doc.78.motion and memo re motion to strike claims

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW MEXICO

UNITED STATES OF AMERICA,

Plaintiff,

vs. Civil No. 11-1109-RB-LFG REAL PROPERTY LOCATED AT 6600 AND 6560 VENTURA ROAD SE, DEMING, NM, AND 6545 EL PORTAL ROAD SE, DEMING, NM, INCLUDING ALL STRUCTURES, APPURTENANCES AND IMPROVEMENTS THEREON, CONTAINING 85 ACRES MORE OR LESS, OWNED BY RICK AND TERRI REESE, ET AL.;

Defendants,

MOTION AND MEMORANDUM OF LAW IN SUPPORT OF MOTION TO STRIKE THE CLAIMS AND ANSWERS OF RICK REESE AND TERRI REESE WITH

RESPECT TO CERTAIN DEFENDANTS IN REM

Pursuant to Rule G(8)(c)(i)(B) of the Supplemental Rules for Admiralty or Maritime

Claims and Asset Forfeiture Actions (Supplemental Rules), the United States moves to strike

the Claims and Answers of Rick Reese and Terri Reese as they relate to the defendant property

owned by Old Ironsides, LLC (Old Ironsides) for lack of standing. The United States also

moves to strike the Claim and Answer of Terri Reese as they relate to property owned by Ryin

Reese or Remington Reese because she does not have an ownership interest in such property. In

support of this motion, the United States respectfully submits this memorandum of law.

Case 1:11-cv-01109-RB-LFG Document 78 Filed 05/30/13 Page 1 of 10

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PROCEDURAL HISTORY On August 24, 2011, a federal grand jury in the District of New Mexico returned an

indictment against Rick, Terri, Ryin and Remington Reese arising from allegations the

defendants participated in the straw purchases of numerous firearms and the unlawful

exportation of those firearms, along with ammunition, to persons working for a Mexican drug

cartel. See 11-CR-2294, Docket Entry (D.E.) No. 2.1

On or about August 30, 2011, acting upon seizure warrants issued by a U.S. Magistrate

Judge for this District, federal law enforcement officers seized the personal property assets that

are the defendants in rem in this case. In addition, the government filed a lis pendens against the

parcel of real property in Deming, New Mexico, that served as the residence of all four members

of the Reese family and the location of the New Deal store.

On December 19, 2011, the United States commenced this civil forfeiture action by filing

a Verified Complaint for Forfeiture In Rem (Verified Complaint). See D.E. No. 1. After filing

the Verified Complaint to institute this civil forfeiture action, the United States sent notice of this

action to all known potential claimants. Both Rick and Terri Reese attempted to file claims on

behalf of Old Ironsides. Rick Reese filed a claim to all of the real and personal property listed

as a defendant in the above-referenced action. D.E. No. 29. His claim further stated that Rick

Reese is the owner of Old Ironsides, LLC and New Deal Shooting Sports. Id. Terri Reese filed

a claim to the above-referenced property that is the subject of this proceeding, including

property owned by an LLC that she has a membership ownership interest in and personal

1 Citations to Docket Entry No. X or D.E. No. X refer to the document filed in this cases official court record and identified by that name in the Courts file.


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property that her adult sons own, like specific guns or ammo. D.E. No. 30. Terri Reeses claim

stated that all property seized is either hers solely and separate, or by community property law,

or by laws arising from the operation of a New Mexico Limited Liability Company. Id.

On March 23, 2012, the United States moved to stay the civil forfeiture case until the

criminal case was resolved through verdict or plea, pursuant to 18 U.S.C. 981(g)(1). See D.E.

No. 36. The Court granted the governments motion to stay the civil forfeiture proceeding on

June 15, 2012. See D.E. No. 47.

From July 17 through August 1, 2012, the Court conducted a jury trial in the related

criminal matter. On August 1, 2012, in exchange for claimants Rick Reese and Terri Reese

agreeing to withdraw their request for a jury trial in the civil case, the United States agreed to

dismiss the criminal forfeiture allegations in the criminal case. The parties memorialized this

agreement on the record the afternoon of August 1, 2012. Later that day, the jury returned its

verdict as to all four criminal defendants. Claimants were each convicted of one count of

violating 18 U.S.C. 924(a)(1)(A). See 11-CR-2294, D.E. No. 353. Following the verdicts, the

Court granted the three convicted defendants motion for a new trial. Id., D.E. No. 404. The

Government appealed. Id., D.E. No. 425.

