United States v. Hatfield

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
No. 96-4286
FRED L. HATFIELD, SR., d/b/a HVAC
Construction Company,
Incorporated,
Defendant-Appellant.
Appeal from the United States District Court
for the District of South Carolina, at Columbia,
Matthew J. Perry, Jr., Senior District Judge.
(CR-95-758)
Argued: October 31, 1996
Decided: March 7, 1997
Before MURNAGHAN and NIEMEYER, Circuit Judges, and
HARVEY, Senior United States District Judge for the
District of Maryland, sitting by designation.
_________________________________________________________________
Affirmed and remanded by published opinion. Judge Niemeyer wrote
the opinion, in which Judge Murnaghan and Senior Judge Harvey
joined.
_________________________________________________________________
COUNSEL
ARGUED: John Dennis Delgado, Columbia, South Carolina, for
Appellant. Eric William Ruschky, Assistant United States Attorney,
Columbia, South Carolina, for Appellee. ON BRIEF: J. Rene Josey,
United States Attorney, Columbia, South Carolina, for Appellee.
_________________________________________________________________
OPINION
NIEMEYER, Circuit Judge:
This case presents the question of whether a debarred government
contractor may be prosecuted criminally for the same fraudulent con-
duct that led to the debarment. The defendant, arguing that his debar-
ment constituted punishment, asserts that the Double Jeopardy Clause
of the Fifth Amendment bars his subsequent criminal prosecution.
Because we conclude that debarment is civil and remedial, we reject
the argument and affirm the district court's order refusing to dismiss
his indictment.
In a twelve-count indictment, the government charges that over a
period of several years beginning in September 1990, Fred L. Hat-
field, Sr., doing business as HVAC Construction Company, made
false and fraudulent statements to the government. The indictment
charges that on several occasions when bidding for government work,
Hatfield fraudulently misrepresented that he had never had a govern-
ment contract terminated for default. It also charges that in perform-
ing government contracts, Hatfield had on various occasions made
certifications for payment that fraudulently stated that work had been
performed and that payments had been made to his subcontractors.
The government further charges that on one occasion Hatfield pres-
ented a false subcontractor invoice.*
This conduct alleged in the government's indictment was also the
basis for Hatfield's earlier debarment from government contracting.
In July 1994, the Department of the Army debarred Hatfield and his
companies from all government contracting for a period of 26
_________________________________________________________________
*The indictment also charges that Hatfield filed a false document in
a bankruptcy proceeding and fraudulently concealed assets, but this con-
duct did not form a basis for Hatfield's debarment from government con-
tracting.
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months. That debarment, Hatfield claims, cost Hatfield and his com-
pany $1,147,227 in attorneys fees, lost profits, and out-of-pocket
expenses. He attributes the majority of that assessment to lost profits
and his own unpaid compensation.
Hatfield filed a motion to dismiss the indictment, arguing that
under United States v. Halper, 490 U.S. 435 (1989), his debarment
constituted punishment because it caused him far more loss than the
loss sustained by the government. Accordingly, he argued, his current
prosecution would result in a second punishment in violation of the
Double Jeopardy Clause. From the district court's order denying Hat-
field's motion to dismiss the indictment, this interlocutory appeal fol-
lowed.
The Double Jeopardy Clause, which provides, "nor shall any per-
son be subject for the same offence to be twice put in jeopardy of life
or limb," U.S. Const. amend. V, prohibits not only successive crimi-
nal prosecutions but also successive punishments for the same
offense. Thus, if the government's debarment of Hatfield and his
companies constituted punishment for double jeopardy purposes, he
is entitled to have his subsequent criminal prosecution dismissed. As
Hatfield argues, it does not matter whether the debarment preceded
or succeeded the criminal prosecution. If both are punishment, the
second proceeding is barred. See United States v. Reed, 937 F.2d 575,
576 n.3 (11th Cir. 1991); United States v. Bizzell, 921 F.2d 263, 267
(10th Cir. 1990). If, on the other hand, debarment is a civil proceed-
ing, it does not implicate the Double Jeopardy Clause because that
clause prohibits "two criminal trials [or] two criminal punishments."
One Lot Emerald Cut Stones v. United States, 409 U.S. 232, 235
(1972). To determine whether debarment is civil or criminal, we look
to (1) whether the procedure was designed to be remedial, and (2)
whether the remedy provided, even if designated as civil, "is so unrea-
sonable or excessive that it transforms what was clearly intended as
a civil remedy into a criminal penalty." Id. at 237; see also United
States v. Ursery, 116 S. Ct. 2135, 2147 (1996); United States v. One
Assortment of 89 Firearms, 465 U.S. 354, 362 (1984).
Debarment is the action taken against a contractor to exclude it
from government contracting for a specified period. See 48 C.F.R.
§ 9.403. The action is an agency proceeding which is "as informal as
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is practicable, consistent with the principles of fundamental fairness."
48 C.F.R. § 9.406-3(b)(1). The cause for debarment, if not based on
a conviction or judgment, must be established by"a preponderance of
the evidence." 48 C.F.R. § 9.406-3(d)(3). Finally, debarment cannot
be imposed to punish but only to serve the remedial goal of protecting
the government. See 48 C.F.R. § 9.402(b).
There can be little doubt that debarment was designed to be a civil
proceeding. By its own procedural rules, it may not be imposed for
punishment, but only to protect the government in its dealings with
contractors. See id. Moreover, its procedures are informal and the
proof demanded is by a preponderance of the evidence. See 48 C.F.R.
