Petition for Writ of Certiorari — Commonwealth Engineering Co. v. United States (No. 189)

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In the Supreme Court of the United States

OCTOBER Ss "a

No. ;

COMMONWEALTH ENGINEERING COMPANY OF OHIO,

Petitioner,

Vv. Aes

THE UNITED STATES OF AMERICA,

Respondent.

_PETITION FOR A WRIT OF CERTIORARI

TO THE COURT OF CLAIMS.

Harry A. ToutMIn, Jr,

308 W. First Street,

Dayton 2, Ohio,

‘Counsel jor Petitioner. .

Of Counsel:

Georce W. STENGEL,

TOGLMIN & ToULMIN.

THE GATES LEGAL PUBLIBHING CO., CLEVELAND, OHIO—MAIN 1.5647

| «

TABLE OF CONTENTS.

Citations to Opinions Below 1

Jurisdiction 1

Law Question Presented 2

| Statute Involved a 2

j . Statement of the Case 3

| _ Argument . 6

-I. The Decision of the Court of Claims Is In Con-

flict With Decisions of This Court

A. The Decision Below

B. A Threat of Termination to Coerce a Con-.

tractor to Give Up His Rights Constitutes

Duress : Hs ; 7

Decisions of This Court Control: They were

ignored

C. Exhaust'>n of Administrative Remedies 4.

Right of Appeal Denied 10

II. Importance of the Question . 11

: Conclusion 12

: APPENDIX: | :

Opinion and Judgment of the Court of Claims 13

Denial of Rehearing at | 20

montane.

e

TABLE OF AUTHORITIES.

a

Cases.

Allied Contractors v. Unfted States, 124 F. — 366,

129 C. Cls. 400 | 10

Barnette v. Wells Fargo National Bank, 270 U. S. 438°6

Freund v. United States, 260 U. S. 60, 43 S. Ct. 70, 67

L. Ed. 131 ~ 6, 7-8

Fruhauf Southwest Garment Co. v. United States,

126 C. Cls. 51, 111 F. Supp. 945 : 7

Robertson v. Frank Brothers Company, 132 U.S. 17,

23, 10 S. Ct. 5, 33 L. Ed. 236 (eee) -=-----*:, 7

Silas Mason Company, Inc. v. United States, 62 F.

Supp. 432,105 C. Cls.27 ~ = _-; 10

United States v. Joseph A. Holpuch Co., 328 U. 5. 234,

. 66S. Ct. 1000, 90 L. Ed. 1192 . 6,8

Universal Sportswear, Inc. v. United States, 180 F.

_ Supp. 391 (1959) 8, 11

Texts. vf

17 A Am. Jur. 572 (Duress § 11) teeta tea Se 7

17 A Am. Jur. 583 (Duress § 19) . 9

17 A Am. Jur. 598 (Duress § 32). 1a

5 Williston on Contracts (Revised Ed.) § 1624 10

> Statutes.

28 U.S. C., Section 1255(1)

28 U.S. C., Section 1491 2,6

In the Supreme Court. of the United States

OCTOBER TERM, 1959.

No. : entnandomas atin

COMMONWEALTH ENGINEERING COMPANY OF OHIO,

Petitioner,

| v.

THE UNITED STATES OF AMERICA,

Respondent.

PETITION FOR A WRIT OF CERTIORARI

TO THE COURT OF CLAIMS.

Petitioner prays that a writ of certiorari issue to re-

view the judgment of the Court of Claims, which was en-

tered in the above entitled case on January 20, 1960.

>

‘CITATIONS TO OPINIONS BELOW.

The opinion of the Court of Claims, which is printed:

in the Appendix hereto at page ‘13, is reported in. 180

F. Supp. 396. .

JURISDICTION.

The judgment of the Court of Claims was entered on .

January 20, 1960, and is printed in the Appendix hereto

at page 20. A timely motion for rehearing was denied on

April 6, 1960. Appendix page 20. The jurisdiction of this

Court is invoked under 28 U. S. C., Section 1255/1).

