Case 1:96-cv-00408-LAS
Document 179
Filed 07/09/2008
Page 1 of 19
IN THE UNITED STATES COURT OF FEDERAL CLAIMS __________________________________________ ) INNOVAIR AVIATION LIMITED, ) ) Plaintiff, ) ) v. ) DOCKET NO. 96-408C ) (Senior Judge Loren A. Smith) THE UNITED STATES OF AMERICA, ) ) Defendant. ) )
PLAINTIFF INNOVAIR AVIATION LIMITED'S OPPOSITION TO DEFENDANT'S MOTION FOR RECONSIDERATION On August 31, 2006, following briefing and oral argument, this Court granted Innovair's motion for partial summary judgment and held that the government took Innovair's Technology License Agreement ("TLA") without just compensation. Innovair Aviation, Ltd. v. United States, 72 Fed. Cl. 415 (2006). 1/ Nearly two years later, the government seeks reconsideration of that ruling based on a recent Federal Circuit decision, AmeriSource Corp. v. United States, 525 F.3d 1149 (Fed. Cir. 2008). The government contends that its interpretation of the AmeriSource decision governs here because, it says, the facts are similar. The government is wrong, both in its interpretation of AmeriSource and in its comparison of the so-called similarities between this case and AmeriSource. This Court's decision in Innovair was correct in 2006 and remains so today. 2/
1/ Innovair incorporates by reference its Motion for Summary Judgment and Memorandum in Support (D.E. 71 & 72), its Proposed Findings of Uncontroverted Fact (D.E. 70), its Response to the Government's Cross-Motion for Summary Judgment & Reply Memorandum (D.E. 83), and its Response to Defendant's Proposed Findings of Uncontroverted Fact (D.E. 82). 2/ In its 2006 decision granting summary judgment to Innovair, the Court denied as moot Innovair's illegal exaction claim. 72 Fed. Cl. at 416. As we explain herein, there is no reason to
Case 1:96-cv-00408-LAS
Document 179
Filed 07/09/2008
Page 2 of 19
INTRODUCTION In AmeriSource, the government seized pharmaceuticals owned by AmeriSource as evidence to be used in a criminal prosecution of another company's principals. The government kept the drugs for so long that they expired and became worthless. Legally and factually, AmeriSource is very different and readily distinguishable from Innovair. AmeriSource deals with the "government's broad power to seize and retain physical evidence." 525 F.3d at 1153 n.4. In contrast, Innovair involves the government's seizure of intangible property (a contract) pursuant to the forfeiture laws and transfer of that property to a third party. Here, the government did not simply retain the property for use as evidence in a court proceeding and thereby cause the property's value to diminish over time, as in AmeriSource. The government took property that was not forfeitable, and of which Innovair was the innocent owner, and gave that property away, to Basler, thereby permanently depriving Innovair of it. Furthermore, the property owner in AmeriSource was at least partially to blame for the loss of its property. AmeriSource asked the criminal court to order the return of its drugs. The court denied the request in part because AmeriSource "could not identify with any reasonable degree of specificity the drugs it owned." 525 F.3d at 1152. Nor was AmeriSource entirely innocent: It shipped the drugs to its customer "a few days after the company's principals had been indicted." Id. at 1156. In the Federal Circuit's view, AmeriSource "did not `do all that could be expected' to prevent the deprivation of its property." Id. Here, it is undisputed that Innovair was entirely innocent and did nothing to lose its rights. It is also important to bear in mind a number of other key points. First, the taking of Innovair's property was effected, not by the government's seizure of the TLA, but by the disturb the Court's 2006 decision. If, however, the Court concludes otherwise, Innovair renews its motion for summary judgment on its illegal exaction claim, which has been fully briefed.
