United States v. Titus

UNITED STATES OF AMERICA v. MARK J. TITUS

CRIMINAL ACTION NO. 11-159

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF LOUISIANA SECTION "B"(1)

Dated: December 12, 2013

ORDER AND REASONS

Nature of Motions and Relief Sought:

Before the Court are pending Motions asserting an interest in property the United States ("Government") seeks to forfeit, the Government's responsive Motions and Oppositions, and briefs ordered by the Court regarding what constitutes a "bona fide purchaser" under both Louisiana law and federal forfeiture law, and related filings. (Rec. Docs. No. 102, 103, 105, 119, 120, 121, 130, 131, 132, 134, 139, 144, 147, & 148 ).

Three parties have asserted an interest in the property the Government seeks to forfeit, although only those of Joan Gail Stelzer ("Stelzer") and Mark James Titus Jr. ("Titus, Jr.") are addressed here.¹ (Rec. Docs. No. 102 & 103). Also before the Court is Titus, Jr.'s Motion for Leave to File an Amended Petition. (Rec. Doc. No. 134).

IT IS ORDERED that the Government's Motion to Dismiss Titus, Jr.'s petition is GRANTED (Rec. Doc. No. 119) and Titus, Jr.'s Motion for Leave to File an Amended Petition is DENIED (Rec. Doc.No. 134).

IT IS FURTHER ORDERED that Stelzer's petition is DISMISSED with respect to the property at 348 Diamond Street. (Rec. Doc. No. 102).

IT IS FURTHER ORDERED that a hearing will be held on Stelzer's Petition with respect to the 841-43 Washington Avenue property on February 19, 2014, at 2:00 p.m., concurrent with oral arguments concerning Valerie Titus's related petition, wherein the parties will address whether Stelzer was reasonably without cause to believe that the property was subject to forfeiture at the time of the alleged purchase. Both the Government and Stelzer will be allowed to conduct limited discovery concerning whether Stelzer was reasonably without cause to believe the 841-43 Washington Avenue property was subject to forfeiture on the date of the alleged purchase. Such discovery shall be completed NO LATER THAN Thursday, February 6^th, 2014.

Procedural History:

On October 10, 2012, the Court entered judgment against Defendant Mark J. Titus ("Defendant Titus") accepting his plea of guilty² to Count One of the one-count Bill of Information, Conspiracy to commit Mail Fraud in violation of 18 U.S.C. §1341, and ordering restitution in the amount of $925,320. (Rec. Doc. No.72). On the same date the Court conditionally granted the Government's Superceding Motion for a Preliminary Order of Forfeiture, subject to any objections Defendant Titus might make within a thirty day window. (Rec. Doc. No. 78 at 29-30). Defendant Titus filed no objections. The Government's motion and proposed preliminary order sought preliminary forfeiture in the form of a $925,320 money judgement against Defendant Titus in personam, a preliminary order of forfeiture against 4637-4639 Tchoupitoulas Street as "tainted" property under 18 U.S.C. §981(a)(1)(C), and preliminary orders of forfeiture against 841-43 Washington Avenue and 348 Diamond Street as "substitute" property under 18. U.S.C. § 853(p). (Rec. Doc. No. 65).

On November 20, 2012 the Court entered a final Order of Forfeiture against Titus and the same properties. (Rec. Doc. No. 94, the "Final Forfeiture Order" hereinafter.) The Court found that Defendant Titus received $925,320 in proceeds from the offense of conviction and that a nexus existed between such proceeds and real property located at 4637-4639 Tchoupitoulas Street (the "Tchoupitoulas Property"), rendering such property "directly traceable" under 18 U.S.C. §981(a)(1)(C). Accordingly, the Court entered a final forfeiture judgment forfeiting to the Government (i) a $925,320 personal money judgment against Defendant Titus, (ii) the Tchoupitoulas Property, and (iii) as "substitute assets" under 18 U.S.C. §853(p), real properties located at 841-43Washington Avenue, 901 Washington Avenue, and 348 Diamond Street. Id. The Government thereafter effected notice of the Order of Forfeiture to third parties with an interest in the real properties, including: Valerie Titus, Stelzer, Titus, Jr., and Property 348 LLC, of which Titus, Jr. was the sole partner at the time of the notice. (Rec. Docs. No. 105-4, 105-1, 108, 109, 110, 111, 119-5 & 119-5).

Titus, Jr., Defendant Titus's son, filed his petition pro se on December 28, 2012, asserting an interest in the Tchoupitoulas Property and claiming that he received ownership of Property 348, LLC, which holds title to the Tchoupitoulas Property, from his father on July 7, 2011. (Rec. Doc. No. 103 at 1-2).

The Government moved for Dismissal of Titus, Jr.'s Petition on January 22, 2013, arguing that he lacked standing to assert an interest in the property. (Rec. Doc. No. 119). On February 20, 2013, the Court ordered Titus, Jr. to respond by March 13, 2013. (Rec. Doc. No. 122 at 2). On March 27, 2013, after requesting and receiving an extension of time, Titus, Jr. filed opposition and a Motion for Leave to File an Amended Petition that effectively sought to substitute "Property 348, LLC," for "Mark Titus, Jr." in his petition. (Rec. Doc. No 134).

