559 F.2d 575 | Ct. Cl. | 1977
delivered the opinion of the court:
Plaintiff Cooper-Macdonald, Inc. is a manufacturer’s representative in the sale of American firearms; certain of its contracts with American companies have been declared renegotiable by the Renegotiation Board and excessive profits under them found for the fiscal years 1969-1971. By this motion for summary judgment, plaintiff asks the court to hold as a matter of law that these arrangements were not renegotiable at all, and if they were they fell under certain limited provisions of the Renegotiation Act of 1951, 50 U.S.C. App. § 1211 et seq., which established larger monetary floors for renegotiation.
For the motion, we take the following facts to be uncontroverted:
In 1958 plaintiff (which we shall sometimes call C-M) was associated with Fairchild Engine and Airplane Corporation (and its related Canadian affiliate) to promote, in Cooper-Macdonald’s foreign sales territories, a certain Fairchild rifle. At that time plaintiff learned of another rifle developed by Fairchild, now known as the M-16, which CM considered to have great potential especially in Asia. Fairchild did not wish to make the M-16 itself and asked plaintiff to find an experienced manufacturer who would. Cooper-Macdonald then arranged with Colt’s Patent Fire Arms Manufacturing Company, Inc. (Colt’s) to obtain rights to both of Fairchild’s rifles. After tripartite negotiations, Fairchild and Colt’s signed an agreement in 1959, amended in 1961, granting Colt’s, for a term extending at least until the expiration of the last-to-expire patent, the "exclusive right to make, use and sell” the two rifles throughout the world, in return for which Colt’s was to pay Fairchild specified sums per item.
At about the same time plaintiff made separate agreements with both Fairchild and Colt’s. In consideration for C-M’s bringing together the latter two companies, Colt’s
Sometime later, at the request of both Fairchild and Colt’s, plaintiff agreed to try to obtain United States technical approval of the M-16. In this connection, Cooper-Macdonald entered into additional agreements with Fairchild and Colt’s. The former (dated August 30, 1960)— the Fairchild-Cooper-Macdonald contract directly pertinent to this case — undertook to pay plaintiff (in addition to other compensation) 10% of royalties received by Fairchild from sales to the United States or from sales to foreign governments which could not be effected without United States technical approval of the M-16. The further contract between Colt’s and C-M (as made in letter agreements in 1960 and 1961, later superseded) provided for payments from the former to the latter on sales to the United States.
In 1962 the United States Air Force adopted the M-16 and bought a considerable number from Colt’s. The Army followed suit in 1963 as a "one-time buy”, and then beginning in 1965 much more widely for the forces in Vietnam; ultimately the Federal Government agreed to purchase M-16’s up to Colt’s production capacity and also obtained the exclusive right to make foreign sales of the item.
Meanwhile, Colt’s and Cooper-Macdonald reconstituted their arrangements inter se. In an agreement of August 1, 1963 — the Colt’s-Cooper-Macdonald agreement governing a large portion of this case, superseding the 1958 and 1960-1961 pacts referred to above — Colt’s acknowledged that CM (1) was instrumental in bringing about the Colt’s-Fairchild agreements of 1959 and 1961, and (2) performed a valuable service by promoting the use of the M-16 by the U.S. armed forces and in developing a market for it. In consideration of the second of these two types of service, Colt’s was to pay $250,000 in 24 installments. For the service of helping with the Colt’s-Fairchild agreements, plaintiff was to receive separately from Colt’s 1% of the
During the renegotiable years (1969-1971), plaintiff received revenues under the 1% provision of the Colt’s-Cooper-Macdonald agreement of August 1, 1963 (see footnote 2, supra) and also amounts under the Fairchild-Cooper-Macdonald contract of August 30, 1960. The Renegotiation Board found these sums renegotiable, and excessive profits for each year ($1,000,000 for 1969, $1,200,000 for 1970, $350,000 for 1971). Plaintiff now puts to us the legal contention that no part of the profits under these agreements was subject to renegotiation.
I.
