# Reply Brief — Allen v. Grand Central Aircraft Co.

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386408_0048%3A04

## Record

- **Collection:** Supreme Court brief
- **Document type:** Reply Brief
- **Published:** January 1, 1954
- **Citation:** 347 U.S. 535

## Text

BLEED THROUGH

BLURRED COPY

INDEX

I. The finding that the continuation of the administra-
tive proceedings would have caused appellee's
credit to be shut off and would disable it from con-
tinuing its operations is not supported by the
evidence ___

II. Neither the statute nor the Constitution are violated
by construing Section 405 (b) to permit maximum
disallowances as great as the entire unauthorized
payroll _ ; , . -

A. Section 405 (b) authorizes the disallowance
of the entire illegal payroll, not merely of

1. Section 405 (©: is substantially identi-
cal with Section 5 of the Stabiliza-
tion of 1942, which, as Congress
knew, had been construed as au-
thorizing the disallowance of the
entire unauthorized payroll _____ _

a. The administrative practice
under Section 5 of the Sta-
bilization Act of 1942.

b. Congressional acceptance of
this administrative inter-
pretation of Section 405 (b)_

2. Events following the enactment of
the Defense Production Act of 1950
indicate Congressional adherence to
the interpretation permitting disal-
lowance of the entire illegal pay-
ree ah Ata deems

tained in the statutory scheme of wage stabiliza-
tion enforcement established by Section 405 (b)__-
A. Congress may utilize administrative proce-
dure to impose the disallowance sanction_.

B. Section 405 (b) provides sufficient guidance
as to the sanction to be imposed_________

291511—54 1 (I)

Page

10

11

12

12

16

19

25

27

II

IV. The disallowance sanction is not in conflict with the
requirement of Art. I, Section 9, of the Constitution
that all direct taxes not covered by the Sixteenth
Amendment be apportioned..._-....-.

1. An income tax is not a direct tax to the ex-
tent that it is based upon business income__
2. The granting of deductions for business ex-
penses is completely within legislative con-
er griesetdenscwrcbsarscnunenscci.

Glascote Products Co., In re, June 3, 1952, Bureau of Na-
tional Affairs, Labor Relations Reporter Binder 7,WHM
Erkan ketgenkentdtpecntidreueeseeesiesse...

Matter of, Case No. 21-CA-1101, 103 N. L. R. B. No.
eaten manacharase wiseuapesbunnetinedese nace...

BLEED THROUGH
BLURRED COPY

21

——_

Il

Cases—Continued Page
Hampton & Co. v. United States, 276 U. §. ae 28
Hedin Construction Co., In re, April 11, 1952, Bureau of

National Affairs, Labor Relations Reporter Binder 7,

WHM 100:1153________. i ae 21
Helvering v. Bankline Oil Co., 303 U. 8. 362__...___ 34, 36
Helvering v. Winmill, 305 U.8.79_............ 19, 20
Hirabayashi v. United States, 320 U.S. 81... 31
Hofferbert v. Anderson Oldsmobile, Inc., 197 F. 2d 504____ : 36
Howard Menu Service, 13 Labor Relations Reporter 687

-ctaoptares, Aca Pete ip Pe EE 14
Interstate Transit Lines vy. Commissioner, 319 U. 8. 590____ 34
Lichter v. United States, 334 U.8.742......... 27, 28, 31
Lilly v. Commissioner, 343 U.8.90........ 35
McDonald vy. Commissioner, 323 U.8.57........_ 34
Missouri Pacific Railway Co. v. Tucker, 230 U. 8. 340_____ 23
Myers v. Bethlehem Shipbuilding Corp., 303 U. 8. 41______ 3
New Colonial Tea Co. vy. Helvering, 292 U. 8. 435.._______ 34
Norfolk-Newport News Contractors’, 15 Labor Relations

Reporter 237 (October 14, PE eetiew datetetese-aniexu 14
Norman-Frank, Inc. v. Arnall, 196 F.2d 502._... 4]
Norwegian Nitrogen Co. v. United States, 288 U. 8. 294___ 19, 30
Oceanic Navigation Co. v. Stranahan, 214 U.S. 320... ___- 27
Opp Cotton Mills v. Administrator, 312 U.S. 126... ____ 28
Oval & Koster, 16 Labor Relations Reporter 741 (June 30,

Teron enenewerdawenwbaseterssendoesisese....... 14
Parker Appliance Co., 13 Labor Relations Reporter 582

(Regional Board Decision) .-..................... __ 14
Parkland Sportswear Co., 13 Labor Relations Reporter

503 (December 1, 1943)............... 14
Passavant v. United States, 148 U.8.214...... 27
Pollack v. Farmers’ Loan & Trust Co., 158 U. 8. 601__.___ 32
St. Louis, Iron Mountain & Southern Railway Company v.

Williams, 251 U. 8. 68............................_. 23
Southwestern Tel. and Tel. Co. v. Danaher, 238 U. S. 482_- 24
Spaulding v. Douglas Aircraft Co., 154 F.2d 419... 31
Stanton v. Baltic Mining Co., 240 U.S. 103_._.._... 33, 36
Stratton's Independence v. Howbert, 231 U.S. 399.....____ 33, 36
Sullenger, Lela, 11 T.C,1076......................... 36
Sunshine Anthracite Coal Co. vy. Adkins, 310 U. 8. 381____ 28
Switchmen’s Union v. Mediation Board, 320 U. 8. 297_____ 27
Textile Mills vy. Commissioner, 314 U.S. 326... 35
United States v. Biwabik Mining Co., 247 U.S. 116_______ 36
United States v. Ju Toy, 198 U. 8. 253..........._ 27
United States v. Rock Royal Co-op., 307 U. 8. 583... __- 28
Von Baumbach v. Sargent Land Co., 242 U.S. 503_______ 36
Wadley Southern R. Co. v. Georgia, 235 U.S. 651__...___. 24

IV

Cases—Continued Page
Weather-Seal Manufacturing Co. v. Commissioner, 16 T. C.
1312, affirmed without opinion, 199 F. 2d 376___.______ 35, 37
White v. United States, 305 U. S. 281_.__-.-..._._..-__- 34
Woodworth, N. A. v. Kavanagh, 102 F. Supp. 9, affirmed on
the opinion of the District Court, 202 F. 2d 154_______- 35
Yakus v. United States, 321 U. S. 414_............._.--- 28
Zehrig, J. C., 16 Labor Relations Reporter 742 (June 30,
ORR ria eee ran rsba sake ca sane bak teks eee aes 14
Constitution, Orders, Regulations and Statutes:
Constitution of the United States, Art. I, Section 9______- 32
Sixteenth AMONG... <<. ose xtecnwenncu sens cuces 32

Executive Order No. 9322 of March 26, 1943 (8 F. R. 3807) _ 14
Executive Order No. 9334 of April 19, 1943 (8 F. R. 5423)- 14

Executive Order No. 10434 (18 F. R. 809)_____- Pesca 4 &-
General Order No. 15, Section 4 (b)___-__- eee ae ee 5, 20, 38
Chee SON FRO Bo cn ee ooo oe oe eeu cae eee. 38
General Order No. 19 (17 F. R. 11368) Late oan cute lee 42
Enforcement Regulation No. 1, 16 F. R. 6028__________- 20, 38

General Wage Stabilization Regulation No. 1, 16 F. R. 816_ 46
National War Labor Board Regulations of September 15,
1944, Section 802.73 (c), 9 F. R. 11422___..___.___.__- 14
Office of Economic Stabilization Regulations:
October 27, 1942, 7 F. R. 8748:

Section 4001.4____- es en ee SE et 15
OWI Csi kes oc eke os oo ceccase ssn 12, 13, 15
Section 4001.10, superseded October 1, 1943, 8
ae CI Se ke ee ga ye 13
As amended November 30, 1942:
Section 4001.5, (a), 7 F. R. 10024__.._________- 14
As amended November 30, 1944:
Bection 4001.25, OF: H. 14087... ...4<-.-:..--. 13
Revised General Procedural Regulation No. 1_____-_---- 38
T. D. 5186 of December 2, 1942, Section 102.28, 7 F. R.
a ook he ease eerie onkos 5
T. D. 5243 of March 12, 1943, 8 F. R. 3158___-________- 5

T. D. 5435 of February 2, 1945, Section 1002.28, 10 F. R.

SE er Rae ne ce hs pee WER eS ok ohne Nee _ a 15
T. D. 5446 of March 17, 1945, 10 F. R. 3008_______- ae 15
Treasury Regulations 111, Section 29.23a-16, 26 C. F.

