Before MAJOR, Chief Judge, and DUFFY and SWAIM, Circuit Judges.
This appeal comes from an order entered by the district court June 15, 1953, authorizing the distribution by its clerk of $125,000, deposited with him under the terms and conditions of an order entered May 14, 1952. Prior to a detailed consideration of these orders, as well as a statement of the contested issues, it appears essential to make a statement of the proceedings which give rise to the present controversy.
A suit was commenced on January 17, 1947, by a large number of persons (hereinafter referred to as plaintiffs), in which action others subsequently joined so that ultimately the plaintiffs numbered about 790 persons. Named as defendants were five privately operated construction companies (hereinafter referred to as defendants or contractors), by whom plaintiffs were employed. The suit was for the recovery of salaries, bonuses and subsistence allegedly due plaintiffs under their contracts of employment and for the recovery of damages resulting from an alleged failure to provide plaintiffs with a safe place to work.The defendants had been engaged in the performance of contracts with the Navy Department to construct defense installations on certain islands in the Pacific Ocean. By these basic contracts, the United States agreed to pay "the actual net cost to the contractors of any recoveries due to accidents or damages to persons or property directly incident to operations under this contract and not due to gross negligence of the contractors" and, upon the termination of the contract, to "assume and become liable for all obligations, commitments and claims that the contractors theretofore in good faith may have undertaken or incurred in connection with said work in accordance with the provisions of this contract."
Upon the outbreak of war between the United States and Japan, on December 7, 1941, and the invasion of Wake, Guam and the Philippines by the armed forces of the Japanese government, the employees of defendant contractors (including plaintiffs) were daptured and imprisoned. Some were killed by the Japanese or died in Japanese prison camps. Those who survived were liberated after V-J Day. The suit related to this period of detention by the enemy. Congress became aware of the circumstances which engulfed employees of certain war contractors, including the plaintiffs, and enacted a series of statutes for their benefit. There is no occasion to review these various relief measures prior to the Act of December 2, 1942, as amended, 56 Stat. 1028, 42 U.S.C.A. §§ 1701-1717. A provision of this Act, 42 U.S.C.A. § 1705(c), provides in substance that any employee who after having obtained the benefits of the Act brought suit against the employer or the United States "to recover wages, payments in lieu of wages, * * * or for liquidated or unliquidated damages under the employment contract, or any other benefit, * * * where a recovery is made or allowed, the Secretary shall have the right of intervention and a lien and right of recovery to the extent of any payments paid and payable under this subchapter * * *."
Pursuant to the terms of the 1942 Act, as amended, payments of approximately $5,000,000 were made to the plaintiffs. Thereafter, on July 3, 1948, Congress enacted the War Claims Act, 62 Stat. 1241, 50 U.S.C.A.Appendix, §§ 2001-2013, conferring additional benefits upon employees within the coverage of the 1942 Act, as amended. Pursuant to the provisions of Sec. 4(a) of the War Claims Act of 1948, 50 U.S.C.A.Appendix, § 2003(a), plaintiffs received amounts aggregating $4,500,000. Thus, by this Act plaintiffs recovered the total amount for which they were suing the defendant contractors as pleaded in their complaint ($9,500,000), after deducting therefrom the amounts previously paid to them or their dependents under the 1942 Act ($5,000,000). As a statutory condition precedent to the receipt of any such monies under the 1948 Act, plaintiffs executed releases running to the defendant contractors and the United States of America from any and all claims arising under or out of their contracts of employment.
Defendants answered the complaint, denying numerous allegations thereof, and pleaded a number of affirmative defenses. Subsequent to the time payments were made to plaintiffs in the amount of $4,500,000 under the 1948 Act and releases executed in the manner above stated, defendants pleaded such releases in bar of the action, and a summary judgment was entered in their favor.
We now approach the proceedings which give rise to the instant controversy between the Secretary of Labor (hereinafter referred to as intervenor) and certain named parties who were the attorneys for and represented plaintiffs in the original suit (hereinafter referred to as attorneys or respondents). Prior to the entry of the summary judgment in favor of the defendant contractors, the attorneys for plaintiffs served a written notice upon such defendants in which they claimed an attorneys' lien under a retainer agreement which they had with the plaintiffs. This agreement called for the payment of 10% of "the amount of money received * * * by settlement or any other means * * * and I hereby assign to you and instruct [defendants] to pay you a sum equal to ten percentum (10%)." This lien notice was given pursuant to the illinois nois Attorneys' Lien Law, Ill.Rev.Stat. 1953, Chap. 13, Sec. 14.
