Bar Ray Products, Inc. v. United States

• Decision Date: 16 October 1964
• Docket Number: No. 382-61.,382-61.
• Citation: 340 F.2d 343
• Parties: BAR RAY PRODUCTS, INC. v. The UNITED STATES.
• Court: U.S. Claims Court

340 F.2d 343 (1964)

BAR RAY PRODUCTS, INC. v. The UNITED STATES.

No. 382-61.

United States Court of Claims.

October 16, 1964.

Albert Foreman, New York City, for plaintiff. M. Carl Levine, Morgulas & Foreman, New York City, of counsel.

Robert R. Donlan, Kensington, Md., with whom was Asst. Atty. Gen. John W. Douglas, for defendant.

Before COWEN, Chief Judge, and LARAMORE, DURFEE, and DAVIS, Judges.

PER CURIAM.

This case was referred pursuant to Rule 57(a) to Herbert N. Maletz, a trial commissioner of this court, with directions to make findings of fact and recommendations for conclusions of law. The case proceeded for adjudication on the basis of the administrative record alone without submission of further evidence and such facts as are necessary to decision of the case are found in the commissioner's opinion which was filed on May 19, 1964. No exceptions to the commissioner's opinion were filed by the parties and on July 17, 1964, defendant filed a motion to dismiss for default pursuant to Rule 63, to which plaintiff filed an answer on July 23, 1964, setting forth that plaintiff accepts the report of the commissioner and agrees and consents that judgment be entered in accordance with his findings and recommendations.

Since the court is in agreement with the opinion, findings and recommendations of the trial commissioner, as hereinafter set forth, it hereby adopts the same as the basis for its judgment in this case without oral argument. Plaintiff is therefore not entitled to recover on its petition, which is dismissed subject to the condition that defendant make tender to plaintiff of all the units in question, as set forth in the opinion, which defendant has in its possession.

In view of this dismissal of the petition, no action is required to be taken on defendant's motion to dismiss filed on July 17, 1964.

OPINION OF COMMISSIONER

Plaintiff had contracts with the defendant for manufacture and delivery of certain photographic processing tray sets. Several years after the units were delivered and accepted, and payment effected, defendant's contracting officer found that they did not meet specification requirements and that their acceptance had been induced by such gross mistake as to indicate fraud. The contracting officer offered return of the units and demanded refund of the purchase price. Plaintiff took an appeal to the Armed Services Board of Contract Appeals (ASBCA) which was denied. Defendant thereupon again offered to return the units and repeated the demand for refund. When plaintiff refused to refund the purchase price, defendant with-held from it monies due under other Government contracts for which recovery is now sought here.

In view of the holding in United States v. Carlo Bianchi, 373 U.S. 709, 83 S.Ct. 1409, 10 L.Ed.2d 652 (1963),¹ the problem in this case — as stated by the court — is "to determine, on the basis of the administrative record and the provisions of the contracts, whether the decision of the Board of Contract Appeals meets the standards of Public Law 356, 83d Cong., 2d Sess., 68 Stat. 81, 41 U.S.C. §§ 321-322 (the Wunderlich Act)." Bar Ray Products, Inc. v. United States, Ct.Cl. No. 382-61, decided July 12, 1963, slip op. p. 3.² Under that act an administrative determination on a question of fact made under the disputes clause of a Government contract is final and conclusive unless the determination is fraudulent, capricious, arbitrary, or so grossly erroneous as necessarily to imply bad faith, or is not supported by substantial evidence. Against this background, plaintiff has filed a statement in the nature of an assignment of errors challenging certain findings of the ASBCA as not being supported by substantial evidence — a contention which defendant denies. Thus the sole issue is whether or not the findings in question are supported by substantial evidence.³

The facts leading up to the present controversy are as follows: Plaintiff, as low bidder, was awarded three contracts on April 9, April 16 and June 17, 1953, for manufacture and delivery of 22 portable field photographic processing tray sets, for a total price of $26,046. Each set was to be a composite unit consisting of a set of three trays, plus elements to provide heat or refrigeration to the solution in the trays. The unit of trays was made of stainless steel and consisted of three open trays arranged side by side and so constructed that by means of plumbing fixtures, water could be circulated through the space immediately beneath the trays. By controlling the temperature of the circulating water, the temperature of the solution in the open trays could be raised and lowered to, and held at, 68° F., which is the commonly accepted temperature for processing photographic products. The heating and refrigeration elements were required to meet the following performance-type specifications:

"* * * The cooler shall have sufficient capacity to cool the water in the trays from 100 degrees F. to 68 degrees F. in 1½ hours when operating in an ambient temperature of 130 degrees F. and a relative humidity of 15 percent.

