Opposition Brief — Lord Manufacturing Co. v. United States

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Constitution and Statutes:

Page

Constitution of the United States:

ee SI Sear asain a enue chee co sn enl 21, 22

Act of June 25, 1910, as amended (35 U.S. C. 68)...... 20, 25

First War Powers Act (50 U. S. C. App. 601).......... 29

Internal Revenue Code:

I I Cg rs es a ei bak Ola a eeawes 15

Revenue Act of 1943 (Act of February 25, 1944, c. 63,

Title VIII, 58 Stat. 21, 92 50 U.S.C. App. 1192) :

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Royalty Adjustment Act (Act of October 31, 1942, 56

Se Se ee es ss Sree ee eae eae

Selective Training and Service Act of 1940 (Act of Sep-

tember 16, 1940, c. 720, 54 Stat. 885, 892, 50 U. S. C.

App. 309) :

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Miscellaneous:

Executive Order 9001, dated December 27, 1941 (6 F. R.

NE es See CAL eek AN TEAS Ch OND Re RKEE eee wD 29

Executive Order No. 9493 (9 F. R. 12860)............. 19

Yuthe Supreme court of the Vinited States

OcToBER TERM, 1949

No. 570

Lorp MANUFACTURING COMPANY, PETITIONER

v.

THE UNITED STATES

ON PETITION FOR A WRIT OF CERTIORARI TO THE

COURT OF CLAIMS

BRIEF FOR THE UNITED STATES IN OPPOSITION

OPINION BELOW

The opinion of the Court of Claims (R. 31-101) is

reported at 84 F’. Supp. 748.

JURISDICTION

The judgment of the Court of Claims was entered

on July 11, 1949 (R. 102). Petitioner’s motion for

a new trial, seasonably filed, was denied on October

3,1949 (R. 102). By order of Chief Justice Vinson,

dated November 1, 1949, the time for filing a peti-

tion for a writ of certiorari was extended to Febru-

ary 16, 1950 (R. 217). The petition for a writ of

certiorari was filed on January 31, 1950. The juris-

diction of this Court is invoked under 28 U. S. C.

1255.

QUESTION PRESENTED

Whether, in the circumstances of this case, an

award fixed on the basis of petitioner’s costs in

full, as shown by its books, plus 10% profit, consti-

(1)

i.

2

tutes ‘‘fair and just compensation’’ for necessary

war goods furnished under orders issued, in 1944,

by the War and Navy Departments pursuant to

Section 9 of the Selective Training and Service

Act of 1940 (providing for mandatory orders to

produce war materials) and to Title VIII of the

Revenue Act of 1943 (‘‘Repricing of War Con-

tracts’’).

STATUTES INVOLVED

The pertinent provisions of Section 9 of the

Selective Training and Service Act of 1940 (Act

of September 16, 1940, c. 720, 54 Stat. 885, 892, 50

U. 8. C. App. 309) and of Title VIII of the Rev-

enue Act of 1943 (Act of February 25, 1944, «.

63, Title VITT, 58 Stat. 21, 92,50 U.S. C. App. 1192)

are set forth in the Appendix, infra, pp. 31-35.

STATEMENT

In 1944, petitioner furnished aircraft mountings

to the War and Navy Departments (Services) un-

der (1) two orders, one issued by each of the Serv-

ices under Section 9 of the Selective Training and

Service Act (Appendix, infra, pp. 31-33), requiring

petitioner to deliver to the Services specific quanti-

ties of its mountings, (2) two contracts wherein

petitioner agreed to deliver certain of its mount-

ings to the Navy at prices which, if they could not

be redetermined by mutual agreement, should be

fixed by the Secretary of the Navy under Title

VIII of the Revenue Act of 1943 (Appendix, infra,

pp. 33-35), and (3) a repricing order issued jointly

a

3

by the services under Title VIII and applicable to

all products thereafter furnished, directly or indi-

rectly, to the Services. Section 9 empowered the

Government to place mandatory orders to produce

war goods, and provided for the payment to the

manufacturer of compensation which ‘‘shall be fair

and just’. Title VIII authorized the unilateral

fixing or refixing by the Government of prices of

articles required for war contracts and subcon-

tracts, if a ‘‘fair and reasonable price’’ could not

be negotiated with the contractor, and established

ultimate court determination of ‘‘fair and just

compensation for the articles and services fur-

nished under the terms of the [price-fixing]

order.’’ The Services determined the statutory

‘‘fair and just’? compensation for the mountings

supplied under the above orders and contracts by

fixing a price which allowed petitioner’s costs in

full as shown by its books plus a profit of 10%.

Petitioner, dissatisfied with this award, filed two

complaints in the Court of Claims, one on Septem-

ber 28, 1945 (amended on April 8, 1948), under

Section 801(c) of Title VIII (R. 1-17), and the

other on September 5, 1946, under Section 9 (R.

18-30). In these complaints, petitioner claimed

that its established list prices should be accepted as

the measure of compensation (R. 11, 20), and sought

judgment of $512,534.09, the difference between its

list prices and the compensation fixed by the Serv-

ices (R. 12, 21,87). The Court of Claims, however,

after making extensive and detailed findings of

a

4

fact (R. 31-87), approved the Services’ determina-

tion as fixing the ‘‘fair and just’’ compensation

prescribed by these statutes (R. 100). The facts

found by the Court of Claims, and on which it based

its conclusion, may be summarized as follows:

A. Background: Petitioner, a Pennsylvania cor-

poration with its principal place of business in

Erie, Pennsylvania,’ is engaged in the manufacture

of devices called ‘‘mounts’” or ‘mountings’

which are designed to absorb vibration (R. 31-32).

H. C. Lord initially manufactured mounts for use

in industrial equipment but subsequently made

them for use in aircraft where the absorption of

vibration is of vital importance, due to the neces-

sity of protecting sensitive flight instruments from

the vibration of heavy engines (R. 32).? During

the course of the years, patents were secured by

Lord and his son, Thomas, both on developments of

their own and by acquisition (R. 34, 81).*

? Petitioner’s business was founded as an individual enter-

prise in 1919 by H. C. Lord, a patent attorney. In 1935, a

partnership was formed between H. C. Lord and Blanche M.

Hartman (now Mrs. H. C. Lord) with interests of 90% and

10% respectively. The transition to the present corporate

form took place in 1940. During the years 1940-1944, H. C.

Lord was president of the corporation and owned 50% of

the stock; Mrs. H. C. Lord, secretary-treasurer, owned 33%

of the stock and Thomas Lord, H. C. Lord’s son, was vice-

president, with 17% of the stock (R. 31-32).

