Paul v. United States

Decision Date14 January 1963
Docket NumberNo. 19,19
PartiesCharles PAUL, Director of Agriculture of California, et al., Appellants, v. UNITED STATES
CourtU.S. Supreme Court

[Syllabus from pages 245-246 intentionally omitted] John Fourt, Sacramento, Cal., for appellants.

Archibald Cox, Sol. Gen., for appellee.

[Amicus Curiae from pages 246-247 intentionally omitted] Mr. Justice DOUGLAS delivered the opinion of the Court.

The main question in this case is whether California can enforce her minimum wholesale price regulations as respects milk sold to the United States at three military installations1 (Travis Air Force Base, Castle Air Force Base, and Oakland Army Terminal) located within California and used for strictly military consumption, for resale at federal commissaries and for consumption or resale at various military clubs and post exchanges. Milk used for the first two categories of use is paid for with appropriated funds, while that used in the clubs and exchanges is purchased with nonappropriated funds. Prior to January 1959, the milk supplies purchased with appropriated funds and used at those installations were obtained as a result of competitive bidding and on terms below the minimum prices prescribed by the Director of Agriculture of California. The Director advised distributors that the State's minimum price regulations were applicable to sales at Travis. Subsequently bids for milk-supply contracts at Travis were in strict compliance with California's regulations, the added cost to the Federal Government being about $15,000 a month. Later that year California instituted a civil action in the state courts against a cooperative that had supplied milk at Travis below the state minimum price, seeking civil penalties and an injunction. Thereafter the United States brought this suit in the District Court. The complaint alleged that state price regulation of milk sales at Travis, a federal enclave, was barred by the Constitution, since Travis is subject to the exclusive jurisdiction of the United States.2 It also alleged that such regulation was an unconstitutional burden on the United States in the exercise of its constitutional power to establish and maintain the Armed Forces and to acquire and manage a federal enclave. The complaint asked that a three-judge court be convened.

Meanwhile, the Director of Agriculture of California warned distributors that the California regulation would be enforced at Castle and at Oakland. Bids for milk thereafter received at Castle were all at or above the state minimum price; and accordingly they were rejected. A new invitation for bids was issued, and one of those received was below the state minimum. Thereupon California sued the successful bidder for an injunction; and later it sued other like bidders. A similar experience was had at Oakland; bids at or above the minimum were rejected, and a contract with a distributor for a prior period was extended for three months with an estimated saving to the United States of over $30,000. California again instituted suit to enjoin the supplier from selling at below established minimum wholesale prices. The United States amended its complaint to include its purchases at Castle. As respects Oakland the United States commenced a separate action by a complaint substantially identical with the other one; and they were later consolidated.

Appellants denied that these three installations were federal enclaves giving the United States exclusive jurisdiction and that there was any conflict between the state regulatory scheme and the federal procurement policy. Appellants also moved that the District Court stay these actions pending determination of state-law questions by the state courts in the pending actions.

The three-judge District Court refused to stay the proceedings and granted the motion of the United States for summary judgment. 190 F.Supp. 645. We postponed a determination of jurisdiction to the merits. Paul v. United States, 368 U.S. 965, 82 S.Ct. 437, 7 L.Ed.2d 394.


Here, as in United States v. Georgia Public Service Comm., 371 U.S. 285, 83 S.Ct. 397, the suit was one 'required' to be heard by a three-judge court within the meaning of 28 U.S.C. § 1253, 28 U.S.C.A. § 1253 and therefore properly brought here by direct appeal. Apart from the question whether the three federal areas were subject to the exclusive jurisdiction of the United States, the issue as to whether or not the state regulatory scheme burdened the exercise by the United States of its constitutional powers to maintain the Armed Services and to regulate federal territory was a substantial federal question, as Penn Dairies, Inc., v. Milk Control Comm. of Pennsylvania, 318 U.S. 261, 63 S.Ct. 617, 87 L.Ed. 748; Public Utilities Comm. of State of California v. United States, 355 U.S. 534, 78 S.Ct. 446, 2 L.Ed.2d 470, and United States v. Georgia Public Service Comm., supra, make clear. A three-judge court was therefore required even if other issues that might not pass muster on their own were also tendered. See 28 U.S.C. § 2281, 28 U.S.C.A. § 2281; Florida Lime & Avocado Growers, Inc., v. Jacobsen, 362 U.S. 73, 80 S.Ct. 568, 4 L.Ed.2d 568.


