Midway Leasing, Inc. v. Wagner Equip. Co.

MIDWAY LEASING, INC., a New Mexico corporation, Plaintiff - Appellant/Cross - Appellee, v. WAGNER EQUIPMENT CO., a Colorado corporation, Defendant - Appellee/Cross - Appellant.

No. 19-2099

No. 19-2108

UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT

January 8, 2021

(D.C. No. 1:18-CV-00132-KBM-KK)

(D. N.M.)

ORDER AND JUDGMENT^*

Before TYMKOVICH, Chief Judge, LUCERO, and BACHARACH, Circuit Judges.

This case involves an effort to obtain tax relief through a county's issuance of industrial revenue bonds. The taxpayer, Wagner Equipment Company, hired Midway Leasing, Inc. to lobby the county for legislative approval of the bonds. Midway Leasing prepared the bond application andmet with county officials to support passage. The effort succeeded, and Wagner Equipment obtained the bonds, which resulted in considerable savings in taxes. In light of these savings, Midway Leasing sought payment for its lobbying work. But the parties disputed the amount, and Midway Leasing sued for breach of contract, quantum meruit, and unjust enrichment. For these claims, Midway Leasing alleged a contract for a contingency fee, to be computed as a percentage of Wagner Equipment's tax savings.

On the claim for breach of contract, the threshold issue involves the enforceability of the alleged agreement to pay a contingency fee for legislative lobbying. To assess enforceability, we apply New Mexico law. The New Mexico legislature adopted the common law, which had prohibited enforcement of an agreement to pay contingency fees for legislative lobbying. To date, neither New Mexico's legislature nor its courts have abrogated that prohibition. So the district court properly awarded summary judgment to Wagner Equipment on the claim for breach of contract.

But the district court didn't rule out an award on the claims for quantum meruit and unjust enrichment. On these claims, the court conducted a bench trial and awarded Midway Leasing $175,000 based on what it had charged another taxpayer for similar lobbying efforts. Midway Leasing argues that it was entitled to more, but the district court haddiscretion to calculate the value to Wagner Equipment based on what another taxpayer had agreed to pay for similar lobbying efforts.

We thus affirm

• the award of summary judgment to Wagner Equipment on the claim for breach of contract and

• the award of $175,000 to Midway Leasing on the claims for quantum meruit and unjust enrichment.

I. The district court properly granted summary judgment to Wagner Equipment on the claim for breach of contract.

Midway Leasing challenges the award of summary judgment on the claim for breach of contract, arguing that the alleged contingency-fee agreement was enforceable under New Mexico law. This argument turns on a legal question, so we engage in de novo review. Campbell v. Bartlett, 975 F.2d 1569, 1575 (10th Cir. 1992). On de novo review, we must apply New Mexico law, predicting how the New Mexico Supreme Court would decide the issue of enforceability. Belnap v. Iasis Healthcare, 844 F.3d 1272, 1295 (10th Cir. 2017). Applying New Mexico law, we conclude that the alleged contingency-fee agreement would have been unenforceable.

A. The New Mexico legislature adopted the common law, which had prohibited enforcement of contingency-fee agreements for legislative lobbying.

In 1876, the New Mexico legislature enacted a statute that incorporated the common law. 1876 N.M. Laws, ch. 2, § 2 (now codified as N.M. Stat. Ann. § 38-1-3). Under the statute, the common law effectivelyfilled "every [statutory] crevice, nook and corner . . . in so far as it was applicable to [New Mexico's] conditions and circumstances." Beals v. Ares, 185 P. 780, 788 (N.M. 1919).

By 1876, the common law prohibited enforcement of contingency-fee agreements for legislative lobbying. See Thomas M. Susman and Margaret H. Martin, Contingent-Fee Lobbying, in The Lobbying Manual: A Complete Guide to Federal Lobbying Law and Practice 669, 676 (William V. Luneburg et al. ed., 4th ed. 2009) ("The early Supreme Court decisions . . . primarily relied on federal common law to hold the contingent-fee lobbying arrangements void and unenforceable."); accord Jack Maskell, Cong. Rsch. Serv., Lobbying Congress: An Overview of Legal Provisions and Congressional Ethics Rules 11-12 (2007).¹ For example, the Supreme Court had held that a plaintiff could not recover a contingency fee for lobbying in support of a right of way, explaining that "[a]ll contracts for acontingent compensation for obtaining legislation . . . [were] void by the policy of law." Marshall v. Baltimore & O.R. Co., 57 U.S. 314, 336 (1853). The Court later repeated the prohibition on enforcing contingency-fee contracts to "procure favors from legislative bodies."² Providence Tool Co. v. Norris, 69 U.S. 45, 55 (1864); see Hazelton v. Sheckels, 202 U.S. 71, 79 (1906) (noting that the Supreme Court had said in Providence Tool Co. that "all contracts for a contingent compensation for obtaining legislation were void").

