Martinez v. Socoma Companies, Inc.

Opinion

WRIGHT, C. J.

Plaintiffs brought this class action on behalf of themselves and other disadvantaged unemployed persons, alleging that defendants failed to perform contracts with the United States government under which defendants agreed to provide job training and at least one year of employment to certain numbers of such persons. Plaintiffs claim that they and the other such persons are third party beneficiaries of the contracts and as such are entitled to damages for defendants’ nonperformance. General demurrers to the complaint were sustained without leave to amend, apparently on the ground that plaintiffs lacked standing to sue as third party beneficiaries. Dismissals were entered as to the demurring defendants, and plaintiffs appeal.

We affirm the judgments of dismissal, As will appear, the contracts nowhere state that either the government or defendants are to be liable to persons such as plaintiffs for damages resulting from the defendants’ nonperformance. The benefits to be derived from defendants’ performance were clearly intended not as gifts from the government to such persons but as a means of executing the public purposes stated in the contracts and in the underlying legislation. Accordingly, plaintiffs were only incidental beneficiaries and as such have no right of recovery.

The complaint names as defendants Socoma Companies, Inc. (“So-coma”), Lady Fair Kitchens, Incorporated (“Lady Fair”), Monarch Electronics International, Inc. (“Monarch”), and eleven individuals of whom three are alleged officers or directors of Socoma, four of Lady Fair, and four of Monarch. Lady Fair and the individual defendants associated with it, a Utah corporation and Utah residents respectively, did not appear in the trial court and are not parties to this appeal.

The complaint alleges that under 1967 amendments to the Economic Opportunity Act of 1964 (81 Stat. 688-690, 42 U.S.C. §§ 2763-2768, repealed by 86 Stat. 703 (1972)) “the United States Congress instituted Special Impact Programs with the intent to benefit the residents of certain neighborhoods having especially large concentrations of low income persons and suffering from dependency, chronic unemployment and rising tensions.” Funds to administer these programs were appropriated to the United States Department of Labor. The department subsequently designated the East Los Angeles neighborhood as a “Special Impact area” and made federal funds available for contracts with local private industry for the benefit of the “hard-core unemployed residents” of East Los Angeles.

On January 17, 1969, the corporate defendants allegedly entered into contracts with the Secretary of Labor, acting on behalf of the Manpower Administration, United States Department of Labor (hereinafter referred to as the “Government”). Each such defendant entered into a separate contract and all three contracts are made a part of the complaint as exhibits. Under each contract the contracting defendant agreed to lease space in the then vacant Lincoln Heights jail building owned by the City of Los Angeles, to invest at least $5,000,000 in renovating the leasehold and establishing, a facility for the manufacture of certain articles, to train and employ in such facility for at least 12 months, at minimum wage rates, a specified number of East Los Angeles residents certified as disadvantaged by the Government, and to provide such employees with opportunities for promotion into available supervisorial-managerial positions and with options to purchase stock in their employer corporation. Each contract providecLfof the lease of different space in the building and for the manufacture ofa different kind of product. As consideration, the Government agreed to pay each defendant a stated amount in installments. Socoma was to hire 650 persons and receive $950,000; Lady Fair was to hire 550 persons and receive $999,000; and Monarch was to hire 400 persons and receive $800,000. The hiring of these persons was to be completed by January 17, 1970.

Plaintiffs were allegedly members of a class of no more than 2,017 East Los Angeles residents who were certified as disadvantaged and were qualified for employment under the contracts. Although the Government paid $712,500 of the contractual consideration to Socoma, $299,700' to Lady Fair, and $240,000 to Monarch, all of these defendants failed to perform under their respective contracts, except that Socoma provided 186 jobs of which 139vwere wrongfully terminated, and Lady Fair provided 90 jobs, of which all were wrongfully terminated.

