Brief for the United States — Rex Trailer Co. v. United States

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pie <5 ey, Bs [ Office - Supreme Coart,: UJ. 3.

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oust oct 4 1965

i WAROLD 8. WILLEY, Clerk

Rex'Trarer Company; INC. PerivioneR = |:

s3% Py x FS ; ie 3 F SF Bee fei i “eee r » ;

ON” WHIT ‘OF. ‘CERTIORARI TO. HE ‘UNITED. STATES. ae eee “ee

COURT OF APPEALS FOR THE SEVENTH CrRoulT

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pinjons below ast ee he are ee 4G fate earn weer fat

Jurisdiction Nee i A ey Oa aca l

(Question presented yi ..........605. Stowe eae kage “2s

tetas tivelved °.. ~~... POETAG EE REE SOOO Ae 2

Statement OR EEE SE SAS SA DELO ae 3

/The- statutory background pax peRes Wea euss etiows 4

“The proceedings. in the instant case....... : eee 7

i a A Eee ras ‘10

- Argument: ; Boss pee =,

The Government's suit’ to recever under Section

~ \ 26(b)(1) Of the Surplus Property Act‘is not bar-

: red by the prohibition against double jeopardy. ._ 12

A. Well-established principles support — the

holding below that recovery by the Gov-

: . ernment would not place petitioner in

: -* jeopardy ‘for a second time. 3.

B. The fact that no. damages. were dies ian

does not convert the suit into an action.

eS Se | ees er eRree pevees ses 27

i i ERE Ee kT Le eee eas 4 orate 39

: ‘ CITATIONS

Cases: hea |

‘Ate hison, Topeka & Seite ‘Fe Ry. v. Nichols, 264 =

Us ERR RENTS hss Okie ae ane - 2

Barnes Coal Cor p.V. Retail Cc oal Merchants. Ass’ n,

128 F. 2d @45....... Cr iodine as ee Pe ee as 22

Bigelow v. RKO Radio Picture s, 327 US. 254. - 38°

Boyd v. United States, MEI MOUs kv ns os giv e's 14

Brady: Dale, FBG 0... ioe 21,38

_._—__-=“talvin v. thidaiey 178 Mass. 29° TC ere aa

(hattanooga Foundry v. Atlanta, 203 U.S. 390.... " 21-22 -

( ‘lydebank sen gee igh & Shipbuilding Co. v. C as- |

te taneda |1905] A.C. 6........1:,...: Pe ere yen -* jo

Coffey v. United oy 116 U.S. 436 Narain et ‘+> 28,98

\ Cox‘ ¥. ibe Brothers, 237 N.Y. 376; 143 NE,

eR: een e Capea eereaean tei e reer te

Cases— ‘ontinued :

: oe : Page

Crary v. Porter, 157 % 2d 410..........-.. ed ie a

_ Currie v. Flack, 190 F. 2d. 549... 22. .00.00.08. 22,38 |

P Se Douglas v. Cunningham, 294 Uses. 207........ Vora,

Federal Trade ¢ ‘ommission v. mwa Co.; 263-

US. 565 ......: DIR RAE Ree r se aot ee - 34

_ Fields v. Washington, 173 F. aA id bab eced eae 22

Gordon’ v. Street [1899] 2.Q.B. 641-.......... os, 34

(rreen Vv. Victor Talking Machine Co., 24 F. 2c

378, certiorari denied; 278 U.S. me. re 34

Guessefeldt v. McGrath, 342 U.S. 308. / Pitecerey es 26

Hedden v..Griffin, 136 Mass. 229. Fives cee Chena 34

Helvering v. Mitchell, 303 U.S, 391, |

‘ ? 10. 14, 16, 19-21, 26, 27, 28, 36, 38, 39

Huntéhgton v. Attrill? “LEE Sg seen ee 21, 22

James-Dickinson Co. ¥: Harry, 273,US8. 119..... 22

Meeker & Co. v. esata Valley. R. Co.,.236 U.S. *

WE sea Ps rk Oh ks ie EG ES 22

Murphy v. U hited States, 272 ing 33 eee 14, 26

} Murray «& Sorenson, Inc. U nited states, 207

P.. 2d 146. .: 2. veers re ear via ble kek cies ae

Overnight Motor Co. v. Missel,. 316 U.S. 572..:... 38

Pri€be & Sons v. United States, 332 US..407...... 29 .

Popham v. Eyre, Lofit 786, 98 Eng. Rep. 919 (Ch., :

ete lar Se” Saee ee ae in 34°

Robertson v. “Argus Hosiery Mills, 2h P..9d 205, °. °

certiorari denied, 314 USS. 681....... ee apie 22

* Schinkal v. United States, CA. 9, No. 14313° (de-

~~ elded September Be one ceeWiwes » aa

; Smith vo W heatcroft, 9 ¢ ‘h. Div. re een Sy hes? 34

~ Stockwell v. United States, 13 W: “3 eee Y 36, 38

Sulfivan: v. “Associated heen ond Distrib ="

lors, 6 F.2d 1000..... Sd ae non ae Walla hk ee bk 22

SiungPrinting & Pub. Assn. Vv. Moore, 183 U. s. 642. 30)

United States *: Pe rceaans Steel, Co., 205 US. :

eo eee ee PEPE ee Perey Kieend” > sae :

U nile d States V. Choufeau, 102 US S603... at (ees 13

- Enited States.v. © OngTess of Inubuistrial Organiza .

| Hors, 335 US. 106... .. ieee uerck Mas Keeei 26

C nited States ¥. Graingey, 306 US. 25........... 39 .

United States v. Cramer, 191 F. 2d “41. beexicrienk :

bor HI

Cases—Continued : ie

3 ry : | ee : Page

United States v. Grannis, 172 F. 2d 507, certiorarl _

- denied, 337 U. 3. 918. Me chee ae ed Pha Rast Sayed 18, 22, 31

“L'nited State sv. ‘LaFrancd, 282 U.S.568: ay

United States v. One Dodge Sedan, 113 F, “2d. 552." 26

_ United States v. Real Estatg Boards, 389 U.S7485. . - 1820

: Enited States v. Rohleder,.157 F.2d 126........ '_. aa

‘United States v. Smith, 342 U.S. 225....:....... _ 39

United States vy. Waikof, 144 F, ged ga......: cman 30

United States v. Weaver, 207 F: 2d 796 an 10, 21, 1, 32, 39

United States vs Withesspoon, 211 F. SAO. oi css 21,39

United States ex rel. Marcus v. Hess, 41 F. Supp.

We oe Spee ena oben wimncheeye ake ‘oe

: United ‘States éx rel. Marc ie v. Hess, 317 Us -

5 jee 10,11, 42, 13, 14- 19, 21. -22: 33. 26, 27 , 28, 39

SU nited States ex rel Ostrager v. Contractors, 317

Sa 8 bce hes OA Gears een ones :- 14,16:

| - Various [tems v. United States, 282 U.S. 577...... -14, 26

‘¢ — Wisconsin v. Pelican Insiirance Co., 127,US8: 265.2" 22

Woolworth Co. v. Contemporary, Arts, 344 USS. lee

ee eer aint Nees PPP EE EP eS Se

Constitution and Statutes: cae

“Constitution of the United States: - y faa)

~ Fifth Amendment --....:...%.. ies estes J

# — Act of September 18, 1945, 59 Stat. 533, 50 US .C.

App. (1946 ed.) 1614a, 1614b ..2........ es et

False Claims ~Act (Rev. Stat. 5438, 3490, 31

OBC. SBE) on. cets et eg ieee gts 21, 22, 32

: Og

- Federal Property and Administrative Services. Act.”

of 1949; 63 Stat. 377:

‘Section 105, 5 U.S.C. 630c ...;...... Patein 307 | 5

Section. 209, 40 U.S.C. 489 See 2

| pretense ae here re re eee pg? 2:

. Revenye Act of 1928, Section 203--........ weeeee ‘419

Surplus Property Act of 1944, 58 Stat. 765, et. ‘seq.

atid as amended, 60. Stat. 168, 50 U.S.C. App.

(1946 ed.) 1611 -et 2 per 31.

Section 2 ..... Nie es Pee Trt Tere TT CES noe

ett IAA). 56 Giese acer eieaun ei

"av ; ger

Constitytion aud Statutes —t ‘ontinued | eee

: mh oo) 5

(Section | Rea erg ier poe pkbuepreweaes 4

"section 2(h) AER COREA fe Sa oe eterno a

Section 2(q): ...7....... Ss ieuede as a ene 5°

eee ee ci Paty i eras: pas

. section 12 (1940°ed., Supp. yo Se 6

| Section- 43° (1940 ed., NGF ered e ees at 6.

