Petition for Writ of Certiorari — Monolith Portland Midwest Co. v. Reconstruction Finance Corp. (No. 949)

TOPICAL INDEX

Page

Petition for Certiorari 1

Opinions Below 2

Jurisdiction 2

Questions Presented 2

Statutes Involved 3

Statement of the Case. 4

1. Nature of the Case and Present Status... 4

2. Contract Right. 5

3. Admitted Events Establishing the Value of

Petitioner’s Process 7

4. The First Action 11

5. Petitioner’s Termination Claim 12

6. Error Below 12

7. The Decision of the Court of Appeals... 14

8. Petitions for Rehearing 14

Reasons for Granting the Writ. 15

A. The Decision of the Court of Appeals, Affirm-

ing the Trial Court’s Limited Construction of

the ‘‘fair compensation’’ Provided in the Con-

tract Settlement Act, to Mean Reimbursement

of Expenses Only, Involves an Important

Question of Federal Law Fundamental to the

Conduct of the Case. It is Erroneous and Con-

trary to All of the Decisions of this Court. If

Not Reversed, No Citizen Can Rely Upon Fair

Treatment When Contracting with the Gov-

ernment.

15

ii Index

Page

1. The “‘fair compensation’? provided by the

Contract Settlement Act to a contractor

whose contract has been terminated for the

convenience of the Government is identical

to the “‘just compensation’”’ allowed for

other comparable Governmental takings... 15

2. ‘‘Fair Compensation’’ provided by the Con-

tract Settlement Act includes the ‘‘value of

the contract” terminated for the conven-

ience of the Government, in accordance

with the principles enunciated by this Court

in De Laval v. United States, 284 U.S. 61

(1931), and other similar cases. 18

3. The ‘‘fair compensation’’ provided by the

Contract Settlement Act includes the quan-

tum merutt value of the Government’s post-

termination beneficial use of the alumina

plant through Bureau of Mines. 20

4. The ‘‘fair compensation’’ provided by the

Contract Settlement Act is not limited to

mere reimbursement of out-of-pocket ex-

penses. 24

5. The Court below mistakenly overlooked the

declaratory relief sought by Petitioner... 27

B. The Decision of the Court of Appeals, Approv-

ing the Trial Court’s Unqualified Acceptance

of the Contracting Agency’s Findings Has

Decided an Important Question of Federal

Law in a Manner Inconsistent With the Deci-

sions of this Court 29

Conclusion 31

Index iii

Page

Appendix App. 1

A. Opening and Judgments Below App. 1

1. Opinion of the Court of Appeals for

the Ninth Circuit, 240 F. 2d 440, Jan-

uary 7, 1957 App. 1

2. Judgment of Ninth Court of Appeals

(R. 347) App. 12

B. Statutes App. 13

1. Pertinent Portions of the Contract

Settlement Act of 1944, Chapter 358—

Public Law 395 [S. 1718], 41 U.S.C.

101, et seq. App. 13

2. Pertinent Portions of the War Mobil-

ization and Reconversion Act of 1944,

Chapter 480—Public Law 458 [S.

2051}, 50 U.S.C. App. 1651, et seg......... -App. 27

iv Index

TABLE OF CASES AND AUTHORITIES CITED

Cases

Page

Brooks-Scanlon Corporation v. United States, 265

U.S. 106 (1924) 19

De Laval v. United States, 284 U.S. 61 (1931)_..2, 18, 19

Dermott v. Jones, 64 U.S. (23 How.) 220 (1859)... 22

Lichter v. United States, 334 U.S. 742 (1948)... 21

Monolith Portland Midwest Company v.

Reconstruction Finance Corporation

95 F’. Supp. 570 (1951) 4, 12, 27

102 F.. Supp. 951 (1952) 4,13

128 F. Supp. 824 (1955) 1, 4, 13, 15, 18,

24, 26, 28, 29

178 F. 2d 854 (1949) ; Cert. Den., 339 U.S. 932

(1950) ; Rehear. Den., 339 U.S. 954 (1950)..4, 5, 11

240 F. 2d 444 (1957) 1, 4, 14, 18, 28

Monongahela Navigation Co. v. United States, 148

U.S. 312 (1893) 16, 18, 24

New Haven Water Co. v. City of New Haven, 106

Conn. 562, 139 A. 99 (1927) 17

R.F.C. v. J. G. Menihan Corp., 312 U.S. 81 (1941)... 3

Seaboard Air Line Railway Co. v. United States,

261 U.S. 299 (1923) 18, 24

United States v. Aluminum Company of America,

91 F. Supp. 333 (S.D. N.Y. 1950) 8, 10

United States v. Cumming, 130 U.S. 452 (1889)... 25

United States v. General Motor Corp., 323 U.S. 373

(1944) 17, 19, 23

United States v. Lexington Mill & Elevator Co., 232

U.S. 399 (1913) 25

Index v

Page

United States v. New River Collieries Co., 262 U.S.

341 (1923) 19

United States v. Peewee Coal Co., 341 U.S. 114

(1951) 16, 26

Wilson Athletic Goods Mfg. Co. v. United States,

161 F. 2d 915 (C.C.A. 7th 1947) 16

Authorities

Act of October 16, 1941 (50 U.S.C.A., App. See. 721) 16

Contract Settlement Act of 1944 (ce. 358, 58 Stat.

