Appeals from the United States District Court for the
Southern District of Texas
HIGGINBOTHAM, SMITH, and SOUTHWICK, Circuit Judges.
E. SMITH, CIRCUIT JUDGE
Butt ("Huma") and Tajuddin Salahuddin, pro
se, asserted interests in a convicted criminal
defendant's property that was subject to criminal
forfeiture and criminal restitution. The district court
denied their motions for ancillary hearings and return of
property. They appeal, challenging the rejection of their
petitions for ancillary hearings and asserting their
interests in the criminal defendant's property. We affirm
in part, vacate in part, and remand.
Javed Butt ("Babar") was convicted of mail fraud.
During the criminal investigation, the government seized from
Babar $91, 267 (the "cash") and 452 electronic
devices (the "devices") consisting of tablets,
phones, and computers. The cash was transferred to the U.S.
Marshals Service. The district court sentenced Babar, in
part, to $287, 679 in restitution and ordered him to forfeit
$287, 679. The court also granted the government's
motions to forfeit 360 of the devices to the United States in
partial satisfaction of the forfeiture order and to turn over
the cash in partial satisfaction of Babar's restitution
and Salahuddin, not parties to the criminal proceeding,
asserted interests in the cash and electronic devices, filing
individual pro se motions seeking ancillary hearings
and the return of property. Huma, Babar's sister, claimed
that she had a "priority ownership" in and was a
"bonafide purchaser" of the cash and devices
because she had paid off a debt that Babar owed to a third
party for lending him money to purchase electronic devices.
The district court denied her motion because she was not a
party to the criminal proceeding.
contended that he was a secured creditor of Babar's and
that he possessed a lien superior to that of the United
States on the cash and devices because he had executed a
Collateralized Inventory Loan with Babar that placed that
property "under lien." The court also denied
Salahuddin's motion because, taking his allegations as
true, he was "at best" "an unsecured
creditor" of the cash and devices, so "the United
States ha[d] a superior claim to the assets."
appeal, Huma and Salahuddin challenge the denial of their
motions asserting their interests in the cash and devices and
seeking ancillary hearings. Huma contends that she has a
"superior right because she is a bonafide lien
holder" of the cash and devices for having paid
Babar's debt to the third party. Salahuddin maintains
that the Collateralized Inventory Loan establishes him as
Babar's secured creditor with a lien superior to that of
the United States on the cash and devices.
party "asserting a legal interest in property which has
been ordered forfeited" may "petition the court for
a hearing to adjudicate the validity of his alleged interest
in the property." 21 U.S.C. § 853(n)(2)-(3);
see also Fed. R. Crim. P. 32.2(c). When "a
third party files a petition asserting an interest" in
property that the government seeks to forfeit, the district
"court must conduct an ancillary proceeding." Fed.
R. Crim. P. 32.2(c)(1). A petitioner has the burden of
proving "by a preponderance of the evidence that"
(1) "legal right, title, or interest" in the
forfeited property "was vested in the petitioner rather
than the defendant" or that petitioner's "legal
right, title, or interest" was "superior" to
that "of the defendant at the time of the commission of
the acts which gave rise to the forfeiture," or (2)
"the petitioner is a bona fide purchaser for value of
the right, title, or interest in the property and was at the
time of purchase reasonably without cause to believe that the
property was subject to forfeiture." 21 U.S.C. §
[an] ancillary proceeding, the court may, on motion, dismiss
the petition for lack of standing, for failure to state a
claim, or for any other lawful reason." Fed. R. Crim. P.
32.2(c)(1)(A). "For purposes of the motion, the facts
set forth in the petition are assumed to be true."
Id. "Although . . . ancillary proceeding[s]
arise in the context of criminal forfeiture, [they] closely
resem-ble . . . civil proceeding[s]." Furthermore, the
advisory committee's notes to Rule 32.2 state that courts
should follow the Federal Rules of Civil Procedure for
"fundamental areas" of ancillary proceedings, such
as "motion[s] to dismiss." Fed. R. Crim. P. 32.2
advisory committee's note to 2000 adoption.
this court applies the standard of review under Federal Rule
of Civil Procedure 12 to the pleading-stage dismissal of a
petition for an ancillary proceeding. That standard of review
states that this court "review[s] de novo a district
court's grant or denial of a Rule 12(b)(6) motion to
dismiss" for failure to state a claim, "accepting
all well-pleaded facts as true and viewing those facts in the
light most favorable to ...