Bickham Lincoln-Mer v. United States

• Court: Court of Appeals for the Fifth Circuit
• Decided: February 26, 1999
• Docket: 97-31038
• Status: Published

Opinion

UNITED STATES COURT OF APPEALS For the Fifth Circuit

No. 97-31038

BICKHAM LINCOLN-MERCURY INCORPORATED,

Plaintiff-Appellant,

VERSUS

UNITED STATES OF AMERICA,

Defendant-Appellee.

Appeal from the United States District Court for the Western District of Louisiana

February 26, 1999 Before DeMOSS, PARKER and DENNIS, Circuit Judges. DENNIS, Circuit Judge: Bickham Lincoln-Mercury, Inc. (Bickham) was prosecuted for failure to file Form 8300 with

the Internal Revenue Service following two transactions involving the receipt of more than $10,000.

As part of a plea agreement, Bickham pleaded guilty and paid a $5,000 criminal fine and the

government agreed that it would not initiate further prosecutions against Bickham. Approximately

a year later, the government imposed a civil penalty of $27,000 based upon the same conduct which resulted in the criminal penalt y. The issues on appeal are whether imposition of the civil penalty

following the criminal fine violated the plea agreement and constituted double jeopardy under the

Fifth Amendment.

Factual and Procedural Background

Bickham owned and operated a Lincoln-Mercury dealership in Lafayette, Louisiana. Section

6050I(f)(1)(A) of the Internal Revenue Code requires the submission of Form 8300 in connection

1 with a transaction involving the receipt of more than $10,000. Bickham engaged in two transactions

which resulted in the receipt of approximately $40,580 but neither transaction was reported to the

Internal Revenue Service (IRS) via Form 8300. Despite Bickham’s failure to file Form 8300, the IRS

identified the unreported transactions as part of an investigation targeting car dealerships to uncover

Section 6050I violations. In March 1993, the government filed a bill of information charging

Bickham with two counts of failure to file Form 8300. The evidence indicates that Bickham

deliberately withheld this data from the IRS. For example, one purchaser approached Bickham after

he was rebuffed by another dealership when he suggested that the salesman conceal the amount of

cash paid for a particular car. After the purchaser recounted the incident to a Bickham employee, the

employee contacted the other dealership and arranged to have the car transferred to Bickham’s

facility where the sale was completed without filing Form 8300.

The plea agreement in the criminal case provided that Bickham would plead guilty and pay

a fine of $5,000. In return, the government would “not [] further prosecute defendant . . . for the

willful failure to timely file a Form 8300.” In September 1993, the district court allowed Bickham

to change its plea to nolo contendere since an admission of guilt would result in the loss of the

franchise. The plea of nolo contendere was subject to the same conditions as the guilty plea.

The IRS proposed a $27,000 civil penalty in December 1994 based upon Bickham’s failure

to file Form 8300. Bickham asked the district court to deny this request because a civil penalty would

constitute a violation of the plea agreement and amount to double jeopardy. The district court denied

Bickham’s motion. Bickham paid the civil penalty and filed an administrative claim for a refund.

When the refund claim was denied, Bickham initiated a refund suit. Both parties filed cross motions

for summary judgment. The district court granted the government’s motion for summary judgment

in the refund suit and Bickham timely filed an appeal. We affirm the district court’s decision.

Standard of Review

A district court’s determination of the terms of a plea agreement is a factual question which

2 is reviewed for clear error. United States v. Clark, 55 F.3d 9, 11 (1st Cir. 1995), cert. denied, 117

S. Ct. 272 (1996). In this circuit, deciding whether the government violated a plea agreement is a

question of law subject to de novo review. United States v. Aderholt, 87 F.3d 740, 742 (5th Cir.

1996). The party asserting a breach of a plea agreement must prove the underlying facts establishing

a breach by a preponderance of the evidence. United States v. Hernandez, 17 F.3d 78, 81 (5th Cir.

1994).

We review a district court’s grant of summary judgment de novo, applying the same standard

as the district court. Dutcher v. Ingalls Shipbuilding, 53 F.3d 723, 725 (5th Cir. 1995). Summary

judgment is proper when there is no genuine issue of material fact and the movant is entitled to

judgment as a matter of law. Questions of fact are viewed in the light most favorable to the

nonmovant while questions of law are reviewed de novo. Id.

