Court Tells FBI It Can’t Just Take A US Private Vault Customer’s Money Without Explaining Its Actions

Legal Issues

from the hoisting-the-federal-Jolly-Roger-isn't-enough dept

US Private Vaults is a private company, in multiple senses of the word. Despite the use of the acronym “US,” US Private Vaults is not a government entity. The service it offers aligns roughly with storage services federally insured banks offer: a secure place to hold valuables that is only accessible by those who have keys to the safety deposit boxes.

But there’s a crucial difference: US Private Vaults does not collect or store identifying information about its customers. The company also does not keep a set of duplicate keys. Its service is pretty much end-to-end encryption, but for physical property. The company can’t provide law enforcement with identifying info, nor can it unlock anyone’s storage boxes when presented with a warrant.

Those privacy features led the government to assume anyone seeking to use this service must be a criminal. That was pretty much its argument when it sought a warrant to search a US Private Vaults location in Beverly Hills, California.

However, the FBI told the magistrate that it would not simply take everything it found when it raided this location. Instead, it told a judge it would inventory the contents of any boxes it was able to open and contact box owners to return their property if it could find any identifying information. That’s not what actually happened. The FBI broke its own sworn promise to the magistrate and proceeded to take possession of pretty much every bit of property it found, apparently hoping to use civil forfeiture to retain possession forever.

The FBI was sued multiple times by US Private Vaults customers. In at least one case, a court has ordered the FBI to return the property it specifically told a magistrate judge it wasn’t actually going to take.

Another lawsuit against the FBI is moving forward again, thanks to a ruling by a California federal court. In this case, the FBI took $2,000 in cash from a box owned by Jeni Pearsons. The FBI can’t argue there was no cash in the box. As this XTwitter thread by Rob Johnson explains, Pearsons documented the contents of her vault box every time she visited. Her most recent photo of the box’s contents — which clearly shows the $2,000 in cash — occurred just a month before the February 2021 raid.

When confronted with this fact, the FBI refused to offer any argument in defense of its thievery. Instead, it argued it was above the law. The FBI invoked sovereign immunity — which is normally the sort of thing invoked by the top level of governments in international lawsuits. This move by the FBI suggests it had no real argument to support its taking of Pearsons’ money, only the small hope the court could be persuaded to pretend the FBI’s theft was an executive action beyond the reach of the US judicial system.

The good news is that it didn’t work. The court handling Pearsons’ case (she’s represented by the Institute for Justice, which is handling multiple US Private Vaults cases) has told the FBI the very least it has to do is explain itself.

The minute order [PDF] says the invocation of sovereign immunity won’t work here. The lawsuit will move forward.

It first notes the facts of the case, which show the FBI simply made $2,000 vanish without explanation.

Plaintiffs stored numerous valuable items in a safe deposit box at USPV, including approximately $20,000 in silver and $2,000 in cash. On March 22, 2021, pursuant to a warrant, the FBI searched USPV’s business premises and seized various property, including Plaintiffs’ safe deposit box. The FBI later returned Plaintiffs’ silver but not their cash, which had seemingly “disappeared.”

It then goes on to point out the FBI’s apparently deliberate misleading of the magistrate approving the USPV search warrant.

Notwithstanding her representations to the magistrate, [FBI agent Lynne] Zellhart spearheaded “a separate plan — concealed from the magistrate who approved the warrant — to administratively forfeit all boxes containing property worth at least $5,000 (the FBI’s minimum threshold for profitability), and to conduct Investigatory searches of the boxes for evidence to support the forfeitures.” Therefore, “[i]instead of honoring its promises to safeguard the safe-deposit boxes and return the contents to the rightful owners, the government instead … [broke] into the safe-deposit boxes to look for property to forfeit and search[ed] for evidence to support the forfeitures.” As part of that plan, Zellhart created “specialized one-time search procedures” that included the use of drug sniffing dogs, documenting “cash observations,” and sending copies of paperwork to the asset forfeiture unit.

It was nothing but a cash grab. The FBI told a judge one thing and then did something else entirely, solely for the purpose of enriching the FBI itself. The fact that almost no criminal charges have been filed clearly indicates this was never about stopping crime or criminals.

The court denied the Bivens claim, something that’s unsurprising since it’s almost impossible to hold federal agents accountable under this particular Supreme Court precedent.

But that doesn’t mean the FBI is off the hook. Other actionable claims were made and the bizarre invocation of sovereign immunity isn’t going to allow the FBI to escape this lawsuit. Taking cash without bothering to explain exactly why the government was right to do so is unacceptable. That claim can move forward.

Here, Plaintiffs allege that the FBI seized their property and never returned it. Moreover, Plaintiffs allege that the FBI has no apparent need for the property. For these reasons, Plaintiffs have pleaded a plausible Takings Clause claim, and the court DENIES the Motion with respect to this claim.

The Federal Tort Claims Act (FTCA) move ahead as well, thanks to the FBI’s unwillingness to abide by the promises it made to the magistrate judge when securing the warrant.

Here, the parties do not meaningfully dispute that Plaintiffs’ claims involve goods detained by law enforcement. Instead, the parties disagree regarding whether Plaintiffs have alleged that the property was seized solely for the purpose of forfeiture. Plaintiffs argue that they have made exactly this allegation, since they alleged the FBI seized only the nests for law enforcement purposes, then subsequently searched the individual boxes for contents sufficiently valuable to be forfeitable. The Government contends that Plaintiffs have alleged that the FBI seized the property for both Investigatory and forfeiture purposes.

The Government’s argument is unavailing. Plaintiffs specifically allege that the FBI’s warrant application “sought to seize ‘the nest of boxes themselves, not their contents.'” Moreover, Plaintiffs allege that the FBI planned to “administratively forfeit all boxes containing property worth at least $5,000 (the FBI’s minimum threshold for profitability), and to conduct Investigatory searches of the boxes to support the forfeitures.” These statements allege that Plaintiffs’ property was not seized for any other purpose than “for the purpose of forfeiture.”

The Government makes no additional arguments for dismissal of the FTCA claims. Accordingly, the Court DENIES the Motion with respect to those claims.

The lawsuit moves forward. The FBI will now be forced to deal with discovery. Considering it has already been shown to be a liar, the FBI may try to settle this suit, rather than hand over information that could prove useful to others engaged in litigation over the USPV raid. But if it still thinks it can win this, things could get very interesting in the next few months once the FBI starts handing over documents and communications related to this raid. But, no matter how this turns out, we have enough evidence on hand already that shows the FBI is willing to lie to judges to get what it wants.

Filed Under: 4th amendment, civil asset forfeiture, fbi, forfeiture, jeni pearsons, search and seizure
Companies: us private vaults