U.S. v. Louisville Edible Oil Products, Inc., 90-6026

• Decision Date: 15 April 1991
• Docket Number: No. 90-6026,90-6026
• Citation: 926 F.2d 584
• Parties: , 59 USLW 2575, 21 Envtl. L. Rep. 20,690 UNITED STATES of America, Plaintiff-Appellee, v. LOUISVILLE EDIBLE OIL PRODUCTS, INC. also known as Louisville E.O.P., Inc.; Presidential, Inc.; Frank Reed Metts; A. Dean Huff; Raymond Carl Marrillia, Jr., also known as Sammy Marrillia, Defendants-Appellants.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 584

926 F.2d 584

32 ERC 1858, 59 USLW 2575, 21 Envtl.

L. Rep. 20,690

UNITED STATES of America, Plaintiff-Appellee, v. LOUISVILLE EDIBLE OIL PRODUCTS, INC. also known as Louisville E.O.P., Inc.; Presidential, Inc.; Frank Reed Metts; A. Dean Huff; Raymond Carl Marrillia, Jr., also known as Sammy Marrillia, Defendants-Appellants.

No. 90-6026.

United States Court of Appeals Sixth Circuit.

Argued Jan. 24, 1991.

Decided March 1, 1991.

Rehearing and Rehearing En Banc

Denied April 15, 1991.

Joseph M. Whittle, U.S. Atty., Richard A. Dennis, Asst. U.S. Atty., Louisville, Ky., James B. Gelin, Vicki B. Plaut (argued), U.S. Dept. of Justice, Land & Natural Resources Div., Paul S. Rosenzweig, U.S. Dept. of Justice, Environmental Crimes Section, Washington, D.C., for plaintiff-appellee.

Frank E. Haddad, Jr. (argued), Louisville, Ky., for defendants-appellants.

Before MARTIN and KRUPANSKY, Circuit Judges, and PECK, Senior Circuit Judge.

BOYCE F. MARTIN, Jr., Circuit Judge.

We have before us the denial of a motion to dismiss a nine count indictment charging asbestos related violations of the Clean Air Act, 42 U.S.C. Sec. 7401 et seq., and the Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C. Sec. 9601 et seq. Defendants claim this federal prosecution is barred by the double jeopardy clause of the fifth amendment because previous fines levied by a local environmental enforcement agency were, in effect, federal punitive measures carried out through a state agency to regulate the same conduct. Defendants also argue that prosecution under both the Clean Air Act and the Comprehensive Environmental Act violates the double jeopardy clause by subjecting them to multiple prosecution for the same conduct. Because the actions taken by the federal and state government are those of independent sovereigns, and because the Clean Air Act and the Comprehensive Environmental Act encompass separate offenses requiring differing elements of proof, we affirm the judgment of the district court that double jeopardy has not attached.

Louisville Edible Oils Products is a Kentucky corporation engaged in the business of producing edible oils such as salad oil. A federal indictment charges that Louisville Edible owned two facilities in Louisville, one at 2500 South Seventh Street and the other at 1303 South Shelby Street, from which it knowingly emitted friable asbestos, an air pollutant, and demolished or renovated a stationary asbestos source in violation of the Clean Air Act and the Comprehensive Environmental Act. These actions were allegedly carried out in whole or in part by Louisville Edible and its co-defendants: Presidential, Inc., an Indiana corporation affiliated with Louisville Edible operating as its construction and demolition unit, Frank R. Metts, former Chief Executive Officer and controlling stockholder of Louisville Edible, who died August 20, 1990, A. Dean Huff, director and President of Presidential and Special Products Manager of Louisville Edible, and Raymond Carl Marillia, Jr., director and Secretary Treasurer of Presidential and Vice President for Facilities Management of Louisville Edible. Defendants concede that each facility contained equipment insulated with asbestos which may have emitted asbestos into the air during the removal process.

The local environmental enforcement agency, the Jefferson County Air Pollution Control District, had repeatedly fined Louisville Edible for its disregard of state environmental legislation. Beginning in April of 1977, the Air Pollution Board fined Louisville Edible $25,000 for the release of asbestos from its Seventh Street facility. Louisville Edible was cited on several other occasions and was fined an additional $24,000 in July of 1988 for an illegal renovation of the asbestos containing facility at Shelby Street. Another $125,000 was assessed against Louisville Edible in July of 1989 for asbestos violations at both facilities. These fines were levied only against Louisville Edible.

