Fulton Iron Co. v. Larson

• Decision Date: 13 October 1948
• Docket Number: No. 9799.,9799.
• Citation: 171 F.2d 994
• Parties: FULTON IRON CO. v. LARSON.
• Court: U.S. Court of Appeals — District of Columbia Circuit

171 F.2d 994 (1948)

FULTON IRON CO. v. LARSON.

No. 9799.

United States Court of Appeals District of Columbia Circuit.

Argued June 11, 1948.

Decided October 13, 1948.

Writ of Certiorari Denied January 31, 1949.

Mr. James R. Kirkland, of Washington, D. C., with whom Messrs. Irvin I. Goldstein and Edward J. Hayes, both of Washington, D. C., were on the brief, for appellant.

Mr. Edward H. Hickey, Sp. Asst. to the Atty. Gen., with whom Messrs. George Morris Fay, U. S. Atty., and Richard E. Guggenheim, Atty., Department of Justice, both of Washington, D. C., were on the brief, for appellee.

Before CLARK, WILBUR K. MILLER and PRETTYMAN, JJ.

Writ of Certiorari Denied January 31, 1949. See 69 S.Ct. 489.

CLARK, J.

Appellant (plaintiff below), Fulton Iron Company, is a Delaware corporation with its principal place of business in Cleveland, Ohio. Appellee (defendant below), Jess Larson, is sued in his official capacity as War Assets Administrator and Surplus Property Administrator.

The subject matter of the present suit is a piece of real property located at Granite City, Illinois, in the St. Louis metropolitan area. This property consists of two blast furnaces, a coke plant and a by-products plant located on about 211 acres of land. This property has been designated as Plancor 438 and will be referred to as such hereinafter. Plancor 438 is and has been a major source (if not the sole source) of supply of pig iron for the St. Louis and East St. Louis industrial areas.

Early in 1942, the Government purchased Plancor 438 from Koppers Co., Inc. (hereinafter called "Koppers"). Since that time and up to the present date, Plancor 438 has been operated by Koppers as a lessee of the Government.

On September 6, 1947, appellee set the fair value of Plancor 438 at $2,500,000.00. On September 15, 1947, appellee issued an invitation to bid for the sale by appellee of Plancor 438 and the invitation for bids set the minimum purchase price to be considered at $2,250,000.00. By October 6, 1947 (the final date set by appellee for the submitting of bids) the following three bids were filed with appellee: (1) Fulton Iron Company (appellant), $2,750,000.00; (2) Tucker Motor Corporation (hereinafter called "Tucker"), $2,751,000.00; and (3) Missouri-Illinois Furnaces, Inc. (hereinafter called "Missouri-Illinois"), $3,255,000.00.

On October 10, 1947, four days after the bids were required to be filed, appellee admittedly "without notice to appellant or to Tucker and without cause shown" arbitrarily raised the fair value from $2,500,000.00 to $3,250,000.00, almost the exact amount of the bid of Missouri-Illinois. Appellant alleges that this unauthorized increase had the net effect of rendering appellee incapable of obtaining from either appellant or Tucker under War Assets Administration Regulation 5, Part 8305.19(a),¹ the new fair value as set after the bids had been submitted and closed and had the further effect of disqualifying appellant as a bidder for the purchase of Plancor 438.

Missouri-Illinois, the highest bidder, is an Illinois corporation organized by Koppers and by the Hanna Coal and Ore Company (hereinafter called "Hanna"). All of the stock of Missouri-Illinois was held by Koppers and Hanna in equal shares. The directors of Missouri-Illinois with one exception, are either officers and/or directors of Koppers, or Hanna, or the M. A. Hanna Company, which owns all the stock of Hanna.

