United States v. Davison Fuel and Dock Company

• Decision Date: 06 January 1967
• Docket Number: No. 10567.,10567.
• Citation: 371 F.2d 705
• Parties: UNITED STATES of America, Appellee, v. DAVISON FUEL AND DOCK COMPANY, a Corporation, Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

371 F.2d 705 (1967)

UNITED STATES of America, Appellee, v. DAVISON FUEL AND DOCK COMPANY, a Corporation, Appellant.

No. 10567.

United States Court of Appeals Fourth Circuit.

Argued November 3, 1966.

Decided January 6, 1967.

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David W. Matthews, Cincinnati, Ohio (John H. Clippinger, Wilbur L. Collins, Cincinnati, Ohio, David D. Johnson, Jackson, Kelly, Holt & O'Farrell, Charleston, W. Va., and Taft, Stettinius & Hollister, Cincinnati, Ohio, on brief), for appellant.

Robert V. Zener, Atty., Dept. of Justice (John W. Douglas, Asst. Atty. Gen., David L. Rose, Atty., Dept. of Justice, and Milton J. Ferguson, U. S. Atty., on brief), for appellee.

Before BRYAN, WINTER and CRAVEN, Circuit Judges.

CRAVEN, Circuit Judge:

Mine workers in West Virginia were paid lower wages than the minimum established under provisions of the Walsh-Healey Public Contracts Act, 41 U.S.C.A. Sections 35-45. The United States, for the benefit of the miners, sued to compel Davison Fuel and Dock Company to pay each miner the difference between what he received and what he would have received had wages complied with standards set under authority of the Act.¹

The district court decided that Davison had sufficient contractual relationship with the United States to invoke provisions of the Walsh-Healey Act and entered judgment for the use and benefit of the miners. We affirm.

Although the facts are stipulated, it is necessary to an understanding of the problem to set them out in some detail.

National Lead contracted to operate on a cost-plus-a-fixed-fee basis the Atomic Energy Commission's Feed Materials Production Center at Fernald, Ohio. The contract provided, inter alia, that National Lead should acquire for the Government necessary materials which had not been furnished by the AEC and that payment for such materials was to be made from government funds deposited in special accounts. The Government reserved the right to require purchase orders to be submitted for its approval. Under the contract title to all materials purchased was to pass directly from the vendor to the Government.

Appellant, Davison,² entered into two purchase order contracts exceeding $700,000 in combined amount, to supply coal over a period of two years for the operation of the Fernald facility.

The contracts provided that Davison "shall produce (or arrange to have produced) * * *" the coal and "shall deliver coal from the source at the rate specified by the agreement and in the schedule(s)." The coal was "not (to) be delivered * * * from any other source * * * than set forth * * *" in the attached schedules. The schedules named the source as a particular mine at Crown Hill, West Virginia, operated by Riverton Coal Company. Riverton was a wholly-owned subsidiary of Fields Creek Coal Company, which was itself a wholly-owned subsidiary of Davison.

Davison operated no coal mines directly but owned and operated truck scales, a tipple, coal processing plant, and barge loading facility at Marmet, West Virginia. At North Bend, Ohio, Davison maintained a river harbor, including barge unloading facilities, coal processing plant, storage yard, and rail and truck shipping facilities. In addition, Davison owned coal producing properties in the vicinity of Marmet, West Virginia, which it leased to various mine operators.

The coal actually delivered by Davison under the purchase order contracts originated from three sources: the Riverton Coal Company, the designated source; Fields Creek Coal Company; and thirtytwo other non-affiliated producers whose employment practices, as stipulated, did not comply with the minimum wage and overtime requirements of the Walsh-Healey Act. Although the Riverton mine produced a sufficient amount of coal to meet Davison's obligation under the contracts, Davison, apparently in accord with practices in the industry, purchased and intermingled coal from other producers in fulfilling its general contract obligations. To meet the specifications of the purchase orders, the raw coal before delivery had to be processed by screening, picking and crushing. This was accomplished in facilities of either Davison or its subsidiary, the Riverton Coal Company.

I.

The stipulations and representations required by the Walsh-Healey Act and liability for their violation are applicable only to "any contract made and entered into by any executive department, independent establishment, or other agency or instrumentality of the United States * * *." 41 U.S.C.A. § 35. (Emphasis added.) A predicate, therefore, to liability on the purchase order contracts here in issue is that they be found, for purposes of the Act, to be "government contracts." Davison contends the contracts were between it and National Lead, two private corporations, and hence, not within the reach of the Walsh-Healey provisions.

