Midway Leasing v. Wagner Equipment ( 2021 )

FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
FOR THE TENTH CIRCUIT January 8, 2021
_______________________________________
Christopher M. Wolpert
Clerk of Court
MIDWAY LEASING, INC., a New
Mexico corporation,
Plaintiff - Appellant/Cross -
Appellee,
Nos. 19-2099 & 19-2108
v. (D.C. No. 1:18-CV-00132-KBM-KK)
(D. N.M.)
WAGNER EQUIPMENT CO., a
Colorado corporation,
Defendant - Appellee/Cross -
Appellant.
_________________________________________
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 and
* This order and judgment does not constitute binding precedent except
under the doctrines of law of the case, res judicata, and collateral estoppel.
But the order and judgment may be cited for its persuasive value if
otherwise appropriate. Fed. R. App. P. 32.1(a); 10th Cir. R. 32.1(A).
met 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 had
2
discretion 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 effectively
3
filled “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 a
1
The Congressional Research Service explained:
Although there is no general federal law expressly barring
all contingency fees for successful lobbying before Congress,
there is a long history of judicial precedent and traditional
judicial opinion which indicates that such contingency fee
arrangements, when in reference to “lobbying” and the use of
influence before a legislature on general legislation, are void
from their origin (ab initio) for public policy reasons, and
therefore would be denied enforcement in the courts.
Jack Maskell., Cong. Rsch. Serv., Lobbying Congress: An Overview of
Legal Provisions and Congressional Ethics Rules 11–12 (2007).
4
contingent 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”).
2
In applying the common law’s prohibition, some courts have
distinguished between contingency-fee contracts to lobby for legislation
involving
• settlement of debts, which may be lawful, and
• “favors,” which are unenforceable.
Brown v. Gesellschaft Fur Drahtlose Telegraphie, M.B.H., 104 F.2d 227,
229 (D.C. Cir. 1939); Comm’r v. Textile Mills Sec. Corp., 117 F.2d 62, 65
(3d Cir. 1940); Hollister v. Ulvi, 271 N.W. 493, 498 (Minn. 1937). Unlike
legislation involving settlement of debts, legislation governing favors
serves to provide “advantages or benefits to which, prior to the enactment”
the person seeking the legislation had no cognizable claim. Gesellschaft
Fur Drahtlose Telegraphie, M.B.H. v. Brown, 78 F.2d 410, 413 (D.C. Cir.
1935).
Midway Leasing’s lobbying involved favor legislation, not debt
legislation, because Wagner Equipment had no prior claim to the bonds. So
even in those jurisdictions permitting contingency fees for lobbying on
debt legislation, Midway Leasing’s alleged agreement would have been
unenforceable.
5
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 law
3
The dissent contends that New Mexico embraces a public policy
favoring freedom of contract. But all of the cited cases acknowledge other
legal limitations on the public policy involving freedom of contract. See
First Baptist Church of Roswell v. Yates Petroleum Corp., 345 P.3d 310,
313 (N.M. 2015) (“New Mexico . . . has a strong public policy of freedom
to contract that requires enforcement of contracts unless they clearly
contravene some law . . . .” (emphasis added) (quoting Berlangieri v.
Running Elk Corp., 76 P.3d 1098, 1105 (N.M. 2003)); K.R. Swerdfeger
Constr. v. UEM Bd. of Regents, 142 P.3d 962, 970 (N.M. Ct. App. 2006)
(same); H-B-S P'ship v. Aircoa Hosp. Servs., Inc., 114 P.3d 306, 315 (N.M.
Ct. App. 2005) (same). The dissent acknowledges that these legal
limitations include the bar on contingency-fee agreements for legislative
lobbying, which “was absorbed into New Mexico territorial common law in
1876.” Dissent at 3–4.
6
continues 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,
7
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);
8
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).