649, 41 U.S.C.A., Sees. 101 et seq.)....2, 3, 4, 11, 13, 15,

16, 17, 20, 23, 24, 27, 28

Sec. 1 26

Sec. 6 25, 26

See. 6(d) 24

See. 13 24, 25, 26, 29, 30

See. 13(b) 2, 25

See. 13(b) (2) 25

See. 13(¢) (3) 25

Sec. 20(e) 27

Joint Resolution (Public Law 109) of June 30,

1945, c. 215, 59 Stat. 310 5

War Mobilization and Reconversion Act of 1944

(ce. 480, 58 Stat. 785; 50 U.S.C. App. Sees. 1651

et seq.) 3, 6, 20, 21

28 U.S.C. 1254(1) 2

90 Congressional Record 6076 24

IN THE

SUPREME COURT

OF THE

United States

October Term, 1956

MONOLITH PORTLAND MIDWEST

COMPANY, a Corporation,

Petitioner,

vs.

RECONSTRUCTION FINANCE COR-

PORATION, a Corporation,

Respondent.

Cee reeere----eeeees

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF

APPEALS FOR THE NINTH CIRCUIT.

PETITION FOR CERTIORARI

Petitioner prays that a writ of certiorari issue to

review the judgment of the United States Court of

Appeals for the Ninth Circuit herein.

OPINIONS BELOW

The District Court’s Opinion is reported at 128 F.

Supp. 824. The opinion of the Court of Appeals for

the Ninth Circuit (R. 339) is reported at 240 F. 2d 444.

2

JURISDICTION

The judgment of the United States Court of Ap-

peals was entered on January 7, 1957. (R. 347). Re-

hearing was denied without opinion on April 1, 1957.

The jurisdiction of this Court is invoked under 28

U.S.C. 1254(1).

QUESTIONS PRESENTED

1. Whether the ‘‘fair compensation’’ guaranteed by

the Contract Settlement Act of 1944 for termina-

tion of a contract to test an experimental alumina

process is limited to mere reimbursement of out-

of-pocket expenses; or whether the court may con-

sider the substantial value of such contract in

fixing ‘‘fair compensation’’ as this Court did in

De Lawal v. United States, 284 U.S. 61 (1931) and

all similar cases.

2. (a) Whether such a contractor whose contract is

terminated so that a governmental agency may

complete the contemplated experimental operation,

may maintain a suit against RFC, the Govern-

ment’s designated financial agent, for the quantum

meruit value of the Government’s post-termination,

beneficial use of the res created; and,

(b) Whether such a claim may be asserted as an

element of, or evidence of ‘‘fair compensation”’ in

a Section 13(b) suit under the Contract Settlement

Act of 1944, or independently thereof, but joined

to a claim for relief under the Act.

3

3. Whether it is proper in a suit for compensation

under the Contract Settlement Act, to extend the

prima facie correctness of a contracting agency’s

ex parte findings on termination claims to findings

by the agency in its own favor exceeding the award

to the war contractor, for events arising after the

termination, and to render judgment for the agency

on such claims solely on such presumption, in the

face of substantial uncontradicted evidence to the

contrary.

4. Whether it was error for the courts below to deny

normal court costs to petitioner, the prevailing

party, contrary to the rule announced by this Court

in RFC v. J. G. Menihan Corp., 312 U.S. 81 (1941).

STATUTES INVOLVED

The pertinent provisions of the Contract Settle-

ment Act of 1944, 58 Stat. 649, 41 U.S.C. 101 et seq.,

and the War Mobilization and Reconversion Act of

1944, 58 Stat. 785, 50 U.S.C. App. 1651 et seq., are set

out in the Appendix, pp. 13-28.

4

STATEMENT OF THE CASE

1. Nature of the Case and Present Status

The status of this action’ for compensation under

the Contract Settlement Act of 1944 is that the judg-

ment of the district court has been reversed and re-

manded for trial by jury. (R. 347). The Court of

Appeals approved the trial court’s limitation of com-

pensation to expenses only, (128 F. Supp. 824, 842,

846) and gave no consideration to the value of peti-

tioner’s contract, or the value of the Government’s

use of petitioner’s admittedly valuable process, as ele-

ments of ‘‘fair compensation.”’ (240 F. 2d. 444, 449).

This question is of national importance, involving

two basic industries (alumina and cement), a remedial

Congressional direction to pay ‘‘fair compensation,”’

and the continuing necessity for consistent, fair com-

pensation to contractors whose contracts are termi-

nated for the convenience of the Government or its

corporate agents.

The decisions of the lower courts are in conflict

with all reported decisions upon the question of com-

pensation. This conflict should be eliminated before

jury retrial instead of afterward, in this, the eleventh

year of litigation.

riking portions of tioner’s complaint and limiting tioner expenses

aay 102 F. Supp’ S81 (1952), denying yollanats totes for fan ene

2. Contract Right

The Ninth Court’s 1949 opinion denying relief for

non-exhaustion of administrative remedy acknowl-

edged the motivation for the contract in suit.’ Peti-

tioner and the United States desired to determine

commercial feasibility of extracting alumina from in-

exhaustible native ores by petitioner’s process, which

simultaneously produced partially processed cement.

The commercial test of this unique plant for at least

90 days was the basic consideration for petitioner’s

execution of the contract. The underlying purpose

was to free America from the cost and hazard of im-

portation by using rative ores in the strategic billion

dollar aluminum industry.