On September 4, 2012, the United States filed an unopposed motion to lift the order

staying the civil forfeiture action. D.E. No. 48. On September 6, 2012, the Court entered an

Order lifting the stay. D.E. No. 49. On November 16, 2012, the Court entered an Order staying

discovery and all case management deadlines until the sentencing hearing in the related criminal

case. D.E. No. 60.


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On May 13, 2013, Defendants Rick Reese and Terri Reese filed a Motion for Partial

Release of Assets in the above-captioned case, as well as the related criminal prosecution. D.E.

No. 63; 2:11-CR-02294-RB, D.E. No. 437. As part of that motion, claimants ask that this civil

forfeiture action be stayed until the conclusion of the criminal case. D.E. No. 63 at 2. Although

claimants have not cited any legal basis for the stay, such a motion may be filed by them pursuant

to 18 U.S.C. 981(g)(2). The United States does not object to the Court staying the case

pending the conclusion of the related criminal case, including any response to this Motion to

Strike.

LEGAL ANALYSIS

A. The Court Must Strike the Claims and Answers of Rick Reese and Terri Reese to Defendants In Rem Owned by Old Ironsides for Lack of Article III Standing.

1. Standard of Review

Supplemental Rule G(8)(c)(i)(B) provides that [a]t any time before trial, the government

may move to strike a claim or answer . . . because the claimant lacks standing to contest the

forfeiture. The motion to strike a claim or answer may be presented as a motion for judgment

on the pleadings or as a motion to determine after a hearing or by summary judgment whether the

claimant can carry the burden of establishing standing by a preponderance of the evidence.

Supp. R. G(8)(c)(ii)(B); see United States v. $12,126.00 in U.S. Currency, 337 Fed. Appx. 818,

820 (11th Cir. 2009); United States v. Vehicle 2007 Mack 600 Dump Truck, 680 F. Supp. 2d 816,

823 (E.D. Mich. 2010).

In order to challenge a civil forfeiture action, a claimant must have standing within the

meaning of Article III of the United States Constitution. See United States v. Bearden, 328 F.3d


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1011, 1013 (8th Cir. 2003); United States v. Cambio Exacto, S.A., 166 F.3d 522, 526 (2d Cir.

1999). Thus, standing is the threshold question in every federal case which must be addressed

prior to and independent of the merits of a partys claims. Warth v. Seldin, 422 U.S. 490, 498

(1975); see United States v. 1998 BMW I Convertible, 235 F.3d 397, 399 (8th Cir. 2000); see

also Supp. R. G(8)(c).

A civil forfeiture action is unlike most other civil actions in that the defendant is the

property subject to forfeiture and, as such, it is the claimant, not the plaintiff, who has the burden

to demonstrate standing by a preponderance of the evidence. United States v. $38,000.00 in U.S.

Currency, 816 F.2d 1538, 1543 n.11 (11th Cir. 1987); see also Supp. R. G(8)(c)(B).

2. Rick Reese and Terri Reese Who Each Filed Claims on Their Own Behalf Have Failed to Establish Article III Standing to Contest Forfeiture of Defendant Property Owned by Old Ironsides.

In a forfeiture action, the determination of whether a claimant has Article III standing

turns upon whether the claimant has a sufficient interest in the property to create a case or

controversy. $38,000.00 in U.S. Currency, 816 F.2d at 1543. To demonstrate a case or

controversy sufficient for purposes of Article III standing in the forfeiture context, a claimant

must demonstrate a colorable interest in the property, which includes an ownership or a lesser

possessory interest in the property. United States v. 5208 Los Franciscos Way, 385 F.3d 1187,

1191 (9th Cir. 2004); see Via Mat Intl S. Am. Ltd. v. United States, 446 F.3d 1258, 126263

(11th Cir. 2006) (noting ownership of property seized can be evidence of sufficient injury to

confer standing, ownership is not required; [N]on-owners, such as bailees or those with

possessory interests, can also have injuries resulting from the seizure of property that are

sufficient to establish standing.).