Be. se a os ne a rama ce awd wa ewomaten 15, 19
War Food Administration Regulations of January 17,

1004, Section 1100.18, 9 F. BR. G09....-......-.<--.<5- 15
War Food Administration Regulations of June 23, 1945,

Section 1100.16, 10 F. RB. Y61S.....-....-....2-.....- 15

SEARO DIP TW CT. yee

BLEED THROUGH
BLURRED COPY

——_

Vv

Constitution, Orders, Regulations and Statutes—Continued

Defense Production Act of 1950: Page
Section 403 (b)__._______. RE Wee Ke kh oe a are 40, 43
Section 404 ______ na Sete MiNi nal tr in aes eso reece Sate sc 41
NGI isn ive edinnddwutinewccwn 11, 19, 23, 29, 44
, re en eae 44
EE aeickacacdoeusp ceo tues. c cel ee 37, 38, 41
SE hia eid re cree te eS! ie 11

Defense Production Act Amendments of 1951___..______. 21, 37

Defense Production Act Amendments of 1952....._____. 21

Emergency Price Control Act of 1942:

Section 2 (a) (50 U.S. C. App. 902 (a))............. 40
Internal Revenue Code, Sec. 23 (a) (1) (A)__.._._____. 34
Stabilization Act of October 2, 1942:

eli iie eddinas dads aoe cocks see enaad cudkuwn 19, 29

Miscellaneous:

I MN, RUE sie ccc cn cecaccccccuanucuees. 38

96 Cong. Rec. 14064-14065__........._._....... 38

Pe I Miia no oe rows ccc vccccwe ncocesecsc... 20

Federal Rules of Civil Procedure, Rule 52__......._____. 3

Hearings before the Committee on Banking and Currency,
United States Senate, 79th Cong., Ist Sess., on S. J. Res.
ese oe cece eresc fh 7S a Epa h RcRe ee ee 18

Hearings before the Subcommittee of the Committee on
Appropriations, House of Representatives, 78th Cong.,
2d Sess., on the National War Agencies Appropriations
Bill for 1945, pp. 240-241__..........._. 16, 17

Hearings before the Subcommittee of the Committee on
Appropriations, House of Representatives, 79th Cong.,

BW Ns I Pas on can ccikvvancareccdauccacces - me, 19

Hearings before a Subcommittee of the Committee on
Appropriations, United States Senate, 78th Cong., 2d

Sess., on H. R. 4879, pp. 132-133__._.__________. “i 17
National Wage Stabilization Board, The, January 1, 194
February 24, 1947, pp. 230-231.......______- a ed 7 13
S. Rept. 2250, 81st Cong., 2d Sess.:
PME a Sea eewn ae dole ken a6 ue son anc kasd teceleuds 26
SR RRSP een O_O CN ae a 12
Termination Report of the National War Labor Board, Vol. I,
pp. 455-496; Vol. U1, p. 749... 13

BLEED THROUGH

BLURRED COPY

—

Guthe Supreme Court of i.e Gnited States

OcToBER TERM, 1953
No. 450

ArTHUR P. ALLEN, CHAIRMAN, TWELFTH REGION
WAGE STABILIZATION BOARD, ET AL., APPELLANTS

v.

GRAND CENTRAL AIRCRAFT Co., A CALIFORNIA
CoRPORATION

ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF CALIFORNIA

REPLY BRIEF FOR APPELLANTS

In our main brief, we have discussed the three
points necessarily before the Court on this appeal.
We have there argued: (1) that the court below
lacked equitable powers to enjoin, in view of the
well established doctrines of exhaustion of remedy
and prematurity; (2) that Section 405 (b) of the
Defense Production Act of 1950 provides an ad-
ministrative means of enforcement of wage sta-
bilization regulations; and (3) that the power to
conduct administrative enforcement proceedings
continues. The first two of these points were de-
(1)

2

cided, adversely to the Government, by the court
below. The third point is important in connec-
tion with possible contentions as to the mootness
of the cause.

The court below noted (R. 35-36) that appellee
had raised other defenses on which it did not
pass." Appellee presents these contentions to the
Court as additional grounds for sustaining the de-
cision below (Appellee’s Brief, pp. 67-90). This
brief will deal with these arguments, and show
that they are without merit. First, however, we
will revert to an aspect of the exhaustion of rem-
edy point upon which we did not elaborate in our
main brief, but which now becomes appropriate
for discussion in view of certain overstatements of
the evidence made by appellee (Appellee’s Brief,
pp. 9, 19, 91, 97).

?, In view of the intimations in appellee’s brief (pp. 10, 54),
that the wage increases here involved were “merit” increases,
or increases given “under pressure from their employees or
their union representatives”, attention is called to the Deci-
sion and Order of the National Labor Relations Board in Jn
the Matter of Grand Central Aircraft Co., Inc. and Interna-
tional Union, United Automobile, Aircraft and Agricultural
Implement Workers of America, CIO (UAW-CIO), Region
6, Case No. 21-CA-1101, and Jn the Matter of Grand Central
Aircraft Co., Inc. (Employer) and International Union,
United Automobile, Aircraft and Agricultural Implement
Workers of America, CIO (UAW-CIO) (Petitioner) , Case
No. 21-RC-1813, 103 N. L. R. B. No. 101, presently pending
on review in the Ninth Circuit. The Board found that the
principal wage increases here involved were unfair labor
practices because granted in order to induce the employees
to oppose representation by the complaining union.

OE TEC Caen a ea tpn PREECE, PERN EE NOE PRG Ca Ay LOA SPE gtr ra sy caepieectnrnet ne

BLEED THROUGH
BLURRED COPY

_—

I. THE FINDING THAT THE CONTINUATION OF THE
ADMINISTRATIVE PROCEEDINGS WOULD HAVE CAUSED
APPELLEE S CREDIT TO BE SHUT OFF AND WOULD
DISABLE IT FROM CONTINUING ITS OPERATIONS IS
NOT SUPPORTED BY THE EVIDENCE
The court below found (R. 37) that

*** the continuance of the threatened
administrative proceedings will cause
plaintiff’s bank credit to be shut off and
will disable plaintiff [appellee] from con-
tinuing its operations.

Although this finding of fact has no support

in the undisputed evidence and is thus not pro-

tected by Rule 52, Federal Rules of Civil Pro-
cedure, we did not argue the evidentiary point
in our main brief,’ but directed our discussion to
the legal issues of general importance which
would resolve the questions raised in the entire
group of cases of which this is representative.

However, in its effort to distinguish this case

from Myers v. Bethlehem Shipbuilding Corp., 303

U.S. 41, appellee has placed such stress on this

finding, and so overstated the evidence on which

it was based, that it has become imperative to
challenge the pertinent finding of fact and to re-
duce the pertinent evidence to its proper propor-
tions. If the evidence is insufficient to support

3

* The Government had assigned as error the district court's
finding of irreparable injury, of which this was a part. See
Assignment of Error No. 2, R. 38, Specification of Error No.
1, Main Brief, p. 15.

291511542

vw

eh ated PPR FL UA aren eet, Lin yey

7 7

this finding, appellee’s argument on irreparable
injury in large part disappears. But even if the |
finding is allowed to stand, the underlying evi-
dence is significant as indicating how speculative
a showing of injury would be sufficient to escape
from the exhaustion rule. At the very least, the
finding must be interpreted in the light of the
undisputed evidence on which it rested.

Actually the evidence, far from establishing
that the continuance of the proceedings would
cause the shutting off of appellee’s bank credit,
shows that the bank loans had been renewed
once before during the pendency of the proceed-
ings; that the holding of the hearing by the En-
forcement Commissioner would not affect the
bank’s credit policy; that the bank might change
the terms of the credit if the Enforcement Com-
missioner should recommend a high disallowance
figure and if the chances of a modification by the
National Enforcement Commission were slight;
and above all that in no circumstances would the
bank “take injurious action and deliberately wipe
a company out’’ (R. 71). The evidence in ques-
tion is that of Mr. Lawler, executive vice-presi-
dent and a member of the loan committee of the
Farmer’s and Merchant’s National Bank of Los
Angeles; it comprises only 11 pages of the record
(R. 62-72).

Upon direct examination (R. 62-64), Mr. Law-
ler testified that his bank and two other banks

BLEED THROUGH
BLURRED COPY

—

extended a substantial credit to appellee which
was up for renewal on September 30, 1953; that
generally speaking his recommendations were
usually and normally followed by the Board of
Directors (R. 62-63) ; and that his recommenda-
tion for a renewal of the loan would be negative
if the Enforcement Commissioner should recom-
mend a disallowance of any amount between
$5,000,000 and $750,000 (R. 63-64).2 Mr. Lawler
stated that “cf an enforcement commissioner of
the National Enforcement Commission * * *
should make findings and determinations that
wages in the amount of $5,000,000 or more should
be disallowed for income tax and or an alterna-
tively contract reimbursement purposes for the
year 1951”’ (R. 63), he “would recommend that
the bank not extend the credit agreement” (R.
64). In answer to further questioning he stated
that the same would be true “if the enforcement
commissioner’s findings and determinations was
that the amount of such disallowance should be
$3,000,000,’’ $1,000,000 or *¥/, of a million dollars,

*The entire payroll for the period under consideration
amounted to $5,561,484.11, the alleged excessive payment to
$959,857.50 (R. 17-78) ; appellee (Br., p. 8) states that cor-
rection of mathematical errors reduces the latter amount
to $755,305.50. While General Order No. 15, Section
4 (b) (Main Brief, p. 92) provides that “the usual and gen-
eral policy shall be to disallow an amount at least equal” to
the excess payment, it plainly envisages the imposition of a
sanction for a lesser amount, and, as we have shown in our
main brief (p. 7, fn. 7), such disallowances have constituted

a substantial portion of the cases handled by the National
Enforcement Commission.

5

—

6

or if the findings were made by the National
Enforcement Commission instead of by the en-
forcement commissioner (R. 64). Mr. Lawler
did not make any statement that the holding of
the hearing would impair appellee’s credit stand-
ing, and there is no evidence in the record to that
effect. This in itself disproves the finding that
‘continuance’ of the proceeding ‘‘will cause
plaintiff’s bank credit to be shut off.’’

Of obvious significance in this connection is the
disclosure on cross-examination that the banks’
credit to appellee had been extended in December
1952, although the bank knew at that time of the
pendency of the instant proceedings and of the
resulting potential liability (R. 65-67).

