# Brief for the US in Opposition — Paisner v. United States (No. 686) > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386419_0034%3A3 ## Record - **Collection:** Supreme Court brief - **Document type:** Brief for the US in Opposition - **Published:** January 1, 1957 ## Text pn INDEX Page Opinion below _-_. | be 3 l Jurisdiction. _. Ew . , : 1 Question presented-_._... .--._-.--.--- oie 3 2 Statute involved a a, oe a Re aa | eae Statement. ___- : Argument. ___. E See a 6 Conclusion. . Su ; | 11 , CITATIONS Me Cases: ae Causey Vv. United States, 240 U.S. 399... ._:.. 6,8,9 Clark v. United States, eS : bad Miller v. Ammon, 145 ULS. 421_.. Matera ss 7 Pan American Petroleum and Transport Co. v. United States, 273 U.S. 456... Chote fae eae ona 6 Sutton v. United States, 256 U.S. 575 : a United States vo Trinidad Coal and Coking Company, a4 OA : ee ef Waskey v. Hammer, 223 U.S. 85_--.. 7 Statute: | Walsh-Healey Public Contracts Act, 49 Stat. 2056, ef seq., 4] U.S. C. 35, ef eee. .- 2y Gy Gy. 15 Oe Oy 10, 11 Miscellaneous: . 41 C. F. R. 203.10. _- Sige nee €_ So enaaepety 10 6 Williston, Contracts ( tet. ed., 1938) §1770_.__.- ; 9 ~: (1) ae | ge a ee eee ey Gn the Supreme Gourt of the United States OcToBER TERM, 1957 No. 686 Harry PAIsNER AND SAMUEL PA‘SNER, CO-PARTNERS, D/B/A QuaLITY MANUFACTURING COMPANY, PETI- TIONERS 3 Vv THE UNITED STATES ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF CLAIHS BRIEF FOR THE UNITED STATES IN OPPOSITION OPINION BELOW The opinions of the Court of Claims (Pet. App. 15-23) are reported at 150 F. Supp. 835. TURISDICTION The judgment of the Court of Claims was entered on May 8, 1957. A motion for rehearing, timely filed, was denied on October 9, 1957. The petition for a writ of certiorari was filed on December 23, 1957. The jurisdiction of this Court is invoked under 28 U.S. C. 1255 (1). (1) ‘ 2 * QUESTION PSESENTED ~ Whether a contractor, who through deception "obtains a series of Government contracts after hav-- ing been debirred “under Section 3 of the Walsh- Healey Act from the award of such colitracts, Is entitled te any profits on eoods manufactucetl anal \ co delivered tnder such contracts. STATUTE INVOLVED Section 3 of the Walsh- appma coats Contracts Net, wy Stat. 2O3S7T, 41 VU . 37, provides:: The Comptyfler General is-authorized and directed tgAfistribute a list to all agencies of the United States contamning the names of persons or firms found by the Seegetary of Labor to have breached any of the agreements or representations required by -this Aet. i Unless the Secretary of Laber otherwise ree- ommends no contracts shall be-awarded'to such persons or firms or to any firm, corporation, Snartuership, ‘or associatigy in) Which such personggor firms have a controling interest until three years haye elapsed from the date the Sceretarse of Labor determines such breach ‘a } ave ce marred. STATEMENT During World War II, the petitioners, Harry Paisner and Samuel Paisner, then trading as a partnership under the name of Westchester Hats, committed certain violations of the Walsh- Heal Public Contracts Act (49 Stat. 2036, et. seq., 41 U. S. C. 35, et seg.) in the perforniance of their a Government contracts (Pet. App. 15224). On April 24, 1950, the Secretary of pag wifter investis gatioy, hearings, and a report and recommendations by a trial examiner, found tiat petitioners were eullty the violations as charged (Pet. App. 15, 24). Pur- suant to Section 3 of the Walsh=tlealey Act, supra, petitioners were debarred from entering into or being eawarded Government contracts for a period of three years commencing April 24, 1950 (Pet App. 15, 24). Petitioners were duly -advised of them imelgibility (Pet. App. 25). ; In the cneantime, petitioners had changed their oe name to Quality Manufacturing Com- pany in, 1946 CPt. App. 16, 24). Under that new hare, petitioners, im 19 30 and agaim-in gol, bid for” and obtained, two Gove rifi@at conte: acts although, as they knew, they were then ur ae of debarred bidders (Pet. Ape. 16, 2D). <* ‘hese contracts were fully performed and petitioners were paid the con- tract price of $L81 50.46 (Pet. App. 16, 30). In December AQOL, _ Quality Manufacturing Com- eee pany filed a bid form, signed by Warry Paisner-as——— a partner, for a contract calling for the manufacture of 90,000 sleepmg bags (Pet. App. 16, 26). Peti- tioners were awarded this third contract and c¢om- meneed performance (Pet. App. 16, 27). On March 18, 1952, the Government, on discovering that Paisner was ineligible to bid, issued a stop order, later c@on- firmed by a letter to petitioners on April 10, 1952, 4 which ecarceled the contract as void ab initio (Pet. App. 16, 27).’ ie Before awarding the sleeping bag contract, the Government had made a routine examination of the list of debarred contractors but, because the list carried the names of Harry Paisner, Samuel Paisner, and Westchester Hats, nad failed to connect Quality Manufacturing Company withthe offenders (Pet- App. 16, Pr): -There were incorporated by reference into the contract certain regulations of the Seeretary of Labor whereby petitioners. represented that they were not ineligible to receive Government contracts beeause of sanctions imposed for. violations of the Walsh-Healey Act (Pet. App. 26 27). Petitioners delivered a total of 12,106 sleeping bags, which the Government accepted (Pet. App. 17, 28). However, payment for these was rertused. ~Peti— tioners brought this suit to recover the contract price of the completed and accepted units and for profits lost on the balance .of the vanceled. contract (Pet. App. 17). The Government counterclaimed for the cost incurred~in reletting the balance of the third contract, whieh was found to be $896, and for $181,580.46, the amount paid petitioners for the full performance of the two earlier contracts (Pet. App. 17). 7 | The Commissioner of. the Court of Claims, who tried the case and filed a writtef opinion, ruled that 1 After this cancellation, but before the last delivery on May 16, 1952, petitioners were reinstated as eligible for Gov- ernment contracts. (Pet. App. 17.) 4) petitioners, as perpetrators of a fraud in contracting ‘illegally with full knowledge of their debarment, should be required to forfeit all sums paid to them - under the first two contracts and should not be » allowed to,recover for the units delivered and ac- cepted under the third contract. ‘The Commissioner thus denied petitioners any recovery ggid awarded the United States the full amount of its counter- elaims, that is, the Sum of $896 and. the sum. of $181,586.46 (Pet. App. 20). | The Court of Claims affirined in part, and reversed in part, the Commissioner’s determination. The ‘ourt of Claims held that petitioners were entitled to recover the contract price of the 12,106 sleepmeg hags which they completed and deliveree, less their profits on these units. The Government was awarded = judgement on, its first counterclaim in the amount of $896, representing the cost-of—removal of Govern- ment-owned material from petitioners’ premises and, in addition, the sum of $21,789.66, representing peti- tioners’ profit on the two earlier contracts which were completely executed, rather than the return of the total payments of $181,580.46, which had been awarded by the Cornmissioner. A judgment was entered in the Governmem’s favor in the sum of $12,153.45 “(the profits on the two earlier contracts plus $896, less the value of the units delivered, on. the third contract). Judge Whitaker dissented stat- ing that he would deny petitioners recovery for the units delivered on the third eontract but weuld prechide thesGovernment from recovering the profits on thetwo earlier contracts. | N 6 ARGUMENT : The decision below, holding void the contracts which petitioners procured knowi.g that they were debarred from receiving Government contracts, rests upon the application of settled principles of coutract law to the facts of this case. And since the court balow would have heen justified in following the ruling of its Commissioner im not permitting peti- tioners to retain any sums received for goods de- livered and Recepted, petitioners” principal attack on the judgment below—-which merely required them to foreeo the profits on their fraudulently obtained and » ; 7 unauthorized contracts—is without any basis in law orweason. Moreover, thove is no contliet of decisions and the-case is-a unique one, Faising ‘ho issue of large importance in the administration of the W alsh- Healey Public Contracts Acts Further review by this Court is therefore not warranted. 