Case Name: KAISER ALUMINUM & CHEMICAL CORPORATION v. The UNITED STATES
Court: United States Court of Claims
Jurisdiction: United States
Decision Date: 1969-04-11
Citations: 409 F.2d 238
Docket Number: No. 49-63
Parties: KAISER ALUMINUM & CHEMICAL CORPORATION v. The UNITED STATES.
Judges: Before COWEN, Chief Judge, LARA-MORE, DURFEE, DAVIS, COLLINS, SKELTON and NICHOLS, Judges.
Reporter: Federal Reporter 2d Series
Volume: 409
Pages: 238–246

Head Matter:
KAISER ALUMINUM & CHEMICAL CORPORATION v. The UNITED STATES.
No. 49-63.
United States Court of Claims.
April 11, 1969.
Max Thelen, Jr., San Francisco, Cal., attorney of record, for plaintiff. Robert Gordon Sproul, Jr., and Thelen, Marrin, Johnson & Bridges, San Francisco, Cal., of counsel.
Frances L. Nunn, Washington, D. C., with whom was Asst. Atty. Gen., William D. Ruckelshaus, for defendant.
Before COWEN, Chief Judge, LARA-MORE, DURFEE, DAVIS, COLLINS, SKELTON and NICHOLS, Judges.

Opinion:
ON DEFENDANT'S MOTIONS UNDER RULE 69(b) (1) AND (2) FOR RELIEF FROM JUDGMENT AND FOR STAY OF PROCEEDINGS
NICHOLS, Judge.
This case is before us on defendant's motion under Rule 69(b) (1) and (2) for relief from our judgment in Kaiser Aluminum & Chem. Corp. v. United States, 388 F.2d 317, 181 Ct.Cl. 902 (1967), and defendant's motion for a stay of proceedings on the Rule 69(b) motion until a decision has been rendered in another case pending before us. Plaintiff, Kaiser Aluminum & Chemical Corp. (hereinafter Kaiser), opposes both motions. A brief review of this earlier Kaiser case (hereinafter Kaiser I) is necessary for an understanding of the present controversy.
As part of the aluminum expansion program during the Korean War, the General Services Administration (hereinafter GSA) executed contracts on behalf of the defendant with three major aluminum suppliers: Kaiser, the Reynolds Metals Company (hereinafter Reynolds), and the Aluminum Company of America (hereinafter Alcoa). The contracts with each of the companies required expansion of their aluminum production facilities in return for defendant's market guarantee agreements. Under its contracts, Kaiser was to construct additional facilities, privately fi nanced, and operate them. In return defendant guaranteed to purchase the production of the additional facilities required by the contracts to the extent that Kaiser was unable to sell this production or use it for its own purposes. Kaiser's contracts obligated it to produce 2 billion 282 million pounds of primary aluminum pig. The ultimate issue in Kaiser I was whether or not that amount of production had been achieved. If it had, the Government was relieved of its guarantee liability. If not, Kaiser could produce the remainder and "put" it to the Government, as defined below. The dispute centered around the accounting method used in measuring production under these contracts prior to April 1, 1957. The method of measuring production after that date was not in dispute, having been settled by amendments to the contracts and specifically it was decided by such amendments what treatment should be accorded off-grade aluminum (an unintended product of an aluminum reduction line, most often in the startup phase of operations, which, according to accepted commercial practices when the contracts were negotiated, was defined as aluminum pig having a purity of less than 99%) and alloys (a product which results from the deliberate addition of other metals in the reduction pots). We held, however, that the amendments left open the measurement of production before April 1, 1957.
Kaiser claimed two grounds for recovery in that suit: first, that defendant had breached its original contracts with Kaiser and second, that defendant had breached its later so-called "most favored nation" agreement with Kaiser. Article I of the contracts provided (the contracts were identical in their relevant terms and the following provision is taken from the contract to construct facilities at Chalmette, Louisiana referred to in Kaiser I as Chalmette I):
Subject to the terms and conditions hereof, Contractor agrees to produce and to sell Five Hundred Thousand (500,000) short tons of 2,000 pounds each, of primary aluminum pig, said primary aluminum to be of minimum grade of ninety-nine percent (99%) aluminum, which primary aluminum is herein called the "additional production." The Contractor will produce such aluminum from facilities which the contractor agrees hereafter to construct, herein called the "additional facilities."