2
Case 1:96-cv-00408-LAS
Document 179
Filed 07/09/2008
Page 3 of 19
government's action in transferring all rights in the TLA to a third party pursuant to the Substitute Res Bond, thus disabling itself from ever returning Innovair's property. Second, the TLA, as the government concedes, is not contraband and is not in any other way illegal to own or use, and it was not an instrumentality of a crime or used in any way to facilitate any criminal conduct. Nor was it evidence in any criminal proceeding. It was seized solely on the alleged ground that the government believed it was acquired in part with "tainted" monies Air Colombia had paid Innovair to purchase two converted airplanes. 3/ Third, the government sought to forfeit the TLA under 21 U.S.C. § 881(a)(6)(1988), which expressly provided that the property of an "innocent owner" was not subject to forfeiture. Fourth, Innovair prevailed in its innocent owner defense -- unsurprisingly, since the government never believed Innovair was anything but an innocent owner 4/ -- and under federal law the government was required to return Innovair's property "forthwith." 28 U.S.C. § 2465. For all these reasons, Innovair's claim in this Court is different from AmeriSource, different from Bennis v. Michigan, 516 U.S. 442 (1996), and different from the line of cases involving forfeited property.
3/ See, e.g., Compl. ¶ 24; Answer ¶ 24 (admitting allegation that Innovair's property was seized as purported proceeds of other persons' illegal activities). 4/ See, e.g., Compl. ¶ 11; Answer ¶ 11 (admitting allegation that "the United States has never contended that Innovair . . . w[as] aware that [it] w[as] dealing with the Colombian cartel or that [it] had any involvement with drug dealing or money laundering or that [it] had any reason to know that the money [it] received from the Colombians was `tainted'"); see also Compl. ¶ 19, Answer ¶ 19 (averring that "the Government has never contended that the TLA was contraband; however, a substantial amount of the value of Innovair's obligation to pay Basler for the TLA was paid for from funds from Air Colombia"; admitting allegation that "the government has never alleged that Innovair or its principals had any involvement in criminal activity or any knowledge that the funds applied to the TLA license payments were `tainted' ") .
3
Case 1:96-cv-00408-LAS
Document 179
Filed 07/09/2008
Page 4 of 19
ARGUMENT I. The AmeriSource Decision Does Not Disturb This Court's Grant of Summary Judgment. A. Facts and Procedural Background
As plainly stated at the outset of the Federal Circuit's opinion, the question presented in AmeriSource was "whether the Fifth Amendment's Takings Clause applies when the government seizes an innocent third party's property for use in a criminal prosecution but never introduces the property in evidence, and it is rendered worthless over the course of the proceedings." 525 F.3d at 1150 (emphases added). AmeriSource, a pharmaceuticals distributor, contracted to sell approximately $150,000 of drugs to Norfolk Pharmacy, retaining ownership of the drugs until payment was made. Id. Shortly before the shipment was delivered, Norfolk's principals were indicted on criminal charges including "unlawful distribution of prescription pharmaceuticals" and thereafter the government seized large quantities of pharmaceuticals, including the AmeriSource shipment, from Norfolk's warehouse. Id. AmeriSource soon moved under Rule 41(e) (now Rule 41(g)) of the Federal Rules of Criminal Procedure in the district court for return of its pharmaceuticals. The magistrate's report and recommendation, adopted by the district court and unchallenged by the parties to that proceeding, "rejected AmeriSource's petition because AmeriSource could not identify with any reasonable degree of specificity the drugs it owned" among the seized pharmaceuticals, which commingled the AmeriSource pharmaceuticals among those from other distributors. Id. at 1151-52. The magistrate also "found that AmeriSource had not demonstrated that it lacked an adequate remedy at law[,]" as the government had argued. Id. at 1152. By the time the criminal proceedings had concluded (after an appeal overturning the convictions and the subsequent entry of guilty pleas), AmeriSource's pharmaceuticals (assuming they could have then been identified as belonging to
4
Case 1:96-cv-00408-LAS
Document 179
Filed 07/09/2008
Page 5 of 19
AmeriSource) had passed their expiration dates and had no value. Id. at 1151. AmeriSource then brought a taking claim in this Court, and the Court granted summary judgment to the government. In an opinion authored by a United States District Judge from Massachusetts sitting by designation, the Federal Circuit affirmed the grant of summary judgment and held that the government's actions did not constitute a taking. B. The Government's Reading of AmeriSource Is Wrong, and the Decision Does Not Govern Innovair's Claim.
