Helene Curtis Industries, Inc. v. United States

• Decision Date: 06 February 1963
• Docket Number: No. 251-56.,251-56.
• Citation: 312 F.2d 774
• Parties: HELENE CURTIS INDUSTRIES, INC. v. The UNITED STATES.
• Court: U.S. Claims Court

312 F.2d 774 (1963)

HELENE CURTIS INDUSTRIES, INC. v. The UNITED STATES.

No. 251-56.

United States Court of Claims.

February 6, 1963.

Newell A. Clapp, Washington, D. C., for plaintiff. Robert M. Lichtman, Washington, D. C., was on the briefs.

Edna P. Goldberg, Washington, D. C., with whom was Acting Asst. Atty. Gen. Joseph D. Guilfoyle, for defendant.

DAVIS, Judge.

Helene Curtis, a concern better known as a purveyor of cosmetics but also possessing general experience in the compounding and packaging of more mundane chemicals, contracted with the Army in 1951 and 1952 to supply large quantities of a disinfectant chlorine powder to be used by troops in the field — the Korean hostilities were then in progress — to disinfect mess gear and fresh fruits and vegetables. This disinfectant had been developed after World War II by the Office of the Quartermaster General in conjunction with two universities and two chemical companies, one of which was Wallace & Tiernan, Inc. Wallace & Tiernan was the sole source of chlormelamine, the disinfectant's active ingredient, which in solution released chlorine molecules to kill bacteria and germs. Chlormelamine is a generic term, covering several types of a chemical with different numbers of chlorine molecules (mono-, di-, tri-, tetra-, penta-, and hexachlormelamine); the types with five or six molecules are virtually insoluble while tri-chlormelamine is adequately soluble. In 1951 chlormelamine was a new and patented chemical, and its properties were not widely or generally known. The disinfectant based on it had never been mass-produced.

When the Korean hostilities increased the immediate need for a field disinfectant of this kind, the Army prepared a specification for the product, which was issued in August 1951. This specification was very skimpy; it provided that the disinfectant (called "disinfectant, chlorine, food service") was to be "a uniformly mixed powder or granular material," composed of chlormelamine and three other ingredients in specified maximum and minimum percentages by weight. With respect to the active ingredient, chlormelamine, the specification simply gave directions as to the percentage of titrable chlorine, moisture content, and color. For the finished product, requirements were given for the percentage of titrable chlorine, solubility, and particle size (among others not now pertinent).

On the basis of this specification, the Army put forth, in September 1951, an invitation to bid on a contract to supply 2,251,000 pouches of the disinfectant, all deliveries to be completed by June 1952. Plaintiff received an invitation, and began a study to see whether it should participate. Concentrating on the novel chemical chlormelamine, plaintiff's employees (a) obtained a five-pound sample of that chemical from Wallace & Tiernan, (b) formulated a small batch of chlormelamine in their own laboratory, (c) examined the technical literature on the chemical, (d) studied the military specification, and (e) compounded by simple mixing several laboratory batches of the disinfectant to be produced. As a result of its inquiries, plaintiff concluded that chlormelamine was a fine, free-flowing powder, and that the disinfectant could be produced by simply mixing that powder with the other ingredients, without any grinding of the chlormelamine particles. Plaintiff's bid was made on this basis. Of the eleven bids received by the Army, plaintiff's was the lowest, and it received the award of its first contract for the disinfectant on November 8, 1951.

Our findings portray plaintiff's tribulations in manufacturing the disinfectant after it began production in January 1952. In that month it successfully manufactured a 175-pound batch of the disinfectant, and then a 1,000-pound (production size) batch, by using a simple mixing process. But the succeeding production-size batches failed to meet the solubility test of the specification. Considerable study convinced plaintiff that simple mixing would not produce the required product but that it was necessary to grind the chlormelamine so as to reduce its particle size in order to meet the solubility standard. Grinding of the cholorine ingredient led to several production problems, and further study and experimentation was then needed to develop manufacturing techniques which would overcome these new and unexpected difficulties — difficulties which brought increased costs and burdens. As a result of the problems encountered because of the need for grinding (as well as the blending problem, still to be discussed), the sum of plaintiff's costs on this contract exceeded its bid by over $90,000; of this amount, some $60,000 was attributable to the unfore-seen need for grinding (and the complications it brought in train).

