author: ALDISERT, Circuit Judge.

text:
    Max GORDON et al. v. RANDOM HOUSE, INC., Max Gordon, Appellant.
    No. 72-2150.
    United States Court of Appeals, Third Circuit.
    Argued Sept. 17, 1973.
    Decided Nov. 7, 1973.

      Benjamin Paul, Philadelphia, Pa., for appellant.
    Ira P. Tiger, Ralph G. Wellington, Schnader, Harrison, Segal & Lewis, Philadelphia, Pa., for appellee.
    Before KALODNER, ALDISERT and GARTH, Circuit Judges.
   OPINION OF THE COURT

ALDISERT, Circuit Judge.

The question for decision is whether a genuine issue of material fact existed in a libel action thereby precluding entry of summary judgment in favor of the book publisher. Relying on Rosenbloom v. Metromedia, Inc., 403 U.S. 29, 91 S. Ct. 1811, 29 L.Ed.2d 296 (1971), and New York Times Co. v. Sullivan, 376 U. S. 254, 84 S.Ct. 710, 11 L.Ed.2d 686 (1964), the district court, 349 F.Supp. 919, ruled as a matter of law that the alleged defamatory statements were not published with knowledge that they were false or with reckless disregard as to whether the statements were false. Contending that the publisher’s affidavits in support of its motion for summary judgment and Gordon’s opposing affidavits presented a jury question, the plaintiff has appealed. We reverse, vacate the judgment, and remand for the development of a complete record at trial.

I.

Max Gordon, a Philadelphia retailer of the Jewish faith, sued Random House, a book publisher, in libel for alleged defamatory statements contained in the prologue to a book entitled “The Negroes and the Jews” authored by Lenora E. Berson. The book was published in, April, 1971.

The Prologue relates that Gordon had escaped the pogroms of Russia, had become a business retailer through the dint of hard work and sacrifice, and then had become a victim of the 1964 North Philadelphia black community riots. Counterposing the Gordon story is the story of “Earl,” a black itinerant, allegedly interviewed on a Harlem park bench, who explains why he hates Jews, especially those in the retail business who sell cheap clothes at high prices and “gyp” blacks. The Prologue effectively portrays a picture of metropolitan neighborhoods becoming black and Puer-to Rican, with “the Max Gordon’s and their younger, more Americanized coreligionists . . . [forming] the business infra-structure,” portraying Gordon as a Jewish merchant in conflict with “Earl” and other blacks: “As antagonists they may well hasten the nation down the bloody road of racism and reaction.”

Plaintiff grounds his libel action, brought in diversity under 28 U.S.C. § 1332 with Pennsylvania substantive law governing, on the theory that the book’s implication is that he is a dishonest merchant who cheats blacks and is causing trouble and difficulties for this nation.

It is the publisher’s position that Gordon was not entitled to a trial on the substantive merits of this claim because, irrespective of whether Gordon was famous, he had become involved in a matter of “public or general concern”-by his conduct when he telephoned his 1964 Philadelphia riot experiences to the Philadelphia Inquirer, which later published an account of Gordon’s experi-enees. The publisher contends that the relationship between Jewish merchants and inner-city blacks has been the subject of widespread public interest in national news magazines and many national and local publications. It is on this basis that Random House contends that it comes within the “involvement in an event of public or general concern” protection of the plurality opinion of Rosen-bloom. Accordingly, the publisher argues that for Gordon to have the substantive merits of his libel claim heard, it is necessary for him to show that the “defamatory falsehood was published with knowledge that it was false or with reckless disregard of whether it was false or not.”

Gordon does not contend that Random House published with actual knowledge of the falsehood. Rather he seems to proceed on twin theories: First, he contends that the New York Times rule does not apply and that Pennsylvania libel law of lack of reasonable care is the appropriate standard. Alternatively, if New York Times does apply, there is a sufficient issue of “reckless disregard”: that considering the cumulative effect of the lack of investigatory efforts, of advertising the book as containing actual interviews, of the inaccuracy of the Prologue and of the inherent improbability of “Earl’s” statements, a sufficient issue was joined to have a fact finder decide whether the publisher acted with a reckless disregard.

The publisher filed affidavits explaining that Lenora E. Berson represented that the factual statements in the Prologue concerning Max Gordon were based on an actual interview she had with him, plus information contained in the public press. In her deposition the author stated that she talked by telephone to a man representing himself as Gordon. For his part, Gordon denies either a face to face or a telephonic interview.

Random advertised: “Through actual interviews and personal experiences, the author analyzes the complex sociological and economic pressures exerted on and by [Blacks and Jews]. . . .” (Emphasis supplied.) Gordon, on the other hand, showed that “Earl” was never interviewed by Berson.

Random House sets forth affidavits by its representatives stating that it had no reason to doubt the author’s veracity and, accordingly, made no further investigation. Gordon replies in kind that because of the potential for defamation Random House should have done more than take its author’s word at face value. Gordon contends that the publisher should have investigated the authenticity of the critical interviews with Gordon and “Earl”.

II.

The landmark New York Times case held that the constitutional guarantee of freedoms of speech and press imposed severe restrictions on the state libel laws when the allegedly defamatory publications related to official conduct of a public official. The Court said that these constitutional guarantees prohibit recovery of damages “unless he [the public official] proves that the statement was made with ‘actual malice’— that is with knowledge that it was false or with reckless disregard of whether it was false or not.” 376 U.S. at 279-280, 84 S.Ct. at 726. The Court required proof of “actual malice” presented with “convincing clarity” or proof of “the recklessness that is required for a finding of actual malice.” 376 U.S. at 285-286, 288, 84 S.Ct. at 730.

The protection originally granted the publications relating to “public officials” were later extended to cover “pub-lie figures.” Curtis Publishing Co. v. Butts and Associated Press v. Walker, 388 U.S. 130, 87 S.Ct. 1975, 18 L.Ed.2d 1094 (1967). The Rosenbloom, plurality-articulated both the legal precept and the procedural standards utilized by the district court in the case before us: “. . .a libel action . . . by a private individual . . . for a defamatory falsehood in a . . . [publication] relating to his involvement in an event of public of general concern may be sustained only upon clear and convincing proof that the defamatory falsehood was published with knowledge that it was false or with reckless disregard of whether it was false or not.” 403 U.S. at 52, 91 S.Ct. at 1824. [Footnote omitted.] “[R]eckless conduct is not measured by whether a reasonably prudent man would have published, or would have investigated before publishing. There must be sufficient evidence to permit the conclusion that the defendant in fact entertained serious doubts as to the truth of his publication.” 403 U. S. at 56, 91 S.Ct. at 1826.

III.

We experience some discomfort in accepting the Rosenbloom plurality opinion as a definitive statement of the appropriate law for this proceeding. Although the district court seemed quick to accept the opinion of three Supreme Court Justices as ruling case law, we are constrained to observe that the affirmance of this court’s judgment in that case was produced by a majority coalition of Supreme Court Justices for diverse reasons.

Justice Black concurred in the result because he and Justice Douglas “[found] no room in the First Amendment for any defamation recovery whatsoever.” 403 U.S. at 58, 91 S.Ct. at 1827. Justice Black is no longer on the court. Justice White concurred in the result because he found that Rosenbloom had been arrested by a police officer, a public official, and that therefore the New York Times doctrine was applicable: “. . . discussion of the official actions of public servants such as the police is constitutionally privileged. . . .In the present case, for example, the public would learn nothing if publication only of the fact that the police made an arrest were permitted. . . . ” 403 U.S. at 61, 91 S.Ct. at 1828. It is open to conjecture whether Justice White would apply the New York Times rule to the facts in the case before us.

Justices Stewart and Marshall, dissenting, suggested a remand “for a determination of whether Mr. Rosenbloom can show any actual loss.” 403 U.S. at 87, 91 S.Ct. at 1841. They expressly rejected the plurality’s “conditional constitutional privilege for defamation published in connection with an event that is found to be of ‘public or general concern.’ ” 403 U.S. at 78, 91 S.Ct. at 1837.

Justice Harlan, who is also no longer on the court, expressed still a fourth viewpoint: “It is, then, my judgment that the reasonable care standard adequately serves those First Amendment values that must inform the definition of actionable libel and that those special considerations that made even this standard an insufficiently precise technique when applied to plaintiffs who are ‘public officials’ or ‘public figures’ do not obtain where the litigant is a purely private individual.” 403 U.S. at 72, 91 S.Ct. at 1833, Harlan, J., Dissenting.

Confronted with the foregoing diverse expressions, we are unable to share the certainty of the district court in accepting the Rosenbloom plurality as the law of this case. Justice Holmes’ definition of law comes to mind: “The prophecies of what the courts will do in fact, and nothing more pretentious, are what I mean by the law.” Confronted with such divergence on the Supreme Court level, we suggest that the accuracy of our “prophecies” will depend upon the yet unarticulated First Amendment philosophies of Justices Powell and Rehnquist.

Because of the absence of a complete trial record, we have concluded that this case is not ready for adjudication of the constitutional issue. Neither this court nor the district court should hazard an adjudication on this truncated record.

The necessity for a full trial record is mandated because, insofar as the courts of this circuit are concerned, the ruling case law of Rosenbloom is that which is contained in our opinion when that case was before us. 3 Cir., 415 F.2d 892. There we were careful to emphasize: “It is our view that at least in the present factual context the proper accommodation between the First Amendment protections and the state law of defamation is found by requiring a plaintiff to meet the standard of proof formulated in New York Times Co. v. Sullivan, supra, i. e., that in order to recover damages here, plaintiff must prove that the statement was made with ‘actual malice’ — either with knowledge that it was false or with reckless disregard of whether it was false or not. In adopting the accommodation reflected in the actual malice standard we are not precluding plaintiff and others in similar situations from recovering in actions for defamation of character. We are merely establishing the quantum and type of proof required to permit recovery.” 415 F.2d at 896. (Emphasis supplied.)