On August 11, 1950, the attorneys filed in the original proceeding a petition for enforcement of attorneys' lien in the amount of $450,000 (10% of the amount paid to plaintiffs under the 1948 Act). Defendant contractors by their personal attorney answered this petition, denied material allegations thereof and pleaded a number of affirmative defenses. On April 11, 1951, the Secretary of Labor filed a motion seeking leave to intervene in the attorneys' lien controversy, asserting that by virtue of the 1942 Act, as amended, he was entitled to a lien upon any recovery the attorneys might be allowed against the defendant contractors. This was the first time that any agency of the United States attempted to become a party to any of the proceedings, and intervention was then sought solely for the limited and specific purpose asserted in the intervening complaint. It is true that some of the pleadings in the original proceeding carried the name of the United States Attorney in addition to that of the personal attorneys for the defendant contractors but, even so, it appears that the government attorney appeared on behalf of the defendant contractors rather than on behalf of an agency of the government.
The motion of the Secretary of Labor, filed April 11, 1951, was not acted upon by the court, for some reason not clearly disclosed by the record.However, it is reasonable to presume that the court regarded the request to intervene as premature, in view of the limited and specific purpose for which intervention was sought.At any rate, it appears obvious that there was no occasion at that time to permit intervention by the Secretary of Labor for the purpose of attempting to establish a lien upon a recovery which might or might not be had by the attorneys against the defendant contractors for an attorneys' lien.
In any event, the attorneys and the defendant contractors compromised and settled the attorneys' lien controversy which was embodied in the much disputed order of May 14, 1952. This order in its preamble discloses that the matter came on for hearing upon the joint motion of the attorneys (naming them) and the defendant contractors (naming them) and, among other things, recites:
"That as a result of negotiations for settlement the Attorneys agreed to accept and the Contractors agreed to pay $125,000 in full settlement of the claims asserted by the Attorneys in their said petition, but the assertion by the Intervenor of his claim of a lien and right of recovery gave rise to the question of whether the Attorneys or the Intervenor are legally entitled to the said $125,000 and the Contractors, being unwilling to pay said amount until said question is judicially determined, are in the position of an impartial stakeholder of the sum of $125,000, and are concerned only with the problem of making the aforesaid payment to the person or persons legally entitled thereto, and have agreed to pay the said sum into Court to be disposed of as hereinafter provided. The Attorneys have agreed in consideration thereof, to release all their claims against the Contractors and the United States whether asserted in said petition for the enforcement of an attorneys' lien or otherwise, arising by reason of payments made to plaintiffs and intervening plaintiffs in said cause by the Contractors or the United States of America under legislation now in force or which may hereafter be enacted."
The order provides (1) that the intervenor (Secretary of Labor) is granted leave to file his intervening complaint; (2) that all parties named in such complaint be permitted to file answers thereto; (3) that the contractors shall "deposit with the Registry of this Court the sum of $125,000, which sum shall be paid to the persons or person legally entitled thereto as ordered by this Court upon the adjudication of the issues raised by the intervening complaint as amended and all answers or other pleadings thereto"; (4) that the attorneys execute and deliver to the contractors concurrently with the $125,000 deposit releases in the form attached to the order, and (5) that upon proof of the deposit of the money with the clerk as directed and of the execution and delivery of the releases as ordered, the petition of the attorneys for the enforcement of a lien against the contractors should be dismissed "without prejudice to the adjudication of the issues raised by the said intervening complaint as amended and any answers or other pleadings thereto."
Pursuant to the authority contained in the order of May 14, 1952, the Secretary of Labor on the same date filed what is designated as an amendment of his intervening complaint, in which reference is made to the order "providing for the deposit by the defendants in said cause into the Registry of this Court of the sum of $125,000 upon the conditions and for the purposes and disposition stated in said order." The complaint alleged "that if any award of said $125,000 should be made to the attorneys for the plaintiffs * * * in said cause it should, as a matter of law, be held to be a 'recovery made and allowed' within the meaning of those words ...