Court Opinion

ID: 9466960
Source: CourtListenerOpinion
Date Created: 2023-08-05 01:34:00.118901+00
Date Added: 2024-06-11T17:40:04.297435
License: Public Domain

LOGAN, Circuit Judge,
concurring in part and dissenting in part.
I agree with the result reached by the majority on the 1970 contract. If I could read the 1966 contract as definitely contemplating completion of the sale of $110,000,-000 of authorized bonds within a limited time frame, I would agree with the majority’s conclusion on that contract also. But I think, in context, the 1966 contract was a long-term personal services contract, intended to bind the Authority to hire Mike-sell Associates as financial consultants when and if they were needed. As such it is not unlike a commitment to hire a particular lawyer for his or her lifetime whenever the corporation has need for legal services. 1 believe that such a contract is unenforceable to the extent it has not been performed.
The applicable statute states the $110,-000,000 bond authorization in terms of an overall limit. “The district shall have power and is hereby authorized to issue from time to time, as the need thereof arises, bonds for corporate purposes of not to exceed One Hundred Ten Million Dollars ($110,000,000.00), in such amount or amounts as are necessary or convenient to the exercise of the powers, rights, privileges and functions conferred upon it by this Act . .” Okla.Stat.Ann. tit. 82, § 870 (West 1970). The 1966 contract, replacing a 1955 contract, tracks the language of the statute, reciting that the Authority is authorized to issue “from time to time as the need therefor arises bonds for corporate purposes of not to exceed $110,000,000,” and that the Authority proposes to issue “from time to time” bonds for unspecified improvements. It then purports to bind the Authority to employ the Mikesell partnership as financial consultant until all remaining authorized bonds ($38,000,000) are issued. The most that I can infer from this is a contract for the lifetime of the Mikesell partners or until the authorized bond limits are reached. There is no indication when, if ever, the Authority would issue the remaining authorized bonds.
The Grand River Dam Authority statute was passed in 1935. By the date of signing *216the 1966 contract only $72,000,000 of bonds had been issued, and the Authority had been operating eleven years under a 1955 agreement with a predecessor to R. S. Mike-sell Associates. At the end of more than ten additional years, when the 1966 contract was terminated, $8,800,000 of the authorized bonds remáined unissued. The 1970 contract is pertinent in that it was made in contemplation of legislation authorizing an expansion of the purposes for which bonds could be issued by the Authority.
It seems clear from the record the then existing board of directors of the Authority intended to bind the Authority ad infinitum to this particular financial advisor because of its confidence in the partnership’s expertise and its desire to avoid political pressures designed to obtain this bond business.
The crucial question is whether this contract would be regarded by the Oklahoma courts as violative of public policy. I think the trial court determined correctly that it would, although I do not agree with its conclusion that such a contract may not extend beyond the term of the contracting board.
Oklahoma appears to have no case directly in point, but there are many cases in other jurisdictions involving private corporations. A few decisions indicate a contract for personal services may not run beyond the term of the board of directors that enters into it. E.g., Beaton v. Continental Southland Sav. & Loan Ass’n, 101 S.W.2d 905 (Tex.Civ.App.1937). But most permit contracting for a reasonable term. In several cases contracts for five years or less have been upheld. E.g., United Producers & Consumers Co-op. v. Held, 225 F.2d 615 (9th Cir.1955) (3 years); In re Paramount Publix Corp., 90 F.2d 441 (2d Cir.1937) (3 years); Realty Acceptance Corp. v. Montgomery, 51 F.2d 636 (3d Cir.1930) (5 years); Streett v. Laclede-Christy Co., 409 S.W.2d 691 (Mo.1966) (5 years); Leventhal v. Atlantic Fin. Corp., 316 Mass. 194, 55 N.E.2d 20 (1944) (5 years). In at least two cases ten years has been regarded as reasonable. In re American Range & Foundry Co., 22 F.2d 558 (D.Minn.1927); Koppitz-Melchers, Inc. v. Koppitz, 315 Mich. 582, 24 N.W.2d 220 (1946) (dictum). One case held that a suit for breach of a twenty-year employment contract stated a cause of action because the duration was not per se against the interests of the corporation and its stockholders. Whitley v. Whitley Const. Co., 121 Ga.App. 696, 175 S.E.2d 128 (1970). Another case upheld a lifetime contract employing the former chairman of the board as a consultant and prohibiting him from competing with the company. Because the former chairman was seventy years old when the contract was executed, the court concluded the lifetime term was limited and reasonable under the circumstances. Osborne v. Locke Steel Chain Co., 153 Conn. 527, 218 A.2d 526 (1966).
