US v. Fleetwood Enterprises, Inc.

• Decision Date: 29 June 1988
• Docket Number: Civ. A. No. 88-68-JLL.
• Citation: 689 F. Supp. 389
• Parties: UNITED STATES of America, Plaintiff, v. FLEETWOOD ENTERPRISES, INC., Defendant.
• Court: U.S. District Court — District of Delaware

689 F. Supp. 389

UNITED STATES of America, Plaintiff, v. FLEETWOOD ENTERPRISES, INC., Defendant.

Civ. A. No. 88-68-JLL.

United States District Court, D. Delaware.

June 29, 1988.

William C. Carpenter, Jr., U.S. Atty., and Kent A. Jordan, Asst. U.S. Atty., Wilmington, Del., and John R. Bolton, Asst. Atty. Gen., Surrell Brady and Richard C. Stearns, Attys., Civ. Div., Dept. of Justice, Peter S. Race and Peter B. Rustin, Dept. of Housing and Urban Development, Washington, D.C., of counsel, for plaintiff.

Richard K. Herrmann of Bayard, Handelman & Murdoch, Wilmington, Del., Lawrence F. Henneberger, Salvatore A. Romano, and Randall J. Boe of Arent, Fox, Kintner, Plotkin & Kahn, Washington, D.C., and Richard Chernick and Steven E. Sletten of Gibson, Dunn & Crutcher, Los Angeles, Cal., and William H. Lear, Vice President-General Counsel, Fleetwood Enterprises, Inc., Riverside, Cal., of counsel, for defendant.

MEMORANDUM OPINION

LATCHUM, Senior District Judge.

The United States filed this action to recover civil penalties from Fleetwood Enterprises, Inc. ("Fleetwood"), for alleged violations of the National Manufactured Housing Construction and Safety Standards Act of 1974 ("the Act"), 42 U.S.C. § 5401 et seq. The United States charged in its complaint that Fleetwood designed and constructed approximately 20,000 mobile homes in violation of federal standards. (Docket Item "D.I." 1.)

On April 29, 1988, this Court entered a Memorandum Opinion (D.I. 28) and an Order (D.I. 29) denying Fleetwood's motion for transfer of this action to the United States District Court for the Central District of California. Presently before the Court are three motions: (1) plaintiff's motion to strike several of defendant's affirmative defenses or, in the alternative, for partial judgment on the pleadings (D.I. 14); (2) plaintiff's motion to compel discovery and for discovery sanctions and costs (D.I. 22); and (3) defendant's motion for a protective order (D.I. 33).

For the reasons set out below, the Court will: (1) deny in part and grant in part plaintiff's motion to strike and for partial judgment on the pleadings; (2) grant plaintiff's motion to compel; (3) issue a protective order in the form proposed by plaintiff, and (4) reserve decision on the issue of discovery sanctions and costs.

A. Motion to Strike

The Manufactured Housing Act established construction and safety standards for manufactured homes. 42 U.S.C. § 5401. The Act's stated purpose is to improve the quality and durability of manufactured homes and reduce injuries and property damage resulting from manufactured home accidents. Id. Violations of the Act are punishable by either the Act's civil penalty, § 611(a), or by its criminal penalty, § 611(b). 42 U.S.C. § 5410(a) & (b).¹ The Act's civil penalty provision authorizes fines of up to $1,000 per violation. Id. at § 5410(a).

The Government alleges in this action, inter alia, that over 10,000 homes designed and built by defendant have one or more shearwalls which are incapable of sustaining the design loads established by the Act. (D.I. 1 at 4-5.) The Government also charges that defendant designed and constructed over 8,000 homes with uplift straps and fasteners of insufficient strength to meet the Act's requirements. (Id. at 7.) The plaintiff seeks a penalty against the defendant of $1,000 per violation under § 611(a) of the Act. (Id. at 9.)

In its answer to the complaint, the defendant asserted that § 611(a) of the Act violates the Fifth, Sixth and Eighth Amendments to the U.S. Constitution. (D.I. 6 at 5-7.) These constitutional challenges are set forth in defendant's answer as affirmative defenses four through seven. (Id.) Plaintiff seeks to strike these defenses, or in the alternative, receive judgment on the pleadings as to these defenses. (D.I. 14.)

Motions to strike under Rule 12(f) of the Federal Rules of Civil Procedure are generally not favored by the courts, and will not be granted unless the insufficiency of the pleading at issue is clearly apparent. Louisiana Sulphur Carriers v. Gulf Resources and Chemical Corp., 53 F.R.D. 458, 460 (D.Del.1971). In considering a motion under Rule 12(c) for judgment on the pleadings, a court must view the pleadings in the light most favorable to the non-moving party and will grant judgment only if the moving party is clearly entitled to judgment. Commerce National Bank in Lake Worth v. Baron, 336 F.Supp. 1125, 1126 (E.D.Pa.1971); see also Huntt v. Government of Virgin Islands, 339 F.2d 309 (3d Cir.1964).

