Opinion ID: 2211695
Heading Depth: 1
Heading Rank: 4

Heading: Unconstitutional As Applied?

Text: Having concluded that the monetary sanction imposed under the Act is civil, rather than criminal, in nature, we next consider whether the sanction is nevertheless punishment for purposes of the double jeopardy clause. The double jeopardy clause protects against three distinct abuses: (1) a second prosecution for the same offense after acquittal; (2) a second prosecution for the same offense after conviction; and (3) multiple punishments for the same offense. See North Carolina v. Pearce (1969), 395 U.S. 711, 717, 89 S.Ct. 2072, 2076, 23 L.Ed.2d 656, 664-65. a. Multiple Prosecution If the Act imposed a criminal sanction, application of statute to any person who previously had been criminally prosecuted or punished for the same offense would violate the multiple-prosecution prong of the double jeopardy clause. (See North Carolina v. Pearce (1969), 395 U.S. 711, 717, 89 S.Ct. 2072, 2076, 23 L.Ed.2d 656, 665.) Because we have found that the proceeding to collect the tax and penalty is civil in nature, it does not qualify as a subsequent prosecution within the meaning of the double jeopardy clause. (See Taylor v. Sherrill (1991), 169 Ariz. 335, 819 P.2d 921; see also 3 W. LaFave & J. Israel, Criminal Procedure § 24.1(b)(1984).) Thus, the prohibition against multiple prosecutions is not implicated in this case. We express no opinion, of course, as to whether the State could have initiated a second criminal proceeding against Rehg pursuant to that portion of the Act which authorizes the imposition of criminal penalties upon those who fail to pay the tax. That question is not before us.              b. Multiple Punishment Only the third protection offered by the double jeopardy clause is at issue here. The protection against multiple punishment prohibits the State from punishing twice, or attempting a second time to punish criminally, for the same offense. ( Helvering v. Mitchell (1938), 303 U.S. 391, 399, 58 S.Ct. 630, 633, 82 L.Ed. 917, 922.) Analysis of this protection is case-specific, requiring an individualized assessment of the civil sanction imposed and the purposes that sanction serves in a particular case. The question raised here is whether the tax imposed in this case, upon conduct that was the subject of a prior criminal prosecution and punishment, is so excessive that it constitutes a second punishment prohibited by the Federal and State Constitutions. The multiple-punishment prong of the double jeopardy clause is normally triggered only when a sovereign attempts to criminally punish a defendant twice for the same offense. ( United States v. One Assortment of 89 Firearms (1984), 465 U.S. 354, 104 S.Ct. 1099, 79 L.Ed.2d 361.) As a general rule, the clause does not bar the State from imposing both a civil and a criminal penalty upon defendant for the same offense. ( Helvering v. Mitchell (1938), 303 U.S. 391, 399, 58 S.Ct. 630, 633, 82 L.Ed. 917, 922.) The State may impose a criminal and civil sanction in a single proceeding, as long as the court determines that the total punishment [does] not exceed that authorized by the legislature. ( United States v. Halper (1989), 490 U.S. 435, 450, 109 S.Ct. 1892, 1903, 104 L.Ed.2d 487, 503, citing Missouri v. Hunter (1983), 459 U.S. 359, 368-69, 103 S.Ct. 673, 679, 74 L.Ed.2d 535, 544.) Recently, however, the United States Supreme Court held that a disproportionately large civil sanction imposed in a subsequent civil proceeding may, under certain circumstances, constitute punishment within double jeopardy's multiple-punishment prohibition. United States v. Halper (1989), 490 U.S. 435, 109 S.Ct. 1892, 104 L.Ed.2d 487. The plaintiff here contends that he has been punished once for conduct arising out of his possession of the unstamped drugs, when he was sentenced upon his conviction for manufacture or delivery of a controlled substance. He argues that, under Halper, the State cannot punish him a second time without violating the double jeopardy clause's proscription against multiple punishment. He argues that the civil penalty imposed upon him is punishment because it is meant to deter his conduct. As noted, the United States Supreme Court recently addressed a similar contention in United States v. Halper (1989), 490 U.S. 435, 109 S.Ct. 1892, 104 L.Ed.2d 487. In Halper, the respondent submitted 65 false Medicare claims, each overcharging the government by $9, and cumulatively overbilling the government for $585. Halper was prosecuted, convicted, sentenced to two years' imprisonment and fined $5,000. Following Halper's criminal prosecution, the government brought a civil suit based on the same 65 false Medicare