Since Cooper-Macdonald had no prime contracts with the Federal Government, the issue is whether its individual agreements with Fairchild and with Colt’s were "subcontracts” as defined in the 1951 Renegotiation Act. The plaintiffs overriding argument is that the Colt’s-Fairchild agreement was not a mere license but a non-renegotiable sale of patent rights and therefore that the subordinate arrangements with Colt’s and Fairchild could not be "subcontracts” under the statute. The Government agrees that, if the Colt’s-Fairchild agreement was a true sale, it was not itself renegotiable (see Renegotiation Board, Renegotiation Ruling No. 5, 32 C.F.R. § 1499.1-5(a)(l)(i)), but denies that the arrangement was a sale. The initial question in the case is, therefore, whether the Colt’s-Fairchild contract was subject to renegotiation.
The Colt’s-Fairchild arrangement which applied to plaintiffs profits for 1969-1971 was the agreement as amended on December 12, 1961, not the earlier one dated January 7,
Putting renegotiation aside, we would have no difficulty in characterizing the December 1961 Colt’s-Fairchild agreement as a sale for general purposes of the law. The instrument granted Colt’s an exclusive license to make, use and sell the patented rifles anywhere in the world, up to the expiration date of the last-to-expire patent; this included the right to grant sub-licenses but did not cover the right to reassign the patent or the agreement.
The Government’s position is that the matter is different for renegotiation because the Board has promulgated a regulation excluding from the concept of a sale (for renegotiation purposes) "a transaction involving the retention of a security title to insure the vendor against loss upon a default in payment, or of a right of recapture upon default.” Renegotiation Ruling No. 5, 32 C.F.R. § 1499.1-5(a)(2) and (b).
We agree with the Tax Court and the Ninth Circuit. To the extent the regulation attempts to deny the character of a sale to a patent arrangement simply because it contains a right of recapture, the Ruling cannot be enforced. Assuming as we do that the regulation must be sustained so long as it is "reasonably related to the purposes of the enabling legislation” (Mourning v. Family Publications Service, Inc., 411 U.S. 356, 369 (1973)), we see this part of the Ruling as inconsistent with the Congressional treatment of patents in the Renegotiation Act and unsupported by any of the purposes of that statute. The Board itself says in Ruling No. 5: "Plainly, Congress did not intend that sales of patents, providing for the present unconditional transfer of title from the owner to the purchaser, should be subject to renegotiation.” 32 C.F.R. § 1499.1-5(a)(1)(ii). It is just as plain to us that, in excluding sales of patents, Congress meant the concept of a patent sale to have the same
The only purpose defendant gives us for the no-recapture provision in the Renegotiation Ruling is that, without it, two parties in the position of Fairchild and Colt’s, but who secretly intended no more than a term license, e.g., for four years (which would clearly be renegotiable), could collude to avoid renegotiation by purporting to sell the patent for installment payments, including a right of recapture, with the pseudo-assignee then defaulting by prior arrangement at the end of the four years, and the pseudo-assignor then recapturing pursuant to the preconceived secret plan. The objective of the no-recapture clause is said to be to forestall such circumvention of the Act. As plaintiff points out, if firms are really bent on collusion of this type they could simply omit the recapture provision and agree undercover for the patent to be reconveyed after the secret term. The point is that collusion of this kind will not be avoided or neutralized by insisting that there be no recapture provision, but that bona fide patent sales, such as we have to assume the Fairchild-Colt’s transaction to be, will be rendered renegotiable despite their statutory exclusion which the Board itself expressly recognizes. The more general point is that this variety of collusion, to the extent it exists at all, would be no more important for renegotiation than for tax, patent, and contract law which have not found it necessary or appropriate to embody such an anti-recapture component in the definition of a patent sale. The thin sliver of purported policy which defendant presents is thus not enough to outweigh the much stronger assumption that Congress accepted the traditional sense of a patent-sale for renegotiation, as well as for the other branches of the law. We hold, therefore, that the Colt’s-Fairchild agreement pertinent to this case was a non-renegotiable sale.
