Opinion
Editorial Note:
This opinion appears in the Federal reporter in a table titled "Table of Decisions Without Reported Opinions". (See FI CTA9 Rule 36-3 regarding use of unpublished opinions)
Appeal from the United States District Court for the Central District of California Manuel L. Real, District Judge, Presiding.
Before: BROWNING, FLETCHER and D.W. NELSON, Circuit Judges.
This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by Ninth Circuit Rule 36-3.
Darnelle and Adaline Garcia appeal the district court's summary judgment for the United States in this in rem proceeding against property owned by the Garcias. We have jurisdiction pursuant to 28 U.S.C. § 1291, and we reverse.
We review the district court's summary judgment de novo. Bagdadi v. Nazar, 84 F.3d 1194, 1197 (9th Cir.1996). We must determine, viewing the evidence in the light most favorable to the nonmoving party, whether there are any genuine issues of material fact and whether the district court correctly applied the relevant substantive law. Id. The availability of collateral estoppel is also reviewed de novo. In re Russell, 76 F.3d 242, 244 (9th Cir.1996).
DISCUSSION
A. Collateral estoppel
Collateral estoppel prevents relitigation by parties of issues actually litigated and necessarily decided in a prior action. Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326 n. 5 (1979). We consider the following factors when analyzing issue preclusion in a case involving a criminal matter:
The criteria for the application of collateral estoppel are: (1) the prior conviction must have been for a serious offense so that the defendant was motivated to fully litigate the charges; (2) there must have been a full and fair trial to prevent convictions of doubtful validity from being used; (3) the issue on which the prior conviction is offered must of necessity have been decided at the criminal trial; and (4) the party against whom the collateral estoppel is asserted was a party or in privity with a party to the prior trial.
United States v. Real Property Located at Section 18, 976 F.2d 515, 518 (9th Cir.1992) (quoting Avers v. City of Richmond, 895 F.2d 1267, 1271 (9th Cir.1990)).
In Garcia's criminal appeal, we held that the source-of-funds issue was not "of necessity ... decided at [Garcia's] criminal trial." See United States v. Garcia, 37 F.3d 1359 (9th Cir.1994). In the criminal appeal, Garcia relied upon the fact that his Swiss bank account contained both drug-related and untainted funds to argue that "the Government had to meet a higher standard [of proof to convict Garcia of money laundering] by proving that all the money used in the transaction came specifically from drug proceeds, not from untainted funds commingled in the Swiss bank account." Id. at 1364 (emphasis added).
We rejected Garcia's argument and concluded that "under the money laundering statutes, due to the fungibility of money, it is sufficient to prove that the funds in question came from an account in which tainted proceeds were commingled with other funds." Id. at 1365. We upheld Garcia's money laundering convictions despite the fact that the district court refused to instruct the jury on how to proportion the proceeds between drugrelated and untainted funds. "The presence of some tainted funds in the commingled account is sufficient to taint the $420,000 wired from [Garcia's] Swiss account to Santa Monica to buy the house." Id. at 1365-66.
Our analysis of the jury instructions demonstrates that the jury did not of necessity find that all of the $420,000 was derived from a drug-related source. Cf. Real Property Located at Section 18, 976 F.2d at 518 (claimant's guilty plea to criminal charge "cannot have a preclusive effect on the civil litigation of the issue of how much land the government is entitled to") (emphasis added). Accordingly, the jury's verdict that a portion of the substitute res was derived from an unlawful activity cannot estop the Garcias from arguing that a different portion of the res was "purchased with legitimate assets" and therefore is not forfeitable. See United States v. Real Property Located at 20832 Big Rock Dr., 51 F.3d 1402, 1411 (9th Cir.1995) ("Any interest in property purchased with illegitimate assets is forfeitable, but any interest purchased with legitimate assets, even the legitimate assets of a drug dealer or someone who knows they are doing business with a drug dealer, is not forfeitable" under 21 U.S.C. § 881(a)(6), "because it is not 'proceeds traceable to' a drug transaction."). That is to say, although the Garcias cannot now argue from the facts established at trial that none of the $420,000 is in fact traceable to a drug transaction, the Garcias still may argue that the government did not have probable cause to believe at the time of the forfeiture that any portion of that amount was traceable to such a transaction.
B. Probable cause
Having determined that collateral estoppel does not dispose of this case, we must also consider whether the district court properly granted full summary judgment to the government. Full summary judgment may have been proper if, without the benefit of collateral estoppel, the government established probable cause to believe that the entire substitute res represents proceeds traceable to drug transactions and if the Garcias failed to rebut the government's showing.