The government argues that the AmeriSource decision means that " `property seized and retained pursuant to the police power is not taken `for public use' in the context of the Takings Clause' " and that "so long as the Government exercises its authority `pursuant to some power other than eminent domain, then the plaintiff has failed to state a claim for compensation under the Fifth Amendment.' " Mot. for Recon. at 5. Both of these statements are demonstrably incorrect. Although the government has quoted language from the AmeriSource decision, it has failed to consider the meaning of the language within the context of the facts of the case and the decision as a whole and under the well-established doctrines of constitutional law. First, the scope of the AmeriSource decision is framed by the question presented: "whether the Fifth Amendment's Takings Clause applies when the government seizes an innocent third party's property for use in a criminal prosecution but never introduces the property in evidence, and it is rendered worthless over the course of the proceedings." 525 F.3d at 1150. Indeed, just before its statement that "[p]roperty seized and retained pursuant to the police power is not taken for a `public use' in the context of the Takings Clause[,]" id. at 1153, the Court explained that "[a]lthough the precise contours of the principle are difficult to discern, it is clear that the police power encompasses the government's ability to seize and retain property to be used as evidence in a criminal prosecution." Id. at 1156 (emphasis added). Thus, the Federal
5
Case 1:96-cv-00408-LAS
Document 179
Filed 07/09/2008
Page 6 of 19
Circuit plainly did not mean that use of the police power ipso facto precludes a taking, but only that, as in the case before it, the specific exercise of the police power to seize and retain property to be used as evidence in a criminal prosecution does. In context, the term "police power," as used in the Federal Circuit's statement that "[p]roperty seized and retained pursuant to the police power is not taken for a `public use' in the context of the Takings Clause," is a shorthand for the governmental seizure of property for use as evidence in a criminal case. 5/ That is confirmed by AmeriSource's reliance on Acadia Technology, Inc. v. United States, 458 F.3d 1327 (Fed. Cir. 2006), which cautioned that "it is insufficient to avoid the burdens imposed by the Takings Clause simply to invoke the `police powers' of the state, regardless of the respective benefits to the public and burdens on the property owner." Id. at 1332. See AmeriSource, 525 F.3d at 1153 (discussing Acadia). The plaintiff's taking claim was precluded in Acadia because "the prohibition on importing goods bearing counterfeit marks that misrepresent their quality and safety is the kind of exercise of the police power that has repeatedly been treated as legitimate even in the absence of compensation to the owners of the imported property." Acadia, 458 F.3d at 1332-33. See also id. at 1332 (observing that "the exercise of the police power to condemn contraband or noxious goods . . . has not been regarded as a taking for public use"). 6/
5/ See AmeriSource Corp. v. United States, 75 Fed. Cl. 743, 747 (2007) ("In the present case, the [Government] argued that whenever it seizes and retains property intended for use as evidence in a criminal prosecution, no other showing is necessary for this to constitute a noncompensable exercise of police power.") (emphases added), aff'd, 525 F.3d 1149 (Fed. Cir. 2008). 6/ As AmeriSource recognized, the government's police power is an "amorphous aspect of sovereignty" and " `was always a flexible notion -- so flexible, indeed, that some have quipped that the concept has little to commend it beyond alliteration.' " 525 F.3d at 1153 (quoting Lawrence H. Tribe, American Constitutional Law § 6.4 (3d ed. 2000)).
