Court: United States Court of Appeals for the Ninth Circuit

Filed: 2026-09-23

Docket: 5:19-cv-02337-

The ninth-circuit reversed the district court’s grant of summary judgment for the federal government in Lionel Cannon’s motion under Federal Rule of Criminal Procedure 41(g) seeking the return of $218,000 in cash seized by FBI agents but subsequently stolen by Special Agent Scott Bowman. The court held that sovereign immunity does not bar a Rule 41(g) claim when the government has lost seized cash but later recovers funds traceable to those specific proceeds through criminal forfeiture proceedings against the thief. Relying on the fungible nature of money, the panel determined that recovering the value of the stolen currency constitutes the “return” of property rather than a claim for money damages, distinguishing this scenario from cases where lost or destroyed property cannot be recovered at all. Under this standard, once the government recovers traceable funds, it bears the burden of demonstrating a legitimate reason to retain them. The court found that the government failed to meet this burden because it conceded it had not initiated forfeiture proceedings for the stolen amount due to the statute of limitations and offered no evidence that Cannon lacked lawful possession of the intermingled funds, despite Cannon providing specific documentation regarding lawful sources such as employment income and car sales. Consequently, the case is remanded to the district court for further proceedings to determine the exact amount of recovered funds traceable to Cannon’s safe and to adjudicate his entitlement to their return.

Do It For The Case Law is a news reporting service. Nothing in this episode constitutes legal advice.

Court: United States Court of Appeals for the First Circuit

Filed: 2026-09-23

The First Circuit affirmed the district court’s order classifying a $8.5 billion proof of claim filed by the PREPA bondholders’ trustee against the Commonwealth of Puerto Rico as a “Section 510(b) Subordinated Claim” under the Commonwealth’s Title III restructuring plan, thereby excluding the claim from any distribution to general unsecured creditors. The court held that 11 U.S.C. § 510(b), which mandates the subordination of claims for damages arising from the purchase or sale of a security, applies to the trustee’s claim because the Commonwealth allegedly impaired statutory and constitutional protections that served as a material inducement for investors to purchase the PREPA revenue bonds. Rejecting the bondholders’ argument that § 510(b) is limited to misconduct occurring at the exact moment of the securities transaction, the court applied a causal nexus standard consistent with other federal circuits, concluding that the claim sought damages arising from the purchase because the alleged post-transaction impairment targeted rights specifically granted to induce that purchase. The court further rejected the bondholders’ alternative arguments that the canon of constitutional avoidance required a narrower reading of the statute and that the claim should only be subordinated to claims senior or equal to the bonds rather than fully subordinated, noting the latter issue was waived for failure to raise it in the district court. As a practical consequence, the bondholders’ claim receives no recovery under the Commonwealth Plan’s Class 64 classification, which provides zero distribution to subordinated claims, while general unsecured creditors (Class 58) will recover approximately twenty percent of their claims rather than the reduced five percent they would have received had the $8.5 billion claim been classified as a general unsecured claim.

Do It For The Case Law is a news reporting service. Nothing in this episode constitutes legal advice.

Court: United States Court of Appeals for the Tenth Circuit

Filed: 2026-09-23

Docket: 5:23-CV-03180-JWL)

The tenth-circuit affirmed the district court’s denial of James Laughrey’s habeas corpus petition under 28 U.S.C. § 2241, which challenged his military general court-martial convictions on the grounds that he was a retired soldier and thus outside the jurisdiction of the military courts. The court first determined that the appeal was not moot despite Laughrey’s release from confinement because he faces collateral consequences, including the loss of retirement pay, veterans’ benefits, firearm rights, voting rights, and mandatory sex offender registration. Regarding the merits, the court applied a two-part analysis. First, Laughrey’s claim that Army Regulation 27-10 required Judge Advocate General approval for referring charges against retired soldiers was deemed unexhausted because it was not raised in military courts and did not fall within the narrow exception for constitutional challenges to jurisdiction over civilians; consequently, the claim was waived. Second, Laughrey’s alternative constitutional challenge—that the “Make Rules Clause” of Article I does not authorize court-martial jurisdiction over retired servicemembers—was reviewed de novo but rejected based on controlling precedent. Citing *Wilson v. Curtis*, 150 F.4th 1359 (10th Cir. 2025), and 10 U.S.C. § 802(a)(4), the court held that retired servicemembers retain military status due to obligations such as obeying orders, potential recall, rank maintenance, and pay receipt, thereby remaining within the definition of “land and naval Forces.” As a result, the court-martial possessed proper jurisdiction over Laughrey, and his petition was denied.

Do It For The Case Law is a news reporting service. Nothing in this episode constitutes legal advice.