Jacob Hoffman Brewing Co. v. McElligott

259 F. 525, 170 C.C.A. 487, 1919 U.S. App. LEXIS 1665

• Court: Court of Appeals for the Second Circuit
• Decided: June 28, 1919
• Status: Published

Opinions

WARD, Circuit Judge.

These three cases involve the same question, and in each the appeal is from an order of the District Court of the United States for the Southern District of New York restraining, pending final hearing, the defendant McElligott, Acting and Deputy Collector of Internal Revenue of the Third District of New York, from refusing to issue licenses to the complainants as brewers of- beer, or to issue revenue stamps in respect to their beer, provided they pay or duly tender the taxes required by law, and restraining the defendant Caffey, United States Attorney for the Southern District of New York, from arresting or prosecuting the complainants, their officers, agents, servants, etc., or from enforcing forfeiture of their property for failure to affix revenue stamps to their barrels of beer when such failure is due to the refusal of the defendant McElligott to issue the sáme, and from enforcing the pains and penalties of the act of November 21, 1918, c. 212, 40 Stat. 1046, by arresting or prosecuting the complainants, their officers, agents, etc.

The complainants are brewers of beer made from malt with an alcoholic content not exceeding 2.75 per cent, by weight, and the rights of the parties in connection with the orders appealed from depend upon the act of Congress of November 21, 1918, the relevant portions of which are:

“That after June 30, 1919, until the conclusion of the present war and thereafter until the termination of demobilization, the date of which shall be determined and proclaimed by the President of the United States, for the purpose of conserving the man power of the nation, and to increase efficiency in the production of arms, munitions, ships, food, and clothing for the army and navy, it shall be unlawful to sell for beverage purposes any distilled spirits, and during said time no distilled spirits held in bond shall be removed therefrom for beverage purposes except for export. After May 1, 1919, until the conclusion of .the present war and thereafter until the termination of demobilization, the date of which shall be determined and proclaimed by the President of the United States, no grains, cereals, fruit, or other food product shall be used in the manufacture or production of béer, wine,- or other Intoxicating malt or vinous liquor for beverage purposes. After June 30, 1919, until the conclusion of the present war and thereafter until the termination of demobilization, the date of which shall be determined and proclaimed by the President of the United States, no beer, wine, or other intoxicating malt or vinous liquor shall be sold for beverage purposes except for export. The Commissioner of Internal Revenue is hereby authorized and directed to prescribe rules and regulations subject to the approval of the Secretary of the Treasury, in regard to the manufacture and sale of distilled spirits and removal of distilled spirits held in bond after June 30,1919, until this act shall cease to operate, for other than beverage purposes; also in regard to the manufacture, sale, and distribution of wine for sacramental, medicinal, or other th,an beverage uses. After the approval of this act no distilled, malt, vinous, or other intoxicating liquors shall be imported into the United States during the continuance of the present war and period of demobilization: Provided, that this provision against importation shall not apply to shipments en route to the United States at the time of the passage of this act.

“Any person who violates any of the foregoing provisions shall be punished by imprisonment not exceeding one year, or by fine not exceeding $1,000, or by both such imprisonment and fine. * * *”

[1] Originally the Internal Revenue 'Department took the position that after May 1, 1919, it would not license brewers who manufactured beer with an alcoholic content equaling or exceeding one-half of 1 per cent, by volume, nor sell the revenue stamps to be affixed to barrels of such beer; but afterwards, by advice of the Attorney-General, this position was abandoned, and the department consented to license brewers and to sell them revenue stamps, even if their beer did contain an alcoholic content equaling or exceeding one-half of 1 per cent, by volume. Accordingly the complainants are not now subject to any forfeiture or penalty under the internal revenue acts if they pay the taxes required by law. The only risk they are exposed to if they continue to brew beer of an alcoholic content not exceeding 2.75 per cent, by weight is that of imprisonment for not more than one year, or a fine not exceeding $1,000, or both, if such manufacture be found to be a violation of the act of November 21, 1918. Nevertheless the injunction against the acting deputy collector, defendant, can do no harm, and, in view of the position originally taken by the Internal Revenue Department, it may go against him.

In this case we have not to inquire whether an administrative board is acting without or beyond its jurisdiction (Gegiow v. Uhl, 239 U. S. 3, 36 Sup. Ct. 2, 60 L. Ed. 114), or to deal with any attack upon or interference with the complainants’ property (United States v. Lee, 106 U. S. 196, 1 Sup. Ct. 240, 27 L. Ed. 171), or of confiscation of it, as in the Rate Cases.

