Petition — Solitron Devices, Inc. v. United States
Supreme Court brief1977
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IN THE
Supreme Court of the United States
Ocroperk Treem, 1976
SOLITRON Devices, Inc., Petitioner,
. 2
UNITED STATES OF AMERICA, Respondent.
PETITION FOR A WRIT OF CERTIORARI TO
THE UNITED STATES COURT OF CLAIMS
SIDNEY DICKSTEIN
SEYMOUR GLANZER
GEORGE KAUFMANN
2101 I, Street, N. W.
Washington, D.C. 20037
Attorneys for Petitioner
DickSTEIN, SHArrro & Morin
Of Counsel
Press or Byron S. ADAMS PRINTING, INC., WASHINGTON, D. C
ae
en ee Gree Pano
TABLE OF CONTENTS
Page
Opinion Below ........... ASC SRE OMRERORG KEN Kes 1
SED nc6de-0ns04e0dusee0sneneess jabaedvinass 1
Ss rE... Pecunadntuuanesseceesensiéns 2
Statute and Constitutional Provisions Involved ...... 2
Statement of the Case ..........cceeeccaecceceuccss 2
A. Proceedings Before the Renegotiation Board .. 2
B. Proceedings in the Court of Claims ........... 3
I ete ec cecwiie<S cases 3
2. The Court of Claims’ Decision ............ &
Reasons for Granting the Writ—The Court Has De-
cided an Important Question of Statutory Construe-
tion in a Manner Which Conflicts With a Control-
ling Decision of This Court, and With Accepted
Principles of Statutory Construction and the Limi-
tations on Judicial Power Declared in Article IIT
and the Fifth Amendment of the Constitution .... 10
I. The Court of Claims’ Interpretation of the Re-
negotiation Act Is Incorrect ................. 10
II. As Construed Below. the Renegotiation Act Ts
IE 6 Gunn. o40.46 5 6-05Nessceensecnsae 17
ie SE oak on setkbidséncdetennen 17
Be I bev tciccceuaedsesescive 21
IIT. The Questions Presented Are of Exceptional
PD PEN 0 5.4605 546.60 60005 00400006050 24
SED 6046 hui n40e6sneecansesvenseuneccous 25
il
AUTHORITIES CITED
Page
CAsEs:
Commissioner v. Shapiro, 424 U.S. 614 ............ 21, 22
Crowell v. Benson, 285 U.S. 22 ...........0.e08. Leee ae
Federal Radio Comm. v. General Electrie Co., 281 U.S.
Dr Calin deduenactessun ne gabbavebsceteesees ens 19
eee M, GN, Ge ie GF bes sccccocccisccccess 7
Glidden Co. v. Zdanok, 370 U.S. 580 .............4.. 17
Greene v. MeKlroy, 360 U.S. 474 .......... cee ee wees 17
Hecht Co. v. Bowles, 321 U.S. 321 .....cccsccccenss 12, 13
Keller v. Potomac Electric Power Company, 261 U.S.
DE cubddatbddathsnaskeheeunsasssacacantenedn 17, 19
Laing v. United States, 423 U.S. 161 ................ 22
Machinists v. Street, 367 U.S. 740 ...........0eeeees 16
Marie and Alex Manoogian Fund v. United States, 212
i fF FOS RR EPP rrr rrr rr Tr rrr 15
Mitchell v. W. T. Grant Company, 416 U.S. 600 .....22, 28
Muskrat v. United States, 219 U.S. 346 ..... er ae 17
North Georgia Finishing, Ine. v. Di-Chem, Ine., 419
a UE udGatecnactonddeunsenes wreTr TT ire 7, 9. 22, 23
Phillips v. Commissioner, 283 U.S. 589 ............. 22
Pope v. United States, 323 U.S. 1 ..............4.. 14, 18
Prentis v. Atlantie Coast Line Co., 211 U.S, 210 ..... 18
Regional Rail Reorganization Act Cases, 419 U.S. 102.7, 15
Renegotiation Board v. Bannereraft Co., 415 U.S. 1. .10, 11,
; 14, 23, 24
Sandnes’ Sons, Ine. v. United States, 199 Ct. Cl. 107,
Ge We EE keaseavesesceses 5, 6, 8, 12, 13, 14, 15, 22
Tutun v. United States, 270 U.S. 568 ............... 18
United States v. Clark, 72 F. Supp. 393 (D. Oregon)... 15
United States v. Hopkins, 95 F. Supp. 14 (N.D. Ohio) 15
United States v. Johnson, 323 U.S.-273 ............. 17
United States v. Klein, 13 Wall. (80 U.S.) 128 ...... 20
United States v. Miller, 111 F. Supp. 368 (E.D. Mich.) 14
United States v. Shanaman, 123 F.Supp. 402 (E.D.
Pe Aven sue teee ecee hen eee seauecasen deat 15
United Steelworkers of America v. United States, 361
ee hakye ce ea ceuueenctcdxcuctuscesssvunbes 18
Authorities Cited Continued ili
Page
CONSTITUTION AND STATUTES:
United States Constitution
pL RRA ee eee 2, 6, 9, 12, 17, 21
PU SI Wk.n. 660 6066400 doeceeces 2, 6, 21, 23
Emergency Price Control Act of 1942, 56 Stat. 23,
S me Ldetenesses SP SEEG eS eKE aes wean he 12
JupicraL Cove:
ee ee OED: ban kive oud ees 6408K5 6s cneeearen 1
NG er ere 2,15, 16, 17
Labor-Management Relations Act of 1947, as amended,
61 Stat. 136, 783 Stat. 519, 29 U.S.C. § 141 et seq.:
a dre ere re i Shag al a oad 18
EY One oe ee el ee ee aes ort 18
eer Se anes Pe 18, 19
Renegotiation Act of 1951, 65 Stat. 7 ef seq., as
amended, 50 U.S.C.App. §§ 1211 ef seq.:
§ 103, 50 U.S.C.App. 1213 ........ccccccseeee BO
§ 106, 30 U.B.C.App. 1216 ....ccccccccecss passim
SB, BO WRAL, FEED ccc vccevesccsoes passim
MISCELLANEOUS:
Carroll, Alice in Wonderland ...........0c ccc eeeees 11
Hart, The Power of Congress to Limit the Jurisdiction
of Federal Courts: An Exercise in Dialectic, 66
Harv, L. Rev. 1362 (1953) ........ccceeceeeeees 20
Twentieth Annual Report of the Renegotiation Board
SEE. A0kon 6 vce C4NSUNNA OR SECC ESKdns ReNNES OS eS 22
IN THE
Supreme Court of the United States
Ocroper Tero, 1976
No.
Souirron Devices, Inc., Petitioner,
Vv.
Unitrep Srates or America, Respondent.
,
PETITION FOR A WRIT OF CERTIORARI TO
THE UNITED STATES COURT OF CLAIMS
OPINION BELOW
_ The opinion of the Court of Claims is reported at’
537 F.2d 417 and reproduced in the Appendix, infra,
It will be cited as ‘‘ App.’’ followed by the page number
of the opinion.
JURISDICTION
The Court of Claims granted the Government’s
‘*Motion for Judgment in Aid of Execution on Orders
of the Renegotiation Board’’ on June 16, 1976. On
September 8, Mr. Justice Brennan entered an order
extending the time in which to file a petition for writ
of certiorari until November 13, 1976. The jurisdie-
tion of this Court rests on 28 U.S.C. § 1255(1).
2
QUESTIONS PRESENTED
1. Does the Renegotiation Act authorize the Court
of Claims to enter a contested ‘‘ judgment in execution
of orders‘of the Renegotiation Board’? without any
consideration of the merits underlying those orders?
_ 2. If so, does the Act, to that extent, violate Arti-
ele ILL and/or the Fifth Amendment of the United
States Constitution on its face or as applied to a con-
tractor who is solvent but cannot produce a bond in
the amount of the Renegotiation Board’s order less
applicable tax credits ?
STATUTE AND CONSTITUTIONAL PROVISIONS
INVOLVED
This case involves §§ 1215 and 1218 of the Renego-
tiation Act of 1951, ¢. 15, 65 Stat. 7 et seq. as amended,
50 U.S.C. App. §§ 1211 et seq. and 28 U.S.C. § 2508.
It also involves Article II] and the Fifth Amendment
of the United States Constitution. They are repro-
duced in pertinent part in the Appendix, infra.
STATEMENT OF THE CASE
A. PROCEEDINGS BEFORE THE RENEGOTIATION BOARD
Petitioner Solitron Devices, Ine. (‘‘Solitron’’) is a
New York corporation organized in 1959. It is en-
gaged in the business of designing, developing and man-
ufacturing a wide range of eleetronie components for
the commercial, entertainment, industrial, computer,
telecommunication, aerospace and defense markets.
Since 1967, Solitron has been subject to the Renego-
tiation Act of 1951, as amended, 50 U.S.C. App. § 1211,
et seq. (hereinafter the *‘ Act’’). This case arises out of
a proceeding to determine Solitron’s alleged excessive
profits subject to the Act for the fiseal years ending in
February 1967, 1968, 1969 and 1970. The proceedings
before the Renegotiation Board (‘‘the Board’’) were
eo
3
vigorously contested by Solitron which asserted that if
the Act were correctly construed and applied to its
business, it would not be found to have realized any ex-
cessive profits. Since the court below did not pass on
the merits of the Board’s determination (see App. pp.
2, 12), the bases of Solitron’s disagreement need not be
set forth. In the words of the court below, the ultimate
resolution on the merits “involves accounting ques-
tions, and matters of judgment.’’ (App. p. 2, infra).
The Board issued its orders on January 24, 1975 de-
termining excessive profits for Solitron’s four fiseal
years ending in February of 1967-1970." The total
amount assessed was $3,868,759.00.?
B. PROCEEDINGS IN THE COURT OF CLAIMS
1. The Pleadings.
On April 23, 1975, Solitron filed a timely petition
with the Court of Claims for a redetermination of ex-
cessive profits pursuant to § 108 of the Act, 50 U.S.C.
App. § 1218." On May 19, 1975, the United States filed
1The order for the fiseal year ending February 28, 1967 finding
an excessive profit of $491,112.00 is reproduced at Appendix B.
The other orders are identical except for the change in date and
amount. The February 29, 1968 order was for $1,283,415.00; the
February 28, 1969 order was for $483,451.00; and the February
28, 1970 order was for $1,460,783.00. In addition the Board also
assessed General R. F. Fittings, a subsidiary of Solitron, $150,000
for the period September 1, 1968 to February 28, 1969.
2 With respect to the fiseal year 1971, the Renegotiation Board
has determined that Solitron suffered a_ renegotiable loss of
$4,200,000. Such a loss may be carried forward but never back.
® We shall, hereinafter, refer to the sections in the U. S. Code, in
order to conform to the usage of the Court of Claims in its
opinion.
4
an answer and counterelaim.* The Government request-
ed “that the Court enter judgment for the defendant
for the $3,868,759 determined to be excessive profits by
the January 24, 1975 orders of the Renegotiation
Board, plus such additional profits as the Court may de-
termine, with such interest and adjustments as are pro-
vided by law; that plaintiff’s petition be dismissed ; and
that the Court grant defendant such other and further
relief as may be deemed just and proper.’’ °
On the same day the government filed its ‘* Motion for
Judgment in Aid of Execution on Orders of the Rene-
gotiation Board’. The Government therein set forth
the orders of the Renegotiation Board which had been
entered against Solitron. It continued:
“The plaintiff filed its petition in this case on
April 23, 1975. Pursuant to section 108 of the Re-
negotiation Act the plaintiff had ten days after the
filing of its petition within which to file a bond sat-
isfactory to this Court to stay execution on the
Board’s orders. No such bond has been filed. At-
tached to this motion is an affidavit (Exhibit A)
from the Office of Comptroller of the Army that
the plaintiff has not made payments of the amounts
due under the Board’s orders.