? Up to the early 1930's, all-weather flying was virtually

impossible because flight instruments did not give consistently

accurate readings on account of destructive vibrations trans-

mitted to the instruments from the aircraft’s frame (R. 32).

* The Army considered the problem of vibration absorption

in aircraft of such importance that in 1934 it established a

special laboratory in Wright Field to aid in its solution. Ex-

5

The court below stated that gradually Lord’s air-

craft mounts became generally accepted by the in-

dustry, almost to the complete exclusion of other

products; from 1932 to 1942, petitioner occupied

‘‘a dominant place in that field with little or no

real competition’? (R. 34-35). One or two com-

petitors entered the field in 1941, followed to a

larger extent during 1942 and 1943 by others ; these

competitors, however, manufactured only one or

very few types of these products (R. 37, 38). Peti-

tioner remained the only concern producing a full

line and for many items was the sole source of

supply (R. 37-38).° All during the war period

petitioner, its subcontractors working under its

instructions, and its competitors generally worked

tensive work was carried on especially by one W. E. Stitz, a

War Department aeronautical engineer. In 1939 Stitz ob-

tained a patent on a mounting which he developed and which

was an improvement on the Lord mounting. Stitz assigned

his patent shortly after its issuance to Lord, “subject to a

license retained by the United States Government for govern-

mental purposes” (R. 34).

4 The so-called Lancaster mounting was used by the Navy

until 1938 when it was replaced by the Lord mounting (R. 33).

5 During the early years of the war, petitioner’s products

were the only ones approved under Army specifications (R.

35, 40). Moreover, where petitioner’s mounts were already in

use, competitors’ products were not always interchangeable

and it was therefore necessary to obtain petitioner’s parts for

maintenance purposes. None of the competitors had the back-

ground of petitioner’s engineering experience and research

and, as a rule, engineering services comparable to petitioner's

were not furnished to the purchasers of their products. In

addition, purchasers were often reluctant to take the new

firms’ products in place of those of petitioner which were

of a high character and had proved satisfactory over several

years of use and with which they were familiar. (R. 38.)

6

at full capacity in order to supply the needs of the

Services (R. 38).

Petitioner first began to show profits in 1935 and

thereafter earned slowly increasing profits until

1940 (see chart infra; R. 35). With the com-

mencement of the National Defense program and

the placement of large orders for aircraft by the

War and Navy Departments, petitioner’s profits

increased tremendously due to the great demand for

the aircraft mountings (R. 35). The following

chart sets forth petitioner’s total sales and profits

(before taxes and renegotiation) * from 1936-1943

and for the first ten months of 1944 (R. 35):°

Year Sales Profits Percentage

of profit

on cost

MG oshwetcenatcs. $138 676.95 $36 594.43 43.05

ee 181,860.47 38 , 285.38 32

ee 217 ,495.72 49,174.15 35.92

JRE See 414,493.19 125 , 183.68 53.

nn Se a ee 2,167 ,621.11 1,225 ,092. 23 172.18

WP hashes isis sx 4,952 433.59 2,857 ,692.80 168.13

RE ee 13 901,571.19 7, 328,588.35 123.10

Ms Sieh satel sc 29 , 266 ,080. 49 12,077 ,313.59 74.08

1944 (10 mos.)...... 28 ,052 , 766 .02 9,769 274.25 56.28

* Until 1940, petitioner was still a relatively small concern.

On April 1, 1940, petitioner had only 170 employees but, by

the end of 1942, the number of its employees had increased

to 1850 (R. 35).

* Determinations were made under the Renegotiation Act

that petitioner’s profits were excessive in the amount of

$5,200,000 for 1942, $10,250,000 for 1943, and $7,750,000 for

1944. Petitioner has filed petitions in the Tax Court of the

United States contesting these determinations and claiming it

realized no excessive profits during the years in question.

These suits are now pending. Lord Mfg. Co. v. United States,

T. C. 22-R (1942); Lord Mfg. Co. v. War Contracts Price

Adjustment Board, T. C. 353-R (1943); T. C. 603-R (1944).

* During these periods, Lord, his wife and son received the

following amounts as salaries, partnership profits, and cor-

poration dividends (R. 36):

a

a

7

Petitioner had developed and put on the market

the products here involved before our entry into

war (R. 38). With little competition in some in-

stances, and in most instances without any compe-

tition, petitioner established prices prior to the war

which were continued with little or no changes until

October 2, 1944, the effective date of the Title VIIT

repricing order involved here (infra, pp. 14-18;

R. 38). These prices were based not upon any fixed

formula or percentage of profit, but ‘‘ what the traf-

fic would bear’’ (R. 38).° The only general price

change of consequence during its entire existence

was a general 15% increase made in November 1939

(R. 38). Petitioner was generally successful in re-

sisting efforts to secure price reductions and con-

sistently refused to give cost breakdowns to

prospective purchasers (R. 38-39). When faced

with a competitive situation as to some of its

products during the war period, petitioner sought

to stifle competition by notifying prospective pur-

Year H.C. Lord Thomas Lord Mrs. H. C. Lord

Se Sis icir. eee $40 994.03 $5,050.00 $4,554.89

MES So twads ess cies 46 ,672.24 5,327.27 5,185.80

Soe tein gee cease 59,708.65 6,010.20 6,634.29

DN tn oes 150 ,978.63 7,496.59 16,773.40

We GWiktdhcacases 160 ,617.09 79,375.00 36,591.03

ERE ere ree ty 109 ,500.00 135 ,000.00 49 ,500.00

ARP eee roe 109,500.00 135 ,000. 49 ,500.00

Ps eed wk aoe 109 , 500.00 135 ,000.00 49 ,500.00

RON oh co as os hase 109 , 500.00 135 ,000.00 49,500.00

The net worth of the business increased from about $130,000

in 1936 to about $1,000,000 in 1940, to 41% million dollars in

1944; this increase was attributable solely to the reinvestment

of profits (R. 36-37).

®In almost all cases, particularly for its most important

product, the expensive so-called dynafocals, no reduction in

price was allowed for large orders (R. 38).

a

a

chasers of competing products as to its patent hold-

ings and their potential liability for patent in-

fringement, with the result in many instances that

the prospective purchaser sought petitioner’s

product even at a somewhat higher price rather

than risk incurring liability for patent infringe-

ment (R. 39).° Although the competitors’ prices

became generally lower than petitioner’s," for

various reasons, including the patent situation and

desperate need for mounts (see, fn. 5, supra, p. 5),

petitioner supplied to the Services about 60% of

all aircraft mounts during the war years (R. 39).

