HUDSON v. UNITED STATES
John Hudson was chairman of the First National Bank of Tipton and the First National Bank of Hammon. Hudson used his position to regain bank stock he had used as collateral on defaulted loans through a series of bank loans to other parties. Upon investigation the Office of the Comptroller of Currency (OCC) found that the loans were made in violation of several banking statues and regulations. The OCC fined and debarred Hudson for the violations. Later, he faced criminal indictment in federal District Court for violations tied to those same events. Hudson objected, arguing that the indictment violated the Double Jeopardy Clause of the Fifth Amendment.
The U. S. Court of Appeals for the Tenth Circuit eventually found for the Government in light of United States v. Halper on the grounds that the original proceedings were civil in nature and not so disproportional to the proven damages to the Government as to qualify as a form of criminal punishment.
Are punitive fines and debarment by the Office of the Comptroller of Currency a sufficiently "criminal" form of punishment that a subsequent criminal indictment for the same violations would violate the Double Jeopardy Clause of the Fifth Amendment?
Legal provision: Double Jeopardy
No. In a unanimous decision written by Chief Justice William H. Rehnquist, the Supreme Court upheld the Tenth Circuit's decision based on the distinction made in United States v. Ward between criminal and civil punishments. The Court held that the Double Jeopardy Clause does not apply to non-criminal penalties, even if the purpose of the penalty is to punish the offenders and deter future offenders. Since the first punishment handed down by the OCC - a Federal Banking Agency, not a court - was not a criminal punishment, the subsequent indictments were upheld.
ORAL ARGUMENT OF BERNARD J. ROTHBAUM ON BEHALF OF THE PETITIONERS
Chief Justice Rehnquist: We'll hear argument next in Number 96-976, John Hudson v. United States.
Spectators are admonished do not talk until you get out of the courtroom.
The Court remains in session.
Mr. Rothbaum: Mr. Chief Justice and may it please the Court:
The double jeopardy claims case before the Court today had its genesis in some bank loans in the mid-1980's in several small Oklahoma banks controlled by the petitioners.
These loans were challenged by Federal bank examiners as collectively violating insider lending regulations.
As a result, in 1989 the Comptroller of the Currency proposed to impose civil penalties on petitioner, two types petitioners... that's two types.
First, a lifetime bar from the business of banking or at any federally insured institution, subject to the right to reapply at a later time in writing.
Unidentified Justice: You said the business of banking or any federally insured institution.
Would that have applied to a bank which was not federally insured?
Mr. Rothbaum: Your Honor, it applies to... it actually... the State banking system through the FDIC insurance system, or through the national banks through the Comptroller's regulatory authority, and it would have to be with the permission of both agencies before they could return.
In addition to which, the Comptroller proposed civil penalties of $100,000 against Mr. Hudson and $50,000 each against the other two petitioners, Messrs. Baresel and Rackley.
Now, these sentences were imposed pursuant to a statutory scheme that, unlike some, for these sections... for these section required timing rules that there be willful acts and the Administrator then considered whether it is repetitive, whether there is concealment, questions of bad faith and so forth.
With regard to that scheme those findings were met here, remain here and are in the record.
The statutes do not contain any authority for the administrative agencies to consider matters such as internal investigatory costs, expenses incurred in investigating the bankers, or other similar matters, nor did the Government contend at any time that it had suffered quantifiable monetary loss for which this sanctions, these bonds were some sort of recompense.
At no time did the OC... did OCC ever take such a position.
In 1992, the petitioners were indicted for the same 18 loans, the only difference being that there is one conspiracy count in the indictment.
However, it is important to note that the Comptroller purported to find that these were acts done by the petitioners together, and that the statutes under which he imposed his sanctions allowed that to be considered in the penalty.
Unidentified Justice: May I just interrupt with one thought, Mr. Rothbaum?
You say they were indicted for the same loans.
Now, of course, they were actually indicted for violating certain statutes, and you were penalized for violating certain rules, and the Government argues the Blockburger test is not met in this case, and you say the Blockburger test doesn't apply, as I understand.
If the Blockburger test did apply, is it not clear that it's not satisfied?
Mr. Rothbaum: Your Honor, if the Blockburger test applies, then it applies at the level of generality that the Government seeks.
Unidentified Justice: Well, it's a simple test.
One statute requires an element, the other does not, and vice versa.
Mr. Rothbaum: Well, but Your Honor--
Unidentified Justice: You don't meet that test here, do you?
Mr. Rothbaum: --I suppose, stated that abstractly, we might not, but our views on that point is twofold.
First, the Court has never applied that type of analysis in this case, in this type of case, whether it's a civil--
Unidentified Justice: Right.
Mr. Rothbaum: --proceeding, and the use of the language same transaction repeatedly appears to me not to be an accident, because particularly if you look at the--
Unidentified Justice: So even acknowledging that we've never done it expressly in this... because we don't have very many of these cases, is there any reason why that test should not be applied, because even if you say same transaction, you have to in some way define exactly what it is the transaction gave rise to the two different punishments.
Why doesn't it make sense just to apply Blockburger?
Mr. Rothbaum: --I think it makes sense to say, when we're talking about introducing punishment upon a particular individual for allegedly getting involved with an insider loan transaction, that the same insider loan transaction should not be punished twice in separate proceedings, and to that extent, the cases upon which the Court relied in LaFranca, Justice Miller's opinion on circuit in the McKee case, and the opinion of the Southern District of New York in the Gates case support that view, and I think clearly those two cases and probably Halper itself can come out differently under a strict Blockburger analysis, so I do think the Court has taken the position.
