Reply Brief — Battle Born Investments Company, LLC, et al., Petitioners v. United States

NO. 23-1164

In the

Supreme Court of the United States

________________

BATTLE BORN INVESTMENTS COMPANY, LLC;

FIRST 100 LLC; 1ST ONE HUNDRED HOLDINGS LLC,

Petitioners,

v.

UNITED STATES OF AMERICA,

________________

Respondent.

On Petition for Writ of Certiorari

To the United States Court of Appeals

For the Ninth Circuit

________________

REPLY BRIEF FOR PETITIONERS

________________

Rod J. Rosenstein

Counsel of Record

Kellam M. Conover

KING & SPALDING LLP

1700 Pennsylvania Avenue NW

Washington, DC 20006

(202) 737-0500

rrosenstein@kslaw.com

Counsel for Petitioners

August 13, 2024

TABLE OF CONTENTS

TABLE OF AUTHORITIES ....................................... ii

REPLY BRIEF FOR PETITIONERS ........................ 1

I.

Undisputedly, The Question Presented Is

Immensely Important ......................................... 2

II. The 6-3 Circuit Split On The Question

Presented Warrants Review ............................... 4

III. The Decision Below Is Wrong ............................. 7

IV. There Are No Vehicle Problems ........................ 11

CONCLUSION ......................................................... 13

ii

TABLE OF AUTHORITIES

Cases

Ashby v. McKenna,

331 F.3d 1148 (10th Cir. 2003).............................. 12

Culley v. Marshall,

601 U.S. 377 (2024) .................................... 1, 2, 3, 10

United States v.

$17,900.00 in U.S. Currency,

859 F.3d 1085 (D.C. Cir. 2017) ............................ 3, 6

United States v.

$31,000.00 in U.S. Currency,

872 F.3d 342 (6th Cir. 2017).................................... 1

United States v.

$148,840.00 in U.S. Currency,

521 F.3d 1268 (10th Cir. 2008)............ 1, 2, 4, 5, 8, 9

United States v.

Funds in the Amount of $239,400,

795 F.3d 639 (7th Cir. 2015).............................. 6, 10

United States v.

$304,980.00 in U.S. Currency,

732 F.3d 812 (7th Cir. 2013).................................... 6

United States v.

$515,060.42 in U.S. Currency,

152 F.3d 491 (6th Cir. 1998)................................ 5, 6

United States v.

$557,933.89, More or Less, in U.S. Funds,

287 F.3d 66 (2d Cir. 2002) ................................... 1, 5

iii

United States v.

$774,830.00 in U.S. Currency,

2023 WL 1961225 (6th Cir. Feb. 13, 2023) ............. 5

United States v. Contents of Acct.

Nos. 3034504504 & 144-07143,

971 F.2d 974 (3d Cir. 1992) ..................................... 6

United States v. One 1998 Mercury Sable

Vin: 1MEMF5OU4WA621967,

122 F. App’x 760 (5th Cir. 2004) ............................. 6

United States v. One Lincoln Navigator 1998,

328 F.3d 1011 (8th Cir. 2003).................................. 5

United States v. Phillips,

883 F.3d 399 (4th Cir. 2018)................................ 4, 6

Other Authorities

Consent Agreement,

Battle Born Invs. Co. v. DOJ,

No. 1:24-cv-00067

(D.D.C. June 18, 2024), ECF 15-7 ......................... 10

REPLY BRIEF FOR PETITIONERS

The government’s brief confirms that certiorari is

needed in this case to ensure meaningful judicial

scrutiny of the forfeiture of a bitcoin wallet that was

“the most valuable asset ever seized.” C.A. ER-21.

The government has routinely pressed a view of

standing that prevents many legitimate claimants

from contesting the forfeiture of their property. Lower

courts—including then-Judges Sotomayor and

Gorsuch—have repeatedly rejected the government’s

view as “mistaken,” “fundamental[ly] flaw[ed],” and

“problematic.” See, respectively, United States v.

$557,933.89, More or Less, in U.S. Funds, 287 F.3d 66,

76 (2d Cir. 2002) (Sotomayor, J.); United States v.

$148,840.00 in U.S. Currency, 521 F.3d 1268, 1274

(10th Cir. 2008) (Gorsuch, J., on panel); United States

v. $31,000.00 in U.S. Currency, 872 F.3d 342, 353–54

(6th Cir. 2017). Yet the government remains unfazed.

This Court needs to step in.

