This post examines an opinion from the U.S. District Court for the District of Nevada: U.S. v. Kane, 2016 WL 1411353
(2016). The judge begins her opinion by
explaining how, and why, the prosecution arose:
On January 19, 2011, Kane and his
co-defendant were indicted on
two counts of conspiracy to commit wire fraud and fraud in connection
with computers. . . . The
indictment also contains four forfeiture allegations involving `any property
which constitutes or is derived from proceeds traceable to’ the offenses charged
in the indictment, seeking `an in personam criminal forfeiture
money judgment up to $1,500,000.00.’ . . . The indictment alleges that, from
about April 2009 to September 2009, Defendants devised a way to exploit video
poker machines to defraud casinos, which involved changing the playing credits
to a higher denomination, accessing the
previous winning hand of cards that were wagered at the lowest denominations,
and triggering a jackpot without playing or paying at the higher denomination. .
. .
According to Kane, on July 3, 2009,
after he won a $10,000 jackpot at the Silverton Hotel and Casino (`Silverton’)
and before he could be paid, Gaming Control detained him for allegedly
committing the fraud asserted in count 2 of the indictment. . . .
At the time, he had $27,000 in his
pocket (`the Property’) and approximately $1,200 in credit on the machine he
was playing, which Gaming Control cashed out. . . . Gaming Control seized the
Property and cash `as evidence.’ . . . A criminal action was initiated in Las
Vegas Justice Court, where Kane made this initial appearance on September 1,
2009 (`State Case’). . . . The State Case was subsequently dismissed in January
2011, when the Government filed a complaint and the indictment was issued in
this case. . . . Kane contends that the
Property belongs to him and was not part of the proceeds of any alleged fraud. .
. .
U.S. v. Kane, supra.
The opinion then takes up the “procedural history” of the
case, explaining that
[i]n October 2012, in response to
Defendants' motions to dismiss, the Magistrate Judge recommended dismissal of
counts 2 and 3 of the indictment. . . . The Government initially objected but
subsequently moved to dismiss these two counts. . . . The Government later
moved to dismiss the remaining conspiracy count without prejudice. . . . Both motions were granted. . . . The Court
issued the final dismissal order on November 25, 2013. . . .
Over a year later, on June 10, 2015,
Kane filed a motion for return of property taken by Gaming Control and FBI
agents. . . . In its response, the Government indicated it would return
items seized by the FBI, excluding the money seized by Gaming Control. (Dkt.
no. 124 at 1.) At the hearing on the motion, the parties advised the Magistrate
Judge that the matter was resolved . . . accordingly, the Magistrate Judge
denied the motion without prejudice. . . .
U.S. v. Kane, supra.
Motions for the return of property taken by the government
as part of a criminal investigation are authorized by Federal Rules of Criminal Procedure Rule 41(g), which provides that
[a] person aggrieved by an unlawful
search and seizure of property or by the deprivation of property may move for
the property's return. The motion must be filed in the district where the
property was seized. The court must receive evidence on any factual issue
necessary to decide the motion. If it grants the motion, the court must return
the property to the movant, but may impose reasonable conditions to protect
access to the property and its use in later proceedings.
Getting back to the District Court Judge’s opinion, it goes
on to explain that
Kane's counsel subsequently contacted
Gaming Control for the return of the Property. . . . In a letter dated July 31,
2015, Gaming Control informed Kane that he had `thirty (30) days to file a
written claim with the State Gaming Control Board (Board) for return of the
evidence seized in the above-referenced matter [the State Case].’ . . . The
letter also outlines the procedures for resolving any disputed claims to the
seized Property pursuant to Nevada Revised Statutes § 465.110. . . . Kane
responded to assert a claim to the Property, as did Silverton. . . . The
Government asserts no claim to or interest in the Property. . . .
On August 17, 2015, Kane filed a second
motion for return of property, seeking a return of the Property (`the Motion’).
. . . After a hearing on the Motion, the Magistrate Judge issued the [Report & Recommendation] to which Kane now objects.
U.S. v. Kane, supra.
As this site explains, a U.S. District
Court Judge, like the judge who has this case, can refer certain matters to a
U.S. Magistrate Judge, which means the Magistrate Judge will take steps to do
what he or she needs to do to draft a Report & Recommendation that will
recommend that the District Court Judge take certain action, such as granting
or denying a motion for return of property. The District Court Judge should review the
recommendation(s) the Magistrate Judge makes in the R&R and either accept
them, and the action predicated on them, or reject both.
