Luis Gines-Perez v. Raymond W. Kelly, Commissioner, United States Customs Service

United States Court of Appeals
For the First Circuit
No. 02-1525
LUIS GINES-PEREZ,
Plaintiff, Appellant,
v.
RAYMOND W. KELLY, COMMISSIONER, UNITED STATES CUSTOMS SERVICE,
Defendant, Appellee.
ONE 34' SCARAB VESSEL,
Defendant.
_____________________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Juan M. Pérez-Giménez, U.S. District Judge]
Before
Selya, Circuit Judge,
Stahl, Senior Circuit Judge,
and Lynch, Circuit Judge.
Luis Gines-Perez on brief pro se.
H.S. Garcia, United States Attorney, Miguel Fernandez,
Assistant United States Attorney, Chief, Civil Division, and Jose
Javier Santos Mimoso, Assistant United States Attorney, on brief
for appellee.
June 27, 2003

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SELYA, Circuit Judge. Plaintiff-appellant Luis Gines-
Perez appeals from the district court's entry of summary judgment
in favor of Raymond W. Kelly, Commissioner of the United States
Customs Service (the Service). The underlying case involves the
Service's seizure of a boat belonging to the appellant on the
ground that a culpable connection existed between the boat and
certain money laundering and drug-trafficking activities. See 18
U.S.C. § 1956; 21 U.S.C. § 841. The appellant claims that the
Service's actions violated the Due Process Clause of the Fifth
Amendment. We agree.
I.
The genesis of this matter can be traced to October 20,
1998, when the government obtained a seizure warrant for the
appellant's boat (a thirty-four foot Wellcraft Scarab III). The
following day, the Service took possession of the boat. On October
29, it notified the appellant of the seizure by letter. This
missive stated that the government had reason to believe that the
vessel had been purchased with the proceeds of unlawful activity,
and therefore, that it was forfeitable. The letter informed the
appellant that he could request relief from the impending
forfeiture by petitioning for remission within thirty days of the
date of the letter. See 19 U.S.C. § 1618.
When the appellant did not file a petition for remission
within the stipulated period, the Service sent him a second letter

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in which it advised that a notice of seizure and intent to forfeit
would be published on and after May 5, 1999. The letter also
stated that should the appellant wish to stay the administrative
forfeiture proceedings and place the matter before a court, he
would have to file a claim and post a bond within twenty days from
the date of the first publication.
The appellant responded to this letter within the twenty-
day period, acknowledging the "claim and cost bond" requirement.
His letter stated that he had decided to apply for in forma
pauperis (IFP) status so as to dispense with the necessity for
posting a bond. The appellant attached a completed IFP application
to this letter.
Over eight months later — without either ruling on the
IFP application or referring the case to the United States Attorney
for the initiation of judicial proceedings — the Service informed
the appellant, by letter dated February 7, 2000, that it had
decided not to pursue forfeiture, but, rather, would release the
boat to the appellant. The Service added, however, that the
appellant would have to (a) pay the costs associated with the
seizure and storage of the boat, and (b) sign an indemnity
agreement. The letter admonished that if no action were taken
toward "the remission of the vessel" within thirty days, the
Service would commence administrative forfeiture proceedings by

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publishing a first notice of intent to forfeit at some time during
March of 2000.
The appellant apparently did not accept the offer. In a
follow-up letter, under date of March 29, 2000, the Service
informed him that since he had not paid the seizure and storage
costs, the boat would be summarily sold pursuant to 19 U.S.C. §
1612(b), and that he would be entitled to any money leftover after
payment of the costs. The appellant responded by bringing this
suit on June 8, 2000. Approximately three weeks later, the Service
reported that it had sold the boat, that there were no excess
proceeds, and that it regarded the case as closed.
II.
Under the customs laws, which apply here, seized property
worth $500,000 or less may be subject to administrative forfeiture
without judicial involvement. See 19 U.S.C. § 1607. The agency
seizing the property must give notice of the seizure to all parties
in interest and must inform them of the applicable procedures for
contesting the proposed forfeiture. Id. To initiate
administrative forfeiture proceedings, the agency must publish
notice of intent to forfeit for three successive weeks in a
newspaper of general circulation in the judicial district in which
the seizure occurred. See id.; see also 19 C.F.R. § 162.45(b)(1).
In order to contest such a forfeiture, an interested
party must file a claim and cost bond within twenty days of the

