218 F. Supp. 509 | S.D.N.Y. | 1963
The Government has filed two separate complaints under the Renegotiation Act, 50 U.S.C.App. §§ 1211-1233 (sometimes referred to herein as “the Act”), to recover excess profits from defendants Rockland Steamship Corporation (“Rock-land”) and Kingston Steamship Corporation (“Kingston”). Defendants’ ships transported goods for the Armed Services pursuant to contracts with the Department of the Navy. Subsequently, renegotiation proceedings were conducted under the Act, and the Renegotiation Board finally determined that defendant Rockland realized excess profits of $125,-000, and defendant Kingston realized excess profits of $150,000. In accordance with the Act, defendants were allowed tax credits for taxes paid on the excess profits determined by the Board.
The Government’s action in this Court is brought under a section of the Act which authorizes suits to recover excess profits as determined by the entry of a Renegotiation Board order.
The Government brought its action in this Court in March 1961. The Government and defendants have each moved in this Court for summary judgment. Defendants contend that, as a matter of law, the contracts are not subject to the Act because of the effect of 10 U.S.C. § 2631, which provides:
“Only vessels of the United States or belonging to the United States may be used in the transportation by sea of supplies bought for the Army, Navy, Air Force, or Marine Corps. However, if the President finds that the freight charged by those vessels is excessive or otherwise unreasonable, contracts for transportation may be made as otherwise provided by law. Charges made for the transportation of those supplies by those vessels may not be higher than the charges made for transporting like goods for private persons.”
Defendants argue that contracts ' made pursuant to this statute are removed from the effect of the Renegotiation Act, unless the President makes a finding that the rates charged are excessive or unreasonable, which concededly has not been done here. Defendants further argue that this Court has the power to determine that the contracts in question are not subject to the Renegotiation Act.
The Government contends that it is entitled to summary judgment because the issue of whether the contracts are covered by the Renegotiation Act cannot be raised here but must be decided in the Tax Court, and there are no other genuine and material issues to be decided by this Court.
The key question on these facts is whether this Court has the power to decide now if the contracts are covered by the Renegotiation Act. I conclude that the Court does not have such power and that defendants must pursue their already pending suit in the Tax Court for a decision as to that issue. In Maeauley v. Waterman S.S. Corp., 327 U.S. 540, 66 S.Ct. 712, 90 L.Ed. 839 (1946), the contention was made that the contracts there involved were not subject to the Act because they were made with a British, rather than an American, governmental agency. The Supreme Court held that the Tax Court, and not the District Court, should decide in the first instance whether the contracts in question were subject to the Act. The Court said that “[the District Court] cannot now decide questions of coverage when the administrative agencies authorized to do so have not yet made their determination.” (327 U.S. at 544, 66 S.Ct. at 714).
Defendants contend that the question of whether 10 U.S.C. § 2631 “removes”
In United States v. California Eastern Line, Inc., 348 U.S. 351, 75 S.Ct. 419, 99 L.Ed. 383 (1955), the question before the Court was whether a decision of the Tax Court holding that a contract was not subject to the Act was reviewable in the United States Courts of Appeals. In the course of its decision, the Court stated (348 U.S. at 354-55, 75 S.Ct. at 421):
“In making determinations as to excess profits the Tax Court must decide at least two separate but interrelated questions: (l)whether a renegotiable contract is involved and (2) the amount if any of excessive profits. We held in the Waterman case that the Tax Court has primary, exclusive jurisdiction to decide whether a contract is renegotiable. That result was reached because the Act gives the Tax Court exclusive jurisdiction to determine the amount of profits and the existence of a renegotiable contract is essential to such a determination.”
In Lichter v. United States, 334 U.S. 742, 792, 68 S.Ct. 1294, 1320, 92 L.Ed. 1694 (1948), the Court emphasized the primary jurisdiction of the Tax Court under the Renegotiation Act:
“[T]he statutory provision thus made for a petition to the Tax Court was not, in any case before us, an optional or alternative procedure. It provided the one and only procedure to secure a redetermination of the excessive profits which had been determined to exist by the orders of the respective Secretaries or of the Board in the cases before us. Failure of the respective petitioners to exhaust that procedure has left them with no right to present here issues such as those as to coverage and the amount of profits which might have been presented there.” (Emphasis added.)