Unidentified Justice: If Blockburger is adequate protection for two criminal prosecutions, then a fortiori ought to be adequate protection for a criminal and a civil prosecution.
What's wrong with that formula?
Mr. Rothbaum: Your Honor, I suppose my response to that is, Blockburger presupposes this elements analysis, and I'm not sure that always fits.
And I think often times it doesn't, where you do not have... where you have the penalty problem, if you determine your punishment but there's not necessarily a criminal offense associated with it.
For example, last term's decision in the CFI Fabricators case the Court determined there the type of punishment, penalty for failure to pay a tax.
That did not mean that there had to be a criminal prosecution or that the criminal process had to be invoked, but I think it has to focus on the realities of the statutory schemes that are at issue, and the threshold question, is this punishment?
Unidentified Justice: But double, double jeopardy provision is designed to protect someone from being twice prosecuted, basically.
Mr. Rothbaum: Or twice punished.
Unidentified Justice: Yes, and what you're doing is, you have had one criminal prosecution, you've had one civil prosecution, and now you're saying, well, we claim that the civil prosecution was actually punitive under Halper, but surely if the double jeopardy provision is designed to prohibit two prosecutions Blockburger should be plenty of... plenty sufficient to protect the double jeopardy interest, for one of the things is civil.
Mr. Rothbaum: I agree, Mr. Chief Justice, where there are two criminal prosecutions, but where, as here, the question, the first question is, is there punishment imposed by--
Unidentified Justice: But you have to really squeeze to get the civil thing into double jeopardy at all, because the classic doctrine is that the law doesn't prohibit the imposition of one criminal and one civil penalty.
Mr. Rothbaum: --If it is a civil penalty, if it is truly civil.
Unidentified Justice: And that's what Congress said here, was that it was civil.
Mr. Rothbaum: Congress said this was a civil penalty, that is how they cast it, but it is our view, it is our submission, that as the Seventh Circuit held in regard to an almost identical worded statute, in the Healy case, that the effect here is necessarily cumulative.
Unidentified Justice: Well, strain to get it... to make it criminal, in order to get it within the double jeopardy rule, then once there, you strain to get it out through the Blockburger test.
Mr. Rothbaum: Your Honor, I'm not... I would not characterize it as a strain to say that it's criminal.
The Court, the Court has not said it was criminal.
In cases going back as far as Choteau in the 1880s.
Helwig in the 1900's, which is cited and quoted in the CFI case, in each of those cases the Court held that the statutory scheme there imposed punishment.
In none of them, or at least not in most of them, was that made in the context of a criminal proceeding.
It was found to be the effect of what had been done to the defendant.
And what has been done here in our case is punitive, and let me add--
Unidentified Justice: Were those double jeopardy cases, the ones you--
Mr. Rothbaum: --No, sir.
No, sir... well, Chouteau was.
Helwig was the case in which jurisdiction in the court is at the time was divided between the district and circuit courts.
If it was civil it went to the district court, it was criminal it went to the circuit court, and the Court held since it was criminal the district court had no jurisdiction.
And let me add another point here with regard to the nature of this proceeding.
This proceeding is slightly different than many of the regulatory enforcement actions brought by various Government agencies, because they, many of them rest upon pure negligence, or upon a standard of conduct of less than knowing the rule for misconduct.
That is not... that happens not to be true here, at least under the statute as it was written prior to the 1981 amendments, and if the Court will look on page 62, I believe, of the appendix to the petition, the Comptroller's office says.
Second, these statutes... this is true from the legislative history that is in our brief, it's true for similar statutes.
These statutes have come into existence on the premise that what will happen here, what in fact happened here wouldn't have happened, that what was needed was a lesser penalty so that the criminal process did not have to be invoked.
Unidentified Justice: --Well, Mr. Rothburger, I... Rothbaum, I assume that to succeed here you really have to rely on this Court's Halper decision in large part.
Mr. Rothbaum: Well, Halper is certainly an important decision for our position, I believe because it is the first time that the Court announced categorically that the Constitution's Double Jeopardy Clause could apply in a civil proceeding.
Unidentified Justice: But it certainly said on its face that it was reserved for the rare case, and there was a far greater disparity there in the amounts selected, and the Government's expenses, than would be the case here.
I'm not sure that even on its face your petition would meet Halper under any standard, and the second thing I want you to address is that it looks to me like Halper may have been driven in part by due process concerns about vindictive use of civil proceedings following a criminal prosecution.
Now, here, the civil sanctions were imposed first, were they not?
Mr. Rothbaum: Yes, they were, Your Honor.
Unidentified Justice: So there's no danger here of a vindictiveness or a due process sort of concern that may have driven Halper.
Mr. Rothbaum: That is correct.
We do not claim vindictive prosecution.
Unidentified Justice: No.
Mr. Rothbaum: With regard to the--
Unidentified Justice: So if Halper is limited in that fashion, as I think it might be, how do you prevail?
Mr. Rothbaum: --Well, Your Honor, as to the first part of your question, a rare case, this too, is an unusual case.
It would be an unusual case where the Government will elect to try and claim both severe administrative sanctions and criminal--
Unidentified Justice: About every book on my wall is a rare case.
We're never very successful up here when you say this is a rare case.
The States are having a tremendously difficult time.
Mr. Rothbaum: --Your Honor, the only point I was making was at least within the Federal system, careful coordination between the SEC and the Justice Department, 1940's in the Justice Department, bringing civil and criminal proceedings is the norm today.
Unidentified Justice: Yes, but wasn't the rarity that Halper was talking about a reference to the nature of the civil penalty involved there, and if so, what is the rarity here?