Kaiser interpreted this provision to mean that only metal which had a minimum purity of 99% aluminum or higher would be included in computing "additional production" (thus excluding off-grade) and also that the weight of minimum purity metal should be determined without reference to any other metal added to make alloys. (In Kaiser I we referred to this basis of measuring contract production as the "net basis".) The parties had stipulated that the weight of all offgrade and alloy additions before April 1, 1957 was 84,-407,143 pounds, thus, if plaintiff's interpretation of the contract were correct, then Kaiser would have been able to "put" (a forced sale of aluminum to the Government due to a contractor's inability to dispose of the offered aluminum through the usual channels. See Finding 15, Kaiser, supra, 388 F.2d 317, 181 Ct.Cl. at 944.) An additional 84,407,143 pounds to the Government, as the amount of contract production would have been reduced by that amount.
Defendant argued that the weight of all aluminum produced at the additional facilities prior to April 1, 1957, regardless of purity and including alloys, should be used to measure the amount of "additional production." (This basis of measurement was referred to as the "gross basis" in Kaiser I.) If this interpretation were correct, then Kaiser would have had no claim for recovery.
Kaiser also relied on a most favored nation theory to support its claim. In negotiating the contracts the defendant had agreed that each of the aluminum companies would receive uniform treatment. Letters from defendant to each of the suppliers confirmed this policy. The agreement allowed Kaiser to compel amendment of its contract terms to conform with the terms of its competitors' contracts. Kaiser had never requested amendment of its contract pursuant to the agreement, but it did contend that its contract should be accorded the same interpretation as those of its competitors. Kaiser argued that Reynolds had been allowed to exclude alloys and off-grade and therefore, under the terms of the agreement, it should be allowed to compute its production for contract purposes in the same way. Kaiser regarded defendant's refusal to permit it to compute its contract production on a net basis as a breach of the most favored nation agreement. Defendant for reasons needless to go into, in view of other conclusions we reach, decided not to contest Kaiser's assertions about Reynolds' accounting methods. Reynolds was not a party and its officials were not called as witnesses. The court took what was said about Reynolds as true, and so found. (Finding 42.) We decided that Kaiser's most favored nation agreement gave it a right to compel a uniform interpretation of its contract and that since Reynolds (as we supposed) had been allowed to exclude alloys and off-grade in computing its contract production Kaiser was entitled to do the same. On December 15, 1967, we entered judgment for Kaiser in the amount of $7,-198,655.55.
After our Kaiser I decision, Reynolds filed a claim for damages of $7,643,436 with the GSA. Reynolds claimed that it had not excluded all of its offgrade metal in computing contract production, but only some of it, and therefore under its most favored nation agreement with the defendant, it was entitled to the same interpretation of its contract that Kaiser received in Kaiser I, i. e., it claimed the right to exclude all offgrade in computing contract production. GSA denied the claim and defendant then brought a suit in the United States District Court for the District of Columbia for a declaratory judgment stating that the United States was not liable to Reynolds notwithstanding our Kaiser I decision. While defendant's declaratory judgment suit was pending, Reynolds filed suit in this court, and defendant then dismissed its suit in the district court. Defendant then filed a motion for relief from the Kaiser I, judgment and a motion to stay the proceedings on that motion until the pending Reynolds' suit was disposed of. Defendant maintains that our Kaiser I decision, as far as it relied on Reynolds' exclusion of offgrade, is erroneous, but until Reynolds' case is decided, the error cannot be determined. Kaiser opposes both motions. The treatment of alloys is not at issue in the present suit — only the treatment of offgrade. For reasons to be discussed infra, neither of defendant's motions can be granted.
Defendant argues that Kaiser 1 was decided on the most favored nation theory and our finding that Reynolds excluded offgrade was the basis for our decision in Kaiser's favor; therefore if Reynolds did not exclude offgrade in computing its contract production, Kaiser l is erroneous. Plaintiff, on the other hand, argues that its right to recovery in Kaiser I was based on both its interpretation of the basic contract and its most favored nation theory and that even if Reynolds did not exclude off-grade in measuring contract production, so that the most favored nation theory is not determinative as to offgrade, our decision must stand on the original contract ground. Neither party is entirely correct.
Our decision in Kaiser I was indeed based on the most favored nation theory, see Finding 60, Kaiser, supra, 388 F.2d 317, 181 Ct.Cl. at 968, but in deciding the case on that ground, we did not reject Kaiser's contract theory as a basis for its recovery. We did discuss the contract issue at length, but as the case was presented to us, the most favored nation ground seemed to provide a clear and sufficient basis for Kaiser's recovery on both the alloy and offgrade issues, and resolution of the contract ambiguities was made unnecessary thereby. But defendant now wishes to challenge our reli anee on Reynolds' treatment of offgrade as a basis for Kaiser's recovery and it does appear there is at least uncertainty as to how Reynolds dealt with its off-grade in computing "additional production." In making this statement we are not prejudging Reynolds' case which is pending before us, and any proof of how Reynolds treated its offgrade will have to await further proceedings in that case.
