Allen v. Grand Central Aircraft Co

• Decision Date: 24 May 1954
• Docket Number: No. 450,450
• Citation: 98 L.Ed. 933,347 U.S. 535,74 S.Ct. 745
• Parties: ALLEN et al. v. GRAND CENTRAL AIRCRAFT CO
• Court: U.S. Supreme Court

347 U.S. 535

74 S.Ct. 745

98 L.Ed. 933

ALLEN et al.

v GRAND CENTRAL AIRCRAFT CO.

No. 450.

Argued May 11, 12, 1954.

Decided May 24, 1954.

[Syllabus from pages 535-536 intentionally omitted] Mr. Robert L. Stern, Washington, D.C., for appellants.

Mr. Richard W. Lund, Beverly Hills, for appellee.

Mr. Justice BURTON delivered the opinion of the Court.

The principal question for decision is whether the Defense Production Act of 1950¹ authorized the President to apply administrative action to the enforcement of its wage stabilization provisions. For the reasons hereafter stated, we decide that it did.

There is here also the question whether such administrative enforcement may be applied even after the restrictions placed on wages under Title IV of the Act² have expired, provided the enforcement is limited to violations antedating such expiration. Our answer is in the affirmative.

Appellee further claims that the pending administrative proceeding should be enjoined because the mere conduct of that proceeding might cause it irreparable damage. For the reasons given below, we find that argument untenable.

Appellee, Grand Central Aircraft Company, is a California corporation which was engaged, in 1951, in the production and repair of aircraft equipment in Glendale, California, and Tucson, Arizona. November 4, 1952, the Wage Stabilization Board³ filed a complaint with the National Enforcement Commission⁴ alleging in substance that appellee, between January 26, 1951, and January 1, 1952, had paid wage increases in violations of an order freezing wages at the levels of January 25, 1951.⁵ Those payments consisted of wages totaling about $5,500,000, including about $750,000 alleged to have been in excess of the wage ceilings. January 14, 1953, the National Enforcement Commission appointed Phil C. Neal to hear the evidence as an Enforcement Commissioner and to recommend to the Commission a determination of the issues in the proceeding. He set the case for hearing on February 24 at Los Angeles, California, but further action was enjoined as, stated below, so that the proceeding is still pending at that stage.⁶

February 13, 1953, appellee filed the instant suit in the United States District Court for the Northern District of California, Southern Division. Appellee asked the court to restrain the defendant members of the Wage Stabilization Board, the National Enforcement Commission, officials of the Twelfth Region Wage Stabilization Board, and the Enforcement Commissioner, from proceeding with the administrative hearing. Only the regional officials and the Enforcement Commissioner were served. In its complaint, appellee denied that it had violated the Defense Production Act or any regulation or order under it. Appellee claimed also that the administrative procedure then being followed was unauthorized by the Constitution or any statute and that, even if originally authorized, that authorization had now expired. Finally, appellee claimed the hearing should be enjoined because the mere conduct of the proceeding would inflict irreparable damage upon it. A three-judge District Court, convened under 28 U.S.C. (1952 ed.) § 2282, 28 U.S.C.A. § 2282, granted the restraining order and interlocutory injunction sought by appellee against further conduct of the administrative proceeding. After hearing and trial, the injunction was made permanent. 114 F.Supp. 389. The order was then appealed to this Court under 28 U.S.C. (1952 ed.) § 1253, 28 U.S.C.A § 1253. Stay of the injunction was denied, two Justices dissenting and one not participating. Norback v. Grand Central Aircraft Co., 345 U.S. 988, 73 S.Ct. 1128, 97 L.Ed. 1397. Probable jurisdiction of the appeal was noted. 346 U.S. 920, 74 S.Ct. 309.

A somewhat comparable case was decided by a three-judge United States District Court for the Northern District of Texas in favor of an employer June 14, 1953, in Jonco Aircraft Corp. v. Franklin, 114 F.Supp. 392, with Chief Circuit Judge Hutcheson dissenting. That judgment was reversed by this Court, per curiam, for failure of appellee to exhaust its administrative remedy. 346 U.S. 868, 74 S.Ct. 126.

I.

We consider first the claim to injunctive relief which appellee made on the ground that the conduct of the proposed administrative hearings would cause it irreparable damage by weakening its bank credit and depriving it of essential working capital. On that basis, interlocutory relief was granted pending the court's determination of the ultimate issue of the validity of the administrative procedure. That injunction has been made permanent but the Government, on behalf of appellants, contends that appellee is acting prematurely in seeking such relief before carrying the prescribed administrative procedure at least to the point where it faces some immediate compulsion and greater probability of damage than it has established.

