Jacob Hoffman Brewing Co. v. McElligott

• Citation: 259 F. 525
• Parties: JACOB HOFFMAN BREWING CO. v. McELLIGOTT, Deputy Internal Revenue Collector, et al. CLAUSEN-FLANAGAN BREWERY v. SAME. RUPPERT v. SAME.
• Decision Date: 28 June 1919
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

259 F. 525

JACOB HOFFMAN BREWING CO. v. McELLIGOTT, Deputy Internal Revenue Collector, et al. CLAUSEN-FLANAGAN BREWERY v. SAME. RUPPERT v. SAME.

United States Court of Appeals, Second Circuit.

June 28, 1919

Francis G. Caffey, U.S. Atty., of New York City (William C. Fitts. Vincent H. Rothwell, and Cornelius J. Smyth, all of New York City, of counsel), for appellants.

Root Clark, Buckner & Howland, of New York City (Elihu Root and William D. Guthrie, both of New York City, of counsel), for appellee Jacob Hoffman Brewing Co.

Guggenheimer Untermyer & Marshall, of New York City (Elihu Root and William D. Guthrie, both of New York City, of counsel), for appellee Clausen-Flanagan Brewery.

Fitch &amp Grant, of New York City (Elihu Root and William D. Guthrie, both of New York City, of counsel), for appellee Jacob Ruppert.

Before WARD, ROGERS, and HOUGH, Circuit Judges.

WARD Circuit Judge.

These three cases involve the same question, and in each the appeal is from an order of the District Court of the United States for the Southern District of New York restraining, pending final hearing, the defendant McElligott, Acting and Deputy Collector of Internal Revenue of the Third District of New York, from refusing to issue licenses to the complainants as brewers of beer, or to issue revenue stamps in respect to their beer, provided they pay or duly tender the taxes required by law, and restraining the defendant Caffey, United States Attorney for the Southern District of New York, from arresting or prosecuting the complainants, their officers, agents, servants, etc., or from enforcing forfeiture of their property for failure to affix revenue stamps to their barrels of beer when such failure is due to the refusal of the defendant McElligott to issue the same, and from enforcing the pains and penalties of the act of November 21, 1918, c. 212, 40 Stat. 1046, by arresting or prosecuting the complainants, their officers, agents, etc.

The complainants are brewers of beer made from malt with an alcoholic content not exceeding 2.75 per cent. by weight, and the rights of the parties in connection with the orders appealed from depend upon the act of Congress of November 21, 1918, the relevant portions of which are:

'That after June 30, 1919, until the conclusion of the present war and thereafter until the termination of demobilization, the date of which shall be determined and proclaimed by the President of the United States, for the purpose of conserving the man power of the nation, and to increase efficiency in the production of arms, munitions, ships, food, and clothing for the army and navy, it shall be unlawful to sell for beverage purposes any distilled spirits, and during said time no distilled spirits held in bond shall be removed therefrom for beverage purposes except for export. After May 1, 1919, until the conclusion of the present war and thereafter until the termination of demobilization, the date of which shall be determined and proclaimed by the President of the United States, no grains, cereals, fruit, or other food product shall be used in the manufacture or production of beer, wine, or other intoxicating malt or vinous liquor for beverage purposes. After June 30, 1919, until the conclusion of the present war and thereafter until the termination of demobilization, the date of which shall be determined and proclaimed by the President of the United States, no beer, wine, or other intoxicating malt or vinous liquor shall be sold for beverage purposes except for export. The Commissioner of Internal Revenue is hereby authorized and directed to prescribe rules and regulations subject to the approval of the Secretary of the Treasury, in regard to the manufacture and sale of distilled spirits and removal of distilled spirits held in bond after June 30, 1919, until this act shall cease to operate, for other than beverage purposes; also in regard to the manufacture, sale, and distribution of wine for sacramental, medicinal, or other than beverage uses. After the approval of this act no distilled, malt, vinous, or other intoxicating liquors shall be imported into the United States during the continuance of the present war and period of demobilization: Provided, that this provision against importation shall not apply to shipments en route to the United States at the time of the passage of this act.