Recently in Taggart v. Wadleigh-Maurice, Ltd., 489 F.2d 434, 438 (3d Cir., 1973), this court reversed a grant of summary judgment previously entered in favor of a defendant in an invasion of privacy case and remanded, observing :

[Judgment for defendant] . . ., if it is to be made, should be made on a record in which the facts have been fully developed. Only with such a record can the necessary balance between the conflicting rights of personal privacy and of freedom of expression properly be struck. We realize that requiring the defendants to defend in a trial rather than to obtain summary judgment puts them to additional expense, and arguably subjects their first amendment rights, should those rights ultimately be held to prevail over [plaintiff’s] . . . right to privacy, to that much extra “chill.” In the context of the problem — their commercial exploitation of [plaintiff’s] allegedly induced performance — this degree of “chill” seems to us de minimus when compared with the unsatisfactory alternative of ruling on a potentially serious conflict between legally protected rights without a complete record.

It will be the responsibility of the district court to develop a trial record sufficient to accommodate intelligently that which Justice Marshall has described as “two essential and fundamental values. .” Rosenbloom, supra, 403 U.S. at 78, 91 S.Ct. at 1837. First, there must be a determination of whether Max Gordon can be said to have lived an obscure private life or whether it can be said that prior to the Random House publication, he had taken part in a public controversy. The protection of the reputation of anonymous persons “from unjustified invasion and wrongful hurt reflects no more than our basic concept of the essential dignity and worth of every human being — a concept at the root of any decent system of ordered liberty.” Rosenblatt v. Baer, supra, 383 U.S. at 92, 86 S.Ct. at 679 (1966). (Stewart, J., Concurring.)

The threshold question of Gordon’s private status vel non is of fundamental importance in determining whether he fits the mold of Rosenbloom. His entire lifestyle must be taken into consideration along with the evidence of the Philadelphia Inquirer story of 1964 following the North Philadelphia riots.

Countervailing the right to privacy is the equally respected concept of a citizenry informed by a free and unfettered press, a concept deemed basic to our system of ordered liberty. “Our citizenry has a legitimate and substantial interest in the conduct of . persons [intimately involved in the resolution of important public questions] and freedom of the press to engage in uninhibited debate about their involvement in public issues and events is as crucial as it is in the case of ‘public officials.’ ” Curtis Publishing Co. v. Butts, 388 U.S. 130, 164, 87 S.Ct. 1975, 1996, 18 L.Ed.2d 1094 (1967) (Warren, C. J., Concurring in the result).

With the development of an adequate record, the district court will then be in a position to strike the proper balance between these two essential and fundamental values.

In Rosenblatt v. Baer, 383 U.S. 75, 88, 86 S.Ct. 669, 677, 15 L.Ed.2d 597 (1966), the Court stated “that, as is the case with questions of privilege generally, it is for the trial judge in the first instance to determine whether the proofs show respondent to be a ‘public official.’ ” Similarly, in this case the trial court must decide as a matter of law whether the subject matter of the alleged defamatory material constituted an event of “public or general concern,” Rosenbloom v. Metromedia, 403 U.S. at 52, 91 S.Ct. 1811 (plurality opinion), at 78 (Marshall, J., dissenting), and then whether there was on the part of Gordon an “involvement in [such] an event. ...” Ibid., 403 U.S. at 52, 91 S.Ct. 1811. In this process the court will decide whether it will be appropriate to apply the test applied by this court under the “factual complex” of Rosen-bloom. For ruling case law it will have the guidance of this court’s opinions in Rosenbloom, and Grove v. Dun & Bradstreet, Inc., 438 F.2d 433 (3d Cir. 1971). Additionally, the district court will have the advantage of the four separate opinions of the Supreme Court Justices heretofore described.

IV.

Separate and apart from the foregoing, other facets of this proceeding suggest the advisability of remand for a trial. In reviewing summary judgment, the question on review is whether there was a “genuine issue as to any material fact” before the district court. The presence of such an issue precludes the moving party from obtaining “judgment as a matter of law.” F.R.Civ.Pro. 56(c).

In the posture we receive this case, we do not have a complete trial transcript, as did the Court in New York Times and Rosenbloom. We are not called upon to evaluate the quantum of evidence adduced at trial; we therefore do not have properly before us the question of whether the evidence met the “clear and convincing” test of the plurality of Rosenbloom or the “convincing clarity” test of New York Times. We only decide whether a material fact is controverted in the context of a genuine issue.

V.

Only for the purpose of this analysis and for the remainder of this discussion we shall assume the Rosenbloom plurality doctrine would be applicable to this case. So postured, our inquiry perforce is confined to an extremely narrow compass: Was there a genuine issue as to “reckless disregard”? We believe such an issue exists for the following reasons.

First, we are mindful of St. Amant v. Thompson, 390 U.S. 727, 732, 88 S.Ct. 1323, 1326, 20 L.Ed.2d 262 (1968), where the Court stated:

The defendant in a defamation action . . . cannot, however, automatically insure a favorable verdict by testifying that he published with a belief that the statements were true. [The defendant will not] be likely to prevail when the [author’s] . allegations are so inherently improbable that only a reckless man would have put them in circulation.

Random’s affidavits state that it published with the belief that the statements concerning Gordon were true; however, it carefully avoided any statement as to whether it published with the belief that “Earl’s” statements were true. Therefore, the reasoning of St. Amant applies, a fortiori, to this case, and the inherent improbability of “Earl’s” statements becomes a crucial factual inquiry.

Earl’s Prologue statements revealed that he viewed himself as a victim in almost every aspect of his life. The Jews were the sole cause of his victimization. Moreover, he saw the Jews as the reason for the riots. Plaintiff argues that the question of the inherent improbability of “Earl’s” statements was an issue for the fact finder. The district court determined that there existed no genuine issue as to the inherent improbability of “Earl’s” statements. It reasoned:

As the increasing amount of consumer protection legislation and executive branch activity stands witness to, merchants, be they Jews or non-Jews, are neither physically nor intellectually incapable of victimizing their customers.

We believe that the district court’s resolution of this question constituted an invasion into the province of the fact finder.

Second, Random relied upon Berson’s representation that the factual statements in the Prologue concerning Max Gordon were based on an actual interview plus information contained in the public press. Random, however, made no attempt at corroboration. Gordon has denied any interview with Berson, telephonic or otherwise. Moreover, Random’s affidavits do not reveal whether Berson represented that she interviewed “Earl” or whether Random sought such assurance from her. Yet Random’s advertisement on the book jacket referred to “actual interviews.”

The publisher asserts that it was required to do no more than take its author’s word at face value. The plaintiff counters that because the publisher advertised that the book’s contents were based on actual interviews, it should have conducted an investigation. Evaluation of detailed evidence supporting each of these contentions was more properly the province of the fact finder, rather than the court. Inferences to be drawn therefrom were not for the litigants, not for the court, but solely for the fact finder. Moreover, the court must then decide, in the context of “reckless disregard,” whether a distinction may properly be drawn between the responsibility of a newspaper or radio station in the dissemination of “hot news” and that of a book publisher in the publication of a book. (See, e. g., note 5, supra.)

In sum, whether this case be viewed as requiring a complete trial record in order to strike a proper balance between the right of privacy and the First Amendment or as presenting a genuine issue of material fact as to reckless disregard, we believe that this is a case for the evaluation of a fact finder.

The judgment of the district court will be vacated and the cause remanded for proceedings consistent with the foregoing.

      . Mere investigatory failures, without more, have been held insufficient to constitute “reckless disregard”. New York Times, supra; Baldine v. Sharon Herald Co., 391 F.2d 703, 707 (3d Cir. 1968). In this case, however, Gordon relies not only on Random House’s failure to make an investigation, but also on an accumulation of various other factors. Bee, ante, page 1358.

      . “Given this spectrum of proposed restrictions on state defamation law and assuming that MR. JUSTICE BLACK and MR. JUSTICE DOUGLAS, will continue in future cases to support the severest of the restrictions, it would seem that at least five members of the Court would support each of the following rules:
      “Por public officers and public figures to recover for damage to their reputations for libelous falsehoods, they must prove either knowing or reckless disregard of the truth. All other plaintiffs must prove at least negligent falsehood, but if the publication about them was in an area of legitimate public interest, then they too must prove deliberate or reckless error. In all actions for libel or slander, actual damages must be proved, and awards of punitive damages will be strictly limited.”
      403 U.S. at 58-59, 91 S.Ct. at 1827, White, J., Concurring.

      . “The threats to society’s interest in freedom of the press that are involved in punitive and presumed damages can largely be eliminated by restricting the award of damages to proved, actual injuries. The jury’s wide-ranging discretion will largely be eliminated since the award will be based on essentially objective, discernible factors. And the self-censorship that results from the uncertainty created by the discretion as well as the self-censorship resulting from the fear of large judgments themselves would be reduced. At the same time society’s interest in protecting individuals from defamation will still be fostered. The victims of the defamation will be compensated for their real injuries. They will not be, however, assuaged far beyond their wounds. And, there will be a substantial although imprecise and imperfect admonition to avoid future defamation by imposing the requirement that there be compensation for actual damages.” 403 U.S. at 84-85, 91 S.Ct. at 1840, Marshall, J., Dissenting.

      . Holmes, The Path of the Law, 10 Harv.D. Rev. 457, 460-461 (1897).

      . Although not controlling, it is of no little importance that in Bosenbloom, we addressed ourselves to the fact that the broadcast concern is a “subject matter of public interest, but of equal significance they involve broadcast of ‘hot news’ items, i. e., summaries of the latest news given on the hour and the half hour in reports ranging from ninety seconds to ten minutes. In one of the ten minute broadcasts containing alleged defamatory matter there were eighteen separate items of news covered. The primary value of these items to the public is in conveying the latest news as promptly as possible so that it has the opportunity to be informed of news items of possible immediate public concern. It is not realistic to require thorough research or verification of each individual item under these conditions. The need for constitutional protection in the circumstances is much more apparent than in the cases of the so-called documentaries or feature stories where time is available to attempt to verify questionable material.” 415 F.2d at 895-896.
      “Defendant was reporting fresh news developments consisting of activities and charges made by public authorities and counter activities by the plaintiff in an area of public concern.” 415 F.2d at 897.

