Appendix — Renegotiation Bd. v. Grumman Aircraft Engineering Corp.
Supreme Court brief1975
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IN THE
Supreme Court of the United States
OCTOBER TERM, 1973
No. 73-1316
THE RENEGOTIATION BOARD,
Petitioner,
—Vv.—
GRUMMAN AIRCRAFT ENGINEERING CORPORATION
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT
OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT
INDEX TO APPENDIX
Page
Docket Entries 00 1
Complaint oo... eee vo ooo 4
Exhibit A 00... 8
Exhibit Boo... eee 10
Exhibit Coo... 4
Exhibit Doo . 14
Exhibit: Fool cceccecceecceccecceeeceeceee. is 17
Exhibit Goo... eee tees crs ee 19
Motion of Plaintiff for Summary Judgment . see 20
PRRirse. nee
ii INDEX
Motion of Plaintiff for Summary Judgment—Continued
Affidavit of John F. Carr
Exhibit I ..............
BSnibit Unig
exhibit. U1 ..c-cccsccc-2s
Femi EV resceccnrecnccsssstioas cscs
OC LL | Sp eer ener er ener ren rer ame
Exhibit VI .|............
Bexhibit. VEL cicceccccccceseossscsccessecrsreesee —
Exhibit: VID] 22... ....00-----:0-cccssecseseceesecsreenenee
Statement of material facts as to which Plaintiff contends
there is no genuine issue —......... 0.0... sees devesceuees
Opposition of Defendant to Plaintiff's Motion for Summary
JUAgMENt on. eeeeeec ce eeeee eee eeeeeteeeeeeteeeentt oe ee re
Motion of Defendant to Dismiss or in the Alternative for
Summary Judgment . ..............- oe ieiesued pug no ve esestpe cuenss poets sapeeeeeeiaes
Affidavit of Lawrence E. Hartwig ......
Statement of material facts as to which Defendant contends
there is no genuine issue ...............-.:..:..: eee
Order Denying Plaintiff's Motion for Summary Judgment
and Granting Defendant’s Motion for Summary Judg-
MON... sees eeccecceeeccccececeeceeeeccecseecteeeeescetucoeesstiaeeteeneesensy esa dessp tess
Notice of Appeal by Plaintiff ...................- spa eaeeiceeeenrtews
Decision of the Court of Appeals for the District of Columbia
Circuit 222... ceeeeeeeeeeeeeeeeeeeteeeseees ee eens ee
Motion of Defendant for Summary Judgment .
Affidayit of Vernon James Dwyer 2.0.
Affidavit of George Joseph Vecchietti 0.0.00... “.
Affidavit of Lawrence E. Hartwig ................... es
Motion of Plaintiff for an Order in Accordance with the
Mandate of the Court of Appeals . co
Order Denying Motion of Defendant for Protective Order
as to Chairman Hartwig and Holding Motion for Order
in Accordance with Mandate in Abeyance Pending Out-
come of Chairman Hartwig’s Deposition . ere
5
73
INDEX iil
Page
Deposition of Chairman Hartwig 74
Opinion Denying Motion of Defendant for Summary Judg-
ment and Granting Motion of Plaintiff for Order in Ac-
cordance with Mandate Order to be Submitted within 10
Days 2. ee 205
Motion of Defendant for Rehearing ee 220
Affidavit and Claim of Privilege (Lawrence E. Hart-
Wik) oe . . 22)
Opposition of Plaintiff to Motion for Rehearing 223
Order of June 7, 1971 joes sase te thoes seeeddeeeesueseeeeesaeass: 224
Order Denying Motion of Defendant for Rehearing 227
Motion of Defendant for Stay po . 228
Notice of Appeal by Defendant from Order of June 7, 1971 230
Order Allowing Certiorari 231
/
y
S aOR
1
IN THE SUPREME COURT OF
THE UNITED STATES
No. 73-1316
THE RENEGOTIATION BOARD, .PETITIONER
v.
GRUMMAN AIRCRAFT ENGINEERING CORPORATION
Appeal From Order of the United States Court of
Appeals for the District of Columbia
APPENDIX
RELEVANT DOCKET ENTRIES
1968
June 27—Complaint, appearance Exhibits A, B, C, D, E, F,
& G. filed
Aug. 6—Motion of pltf. for summary judgment; c/m 8-6;
affidavit of John F. Carr with exhibits 1 thru 8; state-
ment; P&A; exhibits A thru C; M.C. filed
Aug. 26—Opposition of deft. to plitf.’s motion for summary
judgment; c/m 8-26, filed
Aug. 26—Motion of deft. to dismiss or in the alternative for
summary judgment; affidavit; statement; P&A; c/m
8-26; M.C. filed
ERE ME Peep SEPA TARR Ne eye
+
PEO
Beer eognn cen we
9
=
RELEVANT. DOCKET ENTRIES
1968
Sep. 9—Opposition of pltf. to deft’s motion to dismiss;
cross-motion for summary judgment; P&A; exhibit:
cm 9-9. filed
Nov. 8—Transcript of proceedings, 10-18-68, Vol. I, pp.
1-41 (reporter: Eva Marie Sanche. Court's copy.) filed
Nov. 4—Order denying pltf’s totion for summary judgment
and granting deft’s motion for summary judgment. (N)
- Micro 11-7-68 Corcoran, J. .
Dec. 5—-Notice of appeal by pltf; deposit: by Charles W. Col-
on $5.00; copy mailed to Irwin Goldbloom, Department
of Justice. filed
1970 / _
June 30—Motion of deft. for summary judgment; affidavit
(3) statement; c/m 6-30-70; .
Aug. 6—Motion of pltf. for an order in accordance with the
mandate of USCA; P&A; exhibit A; c/m-8-6-70;
Aug. 6—Notice of pltf. to take depositions of Vernon
James Dwyer, Geo. H. Vecchietti and Lawrence E. Hart-
wig; c/m 8-6-70.
Sep. 28—Withdrawal of taking of deposition of George J.
Vecchietti and James Dwyer by pltf; c/m 9-28.
Oct. 1—Order denying motion of deft. for protective order
as to Chairman Hartwig and holding motion for order
in accordance with mandate pending outcome of Chair-
man Hartwig’s deposition (N) Corcoran, J.
Jan. 22—Supplemental memorandum of P & A; by pltf in
support of motion for an order in accordance with the
mandate of the Court of Appeals; attachments A, B &
C; c/m 1-22-71.
Mar. 16—Supplemental P & A of deft in support of motion for
summary judgment and in opposition to pltfs’ motion for
order in accordance with the mandate of the Court of
Appeals; attachments (2); ¢/m filed 3-11-71
3
RELEVANT DOCKET ENTRIES
1970
Apr. 26—Opinion denying Motion of Deft. for summary judg-
ment and granting motion of Pltf. for order in accord-
ance with mandate Order to be submitted within 10 days.
(N) (Reporter—Eva Marie Sanche) J. Corcoran ~
May 18—Motion of deft’for rehearing; affidavit; P & A; ¢/m
5-18-71; M.C. filed
June 4—Opposition of pltf. to motion for rehearing; P&A;
exhibit A; c/m filed 6-4. ,
June 7—Order in accordance with mandate of U.S.C.A. (N)
Corcoran, J.
June 15—Order denying motion of deft. for rehearing (N)
Corcoran, J.
July 2—Motion of deft. for stay; no objection
Aug. 5—Notice of appeal by Deft from order of June 7,
1971; copy mailed Schamley
4
UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF COLUMBIA
Civil Action No. 1595-68
GRUMMAN AIRCRAFT ENGINEERING CORPORATION,
Bethpage, Long Island, New York, PLAINTIFF
v.
THE RENEGOTIATION BOARD, DEFENDANT
COMPLAINT
I
This is a civil action to order the production of opin-
ions and records under the Public Information Section
of the Administrative Procedure Act, Public Law 90-23,
81 Stat. 54, U.S.C., Title 5, Section 552, Paragraphs
2(A) and (3) of Subsection (a) which provide, in part:
(2) Each agency, in accordance with published
rules, shall make available for public inspection and
copying—
(A) final opinions, including concurring and
dissenting opinions, as well as orders, made in
the adjudication of cases;
(3) Except with respect to the records made avail-
able under paragraphs (1) and (2) of this subsec-
tion, each agency, on request for identifiable records
made in accordance with published rules stating the
time, place, fees to the extent authorized by statute,
and procedure to be followed, shall make the rec-
ords promptly available to any person... .
Jurisdiction is conferred on the Court by 5 U.S.C. See-
tion 552(a) (3).
II
Plaintiff is a New York corporation with its principal
office in Bethpage, Long Island, New York. Defendant
is an agency of the United States of America with its
g
5
principal office in the District of Columbia. The opinions
and records sought by this action are situated in this
judicial district.
First Count
IIT
By letter dated April 26, 1968, copy attached hereto
as Exhibit “(A),” Plaintiff requested that certain final
opinions, orders and identifiable records ( hereinafter
collectively referred to as “opinions”) of Defendant be
made available by Defendant for inspection and copying.
IV
By letter dated April 30, 1968, copy attached hereto
as Exhibit “B,” Defendant, by its General Counsel, How-
ard W. Fensterstock, refused to make available said
opinions for inspection and copying by Plaintiff,
V
By letter dated May 7, 1968, Plaintiff requested that
Defendant review the General Counsel’s refusal to fur-
nish Plaintiff with the opinions referred to in Paragraph
III, above.
VI
By letter dated May 21, 1968, copy attached hereto
as Exhibit “C,”’ Defendant upheld the action of the Gen-
eral Counsel and thereby refused to make available the
opinions requested by Plaintiff as set forth in paragraph
III, above. Said refusal constituted final action by De-
fendant with respect to Plaintiff’s request.
a VII
The refusal of Defendant to make available said opin-
ions was contrary to and in violation of the requirements
of Paragraphs (2)(A) and (3) of Subsection (a) of 5
U.S.C. Section 552. To the extent said refusal is based
upon Regulations promulgated by Defendant under 5
U.S.C. Section 552, said Regulations are inconsistent
with said statute.
6
Vill
Plaintiff has been caused and continues to be caused
irreparable injury by Defendant’s refusal to make avail-
able the opinions of Defendant referred to in Paragraph
III, above.
Second Count
IX
By letter dated May 7, 1968, copy attached hereto. as
Exhibit “D,” Plaintiff requested that certain identifiable
records be made available by Defendant for inspection
and copying.
xX
By letter dated May 21, 1968, copy attached hereto as
Exhibit “E,” Defendant, by its General Counsel, Howard
W. Fensterstock, refused to make available said records
for inspection and copying by Plaintiff.
XI
By letter dated May 28, 1968, copy attached hereto as
Exhibit “F,’ Plaintiff requested that Defendant review
the General Counsel’s refusal to furnish Plaintiff with
the records referred to in Paragraph IX, above.
XIT*
By letter dated June 13, 1968, copy attached hereto
as Exhibit “G,” Defendant upheld the action of the Gen-
eral Counsel and thereby refused to make available the
records requested by Plaintiff as set forth in Paragraph
IX. above. Said refusal constituted final action by De-
fendant with respect to Plaintiff’s request.
XIII
The refusal of Defendant to make available said rec-
ords was contrary to and in violation of the require-
ments of Paragraph (3) of Subsection (a) of 5 U.S.C.
Section 552. To the extent said refusal is based upon
Regulations promulgated by Defendant under 5 U.S.C.
7
Section 552, said Regulations are inconsistent with said
statute.
XIV
Plaintiff has been cauised and continues to be caused
irreparable injury by Defendant’s refusal to make avail-
able the records of Defendant referred to in Paragraph
IX, above.
WHEREFORE, in accordance with the provisions of para-
graphs 2(A) and (3) of Subsection (a) of 5 U.S.C.
Section 552, Plaintiff prays that:
(a) Defendant, its agents, employees and representa-
tives be enjoined from withholding said final opinions,
orders and identifiable records and be ordered to produce
said final opinions, orders and identifiable records for
inspection and copying by Plaintiff.
(b) Defendant’s Regulations, Title 32, Chapter XIV,
Subchapter B, Part 1480, of the Code of Federal Regu-
lations, implementing 5 U.S.C. Section 552, be declared
invalid to the extent inconsistent with said statute.
(ec) The Court order such other relief as is just and
equitable. '
GADSBY AND HANNAH
By: /s/
CHARLES W. COLSON
Attorneys for Plaintiff
1700 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
(202) 223-9100
8
EXHIBIT “A”
April 26, 1968
The Renegotiation Board
Washington, D.C. 20446
___ Attention: Mr. Nathan Bass, Secretary to the Board
Subject: Renegotiation Proceedings
Grumman Aircraft Engineering Corporation
Fiscal Year ended December 31, 1965
Gentlemen:
We are in receipt of your letter of April 15, 1968, ad-
vising us that the Renegotiation Board has determined
that this company realized excessive profits in the amount
of $7,500,000 for the fiscal year ended December 31,
1965.
Because of the Board’s adverse determination, it is ap-
parent that we in some way failed to address ourselves
in our appearance before the Board division assigned to *
the case to the important points or matters in this case.
At the outset of our presentation before the division on
April 8, 1968, we stressed that no specific points for pres-
entation had been designated. Accordingly, we believe
that the case has been prejudiced to our detriment by the
failure of the Board in its letter of February 9, 1968, to
provide us with a Notice of Points for Presentation as
required by Sections 1472.4(c) and 1472.5 of the Re
negotiation Board Regulations.
We now request that the Board, in order to correct this
prejudicial procedural defect, comply with its regulations
and provide this company with a Notice of Points for
Presentation. Thereupon, we request that we be given the
opportunity for another meeting with the Board division
assigned to this case pursuant to Section 1472.4 (c) of the
Board's regulations and that the Board thereafter pro-
ceed with this case in compliance with its regulations.
In the event of your denial of the aforementioned re-
quest, we should like, in the alternative, to be provided
with a summary of the facts and reasons upon which
vour determination of excessive profits is based pursuant
to Sections 1472.4(d) and 1477.3 of the Board’s regula-
9
tions in order to assist us in determining whether or not
we will enter into an agreement with the Board. In
light of the fact that we have not been given a Notice of
Points for Presentation, however, we are not in a position
to state that we have submitted all the evidence be
lieved to be relevant to the instant renegotiation pro-
~ Ceedings:
As requested by your letter, we enclose herewith a copy
of the face sheet of our New York State Franchise Tax:
Return for such fiscal year together with our computa-
tion of the state tax credit applicable to the tentative re-
tained profits. .
We also request, as further assistance in enabling us
to determine whether to enter into an agreement with the
Board, that, in accordance with 5 U.S.C. Section 552, the
Renegotiation Board make available for our inspection
and copying the final opinions, determinations, unilateral -
orders, agreements, clearance notices and letters not to
proceed issued in the adjudication of renegotiation cases
for the renegotiable years 1962 through 1965 involving
the following companies:
Douglas Aircraft Company Martin Marietta Corporation
The Boeing Company General Dynamics Corporation
Lockheed Aircraft Corporation McDonnell Company
Ling-Temco-Vought, Inc. Northrop Corporation
North American Aviation, Inc. Bell Aerospace Corporation
Fairchild Hiller Corporation Litton Industries, Inc.
Republic Aviation Corporation Avco Corporation
In this connection, we also request that we be given ac-
cess to written summaries of the facts and reasons upon
which such final opinions, determinations, unilateral or-
ders and agreements have been reached.
In conclusion, we also request that we be provided with
the final vote of each Member of the Board in the instant
proceeding.
Very truly yours,
GRUMMAN AIRCRAFT ENGINEERING CORPORATION
JOHN F. CARR
Secretary and General Counsel
JFC:ms
10
EXHIBIT “B”
THE RENEGOTIATION BOARD
WASHINGTON, D.C. 20446
April 30, 1968
Grumman Aircreft Engineering Corporation
Bethpage
Long Island, New York 11714
Attention: John F. Carr, Esq.
Secre:ary and General Counsel
Subject: Renegotiation Proceedings
Grumman Aircraft Engineering Corporation
_ Fiscal Year ended December 31, 1965
Gentlemen:
The Board has received your letter of April 26, 1968,
directed to Mr. Nathan Bass, Secretary to the Board, in
which you make several requests in connection with the
above-entitled renegotiation proceedings. Included in your
letter was a request pursuant to the Freedom of In-
formation Act, 5 U.S.C. 552. That portion of your letter
containing such request has been referred to me pursuant
to section 1480.7(b) of this Board’s regulations.
You request that the Board make available to you, for
inspection and copying, “the final opinion, deterniina-
tions, unilateral orders, agreements, clearance notices
and letters not to proceed issued in the adjudication of
renegotiation cases for the renegotiable years 1962
through 1965 involving the following companies:
Douglas Aircraft Company Martin Marietta Corporation
The Boeing Company General Dynamics Corporation
Lockheed Aircraft Corporation McDonnell Company
Ling-Temco-Vought, Inc. Northrop Corporation
North American Aviation, Ince. Bell Aerospace Corporation
Fairchild Hiller Corporation Litton Industries, Inc.
Republic Aviation Corporation Aveo Corporation
You also request that you be given access to “written
summaries of the facts and reasons upon which such
11
final opinions, determinations, unilateral orders and
agreements have been reached.”
I have concluded that the records you request are
Subject to the exemptions set forth in 5 U.S.C. 552(b)
(3) and (4), and RBR 1480.9(a) (3) and (4). Further,
the Board has specifically determined that records of the
type requested in your letter are exempt. RBR 1480.9
(b) provides, in part, as follows:
(b) Certain records.—Without limiting the gen-
erality of the provisions of paragraph (a) of this
section, the following are exempt:
* * * * 2
(3) Deterniinations, unilateral orders, agree-
ments, clearance notices, and letters not to proceed
(see Part 1498 of this subchapter).