By this motion the defendant seeks judgments
from this Court in the amount due under the
Board’s orders, less applicable federai income tax
credits. Defendant, under the Act, is entitled to
*The jurisdictional basis of the counterclaim was described
as follows:
“The United States Court of Claims having jurisdiction
over any set-off or counterclaim by the United States against
the plaintiff herein (28 U.S.C. 1503; 2508 (1970)) in the
appropriate forum in which to bring this action (50 U.S.C.
App. 1215(b) (3) (1970) as amended).’’ Answer and Counter-
claim, par. 18.
5 Jd. unnumbered par.
5
such judgments in execution of the Renegotiation
Board’s Orders. O'Brien Gear & Machine Co. v.
United States, 199 Ct. Cl. 1014 (1972) ; Stylecraft
Clothes, Inc. vy. United States, No. 41-74, Order of
August 5, 1974.’ ° ;
The cited cases followed Sandnes’ Sons, Ine. v. United
States, 199 Ct. Cl. 107, 462 F.2d 1388 (1972) (hereafter
““Sandnes’ ’’). The court had there held that where, af-
ter a determination of excessive profits by the Renegoti-
ation Board, a contractor files a petition in the Court of
Claims for a de novo redetermination pursuant. to
§ 1218, but does not within ten days file a ‘‘good and
sufficient bond”’ to ‘‘stay the orders of the Renegotia-
tion Board”’ (id.), the Government is entitled to a judg-
ment in the amount of excessive profits determined by
the Board, less applicable tax credits. According to
Sandnes’, the Government is entitled to such judgment
prior to the court’s redetermination of excess profits
and without any inquiry by the court into the merits
of the Board’s order. The sole exception recognized
by the court to its absolute duty to enter such an order
is where the entry of judgment would make it impos-
sible for the contractor to proceed with the litigation
in the Court of Claims and its inability to make pay-
ments of the amount due under the Board’s orders or to
post satisfactory bond is not due to its own fault ae-
cording to the strict standards set forth by the court.
The motion also set forth the Internal Revenue Serv-
ice’s determination of the amount of tax credits to
which Solitron is entitled in conneetion with the
Board’s determinations. The Government demanded
judgment on the Beard’s orders and the amounts of
those orders less the tax credits as determined by the
® Defendant’s Motion, ete., pp. 2-3.
6 t
IRS, plus interest commencing thiriy days after the
Board’s orders."
Solitron opposed the Government’s motion, on statu-
tory and constitutional grounds which we here sum-
marize:
a. The court’s construction of the Renegotiation
Act in Sandnes’ was incorrect. The Act does not author-
ize the court to enter any judgment based on the orders
of the Beard but requires the court to make a de novo
determination of excessive profits prior to entering any
order in favor of or against the contractor. The fune-
tion of the bond deseribed in § 1218 is to ‘‘stay’”’ the
self-help procedures set forth in § 1215(b) (1), viz. the
direction of the Board to the Secretaries of the appli-
cable executive departments to retain monies due the
contractor under other contracts, to direct third parties
to withhold monies from the ‘contractor, and the like.
Failure to file such bond leaves the Government free to
exercise self-help. It does not authorize or require the
Court of Claims to enter an order of its own granting
judgment to the Government ‘‘in aid of exeention on”’
the Board’s order, which § 1218 treats as a nullity in
the Court of Claims.
b. The Sandnes’ construction of the Act is inecon-
sistent with Article ILI of the Constitution because it
thrusts on the Court of Claims (established under
Article I11) the non-judicial function of entering judg-
ment based solely on the unilateral determination of
the Board, which is an agency of the Executive Branch.
ce. The granting of the motion would deprive
Solitron of its property without due process, in viola-
tion of the Fifth Amendment, under the standards
established in the ‘‘pay now-litigate later’’ cases such
7 Id. pp. 3-5.
7
as Fuentes vy. Shevin, 407 U.S. 67, and North Georgia
Finishing, Inc. v. Di-Chem, Inc., 419 U.S. 601. Soli-
tron urged that the bare allegation that the Board had
entered orders determining excessive profits to be a
particular amount was a constitutionally insufficient
showing of the Government’s likelihood of success in
the redetermination proceedings, both as a matter of
law and under the circumstances of this case.
Solitron presented considerable evidence regarding
its financial condition. It showed that its financial
structure permits the Company to operate as a viable
going business, fully capable of meeting its obligations
as they become due, but that it does not have sufficient
unencumbered assets (other than those which provide
the minimum working capital needed for continuing
operations) which it could have pledged as collateral
for a bond in excess of 2.5 million. Solitron averred
on the basis of an opinion of its independent aeeount-
ants, Price Waterhouse Co, that although no technical
default would arise from the Government’s obtaining
the judgment it seeks herein, it is doubtful that, should
the Government enforce said judgment, Solitron would
be in a position to realize the full values of its assets
or continue as a going concern.” It was further shown
* Price Waterhouse & Co. described the situation as follows:
‘The ultimate outcome of these uncertainties cannot present-
ly be determined. If significant additional liabilities result
therefrom, the corporation may be unable to continue as a go-
ing concern because of its inability to meet such liabilities and
its other debts. The accompanying financial statements have
been prepared on the basis of accounting principles applicable
to a going concern, Accordingly, they do not purport to give
effect to adjustments that may be necessary should the cor-
poration be unable to continue as a going concern and, there-
fore, be required to realize its assets and liquidate its liabilities
and commitments in other than the normal course of business
and at amounts different from those in the accompanying
financial statements.’’
8
that the entry of the judgment would adversely affect
Solitron’s ability to refinance its existing debentures
due in September, 1977 and/or obtain additional capi-
tal in the securities markets. An additional antici-
pated consequence of the entry of the judgment would
be that Solitron’s right to prosecute the redetermina-
tion proceeding would be hampered or eliminated—
the only potential injury which Sandnes’ had recog-
nized as a possible defense to the Government’s motion
for judgment.
d. Solitron contested the Internal Revenue Serv-
ice’s calculations of the tax credits to which it was
entitled. It asserted that in its view and that of its
independent accountants it was entitled to a tax credit
of $388,822 greater than that computed by the Internal
Revenue Service and that the judgment sought by the
Government should therefore be reduced to $2,542,967.
2. The Court of Claims’ Decision.
The Court of Claims, sitting en bane, granted the
Government’s motion. The court reaffirmed the statu-
tory interpretation of Sandnes’ (App. pp. 4-5) and
rejected Solitron’s constitutional arguments. As the
coneurring judges said: ‘The majority opinion does
not squarely address Solitron’s Article II] defense’’
(id. p. 12). In passing on the due process claim, the
court drew from this Court’s decisions the following
test:
‘We think an Act is facially constitutional if it
is in that class and if it authorizes a temporary
deprivation of property without a hearing, but
permits the ultimate making whole of the debtor
in ease he prevails in the due process hearing
ultimately provided. Any exeeption must be in
the instance of some extraordinary hardship as in
9
Shapiro’s ease [Commissioner v. Shapiro, 424
U.S. 614] irreparable because victory in an ulti-
mate trial manifestly would not make him whole.
This is nearly the formula the majority had in
mind in the Sandnes’ ease.”’ (App. pp. 10-11)
With reference to North Georgia Finishing, supra,
the court said that the Renegotiation Board’s ‘‘orders
are at least more than a private creditor’s ipse dixit”’
(id. p. 10), and that the Board’s opinions in this case
‘fare at least facially reasonable, not bearing the in-
dicia of bias and prejudice, nor appearing the work
product of an kangaroo court”’ (7d.)°
The court concluded:
‘* Accordingly, defendant’s motion for judgment
in aid of execution is granted. The tax credit
computations furnished by the Internal Revenue
Service must be used. If they are wrong, this
can be corrected in the final judgment.”’
It entered judgment for defendant as prayed, total-
ling $2,931,849.40, plus interest (App. p. 12). Judge
Bennett, joined by Judge Kunzig, filed a coneurring
opinion addressed to the Article III issue.
® The court determined that any injury arising out of the grant-
ing of judgment was due to management’s failure to plan ade-
quately for the contingency of an adverse Renegotiation Board
order, and therefore did not justify withholding of judgment un-
der Sandnes’ (id. at 11; see also id. at 3-4, 6-7).
10
REASONS FOR GRANTING THE WRIT
THE COURT OF CLAIMS HAS DECIDED AN IMPORTANT QUES-
TION OF STATUTORY CONSTRUCTION IN A MANNER
WHICH CONFLICTS WITH A CONTROLLING DECISION OF
THIS COURT, AND WITH ACCEPTED PRINCIPLES OF
STATUTORY CONSTRUCTION AND THE LIMITATIONS ON
JUDICIAL POWER DECLARED IN ARTICLE III AND THE
FIFTH AMENDMENT OF THE CONSTITUTION.
I. The Court of Claims’ Interpretation of the Renegotiation
Act Is Incorrect.
A. In Renegotiation Board v. Bannercraft Co.,
415 U.S. 1, 23-24, this Court described the statutory
scheme after proceedings before the Renegotiation
Board have run their course:
“There is no limitation or denial of the contrac-
tor’s normal litigation rights when the renegotia-
tion process is at end. The *ontractor may insti-
tute its de novo proceeding in the Court of Claims,
unfettered by any prejudice from the agency pro-
ceeding and free from any claim that the Board’s
determination is supported by substantial evi-
dence. There the usual rights of discovery are
available. And there the parties are not bound by
a prior determination made at any level of the
Renegotiation Board structure. 50 U. 8. C. App.
§ 1218. That proceeding is the judicial remedy
at law provided by the Renegotiation Act and is
adequate protection against injury. Note, 41 Geo.
Wash. L. Rev. 1072, 1084 (1973). We note that a
contractor does not become obligated to remit
excessive profits until termination of the Court of
Claims suit, if it elects that course. The injury
suffered, absent an injunction, is no more than
the risk of being unsuccessful in the de novo
bargaining process and the ineurrence of the
expense incident to renegotiation.’’ (footnote
omitted )
The Court of Claims’ interpretation of the Renego-
tiation Act is wholly inconsistent with the foregoing.
11
Under that court’s judgment the contracter was
deemed ‘‘ obligated to remit [what the Board had deter-
mined to be its] excessive profits’’ before ‘‘termination
of the Court of Claims suit’’ (id.), indeed, at its very
inception. Although this Court construed §1218 as
providing—in accord with its clear language—that
‘‘there’”’ (referring to the Court of Claims) ‘‘the par-
ties are not bound by a prior determination made at
any level of the Renegotiation Board structure,” that
court has here given ‘‘ judgment in aid of execution on
orders of the Renegotiation Board’’ treating those
orders as conclusive of the amount due. Thus, the
judgment entered below is, contrary to Bannercraft,
a most severe “‘limitation’’ of ‘‘the contractor’s normal
litigation rights’’, for, this side of Wonderland such
rights normally entail an opportunity to litigate the
merits before, not after, a substantial money judgment
is entered.”
B. The decision below is incorrect even as a matter
of first impression.