In its last brief, defendant concedes that the payments from Fairchild to Cooper-Macdonald are not renegotiable in the latter’s hands if the Fairchild-Colt’s agreement is not renegotiable. Since that is the conclusion we have reached in Part I, supra, the Fairchild payments will be excluded from the renegotiation proceeding in this court. We accept the defendant’s concession because Fairchild (unlike Colt’s) had no relevant renegotiable contract with a Department or agency to which the Fairchild-Cooper-Macdonald agreement could be a related "subcontract”; similarly, the Fairchild-Cooper-Macdonald agreement was not a "subcontract” related to any of Colt’s renegotiable prime contracts within the proper application of § 103(g) of the Act, 50 U.S.C. App. § 1213(g).
Ill
This leaves the payments by Colt’s to plaintiff, sums which defendant continues to insist are renegotiable even though the Fairchild-Colt’s agreement is held to be not renegotiable in itself. Colt’s had prime renegotiable contracts for 1969-1971 with the Government, and the question is whether the Colt’s-Cooper-Macdonald agreement of August 1,1963 (under which Colt’s paid plaintiff in 1969-1971) is to be considered a statutory "subcontract” directly under those prime agreements. If there is such a direct relationship between Colt’s prime business and its subsidiary agreement with C-M, then it would be irrelevant that the Colt’s-Fairchild pact was a sale not subject to renegotiation. Being directly under Colt’s prime contracts, the Colt’s-C-M agreement, if a statutory "subcontract,” would be a negotiable "related subcontract” covered by § 102(a) of the 1951 Act, 50 U.S.C. App. § 1212(a).
We posit our discussion of this problem on two basic premises undisputed in the case as it has been argued: first, the Fairchild patents were essential to Colt’s production of the rifles sold to the Government, and plaintiff was being paid in 1969-1971 for helping Colt’s to obtain its patent agreement with Fairchild; and, second, plaintiff was not
Defendant’s candidate for coverage (among the five "subcontract” definitions in the Renegotiation Act of 1951) is § 103(g)(3)(B), 50 U.S.C. App. § 1213(g)(3)(B):
The term "subcontract” means — * * * "any contract or arrangement * * * under which — * * * any amount payable is determined with reference to the amount of a contract or contracts with a [designated] Department or of a subcontract or subcontracts.”7
The history starts with the related "subcontract” provision of the 1943 Renegotiation Act (as amended).
In Wolff v. Macauley, 8 T.C. 146, 151-52 (1947) — not involving a broker like Cooper-Macdonald but architects who prepared plans for and serviced renegotiable contracts — the Tax Court decided that "such contract” harked
Cooper-Macdonald urges that we carry over the same reading to the partly different language and format of § 103(g)(3)(B) of the 1951 Act, 50 U.S.C. App. § 1215(g)(3)(B), which omits the word "such contract” and unlike the earlier Act places those subcontracts on which the amount payable "is determined with reference to the amount of a” renegotiable contract (or subcontract) in a separate sub-paragraph. Plaintiff downgrades these textual changes by emphasizing the parts of the legislative history tending to show that no substantive change was intended in 1951: (a) the statement of Representative Vinson, a chief sponsor of the 1951 Act, that "In essence, renegotiation under this bill will be substantially identical with renegotiation carried on under the 1943 Renegotiation Act” and "The definition of a subcontract contained in this bill is substantially identical with that contained in the 1943 Act” (Hearings on H.R. 9246 before the House Committee on Ways and Means, 81st Cong., 2d Sess. 16 (1950)); (b) references by the principal executive witness to bringing "brokers and dealers under renegotiation,” including "the so-called 5 percenters,” without,any suggestion that the Tax Court decisions would be overturned or changed (id. at 63); and (c) the absence in the Committee reports of any indication that the Tax Court rule was to be modified. On the basis of
Defendant, on the other hand, denies that the 1951 Act was a reenactment or recodification of the 1943 statute, urging rather that it was only "modeled generally after the World War II Renegotiation Act” (97 Cong. Rec. 582, Jan. 23, 1951, Cong. Allen) and though following very closely the framework and details of the World War II Act "it contains a series of changes from the World War II law which experience has indicated are desirable under the present circumstances” (Sen. Robertson, 97 Cong. Rec. 1349, Feb. 19, 1951).