On September 10, 1946, after petitioner had sub-

stantially completed the plant, respondent* gave notice

2“The contract in suit was made on June 28, 1943 between appellant (peti-

tioner), a cement company, and Defense Plant i a i of

Reconstruction

respondent Finan

tract was the mutual desire of appellant (petitioner) and the United Ststes iow.

ernment ta determine the f ibi commercially

plant and to license to Defense Plant Corpora-

should operate the f

the right of either party to cancel the operating upon thirty days

notice, at any time after 60 days after completion - , Defense Plant

Corporation teat chould th decide to dupes 3 t during the

continuance of the o} agreement or within six months of its termination,

appellant (petitioner) have the first option to purchase.” (Monolith Port-

a4 omg Naga v. Reconstruction Finance Corporation, 178 F. 2d 854,

8In 1945, Congress dissolved Defense Plant ration and t as

sumed Defense Plant tion’s liabilities. Joint Resolution (Public Law 109)

of June 30, 1945, c. 215, 59 Stat. 310.

of cancellation, justifying its notice under the War

Mobilization and Reconversion Act of October 1, 1944.

(R. 79). Respondent had no contractual right to can-

cel. On June 26, 1946 respondent and other agents of

the Government (including Aluminum Industry rep-

resentatives), met and determined to terminate peti-

tioner’s contract and hold the unique plant for opera-

tion by the Bureau of Mines.‘

Although petitioner in writing protested and gave

notice of its claims (Exhibits 136-144), the June 26th

decision to appropriate petitioner’s process and use

the plant was carried out. The Bureau of Mines, after

obtaining appropriations totalling $2 million, com-

pleted the plant and to some degree operated it. (T.

3644-3648, 3666-3696, 3728-3729; Exs. 21, 21A, 102,

102A). To date no report of the results of its opera-

tion has been made to the public.

After the Bureau of Mines abandoned the plant,

its disposal was the subject of Congressional investi-

gation. Its sale to Ideal Cement Company in 1955, was

approved by the House Government Operations Com-

mittee, conditioned upon retention of the alumina

testing facilities intact for ten years.

4A memorandum of the conference of interested government agencies on June

26, 1946, (Exhibit BF) records that:

It was the consensus of opinion that “. . . the best interest of the Government

would be served by Reconstruction Finance Corporation effecting the termina-

7

To date, petitioner has not even been aia the

monies expended or expenses incurred in designing,

equipping and creating the unique alumina pilot plant

located at Laramie, Wyoming.

3. Admitted Events Establishing the Value of

Petitioner’s Process

In 1941 the Government solicited industry to aid

in the solution of the existing aluminum crisis. (T. 123,

Exhibit 17). Reynolds had been operating about one

year, and Alcoa was the sole historical producer. (Ex-

hibit 16, App. A, pp. 318-321).

In January 1942, petitioner submitted its cement-

alumina process to the Government in confidence. (T.

128-150). The W.P.B. reported in March 1942, that

this was the type of process it had been waiting for

because all materials mined were used. (Exhibit 44).

Petitioner was requested to demonstrate its process

through a test plant stage. (T. 151-185).

On June 8, 1942 Alcoa recommended, and there was

appropriated $56,000,000 to produce alumina from the

then dwindling supply of the Nation’s low-grade baux-

ite. (Exhibit 16, p. 196). The process ised petitioner’s

process steps or their equivalent upon low-grade baux-

ite only, with no contemporaneous cement product. (T.

3365-3368). A plant was built at Hurricane Creek,

Arkansas adjacent to the nearly exhausted sole domes-

tie bauxite deposits. (Exhibits 16, p 202, 96, A-D).

This plant was completed about 1945, and after, Alena-

Attorney General anti-trust negotiations was sold to

i

Reynolds Metals Company. (Exhibit 16, pp. 318-321).

The negotiations involved Alcoa’s claim that its proc-

ess which the Hurricane Creek plant was built to use

had a value of from $10-12 per ton. (Exhibit 20, App.

E, p. 77). As of time of trial in 1953 the aluminum

industry produced over 3,000,000 tons of alumina per

year. (Exhibit 132).

During the period March 1942 to April 1943 peti- —

tioner demonstrated its process to W.P.B. by a test

plant operation at its own expense. (T. 5171-5173).

The W.P.B. recommended, and the Secretary of War

directed, that respondent (Defense Plant Corporation)

execute a contract with petitioner for the unique Lara-

mie, Wyoming pilot plant. (Exhibits 51-54). The docu-

ments confirm the purpsse of the plant to be:

“*. . . an experimental unit with the sole ob-

jective of determining whether or not the process

can be applied successfully to the production on

a large scale of alumina from anorthosite and/or

elay.’’ (Exhibits 52, 58, 110).

The importance to the national economy of a com-

bined process producing alumina and cement, in times

of peace or war, is partially stated in Untted States v.

Aluminum Company of America, 91 F. Supp. 333,

(S.D. N.Y. 1950): (p. 410)

‘*. . . the refinement of these processes (alu-

mina-from-clay) . . . constitutes an important

avenue, if not the major avenue, of development

in the industry. The elimination of the need for

9

foreign bauxite supplies could easily provide the

initiator of a successful process with a tremend-

ous cost advantage and would contribute greatly

to our national security . . .”

After expenditure of $665,000,000 on plants alone

in the wartime aluminum program (Exhibit 20, p. 3),

the Government has directly or indirectly poured hun-

dreds of millions of dollars into the aluminum pro-

gram since the war.*

As the Congressional Committee said in recom-

mending further alumina experimentation by govern-

ment subsidy (Exhibit 20, p. 13):

«|. That would be cheap insurance for a nation

that has just spent over $200,000,000,000 for a war

won largely by aluminum airplanes.”’

