Reply Brief — Cheff v. Schnackenberg

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CITATIONS

CasEs:

Boute v. City of Columbia, 378 U.S. 347 (1964) ......

Floersheim, In re, 316 F.2d 423 (9th Gor. SSB) i... si

Harris v. United States, cert. granted, 379 U.S. 944

RS RR es reer) errr

Pierce v. United States, 314 U.S. 306 (1941) .........

United States v. Barnett, 376 U.S. 681 (1964) .......

United States Constitution:

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STaTUTEs:

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In THE

Supreme Court of the Anited States

Ocroser TERM, 1964

No. 1043

In re PAUL THEODORE CHEFF, PETITIONER

ON PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

REPLY BRIEF FOR PETITIONER

Question 1'—Respondents have failed to come to grips

with our basic proposition that petitioner’s conviction for

criminal contempt is in violation of the right of fair warn-

ing guaranteed by the Due Process Clause of the Fifth

Amendment. They have sought to obscure this important

constitutional issue by not even listing it as a question

presented for review by this Court, and by treating it as

a mere “related claim” to our attack on the sufficiency of

the evidence (Br. 2, 9).

The first of two paragraphs obliquely referring to Ques-

tion 1 (Br. 9-10) begins with a complete misstatement of

petitioner’s contention. We are said to have claimed the

court order did not put petitioner on notice that “failure to

' The various matters raised in respondents’ brief in opposition

(hereinafter referred to as “Br.”) will be discussed under the head-

ing of the question presented in the petition for certiorari in No.

1043 (hereinafter referred to as “Pet.”) to which they relate. The

abbreviations used herein in citing to the record are the same as

those used in the petition (Pet. 2 n.1).

2

correct the practices engaged in by the corporation’s sales-

men might constitute a violation” (Br. 9). Petitioner has

never contended any such thing. Indeed, we have specifi-

cally disclaimed any theory “that a prohibitory order

places no affirmative duties on corporate officers or that a

criminal contempt conviction may net be based upon a fail-

ure of such officers to take action designed to prevent vio-

lations by subordinates” (Pet. 9).

What petitioner does contend and what respondents

have wholly failed to refute is that his conviction was

predicated upon a failure to change certain sales policies

as distinguished from the eight deceptive sales practices

inhibited by the court order. These sales policies relied

upon by the court were neither expressly nor impliedly

covered by the order and, hence, petitioner’s conviction is

in violation of the fundamental principle that no man

should be held criminally responsible for conduct which he

could not understand to be proscribed or required (Pet. 10).

Respondents next state that petitioner had notice that

the “factors” (sales policies) relied upon by the court below

“‘eontributed to a condition which lent itself to undisci-

plined sales practices’” since they were mentioned in the

opinion of the FTC hearing examiner issued over a year

before the pendente lite order was entered (Br. 10). But

the statements in the hearing examiner’s initial decision

cited by respondents did not become a part of the FTC

cease and desist order nor were they incorporated in the

court’s pendente lite enforcement order. Indeed, at the time

the pendente lite order was entered, the Court of Appeals

made no findings as to the correctness of either the FTC

decision or any opinions or comments expressed in the

hearing examiner’s initial report. On the contrary, the sole

basis for the pendente lite order was the judgment of the

court that issuance of such order was “necessary to prevent

oO

3

injury to the public and to petitioner’s competitors. . . .”

(Pet. 33). Thus, at the time the court order was entered

there had been no judicial determination that the “factors”

now relied upon by the court below were contributory to

the use of the prohibited practices.

Furthermore, there is not one scintilla of evidence in this

record to show that petitioner’s failure to make changes in

the sales policies relied upon by the court caused a single

violation of the order. This essential causative link is sup-

ported by nothing but pure assertion.

It is obvious, therefore, that the cited comments in the

FTC examiner’s initial decision afforded petitioner no

notice that his failure to change policies respecting mar-

kets, pricing, the basis for compensating salesmen and the

structure of Holland’s sales organization would subject

him to liability for criminal contempt. In any event, as we

have previously pointed out, had the FTC or the court

considered changes in Holland’s policies on these matters

essential to effect compliance, provisions requiring such ac-

tion could have been incorporated in the orders (Pet. 8-9).

We submit that by holding petitioner in criminal con-

tempt for failing to make policy changes neither expressly

nor impliedly required by the terms of the order, the court

below engaged in an unforeseeable, retroactive, and hence

unconstitutional judicial expansion of the narrow terms of

the court order under the teaching of Bouie y. City of

Columbia, 378 U.S. 347, 352 (1964) and Pierce v. United

States, 314 U.S. 306, 310-11 (1941), and reached a result

squarely in conflict with the Ninth Cireuit’s decision in

In re Floersheim, 316 F.2d 423 (9th Cir. 1963).

Question 2—-Although the court below declined to make

special findings of fac. as petitioner had requested (Pei.

