UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA

Transcription

1 1 Scott A. McMillan, SBN 0 Michelle D. Volk, SBN 1 Sean E. Smith, SBN The McMillan Law Firm, APC 0 Nebo Dr., Suite 0 La Mesa, CA 1-0 Tel x Fax Attorneys for Plaintiff, Lycurgan, Inc. LYCURGAN, INC. d/b/a ARES ARMOR, Plaintiff, v. B. TODD JONES, in his official capacity as Head of the San Diego Bureau of Alcohol, Tobacco, Firearms and Explosives; and DOES 1-, Defendants. UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA CASE NO. -CV- JLS (BGS) PLAINTIFF LYCURGAN, INC. S OPPOSITION TO DEFENDANT S MOTION TO DISMISS; REQUEST FOR EVIDENTIARY HEARING ON RULE (b)(1) MOTION; REQUEST FOR CONVERSION TO RULE MOTION FOR SUMMARY JUDGMENT UNDER RULE (d) Judge: Hon. Janis L. Sammartino Dept.: A Date: November, Time: 1:0 P.M. Plaintiff Lycurgan, Inc. respectfully submits the following memorandum of points and authorities for the consideration of the Court in opposition to Defendant United States Motion to Dismiss.

2 1 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF PLAINTIFF S OPPOSITION TO DEFENDANT S MOTION TO DISMISS TABLE OF CONTENTS I. INTRODUCTION II. FACTUAL AND PROCEDURAL BACKGROUND III. IV. A. Company Background B. Search and Seizure C. Administrative Civil Forfeiture D. Action to Unseal the Search Warrant Affidavit and CAFRA Action THE SEIZED UNFINISHED LOWER RECEIVERS ARE NOT FIREARMS, NOR ARE THEY CONTRABAND THE MOTION TO DISMISS UNDER RULE (b)(1) FOR WANT OF SUBJECT MATTER JURISDICTION FAILS A. Legal Standard B. Merits cv- JLS (BGS) 1. Federal Courts Have Jurisdiction Over Claims for the Return of Forfeited Property This Court Has Equitable Jurisdiction The Administrative Procedure Act Waives Sovereign Immunity Over Claims Seeking Non-Monetary Relief Against Federal Agencies PLAINTIFF S OPP N TO DEFENDANT S MTN TO DISMISS i

3 1. This Court has Continuing Jurisdiction Under CAFRA CAFRA Governs Civil Forfeiture Proceedings Relating to Property Seized Pursuant to a Criminal Search Warrant An Independent Legal Basis For a Seizure Does Not Vitiate CAFRA CAFRA Waives Sovereign Immunity C. The Government Relies Exclusively on Two Unpublished Cases that Are Inapposite and Undermine the Government s Position D. Lycurgan Respectfully Requests the Opportunity to Prove the Court s Jurisdiction Through Discovery and an Evidentiary Hearing V. THE MOTION TO DISMISS UNDER RULE (b)() FOR FAILURE TO STATE A CLAIM UPON WHICH RELIEF MAY BE GRANTED FAILS.... A. Legal Standard B. Merits The Court Should Convert the Rule (b)() Motion into a Motion for Summary Judgment Under Rule (d) Plaintiff s Expert Witness Confirms the Seized Items Are Not Firearms Defendant s Extrinsic Evidence that the Seized Items Are Firearms Lacks Foundation VI. CONCLUSION cv- JLS (BGS) PLAINTIFF S OPP N TO DEFENDANT S MTN TO DISMISS ii

4 1 TABLE OF AUTHORITIES Federal Statutory Authority U.S.C ,,,, -,, Code of Federal Regulations U.S.C U.S.C U.S.C U.S.C U.S.C U.S.C U.S.C U.S.C Federal Rules of Civil Procedure Rule (b)(1) Rule (b)() , - Rule (d) , Rule , Rule , Federal Decisional Authority Amerisource Corp. v. United States (Fed. Cir. 0) F.d Aschcroft v. Iqbal (0) U.S Bell Atl. Corp. v. Twombly (0) 0 U.S , Bell v. Hood () U.S Bowen v. Massachusetts () U.S Burman v. United States (D. Md 0) F.Supp.d cv- JLS (BGS) PLAINTIFF S OPP N TO DEFENDANT S MTN TO DISMISS i

5 1 Celata v. United States, Fed. Appx. (th Cir. 0) , Daniels-Hall v. Nat l Educ. Ass n (th Cir. ) F.d Delano Farms Co. v. Cal. Table Grape Comm n (Fed. Cir. ) F.d Foehl v. United States (d Cir. 01) F.d , Friedl v. City of New York (nd Cir. 00) F.d Gammon v. GC Services Ltd. Partnership (th Cir. ) F.d Global Network Communs., Inc. v. City of New York (nd Cir. 0) F.d 0..., Gunasekera v. Irwin (th Cir 0) 1 F.d , Kokkonen v. Guardian Life Ins. Co. of America () U.S Laub v. United States Dept. of Interior (th Cir. 0) F.d , Mantilla v. United States (d Cir. 0) F.d Marshall Leasing v. United States (th Cir. 0) F.d McCann v. George W. Newman Irrevocable Trust (d Cir. 0) F.d 1...., McLachlan v. Bell (th Cir. 01) 1 F.d Okafor v. United States (N.D. Cal. ) U.S. Dist. LEXIS Ramsden v. United States (th Cir. ) F.d Republic Nat l Bank v. United States () 0 U.S Rosales v. United States (th Cir. ) F.d , Rutman Wine Co. v. E. & J. Gallo Winery (th Cir. ) F.d Scheuer v. Rhodes () U.S Sun Valley Gas, Inc. v. Ernst Enters. (th Cir. ) F.d United States v. Martin Lane (th Cir. 0) F.d , - United States v. Contents of Accounts (W.D. Ky ) U.S. Dist. LEXIS ,,, United States v. Ferro (th Cir. ) 1 F.d ,,, United States v. Martinson (th Cir. ) 0 F.d United States v. Premises of nd Amendment Guns, LLC (D. OR. ) F.Supp.d -cv- JLS (BGS) PLAINTIFF S OPP N TO DEFENDANT S MTN TO DISMISS ii

