Appendix — Ghioto v. Hampton

Supreme Court brief1962

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7 “

_ IN THE

Supreme Court of the United States

Octrosrr Tera, 1962

., 418

Nicnots & Company, Petitioner,

; Ve oi ‘ ;

2 . 2 | ;

Pie Unirep Srates; Respondent,

APPENDIX TO PETITION FOR A WRIT OF

CERTIORARI TO THE UNITED STATES

. . COURTOFCLAIMS /

Rank J. DELANY

1317 EF Streets NW,

Washington 4, D.C.

Attorney for Petitienes

a the ited States Court of Claims

No. 98-54

(Decided. March 7, 1962) ,

NICHOLS & COMPANY v . THE UNIT ED STATES

Peiah J. Delany for plaintiff.

David Orlikoff, with whom was Aestébeiat Attorney Gen-

eral William 1. Orrick, Jr., for defendant.

OPINION

_Wyrraxer, Judge, delivered the opinion of the’ court:

On Marth 5, 1954, plaintiff filed its petition in this case

seeking damages for breach of its contracts with defendant,

represented by the Production and Marketing Administra-

tion (hereinafter referred to as PMA) of the Department .

_ of Agriculture (hereinafter referred to as USDA), for the

sale of 118 lots, oF some 58,000-cases- ofeggs;which defendant

-intended to use in connection with its school lunch program. *

In Count-I plaintiff says some of the inspectors who graded

its eggs were “prejidiced, biaséd, aftt lackiug in impartial-

_ ity,” that they. refused to inspect eggs‘tendered for delivery

. until they had been reworked, refused to reinspect them when

requested to do so, used an improper candler in inspecting

them, and otherwise acted in an = capricious, and

grossly erroneous ‘manner,

Damages of $300,000’ are alleged.

‘Its petition also contained Counts II, III, and IV, but

our Commissioner has found, and plaintiff admitted, on oral

"argument that it had not made out a case on these counts. .

Souicthing over 18 months later, and about six months

after the taking of proof had begun, plaintiff .amended its

petition by the addition of Count V. -In this count it alleged

nes Cl

that the Department of. Agriculture. “unfeasonably, firbi.

trarily, capriciously, fraudulently, and in bad faith”, (1)

" failed to make an impartial inv estigation of its complaints of

improper grading, but, instead, sought to find evidence of.

wrongful conduct on the part of plaintiff and its president :

(2) it sought to intimidate and- coerce plaintiff into fore-.

going its claim against ‘an egg dealer by the name of Wein-

berg Bros. ; fy it failed to‘furnish an adequate number of.

graders; and (4) it “intimidated, harassed, interferéd with -

"and coerced” certain’ egg graders who were doing an honest

job in grading plaintiff's eggs,:and supplanted them with

other graders who “arbitrary, capriciously, fraudulently,

unreasonably and improperly.” graded plaintiff's eggs.

Tt further alleged that the Department’ on May 3, 1955 D,

repudiated ..its contracts. for furnishing grading service and

refused to furnish further service except on terms which

discriminated against plaintiff in comparison w ith. the

service furnished other dealers similarly situated,

All of this it alleges resulted in ‘damege | tu samme

business in the amount of $750,000.; |

. A great deal of bad feeting has aiaied bet ween. the parties

—i ‘the time of the first rejection of the eggs plaintiff

tendered for inspection preliminary to delivery under the

contracts. Plaintiff heatedly protested their rejection, charg-

ing that two of .the inspectors had. not acted fairly and

impartially. It was not long before it charged them with

conscious Wrong-doing, and demanded that they ke with-

drawn from plaintiff's plant. Later, similar charges were

made against other inspectors, and finally plaintif? alleged

that the officials of the. Production and Market jng Adminis-

tration of the. Department of Agriculture were in. a.

cénspirac y t) put ‘it out of business. >

Plaintiff says-one of the accused inspectors who was

grading its eggs asked: plaintiff's president, Mr. Nichols, if

he would sell him eggs on credit, if he should decide to go

ito the retail egg business, and this is net denied, PlaintitT

_ also says. that when he told Dolson, the supervisor of the

Chie: ago area, comprising 12 States, including Hlinois, that

he was going to file a claim against the defendant, they got

‘into a heated argument, in the cqurse of which Dolson said ;

tliat Nichols was trying to pick the inspectors to inspeet his

Sass et a

. > .

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products, that he did not propose to Jet him do it, that he

"Was not going to let him run the Department of Agriculture,

but that the Department was going to tell him what to do,.

and that he had better do it and if he did not, he, Dolson, ~

would put him out of business. This is not denied. The

heat had nat died down when the case was tried. During the

trial plaintiff, or its attorney, charged one of the inspectors

who testified with perjury. aA ; Me

_ Insuch an atmosphere, it is not easy to determine the true’

facts, but this we must do if we can, for if the charges plain-

tiff makes are true, we have a case of outrageous official

oppression, and ‘positive dishonesty and fraud on the part

of Government officers. Tf they. are not’ trife, plaintiff is to =

"be severely condemned for. making unsupported charges

against Government officials and employees-ho were doing

their duty. pe tnie S eeee aae |

We shall discuss Cou\it I first. .Plaintiff entered into two

contracts with defendant, in its own name, to furnish storage + -

eggs for ‘use under the school lunch program. In addition,

Rich & Company, brokers, entered into three other similar

contracts on plaiftiffs behalf. The terms of the contiacts.

were exacting, and hard to comply with by the furnjshing

of storage efgs, which were specified by the contracts. - For

instance, the contracts allowed a loss. factor on account of

“dirties, leakers and loss combined” of only 449 of one per-

cent. “This is only four or five eggs out of. 1,500,

It was, of course, impossible to inspect every egg out. ‘of

21,000,000 + , the number plaintiff was to furnish. ‘The muini-

mum number required to be inspected was 1,500 out of each

lot of 180,000 eggs. The cases to be inspected were supposed

to be selected at random by the. inspectors. If the warehouse

employees did the selecting of the sample. the ins wector's

_emproyees a ere ng OF the ggmiple, the inspectors:

certificate was supposed to note this fact. :

When the first lots were offered for the September 2 deliv

ery at’ Peoria, Hlinois, only 1 lots out of 47 were accépted.,

The inspectors for the Department of Agriculture were

_/Fhomas*S. MeCurley, who was the Supervisor for the State

of Tilinois, and Robert L. Young. Plaintiff reqvested that.

the eggs be reinspected, MeCurley told plaintiff that it was

tiseless to dose untibthey had been reworked, and he declined

ae ‘

to do so until this had been done.’ He gtated, either dn this + _

occasion, or at an earlier time, that in his opinion it was not — ,

possible for storage eggs to meet.the rigid requirements of

. the specifications until they had been reworked.- Three other

officials of the USDA testified to the same opinion. This is

supported by the fact that 40 of the 59 lots plaintiff placed —

in the warehouse in the spring, for which certificates of

‘inspection were introduced -in evidence, showed “dirties,

Jeakers and loss” in exeess of 9 of one percent. Their con- |

‘dition did not improve with age. It was not unreasonable -

under the: circumstances for the. inspectors to require that —

they be reworked before they were reinspected. —-

‘The regulations permitted a dealer who wi. dissatisfied

' with the grading given to call for a regrading, or an appeal

grading. Regrading consists of a reexamination of the orig-

inal sample and the examination of another sample selected: .

at — The: revyésed grade is the average of the two.

~ Regratting is done by the inspector who did the first grading. -

An appeal. grading i is done by a different grader, two, if:

practical, “Thé piace is the sume as if- segreding. See

Finding 19.

No appeal grading was requested. :

Plaintiff reworked the eggs, as the inspector had. insisted

’ it should do. After} having ‘done so to the extent it considered

necessary, it again offered them for delivery. Only 7 lots out

_of the 24 offered were accepted. ‘This was due, in-part at

least, to the fact that, since there were no satisfactory facil-

ities at the Peoria. warehouse for reworking them, they were

__:___ transported from the warehouse to plaintiff's plants at Avon _

_ and Bushnell, some 55 miles away, for reworking, and then

_ breught back to the warehouse for inspection and delivery.

* Handling of storage eggs tends to make them deteriorate.

In addition, upon return to the warehouse they were left

‘on the loading docks for several hours in eis ccaranaaed

_ ranging from 52.7° to 83°.

_ - Later, arrangements were made, with the assistance of a - A

Mr. Shearer, one .of the PMA officials from Chicago, to - -

rework the eggs at the warehouse. After this had been done,

32 out of the next. 82 lots offered were accepted.

1 Reworking consisted of the removal of * sche” and “dirties, leakers and

loss” and any others in which defects were diseorered by caning. ee

. 5 |

A total of 165 lots were offered at Peoria before the 77

lots tp be‘delivered there were accepted. es |

.. All contracts were fully performed on November 12, 1952.

Since deliveries were due on September 2, 1952, and Octo-

ber 1, 1952, penalties were incurred for late delivery, °

Plaintiff only complains of the regrading. of its eggs

which was done at Peoria. There Were. rejections at other

places, but plaintiff does not complain about these. It Says

. 4 ~ ° fe

Inspectors McCurley and Young, who did most of the

grading at Peoria, intentionally, arbitrarily, and fraudu-

‘lently rejected eggs that complied with ‘the specifications.

If they did, plaintiff! was damaged by the unnecessary cost

of reworking them and penalties assessed for late delivery.

' What proof does plaintiff offer to support. this erave

charge? Principally two.things: one, that the percentage

. . e — ’ . Ld

of rejections at other-places Was much less than at I eoria,

“and, second, some statistical studies it made of the grading:

of eggs put in wareli@uses in Chicago in the spring of the

years 1949, 1950, 1951, and 1952, and the grading of thetn ™

when they were taken out in the fall, which showed they

~ graded higher insthe fall than in the spring. |

As to the latter, it is not shown that the eggs in question —

were plaintiff ’s eggs, nor that McCurley and Young had any

direct connection with the grading of them, except only that

MecCurley was*the Supervisor for the State of linois. It

is not shown that - Young had any, connection, with the

» grading of them.’ Nor is it shown which of the two gradings —

were false, the spring gradings or the fall gradings. | \dso,

the period covered is prior to. plifintiff’s contracts. “This.

testimony is of no value on the quéstion of whether MeCu rley

and Young were guilty of fraid in grading plaintiff's eggs.

‘It’ is quite true that plaintiff fared much better with its”

deliveries at Memphis, St. Louis. and Burlington than it did

at Peoria... At Memphis there were no rejections. At

St., Louis, ong out of five lots was rejected. At Burlington,

of the seven lots offered for the September 2 delivery, only

' one was rejected; but three of the eight offered for the

October 1 delivery were rejected, a total of four out of fifteen.

The-Memphis eggs were shipped. nine lots from Peoria, and

three from Burlington. the hy

- & question in our minds, but a question, a suspicion even, .

This indicates, but does not prove, either that the i inspec:

tors at Peoria were, at least, too strict, or the other inspectors |

were too'lenient, or, perhaps, the quality of the eggs offered

was not the same, or the inspectors at one place happened

upon better samples than at another. Also, the findings show

7 that grading is often a matter of judgment; two impartial _

graders might well differ in grading the.same case. This»

is especially true here where oniy five éggs out of 1,500 could

. cause the rejegion of an entire lot, The variance indicates,

however, that something was wrong somewhere. It raises

falls far.short of @at clear and cony — proof necessary

to prove fraud.

Whien plaintiff sowedial i eggs, it was hecessary ® -

examine them, reject the “checks” and “dirties, leakers and

loss” and candle so ntany of the others as it deemed necessary.

Its employees who did this work were in an excellent position

to testify whether or not the rejections by the inspectors had

been improper, but plaintiff did not call them to testify. We

regard this as quite significant.

The regulations provided~for. an appeal fro gradings

which the egg dealer tiiought- were improper. (Where such

an appeal was taken, the Department. was required to have

a different grader. reexamine the samples inspected and --

examine other samples selected at random from the eggs

offered.( Such an appeal would have provided direct evidence

_ of, fraud, if fraud had been practiced. No appeal was taken.

- Instead of taking an appeal, plaintiff asked: that MceCurley

and Young be replaced by other inspectors, but this it had.

‘no right to do, wi it was shown they were acting improp- ~~

erly. An appeal should have disc chether or not they

\ were acting improperly, but no appeal. was en.

Althongh plaintiff did not take an appeal, nevertheless ,

Dale H. Shearer was sent down from the Chicago head-

_, quarters to investigate plaintiff's complaints. He rechecked

"ad number of the lots and found the samples substantially the

same as the inspectors had graded them. Also, he'¢ checked

two lots that had been reworked and accepted one and re-

jected. the other. No acc usations are made against Mr.

Shearer's integrity or impartiality.

"use of a BB candler, instead of the normal Faris candlet, If

Besides McCurley atid Young, 2 Mr. Crosson, and a-

Mr. Dingham also inspected some of the lots offered. Of

the 1% lots inspected - Ye Mr. -Dingham, 14 were rejected.

-No accusation is‘madé against him...

In order té-show partiality, plaintiff complains of the

a reflector is used with it. a BB candler is capable of giving

a much brighter light than ‘the Faris candler.

For two reasons this would seem to be no ground for

complaint. First, any candler that is ysed inust be one that

will disclose defects within the interior of an'egg. Its light

must be bright enough for this. A brighter light does not

disclose more defects—any’cgndler is supposed to disclose —

them all; the brighter light merely makes them more readily

apparent and, therefore, speeds up ‘the work.

In the second place, this BB candler is in general use today,

If plaintiff may complain of its, use, hundreds of others may.

We have heard of no others. It is also significant that the

BB candler was used at Memphis, where there were no

“rejections. If it caused rejections at Peoria, m would seem —

it would have caused them at Memphis. the

When Wwe weigh the evidence pro and con, we must con-

clude that fraud in the grading of plaintiff's S eggs has not

been proven, Tn spite of McCurley’s inquiry’ of Nichols

about Sales of eggs to him on ‘credit, and Dolson’s remark

‘that plaintiff had better do what the Department directed

him to. do or ‘they would put him out of business—in spite -

of this, we think that the most that can be said is that the

inspectors required strict compliance with the cont racts, We

are snot convinced that the inspectors required more than

their duty demanded. Out of 86 lots rejected, 83 were >”

rejected hecitise the “cirties, leakers atid loss” exceeded 34 o—

of one percent, Since most of the initial offerings were of

eggs that had not been reworked, and since the certificates

issued when the eggs were put in the warehouse in the spring

showed “dirties, leakers and loss” in excess of %\9 of one

_percent.in the case of 40 lots out of 59, it is Hot surprising

that Inter that fall 83 out of the 165 offered should »

have shown “dirties, leakers and loss” in excess of % 9 of

one percent, — ”

C ount J of plaintiff's petition will he dismissed.

Count V.

Plaintiff” ee in this cout tl that officials of. the United

“States Department of “Agriculture, in reprisal for its making

_ a claim. against defendant for breach of its contracts to —

furnish eggs under the school lunch program, discussed

under, Count I, set about to destroy its business. Tt alleges

it undertook to do this by. failing to furnish-the grading

-service it had contracted to furnish, and by arbitrary, capri-

_ cious and fraudulent gragdiags by some of its inspectors, and

by harassing, intimidating and coercing others.

On_ various dates prior to April 1, 1954, plaintiffsand

: defendant entered into contracts for the grading of plaintiff's -

products. These were supplanted by” four contracts entered —

into on: April 1, 1954: ‘These contracts: were on -printed

forms and were cubstantially the same. All of.them read, .

in part, substantially as follows:

‘ Iv Is Acreep: Twat: a; & .

ze (a) PMA will provide an ailequate number of graders

to perform the grading service covered hereby:

(b) At the sole discrétion of PMA the graders mpy

be either a Federal or State aplayer: or ‘a licensed. em- °

ployee of the applicant ;

= {c) PMA shall not be responsible for damages. ac-

cruing through any acts of commission or dission -on

the part of any grader;

_. (@) The provisions hereof 'shall continue in full force

and effect: from its effective date until suspenled, with-

_ drawn, or terminated, by (i) mutual consent ‘of the ap-

plicant and PMA: (ii) written notice given by. either

arty ‘te the other to take effect on a specific date not

ess than 30 da¥s from the date of: the giving of 4uch

notice; (iii), one (1) day’s written notice by PMA to ~

the applicant, if the applicant fails to honor any invoice

within thirty (30) days after date of invoice covering

the cost of the grading serv ice as herein provided; or

iv) termination of the services requested hérein pur-

suant tothe provisions in the following paragraph (¢) ;

s (e) The services to be rendered hereunder shall be ter- .

' minated by PMA at any time’ PMA, acting pursuant

to any applicable laws, rales, or regulations, debars the

. applicant from receiving any further benefits of: the

service, or the ‘services hereunder may be suspended or

terminated at any time PMA concludes that the appli- :

. cant has not con formed, or carmot eceainess hereto; *

dae 9

ae Coincident witl’ the execution of the four cont racts on

| > April 1, 1954, the following memorandum of agreement ‘was

“ ~__. also-excutied by the parties: Serre

_- In order to haye a mutual agreement. Yeto the condi-

* tions undewhich service is being furnished, we request

your concurrence to the following items ¥ ©

. _. 1. Mr. Schute will be the grader. in charge and inspec-

tor of egg products in charge for all contracts in effect

in your plants at Avorand Bushnell, TIL

2. A bonded assistant willg assist’ Mr. Schute at

Bushnell. . ; “oie

-. © 4. Mr, Schute’s normal: hours of duty will be from .

pei is a.m: go 12 noon and from 1 p.m. to 4 p.m. Monday thru

_. Fyiday, We do not expect him to work ovestime except

on official werk. THis annual and sick leave will be in.

accordance with the cooperative agreement between the

TS, ne ment of Agriculture and the Tll. State De- >

partment of Agri.

Bence Met 5. All-official travel of Mr, Schute is by direction of. -

his supervisor. It is understood that he may travel be-

tween Bushnell and Avon as directed by you. Such

travel will be charged to you at the regular Federal race -

and is payable to the Treasurer of the United States upon

presenthtion of a proper billing by the Grading Service.

6. You are to furnish both gradérs adequate facilities. . -

These are (but ngt necessarily limited to): ,

a. metal locker with lock. - 2

ib. individual egg scale with test weight.

‘ce. scale for weighing 15 dozen eggs.

