Opinion ID: 490525
Heading Depth: 3
Heading Rank: 2

Heading: Communications Among the Defendants

Text: 44 Perhaps the strongest evidence of a conspiracy offered by Apex is contained in a notebook kept by Dennis Denihan of Northeast memorializing a telephone conversation on February 3 between Fred Slifka, an officer of Global, and Don Oliver at Northeast. The entry in the notebook read: DAO Re Merc Nominations 45
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47 At end of five days window NPC to demand 10 pct penalty + oil plus go to court 48
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50 [Portion obliterated]. 51 Under the circumstances herein, we believe a reasonable inference could be drawn that this notebook entry evidences an agreement between Slifka of Global and Oliver of Northeast to take the actions set forth in it. The district court suggested that since Apex itself picked GATX as the place of delivery, it is more likely that the conversation was a natural one between traders faced with the possibility of an Apex default on deliveries; that it was merely a discussion of shared concerns. See 641 F.Supp. at 1267. In other words, since those in the market were aware that Apex might well default, it was reasonable for competitors to discuss this possibility and also possible responses to be taken in order to ensure delivery of the oil. 52 However, while Apex itself initially chose GATX as the delivery location, there was some evidence indicating that Apex had not in the past been held to its initial selection of a delivery site. Moreover, it seems that if these two parties truly were concerned primarily with early delivery of the oil, a better way to ensure delivery might have been to show some flexibility as to the mode and place of delivery. Instead, the notebook entry seems to suggest that Northeast and Global may have agreed to insist on delivery of the oil at GATX. The long defendants cite evidence suggesting they feared loss of priority if they showed flexibility. However, this merely represents evidence disputing the inference which can be drawn from the notebook entry. 53 Moreover, the district court seems to have accepted the long defendants' assertion that since the price of No. 2 oil was falling at the time the nominations were made, no issue of fact could exist as to the motivation behind the early nominations. As this argument runs, it was sensible to accept the oil early so that a higher price could be charged on resale. This would tend to show that the notebook entries merely evidence an innocent conversation about how to achieve that end. 54 We cannot agree with this characterization of the evidence. First, assuming prices were falling, it was not inevitable that early nomination would be advantageous. For example, it would not have made sense to incur storage costs if fairly rapid resale was not feasible. A table compiled by the long defendants indicates that for all long positions in February 1982 No. 2 oil contracts, defendant and non-defendant, only about 30% of all nominations specified the first two days of the delivery period. Our calculations, based upon apparently undisputed compilations, submitted by Apex, of the number of nominations for each day made by each long defendant, indicate that over 60% of the long defendants' nominations were for the first two days (over 75% for the first three days); and approximately 65% of Global's nominations were for the first two days (100% in the first three days). While only about 10% of Northeast's nominations were for the first two days, over 55% were for the first three days. The non-defendant longs nominated only 15% of their contracts for delivery for the first two days (19% in the first three days). In fact, it appears that the non-defendant longs nominated at most 23% of their Apex contracts for the first three days. It therefore seems clear that not all holders of long positions in oil contracts in a climate of falling prices saw fit to take delivery early, even with respect to those contracts to be delivered by Apex. Indeed, some evidence indicates that in the two months prior to February 1982, No. 2 oil prices may have been dropping, albeit not as rapidly. In those months, very few contracts were nominated early by holders of long positions. 55 We see no conflict between our view here that evidence of falling prices does not necessarily indicate that early delivery was in the interest of every holder of a long position, and our discussion above in which we stated that demanding early delivery was not automatically suspect. We believe that the demand of early delivery, by itself, creates no dominant inference. 56 However, in light of the incriminating nature of the notes regarding the telephone conversation, since we must draw reasonable inferences in favor of Apex, we conclude that the finder of fact should decide whether the denial of conspiracy by the defendants should be accepted. We do not reverse as to Global and Northeast since the claims against them have been settled. See note 1, supra. However, this discussion is relevant to interpreting additional communications among certain defendants which are discussed below. 57 We next consider several entries made in the notebook of William Berberich of Belcher on February 1, 1982, prior to the nominations by the long defendants. In that notebook, the name of Don Oliver, a trader at Northeast, appears. An arrow is drawn from the name to the notation, Losses. Under these notations there are additional notations that appear to relate to prices of No. 2 oil. Then there appears the following: Demand delivery  (emphasis in original), Look for Default and Merc--EFP. Several pages later, in another notation for February 1, the notebook reads, Sat. demand 12:01 Sat. [February 6] AM; and in notations for February 2 appear the words, promote crunch and press for default. 