"* * * The cooling unit shall become effective when the temperature of the circulating water exceeds 70 degrees F. and shall remain effective until the temperature of 68 degrees F. has been reached. The heating unit shall become effective when the temperature of the circulating water drops below 66 degrees F. and shall remain effective until a temperature of 68 degrees F. has been reached. The design of the thermostatic control shall be such as to prevent simultaneous operation of the heating and cooling units."

Each contract contained inspection clauses which read in part:

"(c) * * * Final acceptance or rejection of the supplies shall be made as promptly as practicable after delivery, except as otherwise provided in this contract; but failure to inspect and accept or reject supplies shall neither relieve the Contractor from responsibility for such supplies as are not in accordance with the contract requirements nor impose liability on the Government therefor.

"(d) The inspection and test by the Government of any supplies or lots thereof does not relieve the Contractor from any responsibility regarding defects or other failures to meet the contract requirements which may be discovered prior to final acceptance. Except as otherwise provided in this contract, final acceptance shall be conclusive except as regards latent defects, fraud, or such gross mistakes as amount to fraud."

Each contract also contained the following guarantee clause:

"It is understood that the equipment herein specified shall be guaranteed for a period of one (1) year from date of final acceptance thereof against defective materials, design and workmanship. Upon receipt of notice from the Government of failure of any part during the guarantee period, the affected part or parts shall be replaced promptly by new parts by and at the expense of the contractor."

Shortly after having been awarded the first two contracts for the photographic processing tray sets, plaintiff on April 23, 1953, wrote the contracting officer requesting permission to make certain modifications to the specifications which it said "would be to the Government's advantage without affecting the price per unit." The contracting officer replied that "the severe limitations imposed on the end use of the equipment and its specialized application" would not permit adoption of the suggested changes and requested that "this current procurement be accomplished under the specifications designated."

The 22 units were shipped during the period December 30, 1953 to January 18, 1954; accepted by the defendant's inspector; and paid for. Some 8 months later, defendant made an inspection of one of the units in the course of which it discovered a number of defects in the unit's design and workmanship. For that reason the contracting officer sent plaintiff an unsatisfactory equipment report in September 1954. Plaintiff replied in December 1954, conceding that the units did not meet specifications but adding that it had deviated from the specifications "only after lengthy discussion with (defendant's) personnel and only with their consent and approval." In this connection, the plaintiff indicated that the specifications were in error and that the deviations it had made "were an improvement in performance over what the government would have gotten for their money if the specifications were and could have been followed."

In January 1955, after another unit was inspected, the contracting officer addressed a letter to the plaintiff in which he "determined that the units are defective in design and workmanship" and made demand under the guarantee clause for correction of specified defects. Plaintiff responded that the demand was unacceptable stating that it had been instructed to build the units "so as to circumvent the specification contradictions"; that "no changes could be given to (it) in writing because the award was on a `buy against' action";⁴ and that it had "built (the) equipment to the intent of (the) specifications and in such a manner as to be suitable to the use intended." In view of plaintiff's refusal to correct the defects, the contracting officer in a letter dated May 2, 1955, made demand under the guarantee clause for $15,185.50 — the amount he estimated as the cost of making the corrections. On the same day (May 2, 1955), plaintiff appealed from this decision and requested an oral hearing. This appeal, however, was never forwarded to or docketed by the ASBCA. Instead, further efforts were made to resolve the dispute by agreement. Finally, the contracting officer, on April 4, 1956, issued findings of fact with respect to the demand for $15,185.50 under the guarantee clause, in which he listed specific defects in design and workmanship and concluded that the contracting officer had never authorized the contractor, either orally or in writing, to deviate from the...