Grismac Corp. v. United States

• Decision Date: 18 May 1977
• Docket Number: No. 4-72.,4-72.
• Citation: 556 F.2d 494
• Parties: GRISMAC CORPORATION v. The UNITED STATES.
• Court: U.S. Claims Court

556 F.2d 494

GRISMAC CORPORATION v. The UNITED STATES.

No. 4-72.

United States Court of Claims.

May 18, 1977.

John J. Reed, Washington, D.C., attorney of record for plaintiff. Hudson, Creyke, Koehler & Tacke, Washington, D.C., of counsel.

Frances L. Nunn, Washington, D.C., with whom was Acting Asst. Atty. Gen., Barbara Allen Babcock, Washington, D.C., for defendant.

Before NICHOLS, KUNZIG and BENNETT, Judges.

OPINION

NICHOLS, Judge.

This case is before the court on defendant's exceptions to fact findings, conclusion of law, and proposed opinion filed by Trial Judge C. Murray Bernhardt in accordance with Rule 134(h). The facts found by the court are those stated in this opinion. It is unnecessary to pass on both parties' exceptions to the trial judge's fact findings, as they would not change the result if sustained. We differ with the trial judge's legal conclusions, though we are greatly aided by his able analysis of the novel and interesting problem presented. We conclude that the action cannot be maintained and the petition must be dismissed.

The suit is under the Tucker Act, 28 U.S.C. § 1491, to enforce an alleged contract or contracts "implied in fact." The parties have not discussed, nor do we consider, whether the action is maintainable in face of 31 U.S.C. § 200. Our conclusion is reached on other grounds.

Our legal conclusion considerably diminishes the amount of detail as to the facts that need be stated.

In the spring of 1969 plaintiff submitted proposals 63314 and 63316 to the Army Ammunition Procurement and Supply Agency at Joliet, Illinois ("APSA"), and proposal 63313 to the Savanna Army Depot in Savanna, Illinois. Proposal 63313 was handled by APSA along with the other two. Each proposal was headed "Unsolicited Value Engineering Proposal." No. 63313, dated March 20, 1969, recommended that the decks for wooden pallets used as a base for storing and handling boxed ammunition employ a cheaper CD grade of plywood instead of the prevailing CC grade. No. 63314, dated March 21, 1969, recommended the same plywood substitution for wire-bound ammunition crates. No. 63316, dated June 18, 1969, recommended reduction of the standard deck size of the pallet from 27 3/4" X 34 3/4" to a deck of smaller dimensions, so that five rather than three decks could be obtained from a standard size 48" X 96" plywood sheet and at the same time accommodate the varying stacked dimensions of ammunition boxes loaded thereon, with an obvious saving from waste reduction.

Each of the three proposals bore the following restrictive legend:

Notice: The data contained herein shall not be disclosed outside the government, or duplicated, used, or disclosed in whole or in part, for any purpose other than to evaluate this value engineering proposal; except that if this proposal be accepted by the government, the government shall have the rights to the use of the data, and may duplicate or disclose, in whole or in part, in any manner and for any purpose whatsoever, and shall have or permit others to do so, to the extent necessary to fully utilize the proposal.

Each proposal also expressed the plaintiff's desire to negotiate compensation in the form of a share in the Government's present and future contract savings attributable to use of the proposal.

Because of the "value engineering" title on each of plaintiff's proposals, all three when received by APSA's Value Engineering Office ("VEO") were forwarded to appropriate Army offices charged with the evaluation of value engineering change proposals ("VECP"). VECP's were (and are) cost reduction proposals offered to the Government under existing express contracts pursuant to Armed Services Procurement Regulation ("ASPR") 1-1701 et seq., 32 C.F.R. §§ 1.1701 et seq. (1969). If a proposal was deemed meritorious, i.e., technically adequate, beyond existing contract requirements, and cost-saving, the cognizant office was to incorporate it into current procurement specifications for that item. Since a compensable VECP could be submitted by a contractor only under an existing contract containing a "value engineering incentive clause," he would be compensated if at all by an adjustment under his existing contract. No separate contract to compensate for use of the idea was needed.