[2-4] It is perfectly well settled that the United States may not be sued, except upon its own consent. Such consent it has given by various statutes which do not apply to the case under consideration. There is no difference between the states and the United States in respect to this immunity from suit. It is an attribute of every sovereign, recognized by all sovereigns. A criminal suit in the federal courts must be brought in the name of the United States, and can only be brought by the United States attorney. Confiscation Cases, 7 Wall 454, 457, 19 L. Ed. 196. A suit in equity to enjoin the United States attorney from instituting criminal proceedings under a statute of the United States is manifestly a suit against the United States. In such a case the United States is sued as effectively as if it were a defendant by name. There is, however, a well-recognized exception to the rule, viz. if property rights are invaded, and the statute in question is unconstitutional, it is void, is to he treated as nonexistent, and so no defense to the United States attorney. When instituting criminal proceedings under it he is to be regarded not as representing the United States in his official capacity, but as acting individually. So if, under a valid statute, he threatens to proceed in a manner injurious to complainant’s property rights, and not authorized by the statute, he transcends his authority, does not represent the United States, is not protected by the statute, and may be enjoined. Irreparable injury alone is not enough. Both these conditions must exist. Obviously In such cases the constitutionality of the statute, or the question whether the United States attorney has transcended his authority, must be determined by the court before it can determiné whether the particular suit is or is not against the United States. Mr. Justice Peckham said in Ex parte Young, 209 U. S. 123, 159, 28 Sup. Ct. 441, 453 (52 L. Ed. 714, 13 L. R. A. [N. S.] 932, 14 Ann. Cas. 764):

“It is also argued that the only proceeding which the Attorney General could take to enforce the statute, so far as his office is concerned, was one by mandamus, which would be commenced by the state in its sovereign and governmental character, and that the right to bring such action is a necessary attribute of a sovereign government. It is contended that the complainants do not complain and they care nothing about any action which Mr. Young might take or bring as an ordinary individual, but that he was complained of as an officer to whose discretion is confided the use of the name of the state of Minnesota so far as litigation is concerned, and that when or how he shall use it is a matter resting in his discretion, and cannot be controlled by any court.

“The answer to all this is the same as made in every case where an official claims to be acting under the authority of the state. The act to be enforced is alleged to be unconstitutional, and, if it be so, the use of the name of the state to enforce an unconstitutional act to the injury of complainants is a proceeding without the authority of and one which, does not affect the state in its sovereign or governmental capacity. It is simply an illegal act upon the part of a state official in attempting by the use of the name of the state to enforce a legislative enactment which is void because unconstitutional. If the act which the state Attorney General seeks to enforce be a violation of the federal Constitution, the officer in proceeding under such enactment comes into conflict with the superior authority of that Constitution, and he is in that case stripped of his official or representative character, and is subjected in his person to the consequences of his individual conduct. The state has no power to impart to him any immunity from responsibility to the supreme authority of the United States. See In re Ayers, supra [123 U. S.] p. 507 [8 Sup. Ct. 164, 31 L. Ed. 216]. It would be an injury to complainant to harass it with a multiplicity of suits or litigation generally in an'endeavor to enforce penalties under an unconstitutional enactment, and to prevent it ought to be within the jurisdiction of a court of equity. If the question of'unconstitutionality with reference, at least, to the federal Constitution, be first raised in a federal court, that court, as we think is shown by the authorities cited hereafter,.has the right to decide it, to the exclusion of all other courts.”

The act of November 21, 1918, is a war measure, constitutional as such, and by its express terms is to continue in force until a time which has not yet been reached, i. e., the conclusion of the present war and thereafter until the termination of demobilization, the date of which shall be determined and proclaimed by the President of the United States. Until such time it is the duty of the United States attorney, defendant, under section 771, United States Revised Statutes (Comp. St. § 1296), to prosecute all delinquents for crimes and offenses covered by it. .

The sole ground upon which the United States attorney, defendant in this case, is charged with transcending his authority is that he erroneously construes the statute in connection with the complainant’s product, viz. as prohibiting the use of food products in the manufacture of any beer for beverage purposes after May 1, 1919, and the sale of such beer after June 30, 1919; whereas, the act, properly construed, prohibits only the manufacture and sale of such beer as is intoxicating, which the complainants’ beer, containing not more than 2.75 per cent, of alcohol by weight, is not.

[5, 6] Although we concur in the construction of the statute by the court below, and assume that the United States attorney will institute criminal proceedings, we do not think the court had power to stay him by injunction from doing so. The proper place for determining whether such criminal proceedings are maintainable is not in a court of equity, but upon an indictment tried in a criminal court before a jury. For any error then committed there will be an adequate remedy by writ of error. We recognize the importance of the interests at stake; that the complainants and others in like case, if not content to manufacture beer containing an alcoholic content not equaling or exceeding one-half of 1 per cent, by volume, must choose between discontinuing their business or carrying it on at the risk of punishment under the act of November 21, 1918, if they continue after May 1, 1919, to manufacture, and after June 30, 1919, to sell, beer containing not more than 2.75 per cent, of alcohol by weight. The question, however, is not one of convenience or of discretion, but of the power of the court; and we think such an extension of judicial power, to meet what seems to be a hard case, to the domain of the executive department and of the courts of common law, would be an injury to our system of jurisprudence still more serious.