6
Case 1:96-cv-00408-LAS
Document 179
Filed 07/09/2008
Page 7 of 19
Given the facts of AmeriSource -- including the fact AmeriSource could not even identify its property among the whole of the seized pharmaceuticals -- and the existing case law, the result in AmeriSource is unsurprising. The outcome of AmeriSource turned on the fact that the pharmaceuticals were lawfully seized "in connection with [the government's] investigation" of conspiracy, unlawful distribution of prescription pharmaceuticals, operating an unregistered drug facility, and conspiracy to commit money laundering. 525 F.3d at 1150. As the Federal Circuit recognized, both United States v. One 1979 Cadillac Coupe de Ville, 833 F.2d 994, 1000 (Fed. Cir. 1987) and Seay v. United States, 61 Fed. Cl. 32, 35 (2004), among other decisions, stand for the proposition that the government is not liable for a taking for the damage or loss of value to property that arises from the government's lawful seizure and possession. See AmeriSource, 525 F.3d at 1154. Thus, under established principles, the claim in AmeriSource did not constitute a compensable taking. There is no doubt that the government has authority to seize and retain property for use as evidence in a criminal prosecution. See AmeriSource, 525 F.3d at 1153 (citing Warden v. Hayden, 387 U.S. 294, 309-310 (1967)). "[G]athering and preserving of evidence is a police power function, necessary for the safety and general welfare of society." Eggleston v. Pierce County, 64 P.3d 618, 768 (Wash. 2003) (en banc). Moreover, the Supreme Court has made clear that the personal cost involved in providing evidence in criminal matters is a "public duty" each citizen owes in service to the public welfare and is not compensable pursuant to the Fifth Amendment. See Hurtado v. United States, 410 U.S. 578, 588-589 (1973) ("[T]he Fifth Amendment does not require that the Government pay for the performance of a public duty it is already owed. It is beyond dispute that there is in fact a public obligation to provide evidence and that this obligation persists no matter how financially burdensome it may be . . . . The personal
7
Case 1:96-cv-00408-LAS
Document 179
Filed 07/09/2008
Page 8 of 19
sacrifice involved is a part of the necessary contribution of the individual to the welfare of the public") (citations omitted). Thus, as the government correctly stated in its appellate brief in AmeriSource, the Takings Clause "is not implicated by the legal seizure of property pursuant to a criminal investigation." U.S. Br. in AmeriSource at 14 (quoting Dickens v. Lewis, 750 F.2d 1251, 1255 (5th Cir. 1984)). None of these principles are implicated by the government's actions in negotiating and executing the Substitute Res Bond, which permanently divested Innovair of its rights in the TLA. 7/ In any event, the statement that "property seized and retained pursuant to the police power is not taken `for public use' in the context of the Takings Clause," 525 F.3d at 1153, cannot be divorced from the particular setting before the Federal Circuit because, read too broadly and out of context, that statement is in direct conflict with the established principle that "public use" under the Takings Clause is "coterminous with the scope of a sovereign's police power." Hawaii Housing Auth. v. Midkiff, 467 U.S. 229, 240 (1984); see also Berman v. Parker, 348 U.S. 26, 31-32 (1954). Under the Supreme Court's binding precedent, the analysis of whether a taking is for "public use" under the Takings Clause is determined by whether the taking was within the government's police powers. See Midkiff, 467 U.S. at 240; Berman, 348 U.S. at 31-32. Furthermore, the Court has made clear that the police power does not trump the Takings Clause -- as even the dissenting Justices in Nollan v. California Coastal Comm'n, 483 Of course, just because the government may seize property for use as evidence in a 7/ criminal case does not mean that the government can keep the property forever. "As a general rule, property owners are entitled to have seized property returned once it is no longer needed for criminal proceedings in district court." AmeriSource Corp. v. United States, 2005 WL 6112630, at *3 (Fed. Cl. Nov. 15, 2005) (citing United States v. Wilson, 540 F.2d 1100, 1103-04 (D.C. Cir. 1976)). Suppose a thief steals a privately owned Monet and is caught. The government presumably may keep the painting as evidence during the art thief's prosecution. But the government surely cannot just hang it in the National Gallery of Art when the case is over. Here, the government never gave the TLA back. Instead, it gave the TLA away. Not even the broad police power to seize and retain evidence of a crime permits that disposition of property.
8
Case 1:96-cv-00408-LAS
Document 179
Filed 07/09/2008
Page 9 of 19
U.S. 825 (1987), recognized. See id. at 853 (Brennan, J., dissenting) ("The fact that the Commission's action is a legitimate exercise of the police power does not, of course, insulate it from a takings challenge"); id. at 843 n.1 ("Of course, government action may be a valid exercise of the police power and still violate specific provisions of the Constitution."). For example, in Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982), the Supreme Court agreed that the alleged taking was "within the State's police powers" but went on to explain that it "is a separate question, however, whether an otherwise valid regulation so frustrates property rights that compensation must be paid." Id. at 425. 8/ Thus, to avoid a construction of AmeriSource that would conflict with Supreme Court precedent, the statement in AmeriSource that seizure and retention of property pursuant to "the police power" is not a taking for public use must be read in its proper context to mean an exercise of the police power to seize and retain evidence for use in a criminal case. C. Neither Bennis, Nor the Federal Circuit's Gloss on Bennis, Forecloses Innovair's Claim.
