Daily Development for Sunday, April 1, 2001

By: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
prandolph@cctr.umkc.edu

FORFEITURE; RICO; ENDANGERED SPECIES ACT: Federal court upholds possibility of forfeiture for conspiracy to violate Endangered Species Act.

U.S. vs. Purr, 25 F.S.2d 322 (D. Mont. 2001)

In a case that threatens to expand broadly the number of situations in which the United States Government will pursue forfeiture claims, a federal district court has let stand a recording of intent to forfeit a landlord's interest in a shopping center pending the landlord's prosecution for conspiracy to violate the Endangered Species Act. The government alleges not only that the landlord was complicit in its tenant's efforts to sell rare Canadian bobcats as pets, but also that the landlord's involvement amounted to "racketeering" under the federal RICO legislation, and consequently it is appropriate to invoke the civil forfeiture provisions available to the government under that statute.

Landlord operated a 15 store neighborhood shopping center in Kalispell, Montana. In 1996, landlord leased space in its center to Jape, who operated an outdoor supply store. A feature of Jape's operation was the sale of various varieties of hound puppies, used as hunting dogs. Soon after constructing the pens and other service facilities for the maintenance of the dogs while they were for sale, Jape began opening its premises evenings for meetings of local hunting groups. The landlord, an avid huntsman, regularly attended these meetings. At one of these sessions, as a joke, someone suggested that Jape arrange with some local hunters to trap bobcat cubs and to sell them in these evening sessions as pets. As a joke, Jape indeed did arrange for a bobcat cub to be acquired, and discovered that there was a ready market for the sale of the cub.

Thereafter, at intervals of about a month, Jape continued to acquire illegally trapped bobcats and to sell them in the evening "meetings" of the hunter's group. Because it was not deemed wise to display the bobcats in the dog cages during the day, Jape leased an equipment shed behind the center from landlord. The government alleged that landlord "knew or should have known" of the intended use of the equipment shed to keep the bobcats.

In 1999, Jape renewed the lease for another three year term. Soon thereafter, one of Jape's customers was seriously injured in a car accident leaving the center when the bobcat he had purchased got loose in the cab of his pickup truck. Jape was arrested by the U.S. Fish and Wildlife Service for violation of the Endangered Species Act. Jape apparently cooperated with the government to help it develop a case against Purr, and ultimately the government brought a criminal proceeding against Purr under the Racketeering and Corrupt Practices Act (RICO) and filed a petition in federal court to forfeit the landlord's interest in the shopping center due to the landlord's use of the center for a criminal enterprise. The petition alleged that the title that should be forfeited should be that in existence as of the time that Jape first commenced illegal use of the premises with landlord's knowledge. This time predated any of the other current leases on the property.

The court permitted the filing of the petition to forfeit, commenting that theft of an endangered species was a crime of "serious public concern, meriting the harshest of deterrents." It noted that, although simple knowledge of Jape's activities might not give rise to a criminal conspiracy, the renewal of Jape's lease with knowledge of his criminal conduct was an act that contributed significantly to the carrying out of the criminal enterprise. This act was not an isolated instance, because the landlord had earlier leased additional space to Jape in which Jape stored the bobcats, and landlord "had every reason to know" that this was the use that Jape had for the space. Such repeated acts in furtherance of a repeated series of criminal violations of federal law constituted the carrying out of a criminal enterprise and justified not only conviction, but also forfeiture of the entire center, which the court estimated had a value of over $3 million.

Other tenants of the center, two of them "anchor tenants" with over 50,000 square foot premises, intervened, alleging that they were innocent parties who would lose valuable rights if their leases were terminated as a consequence of the forfeiture. But the court here held that if the government could show that the other tenants were aware or should have been aware of Jape's nocturnal activities, then they were subject to forfeiture.

Comment: Notwithstanding recent amendments, and a general "go slow"

policy on the part of most federal prosecutors, the fact remains that the federal forfeiture laws stand as a significant threat to landlords. Although, in hindsight, landlords can be made to appear fully knowledgeable about the criminal affairs of their tenants, the fact is that landlords often can be duped or diverted and, in the final analysis are neither detectives nor prosecutors. The fact that they could be convicted of crimes and forfeit their possessions simply for doing business with others who carry out criminal activities may strike prosecutors as a valuable weapon, but to many these rights are the basic ingredients of a police state. Of course, this posting is the editor's annual April Fool's Day posting, so there is no particular reason to raise the alarm quite yet. But consider particularly the situation of others, even less complicit than our hypothetical landlord - the tenants here. How much ev idence must be adduced to justify setting aside their "good faith purchaser status?" In the circumstances set forth here, would the typical Montana store manager likely turn in his neighbor? Should his employer suffer significant economic loss if he does not?

Items in the Daily Development section generally are extracted from the Quarterly Report on Developments in Real Estate Law, published by the ABA Section on Real Property, Probate & Trust Law. Subscriptions to the Quarterly Report are available to Section members only. The cost is nominal. For the last six years, these Reports have been collated, updated, indexed and bound into an Annual Survey of Developments in Real Estate Law, volumes 1‑6, published by the ABA Press. The Annual Survey volumes are available for sale to the public. For the Report or the Survey, contact Maria Tabor at the ABA. (312) 988 5590 or mtabor@staff.abanet.org

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