Dugan & McNamara, Inc. v. United States

LittletoN, Judge, on January 11,1955, delivered the opinion of the court: On October 5,1954, we dismissed defendant’s fifth counterclaim based on the False Claims Act, 31 U. S. C. 231 et seq., because the fraudulent acts alleged to come within that Act — 605 — occurred more than six years prior to the filing of the counterclaim on June 29,1953, and were therefore barred by the six-year period of limitations contained in the Act (§ 235). Defendant has now moved for a reconsideration of that decision and in so doing has raised an issue which was not heretofore presented to the court. Defendant’s position now is that assuming the applicability of the six-year statute of limitations, that period did not commence to run until January 1, 1950, by reason of the provision of the Wartime Suspension of Limitations Act, 18 U. S. C. 3287, Supp. IV, 1946 Ed. This Act provides in pertinent part: When the United States is at war the running of any statute of limitations applicable to any offense (1) involving fraud or attempted fraud against the United States or any agency thereof in any manner, whether by conspiracy or not, * * * shall be suspended until three years after the termination of hostilities as proclaimed by the President or by a concurrent resolution of Congress. The President proclaimed the termination of hostilities of World War II on December 31,1946, 3 CFR, 1946 Supp., 77-78, thus resuming the running of the statutes of limitations as of December 31,1949. The Wartime Suspension of Limitations Act, hereafter referred to as the Suspension Act, was first enacted following World War 1, 42 Stat. 220, and was again enacted as temporary legislation in 1942, 56 Stat. 747. Both statutes were similar and extended the statute of limitations as to any “offenses involving the defrauding or attempts to defraud the United States * * * and now indictable voider any existing statutes.” (Italics supplied.) With the Contract Settlement Act of 1944, 58 Stat. 649, 667, the Suspension Act was amended so as to include violations of that Act. In so doing the phrase “now indictable under existing statutes” was deleted, but the statute still included the following concluding sentence: This section shall apply to acts, offenses, or trcmsactions where the existing statute of limitations has not yet fully run, but it shall not apply to acts, offenses, or transactions which are already barred by provisions of existing laws. (Italics supplied.) — 606 — It was later reenacted in 1944 at which, time a clause was added dealing with violations of the Surplus Property Act, 58 Stat. 781. The language was then carried into 18 U. S. C. 590a. The codification of the Criminal Code in 1948 resulted in the repeal of 18 U. S. C. 590a and tlie enactment of the Suspension Act, 62 Stat. 828, in its present form, supra, as permanent legislation to be applicable whenever the country is at war. The False Claims Act was first enacted in 1863, 12 Stat. 696. It made certain acts to defraud the Government punishable by fine and imprisonment, and provided that any person who committed any of the prohibited acts should forfeit and pay to the United States the sum of $2,000 for each act and, in addition, double the amount of the damages. It also provided a qui tarn, suit by an informer in which half of the recovery would go to the informer. The prohibited acts included the making of a claim against the United States knowing such claim “to be false, fictitious, or fraudulent.” The different portions of the Act have since that date been distributed throughout the code. The portion imposing ci’iminal penalties is now 18 U. S. C. 287 and that providing for the statutory recovery by the United States of $2,000 for each act and double the amount of the damages is now 31 U. S. C. 231. In United States v. Grainger, 346 U. S. 235, the Court held that the Suspension Act was applicable to the three-year statute of limitations relating to proceedings under that portion of the False Claims Act which imposes criminal penalties. Defendant argues that since 31 U. S. C. 231, involved here, and the criminal portion both prohibit the knowingly making of a “false, fictitious, or fraudulent” claim against the United States, and since the Supreme Court has held that such an act constitutes an “offense” within the scope of the Suspension Act when the United States proceeds against the wrongdoer by criminal prosecution such making is an “offense” within the scope of the Suspension Act when the United States avails itself of the civil remedies afforded to it under 31 U. S. C. 231. Plaintiff’s position is that (1) the Suspension Act applies only to