The government also points to the Federal Circuit's statement that "Bennis suggests that so long as the government's exercise of authority was pursuant to some power other than eminent domain, then the plaintiff has failed to state a claim for compensation under the Fifth Amendment." AmeriSource, 525 F.3d at 1154 (citing Bennis v. Michigan, 516 U.S. 442, 453 (1996)). That notably equivocal statement should be viewed as dicta unnecessary to the holding in the case. In Bennis, a man was convicted of gross indecency after using his car to facilitate As this Court stated in its 2006 ruling: "Although the Government argues in terms of the 8/ `police power,' it appears that the argument is focused on the Government's law enforcement power, not on the broader police power. Loretto forecloses the argument that the Court should be reluctant to find a taking when the broader police powers are at stake." Innovair, 72 Fed. Cl. at 424 n.10 (emphasis added).
9
Case 1:96-cv-00408-LAS
Document 179
Filed 07/09/2008
Page 10 of 19
prostitution and the car he used for that illicit conduct was forfeited. His wife, an innocent coowner, unsuccessfully sought to recover her interest in the vehicle. Her interest was forfeitable because the property "facilitated and was used in criminal activity." Bennis, 516 U.S. at 453. Bennis thus stands for the proposition that, in this Court's words, "property put to illicit use can be forfeited without subjecting the Government to liability." Innovair, 72 Fed. Cl. at 424. That proposition has no bearing on this case, however, "because the TLA was never put to illicit use and not subject to forfeiture." Id. The TLA was not "used in any criminal activity that would subject it to forfeiture." See Bennis, 516 U.S. at 449. What the Bennis Court said on the page cited by the Federal Circuit in AmeriSource was that, because the forfeiture of the Bennis' car was lawful, "the property in the automobile was transferred by virtue of that proceeding from [Mrs. Bennis] to the State. The government may not be required to compensate an owner for property which it has already lawfully acquired under the exercise of governmental authority other than the power of eminent domain." Bennis, 516 U.S. at 453. The Supreme Court did not say that the exercise of governmental authority outside the eminent domain context is immune from the Takings Clause. The Federal Circuit surely did not mean in AmeriSource that the Takings Clause applies only in eminent domain cases since that would eviscerate countless Supreme Court cases, including Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992). Likewise, that interpretation would dispose of all or virtually all of this Court's takings claims! The government claims that AmeriSource extended the "Bennis principle even further holding that, if the Government seizes property pursuant to its `police powers' and holds on to it, even to the point of rendering it valueless, the Government has not committed a taking, regardless of whether or not the property owner is innocent." Mot. for Recon. at 13 (citing
10
Case 1:96-cv-00408-LAS
Document 179
Filed 07/09/2008
Page 11 of 19
AmeriSource, 525 F.3d at 1155-57). Not so. AmeriSource did not extend Bennis; both cases involved unremarkable applications of existing law. As discussed above, the seizure and retention of property during the pendency of a criminal investigation and proceeding (as in AmeriSource) has long been held not to constitute a taking, while the forfeiture of property put to illicit use (as in Bennis) has been grounds for forfeiture, notwithstanding the property interests of innocent interest-holders, from centuries past. See Bennis, 516 U.S. at 446 ("a long and unbroken line of cases holds that an owner's interest in property may be forfeited by reason of the use to which the property is put even though the owner did not know that it was to be put to such use"); id. at 446-451 (discussing line of cases). The taking of the TLA fits into neither of these categories, and Innovair's claim is in no way foreclosed by them. Unlike the governmental actions involved in AmeriSource and Bennis, which are settled parts of our country's legal tradition, see Bennis, 516 U.S. at 453 ("We conclude today, as we concluded 75 years ago, that the cases authorizing actions of the kind at issue are too firmly fixed in the punitive and remedial jurisprudence of the country to be now displaced.") (quotation and citation omitted), the actions underlying Innovair's claim are of recent vintage and introduced the use of new governmental powers and new defenses. This Court in granting summary judgment to Innovair in 2006 properly rejected the government's reliance upon Bennis. See Innovair, 72 Fed. Cl. at 424. This Court properly dismissed the government's arguments, and the same reasoning still applies: "Nobody, however, is challenging the proposition that property put to illicit use can be forfeited without subjecting the Government to liability. That issue is not before the Court because the TLA was never put to illicit use and not subject to forfeiture." Id.