Mr. Rothbaum: Well, it seems to me that the... perhaps rarity is the wrong word.
The distinguishing factor in Halper was that part of the sanction there admitted to be obtained as remedial.
The problem was determining how much more, at what point along a continuum did that $2,000 for each false claim penalty become penal, if at all?
Unidentified Justice: Are we still talking about civil preceding criminal, which is how we got into this discussion with a question from Justice O'Connor?
I thought your response for that is that the basic claim here is a double jeopardy claim.
Mr. Rothbaum: That's correct.
Unidentified Justice: And the assertion is that double punishment violates the Double Jeopardy clause, as Halper held, whether it's civil or criminal, and double punishment is double punishment, no matter which one comes first.
Mr. Rothbaum: No matter which one come first.
Unidentified Justice: I don't see... how do you run around that?
Mr. Rothbaum: I don't run around that.
I don't run around it.
I say, I believe that is a correct statement, that the order of the proceedings does not matter.
If, for example, in the case in which there has been a civil punishment imposed, say this is the CFI Federal case, if thereafter on the same facts there had been an attempt to indict, and say, well, the defendant would at least in my judgment have a strong argument, that once this Court had determined this was punishment, that he could not be further punished in a separate proceeding.
Unidentified Justice: Well, some civil penalties aren't punishment, others are, and they're all penalties, and so accepting that it doesn't matter, that the order doesn't matter, accepting that arguendo, what penalties are okay because they're civil, and what civil penalties are not okay because they're really punishment?
How do we... the books are filled with civil penalties.
How do we which ones are okay, don't get us into double jeopardy problems, and the ones that do?
I mean, what standards would pass muster as a genuine civil penalty, no double jeopardy problem?
Mr. Rothbaum: I think one of the most useful precedents would be the Hicks case, in view of the distinctions between civil and criminal intent, is it a determinate or indeterminate sentence.
If, for example, to take a hypothetical out of the reply brief, if the petitioners had been ordered to make a capital contribution to make up capital impairment and given a specific amount of time to do it, and thereafter, if you didn't, impose a certain fine there will be a strong argument, as I read Justice White's opinion in Hicks, that that is an indeterminate and therefore remedial sanction.
Unidentified Justice: But why should we import from the distinction between civil contempt and criminal contempt, which Hicks dealt with, I think... why should we import that into this area?
Mr. Rothbaum: --Because I think, in answer to your question, Mr. Chief Justice, it provides a useful standard for answering the question which Justice Ginsburg asked.
And that is, how do you know... how is one to determine which is which?
Unidentified Justice: When is a penalty not a punishment, a wonderful... the unsophisticated mind would think that a penalty is always a punishment, wouldn't it?
Mr. Rothbaum: --Your Honor, the unsophisticated mind might, but Congress having chosen to use the word penalty in different contexts, it is simply a fact which exists in the United States Code.
And as I read this Court's cases from Chouteau forward, that cannot affect the fourth principle--
Unidentified Justice: So, but... it's got to be something more than, like, a day fine that's meant to get you to comply with the law.
That will never be the case here, because you've already not complied, and whatever the penalty is for, it's for past conduct.
It's already done.
So you're giving Hicks as an example, where the whole idea is, you got the keys to the kingdom, to the jailhouse in your pocket, comply, and you're home free.
Here, you're being penalized for something you did in the past, so that's why I can't get much from Hicks.
Mr. Rothbaum: --And we're being penalized for something we did in the past, after having been told we can no longer participate in the business of banking, it would be different.
Unidentified Justice: Well, I would just like to know what is a civil penalty... that is, definitely was something you'd done in the past, not to get you to comply, come into compliance with the law, but something that you've done in the past, what kind of penalty... can there be such a thing as a civil penalty that doesn't get you into double jeopardy problems?
Mr. Rothbaum: Yes, I think there can.
For example, if the Government has suffered... in the example of a false claim, if the Government has suffered an economic measurable financial--
Unidentified Justice: That's like revoking a drivers license.
Mr. Rothbaum: --Your Honor, I would not take credit for... process of law--
Unidentified Justice: One of the things you haven't brought up is the... in response to Justice Ginsburg's question is the justification that the Government is basically recouping its enforcement costs.
Why isn't that something we ought to consider as a criterion?
Mr. Rothbaum: Your Honor, in the first place, I... two points.
The first one is, at the very least, Congress should enact it.
And this statute, by no stretch of the imagination, directs or allows the Administrator to consider that action.
Unidentified Justice: Well, it leaves the question entirely open, I guess.
I mean, you can't tell from what Congress has said what the object is, I guess, can you?
Mr. Rothbaum: From what Congress has said, you can determine that it did not authorize consideration of Government costs, and second--
Unidentified Justice: Well, I mean, how can we say that?
I mean, I would--
Mr. Rothbaum: --Well, Your Honor, it says, in considering the amount of the fine, and then lists the criteria.
Unidentified Justice: --I thought the criteria were the OCC's criteria.
Mr. Rothbaum: They are in the statute, and then the OCC has expanded on through what is called the penalty matrix, which has a series of points, functioning like the Sentencing Guidelines, but the criteria as to what must be considered statutory.
Unidentified Justice: Mm-hmm.
Mr. Rothbaum: And the second point I would make on that issue is that we are not talking about costs in the sense of obtaining expert witnesses or something like that.
What the Government was attempting to do here is to say they could simply take the cost of operation.