The problem here is that despite the fact that plaintiff had no express contract with the Army containing a value engineering incentive clause as a basis for its proposals, the proposals themselves were nevertheless incorporated into Army procurement specifications as if they were VECP's, and were thereafter used throughout the Army. At the outset APSA's VEO noted that the proposals were "unsolicited," i.e., without an existing contract as a predicate, but raised no questions and did not alter its procedures on that account. The thought of procedural deficiencies did not occur to VEO until after the Army had adopted and used the suggestions. Instead, as stated, VEO routed the proposals upon receipt to the cognizant offices for processing. No. 63314 went to Picatinny Arsenal at Dover, New Jersey ("Picatinny"), and Nos. 63313 and 63316 went to APSA's Technical Data Division ("TDD"). After processing clearance through a chain of technically cognizant offices the proposals were changed in minor respects, adopted, and thereupon distributed to all Government-owned, contractor operated ("Go-co") load plants as official changes (mostly mandatory) in the applicable technical instructions and/or engineering orders, so that thereafter all such pallets had to conform to the changes suggested by plaintiff (changes in material for wirebound boxes were optional), with minor amendments.

In point of fact the ideas were not entirely new. Some Army installations had arrived at similar ones, unknown to plaintiff and the officials with which it dealt, and had put them into effect. Details as to this are not necessary as it is not the ground of our decision, though defendant has argued lack of novelty at length and denies that plaintiff actually brought about the changes in practice above-mentioned. We do not pass on this.

Having, as it supposed, put plaintiff's ideas to extensive use, VEO belatedly turned its attention to the question of compensation. Plaintiff obviously never expected to make its contribution for nothing, and the effective immediate seizure and use of it with the failure to compensate or even discover a basis of compensation, caused and still causes the Army to cut a bruta figura, as an Italian would say. Initially, the problem was a dispute among Army lawyers as to whether 10 U.S.C. § 2386 (further discussed below) and implementing regulations (as to which also see below) permitted the expenditure of procurement funds to pay plaintiff for its ideas. Then surfaced the issue of originality, and other matter throwing doubt on the value of the ideas. Plaintiff wanted $1,500,000, and is demanding $3,519,761 here, with a percentage of future savings. Ultimately APSA decided to work up a proposal to pay $50,000 under the present statutory successor to the First War Powers Act, now 50 U.S.C. §§ 1431-1435, as the effectuation of an informal commitment. Implementing regulations under this authority, as they were then, are in ASPR § 17-000 and ff., 32 C.F.R. § 17.000 and ff. (This and subsequent ASPR references are to the January 1, 1971 revision.) There were stringent limitations that circumscribed any action of this kind; the APSA officials could not have done it on their own; and there is nothing to show that the right to make a legal payment could have been established. The proposal was dropped because plaintiff rejected the $50,000 as wholly inadequate.

The findings and the trial judge's proposed opinion deal extensively with the question of identifying who in the Armed Forces might have had authority to bind the Government to a contract implied in fact of the kind described, and when such a person was found, whether acquiescence in the procurement could be imputed to him. We think all this is interesting but here preempted by the question whether anyone except Congress had such authority. Congress could have created a money liability in a case of this kind, but the question to be faced is whether it ever did. Eastport S.S. Corp. v. United States, 372 F.2d 1002, 178 Ct.Cl. 599 (1967). In that case, too, defendant cut a bruta figura, for by bureaucratic bungling it had caused plaintiff substantial loss, but this was not enough for liability in this court.

Padbloc Co. v. United States, 161 Ct.Cl. 369 (1963), quite closely resembles in its facts the case at bar. In indicates that the Government can be liable to pay compensation on an implied contract theory if it misappropriates and uses intellectual property not amounting to a patent or copyright, and submitted under restrictive clauses for the purpose of making a sale. In that case, however, the property was a design. The findings include several pages of drawings. By virtue of 10 U.S.C. § 2386, funds appropriated for procurement could have been used to purchase a "design," by the statute's express terms. Thus the implied contract was one which could have been made express, and the Eastport standard was met. This is not spelled out in the opinion, presumably because not debated by counsel. But the case is clearly not authority that the Government may be mulcted under an implied contract in a situation where it could not have made an express one that would be binding.

We agree with the Army lawyers that the decisive issue in this case is whether 10 U.S.C. § 2386 authorizes expenditure of appropriated funds to purchase suggestions of the kind plaintiff submitted. That section reads as follows:

Funds appropriated for a military department available for making or procuring supplies may be used to acquire any of the following if the acquisition relates to supplies or processes produced or used by or for, or useful to, that department:

(1) Copyrights, patents,

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