Bannercraft Clothing Company v. Renegotiation Board

• Decision Date: 06 July 1972
• Docket Number: No. 24685,24778 and 71-1025.,24685
• Parties: BANNERCRAFT CLOTHING COMPANY, Inc. v. The RENEGOTIATION BOARD, Appellant. ASTRO COMMUNICATION LABORATORY, A Division of Aiken Industries, Inc. v. The RENEGOTIATION BOARD, Appellant. DAVID B. LILLY CO., Inc. et al. v. The RENEGOTIATION BOARD, Appellant.
• Court: U.S. Court of Appeals — District of Columbia Circuit

151 US App. DC 174, 466 F.2d 345 (1972)

BANNERCRAFT CLOTHING COMPANY, Inc. v. The RENEGOTIATION BOARD, Appellant.

ASTRO COMMUNICATION LABORATORY, A Division of Aiken Industries, Inc. v. The RENEGOTIATION BOARD, Appellant.

DAVID B. LILLY CO., Inc. et al. v. The RENEGOTIATION BOARD, Appellant.

Nos. 24685, 24778 and 71-1025.

United States Court of Appeals, District of Columbia Circuit.

Argued March 9, 1972.

Decided July 6, 1972.

COPYRIGHT MATERIAL OMITTED

Mr. William D. Appler, Atty., Dept. of Justice, with whom Asst. Atty. Gen. L. Patrick Gray, III and Messrs. Thomas A. Flannery, U. S. Atty. at the time the brief was filed, and Walter H. Fleischer, Atty., Dept. of Justice, were on the brief, for appellant. Mr. Morton Hollander, Atty., Dept. of Justice, also entered an appearance for appellant.

Mr. Robert L. Ackerly, Washington, D. C., with whom Mr. James J. Gallagher, Washington, D. C., was on the brief, for appellees in Nos. 24,685 and 24,778.

Mr. Burton A. Schwalb, Washington, D. C., with whom Mr. Michael Evan Jaffe, Washington, D. C., was on the brief, for appellee in No. 71-1025.

Before WRIGHT and MacKINNON, Circuit Judges, and MATTHEWS,^* Senior District Judge, United States District Court for the District of Columbia.

J. SKELLY WRIGHT, Circuit Judge:

These consolidated appeals present important questions, unresolved in this jurisdiction,¹ as to the remedial powers of District Courts under the Freedom of Information Act, 5 U.S.C. § 552 (1970). The three appellees in these cases are each Government contractors subject to the Renegotiation Act of 1951, 50 U.S.C.App. §§ 1211-1233 (1970), an elaborate statutory scheme designed to recoup excessive profits made by those doing business with the Government. During the renegotiation process, each appellee filed with the Renegotiation Board a proper request for documents connected with the process. See 5 U.S.C. § 552(a) (3). In each case the Board rejected the request, citing one or more of the exemptions contained in the Information Act, 5 U.S.C. § 552 (b) (1)-(9), and in each case the contractor then filed suit in the District Court to force production of the documents. See 5 U.S.C. § 552(a) (3).

On these appeals we are not asked to rule on the general applicability of the Information Act to the Renegotiation Board—an issue resolved by this court in Grumman Aircraft Engineering Corp. v. Renegotiation Board, 138 U.S.App.D.C. 147, 425 F.2d 578 (1970). Nor are we faced with the task of evaluating the various constitutional and statutory arguments which the Board advances in an effort to prevent forced production of the documents. Those issues are still sub judice in the various District Courts, and it would be improper for us to express any views on them until a final order from the District Court is appealed to us.² Rather, the question which divides the parties at this stage is the propriety of preliminary injunctions issued in each of these cases against continuation of the renegotiation process until the final status of the documents is determined. Appellees argued successfully in District Court that such an injunction was essential in order to preserve the status quo and prevent irreparable injury. Specifically, they claimed that without an injunction the renegotiation process would be completed long before the status of the disputed documents could be determined. Although completion of renegotiation would not formally moot the controversy, appellees contended, it would frustrate the purpose of the Information Act by depriving them of access to the documents during the period when such access would be useful.

In response the Board argued before the District Judges that the Freedom of Information Act nowhere conferred jurisdiction on trial judges to enjoin Board proceedings. Alternatively, the Board contended that, even if such jurisdiction could somehow be found, the doctrine of exhaustion of administrative remedies precluded equitable intervention in ongoing administrative procedures. Having unsuccessfully pressed these arguments at the trial level, the Board now reasserts them here. However, for the reasons detailed below, we find them insufficient to persuade us that the District Judges abused their discretion in granting preliminary injunctive relief. We hold that the Freedom of Information Act does confer jurisdiction on District Courts to enjoin administrative proceedings pending a judicial determination of the applicability of the Information Act to documents involved in those proceedings. We further hold that the exhaustion doctrine poses no obstacle to issuance of such an injunction in a proper case. It follows that all three decisions appealed from must be affirmed.