The complaint contains 11 causes of action. The second, fourth, and sixth causes of action seek damages of $3,607,500 against Socoma, $3,052,500 against Lady Fair, and $2,220,000 against Monarch, calculated on the basis of 12 months’ wages at minimum rates and $1,000 for loss of training for each of the jobs the defendant contracted to provide. The third and fifth causes of action seek similar damages for the 139 persons whose jobs were terminated by Socoma and the 90 persons whose jobs were terminated by Lady Fair. The first, seventh, and eighth causes of action seek to impose joint liability on Socoma, Lady Fair, and Monarch as joint venturers, alleging that they negotiated the contracts through a common representative and entered into a joint lease of the Lincoln Heights jail building. The ninth, tenth, and eleventh causes of action seek to impose the liability of the corporate defendants upon their officers and directors named as individual defendants, alleging that the latter undercapitalized their respective corporations and used the same as their alter egos.¹

Each cause of action alleges that the “express purpose of the [Government] in entering into [each] contract was to benefit [the] certified disadvantaged hard-core unemployed residents of East Los Angeles [for whom defendants promised to provide training and jobs] and none other, and those residents are thus the express third party beneficiaries of [each] contract.”

The general demurrers admitted the truth of all the material factual allegations of the complaint, regardless of any possible difficulty in proving them (Alcorn v. Anbro Engineering, Inc. (1970) 2 Cal.3d 493, 496 [86 Cal.Rptr. 88, 468 P.2d 216]), but did not admit allegations which constitute conclusions of law (Faulkner v. Cal. Toll Bridge Authority (1953) 40 Cal.2d 317, 329 [253 P.2d 659]) or which are contrary to matters of which we must take judicial notice (Chavez v. Times-Mirror Co. (1921) 185 Cal. 20, 23 [195 P. 666]). (See Witkin, Cal. Procedure (2d ed. 1971) Pleading, §§ 328, 800.) When a complaint is based on a written contract which it sets out in full, a general demurrer to the complaint admits not only the contents- of the instrument but also any pleaded meaning to which the instrument is reasonably susceptible. (Coast Bank v. Minderhout (1964) 61 Cal.2d 311, 315 [38 Cal.Rptr. 505, 392 P.2d 265].) Moreover, where, as here, the general demurrer is to an original complaint and is sustained without leave to amend, “the issues presented are whether the complaint states a cause of action, and, if not, whether there is a reasonable possibility that it could be amended to do so.” (MacLeod v. Tribune Publishing Co. (1959) 52 Cal.2d 536, 542 [343 P.2d 36]; see 3 Witkin, Cal. Procedure (2d ed. 1971) Pleading, § 845.) Thus, we must determine whether the pleaded written contracts support plaintiffs’ claim either on their face or under any interpretation to which the contracts are reasonably susceptible and which is pleaded in the complaint or could be pleaded by proper amendment. This determination must be made in light of applicable federal statutes and other matters we must judicially notice. (Evid. Code, §§ 451, 459, subd. (a).)

Plaintiffs contend they are third party beneficiaries under Civil Code section 1559, which provides: “A contract, made expressly for the benefit of a third person, may be enforced by him at any time before the parties thereto rescind it.” This section excludes enforcement of a contract by persons who are only incidentally or remotely benefited by it. (Lucas v. Hamm (1961) 56 Cal.2d 583, 590 [15 Cal.Rptr. 821, 364 P.2d 685].) American law generally classifies persons having enforceable rights under contracts to which they are not parties as either creditor beneficiaries or donee beneficiaries. (Rest., Contracts, §§ 133, subds. (1), (2), 135, 136, 147; 2 Williston on Contracts (3d ed. 1959) § 356; 4 Corbin on Cbntracts (1951) § 774; see Rest.2d Contracts-(Tentative Drafts 1973) § 133, corns, b, c.) California decisions follow this classification. (Southern Cal. Gas Co. v. ABC Construction Co. (1962) 204 Cal.App.2d 747, 752 [22 Cal.Rptr. 540]; 1 Witkin, Summary of Cal. Law (8th ed. 1973) Contracts, § 500.)

A person cannot be a creditor beneficiary unless the promisor’s performance of the contract will discharge some form of legal duty owed to the beneficiary by the promisee. (Hartman Ranch Co. v. Associated Oil Co. (1937) 10 Cal.2d 232, 244 [73 P.2d 1163]; Rest., Contracts, § 133, subd. (l)(b).) Clearly the Government (the promisee) at no time bore any legal duty toward plaintiffs to provide the benefits set forth in the contracts and plaintiffs do not claim to be creditor beneficiaries.