1. We first, of course, address the language of the
Act. No provision of the Act by its terms requires the
Court of Claims to erter a ‘‘judgment in aid of exeeu-
tion on orders of the Renegotiation Board’’. Section
1215(b)(3) provides that ‘‘aetions on behalf of the
United States may be brought in the appropriate courts
of the United States to recover’’ excessive profits
from the contractor or persons directed to withhold
from him (see App. p. 4, infra). But an authorization
to one party to sue another to recover monies does not
1” But see, L. Carroll, Alice in Wonderland, e. 12: ‘‘No! No!
Sentence first—verdict afterwards.’’ Even in the celebrated case
there reported, a trial of sorts was conducted before the sentence.
See id., ec. 11 and 12.
12
establish that the suing party is automatically entitled
to judgment in its favor, and a grant of jurisdiction to
a court is normally construed to grant power to decide
the case for, or against, the party bringing the action.”
As this Court held in Hecht Co. v. Bowles, 321 U.S.
321, 329:
**A grant of jurisdiction to issue compliance or-
ders hardly suggests an absolute duty to do so un-
der any and all cireumstanees. We eannot but
think that if Congress had intended to make such
a drastic departure from the traditions of equity
practice, an unequivocal statement of its purpose
would have been made.”’ (Jd. at 329) ”
The Court of Claims’ opinions do not address this
point; indeed, the Sandnes’ opinion, which was fol-
lowed herein, does not even mention § 1215(b) (3).
Rather, the court’s construction was derived by ‘‘an
obvious negative pregnant’’ which, as noted, is the
provision which grants jurisdiction to the Court of
Claims to make a de novo determination of the amount,
if any, of excessive profits due. The sentence relied
upon here and in Sandnes’ is the following:
“The filing of a petition under this section shall
operate to stay the execution of the order of the
11 Where the court is one created by Article III of the Consti-
tution, that result is, in our view, constitutionally compelled. See
pp. 17-21 infra.
In Hecht, this Court construed § 205(a) of the Emergency
Price Control Act of 1942 (56 Stat. 23) which granted the OPA
Administrator authority to apply to a court for an order enjoining
violations of the Act and provided that upon a showing of such
a violation ‘‘a permanent or temporary injunction, restraining
order, or other order shall be granted without bond.’’ It was held
that notwithstanding the direction ‘‘shall be granted’’, the court
to which application is made was empowered to withhold the
relief sought by the Administrator.
13
board under subsection (b) of Section 105 [50
U.S.C.App. § 1215(b)] only if within ten days
after the filing of the petition the petitioner files
with the Court of Claims a good and sufficient
bond, approved by such court, in such amount as
may be fixed by the Court.”’
From this the court below reasoned as follows:
‘*Plaintiff notes the stay provision in See. 1218
which cross references to See. 1215(b) and the
‘execution of the order of the Board’ as the thing
stayed. It argues that this means the See. 1215
(b)(1) withholding procedure. However, suit
under See. (b)(3) is also ‘execution’ under See.
1215(b) and that such suits are ‘execution’ is also
shown by the fact that parties ordered to withhold
from the contractor under’ See. 1215(b)(1) may
also be sued. Plaintiff would reach an absurd
result with the effect of the bond apparently being
only to stay collection by means other than suits
and not to stay suits. The effect of the bond
clearly is to stay collection by any means, and by
an obvious negative pregnant, with no bond, col-
lection by any available means, including suits but
not limited to suits, is not stayed.’’ (App. pp. 4-5)
See also Sandnes’, 462 F.2d at 1390-1391.
Since this petition is not, of course, a full-dress argu-
ment on the merits, we shall assume, arguendo, that the
court was justified in treating § 1218 as referring to
§ 1215(b) (3), so that in the absence of a bond, ‘‘collec-
tion by any available means, including suits but not
limited to suits, is not stayed’’. But even this assump-
tion merely begins the inquiry, for the court must then
ascertain the meaning of subsection (b)(3) in order
to determine its role when the Government seeks to col-
lect thereunder. In other words, assuming that the
filing of a bond stays the Government from bringing
14
a suit to collect under § 1215(b) (3), and the contrac-
tor’s failure to file a bond permits the Government to
bring such a suit, it does not follow, “‘by an obvious
negative pregnant’’ or otherwise, that the court in
which such suit is brought may, solely on the basis of
the Board’s order, enter judgment for the Government
in the amount which the Board had determined.” As
we have seen, that result derives no support from § 1215
(b)(3) (which we note, neither uses the word ‘exe-
cution’’, nor refers to the order of the Board). And
the court’s result undermines the basic purpose of
§ 1218 to provide a de novo proceeding wherein the
contractor is ‘‘unfettered by any prejudice from the
agency proceeding and free from any claim that the
Board’s determination is supported by substantial
evidence’’ (Bannercraft, supra, 415 U.S. at 23)."
8 Of course, if no petition for review is filed, the Board’s deter-
mination becomes final and binding on the contractor; the contrac-
tor would then have no defense on the merits to a suit by the
Government under § 1215(b)(3) and it would be entirely econ-
sistent with the statute, and the court’s judicial function (see
Pope v. United States, 323 U.S. 1, 12), for it to enter judgment in
the amount of the Board’s order. So, too, with an order of the
yi of Claims if suit for recovery is brought after redetermi-
nation.
In Sandnes’ the court below relied on cases which it under-
stood to have held that the district courts were obligated to enter
judgment for the United States to enforce the Board order pend-
ing redetermination, when that role was vested in the Tax Court
462 F.2d at 1390. But the course of decision was far less uniform
than the Sandnes’ opinion suggests. Indeed, United States v
Miller, 111 F.Supp. 368 (B.D. Mich.), squarely held that. the
Renegotiation Act does not anthorize a court to enter a judgment
against a contractor without a determination of the merits where
as here, the contractor has instituted a proceeding for a redeter.
mination in the appropriate tribunal. And the only a ellate
case cited postponed decision of an appeal from a summa age
ment entered for the government in a suit for excess wor oe
ing conclusion of the proceedings under the Reugiiietiee has
we ———
15
2. A further obstacle to the court’s interpretation
of the Renegotiation Act is 28 U.S.C. § 2508, which
provides that if ‘‘upon the whole case it {the court]
finds that the plaintiff is indebted to the United States
it shall render judgment to that effect, and such judg-
ment shall be final and reviewable.’’ Yet, in this case
the court rendered a judgment in favor of the Govern-
ment while the plaintiff’s claim was still pending.
When this point was first raised in Sandnes’, the Court
of Claims stated that the ‘‘general language [of 28
U.S.C. § 2508], enacted long before we had renegotia-
tion jurisdiction, must yield to specific language en-
acted especially for renegotiation cases’’ (462 F.2d at
1391). The fatal flaw in this analysis is in its premise:
as we have shown, there is no ‘“‘specifie language”’ in
the Renegotiation Act which requires the entry of
judgment for the Government before consideration of
‘“the whole case’. And the cireumstance that the Re-
negotiation Act gave the Court of Claims jurisdiction
when 28 U.S.C. § 2508 was on the books, also noted in
Sandnes’, brings directly inte play the reasoning ap-
proved in Regional Rail Reorganization Act Cases,
419 U.S. 102, 134:
‘¢A new statute will not be read as wholly or even
partially amending a prior one unless there exists
a ‘positive repugnancy’ between the provisions of
the new and those of the old that cannot be recon-
Marie and Alex Manoogian Fund vy. United States, 212 F.2d 369,
370 (C.A. 6). Two other district court cases cited in Sand nes’
reluctantly assumed an obligation to enter judgment for the gov-
ernment, but for aught that appears without being presented with
any contrary construction of the Act, United States v. Hopkins,
95 F.Supp. 14 (N.D. Ohio); United States v. Clark, 72 F.Supp.
393 (D.Oregon). Only United States v. Shanaman, 123 F.Supp.
402 (E.D.Pa.) was a square holding in support of the Government's
right to a judgment while redetermination proceedings are
pending.
16
ciled. ... This principle rests on a sound founda-
tion. Presumably Congress had given serious
thought to the earlier statute, here the broadly
based jurisdiction of the Court of Claims. Before
holding that the result of the earlier consideration
has been repealed or qualified, it is reasonable for
a court to insist on the legislature’s using language
showing that it has made a considered determina-
tion to that end....”’
There being no “‘‘positive repugnancy’’ between
§ 1215(b) (3) or any other provision of the Renegotia-
tion Act on the one hand, and 28 U.S.C. § 2508 which
governs the granting of judgment to the United States
on its counterclaim on the other, it must be presumed
that Congress intended § 2508 to apply when it granted
redetermination jurisdiction under § 1218 of the Rene-
gotiation Act to the Court of Claims. Indeed, that
reading is the one which best harmonizes with the pur-
pose of the jurisdictional grant, see pp. 10-14 supra.
3. A final ground for preferring petitioner’s inter-
pretation of the Renegotiation Act is that it alone com-
plies with the long-standing rule that ‘‘[f]ederal
statutes are to be so construed as to avoid serious doubt
of their constitutionality’? (Machinists v. Street, 367
U.S. 740, 749). Of the many occasions on which this
eanon of construction has been applied, Crowell v.
Benson, 285 U.S. 22, is particularly apposite, for there
Chief Justice Hughes construed the Harbor Workers’
Compensation Act (of 1927) so as to avoid potential
conflict with both the Due Process Clause (id. at 45-
46)"° and the judicial power of the United States (id.
15 “Moreover, the statute contains no express limitation attempt-
ing to preclude the court, in proceedings to set aside an order as
not in accordance with law, from making its own examination and
determination of facts whenever that is deemed to be necessary to
enforce a constitutional right properly asserted.’’ (Jd. at 46)
nail —
17
at 54-62). Another instance squarely in point is
Greene Vv. McElroy, 360 U.S. 474, 507-508:
‘*Where administrative action has raised serious
constitutional problems, the Court has assumed
that Congress or the President intended to afford
those affected by the action the traditional safe-
guards of due process. See, e.g., The Japanese
Immigrant Case, 189 U.S. 86, 101; Dismuke v.
United States, 297 U.S. 167, 172; Ex parte Endo,
323 U.S. 283, 299-300; American Power Co. v.
Securities and Exchange Comm’n, 329 U.S. 90,
107-108; Hannegan v. Esquire, 327 U.S. 146, 156;
Wong Yang Sung v. McGrath, 339 U.S. 33, 49.
Cf. Anniston Mfg. Co. vy. Davis, 301 U.S. 337;
United States v. Rumely, 345 U.S. 41. These cases
reflect the Court’s concern that traditional forms
of fair procedure not be restricted by implication
or without the most explicit action by the Nation’s
lawmakers, even in areas where it is possible that
the Constitution presents no inhibition.”
If the Renegotiation Act is to be construed in the
direction of constitutional policy’? “—that the judi-
ciary should be independent, and that parties are en-
titled to a hearing before a money judgment is
entered against them—the judgment may not stand.
II. As Construed Below, the Renegotiation Act Is
Unconstitutional.
A. Article IIT. In Glidden Co. v. Zdanok, 370 U.S.
530, this Court held that the Court of Claims is a court
ereated under Article III. As such, it may perform
only judicial functions, see, ¢e.g., Muskrat vy. United
States, 219 U.S. 346 (1911); Keller v. Potomac Elec-
tric Power Company, 261 U.S. 428, 444 (1923). While
United States v. Johnson, 323 U.S. 273, 276, quoted with ap-
proval in Regional Rail Reorganization Cases, 419 U.S. 102, 134.
