United States v. Ben Grunstein & Sons Co.

• Decision Date: 19 January 1955
• Docket Number: Civ. No. 888-51.
• Parties: UNITED STATES of America, Plaintiff, v. BEN GRUNSTEIN & SONS CO., et al., Defendants.
• Court: U.S. District Court — District of New Jersey

127 F. Supp. 907

UNITED STATES of America, Plaintiff, v. BEN GRUNSTEIN & SONS CO., et al., Defendants.

Civ. No. 888-51.

United States District Court, D. New Jersey.

January 19, 1955.

COPYRIGHT MATERIAL OMITTED

Raymond Del Tufo, Jr., U. S. Atty., Newark, N. J., William M. Lytle, E. Leo Backus, Washington, D. C., for plaintiff.

Kasen, Schnitzer & Kasen, Morris M. Schnitzer, Newark, N. J., Aranow, Brodsky, Einhorn & Dann, Robert R. Dann, New York City, for defendants.

HARTSHORNE, District Judge.

The question here is as to the effect in a civil suit by the United States under the False Claims Act, Revised Statutes Sections 3490, 5438, 31 U.S.C.A. §§ 231-233, of a plea of guilty to a Federal indictment by certain defendants in both proceedings. Save that the civil complaint, as now amended, covers not only a general over-all conspiracy, in accordance with the pre-trial order¹, but more than 400 other counts on alleged substantive offenses, the situation here, both in fact and in law, is much the same as that ably dealt with by Judge Meaney, of this district, in United States v. American Packing Corporation, D.C. N.J.1953, 113 F.Supp. 223.

More specifically, the Government's motion asks for the entry of interlocutory summary judgment on the issue of liability against defendants Ben Grunstein and Sons Company and William Grunstein, both of whom had previously pleaded guilty to Count 1 in Federal Criminal Indictment 65-51, the other defendants in said civil complaint, some of whom were also parties to said indictment, not having so pleaded or been found guilty.

The applicable principles of law may be briefly stated. They are based on the doctrine of collateral estoppel, i. e., that an issue once litigated and determined is decided for all time between the parties to the suit, and therefore cannot thereafter be re-litigated in a second proceeding between the same parties or their privies. State of Oklahoma v. State of Texas, 1921, 256 U.S. 70, 41 S.Ct. 420, 65 L.Ed. 831; Local 167 of International Brotherhood of Teamsters, Chauffeurs, Stablemen & Helpers v. U. S., 1934, 291 U.S. 293, 54 S.Ct. 396, 78 L.Ed. 804; Emich Motors Corp. v. General Motors Corp., 1950, 340 U.S. 558, 568, 71 S.Ct. 408, 95 L.Ed. 534. This principle applies when the first action is criminal and the second civil, provided the result in the criminal case was a conviction, Local 167 of International Brotherhood of Teamsters, Chauffeurs, Stablemen & Helpers v. U. S., supra; Emich Motors Corp. v. General Motors Corp., supra, though not when the criminal case resulted in an acquittal, due to the difference in the applicable rules as to the quantum of proof. Helvering v. Mitchell, 1938, 303 U.S. 391, 58 S.Ct. 630, 82 L.Ed. 917; U. S. v. Gramer, 9 Cir., 1951, 191 F.2d 741, 27 A. L.R.2d 1132. Nor is it material whether the judgment of conviction result from a trial, as in the Local 167 and Emich Motors cases, or from a plea of guilty. U. S. v. Bower, D.C.E.D.Tenn.1951, 95 F.Supp. 19; United States v. American Packing Co., supra; U. S. v. Accardo, D.C.N.J.1953, 113 F.Supp. 783, affirmed 3 Cir., 1953, 208 F.2d 632; U. S. v. American Precision Products Co., D.C. N.J.1953, 115 F.Supp. 823; Blumen v. Haff, 9 Cir., 1935, 78 F.2d 833. Surely, if, after a criminal verdict against him, overruling his denial of guilt, one is not permitted to make further denial, he should not be permitted to do so, when, instead of denying guilt, he has previously formally admitted it. Indeed at times a plea of guilty is given greater scope than is a judgment of conviction after trial, as where the parties are not the same in the two proceedings. 31 A.L.R. 261, 278 (1924); 18 A.L.R.2d 1287, 1290 (1951); 5 Wigmore, Evidence, Sections 1066, 1346, 1671a.

In applying these principles we find the parties in question to the civil complaint here to be the same as in the criminal indictment. The remaining point is as to whether any of the "questions distinctly put in issue and directly determined in the criminal prosecution" are raised in the civil complaint between the same parties. Emich Motors, supra, 340 U.S. at page 568, 71 S.Ct. at page 413. This requires a comparison of Count 1 for conspiracy in the indictment, to which alone the defendants pleaded, with the complaint, together with a consideration of the scope of the issues determined in the criminal conspiracy conviction. For it is the scope of the prior conviction which creates the estoppel.

It is well settled that a conviction based on a verdict settles all issues "essential to the verdict". Emich Motors, supra 340 U.S. 558, 71 S.Ct. 414. But since in a criminal conspiracy case proof of the unlawful agreement between the parties, plus the commission of any overt act, not necessarily all those alleged, suffices to support a verdict of guilty, no conviction of a criminal conspiracy, whether on verdict or plea, suffices of itself, without further evidence, to prove that defendant either admitted, or was found guilty by the jury, of committing any particular overt act. Nor, if the conspiracy is alleged to have been effectuated, as in Emich Motors, by a number of means, each of which would have sufficed therefor, can it be determined on a plea of guilty to such count, which of such means were admitted by the defendant to have been adopted for that purpose. Emich Motors, supra. All that such plea admits is "the existence of the conspiracy as charged * * * as well as participation therein by the defendants so pleading." United States v. American Packing Co., supra 113 F.Supp. 225. But, of course, the conspiracy as charged means the admission of that particular conspiracy in its essential nature, else the pleading defendants could not later plead double jeopardy to another indictment of that same nature. With these principles in mind, we turn to a consideration of Count 1 of the indictment and of the civil complaint.

As to the first question, the identity of any essential issue, under the criminal count pleaded to, and under the civil complaint, we note that such complaint under the statute both counts on a conspiracy to defraud the United States by obtaining or aiding to obtain the payment of a knowingly false claim, and also complains in a host of other counts of the substantive making or presenting of claims by the defendants to the United States and obtaining payment thereof, knowing said claims to be false.

Turning to Count 1 of the Indictment, we find it charges the defendants with conspiring "to commit offenses against the United States, to wit, to violate Section 80, Title 18 U.S.C. (1946 ed.) and Section 1001, Title 18 U.S.C. * * *." Section 80, so far as material, prohibits the wilful presentation of a false claim to the United States or the wilful making of a false claim to defraud the United States. Section 1001 prohibits the knowing falsification of a document before any Government agency. The statutes upon which the indictment are based therefore generally cover the knowing making or presenting of a false claim to the United States in order to defraud it.² The same paragraph of the indictment then continues by alleging that these statutory violations were "to defraud the United States by depriving it of its money and property, by corrupting and deceiving its officers and employees assigned to make inspections at the plant of the said company, by depriving it of the honest and efficient services of certain of its said officers and employees, and by circumventing, defeating and frustrating the safeguards and inspection processes established by the Department of the Army for its protection in the purchase of meat products." This paragraph of the...