United States v. Eilberg

• Citation: 507 F. Supp. 267
• Decision Date: 22 October 1980
• Docket Number: Civ. A. No. 79-1623.
• Parties: UNITED STATES of America v. Joshua EILBERG.
• Court: U.S. District Court — Eastern District of Pennsylvania

507 F. Supp. 267

UNITED STATES of America v. Joshua EILBERG.

Civ. A. No. 79-1623.

United States District Court, E. D. Pennsylvania.

October 22, 1980.

Peter F. Vaira, U. S. Atty. by Gary Tilles and Antoinette R. Stone, Asst. U. S. Attys., Philadelphia, Pa., for plaintiff.

John Rogers Carroll and Thomas Colas Carroll, Philadelphia, Pa., for defendant.

Steven Ross and Stanley Brand, Washington, D. C., for Clerk, U. S. House of Representatives.

Thomas B. Rutter, Philadelphia, Pa., for intervenors Corson & Getson.

OPINION

LOUIS H. POLLAK, District Judge.

In February of 1979, Joshua Eilberg, a lawyer who had been a Congressman from northeast Philadelphia for six terms (January of 1967 to January of 1979), pleaded guilty to one count of a federal criminal indictment. That count charged a violation of 18 U.S.C. § 203. Under Section 203, a Member of Congress is guilty of a crime if he, "otherwise than as provided by law for the proper discharge of official duties ... receives ... any compensation for any services rendered ... by himself or another at a time when he is a Member of Congress ... in relation to any proceeding or application ... in which the United States is a party or has a direct and substantial interest, before any department or agency. ..." The criminal conduct admitted by Mr. Eilberg was that he had received a share of the fee paid by Hahnemann Hospital to the (then) law firm of Eilberg, Corson, Getson & Abramson¹ for services performed while Mr. Eilberg was a Congressman, by Mr. Eilberg and other members of the firm, in connection with Hahnemann's application to a federal agency, the Community Services Administration, for a major construction grant.

After the criminal proceedings were concluded, the United States brought this civil action for sums allegedly owed the United States by the former Congressman. The complaint sets out three "claims for relief." But these three claims comprehend only two causes of action.

The first cause of action-conceptualized in alternative forms in the first and second claims for relief-is perceived by the United States as arising directly from the unlawful course of conduct acknowledged by Mr. Eilberg in his guilty plea. It asserts that the United States is entitled to recover the share received by Mr. Eilberg of his firm's Hahnemann fee, this constituting the "compensation" received by Mr. Eilberg in violation of Section 203. The first claim for relief predicates the asserted entitlement on a theory of breach of fiduciary duty and a consequent constructive trust of which the United States is the beneficiary. The second claim for relief predicates the same asserted entitlement on a theory of breach by Mr. Eilberg of his implied agency contract with the United States and resultant unjust enrichment recoverable by the United States.

The second cause of action-set forth in the third claim for relief-rests upon another (chronologically, and perhaps factually, overlapping) course of conduct which, it is alleged, was pursued by Mr. Eilberg while he was in Congress and which, it is further alleged, defrauded the United States of an as-yet undetermined sum of money. Specifically, it is asserted that, each month, from May of 1973 to January of 1978, Mr. Eilberg certified that telephone toll calls charged by Mr. Eilberg, or family members, or associates, to Mr. Eilberg's Congressional telephone credit card were official calls when, in fact, they dealt with matters unrelated to Mr. Eilberg's responsibilities as a Congressman. The United States contends, in effect, that, by virtue of these allegedly false certifications, Mr. Eilberg avoided reimbursing the United States for long-distance calls which he, not the United States, should have borne the cost of. The United States views each of these alleged false certifications as a violation of the False Claims Act; and for each culpable certification the United States seeks, pursuant to the Act, double the damages sustained and a $2,000 penalty. 31 U.S.C. § 231.

Mr. Eilberg's motion to dismiss challenges the substantive viability of both causes of action. And the Clerk of the House of Representatives-resisting a proposed subpoena for House records (logs of, and other materials relating to, Mr. Eilberg's toll calls) with which the United States hopes to document its claim under the False Claims Act-denies the justiciability of the second cause of action.

I.

