U.S. v. Killough
| Decision Date | 12 July 1988 |
| Docket Number | No. 86-7914,86-7914 |
| Parties | 26 Fed. R. Evid. Serv. 774 UNITED STATES of America, Plaintiff-Appellee, Cross-Appellant, v. Limmie Lee KILLOUGH, et al., Defendants, William Donald Fountain, Ronald Caswell Kirkland, Luther Manuel Henry, Individually and d/b/a L.B. Henry Tree Surgery, Inc.; Louis Rodney Henry, individually and d/b/a LRH Mobile Contractors, Inc.; James Harrell, Individually and d/b/a LRH Mobile Contractors, Inc.; John R. Peters, Individually and d/b/a J & J Trim Shop, Defendants-Appellants, Cross-Appellees. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
James Jerry Wood, Wood & Parnell, P.A., Montgomery, Ala., for fountain.
Clay, Massey & Gale, Edward Massey, Melissa A. Posey, Mobile, Ala., for Kirkland.
Azar & Azar, P.C., George Azar, Edward Azar, Montgomery, Ala., for L.M. Henry, L.R. Henry and J.R. Peters.
Brannan & Guy, P.C., J. Bernard Brannan, Jr., Montgomery, Ala., for Harrell.
James Eldon Wilson, U.S. Atty., D. Broward Segrest, Asst. U.S. Atty., Montgomery, Ala., Rachel Jacobson, U.S. Dept. of Justice, Civil Div., Washington, D.C., for U.S.
Appeals from the United States District Court for the Middle District of Alabama.
Before RONEY, Chief Judge, CLARK, Circuit Judge, and MORGAN, Senior Circuit Judge.
This appeal arises from a civil action brought by the United States against certain Alabama mobile home contractors seeking recovery for proceeds unlawfully obtained through falsified invoices. Following a jury verdict, the district court entered its order awarding the government a total of $1,267,800 in damages and $24,000 in statutory penalties. Defendants appealed, alleging numerous errors, including the government was collaterally estopped from bringing a civil action against defendants because of a compromise agreement between the government and the defendants made at the time the guilty pleas were entered, the trial judge committed several acts of reversible error, and insufficient evidence was presented at trial from which the jury could render its inconsistent awards of damages. The government cross-appealed, contending the district court should have granted the government summary judgment on the issue of damages and should have awarded it a statutory penalty for each of the fifty-two invoices proved at trial. We affirm in part, remand in part.
In autumn 1979, in the aftermath of Hurricane Frederic, the President of the United States declared the State of Alabama to be a major disaster area within the meaning of 42 U.S.C. Sec. 5122. This Declaration authorized the Federal Emergency Management Agency ("FEMA") to send federal funds to Alabama for the purpose of administering a disaster relief effort. Two state officials, Limmie Lee Killough and Joseph Toofie Deep, managed a temporary housing program as part of the relief effort. The two state officials were responsible for awarding contracts for the set-up of mobile homes and for approving the payment of invoices submitted by the set-up contractors. Killough and Deep had authority to award contracts without obtaining bids.
In the process of administering the housing program, Killough and Deep solicited kickbacks from certain contractors in exchange for awarding them contracts. To generate the money for the kickbacks, the contractors would inflate the invoices they submitted. Killough and Deep would approve the inflated invoices for payment from the federal funds and the contractors would then kickback part of the money they received to Killough and Deep. The defrauding contractors included Luther Manuel Henry, Louis Rodney Henry, John R. Peters, William Donald Fountain, Jr., and James Louis Harrell, the appellants and cross-appellees in the case at bar (hereinafter "defendants").
The defendants were indicted in November 1982 on various charges arising out of the kickback scheme. They all entered guilty pleas to conspiracy to defraud the United States in violation of 18 U.S.C. Sec. 371. Luther Manuel Henry, Louis Rodney Henry, and James Louis Harrell also plead guilty to making false statements in violation of 18 U.S.C. Sec. 1001. In their guilty pleas, the defendants admitted they paid kickbacks of either $500 or $600 per set-up and that the kickback monies were generated by inflating the price of the mobile home set-ups.
