Opinion ID: 715406
Heading Depth: 2
Heading Rank: 1

Heading: evidence of a bid-rigging conspiracy

Text: 17 In the district court's Order filed on July 14, 1992, the trial judge lists the then known evidence of bid-rigging among electrical contractors relevant to the Diablo Canyon project. 18 The judge noted that there was no real dispute that some of the bidders for the electrical work at Diablo Canyon engaged in bidding improprieties. However, it was less clear (1) that PG & E suffered any injury due to these improprieties, and (2) that each Defendant behaved improperly with respect to each contract. 19 Regarding injury, PG & E contends that the bid-rigging conspiracy proximately caused PG & E to negotiate one-on-one with the winner of Contract 8802, that is, Foley, and to modify that contract to include more work (whatever was left to be done under Contract 8807) at a better rate to Foley than the winning bid should have required if there had been no bid-rigging. PG & E contends further that Foley was thereby enabled to underbid other contractors for non-electrical work by incorporating as part of its bid an offer to reduce the super-competitive payment terms under Contract 8802 to a competitive level. 20 Regarding the extent of each defendant's liability, PG & E contends that there was a single overarching conspiracy among all defendants to allocate all of the electrical work at Diablo Canyon (and elsewhere in the Western United States), rather than a separate conspiracy for each bid. Thus all defendants as co-conspirators would be liable for the totality of PG & E's bid-rigging injury proximately caused by any one or more of the conspirators even though the evidence does not connect each defendant with each rigged bid.
21 Section 1 of the Sherman Act generally proscribes any contract, combination or conspiracy that unreasonably restrains the nation's domestic or foreign commerce. 15 U.S.C. § 1. As construed by the courts, Section 1 broadly prohibits concerted action that unreasonably restrains the nation's domestic or foreign trade. See, e.g., National Society of Professional Engineers v. United States, 435 U.S. 679, 690 (1978), and Standard Oil Co. v. United States, 221 U.S. 1, 65 (1911). 22 The coverage of Section 1 of the Sherman Act is necessarily directed at concerted action only. Thus, an actual concert of action between at least two separate persons or entities must first be demonstrated. United States v. Trenton Potteries Co., 273 U.S. 392 (1927). 23 Typically, the existence of a contract, combination or conspiracy must be inferred from circumstantial evidence. Virtually any evidence may be used for this purpose if it indicates that the parties entered into an understanding or agreement to take joint action. Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752 (1984). Merely coincidental behavior that can be explained on legitimate business grounds does not, however, in itself establish a conspiracy if it is equally indicative of a series of unilateral actions. City of Long Beach v. Standard Oil Co. of Cal., 872 F.2d 1401 (9th Cir.1989), cert. denied 493 U.S. 1076 (1990).
24 In its Opposition to Defendants' Rule 50(a) Motion re Sherman Act, PG & E offered evidence from which the jury could infer that Fischbach had the requisite knowledge, motive, plan and intent to rig large electrical jobs in the Bay Area. 25 The only direct evidence that PG & E has proffered in its brief was the testimony by Mr. Brown, Foley's first Bay Area manager. In his cross examination at trial, Brown stated that, with regard to Contract 8807, Mr. Hatten told me that [Hatten] controlled all people that was bidding that job. Mr. Hatten was the Bay Area manager for the L.K. Comstock Company, one of Foley's competitors. This is the only evidence of any conspiratorial agreements about which Brown testified he had personal knowledge. Moreover, the district court had stricken that statement as hearsay concerning Hatten's statements. 26 PG & E provided the following circumstantial evidence that the district court laid out in its June 3, 1994 Order: 27 (1) Fischbach, through Francis Kellstrom and Jerome Littman agreed to a silent joint venture with Charles Berrell of Foley to rig a job at the Shell Oil refinery in Martinez, California. 28 (2) William Earl, Fischbach's branch manager, admitted that he probably gave complimentary bids to other electrical contractors. 