# Appendix — Kyer v. United States

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Appendix
- **Published:** January 1, 1967
- **Citation:** 387 U.S. 929

## Text

A-1 =
APPENDIX 4A
IN THE |

Auten States Court of Claims

Artin

bE - a
> : ‘YER,
: : Plaintiff,
| | vs. ‘ Docket. -
: } | Unrrep States or AMERICA, No. 326-64
| | - - Defendant. j
PETITION

To the Honor able, The United States Court of Claims:

\ COUNT ONE earl

The petition of Fritz Kyer, for a First Count, re-
spectfully represents that:

Plaintiff is a citizen of the United States and re-
" sides at 4564 East San Gabriel Avenue, ¥reens, 3 in the
State of —_—, ;
XO Aids af
This claim is filed against the United States under .
z _ and pursuant to the provisions of 28 U.S.C. Section
E>. ~ (1491, aa a!
aes: aire | III - a |
_- The Grape Crush Administrative Committee is an
agency created under the provisions of, and pursuant
to, the Marketing Agreement and Order. No. 990

A-2
issued under the Agricultural Marketing Agreement
Act of 1937 as amended (7 U.S.C. 601-674).

IV
That at all times herein mentioned ° plaintiff was
__..and now is a duly licensed broker carrying on a
brokerage business in alcohol, wines, distilled spirits
and similar alcoholic — , |

Vv

_ That during 1962 plaintiff was employed by said
Grape Crush Administrative Committee to procure
a purchaser for the surplus or “‘set aside’ wine and
wine products under the control of said Grape Crush
Administrative Committee, under an oral agreement
by the terms of which said plaintiff was to be paid
one cent per gallon on gallons sold, as commission.
: vI
Thereafter in pursuance of tlie authority of said ‘
‘ employment and in reliance thereon, and in consid-
eration of the commission to be paid, plaintiff, acting
as the agent for said Grape Crush Administrative
Committee, procured and induced one Publicker In- ’.
dustries Inc. of Philadelphia, Pennsylvania,’ to make
an offer of approximately thirty cents (30¢) per
‘wine gallon-at approximately 188 proof f.o.b. ship,
Stockton, California, with an expressed willingness _
to go higher by one or two cents per gallon provided —
it was given the exclusive right to purchase all of

n

a SEXES Pp Poe ymewe en > yee’ sone ee pe tm or

cml ene

_ Committee..

‘ this connection, however, said | Grape Crust Adminis-

Crush. Administrative Committee for his commission,
‘but the defendant has refused and does now refuse

~ A-3_

said “set aside’ or surplus wine and wine products
under the control of said seesnn adh Crush Administrative

| | VE

Plaintiff thereupon .communicated the offer of —
said Publicker Industries Inc. to said ‘Grape Crush
Administrative Committee and performed further
services toward the consummation of said sale. In

trative Committee closed the sale of ten million, one
hundred thousand gallons of said wine and wine
products with said Publicker Industries Inc., but said
Grape Crush Administrative Committee refused, and
ever since has refused, and does now refuse, to pay
to plaintiff any commission or compensation whatso-
ever, and plaintiff has made demand upon said Grape

to pay plaintiff any commission or compénsation
whatsoever, and no part of said commission‘ of
$101,000.00 has been paid, and plaintiff has been |
damaged in said sum of one hundred and one thou- ©

sand dollars ($101,000.00) by reason of the matters
and things herein set forth.

VIII ‘ .

No action on this claim and demand has been taken

by.the defendant or by congress or by any department »

other than as set forth above. Plaintiff is the sole .

owner of the claim and has made no transfer or as-__
signment of the claim or any part thereof.’ Plaintiff —

— A-4?
is justly entitled to recover the amount claimed after
allowing all just credits and set-offs. |

.- (a
rv

| count Two
The Petition of Fritz Kyer, for’a Second Count, |

| respectively eer that:

ae I | op
'. Plaintiff, Fritz ie ‘repeats and repleads all of | |

the allegations*contained in Paragraphs I, II, ITI and
IV of his First Count, to which reference is hereby
made, and the same are hereby incorporated and re-
ferred to in this Second Count dnd made a part
hereof as though the same were“again fully set forth.

Ir /

Within three (3) years last past the plaintiff per-
formed services for the defendant at its request, as
broker, in the sale of ten million one hundred thou-
sand. gallons of alcohol, wine and wine products.

”

III
Such services were reasonably worth the sum
of One Hundred and One Thousand Dollars. ($101,
000.00). : ,
oe IV
Although demand has, been made for payment upon -
defendant by and through said defendant Grape

Crush Administrative Committee, the defendant has

not paid said sum nor any part thereof.

———————————

‘No action on this claim and demanid has been taken

by the defendant or by congress or by any department

‘other than as set forth above. Plaintiff is the sole

owner of the claim and has made no transfer or as-.

signment of the claim or any part thereof. Plaintiff

is justly entitléd to recover the amount claimed after
allowing .all just credits and offsets.

Wherefore, plaintiff prays judgment ane the
United States of America in the sum of One
Hundred and One Thousand Dollars ($101,000.00),
with-interest thereon and for such other and further

— relief as- “may be proper.
L, KEennetu Say,
| _ Attorney for Petitioner.
' Lucius Powers, JR., | |
- LAWRENCE KENNEDY,
_ Of Counsel.

.
SATE OE SIR RRS

e

at

a B-1
@prenpxB
IN THE UNITED STATES COURT OF CLAIMS
No. 326-64 _ ee.
(Filed Dec. 17, 1965)

FRITZ KYER v. THE UNITED STATES

REPORT OF COMMISSIONER TO THE COURT |
ON DEFENDANT'S MOTION TO DISMISS*

L. Kenneth Say, attorney of record for plaintiff.

Edward J. Friedlander, with whom was Assistant
Attorney General John W. Douglas; for defendant.

_” OPINION | mee

WILLI, Commissioner: This case presents the ques-
tion of whether a broker can hold the United States liable
for breach of:a sales commission contract that he en-
tered into with an unincorporated association of grape
' producers established and controlled by the Secretary

of Agriculture pursuant to authority vested in him by
the Agricultural Marketing Agreement Act of 1937, as
_amended.! . ee ee
. The defendant, characterizing the association as a
so-called "nonappropriated-fund activity," has moved
to dismiss on the theory that the United States. has not
consented ‘to be sued on the. contractual obligations of
such an entity, the premise being that lack of consént i¢

* ‘The opinion and recommended conclusion of law aye submit- .
ted pursuant to order of the court under Rule 54(b). ; ia

“1, 296, 50 Stat. 246; 7 U.S.C. §§ 601 et seq.

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to be.inferred from Congress' failure to appropriate
funds in support of the activity. :

The relevant facts, none of which are disputed, are ©
simple and straightforward. |

Plaintiff, a United States citizen and resident of Fres-

no, California, is a broker licensed to deal in alcohol,
wines, and various other distilled spirits. |

In 1962, he entered into a sales commission contract
with the Grape Crush Administrative Committee, an un-

incorporated association created under a federal mar-..

keting order . issued by the Secretary of Agriculture
- with respect to grapes produced in various specified
. Counties of California. ,

Under the plaintiff's contract he was to’secure an.
interested purchaser for a quantity of industrial alcohol

‘that had been made from surplus grapes produced in the —

_ California area covered by the marketing order. For
this service he was to receive a commission of one cent
' per gallon of alcohol sold. . He located a purchaser, Pub-
licker Industries, and the sale was‘made but the Com-
_ mittee refused to pay the stipulated commission.

The litigation that followed, and has now culminated
here, began in a California state court.. On request, the
defendant's attorney has furnished copies of certain doc-
uments of record in that earlier litigation from which
its pertinent details may be gathered. -

On June 30, 1964, plaintiff filed suit in the Superior:
Court of the State of California for the County of Fresno
against the Grape Crush Administrative Committee. and
sixty-two of its members named as "John Does."

_ On July 8, 1964, the United States Attorney for the
Southern District of California filed with the United
States District Court for the Northern Division of that

? 7 C.F.R. §§ 990.1 et seq. (26 F.R. 7797; 26 F.R, 12751). —

/]

. f-—.

; Bee

District, a petition for removal of the action to federal —
court pursuant to the provisions of 28 U.S.C. §. 1442(a)
(1).° The substantive allegation of the petition was:

' ‘That the above-captioned action is one which
may be removed to this Court pursuant to Sec- -
tion 1442 of Title 28, United States Code, for -
the reasons that said defendant Grape Crush
Administrative Committee is an agency of the
United States of America designated by the
Secretary of Agriculture to administer the
Federal Marketing Order, 7 C.F.R. 99029.

See United States-v, Levine,-129 F.2d 745 (1942).

On July 9, 1964, the District Court, apparently ac-
cepting the representations quoted above, issued an or-
der for removal. is |

On September T¥ 1964, in the District Court to which
plaintiff's suit had been removed, the United States At-
torney filed a motion to dismiss. ‘The grounds of the
motion were-(1) that the court lacked jurisdiction over
the defendant; (2) that the court lacked jurisdiction over
the subject matter of the action; and (3) that the com-
plaint failed to state a claim on which relief could be
granted. . ;

In a supporting memorandum the United States At-
torney urged that the Committee, as an "* * * integral
part of the Department of Agriculture and of the United.

