Porter v. Sklut

        These two actions, which were consolidated for trial, are for an injunction and treble damages for alleged over-ceiling sales of skins. Since the commodity in question has been decontrolled, FN1 the prayer for injunctive relief is now moot and has been withdrawn by plaintiff. The claimed treble damages amounted to $19,766.88. A shipment, alleging an overcharge of $1,155.60, was abandoned by the plaintiff. Another shipment, alleging an overcharge of $269.32, was also abandoned. Prior to the introduction of testimony, plaintiff limited the action to two counts in Civil Action No. 526 and one count in Civil Action No. 684. In Civil Action No. 526 the Administrator alleged an overcharge of $362.96 on a shipment of hides made to the American Hide and Leather Company in July 1944 and an overcharge of $554.32 on a shipment of hides made in January 1945 to the same company. In Civil Action No. 684, the Administrator alleged an overcharge of $2,458.88 on a shipment of hides made to the Allied Kid Company in May 1945 and claimed $7,376.64. At trial, plaintiff conceded the alleged overcharge amounted to $348.60; the discrepancy between $2458.88 and $348.60 was due to the circumstance that the allegation of $2458.88 was the total invoice price to Allied Kid Company rather than the amount over the ceiling. In all cases of actual overcharge plaintiff asked for damages of treble the above amounts.

        The government offered the following testimony with respect to the shipments made to American Hide and Leather Company. The government inspector made a sample inspection which was at least as fair as that generally used in the trade to test the quality of hide shipments. The general practice is to make a check of 2 1/2% to 5% of the hides, but in these cases approximately 10% of the hides were checked. His testimony in regard to the shipment of July 1944 is analyzed as follows:

Weight	Total	No.	Percent	No. Skins	% of Upgrade
Range	No.	Inspected	Inspected	Upgraded	Base on No.
(lbs)	Skins				Inspected
--------	-----	---------	---------	---------	------------
12 to 17	250	25	10%	9	36%
9 to 12	390	30	8%	12	40%
7 to 9	394	24	6%	6	25%

        The total value of these three weight classification groups was $3,629.60 based on an invoice price for No. 1 hides and in accordance with the regulation; for No. 2 grade the invoice price would have been 10% less, or $362.96, and this is the amount of the overcharge alleged.

        The shipment of January 1945 is analyzed as follows:

Weight	Total	No.	Percent	No. Skins	% of Upgrade
Range	No.	Inspected	Inspected	Upgraded	Base on No.
(lbs)	Skins				Inspected
--------	-----	---------	---------	---------	------------
5 to 7	190	20	10%	12	60%
7 to 9	592	64	10%	22	34.4
9 to 12	612	60	10%	14	23.3
12 to 17	290	30	10%	7	23.3

        The total value of the four classes of hides checked was $5,543.20 based on invoice price for No. 1 grade. Using the same method of calculation as was applied to the prior shipment, the total overcharge for this shipment was $554.32.

        It appeared on cross examination of the government expert that defendants had paid $124.52 to the American Hide and Leather Company as a refund for the upgrading of the shipment of July 1944. It appeared also that the government expert's inspection and that of the American Hide and Leather Company were identical and that there was agreement between them on the entire inspection. The American Hide and Leather Company calculated their claim for refund based on the percentage of the sample as applied to the entire weight group involved. For example, if 36% of the sample was found to be upgraded, then they considered that 36% of the entire lot in that group had been upgraded and made their claims on that basis. Defendants offered testimony that the hides were of all one grade and that there was room for much difference of opinion by expert graders.

        In respect to the May 1945 shipment to Allied Kid Company the government, by a different expert witness, offered the same type of testimony as in the case of the two prior shipments. He made an examination of a little more than 11% of the skins. The witness testified that while the regulation set no standard that would serve as a guide for differences in classification, there would generally be no difference of opinion between experts as to the grade of skins when certain obvious defects such as improper trimming and holes in the skins were present. Defendants produced an expert who testified that there would probably be considerable disagreement among experts in regard to the grade to be given hides. Nevertheless, the witness testified as follows:

        'By the Court: Q. Were you present when Mr. Kalbfeld was in the Plant? A. Yes, I was.         'Q. Did you agree or disagree with his findings? A. I did not quite agree with him.'