      . See, e. g., Associated Press v. Walker, 388 U.S. 130, 87 S.Ct. 1975, 18 L.Ed.2d 1094 (1967) ; Curtis Publishing Co. v. Butts, 388 U.S. 130, 87 S.Ct. 1975, 18 L.Ed.2d 1094 (1967) ; Beckley Newspaper Corp. v. Hank, 389 U.S. 81, 88 S.Ct. 197, 19 L.Ed.2d 248 (1967) ; Greenbelt Publishing Assn. v. Bres-ler, 398 U.S. 6, 90 S.Ct. 1537, 26 L.Ed.2d 6 (1970) ; Rosenblatt v. Baer, 383 U.S. 75, 86 S.Ct. 669, 15 L.Ed.2d 597 (1966).

      . “1 Harper & James, Torts § 5.29 (1956) ; Prosser, Torts § 110, p. 823 (3d ed. 1964), Restatement, Torts § 619. Sucb a course will both lessen the possibility that a jury will use the cloak of a general verdict to punish unpopular ideas or speakers, and assure an appellate court the record and findings required for review of constitutional decisions. Cf. Speiser v. Randall, 357 U.S. 513, 525, 78 S.Ct. 1332, 1341, 2 L.Ed.2d 1460; New York Times, 376 U.S., at 285, 84 S.Ct. at 728.” 383 U.S. at 88 n. 15, 86 S. Ct. at 677.

      . We do not indicate at what stage of the litigation this ruling must be made, other than to require that “[t]he court shall inform counsel of its proposed action prior to arguments to the jury. . . . ” F.R.Oiv.Pro. 51

      . Moreover, there should be a complete development of the role of the author in the preparation of her work, and a specific determination of what, if any, responsibility the publisher must bear if it be found that her conduct breached the standard of “reckless disregard.”


source: Caselaw Access Project

author: MULLIGAN, Circuit Judge:

license: Public Domain

text:
    UNITED STATES of America, Appellee, v. Flora PURIN and Emani Da Silva, Defendants-Appellaiits.
    Nos. 157, 166, Dockets 73-1668, 73-1947.
    United States Court of Appeals, Second Circuit.
    Argued Sept. 17, 1973.
    Decided Nov. 7, 1973.

      James P. Lavin, Asst. U. S. Atty. (Paul J. Curran, U. S. Atty., for the S. D. New York, John D. Gordan III, Asst. U. S. Atty., of counsel), for appellee.
    Lawrence Stern, New York City (Rubin, Gold & Geller, New York City, of counsel), for defendant-appellant Pur-in.
    John S.'Martin, Jr., New York City (Martin & Obermaier, Abraham D. So-faer, New York City, of counsel), for defendant-appellant Da Silva.
    Before SMITH, MULLIGAN and OAKES, Circuit Judges.
   MULLIGAN, Circuit Judge:

These are appeals from judgments of conviction by Flora Purin and Ernani Da Silva entered after a five-day trial before Hon. Charles L. Brieant, Jr., United States District Judge, Southern District of New York, and a jury. Pur-in was sentenced on March 23, 1973 to three years imprisonment on counts II and IV of a four count indictment, sentences to run concurrently. Count II charged Purin and a Paulo Romero with distributing and possessing with intent to distribute approximately 27.75 grams of cocaine on September 9, 1971 and count IV with distributing and possessing with intent to distribute approximately 180.3 grams of cocaine on September 23, 1971 in violation of 21 U.S.C. §§ 812, 841. She was acquitted on count I which had charged a conspiracy with appellant Da Silva and Paula Romero. Da Silva was convicted on count I charging the conspiracy to violate the federal narcotics laws. 21 U.S. C. § 846. He was sentenced on April 26, 1973 to eighteen months imprisonment.

The investigation which led to the arrest and conviction of the defendants was initiated by a New York City policeman, Michael Bergin, who was employed as a taxi driver during his vacation in April, 1971. One of his passengers, Da Silva, was unable to pay his taxi fare and asked Bergin to stop at his store on MaeDougal Street to get paid. On August 31, 1971 Bergin and his partner Perrigo, a Bureau of Narcotics and Dangerous Drugs (BNDD) agent, both working undercover for the New York Joint Task Force, visited Da Silva’s store and stated that they were in the cocaine business and wanted a connection. Da Silva said that he thought he could line something up and asked them to call the store later that night. He gave them an envelope with the name “Lenny” written on it which he said was the name he was then using and also the telephone number of the store. Later that evening Bergin and Perrigo returned to the store. Da Silva made a phone call in their presence in a foreign language, intermittently speaking English to the agents. He quoted a price of $800 an ounce to them and when they indicated it was too high, he assured them that it was cocaine of good quality and would take a good “cut”. The agents agreed to the price and suggested that they start out with a three ounce purchase. Da Silva set a date for them to return to the store on the afternoon of September 8th. At the appointed time, the agents returned. Da Silva said he didn’t have the cocaine yet, made a call to a “Paulo” and asked them to come back. Later that night when they returned to the store, Da Silva introduced them to Paulo Romero who said he didn’t have any cocaine then but gave the agents his phone number. The following day the agents called Romero and obtained his address. They visited his apartment on West 77th Street where he said he had made arrangements for a delivery of an ounce of cocaine later that evening for $800. On their return Romero directed them to drive to 15 West 72nd Street for a sample. Romero told them to drive around for 15 minutes and then entered the building. Thereafter, Romero advised that no sample could be obtained since his contact did not wish to split up the package. When the agents refused to buy, Romero returned to the apartment and secured a sample which passed muster. Perrigo then accompanied Romero to the 16th floor of 15 West 72nd Street where they were met in the hall by Flora Purin who apologized for the precautions that had been taken but stated that she had to be careful due to the police and narcotics agents. Purin led Perrigo and Romero to a landing between the 15th and 16th floors and pulled out a brown paper bag containing the cocaine from behind a fire hose. Perrigo testified that Purin told him that if he wanted any more cocaine, he was to call Romero who would get in touch with her.

On September 15, 1971 Bergin and Perrigo again returned to 15 West 72nd Street. Perrigo went to Purin’s apartment and indicated his interest in cocaine. She said that she was not interested, had none available but suggested he call again. Purin’s husband Airto Moreira, arrived at the apartment and said that he knew of the prior sale. Moreira objected to cocaine and ordered Perrigo to leave. The following day Romero agreed to sell Bergin and Perri-go another ounce for $900. After testing a sample, the sale was made in Romero’s apartment. It was then determined that the quantity was short and Romero stated that he would get a makeup package from his source. Romero was observed to proceed to 15 West 72nd Street and after 15 minutes, returned to his own apartment where the balance of the cocaine was delivered.

On September 23 Romero advised Ber-gin that he could obtain eight ounces of cocaine from the same girl from whom he had gotten the drugs before, at $900 an ounce. After waiting in Romero’s apartment without success, Bergin and Perrigo left. Later in the evening Romero advised Bergin on the telephone that the girl had arrived. The officers then returned to Romero’s apartment where Purin appeared. She advised Perrigo that procaine was a good cut for cocaine since it maintained the quality of the coke. She advised the officers not to talk if they were ever arrested but to contact Romero who would get them counsel. She said that she would make up any shortage in the cocaine and removed from the apartment refrigerator, a green plastic bag containing eight ounces of cocaine. Perrigo pocketed the cocaine and Bergin said he had to go downstairs to get the $7200 from his car. On his return other officers entered the apartment and made the arrests of Purin and Romero.

Purin took the stand in her own defense and substantially testified that she had been with Romero only because of a clandestine love affair. She admitted using drugs with Romero but maintained that she had stopped and denied that she was a source. Da Silva did not testify.

A) Purin

On appeal Purin’s major contentions involve alleged errors in the admission of evidence. At the time of her arrest Purin was searched in the bathroom of the apartment and the policewoman who made the search found a package of about two grams of cocaine in her brassiere. Purin concededly was not indict ed for the possession of this drug. At the close of its case, the Government sought to introduce this package as part of its direct evidence. This was objected to on the ground that it was evidence of an uncharged crime and that it was prejudicial. The Government argued that it was relevant to establish that Purin had access to drugs. The trial judge excluded the testimony but announced that he would permit inquiry on cross-examination depending on Purin’s testimony. After she had testified, the trial judge stated that he would admit the evidence unearthed by the search since Purin’s testimony on cross-examination was that she had stopped using cocaine before her arrest. The evidence was therefore admitted on rebuttal. Appellant argues that since there was no prior notice of the claimed brassiere cocaine, there was no opportunity for a suppression hearing to establish that the drugs were illegally seized. The trial court proceeded on the theory that whether the drug package was seized legally or not, it was admissible under the rule of Harris v. New York, 401 U.S. 222, 91 S.Ct. 643, 28 L.Ed.2d 1 (1971).

We see no merit at all in the appellant’s position that an evidentiary suppression hearing should or would have been appropriate with respect to the brassiere cocaine. It is most significant that there was no effort at all by Purin to suppress the eight ounces seized in the apartment at the same time which were the basis for count IV of the indictment. The officers had a warrant and there was clear probable cause to arrest Purin in any event. The search was made by an officer in the course of an arrest and was clearly lawful. Chimel v. California, 395 U.S. 752, 763, 89 S.Ct. 2034, 23 L.Ed.2d 685 (1969). Defendant Purin suggested on surrebuttal that the officer picked up the package from the bathroom floor and did not pluck it from her person. Since the searching officer was lawfully present and the package was in plain view even under this version of the facts, it was not illegally seized. See Harris v. United States, 390 U.S. 234, 236, 88 S.Ct. 992, 19 L.Ed.2d 1067 (1968); United States v. Santana, 485 F.2d 365, 366-370 (2d Cir., 1973). There are no facts in the record before us or urged on appeal which would justify an evidentiary hearing, and no claim of an illegal search was ever raised. See United States v. Culotta, 413 F.2d 1343, 1345 (2d Cir. 1969), cert, denied, 396 U.S. 1019, 90 S. Ct. 586, 24 L.Ed.2d 510 (1970); Grant v. United States, 282 F.2d 165, 170 (2d Cir. 1960).