The California Act authorizes the Director of Agriculture to prescribe minimum wholesale and retail prices3 'at which fluid milk or fluid cream shall be sold by distributors to retail stores, restaurants, confectioneries and other places for consumption on the premises.'4 The prohibitions run both against sales and against purchases;5 and both criminal and civil penalties are provided.6 The minimum wholesale prices, promulgated by the Director of Agriculture, have been enforced with respect to sales to the United States, as already noted.

In Public Utilities Comm. of State of California v. United States, supra, we held that the federal procurement policy, which required competitive bidding as the general rule and negotiated purchase or contract as the exception, prevailed over California's regulated rate system. That case, like United States v. Georgia Public Service Comm., supra, concerned transportation of commodities. But the federal policy at the times relevant here was the same for procurement of supplies and services. The statutes in effect at the time of the Public Utilities Commission of State of California case are still the basic provisions governing all procurement by the Armed Services out of appropriated funds. They require that contracts be placed by competitive bidding, the award to be granted 'to the responsible bidder whose bid * * * will be the most advantageous to the United States, price and other factors considered.'7 There are statutory exceptions, the relevant ones being as follows:

'(a) Purchases of and contracts for property or services covered by this chapter shall be made by formal advertising in all cases in which the use of such method is feasible and practicable under the existing conditions and circumstances. If use of such method is not feasible and practicable, the head of an agency, subject to the requirements for determinations and findings in section 2310, may negotiate such a purchase or contract, if-

'(8) the purchase or contract is for property for authorized resale;

'(9) the purchase or contract is for perishable or nonperishable subsistence supplies;

'(10) the purchase or contract is for property or services for which it is impracticable to obtain competition;

'(15) the purchase or contract is for property or services for which he determines that the bid prices received after formal advertising are unreasonable as to all or part of the requirements, or were not independently reached in open competition, and for which (A) he has notified each responsible bidder of intention to negotiate and given him reasonable opportunity to negotiate; (B) the negotiated price is lower than the lowest rejected bid of any responsible bidder, as determined by the head of the agency; and (C) the negotiated price is the lowest negotiated price offered by any responsible supplier.'8

The Armed Services Procurement Regulation speaks in unambiguous terms of a policy 'to use that method of procurement which will be most advantageous to the Government-price, quality, and other factors considered.'9 The Regulation states, 'Such procurement shall be made on a competitive basis, whether by formal advertising or by negotiation, to the maximum practicable extent * * *.'10 Whatever method is used-formal advertising or negotiation-'competitive proposals' must be 'solicited from all such qualified sources of supplies or services as are deemed necessary by the contracting officer to assure such full and free competition as * * * to obtain for the Government the most advantageous contract-price, quality, and other factors considered.'11 If advertising for bids is used, the contract is to be awarded 'to the lowest responsible bidder.'12 Moreover, even when advertising for bids is not used, competitive standards are not relaxed. The policy is 'to procure supplies and services from responsible sources at fair and reasonable prices calculated to result in the lowest ultimate over-all cost to the Government.'13 'The fact that a procurement is to be negotiated does not relax the requirements for competition.'14 'Whenever supplies * * * are to be procured by negotiation, price quotations * * * shall be solicited from all such qualified sources of supplies or services as are deemed necessary * * * to assure full and free competition * * * to the end that the procurement will be made to the best advantage of the Government, price and other factors considered.'15 The Regulation then specifies 20 separate considerations for the selection of a supplier in case of a negotiated procurement.16 The first of these is a 'comparison of prices quoted.' 17

We have said enough to show that the Regulation does more than authorize procurement officers to negotiate for lower rates. It directs...

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