6 United States v. Prince (D. Kan. June, 0) 0 U.S. Dist. LEXIS 1...., -, Warren v. Fox Family Worldwide, Inc. (th Cir. 0) F.d Wiebe v. National Security Agency (D. Md. ) WL cv- JLS (BGS) PLAINTIFF S OPP N TO DEFENDANT S MTN TO DISMISS iii

7 1 I. INTRODUCTION Defendant United States ( the Government ) elected to pursue an administrative forfeiture against Plaintiff Lycurgan, Inc. s ( Lycurgan ) property that was seized pursuant to a criminal search warrant. ( U.S.C. (a)(1)(a)(i).) Once Lycurgan filed its verified claim, contesting the nonjudicial, civil forfeiture, the Government had 0 days to file a complaint for forfeiture or return the property. ( (a)()(a).) The 0-day time limit expired without the Government filing a complaint for forfeiture or returning Lycurgan s property. Also, the Government has not obtained a criminal indictment containing an allegation that the property is subject to forfeiture, or taken any steps necessary to preserve its right to maintain custody of the property as provided in the applicable criminal forfeiture statute. ( (a)()(b).) Consequently, the Government shall promptly release the property pursuant to regulations promulgated by the Attorney General, and may not take any further action to effect the civil forfeiture of such property in connection with the underlying offense. (Id; United States v. Martin Lane (th Cir. 0) F.d 1,.) The Government claims that the Court has no jurisdiction under CAFRA because the Government has an independent basis for withholding Lycurgan s property. [Memo at :-:.] There is no factual or legal authority for the Government s proposition. The purpose of CAFRA is to protect individuals and businesses from the government s indefinite or prolonged detention of their property. The government s initiation and subsequent withdrawal of the administrative forfeiture was an improper attempt to frustrate the purpose of CAFRA. (See United States v. Contents of Accounts (W.D. Ky ) U.S. Dist. LEXIS 1, *-, n..) CAFRA s 0-day time limit would be meaningless if the government may simply drop the civil forfeiture prior to expiration, and still maintain custody of the seized property without consequence. Once the Government notified Lycurgan of its intent to pursue an administrative forfeiture, and Lycurgan responded with a verified claim in opposition, CAFRA took effect and -cv- JLS (BGS) PLAINTIFF S OPP N TO DEFENDANT S MTN TO DISMISS 1

8 1 jurisdiction could not be divested. (United States v. Premises of nd Amendment Guns, LLC (D. OR. ) F.Supp.d, ; Martin Lane, F.d at 1.) II. FACTUAL AND PROCEDURAL BACKGROUND A. Company Background Dimitrios Karras ("Mr. Karras") is the Chief Executive Officer of Lycurgan, Inc., a California corporation d/b/a Ares Armor ("Lyrcurgan"). [Karras Decl. 1.] Lycurgan is a small retail business with four locations: three in Oceanside, California and one in National City, California. [Id..] In addition, it operates a website ( [Karras Decl..] Lycurgan sells gun parts, holsters, cases, apparel, and backpacks, and a product known as an 0% AR- lower receiver. [Id.] An 0% lower is an industry term for an unfinished receiver, which is not a firearm according to prior determinations from the Bureau of Alcohol, Tobacco, Firearms and Explosives ("BATFE"). [O Kelly Decl. 0(g), (h), Exhs. G, H.] Therefore, 0% lowers do not require a federal firearms license and are not regulated under the Gun Control Act of. [McMillan Decl., Exh. D [ Because 0% completed lower receivers are partially completed, they are not regulated as firearms, but are considered inert hunks of metal. There is no prohibition for anyone to possess an 0% lower receiver or a firearm parts kit containing an 0% lower receiver. ).] The sale of 0% lowers account for the vast amount of Lycurgan's sales and revenue. [Karras Decl..] Lycurgan purchases and resells 0% lower receivers, including those that are manufactured by EP Armory. [Id..] EP Armory uses polymer to make its 0% lower receivers, which are no different from any other 0% lower receiver openly sold to the public. [Id.] EP Armory's product is in compliance with previous determinations from the BATFE that the product is not a firearm. [O Kelly Decl. 0(g), (h), Exhs. G, H.] /// -cv- JLS (BGS) PLAINTIFF S OPP N TO DEFENDANT S MTN TO DISMISS

