The Secretary is authorized to make urban development action grants to cities and urban counties which are experiencing severe economic distress to help stimulate economic development activity needed to aid in economic recovery. There are authorized to be appropriated to carry out this section $225,000,000 for fiscal year 1988, and $225,000,000 for fiscal year 1989. Any amount appropriated under this subsection shall remain available until expended.
(1) Urban development action grants shall be made only to cities and urban counties which have, in the determination of the Secretary, demonstrated results in providing housing for low- and moderate-income persons and in providing equal opportunity in housing and employment for low- and moderate-income persons and members of minority groups. The Secretary shall issue regulations establishing criteria in accordance with the preceding sentence and setting forth minimum standards for determining the level of economic distress of cities and urban counties for eligibility for such grants. These standards shall take into account factors such as the age of housing; the extent of poverty; the extent of population lag; growth of per capita income; and the extent of unemployment, job lag, or surplus labor. Any city that has a population of less than 50,000 persons and is not the central city of a metropolitan area, and that was eligible for fiscal year 1983 under this paragraph for assistance under this section, shall continue to be eligible for such assistance until the Secretary revises the standards for eligibility for such cities under this paragraph and includes the extent of unemployment, job lag, or labor surplus as a standard of distress for such cities. The Secretary shall make such revision as soon as practicable following November 30, 1983.
(B) in the case of a city with a population of less than fifty thousand persons, contains an area (i) composed of one or more contiguous census tracts, enumeration districts, neighborhood statistics areas, or block groups or other areas defined by the United States Bureau of the Census or for which data certified by the United States Bureau of the Census are available having at least a population of two thousand five hundred persons or 10 per centum of the population of the city, whichever is greater; (ii) in which at least 70 per centum of the residents have incomes below 80 per centum of the median income of the city; and (iii) in which at least 30 per centum of the residents have incomes below the national poverty level.
The Secretary shall use up to, but not more than, 20 per centum of the funds appropriated for use in any fiscal year under this section for the purpose of making grants to cities and urban counties eligible under this paragraph.
(4) contain a certification satisfactory to the Secretary that the applicant, prior to submission of its application, (A) has identified all properties, if any, which are included on the National Register of Historic Places and which, as determined by the applicant, will be affected by the project for which the application is made; (B) has identified all other properties, if any, which will be affected by such project and which, as determined by the applicant, may meet the criteria established by the Secretary of the Interior for inclusion on such Register, together with documentation relating to the inclusion of such properties on the Register; (C) has determined the effect, as determined by the applicant, of the project on the properties identified pursuant to clauses (A) and (B); and (D) will comply with the requirements of section 5320 of this title.
(ii) twice the amount of the additional consideration provided under clause (i) for projects to be located in cities or urban counties which did not receive a preliminary grant approval during the 24-month period preceding the date on which applications under this section are required to be submitted for the grant competition involved.
If a city or urban county has submitted and has pending more than one application, the additional consideration provided by subparagraph (D) of the preceding sentence shall be available only to the project in such city or urban county which received the highest number of points under subparagraph (C) of such sentence.
(2) For the purpose of making grants with respect to areas described in subsection (b)(2) of this section, the Secretary shall establish selection criteria, which must include (A) factors determined to be relevant by the Secretary in assessing the comparative degree of economic deterioration among eligible areas, and (B) such other criteria as the Secretary may determine, including at a minimum the criteria listed in paragraph (1)(C) of this subsection.
(ii) 2 additional points on the basis of the criterion referred to in paragraph (1)(D)(ii).
(B) 35 percent of the funds is then made available solely on the basis of the factors referred to in subparagraphs (C) and (D) of paragraph (1).
(5)(A) Within 30 days of the start of each fiscal year, the Secretary shall announce the number of competitions for grants to be held in that fiscal year. The number of competitions shall be not less than two nor more than three.
(iii) any funds available for such grants in any previous competition that are recaptured.
(C) Notwithstanding any other provision of this section, in each competition for grants under this section, no city or urban county may be awarded a grant or grants in an amount in excess of $10,000,000 until all cities and urban counties which submitted fundable applications have been awarded a grant. If funds are available for additional grants after each city and urban county submitting a fundable application is awarded one or more grants under the preceding sentence, then additional grants shall be made so that each city or urban county that has submitted multiple applications is awarded one additional grant in order of ranking, with no single city or urban county receiving more than one grant approval in any subsequent series of grant determinations within the same competition.
(D) All grants under this section, including grants to cities and urban counties described in subsection (b)(2) of this section, shall be awarded in accordance with subparagraph (C) so that all grants under this section are made in order of ranking.
(4) the city or urban county makes available, from its own funds or from funds received from the State or under any Federal program which permits the use of financial assistance to meet the non-Federal share requirements of Federal grant-in-aid programs, an amount equal to 20 per centum of the grant to be available under this section to be used in carrying out the activities described in the application.
Activities assisted under this section may include such activities, in addition to those authorized under section 5305(a) of this title, as the Secretary determines to be consistent with the purposes of this section. In any case in which the project proposes the repayment to the applicant of the grant funds, such funds shall be made available by the applicant for economic development activities that are eligible activities under this section or section 5305 of this title. The applicant shall annually provide the Secretary with a statement of the projected receipt and use of repaid grant funds during the next year together with a report acceptable to the Secretary on the use of such funds during the most recent preceding full fiscal year of the applicant.
The Secretary shall, at least on an annual basis, make reviews and audits of recipients of grants under this section as necessary to determine the progress made in carrying out activities substantially in accordance with approved plans and timetables. The Secretary may adjust, reduce, or withdraw grant funds, or take other action as appropriate in accordance with the findings of these reviews and audits, except that funds already expended on eligible activities under this chapter shall not be recaptured or deducted from future grants made to the recipient.
No assistance may be provided under this section for projects intended to facilitate the relocation of industrial or commercial plants or facilities from one area to another, unless the Secretary finds that the relocation does not significantly and adversely affect the unemployment or economic base of the area from which the industrial or commercial plant or facility is to be relocated. The provisions of this paragraph shall apply only to projects that do not have identified intended occupants.
(B) an expansion of any such operation that results in a reduction of any such operation in any city, county, or community described in subparagraph (A)(i).
The restrictions established in paragraph (2) shall not apply if the Secretary determines that the relocation or expansion does not significantly and adversely affect the employment or economic base of the city, county, or community from which the relocation or expansion occurs.
Following notice of intent to withhold, deny, or cancel assistance under paragraph (1) or (2), the Secretary shall provide a period of not less than 90 days in which the applicant can appeal to the Secretary the withholding, denial, or cancellation of assistance. Notwithstanding any other provision of this section, nothing in this section or in any legislative history related to the enactment of this section may be construed to permit an inference or conclusion that the policy of the Congress in the urban development action grant program is to facilitate the relocation of businesses from one area to another.
(A) Any amount withdrawn by, recaptured by, or paid to the Secretary due to a violation (or a settlement of an alleged violation) of this subsection (or of any regulation issued or contractual provision entered into to carry out this subsection) by a project with identified intended occupants shall be made available by the Secretary as a grant to the city, county, or community described in subsection (p) of this section, from which the operation of an industrial or commercial plant or facility or other business establishment relocated or in which the operation was reduced.
(B)(i) Any amount made available under this paragraph shall be used by the grantee to assist individuals who were employed by the operation involved prior to the relocation or reduction and whose employment or terms of employment were adversely affected by the relocation or reduction. The assistance shall include job training, job retraining, and job placement.
(ii) If any amount made available to a grantee under this paragraph is more than is required to provide assistance under clause (i), the grantee shall use the excess amount to carry out community development activities eligible under section 5305(a) of this title.
(C)(i) The provisions of this paragraph shall be applicable to any amount withdrawn by, recaptured by, or paid to the Secretary under this section, including any amount withdrawn, recaptured, or paid before the effective date of this paragraph.
(ii) Grants may be made under this paragraph only to the extent of amounts provided in appropriation Acts.
For purposes of this subsection, the term "operation" includes any plant, equipment, facility, position, employment opportunity, production capacity, or product line.
Not later than 60 days after February 5, 1988, the Secretary shall issue such regulations as may be necessary to carry out the provisions of this subsection. Such regulations shall include specific criteria to be used by the Secretary in determining whether there is a significant and adverse effect under paragraph (3).
Not less than 25 per centum of the funds made available for grants under this section shall be used for cities with populations of less than fifty thousand persons which are not central cities of a metropolitan statistical area. The Secretary shall encourage cooperation by geographically proximate cities of less than 50,000 population by permitting consortia of such cities, which may also include county governments that are not urban counties, to apply for grants on behalf of a city that is otherwise eligible for assistance under this section. Any grants awarded to such consortia shall be administered in compliance with eligibility requirements applicable to individual cities.
A grant may be made under this section only where the Secretary determines that there is a strong probability that (1) the non-Federal investment in the project would not be made without the grant, and (2) the grant would not substitute for non-Federal funds which are otherwise available to the project.
In making grants under this section, the Secretary shall take such steps as the Secretary deems appropriate to assure that the amount of the grant provided is the least necessary to make the project feasible.
For purposes of this section, the Secretary may reduce or waive the requirement in section 5302(a)(5)(B)(ii) of this title that a town or township be closely settled.
In the case of any application which identifies any property in accordance with subsection (c)(4)(B) of this section, the Secretary may not commit funds with respect to an approved application unless the applicant has certified to the Secretary that the appropriate State historic preservation officer and the Secretary of the Interior have been provided an opportunity to take action in accordance with the provisions of section 5320(b) of this title.
(n) Territories, tribes, and certain Hawaiian counties included in term "city"
(1) For the purposes of this section, the term "city" includes Guam, American Samoa, the Northern Mariana Islands, the Virgin Islands, and Indian tribes. Such term also includes the counties of Kauai, Maui and Hawaii in the State of Hawaii.