11
Case 1:96-cv-00408-LAS
Document 179
Filed 07/09/2008
Page 12 of 19
The government wrongly reads AmeriSource to say that Bennis "likely forecloses the possibility that a plaintiff's status as an innocent owner [of forfeited property] may give rise to a Fifth Amendment takings claim." Mot. for Recon. at 7 (citing AmeriSource, 525 F.3d at 1156). Innovair's claim, however, presents a very different question from Bennis and other cases involving forfeited property. Unlike those cases, the TLA was never forfeited, Innovair never lost its ownership interest in the TLA, and Innovair established the legal defense of innocent ownership. Neither the Supreme Court nor the Federal Circuit has addressed a takings claim involving Innovair's circumstances, we hope because the government has rarely, if ever, done what it did here: permanently destroy the non-forfeitable property interests of a person who by the government's own admission it knew to be an innocent owner and then refuse to pay just compensation. The seizure of an innocent third party's property, and its subsequent permanent transfer to another party to gain the proceeds from the property, is not a traditionally accepted exercise of the police power. See Innovair, 72 Fed. Cl. at 419. That conclusion is further supported by the legal and factual context in which Innovair's property was taken. Innovair's TLA was seized and forfeiture proceedings were instituted under the authority of 21 U.S.C. § 881. Section 881 was amended in 1978 "to authorize the seizure and forfeiture of proceeds of illegal drug transactions[, which represented] an important expansion of governmental power." United States v. 92 Buena Vista Ave., 507 U.S. 111, 121 (1993) (emphasis added). Until then, the statute had "closely paralleled the early statutes used to enforce the customs laws, the piracy laws, and the revenue laws: They generally authorized the forfeiture of property used in the commission of criminal activity, and they contained no innocent owner defense." Id. at 121-122. In the words of the Court, Section 881's innocent owner defense was "an express and novel protection for innocent owners[.]" Id. at 122. The
12
Case 1:96-cv-00408-LAS
Document 179
Filed 07/09/2008
Page 13 of 19
Court recognized that Section 881's reach to include proceeds of illegal activity placed at risk "property innocently acquired by persons who had been paid with illegal proceeds for providing goods or services to drug traffickers" -- exactly the government's theory in pursuing Innovair's TLA. Id. at 124; see supra n.3 & 4. Thus, the taking of Innovair's TLA occurred in a setting in which the government was exercising relatively new and broad powers over the proceeds of illegal activity and where the government was constrained by a relatively new defense for innocent property owners. This setting alone takes Innovair's case out of the holding of Bennis and the line of cases addressed in Bennis. D. A Due Process Analysis Does Not Substitute for the Takings Clause.
The government suggests that an innocent owner's only refuge is the Due Process Clause. But it is settled that the mere fact that a governmental action can withstand review under the Due Process Clause is not the end of constitutional analysis. The Supreme Court "ha[s] rejected the view that applicability of one constitutional amendment pre-empts the guarantees of another." United States v. James Daniel Good Real Property, 510 U.S. 43, 48 (1993) (holding that the seizure of property implicates the Fifth Amendment as well as the Fourth). " `Certain wrongs affect more than a single right, and accordingly can implicate more than one of the Constitution's commands. Where such multiple violations are alleged . . . we examine each constitutional provision in turn.' " Id. at 49-50 (quoting Soldal v. Cook County, 506 U.S. 56, 70 (1992)). Whether or not a plaintiff asserts other constitutional claims, his claim under the Takings Clause still must be examined. Innovair has asserted one constitutional claim, its Fifth Amendment takings claim. (Innovair also has a statutory illegal exaction claim. See supra note 2.) The Takings Clause is not subsumed within or superseded by the Due Process Clause or any other provision of the Constitution.
13
Case 1:96-cv-00408-LAS
Document 179
Filed 07/09/2008
Page 14 of 19
II.
