United Meat Co. v. Reconstruction Finance Corp., Civ. A. No. 2089-47

• Decision Date: 03 October 1951
• Docket Number: Civ. A. No. 2089-47,2090-47.
• Citation: 100 F. Supp. 437
• Parties: UNITED MEAT CO., Inc. v. RECONSTRUCTION FINANCE CORP. FEDERATED MEAT CORP. v. RECONSTRUCTION FINANCE CORP.
• Court: U.S. District Court — District of Columbia

100 F. Supp. 437

UNITED MEAT CO., Inc. v. RECONSTRUCTION FINANCE CORP.

FEDERATED MEAT CORP. v. RECONSTRUCTION FINANCE CORP.

Civ. A. Nos. 2089-47, 2090-47.

United States District Court District of Columbia.

October 3, 1951.

Albert I. Schmalholz, New York City, Byron N. Scott, Washington, D. C., William Sardell, Louis Katz, New York City, for plaintiffs.

George Arthur Fruit, Newell A. Clapp, Joseph M. Friedman, and George Morris Fay, U. S. Atty., Washington, D. C., for defendant.

PINE, District Judge.

Plaintiffs, who were meat slaughterers, filed these actions to obtain meat subsidy payments authorized by the Emergency Price Control Act of 1942¹ and Directive 41, Office of Economic Stabilization.²

Defendant, by answer, alleged that plaintiffs had violated Maximum Price Regulation 574, Office of Price Administration, during and prior to the periods for which plaintiffs sought payments. By counterclaim, it prayed for a determination of such violations under said Directive 41 as a basis for non-payment.

Plaintiffs filed motions for summary judgment, asserting that this Court had no jurisdiction to make the determination after the institution of suits by plaintiffs. These motions were denied, and on special appeal the United States Court of Appeals for the District of Columbia affirmed, holding that defendant could properly ask this Court for such determination and withhold payments pending the same.³

Thereupon plaintiffs filed protests with the defendant, attacking the validity of defendant's Regulation 3,⁴ on which it relied as authority for refusal of subsidy payments, and upon denial of the protests, filed suit in the United States Emergency Court of Appeals, praying that the regulation be declared invalid. This the Emergency Court of Appeals refused to do, and decided that the regulation as interpreted by the Court of Appeals was valid and correctly interpreted.⁵

Plaintiffs then moved in this Court for a dismissal of their actions without prejudice. This motion was granted, but defendant's counterclaims were expressly left pending for adjudication. Thereupon defendant moved for summary judgment on its counterclaims in each of the above cases, and these motions are now before this Court for decision. The motions were consolidated for hearing; the issues raised are identical, and both are therefore decided herein.

Maximum Price Regulation 574 prescribes so-called drove ceilings, that is, "Maximum amounts which certain slaughterers may pay for all cattle slaughtered during an accounting period" (Sec. 9), and provides that "no person in the course of trade or business shall pay for live cattle bought or received during any accounting period an amount higher than the maximum amount fixed by this regulation for such live cattle during such accounting period" (Sec. 2(a). The basic formula for determining the maximum permissible cost is contained in Secs. 9(b) and (c), and employing this formula, plaintiffs submitted monthly reports. Each showed an overage in the amount paid of from 4% to 10% for the accounting periods for which subsidy payments were sought,⁶ and of from 1% to 7% for preceding periods for which subsidies had been paid.⁷ These reports are attached as exhibits to the motions here under consideration. Their authenticity is not disputed, and their accuracy is not denied. They were certified by plaintiffs to be true, and formed the basis of their subsidy claims. They conclusively show, and there is no genuine issue to the contrary, that plaintiffs bought livestock at prices so high as to violate MPR 574 during the months covered by defendant's motion. Indeed, the Emergency Court of Appeals has so found.⁸ The legal question, therefore, is whether such undisputed fact, without more, is sufficient to warrant a judicial determination of violations contemplated by the directive and regulation hereinbefore referred to, and thereby provide a defense to any future attempts to collect the subsidies and a basis for recapturing subsidies erroneously paid. Defendant contends that it is sufficient, but plaintiffs take the position that there must be in addition a finding of wilful violation on their part to warrant such determination, and that there is a genuine issue as to such question.

Prior to May 1945, Regulation 3, revised (Section 7003.10(a), of Defense Supplies Corporation (defendant's predecessor) provided that it "shall have the right to declare invalid, in whole or in part, * * * any claim for subsidy payments filed by an applicant who, in the judgment of the War Food Administrator or the Price Administrator, has wilfully violated any regulation of their respective agencies applicable to the purchase or sale of livestock or to livestock slaughter or to the sale or distribution of meat."

On April 23, 1945, the Economic Stabilization Director issued his Directive 41 effective April 24, 1945, in which, in Section 7(b)(1) thereof, the Defense Supplies Corporation was directed as follows: "Defense Supplies Corporation is directed to continue its present procedure of declaring invalid, in whole or in part, any claim for subsidy payment filed by an applicant who, in the judgment of the Price Administrator, has wilfully violated any meat or livestock regulation or order issued by the Price Administrator."

But in the following section of Directive 41, namely Section 7(b) (2), an entirely new provision was added, reading as follows: "Upon a nisi prius determination in a civil action or proceeding * * * against a subsidy applicant, that such applicant has violated any substantive⁹ provision of an Office of Price Administration meat or livestock regulation or order, the Office of Price Administration shall certify the determination to ...