; Section 16° (1940 1 = SUPP. BMGs iene cage 5

RR Ante re eo erty Seer re Pe 9, 10

Section 26(b) ie 2 4, 10, 11, 12, 14, “21, 22, 23, 25,39 ©

et ‘i re Ay he tn a ayes Mis 11, , 24, 25°

Is USC. cay on wih a Rw ool Mane vedas 26 -

- 98 USC.” fi pete ape a Spee Tee re ie Ve

st Se ~ epg ees Me ees Sa vines 21, 39:

“Miscellanéous: . : hiner | ee, Kerk

32 C.F.R. (1946 Supp.) : ag

a) I nk cao ean Pisieiceeeese Oe

Section 8302.11 .......: SS Peatad ni 3 ake oe

0: MN RE 6 oes oases ern ees cle

OD Coie: Mec. 7500... ...-.... te ase es Sein ae

92 Cong. Rec: 4001 ..... Rees Site has ocr 6.

UE hiebe cca te liys tens ser vis eS: 7

Executive Order No. 9689 of January 3], 1946 2

23 (UR Rae daca’ mat pene atts ed Pap er ety eee : 5

H. Rep. No. 1954, 79th Cong. 2d $ Sesé., and p. 2. = 2

_ H.R. 5125, 78th.Cong., 2d Sess.... charwed weeks 24

~ Quarterly Progress Report to the Congress en the >

War Assets Administration,” Second Ss cans “s ; |

* lbp. 8... te Cea t aaa pa ae

aes ee No. 1 of 1947, Sec. 501, 61

i: ' ME Bet ekce kad ea wes odes Se ere, eee es 5

"+ S$. 2065, 78th Cong., 2d. MM Sel cwescavackaessace - 24

> oe: ‘No. 1057, 78th ¢ ong.,- 2d, Sess:

“pp. to ESTER TELE TET TLL CTT eee saa oo 31

Be NN Se tee 4,11, 24, 25

8. Rep. No. 1142, 79th Cong., 2d Sess a ee ioe 6

iE gti ek i ten cee dace osap rr teys 35

ik gee Sater ery ie eeut caaeasad ewes 6

bad

ne Sayre Gort te Mite Stes

Oc TOBE. s Team: 10065: ;

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No. 46.

: ?

‘Rex TrRAiLeR Company, INc., PETITIONER: \

pes ,

Uwnirep States-oF AMERICA ;

« be

ON WRIT, OF CERTIORARI TO THE [NITED STATES —

COURT OF APPEALS FOR THE SEVENTH CIRCUIT

, : 8

BRIEF FOR THE UNITED STATES

OPINIONS BELOW y : L

The ordef of the District Court granting the

-Government’s motion for summary judgment (R.

- 12-13) is not reperted. ~The opinion of the Court /

of Appeals (R. 17- 23) is < reported at 218 KF. 2d 880.

_ 6

, - SURISDICTION : as

The judgment of: the Court of Appeals was

entered on’ January 18,1990 cR. 23). The peti-

“tion fora writ of certiorari was filed on April 11,

1955 and. granted on “May 93, 1955 (R. 24): 349

| . 2 | |

Nan ie eh ees

/) oem noe

U.S :, 937, The jariedic tion of this ( ourt rests upon.

28UL 8. C12: (1),

QUESTION PRESENTED! :

Whether the provision ‘in’ Section 26(b)(1) of”

‘the Surplus Property Act for recovery by the

Gov ernment. of $2,000 plus double the amount of

any damage for frauds ‘perpetrated pon iis com)-

pensatory rather than penal so that suit thereundét

- does not subject petitioner ta‘double jeopardy pro-

~ seribed by, the Fifth Amendment, although in a—

pr ior criminal proceeding. based on the same frauds

- petitioner pleaded nolo -contendere and paid the

_ fines imposed.

STATUTE. INVOLVED

? Section 26. of the Surplus Property ‘Act of 1944

(98 Stat. 765, 780, 50 ¥. 8. C. App. (1946 ed.)

163: )) provided in HE part:'

(b) Every persotf who shall use or engage in

er cause to be used or. engaged in any frandu-

lent trick, scheme, or device, for the purpose of

securing 6r obtaiming, or aiding to secure -or

obtain, for.any person any payment, property,

or other henefits-from the United States’ orany

Government ageney in conneetion with the dis-

position of property. under this Act; or who

enters into an agreement, eupabaation, or con-

spiracy to do any of the foregoing — aid

1 Section -26 of the we Sisweity’ dat, having been re- -

placed by the virtually identical” Section 209 of the Federal.

Property and Administrative Services: Act of 1949 (63 Stat.

377. 392, 40 U.S.C. 489), was repeated, | by Section 502(a)’ of

*+ the. latter Act (63 Stat. 399).

. x - 2.

¢ . a ¢ 3

_ Sees ¢

ec ee er ° j

wd z

- (1) ‘shall: pay to the U nited State s the sum

of “$2,000 for eac ‘h such act, and double the

Se amount of any damage w hich the gb mited States.

may have sustained by reasomr the reof, to-

gether with the cogts of wait: op

(2) shall, if the United States shall ‘so elect,

pay to the U nited States, as liquidaged dam

ages, a a sum equal to twice the consider ration’

agreed to bes given hy sych person tothe U nite dl,

States or any Government agency ; or

a (3) shall, if the United States shall so elect |

restore to the United States the property dite =

secured and obtained’ and the United Sti ates

shall retain as liquidated damages any consid

ration. given to. the “United States or any

Gov erniient agene Vv for such prope rty. |

"Ne

% we?

ee * ae oe

(d). Fhe civil remedies provide ‘din this, sec-

tion shall be in addition to all-other, erimin ul

pe malties and eivil remedies provided by Iau,

| ile.

This is an peren brought by: the U nited States

pursuant to Section 26(by(1) of the. Sur ‘plus P rop- ,

: erty: Act of 1944 (supra, pp. 2-3) to recoyer #2000

for each, of five frauds pe rpetri ited. by petitioner }

upon the United States.in connection with the Gov-

“ernment’s disposal of surplus property. The Dis-

trict Court granted summary. judgment for the

Government’ aud denied it to petitioner, therchy .

rejecting petitioner's claim that, since petitioner

¢ ; +

qe |

hal pleaded yolo contendere. and paid fines 1M) it

-erinuinal action based on the s Sale ¢ vents. thisceivil

person who shall use br engage in

fraudulent trick, se ‘heme, or device, for the purpose

action fordamages was barred by the F ifth Amend-

ment’s prohibition against double jeopardy (R. ¥2 d.

33) Fee court below affirmed (R. 17-25). - he

7 pertine nt facts. may he summarized as follows:

The statutory ee a Section 26(b) of the.

Surplys Proper ty Act of 1944 (s#pra, pp. 2- 3), pur-

suant to which’this action was brought, grants to

the .Cnitede States civil remedies against *‘every

. any

of securing or obtaining *.* .* for any person

any payment, property, or other benefits from the

United States or any Government agency in. con-

nection with the disposition of property under this

Act *-* *,% Section 26(b). authorizes the

United States to recover (1) $2,000 for each such

fraudulent act plus twice the amount of any dam-

ages sustained plus the cost of suit; or (2) ‘twice’

the consideration which the Ore agreed tos

pay; or (3) the property, while keeping the full

consideration paid’ by the fraudtilent purchaser.

See eS. Rep, No, 1057, 78th Cong., Jd Sess., p. 14.

The objectives .of the Surplus Property Act of:

1944 (58 Stat. 765) were to facilitate and regulate

the orderly disposal of surplus property (Section

258 Stat. 766, 30 — App. (1946 ed.) 1611)

while giving effect to dw enty enumerated purposes,

ineluding (d) the discouragement. of monopolistic

practices and the preservation’ of small business,

a e * * e e) 2 Le

Q « . ® wt

.*® . * ronal

Dwr

io the giving of an opportunity to retur ning vet-

‘ale to establish themse Ings: in business. agricul:

uli or “professivnal life, (h)- the discourageme nit

of disposal of surplus property to ‘Speculators, (q )

the preyention Wf the making of wmusual and exces-

sive profits, and (t) the securing to “the United

States as nearly as pos ssibledhe fair value of prop’

erty disposed of under the Act, except when, other-

wise provided. - Ne ae aie

In order to carry out the statutory purpose .

org veter ans, Seetion 16 (58 Stat. 173, a0 U.

. App. (1940-ed.{ Supp. XM) 1625), as pee

-enacted, authorized ‘the Surplus Property Board *

to: prescribe rezulations ‘to effectuate the objee-

tives of this Act to aid veterans to establish and

maintain their own small business, professional, or

agricultural enterprises, by affording veterans suit-

able preferenc a oe, oe aefual operation

2 The-Surplus Property Board was abolished ard its ‘fune-.

tions were transferred to the Surplus Property Administra-

tion’ and the *Surplus Property, Administrator. respectively,

by the Act of September 18, 1945 59 Stat. 533, 50 U.S.C. App.

& (1946 ei.) 16144, 1614b. Executive Order No. 9689 of Janu-.

ry 31, 1946 (14 FR. 1265), transferred these functions first to

the W ar Assets Corporation and, effective March 25, 1946, to

the War Assets Administration and the: Wer Assets Adminis-

trator. .Reorganization Plan No. 1 of 1947, Sec..501, 61 Stat.’

952, transferred these functions batk to the Surplus Prop-

erty Administration and the Surplus Property Adiministra-

tor, changing their names, however, to the War Assets Ad-

ministration and War Assets Administrator, respectively.

The Federal . Property and Administrative-Serviees Act. of

1949, Sec. 105 (63 Stat. 381; 5 U.S.C. 630c) finally placed -

theseafunctions, in the hands of the General Services Adminis-

tration and the Administrator Of General Services, respec-

tively, <“““s oe paar,

of the statute; however, disclosed that it was of lit-

tle value to veterans since federal and state agencies

enjoying higher oe under Sections 12 and,

13 (58 Stat..770, 50. U. *. App. (1940 ed.y Sapp.