criminal actions and not to civil suits and (2) that even if this were not so the False Claims Act is not concerned — 607 — with, “offenses” requiring pecuniary or proprietary loss and is not therefore within the scope of the Suspension Act. In United States v. Borin, 209 F. 2d 145, involving a civil action under the False Claims Act and relied on in our opinion of October 5, 1954, the applicability of the Suspension Act was not put in issue. United States v. Witherspoon, 211 F. 2d 858, was a proceeding by the Government against an individual for violation of the Surplus Property Act of 1944, 58 Stat. 765, which provided for civil remedies identical with those of the False Claims Act, and the Suspension Act was held to be applicable although no mention was made of the criminal versus civil action issue. United States v. Weaver, 107 F. Supp. 963, was also an action under the Surplus Property Act which did meet this issue and held the Suspension Act inapplicable. However, on appeal that decision was reversed on other grounds, 207 F. 2d 796. Two recent District Court decisions, United States v. Murphy-Cook and Company, 123 F. Supp. 806, and United States v. Strange Brothers Hide Co., 123 F. Supp. 177, have resolved this identical issue in defendant’s favor. In the Murphy-Cook case the court without discussion merely stated that the Suspension Act applied. In the Strange Brothers’ case the.court believed that United States v. Grainger, supra, although dealing with the criminal statute was dispositive of the issue stating: The knowingly making of a “false, fictitious, or fraudulent” claim against the Commodity Credit Corporation in connection with its wool handling program is an “offense” within the purview of the Wartime Suspension of Limitations Act when the United States proceeds against a wrongdoer for such wrongdoing by criminal prosecution under Section 287 of 18 U. S. C. A. United States v. Grainger, supra. It would seem that the same wrongdoing by the same wrongdoer would be none the less an “offense” within the purview of the Wartime Suspension of Limitations Act when the United States proceeds against him for such wrongdoing by a ci/oil action under Section ®31 of 31 U. S. C. A. (Italics supplied) . We do not believe this to be the complete answer, for the Grainger case left undecided the further issue which we believe is decisive of the question, that is, whether the Suspen — 608 — sion Act by tbe use of the term “offense” applies to those actions where the United States seeks to recover a civil remedy. Here as in the Strange Brothers' case the violation is not of a criminal statute but one providing for civil redress by way of damages. United States ex rel. Marcus v. Hess, 317 U. S. 537, 549. The meaning to be given the term “offense” in statutory construction is not without difficulty.1 Standing by itself we understand the term to have reference to a breach of law established for the protection of the public, usually, but not necessarily, involving criminal proceedings, as distinguished from an action to redress infringement of mere private rights for which a penalty is imposed or punishment inflicted by judicial proceeding. Pettibone v. United States, 148 U. S. 197; United States v. Hutto, 256 U. S. 524; United States ex rel. Marcus v. Hess, supra; United States v. Winner, 28 F. 2d 295; United States v. Brown, 6 F. Supp. 331. Here, however, we do not have the term standing apart. The 1942 statute with the phrase “now indictable” spoke clearly of only criminal offenses. The 1944 enactment deleted that phrase, but left remaining the concluding sentence stating that the “section shall apply to acts, offenses, or transactions.” This deletion leads us to the conclusion that the Suspension Act then became applicable to all actions involving fraud against the United States whether the Government should seek redress by criminal or civil means. The fraudulent acts alleged here occurred during 1944 and 1945 and the six-year period of limitations applicable, 31 U. S. C. 235, was tolled under the Suspension Act that was in force from 1944 through 1948.2 On June 25, 1948, the Suspension Act was again amended in connection with the codification of Title 18 of the United States Code. The concluding sentence mentioned above was deleted and the statute since then appears as set out at the beginning of this — 609 — opinion, with the term “offense” standing without the further qualifications found in the 1942 and 1944 versions. Whether or not this has served to eliminate civil actions from its meaning is immaterial for our purposes here. If the 1948 amendment does include civil offenses then, of course, the statute of