When questioned about the effect of the lifting
of the injunction and the concomitant resumption
of the proceedings upon appellee’s credit stand-
ing, the witness did not state that this would re-
sult in an automatic or sure withdrawal of the
bank credit. To the contrary, he testified that
the bank’s action would depend, in his opinion,
on many contingencies, including the evaluation
by counsel of appellee’s chances to refute the
charge, saying (R. 69):

That would present, in my opinion, a
contingency that would require very seri-
ous consideration and depending upon the

4 The witness also did not deny that the loan had been con-
tinued despite a previous disallowance of $548,000 by the Air
Force (R. 72, 58-59).

Se te ne

BLEED THROUGH
BLURRED COPY

_—

7

amounts involved, depending upon the re-
view of the matter by our legal counsel, I
would be then in a position where I would
have to appraise the degree of the contin-
gency and the size and amount and that
might give me cause and it certainly would
change the position that the company is
now in.

As J understand it, I am advised that the
company is now protected by an injunction
from further pursuit of this action which
involves a sizeable sum of money which
might very conceivably effect the financial
condition of the company in a serious way.
That is all a matter of opinion; I am ex-
pressing my opinion.

The contingent significance of Mr. Lawler’s
views is enhanced by his admission that the “de-
cision is not entirely up to me,’’ that the ques-
tions were only as to ‘‘what my recommendation
would be to my bank”’ (R. 68). Not even a lead-
ing question on redirect examination could cause
the witness to commit himself beyond this vague
statement (R. 70).°

*“Mr. Lunp. Mr. Lawler, speaking of contingency, I as-
sume, looking at it from your view and the banker's view,
with reference to possible recommendations to your Board
of Directors, the seriousness of this contingency or potential
liability is much greater, is it not, after an enforcement com-
missioner has heard the case and made recommendations for
disallowance in the substantial amount than the seriousness
of this contingency before such determination adverse to the
company.

“Mr. Lawxer. In my opinion, that would be the case. I
haven’t made an analysis.” (R. 70.)

—_—— LOO LA IE LIEN ETERS ILE, SIL ALME SELLE ES SEE IONE I ACNE LER

UNREST GRR OPT SOs PPS ay ey DORE Me ss Sata 2 a Be Be FS ara

“=

Nor were his answers with respect to the effect
of a recommendation made by the Enforcement
Commissioner any more precise. When ques-
tioned by counsel for appellant as to what his
credit recommendation would be if an adverse
determination had been made by the Commis-
sioner and the company had appealed from it
with assurances, believed by the witness, that
there was a good chance of success, he testified
(R. 69):

Mr. Lawter. You haven’t named an
amount involved. I can’t answer your
question until I know what amounts are in
your mind.

Mr. Groner. Why does the amount make
a difference ?

Mr. Law er. Obviously, if it is 25 cents,
it is going to make a difference to $250,000
or two and a half million. My recom-
mendation, if the amount is 25 cents, is
going to [be] entirely different than my
recommendation if the amount is two and
a half million.

8

When questioned from the bench about a hypo-
thetical recommendation to disallow $500,000, Mr.
Lawler disclosed that his testimony that he would
recommend against the renewal of the loan had
to be taken with more than a grain of salt; that it
really meant that he ‘“‘would recommend that our
bank would not renew the agreement on the pres-
ent terms and conditions” (italies supplied) (R.
71-72). This is far from a statement that there

BLEED THROUGH
BLURRED COPY

_ ne!

P,
would be an unconditional cancellation of the
loan. And then, in a continuation of his answer,
the witness stated that the bank would not “take
injurious action and deliberately endeavor to
Wipe a company out” (R. 71). This in itself
refutes the court’s finding that (R. 37):

*** the continuance of. the threatened
administrative proceeding will cause plain-
tiff’s bank credit to be shut off and will
disable plaintiff [appellee] from continuing
its operations.

Mr. Lawler was the only witness who gave testi-
mony with respect to when bank credit might be
withdrawn. His testimony was not disputed and
no one challenges his credibility. But this testi-
mony must be read in the light of the facts that he
Was appellee’s witness, and that the burden of
proving irreparable injury was on appellee.

The finding of the court below must be ap-
praised on the basis of the testimony on which
it must have rested. Absolutely nothing in this
testimony supports the broad findings which the
court made on this issue.

Since the findings has no support at all in the
evidence, it is clearly erroneous. At most, the
evidence indicates that if the Enforcement Com-
missioner made a large enough award * against

*Such an unprecedently large disallowance would be un-
likely unless the Enforcement Commissioner found that ap-
pellee had been guilty of substantially all the violations
charged, and that these violations had been deliberate and

10

appellee, after the hearing the banks would con-
sider changing the terms and conditions of the
loans, but not in a manner which would wipe the
company out. Such evidence of injury is, we sub-
mit, plainly insufficient to warrant a departure
from the doctrine of the Myers and other cases.

Il. NEITHER THE STATUTE NOR THE CONSTITUTION
ARE VIOLATED BY CONSTRUING SECTION 405 (b) To
PERMIT MAXIMUM DISALLOWANCES AS GREAT AS
THE ENTIRE UNAUTHORIZED PAYROLL

Appellee contends (Br. pp. 73, 83, 86) that Sec-
tion 405 (b) does not authorize the disallowance
of the entire illegal payroll but merely the disal-
lowance of the unauthorized excess, and that, ac-
cordingly, regulations issued under Section
405 (b) are in conflict with the statute as to the
amount of disallowance. Appellee also argues
that, if either Section 405 (b) or the regulations
issued thereunder do authorize disallowance of the
entire illegal payroll, its constitutional rights have
been infringed.

The issues thus raised are abstract. As we have
shown, the certification by the National Enforce-
ment Commission of a disallowance larger than
the excess wages has been the rare exception (Ap-
pellants’ Brief, p. 7, fn. 7). Hence, in the absence
intentional (cf. Main Brief, fn. 7, pp. 7-8). In such cir-
cumstances, where the irreparable injury asserted by appellee
would be contingent upon a deliberate violation of the law,

the clean hands doctrine should preclude any relief (cf. Main
Brief, fn. 18, p. 29).

BLEED THROUGH
BLURRED COPY

11

of any indication to the contrar *, it cannot be

assumed that if in the instant case the administra-

tive processes had been permitted to run their
normal course the Commission would have certi-
fied a disallowance larger than the excess wages.”

That appellee must base its arguments on specula-

tion as to the size of the disallowance emphasizes

the prematurity of the points in the case. See
the discussion of the legal principles in our main
brief (pp. 26-32). Reference might also here be
made to the separability clause of the Defense

Production Act (Section 715, Appellants’ Brief.

p. 86), which evidences a clear Congressional de-

sire to limit constitutional challenges to conerete

cases. Putting these considerations aside, we will
discuss the abstract questions presented.

A. SECTION 405 (hb) AUTHORIZES THE DISALLOWANCE OF THE EN-
TIRE ILLEGAL PAYROLL, NOT MERELY OF THE UNAUTHORIZED
PORTION OF THE WAGES
Section 405 (b) gives the President the author-

ity to

prescribe the extent to which any wage,
salary, or compensation payment made in
contravention of any such regulation or
order shall be disregarded * * P
Appellee’s position is that the statutory lan-
guage permits only the disallowance of the illegal
portion of the wage payments. Since 1942 this
language has been consistently construed as pro-
viding for the disallowance of the entire wage
payment made in contravention of the regulation

“We are advised that the largest disallowance by the
National Enforcement Commission in a contested case has
been $47,838 (Jn re Beacon Marine Co. (Ovcan Marine Re-

CLAS

irs, Inc..)L. R. R. Binder 7, WHM 100: 1200, a a

12

or order, and not merely of the unauthorized

portion thereof. Any doubt as to the meaning

of the statutory language is resolved by the legis-
lative history, which fully supports this admin-
istrative construction.

1. Section 405 (b) ts substantially identical with
Section 5 of the Stabilization Act of 1942,
which, as Congress knew, had been construed
as authorizing the disallowance of the entire
unauthorized payroll
As we have pointed out in our main brief (pp.

44-45), when Congress enacted Section 405 (b)

it adopted ‘‘the language of [Section 5 of] the

Stabilization Act of October 2, 1942, respecting

the penalties to be applied for violations of the

wage and salary stabilization program.’’* Sec-
tion 5 had been interpreted and applied from the
very beginning as authorizing the disallowance
of the entire unauthorized payroll. The perti-
nent regulations repeatedly were brought to the
attention of Congress at appropriation hearings
and at hearings concerned with the extension of
the stabilization legislation. The continued ap-
propriation of funds for the National War Labor

Board and the extension of the Act without

amendment amount to the legislative ratification

of this administrative practice.
a. The administrative practice under Section 5

of the Stabilization Act of 1942. Section 4001.10

7S. Rep. 2250, 81st Cong., 2d Sess., p. 39.

SPIES ES pos ea

BLEED THROUGH

BLURRED COPY

13

of the Office of Economie Stabilization Regula-
tions of October 27, 1942 (Main Brief, p. 88),'
issued shortly after the enactment of the Stabili-
zation Act, provided expressly that, where wages
had been increased in contravention of the Act,
the amount to be disallowed was

the amount of the wage or salary paid or
accrued and not merely an amount repre-
senting an increase in such wage or salary.

Experience in the actual enforcement of the
statute indicated that the strict and unalterable
application of this maximum disallowance to each
violation was unduly harsh. On July 13, 1943,
the National War Labor Board, charged with the
enforcement of Section 5, obtained permission
from the Economie Stabilization Director, the
late Chief Justice Vinson, to take the cireum-
stances surrounding the violation into consider-
ation and to mitigate the amount of disallowance
in appropriate cases.”