V) 1621, 1622 ate wo all the surplis

property in which veterans were interested.’ Con-

gress, consequently, amended the Surplus Prop=

erty Avct in 1946 (60 Stat..168) by giving veterans fu

priority surpéssed only by that of the Federal Gev-

ernment and in addition authorizing the Adminis-

trator‘ to | }

~* * *sset aside or otheravise * * * [make]

available quantities and types of any surplus

property, except real property, which he de-

termines to be appropriate for arclusive dis-

posal to veterans for their ewr personal use,

and to enable them to establish and maintain:

their own small business, professional, or ag-

3 ricultural enterprises. [Emphasis added. |

Property | thus set aside for veterans enjoyed ;

superpriority surpassing ‘even that of the U nitea.

States.’ :

.Cf, § S. Rép. No. 1142, 79th eas 2d Sess., and H. Bep.

‘No. 19% 54, ‘79th. Cong:, 2d Sess.; 92 Cong. Rec. 4001, *

4 See fn.2, p. 5, supra.

*S. Rep. No. 1142, 79th Cong, 2¢ Ries. p. 3, isthe the’

‘priorities as’ follows:

1. Property set aside for veterans.

2. Federal Government.

-3. Veterans generally.

4. Small business. |

5. States and their political subdivisions and instru-

mentalities, Q |

7: : .

This preference was of great value to veterans,

not only because it entitled them to acquire the

property at an attractive price. and on favorabje

acquire those items which were in short supply.

In 4946, the United States was still in the midst

of reconiversion, and surplus property sales were

credit terms. but also because it enabled the

the only source from which many Poods could be

acquired.” As had been intended by Congress.

motor vehicles made up a large portion of the sur-

plus property set aside for exclusive use for

veterans.” , . ;

The proceedings in the instant case. The Gov-

ermment’s complaint, which was filed on August 9,

1950:(R. 1-3), alleged in Count I that during the

week of June 17, 1947, at Tinker Field, near’ Okla-

homa City, Oklahoma, petitioner ‘did ,cause Les-

‘ter Daniels to make a false statement of-a material

fact in writing to the War Assets Administration,

6 : : x . ye ' . .

639°C FR. (1946 Supp.) 8302,8(d), 8302.11. The latter ,

regulation provided: "5-70?

Disposal agencies. shall fix the fair value at which

property shall be acquired by’ priority claimants. Such

a fair value shall not be greater than the lowest ‘price

which is offered to any trade level at the time of ac-

quisition by the -priority claimant, or where the fair

_ value ‘is fixed after examining competitive: bids, it “shall .

not be ‘greater than the lowest acceptable bid. = [Em-

phasis added. ] , i Pre

7 See e.g. H. Rep. No. 1954, 79th Cong... 2d Sess., p. 2:

ef. Quarterly Progress Report go the Congress by -the War

Assets Administration, Second Quarter of 1946, p. 19.

Ssce H. Rep. No. 1954, 79th.Cong., 2d Sess., p. 2; 92 oe

- > Ree, 4002. : ae

©Sehedule of Property to be set aside for veterans: Ex-

hibit A following 32 C.F.R. (1946 Supp.) 8302.14.

4 oe

gx’ ™

an-agency of the United States Government, for

the purpose of obtaining 1 Ross Carrier Company :

Straddle Truck, model 90-7056, serial 1940 USA

963821"! (R.:2)." The complaint contained four

additional counts, numbered TI through V, which

are identical with C ount I except as to the name of

the person whom petitioner had caused to, make the

false statement and the description of the vehicle

involved (R. 2. 3). On the basis of the allegations

contained in rae five counts, the complaint prayed

for judgment in the amount of $2,000 for each of

the five frauds perpetrated by petitioner upon the -

Was Assets Administration, as provided in Sec-

tion: 26(b) (1) of the Surplus Property Act (supra,

pp. 2-3), a total of &10,000 plus costs (R.3)+

By its amended answer, petitioner in effect ad-

mitted the truth of the allegations in the Govern-

ment’s complaint, but sought to defend on the

ground that the Government’s action was: one for

a ‘statutory penalty”? and not “for the collection of

‘any obligation or indebtedhess owing to or the re-

coupment or recover, of damage suffered by ‘the

[United States] ™ €R. 6). The answer alleged that

petitioner had previously been indicted for the

‘identical offenses charged inthe * * * com-

plaint * * * to which it had pleaded nolo con-

tendere, and upon which fines in the aggregate

gee of $25,000 had heen imposed and paid (Rt.

-7, 8-11). The answer further averred that’ peti-

1 The “false statements” were statements qualifying .the-

persons named in each of the counts as a veteran for a pri-

ority right to make the purchase, See R. 7, 18.

tioner’s frauds have net caused the Government

any cae or loss since it received the fuil ad-

vertised offering price for the trucks and, had the

trucks nat all been sold to those having claiming

priorities, they would have been sold at the same.

price to nNon-priority pure hasers suc ‘h as petitioner

(R. 7-8). : | } |

| Thereafter, both parties’ moved for summary

“judgment. The Government? s motion was on the

—'vround that there was no genuine’ issue of fact and

further that, since the defenses set out in peti-

—tioner’s. answer were insufficient, the Government

was entitled to judgment as a matter of law (R.

3-4), Petitioner’s motion was based on the’ claim

that the Government's suit, being for a statutory

penalty, was barred by the Fifth Amendment's pro-

hibition against double , jeopardy (R. 4-5). |

The District Court over ruled petitioner’ s motion

for summary judgment .and gr ranted the Govern-

ment’s motion, holding im effect that the double

jeopardy provision of the Fifth Amendment was |

not applicable to this civil-aection for damages” TR.

12-13). Accordingly, the District Court’ entered

judgment for the Government for $10, 000, $2,000

for each of thé five frauds practiced by petitioner,

plus eosts (R. 13). On appeal, the court below at-

firmed, holding that Section 96(b) (1) was com-

pensatory and ‘not -penal, and therefore that the

action was not. barred by the Fifth oe ae. nt’ s

prohibition against double jeopardy. (R, 17-2:

: i Pees 10

SUMMARY OF ARGUMENT

The holding of the court below that the Govern-

ment’s sult untler Section 26(b) (1) of.the Surplus

Property Ket. to recover $2,000 for each of peti- ;

tioner’s five frauds, was not:barred by the double

jeopardy prohibition—because the civil remedy is

compensatory and not punitive—is suppojted, if .

‘not required, by several decisions of this Court,

particularly United States er rel. Marcus v. Hess,

317 UL 8,937, See also, United States v. Weaver,

207 BF. 2d 796 (CLA. 5) (agreeing with the court

below). Applyi ing the comparable provision of the

False Claims Act, Wareus v. Hess held that a prror

criminal proceeding’ ras no bar to the Govern-

ment’s recovery of $2,000 for each of: the false

claims filed in that case. The critical facts are the

saine here and the statutory provisions and their

purposes are practically identical. rae

In-addition, the Surplus. Property. Act-and-its—

ns - legislative @ history show a definite -eongressional

purpose—the gov erning criterion, under npr us Ve

Hess and Helvering v. Mitchell, 303 U. 391, in

characterizing remedies of this gener al pfeonadr

provide a civil compensatory remedy and not

merely a penalty or punitive imposition. Jas‘ us,

~ flrss having been decided. shortly before the enact-

ment of the Surplus Property Act, ‘‘we. may as-

sume ‘that ‘the framers of § 26(b) were aware of .

that decision when they formulated § 26¢b)"" (R-

19). Moreover, since the other subparagraphs of

the Scetion prov ide aoe’ compensatory, remedies

pt -

for violation of the Aét, it is highly unlikely that

Congress intended to include a punitive s sanetion in

‘the same section; indeed, Section 26(¢d) describes:

26(b) as.providing “civil reniedies”* and the Senate

Committee's report characterizes Section -26 as

giving: to the United States “the option of eléct-

ing ‘among three different measures of, damages.

S. Rep. No. 9057. TSth Cong., 2d Sess:, ppe 13-14.

Finally, since the Act itself and its législativ e his-

- a

‘tory show that Congress intended that suits under’

Section 26(b) could and would be brought in addi-

tion (and not merely as an alternative). to criminal

strued to avoid constitutional issues would seem to

require that Section 26(b) be held to proyide a

compensatory remedy, not a penal sanction.

. ee

proceedings, the rule that statutes are to be con-™*

Petitioner’s argument that-Section 26()) (1) is F

—penal in the particular cireumstances of this case

because the frauds assertedly caused no damage

to the Government is “based | on a misreading of

Marcus v. Hess. That case, as well as Helvering V.