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date of the first publication of the intent to forfeit. 19 U.S.C.
§ 1608. The requirement for a cost bond is not inflexible: it is
routinely waived upon proof that a party is unable to afford the
cost of the bond. 19 C.F.R. § 162.47(e). The timeous filing of a
claim, accompanied either by a cost bond or by proof of IFP status
sufficient to secure a waiver, obliges the agency to refer the
matter to the United States Attorney for the commencement of
judicial forfeiture proceedings. 19 U.S.C. § 1608. If, however,
no satisfactory filing is made with the twenty-day period, the
agency may declare the property forfeit. Id. § 1609(a).
As an alternative to litigation, an interested party may
petition the Secretary of the Treasury (the Secretary) for
remission or mitigation. Id. § 1618. The remission procedure
"grants the Secretary the discretion not to pursue a complete
forfeiture despite the Government's entitlement to one." United
States v. Von Neumann, 474 U.S. 242, 250 (1986). Although this
procedure is an informal — and often helpful — way for the parties
to resolve a dispute, remission proceedings are not required in
order to obtain a forfeiture determination. See id.
III.
The district court decided this case in favor of the
Service on the ground that the appellant had not timely responded
to the notice of intent to forfeit. The appellant attacks this
determination. He asseverates in this venue, as he did below, that

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his claim and IFP application were timely filed but that the
Service improperly ignored it. Moreover, he says that once a
seasonable claim and IFP application were filed, the Service had no
license to proceed as it did and that its course of action violated
his due process rights.
The Service disagrees with the appellant's bottom-line
position. Importantly, however, it acknowledges that the appellant
filed a claim and IFP application and does not suggest that these
filings were untimely or otherwise deficient. Thus, the Service
does not seek to defend the district court's determination that the
appellant had not timely responded — and the chronology set forth
above, see supra Part I, leaves no doubt but that the claim was
timely filed. The question, then, is whether the district court's
decision is supportable on some alternative ground.
The Service sees the case this way. It points out that
it had changed its mind about proceeding with forfeiture and had
decided to abort the seizure and release the vessel to the
appellant. It then notified the appellant of its decision to sell
the vessel under 19 U.S.C. § 1612(b) in order to recoup its out-of-
pocket costs. The appellant did not interpose any objection to the
sale. Accordingly, the Service posits, it provided all the process
that was due.
This argument does not withstand scrutiny. The principal
problem is that the manner in which the Service proceeded

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effectively deprived the appellant of his vessel and held him
liable for seizure and storage costs without any reasoned
determination either that the boat was subject to forfeiture or
that the appellant was legally liable to reimburse the government's
costs. We explain briefly.
Section 1612(b) provides, in pertinent part, as follows:
If the Customs Service determines that
the expense of keeping the vessel . . . is
disproportionate to the value thereof, the
Customs Service may promptly order the
destruction or other appropriate disposition
of such property under regulations prescribed
by the Secretary.
19 U.S.C. § 1612(b). One of the purposes of section 1612 is to
substitute a cash fund for a vessel or other seized piece of
property subject to large custodial costs. 1 David B. Smith,
Prosecution and Defense of Forfeiture Cases ¶ 8.04, at 8-28 (2000).
As a result, "[t]he proceeds of [a] sale [under section 1612] shall
be held subject to the claims of parties in interest in the same
manner as the seized property would have been subject to such
claims." 19 C.F.R. § 162.48(a). So viewed, a sale under section
1612 does not — and should not — amount to a final decision
concerning a claimant's right to the property. To the contrary,
such a sale is an intermediate step pending the making of such a
decision.
Here, the Service made no claim of disproportionate
expense. Instead, it took the position that, because the appellant