: dad. B.& Becandling light—this is the only light to

he used_in making official gradings. ,

_ - fe, each for taking indiviual egg tem-

4 speratures,. 7. ¥

- - ./ f..a satisfactory darkened inspection room to

. < / grade shell eggs. x ;

7. Mr. Schute may only take technical direct ion from |

his Departmental supervisors, <If ‘you question his deci. -

sions, gradings, or inspection, vou may appeal these in

accordance, with the regulations of the Secretary of

Agriculture part 55 and part 70, copies of which you -

have. Such-appeals' may be directed to, Mr. McCurley,

Mr. Dolson, or the Washington Office of the Grading

Service. y

_ &. In aceoriance with your request, Mr. Schute will.

make routine tomments to the person in charge of the

; _ @2740e—ea-—-g - / Bay 7 @& .

‘« :

work assigninent, however, major comments will be made

to you or your Son. Bs

% When you begin grading at Avon, Mr. Schute will

review the work ff each eandler with the thought of se--

lecting a bonded assistant for that plant should the‘vol--

ume handled: be such that you desire a bonded assistant

for that plant. . 6 ‘

Prior to the school lunch contracts, the PMA, on May zi.

1952, issued Instruction 918(PY)-4, which was sent to all

dealers holding contracts for inspection and grading serv-

& f.. Ps

ices, Et read: ; -

EMPLOYMENT OF RESIDENT GRADERS WITH STATUS OF CIVIL

. SERVANTS |

I.. Purrosr 7 Licata i

This instruction is issued as a guide’ in carrying out

established policies in the rendering of grading service <<: °

With respect to poultry, eggs, and egy products through

use of civil servant licenses on Federal or State payroll:

II. Procepurr

A. At least one grader, who has tlie status of a civil

servant (State or Federal) will be stationed, in any on? -

ge for each operating shift, regardless of the num-

r of types of grading gervice requested,.except that

* additiona pam may Be stationed at’ a plant when

the regional supervisor deems it-necessary to properly:

or.assistant graders may be provided by licensing bonded

employees. Final check gradings shall be made by the

civil servant grader, ceed

signed by him. However, bonded graders may perform

final check grading, and issué and sign pre, a to im

cases: of emergency leave or sickness on the part of the

raed

civil servant employee.

B. The foregoing procedure will be followed as ex-

peditiously. as. possible with due consideration to operat-

ing and administrative problems in connection with the

recruitment and training of such individuals. As

rapidly as such ‘civil servant personnel becomes avail-

able, they shall replace bonded graders. Action should

be taken immediately to effect this procedure in all cases

where consytier grade labeling is being -performed, ‘atid

in plants Avhere both inspection and grading services

are in efféct. In cases where product is identified orily

on the basis of institutional packs and where fhe services

of sanitarians are required, the bonded grader and sani-

* .

*e. ; . ~

carry out the department’s responsibility. Alternate ——_

rr) P : y.

all certificates issued- will be -

~tarian shall be replaced as rapidly as possible. =. z

Sas ttre. _ ae

. . %

‘ C. Recognizing the personnel management problem

where seasonal operations or small volume are involved,

“sor where product is identified only on the, basis df-in-

stitutional packs, other than in eviscerating and drying

plants, the continued employment. of bonded giladers

~ Will be considered on an individual plant basis. Prior

, ae to considering the continued use of bonded employees

“in seasonal or small plants, consideration shall be: giver

to rendering service by a circuit grader. or sanitarian,

1D). Presently employed licensed bonded graders are

— an excellent source of supply for civil servant graders,

~ Graders secured from this source should be transferred

to plants other than those where they are presently em-

ee However, with approval of the Chief of the

nspection and Grading Division, a civil servant grader

may be stationed in the same plant where he has heen

employed under bond, provided his services asa bonded

licensee have proven excellent in all respects.

On July 18, 1952, this was followed by another memo-

randum, enclosing a copy of Instruction 918, which explained

its purpose. It was.explained that reasons for establishing

this policy included (1) some objections on the part of the.

industry that licensed bonded company employees could: not

perform as unbiased a job as civil service employees; (2)

complaints had been received from livestock sanitition offi-

cials, Public Health officials, and Food and Drug Admiv-

-~istration-officiats who urged that the term “Government .

graded” by licensed graders other than Federal or: State

employees be discontinued ; and (4) it would be in the public ,

interest to proceed toward the eliminagion of the use of

bonded graders on-as practical.a basis as possible as soon .

‘ts feasible, ee. ih.

“The question before’ us is whether defendant’ breached its.’

contracts: by failing to furnish sufficient graders. and by

failing to give fair and iinpartial grading service. In con-

sidering the facts plaintiff advances in support of its charges,

we should bear in mind the colloqhy between Nichols and

Dolson, after the school lunch program contracts had been

fully performed, which we related in discussing Count I.

Shortly after all deliveries had been made under that pro-

gram, Mr. MeCurley, the Supervisor for Illinois, and Dotson,’

the Supervisor for the Chicago area, comprising 12. States,

‘including Illinois, came to one of plaintiff's plants where

° . ba

4 e

they had a discussion with Mr, Nichols and Mr. Altheide,

- the Manager, about plaintiff's complaints.of unfair grading.

The discussion became quite heated, Mr. Nichols complaining

of unfair grading, and stating that he was going to file a

claim against the Government, and Mr. Dolson replying

that Nichols was trying to pick his own inspectors, and that

he was not going to Jet him run the Department, but. the

Department was going to tell him what to do and he had

better do it or hé was going to put him out of business.

However, Nichols says, after lunch, when Dolson came back

_ to the plant, tempefs had cooled, and he acted very much

like a gentleman.

How does plaintiff support its charge of unfair -and

fraudulent conduct, on the part of defendant’s graders and

their superiors, and its charge of a failure to furnish

sufficient graders? : : .

Plaintiff’ had two plants, one’ at Avon‘ ‘and the other at

Bushnell, both in-Illinais. Mrs. Anna Chambers had been .

. plaintiff's employee for 20 years and was supervisor of the

egg room. at the Bushnell plant. She had been licensed: by

the PMA to grade her employer's product, anyl was bonded

to faithfully discharge her. duties. She served in this dual

capacity from January*1952 to May 1955. Mrs. Zenna

Richter was also plaintiff's employee and a licensed bonded

grader at the ‘Avon plant from January “1952 fo ‘January

1953.

On May 10, 1952, one Harry J. Brown, a Gov ernment em-

. ployed NACC? grader, was assigned to the Avon plant and.

remained there until June 12,1953. He also graded eggs at

the Bushnell plant. He was succeeded by, Julius Antoine,

who served from July 7, 1953, to Nov ember 20, 1953. ‘Ray

_ Schute served during April and May 1954, Vitold Kilian

‘® from June 1, 1954, until April 18, 1955, when he was

‘succeeded by John W. Schoonover.

Notwithstanding Dolson’s threat to put plaintiff out of

business in the latter part of 1952, plaintiff does not assert

_ that any of the foregoing inspectors failed.to render fair and.

impartial service: It eoncentrates its fire on John W.

/ Schoonover, who arrived on April 15, 1955... If Dolson

2 An NACC grader was an employe either of the USDA or of a State.

meant to carry out his threat to put plaintitf out of business

through unfair grading of its products, as plaintiff alleges,

it would seem he would not have waited wntil April 1, 1955,

to set about doing su.

, Plaintiff alleges that Mr. Kilian was replaced by Schoon-

over pursuant to the design of the offictals of the PMA: to

‘wreck plaintiff's business, but plaintiff has completely. failed

to prove such a design. It reiterates over and over that there

was such a design, but evidence to support the charge is

‘lacking: Oe tori pee

~ Kilian. was transferred to another post on the order of

Ward Wagner, the Assistant Chief of the Inspection and

Grading Division in Washington. While ona trip to review

egg processing operations in Ilinois, Indiana, and Missouri

he called at plaintiffs plant, accompanied by McCurley, the:

_ Supervisor. for Hlinois. Wrile thére he saw lialf of a let.”

of eggs stacked on dollies outside the cooler, which had been

marked for delivery on an Army contract. He took the

temperature of ‘the eggs and found that-it was from 68° to

70°. The Army contract required that the eggs be kept at

a temperature under 50°. Kilian had recorded the temper- -

ature at 46° to 49°, but he took this temperature prior to

their being loaded on the delivery trucks, contrary to the

Army contract. . This was said to be the reason.for tkansfer-

ring Kilian. There was a-lot-of eontroversy-aboutayhich-

temperature reading was correct; but, so far as we are con-

cerned, it makes.no difference. It proves nothing in support

of the charge of-a design to wreck plaintiff's business.

Anyway, it was Wagner: who transferred Kilian, not’ Dolson.

Wagner did not order Schoonover to replace him. This was

done by. Dolson. There is no proof that Wagner and Dolson

conspired to wreck plaintiff's business. cis .

Plaintiff says that Schoonover fraudulently rejected eges

that should have been aceepted, but the proof does not sustain’

‘this. Upon arrival, Schoonover and Kilian jointly inspected

two lots, both of which wre rejected. Plaintiff does not

show that they should have been pecepted. -Plaintiff be-

lieved in Kikian and a that he was not permitted

to remain as the inspector|at its plants. If Schoonover

practiced a fraud in rejecting these two lots, Kilian was also —

guilty of fraud.. Schoonover \ilso participated in the inspee-

14.

_tion of sev sn athae lats, two of which he inspected by. himself.

These were rejected. There is no proof that they should have

been accepted. Plaintiff took an appeal from Schoonovee’s

gradings on one lot. Since this lot was destined for the

Army, the appeal was decided by the Army Veterinary

Corps, not by the USDA. A Colonel Gould and Captain —

Bland reinspected the eggs. They sustained Schoonover.

Piaintiff never appealed any other gradings by Schoonover.

Plaintiff complains that Schoonover would ‘not pull out

the cases of eggs, but required its employeesto do so, This

hardly shows fraudulent. conduct. Schoonover explaitis that

this was necessary because the eggs -were packed so closely

that none of the cases, éxcept those on the front of the stacks,

could be inspected without moving a number of them. Care-

. ful inspection required that samples be selected from varioys”

parts of the lots. This could not be done without moving |

many of them. 3 ioe

Itseems to us this isa triv ial complaint.

Our Commissioner found that Schoonover agked Jitlieide,

the plant manager, if he could bring his tape recorder to the

. plant and listen to the music. Mr. Nichols so testified, but .

Schoonover, denied it. We have made no finding on it, |

because, whether he did or did not, it has no probative valee. <

We relate it only because this incident and the. repossession

from Mrs. Anna Chambers of the stamp useil i in certifying 2 it

eggs was the immediate occasion for Mr. Nichols’ order to.

- Schoonover to get out of his plant and to stay out. Schoon-

over got out, but returned the next day, but. Altheide, the

plant manager, told himn he would not be permitted to make

any thore inspections. Accordingly, on the instructions of.

Mr. Dolson, Schoonover picked up all Government. property

used in grading eggs and left, on May 3,1955.

All of the foregoing relates primarily to the Avon plant.

As stated; Mrs. Anna Chambers, plaintiff's employee, had

been Hirensed by the PMA to inspect and grade plaintiff's

eggs. She did so without interruption until January: 1953.

After that: date she was permitted to inspect eggs, but the’

. certificate showing their grade had to be signed by the NACC. »

grader. Nichols requested that Brown, the NACC ‘grader

at Avon, be transferred to Bushnell, but McCurley, the State

Supervisor, declined to do so. Instead, he offered to.employ

15 -

Mrs. Chambers as a PMA “grader, but this was not ‘dene.

Later, she was authorized to resume grading service at the

Bushnell plant and to issue a certificate reading:

ABOVE EGGS PACKED IN” ACCORDANCE

WITH OFFICIAL: GRADING UNDER:CONTIN-

VOUS SU PERV ISION, AND ARE ( ‘OVE RED BY

WORK SHEETS ON FILE. ms

It-was, of course, within the disergt ion of the USDA to

permit or to forbid a grader other than a Government or

State employee to issue a certificate. The policy set’ out in

Instruction 918, quoted supra,-was 0° dispense with all’

’ P

graders other than civil setvants as rapidly as possible, and

to require bonded. graders to work under the supervision *-

of a NACC grader. . Plaintiff cannot complain of the restric-

' tion imposed on Mrs. Chambers’ activitiesand of the require--

ment that certificates be signed—hy aN ACC employee.

Apparently there was-no difficulty in getting tliem. signed

by the inspector at Avon or by some other inspector, because

breach nor offers any siiddnre from w rich any estimate of

Mrs. Chambers says the. suspension of her right: to issue

certificates did not interrupt plaintiff's business.

There was an intetval, the duration of which is not.show n,

when there was no grader at the Bushnell plant, but plaintiff ;

inakes no claim for daniages: based alone on this alleged

the damages sustained, ifn, cat be made. i

In order to show djscrimination against it, plaintiff pre-

sented a comparison of the number of bonded andl NACC

graders within the area in which plaintiff did business, for

the years 1951 to 1956. ‘This showed a decrease in the mmnaber

_ of bonded. graders and an ‘increase in NACC graders, the --

greatest difference ocenrring in Towa, and the lesser ‘in

= Hlinvis. See F inding 47. Tris decrease in bonded gr; ders

and increase in NACC graders was in Tine with thie polie y set

out in Instruction 918, quoted syjpro. This was iirst pub-

lished prior to plaintit” s controversy with the USDA and

was of application throughout the United States. We do

not think this is evidence of discrimination against pleint iff.

If the supplanting of bonded gr aders, with NACC graders is

evidence of: discrimination, it is the dealers i in lowa who* have

reason to complain,

NLA

- 16

Plaintiff makes a good deal of the so- sealed Ww einberg

incident. In the latter part of 1952, plaintiff sold‘two lots.

of eggs to Weinberg Bros: of Chicago, to be shipped to the

Jantu Fruit Company of Laredo, Texas. Harry J. Brown,

an NACC inspector at plaintiff's Avon plant, inspected the *

eggs, and graded one lot as 79.74 percent B quality, and

“loss” 1.87 percent, and the other as 78.2 percent B quality,

_and “loss” 2.2 percent. When they arrived at Laredo they

were graded by one Schrimsher, anothex NACC inspector,

' both lots as, “no grade”, and the “loss” on oné lot as 62.4

percent, and, on the other, as 17.7 percent, (Any lot. con-—

~-taining moré than 5 percent loss was graded “no grade.”

The highest grade was. United States Grade AA, the next,

U.S. Specials, the next, U.S, Grade ‘X, then, in order, Pro-

curement I, Procurement II, Procuremént II, Procurement:

IV, USS. Extras, U.S. Girade B, U.S. Standards, US. Grade

“C, U.S. Stained, U.S. Trades, U.S. Dirties, and U.S. Checks,

When eggs didnot meet-the standards of any of these grades,

= were rated “no grade”.) ;

The consignee at Laredo refused to aceept the eggs ad

‘seal them to: Weinberg Bros. in Chicago. “Weinberg

-asked Dolson, whose office was also in Chicago, to send over

an inspector to inspect them. For some reason Dolson him-

self came over and Weinberg says he pronounced the eggs,

“rotten”: Weinberg. refused to pay for'them. . Nichols said

he told him he-had the USDA ofticials behind him. One

would suppose that he was referring to Schrimsher’s cert ifi-

ate and Dolson’s statement that the eggs were rotten, but ,

Nichols says it shows the PMA was trying to put him out

of business. “We do not draw such an inference.

Nichols brought suit. Schrimsher’s deposition was taken,

presumably by Weinbérg, but, when presented to him for

signature, he refused to sign it, upon advice of his superiors,

“> ® because a copy of it was not furnished him. ‘Whether he was

justified in doing so, we do not know, but how this prejudiced |

plaintiff; we are-unable to see, nor can we see how it shows |

. discrimimation againstit by PMA. Schrimsher was Wein-

berg’s, witness, ‘no doubt, and his testimony must have been

unfavorable to Nichols. If it was never put in evidence, so

-much the better for Nichols.

MOI. Anim

Carey an

plaintiff's grading contracts, — Sscpecieaeeeaecneerercnee de

TE. C8 a.

In a note to his finding S86, the ‘Trial Commissioner mays

Schrimsher was recommendéd for his job at Laredo, Texas,

by one Frank. Saito at Des Moines, and he quotes a letter

written Santo by ‘Schrimsher's supervisor at Dallas, Texas, ”

in which he says Schrimsher “did w wonderful job in his

testimony.” We-have omitted this from our findings, because

we cannot see how it can possibly have any probative value.

Asa result of this incident, Harry J. Brown was jnvesti-

gated, and plaintiff says this shows discrimination against

it. Brown admitted he had been negligend, that he had not :

‘lockéd up his grading stamps, as required, but had left them

“Trtriseatp and that the cases delivered to-Laredo, Téxas,

were not the same cases he had stamped in Ayon,. He-also

admitted to having signed work sheets of some other person,

as having been*his own. Forinal charges were preferred

against him. He did not demand a hearing, but resigned.

Thereafter, he was employed by plaintiff.

Plaintiff has failed to prove that any official or any group

of officials of the Department of Agriculture set out to wreck

its business. It has. failed to prove that any of them were

arbitrary or cipricious in their dealings with it, or in their

- conduct toward it; nor has it proved ‘that any inspector was

guilty of fraud inthe grading of its eggs or did so improperly.

Finally, we come to the question of the cancellation of

On May 2, 1955, plaintitf wrote its associated dealers, ‘for

whom it was acting as their marketing agent, stating that it

intended to dispose of its plants as son as possible, and it

suggested that they find other marketing outlets,»

At aboutsthe same time, plaintif{wired the Deputy Chief

of Dairy and Poultry Inspection Service of PMA in Wash-

ington demanding the replacement of Schoonover and stating

that unless this was done and immediate cooperation was

received, it would be necessary to cease operations. Two

,tdditional graders were requested by April 25. On April.