Your letter also requests that you be provided with
the final vote of each member of the Board in the pro-
ceeding with your company. This request, too, is denied:
the exemptions cited above are also applicable to the
voting records of Board members with respect to exempt
matters. See RBR 1490.8. Notwithstanding the forego-
ing, the Board vote in your case will be furnished by
separate letter from the Secretary to the Board. but out-
side the framework of the Freedom of Information Act.
You are hereby advised, pursuant to RBR 1480.7 (d),
that your request for access to records of the Board, as
set forth in your letter of April 26, 1968, is denied.
Your attention is directed to the provisions of RBR
1480.7(e), providing for review by the Board of. this
decision if a written request therefor is made to the
Secretary of the Board within 20 days after the date
of this letter.
Very truly yours,
/S/ HOWARD W. FENSTERSTOCK
General Counsel
“4
SG PULLMAN Nap worn Py
(
12
EXHIBIT “C”
THE RENEGOTIATION BOARD
WASHINGTON, D.C. 20446
Registered mail
Return receipt requested
May 21, 1968
Grumman Aircraft Engineering Corporation
Bethpage
Long Island, New York 11714
Attention: John F. Carr, Esq.
Secretary and General Counsel
Subject: Renegotiation Proceedings
Grumman Aircraft Engineering Corporation
. Fiscal Year ended December 31, 1965
Gentlemen:
By letter dated May 7, 1968, you protest the action of
the General Counsel, in his letter dated April 30, 1968,
denying your request for access to certain information
under 5 U.S.C. 552.
Pursuant to RBR 1480.7(e), the Board has reviewed
the action of the General Counsel.
In the judgment of the Board, the records you have
requested are exempt under the provisions of 5 U.S.C.
552(b), particularly paragraphs (3), (4), and (5) there-
of. See RBR 1480.9(a). Specifically, certain of such
records are within the exemption provided in RBR 1480.9
(b) (3).
The Board accordingly has upheld the action of the
General Counsel and has decided that the records re
13
quested in your letter will not be made available to you
for inspection and copying.
Very truly yours,
/8/ NATHAN BAss
Secretary to the Board
ec: Charles W. Colson, Esq.
Messrs. Gadsby, Maguire & Hannah
Washington, D.C. 20006
’
GY
SNMP M RE PRPS TeN 4
14
EXHIBIT “D”
GRUMMAN AIRCRAFT ENGINEERING CORPORATION
BETHPAGE, LONG ISLAND, NEW YORK 11714
John F. Carr, Secretary and General Counsel
Cable Address: Grumair
May 7, 1968;
The Renegotiation Board i
1910 K Street, N.W.
Washington, D.C. 20446
Attention: Secretary to the Board, Mr. Nathan Bass
Subject: Renegotiation Proceedings
Grumman Aircraft Engineering Corporation
Fiscal Year ended December 31, 1965
Gentlemen:
Pursuant to 5 U.S.C. Section 552, we request that
all of the reports, correspondence, and data contained in
or constituting the files of the Eastern Regional Re-
negotiation Board and of The Renegotiation Board of the
United States in connection with the renegotiation of
Grumman Aircraft Engineering Corporation for the year
1965 be made available for inspection and copying.
Very truly yours,
GRUMMAN AIRCRAFT ENGINEERING CORPORATION
JOHN F. CARR
Secretary and General Counsel
JFC:c
es eet
15
EXHIBIT “E”
THE RENEGOTIATION BOARD
WASHINGTON, D.C, 20446 =
Registered mail
Return receipt requested
May 21, 1968
Grumman Aircrdft Engineering Corporation
Bethpage
Long Island, New York 11714
Attention: John F. Carr, Esq.
Secretary and General Counsel
Subject: Renegotiation Proceedings
Grumman Aircraft Engineering Corporation
Fiscal Year ended December 31, 1965
Gentlemen:
By letter dated May 7, 1968, you have requested that
the Board make available to you, for inspection and copy-
ing, pursuant to 5 U.S.C. 552, “all of the reports, corre-
spondence, and data contained in or constituting the files
of the Eastern Regional Renegotiation Board and of The
Renegotiation Board of the United States in connection
with the renegotiation of Grumman Aircraft Engineering
Corporation for the year 1965.” Pursuant to RBR 1480.7,
your request has been referred to me.
RBR 1480.6(b) provides that a person who requests
access to an identifiable record must provide a reasonably
specific description of the particular record sought, and
that the Board will not comply with a request that does
not provide a sufficient description or with a general or
blanket request.
In my opinion, you have not provided a reasonably
Specific description of particular records; rather, your
request constitutes a general or blanket request for all
files of the Board relating to the above-entitled proceeding.
Further, I have concluded that the records you request
°
Bescce= 2 NOOSE a pee y
16
are, in whole or in part, within the exemptions provided
in 5 U.S.C. 552(b), particularly pa.agraphs (2) through
- (5), and in RBR 1480.9(b).
--- Your request, therefore, is denied. I call your attention
to RBR 1480.7(e), providing for review by the Board of
this decision if a written request therefor is made to the
Secretary of the Board within 20 days after the date of
this letter.
Very truly yours,
/s/ HOWARD W. FENSTERSTOCK
General Counsel
ee: Charles W. Colson, Esq.
Messrs. Gadsby, Maguire & Hannah
Washington, D.C. 20006
17
EXHIBIT “F”
GRUMMAN AIRCRAFT ENGINEERING CORPORATION
BETHPAGE, LONG ISLAND, NEW YORK 11714
Cable Address: Grumair
The Renegotiation Board
1910 K Street, N.W.
Washington, D.C. 20446
Attention: Secretary to the Board, Mr. Nathan Bass
Subject: Renegotiation Proceedings
Grumman Aircraft Engineering Corporation
Fiscal Year ended December 31, 1965
Gentlemen:
This is to request review by the Board, pursuant to
RBR 1480.7(e), of the General Counsel’s decision under 5
U.S.C. § 552 communicated to us by letter of May 21,
1968.
The General Counsel states that our request of May 7,
1968, does not provide “a reasonably specific description
of particular records .. .” Inasmuch as we have copies
of all materials submitted by us to the Board in the
instant proceedings and copies of all communications by
the Board to us, the documents covered by our request are
all other documents in the above-captioned file, including,
for instance, reports received by the Board in the normal
course of its business from customers of the contractor.
In any event, we feel that our request of May 7, 1968, is
sufficiently specific to enable employees of t oard to
locate and make available for inspection and copying the
material in question.
Furthermore, your General Counsel has concluded that
the records we have requested “are, in whole or in part,
within the exemptions provided in 5 U.S.C. 552(b), par-
ticularly paragraphs (2) through (5), and in RBR 1408.9
(b).” Since the records we requested were apparently
sufficiently identifiable for him to have come to this con-
clusion, we are at a loss to comprehend the claim of lack
of specificity.
a |
e wee
Mga
RE Rt
Lee
RAT ER
18
In light of the foregoing, we urge that the documents
included in our request to the Board of May 7, 1968, be
made available for inspection and copying.
Very truly yours,
GRUMMAN AIRCRAFT ENGINEERING CORPORATION
JOHN F. CARR
|
secretary and General Counsel
JFC. eas
19
EXHIBIT “q”’
THE RENEGOTIATION BOARD
WASHINGTON, D.C. 20446
Registered mail
Return receipt requested
June 13, 1968
Bethpage
Long Island, New York 11714
Attention: John F. Carr, Esq.
Secretary and General Counsel
Subject: Renegotiation Proceedings
Grumman Aircraft Engineering Corporation
Fiscal Year ended December 31, 1965
Gentlemen:
Reference is made to your letter dated May 28, 1968,
in which you requested a review, pursuant to RBR 1480.7
(e), of the decision of the General Counsel of the Board
denying your request that the Board make certain infor-
mation available to you for inspection and copying, pursu-
ant to the provisions of 5 U.S.C. 552.
This will advise that the Board has upheld the decision
of the General Counsel as stated in his letter of May 21,
1968.
Very truly yours,
/s/ NATHAN Bass
Secretary to the Board
ce: Messrs. Gadsby, Maguire & Hannah
Washington, D.C. 20006
s Tae ee
20
MOTION FOR SUMMARY JUDGMENT
BY PLAINTIFF
Plaintiff moves the court as follows:
1. That it enter, pursuant to Rule 56 of the Federal
Rules of Civil Procedure, a summary judgment in plain-
tiff’s favor for the relief demanded in the Complaint on
the ground that there is no genuine issue as to any _ma-
tertal fact and that plaintiff is entitled to a judgment
as a matter of law;-
2. If summary judgment is not rendered in plaintiff’s
favor upon the whole case or for all the relief asked and
a trial is necessary, that the court, at the hearing on the
motion, by examining the pleadings and the evidence be-
fore it and by interrogating counsel, ascertain what ma-
terial facts are actually and in good faith controverted,
and thereupon make an order specifying the facts that
appear without substantial controversy and directing
such further proceedings in the action as are just. This
motion is based upon:
(a) The Complaint with attached Exhibits “A”
through “G”’,
(b) The supporting Affidavit of John F. Carr with at-
tached Exhibits “I” through “VIIY” filed herewith,
(c) The Statement of Material Facts As to Which
Plaintiff Contends There is no Genuine Issue filed here-
with.
(d) The Memorandum of Puints and Authorities in
Support of Motion for Summary Judgment with attached
Exhibits “A” through “C” filed herewith.
GADSBY & HANNAH
By: /s/ CHARLES W. COLSON
Attorneys for Plaintiff
21
AFFIDAVIT OF JOHN F. CARR
District of Columbia, ss.
John F. Carr, being first duly sworn according to law,
on oath deposes and says:
1. He is, and at all times hereinafter mentioned has
been, Secretary and General Counsel of Grumman Air-
crait Engineering Corporation.
2. As Secretary and General Counsel, deponent had
the responsibility on behalf of plaintiff herein for super-
vising the renegotiation proceedings instituted by defend-
ant herein against plaintiff herein for the fiscal year
ended December 31, 1965.
3. During the course of the proceedings referred to in
paragraph 2, above, your deponent, as Secretary and
General Counsel of plaintiff herein, mailed to the defend-
ant, herein, in the ordinary course of his duties, the let-
ters attached hereto and incorporated herein as Exhibits
“Ty”, bad hg and a8 Lda
4. During the course of the proceedings referred to in
paragraph 2, above, your deponent, as Secretary and
General Counsel of plaintiff herein, received from the de-
fendant herein, in the ordinary course of -his duties, the
letters attached hereto and incorporated herein as Ex-
hibits “II”, “III”, “V”, “VII” and “VITT’.
Further deponent sayeth nothing.
/s/ JOHN F. CARR
Subscribed and sworn to before me, a Notary Public
in and for the District of Columbia, this 6th day of
August, 1968.
/8s/ BONNIE PREVITE
Notary Public
My Commission expires: June 30, 1972
99
EXHIBIT “I” |
April 26, 1968
The Renegotiation Board
Washington, D.C. 20446
Attention: Mr. Nathan Bass, Secretary to the Board
Grumman Aircraft Engineering Corporation
Fiscal Year ended December 31, 1965
Gentlemen:
We are in receipt of your letter of April 15, 1968, ad-
vising us that the Renegotiation Board has determined
that this company realized excessive profits in the amount
of $7,500,000 for the fiscal year ended December 31,
1965.
Because of the Board’s adverse determination, it is ap-
parent that we in some way failed to address ourselves
in our appearance before the Board division assigned to
the case to the important points or matters in this case.
At the outset of our presentation before the division on
April 8, 1968, we stressed that no specific points for
presentation had been designated. Accordingly, we be-
lieve that the case has been prejudiced to our detriment
by the failure of the Board in its letter of February 9,
1968, to provide us with a Notice of Points for Presen-
tation as required by Sections 1472.4(¢c) and 1472.5 of
the Renegotiation Board Regulations.
We now request that the Board, in order to correct
this prejudicial procedural defect, comply with its regula-
tions and provide this company with a Notice of Points
for Presentation. Thereupon, we request that we be
given the opportunity for another meeting with the Board
division assigned to this case pursuant to Section 1472.4
‘c) of the Board’s regulations and that the Board there-
after proceed with this case in compliance with its reg-
ulations.
In the event of your denial of the aforementioned re
quest, we should like, in the alternative, to be provided
with a summary of the facts and reasons upon which
23
your determination of excessive profits is based pursuant
to Sections 1472.4(d) and 1477.3 of the Board’s regula-
tions in order to assist us in determining whether or not
we will enter into an agreement with the Board. In
light of the fact that we have not been given a Notice
of Points for Presentation, however, we are not in a
NG gy METS Rain tett
position—te—state—that re—have submitted all the evi-
dence believed to be relevant to the instant renegotiation
proceedings.
As requested by your letter, we enclose herewith a copy
of the face sheet of our New York State Franchise Tax
Return for such fiscal year together with our computa-
tion of the state tax credit applicable to the tentative
retained profits.
We also request, as further assistance in enabling us
to determine whether to enter into an agreement with the
Board, that, in accordance with 5 U.S.C. Section 552, the
Renegotiation Board make available for our inspection
and copying the final opinions, determinations, unilateral
orders, agreements, clearance notices and letters not to
proceed issued in the adjudication of renegotiation cases
for the renegotiable years 1962 through 1965 involving
the following companies: ;
Douglas Aircraft Company Martin Marietta Corporation
The Boeing Company General Dynamies Corporation
Lockheed Aircraft Corporation McDonnell Company
Ling-Temco-Vought, Ine. Northrop Corporation
North American Aviation, Inc. Bell Aerospace Corporation
Fairchild Hiller Corporation Litton Industries, Inc.
Republic Aviation Corporation Avco Corporation
In this connection, we also request that we be given ac-
cess to written summaries of the facts and reasons upon
which such final opinions, determinations, unilateral or-
ders and agreements jhave been reached.
24
In conclusion, we also request that we be provided with
the final vote of each Member of the Board in the in-
stant proceeding.
Very truly yours,
GRUMMAN AIRCRAFT ENGINEERING CORPORATION
/s/ JOHN F. CARR
Secretary and General Counsel
JFC:ms
25
EXHIBIT “II”
THE RENEGOTIATION BOARD
WASHINGTON, D.C. 20446
April 30, 1968
wengrg
ROARED Kenan omen
ats
Grumman Aircraft Engineering Corporation
Bethpage
Long Island, New York 11714
Attention: John F. Carr, Esq.
Secretary and General Counsel
Subject: Renegotiation Proceedings
Grumman. Aircraft Engineering Corporation
Fiscal Year ended December 31, 1965
Gentlemen:
The Board has received your letter of April 26, 1968,
directed to Mr. Nathan Bass, Secretary of the Board, in
which you make several requests in connection with the
above-entitled renegotiation proceedings. Included in your
letter was a request pursuant to the Freedom of Informa-
tion Act, 5 U.S.C. 552. That portion of your letter con-
taining such request has been referred to me pursuant
to section 1480.7(b) of this Board’s regulations.
You request that the Board make available to you, for
inspection and copying, “the final opinion, determinations,
unilateral orders, agreements, clearance notices and let-
ters not to proceed issued in the adjudication of rene
gotiation cases for the renegotiable years 1962 through
1965 involving the following companies: '
Douglas Aircraft Company Martin Marietta Corporation
The Boeing Company General Dynamics Corporation
Lockheed Aircraft Corporation McDonnell Company
Ling-Temco-Vought, Inc. Northrop Corporation
North American Aviation, Inc. Bell Aerospace Corporation
Fairchild Hiller Corporation Litton Industries, Inc.
Republic Aviation Corporation Avco Corporation
You also request that you be given access to “written
summaries of the facts and reasons upon which such final
26
opinions, determinations, unilateral orders and agree-
ments have been reached.” .
I have concluded that the records you request are sub-
ject to the exemptions set forth in 5 U.S.C. 552(b) (3)
and (4), and RBR 1480.9(a) (3) and (4). Further, the
Board has specifically determined that records of the
type requested in your letter are exempt. RBR 1480.9
(b) provides, in part, as follows:
(b) Certain records.—Without limiting the gener-
ality of the provisions of paragraph (a) of this sec-
tion, the following are exempt:
* * * *
(3) Determinations, unilateral] orders, agreements,
clearance notices, and letters not to proceed (see
Part 1498 of this subchapter).
Your letter also requests that you be provided with the
final vote of each member of the Board in the proceeding
with your company. This request, too, is denied: the ex-
emptions cited above are also applicable to the voting
records of Board members with respect to exempt mat-
ters. See RBR 1490.8. Notwithstanding the foregoing,
the Board vote in your case will be furnished by separate
letter from the Secretary of the Board, but outside the
framework of the Freedom of Information Act.
You are hereby advised, pursuant to RBR 1480.7 (d),
that your request for access to records of the Board, as
set forth in your letter of April 26, 1968, is denied. Your
attention is directed to the provisions of RBR 1480.7 (e),
providing for review by the Board of this decision if a
written request therefor is made to the Secretary of the
Board within 20 days after the date of this letter.
Verv truly yours,
/S/ HOWARD W. FENSTERSTOCK
General Counsel]
27
EXHIBIT “III”
THE RENEGOTIATION BOARD
WASHINGTON, D.C. 20446
Roagictona] wea:
SVE STSTCTeU matt
Return receipt requested
May 21, 1968
Grumman Aircraft Engineering Corporation
Bethpage
Long Island, New York 11714
Attention: John F. Carr, Esq.
Secretary and General Counsel
Subject: Renegotiation Proceedings
Grumman Aircraft Engineering Corporation
Fiscal Year ended December 31, 1965
Gentlemen:
By letter dated May 7, 1968, you protest the action of
the General Counsel, in his letter dated April 30, 1968,
denying your request for access to certain information
under 5 U.S.C. 552.
Pursuant to RBR 1480.7(e), the Board has reviewed
the action of the General Counsel.
In the judgment of the Board, the records you have
requested are exempt under the provisions of 5 U.S.C.
552(b), particularly paragraphs (3), (4), and (5) there-
of. See RBR 1480.9(a). Specifically, certain of such
records are within the exemption provided in RBR 1480-
.9(b) (3).