A person is a donee beneficiary only if the promisee’s contractual intent is either to make a gift to him or to confer on him a right against the promisor. (Rest., Contracts, § 133, subd. (l)(a).) If the promisee intends to make a gift, the donee beneficiary can recover if such donative intent must have been understood by the promisor from the nature of the contract and the circumstances accompanying its execution. (Lucas v. Hamm, supra, 56 Cal.2d at pp. 590-591.) This rule does not aid plaintiffs, however, because, as will be seen, no intention to make a gift can be imputed to the Government as promisee.

Unquestionably plaintiffs were among those whom the Government intended to benefit through defendants’ performance of the contracts which recite that they are executed pursuant to a statute and a presidential directive calling for programs to furnish disadvantaged persons with training and employment opportunities. However, the fact that a Government program for social betterment confers benefits upon individuals who are not required to render contractual consideration in return does not necessarily imply that the benefits are intended as gifts. Congress’ power to spend money in aid of the general welfare (U.S. Const., art. I, § 8) authorizes federal programs to alleviate national unemployment. (Helvering v. Davis (1937) 301 U.S. 619, 640-645 [81 L.Ed. 1307, 1314-1317, 57 S.Ct. 904, 109 A.L.R. 1319].) The benefits of such programs are provided not simply as gifts to the recipients but as a means of accomplishing a larger public purpose. The furtherance of the public purpose is in the nature of consideration to the Government, displacing any governmental intent to furnish the benefits as gifts. (See County of Alameda v. Janssen (1940) 16 Cal.2d 276, 281 [106 P.2d 11, 130 A.L.R. 1141]; Allied Architects’ Assn. v. Payne (1923) 192 Cal. 431, 438-439 [221 P. 209, 30 A.L.R. 1029].)

Even though a person is not the intended recipient of a gift, he may nevertheless be “a donee beneficiary if it appears from the terms of the promise in view of the accompanying circumstances that the purpose of the promisee in obtaining the promise ... is ... to confer upon him a right against the promisor to some performance neither due nor supposed or asserted to be due from the promisee to the beneficiary.” (Rest., Contracts, § 133, subd. (l)(a) (italics supplied); Gourmet Lane, Inc. v. Keller (1963) 222 Cal.App.2d 701, 705 [35 Cal.Rptr. 398].) The Government may, of course, deliberately implement a public purpose by including provisions in its contracts which expressly confer on a specified class of third persons a direct right to benefits, or damages in lieu of benefits, against the private contractor. But a governmental intent to confer such a direct right cannot be inferred simply from the fact that the third persons were intended to enjoy the benefits. The Restatement of Contracts makes this clear in dealing specifically with contractual promises to the Government to render services to members of the public: “A promisor bound to the United States or to a State or municipality by contract to do an act or render a service to some or all of the members of the public, is subject to no duty under the contract to such members to give compensation for the injurious consequences of performing or attempting to perform it, or of failing to do so, unless, ... an intention is manifested in the contract, as interpreted in the light of the circumstances surrounding its formation, that the promisor shall compensate members of the public for such injurious consequences . . . .” (Rest., Contracts, § 145 (italics supplied);² see City & County of San Francisco v. Western Air Lines, Inc. (1962) 204 Cal.App.2d 105, 121 [22 Cal.Rptr. 216].)

The present contracts manifest no intent that the defendants pay damages to compensate plaintiffs or other members of the public for their nonperformance. To the contrary, the contracts’ provisions for retaining the Government’s control over determination of contractual disputes and for limiting defendants’ financial risks indicate a governmental purpose to exclude the direct rights against defendants claimed here.

Each contract provides that any dispute of fact arising thereunder is to be determined by written decision of the Government’s contracting officer, subject to an appeal to the Secretary of Labor, whose decision shall be final unless determined by a competent court to have been fraudulent, capricious, arbitrary, in bad faith, or not supported by substantial evidence. These administrative decisions may include determinations of related questions of law although such determinations are not made final. The efficiency and uniformity of interpretation fostered by these administrative procedures would tend to be undermined if litigation such as the present action, to which the Government is a stranger, were permitted to proceed on the merits.

