Petition for a Writ of Certiorari — Pennsylvania Turnpike Commission v. McGinnes (No. 201)

~————

ILE COPY

Supreme Court of the United States

October Term, 1960.

s 3

No.~ |) 3

PENNSYLVANIA TURNPIKE COMMISSION,

}*,

;

EDGAR A. McGINNES, District Director of Internal

Revenue, Philadelphia, °

Bee spromede wt,

and

MANU-MINE RESEARCH & DEVELOPMENT COMPANY.

Re. of (ool ie nif

and:

SEABOARD SURETY COMPANY,

es R. ‘| neete ul.

—_————__—_-- —

PETITION FOR A WRIT OF CERTIORARI TO THE,

UNITED STATES COURT OF APPEALS FOR ©

THE THIRD CIRCUIT.

Aarnox M. Fin

bia: Bi. Neate

} , r P ficshie

ann ww & DW WO

;

ar

INDEX.

; . . Page

SIN IIs Spats oan wh ow kw aw ioe a akan ners 2

JunssmectioN ..-......... Ae nla pales Sreeeererrrereeeeere

i Questions, PRESENTED RE EE Gra cevesnnsuetenencns

EE SN is cewwnes ae fed icici re

STATEMENT OF THE CASE... 2.20... .c cece cence et eck awa

REASONS FOR ALLOWING THE WRIT ..............00... ee

SN Kaa bocwadwnkenwcs PE aA ES NS EES Oo aegne

APPENDIX:

Circuit Court Opinion ........... Pea he Riad n eae Wass la

Circuit Court IR a cana ce sce Pele icine a eas a 3a

| ae

f

t .

TABLE OF CASES CITED.

Page

Brooks v. Dewar, 313 U.S. 354 (1948) 2... ..000.5. Gas 6,7

Commessioner. of Internal Revenue v. Wilcox, 327 U. S. 404

ec Taha ra ee LMACEL ARK ERVAS S REA SOE ee te 5

Commonwealth v. Evans, 399 Pa. 387 (1900) ....00.0..0.05.. 5

Houston vy. Ormes, 252 U. S. 469 Pee oe as aa eh be neta )

James v. United States, October Term, 1959, No. 820, vert.

MN TD ines cece Saw d se ke hae ee Neo 5

McClung v. Sillimatri, 6 Wheat. 598 (1821) ....0..0.... en 7

Pennsylvania Turnpike Commission v. MceGinnes, 169 F. Supp.

__ NEST EE ae pen Mees Rae cavewere eharr cies 2

Pennsylvania Turnpike Commission v. McGinnes, 268 F., 2d 65

(3d Cir. 1959), cert. den. 301 U. S. 829 ............. 2,4,6,7

rey ee re $

Rutkin v. United States, 343 U. S.:130 (1952)

s

STATUTES AND AUTHORITIES CITED.

Act of Jume 25, 1948, ¢. 646, 62 Stat. 938:

ee ee oe a ie ee te ee te ie ee Se ee a ee a er ae a a

ed ee ee ee On ee i eo a oe a a a we ee

Ras Boe PRE GUE) dakcky ess chee intnbscanna sek

<n €), BS SASS 25. COCR ee Pete bee Tone

] Moore's Federal Practice, Para. 0.6(5), p. 247 :...........

a

Page °

NSN te OW fo

IN THE

‘Supreme Court of the United States

OctTosER Term, 1960.

ee |

No. ; rs 2

P NNSYLV ANIA TURNPIKE ( ‘OMMISSION,

Petitioner, .

v..

EDGAR A. McGINNES, District Direcror OF INTERNAL

. Revenv E, PHILADELPHIA,

Respondent,

AND

MANU-MINE RESEARCH & DEVELOPMENT

COMPANY,

Respondent,

AND —

SEABOARD SURETY COMPANY,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE |

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT... -

Petitioner prays that a writ of certiorari issue to re.

view the judgment of the: United States Court of Appeals

for the. Third Circuit i in this case.

.

r

to

Petition fora Writ of Certioran

OPINIONS BELOW.

The Opinion of the Court of Appeals in the present

“ease has not vet been-reported, and is priri tted in the Ap-.

pendix hereto. The Opinion of the District Court is ‘re-

ported at 179 F. Supp. 578 (FE. D. Pa. 1960). It is also

contained in pages I6a-24a of the appendix record as printed

for the use of the Court of Appeals, of which nine (9) copies

are filed herewith, under the previsious of Rule 21.

The opinions of the Distriet Court and Court of Ap-

peals in the related case of Pennsylvania Turnpike Commis-

ston vt. MeGinnes are reported at 169 F. Supp. o80 and

268 F. 2d 65, respectively: This Court denied the peti-

tion for a writ of certiorari in that case at 561 U.S. 829.