18
the demarcation between impermissible legislative or
administrative functions and judicial functions is not
always crystal clear, it has long been understood that
‘“‘fa] judicial inquiry investigates, declares and en-
forces liabilities as they stand on present or past facts
and under laws supposed already to exist. That is its
purpose and end.’’ Prentis v. Atlantic Coast Line Co.,
211 U.S. 210, 226. Yet, under the construction of the
Renegotiation Act adopted below, the Court of Claims
takes as conclusive the factual and legal determina-
tions of the Renegotiation Board as to the amount of
excessive profits in entering a judgment against the
contractor. And the court also, for reasons nowhere
explained, treats as conclusive the Internal Revenue
Service’s calculations of the tax credits to which the
contractor is entitled in computing that judgment.
This is plainly not ‘‘the regular course of legal pro-
cedure’? (See Tutun v. United States, 270 U.S. 568,
577). And it is in sharp contrast to the situation de-
scribed in Pope v. United States, 323 U.S. 1, where
‘“‘the court is called on to sanction, by its judgment,
an alleged obligation in a proceeding in which the ex-
istence, validity and extent of the obligation, the exist-
ence of the data, and the correctness of the computa-
tion may be put in issue.’”’ (Jd. at 11. See also id. at
11-12.)
United Steelworkers of America v. United States,
361 U.S. 39, presents an instructive comparison. That
ease involved the constitutionality of § 208 of the Taft-
Hartley Act, 29 U.S.C. § 178, which provides in perti-
nent part that if, in an action by the United States,
brought after a report by a Presidential board of in-
quiry (see §§ 206 and 207 of the Act), the district court
‘*finds that * * * [a] threatened or actual strike
or lockout—
19
‘‘(j) affects an entire industry or a substantial
part thereof engaged in trade, * * * ; and
‘‘(ii) if permitted to occur or to continue, will
imperil the national health or safety, it shall have
jurisdiction to enjoin any such strike or lockout,
or the continuing thereof, and to make such other
orders as may be appropriate.”’
The union contended that § 208 violates ‘‘the constitu-
tional limitation prohibitiug courts from exercising
powers of a legislative or executive nature, powers not
capable of being conferred upon a court exercising
solely ‘‘the judicial power of the United States.’
Keller v. Futomae Elec. Power Co., 261 U.S. 428;
Federal Radio Comm. v. General Elec. Co., 281 U.S.
464."’ (361 U.S. at 43.) This’Court disagreed. An
essential element of its conclusion was:
“The availability of relief, in the common judi-
cial form of an injunction, depends on findings of
fact, to be judicially made. Of the matters decided
judicially, there is no review by other agencies of
the Government.’’ (Jd., emphasis added.)
But whereas § 208 expressly calls for the district
court to make the essential findings giving rise to the
publie right which the Taft-Hartley injunction vindi-
cates, the Renegotiation Act, as construed below, re-
quires no such findings before judgment is entered for
the United States. On that view the Act raises the
same constitutional problem which would have been
presented if the Taft-Hartley Act had authorized the
Presidential board of inquiry to make the critical find-
ings, and had required the district courts to issue an
injunction against a strike or lockout on the basis of
the board’s findings.
The paucity of precedent directly in point reflects
not the infirmity of the constitutional principle which
20
we invoke, but Congress’ historic respect for the inde-
pendence of the Judiciary. But when, in the after-
math of the Civil War, Congress sought to direct the
outcome of pending litigation, in the guise of regulat-
ing the jurisdiction of this Court and the Court of
Claims, the statute was struck down:
‘The court is required to ascertain the existence
of certain facts and thereupon to declare that its
Jurisdiction on appeal has ceased, by dismissing
the bill. What is this but to prescribe a rule for
the decision of a cause in a particular way? In
the case before us, the court of claims has rendered
judgment for the claimant and an appeal has been
taken to this court. We are directed to dismiss
the appeal, if we find that the judgment must be
affirmed, because of a pardon granted to the intes-
tate of the claimants. Can we do so without allow-
ing one party to the controversy to decide it in its
own favor? Can we do so without allowing that
the legislature may prescribe rules of decision to
the judicial department of the government in eases
pending before it ? .
We think not. * * * We must think that Con-
gress has inadvertently passed the limit which
| separates the legislative from the judicial power.
It is of vital importance that the:
kept distinet.”’ ' ese powers be
United States y. Klein, 13 Wall. (80 U.S.) 128, 146-
147,"
‘ i7 Giem Hart, The Power of Congress to Limit the Jurisdic-
won of Federal Courts: An Exercise in Dialectic. 66 ,
1362, 1373 (1953) : ee
“On the other hand, if Congress directs an Article IIT
court to decide a case, T can easily read into Article ITT a
limitation on the power of Congress to tell the court how to
decide it. Rutledge makes that point clearly in [Yakus vy.
21
In the present case, the Court of Claims has con-
strued the Renegotiation Act as requiring that court to
enter judgment on a determination of the Renegotia-
tion Board—an agency of the Exeeutive Branch, rather
than by direction of Congress. But this is a distinction
without constitutional significance, for Article III pre-
serves the separation of powers between the Judiciary
and the Executive ne less than between the Judiciary
and the Legislative Branch. While, as we have ac-
knowledged, there is no precedent precisely in point,
the unconstitutionality of the Act as construed below
should be clear. What would this Court say to a law
which required the courts to enforce an order of the
National Labor Relations Bogard without examining
(even on some limited standard of review) the factual
and legal basis of that order?
B. Fifth Amendment. In Commissioner vy. Shapiro,
424 U.S. 614, 629, Mr. Justice White wrote:
“This Court has recently and repeatedly held
that, at least where irreparable injury may result
from a deprivation of property pending final ad-
judication of the rights of the parties, the Due Pro-
” cess Clause requires that the party whose property
is taken be given an opportunity for some kind of
predeprivation or prompt post-deprivation hearing
at which some showing of the probable validity of
the deprivation must be made.”’
Here the court below entered a judgment against Soli-
tron for almost $3,000,000 without any hearing pending
United States, 321 U.S. 414, 463-468 (dissenting opinion) ], as
the Court itself made it clear long ago in United States v.
Klein, supra. That’s the reason, isn’t it, why Hughes invokes
Article ITI as well as the Fifth Amendment in Crowell v.
Benson [supra]? As he says, the case was one ‘where the
question concerns the proper exercise of the judicial limita-
tions’.’’ (Emphasis in original, footnote omitted)
22
final adjudication in the redetermination proceeding.
Neither this result, nor the Court of Claims’ statement
of the rule (App. p. 10, quoted at pp. 8-9, supra) ean be
squared with Shapiro or the decisions there cited, 424
U.S. at 629-630, n. 11."* And the Renegotiation Board’s
record in the courts sbows that it is highly improbable
that the Board’s ordcr would ultimately be found valid
or inereased.””
The court below erred further in treating the Renego-
tiation Board’s order as an acceptable substitute for the
showing of “probable validity of the deprivation”
required by the Constitution.” The Court thereby
'* Shapiro itself was not. a constitutional decision but rather
applied to the Anti-Injunction Aet the canon of construction which
the court below erroneously failed to apply to the Renegotiation
Act, pp. 16-17, supra. The particular importance of Shapiro, in
addition to its clear statement of the constitutional rule, is its
recognition that that rule applies in cases where the government
is secking to collect taxes, notwithstanding Phillips v. Commis-
svoner, 283 U.S. 589, heavily relied on in Sandnes’, 462 F.2d at
1392-1393. See 424 U.S. at 630-633; see also Laing v. United
States, 423 U.S. 161, 185 (Brennan, J. concurring).
"In 186 cases disposed of in the Tax Court or the Court of
Claims either by stipu'ation of the parties or by the court’s re-
determination, the amount determined by the Board was decreased
in 147, inereased in 6 and left unchanged in 33 cases. Twentieth
Annual Report of the Renegotiation Board, p. 15 (1975).
*°The purpose of these procedural protections is to **euard
against the risk of initial error’’ that would cause the debtor to
suffer irreparable injury while the validity of the creditor’s claim
is litigated. North Georgia Finishing, Inc. v. Di-Chem, Inc., 419
U.S. 601, 608. To prevent such initial error in prejudgment de-
privation of a debtor’s property, a ereditor is required to estab-
lish the probable validity of his claim. Mitchell v. W. T. (rant
Company, 416 U.S. 600, 609; Di-Chem, supra, at 611-12 (Powell,
J. concurring) ; ef. id. at 607. A deprivation of property based
only on information supplied by the creditor can, given other pro-
cedural protections (see infra), be appropriate where the issues
are ‘‘uncomplicated matters that lend themselves to documentary
scnbcolalid —
23
violated the express prohibition of § 1215(a) of the
Act that the Board’s statement of its determination
“shall not be used in the Court of Claims as proof of
the facts or conclusions stated therein”, disregarding
the fundamental difference between the renegotiation
procedure and an adversary hearing which ¢ ONTESS
drew, particularly in §§ 1215(a) and 1218, and which
underlies the decision in Bannercraft, supra. The
decision below departs from the constitutional stand-
ard declared in North Georgia Finishing v. Di-Chem,
Inc., 419 U.S. 601, also in its appraisal of irreparable
injury" The proposition that a medium-sized com-
pany such as Solitron can without irreparable injury
to its business satisfy even a temporary judgment for
$3,000,000 defies commercial reality.
proof.’’ Mitchell, supra, 416 U.S. at 609. But the issue of _
ability of success in a renegotiation proceeding requires a “
analysis of complicated financial and accounting data. i) ow
termine the existence vel non of excessive profits, the court Lap
consider, inter alia, reasonableness of costs and profits, 50 ee
App. § 1213(e) ; net worth, id.; extent of risk assumed by de
id.; nature and extent of contribution to the defense effort, ad.;
character of the business, id.; and accounting methods employed,
50 U.S.C. App. § 1213()).
21 Compare App. p. 11 (‘‘We are not dealing with the installment
buyer of a TV set he cannot afford. We are dealing with a pub-
liely held company, considered responsible enough to be awarded
millions worth of defense contracts over many years.’’) with
North Georgia Finishing, 419 U.S. at 608 (“it may well be that
consumers deprived of household appliances will more likely suffer
irreparably than corporations deprived of bank accounts, but the
probability of irreparable injury in the latter case 1s sufficiently
great so that some procedures are necessary to guard against the
risk of initial error. We are no more inclined now than we have
been in the past to distinguish among different kinds of property
in applying the Due Process Clause.’’)
24
III. The Questions Presented Are of Exceptional Public
Importance.
The Court of Claims’ construction of the Renegotia-
tion Act jeopardizes the financial condition of every
contractor against whom the Renegotiation Board has
rendered a substantial excessive profits determination,
but who is unable to post a ‘‘good and sufficient bond”’
which, in practice is a bond in the amount of that de-
termination less tax credits as determined unilaterally
by the IRS. For the reasons stated in part I of this
petition, we submit that this construction deprives
government contractors of the full benefit of the de
novo proceeding established by Congress. Moreover,
the effect of the Court of Claims’ decision is not limited
to contractors in Solitron’s position; it will inevitably
affect the entire renegotiation process.
The prospect of execution by the Government pend-
ing completion of the proceedings in the Court of
Claims will enormously enhance the Government’s bar-
gaining power in the renegotiation proceedings (ef.