I. The Renegotiation Act

Before evaluating the competing contentions of the parties in any detail, it is first necessary to understand the general contours of the Renegotiation Act and the procedural context in which each of these suits arises. The Renegotiation Act vests broad powers in the Renegotiation Board to eliminate excessive profits³ secured by contractors and subcontractors engaged in the "national defense program." See 50 U.S.C.App. § 1211. The Board exercises these powers by requiring every contractor or subcontractor subject to the Act to file a "Standard Form of Contractor's Report" containing detailed financial information. See 50 U.S.C.A.App. § 1215(e) (1) (1972 pocket part); 32 C.F.R. § 1470.3(a) (1972). On the basis of this information, the Board makes an initial determination as to whether the particular contract should be subject to renegotiation. If the Board decides to proceed, the case is referred to one of the Regional Renegotiation Boards which examines the Standard Form of Contractor's Report and gathers any additional information needed. Personnel employed by the Regional Board then prepare a "Report of Renegotiation" which includes a "recommendation with respect to the amount, if any, of excessive profits for the fiscal year under review." 32 C.F.R. § 1472.3(d) (1972).

Upon receipt of the "Report of Renegotiation" the Regional Board examines the data de novo and makes its own tentative determination as to the amount of excess profits. 32 C.F.R. § 1472.3(e). A conference is then held between the contractor and the regional personnel assigned to the case, at which the contractor is informed of the tentative determination and given an opportunity to present additional data and arguments. At the conclusion of the conference the contractor may either agree to the tentative determination or proceed to the next step. If he elects to contest the tentative determination, a second conference is arranged with a panel of the Regional Board. The panel hears any additional arguments the contractor may wish to make, and then submits its recommendation for a final disposition to the Regional Board—a recommendation which may be for a greater or lesser liability than that contained in the tentative determination. See 32 C.F.R. § 1472.3(f), (h) & (i). Thereupon the Regional Board makes a final recommendation which, again, may be "greater than, equal to, or less than" the tentative determination. 32 C.F.R. § 1472.3(i).

If the contractor is still dissatisfied, he then has recourse to the Renegotiation Board itself. Upon taking such an appeal, the contractor has his case assigned to a division of the Board which is not "bound or limited in any manner by any evaluation, recommendation or determination of the Regional Board." 32 C.F.R. § 1472.4(b). The division studies the case de novo still another time and makes a recommendation to the Renegotiation Board. The Board then makes a final determination which, characteristically, "may be in an amount greater than, equal to, or less than" the prior determinations. 32 C.F.R. § 1472.4(d).

The term "final determination" is something of a misnomer, however, since even at this stage the renegotiation process continues. The Board proceeds to negotiate with the contractor in an effort to secure his voluntary agreement. Only if this effort fails does the Board enter a final order determining the amount of excess profits. 32 C.F.R. § 1472.4(d). This order brings the administrative process to a conclusion, but it still does not exhaust the contractor's remedies. An appeal of right lies to the United States Court of Claims which is explicitly directed to ignore all that has occurred before and to redetermine de novo the amount, if any, of excess profits. See 50 U.S.C.A.App. § 1218 (1972 pocket part). The Court of Claims decision is reviewable in the Supreme Court by writ of certiorari. 50 U.S.C.A.App. § 1218a (1972 pocket part).

At first blush this labyrinthine system of conferences, recommendations and seemingly endless de novo reviews may appear exceedingly wasteful. Upon closer examination, however, it becomes apparent that the Board's bureaucratic structure is carefully attuned to its statutory purpose. The Act's legislative history, as well as the Board's very name, make clear that Congress preferred negotiation to confrontation. Indeed, the Act itself requires the Board to "endeavor to make an agreement with the contractor or subcontractor with respect to the elimination of excessive profits." 50 U.S.C.A.App. § 1215(a) (1972 pocket part). The Board's elaborate system of review is what provides the incentive for the contractor to reach such an agreement. To be sure, the adamant contractor is free to stand on his legal rights and pursue the statutory route all the way to the Court of Claims and beyond. But such a course entails considerable risk, since the de novo nature of each review means that the contractor's liability may well be increased if he pursues his remedies to the next rung of the bureaucratic ladder. Moreover, this risk bulks still larger when one considers the extremely vague standards which the Board uses to measure excessive profits. See note 3 supra. Given the dangers and uncertainty inherent in pursuing...