Unidentified Justice: Sure, to the extent that it may be attributable to your... to any given defendant's behavior, but I guess your answer is that if we were to assume that recoupment of Government cost, even on this attribution basis, was a relevant criterion in deciding where the... whether a penalty had crossed the line into something that was significant for double jeopardy purposes, that your client in fact would have the advantage of such a criterion, because you're saying under this statute that clearly is not what Congress was intending to do, so--
Mr. Rothbaum: And that clearly is not what happened.
Unidentified Justice: --So do you think it would be a relevant consideration as a general matter for us?
Mr. Rothbaum: As a general matter, certainly if Congress speaks to it, that's one thing.
If Congress doesn't speak, and if it is simply a matter allocating the cost of Government to someone to defeat a double jeopardy claim, I think that's very problematic.
In the Walter case in the Ninth Circuit I think Judge Noonan said that this case makes a strong point, that on that theory no private individual has that much money.
Unidentified Justice: How many statutes are there with standards like, has this been done in the past, good faith, the standards that are used here?
Aren't there many statutes labeled civil penalties that are just like this one?
I'm trying to see the consequences of holding in your favor, if we say statutes like this are no good.
Aren't there dozens of them on the books?
Mr. Rothbaum: Your Honor, I'm not... I don't think in order to resolve this case in my client's favor it is necessary to say that statutes such as this are no good.
We are saying that in this instance the use of the statutes resulted in punishment.
I would point out--
Unidentified Justice: But you've said the reason is that the statute is not a Hicks-type, comply with the law, and it isn't compensating the Government for a specific financial loss, so I'm thinking how many statutes fit that standard, and my guess is, there are a great many.
Mr. Rothbaum: --Your Honor, I don't know the exact number off-hand, but I--
Unidentified Justice: Well, many civil provisions are designed to prohibit unlawful conduct where the Government itself isn't harmed at all.
Mr. Rothbaum: --That--
Unidentified Justice: But under your theory, I mean, that would mean they'd never fit--
Mr. Rothbaum: --Well--
Unidentified Justice: --the criteria, and it seems to me you also are characterizing both the civil money penalties and the nonparticipation orders here as punitive, and under your theory, I guess, they couldn't even be brought in separate proceedings without falling in violation of the Double Jeopardy Clause.
Mr. Rothbaum: --Your Honor, with regard to your last point, we do not argue that the nonparticipation sanctions appease.
We argue that, given the nonparticipation, that with imposition on top of that a fixed monetary sums as a penalty for completed acts can have no remedial nonremedial purpose.
If my client had been allowed to continue in the industry, and it had been determined that they had caused X amount of loss, then if the question--
Unidentified Justice: Well, what... suppose... but they had the liberty to reapply, didn't they, so the monetary penalties in case they got in again would surely deter them from doing what they did before.
Mr. Rothbaum: --Well, Your Honor, that's possible I suppose.
Unidentified Justice: It's very possible.
Mr. Rothbaum: But it was not the intent with which they were imposed.
The intent, according to the OCC, in its published order, was... repeated at the hearing before Judge Thompson, was to deter others through publicizing this order.
Now, making of my clients an example in order to deter third parties is a classic definition of punishment regardless of what--
Unidentified Justice: But if we look at the statute, I mean, are we bound by what OCC says at the time?
The question is, what was Congress' intent, wasn't it?
Mr. Rothbaum: --I agree with that, but there has not been any suggestion thus far that there was any divergence between the two.
Unidentified Justice: Well, I'm suggesting it.
Mr. Rothbaum: If I could--
--I would like to reserve... I'm sorry, sir.
Unidentified Justice: Go ahead.
Mr. Rothbaum: --I was going to say, I'll reserve time, but if I missed a question, I apologize.
Unidentified Justice: No, you didn't miss anything.
Thank you, Mr. Rothbaum.
ORAL ARGUMENT OF MICHAEL R. DREEBEN ON BEHALF OF THE RESPONDENT
Mr. Dreeben: Mr. Chief Justice, and may it please the Court:
Civil money penalties serve a vital purpose in Federal regulatory schemes because they serve as an ongoing motivation to regulated parties to conform their conduct to the requirements of the law.
For four reasons, our position is that the imposition of civil money penalties in such regulatory schemes does not constitute a bar under the Double Jeopardy Clause to petitioners' subsequent criminal prosecution.
First, civil money penalties in such regulatory schemes, like civil forfeiture actions, do not constitute punishment for purposes of the Double Jeopardy Clause of the Fifth Amendment.
Second, even assuming that these penalties--
Unidentified Justice: Well, what do we do with language in Halper?
Halper's part of the problem, right?
Mr. Dreeben: --I think, Justice O'Connor, that to a large extent this Court has clarified and limited much of the language in Halper which could be read to lead to very broad results, including results such as petitioners are arguing for today.
One of the most significant features of Halper was its extraordinarily broad definition of punishment as encompassing any sanction that had--
Unidentified Justice: Yes, that's what I'm talking about.
I mean, that leads to a lot of problems.
Mr. Dreeben: --It leads to a lot of problems because Halper thought, or said that any sanction that couldn't be solely explained without reference to deterrence or retribution must be deemed punishment for double jeopardy purposes.
At least twice since that case this Court has retrenched somewhat from Halper's description of punishment in that respect.
Unidentified Justice: May I ask, assuming the language is much too broad in Halper, do you think there was punishment in Halper?
Mr. Dreeben: I think not, Justice Stevens.
Our position in Halper was that there was not punishment within the meaning of double jeopardy.
There was in a common sense--
Unidentified Justice: So it really isn't just a question of language.
The holding is basically wrong in your position.
Mr. Dreeben: --Oh, our position was then--
Unidentified Justice: We can't ignore cases as though they had never been decided--
Mr. Dreeben: --Excepting--
Unidentified Justice: --and having been decided, do you think--
Mr. Dreeben: --Except in the holding of Halper--
Unidentified Justice: --Okay.
