Brooks-Scanlon Corp. v. United States

Background

A private company held and had assigned a contract with a shipbuilder to construct a cargo ship (hull #193) to be completed February 1, 1918. The company had paid large installments, supplied plans, and inspected work; about 19% of the ship was finished by August 3, 1917. The United States Shipping Board Emergency Fleet Corporation, acting under the Emergency Shipping Act, issued a requisition on August 3, 1917 ordering the builder to complete the ship for government use and forbidding further payments from the owner.

Reasoning

The central question was whether the owner’s contract rights were taken and how to measure fair compensation. The Court majority found that Fleet Corporation’s orders put it in the owner’s position, using the owner’s payments, plans, and inspection and requiring completion under the contract, so the contract rights were expropriated. The Court held compensation must be the value of those contract rights at the time of taking — the likely sale price in fair negotiations — considering ship value, contract price, payments, time to completion, replacement cost, and interest. The Court reversed the Court of Claims and sent the case back for a new valuation.

Real world impact

This ruling means owners who lost contractual rights to government wartime requisitions may recover the value of those rights, not just reimbursement of expenses. It affects many similar claims and large sums pending from wartime requisitions. The judgment is not a final distribution of money; the case is remanded for further proceedings to calculate the contract-rights value.

Dissents or concurrances

One Justice disagreed, arguing the Fleet Corporation intended to requisition the physical ship and materials, not the contract, and that the owner’s remedy was reimbursement of payments made before requisition. That view was joined by another Justice and helps explain the competing interpretations of what the government actually took.