Senne
28
The Board accordingly has upheld the action of the
General Counsel and has decided that the records re-
quested in your letter will not be made available to you
for inspection and copying.
Very truly yours,
/8/ NATHAN Bass
Secretary to the Board
ee: Charles W. Colson, Esq.
Messrs. Gadsby, Maguire & Hannahe
Washington, D. C. 20006
29
EXHIBIT “Iv”
GRUMMAN AIRCRAFT ENGINEERING CORPORATION
BETHPAGE, LONG ISLAND, NEW YORK 11714
Pr
John F. Carr, Secretary and General Counsel
Cable Address: Grumair
May 7, 1968
The Renegotiation Board
1910 K Street, N.W.
Washington, D. C. 20446
Attention: Secretary of the Board, Mr. Nathan Bass
Subject: | Renegotiation Proceedings
“Grumman Aircraft Engineering Corporation
Fiscal Year ended December 31, 1965
Gentlemen:
Pursuant to 5 U.S.C. Section 552, we request that all
of the reports, correspondence, and data contained in or
constituting the files of the Eastern Regional Renegotia-
tion Board and of The Renegotiation Board of the United
States in connection with the renegotiation of Grumman
Aircraft Engineering Corporation for the year 1965 be
made available for inspection and copying,
Very truly yours,
GRUMMAN AIRCRAFT ENGINEERING CORPORATION
JOHN F. Carr
Secretary and General Counsel
JFC:c
4
ee eee eee’
—
ia
Berea: See She Pere eee {hese Se pepe:
30
EXHIBIT “Vv”
THE RENEGOTIATION BOARD
WASHINGTON, D.C. 20446
'. Sn ce
Registered mail
Return receipt requested
May 21, 1968
Grumman Aircraft Engineering Corporation
Bethpage
Long Island, New York 11714
Attention: John F. Carr, Esq.
Secretary and General Counsel
Subject: Renegotiation Proceedings
. Grumman Aircraft Engineering Corporation
Fiscal Year ended December 31, 1965
Gentlemen:
By letter dated May 7, 1968, you have requested that
the Board make available to you, for inspection amd copy-
ing, pursuant to 5 U.S.C. 552, “all of the reports, cor-
respondence, and data contained in or constituting the
files of the Eastern Regional Renegotiation Board and of
The Renegotiation Board of the United States in con-
nection with the renegotiation of Grumman Aircraft En-
gineering Corporation for the year 1965,” Pursuant to
RBR 1480.7, your request has been referred to me.
RBR 1480.6(b) provides that a person who requests
access to an identifiable record must provide a reasonably
specific description of the particular record sought, and
that the Board will not comply with a request that does
not provide a sufficient description or with a general or
blanket request.
In my opinion, you have not provided a reasonably spe-
cific description of particular records; rather, your re-
quest constitutes a general or blanket request for all
files of the Board relating to the above-entitled pro-
ceeding, Further, I have concluded that the records you
31
request are, in whole or in part, within the exemptions
provided in 5 U.S.C. 552(b), particularly (2) through
(5), and in RBR 1480.9(b).
Your request, therefore, is denied. I call your attention
this decision if a written request therefor is made to the |
Secretary of the Board within 20 days after the date of
this letter.
Very truly yours,
/8/ HOWARD W. FENSTERSTOCK _ &§
General Counsel
HER,
ce: Charles W. Colson, Esq.
Messrs. Gadsby, Maguire & Hannah
Washington, D. C. 20006
bd
SFL tr EH
EAE T Oe PS g*
ea Se kee
} 32
EXHIBIT “VI”
GRUMMAN AIRCRAFT ENGINEERING CORPORATION
BETHPAGE, LONG ISLAND, NEW YORK 11714
Cable Address: Grumair
May 28, 1968
The Reneggtiation Board
1910 K Street, N.W.
Washington, D.C. 20446
Aitention: Mr. Nathan Bass, Secretary to the Board
Subject: Renegotiation Proceedings
Grumman Aircraft Engineering Corporation
Fiscal Year Ended December 31, 1965
Gentlemen:
This is to request review by the Board, pursuant to
RBR 1480.7(e), of the General Counsel’s decision under
5 U.S.C. $ 552 communicated to us by letter of May 21,
1968.
The General Counsel states that our request of May 7,
1968, does not provide “‘a reasonably specific description
of particular records . . .” Inasmuch as we have copies
of all materials submitted by us to the Board in the instant
proceedings and copies of all communications by the Board
to us, the documents covered by our request are all other -
documents in the above-captioned file, including, for in-
stance, reports received by the Board in the normal course
of its business from customers of the contractor. In any
event, we feel that our request of May 7, 1968, is suffi-
ciently specific to enable employees of the Board to locate
and make available for inspection and copying the ma-
terial ip question.
Furthermore, your General Counsel has concluded that
the records we have requested “are, in whole or in part,
within the exemptions provided in 5 U.S.C. 552(b), par-
ticularly paragraphs (2) through (5), and in RBR 1480.9
(b).” Since the records we requested were apparently
sufficiently identifiable for him to have come to this con-
33
clusion, we are at a loss to comprehend .the claim of
lack of specificity.
In light of the foregoing, we urge that the documents
included in our request to the Board of May 7, 1968, be
made available for inspection and copying.
Very truly yours,
GRUMMAN AIRCRAFT ENGINEERING CORPORATION
/s/ JOHN F. CARR
Secretary and Genéral Counsel
JFC/eas
ERLE EP REES
34
EXHIBIT “VII”
THE RENEGOTIATION BOARD
WASHINGTON, D.C. 20446
Registered mail
Return receipt requested
June 138, 1968
Grumman Aircraft Engineering Corporation
Bethpage
Long Island, New York 11714
Attention: John F. Carr, Esq.
Secretary and General Counsel
Subject: Renegotiation Proceedings
Grumman Aircraft Engineering Corporation
Fiscal Year Ended December 31, 1965
Gentlemen:
Reference is made to your letter dated May 28, 1968,
in which you requested a review, pursuant to RBR 1480.7
(e), of the decision of the General Counsel of the Board
denying your request that the Board make certain in-
formation available to you for inspection and copying,
pursuant to the provisions of 5 U.S.C. 552.
This will advise that the Board has upheld the decision
of the General Counsel as stated in his letter of May 21,
1968.
Very truly yours, .
/8/ NATHAN BAss .
Secretary to the Board
ce: Messrs. Gadsby, Maguire & Hannah
Washington, D.C. 20006
35
EXHIBIT “VII”
THE RENEGOTIATION BOARD
1910 K STREET, N.W.
WASHINGTON, D.C. 20446
STATEMENTS OF FACTS AND REASONS
Grumman Aircraft Engineering Corporation
Renegotiation Proceedings
Fiscal Year Ended December 31, 1965
I. DETERMINATION
As a result of renegotiation under the Renegotiation
Act of 1951, as amended, The Renegotiation Board has
determined that Grumman Aircraft Engineering Corpora-
tion (“the contractor”) realized excessive profits in the
amount of $7,500,000 (subject to appropriate adjustment,
if any, for State income taxes) which should be eliminated
pursuant to the Act. In eliminating this amount, the con-
tractor will be allowed, under Section 1481 of the Internal
Revenue Code of 1954, a credit for Federal income taxes
paid on the excessive profits to be eliminated. An order
embodying the Board’s determination was dated, issued
and entered on May 21, 1968.
II. INTRODUCTION
The Eastern Regional Renegotiation Board on October
26, 1967 determined that the contractor realized excessive
profits in the amount of $7,500,000 and so notified the
contractor. Since the contractor declined to enter into an
agreement, the case was reassigned by the statutory Board
to itself.
A division of the Board visited the contractor’s plants
at Bethpage and Peconic, Long Island, in March, and
on April 8, 1968 the division met with the contractor.
Prior to such meeting, and pursuant to RBR 1472.5, the
Po RR hep ays
| oe TRA IIIS Tree cascH BpepES
36
contractor was furnished a Notice of Points for Presenta-
tion.
By contract types, the contractor’s review year renego-
tiable sales and profits were as follows (000’s omitted) :
. Fixed Fixed Price
1965 Price Incentive CPFF CPIF Total*
$ $ $ . $ $
Sales 202,313 252,788 245,085 113,531 813,717
Profit 21,685 12,509 13,758 4,812 52,764
% 10.7 4.9 5.6 4.2) 6.5
* Does not include no-fee facility contract billings of $48,000.
Special Matters
RBR 1477.4(e) provides that if any material issues of
law or accounting have been raised in a renegotiation pro-
ceeding and have not previously been resolved with the
contractor, such issues, and the disposition thereof, will be
stated together with the reasons for such disposition.
Allocability of Commercial Research and Development
Expense
For a number of years, the contractor has contended
that part of its expenses for commercial research and
development should be alloacted to renegotiable business
under the provisions of RBR 1459.8 (e) (2) (ii) ; the review
year expenses in question relate to the development of the
Gulfstream II airplane.
On the basis of the evidence available to it, the Board
is of the opinion that the Gulfstream was conceived and
developed as a commercial venture with, perhaps, vague
hopes of some sales to the Government. In fact, the con-
tractor has consistently described the aircraft as a com-
mercial venture and in its 1965 Annual Report to stock-
holders referred to the Gulfstream II as “. . . the world’s
fastest, longest-range aircraft designed exclusively for
corporate use.” Furthermore, as late as August 29, 1967,
the contractor in a prospectus continued to classify the
Gulfstream planes, both I and II, under the general head-
ing of commercial products.
37
In view of the foregoing, the Board has refused to allo-
cate any part of the commercial research and development
expenses in question to renegotiable business as such costs
do not qualify under RBR 1459.8 (e) (2) (ii).
III. STATUTORY FACTORS
Character of Business
Contractor, for many years, has been a major designer,
developer, and manufacturer of military aircraft, prin-
cipally for the U.S. Navy. In addition, it has, as a prime
contractor, had the responsibilities of a weapons system
manager. In more recent years, including the review
year, it has become a systems manager for aerospace
vehicles for the National Aviation and Space Adminis-
tration.
Navy prime contracts in the review year included:
A-6A Intruder, an all-weather jet attack plane
E-2A Hawkeye, an early warning plane
C-2A, a turboprop transport
S-2E Tracker, carrier-based antisubmarine plane
OV-1 Mohawk STOL, observation and reconnaissance
plane
Major prime contracts for space projects included the
Orbiting Astronomical Observatory and the Lunar Module
for the Apollo moon landing. In addition, the contractor
was a major subcontractor to General Dynamics for the
F-111 fighter plane.
The major sales categories, which in the review year
accounted for 95% of the renegotiable sales, were as
follows (000’s omitted) : ;
Space (OAO and LM) $336,970
Navy planes and spares 352,832
F-111 pregram 87,480
$777,282
Renegotiable material costs, subcontracting, and items
described by the contractor as direct charges, on an input
basis, totaled $428,594,000, the equivalent of 64% of
ELEAF LIMIT II He AOI 4
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38
manufacturing cost input as compared to $329,902,000,
or 62% in the prior year.
In summary, contractor was a weapons system manager
responsible for developing the system and for the success-
ful mating of all components. In its aircraft programs, it
generally manufactured the fuselage, the landing gear and
airframe, while engines, wheels, brakes, propulsion and
navigational equipment were either furnished by the Gov-
ernment or purchased from others. The estimated cost of
Government-furnished material, not included in either
sales or costs, was $86.3 million.
The majority of the aircraft as well as the spacecraft
programs, were continuing, or follow-on from prior years.
Also, as in prior years, the contractor continued its efforts
to advance the state-of-the-art in its major areas.
The complex nature of the contractor’s review year
products has been recognized by the Board but the con-
tractor has not been considered as a highly integrated
producer.
Extent of Risk Assumed
Approximately 25% of the renegotiable sales were under
firm fixed-price contracts, primarily for the OV, A-6A,
E-2A, and S-2E planes, all of which represented continu-
ing programs. The A-6A and the E-2A were produced
under fixed-price incentive contracts. The fixed-price in-
centive review year sales, amounting to approximately
31% of renegotiable business, were, except for the F-111,
also continuation programs. Although the F-111 program
was started in a prior year, it was still in a development
stage in the review year. Risk in this program was
reduced by 2 clause (not invoked) in the subcontract
under which the prime contractor agreed to reimburse
the contractor up to a certain amount if the estimated
costs proved to be too low and no follow-on orders were
received. The balance of 44% of cost-type contracts
carried minimal pricing risks, but did involve considerable
technical risks because of the unknowns in the OAO and
LM programs and the ever present possibility of termina-
tion. In October 1965, the CPFF contract for the LM
was converted to a CPIF contract.
39
In view of the substantial amount of follow-on work and
the increasing use of comparatively riskless, cost-type
contracts, the Board is of the opinion that contractor
experienced no unusual risks in the review year.
Contribution to the Defense Effort
The success of the A-6A in combat areas and the favor-
able progress of the LM were examples of contribution to
the defense effort, even though part of the development
may have been accomplishd in years prior to the review
period. It is also recognized that some scientific advances
from these and other development programs have been
made available to other research centers. In the opinion
of the Board, the contractor is entitled to moderate con-
sideration under this factor.
Capital Employed
In arguing that its 1965 renegotiable profits were not
excessive, the contractor has stressed its increased invest-
ment in additional facilities, as related to net income and
as compared with the decreasing Government expenditures
for facilities; the increasing extent to which short-term
and long-term debt was used to finance overall operation;
and, the return on allocated, beginning capital empioyed
when compared to the returns in earlier years, after
determinations.
The contractor has during its entire corporate existence
specialized in defense work for the Government; in its
early years, the bulk of its facilities were Government-
furnished. In more recent years, the contractor has as-
sumed greater responsibility for capital investments with
the result that the increase in debt did impose more risk
on the contractor’s equity.
The increase in facilities did enable the ccntractor, with
material help from the Government and its vendors, to
increase its defense production, bringing with such in-
crease vastly expanded renegotiable profits. The result’
in the review year was a return on beginning-of-the-year
allocated net worth of 81%, a rate which, in the opinion
eRe tore ata tet tare ae ee i
40
of the Board, clearly indicates the presence of excessive
profits.
Significant Government capital assistance, without
which the renegotiable volume of over $800 million could
not have been attained, consisted of progress payments
at the beginning of the year of approximately $140 million
under fixed-price and fixed-price incentive contracts and
Government-owned facilities of approximately $61 mil-
lion. Furthermore, 44% of the review year renegotiable
sales were under comparatively riskless, rapid-pay type
contracts that put no great. financial burden on the con-
tractor.
Efficiency
From the information available to it, including personal
observations at the contractor’s plants, the Board is satis-
fied that the contractor’s review year operations were con-
ducted in a reasonably efficient manner, due in part to
relatively high labor productivity. A low labor turnover
rate was experienced. Nevertheless, the Board has re-
ceived some reports of late deliveries. On balance, in the
Board’s opinion, the contractor is not entitled to excep- .
tional consideration under RBR 1460.9.
Reasonableness of Costs and Profits
Costs
Although there were some overruns in the review year,
on an overal basis it has been concluded that, at best, the
contractor can be classified as an average cost producer.
Profits
Review year renegotiable sales were at an all-time hig
greatly exceeding the volume in any prior year. They in
creased substantially over 1964. At the same time renego-
tiable profits increased at a much faster rate. This is
shown by the following table:
4l
Sales Profits %
1965 $813,717 $52,764 6.5
1964 552,732 20,109 3.6
Increment $260,985 $32,655 12.5
Thus an increase of 47% in sales was accompanied by
an increase of 162% in the profits, and the profit margin
on the incremental sales far exceeded the overall rate for
1964. Indeed, the profits on the incremental sales ex-
ceeded the contractor’s total profits in any prior year in
its history.
In our opinion, renegotiable profits of nearly $53 mil-
lion are clearly unreasonable after full credit is given for
all favorable factors such as developmental contribution,
increased investment in plant, and added risks to equity.
~ Consequently, the margin of profit must be adjusted as
provided in RBR 1460.10(b) (3). The Board’s determina-
tion fully and adequately recognizes the review year ef-
forts of the contractor.
IV. CONCLUSION
Evaluating the foregoing under the several statutory
factors, the Board has determined that the contractor
realized excessive profits of $7.5 million during its fiscal
year ended December 31, 1965. The effect of the de-
termination is that the contractor will retain renegotiable
profits of $45,264,088 on adjusted renegotiable sales .of
$606,265,029, or 5.6%; and will have adjusted returns of
21.2% and 69.5% on allocated capital employed and net
worthy respectively.
/s/ NATHAN BASS
Secretary to the Board
* * * *
+e ee
SEY AEST R NARI:
is
42
STATEMENT OF MATERIAL FACTs AS TO WHICH PLAINTIFF
CONTENDS THERE Is No GENUINE ISSUE
Set forth below are the material facts as to which
plaintiff contends there is no genuine issue.
1. Plaintiff is a New York City Corporation with its
principal offices in Bethpage, Long Island, New York.
2. Defendant is an agency of the United States of
America with its principal office in the District of
Columbia.
3. By letter dated April 26, 1968, plaintiff requested
that defendant make available for inspection and copying,
the final opinions, determinations, unilateral orders, agree-
ments, clearance notices and letters not to proceed issued
in the adjudication of renegotiation cases for the rene-
gotiable years 1962 through 1965 involving the following
companies:
Douglas Aircraft Company Martin Marietta Corporation
The Boeing Company General Dynamics Corporation
Lockheed Aircraft Corporation McDonnell Company
Ling-Temco-Vought, Inc. Northrop Corporation
North American Aviation, Inc. Bell Aerospace Corporation
Fairchild Hiller Corporation Litton Industries, Inc.
Republic Aviation Corporation Avco Corporation
In this connection, we also request that we be given
access to written summaries of the facts and reasons upon
which such final opinions, determinations, unilateral or-
ders and agreements have been reached.