On October 17, one week after the fair value had been boosted to conform to the bid of Missouri-Illinois, which excluded from consideration the other two bids by reason of Regulation 5, Robert M. Littlejohn, predecessor in office of appellee, accepted the bid of Missouri-Illinois subject to the approval of the Department of Justice as to the anti-trust laws as required by Sec. 20 of the Surplus Property Act of 1944.²

The Department of Justice first took the position that the proposed transfer would violate the anti-trust laws because of the joint ownership of Missouri-Illinois by Koppers and Hanna. Having been notified of this conclusion of the Department of Justice, Hanna withdrew from any participation in the ownership of Missouri-Illinois and Koppers became the sole owner. Appellee in a letter to Koppers stated that he had no objection to this change in the ownership of Missouri-Illinois. Thereafter the Department of Justice in a letter to the General Counsel of the War Assets Administration signed by the acting Assistant Attorney General stated that: "We would not regard consummation of the proposed sale to the Missouri-Illinois Furnaces, Inc., as a wholly owned subsidiary of the Koppers Company, Inc., to be a violation of the anti-trust laws."

This letter was dated January 15, 1948. But the terms of the original bid of Missouri-Illinois, which was accepted, contained the following language: "11. If such purchase of Plancor 438 is not completed by transfer of title to us prior to Dec. 31, 1947, there shall be refunded to us all amounts heretofore paid by us on account of the purchase price; the release by Koppers Company, Inc., of any obligations of War Assets Administration shall be ineffective; and all other rights and obligations hereunder shall be null and void." Transfer of title of Plancor 438 was not made before December 31, 1947, and has not been made to this day, although it is but fair to say that the transfer has been prevented for the past several months by an injunction pendente lite issuing out of this court.

On January 12, 1947, appellant by letter to appellee requested that appellee consider appellant's original bid on the ground that the bid of Missouri-Illinois had failed. In this letter, appellant also offered to pay $505,000.00 in addition to its original bid of $2,750,000.00 so that the Government would receive from appellant the same amount as was bid by Missouri-Illinois, namely $3,255,000.00. This additional offer was rejected by appellee.

On February 2, 1948, appellant instituted suit against appellee in the District Court by filing a complaint, which was later amended. This complaint as amended prayed the District Court to issue a preliminary injunction against appellee restraining him from making the transfer of Plancor 438 and that this injunction be made permanent upon final hearing. The amended complaint further prayed that the District Court decree and direct: (1) that the bid of Missouri-Illinois became null and void after December 31, 1947; (2) that the change in ownership of Missouri-Illinois rendered their bid invalid because of a material change in said bid; (3) that the sale of Plancor 438 to Missouri-Illinois would be in violation of the Surplus Property Act and/or the anti-trust laws; (4) that appellee reopen the bidding; (5) that appellee negotiate with appellant for the sale to appellant at the same price and terms of payment as were set forth in the bid of Missouri-Illinois; and (6) that the bids received by appellee on October 6, 1947, be considered on the basis of the fair value existing on that date and not as "arbitrarily, unlawfully and fraudulently" fixed on October 10, 1947.

On February 5, 1948, appellee filed in the District Court a motion to dismiss this suit on the grounds that: (1) the complaint failed to state a claim upon which relief may be granted; (2) the appellant has no standing to sue; and (3) that the District Court lacked jurisdiction in that this was a suit against the United States to which the United States had not consented. By order dated March 11, 1948, the trial judge dismissed the complaint. Appellant's motions for injunction pending appeal and for rehearing were denied below. This appeal promptly followed with appellant petitioning this court for injunctive relief pending appeal. After a hearing on this petition on May 7, 1948, we granted appellant the requested injunctive relief pendente lite.

The transactions involved in this case are surrounded by a pervasive and most offensive odor of skulduggery. It is perfectly manifest to anyone who takes the trouble to examine the record that the adjusting of "fair value" by the appellee could only result in insuring that the Koppers interests secured the property. While it is true that the "fair value" test was not conclusive except as to preferred bidders, nevertheless the remarkable proximity of events is significant. Appellant bid somewhat over the original "fair value" fixed by appellee with a third bidder offering a very slightly higher sum, and the Koppers crowd by a strange coincidence bid several hundred thousand dollars more than the other two bidders and by the even more singular circumstance bid a mere thousand or two dollars more than the subsequent "fair value" fixed by appellee after the bids had been submitted and without open notice to any of the parties.

So far the appellee and his agents had built up a very plausible case for the acceptance of the high bid of Missouri-Illinois Furnaces, Inc. (Koppers and Hanna Coal and Ore Corporation). So the Koppers, i. e., Missouri-Illinois bid was accepted. But under the law, a further step was necessary before the final acceptance could be made. It was...