Sloan Shipyards Corp. v. United States Shipping Bd. Emergency Fleet Corporation

Background

Private shipyards and their subsidiaries sued the Shipping Board Emergency Fleet Corporation after the corporation allegedly stopped payments, took possession of plants and forced new contracts during World War I. The Fleet Corporation had been created under the Shipping Act of 1916, with the United States buying most of its stock and later receiving expanded powers through wartime statutes and presidential delegations. Lower courts dismissed two contract suits, holding bigger claims belonged in the Court of Claims, and denied a bankruptcy priority in a third case.

Reasoning

The Court asked whether the Fleet Corporation was so much an arm of the United States that private claimants were barred from suing it in ordinary courts. The majority said no: the corporation was a separate legal person that could be sued for alleged wrongful acts, unless a statute clearly provided a different remedy. Because the complaints alleged unlawful acts by the corporation itself, the District Courts erred in dismissing the two contract suits; but the Court agreed that the corporation did not have a special bankruptcy preference and must stand like other creditors.

Real world impact

Companies that contracted with the Fleet Corporation can press contract claims in federal or state courts instead of being forced into a single federal claims procedure. The ruling may increase litigation across many courts and affect how claimants seek compensation; the transfer of Fleet assets to the Shipping Board could limit recovery.

Dissents or concurrances

Chief Justice Taft disagreed about the first two cases, arguing statutes creating presidential remedies showed Congress intended claims to go to the federal claims process to ensure uniformity and finality.