Under the circumstances here therefore we believe that the trial court could properly have admitted the brassiere cocaine on the Government’s direct case. The Government could reasonably anticipate what in fact Purin’s defense attempted to establish: that she was an innocent bystander, no longer a cocaine user, and present in Romero’s apartment because of her infatuation for him and not because of her interest in drug trafficking. United States v. Wright, 466 F.2d 1256, 1258-1259 (2d Cir. 1972), cert, denied, 410 U.S. 916, 93 S.Ct. 973, 35 L.Ed.2d 279 (1973); United States v. Deaton, 381 F.2d 114, 117 (2d Cir. 1967) . The admission of this evidence in rebuttal does not constitute reversible error. The fact that it was admitted in rebuttal rather than on direct is not significant. It was relevant and probative and its admission in rebuttal was within the discretion of the trial judge. United States v. Glaziou, 402 F.2d 8, 16 (2d Cir. 1968) , cert, denied, 393 U.S. 1121, 89 S. Ct. 999, 22 L.Ed.2d 126 (1969). The evidence against Purin with respect to both the September 9th and September 23rd sales of cocaine was overwhelming.

On rebuttal, the Government introduced into evidence the testimony of an officer Holden to the effect that after her arrest, Purin asked why she had been arrested. When told that it was for narcotics, she stated “It’s the two guys that just left [presumably Perrigo and Bergin] that brought the cocaine to the apartment. I swear to God, I never saw cocaine in my life.” The trial court admitted this testimony as a false exculpatory statement which had independent probative value. There is no question of the admissibility of such statements either on the Government’s direct case (United States v. Tropiano, 418 F.2d 1069, 1080-1081 (2d Cir. 1969), cert, denied, 397 U.S. 1021, 90 S. Ct. 1262, 25 L.Ed.2d 530 (1970)) or in rebuttal (United States v. Kilpatrick, 458 F.2d 864, 866-867 (7th Cir. 1972)). Appellant urges on appeal that the statement was given without Miranda warnings and was therefore inadmissible.

During trial the Government advised the court and defense counsel that the statements were volunteered and not the result of police inquiry and that no Miranda warnings had been given. The trial court granted a recess and although counsel was given the opportunity to question Purin, and the issue was presented a day later on cross-examination when Purin denied making the statement, no Miranda question was raised. In fact, on rebuttal, when Officer Holden testified to the statements only a general objection was made. In view of the failure of the appellant to specifically raise the Miranda point on trial, the question cannot be raised for the first time on appeal. United States v. Bryant, 480 F.2d 785, 791-793 (2d Cir. 1973); United States v. Bell, 464 F.2d 667, 674 (2d Cir.), cert, denied, 409 U.S. 991, 93 S.Ct. 335, 34 L.Ed.2d 258 (1972).

There is nothing in the record to indicate that the statements made were not voluntary and they were therefore properly admitted. Miranda v. Arizona, 384 U.S. 436, 478, 86 S.Ct. 1602, 16 L.Ed.2d 694 (1966); United States v. Tafoya, 459 F.2d 424, 427 (10th Cir. 1972); United States v. Augello, 452 F.2d 1135, 1141 (2d Cir. 1971), cert, denied, 406 U.S. 922, 92 S.Ct. 1787, 32 L.Ed.2d 122 & 409 U.S. 859, 93 S.Ct. 145, 34 L.Ed.2d 105 (1972); Parson v. United States, 387 F.2d 944, 946 (10th Cir. 1968). See also United States v. Vigo, 487 F.2d 295, 298-299 (2d Cir., 1973).

Purin did serve a subpoena duces tecum on the United States Immigration and Naturalization Service, directing the production of its files on Romero. The trial judge advised counsel that the Service had insisted that the file not be made available for examination. However, he inquired as to the reason Purin sought the file and was advised that it would be used to impeach Romero if he was called as a Government witness and if not called by the Government, there was a strong possibility that Romero might be called as a defense witness. The trial judge stated that if this occurred, he would make available whatever material could be used properly on either direct or cross-examination. Romero, although availa-. ble, was not called as a witness by either side and therefore the offer of the trial court never became an issue. It is difficult to imagine how Purin was denied a fair trial because of the refusal of the trial judge to permit a fishing expedition. A subpoena duces tecum in a criminal case is not intended as a means of discovery. Its purported relevancy was alleged to be dependent upon Romero’s appearance as a witness and that never occurred. United States v. Marchisio, 344 F.2d 653, 669 (2d Cir. 1965).

Purin also raises questions as to the propriety of the trial judge’s charge here which we consider to be entirely without substance.

B) Da Silva

Appellant Da Silva’s principal argument on appeal is that the evidence was insufficient to establish that he was a conspirator with Romero and Purin. Looldng at the evidence most favorable to the Government (Glasser v. United States, 315 U.S. 60, 80, 62 S.Ct. 457, 86 L.Ed. 680 (1942); United States v. Tutino, 269 F.2d 488, 490 (2d Cir. 1959)), we are persuaded that there was adequate evidence here to establish his participation in the conspiracy. We have no quarrel with the general proposition advanced by appellant that a mere willing participation in acts with alleged co-conspirators, knowing in a general way that their intent was to break the law, is insufficient to establish a conspiracy. United States v. Falcone, 109 F.2d 579 (2d Cir.), aff’d, 311 U.S. 205, 61 S.Ct. 204, 85 L.Ed. 128 (1940); United States v. Peoni, 100 F.2d 401 (2d Cir. 1938). However, the facts here clearly establish that Da Silva was a knowing and willing participant in the sale of cocaine. When Bergin and Perrigo first approached Da Silva, he was advised not that they were users but rather that they had started “a cocaine business” and were “looking for a connection.” He made the initial contact with Romero and was more than a mere casual conduit. He extolled the quality of the cocaine, negotiated the price and attempted to consummate the deal in his store.

The fact that Da Silva was not present with Purin or Romero when the actual sale was transacted or that there was no evidence to establish that he knew Purin, is not significant. United States v. Bynum, 485 F.2d 490, 495 (2d Cir. 1973); United States v. Calabro, 467 F.2d 973, 982-983 (2d Cir. 1972), cert, denied, 410 U.S. 926, 93 S.Ct. 1358, 35 L.Ed.2d 587 (1973). The claim is made that Da Silva was simply doing a casual favor for a friend and was not therefore a conspirator. The conspiracy charge given was proper, and in fact was repeated at the request of the jury. They could properly infer that Da Silva had a stake in the venture and that his relationship was not peripheral. The furtive maneuvering by Romero and Purin strongly support the testimony of their expressed fear of apprehension by agents. Yet Da Silva had no difficulty making direct contact with Romero not simply to supply the wants of a user but the purported proprietors of a cocaine business. The jury was entitled to infer that Da Silva’s relationship to the cocaine ring was sufficiently intimate to come within the charge given.

We find no substance in the claim that Da Silva’s trial should have been severed. The trial judge initially offered a separate trial for Da Silva which was rejected by his trial counsel who feared that his role would be exaggerated if he were tried alone. The fact that the tactic was not successful is surely insufficient grounds for reversal.

We have considered appellants’ other arguments and find them all to be without merit.

Affirmed.

      . Count III charged Romero with possessing and distributing 23.45 grams of cocaine on September 16, 1971. On May 25, 1972, Romero pleaded guilty to counts II and III of the indictment. Counts I and IV were dismissed at the time of his sentencing.

      . Defense counsel claimed surprise when the Government informed them of Purin’s statements as they did when the Government sought to introduce the cocaine seized from Purin’s brassiere. Even where evidence falls within the rule of Brady v. Maryland, 373 U.S. 83, 83 S.Ct. 1194, 10 L.Ed.2d 215 (1963), however, the Government need not sua sponte give notice to the defense where the accused has knowledge of the evidence (Wallace v. Hocker, 441 F.2d 219, 220 (9th Cir. 1971) ; see United States v. Soblen, 301 F.2d 236, 242 (2d Cir.), cert, denied, 370 U. S. 944, 82 S.Ct. 1585, 8 L.Ed.2d 810 (1962)) and here no pretrial discovery motions were made. In any event, the Government’s aborted attempts to introduce the evidence on its direct ease did give the defense a full day’s time to prepare.

      . See generally United States v. Hysohion, 448 F.2d 343 (2d Cir. 1971). The trial judge instructed that a defendant to be guilty of conspiracy “must, in some sense, promote the venture himself, make it his own or have a stake in the outcome.” He further instructed:
      The defense contends Da Silva was not participating in a conspiracy with Purin or Romero, if there was any, and that he was merely trying to accommodate the undercover agent who had done him a favor in the past by trusting him for an unpaid taxi fare, by putting the agent in touch with Romero to get cocaine.
      Well, just doing this . . , wouldn’t of itself, if you find that that’s all he did, constitute knowing participation in a conspiracy.


author: PER CURIAM:

text:
    Phillip Joseph TINERELLA, Plaintiff-Appellant, v. BETHLEHEM STEEL CORP., Defendant-Appellee.
    No. 71-2869.
    United States Court of Appeals, Ninth Circuit.
    Nov. 15, 1973.
    Seymour L. Ellison, (argued), Belli, Ashe, Ellison, Choulos & Lieff, San Francisco, Cal., for plaintiff-appellant.
    Graydon S. Staring (argued), Lillick, McHose, Wheat, Adams & Charles, San Francisco, Cal., for defendant-appellee.
    Before CHAMBERS, KOELSCH and KILKENNY, Circuit Judges.
   PER CURIAM:

The judgment in this admiralty injury case is affirmed.

As a question of negligence, we cannot find the district court’s findings clearly erroneous.

As to any strict liability theory, the circumstance that the district court in its view of the evidence could not connect Bethlehem (the repairs contractor) to missing bolts, which absence was a factor in causation, relieves us of the necessity of exploring the limits of such a theory.

