Opposition Brief — 141st Street Corporation, by Mark Hersh, managing agent of the Defendant in Rem v. United States of America

1x0 ¥ alee

Iu the Supreme Court of the United States

OCTOBER TERM, 1990

141ST STREET CORPORATION, BY MARK HERSH, ETC.,

PETITIONER

Vv.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

KENNETH W. STARR

Solicitor General

ROBERT S. MUELLER, III

Assistant Attorney General

J. DOUGLAS WILSON

Attorney

Department of Justice

Washington, D.C. 20530

(202) 514-2217

QUESTIONS PRESENTED

1. Whether the district court erred in imputing to

petitioner its agent’s knowledge of and consent to

drug trafficking in petitioner’s apartment building.

2. Whether the jury at the trial to obtain for-

feiture of petitioner’s property was properly in-

structed that petitioner was not an innocent owner

of the property unless petitioner could establish that

it had done all that reasonably could be expected to

prevent the illegal use of its property.

3. Whether due process required that petitioner

receive notice of and an opportunity to be heard prior

to the government’s seizure of petitioner’s apartment

building.

(1)

TABLE OF CONTENTS

Page

Opinion below Beate (hid ell ES CES A OT 1

EE oe le ES rc 1

Statement ....................... 6H TNE eee A RON IOS 1

See SCRE SE ne ean ee 5

EE SN BE ae eR 13

TABLE OF AUTHORITIES

Cases:

Calero-Toledo v. Pearson Yacht Leasing Co., 416

a. ceinickcslwindelains 8, 12

Center v. Hampton Affiliates Inc., 66 N.Y.2d 782,

488 N.E.2d 828, 497 N.Y.S.2d 898 (1985) ........ 5

INS v. Lopez-Mendoza, 468 U.S. 1032 (1984)........ 13

™nvestors Funding Corp., In re, 523 F. Supp. 533

i a iceanbsecuficinnenvceduesysenavese §

Mathews v. Eldridge, 424 U.S. 319 (1976) .......... 11

NAACP Vv. New York, 413 U.S. 345 (1978)........ cae 7

New York v. Burger, 482 U.S. 691 (1987) _............ 11

New York Vv. Harris, 110 S. Ct. 1640 (1990) .......... 12

Prudential-Bache Securities, Inc. Vv. Citibank, N.A.,

73 N.Y.2d 263, 536 N.E.2d 1118, 5389 N.Y.S.2d

699 (1989) LO TAO A 5-6

United States v. Lots 12, 12, 14 and 15, Keeton

Heights, 869 F.2d 942 (6th Cir. 1989) - aval 9

United States v. One (1) 1971 Harley-Davidson

Motorcycle, 508 F.2d 351 (9th Cir. 1974) 12-13

United States v. One 1975 Pontiac Le Mans, 621

ce | ee ee 12

United States v. One 1978 Mercedes Benz, Four-

Door Sedan, 711 F.2d 1297 (5th Cir. 1983)... 12

United States v. One 1981 Datsun 280ZX, 644

fe SB Be ee 10

United States v. Parcel of Real Property Known

As 6109 Grubb Road, 886 F.2d 618 (3d Cir.

1989) - 2.0 A oe oe RN eT 9

United States Vv. Premises Knowt n As 171-02 Lib-

erty Avenue, 710 F. Supp. 46 (E.D.N.Y. 1988) .. 10

(III)

IV

Cases—Continued : Page

United States v. Premises and Real Property at

4492 S. Livonia Road, 889 F.2d 1258 (2d Cir.

RAR ae PR yet EOIN Picks Ca as ta PR RA 12

Constitution and statutes:

U.S. Const. :

Amend. V (Due Process Clause) -....................... 4,11

SEE teeta I Se Da ae 5

ee en I sees bien csaaamapadaaesonseeeoa x

SS 5 ee ee Se ae 4,5, 8,9

IU a SO csdlmainiise cas 4

Ju the Supreme Court of the United States

OCTOBER TERM, 1990

No. 90-781

141sT STREET CORPORATION, BY MARK HERSH, ETC.,

PETITIONER

Vv.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

BRIEF FOR TEE UNITED STATES IN OPPOSITION

OPINION BELOW

The opinion of the court of appeals (Pet. App. 5a-

29a) is reported at 911 F.2d 870.