Bannercraft, supra, 415 U.S, at 21-22), giving a weapon
which Congress did not place in its amory. The force
of this weapon is greatly enhanced by a paradoxical
consequence of the ccurt’s interpretation: The greater
the amount of the Board’s determination, the more
difficult it becomes for the contractor who has filed for
review under § 1218 to avoid execution by putting up
cash or a bond in the amount of the determination, less
tax credits. Thus, the more the Board errs in the diree-
tion of inereasing the award, and thus, the greater the
possibility that that award will ultimately be reduced
by the court in its de novo redetermination, the greater
is the likelihood that the contractor will be forced to
compromise with the Government without completing
}
:
an tree | ib 2
25
the review proceedings or that he will face irreparable
injury from a “judgment in aid of execution’’ of the
Board’s order.
The intrinsic importance of the constitutional ques-
tions requires little elaboration. The apparent failure
of the court below to understand and implement the ~
due process principles which this Court has recently
declared evidence the need for further elucidation of
the rights of parties whose property is sought to be
taken by the order of a court. The continued insis-
tence of the United States in renegotiation and tax
eases that the due process rules declared by this Court
should be diluted when it is trying to protect the
revenue lends further urgenty to the present ease.
And surely this Court has a unique responsibility to
assure itself that the lower courts have not unwittingly
surrendered their independence by placing the impri-
matur of a judicial judgment on an unreviewed order
issued by the Exeeutive Branch.
CONCLUSION
By reason of the foregoing, this Petition for Cer-
tiorari should be granted.
Respectfully submitted,
SIDNEY DICKSTEIN
SEYMOUR GLANZER
GrorcE KAUFMANN
2101 L Street, N. W.
Washington, D. C. 20037
Attorneys for Petitioner
DicksTEIN, SHApTRO & Morin
Of Counsel
APPENDIX
Gn the Gnited States Gourt of Claims
No. 133-75
(Decided June 16, 1976)
SOLITRON DEVICES, INC. v. THE UNITED STATES
Seymour Glanzer, attorney of record for plaintiff. Dick-
stein, Shapiro & Morin, of counsel.
Marvin L. Coan, with whom wag Assistant Attorney Gen-
eral Rex E.. Lee, for defendant. John H. Broadley of counsel.
Before Cowen, Chief Judge, Davis, Sxeuvon, Nicno.s,
Kasutwa, Kunzie, and Bennett, Judges, en bane.
DEFENDANT'S MOTION FOR JUDGMENT IN AID OF EXECUTION ON
ORDERS OF THE RENEGOTIATION BOARD
Nicnots, Judge, delivered the opii.on of the court :
We have before us another variation on the theme of the
rich but impecunious government contractor who has realized
and should refund excessive profits, at least according to
orders of the Renegotiation Board, but who cannot stay en-
forcement. of the orders because of inability to obtain a bond.
It is one of the paradoxes of our time. We convened an ev
bane court to consider the case because of the possibility we
might be obliged to overrule or modify our decision in
Sand nes’ Sona, Inc. v. United States, 199 Ct. Cl. 107, 462 F. 2d
1388 (1972). However, we find no occasion to do so. The list
of cases involving the same problem also includes 0’? rien
Gear & Machine Co. y. United States, 199 Ct. Cl. 1014 (1972) ;
Bannereraft Clothing Co. v. United States, 207 Ct. Cl. 199,
208-284—76
2
518 F. 2d 605 (1975) ; Manufacturers Service Co. vy. United
States, 207 Ct. Cl. 185, 518 F. 2d 1202 (1975). This is the first
case since Sandnes’ in which the working of the statute, as
constructed in Sandnes’, is asserted to violate the Constitu-
tion.
Solitron Devices, Ine. (Solitron) is a publicly held com-
pany. Its securities are traded on the American Stock Ex-
change. It is a New York corporation with a principal place
of business in Tappan, New York. It is in the electronics busi-
ness and has several manufacturing facilities, both in this
country and abroad. General R. F. Fittings, Ine., was a
wholly owned subsidiary but in 1971 became a division of
Solitron, and is included in any reference to the parent. un-
less the context indicates otherwise, Solitron, so far as the
instant case is concerned was engaged in the manufacture of
electronic components such as rectifiers, transistors and
diodes. Part of this was defense business, subject to the Rene-
gotiation Act of 1951, as amended, 50 U.S.C. App. See. 1211,
et, seq. (Act), but the correct allocation of sales and costs to
such business is in dispute. Solitron does not deny that some
at least of its contracts and purchase orders carried the notice
prescribed in 50 1.8.C. App. See. 1214. It does assert that
if the Act were correctly construed and applied to its busi-
ness, it would not be found to have realized any excessive
profits as defined in the Act. This, however, involves account-
ing questions, and matters of judgment, and must be put
before our Trial Division on the merits of the case.
The Renegotiation Board commenced renegotiation with
respect to Solitron’s fiseal years ended February 28, 1967,
February 29, 1968 and February 28, 1969 and 1970 (four
years) and by orders dated January 24, 1975, determined that
Solitron realized excessive profits of $491,112, $1,283,413,
$483.451 and $1,460,783 respectively. A separate order as-
sessed General R. F. Fittings for $150,000 for a short year.
September 1, 1968 to February 28, 1969. These figures are
large reductions from those the Regional Board originally
had recommended, so it would appear Solitron was at one
time menaced with exactions that greatly excecded the orders
now before us. The figures allow for state taxes but are before
adjustment for Federal income taxes.
ee
A me =
3
Solitron has filed its statutory petition in this court to
obtain our redetermination of its excessive profits, under the
Act Sec. 1218, as amended, alleging it realized no excessive
profits. But it has not filed the bond to stay execution of the
Board orders. It says it cannot obtain one, or if it could, it
would only be by furnishing such collateral that it would
be unable to continue business. Defendant has, according to
its usual practice, counterclaimed for the amounts of the
orders. It has collected a little of them but relatively not
much, by other collection measures the Act authorizes. ‘The
motion before us now is for judgment in aid of execution.
If recovery is had on such a judgment, according to our
decision in Sandnes’, supra, it will not prevent Solitron from
continuing to prosecute its litigation here, and if successful,
it could of course recover with interest refunds to the extent
necessary to effectuate our redetermination.
Solitron realized a renegotiable loss of $4,200,000 in its
fiseal 1971, which could not be carried back to the renego-
tiated years. It paid dividends until the end of its fiscal 1973
year. Its 1971, 1972 and 1973 dividends distributed over
$1,000,000, Tt has repurchased its own debentures. It has
invested in real estate. Its working capital February 28, 1975,
was $3,761,000 but cash was only $474,000, In Barron’s of
March 29, 1976, we find its stock listed at 414 high, 3% low.
We have not attempted to analyze the financial statement
furnished in detail.
It seems clear that renegotiation must have been visible
as a cloud on the horizon in fiseal 1967, when the first statu-
tory notices started coming in, and the cloud must have
grown steadily thereafter. Renegotiation was commenced
within two years after the close of each fiseal year. It does
not seem that provision was ever made to assure ability to
pay renegotiation refunds, if and when devermined to be
due. Counsel’s explanation of this obvious fact is that the
company never did believe, and does not now believe, that
anything was due. Management clearly must have been
aware, a long time before the orders of January 24, 1975, that
first the Board staif, then the Regional Board, then the top
Board, were of the opinion that something was due. The fi-
nancial statement (which plaintiff furnished in support of
4
its response) reflects that plaintiff’s management is or has
been in difficulty with the SEC, and has been sued by inves-
tors, because of alleged failure by management to publicize
the severity of their renegotiation problems.
Because of economic conditions it may have now come
about that bonds to stay renegotiation collection are obtain-
able only by companies that could pay the proposed refund
in cash without inconvenience. And it is clear also that the
impact of renegotiation includes not only companies that
chose not to prepare for the day of renegotiation reckoning,
but also companies that, e.g., by losses in years not under re-
view, never had the ability to pay the refund that appears
fair and just from scrutiny of a profitable year or years only.
Counsel have reargued the statutory scheme and we adhere
to our exposition of it, that the whole court was agreed on in
Sandnes’. In brief, by Sec. 1215(b) (1) of the Act, upon the
entry of an order the Board may authorize the Service Secre-
taries te collect by withholding techniques on current pay-
ments. Or by Sec. 1215(b) (3) actions may be brought in “the
appropriate courts of the United States” to recover from the
contractor or persons directed to withhold from him. By Sec.
1218 an entirely different action was authorized to redeter-
mine the excessive profits de novo, originally in the Tax
Court, now in this, And in that section it is provided that the
petition for redetermination stays collection only if a bond
is timely filed. Thus before we were brought into the picture
by Act of July 1, 1971, Pub, L. 92-41, there were two entirely
different court procedures in absence of a bond : to collect, in
the District Court, plainly barred from redetermining or re-
viewing the refund determination itself, as held many times,
and to redetermine, in the Tax Court, which had nothing to
do with collection except as filing a bond there might stay it.
Now that we are the redetermining court, the collection pro-
ceeding, in the absence of a bond is a counterclaim which is
compulsory here. See, also Manufacturers Service Co., supra.
Plaintiff notes the stay provision in Sec. 1218 which cross
references to Sec. 1215(b) and the “execution of the order of
the Board” as the thing stayed. It argues that this means the
See. 1215(b) (1) withholding procedure. However, suit under
Sec. (b) (3) is also “execution” under Sec. 1215(b) and that
ine ew ov
te IOP es A
5
such suits are “execution” is also shown by the fact that par-
ties ordered to withhold from the contractor under Sec.
1215(b) (1) may also be sued. Plaintiff would reach an absurd
result with the effect of the bond apparently being only to
stay collection by means other than suits and not to stay suits.
The effect of the bond clearly is to stay collection by any
means, and by an obvious negative pregnant, with no bond,
collection by any available means, including suits but not lim-
ited to suits, is not stayed.
Plaintiff then turns to its Constitutional argument. Insist-
ing that in reality it owes nothing, it says we cannot constitu-
tionally enter judgment according to the statutory scheme
without some kind of due process preliminary hearing, since
there was avowedly none at the Board level. The right to
recover a refund after trial, if the findings establish entitle-
ment, it says is not enough. Plaintiff is vague about what kind
of preliminary court survey of the ,case would be sufficient.
As a practical matter, in view of the judgmental nature of
renegotiation, we think none would. Plaintiff is doubtless
really demanding that there should be no collection at all
until the processes of this court have been traversed in their
entirety and presuinably, until the Supreme Court has denied
certiorari. The administrative process of determining exces-
sive profits is not a speedy one, as this case illustrates. So far
the judicial process has, alas, not been particularly speedy
either. If plaintiff is right, no one would ever eliminate ex-
cessive profits by agreement. By just refusing to agree, and
petitioning to this court, he could probably retain control and
use of the alleged excessive profits for nearer two decades
than one. If Congress believed that the option to file a bond
had become wholly illusory, except for those who could pay
without hardship, it might well not vote for plaintiff's pro-
cedure. Under the 1943 Act, as we pointed out in Sandnes’,
supra, there was no provision for stay of collection after a
final order, by bond or otherwise.
In Sandnes’, too, the plaintiff would have had us hold that
the procedure we thought the statute required was unconsti-
tutional as to any contractor who was unable to file a bond. A
fair reading of our majority and dissenting opinions will
show all thought the scheme was not facially unconstitu-
# J
tional. The majority thought it might be unconstitutional as
applied to a few exceptional Catch-22 situations, where it
might lead to a petitioner being effectively “chilled” in his
appeal to this court, without ever having had a due process
hearing. The tiajority wanted to be shown that the con-
tractor had got into its predicament without its own fault
or negligence, and further, that the Government would or at
least could use the judgment in a manner to prevent further
prosecution of the petition in this court. The showing never
was made in Sandnes’, as the contractor never went before
the Trial Division to make it, and this might have been antic-
ipated, for the opportunity to make such a showing was not
what it had sought. Three judges in dissent would have en-
tered the requested judgment without further ado, not be-
lieving the statutory scheme could be unconstitutional as to
any state of facts, or at least any suggested by the record
before us.