4
The dissent states that developments in the federal common law after
1876 are irrelevant. Dissent at 9 n.2. For this statement, the dissent
apparently assumes that New Mexico would not recognize any
developments in the common law after 1876. We need not decide whether
this assumption is correct.
9
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 hospital. Id. at 762. And as a public-health official, the
individual could refer patients to the hospital. Id. Despite the dual roles,
the New Mexico Supreme Court upheld the enforceability of the
individual’s contract with the hospital, observing that
• his compensation depended on the number of referrals to the
hospital and
• the government could enter into contracts with agents who
customarily work on commission even though the pay was
contingent on sales volume.
Id. at 763–64. But the New Mexico Supreme Court did not address
legislative lobbying. Id.
Finally, Midway Leasing contends that the conditions in the state
have rendered the common law inapplicable. Appellant’s Opening Br. at
31; Appellant’s Reply Br. at 13. For these conditions, Midway Leasing
10
relies on state statutes; but any statutory abrogation had to be explicit. See
p. 6, above.
3. New Mexico’s legislature has not explicitly abrogated the
common law’s prohibition on contingency fees for legislative
lobbying.
Midway Leasing suggests that the New Mexico legislature abrogated
the prohibition by adopting N.M. Stat. Ann. § 2-11-8, which bans
enforcement of contingency-fee agreements for lobbying the state
legislature. The parties agree that the statutory ban does not cover a
contingency fee for lobbying at the county level. But Midway Leasing
argues that the gap in statutory coverage means that these contingency fees
must be enforceable. 5 So we must address whether a statute addressing
lobbying at the state level serves to abrogate the common law’s prohibition
on contingency fees at the county level. We answer “no.”
As a general matter, we strictly construe statutes that supplant the
common law. State ex rel. Miera v. Chavez, 373 P.2d 533, 534 (N.M.
1962). Through strict construction, we interpret a statute “as supplanting
the common law only if there is an explicit indication that the legislature
5
Midway Leasing also contends that the district court interpreted the
state statute too broadly. As Midway Leasing observes, the district court
found a public policy against contingency fees for legislative lobbying of a
county. But this public policy comes from the common law, not the state
statute.
11
so intended.” Sims v. Sims, 930 P.2d 153, 158 (N.M. 1996); see p. 6,
above.
The state statute (N.M. Stat. Ann. § 2-11-8) is silent on the lobbying
of counties. Midway Leasing argues that this silence suggests disagreement
with the state legislature’s prohibition, pointing out that the county could
have adopted its “own ordinances and regulations governing relations with
private parties and lobbyists.” Appellant’s Opening Br. at 16, 27–28. For
example, Midway Leasing points out that the county adopted a code of
conduct for lobbying and said nothing there about contingency fees for
legislative lobbying. So, Midway Leasing argues, the county must not have
wanted to prohibit contingency fees for legislative lobbying.
Midway Leasing’s argument is misguided. In the absence of explicit
statutory abrogation, the common law continues to prohibit enforcement of
contingency-fee agreements for legislative lobbying. Despite the need for
explicit abrogation, Midway Leasing has relied in part on the county’s
silence on contingency fees for lobbying of counties. Silence alone
couldn’t constitute an explicit abrogation of the common law’s prohibition.
See Atherton v. Gopin, 355 P.3d 804, 810–11 (N.M. Ct. App. 2015) (stating
that statutory silence on a subject couldn’t abrogate the common law);
Gonzales v. Whitaker, 643 P.2d 274, 278 (N.M. Ct. App. 1982) (concluding
that state statutes didn’t abrogate the common law because the statutes had
been silent on the subject).
12
Midway Leasing also argues that the state legislature abrogated the
common law’s prohibition by adopting N.M. Stat. Ann. § 2-11-8. This
section prohibits “lobbying” compensation contingent on “state”
legislation. Id. The statute defines “lobbying” to include attempts to
influence “an official action.” N.M. Stat. Ann. § 2-11-2(D). The term
“official action” refers to “the action or nonaction of a state official or
state agency, board or commission acting in a rulemaking proceeding.”
