# Appendix — Renegotiation Bd. v. Grumman Aircraft Engineering Corp. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386414_0403%3A01 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1975 - **Citation:** 421 U.S. 168 ## Text eee 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 Segein RAK WRB Bei hs a | BETSY TERE HORE Bag poe eRe Paes CoM 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 -<— 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 B [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386414_0403%3A01. Public record. Not legal advice.