At the end of the war, the Government commenced

to dispose of its alumina and aluminum plants.°

Some disposals were finally effected by Alcoa’s

grant of a royaity-free license of the process used in

the Hurricane Creek Alcoa operated government

plant, to new producers, at the demand of the Surplus

_ letion allowances, short term “write-offs” subsidies, guaranteed pur-

chase, ¢.g., ibit 19, pp. 7-8 government loans, and special priorities. All this

has been done in an fort to comply with the policy announced by Congress

(Exhibit 20, p. 44):

“It should be the deliberate national policy to the United States in

& position second to no other nation in the size technical progress of

its t metals industry.

cttateeh — were interested in such purchases

“ All the bi except Alcoa, however, requ

NBR ired Government

assurance that bauxite would be available to them, or that it would be possible

to purchase alumina at a competitive price” (Exhibit 16, p. 320).

10

Property Administrator (Exhibit 16, p. 321). How-

ever, Alcoa still dominated the industry.‘

The Mobile, Baton Rouge and East St. Louis

plants, three of the four plants expanded or built to

use the low-grade bauxite process claimed by Alcoa,

were abandoned. (T. 605, 3376, 3840-3844). The Mo-

bile and Baton Rouge sinter plants were sold to the

Ideal Cement Company (petitioner’s competitor) for

cement plant use at a price approximately 15% of

their cost (T. 3857).

Only four alumina-from-clay experimental plants,

each involving a different process, were authorized

and built during the war (T. 603, 637-638). Three of

these plants, after unsuccessful test, were cannibalized

and sold by the Government at an average of about

13% of their cost. (T. 645, 646, Exhibit AA, R. 230-

231). The Laramie project alone, admitted by the

Bureau of Mines to be the best process submitted (T.

3721-3729), was terminated for the purpose of con-

tinued operation and thereafter operated. (Exhibit

B-F).

After the Bureau of Mines completed its beneficial

operation,*® the Laramie plant was sold to Ideal Cement

Company, for $1,373,000—about 31% of its original

_ ee

11

The parties stipulated below that the reproduction

cost of the Laramie plant as of February 25, 1947, was

$5,941,000 (R. 233), and as of March 1, 1950 was

$6,712,000 (R. 233) or a gain of about $2,300,000 over

its original cost, at the time the Bureau of Mines bene-

ficially operated it.

4. The First Action

In 1946, petitioner commenced an action for com-

pensation and to enjoin the cannibalization or other

disposal of the plant, in order to minimize the loss it

sustained by termination, after first advising RFC

in detail of its claims. (Exhibits 136, 137, 139).

The District Court dismissed the action on the

ground that petitioner had not obtained findings on

its claims, and had not exhausted the remedy provided

by the Contract Settlement Act of 1944. Upon appeal,

the Circuit Court affirmed, holding that petitioner’s

sole claim to relief stemmed from the Contract Settle-

ment Act. (Monolith Portland Midwest Company v.

Reconstruction Finance Corporation, 178 F. 2d 854,

9th Cir., 1949).

This Court denied certiorari, 339 U. S. 932 (1950).°

®The Solicitor General then argued: “Petitioner has been remitted by the

decision of the Court of Appeals to its administrative rem remedy. Subsequent to

utilization of that remedy, petitioner may red gone ead propriate court review. In no

sense have the courts below ruled on the merits peti

itioner’s termination claim.”

12

5. Petitioner’s Termination Claim

Petitioner filed a termination claim with RFC on

January 16, 1950 (Exhibit N, 1. 7) incorporating its

1946 notices and requests for settlement. RFC issued

its ex parte Findings thereon on June 7, 1950 (R. 134).

It there determined that any claim for relief or com-

pensation in excess of petitioner’s out-of- ex-

penses was improper. It found itself entitled to some

$460,000 plus interest for damages allegedly incurred

by being restrained by injunction from liquidating or

‘*c annibalizing”’ this plant as it did all other experi-

mental alumina plants following the war. This not-

withstanding its pre-termination decision not to dis-

pose of the plant—but to appropriate petitioner’s

process for Bureau of Mines operation of the plant

(Exhibit B-F).

6. Error Below

By its complaint (R. 7), petitioner alleged the con-

tract, its performance in creating the unique plant

(including its costs), the termination notice and

claims, the damages suffered thereby, and the exist-

ence of a dispute. It prayed for general declaratory

relief, injunction, and compensation.

Long before trial the court declared the law to be

that petitioner was limited by the Contract Settlement

Act to its expenses only, and struck all allegations as

to petitioner’s damages flowing from the termination.

(95 F. Supp. 570, (1951) ; R. 91-115).

13

Subsequently, the court denied petitioner’s request

for jury trial. (R. 162-173; 102 F. Supp. 951, 1952).

The case was tried by the court, November 5, 1952-

February 20, 1953. Petitioner contended that it was

erroneous to limit the compensation and relief ac-

corded by the CSA to mere out-of-pocket expenses,

and that it was entitled as a matter of law to have

the ‘‘value of the contract’’, and the value of the Bu-

reau of Mines operation taken into account in fixing

‘‘fair compensation.”’

On January 20, 1955, the trial court rendered its

opinion (128 F. Supp. 824), followed by its Findings

of Fact, Conclusions of Law and Judgment (R. 246-

312) on February 10, 1955. In essence, the trial court:

(1) Confirmed its earlier refusal to consider the

‘‘value of the contract,’ the quantum meruit value of

the Government’s use of the plant, or any other ele-

ments except out-of-pocket costs, in fixing ‘‘fair com-

pensation’’ under the Contract Settlement Act. (128

F. Supp. 824, 836, 846, R. 310).

(2) Ruled that Congress deliberately selected ‘‘fair

compensation’’ as a phrase of art distinct and differ-

ent from ‘‘just compensation’’; (R. 259)

(3) Adopted R.F.C.’s ex parte Findings 1 toto,

including the findings where R.F.C. purported to ad-

judicate its own affirmative claims against petitioner

for events arising after the termination, and allowed

R.F.C. some $150,000 on its $460,000 counter-claim ;

14

based upon an assumed depreciation of the plant prior

to the Bureau of Mines beneficial use.