(2) The Secretary may not approve a grant to an Indian tribe under this section unless the tribe (A) is located on a reservation, or on former Indian reservations in Oklahoma as determined by the Secretary of the Interior, or in an Alaskan Native Village, and (B) was an eligible recipient under chapter 67 of title 31 prior to the repeal of such chapter.
An unincorporated portion of an urban county that is approved by the Secretary as an identifiable community for purposes of this section is eligible for a grant under subsection (b)(2) of this section if such portion meets the eligibility requirements contained in the first sentence of subsection (b)(1) of this section and the requirements of subsection (b)(2)(B) of this section (applied to the population of the portion of the urban county) and if it otherwise complies with the provisions of this section.
Of the amounts appropriated for purposes of this section for any fiscal year, not more than $2,500,000 may be used by the Secretary to make technical assistance grants to States or their agencies, municipal technical advisory services operated by universities, or State associations of counties or municipalities, to enable such entities to assist units of general local government described in subsection (i) of this section in developing, applying for assistance for, and implementing programs eligible for assistance under this section.
In utilizing the discretion of the Secretary when providing assistance and applying selection criteria under this section, the Secretary may not discriminate against applications on the basis of (1) the type of activity involved, whether such activity is primarily housing, industrial, or commercial; or (2) the type of applicant, whether such applicant is a city or urban county.
For fiscal years 1988 and 1989, the maximum grant amount for any project under this section is $10,000,000.
(B) except when waived by the Secretary in the case of a severely distressed jurisdiction, not more than one-half of the costs of such activities are derived from such unexpended amount.
This chapter, referred to in subsecs. (g) and (t)(1)(B)(i), (2)(A), was in the original "this title", meaning title I of Pub. L. 93–383, Aug. 22, 1974, 88 Stat. 633, which is classified principally to this chapter. For complete classification of title I to the Code, see Tables.
For effective date of this paragraph, referred to in subsec. (h)(5)(C)(i), see section 516(b) of Pub. L. 100–242, set out as an Effective Date of 1988 Amendment note below.
Chapter 67 of title 31, referred to in subsec. (n)(2)(B), was repealed by Pub. L. 99–272, title XIV, §14001(a)(1), Apr. 7, 1986, 100 Stat. 327.
Amendment of subsec. (n)(1) by Pub. L. 99–500 and 99–591 is based on provisions under the headings "Management and Administration" and "Administrative Provision" in title I of H.R. 5313 [Department of Housing and Urban Development—Independent Agencies Appropriations Act, 1987], as incorporated by reference by section 101(g) of Pub. L. 99–500 and 99–591, and enacted into law by section 106 of Pub. L. 100–202.
1994—Subsec. (o). Pub. L. 103–233, §232(b), inserted before period at end ", except that amounts available to the Secretary for use under this subsection as of October 1, 1993, and amounts released to the Secretary pursuant to subsection (t) of this section may be used to provide grants under section 5308(q) of this title."
Subsec. (t). Pub. L. 103–233, §232(c)(1), added subsec. (t).
1988—Subsec. (a). Pub. L. 100–242, §501(c), substituted "There are authorized to be appropriated to carry out this section $225,000,000 for fiscal year 1988, and $225,000,000 for fiscal year 1989. Any amount appropriated under this subsection shall remain available until expended." for "Of the total amount approved in appropriation Acts under section 5303 of this title for each of the fiscal years 1982 and 1983, not more than $500,000,000 shall be available for each of the fiscal years 1982 and 1983 for grants under this section. There are authorized to be appropriated to carry out the provisions of this section not to exceed $440,000,000 for each of the fiscal years 1984, 1985, and 1986, and any amount appropriated under this sentence shall remain available until expended."
Subsec. (d)(1). Pub. L. 100–242, §515(a), inserted dash before "(A)", indented subpars. (A) and (B), struck out "as the primary criterion," in subpar. (A) and "and" at end of subpar. (B), added subpars. (C) and (D), and struck out former subpar. (C) which read as follows: "at least the following other criteria: demonstrated performance of the city or urban county in housing and community development programs; the extent to which the grant will stimulate economic recovery by leveraging private investment; the number of permanent jobs to be created and their relation to the amount of grant funds requested; the proportion of permanent jobs accessible to lower income persons and minorities, including persons who are unemployed; the impact of the proposed activities on the fiscal base of the city or urban county and its relation to the amount of grant funds requested; the extent to which State or local government funding or special economic incentives have been committed; and the feasibility of accomplishing the proposed activities in a timely fashion within the grant amount available."
Subsec. (d)(3) to (5). Pub. L. 100–242, §515(b), added pars. (3) to (5).
Subsec. (d)(5)(C), (D). Pub. L. 100–404 added subpars. (C) and (D).
Subsec. (d)(6). Pub. L. 100–242, §515(b), (g)(2), temporarily added par. (6), see Effective Date of 1988 Amendment note below.
Subsec. (f). Pub. L. 100–628, §1084(a), substituted "5305" for "5304" after "activities under this section or section".
Pub. L. 100–242, §515(c), inserted at end "In any case in which the project proposes the repayment to the applicant of the grant funds, such funds shall be made available by the applicant for economic development activities that are eligible activities under this section or section 5304 of this title. The applicant shall annually provide the Secretary with a statement of the projected receipt and use of repaid grant funds during the next year together with a report acceptable to the Secretary on the use of such funds during the most recent preceding full fiscal year of the applicant."
Subsec. (h)(1). Pub. L. 100–242, §516(a)(1), (2), designated existing provision as par. "(1) Speculative projects" and inserted at end "The provisions of this paragraph shall apply only to projects that do not have identified intended occupants."
Subsec. (h)(2) to (7). Pub. L. 100–242, §516(a)(3), added pars. (2) to (7).
Subsec. (n)(1). Pub. L. 100–628, §1084(b), directed that subsec. (n)(1) of this section as similarly amended first by provisions made effective by section 101(g) of Pub. L. 99–500 and Pub. L. 99–591 [see 1986 Amendment note below and Codification note above] and later by section 515(i) of Pub. L. 100–242 [see below] is amended to read as if the amendment by Pub. L. 100–242 had not been enacted.
Pub. L. 100–242, §515(i), made amendment identical to Pub. L. 99–500 and 99–591. See 1986 Amendment note below.
Subsec. (r). Pub. L. 100–242, §515(d), amended subsec. (r) generally. Prior to amendment, subsec. (r) read as follows: "In providing assistance under this section, the Secretary may not discriminate among programs on the basis of the particular type of activity involved, whether such activity is primarily a neighborhood, industrial, or commercial activity."
Subsec. (s). Pub. L. 100–242, §515(h), added subsec. (s).
1987—Subsec. (n)(1). For amendment by §106 of Pub. L. 100–202, see 1986 Amendment note below.
Subsec. (n)(2)(A). Pub. L. 100–202, §101(f) [title I, §101], inserted ", or on former Indian reservations in Oklahoma as determined by the Secretary of the Interior," after "reservation".
1986—Subsec. (n)(1). Pub. L. 99–500 and 99–591, §101(g), as enacted by Pub. L. 100–202, inserted at end "Such term also includes the counties of Kauai, Maui and Hawaii in the State of Hawaii." See Codification note above.
Subsec. (n)(2)(B). Pub. L. 99–272 substituted "was an eligible recipient under chapter 67 of title 31 prior to the repeal of such chapter" for "is an eligible recipient under chapter 67 of title 31".
1984—Subsec. (n)(1). Pub. L. 98–454 inserted reference to American Samoa and the Northern Mariana Islands.
Subsec. (n)(2). Pub. L. 98–479 substituted "chapter 67 of title 31" for "the State and Local Fiscal Assistance Act of 1972".
1983—Subsec. (a). Pub. L. 98–181, §121(a), inserted authorizations for appropriations not to exceed $440,000,000 for each of the fiscal years 1984, 1985, and 1986.
Subsec. (b)(1). Pub. L. 98–181, §121(b), substituted "the extent of unemployment, job lag, or surplus labor" for "where data are available, the extent of unemployment and job lag", and inserted provisions for continued eligibility for assistance of any city with a population of less than 50,000 persons, other than a central city of a metropolitan area, which until the Secretary revises the standards for eligibility for such cities and includes the extent of unemployment, job lag, or labor surplus as a standard of distress for such cities, and provisions requiring the Secretary to make such revision as soon as possible following Nov. 30, 1983.
Subsec. (b)(2)(A)(i), (B)(i). Pub. L. 98–181, §121(c), inserted "neighborhood statistics areas," after "enumeration districts,".
Subsec. (c)(3)(C). Pub. L. 98–181, §121(d), added cl. (C).
Subsec. (d)(1). Pub. L. 98–181, §121(e), substituted "criteria for a national competition" for "criteria" in provisions preceding cl. (A).
Subsec. (i). Pub. L. 98–181, §121(f), inserted provisions relating to applications by consortia of cities less than 50,000 population.
Subsecs. (p) to (r). Pub. L. 98–181, §121(g), added subsecs. (p) to (r).
1981—Pub. L. 97–35 substantially restructured and reorganized provisions, made changes in nomenclature and phraseology, and revised purposes, selection criteria and standards, application procedures, approval powers of Secretary, covered activities, limitations, allocation computations, funding prerequisites, amounts for grants, waivers, notice requirements, applicable definitions, and special provisions for years after 1983.
1980—Subsec. (c)(7). Pub. L. 96–399, §110(a)(1)–(3), added par. (7).
Subsec. (n). Pub. L. 96–399, §110(b), added subsec. (n).
Subsec. (o). Pub. L. 96–399, §117(a), added subsec. (o).
1979—Subsec. (b). Pub. L. 96–153, §104, designated existing provisions as par. (1) and added par. (2).
Subsec. (e). Pub. L. 96–153, §104(b), designated existing provisions as par. (1) and substituted "(1) Except in the case of a city or urban county eligible under subsection (b)(2) of this section, in establishing criteria" for "In establishing criteria" in opening sentence, redesignated existing cls. (1) to (3) as (A) to (C), and added pars. (2) and (3).