25, 1. W. Fletcher of the Washington office wired plaintiff |

that two, additional graders could be furnished:at $4 /per

hour and expenses. The following day, Mr. Hamann, Chief

of the Inspection and ( irading Division of PMA at Wash-

_ ington, wired plaintiff that. it considered Schoonover’s serv-

62740462. 38

° . i *

as \

ices satisfactory, but it would assign two additional inspectors

to plaintiff's plant, if desired. The telegram con@aded:

“*.* * Tf you wish to apply for cancellation without con-

- sideration to the 30 day clause_we will consider your appli-

cation on this basis.” = ~ . : ‘

In reply, plaintiff wrote Mr. Hamann a long letter, the

thirteenth paragraph of which reads: :

13. We are left no alternative from your telegram but

to accept the present grader Mr. Schoonover or request

cancellation ; It is impossible for us to accept the present

grader under the circumstances eo: ‘tinan-

cially, or mentally and altho we would like to receive

the service on the proper basis and do not wish same

must request immediate cancellation unless given recon-

sideration by yourself or a superior. This is of course

‘with waiver of the 30 day clause as the extra charges

_ and loss now: incurred are more than we can absorb.

In conclusion plaintiff's president, NicholS, said: “I am tired “

and feel that fighting government, bureaucracy \is an unsur-

mountable obstacle. Unless you reconsider and \give us the

cooperation and service we need and desire please cancel the

service as soon as possible.” * Pace), eR |

On April 29. apparently before receipt of plaintiff's letter

of the 27th, Hamann wired plaintiff: : ea

Reference your wire to Herman Millet\April 22, 1955

your letter handled [sic] to L.- il 25,.195

statements requesting waiver of service ani discontinue

our present business do you desire to cantel your con-

as follows: .

*\* * meantime our dealers met and. are desirous con-

— business if possible please read our letter 27th

and advise accordingly suggest you give serious con-

sideration to reconsidering entire situation ‘before

. making a decision and consider. replacing present in-

spector with one from some country point that has had

no contact personally or otherwise with Dolson or

Chicago ¥ituations and one who is in a position.to give

fair and impartial gradings * * *.

and our wire to you April 26, 1955. Please| clarify youk- =

‘

oe 19.

After- receipt of plaintiff's letter of April 27, Hamann ‘|

wired plaintiff on May 3, 1955, as follows:

As requested in your letter of April 27, 1955 and rae

“» “oP actions taken by you and Mr. Altheide on May 2

well 3.in barring Schoonover from your plant all con-

tracts for grading services with the Agricultural Mar-

keting service to 4 furnished at Avon and Bushnell are

hereby cancelled, effective close Of busiriess May 3, 1955

the acceptance of your notice of cancellation of ¢ ontrac ts:

dloes not affeet your privilege of requesting non-contract

grading uider the regulations.

Plaintiff protested. ‘the cancellation of its contracts.

‘Hamann replied as follows:

Reurtel May 4 my wire to you April 26 advised we did

not consider Sehoonover as havi ‘ing been negligent his —

_ performance of duties since you asked him t6 leave

Hant afternoon of May 2. and Altheide advised him

May 3 that his services not wanted cancellation of your

. contracts. effected in. compliance request contained in.

item 13 page 6 your letter April 27. ey

Plaintiff began negotiations. for the reinstatement of its

contracts. Defendant declihed to reinstate them, but on

June 15, 1955, offered plaintiff a new contract on the same

terms and conditions. as the old ones, but with the under-.

- standing that Mrs. Chambers would be licensed, but that’

there would be a final. inspection-by—an- authorized Federal

or State employee, who .alone was authoriz@@ to issue a

certificate. This proposed contract differed from the old

ones only in that it incorporated in its terms the policy

- announced in Instruction 918, supra. Plaintiff declined’ to

accept it, for the primary reason, apparently, according to

plaintiff's brief, that Mrs. Chambers was not to be permitted

to issue certificates as a bonded grader, but that all certifi-

cates had to be issued by a PMA employee,. which pfaintiff

. said would. put. plaintjff under the complete control of

Dolson and McCurley. .

It would seem that what Nichols said at the conclusion

of plaintiff's letter of April-27,1955, was true, to wit:

I am tired and feel that fighting government bureauc-

racy is an unsurmountable obstacle. Unless you recon-

sider and give us the coo ration and service we need

and desire please cane cel the service as soon as. possible.

From the foregoing recitation of facts it _appears that

plaintiff had’ decided to go out of business, unless it could

“continue with the grading service it demanded. In its long:

letter of April 27. plaintiff set out its grievances, real or

* fanciful, stated the terms upon which it wished to continue,

and stated, that if this was denied it, it “must request imme-

diate cancellation.” Defendant took it at its word, gladly,

we suspect, certainly with alacrity, and cancelled the con

- tracts. It was within its rights in doing so.

As stated, the new contract offered plaintiff was ho more

onerous than-the prior-ones, read. in conjunction: with In-

struction 918,and required no more, as a condition of giving

grading service, than was permitted by the law and regula-

tions. It differed from the old only in that it specifically

defined Mrs. Charmbers’ status and that of other bonded

~ graders, but that status did not werel from her status under. .

the old contiacts. ~— :

Plaintiff has not made out a case under Counts | and V.

Its petition will be dismissed.

- It is so ordered.

Darr, Senior District Judge, sitting by de jaigination ; Dur-

rer, Judge; and LaraMmorr, Judge, concur, Jones, Chief

Judge, took no part in the consideration and decision of this |

case. * -

, ee

a ,

The wuss, having congidered the evidence, fir report of

Trial Commissioner Paul H. McMurray, atid the briefs and

argument of counsel, makes findings of fact ss follows:

1. The plaintiff is and at-all.times herein pertinent was a

corporation organized and existing under the laws of the |

< State of ‘Illinois, with, its principal places of business at.

‘Avon,’ Illinois, and Bushnell, Illinois. The “plaintiff, its.

2 predecessor company, and the ‘Nichols family have been en-

gaged in the poultry ‘and wholesale egg business for many

years, and during the years from 1947 to 1952 had sales of

from $6,000,000 to $7,000,000 per annim. The plaintiff op-

erated a fleet of trucks which picked up eggs from suppliers

in. Illinois, Towa, and Missouri. The plaintiff was recog-

nized as one of the —— ea samatae of eggs in the United '

. States.

e °

- Wagher, a marketing special

2. The Production and Marketing Administration (some-

times hereinafter referred to as PMA) of the United States

Department of Agriculture (sometimes hereinafter referred

to as USDA) provided. inspection and grading services for,

egg and poultry dealers and processors whereby these com-

‘modities could be priced and traded under standardized

classifications. ‘These services: were provided on a fee basis

to dealers ‘and processors having internittent or irregular

inspection requirements, and under continuing service con-

tracts for larger dealers and processors requiring continuous

service, on the basis of the cost of rendering such service. ”

The classifications and grades under USDA standards were

required on the commodity ex¢hanges and were relied upon

by the trade generally, so ‘that it became necessary to obtain

- such grading service to successfully competg in the egg and

poultry business.

Mr. William Tx Ter maohien wi 5 the Director of the PM A

- Poultry Branch and Hermon I/ Miller was the Deputy Di-

rector, Mrs Henry G. TH. Tiymann was the Clief of the

~ Inspection and Grading Division, Bernard W. Kempers was

Chief of the Poultry Produ¢ts Section, and ‘Louis, Ward

st, was Assistant Chief of the

Poultry Products Seation of the ‘Inspection and Grading .

Division, Roy D. Biate was the contracting officer under

0 ts a1 or the delivery of eggs: under the

UC SDA school lunch program and was succeeded by Brian T..

_ Cunningham, representing the Secretary of A’ griculture.

Lavyrence J, Dolson oe Supervisor of the Grading and

"Poultry Division fot the-¢ ‘hicago area, consisting of twelve

States. ‘ine luding Illinois, and Dale TH. Shearer Was his as-

sistant. T. S. MeCurley was a Federal-State Supervisor in

xr harge of the Springtield, Iinois office and the State of Ili-

nois, ° for inspection and grading of eggs and poultry

products,

3. Since, during the oral argument of this case, plainti@

conceded that it had failed to prove it sustained hny damages

under Counts IL 11 Land LV, the court niutkes no findings of

”

“fact with respect to these counts.

ee é -Count I .

-& The Production and Marketing Administration, USDA,

by Announcement PY-61, dated April 15, 1952, offered

to. purchase through competitive bids approximately 500,000

‘cases of Government-graded oil processed shell eggs, pro- |

duced in the Continenta! rok States and packed. in new .

cases for use in connection with the school lunch program. |

The pertinent provisions of PY-M, as amended, are as

follows: are : eras

The United States De Dae of Agriculture (here-

inafter referred to as USDA) announces that it will. ~

_ purchase | competitive bids for future delivery, |

__ approximate! ,000 cases of (rovernment-graded oil *

_ processed shell eggs produced in the Continental United —

States. Until further notice, but not later than June 24,

1952, offerings will be considered weekly covering shell |

= pee at the time of delivery will grade at least 60%

“A” quality, Large 45 pounds average net weight per.

es re 30° dozen eggs. (See Article IT, Quality and

‘Weight). Sek, : ‘

_. To be acceptable for delivery, the shell in carlot

quantities must be stored in PMA-approved warehouses

. located in the 22 cities listed below, or in warehouses

- approved by PMA for the storage of shell eggs located —

in cities immediately adjacent to or within the switching

limits of these 22 cities. Furthermore, consideration

will be given to offerings in PMA-approved warehouses

at any location in the United States, and acceptances

will be made, providing it. is to the advantage of the

USDA. Prior to the timeof final inspection and de-

livery to USDA, the shell eggs may be stored in ‘any

~ warehouse, whether or not approved by PMA. Shown

below are the quantities proposed to be purchased in

éach city for delivery September 2, October 1, Novem-

her 1, and Dece: \ber 1, 1952. .While the quantities speci-

fied have alree.y been contracted for at some of the de-

livéry points, nevertheless vendors may continue to make

offerings at all points listed, or elsewhere, until June 24,

1952, and acceptances will be made, providing it is to.the

advantage of the USDA. cae

_* : * ae .*.*. *

TERMS AND CONDITIONS

_ General: In submitting an offer to sell, the terms and.

conditions of the Announcement and those set forth in

. Valid and birding ‘contract.

”

\ 23

- \ ‘

: “Standard vara ‘onditions”, Form .PM.A-100, ex-

»,)

cept Articles la, 3b7 6, 5, 9, 10, and 16, thereof, shall

become a part of the\offer to gell, and upon acceptance

by USDA the offer and acceptance shall constitute a

| wae Sahn

Articce I, Quaytrry : Offers shall consikt of one or.

more minimum carlot quantities of not less than 480°

cases (30 doz.) and preferably 600 cases. Provided,

however, that failure to offer lots of more. than 480 cases

will hot be cause for rejection...

Articie I, Quauiry axp Weicnt \The quality of the

shell eggs offered shall be in. accordance with the

UNITED STATES STANDARDS ROR QUALITY

OF INDIVIDUAL SHELL EGGS, and shall average

not less than 60 percent *A” Quality. -W\thin the max-

-. imum of 40 percent whicly may he below A” Quality, _

_ hot more than 10 percent may be of the qualities below .”

‘ <“B*. Said-maximum, tolerance of. 10 percent may con-- -

sist of “C” Quality, Stained, not, more than 3 percent

Checks, and not more than %j9 percent Dirties, Leakers

and Loss combined.

_ In instances where the percentages'of Checks, Leakers

and Smashed Effgs exceed the maximum tolerances in- .

dicated, USDA .will, upon receipt of satisfactory evi-°

dence of damage to-éggs while in tyhnsit to delivery

point, accept delivery, as -hereinaft ted, at a reduc-

tion in price to be determined hySESDA, A grading

sand weight certificate obtained.gt point of origin within |

15 days before the date of délivery showing the.lot to be

within the required maximém tolerances, will be accepted

as evidence of condition prior to shipment to delivery

point. In-no event will the eggs be accepted if the:

number of Cheeks exceeds -four and one-half (414) per.

cent or, if the number of Leakers, Dirties or Smashed ¢ 2

_ Eggs combined exceeds seven-tenths (.7) percent. Such

justment iti price per dozen will be made by an amend-

ment tothe contract.

Individual cases Within a. carlot way contain less than

- 60'percent, but not Jess than 50 percent “A” Quality eggs,

except that one case in each 10 examined may contain ™

_ between 40 and 50 percent “A” Quality eggs. Individual

cases may contain not more than 18 percent eggs below

- “B” Quality, provided the average percentage for the

carlot is not mére than: 10 percent: below “B” Quality.

Eggs offered as “Large” shall have an average net

weight of not jess than 45 pounds per case of 30 dozen,

with no case weighing less than 4414 pounds. The

average weight for indis idual egds shall be at the rate

bd Pe

— ‘

24".

of 24 ounces per dozen, with not ‘more than an average

-of 3.33 percent of the eggs in any lot weighing less than

23 ounces per dozen, and no individual case shall contain

more than 10 percent of eggs weighing less than 23

ounces perdozen. . =

- The commodity code for this grade and packing of oil

processed shell eggs is: 093005° age

Not to exceed two (2) per ut of the eggs may be

_ packed small end up. R : ie

*. m Sy *

_ Arricte IV, Grapine anp Cueckvoapine : The official

grading and checkloading shall be pierformed at the

point of delivery shown. in the offer by licensed graders

of the Production and Marketing Administration.

_ (PMA) and it shall -be incumbent upon the vender

to arrange with the Poultry Inspection and. Grading

Division, Poultry Branch, PMA, for grading and check-

loading services. As used herein, ‘checkloading means

that the commodity will be‘ checked. for identification,

count and weight prior to transfer of title. to USDA.

All conte; including grading and weighing fees and ex-,

penses of graders, as well as expenses of check-loading

_ Services shall be paid by the vendor, ‘Each éase of eggs

must be stamped by the PMA grader on one end with

an official identification, including the USDA Lot Num-

ber, except as provided in Article VI; Para, 2.

To be acceptable, egg grading and weight certificates

must bear dates mot more than 7 days prior to the con- °

tract delivery date. Upon the completion.of gradin

and the marketing of containers, vendors shall Sia

immediately to the PMA Commodity Office one copy of

such certificate.. : a

Articre V, Prices: The purchase.prices’are-based on

shell eggs packed and marked a° prescribed in Article

VI hereof. If, upon delivery to USDA, it is determined

- that the commodity does not meet contract requirements

' as to grade or weight, USDA, will accept the eegs and ©

make payment according to the following schedule:

_ When the.grading certificate shows © -

the grade to be: Reduction-in Price:

Bei ween’ 55% and 59.9% “A” qiality__.. Two cents per dozen. —

~ : ry

When the grading certificate shows -

* the average weight to be: Reduction in Price:

_ Between 44 Ibs. and 44.9 Ibs. net per case_. One cent per dozen.

Between 43 lbs. and 43.0 lbs. net per case__ Two cents per dozen.

Shell eggs grading below 58 percent “A” quality or 43

pounds average net weight will be rejected.

* . * oe * * .

:°

ma 2)

Arricte VII, Devivery: The shell eggs shall not be’

‘deemed ready for delivery until they are properly ° > ~

eae until the Ege Grading and Weight Certificate

ehas been issued by PMA and until they meet contract

requirements in all réspects USDA will issue an order

for delivery at least 10 days prior to the delivery date

specified in the contract. After ‘receipt of such order

for delivery, the vendor shall effect. transfer of title of

the shell eggs in the warehouse on the date of delivery .

specified in the contract,and furnish USDA with a non-

negotiable warehouse receipt properly executed as pre-

scribed by USDA. Transfer of title shall not be made

before or after the contract delivery date. ;

If vendor fails to make delivery in accordance wit]

contract terms, such failure will be considered sufficient

reason for USDA to proceed under the provisions of

' ARTICLE 7 of Form’ PMA-100, and USDA reserves

the right to purchase the commodity. elsewhere and

charge the vendor any excess costs resulting from ven-.

dor’s failure todeliver. |

Contractor shall, at his expense, take all necessar

steps to protect the product after inspection by PMA

and until delivery to USDA. Such protection shall in-

clude _ of the shell eggs at a temperature of 2914°

to 31° F. | . , ete

The vendor will pay all in and out handling charges.

through the contract delivery date and for not less than

10 days Pe thereto. USDA will not pay for

charges of any kind incurred by vendor prior to the date

of transfer of title.

_ On delivery, a plus or minus tolerance of five (5) per- ee

‘cent in quantity will be allowed ; provided, however, that.

no carlot quantity is less than 480 cases or more than 600 —..

5. The pertinent provisions of Form PMA-100, entitled

“Standard Contract Conditions,” which was specifically in- °

corporated in and made a part of PY-61, are as follows: |

Articix 2. Specirtcations: The Commodity shall

meet: the. specifications prescribed by the Contract and. _

shall conform to the applicable provisions of the Federal

Food, Drug and Cosmetic Act, and amendments and

regulations thereunder. . oF

_ . Articie 3. Inspecrion. (a) The — must be

inspected after the date of the- Contract and prior ‘to

delivery unless otherwise provided by the Contract. .

- Such inspection shall be made by USDA, or by any

person or agency designated by and under the super-

627404—62-——4 SM erect

(

vision of USDA after the Contractor's request therefor.”

b) If the Contractor shall request, inspection of the

mmodity at least 10 days before the date of delivery

or the first. day of the delivery-period as specified in the

Contract, then the provisions of Article 7 hereof shall

not apply to the delay, if-any, occasioned by the failure

to make inspection in sufficient time to permit delivery

at Time for Delivery; otherwise the provisions of said ,

Article avec. 9 bey any such Late Delivery.: (c) For

the purposes of the Contract, inspection shall not be

deemed to be complete or the Commodity deemed to be

‘ inspected or ready for delivery until the inspection cer-

tificate has been issued. (d) Unless otherwise provided

in the Contract (1) the cost of inspection shall be borne

- ‘by the Contractor, (2) the cost of samples furnished for

inspection shall be borne by'th. Contractor, and (3) any

chemical analysis veeaieed for such inspection shall be

made in accordance with the Official and Tentative

Methods of Analysis of the Association of Official Agri-

cultura] Chemists in effect on the date of the Contract.

(e) Inspectors are not authorized and have no authority’

to prescribe any changes in the Contract or to 6rder

Contractor to perform under the Contract: in any par- -

ticular manner. (f) Inspectors are_not authorized to

accept or reject. commodities offered for delivery.

