695 Opinion of the Court ently before us. The amount of the recovery, if any, has been reserved for further proceedings. The Merchant Marine Act of 1936, 49 Stat. 1985, 46 U.S.C. §§ 1101-1294, authorized the Government, in certain circumstances, to pay subsidies to American ship operators in order to make their operations competitive with those of foreign operators whose costs of operation are substantially lower than those of American operators. But in order to insure that subsidized operations would not be unreasonably profitable to the operators, section 606 (5) of the 1936 Act, 46 U.S.C. § 1176 (5) provided for the recapture by the Government of one-half of the net profits earned by a subsidized operator in any 10-year "recapture period”, which net profits are in excess of 10 percent per annum of the "capital necessarily employed" by the subsidized operator. Section 607 (d) of the 1936 Act, 46 U.S.C. § 1177 (d), provided that "capital necessarily employed" should be defined by regulation of the United States Maritime Commission, which was the Government agency charged with the administration of the 1936 Act. Since, under the statute, the ship operator could keep his profits up to the amount of 10 percent of the "capital necessarily employed" but had to give the Government one-half of all profits above that ten percent, it is apparent that the amount of the "capital necessarily employed" is a factor of the greatest importance in the administration of the ship subsidy contracts. And, as we have seen, the statute authorized the Maritime Commission to define, by regulation, how that key factor should be determined. The initial subsidy contracts, made soon after the enactment of the 1936 Act, provided that the capital necessarily employed by the operator was his net worth. In 1940 the Commission, by General Order No. 31, formally defined the factor as net worth. There were 12 operators of ships, including the plaintiff, who had subsidy contracts made in the years 1937 and 1938. The outbreak of the war greatly increased the profits of the subsidized lines, and correspondingly increased their net worth. In 1940 the Commission decided, in principle, that the definition of capital necessarily employed ought to be Opinion of the Court 154 Ct. Cl. changed. However, it had issued no regulation changing General Order No. 31 when the United States entered the war and requisitioned all merchant vessels, thus suspending all subsidized operations. Although subsidized operations were suspended, the existing subsidy contracts were kept alive by the conditional extension of their termination dates, so that subsidized operations could be resumed after the war. The operators had received large amounts of money for the requisition by the Government of their ships, and for insurance on ships sunk, and had had no opportunity to invest it in new ships, until some time after the war. The Maritime Commission authorized the renewal of subsidized operations on January 1, 1947, provided that all conditions which the Commission might impose were agreed to and incorporated into the subsidy contracts. A subsidy contract with a particular operator includes a great amount of detail with regard to the types of ships to be used, trade routes, minimum and maximum sailings and many other items. Hence, although subsidized operations were permitted to be resumed on January 1, 1947, the first actual signing of the amended contracts did not occur until about January 1, 1950. From January 1, 1947, then, the subsidized operators were working without contracts, and on faith that satisfactory contracts would ultimately be made, and made effective as of January 1, 1947. It will be remembered that the recapture of one-half the profits of subsidized operators, in excess of 10 percent of return on capital necessarily employed, was to be computed on the basis of 10-year periods. The 12 operators which had made their contracts in 1937 and 1938, which contracts were kept alive, though under suspension, during the war, were still, on January 1, 1947, within their ten-year recapture-ofprofits period. And either their contracts as written, or General Order No. 31 issued in 1940, defined their capital necessarily employed as their net worth. At the end of the war, for the reasons mentioned above, the operators were long on cash and securities and short on ships, hence the net worth definition allowed them to retain 10 percent of profits computed on large amounts of capital 695 Opinion of the Court not really employed in the shipping industry. The staff of the Maritime Commission in 1946 proposed to the Commission a supplement to General Order No. 31 which would have eliminated many items of cash and securities from the factor of capital necessarily employed, and would have been effective January 1, 1947. The operators objected to the change, chiefly on the ground that they were holding the cash and securities for the purpose of acquiring ships as soon as ships were available. The Commission rejected the definition proposed by its staff. A new definition, still more disadvantageous to the operators, was proposed to the Commission in 1949. It was adopted by the Commission as General Order No. 71. It provided effective dates ranging from December 31, 1947, to December 31, 1950, for the various operators, and, a matter of great importance, it allowed the net worth factor of General Order No. 31 to remain applicable, for each operator, during the ten-year recapture period which had begun in 1937 or 1938 when the operator began its subsidized operation. The promulgation of General Order No. 71 on December 21, 1949, made