In April 1952 plaintiff was awarded a second contract, for over 3,300,000 more pouches of the disinfectant. The invitations for this contract (with the same specification) were issued on December 12, 1951, and plaintiff submitted its bid on January 17, 1952, immediately prior to the bid opening. This offer was founded on plaintiff's knowledge at that time, and still assumed that mixing would be sufficient to meet the contract requirements, without any need for grinding. An award was due to be made within 30 days of opening, but on February 4 plaintiff gave the Army an extension of 60 days to make the award. Within this extended period, plaintiff learned definitively of the necessity to grind and the resultant extra costs. It contemplated withdrawing its bid on the second contract but did not do so, nor did it seek to increase its bid; instead, it granted the Army, on April 18, 1952, a further 15-day extension within which to accept the original bid. The second contract was awarded to plaintiff on April 23d.

Even after it had discovered the need for grinding and had solved (at higher cost) the ensuing difficulties, plaintiff met serious problems in producing the disinfectant under both the first and the second contracts. It was not able to overcome these additional obstacles completely until it discovered, in December 1952, that Wallace & Tiernan, from whom it was purchasing the chlormelamine ingredient, was not shipping individual batches as they were manufactured but was blending several batches together and supplying this blended chlormelamine. At that time plaintiff asked that only the unblended ingredient be sent to it, and thereafter its production continued without serious interruption throughout the remainder of the two contracts. Apparently the difficulties had been due to the fact that, while each batch of chlormelamine manufactured by Wallace & Tiernan was uniform in itself, there were significant and obvious differences between units. A succession of different batches each of which was uniform in itself could be handled appropriately, but blended batches caused grave trouble. Of the plaintiff's $90,000 loss on the first contract, about $60,000 was (as we have said) due to grinding problems while the remaining $30,000 flowed from the shipment by Wallace & Tiernan of these blended batches. On the second contract, plaintiff lost almost $99,000; there is no breakdown between the extra costs allocable to the grinding problem and those attributable to the blending difficulty.

Plaintiff's suit for these additional costs is founded on its claim that (a) the Army knew of the need for grinding as well as of the probable consequences of lack of uniformity in batches of chlormelamine; (b) plaintiff neither had nor had reason to have this information, as the Army knew; and (c) the Army failed to supply the information to plaintiff (either in the specification or otherwise), and this failure misled plaintiff. Alternatively, the plaintiff asserts that the specification was affirmatively misleading as to the method for making the disinfectant. In considering these claims, we first take up the problem of grinding the chlormelamine. We agree with the Trial Commissioner and find as facts that at the time of the first contract (i) the Army knew that grinding (which is more troublesome and costly than mixing) would in all probability be necessary, not because the specification required that process but because the end-product could not in fact be made without it; (ii) on the basis of the data it had or should be expected to obtain, plaintiff reasonably expected that the job could be done by simple mixing, without grinding; (iii) the Army was aware that plaintiff (and most of the other bidders) expected to produce the disinfectant without grinding; (iv) the contract specification did not inform or alert plaintiff as to the probable need for grinding; and (v) the Army did not otherwise inform plaintiff of this fact. The evidence which is summarized in the subsidiary findings sustains these conclusions of fact. Possessing special knowledge of the characteristics and uncertainties of chlormelamine as well as of the putative problems of compounding the end-product, the Government gave no hint of the necessary information, either in the specification or in the other contract documents. Rather, the Government permitted plaintiff, which it knew to be relatively innocent of these complexities, to enter a bid for this novel product and undertake a process of manufacturing which was undoubtedly planned without the significant information as to grinding possessed by defendant.

The question remains whether this conduct on the part of the Government amounted to a breach of contract. The defendant insists not. It says that unforeseen difficulties do not entitle a contractor to increased compensation; that the specification in this case was an end-product specification which did not require any particular method or process of manufacturing the disinfectant; and that the Government contracted for plaintiff's technical know-how and manufacturing skills, depending on it to produce the end-product. We can accept these general proposit...