There is no dispute the question presented is

critically important. After the petition was filed, five

Justices signaled the need to end the “myriad abuses

of the civil forfeiture system.” Culley v. Marshall, 601

U.S. 377, 403 (2024) (Sotomayor, Kagan, and Jackson,

JJ., dissenting); accord id. at 401–03 (Gorsuch and

Thomas, JJ., concurring) (similar). This case presents

an ideal opportunity to address one particularly

problematic practice, and to do so in the context of a

record-setting civil forfeiture.

Certiorari is further warranted because the

decision below entrenches a 6-3 circuit split on what a

claimant asserting an ownership interest must show

2

to establish standing at summary judgment. The

government’s response—that all circuits apply the

“some-evidence standard,” BIO 16—frames the

relevant rule at too high a level of abstraction. While

all circuits require some evidence of “a facially

colorable interest in the res,” six circuits require

evidence of only the fact that the claimant owns the

property, whereas three require evidence explaining

how ownership was acquired. See Pet. 17–25. These

are two distinct and irreconcilable standards.

The decision below is so indefensible that the

government is forced to adopt a novel view that no

court has adopted—and that its lone cited authority

expressly rejected. “The fundamental flaw in the

government’s logic,” that case explained, is that it

overlooks “an important difference, for standing

purposes,” between possessory and ownership

interests. $148,840.00, 521 F.3d at 1274. The

government nowhere addresses this critical

distinction. And it misapplies the summary-judgment

standard in discounting Petitioners’ substantial

evidence of ownership in this case.

Certiorari is urgently needed.

I.

Undisputedly, The Question Presented Is

Immensely Important.

The government does not dispute the immense

importance of the question presented. See Pet. 12–17;

BIO 10–19 (not disputing importance). Indeed, the

need for certiorari is even more apparent after Culley.

“[C]ivil forfeiture has become a booming

business.” Culley, 601 U.S. at 395 (Gorsuch, J.,

concurring). Every year, the government obtains

3

billions of dollars of property through civil forfeiture

proceedings—often without any proof it is entitled to

keep that property. See id. at 395–97; Pet. 12–14. The

government does not dispute that, to avoid having to

prove its case, it routinely “pushes courts to shut out

legitimate claimants for lack of standing.” Pet. 14. Nor

does it dispute that this practice has persisted despite

repeated rebuke by federal courts. Pet. 14–15.

As five Justices recently lamented, this “system

preys” on disadvantaged populations. Culley, 601 U.S.

at 401 (Gorsuch, J., concurring); see id. at 406–07

(Sotomayor, J., dissenting) (“marginalized groups”

and “low-income communities” bear the brunt of

government abuse). Those groups “are more likely to

use cash,” which is more “susceptible to forfeiture”

than other payment forms. United States v. $17,900.00

in U.S. Currency, 859 F.3d 1085, 1090 (D.C. Cir. 2017)

(quotation marks omitted). Yet the government

continues to peddle an “onerous, unfair, and

unrealistic” view of standing, id. at 1091, that would

force such marginalized groups to “provid[e] some

explanation of how they came to own” their cash before

they can contest whether the government may

permanently keep it, BIO 13.

The Court should take action in this case, which

involves the then-largest civil forfeiture in history.

Indeed, the government continues to use

gamesmanship to try to avoid judicial scrutiny. It tells

this Court that “[n]o one has suggested that

petitioners had to definitively prove their ownership

interest at summary judgment.” BIO 14 (quotation

marks omitted). Yet it told the Ninth Circuit the exact

opposite, convincing that court to deny Petitioners

4

“standing because they did not prove an ownership

interest ... by a preponderance of the evidence.” C.A.

Dkt. No. 29 at 45.

This Court needs to send a message that the

federal government should not be in the business of

depriving legitimate claimants of the opportunity to

dispute the permanent forfeiture of their property.

Transparency

and

adversarial

testing—not

gamesmanship—should prevail when the government

tries to forfeit billions of dollars.

II. The 6-3 Circuit Split On The Question

Presented Warrants Review.

Certiorari is further warranted because the

circuits are deeply divided on what claimants must

show to establish standing at summary judgment

based on an ownership interest. Pet. 17–25. The

government’s response that all circuits apply the

“some-evidence standard,” BIO 16, ignores that they

sharply split 6-3 on what type of evidence is needed.

