Amicus Curiae Brief — Miladis Salgado, Petitioner v. United States

No. 19-659

IN THE

Supreme Court of the United States

_______________

MILADIS SALGADO,

Petitioner,

v.

UNITED STATES OF AMERICA,

Respondent.

_______________

On Petition For A Writ Of Certiorari

To The United States Court Of Appeals

For The Eleventh Circuit

_______________

BRIEF OF AMICI CURIAE

LAW AND ECONOMICS SCHOLARS

IN SUPPORT OF PETITIONER

_______________

Thomas Q. Swanson

GIBSON, DUNN & CRUTCHER LLP

555 Mission St.

San Francisco, CA 94105

(415) 393-8200

tswanson@gibsondunn.com

Joshua S. Lipshutz

Counsel of Record

GIBSON, DUNN & CRUTCHER LLP

1050 Connecticut Avenue, N.W.

Washington, D.C. 20036

(202) 955-8217

jlipshutz@gibsondunn.com

Counsel for Amici Curiae

i

TABLE OF CONTENTS

P a ge

INTEREST OF AMICI CURIAE .................................1

INTRODUCTION AND SUMMARY OF

ARGUMENT .......................................................3

ARGUMENT .................................................................4

I.

FEE-SHIFTING DETERS INEFFICIENT FORFEITURE

ACTIONS THAT MAY LACK A STRONG EVIDENTIARY

BASIS AT THE TIME OF FILING. .............................4

II. THE SALUTARY EFFECTS OF FEE SHIFTING ARE

LOST IF THE GOVERNMENT KNOWS IT CAN AVOID

PAYING FEES BY STRATEGICALLY DISMISSING

UNMERITORIOUS SUITS WITHOUT PREJUDICE.......6

III. DETERRENCE OF NEGATIVE-EXPECTED-VALUE

SUITS MAY BE DESIRABLE TO PROMOTE

EFFICIENCY AND JUSTICE IN THE CIVIL ASSET

FORFEITURE SYSTEM. ..........................................8

CONCLUSION ............................................................10

ii

TABLE OF AUTHORITIES

Page(s)

Cases

United States v. $32,820.56 in U.S. Currency,

106 F. Supp. 3d 990 (N.D. Iowa 2015) ...................... 7

United States v. 115-98 Park Lane S.,

No. 10-CIV-3748, 2012 WL 3861221

(E.D.N.Y. Sept. 5, 2012), aff ’d sub nom.

United States v. Capital Stack Fund,

LLC, 543 F. App’x 17 (2d Cir. 2013).......................... 7

United States v. 2007 BMW 335i Convertible,

648 F. Supp. 2d 944 (N.D. Ohio 2009) ...................... 7

United States v. Any & All Funds on

Deposit at JPMorgan Chase,

No. 12-CIV-7530, 2013 WL 5511348

(S.D.N.Y. Oct. 2, 2013) ............................................... 7

United States v. Approximately $16,500.00

in U.S. Currency,

113 F. Supp. 3d 776 (M.D. Pa. 2015)......................... 7

Statutes

28 U.S.C. § 2465(b)(1) ................................................. 3, 6

Other Authorities

145 Cong. Rec. H4858-02, 1999 WL

419758 (June 24, 1999) .............................................. 6

iii

TABLE OF AUTHORITIES

(continued)

Page(s)

Amy Farmer & Paul Pecorino, A

Reputation for Being a Nuisance:

Frivolous Lawsuits and Fee Shifting in

a Repeated Play Game, 18 INT’L REV. L.

& ECON. 147 ............................................................... 5

Andrew Crawford, Note, Civil Asset

Forfeiture in Massachusetts: A Flawed

Incentive Structure and Its Impact on

Indigent Property Owners, 35 B.C. J.L.

& SOC. JUST. 272 (2015) ............................................. 8

Brent Mast et al., Entrepreneurial Police

and Drug Enforcement Policy, 104 PUB.

