American Brake Shoe Co. v. Bowles

• Decision Date: 28 September 1945
• Docket Number: No. 141,204.,141
• Citation: 151 F.2d 195
• Parties: AMERICAN BRAKE SHOE CO. v. BOWLES, Price Administrator (two cases).
• Court: U.S. Temporary Emergency Court of Appeals Court of Appeals

151 F.2d 195 (1945)

AMERICAN BRAKE SHOE CO. v. BOWLES, Price Administrator (two cases).

Nos. 141, 204.

United States Emergency Court of Appeals.

Heard May 21, 1945.

Decided September 28, 1945.

William Dean Embree, of New York City (Robert L. Lingelbach, of New York City, on the brief), for complainant.

Nathaniel L. Nathanson, Associate Gen. Counsel, Office of Price Administration, of Washington, D. C. (Richard H. Field, Gen. Counsel, Jacob D. Hyman, Chief, Court Review Price Branch, Louis L. Rochmes, Atty., and Joseph Brenner, Atty., all of the Office of Price Administration, all of Washington, D. C., on the brief), for respondent.

Before MARIS, Chief Judge, and MAGRUDER and McALLISTER, Judges.

Heard at New York May 21, 1945.

MAGRUDER, Judge.

The protests in these two cases were directed against orders of the Price Administrator denying applications by American Brake Shoe Company for individual adjustments of the maximum prices on brake shoes.

Complainant is a multi-product manufacturer selling brake shoes, steel forgings, manganese steel and alloy castings, automotive friction brake materials, and many other related products. Complainant's brake shoe division manufactures about 75 per cent of all the brake shoes produced in this country.

Maximum Price Regulation No. 136, as Amended — Machines and Parts, and Machinery Services, issued June 30, 1942 (7 F.R. 5047), established as complainant's maximum prices for brake shoes the prices it had in effect on October 1, 1941. The adjustment provision here involved, § 1390.-25a, was added to the regulation by Amendment 78, issued April 6, 1943 (8 F.R. 4516), and further amended by Amendment 92, issued June 19, 1943 (8 F.R. 8544). It reads in part as follows:

"(a) Application by a seller — (1) Who may receive an adjustment. The maximum price established by this regulation for a machine or part may be adjusted in the case of an essential supplier of an essential machine or part. An `essential machine or part' is one which contributes to the effective prosecution of the war. An `essential supplier' is one whose output or supply of a machine or part cannot be reasonably expected to be replaced at prices lower than the proposed adjusted maximum price. In addition, any person who has entered into, or proposes to enter into, a war contract (as defined in subparagraph (5)), or a subcontract thereunder, is an essential supplier of an essential machine or part.

"(2) When adjustment may be granted — (i) In general. The Office of Price Administration, any regional office, or such other offices as may be authorized by order issued by the appropriate regional office, may adjust the maximum price in the case of an essential supplier of an essential machine or part upon the basis of information submitted by the supplier or of other information. It may make that adjustment whenever it finds that the maximum price of a machine or part is at such a level that (taking into account the cost thereof, the profits position of the supplier and the nature of his business) production or supply of the machine or part is impeded or threatened and that the adjustment would not cause an increase in the cost of living."

The adjustment provision also states certain factors which are considered relevant in determining whether the production or supply of the machine or part is impeded or threatened. The factors are quoted in the footnote.¹

Complainant's first application for adjustment was filed June 16, 1943. It asked for an increase of $3.00 per ton in its average maximum prices for brake shoes. The application was denied by order of the Administrator issued August 26, 1943. In a protest against this order, filed October 23, 1943, complainant alleged that it was an essential supplier of an essential machine or part; that its production of brake shoes was impeded or threatened by the applicable maximum prices, and that the requested adjustment would not cause an increase in the cost of living. The protest was denied by order of the Administrator issued April 1, 1944. In an opinion accompanying the order of denial, the Administrator concluded that the applicant had failed to establish that the existing maximum prices impeded or threatened its production of brake shoes. The Administrator concedes that brake shoes are essential within the meaning of the adjustment provision, that complainant is an essential producer thereof, and that an adjustment would not increase the cost of living.