2

LAW QUESTION PRESENTED. ’

_ Where a small government contractor, who was not

in default, was coerced by threats of the government con-

tracting officer into signing a settlement agreement which

decreased the contract price and took away the con-

fractor’s right of price revision and appeal and by threats

of the contracting officer to invoke default procedure and °

relet the contract to another contractor at a higher price

and thereby throw the contractor into bankruptcy, and

the Government contracting officer changed the contract

settlement in his own handwriting so as to take away the

contractor's right of appeal and forced the contractor to

sign the changed agreement or face bankruptcy by the

Government reletting the contract and charging the con-

tractor with the increased price of the new contractor, may.

the contractor avoid ‘such illegal settlement on the ground

of duress and is it entitled to relief in the Court of Claims

to restore its losses through being deprived of rights of _

appeal by reason of this illegal forced settlement under

threats by the Government contracting officer to relet the

contract and charge the contractor with: the second con-

tractor’s charges?

STATUTE INVOLVED.

The statute relied upon in this case is 28 U.S. C..

$ 1491, which provides:

“The Court of Claims shall have jurisdiction to

render judgment upon any claim against the United

States: .

(1) Founded upon the Constitution; or

(2) Foyinded upon any Act of Congress; or

(3) Founited upon any regulation of an execu-

tive department; or .

3

(4) Founded upon any ‘express or implied con-

tract With the United States; or

(5) For liquidated or unliquidated Seamer

in cases not sounding in tort.” June 25, 1948, ¢. 646.

62 Stat. 940.

‘STATEMENT OF THE CASE.

* On May 20, 1952, the petitioner entered into a con-

tract with the Air Force whereby the petitioner agreed to

design and fabricate an experimental and new electronic

device, never built before, known as a noise spectrometer

for a contract price of $95.711.72. The contract provided

for upward or downward price revision with a ceiling price

of $104,112.70. By supplemental agreement the total con-

tract price was increased to $102,447.22. with a ceiling

price of $111,148.29.

The apparatus was completed in July, 1955. It was

tested in August. and September, 1955, by respondent's

agents and found satisfactory. As a result of those tests.

the completed apparatus was approved for delivery to

Wright-Patterson Air Force Base. subject to final tests

at the latter’s laboratories. There, with the aid of special

instruments which were available only at respondent's

laboratories, respondent's personnel determined that oper-

ation of the apparatus revealed certain erratic character-_

istics which were attributable to the inclusion of certain

emplifiers previously approved and required ‘by respond-

ent. The alleged erratic mechanism was selected by the

Government and instalied by the contractor on the Gov-

ernment’s orders’. The responsibility for its function was

the Government's.

The petitioner was advised by the contracting officer

that changes involving additional eosts of $10,000.00 would

4

be required to. correct’ the defects of the Government s

own selection. -

On March 48, 1956; a conference was held at the con-

tracting officer's office between petitioner and respondent s

representatives to negotiate a close-out of the contract.

At that conference the contracting officer told the peti-

tioner that the respondent desired to terminate the con-

tract for the convenience of the Government and would

accomplish completion of the contract at respondent's own

laboratories if the petitioner would agree to such termina-

tion and a reduction in the contract price of $10,000.00.

At that conference the contracting officer threatened that.

if petitioner failed to agree to that procedure, he would

have the contract terminated for default, and the ‘contract

would be relet to another contractor and the petitioner

would be charged with any additional cost, which would

bankrupt the petitioner.

After the conference, petitioner's president wrote a -

letter, dated April 3, 1956, to respondent's representatives

setting forth the terms of the termination of the contract

for the convenience of the Government. Another con-

ference was held in the contracting officer's office on April

3, 1956. 7

At that ee See the contracting officer told the

petitioner's president that the letter was not satisfactory

because of the inclusion of a right of contract price re-

_ determination and appeal. The contracting officer revised

the letter in his own handwriting by striking out the para-

graph reserving petitioner's right of contract price redeter-

mination and appeal and writing in the language which

the centracting officer demanded the petitioner to incor-

porate in its letter. (A copy of the letter of April 3, 1956.

as revised by the handwriting of the contracting officer.

is attached fo the first amended petition as Exhibit A.)

