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United States v. Real Property Located at 1308 Selby Lane

United States District Court, E.D. Tennessee, Knoxville Division

September 19, 2017




         This matter is before the Court on Intervenor-Claimant Knox County, Tennessee's Motion to Intervene [doc. 36], the United States' Response in Opposition [doc. 40], Intervenor-Claimant Knox County, Tennessee's Motion to Consolidate [doc. 37], the United States' Response in Opposition [doc. 41], and Intervenor-Claimant Knox County, Tennessee's Motion for Oral Argument [doc. 42]. For the reasons herein, the Court will deny the motions.

         I. Background

         The United States brought this civil forfeiture action against two properties-one located at 1308 Selby Lane, Knoxville, Tennessee 37922 and the other located at 1525 Wembley Hill Road, Knoxville, Tennessee 37922, (“Defendant Properties”)-claiming they were subject to forfeiture under 28 U.S.C. §§ 981(a)(1)(C), 2461. [Verified Compl., doc. 1, ¶ 8]. Specifically, the United States alleged that Leslie Janous (“Ms. Janous') purchased the Defendant Properties with $647, 698 in criminal proceeds, which she unlawfully obtained through acts of wire fraud, and that the Defendant Properties were therefore subject to forfeiture. [Id. ¶ 10].[1] Three claimants came forward and asserted an interest in the Defendant Properties-Regions Bank, The Painted Room, and Scancarbon, Inc. [Regions Bank Verified Claim, doc. 8; The Painted Room Verified Claim, doc. 15; Scancarbon, Inc. Verified Claim, doc. 16]. Recognizing their interests, the United States reached an agreement with them for the final disposition of the Defendant Properties, and the parties moved to preserve the agreement in a Consent Order [doc. 19], which provided the United States with the right to sell the Defendant Properties and use the proceeds to meet the claimants' interests. [Id. ¶ 11].[2] The Court approved the Consent Order, which, by its own terms, “constitute[d] entry of a final order of forfeiture.” [Id.].

         But as the United States prepared to sell the Defendant Properties, a dialogue began between it and Knox County, Tennessee (“Knox County”)-which, though it was not a party to the Consent Order, apparently contacted the United States Attorney's Office and maintained that it too had an interest in the Defendant Properties, [3] namely liens for the payment of back taxes. [See Joint Mot. Hold Proceeds in Escrow, doc. 21, at 3]. A dispute then arose between Knox County and the United States, with the United States contending that Knox County was only entitled to collect taxes that had accumulated prior to entry of the Consent Order, not after it. [See United States' Br., doc. 24, ¶¶ 10-11]. In an effort to resolve their dispute, the United States acknowledged Knox County's lien as valid and purported to have waived the requirement that Knox County must file a verified claim of interest in the Defendant Properties. [Id. ¶ 8]. Together, they moved the Court to hold the proceeds from the Defendant Properties' sale in escrow, until the Court could determine the extent of Knox County's liens. [Joint Mot. Hold Proceeds in Escrow at 3]. Although the Court granted the parties' motion, [Order, doc. 22], Knox County soon afterwards moved for relief from the Consent Order altogether, seeking an order “declaring all proceedings, orders, and judgments . . . void and of no effect.” [Mot. Relief, doc. 25, at 1]. The Court denied Knox County's motion [Order Denying Mot. Relief, doc. 33], and Knox County appealed its decision, [Notice of Appeal, doc. 34].

         The Sixth Circuit rejected Knox County's appeal, dismissing it for lack of subject matter jurisdiction because Knox County had never properly become a party to the lawsuit in the first place. [Sixth Circuit's Order, doc. 35, at 3-4]. The Sixth Circuit noted that because a civil forfeiture action is in rem-meaning that the property subject to forfeiture, rather than a person, is the defendant-a third party with an interest in the property has to intervene in the case before it can protect that interest. [Id. at 4]. The Sixth Circuit stated that Knox County could have intervened in three ways: (1) by filing a verified claim, (2) by filing a motion to intervene under Federal Rule of Civil Procedure 24, or (3) by requesting the Sixth Circuit's permission to intervene in a post-judgment capacity for purposes of appeal. [Id. at 4]. Because “Knox County did none of those things, ” it was unable to recognize Knox County as a party to the case. [Id. at 3-4]. Now, Knox County reappears before this Court with a Rule 24 motion to intervene in hand, asking the Court to acknowledge it as “a party to this civil forfeiture proceeding, ” [Mot. Intervene ¶ 34], and to set aside the forfeiture of the Defendant Properties, [Mot. Relief, doc. 36-1, at 1].