JURISDICTION

The judgement of the court of appeals was filed on

August 17, 1990. The petition for a writ of certio-

rari was filed on November 15, 1990. The jurisdic-

tion of this Court is invoked under 28 U.S.C. 1254(1).

STATEMENT

After a jury triai in the United States District

Court for the Southern District of New York, peti-

tioner’s property, a building on West 141st Street in

Manhattan, was ordered forfeited to the United

States. The court of appeals affirmed.

(1)

2

1. Between December 1986 and May 1988, New

York City police received numerous complaints of

drug trafficking in petitioner’s 41-unit apartment

building located at 617 West 141st Street.’ The com-

plaints alleged that drug activity was taking place in

24 apartments on all six floors of the building. Pet.

App. 7a-8a; Gov’t C.A. Br. 4. Five search warrants

were executed at the building prior to May 1988, and

more than 20 arrests had occurred there. Gov't C.A.

Br. 4. Investigation of the building revealed that its

common areas were littered with erack vials and

pipes, that lookouts constantly were posted in front

of the building, and that ‘“‘steerers,” who direct drug

buyers to sellers, loitered outside the building and in

the lobby. Pet. App. &a.

In 1987, police officers repeatedly attempted to con-

tact Mark Hersh. petitioner’s president and_ princi-

pal stockholder. Hersh failed to respond to several

telephone calls and to a letter asking him to come to

the local precinct house to discuss drug. trafficking

in the building. Pet. App. &a. Also during 1987, a

police officer spoke to Morris Nahmias, Hersh’s uncle

and the superintendent of the building, about the

drug trafficking there. Nahmias, who also acted as

petitioner’s rental agent, rent collector, and corporate

representative, denied that anv drug activity wes

occurring in the building. Jhid.; Gov’t C.A. Br. 7.

On three oecasions, the officer asked Nahmias to tell

Hersh to call the officer, but Hersh never called the

officer. Gov’t C.A. Br. 7. One of the residents of the

building complained directly to Hersh about drug

dealers on his floor. Pet. App. 17a. Hersh also visited

' The evidence at trial is set forth in the court of appeals’

decision and the government’s brief in that court.

C—O

3

the building on more than 100 occasions between

1982 and 1988 and spoke with Nahmias on a weekly

basis. Ibid. Nahmias accepted bribes from drug

traffickers to keep the elevators in the building run-

ning in order to facilitate drug trafficking, and he

charged exorbitant rents to lease apartments solely

for the purpose of selling drugs. /d. at 16a.

When police officers began an investigation of drug

trafficking in the building in May 1988, they deliber-

ately decided not to contact the owners of the build-

ing. The officers concluded that, given the level of

drug activity at the building and the prior fruitless

attempts to contact Hersh, the owners were aware

of the drug trafficking and were possibly in league

with the drug traffickers. Pet. App. 8a; Gov’t C.A.

Br. 5.

In May and June 1988, undercover officers purchased

crack cocaine in several apartments in the building.

During these purchases, the officers learned that an

alarm system designed to alert the occupants of the

apartments to police presence ran from a central

connection box on the roof to eight apartments in the

building. Pet. App. 8a-9a. On June 2, 1988, pur-

suant to a valid warrant, officers searched these eight

apartments, found a kilogram of crack cocaine, weap-

ons, and cash, and arrested 26 people. Two weeks

later, after additional undercover drug purchases, of-

ficers executed another warrant to search nine more —

apartments in the building, and uncovered four

pounds of cocaine, cash, and weapons. /d. at 9a.

On June 24, the same dav that the second search

warrant was issued, authorities obtained a warrant

from a United States Magistrate to seize the entire

building and the leasehold interests of 15 people in

the building. Pet. App. 9a. On June 29, the govern-

d

ment seized the building, sealed 15 apartments, and

arrested 12 persons. /bid.

