Petition for Writ of Certiorari — All Right, Title & Interest in Real Property & Appurtenances Thereto Known as 143-147 East 23rd Street v. United States

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Supreme Court, U.S.

FILED

951939 way 28 19%

In The OFFI@E Of iHE GLERK

Supreme Court of the United States

No.

6x,

October Term, 1995

ALL RIGHT, TITLE AND INTEREST IN REAL PROPERTY

AND APPURTENANCES THERETO KNOWN AS 143-147

EAST 23RD STREET, NEW YORK, NEW YORK, LISTED

AS BLOCK 879, LOT 27, WHICH INCLUDES THE

KENMORE HOTEL and JUDE HOTEL CORPORATION,

Petitioners,

VS.

UNITED STATES OF AMERICA,

Respondent.

Petition for Writ of Certiorari to the United States Court

of Appeals for the Second Circuit

PETITION FOR WRIT OF CERTIORARI

ALAN H. LICHTENBERG

Counsel of Record

URI SELLA

LICHTENBERG & GINACH, P.C.

Attorneys for Petitioners

90 Park Avenue

New York, New York 10016

(212) 867-7900

8826

We sotate (800) 3 APPEAL « (800) 5 APPEAL « (800) BRIEF 21

ervices, inc.

QUESTIONS PRESENTE.) FOR REVIEW

1. Joes civil forfeiture of a ‘iutel under 2 U.S.C.

§ 88i(a)(7) constitute an excessive punishment of its owner,

within the meaning of the EighthAmendment, if the owner did not

commit any wrong, and the wrongdoing was committed entirely

by others?

2. Can the owner of the hotel’s failure to act in accordance

with police recommendations be punishable by forfeiture of the

hotel under 21 U.S.C. § 881(a)(7)?

3. Cananentire hotel building be forfeited under 21 U.S.C.

§ 881(a)(7) while wrongdoing was a result of drug activity

performed in only a few of its rooms?

4. Can the consent of the owner of real property to illegal

activities within its property be inferred from the owner’s failure

to successfully prevent such illegal activity?

TABLE OF CONTENTS

Page

Questions Presented for Review ............+eee085 i

TRB OF CORBOINR ois s cicic deececass sav eietee es ii

FeRhe OF CHAGONG ko cniccvsnsonsceesnnaresaseeee ili

ORTEGA ROIOW bencccecceuenctssaeeeeneraeetetes ]

Statement Of FULiBGictiOn ....ceccccuccecsenesevess ]

Statutory Provisions Involved ..............05e008: 1

Statement of the CRUG s.ccn cineca caseeueeseeuncias 2

A. Preliminary Statement .......cccccccscenese 2

B. StatomentoltRe Facts ...civccccecnsscusers 3

C. Summary of the Opinion of the District Court .. 5

D. Summary ofthe Opinion of the Court of Appeals ,

Reasons for Granting the Writ ................0008- 6

I. The Owner Did Not Consent to the Illegal

Activition in (0 TROON. 46 ccc'n ces cesaecanss 6

A. Civil Forfeiture — General Considerations

iii

Contents

Page

B. LackofConsentas Defense ............. 7

C. Ineffectiveness ofthe Police ............ g

Il. The Government Could Not Forfeit the Hotel as

Punishment to the Owner for Failure to Cooperate

with the Local Authorities. ................. 10

A. The Owner Was Not Obligated to Cooperate

with the Local Authorities. ............. 10

III. The Forfeiture Is Unconstitutional Under the

IES oka Crerecavecdcccecens 12

A. The Lower Court’s Application of These

Factors to This Action Constituted Excessive

Punishment Under the Eighth Amendment.

ear e es pee LEME TOL gaceé o 40 6.a-4.0% 12

ee eae wens 15

TABLE OF CITATIONS

Cases Cited:

Alexander v. United States, __ U.S. __, 113 S. Ct. 2766

NS eS ct sa ee ee bene web wegne 14

Austin v. United States, 509 U.S.__, 125 L. Ed. 2d 448, J 13

Re er ee .. 10,13,14

Contents

Page

Payton v. New York, 445 U.S.573, 63 L. Ed. 2d 639, 100S.

Ca RPT U REED cdbcdbat been uevucteyeseenieakes 7

United States v. Certain Real Property and Premises

Known as 38 Whalers Cove Drive, 954 F.2d 29 (2d Cir.),

cert. denied, 113S.Ct.55(1992) ................ 14

United States v. Certain Real Property and Premises

Known as 171-02 Liberty Avenue, Queens, New York,

TIOFP. Supp. 46(E.D.N.Y. 1969) 2... ccccccccsee 9,10, 11

United States v. All Right, Title and Interest in Property

and Premises Known as 710 Main Street, Peekskill, 753

F, BU. DE Ge tees REE cy reo hho eee weaeun 7,8,9

United States v. Chandler, 36 F.3d 358 (4th Cir. 1994) .. 14

United States v. Chem, 913 F.2d 183 .......cccceseees 8

United States v. Good Real Property, 510 U.S. __, 126L.

we eS Ree > ee eee re er 7,13

United States v. Milbrand, 58 F.3d 841 (2nd Cir. 1995)

PPP ET TOC CET ee fee Pee ate POE Pee ee ee x

United States v. 141 st Street Corp. by Hersh, 911 F.2d 870

Fo lw | ene rape me PP yee eee 7,8

United States v. One Parcel Located at 9638 Chicago

Heights, 831 F. Supp. 736 (E.D. Mo. 1993) ........ 14

Contents

Page

United States v. Premises and Property at 4492 South

Livonia Road, Livonia, New York, 889 F.2d 1258 (2nd

Cir. 1989), rehearing denied, 897 F.2d 659 (2nd Cir.

IDOG) ccciccccccevcedvecccerecrassnctesessses 7

United States v. Premises Knownas RR#1, 14 F.3d 864 (3d

Cir, 1994) ..cccccccccccccccesccecccsccesscees 14

United States v. Riverbend Forms, Inc., 847 F.2d 553 (9th

Cie 1988) cc cccc cts cccviecvediedeveresccvecvers 7

United States v. Two Parcels of Property at Castle Street,

31 F.3d 35 (2nd Cir. 1994) ....... cece eee cece 8

Statutes Cited:

21U.S.C. § 881(al(7) ..-. cece cece eer ecereceeee i, 1,5,6, 14

28 U.S.C. § 1254(1) .... cece cece cece eee eeceees 1

PBUS.C.BYZO1L .cccccccvecectaccccccscoresosess l

United States Constitution Cited:

EighthAmendment ........----++esseeerrerreees 13.282

Rule Cited:

Federal Rule of Civil Procedure 3(g) ....-.----++++:: 3

Contents

Other Authorities Cited:

Webster’s Third New International Dictionary 482 (1971)

APPENDIX

Appendix A — Opinion of the United States Court of

Appeals for the Second Circuit Decided February 26,

IFO wccccccnenvesshéseucnaseeeenteneeswesean

Appendix B — Opinion of the United States District Court

for the Southern District of New York Dated June 12,

FORD cs ve ccn pct cnsend eke teiedeeerkenaoansess

Appendix C — Amended Judgment of the United States

District Court for the Southern District of New York

PERU FOES TS. COOS a0 ckbvedisscd cexvacwuewin

Page

30a

‘Veit te

OPINION BELOW

On February 26, 1996, the United States Court of Appeals

for the Second Circuit issued its opinion affirming the opinion of

the District Court, and is reported at 77 F.3d 648 (2nd Cir. 1996)

(Petitioner’s Appendix A). The decision of the United States

District Court for the Southern District of New York was issued

on June 12 and 13, 1995, and is reported at 888 F. Supp. 580

(S.D.N.Y. 1995) (Petitioner’s Appendix B and C).

STATEMENT OF JURISDICTION

The decision of the United States Court of Appeals was

issued on February 26, 1996.

This Court’s jurisdiction in this case is pursuant to 28 U.S.C.

§ 1254(1). The Second Circuit’s jurisdiction is pursuant to 28

U.S.C. § 1291.

STATUTORY PROVISIONS INVOLVED

The Eighth Amendment of the United States Constitution

provides as follows:

Excessive bail shall not be required, nor

excessive fines imposed, nor cruel and

unusual punishments inflicted.

21 U.S.C. § 881(a)(7) provides, in pertinent part, as follows:

The following shall be subject to forfeiture to

the United States and no property right shall

exist in them:

All real property, including any right, title,

and interest (including any leasehold

interest) in the whole or any lot or tract of land

and any appurtenances or improvements, |

which is used, or intended to be used, in any

manner or part, tocommit, or to facilitate the

commission of, a violation of this subchapter

punishable by more than one year’s

imprisonment, except that no property shall

be forfeited under this paragraph, to the

extent of an interest of an owner, by reason of

any act or omission established by that owner

to have been committed or omitted without

the knowledge or consent of that owner.

STATEMENT OF THE CASE

A. Preliminary Statement

This petition raises the delicate balance between the

government’s right to confiscate real property in which crime

was committed and the individual freedom for right of

ownership of land in this country. It requires a determination of

what is considered excessive punishment under the Eighth

Amendment of the United States Constitution. Finally, it

addresses the legitimacy of the civil forfeiture as it is employed

by the government in its battle against illegal drugs.

More specifically, the issues raised in this Petition are the

following:

¢ What constitutes consent of property owner to illegal

activities within the property. !

* Can property be subject to forfeiture if its owner did not

commit any wrong.

¢ Can the government confiscate real property due to an

owner’s failure to comply with police request for cooperation.

¢ Can the government confiscate real property due to the

government’s ineffectiveness in eliminating the criminal

activities within the property.

¢ Is an entire hotel building, including its commercial

portions, subject to forfeiture due to the mere fact that a small

number of its room was used for illegal drug activity.

B. Statement of the Facts

The Petitioner All Right, Title and Interest in Real Property

and Appurtenances, thereto known as 143-147 East 23rd Street,

New York, New York, Listed as Block 879, Lot 27, which

includes the Kenmore Hotel (hereinafter referred to as the

“Hotel”) was occupied by the 22 story Kenmore Hotel, the

largest commercial single-room-cccupancy building in New

York City, comprising more than 600 single-occupancy units,

which were mainly occupied by poor or elderly tenants.

In 1985 the Hotel was acquired by Petitioner Jude Hotel

Corporation (“Jude”) for the sum of $7,900,000.

According to records of the New York City Police

Department (“NYPD”) and the Manhattan District Attorney’s

Office (hereinafter collectively the “Local Authorities”),' from

early 1991 until June 1994, numerous narcotics activities took

1. The facts were issued by the government in a statement of material

facts pursuant to Civil Rule 3(g) of the Federal Rules of Civil Procedure.

place in and around the Hotel, resulting in several arrests and

confiscation of drugs by the NYPD. According to those records,

drug related activities were identified in twenty seven (27) of the

Hotel’s more than six hundred (600) rooms.

In February 1993, more than two years after the NYPD first

identified drug related activities in the Hotel, and after several

attempts by the NYPD to eliminate the criminal activity in the

Hotel, the Local Authorities invited the majority shareholder of

Jude, Dinh Truong Tran (“Tran”) to attend a meeting with the

Assistant District Attorney (the “ADA”). In this meeting, Tran’s

representative was informed by the ADA of the illegal activities

in the Hotel. The ADA recommended that Jude would take

several measures to help the Local Authorities in their battle

against the continuous crime in the Hotel.

The measures recommended by the ADA to Jude included

hiring full time uniformed security guards, screening

prospective tenants, using a surveillance camera, providing

photo identifications to tenants, and authorizing NYPD, in an

affidavit, to patrol the floors of the Hotel and to arrest

trespassers.

