when it had the opportunity fully and fairly to litigate the issue in Bolden that CLS would seek attorneys' fees from it for 1978-1979 in connection with other law suits. Finally, and importantly, judicial economy would not be served by relitigating the 1978-1979 contract issue before this court.
Defendants also contend that collateral estoppel should not apply because they are not identical parties to, or in privity with, the defendants in Bolden. The Court finds, however, that the defendants in Shadis and Bolden are aligned such that collateral estoppel may apply. In both cases, defendants were agencies or individuals employed by agencies of the Commonwealth. The Commonwealth is surely interested in the outcome of all litigation involving its various agencies. The privity between the Commonwealth and its agencies, the State Police, and the DPW, is sufficient to extend the estoppel by judgment to the Commonwealth. Chicago, R.I. & P. Ry. Co. v. Schendel, 270 U.S. 611, 618, 46 S. Ct. 420, 423, 70 L. Ed. 757 (1926).
The Court therefore concludes, for the reasons stated above, that defendant is precluded from raising the 1978-1979 PLSC-DPW contract as a defense to plaintiffs' request for attorneys' fees for work done in that fiscal year.
Finally, although this Court concludes that collateral estoppel bars the contractual defense raised by defendant, the Court is persuaded by the reasoning of Judge Green's opinion in Bolden, and would be inclined to follow Bolden if defendants were not estopped in this case.
2. The 1979-1980, 1980-1981 Contracts: Public Policy
Plaintiffs argue that the contractual term to which they were forced to agree should be found unenforceable because it is void as contrary to public policy.
In determining which rules of law to apply in deciding this issue, the Court notes that the Court of Appeals for this Circuit has suggested in a case treating similar issues that the rules of contract law in the Commonwealth of Pennsylvania should apply. Westmoreland Hospital Ass'n. v. Blue Cross, et al, 605 F.2d 119, 123 (3d Cir. 1979) cert. denied, 444 U.S. 1077, 100 S. Ct. 1025, 62 L. Ed. 2d 759 (1980). (Insurance contract provisions deducting federal mental health staff grants from computation of hospitals' costs of operation not void as contrary to public policy). Westmoreland does not, however, necessarily govern this case. In the first place, the district court in Westmoreland found no public policy that was contradictory to the effect or purpose of the contracts, and the Court of Appeals adopted its analysis, Westmoreland, 605 F.2d at 125. Having not found any conflict between the contracts and the alleged public policy, the issues of resolving that conflict were never actually reached. In the second place, the fundamental claim in this case is not based on contract, as was the claim in Westmoreland. Instead, this is a federal civil rights claim, a part of which is a claim for attorneys' fees, to which a contract is raised as a defense.
Having concluded that it is not bound by any inference that might be drawn from Westmoreland, the Court further concludes that it is to federal law that it must turn for the rules of decision. Of course, this is in part a contracts question, and the Pennsylvania law of contracts would seem germane, but more fundamentally it is an issue of federal question litigation, federally guaranteed rights, and a federal policy of inducing lawyers to bring actions such as this one. This is not at its root a contracts claim, but rather a fees request to which defendants have raised a contracts defense. Therefore, although the Pennsylvania law of "illegal" contracts may be instructive, the Court concludes that it is an issue of federal law that it must now decide.
As a general rule, courts will not enforce contractual provisions that are illegal, and illegal in this sense has been defined as "if either its formation or its performance is criminal, tortious, or otherwise opposed to public policy." Restatement of Contracts § 512 (1932) quoted in Contractor Industries v. Zerr, 241 Pa.Super. 92, 97, 359 A.2d 803, 805 (1976). In this case, however, the Court is not presented with a contract that is illegal in the narrow sense; that is, the contract is not prohibited by any express rule of law. Instead, the contract here seems to function in such a way as to counteract through economic duress an important public policy that is carried out through economic inducement. No case cited to the Court, or uncovered through this Court's research, treats this kind of "contrariness" to public policy. The Restatement of Contracts, however, provides a useful list of considerations. Section 320 of Restatement (Second) of Contracts (Tent. Draft No. 12, 1977) reads as follows:
WHEN A TERM IS UNENFORCEABLE ON GROUNDS OF PUBLIC POLICY.
(1) A promise or other term of an agreement is unenforceable on grounds of public policy if legislation provides that it is unenforceable or if the interest in its enforcement is clearly outweighed in the circumstances by a public policy against the enforcement of such terms.