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Speaker Sortation Systems v. United States Postal Service

decided: January 6, 1978.

SPEAKER SORTATION SYSTEMS, DIVISION OF A-T-O, INC., PLAINTIFF-APPELLANT,
v.
UNITED STATES POSTAL SERVICE, DEFENDANT-APPELLEE



Appeal from the United States District Court for the Eastern District of Wisconsin. No. 71-C-570 - Robert W. Warren, Judge.

Swygert and Wood, Circuit Judges, and William J. Campbell, Senior District Judge.*fn*

Author: Campbell

CAMPBELL, Senior District Judge

Plaintiff-Appellant Speaker Sortation Systems, Division of A-T-O, Inc. (Speaker) furnished labor and materials in connection with the installation of bulk mail sorting equipment at the Post Office in Milwaukee, Wisconsin, under the terms of a subcontract. Speaker instituted this action against the United States Postal Service (Service) demanding judgment on an equitable lien theory in the amount of $94,220.61 for work performed on and materials supplied to that facility for Service's use.*fn1 Central to the viability of Speaker's theory was the existence of a fund in the possession of Service to which the equitable lien could attach.

Kennedy Electric Co., Inc., another subcontractor involved in the same project, instituted an action against Service in the United States District Court for the District of Colorado to enforce an equitable lien for its work performed on and materials supplied to the Milwaukee Post Office. That court found that a fund existed to which Kennedy Electric Co., Inc.'s equitable lien could attach, and entered judgment for the subcontractor. Kennedy Electric Co., Inc. v. United States Postal Service, 367 F. Supp. 828 (D. Colo. 1973), aff'd., 508 F.2d 954 (10th Cir. 1974).

Contrary to the Kennedy court's finding, the district court in the instant case found that since Service owed no money to the general contractor, there was no fund to which Speaker's claimed equitable lien could attach. This appeal requires us to determine whether defendant Service was collaterally estopped from relitigating the issue of the existence of the fund to which Speaker sought to attach its asserted equitable lien. We hold that Service was collaterally estopped on this issue, and reverse the district court's order granting summary judgment in favor of Service.

The facts are undisputed. In late 1969, J. C. Corrigan Co., Inc. entered into a contract with the United States Postoffice Department, Service's predecessor.*fn2 J. C. Corrigan Co., Inc. subcontracted substantially all of the work under the contract to its affiliate, Corrigan Construction Co. (both Corrigan Companies will be referred to hereafter as "Corrigan"). Corrigan thereafter subcontracted major portions of the contract work. Among the Corrigan subcontractors were Speaker and Kennedy Electric Co., Inc. Speaker successfully completed the installation of the equipment under the terms of its subcontract with Corrigan.

It is further undisputed that Corrigan never obtained performance and payment bonds as required both by the Miller Act [40 U.S.C. § 270a et seq.]*fn3 and the terms of the contract itself. Although the contract and applicable regulations limited progress payments to Corrigan to 70% of the cost incurred with a maximum of 70% of the contract price, Service made progress payments to Corrigan amounting to nearly 90% of the contract price. Specifically, in February and March, 1971, Service made payments to Corrigan's assignee of $14,500.00 and $190,747.00, respectively. Service made these payments without the required invoices, without official approval of unusual progress payments as required by 41 C.F.R. § 30.505, and without assurances that the unpaid balance of the contract price was sufficient to cover the cost of completion, as required by 41 C.F.R. § 30.521.1.

On the basis of these same uncontested facts, the Kennedy court found that the improper progress payments of March, 1971 ($190,747.00) and the actual retainage of the obligated appropriation under the contract ($35,739.47) provided a fund in Service's possession out of which the subcontractor Kennedy's claim for an equitable lien for labor and material furnished could be satisfied. Kennedy, supra, 367 F. Supp. at 841. The Kennedy court entered judgment for the subcontractor in the amount of $61,281.31 plus interest.*fn4

It is clear that Service had a full and fair opportunity to litigate the existence of this fund in the Kennedy court. Having had such an opportunity, and having utilized that opportunity to litigate the issue of the existence of the fund, we believe that relitigation on the identical issue of the existence of the same fund should have been precluded in the instant case.

Invocation of the doctrine of collateral estoppel, or issue preclusion, is proper when the party against whom the doctrine is asserted had a full and fair opportunity to litigate the issue in the prior proceeding. Butler v. Stover Bros. Trucking Company, 546 F.2d 544, 551 (7th Cir. 1977); Samuel C. Ennis & Co., Inc. v. Woodmar Realty Co., 542 F.2d 45, 49 (7th Cir. 1976); Garcy Corporation v. Home Insurance Company, 496 F.2d 479, 483 (7th Cir. 1974); Federal Savings and Loan Insurance Corp. v. Hogan, 476 F.2d 1182, 1187-88 (7th Cir. 1973); Cf. Dreyfus v. First National Bank of Chicago, 424 F.2d 1171, 1175 (7th Cir. 1970). That Speaker was not a party to the prior Kennedy litigation is of no importance, for the doctrine of mutuality of estoppel in such situations has been minimized in favor of a more significant determination of "whether the party against whom an estoppel is asserted had a full and fair opportunity to litigate. . . ." Blonder-Tongue Laboratories, Inc. v. University of Illinois Foundation, 402 U.S. 313, 329, 28 L. Ed. 2d 788, 91 S. Ct. 1434 (1971); see Restatement (Second) of Judgments, Appendix § 88, comment b, at 162-163 (Tent. Draft No. 3, 1976).

Nor do we find any special circumstances in the present case by reason of which Service should be given the opportunity to litigate for a second time the existence of a fund composed of monies actually retained and which should have been retained in the administration of the contract to install the bulk mail facility at the Milwaukee Post Office. Contending that two special circumstances do exist in this case which should preclude the application of the doctrine of collateral estoppel against it, Service points to the following provision of the Restatement (Second) of Judgments, supra, Appendix § 88:

"A party precluded from relitigating an issue with an opposing party, in accordance with §§ 68 and 68.1 is also precluded from doing so with another person unless the fact that he lacked full and fair opportunities to litigate the issue in the first action or other circumstances justify affording him an opportunity to relitigate the issue. The circumstances to which consideration should be given include those enumerated in § 68.1 and also whether:

(7) The issue is one of law and treating it as conclusively determined would inappropriately foreclose opportunity for obtaining reconsideration of ...


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