In a letter subsequently issued by the ADAto summarize the

recommendations mentioned in the meeting, the ADA included

a Strict warning addressed to Jude, that if Jude would fail to

cooperate with the Local Authorities and in accordance with the

recommendations of the ADA, the Local Authorities would

move to confiscate the Hotel pursuant to the Federal civil

forfeiture laws.

Jude chose to act according to some of the recommendations

of the ADA and not to act according to others.”

2. Thus, for example, Jude hired uniformed security guards but

(Cont'd)

In June 1994, shortly after the publication in the New York

Times and the New York Post of articles describing the extensive

criminal activity in the Hotel, and in light of NYPD’s failure to

eliminate the drug problem in the Hotel for the last four years, the

government moved to confisc te the property.

Except for the forfeiture of the Hotel, Petitioner, its officers,

agents or employees, were never prosecuted, accused, or

otherwise sanctioned by the local authorities or the federal

government for any violation of narcotics laws, and were never

accused, prosecuted or otherwise sanctioned on violations of any

other laws or regulations, including any rules or regulations

regarding maintenance or security of hotels or buildings. Nor

was it ever argued or demonstrated that Petitioners benefited

from the illegal activity in the Hotel.

C. Summary of the Opinion of the District Court

In supporting Respondent’s right to forfeit the Hotel, the

District Court concluded that:

* the governmentestablished that drug violations occurred

in the Hotel and Petitioner’s “token efforts to correct the

problems that its own mismanagement and neglect helped to

create, fall far short of the diligence required to establish lack of

consent” pursuant to 21 U.S.C. § 881(a)(7) (Petitioner's

Appendix B).

* under the proportionality test adopted by the Court, the

(Cont'd)

dismissed them due to high costs, and hired, instead, tenants of the Hotel as

guards (according to Respondent, the guards hired by Jude were poorly paid

and in effect facilitated the narcotics activities in the Hotel); Jude signed the

affidavit proposed by the ADA after including certain amendments therein;

Jude installed a buzzer at the front door which was broken within a week by

drug offenders and was not replaced.

‘ia

forfeiture was not excessive because the fine imposed on Jude

was reasonable in comparison to fines imposed pursuant to

criminal drug offenses against owner of property.

¢ “the relationship between the Kenmore Hotel and the drug

trafficking that occurred there is sufficiently strong to sustain the

proposed forfeiture against an Excessive Fines Clause

Challenge.”

D. Summary of the Opinion of the Court of Appeals

In supporting Respondent’s right toconfiscate the Hotel, the

Court of Appeals stated that Petitioners failed to demonstrate

their lack of consent to the drug activities in the Hotel because

Petitioners failed to do all that was reasonably expected from an

owner todo once it learned of the illegal activities in the property,

and because unless an owner with knowledge of the activities

could demonstrate that every reasonable activity was taken to

curtail the drug related activity, consent was inferred and the

property was subject to forfeiture. The court further concluded

that under the test adopted by the Second Circuit in United States

v. Milbrand, 58 F.3d 841 (2d Cir. 1995), the forfeiture was not an

excessive punishment.

REASONS FOR GRANTING THE WRIT

THE OWNER DID NOT CONSENT TO THE ILLEGAL

ACTIVITIES IN THE HOTEL.

A. Civil Forfeiture — General Considerations

In enacting 21 U.S.C. § 881(a)(7) Congress intended to

balance between the twoconflicting interests of (1) making drug

trafficking prohibitively expensive for the property owner, and

(2) preserving the property rights of an innocent owner. United

State v. 141st Street Corp. by Hersh, 911 F.2d 870 (2nd Cir.

1990). In interpreting the provisions of 21 U.S.C. § 881(a)(7),

the Court should consider those conflicting interests. It is well

settled law that the taking of property by the government is a

serious action, subject to stringent constitutional scrutiny.

Payton v. New York, 445 U.S. 573, 63 L. Ed. 2d 639, 100 S. Ct.

1371 (1980); United States v. All Right, Title and Interest in

Property and Premises Known as 710 Main Street, Peekskill, 753

F. Supp. 121 (S.D.N.Y. 1990); United States v. Premises and

Property at 4492 South Livonia Road, Livonia, New York, 889

F.2d 1258 (2nd Cir. 1989), rehearing denied, 897 F.2d 659 (2nd

Cir. 1990); United States v. Riverbend Forms, Inc., 847 F.2d 553

(9th Cir. 1988).

Similarly, in United States v. Good Real Property, 510 U.S.

__, 126L. Ed. 491, 114S. Ct. 492 (acase involving applicability

of due process in forfeiture actions) Justice Thomas in a separate

opinion, stated as follows:

Two fundamental considerations seem to

motivate the Court’s due process ruling: first,

a desire to protect the rights incidental to

ownership of real property, especially

residences, and second, a more implicitly

expressed distrust of the Government’s

aggressive use of broad civil forfeiture

statutes.

B. Lack of Consent as Defense.

Consent is defined as the “compliance or approval

esp[ecially] of what is done and proposed by another.” Webster's

Third New International Dictionary 482 (1971).

In order to successfully allege the defense of lack of consent,

it was held that the owner must show that he did what reasonably

might be expected from the owner in order to prevent the illegal

activity. United States v. 141stStreet Corp., 911 F.2d 870 (2d Cir.

1990).

The standard of reasonableness of the owner was narrowly

construed by the court in order to prevent unjust forfeiture. Thus,

in United States v. All Right, Title and Interest in Property and

Premises Known as 710 Main Street, Peekskill, 744 F. Supp. 510

(S.D.N.Y. 1990), the court stated that the owner was required to

show that he at least did something affirmative to stop the

proscribed use of his property. The fact that the owner was

unsuccessful in resolving the drug problem should not be

interpreted as the owner’s implied consent to the activity. United

States v. All Right, Title and Interest in Property and Premises

Known as 710 Main Street, Peekskill, 753 F. Supp. 121(S.D.N.Y.

1990).

In fact, in most situations of forfeiture brought before the

courts, the police was unaware of the existence of illegal

activities in the property, and therefore the reasonable act

expected from the owner was to inform the police of such

activities. United States v. Two Parcels of Property at Castle

Street, 31 F.3d 35 (2nd Cir. 1994) (parents failed to inform the

police of illegal activities by their children). See also, United

States v. Chen, 913 F.2d 183.

In this petition, the police were fully aware of, and

practically helpless against, the criminal conduct in the premises

and in fact informed the owner of such activity. There is no

dispute that Jude took several measures in an attempt to cease the

illegal activities in the Hotel, and Jude’s position is that such

measures constituted reasonable acts on its behalf.’

3. Both the District Court and the Court of Appeals concluded however,

(Cont'd)

C. Ineffectiveness of the Police

When the owner’s attempts to stop the illegal actions in the

property where executed simultaneously with the law

enforcement’s ineffective activities to prevent such activities,

the owner should not be subject to forfeiture. United States v.

Certain Real Property and Premises Known as 171-02 Liberty

Avenue, Queens, New York, 710 F. Supp. 46 (E.D.N.Y. 1989) (it

was unreasonable for the police to require the owner to do what

the police was unable to do by its own efforts). See also, 753 F.

Supp. 121 (S.D.N.Y. 1990), supra (“[t}he fact that he was

unsuccessful in resolving the drug problem (as were the well-

trained police who patrolled the area) should not be interpreted

as his consent to that activity”).

In this petition there is no dispute that the NYPD, for a

period of four years and until it confiscated the property, was

unable to eliminate the illegal activities in the Hotel even though

it patrolled the premises, arrested several offenders, and

confiscated illegal narcotics.

(Cont'd)

that since Jude did not comply with the ADA’s recommendations, and since the

criminal! conduct in the Hotel continued, Jude did not act reasonably to prevent

the crimes.

Il.

THE GOVERNMENT COULD NOT FORFEIT THE

HOTEL AS PUNISHMENT TO THE OWNER FOR

FAILURE TO COOPERATE WITH THE LOCAL

AUTHORITIES.

A. The Owner Was Not Obligated to Cooperate with the

Local Authorities.

There is no dispute that Jude was not obligated to act

pursuant to the recommendations suggested by the ADA during

the meeting held in February, 1993. Furthermore, the

government does not contend that Petitioners violated any

criminal laws orregulations related to supervision, maintenance

or safety of the premises nor that it acted negligently in

connection thereof*. Noris there any allegation the Jude violated

any criminal law.

Consequently, the government had no authority to threaten

Petitioner that if it would fail to act in accordance with the

government’s “recommendations” the government would

confiscate the Hotel. |

In United States v. Premises Known as 171-02 Liberty

Avenue, Queens, New York, 710 F. Supp. 46 (E.D.N.Y. 1989) the

owner of real property in which several drug related offenses

have been committed was asked by the local police to cooperate

with the police in its effort to fight against the offenders on his

property. The owner agreed to cooperate with the police on some

issues but refused to cooperate on others (including his refusal to

4. In Austin v. United States, 509 U.S. __, 125 L. Ed. 2d 448, 113 S.Ct.

2081 (1993) Justice Kennedy with whom the Chief Justice and Justice Thomas

concurred, the court held that “[a]t some point, we may have to confront the

constitutional question whether forfeiture is permitted when the owner has

committed no wrong of any sort, intentional or negligent. That for me would

raise a serious question”.

sign an affidavit permitting the police to arrest people on the

premises). Inresponse to the owner’s refusal to cooperate with

the police, the police informed the owner that if he would not be

“part of the solution [he would be] part of the problem”. After the

owner refused to cooperate, the police moved to confiscate the

premises.

In denying the forfeiture, the court held that the owner was

not under any obligation to cooperate with the police in order to

avoid forfeiture. In addition, the court held that it was

unreasonable on behalf of the police to request from the owner to

eliminate crime in his property while the well-trained police

failed to achieve that same goal. The court stated that it was clear

‘that the police determined that only forfeiture would put an end

to the crime on the premises. In fact, the court concluded, the

police determined to confiscate the property, and the owner

could not have saved his property from the police decision. The

court condemned the government’s action and stated that “[t]he

government has proven only that it took Greco’s property,

without just compensation, for the public purpose of fighting the

war on drugs”.

Indeed, the circumstances in the Liberty Avenue case are

almost identical to those before this Court. In both cases, the

police was continuously unsuccessful in its efforts to eliminate

illegal activity in the property. In both cases the police requested

cooperation from the owners, while there was absolutely no

obligation on the owner to agree to such cooperation. In both

cases, the police threatened the owners that their failure to

cooperate with the police would result in forfeiture of their

property. Finally, in both cases it was clear that the police moved

to forfeit the property after it concluded that only this measure

would best achieve their goal to eliminate the criminal activity

in the property. There is no coincidence that the Local

Authorities, after four years of unsuccessful attempts to “clean”

the Hotel, moved in great haste to confiscate, immediately after

the New York Times and the New York Post published reports on

the criminal activity in the Hotel.

Ill.

THE FORFEITURE IS UNCONSTITUTIONAL

UNDER THE EIGHTH AMENDMENT.

The Excessive Fines Clause limits the government’s power

to impose excessive payments whether in cash or in kind.

In United States v. Milbrand, 58 F.3d 841 (2nd Cir. 1995),

the Second Circuit established the following factors to be

considered in determining excessiveness of a fine:

(1) the harshness of the forfeiture (e.g. the

nature and value of the property and the effect

of forfeiture on innocent third parties) in

comparison to (a) the gravity of the offence,

and (b) the sentence that could be imposed on

the perpetrator of such an offence; (2) the

relationship between the property and the

offence, including whether use of the

property in the offence was (a) important to

the success of the illegal activity, (b)

deliberate and planned or merely incidental

and fortuitous, and (c) temporary or spatially

extensive; and (3) the role and degree of

culpability of the owner of the property.