These mounts were both sold directly to the Serv-

ices and also supplied to airplane manufacturers

who had prime contracts with the Government

(R. 39). ‘‘Because of the conditions under which

these mounts were produced and sold by [peti-

tioner], both prior to and during the war period,

the prices charged therefor by [petitioner] were

not fixed in a real competitive market’’ (R. 39).

In August 1942, after a short period of letting

contracts without requiring estimates of costs or

profits, the Air Force adopted the common business

practice of requiring contractors in fixed price

1° Petitioner consistently refused, even during the war, to

grant any of the many requests for licenses under its patents

(R. 82).

11 Initially, the competitors’ prices did not differ greatly

from petitioner’s. In some instances, they were higher and

in others they were lower. But with the acquisition of ex-

perience and increase in volume, the competitors’ prices were

reduced until, by 1944, they were generally lower than peti-

tioner’s. (R. 39, 82-85.)

|

prime contracts over $25,000 to submit cost break-

downs and proposed profits (R. 40). While there

was no fixed limitation on allowable profits, the

system was designed not only to prevent excessive

profits but to allow profits commensurate with the

risks assumed and services performed (R. 41).

The profits allowed normally ranged from 6% for

manufacturers such as petitioner, who were merely

continuing to manufacture their normal peacetime

products, to 10% for contractors venturing new

untried fields or performing extraordinarily diffi-

cult operations (R. 41).”* This system received an

almost unanimous acceptance by contractors and

under it approximately 77 billion dollars worth of

materials and supplies were procured (R. 42). Al-

though most large procurements involved patented

items, no claim was made, except by petitioner, that

contractors thereby became entitled to larger pro-

fits (R. 42)."*

12 An Air Force cost analysis branch was created to analyze

cost breakdowns submitted by contractors with the branch’s

approval administratively required on all contracts for more

than $25,000. If the branch questioned the fairness or rea-

sonableness of a price, conferences were normally arranged

with the contractor in an attempt to arrive at a mutually

agreeable price. (R. 40-41.)

13 Ten per cent on fixed price procurements was generally

accepted and considered as the top allowable limit. In a few

exceptional instances, because of very special circumstances,

12% profit was permitted. Since these allowances were gen-

erally based on estimated costs, the profits actually realized

were subject to renegotiation during most of the war. (R. 41-

42.)

14 Navy Department procurement was similar to the Air

Force’s with the exception that the Navy generally considered

12% profit on estimated cost as the top limit and the profits

: me

B. Events leading up to orders here involved:

(1) Section 9 order of War Department: In No-

vember, 1942, petitioner refused to furnish the

cost breakdown requested by the Air Forces in

connection with a comparatively small contract,

and referred to a general audit previously made of

its 1941 Air Force contracts (R. 42-43). Since

that audit showed (1) profits on individual items

ranging from 42 to 808%, (2) net profit for 1941

of 2.8 million on about 5 million dollars of business

done, and (3) an indicated profit on some of the

items involved in the proposed procurement rang-

ing from 140 to 275%, petitioner’s officials were

requested to come to Air Force Procurement Head-

quarters at Wright Field to discuss prices (R.

43). At the conference, petitioner refused to re-

duce its prices, claiming, inter alia, that since its

products were patented, it could charge any price

that the market would bear and further that since

commercial purchasers had paid these prices over

a long period of time, the prices it was charging

were only established commercial prices (R. 43).**

Despite the cost analysis branch’s adverse recom-

mendation, the procuring officials reluctantly pur-

chased these items from petitioner at its list prices

because it was the sole source of the items which

were urgently needed to maintain mounts already

it allowed ranged from 10 to 12%, likewise without regard

to whether the items procured were produced under patents

. (R. 42).

1° This position was subsequently elaborated upon in a long

memorandum submitted by petitioner’s president on December

28, 1942 (R. 43-44).

| 11

installed (R. 44). Thereafter, at various times

throughout 1943, similar procurements, although

likewise disapproved by the cost analysis branch,

were necessarily made from petitioner by Air

Force procurement officials (R. 44).

In January, 1944, after a conference with the

Kastern Procurement District procurement offi-

cials,’* at which it reiterated its consistent position

on prices (see supra, pp. 7, 10), petitioner finally

acceded and submitted a cost breakdown in connec-

tion with $650,000 worth of mounts and spare

parts which the Air Forces needed (R. 45). Since:

the breakdown showed that petitioner proposed to

make a 64% profit on one group of items and

39.8% on the other, the proposed procurement was

disapproved (R. 45). Upon the refusal of peti-

tioner’s vice-president to accept a contract based

on prices adjusted to reflect 10% profit, the matter

was referred to Wright Field (R. 45). Ata

further conference at Wright Field on March 22,

1944, Air Forces officials, in order to secure ur-

gently needed products available only from peti-

tioner on a voluntary basis, offered, subject to

the approval of the Secretary of War,” to pur-

16In 1943, Air Force procurement activities, relating to

products such as petitioner’s, were decentralized to the Eastern

Procurement District of New York City, which, although it

had the same experiences with petitioner, out of necessity con-

yg , purchase petitioner’s products at petitioner’s prices

(R. 45).

1 The offer was conditioned on the approval of the Secretary

of War because the 15% profit proffered exceeded the generally

accepted 10% top limit profit which had been approved as

fair and reasonable for this type of Air Force fixed price

contract (R. 46). See supra, p. 9.

a

12

chase the products on the basis of petitioner’s

estimated costs, as disclosed in its cost breakdown,

plus a 15% profit (R. 46). Petitioner, however,

failed to give any answer within the requested

period or even after further exchanges of wires

(R. 46-47).

On May 19, 1944, an order dated May 6 (desig-

nated as ‘‘Compulsory Order No. W 33-038 ac-

2753”’) of the Under Secretary of War, acting

under Section 9, was sent to petitioner, requiring

it to furnish specified quantities of 61 of its

products * to the War Department (R. 51-53).

Petitioner thereafter submitted a ‘‘Price Analy-

sis’? of the items covered by the order, which

showed, on petitioner’s prices, a loss of 11% on one

item and of .0036% on another, profits ranging up

to 337% on the others, with an over-all profit of

43.84% on all 61 items (R. 56). Subsequently, peti-

tioner, in formally acknowledging the order for

the first time, enclosed its price schedule, with the

comment that ‘‘We know of no other relevant data

for the determination of appropriate prices, except

these schedules * * *”’ (R. 57-58). Because

18 The orders embraced the items as to which the Air Forces

had unsuccessfully sought a basis for voluntary agreement

since they had been unable to obtain quotations on these items

from any other source (R. 52).