* * ta * : *

Arriciz 7. Detay. If the Contractor refuses or fails +

to perform the Contract within the time specified, or any

extension thereof, Agency may, by written notice, term-

nate the right,of the Contractor to proceed with delivery

or with such part or, parts thereof as-to which there has _

been delay, and may hold Contractor for any damage —

caused Agency by reason of such termination. Contrac-

tor’s right to proceed hereunder shall not -be terminated

if he “gs Agency prompt written notice of such delay

and the cause thereof, and the Agency determines in

writing that the delay is due solely to causes beyond the

control and- without the fault or negligence of the Con="_

tractor, including but not limited to, preference, priority

‘or allocation orders issued by the Government. Written

notice of such determination shall be given to the Con-—

tractor. In cases of such excusable delay, the time for .

performance shall be extended for a period equivalent

to the time lost because of the delay byt not exceeding

60 days, unless Agency by a written notice to the Con-

tractor extends the period beyond 60 days. The decision

of the Agency as to cause of delay shal] be final and con-

clusive on. the parties. If performance cannot be com-

Ss tig aaa

’ af

ne within the period as extended the Contract may.

terminated by Ageafcy, without pre} .idice to any rights

of Agency due to Contractor’s breach. :

* : “at * es * *

ARTICLE 12. CHANGES AND Extras. No changes in the

terms and conditions of the Contract shall be allowed

unless the sarhe have been ordered in writing by the

- Agency and a change in price, if any, has been stated

in such order. ;

* ” . * *.

Agriche 15. Assignment or Cxiams. No. claims

‘against Agency may ‘be assigned except in accordance

with the Assignment of Claims Act of 1940. Contractor

is‘ permitted to assign the proceeds of'the Contract, or.

any claim arising from any “Tender of Delivery” where

such “Tenders of Delivery” are specifically provided for

in the Contract. (31 U.S.C. § 208).-

a * . #- con a Da ee

Arricie 22. Dispures. Any dispute concerning ques-

tions of fa¢fWhich-may arise unter the Contract and

which is nat disposed of by mutual agreement, shall be

decided by the officer executing the Contract in behalf

of the Agency or by a designee of the Agency who shal¥

reduce his decision to writing and mail a copy to the

Contractor. ° Within 30 days from said writing Con-:

tractor may appeal; to the head of Agency, whose de-

cision or that of his designated representative shall be

tinal and conclusive upon the parties. Pending decision

of such dispute the Contractor shall diligently proceed

with the performance of the Contract.

6. The foregoing specitications called for storage eggs of

an exceptionally high quality. Its requirements were

rigorous; for’ instiince, they permitted only 4 eggs out of ,

1.500 to be within the classitication of “dirties, leakers and

loss.” ica ,

7. The following “Memorandum to Contractors Under

Announcement PY-61, Purchase of Shell Eggs” was issued

Augiist 12, 1952, by Hermon I. Miller, Acting’ Director,

Poultry Branch, and reads as follows: ;

This has reference to Article 1)’, Grading,and Check-

loading, of Anmmoincement PY+61, under which you

have contracted to deliver oil+processed shell eggs.

Among other. provisions,this Article specifies that you

shall furnish PMA Grading and Weight Certificates

‘that bear dates not’ more than 7 days prior to the con- '

98 ,

tract delivery date—Septemiber 2 2, October 1, November

1, or December 1, 1952, as‘the case may be. Inview of ~

the ‘great volume of egg grading work placed oi the

Inspection and Grading Service just prior to these dates,

> and te order to give contractors ample time for vandling,

or for recandling enerations, if necessary, it has been de-

termined that certificates w ‘ill be acceptable which are

dated within 10° days prior to the respective, contract

delivery dates.

endors. are reminded that all eggs must be stored

at the delivery point, named in their contracts in suf-

ficient. time to accomplish all grading or regrading opera-

tions, so that certificates can be issued within the 10-

day period herein provided. ,

Tn case you have not arranged fe PMA’ grading serv-

- dee, we suggest that you do so at once in order that we’

_may Schedule the service to meet your needs.

. 8 Pursuant to announe ement PY*-61, Nichols & Company

submitted a bid on June 13, 1952, which was accepted by

_ PMA Jume 19, 1952, as contract A1PM(MF)2727, for 50

‘lots (15,000 cases of 30 dozen each) of eggs at an approved

_ warehouse in Peoria, Illinois, of which 20 lots were specified

for delivery on September 2, 1952, at $.5250 a dozen and ten °

- lots were specified for delivery October 1, 1952, at $.5320 a

dozen.. © °

All of the lots of eggs offered for deliv ery under contract

A1PM(MP). 2727 on September 2d and a substantial portion ~

- of those offered for delivery October 1st failed to meet fhe

quality requirements specified in PY-61 and. were rejected.

- Upon.requests of the plaintiff for extensions of time on de- |

‘liveries, the PMA granted extensions, which were accepted

" ‘by the plaintiff, for the September 2d to September 12th de: -

. liveries, at one-fifth of a cent a dozen a day, two-fifths of a

cent for deliveries from September 13th to 17th, inclusive,

and four-fifths of a cent a dozen a day from September 18th

to 22d. A similar penalty.of one-fifth of a cent a dozen a

day was imposed for delays in deliveries due October 1 to 12,

1952. The plaintiff continued in default on Some lots and

was finally granted extensions .for both delivery dates to

‘November 7, 1952, at a flat two cents a dozen for all lots on

which deliveries were late ten days or more.

9. On June 21, 1952, plaintiff submitted a bid, which was

accepted by by PMA on. June 26, 1952, for 24 lots (12,000

_ Ast deliveries at Burlington, Iowa

cases) of eggs at an approved warehouse in Burlington, Iowa, .

of which eight lots were specified for delivery September 2,

1952, at $.5249 a dozen, eight lots ‘for delivery October 1,

1952, at $.5349 a dozen, and eight lots for deliv ery November

1, 1952, at $.5449 a dozen, all under contract designated. as’

-A1PM(MF)2738.

Upon request of the plaintiff, the PMA paar” an exten-.

sion of ten days for deliveries due September 2d and October

Ist, ata penalty of one-fifth of-a cent a dozen a day, which

was accepted by the plaintiff: One’ lot which Wasque for

delivery September 2d was delayed seven days, two lots due

for delivery October Ist were delayed two days, and one

other lot eight days. There w ere 1 no delays in the November:

10. In addition to the 54 lots of eggs sold by the plaintiff

in its own name, the plaintiff also sold 64 lots of eggs through

Sol Rich & Company, acting ‘as plaintiff's broker. During .

1952, Sol Rich & C ompany. was regularly engaged as a broker

in connection with the sale of eggs and other commodities

for others. At the requést of the plaintiff, Sol Rich & Com- |

pany, sometimes referred to as Rich, submitted bids in its -

own hame pursuant to announcement PY-61 on behalf of

the plaintiff and a number of other dealers throughout the

‘ country, in accordance with custom in the trade.

Plaintiff informed the defendant by wire on September 14,

1952, that its eggs were sold under Rich contracts A1PM

me (MF) Nos. 2691, 2695, and 2732, and requested an extension

of time without ‘penalty for thé undelivered lots that were

past due at that time. The defendant was also infortiied by

Rich on August 19, 1952, that a portion of the eggs sold under.

contract 2695 were for the Nebraska Egg & Poultry Com-*

pany. All other correspondence relating to these contracts

was carried on with the defendant.and Sol Rich & Company. .

The Rich contracts involving the 64 additional lots of plain-

tiff’s eggs are described in the following findings.. :

1L On May 10, 1952, Rich submitted a bid for the delivery

_of eight-lots of eggs pursuant to PY-61, with deliveries at

Chicago, Los Angeles, San Francisco, Dallas, St. Louis, and ~

- Memphis. “The contracting officer for PMA accepted only

four lots, all of which represented plaintiff's eggs, for deliv-

-ery September 2 2,1 1952.. By letter of May 15,1952, Rich was -

‘notified of this award under contract 2691. ‘Two lots (1,000

- cases) . were designated. for delivery at St. Louis, Missouri,

at $.5224 a dozen, tind two lots (1 000 cases) for delivery at

Memphis at $.5274 wdozen.

By letter of May 22, 1952, Rich notified plaintiff that these

_- lots were sold for plaintiff's account. .

12, On May 17, 1952, Rich submitted a bid. for the delivery

of 42 lots of eggs under PY-61 at various points throughout

the country... On May 21, 1952, this offer was accepted in full

by the PMA as contract 2695. It included 20 lots (10,000 ,

cases) of eggs owned by Nichols & Company, of which five .

lots were to be delivered at an approved warehouse in St.

Louis, September 2, 1952, at $.5224 adozen, five lots for deliv-

ery. in St. Louis October 1, 1952, at $.5324 a dozen, five lots

for delivery in Memphis Septainber 2, 1952, at $.5274 a dozen, -

‘and five lots for delivery in Memphis October 1, 1952, at.

$5374 a dozen.

‘On May 22, 1952, Rich notified Nichols & Onepaie that

/the 20 lots of eggs were sold for its account under PY -6land —

- also advised of the prices specified in contract 2695.

13. On June 14, 1952, Rich submitted a bid under PY-61

for the delivery of 46 lots of eggs, including 40 lots for deliv-

ery at Peoria, Illinois, two lots at Lincoln, two lots at York,

‘Nebraska, and two lots at Duluth, Minnesota. This offer

was accepted by PMA on June 19, 1952, under contract 2732.

The 40 lots (19,200 cases) of eggs specified for delivery at an

approved warehouse in Peoria, Illinois, were sold for Nichols

& Company, with 20 lots to be.delivered September 2, 1952,

> at $.5224 a dozen and 20 lots to he delivered October 1, 1959,

at $.5324 a dozen.

By letter of June 20, 1952, Rich notified Nichols that these

eggs were sold for its account. :

14. The plaintiff ascertained that the vaiinovel ‘warehouse

in St. Louis where it was contemplated that the September

2, 1952, deliveries under the Rich contracts 2691 and 2695

would. be made, was filled with Government surplus coni-

modities and that the warehouse could not accept the eggs for

storage. On August 14, 1952, Rich requested a change of

' the delivery point for the seven lots (3,50 cases) of eggs for

delivery Septémber 2, 1952, from St. Louis to Peoria, Illinois,

with an allowance of freight to St. Louis. The contracts

(2691 and 2695) were aiixended by the contracting officer, Roy

_D. Flato, and Rich was notified of the amendment on August

v2, 1952, providing for a change. in place of delivery of the

September 2 shipment from St. Louis to Peoria, at a redue-

tion of $.025 per dozen. The change & delivery ‘point to

Peoria with reduction in price fixed by the« ont rac ne a

was acceptéd by Rich August 25, 1952.

15. ‘Thirty-six of the 37 lots of eggs offered sale the con-

tr ee Sol: Rich & C ompany for delivery at Peoria Septem: -

ber 2, 1952, failed th, meet the quality requirements specified

in PY-61 and were rejected. The additional work of re-

candling, and replacing 2. large: portion, of. the eggs in each

lotedelayed the deliveries beyond the specilied delivery dates.

Upon — of Rich, the PMA. extended the prospective

September 2 deliveries for-a period.of ten days at a reduc

tion of one-fifth of a cent a dozen a day and two-fifths of a-

cent a.dozen for deliveries after September 12.

On September 17, 1952, Rich wrote the contracting officer:

that it would be in default on the September deliveries of

two lots under contract 2691, five lots under contract 2695,

and three lots under contract 2732. These ten lots were

- accordingly terminated by the contracting officer September

18, 1952. However, by letter of October 24, 1952, thé con-

tracting officer withdrew the termination of these lots and

extended the time for all delinquent deliveries until-Novem- .

ber 7, with a net. reduction of two cents a dozen on all de:

liveries that were delayed for ten days or more. Qne lot

under contract. 2695. was exten r delivery until Novem-

ber 12, 1952, at the flat reduction of two cents a dozen.

Thus, as in the contracts with Nichols & Company, the maxi-

mum reduction for delayed deliveries of ten days or more S

was limited to two cents a dozen on all of the Rich contracts.

_ 16. The plaintiff's contracts 2727 and 2738 called for the

delivery of 54 lots: of 27,000 (30 dozen cases) and the Rich

contracts 2691, 2695, and 2732 called for the delivery of 64

lots of 31,200 30-dozen cases. The plaintiff actually deliv-

ered 118 lots of 57,040 30- dozen cases under all of these con- -

‘tracts, because most of the lots, delivered at Peoria, Illinois,

and Burlington, Iowa, consisted of 480 30-dozen cases. The

plaintiff performed all. of the contracts in full, insofar as

32 . \

they er to the plaintiff's eggs, and made fin ] deliver y.

on or about Noveniber 12, 1952.

The following summary contains the contract price, con-

tract adjustments, and the net payments under‘each group

\ of contracts in accordance with the delivery points required :

‘ : ae . | Niehols con- Rich gontract

Delivery points . tract Nos. 2001,

: 2727 and 2738 oes 2732

Number of lots and cases... oben lamnalglaiaian side 30 (14,465) | 47 (22, 580)"

. . eberares: ete

» Contract prices. .............- bce nasi chosacecwenee $229, 263. 75 32-

_— Cemtrest priens... is oz, 263 $356, 440,

Transfers from t. Louis delivery Sacelaioee ni chkinen ae sah detcieee aad 2; 520. 60

Fonalty tor delays in detivertes piaaawasansac 7, 555. 80 6, 657. 80

Net payments received. .:...... : kenge Riceaace $221, 707.95 | $347, 262.52

‘ :

ar) a, i coe EA

SS = ah

$184, 861. 44° eS

; OY Eee

$1847314. 24 |... -.-....

ensansmiaslass 5 (2, 495)

; for delays... wriaciotthage i eipalira Wass Ale GaGa: kcialnes Gk eben pee cel V2

Net paythents receivsd ... -.-. | --- BROS WHERE OS $39, 677. 33

e Mempail gig mac: pres cetancs a

Number of lots and cases... oN etch pact dee 12 (6,000)

SS ES ERIN Nah SIRS es 45.00

Net payments teceived........... EI, (HALE LEAS $05, 637: 00

- ee * Commed aan 4

Contract prices... eis $008,007.64 | $414,125.19 | $401, 972. 48

Less deductions Eeeareccen MED ATOR 4 ti 17, 498.00-) 8 @ 395. 60

ria cichttntistaitingiiingen $888, 500.04 | $406,022.19 | | 482, 576. 85

ance of 5 differentials in the number of cases in each lot. The are

separated ween A, Xe as Se, Soe t con-

pate st sco Nichols is not the y plaintiff in the Rich contracts. .

It also shows actus’ contract prices, penal net amounts paid. Plaintiffclaims ~

of the jenalties in its Count I.

on of 244 cots « domes for Gelays) 1s ¥7,07kal, or #AA2 perce

17. tied claims breach of the contracts involved in this

” action, particularly at Peoria, Illinois, by inspectors Thomas

S. McCurley and Robert L. Young, who performed most: of

the inspection of eggs offered for delivery at Peoria. | Plain-

tiff contends there was bias and_unfair grading of its eggs,

improper selection of samples for grading, refusal by de-

fendant to perform. regrading of. rejected lots when _re-

quested to do so, excessive and rough handling of eggs, and

the use of a eandling: light with excessively intensive light .

power w hich resulted in reporting of excessive defects in the

éggs examined and improper classification of the: eggs, all

of which plaintiff alleges were contrary to the contract spec-

ifications and administrative regulations for the inspection

and grading of shell eggs’

18. Regulatioris were issued from time to time by PMA

for the grading, labeling, and classification of shell eggs and

poultry products. The regulations-goverhing th8 inspection

and grading of shell eggs during the delivery periods of the

contracts herein: were consolidated and issued in July 1952

as the Shell Egg Graders Handbook, a.copy of which was:

—" in evidence‘as plaintiff Exhibit No. 6.

Shell eggs were classified into approximately 15 Us.

: Gus . as U.S. Grade AA (Consumer), U.S. Specials, U.S.

: @ eA, Procurement I, Procurement II, Procurement III,

- Procurement IV, U.S. Extras, US. Grade B. (Cénsumer),

U.S. Standards, U.S. Grade C (Consumer), U.S. Stained,

_ US. Trades, U.S. Dirties, and U.S. Checks. When any lot.

contained more than 5 percent “loss,” it was certified as “No

> U.S. Grade.” The specifications in PY-61 for weight, grade,

and loss allowanges came under Procurement II grade. The

tolerance for individual cases inspected was 10 percent. less ©

‘than the lot average requirement.

_ The term “stained® was to be employed where the soiled

portion was not more than ‘one-eighth of -the shell area;

“dirties,” where more than.one-eighth of the shell area .was

soiled; “checks,” if:the shell was cracked but the membrane °

was not broken; and “leakers,” if membrane was broken to

- the extent that it permits leakage of the egg. Except onare- .-

quest of an applicant it was not required that “stained” eggs

be graded as to interior oy, other than for loss and

checks: . -

19. The pebdiens permitted a wide latitude for the dis-

cretion and judgment of the — and the proper grading

627404—62—_5

of. the shell eggs depended lar ly upon the training and —

. experience of the grader. However, certain provisions, tol- . °

erances, and ‘allowances were specified and péquired in th

“inspection and grading of shell eggs. *\ | me

The Shell Egg Graders Handbook, which was regularly

employed by graders, provides, in part, as\follows:

I. Réqumep Factiities eet \

* * * ’

B. Candling light . \

1. There are many different styles and types of can- |

dling lights commercially -available in which the light

intensity and the size of the candler o renee ar

siderably. Most of these candling lights, howevek, are

satisfactory, if they are adjusted to proyide comfort

and proper illumination for the job. . It is merely\a

matter: of becoming accustomed to the type of*light ih

use. Accuracy of the candling results can be checked

by. breaking out a few ces and checking the broken \ “

out quality with the candled. results.

The regulations providing standards for quality of in- °

dividual shell eggs include, ‘fer alia, the following:

‘ $42.1 Application. *F * . + ;

‘Interior egg quality specifications for these standards

are based on the use of a candling light delivering ap-

proximately 350 to 450 footgcandles of light. at the can-

dling opening. The usual box type of candling light,

without reflector, using: a clean 40-watt frosted. hulb

about. 1-14 inches from and in direct line (direct light):

behind-the opening which should be approximately 1-14-

inches in diameter, or a clean 60-watt frosted bulb im-

mediately above and 1-14 inches behind the opening (in-

direct light) provides approximately 310 foot-candles of

light at the opening. A 60-watt bulb in a direct light

candler, or a 75-watt bulb in an indirect. light ce adler,

provides approximately 380 foot-candles of light at. the

opening. Reference to “ustial box type of candling’

light” should not be construed as restricting use to that

- type-only. Any type or make of. candling light may .