We did not need to know how Reynolds dealt with its offgrade in order to decide the offgrade issue in Kaiser I in Kaiser's favor. Our decision could have rested on an interpretation of the original contract. Article I of the contract appears on its face to be quite clear. The construction difficulties arose because each of the aluminum companies computed its contract production differently and negotiations between the GSA and the aluminum companies were conducted for several years after execution of the contracts for the purpose of defining the term "additional production." The development of a uniform accounting system for measuring contract production by the suppliers was a major topic of discussion at the negotiations and the problem centered around whether or not alloys should be included in measuring "additional production." Kaiser, supra, 388 F.2d 317, 181 Ct.Cl. at 921. Kaiser always regarded reporting production as a subject distinct from computing production under the contract, as is apparent from its proposals put forth during its negotiations. It always reported its production on a gross basis, but the method of computing production for contract purposes was left to negotiation. Kaiser is entitled to have its contract interpreted as it reads without suffering from the inconsistent actions of other' contractors under other contracts even if their language is the same.
Our interpretation of Kaiser's rights under Article I depends in large part on its actions. We held in Kaiser I, 388 F.2d at p. 328, 181 Ct.Cl. at p. 921, that:
At no point during the years in which the questions of defining the term "additional production" was under discussion, did Kaiser ever advance the proposition that computed production (as distinguished from reported production) should also include offgrade metal.
Thus, Kaiser never desired to have off-grade included in its computations of additional production.
In Kaiser I we concluded that Article I of the contract was ambiguous but that there appeared (388 F.2d p. 328, 181 Ct.Cl. p. 922):
to be no basis for resisting Kaiser's clear right to exclude from "contract" production the weight of the offgrade metal that was included in its production reports, since this was never embraced within the scope of the Article I ambiguity. The contracts called for the production of primary aluminum pig and ingot having a minimum purity of 99 percent.
We reached these conclusions about how offgrade should be treated under Article I not because we thought Reynolds interpreted its contract so as to exclude offgrade but because of the plain meaning of the language, with which Kaiser's actions were always consistent. According to commercial standards applicable during the contract period aluminum of less than 99 percent purity was considered offgrade. See Finding 9, Kaiser, supra, 388 F.2d 317, 181 Ct.Cl. at 941-942, and Finding 17, id., 388 F.2d 317, 181 Ct.Cl. at 946, 947. Therefore, by definition, offgrade would be excluded from computation under the contract as Article I called for production of "primary aluminum to be of minimum grade of ninety-nine percent (99%) aluminum."
The question which we thought to be still unanswered by Article I and the evidence before us was what' treatment should be accorded alloys. We navigated what we thought was the least obstructed channel and resolved the ambiguous alloy issue and the offgrade issue which as to Kaiser was without ambiguity, both together under the most favored nation theory.
Defendant's motions now raise some uncertainty about Reynolds' treatment of offgrade and we can no longer view the offgrade issue as clearly settled under the most favored nation theory; however, we find the solution to the off-grade issue in the contract terms as we have construed and still construe them. What we said regarding Article I of the contracts and its lack of ambiguity on the offgrade issue is still valid and defendant has presented nothing in its motion to the contrary. Rule 69(b) (2) is not intended for the reopening of cases that have been correctly decided under the applicable facts and law.
If our suppositions about Reynolds were wrong, we think the error came about notwithstanding good faith on the part of all concerned in this lengthy and complex litigation.
We now hold that Kaiser is and was entitled to recover on the offgrade issue because of defendant's breach of contract in not allowing Kaiser to exclude offgrade in measuring its "additional production" under Article I of the contract. Defendant's motions are denied and the judgment that Kaiser has recovered in this case will stand.
Following oral argument, defendant was allowed to file an affidavit which plaintiff has moved to strike. That motion is allowed because, in the view we take of the case, the content of the affidavit is irrelevant. It offers an explanation why defendant did not put in issue the accounting treatment of Reynolds' production: the result we reach is unaffected by this. Plaintiff has made another motion in case the motion above mentioned is overruled, but action on that motion is not required, the contingency on which it was made not having arisen.
LARAMORE, DURFEE, DAVIS, and SKELTON, Judges, concur in the foregoing opinion.