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United States v. Webber

decided: May 31, 1968.


Hastie, Chief Judge, and Freedman and Van Dusen, Circuit Judges. Freedman, Circuit Judge (concurring in part and dissenting in part).

Author: Van Dusen

VAN DUSEN, Circuit Judge.

This case is before the court on appeal from a District Court order entering judgment for plaintiff after hearing argument on cross-motions of the parties for summary judgment. 270 F. Supp. 286. The United States sued the appellants, Richard Anthony Webber (Webber) and Robert J. DuHadaway (DuHadaway), trading as R. & R. Engineering Company, and R. & R. Engineering Company, a Delaware corporation (R. & R. corporation) for breach of warranty. The Government brought suit as the assignee of a general contractor of the United States Atomic Energy Commission, Swinerton & Walbert Co. (Swinerton). Swinerton had performed its general contract for the A.E.C. prior to the assignment.*fn1 Swinerton entered into a sub-contract or contracts with the appellants, the first of which was allegedly with the individuals Webber and DuHadaway, trading as a partnership, R. & R. Engineering Company (R. & R. partnership).*fn2

The Government sought recovery for the appellants' breach of their warranty that "no person or selling agency has been retained to solicit or secure this Order upon an agreement or understanding for a commission, percentage, brokerage, or contingent fee, * * *."

The District Court granted summary judgment for the Government for $20,411.68 plus interest,*fn3 after reaching the necessary conclusion that no question of fact existed. Taylor v. Rederi A/S Volo, 374 F.2d 545, 549 (3rd Cir. 1967); Robin Construction Company v. United States, 345 F.2d 610, 614-615 (3rd Cir. 1965). In reaching this conclusion under F.R.Civ.P. 56, the District Court considered part of the record of the previous litigation in Browne v. R. & R. Engineering Co.,*fn4 164 F. Supp. 315 (D.Del.1958), reversed in part 264 F.2d 219 (3rd Cir. 1959), decision on remand unreported, C.A. No. 1873 (D.Del. July 21, 1959). Explicitly not relying on a theory of collateral estoppel, the judge below considered the several opinions in Browne, and what he described as the "facts" of record in that litigation which he found uncontroverted by the appellants' mere denial in their pleadings.*fn5 Appellants filed no other documents except some interrogatories and a motion to compel further answers to such interrogatories.

Browne v. R. & R. Engineering Co. involved a suit against R. & R. corporation by Edmund V. Browne to recover compensation for services rendered. No written contract or specific oral agreement for a fixed amount was proved, but, as we held in our decision at 264 F.2d 219, Browne was nonetheless entitled to recover for his services in quantum meruit. Part of the services, however, were "rendered pursuant to an agreement" for a contingent fee to be paid for "securing" a Government contract from Swinerton. As such payment for his services violated public policy as promulgated in an Executive Order*fn6 providing:

"Every contract * * * shall contain a warranty by the contractor * * * that no person * * * has been employed or retained to solicit or secure * * * [the] contract upon an agreement or understanding for a * * * contingent fee * * *." [Emphasis supplied.]

R. & R. corporation could therefore resist payment for that portion of Browne's services that represented such prohibited activity -- placing R. & R. on a list of those invited to bid. On remand, the District Court found that Browne had already recovered for that portion of his services (engineering and other labor) which did not involve "securing" the Swinerton contract for a contingent fee. In his decision in that case, the trial judge computed the amount of the contingent fee by using a percentage of 7 1/2% of the total contract awarded. No appeal was taken from this decision.

The appellants challenge the summary judgment entered against them on a great many theories. Restated, their two main arguments are, first, that the prior litigation in Browne v. R. & R. Engineering Co. did not prove the existence of any contingent fee contract that violates the above-quoted warranty and even if Browne does show such a contingent fee agreement, the Browne litigation has no effect upon the partnership or individual appellants who were not formal parties to the previous suit; and, second, that even if Browne does show a contingent fee that may be a breach of warranty, the District Court cannot take judicial notice of the record in the Browne litigation for use against the appellants under F.R.Civ.P. 56.

At the outset, the previous decisions in Browne, particularly our decision at 264 F.2d 219, make clear that a finding was made and approved that the plaintiff Browne rendered services pursuant to an agreement or understanding that he would be paid "contingent" compensation. Neither the warranty sued upon nor the governing Executive Order required a contingent fee "contract." Rather, the more general words of "agreement or understanding" (identical in both the Executive Order and the warranty) constitute the basis of liability, if any, in this case.*fn7 The appellants' contention that there is no contingent fee arrangement in violation of the warranty must be rejected.

This finding of "an agreement for a contingent fee" cannot now be denied by R. & R. corporation. R. & R. corporation is collaterally estopped by the Browne litigation from raising any factual question as to the existence of the contingent fee arrangement. It successfully defended against part of Browne's claim by establishing as an affirmative defense that Browne's "claim was in substance a claim for a contingent fee payable on obtaining a government contract and, therefore, illegal." 264 F.2d at 221. Under this Circuit's view of the doctrine of mutuality, Bruszewski v. United States, 181 F.2d 419 (3rd Cir.), cert. den. 340 U.S. 865, 71 S. Ct. 87, 95 L. Ed. 632 (1950); cf. Nickerson v. Kutschera, 390 F.2d 812 (3rd Cir., 3/6/68), it makes no difference that the Government was not a party in the prior litigation. R. & R. corporation is bound by the prior determination that Browne "secured" the Swinerton contract under an agreement or understanding for a contingent fee as those terms were used in the warranty required in all contracts by Executive Order. Even though the Browne opinions were not formally introduced in the present suit, we see no reason why a court is confined to an examination of the judgment in ruling on a question of collateral estoppel, particularly under a F.R.Civ.P. 56 motion. See 1B Moore's Federal Practice, para. 0.443[4] (1965). Moreover, R. & R. corporation, having avoided payment of a considerable contractual liability by proving the existence of a contingent fee arrangement, cannot here be allowed to prevail on an inconsistent position. Scarano v. Central R. Co. of New Jersey, 203 F.2d 510 (3rd Cir. 1953); 1B Moore's Federal Practice, para. 10.405[8], cf. para. 0.405[10] (1965).

The individual appellants were not formal parties in the prior suit and appeared only as witnesses. As nonparties, they will be collaterally estopped from denying the once-proved contingent fee agreement only if they were "privies" to R. & R. corporation, party-defendant in the Browne litigation. See, e.g., 1B Moore's Federal Practice, para. 0.441[3] (1965). As Judge Goodrich wrote, concurring in Bruszewski v. United States, supra, 181 F.2d at 423:

"Privity states no reason for including or excluding one from the estoppel of a judgment. It is merely a word used to say that the relationship between the one who is a party on the record and another is close enough to include that other within the res judicata."

Determining whether appellants Webber and DuHadaway were "privies" to the corporate defendant in the prior suit, however, requires an examination of the records ...

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