4. By letter dated April 30, 1968, defendant, by its
General Counsel, Howard W. Fensterstock, refused to
make available for inspection and copying by plaintiff the
documents specified in paragraph 3, above. |
5. By letter dated May 7, 1968, plaintiff requested that
defendant review the General Counsel’s refusal to furnish
plaintiff with the documents specified in paragraph 3,
above.
6. By letter dated May 21, 1968, defendant upheld the
action of the General Counsel and thereby refused to fur
nish plaintiff-with the documents specified in paragraph
3, above.
\
43
7. Said refusal constituted final action by defendant
with respect to plaintiff’s request.
8. By letter dated May 7, 1968, plaintiff requested that:
all of the reports, correspondence, and data contained
in or constituting the files of the Eastern Regional!
Renegotiation Board and of The Renegotiation Board
of the United States in connection with the renegoti-
ation of Grumman Aircraft Engineering Corporation
for the year 1965 be made available for inspection
and copying.
9. By letter dated May 21, 1968, defendant, by its
General. Counsel, Howard W. Fensterstock, refused to
. make available for inspection and copying by plaintiff the
documents specified in paragraph 8, above.
10. By letter dated May 28, 1968, plaintiff requested
that defendant review the General Counsel’s refusal to
furnish plaintiff with the documents specified in para-
graph 8, above.
11. By letter dated June 13, 1968, defendant upheld the
action of the General Counsel] and thereby refused to fur-
nish plaintiff with the documents specified in paragraph
8; above. ;
12. Said refusal constituted final action by defendant
with respect to plaintiff’s request.
* * * *
prices charged under the same contracts. This, of course,
is acceptable evidence of the voluntary refunds and volun-
tary price reductions.
11. There are also instances where contractors state it
is their general policy to make price reductions in order
- to maintain a set level of profit on the company’s con-
tracts with the Government Defense and Space Agencies.
. AE RPA RE es, ih
44
OPPOSITION TO PLAINTIFF’S MOTION FOR
SUMMARY JUDGMENT
Comes now the defendant, by its undersigned attorneys,
and respectfully opposes plaintiff’s Motion for Summary
Judgment on the grounds that there is no dispute as to
any material facts and defendants are entitled to judg-
ment as a matter of law.
In support of this opposition, the Court is respectfully
referred to the defendant’s Motion to Dismiss or for
Summary Judgment filed concurrently herewith, the Af-
fidavit attached thereto, and the Memorandum of Points
and Authorities in Support Thereof.
Respectfully submitted,
EDWIN L. WEISL, Jr.
Assistant Attorney General
HARLAND F. LEATHERS
IRWIN GOLDBLOOM
Attorneys, Department of Justice
Attorneys for Defendants
* * * *
45
DEFENDANT’S MOTION TO DISMISS OR IN THE
ALTERNATIVE FOR SUMMARY JUDGMENT
Comes now defendant, by its undersigned attorneys,
and respectfully moves the Court, pursuant to Rules 12
and 56, F.R.Civ.P., for a dismissal of the action or for
summary judgment on the grounds that there is no
genuine issue as to any material fact and defendant is
entitled to judgment as a matter of law since the records
as to which access is requested are exempt from disclosure
under 5 U.S.C. 552(b) (3) (4) and (5).
In support of these motions, the Court is respectfully
referred to the Affidavit of Lawrence E. Hartwig, at-
tached hereto, the Statement of Material Facts As to
Which There Is No Genuine Issue, and the Memorandum
of Points and Authorities filed herewith.
Respectfully submitted,
EDWIN L. WEISL, JR.
Assistant Attorney General
HARLAND F. LEATHERS
IRWIN GOLDBLOOM
Attorneys, Department of Justice
Attorneys for Defendants
NSE ER, PT
& PEED
pete
46
AFFIDAVIT
LAWRENCE E. HARTWIG, being first duly sworn, on oath
deposes and says:
1. I am the Chairman of the Renegotiation Board and
as such I am familiar with the files and records of such
Board concerning the renegotiation proceedings of the
Grumman Aircraft Engineering Corporation for its fiscal
year ended December 31, 1965. Such files and records in-
clude the records of the Eastern Regional Renegotiation
Board.
2. All of the correspondence between the Grumman Air-
craft Engineering Corporation (hereinafter sometimes re-
ferred to as “Grumman’”) and the Renegotiation Board
with respect to Grumman’s request for access to records
under 5 U.S.C. 552 is attached to plaintiff's complaint in
Civil No, 1595-68 as Exhibits A through G.
3. I have examined the Board’s files and records con-
cerning the renegotiation proceedings of Grumman for
its fiseal year ended December 31, 1965. The documents
contained in such records and files fall into the follow-
ing four categories:
A. Letters and documents submitted by Grumman
to the Renegotiation Board regarding renegotiation
proceedings for Grumman’s fiscal year ended Decem-
ber 31, 1965, communications from the Renegotia-
tion Board and its personnel to Grumman concern-
ing renegotiation proceedings for Grumman’s fiscal
year- ended December 31, 1965, and inter-agency
communications relating to the establishment of a
tax credit in connection with the determination of
excessive profits for Grumman’s fiscal year ended
December 31, 1965. Access to the foregoing records
is not in dispute. Grumman has specifically indi-
cated that its request did not relate to material sub-
mitted by Grumman to the Board or communications
from the Board to Grumman.” (See Complaint, Ex.
F.) The documents in this category are, however,
available to Grumman if it desires to examine them.
47
B. Inter-departmental and inter-agency communi-
cations between the Renegotiation Board and other
governmental agencies and Departments with re-
spect to the performance by Grumman of its re-
negotiable business for its fiscal year ended De-
cember 31, 1965.
C. Communications between the Renegotiation
Board and a customer of Grumman with respect to
the performance by Grumman of its renegotiable
business for its fiscal year ended December 31, 1965.
D. Intra-agency memoranda and communications
consisting of advisory opinions, conclusions, recom-
mendations, deliberations and analyses prepared by
personnel and members of the Renegotiation Board
in the performance of the decision-making process
of the Renegotiation Board in carrying out its duties
under the Renegotiation Act of 1951, as amended,
with respect to renegotiation proceedings regarding
Grumman’s fiscal year ended December 31, 1965.
4. By its letter dated April 26, 1968, to the Renego-
tiation Board (Exhibit A to complaint), Grumman re-
quested that the Board make available “the final opinions,
determinations, unilateral orders, agreements, clearance
notices and letters not to proceed issued in the adjudica-
tion of cases for the renegotiable years 1962 through
1965” of 14 corporations other than Grumman. Such
letter also requested s written summaries of the
facts and reasons upén which such final opinions, deter-
minations, unilatera} orders and agreements were reached.
To the extent such’.documents are contained in the files
of the Renegotiation Board for such 14 corporations,
the records contain information relating to income, prof-
its, losses or expenditures of “such corporations and the
source thereof and may include information relating to
trade secrets, processes, operations, and style of work
of the various corporations. Such information has al-
ways been considered and treated by the Renegotiation
Board as confidential information submitted by contract-
~ ors subject to the Renegotiation-Act of 1951, and the Re-
negotiation Board has always dealt with contractors on
s
ery See
ay TTR ES
CUPS EIN weg.
RP RAR SOM spas: Pome ay Re gem sy
48
the basis that financial information and information con-
cerning their operations would be treated as confidential.
Prior to the recent amendments (June 29, 1967, 32 FR.
9226) of the Board’s regulations governing the Avail-
ability and Control of Renegotiation Records and In-
formation which were made in the implementation of
the provisions of 5 U.S.C. 552, the regulations of the
Renegotiation Board always provided that information
and records of the nature described above in this para-
graph were regarded and treated as confidential (Re-
negotiation Board Regulation, Part 1480, as issued March
25, 1952, 17 F.R. 2542, as amended, March 11, 1954, 19
F.R. 1370).
/8/ LAWRENCE E. HARTWIG
Subscribed and sworn to before me, a notary public in
and for the District of Columbia, on this 23rd day of
August, 1968.
/s/ JULIA S. MASKIE
Notary Public
My commission expires Sentember 30, 1971.
rs
49
STATEMENT OF MATERIAL FACTS AS TO WHICH
DEFENDANT CONTENDS THERE IS NO
GENUINE ISSUE
Set forth below are the material facts as to which the
defendants contends there is no genuine issue.
1. Plaintiff is the Grumman Aircraft Engineering Cor-
poration. In the course of renegotiation proceedings be-
ing conducted by the Renegotiation Board for Grum-
man’s fiscal year ended December 31, 1965, Grumman re-
quested access to records of the Board concerning the
final opinions, determinations, unilateral orders, agree-
ments, clearance notices of letters not to proceed issued
in the adjudication of renegotiation cases for the re-
negotiable years 1962 through 1965 involving the follow-
ing companies:
Douglas Aircraft Company Martin Marietta Corporation °
The Boeing Company General Dynamics Corporation
Lockheed Aircraft Corporation McDonncil Company
Ling-Temco-Vought, Inc. Northrop Corporation
North American Aviation, Inc. Bell Ae~ospace Corporation
Fairchild Hiller Corporation Litton Industries, Inc.
Republic Aviation Corporation Avco Corporation
This request was contained in a letter to the Board dated
April 26, 1968 (Exhibit A to Complaint).
2. Thereafter, by letter of May 7,. 1968, Grumman
also requested access to:
all of the reports, correspondence, and data con-
tained in or constituting the files of Eastern Re
gional Renegotiation Board and of the Renegotia-
tion Board of the United States in connection with
the renegotiation for Grumman Aircraft Engineer-
ing Corporation for the year 1965 . . . [Exhibit D
to Complaint].
3. By its letter of May 28, 1968 (Exhibit F to Com-
plaint), Grumman clarified its request to the Board by
stating that its request for access to the Board’s files
did not relate to materials submitted by Grumman to
the Board in connection with the renegotiation proceed-
ings or to materials and communications from the Board
to Grumman.
EF
SEE ORS ta mp, eh ia
PENTA A AROSE Raper an pte
Cie oe he eee
WEress
TG;
Bere esc iigece Posner erctnan omnis ge -ciare
50
4. By letters dated May 21, 1968, and June 13, 1968
(Exhibits C and G to Complaint), the Renegotiation
Board advised plaintiff that its requests for access to
records had been denied on the grounds that the records
requested are exempt from disclosure under the provi-
sions of 5 U.S.C. 552(b) (83), (4), and (5) and applicable
regulations of the Renegotiation Board.
5. The files and records of the Renegotiation Board
concerning renegotiation proceedings for Grumman’s 1965
fiscal year contain documents which fall into the follow-
ing categories (Hartwig’s Affidavit) :
A. Letters and documents submitted by Grumman
to the Renegotiation Board regarding renegotiation
proceedings for Grumman’s fiscal year ended Decem-
ber 31, 1965, communications from the Renegotia-
tion Board and its personnel to Grumman concern-
ing renegotiation proceedings for Grumman’s fiscal
year ended December 31, 1965, and inter-agency com-
munications relating to the establishment of a tax
credit in connection with the determination of ex-
cessive profits for Grumman’s fiscal year ended De-
cember 31, 1965.
Access to the foregoir:g documents is nof’ in dispute.
B. Inter-departmental and inter-agency communi-.
cations between the Renegotiation Board and other
governmental agencies and Departments with re-
spect to the performance by Grumman of its re-
negotiable business for its fiscal year ended De-
cember 31, 1965.
C. Communications between the Renegotiation
Board and a customer of Grumman with respect to
the performance by Grumman of its renegotiable
business for its fiscal year ended December 31, 1965.
D. Intra-agency memoranda and communications
consisting of advisory opinions, conclusions, recom-
mendations, deliberations and analyses prepared by
personnel and members of the Renegotiation Board
in the performance of the decision-making process of
the Renegotiation Board in carrying out its duties
51
under the Renegotiation Act of 1951, as amended,
with respect to renegotiation proceedings regarding
Grumman’s fiscal year ended December 31, 1965.
6. With respect to Grumman’s request for documents
contained in Renegotiation Board files regarding the 14
other corporations, to the extent such documents are in
the files of the Board, the records contain information
relating to income, profits, ldsses or expenditure of such
corporations and the source thereof and may include in-
formation relating to trade secrets, processes, operations,
and style of work of the various corporations (Hartwig
Affidavit, para. 4).
Respectfully submitted,
EDWIN L. WEISL, JR.
Assistant Attorney General
HARLAND F. LEATHERS
IRWIN GOLDBLOOM
Attorneys,
Department of Justice
Attorneys for Defendant
e
5la
ORDER
This matter having come before the Court on plain-
tiff’s motion for summary judgment and defendant’s
cross-motion for summary judgment, and the Court hav-
ing considered the pleadings, affidavits and memorandum
of points and authorities filed herein, having heard argu-
ment of counsel, having found there is no genuine issue
of fact to be submitted to the Court and having decided
that defendant is entitled to judgment as a matter of
law, it is 4th day of November, 1968,
ORDERED AND ADJUDGED that:
Plaintiff’s motion for summary judgment be and hereby
is demed, and
Defendant’s motion for summary judgment be and
hereby is granted.
(Signedi Howarp F. Corcoran
Judge
51b
NOTICE OF APPEAL
Notice is hereby given that Grumman Aircraft Engi-
neering Corporation, plaintiff above named, hereby ap-
peals to the United States Court of Appeals-for the Dis- .
trict of Columbia Circuit from the order granting de-
fendant’s. motion for summary judgment and denying
plaintiff’s motion for summary judgment entered in this
action on the 4th day of November, 1968. .
December 5, 1968.
GADSBY AND HANNAH
/s/ CHARLES W. COLSON
Charles W. Colson
and
‘s’ Tom M. SCHAUMBERG
Tom M. Schaumberg
1700 Pennsylvania Ave., N.W.
Washington, D. C. 20006
Attorneys for Grumman
Aireraft Engineering
Corporation
Se | eterna
ereoiay
nai?
Bix Rept: ASS
52
GRUMMAN AIRCRAFT ENGINEERING CORPORATION,
APPELLANT
V.
THE RENEGOTIATION BOARD
No. 22635
United States Court of Appeals
District of Columbia Circuit
Argued Oct. 2, 1969
Decided March 10; 1970
* * * *
Before BAZELON, Chief Judge, and WRIGHT and
ROBINSON, Circuit Judges.
BAZELON, Chief Judge.
This is an appeal from a summary judgment refusing
to order production of documents under the Freedom of
Information Act.' The issue in the case is the scope of
the statutory exemption for confidential information fur-
nished to a federal administrative agency. Appellant,
an aerospace contractor, seeks an order compelling the
Renegotiation Board to produce (1) the orders and opin-
ions* issued during the renegotiation of the contracts
of fourteen companies during the years 1962 to 1965,
‘5 U.S.C. § 552 (Supp. IV, 1969).
*The phrase “orders and opinions” is employed here to en-
compass the “final opinions, determinations, unilateral orders, agree-
ments, clearance notices and letters not to proceed which appellant
requested from the Board. See 32 C.F.R. § 1480.8 (1967); 5 U.SC.
§551(6) (Supp. IV, 1969). In addition to the “Statement of Facts
and Reasons” provided by the Board pursuant to 50 App. U.S.C.
§ 1215(a) (1964), the term “opinion” may also include appellant’s
request for the “summaries of facts and reasons” on which other
“unilateral orders and agreements” are based. As the record now
before us does not adequately describe these “summaries,” it will
be for the District Court on remand to determine whether they
have the status of final agency opinions.
53
and (2) certain documents relating to Grumman’s own
renegotiation for 1965. The Board contends that the docu-
ments are exempt from disclosure because they contain
trade secrets and other confidential information. The
court below granted the Board’s motion for summary
judgment, without opinion. We conclude that the statute
does not render the documents completely immune from
disclosure. Accordingly, we reverse the District Court’s
judgment and remand for further proceedings to deter-
mine which documents (or parts thereof) are available
to appellant under the Act.
I.
[1] The Board has always regarded its opinions and
orders as confidential and therefore not subject to re-
lease under section 3 of the Administrative Procedure
Act.* The authority for such a blanket denial of access
to orders and opinions was removed by the Freedom of
Information Act, which took effect on July 4, 1967.
Government agencies are now required to make available
to the public their “final opinions, including concurring
and dissenting opinions, as well as orders.’ *
[2-5] The Board contends, however, that the opinions
and orders in question are exempted from the Act’s broad
disclosure requirements because they include data sub-
mitted “in confidence” to the Board by defense contractors.
The Board’s argument is grounded in the statutory ex-
’ The Board’s operations are excluded from the requirements of
all parts of the APA except section 3. 50 App. U.S.C. § 1221 (1964).
Section 3 formerly permitted nondisclosure of orders and opinions
which were “required for good cause to be held confidential.” 5
U.S.C. § 1002(b) (1964). The Board imparted secrecy to all its
orders and opinions by employing the presumption that, as a matter
of law, they all came within this exception. 32 C.F.R. § 1480.8
(1967); 17 Fed. Reg. 2542 (1952).
45 U.S.C. § 652(a) (2) (A) (Supp. IV, 1969). Cf. 32 C.F.R.
§ 1480.5 (1969). The reason for requiring concurring and dissent-
ing, as well as majority, opinions to be made public was that “five
agencies—including * * * the Renegotiation Board—do not make
public the minority views of their members,” although the public is
entitled to know the opinions of all agency members. H.R. Rep. No.
