Appeal
from the United States District Court for the Southern
District of Florida D.C. Docket No. 1:15-cv-23616-DPG
Before
WILLIAM PRYOR, NEWSOM, and BRANCH, Circuit Judges.
WILLIAM PRYOR, CIRCUIT JUDGE
This
appeal requires us to decide whether the district court
abused its discretion when it permitted the government to
dismiss its complaint for forfeiture without prejudice and
whether the dismissal entitled the claimants to
attorney's fees under the Civil Asset Forfeiture Reform
Act, see 28 U.S.C. § 2465(b)(1). The government
filed a complaint for forfeiture against certain funds as the
proceeds of criminal activity. Wilson Colorado and his
business Kurvas Secret by W claimed most of the funds, and
Miladis Salgado claimed the remainder. During the litigation,
AnnChery Fajas USA, the victim of the alleged criminal
activity, obtained a state judgment against Colorado and
Kurvas Secret. To satisfy the judgment, the state court
transferred the judgment debtors' interests in the funds
to AnnChery. The government then moved to dismiss its
complaint voluntarily without prejudice on the ground that
the state-court judgment made the outcome of the forfeiture
action irrelevant. The district court granted the motion,
denied the claimants' motion to dismiss the action
with prejudice, and denied the claimants' motion
for an award of attorney's fees. Because the district
court did not abuse its discretion in dismissing the action
without prejudice and the claimants did not
"substantially prevail[]," id., we affirm.
I.
BACKGROUND
AnnChery
Fajas USA, Inc., a company based in Colombia and Florida,
manufactures and sells fajas, a genre of garments that
includes corsets, girdles, and waist cinchers. In response to
growing demand-apparently a result of unofficial endorsements
by celebrities such as Kim Kardashian-AnnChery instituted a
policy limiting the number of fajas a retailer could purchase
to 1, 500 per week.
In late
2014, Wilson Colorado moved from Spain to Miami, where he
resided with his ex-wife, Miladis Salgado. At the suggestion
of Tatiana Narvaez-Caicedo, the general manager of AnnChery
in Florida, Colorado decided to enter the faja retail
business. He established Kurvas Secret by W, Inc., a Florida
corporation, for that purpose.
In
April 2015, AnnChery determined that Narvaez-Caicedo was
helping Colorado and Kurvas Secret circumvent its quota
system and receive AnnChery merchandise without paying for
it. AnnChery fired Narvaez-Caicedo; sent Colorado a demand
letter alleging that he had stolen its merchandise; and filed
a complaint in Florida court against Narvaez-Caicedo,
Colorado, Kurvas Secret, and two other defendants alleging
that they had conspired to steal from and defraud the
company.
After
receiving the demand letter, Colorado liquidated his Wells
Fargo and Chase bank accounts and secured the funds at his
home. These withdrawals consisted of a Wells Fargo
cashier's check for $101, 629.59 and a Chase
cashier's check for $30, 000, both made payable to
Colorado. Colorado purchased these checks using proceeds from
the sale of AnnChery fajas.
Meanwhile,
the Drug Enforcement Administration received a tip asserting
that Colorado was a cocaine distributor and money launderer
and that he used several south Florida residences to store
currency and narcotics. The tipster said that Narvaez-Caicedo
lived in one of the "stash houses" and provided her
address and an accurate description of her car, including the
license-plate number. Law-enforcement officers searched
Narvaez-Caicedo's home and found no currency or
contraband. But she provided them with the address of the
residence where Colorado was living with Salgado.
The
officers searched Salgado's home. There, they discovered
and seized potential drug paraphernalia and-more importantly
for this appeal-both cashier's checks and $15, 070 in
cash in Salgado's master bedroom closet. They found and
seized $55, 600 more in cash beneath a nightstand in Colorado
and Salgado's daughter's bedroom.
The
government filed a complaint in rem against the $70,
670 seized in cash, the value of the Wells Fargo
cashier's check, and the value of the Chase cashier's
check, stating three claims for forfeiture. First, the
complaint alleged that the funds were the proceeds of drug
crimes, see 21 U.S.C. §§ 841(a), 846,
881(a)(6). Second, it alleged that the funds were derivative
proceeds either of drug trafficking or of the interstate
transportation of stolen property, see 18 U.S.C.
§§ 981(a)(1)(C), 2314; 21 U.S.C. §§
841(a)(1), 846. Third, it alleged that the funds were
property involved in or traceable to knowing monetary
transactions or attempted transactions involving the proceeds
of criminal activity, see 18 U.S.C. §§
981(a)(1)(A), 1956(a)(1), 1957.
Colorado,
Salgado, and Kurvas Secret filed claims to the funds.
Colorado and Kurvas Secret claimed ownership of the
cashier's checks and the $55, 600 seized from the
nightstand, as well as a possessory interest in the $15, 070
seized from Salgado's bedroom closet. Salgado claimed
ownership of the cash seized from her closet and a possessory
interest in the rest of the funds.
While
this action was being litigated in the district court, the
state court entered a default judgment in favor of
AnnChery's second amended complaint based on what the
state court found was Colorado and Kurvas Secret's
"willful and deliberate failure to comply with [its]
Orders on discovery." And the state court entered a
permanent injunction against Colorado and Kurvas Secret that
required them to "preserve and segregate any funds in
their financial ...