7. The Decision of the Court of Appeals

Upon appeal the Court of Appeals below vacated

the judgment and remanded the case to the District

Court with instructions to grant a jury trial. (240 F.

(2d) 444). The court devoted 64% pages of an 8-page

opinion to the jury trial point, and briefly concluded

as to petitioner’s claims for other than its costs: (p.

449)

““In these respects, as well as on the questions

of the termination of the contracts, ‘fair compen-

sation,’ ete., we hold that the District Court cor-

rectly narrowed the factual issues.’’

8. Petitions for Rehearing.

Thereafter, respondent petitioned for rehearing

on the jury trial issue, and petitioner petitioned for

clarification, rehearing, and/or certification of the

issue of ‘‘fair compensation’’ to this court. Both peti-

tions were denied without opinion on April 1, 1957.

The Court of Appeals also denied petitioner its nor-

mal costs of appeal.

15

REASONS FOR GRANTING THE WRIT

A. The Decision of the Court of Appeals, Affirming the

Trial Court’s Limited Construction of the “fair com-

pensation” Provided in the Contract Settlement Act,

to Mean Reimbursement of Expenses Only, Involves

An Important Question of Federal Law Fundamental

to the Conduct of the Case. It is Erroneous and Con-

trary to All of the Decisions of This Court. If Not

Reversed, No Citizen Can Rely Upon Fair Treatment

When Contracting With the Government.

1. The “fair compensation” provided by the Contract

Settlement Act to a contractor whose contract has been

terminated for the convenience of the Government is

identical to the “just compensation” allowed for other

comparable Government takings.

The basic and all-permeating error of the trial

court was its holding that ‘‘fair compensation’’ was

deliberately used as a phrase of art by Congress to

provide a ‘‘different measure of recovery’’ than just

compensation (128 F. Supp. 824, 842), citing no direct

authorities or legislative history in support of its radi-

cal departure from the century old judicial recognition

that the generic noun ‘‘compensation”’ is controlling,

and that the various adjectives such as ‘‘just,’’ ‘‘fair”’

or ‘‘reasonable”’ add nothing to the provision.

The trial court’s decision is in square conflict with

all of the many decisions of this Court and the Courts

of Appeal dealing with ‘‘compensation”’, and the court

16

below cites no reason for distinguishing such well con-

sidered and established precedents.

Thus, United States v. Peewee Coal Co., 341 US.

114, 118 (1951) when discussing just compensation

under the Fifth Amendment, speaks of:

«|, . the Government’s obligation to pay fair

compensation for property taken .. .”’ (Italics

added).

In the early case of Monongahela Navigation Co. v.

United States, 148 U.S. 312, (1893) the court said:

(p. 326)

‘*.. . The noun ‘compensation’, standing by

itself, carries the idea of an equivalent .. . so

that if the adjective ‘just’ had been omitted and

the provision was simply that property should not

be taken without compensation, the natural im-

port of the language would be that the compensa-

tion should be the equivalent of the property.”’

In Wilson Athletic Goods Mfg. Co. v. United States,

161 F. 2d 915 (CCA 7th 1947) the court, in constru-

ing the “fair and just compensation’’ provision of

the Act of October 16, 1941 (50 U.S.C.A., App. See.

721), stated: (p. 917)

“‘A fair, just and reasonable compensation

means one that takes into account all factors. . .’’

The same Congress that enacted the Amendments

and Extensions to the Act of October 16, 1941 enacted

the CSA. Interchangeable use of the adjectives ‘‘fair”’

17

and ‘“‘just”’ by this same Congress, approved by the

courts, completely negatives the asserted congressional

intent that the ‘‘fair compensation’’ in the CSA was

intended to provide ‘‘a different measure of recovery’”’

than that traditionally employed for governmental

invasions of private property.

As the court said in New Haven Water Co. v. City

of New Haven, 106 Conn. 562, 139 A. 99 (1927), when

urged by counsel to distinguish ‘‘fair compensation’”’

and ‘‘just compensation’’ held: (p. 105)

‘¢ |... (this question) becomes immaterial since

both mean the same thing. ‘Just’ is the equivalent

of ‘fair’.”’

In light of this court’s recent concern with over-

restrictive definitions of the elements of just compen-

sation which are more concerned with form than

substance (United States v. General Motors Corp., 323

U.S. 373 (1944)), petitioner strongly submits that the

trial court’s error in its restrictive limitation of ‘‘fair

compensation’’ to reimbursement of expenses only re-

quires that certiorari be granted. This Court should

correct such error, otherwise a Congressional direction

to ‘‘fairly’’ compensate a contractor for termination

of his contract will be ignored. A decision on this point

will be fundamental to the further conduct of the case

below.

18

2. “Fair Compensation” provided by the Contract Settle-

ment Act includes the “value of the contract” termi-

nated for the convenience of the Government, in

accordance with the principles enunciated by this

Court in De Laval v. United States, 284 U.S. 61

(1931), and other similar cases.

The trial court ruled that ‘‘fair compensation’’ did

not include the ‘‘value of the contract’’ (128 F. Supp.