1497, 89th Cong., 2d Sess. 8 (1966).
ie Sk |
PEPSI, pobre aah a Oe 5: ae: Syprwetanan REE . iz
wey
PRA URN hageg
pais PS RUDIGER ete a ae os ernie sory
Bixee: GAARA
Bax: we Ka Sates
54
emption for “(4) trade secrets and commercial or fi-
nancial information obtained from a person and privileged
or confidential.” ° This provision was designed to prevent
the unwarranted invasions of personal privacy which
might be caused by the Government’s discriminate release
of confidential infornfation.’ The statutory history does
not jndicate, however, that Congress intended to exempt
an entire document merely because it contained some
confidential information.’ On the contrary, should data
which falls within Exemption (4) appear in any Board
opinion or order, both theAct and the Board’s regula-
°5 U.S.C. §552(b) (4) (Supp. IV, 1969). Cf. 32 C.F.R. §$1480.9
(4) (1969). The Board also cites another statutory exemption
which covers matters that are “(3) specifically exempted from dis-
closure by statute.” 5 U.S.C. §552(b) (3) (Supp. IV, 1969). Ap-
pellee argues that its opinions and orders are brought within this
exemption by 18 U.S.C. § 1905 (1964), which punishes public of-
ficials who divulge “in any manner or to any extent not authorized
by law” information submitted to them by any person on his trade
secrets, income and the like. Unlike other statutes which specifically
define the range of disclosable information, e. g. 26 U.S.C. § 6103
(1964), as amended (Supp. IV, 1969), section 1905 merely creates
a criminal sanction for the release of “confidential information.”
Since this type of information is already protected from disclos-
ure under the Act by §552(b) (4), section 1905 should not be read
to expand this exemption, especially because the Act requires that
exemptions be narrowly construed. 5 U.S.C. § 552(c) (Supp. IV,
1969).
°S. Rep No. 813, 89th Cong., 1st Sess. 9 (1965).
* Id. at 7; H.R. Rep. No. 1497, supra note 4, at 8.
* The “deletion” provision of the Act refers to “opinions” but not
to “orders,” because it apparently contemplates that “orders” are
merely summary statements of agencies’ final adjudicative action
and are accompanied by “opinions” setting forth the agencies’ prin-
ciples and reasoning. See Attorney General’s Memorandum on the
Public Information Section of the Administrative Procedure Act 18
(1967). The renegotiation process clearly does not fit this pattern,
since 90% of the Board’s determinations are by order without
opinion. In order to achieve the statutory purpose of disclosing
agency action while concealing personal identity, the Board must be
allowed to delete identifying details from its orders. Moreover, this
protects the Congressional determination that there be two meth-
ods of renegotiation, voluntary “agreements” (orders) and uni-
lateral Board determinations (orders with opinions), by giving
the same anonymity to all orders as is given to opinions. ~
< SCOONADMEAL AE Es Utah SIO
55
tions * recognize that the interests of confidentiality can
be protected by striking identifying details prior to re-
leasing the document.” The District Court’s judgment,
permitting appellee to deny the public all access to its
orders and opinions, must therefore be reversed and the
cause remanded to allow appellant access to the orders
and opinions requested after appellee has made suitable
deletions.
{6] A request for the orders and opinions concern-
ing a single contractor would clearly create a problem
of confidentiality. In the present case this problem does
not exist because appellant has requested orders and opin-
ions relating to fourteen contractors, and their release en
masse without identifying details wil! preserve anony-
mity. In the future, the Board can avoid the problem
by deleting identifying details from each opinion or order
and then making it available to public inspection as a
matter of course.’’ This procedure will fulfill the statu-
tory mandate by exposing to public scrutiny the agency’s
discharge of its functions while protecting the privacy
of the persons involved in the disposition of individual
cases.**
Il.
In addition to the orders and opinions, appellant also
requested the Board to release “the reports, correspond-
*°5 U.S.C. §552(a) (2) (Supp. IV, 1969); 32 C.F.R. § 1480.5(c)
(1969).
1° The Act requires that “the justification for the deletion shall
be explained fully in writing.” 5 U.S.C. §552(a) (2) (Supp. IV.
1969). Cf. 32 C.F.R. § 1480.5(c) (2) (1969).
11 To preserve the anonymity of its records, the Board may, of
course, refer to them by date or other code number in the index to
its members’ votes and opinions. 5 U.S.C. § 552(a) (2) (Supp. IV,
1969); 32 C.F.R. § 1480.5(d) (1969). A system of numerical iden-
tifications has previously been used to report on the Board’s opera-
tions. See Comptroller General’s Report on Coordination Between
the Renegotiation Board and the Defense Department, BNA Fed.
Contracts Rep. No. 232 at D-1 (July 29, 1968).
12 See H.R. Rep.: No. 1497, supra note 4, at 8; S. Rep. No. 813,
supra note 6, at 7.
PE ee aE RING AY
| i aed
56
ence and data” in connection with Grumman’s renegotia-
tions for 1965. There is no suggestion that these are
not “identifiable records” within the meaning of § 552
(a)(3). In fact, the Chairman of -the Renegotiation
Board inspected the material in question and: divided
it into four categories:
A. Letters and documents exchanged by Grum-
man and the Board;
B. Inter-departmental and inter-agency communi-
cations between the Board and other government
agencies with respect to Grumman’s performance on
its renegotiable contracts;
C. Communications between the Board and a
firm holding a renegotiable contract, concerning
Grumman’s performance as a subcontractor; and
.D. Intra-agency memoranda and communications
consisting of advisory opinions, conclusi iis, recom-
mendations, and analyses prepared by yersonnel and
members of the Board.”
The parties agreee that the documents in category (A)
are available for inspection; appellant also states that it
does not seek access to the advisory memoranda encom-
passed by category (D). Thus the parties appear in an
adversary posture only as to the “performance reports”
in categories (B) and (C),
[7-8] Congress intended that § 522 would make avail-
able to the general public any agency records “which
would routinely be disclosed to a private party through
the discovery process in litigation with the agency.” '*
* Appellant suggested that there might be a fifth category of
documents, “investigatory or other factual reports prepared by
Board employees,” but appellee assured this court that any such
items are included in categories (B) and (C),.
“ H.R. Rep. No. 1497, supra note 4, at 10. Documents are available
“if a court would ‘routinely’ order them produced in discovery
proceedings,” even though the agency might oppose production.
Benson v. GSA, 289 F.Supp. 590, 595 (W.D. Wash. 1968), aff’d sub
nom. GSA v. Benson, 415 F.2d 878 (9th Cir. 1969). While adopting
“discovery” criteria as a gauge for availability, the Act removed the
requirement that a party show “need” for a document: information
\
\
oe 1 OD sen em
57
In Boeing Airplane Co. v. Coggeshall,’’ we held- that the
Board’s investigatory and other factual reports were sub-
ject to discovery. Hence, the documents being sought by
appellant are clearly available to it under the Act unless
they are exempted ‘by subsection (b).
[9-11] The Board contends that such immunity from
disclosure is provided by Exemption (4)’s protection of
confidential commercial and financial information. This
provision has been interpreted to encompass only informa-
tion received from persons outside the Government.’ We
concur in this reading of the statute.’ The plain language
of the exemption—it applies only to “information ob-
tained from any person” '—is reenforced by the statutory
history, which indicates that the exemption was not meant
to allow agencies to render documents “confidential” by
passing them back and forth among themselves.'’ On
the other hand, information which is confidential in the
hands of one agency retains its protected character in
the hands of agencies to which it is subsequently fur-
nished.*” On remand, the District Court will have to
determine, through // camera inspection,*’ whether the
is available equally “to any person.” See Davis, The Information
Act: A Preliminary Analysis, 34 U. Chi. L. Rev. 761, 765-66 (1967).
+ 108 U.S. App. D.C. 106, 289 F.2d 654 (1960).
Benson v. GSA, supra note 14, 289 F. Supp. at 594; Consum-
ers Union of United States, Inc. v. Veterans Admin., 201 F. Supp.
796, 803 (S.D.N.Y. 1969). Cf. Davis, supra note 14, at 787-92.
Cf. Boeing, supra note 15, 108 U.S. App. D.C. at 113, 280 F.2d
at 661.
1*The APA exludes government agencies from its definition of
“persons.” 5 U.S.C. §$ 551(2) (Supp. 1V, 1969).
” S. Rep. No. 813, supra note 6, at 9; H.R. Rep. No. 1497, supra
note 4, at 10.
°° For example, the Board is empowered to inspect income tax re-
turns, and its regulations require that data derived from thet
source not be revealed. 32 C.F.R. § 1480.2(c) (1969).
21 See Ackerly v. Ley, 137 U.S. App. D.C. 133, 420 F.2d 1336
(1969); GSA v. Benson, supra note 14. .
EOE RE ATTN ATCT NERY PEE RARE RTL RENAUD eR
ad Rn Sane
Petey
wi bae al. toate
58
inter-departmental communications involved in this case
come within this narrow category.*°
{12} This analysis does not apply, however, to the
reports submitted by the prime contractor on Grumman’s
performance, since that material originated outside the
Government. After examining those documents, the Dis-
trict Court must decide whether they contain commercial
or financial information which the contractor would not
reveal to the public and therefore are exempt from dis-
closure or are subject to release only after appropriate
deletions have been made.
Reversed and remanded.
»*—
** The Board initially also relied on 5 U.S.C. § 552(b) (5) (Supp.
IV, 1969) which protects agencies’ internal policy memoranda, but
it has since abandoned that contention.
59
IN THE UNITED STATES DISTRICT COURT
_ FOR THE DISTRICT OF COLUMBIA
Civil No. 1595-68
GRUMMAN AIRCRAFT ENGINEERING CORPORATION,
PLAINTIFF
Vv.
THE RENEGOTIATION BOARD, DEFENDANT
MOTION FOR SUMMARY JUDGMENT
Defendant, The Renegotiation Board, by its undersigned
attorneys, respectfully moves for summary judgment pur-
suant to Rule 56(b) F.R.Civ.P. on the ground that there
are no genuine issues as to material facts and*defendant
is entitled to judgment as a matter of law.
In accordance with the Judgment and Opinion of the
Court of Appeals in this cause entered on March 10,
1970, defendant seeks a judgment determining that:
1. The documents in the files of The Renegotiation
Board relating to the performance by the plaintiff of its
Government contracts are not public documents and there-
fore are exempt from disclosure under 5 U.S.C. 552(b)
(3), (4); and
2. The “Summary of Facts and Reasons” relating to
one of the fourteen corporations as to which plaintiff
seeks documents reflecting Renegotiation Board action
is not a “final opinion” within the meaning of 5 U.S.C.
552 (a) (2).
In support of this motion, the Court is respectfully
referred to:
(A) The Affidavit of Vernon James Dwyer, Deputy
Director Procurement Policy, Office of the Secretary of
Defense; and
(B) The Affidavit of George Joseph Vecchietti, Deputy
Assistant Administrator for Industry Affairs, National
Aeronautics and Space Administration: ond
60
(C) A group of documents submitted herewith to the
Court only under seal for in camera examination. A de-
scription of these documents is as follows:
1. Report dated September 20, 1966, of General
Dynamics Corporation, Fort Worth Division, to-
gether with Eastern Regional Renegotiation Board’s
(hereinafter “ERRB’’) letter of inquiry, dated Au-
gust 17, 1966.
2. A letter dated January 15, 1968, from the
Board to Naval Air Systems Command Headquarters,
and the latter’s reply dated January 26, 1968.
3. ERRB’s letter request dated June 16, 1967,
to Naval Plant Representative at Grumman’s Plant
and the Defezse Contract Audit Agency’s report dated
May 7, 1967.
4. ERRB’s letter dated August 17, 1966, to Naval
Plant Representative at Grumman’s plant and the
Navy’s report dated September 12, 1966.
5. Naval Air Systems Command letter dated Sep-
tember 23, 1966, enclosing a report on Grumman’s
performance.
6. ERRB’s request dated August 17, 1966, to
National Aeronautics and Space Administration
(“NASA”) and NASA’s letter of September 16,
1966, enclosing (1)*a report dated September 14,
1966; and (2) a report dated September 12, 1966.
7. NASA’s letter dated September 29, 1966, en-
closing report for Goddard Space Flight Center.
8. Naval Air Systems Command letter dated Oc-
tober 12, 1966, attaching report.
9. ERRB’s August 17, 1966, request and Depart-
ment of the Army’s Performance Report dated Sep-
tember 28, 1966.
10. A group of Contractor Performance Evalua-
tion Reports prepared by the Department of Defense
and NASA bearing the following designations:
a. DDC-CP0024-03
b. DDC-CP0024-05
ce. DDC-CP0079-01
61
DDC-CP0024-04
CPP-660509
DDC-CPP681239
CPT671202
DDC-CPP680811
(D) A copy of a Summary of Facts and Reasons issued
by the Renegotiation Board with respect to a defense
contractor on April 9, 1968. Also, a copy of said Sum-
mary of Facts and Reasons with proposed deletions.
(E) An Affidavit of Lawrence E. Hartwig, Chairman
of The Renegotiation Board.
In further support of this Motion for Summary Judg-
ment the Court is respectfully referred to the Memoran-
dum of Points and Authorities filed herewith.
Respectfully submitted,
rmemt &
WILLIAM D. RUCKELSHAUS
Assistant Attorney General
HARLAND F. LEATHERS
IRWIN GOLDBLOOM
Attorneys, Department of Justice
Attorneys for Defendant
ws"
_
Rea earen
SILO GERRI ETON ference
ORS 1 he
Berroa: CPUS oP. RAR Ra eae
earnerere see SOR Rig eo ee eey TRIMS
62
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
Civil Action No. 1595-68
GRUMMAN AIRCRAFT ENGINEERING CORPORATION,
PLAINTIFF
Vv.
THE RENEGOTIATION BOARD, DEFENDANT
AFFIDAVIT
VERNON JAMES DWYER after first being duly
sworn, deposes and says:
1. I am Vernon James Dwyer, Deputy Director Pro-
curement Policy, Office of the Secretary of Defense.
2. Subsequent to the decision of the United States
Court of Appeals for the District of Columbia Circuit in
Grumman Aircraft Engineering Corporation v. The Re-
negotiation Board, No. 22,635, Performance Reports,
Contractor Performance Evaluation Reports and other
documents relating to the performance of its Government
contracts by Grumman Aircraft Engineering Corporation
were examined and reviewed by me on behalf of: the
Department of Defense. These documents, which relate
to the performance by Grumman of its government~con—
tracts subject to renegotiation during Grumman’s fiscal
year ended December 31, 1965, were prepared by per-
sonnel in this Department and furnished to the Rene-
gotiation Board at the Board’s request.
3. The information contained in the above-referenced
documents consists almost entirely of commercial and
financial data and was largely obtained from Grumman
Aircraft Engineering Corporation by the Defense De-
partment in the course of its administration of govern-
ment contracts with Grumman. In addition, in one in-
stance such reports contain information relating to a
government contractor other than Grumman and such
information was obtained by personnel of the Defense
63
Department in the course of governmental administration
of that contractor’s government contracts.
4. The information which is contained in the above-
referenced documents relating to Grumman and another
contractor is not released to the public since such infor-
mation is of a type regularly received in confidence in
connection with the administration of government con-
tracts and not ordinarily made public by the contractor.
Therefore, such information is confidential under the
provisions of 18 U.S.C. 1905 and 5 U.S.C. 552(b) (4).
Except for the information relating to a contractor other
than Grumman, this Department considers the informa-
tion properly releasable to Grumman and would release
it to Grumman upon Grumman’s request, but would nct
release it outside the Government to any one other than
Grumman.
/s/ Vernon James Dwyer
VERNON JAMES DWYER
5
Se |
vi ee
baat
nes
Siemans
Subscribed and sworn to before me this 5th day of May ©
1970. E
/s/ (dilegible]
otary Public 3
My commission expires July 31, 1973. ;
|
i
64
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA :
Civil Action No. 1595-68
GRUMMAN AIRCRAFT ENGINEERING CORPORATION,
PLAINTIFF
v.
THE RENEGOTIATION BOARD, DEFENDANT
AFFIDAVIT
GEORGE JOSEPH VECCHIETTI after first being
duly sworn, deposes and says:
1. I am George Joseph Vecchietti, Deputy Assistant
Administrator for Industry Affairs, National Aeronautics
and Space Administration.
2. Subsequent to the decision of the United States
Court of Appeals for the District of Columbia Circuit in
Grumman Aireraft Engineering Corporation v. The Re-
negotiation Board, No. 22,635, three Renegotiation Per-
formance Reports and two Contractor Performance Eval-
uation Reports were examined and reviewed by me on
tits and Space Administra-
tion. These documents, which relate to the performance
by Grumman of its government contracts subject to re-
negotiation during Grumman’s fiscal year ended Decem-
ber 31, 1965, were prepared by personnel in this Agency
and furnished to the Renegotiation Board at the Board’s
request.
3. The information contained in the above-referenced
documents consists almost entirely of commercial and
financial data and was largely obtained from Grumman
Aircraft Engineering Corporation by the National Aero-
nautics and Space Administration in the course of its
administration of government contfacts with Grumman.
In addition, in one instance such reports contain informa-
tion relating to government subcontrgétors which might
65
be considered to reveal information that is confidential
to those subcontractors. Such information appears in
Paragraph 14 (p. 6) of the Renegotiation Performance
Report on Contract NAS5-814.
4. The information which is. contained in the above-
referenced documents relating to Grumman and other
subcontractors is considered not to be releasable to the
public because such information is of a type regularly
received in confidence in connection with the administra-
tion of government contracts and not ordinarily made
public by the contractor. Therefore, such information is
considered to be confidential under the provisions of 18
U.S.C. 1905 and 5 U.S.C. 552(b) (4). Except for the
information identified above relating to government sub-
contractors, this Agency considers:the information to be
properly releasable to Grumman, but does not consider
it releasable outside the Government to anyone other
than Grumman.
/s/ George J. Vecchietti
’ GEORGE J. VECCHIETTI
Subscribed and sworn to before me this 13th day of May
1970.
/s/ Margaret F. Nelson
a
I Se YORE: gE RS ep «
oe
Ata ota tae Be aoe ae ear |
eae icy
apy
Nis reagpen
MARGARET fF’ NELSON
* _ Notary Public
My Commission Expires February. 14, 1972.
