U.S. v. All Star Industries ( 1992 )

UNITED STATES COURT OF APPEALS
FIFTH CIRCUIT
______________________________
No. 91-2439
______________________________
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
ALL STAR INDUSTRIES, ET AL.,
Defendants,
MIDCO PIPE & TUBE CO.,
RICHARD A. BRAZZALE,
MANNESMANN INTERNATIONAL
ALLOYS, INC. (MIA),
Defendants-Appellants.
___________________________________________________
Appeals from the United States District Court
for the Southern District of Texas
___________________________________________________
(May 28, 1992)
Before BROWN, GARWOOD, and EMILIO M. GARZA, Circuit Judges.
EMILIO M. GARZA, Circuit Judge:
Mannesmann International Alloys, Inc. (MIA), Midco Pipe &
Tube, Inc. (Midco), and Richard A. Brazzale--former vice-
president of sales at MIA--appeal their convictions for violating
section 1 of the Sherman Act, 15 U.S.C. § 1, and for aiding and
abetting, 18 U.S.C. § 2, by conspiring to fix the prices of
specialty pipe sold through Texas Pipe Bending Company (TPB).
Specifically, these defendants assert that the district court
erred in instructing the jury and abused its discretion in
ordering restitution. Finding no error, we affirm.
I
This case involves an alleged conspiracy between six
corporations1 and three individuals2 to fix the prices of
specialty pipe sold to TPB for purchase by TPB's customers under
a cost-plus contractual arrangement--a violation of section 1 of
the Sherman Act3 and the aiding and abetting statute.4
Specifically, the indictment alleges that TPB and its
distributors conspired to eliminate competition on specialty pipe
bids submitted to TPB for its cost-plus contracts.5
1
They are (1) TPB; (2) Capitol Pipe and Steel Products,
Inc. (Capitol), (3) U.S. Metals, Inc. (U.S. Metals), (4) All Star
Industries, Inc. (All Star), (5) MIA, and (6) Midco.
2
They are (1) Carlton H. Bartula, (2) Richard A.
Brazzale, and (3) Ronald S. Palma.
3
15 U.S.C. § 1.
4
18 U.S.C. § 2.
5
Specialty pipe is used in oil refineries and power
plants to transport materials when carbon steel pipe is
ineffective--for example, when the materials are corrosive or of
extremely high or low temperatures. This specialty pipe often
needs to be bent into shape and welded to fit the configurations
of a particular project--an endeavor that is generally done more
economically at a pipe fabricator's shop than at a job site.
When the precise quantities of each size and grade of pipe are
unknown at the time of contract, contracts with fabricators for
specialty pipe generally call for the fabricators to purchase
pipe from distributors on a cost-plus basis. In this situations,
specialty pipe purchasers pay fabricators (1) the invoice price
of the pipe plus (2) a bargained-upon percentage of that price as
the fabricator's markup.
Because prices for specialty pipe are volatile and it is
difficult for specialty pipe purchasers to predict their needs,
purchasers expect this cost-plus arrangement to bring about a
lower overall cost than the alternative--paying a pipe fabricator
a fixed price which would include a contingency for assuming the
market risk. Specialty pipe purchasers generally believe that
the fixed-price method would inflate bids to the point of making
the present specialty pipe market system--that is, reliance on
-2-
2
A
At trial, twelve alleged co-conspirators--including a former
MIA sales manager, a former MIA executive vice-president, and two
former Midco vice-presidents--described the conspiracy and their
participation in it. According to these witnesses, when TPB was
awarded a fabrication job on a cost-plus basis, Bartula--TPB's
head purchasing agent--decided which distributors should submit
bids. These distributors included All Star, Midco, MIA, Capitol,
Guyon, and U.S. Metals. Bartula or another TPB employee would
then ask Palma6 to "quarterback" the job--that is, to act as a
go-between among the distributors and TPB by discussing the
prospective bids, allocating various material among the bidders,
and working with the bidders to decide the prices each would
submit to TPB.