Mr. Dreeben: --yes.
Then the Court's conclusion in that case was that there was punishment, but the Court reached that by a process of analysis that required looking at the fact that it was a fixed penalty, that the penalty was totally disproportionate to the only legitimate aims of the statute that were not punitive, which in that case--
Unidentified Justice: Was there some element of vindictiveness in sort of a due process focus, do you think, in Halper?
Mr. Dreeben: --I have never seen that in the opinion, Justice O'Connor.
I do think that it was significant to the Court that Halper had been first criminally prosecuted, that the Government then came in and obtained civil penalties--
Unidentified Justice: That's the vindictiveness element.
Mr. Dreeben: --I wouldn't be prepared to concede that that was vindictiveness, because there was no showing in that case, and I don't think that the record would bear the conclusion that the Government was motivated to punish Halper for exercise of any of his constitutional rights, which is normally the due process test that would apply in a criminal case.
Unidentified Justice: No, but a dissatisfaction by the Government, we had this criminal prosecution and we didn't get much punishment out of it, now let's go do something about that.
We've got this civil remedy here.
Mr. Dreeben: Well, if that were true, then it would mean that Halper should not be viewed as a double jeopardy case at all, because that analysis I would think would apply even if it were clear that the second case had nothing to do with the elements that were proved in the first case and thus wasn't the same offense under Blockburger.
We do think that Halper should be, to the extent that it's--
Unidentified Justice: Halper didn't discuss Blockburger for some reason, in the sense of thinking that applied.
Mr. Dreeben: --We didn't raise a Blockburger or same elements issue in Halper because the Civil False Claims Act and the criminal false claims provisions would appear to be satisfied under that test.
We brought the case on a direct appeal from a district court decision to this Court, raising only the question of whether a civil false claims sanction could ever be deemed punishment within the meaning of the Fifth Amendment.
We argued then that only criminal punishment could satisfy the Double Jeopardy Clause.
This Court rejected that, and the question is whether the analysis that was used in Halper should carry over to the very different kind of penalties that are at issue in this case.
Civil money regulatory penalties aim primarily to shape the conduct of parties who are subject to regulation by sitting as an ever-present reminder that there are consequences for violation of the law, and agencies use them for precisely that purpose, which is appropriately described as a deterrent purpose.
Now, under a broad reading of Halper, which I think petitioners have at times embraced, any deterrent purpose would brand these sanctions as punitive for double jeopardy purposes, but this Court has made clear, both in Kurth Ranch and in United States v. Ursery, that even an obvious deterrent purpose does not mean that a civil sanction constitutes punishment and applying an analysis that respected that factor in Ursery, this Court concluded that even though civil forfeiture proceedings are imposed largely to motivate owners of property not to allow their property to be used in violation of the law, that civil forfeiture should not be deemed punishment for double jeopardy purposes even if it might be deemed punishment under a common sense view, or plain view, or under other constitutional provisions.
Unidentified Justice: Were the penalties in Halper not regulatory under this scheme that you're putting forth, that they're distinguishable from the kind of penalties that we have here?
Mr. Dreeben: They were, Justice Kennedy, and they are for two reasons.
The first reason is that--
Unidentified Justice: They were distinguishable, or they were regulatory?
Mr. Dreeben: --They are distinguishable.
They were not regulatory.
The Court deemed the penalties that were imposed under the False Claims Act to be analogous to liquidated damages that a party may collect, whether it governmental or private, when it has been damaged by fraud, and the Court reached that conclusion by looking at the character of the sanctions that were authorized by the statute: damages, actual damages, double damages, and a fixed penalty which the Court viewed as a way of getting rough compensation for the Government, to include not only its direct losses, but costs of investigation and costs of prosecution.
Unidentified Justice: Mr. Dreeben, apart from the fact that this definition of punishment would enable the Government to win this case, what is there to be said for it?
I mean, in the language of the Double Jeopardy Clause, in the common understanding of punishment?
I mean, are we just authorized to give punishment whatever definition in the world we want in order to produce results that we sort of like?
Mr. Dreeben: I think, Justice Scalia, that the starting point is suggested by the fact that the word punishment is not in the Double Jeopardy Clause.
Unidentified Justice: Yes, well, that... yes, we could start with that, and 48 States have asked us to overrule Halper because of that.
Mr. Dreeben: Well, there is, I think, an irreducible need to consider the fact that the Double Jeopardy Clause speaks in language that undeniably connotes a criminal offense.
It speaks of putting somebody in jeopardy of life or limb, and it speaks of an offense, and those are concepts that have primary application, if not exclusive application, to criminal conduct.
Now, we suggest in this case that the appropriate test to reconcile the Double Jeopardy Clause and... with the possibility that civil sanctions may be misused in a way that could implicate that clause, is to apply the test that this Court described in United States v. Ward.
First determine whether Congress intended a civil sanction, and then determine whether there is any evidence, by the clearest proof, that Congress' intent to create a civil sanction should be overridden and that the sanction should be deemed criminal.
That is a test that I think is not only responsive to the language of the Double Jeopardy Clause, but reflects the fact that the consequences under double jeopardy are very significant to the Government.
In this case, we went in through the OCC and found violations of banking regulations, imposed civil penalties, imposed nonparticipation requirements on the petitioners through their settlement, and obtained important results from the point of view of the Office of the Comptroller of the Currency's regulation of the banking system.
Unidentified Justice: May I just interrupt?