9 1 B. Search and Seizure On March,, numerous BATFE agents swarmed Lycurgan's four leased real estate properties located at: (1) / N. Freeman St., Oceanside, CA ; () National City Blvd., Unit B, National City, CA; () 0 Roymar St., Suite D, Oceanside, CA ; and () Industry, Suite A, Oceanside, CA. [Karras Decl..] During its search, the BATFE seized and carried away a large number of polymer castings, among a multitude of other lawfully owned items that are necessary for the efficient functioning of the business. [Id.] C. Administrative Civil Forfeiture On March,, the BATFE mailed a "NOTICE OF SEIZURE AND ADMINISTRATIVE FORFEITURE PROCEEDING" to Lycurgan in an attempt to withhold the seized items with an estimated value of $,.00. [McMillan Decl., Exh. A]. The forfeiture notice provided: The above-described property was seized by the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) for forfeiture pursuant to Title, United States Code (U.S.C.), Section 01(c), U.S.C., Sections 0-, C.F.R., Part, U.S.C., Section and/or 1 U.S.C., Section 1. [McMillan Decl., Exh. A, emphasis in original.] The forfeiture notice incorrectly described the seized items as ",0 Unknown Manufacturer AR Type Receiver/Frame CAL: Unknown SN: None." [McMillan Decl. ; Ex. A.] Such items are the property of Lycurgan in fee simple absolute. [Id.] And they are not "AR Type Receiver/Frame." [Id.] The items are not "receivers" or "frames" as such words are defined in the Gun Control Act of, or prior interpretative determinations of the BATFE under such Act. [Id.; O Kelly Decl., 0(g), (h), Exhs. G, H.] On April,, Lycurgan, through counsel, served a verified claim, contesting the forfeiture and requesting the initiation of a judicial proceeding to challenge such forfeiture. [McMillan Decl., Exh. B.] -cv- JLS (BGS) PLAINTIFF S OPP N TO DEFENDANT S MTN TO DISMISS

10 1 D. Action to Unseal the Search Warrant Affidavit and CAFRA Action On June,, Lycurgan filed a motion to unseal the search warrant affidavit ( Motion to Unseal ). [McMillan Decl..] Lycurgan proffered several reasons why it needed to inspect the affidavit. [Id.] Among the reasons was to enable Lycurgan to adequately challenge the civil forfeiture. [Id.] On July,, the BATFE sent a letter to Lycurgan that provided: The United States Department of Justice will not pursue the civil forfeiture of the asset described above. However, the United States Department of Justice will retain the seized property as evidence in its ongoing criminal investigation. [McMillan Decl., Exh. C.] On July,, the Government filed an opposition to Lycurgan s Motion to Unseal, arguing that the withdrawal of the civil forfeiture mooted the Motion to Unseal. [McMillan Decl..] On July,, Lycurgan filed this instant action under the Civil Asset Forfeiture Reform Act ( CAFRA ) because the Government s time to file a civil forfeiture complaint lapsed pursuant to U.S.C. section (a)()(a). [Compl..] Also, the Government has not obtained an indictment containing any allegation that the property is subject to forfeiture. [Compl..] On July 1,, a hearing was held on Lycurgan s Motion to Unseal. [McMillan Decl..] During the hearing, the Government argued that its withdrawal of the civil forfeiture mooted Lycurgan s motion. [Id.] The Court disagreed. [Id.] The Government also noted that the ultimate decision of whether the seized items are contraband could not be determined in the Motion to Unseal, but may be determined in the instant case. [Id.] On September,, the Government moved to dismiss the instant case on the basis that the Government s withdrawal of the civil forfeiture deprived this Court of subject matter jurisdiction. [McMillan Decl..] /// -cv- JLS (BGS) PLAINTIFF S OPP N TO DEFENDANT S MTN TO DISMISS

11 1 III. THE SEIZED UNFINISHED LOWER RECEIVERS ARE NOT FIREARMS, NOR ARE THEY CONTRABAND Daniel G. O Kelly, a Certified Firearm Specialist and former ATF Special Agent, opined that the seized,0 polymer items known as unfinished receiver banks are NOT firearms, nor are they contraband. [O Kelly Decl. (a)-(d).] In arriving at his opinion, Mr. O Kelly analyzed an exemplar of the subject lower receiver, and spoke with Dimitri Karras, the CEO of Lycurgan, Inc., and Chris Cook, the President of EP Arms, LLC, about the design and manufacturing process of the unfinished lower receivers. [Id. 0(b)-().] Mr. O Kelly also reviewed the documents pertaining to the BATFE s investigation of the unfinished lower receivers, and applicable legal authorities and prior BATFE determinations of what constitutes a firearm. [Id. 0(a)(i)-(viii).] CFR. defines in pertinent part a firearm as: Any weapon, including a starter gun, which will or is designed to or may readily be converted to expel a projectile by the action of an explosive; the frame or receiver of any such weapon; any firearm muffler or firearm silencer, or any destructive device. The unfinished lower receivers seized by the ATF may not be readily converted to a weapon. [O Kelly Decl. 1.] They are not receivers under the definition set forth in CFR.. [O Kelly Decl., citing United States v. Prince (D. Kan. June, 0) 0 U.S. Dist. LEXIS 1.] The ATF s ruling that they are receivers is flawed for a number of reasons. [See, e.g., O Kelly Decl.,, 1,,,, 1.] Specifically, the ATF misapplied the multi-pronged definition contained in CFR., contradicted its own logic, and made multiple unsound conclusions. [Id.] The ATF s nascent interpretation of the lower receivers as firearms display[s] a lack of logic and consistency, which has created a climate in the firearm industry wherein it is nearly impossible for the reasonable man to be able to operate in good faith within the law. [O Kelly Decl..] /// -cv- JLS (BGS) PLAINTIFF S OPP N TO DEFENDANT S MTN TO DISMISS