«

o

The contracting officer then told the petitioner's presi-

dent that he must submit a letter in accordance with his

revision or he would terminate the contract for the peti-

" tioner’s default, which would bankrupt the petitioner. At

that time the petitioner was not in. default, since it had

until June 26, 1959, within which to complete its contract.

However, in the precarious financial-situation in

which the petitioner found itself, it had no choice but

to accept the contracting officer’s demands. The peti-

tioner’s costs in performing the experimental contract

amounted to $144,564.38. As a result of incurring costs

substantially in- excess of the contract price for respond-

ent’s benefit-and with its appreval, the petitioner had been

forced to borrow .$50,000.00 from its bank in addition to

using $20,000.00 of its own funds and $74,000.00 which it

had received from respondent as partial payments. The

bank was pressing petitioner for repayment of the loan.

It was doubtful whether the degree of accuracy of per-

formance which respondent’s project engineer was de-

' manding. could ever, be obtained with the new components

which respondent’s engineers demanded for the apparatus.

Therefore, if the contract were terminated and relet to

another contractor (and petitioner: charged with any

higher price which respondent might pay to the new con-

tractor) petitioner could easily have been thrown into

bankruptcy.

The petitioner was thus ccerced into signing the letter

as revised by the contracting officer. Pal ena

‘After being coerced into agreeing to the above termi-

nation settlement by the contracting officer's threat to

. terminate the contract for default, the petitioner’sought re-.

lief from the Air Force Contract Adjustment Boartl under

the First War Powers Act. The Air Force Contract Ad-

justment Board held it did not have jurisdiction to review

6

the case. . Petitioner then filed an action in the United

States District Court for the Southern District of Ohio,

which was dismissed for want of jurisdiction. This action

was then filed in the Court of Claims. Jurisdiction over

the case was conferred on the’ Court of Claims by 28

U.S.C. 1491. The Court of Claims dismissed the petition

on ground that it failed to state a claim upon which relief

could be granted.

ARGUMENT. -

I. THE DECISION OF THE COURT OF CLAIMS IS IN

CONFLICT WITH DECISIONS OF THIS COURT.:

A. The Decision Below.

_ The decision by the Court of Claims in this case posed

the followirfg dilemma: The settlement agreement was

"either valid or it was invalid because of duress. If there

was no duress, the agreement was valid and petitioner was

bound by it. If there was duress, which would make the

agreement invalid, it was no agreement at all but merely

“a unilateral decision of the contracting cMcer.”’ In the

latter case, the Court of Claims held the petitioner could

not recover because it had failed to exhaust its administra-

tive remedies by appealing to the Secretary of the Air

Force as provided in the disputes clause of the contract

After posing that dilemma, the Court of Claims held: (1)

there was no duress, and (2) even if there had been duress.

the complaint must be dismissed on ground that petitioner

had failed to exhaust its administrative remedies. We be-

lieve the decision is erroneous on both grounds.

'E.g. Freund .v. Unitee States, 260 U. S.-60, 43 S. Ct. 70,

ty L.Ed. 131: Barnette v. Wells Fargo National Bank, 270 U.S

438: United States v. Josegh A. Holpuch Co., 328. U. S. 234, 66

S. Ct. 1000, 90 L. Ed. 11¢2.

7

B. A Threat of Terminatign to Coerce a Contractor to

Give Up His Rights Constitutes Duress.

Three elements are necessary to constitute duress:

“(1) that one side involuntarily accepted the

- terms of another; (2) that the circumstances per-

‘mitted no other alternative; and (3) that said circum-.

stances were the result of coercive acts of the opposite

party. United States v. Bethlehem Steel Corp., 315

U.S. 289, 301, 62 S. Ct. 581, 86 L. Ed. 855: French v.

