MONOLITH PORTLAND MID. CO. v. RECONSTRUCTION F. CORP.

• Decision Date: 22 January 1951
• Docket Number: Civ. No. 11816.
• Citation: 95 F. Supp. 570
• Court: U.S. District Court — Southern District of California
• Parties: MONOLITH PORTLAND MIDWEST CO. v. RECONSTRUCTION FINANCE CORP.

95 F. Supp. 570

MONOLITH PORTLAND MIDWEST CO. v. RECONSTRUCTION FINANCE CORP.

Civ. No. 11816.

United States District Court S. D. California, Central Division.

January 22, 1951.

COPYRIGHT MATERIAL OMITTED

Joseph T. Enright, Gibson, Dunn & Crutcher, all of Los Angeles, Cal., and Henry F. Prince, William French Smith, Los Angeles, Cal., of counsel, for plaintiff.

Lillick, Geary & McHose, Allan E. Charles and William A. C. Roethke, all of Los Angeles, Cal., John F. Porter, San Francisco, Cal., R. C. Goodale, Washington, D. C., for defendant, Reconstruction Finance Corp.

JAMES M. CARTER, District Judge.

This case concerns the War Mobilization and Reconversion Act of 1944, Act of Oct. 3, 1944, c. 480, 58 Stat. 785, 50 U.S.C.A. Appendix, §§ 1651 to 1678, hereafter referred to as the Reconversion Act and the Contract Settlement Act of 1944, Act of July 1, 1944, c. 358, 58 Stat. 649, 41 U.S. C.A. §§ 101-125, hereafter referred to as the Settlement Act and the rights of a contracting party (plaintiff) whose contract with the defendant, Reconstruction Finance Corporation, was allegedly terminated under the above Acts. A previous case by the same plaintiff against the same defendant in this court, No. 6082-B, and seeking practically the same relief, was dismissed by Judge Beaumont on January 25, 1949, and the judgment of dismissal was subsequently affirmed on appeal in Monolith Portland Midwest Co. v. Reconstruction Finance Corporation, 9 Cir., 1949, 178 F.2d 854, certiorari denied, 1950, 339 U.S. 932, 70 S.Ct. 668, 94 L.Ed. ___, which will be hereinafter referred to as the Monolith case. The present case varies from the prior proceeding only in that since the Monolith decision, the plaintiff has exhausted its administrative remedies under the acts referred to above, and has so alleged in its complaint on file.

The matter comes before this court on three motions by the defendant, R.F.C.:

(1) A motion to dismiss or for summary judgment, based essentially on the District court decision by Judge Beaumont in the prior action, No. 6082-B of this court; the Monolith decision in the Court of Appeal referred to above, and the findings of fact and the determination of claim under the Settlement Act made by the R.F.C. dated June 7, 1950, whch are attached to the motion;

(2) A motion to strike certain portions of the complaint;

(3) A motion for a more definite statement.

The Facts.

The action was commenced in the State court and removed to the District court under Title 28 U.S.C.A. § 1441, on the ground that the Reconstruction Finance Corporation was a Federal corporation whose stock was wholly owned by the United States, and on the further ground that the action is one for compensation against the United States, and is further founded on the Constitution and laws of the United States.

The complaint is entitled, "Complaint for damages and equitable and declaratory relief," and there are attached as exhibits, contracts of June 28, 1943 and April 18, 1944, designated as licensing agreements, and contract of June 23, 1943, and two amendatory contracts thereto, dated August 26, 1944, and September 28, 1944, concerning acquisition, construction, management and operation.

The contracts were between Defense Plant Corporation and the plaintiff. In 1945, the R.F.C. dissolved the Defense Plant Corporation and succeeded to its rights and liabilities under the contract. In substance, the contracts provided that Defense Plant Corporation was to furnish the money necessary to construct and operate a test plant to determine the feasibility of commercially extracting alumnae from native anorthosite ores, under a method developed by the plaintiff, and demonstrated a mutual desire of the plaintiff, and the Defense Plant Corporation to determine the feasibility of this method. The plaintiff agreed to supervise the construction of a plant and to license to Defense Plant Corporation the use of its process.

The contracts contained no termination clause as such, except a provision giving either party the right to cancel the operating agreement upon thirty days' notice at any time after sixty days from the time of the completion of the plant. The agreements further provided that the plaintiff operate the plant for ten years, and the Defense Plant Corporation agreed that should it decide to dispose of the plant during the continuance of the operating agreement, or within six months of its termination, plaintiff would have the first opportunity to purchase.

