BUCK KREIHS COMPANY v. United States

• Decision Date: 12 June 1970
• Docket Number: No. 240-69.,240-69.
• Citation: 427 F.2d 770,192 Ct. Cl. 297
• Parties: BUCK KREIHS COMPANY, Inc. v. The UNITED STATES.
• Court: U.S. Claims Court

192 Ct. Cl. 297, 427 F.2d 770 (1970)

BUCK KREIHS COMPANY, Inc. v. The UNITED STATES.

No. 240-69.

United States Court of Claims.

June 12, 1970.

Peter J. Butler, New Orleans, La., attorney of record for plaintiff; Sehrt, Boyle, Wheeler & Butler, New Orleans, La., of counsel.

Edward J. Friedlander, Washington, D. C., with whom was Asst. Atty. Gen. William D. Ruckelshaus, for defendant; Peter J. P. Brickfield, Washington, D. C., of counsel.

Before COWEN, Chief Judge, and LARAMORE, DURFEE, DAVIS, COLLINS, SKELTON, and NICHOLS, Judges.

ON PLAINTIFF'S MOTION AND DEFENDANT'S CROSS MOTION FOR SUMMARY JUDGMENT

NICHOLS, Judge.

Plaintiff, a Louisiana corporation, brings this action to recover certain monies paid to defendant consequent to the application of an allegedly unlawful profit limitations provision in its Government contract. This court's jurisdiction is said to spring from our Tucker Act authority to render judgments upon any claims against the United States founded upon express or implied contract. 28 U.S.C. § 1491 (1964). As the ensuing opinion will establish, however, the instant Contract is maritime in nature, and therefore cognizable under the exclusive admiralty jurisdiction of the Federal District Courts. 46 U.S.C. § 742 (1964).

On July 30, 1965, plaintiff, Buck Kreihs Company, entered into Master Lump Sum Repair Contract MA-738 with defendant acting through the Director, National Shipping Authority of the Department of Commerce, Maritime Administration (MARAD). By this Contract, plaintiff agreed to repair, alter, convert, and otherwise restore certain vessels of the "Victory" ship classification then laying in "mothballs" in the New Orleans area. Pursuant to MA-738, MARAD issued plaintiff eight job orders for the repair and general restoration of the following vessels:

                S/S Hobart Victory          Job Order # 4
                S/S Oberlin Victory          "    "   # 3
                S/S Cornell Victory          "    "   # 2
                S/S San Mateo Victory        "    "   # 8
                S/S Southwestern Victory     "    "   # 9
                S/S Hattiesburg Victory      "    "   # 7
                S/S Rutgers Victory          "    "   # 6
                S/S Loma Victory             "    "   # 5
                

Prior to their delivery to plaintiff's shipyard, these vessels formed part of this nation's reserve fleet of merchant ships. It is undisputed that MARAD's purpose for restoring these vessels was to ready them for active sea duty as supply carriers to serve American soldiers in Vietnam.

Plaintiff alleges that all work prescribed by the job orders was completed in calendar year 1966, resulting in a bill to defendant of $1,871,826.50. After paying this amount in full MARAD audited plaintiff's books and determined that it had received $54,437.96 in excess of allowable profits. Plaintiff was immediately invoiced for this amount and following subsequent negotiations, it was mutually agreed that plaintiff should remit $45,717.01. The remaining $8,720.95 was left as the basis of a dispute unrelated to this case.

MARAD also sought to audit one of plaintiff's subcontractors but was refused. Consequently, plaintiff was invoiced an additional $17,382.60 as a penalty for its subcontractor's refusal.

Plaintiff's objective in this suit is to recover the sum of the excess profits and penalty assessments.

The substantive issue presented would require us to determine the validity of the Article 41 provision found in Addendum 3 to the Contract which purports to impose certain limits on the profits that plaintiff and its subcontractors may derive from the Contract.

Briefly, plaintiff makes the following arguments on the merits: The Renegotiation Act of 1951, 50 U.S.C. App. § 1212(e) (1964) governs profits derived from the instant Contract to the exclusion of the profit limitation provisions found in § 505(b) of the Merchant Marine Act of 1936, 46 U.S.C. § 1155(b) (1964). Defendant attempted to circumvent this statutory exclusion by paraphrasing § 505(b) and incorporating it into the Contract as Article 41. Since § 1212(e) of the Renegotiation Act expressly provides that: "notwithstanding any agreement to the contrary," § 505(b) of the Merchant Marine Act is inapplicable where a contract is covered by the Renegotiation Act, Addendum 3 (Article 41) is a nullity and the monies collected under its terms should be refunded. Excess profits liability for plaintiff and its subcontractors can only be determined under the provisions of the Renegotiation Act.

