## Facts

- In 1948, Congress enacted the Agricultural Act of 1948, which required the President to refer certain import problems to the United States Tariff Commission for investigation before imposing import restrictions that might be needed to protect an agricultural price-support program.
- The United States operated a potato price-support program that obligated it to support potato prices (including by purchasing eligible domestic potatoes that could not be sold commercially) at 90% of parity.
- Because low-priced Canadian potatoes could depress the domestic market and increase federal purchases under the support program, the United States sought to limit the impact of Canadian imports.
- Rather than proceed through the Tariff Commission process, the United States and Canada exchanged diplomatic notes on November 23, 1948, purporting to create an executive agreement effective immediately.
- Under that arrangement, Canada agreed to require export permits for potatoes and to issue permits only when Canadian exporters had firm orders from legitimate U.S. seed users; exporters were also to include in contracts with U.S. importers an assurance that the potatoes would not be diverted or reconsigned for table-stock (food) purposes.
- Capps, Inc., a U.S. importer, purchased potatoes from Canada and gave the required assurance to the Canadian exporter that the potatoes would be used only as seed and not diverted for table-stock use.
- Capps promptly resold the imported potatoes to a retailer without imposing any restriction on use.
- The United States claimed Capps’s assurance was a contract made for the United States’ benefit and that Capps breached it by allowing the potatoes to be used as table stock, forcing the government to purchase an equivalent amount of domestic potatoes under the support program.
- The United States sued Capps for damages in federal district court. After trial, the district court directed a verdict for Capps on the ground that the United States failed to present evidence sufficient to show breach and resulting damages.
- The Fourth Circuit affirmed, reasoning that the alleged contract was unenforceable because it rested on an executive agreement that conflicted with Congress’s import-control procedure and because Congress had not created a cause of action for the type of damages the government sought.
- The Supreme Court affirmed the judgment for Capps, but only on the narrower ground that the evidence did not sufficiently prove the alleged breach; it did not decide the executive-agreement and statutory-authorization questions addressed by the Fourth Circuit.

## Issues

1. Whether, on the trial record, the United States presented evidence sufficient to allow a jury to find that Capps breached the seed-use assurance and caused recoverable damages.
2. Whether the alleged seed-use assurance was enforceable by the United States where the assurance was required by a U.S.–Canada executive agreement adopted outside Congress’s Tariff Commission procedure.
3. Whether Congress had created (or authorized) a damages cause of action allowing the United States to recover increased price-support costs on these facts.

## Decision

- The district court entered judgment for Capps after directing a verdict because the United States’ proof was insufficient to establish breach and resulting damages.
- The Fourth Circuit affirmed the judgment and additionally concluded that the alleged contract was unenforceable because it depended on an executive agreement that conflicted with the statutory import-control scheme and because no congressional cause of action supported the claimed damages.
- The Supreme Court affirmed the judgment, agreeing with the district court that the record did not contain sufficient evidence to prove the alleged breach; the Court expressly declined to reach the Fourth Circuit’s broader grounds.

## Legal Principles

- A directed verdict for the defendant is proper where the plaintiff’s evidence, even when viewed most favorably to the plaintiff, is insufficient to support a reasonable finding of breach and causation of damages.
- An appellate court may affirm a judgment on a narrow, case-dispositive ground and avoid deciding broader questions about statutory authority or the scope of executive power.
- (Fourth Circuit) When Congress prescribes a specific statutory procedure for dealing with imports that threaten an agricultural program, an executive agreement used to achieve similar import-limiting effects outside that procedure may not support an enforceable damages claim by the United States.
- (Fourth Circuit) Absent congressional authorization, courts will not assume a federal damages remedy for increased government expenditures allegedly caused by a private party’s conduct within a regulated market.

## Conclusion

United States v. Capps, Inc. arose from a 1948 executive agreement aimed at limiting Canadian potatoes to seed use to protect a federal price-support program; after Capps imported potatoes under a seed-only assurance and resold them without restrictions, the United States sought damages for alleged diversion, but the district court directed a verdict for Capps for lack of proof of breach and damages, the Fourth Circuit affirmed while also finding the asserted contract and remedy unauthorized, and the Supreme Court affirmed the judgment solely because the evidence did not establish the alleged breach, leaving the broader executive-agreement issues undecided.


United States v. Capps, Inc., 204 F.2d 655, aff'd, 348 U.S. 296 (1955)