824, 846; C. of L. XXVIII, R. 298). Value of the

contract of necessity is evidenced by the value of the

detriment petitioner suffered by being deprived of its

primary consideration, and by the benefits conferred

by petitioner’s performance, including furnishing a

process, ‘‘know-how’’ and expenses, which resulted in

a pilot plant. The Court of Appeals did not discuss

or mention the point of value in its brief and sketchy

discussion of issues other than jury trial. However, its

statement that the trial court’s rulings on ‘‘fair com-

pensation’’ ‘‘correctly narrowed the factual issues”’

(240 F. (2d) 444, 449) apparently approved the trial

court’s conclusions of law striking the pleadings upon

this aspect of compensation and limiting the issue.

This ruling was erroneous because it is in direct con-

flict with decisions of this Court holding that where

a contract is terminated, cancelled, or taken, the ‘‘value

of the contract”’ is a proper element of the compensa-

tion for the taking.

Monongahela Navigation Co. v. United States,

148 U.S. 312 (1893) ;

Seaboard Air Line Railway Co. v. United

States, 261 U.S. 299 (1923) ;

19

United States v. New River Collieries Co., 262

U.S. 341 (1923) ;

Brooks-Scanlon Corporation v. United States,

265 U.S. 106 (1924) ;

De Laval Steam Turbine Co. v. United States,

284 U.S. 61 (1931).

As this Court said in De Laval Steam Turbine Co.

v. United States, 284 U.S. 61, (1931), which involved

the question of a war contract ‘“‘cancellation” or

termination, in deciding that the ‘‘value of the con-

tract”? was a proper and essential element of ‘‘com-

pensation”: (p. 71)

‘< ‘Tt is the sum which, considering all the cir-

cumstances—uncertainties of the war and the rest

—probably could have been obtained for an as-

signment of the contract and claimant’s rights

thereunder; that is, the sum that would in all

probability result from fair negotiations between

an ovner who is willing to sell and a purchaser

» 99

who desires to buy’.

The trial court apparently labored under the mis-

apprehension that the RFC had not “‘taken”’ anything

of Monolith’s and therefore the rules of compensation

announced by the Supreme Court did not apply. (128

F. Supp. 824, 842). This was erroneous as a matter

of law. In United States v. General Motors Corpora-

tion, 323 U.S. 373 (1944) the court clarified the mean-

ing of a ‘‘taking”’ when it said: (p. 378)

20

“In its primary meaning the term ‘taken’

would seem to signify something more than de-

struction, for it might well be claimed that one does

not take what he destroys. But the construction

of the phrase has not been so narrow. The courts

have held that the deprivation of the former owner

rather than the accretion of a right or interest to

the sovereign constitutes the taking. Govern-

mental action short of acquisition of title or occu-

pancy has been held, if its effects are so compiete

as to deprive the owner of all or most of his inter-

est in the subject matter, to amount to a taking.”’

Thus, the termination by RFC of appellant’s con-

tract and the destruction of appellant’s rights under

the contract, together with the Government’s cortin-

ued operation of the plant, was clearly a taking.

3. The “fair compensation” provided by the Contract

Settlement Act includes the quantum meruit value of

the Government’s post-termination beneficial use of

the alumina plant through Bureau of Mines.

Although the contract in suit was terminated under

the War Mobilization and Reconversion Act of 1944,

by a September 10, 1946 ‘‘ Notice of Cancellation” (R.

79) which recited:

«|. . the facilities are no longer required . . .”’

the blunt fact is that the Government had resolved

some three months earlier to terminate so that the

Bureau of Mines—instead of petitioner—could carry

on the experimental operation provided by the con-

tract. (Exhibit B-F, R. 76, 77).

21

In plain English, the contracting agency framed

its Notice of Cancellation in an attempt to comply

with the requirement of Section 202 of the War Mobi-

lization and Reconversion Act that contracts so termi-

nated are no longer used or needed by the Government.

The Government was apparently prevailed upon to

state this reason in respondent’s cancellation notice,

because the decision had then been made to proceed

with the experimental operation. (Exhibit B-F). By

the simple expedient of termination, the Govern-

ment was led to believe, or was prevailed upon to

believe that it could obtain the desired results without

fairly compensating petitioner. It deliberately singled

out the one process the Government had ‘“‘been waiting

for’? (Exhibit 44) and terminated petitioner’s con-

tract, with the intent to continue using it.

The Bureau of Mines thereafter spent some $2,000,-

000 in an experimental operation using petitioner’s

patented process. The details and report of this opera-

tion have yet to be made available to the public or

petitioner.

The procedure employed in this case by the agen-

cies concerned calls to mind the language of this Court

in the ease of Lichter v. United States, 334 U.S. 742

(1948): (p. 754)

‘‘In procedure which affects property rights

as directly and substantially as that authorized by

the Renegotiation Act, the governmental action

authorized, although resting on valid constitution-

al grounds, is capable of serious abuse . . . Within —

procedure thus authorized by the Constitution,

the Congress and the Administration, and here

affirmed, resulting injustices can and should be

carefully examined and as far as possible, re-

lieved . . .’’ (Italics added).

Petitioner submits that the inequitable conduct by

responsible public officials in this transaction should

be corrected in the only way now possible—by pay-

ment of ‘‘fair compensation’’ which will include the

benefits obtained by the Government and the detri-

ment suffered by petitioner by the termination.

As the Supreme Court stated in Dermott v. Jones,

64 U.S. (23 How.) 220 (1859): (p. 233)

‘¢. . . Still, if the other party has derived any

benefit from the labor done, it would be unjust to

allow him to retain that without paying anything.