claims under the False Claims Act. That statute authorized the government to collect a civil penalty of $2,000 for each of the 65 false claims, plus two times the government's actual damages and court costs. Consequently, Halper was subject to a civil sanction of more than $130,000. The actual damages directly attributed to Halper's false claims, however, amounted to only $585, plus approximately $16,000 which the government spent in investigating and prosecuting Halper's false claims. The Federal district court found that, in light of Halper's prior criminal punishment, imposing the full sanction would violate the multiple-punishment proscription of the double jeopardy clause. The court recognized that the False Claims Act imposed a civil, rather than a criminal punishment. The court held, however, that imposing the full civil sanction would constitute a second punishment in violation of the double jeopardy clause. The district court allowed only the recovery of double damages, or $1,170, plus $16,000 in costs. See Halper, 490 U.S. at 440, 109 S.Ct. at 1897, 104 L.Ed.2d at 496. The United States Supreme Court agreed that the disparity between Halper's $130,000 liability and the government's estimated $16,000 in costs was sufficiently disproportionate that the sanction constituted a punishment in violation of the double jeopardy clause. The court concluded: [U]nder the Double Jeopardy Clause a defendant who already has been punished in a criminal prosecution may not be subjected to an additional civil sanction to the extent that the second sanction may not fairly be characterized as remedial, but only as a deterrent or retribution. ( Halper, 490 U.S. at 448-49, 109 S.Ct. at 1902, 104 L.Ed.2d at 502.) Thus, under Halper, the controlling question in determining whether a sanction must be deemed punishment is whether the civil penalty at issue bears a rational relationship to the damages suffered by the government. The plaintiff here, relying upon Halper, claims that the civil sanction imposed upon him under the Act qualifies as punishment within the meaning of the double jeopardy clause. He contends the tax amount assessed against him ($213,675) bears no rational relationship to the damages suffered by the State. He argues that the Act therefore may not constitutionally be applied to him, because the tax assessment constitutes a second punishment prohibited by the double jeopardy clauses of the Federal and State Constitutions. In considering the plaintiff's claims, we must bear in mind that the Court in Halper limited the scope of its holding in several important respects. First, the Court pointed out that a civil remedy does not rise to the level of punishment simply because the legislature authorized civil recovery in excess of the State's actual damages. The Halper Court specifically reaffirmed three prior decisions which held that a large civil sanction did not constitute punishment within the meaning of the double jeopardy clause. Helvering v. Mitchell (1938), 303 U.S. 391, 58 S.Ct. 630, 82 L.Ed. 917 ($350,000 penalty, representing 50% of the unpaid tax, was remedial in nature because it reimbursed the government for investigatory and other costs resulting from taxpayer fraud); United States ex rel. Marcus v. Hess (1943), 317 U.S. 537, 63 S.Ct. 379, 87 L.Ed. 443 (civil fine of $315,000 not barred by defendant's prior conviction for criminal conspiracy to defraud the United States government); Rex Trailer Co. v. United States (1956), 350 U.S. 148, 76 S.Ct. 219, 100 L.Ed. 149 (action to recover $10,000 plus double damages and court costs for fraudulent purchases in violation of Federal Surplus Property Act not barred by prior criminal conviction based on same conduct). Second, the Halper Court recognized that it is often difficult or impossible to determine the precise dollar amount at which a civil sanction ceases to be remedial and takes on the quality of punishment. The Court stated that its prior cases had established that the government is entitled to rough remedial justice, that is, it may demand compensation according to somewhat imprecise formulas, such as reasonable liquidated damages or a fixed sum plus double damages, without being deemed to have imposed a second punishment for the purpose of double jeopardy analysis. Halper, 490 U.S. at 446, 109 S.Ct. at 1900, 104 L.Ed.2d at 500. Third, the Court held that a civil sanction will rarely constitute punishment within the double jeopardy clause. Halper, 490 U.S. at 449, 109 S.Ct. at 1902, 104 L.Ed.2d at 502 (we announce    a rule for the rare case    where a fixed-penalty provision subjects a prolific but small-gauge offender to a sanction overwhelmingly disproportionate to the damages he has