United States District Court, District of Maryland
Ellen Lipton Hollander, United States District Judge
This is a civil forfeiture action brought by the United States (the “Government”), plaintiff, pursuant to 21 U.S.C. § 881(a)(6). Claimant is M&C Wholesale LLC (“M&C” or “Claimant”), a California limited liability company. The property at issue (collectively, the “Defendant Property”) consists of the following: (1) $2, 200, 000 in U.S. currency, seized on or about July 25, 2012, from Wells Fargo bank account number XXXXXXX3269 (“Account 3269”); (2) 20 checks and 14 money orders seized on July 25, 2012, from 27324 Camino Capistrano, Laguna Niguel, California; (3) 51 checks and 14 money orders seized on July 25, 2012, from 33762 Avenida Calita, San Juan Capistrano, California; and (4) 31 checks and 6 money orders seized on July 27, 2012, and August 1, 2012, from Federal Express packages addressed to M&C and its employee, Daniel Bowles (“Bowles”). See ECF 18-1 at 1.
On April 25, 2013, the Government filed a First Amended Verified Complaint for Forfeiture (ECF 18, the “Amended Complaint”), supported by the Declaration of Thomas Adams, Special Agent of the Drug Enforcement Administration (“Adams Declaration” or “Adams Decl.”). In its suit, the Government alleges that the Defendant Property was derived from the distribution of certain products alleged to be controlled dangerous substance analogues. As explained, infra, under the Controlled Substance Analogue Enforcement Act of 1986 (“Analogue Act”), codified at 21 U.S.C. §§ 802(32)(A), 813, certain substances similar to illegal drugs in their chemical structure and physiological effect may be treated, for purposes of federal law, as controlled substances.
Lodging a variety of challenges to the Amended Complaint, Claimant has filed a Motion to Dismiss Amended Complaint and Alternative Motion for More Definite Statement (ECF 22, the “Motion” or “Mot.”), pursuant to Fed.R.Civ.P. 12(b)(6) and the Fifth Amendment’s Due Process Clause. Mot. at 1. The Government opposes the Motion (ECF 25). No hearing is necessary to resolve the matter. See Local Rule 105.6. With one exception, Claimant’s contentions lack merit. Accordingly, for the reasons set forth below, I will grant the Motion, with leave to amend.
I. Factual Background
The factual allegations are drawn largely from the Adams Declaration, attached to the Amended Complaint and incorporated by reference. See Amended Complaint ¶ 8; ECF 18-1.
JWH-018 became a Schedule I controlled dangerous substance on March 1, 2011. Adams Decl. ¶ 7 (citing 21 C.F.R. § 1308.11(g)(8)); see 76 Fed. Reg. 11075-01, 2011 WL 685945 (Mar. 1, 2011) (reflecting addition of JWH-018 as a Schedule I controlled substance). This case involves three substances that are all alleged to be analogues of JWH-018: UR-144, AM2201,  and MAM-2201. Adams Decl. ¶¶ 8, 16, 22-23, 27 (UR-144 and AM2201 alleged to have a substantially similar chemical structure as JWH-018 and to produce a similar effect as JWH-018 when consumed); ¶¶ 46, 56 (MAM-2201 alleged to be an analogue of JWH-018).
According to the Government, funds linked to the sale of UR-144, AM2201, and MAM-2201 are subject to forfeiture. It asserts that the Defendant Property includes “funds seized from a bank account that was used as a repository for [the] payments” for the illegal substances, as well as “checks and money orders constituting the payments themselves” that were submitted by customers of Bowles and M&C. Adams Decl. at 2.
The Government alleges that Bowles and M&C manufactured controlled dangerous substance analogues in California and sold the products to “smoke shops” throughout the United States. Adams Decl. at 1. Bowles and M&C shipped their products to retail stores via the U.S. Mail and Federal Express, and the stores would submit payment to Bowles and M&C through checks or money orders sent in the same manner. Id. at 1-2. Although Bowles’s position with M&C is not specified in the Amended Complaint, the suit indicates that he held a leading role at the company. See, e.g., id. at 1 (stating that “BOWLES and M&C conducted an operation whereby they would manufacture controlled dangerous substance analogues . . .”); ¶¶ 26, 28 (invoices bore Bowles’s name); ¶ 36 (package containing product was addressed from “Daniel BOWLES, M&C Wholesale”); and ¶¶ 72-73 (Bowles provided directions to marketing employee of M&C).
In September and November 2011, an undercover agent of the Drug Enforcement Administration (“DEA”) made several undercover purchases from The Tobacco Stop, a retail business located in Harford County, Maryland. See Adams Decl. ¶¶ 10-27. A DEA source had learned that The Tobacco Stop was selling a synthetic drug known as “Hysteria, ” which was labeled as “potpourri.” Id. ¶ 11. An undercover DEA officer entered The Tobacco Stop on September 22, 2011, and asked whether “Hysteria” was available. Id. ¶ 13. An employee offered, for $20, a bag labeled “‘1 gm HYSTERIA potpourri, 100% Marshmallow leaf not for human consumption.’” Id. ¶¶ 13-14 (quoting packaging). The undercover officer paid the employee, who confirmed that, despite the labeling, the product was intended to be smoked. Id. ¶ 15. The purchased product was tested and found to contain AM2201. Id. ¶ 16.
