Court Opinion

ID: 8594488
Source: CourtListenerOpinion
Date Created: 2022-11-23 16:01:25.665836+00
Date Added: 2024-06-11T16:54:49.023202
License: Public Domain

Cowen, Chief Judge',
concurring: in; part and:-dissenting in‘parts:¡,;
. T.agrep with the majority that,the redetermination pr04 ceeding and the collection proceeding are, as before, separate and independent, leggl actions which, may now be pursued in one court; that this court is,an appropriate forum;for,,rendition, Of .judgment in .favor of*the defendant on its counter*118claim for the amount of excess profits determined by the Eenegotiation Board; and that the defendant’s request for assistance in “execution” of the order of the Renegotiation Board, when the plaintiff files a petition here for redetermi-nation but does not file a bond, is a compulsory counterclaim under Rule 40(a). I also agree with the majority’s reading of Section 108 (b) of the Renegotiation Act, as amended, that it requires this court to grant immediate judgment in favor of the defendant in the amount stated in the Board order when the plaintiff has failed to file a bond and the defendant requests such relief.
However, I dissent from the decision of the majority holding that the plaintiff has raised a constitutional question sufficient to justify the denial of the entry of judgment on the defendant’s counterclaim pending a remand of the case to the trial commissioner for the finding of further facts. Plaintiff has presented only one substantial argument to justify deferment of judgment: that the summary collection proceeding prior to the de novo redetermination of excess profits constitutes a denial of fifth amendment due process. As I see it, nothing will be gained by avoiding the only issue before us; the sole result of the majority decision will be delay. Such a result is at variance with the clear intention of Congress that excessive profits on Government contracts should be expeditiously recovered, consistent with the protection of the interests of the contractors subject to renegotiation. Following a determination of excess profits by the Renegotiation Board, the Act provides for immediate recovery of the excess profits either through administrative procedures available to the Government, for example withholding from a contractor amounts otherwise due to him (Section 105(b)(1)), or through an action for recovery in an appropriate court (Section 105(b) (3)). The plaintiff is entitled to a full judicial redetermination of excess profits by filing a petition in this court, but the statutory language is clear:
* * * The filing of a petition under this section shall operate to stay the execution of the order of the Board * * * only if within ten days after the filing of *119the petition the petitioner files with the Court of Claims a good and sufficient bond * * * (Section 108'(b)). [Emphasis added.]
It must be stressed that the redetermination proceeding is not merely a judicial review of the Board proceeding, and no presumption of correctness attaches to the Board order. The proceeding in this court is a full de novo proceeding, and the burden of establishing excess profits is on the defendant. Lykes Bros. Steamship Co. v. United States, 198 Ct. Cl. 312, 459 F. 2d 1393 (1972). If in the de novo trial in this court, we determine that the contractor realized less excessive profits than the amount found 'by the Benegotiation Board, the contractor will be entitled to recover any amount collected by the Government that exceeds our determination, plus interest as provided in Section 105(b) of the Act. 50 U.S.C.A. Appendix § 1215(b). It is my view, elaborated below, that this statutory plan, effectuating a substantial governmental interest, fully comports with the demands of due process, and that the contrary assertions of the plaintiff are without merit.
Fuentes v. Shevin, 401 U.S. 67 (1972), and similar cases relied on by the plaintiff are not relevant in the situation presented here. Fuentes involved the relationships of private individuals; no governmental or public interests were at stake. The statutes there under consideration permitted one party to deprive the other of property without any notice or hearing. Similar considerations were involved in Sniadach v. Family Finance Corp., 395 U.S. 337 (1969). Even in cases such as Bell v. Burson, 402 U.S. 535 (1971) and Goldberg v. Kelly, 397 U.S. 254 (1970), in which governmental involvement was more direct, the focus of concern was the deprivation of substantial and important governmental benefits without prior hearing. The thread running through all these cases is the hardship summary action works upon indigent individuals who have difficulty securing adequate legal redress of their rights, and are often in ignorance of their rights.