States", * could not be sued eo nomine because Congress

i A et °

2 In pertinent part, this statute provides:

Sec. 1442. Federal officers sued or prosecuted ~

(a) A civil action or ciminal prosecution commenced
in a State court against. any of the following persons may
be removed by them to the district court of the United
States for the district and division embracing the place
wherein it is pending: . +

(1) Any officer of the United States or any agency
thereof, or person acting under him, for any act under
color of such office * * *, . 7

. In dealing with the jurisdictional question posed by its pend-.
ing motion, the Government does not recede ‘from this charac-

_ terization of the Committee.

* 7 - _
iO ec LOSE IO ee LPO SARA OSE TENE a potest Le

B-4.

had not consented to suit against it.” For the same rea--
Son, it was asserted, the plaintiff had failed to state a.

claim on which relief: could be granted. :

It was further contended that suit did not lie against ~
the individual Committee members, named as "John
Does," for two reasons. First, it was said that Rule a;
F.R.C.P., did not authorize suit against "fictitious de-
fendants'® and, second, that under a regulation’ prom-
ulgated by the Secretary of Agriculture the Committee
members were immunized from personal liability on
actount of any acts of omission or commission within
the scope of their committee work. ° |

° See, e.g., Blackmar v. Guerre, 342 U.S. 512 (1952).

The memorandum did not expand on what was meant by "fic- °
titious"' defendants: It seems clear that, notwithstanding the
absence of specific names, all concerned understood that the
defendants in question were the individual members of the Com-
mittee. Rule 17(b), F.R:C.P., provides that the suability of in-+
dividual members of an unincorporated association is to be de-
termined by reference to the law of the state where the district
court action is pending — in this case California. Section 388
-of the California Code of Civil Procedure provides that individ-
ual members of an unincorporated association may be sued in
the name of the’association. Since in this instance the associa- —
tion was a named defendant, its individual members, albeit not
specifically named, were joined as defendants by operation of

. law. See 42 California Law Rev. 812 (1954) for a general dis-
cussion of the question of joinder in the case of California un-
incorporated associations. ) ne ae

" TC.F.R. Sec. 990.76 Personal Liability. :
_No member or alternate member of the committee or board,
nor any employee, representative, or agent of the committee
shall be held personally responsible, either individually, or
- jointly with others, in.any way whatsoever, to any person, for

errors in judgment, mistakes, or other acts, either of commis-
sion or omission, as such -member, alternate member, employ-
er, representative, or agent, except for acts of dishonesty.

° Though admittedly the positions advanced in the prior litiga-
tion create no binding estoppel or legal obligations of consist-
ency in the instant proceeding, it is interesting to note that es-
sentially the whole defense advocated by Government represen-

2

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On October 1, 1964, eleven days before’ the Dis-
trict Court dismissed the suit with prejudice for failure
to state a claim on which relief could be granted, plain-

_ tiff filed suit against the United States in this ‘court for
the same commission that he had initially attempted to
recover from the Committee and its members. !

According to the defendant, '+ it-is the doctrine of
sovereign immunity in its generally understood sense 7”
‘that defeats this court's jurisdiction in the within case.
_. The focus is thus on the Government's amenity to suit

’ tatives on behalf of the Committee and its members was bot- _
tomed on the premise that the United States, asthe Committee's
principal, was the real party in interest in the controversy.
Only before this court, it seems, has the Committee become
legally orphaned as a "nonappropriated-fund activity."

' The Government has made no jurisdictional claim based on
this consideration. See, e.g., Tecon Engineers, Inc. v. United
States, 170 Ct. Cl... _, 343 F.2d .943 (April 1965).

‘December 1964, the Grape Crush Committee was terminated

a

cies, the Secretary of Agriculture assumed custody of the Com-
mittee's books and records and responsibility for its orderly
liquidation, including the final distribution of its funds. In this
connection, the Secretary noted ‘the pendency of the instant suit
in this court and directed that a contingency fund of $135,000 be
retained in order to meet any judgment that the plaintiff might

a Specifically, the defendant says: "It is the contention of de-.
fendant that this is an unconsented suit against the United States
_ and should therefore.be dismissed for lack of jurisdiction over
. the subject matter." (Defendant's Motion To Dismiss The Pe-
tition, p.'2.) . 7a

” See, e.g., United States v. Sherwood, 312 U.S. 584, 586-587
(1941), ie

ny .

iStcatible tic Nateke " Ee ere ee nee ye eee

B-6 -

against it on this claim rather than on the liability im-
plications of the merits of the claim.

Defendant says that the absence of Congressional con-
‘. sent to this suit follows as a matter of law from the fact
that the Grape Crush Committee is a "nonappropriated- .
fund actitity.'' Whatever other functional characteris -
tics that term may connote, the dispositive attribute,
according to the defendant, is the fiscal fact that the
Committee's operations ‘are not underwritten by appro-
priated funds. Thus, the claim is that‘when Congress
fails to appropriate funds in furtherance of an activity,
whether or not governmental in nature, it must be
deemed to have withheld its consent for suits against the
‘ United States on contract claims arising therefrom.

The plaintiff, though insisting that the United States
is liable for breach of the contract in question, acknowl-
edges that '' * * * the funds for administration of the .
Order came not from the Department of Agriculture, but
were taxed directly to the handlers in the area." (Plain-
tiff's Objections To Defendant's Motion To Dismiss The -
Petition, p. 4.) .-

Accordingly, insofar as appropriations actually util-
ized in this particular activity are concerned, the un-
disputed facts of the case furnish a presumptively ade- ©
quate foundation for the jurtecictiona}. argument that de-
fendant advances.

This court has repeatedly declared that the contracts
. of the conventional nonappropriated-fund instrumental-
ities of the armed forces, although made by Government
’ officers, do not bind appropriated funds, do not create a
_debt of the United States, and may not be vindicated in
this court. G. L. Christian And Associates v. United .
States, 160 Ct..Cl. 1, 312 F.2d 418, 425 (1963), and on
rehearing 160 Ct. Cl. 58, 320 F.2d 345, 351 (1963), cert.
denied, 375 U.S. 954; Borden v. United States, 126 Ct.
— 902, 116 F. Supp. 873 (1953); Pulaski Cab Co. v.

On

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United piles, 141 Ct. Cl. 160, 157 F. Supp. 955 (1958);
Gradall v. United States, 161 Ct. Cl. 714, 329 F:2d 960
(1963); Keetz v. United States, 168 Ct. Cl. 205 (1964). -

Proceeding on the assumption that the results in
these cases were based on appropriation considerations,
the defendant relies on this body of authority in urging
dismissal for want of jurisdiction:.

Accordingly, the question is whether the Grape Crush |
Committee is substantially indistinguishable from the
"conventional nonappropriated-fund instrumentalities"
comprehended by the decided cases.

Typically, where the issue at ee’ was the United ?
States' contractual liability, military post exchanges and
kindred organizations have been the "nonappropriated-
fund instrumentalities"' in those decisions of this court
on which defendant relies and in the analogous decisions
of other courts as well. ' ;

Without exception these decisions have held that the
Government is not liable on contracts entered into with
third parties by the-exchanges. Moreover, in every such x
decision rendered since 1942 the courts have treated the
question as controlled by an expression containedina
Supreme Court opinion of that year in Standard Oil Co.:
v. Johnson, 316 U.S. 481 (1942). |

A thorough examination of these atithorities, includ-—
ing Standard Oil Co. v. Johnson, supra, reveals that the
results announced therein were clearly not based on the
matter of appropriations, as related either to the doc-,
trine of sovereign immunity or otherwise. Recovery
against the United States was denied for reasons of lia- ©
bility, not immunity. Essentially, the Government was
held not liable on various post exchange contracts be-
cause, under applicable principles of agency, it was not

'S Bleuer v. United States, 117 F. Supp. 509 (E.D. S.Car. 1950);
Bailey v. United States, 201 F. Supp. 604 (D.C. Alaska 1962). _-

Z

ow

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a party to such contracts. Thus, the plaintiffs' difficulty
was with the merits rather than the enforceability of ©
their claims.

‘The certainty that aieleaietiibion considerations were
not’significantly involved in the end results of.the de-
cided cases is best demonstrated by the fact that, as the
__ courts have recognized, '* post exchange activities have
- traditionally and cons istently aPayn substantia! support

_ and sustenance from the federal revenues hus, what-
, ever the validity of defendant's appropriation argument
as an abstract proposition, it is inapplicable in the case
Of post exchanges because the factual premise (i.e., non-
appropriation) on which it depends simply does not exist.

Cf.. Gay Street Corp. v. United States, 130 Ct. Cl. 341,
346 +347 (1955).

Since 1903 the exchanges have been natpon si iat
included in ee appropriation bills.” -

Meee, e.g., Standard Oil Co. v. Johnson, supra, at 484; Pulaski

Cab Co. v. United States , 141'Ct. Cl., supra, at 163.