Mitchell, ruled that the issue is whether Congress,

anticipating that frauds under the partic ‘ular stat- -

ute would venerally « cause damage, designed a gen-

eral statutory formula to provide restitution for

damage which might well he hard to prove in

“any. individual case; on¢e-it is decided. that such

was. the congressional pUrpose, the remedy ‘ap-

plies: to all cases under the statute ‘irrespective

of their individual facts: or of proof of actual

5; =

«o

° .

damage. The comparable remedy in the False

Claimis Act was actually applied in Marcus v. Hess

without regard to a showing of loss. |

Similarly, here it is clear-that-not only did Con-

-gress anticipate damage generally from frauds

under the Surplus Property Act but that in fact

damage and injury to the Government résulted in-

several ways. And the difficulty of reducing these

damages to a monetary equivalent. furnishes full,

justification - form the $2,000 provision of Seetion

26(b) 61). “The inherent diffic ulty of choosing a

proper specific sum whic h would’ give full restitu-

tion was a problem for C ongress.’ ’ Mareus \V: Hess,

317 U.S. at 592. 3 . SB aaa

o ARGUMENT See as

The Government’ s Suit to Recover Under Seviton 26(b)

(1) of “the Surplus Property wi Not Barred by the

Prohibition Against Double Jeop rdy. —

_ This suit was brought by the United States under:

Section 26(1) (1), of the ‘Surplus Property Act

which provides that *tevery person who shall use or

‘engage in * * * any fraudulent trick, scheme, or

device, for the purpose of securing or obtaining

—

* * * for any person any payment, property, or

po r henefits from the United States or any Gov--

ernment agency in connection with the disposition

of property under this Act * * *°' **shall pay to

the United States the sum of #2000 for each such.

act, and double the athount of any damage whieh |

the United States may. have : ‘sustaine d by r ‘aSOn |

thereof, |

Petitioner in effect admits that it, defr waded the

= oe aka

> :

ay, e

War “Assets Administration i in connection with eer-

tatn sales ‘hy that agency of strplus motor vehicles

“in 1947 (RL 6). Tt, however, seeks ta avoid making

the paviments prese ‘rihed hy Section 26(b) (1) on

the ground that the £2,000 pilus doubt damage pro-

vision constitutes a statutory: penalty and conse-

quently that, because of the prior criminal proc eed- |

ings based on, the same frauds, the Government is

harreth from recevering under Section * 26(b) (1)

by. the double jeopardy provision of the: Fifth

; Amendment. i, This contention is without merit.

; . Ww sit cd cbiinihe Principles Support the Hold- 7

eee ing Below that Recovery by the Government

would not Place Petitioner in Jeopardy for a

_ Second ime. - ge a :

The- ecisions of this C ourt, particularly that in

United States érxel. Marcus vy. Hess, 3Y7-U. S. 537,

» leave no doubt that the instant suit does not operate

to place petitioner in jeopardy for a second time

contrary to the proscription of the. Fifth Amend- 3

ment. For while it is clear that the double jeop-

-ardy provision prohibits the imposition of pun-

ishment twice for the sae (see &. g., United

States v. LaF ranca, 282.0 8. 568; Coffey v. United

States, 116 USS. 486.0 oT “Stites v. Chouteau,

-102 ULS, 603), it is equally well settled that the'con-

stitutional prohibition, is. inapplicable Where the.

second proceeding, although based on the same

facts, is not penal in nature.® See ¢. Yu. United ©

1s* * * nor shall any person: be subject for the same of-”

. fence to be twice put in jeopardy of life « cclmb: * * *”,

¢ 4 -@s

3 | 14

States ex ret. Marcus \. Hess, SV US. 0387; bl onited

States er rel, Ostrager. \. Contractors, 317. U.S

‘562: Helvering v. Mitchell, 303.0. 8. 391; United

Mate sv. Real Estate Boards, 339 ULS, 485. 493. fn.-

: i: Murphy v. United, States, 242 u. S. 630; Vari:

ous Items v. United States, 282° U.S. 577; Boyd v.

©" United States, 116 U.S. 6162 Under the latter de-

cisions, particularly Marcus v. less, supra, which —

involved the very same situation and contention. by |

the defrauders @s to the comparable provision of

‘the False Claims Act, the right of action vested in -

the Government by Section 26(b)(1) of the Sur-

plus Property Act constitutes a civil remedy, com-

pensatory in nature. Accordingly, the court below

properly held that the instant proce ceding does no

come under the proscription of the F ifth Anie nd-

ment. | |

bee Se | Marcus v. Tless, the defendants hal pleaded

nolo-contendere to an indictment for conspiracy ‘to.

defraud the United States and had: paid the fines

e.- imposed. (317 Us S. at SH, 548). After this.¢riminal

_ proceeding, there was instituted agi inst the defend-

ants an actron seeking judgment in accordance with

the provision of np False Claims Act (Rev, Stat.

5438, 3490, 34 U.S.C. 231), which provides, iu lan-

. guage once identical to “that here in-

volved,” that a person who perpet ‘ates certain

frauds upon the U nited States: |

. a? ie forfeit and pay to the U nited

States the sum of two thons: uid dollars. anil, in

- 2 Rev Stat. 3490 apparently served as a model for See--

tion 26(b) (1); see infra, p. 23.

*. ;

Soda: ee ie 2

addition, double fhe amount of dathages which

“the United States may have sustained ta

togethe r with the costs of suit.

4 LS

The defendants. argued that the statute ander which

the action was brought prescribed p penalty and so

the prior criminal proceeding, coupled with the pro-

hibition. against double jeopardy, precluded as-'

‘sessment of. the sti atutory #2.000 plus double dani

complaint (317 U.S. at 548). :

This Court was unanimous in rejec ting these cone

tentions." With . the exeeption of Ma. Justice.

Frankfurter, who would have based the ruling on’

this issue on another eround (S17 ULS. at 593 ff.)

the court was in agreement ‘that the proviston. of

the False Claims Act that the-defr auder should

‘forfeit and pay’? $2,000 and double damages for

ages for each fraudulent act, as sought in the

each fraud upon the Government was remedial and —

Mr. Justice Murphy did not participate in the -consider-

~ ation of the ease, 317. Us. 553.) The dissent of; Mr. Justice

Jackson was direéted tO ansissue other than that of the as-

~ serted double jeopdrdy. 317 U.S. at 556.562.

Wy the view of Mr. istice Frankfurter, there was no

double jeopardy involved because

* * * where two such proceedings me ety | Carry cutethe

remedies whieh Congress has presertbed in advance - for

‘a wrong, they do not twice: put a man in jeopardy. for

the same offense. Congress thereby merely allows the

. comprehensive pe énalties which it has imposed to-be en-

foreed in separate suits ingtead of in a single proceed -

ing.. By doing this Congress does not impose more than

‘a single punishment. And the double’ jeopardy clause

cedure for the —— of punitive eae. {317

US 5. at 555.) -

does not prevent. Congress from prescribing such a pro-_

\ » 4 oi

16 ae

not penal. ** Pointing out that the double jeopardy

* provision applies only té ‘‘actions intended to ati-

thorize ¢riminal punishment to vindicate public

| justice’? and.not to ‘‘civil, remedial actions brought |

primarily to protect the government from financial

—loss’’ (317 U.S. at 548-549), the Court quoted from

_its earlier decision in Helvering v. Mitchell, 303

U. S. 391, 399, to the effect that (317 U.S. at 549):

Congress may | impose both a criminal and a

civil sanction in respect, to the. same “act or

omission ; for the double jeopardy clause pro-

“hibits merely punishiggs twice, or attempting

a second. time to punish criminally,: for the

same offense:. The question for decision is

thus whether * * * [the statute in question]

* * * imposes.a cr iminal sanction. That ques-

tion is one of statutory construction.

oo with reference to the False Claims Act ‘before

it, the Court held (ibid) :- i

It is enough for present purposes if we con-

clude that the instant proeeedings are remedial

and impose a tivil sanction. * * * Ww e cannot.

say that the remedy now before us requiring _

payment of a lump sum [of $2,000] ‘and double

-damages will do more than afford the govern-

> 7

15 The holding in Marcus v. Hess. was applied in United

States ex rel. Ostrager v. Contractors, 317 U.S. 562, decided the ‘

same. day as Marcus v. Hess and similarly -involving the ap-.

‘ plicability of the double jeopardy. provision to an acfion

_¢ under the False Claims Act following a crininal proceeding.

ment complete indemnit y for the injuries done

The Court further aenabe that the $2,000 plus |.

_ double damage provision of the False Claims Act

was enacted by Congress not as a preserver of

peace or to vindicate ‘public justice, but. in order’

to protéct the property rights of the United States,

rights which the whe gare has" jist like any

other person (at 549-550) :° pon a vate

It is, Of course, well accepted that for one

act a. person may be liable both to-pay dam-

ages and to suffer a criminal penalty. Long

ago, this Court said, ‘A man may, be com-

| pelled to make reparations in damages to the

injured party, and be liable ajso to -punish-

mert for a breach of the publie peace, in con-

sequence of the same act; and may be said, —

in common parlarice to be twice punished for

the same offense.’’ Moore v. Illinois, 14 How.

13,19, 20. Congress has ‘‘ power to. give.an ac fs:

tion for damages to ah individual who suffers |

by breach of the law.’”” Chattanooga Foundry

v. Atlanta, 203, U.S. 390, 396, 397. And it has

tlris same power when it, ratlier than some

_private individual, is injured by a fraud. |

- Quite aside from its interest as preserver of

the peace, the government When spending its

. money has the same interest in protecting..it-—

self from. fraudulent practices ax it has in pro-

tec ting any citizen from frauds w vhiech may be |

practiced upon him. ‘The powers of the

”

United States as a sovereign, dealing with of:

fenders: agaist their laavs, “must not he con-

founded ‘with their rights is: a body pofitic.

It would present a’ ktrange anomaly, indeed,,

if, having, the power to make contracts and

hold property as other persons, natural or artt-

ficial, they were not entitled to the same reme-

‘dies for. their protection.” Miton. v. United

States, 1] How. 229, 231,

The opinion conclided on this point (at PP 5o1-

(02): a . :

“

Tt is trie that “* Punishment, in a wertain

and very limited sense,. may he the result of

the statute hefore us so far as the wrong-doer

is, concerned,” but: this is not enough tO abel

it asa criminal statute. Brady v. Daly, 175

_ U.S. 148, 157. We think the chief purpose of

: the statutes here was to provide for restitur.

tion to the. government of money taken from

“*! it By fraud, and that the device of double dam-

ages plus di specific sum was chosen to make

- sure thatthe government w ould he made com-

pletely whole. * * * The inherent difficulty of.

choosing: a proper specifie sum which would

re full restitution was a probleni for Con-

; gress," eet aby

: : ‘

‘ ° co] ‘fe re i>

= o .

