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contract with a department of the Government for the construction of buildings and facilities, the district court had no jurisdiction to hear or so declare.

The reasons for this bill are (1) the subcontracts involved were awarded as a result of competitive bidding under a prime contract with a department of the Government for the construction of buildings and facilities. Such contracts are exempt from negotiation by virtue of section 403 (i) (1) and section 701 (d) of the Renegotiation Act (act of February 24, 1944). These sections read as follows:

Sec. 403 (i) (1). The provision of this section shall not apply to

(E) Any contract with a Department, awarded as a result of competitive bidding, for the construction of any building, structure, improvement, or facility; or

(F) Any subcontract, directly or indirectly under a contract or subcontract to which this section does not apply by reason of this paragraph. SEC. 701 (d). EFFECTIVE DATE

The amendments made by subsection (b) shall be effective only with respect to the fiscal years ending after June 30, 1943, except that (1) the amendments inserting subsections (a) (4) (C), (a) (4) (D), (i) (1) (C), (i) (1) (D), (i) (1) (F), (i) (3) and (1) in section 403 of the Sixth Supplemental National Defense Appropriation Act 1942, shall be effective as if such amendments and subsections had been & part of section 403 of such act on the date of its enactment, and (2) the amendments adding to subsection (d) and (e) (2) to section 403 of such act shall be effective from the date of the enactment of this act.

Mr. and Mrs. Lichter have been called upon to pay, and have paid, the moneys demanded by the Government, and the Government has thereby been unjustly enriched. Inasmuch as the contract are exempt from renegotiation, and inasmuch as, because of procedural mistake, they have no other recourse, the Government may and should, in good faith, return the moneys.

(2) After the issuance of the unilateral order by the Under Secretary of War and prior to the expiration of the time for filing an objection in the Tax Court, Jacob Lichter and Jennie L. Lichter sought and received advice of counsel with reference to their rights to enter a defense to the said order in the district court of the United States in the event that they did not file a petition in the Tax Court, and in the further event the Government ultimately attempted to enforce the order by resort to suit in the district court.

Counsel's advice was that under the 1942 Renegotiation Act all matters of defense with reference to a renegotiation order could be tried and heard in the district court in the time-honored fashion, and that the Revenue Act of 1943 (act of February 24, 1944) did not abrogate this remedy for business of the 1942 calendar year, which Fas the year in which the subcontracts involved in the said order were performed; or, in other words, with respect to business of the 1942 calendar year, that the right to go to the Tax Court was optional only.

Although the several courts in which the case was tried did not affirm the validity of the advice received of counsel, it did receive complete validation in the opinion of Mr. Justice Douglas in the Supreme Court. Mr. Justice Douglas held that the statute says just what counsel had previously advised Mr. and Mrs. Lichter.

This bill was introduced in the sum of $32,935.52, which represents the principal of $27,019.39 and interest thereon in the amount of $5.916.13. Your committee are of the opinion that the amount for interest should be disallowed and recommend the sum to be awarded to the claimants in the amount of $27,019.39, and the bill is amended accordingly, and favorable recommendation is made to the bill, as amended.

DEPARTMENT OF THE ARMY,

Washington, D. C., November 22, 1948. Hon. EARL C. MICHENER, Chairman, Committee on the Judiciary,

House of Representatives. DEAR MR. MICHENER: The Department of the Army is opposed to the enactment of H. R. 7144, Eightieth Congress, a bill for the relief of Southern Fireproofing Co., of Cincinnati, Ohio.

The bill provides as follows:

“That the Secretary of the Treasury be, and he is hereby, authorized and directed to pay, out of any money in the Treasury not otherwise appropriated, the sum of $32,935.52 to Jacob Lichter and Jennie L. Lichter, partners doing business as Southern Fireproofing Company, of Cincinnati, Ohio, in full settlement of all claims against the United States under certain negotiation agreements between them and the Secretary of War (now the Secretary of the Army).”