CHOICE 285 (2000)...................................................... 6

Bruce L. Benson, Escalating the War On

Drugs: Causes and Unintended

Consequences, 20 STAN. L. & POL’Y REV.

296 (2009) ................................................................... 9

Dick M. Carpenter II et al., Policing for

Profit: The Abuse of Civil Asset

Forfeiture 12–13 (2d ed. Nov. 2015) .......................... 9

Emanuela Carbonara et al., Rent-Seeking

and Litigation: The Hidden Virtues of

Limited Fee Shifting, 11 REV. L. &

ECON. 113 (2015) ........................................................ 4

iv

TABLE OF AUTHORITIES

(continued)

Page(s)

John Rappaport, How Private Insurers

Regulate Public Police, 130 HARV. L.

REV. 1539 (2017) ........................................................ 6

Katherine Baicker & Mireille Jacobson,

Finders Keepers: Forfeiture Laws,

Policing Incentives, and Local Budgets,

91. J. PUB. ECON. 2113 (2007).................................... 6

Lucian A. Bebchuk & Alon Klement,

Negative-Expected-Value Suits 1, in

PROCEDURAL LAW AND ECONOMICS

(Chris Sanchirico ed., 2011),

https://ssrn.com/abstract=1534703 ....................... 5, 8

Michael D. Makowsky et al., To Serve and

Collect: The Fiscal and Racial

Determinants of Law Enforcement, 48

J. LEGAL STUD. 189 (2019) ......................................... 9

Michael J. Keblesh, Using Insurance to

Regulate Civil Forfeiture, 50

CREIGHTON L. REV. 455 (2017) ................................... 8

Nuno Garoupa & Luciana Echazu, Why

Not Adopt a Loser-Pays-All Rule in

Criminal Litigation?, 32 INT’L REV. L.

& ECON. 233 (2012) .................................................... 4

v

TABLE OF AUTHORITIES

(continued)

Page(s)

Nuno Garoupa & Francesco Parisi, Should

the Prosecutor Pay for Failure of

Conviction?, Minnesota Legal Studies

Research Paper No. 12-42 (2012) .............................. 9

OIG, Review of the Department’s Oversight

of Cash Seizure and Forfeiture

Activities 28 (Mar. 2017)

https://oig.justice.gov/reports/2017/e170

2.pdf ............................................................................ 9

Rishi Batra, Resolving Civil Forfeiture

Disputes, 66 U. KAN. L. REV. 399 (2017) ................... 8

Steven Shavell, The Fundamental

Divergence Between the Private and the

Social Motive to Use the Legal System,

26 J. LEGAL STUD. 575 (1997) ................................ 4, 5

Steven Shavell, The Social Versus the

Private Incentive to Bring Suit in a

Costly Legal System, 11 J. LEGAL STUD.

333 (1982) ................................................................... 5

1

INTEREST OF AMICI CURIAE 1

Amici curiae are economists, law and economics

scholars, and non-partisan, non-profit organizations

who teach, conduct research, and publish on economics

and law. Amici Curiae are interested in the application

of sound economic theory in this Court’s jurisprudence.

Abigail Blanco is Assistant Professor of Economics at

the University of Tampa. She has published on political

economy and policing.

Donald J. Boudreaux is Professor of Economics at

George Mason University and former chairman of

GMU’s Economics Department. He has published

extensively on the economics of competition and

antitrust and on public-choice economics.

Jonathan Klick, Ph.D., J.D., is Professor of Law at

the University of Pennsylvania and the Erasmus Chair

of Empirical Legal Studies at the Erasmus University

Rotterdam. Klick studies the law and economics of

crime and litigation.

Alexander Lundberg is Assistant Professor of

Economics at West Virginia University. His research

specialty is in Public Economics and Law and

Economics.

Francesco Parisi is Professor of Law at the

University of Minnesota School of law. He has published

extensively on law and economics.