Office of Economie Stabilization Regulations
of November 30, 1944, Section 4001.15 (9 F. R.
14547) accordingly provided that although the
Act authorized the disallowance of the entire
wage payments, extenuating circumstances could

* Section 4001.10 was superseded on October 1, 1943, by the
substantially identical Section 4001.15. 8 F. R. 11960,

* Termination Report of the National War Labor Board,
Vol. I, pp. 435-436; Vol. 11, p. 749. See also The National
Wage Stabilization Board, January 1, 1946-February 24,
1947, pp. 230-231.

14

justify the imposition of a lesser sanction.” The
few decisions of the National War Labor Board
cases in disallowance matters which have been
reported indicate that the Board openly publicized
and applied the rule that the entire illegal payroll
could be disallowed in the absence of mitigating
circumstances.”

Moreover, the National War Labor Board was
not the sole agency charged with the enforcement
of the Stabilization Act. The determination of
violations of agricultural wages and salaries and
the certification of the amounts to be disallowed
were assigned to the Secretary of Agriculture,”
later the War Food Administrator." The Com-

” See also National War Labor Board Regulations, Sec-
tion 802.73 (c), of September 15, 1944, 9 F. R. 11422. provid-
ing that where the Enforcement Division finds that the Act
has been violated it shall make, in appropriate cases, findings
as to the existence of extenuating circumstances, and a recom-
mendation whether less than the full disallowance sanction
should be imposed. -

" For instances in which the entire illegal payroll was dis-
allowed, see, e. g.. Parkland Nportsiwear Co., 13 Labor Rela-
tions Reporter 503 (December 1, 1943): Howard Menu Nerv-
ice, 13 Labor Relations Reporter 687 (January 28, 1944) ;
Norfolk-Newport News Contractors, 15 Labor Relations Re-
porter 237 (October 14, 1944). For mitigation cases, see,
e. 9. Parker Appliance Co., 13 Labor Relations Reporter 582
(Regional Board decision) ; Oral & Koster, 16 Labor Rela-
tions Reporter 741 (June 30, 1945) : Cosden Petroleum Corp.
16 Labor Relations Reporter 741 (June 30, 1945): J. C.
Zehrig, 16 Labor Relations Reporter 742 (June 30, 1945).

* Office of Economic Stabilization Regulations of October
27, 1942, 7 F. R. 8748, as amended by the Regulations of
November 30, 1942, Section 4¢ O1.da, 7 F. R. 10024,

“ Executive Orders No. 9322 of March 26, 1943 (8 F. R.
3807) and No, 9334 of April 19, 1943 (8 F. R. 5423).

LE ELLA ESR aa ee al at ARES PU Ae Ae Ril ARM ee SAR EY PCE RT BPA. oR

BLEED THROUGH
BLURRED COPY

——_

15

missioner of Internal Revenue was given the dual
functions first of administering the Act with re-
spect to salaries in excess of $5,000," and, second,
of actually giving effect to the certificate issued by
the appropriate agency in the computation of
taxes." In all three instances the implementing
regulations originally directed the disallowance of
the entire illegal payroll;” later amendments,
however, permitted the disallowance of a lesser
amount in the presence of mitigating or extenuat-
ing circumstances.” One of these regulations,
T. D. 5446 of March 17, 1945, governing the effect
to be given to certificates of disallowance by the
tax authorities, is still in effect, having been em-
egg in the permanent Income Tax Regulation.
Cf. Treasury Regulations 111, See. 29. 23a-16; 26
C. ¥ R. 29.23a-16.

4 Office of Economic Stabilization Regulations of October
27, 1942, Section 4001.4, 7 F. R. 8749.

'’ Office of Economie Stabilization Regulations of October
27, 1942, Section 4001.10, Main Brief, pp. 87-89.

* Agricultural Labor: War Food Administration Regula-
tions of January 17, 1944, Section 1100.15, 9 F. R. 659. Sal-
aries in Excess of $5,000: Commissioner of Internal Rev-
enue, T. D. 5186 of December 2, 1942, Section 1002.28, 7 F. R.
10056. Effect to Be Given Certificates of Rela
Commissioner of Internal Rev enue, T. D. 5243 of March 12,
wa, 8 F. R. 3158.

® Agviculteral Labor: War Food Administration Regula-
tions of June 23, 1945, Section 1100.15, 10 F. R. 7615. Sal-
aries in Excess of $5,000: Commissioner of Internal Revenue,
T. D. 5435 of Febeuary 2, 1945, Section 1002.28, 10 F. R. 1475.
Effect to Be Given to Certificates of Disallowance : Commis-
sioner of Internal Revenue, T. D. 5446 of March 17, 1945,
10 F. R. 3008.

16

b. Congressional acceptance of this administra-
tive interpretation of Section 405 (b). As we
have shown in our main brief (pp. 46-48), the
Stabilization Act was subject to searching Con-
gressional scrutiny on the frequent occasions of
its extension and also in connection with the
appropriations for the National War Labor
Board. Even in the absence of specific proof
that Congress was actually advised of the inter-
pretation of Section 405 (b) to the effect that the
entire illegal payroll could be disallowed in the
absence of mitigating circumstances, it would
have to be assumed that Congress knew of this
vast body of consistent regulations issued by dif-
ferent agencies and of the actual practice fol-
lowed by them.

As a matter of fact, however, this interpreta-
tion of Section 405 (b) was brought to the at-
tention of various Congressional Committees and
explained to them to their satisfaction. Thus,
at the hearings held in March 1944 in connection
with the National War Agencies Appropriations
Bill for 1945, referred to in our Main Brief at
page 47, Mr. William H. Davis, Chairman of the
National War Labor Board, pointed out to the
House Subcommittee:

So, in the Executive order and the regula-
tions of the Economie Stabilization Direc-
tor it was provided that the entire amount

of wages paid in violation of law would be
disallowed, not just the excessive part, but

PPPS ire ge pent es Copan Siannermergeare

BLEED THROUGH
BLURRED COPY

—

17

the whole of it would be disallowed by
these agencies of Government; provided,
however, that the action of the War Labor
Board, in cases which we cover, and the
Treasury in case of salaries above $5,000,
and so forth, gave us the power, if we
found extenuating circumstances, to say to
what extent those wages will be taken into
account.”

,

Later on,” Mr. Davis pointed out that the
question of disallowing the entire payroll came
up only in 5% of the cases tried by the Board.
The question whether the entire illegal payroll
or only the illegal excess was to be disallowed
came up again in June 1944 at the Senate hear-
ings for the 1945 War Agencies Appropriations
Bill.” After Mr. Freidin, General Counsel of
the National War Labor Board, had explained to
the Committee that, while the October 27, 1942
Regulations permitted the disallowance of the
entire illegal payroll, authority had been obtained
from the Director of Economic Stabilization to
impose a lesser sanction in the presence of miti-
gating circumstances, Senator Hayden remarked

Hearings before the Subcommittee of the Committee on
Appropriations, House of Representatives, 78th Cong., 2d
Sess., on the National War Agencies Appropriations Bill for
1945, pp. 240-241.

® Id., at p. 241.

* Hearings before a Subcommittee of the Committee on
Appropriations, United States Senate. 78th Cong., 2d Sess.,
on H. R. 4879, pp. 132-133.

18 }

that it would be arbitrary if an overpayment of
$88 in a $3,500 case necessarily led to a $3,500 tax
disallowance. Mr. Freidin and Mr. Garrison, a
pubhe member of the Board, explained to the
Senator that the mitigation practice was designed
to prevent such arbitrary results. Senator Hay-
den summarized these assurances with apparent
approval.

It would be possible, under your procedure,

if you say this was done innocently, to

waive it entirely. But if you believe it is

done deliber ‘ately, you want to make the

penalty enough io discourage a repetition

of the act.

Mr. FrReEmIN: P? ‘ecisely so.

Similar advice as to the operation of the dis-
allowance sanction of Section 405 (b) was given
the 79th Congress in connection with the 1945
Extension of the Stabilization Act ”’ and the Na-
tional War Agencies Appropriations Bill for
1946.”

*1 Statement of Mr. William H. Davis, Chairman of the
National War Labor Board of March 7 (, 1945, Hearings be-
fore the Committee on Banking and Currency, United States
Senate, 79th Cong., Ist Sess., on S. J. Res. 30, p. 216:

If the tripartite divi ision finds that a violation exists, it
considers all such extenuating circumstances in re: whing
its determination as to the amount of the unauthorized
Wages to be disallowed. It has been relatively rare in
the experience of the Board that, the violations by an
employer have been deemed suftic ‘iently willful or inten-
tional to justify lisallowance of the entire amount of
wages paid in violation of the act.

“Statement of Dr. George W. Taylor, Chairman of the

National War Labor Board, April 23, 1945, Hearings before
the Subcommittee of the Committee on Appropriations,

PILI ILE II es REA RE Ne clon ie wenn aer tate Pitsaeee

BLEED THROUGH
BLURRED COPY

_ ——_————

19

In these circumstances the repeated extensions
of the Stabilization Act and the several appropri-
ations of funds for the operation of the National
War Labor Board and later for the National
Wage Stabilization Boar.! indicate that Congress,
too, interpreted Section 5 of the Stabilization Act
as authorizing the disallowance of the entire
illegal payroll. And the reenactment of Section
5 as Section 405 (b) of the Defense Production
Act carried with it the approval of their earlier
interpretation of the statutory language. Helver-
ing v. Winmill, 305 U. S. 79, 83; Commissioner v.
Flowers, 326 U.S. 465, 469; Norwegian N itrogen
Co. v. United States, 288 U. 8. 294, 308-315.