Under these authorities, resolution of the question raised here is clear. Defendants' contention that the contracts in question are not covered by the Renegotiation Act should be raised in the Tax Court. If that Court finds that defendants’ position is correct, defendants may recover from the Government any amount collected by it in excess of the amount found due by the Tax Court, with interest at four per cent.
Defendants have cited various Supreme Court cases to show that “the general rule of administrative law requiring exhaustion of administrative remedies is not an invariable rule.”
“The key factors are three; extent of injury from pursuit of administrative remedy, degree of apparent clarity or doubt about administrative jurisdiction, and involvement of specialized administrative understanding in the question of jurisdiction.
* * * * * *
“When the administrative proceeding involves neither abnormal expense nor other irreparable harm, and when the issue of jurisdiction is either doubtful or dependent upon specialized understanding in the agency’s field, requiring exhaustion is normally desirable.”
In this case, defendants commenced a suit in the Tax Court and had only to file a bond to stay the Renegotiation Board order. However, they chose not to do so. Furthermore, they can still process that suit and recover any sums due them with interest. Finally, according to defendants, the basic question is “one of first impression,”
The papers do not disclose any other genuine issues as to material facts. Accordingly, plaintiff’s motion for summary judgment is granted; defendants’ motions for summary judgment are denied. Settle order on notice.
. 50 U.S.C.App. § 1215(b) (8).
. 50 U.S.C.App. § 1215(b) (1) (D), (b) (3).
. 50 U.S.O.App. § 1218 provides:
“Any contractor or subcontractor aggrieved by an order of the Board determining tbe amount of excessive profits received or accrued by such contractor or subcontractor may—
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file a petition with Tbe Tax Court of the United States for a redetermination thereof. Upon such filing such court shall have exclusive jurisdiction, by order, to finally determine the amount, if any, of such excessive profits received or accrued by the contractor or subcontractor, and such determination shall not be reviewed or redetermined*511 by any court or agency. The court may determine as the amount of excessive profits an amount either less than, equal to, or greater than that determined by the Board. A proceeding before the Tax Court to finally determine the amount, if any, of excessive profits shall not be treated as a proceeding to review the determination of the Board, but shall be treated as a proceeding de novo. * * * The filing of a petition under this section shall operate to stay the execution of the order of the Board under subsection (b) of section 105 [section 1215(b) of this Appendix] if within ten days after the filing of the petition the petitioner files with the Tax Court a good and sufficient bond, approved by such court, in such amount as may be fixed by the court.”
The above statutory language, in effect when defendants filed their suit in the Tax Court, was amended in 1962, but the amendments are not dispositive of the issues involved here.
. Defendants’ Memorandum, p. 11.
. See Defendants’ Memorandum, p. 7.
. 307 F.2d 809 (1 Cir. 1962), affirming 3.88 F.Supp. 749 (D.Puerto Rico 1960),
. 50 U.S.C.App. § 1218(b) ; Hermetic Seal Prods. Co. v. United States, 309 F.2d 482 (1 Cir. 1962), cert. denied, 371 U.S. 954, 83 S.Ct. 510, 9 L.Ed.2d 501 (1963); cf. United States v. Ruzicka, 329 U.S. 287, 67 S.Ct. 207, 91 L.Ed. 290 (1946).
. Defendants’ Memorandum, p. 8; see, 6. g., Allen v. Grand Central Aircraft Co., 347 U.S. 535, 74 S.Ct. 745, 98 L.Ed. 933 (1954); Public Util. Comm. of Ohio v. United Fuel Gas Co., 317 U.S. 456, 63 S.Ct. 369, 87 L.Ed. 396 (1943).
. 3 Davis, Administrative Law, § 20.03, at 69-71 (1958).
. 3 Davis, op. cit. supra note 9, § 20.03, at 09-70.
. Defendants’ Memorandum, p. 7.