Getting back to the opinion, the District Court Judge begins
her analysis of the issues raised by the Magistrate Judge’s recommendation by
explaining that the parties to this litigation
do not address the standard of review
of the Magistrate Judge's recommendation. The Magistrate Judge issued an
R&R because the ruling is equivalent to an order of dismissal for lack of jurisdiction, which is dispositive and may not be finally determined by a
magistrate judge. . . . This Court `may accept, reject, or modify, in whole or
in part, the findings or recommendations made by the magistrate judge.’ 28 U.S.Code § 636(b)(1). Where a party timely
objects to a magistrate judge's report and recommendation, then the court is
required to `make a de novo determination of those portions of the
[report and recommendation] to which objection is made.’ 28 U.S. Code §
636(b)(1). In light of Kane's objection, the Court will engage in
a de novo review to determine whether to accept the Magistrate
Judge's R&R.
U.S. v. Kane, supra.
The District Court Judge went on to explain that the
Magistrate Judge recommends that
the Court decline to exercise
jurisdiction over Kane's Motion and deny the Motion without prejudice to Kane,
which would allow him to pursue recovery of the Property under state law. . . .
Kane contends that the Magistrate Judge is right on the law but wrong in its
application. . . . The gist of Kane's argument is that because the Property was
seized as `evidence’ in this case, and because the Government sought its
forfeiture in this action, the Property has a nexus to this case, not the State
Action. Kane also raises arguments that go to the merits of his Motion.
However, because the Court agrees with the Magistrate Judge's recommendation to
decline to exercise equitable jurisdiction, the Court does not address the
merits of the Motion.
U.S. v. Kane, supra.
She goes on to explain that Kane is seeking a return of
the Property pursuant to Rule 41(g) of the Federal Rules of Criminal Procedure. Rule 41(g) provides for `[a] person
aggrieved by an unlawful search and seizure of property or by the deprivation
of property [to] move for the property's return.’ Rule 41(g). While Rule 41(g) is generally used to
facilitate the return of seized property after an indictment has been filed, `district
courts have the power to entertain motions to return property seized by the
government when there are no criminal proceedings pending.’ Ramsden v. United States, 1 F.3d 322,
324 (U.S. Court of Appeals for the 9th Circuit 1993) (referencing Rule
41(e), as amended in 1989, which addressed motions for return of property).
Such motions, however, `are treated as civil equitable proceedings and,
therefore, a district court must exercise ‘caution and restraint’ before
assuming jurisdiction.’ Id. (quoting Kitty’s East v. United States, 905 F.2d
1367, 1370 (U.S. Court of Appeals for the 10th Circuit 1990)).
U.S. v. Kane, supra.
The opinion then explains that
[t]o ensure that the district courts
refrain `from exercising their equitable jurisdiction too liberally,’ the Ninth
Circuit, like other circuit courts, has adopted four factors for the district
court to consider in deciding the threshold question of jurisdiction. Ramsden v. United States, supra; see
United States v. Comprehensive Drug Testing, Inc., 513 F.3d 1085, 1103 (U.S. Court of Appeals for the 9th
Circuit 2008) (noting that the district court may exercise equitable
jurisdiction to entertain a Rule 41(g) motion only after analyzing the
four-factor test articulated in Ramsden). `These factors include:
1) whether the Government displayed a callous disregard for the constitutional
rights of the movant; 2) whether the movant has an individual interest in and
need for the property he wants returned; 3) whether the movant would be
irreparably injured by denying return of the property; and 4) whether the
movant has an adequate remedy at law for the redress of his grievance.’ Ramsden v. United States, supra. If the
`balance of equities tilts in favor of reaching the merits’ of a Rule 41(g) motion,
the district court should exercise its equitable jurisdiction to entertain the
motion. Ramsden v. United States, supra.
U.S. v. Kane, supra.