Subsecs. (l), (m). Pub. L. 96–153, §105, added subsecs. (l) and (m).
1978—Subsec. (c)(6). Pub. L. 95–557, §103(g), added par. (6).
Subsec. (e). Pub. L. 95–557, §103(h), inserted "impact of the proposed urban development action program on the residents, particularly those of low and moderate income, of the residential neighborhood, and on the neighborhood, in which the program is to be located" after "objectives of this chapter".
Amendment by Pub. L. 103–233 applicable with respect to any amounts made available to carry out subchapter II (§12721 et seq.) of chapter 130 of this title after Apr. 11, 1994, and any amounts made available to carry out that subchapter before that date that remain uncommitted on that date, with Secretary to issue any regulations necessary to carry out such amendment not later than end of 45-day period beginning on that date, see section 209 of Pub. L. 103–233, set out as a note under section 5301 of this title.
"(f) Regulations.—The Secretary of Housing and Urban Development shall issue such regulations as may be necessary to carry out the amendments made by this section [amending this section]. Such regulations shall be published for comment in the Federal Register not later than 60 days after the date of enactment of this Act [Feb. 5, 1988]. The provisions of section 119(d)(1)(D), section 119(d)(3), and section 119(d)(4) of the Housing and Community Development Act of 1974 [subsec. (d)(1)(D), (3), (4) of this section], shall take effect on the date of enactment of this Act.
"(1) In general.—The amendments made by this section [amending this section] shall be applicable to the making of urban development action grants that have not received the preliminary approval of the Secretary of Housing and Urban Development before the date on which final regulations issued by the Secretary under subsection (f) become effective. For the fiscal year in which the amendments made by this section become applicable, such amendments shall only apply with respect to the aggregate amount awarded for such grants on or after such effective date.
"(2) Sunset of urban county competition rule.—Effective October 1, 1989, section 119(d)(6) of the Housing and Community Development Act of 1974 [subsec. (d)(6) of this section] is repealed."
Pub. L. 100–242, title V, §516(b), Feb. 5, 1988, 101 Stat. 1936, provided that: "Except as otherwise provided in section 119(h)(5) of the Housing and Community Development Act of 1974 [subsec. (h)(5) of this section] (as added by subsection (a)), the amendments made by this section [amending this section] shall be applicable to urban development action grants that have not received the preliminary approval of the Secretary of Housing and Urban Development before the date of the enactment of this Act [Feb. 5, 1988]."
Pub. L. 100–202, §106, Dec. 22, 1987, 101 Stat. 1329–433, provided that the amendment made by Pub. L. 99–500 and 99–591 is effective on date of enactment [Oct. 18, 1986] of the "pertinent joint resolution" making continuing appropriations for fiscal year 1987 [Pub. L. 99–500 and 99–591].
Amendment by Pub. L. 99–272 effective Oct. 18, 1986, see section 14001(e) of Pub. L. 99–272.
Pub. L. 97–35, title III, §308(c), Aug. 13, 1981, 95 Stat. 396, provided that: "The amendments made by subsections (a) and (b) [amending this section and section 5320 of this title] shall become effective on the effective date of regulations implementing such subsections. As soon as practicable, but not later than January 1, 1982, the Secretary shall issue such final rules and regulations as the Secretary determines are necessary to carry out such subsections."
Amendment by Pub. L. 95–557 effective Oct. 1, 1978, see section 104 of Pub. L. 95–557, set out as a note under section 1709 of Title 12, Banks and Banking.
Section effective Oct. 1, 1977, see section 114 of Pub. L. 95–128, set out as an Effective Date of 1977 Amendment note under section 5301 of this title.
Pub. L. 103–233, title II, §232(c)(2), Apr. 11, 1994, 108 Stat. 368, provided that: "Not later than 10 days after the date of enactment of this Act [Apr. 11, 1994], the Secretary shall, by notice published in the Federal Register, which shall take effect upon publication, establish such requirements as may be necessary to implement the amendments made by this subsection [amending this section]."
"To provide for the revitalization and renewal of inner city neighborhoods in the areas of Los Angeles, California, that were damaged by the civil disturbances during April and May of 1992, and to demonstrate the effectiveness of new town developments in revitalizing and restoring depressed and underprivileged inner city neighborhoods, the Secretary of Housing and Urban Development shall, to the extent or in such amounts as are provided in appropriation Acts, make any assistance authorized under this title available under this title to units of general local government, governing boards, and eligible mortgagors in accordance with the provisions of this title.
"SEC. 1102. NEW TOWN PLAN.
"(a) Requirement.—The Secretary may make assistance available under this title only in connection with, and according to the provisions of a new town plan developed and established by a governing board under section 1107 and approved under subsection (d) of this section. In developing such plans, the governing board shall consult with representatives of the units of general local government within whose boundaries are located any portion of the new town demonstration area for the demonstration program to be carried out under such plan.
"(B) within an area for which the President, pursuant to title IV or V of the Robert T. Stafford Disaster Relief and Emergency Assistance Act [42 U.S.C. 5170 et seq., 5191 et seq.], declared that a major disaster or emergency existed for purposes of such Act [42 U.S.C. 5121 et seq.], as a result of the civil disturbances involving acts of violence occurring on or after April 29, 1992, and before May 6, 1992.
"(1) Governing board.—A description of the members and purposes of the governing board that developed the plan, the manner in which members of the governing board were selected, and the businesses, agencies, interests, and community ties of each member of the governing board.
"(2) New town demonstration area.—A definition and description of the new town demonstration area for the new town development demonstration to be assisted under this title.
"(3) Target community.—A description of the economic, social, racial, and ethnic characteristics of the population of the neighborhood or area in which the new town demonstration area is located.
"(4) Agreements.—Agreements that the governing board will carry out the new town demonstration program in accordance with the requirements of this title.
"(5) Housing units.—A description of the number, size, location, cost, style, and characteristics of rental and homeownership housing units to be developed under the new town demonstration program, any financing for developing such housing, and the amount of assistance necessary under section 1105 for developing the housing under the program.
"(6) Jobs.—A description of the number, types, and duration of any new jobs that will be created in the new town demonstration area and surrounding areas as a result of the demonstration program, and of any job training activities and apprenticeship programs to be made available in connection with the program.
"(7) Social services.—A description of the social and supportive services to be made available under the demonstration program to residents of housing assisted under the demonstration program pursuant to section 1103(d) and to residents of the new town demonstration area.
"(8) Supplemental resources.—A description of any funds, assistance, in-kind contributions, and other resources to be made available in connection with the demonstration program, including the sources and amounts of any private capital resources and non-Federal funds required under section 1103(h).
"(9) Contractors and developers.—A listing of the contractors and developers who potentially will carry out any construction and rehabilitation work for development of housing under the demonstration program and the expected costs involved in hiring such contractors and developers.
"(10) Financing for homebuyers.—A description of any mortgage lenders who have indicated that they will make financing available to families purchasing housing developed under the demonstration program through mortgages eligible for insurance under section 1104 and proposed terms of such mortgages.
"(11) Commitments.—Evidence of any commitments entered into for making any of the resources described in paragraphs (6) through (8) available in connection with the demonstration program.
"(12) Presale requirements.—A description of commitments made to purchase not less than 50 percent of the housing to be developed under the demonstration program for purchase by the occupant and to rent not less than 50 percent of the rental dwelling units to be developed under the demonstration program.
"(13) Community development activities.—A description of the community development activities to be carried out with assistance under section 1106, the amount of assistance necessary under such section for such activities, and of the projected uses of such assistance.
"(1) Submission.—Not later than the expiration of the 6-month period beginning on the date of the enactment of this Act [Oct. 28, 1992], a governing board shall submit a new town plan under this section to the chief executive officers of each unit of general local government within whose boundaries is located any portion of the new town demonstration area described under the plan of the board.
"(2) Approval.—For a plan to be eligible for assistance available under this title, the chief executive officer of all units of general local government to whom the new town plan is submitted shall approve the plan at a public meeting after the plan has been made publicly available for a period of not less than 30 days. A governing board may resubmit for approval any plan returned by any such chief executive officer to the governing board, and such chief executive officer may, upon returning the plan indicate any modifications necessary for approval. A new town plan may not be approved unless such chief executive officers determine that the membership of the governing board submitting the plan is constituted in accordance with section 1107 and the governing board is capable of carrying out the plan.
"(3) Amendment.—An approved new town plan for the demonstration program developed by the governing board may be amended by the board by obtaining approval of the amendment in the manner provided under this subsection for approval of plans. If the chief executive officer of the unit of general local government does not approve or return the amended plan within 30 days of submission, the amended plan shall be considered to be approved for purposes of this subsection.
"SEC. 1103. NEW TOWN DEVELOPMENT DEMONSTRATION PROGRAM REQUIREMENTS.
"(a) In General.—Each of the 2 new town development demonstration programs selected for assistance under this title under section 1102 shall be carried out, by the governing board submitting the new town plan for the demonstration program, in accordance with such plan (and any approved amendments of such plans) and shall be subject to the requirements under this section.
"(b) Local Participation.—With respect to any activities carried out under the demonstration program, the program shall give preference in awarding contracts, purchasing materials, acquiring services, and obtaining assistance or training, to contractors, businesses, developers, professionals, and other establishments located or having offices within the new town demonstration area.
"(1) Number of units.—The demonstration program shall construct or renovate not less than 1,500 dwelling units in the new town demonstration area, of which not less than 60 percent shall be units available for purchase by the occupant.
"(2) Affordability.—Units of varying sizes and costs shall be designed and developed under the demonstration program so that the program provides housing affordable to families of varying incomes not exceeding 115 percent of the median income for the area in which the new town demonstration area is located, including very low- and low-income families (as such terms are defined in section 3(b) of the United States Housing Act of 1937 [42 U.S.C. 1437a(b)]).