2. Events following the enactment of the De-
fense Production Act of 1950 indicate Congres-
stonal adherence to the interpretation permitting
disallowance of the entire illegal payroll

On June 13, 1951, the Wage Stabilization Board
issued its Enforcement Regulation No. 1,16 F. R.
6028 (cf. Main Brief, p. 4). Section 1 of this

House of Representatives, 79th Cong., Ist Sess., pp. 12-13,
pointing out that while the entire illegal payroll could be
disallowed, the Board had authority to reduce or entirely
eliminate these potentially severe penalties on the basis of
the facts in each particular case.

** In connection with the above cited cases dealing with
the weight to be given to Treasury Regulations of long
standing, it should be remembered that the administrative
interpretation of Section 405 (b) authorizing the disallow-
ance of the entire illegal payroll has been embodied in its
present form in Treasury Regulations 111, Section 29.23a-16
since 1945 and that it goes back to 1943.

291511—54—4

20
Regulation—like General Order N 0. 15, Section
4 (b), involved in the instant case (Main Brief,
pp. 91-92)—ealled for the disallowance of the
entire wage payment, not merely of the illegal
wage increase, in the absence of extenuating or
mitigating circumstances.

That Congress was well aware of this Enforce-
ment Resolution appears from the Congressional
debates resulting in the Defense Production Act
Amendments of 1951. Representative Davis of
Georgia quoted the pertinent portion of Enforce-
ment Regulation No. 1 and pointed out, on July
20, 1951 (97 Cong. Ree. 8555), that

Under the provision as it now is, the entire
wage or salary involved may be disal-
lowed * * *,

He introduced an amendment * to make (tbid.)
these heavy penalties possible to be invoked
only if the violation was intentional, for the
period prior to June 30, 1951, because of un-
certainty in the administration of the Act
prior to that time. (

It is significant that Mr. Davis felt that. total

disallowance was authorized by the statute and

that an amendment would be necessary to change
it.

“The amendment would have provided in part “That as
to any such payments made prior to June 30, 1951, this au-
thority shall extend and be applied only to payments made

in willful contravention of any such regulation or order” (97

Cong. Rec. 8555).

EPG LEN LAL RIE IR TE AG YAP ORR RR Cte Fah EN ah ieee OS OI A BREE

BLEED THROUGH
BLURRED COPY

a

21

Mr. Spence, the Chairman of the House Com-
mittee on Banking and Currency, which was in
charge of the bill, objected on the ground that
the amendment

would prevent effective enforcement and
destroy the effect we are trying to achieve
by this act.

The House thereupon rejected the Amendment
(ibid.”), thereby expressing its approval of the
imposition of a disallowance sanction amounting
to the entire payroll in appropriate cases.

Congress thereafter extended Section 405 (b)
twice.” By the time of the last extension (June
30, 1952), the National Enforcement Commission
had handed down its first decisions asserting its
authority to disallow the entire payroll where
warranted by the circumstances. In re Hedin
Construction Co., April 11, 1952, Bureau of Na-
tional Affairs, Labor Relations Reporter Binder
7, WHM 100: 1153, 1163; cf. In re Glascote Prod-
ucts, June 3, 1952, ibid., 1164, 1165-1166; In re
Boz Inc., June 24, 1952, cbid., 1167, 1168.

The material referred to in the preceding pages
shows that before the 1950 Act was passed Con-
gress knew that its predecessor had been con-
sistently construed as permitting disallowances
as high as the entire payroll, that Congress

* The rejected amendment also would have provided for
the judicial review of the determination of the disallowance

(cf. Main Brief, pp. 49-50).
* Defense Production Act Amendments of 1951 and 1952.

22

deliberately used this identical language in 1950,
and that it specifically refused to amend the Act
in this respect when the interpretation was called
to its attention, when the Act was extended and
otherwise amended. It thus seems clear that this
interpretation was both what Congress intended
when the Act was passed and ratified thereafter.

B. THE STATUTORY DISALLOWANCE SCHEME IS NOT
UNCONSTITUTIONAL

Since for the reasons stated the regulations
permitting administrative disallowance up to and
including the entire amount of the unauthorized
payroll are authorized by the statute, we put to
one side appellee’s attempt to separate regulation
from statute for purposes of constitutional at-
tack.” The constitutional challenge must be con-
sidered as relating to the statute.

We submit that there can be no doubt that
Congress can provide a varying or flexible system
of disallowances or sanctions to be imposed in
appropriate circumstances. Argument is unnec-
essary to prove that Congress may impose
monetary penalties substantially greater than the
amount involved in a particular violation; a fine
may exceed the amount stolen. Here, neither
Statute nor regulation go that far—sinee the
maximum disallowance is the amount of the un-
lawful wage payment.

* If the regulations were not authorized by the statute, the
constitutional question would not be reached.

LOL TID LOPLI RETO INES SN Gl ARSE OT ng Rt Yat RCT LEI ACS a8

BLEED THROUGH
BLURRED COPY

,

As we have shown, the disallowance of an entire
unauthorized payroll, the maximum permitted by
the statute, occurred only in a single case in whieh
there existed ‘“** * * a deliberate and intentional
violation after being expressly informed of * * *
obligations under the law.” Appellants’ Main
Brief, pp. 7-8, fn. 7. The sanctions applied in
the bulk of the cases fell well short of the per-
mitted maximum and were carefully designed to
fit the circumstances of each case. Ibid. Stand-
ards with regard to mitigating or extenuating
factors were set forth in wage enforcement regu-
lations at all times and were known to, discussed
with, and approved by Congress. Supra, pp.
16-22.

Appellee’s attack on this system of disallow-
ances, citing Missouri Pacific Rail way Co. Vv.
Tucker, 230 U. 8. 340, is based on considerations
precisely the opposite of those actuall y presented.
The Missouri Pacific decision means no more than
that a fixed and arbitrary penalty, to be applied
without discretion and without relationship to
the circumstances of the particular case, is bad.
Here, of course, no such problem arises. On the
contrary, Section 405 (b) provides flexibility, the
opportunity for the exercise of discretion in par-
tiewir cases. and the shaping of the sanction to
carry out the public policy involved. Far less
carefully designed systems have been sustained.
Cf. St. Louis, Iron Mountain dc: Southern Rail-

24

way Company v. W illiams, 251 U. S. 63, which
differs from the Missouri Pacific case chiefly in
that, just as here, the amount of the sanction lay
within the discretion of the enforcing tribunal.

Appellee also cites (Br. p. 79) Southwestern
Tel. and Tel. Co. v. Danaher, 238 U. 8. 482, and
Wadley Southern R. Co. vy. Georgia, 235 U. 8.
651, in support of an argument that the penalties
here are unlawfully oppressive. But those cases
and the principle for which they stand involve
penalties definitely imposed and rapidly accumu-
lating by the day or otherwise. If the carrier
violated the law, it would subject itself to these
heavily mounting penalties during the period in
which the order was being tested in court; where-
as if it complied, it would also suffer financial
loss. Here there are no cumulative penalties and,
indeed, only a possibility of a large tax disallow-
ance, even assuming what has not yet been deter-
mined, that appellee has violated the law. The
amount does not become greater during the period
of litigation. In addition, it does not appear that
compliance with the wage ceilings would have
been costly; on the face of things, it should have
been more economical. The N ational Labor Rela-
tions Board decision in the case cited at page 2,
fn. 1, supra, implies that what appellee was seek-
ing to avoid was the lawful unionization of its
employees.

Such a system permitting the exercise of dis-
cretion in determining the amount to be disal-

EINE SETS IN ITT EIR! ME IIR BRR S BI SiR

BLEED THROUGH
BLURRED COPY

aa

lowed, depending on the flagrance of the viola-
tion, with the total illegal payroll as a maximum,
obviously violates neither the Eighth nor the
Fifth Amendments.

25

III. NO IMPROPER DELEGATION OF LEGISLATIVE POWER
IS CONTAINED IN THE STATUTORY SCHEME OF WAGE
STABILIZATION ENFORCEMENT ESTABLISHED BY SEC-
TION 405 (B)

Appellee has suggested (Br. p. 88) that Sec-
tion 405 (b) is unconstitutional on the ground
of unlawful delegation. This contention seems to
fall into two parts. First, appellee contends that
Congress lacked power to utilize administrative
procedure for enforcement purposes. Second,
appellee charges that Section 405 (1) contains no
adequate standard with respect to the sanction to
be imposed in the event a violation of wage stabil-
ization regulations is found to have occurred.”
These contentions have little merit.

A. CONGRESS MAY UTILIZE ADMINISTRATIVE PROCEDURE TO
IMPOSE THE DISALLOWANCE SANCTION

As we have shown, Congress deliberately chose
an administrative procedure culminating, in the
event of violation, in a certification of appropri-

* Appellee also argues that the President lacked authority
to delegate the enforcement function to the Office of Defense
Mobilization after Title IV had expired (Br., pp. 56-58).
In support of this contention appellee refers to the provision
in Section 403 requiring the President, when he “determines
that it is necessary to impose price and wage controls gen-
erally over a substantial portion of the national economy”
to administer such controls “through a new independent
agency created for such purpose.” Section 403 itself expired

26

; ate disallowance, as the only effeetive method of
} insuring adherence to wage stabilization regula-
4 tions and orders, a crucial need in a war or emer-
r gency economy (Appelljants’ Main Brief, pp.
41-64). And there can be no doubt that the con-
i seious selection of this enforcement technique,
; based upon the conclusive experience gained dur-
ing World War II, was open to Congress.