2. On July 7, 1988, the government filed a com-

plaint seeking forfeiture of the building pursuant to

21 U.S.C. 881(a)(7). Petitioner filed a claim to the

building, asserting that it was an “innocent owner”

within the meaning of Section 881(a)(7). Before

trial, the district court ruled that any knowledge of

or consent to illegal activity by Morris Nahmias in

the building would be imputed to petitioner, because

Nahmias acted as petitioner’s agent. Pet. App. 4a,

9a-10a. In the same order, the court denied as un-

timely a motion by Stanley Weg, who claimed to be

a shareholder in the corporation, to intervene in the

action. The court also noted that as a shareholder,

Weg had no standing to intervene in the forfeiture

proceeding. Jd. at 4a.

At trial, after hearing the government’s evidence

of drug trafficking in the building, the court held that

the government had shown probable cause to believe

that the building was used to facilitate felony drug

trafficking within the meaning of 21 U.S.C. 881(d).

For this reason, the only issue submitted to the jury

was whether the narcotics trafficking in the building

took place without petitioner’s knowledge or consent.

Pet. App. 10a.

3. The court of appeals affirmed. Pet. App. 5a-29a.

It first ruled that the ex parte seizure of the building

on June 29, 1988, did not violate the Due Process

Clause. 7d. at lla-l5a. It found that the govern-

ment’s interest in halting persistent drug dealing in

the building, when coupled with Hersh’s failure to

respond to police inquiries, outweighed petitioner's

interest in “ownership and possession of an apart-

ment building solely for commercial purposes.” /d.

at 12a. The court also held that the district court

5

had not erred in imputing to petitioner Morris

Nahmias’s knowledge of and consent to drug dealing

in the building. /d. at 16a-17a.

The court next rejected petitioner’s challenge to the

district court’s jury instructions. It held that the dis-

trict court properly instructed the jury that peti-

tioner could prevail either by showing that it did not

know of drug trafficking at the building or that it

did not consent to the drug trafficking. Pet. App.

17a-21a. In addition, the court of appeals upheld the

district court’s instruction that to show lack of con-

sent, petitioner had to establish that once it learned

of illegal conduct, it had done all that it reasonably

could to prevent the illegal use of its premises. /d. at

21a-24a.’

ARGUMENT

1. Petitioner first contends that the district court

erred in imputing to petitioner its agent Nahmias’s

knowledge of or his consent to drug trafficking in

the building. Petitioner concedes that Nahmias was

its agent, but petitioner claims that Nahmias acted

outside the scope of his employment and adversely to

petitioner’s interests and that, therefore, it should

not have been held responsible for his acts. Pet. 8-16.

That fact-bound claim is without merit.

Under New York law, an agent’s knowledge and

actions are imputed to his principal unless the agent

has completely abandoned the principal’s purpose and

acted entirely for his own or another’s purposes. See

Prudential Bache Securities, Inc. vy. Citibank, N.A.,

2 The court also held that Section 881(a)(7) allowed the

government to forfeit the entire building on West 14l1st

Street, not just the 15 apartments connected to drug traffick-

ing, and that so construed the statute does not violate the

Eighth Amendment prohibition aguinst cruel and unusual

punishments. Pet. App. 24a-27a.

6

73 N.Y.2d 263, 276, 5386 N.E.2d 1118, 1125, 539

N.Y.S.2d 699, 706 (1989); Center v. Hampton Af-

filiates Inc., 66 N.Y.2d 782, 785, 488 N.E.2d 828,

497 N.Y.S.2d 898, 900 (1985); In re Investors

Funding Corp., 523 F. Supp. 533, 541 (S.D.N.Y.

1980). Here, as the court of appeals held, Nahmias’s

actions themselves were not adverse to petitioner.