On November 14, 2011, the undercover officer purchased three grams of “Hysteria” for $47 from the same employee, who also sold rolling papers to the officer, “commonly used to roll marijuana-type substances into cigarette form for consumption.” Adams Decl. ¶¶ 17-19. The employee advised the officer to be careful while using the rolling papers because “Hysteria” is “‘very strong.’” Id. ¶ 20 (quoting employee).
The DEA executed a search warrant at The Tobacco Stop in December 2011. At that time, it seized approximately 400 packages labeled “Hysteria, ” approximately 30 packages labeled “Game Over, ” and approximately 17 packages labeled “Black Sabbath, ” as well as similar products. Subsequent chemical analysis of the seized packages labeled “Hysteria, ” “Game Over, ” and “Black Sabbath” showed that they contained AM2201. Adams Decl. ¶¶ 25, 27. Also found during the execution of the search warrant were sales invoices from Daniel Bowles, reflecting shipments of those three substances to The Tobacco Stop. Id. ¶ 26. Employees of The Tobacco Stop were interviewed and indicated that their practice was to pay M&C by check whenever they received an order. Id. ¶ 76.
On April 3, 2012, the Government, through a confidential source, placed a telephone call to the number contained on the sales invoices from Bowles found at The Tobacco Stop. An individual who identified himself as “Dan” answered the call. Bowles agreed to send a “sample package” of his products and told the source that, at that time, he carried four products: “Brain Freeze, ” “Black Sabbath, ” “Game Over, ” and “Dr. Feelgood.” Id. ¶¶ 28-29. Further, Bowles indicated that he no longer sold “Hysteria, ” and noted that “Brain Freeze” was his “best seller.” Id. ¶ 29. Bowles then shipped samples, all labeled with one of those four names, to the source via the Dragon’s Den Smoke House in Baltimore, Maryland. The package contained an invoice on M&C letterhead and was addressed from “Daniel Bowles, M&C Wholesale, ” at 27324 Camino Capistrano, Suite 155, Laguna Niguel, California, 92677. Id. ¶¶ 30-36. The samples were later tested and found to contain UR-144. Id. ¶ 37.
Thereafter, on June 18, 2012, the confidential source placed another call to the same telephone number and spoke again with an individual who identified himself as “Dan.” Adams Decl. ¶¶ 38-39. Although the source asked three times which products were strongest when smoked, only once did “Dan” respond that the products were not intended for smoking. Nor did “Dan” explain that they instead were meant to be used as potpourri. Id. ¶¶ 41, 43. During the call, the source ordered 50 packages of “Brain Freeze, ” which were shipped from “International Wholesale, ” located at the same address used by M&C. Id. ¶¶ 40-45. The “Brain Freeze” product was later tested and found to contain UR-144 and MAM-2201. Id. ¶ 46.
The Government also obtained information from a courier service employee who had made deliveries to and picked up items from M&C’s location in Laguna Niguel, California. Adams Decl. ¶ 47-48. In particular, the courier had been inside one of M&C’s suites and “observed 8-10 individuals seated around a table handling piles of a green herb-like substance. No other activity appeared to be ongoing within the suite.” Id. ¶ 49. An individual who appeared to be an M&C employee told the courier that their business involved selling products wholesale to “smoke shops.” Id. ¶ 50. In his Declaration, Adams avers that analogue products “typically use vegetable or herb substances as a base with which an analogue substance is then combined. Once combined, the analogue and herb/vegetable substances are then typically packaged in small heat-sealed bags for retail sale, and once purchased from a ‘smoke shop’ the contents are then smoked.” Id. ¶ 51.
The Amended Complaint also includes allegations concerning the payment for M&C’s products. Generally, M&C would send cash-on-delivery shipments to retailers who had placed orders with M&C sales personnel. Adams Decl. ¶ 83. Upon delivery, the purchaser would send a bank check or money order payable to Bowles or M&C at 27324 Camino Capistrano, Laguna Niguel, California. Id. As noted, employees of The Tobacco Stop told federal agents that whenever an order from M&C was received, The Tobacco Stop would send its payment by check. According to bank records, between November 2010 and December 2011, “various checks from The Tobacco Stop worth $66, 117.50 [and] made payable to M&C Wholesale and/or Daniel Bowles were deposited in Wells Fargo Bank account XXXXXX0553.” Id. ¶¶ 76-77. That account (“Account 0553”) was opened in M&C’s name, with Bowles and his sister-in-law, Chelsea Bowles, as the account’s signatories. Id. ¶ 78. Notably, on one day alone, July 16, 2011, a total of $324, 522.00 was deposited into Account 0553. See Id . ¶ 78, ¶ 79. Bank records indicate that most deposits into the account originated from businesses with names such as “D & A Smoke Shop, ” “Puff N Snuff, ” “Hawaiian Holy Smoke, ” “190 Drive-Thru Smoke Shop, ” “North Shore Smoke Shop, ” “Happy Daze, ” “Up in Smoke, ” and “Sky High Smoking Accessories.” Id. ¶ 80.