It seems fairly clear, if you apply Blockburger, that wouldn't have barred the criminal proceeding.
Mr. Dreeben: --I agree, Justice Stevens.
Unidentified Justice: So that really in this statute you don't have the practical problem that concerns you generally.
Mr. Dreeben: I agree with that, Justice Stevens.
There are many other Federal regulatory statutes where there is a civil enforcement provision that includes money penalties and that has a criminal counterpart that requires perhaps an additional element of scienter or wilfulness, but that the elements are essentially identical, and--
Unidentified Justice: How would you go about applying Blockburger when you compare the civil and the criminal charges in light of the different burdens of proof?
Does that matter?
Mr. Dreeben: --I don't think that it does, Justice O'Connor, if one embarks on the enterprise of applying the Double Jeopardy Clause to civil proceedings.
The question then would be, under Blockburger, are the elements required to be proved by the Government in the civil case the same constitutionally.
Unidentified Justice: Regardless of the burden.
Mr. Dreeben: Regardless of the burden of proof.
That would not be a ground on which we would suggest that these can be distinguished.
Now, it is, of course, true, that if we brought, for example, a criminal Federal securities case, and the defendant was acquitted, and we then sought to bring a civil Federal securities case that had the same identical elements, we would not be barred because the defendant would have no multiple punishment argument and the burden of proof is lighter in a civil case, so the criminal conviction... the criminal acquittal would not constitute any kind of a collateral estoppel bar on the Government proceeding.
But that, of course, is not what we have here.
What we have here is an agency that, in the course of enforcing its own requirements, and to keep its reins on the regulatory... regulated parties that are before it, imposes civil penalties to let all regulated parties know that there are consequences for violating the law.
Unidentified Justice: But Mr. Dreeben, going back to the second part of Ward, the criteria that the agency uses sound like traditional sentencing criteria to me, I mean, as set out on page 3... wilfulness, insider status, previous warnings, history of violations, loss, number of violations, duration, continuation, and so on.
I mean, that sounds like common law punishment to me.
Mr. Dreeben: Well, the criteria, Justice Souter, may not be very different, but those criteria are aimed at determining what level of penalties is appropriate to send a deterrence signal not only to these individuals but to the world at large, and the Court has--
Unidentified Justice: Yes, but that's exactly what common law courts do in sentencing.
Mr. Dreeben: --That is true, but the Court has recognized that deterrence is a legitimate nonpunitive objective of the civil law.
That is exactly what the Court said in Ursery, when it looked at civil in rem forfeiture, recognized that one of the main purposes of it was to motivate parties, not to allow their property to be used in violation of the law, and then held that that form of sanction is not punishment for double jeopardy purposes.
Unidentified Justice: May we're trying to have it both ways, and maybe you're accepting that difficulty of ours in answering as you do, because I don't know how to draw the line.
Mr. Dreeben: The line is one that I think should be drawn with reference to the fact that the consequence under double jeopardy is entirely to foreclose the second proceeding, as petitioners have presented the question here.
If they are right, and we have imposed punishment in the first proceeding, and assuming that Blockburger were satisfied on their behalf, we would then lose any right whatsoever to bring a criminal prosecution.
In consequence, if the--
Unidentified Justice: So it's the order of the proceedings that you're getting at.
Mr. Dreeben: --Well, the order of the proceedings, but what I wanted to focus on here is simply that there are radical consequences from deeming a sanction to be covered by the Double Jeopardy Clause.
If the Court were to hold, and we would not dispute that these civil fines were sufficiently punitive to implicate the concerns of the Eighth Amendment, what that would mean is that there would be constitutional review of the amount of the fines that were imposed to determine that they were not excessive.
If the Court were to determine that there was a--
Unidentified Justice: The Eighth Amendment uses the word punishment, by the way, which is a great advantage over the Double Jeopardy Clause.
Mr. Dreeben: --Well, it does in the Cruel and Unusual Punishments Clause, but it does not in the Excessive Fines Clause, and I think that the Court has incorporated notions of punishment into both of those clauses to capture in a colloquial way what they are getting at.
Unidentified Justice: All right, but--
Mr. Dreeben: But the Constitution itself doesn't use that word.
Unidentified Justice: --But I think... what... if I understand what your telling me is, number 1 we ought to consider the consequence of applying double jeopardy here, and you're saying, when it would foreclose the criminal proceeding that is a more serious consequence, and is entitled to weight in our line-drawing than if it would impose merely a civil proceeding.
I think that's the first thing you're saying.
Beyond that, is there any sort of line-drawing criterion?
Mr. Dreeben: The--
Unidentified Justice: Well, if you're--
Mr. Dreeben: --The line that I think that comes out of United States v. Ursery is that... is entirely permissible for the Court... for Congress to authorize civil sanctions that pursue a deterrent purpose, and that that does not brand them as punishment under the Double Jeopardy Clause.
Unidentified Justice: --So right away--
--That's not a line.
That's what's not a line.
We're asking you what the line is.
You're telling us what the line isn't.
Mr. Dreeben: The line would be--
Unidentified Justice: The line is not deterrence.
Mr. Dreeben: --Correct.
Unidentified Justice: But what is it?
Mr. Dreeben: The test that we're suggesting in this context is the test articulated in United States v. Ward.
If the sanction is framed as a civil sanction but in purpose or effect it is so punitive as to betray that characterization, then the Court will determine that--
Unidentified Justice: And how does one know that when it's so punitive?
Mr. Dreeben: --It does... how does one know that, Justice Ginsburg?
Unidentified Justice: I thought you had started out by saying you're not... you're accepting Halper, Halper's language is too broad, it has to be confined, and I had written down, fixed penalty, totally disproportionate.
