Summary Judgment — District Court May Not Draw Adverse Inference Based on Non-Moving Party’s Invocation of Fifth Amendment — Applicability of Exclusionary Rule in Civil Forfeiture Cases & Interplay with Discovery Duties

In re 650 Fifth Ave. & Related Props. (U.S. v. Alavi Found.), 2016 U.S. App. LEXIS 13225 (2d Cir. July 20, 2016):

On this appeal, we consider challenges to an award of summary judgment entered in the United States District Court for the Southern District of New York (Forrest, J.), which forfeited to the United States various claimants' interests in multiple properties, including a 36-story office building located at 650 Fifth Avenue in Manhattan ("the Building"), real properties in Maryland, Texas, California, Virginia, and New York, and the contents of several bank accounts, (collectively, "Defendant Properties"). We also consider challenges to the September 9, 2013 order denying a motion to suppress evidence seized from the Alavi Foundation's and [*3]  the 650 Fifth Avenue Company's office. Three concerns prompt us to vacate the judgment as to Claimants Alavi Foundation ("Alavi" or "the Foundation") and the 650 Fifth Avenue Company ("650 Fifth Ave. Co." or "the Partnership"), of which Alavi is a 60% owner.1

1   The Alavi Foundation and 650 Fifth Ave. Co. were the only claimants to request and secure entry of final judgment in this case and, thus, are the only appellants on this appeal. Accordingly, we henceforth use "Claimants" to refer only to the Alavi Foundation and the 650 Fifth Avenue Company.

First, we identify material issues of fact as to whether the Alavi Foundation knew that Assa Corporation, its partner in the 650 Fifth Ave. Co. Partnership, continued after 1995, to be owned or controlled by Bank Melli Iran, which is itself owned or controlled by the Government of Iran, a designated threat to this nation's national security. See Exec. Order No. 12,957, 60 Fed. Reg. 14615 (Mar. 15, 1995). Accordingly, we vacate summary judgment and remand the case for trial as to the Alavi Foundation and 650 Fifth Ave. Co.2

2   Although Assa Corporation is also a claimant whose property interests--including its 40% interest in 650 Fifth Ave. Co.--were forfeited pursuant to the challenged summary judgment, it [*4]  is not a party to this appeal and the material issue we here identify relates only to Alavi. Thus, our decision today does not disturb the judgment and forfeiture order as they relate to Assa.

Second, we conclude that the District Court erred in sua sponte considering and rejecting the Claimants' possible statute of limitations defense without affording notice and a reasonable time to respond. Thus, we vacate that part of the judgment without prejudice for reconsideration on proper notice and hearing.

Third, in rejecting the Claimants' motion to suppress evidence seized pursuant to a challenged warrant, the District Court erred in ruling that the Claimants' civil discovery obligations "obviate the need for any Fourth Amendment analysis." In re 650 Fifth Avenue and Related Properties, 970 F. Supp. 2d 204, 211 (S.D.N.Y. 2013) ("In re 650 Fifth Ave. Suppression Decision"). The Fourth Amendment's exclusionary rule applies in civil forfeiture cases, and a party's civil discovery obligations do not automatically render Fourth Amendment rights and remedies inapplicable. We likewise identify error in the District Court's alternative ruling that every item of unlawfully seized evidence would have been inevitably discovered. While discovery obligations might shield unlawfully seized items from suppression under the inevitable discovery [*5]  doctrine, see United States v. Eng, 971 F.2d 854, 861 (2d Cir. 1992), such a conclusion requires a district court, "for each particular piece of evidence, specifically [to] analyze and explain how, if at all, discovery of that piece of evidence would have been more likely than not inevitable absent the [challenged search]," id. at 862 (internal quotation marks omitted). Because the record fails to demonstrate that particularized review, we remand to allow the District Court to conduct the requisite analysis. On remand, the Government may also pursue its argument--raised before the District Court and on appeal--that the good-faith exception to suppression applies in this case. See United States v. Leon, 468 U.S. 897 (1984).

Accordingly, we vacate the District Court's challenged judgment and remand the case for further proceedings consistent with this opinion.

***

In sum, the record evidence convincingly demonstrates that Bank Melli, and therefore the Government of Iran, continued to control Assa after 1995, [*54]  and admits no genuine issue of triable fact on that question.25

25   While we agree with the District Court that the record evidence shows that there is no triable issue of fact as to the Government of Iran's continued control of Assa after 1995, we take exception to its suggestion that it could draw adverse inferences at summary judgment based on individuals' invocation of their Fifth Amendment privilege, see In re 650 Fifth Ave. Summary Judgment Decision, 2013 WL 5178677, at *15 n.28 (stating that court "may, but need not, draw an adverse inference based on a witness's assertion of his Fifth Amendment privilege" at summary judgment stage). The District Court also suggested that it could impose Rule 37 sanctions on two of these persons for failing to appear for court-ordered depositions, by "assum[ing]" that their testimony would have "further supported the Government's case." Id. at *15. As we have previously held, a court may not draw negative inferences against a nonmoving party on a summary judgment motion. See Stichting Ter Behartiging Van de Belangen v. Schreiber, 407 F.3d 34, 55 (2d Cir. 2005). We need not pursue the error further in this case, however, because, ultimately, the lack of testimony from those witnesses meant that there was no record evidence to dispute the overwhelming evidence of Bank Melli's post-1995 control of Assa. See In re 650 Fifth Ave. Summary Judgment Decision, 2013 WL 5178677, at *22.

 

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