What is at stake in the first cause of action is a sum-alleged by the United States to approximate $35,000-constituting Mr. Eilberg's aggregate distributive share, received by him in acknowledged contravention of 18 U.S.C. § 203, of the fee paid by Hahnemann Hospital to Mr. Eilberg's law firm for legal services rendered in connection with Hahnemann's application for a grant from the Community Services Administration.² The United States is not the only suitor for Mr. Eilberg's share of the Hahnemann fee. In litigation now going forward in the Court of Common Pleas, arising out of the break-up of Mr. Eilberg's firm, two of Mr. Eilberg's former partners-Lawrence Corson and Allan Getson-are seeking to recover, inter alia, the same share of the same fee. To protect their state law claim against Mr. Eilberg from what they deem an unwarranted, or in any event, subordinate, federal claim which may nevertheless be pressed by the United States as preemptive of, or at least competitive with, their state law claim, Messrs. Corson and Getson moved to intervene in this federal proceeding. For reasons explained in a previous opinion, United States v. Joshua Eilberg, 89 F.R.D. 473 (E.D.Pa. 1980), I granted that motion.

It is common ground that the United States' first cause of action has no statutory basis. The cause of action, if it exists, is one rooted in federal common law-rocky soil which produces only a small harvest. Cf. United States v. Standard Oil Company, 332 U.S. 301, 67 S.Ct. 1604, 91 L.Ed. 2067 (1947); and see Hart and Wechsler, The Federal Courts and the Federal System 830-32 (2d ed. 1973); Friendly, In Praise of Erie-And of the New Federal Common Law, 39 N.Y.U.L.Rev. 383, 411-12 (1964). The question is whether the cause of action here pressed by the United States-whether characterized as one sounding in breach of fiduciary duty or as one sounding in unjust enrichment-is an authentic part of the federal common law.

The bedrock of the asserted cause of action is a decision announced by the Supreme Court seventy years ago. In United States v. Carter, 217 U.S. 286, 30 S.Ct. 515, 54 L.Ed. 769 (1910), Mr. Justice Lurton, on behalf of an unanimous Court, sustained a civil action brought by the United States against a former captain in the Army Engineers who was alleged to have taken a large bribe for the letting of a profitable harbor improvement contract. The cause of action thus upheld was one which sought to compel the defendant Oberlin M. Carter "... to account for illicit gains, gratuities, and profits received by him ..." Mr. Justice Lurton explained the nature of the cause of action in the following words (id. at 305-6, 30 S.Ct. at 519-520):

If it be once assumed that the defendant Carter did secretly receive from Greene and Gaynor a proportion of the profits gained by them in the execution of the contracts in question, the right of the United States in equity to a decree against him for the share so received is made out. It is immaterial if that appears whether the complainant was able to show any specific abuse of discretion, or whether it was able to show that it had suffered any actual loss by fraud or otherwise. It is not enough for one occupying a confidential relation to another, who is shown to have secretly received a benefit from the opposite party, to say, "You cannot show any fraud, or you cannot show that you have sustained any loss by my conduct." Such an agent has the power to conceal his fraud and hide the injury done his principal. It would be a dangerous precedent to lay down as law that unless some affirmative fraud or loss can be shown, the agent may hold on to any secret benefit he may be able to make out of his agency. The larger interests of public justice will not tolerate, under any circumstances, that a public official shall retain any profit or advantage which he may realize through the acquirement of an interest in conflict with his fidelity as an agent. If he takes any gift, gratuity, or benefit in violation of his duty, or acquires any interest adverse to his principal, without a full disclosure, it is a betrayal of his trust and a breach of confidence, and he must account to his principal for all he has received.

This venerable judge-fashioned public remedy for a federal official's fraud has retained its vitality. In United States v. Kearns, 595 F.2d 729 (1978), the Court of Appeals for the District of Columbia found that the United States had stated a viable claim in a complaint alleging (1) that the two defendants, while senior officials of the Export-Import Bank, had sold, at a price nearly three times the market, shares they each held in a Thai pulp and paper company with which the defendants had previously been associated (and to which the Bank had loaned several million dollars before the defendants assumed their posts at the Bank), and (2) that the company purchasing the defendants' shares was a subsidiary of a Japanese conglomerate which did a lot of business with the Bank. Speaking through Judge Bazelon, the court said: "The purpose of the ... remedy is not to restore particular funds to the Government, but to provide a means of enforcing the loyalty of its agents. The action pursued here is a proper tool, based on common-law notions of principal-agent relations, for controlling the possible loss of impartial public administration." Id. at 734.

Mr. Eilberg contends that United States v. Carter is without application in an instance such as the one at bar, in which the proposed target of the federal common law civil suit...