We have determined that the legislative history is not conclusive either way but that Congress, in 1951, did make some change from the Tax Court’s rulings under the World War statute, perhaps not so far as defendant urges but still farther than plaintiff is willing to go. It is highly probable that the drafters of the 1951 Act — in the executive
Plaintiff does not deny that this was probably the executive drafters’ purpose but answers that the new interpretation was never communicated to the Congress which was not explicitly told, so far as the records reveal, that this modification was contemplated. This argument has weight, of course, but we do not think it can prevail of itself. There is no indication that Congress was at all aware of the Tax Court’s Wolff, Fine, or French decisions, let alone that it accepted or approved them. The earliest of those opinions was about four years old when the 1951 Act was going through Congress, and the rule they imposed cannot be considered long-established, well-known, or encrusted into the statute. The disputed segment of renegotiation "subcontract” law was very narrow, not one of wide effect. Congress knew in 1951 that changes were being made from the 1943 statute, and there is no indication that every change was to be mentioned or was actually mentioned in the hearings, reports, or debates. True, the statement was made that the "subcontract” definition was "substantially identical with that contained in the 1943 Act,” supra, but that generality, with its modifying adjective "substantially,” could cover this minor modification; Senator George, an important and
Nor can we accept as decisive plaintiffs analogy to statutory revisions, codifications, and consolidations. This was not such but a new measure (after a gap of some years) for a new period, "modeled generally” on the prior Renegotiation Act but also containing "a series of changes from the World War II law which experience has indicated are desirable under the present circumstances.” See supra. In particular, the recent Supreme Court cases cited by plaintiff both involved true revisions (of the Judicial and Criminal Codes in 1948) in which every change in the text was explained in the Revisers’ Notes, and express statements were made by persons important in the revision that no changes of law or policy were to be presumed from mere language changes unless an intent to make such changes was clearly expressed. Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222, 226-28 (1957); Muniz v. Hoffman, 422 U.S. 454, 469, 472, 473-74 (1975). Moreover, the alleged changes rejected in those decisions were unexplained modifications of clear and well-settled Congressional choices or Supreme Court rulings, not as here recent decisions of a lower court (interpreting a subtle ambiguity) which we cannot even say were known to the Congress.
Putting aside these inapplicable and artifical rules of construction (advanced by plaintiff) which would give the heaviest of weight to the Tax Court’s then recent reading of the earlier statute,
We can see no reason why Congress would want to bypass payments by a prime contractor for help in obtaining intangible components essential to production such as the Fairchild patents. Payments of that kind are very likely to add to the Government’s cost of procuring the end item
The statute can, without textual difficulty, be understood to carry out that intention. Of the five "subcontract” clauses of the 1951 Act, subparagraph (B) of § 103(g)(3) most clearly fits this case and fits it best (as it has been presented to us). We have already pointed out that the language of the subparagraph covers plaintiff perfectly. An important objective of the subparagraph, as we sense it, is to blanket arrangements for broker services to the prime (or higher tier subcontractor) (a) directly related to the latter’s performance of its renegotiable agreements and (b) where the broker sub’s compensation is directly tied to the prime’s compensation so that the more the latter makes the more the former will get. Plaintiff gives us some examples of cases which could fall literally under subpara-graph (B) but in which (according to plaintiff) it is improbable that Congress would demand renegotiability under that clause, but unlike this case none of those instances concerns a broker who helped the prime obtain a component essential to the performance of his prime contracts with the Government.
