Jacob Hoffmann Brewing Co. v. McElligott

• Decision Date: 17 May 1919
• Docket Number: 455.
• Citation: 259 F. 321
• Parties: JACOB HOFFMANN BREWING CO. v. McELLIGOTT, Collector of Internal Revenue, et al.
• Court: U.S. District Court — Southern District of New York

259 F. 321

JACOB HOFFMANN BREWING CO. v. McELLIGOTT, Collector of Internal Revenue, et al.

No. 455.

United States District Court, S.D. New York.

May 17, 1919

Root Clark, Buckner & Howland, of New York City (Elihu Root and William D. Guthrie, both of New York City, and William L Marbury, of Baltimore, Md., of counsel), for complainant.

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

AUGUSTUS N. HAND, District Judge.

This is a motion to dismiss the amended bill under equity rule 29 (198 F. xxvi, 115 C.C.A. xxvi) on the ground: (1) That the suit is in effect one against the United States which has not consented to be sued; (2) that the bill seeks to restrain the enforcement of a criminal law; (3) that the complainant has an adequate remedy at law; (4) the Act of Congress prohibits all beer, irrespective of alcoholic content, consequently the threats complained of are lawful and cannot be enjoined.

The complainant contends that the Act of Congress which the defendants threaten to enforce if having the effect contended for by them is unconstitutional.

The complainant is, and for many years has been, engaged in brewing lager beer, and has a valuable brewery, with numerous employes and substantial earning capacity. Since the passage by Congress of the act of August 10, 1917, and the President's proclamations thereunder, complainant has manufactured and sold beer only in accordance with the terms of the act and the executive proclamations. All such beer has contained not to exceed 2.75 per cent. of alcohol by weight and according to the allegations of the bill is not in fact intoxicating.

The act of August 10, 1917, was passed to provide for the national security and defense by encouraging the production and conservation of food during the war, and authorized the President to regulate or prohibit the production of malt or vinous liquors. By its terms he was empowered:

'To prescribe and give public notice of the extent of the limitation, regulation, prohibition, or reduction so necessitated. * * * '

And whenever such notice was given, no person could use any materials in the production of malt or vinous liquors, except under a license issued by the President and in compliance with rules and regulations determined by him, and any person who willfully violated the provisions of the act was punishable by a fine not exceeding $5,000 or by imprisonment for not more than two years, or both.

In order to carry out the purposes of the act, the President was authorized to create any agency and to utilize any department of the government. He deputed the Secretary of the Treasury and the Commissioner of Internal Revenue to carry out the act, subject to his instructions, and issued a proclamation on December 8, 1917, forbidding the production of all malt liquor, except ale and porter, containing more than 2.75 per cent. of alcohol by weight. He issued a proclamation on September 16, 1918, prohibiting after December 1, 1918, the 'production of malt liquors, including near beer, for beverage purposes, whether or not such malt liquors contain alcohol. ' Thereafter, on January 30, 1919, a further proclamation was issued under the same act, which, after reciting that the prohibition of the use of grain in the manufacture of beverages which are not intoxicating has been found no longer essential in order to assure an adequate and continuous supply of food, modified the former proclamation to the extent of permitting the use of grain in the manufacture of beverages which are not intoxicating.

On March 4, 1919, the President issued a fourth proclamation under the same act, amending his proclamation of September 16, 1918, so as to prohibit the production only of 'intoxicating malt liquors for beverage purposes. ' As has also been stated, the bill alleges that complainant's beer is not intoxicating.

On November 21, 1918, after the armistice, Congress passed an act 'to enable the Secretary of Agriculture to carry out' the former Food Conservation Act of August 10, 1917, and provided that:

'After June 30, 1919, until the conclusion of the present war and thereafter until the termination of demobilization * * * 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, * * * 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, * * * no beer, wine, or other intoxicating malt or vinous liquor shall be sold for beverage purposes except for export. * * * 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. * * *

'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: Provided, that the President of the United States be, and hereby is, authorized and empowered, at any time after the passage of this act, to establish zones of such size as he may deem advisable about coal mines, munition factories, shipbuilding plants, and such other plants for war material as may seem to him to require such action whenever in his opinion the creation of such zones is necessary to, or advisable in, the proper prosecution of the war, and that he is hereby authorized and empowered to prohibit the sale, manufacture, or distribution of intoxicating liquors in such zones, and that any violation of the President's regulations in this regard shall be punished by imprisonment for not more than one year, or by fine of not more than $1,000 or by both such fine and imprisonment: Provided further, that nothing in this act shall be construed to interfere with the power conferred upon the President by section 15 of the Food-Control Act, approved August 10, 1917. * * * '.

Prior to February 6, 1919, the Commissioner of Internal Revenue permitted the brewing of beer of 2.75 per cent. of alcohol by weight. February 6, 1919, regulations were promulgated by the Commissioner forbidding the brewing of beer on or after May 1, 1919, where the alcoholic content should exceed one-half of 1 per cent. by volume, and forbidding the sale of beer after June 30, 1919, having a greater alcoholic content than one-half of 1 per cent. by volume, and likewise refusing to allow brewers to qualify after May 1st, and directing revenue officers to report violations.

All the foregoing matters are set forth in the bill of complaint. Complainant contends in general that the act of Congress of November 21, 1918, prohibits only the manufacture and sale of malt or vinous liquors that are actually intoxicating, and delegates to no official the right to apply any standard that will not meet such a practical test. The bill alleges that it is--

'the purpose, intent and threat of the Commissioner of Internal Revenue, his agents and subordinates, * * * as well of the Department of Justice of the United States and its agents, officers, members and employes, including the defendant Francis G. Caffey, to enforce against the complainant, its officers, agents and servants, numbering more than 70, the various pains and penalties, including fine and imprisonment and various forfeitures of property, provided by said act of Congress and other laws and regulations, and thus involve the complainant, its officers, agents and servants in numerous suits and threaten it with the disorganization and dispersion of its staff of skilled and trained employes by frightening them into quitting its employ to avoid prosecution and possible punishment, the destruction of its business, the loss of its customers, and the depreciation, if not destruction, of its good will and property, all to the irreparable damage of the complainant and its stockholders, and which said injury and damage would be incapable of admeasurement and adjudication in an action at law. * * * '

It is to be noted that the Treasury Department, by regulation or decision issued under date of February 6, 1919, quoted in the bill, interpreted the act of November 21, 1918, by declaring that--

'(b) Within the intent of the act of November 21, 1918, a beverage containing one-half of 1 per cent. or more of alcohol by volume will be regarded as intoxicating.'

The United States attorney took the position upon the argument that while he had made, and did make, no actual threats, yet that the act of November 21, 1918, forbade the manufacture, after May 1, 1919, of any liquor which could be classed as beer, irrespective of whether it was intoxicating or not, and the sale of any such liquor after June 30, 1919. He also very properly said that he could offer no encouragement or immunity to those who manufactured or sold any liquors not in accord with his construction of the statute, though he would expect to institute no prosecutions while his motion was pending.

The United States attorney, in challenging the jurisdiction of a court of equity over his actions, relies largely on the decisions of the...