The Fourth and Tenth Circuits epitomize this

intractable conflict. The rule in the Fourth Circuit—

which the government tellingly fails to mention—is

that “a claimant alleging an ownership interest in

seized property must, at a minimum, present some

evidence regarding how the claimant came to possess

the property.” United States v. Phillips, 883 F.3d 399,

405 (4th Cir. 2018) (emphasis added; quotation marks

omitted). That rule cannot be reconciled with the

Tenth Circuit’s opposite rule: In “ownership interest”

cases, that “court[ ] ha[s] not required the claimant to

present the type of explanatory evidence urged by the

government.” $148,840.00, 521 F.3d at 1274–75

5

(emphasis added). Rather, it has required only “some

evidence tending to support the existence of that

ownership interest.” Id. at 1276.

The government concedes that, like the Tenth

Circuit, several other circuits require some evidence of

only the fact of ownership and “no explanation of

ownership.” BIO 17; see, e.g., $557,933.89, 287 F.3d at

73, 79 n.10 (2d Cir.) (upholding standing even though

claimant “asserted the Fifth Amendment” to avoid

explaining how he acquired ownership); United States

v. $774,830.00 in U.S. Currency, 2023 WL 1961225, at

*3 (6th Cir. Feb. 13, 2023) (where “a claimant asserts

an ownership interest, the type of additional

explanatory evidence urged by the government here …

is not essential” (deriving rule from United States v.

$515,060.42 in U.S. Currency, 152 F.3d 491, 499 (6th

Cir. 1998))); United States v. One Lincoln Navigator

1998, 328 F.3d 1011, 1013–14 (8th Cir. 2003)

(unexplained “title” to property established standing).

But the government misreads these cases “as

requiring no explanation of ownership” only in the

absence of “direct evidence” of ownership. BIO 17. No

case says or even suggests that. Rather, as Petitioners

explained—and the government fails to address—

these circuits “sharply distinguish[ ] between the

evidentiary standards for ownership and possession

claims.” Pet. 18; see Pet. 17–21. While these “courts

have required the claimant to [prove] the legitimacy of

[a] possessory interest,” they categorically reject such

a requirement where the claimant “assert[s] an

ownership interest.” $148,840.00, 521 F.3d at 1275

(emphasis removed). What matters is the nature of the

property interest, not the evidence of that interest.

6

The government’s suggestion that the Seventh

and D.C. Circuits would require claimants “to explain

their ownership” is mistaken. BIO 18. The Seventh

Circuit has endorsed the Tenth Circuit’s rule that a

claimant need not “‘explain his relationship to

property that he claims to own,’” United States v.

Funds in the Amount of $239,400, 795 F.3d 639, 642

(7th Cir. 2015) (citation omitted), and has upheld

standing even where a claimant refused to explain his

ownership interest, United States v. $304,980.00 in

U.S. Currency, 732 F.3d 812, 818 (7th Cir. 2013). And

the D.C. Circuit has explained it would be “unfair” to

require claimants to substantiate their “account of

ownership” with, e.g., “pro[of] that [the] cash is

legitimate.” $17,900.00, 859 F.3d at 1090–91.

As to the other side of the circuit split, the

government has no meaningful response. Its

discussion of the facts in Phillips ignores the legal rule

announced in that case—which the Fourth Circuit

took from a possession case. See 883 F.3d at 405

(requiring in “ownership” cases “some evidence

‘regarding how the claimant came to possess the

property’” (quoting $515,060.42, 152 F.3d at 498);

$515,060.42, 152 F.3d at 498 (“The assertion of simple

physical possession of property as a basis for standing

must be accompanied by factual allegations regarding

how the claimant came to possess the property.”).

The Third and Fifth Circuits similarly require

claimants to “rebut the government’s evidence” on the

merits to establish standing. United States v. Contents

of Acct. Nos. 3034504504 & 144-07143, 971 F.2d 974,

986 (3d Cir. 1992); accord, e.g., United States v. One

1998 Mercury Sable Vin: 1MEMF5OU4WA621967,

7

122 F. App’x 760, 763–64 (5th Cir. 2004) (per curiam)

(claimant must “present sufficient evidence to

establish a facially colorable claim that he, not the

[criminal] offenses [at issue], was the source of the

funds”). In sharp contrast to the above circuits, which

require evidence of only the fact of ownership, these

courts require claimants to explain their ownership by

proving legitimate ownership. The government offers

no reason to think these courts would ever apply a

different rule.

Finally, the government wrongly contends that

the decision below “applied the more-claimantfriendly some-evidence standard” addressed above.

