United States v. McFarland

• Decision Date: 19 October 1926
• Docket Number: No. 2429.,2429.
• Parties: UNITED STATES v. McFARLAND et al.
• Court: U.S. Court of Appeals — Fourth Circuit

15 F.2d 823 (1926)

UNITED STATES v. McFARLAND et al.

No. 2429.

Circuit Court of Appeals, Fourth Circuit.

October 19, 1926.

J. S. Bohannan, Asst. to the Sol. of U. S. Department of Agriculture, of Washington, D. C. (A. W. W. Woodcock, U. S. Atty., of Baltimore, Md., and H. H. Clarke, Asst. to the Sol. of U. S. Department of Agriculture, of Washington, D. C., on the brief), for the United States.

William H. Hudgins, of Baltimore, Md., and Lothrop Withington, of Boston, Mass. (Alexander Lincoln and Claude B. Cross, both of Boston, Mass., on the brief), for defendants in error.

Before WADDILL, ROSE, and PARKER, Circuit Judges.

ROSE, Circuit Judge.

This is one of many suits which have been brought by the United States, hereinafter called the government, to recover from dealers in wool profits which the plaintiff says the defendants, during the year 1918, made in excess of the maximum permitted by the "regulations" promulgated by the Wool Division of the War Industries Board for the handling of the wool clip of that year. Among the reported cases dealing with some of the questions raised are United States v. Powers (D. C.) 274 F. 131; United States v. Smith (D. C.) 285 F. 751; United States v. Gordin (D. C.) 287 F. 565, and the same case on writ of error (C. C. A.) 9 F.(2d) 394; United States v. Traugott Schmidt & Sons (D. C.) 2 F.(2d) 290. The opinions in some of them review in more or less detail the conditions which led up to the issuance of the regulations in question, but it has seemed expedient to us to make from the record before us our own rather full statement of what we understand them to have been.

The Legal Status of the War Industries Board.

On August 29, 1916 (39 Stat. 619, 649), more than seven months before we entered the World War, Congress, in anticipation of the possibilities of the future, created a Council of National Defense. It was to be made up of six Cabinet ministers; that is to say of the Secretaries of War, of the Navy, of the Interior, of Agriculture, of Commerce, and of Labor. Its purpose was the "co-ordination of industries and resources for the national security and welfare." Comp. St. § 3115a. Its duties, among other things not here material, were "to supervise and direct investigations and to make recommendations to the President and heads of executive departments as to * * * data as to the amounts, location, method and means of production and availability of military supplies, the giving of information to producers and manufacturers as to the class of supplies needed in the military and other services of the government, the requirements relating thereto and the creation of relations which will render possible in time of need the immediate concentration and utilization of the resources of the nation." Comp. St. § 3115c. In short, it was to inquire, to consider and to recommend. It was empowered to "adopt rules and regulations for its work" and "to organize subordinate bodies for its assistance in special investigations either by the employment of experts or the creation of committees." Comp. St. § 3115d. The italics are ours.

On the 6th of April, 1917, we declared war on Germany. Nearly four months later — that is, on July 28th — the Council of National Defense, with the approval of the President, doubtless under the grant of power to create committees, organized what it called "a small body, to be known as the War Industries Board," "to furnish needed assistance to the departments engaged in making war purchases." Something over seven months afterwards — that is, on March 4, 1918 — the President by letter of that date reconstituted this board. He undertook to remove it from its subordination to the Council of National Defense, and he made it an administrative agency directly responsible to himself. He said that, among other duties, it was to give "advice to the several purchasing agencies of the government with regard to the prices to be paid." He charged it with "the determination whenever necessary of priorities of production and of delivery, and of the proportion of any given article to be made immediately accessible to the several purchasing agencies when the supply of that article is insufficient, either temporarily or permanently."

The board was to have in most respects the constitution it then had, and was to retain its existing advisory agencies so far as was necessary and consistent with the character and purposes of the reorganization; but the ultimate decision of all questions, except the determination of prices, was to rest always with its chairman, the other members acting in a co-operative and advisory capacity. In determining prices, the chairman was to be governed by the advice of a committee consisting, in addition to himself, of the members of the board immediately charged with the study of raw materials and of manufactured products, of the labor member of the board, of the chairman of the Federal Trade Commission, of the chairman of the Tariff Commission, and of the Fuel Administrator.

