Gesellschaft Fur Drahtlose Telegraphie MBH v. Brown

• Decision Date: 13 May 1935
• Docket Number: No. 6294.,6294.
• Citation: 64 App. DC 357,78 F.2d 410
• Parties: GESELLSCHAFT FUR DRAHTLOSE TELEGRAPHIE M. B. H. v. BROWN.
• Court: U.S. Court of Appeals — District of Columbia Circuit

64 App. DC 357, 78 F.2d 410 (1935)

GESELLSCHAFT FUR DRAHTLOSE TELEGRAPHIE M. B. H. v. BROWN.^*

No. 6294.

United States Court of Appeals for the District of Columbia.

Argued April 8, 1935.

Decided May 13, 1935.

Frank J. Hogan and G. Thomas Dunlop, both of Washington, D. C., and Geo. Whitefield Betts, Jr., of New York City, for appellant.

Stanton C. Peelle and Paul E. Lesh, both of Washington, D. C., for appellee.

Before MARTIN, Chief Justice, and ROBB, VAN ORSDEL, HITZ, and GRONER, Associate Justices.

VAN ORSDEL, Associate Justice.

Appellee, plaintiff below, sued defendant corporation for legal services performed by plaintiff and three associates in representing defendant in claims held against the United States. From a judgment for the sum of $250,000 for the services so rendered defendant prosecutes this appeal.

The court below based its judgment upon an extended and very elaborate finding of fact, and in this appeal any defense on the merits has been waived. Counsel for defendant company plant their case upon certain questions of law upon which the present appeal turns.

It appears that in February, 1917, the defendant company was a corporation organized under the laws of Germany with its principal office in Berlin. That prior to the World War it had rights, titles, and interests in the United States of a value of approximately $10,000,000, consisting of the capital stock of the Atlantic Communication Company, a New York corporation, which owned and operated a wireless station in the state of New York, together with the capital stock of the Patents Exploitation Company, another New York corporation, which owned the patents having to do with radio and radio reception. All the property belonging to defendant company was seized in part by the United States government, and the remainder by the United States Alien Property Custodian, so that at the time of the date of the contract, June 22, 1922, the defendant company held claims for the property so seized but which were not recognized as valid and enforceable either by the United States or by the Alien Property Custodian. It was this situation which led defendant company to employ plaintiff and his associates as attorneys to represent it in its claims against the United States.

Defendant corporation entered into the following contract with plaintiff and one Alfred Frankenthaler, the contract being in the form of a letter and an acceptance of the terms and conditions therein stated. The letter reads as follows:

"New York, June 22, 1922. "Messrs. Alfred Frankenthaler and John Wilson Brown III.

"Gentlemen:

"We hereby authorize and appoint you our attorneys, and request you to take such steps as you may deem necessary or advisable for the protection or recovery of any rights, titles, or interests, direct, derivative, contingent, or otherwise, of us or any of us, arising out of or in any way connected with the acts, seizures, or demands of, or possession, sale, or transfer by the Alien Property Custodian of the United States, the United States Government, or any of its departments, bureaus, or divisions, or their respective agents or representatives, or affecting or arising out of any related matters or out of the recent World War, and to enforce such rights against any person, firm, corporation, department, bureau, division, or government, and to make compromise or settlement in respect to such rights.

"It is agreed that you shall be entitled to keep as a retainer fee on any recovery of money or property, a sum equal to 25% thereof, to be deductible from any recovery by you up to the sum of one hundred thousand dollars ($100,000.00) in money or property at its fair valuation. If the valuation of said property cannot be agreed upon between us, same shall be submitted to arbitration.

"It is agreed that a fair and reasonable fee for all services performed resulting in recovery in excess of one hundred thousand dollars ($100,000.00), in money or property, shall be paid to you only out of such recovery. The amount of this fee shall be later determined by agreement between the parties, or failing to reach an agreement, the parties shall submit the same to arbitration.

