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U.S. v. Parcel of Real Property Known as 1500 Lincoln Ave.

filed: November 7, 1991.


On Appeal from the United States District Court for the Western District of Pennsylvania; D.C. Civil No. 89-01251.

Mansmann and Alito, Circuit Judges, and William J. Nealon, Jr., District Judge*fn*

Author: Alito


The United States appeals from an order dismissing its complaint seeking civil forfeiture of property containing a pharmacy that was used for the illegal distribution of prescription drugs. The pharmacy was owned as a tenancy by the entireties by a husband, who was convicted for the illegal activities, and his wife, who did not know about or consent to this use of the property. The district court held that the United States was not entitled at this time to forfeiture of any interest in the property. We will reverse.


In 1989, the United States filed a complaint seeking civil forfeiture under 21 U.S.C. § 881 of property in Pittsburgh, Pennsylvania, on which the Pentown Pharmacy, Inc., was located. The complaint alleged that the property in question was transferred to A. Leonard Bernstein and his wife, Linda M. Bernstein, in October 1979. The complaint asserted that A. Leonard Bernstein, the president of the pharmacy, had used the property for the illegal diversion of various pharmaceutical drugs from 1984 to 1987. The affidavit submitted in support of the complaint asserted the following facts. Dr. Albert T. Smith, who was convicted of drug-related offenses, initially informed the Drug Enforcement Administration that Mr. Bernstein was involved in the illegal diversion of pharmaceutical drugs at the pharmacy. Dr. Smith subsequently engaged in a consensually recorded conversation with Mr. Bernstein at the pharmacy. During that conversation, Mr. Bernstein discussed the illegal diversion of Percocet and Dilaudid, two Schedule II drugs. 21 U.S.C. § 812. Mr. Bernstein also gave Dr. Smith a prescription vial containing Percocet tablets.

In May 1987, a confidential source informed law enforcement authorities that he or she had purchased various controlled substances from Mr. Bernstein without a prescription for the past three to four years. Between May 1987 and October 1987, the confidential informant made five controlled purchases of Schedule III and Schedule IV drugs from Mr. Bernstein at the Pentown Pharmacy without presenting a prescription. After obtaining a warrant, DEA agents searched the pharmacy and recovered $47,000 in cash, including bills bearing serial numbers matching those used by the confidential informant in making the controlled purchases. Mr. Bernstein was subsequently indicted by a federal grand jury for 51 drug-related offenses. He eventually pled guilty to nine counts and was sentenced to ten years' imprisonment.

Mr. and Mrs. Bernstein filed an answer to the forfeiture complaint. Mrs. Bernstein averred that she had "no knowledge of any of the activity that took place at [the pharmacy] in that, even though she is a title owner of the property, she did not occupy the premises." Mr. Bernstein asserted that "the record of his conviction speaks for itself."

In a letter-brief submitted at the court's direction, the government conceded that Mrs Bernstein had "a valid innocent owner defense under 21 U.S.C. § 881(a)(7), which permits forfeiture of any real property used in drug offenses except for any interest of an innocent owner. The government then discussed the extent of the interest in the property that it believed Mrs. Bernstein was entitled to retain. The government first observed that since Mr. Bernstein's interest was forfeitable and since a tenancy by the entireties is an "indivisible" "unitary" estate, the "logical conclusion" was that Mrs. Bernstein had no severable interest that she was entitled to retain. The government did not advocate this result, however, but instead maintained that her husbands illegal use of the property resulted in the severance of the entireties estate (i.e., conversion of the estate into a tenancy in common) and that Mrs. Bernstein was therefore entitled to keep a one-half interest in the property. Counsel for Mrs. Bernstein contended that the complaint should simply be dismissed.

The district court dismissed the complaint, holding "that a spouses innocent owner defense bars a civil in rem forfeiture action against property held in a tenancy by the entirety." The court noted that under Pennsylvania law a tenant by the entireties has title to the whole property, not to a share of the property. Relying on United States v. 15621 S.W. 209th Avenue, 894 F.2d 1511 (11th Cir. 1990), the court reasoned that Mrs. Bernstein, as an innocent owner, was entitled to retain her interest in the property. Because she had "an interest in all of [the property]," the court concluded, no interest in the property was subject to forfeiture by the government. The court also held that Mr. Bernstein's illegal use of the property did not result in a severance of the estate under either Pennsylvania law or federal common law. The court accordingly entered an order dismissing the government's forfeiture complaint.

The government then moved to alter or amend the judgment and argued that the court should enter an order granting forfeiture of the property except to the extent of the interest of the innocent owner, Mrs. Bernstein. Relying on the Sixth Circuit's recent decision in United States v. 2525 Leroy Lane, 910 F.2d 343 (6th Cir. 1990), cert. denied, 111 S. Ct. 1414 (1991), the government contended that it should at least be able to obtain "any separate interest which [Mr. Bernstein] would be entitled to should he survive or divorce [Mrs. Bernstein] or should the entireties be severed in any other manner." The government maintained that its approach would "protect [Mrs. Bernstein's] interest in the property to the fullest extent" because it would give her a life estate in the property and preserve her right of survivorship.

The district court denied the motion to alter or amend the judgment but noted in its opinion that the government could file a lis pendens against the property and thereby preserve its ability to seek forfeiture of any separate interest in the property that Mr. Bernstein might subsequently acquire as a result of the death of his wife or the severance of the tenancy.*fn1 The government then filed this appeal.*fn2


On appeal, the government relies on the same argument advanced in its motion to alter or amend the judgment of the district court. The Bernsteins, on the other hand, appear to insist that nothing short of outright dismissal of the ...

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