: It is well settled, as a matter of principle, that

Congress may, where it deems the method appro-
priate, rest the enforcement of statutes, up to
and including the imposition of sanctions, ex-
clusively with an executive or administrative
agency. ‘‘* * * Congress has long delegated to _
executive officers or executive agencies the deter-

mination of complicated questions of facet and of

on April 30, 1953. Moreover, Congress would not have
intended to require that the carrying through to completion
of enforcement proceedings after expiration of Title IV
would have to be carried through by a “new” agency. The
| committee report shows that the reason for requiring the use
of a “new” agency was to insure coordination in the admin-
istration and enforcement of price, wage and other controls
involved in “the various aspects of this vast program.”
S. Rep. 2250, 81st Cong., 2d Sess., p. 38. Such coordination
was obviously desirable during the period of active admin-
istration, while the programs were in effect, but it was
unnecessary when all that was left to be done was the comple-
tion of specific enforcement proceedings against past viola-
tions. This does not mean that the expiration of Section
405 (b) precluded the President from authorizing the com-
pletion of enforcement by the Office of Defense Mobilization.
His authority stems from the savings statutes discussed at
pages 66-77 of our main brief, together with the authority
conferred upon him by Title VII which does not expire.

CC

Fe RNR ROE A ANON oT NS INSERM REESE SESE SESE ie ey
BLEED THROUGH
BLURRED COPY

——_

27

law. * * *.7’ Switchmen’s Union v. Mediation

Board, 320 U.S. 297, 303; Estep v. United States,
397 U. S. 114, 120; Lichter v. United States, 334
U.S. 742.

The availability of this selection of remedy or
sanction is not affected by the use, in the enforce-
ment scheme, of a money penalty. ‘** * * [T]he
legislation of Congress from the beginning, not
only as to tariff but as to internal revenue, taxa-
tion and other subjects, has proceeded on the
conception that it was within the competency of
Congress, when legislating as to matters exclu-
sively within its control, to impose appropriate
obligations and sanction their enforcement by
reasonable money penalties, giving to executive
officers the power to enforce such peialties with-
out the necessity of invoking the judicial power.”’
Oceanic Navigation Co. vy. Stranahan, 214 U.S.
320, 339; see, also, Lichter v. United States, supra;
United States v. Ju Toy, 198 U.S. 253; Passavant
v. United States, 148 U.S. 214.

Thus, the power of Congress to utilize admin-
istrative enforcement in the wage stabilization
program is clear. Congress has certainly gone no
further here, where enforcement culminates in
the familiar tax collection processes.

B. SECTION 405 (b) PROVIDES SUFFICIENT GUIDANCE AS TO THE
SANCTION TO BE IMPOSED

It is also well settled that constitutional pro-
hibitions against unlawful delegation of legisla-
tive power are not infringed where Congress has

<8) |. tN ate me nae

wy Sa

PONE PGE Te NEE CA” PAN Saline Seca ee pi

a as

28

provided intelligible principles to guide the exer-
cise of the delegated authority. Lichter v. United
States, supra; American Power Co. vy. S. E. C.,
329 U. S. 90, 104; Sunshine Anthracite Coal Co.
v. Adkins, 310 U. S. 381; Opp Cotton Mills vy.
Administrator, 312 U. S. 126; Hampton &: Co. v.
United States, 276 U. 8. 393. Flexibility of ad-
ministration is not only permitted but desirable,
particularly where, as here, Congress seeks to
deal with a complex and difficult subject under an
emergency program. Lichter v. United States,
supra; Yakus v. United States, 321 U. S. 414,
423-424; United States v. Rock Royal Co-op., 307
U.S. 5338, 574. Charges of unlawful delegation
for want of precise standards, such as _ that
leveled by appellee herein, must be approached in
the light of these principles.

First, we turn to the language of Section 405 (b).
We think that if the problem of construction had
to be approached in a vacuum, sufficient guidance
would be found to exist in the language of the
section itseil. By the first sentence of the section,
as we have seen (pp. 10-22, supra), Congress
made illegal the entire wage payment in con-
travention of a maximum wage regulation. ‘No
employer shall pay, and no employee shall re-
ceive, any wage in contravention of any
regulation or order promulgated by the President
under this title.”’ The second sentence of the
section not only provides the method of enforce-
ment, namely, a Presidential directive as to ex-

* * *

eo

NS AAT R GIRL ST LL RTEE RANT BR SELON IRINA TIA WAR

BLEED THROUGH

BLURRED COPY

a ———

29

ecutive or administrative disallowances, but also
creates in the President the power to remit some
or all of the illegal payment thus prescribed.
Specifically, Section 405 (b) directs the President
to prescribe ‘‘* * * the extent to which any wage
* * * payment made in contravention * * * shall
be disregarde

This statutory enforcement scheme parallels

a7? 2%

the familiar method of enforcing the criminal law
by allowing the court to prescribe a maximum
sentence or a lesser sentence in its discretion.
This statute is no more unconstitutional as a dele-
gation of legislative power than is that familiar
device.

But here the problem cannot be approached in
a vacuum. As we have shown, Section 405 (b)
was consciously and specifically copied by Con-
gress in 1950 from the substantially identical text
of Section 5 of the 1942 Stabilization Act; this
1950 utilization by Congress of the language of
the 1942 section took place with actual knowledge
of the interpretation and application of the earlier
section, in thousands of cases, on every point here
material; and Congress was specifically aware of,
and approved, the interpretation and application
of Section 405 (b) during the Korean emergency
period. This close and continuous familiarity
with the interpretation and application of Section
5 and Section 405 (b), specifically included knowl-
edge that the statutory language had been con-
strued as permitting the disallowance of the en-

30

tire illegal payroll of a violating employer as a
maximum, with a power to remit or mitigate the
amount of sanction to he imposed in appropriate
circumstances.”

Given these circumstances, no genuine question
of delegation arises. On the contrary, there is
here presented the clearest possible case of ratifi-
cation by Congress of the administrative inter-
pretation and application of statutory language
precisely reenacted with full knowledge of such
i prior interpretation and application. Helvering
' v. Winmill, 305 U. 8. 79, 83; Commissioner v.
Flowers, 326 U. S. 465, 469; Norwegian Nitrogen
Co. v. United States, 288 B.S 294, 308-315. The
conscious recognition and approval by Congress,
in enacting Section 405 (b), of the minutely de-
tailed pattern worked out during World War II
with regard to wage stabilization enforcement
would, in and of itself, give more than sufficient
content to the language of Section 405 (b) in so
far as standards are concerned. This means that
the words of the statute are to be read as if they
expressly authorized the method of determining
the amount to be disallowed—described in the
antecedent regulation—and copied into the pres-
ent one.

In far more stringent circumstances than are
here present, general congressional approval by
statute of prior detailed executive orders and

ee PS ee te eee

* See Appellants’ Main Brief, pp. 6, 92, for a detailing of
the factors in mitigation.

: ° - ern eeeeran
sR NG eae OOS Be FATE POT IA EE EEE ii ie ia

BLEED THROUGH
BLURRED COPY

a

31

proclamations has been upheld against a charge
of unlawful delegation for want of standards.
Hirabayashi v. United States, 320 U. 8. 81, 102-
104. And this Court has recently held that the
adequacy of a statutory standard can be measured
by reference to an administrative practice known
to the enacting Congress and projected into the
statute under enactment. Lichter v. United States,
334 U. S. 742, 777, 783. The renegotiation
field furnishes a strikingly similar sequence of
statute, administrative interpretation and reen-
actment. The Lichter decision (pp. 777, 783)
followed the reasoning of Spaulding v. Douglas
Aircraft Co., 154 F. 2d 419, 425 (C. A. 9) that
“* * * Twlhatever difficulties may be found in
the original act, the amendments of October 21,
1942, merged the detailed administrative practice
with the statute in a manner to foreclose all pos-
sibility of further doubt.” Here both the 1950
Act in relation to the administrative regulation
and practice under the 1942 Act and the later
amendments and reenactments in relation to the
regulation and practice after 1950 merged the de-
tailed administrative practice into the law.

IV. THE DISALLOWANCE SANCTION IS NOT IN CONFLICT
WITH THE REQUIREMENT OF ART. I, SECTION 9, OF
THE CONSTITUTION THAT ALL DIRECT TAXES NOT
COVERED BY THE SIXTEENTH AMENDMENT BE

APPORTIONED

On p. 87 of its brief appellee makes an involved
argument to the effect that hy disallowing deduc-

32

tions for wages in the computation of its income,
its income tax ceases to be levied upon *‘ineome”’
and is outside the scope of the income tax author-
ized by the Sixteenth Amendment. Accordingly,
appellee concludes that the tax is unconstitu-
tional because Art. I, Section 9, of the Constitu-
tion requires that all direct taxes be apportioned.
There are two short answers to this argument,
(1) the taxes levied upon business income, in
particular that of corporations, never has been
considered a direct tax, and, (2) the ‘‘ineome”’
specified in the Sixteenth Amendment is gross
income; hence, the allowances of income tax
deductions for business expenses are a matter of
legislative grace.

1. An income tax is not a direct tax to the extent
that it is based upon business income

The basie premise of appellee’s argument is
that the income tax levied upon it is a direct tax
which requires apportionment unless it comes
within the terms of the Sixteenth Amendment.
This analysis fails at the very threshold since
this Court has held consistently that a tax im-
posed upon business income is not a direct tax.

Thus, in Pollack vy. Farmers’ Loan & Trust Co.,
158 U. 8. 601, in which the Income Tax of 1894
was held unconstitutional, this Court was careful
to point out (at pp. 635, 637) that an income tax
is a direct tax only to the extent that it is levied

Ak SKN ty sua PSE LSE IERIE S (RIE NEUE

BLEED THROUGH
BLURRED COPY

}

33

upon income derived from real estate and personal

property, and refused to comment
on so much of it as bears on gains or profits
from business, privileges, or employments,
in view of the instances in whith taxation
on business, privileges, or employments has
assumed the guise of an excise tax and been
sustained as such.

