United States v. Utah Construction & Mining Company

PETITIONER:United States
RESPONDENT:Utah Construction & Mining Company
LOCATION:General Petroleum Corporation

DOCKET NO.: 440
DECIDED BY: Warren Court (1965-1967)
LOWER COURT:

CITATION: 384 US 394 (1966)
ARGUED: Mar 23, 1966 / Mar 24, 1966
DECIDED: Jun 06, 1966

Facts of the case

Question

  • Oral Argument – March 24, 1966
  • Audio Transcription for Oral Argument – March 24, 1966 in United States v. Utah Construction & Mining Company

    Audio Transcription for Oral Argument – March 23, 1966 in United States v. Utah Construction & Mining Company

    Earl Warren:

    Number 440, United States, Petitioner, versus Utah Construction and Mining Company.

    Mr. Jaffe.

    Irving Jaffe:

    Mr. Chief Justice, may it please the Court.

    This case involves primarily two issues.

    One deals with the scope of the disputes clause and that is whether or not that clause requires submission of all disputes concerning questions of fact to agency determination.

    We believe that that issue was not covered in the Bianchi decision.

    The second issue presented by this case is whether fact determinations concededly made by an agency under the disputes clause and concededly final under the Wunderlich Act, a binding on the parties and on the courts for all purposes or may the same facts be tried and determined de novo by the Court if deemed relevant to a breach of contract action allegedly outside the scope of the disputes clause.

    We believe that that issue has been decided by the Bianchi decision of this Court.

    The facts of this case are pertinent only to the extent that they illustrate the legal arguments that will be made.

    Suffice it to say that this case concerned a contract which was entered into in 1953 for the construction of an aircraft nuclear reactor project in the State of Idaho.

    During the course of performance of this contract, several disputes arose, many of them were — well, and they were submitted to the agency for determination, some were favorably acted upon, some unfavorably.

    Four of these disputes, all of which had been submitted to the agency before are in — present in this Court.

    Each of those claims are presented in the same manner as they were presented administratively.

    Two — three of them at least include damages for delays.

    The fourth one was not conceded by the Board because it was deemed to be untimely.

    That too was a claim for damages for delays.

    There is added in the petition however, an overall claim for delays damages allegedly resulting from the interaction of each of these four specific matters.

    Now, if we look at the disputes clause itself, we find that its language is apparently clear.

    The pertinent phrase of that clause says, “All disputes concerning questions of fact arising under this contract shall be decided by the contracting officer.”

    Tom C. Clark:

    Where is that, do you have it in the record?

    Irving Jaffe:

    We have that on page 3 of our brief or page 4 — just a moment.

    It appears on page 6 of our brief, excuse me, on page 6 of our brief, subject to appeal and the decision shall be final.

    The Court of Claims however, in construing the phrase arising under the contract reads that clause as though it read all disputes concerning questions of fact arising under other clauses of this contract in which the granting of relief is specifically authorized shall be decided by the contracting officer, etcetera.

    I might also point out that the clause itself begins with the words except as otherwise specifically provided in this contract, all disputes shall be decided by the contracting officer.

    The Court seemingly says, “Only as otherwise specified in this contract shall the contracting officer be authorized to decide disputes.”

    We believe as a practical matter, certainly, the disputes clause ought to read in a manner in which the word says, that is all disputes arising under the contract.

    This clause is the only one, as you will notice, which requires that the contracting — the contractor shall proceed diligently with the work during the resolution of the dispute and until it is resolved.

    If — as the Court of Claims contends, there are some disputes that are outside the scope of the disputes clause, there is no provision on the contract that would require the work to continue while the dispute was resolved.

    Conceivably, the contractor did say, that this dispute between me and you Mr. Contracting Officer is outside the scope of the disputes clause.

    It’s going to be costly for me to continue as you direct and since it’s outside the clause, I’m going to stop working, go to court and find out which of us is right.

    Irving Jaffe:

    Now, the fact is that that has never been done, which I consider or at least I have no knowledge that it has been done.

    And I consider that a factor to show that the contractors themselves had never construed this clause as being limited only to certain types of disputes.

    But there’s another reason —

    Byron R. White:

    Are you suggesting that Judge Davis below said that the — there was a – historically, quite a limitation on this —

    Irving Jaffe:

    Your Honor, if your —

    Byron R. White:

    — that the factual disputes — there’s simply factual disputes underlying breach claims for example, just automatically wouldn’t be found — wouldn’t be decided by the contracting officer —

    Irving Jaffe:

    If your —

    Byron R. White:

    He said it was just too late to — for the Government to contend this, I gather you disagree with that.