Shoemaker, 14 Wall. (U. S.) 314, 322.” Fruhauf

Southwest Garment Co. v. United States, 126 C. Cls.

21, 111 F. Supp. 945, 970.

The complaint which was filed in the Court of Claims

shows that each of those elements was present in this case,

.e., (1) the petitioner involuntarily accepted the respond-

ent's terms, (2) the: circumstances permitted no other

alternative as petitioner would have been bankrupted if it

had refused to accept the defendant's terms, and (3) the

circumstances were the result of coercive acts of the re-

spondent, since petitioner had no reason to fear bank-

ruptey except for the threats of the contracting officer to

invoke the défault procedure, in bad faith. when petitioner

was not in default. “When the duress has been exerted by

one clothed with official autharity, or exercising a public

employment, less evidence of compulsion or pressure is

required. * * *'" Robertson v. Frank Brothers Company,

132 U.S. 17, 23, 10S. Ct. 5, 33 L. Ed. 236 (1889). “Under

the modern view, any wrongful threat which actually puts

the victim in such fear as to compel him to act against his

will constitutes’duress.” 17 A Am. Jur. 572 (Duress $ 11).

DECISIONS OF -THIS COURT CONTROL: THEY WERE IGNORED.

The use of a threat of termination to force a contrac-

tor to give up his rights under a government contract

Clearly constitutes duress. In Freund v. United States, 260

5 o

U. S. 60, 43 S. Ct. 70, 67 L. Ed. 131 (1922). the contrac-

tor, faced with a threat of termination and default of its

performance bond, was forced to provide additional serv-

ices at the contract price. In commenting upon the choic:

forced upon the contractor, Chief Justice Taft. speaking

for a unanimous Court, said (at 260 U. S.70):

“We cannot ignore the suggestion of duress there

was in the situation,-or, the questionable fairness of

the conduct of the Government, aside from the ille-

gality of the. construction of the contract insisted on

* * #9 ,

. In Universal Sportswear, Inc. v. United States, 180

F Supp. 391 (1959), the Court of Claims held a threat by

a contracting officer to invoke the default procedure con-

stituted duress where the contractor was not in default

and the threat was made to coerce the contractor into sign-

ing a stitlement agreement. The Universal Sportswear

case cannot be distinguished from this case.

-. C. Exhaustion of Administrative Remedies.

The petitioner, of course, recognizes that normally

failure to exhaust the administrative remedies provided

in government contracts precludes a contractor from ol)-

taining relief in the Court of Claims. However, where

there is justifiable excuse or in the case where the appea!

procedure is inadequate or unavailable. the contractor

need not pursue and exhaust his administrative remedies

before resorting to the court. United States v. Joseph A

Holpuch Co., 328 U.S. 234, 66 S. Ct. 1000, 90 L. Ed. 1192.

Universal Sportswear, Inc. v. United States . 180 F. Supp

391 (Ct. Cl., 1959).

In inis case the contracting officer coerced the con-

tractor into giving up its right of price revision and ay

9

peal by threatening to invoke the default precedure—and

thereby bankrupt the contracter—when the contractor *

was not in default. In other words, the contractor was

coerced into signing a settlement.agreement by which it

gave up its administrative remedies under ‘duress.

Article 21(g) of the contract provides for an appeal

where the contracting officer determines the amount due

"to the contractor as a termination settlement under Article

21(c) or 21(e) of the contract. In this case the amount

due the contractor was determined by an agreement

between the coritractor and contracting officer pursuant to

Article 21(d) of the contract. There is no appeal from a

determination under Article 21(d). However, the Court

of Claims held a settlement agreement which was procured

from the contractor by duress on the part of the contract-

ing officer “could only amount to a unilateral decision of

the contracting officer” from which an appeal would lie.