Plaintiff, a sailor of the United States Navy, obviously had a strong case for unseaworthiness against the government except that his injury was one where his status as a sailor denied him the right to sue. (The navy owned the ship.) The government has its own provisions to compensate those in the service injured in the line of duty.

Judgment affirmed.


author: PER CURIAM.

text:
    Ethel M. JUHNKE, Appellant, v. IMPERIAL CASUALTY & INDEMNITY COMPANY, Appellee.
    No. 73-1513.
    United States Court of Appeals, Eighth Circuit.
    Submitted Nov. 16, 1973.
    Decided Nov. 27, 1973.
    Curtis D. Ireland, Rapid City, S. D., for appellant.
    Richard O. Sharpe, Rapid City, S. D., for appellee.
    Before VAN OOSTERHOUT and MOORE , Senior Circuit Judges, and WEBSTER, Circuit Judge.

       Honorable LEONARD P. MOORE, Senior Circuit Judge, Second Circuit, sitting by designation.

   PER CURIAM.

The judgment dismissing plaintiff’s complaint as beneficiary of her deceased husband who was insured by defendant’s limited travel and accident policy, on the ground that the husband’s accidental death did not come within the scope of the policy coverage, is affirmed on the basis of Judge Bogue’s opinion, reported at 358 F.Supp. 1135.


author: DITTER, District Judge

text:
    ABKCO INDUSTRIES, INC., Appellant, v. COMMISSIONER OF INTERNAL REVENUE.
    No. 72-1181.
    United States Court of Appeals, Third Circuit.
    Aug. 21, 1973.
    For majority opinion see 3 Cir., 482 F.2d 150.
   DITTER, District Judge

(dissenting):

The problem in this case should be viewed on the basis of business realities rather than contract subtleties: Harrold v. Commissioner of Internal Revenue, 192 F.2d 1002, 1006 (4th Cir. 1951).

In 1961 ABKCO, a recording company, and Evans, a popular artist, entered into an agreement under the terms of which Evans was to receive monthly payments of $7500. for five years. In the event that the total royalties on the net sales of Evans’ records exceeded the total monthly payments, the difference was to be paid to Evans at the end of the contract period. Later the contract was modified so that the monthly payments were increased to $10,000. In 1962 and 1963, ABKCO accrued on its books $433,-712 and $187,065, respectively, for royalties payable to Evans.

During the later years of the contract, Evans’ popularity declined and the sales of his records did not produce sufficient royalties to equal the monthly payments still being made to him. His royalties account was then charged and these charges were treated as income by ABKCO. To the extent that the royalties for 1962 and 1963, $433,712 and $187,-065, exceeded the monthly cash payments to Evans in those years, these deductions were disallowed by the Commissioner of Internal Revenue and the Tax Court.

In arriving at its conclusion, the Tax Court said ABKCO’s contract with Evans provided two separate methods of compensation: (1) monthly payments, and (2) royalties less monthly payments. ABKCO’s deductions of amounts credited to Evans’ for the royalties less monthly payments were held to be contingent because ABKCO credited his account on the basis of records shipped knowing that some records would be returned, and, in fact, in 1964 and again in 1966, more records were returned than were shipped so that Evans account had to be charged for royalties credited to him in prior years.

Well established principles are applicable here:

(1) Deductions are allowable for the taxable year in which all the events have occurred which establish the fact of liability if the amount thereof can be determined with reasonable accuracy: Treas.Reg. § 1.446-1 (e) (1)(ii). Mathematical certainty is not required: Gillis v. United States, 402 F.2d 501, 506 (5th Cir. 1968).
(2) A taxpayer may adopt such accounting methods as are, in his judgment, best suited to his needs, so long as these procedures clearly reflect his annual income, are consistent, and are in accordance with generally accepted accounting principles: Treas.Reg. § 1.-446-1 (a) (2).
(3) Deductions attributable to the business of a particular year must be applied against the income they help to create, and not against that of a subsequent year in which payment made: Helvering v. Russian Finance & Construction Corporation, 77 F.2d 324, 328 (2nd Cir. 1935). What the statute seeks is an accounting method that most accurately reflects the taxpayer’s income on an annual accounting basis: Schuessler v. Commissioner of Internal Revenue, 230 F.2d 722, 724 (5th Cir. 1956).

In the case at bar, there is no question about the fact of liability: the taxpayer was obligated to pay money to Evans. This responsibility is undisputed and unaffected by any provision that dealt with when payment was to be made, the conditions that might reduce liability, and the ultimate amounts of such payments. The only question between Evans and the taxpayer was how much money would be payable to Evans and the only issue between the Commissioner and the taxpayer is the reasonableness of taxpayer’s computations of its liability to Evans. If those deductions were reasonable, based on the information then available to taxpayer, they should be allowed. As this Court has pointed out, mathematical precision is not required of a taxpayer who accrues deductions: Denise Coal Company v. Commissioner of Internal Revenue, 271 F.2d 930, 936 (3rd Cir. 1959).

To reach its decision, the Court below split the provisions of ABKCO’s contract into two segments, the one calling for monthly compensation and the one calling for royalty payments. It then examined the latter on the basis of some of the events which occurred as late as 1966 and concluded the 1962 and 1963 royalty payments were contingent. In other words, judicial hindsight was liberally applied to a part of the facts to interpret part of the agreement.

As I view it, ABKCO’s deductions were properly taken — the business realities known to the taxpayer in 1962 and 1963 were far more important than the legal niceties of the contract. Here the ultimate liability to Evans went hand in hand with the sales of his records. At the time in question, his popularity had increased to such an extent that his royalties for 1962 and 1963 averaged more than $25,000 a month on a contract which guaranteed him only $10,000 a month. In the absence of some known factor that would wipe out this obligation to Evans, the most accurate way for the taxpayer to indicate its yearly income was to accrue Evans’ royalties on a yearly basis. This is exactly what ABKCO did.

The Tax Court’s approach to this matter is wrong for a variety of reasons.

In the first place, the contract was cut into pieces which were examined separately. It should have been considered as one document, with interrelated, interdependent provisions. Secondly, it was error to ignore the taxpayer’s treatment of the obligations created by the agreement. The independent practical construction of a contract by a party bears upon the meaning to be accorded it for tax purposes: Grand Avenue Motor Company v. United States, 124 F.Supp. 423, 426 (D.Minn.1954). Thirdly, the matter is one of good accounting practice, and principles accepted in particular businesses, as much as it is a matter of contract law. The propriety of these deductions from the standpoint of accounting principles was not discussed by the Tax Court.

Fourth, the Tax Court took facts, record-returns in 1964 and 1966, which if relevant for any purpose, dealt with the amount of liability and used them as a basis for concluding there was no liability to Evans. In other words, the Court found that ABKCO had overestimated the amount due Evans and from this decided that nothing was due. Of course, the fact of liability and the amount of liability are distinct concepts —and if the amount of liability is overstated it is unreasonable and should not be allowed. It does not follow that there is no liability at all. Treas.Reg. § 1.461 (a) (2) contemplates that taxpayers on an accrual basis may have to make adjustments and such adjustments are permitted. The possibility that the amount of a fixed obligation may be diminished by later events does not render the obligation contingent: Gillis v. United States, supra, 402 F.2d 508-510.

Fifth, the Tax Court’s rationale is faulty because it considers the royalty value of records-returned in a vacuum— in effect, it says since some records were sent back by distributors all royalty deductions were contingent and therefore improper. If the records-returned figures are significant at all, they must be matched against the value of records shipped to see if the taxpayer’s deductions were reasonable. This was not done. Instead the Court merely cites the royalty value of returned-records in 1964 and 1966, $31,000 and $82,653, respectively, as proof that taxpayer had no obligation to Evans for 1962 or 1963.

Sixth, the figures for records returned in 1964 and 1966 should not have been considered by the Tax Court at all. ABKCO had no facts in 1962 and 1963 to indicate that Evans’ popularity would fall off in 1964. The validity of these deductions should not be determined by what the Tax Court now knows, but on the basis of what ABKCO knew or should have known when it completed its returns for 1962 and 1963. In light of the high sales of Evans’ records in the years in question, there is no basis to conclude that the taxpayer could expect a return of records in a subsequent year in any significant quantity. It would appear to me, therefore, that the taxpayer has estimated its liability with reasonable certainty. Any overstatement was minimal at most and capable of adjustment in subsequent years, as allowed by Treas. Reg. § 1.461-1 (a) (2). Equally important is the fact that the records returned in 1966 might have been shipped in 1964 or 1965 — and therefore would have no bearing on the accuracy of the 1962 or 1963 tax returns.

The taxpayer here is admitting its liability to Evans and denying the contingency of its obligation. This is not a case in which the taxpayer contests a liability while simultaneously accruing it for tax purposes. Cf. Security Flour Mills Co. v. Commissioner of Internal Revenue, 321 U.S. 281, 64 S.Ct. 596, 88 L.Ed. 725 (1944); Dixie Pine Products Co. v. Commissioner of Internal Revenue, 320 U.S. 516, 64 S.Ct. 364, 88 L.Ed. 270 (1944); Lustman v. Commissioner of Internal Revenue, 322 F.2d 253 (3d Cir. 1963). That such cases are clearly distinguishable from this case is evidenced by the special treatment afforded the former under the Code and its corresponding regulations. 26 U.S.C. § 461 (f); Treas.Reg. § 1.461-2. While I recognize that deductions for accruals are not allowed just because a taxpayer admits a liability, Peoples Bank and Trust Co. v. Commissioner of Internal Revenue, 415 F.2d 1341 (7th Cir. 1969); Filed Enterprises, Inc. v. United States, 348 F.2d 485, 172 Ct.Cl. 77 (1965), such instances by their very nature warrant closer analysis than those in which the taxpayer itself contests liability.