12 1 IV. THE MOTION TO DISMISS UNDER RULE (b)(1) FOR WANT OF SUBJECT MATTER JURISDICTION FAILS A. Legal Standard Defendant moves to dismiss this action because the Court lacks subject matter jurisdiction over Plaintiff s CAFRA complaint. [Memo at :1-.] A jurisdictional challenge under Rule (b)(1) may be made either on the face of the pleadings or by presenting extrinsic evidence. [Citation.] Where jurisdiction is intertwined with the merits, we must assume[] the truth of the allegations in a complaint... unless controverted by undisputed facts in the record. [Quotation.]. (Warren v. Fox Family Worldwide, Inc. (th Cir. 0) F.d,.) [J]urisdictional dismissals in cases premised on federal-question jurisdiction are exceptional, and must satisfy the requirements specified in Bell v. Hood, U.S., 0 L. Ed., S. Ct.. (Sun Valley Gas, Inc. v. Ernst Enters. (th Cir. ) F.d, 0.) Under Bell, a complaint may be dismissed for lack of subject matter jurisdiction if the alleged claim under the Constitution or federal statutes clearly appears to be immaterial and made solely for the purpose of obtaining jurisdiction or where such a claim is wholly insubstantial and frivolous. (Bell v. Hood () U.S. at -.) The standard for dismissals for lack of subject matter jurisdiction under Rule (b)(1) is considerably more rigorous than the standard for dismissals for failure to state a claim under Rule (b)(). (Gammon v. GC Services Ltd. Partnership (th Cir. ) F.d,.) Plaintiff bears the burden of establishing subject matter jurisdiction. (Kokkonen v. Guardian Life Ins. Co. of America () U.S.,.) In light of this burden, the court must give the plaintiff a reasonable opportunity, if requested, to conduct discovery to establish the court s jurisdiction. (Laub v. United States Dept. of Interior (th Cir. 0) F.d 0,.) Additionally, the court should hold an evidentiary hearing upon request of either party. (Rosales v. United States (th Cir. ) F.d -cv- JLS (BGS) PLAINTIFF S OPP N TO DEFENDANT S MTN TO DISMISS

13 1, 0; McCann v. George W. Newman Irrevocable Trust (d Cir. 0) F.d 1, 0 [ If there is a dispute of a material fact, the court must conduct a plenary hearing on the contested issues prior to determining jurisdiction. ].) If the court does not hold an evidentiary hearing, and resolves the motion on declarations alone, the complaint s factual allegations must be accepted as true. (McLachlan v. Bell (th Cir. 01) 1 F.d 0, 0.) A dismissal for lack of subject matter jurisdiction is without prejudice and has no res judicata effect. (Fed. R. Civ. P. 1(b).) B. Merits 1. Federal Courts Have Jurisdiction Over Claims for the Return of Forfeited Property. The district courts shall have original jurisdiction, exclusive of the States, of any seizure under any law of the United States.... ( U.S.C..) [T]he federal courts have universally upheld jurisdiction to review whether an administrative forfeiture satisfied statutory and due process requirements. (Foehl v. United States (d Cir. 01) F.d, -.) The Administrative Procedure Act ("APA") waives sovereign immunity over claims for equitable relief. (Marshall Leasing v. United States (th Cir. 0) F.d,.) Return of forfeited property is an equitable remedy. (Id., citing Bowen v. Massachusetts () U.S..) Federal courts have jurisdiction over a complaint, alleging that the government failed to abide by the statutory scheme of U.S.C. (a). (Okafor v. United States (N.D. Cal. ) U.S. Dist. LEXIS, *, *.) Here, The Government initiated an administrative forfeiture proceeding against Lycurgan s seized property. [McMillan Decl., Exh. A.] Lycugran, through counsel, contested the forfeiture. [McMillan Decl., Exh. B.] Such actions vested this Court with continuing jurisdiction in the civil forfeiture proceeding, which is an action in rem. ( U.S.C. (b)(1); Martin Lane, F.d at 1-, citing Republic Nat l -cv- JLS (BGS) PLAINTIFF S OPP N TO DEFENDANT S MTN TO DISMISS

14 1 Bank v. United States () 0 U.S. 0,.) The Government s subsequent withdrawal of its notice forfeiture proceeding did not divest this Court of its continuing jurisdiction. (Id. at 1 [ [I]n in rem forfeiture actions that jurisdiction, once vested, is not divested, omitting quotation.].) Accordingly, the Government s suggestion that it deprived this Court of jurisdiction is without merit. (See Marshall Leasing, F.d at 0 [ Appellant's failure to resort to the statutory scheme for obtaining a judicial forfeiture cannot be taken to deprive this court of jurisdiction... and that the statutory scheme and the Constitution required the government itself to initiate judicial forfeiture. ].) Lycurgan s complaint is essentially a request for the Court to compel the Government to comply with its statutory duty under section (a), which falls under this Court s jurisdiction. ( U.S.C. 1.). This Court Has Equitable Jurisdiction. This Court has equitable jurisdiction to entertain Lycurgan s complaint against the Government for the return of its property. (United States v. Martinson (th Cir. ) 0 F.d, - [ A district court has jurisdiction to entertain motions to return property seized by the government when there are no criminal proceedings pending against the movant. ]; Ramsden v. United States (th Cir. ) F.d,.) The Court should treat Lycurgan s complaint as an civil equitable proceeding since there are no criminal proceedings pending against any employee or agent of Lycurgan. (Id.; Karras Decl..) Lycurgan s attack of the Government s administrative forfeiture proceeding confers equitable jurisdiction upon this Court. (See Mantilla v. United States (d Cir. 0) F.d, -.). The Administrative Procedure Act Waives Sovereign Immunity Over Claims Seeking Non-Monetary Relief Against Federal Agencies. The Administrative Procedure Act ("APA") provides that: A person suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action within the meaning of a relevant statute, is entitled to judicial review thereof. An action in a court of the -cv- JLS (BGS) PLAINTIFF S OPP N TO DEFENDANT S MTN TO DISMISS