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To evaluate a particular ownership interest, the Court is required to engage in a two-step

process in which it looks to state law to determine what interest the claimant has in the property

to be forfeited, but then looks to federal law to determine whether that particular interest is

forfeitable under the relevant statute. See United States v. One 1990 Beechcraft 1900 C Twin

Engine TurboProp Aircraft, 659 F. Supp. 2d 1260, 1267 (S.D. Fla. 2009) (state law determines

ownership interest for purposes of 18 U.S.C. 983(d)(6)(A), but exceptions listed in

983(d)(6)(B) are determined independent of state law) (citations omitted); Bearden, 328 F.3d at

1013. (Ownership interests are defined by the law of the State in which the interest arose).

Despite the references to Old Ironsides in both Rick Reeses and Terri Reeses claims, the

LLC itself Old Ironsides, LLC never filed a claim to any of the defendants in rem in this case.

Rather, Rick Reese and Terri Reese filed claims on their own behalf, in which they asserted

interests in the defendant properties owned by Old Ironsides by virtue of their interests in the

LLC. D.E. Nos. 29-30. Claimants Rick and Terri Reese lack Article III standing to assert in

their individual capacities, rights belonging to the LLC as an entity.2

New Mexico law is consistent with the United States position that a member of an LLC

lacks standing to file a claim through its membership in an LLC. New Mexico law holds:

Property transferred to or otherwise acquired by a limited liability company is property of the

limited liability company and not of the members. A member has no interest in an item of

2 The United States does not believe Terri Reese has an ownership interest in Old Ironsides. Its Articles of Organization do not refer to Terri Reese as an organizer or member. See Ex. A. Nevertheless, Terri Reese filed a claim to property owned by an LLC that she has a membership ownership interest in and to property seized [that] is hers solely and separate, or by community property law, or by laws arising from the operation of New Mexico Limited Liability Company (or belong to her adult sons). D.E. No. 30. This memorandum of law does not attempt to litigate Terri Reeses membership interest in Old Ironsides. Assuming, arguendo, that Terri Reese has a membership interest in the LLC, her claim should nevertheless be struck with regard to property owned by Old


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limited liability company property. N.M.S.A. 53-19-29(A) (emphasis added). A limited

liability company formed pursuant to the Limited Liability Company Act is a separate legal

entity. N.M.S.A. 53-19-10(A). Thus, under New Mexico law, Rick and Terri Reese are

separate legal entities from Old Ironsides. As such, claimants Rick Reese and Terri Reese lack

Article III standing to assert, in their individual capacities, rights belonging to the LLC.

The Articles of Organization for Old Ironsides, signed by Rick Reese on September 29,

1999, further prove that Old Ironsides is a distinct legal entity from Rick (or Terri) Reese with its

own property rights. Article VIII of the Articles of Organization, attached hereto as Exhibit A,

states: Real or chattel property transferred to or acquired by the Company is property of the

Company and not property of the members. Ex. A at 4 (emphasis added).

As the court recently explained in United States v. All Funds in the Account of Prop.

Futures, Inc., 820 F. Supp. 2d 1305, 1329 (S.D. Fla. 2011), just as shareholders in a corporation

do not have Article III standing to contest the forfeiture of corporate property, the LLC minority-

member claimants in this case likewise have no Article III standing to contest the forfeiture of the

Defendant Properties owned by the Buyer/Lessor LLCs. See also United States v. New Silver

Palace Rest., Inc., 810 F. Supp. 440, 442-444 (E.D.N.Y. 1992) (since shareholder claimants were

neither owners nor lienholders with respect to corporate assets, they had no standing to file a

claim in a forfeiture proceeding); United States v. Real Prop. Known at 479 Tamarind Dr., No.

98-Civ-2279, 2005 WL 2649001, at *4 (S.D.N.Y. Oct. 14, 2005) (holding that shareholders of

Canadian corporation lacked standing to contest forfeiture of corporate assets). In All Funds in

the Account of Prop. Futures, Inc., the court further explained that LLC members own equitable

Ironsides for lack of standing for the reasons set forth in our motion.


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interests, deriving as they do from their status as LLC members. 820 F. Supp. 2d at 1328. Such

equitable interests run[] not to any specific assets or res of the Buyer/Lessor LLCs, but rather

run[] to the Buyer/Lessor LLCs general holdings. Id. (emphasis in original).