Specifically, Bartula or Palma would call selected bidders
to inform them that (1) they would be receiving a request for a
quotation on a cost-plus job, (2) Palma would quarterback the
job, and (3) the job was to be handled on a "code 5", "10", or
"15" basis--meaning that the job was to be rigged and TPB would
independent pipe fabricators who do the work off site--
uneconomical. To assure that they receive competitive prices,
purchasers generally require pipe fabricators to solicit and
submit competitive bids from three or more distributors.
Between 1981 and 1984, there were only 5-7 of these
specialty pipe distributors in the market. However, fabricators
such as TPB sometimes carried their own specialty pipe inventory
and were able to bid against the pipe distributors. See infra
note 15 and accompanying text.
6
Palma worked for Capitol in 1981 and 1982, and then for
his own company--All Star--in 1983 and 1984.
-3-
3
receive either a five, ten, or fifteen percent kickback. The
distributors then padded their bids accordingly, adding this
five-to-fifteen percent onto their bids and rebating the money to
TPB in the form of a "credit memo" or check. TPB and its
distributors sometimes referred to this scheme as TPB's "volume
discount program."
As quarterback, Palma would discuss the bidders' preferences
and agree on an allocation among them of the materials needed.
The bidders who were designated winners would then determine
their prices. In addition to the five-to-fifteen percent added
to the bid price for TPB's kickback, these bid prices included
higher than normal markups resulting in prices generally 20
percent--and as much as 75 percent--higher than competitive
prices. Palma would then pass these inflated prices onto the
other bidders who would protect them by bidding higher. Work was
usually awarded according to the allocation agreed upon by the
distributors.
B
TPB, Capitol, and U.S. Metals entered into plea agreements.
All Star, MIA, Midco, Bartula, Brazzale, and Palma went to trial
and were convicted by a jury on March 19, 1990. Judgments of
conviction were entered on May 20, 1991: The district court
fined each of the corporate defendants $250,000 and, as a
condition of probation, ordered them jointly and severally liable
for restitution in the amount of $859,935; Bartula was sentenced
to three years imprisonment, with all but the first six months
-4-
4
suspended; Brazzale and Palma received suspended sentences and
were placed on probation for five years. MIA, Midco, and
Brazzale appeal their convictions.
II
Defendants challenge both the district court's (A) jury
instruction and (B) its award of restitution. Defendants' jury
instruction challenge fractures into assertions that the district
court erred in:
(1) instructing the jury under the per se rule
analysis,
(2) refusing to instruct the jury on "rule of reason"
analysis, and
(3) refusing to instruct the jury on the theories of
defense (that is, good faith and lack of specific
intent).
As for its award of restitution, MIA asserts that the district
court abused its discretion by:
(1) ordering restitution for injuries outside the
limitations period,
(2) failing to credit MIA for payments made to settle
related civil claims, and
(3) making restitution joint and several.
A
1-2
Section 1 of the Sherman Act provides in part that "[e]very
contract, combination in the form of trust or otherwise, or
conspiracy, in restraint of trade or commerce among the several
States, or with foreign nations, is declared to be
illegal . . . ." 15 U.S.C. § 1. Despite the scope of its
-5-
5
literal meaning, the Supreme Court has always recognized that
section 1 was "intended to prohibit only unreasonable restraints
of trade." Business Electronics v. Sharp Electronics, 485 U.S.
717, 723, 108 S. Ct. 1515, 1519 (1988) (emphasis added).
Therefore, "[o]rdinarily, whether [a] particular concerted action
violates § 1 of the Sherman Act is determined through case-by-
case application of the so-called rule of reason--that is, `the
factfinder weighs all of the circumstances of a case in deciding
whether a restrictive practice should be prohibited as imposing
an unreasonable restraint on competition.'" Id. (citation
omitted).
