United States v. Pownall, No. 4771.

• Court: United States District Courts. 9th Circuit. United States District Court (Southern District of California)
• Writing for the Court: Leo R. Friedman and Jos. I. McMullen, both of San Francisco, Cal., for defendants
• Citation: 65 F. Supp. 147
• Parties: UNITED STATES v. POWNALL et al.
• Docket Number: No. 4771.
• Decision Date: 22 March 1946

65 F. Supp. 147

UNITED STATES
v.
POWNALL et al.

No. 4771.

District Court, S. D. California, Central Division.

March 22, 1946.

65 F. Supp. 148

Charles H. Carr, U. S. Atty., and Ronald Walker, and Robert E. Wright, Asst. U. S. Attys., all of Los Angeles, Cal., for plaintiff.

Leo R. Friedman and Jos. I. McMullen, both of San Francisco, Cal., for defendants.

YANKWICH, District Judge.

By its complant, the Government seeks to recover excess profits in the sum of $113,709.19, with interest at the rate of six per cent per annum, from March 13, 1945, earned by the defendants on a war contract, as determined on December 27, 1944, by the War Contracts Price Adjustment Board under the Renegotiation Act of 1942 (Public Law 753, 77th Congress, 2nd session, Title VIII; 50 U.S.C.A.Appendix § 1191), as amended and reenacted by the Revenue Act of 1943 (Public Law 235, 78th Congress, 2nd session, Sec. 701; 50 U.S. C.A.Appendix § 1191). The determination is now final.

Actually the computed excess profit is $628,373.14. The amount which it is sought to recover is arrived at by deducting the sum of $514,663.95, as a tax credit, on the assumption that it was returned by the defendants as income for tax purposes and that taxes have been or will be paid on it.

The facts back of the controversy are undisputed. The only issue is one of law, arising from the defendants' attack on the constitutionality of the Renegotiation Acts. Each side has made motions for judgment on the pleadings, or, in the alternative, for summary judgment. However, at my suggestion, the facts were stipulated in open court, in order that an adjudication might be made on the merits.

The Renegotiation Act of 1942 and the re-enactment of 1943 are both challenged as involving unlawful delegation of legislative power, as violative of due process — because of their alleged vagueness, indefiniteness, and retroactive character — and as unconstitutional interferences with private contracts.

A thorough study of the questions thus presented in extensive briefs before submission, and after the oral argument and submission, has led me to the conclusion that none of the grounds urged for the infirmity of either statute is valid.

The opinion of the Ninth Circuit Court of Appeals in Spaulding v. Douglas Aircraft Co., Inc., 154 F.2d 419, filed after the submission of this cause, passes on and rejects most of the contentions in this case.¹ That opinion and the fact that I have recently had occasion to discuss very fully the war powers of the Congress in Gray v. Commodity Credit Corporation, D.C.Cal. 1945, 63 F.Supp. 386, make it unnecessary to state, with any degree of elaboration, the grounds for the conclusion reached here.

65 F. Supp. 149

More, an attempt to cover the grounds covered by the Circuit Court's opinion would be useless. For that opinion must control me. Any additional reasons might, perhaps, be justified by pride of authorship. In the face of so recent a decision of the higher court, its exercise now would not be in good taste

However, certain issues particular to this case call for comment.

In this, as in other cases which deal with the exercise of legislative power in war time, one can make a rather plausible argument by disregarding realities. This was attempted in Gray v. Commodity Credit Corporation, supra, and also here. And it was done by applying to war-time legislation constitutional norms which obtain only in peace time, and by considering war contracts as private contracts unrelated to governmental war activities. This cannot be done. It is quite true, as a general proposition, that the Constitution governs in time of crisis or war, as well as in time of peace. Ex parte Milligan, 1866, 4 Wall. 2, 71 U.S. 2, 18 L.Ed. 281; Home Building & Loan Association v. Blaisdell, 1934, 290 U.S. 398, 54 S.Ct. 231, 78 L.Ed. 413, 88 A. L.R. 1481.

However, restrictions on personal and property rights are sustained in time of war which would not be given judicial sanction in peace time. See, Hirabayachi v. United States, 1943, 320 U.S. 81, 93, 63 S.Ct. 1375, 87 L.Ed. 1774; Toyosaburo Korematsu v. United States, 1944, 323 U.S. 214, 65 S.Ct. 193; Bowles v. Willingham, 1944, 321 U.S. 503, 64 S.Ct. 641, 88 L.Ed. 892; Yakus v. United States, 1944, 321 U.S. 414, 64 S.Ct. 660, 88 L.Ed. 834; Steuart & Bros. v. Bowles, 1944, 322 U.S. 398, 64 S.Ct. 1097, 88 L.Ed. 1350; and see my opinion in Gray v. Commodity Credit Corporation, D.C.Cal. 1945, 63 F.Supp. 386, 394, 395, and cases in Notes 1, 2, 10, 12 and 19. It is true that the defendants were subcontractors, and did not deal directly with the Government. But the money which came to them from the prime contractor — the money used in constructing the implements of war for which the defendants manufactured parts (automatic screw products, including assembly rings, prongs and sockets)— had its source in the Treasury of the United States. It was public money voted by the Congress. And it is inconceivable that the Congress, which declared war and provided the means for conducting it successfully, should not be able, in the exercise of its unlimited power to wage war, to declare that excessive profits made by a subcontractor, be returned to the Government, through an administrative procedure for renegotiation, aiming to determine whether the profits were excessive.

The immensity of the Government's effort in this war and the variety of contractual relations between it and private industry which manufactured the weapons of war led to modification of some accepted concepts. Thus, for instance, section 35 of the Criminal Code, 18 U.S.C.A. § 82, which prohibited larceny of personal property of the...