A. The Lower Court’s Application of these Factors to this

Action Constituted Excessive Punishment Under the Eighth

Amendment.

In adopting the factors established in Milbrand the Court of

Appeals disregarded serious questions and doubts casted by the

Supreme Court of the United States. Thus, Milbrand referred to

the value of the property as an issue to be considered. However,

Justice Scalia specifically stated in his opinion in Austin v.

United States, 125 L. Ed. 2d 448, 113 S. Ct. 2081 (1993) that

“(t]he question is not how much the confiscated property is

worth, but whether the confiscated property has a close enough

relationship to the offense”. Furthermore, In providing that there

was a “substantial relationship” between the Hotel and the

offenses, because the Hotel provided “seclusion and privacy” to

the offenders, the Court of Appeals disregarded the doubts raised

by the Supreme Courtas to the traditional “guilt” attributed to the

property, when such property constitutes merely the place in

which the offense took place. Thus, in United States v. Good Real

Property, 510U.S.__, 126L. Ed. 2d 491, 114S. Ct. 492, Justice

Thomas stated that “[uJnder this provision [21 U.S.C.

§ 811(a)(7)], ‘large tracts of land [and any improvements

thereon] which have no connection with crime other than being

the location where a drug transaction occurred’,. . . are subject

to forfeiture. It is difficult to see how such real property is

necessarily in any sense ‘guilty’ of an offense. . .”

It is clear that the Kenmore Hotel could not be considered as

that traditional “instrument” with which the offense occurred

(such as are, for example, the scales used for measurement of

unlawful drugs, the farm used to cultivate marijuana, and the

illegal distillery used to distil liquor).

Moreover, in forfeiting a Hotel of more than 600 rooms

while the actual criminal activity was limited to no more than 30

rooms, the Court of Appeals disregarded another question

related to the instrumentality of the property which is forfeited.

As illustrated by Justice Scalia in Austin, by way of analogy to

common-law: “if aman was killed by a moving cart, the cart and

its horses were deodands, but if the man died when he fell from

a wheel of an immobile cart, only the wheel was treated as a

deodand, since only the wheel could be regarded as the cause of

death.”

Finally, the Court of Appeals failed to adequately examine

the connection between the owner of the Hotel and the criminal

activities conducted in the Hotel. In fact, nowhere in the court’s

decision is there any showing that the owner committed any

wrong, either intentional or negligent.* The only fault attributed

to the owner by the Court of Appeals is that it failed to comply

with the local authorities’ recommendations (however, those

constituted nothing but recommendations and imposed no legal

duty); and that the owner was unsuccessful in eliminating the

criminal activities from the Hotel (even though, there is no

dispute that the well trained NYPD was unsuccessful as well).

5. Although it is not specifically required under 21 U.S.C.

§ 881(a)(7) that the owner of the property will commit criminal offence in

order to forfeit its property, it is nevertheless the most common consideration

applied by the courts in determining the right of the government to forfeit

property. See, e.g., Alexander v. United States, __ U.S. __, 113 S. Ct. 2766

(1993); Austin v. United States, 509 U.S. __, 125L. Ed. 2d 448, 113 S. Ct. 2081

(1993); United States v. Chandler, 36 F.3d 358 (4th Cir. 1994); United States

v. Premises Known as RR#1, 14 F.3d 864 (3d Cir. 1994); United States v.

Certain Real Property and Premises Known as 38 Whalers Cove Drive, 954

F.2d 29 (2d Cir.), cert. denied, 113 S.Ct. 55 (1992); United States v. One Parcel

Located at 9638 Chicago Heights, 831 F. Supp. 736(E.D. Mo. 1993).

CONCLUSION

WHEREFORE, for all of the foregoing reasons and in the

interest of justice it is respectfully prayed that the Petition for

Writ of Certiorari be granted.

Respectfully submitted,

ALAN H. LICHTENBERG

Counsel of Record

URISELLA

LICHTENBERG & GINACH, P.C.

Attorneys for Petitioner

90 Park Avenue

New York, New York 10016

(212) 867-7900

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APPENDIX A — OPINION OF THE UNITED STATES

COURT OF APPEALS FOR THE SECOND CIRCUIT

DECIDED FEBRUARY 26, 1996

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

No. 934 August Term, 1995

(Argued: January 8, 1996 Decided Feb. 26, 1996)

Docket No. 95-6157

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

MILLAR ELEVATOR SERVICE COMPANY,

Plaintiff,

ALL RIGHT, TITLE AND INTEREST IN REAL PROPERTY

ANDAPPURTENANCES, thereto known as 143-147 East 23rd

Street, New York, New York, Listed as Block 879, Lot 27, which

includes the Kenmore Hotel,

Defendants,

JUDE HOTEL CORPORATION,

Claimant-Appellant.

Appendix A

Before: VAN GRAAFEILAND, KEARSE, and MINER,

Circuit Judges.

Appeal from ajudgment of the United States District Court

for the Southern District of New York, Milton Pollack, Judge,

ordering the forfeiture of the defendant property, including the

Kenmore Hotel, to the United States because of narcotics

activity, 21 U.S.C. § 881(a)(7), over claimant’s Eighth

Amendment objection. See 888 F. Supp. 580 (1995).

Affirmed.

ELLEN SILVERMAN ZIMILES, Assistant United

States Attorney, New York, New York (Mary Jo White,

United States Attorney for the Southern District of

New York, Kenneth M. Karas, Steven M. Haber,

Assistant United States Attorneys, New York, New

York, on the brief), for Plaintiff-Appellee.

DORIS G. TRAUB, New York, New York (Traub &

Traub, New York, New York, on the brief), for

Claimant-Appellant.

KEARSE, Circuit Judge:

Claimant Jude Hotel Corporation (“Jude”) appeals from a

final judgment of the United States District Court for the

Southern District of New York, Milton Pollack, Judge, ordering

the forfeiture of certain of Jude’s real property, which includes

the Kenmore Hotel (the “Kenmore” or the “Hotel’”), to the United

States pursuant to 21 U.S.C. § 881(a)(7) (1994) on the ground

that the Hotel was used to facilitate narcotics activity with the

knowledge of Jude and without meaningful efforts by Jude to

Appendix A

prevent that activity. After the parties informed the court that

there would be no need for atrial and that the only issue would be

whether or not the forfeiture violated the Excessive Fines Clause

of the Eighth Amendment to the Constitution, the district court

granted summary judgment to the government, finding no

violation of that Clause. On appeal, Jude contends (1) that

summary judgment was inappropriate because there existed

genuine issues of fact to be tried, and (2) that the court

erroneously found that there was no Eighth Amendment

violation. We conclude that the first contention has been waived

and that neither has any merit.

I. BACKGROUND

Following several years of investigations by federal and

local law enforcement officials into narcotics trafficking at the

Kenmore Hotel in Manhattan, and after several attempts by local

law enforcement officials to have Jude take steps to impede use

of the Hotel for narcotics activity, the government commenced

the present action in June 1994 seeking civil forfeiture of the

Hotel. Following a period of discovery, the government moved

for summary judgment. The motion was preceded by a

conference with the district judge and a letter to the judge, from

the government and Jude jointly, stating that there would be no

need for atrial because the only issue was whether the requested

forfeiture would violate the Eighth Amendment’s Excessive

Fines Clause:

As the parties explained to Your Honor this

past Monday, the parties believe that the case

can be resolved on papers and need not

involve a trial. To avoid a trial, the parties

were going to agree on undisputed facts and

Appendix A

brief the alleged excessiveness of the

forfeiture of the Kenmore.

(Government’s letter to the district court dated April 20, 1995, at

1,co-signed by Jude’s attorney with the notation “Agreed to By:

Barry M. Fallick, Esq. Counsel for Jude Hotel Corp.” (“Joint

Government Jude Letter”).) The letter went on to state that,

although the parties would not provide the court with a

stipulation, Jude would not dispute the government’s statement

of the facts. It stated that, following one additional deposition,

the Government will move for summary

judgment on the forfeiture of the building and

submit in support of its motion a statement of

undisputed facts, pursuant to Local Rule

3(g). The Government will also brief the

issue of the purported excessiveness of the

civil forfeiture of the defendant premises.

Claimant Jude Hotel Corporation will

brief the excessiveness issue, but will not

submit its own set of undisputed facts. In

short, there will be no need for a trial.

(Joint Government-Jude Letter at 1-2 (emphasis added).)

A. The Undisputed Facts

On April 29, 1995, the government moved for summary

judgment, supported by, inter alia, affidavits of law enforcement

agents and deposition testimony from several individuals

involved in the operation of the Hotel. The latter group included

Truong Dinh Tran (“Truong”) who was Jude’s president and

Appendix A

majority shareholder; Cham Nguyen (“Cham”), Truong’s

longtime girlfriend who managed the Kenmore Hotel and lived

with their children on the second floor of the Hotel, and was a

shareholder in Jude; and Leon Aptekar, who had been employed

at the Hotel for some 25 years prior to 1994 and who, as the night

auditor, had responsibility for billing, record-keeping, and petty

cash disbursements. The motion was supported by a 54-

paragraph statement pursuant to Rule 3(g) of the Civil Rules for

the United States District Courts for the Eastern and Southern

Districts of New York (“Rule 3(g)”) of the material facts as to

which the government contended there was no genuine dispute

(“Rule 3(g) Statement”). The Rule 3(g) Statement, thoroughly

annotated with citations to the affidavits and the depositions, set

out undisputed facts, including those recounted below, with

regard to, inter alia, Jude’s ownership of the Kenmore, the

current value of Jude’s equity interest in the property, the

narcotics activity at the Hotel in 1991-1994, and Jude’s

knowledge of and responses to that activity.

1. Narcotics Activity at the Kenmore Hotel

The 22-story Kenmore Hotel is the largest commercial

single-room-occupancy (“SRO”) building in New York City,

comprising more than 600 single-occupancy units. Many of its

residents are elderly, infirm, and/or on public assistance. Jude,

which was incorporated to purchase the Hotel and was owned

principally by Truong, bought the Hotel in 1985, not expecting

it to make a profit but anticipating that it would be atax shelter for

other companies owned by Truong. “TRUONG had no intention

of spending any substantial money on improvements at the

Kenmore for at least the first ten years” after Jude purchased the

property. (Rule 3(g) Statement J 26 .)

Appendix A

Prior to its purchase by Jude, there had been “few if any

problems with narcotics trafficking at the Kenmore.” (Rule 3(g)

Statement 25.) After Jude bought the Hotel, Truong reduced the

staff and insisted that as many rooms as possible be rented,

without regard to the identities of the individuals. The staff

thereafter rented rooms to all comers, without obtaining

identification or conducting any inquiry into their backgrounds.

Beginning at least as early as 1991, the Kenmore was a

beehive of narcotics-related activities, including the sale,

distribution, preparation, packaging and/or possession of

narcotics. According to the records of the New York City Police

Department (“NYPD”) and the Manhattan District Attorney’s

Office (collectively the “local authorities”), from January 1,

1991 through June 6, 1994, there were 189 narcotics arrests and/

or incidents of reported narcotics-related activity at the Hotel.

NYPD officers patrolling the halls and responding to police calls

during that period made numerous seizures of crack cocaine and

narcotics paraphernalia, including crack vials, plastic baggies

used to bundle vials in packages of 50, and implements for

“cooking” cocaine into crack. During that 3 1/2-year period,

more than 100 individuals were arrested and/or involved in the

drug activity; some 70 of them were convicted.