The President said that the duties of the chairman were to act for the joint and several benefit of all the supply departments of the government; to let alone what is being successfully done, and to interfere as little as possible with the present normal processes of purchase and delivery in the several departments; to guide and assist wherever the need for guidance or assistance may be revealed, for example, in the allocation of contracts, in obtaining access to materials in any way pre-empted, or in the disclosure of sources of supply; to determine what is to be done when there is any competitive or other conflict of interest between departments in the matter of supplies; to anticipate the prospective needs of the several supply departments of the government and their feasible adjustment to the industry of the country as far in advance as possible, in order that as definite an outlook and opportunity for planning as possible may be afforded the business men of the country; and in brief to "act as the general eye of all supply departments in the field of industry." Again the italics are furnished by us.

The government in its brief suggests that if, at the time the President reorganized the board, there was any doubt as to his legal power to do so, it was removed by the Overman Act of May 20, 1918 (40 Stat. 556 Comp. St. §§ 283a-283f), which empowered him "to make such redistribution of functions among the executive agencies as he may deem necessary," and by his subsequently issued executive order of May 29, establishing the War Industries Board as a separate administrative agency, to act for him and under his direction, with the functions, duties, and powers outlined in the letter of March 4, already summarized.

At some date not stated in the record, but apparently prior to April 19, the board had created certain "commodity sections," among them the "Wool Division," whose members, or some of them, were experts taken from that industry.

The Demand for Wool in 1918.

At least as early as the beginning of April, 1918, it became evident to the Quartermaster General of the Army that before December 31 of that year the government, in order to clothe its armed men, would need about 125,000,000 pounds of scoured wool. There were 56,000,000 immediately available, leaving 69,000,000 to be supplied from the domestic clip of the then current year, which it was estimated would yield about 120,000,000 pounds of the scoured article. If from this total 69,000,000 pounds were taken for the use of the military forces, on land and sea, there would be left for the civilian population but 51,000,000 pounds, or less than one-quarter of the quantity ordinarily required in peace times.

If the laws of supply and demand were allowed unchecked operation, prices might go to unheard-of heights; they were already two or three times as high as they had been in the years immediately preceding August 1, 1914. Faced by such conditions, the Quartermaster General sought the advice and assistance of the War Industries Board. On the 15th of April, his office put, in the form of a letter to it, the substance of some conversations held some days earlier with some of its members. In this communication it was suggested, among other things, that the wool growers, wool dealers, and wool manufacturers be called together to discuss the situation, and under the direction of the War Industries Board to arrange to meet the needs of the occasion. It was desirable that action should be taken before the movement of wool began, and in some sections shearing was already under way.

Powers of the Executive to Procure Supplies and to Regulate Prices.

By section 120 of the Act of June 3, 1916 (39 Stat. 166, 213 Comp. St. §§ 3115f-3115h), the President was authorized to place an order with anybody for any needed material of the sort usually produced by such person. Such an order was to be given preference over all private engagements, whether they were prior in date or not. Failure to comply with it entailed serious penalties, and moreover authorized the President to take over the plant of the recalcitrant and operate it, just compensation being, of course, made.

The President, as Commander-in-Chief of the Army and the Navy, doubtless had the constitutional power in war time, in cases of immediate and pressing exigency, to appropriate private property to public uses; the government being bound to make just compensation therefor. Mitchell v. Harmony, 13 How. 115, 133, 14 L. Ed. 75; United States v. Russell, 13 Wall. 623, 20 L. Ed. 474; Roxford Knitting Mills v. Moore & Tierney, 265 F. 177, 179, 11 A. L. R. 1415. The first of the above cases shows how careful the courts are to restrict the exercise of this power within narrow bounds. Various statutes, passed during or in anticipation of our entry into the World War, expressly authorized the President to requisition sundry classes of property of which the government...