We believe the Court of Claims was in error in regarding

an agreement which was extorted by duress as absolutely

void rather than voidable. With regard to thé effect of

duress, 17 A Am. Jur. 583 (Duress $19) states:

“* * * duress, like fraud. rarely becomes material

as such, except where 2 contract or conveyance has

been made which the maker wishes to avoid, and it is

the well-established general rule that in such cases the

duress inducing the making, while rendering the

contract or conveyance voidable at the option of, the

- persons coerced, does not render it absolutely . void,”

and it is susceptible of ratification express or implied.

It is, like other voidable contracts. valid until it is

avoided py thé person entitled to avoid it.”

That rule has been followed by this Court. In Bar-

nette vy. Wells Fargo National Bank, 276 U. S. 438 (1926),

the Court said:

10)

“Actsinduced by duress such as is here relied on

which operates only on the mind and falls short o:

actual physical compulsion, are net. void in law, bu:

are voidable only, at the election of him whose act

was induced by it. Andrews vr. Connolly, 145 Fed. 4

46: Miller v. Davis, 52 Colo. 485, 494: Eberstein +

Wilietts, 134 Il. 101; Fairbanks v. Snow, supra; Miiley

“v, Lumber Co., 98 Mich. 163; Oregon & P. R. R. Co. +

Forrest, 128N. ¥.83 * * *” (p. 444).

Fora similar statement of the rule, see 5 Williston on

Contracts (Rev ised Ed.) § 1624.

RIGHT OF APPEAL DENIED.

The settlement agreement which the petitioner was

coerced into signing by the contracting officer's duress took

away the petitioner's right of contract price redetermina-

tion and appeal. Clearly this was a voidable agreement.

i.e. it was not absolutely void but was valid until (and

unless) it was set aside by the Court of Claims on ground

of duress. It could not be regarded as a “unilateral deci-

sion of tae contracting officer,”” as was held by the Court

below. It therefore prevented the petitioner from pursu-

ing its administrative remedies by appealing to the Secre-

tary of the Air Force.

The administrative remedies provided by the contract

pertained only to disputed questions of fact. Allied Con-

tractors .v. Unated: States, 124 F, Supp. 366. 129 C. Cis

400; Silas Mason Company, Inc. v. United States. 62 F

Supp. 432. 105 bs Cls. 27. What constitutes duress is ¢

matter of law. 17 A Am. Jur. 598 (Duress Se). 2t the

petitioner had baker to the Secretary of the Air Fore:

the Secretary clearly would not have had jurisdiction, t

set aside the settlement agreement on ground of dures:

Whether there was duress was a question of law which’

could only be decided by the Court of Claims. As th:

1]

duress rendered the settiement agreement voidable, rather

than void, it was valid until set aside by the Court. and

prevented the Secretary fram deciding any disputed ques-

tions of iact until it was set aside. Consequently, the peti

toner was precluded from pursuing any of the administre-

tive remedies provided by the contract before going to the.

Court of Claims. There were no administrative remedies

to exhaust or pursue.

Hl. IMPORTANCE OF THE QUESTION.

The question presented in this petition is obviously of

great importance jn the administration of government con-

tracts. [f the decision in this case is allowed to stand.

every small government contractor wil! be at the mercy of

the contracting officer whenever a dispute arises. As the

Court of Claims said in Universal Sportswear, Inc. v.

United States, 180 F. Supp. 391, a small company which

has only one goverament contract obv iously cannot afford

to suffer a default. termination and the excess costs which

may be paid to another contractor. That is especially true

where the contract calls for the fabrication of an experi-

mental device, as in this case.

If a contracting officer of the United States Govern-

ment—with all the powers which he possesses—can cgerce

a contractor into giving up its right of price revision and

appeal under a threat of | being thrown into bankruptcy, it

is high time to correct the situation So as to provide pro-

tection for small contractors on which the Government

must depend in large numbers in peace and war. The

nited States Seas cannot afford to let its em-

plovees engage in sharp and coercive practices that would

not be tolerated in dealings in civil life between business

men. The only hope for correction cf this arbit rary and

disastrous situation is in this Court. :

12 ,

CONCLUSION.

