Effect of 31 U.S.C. § 484 on the Settlement Authority of the Attorney General

Opinion

Effect of 31 U.S.C. § 484 on the Settlement Authority of the Attorney General

A p ro p o sal w h e re b y sum s receiv ed in settlem en t o f a suit b ro u g h t by th e U n ited S tates an d th e C o m m o n w e a lth o f V irg in ia for e n v iro n m e n ta l d am ag e resu ltin g from an oil spill w o u ld be d o n a te d to a w a te rfo w l p re se rv a tio n o rg an izatio n , is b a rre d by 31 U .S.C . § 484, w h ic h req u ires th at all m o n ey receiv ed for th e use o f th e U n ited S tates be d ep o site d in th e T re a su ry . T h is req u irem en t fu rth e rs the co n stitu tio n al goal o f re se rv ­ ing to C o n g ress responsibility fo r d ete rm in in g w h e th e r an d h o w p ublic funds a re to be spent. W h ile th e C o m p tro lle r G e n e ra l has found § 484 in ap p licab le in situ atio n s w h e re the funds in v o lv e d are re c e iv e d in tru st for a p a rtic u la r p u rp o se, this th e o ry is usually insufficient to o v e rrid e th e m an d ate o f § 484 w h e re th e tru st is c re a te d by n o n sta tu to ry ex ecu tiv e actio n . In this case, w h e re th e U n ited S tates has not in c u rre d an y m o n e ta ry loss as a result o f the oil spill, § 484 w o u ld n ot be o ffen d e d by a se ttle m e n t th at a ttrib u te d th e e n tire sum receiv ed to its co -plaintiff, w h ic h c o u ld th en d ire c t th e m o n ey to a ch arity .

June 13, 1980 MEM ORANDUM OPINION FOR TH E ASSOCIATE ATTORNEY G EN ER A L

This responds to your request for our views concerning the Justice Department’s authority to approve the proposed settlement in In re Complaint o f Steuart Transportation Co., etc. (E.D. Va.-Civ. No. 76-697-N). For the reasons discussed below, we conclude that the settle­ ment as proposed is barred by 31 U.S.C. § 484 (1976). However, it would be possible to modify the settlement in this case to achieve the same result without violating § 484.

In our view, the issues surrounding your authority to compromise this suit derive from more fundamental questions involving the extent of executive authority to bring nonstatutory suits on a public trust/ parens patriae theory.1 However, we do not address the question of independent executive authority to sue in this memorandum because we feel that the court’s opinion has effectively mooted the question for purposes of this suit.2 Instead, we will focus on the legal implications of

1 T h e governm ent should consider th e same questions o f authority w hen it fashions its initial claim for relief as w hen it negotiates th e settlem ent decree. In this case the governm ent w ould address the same issues regarding disposition o f m oney w h eth er it received a dam ages aw ard pursuant to a consent decree o r a final judgem ent after trial.

* A lthough the c o u rt's opinion in Steuart clearly finds au thority for the public trust /parens patriae action, it does not indicate w h e th er this authority resides in the federal o r state plaintifT (o r in both). See 495 F. Supp. 38, 40 (E .D . Va. 1980).

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the proposed disposition of money damages obtained in this suit either through settlement or final judgment.

I. Facts

The United States and the Commonwealth of Virginia have sued Steuart Transportation Company alleging that it caused an oil spill in the Chesapeake Bay. Each sovereign sought: (1) damages for the death of migratory waterfowl, (2) statutory penalties, and (3) cleanup costs (including pre-judgment interest). One aspect of the proposed settle­ ment is that the federal and state government would share an entitle­ ment to damages for the death of the waterfowl.3 Under the terms of the settlement, this money would be “donated by Steuart” to a water­ fowl preservation organization to be designated jointly by the State of Virginia and the U.S. Department of the Interior. The State of Virginia has notified us that it is ready to approve the proposed settlement.

II. Discussion

The Constitution commits to the legislative branch of government control over public expenditures. U.S. Const. Art. I, §8, cl. 1; id., Art. I, § 9, cl. '7. Congress has passed various statutes designed to ensure that congressional prerogatives under this constitutional scheme are not diminished by executive action.4 Of particular significance is 31 U.S.C. § 484, which provides that:

The gross amount of all moneys received from what­ ever source for the use of the United States, except as otherwise provided in section 487 of this title, shall be paid by the officer or agent receiving the same into the Treasury, at as early a day as practicable, without any abatement or deduction on account of salary, fees, costs, charges, expenses, or claim of any description whatever.