15 1 United States seeking relief other than money damages and stating a claim that an agency or an officer or employee thereof acted or failed to act in an official capacity or under color of legal authority shall not be dismissed nor relief therein be denied on the ground that it is against the United States or that the United States is an indispensable party. ( U.S.C. 0.) The waiver of immunity is not limited to APA cases. (Delano Farms Co. v. Cal. Table Grape Comm n (Fed. Cir. ) F.d, -.) Dimitri Karras, CEO of Lycurgan, suffered a legal wrong because the Government unlawfully seized Lycurgan s property in violation of the Fourth Amendment for the purpose of civil forfeiture. [McMillan Decl.,, Exhs. A, Exh. D, (a).] Lycurgan contested the civil forfeiture and seeks the return of its lawfully owned property. [McMillan Decl..] Lycurgan s non-monetary claim against a federal agency is not barred by sovereign immunity. (Delano Farms Co., F.d at - [ The APA... waives sovereign immunity for any action stating a claim against the United States (or its officers or employees) and seeking relief other than money damages. ]; Foehl, F.d at [ A claimant can collaterally attack an inadequately noticed administrative forfeiture by suing for equitable relief, i.e., the return of the seized property under U.S.C. 1, via the waiver of sovereign immunity found in section 0 of the Administrative Procedure Act. ].). This Court has Continuing Jurisdiction Under CAFRA. The Civil Asset Forfeiture Reform Act (CAFRA) requires the Government to file a complaint for forfeiture or return the property [n]ot later than 0 days after a claim has been filed. ( U.S.C. (a)()(a).) If the 0-day deadline expires without the Government filing a complaint or obtaining a criminal indictment concerning the property, the Government shall promptly release the property pursuant to regulations promulgated by the Attorney General, and may not take any further action to effect the civil forfeiture of such property in connection with the underlying offense. (Id.; Martin Lane, F.d at.) CAFRA allows a party to seek the return of property in district court. ( (f).) -cv- JLS (BGS) PLAINTIFF S OPP N TO DEFENDANT S MTN TO DISMISS

16 1 The provision of CAFRA appears to safeguard the claimant in an administrative forfeiture, in that it requires the government to move forward with a civil forfeiture action if the claimant contests the administrative forfeiture. (United States v. Contents of Accounts (W.D. Ky ) U.S. Dist. LEXIS 1, *-, n..) In Contents of Accounts, the government executed a search warrant against Chavez, Inc., a business that sold cigarettes online. (Id.) ATF agents seized a majority of Chavez, Inc. s property, including cigarettes and bank accounts, prior to an indictment or the filing of a civil complaint. (Id. at *-.) The government initiated a civil forfeiture of the property on the grounds that the property was contraband. (Id. at *.) Chavez, Inc. attempted to challenge the probable cause of the search warrant through motion practice and discovery. (Id. at *-.) The United States sought a fourmonth stay of civil discovery on the grounds that the discovery would hinder its efforts in an ongoing criminal investigation. (Id. at *.) The court denied the government s motion to stay. (Id. at *.) The court held: The government, after making its election to proceed by civil forfeiture and to seize Defendants property, now seeks to stay the litigation and to significantly limit Defendants ability to recover it. This is neither right nor consistent with the applicable statutes. (Id. at *.) The instant case is analogous to Contents of Accounts. Here, Defendant United States ( Government ) seized Plaintiff Lycurgan, Inc. s ( Lycurgan ) business property, prior to indictment or the filing of any civil complaint. [Karras Decl..] Less than two week later, the Government submitted a formal notice to Lycurgan of the Government s intent to initiate an administrative forfeiture proceeding against the seized items on the grounds that they are contraband. [McMillan Decl., Exh. A.] Lycurgan served a verified claim contesting the forfeiture. [Id., Exh. B.] For over three months, Lycurgan incurred attorney s fees and costs in preparation for opposing the civil forfeiture. [Id..] On July,, the Government informed Lycurgan it would no longer pursue -cv- JLS (BGS) PLAINTIFF S OPP N TO DEFENDANT S MTN TO DISMISS

17 1 civil forfeiture, but would continue to retain Lycurgan s property in light of the ongoing criminal investigation. [McMillan Decl., Exh. C.] In the words of Contents of Accounts, [t]his is neither right nor consistent with the applicable statutes. (Id, supra, at *.) By electing to proceed by civil forfeiture, jurisdiction under CAFRA attached. (Cf. id.) The Government is not free to dismiss or halt the civil suit when it becomes inconvenient. (Id. at *.). CAFRA Governs Civil Forfeiture Proceedings Relating to Property Seized Pursuant to a Criminal Search Warrant. The government routinely invokes CAFRA with respect to items seized pursuant to criminal search warrants. (See, e.g., Contents of Accounts, U.S. Dist. LEXIS 1, at *-; Burman v. United States (D. Md 0) F.Supp.d, [ [T]he Drug Enforcement Agency (DEA) began civil forfeiture proceedings against the seized property pursuant to 1 U.S.C. 1. ]; United States v. Ferro (th Cir. ) 1 F.d 0, 0 [ The forfeiture proceeding for the contested firearms is governed by U.S.C., also known as the Civil Asset Forfeiture Reform Act, or CAFRA. ]; United States v. Premises of nd Amendment Guns, LLC (D. OR. ) F.Supp.d.) CAFRA itself contemplates civil forfeiture of property seized pursuant to a criminal search warrant. (See U.S.C. (a)(1)(f) [ The Government shall not be required to return contraband or other property that the person from whom the property was seized may not legally possess. ].) The Government s own action in this case in seeking civil forfeiture of the items seized pursuant to the criminal search warrants confirms same. Furthermore, the search warrant affidavit that supported the raid of Lycurgan noted that targeted items were subject to possible forfeiture. [McMillan Decl., Exh. D (a).] In Premises of nd Amendment Guns, LLC, ATF agents raided a business pursuant to a criminal search warrant, and seized guns, computers and documents. (Id., supra, at.) The ATF then started administrative forfeiture proceedings against the -cv- JLS (BGS) PLAINTIFF S OPP N TO DEFENDANT S MTN TO DISMISS

