United States v. Hudson

PUBLISH

UNITED STATES COURT OF APPEALS
Filed 8/8/96
TENTH CIRCUIT

UNITED STATES OF AMERICA,
)
Plaintiff-Appellant )
)
v. ) No. 95-6030
)
JOHN HUDSON; LARRY BARESEL; )
JACK B. RACKLEY, )
)
Defendants-Appellees. )

Appeal from the United States District Court
for the Western District of Oklahoma
(D.C. No. CR-92-152-T)
(879 F.Supp. 1113)

Joseph Douglas Wilson, Criminal Division, Department of Justice,
Washington, D.C., (Patrick M. Ryan and Timothy W. Ogilvie, U.S.
Attorneys Office, Oklahoma City, Oklahoma, with him on the
briefs), for Plaintiff-Appellant.

B.J. Rothbaum Jr., Linn & Neville, Oklahoma City, Oklahoma (Drew
Neville, Linn & Neville, Oklahoma City, Oklahoma; Lynn A. Pringle
and Stephen W. Elliott, Oklahoma City, Oklahoma; James A. Rolfe,
Dallas, Texas; C. Merle Gile, Oklahoma City, Oklahoma, with him
on the briefs) for Defendants-Appellees.

Before TACHA, LOGAN and REAVLEY, * Circuit Judges.

*
The Honorable Thomas M. Reavley, United States Court of
Appeals, Fifth Circuit, sitting by designation.
REAVLEY, Circuit Judge.

The United States appeals the dismissal on double jeopardy

grounds of its criminal indictment against John Hudson, Larry

Baresel, and Jack B. Rackley (“defendants” or “appellees”).

Prior to being indicted the defendants had been fined by the

Office of the Comptroller of the Currency (“OCC”). The
defendants moved to dismiss the indictment for violating the
1
“multiple punishments” prong of the Double Jeopardy Clause. The
district court granted the motion, concluding that the OCC fines

were punishment for the same offenses charged in the indictment.

Because we find that the fines were not punitive, we reverse and
remand for further proceedings.

PROCEDURAL HISTORY

In 1989, the OCC issued civil penalties against the
appellees for alleged banking violations. 2 The OCC maintained

that the violations caused approximately $900,000 in losses to

the Federal Deposit Insurance Corporation, and ordered Hudson to

1
The Double Jeopardy Clause of the Fifth Amendment provides:
“[N]or shall any person be twice put in jeopardy of life or limb.
. . .” U.S. Const. Amend. V. The Double Jeopardy Clause
protects against three abuses: (1) a second prosecution for the
same offense after acquittal; (2) a second prosecution for the
same offense after conviction; and (3) the imposition of multiple
punishments for the same offense. United States v. Halper , 490
U.S. 435, 440, 109 S.Ct. 1892, 1897 (1989).
2
The civil penalties were imposed pursuant to 12 U.S.C. §§
93(b) and 504 for alleged violations of 12 U.S.C. §§ 84 and 375b,
and of 12 C.F.R. §§ 31.2(b) and 215.4(b).
2
pay $100,000 and Rackley and Baresel to pay $50,000 each. The

OCC also issued orders (“prohibition orders”) which in essence

sought to prohibit appellees from all banking activities.

As a result of the then pending administrative actions

against them, the appellees and the OCC entered into agreements

(“consent orders”) in which Hudson consented to pay $16,600 and

Rackley and Baresel consented to pay $15,000 each. The appellees

also agreed not to participate in most, if not all, banking

activities without prior authorization from the government. In
addition, each consent order contained a provision (“waiver

provision”) stating that nothing in the consent order constituted
a waiver of any right the government had to bring other actions

against the appellee. Hudson’s and Baresel’s consent orders each

contained a provision stating that the order “does not constitute

an admission” by either “to any of the charges contained” in the

OCC’s notices.
After the government indicted the defendants for the same

transactions upon which the OCC sanctions were based, the
defendants moved to dismiss the indictment. The district court

initially denied the motion, ruling that the waiver provision was

a valid waiver of the defendants’ double jeopardy claim, and that

the fines and nonparticipation sanction were solely remedial.

The defendants appealed, and a prior panel of this court reversed

in part, affirmed in part, and remanded for further proceedings.
See United States v. Hudson , 14 F.3d 536 (10th Cir. 1994)

(“Hudson I”).

3
 Hudson I first determined that the waiver provision did not

constitute a waiver of the defendants’ double jeopardy rights.