The order stated that petitioner would be paid “fair

and just compensation” and authorized it to submit “such

data as in your opinion may be pertinent to the determination

of such reasonable price” (R. 53). The letter of transmittal

advised petitioner that if it so desired, negotiation to arrive

at satisfactory prices with a view to superseding the order

by a voluntary agreement would be permissible (R. 54).

a

wal

of negotiations looking toward voluntary agree-

ment as to prices, the War Department deferred

fixing compensation under this order. These prices

were fixed on October 24, 1944, on the same basis

as the prices in the Title VIII repricing order (R.

81). See infra, pp. 16-17.

(2) Navy Department Section 9 Order: At or

about the same time, the Navy required four items,

on which petitioner among others had submitted

bids (R. 47). The Navy preferred petitioner’s

products but inasmuch as petitioner’s prices were

substantially higher, the Navy sought through

negotiation to have these prices reduced (R. 47).

Upon the failure of these negotiations, the Navy,

also acting under Section 9, on April 27, 1944, placed

an order (designated ‘‘Compulsory Order No. 2’’)

with petitioner for specified quantities of the four

items in question (R. 47-49).” In response to

petitioner’s protest of May 3, which similarly en-

closed its price schedules for the articles, with the

comment: ‘‘ We know of no other relevant data for

the determination of appropriate prices’’ (R. 50)

(supra, p. 12), the Acting Secretary of the Navy on

May 16, stated ‘‘that, according to your own figures,

your prices exceed your costs by 131%”’ (R. 51).

On May 27, the Secretary of the Navy made his

determination of reasonable prices, totalling $85,-

13

2° The order was similar in text to that of the War Depart-

ment. See fn. 19, p. 12, supra. Both orders are set out in full

in the findings of the Court of Claims at R. 47-49, 51-53.

“a

—

14

302.70, on the basis of a report, made by Navy rep-

resentatives after examining petitioner’s books,

which showed that by allowing every cost item ap-

pearing on the books, including all administrative

overhead, selling and patent expenses, petitioner

would have made $113,067.10 profit on its originally

quoted price of $189,840, a profit of 147% on cost

(R. 54). The prices were fixed by the Secretary

of the Navy to yield petitioner profits of 10% on

the prices so fixed, and 11.1% on cost (R. 55).

(3) Navy Contracts of June 29 and July 24, 1944:

On June 29, and July 24, 1944, respectively, the

Navy entered into two contracts with petitioner

for the furnishing of certain products (R. 58).

Each contract contained a ‘‘Price Redetermina-

tion’’ provision, which, after stating that “ ‘the

prices specified herein * * * are the prices quoted

* * * by the Contractor,’ ”’ provided that the par-

ties should negotiate for a redetermination of

prices by mutual agreement and in the event of

failure of these negotiations, the Secretary of the

Navy could fix prices under Title VIII of the Rev-

enue Act of 1943, and petitioner should have all

remedies available thereunder (R. 58-59).

(4) Title VIII Joint Repricing Order: Mean-

while, on June 13, 1944, a meeting was held between

representatives of petitioner and the Services to

ascertain whether a voluntary agreement could be

reached as to the items covered by the two orders

under Section 9 and also to reexamine the entire

_—

15

procurement relationship between petitioner and

the Government, including both its prime and its

subcontracts (R. 56). Despite renewal of the

Army’s offer to pay prices based on estimated costs

plus 15% profit (see supra, pp. 11-12), no agree-

ment was reached (R. 57). Further meetings and

negotiations took place on July 13, July 20, and

other times, at which the Services proposed an

interim 32% discount on petitioner’s list prices

pending fixing of prices on a realistic cost basis (R.

59-63). Petitioner indicated that it would accept

these terms in consideration of the ‘‘ promise of the

Services of their cooperation and assistance in

providing a sound financial condition of the com-

pany and of the receipt of such relief’? (R. 63).

Subsequent negotiations revealed that petitioner

was conditioning its acceptance not only on ap-

proval of outstanding applications for certificates

of necessity under Section 124 of the Internal Rev-

enue Code, permitting accelerated amortization for

tax purposes, but also on freedom from statutory

renegotiation (R. 63-64).” See supra, p. 6, fn. 13,

p. 9; R. 41-42. The whole problem was further

discussed at a large conference on August 29 and

upon failure to agree, the Services finally con-

cluded that they had no alternative but to com-

mence formal proceedings under Title VIII for

*1 Although it was against petitioner’s policy to avail itself

of direct government financing, petitioner by May 1944 had

applied for and received certificates of necessity under Section

124 of the Internal Revenue Code for its expanded emergency

facilities in the amount of approximately $3,700,000 (R. 36).

——_

16

the entire repricing of petitioner’s products which

were being supplied, directly and indirectly, to the

Services (R. 64-65).

On August 30, 1944, the Services delivered to

petitioner identical letters headed ‘‘Requirement

to Negotiate Fair and Reasonable Prices,’’ setting

a time and place for meeting for that purpose (R.

65-66, 67).” Preparatory to the meeting, the Serv-

ices conducted a joint examination of petitioner’s

books which disclosed that on the basis of its cur-

rent costs, petitioner would make 73.36% profit on

its unfilled military orders, as of June 30, 1944, of

approximately $16,000,000, and that petitioner had

made 73% profit on its 1943 business and 86.65%

profit on its January and February, 1944 business

(R. 67).* Since petitioner took basically the same

position at this conference as it had taken at pre-

vious conferences,“ the Services’ representatives

22 The letters stated, inter alia:

Negotiations with you with reference to the prices of

the above-mentioned products have extended over a long

period of time and you have refused voluntarily to agree

to fair and reasonable prices therefor. The prices charged

by you * * * have resulted and are continuing to result

iR oy earning excessive profits from war contracts.

. 66.

8 All of petitioner’s costs, as shown by its books, directly

or indirectly attributable to manufacturing items, were in-

cluded in the computation, including all general overhead,

administrative, and selling expenses as well as patent expenses.

Questionable items were decided on bases most favorable to

petitioner. (R. 67.)

* The only additional offer advanced by petitioner was

the unworkable suggestion that petitioner would meet any of

its competitors’ prices provided certain factors were taken

into consideration in comparing the competitors’ prices with

petitioner’s prices, that is, petitioner would meet a competi-

iil

17

concluded that petitioner was not negotiating in

' good faith and adjourned the meeting (R. 68-69).