The sponsor of § 484’s predecessor statute indicated in House floor debates that the original statute was intended to “carry out both the spirit and letter of the Constitution.” Cong. Globe, 30th Cong., 1st Sess. 466 (1848) (remarks of Rep. McKay). Representative Toombs, another supporter of the original bill, explained its purpose and constitutional underpinnings as follows:

This bill sought simply to put all the money into the public treasury, and draw it from the public treasury by law, according to the requirements of the Constitution, so

3 T h e governm ent originally claimed dam ages for the w aterfow l on a parens patriae theory, but it did not seek criminal penalties under the M igratory Bird T reaty A ct, 16 U.S.C. § 707.

* See.; e.g., 41 U.S.C. §§ 11-14 concerning public contracts.

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as to get rid of the difficulty of spending two or three millions without authority of law, as we now did.

Id. at 475.

The opinions of the Comptroller General construing § 484 tend to emphasize the prerogatives of the Congress and find exceptions to application of § 484 only when supported by a clear expression of congressional intent. For example, on several occasions the Comptroller General has ruled that funds derived from vending machines on government-owned or -controlled property may not be used for em­ ployee recreation or welfare activities but must be deposited in the Treasury pursuant to §484. 32 Comp. Gen. 124 (1952); 32 Comp. Gen. 282 (1952). On the other hand, the Comptroller General has found § 484 inapplicable in situations where a legislative scheme implied a congressional intent to make particular programs self-sustaining. See, e.g., 22 Comp. Gen. 1133 (1943) (War Materials Insurance Program), 23 Comp. Gen. 652 (1944) (Soil Conservation Act), 24 Comp. Gen. 847 (1945) (Lend Lease Act).

The Comptroller General also has recognized a distinction between trust funds and other monies received for the United States for pur­ poses of §484. For example, in 51 Comp. Gen. 506 (1972), the Comp­ troller General noted that revenues generated by the Smithsonian in operating the National Zoo were revenues derived from the use of both appropriated funds and Smithsonian trust funds. Despite the fact that the bulk of the administration of zoo operations is supported by appro­ priated funds, the Comptroller General agreed that § 484 need not apply to zoo operations so long as full disclosure is made to the Congress of the gross amount of all receipts realized from zoo activities that are supported by appropriated funds.5 The Comptroller General has also indicated in dictum that § 484 would not require that money received by the United States in trust for a particular purpose be deposited in the Treasury. 27 Comp. Gen. 641 (1948). However, in that case the Comptroller General carefully scrutinized the underlying law and facts and determined that no proper and legal trust had in fact been created. Accordingly, the Comptroller General ruled that the money must remain in the Treasury unless and until Congress appropriated it for a particular purpose.

The Office of Legal Counsel has also read § 484 to have a fairly broad application. For example, we have advised the Federal Bureau of Investigation (FBI) that, absent legislation to the contrary, money gen­ erated by FBI undercover operations must be considered money “re­ ceived . . . for the use of the United States” and must be deposited in

6 T h e C o m p tro ller’s analysis applying § 4 8 4 only to revenues that are derived entirely from the use o f appropriated funds is likely to be sui generis to the zoo opinion. In any event, this analysis is difficult to apply in the Steuart context, w here the parens patriae litigation was supported by appropri­ ated funds, but the subject o f com pensation (the birds) was not.

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the Treasury pursuant to §484. We have also advised that Freedom of Information Act fees collected by the FBI must be deposited in the Treasury. However, like the Comptroller General’s trust opinions, we have recognized that § 484 should not be applied to money given to the government which is not available to the United States for disposition on its own behalf. Thus, we advised that money received by the FBI from an insurance company to purchase a stolen car is not subject to § 484. We have also advised that money received by private entities working with the government may not be subject to § 484.6 There are no judicial precedents construing § 484 that would assist us in analyzing the Steuart case. However, the Ninth Circuit held in Emery v. United States, 186 F.2d 900, 902 (9th Cir. 1951) that money for rental overcharges paid by landlords to the Treasurer of the United States pursuant to a court order was held by the government in trust for the tenants. Since the money held in trust did not involve any appropriation by Congress, the court concluded that payment of the money by the United States to individual tenants would not be an unlawful appropriation in violation of Article I, § 9 of the Constitution. Similarly, in Varney v. Warehime, 147 F.2d 238, 245 (6th Cir. 1945), the Sixth Circuit held that assessments against milk handlers to cover the expenses of the War Food Administration were trust funds which need not be deposited in the Treasury.

Applying these precedents to the settlement of the Steuart waterfowl claim, we believe that there are two theories that could be asserted to defend a settlement that did not direct the money into the federal Treasury, as generally required by § 484. The first theory would be that the money was received in trust for the people of Virginia or the United States. The second theory would be that under the terms of the settlement no money was “received” at all.