Nahmias acted as petitioner’s managing agent at the

building. In that role, he leased apartments and

maintained the building. His involvement in drug

trafficking at the building came as part of his per-

formance of these duties. Pet. App. 7a-9a, 16a. In

addition, Nahmias derived considerable profit from

his illegal activities, and petitioner put on no -evi-

dence to discharge its burden of showing that it did

not share in these profits. /bid. Moreover, even if

Nahmias did not share his excess profits with peti-

tioner, his actions ensured that the apartments in

the building remained rented and that rentals con-

tinued to flow to petitioner. Thus, he had not aban-

doned his role as petitioner’s agent. ;

In any event, the court of appeals correctly found

that the district court’s imputation of Nahmias’s ac-

tions to petitioner was of no significance because the

jury could have concluded that Hersh, petitioner’s

president and principal stockholder, knew about the

extensive and persistent drug trafficking in the build-

ing, yet he failed to take any action. Pet. App. 17a.

Police officers repeatedly left messages at Hersh’s

office about the drug trafficking at the building: the

officers sent Hersh a letter informing him of the

problem and asking for his assistance; a tenant of

the building complained to Hersh about drug dealing

on his floor: and Hersh personally visited the build-

ing frequently and therefore must have seen the clear

evidence of ongoing drug trafficking. Accordingly,

7

the jury had direct proof that Hersh knew and yet

did nothing about the drug trafficking at the build-

ing. Under these circumstances, it is irrelevant that

Nahmias’s knowledge and conduct were imputed to

petitioner.’

2.- Petitioner argues that the district court erred

by instructing the jury that to show its lack of con-

sent to drug trafficking at the building, petitioner

had to establish that it had done all that reasonably

could be expected of it to prevent the illegal use of

its premises. Pet. 16-18.‘ The court of appeals cor-

rectly upheld this jury instruction.

3 Petitioner also claims that the district court erred in

denying shareholder Stanley Weg’s motion to intervene. Pet.

9, 14-15. The district court denied Weg’s motion on the

ground that it was untimely, however, and petitioner did not

raise this issue in the court of appeals. Accordingly, this

Court should not consider petitioner’s claim. In any event,

petitioner’s fact-bound claim, which is addressed to the dis-

cretion of the district court, see NAACP v. New York, 4138

U.S. 345, 366 (1973) (district court has broad discretion to

deny untimely motion to intervene), raises no issue war-

ranting review by this Court.

4In relevant part, the district court instructed the jury

as follows, Gov’t C.A. Br. 23-24 (quoting C.A. Supp. App.

491-492) :

Now, one gives one’s consent to something when one

voluntarily allows what is pianned or done by another

or when one agrees or accepts a course of action. You

must examine the acts or any failures to act by the

claimant, such as what steps it took or might have taken

to rid the property of the drug dealers, and determine

whether these can be said to constitute the claimant’s

consent to the use of the premises in the illegal manner

alleged.

I instruct you that once an owner or his agent is on

. actual notice of illegal conduct involving the owner’s

leased property the owner has a duty to do all that rea-

8

The forfeiture statute, 21 U.S.C. 881(a) (7), pro-

vides for the forfeiture of any real property that is

used to commit a controlled substance violation. The

statute, however, contains an exception for property

otherwise subject to forfeiture if the owner can show

that the act giving rise to the forfeiture was “‘com-

mitted * * * without [his] knowledge or consent.” In

construing the consent element of that exception, the

Second Circuit drew upon Calero-Toledo v. Pearson

Yacht Leasing Co., 416 U.S. 663, 689 (1974), which

stated in dicta that forfeiture of an innocent owner’s

property may be unconstitutional if the owner “had

done all that reasonably could be expected to prevent

the proscribed use of his property.” The Second Cir-

cuit used that standard to define the absence of con-

sent under Section 881(a)(7), because “it provides

a balance between the two congressional purposes of

making drug trafficking prohibitively expensive for

the property owner and preserving the property of

an innocent owner.” Pet. App. 22a-23a.

Petitioner contends that the definition of ‘‘consent”

adopted by the Second Circuit is erroneous because it

is not expressly set forth in Section 881(a). Pet. 18.

The statute does not define that term, however, and

petitioner does not offer an alternative definition.

Moreover, the Second Circuit reasonably interpreted

that term in a manner that gives effect to Congress’s

sonably could be expected to prevent the illegal use of its

premises.

It is for you to decide using your common sense what

actions would have comprised a reasonable response by a

landlord in similar circumstances. I instruct you that

“ the claimant is not, however, required to take vigilante

or lawless actions in connection with any drug activity on

its premises or to endanger the safety of its employees

or to engage in conduct which would be wholly futile.