1 It is well established that a contract with the United States 1s void ab initio and? unenforteable neainst the. United States if entered into in viola- tion of a statutesprohibiting it or in the absence of- statutory anthorization Pan American Petroleum | ~ aud Transport Co. x. l nited “States, 973 U. 8. 406; Nutton Vv. cae: States, 256 U. S>ag: Causey Vo United States, 240 S. 3995: United Salon, Trini- ~. i PAs petitioners porn out. this cas® “seems to be one of~. first impression” (Pet. 8). It is sigatficant to note in this connection that the Walsh-Healey Act hasbeen in effect for more than vi vears, 1 Stat. ZOS8, «> ee | | ; ~ é dad Coal and Coking Cempeny, 137 U.S. 160. And it is manifest that Section 3 of the Walsh-Healey Act, supra, p. 2, entirely deprived the contracting officers of authovity to award any of the three con- tracts in question to petitioners. Seeticn 3 is an explicit command to Government contracting officers that they cannot contract with certain persons. ‘To treat contracts entered into, in the fact of this prohi- bition, as fully valid and Jegal, as petitiogers urge (Pet. 8). would frustrate the major purposes: of the Walsh-Healey Act, for it would inake ineffective the intended sanction against contractors who lave know- ingly solicited and accepted forbidden contracts and are allowed to retain the full fruits of their miseon- duct: Moreover, the contention that a eontract im vio- lation of a statutory prokibition is illegal and void only if Congress uses express Janguage to this effect is baseless. Washkey v. Hammer, 223 U.S. 85; Miller v. Ammon, 145 U. S. 421.) Significantly, there was ne disagreement in the opinions of the majority, the dissenter, and the Commissioner as to the fact that the contracts in question Were Jllegal ard void, though there was disagreement as to the consequences that should tlow from this fact. 2. It is the general rule that, where conisacts with the United States are void from a failure of au- thority to bind the United States, the latter may retain the benefits of performance without lability to pay the contractor on ai quantum meruit or quantam valebat basis, even though the contractor may he innocent of wrongdoing. Sutton v. United &% 8 States, 256 U. 8. 575;° and there is authority for the proposition the United States may recover any monies paid pursuant to such a prohibited con- tract and yet retain the benefits of the performance. See, e. g., Causey v. United States, 240 U. S. 395; . United States v. Trinidad Coal- and Coking Com- pany, 137 U. S. 160. Moreover, Clark v.: United States, 95 U. S..539, and the related cases cited by petitioners (Pet. 11) do not support their contention that the illegality in' this case did not bar a quantum _meruit recovery. Those cases present imstances where the contracts themselves are not forbidden but are merely irregular as not complying with laws prescribing the manner of their execution. These laws, regulating the mode or manner of letting contracts, implicitly acknowledge that the contracts are authorized and could be properly let arid thus when they are performed they are honored to the extent of granting recovery of reasonable value, in - contrast to the ease where, as here, there is a lack of autiiority to let any contract to the claimants. In 5 Petitioners seek: to distinguish the Sutton case (Pet. 10) by stating that there Congress definitely and specifically—pro- hibited all contracts forgwhich no appropriations had_ been passed and consequently for work and materials which the Government did not desire er require. This is precisely what | Congress sought to accomplish through Section 3 of the - Walsh-Healey Act. The language of the statutory prohibti- tions is similar. And, indeed, with reference to the Walsh- Healey Act, the clear intent of. Congress, as expressed in the Act, is that unless the Secretary of Labor interceded, which he did not in this instance, it did not want any supplies from debarred contractors and that all~such contracts were pro- hibited. 