    Irving Jaffe:

    Mr. Justice White, I do.

    I disagree with that and I think that I will be able to show or I think I could demonstrate now that the historical treatment of the disputes clause has not created such a firmly rooted or firmly entrenched judicial or administrative course of conduct which would in any way foreclose this Court from examining —

    Byron R. White:

    Except — except in the Court of Claims?

    Irving Jaffe:

    Well, that is one of the reasons.

    The District Courts and the federal courts have not so construed the clauses (Voice Overlap) —

    Byron R. White:

    Which the only — which is about the only court that has anything to do with it.

    Irving Jaffe:

    Well, the District Courts have concurrent jurisdiction under $10,000 and while they don’t have anywhere near the same number of cases or those involving as large amount of money.

    They do have these cases with some degree of (Voice Overlap) —

    Byron R. White:

    You’re not suggesting the Court of Claims has ever held – held the disputes suppose to have that — the scope you suggest?

    Irving Jaffe:

    Oh no, I don’t suggest that the Court of Claims hasn’t — has done that.

    I do suggest however that when the Court of Claims treated with this subject, they were treating with it under misconceptions of the law and in two circumstances the rationale that they used was rejected by this Court.

    In other words, we do not have an ancient practice.

    I think that we will show that the Bianchi decision itself is the first reason for the Court to focus on the arising under because prior to the Bianchi decision, the Court of Claims tried all cases de novo whether it was a breach of contract claim or whether it was an arising under claim as they conceive that clause.

    So I believe that until the Bianchi decision, which is only approximately three years ago, we cannot look at the practice that that was engaged in then as foreclosing any further examination of this subject.

    Byron R. White:

    You are going to talk about what’s the administrative fact?

    Irving Jaffe:

    Yes I shall.

    If you like, I will discuss it now.

    Byron R. White:

    I just wondered — I gather you say that the — contracting officers have not regularly rejected breach of contract claims as (Voice Overlap) —

    Irving Jaffe:

    Only —

    Byron R. White:

    — outside the clause or is —

    Irving Jaffe:

    There is only —

    Byron R. White:

    — not within their work?

    Irving Jaffe:

    Only in the sense that it might have been characterized as a pure breach of contract.

    Actually, most breach of contract claims as the Court of Claims would define it, have been submitted by contractors to the contracting officers and to the Board.

    They have always determined as they did in this case and as you thought it in this case, submitted — delays damages claims to the contracting officer —

    Byron R. White:

    That was in other clauses of the contract.

    Irving Jaffe:

    Pardon?

    Byron R. White:

    That’s under other clauses of the contract.

    Irving Jaffe:

    Well, the Court of Claims says they are not.

    Byron R. White:

    Well, I know but —

    Irving Jaffe:

    The Court —

    Byron R. White:

    The submission Utah made in this case was under other clauses, was it not?

    Irving Jaffe:

    Well, if Your Honor please, they submitted three claims, the Pier Drilling claim, for example, asked for excess cost in the sum of $17,000 and damages due to the delays (Inaudible) by the problems in the Pier Drilling, for going into the winter months for $83,000.

    Now in the Court of Claims, they asked for the same $17,000 and instead of asking for $83,413.46, they asked for $183,413.46.

    They merely put a “1” before it.In the concrete aggregate claim, they claimed and were paid for the extra sand, the extra materials, general supervision and a margin for profit.

    That’s not in either place.

    Administratively, that claim was allowed.

    They then asked for a $109,000 some odd dollars for the increase cost caused by the delays.

    Now, all of those claims that is except for the concrete which was held untimely, all of those claims, the Board of Contract Appeal said, “Our jurisdiction is clear.”

    Now if this is going to be a situation of a label, then I will admit that the Boards, if a contractor said this is a pure breach of contract or a pure breach of warranty, have said this is outside the scope of our jurisdiction.

    But if they had to determine the facts if they called it increased cost because of delays are being thrown into the wintered months, the Boards have always determined that very kind and type of fact as they did in the Utah case here.

    Now the — besides of which, the Administrative Boards whenever they did say that, we refer to one place in our brief where the Armed Services Board of Contract Appeals in discussing the — in refusing to hear what they considered a breach claim in the Simmel-Industrie case said, decisions by the Court of Claims have stated that it was not bound by findings of fact made by this Board in appeals involving breach of contract claims.