18 1 seized firearms by providing timely notice of its intent to seek forfeiture, pursuant to U.S.C. (a)(1)(a)(i). (Id. at 1.) The gun owners filed a motion to return property under Federal Rule of Criminal Procedure 1(g). (Id. at 1.) The court held that Rule 1(g) was inapplicable because the firearm owners ha[d] an adequate legal remedy in the forfeiture procedure under CAFRA. (Id. at.) In so holding, the court disagreed with the gun owners argument that mere notice of an administrative forfeiture is not enough to invoke [CAFRA s provisions] and that a [sic] actual civil forfeiture case must be filed. (Premises of nd Amendment Guns, LLC, F.Supp.d at.) The court found that CAFRA was triggered when the government filed its notice of intent to pursue an administrative civil forfeiture, and the gun owners filed a claim in opposition. (Id., citing U.S.C. (a)(1)(a)(i)(iv).) The court denied the gun owners attempt to reclaim their property through the criminal process because CAFRA had already been triggered. (Premises of nd Amendment Guns, LLC, F.Supp.d at [ The [gun owners] will get their opportunity to seek return of the guns in the forfeiture process. This rule makes sense to avoid parallel proceedings. ].). An Independent Legal Basis For a Seizure Does Not Vitiate CAFRA. CAFRA recognizes that there may be multiple bases for retaining and seizing property. ( U.S.C. (a)()(c).) And such bases are not exclusive - they may exist simultaneously. (Id. [ In lieu of, or in addition to, filing a civil forfeiture complaint, the Government may include a forfeiture allegation in a criminal indictment, emphasis added.].) CAFRA provides that the Government may pursue (1) only a civil forfeiture, () only a criminal forfeiture, or () both. (Id.) As mentioned above, the Government elected to pursue a civil forfeiture, likely because the Government has not obtained a criminal indictment containing an allegation that the property is subject to criminal forfeiture. [Karras Decl. ; McMillan Decl., Exh. A; (a)()(b).] There is no provision under CAFRA, or any legal authority, that permits the Government to pursue -cv- JLS (BGS) PLAINTIFF S OPP N TO DEFENDANT S MTN TO DISMISS

19 1 civil forfeiture, and subsequently, when it become more advantageous or convenient for the Government, to drop the civil forfeiture for some other basis to continue retaining the seized property. (See Contents of Accounts, U.S. Dist. LEXIS 1, *; see also Premises of nd Amendment Guns, LLC, F.Supp.d at.) Allowing the Government to initiate and withdraw civil forfeiture proceedings at will would be inequitable and frustrate the purpose of CAFRA to require[] the government to move forward with a civil forfeiture action if the claimant contests the administrative forfeiture. (Contents of Accounts, U.S. Dist. LEXIS 1, *-, n..) The 0-day deadline imposed by U.S.C.S. (a)()(a) would be meaningless if the Government could unilaterally terminate the civil forfeiture proceeding just prior to expiration, and continue retaining the seized property without consequence. Granting the Government s motion to dismiss would be particularly inequitable in this case where Lycurgan incurred attorney s fees and costs for over three months in anticipation of the noticed civil forfeiture proceeding. [MCMillan Decl..] Additionally, the Government s actions in creating a moving target of the process for Lycurgan to reclaim its lawfully owned property has created a substantial hardship. This hardship is pronounced by the fact that the seized business inventory is necessary for the efficient operation of Lycurgan. [Karras Decl. ; See (f)(1)(c).] Lycurgan maintains that the seized items are not contraband or firearms, within the meaning of the Gun Control Act of. [Karras Decl..]. CAFRA Waives Sovereign Immunity. CAFRA waives sovereign immunity regarding damage to property while in the possession of certain government employees, including law enforcement officers, if: (1) the property was seized for the purpose of forfeiture under any provision of Federal law providing for the forfeiture of property other than as a sentence imposed upon conviction of a criminal offense; () the interest of the claimant was not forfeited; () the interest of the claimant was not remitted or mitigated (if the property -cv- JLS (BGS) PLAINTIFF S OPP N TO DEFENDANT S MTN TO DISMISS

20 1 was subject to forfeiture); and () the claimant was not convicted of a crime for which the interest of the claimant in the property was subject to forfeiture under a Federal criminal forfeiture law. ( U.S.C. 0(c).) Here, the Government seized the 0% unfinished lower receivers for the purpose of administrative forfeiture. [McMillan Decl.,, Exhs. A, Exh. D (noting that ATF and Lycurgan negotiated a voluntary surrender of Lycurgan s unfinished receivers for forfeiture just four days prior to the raid).] The search warrant affidavit expressed the Government s intention to seize the targeted items for forfeiture as well. [McMillan Decl., Exh. D (a).] Lycurgan s interest in the seized items was neither forfeited, nor remitted or mitigated. In fact, Lycurgan timely filed a verified claim to contest the civil forfeiture. [McMillan Decl., Exh. B.] Lastly, neither Mr. Karras, nor any employee of Lycurgan was convicted of a crime. [Karras Decl..] Moreover, the Government has not obtained an indictment or even initiated a criminal proceeding against any employee or agent of Lycurgan. [Id.] Therefore, all the four elements are satisfied for waiver of sovereign immunity under CAFRA. (See U.S.C. 0(c)(1)-().) C. The Government Relies Exclusively on Two Unpublished Cases that Are Inapposite and Undermine the Government s Position The Government cites Celata v. United States, Fed. Appx. (th Cir. 0) 01, 0 (unpublished) and Wiebe v. National Security Agency (D. Md. ) WL 0, * (unpublished) for the proposition that CAFRA does not apply where there is an independent legal basis - such as a criminal search warrant - for seizing and retaining the property. [Memo at :-.] These cases are inapposite because the government did not seek civil forfeiture in either of those cases. (Celata, Fed. Appx. At 0 [ Celata identifies no authority that indicates he may hold the government to the time limitations in forfeiture statutes when the government is not pursuing forfeiture under those statutes, emphasis added.]; (Wiebe, WL 0, * -cv- JLS (BGS) PLAINTIFF S OPP N TO DEFENDANT S MTN TO DISMISS

