The opinion of the court was delivered by: DIMOCK
This is a motion, under Rule 56, Fed.Rules Civ.Proc., 28 U.S.C., by the United States of America, plaintiff, for an order striking the answer of Whitehouse & Pine, Inc., defendant, granting summary judgment in favor of plaintiff against defendant and vacating defendant's notice of deposition served upon plaintiff and dated January 12, 1953.
Subsequent to the date of service of plaintiff's motion but prior to the agreed date for argument thereof defendant served plaintiff with a cross-motion for leave to amend the answer to the complaint. Upon the consent of the parties upon oral argument, I granted defendant's motion to amend and will consider plaintiff's motion as addressed, so far as pertinent, to the amended answer.
The action is brought pursuant to Title 28 U.S.C. section 1345 and section 403(c) of the Renegotiation Act as amend,
50 U.S.C.App. § 1191. The Government seeks to recover the sum of $ 170,000 together with interest computed at the rate of six percent from September 14, 1946. The complaint alleges the commencement and completion of renegotiation proceedings under the Renegotiation Act culminating in a determination by the Navy Department that defendant realized $ 170,000 in excessive war profits during its fiscal year ended May 31, 1943.
Defendant admits the determination and receipt of notice thereof but answers that the sum determined is excessive.
In support of its motion the Government argues that the question which defendant seeks to raise is one which could have been raised only by an appeal to the Tax Court and that since defendant admits that it failed to take an appeal to the Tax Court there is no material fact in issue between the parties.
Defendant counters by saying that it is a 'subcontractor' of the special type defined in § 403(a)(5)(B) of the Renegotiation Act, that '(a)(5)(B) subcontractors' have no right of appeal to the Tax Court and that, unless this court construes the Act as providing a hearing here on defendant's contention that the amount claimed as a result of renegotiation is excessive, the Act is unconstitutional as applied to defendant.
Defendant says that if this court should construe the Act as providing a hearing here there would still be a material issue of fact with respect to the correctness of the determination of the amount of excessive profits so that, in that case, plaintiff's motion for summary judgment would have to be denied.
Defendant further says that, if this court does not construe the Act as providing a hearing here and it is consequently unconstitutional, not only would plaintiff's motion for summary judgment have to be denied but summary judgment would be granted defendant dismissing the case.
Section 403(e)(2) of the Act,
which provides for appeals to the Tax Court, reads in part:
'(2) Any contractor or subcontractor (excluding a subcontractor described in subsection (a)(5)(B)) * * * aggrieved by a determination of the Secretary made on or after the date of the enactment of the Revenue Act of 1943, with respect to any (fiscal year ending before July 1, 1943), as to the existence of excessive profits, which is not embodied in an agreement with the contractor or subcontractor, may, within ninety days (not counting Sunday or a legal holiday in the District of Columbia as the last day) after the date of such determination, file a petition with The Tax Court of the United States for redetermination thereof.'
Section 403(a)(5)(B) of the Act,
which in effect describes these '(a)(5) (B) subcontractors', reads in part:
'(5) The term 'subcontract' means -- * * *
'(B) Any contract or arrangement other than a contract or arrangement between two contracting parties, one of which parties is found by the Board to be a bona fide executive officer, partner, or full-time employee of the other contracting party, (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 * * *.'
Some language in the amended answer and the 'Memorandum of Defendant In Opposition to Plaintiff's Motion for Summary Judgment' seems to indicate that defendant seeks to support its contention that the amount claimed as a result of renegotiation is excessive upon a theory that the amount claimed was based, to a large extent, upon commissions earned by defendant on contracts which it procured for ...