Menu

AZAPP Blog Your resource for news and analysis of cases in Arizona's appellate courts.

AZAPP Blog header image

State ofArizona v. Western Union Financial Services, Inc - 7/1/2008

Arizona Court ofAppeals Division One Holds That Arizona Courts Have Jurisdiction To Issue Pre-Forfeiture Seizure Warrants For Monies Not in Arizona And Addresses a Variety of Other Issues In the Forfeiture Context.


The State ofArizona filed a lengthy affidavit and supporting materials to request a warrant to seize for forfeiture monies purportedly traceable to racketeering activities.   Specifically, the State sought to seize Western Union (“WU”) wire-transfers of $500 or more, effectuated within a particular 10-day period, sent to and from 28 states, not includingArizona, and twenty-six locations inSonora,Mexico.  The State argued that the transfers were traceable to human smuggling and narcotics trafficking.  The affidavit described the methods used to facilitate human smuggling and narcotics trafficking throughArizona, but did not identify any particular persons, property, or transactions that were specifically related to illegal activities inArizona.

The superior court issued the warrant, and WU filed an emergency motion to quash.  The motion did not challenge that portion of the warrant authorizing the seizure of funds sent fromArizona toSonora, but contested the State’s ability to seize funds sent from another state for intended delivery inSonora.  Following the filing of the motion to quash, the case was transferred to Judge Kenneth Fields, and after an evidentiary hearing, the court granted WU’s motion to quash.  The superior court found that the wire transfers did not “flow through, touch or have any connection with”Arizona and were “carried out in and constituted interstate and foreign commerce.”  The Court also found that the State had failed to establish in personam jurisdiction over the customers utilizing the money transfers or in rem jurisdiction over the money transfers themselves.  Finally, the Court found the State lacked probable cause to believe any WU customers had committed crimes inArizona.  For those reasons, the court concluded the seizure warrant was unconstitutional as applied under the Commerce Clause, Foreign Commerce Clause, Due Process Clause and the Fourth Amendment of the United States Constitution.  The Court enjoined the State from engaging in future, similar attempts to seize wire transfer funds.

Reviewing the legal issues de novo and the grant of the preliminary injunction for an abuse of discretion, the Arizona Appeals Court vacated the trial court’s rulings.  In a lengthy 75-page opinion, Division One addressed jurisdiction, probable cause, the dormant commerce clause, and state sovereignty. 

Regarding jurisdiction, the Court held that A.R.S § 13-4302 does not constrain the superior court’s jurisdiction to issue pre-forfeiture seizure warrants.  Rather, that provision applies to the initiation of forfeiture proceedings.  In so holding, the Court relied on the language of the statute and — noting that “[o]ur courts have consistently held that anticipatory search warrants are permissible under the Fourth Amendment” — analogized a pre-forfeiture seizure warrant to a search warrant.  Turning to the issue of in personam and in rem jurisdiction, the Court first found that the superior court lacked in personam jurisdiction over the owners or interest holders in the funds as no such parties were served with process.  However, the Court found the superior court did have in rem jurisdiction over the wire transfers themselves because they constituted “property” as defined by the criminal code and because the res was located in Arizona.  Specifically, the “electronic credits” (ECs), reflected in WU’s computer system as the amount of money being wired, and the item on which actual payout is based, constituted intangible property “of value.”   A.R.S § 13-105(32).  After finding the wire transfers were in fact “property,” the Court conducted an exhaustive review of United States Supreme Court cases addressing jurisdiction.  Ultimately applying the “minimum-contacts” standard, the Court found that the res was located in Arizona because it constituted proceeds from human smuggling and narcotics trafficking activities that predominantly occurred in Arizona.  According to the State’s affidavit, the typical smuggler brings undocumented persons intoArizona, and they are held hostage inArizona in a “stash house” until their “sponsor” negotiates an agreement for their release with the smuggler.  The smuggler performs the agreement inArizona by releasing the undocumented persons upon notification of payment by the sponsor.

The Court then held that WU had standing to move to quash the warrant and turned to the merits of the superior court’s probable cause determination.  The Court described in great detail the State’s lengthy investigation (involving four state agencies and the federal Bureau of Immigration and Customs Enforcement) and the information the investigation uncovered.  Rejecting WU’s argument that the State was required to demonstrate either that specific individuals had engaged in human smuggling or drug trafficking or that the res was linked to a particular criminal event, the Court held that “the State only had the burden to show that the res –the [electronic transfers] – were proceeds of or used to facilitate either or both of those offenses.”  The Court also held that the warrant was not a general warrant because it did not afford the State “discretion to rummage through WU’s computer system and decide which ECs to seize.”  Rather, it precisely described the place to be searched and the res to be seized.

Finally, the Court addressed the trial court’s finding that the warrant impermissibly interfered with interstate and foreign commerce.  Holding that the warrant did not violate the dormant interstate Commerce Clause, the Court noted that it did not “directly regulate commerce outsideArizona’s borders” and “the incidental burden imposed on interstate commerce did not clearly exceed the benefit of the warrant to state.”  Likewise, the Warrant did not violate the dormant foreign Commerce Clause because it neither directly regulated or disrupted foreign commerce between the corridor states and northernSonora nor interfered with the authority of theUnited States in foreign relations withMexico.  Lastly, the Court held that the warrant did not invade the sovereign authority of other states.  The State did not impose its authority beyond its borders, and the record before the Court did not suggest the Warrant “interfered with the operation of other states’ laws.”

Judge Timmer, presiding Judge, authored the opinion, with Judges Norris and Brown concurring.

Posted On: 7/8/2008