As shown in the above argument, this petition for

certiorari should be granted because of the importance of

the question presented and the conflict of the decision

below wi:h decisions by this Court.

Respectfully submitted,

Harry A. TouLMIN, Jr.,

Counsel for Petitioner.

Of Counsel: .

Georce W. STENcEL,

TouLMIN & TouLMI™.

)

APPENDIX.

OPINION AND JUDGMENT OF THE COURT OF CLAIMS.

IN THE UNITED STATES COURT OF CLAIMS

No. 16-59

( Decided January 20, 1960)

Tue COMMONWEALTH ENGINEERING ComMPaNy oF Onto v.

THe Uniteb States

Mr. H. A. Toulmin, Jr. for the plaintiff. Mr. Folsom

E. Drummond and Mr. George W. Stengel were on the

brief |

Mr. Claré E Walker. with whom was Mr. Assistant

Attorney General George Cochran Doub, for the defend-

ant.

ON DEFENDANT'S MOTION TO DISMISS PLAINTIFF'S FIRST

AMENDED PETITION

Laramore, Judge, delivered the opinion of the court:

Plaintiff's petition and exhibits attached thereto dis-

close that on May 20, 1952. plaintiff entered into a nego-

tated contract with the Air. Force whereby the plaintiff

agreed to- design and fabricate a certain electronic device

Known as a noise spectrometer for the contract price of

$95,711.72. The contract provided for upward or down-

ward price revision, with a ceiling price of $104,412.70. ‘By

‘upplemental agreement, the total target contract price

Was increased to $102,447.22 with a ceiling price of $111.-

148 29.

Subsequently plaintiff began performance of the con-

tract and the time of contract delivery date was extended

irom’ time to time to. June 26. 1956.

14

The apparatus was completed in July 1955 and tested

in August and September 1955 by defendant's agents and

found satisfactory. Further tests at Wright-Patterson Air

Force Base, as provided for in the contract, revealed an

erratic performance of the item and defendant refused to

accept delivery. Plaintiff was advised that changes in-

volving additional costs of $10,000 would be required.

The parties met at a conference to negotiate a settle-

ment of the dispute. At that conference defendant's agents

told plaintiff that.the defendant desired to terminaté the

contract for the convenience of the Government and would

accomplish completion of the contract at defendant's own

laboratories if the plaintiff would agree to such termina-

tion and a reduction in contract price of $10,000. At that

conference, plaintiff alleges, defendant's agent threatened

that. if plaintiff failed to agree to this procedure, he would

have the contract terminated for default and the contract

would be relet and the contractor would be charged with

any additional costs. Plaintiff alleges this would have

bankrupted the claimant contractor.

After the conference plaintiff's president wrote a

letter, dated April. 3, 1956; to defendant's representatives

setting forth the terms of a termination of the contract for

the convenience of the Government. Anticther conference

was held wherein plaintiff's president was told. that the

letter was unsatisfactory because of the inclusion .of a right

of contract price redetermination and appeal. The letter

was then revised by striking out the portion objected to.

Plaintiff then alleges defendant's agent told its president

that he must submit a letter j in accordance with the revision

or he would terminate the contract for plaintiff's default

At this time, plaintiff alleges. it was not in default, having

until June 26, 1956, within which to complete its contract.

Plaintiff claims that it acceded to claimant's demands

for such termination under financial’ duress. but subse-

15

quently sought review of the action of defendant's agents

by applying for rehef to the Air Force Contract Adjust-

ment Board in accordance with P.L. 921 (81st Congress,

which amended the First War Powers Act of 1941, 55 Stat.

838, as amended by 64 Stat. 1257).

On November 15, 1957, the Air Force Contract Ad-

justment Board’ advised plaintiff it did not have jurisdic-

tion to review the case under the First War Powers Act of

1941, supra. ; |

Plaintiff then filed an action in the District Court,

which was dismissed for want of jurisdiction. This suit fol-

lowed. .