         II. Legal Standard

         Intervention is “[t]he entry into a lawsuit by a third party who, despite not being named a party to the action, has a personal stake in the outcome.” Intervention, Black's Law Dictionary (10th ed. 2014) (citing Fed.R.Civ.P. 24). Intervention is available to a party in two forms under the Federal Rules of Civil Procedure: intervention as of right and permissive intervention. Fed. R. Civ. P 24(a)-(b). Federal Rule of Civil Procedure 24(a) permits a party to intervene in an action as of right, which means a court must allow a party to intervene when that party:

(1) is given an unconditional right to intervene by a federal statute; or
(2) claims an interest relating to the property or transaction that is the subject of the action, and is so situated that disposing of the action may as a practical matter impair or impede the movant's ability to protect its interest, unless existing parties adequately represent that interest.

Fed. R. Civ. P. 24(a). Under this language, a would-be intervenor must satisfy four elements before he is entitled to intervene: “(1) the motion to intervene is timely; (2) the proposed intervenor has a substantial legal interest in the subject matter of the case; (3) the proposed intervenor's ability to protect their interest may be impaired in the absence of intervention; and (4) the parties already before the court cannot adequately protect the proposed intervenor's interest.” Coal. to Defend Affirmative Action v. Granholm, 501 F.3d 775, 779 (6th Cir. 2007) (citation omitted). “[A] failure to meet [any] one of the [four factors] will require that the motion be denied.” Grubbs v. Norris, 870 F.2d 343, 345 (6th Cir. 1989).

         III. Analysis

         Although Knox County does not expressly say so, the type of intervention that it pursues appears to be intervention as a matter of right under Rule 24(a), parts of whose language it recites, if only briefly, in its motion. [See Mot. Intervene ¶¶ 35-36]. As an initial matter, the fact that a case like this one is in post-judgment cannot in and of itself preclude a party from achieving intervention. See Taylor v. KeyCorp, 680 F.3d 609, 616 n.7 (6th Cir. 2012) (“Entry of final judgment, alone, is not a basis upon which to deny a motion to intervene.” (citing United Airlines, Inc. v. McDonald, 432 U.S. 385, 394-96 (1977))). Rather, the question of whether a motion to intervene is timely-the first of the four elements for analysis under Rule 24(a)-is “a matter within the sound discretion of the district court.” Stotts v. Memphis Fire Dep't, 679 F.2d 579, 582 (6th Cir. 1982) (citations omitted).

         But even before the Court weighs the issue of timeliness-or any issue relating to the four elements for analysis-it must recognize that intervention is first and foremost a matter of standing. “For all relief sought, there must be a litigant with standing, whether that litigant joins the lawsuit as a plaintiff, a coplaintiff, or an intervenor of right.” Townof Chester v. Laroe Estates, Inc., 137 S.Ct. 1645, 1651 (2017) (emphasis added).[4] Standing to sue is a doctrine that “limits the category of litigants empowered to maintain a lawsuit in federal court to seek redress for a legal wrong.” Spokeo, Inc. v. Robins, 136 S.Ct. 1540, 1547 (2016) (citations omitted). The legal wrong that Knox County, as a prospective intervenor, seeks to redress is the civil forfeiture of the Defendant Properties, and it requests an order setting aside that forfeiture. [Mot. Intervene at 9; Mot. Relief at 1].[5] In reviewing Knox County's right to intervene and pursue this relief, the Court has license to raise standing sua sponte ...

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