BIO 16. Like the Third, Fourth, and Fifth Circuits, the

Ninth Circuit applied a different standard, requiring

Petitioners to explain their ownership interest.

Despite Petitioners’ undisputed “ownership rights to

the bankruptcy estate of Ngan” and evidence of Ngan’s

prior ownership, the panel faulted Petitioners for

“offer[ing] nothing to suggest how Ngan would have

come into ownership of the [contested] bitcoin.” App.6.

The government ignores both the panel’s actual

reasoning and its tacit acknowledgement that it was

imposing a requirement that other circuits do not. See

App.7 (observing that “no authority in [that] Circuit”

foreclosed this requirement).

The decision below thus entrenches a 6-3 circuit

split that requires resolution by this Court.

III. The Decision Below Is Wrong.

Given the undisputed importance of the question

presented and deep division among the circuits, the

government’s argument that the Ninth Circuit

8

“correctly” struck Petitioners’ claims is irrelevant to

the cert-worthiness of this case. BIO 10. It is also

flawed on its own terms.

The government contends that, absent “some

direct evidence of ownership”—e.g., possession,

control, or a financial stake—the panel was correct to

require “some explanation of how [Ngan] came to own”

the 1HQ3 wallet. BIO 13. But the lone authority it

cites for this novel rule categorically rejected such a

requirement, reasoning that “[t]he fundamental flaw

in the government’s logic” is that it overlooks “an

important difference, for standing purposes,” between

possessory and ownership interests. $148,840.00,

521 F.3d at 1274 (Gorsuch, J., on panel). Petitioners

detailed this critical flaw, Pet. 26–27, yet the

government offers no response.

A “distinct evidentiary burden exists in

possession cases” because a claimant’s explanation of

possession is needed to distinguish a lawful possessor

or bailee, who would “suffer a constitutional injury in

fact” if deprived of that property, from a mere

custodian or unknowing transporter, who would not.

See $148,840.00, 521 F.3d at 1276. No “explanatory

evidence” is needed in ownership cases, however,

because the mere fact of ownership establishes that

the claimant would be injured if deprived of the

property. See id. at 1275. Importantly, whether

ownership is evidenced through possession, control, or

otherwise is irrelevant: A colorable ownership

interest—however it is evidenced—establishes the

claimant’s concrete stake in a forfeiture.

Regardless, the government’s novel rule has no

bearing here because, despite receiving no discovery,

9

Petitioners did provide evidence of Ngan’s ownership

and control of 1HQ3. Their unrebutted evidence

showed that Ngan tried to sell enormous quantities of

bitcoin, secured one sale through draft agreements

and an escrow account, and specifically indicated the

1HQ3 wallet would fund that sale. Pet. 25 (citing

App.39–50; App.57–64; ER-35–72). This conduct

would have been pointless had Ngan not controlled the

1HQ3 wallet. In addition, Ngan’s associate deleted 54

files from Ngan’s devices, App.83–84—a fact the

government cannot explain except by reference to “the

54 transfers of bitcoin” that it says eventually ended

up in 1HQ3, BIO 11. 1 Taken together, and drawing all

inferences in Petitioners’ favor, this is “some evidence

tending to support the existence of [Ngan’s] ownership

interest.” $148,840.00, 521 F.3d at 1276.

The government suggests this evidence “indicates

at most that Ngan was behind one of the numerous

scams at that time.” BIO 11. But that adverse

inference is not permissible on summary judgment. In

the referenced scams, the buyer paid the scammer

before receiving a (fake) key to a bitcoin wallet. See

App.28–32. Ngan, in contrast, was selling actual

bitcoin and could not possibly scam any buyer because,

under the sale and escrow agreements Ngan drafted,

he would receive no payment until after the buyer

“confirm[ed] ... receipt” of the bitcoin. App.44. Nor was

1 It is irrelevant whether bitcoin transactions are ordinarily

“saved on the parties’ devices.” BIO 11 n.2. According to the

government, the 54 purported transfers here were not ordinary

bitcoin transactions; they stemmed from a “vulnerability in Silk

Road’s vendor portal” that “tricked Silk Road into sending bitcoin

to” other wallets. D. Ct. Dkt. No. 99-2 ¶ 9.

10

Ngan’s ownership “facially implausible.” Contra

BIO 17. It is highly plausible that a man of

“substantial personal wealth” who conceals millions of

dollars in assets, App.81, would try to sell bitcoin

worth only $354,000 when it was allegedly taken from

Silk Road, ER-169 ¶ 15.