The case arises on defendant's motion to dismiss the

petition on the ground that the petition fails to state a

claim upon which relief may be granted. ° .

__ It is to be noted that plaintitf’s petition alleges arbi-

trary action on the part of the Air Foyce Contract Adjust-

ment Board in not taking jurisdiction of plaintiff's applica-

tion for relief. Apparently plaintiff claims relief under the

First War Powers Act. supra, and further claims this Court

can review under the provisions of 41 U.S. C. $ 321, which

is the so-called Wunderlich Act. This Act gives finality to

decisions unless the same are “fraudulent or capricious or.

arbitrary or. so grossly erroneous as necessarily to imply

bad faith, or are not supported by substantial evidence.”

However, as pointed out by the Government in its

brief. the granting of such relief js not a matter of right,

and denial of such relief gives rise to no legal or equitable

claim. Cooper Tire & Rubber Co. v. United States, 138 C

Cls. 539: Bolinders Co.. Inc., v. United States, 139 C. Cls.

'77: Waller v. United States, 114 C. Cls. 640. Therefore,

this could not be a compliance with the articles of the con-

tract providing for claims and appeals as discussed later.’

It the above were plaintiff's only allegation, its peti-

tion would fall on that premise alone. However, plaintiff

16

apparently invokes the jurisdiction of this court under 28

U.S.C. § 1491, which is the Act giving this Court its gen-

eral jurisdiction.: Under this circumstance we must look

to the petition and contract to- learn whether plaintiff's _

petition is sufficient.

¢ Plaintiff seems to base its complaint on the proposi-

: tion that the parties met and settled their dispute but that

plaintiff was coerced into settlement by statement of Robert

W. Logan, defendant's contracting officer. The statements

complained of and allegedly attributed to Logan as set

- forth in the petition as the allegation of duress were “if

claimant failed to agree to this procedure, he would have

the contract terminated for claimant’s default and the con-

tract would be relet to another contractor and claimant

charged with any higher price defendant would pay to the

new contractor, which, would have bankrupt [sic] the

plaintiff.” |

Under this allegation the threshald question is

whether this statement constituted duress. This question

must be answered in the negative. As was stated in Fru-

hauf Southwest Garment Co. v. United States, 126 C. Cls.

D1, at 62:

It has become settled law that the mere stress of

business conditions will not constitute duress where

the defendant was not responsible for those circum-

Stances..

As a matter of fact, something more must be present than

threatened financial disaster. DuPuy v. United States, 67

C. Cls. 348, 381.

Plaintiff relies on the case of Universal Sportswear,

Inc. v. United States, No. 411-57, decided March 4, 1959

However, the Universal Sportswear ’case is distinguished

on the facts. In Universal more than a threat of financial.

disaster was present: i.e., there was present the threat of

ee en,

ote er,

|

termination for default; rejection of all raincoats, claim for

damages. confiscation of all raincoats: threat to make plain-

tif pay for the cost of material, excess cost in reletting and

default of bond. Additionally, this came after a promise

that plaintiff would be: paid, which promise was later

broken by the furced amendment of the contract. As a

matter of fact, in Universal, the contractor was forced to

do additional work under the contract and nothing could

be done about it. Here the contract was either terminated

by agreement or there was no agreement. In either event.

as pointed out later in this Opinion, the Government was

within its rights. ;

If, as alleged, defendant's agent threatened to termi-

nate the contract for default, and plaintiff was in default,

then of course the defendant was threatening to do what

it had a right to dg. Milton Beatty v. United States, Cong.

No. 8-55, decided December 3, 1958, and cases cited there-

in.

If, as alleged, plaintiff was not in fact in default at that

time, then the settlement if procured by duress could only

amount to a unilateral decision of the contracting officer. |

In these circumstances the defendant still had the right to

terminate for convenience of the Government, under either

article 11(e) or article 21(a) ‘of the contract.

Article 11(a) provides for termination for default of

the contractor. . .