Why would Congress single out brokers like Cooper-Macdonald for placement under § 103(g)(3), with its $25,000 yearly floor, rather than putting them under the other "subcontract” paragraphs with a million-dollar floor? We cannot say for sure but we do know that neither paragraphs (1) or (2) (which have the larger minimum) fits this case without very considerable strain (see Part IV, infra), while paragraph (3)(B) fits very easily. We also think, as explained above, that, at least in 1951, Congress did not wish to have persons like Cooper-Macdonald free of all renegotiation. We know, too, that in 1943 and presumably also in 1951 Congress seems to have been particularly keen on renegotiating contingent-fee nonperforming brokers whom it assumed were especially likely to obtain excessive compensation. See the excerpts from the 1943 legislative history quoted in the Wolff case, supra, 8 T.C. at 150-51, and the dissent in the Fine case, supra, 9 T.C. at 610. Little in the legislative history adverts to our precise type of case or suggests directly that a person like Cooper-Macdonald would be renegotiable,
In sum, our conclusion that subparagraph (B) applies to plaintiffs contract of August 1963 with Colt’s rests on these legs:
(a) In all probability Congress desired to subject such an agreement, directly and significantly related to the prime’s performance of its renegotiable business, to testing for excessive profits;
(b) in its phasing subparagraph (B) of § 103(g)(3) of the 1951 statute fits this August 1963 agreement snugly, while paragraphs (g)(1) and (2) do not;
(c) although the different text of the 1943 Act together with its legislative history could reasonably be read as limiting the 1943 "broker” provisions to persons who helped procure renegotiable contracts, still the 1943 history is consistent in overall objective with application of the new (1951), subparagraph (B) to Cooper-Macdonald, and the 1951 history does not negative that reading; to put it another way, the legislative history is compatible with both readings and the difference in phraseology makes the difference in result.
A word should be said about subparagraphs (A) and (C) of § 103(g)(3).
IV
Although plaintiff insists that it is not renegotiable at all for 1969-1971, it contends strongly that, to the extent it is held renegotiable, this should be under § 103(g)(2), 50 U.S.C. App. § 1213(g)(2),
Perhaps more important, plaintiff was in no sense the owner of the patents, in either the legal or the equitable sense. There is no claim of legal proprietorship and the only assertion of equitable ownership is that C-M was a joint venturer with Fairchild and Colt’s in exploiting the patents. It is plain, however, that in a joint venture the members must share control of the property as well as participate in both the profits and the losses. See Commissioner v. Tower, 327 U.S. 280, 286-87 (1946); Lentz v. United States, 171 Ct. Cl. 537, 546, 346 F.2d 570, 575 (1965); Venneri v. United States, 169 Ct. Cl. 74, 83, 340 F.2d 337, 343 (1965). There is no reason to think that plaintiff met these components. Under the Colt’s-Cooper-Macdonald agreement, Colt’s could, at its sole discretion, limit or discontinue use of the Fairchild patents (by diminishing or ending its manufacture and sale of rifles) "without incurring any liability whatsoever to Cooper-Macdonald by reason thereof.” Thus, plaintiff had no part in the control of the patents. Nor is there any showing that plaintiff would bear any part of losses suffered by Colt’s through the patents. Cooper-Macdonald was a broker or finder, not a joint venturer.
Much more weakly, plaintiff wonders whether, if it has to be renegotiated, the proper "subcontract” definition would not be § 103(g)(1), 50 U.S.C. App. § 1213(g)(l)
This semi-suggestion will not wash. The fact is that plaintiff performed none of Colt’s work nor did it furnish the Fairchild patents. Colt’s bought the patents from Fairchild under an agreement which we have held in Part I, supra, to be free of renegotiation. What Cooper-Macdonald did was, as a broker, to bring the other two together and to help Colt’s in acquiring the patents and Fairchild in selling them to Colt’s; this was something quite different from "furnishing” the patents.
Conclusion
For these reasons, we grant plaintiffs motion for summary judgment insofar as it pertains to the receipts from Fairchild and deny it insofar as it pertains to the receipts from Colt’s. The case is returned to the Trial Division for further proceedings consistent with this opinion.
We state only the facts necessary to our decision. Each party has put forward a host of other factual allegations which may bear on the amount of renegotiable profits, if any, but do not, as we now see it, relate to the purely legal issues we have before us at this stage.
All the amounts plaintiff received from Colt’s for 1969-1971, involved in this renegotiation proceeding, were paid and received under this 1% provision.