On September 23, the Secretaries of War and

Navy, acting pursuant to Title VIII, jointly issued

to petitioner ‘‘ Army-Navy Joint Repricing Order

No. 1.’”’* This order which embraced 655 items—

consisting of practically all of petitioner’s princi-

pal products then being furnished to the War and

Navy Departments ‘‘either directly under prime

contracts with [the] Departments or indirectly

under subcontracts’? (R. 69-72)**—was to be ef-

fective from October 2, 1944, to March 31, 1945

(R. 71), and fixed prices for these items on the

basis of the Army-Navy audit of petitioner’s

costs,” to which was added a profit of 10% on costs

(R. 72).”

tor’s prices provided quantities of orders were the same, the

quality was the same, the delivery dates were identical, and

the relative amounts of governmental financial assistance were

comparable (R. 68-69).

25 Copies of the order were sent petitioner’s customers ad-

vising them of the new prices applicable to petitioner’s

products covered by the Order (R. 72).

26 The order specifically provided that it did not apply to

the Section 9 orders previously issued (R. 72). See supra,

pp. 10-14.

27 After the Order became effective, the Services established

at petitioner’s plant a “cost inspection office” to discover

such cost changes as might occur from time to time as would

warrant amending the Order, as well as to receive such sug-

gestions as petitioner might have to offer for amendments,

based either upon alleged mistakes in the Order or upon

changed cost conditions. However, no such suggestions were

ever received by the “cost inspection office”. (R. 72.)

28The amount of profit allowed was more than would

ordinarily have been allowed under the Services’ pricing

practice (supra, p. 9), especially since a substantial portion

of petitioner’s work was being performed by sub-contractors,

18

In addition to protesting the Order in identical

letters dated September 30, 1944, to the Secretaries

of War and Navy (R. 72-73),” petitioner, in an

attempt to force the Services ‘‘to rescind the re-

pricing order, or at least to have it modified” (R.

74), notified its customers that effective with the

Repricing Order, they would have to pay cash in

advance for the entire amount of any orders for

items covered by the Repricing Order, that ship-

ments on pending orders would have to be

paid for on a C. O. D. basis, and that its

customary terms of allowing discounts for pay-

ments within specified times was abandoned,

with the new terms ‘‘net cash (no cash discount) ”’

(R. 75-76). The adoption of this policy brought

a large number of complaints and protests; some

customers, because of need for petitioner’s products,

complied, but others refused to deal with peti-

tioner with the result that deliveries fell sharply

during October (R. 77). The Services wired peti-

tioner several times informing it that this new pol- -

but in the circumstances and in the interest of fairness, the

Services decided to allow the highest profit margin which the

War Department was allowing to contractors on such fixed-

price production contracts (R. 69).

*® Petitioner protested on the grounds, inter alia, that “no

effort has as yet been made by the Services to negotiate with

the Lord Company” as required by statute and that the

order “gives no consideration to * * * the fact that the Lord

products are covered and protected by patents and the fact

that the user of Lord products incurs no liability for the

infringement or use of patents” (R. 73).

% This new policy was not to apply to orders or items not

covered by the Repricing Order or to civilian business, as to

which the former practices were continued (R. 76).

19

icy violated the Repricing Order” and was inter-

fering with vitally needed war production (R. 77-

81). Upon petitioner’s failure to revert to its for-

mer terms of sales, the Secretary of the Navy,

on October 25, 1944, acting pursuant to Executive

Order No. 9493 (9 F.R. 12860) specifically author-

izing and directing such action, seized and there-

after operated petitioner’s plant (R. 81).”

For all the items supplied by petitioner under the

orders and contracts here involved, petitioner was

paid, at the prices fixed by the Services, the sum

of $979,050.10 (R. 87). Since it cost petitioner

$885,954.89 to produce these items, petitioner

actually realized a profit thereon of $93,905.21,

a profit of 10.5% on cost (R. 87).% At peti-

tioner’s list prices, which it seeks to establish here

as the measure of compensation, petitioner

would have received $1,491,584.19, and since $605,-

629.30 of that would have been profit, it would have

realized 68.3% profit on cost (R. 87). The differ-

ence between the $605,629.30 profit it would have

31 The Repricing Order provided:

* * * No change shall be made in Lord Manufacturing

Company’s existing usual terms and conditions of sale

with respect to deliveries subject to this order that shall

have the effect of increasing the return to Lord Manu-

facturing Company provided by such prices under such

terms and conditions [R. 70-71].

82 Petitioner’s separate suit to recover compensation for

the Government seizure and operation of its plant is pending

in the Court of Claims. Lord Mfg. Co. v. United States,

C. Cls. No. 47000.

83 The profit actually received was slightly higher than that

estimated since petitioner’s actual costs were somewhat below

those estimated.

oe. aS Lge ol

20

received under its list prices and the $93,095.21

profit received under the Services’ determination is

$512,534.09, the amount which petitioner seeks to

recover in these proceedings. See supra, p. 3.

ARGUMENT

This proceeding is one of several brought

against the Government by petitioner, the dominant

producer of desperately needed aircraft mount-

ings, as a result of petitioner’s persistent refusals,

at the height of the war, to accept for its mountings

anything less than its commercial list prices, which

were set at ‘‘what the traffic will bear’’ and which

netted petitioner fantastic profits, in some in-

stances in excess of 300% on costs.** This case

marks one of the very few instances where the

Services invoked their authority under Sec-

tion 9 of the Selective Training and Service

Act of 1940, and Title VIII of the Revenue Act

of 1943. The Services exercised that authority

here very reluctantly, and only after long-drawn

out efforts to obtain voluntary price reductions

from petitioner convinced them that petitioner was

intent on full exploitation of its patents and near-

monopoly position.

In this case, petitioner is seeking to obtain judi-

cial approval of its list prices as the measure of

**In addition to the instant case, the three renegotiation

proceedings pending in the Tax Court (supra, fn. 7, p. 6), the

suit for the seizure of its plant (supra, fn. 32, p. 19), there are

two suits for infringement of petitioner’s patents brought under

the Act of June 25, 1910, as amended (35 U. S. C. 68). Lord

Mfg. Co. v. United States, C. Cls. Nos. 47714, 47715.

21

compensation for the mountings furnished under

the Section 9 and Title VIII orders. Petitioner

assumes that these orders involved a Fifth Amend-

ment taking of its property and accordingly urges

that it is entitled to the just compensation pre-

scribed by that Amendment. Arguing from this

premise, petitioner contends that its established list

prices constituted the market value of its products,

and hence should have been accepted by the Court

of Claims as the measure of its compensation, ap-

parently without reference to the tremendous

profits it would obtain thereunder. This position,

we submit, is patently unsound and raises no quies-

tions warranting review by this Court.

1. Contrary to petitioner’s flat statement (Pet.

3), the Court of Claims did not hold that the Serv-

ices’ actions resulted in a Fifth Amendment tak-

ing. On the contrary, the court below merely

stated that ‘‘we are inclined to the opinion that

there was a taking of [petitioner’s] property” (R.

