition — at this stage, it is purely an executive action.” See 2000 Toyota Tundra Pickup Truck v. United States, No. 08-MC-00032, 2008 WL 2078835, at *2 (E.D. Pa. May 14, 2008) ("When a party petitions for remission, the validity of the seizure is presumed and the property is returned only as a matter of leniency. Thus the remission or mitigation route is for all practical purposes a matter of administrative grace").

The Court noted that the “ATF rejected Farrace's petition for remission, as well as Farrace's subsequent request for reconsideration,” and concluded that it could not review these decisions because “a federal court lacks jurisdiction to review the merits of administrative forfeiture once the administrative process has begun." See One 1987 Jeep Wrangler, 972 F.2d at 480. Having found that it lacked subject matter jurisdiction to review the ATF's rulings, the Court granted the ATF's motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(1).