Evening star. [volume] (Washington, D.C.) 1854-1972, 1940-10-14
|SupremeC Court
To Review Case
Of Ship Profits
Browder Conviction
Also to Be Studied
By Tribunal
By J. A. FOX.


over defense-production profits, the
Government today won Supreme
Court review of litigation challeng-
ing the right of the Bethlehem
Shipbuilding Corp. to collect S5270.-
900 additional for World War ship
building contracts on which s113.-
100000 already has been paid. and
requiring the company to turn back
part of the money.
Rebuffed in the lower courts on
the case which has been pending Is
years. the Government asked for
the Supreme Court review on the
grounds that Bethlehem profits had
been "inordinate and unconscion-
able" and that the issue had an i'm
portant bearing on the vast defense
program on which the United States
now is engaged.
The court also agreed today to
review the case Of Earl r. BroWder,
Communist candidate for President.
who was sentenced to four years in
prison and fined $4,000 for passport
fraud. Justice Murphy, Attorney
General when Browder was con.
victed. took no part in the case.
To Take Wage-Hour Case.
The court agreed also to review
a case involving the constitutionality
OF the Wage-Hour Act which was
instituted by the textile industry
but refused to go into other itiga-
ton in which the Government
sought again to narrow the scope OF
the overlapping ban of the Federal
Communications Act.
Although holding against the
Government in the Bethlehem llU-
CATION case the lower courts had
condemned the terms of the con-
tracts as daylight robbery" and
commercial greed and Attorney
General Jackson said that the out
come in the Supreme Court un.
doubtedly would influence admins
tration of the provision OF the Con-
scription Act permitting the Gov
eminent to take over industries
when necessary to obtain defense
material at a reasonable cost.
1t is "of immediate national con-
Germ that there should be an author
itative determination Of the extent
to which the country's need should
place it at the mercy Of its con-
tractors" the Supreme Court was
told in the Government brief.
Justices Stone, Roberts and Muir
ply took no part in the case.
Involves Two Suits.
The Bethlehem litigation involves
two suits growing out Of the con-
struction of SO cargo vessels and
tankers for the wartime merchant
Meet. the Government alleging it
was bound by necessity to meet the
terms now declared exorbitant. The
Government in 1925 sued Bethlehem
Steel. the parent company. and
certain subsidiaries for an account
ing and recovery under the con-
tracts. and the Bethlehem Ship
building Corp. countered with q
claim for 81 691 900 as an unpaid
bonus" A special master sitting
in the case recommended dismissal
of the Government bill, and ruled
that judgment for s5.270,000
should be entered for Bethlehem.
District Court for the Eastern Dis
trict of Pennsylvania and the Third
Circuit Court of Appeals upheld
this disposition.
In negotiating for the ships, &C
cording to the Government, Beth
lehem refused to contract with the
feet corporation on lump sum-
basis. but demanded actual cost OF
construction, plus fixed profit OF
about 10 per cent Of the estimated
cost, plus bonus for savings
equal to half of The amount by
which the actual cost fell below
the estimated cost.
The estimated cost was fixed at
$ll9,750.000, while the actual base
cost turned out to be 1872 900, 000 a
difference approximating $27 900. 900
according to the Government. The
company collected more than $40
900 900 profits including better than
So. 900 900 under the bonus for saw.
ings" arrangement.
Unprecedented Conditions.
The Government said the builder
was in a better position to figure on
the estimated cost than its repre-
sentative. the Emergency Fleet
Corp; the company declares that
unprecedented conditions sur
rounding labor and materials made
closer figuring impossible, and the
special master also decided that the
estimate represented reasonable
estimates of probable cost"
The Court of Appeals said that
since the Fleet Corp. knew how
(see SUPREME COURT, Page A-D