"We reserve the right to terminate this employment at any time, provided that at the time of revocation a fair and reasonable fee for your services rendered to the date of termination shall be paid in lieu of your contingent interest in the recovery.

"Should you at any time terminate your employment, you will of course, give us ample notice.

"Yours very truly "Gesellschaft Fur Drahtlose Telegraphie, M. B. H (Expressly including our interest direct or indirect, as creditor, owner, stockholder or otherwise of Atlantic Communication Co., Patent Exploitation Co., etc.) "By Willy Bredow "Attorney in Fact (power of attorney dated April 10, 1922)."

The two contracting attorneys associated with them George Frankenthaler, a New York attorney, and Alfred K. Nippert, a practicing attorney of Cincinnati, Ohio, with office connections in the District of Columbia. Plaintiff holds by assignment from his associates the entire claim here sued upon.

The court below in its findings of fact stated: "The contract of employment of June 22, 1922, was drafted by the plaintiff and the language was made by him sufficiently comprehensive to include within the scope of the services to be performed by him and his associate the securing of remedial legislation" (and that plaintiff so understood the contract is abundantly shown by the character of services actually performed).¹ "Such services as were performed by the plaintiff and his associates were all pursuant to and comprehended within the provisions of the written contract of employment of June 22, 1922, and there was no employment of the plaintiff or any of his associates, Alfred Frankenthaler, George Frankenthaler, or Alfred K. Nippert, independently of said written agreement. * * * The written contract contemplated and included such services as might thereafter become necessary or advisable in securing remedial legislation in consideration of a contingent reward out of the interest in any recovery by the defendant resulting from such services."

It is alleged by way of defense that plaintiff had been employed by the Alien Property Custodian from January 20, 1919, to April 15, 1921, during which period the United States and the Custodian, "acting partly or wholly by and through the plaintiff and others, then in or connected with the office of the said Alien Property Custodian, partially or wholly divested the defendant of its aforesaid rights, titles, and interest, because of which said seizure and detention there arose the defendant's claims for the return thereof or compensation therefor." In other words, the suit is defended upon the ground that the "employment and letter of employment were obtained from the defendant, not on its own initiative, but by the active procurement of the plaintiff and the said Alfred Frankenthaler, and are both in fact and in law null and void as against public policy." The further defense is made that the contract by its terms might involve the procurement of legislation and necessitate plaintiff and his associates using their influence with members of Congress. This occurred, and it is contended that the contract in terms providing for contingent compensation for the services rendered, and thus containing the inducement to use undue influence in securing the legislation, it must be construed as a lobbying contract, and therefore void.

Considering first the defense based upon the rule of law that plaintiff having been employed in the office of the Alien Property Custodian between the time the property was seized and the present contract of employment entered into, plaintiff's claim for attorneys' fees is void and unenforceable, since it is in conflict with the well-established rule of public policy that where an attorney has acted for a client he cannot thereafter assume a position hostile to the client concerning the same matter, or use against the client knowledge or information obtained from him while the relation existed. It is contended that this rule extends to officers of the government employing attorneys and that such officers are entitled to the same protection against unprofessional conduct on their part as are private persons.

The propriety of this rule has long been recognized and enforced. It is the enunciation of a principle of the common law that courts will not lend their aid to enforce illegal contracts or contracts inconsistent with sound morals or public policy. This has led to a general condemnation of contracts for the procuring of legislation, especially where the legislation is remedial and provides for the assertion of claims against the government, and the contract is for a contingent portion of a claim that may be given legal status through success in securing the legislation. Such contracts are illegal as tending to corrupt by improper influence the integrity of our political institutions. It is incumbent, therefore, upon the courts to pronounce void any such contract in which the ultimate or probable tendency would be to corrupt or mislead the judgments of legislators in the performance of their duties. Marshall v. B. & O. R. Co., 16 How. 314, 14 L. Ed. 953.

It is urged by counsel for plaintiff, and the court below seems to have adopted the theory, that there is nothing in the conduct of the plaintiff, under his contract, or in the terms of the contract itself, that are adverse to the interests represented by the Alien Property...