Matthew Cavedon
Civil forfeiture laws permit law enforcement to seize property allegedly connected to criminal activity. These laws have been heavily scrutinized. Congress enacted the Civil Asset Forfeiture Reform Act (CAFRA) to curb erroneous forfeitures and make claimants whole “after wrongful government seizures.” Under CAFRA, a property owner may recover reasonable attorneys’ fees and other litigation costs if he or she “substantially prevails.”
Richard Ross is an attorney who holds client funds in a trust account at a bank. On October 6, 2021, a business wired $29.6 million into that account after receiving a fraudulent email instructing it to do so. The business soon discovered the fraudulent nature of the email and reported this to the authorities. Ross, believing the funds came from a client who settled a copyright matter, distributed them as instructed. When the bank flagged the transaction for fraud, Ross directed it to recall all pending transfers. By acting promptly, Ross prevented the fraudster from stealing $1.5 million dollars.
But Ross’ vigilance apparently did not matter to the government. It seized the entire contents of Ross’ account—totaling over $4.1 million—even though more than $1.2 million was, according to the government’s own warrant application, “unrelated” to the fraud. In fact, that portion of the money was a combination of other client funds and proceeds from the sale of Ross’ home. Nevertheless, the government proceeded to seek forfeiture of every last dollar.
Over the course of more than a year of litigation, Ross incurred over $100,000 in attorneys’ fees. He then requested that a stay on the case be lifted so that he could move for summary judgment. In response, the government hastily moved to voluntarily dismiss the case without prejudice (meaning it could technically be refiled in the future). Ross opposed this motion, warning that an unconditional dismissal without prejudice could circumvent CAFRA’s fee-shifting provision and thereby cause prejudice—but the district court granted the motion anyway. It then denied Ross’ request for attorneys’ fees.
Ross appealed to the Second Circuit, which affirmed the district court’s denial of fees. It held that because the district court dismissed the case without prejudice, “Ross cannot be said to have ‘substantially prevailed.’” Ross petitioned the Supreme Court to take the case.
Cato, joined by the National Federation of Independent Business, filed an amicus brief supporting Ross’ petition. Civil forfeiture hurts everyday Americans and small businesses. CAFRA—an overwhelmingly bipartisan package of reforms—aimed to “increase the due process safeguards for property owners whose property has been seized.” It allows claimants to recover attorneys’ fees if they successfully challenge a forfeiture. But in the 26 years since its enactment, the government has developed a litigation strategy that undermines CAFRA and leaves wronged claimants less than whole.
Unfortunately, stories like Ross’ are common. He is merely the latest in a long line of innocent victims who have been denied recovery despite CAFRA. In each case, the government litigated aggressively and then sought voluntary dismissal without prejudice once a claimant’s likelihood of prevailing became clear.
Because the government engaged in gamesmanship to avoid fee-shifting, the district court erred in granting its motion to dismiss. If the government voluntarily dismisses a forfeiture case to avoid losing it—as was done here—a claimant should be able to recover. This Court should disclaim the existence of the CAFRA loophole upon which the government relies to avoid paying meritorious claimants what they are rightfully due.