National Lead is, indeed, a private corporation. But here it was acting as an agent of the AEC, an instrumentality of the Government, in purchasing necessary supplies for operation of the AEC Fernald facility. For purposes of the Walsh-Healey Act, we think the contracts were "made and entered into" by the AEC, admittedly an instrumentality of the United States, and the purchases were those of the Government. Cf. United States v. Livingston, 179 F.Supp. 9 (E. D.S.C.1959), aff'd mem., 364 U.S. 281, 80 S.Ct. 1611, 4 L.Ed.2d 1719 (1960).

Both contracts were in the form of agreements between National Lead and Davison. Each contained, however, express stipulations that it was entered into by National Lead for and on behalf of the Government; that shipments of the coal were to be made to the United States Atomic Energy Commission, % National Lead Company; and that title to the coal was to pass directly to the Government as purchaser. The contracts were not to be binding without written approval of the AEC and were, in fact, signed by AEC contracting officers.

The purchase order contracts contained many standard clauses included and in some instances required to be in government contracts.³ The contracts specifically provided for incorporation by reference of the representations and stipulations of the Walsh-Healey Act, including applicable rulings and interpretations of the Secretary of Labor.

The coal was to be paid for from funds advanced by the Government and segregated for this purpose by National Lead which was to acquire no right or interest in them. The Government remained liable directly if for any reason payment was not made.

The contracts plainly impose the ultimate liability and risk in the purchase transaction on the Government. Davison can express no surprise that the Government's status is that of purchaser for it was named as such in the contracts. The United States was sufficiently a party to the contracts with Davison to support the conclusion of the district judge that they were made by a government instrumentality within the meaning of the Walsh-Healey Act.

Davison urges on us in support of its position the decisions of the Supreme Court in United States v. Boyd, 378 U.S. 39, 84 S.Ct. 1518, 12 L.Ed.2d 713 (1964), and Powell v. United States Cartridge Co., 339 U.S. 497, 70 S.Ct. 755, 94 L.Ed. 1017 (1950). However, these are not pertinent for they determine only that the companies involved were not to be considered constituent parts of the Government. Here, the United States does not claim that National Lead was a part — agency or instrumentality — of the Government, but only that National Lead was being compensated in its private corporate capacity as a purchasing agent for the AEC. This arrangement was a lawful delegation of authority whereby National Lead served as government purchasing agent. See United States v. Livingston, supra, 179 F.Supp. at 21.

Alabama v. King & Boozer, 314 U.S. 1, 62 S.Ct. 43, 86 L.Ed. 3 (1941), also cited by Davison, is distinguishable from the present case. There the purchaser of materials was held to be the private contractor and not the Government; however, the purchase order specifically stated that it did "not bind, nor purport to bind" the Government. In addition, the private contractor paid for the materials initially with his own funds, subject to reimbursement, and title passed to the Government only after written acceptance by the United States contracting officer. "Meanwhile, title to materials was in the contractor, who had purchased them on his own credit and who, presumptively, could have diverted them to other purposes." United States v. Livingston, supra, 179 F.Supp. at 21. A result contrary to that in King & Boozer was reached in Kern-Limerick, Inc. v. Scurlock, 347 U.S. 110, 74 S.Ct. 403, 98 L.Ed. 546 (1954), where on contractual terms more nearly like those in the present case the Government was held to be the actual purchaser and the private contractor its purchasing agent.

Moreover, King & Boozer, as Boyd, supra, and indeed, Kern-Limerick, dealt with problems of immunity from state taxation which involved consideration of different policies than in the case now before us. The Walsh-Healey Act is remedial wage and hour legislation and will be construed liberally to effectuate congressional policy "that the Federal Government should procure and use only goods produced under safe and fair working conditions." George v. Mitchell, 108 U.S.App.D.C. 324, 282 F.2d 486, 493 (1960). The Act will be interpreted to further its purpose "to obviate the possibility that any part of our tremendous national expenditures * * * go to forces tending to depress wages and purchasing power and offending fair social standards of employment." Perkins v. Lukens Steel Co., 310 U.S. 113, 128, 60 S.Ct. 869, 877, 84 L.Ed. 1108 (1940).

The divergence of relevant policies and difference in the contexts in which the issues arise also assist to explain what may appear to be a conflict between our decision in this case and a decision of the Sixth Circuit on the question of whether substantially similar...