    We cannot in good conscience compel the parties to undertake the great expense involved in presenting this matter before us when it must be admitted, then our decision or findings of fact may be of no avail to either party.

    I submit that the Board — of Boards of Contract Appeals have sometimes declined to entertain what they recognized as a breach of contract claim because it would serve no purpose.

    The Court of Claims would try it all over again, they wanted to comply with the decisions of the Court of Claims.

    In many instances, they thought they were complying with this Court’s decisions in the Rice case and the Crook case where this Court said that the delayed damages clause which appears as a standard clause in most contract did not authorize the Government, not the Board but even the courts to grant any damages for delay because that clause merely provided as an equitable adjustment and extension of time and a remission or non-imposition of the liquidated damages stipulated in the contract.

    The Boards have frequently said, “You are asking for delay damages, and under the Rice doctrine or the Crook case, we can’t give you any and nobody else can.So therefore, we won’t hear it.”

    So, I do not believe that there was any firmly established judicial or administrative course of conduct which would not allow this clause in the contract to be read now as the Government contends, it speaks plainly and as it should be read.

    As a matter of fact, the words arising under is not peculiar or unique in this contract.

    The words arising under are used as a base for federal jurisdiction for example, District Court jurisdiction, when you talk about a case arising under a federal law.

    Now that has been construed to be satisfied if rights or obligations are created or controlled by a federal law and then if one comes into court to either establish the — those rights or to complain of a violation of those rights or obligations the federal court has jurisdiction.

    I see no reason why the clause in the disputes clause should be read any differently.

    Irving Jaffe:

    The contract governs the rights and the obligations of the parties and if there was a violation of those rights or if there was a need to enforce one of those rights, there is no warrant for saying that that is not a matter which arises under the contract in the same manner that any right or obligation arising under a federal law for jurisdictional purposes isn’t equally affected.

    Abe Fortas:

    Is this phrase in the disputes clause — or you — concerning all disputes — concerning questions of fact, are all of these questions of fact that are involved here — are there some questions of law?

    Irving Jaffe:

    If Your Honor please, there are questions of fact — many questions of fact that have been decided in the case before us —

    Abe Fortas:

    Yes.

    Irving Jaffe:

    — by the Board.

    There may very well be other facts which may have to be decided which have not yet been decided.

    Abe Fortas:

    Well, (Voice Overlap) yes, my question is the other one (Voice Overlap) —

    Irving Jaffe:

    Now if there are questions of law —

    Abe Fortas:

    Yes.

    Irving Jaffe:

    — the Boards of course will decide those questions of law.

    The courts however are not bound by the decision on the question of law, there’s no finality.

    Abe Fortas:

    Well, I understand that sir, but if this is looked on as a — some extension or a contractual matter, does this clause which is different from here — is in fact different from the one in the preceding case we had before us?

    Irving Jaffe:

    Yes.

    Abe Fortas:

    Does this clause make any difference in your view with respect to the result we ought to reach?

    Irving Jaffe:

    No.

    Abe Fortas:

    — because it seems it confine jurisdiction of the contracting officer who disputes the concerning questions of fact.

    Irving Jaffe:

    Oh well, let me – let me answer that this way.

    Abe Fortas:

    You’ve been talking about disputes arising under the contract —

    Irving Jaffe:

    Well, I’m speaking — I should be speaking (Voice Overlap) —

    Abe Fortas:

    Phrase here.

    Irving Jaffe:

    I should be speaking about disputes concerning questions of fact.

    The only reason that that now says disputes concerning questions of fact whereas sometimes the clause says disputes concerning questions and in former days they said before the Wunderlich Act, it’s more frequently said all disputes concerning — all disputes arising under this contract with the passage of the Wunderlich Act, the dropping of anything or the use of the word fact was merely intended to show that a decision on a question of law would not be final because this disputes clause is itself a finality clause as much as it is a jurisdictional clause.

    So that when — and the Court of Claims incidentally — we’re not at odds with the Court of Claims on the question of law.

    In Morrison-Knudsen, a case — a decision which they handed down on exactly the same day they handed down the Grace case.

    The Court of Claims there said that it would not determine whether or not to try cases de novo on the law of fact dichotomy.

    They recognized that if there was a clause, they still construed this arising under the same way, that if there was another clause of the contract which authorize the examination of facts and the determination of facts by the Board, then they would not grant the trial de novo and would accept those facts as found even though it underlay primarily a question of law.