§ 9.406-3(b)(1), (d)(3). Finally, the remedial purpose is linked to spe-
cific conduct that relates to the protection of the government from
fraud, neglect, nonperformance, or other conduct lacking integrity,
with a focus on the "present responsibility" of the contractor. 48
C.F.R. § 9.406-2; see also United States v. Bizzell, 921 F.2d 263, 267
(10th Cir. 1990) ("debarment constitutes the rough remedial justice
permissible as a prophylactic governmental action" (internal quotation
marks omitted)); cf. Ursery, 116 S. Ct. at 2148 (even though in rem
civil forfeiture has "certain punitive aspects," it is designed to serve
important nonpunitive goals and is, therefore, a remedial sanction).
We also believe that debarment for 26 months is not so "unreason-
able or excessive" as to transform what is designed as a civil remedy
into a criminal penalty. Hatfield is accused of fraudulently misrepre-
senting material facts on numerous occasions over a span of years,
and of overstating a subcontractor's billing by more than $10,000.
These facts raise a serious question about his "present responsibility"
as an honest and dependable contractor to the government. In United
States v. Glymph, 96 F.3d 722 (4th Cir. 1996), where the facts are
strikingly similar -- Glymph was debarred for knowingly supplying
the government with parts that did not conform to purchase order
specifications -- we rejected the argument that a four-year debarment
was "overwhelmingly disproportionate" where the government paid
more than $40,000 for nonconforming parts. See id. at 725-26. We so
held even though the regulations provide that generally debarment
should not exceed three years. See 48 C.F.R.§ 9.406-4; see also
Glymph, 96 F.3d at 725 n.*. We believe the holding of Glymph con-
trols the disposition of this case. The government estimates that Hat-
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field caused direct losses between $40,000 and $60,000, which does
not take into account victims and losses sustained by subcontractors
and suppliers whom Hatfield did not pay. In these circumstances, the
26-month debarment was not so unreasonable or excessive as to trans-
form the remedial sanctions into a criminal penalty.
Hatfield argues that notwithstanding our holding in Glymph, the
Supreme Court's holding in United States v. Halper, 490 U.S. 435
(1989), requires a "particularized assessment" to determine whether
the debarment in this case is punitive. He maintains that such an
assessment would disclose that his losses sustained from the debar-
ment were excessively disproportionate to the harm caused to the
government.
In Halper, the contractor was assessed a civil penalty of $130,000,
which was 220 times greater than the government's $585 in damages.
The Supreme Court held that while the civil penalty did not rise to the
level of punishment solely because Congress provided for a remedy
in excess of the government's actual damages, its precedent did not
"foreclose the possibility that 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." 490 U.S. at 442. The
Court held in the particular circumstances that Halper's $130,000 lia-
bility was sufficiently disproportionate as to constitute punishment.
See id. at 452.
We do not believe that the Halper decision applies to a case of the
type before us. In Ursery, the Supreme Court noted that the Halper
balancing test -- weighing the government's harm against the penal-
ty's size -- was appropriate only where the penalty was for a "fixed
monetary" amount. 116 S. Ct. at 2145. Consequently, the Court noted
that when confronted with the in rem forfeiture sanction where the
"nonpunitive purposes served" were "virtually impossible to quan-
tify," the Halper test is "inapplicable." Id. Indeed, though we had no
need to decide the issue in Glymph, our opinion indicated that the
applicability of Halper to debarment was doubtful. See Glymph, 96
F.3d at 725-26 (citing United States v. Borjesson, 92 F.3d 954, 956
(9th Cir. 1996)).
For the same reasons given in Ursery, we believe that debarment
here is not subject to the same type of "particularized assessment"
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which Halper requires for fixed-amount penalties. That is, the gov-
ernment does not seek the return of a particular quantity of funds but
instead seeks to protect the quality of its acquisition programs. Of
course, the debarred contractor may quantify its losses in terms of
potential profits, and the government may even be able to attach a
number to much of the reason for debarment. For instance, we identi-
fied a $40,000 loss in nonconforming parts in Glymph. See 96 F.3d
at 726. But the government may also debar a contractor for non-
monetary causes such as those affecting the responsibility of a con-
tractor or for disreputable business practices. See 48 C.F.R. § 9.406-
2(a)(5), (c). Where the sanction and the purposes it seeks to achieve
are qualitative rather than merely quantitative, the Halper inquiry is
inapplicable. Instead, the question becomes the one raised in Ursery
-- whether the debarment is in effect so unreasonable and excessive,
i.e. so punitive, that we must, from the "clearest proof" conclude that
the proceeding is not civil but criminal in nature. See Ursery, 116 S.
Ct. at 2148-49.
In the case before us, Hatfield has not carried the burden of demon-
strating with clearest proof that his 26-month debarment is dispropor-
tionate to the benefits received by the government in protecting it
against the effects of willful failures to perform in accordance with
the terms of government contracts, the effects of a history of failures
to perform, and the adverse effect of having the government contract
with an irresponsible contractor. See 48 C.F.R. § 9.406-2(b)(1), (c);
§ 9.402(b); see also Glymph, 96 F.3d at 725-26. Indeed, we doubt that
any debarment within the three-year guideline established in the regu-
lations, see 48 C.F.R. § 9.406-4, could present a case sufficiently
punitive to implicate the Double Jeopardy Clause. Cf. Glymph, 96
F.3d at 725 n.* (holding a four-year debarment not to be of constitu-
tional significance).
Accordingly, we affirm the district court's order denying Hatfield's
motion to dismiss the indictment in this case. The case is remanded
for further proceedings.
AFFIRMED AND REMANDED
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