Aircraft Diesel Equipment Corporation v. Hirsch

• Decision Date: 16 June 1947
• Docket Number: No. 95,95
• Parties: AIRCRAFT & DIESEL EQUIPMENT CORPORATION v. HIRSCH et al
• Court: U.S. Supreme Court

331 U.S. 752

67 S.Ct. 1493

91 L.Ed. 1796

AIRCRAFT & DIESEL EQUIPMENT CORPORATION

v HIRSCH et al.

No. 95.

Argued Jan. 15, 1947.

Decided June 16, 1947.

As Amended on Denial of Rehearing

Oct. 13, 1947.

Appeal from the District Court of the United States for the District of Columbia.

[Syllabus from pages 752-754 intentionally omitted] Mr. Arthur R. Hall, of Chicago, Ill., for appellants.

Mr. Robert L. Stern, of Washington, D.C., for appellees.

Mr. Justice RUTLEDGE delivered the opinion of the Court.

This case is the fourth in a series seeking here a determination of the invalidity, on constitutional grounds, of the First and Second Renegotiation Acts¹ and allied legislation.

In Coffman v. Breeze Corporations, 323 U.S. 316, 65 S.Ct. 298, 89 L.Ed. 264, and in Alma Motor Co. v. Timken-Detroit Axle Co., 329 U.S. 129, 67 S.Ct. 231, the Royalty Adjustment Act² was attacked. The Alma Motor case was remanded to the Circuit Court of Appeals for a determination of the Act's applicability. The suit in the Coffman case was by a patent owner to restrain his licensees from paying accrued royalties to the Government pursuant to the Act's provisions. We held that the complaint had been rightly dismissed for want of equity jurisdiction, since the plaintiff had an adequate remedy at law by suit against its licensees, and also for want of a justiciable case or controversy.

In Mine Safety Appliances Co. v. Forrestal, 326 U.S. 371, 66 S.Ct. 219, 90 L.Ed. 140, a government contractor challenged the Renegotiation Acts.³ The complaint sought to enjoin the Secretary of the Navy from taking action 'which would stop payment by the government of money lawfully in the United Sttes Treasuery to satisfy the government's and not the Secretary's debt to the appellant.' 326 U.S. at page 374, 66 S.Ct. at page 221, 90 L.Ed. 140. Accordingly we held that the Government was an indispensable party. Since it neither had been joined in the suit nor had consented to be sued in such a proceeding, it followed that the complaint had been properly dismissed.

In one other case, Macauley v. Waterman S.S. Corporation, 327 U.S. 540, 66 S.Ct. 712, 90 L.Ed. 839, constitutionality was not involved, but coverage of the Renegotiation Acts was put in issue. The suit was brought in a District Court for a declaratory judgment and to restrain further renegotiation proceedings affecting the specified contracts. The contractor had not sought a decision on coverage from the Tax Court. We held that the Tax Court has power to decide such questions in the proceedings authorized by § 403(e)(1) of the Second Renegotiation Act. Hence, under the authority of Myers v. Bethlehem Shipbuilding Corporation, 303 U.S. 41, 58 S.Ct. 459, 82 L.Ed. 638, the complaint in the Waterman case also was held rightly to have been dismissed, in this instance for the plaintiff's failure to exhaust its administrative remedy.

Now the Aircraft & Diesel Equipment Corporation seeks a declaratory judgment that the First and Second Renegotiation Acts are unconstitutional on various grounds. Injunctive relief also is asked. And, in addi- tion to the constitutional questions, determination is sought of issues of coverage and other matters.

The defendants, appellees here, consist of the members of the War Contracts Price Adjustment Board, the Secretary of War, and the Under Secretary of War. ⁴ Pursuant to the statutory requirement, 50 Stat. 751, 752, 28 U.S.C. § 380a, 28 U.S.C.A. § 380a, a district court of three judges was especially convened. After hearing, the complaint was dismissed.⁵ One ground for this action was that the suit is premature, since proceedings were pending and undetermined in the Tax Court, pursuant to appellant's applications, for redetermination of its allegedly excessive profits for 1942 and 1943.⁶ The court also held that it was without jurisdiction in equity, since in its view adequate remedy at law was available to Aircraft. Probable jurisdiction of the appeal was duly noted here.⁷ 66 S.Ct. 1346.

We think the District Court correctly dismissed the complaint, and for the reasons stated as grounding its action. The issues expansively include almost all comprehended in the causes previously determined here. But the case reaches this Court in a posture differing in some sub- stantial respects from that characterizing any of those proceedings. Hence it becomes necessary to set forth with some particularity the facts and controlling issues.