Defendant's fourth and fifth affirmative defenses, which charge that § 611(a) of the Act is overbroad and vague in violation of the Fifth Amendment's Due Process Clause, are easily resolved. Plaintiff argues that § 611(a) is not overbroad on its face because it does not infringe any constitutionally protected conduct, as required under Village of Hoffman Estates v. Flipside, 455 U.S. 489, 494, 102 S.Ct. 1186, 1191, 71 L.Ed.2d 362 (1981). (D.I. 21 at 5.) Plaintiff contends that § 611(a) is not impermissibly vague because its language was sufficiently precise to put the defendant on notice that violations of § 610(a) could render the defendant liable for civil penalties. (Id. at 5-12.) Plaintiff also argues that § 611(a) is neither overbroad nor vague as it applies to defendant. (Id. at 13-14.) Because defendant has failed to respond in either its answering brief or at oral argument to plaintiff's contentions, the Court concludes that defendant has waived its right to assert its fourth and fifth affirmative defenses. Accordingly, the Court will grant plaintiff's motion to strike defendant's fourth and fifth affirmative defenses.

The defendant's sixth affirmative defense charges that § 611(a), both on its face and as applied to defendant, is unconstitutional because it violates the Excessive Fines Clause of the Eighth Amendment. (D.I. 6 at 6.) The defendant asserts that the potential fine in this case could be as high as $19,428,000, if the Court applies the maximum penalty of $1,000 per violation to each of the 19,428 violations alleged by the Government. (D.I. 26 at 5.) Defendant argues that such a large fine would be sufficiently similar to a criminal penalty to fall under the Excessive Fines Clause of the Eighth Amendment. (Id. at 6-14.) Fleetwood points to a footnote in the Supreme Court's opinion in Ingraham v. Wright, which stated: "Some punishments, though not labeled `criminal' by the State, may be sufficiently analogous to criminal punishments in the circumstances in which they are administered to justify application of the Eighth Amendment." 430 U.S. 651, 669 n. 37, 97 S.Ct. 1401, 1411 n. 37, 51 Ed.2d 711 (1977). Defendant points out that in Aetna Life Insurance Co. v. Lavoie the Supreme Court stated that the issue of whether a $3,500,000 punitive damages award is impermissible under the Excessive Fines Clause was one of several important issues that the Court did not reach in the case. 475 U.S. 813, 828-29, 106 S.Ct. 1580, 1589, 89 L.Ed.2d 823 (1986).

This Court notes that the fine provided for in § 611(a) of $1,000 per violation is a maximum, leaving the Court with discretion to fine the defendant in an amount less than $1,000 per violation. Even if the Court were to assume that the civil penalty in § 611 falls under the Excessive Fines Clause of the Eighth Amendment, § 611(a) cannot be unconstitutional on its face because it in no way mandates an excessive fine.

As to whether § 611(a) is unconstitutional as applied to defendant, the Court finds that this issue is not yet ripe for judgment. Whether § 611(a) is unconstitutional as applied to defendant ultimately depends upon the size of the fine the Court levies on the defendant, if the defendant in fact is found to have violated the Act. Because the Court has discretion in determining the appropriate amount of any fine imposed on defendant, the Court at this time cannot say that defendant's constitutional rights have been or will be infringed.

Accordingly, the Court will grant to the plaintiff a partial judgment on the pleadings as to defendant's sixth affirmative defense insofar as it alleges that § 611(a) is unconstitutional on its face. The Court will deny plaintiff's motion to strike or, alternatively, for judgment on the pleadings, as to defendant's sixth affirmative defense claiming that § 611(a) is unconstitutional as applied to defendant.

Defendant's seventh affirmative defense contends that § 611(a) of the Act and related provisions² are unconstitutional on their face and as applied because they permit the imposition of large punitive awards without affording defendant the protections provided defendants in criminal cases under the Fifth, Sixth and Eighth Amendments to the Constitution. (D.I. 6 at 6-7.) Defendant argues that § 611(a), though labeled as a civil penalty, is essentially penal in nature. (D.I. 26 at 16-23.) Defendant contends that the potential $19,000,000 fine that defendant may incur is vastly disproportionate to any actual out-of-pocket loss incurred by the Government as a result of the alleged violations. According to Fleetwood, this case resembles United States v. Halper, 664 F.Supp. 852 (S.D.N.Y.1987), where a civil fine was found to constitute a criminal penalty because it lacked a "rational relation" to the Government's "out-of-pocket loss." 664 F.Supp. at 855. Consequently, the court in Halper concluded that the defendant was entitled to protection under the Double Jeopardy Clause of the Fifth Amendment.

Under § 611, the Congress has clearly provided for both a civil penalty (§ 611(a)), and a criminal penalty (§ 611(b)). However, the Supreme Court has indicated that such a designation may not be dispositive of the issue. In Trop v. Dulles, 356 U.S. 86, 94-95, 78 S.Ct. 590, 594-95, 2 L.Ed. 2d 630 (1958), a plurality of the Supreme Court ruled that a legislative classification of a statute as non-penal will not preclude a court from finding that the statute is...