"(3) Homeownership units.—Dwelling units developed under the demonstration program for purchase by the occupant shall initially be sold at prices affordable to families eligible to purchase such units. Such units shall be available for purchase only by families having incomes not exceeding the amount specified in paragraph (2). The demonstration shall develop 2-, 3-, and 4-bedroom units for purchase.
"(4) Rental units.—Dwelling units developed under the demonstration program that are to be available for rental shall include family-type units and single bedroom and efficiency units designed for elderly occupants. Such units shall be available for occupancy only by families who (upon initial occupancy) have incomes of (A) less than 60 percent of the median income for the area, or (B) less than $20,000. Occupant families shall pay not more than 30 percent of the family income for rent.
"(d) Social Services.—The demonstration program shall provide for appropriate social and supportive services to be made available to residents of housing assisted under the demonstration program and to other residents of the new town demonstration area, which may include rental and homeownership counseling, child care, job placement, educational programs, recreational and health care facilities and programs, and other appropriate services.
"(e) Job Creation and Training.—The demonstration program shall provide, to the extent practicable, that activities in connection with the demonstration program, including development of housing under subsection (c) and community development activities assisted under section 1106, shall employ and provide job training opportunities for residents of the housing assisted under the demonstration program and other residents of the new town demonstration area.
"(f) Financing.—The demonstration program shall provide for coordination with banks, credit unions, and other mortgage lenders to make financing available to purchasers of units developed under the demonstration program through mortgages eligible for insurance under section 1104, and shall give preference to such mortgage lenders who have offices located within or near the new town demonstration area.
"(g) Support Facilities.—The demonstration program shall encourage, facilitate, and provide for development of appropriate support facilities to serve residents in the housing developed under the program, including infrastructure and commercial facilities.
"(h) Non-Federal Funds.—The governing board carrying out the demonstration program shall ensure that not less than 25 percent of the total amounts used to carry out the demonstration program is provided from non-Federal sources, including State or local government funds, any salary paid to staff to carry out the demonstration program, the value of any time, services, and materials donated to carry out the program, the value of any donated building, and the value of any lease on a building.
"SEC. 1104. FEDERAL MORTGAGE INSURANCE.
"(a) In General.—Pursuant to title II and section 251 of the National Housing Act [12 U.S.C. 1707 et seq., 1715z–16], the Secretary shall (to the extent authority is available pursuant to subsection (d)) insure mortgages under this section involving properties upon which are located dwelling units described in section 1103(c)(3) of this Act that are developed under the new town demonstration programs carried out pursuant to this title.
"(2) have a maturity of 35 years from the date of the beginning of the amortization of the mortgage.
"(c) Board Approval.—The Secretary may provide insurance under this section for a mortgage only if the governing board for the demonstration program for the new town demonstration area in which the property subject to the mortgage is located has indicated to the Secretary approval of the mortgage in connection with the demonstration program.
"(d) Insurance Authority.—To the extent provided in appropriation Acts, the Secretary shall use any authority provided pursuant to section 531(b) of the National Housing Act [12 U.S.C. 1735f–9(b)] to enter into commitments to insure loans and mortgages under this section in fiscal years 1993 and 1994 with an aggregate principal amount not exceeding such sums as may be necessary to carry out the demonstration under this title. Mortgages insured under this section shall not be considered for purposes of the aggregate limitation on the number of mortgages insured under section 251 of the National Housing Act [12 U.S.C. 1715z–16] specified in subsection (c) of such section.
"SEC. 1105. SECONDARY SOFT MORTGAGE FINANCING FOR HOUSING.
"(a) In General.—The Secretary shall, to the extent amounts are provided in appropriation Acts under subsection (e), provide assistance under this section through the governing boards carrying out the new town demonstration programs under this section to assist in the development of housing under the program.
"(b) Use.—Any assistance provided under this section shall be used only for costs in planning, developing, constructing, and rehabilitating housing under the demonstration program available for rental or purchase by the occupant. The governing board shall determine, according to the new town plan for the demonstration program, the allocation of amounts of assistance provided under this section.
"(c) Amount.—The Secretary may not provide assistance under this section for the development of housing under a demonstration program in an amount exceeding $50,000 per dwelling unit assisted.
shall be secured by a second mortgage held by the Secretary on the property involved.
"(2) Terms.—During the period ending upon repayment of the assistance as provided in this subsection, any building containing rental units that is provided assistance under this section shall be used as rental housing subject to the requirements of section 1103(c)(4). During the period ending upon repayment of the assistance as provided in this subsection, any dwelling unit made available for purchase by the occupant that is provided assistance under this section may be sold only to a family having an income not exceeding the amount specified in section 1103(c)(2).
"(3) Interest.—Any assistance provided under this section for a building or dwelling unit shall bear interest at a rate equivalent to the rate for the most recently marketable obligations issued by the United States Treasury have terms of 10 years. The interest on such assistance shall be required to be repaid only upon sale of the building.
"(4) Discounted repayment.—The assistance provided under this section for any building containing rental units or any dwelling unit available for purchase by the occupant shall be considered to have been repaid for purposes of this subsection if the original purchaser of the building or the dwelling unit pays to the Secretary an amount equal to 50 percent of the amount of the assistance provided under this section.
"(e) Authorization of Appropriations.—There are authorized to be appropriated for fiscal years 1993 and 1994 such sums as may be necessary for providing assistance under this section.
"SEC. 1106. COMMUNITY DEVELOPMENT ASSISTANCE.
"(a) In General.—The Secretary shall provide assistance under this section, to the extent amounts are provided in appropriation Acts under subsection (h), to units of general local government to address vital unmet needs and to promote the creation of jobs and economic development in connection with the new town demonstration programs carried out under this title.
"(3) that will comply with a residential antidisplacement and relocation assistance plan described in subsection (d).
"(5) the unit of general local government will comply with the other provisions of this title and with other applicable laws.
"(C) provide that where a claim for assistance under subparagraph (A)(iv) is denied by the unit of general local government, the claimant may appeal to the Secretary, and that the decision of the Secretary shall be final unless a court determines the decision was arbitrary and capricious.
"(2) Exception.—Paragraphs (1)(A)(i) and (1)(A)(ii) shall not apply in any case in which the Secretary finds, on the basis of objective data, that there is available in the area an adequate supply of habitable affordable housing for low- and moderate-income persons. A determination under this paragraph shall be final and nonreviewable.
"(F) to be used for other public purposes.
"(2) Construction of public works and facilities.—The acquisition, construction, rehabilitation, or installation of public works or public facilities within the new town demonstration area, including buildings for the general conduct of government and facilities for coordinating and providing activities and services for high risk youth (as such term is defined in section 509A [now 517] of the Public Health Service Act).
"(3) Clearance and rehabilitation of buildings.—The clearance, removal, and rehabilitation of buildings and improvements located within the new town demonstration area, including interim assistance, assistance for facilities for coordinating and providing activities and services for high risk youth (as such term is defined in section 509A [now 517] of the Public Health Service Act), and assistance to privately owned buildings and improvements.
"(A) Public services.—The provision of public services within the new town demonstration area that are concerned with job training and retraining, health care and education, crime prevention, drug abuse treatment and rehabilitation, child care, education, and recreation, which may include the provision of public health and public safety vehicles.
"(C) Limitation.—Not more than 25 percent of the amount of any assistance provided under this section (including program income) to any unit of general local government may be used for activities under this paragraph.
"(5) Relocation assistance.—Relocation payments and assistance for individuals, families, business, and organizations that are displaced as a result of activities assisted under this title.
"(6) Payment of administrative expenses.—Payment of reasonable administrative costs associated with activities assisted under this section and any expenses of developing the new town plan under section 1102.
"(f) Allocation of Assistance.—The Secretary may not provide more than 50 percent of any amounts appropriated under this section in connection with any one of the 2 new town demonstration programs carried out under this title.
"(g) Other Requirements.—The provisions of subsections (f), (g), and (h) of section 104, subsections (c) and (d) of section 105, section 107, 108, 109, and 110 of the bill, H.R. 4073, 102d Congress (as reported on March 14, 1992 [May 14, 1992, H. Rept. No. 102–524], by the Committee on Banking, Finance and Urban Affairs of the House of Representatives), shall apply to grantees receiving assistance under this section.
"(h) Authorization of Appropriations.—There are authorized to be appropriated for fiscal years 1993 and 1994 such sums as may be necessary for assistance under this section.
"(a) Purpose.—For purposes of this title, a governing board shall be a board organized for the purpose of developing a new town plan under this title and carrying out a new town development demonstration under this title.
"(4) representatives of financial institutions located or having offices in such area.
"(c) Organization.—A governing board may organize itself and conduct business in the manner that the board determines is appropriate to carry out the new town development demonstration under this title.
"Each governing board carrying out a new town development demonstration under this title shall submit to the Congress a copy of the new town plan of the governing board, upon the approval of that plan under section 1102(d).
"(1) Demonstration program.—The terms 'demonstration program' and 'program' mean a new town development demonstration program receiving assistance under this title, which is carried out within a new town demonstration area by a governing board.
"(2) Governing board.—The term 'governing board' means a board established under section 1107.
"(3) New town demonstration area.—The term 'new town demonstration area' means the area defined in a new town plan in which the new town development demonstration under the plan is to be carried out.
"(4) New town plan.—The terms 'new town plan' and 'plan' mean a plan under section 1102 developed by a governing board.
"(5) Unit of general local government.—The term 'unit of general local government' means any city, county, town, township, parish, village, or other general purpose political subdivision of the State of California."
Pub. L. 100–242, title V, §515(e), Feb. 5, 1988, 101 Stat. 1933, which required the Comptroller General of the United States to triennially prepare and submit to Congress a comprehensive report evaluating the eligibility standards and selection criteria applicable under this section, terminated, effective May 15, 2000, pursuant to section 3003 of Pub. L. 104–66, as amended, set out as a note under section 1113 of Title 31, Money and Finance. See, also, item 14 on page 9 of House Document No. 103–7.
