Fighting back:
Remedies for the wrongfully prosecuted?

Large corporations and state targets
remain without a remedy

The relatively generous eligibility requirements of the Hyde Amendment will make criminal fee shifting an option for many vindicated targets of federal prosecutions: Most individuals and small- to medium-sized businesses will be eligible for recovery if they can satisfy the elements of the statute. But what about larger corporations or those prosecuted in state court? Such vindicated targets are without a remedy as our system currently is constituted.

General Dynamics Corp. recently found itself in a position not conceptually different from Marsha Jones. In 1978 General Dynamics entered into a contract with the U.S. Army to build a prototype of an anti-aircraft weapon system. Shortly after the agreement was consummated, the Defense Contract Audit Agency (DCAA) commenced a series of audits of General Dynamics' charging under the contract. These audits culminated in a DCAA audit report concluding that General Dynamics mischarged approximately $8.4 million to the government. The DCAA conclusions were wrong; in fact, the entire audit was based upon a fundamental misunderstanding of the contract terms. Nevertheless, the DCAA audit report was referred to the Department of Justice in 1984. An extensive criminal investigation ensued, resulting in a 1985 indictment charging General Dynamics and several of its officers with conspiracy and with making false statements to the United States. Eighteen months later, the Department of Justice realized that its criminal case was founded on a seriously flawed DCAA audit. The prosecutors voluntarily dismissed the indictment.

Clearly, General Dynamics is too big a corporation to be eligible for fee shifting under the Hyde Amendment. Civil remedies against the United States government also generally are foreclosed. One may sue the United States for damages in tort only pursuant to the procedures and limitations of the Federal Tort Claims Act (FTCA)²², which includes several important exceptions to the United States' waiver of sovereign immunity. The FTCA explicitly prohibits recovery against the United States for claims arising out of false arrest, malicious prosecution, and abuse of process, as well as claims arising out of the exercise or performance of a discretionary function or duty by a government employee.²³

General Dynamics attempted to avoid the FTCA's various limitations and exceptions by suing for professional malpractice the DCAA auditors who initiated and pursued the investigation.²⁴A federal district court concluded that General Dynamics had proved its malpractice claim and awarded the company $25 million in damages. However, the Ninth Circuit Court of Appeals reversed, holding that the United States was immune from suit under the FTCA under the discretionary function exception.²⁵ A divided panel rejected General Dynamics' attempt to posture its case as an attack on the government auditors rather than on the prosecutors, holding that "[w]here, as here, the harm actually flows from the prosecutor's exercise of discretion, an attempt to recharacterize the action as something else must fail."²⁶

The Ninth Circuit's rejection of General Dynamics' creative attempt to bypass the FTCA restrictions and obtain a civil remedy for damages sustained as a result of a misguided investigation and prosecution appears to foreclose federal civil remedies for large corporations.

Finally, consider targets of Wisconsin state court prosecutions. Like large corporations, such targets have no recourse for unsuccessful criminal investigations and prosecutions. There is nothing in the Wisconsin criminal code analogous to the Hyde Amendment that would permit fee shifting. Civil remedies also are limited: Sovereign immunity protects the state from suit, and any waiver of sovereign immunity includes an exception for discretionary functions of state agents.²⁷ And under Wisconsin law, "prosecutors possess absolute immunity with respect to the initiation and pursuit of prosecution."²⁸ State investigators or auditors also likely will be protected by absolute or qualified immunity.²⁹

Conclusion

The Hyde Amendment fee shifting provision will apply only in those rare cases where a prosecution goes truly and fundamentally awry. However, the statute is a powerful tool for successful criminal defendants who have been victimized by federal government overreaching. Lawyers representing criminal defendants like Marsha Jones now have at least one possible answer when their acquitted client asks, "What next?" Those representing large corporations or targets of state prosecutions, however, remain without a remedy.

David W. Simon, U.C.-Berkeley 1994, is an associate with the Milwaukee office of Foley & Lardner. He formerly was a law clerk to the Hon. Robert W. Warren, U.S. District Court for the Eastern District of Wisconsin.

Endnotes

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¹111 Stat. 2440, 2518, PL 105-119 (1997).

²143 Cong. Rec. H7786-04, *H7792 (Sept. 24, 1997).

