United States v. Acme Process Equipment Company

In 1953 an entity of the United States Army (the government) (defendant) awarded Acme Process Equipment Company (Acme) (plaintiff) a contract under which Acme agreed to manufacture and deliver a certain number of rifles. Acme was inexperienced at manufacturing rifles, but the government wanted to expand the rifle’s manufacturing base. Acme had difficulty performing under the contract, later claiming that its costs for manufacturing the first 446 rifles were $1,179.29 per unit and later were $690.21; the contract price was $384.95 per unit. Citing an illegal contingent-fee arrangement, illegal kickbacks, and false claims, the government canceled the contract before Acme delivered all the rifles. Acme sued the government for breach of contract. Acme claimed that the government’s ulterior reason for canceling the contract was that the rifles were obsolete, and Acme sought restitution. Acme had significant expenses in its efforts to fulfill the contract, and the government’s cancellation of the contract ruined Acme. The trial court found for Acme but awarded Acme damages for postcancellation costs and the amount that Acme could have reduced its financial losses if the contract had been performed. Because the trial commissioner determined that Acme’s remedy could only be damages and not restitution, no evidence regarding the reasonableness of Acme’s costs in manufacturing the rifles was heard. Acme appealed, seeking restitution.