Sovereign Immunity Bars an Inherent Power Monetary Sanction Against the Government — Lingering Question Whether Inherent Power Sanctions May Be Imposed in Criminal Cases
United States v. Droganes, 2013 U.S. App. LEXIS 17819 (6th Cir. Aug. 27, 2013):
This case arises from a longstanding dispute between Sam Droganes and the United States Government. Droganes is a fireworks dealer in northern Kentucky. In 2007, agents of the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) raided his business on suspicions that he was illegally selling "display" fireworks. The agents seized more than 800,000 pounds of merchandise, only a portion of which proved to be contraband. In 2009, Droganes pleaded guilty to distributing explosives without a license and agreed to forfeit the seized items "that [were] determined by ATF to be display fireworks." The government then tendered a proposed forfeiture order encompassing all such fireworks, which the district court eventually accepted. Droganes objected to both the breadth of the order and the classification standard the government used to sort the fireworks. Droganes also sought monetary sanctions against the government for allegedly failing to return the seized legal fireworks in a timely manner or to reimburse him for them. The district court rejected all of his claims. We affirm.
Droganes next argues that the district court erred in denying his motion for compensatory sanctions against the government. While the court found that the government engaged in otherwise-sanctionable conduct for failing to fully comply with court orders and repeatedly delaying the return of Droganes's consumer fireworks, the court nonetheless held that sovereign immunity barred it from imposing any monetary penalty. The question on appeal is whether a waiver or other means of overriding sovereign immunity exist in this case. Because this is purely a question of law, our review is de novo. See Premo v. United States, 599 F.3d 540, 544 (6th Cir. 2010).
We begin by way of background. Droganes requested that the district court impose sanctions on the government to compensate him for, among other things, the value of his unreturned consumer fireworks following an unsuccessful Criminal Rule 41(g) motion to the same effect. He cited Civil Rule 11 as a basis for the proposed sanctions--though it is plainly inapplicable in a criminal proceeding. He also cited the district court's inherent authority, which is generally considered one of a number of implied powers that belong to the federal courts as a necessary incident to their judicial duty. United States v. Hudson, 11 U.S. (7 Cranch) 32, 34 (1812). These powers "allow the courts to formulate procedures for their cases, including a mechanism to control the lawyers before them." United States v. Aleo, 681 F.3d 290, 306 (6th Cir. 2012) (Sutton, J., concurring) (describing the "inherent power to sanction" in civil cases). Droganes seems to assume on appeal that the inherent authority to sanction parties remains as robust in criminal proceedings as it is in civil proceedings. We accept this proposition for purposes of deciding the instant case, but note that it is very much up for debate.
Footnote 1. At least one recent opinion expressed doubt that a lower federal court ever has the power "to use [its] inherent authority, as opposed to the contempt power established by statute (18 U.S.C. § 401) and implemented by rule (Fed. R. Crim. P. 42), to punish" bad-faith conduct by a party in a criminal case. Aleo, 681 F.3d at 306 (Sutton, J., concurring); see also id. at 305 n.13 ("It may be questionable whether the inherent authority to sanction even exists in a criminal case such as this one. An argument can be made that Federal Rule of Criminal Procedure 42, covering criminal contempt, is the sole mechanism for punishing bad-faith conduct in criminal cases."). Because we conclude that Droganes's claim is barred by sovereign immunity, we need not reach this question.
Even so, the compensatory sanctions sought here implicate sovereign immunity concerns. Sovereign immunity is the familiar principle that the government cannot be sued except by the consent of Congress. See, e.g., United States v. Testan, 424 U.S. 392, 399 (1976); United States v. Michel, 282 U.S. 656, 659 (1931). A corollary of this principle is that monetary claims potentially disruptive of the public fisc are similarly barred absent Congress's consent. See United States v. Horn, 29 F.3d 754, 761 (1st Cir. 1994); see also Aaron Tang, Double Immunity, 65 Stan. L. Rev. 279, 292-94 (2013) (describing immunity from monetary judgment as "the second layer of sovereign immunity"). Though neither the primary principle nor its corollary spring from certain origins, see Horn, 29 F.3d at 761, both are firmly entrenched in modern law. That is not to say sovereign immunity is absolute. Congress can waive it, but only by an unequivocal expression in statutory text. Lane v. Pena, 518 U.S. 187, 192 (1996). Such a waiver will not arise by implication, nor by incident of a "statute's legislative history" without sufficient clarity in the text itself. Id. Droganes fails to identify one here, and we can find no obvious candidate. Neither 18 U.S.C. § 401, the statute conferring broad contempt power upon district courts, nor Criminal Rule 42, the procedural rule implementing that power, is sufficiently clear and unequivocal. But see 18 U.S.C. § 3006A, Statutory Notes (allowing the assessment of costs against the government for bad-faith prosecutions). Droganes's argument fails for two reasons in the absence of a waiver.