In addition to the provisions on resolving disputes each contract contains a “liquidated damages” provision obligating the contractor to refund all amounts received from the Government, with interest, in the event of failure to acquire and equip the specified manufacturing facility, and, for each employment opportunity it fails to provide, to refund a stated dollar amount equivalent to the total contract compensation divided by the number of jobs agreed to be provided. This liquidated damages provision limits liability for the breaches alleged by plaintiffs to the refunding of amounts received and indicates an absence of any contractual intent to impose liability directly in favor of plaintiffs, or, as claimed in the complaint, to impose liability for the value of the promised performance. To allow plaintiffs’ claim would nullify the limited liability for which defendants bargained and which the Government may well have held out as an inducement in negotiating the contracts.³

It is this absence of any manifestation of intent that defendants should pay compensation for breach to persons in the position of plaintiffs that distinguishes this case from Shell v. Schmidt (1954) 126 Cal.App.2d 279 [272 P.2d 82], relied on by plaintiffs. The defendant in Shell was a building contractor who had entered into an agreement with the federal government under which he received priorities for building materials and agreed in return to use the materials to build homes with required specifications for sale to war veterans at or below ceiling prices. Plaintiffs were 12 veterans, each of whom had purchased a home that failed to comply with the agreed specifications. They were held entitled to recover directly from the defendant contractor as third party beneficiaries of his agreement with the government. The legislation under which the agreement was made included a provision empowering the government to obtain payment of monetary compensation by the contractor to the veteran purchasers for deficiencies resulting from failure to comply with specifications. Thus, there was “an intention . . . manifested in the contract . . . that the promisor shall compensate members of the public for such injurious consequences [of nonperformance]. ”⁴

Plaintiffs contend that section 145 of the Restatement of Contracts, previously quoted, does not preclude their recovery because it applies only to promises made to a governmental entity “to do an act or render a service to . . . the public,” and, plaintiffs assert they and the class they represent are identified persons set apart from “the public.” Even if this contention were correct it would not follow that plaintiffs have standing as third party beneficiaries under the Restatement. The quoted provision of section 145 “is a special application of the principles stated in §§ 133 (la), 135 [on donee beneficiaries]” (Rest., Contracts, § 145, com. a), delineating certain circumstances which preclude government contractors’ liability to third parties. Section 145 itself does not purport to confer standing to sue on persons who do not otherwise qualify under basic third party beneficiary principles.* ***⁵ As pointed out above, plaintiffs are not donee beneficiaries under those basic principles because it does not appear from the terms and circumstances of the contract that the Government intended to make a gift to plaintiffs or to confer on them a legal right against the defendants.

Moreover, contrary to plaintiffs’ contention, section 145 of the Restatement of Contracts does preclude their recovery because the services which the contracts required the defendants to perform were to be rendered to “members of the public” within the meaning of that section. Each contract recites it is made under the “Special Impact Programs” part of the Economic Opportunity Act of 1964 and pursuant to a presidential directive. for a test program of cooperation between the federal government and private industry in an effort to provide training and jobs for thousands of the hard-core unemployed or under-employed.⁶ Thb* congressional declaration of purpose of the Economic Opportunity Act as a whole points up the public nature of its benefits on a national scale. Congress declared that the purpose of the act was to “strengthen, supplement, and coordinate efforts in furtherance of [the] policy” of “opening to everyone the opportunity for education and training, the opportunity to work, and the opportunity to live in decency and dignity” so that the “United States can achieve its full economic and social potential as a nation.” (42 U.S.C. § 2701 .)⁷

In providing for special impact programs, Congress declared that such programs were directed to the solution of critical problems existing in particular neighborhoods having especially large concentrations of low-income persons, and that the programs were intended to be of sufficient size and scope to have an appreciable impact in such neighborhoods in arresting tendencies toward dependency, chronic unemployment and rising community tensions. (42 U.S.C. former § 2763.)⁸ Thus the contracts here were designed not to benefit individuals as such but to utilize the training and employment of disadvantaged persons as a means of improving the East Los Angeles neighborhood. Moreover, the means by which the contracts were intended to accomplish this community improvement were not confined to provision of the particular benefits on which plaintiffs base their claim to damages—one year’s employment at minimum wages plus $1,000 worth of training to be provided to each of 650 persons by one defendant, 400 by another, and 550 by another. Rather the objective was to be achieved by establishing permanent industries in which local residents would be permanently employed and would have opportunities to become supervisors, managers and part owners. The required minimum capital investment of $5,000,000 by each defendant and the defendants’ 22-year lease of the former Lincoln Heights jail building for conversion into an industrial facility also indicates the broad, long-range objective of the program. Presumably, as the planned enterprises prospered, the quantity and quality of employment and economic opportunity that they provided would increase and would benefit not only employees but also their families, other local enterprises and the -government itself through reduction of law enforcement and welfare costs.