This case is entirely distinguishable from those noted above. The plaintiff, a corporation, has been fully aware of *120the Renegotiation; proceedings > at < every, stage ¡it was a; participant in-the'proceeding before; tb'e’-Board; 'although, that proceeding admittedly did not provide adéquate due process safeguards.‘ Plaintiff, by filing a petition ¡in this court, has iiiltin,ted ' a proceeding which will'fully protect ¡its Interests'. The most important consideration, and one. Vdiich' the plaintiff’has failed to meet, is that it became subject to' renegotiation only because it ’voluntarily' entered mib''contractual relationships' with the United’ States.' That its' contracts would be subject to renegotiation was expressly stated in the contracts'; it 'is"’ihafguable that the plaintiff is' chargeable with knowledge of the terms of its.contfabts and the'statutes and regulations 'governing Féderál procurement‘Eyéh if the renegotiation clause had inadvertently been omitted from! the contract,, the teriiis of the'Act would still' have, been ‘binding: G.L. Christian & Associates v. United States, 160 Ct. Cl. 58, 66, 320 F. 2d 345, 350 (1963), cert. denied,375 U.S. 954. (1963). In that case we stated:
* * * Obligatory Congressional enactments/are. held to ,, ■ .goyepn federal contracts, because there is a need to guard 1 "¡_J:thé .dbmiriant 'legislative' policy,'against 'ad 'h'oc' en-*'lil croaclimént or’dispensation!'by the executive ‘(see, e.g., United States v. Mississippi Valley Co., 364 U.S. 520. (1961) )•. * * *
■ j, Like.other individuals,who, cleaLwith the Federal Government (see, e.g., Federal Crop. Insurance Corp. v. Merill 332 U.S. 380, (1947)), potential ‘ contractors can ‘;" validly be' bound’ tb’ ’disóoVér'’the' published • directives tolling-’ thehT'the' limits’ aiid'the scope of the agreements ■ the Government can 'make. (160 Ct. Cl. at 67, 320 F. 2d at 351.)
Plaintiff was fully'cognizant, or should have been, prior-to entering into' its -contracts, -that’ it would he- subject to¡ the Renegotiation Act,' and to all the provisions thereof. Nonetheless^, plaintiff, chose ;.tb enter into! its'Contracts with the United States; and it has derived substantial benefits from them-.. It is undisputed that plaintiff eariied substantial profits from its contracts; the only question is whether any portion was-,excessive;. To characterize these contracts as “contracts of adhesion',”; because <alLthe terms were prepared by. the *121Government and because the contractor had no-opportunity to object to the renegotiation provision, does not help the plaintiff or add anything to its case. The plaintiff was under no obligation to dp business with the Government; it did so voluntarily, presumably because it, considered it to.its advantage to do: so.-There is nothing unfair or unjust in holding the plaintiff -to its agreement. See Slawson, Standard Form, Contracts and Democratic Control of Lawmaking Power, 84 Harv. l. rev. 529, 549-53 (1971). Assuming arguendo., that the, collection-before-hearing provisions at issue do not comport with, due process, plaintiff voluntarily, knowingly, and. intelligently agreed, that,after issuance of the order of the ¡Renegotiation Board the excess profits therein determined would be immediately collectible unless plaintiff filed a timely petition in this court and an adequate bond. See, D. H. Overmyer, Co. v. Frick Co., 405 U.S. 174, 185-7 (1972), whepein the Court, reaffirmed the well-established principle that “[t]he due process .rights to notice and hearing.prior to a civil judgment are subject to waiver. * *, *” (Id. at 185.) That case, dealing,with a,cognovit note-.between,two corporations, concerned a waiver of any notice and. due process hearing, while this pasp involves only, the particular stage at which the plaintiff will,get its full judicial hearing. Also presenting a useful analogy to the present.issue is. Fahey v. Mallonee, 332 U.S. 245 (1917). In that case, the federal-Home Loan Bank Commissioner had, under a, provision of the Home Owners’ Loan Act of 193.3, appointed a conservator to take, possession of a savings, and, loan association, on.grounds of mismanagement,; The. plaintiff association, fiad .had no notice.or hearing prior to,the appointment. The, Court, considering the important public interest involved, held that due process,was pot denied by delaying the,, time .of tibe hearing. Significantly,, the Court stated that even assuming that the procedures were defective, the association had, by accepting and receiving benefits under á ‘Federal charter,’ subject to the terms of the actj waived the right to1 challenge oh cohstitutiónál grounds a provision thereof. ,l >:y y\‘ '1
^ The,present management obtained a,charter which ! 'pfóvided"'that the'Association “Shall át all times be1 süb-*122ject to the provisions of the * * * Act * * * and to any amendments thereof, and to any valid rules and regulations made thereunder as the same may be amended from time to time,” * * *.