JURISDICTION.

The judgment of the Court of Appeals is dated and was

entered on May 24, i960. .Inrisdiction of this Conrt is in-

voked under 28 U.S. C. § 1254(1).

QUESTIONS PRESENTED FOR REVIEW.

~ Does a United States Distriet Court have jurisdiction

of an action removed from a state court under 28 U.S. ©.

* 1442 by respondent, District Direetor of. Laternal Revenne,

Wherein netitioner, Pennsylvania Turnpike Commission, an

ageney of the Commonwealth of Penusylvania, seeks to en-

join the District Director from refunding to respondent,

Manu-Mine Research and Development Company, or its

assignee, respondent, Seaboard Surety Company, over

$900,000 fraudulently obtained from petitiorier: by Mann-

Mine, and used by Manu-Mine to pay its 1955 income tax,

where Manu-Mine has applied for a refund of the tax, and

wherein petitioner also seeks an order directing payment

of any such refund determined to be due, to petitioner as

rightful owner of the fund?

Petition fora Writ of Certiorari 3

STATUTES INVOLVED.

The case imvelves’® 1442(a)- of the Judicial Code of the

United States, which provides that: ‘tA. civil action or

criminal prosecution commenced ina State eourt against

any of the following persons may be removed by them to the

distriet-court of the United States for the distriet and divi-

sion embracing the place Whereth it is pending: A

(1) Any otheer of the United States or any ageney

thereat. or person acting under him, for any aet under color

of such office or on aecount of any right, title or authority

claimed under any Aet of Congress for the apprehension o

punishment of criminals or the coileetion ef the revenut

.. .) Aet of June 25, 1948, ¢. 646, 62 Stat. 938, 28 U.S. Ce

Section 1442(a)(1). .

STATEMENT OF THE CASE.

Petitioner, Pennsylvania Turnpike ~ Commission,

‘brought this suit in a Pennsvivania state court to enjoin

the Distriet Direetor of Internal Revenue in Philadelphia

from paying to respondent, Manu-Mine Researeh and De- ~

velopment Company, or its assignee, respondent, Seaboard

Surety Company, a tax refund of about $900,000 derived

from funds possession of which is alleged to have been

fraudulently obtained by Manu-Mine from petitioner. The

complaint alleged that in 1956 Manu-Mine paid more than

$1,000,000 on its 1955 federal Income tax, using for that

purpose money obtained by fraud from petitioner, and

that the funds so paid were and are petitiener’s property

cand did not belong and have net rightfuily belonged to

Manu-Mine. The tax payment was made to defendant Me-

Ginnes, District Director of [nternal Revenne in Philadel-

phia. Thereafter Manu-Mine or its assignee, Seaboard,

applied to MeGinnes for a refund of such tax payment in

the amount of about $900,000. MeGinnes was about to

allow the claim for refund and,te direct its payment to

+ Petition fora Writ of Certiorari

Mann-Mine or Seaboard. Petitioner notified MeGinhes of

its claim to the fund but despite the notification, MeGinnes

refuseil to recognize petitioner's claim and refused to with-

hold payment of the. fund pending determination of peti-

tioner’s claim. :

The prayer for relief sought an injunction restraining

MeGinnes from making the refund payment to Manu-Mine

or Seaboard and an order, directing him to pay over the

fund to petitioner, upon a determination that it belonged

to petitioner.

The District Director removed the case to the U sia

States District Court for the Eastern District of Penn-

sylvania, ptirsuant to 28 U.S.C. 4 1442(a)(1), and filed an

answer on the merits denying liability. Manu-Mine and

Seaboard moved to dismiss’ for lack of jurisdittion. The |

District Court granted their motions, on the ground that

the state court, where the action originated, had no power

to enjoin a federal officer in a- matter involving his official

duties, ‘even though only ministerial and not discretionary

action.was sought to be enjoined, and that, aceordingly, the

federal court could acquire no jurisdiction on removal, The

“Court of Appeals affirmed. in a brief opinion, adopting the

reasoning of the district court. Before the Court of Ap-

peals, the District Director joined i in the positions of Manu-

Mine and Seaboard.

Petitioner had_ originally filed an action seeking the

same relief in the United States District Court, but the

Court of Appeals held that there was no original: federal

jurisdiction and accordingly that action was dismissed.

: Pennsylvania Turnpike Commission v. McGinnes, 268 F. 2d

65 (3d Cir. 1959). This Court denied certiorari. 361 U.S.

829. That decision heft open the question of- state court.

jurisdiction.

.

Petition fora Writ of Certiorari i)

oe REASONS FOR ALLOWING THE WRIT.

