44 57 Renegotiation Board v. Grumman Aircraft Engineering Corporation 8212 1316

• Decision Date: 28 April 1975
• Docket Number: No. 73,73
• Citation: 95 S.Ct. 1491,421 U.S. 168,44 L.Ed.2d 57
• Parties: . 44 L.Ed.2d 57 The RENEGOTIATION BOARD, Petitioner, v. GRUMMAN AIRCRAFT ENGINEERING CORPORATION. —1316
• Court: U.S. Supreme Court

421 U.S. 168

95 S.Ct. 1491.

44 L.Ed.2d 57

The RENEGOTIATION BOARD, Petitioner,

v GRUMMAN AIRCRAFT ENGINEERING CORPORATION.

No. 73—1316.

Argued Jan. 14, 1975.

Decided April 28, 1975.

Syllabus

Pursuant to the Government contract renegotiation process in effect under the Renegotiation Act of 1951 for so-called Class A cases (those in which the contractor reported profits of more than $800,000 on the relevant contracts) during the period involved in this case, if the Regional Board made a recommendation as to the amount of excessive profits in the year in issue rather than recommending a clearance, i.e., a unilateral determination that a contractor realized no excessive profits during the year in issue, the case, if the contractor declined to enter into an agreement, would be reassigned to the Renegotiation Board (Board). The case file, including the Regional Board Report, was then transmitted to the Board and assigned to a division of the Board, usually consisting of three of its five members, which in due course would make its own decision and sumbit to the full Board a Division Report, including a recommendation for final disposition of the case. If the Regional Board concluded that no excessive profits had been realized and that a clearance should therefore issue, a 'final recommendation' that a clearance be issued was sent to the Board, which considered the case on the basis of the Regional Board Report. Respondent brought an action pursuant to the Freedom of Information Act (FOIA), 5 U.S.C. § 552, seeking disclosure of certain Regional Board Reports resulting in a recommendation of clearance and Board approval, and of Division Reports in other cases, all related to and issued during renegotiation proceedings involving 14 other companies during the period 1962—1965. The District Court ultimately granted relief on the grounds that both the Regional Board and Division Reports were 'final opinions' within the meaning of § 552(a)(2)(A), which requires a Government agency to make available to the public 'final opinions, including concurring and dissenting opinions, as well as orders, made in the adjudication of cases,' and were not exempt from disclosure under § 552(b)(5) (Exemp- tion 5) as 'inter-agency or intra-agency memorandums . . . which would not be available by law to a party other than an agency in litigation with the agency.' The Court of Appeals affirmed, further holding that even if the Regional Board Reports were not 'final opinions of the Board, they were disclosable as final opinions of the Regional Board, which was to be considered an 'agency' for purposes of the FOIA. Held: Neither the Regional Board nor Division Reports are final opinions and they do fall within Exemption 5, since (1) only the full Board has the power by law to make the decision whether excessive profits exist; (2) both types of reports are prepared prior to that decision and are used by the Board in its deliberations; and (3) the evidence fails to support the conclusion that the reasoning in the reports is adopted by the Board as its reasoning, even when it agrees with a report's conclusion. Pp. 183-190.

(a) The Regional Board Reports, being prepared long before the Board reached its decision and being used by it as a basis for discussion, are precisely the kind of predecisional deliberative advice and recommendations contemplated by Exemption 5 which must remain uninhibited and thus undisclosed, in order to supply maximum assistance to the Board in reaching its decision. Regardless of whether the Regional Boards are agencies for Class A purposes so that their final recommendations are inter-agency memoranda, or are not agencies separate from the Board so that their recommendations are ntra-agency memoranda, the Regional Boards' total lack of decisional authority brings their reports within Exemption 5 and prevents them from being 'final opinions.' Pp. 185-188.

(b) Since the Division Reports were prepared before the Board reached its decision and to assist it in its deliberations, and were used by the full Board as a basis for discussion, the Board should not be deprived of such a thoroughly uninhibited version of this valuable deliberative tool by making such reports public on the unsupported assumption that they always disclose the final views of at least some Board members. Pp. 189-190.

157 U.S.App.D.C. 121, 482 F.2d 710, reversed.

Allan A. Tuttle, Raleigh, N.C., for petitioner.

Tom M. Schaumberg, Washington, D.C., for respondent.

Mr. Justice WHITE delivered the opinion of the Court.

