United States v. Aronin

• Decision Date: 28 September 1944
• Citation: 57 F. Supp. 186
• Parties: UNITED STATES v. ARONIN.
• Court: U.S. District Court — Southern District of New York

57 F. Supp. 186

UNITED STATES v. ARONIN.

District Court, S. D. New York.

September 28, 1944.

James B. M. McNally, U.S. Atty., and Florence P. Shientag, Asst. U. S. Atty., both of New York City, and Abraham Glasser, Sp. Appellate Atty., Office of Price Administration, of Washington, D. C., for plaintiff.

Poses, Katcher & Driesen, of New York City (Samuel Poses and Harry Stein, both of New York City, of counsel), for defendant.

LEAMY, District Judge.

The defendant, a manufacturer of women's fur garments, has pleaded not guilty to an indictment and an information charging him with violations of certain provisions of the Emergency Price Control Act of 1942, 50 U.S.C.A.Appendix § 901 et seq., and regulations issued pursuant thereto. The indictment charges him with having violated record keeping requirements applicable to his business by virtue of maximum price regulation No. 178 issued pursuant to the Act, namely the destruction and falsification of base period records, and the submission of a false base period statement based on the falsification of records. The information charges him with demanding and obtaining illegal and excessive prices for his garments consequent upon and as an outgrowth of the alleged record falsifications. That is, that after fraudulently establishing false and unlawful maximum prices for his garments by altering his records, he then proceeded to charge such false and unlawful prices.

The question for immediate decision arises upon an application by the defendant for leave to file a complaint in the Emergency Court of Appeals setting forth objections to the validity of the Maximum Price Regulation No. 178 issued pursuant to the Act, or those provisions thereof which form directly or indirectly the basis of the indictment and information, and for an order staying the criminal proceedings until the determination of the proceedings before the Emergency Court of Appeals.

Maximum Price Regulation No. 178 was issued on July 9, 1942, to become effective on July 10, 1942. At that time the Act, Section 203(a), provided that a protest contesting the validity of a regulation had to be filed with the Administrator (from whom there is an appeal to the Emergency Court of Appeals) not later than sixty days after its issuance. No protest was filed by the defendant within the then required time.

The instant application, however, was filed pursuant to a new statutory procedure adopted in connection with the recent renewal of the Emergency Price Control Act of 1942 ("the Stabilization Extension Act of 1944," Pub.Law 383, 78th Congress, 2nd Sess.). Section 107(b) of the renewal Act, adding a new subsection, 204(e), to the original Act contains the provisions under which this application was filed. In fact it establishes two methods by which a defendant in a criminal proceeding under Section 205(b) of the Act may obtain a stay of further proceedings.

The first of these two methods is available only to a defendant who, prior to institution of the criminal proceeding properly filed a protest in the regular manner under Section 203 of the Price Control Act. In such a case, if the Court finds that the defendant's objections to the regulation involved, as set forth in the protest, are "made in good faith," then the defendant is entitled to a stay pending determination. This method, however, is not applicable in the present case, since the defendant did not file a protest prior to the institution of the criminal proceeding.

The second method for obtaining a stay, and the method which the defendant has invoked, provides that within thirty days after arraignment or within five days after judgment, the defendant may apply to the Court in which the criminal proceeding is pending, for leave to file in the Emergency Court of Appeals a complaint challenging the validity of the regulation alleged to have been violated. The granting of the defendant's application (Which application must, of necessity, set forth his objections to the validity of any provision which he is alleged to have violated), is conditioned upon two findings to be made by the District Court: (1) That the defendant's objections to the regulation are "made in good faith," and (2) that "there is reasonable and substantial excuse for the defendant's failure to present such objection in a protest filed in accordance with section 203(a)."

The questions then for determination here are: (1) Has the applicant set forth "objections" to the validity of the regulatory provision which he is charged with violating; (2) has he shown that his objections are "made in good faith"; and (3) has he shown that he has a "reasonable and substantial excuse" for not having presented his objections earlier under the regular statutory protest procedure?