To me the accrual of these royalties on a year by year basis most nearly corresponded with the realities of the business transaction, as those realities now appear, and, even more obviously, as those realities would have been known by the taxpayer in 1962 and 1963. Expenses of one year cannot be used to reduce income of a later year, and a taxpayer who fails to accrue an expense in the proper year pays the price of losing it as a deduction unless he files a claim for credit or refund within the time allowed: Treas.Reg. § 1.461-1 (a) (3). Had ABKCO elected to defer claiming its deductions until the year of payment, would it now be confronted with the argument that the royalties should have been accrued for 1962 and 1963 and are now forever lost? It might well be — and if so, this would mean the Commissioner can await subsequent events and second guess the taxpayer to the Government’s great advantage. I do not believe this is the law nor that it should be.

For the reasons stated, I respectfully dissent and would reverse the decision of the Tax Court.

      . The royalties were to be five per cent of x-eeords produced to be sold, that is, 90% of all records produced. Apparently, industry experience has shown that ten per cent of all records produced will not be sold: they will be used for promotional purposes, be returned by distributors, etc.

      . In Denise, the taxpayer was engaged in strip mining. As one of its costs, it accrued estimates of the amounts it would be required to spend in future years for land rehabilitation. The Tax Court’s decision that these expenses were too speculative was rejected by this Court.

      . Treas.Reg. § 1.446-1 (a) (2) says: “ . . . A method of accounting which reflects the consistent application of generally accepted accounting principles in a particular trade or business in accordance with accepted conditions or practices in that trade or business will ordinarily be regarded as clearly reflecting income, provided all items of gross income and expense are treated consistently from year to year.” (emphasis added) When evidence of industry practice was offered, the Learned Hearing Judge said “ . . .1 will not preclude you from presenting this evidence to the Court, and let you attempt to make anything out of it that you think you can, but I think I must caution you that it is probable that you can make very little of [sic] anything out of it. The problem is, under this contract, and there are many points in the law where commercial accounting practices do not coincide with the accounting permissible under the tax laws, so with full awareness of the difficulties and pitfalls that face you, I will let you go ahead.” Appendix, p. 49.

      . At the time of the hearing before the Tax Court, ABKCO offered to show for each year, not just 1964 and 1966, the value of Evans’ records shipped and the value of Evans’ records returned by distributors. The Court indicated this evidence would have little probative force because a consideration of matters occurring in subsequent years would “destroy the whole concept of the annual system of accounting.” Appendix, pp. 39-41. The taxpayer then withdrew the witness who was to supply this data.

      . For 1964, Evans’ royalty account was charged with $31,000. for records returned by distributors as unsold. In prior years he had been credited with royalties for records shipped as follows:
      Year ending
      December 31, 1961 $ 17,973.64
      December 31, 1962 433,712.00
      December 31, 1963 187,065.00
      Total $638,750.64
      Thus, the charge back in 1964 amounted to less than five per cent of the prior years’ royalties.


text:
    PROJECT MAP, INC. v. The UNITED STATES.
    No. 31-73.
    United States Court of Claims.
    Nov. 14, 1973.
    John S. Nolan, Washington, D. C., Atty. of record, for plaintiff.
    Russell W. Koskinen, Washington, D. C., with whom was Acting Asst. Atty. Gen., Irving Jaffe, for defendant.
    Before DAVIS, SKELTON and KUN-ZIG, Judges.
   ON DEFENDANT’S AND PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT

PER CURIAM:

This case implicates three contracts plaintiff Project Map, Inc. has had with the Department of Labor. The contractor sues to recover $26,166.42 admittedly due it under Contract 0424. The defendant has withheld that sum from the amount concededly owing under that agreement because, on the other two contracts (Contracts 0401 and 0430), the contracting officer determined that plaintiff had been overpaid by at least that figure. In each instance this determination of overpayment was appealed to the Department’s Board of Contract Appeals, and both disputes are still pending before that tribunal. The contractor says that there is no dispute as to Contract 0424, on which it is suing, and therefore it should now be paid the full sum due under that agreement. The Government admits that there is no controversy as to 0424 but asserts a right to set off, on that agreement, amounts it claims owing to it under the other two contracts. Both sides have moved for summary judgment.

Part III of Dale Ingram, Inc. v. United States, 475 F.2d 1177, 1188, 201 Ct.Cl. 56, 76 (March 1973), dealt with precisely the same problem. In that instance, too, the defendant withheld payment of a sum awarded by the Board of Contract Appeals on one contract because there was then pending before the Board a dispute as to another of the contractor’s agreements under which the contracting officer had held the contractor indebted to the Government in a larger sum. That plaintiff, just like Project Map, Inc., argued that the failure to pay the conceded sum was a breach of contract entitling the claimant to immediate judgment. The court squarely rejected this contention “because the Government has a right of off-set with respect to the decision of the contracting officer [on the other contract] now pending before the Board in which he held that the plaintiff is indebted to the Government in the sum of [a figure greater than that withheld]. The decision of the contracting officer in this regard is final and binding until and unless it is reversed or changed by the Board or by this court should the case be appealed here from the Board. Consequently, the Government has the right to withhold the [sum withheld] awarded to the plaintiff in this case until [the other appeal] has been finally decided.” 475 F.2d at 1188, 201 Ct.Cl. at 76.

Dale Ingram, Inc. is dispositive here. We do not agree with plaintiff that that holding was counter to 31 U.S.C. § 227, a provision which is limited to prescribing the procedure for offsets against court judgments obtained against the Federal Government. The section does not deal with the federal right of set-off prior to the entry of a court judgment, nor does it suggest in any way that the set-off rights of the Federal Government, unlike those of other creditors, are confined to the single remedy of set-off after a judgment has been obtained. On the contrary, in United States v. Munsey Trust Co., 332 U.S. 234, 239, 67 S.Ct. 1599, 1602, 91 L.Ed. 2022 (1947), the Supreme Court said that “the government has the same right ‘which belongs to every creditor, to apply the unappropriated moneys of his debtor, in his hands, in extinguishment of the debts due him.’ ” See, also, Madden v. United States, 371 F.2d 469, 470, 178 Ct.Cl. 121, 122-123 (1967). There is no intimation that this right is restricted solely to a debt which is admitted by the debtor, and that has not been the practice either of the Government or of the private commercial world.

If 31 U.S.C. § 227 has any bearing at all, its underlying policy serves to support the ruling in Dale Ingram, Inc. The section declares that, in the circumstances to which it applies, the Comptroller General, once the alleged debtor disputes his obligation, shall cause legal proceedings to be begun to try out the issue — but only “if such debt is not already in suit.” The premise is simply that there should be an impartial determination of the disputed debt. But that is exactly what is happening in Dale Ingram, Inc., as well as in the present case. In both instances, the controversial debt is “already in suit” in the sense that the Board of Contract Appeals (and perhaps ultimately a court) will decide whether the money is properly owing by the contractor. There is thus bound to be an impartial determination, and the process of securing it had already been started before this action was begun. Cf. Eastport S.S. v. United States, 130 F.Supp. 333, 335, 131 Ct.Cl. 210, 214 (1955).

Plaintiff also contends that Dale Ingram, Inc. is contrary to the rationale of Eastport S.S. v. United States, supra, 130 F.Supp. at 335, 131 Ct.Cl. at 213-214, and id., 140 F.Supp. 773, 135 Ct.Cl. 175 (1956). We perceive no inconsistency. Eastport Steamship I involved a disputed debt set off by the Comptroller General against a prior judgment obtained by the steamship company against the United States; instead of waiting for the Comptroller General to cause a suit to be instituted, the plaintiff brought suit here for the portion of the prior judgment which had not been paid. The court held that 31 U.S.C. § 227, supra, did not prevent the claimant from taking the initiative by itself instituting the first action. Eastport Steamship II carried out that reasoning to allow interest if the withholding turned out to be improper. Nothing in either opinion suggests, even remotely, that the procedure under § 227, after judgment is entered, is the only right of set-off ever possessed by the Government. Nor do the opinions imply that, where, as here, a proceeding to resolve the dispute is already in existence, the claimant has a right to commence a second, independent proceeding.

We shall therefore follow Dale Ingram, Inc. in granting judgment for the amount withheld under Contract 0424, subject to the Government’s right of set-off. At the oral argument we were informed, and both parties agreed, that in August 1973 the contracting officer revised his determinations to find that the plaintiff is due $31,275.67 under Contract 0424 and that the defendant’s claims under Contracts 0401 and 0430 are reduced to $15,973.60. This leaves a balance of $15,302.07 admittedly due plaintiff, without dispute. We see no reason why this sum should not be paid promptly to plaintiff once its tax problems are finally disposed of. The remaining amount represents the alleged debt, still in controversy, which is now before the Board of Contract Appeals for determination. Disposition of that portion of the amount in suit will have to await the final outcome of those administrative proceedings and of any court review which may follow.

Accordingly, we grant and deny both motions for summary judgment to the extent that judgment is awarded plaintiff for $26,166.42, subject to the right of the Government to set-off its claims, if any, against the plaintiff in the appeals now pending before the Board of Contract Appeals (or by a court if the case goes to court), and also with respect to any tax, interest or penalty still due under or with respect to the notice of levy filed by the Internal Revenue Service with the Department of Labor.

      . “§ 227. Offsets against judgments against United States

      “When any final judgment recovered against the United States duly allowed by legal authority shall be presented to the Comptroller General of the United States for payment, and the plaintiff therein shall be indebted to the United States in any manner, whether as principal or surety, it shall be the duty of the Comptroller General of the United States to withhold payment of an amount of such judgment equal to the debt thus due to the United States; * * * ”

      . The Labor Department received a notice of levy from the Internal Revenue Service against plaintiff in the sum of $156,662.90, but plaintiff’s brief says that the full amount of the taxes has been paid and a request for abatement of the penalties has been filed (which plaintiff expects to be favorably considered).


author: KUNZIG, Judge. NICHOLS, Judge DAVIS, Judge

text:
    FEDERAL ELECTRIC CORPORATION v. The UNITED STATES,
    No. 166-72.
    United States Court of Claims.
    Oct. 25, 1973.