    So the Court of Claims itself does not make the law of fact dichotomy, a basis for determination of facts either by the Court or by the agency.

    So we have — we don’t have that quarrel even with the Court.

    I think it must readily be understood that no relief could be granted by anyone even under the changes article which no one disputes.

    Merely upon the finding of facts, the granting of relief, however elementary it may be, involves the application of some legal principle to those facts in order to say, “You are entitled to so many dollars.”

    Irving Jaffe:

    So that they must — everyone must who’s granting relief, apply legal principles and determine them.

    Now, there is a second point involved in this case which is embodied in the dissenting opinion of Mr. — of Judge Davis of the Court of Claims.

    That point concerns the finding of facts properly found in the court — under the Court of Claims interpretation of the arising under clause, in connection with relief which the Board might have — might have granted.

    The Court now says however that when those same facts have to do with their so-called breach of contract claim that it will determine those facts de novo and they will not be bound by the facts as found by the Board.

    Judge Davis dissents on the ground that he feels that that — the disputes clause, the Wunderlich Act and the decision of this Court will be argued, have already declared that any facts properly so found are binding for all purposes.

    That seems to me to be demonstrable very readily.

    In the disputes clause, it says — and speaking of the finality aspect of the clause, it says, “Whose decision shall be final and conclusive upon the parties thereto.”

    In other words, the facts found by him which withstand the test of the Wunderlich Act and in the — this case, they do withstand the test of the Wunderlich Act or at least they assume it for the purposes of their decision.

    If finding on the parties that at a certain fact that now exist, which the parties must accept, they cannot come in as they do in this case and say that the delays which the Government found for 60 days let us say, are no longer 60 days for any purpose but an extension of time and the fact that I can’t be assessed for any liquidated damages for that 60-day period.

    We now come into the Court as the majority opinion illustrates and says, “We now claim that the delay was 120 days.

    And of that a 120 days, we believe that a 105 were unreasonable delays caused by the Government and therefore, we want damages for that period of time.”

    The dissenting opinion of Judge Davis said that the period of delays found by the Board were necessary for them in order to determine whether they give an extension of time.

    And in considering those things, the delays damages article, Article 9 which appears in our brief on page 4, beginning on page 4, makes — delegates the contracting officer the job of finding out the courses and the facts of delay and makes those final.

    Now are they final only for the period of time that the contract may be extended or to the period of time during which liquidated damages will not be assessed, or does it actually find that this is the period of delay.

    It includes delays caused by the Government.

    May the Court now say, “Well, the contracting officer found that the Government only caused 60-days delay.”

    But now that he is suing for damages for that delay, we can find that it was a 120 days, and try all the facts all over again.

    Neither the contract nor the Wunderlich Act which doesn’t speak about final or limited purposes, or final only for the purpose for which they acted, it is final and is final for all purposes, we think that is self-evident.

    One other thing that I would like to emphasize is that this Court has ruled that this arrangement, this contract between the parties, that the fact finders, the triers of the fact shall be one party to the agreement is a valid, binding, and enforceable agreement.

    Now, we ask this Court to find and determine that the disputes clause here without restriction makes the agency, to trier of all questions, all disputed questions concerning a question of fact in the disputes clause which we urge stands on its own feet, not related to any other clause in the contract.

    We say that that clause makes the Government agency the trier of all the facts that may arise concerning a question under this contract.

    And if the dispute is bottomed upon this contract, if they must plead this contract in order to be successful in the course of action, then it is a course of action or it is a claim or a dispute arising under the contract and any question concerning that dispute must be tried by the agency.

    And, the only thing that would happen if the agency did not — either because it was — it mistakenly believed it had no jurisdiction, if as this Court said in Bianchi, if the record is insufficient, if it’s defective, if more facts are needed, then the trier of the fact, the agency, tries them and it goes back either by suspension or remand, the semantics are unimportant.

    I would like to reserve my remaining time.

    Thank you.

    Earl Warren:

    Mr. Johnson, would you like to start your argument now or wait till morning, you may do just as you please.

    You’re almost in adjournment time.

    Gardiner Johnson:

    Yes, Your Honor.

    Mr. Chief Justice, I think about all I would have time to say this afternoon would be that I dissent.

    Earl Warren:

    Very well, you can do that in extension in the morning.

    Gardiner Johnson:

    Thank you Your Honor.