United States v. Personal Finance Company

• Decision Date: 15 July 1959
• Parties: UNITED STATES of America, Plaintiff, v. PERSONAL FINANCE COMPANY, a New York corporation, Defendant.
• Court: U.S. District Court — Southern District of New York

174 F. Supp. 871

UNITED STATES of America, Plaintiff, v. PERSONAL FINANCE COMPANY, a New York corporation, Defendant.

United States District Court S. D. New York.

July 15, 1959.

Arthur H. Christy, U. S. Atty., by Mark F. Hughes, Jr., Asst. U. S. Atty., New York City, for plaintiff.

Gallop, Climenko & Gould, New York City, for defendant.

EDELSTEIN, District Judge.

The superseding information charges the defendant with a large number of violations of the consumer credit controls in effect during the Korean conflict, under § 601 of the Defense Production Act of 1950, 50 U.S.C.Appendix, § 2131, 50 U.S.C.A.Appendix, § 2131 and Regulation W of the Board of Governors of the Federal Reserve System, effective September 18, 1950.¹ Only three groups of counts are to be moved for trial, totaling 200 alleged violations: group II charges 8 violations of § 4(a)(1) of Regulation W by as many loans to different borrowers, each in excess of the maximum loan value permitted by that section for the purpose of the loan; group III charges 155 violations of § 4(a)(2) by as many loans to different borrowers, each in excess of the maturity limitations of the section for the purpose of the loan; and group V, charging 37 violations of § 4(d) by as many loans to different borrowers without taking from each borrower the required statement. The defendant has moved to dismiss all but the first count in each group on the ground that they are duplicitous of the initial counts charged.

It is the defendant's position, on the authority of United States v. Universal C.I.T. Credit Corp., 344 U.S. 218, 73 S.Ct. 227, 97 L.Ed. 260, that § 601 of the Defense Production Act and the applicable provisions of Regulation W did not make a separate crime out of each of the acts charged in the 200 counts, but that they merely proscribed courses of conduct. Therefore the aggregated acts pleaded within each group constitute merely a single alleged offense, leaving the superseding information with only three valid counts, one in each group. The basis for this position is that it is possible to read the statute and the regulation so as to make the allowable unit of prosecution either a course of conduct or an individual act. In the latter reading, the defendant runs the risk of a $1,000,000 fine, $5,000 on each of 200 counts. In the former reading, the defendant is subject to possible fines amounting to $15,000 for three counts. In such a situation, before the court may choose the harsher alternative, it is necessary that Congress should have declared its purpose in language that is clear and definite. And it is contended that Congress has not so spoken.

The Government denies any ambiguity in the statute or regulation, pointing out the singular form of the language, referring to single individuals and single transactions. The penal section of the Defense Production Act (§ 603, 50 U.S.C.Appendix § 2133, 50 U.S. C.A.Appendix, § 2133) subjected "any person" who willfully violated "any provision" of § 601 or any regulation issued thereunder to criminal penalties. But § 601 did not proscribe any conduct. It merely authorized the issuance of regulations by the Board of Governors of the Federal Reserve System "in accordance with and to carry out the provisions of Executive Order Numbered 8843 50 U.S.C.A.Appendix, § 2131 note * *". Section 2 of that Order authorized the Board to prescribe regulations concerning "any extension of instalment credit * * *". Section 4 of Regulation W required "each instalment loan" to comply with principal amount and maturity requirement. Section 4(d) provided that "no registrant" shall make "any instalment loan" without accepting in good faith a signed statement of the borrower. See also §§ 5(b), 7(i) and 8(a). But similar singular language appears in the Fair Labor Standards Act, 29 U.S.C. § 201, 29 U.S.C.A. § 201, as construed in the C.I.T. case. Section 6 requires "every employer" to pay "to each of his employees" a minimum wage; section 7 provides that "no employer" shall employ "any of his employees" who is engaged in commerce or production of goods for commerce for more than a fixed number of hours per workweek unless "such employee" receives additional compensation. Section 15(a) makes it unlawful for "any person" to violate "any" of the provisions of § 6 or § 7 or knowingly to make "any" false "statement, report, or record." Section 16(a) imposes punishment on "any person" who willfully violates "any" of the provisions of § 15. Despite such singular language the Court held that the prohibitions related to courses of conduct rather than to the singular component acts. A clear and unambiguous purpose to make the unit of prosecution an individual act or transaction is no more definitely or unmistakably to be read from the wording of the statute and regulation here involved. What Congress has made the allowable unit of prosecution cannot be determined merely by a literal reading.

But the Government argues that in order to give the legislation a commonsensical meaning, in the light of the logic of the situation covered by statute, it must be concluded that the allowable unit of prosecution intended is the separate transaction rather than a course of conduct composed of such transactions. This logic is related to the nature of the transaction involved. The making of a loan in violation of regulatory requirements is not, it is insisted, the kind of an act that can logically be an item in a course of conduct under the "impulse" theory of Blockburger v. United States, 284 U.S. 299, 52 S.Ct. 180, 76 L.Ed. 306, adopted by the Supreme Court in the C.I. T. case. Such a transaction is characterized as essentially intermittent and discontinuous, each one constituting an entirely new bargain requiring a new decision and arising from a new and separate impulse. Different borrowers may be involved, there may be a variety of techniques to disguise violations, by different personnel of the lender at different times and at different places.

The argument is plausible and tempting, but on analysis it must be rejected. A similar argument was made to the Supreme Court in the C.I.T. case. It was there argued² that the Fair Labor Standards Act, in its minimum wage and overtime provisions, provided for offenses specifically limited as to each employee for each workweek. The limiting language is in the same singular form, previously compared, as the language employed in Regulation W. It was said that a decision as to each employee for each week was necessarily a new decision not part of any continuous pattern, even if there were a general and over-all intention to violate the Act. The alleged offenses might not be repeated from week to week. An employer might pay less than the minimum, or fail to pay overtime, in one workweek and then never do so again. He might require an employee to work overtime one week during each of several months. He might require one employee to work overtime one week, and another to work overtime in some succeeding week. Different employees, new or old, might be involved. There might be at various periods different offenders among the employer's officers.

It is true that the Supreme Court did not decide the C.I.T. case merely by a rejection of the Government's argument that each alleged violation resulted from a separate impulse. Rather than analyzing the situation in terms of impulses, under In re Snow, 120 U.S. 274, 7 S.Ct. 556, 30 L.Ed. 658 and Blockburger v. United States, 284 U.S. 299, 52 S.Ct. 180, 76 L.Ed. 306, it rejected the authority of those cases as relevant because of the history and language of the legislation, and on the "solid ground" of the specific history of the legislative process that culminated in the Fair Labor Standards Act, gave it the meaning of proscribing courses of conduct. But the Court used the impulse test of the Blockburger case in defining a course of conduct, and its definition necessarily rejected the Government's contention that each violation charged stemmed from a separate impulse. It is difficult to perceive any logical distinction between the items urged as separate...