2. Jude’s Knowledge of and Response to the Narcotics

Activity

After learning of narcotics activity in and around the Hotel,

Aptekar, the night auditor, notified Cham, the Hotel’s manager

and part-owner. When Aptekar learned that some of the “security

guards” were taking bribes from individuals seeking entry into

the building, he informed Cham of that fact as well.

Appendix A

In November 1992, Assistant District Attorney (“ADA”

Ann B. Rudman, Director of the Manhattan District Attorney’s

Office Assest Forfeiture Unit, wrote to Truong about the

substantial drug activity at the Hotel. The letter requested a

meeting with Truong at the earliest possible time. No such

meeting was held until four months later, on February 22, 1993.

Truong did not attend but sent his representative, La D. Tran

(“Tran”).

At this meeting, Tran was advised there had

been at least sixty-five drug arrests during the

previous two years, thirty-three arrests for

other types of crimes stemming from drug

activity, and at least three drug related

homicides at the building. . . . Tran was told

the likely cause of the crime problem in the

building was that the building itself was

being used to facilitate drug trafficking. . . .

Tran claimed the family had owned the

Kenmore Hotel since 1985, that the hotel had

not been profitable, that they were aware of

the drug problem and had a security booth to

check people and they try to evict persons

involved with drugs... .

(Rule 3(g) Statement J 29 (emphasis added).) At that meeting,

Rudman

advised Tran to take reasonable steps to try to

stop the drug activity, such as: 1) hire full-

time uniformed security guards, in that the

then current security people at the hotel...

charge people money to come in and

Appendix A

purchase drugs, 2) screen prospective

tenants, 3) use a surveiliance camera, 4)

provide a photo identification card for

tenants and 5) consider hiring a temporary

management team to take over the hotel and

clean up the hotel.

(Rule 3(g) Statement { 30.) Rudman followed up this meeting

with a letter dated February 25, 1993,

memorializ[ing}] to Tran the recom-

mendations made during the meeting of

February 22, 1993, tocombat drug activity at

the Kenmore Hotel, which included the

following:

Carefully screen every applicant for

an apartment;

Keep every building entrance

including the front door locked and

install a buzzer system in the front

door;

Permit only identified tenants,

verified guests of tenants, or others

who demonstrate a legitimate reason

for being present to enter the

premises;

Require each guest to sign in at the

lobby front desk and record the name

of the tenant whom he/she is visiting;

Appendix A

Require each tenant to display some

type of identification (preferably

photographic identification) to gain

entry into the premises;

Hire twenty-four hour, seven day a

week private uniform [sic] security

guards from an accredited security

firm. (Ms. Rudman stated in her letter

that the present security guards are

either selling drugs or permitting

individuals for a sum of money to

enter the lobby and buy drugs.)

Be sure management oversees the

premises and closely supervises the

uniform [sic] guards;

Install and operate 24 hours a day a

surveillance camera in the lobby;

Post and prominently display house

rules which include the prohibition of

all illegal controlled substances on the

premises and a warning that violators

will immediately be evicted. Post

notice that there is a surveillance

camera in the lobby.

Tightly secure every vacant apartment

to prevent intrusion by trespassers.

Regularly check that these apartments

remain secure;

10a

Appendix A

Keep all public halls, stairwells, and

public rooms well lit and clean;

Once a tenant has relinquished his/her

room, make sure the key to the room

has been returned to management.

This letter informed Tran that officials would

seek assistance from the Federal

Government in bringing an action pursuant

tot he federal forfeiture laws in the event that

his cooperation was not forthcoming.

(Rule 3(g) Statement J 32.) Rudman sent Tran another letter

dated March 8, 1993, again urging Jude to consider

implementing the steps recommended at the meeting and in her

letter February 25.

At the February 22, 1993 meeting, Rudman asked Tran to

provide the local authorities with a list of all Hotel tenants and to

sign a form affidavit authorizing NYPD to patrol all floors of the

Hotel and arrest trespassers. Tran did not sign the affidavit but

took it with him. He eventually returned an affidavit “in which he

had made substantial changes,” and he never sent the requested

list of all tenants. (Rule 3(g) Statement { 30.) At the meeting,

Tran had said he would send the Kenmore’s manager to meet with

Rudman and representatives of NYPD the next day. The manager

did not come; Tran called to say that anew manager — aretired

police officer — was going to be hired, but there is no evidence

that such a manager was ever hired. (Rule 3(g) Statement { 31

n.2.)

Jude appears to have made scant effort to adopt Rudman’s

lla

Appendix A

recommendations. For example, Jude “never provided formal

identification for tenants.” (Rule 3(g) Statement J 39.) The lone

security guard at the front desk of the Kenmore was not

uniformed, and whenever he left the desk, it was unattended.

(Rule 3(g) Statement 38.) Agents later found what appeared to

be “sign-in” sheets that visitors to the Hotel were to sign before

entering the building; some of the visitors signed in with such

names as “Panama” and “Fat Boy.” (Rule 3(g) Statement J 47.)

Further, “[w]hile alock with a buzzer system was installed on the

front door to the Kenmore Hotel in 1993, the mechanism

functioned for approximately one week and has not been

operating since that time.” (Rule 3(g) Statement J 37.) A

“surveillance camera in the lobby area lead [sic] to amonitor on

the second floor in the hotel manager’s bedroom,. . . . but [wa]s

not monitored on a routine basis.” (Rule 3(g) Statement { 40.)

And “[{vJacant apartments in the building were often not

secured.” (Rule 3(g) Statement J 41.) During a period of little

more than two months in late 1993, police officers found crack

and drug paraphernalia in several vacant rooms that had been left

unsecured. (E.g., Rule 3(g) Statement 7 14, 16, 17.) Officers

also intercepted drug dealers in hallways and stairwells.

According to Jude’s accountant, from October 1, 1992, to

September 30, 1993, Jude spent only $1,250 on security services

at the Kenmore Hotel. (Rule 3(g) Statement { 43.) From the

records produced by Jude, it appears that those who provided

security services during this period were “unconnected to any

professional company.” (Rule 3(g) Statement { 45.) Further,

[w]hile TRUONG employed some

uniformed security guard services in 1993

and 1994, these services terminated their

work at the Kenmore Hotel because of

12a

Appendix A

TRUONG’ s failure to pay the bills related to

such services. ... As replacements for the

uniformed security guards, TRUONG hired

tenants at the building to work as security

guards, many of whom had no training as

security guards.

(Rule 3(g) Statement J 23.) Jude paid its new security guards

$2.50 per hour. (Rule 3(g) Statement J 27.) Some of these guards

took bribes from individuals seeking entry into the building;

some steered customers to narcotics suppliers; some were

arrested for narcotics activity of their own. (Rule 3(g) Statement

q 24.)

In addition to Aptekar’s notifying Cham and ADA

Rudman’s notifying Truong and Tran of the narcotics problem in

the Kenmore Hotel, the problem generated “at least nine”

newspaper articles on the Hotel beginning in December 1993,

describing the Kenmore as, inter alia, acrime haven and New

York’s most dangerous SRO. One article “quote[d] a former

security guard who stated that because he was paid so poorly by

Tran, ‘he had nochoice but to take payoffs from drug dealers who

wanted to enter the building.’ ” (Rule 3(g) Statement { 34.)

“After publication of the articles, neither TRUONG nor any

representative of the Kenmore Hotel made any attempt tocontact

ADA Rudman or the United States Attorney’s Office.” (Rule

3(g) Statement ¥ 35.) And according to housing court records,

though Jude instituted more than 500 actions to evict tenants for

nonpayment of rent, it never instituted eviction proceedings

based on narcotics activity. (Rule 3(g) Statement { 42.)

In 1994, narcotics activity at the Hotel escalated. Of the

narcotics-related incidents recorded by the local authorities in

13a

Appendix A

1991-1994, nearly 60% occurred during the first five months of

1994, and nearly 50% occurred during April and May of 1994

alone. Crime in general in the vicinity of the Kenmore, and

community complaints about the Kenmore, increased as well. In

May 1994, one 86-year-old tenant was found strangled to death

in acommunal bathroom.

In continuing the Kenmore investigation in 1994, NYPD

sent ‘undercover officers (“UCs”) and aconfidential informant

into the Hotel.

These UCs purchased crack on 13 occasions

between on or about March 16, 1994 and May

30, 1994... . The UCs easily gained access

to the building and were often “steered” to the

crack dealers by the “security guards.” ....

On certain occasions, they paid a security

guard some amount of money, sometimes as

little as one dollar, to gain access to the

building.

(Rule 3(g) Statement 20.) One guard offered, for a price, to tell

police that the UCs inside the Hotel were there to visit relatives.

The confidential informant (“CI”), who had previously provided

law enforcement agents with reliable information, posed as a

supplier of crack and cocaine and paid security guards as much

as $10 to let him into the Hotel. On one such occasion,

the security guard. . . indicated to the CI that

he (the security guard) had collected $200 in

bribes on that day from people seeking entry

into the Kenmore Hotel. . . . Many of these

bribes came from people the security guard

l4a

Appendix A

knew were entering the Kenmore Hotel to

buy crack.

(Rule 3(g) Statement { 21.) On his visits to the Hotel, the CI met

several individuals who sold crack; he witnessed several crack

sales; and he was physically threatened by several crack dealers

who thought he was trying to steal their business.

In early June 1994, the government filed the present civil

forfeiture complaint and seized the building. During the seizure,

the government found tenant application forms that were

incomplete. (Rule 3(g) Statement] 46.) From late 1993 through

May 1994, Jude got most of its tenants through referrals from

Soho Realty Company. Soho’s owner-president Albert Imano

testified that though he had applicants fill out a one-page form

that asked certain pedigree information, he did not, for the most

part, require the prospective tenants to complete the forms; nor

did he investigate the background of those individuals before

placing them in a building or give the forms to the management

of the Kenmore. (Rule 3(g) Statement { 51.)

3. The Value of the Property

~ Jude bought the property in 1985 for approximately $7.9

million. However, at the time of the summary judgment motion,

[bJased on a market appraisal and the two

most recent offers to purchase the Kenmore

Hotel, the building ha[d] a gross value of

between $3.0 and $3.45 million, without

offsetting the value of liens and mortgages on

the building. ... The mortgages and liens

[we]re currently valued at approximately

lSa

Appendix A

$1.5 million....Other costs, fees and

liabilities of the building total[ed] as muchas

$1.6 million.

(Rule 3(g) Statement { 8.) In addition, the United States

Marshal’s Service may file on the property alien valued between

$1 and $4,000,000. (Rule 3(g) Statement 5.)

B. The District Court’s Decision

Jude, in opposing summary judgment, did not submit a

counterstatement pursuant to Rule 3(g) and presented no

countervailing evidence. Its memorandum of law was devoted

solely to the Excessive Fines Clause issue and argued that “since

forfeiture is now considered punishment to the owner of the

defendant-in-rem property,” the question was whether it

is. . .a violation of the Eighth Amendment’s

“Excessive Fine[ ]s” Clause to order

forfeiture of property where the claimant/

owner is not involved in the criminal acts

underlying the forfeiture, and has derived no

personal benefits from the criminal activity.

(Jude’s Memorandum of Law in Support of its Claim that

Forfeiture of the Defendant-In-Rem Property Violates the

Excessive Fines Clause of the Eighth Amendment (“Eighth

Amendment Memorandum”) at 2.) The memorandum

emphasized that Jude and Truong themselves had not been

accused of criminal activity, and it argued that “it was apparent”

that Jude

was practically unable to do anything

l6a

Appendix A

because of the overwhelming [ Jproblem of

drug trafficking in New York City....