However, the Court has also introduced a shortcut around
case-by-case rule of reason analysis: the Court has found
certain agreements to be so egregiously anticompetitive "that
they are conclusively presumed illegal without further
examination under the rule of reason generally applied in Sherman
Act cases." Broadcast Music, Inc., v. Columbia Broadcasting
System, Inc., 441 U.S. 1, 7-8, 99 S. Ct. 1551, 1556 (1979); see
also Business Electronics, 485 U.S. at 723-24, 108 S. Ct. at 1519("Certain categories of agreements, however, have been held to be
per se illegal, dispensing with the need for case-by-case
evaluation.").7 "[A]greements among competitors to fix prices on
7
The policy undergirding this per se unreasonableness
approach is to avoid "the necessity for an incredibly complicated
and prolonged economic investigation into the entire history of
the industry involved, as well as related industries, in an
effort to determine at large whether a particular restraint has
been unreasonable--an inquiry so often wholly fruitless when
undertaken." Broadcast Music, 441 U.S. at 8, n.11, 99 S. Ct. at
-6-
6
their individual goods or services are among those concerted
activities that the Court has held to be within the per se
category." Broadcast Music, 441 U.S. at 8, 99 S. Ct. at 1556.8
The district court found the price fixing arrangement between TPB
and its distributors to be such an agreement and instructed the
1556 n.11, quoting Northern Pac. Ry. Co. v. United States, 356
U.S. 1, 5, 78 S. Ct. 514, 518 (1958) (citations omitted). The
standard test for determining application of this per se rule is
whether the business practice "facially appears to be one that
would always or almost always tend to restrict competition and
decrease output. . . ." Id. at 19-20, 99 S. Ct. at 1562, citing
United States v. Gypsum Co., 438 U.S. 422, 436 n.13, 441 n.16, 98
S. Ct. 2864, 2873 n.13, 2875 n.16 (1978).
8
Id. at 9, 99 S. Ct. at 1557 ("As generally used in the
antitrust field, `price fixing' is a shorthand way of describing
certain categories of business behavior to which the per se rule
has been held applicable."); see Catalano, Inc. v. Target Sales,
Inc., 446 U.S. 643, 647, 100 S. Ct. 1925, 1927-28 (1980) (price
fixing agreement among competitors is archetypal example of
conduct that is illegal per se); Northern Pac. Ry. Co., 356 U.S.
at 5, 78 S. Ct. at 518 (price fixing is illegal per se "without
elaborate inquiry as to the precise harm [it has] caused or the
business excuse for [its] use."); United States v. MMR Corp., 907
F.2d 489, 495 (5th Cir.) (Where defendants were charged with bid
rigging in violation of Sherman Act, holding that "[i]t is enough
that the government shows that the defendants accepted an
invitation to join in a conspiracy whose object was unlawfully
restraining trade.") (citation omitted), cert. denied, 111 S. Ct.
1338 (1990); United States v. Flom, 558 F.2d 1179, 1183 (5th Cir.
1977) ("An agreement that one company would not submit a bid
lower than another is price fixing of the simplest kind and is a
per se violation. . . .") (citation omitted). Thus, "[i]n cases
involving behavior such as bid rigging . . . the Sherman Act
will be read as simply saying: `An agreement among competitors to
rig bids is illegal.'" United States v. Koppers Co., 652 F.2d
290, 294 (2d Cir.), cert. denied, 454 U.S. 1083, 102 S. Ct. 639(1981), quoting United States v. Brighton Bldg. & Maint. Co., 598
F.2d 1101, 1106 (7th Cir.), cert. denied, 444 U.S. 840, 100 S.
Ct. 79 (1979).
-7-
7
jury accordingly, thereby rejecting the rule of reason
instructions proposed by defendants.9
The government asserts a conspiracy among distributors to
fix the price of specialty steel and pass that non-competitive
price onto end users. To diminish the importance of their
horizontal agreement to rig specialty steel bidding, defendants
emphasize the vertical component of the conspiracy--that is,
TPB's involvement--by proffering a hostage ("TPB made us do it")
theory:
The unique fact of this case is that the pipe
distributors did not, as in a conventional case, come
together voluntarily to fix prices on products to be
sold to their customers. Rather, directions flowed the
other way. It was the suppliers' customer, Texas Pipe
Bending . . . , which directed its suppliers in the
scheme. TPB dictated the prices in the bids it
expected to receive from suppliers. TPB then purchased
and took title to the goods, which were passed on to
the end users.10
9
The district court's jury instructions are discussed
and quoted infra at notes 19-20 and accompanying text.