limitations on defendant’s counterclaim will not expire until the end of 1955; on the other hand if the 1948 amendment did once again restrict the Suspension Act to criminal offenses then the statute of limitations for our purposes began to run again on June 25, 1948, and the defendant’s counterclaim having been filed on June 29, 1953, is within the six-year period. Mr. G. Fred Dibona, for the plaintiff. Mr. James F. Masterson was on the brief. Mr. Jess H. Rosenberg, with whom was Mr. Assistant Attorney General Warren E. Burger, for the defendant. As for plaintiff’s alternative contention, it is quite clear that the fraud alleged to have been practiced was of a pecuniary nature. If defendant’s position is correct then the Government has been financially injured to the extent of $102,291.46 representing the total overpayment made to plaintiff on the allegedly fraudulent invoices. Our ruling of October 5,1954, dismissing defendant’s fifth counterclaim is set aside and plaintiff’s motion to dismiss that counterclaim is denied. In all other respects the opinion of that date is to remain in full force and effect. It is so ordered. Laramore, Judge; MaddeN, Judge; WhitakeR, Judge; and JONES, Chief Judge, concur. (Decided October 6,1954) LittletoN, Judge, on October 5,1954, delivered the opinion of the court: Plaintiff brought this suit to recover $93,312.07 alleged to be due for services furnished the defendant during the period January to May 1947 under stevedoring contracts — 610 — with, the Army. The case is now before the court on plaintiff’s motion to dismiss defendant’s counterclaims. Defendant admits that $93,033.04 has been earned by plaintiff under the 1947 contracts but alleges in its answer that full payment has been made to plaintiff by offsetting against that sum plaintiff’s alleged indebtedness to defendant which arose out of prior contracts between the parties. Defendant has set forth in its answer to plaintiff’s petition six counterclaims, all of which arose in connection with steve-doring contracts between plaintiff and the Army or War Shipping Administration during the years 1944r45. The first four counterclaims rest on the common law right to recover overpayments charged by plaintiff and other contract damages alleged to have been sustained by defendant on these prior contracts. The total amount claimed in these first four counterclaims is $105,571.28. The fifth represents a claim against plaintiff under the False Claims Statute, 31 U. S. C. 231, alleging fraud on plaintiff’s part relative to the alleged overpayments. The liability assessed by that statute is double the amount of the actual damages sustained plus $2,000 for each act committed in violation of the statute. The sixth counterclaim rests on the identical premise with the same measure of damages as the fifth except that the fraudulent acts are alleged to be comprehended within the provisions of Section 19 (c) (1) of the Contract Settlement Act of 1944, 58 Stat. 667, which now appears as Section 119 of Title 41 of U. S. C., 1952 ed. Plaintiff has moved to dismiss these counterclaims on three grounds: (1) The court lacks jurisdiction over all the counterclaims since the causes of action upon which they are based accrued more than six years before either the filing of the petition or the filing of the counterclaims and are therefore barred by the six-year limitation of 28 U. S. C. 2501.1 (2) As to the fifth, the False Claims Act itself has a six-year limitation which bars defendant’s fifth counterclaim and (3) the sixth must fail because the Contract Settlement Act is inapplicable to any of the prior contracts upon which this counterclaim is based. — 611 — Defendant contends that it is Section 2508 of Title 28 U. S. C.2 which vests this court with jurisdiction over counterclaims and that the section contains no limitation on the time within which the United States can assert a counterclaim in a suit against it in this court. As for the six-year limitation contained in the False Claims Act, defendant takes the position that it only applies to qui tarn, suits by private informers under the Act and not to actions brought by the United States. While admitting that the principal concern of the Contract Settlement Act was to provide procedures needed in connection with the termination of war contracts and that the contracts here in question were not so terminated, defendant urges that the language of the fraud provision of that act shows that it is not to be restricted to only frauds which occur under terminated contracts. Generally, no statute of limitation will be applied against the United States. Grand Trunk Wn. Ry. Co. v. United States, 252 