This precise question was decided in accordance with these views by the Circuit Court of Appeals for the Sixth Circuit in Arbuckle v. Blackburn, 113 Fed. 616, 51 C. C. A. 122, 65 L. R. A. 864. Judge Day, who as Justice Day wrote the opinion in the Hammer Case, 247 U. S. 251, 38 Sup. Ct. 529, 62 L. Ed. 1101, Ann. Cas. 1918E, 724, greatly relied upon by the complainants, and to be presently considered, said;

“We are now dealing with an officer of a state proceeding under a valid law of the state, and whose error lies in wrongfully construing the statute so as to include the complainant’s product. To entertain the bill in this aspect would be to subvert the administration of the criminal law, and deny the right of trial by jury, by substituting a court of equity to inquire into the commission of offenses where it would have no Jurisdiction to punish the parties if found guilty. It,would be the extension of equity jurisdiction to cases where prosecutions in state courts by the state officers are sought to be enjoined, with a view to determining whether they shall be allowed to proceed under valid statutes in the courts of law. We think this an enlargement of the jurisdiction opposed to reason and authority. It is claimed, however, that conceding that a court, of equity cannot enjoin the prosecution of criminal offenses, as a general thing, the rule is different when property rights are involved; and we are cited to cases holding that equity has jurisdiction to enjoin acts likely to be destructive of property rights, although the acts complained of constitute infractions of the criminal law. This is quite a different proposition from enjoining criminal proceedings alleged to be indirectly destructive of property rights. Many criminal prosecutions may affect the property of the person accused. A property may be greatly injured by the wrongful and unfounded charge that it is used for immoral purposes. Such prosecution may destroy its rental value and prevent its sale, yet a court of equity could not usurp the right of trial which both the state and the accused have in a common-law court before a jury. Every citizen must submit to such accusations, if lawfully made, looking to the vindication of an acquittal and such remedies as the law affords for the recovery of damages. It is often a great hardship to' be wrongfully accused of crime, but it is one of the hardships which may result in the execution of the law, against which courts of equity are powerless to relieve. Suess v. Noble (C. C.) 31 Fed. 855; Hemsley v. Myers (C. C.) 45 ; Kramer v. Board, 53 N. Y. Super. Ct. 492; Food Co. v. McNeal, 1 Ohio, N. P. 266.”

District Judge Grubb in Central Consumers Co. v. Austin, 238 Fed. 616, arrived at the same conclusion. It is said that these cases are inconsistent with the decision in Ex parte Young, supra. In that case the defendant Young, Attorney General of Minnesota, had been enjoined by the Circuit Court of the United States from enforcing an act of the state of Minnesota fixing the charges for freight transportation at rates found to be confiscatory. After this order was entered in the federal court the Attorney General, in direct defiance of it, applied to a state court'for a writ of mandamus compelling the railroad company to comply with certain provisions of the state act. For this he was adjudged by the Circuit Court to be in contempt, and put in custody of the United States marshal. Thereupon he applied to the Supreme Court for leave to file a petition for writs of habeas corpus and certiorari, which the court denied. The act was held to be unconstitutional because, among other reasons, it had been found by the lower court to be confiscatory of the railroad company’s property. The general rule that courts of equity have no jurisdiction- to enjoin criminal proceedings was fully recognized, but the injunction was sustained because of certain exceptions to the general rule within which that case fell. Mr. Justice Peckham said, at page 161 of 209 U. S., at page 454 of 28 Sup. Ct. (52 L. Ed. 714, 13 L. R. A. [N. S.] 932, 14 Ann. Cas. 764):

•‘It is further objected (and the objection really forms part of the contention that the state cannot be sued) that a court of equity has no jurisdiction to enjoin criminal proceedings, by indictment or otherwise, under the state law. This, as a general rule, is true. But there are exceptions. When such indictment or proceeding is brought to enforce an alleged unconstitutional statute, which is the subject-matter of inquiry in a suit already pending in a federal court, the latter court, having first obtained jurisdiction over the subject-matter, has the right, in both civil and criminal cases, to hold and maintain such jurisdiction, to the exclusion of all other courts, until its duty is fully performed. Prout v. Starr, 188 U. S. 537, 544 [23 Sup. Ct., 398, 47 L. Ed. 584], But the federal court cannot, of course, interfere in a case where the proceedings were already pending in a state court. Taylor v. Taintor, 16 Wall. 366, 370 [21 L. Ed. 287]; Harkrader v. Wadley, 172 U. S. 148 [19 Sup. Ct. 119, 43 L. Ed. 399].