Should we be satisfied to follow Sandnes’ as a precedent,
we would have to consider the matters we wanted to know
more about in Sandnes’. Here we know enough to make
reference to the Trial Division unnecessary. It is quite appar-
ent that management had nine years, almost. from the time
the statutory notices started coming in until the final orders.
to commence making preparations for the evil day to come.
However unjust they thought the demand would be, pru-
dent management would have suggested some hedge against
it. Management must prepare for the unjust as well as the
just exaction. If the notices are not to warn the contractor
to prepare for the blow of a Board order, it is diffieult to
see what purpose Congress meant them to serve. Solitron
didn’t even stop paying dividends until after 1973. They
turned over profits many times exceeding the sums now de-
manded. Assuming they are now unable to obtain a bond,
this would be irrelevant if they could pay the refund and
continue in business. They could do this if they had taken the
most obvious precautions. They are not, therefore, in the
predicament they are in without their own fault or negli-
gence. as at least a contributing cause according to their own
showing here.
ee. ee
oar
ee ae
rey
7
In Sandnes’ we directed an inquiry (199 Ct. Cl. at 117, 462
F. 2d at 1394) :
b. Whether plaintiff's financial condition is due in any
part to dividends or other distributions made from the
notice of commencement of renegotiation, to now.
In Sandnes’ the contractor was in bankruptcy. In view of
this we were also uncertain what if any effect the judgment
would have, surmising that like the Board order, it would
simply be an item to be proved in the bankruptcy. We di-
rected inquiry as to that point. Plaintiff here is not in bank-
ruptey and the possibility that our judgment could be used
in a destructive way therefore has more plausibility. Plain-
tiff is not insolvent but we accept at least arguendo that ii
defendant had the judgment it could, if it so willed, put
plaintiff in a situation of stringency for cash and working
capital, and might make it unable to meet other current |i-
abilities. It would be imprudent for,the Government to do so,
no doubt, as killing the golden goose, but this does not guar-
antee it will not do it. It would seem however, if Government
really attempted at whatever cost to itself as well as to the
contractor, to collect on a liability that our ultimate decision
on the merits may wash out entirely, a receivership would be
a good defense. Plaintiff’s not being in bankruptcy or re-
ceivership means its management, so long as this state con-
tinues, could dispose of assets while the case was pending
here, a factor not present in Sandnes’.
Assuming as the majority did in Sandnes’, that the statu-
tory scheme may be unconstitutional as it might be applied
in a few situations where the judgment in aid of execution
would have an exceptionally harsh impact and would “ehill”
further prosecution of the case on the merits, before any due
process hearing thereon, we do not see this as such a case. In
some respects, as pointed out, the situation in Sandnes’ was
more suited to give us pause, and to justify a pause for further
inquiry. To avert the judgment, therefore, plaintiff must per-
suade us, contrary to the view of the entire court in Sandnes’,
that. the statutory scheme is facially unconstitutional or at
least unconstitutional as applied to every contractor who can-
not furnish a bond to stay execution of the Board order. This
is Solitron’s backup position. It expects us to overrule
- ~ OF]
Sandnes’ on the basis of changes in the “legal climate”, 7...
the atmosphere emanating from Supreme Court decisions
dealing with “collect now, litigate later” techniques, handed
down since the date of Sandnes’, July 14, 1972.
Commissioner v. Shapiro, —— U.S. ——, was decided
March 8, 1976, and of course was much discussed in oral argu-
ment before us. It shows that “collect now, litigate later” has
its limits even in the generally open field of Internal Revenue
enforcement. Defendant had assessed taxes on Shapiro and
served levies upon various banks in which he had accounts or
safe deposit boxes. He was about to be extradited to [srael
to be tried for fraud there, and relied on the seized funds to
finance his defense and for bail money there. He had a suit
pending in the Tax Court which had not been decided. The
damage from the seizures would obviously not be repaired
by ultimate victory in the Tax Court. The question was
whether the Anti-Injunction Act, IRC Sec. 7421(2) barred
Shapiro’s injunction suit, with the TRS merely asserting
there was a tax liability, or whether some inquiry had to be
made as to its factual basis. The Government would have re-
quired Shapiro to prove there was no factual basis for the
tax, not informing him what facts it had. The Court affirmed
the D.C. Cireuit, holding for Shapiro. The Court said that
to allow the Government to seize and hold property merely
on « good-faith allegation that a tax was due, would raise
serious Constitutional problems when, as in Shapiro’s case,
the seizure would cause irreparable injury. Slip op. at p. 14.
These statements are supported by a footnote 11, citing
Goldberg vy. Kelly, 397 U.S. 254 (1970); and Sniadach v.
Family Finance Corp., 395 U.S. 337 (1969), of which we had
the benefit in our Sandnes’ decision, and North Georgia
Finishing, Ine y. Di-Chem, Inc., 419 U.S. 601 (1975), which
has come down since. This latter case holds a Georgia gar-
nishment. statute unconstitutional because a writ tying up a
banking account may be had at the outset of litigation just
by filing a conclusory affidavit and a bond with a clerk of
court or other non-judicia] officer. The footnote, however,
distinguishes Regional Rail Reorganization Act Cases, 419
U.S. 102 (1974), where it was held that no probable cause
hearing is required where complainant will eventually be
ee eet Ae ne ee
cn
9
made whole for any inadequacy in compensation for con-
fiscated property.
North Georgia Finishing, Inc. supra, likewise distin-
guishes Mitchell y. W. 7’. Grant Co., 416 U.S. 600 (1974),
where a “sequestration” statute passed constitutional muster
because there the seller-creditor holding a vendor’s lien could
obtain the writ only from a judge who had to be satisfied by
an affidavit setting forth the facts, beyond mere conclusory
allegations There is much debate among the Justices, which
need not concern us here, whether Mitchell vy. W. 7’. Grant
Vo., overrules Fuentes v. Shevin, 407 U.S. 67 (1972), and is
in turn overruled by North Georgia Finishing, /nc., supra.
Defendant relies on two other recent Supreme Court tax
cases interpreting the Anti-Injunction Act, IRC Sec, 7421
(a), that go unmentioned in Shapiro, but assuredly are not
to be regarded as overruled sub silentio. In Bob Jones Uni-
versity v. Simon, 416 U.S. 725 (1974), that Act was held
to bar a suit to enjoin the IRS from removing plaintiff from
the list of tax-exempt private schools, It was asserted that
this would cause donors to stop contributing for fear of losing
their own tax deductions, an irreparable injury that ulti-
mate vietory in the school’s own tax litigation would not
repair, It was held that the school could not maintain the
suit because it could not bring the case within /nochs v.
Williams Packing & Navigation Co., 870 U.S. 1 (1962), i0.,
it could not show the Government could under no circum-
stances prevail. Commissioner v. “Americans United” Inc.,
416 U.S. 752 (1974), followed immediately after Bob Jones
and involves similar issues. The Court says expressly that
irreparable injury does not suffice to bring a case within the
Enochs vy. Williams Packing & Navigation Co., exception,
416 U.S. at 762. We read these cases, with Shapiro, as re-
stricting any judge-made exceptions to the Anti-Injunction
Act. to narrow situations of infrequent occurrence. Here, of
course, we have no Anti-Injunetion Act and we have legis-
lation of some but not major impact upon the Revenue. The
total inability to prevail standard would be difficult to en-
graft on a Renegotiation case, when so much depends on
individual judgment. Of course, any issue, whether a con-
tractor is exempt or otherwise not subject to Renegotiation
10
at all, can here be litigated by summary judgment at the
outset of the case, as was done in Newport News Shipbuild-
ing & Dry Dock Co. v. United States, 208 Ct. Cl. , 527
F. 2d 1213 (1975), wherein the contractor got a summary
judgment exonerating it from Renegotiation liability for
the'year involved, on showing that the Board had inadvert-
ently allowed statutory limitations to run before the date of
its Order.
It seems fair to say from the recent cases that the indigence
of the debtor, and the fact that the contract to be enforced
was one of adhesion, have lost some of the importance we
assigned to them in our Sandnes’ discussion. On the other
hand, there is no more reason than before to believe that the
due process requirements engrafted on the legal remedies of
private creditors will be transferred entire to the extraor-
dinary remedics granted the Government in the enforcement
of its Revenue Acts and other important monetary legisla-
tion. We think an Act is facially constitutional, if it is in that
class and if it authorizes a temporary deprivation of prop-
erty without a hearing, but permits the ultimate making
whole of the debtor in case he prevails in the due process
hearing ultimately provided. Any exception must be in the
instance of some extraordinary hardship as in Shapiro's
case, irreparable because victory in an ultimate trial mani-
festly would not make him whole. This is nearly the formula
the majority had in mind in the Sandnes’ case.
We do not wish to be understood, however, as holding that
our judgment here will have no better foundation than the
garnishment process in Georgia. The Board’s orders are at
least more than a private creditor’s ipse dixit, considering
the Board’s statutory independence (50 U.S.C. App. See.
1217), the elaborate procedure it follows according to law
and regulations, and its internal appeals, here very successful
for the contractor. The order may not have been arrived at by
due process in the traditional sense, but contractor was
afforded the process which was due in the circumstances, in-
cluding the availability of a full trial later on. Cf. Flute v.
United States, Ct. Cl. No. 38-75 (decided May 12, 1976).
We can and have read the Board’s opinions attached to the
petition, and see that they are at least facially reasonable,
11
not bearing the indicia of bias and prejudice, nor appearing
the work product of a kangaroo court. Plaintiff asserts bad
faith in refusing to consider a Price Waterhouse audit sub-
mitted late in the case. The Board explains its position as to
this. Whether the audit is decisive for plaintiff of course
remains to be determined.
Plaintiff asserts that our function in entering the judg-
ment in aid of execution is ministerial, unworthy of an Arti-
cle III court. It was performed by District Courts before
Pub. L. 92-41, supra, albeit with some grumbling. We have
necessarily taken the case under our scrutiny to the extent
indicated. On the whole, we think our pre-execution judicial
scrutiny of the case will stand comparison with that under
the Louisiana “sequestration” law, upheld in J/itehell v.
W. 7. Grant Co., supra.
Thus we think the basis for departing from the statutory
procedure on constitutional due process grounds clearly exists
only, if at all, when enforcembnt of that procedure, as
written, threatens a contractor with substantial injury which
would not be reparable by the final judgment obtained after
trial on the merits. Albeit dictum, here we will say now that
Shapiro teaches us not to view such instances lightly when
their existence is shown. This is not such a case. We are not
dealing with the installment buyer of a TV set he cannot
afford. We are dealing with a publicly held company, con-
sidered responsible enough to be awarded millions worth of
defense contracts over many years. Though the long time con-
sumed by the cases before the Board is apparently not un-
usual, we doubt. if Congress contemplated that a contractor
would be able to retain alleged excessive profits, interest free,
as long as this one has. In the long time taken and given the
size, volume, and profitability of the business, it should have
been easily possible to prepare for the blow. If plaintiff is
in the plight it asserts it is, its own management is largely
responsible. Considering the options open to both Govern-
ment and contractor, the possibility of irreparable injury is
not a clear and present danger, as in Shapiro's case, but re-
mote and speculative at the worst. Plaintiff may be concerned
how the judgment will be received by the SEC and by its
investor plaintiffs, but they all can read this opinion and see
12
there is not a final judgment here on the merits, If collection
from plaintiff is effected, it may recover everything on final
judgment, with interest as provided by law. There is no clear
and convincing demonstration that this will not make it
whole.