Stelzer, Defendant Titus's mother-in-law, filed a petition asserting an interest in the 841-43 Washington Avenue and 348 Diamond Street properties and requesting leave to conduct discoveryon December 24, 2012. (Rec. Doc. No. 102). Therein, she asserted that on July 7, 2011, she paid $10 for the Diamond Street property and $25,000 for the Washington Avenue property. Id. at 2.

The Government moved for dismissal of Stelzer's petition on January 11, 2013, and Stelzer filed opposition shortly thereafter. (Rec. Docs. No. 105 & 120). On February 20, 2013, the Court denied Stelzer's request for discovery for failure to show cause under Federal Rule of Criminal Procedure 32.2(c)(1)(B), denied the Government's Motion to Dismiss without prejudice to reconsider, and ordered briefing on the issue of what constitutes a "bona fide purchaser" under both Louisiana law and federal forfeiture law, advising that the Court would reconsider the Government's motion for dismissal after such briefing without further motions. (Rec. Doc. No. 122 at 3). Both Stelzer and the Government submitted briefs in response to the Court's Order and subsequent reply briefs. (Rec. Docs. No. 130, 131, 144, 148).

Law and Analysis:

1. Third-party interests under 21 U.S.C. § 853(n) and Titus Jr.'s Petition

"After an order of forfeiture is entered, the government is required to publish notice of the order and may also, to the extent practicable, provide direct written notice to anyone known to have a potential interest in the property." United States v. Stone, 304 F. App'x. 334, 336 (5th Cir. 2008), citing 21 U.S.C. § 853(n).Within 30 days of said notice, any third party asserting an interest in property subject to forfeiture must petition the court for a hearing in order to assert his interest. Id. Under Federal Rule of Criminal Procedure 32.2(c), the Court is required to conduct an ancillary proceeding to adjudicate the third party interests. Stone, 304 Fed. Appx. at 335-36. Although the proceedings arise in a criminal context, they closely resemble civil proceedings. Id. at 336 (citing United States v. Corpus, 491 F.3d 205, 208 (5th Cir. 2007)). Thus, prior to a hearing or discovery, a court may, upon a party's motion, "dismiss the petition for lack of standing . . . or for any other lawful reason." Stone, 304 Fed.Appx. at 336 (quoting Fed. R. Crim. P. 32.2(c)(1)(A)).

The Fifth Circuit has long recognized that third-parties must first demonstrate standing to contest federal forfeiture of assets. See, e.g., United States v. Three Hundred Sixty Four Thousand Nine Hundred Sixty Dollars ($364,960.00) in U.S. Currency, 661 F.2d 319, 326 (5th Cir. 1981)(stating that a claimant who challenges the government's forfeiture of money or property under a federal statute "must first demonstrate an interest in the seized item sufficient to satisfy the court of its standing to contest the forfeiture").

Here, as he concedes, Titus, Jr. has no standing to assert a personal interest in the Tchoupitoulas Property because it is ownedby Property 348, LLC. (Rec. Doc. No. 147 at 2).³

In federal forfeiture actions, ownership interests are determined by state law. United States v. Lester, 85 F.3d 1409, 1411 (9^th Cir. 1996); United States v. East Carroll Correctional Sys., Inc., 14 F.Supp. 2d 851, 853 (W.D. La. 1998). Louisiana law clearly states that "[a] member shall have no interest in limited liability company property." La. R.S. § 12:1329; see also Kelly v. Porter, 687 F.Supp. 2d 632, 636 (E.D. La 2010) ("Louisiana law provides that Kelly—even as the sole member of [an LLC]—has no ownership interest in [the LLC's] property.") It is therefore clear that Titus lacks standing to assert the interests of Property 348, LLC.

Thus, rather than assert standing, Titus, Jr. seeks leniency on two grounds. First, he asks the Court to liberally construe his Petition as asserting Property 348, LLC's interest rather than his own. (Rec. Doc. No. 132 at 3-4). He emphasizes that his petition made reference to his recent acquisition of and sole membership in the LLC, asserts that his intention to assert the LLC's interest is thereby made clear, and concludes that the "only rational" interpretation of his petition is as a good faith, pro se attempt to do what the law required of him. Id. at 4.

The Court cannot construe the petition as he requests, however, because it would result in illegality: pro se representation of abusiness entity. The Fifth Circuit has made clear that such representation violates federal law. See Southwest Express Co., Inc. v. ICC, 670 F.2d 53, 55 (5^th Cir. 1982)("Corporations and partnerships, both of which are fictional legal persons, obviously cannot appear for themselves personally.")

Next, Titus, Jr. seeks leave to file an amended petition on behalf of Property 348, LLC, invoking the doctrine of equitable tolling. (Rec. Doc. No. 132 at 4). In...