Therefore, as a matter of law, the forfeiture in

this case would offend the Eighth

Amzndment as an “Excessive Fine.”

(Id. at 16-17.) Although Jude also made several factual

assertions in its memorandum, stating for example, that it “did

notcondone the illegal activity,” that ithad sought the assistance

of the Manhattan District Attorney’s Office, that it had

“install[ed] additional electronic security equipment including

a buzzer system and closed-circuit video cameras,” that it had

“increas[ed] security presence” and allowed the police access to

the hotel, and that it had “institut{ed] and prosecut[ed] numerous

eviction proceedings in housing court against tenants” (id. at 4),

it presented no affidavits, documents, or other materials that

would have been proper under Fed. R. Civ. P. 56 to support or

expand upon its factual assertions, and it took no issue with any

fact asserted in the government’s Rule 3(g) Statement. Truong

sent the court a five-page letter, attempting to contest some of the

facts set out in the Rule 3(g) Statement and to paint Jude as

having made many attempts torid the Hotel of narcotics activity;

but his letter was unsworn.

The district court, in an Opinion dated June 12, 1995,

reported at 888 F. Supp. 580, granted the government’s motion

for summary judgment. Preliminarily, the court stated that it

accepted the facts set out in the Rule 3(g) Statement, pointing out

that Jude had “entered into a letter agreement with the

government. . . to have this matter resolved on the basis of the

government's statement of undisputed facts.” 888 F. Supp. at 581

n.1. The court noted its receipt of Truong’s letter but stated that

Truong’s unsworn assertions (and an unsworn response thereto

17a

Appendix A

by the government) were not proper submissions on a summary

judgment motion and were not entitled to consideration. /d.

On the merit, the court held that the property was subject to

forfeiture under 21 U.S.C. § 881(a)(7) as property used to

facilitate the commission of narcotics felonies. The court noted

that Jude, despite having notice of the substantial narcotics

activity at the Kenmore, “did not take any significant steps along

the lines suggested by ADA Rudman, even though drug

trafficking continued and even increased at the Kenmore Hotel

after the meeting with Rudman.” 888 F. Supp. at 582. The court

noted, inter alia, that Jude rented apartments to persons as to

whom it had conducted no background inquiry; that Jude failed

to provide tenants with photo identifications so that the “guards,

were they so inclined, could distinguish the hundreds of tenants

that lived at the Kenmore at any given time from the numerous

visitors,” id. ; that though Jude installed a front-door buzzer, the

buzzer worked for only a week and was never fixed or replaced;

that the surveillance camera “went largely unwatched”; that

vacant apartments were unsecured, providing narcotics dealers

with operating and storage space; that in lieu of trained,

uniformed guards, Jude hired as guards Hotel tenants whom it

paid only $20 per eight-hour shift; that the guards took bribes for

allowing potential drug buyers to enter the building and for

steering them to drug suppliers; and that some of the guards also

sold drugs themselves. The court concluded that, as a matter of

law, Jude could not establish a statutory defense to forfeiture

because

_ [t]he claimant does not dispute that the

Kenmore Hotel was used for drug trafficking

and that the claimant knew about the

trafficking. The claimant’s token efforts to

18a

Appendix A

correct the problems that is own

mismanagement and neglect helped to

create, fall far short of the diligence required

to establish lack of consent.

Id. at 583.

Turning to Jude’s contention that the proposed forfeiture

would violate the Excessive Fines Clause, the district court

analyzed the question in two ways. First, looking to this Court’s

decision in United States v. Certain Real Property and Promises

Known as 38 Whalers Cove Drive, Babylon, New York, 954 F.2d

29 (2d Cir.) (“Whalers Cove”), cert. denied, 113 S.Ct.55,121L.

Ed. 2d 24 (1992) the district court applied a strict proportionality

test, analyzing the forfeiture “as though it were a monetary fine

comparable in magnitude to the claimant’s financial interest in

the property and compared it to monetary fines that could be

imposed on the sort of misconduct in which the claimant

engaged.” 888 F. Supp. at 583. Using the Whalers Cove analysis,

the court found the forfeiture was not excessive. The court noted,

inter alia, that itis acriminal offense for the owner of a building

to “manage or control [the] building . . . or make available for

use, with or without compensation, the building ... for the

purpose of unlawfully manufacturing, storing, distributing, or

using acontrolled substance,” 21 U.S.C. § 856(a)(2) (1994), and

that a violation of this section subjects a corporate defendant to

a fine of up to $2,000,000. The court observed that this section

had been applied to a motel owner “who was aware of (or at least

willfully blind to) the fact that the motel had been overrun by

drug dealers.” 888 F. Supp. at 585 (citing United States v. Chen,

913 F.2d 183, 191 (Sth Cir. 1990)).

The court accepted the valuations of the property set forth in

19a

Appendix A

the Rule 3(g) Statement, which were based on a recent appraisal

and recent offers of purchase, reduced by the amounts of

outstanding mortgages and liens and the cost of bringing the

building into conformity with housing regulations. Without

considering possible further reductions for any liens that the

United States Marshals Service might be entitled to impose, the

court found thatJude’s equity in the building was between $0 and

$500,000 and therefore treated the proposed forfeiture as the

equivalent of a monetary fine of up to $500,000. Measuring

Jude’s maximum $500,000 equity interest against the $2 million

potential fine for a violation of § 856(a)(2), the court concluded

that the prescribed maximum punishment was at least four times

Jude’s equity interest in the property, and that, “[vJiewed as

punishment for the claimant permitting its property to be used for

drug trafficking, such a fine is not excessive.” 888 F. Supp. at

585.

Alternatively, the court found that the proposed forfeiture

would not be unconstitutionally excessive under a multi-factor

analysis, rather than a strict proportionality test:

The claimant has urged this Court to

apply a multifactor test of the claimant’s own

invention, under which “the government

[must] show that the claimant was culpable

and that the property was a material part of

serious criminal activity.” Claimant’s Brief

at 14. The claimant argues that the proposed

forfeiture would be unconstitutionally

excessive under its test, because Jude Hotel’s

lack of active participation in any narcotics

trafficking absolves it of any culpability

punishable by forfeiture and because the

20a

Appendix A

property itself is not sufficiently related to

the trafficking to be forfeited, the Kenmore

Hotel being merely a place where drugs

happened to be sold.

....Even if the Second Circuit were to

apply the claimant’s suggested factors, the

forfeiture of the Kenmore Hotel would still

not violate the Excessive Fines Clause. Both

prongs of the claimant’s test point in favor of

permitting the proposed forfeiture: Jude

Hotel is culpable for the drug trafficking at

the Kenmore Hotel, and a substantial

relationship does exist between the hotel and

the trafficking that occurred there.

Jude Hotel’s attempt to deny it

culpability for the narcotics trafficking is

contradicted by the undisputed facts of this

case, which establish that the claimant failed

to take any significant action to stop drug

trafficking at the Kenmore despite receiving

ample notice of the problem. The claimant’s

management of the hotel facilitated its use as

a Site for drug trafficking: its practice of using

inadequately paid and untrained tenants as

security guards for the Kenmore Hotel

affirmatively facilitated drug trafficking at

the Kenmore by creating an incentive for

these “guards” to accept bribes in return for

access to the hotel and otherwise to cooperate

with the drug dealers, its failure to secure

. vacant apartments supplied drug dealers with

2la

Appendix A

locations for storing and selling drugs, and its

willful blindness to the dangers of accepting

tenants without making any effort to check

their backgrounds.

The relationship between the Kenmore

Hotel and the drug trafficking that occurred

there is sufficiently strong to sustain the

proposed forfeiture against an Excessive

Fines Clause challenge. The Kenmore Hotel

provided seclusion and privacy for the

consummation of drug transactions and for

the storage of drugs and drug paraphernalia.

Four courts that have interpreted the

Excessive Fines Clause to require a showing

of a relationship between the forfeited

property and illegal activity have found this

relationship to be sufficient.

Id. at 585-86 (footnote omitted).

The undisputed facts of the instant case

demonstrate that, under the claimant’s

management, the Kenmore Hotel provided a

degree of seclusion for drug activity inexcess

of the seclusion that one could obtain from an

ordinary hotel. The physical decay of the

hotel itself provided drug traffickers with

unlocked, vacant rooms in which to store

their drugs, and the defective door buzzer and

the location of the security camera monitor

facilitated illicit access to the building. The

22a

Appendix A

ineffectiveness and corruption of the tenant-

guards has already been described.

Id. at 586-87.

Judgment was entered in favor of the government, and this

appeal followed.

II. DISCUSSION

On appeal, Jude contends principally that the district court

did not apply the proper legal standard for assessing Jude’s

Eighth Amendment contention and in any event erred in

concluding that there was no Excessive Fines Clause violation.

It also argues that summary judgment could not properly be

granted because there were issues of fact for trial. For the reasons

below, we see noerror in the district court’s constitutional ruling,

for though its decision was rendered prior to this Court’s opinion

in United States v. Milbrand, 58 F.3d 841 (2d Cir. 1995)

(“Milbrand”), which established a standard for analysis of

Excessive Fines Clause contentions in civil in rem forfeiture

cases, and though in deciding a case on direct appeal, we are to

apply the law as it exists at the time of ourdecision of the appeal,

see, e.g., Harper v. Virginia Department of Taxation, 113 S.Ct.

2510, 2513 (1993), we conclude that the district court’s findings

and alternative analysis were sufficient under the Milbrand

standard. We also conclude that Jude waived its opportunity to

assert that summary judgment was inappropriate on the ground

of any factual dispute; and, in any event, we conclude that there

were no genuine issues of material fact to be tried and that the

undisputed facts showed that the government was entitled to

judgment as a matter of law. We address Jude’s challenge to the

availability of summary judgment first.

23a

Appendix A

A. Forfeiture and Summary Judgment

Subchapter I of Title 21, chapter 13, dealing with the

enforcement of prohibitions against activities involving

controlled substances, see 21 U.S.C. §§ 801-904 (1994),

subjects to civil forfeiture all real property

which is used, or intended to be used, in any

manner or part, tocommit, or to facilitate the

commission of, a violation of this subchapter

punishable by more than one year’s

imprisonment, except that no property shall

be forfeited ... by reason of any act or

omission established by th[e] owner to have

been committed or omitted without the

knowledge or consent of that owner.

Id. § 881(a)(7). Once the government has shown probable cause

to believe that property is subject to forfeiture, the burden of

proof shifts to the claimant opposing forfeiture to establish by a

preponderance of the evidence that the narcotics activity on the

property occurred without its knowledge or, ifit had knowledge,

without its consent. See United States v. Two Parcels of Property

Located at 19 & 25 Castle Street, 31 F.3d 35, 39 (2d Cir. 1994).

In order to demonstrate a lack of consent, the claimant must

prove that it did “ ‘all that reasonably could be expected to

prevent the illegal activity once [it] learned of [the activity].” ”

Id. (quoting, with emphasis, United States v. 141 st Street Corp.,

911 F.2d 870, 879 (2d Cir. 1990), cert. denied, 498 U.S. 1109

(1991)). As we stated in United States v. Certain Real Property

& Premises, Known as 418 57th Street, Brooklyn New York, 922

F.2d 129 (2d Cir. 1990):

24a

Appendix A

Congress intentionally placed a significant

burden upon owners to remain accountable

for the legitimate use of their property.