The proposed hearings are to be held before an Enforcement Commissioner with authority merely to recommend findings to a Regional Enforcement Commission subject to review by the National Enforcement Commission. Those findings may show no violation of wage ceilings. At most, they will be concerned with appellee's alleged payment of wages in excess of wage ceilings to an extent of about $750,000. If such a violation of the ceilings is found by the National Enforcement Commission, it may then, under § 405(b) of the Defense Production Act of 1950 and the President's delegated authority, certify to governmental agencies, including the Bureau of Internal Revenue for income-tax purposes, the disallowance of all or part of appellee's illegal wage payments. Appellee argues that such proceedings carry the possibility of the disallowance as a business expense, for income-tax purposes, of $750,000, more or less, up to the total wages paid, exceeding $5,500,000. Appellee contends also that the mere threat of such action would jeopardize the bank credit upon which it depends for essential working capital. There is grave doubt of the right of appellee thus to test the validity of administrative procedure before exhausting it or bringing the issues closer to a focus than it has done. However, it is clear that once the right of the Government to hold administrative hearings is established, a litigant cannot enjoin them merely because they might jeopardize his bank credit or otherwise be inconvenient or embarrassing. Aircraft & Diesel Equipment Corp. v. Hirsch, 331 U.S. 752, 777 779, 67 S.Ct. 1493, 91 L.Ed. 1796. '(T)he expense and annoyance of litigation is 'part of the social burden of living under government." Petroleum Exploration, Inc. v. Public Service Commission of Kentucky, 304 U.S. 209, 222, 58 S.Ct. 834, 841, 82 L.Ed. 1294. See also, Myers v. Bethlehem Shipbuilding Corp., 303 U.S. 41, 47, 58 S.Ct. 459, 461, 82 L.Ed. 638; Chicago & Southern Air Lines v. Waterman S.S. Corp., 333 U.S. 103, 112—113, 68 S.Ct. 431, 436—437, 92 L.Ed. 568; Franklin v. Jonco Aircraft Corp., per curiam, 346 U.S. 868, 74 S.Ct. 126.

It is appellee's principal claim that there is no properly authorized administrative procedure for it to exhaust and that the administrative authorities who seek to determine its case have no lawful right to do so. We, therefore, go directly to the heart of this controversy, which is the question whether the administrative enforcement of the 1950 wage stabilization program has been validly authorized.

II.

The procedure in question is prescribed by General Procedural Regulation 1, Revised, issued by the Economic Stabilization Administrator, August 21, 1952, 17 Fed.Reg. 7737. The hearings are to be conducted regionally by an Enforcement Commissioner and provision is made for appeal to the National Enforcement Commission. That Commission (NEC) is authorized to issue a certificate of disallowance prescribing the amount of wages to be disregarded by the executive departments and other governmental agencies in determining the costs and expenses of appellee for the purposes of any other law or regulation. ESA Gen. Order No. 18, July 28, 1952, 17 Fed.Reg. 6925. Standards of action are prescribed by the Economic Stabilization Administrator in his General Order No. 15, April 3, 1952, 17 Fed.Reg. 2994. Appellee does not complain of noncompliance with these regulations. It complains rather that they are not authorized by statute or that, if purporting to be so authorized, the statute violates the Federal Constitution.

The Government finds authority for the creation of this administrative machinery in § 405(b) of the Defense Production Act of 1950, when read in connection with the entire Act. That section is derived from § 5(a) of the Stabilization Act of 1942, 56 Stat. 767, 50 U.S.C. Appendix, (1946 ed.) § 965(a), 50 U.S.C.A. Appendix, § 965(a). To read the Defense Production Act of 1950 without reference to this model is to read it out of the context in which Congress enacted it.

The Stabilization Act of 1942 was a vital wartime measure, adopted October 2, 1942, directing the President 'on or before November 1, 1942, to issue a general order stabilizing prices, wages, and salaries, affecting the cost of living'.⁷ In it, Congress relied upon presidential action geared to the critical necessity for speedy compliance. Its purpose was to check inflation. It subordinated individual convenience to nation-wide standards. Its sanctions were entrusted to administrative agencies capable of prompt action. Section 5(a) provided that—

'No employer shall pay, and no employee shall receive, wages or salaries in contravention of the regulations promulgated by the President under this Act. The President shall also prescribe the extent to which any wage or salary payment made in contravention of such regulations shall be disregarded by the executive departments and other governmental agencies in determining the costs or expenses of any employer for the purposes of any other law or regulation.' 56 Stat. 767, 50 U.S.C.Appendix (1946 ed.) § 965(...