Pursuant to this Court’s Rule 37.6, counsel for amici state that

no counsel for a party authored this brief in whole or in part, and

that no person other than amici or their counsel made a monetary

contribution to the preparation or submission of this brief. Pursuant

to Rule 37.2, counsel for amici state that after timely notification,

all parties consented to the filing of this brief.

1

2

The Buckeye Institute (“Buckeye Institute”) was

founded in 1989 as an independent research and

educational institution—a think tank—to formulate and

promote free-market solutions for Ohio’s most pressing

public policy problems. The staff at the Buckeye

Institute accomplishes the organization’s mission by

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compiling and synthesizing data, formulating freemarket policies, and marketing those public policy

solutions for implementation in Ohio and replication

across the country. The Buckeye Institute is a

nonpartisan, non-profit, tax-exempt organization, as

defined by I.R.C. § 501(c)(3). The Buckeye Institute’s

Legal Center files and joins amicus briefs that are

consistent with its mission and goals. The Buckeye

Institute's Economic Research Center provides reliable

economic research, data analysis, and econometric

modeling at the state level. The Economic Research

Center files and joins amicus briefs that relate to the

intersection of law and economics.

The James Madison Institute is one of the nation’s

oldest and largest nonprofit, nonpartisan research and

educational organizations. The Institute’s policy

recommendations are rooted in the principles found in

the U.S. Constitution—such timeless ideals as limited

government, economic freedom, federalism, and

individual liberty coupled with individual responsibility.

The Institute is a free-market policy organization

focused on state-based issues. It has a strong interest in

assisting the public and governments in rational

economic decision-making.

Reason Foundation is a national, nonpartisan, and

nonprofit public policy think tank, founded in 1978.

Reason’s mission is to advance a free society by applying

and promoting libertarian principles and policies—

including free markets, individual liberty, and the rule

of law. Reason supports dynamic market-based public

3

policies that allow and encourage individuals and

voluntary institutions to flourish. Reason advances its

mission by publishing Reason magazine, as well as

commentary on its websites, and by issuing policy

research reports. To further Reason’s commitment to

“Free Minds and Free Markets,” Reason participates as

amicus curiae in cases raising significant constitutional

or legal issues.

INTRODUCTION AND

SUMMARY OF ARGUMENT

This case entails competing interpretations of the

Civil Asset Forfeiture Reform Act of 2000 (“CAFRA”),

codified at 28 U.S.C. § 2465(b)(1). As Miladis Salgado’s

petition for a writ of certiorari describes, the division in

the lower courts over the meaning of “substantially

prevails” has caused widespread confusion.

The

Eleventh Circuit’s approach is in conflict with the text

and legislative history of the statute.

Amici submit this brief because the Eleventh

Circuit’s approach is flawed for an additional reason: it

negates the incentives crafted by CAFRA’s fee-shifting

provision. As explained below, economic theory suggests

that fee-shifting in this context would meaningfully

deter the filing of inefficient and unmeritorious civil

asset forfeiture actions, such as the one in this case. The

Eleventh Circuit’s holding, however, eliminates this

important constraint on civil asset forfeiture actions.

Amici respectfully request that the petition for a writ

of certiorari be granted so the incentive structure

adopted by Congress may be reestablished in the

interests of efficiency and justice.

4

ARGUMENT

I.

FEE-SHIFTING

DETERS INEFFICIENT FORFEITURE

ACTIONS THAT MAY LACK A STRONG EVIDENTIARY

BASIS AT THE TIME OF FILING.

“Fee shifting”—sometimes referred to as the “English

rule”—has several desirable effects. In the absence of

fee shifting, all parties tend “toward overuse of the legal

system,” as they do not “take into account that [their]

suit will cause the [counter-party] and possibly the court

to incur legal expenses as well.” Steven Shavell, The

Fundamental Divergence Between the Private and the

Social Motive to Use the Legal System, 26 J. LEGAL STUD.