The common law's prohibition was thus absorbed into New Mexico law.³ Given New Mexico's absorption of the common law, its prohibition on contingency-fee agreements would have remained in place until explicitly abrogated by the courts or the legislature. See Sims v. Sims, 930 P.2d 153, 158 (N.M. 1996) ("A statute will be interpreted as supplanting the common law only if there is an explicit indication that the legislature so intended.").

B. The prohibition has not been explicitly abrogated.

Midway Leasing argues that the common law's prohibition has been abrogated by the U.S. Supreme Court, New Mexico courts, and the New Mexico legislature. We disagree, concluding that New Mexico lawcontinues to prohibit enforcement of contingency-fee agreements for legislative lobbying.

1. The U.S. Supreme Court has not abrogated the prohibition.

Midway Leasing argues in part that this prohibition at common law has withered with the times. For this argument, Midway Leasing points out that

• some pre-1876 opinions by the Supreme Court had prohibited any payment for legislative lobbying and

• payment for legislative lobbying is now considered permissible and protected.

Compare Providence Tool, 69 U.S. at 55, with Lobbying Disclosure Act of 1995, 2 U.S.C. §§ 1601-1614. Given the current approval of paying lobbyists, Midway Leasing insists that the U.S. Supreme Court has expressly rejected the common law's prohibition on contingency fees for legislative lobbying. We disagree.

Despite the modern era's acceptance of paying lobbyists to influence legislation, we cannot assume that the Supreme Court would overrule its opinions prohibiting contingency-fee agreements for legislative lobbying. Rodriquez de Quijas v. Shearson/Am. Express, Inc., 490 U.S. 477, 484 (1989). Courts of appeals have thus continued to recognize the Supreme Court's century-old prohibition. See Fla. League of Pro. Lobbyists, Inc. v. Meggs, 87 F.3d 457, 462 (11th Cir. 1996) (stating that Supreme Court precedents continue to hold "that contracts to lobby for a legislative result,with the fee contingent on a favorable legislative outcome, were void ab initio as against public policy"); Luff v. Luff, 267 F.2d 643, 646 (D.C. Cir. 1959) ("Contingent fee arrangements, conditioned on the obtaining of favorable legislation, are unenforceable in the courts."); Browne v. R & R Engineering Co., 264 F.2d 219, 222 (3d Cir. 1959) (noting the existence of "[a] judicially enforced public policy against contingent fees for obtaining legislation").

Midway Leasing also suggests that the Supreme Court has retreated from its earlier precedents. For this suggestion, Midway Leasing relies on five Supreme Court opinions. But none of them cast doubt on the continuing vitality of Marshall and Providence Tool.

For example, Midway Leasing discusses United States v. Harriss, 347 U.S. 612 (1954). There the Supreme Court upheld a federal lobbying disclosure act as constitutional, construing the statute to cover only attempts to influence legislation through direct communication with legislators. Id. at 624-25. The Court suggested that a broader statute might have violated the First Amendment's rights "to speak, publish, and petition the Government." Id. at 625. So, Midway Leasing argues, the First Amendment protects lobbying. But the Court did not address contingent compensation for lobbying.

The four other cited opinions are even more attenuated. Three did not involve legislative lobbying: Stanton v. Embry, 93 U.S. 548 (1876);Oscanyan v. Arms Co., 103 U.S. 261 (1880); and PanAmerican Petroleum & Transport Co. v. United States, 273 U.S. 456 (1927). And the fourth opinion did not involve a contingency-fee agreement. Steele v. Drummond, 275 U.S. 199 (1927).⁴

* * *

In our view, the Supreme Court hasn't retreated from its nineteenth-century opinions prohibiting enforcement of contingency-fee agreements for legislative lobbying.

2. New Mexico courts have not questioned the common law's prohibition on contingency-fee agreements for legislative lobbying.

Like the U.S. Supreme Court, New Mexico courts have not retreated from the common law's prohibition on contingency-fee agreements for legislative lobbying. Midway Leasing disagrees, referring to three state-court opinions:

1. Millspaugh v. McKnab, 7 P.2d 51 (Kan. 1932),

2. Noble v. Mead-Morrison Mfg. Co., 129 N.E. 669 (Mass. 1921), and

3. Ingalls v. Perkins, 263 P. 761 (N.M. 1927).

Two of the cited opinions involve the law of states other than New Mexico. See Millspaugh v. McKnab, 7 P.2d 51 (Kan. 1932); Noble v. Mead-Morrison Mfg. Co., 129 N.E. 669 (Mass. 1921). So those opinions do not address the common law as adopted in New Mexico. See N.M. Stat. Ann. § 38-1-3.

Midway Leasing also relies on Ingalls v. Perkins, 263 P. 761 (N.M. 1927), but this opinion does not reject the common law's prohibition on contingency fees for legislative lobbying. Ingalls instead addresses an individual with dual roles. Id. As a physician, the individual served patients at a...