The law, therefore, implies a promise on his part

to pay such a remuneration as the benefit con-

ferred is really worth .. .”’

In this case there were three important rights or

interests—the contract for construction and operation,

the acceptance of the benefits of appellant’s construc-

tion, and the licensing contract by which appellant

shared its patents with RFC.

: When RFC terminated the contract, it ‘‘took’’ the

contract by destroying it, and thereafter, its principal,

the United States, used the patented process and the

unique plant. The termination thus in practical effect

destroyed the years of patent life dedicated by peti-

tioner to the Laramie project, and the years required

-—

23

to build and bring a new plant to the point of opera-

tional test of the patented process. By the Contract

Settlement Act, Congress designated respondent as the

financial agent of the United States to pay fair com-

pensation in an amount determined by a court of

competent jurisdiction in accordance with existing

law.

Appellant submits that this state of facts brings

the case squarely within the analogy drawn by the

Supreme Court in United States v. General Motors

Corporation, 323 U.S. 373 (1944).

There the petitioner was the owner of a long-term

lease. The Government by condemnation, carved out

a short-term occupancy, and the court allowed com-

pensation pro-rata on a long-term basis only, refusing

petitioner’s proof of actual losses as elements to be

considered in fixing compensation. The Supreme

Court held: (p. 382)

“It is altogether another matter when the

Government does not take his entire interest, but

by the form of its proceeding, chops it into bits,

of which it takes only what it wants, however few

or minute, and leaves him holding the remainder,

which may then be altogether useless to him, re-

fusing to pay more than the ‘market rental value’

for the chips so cut off. This is neither the ‘tak-

ing’ nor the ‘just compensation’ the Fifth Amend-

ment contemplates.”’

24

4. The “fair compensation” provided by the Contract

Settlement Act is not limited to mere reimbursement

of out-of-pocket expenses.

The trial court held that petitioner’s recovery was

limited to mere reimbursables only under Section 6(d)

of the Contract Settlement Act. (128 F. Supp. 824,

842). This holding was in error for many reasons, for

example:

(a) It is contrary to the many 4ecisions of this

Court stating the principle that the ascertainment of

compensation is a judicial function—not a legislative

function. (Monongahela Nav. Co. v. United States,

148 U.S. 312, 327; Seaboard Air Line Ry. Co. v. United

States, 261 U.S. 299, 304).

(b) It is contrary to the intent of Congress as

shown by Congressman Wolverton’s explanation of

the Act (90 Congressional Record 6076) :

‘*. . . No existing remedy that a claimant now

has under the law is taken from him, but in addi-

tion thereto he is given an opportunity to avail

himself of a settlement procedure that can facili-

tate his settlement if he desires. . .”’

(ce) It is contrary to the internal evidence of the

Act itself which clearly shows that the standards for

settlement enumerated in Section 6(d) were for guid-

ance to agency settlements only and are not binding

on the courts in a Section 13 suit.

The term ‘‘fair compensation”’ is the most import-

ant phrase used in the Act. If, as the trial court as-

25

serts, it is a phrase of art and intentionally used by

Congress to restrict the compensation paid to reim-

bursables only, Congress would surely have defined it

in Section 3 when it defined eighteen other words and

phrases used in the Act. Or, it would have been quite

simple to add to Section 6 or Section 13 the words:

“‘no additional compensation shall be paid except as

herein provided,’’ or other words of limitation. Had

Congress intended to limit the plain and literal mean-

ing of “‘fair compensation,”’ it could easily have found

apt words to do so. (United States v. Lexington Mill

¢& Elevator Co., 232 U.S. 399, 1913).

Petitioner submits that it is clear that Congress

did not atiempt to limit proper judicial inquiry under

Section 13 as to what would be “‘fair’’ or “‘just”’ or

“‘equitable’’ under any given circumstances. After ob-

taining ez parte findings by the agency, the contractor

remains free to pursue his traditional court remedy.

(Section 13(b).) In such proceeding the court will

consider the claim made, and subject only to the prima

facie correctness of the facts found by the agency, will

determine ‘‘fair compensation’’ ‘‘in accordance with

existing law . . .’’ (Section 13(b)(2)), and will enter

judgment on the ‘‘law and the facts’ (Section 13(c)

(3)). It is settled that such a direction in a remedial

statute such as the Contract Settlement Act authorizes

such judgment:

‘*. . . as, under all the evidence, would be con-

sistent with law .. .”’ (United States v. Cum-

ming, 130 U.S. 452, (1889).)

Section 6 of the Act, relied upon exclusively by the

trial court in limiting petitioner to reimbursables (128

F. Supp. 824, 842), merely requires the agencies (not

the courts) to negotiate speedy settlement of war con-

tract claims after considering certain designated

standards, ‘‘in accordance with the terms of this Act.’’

Section 6 does not even purport to limit a court in

the required judicial determination of compensation

in fact. The trial court’s narrow, restrictive interpre-

tation ignores the balance of the Act, including Sec-

tion 13, where Congress repeatedly directs that con-

tractors be fairly and equitably compensated. In

addition, it is ‘‘tailored’’ to the necessities of the

agency, revives the discredited ‘“‘most favored liti-

gant’? status for governmental corporations, and

thwarts substantial justice.

Petitioner submits that in a Section 13 suit for

fair compensation, as in any other suit for compensa-

tion for a governmental taking, the test should be the

requirement of ‘‘just compensation”. The most rea-

sonable solution is to award compensation to the owner

as determined by a court under all the circumstances

of the particular case. (United States v. Peewee Coal

Co., 341 U.S. 114 (1951).