Peer errseg PRP treatments cree inamirnseriencneen
66
IN THE UNITED STATES DISTRICT COURT
FOR THE. DISTRICT OF COLUMBIA
Civil Action No. 1595-68
GRUMMAN AIRCRAFT ENGINEERING CORPORATION,
PLAINTIFF
Vv.
THE RENEGOTIATION BOARD, DEFENDANT
CITY OF WASHINGTON )
ss
DISTRICT OF COLUMBIA )
‘
AFFIDAVIT
LAWRENCE E. HARTWIG, being duly sworn, de-
poses and says:
1. I am the Chairman of The otiation Board,
the defendant in the above-entitled ‘lon I make this
affidavit in support of the position of the Board that
Summaries of Facts and Reasons are not “final opinions”
of the Board within the meaning of 5 U.S.C. 552 (a) (2)
(A).
2. A Summary of Facts and Reason? is to be distin-
guished from a Statement of Facts and Reasons. A
Statement is furnished, upon request, pursuant to the
requirements of Sections 105(a) of the Renegotiation
Act of 1951, which provides in part as follows:
* * * Whenever the Board makes a determination
with respect to the amount of excessive profits, and
such determination is made by order, it shall, at the
request of the contractor or subcontractor, as the
case may be, prepare and furnish such contractor or
subcontractor with a statement of such determina-
tion, of the facts used as a basis therefor, and of
its reason for such determination.
67
A Summary, on the other hand, is not a statutory docu-
ment; the Act does not require the Board to furnish
it. It is given, upon request, pursuant to a regulation
promulgated by the Board in furtherance of the direction
in the Act (sec. 105(a)) that the Board “shall endeavor
to make an agreement with the contractor or subcon-
' tractor with respect to the elimination of excessive
profits.” The stated, and sole, purpose of the Board in
providing the contractor with a Summary is “to assist
the contractor in determining whether or not it will
enter into an agreement” (RBR 1477.3). A Summary is
available to the contractor not only at the Board level,
but also at the regional board level; and a Summary ;
issued by a regional board may be superseded by one is-
sued by the Board after its review of the case. Thus, in a
given case, there may be two separate Summaries which
have different analyses and come to different conclusions.
Whereas a Statement is furnished only in conjunction
with a determination made by order, a Summary is
available to the contractor in any case, whether the de-
termination is subsequently embodied in an order or in
an agreement.
3. If a contractor declines to enter into an agreement,
the Act, in section 105(a), requires the Board to “issue
and enter an order determining the amount” of excessive
contractor files a petition with the United States Tax
Court for a redetermination, such order is “final and
conclusive and * * * not * * * subject to review or re-
determination by any court or agency.” It is only after
the issuance of such an order that the contractor may
request and obtain a Statement. The Statement, like the
order, is final. If the contractor wishes to contest the —
order, because he believes that the Statement contains ~
either an error of fact or an improper evaluation of his ~
case, or for any other reason, his only recourse is to ©
petition the Tax Court for a redetermination.
4. A Summary, unlike a Statement, is not a final ex- ©
position of the Board’s view of the case. It is furnished,
not after a final order has been issued, but in the course
68
of a renegotiation proceeding. It is given after the case
has been fully discussed at a meeting or meetings be-
tween the contractor and Board representatives, and it
may or may not include all the views expressed at such
meetings. It is intended as an aid in the effort to reach
agreement with the contractor. In the nature of things,
since the case is still open, the Summary is subject to
change; it is not a final opinion. It is issued after a
determination is made, but before the determination is
embodied in an order or agreement. If, during that
interval, the Board discovers or the contractor points out
that an error has-been made, or that a material point
has been overlooked, the determination is modified «ac-
cordingly. A Statement, if thereafter issued in such a
case, would reflect the change or correction so made and
thus would necessarily differ from the Summary pre-
viously furnished.
5. Changes or corrections of the type described in the
preceding paragraph have in fact occurred. For example,
the Board determined excessive profits of $175,000 in
the case of a contractor engaged in the development and
production of advanced electronic systems and equipment. |
A summary was furnished to the contractor. Among
other things, it stated that the contractor’s performance
of a major subcontract in the fiscal year under review
involved little risk because of the prior experience of
the contractor in making a similiar product. The con-
tractor subsequently supplied convincing evidence that
its earlier product was substantially different from that
manufactured and sold in the review year. The Board
thereupon undertook a reevaluation of the case and
concluded that the contractor was entitled to additional
credit under the statutory factors of extent of risk as-
sumed and contribution to the defense effort. As a re-
sult, the Board reduced its determination of excessive
profits to $150,000. The contractor accepted the revised
determination and entered into a refund agreement.
6. In another case, involving the renegotiation of the
plaintiff in this action for an earlier fiscal year, the
Board determined excessive profits in the amount of
$4 million. A Summary was furnished upon request of
69
the contractor. Thereafter, it developed that the con-
tractor had made a price reduction in the amount of
$430,550, applicable to deliveries and billings made in
the year under review. The Board accordingly made a
direct accounting adjustment in the same amount, which
reduced the determination of excessive profits to $3,-
569,450. Notwithstanding this modification, the con-
tractor declined to enter into an agreement and an order
was issued.
/s/ Lawrence E. Hartwig
LAWRENCE, E. HARTWIG
Subscribed and sworn to before me, a notary public in
and for the District of Columbia, on this 23rd day of
June, 1970.
/s/. Helen V. Allen ?
HELEN V. ALLEN .
My Commission Expires May 14, 1974.
Rear
an eee
?
~
PRT RES RRA
PIN, OX NEES LU Op aR
ORR OMT CRAY
TA ge Leh
eres o>
70
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
Civil Action No. 1595-68
GRUMMAN AIRCRAFT ENGINEERING CORPORATION,
PLAINTIFF
v.
—“~~_—r*7L_
"THE RENEGOTIATION BOARD, DEFENDANT
MOTION FOR AN ORDER IN ACCORDANCE WITH THE
MANDATE OF THE COURT OF APPEALS GRANTING
ACCESS TO OPINIONS AND TO INVESTIGATORY
OR OTHER FACTUAL REPORTS PREPARED
BY BOARD EMPLOYEES ie
Plaintiff, Grumman Aircraft Engineering Corporation,
respectfully moves this Court to enter an order granting
plaintiff access to, for the purpose of inspection and
copying, defendant’s (a) opinions relating to fourteen
namec. corporations for the years 1962 through 1965 and
(b) investigatory or other factual reports prepared by
Board employees relating to the renegotiation of plain-
tiff for the year I965 not heretofore made available in
accordance with the Mandate of the Court of Appeals
entered on March 10, 1970.
Inasmuch as plaintiff has never been given access to
' defendants’ files relating to plaintiff or to said fourteen
corporations, plaintiff cannot specifically identify all such
factual reports and opinions and ‘therefore requests
that the Court make in camera inspection of each such
file.
Included in this motion by way of example but not by
way of limitation are:
(1) Any reports of “personal observations” (Joint.
App. at 36) made by Board employees on visits
to plaintiff’s plants. |
(2) Any “Statement of Facts and Reasons” furnished
“pursuant to Renegotiation Board Regulation
(3)
(4)
(5)
(6)
(7)
71
(“RBR”) 1477.2 (32 CFR 1477.2) and Section
105(a) of the Renegotiation Act of 1951 (50
U.S.C. App. §1215(a)).
Any “Summary of Facts and Reasons” prepared
pursuant to RBR 1477.3 (32 CFR 1477.3) when
no “Statement-of Facts and Reasons” was sub-
sequently furnished.
Any “report” prepared by a Regional Board pur-
suant to RBR 1473.2(a) (32 CFR 1473.2(a))
which results in a clearance.
Any “report” prepared by a Regional Board pur-
suant to RBR 1475.3 (32 CFR 1475.3) which
does not result in a clearance and when no “State-
ment of Facts and Reasons” or “Summary of
Facts and Reasons” was subsequently furnished.
Any “recommendation” prepared by a division of
The Renegotiation Board pursuant to RBR 1472.4
(d) (32 CFR 1472.4(d)) which results in a
clearance.
Any “recommendation” prepared by a division of
The Renegotiation Board pursuant to RBR 1472.4
(d) (32 CFR 1472.4(d)) which does not result
in a clearance and when no “Statement of Facts
and Reasons” or “Summary of Facts and Rea-
—>
(8)
(9)
(10)
sons” Wa shed:
Any opinion rendered in a Class B case which
results in a clearance pursuant to RBR 1473.2
(b) (32 CFR 1473.2(b)).
Any opinion rendered in a Class B case pursuant
to RBR 1472.3 (32 CFR 1472.3) which does not
result in a clearance and when no “Statement
of Facts and Reasons” or “Summary of Facts
and Reasons” was subsequently furnished. ~
Any transcript, minutes or memoranda of meet-
ings of defendant or any panel or division thereof
_ reflecting (a) any of the above or (b) any other
opinion of defendant.
a Beate ss
ia
72 .
In support of this Motion, the Court is respectfully
, referred to the Memorandum of Points and Authorities
filed herewith.
Respectfully submitted,
/s/.Tom M. Schaumberg
Tom M. SCHAUMBERG
/s/ Rexford T. Brown
REXFORD T. BROWN
Attorneys for Plaintiff
GapsBy & HANNAH
1700 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Telephone: (202) 223-9100
ae i
73
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
Civil Action No. 1595-68
[Filed Oct. 1, 1970. Robert M. Stearns, Clerk]
3
4
;
3
:
PSY
GRUMMAN AIRCRAFT ENGINEERING CORPORATION,
PLAINTIFF
v.
THE RENEGOTIATION BOARD, DEFENDANT
ORDER
TEE at NI vin 5 SCOUTS eT R TIC
big
This matter came on to be heard on plaintiff’s motion
for an order in accordance with the Court of Appeals
mandate granting access to opinions and to investigatory
‘or other factual reports prepared by Board employees.
In aid thereof, they seek to depose Mr. Lawrence E.
Hartwig, Chairman of the Renegotiation Board. The
defendants seek a protective order against deposing Mr.
Hartwig.
It is clear from the Court of Appeals decision, Grum-
man Aircraft Vv. The. Renegotiation Board, 425 F.2d 578 é
C. 1970), that the final orders and opinions of the ~~
Board are t0 blic once identifying details —
have been deleted. It is not clear, ho 7
stitutes in fact a final order and opinion. The deposition —
of Chairman Hartwig should be an aid in this deter-
mination.
The Court therefore denies the Board’s mokion for a
protective order as to Chairman Hartwig and orders
the immediate taking of his deposition. Plaintiff’s mo-
tion for an order in accordance with the mandate is held
in abeyance pending the outcome of Chairman Hartwig’s
deposition.
ss ee
So ordered.
/s/ [Mlegible]
Judge
DATED: October 1, 1970
74
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
GRUMMAN AIRCRAFT ENGINEERING CORPORATION,
PLAINTIFF a
‘ /
THE RENEGOTIATION BOARD, DEFENDANT
NOTARY: Helen V. Alle’ (Commission expires May 14,
1974)
REPORTER: Sandra Spivak, CSR
Deposition Duces Tecum, pursuant to Notice Friday, No-
vember 6, 1970, at 11:00 A.M. at the offices of Mr.
Lawrence FE. Hartwig, Chairman of the Renegotiation
Board Room 800, 1910-K Street, N.W., Wash., D.C.
Appearances:
For the Plaintiff:
Gadsby, & Hannah,
1700 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
represented by:
TOM M. SCHAUMBERG, ESQ.
and
— RD T. BROWN, ESQ.
For the Defendant:
The Department of Justice,
represented by:
IRWIN GOLDBLOOM, ESQ.
LAWRENCE E. HARTWIG,
HAVING BEEN FIRST DULY SWORN, TESTIFIED
AS FOLLOWS: :
PAARL AIE. AE SRE NE EE a TIED
75
DIRECT EXAMINATION
1] MR. SCHAUMBERG: Chairman Hartwig, I am
om Schaumberg, Counsel for Grumman Aircraft Engi-
neering Corporation. With me today is Rexford T.
Brown, also of the firm of Gadsby and Hannah.
BY MR. SCHAUMBERG: q
Q Would you please state your name and present ad-
dress.
(
THE WITNESS:
A Lawrence E. Hartwig, 3520 39th Street, N.W.,
Washington, D.C.
What is your present place of employment?
Chairman of the Renegotiation Board.
How long have you held that position, sir? i
Since April, 1961. ?
Where were you employed prior to that? .
I was a member of the Renegotiation Board.
And how long have you been a member of that i
Board? i
A Since October 3, 195i.
Q Does that date indicate that you have been a mem-
ber of that Board since its inception under the ’51 Re-
negotiation [2] Act? :
A Yes.
Q Would you please subscribe your duties as Chair-
man of the Renegotiation Board?
A Well, the duty of the Chairman of the Renegotia-
tion_Board is to preside over the Board meetings, to
operate as the chief administrative officer with respect
to duties which the Board entrusts to the Chairman. To
see that the cases are processed expeditiously. To par-
ticipate in Board deliberations with respect to cases and
the decision of cases, the promulgation of regulations,
bulletins and rulings, published policy statements, and
to act as the spokesman for the board on Capitol Hill
with respect to Board legislation and elsewhere.
Q_ As Chairman of the Board, are you familiar with
every aspect of its operations?
OPO PO PO
WSO
76
A I think I am. I’d like to think I am.
Q Did you receive a notice of deposition?
A Yes, I did.
Q Did you bring with you into the hearing room the
documents that were mentioned in that Notice?
A Well, the files are very voluminous and they are
in another room not far from this office.
MR. SCHAUMBERG: We will go off the record.
[Whereupon, a discussion was held off the record. |
[3] MR. SCHAUMBERG: We will go back on the
record.
MR. GOLDBLOOM: Would you read the last ques-
tion and answer?
[The record was read by the reporter]
MR. SCHAUMBERG: Why don’t you make a state-
ment about what happened as a result of our off the
record discussion, Mr. Goldbloom?
MR. GOLDBLOOM: The files have now been brought
into this room, and they are here.
BY MR. SCHAUMBERG:
Q Chairman Hartwig, are those all of the files that
were called for in the subpoena?
THE WITNESS:
A_ To the best of my belief.
MR. GOLDBLOOM: I didn’t count them this morning,
or look at them; but I understand that the files in con-
nection with your subpoena were amassed. They were
not here at the Board, as I understand it, at the time.
Most of the files, as I understand it, or a good many of
. them, were out at the Los Angeles Regional Board, or the
Western Regional Board, and had to be shipped here.
MR. SCHAUMBERG: We appreciate that.
BY MR. SCHAUMBERG:
Q Chairman Hartwig, before we get into the detail
and contents of any of these files, would you be kind
enough [4] for the purposes of this record, to give us a
short description of the renegotiation process?
77
THE WITNESS:
A Yes. All filings over the floor—over the million-
dollar floor—are meade here at the headquarters. These
filings then go through what we call the screening process.
First they go to the Office of Accounting, to check the
segregation of sales, allocation of costs, and then to the
Office of Screening and Exemption. If a case does not
involve excessive profits, does not pose problems, it is
screened out here at headquarters. Cases which may
involve excessive profits are assigned to one of the two
regional boards, on a geographic basis.
The cases assigned to the regional boards for process-
ing are typically assigned then to a renegotiator and an
accountant, who comprise a team. The accountant de-
velops information with respect to the segregation of
sales, allocation of costs, the development of the figures.
The renegotiator is concerned with securing information
from the contractor and from the procurement agency
involved, with respect to the contractor’s performance
and any other matters that are of interest in the evalua-
tion of the profit.
When the—and this now involves meetings with the
contractor, correspondence with the contractor.
[5] When the team has secured enough information to
prepare its report, it prepares what is called a Report
of Renegotiation, which consists of a Part 1(a), the
accounting part, and the Part 2, which is the rene-
gotiator’s evaluation and recommendation to the Re-
gional Board.
The recommendation of the renegotiator is then con-
sidered by the Regional Board, and at this point you
have to distinguish between the Class A case and a
Class B case. A Class B case is one in which the re-
negotiable profits are less than $800,000. In that kind
of case, the Board has delegated final authority to the
Regional Boards to conclude the case by a clearance or
by refund agreement. In all other cases, the Regional
Board’s action is simply a recommendation to the statu-
tory board because those actions must be concluded here.
4
: ;
wy 1S RR, |
SISA
TEEPE TED OOH RAR REED nme: he RT
78
Now, there is a little exception to what I just said.
Now, take the refund case. If the contractor does not
agree with the designation of the Regional Board, in a
Class B case, the Regional Board has the authority to
issue a unilateral order, which may be appealed to the
Statutory Board.
All right. So, let us take a typical Class A Case
because those are the cases, really, that are involved
in your request. I believe they are all Class A cases.
I'll describe the procedure there: the report of the re-
negotiation is submitted to the Regional Board. They
consider the [6] recommendation made by the renegotia-
tor. And let us assume that the renegotiator recommends
to the Regional Board that the Regional Board recom-
mend to the Statutory Board that there is a clearance.
The Regional Board will then approve the recommenda-
tion of the Renegotiator, but not the report, simply the
recommendation.
The report, then, with the case file comes up to head-
quarters for review, because the Statutory Board has
reserved to itself authority to conclude those cases. When
the recomemnded clearance comes to the headquarters,
it is first sent to. the Office of Accounting, which pre-
pares an accounting memorandum addressed to the Office
of Review, in which it comments upon the accounting, the
figures, and indicates whether in its opinion the Re-
gional Board accountant, his recommendation, has been
satisfactory.
Assuming that to be so, then the Office of Review will
look at the recommendation of clearance and it will assign
a reviewer to the case. And the reviewer will indicate
then by way of recommendation to the—to the Board
whether he concurs or disagrees with the Regional Board’s
recommendation.
And the Director of the Office of Review will also
indicate whether he agrees or disagrees with the recom-
mendation of the Regional Board.
So that when the case then comes up to the Board on
its [7] agenda, the papers have previously been circulated
to the Board members for study.
