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United States v. $70

United States Court of Appeals, Eleventh Circuit

July 8, 2019

$70, 670.00 IN U.S. CURRENCY, et al., Defendants, KURVAS SECRET BY W, WILSON COLORADO, MILADIS SALGADO, Interested Parties-Appellants.

          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.


         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 ...

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