Defendant counters with these rebuttals: Article 41 was not added to the Contract pursuant to § 505(b), supra, as evidenced by the nature of the Contract. Plaintiff, under MA-738, was required to repair vessels; § 505(b) is limited to control only those profits derived from new vessel construction contracts or from contracts to repair vessels engaged in charter operations. Article 41 is a valid contract provision. In drafting amendments to the Renegotiation Act, the Senate considered preempting Article 41 provisions along with the profit limitations of § 505(b), but when enacted, the resulting § 1212(e), supra, was silent as to Article 41s, thus impliedly validating their use.

We are unable to reach this issue without overstepping our established jurisdictional boundaries. Our discussion below explains why plaintiff must seek relief elsewhere.

The following fundamental premises provide a good introduction to our jurisdictional problem: Under the Suits in Admiralty Act, 46 U.S.C. § 742 (1964), any cause of action which, if brought against a privately owned vessel or cargo, would compel a proceeding in admiralty, can now be maintained against the United States in personam in an appropriate non-jury proceeding. Such suits "shall be brought in the district court of the United States for the district in which the parties so suing, or any of them, reside or have their principal place of business in the United States, or in which the vessel or cargo charged with liability is found." (Id.) (Emphasis supplied). Even where such suits are founded upon express or implied contracts made with the United States, they are not cognizable under the Court of Claims' Tucker Act jurisdiction. New Orleans Stevedoring Co. v. United States, 185 Ct.Cl. 604 (1968), cert. denied, 397 U.S. 1064, 90 S.Ct. 1501, 25 L.Ed.2d 685 (1970); Smith-Johnson Steamship Corp. v. United States, 142 F.Supp. 367, 135 Ct.Cl. 866, cert. denied, 352 U.S. 895, 77 S.Ct. 127, 1 L.Ed.2d 85 (1956). Finally, claims founded upon maritime contracts give rise to admiralty jurisdiction. See e. g., De Lovio v. Boit, 7 F.Cas. 418, 444 (No. 3776) (C.C.D.Mass.1815).

Defendant contends that a contract to repair a vessel is maritime. Alcoa Steamship Co. v. Charles Ferran & Co., 383 F.2d 46 (5th Cir. 1967); see also Flowers v. Travelers Ins. Co., 258 F.2d 220 (5th Cir. 1958). Since the instant Contract was written by MARAD and interpreted by plaintiff to be for vessel repairs, defendant concludes that the Contract is maritime and beyond our jurisdiction.

In its brief, plaintiff asserted that its suit "is not a libel filed against the United States * * * nor is it one for damages arising out of tort or breach of contract." Rather it insisted that the "thrust of its Petition is to have this Court adjudicate whether * * * an administrative agency of the United States applied the proper act in attempting to recapture purported excess profits." In essence plaintiff is now telling us that the merits of its claim derive not from the contract but rather from § 1212 (e) of the Renegotiation Act. We believe, however, that plaintiff's original classification of its claim, as given in its petition is more accurate legally: "The United States Court of Claims has jurisdiction with reference to this suit * * as it is founded upon a contract with the United States of America." (Emphasis supplied.) Our conclusion is dictated by our decision in Smith-Johnson Steamship Corp. v. United States, supra.

In Smith-Johnson, plaintiff contracted with the Maritime Commission for the charter of certain vessels. Included in the charter agreement signed by the parties was a profit limitation schedule which the Government later employed in determining that plaintiff had earned in excess of allowable profits. Plaintiff paid the assessed amount and thereafter brought suit in this court alleging that the Government had exacted from it more than was authorized by § 5(b) of the Merchant Ship Sales Act of 1946 and § 5(c) of the Merchant Marine Act of 1936. The narrow issue before us was whether this was a claim founded upon the charter agreement contract, in which case it was a maritime issue within the exclusive jurisdiction of an appropriate district court, or was it founded upon the two Federal statutes, in which case we had jurisdiction under the Tucker Act. Although we initially decided the latter was true, Smith-Johnson Steamship Corp. v. United States, 139 F.Supp. 298, 135 Ct.Cl. 869, cert. denied, 351 U.S. 988, 76 S.Ct. 1047, 100 L.Ed. 1501 (1956), the Supreme Court's per curiam affirmance of the Second Circuit's Sword Line, Inc. v. United States, 351 U.S. 976, 76 S.Ct. 1047, 100 L.Ed. 1493 (1956), impelled us to reverse our position. Smith-Johnson Steamship Corp., supra, 142 F.Supp. 367, 135 Ct.Cl. at p. 866. The Supreme Court said simply: "* * * The libel, though dependent on a statute, alleges unjust enrichment from a maritime contract."

Since our plaintiff's claim is similarly motivated in that it seeks to recover excess profits exacted under an allegedly unlawful contract provision, we are bound by our second Smith-Johnson to hold that it is a claim founded upon a contract. Hence, since plaintiff conceded in its brief that this was a vessel repair contract, it would appear that its entire claim is founded upon a maritime contract not cognizable in this court.

Plaintiff urges, however, that at least with respect to three of the ships — the Hobart, Oberlin and Cornell — MA-738 was not a maritime contract. While admitting that its assigned task...