’

on See also, United States’ v. Grannis; 172 F. 2d°507, 511

Wye 4); certiorari denied, 337° US. 9t8. where the Court

_ of Appeals. for the Fourth Circuit held that “Tt is: clearly

pee ire that the defense of double jeopardy is not ap-

| plicable. to civil aefions ‘under the federal false claims stat-

ute.”

_As already indicated, Marcus v. Hess refers to

the. Court’s earlier decision in Melrering) \. Mit-

ehell, 303 U.S. 391. In that case, the —

liaving heen acquitted of fraud under thie

in earlier criminal proceedings. sought to defeat

. the Government's subsequent suit for the 50% , avd-

~ dendim to the taxes assessed under Section 293 of

the Revenue Act of 1928 onthe ground that; this

additional 50 constituted ao penalty and henee

its recovery byethe-Government was barred by the

double jeopardy prohibjtion. Iu rejecting: this

claim, the-Court reaffirmed as long settled [TJ hat |

acquittal on a cyiminal charge. ix not ‘a v har toa

evil action by the Government, remedial, in its -

® ‘nature, arising out of thes sane facts on = h the

zetisninte proc coding was hased”’ BOB, Boat, HOT.

see also 308 US, at 398-3 HO) oy “ ‘ourt then went

, on to comment (303 ELS. at 401):

Scie coe he remedial character of actions impos-

ing additions to at TaN, has heen made clear by

this Court in passing ppon similar legislat on.

They are. provided primarily as ‘a safeguard

forzthe protection of. the revenue anid to reim-

burse the Government for the heitvy’ expe Hse

of inyestigation and the loss resulting from the:

taxpayer's fraud. Tn Stockwell v.. United

ys States, 13 Wall. 531. 547,551, the Court said

of a provision which added double the value.

of. the goods: 4s | |

o “Tt. sare therefote he éonside red as remed-_

ial. as. providing indemnity for Joss. And it

. ‘

tax laws -

- ts not the less sq because the liability of the

wv rongdoer is ‘measured by double the value of

the goods, rec eived, concealed, or purchased,

instead of their single value.. The act of ab-

stracting goods illeg ally. ‘imported, ree eiving,

concealing or buying. them, inter poses difficul-

ties In the way of a government seizure, and»

impairs, therefore, the value of the govern-—

ment right. It is, then, hardly accurate. to

say that the only loss the government can sus-

tain from ‘concealing the goods liable to seizure

is their single value, dr to assert that the liabil-.

ity imposed by the statute of double the value

is arbitrary and. without reference to indemni-

figation. Double the value. may not be more

than complete indemnity * * *.:

“The act of 1823 wasg.as we. have seen,

remedial in its mature. Its purpose was ‘to -

secure full compensation forinterferenc ew ith

~ the rights of the United States.’

Noting that wmong the various types of remedial

sanction was ‘‘the payment of fixed or variable.

sums of money”’ (303 U.S. at 400), the Court con-

ssininnsicjinl esate \ 3

Another remedial sanction, “which | is characteristically-

free of the punitive criminal element is revocation of a priv-:

ilege voluntarily granted” such as the deportation of -aliens

and disbarment. 303 U.S. at 399. fn. 2 and cases there cited.

See also, United States v. Real Sele Boards, 339 U.S. 485,

493, tn. 6 «°The-fact that in ease of corporations dissola-

tien ean resnit from a civil suit under the anti-trust laws _

doés not muke+the proceeding any the less*remedial. The

civil-suit aims to put an end to the restraint, not to impose.

punishment for+past acts”)

Bea ‘ “ }

° . ate

cluded that thé basic qugstion is one of statutory

construction and that the statute and its history in-

dicated clearly that Congress intended a civil re-

‘medial, not a criminal penal, sanction | (id., at 401- -

402). : ; i

2. ine construction accorded by this Court in

Marcus v. Hess to the $2,000. plus ‘double dami ge

provision of the False Claims Act is fully appli-

cable to the virtually identical provision of Section

96(b)(1) of the Surplus Property Act here in-

‘volved. “As ‘in. Marcus v. Hess, the, action was

brought by the Government not as preserver of

peace or to vindicate: public justice, but, as‘held in

United States v. Weaver, 207 F. 2d 796,797, (CLA,

5), as ‘sa civil action to reeoyer an award of, dam-

ages of a compensatory nature, payable to the

es States for injuries to its eee ty rights."

® The We eaver case involved the same basie issue as that

presented by the instant case, ?. e,, Whether Section 26(b+(1)

of the Surplus Property Act is penal or compensatory Al-

though the context in which that issue was raised in Weaver

differs from the present one (in Weaver, the ultimate ques-

tion was whether“the ‘action was subject to the statute ‘of

limitations for suits for penalties: contained in 28 USC.

2462), petitioner has recognized that» this difference is im-

material and has. invoked as support for its position United

States v. Witherspoon, 211 F. 2d 858 (C.A. 6), where in pre-

cisely the same context as Weaver, Section 26(b) (1) was held.

penal. (Pet. 5-6, Br. 9). See infra, p. 39, fn. 34.

In fact, as the court below held (R. 21), no distinction.

flows fromthe difference, for in -both the double jeopardy

_ (involved ‘here) and the dimitations situations (jnvolved in’

Weaver ‘and Witherspgon), “penalty” is. used in the sense

of an exaction designéd to punish. an offense against. the

public justice. Compare Marcus v. Hess, 317 US. at 548-549,

supra,.p. 16, with Huntington vy. Attrill, 146 U.S. 657, 658, 673-

74, 683; Brady v. Daly, 175 Us. 148, 156; Chattanooga:

7”

_This is evident from, the similarity in purpose of

the provisions; both relate to: frauds, upon the

Government, the False Claims Act pertaining to.

frauds in connec tion with elaims submitted to the

Government and Section .26(b) (1) dealing with |

frauds in procuring. praperty from the. CGovern-

ment. Andee d, inasmuch a& the strong “forfeit .

and pay’ fanguage of False Claims Act was not”

deemed by this Court to convert the $2 000 plus

double damages provision of that Act into a pen-

alty. it would. seem, ‘as the court below held‘ (R.

Foundry v. Atlanta, 203 U.S. 390, 397; Meeker & Co. v.

Lehigh Valley R. Co., 236 U.S. 412, 423 (all but one of which

eases were referred to in Marcus v. Hess): This is the sense

‘that: “penalty "is given generally ‘under federal law.. Hunt-

mnaton ¥. Attrill, gupra (conflicts of laws); Wisconsin v. Peli-

can Insurance Co. } 137 US. po (confliets of laws); James-

Pickinson Co. v. Harry, 273 U.S. 119, 126 (conflicts of laws) ;

Sullivan v. Associated aaa and -Distributors, 6 - 2d

1000. 1009 (CLA. 2) (abatement); Barnes Coal Corp. v. Re-

_ tal Coal Merchants Ass'n, 128 F. 2d 645 (C.A. 4) lalate:

- ment); United States v. Grannis, 172 F. 2d 507, 514 (C.A. 4),

certiorari denied, 337 U.S. 918 (abatement): Robertson v.

Argus Hosiery Mills, 121 F. 2d 285 (C.A. 6), certiorari de-

_ nied, 314 U.S. 681 (jurisdiction under 28 U.S.C. ° 1355);

Fields v. W ashington, 173 F. 2d 701. (CLA. 3). (jurisdiction

under 28 U.S.C. 1355); Curne v. Flack @Q0 F. 2d 549 (CLA. .

1) taste under 28 UNC. 1355); Cor v. Lukes Broth-

ers, 237 N.Y. 376, 143 N.F. 226 (jurisdiction under 28 S.C.

1355); Crary v. Porter, 157-F. 2d 41@, 413-414 ie A. 8) (self+

incrimination): Schinkal v" Unitéd States. C.A. 9 No. 14313

(decided Septen*er 20, 1955), (self-inerimination).

"In regard: to the * ‘forfeit and pav”™ language of the

False Clainis Act the Court commented i317 Us. at 55ld:

Ht is argipd that the $2,000 “forfeit and pay” provi-

sion is “eriminal” rather than “civil,” even if the double

damage feature is not. The words “forfeit. and pay”

- relate alike to the $2.000 sum and the double. damages.

‘

20), Shine the ‘milder require mens of “pay* imposed

hy* Section 26(b)(1) would « fortiori militate

against petitioner's construction.

Moreover, in view of the express ruling in both

Marcus V.. Hess and Helvering v. Mitchell that the °

problem of the nature of remedy is basically one of

statutory construction, and of ascer taining. the leg-

islative intent, it is important to note that Marcus

v. Hess was decided in Janwaty 1945, shortly hetore

the enactment of the ee Property Act of 1944

on Octobe 1 3. 1944. Tie these cireumstances, "we

may assume that the framers of \ 26(b) were aware

of that decision when they formulated » 26( b)’?:

CR. 19), and, consequeritly, ‘that by « ‘arrying over

into Section 26()) (1) the provisions of. the False

Claims Act ¢ construed aq conipensatory in Marcus v.