“Where one commences a criminal proceeding who is already party to a suit then pending in a court of equity, if the criminal proceedings are brought to enforce the same right that is in issue before that court, the latter may enjoin such criminal proceedings. Davis, etc., Co. v. Los Angeles, 189 U. S. 207 [23 Sup. Ct. 498, 47 L. Ed. 778]. In Debbins v. Los Angeles, 195 U. S. 223-241 [25 Sup. Ct. 18, 49 L. Ed. 169], it is remarked by Mr. Justice Day, in delivering the opinion of the court, that ‘it is well settled that where property rights will be destroyed, unlawful interference by criminal proceedings under a void law or ordinance may be reached and controlled by a court of equity.’ Smyth v. Ames [169 U. S. 466, 18 Sup. Ct. 418, 42 L. Ed. 819], supra, distinctly enjoined the proceedings in indictment to compel obedience to the rate act.

“These cases show that a court of equity is not always precluded from granting an injunction to stay proceedings in criminal eases, and we have no doubt the principle applies in a case such as the present. In re Sawyer, 124 U. S. 200, 211 [8 Sup. Ct 482, 31 L. Ed. 402], is not to the contrary. That case holds that in general a court of equity has no jurisdiction of a bill to stay criminal proceedings, but it expressly states an exception, ‘unless they are instituted by a party to the suit already pending before it and to try the same right that Js in issuo there.’ Various authorities are cited to sustain the exception. The criminal proceedings here that could be commenced by the state authorities would be under the statutes relating to passenger or freight rates, and their validity is the very question involved in the suit in the United States Circuit Court. The right to restrain proceedings by mandamus is based upon the same foundation and governed by the same principles.”

The case under consideration does not fall within any of these exceptions. See, also, Davis v. Los Angeles, 189 U. S. 207, 23 Sup. Ct. 498, 47 L. Ed. 778.

Only two cases are referred to in which United States attorneys have been enjoined, and the complainants rely upon them as showing that this question of jurisdiction was disregarded. Wilson v. New, 243 U. S. 332, 37 Sup. Ct. 298, 61 L. Ed. 755, L. R. A. 1917E, 938, Ann. Cas. 1918A, 1024, and Hammer v. Dagenhard, 247 U. S. 251, 38 Sup. Ct. 529, 62 L. Ed. 1101, Ann. Cas. 1918E, 724. In them, as in the case under consideration, only injunctive relief was prayed for. The moment that relief was granted or denied the suit was at an end. The only difference is that, the decree in the two cases cited being final, an appeal lay directly to the Supreme Court (section 238, Judicial Code, Act March 3, 1911, c. 231, 36 Stat. 1157 [Comp. St. § 1215]), whereas in this case, the order being interlocutory, appeal lay only to the Circuit Court of Appeals (section 129, Judicial Code [Comp. St. § 1121]). It is said that because the Supreme Court disposed of the two cases cited it actually exercised the jurisdiction which the complainants deny the court in this suit has. Jurisdiction as a federal court is plain in all three cases, but this does not prove that a suit' against the United States can be maintained 'either by consent of the parties or of the court or by oversight of either or both. The right to maintain the suits, i, e., to give the injunctive relief prayed for, could not be determined until the court had ascertained whether they fell within the general rule or within the exception. In Wilson v. New the moment the court found the act constitutional, from proceeding-under which the United States attorney had been enjoined, the suit was necessarily found to be one against the United States, and the injunction improper, without any reference to the property rights involved. So in Hammer v. Dagenhard, the moment the statute was-found to be unconstitutional, and the complainant’s right to employment directly invaded by its enforcement, the suit was necessarily found not to be against the United States, and the injunction was proper within the well-established exception. The decisions in these cases do not impair the general rule as to suits against the United States, or extend the exception to that rule. The whole attention of the court was directed to the vital question of constitutionality, and the fact that it did not restate well-established law does not convince us that it intended to depart therefrom.

We are sure that the United States attorney will co-operate with the complainants to have the question involved determined as speedily, and in the meantime with as little interference with their business, as-possible.

Because the suit, so far as the defendant Caffey, United States attorney, is concerned, is against the United States, and there is no direct injury to the complainants’ property rights, and the act of Congress under which it is charged he is threatening to proceed is constitutional, and in so proceeding he will not transcend his authority under the act, the order of the court below is modified by striking out the injunction pendente lite against him, and as so modified is affirmed.