* * * It is an elementary rule of constitutional law that one may not “retain the benefits of the Act while attacking the constitutionality of one of its important conditions.” United States v. San Francisco, 310 U.S. 16, 29. As formulated by Mr. Justice Brandeis, concurring in Ashwander v. Tennessee Valley Authority, 297 U.S. 288, 348, “The Court will not pass upon the constitutionality of a statute at the instance of one who has availed himself of its benefits.” (Id. at 255.)
At the least, the present plaintiff has waived the right to challenge, on due process grounds, the renegotiation procedures referenced in its contracts, voluntarily executed by plaintiff, especially where the provision is imposed on all such contracts by an act of Congress in furtherance of an important governmental policy. As previously stressed, plaintiff’s interests will be fully protected in the proceedings before this court.
The Supreme Court has repeatedly approved of reasonable statutory provisions permitting governmental action prior to a hearing where an important governmental or public interest is involved. Fuentes v. Shevin, supra, 407 U.S. at 84, 89-93; Yakus v. United States, 321 U.S. 414, 441 (1944). See also, Cafeteria & Restaurant Workers v. McElroy, 367 U.S. 886 (1961); Ewing v. Mytinger & Casselberry, Inc., 339 U.S. 594 (1950); Fahey v. Mallonee, supra; and Bowles v. Willingham, 321 U.S. 503 (1944). With particular relevance for this case, the Court has approved collection prior to hearing in cases involving protection of the public revenues. E.g., Phillips v. Commissioner, 283 U.S. 589 (1931). While this case does not involve the internal revenue law, the 1943 Renegotiation Act was, as the majority notes, part of the Revenue Act of that year, and the renegotiation law is analogous to the revenue laws in that elimination of excessive profits from Government contracts is a measure designed to safeguard the public treasury. Congress has made clear its intention that the defense of the United States should be *123secured at a fair price. Section 101 of the Renegotiation Act of 1951, the “Congressional declaration of policy,” states:
It is recognized and declared that the Congress has made available for the execution of the national defense program extensive funds, by appropriation and otherwise, for the procurement of property, processes, and services, and the construction of facilities necessary for the national defense; that sound execution of the national defense program requires the elimination of excessive profits from contracts made with the United States, and from related subcontracts, in the course of said program; and that the considered policy of the Congress, in the interests of the national defense and the general welfare of the Nation, requires that such excessive profits be eliminated as provided in this title * * *.
The importance of the renegotiation program is further illustrated in the Hearing Before a Subcommittee on Renegotiation Board of Operations of the House Committee on Government Operations, 92d Cong., 1st Sess., pt. 2, at 15-18, (1971), wherein is inserted in the record an article by Lawrence E. Hartwig, then Chairman of the Renegotiation Board, containing, inter alia, the following comments:
On March 7, 1955, at a time when defense procurement was sharply reduced after Korea, President Eisenhower recommended the extension of the Renegotiation Act of 1951 and stated: “I make this recommendation ■because I believe the welfare of the country requires it.” Eleven years later, at the peak of the Vietnam buildup, President Johnson commented on signing yet another extension of the Act: “We need this vital measure. It is another important tool in our constant quest to get a dollar’s worth of value for every defense dollar spent.” Thus, in periods of both increase and decline in procurement renegotiation has been deemed necessary for the national welfare. * * * (Id. at 15-6.)