On July 25, 1946, plaintiff received a written "stop work" order from R.F.C. and on September 14, 1946, plaintiff received a written notice of termination dated September 10, 1946. On the latter date the plant was near completion. The notice of cancellation states that "The War Department has advised that the facilities (involved herein) * * * are no longer required for production for the Government and the Director of War Mobilization and Reconversion has directed this Corporation to terminate the aforesaid agreement dated June 28, 1943, as amended * * *". Although not expressly stated, the alleged termination was pursuant to the Reconversion Act referred to above. Plaintiff thereafter commenced its prior action in the District court November 7, 1946, resulting in the Monolith decision, supra.

The complaint herein prays judgment as follows:

Sub. 1-5: (of the prayer) for various sums of money for "compensation for services rendered," and "for reimbursement for disbursements and expenditures" and for interest.

Sub. 6: that the defendant be enjoined from (a) interfering with the right of plaintiff to possession of the plant; (b) reporting any of the real or personal property of the plant to the General Services Administration or from transferring, disposing, dismantling or removing the plant and for the sum of $600,000 for the cost of the completion of the plant, and for the sum of $1,500,000 for the cost of managing and operating the plant on an experimental basis for a test period.

Sub. 7: that in the alternative if plaintiff is not entitled to the relief prayed for in paragraph 6 of the prayer, that it have judgment against the defendant in the sum of $7,500,000 general damages, in addition to the particular amounts prayed for as services rendered, reimbursement, interest, etc., in paragraphs 1 to 5 of the prayer.

Sub. 8: that the court adjudicate the legal rights and duties of the parties.

Generally speaking, the allegations in the complaint and the prayer are similar to those in the prior action, except that the plaintiff has alleged the exhaustion of its administrative remedies under the acts referred to above.

The claim made by the plaintiff dated January 16, 1950, and filed with the R.F.C. instituting administrative proceedings is as extensive (if not more so) as the prayer of the present complaint, and in particular claims the same monetary items referred to in paragraphs 1 to 5 of the prayer of the complaint; the possession of the plant, injunction, the sums of $600,000 to complete it, and the sum of $1,500,000 for the test run similar to paragraph 6 of the prayer of the complaint; and contains the alternative claim in the sum of $7,500,000 damages (in addition to the monetary claim in paragraphs 1 to 5 of the complaint) in the event plaintiff does not secure possession, injunction and the $600,000 to complete and the $1,500,000 for a test run, similar therefore to paragraph 7 of the prayer of the complaint.

The ultimate question presented is whether or not the contractor (plaintiff) after the termination of the contract or a breach as alleged by the plaintiff, may sue in the District court for damages for breach of contract and for equitable relief without reference to the measure of compensation provided for by the Settlement Act, after it has exhausted its administrative remedy by filing a claim, after failure to effect settlement and after findings of fact and determination of amount of claims have been made by the agency (R.F.C.). Specifically, questions are presented concerning (1) the interpretation of the Reconversion and Settlement Acts; (2) whether they apply to prior contracts; (3) the effect of the exhaustion of administrative remedies; (4) conceding that Congress has power to enact legislation providing for termination, has Congress exercised that power in the Reconversion and Settlement Acts; (5) the effect of the "Impairment of contract" clause in the Settlement Act; (6) the effect of the Administrative finding that the contract in question was a "prime contract for war production"; (7) was the contract properly terminated; (8) finally, the ultimate question as to whether plaintiff may sue for damages for breach of contract and equitable relief or whether plaintiff's remedy is to "fair compensation" as defined and limited by the terms of the Settlement Act.

The Law

I.

The Settlement Act and the Reconversion Act must be read together. Becoming effective on July 1, 1944, and October 3, 1944 respectively, the "* * * Acts were designed to promote the orderly termination and settlement of war contracts. Each was an essential element of a unitary remedy. The Reconversion Act incorporated the Office of Contract Settlement, established by the Settlement Act, into the Office of War Mobilization and Reconversion. * * *" Monolith case, supra, 178 F.2d at page 857.

II.

The Acts apply to contracts previously made. The Settlement Act expressly provided that a "prime contract" included such a contract "heretofore or hereafter entered into". Settlement Act, Sec. 3(a), 41 U.S.C.A. § 103(a). Since the Acts must be read together and since one supplements the other and they are each part of a "unitary remedy", we hold that the Reconversion Act also applies to contracts entered into before the passage of the Act. This was so decided in the Monolith case, supra.

III.

It is argued that the Monolith case, supra, does not so hold because of a contention that...