29 (3) Fischbach qualified to bid as an electrical subcontractor on a civil contract prior to bidding on contract 8807. PG & E contends that this led to the conspiratorial agreement between Fischbach, Comstock, Lord Electric and Foley. Specifically, PG & E points to Brown's testimony indicating that prior to bidding on contracts 8807 and 8802, the contractors determined that those contracts would go to Comstock. 30 (4) Brown attended at least one meeting at the Walnut Creek Inn, where representatives from other contractors, including Fischbach, urged him to agree to Comstock's right to be the lowest bidder on all electrical work at Diablo Canyon. 31 (5) Brown told Comstock what Foley intended to bid for contract 8807. PG & E argued that the jury could infer that Fischbach obtained bid information in advance because the same happened to Lord Electric, another bidder. 32 (6) Fischbach's bid on contract 8807 was higher than Foley's, which PG & E asserts evidences that Fischbach participated in the conspiracy. 33 (7) William Earl's admission that he signed the names of Fischbach's president and corporate secretary on the bid for 8807 without obtaining their authorization to do so. PG & E argues that the jury can infer that there was no need for authorization because Earl and even Kellstrom knew that Fischbach's bid was a complimentary bid. 34 (8) After Foley was declared the winner of contract 8807, but before PG & E solicited bids for contract 8802, Brown met with Charles Berrell in Salt Lake City to discuss a pay-off by Foley to Comstock. At that meeting, Foley promised and Comstock agreed to accept $375,000 in return for which Foley would be the low bidder on 8802. According to PG & E, the jury can infer from this evidence that Comstock controlled the other bidders and that Fischbach was one of them. In PG & E's opinion, it would make no sense for Foley to make a payoff for the outcome on 8807 and 8802 unless there was no risk of competition from Fischbach and Lord Electric, the other contractors who could have bid for the job. 35 (9) A year after the Salt Lake City meeting, Brown met with Hatten and Albrecht (of Wismer & Becker) and flipped coins for contract 8808. PG & E maintains that the jury can infer from this that Fischbach's and Lord's bid for that contract were known to be losing bids, since that result was predetermined by the coin toss. 36 (10) Brown did not include any pay-off for Comstock when he prepared Foley's bid for contract 8802, although he did include $250,000 for Wismer & Becker. PG & E asserts that this clearly shows that the promised $375,000 pay off to Comstock had already been satisfied, by the earlier Washington Metro trade-off. PG & E asserts that this proves there was no threat of competition from Fischbach even before the bids for 8802 were submitted. 37 (11) The absence of evidence that Fischbach ever made a sales call on PG & E after contract 8802 was awarded to Foley. PG & E insists that such a call is standard practice in a truly competitive market. 38 (12) In light of evidence that large jobs like Diablo Canyon were rigged at the highest corporate levels, the jury could infer that other executives at Comstock spoke to Fischbach and informed Hatten of the results of those conversations. 39 The Supreme Court discussed the implications of circumstantial evidence in a case involving allegations of antitrust conspiracy. Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574 (1988). The Court stated that the plaintiff must come forward with sufficiently unambiguous evidence  'that tends to exclude the possibility'  that the defendants were acting lawfully. Id. at 588, citing Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 763-64 (1984). 40 The question becomes whether, on the evidence presented, the protection of innocent independent conduct outweighs the costs associated with the potential decrease in strict antitrust enforcement. If it does, then the plaintiff must come forward with additional, sufficiently unambiguous evidence that does not have these undesirable deterrent effects. In re Coordinated Pretrial Proceedings, 906 F.2d 432, 439 (9th Cir.1990), cert. denied 500 U.S. 959 (1991). 41 We find that the evidence regarding the meetings amongst the contractors is sufficient to allow a reasonable juror to conclude that Fischbach engaged in contract, combination or conspiracy that unreasonably restrains the nation's domestic or foreign commerce, in violation of the Sherman Antitrust Act § 1. We therefore reverse on this issue and remand for further proceedings.