The Government's Factual Comparisons Between Innovair and AmeriSource Fail, as the Cases Are Much More Different Than Similar. The government argues that AmeriSource should govern in this case because
(1) the TLA was seized pursuant to the government's police powers, like the seizure of evidence in AmeriSource; (2) Innovair was innocent, "like AmeriSource"; and (3) Innovair "like AmeriSource" had the opportunity to avail itself of legal procedures to secure the return of its property but was unable to secure the return of the seized property. None of these so-called similarities holds up to scrutiny. First, AmeriSource's claim arose from the seizure of its pharmaceuticals for use as evidence -- a clear exercise of the government's police power to gain control over and maintain the use of evidence, clearly established in prior case law. See supra at 7. Innovair's claim, by contrast, does not arise from a seizure at all, but instead arises from the government's action in entering into the Substitute Res Bond that was subsequently approved by the district court. There is no tradition or authority that identifies this kind of governmental action as an exercise of police powers that cuts off Innovair's property rights. That is especially so considering that the taking occurred during the course of the in rem proceedings in which Innovair prevailed in establishing its statutory innocent owner defense. Second, Innovair was, and remains, an innocent owner; AmeriSource cannot say the same. AmeriSource's innocence or not was never at issue and was never determined in connection with the proceedings for which its property was seized. The Federal Circuit expressed skepticism about AmeriSource's blamelessness, however, noting that AmeriSource shipped the pharmaceuticals at issue only after the defendants in the criminal matter were indicted. See AmeriSource, 525 F.3d at 1156 ("Here, there is a strong argument that AmeriSource did not `do all that could be expected' to prevent the deprivation of its property").
14
Case 1:96-cv-00408-LAS
Document 179
Filed 07/09/2008
Page 15 of 19
By contrast, in Innovair's case, innocence was a legal defense to the loss of its property interests, Innovair pursued that defense throughout the proceedings, and Innovair proved that it was an innocent owner whose property was not subject to forfeiture. See D. Ct. Summ. J. Op. at 12-16, 26 (attached as Tab 5 to D.E. 70, Innovair's Proposed Findings of Uncontroverted Facts); D. Ct. Findings of Fact and Conclusions of Law at 21 (attached as Tab 1 to D.E. 70, Innovair's Proposed Findings of Uncontroverted Facts). Thus, Innovair was adjudicated to be an innocent owner under the terms of the forfeiture statute under which the government attempted, and failed, to forfeit Innovair's TLA. Innovair is actually and legally innocent. And its adjudicated innocence has legal significance under the express terms of the statutes enacted by Congress: under the laws of the United States, its property was not subject to forfeiture and Innovair was entitled to its return "forthwith." 28 U.S.C. § 2465. In this way, Innovair -- unlike AmeriSource -- is not asking this Court to adopt a policy that a takings claim lies, see 525 F.3d at 1157, it is enforcing rights contained in the policies set forth in Congress' enactments. Third, the government's suggestion that Innovair had available to it or received due process as if that concludes the constitutional inquiry is wrong as a matter of law. Mot. for Recon. at 11. As discussed above, whether or not governmental action satisfies due process, it can still violate other constitutional provisions, including the Takings Clause. The government makes the bizarre argument that, like AmeriSource, Innovair should have filed a motion under Rule 41 of the Federal Rules of Criminal Procedure. Mot. for Recon. at 10. A One L could spot the glaring error in this argument: Rule 41 applies only in criminal proceedings, and may not be employed in a civil in rem forfeiture proceeding. See Fed. R. Crim. P. 1(a)(1) ("These rules govern the procedure in all criminal proceedings in [federal court]."); id. at 1(a)(5) ("Proceedings not governed by these rules include . . . (B) a civil property
15
Case 1:96-cv-00408-LAS
Document 179
Filed 07/09/2008
Page 16 of 19