Therefore, we balance [ ] our determination

of the knowledge-consent issue with a

stringent interpretation of consent... .

Id. at 132. “Unless an owner with knowledge can prove every

action, reasonable under the circumstances, was taken to curtail

the drug-related activity, consent is inferred and the property is

subject to forfeiture.” Jd.

In some cases, aclaimant’s defense of lack of knowledge of

lack of consent can be decided as a matter of law. See, e.g., United

States v. One Parcel of Preperty, Located at 755 Forest Road,

Northford, Connecticut, 985 F.2d 70, 73 (2d Cir. 1993)

(affirming summary judgment against claimant). In others, a

trial will be required. See, e.g., United States v. Certain Real

Property & Premises, Known as 418 57th Street, Brooklyn, New

York, 922 F.2d at 132 (citing “fair dispute” as to whether

contacting attorney was all that reasonably could have been done

or whether other steps suggested by the government would have

been productive); see also United States v. One Parcel of

Property Located At 2] Allen Place, No. 94-6242, slip op. at

1261 (2d Cir. Jan. 26, 1996) (reversing grant of judgment as a

matter of law after jury verdict in favor of claimant on defense of

lack of consent).

The record of the present case in the district court did not

create any need for a trial. Consistent with its pre-motion

representation to the district court, Jude did not submit a Rule

3(g) Statement of its own; thus, under Rule 3(g), the facts set out

in the government’s Rule 3(g) Statement were deemed admitted.

ea ee

25a

Appendix A

Nor did Jude submit any factual materials pursuant to Rule 56.

The submission of Truong’s unsworn letter was an inappropriate

response to the government’s motion for summary judgment,

and the factual assertions made in that letter were properly

disregarded by the court. See, e.g., Fed. R. Civ. P.56(e) (response

to properly supported summary judgment must be “by affidavits

or as otherwise provided in this rule,” see, e.g., Fed. R. Civ. x’.

56(c) (depositions, answers to interrogatories, and admissions

on file, together with the affidavits”)).

Nor can we endorse Jude’s tactic of contending on appeal

that summary judgment was inappropriate on the ground that

there were issues of fact to be tried after it had declined to dispute

the government’s Rule 3(g) Statement, had made no proper

proffer of any factual dispute, and had represented to the district

court that “there will be no need for atrial” (Joint Government-

Jude Letter at 2). Jude’s opportunity to argue that there were

genuine issues of fact to be tried was deliberately bypassed.

In any event, the record reveals no genuine issue to be tried,

either as to the facts set out in the Rule 3(g) Statement or as to

what inferences should be drawn therefrom. Those facts as to the

scope of the narcotics activity, Jude’s knowledge of it, and its

lack of any meaningful response to the notice of narcotics

activity from many sources, are set forth in some detail in Part

I.A. above. Jude came forward with noevidence to controvert the

undisputed facts. For example, although its Eighth Amendment

Memorandum stated that Jude had installed a front-door buzzer

at the Hotel, Jude did not attempt to dispute the fact that the

buzzer broke within a week after installation, and it submitted no

evidence to show either that it did not know the buzzer had

broken or that it made any effort to have the buzzer fixed.

Although its Eighth Amendment Memorandum stated that Jude

26a

Appendix A

was “practically unable to do anything” to impede the narcotics

activity at the hotel, Jude submitted no evidence that it made any

effort to, forexample, provide tenants with identification cards,

or screen visitors, or secure vacant rooms, or keepcommon areas

such as hallways and stairwells well lighted. Although its Eighth

Amendment memorandum stated that Jude had instituted and

prosecuted “numerous eviction proceedings in housing court,”

Jude submitted no evidence tocounter the Rule 3(g) Statement’s

representation that the records of that court revealed more than

500 eviction actions by Jude for nonpayment of rent but not one

for narcotics activity. And although its Eighth Amendment

Memorandum stated that Jude had “increas[ed] security

presence.” Jude submitted no evidence to controvert the Rule

3(g) Statement’s revelation that Jude hired untrained tenants as

guards and paid them at the rate of $2.50 an hour, nor anything to

controvert Jude’s accountant’s evidence that the amount Jude

spent on guards for the Kenmore in the one-year period from

October 1, 1992, to September 30, 1993, amounted to less than

$3.50 a day, i.e., less than 15 cents an hour.

In light of the undisputed facts set out in the Rule 3(g)

Statement, no reasonable factfinder could conclude that Jude

took all reasonable measures to deter drug trafficking at the

Kenmore Hotel.

B. The Excessive Fines Clause Argument

Jude contends that the district court did not apply the proper

standard, i.e., that set out in Milbrand, 58 F.3d 841, in assessing

whether the forfeiture constituted an excessive fine. Although

the district court’s decision was rendered prior to our decision in

Milbrand, we conclude that its alternative analysis adequately

considered the pertinent Milbrand factors.

27a

Appendix A

In Milbrand, we considered the standard to be applied in

assessing the applicability of the Excessive Fines Clause tocivil

in rem forfeitures in the wake of the Supreme Court’s post-

Whalers Cove decision in Austin v. United States, 113 S.Ct. 2801

(1993). In Milbrand, we noted the proportionality analysis that

had been used in Whalers Cove and we concluded that, although

proportionality is a factor to be considered, the proper test is “a

multi-factor test combining the principles of both

instrumentality and proportionality.” 58 F.3d at 847. We stated

that the factors to be considered by a court in determining

whether a forfeiture violated the Excessive Fines Clause

included

(1) the harshness of the forfeiture (e.g., the

nature and value of the property and the effect

of forfeiture on innocent third parties) in

comparison to (a) the gravity of the offense,

and (b) the sentence that could be imposed on

the perpetrator of such an offense; (2) the

relationship between the property and the

offense, including whether use of the

property in the offense was (a) important to

the success of the illegal activity, (b)

deliberate and planned or merely incidental

and fortuitous, and (c) temporally or spatially

extensive; and (3) the role and degree of

culpability of the owner of the property.

Id. at 847-48.

Although the district court in the present case ruled that the

Whalers Cove test was applicable, it also considered an

alternative multi-factor test and substantially reviewed the

28a

Appendix A

above factors of harshness, relationship, and owner culpability.

For example, as to harshness, the court concluded, inter alia, that

the forfeiture would not be disproportionate in light of the fact

that Jude’s loss of its $0-to-$500,000 equity interest was at most

1/4 of the sentence that could be imposed on Jude as an owner that

had allowed its building to be used for narcotics offenses.

As tothe relationship between the property and the offense,

the court concluded, inter alia, that “a substantial relationship

does exist between the hotel and the trafficking that occurred

there” because the Kenmore “provided seclusion and privacy for

the consummation of drug transactions and for the storage of

drugs and drug paraphernalia,” 888 F. Supp. at 585-86, and “that,

under the claimant’s management, the Kenmore Hotel provided

a degree of seclusion for drug activity in excess of the seclusion

that one could obtain from an ordinary hotel,” id. at 586-87. The

court noted the trade in crack cocaine had been “brisk” between

January 1991 and June 6, 1994, and that the “drug dealing was

widespread in the building” and “extensive.” /d. at 581.

As to the degree of the owner’s culpability, the court noted

that Jude admittedly “knew about the trafficking,” and “that its

own mismanagement and neglect helped to create” the

problems. /d. at 583. The court note that “[djespite the extensive

nature of the drug trafficking conducted at the Kenmore Hotel,

complaints from tenants, and media coverage of the Hotel’s drug

problem, Jude Hotel did virtually nothing to improve

conditions,” id. at 582; that Jude “did not take any significant

steps” to hinder such trafficking “[i]n spite of the warnings: and

recommendations it had received from local law enforcement

officials, id.; that Jude had been “willful[ly] blind[ ]” to the

dangers of accepting tenants without any screening effort, id. at

586; and that Jude “facilitated [the Hotel’s] use as a site for drug

29a

Appendix A

trafficking” and “affirmatively facilitated drug trafficking”

through its use of underpaid guards “by creating an incentive for

these ‘guards’ to accept bribes in return for access to the hotel and

otherwise to cooperate with the drug dealers,” id. at 585-86. The

court noted that, after Jude failed to take any meaningful steps

despite receiving official warnings, “drug trafficking [at the

Kenmore] continued and even increased,” id. at 582, and

concluded that “Jude Hotel is culpable for the drug trafficking at

the Kenmore Hotel,” id. at 585.

The district court adequately considered the relevant

Milbrand factors. Its amply supported conclusions 1s to those

factors demonstrate that the Milbrand test was met.

CONCLUSION

We have considered all of Jude’s arguments on this appeal

and have found them to be without merit. The judgment of

forfeiture is affirmed.

30a

APPENDIX B — OPINION OF THE UNITED STATES

DISTRICT COURT FOR THE SOUTHERN DISTRICT

OF NEW YORK DATED JUNE 12, 1995

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

94 Civ. 4148 (MP)

UNITED STATES OF AMERICA,

Plaintiff,

ALL RIGHT, TITLE AND INTEREST IN REAL PROPERTY

AND APPURTENANCES THERETO KNOWN AS 143-147

EAST 23RD STREET, NEW YORK, NEW YORK, LISTEDAS

BLOCK 879, LOT 27 WHICH INCLUDES THE KENMORE

HOTEL,

Defendant-in-rem.

APPEARANCES

Mary Jo White

United States Attorney for the

Southern District of New York

(Ellen Silverman Zimiles and

Kenneth M. Karas of counsel)

One St. Andrew’s Plaza

New York, New York 10007

LAOS I aR We

ee ee

3la

Appendix B

Rochman, Platzer, Fallick,

Rosmarin & Sternheim

(Barry M. Fallick of counsel)

Attorney for claimant Jude Hotel

Corporation

666 Third Avenue

New York, New York 10017

OPINION

MILTON POLLACK, Senior District Judge:

This is an in rem civil forfeiture action pursuant to 21 U.S.C.

§ 881(a)(/ ). The government has moved for summary judgment

under Fed.R.Civ.P. 56. The claimant-owner’s sole argument

against the proposed forfeiture is that it would violate the

Excessive Fines Clause of the Eighth Amendment.

The motion will be granted for the reasons stated below.

Background’

The defendant-in-rem, 143-147 East 23rd Street, New York,

1. The facts recited herein are taken basically from the government’s

Statement of Material Facts Not in dispute Pursuant to Civil Rule 3(g) and

supporting documentation thereto. Counsel for the claimant Jude Hotel

Corporation entered into a letter agreement with the government, a copy of

which is appended to the government’s memorandum of law, to have this matter

resolved on the basis of the government’s statement of undisputed facts.

However, on May 5, 1995, the claimant’s majority shareholder, Truong

Dinh Tran, submitted an unsolicited letter to the Court stating his own view of

(Cont'd)

32a

Appendix B

New York, consists of the Kenmore Hotel, a single room

occupancy apartment building mainly occupied by poor or

elderly tenants, four street-level commercial leaseholds, and a

basement swimming pool. The building is across the street from

Baruch College, two blocks away from a school for disabled

children, and diagonally across from the headquarters of United

Cerebral Palsy. Claimant Jude Hotel Corporation (“the

claimant” or “Jude Hotel”) owns the property. Jude Hotel’s

majority shareholder, Truong Dinh Tran, purchased the property

for $7.9 million in November 1985, in order to generate losses

that would shelter income from other hotels owned by Truong.

Under Jude Hotel’s management, the building has fallen into

serious disrepair and accumulated numerous citations for

housing code violations. Taking into consideration outstanding

mortgages and liens and the costs to bring the building into

conformity with the housing code, Jude Hotel’s equity in the

building is somewhere between $0 and $500,000, based on an

appraisal conducted in September 1994, and on two offers to

purchase the building made in mid-1995.?