' be used so long as the resulting foot-candles of light are

the same. ei

'- The Shell Egg Graders Handbook provides at paragraph

V, “THE DRAWING OF SAMPLE,” in part as follows :

A. Graders are to personally draw all stmples,includ- «

ing, if possible, samples from lots in a public ware-

_ 35-

house.. When sample is drawn by a public warehouse

employee, the covering certificate shall be qualified with

the words typed in all capital letters WAREHOUSE

SAMPLE. ° oe

B. * * * Draw the samples proportionately from var- .

ious parts of the lot.

* * * Ce a.

G. Regrading—A ppeal Grading,

Whenever an applicant questions the correctness. of

: the original grade and size, a nh eer | may be made by

- shall

_ Ing) and the dup

re-examining the original sample and in addition draw

a sore size Sample at random. The final. grade

the a of the ot a ag ay (second grad-

icate sample. The fee for such grad-

ing shall be based on time? ‘The date on the certificate

shal! :be the date of the: final —— Such a regrade

may be made only after the original’ certificate is |

* surrendered.

An applicant may also file a request for an. appeal

grading. Whéenever such an appeal is allowed, the grad-

Ing procedure, shall be the same as for a regrading.

An appeal grading could: be made by any interested party

who was dissatisfied with the grading certificate’ within 2

days after it» was issued, orally or in writing, whereas a re-

quest for regrading could: be made at any time by such in--

terested party. The pertipent provisions of the regulatians

dealing with appeal grading are set out in 7 C.F.Ri, Part 55,

as follows: | \ pies

$55.42 When appeal grading may be requested. An

application for an-appeal, grading may be made\by any

interested party who 1s dissatisfied with any determina- ,

tion stated in any grading certificates if the identity of

the samples.-or the -product, has not been lost; and\such -

\ application sor an ap a erecing shall be made within -

two days following the day on which the gradihg \was

performed. Upon approval by the Administrator, the

‘may be made may be extended, ,

time within which an application for ar

L appeal grading

§ 45.28 ow to obtain appeal grading.’ Appeal grad-

ing may be obtained by filing a request therefor (a) with

the Administrator, (b) with the grader or inspectot who

issued the grading certificate with respect:to which the

_appeal grading is requested, (c) with the immediate

superior of such grader or inspector, or (d) with the

officer in change of any office of grading. The applica-

‘tion for appeal. grading shall state the reasons therefor

°r

and may be accompanied by a copy of the aforesaid

grading certificate or any other. information the : P

plicant may have secured regarding the product, at the

time-of grading, from, which the aippeal is requested.

* Such application may be made orally (in person or by .

telephone), i in-w riting, or by telegrap h. If made erally,

written contirmation may he required. et,

* al + * ‘ *

‘$55.28 Who shall make appeal gradings... An appeal

. grading of any graded. product shall be made by any

grader (other than the one from whose grading the - ap.

_ peal is made) designated for this peony by.the Admin-

istrator; and, whenever practical, such appeal grading

> shall be conducted jointly by two such gradets, -

20.: The number of samples inspected for the purpose of

grading a lot depended upon the size of the lot offered. . In

carlots of 401 to 600 cases, the minimum samples required

to be inspected were 15 cases of 30 dozen each. But, if ‘in

doubt, or if the quality of a lot was irregular and the grade

not clearly defined; it was necessary to. examine as many

as 30 or more_cases. aa

The grading of samples required the examination of 100°

eggs in each case of 360 eggs, and the average grade for the

‘lot was based upon the number of sample cases multiplied

by 100. Thus, a minimum, of 1;500 eggs were inspected for

the determination ‘of the avérage grades of each lot of 500

cases of 180,000 eggs, representing less than 1 percent (.83

percent) of the lot graded. Further, the “loss” allowance of

percent under PY-@. permitted a maximum of four or

five eggs, of combined dirties, leakers, and other eggs .con-

stituting “loss” out of the total of 1,500 eggs inspected.

The quality of a lot was determined upon the basis of the

‘total number of samples selected. It was an applicant's

. privilege to rework the lot, by remoying the eggs candled-by

certain candlers, by individuak case inspection, by recan-

dling, or by eliminating portions of the lot. But,. when the

character of the lot was clianged in this manner, it was/re-

‘quired that new samples be selected and the grades certjfied

as a new lot. The original certificate was never

destroyed.

21. The method of grading required that the 100 eggs, in-

spected in the first sample case be taken from*the top three

“aes st phe

‘ . ° t - Cs ‘*

fillers of 36 eggs each on one end of the case, except eqght

eggs in the lower filler. “The second sample case reqiired

the examination of the second, third, and fourth-fillers :.the

third sample required the examination of the third, fourth,

and fifth fillers; the fourth samy le required the eXampina-

tion of the first, second, and fi h fillers’; and the fifth

sample required the examination of the tirst, fourth, and fifth

fillers, all from one end of the cyse and excluding eight eggs:

in the lower filler in each- rinatanch Th e Sume proc edure Was’ —

to be followed in the examination e — in excess of

five for the same lot. :

The tight eggs in the lower: filler of each cause.examined

were to be left-in. the same Cornerin each case in order to

avoid’ any argumnerit as to whether any of the eight egys left

“> in the third filler were to be included or excluded in grading

> ce)

Rs. <>

aa Ne

the case, :

The 100 egys cunmaiaed: in each case were then to’ be re-

placed on the top fillers oflone end of the. ease, and that

end was:to be stamped twice to identify the end examined.

_ The entire lot was then identified by. the official grade stainp.

22-In the grading process each half case graded was to be

examined for the presence .of. any undesirable odors, om

if found, the lot wits, placed i ina “No U.S. Grade” classifica- ,

tion. All eggs appearing dirty when thie filler Was removed

were to be candled first. . ;

A memorandunr, sqmetines referred to asa work sheet,

was required for the recording of all details upon which a

‘ grade was determined. In connection with its’ preparation,

the Shell Egg graders Handbook ‘states, in part, as follows:

XI. Preparation OF MemoranpuM

A. Execute the official egg graders .memor andutn in

detail at the time of grading. AG) grading certificates

shall be “ba¢ked-up” with a detailed memorandune which

shall be kept on file, Sign the memorandum in ink or

indelible pencil.

B. The detail required on the memorandun) inc ludes

_ all information that is typed on the certificate and in

addjtion such comments as to loading, holding, and gen-

eral character of the eggs astnay_be useful, should there

be 1 dispute as to the ace uracy: of ‘the ghdemra later

S% date. ;

the contracts, and commencing about the erid. of July 1952,

The final grading was prepared in certificate: form, show- — :

ing the classification of each case sample, and the average

’ grade of all samples, which became the grade of the lot. The

number of copies of cértificates depended upon the request

of the applicant for whom the.original, and as many. copies

as desired, were to be furnished. One copy with the official _ ,

memorandum attached was to be forwarded each Saturday — .

to the State Supervisor's office. One copy was attachedtothe

monthly report to the State Supervisor's office, and an extra ;

copy was prepared when the applicant was a Federal agency.

Upen request of an applic ant, advance information could

. be furnished in respect ‘to all or part of any grading cer- ue}

tificate issued to him or to any person designated by him. ae

23. ‘Prior to the dates that bids were submitted for the

delivery of eggs under PY-61 by Nichols and Rich, the’plain-

. tiff had in storage 89 lots of eggs in approved warehouses j in

_ Peoria, Illinois, and 28 lots of eggs in Burlington, Iowa. . All *»

- of these eggs had been inspected and 4 ded and certificates

"were issued at the time they were placed in storage. Certigi-

cates covering 59 lots of eggs in warehouses in Peoria were

introduced in evidence. Most of these lots of eggs were

graded as “extra large,” and, with the exception of orie lot . :

which was graded 68.9 percent, each lot was graded 70 per-

eént, or better of “A” quality. However, the “loss™.classifi-

cation in excess_of 3 pereent and up to a maximum of 8

"percent appeared in the certificates for 27 lots at Peoria and

* four lots at Burlington, with: additional. loss by reason, of

dirties and leakers in excess of .3 percent in four lots at

the'59 lots for which certificates had been issued when t

“Peoria and five lots at Burlington. Thus there were 40 arid

- eggs were placed in storage containing: “loss” i in excess of

_ 8 percent specified under PY-61.

24. Prior to the time for the first offering of eggs wader 7 \

plaintiff had portions of each-lot removed from the ‘ware- ;

houses arid’ recandled. Undesirable efgs were removed 7

and replaced before” returning them to storage and ‘before '

they were offered for final inspection. ‘Those ‘stored at

- Peoria, Illinois, were hauled to plaintiff's plant at Avon in

refrigerater trucks, a distance of approximately 55 miles, *

39 ; - :

. where the rec andling was per formed by plaint iff s employ ees.

Approximately 3,000 cases of eggs out of about 40,000 cases

were reworked in this manner: From, five cases to approxi-

mately 150 cases in each lot were reworked in order to. im-

prove the grade average so’ that the-lot would meet the

contract requirements. All cases of eggs that were recandled

and inspected were marked for identification .with a small

: strip of soutch tape. ae

. 25. Prior to the inspection of any of the eggs tendered for

deliv ery, Thomas McCurley told Mr. Nichols that he was of

the opitvion that storage eggs could not meet the requirements"

of PY-61 without complete reworking. This opinion was

shared by at least three other officials of the USDA, all of

whom so testified at the trial of this cases

At dbout this same time MeCurley also told Nichols that

he was considering going into the: retail poultry and egg busi-

. ness in Springfield, and asked Mr. Nichols, in case he decided

to do'so, if‘e would furnish him pou't ry and eggs on credit,

but Mr. Nichols told him that he conducted his business on_a

cash basis and could not do so.’ .

26. Ky letter dated August 20, 1952, to Thomas McCorley, ;

the plaintiff submittéd for inspectio nat Peoria 20 lots of eggs

_on.its contract 2727 and twenty dots on the Rich contract:

2732.. These lots were offered for deliv ery to PMA on Sep-

tember 2, 1952, together with seven lots under Rich contracts

2691 and 2695 on which deliveries were transferred from St.

Louis to Peoria. When plaintiff offered eggs under the Rich -

contracts, McCurley made inquiry as to plaintiff's interest in. .

_the Rich contracts, and was informed by M. L. Nichols, Sr.,

president of the plaintiff corporation, that it was under a

financial arrangement, but he sand not advise McCurley that

Rich was his broker. °

Of the 47 lots tendered at “Peoria for delivery September

. 2, 1952, only 11 lots were secepted under Rich contract 2732

and all other lots were rejected for failure to meet the re-

quirements of PY-61. Thereafter the plaintiff was‘required

tc rework substantially ali eggs offered under PY-61, as

hereinafter reported.

‘Of the 30. lots tendered:at Peoria ae delivery October 1,

1952, or contracts 2727 and 2732, only ten lots were accepted

\ \

without penalty. The plaintiff offered and paid for inspec--

tion of 165 lots of eggs at Peoria ‘before the acceptance of -

77 lows under contracts involved herein, °

Approximately 111 lots of eggs were reworked completely

one or more times.

“27. On August 20. 1952, plaintiff: wibenitted’ for inspection

eight lots of eggs at Burlington, Iowa. Seven of these lots

met the requirements for weight and quality Of PY-61 and

‘were delivered ander contract 2738 on September 2d, and

one lot war reworked and accepted on September 9, 1952. .

Eight additional lots were Offered for inspection September

19, 1952, of which five lots were accepted for delivery Octo- ,

ber Ist. Of the three lots rejected, two lots were reworked

and accepted October 3d ard one lot Was Ac’ cepted: October 9;

1952. All eight lots offered for inspection and delivery

November 1, 1952, were accepted on contract 2738. y

28, Plaintitl hail ho eggs in storage at Memphis but trans-

ferred nine lots fron, Peoria and three lots from Burling-

ton to an approved warebouse there for delivery under Rich

contracts 2691 and 2695. The inspection certificates issued

at the time these lots were placed in storage show “loss” in

excess of .3 percent on, seven of these lots. They were par-

tially reworked before they were-offered for delivery. qv one

of these lots was rejec ted. Seven lots were a ciptel for

delivery Septeniber Ist, and five lots on ‘October 1, 1952.

The plaintiff offered five lots of eggs at St. ‘Tanis for de-

divery October 1, 1952, ander- Rich contract 2695, of which

one lot was rejected and replaced. :

29. Pursuant to plaintiffs request for the inspection ‘of

eggs it proposed to deliver under the contracts herein, in-

spectors Thomas S. MeCurley and Robert L. Young com-

menced inspection of these eggs at the Peoria warehouse

about August 25, 1952, The first few lots were found of

very high quality; it was found that some of the sample.

cases were marked with a strip of scotch tape, indicating -

that they had been reworked. It is established ‘that when

warehouse employees select the samples for an inspector

‘they are likely to take them from the most accessible places

and also replace the reworked eggs in the most accessible

portion of the lot from which the samples for a final inspec-

tion would normally be taken, In one instance five addi-

tional. sample cases were drawn by’ inspector MecCurley,

whereby an excess loss was established for the lot ae.

additional lots. were rejected by amendments.

The inspectors at Peoria stated that, the .samples inspected

during the first two days were drawn by warehouse em-

plovees, but the. certificates issued for these first lots do not

indicate who drew the samples, as required by the regulations.

Jn Burlington, Lowa, where warehouse employees drew sam-

ples during the first few “days, it is’so indicated on the cer-

tifie: ites issued. except for the first two d: Vs of Inspect ion,

all samples at Peoria were selected and designated by the

Inspec tors,

Inspectors MeCuriey and Young graded most of the eggs

offered by plaintiff at Peoria, but they ere later assisted |

by inspector James S. Crosson, and, during the first week,

William H. Dingman assisted in the inspection and signed

_ certificates for 17 lots, of which T4 lots failed to meet the re-

quirements of PY 61. By August 30, 1952, samples from

19 lots had been — and: 38 of these lots failed to meet

requirements, :

The plaintiff had no repytecntative at Peoria where the

inspection was being performed until late August or the first.

of September 1952, when Mr. Harold Altheide, the plant

manager, arrived at Peoria to take over the rejected lots of

eggs and offer other eggs on the contract. The rejected lots

of eggs were reworked as rapidly as possible at Avon and

Bushnell, Hlinois, so that they could be offered as new lots

and reduce the delay in making deliveries. When most of

the reworked eggs were again rejected Altheide declined to

offer other eggs, and on September 26th requested Nichols

to relieve him of duty at Peoria. Mr. Merlin Nichols. Jr.,

came to Peoria about October 1, 1942, and supervised the re-

working of eggs and offers of ergs under the contracts until

completion:

30. Small cold storage Warehouses do not normally pro-

vide space for reworking’ stored eggs, but furnish only one

small room for the inspectors. During the period -from -

September 1 to 12, 1952, the plaintiff hauled some 27 com- —

plete lots to Avon-:and Bushnell, Illinois, for reworking.

The plaintiff had employed additional graders and main-

tained approximately 20-to 24 graders in reworking eggs

42.

rejected at Peoria. Because of the urgency to make early

delivery,and reduce the penalty for delays, the plaintiff re- —

worked 23 lots entirely, and returned four of the lots and —

redistributed them with four other lots.::

During the period from September 4, when inspection

was resumed,-until September 15, 1952, the inspectors exam- .

ined 24 additional lots, most of which had been reworked |

completely. Only 7 lots of these met contract Tequirements

and 17 lots were rejected. ~

Inspections were made and certificates issued on eight lots

the same day they were returned to the warehouse, three

other lots on the first day in storage, four on the second day,

two on the third day, five on the fourth day, and two, on the

fifth day. The lots that were reworked at Avon and Bush-

nell were not.usually stored in the warehouse cooler until

‘after inspection to determine whether or not tea would be

accepted.

Tt was the duty of parshoussten’ to store all perishables

as soon as received. Because of the procedure of inspecting

. these lots before placing them in storage, some of the eggs

_ remained on the loading docks for several hours and the

weather was very-warm; the average temperatures for the

month of August being: from 62.2° F. low to 83° high, and

for September a minimum of 52.7° and a maximum of 78.7°.

' Some of the samples were returned to the warehouse the

same day they were inspected.’: Samples marked for inspec-

tion would be placed on ddllies or platforms and shifted from

place to place in congested areas until they could be inspected. .

This was necessary because they could not be returned to the

warehouse until they had been inspected and accepted.

The stenciling of all cases in a lot which was approved for |

delivery on PY-61 contracts was omitted in. the early lots

until they were loaded out. in order to avoid excessive han-

dling. Howgver, McCurley required that all of these lots be

stenciled before a: certificate of inspection would be issued,

and that all lots offered under P ¥-61 contracts thereafter be

marked and stenciled before inspection, which resulted in

‘additional handling.

Certificates of inspection were normally issued the same

day that eggs were graded, and the applicant, plaintiff in this

case, would normally have received the same within two or.

‘on

three days, except for some delay in Stenc iling the early

lots inspected.

' Thereafter, arrangements were made whereby all of the

eggs rémaining for delivery were reworked in the hallways.

of the warehouse. Regular ‘inspection Was again resumed

about September 23, 1952, and continued until about Novem-

ber 8, 1952. All of the eggs offered during this period were

reworked in the Peoria warehouse and a2 lots were accepted

asi of 82 lots inspected.

31. Noregular dnspection was per formed at Peoria bet ween.

August 30 and September 4, 1952, after only 11 lots were

accepted out of 47 due for deliv ery on September 2 , 1952.

Nichols offered other lots, which: he had on storage in Beorie

for intended delivery” October Ist, butt, MeCurley stated it

Was useless to inspect any additional lots for-deliver ¥ under

the lunch program of PY-61 until they had been completely

reworked. Dolson stated that his instructions to MceCurley

Were to continue to grade lots offered, and that the rewor kina

of a lof of eggs was not a condition to complying ‘with’ a»

request fer inspection. However, it was McC urley’s opinion

and he so advised Nichols, that eggs which were inspected in»

the spring when stored, having a loss factor of .3 up to, .7 .

percent, could not be expected to pass inspection for acgept-

ance under: PY-61 with a maximum loss allowance of .3

percent because of some deterioration which would oceur

while in storage and\from handling. - | ,

No regular oe was performed at Peoria from Sep--

tember 15th, when the reworking of eggs Was discontinued at -

Avon and Bushnell, and September 23, 1952, when plaintiff

established graders to rework eggs in the Peoria warehouse.