This case involves the rights of petitioner, the victim

of a fraud, to recover.a taxxrefund applied for by the de-

frauding wrongdoer, who paid a federal income tax on the

fraudulently obtained funds with the fraudulently obtained

funds. Petitioner seeks to prevent the refund from being

returned to the wrongdoer. The right to refund arises

from a loss earryback available to the wrongdoer from a

"later year, but the only money that can be returned by way

of refund is that of petitioner, since that was the only

-money paid by the wrongdoer to the District Director in

the first insfance. . The case has great public importance in

that the defrauded party is a governmental instrumentality

of the Commonwealth of Pennsylvania. Criminal éonvie-

tions of Manu-Mine’s president and general manager have

been affirmed by the Pennsylvanie Supreme Court. Com-

monwealth v. Evans, 399 Pa. 387 (1960). ite

. In Commissioner of Internal Revenue. v. Wilcox, 327

U.S. 404 (1946) and Rutkin v. United States, 348 U.S. 130

(1952), this Court considered the taxability to the wrong-

- doér of money obtained by embezzlement and extortion, and

recently again granted certivrari on the issue of the tax-

ability of embezzled funds. James v. United States, Octo-

ber Term, 1959, No. 820, cert. granted May 16, 1960. In

none of these cases was the claim of the victim for reeovery

of the funds at issue, as it is here, although the majority

opinion in Wilcox and the dissenting opinion in Rutkin in- |

dicate a sensitivity to the problem.

Learning that the District Director was about to make

a quick administrative refund to Manu-Mine, petitioner

originally brought suit to prevent it in the United States

District Court, and that suit, as néted above, was dismissed,

for lack‘of original federal jurisdiction. This suit Was then

filed in the state court and removed by the District Director.

ie

!

6 Petition for a Writ of Certirari

If that avenue also js to remain closed to petitioner, as it

has been by the decisions of the District Court and Court

of Appeals, then petitioner has no recourse to prevent the

refund from returning straight into the hands of the

defrauder.

Petitioner submits that the result reached by the Dis-

trict Court and Court of-Appeals are- incorrect, and cannot

_ be squared with the decisions of this Court in Houston rv.

Ormes, 252 U.S. 469 (1920) and Brooks v. Dewar, 313 TU. S.

854 (1941). Houston v. Ormes was a suit to impress an

equitable lien on a fund in the hands of the Secretary of

the Treasury for payment to another, against whom plain-

fiff had the right to the equitable lien. It was brought in

the Distriet Court of the District of Columbia, but, as this

Court characterized it. it Was an eqnitable action, and net

‘a mandamus action. The plaintiff's right to maintain the

action was sustained.

The relief sought in that case ne lv parallels the

relief sought here, where petitioner seeks to impress an

equitable lien on a tax refund, only upon a determination

that such refund is to be paid, and does not seek to compel

the cxercise of any discretionary action. Meanwhile, an

injunction is sought to prevent payment of the refund to -

the wrongdoer, pending the determination of petitioner's.

rights. As pointed out in Houston v. Ormes, this is not a

syit against the United States, sinee it seeks to affect only

the ministerial duty of payment, after the refund has been

allowed, and to maintain the status quo meanwhile.

The Court of Appeals in the first action, distinguishing

Houston v. Ormes, advanced there by petitioner as a basis

for sustaining federal-jurisdiction, had this to say: ‘‘ As the

Supreme Court recognized, the generally equitable juris-

diction of the Bistrict Court of the District of Columbia,

analogous to the equitable jurisdiction of a state court, was

invoked. Here in Pennsylvania it is the state courts and

not any federal court which exerrise such jurisdiction.”’

Pennsylvania Turnpike Commission v. McGinnes, 268 F. 2d

Petition fora Writ of Ce rtwrari

65, 68 (38d Cir. 1959). Now the Court of Appeals has re-

jected state court jurisdiction as well. .

This result has been reached on the doctrinal ground

that a state court has no jurisdiction to enjoin a federal

officer, even’ in a purely ministerial matter. In that re-

spect, it conflicts with Brooks t. Dewar, 313 U. S. 354

(1941), where this Court expressly held that a state court

has equitable jurisdiction to enjoin a federal officer but

proceeded to deny recovery on the merits. ‘This is distinct

from the mandamus cases, where both federal: and state

jurisdiction have been denied. McClung v. Silliman, 6

Wheat. 598 (1821). :

Tie federal government preserves ample protection

against state interference in two ways. First, if essential

interests of the United States are involved, both state and

federal jurisdiction will be denied, on the ground that the

United States has not consented to suit. Secondly, as ‘Pro-

fessor Moore has pointed out, in arguing in favor of state

court jurisdiction to enjoin federal officers, the federal gov-

ernment is protected by the broad right of removal given

to its officers. 1 Moore’s Federal Practice, Para. 9.615),

p. 247. Here, the United States is not an indispensable

party ordhe real party in interest and removal has been

effected. by the Distriet Ditector. The apprehension of

state interference with federal funétions, exptessed by the

district judge here as the underlying basis for his decision,

is therefore not realistic. Brooks v. Dewar, which sustains

jurisdiction, has never been overruled.

s Petition for a Writ of Certiorari

CONCLUSION.

