Howard Industries v. United States, 48874.

• Decision Date: 04 April 1949
• Docket Number: No. 48874.,48874.
• Citation: 83 F. Supp. 337,113 Ct. Cl. 231
• Parties: HOWARD INDUSTRIES, Inc. v. UNITED STATES.
• Court: U.S. Claims Court

83 F. Supp. 337

113 Ct. Cl. 231

HOWARD INDUSTRIES, Inc. v. UNITED STATES.

No. 48874.

United States Court of Claims.

April 4, 1949.

Raoul Berger, of Washington, D. C. (Gottlieb, Schwartz & Friedman, of Chicago, Ill., on the brief), for plaintiff.

Mary K. Fagan, of Washington, D. C., and H. G. Morison, Asst. Atty. Gen. (Edgar T. Fell and Robert E. Mitchell, both of Washington, D. C., on the brief), for defendant.

Before JONES, Chief Judge, and LITTLETON, WHITAKER, MADDEN, and HOWELL, Judges.

HOWELL, Judge.

The defendant moves to dismiss the petition.

Plaintiff's action is brought under Public Law 657, 79th Cong., 2d Sess., Ch. 864, 60 Stat. 902, 41 U.S.C.A. § 106 note, known as the Lucas Act, which authorizes relief for war contractors who suffered net losses in the performance of Government contracts between September 16, 1940, and August 14, 1945. The case was originally filed in the District Court of the United States for the District of Columbia and was transferred to this court pursuant to Section 6 of the Lucas Act, as amended June 25, 1948, § 37, Public Law 773, 80th Congress, 62 Stat. 869, 41 U.S.C.A. § 106 note.

Plaintiff had three prime contracts with the Navy Department dated October 24, 1943, February 27, 1943, April 3, 1944, and modifications and changes thereto, which contracts were consolidated into one contract Noa (s) 4395 dated July 31, 1944, and one contract with the War Department. Plaintiff alleges that in the performance of such contracts it incurred a net loss of $235,882.34 through no fault or negligence of its own and that prior to August 14, 1945, written requests for relief concerning the losses were addressed to the Navy Department. Plaintiff further alleges that pursuant to Public Law 657 and Executive Order 9786 Oct. 5, 1946,¹ it filed with the Navy Department its claim for relief on February 7, 1947, within six months after the date of the approval of said act, which claim was denied in toto by that department acting through its War Contracts Relief Board. This determination was based mainly upon Paragraphs 204 and 307 of Executive Order 9786.

The defendant bases its motion to dismiss the petition on the following grounds:

"(1) that plaintiff did not have on file with the proper department or agency, on or before August 14, 1945, a written request for relief with respect to losses alleged in its complaint, as required by Section 3 of the Lucas Act, in that plaintiff's letters to the Navy Department, dated December 16, December 17, 1943, and May 28, 1944, attached to its petition, are the only documents that could be construed as `requests for relief,' and that they are not the sort of requests for relief contemplated by the Lucas Act. In this connection, defendant argues that the Lucas Act is a mere extension of the First War Powers Act² and that only claims which might have been granted under that act can be considered under the Lucas Act, i. e., a request for an amendment to a contract without consideration;

"(2) that if the court should decide that plaintiff has filed proper `requests for relief,' plaintiff's claim is barred by a settlement agreement of November 18, 1944, entered into voluntarily by plaintiff with the Government under the terms of the Contract Settlement Act of 1944,³ and that therefore no request for relief under the First War Powers Act of 1941 was pending and undisposed of as of August 14, 1945."

Section 3 of the Lucas Act provides in part:

"Claims for losses * * * shall be limited to losses with respect to which a written request for relief was filed with such department or agency on or before August 14, 1945, but a previous settlement under the First War Powers Act, 1941, or the Contract Settlement Act of 1944 shall not operate to preclude further relief otherwise allowable under this Act."

Section 2 of the act limits the amount of a claim to the net loss (less the amount of any relief granted subsequent to the establishment of such loss) on all war contracts and subcontracts of the claimant performed during the statutory period, and provides that consideration must be given to any action taken with respect to the contracts and subcontracts under the Contract Renegotiation Act,⁴ the Contract Settlement Act of 1944, any relief granted under section 201 of the First War Powers Act, 1941, "or otherwise," and any relief proposed to be granted by any other department or agency under the Lucas Act.