We put off for later discussion (Parts II and III, infra) the issue of whether C-M’s subordinate arrangements would still be renegotiable even if the Fairchild-Colt’s agreement was not itself renegotiable.
It is unclear that the bar on reassignment had much substance since Colt’s could sub-license to another firm the entire right to make, use, and sell the rifles.
The Ruling goes on to say: "On the other hand, retention of a vendor’s lien is not inconsistent with an absolute sale and will not of itself subject the transaction to renegotiation.”
The August 1963 Colt’s-Cooper-Macdonald agreement recited:
"D. Cooper-Macdonald has extensively promoted the use of the AR-15 [M-16] rifle by the U.S. Armed Forces. * * *”
"E. Colt acknowledges that the services rendered by Cooper-Macdonald were valuable in the promotion of said weapon and the development of a market for its sales and use. The parties now wish to revise and redefine their obligations and responsibilities to each other in light of the past services of Cooper-Macdonald to Colt in obtaining the license to manufacture and sell the AR-15 rifle, and in having promoted its acceptance by the U.S. Army, Navy, Air Force and other potential users.”
However, as indicated supra, the payment provisions of the agreement were divided into two separate categories. Paragraph 2 declared that "In consideration of the market development work * * * performed by Cooper-Macdonald to promote the sale of Rifles to U.S. Government and other users,” $250,000 was to be paid by Colt’s to Cooper-Macdonald in 24 installments. All of these payments were made prior to the renegotiable years. Paragraph 3 then provided, *'[i]n consideration of all services performed by Cooper-Macdonald in bringing about agreements between Fairchild * * * and Colt,” for the payment by Colt’s of 1% of the price received by Colt’s from the sale of its rifles anywhere in the world. The payments received by plaintiff during the years in review were all received under paragraph 3.
On this motion for summary judgment, defendant has not claimed, or presented any materials tending to show, that any part of the payments under paragraph 3 was in fact made for promoting the acceptance of the rifles by the Government or for developing the government market.
Nor has the defendant urged that (if the Colt’s-Fairchild agreement is not renegotiable) the whole Colt’s-Cooper-Macdonald agreement falls under § 103(g)(3)(C) ("any contract or arrangement * * * under which * * * any part of the services performed or to be performed consists of the soliciting, attempting to procure, or procuring a contract or contracts with a Department or a subcontract or subcontracts”) simply because part of the services covered by that August 1, 1963 agreement were for market development and promotion. Plaintiff says that paragraphs 2 and 3 are severable but perhaps an argument could be made that nevertheless § 103(g)(3)(C) applies (see French v. War Contracts Price Adjustment Board, 13 T.C. 276, 280, 281 (1949)); we do not understand defendant to be making that contention in opposition to this motion.
The "subcontract” part of the 1951 Renegotiation Act (§ 103(g), 50 U.S.C. App. § 1213(g)) sets forth five separate definitions of a renegotiable subcontract:
Paragraph (1) refers to orders or agreements for performing the work or furnishing*495 supplies (it is briefly discussed infra in Part IV);
Paragraph (2) covers the right to use patented or secret methods, etc. (it is considered in Part IV, infra).
Paragraph (3) includes three subparagraphs. Subparagraph (A) covers agreements in which any amount payable is contingent upon the procurement of a renegotiable contract or subcontract (it is briefly noted at the end of this Part III, infra). Subparagraph (B), discussed at length in the text, is the prime focus of this segment of the case. Subparagraph (C) is quoted in relevant part in footnote 7, supra, and relates to agreements for soliciting or procuring renegotiable contracts or subcontracts (it does not seem to be relied upon by defendant in the present motion, see footnote 6, supra).
It is important to note that, for subcontracts covered by paragraphs (1) and (2), the renegotiable floor is $1,000,000 per year for 1969-1971, while the floor for the three types covered by paragraph (3) is $25,000 per year (§ 105(f)(1) and (2), 50 U.S.C. App. § 1215(f)(1) and (2)).