58 Apex asks us to infer from this that Berberich spoke to Oliver on February 1 and agreed to demand delivery  and thereby press for default on the part of Apex. Apex offers no other evidence indicating that the conversation ever took place. Looking at this evidence alone, we agree with the defendants and the district court that inferring that a conversation took place would amount to speculation. Proof of Belcher acting independently in an attempt to create a short squeeze would not show a violation of the Sherman Act as alleged in the amended complaint. 59 Apex states that the suggested inference is a proper one because Belcher held a long position that was relatively small in comparison to the size of Apex. It is posited that Belcher alone could not have hoped to create a crunch and that therefore Belcher must have conspired to create the crunch. 60 This reasoning ignores the undisputed evidence that Belcher was aware that Apex had relatively small amounts of No. 2 oil at GATX. On February 1, Apex actually had a deficit balance of oil at GATX. It also was widely known that Apex had a huge short position. Thus, it would not be unreasonable for officials at Belcher to assume that other holders of long positions might nominate some contracts early. One might also note that the 315 contracts held by Belcher amount to 12,600,000 gallons, not an insignificant amount of oil. 61 At oral argument, counsel for Apex stated that it could have made delivery on all of its obligations were it not for the insistence on the use of GATX. Accordingly, we are asked by Apex to conclude that Belcher could not have reasonably expected to squeeze Apex with only 315 contracts. First, even if we assume this were so, it says nothing of the knowledge or beliefs of Belcher officials as to the matter. Apex in its brief cites a passage from a deposition of Paul Novelly, a principal of Apex. However, in that deposition Novelly merely stated that Apex had enough oil in its system to deliver against the February contract[s] for the month. He did not testify that Apex could complete delivery the first three days of the delivery period. Thus, even if we were to assume that Belcher knew or believed that Apex was capable of delivering the oil over the course of the month, it could have harbored a reasonable expectation that it could squeeze Apex by nominating its 315 contracts for the first minute of the delivery period. We therefore cannot draw an inference of conspiracy from this notebook entry alone. 62 However, Apex also points to another conversation, between Slifka of Global and Berberich of Belcher, which Apex argues supports an inference that Belcher took part in a conspiracy. On February 3, Slifka spoke to Berberich. Berberich admitted that the conversation took place, but stated that it was limited to whether Slifka thought there would be a default and to the fact that Warren held a long position. In his notebook for that day, Berberich entered Slifka's name and telephone number, followed by, 1) G.E. Warren .150. 2) Sent Wires and Want Immediate Answer. 3) Threatened WS [illegible]. Two pages later in the notebook, on the same date, an entry reads: 63 --Penalty to start Fri.-- 64 --10% after 5 days-- 65 --oil at 5 days-- 66 --Bring suit against exchange 67 --Restraining order to prevent any further trades on Merc. 68 Apex points out that the above entries in Berberich's notebook closely resemble the entries in Denihan's notes, discussed above, regarding a conversation between Slifka (Global) and Oliver (Northeast) on the same day. Apex also points out that  'once a conspiracy is shown, only slight evidence is needed to link another defendant with it.'  United States v. Wilkinson, 754 F.2d 1427, 1436 (2d Cir.) (Mansfield, J.) (quoting United States v. Marrapese, 486 F.2d 918, 921 (2d Cir.1973), cert. denied, 415 U.S. 994, 94 S.Ct. 1597, 39 L.Ed.2d 891 (1974)), cert. denied, 472 U.S. 1019, 105 S.Ct. 3482, 87 L.Ed.2d 617 (1985). 69 In our view, the similarity between the notes seems striking. If a finder of fact were to infer a conspiracy between Global and Northeast, a possibility we have concluded would be reasonable in light of Denihan's notebook entries, see supra, it could reasonably conclude in light of Berberich's notebook entries regarding the Slifka conversation that Belcher also participated, especially if we view the Slifka conversation in light of Berberich's notations made two days earlier (e.g., promote crunch and press for default). The long defendants point out that the conversation between Berberich and Slifka took place after Belcher had made its nominations, and argue that the entries merely refer to a discussion of whether there was going to be a default. However, the notes could more easily be interpreted as outlining the method of continuing the pressure that already had been placed on Apex. Thus, it reasonably could be inferred that the conversation consisted of more than mere speculation concerning Apex's ability to deliver. Accordingly, in light of all of the circumstances, including communications among the defendants and their parallel conduct, we must conclude that sufficient evidence has been produced from which a factfinder could infer that Belcher, Global, and Northeast  'had a unity of purpose or a common design and understanding, or a meeting of the minds in an unlawful arrangement.'  International Distribution Centers, 812 F.2d at 793 (quoting Michelman, 534 F.2d at 1043). We therefore reverse the dismissal of the antitrust claims as to Belcher. 70 Apex points to evidence of a series of additional conversations said to have occurred among the long defendants. Bearing in mind that evidence of the mere exchange of information by competitors cannot establish a conspiracy, see Kreuzer v. American Academy of Periodontology, 735 F.2d 1479, 1487 (D.C.Cir.1984), we have carefully considered the arguments of Apex with respect to these conversations. For essentially the reasons stated by the district court, see 641 F.Supp. at 1266-69, we conclude that inferring the existence of a conspiracy from the remaining conversations would amount to mere speculation.