forfeiture"); United States v. Price, 914 F.2d 1507, 1511 (D.C. Cir. 1990) (Rule 41 motion not available in civil forfeiture proceeding); United States v. Castro, 883 F.2d 1018, 1019-20 (11th Cir. 1989) (same). This spurious argument is typical of the kind of arguments the Government has made, and courts have rejected, over and over in this case. See, e.g., United States v. Basler Turbo-67 Conversion DC-3 Aircraft, 1996 WL 88075, at *2 (9th Cir. 1996) ("[W]e are mystified by the government's assertion that when it seized the TLA it seized something in which Innovair had no legal interest."); id. (calling government's legal theory "thaumaturgy"); Innovair, 72 Fed. Cl. at 423 (finding it "puzzling" why the government filed a notice of supplemental authority regarding a clearly inapposite case). 9/ With such arguments, the government has strung this case out, and avoided payment of just compensation, for some 17 years. In any event, although both AmeriSource and Innovair came to this Court to assert takings claims, there is no logic in asserting that both Innovair and AmeriSource had the opportunity to avail themselves of legal procedures to secure the return of its property but were unable to secure the return of the property when each plaintiff reached this Court after such different proceedings. To be sure, the government rejected the bond Innovair offered to secure the release of the TLA during the pendency of the forfeiture proceedings, secretly negotiated a bond with another party, and moved for the district court's approval of the Substitute Res Bond over Innovair's strenuous objections. But Innovair went on to prevail in its innocent owner defense to the forfeiture of its property and earned the right to the return of its property
9/ The government's motion also contains this head scratcher: "In AmeriSource, no allegation was made that the pharmaceuticals were illegal or used in the commission of a crime." Mot. for Recon. at 6 n.4. But the drugs were seized precisely because they were evidence of a crime. Thus, we are at a loss to understand how the government can say the drugs were not "used in the commission of crime." See AmeriSource, 525 F.3d at 1155 ("In the instant case, AmeriSource did not contest the government's position that the drugs were connected to the crime"). 16
Case 1:96-cv-00408-LAS
Document 179
Filed 07/09/2008
Page 17 of 19
"forthwith" under 28 U.S.C. § 2465. See D. Ct. Summ. J. Op. at 12-16, 26 (attached as Tab 5 to D.E. 70, Innovair's Proposed Findings of Uncontroverted Facts); D. Ct. Findings of Fact and Conclusions of Law at 21 (attached as Tab 1 to D.E. 70, Innovair's Proposed Findings of Uncontroverted Facts). In appeals to the Ninth Circuit, that court confirmed that Innovair was an innocent owner who retained its property interest in the TLA. See Basler Turbo-67 Conversion DC-3 Aircraft, 1996 WL 88075, at *1; United States v. Basler Turbo-67 Conversion DC-3 Aircraft, 2000 WL 1770611, at *1 (9th Cir. 2000). AmeriSource, by contrast, failed to establish its right to secure the release of its property in its Rule 41 proceeding, failed to challenge the magistrate's report and recommendation, and even failed to identify the specific property which it claimed to own and sought to repossess. AmeriSource, 525 F.3d at 1151-52. In this regard, as with the other so-called similarities between this case and AmeriSource, there are no material points in common. CONCLUSION In AmeriSource, the Federal Circuit acknowledged the "considerable appeal" of plaintiff's argument that a taking occurs when the government, acting under its police power to secure evidence in a criminal prosecution, deprives an innocent owner of its property, "as a matter of policy" but goes on to state that "AmeriSource has failed to prove that such a taking could occur in theory, much less that such a taking occurred in this case." 525 F.3d at 1155. In this case, however, Innovair established both in theory and in fact that a taking occurred here, because here it is the express policy of the United States is that Innovair, an innocent owner, could not have been deprived of its property, 21 U.S.C. § 881, and Innovair established its right to have its property "returned forthwith." 28 U.S.C. § 2465. There is nothing in the
17
Case 1:96-cv-00408-LAS
Document 179
Filed 07/09/2008
Page 18 of 19
AmeriSource decision that disturbs this Court's August 31, 2006 summary judgment decision, and the government's motion for reconsideration should be denied. Respectfully submitted, s/Ty Cobb Ty Cobb HOGAN & HARTSON LLP 555 Thirteenth Street, N.W. Washington, D.C. 20004 (202) 637-5681 (direct) (202) 637-5910 (facsimile) Attorney of Record for Plaintiff Innovair Aviation Limited Of Counsel: H. Christopher Bartolomucci Audrey E. Moog HOGAN & HARTSON LLP 555 Thirteenth Street, N.W. Washington, D.C. 20004 (202) 637-5810 (direct) (202) 637-5910 (facsimile) Dated: July 9, 2008
18
Case 1:96-cv-00408-LAS
Document 179
Filed 07/09/2008
Page 19 of 19
CERTIFICATE OF SERVICE I hereby certify that on this 9th day of July, 2008, I filed the foregoing Plaintiff Innovair Aviation Limited's Opposition to Defendant's Motion for Reconsideration using the Court of Federal Claims' Electronic Court Filing system, which automatically caused notice to be sent to counsel of record for the parties. s/Ty Cobb Ty Cobb Counsel for Innovair Aviation Limited