Thus, claimants Rick and Terri Reeses equitable interests derived from their presumed

status as LLC members run not to any specific assets or res of Old Ironsides, but rather run to

Old Ironsides general holdings. As such, just as shareholders in a corporation do not have

Article III standing to contest the forfeiture of corporate property, the LLC member claimants in

this case have no Article III standing to contest the forfeiture of the defendant properties owned

by Old Ironsides. Accordingly, the Court must strike the Claims and Answers of Rick Reese and

Terri Reese as they relate to property owned by Old Ironsides.

B. The Court Must Strike the Claim and Answer of Terri Reese to Defendants In Rem Owned by Ryin Reese or Remington Reese for Lack of Article III Standing.

Likewise, Terri Reese cannot establish a colorable interest in the defendant property

owned by Ryin Reese or Remington Reese. Terri Reeses claim asserts an interest in personal

property that her adult sons own, like specific guns or ammo. D.E. No. 30. Pursuant to

Supplemental Rule G(8)(c)(i)(B), the references to all property that is owned by her adult sons

should be stricken from Terri Reeses Claim and Answer for lack of standing. Terri Reese lacks

standing to assert an interest in defendant property owned by Ryin or Remington Reese because,

as her claim admits, she does not have any ownership interest in such property. To the extent

that her adult sons wanted to contest the forfeiture of their property, they had the opportunity to

file claims. Ryin and Remington Reese not only declined to file claims, they disclaimed any and

all interest in the defendant property in June 2012. See D.E. 45-56.


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More specifically, Ryin and Remington Reese filed separate disclaimers to the defendant

property on June 13, 2012, and June 8, 2012, respectively. Id. These identical disclaimers stated

that the filer hereby disclaims any right, title or interest in the Defendant Properties listed in the

caption above on the condition that no costs or expenses be assessed against the undersigned;

consents to entry of judgment for relief demanded in the complaint; and waives notice of all

further actions and proceedings. Id. To the extent that Terri Reese would have been able to

articulate a claim based on her sons ownership interest in certain property, which the

Government does not believe possible, such claim was extinguished when Ryin and Remington

Reese disclaimed any and all interest in the defendant properties. See D.E. 45-46.

CONCLUSION

Based on the foregoing, the Court should grant the United States motion to strike the

Claims and Answers of Rick Reese and Terri Reese with regard to the defendants in rem owned

by Old Ironsides for lack of standing pursuant to Supplemental Rule G(8)(c)(i)(B). In addition,

the Court should grant the United States motion to strike the Claim and Answer of Terri Reese

as it relates to property owned by Ryin Reese or Remington Reese for lack of standing pursuant

to Supplemental Rule G(8)(c)(i)(B).

Respectfully submitted,

KENNETH J. GONZALES United States Attorney

STEPHEN R. KOTZ Assistant U.S. Attorney

P.O. Box 607 Albuquerque, NM 87103-0607

(505) 346-7274


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PAMELA J. HICKS Acting Deputy Chief, Asset Forfeiture

& Money Laundering Section KRISTEN M. WARDEN

Trial Attorney Asset Forfeiture and Money

Laundering Section Criminal Division

U.S. Department of Justice 1400 New York Ave.

Washington, DC 20530 (202) 514-1263


EXHIBIT A

Case 1:11-cv-01109-RB-LFG Document 78-1 Filed 05/30/13 Page 1 of 9

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OLD IRQNSIAES, A Z,IMITEI7 LIABII,IT'Y COMPANY

2Q37653

The publ~.c Regulation Gammission ce~ti~i~a that ~h~Articles o~ C}rg~nization, duJ.y s3.c~ned and verxf3.ed gureuan~to thy: previsions o~ theLIMTT~I3 LTAHTLTTY COMPP.I~Y ~C'~

have been xecei~r~d~b~r~it~andVare~foundAto~con~c~xm to law.c~

Accorda.n3aY, by virtue of the authori~~ created in iC bylar~, ~h~ Pub~,~c Regulation Camm~.s~ia~ i~~ues ~hi,sC~rti~ cater of Organization and at~ach~a ~~reto a duplicateof the Articl~a of Organisation. ,

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'I"he undersigned. organizers, desiring to form a lfan~~~d liability company pursuantto tie Limr#ed Liability ~vmpany' Aat ofthe State of ~1ew ~~co, adopts the followingArticles of Qrgani~ation for the Company;

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The name of the company isOld .~ransides, A Limi#ed LiabiXzty ~'o~apterty,

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A.RTIGI.E IVMaaagement

The limited liability company shall be maaaged by the meanbers in accrndaacewith an Operating Agreement to be adopted by the members.