"6. 975, 32 Stat. 927;-c. 1485, 33 Stat. 259; c. 1307, 33 Stat.
827, 836; c. 3078, 34.Stat. 240, 253; c. 2511, 34 Stat. 1158, 1169;
Cc. 163, 35 Stat. 106, 119; c. 252, 35 Stat. 732, 744; c. 115, 36
Stat. 243, 255; c. 209, 36 Stat. 1037, 1050; c. 391, 37 Stat. 569,
582; c. 93, 37 Stat. 704, 715; c. 72, 38 Stat. 351, 364; c. 143, 38
Stat. 1062, 1076; c. 418, 39 Stat. 619, 636-637; c. 12, 40 Stat.
40, 56-57; c. 29, 40 Stat. 182, 195- 196; c. 79, 40 Stat. 345, 363;
c. 28, , 40 Stat. 821, 830; c. 143, 40 Stat. 845, 862; c. 201, 40 .
Stat. 1020, 1029; c. 8, 41 Stat. 104, 118-119; c. 240, 41 Stat. 948,
963; c. 33, 42 Stat. 68, 83; c. 253, 42 Stat. 716, 719; c. 178, 42
Stat. 1377, 1380; c. 291, 43 Stat. 477, 480; c. 225, 43 Stat. 892,

"895; c. 146, 44 Stat. 254, 256; c. 167, 44 Stat. 1106, 1108; c. 232,

45 Stat. 326, 329; c. 366, 45 Stat. 1349, 1352; c. 862, 46 Stat.
1014-1015; c. 520, 47 Stat. 709, 718-720; c. 165, 48 Stat. 614,,.
642; c. 54, 49 Stat. 120, 148; c. 404, 49 Stat. 1278, 1309; c. 423,
* 50 Stat. 442, ‘468; c. 347, 52 Stat. 642, 667; c. 88, 53 Stat. 592,
618;-c. 343, 54 Stat. 350, 378; c. 262, 55 Stat. 366, 392; c. 477,
56 Stat. 611, 631; c. 185, 57 Stat. 347, 367; c. 303, 58 Stat. 573,
593-594; c. 265, 59 Stat. 384, 404; c. 583, 60 Stat. 541, 563; c.
357, 61 Stat. 551, 569-570; c. 632, 62 Stat. 647, 667; c. 787, 63
Stat. 987, 1022; c. 512, 65 Stat. 423, 448, 449.

ee oe et
i) r

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e

In 1933 and 1934, Congress required disbanded orga-
nization funds of $298,068, derived primarily from post
exchange — to be covered | into the Federal

Treasury. '

Since 1902 post ro one have been permitted, with .
the consent of the Postmaster General, to exercise the |
franking privilege on all correspondence relating to their

business. January 23, 1902, Circular No. 5, Hdqrs. of

the Army, Washington.

At posts where exchange buildings haves not been pro-
vided for by direct appropriation Army regulations?”
have required the commanding officer to set aside any
available building suitable for post exchange use. If such
a building is unavailable the commanding officer may
authorize the construction of a temporary building, util-
izing the labor of troops, and the Quartermaster Corps
is authorized to supply the necessary tools, windows,
sashes, doors, and such other material as may be on
hand and can be spared. The Quartermaster is also au- -

' thorized to‘furnish heat and heat and lighting apparatus

and to sell ordinary subsistence items. toa post exchange |

- at cost. Post exchanges are permitted the free use of.
radio, telegraph, and cable facilities owned by the _—

partment of Defense.

' Post exchanges have been relieved of the burden of a
variety of federal taxes. S.T. 620, XII-1 Cum. Bull. 419

- (1933); S.S.T, 269, 1938-1, Cum. Bull.-441. In certain

instances such exemption has been baSed on the finding .
that the exchanges were "wholly owned" by-the United
States. S.S.T. 385, 1940-1 Cum. Bull. 202...

Finally, as this court noted in Dugan v. United States,

. 84 Ct. CL 458, 463 (1899), the exchanges receive the pro-

ceeds from sales of surplus rations that have, of course,
been purchased with appropriated funds.

">. 281, AT Stat. 1571, 1573; c. 756, 48 Stat. 1224, 1229.
“AR 210-65, pars. 46, 47, 51 i and 59.

B-10

Considering the realities of the exchanges' long-
Standing and substantial involvement, both direct and in-
direct, with federal funds, it is. altogether untenable to
contend that by its appropriation activities Congress |
should be deémed, by implication, to have removed ex-
change contracts from the general waiver provisions of |
the Tucker Act. 1° . .

‘In 1887, by adopting the Tucker Act, Congress waived
the sovereign's immunity as to suits against it founded
on contract obligations. At no time since has Congress*
_ narrowed this general waiver by specifically removing -

_ the contracts of post exchanges or kindred activities
from its scope. It failed to do this even, though ‘it re-
peatedly demonstrated both its awareness of the immun-
_ ity implications '% attending post exchange attivities and
\the necessity for express Conferral of immunity as to
such activities by enactment of appropriate legislation.”°

Accordingly, to the extent that any exchange coritract
may be regarded as that of the United States, the Govern-
- ment enjoys ‘no immunity from suit thereon. If, on-the
other hand, such a contract is determined not to be that .
of the United States, then a suit against it fails for lack
' of a valid claim and not because Congress, for-reasons -
independent of the merits of the particular claim, has —
refused to authorize the institution of suit thereon.

As stated earlier, the courts have generally regarded
Standard Oil Co. v. Johnson, 316 U.S. 481 (1942), as con-
trolling authority for the proposition that the United.
States cannot be held liable on the contracts of nonappro-
priated-fund instrumentalities. atte

| Notably, the case did not involve a post exchange's
-contract or the United States’ liability thereon.

°C, 359; 24 Stat. 505.
C, 582, 49 Stat. 1519,°1521.
”° C. 787, 54 Stat. 1059-1060. |

B-11__..

A California statute imposed a license tax, measured
by gallonage, on the privilege of distributing motor ve-
hicle fuel within the State. A specific exemption was
provided in the case of ""* * * any motor vehicle fuel
sold to the Government of the United States or any de~
partment thereof for official use of said Government."

The question in the case was whether Army post ex-
changes came within the quoted language of the exemp-—
tion provision so that sales of gasoline to such organi-

zations could be made free of tax.

In holding that exchanges were within the exemption;
the Court found "'* * * that post exchanges as now oper -
ated are arms of the Government deemed by it essential
for the performance of governmental functions. Théy
are integral parts of the War Department, share in ful-

_ filling the duties entrusted to it, and partake ‘of whatever
_ immunities it may have under the Constitution and fed-
eral statutes." Standard Oil Co. v. Johnson, supra, at
485. ' ae 2

Before examining the factors on which the Court re-
lied in reaching its announced conclusion, the quoted
reference to immunity should be particularly noted.
. Specifically, the immunity enjoyed by exchanges was de-
, Clared to be coéxtensive with that of the War Depart-
-“ment, no more and no less. Recognizing the unques-_

tioned amenity of the United States to suit-on War De-

partment contracts by virtue. of the Tucker Act, it ‘is

apparent that if the sovereign is deemed: insulated from

liability on a rey entered into by one of the "inte-
gral parts of the War Department" its nonliability must
rest on reasons other than immunity.

At the outset, the Court charted the relevant guide-
lines for determining the legal status of post exchanges
and their relationship to the United States. Thus, it
said (at page 483): © > —

* * * post exchanges operate under regulations
of the Secretary of War pursuant to federal au-

a. The first such regulations were published as G.O. 46,
Har. ‘of the Army, July 25, 1895;:

Le “Sec. 20, Act of July 15, 1870, c. 294, 16 Stat. 315, 319,
provided:
- And be it further enacied, That the ihacebiae of War
shall prepare a system of general regulations for the -
-administration of.the affairs of the Army, which, when
approved by Congress, shall.be in force and obeyed un-
til altered or revoked by the same authority; and said
. regulations shall be reported:to Congress at its next
_ session; Provided, That said regulations shall not be
- inconsistent with the laws of the United. States. _

4 an Act of March 1,°1875, c. 115, 18 Stat. 337, provided:
Be. it enacted by the Senate’ and House of Representa-

. tives of the United States of America in Congress assem-
‘bled, That so much of section twenty of the act approved
July. ‘fifteenth, eighteen hundred and seventy, entitled "An
act making appropriations for the support of the Army for
.the year ending June thirtieth, eighteen hundred and sev-
_enty-one, and for other purposes," as requires the system
ot general aa atataciend for the Army therein authorized to

ae a

aise Rae ii tes atime hie leo Fe

B-13

As the final item of a resume of various practices
' and procedures exemplifying the effect of the applicable
Army exchange regulations, the Court observed (at page
° 483): =: . } | sSars eek
The Government assumes none of the financial
obligations of the exchange. But government
officers, under government regulations, handle
and are responsible for all funds of the exchange
which are obtained from the companies or de-
tachments composing its membership. Profits,
if any, do nat go to individuals. : They are used
to improve the soldiers’ mess. to provide var-
ref shea of recreation, and in general to add
to the pleasure and comfort of the troops. (Em-
_. phasis added.) - es

Evaluated in context, the underscored remark repre-
sents nothing more than the specification of one aspect
of the exchange regulations*” which, if viewed in isola-

tion, might vary the conclusion that exchanges are full-

be reported to Congress at its next session, and approved
‘by that body, be, and the same is hereby, repealed; and
the President is hereby authorized under said section, to
make and publish regulations for the government of the
Army in accordance with existing laws. :

Until recently, the following had been the provision ‘dealing
with post exchanges typically contained in the published regula-
on a C.F.R. (1962 Ed.), Sec. 554.6 (24 F.R. 3323, Apr. 29,
1959)]: $ oO ia
Sec. 554.6 Legal status. : a ae ;
The A&AFES is an instrumentality of the United States en- .
titled to the immunities and privileges available to the de~
partments and agencies of the Federal Government under the
Federal Constitution and statutes and under international trea
ties, conventions, and administrative agreements. The United
States is not responsible for contract, tort, and compensation
claims against-the ASAFES and has not waived its immunity ©
from suit on those claims.. Any claim arising out of the ac-
. tivities of the A&AFES shall be payable solely from nonappro
ri priated funds. — ae |

> The foregoing provision has been displaced by the following [32
C.F.R. (1962 Ed..as supplemefited), Sec. 554.6 (28 F.R. 5564,
June 6, 1963)]: ae oe aoe ar

B-14

_ ‘fledged governmental arms. That this lone considera-
tion had no such effect was promptly demonstrated by.
the Court's enumeration of a series of countervailing

- functional attributes that also emanated from the regu-
lations. 7 A | :

The essential importance of all this for our purposes

is not so much the effect of the nonliability feature on

' the exchanges’ gqvernmental status as it is the fact that
the regulations are the source of that nonliability. .