We first consider the exact nature of the three letters purporting to be "requests for relief" as required by Section 3. Those letters related to the three Navy contracts here in issue, and requested a redetermination of the contract price because of an operating deficit, such redetermination to be made pursuant to the escalator clause of the contract.

Such a request for a redetermination of the contract price because of an operating deficit is, we believe, a request for relief with respect to losses incurred in the performance of the contracts. The Government does not dispute this fact, but contends that the relief requested in the letters was not the sort of relief that could have been granted under the First War Powers Act, Section 201, and that therefore it cannot be granted under the Lucas Act. The Navy Department had originally denied these requests for relief on the ground that the contemplated termination of the contracts for the convenience of the Government precluded the exercise of the Navy Department's authority under the First War Powers Act to amend contracts without consideration "to further the prosecution of the war." The Government then refers us to Paragraph 307 of Executive Order 9786 and states that since the contracting agency found that First War Powers Act relief from loss could not have been granted, no relief may now be had under the Lucas Act. Paragraph 307 of the Executive Order provides in part as follows:

"Relief with respect to a particular loss claimed shall not be granted under the Act and these Regulations unless the war agency considering the claim finds * * * that relief would have been granted under the First War Powers Act, 1941, if final action with respect thereto had been taken by the war agency on or before August 14, 1945."

We cannot agree with the Government's contention that the Lucas Act is merely an extension of the First War Powers Act and that only those claims that could have been allowed under that act may be considered under the Lucas Act. We shall examine paragraph 307, quoted above (which is one of the regulations issued pursuant to Section 1 of the Lucas Act) first in the light of the express terms of the act, and secondly in the light of the act's intent as expressed in its legislative history.

Section 201 of the First War Powers Act, 1941, provides that relief may be granted a war contractor by a war agency by entering into contracts or amendments or modifications of contracts where the agency deems that such action would facilitate the prosecution of the war. The Lucas Act does not require that the war agency make any such determination as a basis for relief. Section 1 of the Lucas Act provides that war agencies may grant a war contractor relief from losses incurred between September 16, 1940, and August 14, 1945, where such losses were incurred without fault or negligence on the part of the contractor. Further evidence that the Lucas Act provides broader relief than was contemplated by the First War Powers Act is found in the language of Section 2 directing that in determining the amount of a contractor's net losses, consideration shall be given to relief granted under the Contract Renegotiation Act, the Contract Settlement Act of 1944, the First War Powers Act, or any other relief granted. Again, in section 3, the Lucas Act provides that prior settlements under the Contract Settlement Act of 1944 and under the First War Powers Act, 1941, shall not bar further relief under this act. In this connection, it should be noted that the Contract Settlement Act granted much broader relief than did the First War Powers Act and on an entirely different basis.

The legislative history of the Lucas Act⁵ reveals that, as originally conceived, the act was intended to be merely an extension of the First War Powers Act. Certain war agencies had taken the position that the termination of hostilities on August 14, 1945, eliminated the basis for First War Powers Act relief because it was then no longer possible to make the requisite determination that the action authorized by the act would "facilitate the prosecution of the war." Other agencies took the opposite view, with the result that pending claims were considered by some war agencies, and were dismissed without consideration by others. As the hearings progressed, the committee noted that in many instances First War Powers Act relief which had been rendered had been far from adequate and had left war contractors with net losses on their over-all operations. Accordingly, it was decided to change the language of section 1 which originally authorized modification of contracts to "prevent a manifest injustice" (i. e., the situation where some war agencies continued to grant First War Powers Act relief after August 14, 1945, and some did not) to language authorizing the Government to "settle equitable claims of contractors * * * for losses (not including diminution of anticipated profits) incurred * * * without fault or negligence on their part in the performance of such contracts * * *."⁶

The legislative history of Section 3 of the Lucas Act, which we shall take up in connection with the Government's final ground for dismissal, is further evidence that the bill as finally enacted went beyond the mere extension of First War Powers Act relief.

We accordingly conclude that Paragraph 307 of Executive Order 9786 is a regulation unauthorized by the Lucas Act and is in direct conflict with the express terms of the act and with its intent as revealed in its...