The fact that plaintiffs were in a position to benefit more directly than certain other members of the public from performance of the contract does not alter their status as incidental beneficiaries. (See Rest., Contracts, § 145, illus. 1: C, a member of the public cannot recover for injury from B’s failure to perform a contract with the United States to carry mail over a certain route.)⁹ For example, in City & County of San Francisco v. Western Air Lines, Inc., supra, 204 Cal.App.2d 105, the agreement, between the federal government and the city for improvement of the airport could be considered to be of greater benefit to air carriers using the airport than to many other members of the public. Nevertheless, Western, as an air carrier, was but an incidental, not an express, beneficiary of the agreement and therefore had no standing to enforce the contractual prohibition against discrimination in the airport’s availability for public use. The court explains the distinction as follows: “None of the documents under consideration confers on Western the rights of a third-party beneficiary. The various contracts and assurances created benefits and detriments as between only two parties—the United States and the City. Nothing in them shows any intent of the contracting parties to confer any benefit directly and expressly upon air carriers such as the defendant. It is true that air carriers, including Western, may be incidentally benefited by City’s assurances in respect to nondiscriminatory treatment at the airport. They may also be incidentally benefited by the fact that, through federal aid, a public airport is improved with longer runways, brighter beacons, or larger loading ramps, or by the fact a new public airport is provided for a community without one. The various documents and agreements were part of a federal aid program directed to the promoting of a national transportation system. Provisions in such agreements, including the nondiscrimination clauses, were intended to advance such federal aims and not for the benefit of those who might be affected by the sponsor’s failure to perform.” (204 Cal.App.2d at p. 120.)

For the reasons above stated we hold that plaintiffs and the class they represent have no standing as third party beneficiaries to recover the damages sought in the complaint under either California law or the general contract principles which federal law applies to government contracts.¹⁰

The judgments of dismissal are affirmed.

McComb, J., Sullivan, J., and Clark, J., concurred.

1 The fourth, fifth, and tenth causes of action, being directed solely against non-appearing defendants, to wit, Lady Fair and its officers and directors, are not before us on this appeal.

2 The corresponding language in the Tentative Drafts of the Restatement Second of Contracts (1973), section 145, is: “[A] promisor who contracts with a government or governmental agency to do an act for or render a service to the public is not subject to contractual liability to a member of the public for consequential damages resulting from performance or failure to perform unless ... the terms of the promise provide for such liability . . . .”

The language omitted in this quotation and the quotation in the accompanying text relates to the creditor beneficiary situation in which the government itself would be liable for nonperformance of the contract. As noted earlier, plaintiffs do not claim to be creditor beneficiaries.

3 Comment a of section 145 of the Tentative Drafts of the Restatement Second of Contracts points out that these factors—retention of administrative control and limitation of contractor’s liability—make third party suits against the contractor inappropriate: “Government contracts often benefit the public, but individual members of the public are treated as incidental beneficiaries unless a different intention is manifested. In case of doubt, a promise to do an act for or render a service to the public does not have the effect of a promise to pay consequential damages to individual members of the public unless the conditions of Subsection (2) (b) [including governmental liability to the claimant] are met. Among factors which may make inappropriate a direct action against the promisor are arrangements for governmental control over the litigation and settlement of claims, the likelihood of impairment of service or of excessive financial burden, and the availability of alternatives such as insurance.” (Italics supplied.)

4 In contrast to Shell, supra, is City & County of San Francisco v. Western Air Lines, Inc., supra, 204 Cal.App.2d 105. There, Western Air Lines claimed to be a. third party beneficiary of agreements between the federal government and the City and County of San Francisco under which the city received federal funds for the development of its airport subject to a written condition that the airport “be available for public use on fair and reasonable terms and without unjust discrimination.” Western Air Lines asserted that it had been charged for its use of the airport at a higher rate than some other air carriers in violation of the contractual condition, and therefore was entitled to recover the excess charges from the city. One of the reasons given by the court on appeal for rejecting this contention was the absence of any provision or indication of intent in the agreements between the government and the city to compensate third parties for noncompliance. The court said: “The granting agreement in each instance entitles the [federal] administrator to recover all grant payments made where there has been any misrepresentation or omission of a material fact by the sponsor [i.e., the city]. We find no other provision for recovery of funds by the administrator and none whatsoever permitting recovery of money or excess rates by a private party. Indeed the language of the granting agreement itself appears to us to point up that it is simply and entirely a financial arrangement between two parties. As the agreement states, it constitutes ‘the obligations and rights of the United States and the Sponsor with.respect to the accomplishment of the Project. . . .”* (204 Cal.App.2d at p. 120.)