Section 881(a) (6) of Title 21 provides for the forfeiture of seized money if it was "(1) furnished or intended to be furnished in exchange for a controlled substance; (2) traceable to such an exchange; or (3) used or intended to be used to facilitate a violation of federal drug laws." United States v. $191,910 in U.S. Currency, 16 F.3d 1051, 1071 (9th Cir.1994). Before such a forfeiture will lie, the government must initially establish probable cause to believe that the seized proceeds were connected to drugs. See 21 U.S.C. § 881(d); 19 U.S.C. § 1615; $191,910 in U.S. Currency, 16 F.3d at 1071; United States v. $5,644,540 in U.S. Currency, 799 F.2d 1357, 1362 (9th Cir.1986). If it does, the burden then shifts to the claimant to prove by a preponderance of the evidence that the proceeds were not derived from an illegal drug transaction. $5,644,540 in U.S. Currency, 799 F.2d at 1362. If the claimant fails to carry this burden, the property is forfeited.
To meet its burden of establishing probable cause, "the government must show that it had reasonable grounds to believe that the [money] was related to an illegal drug transaction, supported by less than prima facie proof but more than mere suspicion." United States v. U.S. Currency, $30,060, 39 F.3d 1039, 1041 (9th Cir.1994) (quoting $5,644.540 in U.S. Currency, 799 F.2d at 1362). "To pass the point of mere suspicion and to reach probable cause, it is necessary to demonstrate by some credible evidence the probability that the money was in fact connected to drugs." Id. (quoting United States v. Dickerson, 873 F.2d 1181, 1184 (9th Cir.1988)).
We do not believe that the government met its initial burden in the partial motion for summary judgment submitted to the district court. Standing alone, Garcia's possession of a large sum of money does not establish probable cause to believe that this sum was derived from a drug-related transaction. We have held that the establishment of probable cause "requires more than the mere existence of a large amount of cash ...; the money must be in combination with other persuasive circumstantial evidence" of an illegal drug transaction. United States v. Padilla, 888 F.2d 642, 644 (9th Cir.1989) (internal quotations omitted). Moreover, we recently declared that "any amount of money, standing alone, would probably be insufficient to establish probable cause for forfeiture." $191,910 in U.S. Currency, 16 F.3d at 1072. Accordingly, the government must come forward with credible evidence "tending to establish that the money was drug-related." Id.
The evidence presented by the government in its motion for partial summary judgment at most suggests that Garcia's personal assets were not generated exclusively (or even predominantly) by his DEA income. But the evidence fails to indicate that the $420,000 with which the Garcias purchased the defendant property was derived from an illegal drug transaction. See U.S. Currency, $30,060, 39 F.3d at 1044 (claimant's possession of large sums of money "may support a suspicion of illegal activity, [but] a mere suspicion of illegal activity is not enough to establish probable cause that the money was connected to drugs"); $191,910 in U.S. Currency, 16 F.3d at 1072 (claimant in possession of large sum of money "could just as easily have been a distributor of 'street money' in a political campaign, an embezzler, a jewel smuggler, an art thief, or an S & L crook as a drug conspirator"); see also United States v. Real Property and Appurtenances Thereto Known as 785 St. Nicholas Ave. and 789 St. Nicholas Ave., 983 F.2d 396, 405 (2d Cir.1993) (noting that "the connection between an individual's private assets and drug transactions is not one to be lightly made").
The only evidence connecting the $420,000 wire transfer to an illegal drug transaction is Garcia's criminal conviction for participation in a drug-related conspiracy. But this verdict cannot be relied upon to establish probable cause because it was not rendered until April 1991, nearly two years after the government initiated this in rem forfeiture action. See $191,910 in U.S. Currency, 16 F.3d at 1066, 1071 (government must establish probable cause at the time it institutes forfeiture proceedings and cannot rely on after-acquired evidence to meet this burden).
To this point, the government has failed to demonstrate with credible evidence that, at the time it instituted this forfeiture proceeding, it had probable cause to believe that the defendant property was purchased with drug-related funds and was therefore forfeitable under 21 U.S.C. § 881(a)(6). This does not necessarily mean that, if given the chance, the government will be unable to establish probable cause. The district court's improper grant of full summary judgment precluded the government from doing more to establish the requisite probable cause. It also precluded the Garcias from rebutting any evidence of probable cause presented by the government. We therefore remand this case to the district court so that the parties may attempt to meet their respective burdens under 21 U.S.C. § 881(d), and so that Adaline Garcia may attempt to assert an innocent-owner defense.
The Garcias did not receive adequate notice that they were required to rebut the government's attempt to establish probable cause. A party must be provided with adequate notice of the basis of the summary judgment motion against which it must defend. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) ("Of course, a party seeking summary judgment always bears the initial responsibility of informing the district court of the basis for its motion.... "); Fountain v. Filson, 336 U.S. 681, 682-83 (1949) (reversing summary judgment "on a new issue as to which the opposite party had no opportunity to present a defense"). The government's partial summary judgment motion was addressed only to the question of whether collateral estoppel precluded the Garcias from introducing evidence of a non-drug source for the res. The motion did not call for presentation of the actual evidence.
REVERSED AND REMANDED.