6 n. 5), and although no record references are cited in its

4

opinion, respondents’ brief in opposition now claims there

is support in the record for at least two of the court’s many

conclusions. However, the documents and testimony re.

ferred to are an inadequate basis for the conclusions

singled out and, indeed, provide a further specific illustra-

tion corroborating petitioner’s position that the evidence

in this record is manifestly insufficient to sustain his con-

tempt conviction.

As support for the court’s conclusion that petitioner

“pursued a course of conduct designed to construct an

apparent compliance with the order and to devise a de-

fense against charges of violation” (Pet. 23) respondents

refer to an alleged admission made by petitioner on cross-

examination (Br. 8). It is claumed that petitioner “admitted

having taken no other steps in 1959 to obtain compliance

than he had taken in 1952, in an earlier purported at-

tempt-—which he knew to have been ineffective—to stop the

eorporation’s unlawful practices” (Ibid.). Even a cursory

glance at the cited pages of transcript show this conten-

tion to be totally inaccurate. Petitioner admitted no such

thing.

What happened was this: during the course of cross-

examining petitioner, prosecution counsel asked the couri

to take judicial notice of testimony given by petitioner

in the antecedent FTC proceeding. Over petitioner’s ob-

jection, this prior testimony was admitted, not for pur-

poses of impeachment but as “primary evidence,” and

was then read into the record.’ It disclosed that in 1952,

petitioner wrote to Mr. Richard P. Whiteley, Director of

the Bureau of Anti-Deceptive Practices of the Federal

2 All matters pertaining to the admission into evidence of peti-

tioner’s testimony in the FTC proceeding, including our objections

thereto and the arguments of prosecution counsel based upon such

testimony, will be found in Env. 11, Tr. Vol. 18, pp. 2068-87.

_—ae

5

Trade Commission, and agreed to take steps to prevent

the use of certain sales practices by Holland’s salesmen.

In the FTC proceeding, petitioner was asked what steps

had been taken and he stated:

“A We have a public relations department which

employs several men. We have extra men out

under the branch controller. We have established

a man under—an ex-F'BI man, who was hired from

the FBI. We have had repeated meetings with

division managers and we have issued bulletins or

letters on it.

“Q Have you bulletinized your individual salesmen

on this?

“A I think not” (Env. 11, Tr. Vol. 18, p. 2080).

Prosecution counsel in this case then argued to the court

(petitioner did not admit) that the steps taken in 1959

to obtain compliance were no different than those taken

in 1952 (Jd., pp. 2085-87).

Until receiving the respondents’ brief, we. had no way

of knowing that petitioner’s testimony in the FTC pro-

ceeding was being relied upon as a basis for his contempt

conviction and, hence, we made no reference to such testi-

mony in our petition for certiorari. However, since this

prior testimony is now cited as the principal basis for

one of the court’s conclusions, we again wish to challenge

its admission by judicial notice as we did during the trial

(Env. 11, Tr. Vol. 18, pp. 2069-70, 2072, 2083, 2086). Judi-

cial notice was improperly taken of this prior testimony

since the rules of evidence in an FTC hearing are entirely

different than they are in a criminal contempt proceeding

and since petitioner was not even a party to the FTC

case. In addition, said testimony was admitted into evi-

dence, not during the prosecution’s case in chief nor on

rebuttal, but while petitioner was presenting his defense.

—

6

But even if judicial notice were properly taken, the

above-quoted testimony from the FTC hearings (supra,

p. 5) (the only evidence in the record concerning what

was done in 1952) wholly fails to show that the steps taken

in that year were in any way comparable to the compliance

program set up following entry of the pendente lite order

in 1959. The department referred to in petitioner’s prior

testimony was denominated “a public relations depart-

ment.” There is no showing that this department was

charged with the functions assigned to the Product Service

Department, which was specially set up in 1959 to assure

compliance with the pendente lite order and which was

given the direction and authority to investigate, document

and take appropriate disciplinary action in response to

sales complaints (see Pet. 7 and record citations). The

prior testimony refers to “meetings with division managers”

but does not disclose what matters were discussed at such

meetings, the frequency of them or the period of time

during which such meetings were held. In contrast, the

uncontradicted testimony in this record shows that fol-

lowing the entry of the pendente lite order, compliance

procedures were discussed at all division managers’ meet-

ings, which were held monthly (see Pet. 7-8 and record

citations). In the FTC proceeding, petitioner testified that

bulletins were sent out but the testimony does not reveal

the content of such bulletins, the frequency with which they

were sent out or their purpose. The FTC testimony

further indicates individual salesmen were not bulletinized.

In contrast, following entry of the court order, a number

of bulletins were sent periodically to individual salesmen

specificially emphasizing compliance with the court order

(see Pet. 7 and record citations).

Assuming, arguendo, that the steps taken in 1952 and

1959 were comparable, the record still does not support the

7

conclusion that the 1952 program was inherently deficient

and that petitioner knew this. The only evidence in the

record is to the contrary and shows that Mr. Whiteley,

himself, wrote to Holland in January 1953, complimenting

it for

“. . . making every effort to satisfy the complaints

that had been made with respect to certain practices

of your employees” (Eny. 14, CX 52).

