
77 F.Supp. 380 (1948)
FEDERAL CARTRIDGE CORPORATION
v.
UNITED STATES.
No. 47675.
Court of Claims.
May 3, 1948.
*381 *382 *383 *384 *385 *386 *387 Loring M. Staples, of Minneapolis, Minn. (Faegre & Benson, of Minneapolis, Minn., on the brief), for plaintiff.
Paris T. Houston, of Washington, D. C., and H. G. Morison, Asst. Atty. Gen., for defendant.
Before JONES, Chief Justice, and WHITAKER, HOWELL, MADDEN and LITTLETON, Judges.
WHITAKER, Judge.
Plaintiff sues for Social Security taxes which it alleges it was required to pay on account of its performance of a cost-plus-a-fixed-fee contract which it entered into with the defendant for the operation of the Twin Cities Ordnance Plant at New Brighton, Minnesota.
Prior to entering into this contract with defendant on July 14, 1941, plaintiff had been operating at Anoka, Minnesota, about 13 miles from New Brighton, a plant for the manufacture of sporting-type ammunition, shotgun shells, .22 calibre rifle ammunition, and air-rifle ammunition. Its annual pay roll at this plant ran in the neighborhood of $600,000. On this it was subject to a Social Security tax levied by the State of Minnesota of ¾ of 1 percent. The Minnesota *388 tax was graduated from 0.5 of 1 percent to 2.75 percent, depending upon the amount payable from the Minnesota unemployment fund on account of unemployment in an individual plant. In plaintiff's plant there was but little unemployment, and consequently the tax levied upon it was comparatively small.
At the Twin Cities Ordnance Plant there was manufactured .30 calibre and .50 calibre cartridges. These were cartridges used by the armed forces. It was a war plant. Its operations ceased upon termination of the war.
In 1943 the State of Minnesota amended its Employment and Security law to provide for unemployment which would be brought about by the termination of the war. Insofar as plaintiff's situation is concerned, it provided for a levy of 3 percent on that part of an employer's pay roll which exceeded 200 per cent of its 1940 pay roll. Plaintiff's pay roll at its Anoka plant during the war years was much less than 200 percent of its 1940 pay roll; but, its quarterly pay rolls at the Twin Cities Ordnance Plant ran from $3,511,103.42 to $14,204,176.71 as against the largest 1940 quarterly pay roll of $170,698.34. Hence, plaintiff became liable for the 3 percent tax. It became liable for it only because of its operations at the Twin Cities Ordnance Plant.
The question presented is whether or not it is entitled to charge as a cost of performance the entire 3 percent levied on its combined Anoka and New Brighton pay rolls, or whether or not this 3 percent tax should be apportioned between the New Brighton Plant and the Anoka Plant in accordance with the pay rolls at each, and only a portion charged as a cost of performance under the cost-plus-a-fixed-fee contract. The Comptroller General took the latter view and plaintiff sues on the theory that the entire 3 percent tax was an expense attributable to its operation of the Twin Cities Ordnance Plant, and that under its contract with the Government it is entitled to reimbursement therefor.
The contracting officer agreed with plaintiff, and reimbursed it for the entire amount it paid on account of this 3 percent tax; but the Comptroller General overruled the contracting officer, and the contracting officer in turn required plaintiff to make reimbursement for the amount of this tax attributable to the Anoka pay roll. Notwithstanding this decision of the Comptroller General, the Board of Contract Appeals in the War Department also held that the plaintiff was entitled to be paid the entire 3 percent tax, but the Comptroller General adhered to his previous decision and plaintiff has not been paid the amount of this tax attributable to the pay roll at the Anoka plant.
Whether or not this is right is, of course, to be determined by the provisions of the contract.
Article V-A of the contract provided in part: "(1) The Contractor shall be reimbursed in the manner hereinafter described for such of its actual expenditures in the performance of the work under this contract, and * * * paid the predetermined fixed amounts as may be approved or ratified by the Contracting Officer, and as are included in but not limited to the following items: * * *" Paragraph a provided for reimbursement of labor, materials, tools, machinery, equipment, etc., for "either temporary or permanent use for the benefit of the work." Paragraph e provided for expenses of procuring labor and transportation of material, supplies, etc. Paragraph i provided for reimbursement of: "The cost of losses or expenses not compensated by insurance or otherwise * * * actually sustained by the Contractor in connection with the work and found and certified by the Contracting Officer to be just and reasonable, unless reimbursement therefor is expressly prohibited; * * *" and paragraph k provided for reimbursement of: "Payments made by the Contractor under the Social Security Act (employer's contribution) and any disbursements required by law which the Contractor may be required on account of this contract to pay on or for any plant, equipment, process, organization, materials, supplies, or personnel * * *"
In addition to this article of the contract, article VII-A contained this broad language: "It is the understanding of the parties hereto, and the intention of this *389 contract, that all work under Titles I, II, III, and IV of this contract is to be performed at the expense of the Government and that the Government shall hold the Contractor harmless against any loss, expense (including expense of litigation), or damage (including liability to third persons because of death, bodily injury or property injury or destruction or otherwise) of any kind whatsoever arising out of or in connection with the performance of the work under this contract, except to the extent that such loss, expense, damage or liability is due to the personal failure on the part of the corporate officers of the Contractor * * * to exercise good faith or that degree of care which they normally exercise in the conduct of the Contractor's business."
It is thus seen that it was, in short, the intention of the parties that the contractor should be reimbursed for every sort of expense or liability incurred as a result of the carrying out of the contract, with the sole exception of such expenses as were incurred as the result of the failure of plaintiff's officers to exercise good faith or that degree of care which they exercised in the carrying out of their own business.
Plaintiff was merely running the plant for the Government; the Government was paying all the expenses and paying the plaintiff a fee for running the plant for it.
It is admitted that except for the operation of this Twin Cities Ordnance Plant, plaintiff would not have been liable for this extra 3 percent unemployment tax. The payment of the tax, therefore, was an expense incident to the carrying out of this contract, and under its plain terms plaintiff is to be reimbursed therefor in full.
There is more than one provision of the contract that requires this. It is required under article VII-A, in which the Government agrees that it will "hold the Contractor harmless against any loss, expense, * * * or damage * * * of any kind whatsoever arising out of or in connection with the performance of the work under this contract."
It is allowable under paragraph i of article V-A, which reads in part: "The cost of losses or expenses not compensated by insurance or otherwise * * * actually sustained by the Contractor in connection with the work and found and certified by the Contracting Officer to be just and reasonable, unless reimbursement therefor is expressly prohibited; * * *" Nowhere in the contract do we find any prohibition against the payment of this expense, and the contracting officer has agreed that it was a just and reasonable expense because he authorized its payment.
The reimbursement of it is explicitly authorized under paragraph k of article V-A which reads: "Payments made by the Contractor under the Social Security Act (employer's contribution) and any disbursements required by law which the Contractor may be required on account of this contract to pay on or for any plant, equipment, process, organization, materials, supplies, or personnel; * * *" This was a disbursement required by law which the contractor was required to pay on account of the personnel employed in carrying out the contract.
We do not think the contract admits of any other interpretation. The plaintiff so construed it and the Government's own contracting officer so construed it.
Judgment will be entered in favor of the plaintiff for $87,498.42.
JONES, Chief Justice, and HOWELL, MADDEN and LITTLETON, Judges, concur.