ARTICLE VPnrpos~

The purpose of the Compaay is to buy, sell, lease, reef, develop or otherwiseengage in the whole.9ale and retail sale of hunting and spotting supplies and relatedactivitica; to engage in any lawful business ~ennitted to a limitod liability company umd~the taws of ~e State of New Moxico; and to havc all of the powers enumerated in ireNow Me~cico Limited Liability Cpmpany Act.

Any other businoss not expressly prohibited by law.

AR'T'ICLE VIFiacai Year

Thy Company's fiscal year will be teased on a calendar year and sad oa the 31stday of Docember.

ARTICLE VIIFormstfa~ of Comepivay

In accordance with NMSA 53-19-10.1993 Repl. Pamg., the Company will befotmod upon S1in8 with the New Mexico State Corporation Commiasian.

ARTICLE VIIIO~vaetship of Property

~~'~~~:~~~~`> Real ar chattel property transfen~ed to or acquired by the Company is property of~, ~ ffie Company and not property of the members.

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SE ADVISED THAT ` PHIS COMMISSION HISS AI?PROV'ED FILED THE 2~,R.TTC~E3 OF 4RG.'~N~~.~i`I'20Id, FOR THE ABOVE REFERENCED QRGA~33~L~'I'IC7~ E'1Y'FEC`TTVE O~"I`0$ER 12, 1999.THE ATTAC:~3ED CERTIFICATE DQES NO'S CQN~~I E .R.UfiHOR~Z,'~.T20N E'QR THE ABOVEREFEREPtCED OFtGAP7SZATIC?I~7 T(7 `T'F2ANSACT ANY BUSI3+I~S$ WHICH R~QLTI S CC(:}}A9PLIAN~W~.TH' tJTFiER APPLICABLE FEDERAL OR STATE r,AYd9, TN'CT;r7DIP7C~, BLIT 2dQT LI~SITl~i7 TO,STATE LICEN3INt3 REQUZR,~MENTS. I'I' SS ~'HE QR~ ~Z.A'TION'S 80LE RES~4NE3T$~L2TY'1'C) UBTATN SUCH COt+~PT,IANCE WIC ALL ~E T~.EQUTR.E"MEP~'1'9 APPLICABLE '~'Ei~R~~`1"C)Pk"tIOR 'I'C) E~GAGTNG IN THE BUSINESS FOR t~TFiTGk3 I'~ HAaS OB'~AZ1J~D 't'FSE ATT~.CT~~CE~'tTTFICATE OF O~G~I7~~'T~N.

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'I'H~ ATTAC1~iED ,~1RTI~Z,~S OF C3RGANIZATIORI SHOt3'~~ ~~~QME A P~F~~NE3~'~ ~3 fE~iT .Off''3.'FiE ORC3~.N~Z.A,,~.'~QN' 8 RECORDS . YOiJR CA~10ETaL,I~I) NECK ~ ~5 VAZT?~e~"T~D L3'Y 'T,"FiIBCO~iNiTBSIC?bl'; IS YOUR RECEIPT. Ik' Y'QU HAVE QLIE9TIt33~, PL C~A'T'1~~'T"CE~ARTEREI3 DOCtTPiF~ii'I' DIVTSIt3~ AT (505y 82'7-457.2 ~'tJR A98SBTAtdCE.e,

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NEW MEXICO) PUk3LIC REQULATION COhh~1I5SIn~TP~.kZ..A. BuildingI I2U Paseo de Per~tta

y,P.O. Bax i 269Santa Fe, I~Tew A~iexict~ 875tk~

R~: t~dd Iwonsides, LLC

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rc1~ Enclosed pl~~se find duplicaic ori$insls of the A~ttcl~s of C7rgan~'iatian o, f t3Xd Irntrsfd~a,I.LC, far filing, I have enclosed a che:~ in the amount of X5{9.00 to cover the cost of fitiz~ thisr3ocura~nt.

If ypu should have questions, please fell free to can~.ct our af,~ce.~ f

~~~ ~ ~ T'hai~ you far your asslstanc~ #n this mater.F ;;Sincerely youz~,

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doc.78.motion and memo re motion to strike claims

Documents