U. S. 112, 121. In addition no limitation of action will be applied against the Government unless Congress has clearly manifested an intention that one is to apply. United States v. Wurts, 303 U. S. 414, 416; United States v. Nashville C. & S. L. R. Co., 118 U. S. 120, 125. Section 2508, supra, gives this court jurisdiction over counterclaims and contains no limitation as to when they may be asserted, but this is not controlling if other statutes do fix a limitation. Plaintiff’s insistence that a counterclaim is a claim within the meaning of the term “claim” as used in Section 2501, supra, and thus subject to the application of the limitation of that section against the Government as well as the claimant, cannot be supported. The immediate forerunner of Section 2501 was Section 262 of the — 612 — 1940 Edition of Title 28 U. S. C. which read in part as follows: Every claim against the '■United States cognizable by the Court of Claims, shall be forever barred unless the petition setting forth a statement thereof is filed in the court * * * within six years after the claim first accrues. [Italics supplied.] The presence of the phrase “against the United States” clearly limited the application of that section to claims presented in the petition. This phrase was deleted in the 1948 revision of Title 28. Plaintiff would have us believe that Congress by a deletion in one section (2501) intended to place a limitation on a right given the United States under another (2508). Such is not the clear manifestation which is required when Congress intends to apply a statute of limitation against the Government. United States v. Wurts, supra. Defendant’s first four counterclaims are, therefore, permitted to stand, and plaintiff’s motion to dismiss them is denied. Plaintiff’s objection to the fifth counterclaim, however, is, in our opinion, well taken. The limitation of suit provision, 31 U. S. C. 235 (12 Stat. 696, as amended by the Act of December 23,1943, 57 Stat. 608), of the False Claims Act reads as follows: ■ ' Every suit shall be commenced within six years from the commission of the act, and not afterward. Defendant’s argument that the limitation of that section applies to suits under the Act by private informers and not to those by the United States was made and rejected by the court in United States v. Borin, 209 F. 2d 145, 147, where the court stated: It [the United States] concedes that a reading of the Congressional debates preceding the passage of the original Act in 1863 indicates the intention that the limitation was to apply to all suits (see Congressional Globe, 37th Cong., 3rd. Session, p. 958); but insists that the Conference Report (H. Rept. 933, 78th Cong., 1st Session, p. 5) having to do with a 1943 amendment to the Act, limiting but not eliminating private suits, shows that the retention of the qui tarn provision was the sole reason for leaving the time limitation undisturbed. We — 613 — do not agree. To the contrary, we think that the terms of the Act are so plain and unambiguous as to make resort to legislative history unnecessary; and further, that, if such history is referred to from the inception of the statute, it confirms the view that the section means what it says and applies to every suit under the Act. We agree with that holding, and since all the acts which are alleged to come within this Act occurred more than six years prior to the filing of the counterclaim on June 29,1953, defendant’s fifth counterclaim must be dismissed. Plaintiff's motion to dismiss this counterclaim is, therefore, allowed. .Plaintiff has moved to strike the sixth counterclaim on the ground that the fraud provision of the Contract Settlement Act applies only to those contracts which have been terminated by the cessation of hostilities and has no application here because all contracts in question upon which this counterclaim is based were fully completed. The fraud section of the Act reads in pertinent part as follows: Every person who makes or causes to be made, or presents or causes to be presented * * * any claim * * * knowing the same to be false, fraudulent, or fictitious or knowing the same to contain or to be based on any false, fraudulent, or fictitious statement or entry, or who shall cover up or conceal any material fact * * * for the purpose of securing or obtaining, or aiding to secure or obtain, for any person any benefit, payment, compensation, * * * from the United States * * * in connection with the termination, cancelation, settlement, payment, negotiation, renegotiation, performance, pro-cwrement, or award of a contract with the United States or with any other person * * *. [Italics supplied] Defendant