(Cont'd)

the facts. The government has responded by letter in which it alleges that

Truong’s allegations are either false, incomplete, or irrelevant to the material

issues of fact in this case. Neither of these letters is technically entitled to

consideration as appropriate submissions for or on the pending motion; each

lacks essential evidentiary character. See 28 U.S.C. § 1746 (permitting unsworn

declarations to substitute with like force and effect for an affidavit only if

“subscribed by [the declarant], as true under penalty of perjury”); Gordon v.

Watson, 622 F.2d 120, 123 (Sth Cir. 1980) (“It is an unsworn statement, which

the court may not consider in determining the propriety of summary

judgment.”).

2. This estimate does not take into account any liens that the United States

Marshalls Service, which presently manages the Kenmore Hotel, may be

entitled to impose on the property.

33a

Appendix B

A brisk trade in crack cocaine developed at the Kenmore

Hotel, the transactions being conducted in unoccupied

apartments and in the common areas throughout the building.

Between January 1991, and June 6, 1994, there were numerous

narcotics arrests and reported incidents of narcotics-related

activity in and around the Kenmore Hotel. New York police

officers also seized drugs and drug paraphernalia, including

hundreds of vials used to package crack cocaine, from vacant

rooms and common areas of the building.

Based on the history of narcotics activity in the Kenmore

Hotel, the Manhattan South Narcotics Division launched an

investigation using undercover officers and a confidential

informant to purchase narcotics in the Kenmore Hotel. This

investigation established not only that drug dealing was

widespread in the building but also that the security guards at the

Kenmore facilitated the narcotics trafficking. Although Jude

Hotel intermittently employed some uniformed security guard

services in 1993 and 1994, these services terminated their work

at the Kenmore Hotel because of Truong’s failure to pay them. In

lieu of uniformed security guards, Truong hired tenants from the

Kenmore Hotel and from the Carter Hotel, another of Truong’s

properties, paid them only $20 per eight-hour shift, and failed to

provide them with uniforms or training. These security guards

allowed potential drug buyers to gain access to the building and

directed them to drug suppliers in return for a bribe. One guard

offered to tell any police who inquired that undercover officers

posing as buyers were merely visiting relatives at the hotel, and

another warned an undercover officer entering the building that

police were conducting an investigation inside. Some of the

guards also sold drugs themselves.

Despite the extensive nature of the drug trafficking

34a

Appendix B

conducted at the Kenmore Hotel, complaints from tenants, and

media coverage of the hotel’s drug problem, Jude Hotel did

virtually nothing to improve conditions. This was not for lack of

notice. In November 1992, the Manhattan District Attorney’s

Office requested a meeting with Truong to discuss a strategy to

combat drug trafficking at the Kenmore. In February 1993, La

Tran, one of Truong’s associates, met with Assistant District

Attorney Anne Rudman, who advised him that the Kenmore

Hotel was being used to facilitate drug trafficking and urged him

to take reasonable steps to try to stop the drug activity, such as

hiring full-time uniformed security guards, screening

prospective tenants, using a surveillance camera, providing a

photo identification card for tenants, and considering hiring a

temporary management team to take over the hotel and clean it

up. ADA Rudman also asked Tran to sign a form affidavit

authorizing the NYPD to patrol all the floors and arrest

trespassers, which Tran did not sign. These recommendations

were subsequently memorialized in a letter to Tran dated

February 25, 1993, which also informed Tran that officials

would seek assistance from the federal government in bringing

an action pursuant to the federal forfeiture laws in the event that

his cooperation was not forthcoming.

In spite of the warnings, the claimant did not take any

significant steps along the lines suggested by ADA Rudman,

even though drug trafficking continued and even increased at the

Kenmore Hotel after the meeting with Rudman. Although the

claimant did install a buzzer on the front door, that buzzer broke

within one week of its installation and was never fixed. Even

though a surveillance camera was placed in the lobby of the

Kenmore, the monitor was placed in the bedroom of one of

Truong’s associates and went largely unwatched. The claimant

continued to employ tenants as security guards and failed to

35a

Appendix B

provide tenants with photo identification so that these guards,

were they so inclined, could distinguish the hundreds of tenants

that lived at the Kenmore at any given time from the numerous

visitors to the Kenmore. The claimant also accepted over 100

tenants placed by a real estate company that regularly placed

individuals who had come from prison or had criminal records,

and the claimant did so without asking to see application forms

that these tenants had completed for the real estate company. The

claimant rented to these tenants even though some of them had

already been rejected as tenants by the Carter Hotel.

On June 6, 1994, the government filed under seal a verified

complaint against the property that sought forfeiture under 21

U.S.C. § 881(a)(7) based on distribution of cocaine at the

Kenmore Hotel in violation of 21 U.S.C. § 841(a)(1). On the

same day, the Honorable John E. Sprizzo, United States District

Judge for the Southern District of New York, issued a seizure

warrant pursuant to 21 U.S.C. § 881(b), permitting the

Government to seize the Kenmore from Claimant Jude Hotel

Corporation and to manage it pending the resolution of the

Government's forfeiture action. In authorizing the seizure of the

defendant-in-rem property, Judge Sprizzo found that there

existed exigent circumstances that excused the Government

from providing pre-seizure notice to the Claimant Jude Hotel

Corporation and from attending a pre-seizure hearing.’ Under

the authority of the seizure warrant issued by Judge Sprizzo, the

Government seized the Kenmore Hotel on June 8, 1994.

3. Claimant Jude Hote! Corporation has made no challenge to Judge

Sprizzo’s seizure warrant.

36a

Appendix B

Discussion

I. The property is subject to forfeiture.

The basis for the proposed forfeiture is 21 U.S.C.

§ 881(a)(7), which provides:

The following shall be subject to

forfeiture to the United States and no

property right shall exist in them:

* * *

(7) All real property, including any right,

title, and interest (including any leasehold

interest) in the whole of any lot or tract of land

and any appurtenances or improvements,

which is used, or intended to be used, in any

manner or part, to commit, or to facilitate the

commission of, a violation of this subchapter

punishable by more than one year’s

imprisonment, except that no property shall

be forfeited under this paragraph, to the

extent of an interest of ari owner, by reason of

any act or omission established by that owner

to have been committed or omitted without

the knowledge or consent of that owner.

The government bears the initial burden of demonstrating

probable cause to believe that the property is subject to

forfeiture, and the claimant opposing forfeiture bears the

ultimate burden of establishing one of two defenses to forfeiture:

that the property was not in fact used for illegal purposes or that

37a

Appendix B

the illegal use was without the claimant’s knowledge or consent.

See United States v. Two Parcels of Property at Castle Street, 31

F.3d 35, 39 (2nd Cir. 1994).

The government has established probable cause to believe

that the Kenmore Hotel was used for drug trafficking in violation

of 21 U.S.C. § 841(a)(1). Cf. Castle Street, 31 F.3d at 39 (holding

that probable cause to forfeit a house was established by

evidence that “many narcotics sales took place in the driveway

between the garage and the residence, and on the street in front of

the garage” and that “thirty-two packets of heroin were found in

the garage drainpipe”). The Court also finds that the claimant

cannot as a matter of law meet its burden of establishing a

defense to forfeiture. The claimant does not dispute that the

Kenmore Hotel was used for drug trafficking and that the

claimant knew about the trafficking. The claimant’s ioken

efforts to correct the problems that its own mismanagement and

neglect helped to create, fall far short of the diligence required to

establish lack of consent. See United States v. 14 1st Street Corp.,

911 F.2d 870, 879 (2nd Cir. 1990) (holding that aclaimant must

prove “that he did all that reasonably could be expected to

prevent the illegal activity once he learned of it” in order to

establish lack of consent), cert. denied, 498 U.S. 1109 (1991).

Il. The proposed forfeiture is not excessive.

In United States v. Certain Real Property and Premises

Knownas 38 Whalers Cove Drive, Babylon, New York, 954 F.2d

29 (2nd Cir.) cert. denied, 113 S.Ct. 55 (1992) (“Whalers Cove”),

the Court analyzed the excessiveness of an in rem forfeiture

under a proportionality test that treated the challenged forfeiture

as though it were a monetary fine equal in magnitude to the

claimant’s financial interest in the property and compared it to

38a

Appendix B

monetary fines that could be imposed on the sort of misconduct

in which the claimant engaged. Whalers Cove dealt with a

condominium in which the owner had a $68,000 equity interest

and involved, inter alia, an Excessive Fines Clause challenge to

the forfeiture pursuant to 21 U.S.C. § 881(a)(7) on account of the

owner’s sale of $250 worth of drugs inside the condominium.

The Court first concluded that the forfeiture of the condominium

was presumptively punitive because of the disparity between the

value of the drugs sold and the claimant’s equity interest and

because the government did not contend that the condominium

was forfeitable as an instrumentality of crime. See id. at 37.

However, the Court then held that, it was not unconstitutionally

excessive even if if the forfeiture were in fact punitive in nature

(“[j]udging from the penal laws of the United States and the

various states mentioned above [in the Court’s discussion of a

challenge to the forfeiture under the Cruel and Unusual

Punishments Clause], a fine of many thousands of dollars for a

minor drug offense is not beyond the pale.” Jd. at 39).*

Subsequent to Whalers Cove, the Supreme Court

considered the applicability of the Excessive Fines Clause in

Austin v. United States, 113 S.Ct. 2801 (1993) and ruled that the

Excessive Fines Clause applied to all forfeitures under 21 U.S.C.

§ 881(a)(4) and (a)(7), because “forfeiture under these

4. The Court does not interpret Whalers Cove to mean that the

government can never obtain the forfeiture of property whose value far exceeds

the magnitude of the monetary fines that could be imposed on the claimant’s

misconduct. The Whalers Cove Court was careful to note that it did not

determine “at exactly what point a fine or forfeiture might violate the Excessive

Fines Clause, because wherever such a line could be drawn, this forfeiture

would be proper.” Jd. Whalers Cove does not tell us what an excessive forfeiture

is, only what it is not; itis essentially a “safe harbor” rule for in rem forfeitures.

39a

Appendix B

provisions constitutes ‘payment to a sovereign as punishment

for some offense’... .” Jd. at 2812 (quoting Browning-Ferris

Industries, Inc. v. Kelco, 492 U.S. 257, 265 (1989)).

Austin v. United States does not overrule Whalers Cove’s

proportionality test of excessiveness. The Supreme Court

expressly declined to place limits on and failed to express

standards by which to determine whether a particular forfeiture

was excessive. See Austin, 113 S.Ct. at 2812 n.15 (“We do not

rule out the possibility that the connection between the property

and the offense may be relevant, but our decision today in no way

limits the Court of Appeals from considering other factors in

determining whether the forfeiture of Austin’s property was

excessive.”). Thus, a subsequent district court case relied again

on the doctrine of Whalers Cove in the determination of what

constitutes excessiveness. “The majority opinion in Austin

clearly and unequivocally stated that it was for the circuit courts

to fashion appropriate tests to determine whether a forfeiture is

constitutionally excessive, and in this Circuit Whalers Cove

controls.” United States v. Real Property: 835 Seventh Street

Rensselaer, Rensselaer County, New York, 832 F. Supp. 43, 48

(N.D.N.Y. 1993) (citation omitted) (declining to reconsider

summary judgment in favor of claimant, in which the court held

that the proposed forfeiture violated the Cruel and Unusual

Punishments Clause of the Eighth Amendment, where the

government argued that Austin required a different analysis of

Eighth Amendment challenges to in rem forfeitures).°

5. The claimant has cited U.S. v. Premises Known as RR No. 1, 14 F.3d

864 (3rd Cir. 1994), as questioning the continuing validity of Whalers Cove.