32. About two days after os of eggs was com-

~ menced in Peoria.on August 2 25, 1952, Lawrence J. Dolson,

the Chicago area supervisor, was'informed by McCurley that

Nichols had protested the rejections being made by the in-

spectors and had requested reinspections of-the same lots.

Dolson advised McCurley that regrading was not permitted —

unless the lot had been reworked, or the character had been °

-materially changed, so as to constitute a new lot of eggs.

The plaintiff made repeated requests forthe regrading of

lots previously rejected, but ‘requested that the regrading be

. per formed by inspectors other than MeCurley or Y oung.

og ~

| cf

° | 44

In one instance McCurley had assembled a group of “loss”

eggs that caused the rejection of the lot, and Mr. Altheide

requested that the eggs be broken out of the shell to deter-

mine the condition of the- contents. They were broken: in

. the presence of three inspectors and every egg in the group

was found satisfactory and the grading was amended for ac-

ceptanceofthelot. © — - :

Plaintiff made no request’ for appeal grading.

33. As stated, a Mr. Dolson was the supervisor for the Chi-

_ cago area, consisting of 12 States, including Illinois, but

- plaintiff, from the beginning, lodged his protests against

what it considered unfair grading of its eggs with the PMA

officials in Washington. © :

~ On September 14, 1952, plaintiff wired Messrs. Termohlen,

Flate, Kemper and Cunningham, in part, ‘as follows:

We further request extension of time for delivery. with-

out ‘penalty after September 12th because we believe

Agency thru its agent and inspector in charge failed to

have made inspections without prejudice. We further

believe we could have made by this writing full delivery

of all lots sold had we had inspection without prejudice

in the normal course of business. We believe we have

_ had much unnecessary and abnormal expense and costs

in regrading of eggs which might have otherwise been

—— had inspector in charge not been prejudiced. -

We believe the inspector to be of high integrity and sin-

cere in his work -but that he was at all times abritrary in

his decisions: regarding this particular contract and

_ made the decisions as to the outcome of the grading prior

to making inspections. Inspector informed us that eggs -

would not meet requirements of cofitract prior to grad-_

ing, during original grading, during regrading and has

tateemed us as of Sept. 13th that it would be impossible

‘to pass further inspections because he had checked lots

—— inspected and found same to, contain more

s than when originally inspected. That inspector in

charge further informed us that agency should not have

made contract which in his opinion was and is impossible:

to fill with storage eggs and alsoinformed us we should

not have sold eggs under a contract which in-his opinion |

was impossible to fill.: Inspector further informed us

/ several times that he was not.taking any responsibilities

‘ which might endanger his job and future and also that

PMA should have taken steps to have this particular

contract inspected by other inspectors. All we ask ‘is

that the agency allow us to fulfill this contract in the

_—

best possible time’ ayd manner under continuous super-

vision and inspectjon by inspectors we by Mr.

. Kempers who can/Anake inspections without fear of per-

sonal harm and Avithout prejudice to our fulfillment of -

our contract and-obligation. Since, Messrs: Termohlen, ;

Miller, Flato/Cunningham and Kempers have promised |

us their wholehearted support and cooperation and that |

the agency has.no intent of jeopardizing or causing the

failure of our business and o putting our employees out

of a job we hope the agency will give serious considera- |

tion to our request.as outlined to Mr. Cunningham that

beginning at once we be allowed to fulfill September

contracts under continuous supervision and inspection

while regrading the balance of coyttact by inspectors

designated by Mr. Kempers either at Peoria or our

ants without any additional penalties of time after

Repteaiher 12th as we could not financially absorb same.

. * * * * *

_ 34. Upon the direction of Bernard W. Kempers, the As-

sistant. Supervisor for the Chicago area, Dale H. Shearer...

went to Peoria to receive and. investigate Nichols’ complaints.

He rechecked a number of the lots that had been rejected

and found the samples substantially. the same as‘they had

beeh graded by the inspectors. Sajak:

While’in Peoria, Mr. Shearer explained ® both Mr.’

Nichols and Mr. Altheide the reasons that the eggs were not

meeting requirements, and reported that he recejved no spe-

cifie complairft on any specific lots while he was there, The.

only-specific complaint that he could recall was the first tele-

_ phone call by Nichols to his-office that the men were follow."

ing the book too closely. Mr. Nichols did not -omplain to

Mr. Shearer of any unfair grading. as

Prior to the installation of reworking operations in the .

Peoria warehouse, Mr. Shearer made personal inspections —

of two lots bearing new lot numbers and which obviously had

been’ reworked at Avon or Bushnell. One certificate was

issued by him on September 9, 1952, and met, the require:

ments of PY-61. The other certificate issued September 16,

1952, failed to meet such requirements. —On a later visit, on

September 22 and 23, Mr. Shearer inspected five of the origi-

nal lots, originally stored in the Peoria warehouse ih Febru-

ary 1952, all of which had been reworked, and all these met

contract requirements. , |

On. October 10, 1952,.Mr. Shearer reported to Bernard. W.

Kempers that the g gradings by\McCurley, ‘Young, and Cros-

son were correct. \

35. The plaintiff contends that one major reason for the

downgrading of its eggs was the type of candling light em-

ployed by the inspectors. This type is kgown as the “BB”

candler, containing a 60-watt clear bulb, with a reflector —

that would deliver a light-estimated in excess of 4,000 foot-

candles at three inches from the aperture. The “BB” candler

had an aperture approximately 1%,¢th of an inch, with a ©

rubber bumper. or gasket around the edge. Without the

- reflector the light infensity would measure about 300 foot-

candles, and with adjustments of the reflector it would vary

from 300 to in excess of 4,000 foot-candles. With the greater

light intensity, certain defects in an egg became more pro-

nounced and‘a wider range of flaws could be observed. It

permits: faster observation of the egg content and a more

| rapid inspection operation.

The “BB” candler has been used uniformly * the USDA

inspection service since 1952. However, this was the first

use of the “BB” candler in plaintiff's experience. There is

no evidence that any of the graders at Peoria had any prior

‘experience j in the use of the “BB” candler, except William H.

Dingman, who used it in sofne field work in Korea in 1950.

The merits of the “BB” candler are established by its

adoption and use as the standard type in all major ware-

houses. The downgrading of plaintiff's eggs; . if any, which

resulted from the use of the “BB” candier, | is not: Geterm}--

_-nable from the evidence presented.

_ 36. The plaintiff had a number of conferences with PMA

officiais in connection with the grading and reworking, of

eggs and to arrange extensions of time for deliveries. At con-

ferences in Washington on September 12 and 15, 1952, Nichols

‘submitted his complaints of unfair grading and requested

an investigation, The matter was discussed with Messrs. -

Kempers, ‘Termohlen|, Miller, Flato, and Cunningham.

M-. Miller stated that it was not contemplated that eggs

offered under PY-61 would be reworked, but that the bid

price should have provided for necessary reworking to meet

the quality and loss requirements and that most of the eggs.

ogered. .were reworked. Both Mr. Kemper and Mr. Tér- *

mohlen were of the opinion that plaintiff? should’ have known

that ‘storage eggs would have required reworking to meet

the requirements of PY-61. _These officials offered to co-

. operate and did assist in the arrangement for the reworking

of eggs in the Peoria warehouse, in order that plaintiff might

avoid hauling them to Avon and Bushnell and the excessive -

handling. . tk , Yy ;

A report of deliveries under PY}-61 in Nebraska was made

“by the state supervisor, pointing ‘out that, of- 116 originaL-

lots’ offered, 50 iots had not beén reworked and 28 of them

» Were accepted and 22 were rejected; 66 lots had been re-

worked, and, of these, 54 lots were accepted and 12 rejected. ..

A total of 118, lots were finally accepted in Nebraska by re-

placement of certain. lots and the reworking of other lots.

Tliere is no evidence to show to what extent the original lots

were reworked. Some of the lots offered liad never been .

“fnspecved” when they were placed in storage. Sol Rich-&™

Company was contractor for 46 of the lots delivered in

Nebraska. : .

No documentary data relatingite the experience of other

_ contractors under. PY-61 have been put in the record in this

case. a

~37. On January 18, 1953, the plaintiff submitted a claim to

the Comptroller General for $177,136.27, based upon unfair

| _and improper grading of eggs delivered under PY-61,

“Oo

‘primarily at Peoria, Illinois. The claim as filed is:a part of

plaintiff's proof in the record of this suit. )

By letter of June 29, 1953, True D. Morse; Under Secre-

‘tary of Agriculture, ‘submitted to the Comptroller General.

a memorandum by William D. Termohlen, dated May 28,

1953, together with copies of two investigative reports, and

recommended that plaintiff's claim be denied in its entirety. . -

‘There is no evidence of Reord to show what action, if any,

was taken by the Comptroller General's office with respect to

plaintiff's claim. ar, | . .

38. The reason assigned for rejection of most of the eggs

offered by plaintiff was a loss factor in excess of the .3 per-’

cent maximum aHowance. ‘Good ‘eggs do not. déteriorate

very much while in storage, but poorer quality eggs continue

to’ deteriorate. The hauling and repeated handling of the

48 .. .

eggs in the reworking procedurse and inspections contributed

to the deter » ration and loss factor in plaintiff's eggs.

The eggs vtiered for delivery at Memphis were reworked

only in part, and were all. inspected at Avon, Illinois, for

- quality under PY-61 before they were transferred to Mem-

phis. ,However upon final inspection at Memphi nine out

of the twelve lots contained checks or losses: in ‘excess of *

‘maximum allowances, but were accepted With a small pen-

alty reduction in price ‘because of the additional tolerances

for transit damages permitted under Article II of PY-61,

where the eggs had been inspected within 15 days prior to

” final inspection and delivery ete WA: found to have been

within the maximum tolerances.

The lats transferred to Memphis wi first inspected wt

-Avon by Harry J. Brown and upon deliver} to the Memphis

warehouse were inspected by W. A. Covingtdn,.

‘39. The plaintiff furnished 57,040 cases of cass ‘gr approxi-.

mately 11.4 percent of the 500,000 cases of authorized pur-

- chases under PY-61. Except for the comparison of grading

and rejections at Peoria with certificates issued for plaintiff's

- deliveries at Burlington,.St. Lotis, and Memphis, there is no |

_ evidence that plaintiff attenipted to obta... the certificates

and compare grades' on deliveries: under — by other

; contractors.

In order to show irregularities and unfair dow! hiding:

'” of its eggs at Peoria, the plaintiff requested and received

copies of certificates issued in the Chicago area ‘for the

spring and fall grading for the same lots of storage eggs

during the years 1949 to 1952, inclusive. The plaintiff made

a study and prepared lyses of the certificates for the® |

same Jots issued in the spring, when the eggs were stored,

| _.and in the fall, when the eggs were sold, as follows:

t Letson |“ Increase ip variation

wuich Lots show- allowances to fall

-. Spring ing in- owners

Y and fall crease in

certificates | absolute

were quality Number Value at

issued oflots |. 48¢ per

SS Se > 23 | 1 $280. 00

SS are aR. | o74 182 490 205. 14

1@51.. aneaiel 14 41 1m 352. 31

1952... | 717 190 457 260. 92

N | . : : ; . : .

a , cae’ 49

40. Under the rules of the Chitago Mercantile Exchange. -

penalties are imposed on a point kasis by the reduction of a

certain number of eggs in each lot measured by the graded

perventage of quality below “par.” The plaintitls analyses

- for Y952 of certificates issued on the same lots of stored egys

in the spring and in the fall reflect a substant lly greater.

. penalty reduction in the spring certificates, when the eggs

were first stored, with a corresponding penalty in the price ,

received by the farmers and dealers who produced oracquired

the eggs for storage. The fall certificates for the same lets

show reductions in penalty éggs in 457 lots, an Increase in

190 lots and no change in 144 lots, The net benetit tothe fall

- owner, on the basis of 48 cents a doZen, amounted toS1 19.260,

The defendant declined fo verify or dispute these analyses. .

“Mr. William D. Termohilen could not account for any in-

crease in the absolute quality of stored eggs, but pointed out

that a greater tolerance allowance is made in fall grading.

Mr. Hermon I. Miller testified that an increase in the graded |

quality im the fall could be brought about by variations ‘iin

the dots graded, since “warehouse samples” are normally used

‘for fall inspections, and storage lots are generally accumu-

lated from current receipts constituting small lots from

different séurces from which samples might be taken.

On cross-examination Termohlen and Miller testified that

nN. - SO many variations between gradings made.in the spring.and

those accomplished in the fall could not be attributed to

human error. ‘at . ; .

_ 41, The regulations for United States Standards, Grades,

and Weight Classes for+ Shell. Eggs, covering wholesale

grades, issued July 1, 1952, provide the tolerances for loss in

each 30-dozen casé of eight eggs, or 2.2 percent in U.S. Extras,

A quality ; and-ten eggs, or 2.8 percent, in’ U.S. Standards, B-

quality, with the following provision :

§ 42.51 *9* * (b) * * * Forthe period be inning on

August 15 of any year and extending through January

31 = the next er the permitted tolerance fa Lass

with respect’ to “refrigerator eggs” is 12 egus (3.3 per-

: cent) [for'U.S. Extras, A quality] :°

eae = _ * . o rae Se, —

, bs ‘* The comparison of certificates issued in the spring: and in the fall was

a 4 de by plaintiff. . i cate

« © 4 a

Dios (AEs

Sate (d)..* * * For the period beginning on August i

'.. of any year-and extending through January 31 of the

next year, the permitted tolerance for Loss with respect

“ “refrigerator eggs” is 15 eggs (4.2 percent) [for U.S. -

| Standards, B wunlty} gt nie : Le

‘ There iscno explanation -in’ the regulations, nor ‘in the

graders’ handbogk, for the increase of 50 percent “loss” tol-

erance-allowance in fall grading. However, this inc

. loss tolerance applied to “wholesale grades” orily, and did not

apply ‘to “consumer” or “procurement” egg grading.

Count V .- |

: bed

_ 42, Durin'g the period pertinent to elaims herein, the plajn-

tiff entered into various contracts and repfacements thereof

‘for grading and inspection servives, all of which were exe-

_mentg stipulatéd in the contracts were s

* The é¢ontracts provfled in paft as follows: -

cuted on the printed forms pearisedty EMA. The agree-

antially the same.

Ir Is Acreep Tuat: — a wtern Ih, ‘

_ (a) PMA will provide an adequate nuinber of graders

to perform the grading.service covered hereby ;

bb) Aé the sole discretion of PMA the gra

be either a Federal or State employee or a licensed em-

loyeeoftheapplicant; =

PY) PMA. ahs

MA shall not be responsible for damages ,ac-

cruing through any acts of commission or omission on

‘the part of any ler; ie

‘ (d) The provisions hereof shall.continue in full force

: and effect*from. its effective date until suspended, -with-

ders may

dratvn, or terminated, by (i) mutual consent of the ap-

plicant and PMA; (ii) written notice given by either.

j than 30 days from the date of the giving of stich

jee; (iii) one (1) day’s written notice by PMA to

Of applicant, if the applicant fails to honor any invoice

within thirty (30) days after date of invoice covering

the cost of the grading service as. herein provided; or

- (iv) termination of the services requested herein pur-

- suant te the provisions in ike following paragraph (e) :

. fe). The services to be rendered hereynder halt be ter-

minated by PMA at any time PMA, acting pursuant

* to the other to take effect on a specific date not

‘to any applicable’ laws, rules, or regulations, debars the -

applicant from receiving any further benefits of the

service, or the services hereunder may be suspended or

aS tas }

_, terminated at any time PMA concludes that’ the appli-

cant has not conformed, or cannot conform hereto; '* * *

The following Gontracts and replacemeyt contracts were

"entered into bet ween. plaintiff and PMA, grouped in-accord-

ance with the type of service;and the plant where services

~ would be-performed: * a cbs

~ Applica- Date Type grading or service | Plant loca.

tion date |. approved ; . ; tion

4/ 5/51 |. 4/16/51 | Shell eggs. ; Bushnell.

6/27/51 7/25/51 | Shell eggs. “ae 2 - . Bushnell,

“9/52 1/23/52 | Shell eggs. Si --| Bushnell,

3/13/54 4/ 1/54 | Shelleggs... * --| Bushnell.

11/ 9/51 |-4\ 11/26/51 | Shell eggs. -.| Avon.

1/ 9/52 1/23/52 | Shell eggs. - seen,”

3/13/54 _. 4) 1/4 | Shell eggs. . Avon.

11/ 9/5) 11/26/51 | Egg products .... .._. fiene en Bushnell.

1/ 9/52 1/23/52 | Egg products _—- CI ST EID a" Bushnell.

3/08/54 4/ 1 7 See Tae Bushnell).

1/ 9/52 | . 10/ 6/ Dressed poultry enacted Bushnell.

(13/54 4/ 1/34 | Dressed poultry..-. + wo/!---%---] DUMON. .

Fhe plaintiff had four grading contracts hich’ were in

effect on April 1.1954. Each of thesé contracts specified that

-graders provided by. PMA might be Federal or State em-

ployees or licensed employees of the plaintiff, but at the sole

discretion of PMA. Licensed employees were required to

furnish a bond to PMA, but could engage in apy other activiz~

ties of the operator, including supervisory duties, whereas

a grader who, was 2 Federal employee was required to coit-

fine his activities fo grading services and such closely-related -

activities as‘the PMA might approve, bat could not in any

instance assume,the duties of management. —

43. In addition to the several grading service cont racts, t

separate mémorandum of agreement, dated A’pri! 1, 1954, was

prepared, signed, and submitted to plaintiff by L. J. Dolson

and Thomas®. McCurley, for PMA, ard was signed by M: L-

. Nichols for the plaintiff. This agreement was as follows:

In order to have a niutual agreement as to the condi-

tions under which service.is being furnished, we request

~ your concurrence to the fcllowing items:

_ 1. Mr. Schute will be the grader in charge and yo

tor of egg products in charge for all contracts in effect

in your plants at Avon and Bushnell, Il. Hee

2.4 bonded assistant will assist Mr. Schute at

- Bushnell. = caf |

3. Mr. Schute’s headquarters-will be Bushnell. .

’

‘ S ~ ; ‘ ¢

at 7

Se s2 *} *

: Ss c ; . q

4. Mr. Schute’s normal hours of duty will be from

- 7 a.m. to 12 noon and from 1 p.m. to 4 p.m. Monday thru

Friday. We do not expect him to work gvertiine except

on official work. His annual and sick leave will be in

accordance with the cooperative agreement between the

U.S. Department of Agriculture and the Ill. State De- °

. partment of Agri. ; So aeasinel :

- 5. All official travel of Mr. Schute is by direction of .

at P

his supervisor. Tt is understood that he may trayel be- ~

tween Bushnell and Avon as directed by ‘you:” Such

travel will be. charged to you at the regular Federal rate

and is payable. to the Tréasurer.of the United States upon

_ presentation of a proper billing by the Grading Service.