2 ae or terms of this distinction,‘ Section 3 of the Walsh- Healey Act, in withdrawing all authority to let con- tracts to an ineligible contractor, refers no.more to the manner of letting than did the comparable statu- tory prohibition in the Sutton case, supra. ° Application of these principles of contract law te the facts in this case would have supported the con-» . elusion of the Commissioner that_ petitioners were ~ entitled to no recovery on its claim and_ that the’, United States should. have full recovery on its, if, counterclaims. “See, e. g., Causey v. United States, 7 2 240 U.S. 399; United States v. Trinidad Coal ae 4 Coking Company, 137 U. S. 160. The fact that the Court of Claims awarded the United States less than such a full recovery an@ required petitioners to forego: only their profigs certainly provides no basis for complaint by petitioners. Indeed, although the Walsh-Healey Act does have a number of provisions applicable to violators which are merely compensa- tory, it seems clear that Section 3, which prescribes a three-year debarment, imposes an additional sanc- tion which is a penalty and punitive in nature. Peti- tioners’ conscious ‘disregard of Section 3 and their *In referring to Clark and related cases, Professor Williston says “the contract remains unenforceable even after full per- formance by the sellef;\gut as the provisions of the statute are held to be rather Po purpose of compelling govern- ment officials to complh—with statutory directions. for the formation of contracts than to render illegal a contract made otherwise, ene who has performed a contract where the required formalities were not observed) may recover on a quantum meruit or quantum valebat.” 6 Williston, Contracts (Rev. ed., 1938) § 1770. 10 submission of “bids embracing the Secretary of qr, abor's promulgated stipulations of eligibility and non-participation by meligible contractor, with its consequen. inducement on respondent's agents to contract. certainly was deceptive and reprehensible gs found by the court below. Petitioners can raise no equity in their faver by showing that they merely attempted to defraud the United States by the’ repr e- sentations which their bidding embraces and that they were not successful because the United States relied on another source for the information upon whieh it acted. To permit petitioners full recovery world completely destroy the purposes of this provi- sion and reward petitioners for ther tacties in obtain- Wag a three contracts in question, i There is also no merit to petitioners’ coute ntion (Pe et. 9) that the period of their ineligibility’ under Section 3 commenced on June 24, 1948, when the trial examiner made his report to the Secretary of Labor, and expired on June 23, 1991, before the see- ond and third contracts were awarded. The report ef the trial examiner is advisory and contaiis only refommendations: it im no way purports to he the Secretary’s act. $1 CO. BP. Re 205.10. Under the explieayterms of Section 3, the three-year period of inclizipwity runs ‘from: the date the Secretary of determines” and finds that the Walsh-Healey Labor ated. Here the Secretary of Labor made ding until April 24, 1950.) Petitioners remained eligible to bid for and receive awards until Act was vit no such 1] this final determination. While petitioners new state that it would be an ‘tanomalous and embarrassing situation” if these found’ e@tilty of violations by the _trialexaminer could continue to take valid contyacts (Pet. 9), the record shows that petitioners — not content to rely on the trial examiner's findings and recommendations in 1948 but petitioned the Seere- tary not to accept them and thus -by their appeal forestalled the Secretary's determination until 1950. Petitioners’ contention, if accepted, would permit the -absurd result that a violator of Walsh-Healey Act could suspend the operation Of the Ac hy petitions to the Secretary net to accept the findings of his sub- ordinates, and later count this period as part of the three-vear period of ineligibility. CONCLUSION For the foregoing reasons, it is respectfully sub- mitted that the petition for a writ of certiorari should be denied. J. LEE RANKIN, Solicitor Grengral. Georce CocurRan Dovp, Assistant Attorney General. Morton HOLLANDER, Peter H. Scuirr, Attorneys. JANUARY 1958. U ft GOVERN MT AT PR mT mS OFFICE (988 --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386419_0034%3A3. Public record. Not legal advice.