575, 578 (1997). Where available, fee-shifting provides

a counterweight to litigious impulses. Scholars agree

that the English Rule “promote[s] settlement,

enhance[s] civil litigation, favor[s] more meritorious

claims, [and] decrease[s] the number of nuisance

lawsuits.” Nuno Garoupa & Luciana Echazu, Why Not

Adopt a Loser-Pays-All Rule in Criminal Litigation?, 32

INT’L REV. L. & ECON. 233, 233 (2012).

Critically, the English Rule does not depress

litigation indiscriminately. Rather, it has a stronger

deterrent effect on weaker claims. See Emanuela

Carbonara et al., Rent-Seeking and Litigation: The

Hidden Virtues of Limited Fee Shifting, 11 REV. L. &

ECON. 113 (2015) (finding that fee-shifting reduces

litigation, but not where the parties’ positions have

comparable merit, or where the government has the

clear upper hand). Thus, as a result of fee-shifting,

“[l]itigation is more concentrated on cases with more

equal merits.” Id. at 134. And in the criminal context,

the English rule actually delivers “more deterrence” and

“at a lower cost.” Garoupa & Echazu, supra, at 237

(emphasis added).

Fee-shifting is particularly useful in marginally

deterring Negative Expected-Value (NEV) suits. NEV

5

suits are “suits in which the plaintiff would obtain a

negative expected return from pursuing the suit all the

way to judgment—that is, one in which the plaintiff’s

expected total litigation costs would exceed the expected

judgment.”

Lucian A. Bebchuk & Alon Klement,

Negative-Expected-Value Suits 1, in PROCEDURAL LAW

AND ECONOMICS (Chris Sanchirico ed., 2011),

https://ssrn.com/abstract=1534703. There are several

reasons why, absent fee-shifting, litigants might choose

to pursue NEV suits—even unmeritorious ones—despite

their negative expected values.

See id. at 2–7

(discussing factors such as asymmetrical information,

the defendant’s up-front cost to defend, the potential to

gain new information through the litigation, and

whether the plaintiff is a repeat player). These suits

create inefficiency and waste in the system, and may be

undesirable on public policy grounds as well. See id. at

8 (“[W]ith respect to NEV suits that are frivolous, an

NEV plaintiff's ability to extract a settlement offer

might well have undesirable consequences.”).

Fortunately, fee shifting has proven effective in

reducing costs associated with unmeritorious NEV suits.

See Amy Farmer & Paul Pecorino, A Reputation for

Being a Nuisance: Frivolous Lawsuits and Fee Shifting

in a Repeated Play Game, 18 INT’L REV. L. & ECON. 147

(finding that “ fee shifting is effective in reducing costs

associated with nuisance suits”). Under the English

Rule, litigants will ordinarily avoid filing NEV suits,

meaning that many inefficient or frivolous suits are

never filed. See Steven Shavell, The Social Versus the

Private Incentive to Bring Suit in a Costly Legal System,

11 J. LEGAL STUD. 333 (1982); Shavell, Fundamental

Divergence, supra, at 575.

In the forfeiture context, NEV suits might include

meritorious actions involving small sums, as well as

unmeritorious actions—like the one defended by

Petitioner—in which the government lacks sufficient

6

evidence to carry its burden of proving a nexus between

the seized property and criminality. Fee shifting serves

to deter such inefficient actions, just as it does in private

litigation,

because

government

actors

(here,

prosecutors) are rational decision makers that respond

to changed incentives. See John Rappaport, How Private

Insurers Regulate Public Police, 130 HARV. L. REV. 1539,

1593 (2017) (finding that government officials respond

to financial incentives, despite the fact “that public

dollars, not personal ones, will be used to satisfy any

financial obligation”); Brent Mast et al., Entrepreneurial

Police and Drug Enforcement Policy, 104 PUB. CHOICE

285, 303 (2000) (stating that “[l]ike market

entrepreneurs,” law enforcement officials “will respond

to relative prices”); see also Katherine Baicker & Mireille

Jacobson, Finders Keepers: Forfeiture Laws, Policing

Incentives, and Local Budgets, 91. J. PUB. ECON. 2113,

2117 (2007) (“[P]olice respond to monetary incentives in

ways predicted by theory….”).

