In a rare defeat for the United States, Bryan Cave persuaded a federal judge in the Middle District of Florida to enter summary judgment against the government in a civil forfeiture case. The case concerned the validity of a quit claim deed to real property in New York. The deed’s grantor conveyed the property as part of a settlement of disputed fraud claims with the grantee. One month later, the United States sued to invalidate the quit claim deed and to forfeit the grantee’s interest in underlying property. Shortly thereafter, a grand jury indicted the grantor for wire fraud.
Bryan Cave successfully argued that the grantee was an "innocent owner" under 18 U.S.C. § 983. The court’s forty-page opinion, available at 2015 WL 4254381 and via this link, is noteworthy for three reasons.
First, the court found that the innocent owner defense applied so long as the grantee did not know that the property at issue was purchased with money obtained through fraud. Knowledge of the grantor’s criminal activity in general does not defeat the innocent owner defense.
Second, the court found that the grantee had given value in exchange for the deed simply by releasing claims for fraud against the grantee. No exchange of money was necessary for the grantee to qualify as a purchaser for value.
Third, the court held that the grantee’s inability to record the quit claim deed was of no consequence. The innocent owner defense applies even where the ownership interest is founded upon a deed that has not yet been recorded. Further, the grantee had standing to defend against forfeiture even though he never maintained possession of the property. The grantee exercised sufficient "dominion and control" over the property by, among other things, negotiating for the quit claim deed and hiring counsel to enforce his rights under that deed and to defend against forfeiture.