10
Reply Brief for Appellant Midco Pipe & Tube, Inc. at 3,
United States v. All Star, No. 91-2439 (5th Cir. filed Dec. 12,
1991) ["Midco Reply Brief"]. Defendants rely upon Sitkin
Smelting & Refining Co. v. FMC Corp., 575 F.2d 440 (3d Cir.),
cert. denied, 439 U.S. 866 (1978), to argue that this case simply
involves "sham bidding" orchestrated by a buyer, and, therefore,
is not a per se violation of the Sherman Act. Specifically,
defendants cite Sitkin, 575 F.2d at 447, for the proposition that
the mere existence of sham bidding does not create a presumptive
violation of the Sherman Act, and United States v. Fischbach &
Moore, Inc., 750 F.2d 1184, 1196 (3d Cir. 1984), cert. denied sub
nom., 470 U.S. 1029, 105 S. Ct. 1397 (1985), for the proposition
that no antitrust violation can arise if a customer--defendants
allege that TPB, not the specialty steel end users, was their
customer--acquiesces in the transaction or conspiracy. We find
Sitkin easily distinguishable, however, for in that case there
was no horizontal collusion among competing buyers or sellers.
See Sitkin, 575 F.2d at 446-48. As the court explained, "The
price-fixing within the scope of the per se prohibition of § 1 .
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8
In sum, defendants would have us believe that (1) they dealt only
with TPB and not with each other, (2) TPB told them what to bid
and, for the sake of staying in business, they did what they were
told, and, (3) after their deals were done, TPB went forth on its
own to cheat its customers, the specialty pipe end users, with
inflated prices.11 However, the record stages a very different
. . is an agreement to fix the price to be charged in
transactions with third parties, not between the contracting
parties themselves." Id. at 446 (emphasis added).
11
Specifically, MIA and Brazzale assert that:
The indictment describes a scheme whereby TPB, a
customer of Mannesmann and other pipe distributors,
directed them to submit prearranged bids to it for its
use in satisfying cost-plus contracts between TPB and
its own customers--the "end users"--when the contracts
require competitive bidding. No antitrust injury
results from this conduct.
* * *
What the government has done is turn a business tort by
TPB against its customers into a criminal antitrust
conspiracy against those customers by parties who did
not contract with them but only with TPB, parties who
did not tell TPB what to do with its pricing and who
had no relationship with TPB's customers.
Brief of Defendants-Appellants Mannesmann International Alloys,
Inc. and Richard A. Brazzale at 10, 17, United States v. All Star
Industries, No. 91-2439 (5th Cir. filed Oct. 16, 1991) ["MIA
Brief"].
Midco asserts that, "[b]ecause TPB's arrangement with its
distributors was vertical[--that is, TPB purchased specialty
pipe as [Midco's] customer, fabricated it, and then resold it to
the end users who were TPB customers--]and caused no demonstrable
economic harm, the [district] court should have submitted [their]
rule of reason instructions. At the very least, it should have
submitted the case to the jury under the alternative theories of
per se liability and rule of reason analysis." Brief for
Appellant Midco Pipe & Tube at 24, United States v. All Star
Industries, No 91-2439 (5th Cir. filed Oct. 11, 1991) ["Midco
Brief"]. Midco relies upon Business Electronics v. Sharp
Electronics, 485 U.S. 717, 108 S. Ct. 1515 (1988), for the
proposition that the agreement between specialty pipe
distributors and TPB was vertical, thereby making the per se rule
inapplicable. However, we find Sharp easily distinguishable
since that case involved a wholly vertical restraint--an
-9-
9
scenario: where specialty pipe distributors, TPB, and specialty
pipe end users were united by underlying cost-plus contracts,
distributors who were normally horizontal competitors conspired
to rig their bids with the explicit intention of inflating the
cost aspect of cost-plus contracts and deceiving specialty steel
end users.12 The conspiracy depended upon distributor
agreement between a manufacturer and a dealer to terminate
another dealer--without any agreement on price or price levels.