Accordingly, defendant’s motion for judgment in aid of
execution is granted. The tax credit computations furnished
by the Internal Revenue Service must be used. If they are
wrong, this can be corrected in the final judgment. Judgment
is entered for defendant in the following amounts with
interest as provided by law:
Fiseal Year:
Es See ee aS ee $491, 112. 00
SETI Mecdshiendiciaesscaslisetiibeetbitinticsieatlildeeriidibdeminantititiitieilpaniantaabinsaetaimiitag 1, 283, 413. 00
Ee ae eT NT 483, 451. 00
a ee a ae 1, 460, 783. 00
kK en 150, 000. 00
Less tax credits as follows:
Fiseal Year:
I catia ies aa ean aia einai $235, 733. 76
I idelideiedeernstenniniceaencitheieeecieceiitnieitaeai iain ca aan None
TETIIEET csniidicisiehdishabdhineideacheaiescesentnabdiiaaeianaaiatiatiamedeempeaptientmniamadiibtias None
STEED ciciicsiditsnistsininiteseitatesineeinciianeialiniicecemnieescuiiiiigtntiatatiaity Not known:
Defendant
stipulates
maximum
possible,
48%.
a GS Gs Be De wccacemnssimeeanes None
Net after tax credit:
Fiseal Year:
a oe ae ae a Ce eee $255, 378. 24
RE ee ee eS er 1, 283, 413. 00
a nT, a ee ee ne 483, 451. 00
RS eee en eC Ee 759, 607. 16
For General R. F. Fittings..............-.-_. 150, 000. 00
Bennett, Judge, joined by Kunzic, Judge, concurring:
I concur in the result and in the court’s opinion so far as it
goes, but feel it necessary to add a few words because the
majority opinion does not squarely address one of the two
constitutional defenses asserted by plaintiff to defendant’s
motion for summary judgment in aid of execution of the
orders of the Renegotiation Board entered against plaintiff.
oc i RAGED tina tw A ni teal etal. 5 aati TET CEI ie LIE
13
Plaintiff correctly observes that the U.S. Court of Claims
is a court created under article III of the Constitution.
Glidden Co. v. Zdanok, 370 U.S. 530, 571-84 (1962). Plaintiff
then refers us to article III, section 2, of the Constitution.
Section 2 provides that the federal judicial power extends
to all “cases and controversies” to which the United States
shall be a party. But, plaintiff says that pre-hearing entry
of a money judgment by this court based not upon facts and
evidence, but solely upon the board’s orders, would not be
an act of a sufficiently judicial nature to be performed by
an article III court. In other words, such a judgment would
be void since not produced by an exercise of the judicial
power of the United States. Plaintiff views the renegotiation
statute as attempting to vest in the judiciary jurisdiction
over matters which are purely legislative or administrative
in their substance when in section 108 it would authorize
issuance of pre-redetermination “judgments” in aid of execu-
tion of administrative orders. Plaintiff says that this is just
not adjudication by the court of a justiciable controversy.
This particular question has not heretofore been squarely
addressed in a majority opinion of this court in renegotia-
tion cases. I think we must now speak to it. Of course, it is
not contested that legislative or administrative jurisdiction
cannot be conferred upon article III courts. To do so would
violate the doctrine of the separation of powers. The question
now is whether or not that is what Congress has done here.
Plaintiff asserts that for us to enter a $2.9 million judgment
against it without evidence upon which we can exercise the
judicial power of the United States, indeed lacking even
an administrative record, and in face of the policy of the
Renegotiation Act that no presumptive validity attaches to
the unilateral declarations of the Renegotiation Board,
simply makes the court a rubber stamp for the board and
transforms the court into an extention of the administra-
tive processes of the executive branch. Alternatively, plain-
tiff suggests that if section 108 of the Act requires this court
to enter a judgment on behalf of defendant in such a factual
void, that section should be held to be unconstitutional “as
it is patently antithetical to the concept of justiciability em-
bodied in Article III of the Constitution.” On justiciability
generally, see Baker v. Carr, 369 U.S. 186 (1962).
14
Plaintiff’s constitutional arguments are serious and two-
fold. First, that to go along with defendant’s demand for
judgment because plaintiff has not posted the required bond
would be premature and deny plaintiff due process if there is
no hearing on that issue, or indeed upon all the issues pre-
sented by the pleadings. The court’s opinion deals adequately
with plaintiff’s due process issue as it pertains to a demand
for hearing before judgment in aid of execution of the
board’s orders. The second issue, however, which the opinion
does not address, is whether the judicial power of the United
States attaches at all in the present posture of the case.
We have here a peculiar statute that requires a contractor
“to pay now and litigate later.” But, it does provide plain-
tiff with the opportunity, in a de novo hearing at a later date,
to show, on the merits, that the board determination was
wrong and to recapture, with interest, any sums wrongly
found by the board to have been excessive profits. It is in the
present initial stage of the case that we have this ancillary
proceeding with reference to stay of execution. As defend-
ant suggests, this is the time for the court to inquire into
whether the board’s orders were entered against the proper
party, whether the procedures followed in entering the board
orders were lawful, whether plaintiff has paid the amount
claimed by the board to be due, whether it has in fact posted
the required bond to stay execution, and whether the entry
of a judgment now would have a chilling effect on plaintiff’s
ability to litigate the de novo redetermination. The court has
no probiems with these factors in this case. It adheres to its
prior holdings that section 108 requires the posting of a bond
as a condition for stay of the orders of the Renegotiation
Board and that the court is required and directed to grant
a judgment in aid of execution based on those orders when
no proper bond is filed without excusable cause.
As to the jurisdictional issue, this proceeding involves a
justiciable case or controversy to the extent it seeks, and de-
fendant opposes a judicial determination of the ultimate issue
of excessiveness. The ancillary or collateral relief now being
sought—judgment in aid of execution of the board’s orders—
could not be awarded in the absence of plaintiff’s own petition
for redetermination. We would have no jurisdiction absent
A TL i RIE eM Tel TILL
15
an affirmative claim for relief. In order words, plaintiff
brought us a case or controversy when it filed its petition. We
do not decide the merits thereof at this stage, but under the
statute must go forward as it directs without prejudice to
plaintiff’s right and opportunity to prove to us that the board
was wrong and that its profits were not excessive. The judi-
cial power has been invoked. Yes, it is hard to have to put
up the money first and litigate later. But, this statutory
scheme was on the books when plaintiff took the contract
with notice of it. By entering renegotiable business and by
failing to provide the bond the statute requires, plaintiff, in
my view, has waived the right to any hearing on the merits
of the excessiveness issue prior to execution of the board’s
orders. Also, the Supreme Court has sanctioned the consti-
tutionality of the pay now, litigate later scheme in upholding
unilateral revenue determinations similar to the scheme in
the Renegotiation Act, where adequate opportunity is af-
forded for a later judicial determirfation of the legal rights.
Phillips v. Commissioner, 283 U.S. 589, 593-95 (1931). Of
course, there is room for argument that the basic purpose of
the Renegotiation Act is not to gather revenue, if that makes
any difference, which I think not. Sandnes’ Sons, Ine. v.
United States, 199 Ct. Cl. 107, 462 F. 2d 1388 (1972). But,
plaintiff cannot complain when it has not convinced the court
that it cannot put up the bond to stay execution. Cooper-
MacDonald, Inc. vy. United States, Ct. Cl. No. 88-75, 207
Ct. Cl. (Order, Oct. 3, 1975); O’Brien Gear & Machine
Co. v. United States, 199 Ct. Cl. 1014 (1972). Hardship en-
tailed by the bond requirement is insufficient excuse, without
more, for noncompliance. Nor can it properly claim that we
are not proceeding with a case or controversy under article
III when it has given us just that which it now says is lack-
ing, and we are only proceeding in an ancillary, collateral
way without prejudice to the merits of plaintiff’s principal
claim.
U.S. GOVERNMENT PRINTING OFFICE: 976
et
<a
17
APPENDIX B
Order of the Renegotiation Board
Order Determining Excessive Profits
WHEREAS:
A. A renegotiation proceeding was heretofore duly
commenced by or on behalf of the Renegotiation Board
pursuant to the Renegotiation Act of 1951, as amended
(hereinafter referred to as ‘‘the Act’’), with Soirrron
Devices, Inc., a New York corporation
(hereinafter referred to as ‘‘the Contractor’’), with re-
spect to the fiscal year of the Contractor ended February
28, 1967 which said proceeding was assigned to and con-
ducted by the Eastern Regional Renegotiation Board.
B. Said regional board recommended a determination
that the sum of Three Million Two Hundred Thousand ...
Dollars ($3,200,000) represented the portion of the profits
of the Contractor from contracts and subcontracts subject
to the Act for said fiscal year which was excessive within
the meaning of the Act. The Renegotiation Board there-
after reassigned the case to itself.
C. The Contractor has been afforded full opportunity
to submit all pertinent financial, operating and other data,
and due consideration has been given thereto in accordance
with the Act and the Renegotiation Board Regulations
promulgated pursuant to the Act.
D. The Contractor has been afforded an opportunity,
but has declined, to enter into an agreement for the elimi-
nation of excessive profits in the amount hereinafter stated.
Now, Tuererore, it is hereby:
1. DererMivep as a result of such renegotiation that
the Contractor realized excessive profits in the amount of
EE EEE EE
bonn6adeedscntunstecesecubabsaieibeansiudésdaans Dollars
($500,000) from contracts and subcontracts subject to the
Act for its said fiseal year.
2. Furruer Dererminep that, after proper adjustment
on account of the taxes measured by income, other than
Federal taxes, which are attributable to the portion of the
profits of the Contractor which is not excessive, the amount
of excessive profits to be eliminated is Four Hundred
Ninety-one Thousand One Hundred Twelve .............
($491,112).
3. Orprrep that such excessive profits, as so adjusted
in the amount of Four Hundred Ninety-one Thousand One
ee I « 5k 04ase scabs tannced sane Dollars
($491,112) be eliminated pursuant to the Act and said
Renegotiation Board Regulations, subject to the applicable
tax credit, if any, for Federal income taxes provided in
Section 1481 of the Internal Revenue Code of 1954.
Tue RENEGOTIATION Boarp
By (signed) Rex M. Mattinety
Dated, issued and
entered on: Jan. 24, 1975
~ ad ee
Se ae Saks ts
19
APPENDIX C
Statutes and Constitutional Provisions Involved
Section 105(a) and (b)(1)-(3) of the Renegotiation Act
of 1951, as amended. 65 Stat. 7 et seq., 68 Stat. 1116, 1118,
70 Stat. 787, 74 Stat. 202, 76 Stat. 134, 82 Stat. 1345, 85
Stat. 97, 98, 50 U.S.C.App. §§ 1215(a), (b)(1)-(3) provides
as follows:
50 U.S.C.App. § 1215.
(a) Renegotiation proceedings shall be commenced
by the mailing of notice to that effect, in such form as
may be prescribed by regulation, by registered mail or
by certified mail to the contractor or subcontractor.