N.M. Stat. Ann. § 2-11-2(G) (emphasis added).
Midway Leasing interprets this reference to a “board or commission”
to include a county’s boards or commissions. Based on this interpretation,
Midway Leasing contrasts this broad definition with the specific
prohibition against contingency fees for lobbying of the state legislature.
In Midway Leasing’s view, the difference in statutory breadth reflects
abrogation of the public policy against contingency fees for legislative
lobbying at the county level. This interpretation improperly disregards
grammar, common sense, the statutory context, and the necessity of
explicit abrogation.
Midway Leasing bases its argument on this series: “a state agency,
board, or commission.” N.M. Stat. Ann. § 2-11-12(G). The series consists
of three nouns, all various forms of a public entity:
• “agency”
• “board”
13
• “commission”
The first item in the series (“agency”) is preceded by an adjective: “state.”
Given the placement before the noun “agency,” the word “state” is a
“prepositive adjective.” Bryan A. Garner, The Chicago Guide to Grammar,
Usage, and Punctuation 463 (2016).
Prepositive adjectives ordinarily apply to each noun in a series
involving “a straightforward, parallel construction.” Alpern v. Ferebee,
949 F.3d 546, 550 (10th Cir. 2020) (quoting Potts v. Ctr. for Excellence in
Higher Educ., Inc., 908 F.3d 610, (10th Cir. 2018)). For example, when we
interpret the Fourth Amendment’s reference to “unreasonable searches and
seizures,” we intuitively apply the prepositive adjective (“unreasonable”)
to both nouns in the series (“searches and seizures”). The same is true
here: The prepositive adjective “state” modifies each noun in the parallel
series: “agency, board or commission.” As a matter of grammar, then, the
statute refers to a state agency, state board, or state commission.
This grammatical construction reflects common sense. Why would
the legislature adopt a statute regulating county “boards” or
“commissions,” but not county “agencies”? The legislature obviously
intended to regulate state entities regardless of whether they identified
themselves as “boards,” “commissions,” or “agencies.” Midway Leasing’s
14
contrary construction of the statute disregards not only grammar but also
common sense.
Midway Leasing’s construction also disregards the context of § 2-11-
8(G). This section appears in the Lobbyist Regulation Act, N.M. Stat. Ann.
§§ 2-11-1 to 2-11-9, which is part of Chapter 2 of the New Mexico
Statutes. The chapter concerns the legislative branch of state government
but does not address county government. County governments are
addressed in a different chapter (Chapter 4). Given the context of Chapter
2, the statutory term “board or commission” refers only to the state’s
boards and commissions, not the counties’ boards and commissions.
But even if the state statute had defined “lobbying” to encompass
efforts to influence county commissions, the statute didn’t address
contingency fees for lobbying counties. Nor does Chapter 4 of the New
Mexico Statutes, which pertains to county governments. So even under
Midway Leasing’s interpretation, New Mexico statutes would have been
silent on contingency fees for county legislation. And silence alone doesn’t
constitute explicit abrogation of the common law’s prohibition on
contingency fees for legislative lobbying. See pp. 11–12, above.
* * *
New Mexico adopted the common law, which had prohibited
enforcement of the alleged contingency-fee agreement. That prohibition
was not explicitly abrogated, so the district court acted properly in
15
awarding summary judgment to Wagner Equipment on the breach-of-
contract claim. 6
II. The district court did not abuse its discretion in awarding
$175,000 to Midway Leasing for quantum meruit and unjust
enrichment.
Midway Leasing also challenges the award of $175,000 for quantum
meruit and unjust enrichment on two grounds:
1. The court should have declined to consider whether the parties
had reached a meeting of the minds on payment of a
contingency fee.
2. The district court should have considered Wagner Equipment’s
agreements with other tax consultants.
We reject both arguments.
