I allowed myself to be drawn into a debate
(start at the post 11-14-11, 1:27 AM) over whether FRNs are "lawful money". I don't go there often; it had actually been going on for over a week, addressed to me but unbeknownst to me, until someone emailed me. A poster named "indio007" came up with a case I had never seen - United States v. Thomas
, 319 F.3d 640 (3rd Cir. 2003). It contains the following language:
Paper currency, in the form of the Federal Reserve Note, is defined as an "obligation of the United States" that may be "redeemed in lawful money on demand." 12 U.S.C. § 411 (2002). These bills are not "money" per se but promissory notes supported by the monetary reserves of the United States.
Now, I don't think that's very accurate.
Here's how I dealt with it there:
I hadn't seen that case before. That's a damn good question.
I think the answer is that you have to read cases as wholes, not pull quotes from context. The issue in Thomas was not directly whether FRNs are money or notes. Thomas was a drug dealer, from whom the DEA had seized cash (FRNs) to forfeit. The problem arose when the DEA converted the cash to a cashier's check. There is a line of in rem forfeiture cases that holds the the forfeiture is defeated if the govt relinquishes possession of the item before the forfeiture is complete. Thomas argued that the govt did exactly that. The Third Circuit was squirming to avoid that conclusion. In doing so, it used the language you quote to say, hey, FRNs are not that different from checks. I don't think they put a lot of thought into that conclusion before writing it. After all, in an earlier part of the opinion (¶4) they explicitly refer to the seized funds as "the money". It doesn't make a lot of sense to first say that FRNs are money and later say they're not.
I can't say I like it much, either. However, the preceding paragraph and the entire paragraph containing the questionable text reads:
It behooves authorities to preserve seized money in the form in which they seized it when they intend to use it as physical evidence in a trial. Typical situations are when cash traded for drugs contains trace residue of the narcotics involved or when the serial numbers on the bills implicate the accused. However, when no legal significance attaches to the bills themselves, some courts favor a departure from literal application of in rem jurisdiction. In Madewell v. Downs, 68 F.3d 1030, 1042 n. 14 (8th Cir.1995), the Eighth Circuit refused to follow Scarabin, holding that “[c]urrency, cashier's checks, and bank deposits are simply surrogates for each other, and in modern society are certainly regarded as ‘fungible,’ when the question is ownership of the funds each represents.” Similarly, the Ninth Circuit rejected the argument that when “currency was exchanged for a cashier's check, the currency, which is the res, ‘disappeared into the banking system and is no longer identifiable.’ ” United States v. $46,588 in U.S. Currency and $20.00 in Canadian Currency, 103 F.3d 902, 905 (9th Cir.1996). Citing Madewell, it held that “the cashier's check was an appropriate, fungible surrogate for the seized currency.” Id.
This approach accords comfortably with the jurisprudence of civil forfeiture. Historically, forfeiture proceeded from the legal fiction that property used in the commission of a crime itself offends the law. See, e.g., The Palmyra, 25 U.S. (12 Wheat.) 1, 14, 6 L.Ed. 531 (1827). The forfeited res, as a legal entity, is identical with the physical article when the property is, for example, a sea vessel, an automobile, or a firearm. Currency, however, differs substantially from such objects. Paper currency, in the form of the Federal Reserve Note, is defined as an “obligation[ ] of the United States” that may be “redeemed in *645 lawful money on demand.” 12 U.S.C. § 411 (2002). These bills are not “money” per se but promissory notes supported by the monetary reserves of the United States. When an individual engages in a criminal transaction with paper currency, although the individual certainly uses the notes to accomplish the criminal end, the currency's monetary value funds the transaction and is also an appropriate target of forfeiture. This result also follows from the fact that an individual who uses legal documents representing ownership of land to raise funds for a criminal purpose renders the land itself subject to forfeiture. See United States v. RD 1, Box 1, Thompsontown, 952 F.2d 53 (3d Cir.1991). It would be absurd, in that case, to suppose that forfeiture could attach only to the document and not to the legal interests represented by that document. We therefore hold that the DEA did not abandon the res when it converted the currency to a cashier's check.
I would argue that the questionable argument is "dicta", in that it's not necessary to reach the Court's conclusion. On the other hand, the Scarabin
case in question is one that reached the opposite conclusion when the seizing agency converted the cash to a cashier's check, and sent that to the DEA, which then deposited the check. However, in Scarabin
, the court was desperately trying to find a reason why the funds shouldn't have been forfeited, as "Scarabin pursued remission of forfeiture via administrative channels but was rebuffed due to a technicality," the 5th Circuit ruled that it couldn't overturn the decision, but suggested that the DEA return the money anyway. After the DEA refused, and the 5th Circuit justices discovered the cashier's check problem, they decided they did
have the power, and acted accordingly.
Does this help?