Hess, Congress intended: Section 26(b) (1) simi- -

larly to provide a civil compensatory remedy,

That Congress intende «1 Section 26(b) (1) ‘to,

The use of the word “forfeit in conjunction with the

word “pay” dees not force the conclusion that the pro-

vision is criminal. No one doubts that Congress could

have. accomplished the same result’ by authorizing

“double” or “quadruple” or “punitive” damages or a:

Jump sum payment for attorney's fees, or by definition

of the elements of “actual damages.” Special conse-

quence cannot be drawn from the usé of the word “for-

feit.” While this might under other circumstances be.

an appropriate word td suggest a fine upon the failure

to pay which an individual: might be imprisoned, ‘no

such punishment is prov ided here upon ‘default in pay-

ment. The words “forfeit and pay” are wholly con-

- sistent with a civil action for damages. Atchison, T. &.

S. F. Ry. Co. v. Nichols, 264 US. 348, 350-352; cf.

Hepner v. United States, 213 US, 103. 104-111. |

be compensatory ts also nianifest fromthe face of

the Act. Section 26(b), supra, , p. 3, explicitly

deséribes subsection (b)as providing *!c ‘ivil rem-

edies.”’ In addition, subparagraphs (2) and (3)

of that Section, providing only for multiple dam-

ages, plainly are compensatory in nature (see,

infra, p. 38, fn. 32), and it is unlikely that Congress

would include a punitive sanction and two compen-

satory remedies inthe same sec tion. |

Any doubt as to the congr essional intent is dis-

sipated by the legislative histery. In its report on

2065,. 78th Cong., 2d Sess., the Pll which, as.

amended, became.the Surplus Prop-

44,°" the Senate Committe on Military

subsequently

erty Aet of

Affairs desermbed the provisions of what was then —

Section 23(b) as dealing (S. Rep. No, 1057, 78th:

~ Cong., 2d Sess., pp. 13-14.).

+ 2

engage in false, fraudulent, or fictitious activ-

ities, or conceal or misrepresent material facts,

or act with intent to defraud the United States,

or who enter into an agreement or conspiracy

or cause other people to-do any of the fore-

going. The United States is given the option

of electing among three different measures of

damages— : |

Ae ) Any person engaged in such activities

“° While the bill enacted was Resienated H.R. 5125, the

Senate, after considering S _ 2065, struck everything after the

enacting clatse. of H.R 5125 as it passed the House and

‘substituted therefor the text of the Senate bill, as amended. '

90 Cong. Rec. 7330:

“

* with the civil liability of persons who

se,

ns He “

can be sued for the sum of $2,000 fer each such

‘act, plus twice the amount of any damage sus-

| oe nited States, plus the cost of

suit. :

(2) The United Stites may recover from

such person twice the consideration which hic

agreed to give to it: |

(3) The United States may rors ‘* prop:

erty acquired by reason ef the aboverdescribed

given to it for that ‘property.

Piainly, Congress viewed all three subparagraphs

of Section 26(b) as in part materia and, of par--

ticular significance here, viewed subparagraph (1),

as well as the other subparagraphs, as compensa-

tory in nature.

Finally, Section 26(d) supra, 'p. 3, expressly |

-8 - ~ "

provides that the ‘civil remedies provided in [See-

tion 26} shall be in addition to all other criminal

penalties and civil remedies pr ovided by law.’’. In

the same vein, the report of the Senate Committee

eras out (8. Rep. Neo. 1057, 78th @ong., 2d Sess.,

. 14): | _@

other civil remedies which the United States

may have and of such provisions of the Crimi- -

nal Code as relaté to fraud (18 U S.C. sec. 80)

and conspirac] v'(18 USC. sec, 83).

It is apparent that not only did ‘Congress in-

tend actions-under Section 26(b) to bein addition,

fraudulent’ activities, ‘plus’ the consideration —

. 65. , a

not an alte ‘native, to criminal proceedings: but -

also that it.contemplated the very situation which

is here presented—a prior ¢ ‘Timinal proceeding un-

der 18 ULS.C. 80-(R, 8: Pet. Bro 4. fu. 2) —and

which petitioner lsdean as the basis for the out-

lawry of the present action by the proseription.

against double jeopardy. Furthermore, since it

would he wiconstitutiouml to apply Section 26

(b) (1). in these cireunistances (specifically Ch-

, visaged by Congress) if it were construed as penal

(Helvering vo Mitchell, supra, at 401; United

States Vv. apeiugeise 282 U.S. 568; Coffey v. United

States, 116 U.S. 436) but there isto suc h problem:

if Section ° 26 (bb qs held to be compensatory, ¢

the rule that statutes are to be construed to avoid

constitutional issues * *(see, €.9.; Murph yoy. United

States, 272 U.S. 680, 632: U nited States v. Con-

gress of Industrial Organizations, 385 U.S. 106,

120, 121: Guessefeldt ve MeGrath, 349. U.S. 308,

319) would seem particularly applicable:

Petitionher’s reliance on this Court’s earlier opin-

ions in Coffey v. United States, 116 U.S. 436, and

United States v. LaF ranca, 282 U.S. 568, is inis-

placed (Br.10). Inaddition to the doubt ful-valitt-

ity of Coffey (se e, €.9.; Various Items Wis {" nited

Stites, 282 US. 577; United States V. One Dodga

Sedan, 113 F.2d 552, 953 {€.A. 3): United States

vy. Grammer, 191 B. 2d 741, 743 (CLA. 9), it should’

he noted ‘that (1) the defrauders invoked these

cases—without success—in Mareus vy. Hess and

Helvering v. Mitchell (Brief for Respondents in

No, 173, Oct. Term, 1942, pp. 80 ff.: Brief for Re-

spondent in No, 324, Oct, Term, 1937, pp. 6, 7, 19,

26,36); (2) that the Second Circuit, in arriving at

its holding in Mitchell that the double jeopardy

provision was applic ‘able, likewise relied iipon these .

cases (89 F. Bd 8&3, 878 ; see 303 U.S, at 405- 406):

‘and (3) that in Mitchell this Court expressely held

these cases inapplicable, reasoning that **[s Jinee

we construe [the statute] as imposing ay civil ad-

ministrative. sanction, neither case. presents an eb-

stacle to the recovery of * * * the 50 per centum

addition here-in issue’? (303 U.S. at 406): sge.also.

| Marcus ¥. Fess, supra, ‘at Dp. 54 (Cone urring oOpin-

ion of Frankfurter, J.). Similarly, these ‘ASes Pre-

sent no obstacle to the Government’s recovery in

the instant cAse, sinée as we have shown above,

Section 26(b) (1) is compensatory, not penal:

B, The Fact that no Damages Were Alleged Does.

Not Convert -the Suit trto an Action for a

Penalty. "s

Asserting that its answer ‘“‘pleaded facts show-

ing that the Government suffered 210 damage or

‘loss from the sale of such frucks, having received |

‘the full advertised offering price’? (Br..7), peti--

"-tioner, urges that for-that-reasan, the instant pro-

ceeding must he fora penalty under the principles

emineiated in Marcus ¥. less. . This, .petitioner

reads, as holding that the Goverment’s recovery

of the statutory ‘sum is compensatory only whe re

‘the facts involved in a particular case show

actual damage to the Government (Br. 10). Conse-

-quently. petitioner claims, while the Government .

suffered damages justifying civil recovery in both

eee ee

‘28

Mare ‘us V. Hess and Helvering Vv. Mitchell; there

is no such basis for rec overy of comper hsation here

‘and hence the ¢ lovernment’s action under: Sectiop

. 26¢b)(1) could only be for a penalty.

1. Petitioner's argument is based ona misread

ing of Marcus vy. Hess, as well as of Helvoring \.

Mitchell, As shown above, the opinion in beth

cases pa it clear that the issue whether the

‘statutory re ‘medy is penal or compensatory ix one of |

xeneral construction and intent, not dependent

Upon Whether-aetual. damages. could or would be.

tts in a-particular ¢ase. In other words, Marcus

. Hess held that Congress anticipated that’ fraudg

woiifa result in damage to the Government ai

since some of. these damages might not be redue ible

to a monetary equivale nt, it provided the statutory

formula to,assure full recovery. !* We think,”* the

- Court said, ‘the chief purpose of the statutes: here

was to provide restitution to the governinent of

money taken from it by fraud, and that the device

of double damages plus a specitic sum was chosen -

to make sure that the government would be made

completely whole * * * . The inherent diffic iflta:

oof choosing a proper spec ifie sum whieh would giv O

full restitution was a problem for Congress,") 317

U S. at 551-552." In these, cireumstances, the ex-

=! The Court also said (317 U Sat 530-1):

’

* * * Congress might have’ provided here as it did in.

the anti ‘rust laws for reeoverv of “threefold damages

ust sed and the cost of suit, including a reasonabie

attorney's fee.” * * * Congress could remain fyjly in

the common law tradition and still provide punitive’dam-

ages. “By the comnion as well as by statute law, men .

< Seca

-tent of actual recoverable damages sufferéd ina.

particular c ise is irrelevant, a conclusion.fully supe

ported hy the statutory langiage that the Govern-

ment is to recover ‘the sum of two thousand del-

lars. and, in addition, double the amount of danr-

ages Which the United States may have sustained”

(emphasis added). See “ee — States Vv. Rokleder,

157 Pr. 2d 126, 129 (€, :

Fn this rex pect, the statutory provision for the

(iovernment’s recove rv is comparable to a contrac:

tual provision for liquidated damages, as te which.