21 1 [holding that CAFRA does not apply because the Government is not seeking and has never sought forfeiture, emphasis added.].) Here, on the other hand, the Government did seize Lycurgan s property in a nonjudicial civil forfeiture proceeding under CAFRA. On March,, the Government mailed Lycurgan, Inc. a NOTICE OF SEIZURE AND ADMINISTRATIVE FORFEITURE PROCEEDING. [McMillan Decl., Exh. A.] The forfeiture notice provided: The above-described property was seized by the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) for forfeiture pursuant to Title, United States Code (U.S.C.), Section 01(c), U.S.C., Sections 0-, C.F.R., Part, U.S.C., Section and/or 1 U.S.C., Section 1. [McMillan Decl., Exh. A, emphasis in original.] The Government s statement that the EP0s at issue in this case were not seized in a nonjudicial forfeiture proceeding [Memo at :-] is in direct contradiction to the Government s previous statement that the EP0s at issue were seized by the [BATFE] for forfeiture pursuant to... Section. [McMillan Decl., Exh. A.] Additionally, the Government s cited cases undermine its position that the Court lacks subject matter jurisdiction. (Celata, Fed. Appx. At 0 [ We have jurisdiction under U.S.C. 1. ]; (Wiebe, WL 0, *- [holding that the petitioners had standing to sue because they established a sufficient ownership interest in the seized property].) D. Lycurgan Respectfully Requests the Opportunity to Prove the Court s Jurisdiction Through Discovery and an Evidentiary Hearing The Court has subject matter jurisdiction of this complaint under CAFRA. CAFRA was triggered when the Government served its notice of intent to pursue civil forfeiture against the seized items, and Lycurgan, through counsel, contested the civil forfeiture by serving a verified claim. (Premises of nd Amendment Guns, LLC, -cv- JLS (BGS) PLAINTIFF S OPP N TO DEFENDANT S MTN TO DISMISS

22 1 F.Supp.d at, citing U.S.C. (a)(1)(a)(i)(iv).) As Lycurgan has the burden to establish the Court s jurisdiction, Lycurgan intends to engage in discovery, and requests the Court to hold an evidentiary hearing on the contested issues. (Laub, F.d at ; Rosales, F.d at 0.) Discovery and an evidentiary hearing would be particularly useful in this case because Lycurgan objects to the material, factual arguments submitted by the Government in the attached declarations of Special Agent Marks and Brice P. McCracken [Gov. s Exhs. 1 and, respectively]. Lycurgan respectfully requests the opportunity to prove this disputed, material issue of fact in an evidentiary hearing. (See Rosales v. United States (th Cir. ) F.d, 0; McCann v. George W. Newman Irrevocable Trust (d Cir. 0) F.d 1,.) Dismissal of this complaint based on a lack of jurisdiction would be premature, and would deprive Lycurgan of a fair opportunity to establish the Court s jurisdiction. V. THE MOTION TO DISMISS UNDER RULE (b)() FOR FAILURE TO STATE A CLAIM UPON WHICH RELIEF MAY BE GRANTED FAILS A. Legal Standard In addition to the jurisdictional challenge, the Government challenges the complaint on the basis of Rule (b)(). [Memo at :1-.] A Rule (b)() motion tests the legal sufficiency of the claim or claims stated in the complaint. (Bell Atl. Corp. v. Twombly (0) 0 U.S., -.) The complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. (Aschcroft v. Iqbal (0) U.S.,, quoting Twombly, 0 U.S. at 0.) In ruling on a Rule (b)() motion, the court must construe the complaint in the light most favorable to the plaintiff, and accept all well-pleaded allegations as true. (Daniels-Hall v. Nat l Educ. Ass n (th Cir. ) F.d,.) When a complaint adequately states a claim, it may not be dismissed based on a district court s assessment that the plaintiff will fail to find evidentiary support for his allegations or prove his claim to the -cv- JLS (BGS) PLAINTIFF S OPP N TO DEFENDANT S MTN TO DISMISS