Perhaps of greatest significance is the fact that the court

below made no finding nor did respondents refer to any

evidence (indeed there is none) that petitioner knew or

had any reason to believe that the compliance program set

up in 1959 was not bringing about compliance with the

court order. On the contrary, the record shows that

countless men who violated the court order were either

fired or demoted (see Pet. 8 and record citations). It

further shows that petitioner was given frequent reports

and in fact believed that the steps taken by the company

following entry of the court order were effectively bring-

ing it into compliance and preventing violations (Env. 10,

Tr. Vol. 16, pp. 1832-38, 1855-57; Env. 13, PX 93; Env. 14,

CX 3, 35, 37, 40, 41).

Respondents claim support for the court’s conclusion

that petitioner complained of recommendations to dis-

charge salesmen suspected of violating the court order,

based on a November 2, 1959 “Firepot” article (Env. 13,

PX 35) and a letter which petitioner wrote several days

earlier (Id., PX 87; Br. 8-9).

That article, however, simply does not support the con-

clusion. It does not even mention “salesmen” nor is it

directed at attempts to fire employees who engage in de-

ceptive sales practices. In fact the article excepts from

its scope recommendations to fire employees who engage

8

in deceptive practices and thereby “jeopardize the welfare

_ of the company” and warns that employees guilty of such

practices will be dealt with by “summary action” (Env. 13,

PX 35). What it does condemn is the unjustified and

indiscriminate firing of company employees simply because

someone “dislikes the cut of . .. [their] features” or

“doesn’t like what .. . [they have] said” or about whom

there is “a slight rumor” or for “lack of business’ (Ibid.).

Petitioner specifically testified that the article was written

because four or five branch managers had been fired for

this last reason—lack of business—and that it had nothing

to do with recommendations to fire employees who were

thought to have violated the court order (Env. 10, Tr.

Vol. 16, pp. 1902-03).

Furthermore, petitioner’s letter to company counsel does

not support the court’s conclusion since it, too, was directed

only at unjustified recommendations to “ ‘fire’ everybody”

(Env. 13, PX 87). Petitioner carefully pointed out that he

was not talking about employees guilty of deliberate

wrongdoing or prevarication whom, he stated, “we do not

want” (Ibid.).

Thus, neither PX 35 nor PX 87 provides a basis for the

conclusion that petitioner complained of recommendations

to discharge salesmen who had violated the pendente lite

order.

A March 1960 issue of the “Wirepot” (Env. 13, PX 43) is

cited as evidence that “ ‘salesmen whom [the head of the

complaint division] recommended discharging were praised

in the [corporation’s house organ]’” with petitioner’s

“‘mowledge and approval’ » (Br. 9). The “salesman”

mentioned in respondents’ brief as having been the subject

of a discharge recommendation, one Joseph Mascali, was in

fact demoted to a position in which he made substantially

less money (Env. 8, Tr. Vol. 2, pp. 256-59). The prosecu-

9

tion did not prove or even contend that Mascali, after his

- demotion, did anything even suggestive of being a decep-

tive sales practice.

The “praise” accorded Mascali consisted of merely listing

his name, along with 27 others, on page 12 of this issue of

the “Firepot” (PX 43) under the heading “Special Heating

Technician Citations.”

Most importantly, there is not one scrap of evidence in

this record (and respondents could point to none) showing

that petitioner either knew of or approved giving such

“praise” to this salesman.

Thus, none of the evidence cited in the respondents’ brief

supports the court’s conclusions and this absence of any

substantial evidentiary basis further illustrates the need

for review on certiorari by this Court.

Question 3—Respondents argue that since the prison

sentence imposed upon petitioner is within the punishment

limits established by Congress in 18 U.S.C. § 1(3) (Br. 2-3),

the issue involved in Harris v. United States, cert. granted,

379 U.S. 944 (1964) (No. 526) is not present in this ease.

However, the fact that petitioner’s six-month prison sen-

tence does not exceed the maximum period designated by -

Congress in order for a statutory misdemeanor to be &

“petty offense” is not determinative. There is nothing in

United States v. Barnett, 376 U.S. 681 (1964) suggesting

that the petty offense punishment limits contained in 18

U.S.C. $1(3) are applicable to a contempt proceeding.

Indeed, the penalty that may be imposed in a non-jury trial

criminal contempt case raises an important constitutional

question under Article III, $2, Par. 3, and the Sixth

Amendment (Pet. 17) which this Court, not Congress, must

decide. Hence, the issue involved in Harris is also pre-

10

sented in this case and, accordingly, certiorari should be :

granted. q

For all of the reasons set forth in the petition and this ~

reply we urge that a writ of certiorari be issued. 4

Respectfully submitted,

Ricuarp M. Kreox

Txomas W. JoHNSTON

JoserH V. GRIFFIN a

135 South LaSalle Street

Chicago, Illinois 606038

Counsel for Petitioner

Of Counsel:

CHADWELL, Kecx, Kayser,

Rueeies & McLaren

135 South LaSalle Street

‘Chicago, Illinois 60603

May 1965