We conclude that the district court didn’t err by considering whether
the parties had a meeting of the minds. Under New Mexico law, the
absence of a meeting of the minds bears on the claims for quantum meruit
6
The dissent states that allowance of contingency fees wouldn’t be
bad. We express no opinion on the desirability of contingency fees for
legislative lobbying. The issue isn’t whether New Mexico’s public policy
is good or bad; we instead must decide only
• whether the common law is inapplicable to the New Mexico
conditions and
• whether the New Mexico legislature has explicitly abrogated
the common law’s prohibition.
It’s not our role to decide whether the bar on contingency fees is good or
bad.
16
and unjust enrichment: If the parties have not agreed on the terms of
payment, the court can consider other ways to measure the value to Wagner
Equipment. See Hydro Conduit Corp. v. Kemble, 793 P.2d 855, 857 (N.M.
1990). So the court’s first task was to decide whether the parties had
agreed on the payment terms.
In carrying out this task, the court found that the parties hadn’t
agreed. Despite the absence of an agreement, the court recognized that
Midway Leasing was entitled to payment for the value of its work to
Wagner Equipment. Because the parties hadn’t agreed on how to measure
the value of those services, the court appropriately considered other
possible measurements. See Restatement (Third) of Restitution and Unjust
Enrichment § 49 cmt. f (2011).
To measure the value, Midway Leasing argues, the district court
should have relied on Wagner Equipment’s contingency-fee agreements
with other tax consultants. In addressing this argument, we apply the
abuse-of-discretion standard. Davoll v. Webb, 194 F.3d 1116, 1139–40
(10th Cir. 1999). A court abuses its discretion when it commits a legal
error. State v. Oppenheimer & Co., 447 P.3d 1159, 1163 (N.M. 2019). In
our view, the court had the discretion to measure the value to Wagner
Equipment based on the flat fee that Midway Leasing had charged another
client for similar work. See Cano v. Lovato, 734 P.2d 762, 777 (N.M. Ct.
App. 1986).
17
Opting for the flat-fee approach, the district court considered one
project especially telling: Midway Leasing’s president, Mr. D. McCall, had
obtained a $175,000 fee for similar consulting work on behalf of another
company. The district court could reasonably rely more heavily on this
flat-fee contract than on the contingency-fee contracts with tax
consultants. The court thus had discretion to use the flat-fee contract when
measuring the value to Wagner Equipment. See id.III. We affirm the district court’s rulings.
We affirm (1) the grant of summary judgment to Wagner Equipment
on the contract claim and (2) the $175,000 award on the claims involving
quantum meruit and unjust enrichment. 7
Entered for the Court
Robert E. Bacharach
Circuit Judge
7
Wagner Equipment cross-appealed, arguing that the award of
$175,000 in restitution to Midway Leasing was excessive. But Wagner
Equipment asked us to consider the cross-appeal only if we were to remand
to the district court. Because we are not remanding, we do not consider the
cross-appeal.
18
19-2099 and 19-2108, Midway Leasing Inc. v. Wagner Equipment Co.
Tymkovich, Chief Judge, dissenting
By statutory enactment, the New Mexico legislature abrogated the public policy
against contingent fee contracts or success bonuses of the kind at issue here. I would
remand the case for a ruling on the existence and terms of the arrangement between
Midway and Wagner. I accordingly dissent as to Part I of the majority opinion, but
concur as to Part II.
I. Background
This diversity appeal arises out of a partially formed agreement between Midway
Leasing Inc. and Wagner Equipment Co. for services from Midway to help develop
Wagner’s newly acquired property in New Mexico. During Wagner and Midway’s
dealings, Wagner decided to apply for industrial revenue bonds. Wagner and Midway
reached a verbal agreement for Midway to perform many tasks associated with obtaining
the IRBs, including composing the application, meeting with and lobbying county
commissioners, and negotiating IRB terms. These tasks were crucial to obtaining the
IRBs because the bonds are only issued upon a favorable vote and the enactment of an
ordinance authorizing the issuance of the bonds by the county commissioners. Midway
held up its end of the bargain and the IRBs were issued to Wagner. The parties never got
around to discussing compensation for these services until Midway’s performance was
more or less complete. The parties disputed compensation, which led Midway to file suit
against Wagner for breach of contract and unjust enrichment.