«Í*
The continuing need for renegotiation was stated by President Eisenhower in his already quoted message as follows:
“In spite of major improvements, which we have achieved in our contracting and price redetermination operations, there nevertheless remains an area in which only renegotiation can be effective to assure *124tiiat the United'States gets’wtai i£ needs ifor'liefense at 4air prices. * * *”
‘ {Id. at 16.)
" :*'• 1 ' ' ■ Hi ■ ■ - ' Hi ' ■ ‡ . ' Hi
' Renegotiation also has an impact on procurement as a deterrent'against over-pricing. Over the years,'pro-ouremént officials have repeatedly testified to the value of renegotiation inthéir' erideávor , to‘ negotiate " closer prices; realizing that excessive profits will have to be refunded, contractors are more likely to agree to reasonable prices. The' Senate Committee on Finance also recognized this effect of renegotiation in its 1966' report, in which it recommended ;an extension of the act:
the renegotiation process has had a deterrent effect on overpricing .on. 'Government contracts because of the realization that renegotiation is backstopping the allowable profits.- (S. Rept. No.1295, 89th Cong., second sess. 2 (1966).) ”
Id. at 17-18.)
Congress has implemented this important- governmental policy in the Renegotiation Act, and has provided for prompt recovery of excessive profits as" determined by the Board. The'procedures, as noted, provide'adequate protection, of the interests of contractors, like the plaintiff, who voluntarily become subject to the procedures by entering into contracts- with the Government. Since 1951, contractors have been able to. avoid summary collection by filing the requisite bond. Given the importance of The governmental interest, tlie court should be reluctant to hold that'the procedures in the Act do not comport with due process. The asserted, financial distress of the, plaintiff .is appealing, but is an insufficient ground for overturning these procedures. In Bowles v. Willingham, supra, involving wartime rent control orders imposed on landlords in' certain areas without notice or hearing, the Supreme Court stated that general-statutes within the state power are passed that affect the person or property of individuals almost to rain without any hearing; yet the Court held that the interests of those aggrieved were protected by the availability of judicial review. The Court stated:
u * * * To be sure, that review comes after the order has been promulgated; and no provision for a stay is made. *125Bút' as wé^íiavé held ',m Yakus v. United States, supra, that' review ’ satisfies' the 'réqtiirénients- of due process.- '*• “Where only ’property-'rights,' are. involved, mere -postponement of., the . judicial ¡ ,enqriiry. is;;n.pt a denial of due ¡process, if the ¡opportunity given for ,tKp ultimate ..judicial determination) pf "the liability .is adequate."* * * Delay in the judicial determination of property rights is not uncommon where it- is- Essential that governmental-'-needs be immediately'¡satisfied.” Citation omitted.]; (321 U.S. at 520.)
Given the .contractual framework'1 of the' renegotiation- law, the present plaintiff’s-due process arguments :are; lacking- in merit.
