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UNITED STATES v. EDWIN B. STIMPSON CO.

September 27, 1957

UNITED STATES of America, Plaintiff,
v.
EDWIN B. STIMPSON COMPANY, Inc., Defendant



The opinion of the court was delivered by: ZAVATT

This is a civil action brought under Section 409 of the Defense Production Act of 1950, as amended (50 U.S.C.A.Appendix, § 2109), to recover damages for alleged violations by the defendant of Ceiling Price Regulation 47, which was issued pursuant to said Act on June 21, 1951 and which became effective June 26, 1951. This regulation was in full force and effect during all of the times stated in the complaint.

The preamble or 'Statement of Considerations' of Regulation 47 recites that it was issued to meet a critical shortage of scrap metal during the Korean incident and to overcome certain abuses in the trade by virtue of which sellers of brass mill scrap were receiving prices for such scrap metal which reflected metal values in excess of prevailing prices for virgin metal.

 'As in the case of virtually all scrap metals, however, the outbreak of hostilities in Korea and the inauguration of our defense program upset this customary relationship and the prices for brass mill scrap rose more sharply than the prices for new metal. During the base period of the General Ceiling Price Regulation (December 19, 1950, to January 25, 1951, inclusive) the market for brass mill scrap was extremely chaotic and some sellers were able to obtain prices for scrap which reflected metal values in excess of the prices prevailing for new metal. Thus while new copper was selling at 24 1/2 cents per pound, brass mills were compelled to pay as much as 28 cents or more per pound for copper in scrap. Similarly, 70/30 Yellow Brass scrap having a value, in terms of new metal prices, of 22 1/2 cents a pound was selling for as much as, and in some cases more than, 26 cents per pound.

 'This abnormal price relationship, reflected in ceiling prices established under the General Ceiling Price Regulation, has disrupted the normal flow of scrap and is causing some hardship to consumers. These circumstances, and the accompanying uncertainty and confusion among both buyers and sellers, constitutes a serious threat to the continued output of brass mill products essential to both the defense program and the civilian economy.

 'The ceiling prices established by this regulation are designed to correct this situation by rolling back the ceiling prices for brass mill scrap to a level which will restore, generally, the same cents per pound differential between the prices for such scrap and the prices for new metal which prevailed in the period preceding the Korean crisis.'

 Section 4(1) of the Regulation fixes the ceiling prices for the various grades of brass mill scrap 'f.o.b. point of shipment * * * when sold by any person other than a dealer * * *'.

 The 'Statement of Considerations' of the Regulation recognizes the fact that deliveries of brass mill scrap in relatively large quantities ordinarily command some premiums over deliveries in lesser amounts and, in order to encourage the sale of brass mill scrap in large quantities, it permits sellers of such scrap metal to charge a quantity premium, in addition to the ceiling prices, under certain circumstances.

 'Although there does not appear to be any customary trade practice in the marketing of brass mill scrap insofar as quantity premiums are concerned, it does appear that deliveries in relatively large quantities ordinarily command some premiums over deliveries in lesser amount. In recognition of this fact and in order to encourage the accumulation and distribution of needed brass mill scrap, the regulation establishes certain premiums for a delivery or series of deliveries in specified quantities.'

 The circumstances under which quantity premiums are authorized and the amount of such premiums are provided in Section 4(2) of the Regulation as follows:

 '(2) Quantity premiums. In addition to the ceiling prices determined in accordance with subparagraph (1), of this paragraph, the quantity premiums set forth in Table B may be charged if the seller, within a period of three consecutive calendar days (excluding Saturdays, Sundays, and legal holidays) delivers from one or more shipping points the specified quantity of material (i) to a public carrier for transportation to the buyer's receiving point, (ii) to the buyer at his receiving point in a conveyance owned or controlled by the seller, or (iii) upon a conveyance owned or controlled by the buyer. The amount of material delivered during any calendar day may be counted only once in determining whether a quantity premium may be charged. 'Whether a delivery or series of deliveries qualifies for a quantity premium shall be established on the basis of the actual weight of brass mill scrap determined at the buyer's receiving point. The weight of containers, dunnage, or other tare may not be included in determining whether a quantity premium may be charged. Table B Premium per pound Quantity: of scrap (cent) 20,000 to 40,000 pounds 1/2 40,000 pounds or more 1."

 In this case, there is no claim that the defendant violated the established ceiling prices specified in Section 4(1), but, rather, that it violated Section 4(2) of the Regulation because it charged a quantity premium of 1 cents per pound on all sales of brass mill scrap under circumstances which did not entitle the defendant to charge the quantity premium.

 During the past 105 years the defendant has been and still is engaged in the business of manufacturing and selling metal products, particularly eyelets, rivets, grommets and fasteners. Its place of business is in the Eastern District of New York. It pruchases virgin metal from several mills, including Volco Brass and Copper Company, of Kenilworth, New Jersey, and Waterbury Rolling Mills, Inc., of Waterbury, Connecticut. Its purchases of such metals, in 1952, aggregated approximately $ 1,000,000 and its gross sales during that year were in excess of $ 6,000,000. The two supplying mills above named sold and delivered virgin brass to the defendant, which they delivered to the defendant's place of business in large, heavy-duty, open boxes which are described in the trade as 'skids' and are the property of the supplying mills. After the virgin metal was removed from these boxes at the defendant's place of business, the boxes remained there until the defendant had filled them with residual scrap which results from the defendant's manufacture of metal products. The defendant accumulated brass mill scrap at the rate of approximately 10,000 pounds per day. It baled this scrap into briquets, each of which it weighed, tagged and placed into one of the boxes owned by one of the supplying mills. At some time thereafter it sold quantities of this scrap, so stored, to its supplying mills -- including Volco and Waterbury. The defendant is not a dealer in scrap metal. It does not acquire scrap metal for purposes of resale as waste, scrap or salvage. Rather, it sells its own scrap metal, which is a by-product of its manufacturing process, to one or more of the mills from which it has purchased the virgin metal.

 Certain sales of brass mill scrap by the defendant to Volco and Waterbury are the subject matter of this action, specifically its sales to Volco between May 22, 1952 and October 15, 1952, and its sales to Waterbury between March 10, 1952 and December 1, 1952. The plaintiff claims that the defendant was not entitled to charge a quantity premium of 1 cents per pound in addition to the basic selling price f.o.b. point of shipment, and that by so doing it violated Ceiling Price Regulation 47 which was issued by the Director of Price Stabilization pursuant to the Defense Production Act of 1950, Executive Order 10161 (15 F.R. 6105) 50 U.S.C.A.Appendix, § 2071 note, and Economic Stabilization Agency General Order No. 2 (16 F.R. 738).

 When Regulation 47 was issued the defendant notified Volco and Waterbury that it would be willing to sell scrap to these mills only in 40,000 pound lots; that when the defendant had 40,000 pounds of scrap ready for Volco or Waterbury it would send the appropriate mill its memorandum bill. It was the understanding between the defendant and these two mills that title to scrap in 40,000 pound lots passed to the purchasing mill and ...


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