6. You are to furnish both svedait adequate facilities.

' Thesp are (but not necessarily limited to).*.° - — .

"a. metal locker with lock. —

‘b. individual egg scale with test weight.

c, Scale for wei Sing 15 dozen eggs. .

d. B. & B.candling light—this is the only light to -

be used inmaking official gradings. = =

., @. thermometer for ta emia | egg tem.

' peratures. ; aE» LEE 3 .

f. a satisfactory darkened inspection room to

grade shelleggs.. * Nee ea NG

_7. Mr. Schute may only take technical direction from

his Departmental supervisors. If you question his deci-

sions, gradings, or inspection, you may appeal these in

| accordance with the a pre of the Secretary of

_. Agriculture part 55 and part 70, copies of which you

Mr- Dolson, or the Washington Office of the Grading

Service. i vr

8. In accordance with your request, Mr. Schute will .

make routine comments to the person in charge.of the

work assignment, however, major comments will be

made to youor your Son. |. |

-9.:When: you begin grading at. Avon, Mr. Schute will

review the work of each candler with the thought of se-

lecting a bonded assistant for that plant should the vol-

ume handled be such that you desire a bonded assistant

-for that plant.

44, The Federal Regulations governing licensed graders,

‘inspettors, samplers, an@ supervisors of packaging eggs and

egg products provide, in part,as follows: = :

'. $55.33 _ Who may be licensed. (a) Any person who

.is a Federal or State employee possessing proper quali-

yee ppaeie Bi 8

; aioe tan ie ° |

fications as determined by an examination for compe-

tency and yho is to perform service pursuant to this

. part licensed by the Secretary as a grader, in- |

‘Spector, sampler, or supervisor of ckaging.

(b) Any prospective licensee other than.a Federal

- or State employee” possessing roper qualifications as

determined by an examination for compétency and who ° .

is to perform service purSuant to this part may be li-

censed by the Secretary as a grader, inspector, sampler,

_ or supervisor of packaging. However, prior, to the

granting of the license he.shall procure and deliver to.

the Administration a surety bend issued-by such surety

- a8 may be approyed by the Administrator, In the amount:

of $1,000 for tlie proper performance of the duties of

such licensee under this part. - ; :

There is. nothing in, the Federal regulations which. re-

quired or atithorized a licensed employee of the Federal or

State government. performing the samé or similar duties

to supervise the grading or inspection service performed by

a licensed employee of the operator. Theigsis nothing in-

these regulations which precludes, licénsed “bonded” graders |

from performing such‘check-grading and from issuing cer.

- tifi@ates of inspection or grades in the same manner as ‘an

NACC grader." \\ *.

However, as\more fully reported in findings 45 through 47,

Negitining in 1952, PMA announced a policy which would

require the gradual replacement of licensed plant employees

with Federal or State civil service employees. In the execu-

_ tion of this- policy at. least one Federal or State lieynsed

grader was to be placed in each plant in a supervisory

capacity initially. The civil service grader was to make all

final check gradings and-all grading cértificates were to be

signed by him. | : ‘

- 45. The utilization of licensed company: employees origi-

nated and their use was eXpanded during World War. IT.

For several -years the PMA had considered a policy which :

would result in the gradual replacement of licensed plant-

employed personnel, with licensed Federal or. State civil

" service employees. This plan would avoid any increase in

the number of licensed company’ employees, and replace °

those in firms having moré-than bne service contract with

PMA. This policy was Set out in Instruction No, 918 +

(PY)-4, issued by the Director of the Poultry Branch of -

. >

@ » rr.

‘a

civil servanggeiployee.

‘PMA-on May 21, 1952, to all regional grading supervisors

_ and Federal-State‘supervisors. It reads as follows:. —

F. OF RESIDENT Gi STATU

se ve tne | gly ATUS OF CIVIL

I. Purroszs.. - 3 . ¥ ;

. This instruction is issued as-a guide in carrying out |

‘-established policies in the rendering of grading service

with respect to poultry, eggs, and egg products through

use of civil servant licenses on Federal or State PayroH.

A. At least one grader, who has the status of a civil

__. Servant (State or Federal) will be stationed in any one

lant for each operating sh#ft, regardless of the num-

r of types of grading service requested, except that

additional personnel may be stationed at a plant when

the regional supervisor deéms it necessary. to properly

carry out the department’s responsibility. Aiternats

or assistant graders may be provided by licensing bonded

employees. - Final check gradings shall be made by the

civil servant grader, and all certificates issued will be

signed by him. However, bonded-graders may perform -

final check grading. and issue and sign corthecten in-

cases of emeggency leave or sickness on the- part of the

B. The it procedure will be followed as ex-

peditiously as ible with due consideration to operat-

ing and administrative problems in connection with.the

recruitment-and training of such individuals. As

ng as such civil servant personnel becomes avail-

e, they. shall replace botided graders. Action should

be taken immediately to effect this procedure in all cases:

_ where consumer e labeling is being performed, and

in plants where both inspection and grading services

are in effect. In cases where product:is identified only

on the basis of institutional packs and where the services

of sanitarians are required, thé bonded grader and sani-

tarian shall be replaced as'rapidly as possible.

_. C. Recognizing the personnel management problem

where seasonal operations or-sinall volume are involved,

or where product is identified only on the basis ‘of in-

stitutional packs, other than in eviscerating and drying

- plants, the continued employment of bonded

will be considered on an individua! plant basis. Prior

to considering the continued use of bonded employees

in seasonal or small plants, consideration shall be given

to rendering service by a circuit grader or. sanitarian.

D. Presently employed lice bonded graders are

an excellent source of supply for civil servant graders. -

Graders secured’from this source should be transferred

to plants other than those where the are presently em-

loyed. However, with approval of the Chief of the

- ga, Inspection and Grading Division, a civil servant grader

~amay be statiéned in the same plant where he has been.

employed under bond, provided his services as a bonded

licensee have proven excellent in.all respects.

46. On July 18, 1952, the PMA submittéd a memorandum

circular to. all firms holding contracts for inspection and

grading services, ‘with a copy of Instruction. No. 918, to

clarify. some misunderstandings and to explain the procedure

in placing the policy in effect. It was explained that rea-

gons for establishing this policy included, ( 1) some objections

on the part, of the. industry that licensed. bonded company

Service employees; (2) complaints had been received from

| livestock sanitation officials, Public Health officialsand Food

and Drug Administration officials who urged thit the term

“Government graded” by licénsed graders other than Fed-

‘ eral or State employees be discontinued ; and (3) it would

_ be in the public interest to proceed toward the elimination

of the use of bonded graders on as practical a basis as pos-

sible as soon as feasible. * ‘

The memorandum further stated that it was the policy of

PMA to gradually replace plant-employed personnel 1i-

censed by PMA initially-where the volume of operation was

~———such that a fill-time ,

Clearly justified, particularly where consumer grade labeling

was being performed and both inspection and grading serv-

ices were in effect, as would apply to ready-to-cook poultry ;

where grading is done only on the basis of institutional packs

bend where the volume was found to be such that one Govern-

ment. employee could satisfactorily handle supervision of

\_ both grading and sanitation, giving due consideration to

' plant operating problems. Thereafter it was plenned.to con-

‘tinue the policy of replacements in consumer grade labeling

.of shell eggs, institutional pack grading of shell eggs,. dress

poultry grading institutional packs, plant. sanitarians, and

liquid and frozen egg inspectors. This was to be accom:

plished with due consideration given to seasonal operations

or small volume on an individual plant~basis. It-was also

| sinned that a very y important cuntidereiien was to bring hawk

this new policy with a minimum of inconvenience and with

. little or no ad@tional cost to the industry..

47. The following comparison. of graders for Tlinois ;

"(other than Chicago), Indiana, and Iows, -plaintiff’s com-

é petitive area, is listed for firms ne PMA “contract”

grading and .inspection services und er the _Feapective state

| 7 ising offices indicated :

| “ \

1 t 1\s << 2% ‘

.| Springfield | . Lafayette Des-Moines |

| Se MS Oe Se a, Se A Seen Aw See oe

Year |, Meath’ |S | —- = oe

‘ali ;Bie¢-l yg S 3:;2°),)3\%

| & 16 : 5°} -O 1-0

| a ae ee 5. 8 is

eS @e-72 !|6 Zz = . a |Z

4 a a ee See De | ae a idaensioaiatin ———— | -

? | ! _ \ |

1961, ...... {am | 13} 3 | -wih\ 4; 198) ° 8; 10 13

Pieces 2 Soe | 96. 1 mio. 31. ate] oan] ame] ae A

; Oct-22...) Ww 4; 8] ¢@! of] oO} 1% 15

1053... | apr...*..- foe eS ee ae ee ee ee

ee 14 | 4; 12} 3 eo} 15.) =

Sn cncencd Gee oseennt 125 ip Ee Vip 3 ‘Sai; 4] ° & 21

Oct. mi a) 1. at SB) Be ae

re a ae } 18 | §! af 3 ee ieee eee 27

} Oct. 2222.2} 16 3; wi; 38)..82! BS] a1 é

08... BP ocenss |} Wy... 3) “mje 8] Sty} my w]e

a | 8) "@)] st) 8] 42)” ww] 8 43

48. Following complaint from the plaintiff that the PMA

_ graders were biased and prejudiced in grading eggs for

‘delivery under the gontracts now in suit at Peoria; Illinois, ~ at

‘an investigation wapmade by the USDA with respect to its -

+—— own employees who-were-involved, as-well-as the plaintiff.

The investigation was performed by the Compliance and

_ Investigation Division. The plaintiff sfecords were ex- }

amined, many. of : its ——. were sncsinrngcgne hes

course of the. investigation.

Shortly thereafter, Mr. Nichols, Mr. Nitheide, plaintiff's

plant manager-at Peoria, Mr. McCurley, the Snpervisor for .

the State of Illinois, and Mr. Dolson, the Supervisor-forthe— aay eee B

12-state area comprising Illinois, were dise ussing plaintiffs.

complaints. They got into quite a heated argument, Nichols

charging that he had not recgived fair atid impartial inspec-

tion, and IQolson replying that Nichots was trying to pick

. his own inspectors, and was trying to tell tell the Government

. what to do, but he was not gaing to Tet him do it, that he

ters

was going to tell Nichols what to do, And that he had better -

» ,° learn then and there

was going'to tile a ¢lai

aa:

that he had to de it. Nichols said he.

m against the Government, and. Dolson

said that-he was going to put Nichols out of business. .

49. The plaintiff had ‘coutracts for continuous grading

services with PMA fe

for. shell egg grading

” shell eee grading at its Avor lant,

and egg products grading, and (from 2

October 1952) dor poultry, inspection at its Bushnell plant,.

- Decne PMA was required to furnish an atlequate number

of graders and inspec

tors/either Federal or State employees

i or licensed, bonded employees of the company, as reported

in findings 42 and 43.

During the périod

Mrs. Anna Chambers was the licensed, bonded shell, egg 4

‘ *>- ca a

from January 1952 until May 1955, \

grader at plaintiff's Bushell plant. She also performed the

egg pfoducts inspect

ion and supervised tlie egg-breaking

plant at-Bushnell commencing in. J anuary or February 1953. °

_ _ + Mrs. Zenna Richter was the licensed bonded grader at plain-

/_/ tiffs Avon plant during the period from January 1952 until

about May 10, 1952,

Brown, an NACC grag

when she was replaced by Harry J.

er, and she fina]ly resigned in January

1953. No other licensed, bonded grader was thereafter au-

thorized in_ plaintiff's plants, except for about 2 weeks in*~~

— Sune: 1953, when Ey

—+-——-—and Was dismissed.

° 50. About May 10,

2 en served for a trial period

1952, “Harry J. Brown was assigned

to plaintiff's Avon plant.and remained until about June 12, -

—"1953>--Others assigned to this plant included Julius W. An-

toine, from July 7,

1953, until November 20, 1953; Ray

Schute during April and May 1954; and Vitold Kilian from:

- - about June 1, 1954, until April 18,:1955, on which date he. .:

_ Was replaced by John W. Schoonover. eeegeeeeann

+ Mrs. Chambers w

r employee of Nichols &

——_—— Company for approximately 20 years and the supervisor of

| 1947 and a few years

as licensed as a shell egg grader about

later was “bonded” as a PMA grader.

She regularly issued PMA grading certificates, DA form 212. ‘>

for approximately two years, until about January 1953, -

: For ‘a time thereafter

, She was permitted to work under the’

supervision. of the PMA inspector, but certificates showing

the grade had to be signed by the PMA Inspector,

BL. “The. plaintiff s egg-breaking sain oat Bushnell was ap-

proved for the production of frozen egg products up

USDA: grade standards about January 16, 1953. On Jan-

-uary 22, 1968, BW. Kempers wired Dolssn at Chicago as J

follows: . : - ff

PMA’ ‘POLICY REQUIRES PLACEMENT. OF °&

NACC BASIS PREVIOUS DIFFICULTIES AT.

NICHOLS, BUSHNELL, NECESSARY WE REN--

DER SERVICE BASIS NACC, THEREFORE

‘UNABLE TO HONOR REQUEST FOR LICENSE

BY CHAMBERS UNTIL NACC. STATIONED

‘THAT POINT

All such service was temporarily suspended at Bushnell

j January 24, 1953. because PMA would not permit a “bonded” _

_grader.at this plant to issue certificates, and was unable ih

2 provide a Federal or State employee. en ore

Plaintiff protested the suspension of grading service at the

Bushnell plant of the ground that its competitors were hav-

_ing continuous Operations under bonded graders and sug: |

gested to McCurley that Harry J. Brown, the NACC grader" “t

at Avon, be transferred to Bushnell. . McCurley. declined

~ to transfer Brown to Bushnell because of his i lence in

.grading egg products, but offered to employ Mrs. Chambers \, -

as.an NACC grader and permit her to continue grading

_there. She was not employed by PMA, but. later Mr. .

McCurley furnished her # letter of authorization to perform

grading service in plaintiff's ege-products’ plant. The sus- -_

pension: of Mrs. Chambers’ right to issue certificates did et:

. interrupt plaintiff's business. "| "

On February 25; 1953, Mr. Dolson and Mr. McCurley

visited plaintiff's egg- breaking plant at Bushnell and found

it did not meet compliance requirements with respect to sev-

eral items. Plaint#f was requested to eliminate wooden

racks from the breaking room, provide sufficient leaker trays

_ to‘handle all leakers from the candling room; and provide -

an additional tank in the kitchen, as.the plant had three wash

tanks in the kitchen when approved and it was found that ~

plaintiff was operating with only two tanks. Plaintiff was

also advised that a further check would — maile at the

plant. — *=, aa

52.. Mrs. Chambers supervised the egg-breaking produc-

tion and graded eggs until her stamp and other Goverument

papers were again taken up, about the end of April 1955, -

and all of plaintiff's service contracts, were terminated, as

hereinafter reported. However. she was not permitted to

issue completé USDA grading certificates recognized by the

trade, but a type of certificate on the regular form DA-212, -

‘showing the volume of eggs graded, a specimen of. which.

reads as follows: ke |

2804 CASES U.S. EXTRAS GRADEA -

ABOVE EGGS PACKED WW: ACCORDANCE

“WITH OFFICIAL-GRADIN

« QUS. VISION, AN

_-WORK ‘SHEETS ON FILE.

- These certificates were supimarized monthly and sub-

‘mitted to the PMA State Supervisory. office from which

UNDER CONTINU- |

‘ARE COVERED BY.

Nichols & Company .was billed monthly, in accordance with’ |

— contract charges reporte: in finding 42. : ; Bei.

. _53. About May 10, 1952, Harry J. Brown was:-assigned to

plaintiff's Avon eae as NACC shell egg grader, and graded

‘" : eggs at both the A’vonfand Bushnell piants. He also per-

| _ formed som¢ of he grading of eggs for delivery under the. ~

"Plaintiff's contracts“ at Peoria and Memphis. He ‘was a

USDA grader for many years, first licensed for poultry grad-

- ing about/1933 on 1934, and as a shellsegg grader about

_ March .¥952. - \ PRES gti, aa ates ooh

Abant February 20, 1953, Brown was charged by défend-

a dag misplacing and mishandling of his —e grading

st ,

Adid resign from the service. On June 10, 1953, immediately

p and some nionths later was requested to‘resign and -

/ after ‘Brown resigned from PMA, he was employed bv |

Nichols. | | ae

54 “On November 26, 1952. Harry J. Brown inspected and

‘graded two lots of eggs.for Nichols & Company at Avon,

indicating on the said certificates that ‘Weinberg Bros. of

Chicago was the buyer. Thereafter, on December 4 and 5,

1952, two grading certificates were issued by Lester R.

Schrimsher at Laredo, Texas, bearing the same lot nan

cafried in plaintiff's Avon plant and the same numif}

cases i in each respective hot, that show a vin “loss” in the

. 88 esse arsenal follow:

Brown L Sehrimsher

—-- . > aero — - = ¥ —- — ——— ey

. “AVON LoT NO. 426723, ;

Certificates issued. ...............-..------- M0 ME, i cressnccoces ‘

: Number of cases ..-.....--.--....----- piehll Meiesdhadtnerhinentd 575.

: Sam ii ERTL TIAA tinh ehabpate te-5----| 15.

grade and size. ....................- U.S, Standards “No Grade.”

: ; i 79.74% B quality

Loes ...:.- Se escent Cckeadimnmes dies .| 52.4%

‘ &

AVON LOT NO. 426724 q

Nuthber of cases.......... -_.. = 70 ME ae dkvee iden dagnasd 25.

