U.S. v. WRW Corp.

• Decision Date: 07 May 1993
• Docket Number: No. 91-6253,91-6253
• Citation: 986 F.2d 138
• Parties: , 23 Bankr.Ct.Dec. 1672, Bankr. L. Rep. P 75,155, 23 Envtl. L. Rep. 21,252, 1993 O.S.H.D. (CCH) P 29,973 UNITED STATES of America, Plaintiff-Appellee, v. WRW CORPORATION, Defendant, Roger Richardson; Noah Woolum; and William Woolum, Defendants-Appellants.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 138

986 F.2d 138

61 USLW 2563, 23 Bankr.Ct.Dec. 1672,

Bankr. L. Rep. P 75,155,

23 Envtl. L. Rep. 21,252,

1993 O.S.H.D. (CCH) P 29,973

UNITED STATES of America, Plaintiff-Appellee, v. WRW CORPORATION, Defendant, Roger Richardson; Noah Woolum; and William Woolum,

Defendants-Appellants.

No. 91-6253.

United States Court of Appeals, Sixth Circuit.

Argued Dec. 10, 1992.

Decided Feb. 17, 1993.

Rehearing and Rehearing En Banc

Denied May 7, 1993.

Lawrence R. Carmichael, Asst. U.S. Atty. (briefed), Karen K. Caldwell, U.S. Atty., David Middleton, Asst. U.S. Atty. (argued), Lexington, KY, for plaintiff-appellee.

Stephen M. Miller (argued and briefed), Nashville, TN, Michael T. Gmoser (argued and briefed), Hamilton, OH, for defendants-appellants.

Before: GUY and NORRIS, Circuit Judges; and PECK, Senior Circuit Judge.

JOHN W. PECK, Senior Circuit Judge.

In 1985, civil penalties totaling $90,350.00 were assessed against WRW Corporation (WRW), a Kentucky corporation, for serious violations of safety standards under the Federal Mine Safety and Health Act (the Act) which resulted in the deaths of two miners. Following the imposition of civil penalties, WRW liquidated its assets and went out of business.

Three individual defendants, who were the sole shareholders, officers and directors of WRW, were later indicted and convicted for willful violations of mandatory health and safety standards under the Act. Roger Richardson, Noah Woolum, and William Woolum each served prison sentences and paid criminal fines. After his release from prison, Roger Richardson filed for bankruptcy under Chapter 7 of the Bankruptcy Code.

The United States (the Government) brought this action in May of 1988 against WRW and Roger Richardson, Noah Woolum, and William Woolum to recover the civil penalties previously imposed against WRW. The district court denied the individual defendants' motion to dismiss and granted summary judgment to the Government, piercing the corporate veil under state law and holding the individual defendants liable for the civil penalties assessed against WRW. The district court also granted summary judgment to the Government on the issue of whether Roger Richardson's civil liability was discharged in bankruptcy, holding that it was a non-dischargeable debt. For the reasons discussed herein, we affirm.

I. Double Jeopardy

The defendants' unsuccessful motion to dismiss this action was premised upon the argument that the imposition of civil penalties following their criminal convictions amounts to a violation of the Double Jeopardy Clause of the Fifth Amendment, which prohibits the imposition of multiple punishments for the same offense. In United States v. Halper, 490 U.S. 435, 448-49, 109 S.Ct. 1892, 1901-02, 104 L.Ed.2d 487 (1989), the Supreme Court held:

under the Double Jeopardy Clause a defendant who already has been punished in a criminal prosecution may not be subjected to an additional civil sanction to the extent that the second sanction may not fairly be characterized as remedial, but only as a deterrent or retribution.

The defendants now argue that the district court erred in ruling that Halper does not apply.

The Halper rule was developed to apply to "the rare case ... where a fixed-penalty provision subjects a prolific but small-gauge offender to a sanction overwhelmingly disproportionate to the damages he has caused." Id. at 449, 109 S.Ct. at 1902. Unlike Halper, in this case there is no fixed penalty provision to review but instead we review a civil penalty which was based upon a list of factors. 30 U.S.C. §§ 820(a), 820(i). The defendants argue that the purpose of the Act's civil penalty provisions is wholly punitive, so that a civil penalty under the Act constitutes an impermissible second punishment when used following a criminal conviction for the same conduct. However, the district court held that the civil penalty provisions serve remedial goals both in general and as applied in the instant case. Our review of the district court's double jeopardy ruling is de novo. See United States v. Furlett, 974 F.2d 839, 842 (7th Cir.1992); United States v. Reed, 937 F.2d 575, 577 n. 4 (11th Cir.1991). Although the instant appeal presents a close case, we agree with the district court that the civil penalty assessed against the individual defendants does not constitute double jeopardy.