" One further point should’ be made. Plaintiff-, and- th¿ majority, note that some'district courts,- in considering suits by the1 United "States for collection of excésis'profits ‘determined by1 the Board' while redetermination proceedings wére'pending' in the Tax Court, balked at br: complained about the unfairness of enforcing'Ciders of the Renegotiation Board they ;had no1 power to review: In sorcte- of -the cases cited by the majority, the contractor did not apparently have the option of avdiding collection'by posting a bond ór ofhéf'secürity. In most' cases, notwithstanding 'their relútítahcéf the courts granted the recjuested - judgments in favor of the United States. E.g.; United States v. Hopkins, 95 F. Supp. 14 (N.D. Ohio 1950; United States v. Clark, 72 F. Supp. 393 (D. Ore. 1947). Other courts during the same1’ period.1' 'followed' the; Statutory directives' dfi'* Section ltí8;(b) "without" expressing'’anji such’ 'disapprdva'l'. United States v. Shanaman, 123 F. Supp. 402 (E.D. Pa 1954). United States v. American Textile Machine Corp., 119 F. Supp. 253 (M.D.) Tenn. 1953 rev'd on other grounds, 220 F. 2d 584 (6th Cir. 1955); United States v. Edward Valves, Inc., 101 F. Supp. 559 (N.D. Ind. 1951), aff'd 207 F. 2d 329 (7th Cir. 1953), cert. denied, 347 U.S. 934 (1954). i ‘No fórahV'&i^likié'beeli’ fckifici. ’in wliicd'Hie eburts* ekpreSséd disapproval of the statutory1 procedures." In Hermetic Seal Prod. Co., P.R. v. United States, 307 F. 2d 809 (1st Cir.1962), the'court agreed td stay a: judgfiieht ntfíavor’hf tíié"Unitéd States for. excess' profits’ pending'! resolution bg:the' Taix Court of ah important question of coverage bfthehct.'How'-*126ever, that decision was shortly thereafter vacated when the court was informed that the petitioner had failed to file the required bond in the Tax Court; the court enforced the mandatory statutory procedures. 309 F. 2d 482 (1st Cir.1962), cert. denied, 371 U.S. 954 (1963), Accord, United States v. Rockland Steamship Corp., 218 F. Supp. 509 (S.D.N.Y. 1963).
It is my opinion that, as a matter of law, plaintiff has failed to establish its contention that due process would be denied by granting immediate judgment in favor of the defendant on its counterclaim. Having voluntarily entered into contractual relationships with the United States, with knowledge that its profits would be subject to renegotiation and to all the provisions of the Renegotiation Act, as amended, plaintiff has effectively waived the right to challenge on constitutional grounds the clear requirements of Section 108 (b). Even if a challenge on due process grounds is permissible, the statutory provisions comport with the requirements of due process, and afford adequate protection of the plaintiff’s interests. Congress has expressed an important governmental interest in promptly recovering excessive profits as determined by the Renegotiation Board. Given this important governmental interest, there is no fundamental unfairness in postponing the judicial inquiry until after the Government has had the opportunity to collect the amounts determined by the Board. Plaintiff’s interests are fully protected by the ready availability of the de novo re-determination proceeding in this court, wherein the major burden of proof is on the Government.
It is interesting to note the potential anomaly the majority decision creates between the situation of this plaintiff and that of another contractor, in similar financial straits, who has money due from the United States on account of other contracts. In the latter situation, the Government can “execute” the Board order simply by withholding payments due under other contracts. No relief would be available to that contractor pending the conclusion of redetermination proceedings in this court. The instant plaintiff, by the happenstance of having ostensibly received all the amounts due on its contracts, has, temporarily at least, been able to frustrate the Congres*127sional policy favoring prompt judgment for the excess profits determined by the Board, without giving the Government security in the form of a bond.
I agree that the statutory requirement might work a hardship on a contractor who is financially unable to provide a bond. It is no greater hardship than would be experienced by an insolvent contractor if the Government took over his only remaining asset by deducting the excessive profits found by the Board from amounts due him on other contracts. However, if actual or potential hardship is to be relieved, the remedy should be provided by Congressional amendment of the applicable law rather than by the court.
The Government’s motion for judgment in aid of the execution of the Renegotiation Board’s order of August 4, 1971, was filed in this court on January 28,1972. The question before us has been fully briefed and argued before the full court by both parties. For the foregoing reasons, I would follow the decisions of the First Circuit and the District Courts, cited above, and grant the Government’s motion for judgment. At the same time, I concur fully in the court’s denial of the Government’s motion for a default judgment, dismissing plaintiff’s petition, and I would remand the case to the trial commissioner for a de novo redetermination of the amount of excessive profits realized by plaintiff.
Skelton, Judge, and Kunzig, Judge, join in the foregoing opinion concurring in part and dissenting in part.