Now, what else?
Mr. Dreeben: As far as the scope of Halper?
Unidentified Justice: To... no.
What should our standard be for saying, this is labeled civil penalty, but it gets into double jeopardy territory because it's punishment, and we know that for what identifying characteristics?
And so you... what you started to say now, using Ward, is, when it becomes... the words were... are highly generalized, so I would like you to be more concrete.
Mr. Dreeben: The most concrete that I can be, Justice Ginsburg, is to note that first, any civil sanction needs to be considered on its own terms, so that there will be different results for different kinds of civil sanctions, and second, the kind of civil sanction that we're talking about here, it is not the entire class of civil money penalties, it is the class of civil money penalties that are imposed for regulatory purposes, and our submission is that categorically the Court should conclude that if those sanctions are enacted under... imposed under statutes that passed the Ward test, there is not a double jeopardy problem.
Now, the Ward test will always be a highly case-specific enterprise for this Court because, to the extent it's been particularized, it looks to the list of factors that the Court articulated in Kennedy v. Martino Mendoza, and those factors, the Court noted even in that case, may point in different directions and they have to be balanced.
Unidentified Justice: Well, if--
--Well, Mr. Dreeben, in Halper the criminal prosecution occurred first and then the civil penalties.
Mr. Dreeben: Correct.
Unidentified Justice: And at least as I look at it it seemed to me to have some element in there of a concern by the Court of vindictiveness and disproportionality, if you will, and due process-type concerns.
Here, in this case, the civil sanctions were imposed first, so none of that could be present.
Maybe that line is useful.
What comes first?
Mr. Dreeben: Well, that would certainly confine Halper to its facts, and would restrict--
Unidentified Justice: It would really cut Halper loose from all reasoning, wouldn't it?
Mr. Dreeben: --It would cut Halper loose from the Double Jeopardy Clause.
Unidentified Justice: Yes, which... on which it was based.
Mr. Dreeben, don't you think it would be even more vindictive if the Government, having lost an action for civil penalties, was so mad that it prosecuted the person criminally?
That's real vindictiveness.
Mr. Dreeben: Well, I don't think that Halper itself involved a case in which vindictiveness was established.
Unidentified Justice: No.
I'm saying, if you're looking for a situation that displays vindictiveness, it's not the one where the civil precedes... follows the criminal, it's the one where the civil precedes the criminal and, having lost the civil case, the Government is so enraged it prosecutes the person criminally.
Mr. Dreeben: We might have a problem--
Unidentified Justice: That seems to be more vindictive, not less.
Mr. Dreeben: --We might have a problem under conventional collateral estoppel doctrine if we fail to persuade the fact-finder by a preponderance of the evidence that certain facts were proved, and then we sought to prove to another fact-finder that they were established beyond a reasonable doubt.
There are already conventional protections in the law that would cover cases like that, and I'm not aware of any case where we did that.
Unidentified Justice: But you did mention issue preclusion, which would be a good, neutral reason for doing the criminal prosecution first, because if you win in the criminal prosecution, if you've established the facts beyond a reasonable doubt, then you do have issue preclusion--
Mr. Dreeben: That is true.
Unidentified Justice: --In the civil case.
Mr. Dreeben: That is true, and there are often good reasons to do the criminal prosecution first, not the least of which is that grand jury investigations are surrounded by secrecy, and you want to encourage the grand jury to be able to gather information without interfering with any civil process, and oftentimes grand jury investigations will go forward, the civil case will sit back, and there are also many cases where the Government decides after a criminal conviction is obtained there's no need to proceed with any further proceedings for penalties.
But in a case like this, the agency made a perfectly valid judgment that there was an importance to moving promptly to impose the nonparticipation order to protect members of the public from further potential banking violations by these individuals, and to impose the civil penalties so that the rest of the regulated industry was aware that even a regulatory violation has consequences, whether or not down the road somewhere the particular individuals who committed it were so culpable that they should also be subjected to criminal prosecution.
And it would therefore be a fairly dramatic consequence for the Government to have to choose an election of remedies at a point where the agency knows that there's a violation, but nobody knows whether there will be sufficient evidence of criminal activity to warrant a grand jury to indict.
And in that sense, the order of proceedings not only has a great practical significance, but I think that it also has a constitutional significance.
The submission of the defendants here is that the multiple punishments doctrine exists in a fashion that makes a punishment a jeopardy for constitutional purposes.
That has never been the traditional way that this Court has analyzed multiple punishments questions even before Halper.
The Court has applied the multiple punishments doctrine even when there was indisputably a single jeopardy.
The Court has held that the multiple punishments doctrine prohibited the imposition of cumulative punishments in one proceeding when the legislature has not authorized it, and in those cases there was clearly only one jeopardy.
The basic premise of the multiple punishments doctrine was that once an individual has been put in a criminal jeopardy, additional punishment shall not be imposed on that individual for the same crime, and that is not satisfied in a case in which petitioners here have never been criminally indicted and have never been criminally charged.
Now, if the Court agrees with us that the Double Jeopardy Clause is categorically not applicable to civil regulatory sanctions unless the defendant is able to make the showing that, despite the civil characterization, the civil sanctions were in fact criminal under the United States v. Ward test, it doesn't mean that there's no constitutional limit, or no statutory limit to the amount of civil penalties that the Government can impose.
There is judicial review that is governed by traditional APA standards of whether a particular civil penalty is within the boundaries that have been set by Congress and that are established by the criteria of the regulatory agency, and there is also review under the Eighth Amendment Excessive Fines Clause to keep the particular civil penalties in question within constitutional bounds.
