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RENEGOTIATION BOARD v. GRUMMAN AIRCRAFT ENGINEERING CORP.

April 28, 1975

RENEGOTIATION BOARD
v.
GRUMMAN AIRCRAFT ENGINEERING CORP.



CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT

Burger, Douglas, Brennan, Stewart, White, Marshall, Blackmun, Rehnquist; Powell took no part in the consideration or decision of the case.

Author: White

[ 421 U.S. Page 170]

 MR. JUSTICE WHITE delivered the opinion of the Court.

The issue in this case is whether certain documents - documents generated by the Renegotiation Board (Board) and by its Regional Boards in performing their task of deciding whether certain Government contractors have earned, and must refund, "excessive profits" on their Government contracts - are "final opinions" explaining the reasons for agency decisions already made, and thus expressly subject to disclosure pursuant to the Freedom of Information Act (Act), 5 U.S.C. § 552(a)(2)(A), or are instead predecisional consultative memoranda exempted from disclosure by § 552(b)(5). See NLRB v. Sears, Roebuck & Co., ante, p. 132.

I

Essential to the consideration of whether the documents at issue in this case must be disclosed pursuant to the relevant provisions of the Act is an understanding of the renegotiation process, a process that itself serves to define the documents in issue and hereinafter described.*fn1

[ 421 U.S. Page 171]

     Under the Renegotiation Act of 1951, 65 Stat. 7, as amended, 50 U.S.C. App. § 1211 et seq., the Government is entitled to recoup from those who hold contracts or subcontracts with certain departments of the Government any "excessive profits" received by such persons on such contracts. The amount of the profits which will be considered "excessive" in connection with a particular contract depends upon the statutory factors which are set forth in the margin.*fn2 As the Board's name suggests, it

[ 421 U.S. Page 172]

     endeavors to, and in fact does, conclude the vast majority of its cases by agreement. 50 U.S.C. App. § 1215(a) (1970 ed., Supp. I). Absent an agreement, however, the Board must decide either to issue a "clearance," i.e., a unilateral determination that the contractor realized no excessive profits during the year in issue, or to issue a unilateral order fixing excessive profits at a specified amount and directing the contractor to refund them. The unilateral order is final unless a de novo determination regarding excessive profits is sought within 90 days before the Court of Claims.*fn3 It is in those cases not terminated by agreement that the documents at issue in this case were generated.*fn4 With this in mind, we turn to the details of the renegotiation process as it existed during the period relevant to the decision in this case.*fn5

Persons holding contracts or subcontracts with certain departments of the Government were required to file financial statements as prescribed by the Board, 50 U.S.C. App.§ 1215(e)(1) (1964 ed.); 32 CFR Part 1470, if their receipts from those contracts met the requisite jurisdictional amount, 50 U.S.C. App. § 1215(f). These statements

[ 421 U.S. Page 173]

     were reviewed by the staff of the Board, and, if that initial review indicated the possibility that the contractor realized "excessive" profits, the "case" was referred to one of two Regional Boards for further action.*fn6 At the time of this assignment, each case was designated as a Class A case or a Class B case: the former if the contractor had reported profits of more than $800,000 on the relevant contracts covered in his financial statement, and the latter in all other cases.*fn7 The principal difference between Class A cases and Class B cases was that the Regional Boards had some final decisional authority in the latter and none in the former. 32 CFR §§ 1471.2(b), 1473.2(a), 1474.3(a), and 1475.3(a). Since the documents sought by respondent in this case were all generated in Class A cases, only the procedure applicable to those cases will be discussed.

After reference to a Regional Board, a case was usually assigned to a staff team consisting of an accountant and a renegotiator.*fn8 This team, after determining what further information from the contractor was required, secured such information and received any submissions

[ 421 U.S. Page 174]

     the contractor might have wanted to make with regard to his case, including his position concerning the statutory factors that largely determined whether he had received "excessive profits," 50 U.S.C. App. § 1213 (e). A document entitled "Report of Renegotiation" was then prepared by the team. Part IA of that report, the accountant's section, contained pertinent financial and accounting data and was furnished to the contractor upon request.*fn9 Part II of the Report of Renegotiation, prepared by the renegotiator, and not furnished to the contractor, generally contained "an analysis and evaluation of the case; and a recommendation with respect to the amount, if any, of excessive profits for the fiscal year under review." 32 CFR § 1472.3 (d). According to testimony given in this case, a Part II in outline form would be as follows: S

"A. Sources of Information

"B. Application of Statutory Factors:

"1. Character of Business

"2. Capital Employed

"3. Extent of Risk Assumed

"4. Contribution to the Defense Effort

"5. Efficiency

"6. Reasonableness of Costs and Profits

"(a) Costs

"(b) Pricing

"(c) ...


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