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United States v. Thirty-Two Thousand Eight Hundred Twenty Dollars and Fifty-Six Cents ($32

United States Court of Appeals, Eighth Circuit

September 30, 2016

United States of America, Plaintiff- Appellee,
v.
Thirty-two thousand eight hundred twenty dollars and fifty-six cents ($32, 820.56) in United States Currency, Defendant, Carole Hinders; Mrs. Lady's Inc., Claimants-Appellants. United States of America, Plaintiff- Appellee,
v.
Thirty-two thousand eight hundred twenty dollars and fifty-six cents ($32, 820.56) in United States Currency, Defendant, Carole Hinders; Mrs. Lady's Inc., Claimants - Appellants.

          Submitted: February 9, 2016

         Appeals from United States District Court for the Northern District of Iowa - Sioux City

          Before SMITH and COLLOTON, Circuit Judges, and ERICKSON, [1] District Judge.

          COLLOTON, Circuit Judge.

         In May 2013, the Internal Revenue Service ("IRS") seized $32, 820.56 from Carole Hinders's business bank account based on allegations that Hinders had unlawfully "structured" deposits to avoid federal currency reporting requirements. The government then filed a civil forfeiture complaint against the seized currency. Hinders responded by filing claims to the seized property.

         Over a year later, the government moved to dismiss the case, and the district court[2] dismissed the action without prejudice. Hinders moved for attorney fees, costs, and interest under the Civil Asset Forfeiture Reform Act ("CAFRA"), 28 U.S.C. § 2465(b)(1), and asked the court to dismiss the case with prejudice on a motion to reconsider. The district court denied Hinders's motion for fees under CAFRA and declined to reconsider its prior dismissal without prejudice. Hinders appeals, and we affirm.

         I.

         Carole Hinders owned and operated Mrs. Lady's, a Mexican restaurant in Arnolds Park, Iowa. The restaurant accepted only cash and checks for payment, and Hinders regularly deposited the restaurant's earnings in the bank. Hinders almost always deposited less than $10, 000 at a time but occasionally deposited more than that amount. According to Hinders, she did this on the advice of her mother, who previously managed the bookkeeping for Mrs. Lady's and told Hinders that she could "avoid paperwork at the bank" if she kept deposits under $10, 000. This activity caught the attention of the IRS, which investigates persons believed to be "structuring" transactions to evade a bank's legal obligation to report cash transactions exceeding $10, 000. See 31 U.S.C. §§ 5313(a), 5324(a)(3); 31 C.F.R. § 1010.311.

         In May 2013, the IRS seized $32, 820.56 from the restaurant's business checking account. Before the seizure, Agent Christopher Adkins, an IRS task force officer, reviewed the restaurant's bank statements from mid-April 2012 through mid-February 2013. While more than $315, 000 had been deposited during this period, no individual deposit had exceeded $10, 000. A majority of deposits were for amounts between $5, 000 and $9, 500, and deposits on consecutive business days accumulated to more than $10, 000 on multiple occasions.

         On the day of the seizure, Agent Adkins interviewed Hinders. According to Adkins, Hinders confirmed that she was aware of the reporting requirement and claimed that she did not break up cash for deposit. Adkins contends that Hinders then changed her story after being shown a record of her deposits and admitted that she broke up deposits so that the bank would not have to fill out paperwork. When asked why she did this, Hinders asserted that she thought avoiding paperwork was a good thing and that her mother had advised her to keep deposits below $10, 000.

         Hinders disputes Adkins's account of the interview. She admits that she broke up deposits to keep them under $10, 000 and does not recall denying this fact. She claims that Agent Adkins asked her if she knew of "the $10, 000 rule, " and she admitted that she did, but says that she was thinking of the internal bank paperwork that her mother had described. Hinders maintains that she did not know that the bank was required to report deposits greater than $10, 000 to the IRS.

         In October 2013, the government filed a civil forfeiture complaint against the seized property, alleging that it represented proceeds from structuring offenses committed by Hinders in violation of 31 U.S.C. § 5324. Hinders filed two claims to the property, one in her capacity as president of Mrs. Lady's, Inc., and one in her personal capacity. The parties submitted a scheduling order and discovery plan to the court and began discovery.

         In October 2014, the IRS issued a policy memorandum that altered its approach to civil forfeiture. The new policy provided as a general rule that the agency no longer would pursue the seizure and forfeiture of funds in structuring cases where the funds were believed to have come from legal sources. A forfeiture in these circumstances would be pursued only in exceptional circumstances and with approval by the Director of Field Operations.

         In December 2014, the government moved to dismiss the forfeiture complaint without prejudice. The motion stated that the government wished to exercise its prosecutorial discretion to decline to pursue the case and to allocate its resources elsewhere. The government asserted that the parties had undertaken limited discovery, that trial was not scheduled to begin for several months, and that Hinders would not be prejudiced by dismissal. Hinders opposed the government's motion. She urged the court to dismiss the case with prejudice, or to deny the motion altogether and allow the case to proceed to trial. She argued that the government ...


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