~ this Court said in Priche d& Sous vy. United States,

<392 US. 407, 411-412: :

*** When they are fi air and re: Ison ible a at

tempts to fix’ just compensation for antic {pated

loss caused hy breach of contract, they are en-

forced, ** * They serve a particularly useful

function when damages are uncertain in na-

ture or amount or are unmeasurable, as .s the

the fact that. the damadtes suffered are shown

=—to be less than the damages contracted: for is- \

| ; ae ‘

are often punished for agzravated misconduct or lawless

acts by means of civil action and: the damages inflieted..

by way of penalty or pupishment given to. the party

injured!" * * * This Court has noted the general prac-

tice in state statutes of aHewing double or treble or

‘even quadruple damages. * * -* Punitive or exemplary

damages ‘have been held recoverable sunder a statute .

like this which combines provision for criminal punish«

ment with others which afford ,a civil remedy to the

individual injured. * * * The law can provide the

same measure of damag? for the yovernment as it tan

i ‘for an individual. ba

“=

. 30

not fatal. ‘Phese provisions are to be judged

as of the time of makfiig the contract” |

That the iestilieaas 3 in Mareud,. Hess was not in-

tended to apply only in thase cases in whieh the -

Ciovernment is shown to have suffe red spec itie lam-

age is further evidenced by the fact that, although

fhe Distriet Court’s opinion in that case shows that

some of the fraudulent acts were detected at the

Inception and no actual damage was suffered by

the Government with respect -to several contracts

(41 F. Supp. 197, : 218 (W.D.*Pa.) ).2* this Court did

not differentiate these frauds but rejected the de-

frauders’ claim of d-.ble jeopardy with respect to’

all the fraudulentracts, “See United States v. Roh-

leder, 157 F.2d 126, 129 (CLA. 3). > Mr. Hastice 7

Frankfurter so understood the Court’s opinion.’

22 See, also Sun Printing & Pub. Assn. ¥. Moore, 183 U.S;

642, 672-674: United States v. Bethlehem Steel Co., 205 U.S.

105, 121; Clydebank Engineering & Shipbuilding Co. vy.

Castaneda {1905| A.C. 6, 11- 13, 20; United States Vv. Walkof,

144 F. 2d 75, 77 (C.A. 2).

“The next reason “urged by defendants: for a new trial

Is that the court etred in refusal of. defendants” 9th point.

which reads as follows: ‘9. There ean be no reeovery of any

penalty or forfeiture on account of any project in which no

actual damages have been shown.’ Section 3490, RUS... ex-

pressly provides for-a penalty of $2,000, ‘and, in addition.

daable the amount of damages which the United States may:

have’ sustained.’ This makes it-piain that regardless of dam-

ages sustained, the United States would still be entit4ed to -

recover the penalty. This point refers to instances where

the United States withheld payments on account of the dis-

“covery of the fraud, so that no actual damage was shown.

However, that woutd not .preelude the Umited States from

recovery ‘of the penalty pre scribed by Section 3490, R.S.”

“4 In his cogeurring opinion. Mr. Jhistice Frankfurter criti-

cized the. Court, for not allowing “the - who invoke the

i A a i a a ee . w

The courts of appeals have. also dead Marcus Vv.

Hess as giving a general constraction of the statute.

onpt limited to particular cases in whieh damages

vare proved. United States v. Grannis, 172 F. 2d

507, 511 (CLA. 4)3 ve denied, 337 U.S. 918;

Murray d& Sorenson, Trev. U nited: States, 207 F:

a 123 (CA. 1). ens ; |

‘Since the Surplus Property Act of LO44 ont:

with ihe disposal of all kinds and manner of: sur-

plus equipment and property, real and persohial,

ranging vip to war plants, ships, str ategic minerals, e

airports, aircraft, se and port terminals. (see,

DS Stat. 769 ff) 2 it w ould seem ‘lear that the dam-

Constitution, as do the sila here ** to preve that,

as a matter of fact, the ‘forfeiture and the double damages °

are punitive because they exceed any amount (gat could

reasonably be regarded as the equivalent of compensation

for the Govermment's loss” (317 U.S: at 554).

2 As noted-by. the Senate Committee on Military \afiaig

(S. Rep..No. 1057, 78th Cong., 2d Sess., pp. 2-34: \

owned property available for distribution. at the \ end

of the war vary from 50 billion collars to 112. billion.

Of course, the bulk of this material will consist’ of —

weapons of war unsuitable for any peacetime use. How- |

ever, it is certain that there will be many billions of

dollars of consumers’ goods available to’ supply the se-

cumulates! demand of war- -imposed civihan shortages:

to provide a large part of this: ans contribution. &

foreigh relief; and to sitimulate new demands for -new

civilian-type products, largely unknown, or at. least un-

available to civilians in pre-war times. —

At Jeast a third, and probably more, of fhe Govern-

ment's $15,000,000,000 investment in plants ‘and equip-

ment will be convertible to peacetime uses. The dispe-

sition of the Governmept-owned plants constructed to

supply the expanded d-for steel, light metals, chemi-

cals, synthetic rubber, and high- octane gasoline will have

ages likely to result. to the Government from. frauds

cormnitted in connec tion with, the disposal of such

property would be at least as e xtensive and diftieuk

‘of exact proof as those resulting from the frauds

a en

dealt. with in the I’: Ise ( ‘laims Act. Thus, the Ste :

plus Prope rty Act’s provision for $2,000 plus’ dou-

ble damages for each fraudulent act, like the COME

parable provision of: the. False Claims Act, consti- -

tutes a reasonable measure, in general, of the fore-

~ seeable damage to the Government. » As was stated

in United States v. Weaver 207 F. 2d 796, 798

(CA. 5): 3 a

ea he intent and purpose of the Surplus Prop-.

erty Act of 1944, 58 Stat. ' 756, were to facil

tate and regulate the orderly: disposal of sur-

plus ‘property of the United States, ‘including

the giving of an opportunity to returning vet-

erans to establish themselves in: business, agri-

culture, or professional life. Therec; an be no

doubt that the property rights of the U nite dL yo

States were injured as a result of the actsal-

Jeged in the complaint. Section 26(b) (1)

seeks ‘to indemnify the United States for such’

injuries. za provides foP payment to the

United: States of an amount. hot so dispro-

a profound-effeet on the future industrial structureepf the

‘Nation. In addition to -these integrated facilities, the

- Government has ‘several billions of dollars invested in

such \equipment- as machine tools, whose wartime. pro-

duction amounts to. 20 years’ normal supply, apd in

Structures which may, if preperly used, house the

thousands, of new enterprises needed: to supply peace-

time. employment to millions of war workers.

vw,

eS, | : os |

portionate to the actual injury that -it cannot

he deemed wholly compensatory. saan

‘- Petitioner's ‘claim that its frauds caused the

Government no damage overlooks the fact that the

Government intended to sell the surplus motor. ve-.

hicles in the prescribed order of. priority under

which dealers such as petitioner were at: the bat-

made (shortly ‘after the termination of active-hos-

tilities in World War II). there was an ac ute

shortage of motor vehicles; that the Government °_

wished. to accord a priority to. purchase surplus

motor vehicles to certified vetérans in order to aid

them in their reassimilatiogzinto civilian life; and

consequently that the prices and conditions under

- which the Government was willing td make these |

sales to these veterans were far more favorable

to them than those generally prevailing im’ the |

iarket place. =

-In-order to help certified. Peery in eis “re-

adjustment to civilian life, the~Government wads

willing to sell these’ vehicles: to them at a price

substantighy: lower than that which the vehicles”:

wouk-bring in the open market. See, supra, p.°7,

fn. 6. Howev ér;:the Government ‘was not willing

to sell these motor vehicles generally to those not”

entitled to priority, and even if ‘it were, there: is

no indication that it would have heen willing to

sell the vehicles generally at the same price and

— the same: conditions.” In these circum

as. Petitioner’ s allegations that’ under’ the advértisement and

tom of the list; that at the time these salés were’,

+ : . 2%

: ‘ . .

ow SA, A, Ae 2 - + = —_ ad -_ = is 2° Sees cn ~ —_— «= ~ - = ~

~ stances, petitioner’ S “fraudulent masque rade as

various veter ans had the effect” hot only Gf dndtie- +

ang the Government to sell the vehicles to persons

with whom: it had no ‘intetition ‘of dealing” bait

also of selling the vehicles at lower thi m market

prices to per sons’ not entitled to priority for pur-

_ order of sale, any vebicles left over after all priorities were

‘satisfied would’be sold to non- priority purchasers such’ as

petitioner, fail to recognize’ thé realities of the situation ther

prevailing. Thé shortage’ of civilian’ Vehicles was so acute

in 1946-1947. that there, were not enough: surplus vehicles to —

satisfy the ‘neéds ‘of all priority holders. The result was

that it, was an extremely rare ‘situation that vehicles “were ’

sold to non- priority purchasers. In this connection, it is

significant that. petitioner nowhere claims or even suggests

that the’ price at which the vehicles were: sold by. the Gov--

-ernment was the price then prevailing:, in’ the market,

whether Jegitimate, gray or black; in contrast, the fact

‘that petitioner was willing to- resort to fraud to obtain

these vehicles strongly: indicates that the Government's. sell-

profit, probably .substantia'ly; on the resdle. At this point,

it shoukt also be recalled that among. the stated. purposes of

the Surplus Property Act were the. discouragement of, dis-

posal of surplus property te speculators andthe prevention |

pp. 4- 5. e ;

27 It-is well established that a sites es the right Yo select

his Pye) (Federal Trade Commission v, Raymond’ Co.,

263 U.S . 573; Green V. Victor. Talking: Machine Cwm, 24

: BL 2d 378, 4 'C.A. 2)“eertiorari den ied,. 278 Us. 6u2!,

ahd the law will protect a-seller who has been misled into

making a sale: by. virtue of the purchaser's Taise representa-

tion that he belongs to a class with whom the “vendor is wWill-

“ing to, deal or that he“does not belong to a group with wlio,

‘the seller is unwilling to have any dealings. Gorddn v. Street

[1899] 2Q B: Al (C.A.); ef. Smith v. Wheatcroft, 9 Ch. Div.