98) and went on to comment, ‘‘ However, in the cir-

cumstances of this case, we do not think it particu-

larly important whether it be construed as a

strongly worded order with which [petitioner] re-

luctantly complied, or whether it be construed as a

taking of private property. The net results as we

see them are practically the same.’’ (R. 98.) It

was the court’s position that—regardless of

whether or not there was a taking here, and

whether or not the ‘‘just and fair’’ compensation

22

prescribed by Section 9 and Title VIII may, in

non-taking cases, be less than the Fifth Amend-

ment’s standard—the full measure of the consti-

tutional requirement was satisfied by the adminis-

trative awards in this case. This holding we be-

lieve to be unassailable.”

The decisive test in ‘‘just compensation’’ cases

was recently stated by the Court :—‘‘ Whatever the

circumstances under which such constitutional

questions arise, the dominant consideration always

remains the same: What compensation is ‘just’

both to an owner whose property is taken and to

the public that must pay the bill? The word ‘just’

in the Fifth Amendment evokes ideas of ‘fairness’

and ‘equity’ . . .”? United States v. Commodities

Trading Corp., Nos. 156, 163, this Term (decided

March 27, 1950), slip opinion, p. 2. As summarized

last Term in United States v. Cors, 337 U. 8. 325,

332:

The Court in its construction of the consti-

tutional provision has been careful not to re-

duce the concept of ‘‘just compensation”’ to a

formula. The political ethics reflected in the

Fifth Amendment reject confiscation as a

measure of justice. But the Amendment does

85 If there was no taking, the just compensation clause of

the Fifth Amendment is, of course, irrelevant, except insofar

as its standard may be incorporated in Section 9 and Title

VIII.

We think it easily demonstrable, if the issue becomes

pertinent, that at least the Navy contracts of June 29 and

July 24, 1944 (supra, p. 14) and the joint repricing order

(supra, pp. 14-18) issued under Title VIII (infra, pp. 33-35)

did not involve a taking. Cf. Lichter v. United States, 334

U. S. 742, 745, fn. 1, 787, 788.

23

not contain any definite standards of fairness

by which the measure of ‘‘just compensation’’

is to be determined * * *. The Court in an

endeavor to find working rules that will do

substantial justice had adopted practical

standards, including that of market value.

See, also, United States v. Toronto Naw. Co., 338

U. 8S. 396, 402; United States v. Felin & Co., 334

U. S. 624, 641; United States ex rel. T. V. A. V.

Powelson, 319 U. 8. 266, 279-280; United States v.

Miller, 317 U. 8. 369, 373, 374-375.

It follows from these principles that even if pe-

titioner’s commercial list prices could properly be

characterized as evidencing a ‘‘market value”’ of a

sort,** they should not be used as the measure of its

just compensation. When the application of mar-

ket value ‘‘would result in manifest injustice to

owner or public, courts have fashioned and applied

other standards.’’ United States v. Commodities

Trading Corp., Nos. 156, 163, this Term, decided

March 27, 1950, slip op., p. 2. Cf. United States v.

Miller, 317 U. S. 369; Olson v. United States, 292

U. S. 246; United States v. Cors, 337 U. S. 325.

Petitioner’s list prices did not reflect the type of

market value which sometimes is used as the meas-

36 Tt is difficult to see how the list prices can be equated

with market value just because petitioner insisted on selling

at those prices and its customers purchased at those prices

because they could not help themselves. Market value con-

notes a number of sellers and buyers, and other manufacturers

of these products, who were relatively new in the field, were

selling at prices below those set by petitioner. Supra, p.

8; fn. 37, infra, p. 24; R. 82-5.

24

ure of just compensation, i.e., the price which “a

willing buyer would pay in cash to a willing seller,”’

United States v. Miller, 317 U. 8. 369, 374. On the

contrary, petitioner’s prices were those of a near-

monopolist and were set not on the basis of any

fixed formula or percentage of profit but as the

Court of Claims found (R. 38), at ‘“‘what the traf-

fic would bear.’”’ Before the war, petitioner had a

virtual monopoly of the aircraft mounting field ; it

occupied ‘‘a dominant place in that field with

little or no real competition”’ (R. 34-35). Al-

though some competition did appear during the

war, petitioner resisted it strenuously by threaten-

ing suits for patent infringement (R. 39). Despite

the competition, which nevertheless did secure a

foothold,” petitioner, who remained the sole con-

cern producing a full line and the only source of

supply of many items, continued to supply about

60% of all aircraft mounts (R. 37-38, 39).

The aircraft industry and the Government did

not pay petitioner’s prices willingly; they paid

these prices because they desperately needed prod-

ucts such as petitioner’s which, in many instances,

were produced only by petitioner. The findings

of the court below detail the numerous efforts made

to obtain voluntary price reductions from peti-

tioner and the reluctance of the Government and

*7 Although the competitive prices were higher initially than

petitioner’s, they were generally lower in 1944 as the com-

petitors acquired experience and their volume increased (R.

39).

a

25

the industry to purchase from petitioner, but the

needs of the situation were so imperative that

there frequently was no alternative but to buy pe-

titioner’s mountings at petitioner’s prices. Coupled

with this great need was petitioner’s strategic pat-

ent position, to which the Court of Claims rightly

referred in its discussion of the character of the

‘‘market’’ and the ‘‘market value’’ claimed to be

present in this case (R. 100). As summarized by the

eourt below, ‘‘because of the conditions under

which these mounts were produced and sold by

[petitioner], both prior to and during the war

period, the prices charged therefor by [petitioner]

were not fixed in a real competitive market’’ (R.

39) .*°

Moreover, it would have been unfair to virtually

all other manufacturers as well as the public to

accept list prices returning such fantastic profits

to petitioner as the measure of just compensation.

As pointed out by the court below (R. 101):

38 There is no substance to petitioner’s contention advanced

both in the negotiations with the Services (R. 43, 44, 73) and

in the court below, as well as inferentially suggested here

(Pet. 20, 21), to the effect that the patents embodied in its

products entitled it to its full list prices. Apart from the

fact that practically no other contractor claimed entitlement

to higher profits by reason thereof (R. 42), it is clear that

the Act of June 25, 1910, as amended (35 U. S. C. 68), and

the Royalty Adjustment Act (Act of October 31, 1942, 56

Stat. 1013, 35 U. 8. C. 89-96), were enacted for the express

purpose of making such patented products available directly

or indirectly to the Government at fair and just costs. Cf.

Crozier v. Krupp, 224 U. 8. 290; Richmond Screw Anchor Co.

v. United States, 275 U. S. 331; Coffman v. Federal Labora-

tories, Inc., 171 F. 2d 94 (C. A. 3), certiorari denied, 336 U. S.

