Reconstruction Finance Corporation v. JG Menihan Corp.

Background

The dispute began when a government-owned lending agency, the Reconstruction Finance Corporation (RFC), took mortgages and a business’s trademarks and trade names as security for a loan and later bought the property at a bankruptcy trustee’s sale. A new corporation then began using those trade-marks, and the RFC sued for an injunction. The trial court denied the defendants’ request for costs and additional allowance after the RFC lost, the Court of Appeals reversed that denial, and the Supreme Court agreed to resolve a conflict among lower courts.

Reasoning

The central question was whether the RFC could be treated like a private party and be ordered to pay ordinary court costs and equity allowances after losing litigation. The Court explained that the RFC is a government-chartered corporate agency whose stock is held by the United States and whose board is presidentially appointed with Senate confirmation, but that status alone does not give it the government’s sovereign immunity. Because Congress expressly authorized the RFC “to sue and be sued,” and there is no indication Congress intended to give it immunity, the Court held that the phrase includes the usual incidents of litigation, including costs and equity allowances. The Court therefore affirmed the Court of Appeals’ judgment allowing costs.

Real world impact

Agencies that Congress authorizes “to sue and be sued” will generally face the same risk of paying costs as private parties. Defendants who successfully resist suits by such federal corporations can recover ordinary costs and by-equity allowances. This ruling decides the cost question here; it does not reopen the broader factual merits of other trademark disputes.