Droganes cannot accomplish by a motion for sanctions what he could not accomplish by his earlier, ultimately unsuccessful Criminal Rule 41(g) motion. That rule provides criminal defendants with a means to seek the return of property seized by federal agents. Fed. R. Crim. P. 41(g) ("A person aggrieved by an unlawful search and seizure of property or by the deprivation of property may move for the property's return."). It does not say what happens when the property in dispute, as here, has been lost or destroyed. Ordonez v. United States, 680 F.3d 1135, 1137-38 (9th Cir. 2012). Nor does it expressly authorize a defendant to sue the government for compensation in such circumstances. Id. at 1138, 1140 (holding that "Rule 41(g) contains no express and unequivocal waiver of the government's sovereign immunity"). For this reason, at least nine circuits "have held that sovereign immunity bars an award of money damages against the government on a Rule 41(g) motion where the property cannot be returned." Id. at 1138 & n.2 (collecting cases). Because Droganes's motion for sanctions is indistinguishable in substance, it suffers the same fate. Having failed to win an order for the return of his consumer fireworks, Droganes sought monetary relief in an amount equal to their "retail value." The appropriate way to do so would have been to file under the Federal Tort Claims Act, 28 U.S.C. § 1346, which constitutes a limited waiver of sovereign immunity for lost or destroyed property claims. We will not endorse an end run on these principles and procedures. Accord McBride v. Coleman, 955 F.2d 571, 576 (8th Cir. 1992) ("It does strike us as being a dubious proposition that by filing a contempt motion a claimant can be positioned to recover an unlimited amount of compensatory damages from the United States without being bound by the strictures of . . . the Federal Tort Claims Act . . . .").
Droganes then resorts to arguing that the district court's inherent authority to sanction simply trumps the government's sovereign immunity. This argument is problematic in multiple respects. First, as discussed above, it is hardly clear that a district court has any such authority in the criminal context. See Aleo, 681 F.3d at 305 n.13; id. at 306 (Sutton, J., concurring). Second, most circuits faced with similar arguments have suggested that the government's sovereign immunity wins when it comes head-to-head with a lower court's inherent authority. See, e.g., United States v. Horn, 29 F.3d 754, 761-66 (1st Cir. 1994); Coleman v. Espy, 986 F.2d 1184, 1191-92 (8th Cir. 1993); Barry v. Bowen, 884 F.2d 442, 444 (9th Cir. 1989). We see no good reason to chart a different course at this time.
None of this is to say that courts are powerless to control the government when it refuses to play by the rules. Congress has already authorized sanctions against the government in criminal cases where the decision to prosecute is "vexatious, frivolous, or in bad faith." 18 U.S.C. § 3006A, Statutory Notes. And it has effected an even broader waiver of sovereign immunity in civil cases. Other circuits have held that the Equal Access to Justice Act, 28 U.S.C. § 2412, authorized sanctions against the government for misconduct under Civil Rule 11. See, e.g., Adamson v. Bowen, 855 F.2d 668, 670-71 (10th Cir. 1988). Both of these mechanisms remain in place to protect the integrity of the judicial process and deter litigation abuses committed by the government. See also Horn, 29 F.3d at 766 (listing a number of "other weapons in [the courts'] armamentarium"). Unfortunately for Droganes, neither waiver applies in this case.
Nor does our holding condone what the government has done here. Like the district court, we are disturbed by the seemingly interminable delays in testing the seized fireworks, many of which the government knew not to be display fireworks. We are also disturbed by the government's doublespeak regarding the condition of the consumer fireworks and its ability to return them to Droganes. While we ultimately affirm the denial of his motion for sanctions for the reasons given, we acknowledge that Droganes deserved better treatment from his party-opponent.
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