There have been numerous legislative steps in the development of the Renegotiation Act, of which only the following three are material to this matter: (1) The so-called Original Renegotiation Act contained in section 403 of the Sixth Supplemental National Defense Appropriation Act, approved April 28, 1942 (56 Stat. 245): (2) title VIII of the Revenue Act of 1942, approved October 21, 1942 (56 Stat. 982); and (3) the so-called Second Renegotiation Act, title VII of the Revenue Act of 1943, passed over the veto of the President, February 25, 1944 (58 Stat. 78). Insofar as material, the Original Renegotiation Act directs the Secretaries of certain of the executive departments, including the War Department (now Department of the Army), to insert in all war contracts a provision for renegotiation of the contract price; a provision for retention by the United States of excessive profits, or repayment of such profits to the United States; and a provision requiring prime contractors to insert similar clauses in subcontracts. It further directs the Secretaries concerned to require renegotiation of contract

ices: directs elimination of excessive profits realized under such contracts either by reductions in contract prices, or by withholding payments otherwise due the contractor, or by directions to prime contractors to withhold for the United States sums otherwise due a subcontractor, or by court actions brought on behalf of the United States. It provides for tax credits; authorizes final agreements between the Government and the contractor; and provides that it shall be applicable to all contracts and subcontracts, regardless of the presence or absence of a renegotiation clause, except those as to which final payment had already been made prior to April 28, 1912

Insofar as material, the amendment contained in the Revenue Act of 1942 authorizes the renegotiation as a group of all contracts and subcontracts held by one contractor or subcontractor, without separate renegotiation of the contract price of each contract or subcontract. Insofar as material, the Second Renegotiation Act grants exclusive jurisdiction to the Tax Court of the United States, in proceedings de novo, to finally determine the amount, if any, of excessive profits realized and grants 90 days to any contractor or subcontractor aggrieved by a unilateral determination of the Secretary concerned or of the War Contracts Price Adjustment Board within which to file a petition in such Tax Court for a redetermination thereof.

The necessity which existed for an act authorizing renegotiation of war contracts becomes apparent when it is realized that as of June 30, 1947, 118,101 contractors had been assigned for renegotiation with respect to the fiscal years 1942 through 1946, and contracts aggregating over $190,000,000,000 were subjected to renegotiation. Of the contracts so assigned for renegotiation, 115,535 (or 97.8 percent) were completed as of June 30, 1947. Out of the 115,535 completed assignments, 85,037 (or 73.6 percent) resulted in cancellations or clearances indicating that no excessive profits had been made or that the contractor was found to be exempt from renegotiation; 28,889 (or 25 percent) resulted in bilateral refund agreements between the Government and the contractor; and 1,609 (or 1.4 percent) resulted in unilateral determinations by the Secretaries of the Departments concerned or by the War Contracts Price Adjustment Board. Of the 30,498 contracts involving determinations of excessive profits, 28,889 (or 94.72 percent) were determined on a bilateral basis and 1,609 (or 5.28 percent) were determined on a unilateral basis. As of June 30, 1947, the gross recoveries through renegotiation amounted to the sum of $10,434,637,000, and the estimated net recovery (after deduction of the Federal tax credit allowed contractors on renegotiation refunds) amounted to $3,130,391,000. Of the gross recoveries of $10,434,637,000, some $895,493,000 (or 8.58 percent) were involved in unilateral determinations and the rest were recovered by voluntary, or bilateral, agreement.

It is believed that the foregoing statistical summary discloses the tremendous importance of the Renegotiation Act and the vast extent of its application to war contracts. With the foregoing in mind the Department will proceed to å consideration of the specific war contracts which are the subject of this bill.