79
All of the staff’s recommendations have been circulated
for study by the individual Board members. Each one
will conduct his own independent study. Each one has
an assistant who himself may look at the case file and
look at the underlying documents for the purpose of
advising that Board member.
And then, when the recommendation clearance of the
Regional Board comes up on the Board. agenda, the
Board simply approves or disapproves the clearance.
It does not adopt any of the memoranda that are before
it. It does not ratify or adopt any of these staff memo-
randa. It simply, in the exercise of its judgment, says
it is a clearance or it isn’t a clearance. And there is no
Board-adopted document which you could call an opinion.
Then, after the Board has acted, the clearance notice
is issued to the contractor. Now, I believe that in your
_ Class A case the notice is issued by the Regional Board.
If the Regional Board is the one that recommended the
clearance and the Board approved the clearance, I think
it goes out from the Regional Board.
Q Would you explain to us, Chairman Hartwig, what
happens in the instance of a Class A case where the—
well, there are two instances, when either the Regional
Board [8] makes a recommendation not of clearance but
rather that there be a determination of excessive profits,
or secondly, in the instance where the Statutory Board
disagrees with the recommendation of the Regional Board
and determines that there are excessive profits.
A Well, in a Class A case where the Regional Board
recommends a refund they will attempt to secure the
agreement of the contractor to that recommendation. You
must understand that all of our procedure is directed
toward reaching agreements with the contractors. And
so, even though the Regional Board has no authority to
bind the Board with respect to a refund in a Class A
case, even at that level there are procedures. The Re-
gional Board attempts to secure the agreement, even be-
fore the Statutory Board has reviewed the case.
Well, let’s assume then, that the contractor agrees,
the recommendation comes up here for review, and we
are notified that the contractor agrees. And so the ques-
AG TORTS SY Lom INCRE:
FETA NRT CORI
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A
80
tion then is whether we will approve this recommenda-
tion, and if we do, well then of course the agreement is
signed.
But the—the case is reviewed by the staff, in the
Same way that I described the clearance review. It
goes to the Office of Accounting, the Office of Review,
to make its recommendations to the Board. -
Now, in the second case—
(9] Q May I interrupt you for one moment, sir. Are
there instances where the Regionel Board recommends.
a refund and where the Statutory Board thereupon re-
views the case in greater detail than you just described,
namely by inviting the contractor to make a presentation,
etcetera, to the Board?
A Let’s take the Class A case where the coniractor
does not agree. That’s an impasse case, we call that an
impasse case, and that’s automatically reassigned up here.
And then we—under the statute I have authority to
appoint Divisions.
So I will designate a Division of the Board, usually
three members, to hear the case. Prior to the time that
the meeting is set up with the contractor, with the
Division, the case is reviewed by the Office of Accounting
and by the Office of Review and they make analyses,
sometimes indicating individual differences with views
expressed by staff members, all for the guidance of the
Division’s consideration of the case.
With that, with these analyses prepared at headquar-
ters, and the report of renegotiation, and the case file
along with material in the case file before the Division,
with all that material before it, the Division then will
meet with the contractor and at that meeting, as our
regulations state, the contractor will be given a com-
pletely fresh look at his case.
[10] In other words, under our procedure, neither the
division nor the Board is bound in any way by the
determination of the Regional Board; the refund could
be higher, lower, or result in a clearance. So after the
meeting with the contractor, in which he presents his
arguments, and the case is submitted for decision, the
Division then will meet and decide the recommendation
81
it will make to the full Board, and it prepares a Di-
vision Report to the full Board. And let us assume,
for example, that they recommend a refund. Well, it
doesn’t make any difference whether they recommend
a refund or a clearance. The fact is that when the
Board adopts the recommendation of the Division, it
does just that. It does not adopt the Division report.
It adopts the conclusion. It adopts the conclusion or the
recommendation, but not the report.
Then, after the Board has made its determination, as
you know, the contractor is notified and is given a period
of time to indicate whether it agrees with the determina-
tion or wishes to have the Board issue a_ unilateral
order.
Now, again, let me point out that this carries out the
spirit of our procedure, which is that here we always
try to reach an agreement. The order is the last step
in a case. If, actually when the procedure falls down,
that’s when-we issue an order. Because we always try
to get an agreement.
[11] And so, the next step then is to invite the contrac-
tor, get him to agree or disagree, ask him whether he
agrees or disagrees with the determination. At that point
in our procedure, we have an administrative document
which we call a Summary of Facts and Reasons, which
the contractor may request if he wishes, in order to en-
able him to make up his mind whether or not he will
enter into an agreement.
If then the contractor says to the Board within the
time period that he cannot decide whether to agree or
not without receiving a summary, he requests a sum-
mary, and we will issue it to him.. After we issue the
summary, which is again designed to persuade him to
agree, he may—and has in some cases, as I think my
affidavit points out—indicate some errors in the Board’s
decision.
If that is so, then the determination is corrected, and
a modified determination is made. At that point, of
course, he is invited again to agree or disagree. And
then, at the end of the road, if he says finally he does
not agree, we will issue a unilateral order, the order
sw
Lee: NTR, TORT AL aA AA DRT RC a eR 1
mS Re Nag gates
82
that is proscribed in the Act, and which is final so far
as we are concerned because it starts then the 90-day-
period for appeal to the Tax Court.
After that ordered is entered, issued, the contractor
is entitled to a statement of facts and reasons, upon
his request. [12] In both instances you will note that in
the case of the summary it is not issued except upon re-’
quest of the contractor, and likewise in the case of the
statement.
Q I believe you were also going to explain the in-
stance when the Regional Board recommends clearance
and the Statutory Board reviews the matter and de-
termines that there are excessive profits.
A Well, the procedure there is essentially the same
as it is in the impasse case, the ony difference being
that in that case the recommendation of clearance will
be considered by the Board and the Board will de-
termine that it cannot at that point approve the recom-
mendation, so it will reassign the case to the Statutory
Board for further proceedings. And in that case, as in
the impasse case, a Division will be set up, the same
kind of study and analysis made by the same people
who worked on the impasse cases. And then after a
meeting with the contractor, if it does result in a
refund, then it will have the same procedure.
Q Directing your attention first, Chairman Hartwig,
to those instances where cases are screened out at the
Statutory Board level: by letter of June 18, 1970, the
Secretary of the Board transmitted to us certain docu-
ments which included a document entitled “Notice of
Clearance without Assignment”. Is that the document
whereby a case which is screened out at the Statutory
Board level is terminated?
[138] A That is the document which indicates that the
Board will not, has decided not to proceed further with
the case.
Q When you say that the Board has decided that,
is that decision in fact made by the Board?
A Well, that brings up the question of relegation
to the Office of Screening and Exemption.
oe”
SH, 83
THE WITNESS: Let us go off the record.
[Whereupon, a discussion was held off the record]
THE WITNESS: Let us go back on the record.
THE WITNESS:
A Paragraph 4(c) of General Order 2 of the Board
delegates certain authority to the Office of Screening and
Exemptions. It says that that Office shall have authority .
“without requiring approval of the\Board, to cause
filings to be assigned or cleared” by that Office.
And then I’ll omit some language that isn’t pertinent
here, “but that prior Board approval’ shall be required
for the clearance for filings in the following circum-
stances:
1) When the filing of a Broker-Agent shows renegoti- ,
able commission income in excess of $100,000, and re-
negotiable profits in excess of $50,000.
2) When the filing of any other contractor shows a
renegotiable sale in excess of $10,000,000 or renegotiable
profits in excess of $200,000.”
[14] So, that office has authority to screen out cases
under this delegation and has to submit to the Board its
recommendations for cases: that do not fall within that
delegation.
Q May I ask you, Chairman Hartwig, what the date
of promulgation of that order is?
A This is June 16, 1970. This was amended June
16, 1970. Actually the order had been in effect for a
number of years prior to that. We put a new date on
each of these orders every time we amend it.
Q How long has that document been available to the
public?
A I think this document was—I don’t.
MR. GOLDBLOOM: You don’t know. |
THE WITNESS: I don’t know.
BY MR. SCHAUMBERG:
Q Let me rephrase the question, Chairman Hartwig.
How long has that document, either in its amended form,
SA one ap Ee
84
or any of its predecessors, which you say have been in
effect for a number of years, been available to the public?
THE WITNESS:
A The reason I hesitate is that we have a large
project here to implement that Freedom of Information
Act and this is only one of a larger package of ad-
ministrative orders and general orders that we reviewed
to determine which we had to place in the library and
what we didn’t have [15] to place in the library. So, I am
able to pinpoint the date at that. time. But I do know
that it was placed in the library in accordance with the
effort on our part to comply with the Freedom of In-
formation Act.
Q To your knowledge is that General Order pub-
lished in the Codg,of Federal Regulations?
A I don’t nae
Q If I have understood your testimony correctly, you
have stated that unless—well, I don’t want to rephrase
your testimony, but tfiere are instances when the office
of Review has been delegated the authority to send to
the contractor in question a Notice of Question without
assignment? ;
A That’s the Office of Screening and Exemptions.
Q Do you have in this room any files which include
such a document as the Final Order of the Board?
A You meam do any of these files, is your question
do any of these files contain a Clearance without Assign-
ment Notice?
Q That is correct.
“A Well, I think so.
Q And if 30, would you please place before you one
such file.
MR. GOLDBLOOM: We will go off the record.
{Whereupon a short recess was taken |
MR. GOLDBLOOM: We will go back on the record.
[16] MR. SCHAUMBERG: Would you read back the
last question and answer, please.
[The record was read by the reporter]
ag
85
BY MR. SCHAUMBERG:
Q Do you now have before you, Chairman Hartwig,
a file which resulted in a Notice of Clearance without
Assignment?
THE WITNESS: |
A Yes, I do.
Q I should like to ask you, starting with the last
document in that file, to give us a description of the
following document or the document which—actually,
precedes that document, by telling us either the date and/
or something that will identify the document.
A All right. The first document is a Notice of
Clearance without Assignment.
The next is a form called “Office of Assignment,
Analyst’s Worksheet,” which simply gives the history
of this particular company in renegotiation. That is,
what happened in prior years, that sort of thing, for
informational purposes. And it would also contain refer-
ences to, as it does in this case, wholly owned subsi-
diaries, which would be in a separate file.
The next is a form letter addressed to the company,
requesting information pertaining to voluntary refunds
and [17] price reductions.
The next is a, is the contractor's filing, with schedules
and the annual report.
MR. GOLDBLOOM: Of the contractor?
THE WITNESS: Of the contractor; which the con-
tractor probably submitted with the RB 1.
Next is a letter te the company responding to the
request for an extension of time to submit data. And
the letter preceding that is from the company requesting
an extension of time relative to the submission of their
tax data.
Can I strike that?
MR. GOLDBLOOM: You can add to it.
THE WITNESS:
A All right. I will add to it. Well actually the
letter says “In view of this company’s prior year’s ex-
exer MES
86
perience relative to the submission date of their im-
mediate income tax return, and in view of the time
required to consolidate certain figures,” they want an
extension of time to make their renegotiation file.
And the letter preceding that responds to that request.
BY MR. SCHAUMBERG:
Q For my purposes you have gone far enough into
that file, unless to make the report complete you would
like to read the rest of the documents in, I see no need
for it.
MR. GOLDBLOOM: Havejyou described the entire
file?
[18] THE WITNESS:
A No, there is in the cover the screening report.
That form simply records in capsule form, you might
say, the figures presented in the contractor’s filing.
BY MR. SCHAUMBERG:
Q Does that document have sub-parts to it, so that —
you can describe the various parts of it, or is it just a
series of numbers on.a form?
THE WITNESS:
A It’s a series. It sets forth the renegotiable sales
and profits, the returns, and—
MR. GOLDBLOOM: Returns?
THE WITNESS:
A Return rates, return on sales, return on net worth
return on capital.
It sets out information—and this is all gleaned from
the contractor’s filing, with respect to officers’ salaries,
and turnover rates, information with respect to material
costs, including subcontracting. And then there is simply
a form box to be checked: “Method of sales, segrega-
tion acceptable?” Box, yes. Check yes. “Method of cost
allocation acceptable?” Box checked yes. .
And then a box at the bottom which is checked by
staff employee of thé*Office of Screening and Exemptions:
a
Aa
87
“Clearance recommended?” Box yes.
[19] There is also a line which indicates whether the
contractor has self-applied the commercial exemption. In
this particular case the contractor did not self-apply the
commercial exemption.
That’s it.
Q Is that the only other document, then, in addition
to those that you enumerated 2before?
A Yes. .
Q Is-there a document in that file that considers
the so-called statutory figures?
A Not in this file.
Q Are there instances, to your knowledge, where the
statutory figures are considered by the Office of Screening
and Exemptions?
A Well, I would say in response to your question
that in all cases the screening people apply the statute.
But to make myself clear—ard this may provide an
answer to your question—take the most obvious case
where a contractor reports an overall loss on renegoti-
able business. And I believe our recent experience has
been that about 20% of the filings are in that category.
I ask you whether you are applying the statutory factors
when you say that a contractor who has a loss has not
made excessive profits. Or, who has obviously low profits.
Q_ Well, taking another example, however, where there
[20] are indeed profits on renegotiable business rather
than a loss, are there instances where the screening re-
port will cover the statutory factors such as: character |
of the business, extent of the risk assumed, contribution
to the defense effort, capital employed, efficiency and rea-
sonableness of costs, and profits.
A Well, I think that when the screening people find
a case which requires an extensive exploration and re-
quires thé application of the factors, this is a case which
is assigned to a Regional.
Q In any effort, then, to have a complete record, I
would appreciate it if you would check the screening
report in three or four other files, to determine if in any
one of those you see any reference to the statutory
factors that I just enumerated.
88
A Well, my general knowledge—
MR. GOLDBLOOM: Let us go off the record.
[Whereupon, a discussion was held off the record. |
THE WITNESS:
A You won't find a discussion of the statutory factors;
but I want to indicate that perhaps the reasonableness
of costs and profits, which is a factor in the law, is the
one that is considered, at least impliedly, when you screen
out a case involving a loss or a very low profit. And so,
while there may not be a discussion of the factors, the
[21] factor which makes the case a candidate for clear-
ance early in the process would be applied.
I may also wish to add to this, there is a loss-carried-
forwarded provision in the statute, a 5-year loss-carried-
forward. And in a case when the \oss-carried-forward
wipes out the contractor’s profit, that kind of a case
would be a candidate for clearance without assignment.
BY MR. SCHAUMBERG:
Q_ In those cases which are terminated with the No-
‘tice of Clearance without Assignment, is there characteris-
tically any consideration given to comparisons of that
contractor by other contractors using the same product
or using the same processes?
THE WITNESS:
A This would be the exceptional case, I would say,
because you’re dealing in these cases with obviously. non-
excessive profits, and our people develop expertise through
the years, and just know that in a certain industry or
sub-industry, if a person has one-half of one percent
profit on sales, that that is not excessive profit. There
are comparisons of the company with its past rene-
gotiation experience, because that information is avail-
able to: this committee.
Q Are the rules of thumb that you just referred to,
such as one-half of one percent, are those reduced to
writing [22] anywhere for your employees to consider?
A No. It would be impossible to do it.
89
MR. SCHAUMBERG: We will take a short recess.
{Whereupon, a short recess was taken]
MR. SCHAUMBERG: We’ll go back on the record.
BY MR. SCHAUMBERG:
Q_ Referring, Chairman Hartwig to Paragraph 4(c)
of the General Order 2 which you read into the record
before, that paragraph indicates that “prior Board ap-
proval shall be required for the clearance of filings
when the filing shows renegotiable sales in excess of .
$10,000,000 or renegotiable profits in excess of $200,000.”
Is any such file included in the group that you have
provided us with, the final document in? It is my under-
standing that the file that we just went through—
MR. GOLDBLOOM: Do you understand the question?
BY MR. SCHAUMBERG:
Q It is my understanding that the file we just went
through, Chairman Hartwig, was not the exception that
I just read to you.’ That was a file where the staff was
authorized to issue the clearance. What I am now asking
about is the case that is the exception.
MR. GOLDBLOOM: Let us go off the record.
[Whereupon, a discussion was held off the record]
MR. GOLDBLOOM: | Let us go back on the record.
[23] THE WITNESS: Would you repeat the question
again?.
[Whereupon the record was read by the reporter]
THE WITNESS:
A Well, the case that I described was then not the
exception. That was a case that was.submitted to the
Board for approval.
BY MR. SCHAUMBERG:
Q Just so the record is clear, so that is the exception? -
A That is the exception. Well, it’s—
MR. GOLDBLOOM: Why don’t we define our terms,
rather than talking about exception and non-exception?
Weert
90
THE WITNESS:
A The case I described was a case where the Office
of Screening and Exemptions did not have delegated
authority to screen out the contractor. In that actual
case, the office submitted its recommendation to the
Board and the Board approved it. So that the Clearance
without Assignment in that case went out without ap-
proval.
BY MR. SCHAUMBERG:
Q And that Board approval was given on the basis
of the documents that you identified earlier?
THE WITNESS:
A Yes. There is one other document which is not in
this file and it simply a typewritten list of the cases
which [24] are recommended for clearance by the Office .
of Screening and Exemptions. They will submit their
list to the Board for approval or disappreval.—____—
Q Are these then decided by the Board en masse?
A Yes. Well, one at a time, yes. I thought you meant
with the Board en masse. No, the Board goes through
each case on the list and decides whether it will approve
the recommendation or whether the case should be as-
signed for further processing.
Q And is it correct, Chairman Hartwig, that all of
those cases that come to the Board for approval never
have—at least in the files that are the subject of this
case—an analysis as such of the statutory factors? And
when I say “as such” I recognize that reasonableness
of cost and profits is always inherent in a decision. But
other factors such as contribution to the defense effort,
etcetera, are not necessarily inherent in that.