Accordingly, in observing, as obiter dictum, that the
Government was not liable on exchange financial obliga- .
tions, the Court was simply applying the settled princi-
ple that whatever the form in which the Government
functions, anyone entering into an arrangement with it ~
* _ , takes the risk of having accurately ascertained that he

who purports to act for the Governments stays within
the bounds of his authority, the scope of which may be
_ explicitly defined by Congress or be limited by delegated
_ legislation, properly exercised through the rule-making
power. Federal Crop surance Corp. v. Merrill, 332
U.S. 380, 384 (1947). oS Re . =i
The Government's nonliability in such a situation
stems not from the absence of a relinquishment of sov-
: a ee
Sec. 554.6 Legal status. a | Sd
The A&AFES is an instrumentality of the United States. As
. such, it is entitled to the immunities and privileges. enjoyed
. by the Federal Government under the Constitution, Federal

_ statutes, established principles of International Law, and in-

_ ‘ternational treaties and agreements. The A&AFES is immune
from direct State taxation and’ from State regulatory laws,
such as licensing and price control statutes, whose applica-
tion would result in interference with the performance by the

_ A&AFES of its assigned federal functions. Suits by or against
the A&AFES or individual exchanges are in legal effect suits
by or against the United States and must be brought in the
name of the United States. However, claims against the A&
AFES or individual exchanges and jadgments, including com-
promise settlement of court actions, against the United States
arising out of exchange activities are payable solely out of-
A&AFES funds. . " ; ua

4

-B-15

ereign immunity to suit but from the operation of com-

mon law rules of agency under which the doctrines ‘of

- apparent authority and estoppel have, for reasons of
public policy, long been held inapplicable where the Gov-

-ernment's role is that of principal.

As early as 1813 the Supreme Court announced the
rule and its underlying reasons. _- *

In Lee v. Munroe, 7 Cranch (11 U.S.) 366 (1813), the
holder of certain promissory notes agreed to accept sev-
- eral parcels of Washington real estate from his debtors

in satisfaction of the debt. Ostensibly the debtors had
acquired these properties from the City of Washington.

Before consummating this arrangement the creditor
inquired of the Commissioners of Washington whether
they would convey. the properties in question to him.

_ They agreed that they would and so noted in their offi-
cial journal. The creditor thereupon turned over the
notes to his debtors in return for an order from them -
directing the Commissioners to convey the subject prop-
erties to the creditor. ee er

In fact, the debtors still had purchase money obliga-
tions outstanding on these properties and when the cred- '
itor presented the debtors' conveyance order to the
_ Commissioners they refused to convey unless the cred-
itor paid the remaining balance due on the properties.
The debtors thereupon became insolvent. .The creditor _
then sued the United States, in the name of the Commis -
Sioners, for damages resulting from his acceptance of
_ the Commissioners' earlier assurance with respect to

conveyance. | ; | . :

In his suit the creditor relied on the line of authority
to the effect that if one who is about to lend money with’ |
real estate as collateral approaches a prior mortgagee, -
disclosing his intention of making the loan, and is ad- -
vised by the latter that the property is unencumbered
the law will thereafter give. the lender preference over
the prior mortgagee with respect to the property.

. — ~ 4 ” ” s - . nun 8 Pp 6 ‘ .
narrate as mii i a the a i Jarier 22 EN i SAN Gi. AS ii eT I 2A och ki

id

B-16

In denying recovery, the Court acknowledged the va- _

lidity of the above principle in private transactions di-
rectly involving the real parties in interest but refused

O°

to extend it to situations where the public's’ interest was
represented by agents... In such instances, the Court de-
clared, .estoppel will not lie against the Government
'* * * unless it most manifestly appear that the agent

_was acting within the scope of his authority, and was em-

powered, in his capacity of agent, to make the declara- ag
tion or representation which is relied on as the ground

‘of relief."" Lee v. Munroe, supra, at 368.

The Court based its ruling on considerations of prac-
tical necessity, Saying (at pages 369-370):

Were it otherwise, an officer interested with
the sales of public lands, or, empowered to
make contracts for such sales, might by in-.
-advertence, or incautiously giving information
to others, destroy the lien of his principals on. -
very valuable and large tracts of rural estate,
and even produce alienations of them without
any consideration whatever being received. It
is better that an individual should now and then
suffer by such mistakes, than to introduce:a
rule against an abuse, by which, by improper
collusions, it would be very difficult for the
public to protect itself.

This special rule of agency, singularly applicable in
the case of a governmental principal, has been univer- _
sally accepted and applied. Hawkins v. United States,

96 U.S. 689, 691-692 (1877); Kelly v. United States, 116
Ct. Cl. 811, 818-820 (1950); Nuss v. United States, 127
Ct. Cl. 197, 206-207, 117 F. Supp. 413 (1954); Newman ©
v. United States, 133 Ct. Cl. 429, 438, 135 F. Supp. 953
(1955); National Electronic Laboratories, Inc. v. United
States, 148 Ct. Cl. 308, 316, 180 F. Supp. 337 (1960); ©

’ Byrne Organization Inc. v. United States, 152 Ct. Cl.
578, 586-587 (1961); United States v. Holley, 199 F.2d
575, 578 (5th Cir. 1952); Blake Construction Co.'v. United
‘States, 296 F.2d 393, 396 (D.C. Cir. 1961); Prestex Inc.

B-17 .

v. United States, 162 Ct.Cl. 620,625, 320 F.2d 367 (1963);
G, L. Christian and Associates v,. United States,- supra.

In its decisions in the post exchange area this court
has not just followed the pronouncement of Standard Oil
Co. v. Johnson, supra, respecting the Government's con- -
tract responsibility, but has premised that result on the

_ agency principle previously discussed. In short, the

holdings have been that the Government was not liable
on the exchange contracts because, by virtue of the pub-
lished exchange regulations, it was not a party to them.

In Borden v. United States, supra, the plaintiff unsuc-
cessfully attempted to hold the United States on an em-

_ ployment contract between himself and an overseas post:

exchange. Although the precedential significance of
Standard Oil Co, v. Johnson, ‘supra, was given due defer-
ence, both the majority ° and dissenting“ opinions make
clear the heavy influence of the applicable regulation on

' the court's decision.

More recently, in Pulaski Cab Co. v. United Stee.
141°Ct. Cl. 160, 157 F. Supp.‘955 (1958), the court again |
considered the question of the United States' legal re-
sponsibility under a'contract entered into by a military
post exchange.. Though the result.was the same as in

- Borden supra, the supporting ere. was somewhat

more analytically. expansive.

The opinion is particularly helpful in Clarifying the
respective significance and interrelationship of princi-
ples of liability, on the one hand, and deena and jur-

°° Borden v. United States , 126 Ct. Cl., supra, at 908, where the |

Majority noted that at the time of the transaction under: review

Paragraph 35(h)(1) of AR 210-65 provided:

Exchange contracts are solely the obligation of the ex-
change. They are not Government contracts and the dis-
tinction between exchange contracts and Government con-
“ne will be observed and clearly indicated at all times.

*4 Borden v. United States , 126 Ct. cl. » Supra, at 912. os

.
WEE PREACH HRD, ORE AES A SD

B-18

a isdiction on the other, that operate to preclude a recov-
ery against the Government on such ‘a contract.

While it is true that the court phrased its ultimate
conclusion in terms of want of jurisdiction,” it was
made perfectly clear that the jurisdictional barrier to
recovery only arosé as a result of the liability determi-
-nation to the effect that thé Government was not a party
to the contract:on which suit was brought. Only then
could it be said that the suit was without the scope of
the Tucker Act.?° Where such an antecedent determi- ©
nation is essential to the establishment of a jurisdic-
tional void >the action fails on the: merits, nor for want of
jurisdiction. ?* ‘Ralston’ Steel Corp. v. United States, 169
Ct. Cl. 119, $40 F.2d wee, 668-669 (1965), cert. denied,
381 U.S. 950.

To determine that the suit was not elated on "any |
‘express or implied contract with the United States," the
court looked, as. it had in Borden, supra, to the-applica-
ble exchange regulations which provided that: "Contracts
involving exchanges are. not Government contracts
and such distinction will be stated therein." Pulaski

Cab Co. v. United States, 141 Ct..Cl., supra, at 163.
Coupling this-feature of the regulations with the proposi-
tion that an agent without authority to do so cannot make -

a 5

? WH) are of. the opinion that plaintiffs must fail in their attempt
to invoke the jurisdiction of this court." Pulaski Cab Co. v.
— States, 141 Ct. Cl., supra, at 162. ‘

ais 8 98 U.S.C. § 1491 providing in relevant part:
The Court of Claims shall have jurisdiction to render
‘judgment upon any claim against the United States founded
- * * * upon * * * any express or: implied contract with the
: _, United States ***, -

*7 since the Tucker Act serves as both the measure of this court
general ‘jurisdiction and as the émbodiment of the sovereign's
‘waiver of immunity in the contract area, the same reasoning
would apply if the suggestion was that the suit failed because the _
United States had not consented to its being ae rather than ~
because of the merits. ws

_@

B-19
the United States liable for its contracts,”® the court

‘found that the Government was not a party tothe contract |
in suit. There is no suggestion that, had the privity de-
termination been otherwise, the action would have failed

, for reasons of jurisdiction or immunity. Indeed, the 3

‘contrary implication is to be gathered from the court's
remarks directed to the fact that the question of the ex-
change's liability was not before it. Pulaski Cab Co, v.
United States, 141 Ct. Cl., supra, at 163.. .