I.

Appellant is in the business of manufacturing diesel fuel injection equipment and precision parts, and aircraft precision parts. Its manufacturing activities, insofar as material,⁸ were carried on under subcontracts with government contractors. The contractor in turn furnished the completed aircraft or engines t the Unite d States.

Pursuant to the First Renegotiation Act, the Secretary of War, acting though his delegate the Under Secretary of War, determined on October 27, 1943, that during the fiscal year ended November 30, 1942, appellant had realized excessive profits (less tax credits) amounting to $204,000. On April 29, 1944, the Under Secretary directed appellant's customers to withhold this sum from appellant. Thereafter it filed a petition with the Tax Court⁹ for a redetermination of the alleged excessive profits. Nevertheless, on July 19, 1944, the Under Secretary further directed appellant's customers to pay the $204,000 into the Treasury of the United States, and this direction was obeyed. ¹⁰

Following the fiscal year ended November 30, 1943, renegotiation proceedings were instituted under the Second Renegotiation Act. On January 11, 1945, the Under Secretary of War, as delegate of the War Contracts Price Adjustment Board, entered an order determining that appellant had realized excessive profits of $1,265,000. Deduction of tax credits reduced this amount to approximately $270,000. Appellant again filed a petition for redetermination with the Tax Court.¹¹ Then followed this suit.

The amended complaint is too lengthy for detailed summarization in this opinion. Apart from allegations going to constitutionality and coverage, including asserted defects in the renegotiation procedures followed,¹² the complaint sought to establish jurisdiction in the District Court, equitable in character, by showing the inadequacy of all available legal or other remedies. These included the pending Tax Court proceedings, possible suit in the Court of Claims following completion of the Tax Court's determination, and actions at law against appellant's customers, contractors with the Government to recover the amounts said to be due under their varios contract s.

In particular it was alleged that, notwithstanding the pendency of the Tax Court proceedings, the Board and the Secretary, or his delegates, were taking steps to prevent Aircraft's customers from paying over to it moneys owing on contracts, aggregating $270,000, and claimed to be due the Government as excessive profits. The complaint alleged further that the Board and the Secretary were threatening to direct Aircraft's customers to pay these sums into the Treasury¹³ and that, unless they were re- strained, such payment would be made, to appellant's irreparable injury.¹⁴ No direct relief was asked, by way of judgment or decree, for refund of the $204,000 collected by the Government from appellant's customers, pursuant to the First Renegotiation Act, as excessive profits realized in 1942. It was suggested, however, that if that Act should be found invalid and the Second Act sustained,¹⁵ the Government should be permitted to collect only the difference between $270,000, the amount determined to be excessive profits for 1943, and the $204,000 collected for 1942. The suggestion, of course, if formally made, would be substantially a claim against the Government by way of setoff of the latter amount. Cf. Mine Safety Appliances Co. v. Forrestal, supra.

The Government has contested each of appellant's claims. But its primary contentions have been aimed at Aircraft's jurisdictional showing. It argues that the suit in substance and legal effect is one against the United States, to which there has been no governmental consent, cf. Mine Safety Appliances Co. v. Forrestal, supra; that the suit is premature, because the Tax Court proceedings have not been completed and until this has been done Aircraft will not have exhausted its administrative remedy, cf. Macauley v. Waterman S.S. Corporation, supra; that the Tax Court has been given exclusive jurisdiction in renegotiation matters; and that, in any event, there is no jurisdiction of an equitable character in the District Court, to afford the relief appellant seeks, since it has an adequate remedy at law by suit upon its contracts to recover any amounts due from its customers, in which all questions of constitutionality may be determined. Cf. Coffman v. Breeze Corporation, supra.

In the latter connection appellee Hirsch, as chairman of the Board, has filed an affidavit admitting that he and the other appellees, unless restrained, will take steps, as appellant alleges, to prevent payment of the $270,000 by its customers to it, and also to secure payment of that sum into the Treasury. The affidavit sets forth, however, that direction for payment will not be required or made as to more than two or three of appellant's customers and, in the event this does not result in payment of the full amount, the Government will proceed to collect whatever may remain by suit against appellant.

Aircraft, on the other hand, both in the amended complaint and by the supporting affidavit of its president, alleged that no such sum as $270,000 was owing to it from, or could be collected by direction to, any two or three of its customers. Rather it was set forth that collection of any such amount could be made only by direction to some sixteen or more customers. And on the same basis it is asserted that Aircraft's remedy by suit against its customers would require...