Hecht Co v. Bowles, No. 316

• Court: United States Supreme Court
• Writing for the Court: DOUGLAS
• Citation: 321 U.S. 321,64 S.Ct. 587,88 L.Ed. 754
• Parties: HECHT CO. v. BOWLES, Price Administrator
• Docket Number: No. 316
• Decision Date: 28 February 1944

321 U.S. 321 64 S.Ct. 587 88 L.Ed. 754 HECHT CO.

v.

BOWLES, Price Administrator.

No. 316. Argued Feb. 3, 4, 1944. Decided Feb. 28, 1944.

Mr. Charles A. Horsky, of Washington, D.C., for petitioner.

Mr. Chester T. Lane, of Washington, D.C., for respondent.

Mr. Justice DOUGLAS delivered the opinion of the Court.

Sec. 205(a) of the Emergency Price Control Act of 1942, 56 Stat. 23, 50 U.S.C.App.Supp. II, §§ 901 et seq., 925, 50 U.S.C.A.Appendix, §§ 901 et seq., 925, provides: 'Whenever in the judgment of the Administrator any person has engaged or is about to engage in any

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acts or practices which constitute or will constitute a violation of any provision of section 4 of this Act, * * * he may make application to the appropriate court for an order enjoining such acts or practices, or for an order enforcing compliance with such provisions, and upon a showing by the Administrator that such person has engaged or is about to engage in any such acts or practices a permanent or temporary injunction, restraining order, or other order shall be granted without bond.' The question in this case is whether the Administrator, having established that a defendant has engaged in acts or practices violative of § 4 of the Act is entitled as of right to an injunction restraining the defendant from engaging in such acts or practices or whether the court has some discretion to grant or withhold such relief.

Sec. 4(a) of the Act makes it unlawful for a person to sell or deliver any commodity in violation of specified orders or regulations of the Administrator. A regulation issued under § 2 of the Act and effective in May, 1942 (7 Fed.Reg. 3153) provided that no person should sell or deliver any commodity at a price higher than the authorized maximum price (§ 1499.1) as fixed or determined by the regulation.¹ Since maximum prices were fixed with

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reference to earlier base periods, the regulation also provided for the preservation and examination of existing records.² And provision was likewise made for the keeping of current records reflecting sales made under the regulation³ and for the filing of maximum prices with the Administrator.⁴

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There is no substantial controversy over the facts. Petitioner operates a large department store in Washington, D.C. and did a business of about $20,000,000 in 1942. There are 107 departments in the store and each sells a separate line of merchandise. In the fall of 1942 the Administrator started an investigation to determine whether petitioner was complying with the Act and the regulation. The investigation was a 'spot check', confined to seven departments. In each of the seven departments violations were disclosed. As a result this suit was brought. The complaint charged violations of the maximum price provisions of the regulation and violations of the regulations governing the keeping of records and reporting to the Administrator. The Administrator payed for an injunction enjoining petitioner from selling, delivering or offering for sale or delivery any commodity in violation of the regulation and from failing to keep complete and accurate records as required by the regulation. In its answer petitioner pleaded among other things that any failure or neglect to comply with the regulation was involuntary and was corrected as soon as discovered.

Numerous violations both as respects prices and records were discovered. Thus in six of the seven departments investigated there had occurred between May and October,

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1942 some 3700 sales in excess of the maximum prices with overcharges of some $4600. The statements filed with the Administrator were deficient, some 400 items of merchandise being omitted. And there were over 300 items with respect to which no records were kept showing how the maximum prices had been determined.

There is no doubt, however, of petitioner's good faith and diligence. The District Court found that the manager of the store had offered it as a laboratory in which the Administrator might experiment with any regulation which might be issued. Prior to the promulgation of the regulation the petitioner had created a new section known as the price control office. That office undertook to bring petitioner into compliance with the requirements of the regulation in advance of its effective date. The head of that office together with seven assistants devoted full time to that endeavor. But the store had about 2,000 employees and over one million two hundred thousand articles of merchandise. In the furniture departments alone there were over fifty-four thousand transactions in the first ten months of 1942. Difficulties were encountered in interpreting the regulation, in determining the exact nature of an article and whether it had been previously sold and at what price, etc. The absence of adequate records made it difficult to ascertain prices during the earlier base-period. Misunderstanding of the regulation, confusion on the part of employees not trained in such problems of interpretation and administration, the complexity of the problem, and the fallibility of humans all combined to produce numerous errors. But the District Court concluded that the 'mistakes in pricing and listing were all made in good faith and without intent to violate the regulations.'

The District Court also found that the mistakes brought to light 'were at once corrected, and vigorous steps were taken by The Hecht Company to prevent recurrence of

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these mistakes or further mistakes in the future.' The company increased its price control office to twenty-eight employees. New methods of internal control were instituted early in November, 1942 with the view of avoiding future violations. That new system of control 'greatly improved' the situation. Petitioner undertook to make repayment of all overcharges brought to light by the investigation in case of customers who could be identified. It proposed to contribute the remaining amount of such overcharges to some local charity. The District Court concluded that the issuance of an injunction would have 'no effect by way of insuring better compliance in the future' and would be 'unjust' to petitioner and not 'in the public interest'. It accordingly dismissed the complaint. Brown v. Hecht Co., 49 F.Supp. 528. On appeal the Court of Appeals for the District of Columbia reversed that judgment, one judge dissenting. 137 F.2d 689. That court held that the findings of the District Court were supported by substantial evidence, except that it did not consider whether the evidence supported the findings that an injunction would not insure better compliance in the future and would be unjust to petitioner. In its view the latter findings were immaterial. For it construed § 205(a) of the Act to require the issuance of an injunction or other order as a matter of course, once violations were found.

The case is here on a question for a writ of certiorari which we granted because of the importance of the problem in the administration of the Act.

Respondent insists that the mandatory character of § 205(a) is clear from its language, history and purpose. He argues that 'shall be granted' is not permissive, that since the same section provides that the Administrator 'may' apply for an injunction and that, if so, the injunction 'shall' be granted, 'may' and 'shall' are each used in the ordinary sense. It is pointed out that when the bill (for which the Act in its final form was substituted)

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passed the House, § 205(a) provided that 'upon a proper showing' an injunction or other order 'shall be granted without bond.'⁵ The words 'upon a proper showing' were stricken in the Senate...