caused). Finally, the Court held that punishment is not measured from the defendant's perspective. The Court noted: This is not to say that whether a sanction constitutes punishment must be determined from the defendant's perspective. On the contrary, our cases have acknowledged that for the defendant even remedial sanctions carry the sting of punishment. ( Halper, 490 U.S. at 447 n. 7, 109 S.Ct. at 1901 n. 7, 104 L.Ed.2d at 501 n. 7.) A civil penalty constitutes punishment only when it is completely unrelated to the government's damages and expenses. Halper, 490 U.S. at 449, 109 S.Ct. at 1902, 104 L.Ed.2d at 502. The Halper Court's analysis suggests that a threshold exists that must be crossed before an inquiry into the multiple-punishment prong of the double jeopardy clause is required. Certain civil sanctions, such as reasonable liquidated damages, fall below this threshold and are presumed to be rationally related to the government's costs without further scrutiny. When the sanction appears to be extreme in relation to the government's damages and costs, however, the threshold is crossed. At that point, a civil sanction will be closely scrutinized to determine whether it constitutes punishment within the meaning of the double jeopardy clause. Bearing this analysis in mind, we consider the plaintiff's claim that the monetary sanction imposed upon him under the Act constitutes punishment within the meaning of the double jeopardy clause. Initially we note that, in Halper, the district court was able to estimate, with some degree of accuracy, the actual loss which the government sustained as a result of the defendant's fraudulent conduct and the amount which it spent prosecuting the defendant. The district court then compared this sum with the monetary sanction which the government sought and found that the sanction was more than eight times the amount which the government lost or expended as a result of the defendant's conduct. The district court concluded that imposition of the total sanction authorized by statute would violate double jeopardy principles. The Supreme Court agreed that the 8-to-1 ratio between the sanction and the government's loss was extreme. In this case, on the other hand, such an analysis is more difficult because neither the State nor the plaintiff introduced any evidence regarding the total loss the State suffered as a result of the plaintiff's conduct. We know, of course, that the plaintiff's failure to pay the tax resulted in a loss to the State of $42,000 in tax revenue. We also know that the Act imposes a sanction of four times the unpaid tax. We do not know, however, whether this $168,000 sanction even remotely approximates the amount which the State spent in investigating and prosecuting the plaintiff. When confronted with such a gap in the record, we conclude that a number of factors should be considered in determining whether the statutory sanction crosses the threshold established in Halper that is, whether the civil sanction appears extreme in relation to the government's damages and costs. One factor to consider is whether the amount of the sanction imposed upon a particular offender is rationally related to the expense of detecting and prosecuting the type of offense which the defendant has committed. United States v. Walker (9th Cir.1991), 940 F.2d 442 ($500 civil fine imposed upon a defendant who failed to present marijuana to custom officials for inspection when he entered the country was rationally related to the costs which the government incurs in maintaining border check points and administering the customs system). Some courts have made this factor determinative. When the evidence tends to show that the sanction imposed is rationally related to the expense of detecting and prosecuting the type of offense which the defendant has committed, the sanction is upheld. ( United States v. WRW Corp. (E.D.Ky.1989), 731 F.Supp. 237 ($90,000 fine imposed upon defendants for violations of the Mine Safety and Health Act was not barred by double jeopardy; any loss which the government suffered as a result of the defendants' safety violations was unquantifiable, but the fine was not extreme and divorced from the ancillary costs of detection, investigation and prosecution which the government routinely incurred in administering the Act).) When the sanction is not rationally related to the costs of detecting the type of offense the defendant committed, courts require the government to show that the sanctions imposed upon a given defendant are reasonably related to the expenses incurred in investigating and prosecuting the particular defendant upon whom the sanction is imposed. United States v. Hall (M.D.Pa.1990), 730 F.Supp. 646, 655 ($1,035,000 civil fine imposed on defendant who was previously convicted of illegally transporting bearer bonds was barred by double jeopardy, where the defendant introduced uncontradicted evidence that the government sustained only minimal expense in detecting the offense and that penalty equal to the face value of the bonds was not rationally related to the goal of making the Government whole). Under the circumstances of this case, however, reliance upon this factor alone is inappropriate because it is not entirely clear what conduct and costs may be considered in determining whether the $168,000 civil fine is excessive. In Halper, the same conduct (submission of false Medicare claims to the government) formed the basis of both the criminal punishment and the subsequent civil fine. Here, however, the conduct for which the defendant was criminally punished (manufacture or delivery of a controlled substance) is different from that which is the subject of the civil sanction (failure to pay a tax on the controlled substance). If we consider the costs which the State routinely incurs in detecting, investigating and prosecuting criminal drug offenses, the sanction does not appear extreme and divorced from the State's costs. On the contrary, the $168,000 penalty imposed upon the plaintiff appears to bear a rational relationship to the goal of compensating the State for the costs typically incurred in investigating and prosecuting that type of conduct. If, on the other hand, we consider only the costs typically incurred in investigating and prosecuting persons who fail to pay a tax on controlled substances, the $168,000 sanction appears to be extreme in relation to those costs. Regulations issued in conjunction with the Act suggest that the amount of money which the State spends in investigating and prosecuting that type of conduct (failure to pay the tax) will be minimal. One of these regulations requires prosecuting officials to notify the Department of Revenue whenever they obtain a conviction of a dealer for violation of the Illinois Controlled Substances Act or the Cannabis Control Act, where the container of drugs in the dealer's possession did not bear tax stamps. Using the information received from prosecuting officials, the Department serves a Notice of Tax Liability upon the dealer, such as that served upon the plaintiff in this case. (86 Ill.Adm.Code § 428.130 (1991).) This regulation suggests that State will generally sustain only minimal expense in detecting violations of the Act. Because it is unclear whether the sanction at issue here bears a rational relationship to the amount which the State spends in detecting and prosecuting the type of offense which the defendant has committed, additional factors must be considered. We find that two other factors are relevant in determining whether the threshold established in Halper between a permissible civil fine and an impermissible second punishment has been crossed in this case. One important factor is whether the civil sanction imposed under the Act is comparable to civil penalties imposed under other Illinois statutes. (See Solem v. Helm (1983), 463 U.S. 277, 103 S.Ct. 3001, 77 L.Ed.2d 637.) Our research has failed to disclose any other Illinois tax statute which imposes a penalty which even remotely approximates the substantial penalty of four times, or 400%, of the unpaid tax imposed under the Act. The harshest penalty imposed under any other tax statute is only 75% percent of the unpaid tax. (Ill.Rev. Stat.1989, ch. 120, par. 10-1002 (fraudulent failure to pay income tax); see also Ill.Rev. Stat.1989, ch. 120, par. 1209 (50% penalty for fraudulent failure to pay local services on mobile homes tax); Ill.Rev.Stat.1989, ch. 120, par. 405A-8 (25% penalty for failure to pay estate and generation-skipping transfer tax).) Even if we consider nontax statutes, the penalty imposed under the Act appears excessive. See, e.g., Ill.Rev.Stat. 1989, ch. 38, par. 60-7 (authorizing treble damage award for violations of State antitrust laws); but see Ill.Rev.Stat.1989, ch. 111½ par. 1042 (authorizing civil penalty not to exceed $50,000 for each violation of environmental protection laws, plus an additional $10,000 for each day the violation continues). Another important consideration is whether the 400% penalty imposed under the Act is comparable to the penalty imposed for the same conduct in other jurisdictions. (See Solem v. Helm (1983), 463 U.S. 277, 103 S.Ct. 3001, 77 L.Ed.2d 637.) Our research reveals that at least 20 other States have statutes which impose a substantial tax upon cannabis and other controlled substances. Almost all of these State statutes impose a civil penalty substantially less than that