The Supreme Court in Halper held that the same civil penalty provision may be remedial in general but punitive as applied in an individual case. See Halper, supra, 490 U.S. at 438, 109 S.Ct. at 1896. However, the Court did not abandon earlier analytical framework used to determine whether a specific penalty provision may be characterized as remedial or punitive in a general sense. Thus, we turn first to United States v. One Assortment of 89 Firearms 465 U.S. 354, 362-63, 104 S.Ct. 1099, 1105, 79 L.Ed.2d 361 (1984), where the Court applied the following test for determining whether a civil proceeding is criminal and punitive, or civil and remedial:

First, we have set out to determine whether Congress, in establishing the penalizing mechanism, indicated either expressly or impliedly a preference for one label or the other.... Second, where Congress has indicated an intention to establish a civil penalty, we have inquired further whether the statutory scheme was so punitive either in purpose or effect as to negate that intention.

(quoting United States v. Ward, 448 U.S. 242, 248, 100 S.Ct. 2636, 2641, 65 L.Ed.2d 742 (1980)) (citations omitted). In this case, it is obvious that Congress has intended the penalties under 30 U.S.C. § 820(a) to be civil. Not only is the statute so labeled, but the civil provisions are somewhat broader in scope than the criminal provisions. Whereas "willful" violations can be "punished" by a criminal fine or imprisonment under 30 U.S.C. § 820(d), civil penalties may be assessed regardless of fault.

The next step is to determine "whether the statutory scheme [is] so punitive either in purpose or effect as to negate Congress' intention to establish a civil remedial mechanism." One Assortment of 89 Firearms, supra, 465 U.S. at 362-63, 104 S.Ct. at 1105 (citation omitted). Unless the purpose or effect of the civil penalty provisions are shown clearly to be punitive, courts will not "override Congress' manifest preference for a civil sanction." Id. at 365, 104 S.Ct. at 1106. However, "in determining whether a particular civil sanction constitutes criminal punishment, it is the purpose actually served by the sanction in question, not the underlying nature of the proceeding giving rise to the sanction, that must be evaluated." Halper, supra, 490 U.S. at 447 n. 7, 109 S.Ct. at 1901 n. 7.

To assess the purpose of the sanction at hand, we turn to factors first enumerated in Kennedy v. Mendoza-Martinez, 372 U.S. 144, 83 S.Ct. 554, 9 L.Ed.2d 644 (1963) and more recently alluded to in Halper as appropriate to determine whether a sanction is civil or criminal.

Whether the sanction involves an affirmative disability or restraint, whether it has historically been regarded as a punishment, whether it comes into play only on a finding of scienter, whether its operation will promote the traditional aims of punishment- retribution and deterrence, whether the behavior to which it applies is already a crime, whether an alternative purpose to which it may rationally be connected is assignable for it, and whether it appears excessive in relation to the alternative purpose assigned are all relevant to the inquiry, and may often point in differing directions. (footnotes omitted).

Id. 372 U.S. at 168-169, 83 S.Ct. at 567-68 (footnotes omitted); see also Halper, supra, 490 U.S. at 448, 453, 109 S.Ct. at 1901, 1904 (Kennedy, J., concurring). In this case, application of the Mendoza-Martinez factors supports the conclusion that the civil penalty is remedial rather than a conclusion that it promotes traditional aims of punishment.

We emphasize that the civil penalty imposed does not involve an affirmative disability or restraint, has not been historically regarded as a punishment, and does not require a finding of scienter. The defendants argue that the imposition of a civil penalty promotes the aims of retribution and deterrence, given the various factors used to determine the amount of the civil penalty. ¹ However, even though the application of these factors to a given case may result in a penalty which is punitive, we conclude that imposing a civil penalty for health and safety violations which varies in amount based upon the severity of the violation and the operator's attempts to come into immediate compliance may as readily be ascribed to the remedial purpose of promoting mine safety. Although the defendants further argue that their behavior was already a crime under 30 U.S.C. § 820(d), as pointed out above the civil penalty provisions cover a broader range of conduct than the criminal provisions under the Act and are not co-extensive with the criminal provisions. Moreover, it is clear that " 'Congress may impose both a criminal and a civil sanction in respect to the same act or omission.' " One Assortment of 89 Firearms, supra, 465 U.S. at 365, 104 S.Ct. at 1106-1107 (quoting Helvering v. Mitchell, 303 U.S. 391, 399, 58 S.Ct. 630, 633, 82 L.Ed. 917 (1938)).

The last of the Mendoza-Martinez factors--whether the civil penalty appears excessive in relation to a remedial purpose--drew close scrutiny in Halper, where the application of a fixed civil penalty provision resulted in a penalty of $130,000 even though the Government's expenses appeared to be no more than $16,000. However, the fact that the penalty does not compensate the Government for precise actual losses does not preclude it from being remedial in nature. As noted in Halper, "the Government is entitled to rough remedial justice, that is, it may demand compensation according to somewhat imprecise formulas, such as reasonable liquidated damages or a...