23 1 satisfaction of the factfinder. (Twombly, 0 U.S. at, citing Scheuer v. Rhodes () U.S.,.) Generally, a Rule (b)() motion precedes any discovery by plaintiff because the purpose of such a motion is to challenge the claims as alleged only within the four corners of the complaint. (Rutman Wine Co. v. E. & J. Gallo Winery (th Cir. ) F.d,.) However, if the court considers extrinsic matter outside the pleadings, the court must convert the Rule (b)() motion into a motion for summary judgment. (FRCP (d).) Conversion to a summary judgment motion deters trial courts from engaging in factfinding when a ruling on a motion to dismiss and ensures... a plaintiff will have an opportunity to contest defendant s relied-upon evidence by submitting material that controverts it. (Global Network Communs., Inc. v. City of New York (nd Cir. 0) F.d 0,.) The nonmoving party shall be afforded the opportunity to obtain discovery under Rule (f), if requested, to oppose a motion for summary judgment. (Gunasekera v. Irwin (th Cir 0) 1 F.d 1,, n. 1.) Summary judgment shall not be granted if the movant fails to prove there is no genuine dispute as to any material fact, and the movant is entitled to judgment as a matter of law. (FRCP (a).) Here, the Government relies on two inadmissible declarations from Special Agent Marks and Agent Brice P. McCracken. [Def. s Exhs. 1,.] Both failed to execute their declarations consistent with U.S.C.. B. Merits 1. The Court Should Convert the Rule (b)() Motion into a Motion for Summary Judgment Under Rule (d). The Court has discretion to either consider or reject evidence presented outside the pleadings as part of a Rule (b)() motion. (Friedl v. City of New York (nd Cir. 00) F.d,.) If the Court does consider evidence presented outside the pleadings, then the Court must convert the Rule (b)() motion into a motion for -cv- JLS (BGS) PLAINTIFF S OPP N TO DEFENDANT S MTN TO DISMISS

24 1 summary judgment under Rule. (FRCP (d); Friedl, F.d at.) Here, Defendant filed the pending motion to dismiss under Rule (b)() and submitted two declarations therewith of two ATF agents, Special Agent Marks and Brice P. McCracken. [Def. s Exhs. 1,.] The Government s submitted declarations argue that the seized items are firearms and were illegally possessed by Lycurgan. [Id.] These factual allegations are material because the Government shall not be required to return contraband or other property that the person from whom the property was seized may not legally possess. ( U.S.C. (a)(1)(f).) These material factual allegations are also disputed. [Compl..] Accordingly, consideration of the declarations of the ATF agents presented outside of the pleadings converts the Rule (b)() motion into a motion for summary judgment. (Amerisource Corp. v. United States (Fed. Cir. 0) F.d,, n. [ Although the motions were originally filed as motions to dismiss, the Court of Federal Claims determined that the parties had submitted sufficient evidence in the forms of affidavits to convert them into motions for summary judgment. ].) Plaintiff requests the opportunity to seek discovery and present evidence that controverts the Defendant s submitted evidence. (Global Network Communs., Inc., F.d at ; Gunasekera, 1 F.d at, n. 1.). Plaintiff s Expert Witness Confirms the Seized Items Are Not Firearms. Daniel G. O Kelly, a Certified Firearm Specialist and former ATF Special Agent, opined that the seized,0 polymer items known as unfinished receiver banks are NOT firearms, nor are they contraband. [O Kelly Decl. (a)-(e); see supra Section III.] To the extent that the Government seeks dismissal of the complaint under Rule (b)() based on its jurisdictional challenge, the Government s motion fails. (See supra Section IV.) /// /// -cv- JLS (BGS) PLAINTIFF S OPP N TO DEFENDANT S MTN TO DISMISS

25 1. Defendant s Extrinsic Evidence that the Seized Items Are Firearms Lacks Foundation. Plaintiff Lycurgan objects to the declarations of the ATF agents submitted with the Government s motion to dismiss. The agents factual allegations that the items seized from Lycurgan are firearms and contraband, lack foundation and are without merit. (Evid. Code 0, 0.) Both agents baldly state: On or before //, ATF FTB determined that the EP0 lower receiver manufactured by EP Armor was a firearm as defined by U.S.C. 1(a)(). [Marks Decl. ; McCracken Decl..] This statement lacks information about which individual or individuals determined that the seized items are firearms, what the qualifications of the individual(s) are to make that determination, and how the determination was made. Notably, the ATF previously determined that the items are NOT firearms. [O Kelly Decl. 0(g), (h), Exhs. G, H.] The Government acknowledged in its search warrant affidavit concerning the raid of Lycurgan that 0% unfinished lower receivers are simply inert hunks of metal. [McMillan Decl., Exh. D [ Because 0% completed lower receivers are partially completed, they are not regulated as firearms, but are considered inert hunks of metal. There is no prohibition for anyone to possess an 0% lower receiver or a firearm parts kit containing an 0% lower receiver. ).] Lastly, the Government has not obtained a criminal indictment containing an allegation that the seized items are subject to forfeiture. [Karras Decl..] / / / / / / / / / -cv- JLS (BGS) PLAINTIFF S OPP N TO DEFENDANT S MTN TO DISMISS

26 1 VI. CONCLUSION For the foregoing reasons, Plaintiff Lycurgan, Inc. respectfully requests the Court to deny Defendant s motion to dismiss. Further, Lycurgan respectfully requests the Court to (1) allow Plaintiff to engage in the discovery process to meet its burden in establishing the Court s jurisdiction, () hold an evidentiary hearing on the issue regarding the Court s jurisdiction, () convert Defendant s motion to dismiss into a motion for summary judgment under Rule (d), and () allow Plaintiff to engage in the discovery process to controvert Defendant s extrinsic evidence that attacks the merits of Plaintiff s claims. If the Court is inclined to grant Defendant s motion to dismiss, Plaintiff respectfully requests the Court to grant it leave to amend the complaint. (See Fed. R. Civ. P. 1(b).) DATED: October, -cv- JLS (BGS) Respectfully submitted THE MCMILLAN LAW FIRM, APC /s/ Scott A. McMillan Scott A. McMillan, Esq. Attorney for Plaintiff, Lycurgan, Inc. PLAINTIFF S OPP N TO DEFENDANT S MTN TO DISMISS