. 223; Popham \ . Eyre, Lofft. 786, 98 Eng. Rep. 919 (Ch

174); Hedden v. Grigin, 136 Mass. 229.

“ing price was below market and that petitionet expected to °

Ae ole

Peete sce 3

‘poses not within the stated priorities. Plainly, this

caused damage to the (iovernme nt anicits interests.

In addition, by fraudulently procuring the ve-

hicles,, petitioner reduced the mumber of. surplus

~*% vehielés in the hands of the War Assets Adminis-

‘ation. AsSa_ result, some government agency.

which was entitled to pr lar ity might-very well have

been uni able to purchase vehicles which it needed-

sates War Assets Administration aud so ¢ ompelled

to purchase vehiclés at the higher market pFice.

JW hile Congi'ess was agreeable to.that result as far

@ as veterans were cone ‘erned; it intended that gov-

crment ‘agencies have top priority after vete rans

in S.

- -

guard against prefisely suc h a. result as far.

as other purchasers were concerned, = As stated

Rep. No. 1142. 79th Cong., 2d Sess, ‘on the

| hill according top pr jority to veterans (at. pp. 1-2):

The committee aime ude uit still continues -

the general first priority extended to Govern-.

went agencies. It should be noted that the.

purpose of this priorityds to save the Govern-

nent money where one Govetnment agency has

surplus equipment whith another Governnie nt~<

agency requires for. the discharge’ of its-te-

sponsibifities. If the veterans’ preference were

advanced to outrank the Federal Government

priority, the Federal Government might he

compelled in many instane es to purchase in

the epen market the same or.similar goods as

28 For the order of priority. sce the Statement. supra,

- Pp. 5-6. as 9@ :

3 .

36.

those which were disposed of as surplus by

the War Assets Administration.

Thus, petitioner's frauds had the effeet. of redue-

° £ . sd f a . . : . ; : 2 w

ing the number of vehicles available to priority

helders, including governmerit agencies, and? so

might very well have caused damage to the Govern-

* "ment.on this’ additMaal score, -

Finally, it is settled that the Government

entitled not only to recovery of its actual | a

but also to reimbursement ‘of the’ costs ine surred :

in connection w ith the ferreting out and investigat-

ing the frauds. In Helvering. v. Mitchell, supra,

“at 401, this Court held that the additional tax of

50°, imposed in the case of a:tax fraud was of a

remedial nature ‘‘to reimburse the Government —

for the-heavy expense of investigation and the loss

resulting from the taxpaver’s eo “) Simi-

larly, Stockwell vy. UnitedAStates, 1 3 Wall. 53

had : stressed (at. AT): ne

“Y While petitioner iiouien that its answer negates danrage

te the Government, examination thereof indicates that it does

hot, eompletely do so. “The pertinent allegation of the an-.

swer is.to the effgct TR. 8: see also, supra; p. 9):

That ‘by reason of the facts above set forth. the pli 1in-

tiff was not-damaged and did not suffer any loss because

of the sale 6f said trucks and. received-the full\advertised

offering price for the same, and had said trucks not been

sold to the persons who purchased them: they “be

have been sold at the. same price to other priority .

-non-priority. purel: agers. *. :

This allegatren attempts to negate only out-of- pocket dam-

ages stemming from the sales themselves ‘and in no way

‘denies that the Government incurred costs” in connection with

“ferreting out the frauds, for whiel) it is entitled to reim-

bursement as set out in. the text. |

. ia

a“,

‘ .

ee °

. m= aes . °

. ‘

vale ili i is, er" hardly accurate to say thi it

the only loss the Government eau sustain from

concealing the goods liable to seizure is their

single \ ‘ale, or to assert that the li: ability in-

paked: by the statiite of doulle the value is ar-

bitrary and. Without reference té indemmific ‘a-

tion. Double the value may not he more than

complete indemnity.

~~ Althouginthe Goverment was damaged in seva.

‘eral ways in the instant case, it is difficult, if not

7 impossible, to reduce the injury to a monetary

equivalent.” This does not mean, however, that the

~exaction of the prescribed sum of $2,000 was in-

trinsically a provision for a penalty. To the con-

trary, it furnishes the raison d'etre tor the di NA gC

formulae of Section 26(b). In cases involving ‘ac-

tionable wrongs the injured party is frequently

confronted with serious difficulties in establishing

the full extent of the injuries suffered by him and

an ‘proving. their monetary equivalent.” Ci. Wool-

worth Co. Vv. Contemporary. Arts, 3844 U.S, 228,

932. <The -mast elementary conceptions: of jus-

- * » This very uncertainty as to Sea would

vive full rgstitution has been the reason why liquidated dam-

“ age provisions, particularly ino government contracts, have

heen sustained, See, supra, pp. 23-30. . «.

In the W ool orth ease, the Court uplield an award of

damages in the amount of $5,000, the maximum ‘allowed by:

statute for infringement of copyright “in lew of aetual dam-

ages and profits”, notwithstanding the facts that the in-

fringer showed that its actual profits from the infringement

were about $900 and the: record failed to show an actually

_-sustained damage by the, copyright owner.

——.. a!

multiple.” Jump sum,

os ¢

tice and public poliey require that*the wrongdoer

shall bear the risk of the uncertainty which his

own wrong has created.”’ Bigelow v. RKO Radio

Pictures, 327 U.S.251, 265, and cases there cited, .

In: Brady v. Daly, 175 U.S. 148, where a statutory:

minimum damage for copyright infringeme nt was

_attac ‘ked as penal, the Court ruled (at: p. 154):

* oe In the face of the difficulty of dete r-

mining the amount of such damage in all cases,

the statute provides a minimum. sum for i a re-

covery in any case, leaving it open fora larger

recovery upon proof of greater damage in

those cases where such proof can be made.

* * * The person wrongfully performing or

representing a dramatic composition is, in the

words of the statute, “liable, for ‘damages

thereof...) This means all the d: images, that

are the direct result of his wrongful act. The

further provision in the.statute, that those _

damages shall be at.Jeast a certain sum named

in the statute itself, does not change the char-

acter of the statate.and render it a penal in-,

.stead of a remedial one. hiv Tig

‘For these ” reasons, statutes which provide for

or minimum damages have

por ti Shtee

on Stockirell vy, me States, 13 Wall. 531, 547, 551; Over-

night Motor Co. v. Missel, 316 US. 572, 583-4: Cor v. Lykes

Bros., 237 N.Y. 376, 143 N.E. 226; Carne v. Flack, 190 F. 2d

549 (CAL 1); Helvering v. Mitchell, 303 U.S. 391, 401: Cal-

rin v. Huntley, 178 Mass. 29.00: | —<

*8 Atchison, Topeka & Santa Fé Ry. v. Nichols, 264 U.S.

348. 351; Douglas v. Cunningham, 294 U%®. 207;. Woolworth

Co. v. Contemporary Arts. 344 US. 228. 3 :

ay)

heen phe Id and applied as proparly compensa-

tory. ; |

CONCLUSION

For the for egoing reasons, it is respectfully sub-

mitted that the judgment be low should he affirmed,

2 Solicitor (reneral,

W ARREN E. BURGER,-. * -

Assistant Attoy ney General,

Menvix Ricnrer; | |

. . + Attorney.

2K.

io 3

~ OcToOBER, 1955

. .

4 United States’ v. Witherspoon, 211 Fo 2d 858 (CLA. 6),

relied on by petitioner (Br. 9), while opposed “to our position,

is, We believe, incorrectly: decided. In. eon ease, which

‘involved, the. same situation as-the We aver case, the Court

of Appeals for the Sixth Cireuit ruled that Section 26ibd (1)

was penal, . subject’ to the limitation provision of 28

U.S.C. 2462. See supra, p. 21, fn. 18.-. However, the

Sixth Circuit went on to rule that the War, ‘Time Sus-

pension of Limitations Act was applicable to those frauds

which occurred before December 31, 1946. As a result, when

Witherspoon was deeided* on “March 22, 1954, suifs under

pepsi Nie fot such frauds were i not time barred.

United Statée> em 342 U.S. 225; at v.

Ole er, 346 U S. 23 , 240-248.

Apart from the J fact that the W itherspoon pinion. merely

states its conclusion without qepporing reasoning or rationale,

it is noteworthy, us the court below commented, that “the

opinion. made pe mention of Helvering v. Mitchell, supra, or

Marcus, v. Hess. supra. nor why these decisions which we

regard as persuasive, were regarded by that court as Inapi-

plicable” (R. 21,.fn. 2). These cases were urged upon’ the

Sixth Circuit by’ the Govermment as was Weaver, and as

to the litter, the only recognition accorded by the Sixth

Cireuit ‘was its bare: citation preceded by “But see contra”

(211 F. 2d at-861)

$ GOVERNMENT PRINTING OFFICE -'955 3és3o3 . ab6

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