Admittedly, other courts have both held and observed
as obiter dictum that Government instrumentalities, be-
cause they are instrumentalities, enjoy a federally de-
rived immunity from suit on their own obligations. Edel-
_ Stem v. South Post Officers Club, 118 F. Supp: 40 (E.D.

_Va. 1951); Bailey v. United B-20—
_Ttnatter of general principle... Keifer & Keifer v. R.F.C.,
306 U.S. 381, 390-391 (1939); Larson v. Domestic &
Foreign Corp., 337 U.S. 682, 703-704 (1949).

Applying the principles announced in Standard Oik
Co. v. Johnson, supra, and in this court's decisions in
- Borden, supra, and Pulaski Cab Co., supra, it is evident
that the critical inquiry in deciding the fundamental.
problem” posed by the instant motion is whether, in
entering into the contract on which suit is brought, the —
_ Grape Crush Committee was acting within the scope of
its actual authority as an agent of the United, States. To
‘resolve this question of agency, we look to the relevant
statute and regulations. . Ts 7

In United States v. Rock Royal Co-operative, 307 U.S.
333, 542-548 (1939), the Court discussed the structure’
and objectives of the Agricultural Marketing Agreement
Act of 1937,°' as amended (7 U.S.C. § 601 et seq.).

Declaring that the interstate exchange of agricultural
' commodities on an orderly and reasonably priced basis
is in the national public interest,” Congress propounded
_ a series of measures in aid of this objective-and vested
the Secretary of Agriculture with the authority and re-
sponSibility for the implementation of them. °

Among the devices selected to effectuate the declared

policy of the Act was that of the so-called marketing ‘—

order. * Its general purpose was to establish and maén-

5° This opinion treats the defendant's motion as one for judg-
ment on the pleadings in order that the result, for which it con- —
tends, not be made to depend solely on the question of whether .
this court has jurisdiction to entertain the controversy.

*! The Act, c. 296, 50 Stat. 246, was adopted as a partial re-
enactment and amendment of the Agricultural Adjustment Act
_ of 1933, c, 25, 48 Stat} 31. The legislation followed as an after-
‘math of the decision in United States v. Butler,.297 U.S. 1° (1936)

7-08.05 601. e
UBC, 6003. 5
4 7 U.S.C. § 608c.

Wp Ray ad ia nc ial

B-21 _
tain such marketing conditions for various agricultural
commodities, including grapes, as would provide, in the

_ interests of producers and consumers, an orderly flow ° -
of such commodities to market during their normal mar-—

keting seasons in order to avoid unreasonable fluctua-__
tions in supplies and prices. ‘ ' ado

Congress provided legislative standards for the issu-
ance, Composition, and administration of the marketing
orders. Thus, it designated the "handlers" (i.e., proces-
sors or distributors) *° as the focal point of the regu-
latory aspects. of the enumerated agricultural commodi-
ties®” as to which orders could be issued. It/charged _
the Secretary with the responsibility for deter mining
whether, applying stated criteria, a marketing order
should be issued** and prescribed various functional _
features that were to be included in such ordersaswere -
issued. “ag Among such features was one incorporated in
the marketing order here involved; that of: '"Determin-
ing, or providing methods for determihing, the exist-
ence and extent of the. surplus of any such commodity or
product, or of any.grade; size, or quality thereof, and
providing for the control and disposition of such surplus,

_ and for equalizing the burden of such surplus elimina- _
_ tion or control among the producers and handlers there-
_of.''4° Another authorized the Secretary to appoint

agencies, such as the Grape Crush Committee, to aq-
minister the marketing orders that he promulgated.

The Act also required that. marketing orders, such as
the one here involved, include provision for assessment

*° 7 U,S.C. § 602(4),

°° 7 U.S.C. § 608¢(1).

*" 7 U.S.C. § 608c(2). °

*° 7 U.S.C. § 608¢(3), (4). |
°° 7.U.S.C..§ 608c(6), (7). are

49 7 U.S.C. § 608c6)@).
“41 7 ULS.C. § 608c(7)(C).

oa i Saati

of,

B-22

against each affected handler of his pro rata share of

_ such expenses, other than expenses of receiving, hand-
ling, holding or disposing of the subject commodity, as

the Secretary deems reasonable and likely to be incurred
by his appointed local agency. *

Congress appropriated substantial funds for, amdg
other things, "administrati¥€ expenses" of the various
activities authorized by the Act,*° including the issuance .
and administration of marketing orders, and for encour-
agement of domestic consumption of agricultural com- .
modities "by diverting them, by the payment of benefits
or indemnities, or by other means, from the normal
channels of trade and commerce." —_,,. .

Over the years appropriations in fyrtherance of the
various programs authored by this_legislation have been .
substantial. For all of these programs, the language of
the Act became authority for the making of appropria- -
tions. Calvert Distilling Co. vw United States, 94 Ct. Cl.

- §17, 522 (1941). |

.Considering the totality of the. provisions referred. to.

above, it cannot be said that either in terms-of function

or supporting appropriation, Congress registered any

. discernible disclaimer of federal responsibility with re-

spect to a surplus disposal transaction suchas the Grape

- ' Crush Committee's commission contract with the plain- .
tiff.

- The detection of surpluses of specified pooh al
~ commodities and their removal from normal ch ls
, of trade were among the primary responsibilities ‘del- ¢
.egated to the Secretary under the. terms ofthe Act. Con- _
gress declared such activities to be in the national in-
terest and authorized the Secretary to utilize agents of .

° 7 U.S.C. § 610(b) (2) (ii). °
37 U.S.C. § 612(b), (c).
47 U.S.C. § 612c.

B-23

-his selection for carrying them out.’ In short, the pow-
ers, and indeed the duties, conferred on the Secretary
by the Act were amply broad to accommodate his par -
ticipation, on behalf of the United States, in a surplus ©
disposal transaction of the type here in suit. That he
elected to have his duly appointed agent act in his stead
does not of itself serve to narrow the authority granted

-him by Congress. | :

Finally, if the Secretary's authority to'‘make such a
_ contract be acknowledged, it cannot be said that the ap-
propriation measures approved by Congress failed to.
provide for the expenses incident thereto so as to neces-
-Sarily undercut that authority by implication. Cf. Gay '
Street Corp. v. United States, 130 Ct. Cl. 341, 346-347
(1955). Whether and to what extent federal moneys were
in fact used to sustain the operations of the Grape Crush
Committee as the Secretary's agent is not the relevant
inquiry in this connection. The critical question is
_ whether Congress provided moneys on which-the Secre-
tary was free to draw in the exercise of his delegated
powers. Examined without undue attenuation, the under- -
lying legislation requires an affirmative answer so that
had the Secretary entered into the contract with plaintiff?
he could lawfully have committee appropriated funds to
its execution. :

The ultimate problem therefore becomes that of as-
_ certaining the breadth of the Secretary's delegation of
_ his powers to the Grape Crush Committee. As alre
. noted, Congress specifically authorized himto disc
his functions and responsibilities in the marketing orgler
area through agents of his selection.” It does not, ;
course, follow that simply because the Secretary elected
to use the agency device in this instance he necessarily
endowed his appointee with all of his powers'under the
Act. Nothing therein requires him to operate in this
connection on an all-or-nothing basis. United States v..

.
4

| ® See fn. 41, supra.

B-24 oe ome

7

“>. Allen-Bradley Co., 352 U.S. 306 (1957). The scope of

the-power grant is to py determined from the terms of
the marketing order “ of which plaintiff was aware By

operation of law.” This is the teaching of Standard Oil
. ‘Co, v. Johnson, supva,;andFederal Crop: Ins, — v.

Merrill, supra, keer ae

~~
: Consonant with: the several statutory directives pre-
viously mentioned, the marketing order contains afully.
comprehensive array of provisions covering the estab-
lishment, functions, powers, and duties of the Commit-
tee and its operating relationship to the Secretary. |

| The: principal general power and responsibility *
vested in the: ‘Committee iS the administration of the
terms and provisions of the marketing order promul-

gated by the Secretary. y

: For each crop year the Committee’ is + veadeasiile for
recommending to the Secretary the quantity of grapes

that may be freely sold without marketing restrictions?”

If approved ‘by the Secretary, this recommendation be-
comes controlling as to the area covered by the order.®° -

In those instances where actual production of grapes .
exceeds the quantity that the Secretary has determined
may be freely sold, the marketing order requires that
the excess be converted by the "handlers" into spiritous
grape products of a type approved by the Secretary. The
ordér denominates such products as "'set.aside."*! In .
the instant case the set aside was the industrial alcohol ©
that plaintiff alleges he was ‘commissioned to sell for a -
— finder's fee. ' ;

~ 1 CFK $$ 990.1 et seq. 26 F.R. 7797; 26 FR. 12751).

