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AFL-CIO v. KAHN

May 31, 1979

AMERICAN FEDERATION OF LABOR AND CONGRESS OF INDUSTRIAL ORGANIZATIONS et al., Plaintiffs,
v.
Alfred E. KAHN, Chairman of the Council on Wage and Price Stability, et al., Defendants



The opinion of the court was delivered by: PARKER

MEMORANDUM OPINION

The issue presented for determination in this proceeding is whether President Jimmy Carter acted with statutory authority and within permissible constitutional limits when he issued Executive Order 12092, 43 Fed.Reg. 51375 (1978). *fn1" The Order and implementing regulations provide for debarment of federal contractors who do not comply with the administration's wage-price guidelines. The announced purposes of the Order are to curb escalating inflation, to provide standards to stem the continuing rise of wages and prices in the private economy, and to reduce inflationary cost trends in government procurement processes.

 The American Federation of Labor and Congress of Industrial Organizations, and nine of its affiliate international unions, including the United Rubber, Cork, Linoleum and Plastic Workers of America (United Rubber Workers or URW), challenge the Order and its implementing regulations. They seek declaratory and equitable relief against the defendants Alfred E. Kahn and Barry P. Bosworth, the chief administrative officers of the Council on Wage and Price Stability (Council or COWPS), and Lester A. Fettig, Administrator of the Office of Federal Procurement Policy (OFPP), Office of Management and Budget. These officials administer and enforce the wage-price controls which are central to the President's actions.

 The plaintiff unions charge that President Carter acted without statutory or constitutional authority and that the debarment mechanism constitutes in fact an unauthorized system of mandatory controls. They further charge that the President's action ignores and has the potential of destroying the long-standing and recognized public policy of free collective bargaining. They ask this Court to declare unlawful the system of wage controls embodied in the pay standard of the Order and the implementing COWPS and OFPP regulations. They also seek to enjoin the defendants from administering, enforcing or giving any effect to the system of controls as applied to wages.

 The defendants respond that the program is not mandatory within the meaning of the Council on Wage and Price Stability Act (COWPSA) *fn2" and is implicitly authorized by the Federal Property and Administrative Services Act of 1949 (Procurement Act). *fn3"

 The relevant matters and legal issues have been exhaustively briefed. The Court has reviewed the entire record and considered the oral presentations of the several able counsel.

 For the reasons set forth below the Court decides that the President has acted without statutory authority and has invaded an area reserved for the Congress by Article I of the Constitution. The anti-inflationary program as embodied in the system of controls authorized by Executive Order 12092 is unlawful and must be rejected.

 Introduction

 On May 2, 1979, the United Rubber Workers applied for temporary injunctive relief, seeking to enjoin the defendants from interfering with the then ongoing collective bargaining with several rubber companies and otherwise exercising authority under the Executive Order and the regulations. The application for a temporary restraining order was denied on May 4. At that time it appeared that cross motions for summary judgment were an appropriate and expedient means of presenting and resolving the issues involved. All counsel concurred, filed briefs on an expedited schedule and presented oral argument on May 16, 1979.

 Certain United States Senators and Representatives were allowed to file a memorandum amicus curiae. *fn4" The memorandum addressed the issue of executive authority and their application for leave to file stated:

 
The issues of statutory and constitutional authority for Executive Order 12092 presented in this case involve not only the interests of the parties to the action, but also the fundamental interest of Congress and its members in maintaining the constitutional authority entrusted to them.

 A. The Regulatory Scheme

 In promulgating the Executive Order, President Carter invoked the authority found in "the Constitution and statutes of the United States of America, including . . . the Council on Wage and Price Stability Act . . . (and) the Federal Property and Administrative Services Act . . . ." The Order has a two-fold purpose: "to encourage noninflationary pay and price behavior by private industry and labor, and to provide for the procurement by Executive agencies and Military Departments of personal property and services at price and wage rates which are noninflationary . . . ."

 The Order prescribes general standards to measure noninflationary wage and price behavior of private firms *fn5" and directs the Council on Wage and Price Stability to: issue guidelines to define further the standards for noninflationary pay and price behavior to be incorporated into government procurement contracts; monitor business compliance with them; publicize the names of noncompliant firms; publish procedures to be used in Council proceedings pertaining to the standards; and "take such other action as may be necessary and consistent with the purposes" of these directives. *fn6" The Order gives the Administrator of the Office of Federal Procurement Policy general responsibility for implementing the standards, including the issuance of regulations and procedures for determining exceptions and granting exemptions. *fn7" In addition, general sanctions are provided directing each executive agency and military department head to:

 
On December 28, 1978, the Council published final pay and price standards pursuant to ยง 1-101(b) of the Order. 43 Fed.Reg. 60772. The Council has published final procedural rules, which govern submission of reports and notifications requested by the Council as well as requests for approval of exceptions to the standards. 44 Fed.Reg. 1346 (1979).
 