Article 11(e) of the contract provides: |

If, after notice of termination of this contract un-

der the provisions of paragraph (a) of this clause. it is

détermined that the failure to perform this contract is

due to causes beyond the control and without the

fault or negligence of a Contractor pursuant.to the

provisions of paragraph (b) ‘of this clause, such Notice

of Default shall be deemed to have been issued pur-:

-18

suant to the clause of this contract entitled “Termina-

tion for Convenience of the Government,”*and the

rights and obligations of the parties hereto shall in

such event be governed by such’ clause. (Except as

otherwise provided in this contract, this paragraph

_(e) applies only if this contract is with a military de-

partment.)

Termination fer convenience of the Government was

exactly what the Government wanted. In fact, plaintiff's

petition alleges “at this conference defendant's agents told

claimant's agents that they desired to effect a termination

‘of the contract for the convenience of the Government,

*k ook oe

Article 21(a) reads as follows:

The performance. of work under this contratt °

may be terminated by the Government in accordance

with this clause, in whole, or from time to time in

part, whenever the Contracting Officer shal! deter-

mine that such termination is in the best interests of

the Government. Any such termination shall be

effected by delivery to the Contractor of a Notice of

Termination specifying the extent to which perform-

ance of work under the contract is terminated, and

the dete upon which such termination becomes ef-

fective.

Therefore, when the Gevernment told plaintiff it was

terminating for the convenience of the Government, which

is what, from the allegations and exhibits, we believe oc-

curred, the Government was well within its rights under

the contract.

Under these circumstances article 21(d) of the con-

tract permits the parties to agree upon the amount to be

.paid the contractor. In the event of failure to agree, the

contracting officer has the right under article 21(e) to

|

OY oe

"19

determine the amount. if any, due the contractor. Article

. 21(g) provides for an appeal by the contraetor under the

“Disputes” clause. provided the contractor files a claim as

provided for in paragraph (c) of article 2]. Paragranh

(c) provides for filing a claim within two yeats:from the

effective date of termination, unless one or more exten-

sions in writing are granted. ;

So in this case, since the Government asked for some-

thing for which it had a legal right, the threat could not

‘ amount to duress and the resulting agreement is legal and

binding. Inasmuch as we believe the agreement is binding,

no further discussion is necessary. However, other rea-

sons are present which show the invalidity of plaintiff's

claim and are discussed below. _ ats 5

‘ Since the termination was for the convenience of

the Government and the resulting determination of the

amount due was under article 21(e), plaintiff had the

duty to appeal the decision. The contract then further pro-

vides in article 21(g) that the contractor must submit a

claim within a certain time.

_ Plaintiff failed to file such a claim and under article’

21(g) the amount found by the contracting officer is the

only. amount the contractor would be entitled to. Further-

more, even had plaintiff filed such a claim, no appeal was:

ever taken by plaintiff under the “Disputes” clause as pro-

vided and consequently plaintiff had failed to exhaust its

administrative remedy. United States v. Callahan Walker

Construction Co., 317 U. S. 56; United States v. Blair, 321

U. S. 730. :

Accordingly, we must hold that plaintiff has received

all its rights under the contract, and the petition fails to

state a claim ypon which relief may be granted.

20

Defendant's motion is.granted, and plaintiff's petition

is dismissed.

It is so ordered.

Reep, Justice (Ret.), sitting by designation; Lrrrie-

.TON, Judge (Ret.); Mappen. Judge; and Jones, Chief

Judge, concur.

DENIAL OF REHEARING.

UNITED STATES COURT OF CLAIMS.

No. 16-59.

THe COMMONWEALTH ENGINEERING CoMPANY OF OHIo

Vv.

Tue Unitep States

CLEeRK’s OFFICE

Washington, D. C., April 6, 1960

To Attorney of Record and Assistant Attorney General,

and Commissioner

Sirs:

Please take notice that in: the above-entitled cause

there has been entered this day on the plaintiff’s motion

tor rehearing the following order OVERRULED.

Very truly yours,

WILLARD L. Hart. 4

Clerk. Court of Claims