Pub. L. 98–181, title I [title I, §123], Nov. 30, 1983, 97 Stat. 1172, which provided for a demonstration program to determine the feasibility of supporting eligible neighborhood development activities by providing Federal matching funds to eligible neighborhood development organizations, was transferred to section 5318a of this title.


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Abington Twp. v. Dunkin' Donuts F. Corp.
Abington Twp.v.Dunkin' Donuts F. Corp.
Zoning — Permits — Scope of appellate review — Abuse of discretion — Error of law — Zoning ordinance — Strict statutory construction — Meaning of words — Ambiguities — Words and phrases — Restaurants.
Argued February 7, 1972, before President Judge BOWMAN and Judges CRUMLISH, JR., KRAMER, WILKINSON, JR., MENCER, ROGERS and BLATT.
Appeal, No. 372 C.D. 1971, front the Order of the Court of Common Pleas of Montgomery County in case of Appeal of: Dunkin' Donuts Franchising Corp. and Mark Cohen, Owner-intervenor, From Decision of The Abington Township Zoning Hearing Board and Walter Joseph Frantz, M.D., Protestant of Record, Intervenor, and Township of Abington, Intervenor.
Building permit issued. Permit rescinded by Zoning Hearing Board upon appeal by protestant. Permittee appealed to the Court of Common Pleas of Montgomery County. Reversed and remanded. VOGEL, J. Township appealed to the Commonwealth Court of Pennsylvania. Held: Affirmed.
Daniel B. Michie, Jr., with him Fell, Spalding, Goff Rubin, for appellant.
Emanuel A. Bertin, with him Moss, Rounick Hurowitz, for appellee.
Fred J. Silverman, for intervenor, Cohen.
Hubert D. Yollin, for intervenor, Krantz.
On March 20, 1970, a building permit was issued to appellee Dunkin' Donuts Franchising Corporation (Dunkin' Donuts) to permit the erection of a building on property zoned F-1 Commercial District located on the northwest corner of Old York Road and Berrell Avenue, Abington Township, Montgomery County. The purpose of the building, as stated on the permit application, was to erect a "retail baked goods and restaurant."
Walter J. Krantz, M.D., whose property is located immediately adjacent to the property in question, appealed on March 27, 1970, to the township Zoning Hearing Board (Board) from the issuance of the permit. After a public hearing, the Board, on June 10, 1970, rendered its decision in which it rescinded the permit on the grounds that (1) the parking requirements were not met for a combination restaurant and retail baked goods shop; and (2) the proposed establishment is a "restaurant specializing in take-out foods" which is prohibited in a F-1 Commercial District by Section 1101 (4) of the township ordinance. On July 9, 1970, Dunkin' Donuts appealed from the Board's decision to the Montgomery County Court of Common Pleas. The owner of the subject property and Dr. Krantz then intervened. After argument before the court en banc on April 7, 1971, the court on April 15, 1971, reversed the Board's determination that the proposed use of the property is prohibited in an F-1 Commercial District and remanded the matter to the Board on the issue of compliance with the parking requirements for the double usage as a retail baked goods shop and restaurant. This was in accord with the court's determination that a Dunkin' Donuts enterprise ". . . constitutes a double usage, namely, a restaurant and retail bakery, both permitted uses under Article XI, Section 1101 (4) and (7) of the Ordinance." The township then intervened in the case and brought this appeal on May 12, 1971.
2. Retail store, not including a pet shop.
4. Restaurant or similar establishment, not including drive-in restaurant, or restaurants specializing in take-out foods.
7. Personal service shop or custom shop for the repair or servicing of clothing or household articles or for making articles to be sold at retail on the premises, such as: . . . bakery or confectionery; or similar establishment."
Initially, as to a Motion To Quash filed by appellee, after considering the supplemental briefs filed by each party, we dismiss such motion as having no merit.
Since the court below took no additional testimony, our duty is to determine whether the Board clearly abused its discretion or committed an error of law. Lower Providence Township and Wood v. Ford, 3 Pa. Commw. 380, 283 A.2d 731 (1971), and cases cited therein.
"The company is engaged primarily in developing, franchising, and operating shops that feature a wide variety of donuts and donut pasteries, as well as coffee and other beverages. It also franchises or operates drive-in restaurants that serve inexpensively priced hamburgers and other food and beverage items.
"Dunkin' Donuts shops feature more than 52 varieties of donuts, as well as donut pasteries, all freshly prepared at the shop, and also coffee and other beverages, both for take-out and on premises consumption."
We specifically do not deal here with that type of Dunkin' Donuts operation referred to as ". . . drive-in restaurants that serve inexpensively priced hamburgers and other food and beverage items."
The record reveals that Dunkin' Donuts sells coffee, hot chocolate, hot tea, milk, iced coffee, iced tea, soft beverages, such as grape and orange drinks, and juices of many types. It operates 24 hours a day and 7 days a week.
Approximately 400 square feet of the proposed building would be used for the sale of these beverages and doughnuts to customers at a "sit-down counter" which has twenty stools. Approximately 80 square feet of the building, near the entrance and exit doors, would be taken up with a smaller counter, with a separate cash register, where doughnuts would be sold by the dozen.
Appellants of course argue that Dunkin' Donuts deals in a specialty item, i.e., doughnuts, the majority of which it is alleged are taken out for consumption elsewhere, and therefore such store falls within the meaning of "restaurants specializing in take-out foods," a use prohibited by Section 1101(4) of the ordinance in an F-1 Commercial District.
Dunkin' Donuts counters that, as stated on the original building permit application, its operation will be a "retail baked goods and restaurant" and therefore allowable under subsections (4) and (7) of Section 1101.
"restaurant" — "an establishment where refreshments or meals may be procured by the public; a public eating house."
"refreshment" — "something (as food, drink) that refreshes"; and in the plural means "a light meal; lunch."
"bakery" — "a place in which baked products (as bread, cakes, cookies) are made; an establishment (as a retail shop) that sells baked products chiefly or exclusively." Black's Law Dictionary 181 (4th ed. 1968) defines "bakery" as: "Any place used for the purpose of mixing, compounding, or baking for sale or for purposes of a restaurant, bakery or hotel, any bread, biscuit, pretzels, crackers, buns, rolls, macaroni, cake, pies, or any food products of which flour or meal is a principal ingredient."
In the absence of an ordinance definition, it would seem, at least by accepting Black's more general definition, that Dunkin' Donuts' proposed use could be described (Section 1101 (7)) as a "Personal service shop or custom shop . . . for making articles to be sold at retail on the premises, such as: . . . bakery or confectionery; or similar establishment." See Kane v. Livingston, 170 N.Y.S.2d 98 (1957).
'In its plan of operation, . . . (of the proposed Burger King) . . . there were to be no car-hops or waitresses and no take-out windows. A limited menu of prepared food would be offered its customers and it would be necessary for those who wished to purchase anything to go into the building where they would be served from a counter. Patrons could eat inside or take their order away from the building. There would be no service to automobiles, or curb-service, as it is frequently called. All food and beverages would be served in paper containers. . . .' (Emphasis supplied)"
It might well be that the inclusion into the township ordinance of the phrase "drive-in restaurant" was meant to proscribe such establishments as Burger King, McDonalds, Carrolls, Red Barn, and Gino's, and the phrase "restaurants specializing in take-out foods" to prohibit Dunkin' Donuts-type restaurants or "snack shops". But since appropriate definitions are lacking in the ordinance, we are left to speculate as to what such terms mean, and we ". . . will not attach a strained meaning to the words of the ordinance or find a prohibition by implication, however, since zoning regulations are in derogation of the common law and are strictly construed [in favor of the property owner]." Annot., 82 A.L.R. 2d 989, 992 (1962); Peterson v. Zoning Board of Adjustment, 412 Pa. 582, 195 A.2d 523 (1963); Fidler v. Zoning Board of Adjustment, 408 Pa. 260, 182 A.2d 692 (1962); Lord Appeal, 368 Pa. 121, 81 A.2d 533 (1951). Thus, where an ordinance uses the terms "restaurant", "drive-in restaurant", and "restaurants specializing in take-out foods" without defining any of them, any ambiguity in their meaning or application will be resolved in favor of the property owner. Vitolo v. Chave, 63 Misc.2d 971, 314 N.Y.S.2d 51 (1970). "What constitutes a 'restaurant' as opposed to a 'drive-in restaurant' [or, for that matter, 'restaurants specializing in take-out foods'] for the purpose of determining the permitted use of property under a zoning classification in which those terms are not otherwise defined is determined by considering the common and ordinary meaning of those terms, liberally construing them in favor of the permitted use so as not to extend the restrictions of the ordinance to any limitation of use not therein clearly prescribed." Ederer v. Board of Zoning Appeals, 18 Ohio Misc. 143, 147-8, 248 N.E.2d 234, 237 (1969).
"One need only add that there are no sure external standards for judging legislative motive: and that once such an inquiry is admitted, the Court is on the high seas of subjectivism with not a port in sight." The Mind and Faith of Justice Holmes 146 (M. Lerner ed., Modern Library ed. 1943).
As the court stated in Appeal of American Fast Foods, Inc., 18 Ches. Co. Rep. 311, 312, 50 Pa. D. C. 2d 192, 194-5 (1970): "The township argues that the provision in question is directed against the operation of a 'Gino' type of establishment, and that such an establishment creates undesirable side effects which should not be permitted within the township. We do not know whether a Gino establishment is good or bad from the township's point of view. If it encourages activity which conflicts with the public interest, the prohibition of the undesirable activity would seem to be the appropriate method of overcoming its undesirable effect. That result cannot be obtained by attempting to read a meaning into the language of the zoning ordinance which that language does not justify."

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Contractors are now familiar with the Supreme Court’s June 2016 decision in Universal Health Services, Inc. v. United States ex rel. Escobar [PDF]. That decision recognizes False Claims Act liability for implied false certifications. But it also holds that FCA liability is available only when the false statement or omission is “material” to the Government’s decision to pay a claim. Our discussion of Escobar is available here.