1
Midway contends Wagner contracted to pay 18 percent of Wagner’s tax savings
resulting from the IRBs over the next thirty years—over $3 million. Wagner filed a
motion for summary judgment asserting that the alleged contingency fee agreement for
lobbying the county commissioners to approve the issuance of IRBs to Wagner violates
New Mexico public policy and is thus void. The district court agreed with Wagner. It
found New Mexico’s public policy against contingency fee agreements for legislative
lobbying—adopted from Providence Tool v. Norris, 69 U.S. 45 (1864)—has not been
abrogated by any New Mexico law or judicial decision and thus voids the contingency fee
contract to lobby the county commissioners.
The majority also reaches this conclusion by affirming the district court, but I
conclude the New Mexico legislature has abrogated this public policy.
II. The New Mexico Legislature Abrogated the Public Policy
Described in Providence Tool
In concluding that the alleged contract violates New Mexico public policy, the
majority rejects the state legislature’s clear abrogation of the century-old public policy
against contingency fee agreements for legislative lobbying.
In a diversity action, if “the state’s highest court has not decided the issues
presented, [the panel] may . . . predict how it would rule.” Koch v. Koch Indus., Inc., 203
F.3d 1202, 1230 (10th Cir. 2010). Although making this prediction in the absence of
guidance from the New Mexico Supreme Court necessarily requires some guessing, we
should be mindful that “as a federal court, we shouldn’t expand New Mexico law in a
2
manner that the state courts have not.” Herndon v. Best Buy Co., 634 F. App’x 645, 648
(10th Cir. 2015) (unpublished) (internal quotation marks omitted). Moreover, if the state
legislature has answered the question for us, we should not ignore its direction.
This case requires us to predict how the New Mexico Supreme Court would weigh
competing public policies (1) in favor of freedom of contract, and (2) against contingency
fee agreements for legislative lobbying.
New Mexico has a strong public policy in favor of freedom of contract. See First
Baptist Church of Roswell v. Yates Petroleum Corp., 345 P.3d 310, 313 (N.M. 2015).
This public policy “requires enforcement of contracts unless they clearly contravene
some law or rule of public morals.” Berlangieri v. Running Elk Corp., 76 P.3d 1098,
1105 (N.M. 2003) (internal quotation omitted) (emphasis added); see also H-B-S P’ship
v. Aircoa Hosp. Servs., Inc., 114 P.3d 306, 315 (N.M. Ct. App. 2005). In some instances,
New Mexico courts require a contract to violate an “explicit public policy expressed in a
statute or judicial decision” in order to override the public policy of freedom of contract
and be deemed void. K.R. Swerdfegar Constr. v. UNM Bd. of Regents, 142 P.3d 962(N.M. Ct. App. 2006).1
1
The majority opinion faults the dissent for focusing on New Mexico’s public
policy of freedom of contract which is limited by “the bar on contingency-fee agreements
for legislative lobbying.” Maj. Op. at 5 n.2. But that is not how I read New Mexico’s
case law. Instead, New Mexico embraces public policies for freedom of contract and
against contingent fee agreements for legislative lobbying. And when public policies
conflict, the court must accommodate the two as best we can. I conclude that New
Mexico courts would find that its public policy against contingent fee agreements for
legislative lobbying should give way to its public policy for freedom of contract for the
reasons explained below.