imposed under our Act. (See, e.g., Ala.Code § 40-17A-9 (Michie Supp.1991) (100%); Iowa Code Ann. § 421A.12 (West Supp.1992) (100%); Minn. Stat.Ann. § 297D.09 (West 1991) (100%); Wis.Stat.Ann. § 139.95 (West Supp.1991) (100%).) In fact, only one State, other than Illinois, imposes a civil penalty in excess of 100% of the unpaid tax. Colo.Rev.Stat. Ann. § 39-28.7-107 (West 1990) (1,000% penalty). In sum, applying the three factors discussed above to the civil penalty imposed upon the plaintiff here, we find that the 400% penalty crosses the threshold established in Halper. The $168,000 penalty appears excessive in relation to the costs the State would generally incur in investigating and prosecuting the type of conduct in which the plaintiff engaged (failure to comply with the Act). In addition, the sanction is disproportionately large when compared with civil penalties imposed upon other tax offenders in this State. Finally, the penalty appears excessive when compared with penalties imposed in other States upon persons who fail to pay a tax upon controlled substances. Accordingly, we conclude that the 400% penalty which the State seeks to impose upon the plaintiff here may be so extreme and so divorced from the State's expenses as to constitute punishment within the meaning of the double jeopardy clause. The trial court erred, however, in quashing the tax assessment outright. The State should be given an opportunity to present evidence of its actual costs arising from the plaintiff's conduct. The trial court must determine, on the basis of such evidence, the size of the civil sanction the State may receive without crossing the line between remedy and punishment. United States v. Halper (1989), 490 U.S. 435, 450, 109 S.Ct. 1892, 1902, 104 L.Ed.2d 487, 502-03. We note, however, that on remand no weight should be given to the plaintiff's argument that the State was motivated by an intent to punish him. The plaintiff's brief urges this court to consider a number of facts and circumstances unique to his case which, he claims, demonstrate that the sanction was intended to punish rather than to make the State whole. For example, the plaintiff points to the fact that the Notice of Tax Liability was issued on November 8, 1990, but was not served upon him until a week later, immediately after his sentencing hearing. He also claims that, after the trial court imposed a sentence of probation, the assistant State's Attorney turned around and gave a thumbs up signal to someone seated in the back of the court room. This person was apparently the same person who ultimately served the plaintiff with the Notice of Tax Liability after the sentencing hearing. The plaintiff claims that this sequence of events demonstrates that the State was motivated by an intent to punish him with a substantial civil sanction because it was dissatisfied with the sentence the trial court imposed in the criminal proceeding. We conclude, however, that these facts are totally irrelevant to the question of whether the civil sanction imposed upon the plaintiff qualifies as a second punishment within the meaning of the double jeopardy clause. As Justice Kennedy stated, in his concurring opinion in Halper: Today's holding, I would stress, constitutes an objective rule that is grounded in the nature of the sanction and the facts of the particular case. It does not authorize courts to undertake a broad inquiry into the subjective purposes it may be thought to lie behind a given judicial proceeding. [Citations.] Such an inquiry would be amorphous and speculative, and would mire the courts in the quagmire of differentiating among the multiple purposes that underlie every proceeding, whether it be civil or criminal in name. It would also breed confusion among legislators who seek to structure the mechanisms of proper law enforcement within constitutional commands. ( Halper, 490 U.S. at 453, 109 S.Ct. at 1904, 104 L.Ed.2d at 504-05 (Kennedy, J., concurring).) As previously stated, the controlling question is whether the civil penalty imposed in the second proceeding bears any rational relation to the damages suffered by the State. Here, it appears that the $168,000 sanction imposed upon the plaintiff may be sufficiently disproportionate to the State's costs as to constitute a second punishment within the meaning of the double jeopardy clause. Accordingly, we vacate the circuit court's order quashing the tax assessment and remand this cause to the circuit court so that the State may present evidence of its actual costs arising from Rehg's failure to comply with the Act, and for such further proceedings as may be required in accordance with the views expressed herein. Circuit court reversed; cause remanded.