9

purposes. Finally, the standard adopted by the court

of appeals does not require a property owner to under-

take futile or dangerous efforts to curtail drug ac-

tivity; that standard only requires a party to under-

take reasonable steps toward that end.

Petitioner claims that the standard adopted by the

court below conflicts with the standard set forth in

decisions of the Third and Sixth Circuits. Pet. 17-18.

The Third Circuit case, United States v. Parcel of

Real Property Known As 6109 Grubb Road, 886 F.2d

' 618 (1989), clearly does not conflict with the deci-

sion below, since that court expressly declined to

consider whether a claimant asserting an innocent

owner defense must show that it did “all that rea-

sonably could be expected.” Jd. at 627. In United

States v. Lots 12, 13, 14, and 15, Keéton Heights,

869 F.2d 942, 947 (6th Cir. 1989), the court stated

that Section 881(a)(7) “imposes no requirement

that a person who claims the status of ‘innocent

owner’ establish that he has done all that he could

reasonably be expected to do to prevent the proscribed

use of his property.” According to the court, “[i]t

is enough, under the statute, that the owner estab-

lish that the proscribed act was committed ‘without

the knowledge or consent of that owner.’” 869 F.2d

at 947. That statement, however, was dicta, since the

court ruled that the government had not properly

put the claimant’s knowledge or consent in issue at

all. bid. Fn addition, the court of appeals evidently

considered the “all that reasonably could be expected”

standard in the context of the claimant’s assertion

that she fulfilled that obligation and therefore the

property could not be constitutionally forfeited, rather

than in the context of an assertion that the standard

Was an appropriate test for consent under the stat-

ute. Jd. at 946-947. Moreover, the Sixth Circuit did

10

not explain what are the elements or coutours of the

consent standard. When confronted with a case re-

quiring a definition of the absence of consent, the

Sixth Circuit may adopt a standard that is indis-

tinguishable from the one adopted by the court of

appeals here. Under these circumstances, the Sixth

Circuit cannot be said to have fully considered and

rejected the standard adopted by the court below. Re-

view of the asserted conflict between the decision be-

low and in Keeton Heights would therefore be pre-

mature.”

In any event, petitioner could not satisfy even the

least demanding definition of the term ‘‘consent.” The

government showed that petitioner’s agents, includ-

ing its president and chief shareholder Hersh, knew

about a long-standing and virulent drug problem at

their building, but did nothing to terminate it. In-

stead, petitioner’s superintendent and rental agent

actively. sought to further the drug trafficking in the

building. Hersh ignored repeated police attempts to

enlist his aid in curtailing drug dealing in the build-

ing. Indeed, Hersh failed to take any meaningful

steps to rid the building of drug dealers after the

June 2, 1988, raid on the building. Thus, the govern-

ment here provided sufficient evidence to allow a jury

5 Petitioner also asserts that two district court decisions

conflict with the Second Circuit’s decision here. See United

States Vv. Premises Known As 171-02 Liberty Avenue, 710

F. Supp. 46 (E.D.N.Y. 1988) ; United States v. One 1981 Dat-

sun 208ZX, 644 F. Supp. 1280 (E.D. Pa. 1986). In the Liberty

Avenue case, however, the district court found that the prop-

erty owner had done evervthing that was reasonable under

the circumstances: it held that the additional steps that the

government argued that the owner should have taken were

unreasonable. In One Datsun 280ZX, the court found that

the claimant had done all that could be expected to prevent

the illegal use of the vehicle in question. 644 F. Supp. at 1288.

11

instructed under a more lenient standard to conclude

that petitioner consented to the drug trafficking. Ac-

cordingly, because petitioner could not prevail even

under the most lenient standard, its claim does not

warrant further review.

3. Petitioner contends that the initial ex parte seiz-

ure of the West 141st Street building on June 29,

1988, violated the Due Process Clause of the Fifth

Amendment. In particular, petitioner argues that it

was entitled to notice and a hearing prior to the

initial seizure of the building. Pet. 18-21. That claim

also does not warrant further review.