Accordingly, the Corporation Tax Act of 1909,
which preceded the Sixteenth Amendment, was
held constitutional as ‘‘an excise tax upon the
conduct of business in a corporate capacity, meas-
uring, however, the amount of tax by the income
of the corporation.’’ Stratton’s Independence v.
Howbert, 231 U.S. 399, 414; Flint v. Stone Tracy
Co., 220 U. S. 107, 151-152.

Similarly, the decisions interpreting the Income
Tax Acts enacted subsequent to the Sixteenth
Amendment are careful to point out that except
for their incidence upon income derived from real
or personal property, income taxes are in the na-
ture of indirect excise taxes. Brushaber v. Union
Pacific R. R., 240 U. 8S. 1, 16-17; Stanton v.
Baltic Mining Co., 240 U. 8. 103, 114. The latter
ease is of particular import, since it rejected the
argument similar to the one advanced here, that
an income tax statute which does not allow for an
adequate depletion allowance is not authorized by
the Sixteenth Amendment.

Since the appellee’s income sought to be taxed
here is derived from business and not from real

34

or personal property, the application of the in-
come tax to it would be in the nature of an
indirect excise tax, and appellee’s reliance on the
Sixteenth Amendment is utterly misplaced.

. 2. The granting of deductions for business ex-
‘ penses 1s completely within legislative control

; The second branch of appellee’s argument is
that the income tax authorized by the Sixteenth
Amendment is a tax upon net income and does
not permit Congress to disregard any costs of
doing business.

Pursuant to Section 23 (a) (1) (A) of the
Internal Revenue Code, ‘ta reasonable allowance
for salaries or other compensation for personal
services actually rendered * * * shall be allowed
as deductions.”’ Appellee appears to argue thai
it has some vested, constitutional right to this
deduction and that it is beyond the power of
Congress to disallow it. This Court, however,
has held consistently that ‘‘every deduction from
gross income is allowed as a matter of legislative
grace’ (White v. United States, 305 U. S. 281,
292; New Colonial Tea Co. v. Helvering, 292 U. S.
435, 440; Helvering v. Bankline Oil Co., 303
U.S. 362, 366; Interstate Transit Lines v. Com-
missioner, 319 U. S. 590, 593; McDonald vy. Com-
missioner, 323 U. 8. 57, 60), and ‘‘does not turn
on general equitable considerations’’ (Deputy v.
du Pont, 308 U.S. 488, 493).

wey OES d
¥ ES NSS FOR ELL LEE NDT L IT ROE EL BI See

BLEED THROUGH
BLURRED COPY

Moreover, even in the absence of a direct statu-
tory command, deductions for expenses tainted
with illegality may be disregarded. Teztile Mills
v. Commissioner, 314 U. S. 326, 335-339, and see
Lilly v. Commissioner, 343 U. 8. 90, 97, stressing
the difference between an unethical and an illegal
business expenditure.

Hence, since Congress has the power completely
to disallow deductions for wage payments, and
since even without a statute wage payments made
in violation of anti-inflationary legislation could
be disallowed as deductions, Congress without
doubt had the power to provide for the disallow-
ance sanction of Section 405 (b). The courts
accordingly have upheld tax disallowances which
came up under Section 5 of the Stabilization Act
of 1942. Weather-Seal Manufacturing Co. V.
Commissioner, 16 T. C. 1312, affirmed without
opinion, 199 F. 2d 376 (C. A. 6); N. A. Wood-
worth v. Kavenagh, 102 F. Supp. 9 (EB. D. Mich.),
affirmed on the opinion of the District Court, 202
F. 2d 154 (C. A. 6).

The cases cited by appellee do not hold to the
contrary. Doyle v. Mitchell Bros. Inc., 247 U.S.
179, involved the extent to which the proceeds
of a sale of a capital asset constitute income.
This Court held as a matter of statutory inter-
pretation, using the term ‘‘income”’ in its “nat-
ural and obvious sense,’’ that the determination
of income derived from the sale of property re-
quired the deduction from the proceeds of the

35

2

36 }

sale of an amount equal to the costs of the asset.
; (247 U. S. at 184, 185.) No constitutional ques-
tion was involved. There was no oceasion to
pass on the proposition asserted here by appellee
that a statutory computation of income which
: did not leave the capital investment intact would
be unconstitutional. To the contrary, as we have
pointed out above” this Court has held repeatedly
in the related field of wasting assets such as mines
or gas that Congress is under no constitutional
obligation to provide for a depletion allowance,
large enough to restore the capital investment.
Stratton’s Independence vy. Howbert, 231 U. S.
399; Stanton v. Baltic Mining Co., 240 U. 8. 103;
Von Baumbach vy. Sargent Land Co., 242 U. S,
903, 521-526; United States v. Biwabik Mining
Co., 247 U. 8. 116; H elvering v. Bankline Oil Co.,
303 U.S. 362, 366-367.

Nor is appellee aided by decisions such as Lela
Sullenger, 11 TC 1076; Commissioner vy. W eis-
man, 197 F. 2d 221 (C. A. 1); Hofferbert y. An-
derson Oldsmobile, Inc., 197 F. 2d 504 (C. A. 4).
In these instances the tax authorities unsuccess-
fully sought to disallow as costs of goods sold
those portions of the purchase prices paid by the
taxpayer which exceeded the OPA ceiling. In
all three instances the decisions were largely in-
fluenced by the consideration that, in contrast to
wage and salary stabilization, prior to the Defense

— as

Bia he

ahaa Men Kink ROM tsa matistil re sats

Po Nh eal Sis ag ey’ Rae De og Ce Re aT

*° Supra, pp. 33-34.

POISE LS RIN NMI E TAILLE NEE DAY ORE RTE RITE aHae ERNE rt

BLEED THROUGH
BLURRED COPY

37

Production Act Amendment of 1951 Congress had
not expressly provided for tax disallowance in
the case of price control violations (main brief
p. 50, 61-64). The courts were reluctant, in the
absence of an express statutory direction, to
sanction a computation of income which did
not provide for the reimbursement for capital
expenditures.”

V. THE ABSENCE OF RECITALS AS TO INDUSTRY CON-
SULTATION DOES NOT AFFECT THE VALIDITY OF THE
INSTANT PROCEDURAL REGULATIONS

Section 709 of the Defense Production Act pro-
vides in pertinent part (Appellants’ Main Brief,
pp. 85-86) :

* * * Any rule, regulation, or order, or
amendment thereto, issued under authority
of this Act shall be accompanied by a state-
ment that in the formulation thereof there
has been consultation with industry rep-
resentatives, including trade association
representatives, and that consideration has
been given to their recommendations, or
that special circumstances have rendered
such consultation impracticable or contrary
to the interest of the national defense, but
no such rule, regulation, or order shall be
invalid by reason of any subsequent find-
ing by judicial or other authority that such
a statement is inaccurate.

Cf. the comment on the Sullenger case in Weather-Seal

Mfg. Co. v. Commissioner, 16 TC 1312, 1320, affirmed, 199 F.
2d 376 (C. A. 6).

38

Appellee contends (Br. p. 67) that the pro-
cedural regulations, under which the administra-
tive proceedings here involved were to have taken
place, violate Section 709 in that they fail to re-
cite that industry consultation took p'ace in con-
nection with their formulation or that such
consultation was impracticable. Specifically, the
regulations thus attacked are General Orders 15
and 18 and Revised General Procedural Regula-
tion No. 1, described in detail in our main brief
at pp. 5-10.”

In the first place, Section 709 is not applicable
to general procedural regulations such as we have
here. The reference to ‘‘industry” and ‘‘trade
association” representatives indicates that Con-
gress was thinking of regulations of particular
industries with respect to business practices. See
96 Cong. Ree. 12176-7, 14064-5. Such a refer-
ence would not be appropriate for general rules
of procedure, as to which business men are not
experts and which do not pertain to particular
industries. Which trade association representa-
tives and which industries, for example, would

* These procedural regulations, covering procedure before
the National Enforcement Commission, all stem from En-
forcement Regulation No. 1, 16 F. R. 6028 ( Appellants’ Main
Brief, p. 4) which was issued by the tripartite Wage Stabili-
zation Board on June 13, 1951, at which time enforcement
was a function of the Board. As we have shown, on July 28,
1952, enforcement was transferred to the National Enforce-
ment Commission, a separate entity created by the Economic
Stabilization Administrator. Appellants’ Main Brief, p. 5.

stich incmeatl ie nee OTRAS Depew Toe ed Na a eas

BLEED THROUGH
BLURRED COPY

rages

Hale e

39

be consulted in framing such procedural regula-
tions?

The establishment of enforcement machinery and
procedure is purely governmental business, to be
worked out with due regard for controlling rules of
law. No one would have expected that business or
industrial representatives should be consulted as to
the method of proceeding against violators of ad-
ministrative regulations. The regulations here in-
volved, in summary, provide that the National
Enforcement Commission shall determine, on com-
plaint by other governmental agencies, whether the
wage stabilization requirements have been violated,
describe the procedure to be followed by that Com-
mission (in conformance with customary pro-
cedural standards for administrative agencies), and
define the policies to be followed by the Commission
in determining the amounts to be disallowed in par-
ticular cases. Obviously the requirement in Sec-
tion 709 for consultation with industry and trade
association representatives cannot have been meant
to cover regulations such as these.