The Southern Fireproofing Co., à partnership consisting of Mr. Jacob Lichter and Mrs. Jennie L. Lichter, is in the business of constructing brick-masonry structures. During 1942 it held nine subcontracts with a number of construction companies who were prime contractors with the United States, such nine subcontracts representing a total business of $710,224.16. During 1943 and 1944 numerous conferences were held with Mr. Jacob Lichter, one of the partners, with a view to a bilateral determination concerning the excessive profits which, in the opinion of the War Department, had been realized by the Southern Fireproofing Co. on its said subcontracts during the calendar year 1942. These conferences failed to result in an agreement by reason of the fact that Mr. Lichter contended that the Renegotiation Act was unconstitutional and that, in any event, for various reasons, it was not applicable to the nine subcontracts of the Southern Fireproofing Co. As a result of the impasse which was reached, the matter was presented to the Under Secretary of War, who, on October 20, 1944, acting under duly delegated authority, found and determined that $70,000 of the profits realized by the Southern Fireproofing Co. during the calendar year 1942 under its said subcontracts were excessive, subject, however, to a tax credit in the amount to which the partners constituting the Southern Fireproofing Co. might be entitled under the pertinent provisions of the Internal Revenue Code; and directed the payment to the Treasurer of the United States of such excessive profits, less such tax credit. Notice of the afore-mentioned determination of the Under Secretary of War was given to the Southern Fireproofing Co. on the same date. No petition was filed in the Tax Court of the United States within the time limited by the Second Renegotiation Act, or at any time thereafter.

It was determined that against the excessive profits of $70,000 the Southern Fireproofing Co. was entitled to a tax credit of $42,980.61, leaving a net refund payable to the United States in the amount of $27,019.39. Upon the failure of the Southern Fireproofing Co. to pay that amount to the Treasurer of the United States the matter was referred to the Attorney General of the United States who directed the institution of a suit in the District Court of the United States for the Southern District of Ohio, western division, and, on June 21, 1946, the district judge granted the motion of the United States for summary judgment, and judge ment was thereafter entered in favor of the United States in the amount of $27,019.39, with interest thereon from November 6, 1944, until paid (68 F. Supp. 19). The partners composing the Southern Fireproofing Co. thereupon appealed to the United States Circuit Court of Appeals for the Sixth Circuit, which, on March 10, 1947, affirmed the judgment of the district court (160 F. 2d 329). Certiorari was granted by the Supreme Court of the United States on June 16, 1947 (331 U. S. 802), and, on June 14, 1948, that Court affirmed the judgment in favor of the United States, upholding the constitutionality of the Renegotiation Act and the determination of its applicability to the nine subcontracts held by the Southern Fireproofing Co. (334 Ú. S. 742). On June 30, 1948, the Southern Fireproofing Co. transmitted to the Attorney General, in payment of the judge ment in favor of the United States, a check in the sum of $32,935.32 ($27,019.39, excessive profits; and $5,916.13, interest thereon).

It thus appears that the propriety and legality of the determination of the Secretary of War that the Southern Fireproofing Co. had realized excessive profits on its war business has been considered and sustained by the Supreme Court of the United States. At the same time the Supreme Court considered and sustained determinations of excessive profits against two other war contractors (Pownall v. United States, and Alexander Wool Combing Company v. United States, decided jointly with Lichter v. United States, 334 U. S. 742). In addition, as has already been set forth, many thousands of war contractors have reached bilateral refund agreements with the Government and, as of June 30, 19477, unilateral determinations had been made in cases of more than 1,600 other war contractors. The enactment of this bill, refunding to the Southern Fireproofing Co. the amount which it has paid to the United States as a result of the determination that it had realized excessive profits from its war contracts would result, insofar as these claimants are concerned, in disregarding the Renegotiation Act, the express policy adopted by the Congress for the prevention of excessive war profits, and would constitute legislative discrimination. The Department of the Army knows of do

accordingly, and favorable recommendation is made to the bill, as amended,

DEPARTMENT OF THE ARMY,

Washington, D. C., November 22, 1948. Hon. EARL C. MICHENER, Chairman, Committee on the Judiciary,

House of Representatives. DEAR MR. MICHENER: The Department of the Army is opposed to the enactment of H. R. 7144, Eightieth Congress, a bill for the relief of Southern Fire. proofing Co., of Cincinnati, Ohio.