possible the closing of subsidy contracts with those operators as to which the other details of their contracts had been agreed upon. Five contracts were executed within two weeks, two more early in 1950, and one in March 1951. This accounted for eight of the twelve subsidized operators. These eight operators got the advantage, then, of the net worth factor from January 1, 1947, the date of their resumption of subsidized operations, to the date later in 1947 or in 1948 when their original ten-year recapture period had expired. From the date of the end of their recapture period, these operators would have their capital necessarily employed factor determined by the new and less favorable definition contained in General Order No. 71. In the early part of 1950 there was vigorous criticism of the Maritime Commission by the General Accounting Office and by the House of Representatives Committee on Expenditures in the Executive Departments. One ground of criticism was the Commission's failure to make the new definition, more favorable to the Government, of capital Opinion of the Court 154 Ct. Cl. necessarily employed, which new definition was contained in General Order No. 71, applicable to all subsidized operators from January 1, 1947, instead of from the dates of expiration of their ten-year recapture periods. On May 24, 1950, the Maritime Commission was abolished and its functions were transferred to the Federal Maritime Board and the Maritime Administration. The Board referred the problem of capital necessarily employed to its staff. The staff requested the eight operators whose new contracts provided that General Order 31 should continue to apply to their operations until the end of their recapture period, to consent to a roll-back of the General Order 71 definition to January 1, 1947. The operators refused to consent. There was extensive study by the staff and negotiation with the operators. In April 1951, the Board approved a staff recommendation that the four operators whose contracts had not yet been executed be required to agree, in their contracts, that after the contracts had been made the Board should still have the power to modify the terms of General Order No. 71, including its effective date, and apply the modified terms to these four operators. The operators, apparently all of them, protested both the legality and the equity of the proposal. They knew that the purpose of the proposal was to get from the four operators contractual consent to a roll-back to January 1, 1947, if the Board should decide to make that date the effective date of General Order No. 71. Two of the remaining four operators, one in June and the other in August, 1951, waived subsidy payments for the period from January 1, 1947, to the end of their recapture periods. That left only the plaintiff and Oceanic Steamship Line with their contracts unsettled. A hearing, with oral argument, on the staff proposal to amend General Order No. 71, was held on July 11, 1951. The shipping industry opposed the proposal on the ground that it would be retroactive and discriminatory. More than a year later, on September 17, 1952, the Board announced its decision. The decision was to make the order effective, as of January 1, 1947, for those operators whose subsidy contracts were executed after April 30, 1951. The plaintiff and 695 Opinion of the Court Oceanic would be the only operators answering that description. The Board, in its decision, said that it could not apply the roll-back to the eight operators with which the Commission had signed contracts, because that would violate their contracts and also violate the Congressional objective of a "fair measure of stability" in subsidy contracts. It said that equality of treatment of all the subsidized operators would be desirable but that the fact that contractual rights prevented the roll-back as to the operators with whom contracts had been completed could not be permitted to compel the Board to apply to the operators who did not have contracts a rule which, in the opinion of the Board, should not have been applied to any of the operators. We now narrate the course of dealing between the plaintiff and the Commission, and later the Board. The plaintiff, after the war, resumed commercial operations in 1946, and, subject to the anticipated subsidy contract, resumed subsidized operations on January 1, 1947. In February 1947, the Commission assured the plaintiff that, subject to the making of the necessary findings and determinations as to routes, sailings, competitors' costs, etc., the Commission would be able to act on the plaintiff's contracı "at an early date." Similar assurances were made to the plaintiff in 1948, 1949, and 1950. During the years 1947-1951 the plaintiff took many actions, including construction, purchase, and chartering of ships, on the assumption that it was a subsidized operator. It complied with all the obligations of a subsidized operator, but it could not actually collect any subsidy payments because its contract had not been executed. On May 13, 1949, the Commission sent the plaintiff a 13-page letter reciting the terms which the plaintiff's contract would contain. The Commission requested the plaintiff to show its agreement by endorsement on a copy. The plaintiff answered by a letter in which it pointed out the need for minor changes in route descriptions and annual sailings and, except for these suggestions, agreed to the Commission's proposed contract. The Commission's staff later described the plaintiff's letter as an acceptance, with certain reservations, of the Commission's proffered contract. That proffered contract |