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MCGANN MFG. CO. v. UNITED STATES

July 6, 1951

McGANN MFG. CO., Inc., et al.
v.
UNITED STATES et al.



The opinion of the court was delivered by: WATSON

This is a petition by the McGann Manufacturing Company, Inc. for an equitable determination praying for relief from alleged losses suffered in performance of contracts and subcontracts with the United States during World War II. The action is brought under the War Contracts Hardship Claims Act, Public Law 657, 79th Cong., 2nd Sess., Ch. 864, 60 Stat. 902, as amended by Section 37 of Public Law 773, 80th Cong., 2nd Sess., 41 U.S.C.A. § 106 Note, also known as the Lucas Act (hereinafter referred to as the Act). The case was tried by the Court without a jury.

Petitioner's claim is for alleged losses under contracts with the United States Maritime Commission for the manufacture of steam winches, designated MCc-30641 and MCc-35480; under a subcontract with Dravo Corporation for the fabrication of box sections and flat work for LSTs issued by Dravo under its prime contract with the United States Navy, designated NObs-1312; under a contract with the United States Maritime Commission for the manufacture of electric winches, designated MCc-29292; and for estimated collection costs.

 Petitioner has conceded in its brief that it cannot recover reimbursement for alleged losses sustained in performance of the Maritime steam winch contract because it did not comply with Section 3 of the Act, which limits claims for losses to those with respect to which a written request for relief was filed with the department or agency concerned on or before August 14, 1945. The phrase 'written request for relief' as it appears in Section 3 of the Act has been construed by the United States Supreme Court in the case of Fogarty v. United States, 1950, 340 U.S. 8, 71 S. Ct. 5, to mean written notice presented prior to August 14, 1945, to an agency which was authorized to grant relief under Section 201 of the First War Powers Act, 50 U.S.C.A.Appendix, § 611. Petitioner concedes that such written notice of the claim under the Maritime steam winch contract was not given. Petitioner's claim under this contract should be denied.

 Petitioner's claim for alleged losses sustained in the performance of the Dravo subcontract must be examined in the light of another limitation to recovery contained in Section 1 of the Act, wherein it is provided, inter alia, that equitable claims for losses should be settled where the losses were incurred without fault or negligence on the part of the contractors or subcontractors in the performance of such contracts or subcontracts.

 It appears from the evidence that petitioner sought the subcontract from Dravo Corporation, representing that it had adequate facilities and personnel available to do the work. Petitioner bid for the subcontract on the basis of producing 159 tons per week of fabricated steel at a price of $ 115 per ton for fabrication of box sections and flat work, unpainted. Petitioner never lived up to this schedule. According to the testimony of an expert, the price under the subcontract was fair.

 Petitioner contended throughout the trial that one of the main causes of its loss on the Dravo subcontract was the lack of 'know-how' assistance from the Dravo Corporation. It appears that prior to the granting of the subcontract, officials of petitioner met with officials of the Dravo Corporation at the Dravo plant at which time the Dravo officials explained the work to be done and gave petitioner's officials opportunity to examine similar work in progress. The subcontract contained no promise by Dravo to give petitioner 'know-how' assistance. Nevertheless, petitioner's officials were free to visit the Dravo plant and observe similar work during the course of the subcontract. Petitioner conceded that Dravo did send to petitioner's plant Ray Quain, an employee of the Dravo mold lift, to aid in making wooden templates for use in the performance of the subcontract. Petitioner further conceded that James F. Mahon, a Dravo inspector, was permanently stationed at petitioner's plant during the performance of the subcontract. Defendant's Exhibit X, a letter of May 23, 1944, from petitioner by William J. Kuntz, president and general manager of petitioner, to Dravo Corporation, acknowledged Dravo Corporation's 'continued cooperation'. 'Know-how' assistance from the Dravo Corporation was adequate under the circumstances, and in any event its lack was not a cause of petitioner's loss on the Dravo subcontract.

 Petitioner further contended that one of its causes of loss on the subcontract was delay by the Dravo Corporation in delivering steel, drawings and shop bills. The fact is that Dravo fully complied with the terms of the subcontract as to delivery of steel, drawings and shop bills, except for a delay by Dravo in the delivery of steel at the beginning of the term of the subcontract. This delay by Dravo was cured by March 31, 1944, and to compensate for it Dravo extended the date on which petitioner was to make the first delivery of the fabricated steel. There were no further delays by Dravo and Dravo received no complaints from petitioner about delays after March 15, 1944. Petitioner did not meet the extended delivery date and soon fell so far behind the delivery schedule that Dravo and petitioner agreed to reduce the rate of petitioner's required shipments. Petitioner never completed work as required by the subcontract. The work to be done by petitioner consisted of fabricating flat work and box sections. The box sections were more costly to fabricate, and it appears that petitioner completed more flat work than box sections. There was no delay by Dravo Corporation which caused petitioner's loss under the subcontract.