On January 4, 1979, the Office of Federal Procurement Policy published a Policy Statement with the effect of final regulations. 44 Fed.Reg. 1229. Under the Statement, companies determined by the Council not to be in compliance with the noninflationary pay and price standards are ineligible for federal government contract awards anticipated to exceed $ 5 million, unless noncompliance is waived by the government. If after an award it is determined that a contractor was willfully not in compliance with the voluntary standards when he certified otherwise, the contract may be terminated or the contractor required to accept an equitable reduction of the contract price or cost allowance and profit or fee. The contractor must require a certification of compliance with the pay and price standards before awarding any first tier subcontract that exceeds $ 5 million.
 
The $ 5 million threshold directly covers approximately 50 percent of all government procurement dollars, but will actually influence up to 65 to 70 percent because many of the companies that must certify compliance for contracts exceeding $ 5 million also routinely bid on smaller government contracts.
 
The consequences of violating the certification provisions are serious. In addition to being declared ineligible for federal contracts, the names of noncompliant firms are circulated to all procuring agencies. Such firms are ineligible for any further award until removed from the Council's list. OFPP rules make COWPS the sole determiner of whether a firm is in noncompliance. An accused company receives notice and an opportunity to file written comments before being placed on the list but COWPS decides whether a hearing will be held.
 
These regulations have allegedly had a direct and serious impact. The affidavit of Peter C. Bommarito, *fn9" International President of the United Rubber Workers, filed with the application for a temporary restraining order, shows that the URW was negotiating with the so-called Big Four rubber companies Uniroyal, Firestone, Goodrich, and Goodyear in an effort to renew their contracts. Specifically, the URW was bargaining with Uniroyal, the lead company, with the objective of achieving a settlement that would be a pattern setter for the industry. In seeking temporary injunctive relief, the URW alleged that during the week of April 16, 1979, it had reached virtual agreement with Uniroyal on a contract in excess of the President's wage guidelines and that Firestone and Goodrich had also tentatively agreed to the settlement. The affidavit states that the government then intervened, threatening Uniroyal with contract debarment, and ultimately forced that company to renege on the agreement. The company is said to have denied reaching an agreement, though not to have denied a governmental role in the negotiations. In any case, no agreement has been reached and the URW called a strike against Uniroyal which is at present in its third week.
 
B. The Government's Contentions
 
In response to the union challenge, government counsel admit that this was the "first direct attempt . . . found (where the Executive used) the procurement power and . . . another executive agency to set wage and price guidelines through executive orders." *fn10" Nonetheless they stoutly maintain that President Carter's anti-inflationary program is based upon explicit statutory authority: that the Wage and Price Stability Act of 1974 authorizes the Council to establish the pay and price standards and that the regulatory scheme revolving around the debarment mechanism does not render the program involuntary; that the OFPP regulations designed "to ensure economy and efficiency in government procurement" are supported by the Procurement Act. They also insist that the anti-inflation measures pursued by Mr. Carter in no way conflict with prior congressional enactments.
 
The question of whether the President has exceeded permissible limits of statutory or constitutional authority is infrequently presented for judicial determination and is one which the Court approaches with great caution. The issue was before the Supreme Court in a strikingly similar situation in Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579, 72 S. Ct. 863, 96 L. Ed. 1153 (1952). The complexity of the issue is reflected by the number, length and variety of approaches of the several concurring opinions. For present purposes perhaps the most instructive is that of Mr. Justice Jackson who stated "(p)residential powers are not fixed but fluctuate, depending upon their disjunction or conjunction with those of Congress." 343 U.S. at 635, 72 S. Ct. at 870. He then delineated three situations where presidential powers might be challenged, and the legal consequences flowing from their "disjunction or conjunction with those of Congress:"
 
1. When the President acts pursuant to an express or implied authorization of Congress, his authority is at its maximum, for it includes all that he possesses in his own right plus all that Congress can delegate. . . .
 
2. When the President acts in absence of either a congressional grant or denial of authority, he can only rely upon his own independent powers, but there is a zone of twilight in which he and Congress may have concurrent authority, or in which its distribution is uncertain. Therefore, congressional inertia, indifference or quiescence may sometimes, at least as a practical matter, enable, if not invite, measures on independent presidential responsibility. . . .
 
3. When the President takes measures incompatible with the expressed or implied will of Congress, his power is at its lowest ebb, for then he can rely upon his own constitutional powers minus any constitutional powers of Congress over the matter. Courts can sustain exclusive Presidential control ...

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