The Board shall endeavor to make an agreement with
the contractor or subcontractor with respect to the
elimination of excessive profits received or accrued,
and with respect to such other matters relating thereto
as the Board deems advisable. Any such agreement,
if made, may, with the consent of the contractor or
subeontractor, also include provisions with respect to
the elimination of excessive profits likely to be received
or accrued. If the Board does not make an agreement
with respect to the elimination of excessive profits re-
ceived or accrued, it shall issue and enter an order
determining the amount, if any, of such excessive prof-
its, and forthwith give notice thereof by registered
mail or by certified mail to the contractor or subcon-
tractor. In the absence of the filing of a petition with
the Court of Claims under the provisions of and within
the time limit prescribed in section 108 [section 1218
of this Appendix], such order shall be final and con-
elusive and shall not be subject to review or redeter-
mination by any court or other agency. The Board
shall exercise its powers with respect to the aggregate
of the amounts received or accrued during the fiscal
year (or such other period as may be fixed by mutual
= OS Se 6 8 Se Rn oS
a
<— FR RY ONE GES Slo” agp 24 Bh, semen ee
20
agreement) by a contractor or subcontractor under
contracts with the Departments and subcontracts, and
not separately with respect to amounts received or ac-
erued under separate contracts with the Departments
or subcontracts, except that the Board may exercise
such powers separately with respect to amounts re-
ceived or accrued by the contractor or subcontractor
under any one or more separate contracts with the De-
partments or subcontracts at the request of the con-
tractor or subcontractor. By agreement with any con-
tractor or subcontractor, and pursuant to regulations
promulgated by it, the Board may in its discretion
conduct renegotiation on a consolidated basis in order
properly to reflect excessive profits of two or more
related contractors or subcontractors. Renegotiation
shall be conducted on a consolidated basis with a par-
ent and its subsidiary corporations which constitute
an affiliated group under section 141(d) of the Internal
Revenue Code [section 141(d) of Title 26] if all of the
corporations included in such affiliated group request
renegotiation on such basis and consent to such regu-
lations as the Board shall prescribe with respect to
(1) the determination and elimination of excessive
profits of such affiliated group, and (2) the determina-
tion of the amount of the excessive profits of such
affiliated group allocable, for the purposes of section
3806 of the Internal Revenue Code [section 3806 of
Title 26], to each corporation included in such affiliated
group. Whenever the Board makes a determination
with respect to the amount of excessive profits, and
such determination is made by order, it shall, at the
request of the contractor or subcontractor, as the case
may be, prepare and furnish such contractor or subcon-
tractor with a statement of such determination, of the
facts used as a basis therefor, and of its reasons for
such determination. Such statement shall not be used
in the Court of Claims as proof of the facts or conclu-
sions stated therein.
she ee lt AO Ln a Bi te Oy
21
(b) (1) General procedures. Upon the making of an
agreement, or the entry of an order, under subsection
(a) of this section by the Board, or the entry of an
order under section 108 [section 1218 of this Appen-
dix] by the Court of Claims, determining excessive
profits, the Board shall forthwith authorize and direct
the Secretaries or any of them to eliminate such ex-
cessive profits—
(A) by reductions in the amounts otherwise pay-
able to the contractor under contracts with the De-
partments, or by other revision of their terms;
(B) by withholding from amounts otherwise due
to the contractor any amount of such excessive prof-
its ; ‘
(C) by directing any person having a contract
with any agency of the Government, or any subcon-
tractor thereunder, to withhold for the account of
the United States from any amounts otherwise due
from such person or such subcontractor to a con-
tractor, or subcontractor, having excessive profits to
be eliminated, and every such person or subcon-
tractor receiving such direction shall withhold and
pay over to the United States the amounts so re-
quired to be withheld;
(D) by recovery from the contractor or subcon-
tractor, or from any person or subcontrator directed
under subparagraph (C) [of this subsection] to
withhold for the account of the United States,
through payment, repayment, credit, or suit any
amount of such excessive profits realized by the
contractor or subcontractor or directed under sub-
paragrph (C) [of this subsection] to be withheld
for the account of the United States; or
(EK) by any combination of these methods, as is
deemed desirable.
22
(2) Interest. Interest at the rate per annum deter-
mined pursuant to the next to the last sentence of this
paragraph for the period which includes the date on
which interest begins to run shall accrue and be paid
on the amount of such excessive profits from the thir-
ticth day after the date of the order of the Board or
from the date fixed for repayment by the agreement
with the contractor or subcontractor to the date of re-
payment, and on amounts required to be withheld by
any person or subcontractor for the account of the
United States pursuant to paragraph (1)(C) [of this
subsection], from the date payment is demanded by the
Secretaries or any of them to the date of payment.
When the Court of Claims, under section 108 [section
1218 of this Appendix], redetermines the amount of
excessive profits received or accrued by a contractor
or subcontractor, interest at the rate per annum deter-
mined pursuant to the next to the last sentence of this
paragraph for the period which includes the date on
which interest begins to run shall accrue and be paid
by such contractor or subcontractor as follows:
(A) When the amount of excessive profits deter-
mined by the Court of Claims is greater than the
amount determined by the Board, interest shall ac-
crue and be paid on the amount determined by the
Board from the thirtieth day after the date of the
order of the Board to the date of repayment and, in
addition thereto, interest at the same rate shall ac-
crue and be paid on the additional amount deter-
mined by the Court of Claims from the date of its
order determining such excessive profits to the date
of repayment.
(B) When the amount of excessive profits deter-
mined by the Court of Claims is equal to the amount
determined by the Board, interest shall accrue and
be paid on such amount from the thirtieth day after
2s la eh BE Be nia ee al ass Ta ee
ae ai ssi pte rs 6 ht
23
the date of the order of the Board to the date of
repayment.
(C) When the amount of excessive profits deter-
mined by the Court of Claims is less than the amount
determined by the Board, interest shall accrue and
be paid on such lesser amount from the thirtieth day
after the date of the order of the Board to the date
of repayment, except that no interest shall accrue
or be payable on such lesser amount if such lesser
amount is not in excess of an amount which the con-
tractor or subcontractor tendered in payment prior
to the issuance of the order of the Board.
Interest shall accrue and be paid at a rate which the
Secretary of the Treaswry shall specify as applicable
to the period beginning on July 1, 1971, and ending on
December 31, 1971, and to each six-month period there-
after. Such rate shall be determined by the Secretary
of the Treasury, taking into consideration current pri-
vate commercial rates of interest for new loans ma-
turing in approximately five years.
(3) Suits for recovery. Actions on behalf of the
United States may be brought in the appropriate
courts of the United States to recover, (A) from the
contractor or subcontractor, any amount of such ex-
cessive profits and accrued interest not withheld or
eliminated by some other method under this subsee-
tion, and (B) from any person or subcontractor who
has been directed under paragrph (1)(C) of this sub-
section to withhold for the account of the United
States, the amounts required to be withheld under
such paragraph, together with accrued interest thereon.
Sections 108 and 108A of the Renegotiation Act of 1951
as amended 65 Stat. 7 et seq., 70 Stat. 791, 76 Stat. 134, 85
o
ee
24
Stat. 97, 98, U.S.C. App. §1218 and 1218a provide as
follows:
§ 1218.
Any contractor or subcontractor aggrieved by an
order of the Board determining the amount of exces-
sive profits received or accrued by such contractor or
subcontractor may—
(a) if the case was conducted initially by the
Board itself—within ninety days (not counting Sun-
day or a legal holiday in the District of Columbia
as the last day) after the mailing under section
105(a) [section 1215(a) of this Appendix] of the
notice of such order, or
(b) if the case is not condueted initially by the
Board itself—within ninety days (not counting Sun-
day or a legal holiday in the District of Columbia
as the last day) after the mailing under section
107(e) [section 1217(e) of this Appendix] of the
notice of the decision of the Board not to review the
case or the notice of the order of the Board deter-
mining the amount of excessive profits,
file a petition with the Court of Claims for a redeter-
mination thereof. Upon such filing, such court shall
have exclusive jurisdiction, by order, to determine the
amount, if any, of such excessive profits received or
acerued by the contractor or subcontractor, and such
determination shall not be reviewed or redetermined
by any court or agency exeept as provided in section
108A [section 1218a of this Appendix]. The court
may determine as the amount of excessive profits an
amount either less than, equal to, or greater than
that determined by the Board. A proceeding before
the Court of Claims to finally determine the amount,
. niceties Liss dei naanbai ‘ a
a) =
ne ee
— a
25
if any, of excessive profits shall not be treated as a
proceeding to review the determination of the Board
but shall be treated as a proceeding de novo. In the
case of any witness for the Board, the fees and mile-
age, and the expenses of taking any deposition shall
be paid out of appropriations of the Board available
for that purpose, and in the case of any other wit-
nesses shall be paid, subject to rules preseribed by the
court, by the party at whose instance the witness ap-
pears or the deposition is taken. The filing of a peti-
tion under this section shall operate to stay the execu-
tion of the order of the Board under subsection (b) of
section 105 [section 1215(b) of this Appendix] only
if within ten days after the filing of the petition the
petitioner files with the {’ourt of Claims a good and
sufficient bond, approved by such court, in such amount
as may be fixed by the court. Any amount collected
by the United States under an order of the Board in
excess of the amount found to be due under a determi-
nation of excessive profits by the Court of Claims shall
be refunded to the contractor or subcontractor with
interest thereon from the date of collection by the
United States to the date of refund at the rate per
annum determined pursuant to the next to the last
sentence of section 105(b)(2) [section 1215(b)(2) of
this Appendix] for the period which includes the date
on which interest begins to run.
§1218a. Review of Court of Claims decisions
The decisions of the Court of Claims under section
108 [section 1218 of this Appendix] shall be subject
to review by the Supreme Court upon certiorari in the
manner provided in section 1255 of Title 28 for the
review of other cases in the Court of Claims.
26
28 U.S.C. § 2508 provides as follows:
§ 2508.
Upon the trial of any suit in the Court of Claims in
which any set-off, counterclaim, claim for damages, or
other demand is set up on the part of the United States
against any plaintiff making claim against the United
States in said court, the court shall hear and deter-
mine such claim or demand both for and against the
United States and plaintiff.
If upon the whole case it finds that the plaintiff is
indebted to the United States it shall render judgment
to that effect, and such judgment shall be final and
reviewable.
The transeript of such judgment, filed in the clerk’s
office of any district court, shall be entered upon the
records and shall be enforceable as other judgments.
Article III, the United States Constitution provides in
pertinent part as follows:
Section 1. The judicial Power of the United States,
shall be vested in one supreme Court, and in such in-
ferior Courts as the Congress may from time to time
ordain and establish. The Judges, both of the supreme
and inferior Courts, shall hold their Offices during good
Behaviour, and shall, at stated Times, receive for their
Services, a Compensation, which shall not be dimin-
ished during their Continuance in Office.
Section 2. The Judicial Power shall extend to all
Cases, in Law and Equity, arising under this Constitu-
tion, the Laws of the United States, and Treaties made,
or which shall be made, under their Authority ;—to all
Cases affecting Ambassadors, other public Ministers
and Consuls ;—to all Cases of admiralty and maritime
Jurisdiction ;—to Controversies to which the United
27
States shall be a Party;—to Controversies between
two or more States ;—between a State and Citizens of
another State ;—between Citizens of different States,—
between Citizens of the same State claiming Lands un-
der Gvants of different States, and between a State
or the Citizens thereof, and foreign States, Citizens or
Subjects.
The Fifth Amendment of the United States Constitution
provides in pertinent part as follows:
No person shall * * * be deprived of life, liberty or
property without due process of law.* * *
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.