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could not afford to repay the costs incurred for seizure and
storage, the boat had to be sold. This was a peculiar use of
section 1612 — and in all probability an improper one. To make
matters worse, the Service seems to have treated the sale of the
boat under section 1612 as a final disposition of the case. Once
it had sold the boat, the Service informed the appellant that there
were no proceeds in excess of its bill for costs and told him that
it was closing its file. We think that this was presumptuous — and
without foundation in the law.
To be sure, it appears that the Service did not intend to
treat the sale of the vessel as an actual determination that the
vessel was forfeitable. Quite the opposite is true; the Service
told the appellant that it had decided not to pursue a forfeiture.
Nevertheless, the effect of the Service's action was the same as if
it had decreed that the boat was forfeitable. The closing of the
case meant that the appellant had lost both his property and his
right to challenge that loss.
As a corollary, the Service had unilaterally decided that
the appellant was responsible for the seizure and storage costs
without first having secured a determination that the boat was
forfeitable. This was a fatal omission: had the appellant
prevailed in a forfeiture action, he likely would not have been
liable for these costs. See, e.g., United States v. One 1986 Ford
Pickup, 56 F.3d 1181, 1184 (9th Cir. 1995) (in which the government

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conceded that it could not tax seizure and storage costs against a
party who prevailed in a forfeiture action even though there had
been reasonable cause for the initiation of the forfeiture
proceedings); United States v. One 48 Ft. White Colored Sailboat,
59 F. Supp. 2d 362, 366 (D.P.R. 1999) (holding that a claimant who
prevailed in a forfeiture action was not responsible for storage
and maintenance costs incurred while her property was in the
custody of the government).
Based on the foregoing, we conclude that the way in which
the Service proceeded deprived the appellant of his property
without due process. As said, a sale under section 1612 usually is
an interlocutory remedy, leaving a claimant with a post-sale right
to argue that he is entitled to the proceeds on the basis that the
property originally seized was not forfeitable. The fact that
there were no proceeds leftover from the sale of the boat in the
instant case should not change this result; before the Service
closed the case, it should have provided the appellant with a
proceeding in which to argue that the boat was not forfeitable and
that he was not liable for any of the seizure and storage costs,
and that the proceeds of the sale should go to him (rather than to
defray seizure and storage costs).
The Service offers no real rationale in support of its
decision to treat the sale under section 1612 as a final
determination that the appellant had no ownership interest in the

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1In this regard, we note that the appellant filed the instant
action on June 8, 2000 — shortly after receiving notice of the
Service's intent to sell and well before he received notice that
the sale had been consummated.
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boat. Instead, it focuses on the appellant's supposed failure to
object to the sale of the boat under section 1612. This misses the
point. The issue here is not the appellant's objection to the
sale, but the proper distribution of the proceeds from the sale.
The lack of objection may operate as a waiver as to fact of the
sale — we need not decide this today — but not as to the proper
distribution of the proceeds. Even if the appellant had acquiesced
in a section 1612 sale,1 we question how any such acquiescence
could constitute either an abandonment of a right to the sale
proceeds or an agreement to assume liability for the seizure and
storage costs.
IV.
We need go no further. Concluding, as we do, that the
appellant is entitled to his day in court, we vacate the judgment
below and remand the matter for further proceedings consistent with
this opinion. On remand, the district court should provide the
appellant with the process that the Service neglected to give him:
an opportunity to show that the boat is not forfeitable and that he
therefore should not be expected to bear the costs of seizure and
storage. See Boero v. DEA, 111 F.3d 301, 306 (2d Cir. 1997)
(explaining that "when the government is responsible for a . . .

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claimant's inability to present a claim . . . a hearing on the
merits is available in the district court") (citations and internal
punctuation omitted).
Reversed and remanded.

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