Id. at 539. The court then affirmed that the prohibition order

was remedial and therefore did not violate the Double Jeopardy

Clause. Id. at 540-42. The court concluded, however, that there

was insufficient evidence in the record to support the district

court’s determination that the money sanctions were solely

remedial, pointing out that the district court made no findings

regarding actual losses the government incurred. Id. at 543.
The court therefore vacated the district court’s decision on the

money sanctions and remanded for further proceedings.
On remand the district court conducted an evidentiary

hearing and found that the government’s proven costs were the

$72,000 the OCC spent pursuing the defendants, but concluded that

that the OCC monetary sanctions against the defendants were not

solely remedial. The court found that the fines were imposed for
the same offenses charged in the indictment, and held that the

indictment violated the Double Jeopardy Clause.
ANALYSIS

The only issue we need to address on this appeal is whether

the district court erred in determining that the monetary

sanctions were not solely remedial. 3 We review the district

court’s determination for abuse of discretion. United States v.

3
Because we reverse the case on this issue, we do not
address whether the monetary sanctions were imposed for the same
offenses charged in the indictment.
4
Halper, 490 U.S. 435, 450, 109 S.Ct. 1892, 1902 (1989); United

States v. Bizzell, 921 F.2d 263, 267 (10th Cir. 1990).

Hudson I acknowledged that the case is controlled by Halper,

which considered when a civil sanction may be considered

punishment for double jeopardy purposes. 4 Under the objective

test outlined in Halper, a particular sanction is not punishment

when it bears a rational relation to the goal of compensating the

government for its loss. Halper, 490 U.S. at 449-51, 109 S.Ct.

at 1902-03. The defendant in Halper had overbilled the
government $585 by submitting 65 false claims. He was convicted

in a criminal case and received a $5000 fine. The government
then brought a civil action under the False Claims Act, seeking

civil penalties of over $130,000, based on the Act’s provision

for a civil penalty of $2000 per false claim submitted. The

Court held that the fine was grossly disproportionate to the

damage caused, and was therefore a punishment. The Court
emphasized that its ruling was ”a rule for the rare case,” id. at

449, 109 S.Ct. at 1902, where the civil penalty is “exponentially

greater than the amount of the fraud,” id. at 445, 109 S.Ct. at

1900, and is “so extreme and so divorced from the Government’s

4
The recent Supreme Court case of United States v. Ursery ,
Nos. 95-345 and 95-346, 1996 WL 340815 (U.S. June 24, 1996),
reaffirms that Halper controls the case at bar. In Ursery, the
Supreme Court distinguished between cases involving civil fines
and sanctions, which may constitute punishment under Halper, and
in rem civil forfeitures, which are neither punishment nor
criminal for double jeopardy purposes. Id. at *7-*9. Because
the case at bar involves civil fines and sanctions, Halper
controls.
5
damages,” id. at 442, 109 S.Ct. at 1898, that it could only be

characterized as punishment under the Double Jeopardy Clause.

In the case at bar there was no gross disproportionality

between the total fines imposed, $44,000, and the proven damages

to the government, $72,000.

In United States v. Bizzell , 921 F.2d 263 (10th Cir. 1990),

we held that a fine is not punishment unless it is overwhelmingly

disproportionate to the government’s damages. Id. at 267. In

Bizzell, the Department of Housing and Urban Development (“HUD”)
filed administrative complaints against Charles and John Bizzell.

The Bizzells entered into settlement agreements with HUD. Both
agreements prohibited the Bizzells from participating in HUD

programs for a short period, 5 and John Bizzell agreed to pay a
$30,000 sanction. When the government subsequently indicted the

Bizzells for the same transactions set forth in the HUD

administrative complaint, both defendants moved to dismiss the
indictment on double jeopardy grounds. The district court ruled

that the prohibitions were remedial, but concluded that the

monetary sanction was a punishment because it bore no relation to

a remedial goal. Id. at 265. This court agreed that the

prohibitions were remedial, but disagreed that the monetary

sanction was a punishment. Id. at 266.
The Bizzell court read Halper to state that “a civil remedy

enacted by the government does not rise to the level of

5
John Bizzell was excluded for two years conditioned upon
the payment of his fine and Charles for 18 months. Id. at 265.
6
proscribed ‘punishment’ unless ‘in a particular case a civil

penalty . . . may be so extreme and so divorced from the

Government’s damages and expenses as to constitute punishment.’”

Id. (quoting Halper, 490 U.S. at 442, 109 S.Ct. at 1898); see

also Burke v. Board of Gov. of Federal Reserve System , 940 F.2d

1360, 1367 (10th Cir. 1991) (“[M]ultiple punishments exist for

purposes of double jeopardy where ‘a civil penalty [is] so

extreme and so divorced from the Government’s damages and

expenses as to constitute punishment.’” (quoting Halper, 490 U.S.
at 442, 109 S.Ct. at 1898)), cert. denied 504 U.S. 916, 112 S.Ct.