In September 1985, the United States filed a civil action under the False Claims Act, 31 U.S.C. Secs. 3729-3731 (the "Act"), against the two state officials and the defendant contractors, seeking to recover damages allegedly sustained by the United States as a result of the kickback scheme, as well as penalties provided for by the Act. The government subsequently filed a motion for partial summary judgment based on the collateral estoppel effect of the defendants' guilty pleas. In its order and opinion of July 7, 1986, the district court granted the government's motion for partial summary judgment on the issues of liability and statutory penalties, but denied the motion with respect to the issue of actual damages. The court found there remained a question of material fact regarding the fair market value of the set-ups.
This issue was tried to a jury in October 1986. The jury returned a verdict against the defendants for a total of $633,900. The district court entered its order on October 31, 1986, doubling the amount of damages assessed by the jury in accordance with the Act. The court limited the statutory penalties, however, to those previously imposed by the court in its July 7 order.
Defendants contend that the government is estopped from bringing this civil action because during the prior criminal proceedings the Assistant United States Attorney, Mr. Truncale, promised no further action would be taken against defendants if they plead guilty and fully cooperated with the government. No evidence was presented at trial to support this contention, other than a letter from Truncale to the United States probation office detailing the defendants' cooperation with the government.
The government may not be estopped on the same terms as any other litigant. Heckler v. Community Health Services of Crawford County, Inc., 467 U.S. 51, 60, 104 S.Ct. 2218, 2224, 81 L.Ed.2d 42 (1984). This circuit has held that for estoppel to apply against the government (1) the traditional elements of estoppel must have been present; (2) the government must have been acting in its proprietary capacity as opposed to its sovereign capacity; and (3) the government's agent must have been acting within the scope of his or her authority. United States v. Vonderau, 837 F.2d 1540, 1541 (11th Cir.1988); Fed. Deposit Ins. Corp. v. Harrison, 735 F.2d 408, 410 (11th Cir.1984).
The government is not estopped from bringing this action because even if Truncale actually made such an agreement with the defendants, as an Assistant United States Attorney he had no authority to do so. See 28 C.F.R. Pt. O, Subpt. Y, App., Directive No. 145-81. It is well settled that persons dealing with a governmental agent must take notice of the agent's authority and that any unauthorized acts taken by the agent do not bind the government. Fed. Crop Ins. Corp. v. Merrill, 332 U.S. 380, 384, 68 S.Ct. 1, 3, 92 L.Ed. 10 (1947); Utah Power & Light Co. v. United States, 243 U.S. 389, 409, 37 S.Ct. 387, 391, 61 L.Ed. 791 (1917); Bornstein v. United States, 345 F.2d 558, 562, 170 Ct.Cl. 576 (1965). The government is not estopped from asserting lack of authority as a defense. Bornstein, 345 F.2d at 562. Defendants in another False Claims Act case alleged they had an agreement with the Assistant United States Attorney that if defendants accepted a grant of immunity and testified for the government, defendants would not be liable to the government for any claim arising out of the conspiracy except civil tax liability. United States v. Kates, 419 F.Supp. 846, 858 (E.D.Pa.1976). The district court in Kates held that in his capacity as Assistant United States Attorney, the criminal prosecutor had no authority to compromise a civil claim of the United States. Id. In the case at bar, even if defendants had presented written evidence of such an agreement, Truncale's lack of authority would have rendered the agreement non-enforceable. See Dorl v. Comm'r of Internal Revenue, 507 F.2d 406, 407 (2d Cir.1974) ().
Thus, the government is not estopped from seeking civil damages from these defendants under the Act.
Defendants allege the trial judge committed numerous evidentiary and procedural errors. Defendants contend that their prior guilty pleas should not have been admitted into evidence, at least not without allowing defendants to explain the circumstances surrounding those pleas. Defendants also maintain that the district judge should have recused himself from the case because his conduct throughout the trial indicated his bias and prejudice toward the defendants. Lastly, defendants assert that the district judge committed reversible error by personally marking the jury form before giving it to the jury, and by sending the amended complaint, which was not admitted into evidence, back with the jury to be used in their deliberations.
We must determine whether any of these actions by the trial judge constituted error, and if so, whether the error affected a substantial right of the defendants. Only if an error prejudiced a substantial right of a defendant may a court of appeals reverse a lower court decision. See King v. Gulf Oil Co., 581 F.2d 1184 (5th Cir.1978); 1 Int'l Air Industries, Inc. v. American Excelsior Co., 517 F.2d 714 (5th Cir.1975), cert. denied, 424 U.S. 943, 96 S.Ct. 1411, 47 L.Ed.2d 349 (1976) (...
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