Over the last 18 months, courts across the country have been asked to determine the impact of the Escobar decision. Ten of the eleven U.S. Circuit Courts of Appeal have interpreted Escobar. Numerous U.S. District Courts have applied Escobar in resolving pre-trial motions. Cases based on “garden-variety breaches of contract or regulatory violations” are being thrown out. Even jury verdicts are being overturned for insufficient evidence of materiality. There is one inescapable conclusion from these post-Escobar decisions: materiality matters.
The Supreme Court’s unanimous decision in Universal Health Services, Inc. v. United States ex rel. Escobar, No. 15-7 (U.S. June 16, 2016), upholds the viability of the implied certification theory of False Claims Act liability. But it also makes cases arising from minor instances of noncompliance much harder to prove. The Court held that a knowing failure to disclose a violation of a material statutory, regulatory, or contractual requirement can create False Claims Act liability. The requirement need not be an express condition of payment, but it must be material to the Government’s decision to pay.
Those hoping that the Court would eliminate implied certification altogether will be disappointed with the decision. It opens up the possibility of new False Claims Act cases in the Seventh Circuit and in other jurisdictions that had rejected the implied certification theory or limited its application to conditions of payment. Some cases that might have been thrown out on a motion to dismiss might stand a better chance of surviving through discovery and trial.
The Court nevertheless takes strong steps to limit misuse of the implied certification theory. According to the opinion in Escobar, liability under the implied certification theory can be imposed only when two conditions are satisfied. First, the claim for payment must make “specific representations about the goods or services provided.” An invoice that makes no affirmative statement about the quality of a contractor’s goods or services cannot be the basis for an implied certification.
In some courts in the United States today, a government contractor or a healthcare provider seeking reimbursement from a federal program can violate the False Claims Act even when its work is satisfactory and its invoices are correct. Under the theory of “implied certification,” a minor instance of non-compliance with one of the thousands of applicable statutes, regulations, and contract provisions can be the basis for a federal investigation, years of litigation, as well as fines, penalties, suspension and debarment, even imprisonment of company personnel.
This week, the Supreme Court heard oral arguments in Universal Health Services, Inc. v. United States ex rel. Escobar, Docket No. 15-7, a case involving the viability of the implied certification theory. Here, we look at the questions posed during oral argument to see if we can infer how the Court might resolve the case.
The Supreme Court agreed to consider two questions posed in Escobar. First, the Court agreed to address the current split in the circuits as to the viability of the implied certification theory. The First Circuit’s decision in United States ex rel. Escobar v. Universal Health Services, Inc., 780 F.3d 504 (1st Cir. 2015), broadly adopts implied certification. The Seventh Circuit’s decision in United States v. Sanford-Brown, Ltd., 788 F.3d 696 (7th Cir. 2015), firmly rejects it.
FCA decision a silver lining for KBR, but what about everyone else?
Is every routine contract dispute a potential false claim? Is it a false claim to adopt an interpretation of an ambiguous contract provision that was the subject of debate within the company? As a matter of law and common sense, the answer to these questions must be “no.” But Chief Judge Royce Lamberth’s August 3 decision in United States v. Kellogg Brown & Root Services, Inc., No. 10-cv-530 (D.D.C. Aug. 3, 2011) [pdf], casts sobering doubt on this answer.

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77-1703. Collection of taxes; separate payments; special assessments.
Source:Laws 1903, c. 73, § 146, p. 440; R.S.1913, § 6475; C.S.1922, § 5998; Laws 1927, c. 181, § 1, p. 522; C.S.1929, § 77-1903; Laws 1937, c. 167, § 31, p. 660; Laws 1939, c. 98, § 31, p. 447; Laws 1941, c. 157, § 31, p. 631; C.S.Supp.,1941, § 77-1903; R.S.1943, § 77-1703; Laws 1992, LB 1063, § 135; Laws 1992, Second Spec. Sess., LB 1, § 108.


On the landlord side, numerous developers and landlords have experienced extraordinary fallout in the form of failing tenants, leading to vacancies, decreased rental rates, and worse. There have been instances of “opportunities” – replacing a failing tenant with a more viable one – but those are (far and away) exceptions. Landlords are now faced with attempting to “lure” tenants, but must be wary of their means and methods: for example, is a long-term (say, ten year) lease with a fixed rent (or a rent with nominal increases) too great a price to pay to secure a tenant in this market? The questions – and decisions – facing landlords today will shape their returns on investment for years to come.
Tenants, on the other hand, are “making hay” in leases – at least to the extent that their businesses are succeeding. Those tenants that can afford to expand are doing so, as rental rates can be extremely attractive. And, in many cases, the longer the term the better, as “locking in” rents at current rates may be particularly advantageous to tenants. Market conditions have also enabled some tenants to enter markets (or sub-markets) previously out of their price ranges. In addition, sophisticated tenants have taken advantage of the market to negotiate more favorable terms and conditions in their leases – e.g., option rights, termination rights, expansion and contraction rights, and increased flexibility in assignment and subletting (to name a few).
Landlords and tenants alike face challenges and opportunities in the current climate and should be well-versed in the specifics of such challenges and opportunities in order best to protect and advance their respective interests.
Almost every financial transaction will have a tax consequence, and with proper planning a potential adverse consequence can be eliminated or at least minimized. The following brief discussion is an example of ways in which the tax laws may aid a taxpayer in either a personal or an investment difficulty.
Recognizable gain equal to the difference between the taxpayer’s basis in the property and the mortgage amount.
Realization of taxable income equal to the mortgage amount, if forgiven, in excess of the fair market value of the property.
Fortunately, the taxpayer may qualify under various provisions in the tax code for relief to exclude all or part of the paper income from tax, particularly for debt forgiven in years 2007 through 2012 under the Mortgage Forgiveness Debt Relief Act of 2007. Similar exclusions may also be available under Internal Revenue Code §121 for the gain on the sale of the residence, and under IRC §108 in cases of bankruptcy or insolvency. In any event, serious tax analysis is warranted.
Many investors in real estate development entities have experienced the loss of their investment because of market conditions or, in far too many cases, misappropriation of the funds by the promoter/manager. In either case, the loss may be partially recovered through appropriate tax planning.
For example, individual taxpayers may deduct losses incurred in a trade or business or a transaction entered into for profit under IRC §165(c)(1) and (2), or if such loss arises from a theft, under IRC §165(c)(3). Because of timing issues, the taxpayer should consult with a tax expert as to the most advantageous approach.
Once it is determined that the taxpayer has suffered a deductible loss under IRC §165, further inquiries should be made to determine if all or any part of the loss may be carried back to a prior year to facilitate an immediate benefit by recovering previously-paid taxes. IRC §172 provides for carry back of net operating losses incurred in the current year, and has been periodically amended to specifically benefit taxpayers incurring losses in the recent recession, as was done in the American Recovery and Investment Act of 2009.
The application of the tax laws to assist taxpayers experiencing financial difficulties, such as those mentioned above, may yield significant benefits to the distressed taxpayer, and should be explored in every situation where a significant amount is at stake.
As with any other contract in California, if consent is obtained under false pretenses, an issue can arise as to whether it was a true meeting of the minds, as required for any enforceable contract. While most loan instruments and associated guaranties have standard integration clauses reciting that there have been no other representations made outside the four corners of the contract itself, if fraudulent circumstances can be proven, such clauses are much less helpful. The contractual recitation is then simply evidence which the jury is free to reject if it is troubled by extraneous trickery.
For example, if a non-managing member of an LLC signs a guaranty based upon misrepresentations of a dishonest managing member, an argument can be made that the guarantor’s consent was not voluntary. The inquiry should then focus on whether there are circumstances under which a reasonable lender should have concluded that the managing member was not being straightforward. In short, it is clear in California that a guarantor may use fraud as a defense against liability under a guaranty.
Further, if a lender negligently or in bad faith prevented the borrower from performing under a loan agreement, the guaranty may not be enforceable because each party to a contract has a duty to do everything that the contract requires him or her to do to accomplish its purpose and there is a corresponding duty to refrain from hindering performance by the other party. A party who prevents fulfillment of a condition of his or her own obligation commits a breach of contract and cannot rely on such a condition to defeat his or her liability.
Finally, a creditor who accepts a continuing guaranty owes a duty to the guarantor to disclose facts that materially increase the risk beyond that which the guarantor intended to assume. If the creditor fails to disclose crucial information, the guarantor is exonerated of further liability. To a significant degree, the duty of disclosure arises under the covenant of good faith and fair dealing, implied in all California contracts, and it is unlikely that the duty is waivable.
In California, “a guarantor is exonerated (i.e. released of liability under the guaranty) if, without the guarantor’s consent, the creditor alters, impairs, discharges, or suspends in any respect, the creditor’s rights and remedies against the primary obligator.” Any material change made in an existing contract without the consent of the surety extinguishes the surety’s liability. Modifying the obligation without the guarantor’s consent makes the guaranty unenforceable, and any increase in the amount of the obligation is one such material change.
While only material modifications of an obligation exonerate a guarantor, if a modification is material, it does not matter whether the guarantor was “prejudiced” by the modification or not. A material modification of the underlying obligation may completely exonerate a surety even if the modification is beneficial.
The proper inquiry, therefore, is to determine whether an alteration materially modified the original obligation in a manner not contemplated by the guarantor. The court must examine both the guaranty and the underlying agreement the performance of which was guaranteed. All pertinent factors must be considered to determine whether some material unforeseen obligation was foisted upon the guarantor.