The bill provides as follows:

“That the Secretary of the Treasury be, and he is hereby, authorized and directed to pay, out of any money in the Treasury not otherwise appropriated, the sum of $32,935.52 to Jacob Lichter and Jennie L. Lichter, partners doing business as Southern Fireproofing Company, of Cincinnati, Ohio, in full settlement of all claims against the United States under certain negotiation agreements between them and the Secretary of War (now the Secretary of the Army).”

There have been numerous legislative steps in the development of the Renegotiation Act, of which only the following three are material to this matter: (1) The so-called Original Renegotiation Act contained in section 403 of the Sixth Supplemental National Defense Appropriation Act, approved April 28, 1942 (56 Stat. 245); (2) title VIII of the Revenue Act of 1942, approved October 21, 1942 (56 Stat. 982); and (3) the so-called Second Renegotiation Act, title VII of the Revenue Act of 1943, passed over the veto of the President, February 25, 1944 (58 Stat. 78). Insofar as material, the Original Renegotiation Act directs the Secretaries of certain of the executive departments, including the War Department (now Department of the Army), to insert in all war contracts a provision for renegotiation of the contract price; a provision for retention by the United States of excessive profits, or repayment of such profits to the United States; and a provision requiring prime contractors to insert similar clauses in subcontracts. It further directs the Secretaries concerned to require renegotiation of contract prices; directs elimination of excessive profits realized under such contracts either by reductions in contract prices, or by withholding payments otherwise due the contractor, or by directions to prime contractors to withhold for the United States sums otherwise due a subcontractor, or by court actions brought on behalf of the United States. It provides for tax credits; authorizes final agreements between the Government and the contractor; and provides that it shall be applicable to all contracts and subcontracts, regardless of the presence or absence of a renegotiation clause, except those as to which final payment had already been made prior to April 28, 1912

Insofar as material, the amendment contained in the Revenue Act of 1942 authorizes the renegotiation as a group of all contracts and subcontracts held by one contractor or subcontractor, without separate renegotiation of the contract price of each contract or subcontract. Insofar as material, the Second Renegotiation Act grants exclusive jurisdiction to the Tax Court of the United States, in proceedings de novo, to finally determine the amount, if any, of excessive profits realized and grants 90 days to any contractor or subcontractor aggrieved by a unilateral determination of the Secretary concerned or of the War Contracts Price Adjustment Board within which to file a petition in such Tax Court for a redetermination thereof.

The necessity which existed for an act authorizing renegotiation of war contracts becomes apparent when it is realized that as of June 30, 1947, 118,101 contractors had been assigned for renegotiation with respect to the fiscal years 1942 through 1946, and contracts aggregating over $190,000,000,000 were subjected to renegotiation. Of the contracts so assigned for renegotiation, 115,535 (or 97.8 percent) were completed as of June 30, 1947. Out of the 115,535 completed assignments, 85,037 (or 73.6 percent) resulted in cancellations or clearances indicating that no excessive profits had been made or that the contractor was found to be exempt from renegotiation; 28,889 (or 25 percent) resulted in bilateral refund agreements between the Government and the contractor; and 1,609 (or 1.4 percent) resulted in unilateral determinations by the Secretaries of the Departments concerned or by the War Contracts Price Adjustment Board. Of the 30,498 contracts in volving determinations of excessive profits, 28,889 (or 94.72 percent) were determined on a bilateral basis and 1,609 (or 5.28 percent) were determined on a unilateral basis. As of June 30, 1947, the gross recoveries through renegotiation amounted to the sum of $10,434,637,000, and the estimated net recovery (after deduction of the Federal tax credit allowed contractors on renegotiation refunds) amounted to

$3,130,391,000. Of the gross recoveries of $10,434,637,000, some $895,493,000 (or 8.58 percent) were involved in unilateral determinations and the rest were recovered by voluntary, or bilateral, agreement.

It is believed that the foregoing statistical summary discloses the tremendous importance of the Renegotiation Act and the vast extent of its application to war contracts. With the foregoing in mind the Department will proceed to a consideration of the specific war contracts which are the subject of this bill.