Discussion

In 1984, Congress passed Internal Revenue Code Section 6050I as part of the Deficit

Reduction Act. United States v. Gertner, 873 F. Supp. 729, 731 (D. Mass.), aff’d, 65 F.3d 963 (1st

Cir. 1995). Section 6050I(f)(1) requires a person engaged in a trade or business who receives more

than $10,000 in cash to disclose the purchaser’s name, address and tax identification number on Form

8300, along with the date and nature of the transaction. The purpose of the reporting requirement

is to detect money laundering schemes. Id. According to Section 6050I(f)(2), a person who violates

Section 6050I(f)(1) “shall be subject to the same civil and criminal sanctions applicable to a person

which fails to file or completes a false or incorrect return under this section.”

Section 7203 of the Internal Revenue Code outlines the criminal penalties for the willful

failure to file Form 8300: a maximum fine of $100,000 for a corporation plus the costs of

prosecution. 26 U.S.C. § 7203. In addition to criminal penalties, there are civil penalties for failure

to file Form 8300. Withholding required information from the IRS because of an “intentional

disregard of the filing requirement” can lead to a civil penalty which is the greater of either $25,000

3 or the amount of cash received in the unreported transaction. 26 U.S.C. § 6721(e)(2)(C). Based

upon Section 6721, the IRS assessed a civil penalty of $27,000 against Bickham. Bickham argues

that this civil penalty violated the plea agreement because it stated that Bickham would not be subject

to “further prosecut[ion] . . . for the willful failure to timely file a Form 8300.”

To assess whether a plea agreement has been violated, this court considers “‘whether the

government’s conduct is consistent with the parties’ reasonable understanding of the agreement.’”

United States v. Garcia-Bonilla, 11 F.3d 45, 46 (5th Cir. 1993) (citation omitted). Plea agreements

are contractual in nature and should be interpreted according to general principles of contract law.

Hentz v. Hargett, 71 F.3d 1169, 1173 (5th Cir.), cert. denied, 116 S. Ct. 1858 (1996) (citation

omitted). We begin our analysis with the language of the plea agreement. The plea agreement stated

that Bickham would not be subject to further prosecution. Prosecution typically involves

“proceed[ing] against a person criminally,” Black’s Law Dictionary 1221 (6th ed. 1990), since it is:

part of the terminology of the criminal law, describing the means by which the law is to be enforced, and associated in popular thought with laws for the prevention and punishment of crime. In this sense, the word refers to a criminal action or proceeding, and ‘prosecution’ has been said to be synonymous with ‘criminal action.’

22 C.J.S. Criminal Law § 5 (1989). On the other hand, an action represents a:

proceeding[] of a civil nature, and in this sense, as opposed to ‘prosecution,’ it includes the modes allowed to individuals for enforcement of civil rights or redress of private wrongs, excluding proceedings instituted by the government for the punishment of offenses, and, accordingly, is inapplicable to a prosecution for crime.

1A C.J.S. Actions § 3b (1985).

Case law often distinguishes between criminal prosecutions and civil actions. See Ragan v.

Commissioner of Internal Revenue, 135 F.3d 329, 337 (5th Cir.), cert. denied, 119 S. Ct. 176 (1998)

(stating that case was part of complex situation involving several civil suits and a criminal

prosecution); Bodell v. Walbrook Ins. Co., 119 F.3d 1411, 1420 (9th Cir. 1997) (commenting that

unlike civil actions, only federal sovereign can bring criminal prosecutions); United States v. Balsys,

119 F.3d 122, 126 (2d Cir. 1997), rev’d for other reasons, 118 S. Ct. 2218 (1998) (stating that

deportation proceeding is civil action and not criminal prosecution); United States v. Bongiorno, 106

4 F.3d 1027, 1034 (1st Cir. 1997) (noting Child Support Recovery Act contemplates criminal

prosecutions not civil actions); United States v. Thomas, 709 F.2d 968, 972 (5th Cir. 1983) (noting

higher standard of proof and greater procedural protection in criminal prosecution as opposed to civil

action). Similar distinctions between criminal prosecutions and civil actions are found in statutory

law. See 28 U.S.C. § 1442(a) which states that “a civil action or a criminal prosecution commenced

in a State court . . . may be removed . . .” to federal court.

The district court was not clearly erroneous in determining that civil penalties were not

prohibited by the plea agreement. The plea agreement refers to Section 7203, which imposes criminal

liability on any person who wilfully fails to file returns, supply information or pay taxes. However,

the plea agreement does not state that Bickham is immune from civil liability pursuant to Section

6721. In fact, there is no mention of civil liability in the plea agreement. Thus, it is reasonable to

conclude that both parties understood civil liability was not encompassed by the plea agreement since

they could have included specific language to this effect had they so desired. Given the agreement’s

silence regarding civil liability, we are hesitant to interpret it in a manner which would add terms that

were not agreed upon by the parties. The lack of any discussion of civil liability, plus the fact that

the word prosecute typically refers to criminal proceedings, leads us to conclude that civil liability was

not prohibited by the plea agreement. Therefore, the assessment of a civil penalty did not violate the

agreement.