        Defendants also produced a witness who testified that he was a hide expert and employed by the OPA for two years as a price specialist and investigator. At defendants' request, he inspected the shipment to the Allied Kid Company and, on a sample inspection, found all the hides that he inspected to be of No. 1 grade. The provisions of Revised Price Schedule 9 were as follows:

        'II. The Mixed Lot Provision of RPS 9 applies to These Shipments.         'Section 1314:12(d)         'Hides, kips or clafskins sold in mixed lots. When hides, kips or calfskins are sold in a lot containing more than one type or grade, the maximum price for the lot shall be the maximum price for that type or grade of hides, kips or calfskins included in the lot which has the lowest maximum price, unless (1) the quantity of each type and grade is determined by actual inspection and each type and grade is (2) individually marked or physically seperated so as to be easily identifiable and (3) separately priced on the invoice or similar document.'         'Section 1314:12(3)         'Maximum prices for No. 2's. The maximum price for No. 2 calf and kipskins of the classifications set forth above shall not exceed the maximum price for each such classification reduced by a discount of 10%.'

        Defendants argue that plaintiff has failed to prove any overcharges because, at most, there was honest difference of opinion as to the proper classification of the hides, but if there were any overcharges, then the above section nevertheless does not apply because, since they graded the skins, physically separated and identified them and invoiced them separately by type and grade, the terms of the mixed lot provision as to upgrading the entire lot do not apply. Plaintiff argues that the evidence clearly shows upgrading and that the mixed lot provision of Schedule 9 applies and the entire lot must be downgraded.         Harold Cohen, and Hugo A. Ricciuti, both of Baltimore, Md., and J. Grahame Walker, of Washington, D.C., for the Office of Price Administration.

        H. Albert Young, of Wilmington, Del., for defendants.

        LEAHY, District Judge.

         1. Plaintiff is right in his contentions. With respect to the first two shipments, plaintiff proved his case. The inspection by the government witness was confirmed by the inspector for the purchaser. Moreover, defendants, in effect, conceded that the inspection was a fair one because they made the refund without question. As to the Allied Kid shipment, the government's case is not quite so clear, but I think they have shown that their position is more probable than that of defendants. While it is true that one of the defendants' witnesses testified unqualifiedly that all the skins were of grade No. 1, yet their other witness, who was present at the government inspection, would only go so far as to say that he did not 'quite agree' with the government inspector. This would seem to corroborate the government's position because there was no necessity to disagree entirely with the government inspector because more than one skin was found to be upgraded; in fact, the percentage was very high. I accordingly think the government has proved that upgrading existed and I now turn to the method to be used in computing the overcharges.

         2. Defendants argue, even if there were some No. 2 grade skins in the lot, nevertheless, the mixed lot provision does not apply because of the three conditions specified in the provision, viz.: 'unless the quantity of each type and grade is determined by actual inspection and each type and grade is (2) individually marked or physically separated so as to be easily identifiable and (3) separately priced on the invoice or similar document. ' This argument has defects because the conditions of Revised Price Schedule 9 have not been met. The conditions could only be satisfied where each skin is correctly graded and marked. I have found that this was not the case. The general rule under the Schedule is that if a lot contains skins of more than one grade, all skins must be priced at not more than the maximum price for the lowest grade. The reason for this rule is obviously to facilitate inspection and enforcement of the Maximum Price Regulations, for individual grading and inspection would be wholly impractical. Now, the Schedule envisions that its terms may work a hardship in an individual case; that is the reason that a different rule may apply provided certain conditions are met. To receive the benefit of the special consideration, a seller must strictly comply with the conditions. One of the conditions is that each skin must be individually marked and, obviously, this means correctly marked. Defendants argue that this compels defendants to proceed at their peril and is too harsh. This does not follow because where even a single skin is shown to be upgraded a defendant is no worse off because under the mixed lot provisions the entire lot would be downgraded in such a circumstance. In short, where a seller has individually marked the hides and has incorrectly marked some of them no more severe consequences follow than would be the case under a concededly mixed lot shipment.

        If defendants were right, all a seller would need to do would be to invoice individually and mark the skins and perhaps secure great advantage. He would not be bound by the mixed lot provision compelling a downgrading of the whole lot to the lowest grade. And, if some of his skins were erroneously graded, he would be penalized only as to those. Consequently he would be better off than a seller operating under the general provisions of the section. I am sure that the Schedule was not intended to confer such a windfall on anyone. It was merely intended to alleviate hardship where certain conditions were met.

         I do not however think that the government is entitled to more than single damages. While it is true that the sample inspection showed a very large percentage of upgrading and while I accept sample inspection as showing upgrading, I nevertheless think that such inspection is not satisfactory to show a wilful design on the part of defendants to violate the specified Schedule.

        Judgment may be had, therefore, for the actual amount of overcharge.