That earlier provision was as follows:
"Any contract or arrangement * * * (i) any amount payable under which is contingent upon the procurement of a contract or contracts with a Department or of a subcontract or subcontracts, or determined with reference to the amount of such a contract or subcontract or such contracts or subcontracts or (ii) under which any part of the services performed or to be performed consists of the soliciting, attempting to procure, or procuring a contract or contracts with a Department or a subcontract or subcontracts * *
Like Wolff, Fine did not involve a broker but a manufacturer’s agent who performed substantive field services in connection with the performance of his principal's contracts (which he did not help procure).
Senator Robertson added: “I am informed that the bill represents the view and thinking of a wide number of persons both within and without the Government who had extensive experience with the renegotiation of war contracts during World War II.”
The proposal (as does the Act) imposed a floor of $25,000 per fiscal year for renegotiability under § 103(g)(3). Senator Langer offered an amendment to substitute a $25,000 lifetime floor. As we read the Congressional Record, Senator George opposed the amendment on the ground that the yearly floor would protect engineers and accountants who properly helped service renegotiable contracts but, apparently, were not concerned in their procurement.
We do not say that the 1951 Congress necessarily overturned the Tax Court’s results in Wolff and Fine. What we say, more narrowly, is that the provisions of the 1951 legislation should not be read as necessarily incorporating into the new Act the Tax Court’s broad reasoning that all the subdivisions of what is now paragraph (3) of section 103(g) relate only to persons who procured or attempted to procure renegotiable contracts. Our position is that the 1951 Act should be applied to this case free of any binding effect of the Tax Court’s broad rationale, which was in large part based on the different wording of the 1943 statute.
Plaintiff cites materials tending to show that the Government did not permit Colt’s to include the C-M payments in calculating the costs of the rifles but insisted that those payments came out of Colt’s profits. That special treatment of the payments in this case does not negative the general proposition that such payments are likely to increase procurement costs and thus would be within Congress’s overall contemplation. In any event, Colt’s was allowed to deduct the C-M payments in its own renegotiation proceedings and thus got a cost-type benefit for those payments, to the putative disadvantage of the Government.
One example is an attorney who happens to work on the formulation of the prime’s renegotiable contract and whose compensation depends on the amount of that contract; another illustration is of a sub who works solely on the non-renegotiable facets of a conglomerate’s business but whose compensation is a percentage of the conglomerate’s total sales, including its renegotiable business.
Plaintiff cites part of the legislative history of the insertion of § 103(g)’s forerunner in the 1943 Act — to show that not all persons whose compensation depended on the amount of the prime’s contract were to be renegotiated under these "broker” provisions — but that portion of the history refers to persons who participated in the negotiation of the prime’s renegotiable contracts, not in their performance.
The House Committee report on the original 1943 "broker” provisions, H. R. Rep. 353, 78th Cong., 1st Sess. (quoted in Wolff, supra, 8 T.C. at 150-51) did say, however, that the provisions covered "agents who receive commissions or fees contingent upon the procurement of, or amount of, the Government contracts, or subcontracts thereunder” (emphasis added).
The latter part of the proposition is discussed in Part IV, infra.
Relating to a contract or arrangement-under which—
"(A) any amount payable is contingent upon the procurement of a contract or contracts with a Department or of a subcontract or subcontracts;
(C) any part of the services performed or to be performed consists of the soliciting, attempting to procure, or procuring a contract or contracts with a Department or a subcontract or subcontracts.”
Defendant’s present position is that, as a matter of fact, Cooper-Macdonald played no significant role in Colt’s obtaining its Government business.
"Subcontract” includes -
"(2) any contract or arrangement covering the right to use any patented or secret method, formula, or device for the performance of a contract or subcontract;”
"Subcontract” includes -
"(1) any purchase order or agreement (including purchase orders or agreements antedating the related prime contract or higher tier subcontract) to perform all or any part of the work, or to make or furnish any materials, required for the performance of any other contract or subcontract, but such term does not include any purchase order or agreement to furnish office supplies.”
Moreover, we have just rejected plaintiff’s claim that it had control over the patents — the predicate for its argument that it could be said to have "furnished” them under § 103(g)(1).