139 F. 780 | U.S. Circuit Court for the District of Western Pennsylvania | 1905
This is a motion to enter judgment on reserved points in a suit by the Pittsburgh Dredging & Construction Company against the Monongahela & Western Dredging Company, brought to recover one-half the profits earned by defendant on certain dredging done by it. The facts established by the verdict or uncontroverted in the proofs are these: In June, 1904, the Jones & Laughlin Steel Company were required by the United States engineer in charge of the Monongahela river to remove a large body of slag from the shore bed of that stream. In pursuance of this requirement the steel company requested bids from the plaintiff and defendant dredging companies. Thereupon these
From the terms of the contract, the fact that it was not disclosed to the Jones & Laughlin Company, and the uncontradicted testimony proved on the part of the plaintiff by Smoot, one of the defendant’s officers, who says, “Well, the defendant and the plaintiff —wé had a meeting, and we decided we could fix this thing up and make some money out of it, and get a pretty good price, and we made prices on it,” it is clear that the purpose of the contract was to mislead the steel company into the belief there was competitive bidding between the two companies, and by this collusive bidding secure the contract for their joint benefit. The plaintiff, then, being driven to the necessity of showing such a contract as the foundation of its right to recover, will the law lend its aid to enforce such an agreement? The answer to this turns on the question whether this is an illegal contract, for, as Lord Kenyon said, “It is a maxim in our law that a plaintiff must show he stands on fair ground when he calls a court of justice to administer relief to him,” and to the same effect is the holding of the Supreme Court in McMullen v. Hoffman, 174 U. S. 654, 19 Sup. Ct. 845, 43 L. Ed. 1117, namely: “The authorities from the earliest time to the present unanimously hold that no court will lend its assistance in any way towards carrying out the terms of an illegal contract. In case any action is brought in which it is necessary to prove the illegal contract in order to maintain th’e action, courts will not enforce it, nor will they enforce any alleged right directly springing from such contract.” It will be observed that when the law refuses to be used to en
Such being the attitude of the law toward the enforcement .of illegal contracts generally, we next inquire whether the one here involved was against public policy, and therefore illegal. The purpose of this contract, as stated above, being to create a false appearance of competitive bidding, and by collusive tenders to secure a contract for the joint benefit of the participants, is such a contract against public policy? How such collusive bids stand in the estimate of the Supreme Court is clear. In McMullen v. Hoffman, supra—an agreement for collusive bidding by two bidders for their joint benefit — it was said:
“Upon these facts the question arising is whether a contract between the parties themselves, such as is above set forth, is illegal. In order to answer, the question, we would first naturally ask what is its direct and necessary tendency? Most clearly that it tends to induce the belief that there is really competition between the parties making the different bids, although the truth is that there is no such competition, and that they are in fact united in interest. It would also tend to the belief on the part of the committee receiving the bids that a bona fide bidder, seeking to obtain the contract, regarded the price he named, although much higher than the lowest bid, as a fair one for the purpose of enabling him to realize reasonable profits from its performance. A bid thus made amounts to a representation that the sum bid is not in truth an unreasonable or too great a sum for the work to be done. We do not mean it is a warranty to that effect, or anything of the kind, but simply that a committee receiving such a bid and assuming it to be a bona fide bid would naturally regard it as a representation that the work to be done, with a fair profit, would, in the opinion of the bidder, cost the amount bid. HeDce it would almost certainly tend to the belief that the lower bid was not an unreasonably high one, and that it would be unnecessary and improper to reject all the bids and advertise for a new letting. * * * It might readily be surmised that, if these parties had bid in competition, one or both of the bids would have been lower than their combined bid. It was not necessary, however, to prove so difficult a fact. The inference would be natural. * * * But in this case there is more, even, than concealment. There is the active fraud in the putting in of these, in substance fictitious, bids, in their different names, but in truth forming no competitive bids, and put in for the purpose-*783 already stated. It is not too muck to say that the most perfect good faith is called for on the part of bidders at these public lettings, so far as concerns their position relating to the bids put in by them or in their interest. The making of fictitious bids under the circumstances detailed herein is, in its essence, an illegal and most improper act; indeed, it is a plain fraud, perpetrated in the effort to obtain the desired result.”
And in Hyer v. Richmond Traction Company, 168 U. S. 471, 18 Sup. Ct. 114, 42 L. Ed. 547, referring to the agreement in that case, which was for two rival parties to unite (with the full knowledge of the municipal authorities) in procuring the grant of a franchise for their joint benefit, it was said:
“The vice which is so frequently detected in contracts and agreements of a similar nature lies in the fact of secrecy, concealment, and deception. The one applicant, though apparently antagonizing the other, is really supporting the latter’s application; and the public authorities are misled by statements and representations coming from a supposed adverse but in fact friendly source.”
Now, such being the declared law of the land, why should it not be extended to the case in hand? Because, it is argued, the letting involved in the case cited, and in others that might be, were of public works, and the rule does not apply in private lettings. In the absence of any adjudged case binding on this court compelling us to restrict this wholesome principle of public policy to any such narrow limit, we are unwilling to do so. That such secret, collusive biddings tend, or may tend, to mislead public officials, is conceded. But are they resorted to in private lettings for any other than a like purpose to deceive, or are they any less harmful in effect? It is true the personal interest of the individual, as contrasted with the impersonal interest of the public official, may lead the former to detect more readily the collusive character of the bid; but, as we will see, the vice of the device consists not in the success of the plan, but in the character of the contract; and in both lettings, whether they be public or private, that vice is the purpose to mislead and deceive. “In all.cases where contracts are claimed to be void as against public policy, it matters not that any particular contract is free from any taint of actual fraud, oppression, or corruption. The law looks to the general tendency of such contracts. The vice is in the very nature of the contract, and it is condemned as belonging to a class which the law will not tolerate.” Richardson v. Crandall, 48 N. Y. 348, cited approvingly in McMullen v. Hoffman, supra. Indeed, the case in hand illustrates that there may be cases where the private letting requires the protective shield of the law equally, if not, indeed, more than the public one. If, for example, the government had in this case called for bids to remove this slag, and the two dredging companies here concerned had entered into this agreement to make collusive bids and for a division of profits, and the contract had been awarded one of them, it is clear the law would not enforce rights based on such a contract. If, however, the government, instead of itself removing the slag, required the compan}' that placed it there to do so, and that company is met by the same collusive contract by the same bidders, we see