Arizona Court of Appeals Division One Holds That (1) the State Waives the Right to Challenge a Party’s Failure to Timely File a Claim to Property Under the Civil Forfeiture Statutes by Actively Litigating the Claim for Several Years, and (2) Under Arizona’s RICO Statute, the Maximum Possible Punishment for an Offense Determines Whether the Offense Is “Punishable by Imprisonment for More than One Year.”

Defendant Campos owned Noe Auto Sales (“Noe Auto”).  In February 2004, Campos was indicted for numerous crimes based on Noe Auto’s sales of vehicles used to smuggle illegal aliens.  In September 2004, the State seized Campos’s assets, including the assets of Noe Auto.  In November 2004, the State filed a Notice of Pending Forfeiture and Notice of Seizure for Forfeiture, which required anyone claiming an interest in the seized property to file a claim within 30 days.  Campos did not file a claim but instead moved to stay discovery until the criminal charges were resolved.  Campos and the State stipulated, and the Court ordered, that the State would not be required to file its complaint until 30 days after the court ruled on the motion to stay.  In June 2005, Campos pleading guilty to facilitation of money laundering, a class six undesignated offense, stemming from Noe Auto’s failure to file appropriate forms with the IRS after receiving more than $10,000 in cash for an auto sale involving illegal immigration.  Campos was sentenced to one year of probation, and the offense has later designated a misdemeanor. 

At the State’s request, the trial court repeatedly extended the forfeiture action on the inactive calendar until September 2006, when the State filed a verified complaint.  Campos denied the material allegations in his answer.  More than a year later, and after extensive discovery, Campos moved for summary judgment.  In response, the State argued that Campos had failed to timely file a claim under A.R.S. § 13-4311(D).  The State also argued that Campos’s conviction for money laundering precluded the court from granting his summary judgment motion.  The State then applied for an order of forfeiture of Noe Auto’s property, asserting that nobody had filed a timely claim to that property.  It alternatively moved for partial summary judgment based on Campos’s conviction for facilitating money laundering.  The trial court granted the State’s application and motion and denied Campos’s motion.  After the Court denied Campos’s rule 60(c)(1) motion to set aside the order for forfeiture, Campos timely appealed.

The ArizonaAppeals Court affirmed in part, reversed in part, and remanded.  The Court first reversed the order for forfeiture, holding that the State waived by its conduct Campos’s failure to timely file a claim because it treated him as a claimant, engaged in extensive discovery, and did not challenge his “standing” for over three years.  Relying on City of Phoenix v. Fields, 219 Ariz. 568, 201 P.3d 529 (2009), Jones v. Cochise County, 218 Ariz. 372, 187 P.3d 97 (App. 2008), and other cases, the Court stated that “[a]s a general matter, any litigant, even the State, can waive by conduct its right to object to an adverse party’s failure to comply with statutory, constitutional, contractual, and procedural requirements.”  Applying this principle, the Court ruled in favor of Campos because “waiver by conduct is apparent from the extensive litigation record.”  The Court further explained that applying waiver by conduct against the state was “especially fitting” because it only meant that the State would have to litigate the merits of its forfeiture claim.

The Court next affirmed in part and reversed in part the order granting the State’s motion for partial summary judgment.  In this case, the State sought forfeiture based on racketeering allegations under A.R.S. § 13-2301(D)(4), which requires an act “that would be punishable by imprisonment for more than one year. . . regardless of whether the act is charged or indicted,” “committed for financial gain.”  Only property linked to such racketeering conduct may be forfeited.  If a claimant has been convicted of a crime that meets the elements of racketeering conduct, he is statutorily estopped from denying that he committed racketeering, see A.R.S. § 13-2314(H), and thus the State need only prove a connection between the property at issue and the racketeering conduct. 

The Court affirmed the trial court’s ruling that Campos had engaged in racketeering activity as a matter of law due to his conviction for facilitating money laundering, and held that the State was entitled to partial summary judgment with respect to certain property linked to that racketeering conduct.  The Court explained that the conviction satisfied the “more than one year” requirement in A.R.S. § 12-2301(D)(4) because the maximum sentence available was more than a year.  The Court rejected Campos’s argument that the Court should look to the actual sentence imposed or the presumptive sentence for the crime, explaining that the statutory language that the act need not even be “charged or indicted” shifted the focus from the sentence to the act itself.  The Court also noted that courts interpreting federal racketeering law have reached similar results.  The Court then explained that the State satisfied the “financial gain” requirement by showing through uncontroverted evidence that the potential smugglers, and a Noe Auto employee, would receive financial gain through Campos’s conduct.  Finally, the State presented uncontroverted evidence tying $12,600 in money seized from Noe Auto to the racketeering conduct.  Thus, the Court affirmed in part the entry of partial summary judgment with respect to this property.

The Court, however, reversed the grant of partial summary judgment as to the remainder of the   Noe Auto property seized by the State because there were disputed issues of fact about the State’s allegations of other racketeering conduct, which formed the basis for its attempt to forfeit that additional property.

Judge Norris authored the opinion; Presiding Judge Winthrop and Judge Irvine concurred.