On July 25, 2012, the Government executed three search warrants issued by the United States District Court for the Central District of California at M&C’s place of business: Suites 155, 156, and 172, 27324 Camino Capistrano, Laguna Niguel, California. Among the items seized were several thousand pounds of the suspected analogue “Spice”; “several kilograms of the suspected pure chemicals that make up the suspected analogue products”; “several thousand pre-packaged bags of suspected analogue with various brand names that included Brain Freeze, Dr. Feelgood, Black Sabbath, Game Over, and Hysteria, ” located throughout three suites occupied by M&C; and 20 checks and 14 money orders payable to Bowles or M&C. Adams Decl. ¶¶ 52-57 and Attachment A (listing checks and money orders seized at that location).
That same day, the Government performed a search of Bowles’s residence, located at 33762 Avenida Calita, San Juan Capistrano, California. The search was conducted with the consent of both Bowles and his girlfriend. Adams Decl. ¶¶ 58-60. Among other items, the Government seized additional checks and money orders payable to Bowles or M&C. Id. ¶ 61 and Attachment B (listing checks and money orders seized). Later, on July 27, 2012, and again on August 1, 2012, the Government seized additional packages addressed to M&C, which were found to contain products as well as checks and money orders payable to Bowles or M&C. Id. ¶¶ 63-65 and Attachment C (listing checks and money orders seized).
On or about July 25, 2012, pursuant to a “seizure warrant” issued by the United States District Court for the District of Maryland, the Government seized $2, 200, 000 from Account 3269. Adams Decl. ¶ 84. Notably, the Amended Complaint does not identify the owner or signatory of Account 3269.
According to the Government, its allegations “demonstrate that [Account] XXXXXXX3269 was a repository for money paid to purchase illegal narcotics sold by Daniel BOWLES and M&C Wholesale.” Id. ¶ 85. Moreover, it claims that the checks and money orders listed in Attachments A, B, and C to the Adams Declaration “were intended to be used to purchase illegal narcotics from Daniel BOWLES and M&C Wholesale and represent proceeds from those sales.” Id. ¶ 86.
Additional facts are included in the Discussion.
A. Civil forfeiture actions
A civil forfeiture action is governed by the Civil Asset Forfeiture Reform Act of 2000 (“CAFRA”), Pub. L. No. 106-185, 114 Stat. 202 (codified in part at 18 U.S.C. § 983). In a forfeiture action, the Government must “state the circumstances giving rise to the forfeiture claim with sufficient particularity” to allow a claimant to conduct a “meaningful investigation of the facts and draft a responsive pleading.” United States v. Mondragon, 313 F.3d 862, 866 (4th Cir. 2002). Where the Government’s theory holds that “the property was used to commit or facilitate the commission of a criminal offense, or was involved in the commission of a criminal offense, ” the Government must “establish that there was a substantial connection between the property and the offense.” 18 U.S.C. § 983(c)(3); see United States v. Borromeo, 995 F.2d 23, 25 (4th Cir. 1993); United States v. $95, 945.18 in U.S. Currency, 913 F.2d 1106, 1110 (4th Cir. 1990); United States v. Santoro, 866 F.2d 1538, 1542 (4th Cir. 1989); United States v. $40, 041.20 In U.S. Currency Seized From State Dept. Federal Credit Union Account No. XXX786, 2012 WL 5409753, at *5 (D. Md. Nov. 5, 2012) (Chasanow, J.).
Among the categories of property subject to forfeiture are the following, see 21 U.S.C. § 881(a)(6):
All moneys, negotiable instruments, securities, or other things of value furnished or intended to be furnished by any person in exchange for a controlled substance or listed chemical in violation of this subchapter, all proceeds traceable to such an exchange, and all moneys, negotiable instruments, and securities used or intended to be used to facilitate any violation of this subchapter.
Under CAFRA, the Government ultimately must prove, “by a preponderance of the evidence, that the property is subject to forfeiture[.]” 18 U.S.C. § 983(c)(1). “The government may rely on circumstantial evidence to establish forfeitability.” United States v. Herder, 594 F.3d 352, 364 (4th Cir. 2010). A determination as to whether the Government has met its burden is based on “the totality of the circumstances.” United States v. $864, 400.00 in U.S. Currency, 2009 WL 2171249, at *2 (M.D. N.C. July 20, 2009), aff’d, 405 F. App’x 717 (4th Cir. 2010).
Of import here, “the Government may use evidence gathered after the filing of a complaint for forfeiture to establish, by a preponderance of the evidence, that property is subject to forfeiture[.]” 18 U.S.C. § 983(c)(2). Moreover, “[n]o complaint may be dismissed on the ground that the Government did not have adequate evidence at the time the complaint was filed to establish the forfeitability of the property.” Id. § 983(a)(3)(D). As such, “the Government’s forfeiture claim can advance forward in the face of a . . . motion to dismiss even if the Government’s complaint does not provide all the facts ...