7 Sec. 7; Act tof iuly 26, 1935, c. 417, 49 Stat. 502; 44 U.S.C,
a 307. . é a

7 CFR, § 990.34.
7 GFR. §§ 990.47, 990.53.
° 7 C.F.R. § 990.48,
81 C.F.R. § 990.54,

e

eo

‘% os B-25

‘The Committee is authorized generally to sell, or
otherwise dispose of, all or any part of a set aside on
the best terms obtainable that are consistent with the
terms and aims of the order and is specifically so em-
powered with respect to a set aside consisting of indus -.
trial alcohol.”” The order directs, howéver, that: when
Such a transaction occurs, the proceeds of sale, ‘'after

| _ deduction of any expenses incurred by the committee in

receiving, handling, holding, or disposing" of the set .
aside product, shall be distributed pro rata among the
interested producers.°* Third parties involved in set

"aside disposal transactions are therefore told that in-.
cidental expenses of the types enumerated are to be paid

by the interested producers.out of sales proceeds. Any

subsisting doubt that this provision serves notice that - ue
the Secretary,-and.in turn the Treasury, are not respon-

sible for the payment of such expenses is eliminated by
. the section of the order dealing specifically with the

Committee's authority to incur expenses. It provides:°*

The committee is authorized ta incur such
expenses as the Secretary finds are reasonable
and likely to be incurred by it during each crop -
year for the maintenance and functioning of the
committee and board and for Such other purposes,

other than expenses incurred

in receiving, hand-
ling, holding or disposing of set aside, as the Sec-

retary may, pursuant: to the provisions of this’:

Subpart, determine to be appropriate.. The com-
mittee shall file a proposed budget of expenses |
and rate of assessment with the Secretary as soon
-' aS practicable after the beginning of the crop year.
(Emphasis supplied.) . | Be ie

. Considerations of equity, however’ compelling, cannot.

obscure the fact that in dealing with the Committee the |

_. plaintiff was on notice» both that it had no authority to

7 CFR. § 990.62(@), (c). Pe

°° 7 C.F.R. § 990.62(d).
*4 7 C.F.R. § 990.71.
5 Fn. 47; supra.

commit the Secretary to the oo of expenses of dis-
posing of the set aside alcohol and that. such expenses.
were to be paid, for the account of the interested pro-.
ducers, out of ‘the proceeds of sale. Such proceeds in:
the hands of the Committee are, by virtue of the order,

‘impressed with a trust for the mes of creditors such
as the plaintiff. ;

While the language employed anata differs great-
ly from that used in the post exchange regulations, the
essential message is the same. With commendable di-.
rectness the exchange regulations state that: exchange
contracts are not those of the Government, Here the
_- third party-is told: 'You may deal with the agency for

“the purchase of set aside goods, but if you do-you must
look to the sales proceeds of those goods for payment of _
any claims that you have against the agency arising out

of such dealing."" In terms of Government responsibility —
‘as principal, the effect is the same.: The fact that in the
case of the marketing order the Secretary reserves a
power of veto”® over committee actions cannot be held
to change the result. ‘Nor can the reduction of plaintiff's
damage claim to $100,000 convert a contract with the |
Committee to one with the Government. 31 U.S.C. § 724

(a), is solely concerned with the mode of | paying ‘judg-

ments and interest thereon.’ Its concern is with the sat-

isfaction, not the creation of federal liability. United
States v. Turner, 47 F.2d 86, 88 (8th Cir. 1931).

In summary, it is the settled rule of governmental
agency that prevents the plaintiff from holding the United. ~
States on his contract with the Committee. He was told
by the Secretary's regulations that he could not treat’

_ the Government as the ‘Committee's principal for pur-—
poses of this contract. _

The. plaintiff's failure ie: is not attributable to
problems of net immunity or lack of jurisdiction :

rt}

°6 7 C.F.R. § 990.75.

- . as either of those concepts are conventionally under-_ -

rot

B-27

. os

stood and applied. Sg

Nothing in the Agricultural Marketing Agreement Act.
in terms abridges the Tucker Act's waiver of, immunity
in the contract area. Moreover, tlie appropriation fea-
tures of the former do not permit the inference that _
Congress withheld the support of the federal revenues | N
from implementation of the national program and activ - 2
ities that it sponsored, and so signified an implied nar -
rowing of the waiver. y, os eke

Divorced from the agency principles on which this
case turns, jurisdiction is not a relevant consideration.
Only after the Secretary's regulations are considered
‘and applied can it be said that this is not .a suit ona:

' . contract with the United States. Thus, where the United
States is the named defendant, liability is necessarily

_ determined before a basis for jurisdictional challenge

_ arises. A jurisdictional determination in those circum-

-Stances is an afterthought — at most an abstraction.

‘It is recognized that this opinion shuts off the last
avenue in the plaintiff's series of unsuccessful efforts
to secure a judicial assessment of the nierits of his
claim. Certainly those efforts may not be effectively “ _
frustrated by a chame!eon-like transition in the legal
. Character and status cf the Committee. Fase

For purposes of responsibility under the contract in iy
suit, the Committee is either the Secretary's child or |
‘his stepchild, not either — depending upon what court (
happens, to be examining the relationship. ak

From the documents of record supplied by defehd-
ant's attorney, it seems quite clear that the plaintiff's
Suit against the Committee and its membership was
both removed from the State Court and dismissed in the
_ District Court on the Government's fundamental repre -
_ Sentation that the Committee was acting as tlie Secre-
tary's agent. Taking his cue from those representations °

. : a a

> B-28

and the ‘results that — amebines: the plaintiff pro-
ceeded against. the United States in this court and was
promptly met with the claim that recovery could not be =

: had, because the Committee was not the Secretary's

_ ageng for purposes of the contract in question. One can |
only speculate as to the extent to which the Government' |
reasoning and advocacy. would have been stabilized had
the damage award sought by plaintiff fit within the.
$10,000 limitation on the District Court's Tucker Act
jurisdiction. °’

\s

In: any event, it ‘must be acknowledged that the very
same agency considerations that relieve the Govern-
ment of liability in.this court Squarely place the Com-
mittee and its members in a position of unsheltered
_ responsibility respecting the contract in suit. That re-
sponsibility is neither diminished nor affected by the ~

~ fact that the Committee was formed and functioned as

the Secretary's agent for various defined purposes.

‘Just as such a general aura of agency’ cannot be used

to make the United States shoulder a contractual: obli-

_ gation that it has disclaimed in published administrative
regulations, it cannot shield the Committee from respon-

. Sibility on a contract that those same regulations have 7 :

__made its own. «na eee Bee

The su estion, urged by the SRE before the
District Court, that the Committee members were im-

_ munized from contract responsibility by virtue of the

Secretary's régulation on personal liability °® is wholly

without merit. At least-in the contract area, the Secre- ”

tary is altogether without power-to bestow the ee

that he purported to confer. | tae

“In adopting the Agricultural Masevnibak Act of 1937,
. elas gave no intimation that the Secretary's own.
contracts were withdrawn from the suit provisions of —

a.

" 28 U.S.C. $ 1346(a) (2). ——
ia 1, supra.

t

. :
RRR OPE ENG RET, PNY ES SSN ER MEER Te HMR LIE LE OEE NE mY gM

, B-29

the Tucker Act. Moreover, in authorizing him to select
agents of his choosing to execute his responsibilities in
the marketing order area,” ° Congress neither clothed
those appointees with immunity from contractual re-
sponsibility nor authorized the Secretary to do SO.

While it was within the Secretary's competence to
fashion his administrative regulations in a manner lim-
iting the bounds of the Committee's agency capacity, and

. in so doing remove the United States as principal in re-.
_spect to the Committee's contracts for set aside dis-

position, he had no power to grant immunity from suit,
either to the United States or to the Committee in rela-

tion thereto.

In the light of the significant shift or “clarification,”
if preferred, of the Government's position as disclosed ©
by its submissions in this court, it seems not improb-
able that in the exercise of its sound discretion the Dis-
trict Court might conclude, on appropriate application

by the plaintiff, that there existed “reason justifying re-

lief from the operation of the judgment" ® Bsns 3 the.
Committee's earlier motion to dismiss.

-——~Nonetheless, ‘however meritorious the plaintiff's. con-
. tract,claim against the Committee and ‘its membership,

his suit against the United States in this court must, for
the reasons indicated, be dismissed for failure to estab-

lish a claim on which relief can be granted.

‘It is accordingly recommended that defendant's mo- \
tion to dismiss be be granted and that pean petition

_be dismissed. Sioa:

°7 U.S: Cc. § ‘Bhoomes.
” Rule 600); F.R.C.P,

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TERRIA PR, DE NS ETI RUT BER INe .

. APPENDIX C

C-1. : ee | os +s a

Sn the ited Sines Gout of aims
re wt : “Nogaro a :

( Decided December 16, 1966)

ory :

_ FRITZ KYER y. THE UNITED STATES _

Warren E. Magee for plaintiff; L: Kenneth Say, attorney
of record. Lucius Powers, Jr., and Lawrence Kennedy, of
_ counsel. oo Pais : Fe |
‘Edward J. Friedlander, with whom was Assistant Attor:
ney General John W. Douglas, for defendant. —

Pe a pete
_ Before Cowen, Chief Judge, Laramore, Durrte, Davis,
and Coins, Judges. : eS |

ON DEFENDANT'S MOTION TO DISMISS THE PETITION .