The determination of the process due before a seiz-

ure of property requires use of the balancing test set

forth in Mathews vy. Eldridge, 424 U.S. 319, 335

(i976). That test requires a court to evaluate three

factors: the significance of the property interest at

stake; the risk of an erroneous deprivation through

the- procedures used and the probable value of addi-

tional procedural safeguards; and the government’s

interest in pre-notice seizure. The court of appeals

applied that test in this case and correctly held that

petitioner received the process that was due. See Pet.

App. lla-15a.

As the court of appeals found, petitioner’s purely

commercial interest in the building, although signifi-

cant, is not of the same weight as a homeowner’s in-

terest in his or her property. “An expectation of pri-

vacy in commercial premises * * * is different from

and indeed less than, a similar expectation in an iu-

dividual’s home.” New York v. Burger, 482 U.S. 691,

700 (1987). Petitioner was deprived only of the in-

come from the property, not of the abode of any of its

owners or officers. Second, the risk of erroneous dep-

rivation was minimized by the probable cause hear-

12

ing before the magistrate. Third, the government

had a substantial interest in seizing the building

without notice to petitioner. Prior investigation had

suggested that petitioner’s employees and officers knew

of and were involved in the extensive drug traffick-

‘ing in the building. In addition, the drug trafficking

at the building had survived several prior police raids,

including a search of eight apartments in the building

on June 2, 1988, three weeks before the seizure of the

building, that had resulted in 26 arrests and the seiz-

ure of several weapons. Thus, seizure of the prop-

erty without notice not only was necessary to ensure

that drug trafficking at the building was finally

brought to an end, but also to help ensure the safety

of the police officers involved in the June 29 search

and seizure and of innocent tenants of the building.

See Calero-Toledo v. Pearson Yacht Leasing Co., 416

U.S. at 679 (seizure without prior notice justified be-

cause seizure prevented further illicit use of the prop-

erty).

Even if p@titioner were correct that it was entitled

to preseizure notice, its claim would not warrant

review. Just as an illegal arrest does not render a

person immune from prosecution, e.g., New York v.

Harris, 110 S. Ct. 1640, 1643 (1990), so, too, the

illegal seizure of property does not immunize that

property from forfeiture. United States v. Premises

and Real Property at 4492 S. Livonia Road, 889

F.2d 1258, 1265-1266 (2d Cir. 1989); United States

v. One 1978 Mercedes Benz, Four-Door Sedan, 711

F.2d 1297, 1302-1303 (Sth Cir. 1983); United States

v. One 1975 Pontiac Le Mans, 621 F.2d 444, 450-451

(1st Cir. 1980); United States vy. One (1) 1971

Harley-Davidson Motorcycle, 508 F.2d 351 (9th Cir.

13

1974). See INS v. Lopez-Mendoza, 468 U.S. 1032,

1040 (1984). Petitioner had a full trial on the merits

of its claim that the government did not have the

right to seize its property. Accordingly, the legality

of the seizure has been established at a trial

on the merits, and any error in the June 29, 1988,

seizure without notice does not undermine the in-

tegrity of the judgment entered at the trial. In

short, as the court of appeals concluded, ‘“‘[t]he high

level of ongoing narcotics trafficking in the building,

coupled with [petitioner’s] opportunity to contest the

forfeiture at trial [shows] that issuance of the seiz-

ure warrant by a neutral and detached magistrate

was all the process that was due.” Pet. App. 14a-15a.

Consequently, petitioner’s claim does not merit re-

view.

CONCLUSION

The petition for a writ of certiorari should be

denied.

Respectfully submitted.

KENNETH W. STARR

Solicitor General

ROBERT S. MUELLER, III

Assistant Attorney General

J. DOUGLAS WILSON

Attorney

JANUARY 1991

* Petitioner never requested an evidentiary hearing before

trial on the merits of the seizure; nor did petitioner move to

dismiss the the forfeiture proceeding because of the illegality

of the seizure. Gov’t C.A. Br. 21.

TY VU. S. GOVERNMENT PRINTING OFFICE, 1991 282061 20308

¢

a