United States v. $307,970.00, in U.S. Currency

156 F.Supp.3d 708

United States of America, Plaintiff,

v.$307,970.00, in U.S. Currency, Defendant.

NO. 4:12–CV–136–FL

United States District Court, E.D. North Carolina, Eastern Division.

Signed January 14, 2016

Stephen A. West, United States Attorney's Office, Raleigh, NC, for Plaintiff.

ORDER

LOUISE W. FLANAGAN, United States District Judge

This matter comes before the court on claimants' motion to dismiss the case for due process violations, or, in the alternative, for discovery sanctions. (DE 130). Also pending before the court is the government's motion to stay proceedings, made pursuant to 18 U.S.C. § 981(g). (DE 126). The issues raised have been briefed fully and are ripe for ruling. For the reasons that follow, claimants' motion is denied, the government's motion is granted, and the case is stayed on the terms outlined below.

BACKGROUND

This case has a lengthy and contentious history that is summarized more fully in the court's prior orders. The court herein summarizes only the facts pertinent to disposition of the instant motion. The government seized the defendant funds from claimant Apolinar Garcia–Ancelmo (“Garcia–Ancelmo”) on February 16, 2012, in Wayne County, North Carolina. On July 12, 2012, the government initiated this civil asset forfeiture action in rem against the defendant funds pursuant to 18 U.S.C. § 981 and 21 U.S.C. § 881(a)(6). The government contends the defendant funds were used or intended to be used in facilitating a violation of Title II of the Controlled Substances Act, 21 U.S.C. § 801 et seq.

Claimants are Garcia–Ancelmo, his wife, Cirilia Garcia (“Garcia”), and their daughter Lucia Covarrubias (“Covarrubias”). Claimants Garcia and Covarrubias filed claims of ownership with the court on August 20, 2012. Claimant Garcia–Ancelmo filed a claim of ownership on August 29, 2012. Throughout this case, claimants have contended that the defendant funds were lawfully obtained through their legitimate business operations.

For various reasons, discovery has not been completed. On November 29, 2012, the court entered its first case management order (“CMO”) and discovery began. On January 28, 2013, claimants filed a motion to dismiss pursuant to Rule G(8)(b) of the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions (“Supplemental Rules”) and Federal Rule of Civil Procedure 12(b)(6). On February 11, 2013, the government served on claimants special interrogatories, inquiring as to their “identity and relationship to the defendant property,” pursuant to Supplemental Rule G(6). By operation of law, the government's response time automatically was stayed until 21 days after claimants responded to the special interrogatories, giving the government until as late as March 28, 2013, to respond to the motion to dismiss. See Supplemental Rule G(6)(c).

On March 5, 2013, claimants filed a motion to stay the case. Claimants sought a stay of both discovery and their obligation to respond to the government's special interrogatories, until resolution of their motion to dismiss as well as the government's also-pending motion to amend its complaint. On May 22, 2013, the court granted in part and denied in part claimants' motion to stay. The court granted the motion to stay discovery generally until it resolved the parties' motions. However, the court denied claimants' motion inasmuch as they sought a stay of their response to the government's special interrogatories. The court directed claimants to respond to those special interrogatories within 10 days of its order.

On June 14, 2013, after claimants responded to the government's special interrogatories, but before the government filed its memorandum in opposition to claimants' motion to dismiss, the government filed a motion to compel responses to those same special interrogatories, as well as a motion to stay its response time to claimants' motion to dismiss. Therein, the government argued that claimants had provided materially incomplete responses, or otherwise had altogether failed to respond, to a number of the interrogatories. Briefing on the government's motion to compel ensued. On August 13, 2013, the court entered order granting in part and denying in part the government's motion to compel and granting the government's motion to stay its response time. Specifically, the court directed claimants to answer certain interrogatories within 10 days of the order and granted the government an additional 21 days after claimants' response to file any responsive brief.