'Any person who violates any of the foregoing provisions shall be punished by imprisonment not exceeding one year, or by fine not exceeding $1,000, or by both such imprisonment and fine. * * * c

Originally the Internal Revenue Department took the position that after May 1, 1919, it would not license brewers who manufactured beer with an alcoholic content equaling or exceeding one-half of 1 per cent. by volume, nor sell the revenue stamps to be affixed to barrels of such beer; but afterwards, by advice of the Attorney-General, this position was abandoned, and the department consented to license brewers and to sell them revenue stamps, even if their beer did contain an alcoholic content equaling or exceeding one-half of 1 per cent. by volume. Accordingly the complainants are not now subject to any forfeiture or penalty under the internal revenue acts if they pay the taxes required by law. The only risk they are exposed to if they continue to brew beer of an alcoholic content not exceeding 2.75 per cent. by weight is that of imprisonment for not more than one year, or a fine not exceeding $1,000, or both, if such manufacture be found to be a violation of the act of November 21, 1918. Nevertheless the injunction against the acting deputy collector, defendant, can do no harm, and, in view of the position originally taken by the Internal Revenue Department, it may go against him.

In this case we have not to inquire whether an administrative board is acting without or beyond its jurisdiction (Gegiow v. Uhl, 239 U.S. 3, 36 Sup.Ct. 2, 60 L.Ed. 114), or to deal with any attack upon or interference with the complainants' property (United States v. Lee, 106 U.S. 196, 1 Sup.Ct. 240, 27 L.Ed. 171), or of confiscation of it, as in the Rate Cases.

It is perfectly well settled that the United States may not be sued, except upon its own consent. Such consent it has given by various statutes which do not apply to the case under consideration. There is no difference between the states and the United States in respect to this immunity from suit. It is an attribute of every sovereign, recognized by all sovereigns. A criminal suit in the federal courts must be brought in the name of the United States, and can only be brought by the United States attorney. Confiscation Cases, 7 Wall 454, 457, 19 L.Ed. 196. A suit in equity to enjoin the United States attorney from instituting criminal proceedings under a statute of the United States is manifestly a suit against the United States. In such a case the United States is sued as effectively as if it were a defendant by name. There is, however, a well-recognized exception to the rule, viz. if property rights are invaded, and the statute in question is unconstitutional, it is void, is to be treated as nonexistent, and so no defense to the United States attorney. When instituting criminal proceedings under it he is to be regarded not as representing the United States in his official capacity, but as acting individually. So if, under a valid statute, he threatens to proceed in a manner injurious to complainant's property rights, and not authorized by the statute, he transcends his authority, does not represent the United States, is not protected by the statute, and may be enjoined. Irreparable injury alone is not enough. Both these conditions must exist. Obviously in such cases the constitutionality of the statute, or the question whether the United States attorney has transcended his authority, must be determined by the court before it can determine whether the particular suit is or is not against the United States. Mr. Justice Peckham said in Ex parte Young, 209 U.S. 123, 159, 28 Sup.Ct. 441, 453 (52 L.Ed. 714, 13 L.R.A.(N.S.) 932, 14 Ann.Cas. 764):

'It is also argued that the only proceeding which the Attorney General could take to enforce the statute, so far as his office is concerned, was one by mandamus, which would be commenced by the state in its sovereign and governmental character, and that the right to bring such action is a necessary attribute of a sovereign government. It is contended that the complainants do not complain and they care nothing about any action which Mr. Young might take or bring as an ordinary individual, but that he was complained of as an officer to whose discretion is confided the use of the name of the state of Minnesota so far as litigation is concerned, and that when or how he shall use it is a matter resting in his discretion, and cannot be controlled by any court.

'The answer to all this is the same as made in every case where an official claims to be acting under the authority of the state. The act to be enforced is alleged to be unconstitutional, and, if it be so, the use of the name of the state to enforce an unconstitutional act to the injury of complainants is a proceeding without the authority of and one which does not affect the state in its sovereign or governmental capacity. It is simply an illegal act upon the part of a state official in attempting by the use of the name of the state to enforce a legislative enactment which is void because unconstitutional. If the act which the state Attorney General seeks to enforce be a violation of the federal Constitution, the officer in proceeding under such enactment comes into conflict with the superior authority of that Constitution, and he is in that case stripped of his official or representative character, and is

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