Id. at 735-36, 108 S. Ct. at 1525 ("In sum, economic analysis
supports the view, and no precedent opposes it, that a vertical
restraint is not illegal per se unless it includes some agreement
on price or price levels.").
12
The record establishes that defendant distributors were
fully aware of their role in the overall scheme contrived by TPB-
-that is, they knew they were rigging bids only on cost-plus
contracts that required TPB to obtain competitive bids and also
required the end user-buyers to pay the full rigged priced for
the specialty pipe plus TPB's markup. See infra notes 13-15 and
accompanying text. As for the involvement of Midco and MIA in
this conspiracy, consider the following:
-- MIA's involvement in the conspiracy is captured by
the testimony of Lorne Van Stone, former executive
vice-president of MIA:
Q And what did Mr. Brazzale explain that he and Mr.
Palma did to set price levels?
A Well, they told me that they would discuss the job
and decide which items that International
Alloys was going to get and that we would
protect prices for the other competitors and
we would get our share of the order.
Q And what did you understand "protect other
competitors" to mean?
A To keep our prices high to protect their prices so
that they would receive the job.
Q So would you explain to us how that would work as
a
mechanical matter on a Mannesmann bid as you
understand that process?
A We would sell many times above our usual prices in
order to protect the prices in the
marketplace at Texas Pipe Bending. And where
we were picked to take certain items, we
would be low on those and somebody else would
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10
protect our prices.
* * *
A My understanding was the three or four times that
I
remember that we got part of the jobs, not
all of the jobs, we got part of the jobs
after [Mr. Brazzale] would have had a meeting
with Mr. Palma. That is my understanding.
* * *
Q Did Mr. Brazzale ever explain to you how it came
to
be that Mannesmann would win items on some of
these bids to Texas Pipe Bending where he and
Mr. Palma were talking?
* * *
A They would get the other distributors to raise
their
prices to protect ours on the items that we
were to be given.
Q And did Mannesmann protect the other distributors
on
the rest of the items?
A Yes.
* * *
Q Did Mr. Brazzale ever tell you the names of other
competitors whose prices Mannesmann was
protecting?
A Yes.
Q Whose names did he tell you?
A U.S. Metals
* * *
Q Any other company?
A Gulf Alloys.
Q Any other company?
A Charles F. Guyon Alloys.
Record on Appeal, vol. 37, at 8-55, 8-61 to 8-64, United
States v. All Star Industries, No. 91-2439 (5th Cir.
filed Aug. 6, 1991) ["Record on Appeal"].
-- The record also contains testimony regarding Midco's
involvement from Sam Rossetti, Midco's former vice-
president and sales manager:
Q After Midco entered into this agreement with All
Star and Mr. Palma, was there a change in
Midco's ability to make sales to the Texas
Pipe Bending Company?
A Yes, sir, very much so.
Q And what was that change?
A We had a hundred percent increase in business over
and above what we used to do before.
-11-
11
Q Not to quibble with you, but if you had one sale
before, a hundred percent increase would make
it two sales. How big an increase was it?
A Astronomical.
* * *
Q Did Midco pay--make payments to Texas Pipe Bending
during the '83-'84 period pursuant to the
volume discount arrangement?
A Yes, sir.
* * *
Q Would you describe for us the substance or the
gist
of these calls that you had with Mr. Palma?
A He would tell me whether or not they were hard
dollar jobs or whether or not they were 10 or
15 percent jobs.
* * *
Q Were you told the amount of the quality discount
before or after Midco made up its bid to
Texas Pipe Bending?
A Before.
Q Why were you told before?
A You would have to know how much to add into the
price.
Q What do you mean you would have to know how much
to
add into the price?
A If we were giving Texas Pipe Bending 10 or 15
percent, we would certainly have to cover it
in the price we were quoting.
Q Did Midco--was there any profitability into the
Midco quotes to Texas Pipe Bending for Midco
in addition to whatever you were putting in
for the Texas Pipe Bending Company?