Samples inspected... . doncenadadge See os ee

Official and size....¢.......-,-. *...] U.8. Standards *“No Grade.”

: Ss 78.2% B quality.

Loss... wo nayene--e- wn eeedeeereeercrcee® 2.2%. 0. 0... 2-2 22-2 ees 17.7%.

The certificates.Ssued” by Schrimsher indicate that Julian

Trevino was the applicant, Weinberg Bros. was the-shipper

or seller-and the receiver or buyer “To. be sold,” and that

they were examined at the Cantu Fruit Co., Laredo, Texas.

These ‘certificates were incorrectly prepared, in that they

- failedgo show the: warehouse lot number where they were.

examined, but reflect the same lot numbers under which they

were examined at the aves, Illinois, plant No. 625. bes

' plaintiff.-

” Schrimsher was first. employed October 27, 1952, as a

trainee-grader at thc PMA Des Moines office, He was trans-

_ ferred-to the Dallas, Texas,. office December 1, 1952. The —

rtificates issued by Schrimsher on December 4 and 5, 1952, -

were the first official grading certificates he had issued.

55. The two lots of eggs covered by certificates in the

_ previous finding were returned to Chicago on December 15,

1952, but Weinberg Bros. was ynable to sell the eggs of *

one lot and declined to pay Nichols for them.

. When the were reshipped to Chicago, and while still

. at Weinbe net bading docks, Weinberg first had his inspec-

tor examine them and then telephoned Mr. Dolson of PMA

to have an inspector examine them. Mr. Dolson came over »

himself and made an informal examination of a group of

eggs from the lot and described’ them as “rotten.” No com-

‘plete inspection was made and no official inspection. report

was made as a result of this éxamination,

; Bis ae ° aap Sig th

eee Li, ae

Thereafter Nichols & Company brought ‘suit against

Weinberg Bros., in Civil Action No. 52-252+1L, in. the Cir-.

cuit Court of Fulton County; Illinois, for recovery of the

price of one lot of eggs for which Weinberg. Bros. refused

to pay. he ee a 9 Tee aD ay

-In May 1954 Mr. Schrimsher's deposition was taken ine

‘connection with plaintiff's suit against Weinberg Bros., but |

he was not permitted by PMA ta sign the same on the ground

that_his office in Dallas had not first received a copy of it. -

56. On March 12,1953, plaintiff. was advised by Dolson

that Harry J. Brown was not to-.grade any shell eggs until

further notice, but that grading service would be provided

from the PMA. Chicago or Springfield. offices without addi-

tional charges until Mr. Brown was advised that he would .

again be permitted to officially grade shell eggs at plaintiff's

eons, ;

After Brown had resigned.on June 10,1953, no. other Gov-

‘erninent-employed grader was. available for assignment: as

a resident grader at plaintiff's plants, and plaintiff refused to.

pay for a temporary grader working out of Chicago. I.

The plaintiff's contracts for PMA grading services in effect.

during 1953 provided for a charge equal-to.the salary costs

paid to each grader assigned to the plant by PMA) including

earned“annual leave and sick leave when negessary, These

eontracts also provided, ‘in part, as follows: ee, ane

(iii) A charge of $25.00 for ‘each additional grader

_ or replacement of a pfeviousl ‘assigned grader to the -

Gssignated plant; Providedy That, no charge undtr this

subdivision. (iii)- is to de made:for tem orary relief

graders for regular graders or for the re * eae ofa

. grader who is a Federal employee when the replacement

Js made by PMA. other than at the request of the :

appliant; eg Eanes

nee * * on * : * *

~ A charge for the actual cost to PMA.of any

travel and’ per diem incurred by each grader assigned

to the plant while in the performance of grading service

rendered the applicant ; ey

: The plaintiff was satisfied with the services rendered by

Harry J. Brown, and protested the suspension of his services

by letter of March 13, 1953, to Dolson, which reads, in part:

“The situation must be deaparat for someone in re-

gards-to the action taken on ry Brown. It 'is of no”

eoncern to me but ag ay it seems a terrible =

‘to see an honest man like him get thrown to the wolves

are still a matter of record rdless ‘of attempts to

i \

. - 4

9, ¥

warp them and are available an will he made available

im at the oppentunetions. V7,

% 2° ’ * * *

Afies all this fuss about Brown being i in Bushnell ete.

and my letter to McCurley which is still unanswered

Emon 24,1953) I was indeed surprised when Mr.

mg up Mrs. Anna Chambers stamps and»

suppose the next deal. will be to pull the»

eneat inspection service. What is the reason that

~ghe is not allowed to inspect shell eggs? _ bag?

\ After his resignation from PMA,Mr. Brow n was employed

by Nichols & Company, and: has Sontinued, in nena

employ. |

57. About the end éf Seniniy 1953, Mrs. Zenna. Richter, :

a bonded, licensed grade at plaintiff's Avon plant, resigned,

and plaintiff inimediately applied for oe bonded ine

as a replacement.

During the period from about March 12 to June 12, 1953,

while Harry J..Brown was under suspension and until: his’

resignation, the plaintii? was provided’ shell egg grading”

- service by other PMA graders from Springfield at ne addi-

tional cost to plaintiff, but no be aded grader was authori

\°

‘.A letter, by Howard H, Gordon, PMA Administrator, a

' USDA, dated August 13, 1953, to ae cation se Robert e

Chiperfield, states, in part: nS gee s

In connection with Mr. Nichols? conmrplaint wegniting

delay: in tle installation. of a shell egg grader at his

. Avon-plant, we do not-understand his concern, During

' -the entire period referred to, from April 2; 1953, until. .

. June 10, 1953, when the installation was made, grading

_ Service Was provided by fee graders from the State

supervisor’s Office with no additional charge to. Mr.

Nichols. over and above that which would have been .

made with the licensing of the bonded grader; Miss

Evelyn, W. Ogden.

As to the reason for the delay, it‘so o happens that a

» préblem arose concerning some product’ which had been

graded at Mr. Nichols’ Bushnell} plant by a Government

grader. ‘The aameen was ws gran and certi-

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° . ; ny ®

al : ‘ ‘ EB .

t .

ees aie el it Bays ing

NE mena a O en j ; - , , | | . ‘ .

- . fied. As i customary ‘in: such ‘eases, an investigation —

Was conducted to determite the fa¢ts incident to such ’

matter, including a determination as to whether plant.

“management was in any way involved ‘in. influencing

the improper action: e did not deem ‘it desirable to

“proceed avith the: installation of. the bonded. plant em—

- ployee -a3,a licensed grader. during the course of this in-

vest isn although, as indicated, service Was rendered -—

by State personnel. oak tae,

_ Following the conclusion of the investigation and the

determination that there was ho evidence of improper

action by the plarit management in connection with the

above-mentioned improper grading and certification,the |

bonded grader was installed on June 10 at the Avon

plant. However, when this grader was checked on dune:

22, 1953, by Mr. Robert A. Dorsett with regard to. her

ability to grade eggs according to. Federal standards, he

found thar she did not meet*our standards of proficiency

and her. license Waswithdrawn, .% * * “nae ;

‘

' ~~

. :

There is no evidence which establishes that plaintiff was

thereafter authorized to erfiploy ‘a “bonded”. grader at its.

_ Avon plant. However, Mrs. Chambers; a “hounded” shell

grader’ at Bushnell, was also licensed to inspect and id

:, ’ Certificates on egg products.: ai

+ 58 The next regitar NACC grader assigned by PAPA n-.

_ ° der plaintiffs contracts was. Julius. W. “Antoine. He was

assigned July 6, 1953, as a poultry-and egg grader. He had

formerly worked for Swift.& Company for a years

and ‘as: plant superintendent for about 11 years. We had

Served as an NACC grader for many years’on poultry grad-

ing at the Swift & Company plant. He was reemployed by

PMA and assigned to plaintiff's Bushnell plant to grade eggs

and to supervise: the work performed by the -bonded grater.

Tle wais the only qualified: poultry grader assigned to plain-

tiff tinder its poultry. grading contract, but’ plaintiff never

operated its poultry-dressing plant under Government

inspection, ‘ es ee et eek

Because of criticism of his work and the constant checking

_‘by-PMA ‘officials, Antoine resigned on November 20, 1955...

He was considered for reemployment, but Mr. Dolson recom-

mended against his assignmént at Bushnell, Stating; “I am

. not satisfied that, Mr. Antoine did the best job he vould ‘at

Bushnell.” ty rr tee 4

- . . . ‘

ae pate gece eee

-. 59. During the period ‘from November 20, 1953, until Ray

Schute was temporarily assigned to both of plaintiff’s plants

as grader. in charge and inspector in charge, about April 1,

1954 (see finding 43), plaintiff had no NACC grader as-

‘ signed to service its four ‘contracts with PMA. During this

period Mrs. Anna G. Chambers was the only bonded grader

_in plaintiff's employ, and she was licensed: to inspect egg ~

‘products and to grade shell eggs, but was not permitted to.

issue shell egg grade certificates.

In November 1953 Mr. Dolson. proposed to provide plain-

tiff grading service by an experienced man in the Chicago

area. Plaintiff declined this service because of the higher

costs involved, and suggested the names of nine residents of -

_ Bashnell who were both qualified and experienced and who

would probably accept Government employment on the same

_-termis as were made with Mr. Antoine.

Again about December 29, 1953, Mr. Dolson ‘initial to

' transfer Vitold Kilian, an experienced NACC grader, from

Sauk City, Wisconsin, to Bushnell, under terms which plain-

tiff dgreed to accept about March 10, 1954. Mr. Kilian was

finally transferred and assigned to. plaintiff's s Bushnell plant

about June'l, 1954.

-60. Mr. Vitold Kilian was ; assigned fo plaintig’ s Bushnell

plant from June 1, 1954, until April 18, 1955. He was a

licensed NACC grader for shell eggs, with one. year’s. prior

experience at Sauk City, Wisconsin, He did not have a.

license téyinspect frozen egg products, but McCurley, who,

was his immediate: ‘supervisor, gave him permission to do so.

He graded shell eggs at both Avon and Bushnell, but never

supervised the grading performed by Mrs. Chambers. There

is no evidence of any complaints regarding inspection Ok

grading services during the remainder of 1954. . Kilian per-

formed unofficial inspection on incoming eggs for Nichols and

cooperated. with plaintiff whenever time permitted and ‘he

was not engaged i in official inspection and grading.

61. Early im 1955 the plaintiff organized the “Tri-State

Poultry & Egg Dealers Cooperating Marketing Plan” some-

times referred to asthe Randolph Plan, the latter. being, a”

‘similar organization which had uccessfully operated, in

Iowa. Under the plan plaintiff was to act as the sole mar-

_ keting agent for all cooperating dealers, and all such dealers

en! 65

_ were expected to purchase supplies through the market ing

agency. The plaintiff was to receive a stipulated fee per case

of eggs for various specific services; including handling, re-

_ frigerating, assembling, and selling, also for hauling, proc-

essing, and strapping.. All dealers would receive*the market

price for the eggs marketed. “Somé 39 dealers joined the

plan, including 28 in. western Illinois, teh in southeastern

Towa, and one in northwestern Missouri. _. ? on

62. By circular letter dated *March ‘18, 1955, to the co-

- operating dealers, the plaintiff announced that the market-

ing program’ would be commenced on Monday, March 28th.

During the immediate period. following the inatguration of

- the plan plaintiff marketed a substantial amount of eggs.

‘Approximately 37,330 cases were handled from March 28th

to May 13, 1955, having a value of approximately $411,000,

63. On March 24, 1955, L. Ward Wagner received travel

diana, and Missouri, snd arrived at plaintiff's Bushnell

plant in the afternoon.on April 4, 1955, with Lloyd Fletcher

and, Thomas S, MeCurley, They found approximately one-

half alot of eggs inspected ‘and marked for delivery on an ,

Army contract, They were outside the cooler in the ware--

house. area, stacked on doflies of about 20 cases to the dolly

and packed tightly together. Wagner-took the temperature

of the cases and of invidual. eggs in the cases,.which re-.

ture of an egg the thermometer was inserted into the egg and. *

_ the egg was held inchis hand. Mr. Kilian had inspected that

part of the lot in the morning and had gone to Av6n to ex-

amine the other half of the lot, a distance of about 11 miles.

64. Upon arriving at Avon Wagner inspected the work-

sheets and certificate prepare@by Kilian for this lot of eggs.

Kilian had recorded a temperature cf 46° io 49° for the eggs

when taken that;morfing. The Aring ‘contract* called for

the temperature of the éges “when loaded.” Thé lot had

been only partially loaded, and that part was at Avon. The

‘Army contract required that temperatures of the eggs should

be kejit urider 50° F. ; ya “he eae

~~ Mr. Kilian was accused of incorrectly taking and: record-

ing the temperatures for these eggs, based on a conclusion

that it ‘would be impossible for the eggs to warm up 20°

age

eee 66

"between the | time Kilian took the temperature. and the time

- Wagner took the temperature, with the cases packed tightly

together with about 20 cases on each dolly. Kilian was re}

quired to telephone the Army receiving officer and to give the

temperatures taken by Wagner for this lot of eggs. ' The

eggs were rejected.

65. The'lalf load, or lot, ef eggs at Bushnell was s inspected

and graded by Kilian in the cooler and then moved into the ..

_ storage.area and the temperatures taken. Kilian denied that

his ‘temperatures were incorrect as taken and recorded, but

conceded that his report was incorrect in that the Army con-

tract for the eggs required the recording of temperatures.

ouly after they were loaded on the truck. -

The storage area where the égys were left on dollies in the

Bushnell plant was a brick structure with concrete floor, and

. unheated. Wagner testified that! he found the room tempera-

ture, to be 65° by a different thermometer at the time he

_ checked the temperature of the eggs. The temperatures on

April 4, 1955, at the nearest point where climatological data

were recorded (about 12 miles from Bushnell) were a maxi-

mum of 61° and a‘minimum of 45°.

66. Thereafter Kilian was transferred, effective April 18,

1955, to Illiopolis, Illinois, some 120 miles from Avon. —

When. he was first assigned to Nichols’ plants in June of

1954, he was advised to make ‘sure that USDA instructions

were carried out, to be on the lookout for wrongdoing at the °

. Nichols plants, and that the friction between Nichols and

PMA officials was an unpleasant feature of the assignment

there. During his assignment there, Nichols officials never

argued with him over his inspection and grading determina-

tions, and there was comparative harmony at the Nichols

plants. Because of his previous good record, it was the de-

termination of PMA officials that a transfer was for his own |

best interests.

67 Mr. John W. Schoonover arrived at plaintiff's plants

April 15, 1955, -with Mr. Dolsori and Mr. McCurley. He -

learned of the assignment only the day before. He went

there as a shell egg zrader only, but was to have the as-

sistance of Mrs. Chambers, a bonded grader and egg prod-.

ucts inspector. .The record does not: establish that Schoon- .

over had ~ aac with PMA. inspection and ss

-N

ae, 67

service prior to the time he was assigned to plaintiff's

- -plants, but he was an experienced shell egg grader. Te per-

formed egg grading. service for H. B. Christian from 1935

until 1943, when he went. into military service. In 1946 he —

joined the inspection service of tlie Chicago Mercantile Ex- '

_ change under Chief Inspector Herbert L. Hentschel, and -

continued there until the Government took over the inspec-

‘tion work of the exchange, . Thereafter he was engaged in

the egg business for himself in Chicago. His first official

employment, according to his personnel record, initiated May.

4, 1955, on the recom:nendation of Mr. Dolson for‘his appoint- |

_- ment as a poultry: products. grader instead of a shell. egg

grader, unclassified. The Appointment was approved by

the personnel office at ‘Chicago the same day, and finally

cleared May 9, 1955. He has been engaged since that date

asa poultry grader in the Chicago PMA office. . He remained

at plaintiff's plants unfil May 3, 1955. Ei ant’.

68. In April 1955 Nichols & Company was in the process

. of delivering eggs on large contravts for the A rmy, as well as

‘other ‘Federal and State agencies. Its plant was substan.

tially filled with approximately 5,000 cases of eggs with more’

coming in daily. The cooler was filled with eggs stacked

so closely that sample cases could not be marked for inspec- |

‘tion in various parts of the Jot until they wére moved.

’ Schoonover personflly markéd all samples, and ‘drew the

“samples himself until Mr. Dolson and Mr: MeCuriey left the

plant. Thereafter he declined to handle the cases, and would

not mark his samples until plaintiff's employees broke down

the stacks so that they could be marked. fe inspected two

lots for the Army jointly with Mr. Kilian, both of which were

rejected.” Schoonover. participated in.the grading of seven

lots of-eggs for dedivery on Army contractssef which he in--

. Spected two lots alone. All of these Jots were rejected.

. Nichols made an appeal on only one lot which was rein- |

spected by Colonel Gould and Captain Bland of.the Army

Veterinary Corps, but: they sustained the rejection of

* Schoonover.

One of Nichols” associated dealers came to the plant insist-

ing upon the reinspection in his presence of any of his eggs

which caused the rejection of a lot going to the Army. ‘Al-

though Nichols authorized the inspection, Schoonover de-

clined to make such an inspection, on the ground that many

of the cases in the lot had been shipped out making it im-* *

possible to determine whose eggs had caused the lot to be

rejected.

69. Despite the ini ion of eggs in plaintiff’ s ‘plants, re-

sulting largely from. rejected contract eggs, Schoenover

would do nothing other than candle eggs. He declined to

move any cases of eggs in order to mark samples, and, on at

least one occasion, sat in the plaintiff’s office, where other

_ Officials were engaged in their duties, the whole day, per-

‘forming none of his own duties.

_ Mr. Nichols asked him why he had picked up the shell egg

stamp from: Mrs. Chambers at Bushnell on April 27th, and

was told it was done on orders from Mr. Me ‘Curley. On the. —

evening of the same day Nichols called Schoonover into his

“office, repeated his statements made earlier, and told him to

get out of his plant and to stay out: .

“Upon instructions from Dolson, Schoonover returned the.

next day to plaintiff’s plant, ‘ was told by Altheide- that

. it was Nichols’ instruction that he was not to make any more:

_ inspections. Heagain contacted’Mr. Dolson at Chicago and,

upon Dolson’s instructions, picked up.all Government. prop-

erty at plaintiff’s plant and returned to.C hicago on May 3,

1955.

~ 90. On April 27, 1955, Schoonover

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