A That is right. The committee will, in capsule form,
set forth some basic statistics for the information of
the Board. The kind of statistics that I showed you were
on the screening report, and this enables the Board then
to itself, if it wishes, or an individual Board member
wishes, to investigate the case file, to make his own
study to decide whether it would approve the recommenda-
—
' 91
tion, or whether the case should be assigned for further
processing.
{25] Q Does the Board keep minutes which reflect the
decisions made on these—
A The Board does.
Q Are those minutes available to the public?
A No. I may say the minutes simply record that the
Board’ approved the recommendation of the :Office of
Screening and Exemptions with respect to the following-
named companies. There is no record discussion.
Q Turning now to the cases which resulted in a
Clearance after Assignment, do you have such a file -
available to you.
A Yes.
MR. SCHAUMBERG: Would you, Mr. Goldbloom,
make a list of each of the files that the Chairman goes
through during the course of this deposition?
MR. GOLDBLOOM: I’ll keep a record of the Board
files which are used, from which the Chairman is testify-
ing.
MR. SCHAUMBERG: Thank you.
MR. GOLDBLOOM: All right.
BY MR. SCHAUMBERG:
Q Would you please take that file and, starting with
the last document, go through the same identification
procedure that you did previously.
THE WITNESS: Let’s. go off the record.
[Whereupon, a discussion was held off the -record] ©
[26] BY MR. SCHAUMBERG:
Q It will be satisfactory, Chairman Hartwig, if you
would like to start with the assignment and then move
forward in the renegotiztion process.
THE WITNESS:
A All right. The first document in the file is a
form, “Assignment, Suggestion and Notice,’ which ac-
companied the file to the Regional Board, and it makes
certain comments with respect to certain points that
should be explored among others.
~
Decree ek i eee
RAR aE ag pe UTERO, 4
* 92
Q On that point, Chairman Hartwig, are those points
that relate directly to certain statutory factors?
A In this ease the points were largely segregation
of sales and allocation of costs. And it so happens that
those were the initial suggestions or comments: I know
from general knowledge that there are other cases where
questions involving the statutory factors would be noted
on the assignment sheet, but you must remember that
the Region’s study. of the case is not confined to the
suggestions made by the headquarters staff. These are
simply a way of starting the region to conduct its study.
The next document, RB 1, Filing of the Contractor.
MR. GOLDBLOOM: Excuse me. What is that?
THE WITNESs:
A The RB 1, the Filing, the Coniractor’s Filing.
{27] Some of these documents are not in chronological
order. The next document is a memorandum from the
Director of the Office of Accounting to the Director of
the Office of Review, commenting on the account in Part
l(a).
The next is Notice from the Chairman of the Regional
Board to the contractor stating that the case has been
designated as a Class A case.
Next is a notice of commencement of renegotiation.
Next is a memorandum of a conference between the
renegotiator and the accountant and representatives of
the contractor. 7
Next is a document listing the major prime and sub-
contracts by number.
Next is a request from the contractor for an ex-
tension of time to file certain information that had been
requested.
Next is a document notifying the contractor that due
to the retirement of the renegotiator assigned to the case
that it had been reassigned to another renegotiator.
Then there is a letter from the contractor to the Pro-
‘curement Agency with respect to certain prices that were
bid on certain contracts.
And then—this seems to be a copy of an agreement
between a procurement agency and the contractor with
93
respect to treatment of independent research and de-
velopment.
And then there is a letter enclosing, transmitting that
{28] agreement to the regional board.
Then there is a document submitting the information
to the Regional Board which had been requested.
MR. GOLDBLOOM: Is that from the contractor?
THE WITNESS:
A From the contractor.
The next is a summary of the contractor’s financial
data, which is called a “Schedule A.” And then a letter
transmitting to the contractor the Part 1(a) which is
the account report, including the Schedule A.
Next is the minutes of a telephone ‘conversation be-
tween the accountant and a representative of the con-
tractor, requesting more information with respect to an
accounting point.
Next is a letter from the contractor to the accountant,
submitting some additional accounting information.
Then there is the Report of Renegctiation.
Then there is a letter from the Regional Board to the
contractor stating that the “Regional Board had made a
final recommendation “that you have not realized ex-
cessive profits and that the Statutory Board has been
_ notified.”
It states further that the “Statutory Board will de-
cide whether or not it is in accord with the recom,
mendation.”’
BY MR. SCHAUMBERG:
Q Excuse me, Chairman Hartwig, did you testify
earlier [29] that in'a Class A case such approval had to
be obtained in every instance by the Statutory Board?
THE WITNESS:
A Yes. The next is a form prepared by an’ account-
ant, setting forth the figures involved in this case. This
is prepared by the Regional Accountant.
Next is a form transmitting the documents to the
headquarters.
Beers IEEE Ky
94
Q Which documents are those, sir?
A The complete case file.
Then there is a memorandum from the Office of Ac-
counting directed to the Office of Review, commenting
on the accounting in the Part 1(2).
The next is a document entitled “Review of the De
termination, Office of Review,” setting forth the sales
and profits, and accompanying that document is a memo-
randum of a reviewer in the Office of Review, which
discusses the case and concludes, “In view of the above,
it is recommended that the contractor be given a clear-
ance notice.”
Q Turning back to—
A Excuse me. Now, over in the other part of the
file there is a folder containing performance reports, and
the report of the public accounting firm with respect to
this company, and copies of the company’s income tax
returns. Also what appears to be an accountant’s work
papers.
[30] Q Does that constitute the entire file of that con-
tractor for the entire renegotiable year?
A Weil, there is an assignment file, I believe, that
would contain the material I described with respect to
the other case, because this case went through the screen-
ing process but didn’t end at headquarters. It was as-
signed to the region. The assignment file would simply—
MR. SCHAUMBERG: Let us go off the record.
[Whereupon discussiun was held off the record]
BY MR. SCHAUMBERG:
Q If you would, turn back to the report to renegotia-
tion which you referred to. Does that document contain
_ sub-parts or headings, or anything to differentiate one
portion of it from another?
THE WITNESS:
A Well, the first part, the caption is “Report of
renegotiation,” the first part is “Part 1(a), Accounting
Section,” and “Part 2,”—
Q Excuse me, before you go into part 2, it is called
part 1(a) because there is a Part 1(b), is this right?
bi
~
Go
A There was a Part 1(b) which at one time was
used to summarize a contractor’s representations, or
where the report from the contractor was short, perhaps
the entire report would be incorporated in the 1(b).
But that practice has largely been abandoned because
those who are reviewing !31] those reports will go
through the entire statement of the contractor rather
than rely on a summary of the contractor’s statement.
So, while the 1(b) for all practical purposes no longer
exists, we still call the accounting section l(a).
Q Thank you. Moving on to Part 2, does that have
any sub headings?
“.. A No. Part 2, well, there are sub headings under
the factors. .
Q Could you go through that for us, item by item?
A Well, there is Subheading A, Sources of Informa-
tion. B, Application of Statutory Factors. One under
that. Character of Business. Two under that, Capital
Employed. Three, extent of risk assumed. Fourth, con-
tribution to the defense effort. Five, efficiency. Six, rea-
sonableness of costs and profits.
A under that, costs.
B under that, pricing.
C, profits. And then a large C, capital C, entitled
“Special Matters”, and then a capital D, Conclusion and
Recommendation.
Q Could you describe generally what is included in
the heading “Sources of Information,” without revealing
anything that should not be on the public record, but
just what types generally of information are contained
there?
A For example, it states that performance data were
[32] filed and indicates the file period. This is for the in-
formation of the reviewer. The report refers him to the
case file, to examine the performance data.
Q Is that all that is referred to?
A Well, in this particular case the contractor did
not submit a statement of factors. It makes that state-
ment. And the third point is that there was no visit
to the contractors of this plant. That’s all there is.
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96
Q Is there, under Heading B, Application of the
Statutory Factors, a place where the contractor is com-
pared with other contractors, producing the same or
similar product or using the same or similar processes?
A I don’t see’ any comparison with respect to the
factors here.
Q Could you tell us again generally what kind of
information is contained under Heading C, Special
Matters? ;
A This referred to a claim which the contractor has
outstanding against someone.
Q Is that all that is contained?
A That’s all.
Q And what is contained in Section D?
A Well, this is the conciusion and recommendation,
and the final language is “It is accordingly requested
that the Eastern Regional Board recommend to the Re-
negotiation Board that a clearance notice be issued to
the contractor for [33] the year in question.”
Q- Have we now gone completely through the report
of renegotiation?
A We have.
Q Would you then turn to the memorandum by the
reviewer in the Office of Review to which you referred.
A All right.
Q Could you describe that document in some detail?
Does it have any headings, for instance?
A Well, it has headings “Business, Costs and Ex-
penses”’—
Q Excuse me. Do those have Roman Numerals or
letters or anything?
A No, they are just headings without Roman Nu-
merals. ,
Q Could you give those to me then, please?
A Business, costs, and expenses, selling and adver-
tising, general and administrative expenses, government
assistance, net worth, performance information, statutory
factors, recommendation.
How many pages are in that document?
A Oh, a little more than two pages, single-spaced.
97
Q. Going to each one of those headings now, could
you tell us just generally again what is contained under
each one of them?
A Well, under Business, there is a description of [34]
the—a short description of the product involved. Under
the Costs and Expenses, selling and advertising; general
administration, there is a short discussion of the pertinent
statistics. Under Government assistance, there are statis-
tics with respect to type and amount of Government
assistance. Net Worth sets out again the figure, noting
‘what the figure was in the prior year. Under Perform-
ance Information, there is a general summary of the
comments of the various Government agencies on the
contractor’s performance.
And then under the Statutory Factors there ‘is a very
short characterization of the—well, actually, under the
Statutory Factors, this is simply a summary of the Part
2, it sets forth here the summary of the Part 2 and
indicates that he is in agreement with the Renegotiator’s
summation of the factors. And then the recommendation
concludes: “In view of the above it is recommended
that the contractor be given a clearance notice.”
Q When you went through that file I did not hear
you indicate at which point the Board gave its approval
to the recommendation.
A Well, that would be in another file. This report
of the Office of Review, the comments of the Office of
Accounting, the Report of Renegotiation, would all be
presented to the Board for:consideration at a Board
meeting.
And the case would appear on the Board’s agenda,
and the [35] Board—I assume in this case, since a clear-
ance was. issued—the minutes would simply record the
Board approved the clearance. This is the typical minute.
Q Did you say there was a separate file that con-
tains this information?
A What information?
Q That you just went through. I believe you stated
a moment ago that there was a separate file?
A No, I was simply trying to—
98
MR. GOLDBLOOM: No, he was explaining how—
THE WITNESS:
A —how this came before the Board.
BY MR. SCHAUMBERG:
Q Right.
THE WITNESS:
A And I was explaining that in this case as in all
other Class A cases like it, typically each Board member
would receive a copy of the. Review_of_Determination,— —.
a copy of the reviewer’s recommendation—if there was
one. In this particular case there was one. In some
cases you wouldn’t even have this—and also a copy of
the Report of Renegotiation. Those three documents
would be presented to each Board member. Each would
receive a copy for consideration at the next Board meet-
ing. This gives the Board member, then, the time to
examine any other documents in the [36] file that they
wish to examine prior to the Board meeting.
But you can understand, because of the limitations,
is is impossible to make five copies of a case file for
Board consideration, so these documents are selected for
this purpose from a case file and give the Board mem-
ber a lead into the case.
Q Are there then, in fact, five copies made of these
Jocuments that are given to each Board member?
A I’m afraid to say this, but I think there are more
than five.
Q More than five?
A We try to keep the number dowr; but...
Q Are those files kept with the case files, those five
files that contain these documents?
A No, those extra copies are retained by the Board
members.
Q Doesn’t—
A and from time to time there is a housecleaning.
Q Does the Board member ordinarily bring his file
to the meeting of the Board?
A He does.
99
Q Does the Board member ordinarily make any writ-
ten comments on the file which he was given?
A [Shakes head negatively] It would be an excep-
tion.
Q Going back for a moment to what is contained in
the [37] file that each Board member receives, you stated
that he obtains a copy of the report of renegotiation, and
then you said that he also receives two other documents.
Could you tell me again what those two other documents
are?
A _Well, the report of the Office of Accounting and
the report of the Office of Review. Those are the two
offices which review the case.
Q This is a little bit unclear’ to me: I believe you
stated the first time that one document, you called it
“The reviewer’s recommendation,” which you said is not
given in every instance but was in this instance—
A He gives his recommendation, but he sometimes
does not file a memorandum.
Q In the file that we just went through there was
indeed. such a memorandum.
A There was a memorandum. May I also clarify the
record here. The Review of Determination is a form
which has at the bottom a provision for indicating con-
currence or disagreement by the Office of Review, and
there is a box in which the reviewer can check if he
concurs or disagrees, and there is a box in which the
Director of the Office can check whether he concurs or
disagrees.
Now, in this particular instance, in this case, the
reviewer concurred in the recommendation of the nego-
tiator of the Regional Board, and filed a short memo-
randum which is, [38] in effect, a part of this document
which you call “Review of Determination.” The Acting
Director of the Office of Review also indicated concur-
rence in the box after the Director’s name. There are
instances where the reviewer and the Director will dis-
agree and the disagreement comes befuyé th Board. It is
indicated in this manner. And where there is a disagree-
ment which might, as in this case for example, if the
Acting Director disagreed with the memorandum of the
100
reviewer, he may have also filed a memorandum indi-
cating his disagreement with respect to some point.
Q That did not happen in this case?
A That did not happen in this case.
Q What then happens when the Board members get
together after having read their respective files?
A Well, they come to the Board meeting and vote on
the recommendation.
Q And on what would you say their decision is based?
A Well, it certainly isn’t about to be based, ever,
“on any opinion finally expressed in any one of these docu-
ments. Many times a Board member will agree to a
clearance, in this tase for none of the reasons stated in
the staff document. He may have his own reasons. His
own assistants may have checked out some point that
was bothering him, that he didn’t even discuss with his
colleagues. But the important thing is the informality of
our procedure, whereby we [39] all agree that we agree
on the results.
Q Excuse me. I didn’t hear that.
A_ I say, when we agree, we agree on the result. We
do not ratify or approve any one of these reports.
Q You are suggesting that the result can be separated
from the reasons?
A Iam not only suggesting it, I am saying it. Just
as a practical matter, this is the only way the Board
can do its job. You understand that it’s our mandate to
eliminate excessive profits where these exist. And when
they don’t exist it makes no sense to debate whether
this particular document should be approved.or some
othe: document should be approved. We will have cases
where the reviewer may disagree with the negotiator
now on Part 2 out in the region. If we get the same
result as the negotiator out in the region, that doesn’t
an actual issue between the reviewer and the negotiator
on a particular point. This is unnecessary.
Q Taking the file that’s now before you, you say that
it is the job of the Board to determine whether there are
excessive profits. And you say there is no reason to
engage in a debate where there are none. How do you
know there are none?
101
A Well, each one, each Board member, for reasons of
his own, will conclude in the case that the profits are
not [40] excessive. But the views of one Board member
may not coincide with the views of another Board mem-
ber. That is, they may both agree on the result, but they
may not necessarily agree on the evaluation of one par-
ticular factor or another.
Q Is there any document which states the reasons why
the Board approves the clearance recommended by the
Regional Board? . a
A There is no Board- approved “document, in that
instance.
Q Is there any document which shows that a Board
member might have disagreed with the result?
A In some cases, a Board member may have also
filed a memorandum before the Board for their infor-
mation, and say that “I disagree with the clearance.”
Q But there was no such separate Board memoran-
dum member in this particular file?
A Not in this case.
Or there may be.cases where the Board member simply
may have orally expressed a view, which is not recorded
anywhere, and said, “I dissent.’
Q Do your minutes reflect such dissents?
A If the Board member would file a document for
the Board’s file, the minutes would show the words of
the Board member’s document in the file, yes.
Q But would the minutes reflect that he dissented
from {41} the result?
A Oh, yes.
Q Would the minutes reflect the reasons for his dis-
sent if he gave them orally?
A No.
Q Would the minutes reflect the reasons for Board
concurrence if those were given orally?
A No.
Q Do you have available to you at this time the
earlier file?
A Yes.
Q Without asking you to go through that entire » file,
perhaps you could simply refer to the last several docu-
102
ments which show why that file, rather than going
through the “Clearance without Assignment’ procedure,
resulted in assignment?
A The only document I find that sets forth the
reasons for assignment is the document I discussed first
in this other file, the “Assignment, Suggestion and No-
tice.”
Q That same document is contained in the file that
you are looking at right now?
A Yes, a copy of that document is in this file.
Q Is there a prior document which explains why those
particular topics were suggested for review?
A I don’t find any other memos on the point. Or any
[42] memo for that matter.
Q Is there a screening report in that file, Chairman
Hartwig?
A I don’t see one here. I will have someone look for
the screening report after the luncheon recess.
Q Chairman Hartwig, I am still confused on one
aspect of your earlier testimony. You stated that here
each Board member gets—or at least in this case got—
three documents, one of which was the Report of Re-
negotiation, another being the Reviewer’s Recommenda-
tion. Now, is that the same as the Report of the Office
of Review?
A I think you can say that that is the Report of the
Office of Review. But let me make this clear: the Re-
port of the Office of Review is entitled “Review of the
Determination.” That’s a form, which sets forth as I
said before a short description, one-sentence description
of the products, the name of the contractor, the fiscal
year, the renegotiable sales and profits, and the non-
renegotiable sales and profits of the contractor, with
provisic:: down below for the signature of the reviewer
and of the Director, to indicate whether he concurs or
disagrees with the Region’s recommendation.
The memorandum of the reviewer technically, I sup-
pose you would say is a part of this Review of Determin-
ation. In some cases the reviewer does not submit a
memorandum.
103
Q And then the third document is the Report of the
[43] Office of Accounting?
A That’s right.
Q That the same as Part 1(a) of the Renegotiation
Report?
A No, that is the report prepared by the Office of
Accounting at headquarters, commenting on the Part
l(a). .
_. Q Could we just v
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