      C. Stanley Dees, Washington, D. C., for plaintiff. Gilbert A. Cuneo, Washington, D. C., attorney of record for plaintiff. Harvey G. Sherzer, Washington, D. C., N. J. Villarosa, Nutley, N. J., and Frank X. Prevost, New York City, of counsel.
    Sheldon J. Wolfe, Washington, D. C., with whom was Acting Asst. Atty. Gen., Irving Jaffe, for defendant.
    Before COWEN, Chief Judge, and DAVIS, SKELTON, NICHOLS, KASHI-WA, KUNZIG and BENNETT, Judges.
   ON PLAINTIFF’S MOTION AND DEFENDANT’S CROSS MOTION FOR SUMMARY JUDGMENT

KUNZIG, Judge.

Plaintiff Federal Electric Corporation (FEC) presents a five-count claim for relief in this case involving an indefinite quantity contract between FEC and the Government:

Count I requests a Wunderlich Act (41 U.S.C. §§ 321, 322 (1970)) review of an adverse decision by the Armed Services Board of Contract Appeals (the Board)

Count II asserts the Government breached the contract by insisting plaintiff perform following plaintiff’s purported revocation.

Count III asserts the Government breached the contract by improperly re-procuring under the contract for another supplier’s account.

Count IV alleges a fifth amendment taking of property as a result of the Government’s action described in count II.

Count V alleges a fifth amendment taking of property as a result of the Government’s action described in count III.

Plaintiff moves for summary judgment on counts I through III, while the Government cross-moves for summary judgment on these three counts and moves for summary judgment on counts IV and V.

We hold that the Board’s conclusion in favor of the Government withstands Wunderlich review (count I). We further hold that plaintiff’s arguments gain no greater credence by casting the dispute in terms of a breach of an implied-in-fact contract (counts II and III). Thus, our legal conclusions in favor of the Government under Wunderlich review equally dispose of plaintiff’s breach claims. Accordingly, the Government’s motion for summary judgment on counts 1, II and III should be granted, and the plaintiff’s motion should be denied.

Having so concluded, it is unnecessary for the court to discuss plaintiff’s fifth amendment argument (counts IV and V). Only if the contract had been held unenforceable or the reprocurement erroneous would plaintiff possibly have had an argument that its performance under such conditions resulted in a taking without just compensation. Accordingly, the Government’s motion for summary judgment on counts IV and V should be granted.

I

Background

FEC responded to an Air Force Request for Proposal (RFP) for the production and delivery of five types of mobile generator sets of varying sizes and capacities. The RFP called for an indefinite quantity contract with a minimum of 453 and a maximum of 3600 generators to be ordered within a 12-month period. On December 17, 1965, the contract (AF 04(606)-15369) was approved by an authorized representative of the Secretary of the Air Force. Thereafter, on December 20, 1965, the Air Force mailed an official acceptance of plaintiff’s proposal and at the same time issued the first delivery order for the minimum quantity. On January 11, 1966, the Air Force issued a second delivery order for an additional six generators. Subsequent to receipt of the first two orders, plaintiff realized that^ it had made some substantial errors in its response to the RFP which were resulting in unanticipated losses. Plaintiff had anticipated a small loss on the contract, but not to the extent that became apparent once production began. After meeting with the appropriate Air Force officials, plaintiff notified the Government by letter dated March 29, 1966 that it considered the contract unenforceable with respect to all future unordered goods. The contractor further asserted that its offer to supply the Government up to 3600 generators constituted a revocable offer by plaintiff for those units not yet ordered by the Government. In accordance with this position the contractor advised the Government as follows:

1. Federal Electric Corporation hereby withdraws its offer to supply the unordered generators under Contract AF 04(606)-15369 at the prices quoted in the contract.
2. Notwithstanding the above, should the Government deem that the offer of Federal Electric Corporation, as contained in Contract AF 04(606)-15369, is irrevocable and, as a result thereof determines to place additional orders for generators, then Federal Electric Corporation will promptly pro-' ceed to manufacture the unit so ordered under protest and without prejudice to its rights.
3. Should, as a result of subsequent actions by FEC and/or the Government, it be determined that FEC’s position is correct, as defined above, an equitable adjustment shall be made in accordance with the “Changes” and/or “Extras” clauses of the aforementioned contract.
4. Production under future orders for additional generators will not be deemed as a waiver of FEC’s rights to recover the losses it experiences in supplying the generators because of mistakes made by FEC in bidding contract AF 04(606) — 15369.
5. FEC further asserts that its actions herein are taken solely for the purpose of protecting FEC’s legal rights and that nothing herein should be deemed in any manner whatsoever as a refusal to perform pending resolution of the dispute or disputes between the parties hereto or in any way serve as grounds for terminating the contractor’s right to proceed.

Subsequent to FEC’s letter of March 29, 1966, the Air Force issued the following orders:

Order number Date Quantity

3 March 30, 1966 292

4 April 15, 1966 662

5 May 10, 1966 .................... 8

6 June 13, 1966 101

7 June 14, 1966 199

8 August 17, 1966 .................. 43

9 November 7, 1966 ................. 443

10 December 9, 1966 ................. 426

Plaintiff objected to receipt of each of these and, with the exception of orders number 9 and 10, individual appeals were taken from adverse decisions of the contracting officer regarding plaintiff’s obligation to deliver the items. Additionally, plaintiff objected to orders four and six on the separate basis that they had been expressly made to cover generators ordered but never delivered under a different contract with the Bogue Electric Company (Bogue) and, therefore, intended to mitigate that defaulting contractor’s damages. Throughout this period, plaintiff adhered to its position, as outlined in the March 29, 1966 letter, that it would continue to perform, but under protest.

Plaintiff’s appeals from the decisions of the contracting officer were consolidated before the Board. The Board decided for the Government, concluding:

(1) That the FEC contract came into effect on December 20, 1965, simultaneously with defendant’s placing of the minimum order and, hence, was enforceable ab initio. Plaintiff was thus bound to supply all orders placed under the contract at the prices set forth therein.
(2) The contracting officer was entitled to issue orders under the subject contract to accomplish the reprocurement for the account of Bogue.

We will deal with these two issues separately in the sections which follow.

II

Enforceability of the Indefinite Quantity Contract

In deciding for the Government with regard to the enforceability of the FEC contract, we depart from the Board’s reasoning.

An indefinite quantity contract provides for the furnishing of an undetermined quantity of supplies or services during a specified period. The advantages to the Government of this type of contract are clearly set forth in the applicable Armed Services Procurement Regulations (ASPR):

(i) Flexibility with respect to both quantities and delivery scheduling;
(ii) Supplies or services need be ordered only after actual needs have materialized ;
(iii) The obligation of the Government is limited; and
(iv) It permits stocks to be maintained at minimum levels and allows direct shipment to the user.

32 C.F.R. § 3.409(c)(2) (1965). In order to avoid an attack upon this type of contract for lack of mutuality of obligation (i. e., one party to the contract being obligated to perform while the other is not), the contract must obligate the Government to order a stated minimum quantity. 32 C.F.R. § 3.409-3(a) (1972). See Willard, Sutherland & Co. v. United States, 262 U.S. 489, 493, 43 S.Ct. 592, 67 L.Ed. 1086 (1923).

Although the instant contract did provide for a minimum order of 453 generators, the contractor contends that, since the Government did not place the minimum order until three days after the effective date of the contract, the entire contract is unenforceable ab initio due to lack of mutuality of obligation.

The Government counters that the contract was enforceable because the minimum order was incorporated in or issued contemporaneously with the execution of the contract, and that plaintiff was entitled only to compensation provided for in the contract. In the alternative, the Government contends that, if the contract was unenforceable, plaintiff is barred from seeking additional relief because plaintiff performed and an unenforceable contract is enforceable to the extent that it is performed.

We deem it unnecessary to resolve the issue of enforceability ab initio since we accept the Government’s alternative contention. The present case is governed by the Supreme Court decision of Willard, Sutherland & Co. v. United States, supra, where the Court held that an indefinite quantity government contract, unenforceable at its inception due to a lack of mutuality of obligation, became valid and would be enforced to the extent it was performed. Id. at 493-494, 43 S.Ct. 592.

This court applied the Willard, Sutherland rule to hold enforceable an indefinite quantity contract to the extent that orders had been placed by the Government under it, without determining whether or not the contract was valid ab initio. Tennessee Soap Co. v. United States, 126 F.Supp. 439, 441, 130 Ct.Cl. 154, 158 (1954). This precedent squarely governs the situation at hand. The required minimum order having been satisfied, FEC’s entitlement to compensation for supplying 2633 generator units, including the 2174 supplied following plaintiff’s purported revocation, is governed by the terms of the subject contract.

Nor is this result affected by the fact FEC continued to perform after March 29, 1966 under protest. The contractor in Willard, Sutherland clearly stated that it was “doing this [i. e., performing despite the unenforceability of the contract] under protest which can be straightened out later.” The protest issue was also raised in Early & Daniel Co. v. United States, 271 U.S. 140, 46 S.Ct. 457, 70 L.Ed. 874 (1926), which involved an indefinite quantity contract to deliver hay. When a dispute arose over an alleged breach by the Government, the contractor stated:

[W]e want it distinctly understood that we are doing this under protest and are going to put the matter up to proper authorities in Washington; and if they rule in our favor, [we] want settlement at fair market price for amount we overfill.

271 U.S. at 141, 46 S.Ct. at 457. This language is strikingly similar to that used in FEC’s letter of March 29, 1966. Nevertheless, the Supreme Court held in Early & Daniel that the contractor had the option of delivering or not delivering. Having chosen to deliver, even under protest, the Willard, Sutherland rule applied and the contractor was bound to the contract price to the extent that the contractor performed. Id. at 142, 46 S.Ct. 457.

In an attempt to avoid the effect of the Willard, Sutherland rule, plaintiff raises two arguments which we feel are without merit. First, plaintiff contends that “under the contract” the Government’s actions constituted a “change” and that the disputes clause compelled continued performance under protest by plaintiff while pursuing an administrative adjustment. See Dynamics Corp. of America v. United States, 389 F.2d 424, 182 Ct.Cl. 62 (1968).