The Southern Fireproofing Co., à partnership consisting of Mr. Jacob Lichter and Mrs. Jennie L. Lichter, is in the business of constructing brick-masonry structures. During 1942 it held nine subcontracts with a number of construction companies who were prime contractors with the United States, such nine subcontracts representing a total business of $710,224.16. During 1943 and 1944 numerous conferences were held with Mr. Jacob Lichter, one of the partners, with & view to a bilateral determination concerning the excessive profits which, in the opinion of the War Department, had been realized by the Southern Fireproofing Co. on its said subcontracts during the calendar year 1942. These conferences failed to result in an agreement by reason of the fact that Mr. Lichter contended that the Renegotiation Act was unconstitutional and that, in any event, for various reasons, it was not applicable to the nine subcontracts of the Southern Fireproofing Co. As a result of the impasse which was reached, the matter was presented to the Under Secretary of War, who, on October 20, 1944, acting under duly delegated authority, found and determined that $70,000 of the profits realized by the Southern Fireproofing Co. during the calendar year 1942 under its said subcontracts were excessive, subject, however, to a tax credit in the amount to which the partners constituting the Southern Fireproofing Co. might be entitled under the pertinent provisions of the Internal Revenue Code; and directed the payment to the Treasurer of the United States of such excessive profits, less such tax credit. Notice of the afore-mentioned determination of the Under Secretary of War was given to the Southern Fireproofing Co. on the same date. No petition was filed in the Tax Court of the United States within the time limited by the Second Renegotiation Act, or at any time thereafter.

It was determined that against the excessive profits of $70,000 the Southern Fireproofing Co. was entitled to a tax credit of $42,980.61, leaving a net refund payable to the United States in the amount of $27,019.39. Upon the failure of the Southern Fireproofing Co. to pay that amount to the Treasurer of the United States the matter was referred to the Attorney General of the United States who directed the institution of a suit in the District Court of the United States for the Southern District of Ohio, western division, and, on June 21, 1946, the district judge granted the motion of the United States for summary judgment, and judg. ment was thereafter entered in favor of the United States in the amount of $27,019.39, with interest thereon from November 6, 1944, until paid (68 F. Supp: 19). The partners composing the Southern Fireproofing Co. thereupon appealed to the United States Circuit Court of Appeals for the Sixth Circuit, which, on March 10, 1947, affirmed the judgment of the district court (160 F. 2d 329). Certiorari was granted by the Supreme Court of the United States on June 16, 1947 (331 U. S. 802), and, on June 14, 1948, that Court affirmed the judgment in favor of the United States, upholding the constitutionality of the Renegotiation Act and the determination of its applicability to the nine subcontracts held by the Southern Fireproofing Co. (334 U. S. 742). On June 30, 1948, the Southern Fireproofing Co. transmitted to the Attorney General, in payment of the judge ment in favor of the United States, a check in the sum of $32,935.32 ($27,019.39, Excessive profits; and $5,916.13, interest thereon).

It thus appears that the propriety and legality of the determination of the Secretary of War that the Southern Fireproofing Co. had realized excessive profits on its war business has been considered and sustained by the Supreme Court of the United States. At the same time the Supreme Court considered and sustained determinations of excessive profits against two other war contractors (Pownall v. United States, and Alexander Wool Combing Company v. United States, decided jointly with Lichter v. United States, 334 U. S. 742). In addition, as has already been set forth, many thousands of war contractors have reached bilateral refund &greements with the Government and, as of June 30, 19477, unilateral determinations had been made in cases of more than 1,600 other war contractors. The enactment of this bill, refunding to the Southern Fireproofing Co. the amount which it has paid to the United States as a result of the determination that it had realized excessive profits from its war contracts would result, insofar as these claimants are concerned, in disregarding the Renegotiation Act, the express policy adopted by the Congress for the prevention of excessive war profits, and would constitute legislative discrimination. The Department of the Army knows of no

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