The declaration in Section 1 of the Contract Settle-

ment Act that an objective of the Act is:

‘¢ . . (b) to assure to prime contractors...

speedy and equitable final settlement of claims

99

Ge

27

as well as the prohibition of Section 20(e) that:

“Nothing in this Act shall be deemed to tmpair

or modify any war contract . . .’’ (Italies added)

alone clearly demonstrate the errors below.

5. The Court below mistakenly overlooked the declara-

tory relief sought by Petitioner.

In the third cause of action of its original com-

plaint petitioner incorporated the previous factual al-

legations of its complaint, which merely alleged the

ultimate facts of the transaction (R. 23), that an

‘factual controversy’’ existed and that there should be

a judicial declaration of rights (R. 24) and prayed:

(R. 26)

“8. That the Court determine and declare the

legal rights and duties of the plaintiff and

defendant in the premises.’’

In response to RFC’s motions to strike, ete.-(R. 82

et seq.) the trial court in its Opinion of January 22,

1951 (R. 91, 95 F. Supp. 570) stated: (R. 112)

‘*.. . The motion to strike is denied as to

plaintiff’s third cause of action for declaratory

relief and this court, by this opinion has declared

the rights of the parties in the controversy be-

tween them.”’

As pointed out above, the trial court had, by such

opinion, limited petitioner to reimbursables only. It

thereafter confirmed this restrictive interpretation of

the CSA by its final opinion (128 F. Supp. 824) and

it Findings of Fact and Conclusions of Law. (R. 246).

Therefore, the correctness of the trial court’s

declaration of the rights and duties of the parties

arising out of the transaction and under the CSA, was

squarely before the Ninth Court on appeal. (Points

on Appeal, #1(a), R. 323; Spec. of Errors, #1, 2, Ap-

pendix I, pp. 1-5).

This point is based not on a play on the words

“breach of contract’’ or ‘‘specific performance’ etc.,

but upon the ultimate facts well pleaded, and the con-

struction of the CSA.

Petitioner apprehends that the Court below may

have been misled by the trial court’s final opinion (128

F. Supp. 824) into believing that the only legal points

(doubtful as they are) involved as to “‘fair compensa-

tion’’ (except reimbursables) were the propriety of

“breach of contract’’ and ‘‘specific performance’’ un-

der the CSA (e.g., see 240 F. 2d 444, 449). Such is

not the case.

Leaving aside the first two causes of action the

plea for declaratory relief still demands review. Was

the trial court correct, or was it in error when it lim-

ited appellant’s recovery to reimbursables as a matter

of law?

29

B. The Decision of the Court of Appeals, Approving

the Trial Court’s Unqualified Acceptance of the Con-

tracting Agency’s Findings Has Decided an Impor-

tant Question of Federal Law in a Manner Incon-

sistent With the Decisions of This Court.

’ The trial court ruled that all of RFCO’s ex parte

findings (without hearing) were prima facie correct.

(128 F. Supp. 824, 879). Based on this presumption,

the court allowed RFC some $150,000 in affirmative

relief, (on a cross-claim for $460,000) for alleged dam-

ages suffered by reason of the injunction after the

termination. This ruling was erroneous and plainly

prejudicial, and denied petitioner procedural due

process.

The Contract Settlement Act provides in Section

13 that the contracting agency shall make findings:

‘|... upon his (the contractor’s claim or part

thereof . . .”’ (Italics added).

When petitioner filed its claim, RFC, by its ex

parte findings asserted a cross-claim for injunction

damages. This was a claim for affirmative relief. The

findings determined that petitioner was indebted to

RFC. At trial petitioner relied upon the stipulated

evidence that the plant had in fact increased some

$2,300,000 in value (Exhibit AA) and not depreciated,

as RFC claimed in its findings, and that it had there-

after been extensively and beneficially used by the

30

Government.” The trial court ignored this evidence

and relied upon the supposed presumptive correctness

of RFC’s findings of ‘‘paper depreciation’’ during the

Petitioner concedes the procedural propriety of

RFC’s cross-claim in a Section 13 suit, but earnestly

denies the premise that RFC could exceed the finding

making power in the Act, and by the simple device of

making ex parte findings, shift its own burden of es-

tablishing the right to affirmative relief, and recover

solely on the strength of the supposed presumption of

correctness. This becomes even clearer when it is re-

membered the Court ignored evidence to the contrary.

Petitioner submits that the trial court’s miscon-

struction of the scope, extent and effect of ex parte

agency findings under the Act is contrary to fifty years

of uniform construction of the finding making power

of administrative agencies, upon judicial examination

thereof.

By such a procedure as was here authorized, RFC

is at the same time a party, an expert witness, a lawyer,

a judge and a jury. Such was not the intent of Con-

gress in enacting the remedial Contract Settlement

Act.

10Thereafter, the plant was sold to itioner’s competitor, Ideal Cement

page Fey an Sa ie cea ter ik eo ae

vad Boten Rouge Plants for 15% of coon (T, S007). The esl of the

Com

other 3 plants averaged 13% of cost (Exhibits AA, R. 230). The

Laramie sale brought 31% of cost.

31

CONCLUSION

For the reasons stated, this petition for a writ of

certiorari should be granted.

DATED: April 30, 1957.

Respectfully submitted,

JOSEPH T. ENRIGHT,

Counsel for Petitioner.

NORMAN ELLIOTT

Of Counsel.