Kim Dotcom files Petition to the Fourth Circuit Court of Appeals for rehearing en banc

Today our US legal team on behalf of the Megaupload defendants, including Kim Dotcom, filed a Petition to the Fourth Circuit Court of Appeals for rehearing and rehearing en banc on the issues of forfeiture of assets and fugitive disentitlement. The case is entitled US v Finn Batato. 

An excerpt of the Petition is below. The entire Petiition can be found here.

INTRODUCTION

Petitioners seek en banc review of a 2-1 ruling that conflicts with the precedents of this Court, the Supreme Court, and other circuits on issues of importance to the scope of federal jurisdiction over foreign property and civil forfeiture law.

The case arises from a separate criminal case—the largest criminal copyright case in U.S. history—in which the government indicted several foreign defendants. Instead of following typical procedures—extraditing the defendants and then proving its case at trial before seeking forfeiture—the government took a much more aggressive approach. It brought this civil forfeiture case against foreign property owned by the defendants and others (collectively, “Claimants”) and, relying on the so-called “fugitive disentitlement” statute, argued that the owners’ claims to their property should be stricken and the property forfeited without a trial on the merits.

This foreign property, however, is under the sole control of foreign courts that have not followed U.S. orders. The district court recognized that these courts “may or may not” respect its forfeiture order (JA-1982), and the government admits that “even with a valid forfeiture order, the fugitive’s property may suffer no adverse effect” (Br. 20 n.13). Even after the judgment below, these courts have released millions in assets to Claimants. As one of the courts put it: The “harsh- ness” of the district court’s “fugitive disentitlement” order finds “no place in [its] law” (JA-2197), and any U.S. request that “require[s] [its government] to ride roughshod over [its] own laws” is unenforceable. JA-2199, 2207. In short, the order below is not binding on those controlling the property—it is advisory.

Yet, over Judge Floyd’s careful dissent, the panel held that Article III did not limit the district court’s exercise of in rem jurisdiction, disentitled Claimants from receiving any hearing on their ownership interests, and adjudged their property forfeit. That divided ruling conflicts with the precedents of this Court, the Supreme Court, and other circuits on three major issues.

First, under this Court’s precedent, “[o]nly if the court has exclusive custody and control over the property does it have jurisdiction over the property so as to be able to adjudicate rights in it that are binding against the world.” R.M.S. Titanic, Inc. v. Haver, 171 F.3d 943, 964 (4th Cir. 1999) (Titanic I); R.M.S. Titanic, Inc. v. The Wrecked & Abandoned Vessel, 435 F.3d 521, 530 (4th Cir. 2006) (Titanic II); see Dissent 57 (Addendum B). Here, the property is controlled by foreign courts not bound to obey a U.S. forfeiture order, so such order is “a hypothetical judgment”—an unconstitutional “advisory opinion.” Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 101 (1998).

The panel dismissed Titanic I and II as “admiralty” cases. Op. 12-15. But nothing in those cases suggests that the Court’s Article III analysis was so limited. As Judge Floyd recognized, the cases “contain principles both of admiralty law and of constitutional law.” Dissent 57. En banc review is needed to ensure uniformity in this Court’s decisions, and to avoid a conflict with Supreme Court precedent.

Second, the panel’s decision conflicts with the Second Circuit’s holding that the plain text of 28 U.S.C. § 1355 (Addendum A-1) provides for subject-matter jurisdiction, venue, and service of process in forfeiture cases involving foreign prop- erty, but does not (and could not) “fundamentally alter well-settled law regarding in rem jurisdiction.” United States v. All Funds on Deposit in Names of Meza or De Castro, 63 F.3d 148, 152 (2d Cir. 1995). After all, absent “control over [the foreign] property,” “[a] forfeiture order directed against such property [is] wholly unenforceable.” Id. In holding that § 1355 “dispenses with this traditional re- quirement” of control (Op. 8), the panel invited this result and deepened a circuit split. See Dissent 50 (Meza “reach[ed] the opposite conclusion”).

Third, the panel’s holding that due process allows the government to seize Claimants’ property without an adversarial hearing conflicts with both Supreme Court precedent holding that “a court in a civil forfeiture suit [cannot] enter judg- ment against a claimant because he is a fugitive from ... a related criminal prosecution” (Degen v. United States, 517 U.S. 820, 823 (1996)) and circuit precedent holding that “barring [claimants’] right to defend” civil forfeiture suits violates due process (United States v. $40,877.59, 32 F.3d 1151, 1154-57 (7th Cir. 1994)).

Even apart from the foregoing conflicts with precedent, the panel’s divided ruling raises issues of exceptional importance. By stacking allegations of fugitive status on top of allegations of forfeitability, the government can obtain an unprecedented, roving worldwide license to indict foreign citizens who have never lived or worked in the United States and forfeit their foreign property—all without proving any wrongdoing or having control over the property. Review is warranted.