The issue in this case is whether certain documents—documents generated by the Renegotiation Board (Board) and by its Regional Boards in performing their task of deciding whether certain Government contractors have earned, and must refund, 'excessive profits' on their Government contracts—are 'final opinions' explaining the reasons for agency decisions already made, and thus expressly subject to disclosure pursuant to the Freedom of Information Act (Act), 5 U.S.C. § 552(a)(2)(A), or are instead predecisional consultative memoranda exempted from disclosure by § 552(b)(5). See NLRB v. Sears, Roebuck & Co., 421

U.S. 132, 95 S.Ct. 1504, 44 L.Ed.2d 29. I Essential to the consideration of whether the documents at issue in this case must be disclosed pursuant to the relevant provisions of the Act is an understanding of the renegotiation process, a process that itself serves to define the documents in issue and hereinafter described.¹

Under the Renegotiation Act of 1951, 65 Stat. 7, as amended, 50 U.S.C. App. § 1211 et seq., the Government is entitled to recoup from those who hold contracts or subcontracts with certain departments of the Government any 'excessive profits' received by such persons on such contracts. The amount of the profits which will be considered 'excessive' in connection with a particular contract depends upon the statutory factors which are set forth in the margin.² As the Board's name suggests, it endeavors to, and in fact does, conclude the vast majority of its cases by agreement. 50 U.S.C. App. § 1215(a). (1970 ed., Supp. I). Absent an agreement, however, the Board must decide either to issue a 'clearance,' i.e., a unilateral determination that the contractor realized no excessive profits during the year in issue, or to issue a unilateral order fixing excessive profits at a specified amount and directing the contractor to refund them. The unilateral order is final unless a de novo determination regarding excessive profits is sought within 90 days before the Court of Claims.³ It is in those cases not terminated by agreement that the documents at issue in this case were generated.⁴ With this in mind, we turn to the details of the renegotiation process as it existed during the period relevant to the decision in this case.⁵

Persons holding contracts or subcontracts with certain departments of the Government were required to file financial statements as prescribed by the Board, 50 U.S.C. App. § 1215(e)(1) 1964 ed.); 32 CFR Part 1470, if their receipts from those contracts met the requisite jurisdictional amount, 50 U.S.C. App. § 1215(f). These state- ments were reviewed by the staff of the Board, and, if that initial review indicated the possibility that the contractor realized 'excessive' profits, the 'case' was referred to one of two Regional Boards for further action.⁶ At the time of this assignment, each case was designated as a Class A case or a Class B case: the former if the contractor had reported profits of more than $800,000 on the relevant contracts covered in his financial statement, and the latter in all other cases.⁷ The principal difference between Class A cases and Class B cases was that the Regional Boards had some final decisional authority in the latter and none in the former. 32 CFR §§ 1471.2(b), 1473.2(a), 1474.3(a), and 1475.3(a). Since the documents sought by respondent in this case were all generated in Class A cases, only the procedure applicable to those cases will be discussed.

After reference to a Regional Board, a case was usually assigned to a staff team consisting of an accountant and a renegotiator.⁸ This team, after determining what further information from the contractor was required, secured such information and received any sub- missions the contractor might have wanted to make with regard to his case, including his position concerning the statutory factors that largely determined whether he had received 'excessive profits,' 50 U.S.C. App. § 1213(e). A document entitled 'Report of Renegotiation' was then prepared by the team. Part IA of that report, the accountant's section, contained pertinent financial and accounting data and was furnished to the contractor upon request.⁹ Part II of the Report of Renegotiation, prepared by the renegotiator, and not furnished to the contractor, generally contained 'an analysis and evaluation of the case; and a recommendation with respect to the amount, if any, of excessive profits for the fiscal year under review.' 32 CFR § 1472.3(d). According to testimony given in this case, a Part II in outline form would be as follows:

'A. Sources of Information

'B. Application of Statutory Factors:

'1. Character of Business

'2. Capital Employed

'3. Extent of Risk Assumed

'4. Contribution to the Defense Effort

'5. Efficiency

'6. Reasonableness of Costs and Profits

'(a) Costs

'(b) Pricing

'(c) Profits

'C. Special Matters

'D. Conclusion and Recommendation.'

After a Report of Renegotiation was prepared, but prior to its submission to the Regional Board, the team assigned to the case endeavored to meet with the contractor to resolve 'any issues or disputed matters of fact, law or accounting.' 32 CFR § 1472.3(b). The report was then submitted to the Regional Board.

After reviewing the Report of Renegotiation and the case file, the Regional Board would make a 'tentative recommendation with respect to the amount of excessive profits realized in the...