However, that case does not question the validity of the test that the Second

(Cont’d)

40a

Appendix B

However, Austin does create some uncertainty as to the

proper comparison to be made under the Whalers Cove

proportionality test. In Whalers Cove, the Second Circuit

compared the forfeiture to the fines that various jurisdictions

might impose on one who sells drugs. However, the majority in

Austin concluded that the traditional justifications for in rem

forfeiture “rest, at bottom, on the notion that the owner has been

negligent in allowing its property to be misused and that he is

properly punished for that negligence.” Austin, 113 S.Ct. at

2808. This suggests that the proper comparison is to the

monetary fines that might be imposed on an owner for permitting

his property to be used as a site for drug trafficking, especially in

a case in which the claimant itself did not sell drugs. Because the

owner in Whalers Cove both sold drugs and allowed his property

to be used to sell drugs, so that the forfeiture could be viewed as

punishment for either type of misconduct, this question was not

clearly presented to the Second Circuit in Whalers Cove.

Regardless of this uncertainty, the forfeiture proposed in

this case does not violate the Excessive Fines Clause. The

claimant’s equity in the Kenmore Hotel is estimated to be

(Cont'd)

Circuit applied once it determined that the Excessive Fines Clause was

implicated by the facts of the case. The Third Circuit’s opinion questioned the

validity only of the Second Circuit's Analysis of the applicability of the

Excessive Fines Clause. See Premises Known as RR No. 1, 14 F.3d at 874 (noting

that “[i}n light of the Supreme Court's holding in Austin that all civil forfeitures

under § 881(a)(7) constitute punishment limited by the Eighth Amendment's

Excessive Fines Clause, the analysis of the court of appeals in 38 Whalers Cove

Drive is questionable” but also recommending to district court on remand of

Excessive Fines Clause issue that “the [proportionality] factors articulated in 38

Whalers Cove Drive may offer some help in analyzing the excessiveness

issue.”).

4la

Appendix B

between $0 and $500,00, so the proposed forfeiture is, for

purposes of a Whalers Cove analysis, equivalent to a monetary

fine of up to $500,000. Viewed as punishment for the claimant

permitting its property to be used for drug trafficking, sucha fine

is not excessive. 21 U.S.C. § 856(a)(2) makes it a criminal

offense to

manage or control any building, room, or

enclosure, either as an owner, lessee, agent,

employee, or mortgagee, and knowingly and

intentionally rent, lease, or make available

for use, with or without compensation, the

building, room, or enclosure for the purpose

of unlawfully manufacturing, storing,

distributing, or using acontrolled substance.

Acolorable criminal case may exist under this statute against the

claimant; indeed, one court of appeals has sustained aconviction

under § 856(a)(2) on facts similar to those in the instant action.

See United States v. Chen, 913 F.2d 183, 191 (5th Cir. 1990)

(affirming conviction under § 856(a)(2) of owner of amotel who

was aware of (or at least willfully blind to) the fact that the motel

had been overrun by drug dealers and holding that “§ 856(a)(2)

does not require the person who makes the place available to

others for drug activity to possess the purpose of engaging in

illegal activity; the purpose in issue is that of the person renting

or otherwise using the place.”). A violation of this statute

subjects a corporate defendant to a fine of up to $2,000,000, an

amount at least four times greater than the claimant’s equity

interest in the Kenmore Hotel. See 21 U.S.C. § 856(b). Noris the

forfeiture unconstitutionally excessive when viewed as

punishment for the underlying drug sales. Under 21 U.S.C.

§ 841(b)(1)(C), distribution of any amount of cocaine under 500

grams is punishable by a fine of up to $1,000,000 for an

42a

Appendix B

individual defendant and up to $5,000,000 for a corporate

defendant, and given the extent of the drug trafficking at the

Kenmore Hotel, the weight of cocaine sold there may far exceed

500 grams.

III. The claimant would not prevail under the test that it

proposes.

The claimant has urged this Court to apply a multifactor test

of the claimant’s own invention, under which “the government

[must] show that the claimant was culpable and that the property

was a material part of serious criminal activity.” Claimant’s

Brief at 14. The claimant argues that the proposed forfeiture

would be unconstitutionally excessive under its test, because

Jude Hotel’s lack of active participation in any narcotics

trafficking absolves it of any culpability punishable by forfeiture

and because the property itself is not sufficiently related to the

trafficking to be forfeited, the Kenmore Hotel being merely a

place where drugs happened to be sold.

The Court has concluded, however, that the Second Circuit

in Whaler Cove has adopted a proportionality analysis that

remains the law in the Circuit. Even if the Second Circuit were to

apply the claimant’s suggested factors, the forfeiture of the

Kenmore Hotel would still not violate the Excessive Fines

Clause. Both prongs of the claimant’s test point in favor of

permitting the proposed forfeiture: Jude Hotel is culpable for the

drug trafficking at the Kenmore Hotel, and a substantial

relationship does exist between the hotel and the trafficking that

occurred there.

Jude Hotel’s attempt to deny its culpability for the narcotics

trafficking is contradicted by the undisputed facts of this case,

which establish that the claimant failed to take any significant

43a

Appendix B

action to stop drug trafficking at the Kenmore despite receiving

ample notice of the problem. The claimant’s management of the

hotel facilitated its use as a site for drug trafficking: its practice

of using inadequately paid and untrained tenants as security

guards for the Kenmore Hotel affirmatively facilitated drug

trafficking at the Kenmore by creating an incentive for these

“guards” to accept bribes in return for access to the hotel and

otherwise to cooperate with the drug dealers, its failure to secure

vacant apartments supplied drug dealers with location for

storing and selling drugs, and its willful blindness to the dangers

of accepting tenants without making any effort to check their

backgrounds.®

The relationship between the Kenmore Hotel and the drug

trafficking that occurred there is sufficiently strong to sustain the

proposed forfeiture against an Excessive Fines Clause

challenge. The Kenmore Hotel provided seclusion and privacy

for the consummation of drug transactions and for the storage of

drugs and drug paraphernalia. Four courts that have interpreted

the Excessive Fines Clause to require a showing of arelationship

between the forfeited property and illegal activity have found

6. The claimant contends that the actions of the security guards cannot be

imputed to it in order to support a finding that Jude Hotel is culpable for the drug

trafficking, because the guards supposedly were not acting to benefit the

claimant. The claimant relies on United States v. 4657 Acres in Martin County,

730 F. Supp. 423, 426-27 (S.D. Fla. 1989), which held that, for purposes of

defeating the innocent owner defense under 21 U.S.C. § 881(a)(7), neither

knowledge of nor consent to drug trafficking in which 0.31% shareholder

participated cannot be imputed to the corporation that owned the property

sought to be forfeited, where the corporation did not stand to benefit from its

shareholder’ s unauthorized actions. This reliance is misplaced no imputation of

the guards’ wrongdoing is necessary to establish that Jude Hotel knew about and

consented to the drug trafficking occurring at the Kenmore Hotel.

44a

Appendix B

this relationship to be sufficient. See United States v. Chandler,

36 F.2d 358, 366 (4th Cir. 1994) (“While it would appear that the

farm had substantial purposes other than serving as an

instrument of drug activity, the property nevertheless was an

important, if not necessary, instrument for the drug activity, in

providing a secluded location.”); cert. denied, 115 S.Ct. 1792

(1995). U.S. v. 9844 South Titan Court, Unit 9, Littleton,

Colorado, 865 F. Supp. 709, 715 (D.Colo. 1994) (holding that

residence had sufficient connection to drug trafficking because

its owner intentionally selected it “to conduct his drug activity in

secret and secure from detection from the public and police” and

because “the property was used to store the cocaine, store the

money, take phone calls, an conceal weapons.”); United States

v. One Parcel Property, 853 F. Supp. 1389, 1399, 1402 (M.D.

Ala. 1994) (holding that the government could establish the

existence of a substantial connection between a grocery store

and drug trafficking by proving “a pattern of illegal activities

occurring at the defendant real property” and noting that the

apparent legitimacy of the store “facilitated drug trafficking by

making detection more difficult.”); United States v. One Parcel

Property Located at 9638 Chicago Heights, St. Louis, Missouri,

831 F. Supp. 736, 737 (E.D. Mo. 1993) (holding that forfeiture

was not excessive because “Defendant real property was used as

the situs for the storage and sale of cocaine and crack cocaine.”),

reversed on other grounds, 27 F.3d 327 (8th Cir. 1994).

Claimant relies on United States v. Real Property at 6625

Zumirez Drive, 845 F. Supp. 725 (C.D. Cal. 1994), for the

proposition that “the mere fact that the criminal activity occurred

at the property does not make the property ‘guilty’ of an

offense ... .” Id. 737 (quoting United States v. James Daniel

Good Real Property, 114 S.Ct. 492, 515 (1993) (Thomas, J.

concurring in part and dissenting in part)). That case is

distinguishable from the instant action, because the 6625

45a

Appendix B

Zumirez Drive court based its holding on the conclusion that the

property did not to any special degree facilitate the concealment

of drug activity. In reaching that conclusion, the court rejected as

“mere conjecture” the government's argument that “a legitimate

leather goods business on the property provided a cloak of

legitimacy to the illegal drug traffickers who frequented the

house.” Jd. In the instant action, however, the fact that a security

guard at the Kenmore Hotel offered to tell police that undercover

officers posing as drug buyers were visiting relatives at the

Kenmore Hotel removes from the realm of “mere conjecture” the

inference that drug buyers were exploiting the appearance of

legitimacy inherent in visiting a hotel. The undisputed facts of

the instant case demonstrate that, under the claimant’s

management, the Kenmore Hotel provided a degree of seclusion

for drug activity in excess of the seclusion that one could obtain

from an ordinary hotel. The physical decay of the hotel itself

provided drug traffickers with unlocked, vacant rooms in which

to store their drugs, and the defective door buzzer and the

location of the security camera monitor facilitated illicit access

to the building. The ineffectiveness and corruption of the tenant-

guards has already been described.

Conclusion

The government’s motion for summary judgment is

granted. Submit judgment accordingly.

Dated: New York, New York

June 12, 1995

s/ Milton Pollack

Milton Pollack

Senior United States District Judge

46a

APPENDIX C — AMENDED JUDGMENT OF THE

UNITED STATES DISTRICT COURT FOR THE

SOUTHERN DISTRICT OF NEW YORK

FILED JUNE 13, 1995

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

94 Civ. 4248 (MP)

UNITED STATES OF AMERICA,

Plaintiff,

-V-

ALL RIGHT, TITLE AND INTEREST IN REAL PROPERTY

AND APPURTENANCES, thereto known as 143-147 EAST

23RD STREET, NEW YORK, NEW YORK, LISTED AS

BLOCK 879, LOT 27, WHICH INCLUDES THE KENMORE

HOTEL

Defendant-in-rem.

AMENDED JUDGMENT

Plaintiff, the United States of America, having moved for

summary judgment pursuant to Rule 56 of the Federal Rules of

Civil Procedure, and the said Motion having come before the

Honorable Milton Pollack, Senior United States District Judge,

and the Court thereafter on June 12, 1995, having duly rendered

its decision, it hereby is

ORDERED, ADJUDGED, AND DECREED, that the

plaintiff United States of America’s motion for summary

judgment is granted, claimant Jude Hotel Corporation’s claim is

dismissed, and claimant...

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