At bottom, the government presses—and the

Ninth Circuit endorsed—a rule effectively requiring

Petitioners to “prove legitimate ownership” before

they could contest the government’s forfeiture theory.

Pet. 29. That impermissibly “shift[s] the burden of

proof from the government back to the claimant” to

prove the “property is not subject to forfeiture,” i.e.,

that it is not connected to unlawful activity. $239,400,

795 F.3d at 646. It also presumes that courts should

not scrutinize the government’s forfeiture theory

unless a claimant can effectively disprove it. The

government thus turns on its head “the general rule”

that it “cannot seize a person’s property without a

prior judicial determination that the seizure is

justified.” Culley, 601 U.S. at 398 (Gorsuch, J.,

concurring) (quotation marks omitted).

The government also overlooks the need for

transparency here. Consistent with its pattern in

other Silk Road forfeitures, the government has

granted Individual X unusual leniency so that he

would not contest the 1HQ3 forfeiture. See Consent

Agreement, Battle Born Invs. Co. v. DOJ (“Battle

Born”), No. 1:24-cv-00067 (D.D.C. June 18, 2024),

ECF 15-7 (government apparently never charged

Individual X in exchange for his non-opposition);

DOJ Br. at 10, Battle Born (D.D.C. July 25, 2024),

ECF 19 (government acknowledging Individual X

11

“presently can retain a private life”); Opp. at 3–4, 13–

14, Battle Born (D.D.C. July 12, 2024), ECF 16

(detailing pattern of lenient treatment). And to make

it impossible for Petitioners to establish standing via

proof of Ngan’s connection to Individual X, the

government has refused to disclose Individual X’s

identity in the related FOIA action (which is currently

on summary judgment). The largest forfeiture in

history should not be shrouded in such secrecy.

Accordingly, the Court should either grant

certiorari or, at minimum, hold the petition pending

the related FOIA action, resolution of which could

significantly buttress Petitioners’ standing to contest

the government’s forfeiture.

IV. There Are No Vehicle Problems.

The government does not dispute that this case

presents a rare opportunity to address its tactics in

seeking to avoid judicial scrutiny of its forfeitures, or

that there was extensive briefing and analysis on the

question presented. See Pet. 30–31.

While the government contends Petitioners’

“claims ... should be struck” as untimely, BIO 18–19,

that is no impediment to this Court’s review because

the government ignores the applicable standard of

review. The decision to excuse a claim’s untimeliness

is usually reviewed for an “abuse [of] discretion,” as

the government concedes. C.A. Dkt. No. 29 at 26. But

that question faces an even higher standard of review

here, as the district court never decided whether any

untimeliness should be excused. See App.21–22.

Because the district court did not purport to decide the

issue at all, the government must satisfy the high bar

12

of proving “as a matter of law that it would have been

an abuse of discretion for the trial court to” excuse any

untimeliness. Ashby v. McKenna, 331 F.3d 1148, 1151

(10th Cir. 2003) (quotation marks omitted).

The government makes no argument it can show

an abuse of discretion, much less as a matter of law—

and it cannot make either showing. The most salient

factors courts consider all clearly weigh in Petitioners’

favor: (1) they did not learn of the forfeiture action

until after the January 26, 2021 claims-filing

deadline, App.77; (2) they acted diligently in

“promptly” searching for and “engag[ing] several

counsel” to file their claims within weeks, App.77;

(3) they expended significant resources “hir[ing] data

scientists, forensic experts, private investigators and

attorneys” to prepare their claims, App.76; and

(4) their claims concerned the “most valuable asset

ever seized” through civil forfeiture, ER-21. Just as

importantly, (5) the government suffered no prejudice,

as it did not move to strike Petitioners’ claims until

four months later. See D. Ct. Dkt. No. 62 (claims filed

Mar. 16, 2021); D. Ct. Dkt. No. 90 (government’s

motion filed July 13, 2021).

Accordingly, this case is an appropriate vehicle for

considering the important question presented. This

Court should grant certiorari.

13

CONCLUSION

The Court should grant the petition for writ of

certiorari. Alternatively, the petition should be held

pending resolution of the related FOIA action.

Respectfully submitted,

Rod J. Rosenstein

Counsel of Record

Kellam M. Conover

KING & SPALDING LLP

1700 Pennsylvania Avenue NW

Washington, DC 20006

(202) 737-0500

rrosenstein@kslaw.com

August 13, 2024

Counsel for Petitioners