Thus, as in the sphere of private litigation, economic

theory predicts that a fee shifting provision will increase

the overall efficiency of forfeiture proceedings within its

ambit by selectively weeding out undesirable NEV suits

before they are brought.

II. THE SALUTARY EFFECTS OF FEE SHIFTING ARE LOST

IF THE GOVERNMENT KNOWS IT CAN AVOID PAYING

FEES

BY

STRATEGICALLY

DISMISSING

UNMERITORIOUS SUITS WITHOUT PREJUDICE.

CAFRA provides for fee-shifting in forfeiture actions:

“[I]n any civil proceeding to forfeit property under any

provision of Federal law in which the claimant

substantially prevails, the United States shall be liable

for,” inter alia, “reasonable attorney fees and other

litigation costs reasonably incurred by the claimant.” 28

U.S.C. § 2465(b)(1).

7

Prior to passing CAFRA, Congress was concerned

that even innocent property owners “may exhaust his or

her financial assets in attorney’s fees to fight for the

return of property.” 145 Cong. Rec. H4858-02, H4862

(June 24, 1999) (statement of Rep. Sheila Jackson Lee). 2

In response to this problem, Congress included in the

statute a fee-shifting provision, which it believed would

make successful claimants whole and curb abuse. See

id. at H4852 (statement of Senator Deborah Pryce that

the fee-shifting provision would “put into check the

possibility of government to unintentionally trample

over the rights of innocent citizens.”).

However, as the facts of this case demonstrate,

CAFRA has not effectively deterred NEV suits in the

civil asset forfeiture context because it has been

rendered toothless. Many lower courts have held that a

dismissal without prejudice, even at an advanced stage

of litigation, does not trigger CAFRA’s “substantially

prevailed” test for shifting the property owners’

attorney’s fees to the Government—even when the

seized property is returned to the claimant. 3 The net

As Senator Deborah Pryce summarized, “under [pre-CAFRA]

law, if the owner succeeds in reclaiming his property, the

government owes him nothing for his trouble; no apology, no

interest, no compensation, nothing whatsoever.” 145 Cong. Rec.

H4858-02, H4852. Senator Orrin G. Hatch also voiced concern that

“[t]he costs of contesting a civil forfeiture of property can be

substantial,” and argued that “it is unfair for the property owner to

have to incur attorney fees and costs when the government does not

prevail in civil forfeiture actions.” 145 Cong. Rec. S14612-05,

S14629.

2

See, e.g., United States v. $32,820.56 in U.S. Currency, 106 F.

Supp. 3d 990, 997 (N.D. Iowa 2015); United States v. Approximately

$16,500.00 in U.S. Currency, 113 F. Supp. 3d 776, 779–80 (M.D. Pa.

2015); United States v. Any & All Funds on Deposit at JPMorgan

Chase, No. 12-CIV-7530, 2013 WL 5511348, at *1 (S.D.N.Y. Oct. 2,

2013); United States v. 115-98 Park Lane S., No. 10-CIV-3748, 2012

3

8

effect is that “the government is free to press its case

until it appears unwinnable, and then voluntarily

dismiss it to avoid paying attorney’s fees.” Michael J.

Keblesh, Using Insurance to Regulate Civil Forfeiture,

50 CREIGHTON L. REV. 455, 463 n.46 (2017).

When the Government knows ex ante that it can

ultimately escape attorney’s fees, even on the eve of

defeat, the intended benefits of fee shifting are lost. The

potential for attorney’s fees does not enter into the

Government’s pre-suit cost-benefit analysis, and it may

then (correctly) perceive incentives to bring inefficient or

unmeritorious NEV suits. See Bebchuk & Klement,

supra, at 2–7. As long as the civil asset forfeiture game

offers real prizes and is essentially free to play,

prosecutors have every reason to play it as often as they

can.