3
The competing New Mexico public policy central to this case is a bar on
contingency fee agreements for legislative lobbying. This public policy was announced
by the United States Supreme Court in Providence Tool in 1864 and was absorbed into
New Mexico territorial common law in 1876. See Lopez v. Maez, 651 P.2d 1269, 1273
(N.M. 1982). But Providence Tool’s analysis is of limited utility even if the United States
Supreme Court would still endorse it. The limited question before the Providence Tool
Court was whether the payment of contingency fees to a third party for the purpose of
securing a government contract to furnish it with civil war supplies was void as against
public policy. But the Supreme Court’s reasoning for answering affirmatively was
expansive:
[A]ll agreements for pecuniary considerations to control the
business operations of the Government, or the regular
administration of justice, or the appointments to public offices,
or the ordinary course of legislation, are void as against public
policy, without reference to the question, whether improper
means are contemplated or used in their execution. The law
looks to the general tendency of such agreements; and it closes
the door to temptation, by refusing them recognition in any of
the courts of the country.
Providence Tool, 69 U.S. at 55–56. This reasoning suggests that any contract for
compensation to influence the government violates public policy, including but not
limited to contingency fee agreements for legislative lobbying.
The New Mexico Supreme Court has offered no guidance on how to weigh these
competing public policies. But we have direct guidance from another source: the New
Mexico legislature. In 1978, the legislature enacted the Lobbyist Regulation Act. The
4
Act prohibits contingency fee agreements to lobby the state legislature or governor. See
N.M. Stat. § 2-11-8 (2020) (“No person shall accept employment as a lobbyist and no
lobbyist’s employer shall employ a lobbyist for compensation contingent in whole or in
part upon the outcome of the lobbying activities before the legislative branch of state
government or the approval or veto of any legislation by the governor.”). This Act
explicitly incorporates in New Mexico law only a small portion of the broader public
policy announced in Providence Tool—only codifying that policy as to the lobbying of
the state legislature or governor. With § 2-11-8, then, the New Mexico legislature
abrogated Providence Tool by entering and regulating the lobbying business. But it chose
to do so only at the state level and only for a certain form of compensation, permitting
less regulation for lobbying of local government actors. This is evidenced not only by
the express language of the Act, but also by the legislature’s silence.
The legislature could have statutorily condemned contingency fee agreements to
lobby local government actors—but did not. Chapter 2 of the New Mexico statutes
governs the legislative branch. It explicitly prohibits contingency fee agreements to
lobby state government actors. Chapter 4, on the other hand, governs counties. And
unlike Chapter 2, Chapter 4 does not include a prohibition of contingency fee agreements
to lobby local government actors. It therefore follows that the New Mexico legislature
intentionally overrode the public policy against these agreements as to local government
actors. And even outside the context of the these chapters, the New Mexico legislature
5
could have enacted a statute expressly prohibiting contingency fee agreements to lobby
local government actors—but did not.
The New Mexico legislature was clear that only contingency fee agreements to
lobby the state legislature or governor violate the law and contravene public policy. Its
silence in the Lobbyist Regulation Act and all other statutes about contingency fee
agreements to lobby any other government actor confirms the legislature’s intent to
narrow the Providence Tool public policy and permit contingency contracts to lobby local
government actors.
The majority rejects this legislative silence and instead relies heavily on the lack of
explicit language repealing New Mexico’s broad public policy against contingency fee
agreements for legislative lobbying. But this gets it backwards. It is the New Mexico
public policy in favor of freedom of contract that “requires enforcement of contracts
unless they clearly contravene some law or rule of public morals.” Berlangieri, 76 P.3d
at 1105 (internal quotation omitted) (emphasis added). And here, the New Mexico
legislature is clear that contingency fee agreements for legislative lobbying of local
government actors does not violate public policy or it would have said so. At the very
least, the New Mexico legislature’s specific prohibition of contingency fee agreements to
lobby the state legislature or governor muddies the waters enough such that the same
agreements to lobby local government actors do not “clearly contravene some law or rule
of public morals.” Id.