 One of the main causes of petitioner's inability to perform and resulting loss under the Dravo subcontract was its failure to obtain adequately trained supervisory and other personnel. When petitioner was negotiating for the Dravo subcontract, it knew of the scarcity of labor created by World War II. It appears that the entire LST program was set up so that trained shipbuilders were not necessary to do the work properly. During the course of the performance of the Dravo subcontract, petitioner made very frequent changes in its supervisory personnel. This resulted in improper supervision throughout the plant, leaving employees in the position of not knowing what to do and creating general apathy among the employees. In this connection, the testimony showed that employees were found asleep numerous times during working hours. These frequent changes in supervisory personnel also resulted in lack of coordination of the various stages of the work and the failure of supervisors to be willing to make final decisions with respect to the completion of stages of the work. An example of incompetent supervision during performance of the Dravo subcontract was the hiring of a Mr. Blackmar, who was placed in charge of the structural or plate shop for about four months. Mr. Blackmar admitted to James F. Mahon that he did not know anything about structural or plate shop work. Mr. Blackmar was unable to answer questions of his employees and to properly assign jobs to them. Another example of incompetent supervision was the hiring of a Mr. Zimmerman who was placed in charge of the welding section. It appears that Mr. Zimmerman was not familiar with standard welding symbols or procedures. Welders themselves were frequently replaced creating further confusion in the welding section of petitioner's plant. The evidence also shows that other supervisors were incompetent. Evidences of inadequately trained personnel are shown by testimony concerning the operation of a night shift at petitioner's plant during the course of the work on the Dravo subcontract. Mistakes made by the untrained night shift caused the day shift endless delay and duplication of work. The evidence also shows that untrained personnel improperly marked steel for cutting, causing imperfections in the finished product.

 Another major cause of petitioner's inability to perform and resulting loss under the Dravo subcontract was its failure to circulate promptly to its various shops revisions in the drawings and shop bills sent by Dravo. This failure necessitated frequent changes after completion of a phase of the work and caused confusion and additional expense. Dravo officials suggested a speedup in circulation of these drawings and shop bills but nothing was done by petitioner's officials to remedy the situation.

 Another cause of petitioner's inability to perform and resulting loss under the Dravo subcontract was its lack of adequate equipment. An outstanding example of this inadequacy was the frequent breakdown of cranes needed at all times by petitioner to complete work on the LST sections. These breakdowns occurred frequently and caused considerable delay and additional cost.

 The losses allegedly incurred by petitioner in performance of the subcontract with the Dravo Corporation for the fabrication of box sections and flat work for LSTs issued by Dravo under its prime contract with the United States Navy, designated NObs-1312 were incurred because of fault and negligence on the part of petitioner in the performance of the subcontract.

 Petitioner's claim for alleged losses sustained in the performance of the contract with the United States Maritime Commission for the manufacture of electric winches complies with the Act's requirements for recovery.

 Defendant contends that Petitioner cannot recover alleged losses under the electric winch contract because of Paragraph 204 of Executive Order 9786, which provides, in part, as follows: 'No claim shall be considered if final action with respect thereto was taken on or before that date (August 14, 1945).' It appears from the evidence that the U.S. Maritime Commission, following petitioner's requests of April, 1945, did increase the contract price on the electric winch contract. Although this fact would appear to place the situation under Executive Order 9786, such an argument ignores Section 3 of the Act itself which provides, in part, as follows: 'But a previous settlement under the First War Powers Act, 1941, or the Contract Settlement Act of 1944 shall not operate to preclude further relief otherwise allowable under this Act.' It is fundamental that the provisions of the Executive Order are not controlling insofar as they may be inconsistent with the Act itself. Judge Holtzoff, referring to this problem in Warner Construction Co. v. Krug, Secretary of the Interior, D.C.D.C., 1948, 80 F.Supp. 81, 84, set forth clearly the guiding principles, as follows: 'Insofar as Sections 204 or 307 of the rules and regulations promulgated under the statute may be inconsistent with Section 3 of the Act, these regulations must be deemed invalid. It is elementary law that executive regulations promulgated for the purpose of carrying a statute into effect must be within ...


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