Cottins, Judge, delivered the opinion of the court :*
_ This is a suit for breach of contract in which recovery is
sought. for a brokerage commission allegedly due plaintiff. -
for services rendered to an: agency of the United States, -
established and controlled by the Secretary of Agriculture
pursuant to authority vested in him by the Agricultural

Marketing Agreement Act of 1937.1

-*This opinion takes into consideration the Memorandum Report filed by
_ Commissioner George Willi on December 17, 1965. De |
« - 14Chapter 296, 50 Stat. 246, as amended, 7 U.S.C. $$ 601-24 (1964), The
act was adopted as a partial reenactment and amendment of the Agricul-
tural Adjustment Act of 1933, ch. 25, 48 Stat. 31, as amended. The) legis-
lation followed as an aftermath of the decision in United States v. utler,”
297 U.S. 1 (1936), which held certain sections of the 1933 act unconstitu-

tional. ee
239-719—66 +

A La ENS TR BPN ANREP eT rte ber ene
ny * . sate :

hoes:

Plaintiff is a broker, lidended to deal ja/,leobol, wines, and

various other distilled spirits. In 1962, he entered into a _

Sales commission contract with the Grape Crush Adminis-

trative Committee (hereinafter the “Committee”). Under

the terms of the contract, plaintiff was to secure a purchaser
- for a quantity of industrial alcohol that had been made from

surplus grapes ‘and, in consideration therefor, he was to re- |

ceive a 1-cent-per-gallon’ commission. It is alleged that a

_ purchaser .was located and a sale consummated, but that

ie demand for the commission was refused.

« Plaintiff's &ction yas initially commenced in a California

‘State Court, whenéé, upon petition of the United States
. Attorney for the Southern District of California, the suit
_ was removed to the appropriate United States district court.

Removal was predicated upon 98 U.S.C. § 1442(a) (1) which

ae provides, in pertinent part, for the removal of any ‘civil or

criminal action, involving,. among others, a suit commenced ,
against any agency of the United States.
Upon removal of the action to the district court, plaintiff

se was confronted with a motion to dismiss. In a supporting
memorandum, the United States Attorney urged that the |

~ Committee, as an “*.* * integral part of the Department of
- Agriculture and of the United Stgtes * * *,” could not be

sued 20 nomine ‘because Congress had not! consented to suit

(1952). It was further contended that suit did not lie

‘against it. See, e.g., Blackmar v. Guerre, 342 U.S. 512 .

against the individual Committee members, named as “John _

Does,” for two reasons. First, it was said that Fed. R. Civ. .

P. 17 did not authorize suit against “fictitious defendants”
and, second, that, under a regulation promulgated by the
Secretary, the Committee members were immunized from
personal liability on account of any acts of omission or com-
mission within the scope of their Committee work.? Plain-

"2 Under the act of 1983, ch. 25, § 10(c), (d), 48 Stat. 87, the Secretary of

. Agriculture was authorized to implement regulations to carry out the

' entrusted to him. This regulatory power was retained in the reenactment ‘of:
1937. The regulations applicable here appear in-7 C.F.R. §§ 990.1-.402 -
'(1964).. Section 990.76 of these regulations states:

“No member or alternate member of the committee or board, nor any em-:-

ployee, representative, or agent of the committee shall be held personally

‘responsible, either individually, or jointly with others, in any way whatso-

ever, to any person, for errors in judgment, mistakes, or pther acts, either
of commission or omission, as.such member, alternate member, employee,
fepeenentative, or agent, except for: acts of dishonesty. “4 5

—

C-3

tiff’s suit was dismissed, with prejudice, for failure to state

a claim upon which relief could be granted. . Kyer v. Grape
Crush Administrative Comm., Civil No. 2508-ND, S.D. Cal.,

- Order of October 12, 1964. In this present action, plaintiff

is again faced with a-motion to dismiss. Hea
The Agricultural Marketing Agreement Act of 1937
sought, as its fundamental objective, to effect an orderly

exchange of commodities in interstate commerce in order

to profect. both the interest of the consumer and the pur-

chasing power of the farmer. This goal was to be effected |

through a series of measures with the authority for their

implementation residing in the Secretary’ of Agriculture.
(hereinafter the “Secretary”). Among the devices selected. °

was the so-called marketing order.*. Its general purpose was , -
to establish and maintain such marketing conditions for
- various agricultural commodities, including grapes, as would.
provide, in the interest of producers and consumers, a con- -
trolled flow of such commodities to market during their ©
normal seasons in order to avoid unreasonable fluctuation in

supplies and prices:* vet

_ Congress provided legislative standards for the issuance,
, composition, and administration of the marketing orders.

Thus, -it designated the “handlers” (processors or distribu-
tors)* ag the focal point of the regulatory aspects of the

enumeratéd. agricultural commodities * as to which orders
could be issued. It charged the Secretary with the responsi- © -

_ bility for determining whether, applying stated criteria, a

-/» Marketing order should be issued’ and prescribed various -

functional features.that were to be included in such .orders

as were issued.* Among such features was one incorporated

- in the marketing order here involved; that of: ©

Determining, or. providi methods for determining a
.. the existence sad extent of | surplus of any such com. -

modity or - uct, or of any grade, size, or quality
thereof, an providing for the control and dispesition

. of such surplus, and for equalizing the burden of such

DEL AE ORES BOD OREN ERO ERLE SHEN Th i POX ELE LEE PLR

*7 U.S.C. § 608e (1964). ,
47 UBC. § 602(4) (1964)... -

*7 U.B.C. § 608e(1) (1964).

*7 U.S.C. § 608e(2) (1964). ee |

"7 U.S.C. § 608c(3)-(4) (1964). Baie

*T U.S.C. § 608¢(6)-(7) (1964). , 2

P . Died

:

C-4

surplus elimination or control among the prodicers and

handlers thereof.

Implementation of the marketing orders was to be achieved

through appointment, by the Secretary, of localized agencies —
such as the Grape Crush Administrative Conimittee2° The

Secretary’s power under the act included the authority to
Issue regulations governing the activities of such agencies.
Among the duties thus delegated to,the Grape Crush Ad-

ministrative Committee were the following: For each crop ‘

"year, the Committee was responsible for recommending to.

_ the Secretary the quantity of grapes that might be freely

sold without marketing restrictions." If approved by the.

Secretary, this recommendation became ‘controlling as to
_ the aréa covered by the order:? In those instancés where

actual production of grapes exceeded the quantity that the .

' Secretary had determined might be freely sold, the order
required that the excess be converted by the handlers into
‘spirituous grape products of a type approved by the Secre-
tary. The order denominated such products as “setaside.” *°
In the present case, the setaside was the industrial alcohol
_ that plaintiff alleges he was authorized to sell for a specified
commission. ea -

In pressing his claim here, plaintiff urges its enforceability
against the United States on the.sole ground that the Com-
mittee was an agency thereof and was duly authorized to
enter into the contract in issue. Thus, from -plaintiff’s stand-

‘point, the agency relation establishes the dispositive factor.
In response, defendant affirms the Committee’s status as an
agency of the United States, but rests the disavowal of lia-
bility on two grounds: First, that the Committee’s authority
-was limited in scopé and specifically did not encompass the

right to incur the expenses here sought; and, secondly, that.

defendant -was immune from suit, the Committee being a
‘nonappropriated fund instrumentality. .

We hold that, despite compelling equities in his favor,
plaintiff's claim cannot be vindicated in this court: Our

°7 U.8.C. § 608e(6)(D) (1964). . 7 : :

#7 U.8.C. § 608¢(7)(C) (1964).

27 C.F.R. §§ 990.47, 990.53: (1964).

27 C.F-R. § 990.48 (1964).
#7 C.F.R. § 990.54 (1964).

f

oe

C-5

‘ reasons, independent of any arguments advanced by either

party, are the following:
The jurisdiction ,of this court under the Tucker Act
encompasses “any, claim against the United States: ches
founded. upon: any express or implied contract witli the
United: States; * * *.” While the terms of this statute are
broad, its words must be read in conjunction with and must
be regarded as limited by another statute which provides that .

+. our sjudgments are paid only from appropriated funds."

Thus, to remain within the framework of our jurisdiction, —
it is essential that the contract sued on be one which could
have been satisfied out of ajipropriated funds,’ It is not
enough to say, as plaintiff dées, that his contract was one to
which the United States was a party.: To be actionable in

_this court, that contract must be one which, in the contem-
» plation of Congress, could obligate public monies. G. Z.

Christian & Associates v. United States, 160 Ct. Cl. 1, 14,
312 F. 2d 418, 495, cert. denied, 375 U.S. 954 (1963). If
Congress has indicated that public funds shall not be‘ in-
volved, we cannot grant the relief requested. And that such

__ isthe case here seems to us quite clear.

The Committee with whom plaintiff contracted was neither

_ supported by appropriations nor authorized, in any manner, |

to obligate such funds. Its financial support derived from

’ two sources—handlers.and producers. The former sustained

the Committee’s general expenses and the latter bore the
costs involved in surplus disposals. This self-funding
scheme is one that was created by Congress; the applicable
statute, 7 U.S.C. §.610(b) (2) (ii), provides:

Each order relating to any other commodity or prod-
uct issued by the Sec under this chapter shall. pro-
vide that each handler subject thereto shall pay to es
authority or agency established wnder such order suc.
handler’s pro rata share-(as approved by the Secretary)

of the expenses payable by a cooperative associa- |

tion of producers shall be computed on the basis

. of the quantity of the agricultural commodity or

product thereof covered by such order which is

’ distributed, processed, 6r shipped by such coop- —
‘erative association of producers. The payment of |

assessments for.the maintenance and functioning

- of such authority or agency, as provided for here-

in, may be required under-a marketing agreement

' or marketing order throughout the period the mar- ~

keting agreement or order is in effect .and irre-

.spective of‘whether particular provisions thereof
__are suspended or,become inoperative. =.

