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August 17, 1981

Jack SHADIS, et al.
Frank S. BEAL, et al.

The opinion of the court was delivered by: NEWCOMER

Plaintiffs, as the prevailing party in this case move for an award of attorneys' fees to their attorney, Community Legal Services ("CLS"). Defendants argue that CLS is barred from accepting any such award.

 The Shadis litigation was a class action brought against several Commonwealth employees on behalf of indigent persons who allegedly were deprived of certain medical benefits to which they were entitled under a Medical Assistance program funded and administered by the Commonwealth.

 CLS and other legal services programs ("LSP") acquire funds under the joint federal state title XX program through the Pennsylvania Legal Services Center ("PLSC"), a nonprofit corporation formed by the Commonwealth. Pursuant to this funding arrangement, CLS entered into a series of annual contracts with PLSC for the fiscal years 1978-1981, during which CLS performed much of the work in preparation of this case. The contracts for the fiscal periods 1979-1980 and 1980-1981 contain provisions which allegedly prevent CLS from requesting attorneys' fees arising out of litigation against the Commonwealth or Commonwealth employees.

 Defendants initially argue that the CLS-PLSC funding contracts for 1979-1981 prevent CLS from requesting attorneys' fees generated in the fiscal year 1978-1979 because CLS did not file its request for fees until July, 1980. Defendants argue that the primary funding contract for 1979-80 between PLSC and its fundings source, the Commonwealth Department of Public Welfare contains language to the effect that the LSP, including CLS, "may not accept attorneys' fees in any cases brought against the Commonwealth." Regardless of the validity of such a provision and its power to bind CLS, it does not exclude fees for work done before the contracts went into effect. Moreover, the Court does not find the cases cited by defendant concerning the applicability of changes in statutory laws helpful to its consideration of the contract issues here. The Court finds that the funding contracts between PLSC and DPW and between PLSC and CLS for each of the three fiscal periods pertain only to fees generated by CLS in each of those periods.

 1. The 1978-1979 Contract: Collateral Estoppel and Res Judicata

 Defendants argue that CLS is precluded by a contract between DPW and PLSC from requesting legal fees generated during the fiscal year 1978-1979. That contract provided in pertinent part that "the LSPs and the corporation (PLSC) shall not request attorneys' fees in any case against the Commonwealth or Commonwealth employees." Precisely the issue of whether this contract prevents CLS from requesting legal fees for work done in 1978-1979 in a case against the Commonwealth or its employees was before Judge Green in Bolden v. Pa. State Police, 491 F. Supp. 958 (E.D.Pa.1980).

 The Bolden case was a class action in which plaintiffs alleged racial discrimination in the hiring and promotion practices of the Pennsylvania State Police. The parties agreed to the entry of a consent decree, later modified by the court, which substantially gave the plaintiff class the relief it sought. CLS, attorney for the class, moved for an award of attorneys' fees. Judge Green held that because CLS was not a signatory to the 1978-1979 PLSC-DPW contract and because the provision in question was not ratified by the PLSC board of directors as required, the DPW-PLSC contract did not bar CLS from requesting attorneys' fees for work done in the fiscal year 1978-1979.

 Plaintiffs contend that, in light of the Bolden holding, defendant is barred from asserting the 1978-1979 DPW-PLSC contract provision as a defense by the doctrine of res judicata. Defendants, on the other hand, take the position that the doctrine of collateral estoppel rather than res judicata applies. Defendants argue that since, under the facts here, plaintiffs are urging an "offensive" collateral estoppel, the applicability of the Bolden court's holding to the contract defense raised in Shadis is to be evaluated according to the criteria set forth in Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326, 99 S. Ct. 645, 649, 58 L. Ed. 2d 552 (1979). *fn1" This Court finds that defendants are collaterally estopped from asserting the contract as a defense. It is, therefore, unnecessary to determine whether res judicata applies. *fn2"

 In the Parklane case, the Supreme Court decided "not to preclude the use of offensive collateral estoppel, but to grant trial courts broad discretion to determine when it should be applied." Parklane, 439 U.S. 322, 331, 99 S. Ct. 645, 651, 58 L. Ed. 2d 552. The Court then provided the following guidelines for trial courts: "The general rule should be that in cases where a plaintiff could easily have joined in an earlier action or where ... the application of offensive estoppel would be unfair to a defendant, a trial judge should not allow the use of offensive collateral estoppel." Parklane, 493 U.S. at 331, 99 S. Ct. at 652.

 The Parklane Court's concern regarding the offensive use of collateral estoppel stemmed from an interest in judicial economy and the potential unfairness to a defendant whose position on an issue is precluded by a prior judgment involving that defendant or a party privy and a different plaintiff. None of the Supreme Court's objectives is compromised by application of the doctrine in this case. The Commonwealth had the same opportunities in Bolden to make its case as it does in Shadis. The Commonwealth should have known 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 ...

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