In Dynamics Corp. we held that plaintiff’s performance under protest in order to comply with its contract’s standard disputes clause distinguished its situation from the Willard, Sutherland and Early & Daniel precedents, in which disputes clauses were not present. No challenge was made, however, to the enforceability of the indefinite quantity contract in Dynamics Corp.; the dispute involved only performance by the contractor subsequent to the termination of the admittedly valid agreement. In the present case on the other hand, FEC seeks first to disavow the existence of the subject contract and then, by citing the Dynamics Corp. precedent, to take advantage of the disputes clause which is a part of that very agreement. We cannot abide this effort by the plaintiff to “come up under” the same contract' it seeks to have nullified. Plaintiff “can’t have it both ways.”

Secondly, under its breach-of-contract theory, plaintiff contends that the Willard, Sutherland rule has been modified by recent cases which allow continued performance despite a pre-existing breach. See, e. g., Northern Helex Co. v. United States, 455 F.2d 546, 197 Ct.Cl. 118 (1972). Plaintiff’s reliance on Northern Helex is misplaced. Although the court there allowed continued performance without prejudice after a breach had occurred, the court emphasized that it takes “particular circumstances” in “specific cases” to warrant such action. The special circumstances of Northern Helex (i. e., the processing and storing of helium, a valuable national resource, as a by-product of another chemical process) clearly distinguishes that ease from the instant one.

Though we might find persuasive the contemporary view of performance under protest as restated in section 1-207 of the Uniform Commercial Code and accepted by the court under the special circumstances of the Northern Helex case, we hesitate to extend this view in the face of a clear, contrary rule established and affirmed, albeit a half century ago, by the Supreme Court. We are reminded in this connection of the Court’s recent expression of “difficulty in comprehending how decisions by lower courts can ever undermine the authority of a decision of [the Supreme] Court.” United States v. Mason, 412 U,S. 391, 93 S.Ct. 2202, 37 L.Ed.2d 22 (1973).

In summary, we hold that the subject contract was enforceable to the extent that it was actually performed.

III

The Bogue Reprocurement

Having concluded that the instant contract was enforceable to the extent that it was performed irrespective of the contractor’s protests, it is necessary to discuss plaintiff’s secondary contention — that the Air Force was not entitled to place orders under the contract for the account and benefit of a defaulted contractor. We find that the Board’s decision for the Government was correct as a matter of law.

Prior to the execution of the instant contract, the Air Force was having difficulties with Bogue, another supplier of the same generators. A contract with Bogue was terminated for default on November 19, 1965, thus necessitating a re-procurement to satisfy the requirements of that agreement. Accordingly, the Government on January 31, 1966 issued a reprocurement RFP. FEC responded to this new RFP. The bid price was substantially higher than the one which resulted in the FEC December 1965 contract, yet was still the lowest bid submit-mitted in response to the reprocurement RFP. Rather than issue a new contract, the Government on or about February 21, 1966 offered FEC additional consideration to permit the Government to repro-cure the Bogue units under the original FEC contract. FEC rejected this proposal. The Government then decided to utilize the existing contract to satisfy its reprocurement needs. Accordingly, the Air Force issued the fourth and sixth delivery orders under the original contract on April 15, 1966 and June 13, 1966 for 763 units which had been ordered but not delivered under the Bogue contract. Plaintiff delivered these units, as all others in question, under protest.

FEC contends that the Government was not entitled to reprocure the Bogue requirements under the instant contract, since it was clear that a substantial loss to FEC would result from said reprocurement. The grounds for this position are first that the Board erred in interpreting 32 C.F.R. § 8.602-6(a) (1965), requiring that the contracting officer reprocure at “as reasonable a price as practical,” to mean the “lowest practical price.” Secondly, plaintiff cites the “mistake in bid” cases for the proposition that its original contract was a mistake and thus could not be utilized as the basis for the reprocurement. See Royal Pioneer Paper Box Mfg. Co., 69-1 BCA ¶ 7631; Octagon Process, Inc., 65-2 BCA ¶ 5168.

We deem it unnecessary to reach these difficult questions in this case because we hold that, as far as FEC was concerned, orders four and six were subject neither to reprocurement nor new-contract guidelines because they were merely additional orders under a pre-existing contract.

Admittedly, it appears harsh to place the financial burden of Bogue’s default upon plaintiff. Nevertheless, by the terms of the FEC contract the Government was free to order up to 3600 generators within one year, regardless of the reason why said generators were needed. As long as orders four and six did not result in the quantity limitations of the original contract being exceeded and were consistent in all other respects with the specifications of the contract, there was nothing to prohibit the Government from placing the orders under the original contract. The fact that these were reprocurement orders is relevant only to the Government’s duty to mitigate damages to the defaulted contractor. In an effort to accomplish this goal, the contracting officer is not limited to specific methods of reprocurement, but rather is given broad discretion. Astro-Space Laboratories, Inc. v. United States, 470 F.2d 1003, 1017, 200 Ct.Cl. 282, 308 (1972).

Plaintiff finally contends that the parties’ negotiation for reprocurement under the FEC contract (but at a higher consideration) represented a contemporaneous interpretation by the parties that defendant was not entitled to accomplish the Bogue reprocurement under the subject contract according to its original terms, an interpretation that should be given great weight by the court. See, e. g., Dynamics Corp. of America v. United States, supra, 389 F.2d at 430, 182 Ct.Cl. at 73. We reject this assertion because of its speculative nature. The fact that defendant initially considered increasing plaintiff’s compensation does not necessarily mean defendant felt it could not procure under the original terms of the FEC contract, especially since defendant ultimately did exactly that. Hence, we do not feel the alleged contemporaneous interpretation merits sufficient weight to rebut our decision that the procurement of 763 generators under the FEC contract was proper.

In light of the foregoing, we conclude that the Board’s decision withstands Wunderlich review, though we reject some of the Board’s reasoning in reaching this result. Because the subject contract is found enforceable to the extent performed and the Bogue reprocurement was proper, plaintiff’s breaeh-of-contract arguments are without merit. For the same reasons, we find it unnecessary to reach plaintiff’s fifth amendment allegations.

Accordingly, plaintiff’s motion for summary judgment on counts I, II and III is denied; defendant’s cross motion for summary judgment on counts I, II and III and its motion for summary judgment on counts IV and V are granted; and the petition is dismissed.

NICHOLS, Judge

(concurring):

I join in the judgment of the court, but I would not reject the reasoning of the Board, 68-1 BCA § 6834, or any substantial part thereof. Its handling of the contentions also made here I find simple, sound, and convincing. One beauty (among many) of the Board’s opinion is that it avoids the Scylla and Charybdis between which this court, on its chosen course, must pass: that is, either we must ignore what we call “the contemporary view of performance under protest” or we must presumptuously overrule some elderly Supreme Court decisions. Since we can’t “undermine” their authority, I hope it is true we can’t add to it either.

DAVIS, Judge

(dissenting in part):

I join Parts I and II of the court’s opinion, but on the Bogue reprocurement (Part III) I differ. In my view the parties did not contemplate, when they made this contract, that the Government would be able to use the agreement as a vehicle for reprocuring items under someone else’s defaulted contract, where FEC would suffer a loss through such an order (and therefore objected to it). It seems to me most unlikely that, if the question had been raised during the negotiations, FEC would have agreed that it was obligated to fill the order. To do justice, I would construe the contract, despite its all-embracing language, as not covering this particular situation.

To sanction what was done here is to permit the defendant to elect to bail out Bogue at the expense of FEC — which had, of course, nothing to do with Bogue’s transgression. The defendant was not obligated to Bogue to use FEC as the reprocurement vehicle. The ASPR regulation, 32 C.F.R. § 8.602-6 (a) (1965), calling for reprocurement at “as reasonable a price as practical,” does not direct that the reproeurement order must be given to a low offeror who finds out he has bid too low because of a mistake. Octagon Process, Inc., ASBCA No. 10371, 65-2 BCA ¶ 5168. Similarly, this standard of “as reasonable a price as practical” would not require reprocurement under plaintiff’s contract which likewise had set the price too low because of mistake. On this basis that the Government was legally free to reproeure elsewhere, I would hold it overreaching, and not within the parties’ reasonable contemplation, to insist on reprocuring under the FEC ’ contract although it was by then known to be a loss arrangement. Bogue, not the innocent plaintiff, should bear that portion of the loss.

The rationale of Willard, Sutherland & Co., supra, does not, in my view, control this aspect of the case because the two Bogue reprocurement orders were an authorized constructive change in the original coverage of the contract, entitling plaintiff to an equitable adjustment. With respect to a changes claim “under the contract,” the contractor is required to continue performance, and by doing so does not forfeit his claim for additional payment. There is no problem of invalidity on this portion of the ease. The defendant affirmatively asserts the full validity of the contract, and the plaintiff assumes it, and must assume it, for this facet of its claim.

      . Federal Electric Corporation, 68-1 BCA ¶ 6834.

      . Part XI of the contract reads:
      “This contract shall be effective and binding as of the date of approval thereof by the Secretary or his duly authorized representative as set forth in General Provision 37. The Government reserves the right to issue orders against this contract for a period not to exceed 12 months from the date of approval. For the purposes of computing the aforementioned 12 month time period on this contract, the first day of the contract period shall be excluded and the last day of the contract shall be included.”

      . The following stipulation was submitted by the parties to the Board:
      * * * * *
      “5. That appellant timely appealed from final decisions upholding the right of the Government to issue Orders 3 through 8 under the subject contract. Should the Board determine that appellant was not obligated to accept orders under the contract subsequent to its letter of 29 March 1966 (Tab S, Rule 4 Documents for ASBCA No. 11726, and Tab M for ASBCA No. 11918), a decision by the ASBCA will affect Orders 3 through 10. * * * ”

      . See 1A A. Corrbin, Contracts 152 (1950); 1 S. Williston, Contracts 105A (3d ed. 1957).

      . “A party who with explicit reservation of rights performs or promises performance or assents to performance in a manner demanded or offered by the other party does not thereby prejudice the rights reserved. * * * ”