5 The same is true of the Tentative Draft of section 145 of the Restatement Second of Contracts which declares that the general rules on third party beneficiaries “apply to contracts with a government or governmental agency except to the extent that, application would contravene the policy of the law authorizing the contract or prescribing remedies for its breach” and that “[i]n particular” the limitations of section 145, including those set forth in footnote 2, supra, apply to a government contractor’s liability to a member of the public for nonperformance of a service to the public.

6 The contracts recite:

“Whereas, the Secretary of Labor is authorized by delegation from the Director of the Office of Economic Opportunity, dated June 17, 1968, approved by the President of the United States on June 27, 1968 (33 F.R. 9850, July 9, 1968), to enter into contracts to provide for Special Impact Programs, pursuant to Title ID of the Economic Opportunity Act of 1964, as amended, hereinafter referred to as the Act, directed to the solution of the critical problems existing in particular communities and neighborhoods within urban areas of the Nation having especially large concentrations of low-income persons and

“Whereas, the President of the United States on October 2, 1967, launched a major test program to mobilize the resources of private industry and the Federal Government to help find jobs and provide trailing for thousands of the Nation’s hard-core unemployed, or under-employed, by inviting private industry throughout the country to join with the agencies and departments of the Federal Government in assuming responsibility for providing training and work opportunities for such seriously disadvantaged persons.

“Now Therefore, pursuant to the aforesaid statutory authority, and the directive of the President, the parties hereto, in consideration of the mutual promises herein expressed, agree as follows: . . .”

7 Section 2701 declares: “Although the economic well-being and prosperity of the United States have progressed to a level surpassing any achieved in world history, and although these benefits are widely shared throughout the Nation, poverty continues to be the lot of a substantial number of our people. The United States can achieve its full economic and social potential as a nation only if every individual has the opportunity to contribute to the full extent of his capabilities and to participate in the workings of our society. It is, therefore, the policy of the United States to eliminate the paradox of poverty in the midst of plenty in this Nation by opening to everyone the opportunity for education and training, the opportunity to work, and the opportunity to live in decency and dignity. It is the purpose of this chapter to strengthen, supplement, and coordinate efforts in furtherance of that policy.

“It is the sense of the Congress that it is highly desirable to employ the resources of the private sector of the economy of the United States in all such efforts to further the policy of this chapter.”

8 Former section 2763 provided: “The purpose of this part is to establish special programs which (1) are directed to the solution of the critical problems existing in particular communities or neighborhoods (defined without regard to political or other subdivisions or boundaries) within those urban areas having especially large concentrations of low-income persons, and within those rural areas having substantial out-migration to eligible urban areas, and (2) are of sufficient size and scope to have an appreciable impact in such communities and neighborhoods in arresting tendencies toward dependency, chronic unemployment, and rising community tensions.”

9 This illustration is repeated in Tentative Drafts, Restatement Second of Contracts, section 145, illustration 1.

10 In the absence of controlling provisions in the federal Constitution, statutes or regulations, the United States government’s rights and obligations under its contracts are ordinarily construed according to general contract law rather than the law of any particular state. (Priebe & Sons v. United States (1947) 332 U.S. 407, 411 [92 L.Ed. 32, 38, 68 S.Ct. 123]; Clearfield Trust Co. v. U. S. (1943) 318 U.S. 363 [87 L.Ed. 838, 63 S.Ct. 573].) In disputes between private parties over conflicting claims stemming from United States government contracts, the applicability of federal law to particular issues is generally held to depend on the degree to which the outcome will affect the government’s interests. (Bank of America v. Parnell (1956) 352 U.S. 29 [1 L.Ed.2d 93, 77 S.Ct. 119]; United States v. Taylor (5th Cir. 1964) 333 F.2d 633, 638; American Pipe & Steel Corp. v. Firestone Tire & Rubber Co. (9th Cir. 1961) 292 F.2d 640, 643.) In view of our holding it is unnecessary for us to decide whether or to what extent federal law applies in the present case.