The discussion, by way of a statement of "objections," contained in the affidavit of the defendant, is addressed to a single provision of the Regulation, namely the provision known as the "highest price line limitation." However, neither the indictment nor the information is, in reality, based upon alleged violations of the "highest price line" provision.

Maximum Price Regulation No. 178, which became effective July 10, 1942, provides that after that date no person shall sell or deliver any women's fur coats at higher prices than those established by the Regulation (Sec. 1389.151). The method of maximum pricing established by the Regulation combines the "base period" and cost-plus principles, that is, each seller's maximum legal prices are arrived at by a cost-plus computation referring back to transactions which occurred in a designated base period (Sec. 1389.153). The Regulation makes separate provision for various types of sellers such as retailers and manufacturers of which the defendant is the latter.

In order to insure that the pricing of various classes and types of fur garments sold after the effective date of the Regulation will accurately correspond to the same classes and types sold by a particular manufacturer during the base period months, which were June, July and August, 1941, the Regulation prescribes the tests to be followed in determining the proper class or type of garment (Sections 1389. 153, 1389.165). A two-fold method of classifying garments is used: (1) According to "classifications," and (2) according to "categories" within such "classifications." The term "classification" refers to the functional style or basic functional design type of the garment, i. e., coats, jackets, muffs, etc. The term "category" refers to factors in the raw materials or manufacture of a garment of a particular "classification" which have customarily been regarded as constituting a basis for price differentials between garments of the same "classification", or, in other words, factors which would cause a seller to charge more money for one coat than for another, such as the species of the animal from which the pelt was taken, the manufacturing method employed and the geographical origin of the fur.

The Regulation makes separate provision for a manufacturer's maximum legal prices for (1) "categories" of garments delivered during the base period and (2) "categories" not delivered during the base period. Since the defendant claims as one of his reasons that the regulation is invalid, that it prevents him from competing with manufacturers of higher priced garments, it may be assumed that the instant case involves the latter situation, that is, the coney fur coats involved herein are made of domestic rabbit skins, whereas the only fur garments delivered by the defendant during the base period were coney coats of imported rabbit skins. In view of this "category" factor, i. e., difference in geographical origin, the coats made of domestic skins are a new "category" of fur garments not delivered by the defendant during the base period. For coats thus constituting a new "category", the Regulation (Sec. 1389.153 (a) (2)) establishes the following base period pricing formula: (1) The direct cost of the garment to the manufacturer as defined in Sec. 1389.165(12), plus (2) a designated percentage margin over cost equal to the lowest such margin established for any "category" of the same "classification" of garments in the base period, since, as previously stated, the defendant manufactured and delivered one "classification" and "category" of items exclusively during the base period, i. e., imported rabbit skin coats, the margin permitted for the new "category" (domestic rabbit skin coats) is simply that established for defendant's previous one line of coats in the base period. But the maximum legal price thus computed on the cost-plus basis for new "category" garments not sold in the base period may not be higher, in any event, than the highest price charged by the same manufacturer for any garment delivered in the base period. In other words, manufacturers were placed on notice by the Regulation that if they desired to move into the manufacture of new "categories", they would have to do so without moving into higher price lines than those delivered in the base period. This provision is generally referred to as "the highest price line limitation."

Although mention of the foregoing pricing provisions is necessary for an understanding of the issues presented by this application, yet they are not the provisions upon which the application is to be determined. Instead, the provisions of the Regulation upon which the disposition of the application must turn are the record-keeping provisions, the purpose of which is to make available the data without which a "base period" and "cost-plus" regulation of this type obviously could not operate.

The pertinent record-keeping provisions, as set forth in Section 1389.160 provide in substance that a seller of women's fur garments shall keep for inspection by the Office of Price Administration, all records which will show the maximum prices charged for each category sold during the base...