Following denial of the foregoing protest, American Brake Shoe Company filed its complaint in this court (Case No. 141). Later the protest proceeding was reopened by the Administrator, upon order of this court, for the presentation of additional evidence. By order issued August 29, 1944, the Administrator again denied the protest upon reconsideration.

Complainant's second application for adjustment under § 1390.25a was filed August 15, 1944. It asked for increases of $10.00 per net ton in the maximum prices of each type of brake shoe manufactured and sold by it. This application was denied by order issued October 9, 1944. On November 17, 1944, complainant filed its protest against this order. On February 12, 1945, the Administrator issued an order denying the protest, following which complainant filed a complaint in this court (Case No. 204).

The application for adjustment involved in No. 204 was supplementary to, and in effect superseded, the earlier application involved in No. 141. By order of this court the two complaints were consolidated for hearing and disposition. It will be unnecessary hereinafter to differentiate between the two cases.

Since the protests here were merely against orders denying individual applications for adjustment, this court is not now required to consider whether the maximum prices established by MPR 136, as amended, are "generally fair and equitable". No issue is presented as to the validity of the regulation under the terms of which the individual adjustments were sought. The only question is whether, on the evidence, the Administrator was arbitrary or capricious in concluding that complainant had failed to bring itself within the terms of § 1390.25a, as being entitled thereunder to an upward adjustment of maximum prices. See Capitol Foundry Co. v. Bowles, Em.App., 1944, 146 F.2d 855, 857.

In the interest of uniformity of administration of the adjustment provision, the Administrator has adopted an objective standard for determining when maximum prices may be deemed to constitute an impediment or threat to the applicant's production of a commodity, within the meaning of § 1390.25a. As we said in Capitol Foundry Co. v. Bowles, supra, 146 F.2d at page 857: "The adoption of standards by the Administrator for the sake of uniformity in making necessary adjustments in maximum prices is not only permissible but highly desirable." In his opinion accompanying the order denying the protest in No. 204, the Administrator sets forth the standard by which he has been guided in disposing of applications for adjustment under § 1390.25a. He states that:

"* * * there is deemed to be no threat to production by a manufacturer who currently earns double his base period earnings before income and excess profits taxes, and whose maximum price returns to him total unit factory costs. These include all costs attributable to the particular product except selling and general administrative expense. In the Administrator's opinion, a manufacturer so favorably situated can readily absorb the selling and administrative expense attributed to a particular product. In the case of manufacturers whose current over-all profits are in excess of but less than double their average base period profits, adjustments have been granted increasing particular maximum prices to the point where they will return total unit costs. These standards assure not only that essential manufacturers of essential machinery will not sustain out of pocket losses, but that their maximum prices will contribute a share of the joint costs of their entire operations. How large a share they should be required to contribute is, in the Administrator's opinion, dependent on the individual's relative overall financial picture."

The relevant factors set forth in the adjustment provision itself² dovetail with the standard thus formulated by the Administrator, putting an applicant upon notice that, to make out a case for an adjustment, he will have to supply the Administrator with information as to his base period over-all profits and his current overall profits; also as to whether and to what extent the applicable maximum price for the commodity in question is below or above the total unit cost.

We think that the standard applied by the Administrator is a reasonable one; it is, indeed, somewhat more liberal to the applicant than the standard for adjustment which we approved in Armour & Co. v. Bowles, Em.App.1945, 148 F.2d 546, 550.

It is quite clear from the evidence in the transcript that complainant has failed to establish a case for adjustment under the terms of the adjustment provision and the standard which the Administrator has adopted in administering it.

Complainant's evidence gives a picture of continually rising costs in its brake shoe division, decreasing unit profits on brake shoes, and decreasing brake shoe division profits. The financial information has been conveniently summarized in tables presented by the complainant to the court at the oral argument. These are reproduced here with certain figures added:

                                         Brake Shoe Division Financial Data
                                             Tons of     Brake Shoe     Net Profits     % of
                                           Brake Shoes   Net Profits      Per Net     Profit on
                      Period

...