United States v. Cato Brothers, Inc., 7967.

• Decision Date: 14 December 1959
• Docket Number: No. 7967.,7967.
• Citation: 273 F.2d 153
• Parties: UNITED STATES of America, Appellant, v. CATO BROTHERS, INC., Wilfred R. Cato, William R. Cato, and Magie L. Dunn (nee Magie L. Stone), Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

273 F.2d 153 (1959)

UNITED STATES of America, Appellant, v. CATO BROTHERS, INC., Wilfred R. Cato, William R. Cato, and Magie L. Dunn (nee Magie L. Stone), Appellees.

No. 7967.

United States Court of Appeals Fourth Circuit.

Argued November 12, 1959.

Decided December 14, 1959.

John G. Laughlin, Atty., Dept. of Justice, Washington, D. C. (George Cochran Doub, Asst. Atty. Gen., John M. Hollis, U. S. Atty., Norfolk, Va., and Samuel D. Slade, Atty., Dept. of Justice, Washington, D. C., on the brief), for appellant.

Charles W. Laughlin and A. C. Epps, Richmond, Va. (Christian, Barton, Parker & Boyd, Richmond, Va., on the brief), for appellees.

Before SOBELOFF, Chief Judge, SOPER, Circuit Judge, and THOMSEN, District Judge.

SOPER, Circuit Judge.

This appeal is taken from an order of the District Judge whereby the defendants were released from the obligation of a judgment to pay to the United States the sum of $60,000 on condition that they pay to the United States the sum of $20,000. The judgment for $60,000 had previously been affirmed by this court and the United States appeals on the ground that the District Judge had no power to amend the judgment in this way.

On July 31, 1956, the District Court awarded the United States $2,000 upon each of thirty false claims submitted by the defendants to the Commodity Credit Corporation whereby they obtained loans on cotton in thirty separate transactions and gave notes which contained the false representation that the notes were made by the producers of the cotton. The suit was based on the civil False Claims Act, 31 U.S.C.A. § 231, which provides in effect that any person not in the military or naval service who makes any claim for payment upon or against the Government of the United States or any department or officer thereof, knowing the claim to be false, fictitious or fraudulent, shall forfeit and pay to the United States the sum of $2,000 and, in addition, double the amount of damages which the United States may have sustained by reason of the doing of such act. The judgment of the District Court for $2,000 on each of the thirty false claims was reversed by this court on appeal (United States v. McNinch, 4 Cir., 1957, 242 F.2d 359) on the ground that a claim against the Commodity Credit Corporation is not a claim against the United States since a government corporation is not a department of the government. In reaching this conclusion, we were influenced by the legislative history which showed that the criminal False Claims Act, 18 U.S.C. § 287, which was originally directed against false claims against or upon the Government of the United States or any department or officer thereof, had been specifically amended to add to this list "any corporation in which the United States of America is a stockholder", whereas the civil False Claims Act had not been so amended. The Supreme Court, however, reversed this holding, sub nomine United States v. McNinch, 356 U.S. 595, 78 S.Ct. 950, 2 L.Ed.2d 1001, a companion case considered by us together with the case at bar. The Supreme Court held that a claim against the Commodity Credit Corporation is a claim against the Government of the United States or any department or officer thereof within the meaning of the provisions of the civil False Claims Act.

On remand, the case was reargued in this court, Toepleman v. United States (Cato Bros., Inc. v. United States), 4 Cir., 263 F.2d 697, and additional contentions on behalf of the defendants were considered. These contentions were based on the ground that the United States had not sustained any calculable damages by reason of the actions of the defendants and therefor the imposition of such a plurality of penalties, that is, thirty in the pending case and eighty-two in the companion Toepleman case, was unconstitutional. We rejected the contention on the ground that damages are always suffered by the United States when a false claim is presented and that the Government may protect itself against this eventuality even though the damages are not nicely ascertainable, so that even when the penalty is multiplied by a plurality of impositions, the total amount of the forfeiture cannot be justly regarded as a taking without just cause or due process. Accordingly the judgment of the District Court in favor of the United States was affirmed in Cato Bros., Inc. v. United States, 4 Cir., 263 F.2d 697, and subsequently a petition for writ of certiorari was denied by the Supreme Court, 359 U.S. 989, 79 S.Ct. 1119, 3 L.Ed.2d 978.

Ordinarily this would have been an end of the litigation, but when the case was returned to the District Court the defendants reopened the controversy by moving to vacate the judgment which had just been affirmed. The motion was based on Rule 60 of the Federal Rules of Civil Procedure, 28 U.S.C.A., which empowers the District Court (a) to correct clerical mistakes in judgments and (b) to relieve a party from a final judgment for the following reasons amongst others: (1) mistake, inadvertence or excusable neglect, (2) newly discovered evidence, (3) fraud or misconduct of the adverse party, (4) invalidity, (5) satisfaction or discharge, or (6) "any other reason justifying relief from the operation of the judgment".

The District Judge realized that the problem presented by the motion was a novel one and that no case directly in point could be found; but he finally reached the conclusion that discretion to modify the judgment by reducing the amount thereof from $60,000 to $20,000 in the interest of justice was conferred upon him by the power granted in sub-section (6) of Rule 60(b) quoted above.

In his opinion the judge called attention to the general principle that the law abhors a forfeiture; and he found analogies to the situation in the case at bar in the power conferred upon the court by Rule 46(f)(2), (4) of the Federal Rules of Criminal Procedure, 18 U.S. C.A., to set aside a bail forfeiture in whole or in part, if justice does not require an enforcement of the forfeiture; and also in the power conferred upon the court by 18 U.S.C. § 3617 to remit forfeitures in libel cases instituted by the United States for the forfeiture of vessels or other conveyances used in violation of the Internal Revenue laws. See Continental Casualty Co. v. United States, 314 U.S. 527, 528, 62 S.Ct. 393, 86 L.Ed. 426; United States v. One 1936 Model Ford, etc., Coach, 307 U.S. 219, 59 S.Ct. 861, 83 L.Ed. 1249.

Coming to the merits of the case, the judge expressed the opinion that "the enforcement of the forfeiture would penalize the defendants far beyond the degree commensurate with their culpability"; and he found support for his views in United States ex rel. Marcus v. Hess, 317 U.S. 537, 63 S.Ct. 379, 87 L.Ed. 443, where he said that the Supreme Court expressed the opinion that the statute is remedial and not criminal and indicated the view that the remedy should be commensurate with the gain. In reaching his conclusion that the amount of the forfeiture should be reduced to $20,000, the judge took into consideration that the defendants had received a profit of $8,208.39 but, on the other hand, had been subjected to the expense of a prolonged and costly litigation in the representation of counsel, court costs and so forth, so that the payment of $20,000 would constitute a penalty "fully commensurate with the actions of the defendants and the gains realized by them". He also concluded that the defendants should not be penalized to the extent of saving the Government harmless from the losses which it had incurred by the failure of the ...