while admitting that the primary purpose of the Act was to deal with terminated contracts, points to the inclusion of “performance, procurement, or award of a contract” as an indication that Congress intended to have the provision apply to all war contracts. Such subjects, defendant urges, go beyond activities connected with contract termination. The short answer to this assertion by defendant is, of course, that in using those terms Congress had reference to fraud which may be connected with the “performance, pro — 614 — curement, or award of a contract” which was subject to the Act, i. e., a terminated contract. Nor does the Act, as plaintiff alleges, apply solely to those contracts which were terminated because of the cessation of hostilities. The definition of Section 3 (d) of the Act is contrary to any such intention.3 While the language of the fraud provision of the statute mentioned when read apart from the Act itself lends support to defendant’s position, the opposite is true when the provision is read, as it must be, as a part of an entire Act the purposes of which Congress has made quite clear. Section 1 of the Act, 58 Stat. 649, entitled “Objectives of the Act” which, after covering in (a) through (e) objectives clearly directed toward contract termination, provided in paragraph (f) as follows: to use all practicable methods compatible with the foregoing objectives to prevent improper payments and to detect and prosecute fraud. [Italics supplied.] An examination of the legislative history supports the view that Congress had no purposes in mind when enacting the Contract Settlement Act other than those stated in Section 1. House Report 1355, 78th Cong., 2nd Sess.; Senate Report 836, 78th Cong., 2nd Sess.; House Report 1708, (Conf. Rep.) 78th Cong., 2nd Sess. The only case which has touched on this question supports this result. United States v. Leyde & Leyde, 89 F. Supp. 256, 258. There the court in discussing the Act stated: In view of the liberal provisions of the Act and in order to prevent the payment of fraudulent claims on the Treasury of United States, section 19, * * * provided both civil penalties and criminal sanctions for making fraudulent claims by war contractors subject to the Act. [Italics supplied.] Plaintiff’s motion to dismiss is denied as to the first four counterclaims and granted as to the fifth and: sixth. Those 1 qffr>~p f-yrri 'fr»T>r>itw<*i ni<~iTYn,~,noM f’l'»^ ■wonciav\ii nImmti.» lUllüi TrVTxs \3t/XCiTLv_/i. ÜJLIVXHIU UTO IXIDUXIOHüU. TOT tZIXÜ X WtfcUvUTW UiJJU T i) — 615 — stat-edr (Amended.) The case is referred to a Commissioner of this court for further proceedings. It is so ordered. MaddeN, Judge; Whitaker, Judge; and Jones, Chief Judge, concur. Laeamore, Judge, took no part in the consideration or decision of this case. Footnotes [1] United States v. Krebs, 104 F. Supp. 670, where the court stated that “ ‘offense’ in its usual sense means a crime or misdemeanor, a breach of the criminal law,” but see W. J. Dillner Trans. Co. v. International Brotherhood, 94 F. Supp. 491, 493, where It was stated, “The word ‘offense’ usually used to describe a crime, is broad enough to include a civil injury for which the injured party may seek redress by suit.” [2] Although certain of the alleged acts occurred prior to July 1,1944, the date of the enactment of the 1944 amendment, the suspension was to apply "where the existing statute of limitations has not yet fully run, * * [1] “Every claim, of which, the Court of Claims has jurisdiction shall be barred unless the petition thereon is filed, * * * within six years after such, claim first accrues,” [2] “Upon the trial of any suit in the Court of Claims in which any set-off. counterclaim, claim for damages, or other demand is set up on the part of the United States against any plaintiff making claim against the United States in said court, the court shall hear and determine such claim or demand both for and against the United States and plaintiff. “If upon the whole case it finds that the plaintiff is indebted to the United States it shall render judgment to that effect, and such judgment shall be final and renewable. “The transcript of such judgment, filed in the clerk’s office of any district court, shall be entered upon the records, and be a judgment of such district court and enforceable as such.” [3] “The terms ‘termination’, ‘terminate’, and ‘terminated’ refer to the termination or cancelation, In whole or In part, of wort under a prime contract for the convenience or at the option of the Government (except for default of the prime contractor) or of work under a subcontract for any reason except the default of the subcontractor."