A guarantor may also be exonerated if a material alteration in the debt occurred by reason of conduct of a third party to the extent the lender knowingly participated. For example, a lender could be a co-conspirator in respect to a borrower’s managing member’s fraudulent embezzlement and conversion of loan funds. Here, the lender may be charged not only with knowledge of facts brought to his or her attention, but also of all other facts which a reasonable inquiry would have revealed. Thus, where the facts and circumstances surrounding the managing member’s requests for advances were sufficient to put a prudent bank on notice of an impropriety, the bank may be charged with knowledge of embezzler’s unlawful intent, and the guaranty would become unenforceable since the debt would have become materially altered as a practical economic matter. This is true even if the bank obtained no advantage.
A guaranty may also be unenforceable where the obligor and guarantor are alter egos of one another. When debtors personally guaranty their own obligations or obligations of controlled entities, the guaranty adds nothing to the transaction, and is not enforceable For example, guarantors who are general partners of a primary obligor partnership are themselves principal obligors. Because a principal obligor cannot “guaranty” his own debt, any purported guaranty under these circumstances will be superfluous and unenforceable.
Generally, a guarantor may give advance consent in the guaranty contract to modifications that would otherwise exonerate the guarantor. This is very typical in a workout situation between the lender and borrower where in exchange for a modification or extension of the underlying obligation, the lender is able to correct any documentation issues in its loan papers. The guarantor would be part of that arrangement.
On the other hand, there are most certainly limits to contractual waivers. For instance, it has clearly been established that pre-dispute waivers of a right to complain about lender conduct, whether being negligence or fraud, are not enforceable where public policy is concerned. Also, California courts can sometimes construe guarantor waivers strictly against the creditor, and courts may also refuse to enforce unconscionable provisions.
In any event, any release of future negligence must be explicit, and exculpatory clauses must be unambiguous. And even then it is arguable that the waivers are unenforceable.
Any discussion concerning enforcement of a guaranty must also touch upon collectability, i.e., will a judgment actually be recoverable from the guarantor? Especially in the current state of the economy, this issue is of critical importance to the lender. Quite often the guarantor will threaten bankruptcy or claim insolvency. So in order to proceed, the lender must first get an updated snapshot of the guarantor’s financial situation in order to assess collectability. Not only a current balance sheet and prospects of future income must be reviewed, but also transfers recently made, and creditors or insiders paid, should also be carefully examined. Any protests over privacy should be able to be addressed with a confidentiality agreement. Next, the lender will need to get an assessment of its rights and remedies if a bankruptcy is filed, along with a determination of the likely outcome for its claim in the proceeding against the guarantor. In some circumstances, a bankruptcy filing might be advantageous for a lender, for example the public reporting requirements and court supervision might otherwise prevent the guarantor from transferring or hiding assets.
Whenever a guaranty is part of a transaction that has any connection to real property in California, a lender must take additional steps to review and assess how the unique anti-deficiency law in California will affect the ability to pursue the guarantor. Issues over purchase money obligations, the “one-action” rule and the ability to pursue any deficiency after a non-judicial foreclosure are just some of the concerns that the lender will have to assess. Ignoring them might result in a bar to recovery. For example, a loan made to five borrowers may appear to allow the lender to pursue any of the borrowers for the full amount of the obligation. However, four of the borrowers may claim that they are only “investors” and in effect, are only guarantors to the one primary borrower. If the lender’s loan documents do not provide for the appropriate waivers of the guarantors’ rights and defenses, the lender might not be able to successfully pursue all the co-borrowers on a defaulted loan.
In practice, even the most carefully crafted personal guaranties may face challenges in the courtroom and at the settlement table. In front of a jury, personal guaranties of commercial loans are not likely to be taken at face value because emotion often works to reframe evidence. By no means does that suggest that guarantors always have the upper hand, but clearly good lawyers on both sides of a case will seek to couch their arguments in terms of equity and fairness rather than on the cold written word. So, if an individual guarantor was mistreated by a lender, either directly or through the lender’s participation in wrongdoing by others such as the guarantor’s managing member, a material modification and a disregard of applicable waivers can be found even in the presence of lender-friendly language.
However, if the lender’s attorneys can paint the guarantor as someone who is relying on a technicality, and who was knowledgeable about the risks he or she was taking while the lender was simply trying to collect what is rightfully due, equities could easily shift in favor of the lender.
In the end, perhaps the best overall practical advice for both lenders and guarantors is to retain seasoned trial counsel early as they try to resolve their disputes because attorneys who rely primarily on the written word may not be handicapping the risks appropriately.
As we move into 2011, it may be helpful to review new laws that may affect California real estate brokers and salespersons. The following laws were enacted by the California legislature and signed by Governor Schwarzenegger during the 2009/2010 legislative session.
Prior existing law restricts a California real estate broker or salesperson’s ability to collect advance fees for services that require a real estate license. Brokers seeking to collect advance fees must first get DRE approval of the fee contract. Assembly Bill 1762 clarified that the restrictions do not apply to (1) residential rental security deposits; (2) residential rental applicant screening fees; (3) fees to cover advertising expenses; and (4) certain written “limited service” contracts which are presented as stand-alone services, to be performed on a task-by-task basis, and for which compensation is received as each separate, contracted-for task is completed.
Prior existing law requires foreclosure consultants to register with the Department of Justice before providing foreclosure consulting services, and precludes them from charging or receiving any compensation before fully completing their services. Assembly Bill 2325 extends these restrictions to forensic loan audits, whereby a person arranges an audit of any obligation secured by a lien on a residence in foreclosure. A forensic loan auditor is thus prohibited from collecting fees prior to performing all services. Licensed real estate brokers, lawyers, mortgage brokers, lenders and other specified professions are exempt from the Foreclosure Consultant Law.
Under prior law, homeowners who sell their homes by short-sale could be required to pay their lenders the balance due on the loan after short-sale proceeds were deducted. Senate Bill 931 limits a lender’s ability to collect this deficiency from the homeowner. The lender may not pursue the homeowner for the balance owed where (1) the dwelling consists of four or fewer units; (2) the lender is a first lien holder; and (3) the lender consented to the short-sale in writing. Once the first lien holder gives its written consent, the homeowner is released from any obligation to pay the remaining loan deficiency. The law does not apply if the borrower committed fraud with respect to the short-sale or intentionally damaged the property.
SB 1137 makes it a crime for any person to act as a mortgage loan originator (MLO) without a MLO license endorsement from the Department of Real Estate. The bill also makes it a crime to advertise that you are a real estate salesperson if you do not hold a real estate license, or to advertise MLO services if you do not hold a MLO license endorsement. In addition, the bill precludes a real estate broker from employing or compensating any real estate licensee for engaging in any activity for which a (MLO) license endorsement is required, if that licensee does not have a MLO license endorsement. Loan servicing is not considered a MLO service for purposes of this law.
In 2008, the Governor signed a law that when a residential property is foreclosed upon, any tenants must receive sixty days notice before they may be evicted. In 2009, the United States Congress passed the Protecting Tenants at Foreclosure Act, which requires that after foreclosure, the new owner must generally honor the tenant’s lease until the end of the lease term. SB 1149 provides that tenants who are living in foreclosed homes must be informed of these rights in a cover sheet attached to any eviction notice served within one year of a foreclosure sale.
For further information, please contact CWC’s Chair of the Real Estate Solutions Group, Bill Norman: wnorman@cwclaw.com; 415-765-6236.


The patent venue statute, 28 U.S.C. §1400(b), provides that "[a]ny civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business." In Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222, 226, this Court concluded that for purposes of §1400(b) a domestic corporation "resides" only in its State of incorporation, rejecting the argument that § 1400(b) incorporates the broader definition of corporate "residence" contained in the general venue statute, 28 U.S.C. §1391(c). Congress has not amended §1400(b) since Fourco, but it has twice amended §1391, which now provides that, "[e]xcept as otherwise provided by law" and "[f]or all venue purposes, " a corporation "shall be deemed to reside, if a defendant, in any judicial district in which such defendant is subject to the court's personal jurisdiction with respect to the civil action in question." §§1391(a), (c).
Respondent filed a patent infringement suit in the District Court for the District of Delaware against petitioner, a competitor that is organized under Indiana law and headquartered in Indiana but ships the allegedly infringing products into Delaware. Petitioner moved to transfer venue to a District Court in Indiana, claiming that venue was improper in Delaware. Citing Fourco, petitioner argued that it did not "resid[e]" in Delaware and had no "regular and established place of business" in Delaware under §1400(b). The District Court rejected these arguments. The Federal Circuit denied a petition for a writ of mandamus, concluding that §1391(c) supplies the definition of "resides" in § 1400(b). The Federal Circuit reasoned that because petitioner resided in Delaware under §1391(c), it also resided there under § 1400(b).
As applied to domestic corporations, "reside [nee]" in §1400(b) refers only to the State of incorporation. The amendments to §1391 did not modify the meaning of §1400(b) as interpreted by Fourco. Pp. 3- 10.
(a)The venue provision of the Judiciary Act of 1789 covered patent cases as well as other civil suits. Stonite Products Co. v. Melvin Lloyd Co., 315 U.S. 561, 563. In 1897, Congress enacted a patent specific venue statute. This new statute (§1400(b)'s predecessor) permitted suit in the district of which the defendant was an "inhabitant" or in which the defendant both maintained a "regular and established place of business" and committed an act of infringement. 29 Stat. 695. A corporation at that time was understood to "inhabit" only the State of incorporation. This Court addressed the scope of §1400(b)'s predecessor in Stonite, concluding that it constituted "the exclusive provision controlling venue in patent infringement proceedings" and thus was not supplemented or modified by the general venue provisions. 315 U.S., at 563.
In 1948, Congress recodified the patent venue statute as § 1400(b). That provision, which remains unaltered today, uses "resides" instead of "inhabit[s]." At the same time, Congress also enacted the general venue statute, §1391, which defined "residence" for corporate defendants. In Fourco, this Court reaffirmed Stonite's holding, observing that Congress enacted § 1400(b) as a standalone venue statute and that nothing in the 1948 recodification evidenced an intent to alter that status, even the fact that §1391(c) by "its terms" embraced "all actions, " 353 U.S., at 228. The Court also concluded that "resides" in the recodified version bore the same meaning as "inhabit[s]" in the pre-1948 version. See id., at 226.
