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Puma Industrial Consulting Inc. v. Daal Associates Inc.

decided: January 7, 1987.

PUMA INDUSTRIAL CONSULTING, INC. PLAINTIFF-APPELLEE,
v.
DAAL ASSOCIATES, INC., DAAL TRIMMING & EMBROIDERY, INC., DAAL TRIMMING & EMBROIDERY, DAVID SHAMILZADEH AND AL CONFORTI, DEFENDANTS; DAAL ASSOCIATES, INC., DAVID SHAMILZADEH, AND AL CONFORTI, DEFENDANTS-APPELLANTS



Appeal from a judgment entered in the Southern District of New York, Shirley Wohl Kram, District Judge, awarding $82,418.13 damages to appellee on its claim against appellants for commissions due under a written agreement. Modified and affirmed.

Author: Timbers

Before TIMBERS, VAN GRAAFEILAND and PIERCE, Circuit Judges

TIMBERS, Circuit Judge:

Daal Associates, Inc. ("Daal"), a New York corporation, appeals from a judgment entered September 10, 1986 in the Southern District of New York, Shirley Wohl Kram, District Judge, awarding $82,418.13 damages to Puma Industrial Consulting, Inc. ("Puma") on its claim for commissions due under a written contract ("the contract") between Daal and Puma dated July 21, 1981. David Shamilzadeh and Al Conforti, the officers and sole shareholders of Daal, appeal from the judgment to the extent that it was entered against them jointly and severally as individuals.

The district court held that the contract did not violate federal law and therefore was enforceable; that Daal breached the contract by refusing the pay Puma the agreed upon commission; that through their course of dealing the parties had impliedly modified the contract to provide for a reduction in the amount of the commission to 1.85 percent; and that, since Daal was doing business as a partnership, Shamilzadeh and Conforti were jointly and severally liable for the amount of the fee as the general partners of the partnership.

On appeal, Daal argued (1) that the contract provided for an illegal contingent fee agreement that violated 41 U.S.C. ยง 254(a) (Supp. III 1985), is contrary to public policy and therefore is unenforceable and (2) that the individuals Shamilzadeh and Conforti were not individually liable for the amount of commission.

We reverse that portion of the judgment that holds Shamilzadeh and Conforti individually liable. We modify the judgment accordingly. As modified, we affirm the judgment.

I.

We summarize only those facts believed necessary to an understanding of the issues raised on appeal.

Daal is a wholesaler of embroidery, trimming and knitwear products. Prior to Daal's incorporation in 1978, Shamilzadeh and Conforti, the officers and sole shareholders of Daal, transacted business as partners. Daal transacts business under the name "Daal Trimming & Embroidery". Puma is a New Jersey corporation which assists small business in obtaining and satisfactorily performing government and other contracts.

On July 21, 1981 Puma and Daal entered into the contract. It terms provided that Puma would use its best efforts to obtain contracts, on behalf of Daal, to manufacture products for the government and other agencies and to submit bids for those contracts. In return, Daal agreed to pay Puma a commission of five percent (5%) of the gross amount of any contract awarded or any bid accepted.

Puma subsequently arranged for Daal's name to be added to the Defense Personnel Support Center's list of prospective bidders. Puma then reviewed approximately fifty bids with Daal and assisted Daal in submitting approximately sixteen bids. Two of these bids resulted in contracts. The first contract was for the supply of epaulets ("the epaulet contract"). The second was the for the supply of men's wool sweaters ("the sweater contract").

Daal failed to pay Puma the agreed upon commission after the government awarded Daal the sweater contract. Puma commenced the instant diversity action in the Southern District of New York to collect a commission of $222,751.69 due under the sweater contract. After a bench trial, the court filed its opinion dated September 8, 1986. If found that through the course of their dealings the parties impliedly had agreed that Puma's fee would be 1.85 percent rather than 5 percent and that a fee of 1.85% of the gross amount of the sweater contract was due and owing to Puma. The court also found that the sweater contact was awarded to Shamilzadeh and Conforti as the general partners of Daal Trimming & Embroidery and that they therefore were jointly and severally liable for the commission. The court concluded, as a matter of law, that the contingent fee provision of the contract did not violate federal law. The court ordered judgment to be entered in favor of Puma and against Daal, Shamilzadeh and Conforti in accordance with its opinion. Judgment was entered September 10, 1986. Thereafter Daal filed various motions for ...


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