However, most courts considering contracts for an indefinite period of time, lifetime or long duration (except for contracts settling a claim with an injured employee) have struck them down as unreasonably binding the hands of future directors. E.g., Wilson v. Jennings, 344 Mass. 608, 184 N.E.2d 642 (1962) (16 years); Borland v. John F. Sass Printing Co., 95 Colo. 53, 32 P.2d 827 (1934) (indefinite term, as long as employee owned stock); Clifford v. Fireman’s Mut. Benev. Ass’n, 232 App.Div. 260, 249 N.Y.S. 713, aff’d mem., 259 N.Y. 547, 182 N.E. 175 (1932) (lifetime); Beers v. New York Life Ins. Co., 66 Hun. 75, 20 N.Y.S. 788 (Sup.Ct.1892) (lifetime). Cf. Arentz v. Morse Dry Dock & Repair Co., 249 N.Y. 439, 164 N.E. 342 (1928) (construing contract for “permanent” employment as one to continue until one party wished to sever the agreement).
The vast weight of authority would seem to be against enforcement of very long or indefinite term contracts. Indeed, this Court has stated in the context of applying Oklahoma law that a lifetime contract is invalid absent special circumstances such as personal injury. General Paint Corp. v. Kramer, 57 F.2d 698, 703 (10th Cir.), cert. denied, 287 U.S. 605, 53 S.Ct. 10, 77 L.Ed. 526 (1932). The majority minimizes the public policy argument, however, by referring to Okla.Stat.Ann. tit. 82, § 862(b) *217(West 1970), which provides that the Authority has the power to enter contracts for terms up to fifty years in connection with the development and generation of water power, electric power and electric energy, and the selling, reselling, interchanging and distribution of electric power and energy. The majority’s conclusion rests upon its unexplained determination that section 862(b) also applies to personal service contracts. My reading of the statutory provisions enumerating the Authority’s powers leads me to believe that section plainly does not apply to personal service contracts. Section 862, at the time the 1966 contract was executed, enumerated seventeen powers in separate subsections. The Authority’s power to contract with Mikesell Associates would derive from subsection (m), authorizing appointment of officers, agents, and employees, and subsection (n), authorizing necessary and convenient contracts. Neither section purports to give the board the power to enter binding, permanent (or fifty-year) personal services contracts.
In view of the strong, generally recognized policy against lengthy or indefinite terms in such contracts, and the absence of specific statutory guidance here in contrast to the specific durational authorization concerning development and distribution contracts, I cannot conclude the Oklahoma legislature intended to allow the board to bind its successors to permanently employ certain individuals or entities. This conclusion seems particularly cogent because the members of the board are political appointees. See Okla.Stat.Ann. tit. 82, § 863 (West 1970). The public policy limiting the ability of a board to bind its successors indefinitely, in the absence of a specific statutory directive, is even stronger when public bodies rather than private corporations are concerned.
Whether the 1966 contract at issue here is considered to be limited to a fifty-year term, to the lifetime of Robert S. Mikesell and George S. Wade, or for the indefinite period in which the Authority will have the need to issue $38,000,000 in bonds (which did not in fact occur in 10 years), I believe the Oklahoma courts would strike it down as violative of public policy. Accordingly, I would affirm the trial court on its treatment of that contract.