Secondly, the consultation requirement of See-
tion 709 is properly limited to those regulations
which pertain to the control of industry and trade,
such as the regulation of prices, credit, and the
allocation of materials. Wage stabilization, how-
ever, imposes ceilings on the wages paid to labor,
and thus impinges primarily upon the rights of em-
ployees. If Section 709 had been meant to reach
the subject of wage stabilization, it presumably

iitiiart cnn

40

would have required consultation with represent-
atives of labor and not merely with industry and
trade association representatives.

A reason why this was not required is disclosed
in the framework of the statute. The regulation
with respect to prices, priorities and the like was
to be by Government officials representing only the
public. There was good reason to require such per-
sons to seek the views of the groups to be regulated.

Where wage stabilization was concerned, Title IV
established a different and far more direct pro-
cedure. Section 403 (b) (1) created the Wage
Stabilization Board to be composed “* * * in equal
numbers, of members representative of the general
public, members representative of labor, and mem-
bers representative of business and industry. * * *”’
This provision for direct participation by industry
and labor in the promulgation of regulation in the
field of wage stabilization would have made further
consultation with representatives of industry and
labor both unnecessary and repetitious.

A word should be said as to the history of the
predecessor of Section 709, Section 2 (a) of the
Emergency Price Control Act of 1942, 56 Stat. 23,
50 U.S. C. App. 902 (a), which also required consul-

tation with industry.” This provision was inapplic-

* The pertinent sentence in Section 2 (a) provides that :
Before issuing any regulation or order under the fore-
going provisions of this subsection, the Administrator
shall, so far as practicable, advise and consult with rep-
resentative members of the industry which will be af-

BLEED THROUGH

BLURRED COPY

I AAT ROHN :

41

able to the wage stabilization program which was
created by the subsequently enacted Stabilization
Act of 1942, 56 Stat. 765, 50 U. S. C. App. 961,
et seq. But even with respect to price control,
the Emergency Court of Appeals has stated that
“we never found occasion to set aside a regulation
on this ground [failure to consult with industry ],
even assuming the provision in question could
have been deemed mandatory, and not directory
merely.” Norman-Frank, Inc. v. Arnall, 196 F.
2d 502, 504 (BE. C. A. 1952), a case under the
1950 Act which cites the cases under the earlier
act. The court went on:
At any rate, the point has been rendered
academic by a provision in the Defense
Production Act of 1950 which had no
counterpart in the Price Control Act of
1942.
The court then quoted Section 709, italicizing
the last clause which provides that:
but no such rule, regulation, or order shall
be invalid by reason of any subsequent
finding by judicial or other authority that
such a statement is inaccurate.”

fected by such regulation or order, and shall give con-

sideration to their recommendations.

* Section 404 of the 1950 Act also provides:

In carrying out the provisions of this title, the Presi-
dent shall, so far as practicable, advise and consult with,
and establish and utilize committees of, representatives
of persons substantially affected by regulations or orders
issued hereunder.

This section does not contain the provision, such as
that in Section 709, for “a statement” that there has been

Piste: awh web

42

VI. THE RESIGNATION IN DECEMBER, 1952, OF THE
INDUSTRY MEMBERS OF THE WAGE STABILIZATION
BOARD HAS NO RELATIONSHIP TO THIS PROCEEDING
It is argued by appellee that **the collapse of

the tripartite Wage Stabilization Board destroyed

the statutory scheme for administration of wage

controls.”’ (Br. p. 70).

On December 6, 1952, the Chairman of the
Wage Stabilization Board in Washington re-
signed and, on the same day, the industry mem-
bers of the Board also resigned. On December
15, 1952, the Economic Stabilization Administra-
tor designated the remaining public members of
the Board as the Wage Stabilization Committee.
General Order 19, 17 F. R. 11368. The stated
purpose of this order was to provide an interim
administration of the wage stabilization program
while the Board was rendered inoperative by the
resignation of the industry members. The in-
terim administration was to terminate as soon as
the Board was again rendered operative by the
appointment of industry members.

The change in the organization of the wage
stabilization agency is irrelevant here. The only
functions which the statute required to be per-

consultation with industry representatives, and, we sub-
mit, was purely precatory or directory, not mandatory.
In any event, for the reasons set forth above, Section 404,
like Section 709, could not appropriately be applied to
general procedural or wage regulations.

BLEED THROUGH

BLURRED COPY

Ae NC RANI IRN ce Hts Sone

43

formed by a tripartite board are defined in Sec-
tion 403 (b) (5) of the Act as follows:

(5) The Board shall, under the super-
vision and direction of the Economic Stabi-
lization Administrator—

(A) formulate, and recommend to such
Administrator for promulgatien, general
policies and general regulations relating to
the stabilization of wages, salaries, and
other compensation; and

(B) upon the request of (i) any person

substantially affected thereby, or (ii) any
Federal department or agency whose furc-
tions, as provided by law, may be affected
thereby or may have an effect thereon,
advise as to the interpretation, or the ap-
plication to particular circumstances, of
policies and regulations promulgated by
such Administrator which relate to the
stabilization of wages, salaries, and other
compensation.
For the purposes of this Act, stabilization
of wages, salaries, and other compensation
means prescribing maximum limits there-
on. Except as provided in clause (B) of
this paragraph, the Board shall have no
jurisdiction with respect to any labor dis-
pute or with respect to any issue involved
therein. * * *

Although this subsection vests the authority to
issue general wage stabilization regulations in the
tripartite board, nothing in the law requires the
use of such a board as a part of the enforcement

Bitiesirns.c te

44

machinery in wage stabilization cases. Section
405 (b) grants to the President the authority to
enforce wage stabilization by disallowances, and
Section 703 authorizes him to delegate such au-
thority, without in any way limiting him to the
Wage Stabilization Board.

Furthermore, this proceeding was instituted
on November 4, 1952, on behalf of the tripartite
board prior to the Board’s reorganization in
December, 1952 (R. 3, 10). The case was to be
heard by the National Enforcement Commission,
a separate component of the Economie Stabiliza-
tion Agency from the Wage Stabilization Board.
The case was to have been prosecuted, if it
had been allowed to go on, by a regional attor-
ney for the Wage Stabilization Board or its sue-
cessor. But no further action by the Board itself
Was necessary.

Appellee does not appear to claim that a tri-
partite board must necessarily participate in the
enforcement process. Its argument seems to be
that only such a board could rule on contentions
that appellee’s wage increases were authorized
under the applicable regulations or could have
given an interpretation as to the application of
the regulations in the particular circumstances.
And it is said that such advice from the Board
might have precluded the commencement of the
enforcement proceeding.

But the fact that an agency was not available
to “‘advise as to the interpretation, or the applica-

BLEED THROUGH

BLURRED COPY

eteeeeenin tee ee =
I ne tilt il Ni ea aia

45

tion to particular circumstances” of the regulations
plainly does not mean that they cannot be enforced
by other agencies having enforcement authority. If
this were not the ease no statute subject to adminis-
trative interpretation could be enforced after it
had expired, despite the general saving statute
and other saving provisions, which prove the
contrary.”

Even if appellee’s contention were not defective
for all of the reasons stated above, it would lack
substance. It amounts to a suggestion that an
industry or labor boycott of a tripartite Board
automatically cuts off the agency’s power to func-
tion without regard to the importance of the con-
tinuanee of that function in the public interest.
Where such a boycott or withdrawal occurs, an
interim administration must be provided, as it
was here, to protect the public. Even if such an
interim administration be considered as not free
to engage im new matters, it clearly would have
the power to continue proceedings authorized by
the tripartite Board.

VII. THE REGULATIONS ARE NOT INVALID AS
RETROACTIVE

Appellee argues (Br. pp. 74-76) that the regu-
lations would be invalid as applied to wage in-
creases occurring before June, 1951, when the
Wage Stabilization Board’s resolution prescrib-

*® Here the executive order terminating substantive con-

trols specifically saved the procedure for administrative en-
forcement. Executive Order No. 10434, 18 F. R. 809.

bi

Bist. or Ee Ale Tate ee

mi

ing enforcement procedure was issued. But the
substantive wage stabilization regulation which
fixed the maximum wage level was issued on
January 26, 1951 (16 F. R. 816), prior to any of
the alleged violations. See p. 4, main brief. The
fact that it teok some time to set up the agency
necessary to administer the controls, including the
enforcement machinery, did not mean that the
appeliee was suffering penalties for conduct
which it did not know was illegal. Moreover, the
regulation merely implemented the statute, which
itself authorizes the imposition of an appropriate
disallowance in the event of violation of the sub-
stantive regulation. The fact that the amount to
be disallowed would not be determined until after
the circumstances of the case had been developed
in the administrative proceeding did not consti-
tute the imposition of a penalty improperly retro-
active, any more than does the defendant’s un-
certainty in an ordinary case as to the amount
of the fine or damages which may ultimately be
imposed by a tribunal having discretionary
authority.

46

BLEED THROUGH
BLURRED COPY

PA EONS A VON pin Bare sob crt

47

CONCLUSION

For the reasons set forth herein as well as for
the reasons set forth in our main brief, we re-
spectfully submit that the judgment below should

be reversed.
Simon E. Sospe.orr,
Solicitor General.
WarREN E. BURGER,
Assistant Attorney General.
Rosert L. STERN,
Special Assistant to the Attorney General.
SAMUEL ). SLADE,
HERMAN MARCUSE,
Attorney?

/

Ww

CHARLES H. KENDALL,
General Counsel,
Office of Defense Mobilization.

Marcu 1954.

© S GOVERNY: AT PRINTING COPE fice

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386408_0048%3A04. Public record. Not legal advice.