Unidentified Justice: But both of those standards would have been met in Halper, of course.
Mr. Dreeben: Well, it's not clear whether they would have been met in Halper, as--
Unidentified Justice: But the statute authorized the penalties.
Mr. Dreeben: --The statute clearly authorized it, and one of the problems that the Court had in Halper that is not present here is that the statute required the imposition of fixed penalties for every violation regardless of how significant the fraud was to the Government, and that created the potential for hugely disproportionate civil sanctions being imposed for the particular fines, the particular violations that were at issue.
Unidentified Justice: But before you get to the Eighth Amendment excessive fines provision, you have to show that it is a penalty, do you not?
Mr. Dreeben: --I don't think so, Justice Kennedy.
Unidentified Justice: In our punitive damages cases and jurisprudence, haven't we said that the Eighth Amendment applies only to a criminal proceeding for excessive fines?
Mr. Dreeben: No.
In fact, the holding of Austin v. United States is that the Eighth Amendment applies to civil in rem forfeiture, which is clearly a civil proceeding.
The holding in the punitive damages cases--
Unidentified Justice: In the forfeiture area, yes.
Mr. Dreeben: --Because it's an exaction by the Government of money for a violation of the law, and it is true that it has to be in some sense a penalty.
I don't think a tax, for example, that is a true tax is subject to the Excessive Fines Clause, and I don't think that a disgorgement remedy or a damages remedy would be subject to the Excessive Fines Clause, but all that is constitutionally necessary is that there be a fine, and we would readily concede that the civil penalties that are applicable under the statutes at issue here are constitutional fines.
Unidentified Justice: We have said punitive damages are not fines, though.
All right, I'll look it up.
Mr. Dreeben: In addition, the Court has said that punitive damages are not paid to the Government directly.
The Court reserved the question in the Browning-Ferris case of whether a qui tam case might be viewed differently because the Government collects part of the money, and I think the Court would likewise reserve punitive damage schemes where the punitive damages were paid in part to the State, but in the conventional case where a private party brings a civil case and collects punitive damages the Eighth Amendment has nothing to say about it.
The Eighth Amendment has a lot to say about what the Government does in these civil fines, and therefore there should be no reservation on the Court's part that there would be no constitutional constraint whatsoever were the Double Jeopardy Clause ruled inapplicable to these civil penalties.
Unidentified Justice: Thank you, Mr. Dreeben.
Mr. Rothbaum, you have 4 minutes remaining.
REBUTTAL ARGUMENT OF BERNARD J. ROTHBAUM ON BEHALF OF THE PETITIONERS
Mr. Rothbaum: Thank you, Your Honor.
Mr. Chief Justice, may it please the Court:
With regard to the order of proceedings, I would note the obvious.
That is up to the Government.
If it wishes to bring a criminal prosecution first, it may do so, and as a practical matter, whenever there is a belief that... on the part of the Government that that kind of dual proceeding will be forthcoming, there's traditionally very close coordination, reflected, for example, in the decisions of this Court and the courts of appeals regarding the rights of a litigant to civil discovery while the grand jury is still sitting.
With regard to the Eighth Amendment issue, it may be that the Eighth Amendment also would apply, but that is not an exclusive application.
It is our position that the Double Jeopardy Clause of the Fifth Amendment under this Court's cases apply to a statute such as this, which imposes punishment on solely punitive or traditionally punitive criteria set forth in the statute and expounded by the administrator called upon to do so in a matrix, as it is called, that is self-consciously patterned on the Federal Criminal Sentencing Guidelines.
Unidentified Justice: What happens if you have a Government agency or something says, we're going to fine you $10 if you're late for a meeting.
What's the point of the fine?
Well, we want to get people to the meeting.
Mr. Rothbaum: If the person is allowed to go to the meeting after he pays the fine, that might very well be a remedial imposition.
Unidentified Justice: So it's not remedial.
They said, why'd you do it?
Well, people are late for the meeting.
We want them to be there on time, $3 first meeting, $5 second.
You have to have a trial, and... I mean--
Mr. Rothbaum: Your Honor, I know of no such statute--
Unidentified Justice: --Maybe there's never such a thing, but perhaps some day somebody might think of it.
People get late for the meetings in other organizations.
They fine you if you're late, a little fine.
I think it would be a very good idea.
If that's so, I'm interested in the criteria.
Mr. Rothbaum: --I understand that.
Your Honor, the difficulty I have with your question is that this statute and these criteria are so specific--
Unidentified Justice: They're solely deterrent, just like my fine.
Mr. Rothbaum: --Well, when one measures the size of the fine according to whether it's a recidivism, and according to whether--
Unidentified Justice: All right.
Then it's the size.
It's not now a question of whether it's serving a purely deterrent--
Mr. Rothbaum: --But it must also be an intentional act, at least under the statute as it then existed, and with regard to that point, and where to draw the line on what is and isn't a penalty, I would invite, if I could, the Court's attention to one of the first cases in this area, Chouteau, which held that first a settlement agreement would be treated as being the equivalent of a criminal acquittal or conviction so that the defendant could plead double jeopardy, saying that otherwise a great principle would be sacrificed to mere form, and second, that the mode by which the penalty was imposed did not matter, whether by a civil action or a criminal prosecution.
A unanimous Court repeated that holding in La Franca, and I think the point of La Franca, in distinguishing between the penalty and the tax issue, it must serve some other purpose.
And that, I think, is the point of Ursery.
In addition to the historical, unique... thank you, Your Honor.
Chief Justice Rehnquist: Thank you, Mr. Rothbaum.
The case is submitted.