913. ,

26

The nation was in great peril—our national

life being at stake. People were necessarily

attuned to the war effort. Men and women

were uncomplainingly permitting themselves

to be drafted for all kinds of difficult war jobs.

Women and even children were driving trac-

tors in the hot sun to produce and supply the

food essential to the world-wide operations of

our army and navy and those of our allies,

Young men, who had never had a fling at life,

were taken from their homes to face hardship

and even death on distant fields. Businessmen

generally and even plaintiff’s competitors

were willingly accepting the 10 percent above

cost for supplies and equipment needed in the

war effort. Every effort was made to mobilize

manpower and materials. At such time it is

unthinkable that a man would insist on profits

of 50 to 100 percent; and it is inconceivable

that any court would allow any such profits as

just compensation. It is true that plaintiff

produced an article of quality. That is to its

credit. It is also natural that those who had

the responsibility of procuring the equipment

for those who were to fight in the air should

want the best. But the doctrine that prices

may be based on what the traffic will bear has

no place in our national economy at such a

time.

In these circumstances, the court below was

plainly justified in rejecting petitioner’s list prices

—whether they evidenced the then market value,

or not—in favor of cost plus a reasonable profit as

the measure of compensation to which petitioner

ees

was entitled. See, e.g., United States v. Commodi-

ties Trading Corp., Nos. 156, 163, this Term (de-

cided March 27, 1950), slip op., 2°; United States

v. Cors, 337 U. S. 325, 333-334; United States

v. Toronto Nav. Co., 338 U. 8. 396; Highland v.

Russell Car Co., 279 U. S. 253; see also the discus-

sion before the Advisory Board on Just Compen-

sation on ‘‘calamity”’ and ‘‘hold-up’’ values set out

in the dissenting opinion in United States v. Cors,

337 U. 8. 325, 341, fn. 3, and in the Brief for the

United States in the Commodities Trading Co.

case, supra, at pp. 64-66.”

39In Eastern Machinery Company v. Under Secretary of

War, C. A. D. C. No. 10309 (decided April 10, 1950), the

Court of Appeals for the District of Columbia Circuit, in an

opinion written by Judge Fahy, rejected a contractor’s claim

that the profits left him as the result of statutory renegotiation

were too small, with the comment (slip op., p. 3):

“There is no constitutional guarantee of more than a

small profit in war work. See Yakus v. United States,

321 U. S. 414, 431 (1943); Bowles v. Willingham, 321

U. S. 503, 519 (1943). We believe that this view is also

supported by the recent decision in United States v.

Commodities Trading Corp., supra.”

*° As for petitioner’s contention that it should have received

its list prices because they allegedly constituted the O.P.A.

ceiling prices (Pet. 13-14), it should be noted, first, that

neither the record before the court below nor the record in

this Court contains sufficient evidence indicating what were

the ceiling prices, if any, applicable to petitioner’s products

sold for military use, and that the Court of Claims made no

finding on the point; secondly, that the claimed ceiling resulted

from a price regulation which merely fixed the maximum at

whatever price happened to be charged by the particular

vendor in January 1942 (Pet. 8, fn. 6) and did not establish

a single ceiling applicable to all vendors in like circum-

stances; and, thirdly, that in the Commodities Trading Co.

decision, swpra, the Court held only that the O.P.A. ceiling

should normally be accepted as the “maximum measure of

compensation” (slip op., p. 7; italics supplied), and not that

28

2. The Services’ determination as to compensa-

tion, which the Court of Claims approved and

which was fixed so as to return to petitioner all of

its costs plus abundant profits considering the tre-

mendous volume of business involved, plainly met

the fair and reasonable compensation require-

ments of Section 9 and Title VIII as well as of

the Fifth Amendment. As to costs, all costs shown

by petitioner’s books, directly or indirectly at-

tributable to manufacturing items, were allowed,

including all general overhead, administrative and

selling expenses, with all questionable items de-

cided on bases most favorable to petitioner (R.

54, 67, 72). This allowance of costs was generous,

since the determination of reasonable costs would

here be a prerequisite to the fixing of fair compen-

sation. It is clear that in so determining costs

at least the salaries paid by petitioner’s officers

to themselves (see chart, supra, fn. 8, pp. 6-7) could

properly have been reduced.

The 10% profit allowed was likewise more than

generous. ‘‘In the interest of fairness,’’ petition-

er’s profits were fixed so as to yield ‘‘the highest

profit margin which the War Department was al-

lowing to contractors’’ on the type of production

here involved (R. 69). This prot figure ‘‘was

more than would ordinarily have been allowed”’

(R. 69) under the Services’ pricing systems which

it established the minimum or usual award. In that case,

the Government did not contend for any figure less than

the ceiling price.

—

29

were almost unanimously endorsed by the coun-

try’s manufacturers who dealt with the Services

(R. 41-42). Indeed, during World War II, Con-

gress frequently limited the fees on cost-plus-fixed-

fee contracts to 6 or 7% of the estimated cost. See,

e.g., 54 Stat. 872, 873 (Army contracts for military

posts, fee not to exceed 6% of the ‘‘estimated cost”’

of the contract) ; 56 Stat. 176, 178 (Army and Navy

vessel, aircraft and other contracts, 7% )) ; and Ex-

ecutive Order 9001, dated December 27, 1941 (6

F. R. 6787), promulgated under the First War

Powers Act (50 U. 8. C. App. 601), providing that

in the absence of other ; fit limitations by appli-

cable statutes, the fixed fee under any cost-plus-

fixed-fee contract executed under the Act should be

limited to 7 per cent of the estimated cost.

The liberality of this determination is further

manifest when projected for petitioner’s produc-

tion of the entire year, translated into terms of dol-

lars as applied to its total volume, and compared

with its comparatively small profits during the

typical pre-war years. It cost petitioner over

$20,000,000 to turn out its 1944 volume.” Prices

yielding 10% profit on such costs, if they had been

in effect for the entire year, would thus have re-

turned profits of approximately $2,000,000 a year.

41 For the first ten months of 1944—a period largely un-

affected by the orders involved here—petitioner’s sales were

approximately $28,000,000, and its profits were approximately

$10,000,000 (see R. 35), leaving costs of approximately $18,-

000,000, or approximately $1,800,000 per month. Over a

12-month period, its costs would therefore have totaled ap-

proximately $21,000,000.

- —a

Ee :. oe

30

This would certainly be a handsome return for a

company such as petitioner which, in the pre-war

years 1936-1939, realized profits averaging only

$62,000 a year.

CONCLUSION

The holding of the court below is clearly correct.