The argument under the trust theory could be based upon the terms of the settlement (which could explicitly purport to create a trust), the two Comptroller General opinions cited above which recognize excep­ tions to the application of § 484 to bona fide trusts, and the two circuit court cases that find no constitutional infirmity in the use of funds received in trust by the Executive without explicit legislative authoriza­ tion of the expenditure.7 The weaknesses of a trust argument are: (1) that trusts created by nonstatutory executive action could indeed be used to circumvent legislative prerogatives in the appropriations area; (2) that to some extent all money held in the Treasury or recovered by

6 T here are also C o m p tro ller G eneral precedents to this effect. See 44 Com p. G en. 87 (1964) (involving an entity established w ith federal funds but m aintained through grants from a state university).

7 T here is also some w eak legislative history to § 484's predecessor statute from w hich it could be argued that at the time the original statute was enacted, C ongress recognized that trust funds w ere different from o th e r public funds. See debate on the am endm ent proposed by R epresentative Hall, C ong. Globe, 30th Cong., 1st Sess. 466 (1848).

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the United States in litigation is received “in trust” for the citizenry; and (3) that Congress has created or recognized trust funds explicitly in numerous cases 8 and implicitly in others,9 but it has neglected to do so in this context.10 On balance, we must conclude that the trust argument is insufficient in this case to override the legislative mandate of § 484.

Under the settlement as it is presently structured, we must also reject the argument that § 484 does not apply because no money has been received. In our view, the fact that no cash actually touches the palm of a federal official is irrelevant for purposes of § 484, if a federal agency could have accepted possession and retains discretion to direct the use of the money. The doctrine of constructive receipt will ignore the form of a transaction in order to get to its substance. Although this doctrine originally developed in the context of tax cases, see, e.g., Bennett v. United States, 293 F.2d 323 (9th Cir. 1961) and Pittsburgh- Des Moines Steel Co. v. United States, 360 F. Supp. 597, 600-601 (W.D. Pa. 1971), it should apply in this context as well, if § 484 is to be given any practical effect.11 Since we believe that money available to the United States and directed to another recipient is constructively “re­ ceived” for purposes of § 484, we conclude that the proposed settle­ ment is barred by that statute.

On the other hand, we do not believe that § 484 would be offended by a settlement that attributes the entire sum of money received to our co-plaintiff, the Commonwealth of Virginia. The Commonwealth has an independent claim to these damages, grounded in the traditional parens patriae authority of state sovereigns. It should also be noted that the Commonwealth’s independent right to compensation for oil spills was upheld in In re Complaint o f Allied Towing Corp., 478 F. Supp. 398, 403 (E.D. Va. 1979), and is recognized in the Federal Water Pollution Control Act. 33 U.S.C. § 1321 (F)(4)—(5). Since the United States has not incurred any expense or monetary loss in connection with the lost wildlife, we see no reason why the Justice Department would be

8 31 U .S.C. §725s contains a listing o f num erous trust funds that C ongress has recognized. T he section provides that “all m oneys accruing to these funds are hereby appropriated and shall be disbursed in com pliance w ith the term s o f the tru st.”

9 See. e.g., the trust funds found in Emery, 186 F.2d 900, and Varney, 147 F.2d 258. 10 It should be noted that one year after the Steuart oil spill, the Federal W ater Pollution C ontrol Act was am ended to permit the state o r federal governm ent to recover the cost o f replacem ent or restoration o f natural resources as a clean-up cost, and to perm it the U nited States or a state governm ent to sue on behalf o f the public as trustee o f the natural resources and to use sums recovered to rehabilitate the natural resources. 33 U .S.C. § 1321 (0 (4)-(5) (Supp. I ll 1979).

11 T h e do ctrin e o f co nstructive receipt also has been applied by federal agencies in defining prohibitions on the acceptance o f gifts and honoraria by federal employees. See. e.g., 11 C .F.R . § 110.12(b)(5), w hich defines “accep ted " in the follow ing way:

“ Accepted*' means that th ere has been actual o r co n structive receipt o f the h o n o rar­ ium and that the federal officeholder o r em ployee exercises dom inion o r control ov er it and determ ines its subsequent use. H ow ever, an honorarium is not accepted if the federal officeholder o r em ployee makes a suggestion that the honorarium be given instead to a charitable organization w hich is selected by the person paying the hono­ rarium from a list o f 5 o r m ore charitable organizations provided by the officeholder o r employee.

See also th e D epartm ent o f Ju stice regulation a t 28 C .F .R . 45.735-12(e).

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obligated to seek these damages in lieu of the state plaintiff. If the damages are received and directed to a charity by the state plaintiff, § 484 would not be implicated.12 L arry A. H am m ond

Deputy Assistant Attorney General Office o f Legal Counsel

12 A lthough w e have concluded that the Steuart settlem ent as proposed is barred by § 484, w e must note that the same p rocedure w ould be expressly authorized for subsequent oil spills by the am end­ m ents to the Federal W ater Pollution C ontrol A ct, 33 U.S.C. § 1321(fK4>—

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