6
Such an outcome here would not be a bad thing. Contingency fee arrangements
are not inherently evil. The modern lobbying business (or lawyering where contingency
fees are even more popular) does not “suggest the use of sinister and corrupt means for
the accomplishment of the end desired.” Providence Tool, 69 U.S. at 55. Contingency
fee arrangements are standard operating procedure in modern-day contracts, enabling
freely contracting parties to agree that payment will be due upon the achievement of an
objective, which generally facilitates the agreed upon payment. Put another way,
contingency fee arrangements allow parties to contract with future money. To be sure,
they incentivize a party to achieve an objective so he or she will get paid. But such an
incentive is just as prevalent in other compensation arrangements. For example, even if
parties enter into a fixed compensation agreement, if one party collects payment but does
not perform his end of the bargain, the other party will not shrug it off and move on—you
can bet a demand of repayment. So, the party paid up front has an incentive to perform in
order to keep his money as much as the party paid on a contingency basis has an incentive
to perform to receive his money.
Because a party could hypothetically be incentivized to use corrupt means to
achieve a contract’s objective does not mean the contract is inherently evil, nor should it
be conclusive on the point. If that were true, many contracts could be said to violate
public policy. Other courts have reached similar conclusions, refusing to condemn
contingency fee arrangements as inherently evil, even when they involve influencing the
government. See, e.g., Hall v. Anderson, 140 P.2d 266, 270 (Wash. 1943) (“It will not do
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to hold that public policy forbids one to employ an agent to represent him in dealing with
the government when, as far as the facts show, the employment contemplates an appeal to
the government agency on the merits, as distinguished from the use of some species of
direct or oblique personal influence.”); Noble v. Mead-Morrison Mfg. Co., 129 N.E. 669,
674 (Mass. 1921) (“The question of the legality of the contract in each case is to be
determined by weighing all the elements involved and then deciding whether its inherent
tendency is to invite or promote the use of sinister or corrupt means to accomplish the end
or to bring influences to bear upon public officials of any other nature than the single one
of genuine advantage to the government.”).
Moreover, other state legislatures have gone as far as expressly permitting
legislative lobbying based on contingency fee arrangements, just as I read New Mexico
law to do at the local level. See W. Va. Code Ann. § 6B-3-1(6) (defining “lobbying” as
“the act of communicating with a government officer or employee to promote, advocate
or oppose or otherwise attempt to influence [executive or legislative actions]”); id. §
6B-3-2(a)(4) (requiring lobbyists, as part of registration, to state whether their
compensation “is or will be contingent upon the success of his or her lobbying activity”);
Del. Code Ann. tit. 29, § 5834 (permitting half of a lobbyist’s compensation to be
contingent on “the outcome of any legislative or administrative action”). And there is
also no blanket federal ban on lobbying Congress for contingency fees. See generally 2
U.S.C. § 1601 et seq. Like these authorities, the New Mexico legislature determined
legislative lobbying for contingency fees is not inherently evil, and the majority should
8
not credit Providence Tool’s overstated and unrealized warning about corruption inherent
in contingency fee agreements.
In sum, the New Mexico legislature narrowed the overly broad public policy
announced in Providence Tool by enacting § 2-11-8 which prohibits only contingency fee
agreements to lobby the state legislature or governor. The legislature’s silence as to all
other contingency fee agreements for lobbying—including lobbying of local government
actors—necessarily permits such agreements and abrogates any public policy to the
contrary.
Accordingly, I conclude the alleged contingency fee agreement between Midway
and Wagner to lobby the county commissioners does not violate New Mexico public
policy and is thus enforceable. Although I dissent in that respect, I join the majority in
full in its conclusion that the district court did not abuse its discretion in its damages
award.2
2
The majority focuses much of its analysis on distinguishing federal cases
regarding contingent fee agreements for legislative lobbying after New Mexico adopted
the federal common law to show that the federal common law still prohibits such
agreements. See Maj. Op. at 6–9. But New Mexico absorbed the common law as it was
in 1876, not as it was in 1876 and any subsequent developments. So, later rulings by
federal courts are not automatically incorporated into New Mexico law, and the
majority’s focus on subsequent developments in federal common law is irrelevant.
9