The plea agreement also states that it provides no protection “from prosecution from perjury

. . . false declarations or false statements . . . or obstruction of justice.” Based upon this clause,

Bickham argues that prosecution on any other grounds is prohibited, including the assessment of civil

penalties. We disagree with Bickham’s interpretation of this clause. The exceptions listed are all

criminal acts and the agreement states that Bickham can be prosecuted as a result of these acts. Using

the term prosecution in this context reiterates our finding that prosecution signifies a criminal

proceeding. In addition, the issue of civil liability is not addressed by this clause. Given the use of

the word prosecution in referring to three criminal acts and the fact that the clause does not mention

5 civil liability, we find that the government’s assessment of a civil penalty did not violate the plea

Bickham’s final argument is that the punitive nature of the civil penalty amounts to

punishment in violation of the double jeopardy clause. The Fifth Amendment states that no “person

[shall] be subject for the same offence to be twice put in jeopardy of life or limb . . . .” Congress may

impose both a criminal and a civil sanction for the same act without violating the double jeopardy

clause. Helvering v. Mitchell, 303 U.S. 391, 399 (1938). “Whether a particular punishment is

criminal or civil is, at least initially, a matter of statutory construction” and courts should consider

whether the legislature intended to establish a civil penalty. Hudson v. United States, 118 S. Ct. 488,

493 (1997). While the intent of the legislature can be overridden if “the statutory scheme was so

punitive either in purpose or effect” as to render it criminal despite Congress’ intent to the contrary,

“only the clearest proof will suffice to override legislative intent and transform what has been

denominated a civil remedy into a criminal penalty.” Id. (citations and internal quotations omitted).

The Supreme Court has “long recognized that the Double Jeopardy Clause does not prohibit

the imposition of any additional sanction that could, in common parlance, be described as

punishment.” Id. (citations and internal quotations omitted). In fact, the double jeopardy clause

“protects only against the imposition of multiple criminal punishments for the same offense . . . and

then only when such occurs in successive proceedings . . . .” Id. (citations omitted) (emphasis

added). Sanctions in a civil tax case are not considered criminal penalties. Helvering, 303 U.S. at

402.

The IRS calculated Bickham’s civil penalty according to Section 6721. At the time Bickham

committed its first offense for failure to file in October 1990, Section 6721(e) stated that the penalty

was either ten percent of the aggregate amount of the items required to be reported or $2,000. When

the second offense occurred in February 1991, the penalty under Section 6721(e) had increased to

the greater of $25,000 or the amount of cash due to be reported, up to $100,000. Bi ckham was

assessed $2,000 for its first offense and $25,000 for its second offense, bringing the total civil penalty

6 to $27,000.

This civil penalty is analogous to the fraud penalty at issue in Helvering. In Helvering, the

Court reasoned that the civil fraud penalty served “primarily as a safeguard for the protection of the

revenue and to reimburse the Go vernment for the heavy expense of investigation and the loss

resulting from the taxpayer’s fraud.” Helvering, 303 U.S. at 401. Section 6271 also permits the

government to assess civil penalties to offset the cost of investigating persons who conceal income

from the IRS. The government incurred at least $17,000 in investigative and prosecutorial expenses

in bringing criminal proceedings against Bickham. As the district court noted, t he government is

entitled to rough remedial justice without being deemed to have imposed a second punishment. In

addition, a remedy does not lose the quality of a civil action because more than the precise amount

of actual damages is recovered. United States ex. rel. Marcus v. Hess, 317 U.S. 537, 550 (1943).

Thus, the civil penalty of $27,000 was not so disproportionate that it transformed the civil penalty

into a criminal sanction.

The government raises a separate issue for our consideration: whether the denial of Bickham’s

motion to enforce the plea agreement was a final judgment for collateral estoppel purposes. If the

denial were a final judgment, Bickham cannot bring a second suit. See Neal v. Cain, 141 F.3d 207,

210 (5th Cir. 1998) (stating that when issue of ultimate fact has been determined by a final judgment,

the issue cannot be litigated again between the two parties). Because we find that the plea agreement

was not violated, we do not address the issue of whether Bickham’s relitigation was barred by

collateral estoppel.

Conclusion

For the foregoing reasons, the district court’s judgment is AFFIRMED.