1957 (1992). In Bizzell we noted that under Halper the question
is “whether the civil remedies can be fairly described as

remedial,” Id. at 267, and then applied this objective test to

the facts before it. The court held that the district court had

abused its discretion by holding that the $30,000 sanction was

punitive because “[t]he record simply does not suggest that the
amount John Bizzell agreed to pay HUD was ‘overwhelmingly

disproportionate to the damages he caused.’” Id. at 267. The
court found that the sanction served a remedial goal because “the

government’s losses attributable to John Bizzell far exceeded

$30,000.” Id.

Following that language in Bizzell, the record in the case

at bar “simply does not suggest that the amount [the defendants]

agreed to pay [the OCC] was ‘overwhelmingly disproportionate to
the damages [they] caused.’” And the sanctions can “fairly be

characterized as remedial” because “the government’s losses

7
attributable to [the defendants] far exceeded [the amount of the

fines imposed].”

If subjective intent of the administrative agency were

determinative, we would have to conclude that the prohibition

order, held to be remedial in Hudson I, was punishment, for

undoubtedly the OCC hoped to deter future violations with that

penalty also. It is worth stressing that the Halper test

“constitutes an objective rule that is grounded in the nature of

the sanction and the facts of the particular case. It does not
authorize courts to undertake a broad inquiry into the subjective

purposes that may be thought to lie behind a given judicial
proceeding.” Halper, 490 U.S. at 453, 109 S.Ct. at 1904

(Kennedy, J., concurring); cf. Hicks v. Feiock, 485 U.S. 624,

635, 108 S.Ct. 1423, 1431 (1988).

Cases in two other circuits are closely on point. In United

States v. Furlett, 974 F.2d 839 (7th Cir. 1992), an
administrative law judge sanctioned two futures traders for

various trading transgressions, stating “it is imperative that
sanctions be levied against respondents to deter further illegal

activity and to protect public customers for the type of

insidious conduct described in this case.” Id. at 841 (quoting

United States v. Furlett , 781 F.Supp. 536, 538 (N.D.Ill. 1991)

(quoting the ALJ opinion)). In opposing the defendants’ motion

on double jeopardy grounds, the government introduced an
affidavit delineating the expenses it had incurred in pursuing

the traders. The district court concluded that the fines were

8
remedial for two reasons: they were a form of disgorgement, and

they were not overwhelmingly disproportionate to the government’s

costs incurred in pursuing the traders. Furlett, 974 F.2d at

842.

On appeal, the traders argued that the district court erred

in upholding the ALJ’s sanctions because the ALJ had not, in

fact, considered the government’s loss when he imposed the fine.

Id. at 843. The appellate court rejected this argument, noting

that Halper called for an objective inquiry. Id. at 844. The
court reasoned that merely because the ALJ did not consider the

government’s loss when imposing the fine does not imply that the
fine is not related to the government’s loss. Id. at 843-44.

The court held that the fines were remedial largely because they

were not disproportionate to the damages caused to the

government. Id. at 843.

In United States v. WRW Corp. , 986 F.2d 138 (6th Cir. 1993),
WRW corporation was assessed civil penalties of $90,350 for

violations of safety standards under the Federal Mine Safety and
Health Act. 6 The officers and directors of WRW were later

indicted and convicted for these same violations, and they served
prison sentences and paid criminal fines. After the United

States brought an action to collect the civil fines that had been

assessed against the corporation, the defendants moved to dismiss

on double jeopardy grounds. Relying on Halper, they argued that

6
Federal Mine Safety and Health Act of 1977, §§ 2 et seq.,
110(a), (d), 30 U.S.C. §§ 801 et seq., 820(a), (d).
9
the imposition of civil penalties promoted the aims of

retribution and deterrence, given the various factors used to

determine the amount of the civil penalty. 7 The court stated

that these factors may as readily be ascribed to remedial as to

punitive purposes, id. at 141-42, and emphasized that “the fact

that the Government’s expenses may not have been considered when

assessing the amount of the penalty does not alter the objective

conclusion by the trial court that the penalty assessed is

rationally related to the goal of making the Government whole.”
Id. at 142 (citing Furlett, 974 F.2d at 843-44). The court then

held that the fines were rationally related to the goal of making
the government whole in large part because the civil fines were

not excessive in relation to the United States’ expenses incurred

in the investigation and prosecution of the defendants’

violations. Id. at 142.

CONCLUSION
Under Bizzell and Halper, we hold that it was an abuse of

discretion for the district court to rule that the monetary

sanctions were not solely remedial. The sanctions were

rationally related to the government’s damages. We therefore

7
These factors included: the operator’s history of
previous violations, the size of the penalty versus size of the
operator’s business, whether the operator was negligent, the
effect of the penalty on the operator’s ability to remain in
business, and the good faith of the operator to achieve rapid
compliance after notification of a violation. Id. at 141, n.1
(citing 30 U.S.C. § 820(i)).
10
reverse the order granting the defendants’ motion to dismiss and

remand for further proceedings.

REVERSED AND REMANDED.

11