Rather than respond to claimants' motion to dismiss, on September 13, 2013, the government instead filed a motion to strike the three claims of ownership filed by claimants, as well as a motion for default judgment, the filing of which was grounded in the theory that no claimant had come forward to assert ownership of the defendant funds. In addition, the government filed a motion to continue the stay of its response time to claimants' motion to dismiss, filed some eight months earlier. On September 17, 2013, the court noticed a hearing on the government's various motions. On September 23, 2013, claimants filed a motion to continue that hearing. On September 27, 2013, the court entered a text order denying the government's motion to strike and also denying the government's motion for default judgment. In addition, the court denied claimants' motion to dismiss without benefit of government response, as allowed by Supplemental Rule G(6)(c), and further denied as moot the government's motion to continue its response deadline. The court then directed the parties to submit to it within 14 days a second discovery plan to govern the conduct of pretrial activities.

The parties filed a joint report, pursuant to Federal Rule of Civil Procedure 26(f), on October 10, 2013. On October 15, 2013, the court entered a second CMO, which provided that discovery was to close by April 15, 2014. However, three months into the renewed discovery period, on January 23, 2014, the government filed its first motion to stay the case pursuant to 18 U.S.C. § 981(g). Briefing on the government's motion lasted an extended amount of time, with both parties seeking an extension of time in which to file their respective response and reply, and with claimants filing a disfavored sur-reply without leave of court. Claimants' sur-reply drew a motion to strike from the government, which then had to be fully briefed. In all, briefing on the government's motion to stay was not completed until April 9, 2014. Finally, on May 23, 2014, the court granted the government's motion and stayed the case up to and including July 23, 2014.

The government filed a motion to continue the effect of the stay on July 23, 2014, the day the stay expired. As a result, the case fell into limbo, a sort of quasi-stay, until briefing on the issue was completed. On August 13, 2014, claimants filed a memorandum in opposition to the government's requested stay. In that same document, and in disregard of the Local Civil Rules, claimants embedded a motion, styled as a “request,” to dismiss the case for due process violations. On August 18, 2014, the court entered order granting the government's motion to stay; however, the court tailored the granted stay with an eye toward claimants' due process concerns, limiting its reach to only two months.

At the expiration of the stay period, on October 17, 2014, the parties' filed a joint motion to extend the time to complete discovery and for modification of the second CMO. That joint filing was withdrawn on the same day. On October 24, 2014, the court entered order directing the parties to file a proposed schedule for proceeding with any additional discovery. On November 5, 2014, the parties responded with a second joint motion to amend the second CMO. Therein, the parties requested a new discovery deadline of February 28, 2015, with dispositive motions due by March 31, 2015. The court granted the parties' joint motion on November 7, 2014, and the new case schedule took effect.

On January 30, 2015, one month prior to the close of the discovery period, claimants filed a motion for summary judgment, which argued that the government lacked probable cause to bring this case, as well as that the government could not meet its trial burden. Approximately three weeks later, on February 18, 2015, and 10 days before the close of discovery, claimants filed a motion to stay the proceeding, with the proposed stay to last until the court ruled on their motion for summary judgment. On February 20, 2015, the government also filed a motion to stay the case pursuant to 18 U.S.C. § 981(g). By order entered July 2, 2015, the court granted in part claimants' motion to stay and denied as moot the government's requested motion. In particular, the court bifurcated the issues raised in claimants' motion for summary judgment and stayed the proceedings until resolution of the probable cause issue. The court deferred ruling on the merits issue until the government had the opportunity to complete discovery.

The court denied claimants' motion on the probable cause issue on August 26, 2015. In its order, the court set the final discovery deadline for October 20, 2015, with all dispositive motions due by November 20, 2015. On October 13, 2015, claimants filed a motion for a protective order. Claimants represented to the court that the government sought to depose them in connection with this case, and moved the court for an order limiting the use of their deposition testimony in unrelated proceedings. After claimants filed their motion, the parties jointly moved to extend the discovery deadline until 15 days after the court resolved claimants' motion.

On October 27, 2015, the government filed the instant, third motion to stay proceedings pursuant to 18 U.S.C. § 981(g). Thereafter, on November 10, 2015, claimants filed the instant motion to dismiss or in the alternative for discovery sanctions. In their motion, claimants contend that the...