There is no conflict of decisions. It is respectfully

submitted that the petition for a writ of certiorari

should be denied.

Puuir B. PERLMAN,

Solicitor General.

H. G. Morison,

| ssistant Attorney General.

Paut A. SWEENEY,

MELVIN RICHTER,

Attorneys.

May 1950

31

APPENDIX

1. Section 9 of the Selective Training and Serv-

ice Act of 1940 (Act of September 16, 1940, c. 720,

54 Stat. 885, 892, 50 U.S. C. App. 309) provides in

pertinent part:

The President is empowered, through the

head of the War Department or the Navy De-

partment of the Government, in addition to

the present authorized methods of purchase

or procurement, to place an order with any in-

dividual, firm, association, company, corpora-

tion, or organized manufacturing industry for

such product or material as may be required,

and which is of the nature and kind usually

produced or capable of being produced by such

individual, firm, company, association, corpo-

ration, or organized manufacturing industry.

Compliance with all such orders for prod-

ucts or material shall be obligatory on any in-

dividual, firm, association, company, corpora-

tion, or organized manufacturing industry or

the responsible head or heads thereof and

shall take precedence over all other orders and

contracts theretofore placed with such individ-

ual, firm, company, association, corporation,

or organized manufacturing industry, and any

individual, firm, association, company, corpo-

ration, or organized manufacturing industry

or the responsible head or heads thereof own-

ing or operating any plant equipped for the

manufacture of arms or ammunition, or parts

of ammunition, or any necessary supplies or

equipment for the Army or Navy, and any in-

dividual, firm, association, company, corpora-

tion, or organized manufacturing industry or

32

the responsible head or heads thereof owning

or operating any manufacturing plant, which,

in the opinion of the Secretary of War or the

Secretary of the Navy shall be capable of be-

ing readily transformed into a plant for the

manufacture of arms or ammunition, or parts

thereof, or other necessary supplies or equip-

ment, who shall refuse to give to the United

States such preference in the matter of the ex-

ecution of orders, or who shall refuse to manu-

facture the kind, quantity, or quality of arms

or ammunition, or the parts thereof, or any

necessary supplies or equipment, as ordered

by the Secretary of War or the Secretary of

the Navy, or who shall refuse to furnish such

arms, ammunition, or parts of ammunition, or

other supplies or equipment, at a reasonable

price as determined by the Secretary of War

or the Secretary of the Navy, as the case may

be, then, and in either such case, the President,

through the head of the War or Navy Depart-

ments of the Government, in addition to the

present authorized methods of purchase or

procurement, is hereby authorized to take im-

mediate possession of any such plant or plants,

and through the appropriate branch, bureau,

or department of the Army or Navy to manu-

facture therein such product or material as

may be required, and any individual, firm,

company, association, or corporation, or or-

ganized manufacturing industry, or the re-

sponsible head or heads thereof, failing to

comply with the provisions of this section shall

be deemed guilty of a felony, and upon con-

viction shall be punished by imprisonment for

33

not more than three years and a fine not ex-

ceeding $50,000.

The compensation to be paid to any individ-

ual, firm, company, association, corporation,

or organized manufacturing industry for its

products or material, or as rental for use of

any manufacturing plant while used by the

United States, shall be fair and just: Pro-

vided, That nothing herein shall be deemed

to render inapplicable existing State or Fed-

eral laws concerning the health, safety, secu-

rity, and employment standards of the em-

ployees in such plant.

2. Title VIII of the Revenue Act of 1943 (Act

of February 25, 1944, c. 63, Title VIII, 58 Stat. 21,

92, 50 U. S. C. App. 1192) provides in pertinent

part:

TitLE VIII—ReEpricina oF War CONTRACTS

Sec. 801. Repricinc oF War CONTRACTS.

(a) As used in this section the terms ‘‘ De-

partment’’, ‘‘Secretary’’ and ‘‘article’’ shall

have the same meanings as in subsection (a)

of the Renegotiation Act.

(b) When the Secretary of a Department

deems that the price of any article or service

of any kind, which is required by his Depart-

ment or directly or indirectly required, fur-

nished, or offered in connection with, or as a

part of, the performance or procurement of

any contract with his Department or of any

subcontract thereunder, is unreasonable or un-

fair, the Secretary may require the person

furnishing or offering to furnish such article

34

or service to negotiate to fix a fair and reason-

able price therefor. If such person refuses

to agree to a price for such article or service

which the Secretary considers fair and reason-

able, the Secretary by order may fix the price

payable to such person for furnishing such

article or service after the effective date of

the order, whether under existing agreements

or otherwise. The order may prescribe the

period during which the price so fixed shall

be effective and such other terms and condi-

tions as the Secretary deems appropriate.

(ec) Any person aggrieved by an order fix-

ing a price under this section may sue the

United States in any appropriate court. In

such suit, such person shall be entitled to re-

cover from the United States the amount of

any difference between (1) fair and just com-

pensation for the articles and services fur-

nished under the terms of the order and (2)

the price fixed for such articles and services

by the order; but if the prices so fixed by the

order are found to exceed fair and just com-

pensation for such articles and services, such

person shall be liable to the United States in

such suit for the amount of this excess. Any

such suit shall be brought within six months

after the order by the Secretary on which it is

based, or after the expiration of the period or

periods specified in such order, whichever last

occurs. Such a suit shall not stay the order

involved.

(d) Whenever any person wilfully refuses,

or wilfully fails to furnish any such articles or

services at the price fixed by an order of the

3d

Secretary in accordance with this section, the

President shall have power to take immediate

possession of the plant or plants of such person

and to operate them in accordance with sec-

tion 9 of the Selective Training and Service

Act of 1940, as amended.

(e) The authority and discretion herein

conferred upon the Secretary of each Depart-

ment may be delegated in whole or in part by

him to such individuals or agencies as he may

designate in his Department, or in any other

Department with the consent of the Secretary

of that Department, and he may authorize

such individuals or agencies to make further

delegations of such authority and discretion.

(f) Every purchase order or agreement, or

contract to make or furnish any article or

service of any kind, which is required by a De-

partment or directly or indirectly required,

furnished, or offered in connection with, or as

a part of, the performance or procurement of

any contract with such Department or of any

subcontract thereunder, shall, if made thirty

days or more after the date of the enactment

of this Act, be deemed to contain a provision

under which the person making or furnishing

such article or service agrees that notwith-

standing other provisions of the purchase or-

der, agreement, or contract, he shall be en-

titled to receive for such article or service

only the fair and just compensation provided

for in subsection (c).

WW U. S. GOVERNMENT PRINTING OFFICE: 1950 Sescez 653