Eleventh Circuit Holds Fair Debt Collections Act Requires That District Court Adjudicate Any Contested Ownership Interests In Property Subject To A Writ Of Execution
In addition to the criminal penalties which stem from a fraud based convictions, a court may also order a convicted defendant to pay restitution. “The purpose of restitution . . . , however, is not to punish the defendant, but to make the victim whole again by restoring to him or her the value of the losses suffered as a result of the defendant’s crime.” United States v. Newman, 659 F.3d 1235, 1241 (2011). The Fair Debt Collection Procedure Act (“FDCPA”), 28 U.S.C. §§ 3001-3015, provides the exclusive means for the United States to obtain a satisfaction of a judgment in a criminal case that imposes restitution.
Pursuant to the FDCPA, one of the means the United States may use to satisfy a judgment is to obtain a writ of execution. See 28 U.S.C. § 3203. However, issues often arise when the government attempts to obtain a writ of execution and levy co-owned or jointly-owned property. On November 29, 2012, the United States Court of Appeals for the Eleventh Circuit issued its opinion in United States v. Duran, et al., No. 12-2227 (11th Cir. Nov. 29, 2012), holding that under the FDCPA a District Court must determine any contested ownership interests in property subject to a writ of execution.
In May 2011, Lawrence Duran pled guilty to conspiracy to defraud Medicare. In addition to a sentence of 50 years imprisonment, Mr. Duran was also ordered to pay $87 million in restitution to the United States. On October 19, 2011, the United States applied for a writ of execution against an apartment in New York to partially satisfy the judgment. Within its writ, the Government alleged that Mr. Duran had “possession, custody, or control” and “a substantial nonexempt interest” in the apartment. Opinion at 3. Based on these representations, the clerk issued a writ of execution on the apartment ordering the United States Marshal to satisfy the judgment against Mr. Duran by “levying on and selling” the apartment. Id.
However, prior to Mr. Duran being sentenced, he and his wife Carmen divorced. As part of the divorce settlement, Carmen was given sole title to the apartment which was the subject of the writ. As a result, on November 17, 2011, Carmen Duran moved to dissolve or stay the writ of execution arguing that the United States could not levy the apartment to satisfy the restitution judgment against her ex-husband because he lacked any ownership interest in the residence. Additionally, Mrs. Duran argued that the levy was improper because the Government failed to provide her with any notice of the issuance of the writ. Instead, the Government only provided service to the parties to the criminal proceeding. The District Court denied Mrs. Durans motion on the basis that it lacked jurisdiction to make a ruling on her claims of ownership. Instead, the District Court found that the proper forum for such a dispute would be New York State court.
In vacating and remanding the District Courts decision, the Eleventh Circuit engaged in a step-by-step analysis of the requirements and obligations which must be satisfied in order to levy property with disputed ownership. First, the Court noted that the United States may levy “all property in which the judgment debtor has a substantial nonexempt interest.” Opinion at 6.
However, the Court noted that the FDCPA limits the authority of the United States to levy against jointly-owned property. Pursuant to 28 U.S.C. § 3010 (a), “[c]o-owned property shall be subject to execution to the extent such property is subject to execution under the law of the State in which it is located.” Additionally, “with regard to levying against property under a writ of execution, Ëœco-owned property is subject to execution only to the extent such property is subject to execution under the law of the State in which it is located.” Opinion at 6 (citing 28 U.S.C. § 3203(a)).
As to notice, the Court went on to find that 28 U.S.C. § 3202 requires that the United States serve a copy of the notice on all co-owners and any person with an interest in the property prior to the taking. More importantly, the Court noted that the burden is on the Government to make a “diligent inquiry” to determine who may be an interested party or co-owner. Opinion at 6.
Finally, the Court found that the FDCPA requires the District Court to adjudicate any contested ownership interests in property subject to a writ of execution. As explained by the Eleventh Circuit:
The [FDCPA] provides that the United States may levy only property in which a judgment debtor has a “substantial nonexempt interest.” To that end, the district court must determine whether the debtor has any ownership interests in the property, and the district court must determine the ownership interests of any person who moves to dissolve or modify any writ.
Opinion at 7 (internal citation omitted). Thus, because the district court both failed to determine whether Mr. Duran had a substantial nonexempt interest when the United States levied the property, and failed to determine the respective ownership interests between Mr. and Mrs. Duran in the property subject to the writ of execution, the Eleventh Circuit found that the District Court erred in refusing to adjudicate Carmens motion to dissolve. As such, the Eleventh Circuit vacated the District Courts order and remanded. The Eleventh Circuit instructed the District Court to determine the respective ownership interests, if any, of Mr. and Mrs. Duran in the apartment when the United States obtained the writ of execution and whether Mr. Duran had a “substantial nonexempt interest” in the apartment that the Government could levy.
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