. Marketing Order 990, C.F.R. Part 990, provides in per-
tinent part: iy

te

‘Sec. 990.29 A Grape Crush Administrative
Committee (herein referred to as committee) is
hereby established to administer the terms and

- provisions of this part..Such committee shall con-
“sist of 31 members of whom 18 shall represent

producers, 12:shall represent handlers, and the |
31st member shall bé the chairman of the board

‘ . and also the chairman of the committee. The pro--:

ducer representation shall be two members from
each of the nine districts. The handler represen-
tation shall be one member for each of the hand- .

lers of the six largest tonnages crushed, four
-members for handlers of all other tonnages of the ,
twenty-two largest tonnages,and one member from ~

each of the remaining board categories of handler

‘representation. For each member there shall be

an alternate member.

Sec. 990.39 The Secretary shall select pro-
ducer and handler members and alternate mem-
bers of the board and the committee in the num-
bers and with the qualifications specified in this

D-3

> subpart. Such selections may be made from the
nominations certified by the committee and the ‘'
‘board or from other éligible producers and hand-

‘lers.

Sec. 990.62(d) Net"proceeds. The proceeds

from the disposition, of
Aributed, after deductio

any setaside shall be dis- _
n of any expenses incurred

by the committee in receiving, handling, holding,
or disposing thereof, to the respective producers

or their successors in

interést, on the basis of the

tonnage of their respective contributions to the set-
. aside weighted by sugar content and, when deter -
‘ mined to be appropriate for any varieties, by the
Season average field price of each variety... The

— _distribution of proceeds to producer members of

cooperative associations shall be made to the ap-

propriate association..

Sec. 990.72(a) Requirement for payment. Each
handler shall pay to the committee, upon demand,
r

with respect to

ee tonnage grapes for crushing

received by. him, including such grapes of his own
production, his pro rata share of all expenses’ _
which the Secretary finds are reasonable and like -
ly to be incurred by the committee during each
crop year. Each handler's pro rata share shall be

_ -the rate of assessment

per ton fixed by‘ttie Secre-

tary. At. any time during or after the crop year
the Secretary may increase the rate of assessment :
to cover unanticipated expenses or a deficit in as- _
Sessable tonnage. In order to provide funds to

- Carry out the functions

of the committee and the

board, the committee may accept advance pay-

Sec. 990.72(b) Refunds, Any money collected

ing any crop year and not ex-

pended in connection with the committee's opera-
tions may be used by the committee for a period
of four months subsequent to the end of such crop

D-4

year. At the end of such period the committee
‘shall, from funds on hand, refund or credit: to
handlers' accounts the aforesaid excess. Each
handler's share of such excess fund shall be the —
_amount of the assessment he has paid in excess
of his pro rata share of the actual expenses of the
committee for the preceding crop year. Any mon-
ey collected as assessments hereunder and re-
« maining unexpended in the: possession of the com-
. mittee, or a successor board of trustees for liqui-
dation, after termination of this part, shall be dis-
tributed ‘in such manner as the Secretary may di-
rect: Provided, That, to the extent practical, such
funds shall be returned pro rata to the persons
from whom such funds were collected. ~-— |

The following provisions of Marketing Order 990,
C.F.R. Part 990 are pertinent: |

Sec. 990.35 Duties.
The committee shall have among others the fol-
lowing duties: pe be ;
(a) To act as intermediary between the Secre-
tary and any producer or handler;
| to) To keep minutes, books, and other records
¢ . which shall clearly reflect all of its acts and trans-
actions and these shall be subject to examination —
by the Secretary at any time; :
(c). To investigate and assemble data onthe +

ae production, handling, and marketing of grapes for -

crushing and the products of such grapes; >
- ‘(d). submit to the Secretary such available
information with respect to grapes and grapes for
- crushing and the products thereof as he may re-_ .
_.- quest and such other information as the committee
may deem desirable and pertinent; 3
: te) To select from among its members officers
other than the chairman and to adopt-such rules
and regulations for the conduct of its business as .
it may deem advisable; — ee |
(f) To appoint or employ such other persons
as it may deem necessary and to determine the __
salaries and define the duties of each such person;
. (g) To cause the books of the committee to be
audited by a certified public accountant at least
once éach crop year and at such other times as
_ * the committee may deem necessary or as the Sec-

FRR OER INTEL ENS Pc NI Pi REAR PRE TO

-

en to members;

D-5

o

retary may request, to submit two copies of each
such audit report to the Secretary, and to make

available a copy which does not.contain confiden-

tial data for inspection at the offices ‘of the com-
mittee by producers and handlers; 4
* (h) To prepare and submit to the Secretary.
monthly statements of the financial operations of

the committee and to make sach statements to-

gether with the minutes of the meetings of said
committee and the board available for inspection

_ at the offices of the committee. by producers and

handlers; .. |

(i) To give the Secretary the same notice of i
méetings of the committee and the board as is giv-

(j): To investigate compliance with and to use
means available to the committee to prevent vio-
lation of the provisions: of this part; and

(k) To establish withthe approval of the Secre-
tary such rules and regulations as are necessary -
or incidental to administration of this subpart, -as
are consistent with its provisions, and as would.
tend to accomplish the purposes of this subpart

and the act. , Shs
Sec. 990.62 Disposition.

(a) General. The committee shall have the
power.and authority to sell or dispose of any and .
all setaside upon the best terms and at the highest
return obtainable consistent with the provisions
and objectives of this part, including the encourage-.

ment of new uses or new geographical outlets: If

on any January 31 the total setaside from-all crop |
years is in excess of the equivalent of the ship- = _*
ments of desert wine for the preceding six months

_ ending December 31, the committee Shall, in the
‘absence of foreseeable sales of such excess in

normal outlets pursuant to paragraph (b) of this

‘section, dispose of the excess by June 30 in non-

normal outlets. ‘
a oe

(d). Net Proceeds. T e proceeds from the dis-’

position of any setaside s be distributed, after

deduction of any expenses incurred by the commit-
tee in receiving, handling, holding, or disposing
thereof, to the pl gg producers or their suc-
cessors in interest, on the. basis of the tonnage of
their respective contributions to the setaside

mo mate eee OAS" TUE RRA DiC B ON Sm mee ames ie Leste

- D-6 ao
weighted by sugar content and,.when determined: .
-to be appropriate for any varieties, by the season

' average field price of each variety. The distribu-
tion of proceeds to producer members-of the co-

operative associations shall be made to the appro-
priate association. ~ pe ae | ee
Sec. 990.75 Rights of the Secretary. i
The members of the committee and board (includ-
ing. successors: or alternates) and-any agent or

_ employee appointed or employed by the committee, —
shall be subject to removal-or suspension by the

' Secretary, in his discretion, at any time. Each
and every decision, determination, or other act of .
the committee shall be subject to the continuing
right of the Secretary to disapprove of the same
at any time and upon such. disapproval shall be
deemed null and void. © f

The ‘portion of Grape Crush Administrative Bulletin
64-5 dated December 4, 1964 applicable here reads as
follows: ) +e atte
‘ " Grape Crush Administrative Committee |
.703 North Fulton Street
| P. O.-Box 4035 --
Fresno, California 93744

ete ‘Bulletin 64-5
oe fe, December 4, 1964.
‘TO: GCAB Members and Alternate Members
_ Handlers ng 7 ae
SUBJECT: Closing of GCAB.Offices and _
. Status of Liquidation of GCAC
Affairs — Bee |

"1. Closing of GCAC Offices

——- - The GCAC offices will be closed permanently
_* -on Friday, December 4. All employees will be
terminated on that date except W. Allmendinger.
- eh AR
All of the GCAC books ‘and records will-be trans-
ferred to the custody of the United States Depart-

Pen, “

— .
ment of Aas tecliane not later thah Ciceuias 4
1964. Thereafter, the. Department of Agriculture
personnel will undertake to perform most of the
remaining administrative activities for-the Joint
Board of Trustees that would otherwise be per-

’. formed by. the management staff. * * * a cis
The remaining work involved in the first disburse-_

ment of pool proceeds such as: processing of can-

_ ceHed checks, reissuance of lost checks, etc. fol-

lowing the closing:of the GCAC offices will be
undertaken by the U.S. Department of Agriculture.

The lawsuit filed by Fritz Kyer on October 1 in

” the U.S. Court of Claims, Washington, D.C. against © .-

the United States Government is still pending. .
Since this suit involves the Surplus Pools, the De- _

partment of Agriculture requested that GCAC con- .-—

tinue to hold the $135,000.00 reserve, established
to cover any possible liability resulting from Mr.
Kyer's suit against the Committee, which was dis- |
missed on October 5, 1964.. If any portion of such
reserve becomes available for disbursement to
equity holders it-will be disbursed to them by the
U.S. Department of Agriculture. USDA has been .

_ given all necessary records to make such a dis-

bursement. * * *"

/ Pgs Dre EE Nome en ee at tae ope

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385603_0470%3A2. Public record. Not legal advice.