This landscape remained effectively unchanged until 1988, when Congress amended the general venue statute, §1391(c). The revised provision stated that it applied "[f]or purposes of venue under this chapter." In VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574, 1578, the Federal Circuit held that, in light of this amendment, §1391(c) established the definition for all other venue statutes under the same "chapter, " including §1400(b). In 2011, Congress adopted the current version of §1391, which provides that its general definition applies "[f]or all venue purposes." The Federal Circuit reaffirmed VE Holding in the case below. Pp. 3-7.
(b) In Fourco, this Court definitively and unambiguously held that the word "reside[nce]" in §1400(b), as applied to domestic corporations, refers only to the State of incorporation. Because Congress has not amended § 1400(b) since Fourco, and neither party asks the Court to reconsider that decision, the only question here is whether Congress changed §1400(b)'s meaning when it amended §1391. When Congress intends to effect a change of that kind, it ordinarily provides a relatively clear indication of its intent in the amended provision's text. No such indication appears in the current version of §1391.
Respondent points out that the current §1391(c) provides a default rule that, on its face, applies without exception "[f]or all venue purposes." But the version at issue in Fourco similarly provided a default rule that applied "'for venue purposes, '" 353 U.S., at 223, and those phrasings are not materially different in this context. The addition of the word "all" to the already comprehensive provision does not suggest that Congress intended the Court to reconsider its decision in Fourco. Any argument based on this language is even weaker now than it was when the Court rejected it in Fourco. Fourco held that § 1400(b) retained a meaning distinct from the default definition contained in §1391(c), even though the latter, by its terms, included no exceptions. The current version of §1391 includes a saving clause, which expressly states that the provision does not apply when "otherwise provided by law, " thus making explicit the qualification that the Fourco Court found implicit in the statute. Finally, there is no indication that Congress in 2011 ratified the Federal Circuit's decision in VE Holding. Pp. 7-10. 821 F.3d 1338, reversed and remanded.
The question presented in this case is where proper venue lies for a patent infringement lawsuit brought against a domestic corporation. The patent venue statute, 28 U.S.C. § 1400(b), provides that "[a]ny civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business." In Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222, 226 (1957), this Court concluded that for purposes of § 1400(b) a domestic corporation "resides" only in its State of incorporation.
In reaching that conclusion, the Court rejected the argument that § 1400(b) incorporates the broader definition of corporate "residence" contained in the general venue statute, 28 U.S.C. §1391(c). 353 U.S., at 228. Congress has not amended § 1400(b) since this Court construed it in Fourco, but it has amended §1391 twice. Section 1391 now provides that, "[e]xcept as otherwise provided by law" and "[f]or all venue purposes, " a corporation "shall be deemed to reside, if a defendant, in any judicial district in which such defendant is subject to the court's personal jurisdiction with respect to the civil action in question." §§1391(a), (c). The issue in this case is whether that definition supplants the definition announced in Fourco and allows a plaintiff to bring a patent infringement lawsuit against a corporation in any district in which the corporation is subject to personal jurisdiction. We conclude that the amendments to §1391 did not modify the meaning of § 1400(b) as interpreted by Fourco. We therefore hold that a domestic corporation "resides" only in its State of incorporation for purposes of the patent venue statute.
Petitioner, which is organized under Indiana law and headquartered in Indiana, manufactures flavored drink mixes. Respondent, which is organized under Delaware law and has its principal place of business in Illinois, is a competitor in the same market. As relevant here, respondent sued petitioner in the District Court for the District of Delaware, alleging that petitioner's products infringed one of respondent's patents. Although petitioner is not registered to conduct business in Delaware and has no meaningful local presence there, it does ship the allegedly infringing products into the State.
Petitioner moved to dismiss the case or transfer venue to the District Court for the Southern District of Indiana, arguing that venue was improper in Delaware. See 28 U.S.C. §1406. Citing Fourco's holding that a corporation resides only in its State of incorporation for patent infringement suits, petitioner argued that it did not "resid[e]" in Delaware under the first clause of § 1400(b). It further argued that it had no "regular and established place of business" in Delaware under the second clause of § 1400(b). Relying on Circuit precedent, the District Court rejected these arguments, 2015 WL 5613160 (D Del., Sept. 24, 2015), and the Federal Circuit denied a petition for a writ of mandamus, In re TC Heartland LLC, 821 F.3d 1338 (2016). The Federal Circuit concluded that subsequent statutory amendments had effectively amended § 1400(b) as construed in Fourco, with the result that §1391(c) now supplies the definition of "resides" in §1400(b). 821 F.3d, at 1341-1343. Under this logic, because the District of Delaware could exercise personal jurisdiction over petitioner, petitioner resided in Delaware under §1391(c) and, therefore, under §1400(b). We granted certiorari, 580 U.S. ___ (2016), and now reverse.


Justia › US Law › US Case Law › US Supreme Court › Volume 123 › United States v. Philadelphia & Reading R. Co.
At a trial by jury in a court of the United States, the judge may express to the jury his opinion upon questions of fact which he submits to their determination.
A claim of the United States against a railroad corporation for taxes on undivided profits during a certain period was, after full examination of the books of the corporation by officers of the government and argument before the assessor of internal revenue for the district, settled and adjusted by agreement between the assessor and the corporation at a certain sum, which the corporation paid and took the collector's receipt for. Nearly twelve years afterwards, an internal revenue agent made another examination of the books of the corporation, resulting, as he testified, in charging it with a further sum for taxes during the same period. In a suit to recover this sum, the judge, in charging the jury, told them that the first assessment, the payment of money in pursuance of it, and the acquiescence of the government for so long a time since, raised a presumption that the assessment was correct, and that the money paid covered the defendant's entire liability; that the burden was thus cast upon the government of proving, by such evidence as to fully satisfy the mind, that the assessment was erroneous; that whether it had done so was for the jury to determine, and that the judge did not desire to control their finding, but was of opinion that under the circumstances they should not return a verdict for the government. Held, no error.
Assumpsit for internal revenue taxes. Plea, "nonassumpsit, payment and setoff, with leave &c." Verdict and judgment for the defendant. The United States excepted to the judge's charge to the jury and sued out this writ of error. The case is stated in the opinion.
Trial by jury in the courts of the United States is a trial presided over by a judge, with authority not only to rule upon objections to evidence and to instruct the jury upon the law, but also, when in his judgment the due administration of justice requires it, to aid the jury by explaining and commenting upon the testimony, and even giving them his opinion upon questions of fact, provided only he submits those questions to their determination. Vicksburg & Meridian Railroad v. Putnam, 118 U. S. 545; St. Louis &c. Railway v. Vickers, 122 U. S. 360. The judge who presided at the trial of this action did not exceed his rightful power in this respect.
The action was brought by the United States against a railroad corporation to recover $40,844.19 for unpaid taxes on undivided profits from June 30, 1864, to November 30, 1867, under the Internal Revenue Act of June 30, 1864, c. 173, § 122, as amended by the Act of July 13, 1866, c. 184. 13 Stat. 284; 14 Stat. 138. The trial proceeded upon the rule established by previous decisions of this Court that an assessment is not required by the act nor, if made, conclusive upon either party, and that in an action to recover the tax, the controlling question is not what has been assessed, but what is by law due. Savings Bank v. United States, 19 Wall. 227; Clinkenbeard v. United States, 21 Wall. 65.
"United States Internal Revenue, Collector's Office"
"District of Pennsylvania, July 28, 1868"
"Received of Philadelphia & Reading R.R. Co. forty-one thousand eight hundred & seven 61/100 dollars, for excise tax on --"
"May, 1868, being amount assessed on June list for July 1, 1864, to November 30, 1867."
The only witness called by the United States was an internal revenue agent who testified that in November, 1879, he examined the defendant's books and accounts, the defendant giving him every facility that he desired, and that the result of his examination showed that the gross amount of the tax for the period in question was $85,532.60, and that, deducting an overpayment of $4,890.80 in 1869 on the "renewal fund" (which the Commissioner of Internal Revenue had since held not to be taxable) and deducting also the payment of $39,797.61 in 1868, there was $40,844.19 still due; that he made up the gross amount by charging the company with the total receipts from its road, and with rent received from another corporation, and crediting it with all the working expenses, the "renewal fund," interest paid on mortgages of real estate and on bonded debt, dividends paid to stockholders, and the United States tax, and the state tax on such dividends, and that he did not know how the sum of $39,797.61 was made up.
the dividend, he computed the dividend tax upon the whole dividend declared, and not merely upon the amount actually paid to the stockholders; that the fiscal year of the company ended with November 30th, and that, in computing the tax for the five months from June 30 to November 30, 1864, he credited the company with five-twelfths only of the "renewal fund" for the year ending November 30, 1864, and of the United States tax and the state tax on dividends, and of the annual dividend estimated as aforesaid, although, before June 30, 1864, there was no tax on surplus profits, and money spent in construction was not taxable.
Each of these points was contested by the defendant. It is not pretended that any of them has been determined by judicial decision, and it might well be inferred that they had all been taken into consideration in the settlement between the assessor and the company in 1868. The bill of exceptions further states that the government offered in evidence "all the books of the Philadelphia & Reading Railroad Company referred to, as well as the statements and reports, and closed." But it contains no description of those books, statements, and reports, except as they are mentioned in the testimony of the internal revenue agent.
of the witness referred to (there is no other testimony tending to prove it) is for you to determine. In submitting this question, it is proper to say that in the judgment of the court, it would be unsafe and therefore unjust to find error in the assessment and settlement under the evidence before you, and consequently to render a verdict against the defendant for the large sum of money claimed, as the plaintiff asks you to do. In other words, while the court does not desire to control your finding, but submits the question to you, it is of opinion that you should not, under the circumstances, find for the plaintiff."