334 U.S. 742 (1948), 105, Lichter v. United States

Docket Nº:No. 105
Citation:334 U.S. 742, 68 S.Ct. 1294, 92 L.Ed. 1694
Party Name:Lichter v. United States
Case Date:June 14, 1948
Court:United States Supreme Court

Page 742

334 U.S. 742 (1948)

68 S.Ct. 1294, 92 L.Ed. 1694



United States

No. 105

United States Supreme Court

June 14, 1948

Argued November 20-21, 1947




1. The Renegotiation Act is constitutional on its face as authority for the recovery by the United States of "excessive profits" (less tax credits) realized by private parties in the circumstances of these cases on subcontracts for war goods in time of war with contractors who were also private parties -- even in the absence of contractual provisions for the renegotiation of such profits and even as applied to contracts entered into prior to the enactment of the Act, provided final payments had not been made pursuant to such contracts prior to the date of enactment of the original Act. Pp. 746, 753-793.

2. The power of Congress to authorize the recovery of such excessive profits is included in the broad scope of the war powers expressly granted to Congress by the Constitution. Pp. 753-772.

(a) In time of war, Congress unquestionably has the fundamental power to conscript men and to requisition properties necessary and proper to enable it to raise and support armies. Pp. 756, 765.

(b) The Renegotiation Act was a law "necessary and proper" for carrying into execution the war powers of Congress, and especially its power to raise and support armies. Pp. 757-765.

(c) Not only was it "necessary and proper" for Congress to provide for the production of war supplies in the successful conduct of the war, but it was well within the outer limits of the constitutional discretion of Congress and the President to do so under the terms of the Renegotiation Act in a manner designed to eliminate excessive private profits. See United States v. Bethlehem Steel Corp., 315 U.S. 289, 305. Pp. 763-765, 769.

(d) The plan for renegotiation of profits realized by private parties on contracts for production of war goods -- chosen by

Page 743

Congress as an alternative to mobilization of the productive capacity of the nation into a governmental unit on the totalitarian model -- symbolized a free people united in reaching unequalled productive capacity and yet retaining the maximum of individual freedom consistent with a general mobilization of effort. Pp. 765-772.

3. The authority granted for administrative determination of the amount of "excessive profits," if any, realized on war subcontracts was a constitutional definition of administrative authority, and not an unconstitutional delegation of legislative power. Pp. 774-787.

(a) A constitutional power implies a power of delegation of authority under it sufficient to effect its purposes. Pp. 778-783.

(b) The administrative practices developed under the Act demonstrated the definitive adequacy of the term "excessive profits" as used in the Act. P. 783.

(c) In the light of the purpose of the Act and its factual background, the statutory term "excessive profits" was a sufficient expression of legislative policy and standards to render it constitutional. Pp. 783-786.

(d) The methods prescribed and the limitations imposed by Congress on the contemplated administrative action help to sustain its constitutionality. Pp. 786-787.

4. The war powers of Congress and the President are only those which are to be derived from the Constitution, but the primary implication of a war power is that it shall be an effective power to wage war successfully. P. 782.

5. While the constitutional structure and controls of our Government are our guides equally in war and in peace, they must be read with the realistic purposes of the entire instrument fully in mind. P. 782.

6. It is not necessary that Congress supply administrative officials with a specific formula for their guidance in a field where flexibility and the adaptation of the congressional policy to infinitely variable conditions constitute the essence of the program. P. 785.

7. The collection of renegotiated excessive profits on a war subcontract is not in the nature of a penalty, and is not a deprivation of a subcontractor of his property without due process of law in violation of the Fifth Amendment. Pp. 787-788.

8. The Government was entitled to recover excessive profits (less tax credits) from each of the subcontractors in these cases, whether they arose from contracts made before or after the passage of the Act, provided final payments had not been made pursuant to such contracts prior to the date of the original Act -- even though

Page 744

they arose out of contracts between private parties, and not out of contracts made directly with the Government itself. Pp. 747-753, 788-789.

