Kearney & Trecker Corp. v. United States

688 F.2d 780, 30 Cont. Cas. Fed. 70,302, 231 Ct. Cl. 571, 1982 U.S. Ct. Cl. LEXIS 466
CourtUnited States Court of Claims
DecidedSeptember 8, 1982
DocketNo.477-81C
StatusPublished
Cited by18 cases

This text of 688 F.2d 780 (Kearney & Trecker Corp. v. United States) is published on Counsel Stack Legal Research, covering United States Court of Claims primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Kearney & Trecker Corp. v. United States, 688 F.2d 780, 30 Cont. Cas. Fed. 70,302, 231 Ct. Cl. 571, 1982 U.S. Ct. Cl. LEXIS 466 (cc 1982).

Opinion

FRIEDMAN, Chief Judge,

delivered the opinion of the court:

In this case of first impression, the plaintiff seeks just compensation under the fifth amendment for the alleged taking of its property that occurred when, as a result of the government’s requiring the plaintiff to expedite delivery of a machine it was manufacturing for a government contractor, the plaintiff lost a sale of a similar machine under a contract with a private contractor. The plaintiff seeks the damages it suffered on the aborted second sale, apparently consisting of its expenses and lost profits. The government has moved for summary judgment, which we grant on the ground that the plaintiff has not stated a valid claim for a compensable fifth amendment taking.

I.

In late 1979, the plaintiff entered into contracts with Rolls Royce, Ltd., and Lockheed-California ("Lockheed”) to manufacture for, and to sell to, each of them a complicated machining device called a "Moduline.” The delivery date for the Rolls Royce Moduline was January 1981, and the [573]*573purchase price was $682,480. The delivery date for the Lockheed Moduline was December 15, 1981, and the contract price was cost plus a fixed fee. Lockheed ordered its Moduline for use in a classified Air Force project.

In the second half of 1980, the Air Force decided that its requirements necessitated that Lockheed’s production schedule be accelerated. This in turn required that Lockheed obtain its Moduline in June 1981. Acceleration of the Moduline delivery date was to be accomplished through the Defense Production Act of 1950, as amended, Pub. L. No. 81-774, 64 Stat. 798, codified at 50 U.S.C. App. §§ 2061 et seq. (1976 & Supp. IV1980) (the "Act ”).

The Act authorizes the President "to require that performance under contracts or orders . . . which he deems necessary ... to promote the national defense shall take priority over performance under any other contract or order.” 50 U.S.C. App. § 2071(a). The President has delegated this authority to the Secretary of Commerce, who in turn has delegated it to the Office of Industrial Management (the "Office”). The means by which the Office exercises this authority is the rating of contracts or orders. There are three categories of ratings, each of which gives the contract or order priority over unrated contracts or orders. One of the three ratings, called a directive, takes priority over the other two ratings and was issued in this case. The plaintiff does not contend that it was unaware when it accepted the Lockheed order in 1979 that the government could expedite delivery under the Act.

When the plaintiff was informed that the Air Force was considering the rating of the Lockheed Moduline to expedite its delivery, the plaintiff told the government that that action would delay the delivery of several Modulines to commercial customers with unrated purchase orders.

Because Modulines were "made to order,’’generally took two years to produce, and came off the assembly line at a rate of only two per month, the plaintiff could not expedite production of the Moduline originally designated for Lockheed to meet the June delivery date. Instead, the plaintiff would have to supply Lockheed with a different Moduline that was being manufactured for some customer with a [574]*574lower priority but an earlier delivery date and that could be modified by June 1981 to meet Lockheed’s specifications. Consequently, the delivery date for the commercial customer whose Moduline was delivered to Lockheed would be delayed — perhaps until the Moduline originally scheduled for Lockheed could be completed.

Two factors would increase further the delay for the commercial customer preempted by the rating of the Lockheed contract. First, a three-months’ strike in the second half of 1980 shut down the plaintiffs assembly line and so delayed its overall delivery schedule. Second, the plaintiff had several governmentally rated orders for Modulines other than the Lockheed order. These orders would have to be given priority in any rearrangement of the plaintiffs delivery schedule (that is, efforts first would have to be made to minimize the delay on these rated orders before the needs of the commercial customers could be met).

After considering the plaintiffs concerns, the Office on November 6, 1980, telexed a directive to the plaintiff ordering that the Moduline be delivered to Lockheed by June 30,1981.

On November 12, 1980, the plaintiff accepted the directive. The plaintiff, however, informed the Office that the new Lockheed delivery date would result "in a five month delay beyond our three month strike delay for one of our commercial customers.” Rolls Royce was the unlucky commercial customer. Because of the delay, Rolls Royce notified the plaintiff in late January 1981 that it was cancelling its order.

The plaintiff informed the Office in February 1981 of the Rolls Royce cancellation and stated that it would look "to the government. . . for the reimbursement for all financial loss and damages occasioned by the preemption of our products by the utilization of these priorities.” Subsequently, the plaintiff calculated the total loss at $434,596, the amount for which it now sues.

The plaintiffs petition contends that the issuance of the directive constituted a taking of the plaintiffs property, for which the fifth amendment of the Constitution requires the government to pay just compensation. The plaintiff argues [575]*575the government "took both [the plaintiffs] contract with Rolls Royce and the Modu-Line” delivered to Lockheed.

II.

A. The government argues that its directive that the plaintiff expedite the delivery of the Moduline to Lockheed did not constitute a taking. Assuming without deciding, however, that it was a taking, the plaintiff still cannot recover.

The only property of the plaintiff that the directive "took” was the Moduline intended for Rolls Royce but diverted to Lockheed. The plaintiff received for that Modu-line the same compensation for which it had agreed to deliver a Moduline to Lockheed, i.e., cost plus a fixed fee. We cannot say that this amount did not constitute just compensation for the Moduline.

Just compensation for property the government has taken ordinarily is determined by the fair market value of the property. Kimball Laundry Co. v. United States, 338 U.S. 1, 5-6 (1949); United States ex rel. TVA v. Powelson, 319 U.S. 266, 275 (1943); United States v. Miller, 317 U.S. 369, 374-75 (1943). See generally 4 Nichols’ The Law of Eminent Domain § 12.2 (3d ed. J. Sachman 1981) [hereinafter cited as Nichols’ Eminent Domain ]. Fair market value provides an objective standard that properly ignores the owner’s or condemnor’s "unique need for [the] property or idiosyncratic attachment to it.” Kimball Laundry Co., 338 U.S. at 5.

In the present case, there is no established market price for Modulines. However, Lockheed and the plaintiff negotiated a price (i.e., cost plus a fixed fee) for the Moduline before the plaintiff began to manufacture it or the taking occurred. Cf. 4 Nichols’ Eminent Domain, supra,

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688 F.2d 780, 30 Cont. Cas. Fed. 70,302, 231 Ct. Cl. 571, 1982 U.S. Ct. Cl. LEXIS 466, Counsel Stack Legal Research, https://law.counselstack.com/opinion/kearney-trecker-corp-v-united-states-cc-1982.