For the foregoing reasons, the petition for a writ of

certiorari to the United States Court of Appeals for the

Third Cireuit should be granted.

Respectfully submitted,

Aaron M, Five,

Harotpy FE. Konx,

2635 Fidelity-Phila. Trust Blde..

~ Philadelphia 9, Pennsylvania,

Attorneys for Petitioner.

Appendix.

UNITED STATES COURT OF APPEALS

For tHe Tree Circvir

No. 13,169°°

PENNSYLVANIA TCRNPIKE COMMISSION,

Appellant

v.

EDGAR X. McGINNES, Distater Dinecrorn or Ixternan

Revexve or Prmapvecenia. MANU-MINE RESEARCH |

AND DEVELOPMENT COMPANY axp SEABOARD

SURETY COMPANY

Apres. Frow tor Usiren Stares District Court ror THE

Easters Jystrier or Pexxsynvania.

se Argued May 13, 1960

Before Gooprten, MeLaventrm and Srauey, Circuit Judqes.

OPINION OF THE COURT

(Filed May 24, 1960)

Per Curram

This is an appeal from an order of the District Court |

for the Eastern Distriet of Pennsylvania dismissing the |

complaint of the Pennsyivania Turnpike Commission

against the District Direetor of Internal Revenue for lack of

jurisdiction and remanding the ease against the other de-

(la):

Ja »- Opmion ofthe Court

fendants to the state courts. “It is the second time the ease

has been in this Court. In the first ease we held: that the

United States Distriet Court did not have original jurisdic-

tion of the action. Pennsylvania Turnpike Commission ar,

MeCinnes, 208 F.2d 65 (8d Cir), cert. denied 361 U.S. 820

(1959). Then the plaintiff started an action in the Commer

Pleas Court of Philadelphia County, and the Distriet Di-

rector removed it to the federal distriet court for the East.

erm District, of Pennsylvania under 28 U.S.C. A. 0 1442

(a)(1). The complaint seeks an injunction against the

District Director of Internal Revenue or his successors re-

straining payment of a tax refund to Manu-Mine Research

& Development Company or its assignee, Seabourd Surety

Company, and certain injunctive relief against the two com-

panies. We were advised upon argument ‘that this tax

refund has not vet been allowed through the formal channels

necessary in the Bureau of Internal Revenue.

The distrmet judge dismissed the complaint against the

Distriet Direetor for lack of jurisdiction and remanded the

ease against the other defendants to the ‘state courts. He

made a complete analysis of the problem and dtseussed the

authorities. He was mindful of the difference alleged to be

presented between this suit and the former one, already

referred to. He also pointed out that the plaintiff was not

without remedy against the other defendants in the state

courts of Pennsylvania. 179 PF. Supp. 078 (BE. 1D. Pa. 1959),

We agree with the result reached by Judge Clary and

think that progress of the case will be assisted by the prompt

expression of that ecreement rather than postponing what

we have to say until a taore formal opinion can he written.

The judgment of the district court will be affirmed.

Judgment Ja

UNITED STATES COURT OF APPEALS

For rar Tien Circe.

No. 18,169.

‘ PENNSYLVANIA TURNP IKE COMMISSION,

Appellant,

Vv.

EDGAR A. McGINNES, Disreter Dinector of IsTern an

Revence or Purmapenenia, MANU-MINE RESEAR( ‘Tl

AND DEVELOPMENT COMPANY asp SEABOARD

SURETY COMPANY.

AppreaL From tHe Usirep States Disrarct Cover For

‘ yur Eastecnn Disrrict of PENNSYLVANIA,

Present: Goovricn, MecLatvatriax and Stary, Circuit

Judges.

JUDGMENT.

This cause came on to be heard om the reeord from the

United States Distriet Court for the Eastern District of

Pennsvivania and was argued by counsel.

On consideration whereof, it is now here ordered and

adjudged by this ¢ ourt that the judgment of the said Dis-

trict Court in this case be, and the same is hereby affirmed,

—_ with eosts to Manu Mine Research and Development Com-

pany and Seaboard Surety Company.

Attest:

Ips O. CRESKOFF,

Clerk.

May 24, 1960