III. DETERRENCE OF NEGATIVE-EXPECTED-VALUE SUITS

MAY BE DESIRABLE TO PROMOTE EFFICIENCY AND

JUSTICE IN THE CIVIL ASSET FORFEITURE SYSTEM.

Unmeritorious NEV suits are, by their nature, likely

to fail. But this does not mean that the owners of the

seized property come out unscathed.

To the contrary, such suits are likely to affect

property rights that many owners are unable to

vindicate in court. This is because “[i]ndigent property

owners . . . often lack the resources necessary to combat

an unjust seizure of property.” 4 Andrew Crawford,

WL 3861221, at *5 (E.D.N.Y. Sept. 5, 2012), aff ’d sub nom. United

States v. Capital Stack Fund, LLC, 543 F. App’x 17 (2d Cir. 2013);

United States v. 2007 BMW 335i Convertible, 648 F. Supp. 2d 944,

952 (N.D. Ohio 2009).

4

This is especially true for seizures of relatively small amounts.

“Overcoming [litigation-related] hurdles is frequently difficult for

claimants, especially because the amount seized is often small

enough that it may not be worth pursuing a claim.” Rishi Batra,

9

Note, Civil Asset Forfeiture in Massachusetts: A Flawed

Incentive Structure and Its Impact on Indigent Property

Owners, 35 B.C. J.L. & SOC. JUST. 257, 272 (2015). In

fact, if the government does not bear the cost of

litigation, economic models “suggest[] that prosecutors

would prefer to prosecute poorer offenders as a rule.”

Nuno Garoupa & Francesco Parisi, Should the

Prosecutor Pay for Failure of Conviction?, Minnesota

Legal Studies Research Paper No. 12-42, at 13 (2012);

see also Michael D. Makowsky et al., To Serve and

Collect: The Fiscal and Racial Determinants of Law

Enforcement, 48 J. LEGAL STUD. 189, 196 (2019) (“All

else equal, police are less likely to focus their attention

on groups with countervailing power.”).

Because of this resource imbalance, many innocent

property owners will have to settle their claims for less

than the total amount seized. See Bruce L. Benson,

Escalating the War On Drugs: Causes and Unintended

Consequences, 20 STAN. L. & POL’Y REV. 296, 315-16 &

n.59 (2009) (discussing forfeiture practices in Volusia

County, Florida, where innocent property owners

nonetheless settled “for 50% to 90% of their money”).

The result is that innocent victims of civil asset

forfeiture fail to file suit in the vast majority of cases.

Dick M. Carpenter II et al., Policing for Profit: The Abuse

of Civil Asset Forfeiture 12–13 (2d ed. Nov. 2015); OIG,

Review of the Department’s Oversight of Cash Seizure

and

Forfeiture

Activities

28

(Mar.

2017)

https://oig.justice.gov/reports/2017/e1702.pdf (studying

100 seizures, totaling $6.5 million, and finding that only

14 property owners filed a petition or claim).

This state of affairs suggests that property rights are

currently under-protected and that additional marginal

Resolving Civil Forfeiture Disputes, 66 U. KAN. L. REV. 399, 413

(2017).

10

deterrence of NEV forfeiture actions is warranted as a

matter of both economics and justice.

CONCLUSION

Because lower courts have charted a course around

CAFRA’s fee-shifting provision, inefficient and

unmeritorious forfeiture actions are not adequately

deterred. Closure of this loophole would better protect

the rights of innocent property owners and promote the

just and efficient exercise of prosecutorial discretion.

Respectfully submitted.

Thomas Q. Swanson

Joshua S. Lipshutz

Counsel of Record

GIBSON, DUNN & CRUTCHER LLP

GIBSON, DUNN & CRUTCHER LLP

555 Mission St.

1050 Connecticut Avenue, N.W.

San Francisco, CA 94105

Washington, D.C. 20036

(415) 393-8200

tswanson@gibsondunn.com

(202) 955-8217

jlipshutz@gibsondunn.com

Counsel for Amici Curiae

December 17, 2019