In their motion to dismiss, defendants asserted that the magnitude of the Air Pollution Board fines evidenced an intent to criminally punish Louisville Edible. On this premise, defendants argued that the federal indictment based on the same conduct is barred as successive prosecution under the double jeopardy clause analysis of United States v. Halper, 490 U.S. 435, 109 S.Ct. 1892, 104 L.Ed.2d 487 (1989) (concluding that imposition of civil fine subsequent to criminal prosecution may trigger double jeopardy protection if that fine is punitive in nature and aimed at the same conduct); see also Blockburger v. United States, 284 U.S. 299, 52 S.Ct. 180, 76 L.Ed. 306 (1932) (prohibiting multiple prosecutions by a sovereign for a single offense). Defendants also challenged the Clean Air Act and the Comprehensive Environmental Act counts, claiming they are multiple prosecutions for the same conduct under Grady v. Corbin, --- U.S. ----, 110 S.Ct. 2084, 109 L.Ed.2d 548 (1990) (Double jeopardy clause prohibits subsequent prosecution in which the government must prove as an essential element of the charged offense conduct for which the defendant has already been prosecuted).

The district court rejected these arguments and we agree. Defendants' Halper claim was rejected without reaching the issue of whether the fines levied against Louisville Edible constituted punishment for double jeopardy purposes because the dual sovereignty exercised by the federal government and the Air Pollution Board eliminates any double jeopardy concern. The court also found no merit to the defendants' argument that Grady prevented prosecution on both the Clean Air Act and the Comprehensive Environmental Act counts because it found each charge to be a separate offense requiring differing elements of proof.

As a preliminary issue, we must confront Presidential, Huff, and Marrillia's claim that they are somehow protected by the double jeopardy clause if we find the penalties assessed against Louisville Edible to be punitive under Halper. It is well established that the protection of the double jeopardy clause is "intrinsically personal." Halper, 109 S.Ct. at 1901. However, defendants argue that Louisville Edible's corporate structure as a Subchapter S corporation, 26 U.S.C. Sec. 1361 et seq., extends any protection from prosecution granted to Louisville Edible to them as well. As employees of a Subchapter S corporation, Huff and Marrillia are employed by Louisville Edible on a direct percentage of profits basis. Therefore, defendants argue, any penalty accessed against Louisville Edible was passed directly onto them, precluding further punishment for the same conduct.

Subchapter S is merely a taxing statute under which small closely-held corporations may avoid tax liability by treating shareholders as partners in determining that shareholder's individual tax liability based on his or her pro rata share of the corporation's items of income, loss, deduction or credit. 26 U.S.C. Sec. 1366(a)(1)(A). Subchapter S corporations do not give their employees or shareholders any unique double jeopardy protection. Indeed, taking defendants' argument on its face would allow any individual who gains income on a pro rata basis, whether employed by a subchapter S or not, to claim double jeopardy protection when the income producer has been punished. We agree with the district court that the:

constitutional protection against double jeopardy to which the Halper court referred does not extend to the defendants Presidential, ... Huff, and Marrillia.

Except for applauding the ingenuity of counsel, we reject his first argument.

Thus as to all of the defendants except Louisville Edible there is no second prosecution.

The next basic issue in controversy is whether Halper bars the United States' prosecution of Louisville Edible because of the penalties assessed by the Jefferson County Board. Halper addressed the issue of whether a civil sanction following a criminal conviction for the same conduct would violate the double jeopardy clause of the fifth amendment. 109 S.Ct. at 1892. The United States charged Halper with submitting 65 false claims for Medicare reimbursement, in violation of 18 U.S.C. Sec. 287. As a result of Halper's conduct, the government suffered a total loss of $585. He was sentenced to two years in prison and fined $5,000.

After the criminal proceedings were complete, the United States brought a civil action under the False Claims Statute, 31 U.S.C. Secs. 3729-3731, which authorized a penalty of $2,000 per violation, double the damages sustained by the government, and costs. The district court found that the subsequent civil fine imposed of over $130,000 was so severe as to violate the double jeopardy clause as additional punishment for the same conduct for which Halper had been earlier prosecuted. On review it was stated that although civil penalties do not ordinarily rise to the level of punishment, there exists

the possibility that in a particular case a civil penalty authorized by the Act may be so extreme and so divorced from the Government's damages and expenses as to constitute punishment.... Under the Double Jeopardy Clause, a defendant who already has been punished with criminal prosecution may not be subjected to an...