9. In a suit by the Government under the Act to recover excessive profits administratively determined to have been realized by subcontractors under war contracts in the circumstances of these cases, subcontractors who failed to make timely application to the Tax Court for redetermination of the amount of such excessive profits do not have the right to raise questions as to the coverage of the Act, as to the amount of excessive profits adjudged to be due from them, or as to other comparable issues which might have been presented by them to the Tax Court upon a timely petition for a redetermination. Pp. 753-754, 789-793.

(a) The statute and the course of action taken afforded procedural due process to the subcontractors in these cases. P. 791.

(b) The statutory provision for a petition to the Tax Court was not, in any of these cases, an optional or alternative procedure; it provided the only procedure to secure a redetermination of the excessive profits which had been administratively determined to exist. P. 792.

(c) Failure of the subcontractors in these cases to exhaust that procedure has left them no right to present such issues in this Court. P. 792.

160 F.2d 329; 159 F.2d 73; 160 F.2d 103, affirmed.

The cases are stated concisely in the opinion, with citations to the decisions below, pp. 746-753. Affirmed, p. 793.

Page 745

BURTON, J., lead opinion

MR. JUSTICE BURTON delivered the opinion of the Court.

The Renegotiation Act,1 in time of crisis, presented to this nation a new legislative solution of a major phase

Page 746

of the problem of national defense against world-wide aggression. Through its contribution to our production program, it sought to enable us to take the leading part in winning World War II on an unprecedented scale of total global warfare without abandoning our traditional faith in and reliance upon private enterprise and individual initiative devoted to the public welfare.

In each of the three cases before us, the principal issue is the constitutionality, on its face, of the Renegotiation Act insofar as it is authority for the recovery of the excessive profits sought to be recovered by the United States from the respective petitioners. In each case, the secondary issue is whether the failure of the respective petitioners to petition the Tax Court for a redetermination of the amount, if any, of their excessive profits excludes from consideration here the coverage of the Act, the amount of the profits, and other comparable issues which could have been presented to the Tax Court. In each of these cases, the District Court has held that the Act was constitutional, and that, by failure to petition the Tax Court for their redetermination, the existing orders have become final, as claimed by the Government. Each Circuit Court of Appeals has affirmed, unanimously, the judgment appealed to it. We agree with the courts below.

In each of these cases, the United States obtained a judgment for a sum alleged to be owed to it pursuant to a determination of excessive profits under the Renegotiation Act. The determinations of excessive profits in the respective cases were made by the Under Secretary of War or by the War Contracts Price Adjustment Board after the Revenue Act of 1943 had been approved, [68 S.Ct. 1298] February 25, 1944. That Act contained, in its Title VII, the so-called Second Renegotiation Act, which included provisions for the filing with the Tax Court of petitions for the redeterminations of excess profits. None of these petitioners, however, filed such a petition with the Tax

Page 747

Court. On the other hand, the respective petitioners have relied upon their claims that, as a matter of law, the Renegotiation Act is unconstitutional on its face insofar as it purports to authorize the judgments which have been taken against the respective petitioners. The petitioners contend also that their failures to file petitions with the Tax Court have not foreclosed their respective rights to contest here the coverage of the Act, the amount of the excess profits found against them, and other comparable issues which they might have presented to the Tax Court.


In May, 1945, the United States filed its complaint in the District Court of the United States for the Southern District of Ohio against the petitioners, Jacob Lichter and Jennie L. Lichter, engaged in the construction business in Cincinnati, Ohio, under the name of the Southern Fireproofing Company, a copartnership. The complaint was founded upon the determination by the Under Secretary of War, dated October 20, 1944, that $70,000 of the profits realized by petitioners during the calendar year 1942 from nine subcontracts, executed in 1942 for a total price of $710,244.16, were, under the Renegotiation Act, excessive profits. The complaint showed that the petitioners were entitled to a tax credit of $42,980.61 against such excessive profits. It alleged, moreover, that the petitioners had not, within the required period, petitioned the Tax Court for a redetermination of the order in question, and had not paid or otherwise eliminated the amount of $27,019.39 thus due to the United States.

The petitioners admitted that the Under Secretary had made the...

To continue reading