Circuit Resolves Jurisdictional Questions In Context Of Section 853(n) Asset Forfeiture Proceeding
In a short opinion in United States v. Ohle, 16-601-cr, the Second Circuit (Leval, Calabresi, Cabranes) resolved two open questions about the application of Federal Rule of Appellate Procedure 4, both in the context of a proceeding brought under Title 21, United States Code, Section 853(n). Section 853(n) is the provision of forfeiture law that can be invoked by a third party who claims to have a superior interest in assets that the government is seeking to forfeit. The Circuit held that although 853(n) proceedings arise in the aftermath of a criminal conviction, these ancillary proceedings are civil in nature. The Circuit also held that when the district court issues a short order resolving a motion and promises that a more detailed opinion will follow, appellants plaintiffs may not wait for the more detailed opinion; the time to appeal begins to run upon the issuance of the initial order.
The appeal arose out of the aftermath of a three-week jury trial in the Southern District of New York that led to the conviction of John B. Ohle, III for tax evasion and conspiracy to commit fraud. The conviction resulted in the forfeiture of Ohle’s real and personal property. Several claimants stepped forward to file petitions under Section 853(n) claiming an interest in the property. In May 2013, the district court approved a stipulation and order that enforced a settlement agreement between the claimants and the government. Two years later, the claimants moved to vacate the settlement agreement under Rule 60, and on August 20, 2015, the district court denied the motion in a short order, with a promise that a detailed memorandum would follow. This memorandum order issued on December 30, 2015, more than four months later, and on February 29, 2016, the claimants (now appellants) filed their notice of appeal.
The Circuit Has No Jurisdiction
The Court needed to address two questions in order to assess whether it had jurisdiction. First, if the 853(n) proceeding was criminal in nature, then the claimants filed their appeal out of time, as Federal Rule of Appellate Procedure 4(b) requires that a notice of appeal be filed within 14 days—although a failure to comply with Rule 4(b) does not deprive the Court of jurisdiction. A civil appeal, by contrast, must be filed within 60 days—and an untimely appeal under Rule 4(a) does deprive the Court of jurisdiction.
The Court concluded that a claim under Section 853(n) was civil in nature, bearing few if any of the hallmarks of a criminal proceeding. The claimants are third parties, not criminal defendants, and 853(n) proceedings are conducted separately from the underlying criminal proceedings. The claimants must prove—by a preponderance of the evidence—either (a) that they held a superior interest in the property when the defendant committed the underlying crime, or (b) that they were bona fide purchasers for value who reasonably were without cause to believe that the property was subject to forfeiture at the time they purchased their interest in the property. Absent a petition being filed by a claimant within a specified time period, or if all claimants lose their petitions, the government has clear title to the property in question. This procedure has no punitive aim, and the defendant is not a party to the proceeding. As the Circuit explained, it looks more like a quiet title action than a criminal case. The standard of proof is civil in nature, as is the legal issue to be decided. In addition, Rule 4(b) sets different deadlines for an appeal by the defendant or the government—a claimant is neither, suggesting that Rule 4(b) should not apply. In reaching this conclusion, the Second Circuit followed the Third and Ninth Circuits.
The Circuit then turned to decide whether the claimants here filed their notice of appeal within 60 days of the “entry of the judgment or order appealed from,” thereby making the appeal timely under Rule 4(a)(1)(B). The Court swiftly determined that the 60-day period began to run on August 20, when the Court issued the initial order that summarily denied their motion; the 60-day period was not tolled by the district court’s promise to issue a more detailed opinion, nor was it restarted by the December 30 order. Since the appeal was filed more than 60 days after the August 20 order was entered, the appeal was dismissed due to a lack of jurisdiction.
The Circuit could have avoided the first of the two issues—whether 853(n) proceedings are civil or criminal in nature—given its ultimate finding that the appeal was untimely even under the more lenient appellate deadline afforded to civil litigants. In any event, by deciding to write a short opinion that reached the merits of both issues, the Court has provided guidance to future litigants. With asset forfeiture becoming increasingly common, it is useful for claimants to know when they must file their notice of appeal.
The second issue—whether a party may wait for a more detailed opinion before filing a notice of appeal—puts appellants in a difficult position. An appellant may not know the precise basis for a claim of error until the district court issues its more detailed memorandum opinion, but yet an appeal must be taken within the 60 days following a short, one-sentence order. It is possible that this balance overvalues the interest in finality to the detriment of the losing party who is uncertain about whether to spend time and money pursuing an appeal. To be sure, when a district court issues a short order to be followed by a longer, explanatory opinion, the district court is advancing some important goals of judicial economy and administration. The order helps to apprise parties of the disposition as soon as possible and also allows a judge to clear a motion from the docket. At the same time, given the Ohle decision, this increasingly common process leaves appellants in a difficult spot with respect to the decision about whether to appeal. In light of Ohle, the best approach for a litigant is to file the notice of appeal; it can always be withdrawn if the appellant is persuaded by the district court’s subsequent rationale.