The District Court judge went on to explain that she
agree[d] with the Magistrate Judge that
a balance of these factors counsels against reaching the merits. The Court
accordingly declines to exercise equitable jurisdiction. The first
factor—whether the Government has demonstrated a callous disregard for Kane's
constitutional rights—is at best neutral. There is no dispute that the
Government did not seize the Property, did not take actual possession of the
Property after the initiation of this case, and does not claim an interest in
the Property. At the hearing before the Magistrate Judge, the Government
suggested that because the Property was not seized pursuant to a federal
warrant, the Court should allow the dispute to be resolved through the process
established under state law. . . . Kane insists that the Government's
contention, if accepted, would allow the Government to abdicate responsibility
any time the Government works with state or local agencies. . . .
The Court need not resolve these
hypothetical scenarios because evaluation of the first factor is necessarily
fact specific. The Property was seized as `evidence’ by Gaming Control in the
State Action, which was initiated and only dismissed after the complaint was
filed and the indictment returned in this case. The Property was not seized by
any agency of the federal government. And Kane did not seek a return of the
Property when the State Action was dismissed—he even failed to inquire as to
the status of the Property at the time. Kane further argues that the Government
in this case sought to forfeit the very Property that the Government claims it
did not possess. . . .
However, as the Government aptly points
out, the forfeiture allegations are for a general `criminal forfeiture money
judgment up to $1,500,000.00’ . . ., not for forfeiture of the Property in
particular. . . . This distinction makes
a difference in the Court's evaluation of the callousness of the Government's
action under the first factor.
U.S. v. Kane, supra.
The District Court Judge then went on to parse the remaining
factors courts consider in deciding whether to exercise equitable jurisdiction:
There is no dispute that Kane has an
interest in the return of the Property, which is a substantial sum of money.
The second factor thus favors the exercise of equitable jurisdiction.
However, the third and fourth factors
counsel against the exercise of equitable jurisdiction. Kane will not suffer
irreparable injury because he has an adequate remedy under state law. In fact,
Gaming Control has informed Kane of the process for resolving disputed claims
to seized evidence as established in Nevada Revised Statutes § 465.110(2)(b).
Section 465.110(2) provides, in pertinent part, that `evidence seized by an
agent of the [Gaming Control] Board which does not result in a complaint
charging a violation of the law and evidence for which an order of disposition
is not entered pursuant to subsection 1 [addressing disposal of evidence]’ must
be resolved pursuant to an established process. . . . First, Gaming
Control must notify potential claimants of their right to file—and their
deadline for filing—a claim, which it has done here. Nevada Revised
Statutes § 465.110(2)(a). Where more than one claimant asserts a claim, the
dispute must be resolved pursuant to the following process: (1) the claimants
may agree on how to divide the evidence, subject to Gaming Control's approval;
(2) the claimants may submit the dispute to binding arbitration; or (3) Gaming
Control may interplead the evidence. Nevada Revised Statutes §
465.110(2)(b)(1)-(3). This process has been initiated in this case, thus
giving Kane an adequate remedy to pursue a return of his claimed property.
Kane argues that the process
established in subsection 1, not subsection 2, of Nevada Revised Statutes
§ 465.110 applies. . . . Subsection 1 provides that `[a]fter the final
adjudication of . . . any other complaint involving the seizure of evidence by
an agent of the Board, the court may enter an appropriate order disposing of
all physical evidence pertaining to the complaint.’ Nevada Revised
Statutes § 465.110(2)(a). But the complaint in the State Action was not
adjudicated; it was dismissed when federal charges were filed. More important,
even assuming that dismissal of the State Action amounts to a `final
adjudication,’ Kane's remedy is to seek relief from the court in the State
Action pursuant to Nevada Revised Statutes § 465.110(1).
In sum, `the balance of the equities
tilts’ against reaching the merits of Kane's request under Rule 41(g). . . .The
Court must therefore `exercise ‘caution and restraint,’ and refrain from
exercising equitable jurisdiction to entertain Kane's Motion. . . .
U.S. v. Kane, supra.
The Judge therefore ordered that
the Magistrate Judge's Report and
Recommendation . . . is adopted in full. Kane's objection to the R&R . . .
is overruled. The Court declines to exercise equitable jurisdiction to
entertain Kane's second motion for return of property. Kane's second motion for
return of property . . . is denied without prejudice.
U.S. v. Kane, supra.
As Wikipedia explains, when a motion is denied “without prejudice,” it means the party who filed that motion can try again, in another
motion.
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