³The only reported fee application to date was rejected because the criminal defendant was acquitted before the Hyde Amendment went into effect. See Cleared of Army Fraud, Woman Loses Effort to Recover Legal Fees, Wall St. J. (March 26, 1998) at B13; see also Ann Davis, Life in a Federal Prosecutor's Cross Hairs, Wall St. J. (March 17, 1998) at B1.

⁴Equal Access to Justice Act, 28 U.S.C. § 2412. The Hyde Amendment provides that its awards "shall be granted pursuant to the procedures and limitations (but not the burden of proof) provided for an award under section 2412 of title 28, United States Code."

⁵28 U.S.C. § 2412(d)(1)(B).

⁶See In the Matter of Grand Jury Empanelled February 14, 1978, 597 F.2d 851, 857 n.12 (3d Cir. 1979) (quoting Counselman v. Hitchcock, 142 U.S. 547 (1892)).

⁷See Texas State Teachers Ass'n v. Garland Ind. School Dist., 489 U.S. 782, 790-92 (1989); Lundin v. Meacham, 980 F.2d 1450, 1457-59 (D.C. Cir. 1992).

⁸ The Hyde Amendment incorporates the "procedures and limitations" of 28 U.S.C. § 2412.

⁹28 U.S.C. § 2412(d)(2)(B)(i).

¹⁰See D'Amico on behalf NLRB v. Industrial Union of Marine & Shipbuilding Workers, 630 F. Supp. 919, 922 (D. Md. 1986); see also Cabo Dist. Co. Inc. v. Brady, 1993 WL 313112 (N.D. Cal.).

¹¹See 143 Cong. Rec. H7786-04, *H7792 (Sept. 24, 1997).

¹²See, e.g., Eastway Const. Corp. v. City of New York, 637 F. Supp. 558, 564-65 (E.D.N.Y. 1986) (Weinstein, J.).

¹³House Conference Report No. 105-405 (Nov. 13, 1997).

¹⁴See Love v. Reilly, 924 F.2d 1492, 1495 (9th Cir. 1991); The Taylor Group Inc. v. Johnson, 919 F. Supp. 1545, 1548 (M.D. Ala. 1996).

¹⁵See generally Ralph V. Seep, Annotation: What Constitutes "Special Circumstances" Precluding an Award of Attorneys' Fees Under Equal Access to Justice Act, 106 A.L.R. Fed. 191 (collecting cases).

¹⁶H.R. Rep. 1418 [1980] U.S. Code Cong. & Admin. News 4984, 4990.

¹⁷See, e.g., Hensley v. Eckerhart, 461 U.S. 424, 436-37 (1983) (fee shifting under 42 U.S.C. § 1988).

¹⁸28 U.S.C. § 2412(d)(2)(A)(ii).

¹⁹See Gary Knapp, Annotation, The Award of Attorneys' Fees in Excess of $75 per Hour Under Equal Access to Justice Act, 119 A.L.R. Fed. 1.

²⁰See INS v. Jean, 496 U.S. 154, 110 S. Ct. 2316 (1990).

²¹28 U.S.C. § 2412(d)(2)(A).

²²28 U.S.C. § 1346(b).

²³28 U.S.C. § 2680. For the "discretionary exception" to apply, government acts at issue must involve an element of judgment or choice and must be grounded in policy. Berkovitz v. United States, 486 U.S. 531 (1988).

²⁴General Dynamics Corp. v. United States, 1996 WL 200255 (C.D. Cal.).

²⁵See General Dynamics v. United States, 139 F.3d 1280 (9th Cir. 1998).

²⁶Id. at 1286. In dissent, Judge O'Scannlain disagreed with the majority's application of the discretionary function exception. Under O'Scannlain's reading of Ninth Circuit precedent, a court must evaluate each separate action on a case-by-case basis to determine whether the specific actor had the type of discretion Congress intended to shield via the discretionary function exception. O'Scannlain concluded that the professional negligence of the government auditors was not of the sort Congress intended to protect. Id. at 1287-88 (O'Scannlain, J., dissenting).

²⁷See Wis. Const., Art. IV § 27; see also 57 Am. Jur. Mun. Torts § 181.

²⁸Ford v. Kenosha County, 160 Wis. 2d 485, 504, 466 N.W.2d 646, 653 (1991).

²⁹Yarney v. State of Wisconsin, DHSS, 1998 WL 345030 at *3 (Ct. App. 1998)(slip op.).