A Yes.
* * *
Q On the bids that Midco submitted to the Texas Pipe
Bending Company during the 1983-'84 period,
did the Midco bids show on their face the
amount of the discount that was included?
A No.
Q Did the Midco bids in '83-'84 show on their face
that All Star and Mr. Palma were acting as
your sales agent?
A No.
* * *
Q Would you explain for us what that notation means?
A Well, Texas Pipe Bending would be given 15 percent
of the selling price of the order. And 25
percent of the gross profit after all
-12-
12
expenses would be paid to All Star
Industries.
Q . . . was that a notation that went on documents
that left the Midco Company?
A No.
* * *
A [Mr. Palma] would tell me to protect certain
prices
on certain bids.
* * *
Q And what did you do with the information when Mr.
Palma told you to protect certain bids?
A I raised the prices that we were bidding.
Record on Appeal, vol. 38, at 9-163 to 9-166, 9-168 to 9-
172;
see also Record on Appeal, vol. 39, at 10-31 to 10-32:
Q When Midco put in a bid with a protect number, was
that a number that Midco chose as a
competitive number?
A No.
Q Where did Midco get that number to bid above?
A From Mr. Palma.
-- The testimony of Robert Cohn, Midco's former
executive vice-president and president, further
substantiates Midco's participation in the conspiracy:
Q What use did you make of the information that Mr.
Palma gave you about protecting prices?
A We protected the prices by quoting a higher one
than
was mentioned.
* * *
Q How accurate was Mr. Palma's information about
which
items Midco would get and not get?
A I can never remember them being in error.
* * *
Q Did there come a point in time--did you ever learn
whether or not All Star was bidding on the
same jobs as Midco?
A We did. I did.
* * *
Q Why did you continue to use All Star's services--
excuse me, why did you continue to use Mr.
Palma's and All Star's services after you had
learned those factors?
A Because Midco--and we felt that whatever business
we
might get would be more than we would get
otherwise.
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13
cooperation and participation, and the distributors obliged:
-- Distributors knew that TPB was required to submit at
least three competitive bids to its customers for their
approval, and they took pains to make these bids look
legitimate to the end users.13
-- Distributors did not allocate jobs exactly evenly
because knew that would look suspicious, meaning that
the distributors made a deliberate effort to maintain
the appearance of competitive bidding. See supra note
12.
-- Even on contracts for items they knew they would not
be getting because they were protecting the prices of
other bidders, the distributors would "develop" their
prices by calling manufacturers to give them the
impression that distributors were preparing competitive
bids.14
Record on Appeal, vol. 39, at 10-40 to 10-44.
13
This is substantiated by the testimony of James Dooner,
who was employed by Capitol from 1966 through 1969 and its
competitor, Guyon, from 1969 through 1985 as a sales supervisor
for all southwestern states:
Q Now, Mr. Dooner, did you have some expectation about
what percentage of the sales on rigged bids
to TPB you were going to win?
A On a specific order?
Q Yes.
A The percentage varied. But the answer is yes
because there are some items we didn't
receive at all.
Q Did you expect to get a share equal to the other
distributors on each sale?
A Yes.
* * *
Q Did you always get -- if there were three bidders,
did you always get 33 percent of
the sales of a rigged bid?
A No.
Q Why not?
A The percentage varied because being an equal
percentage would look as if it was pre-done.
Record on Appeal, vol. 32, at 3-56 to 3-58.
14
This effort to make end users believe that the
distributors' bidding was competitive is described by the
testimony of Steve Scott, president of U.S. Metals:
Q If you could just tell the jury if you ever did
-14-
14
Rather than merely being these distributors' customer who then
went on to cheat its own customers, TPB was the distributors'
conduit for passing their inflated, non-competitive specialty
steel bids onto unsuspecting end users. Moreover, in at least
one instance, TPB was also the distributors' horizontal
"competitor" who benefited from the conspiracy at their level.15
Accordingly, we find that defendants cannot escape the per
se rule simply because their conspiracy depended upon the
anything, you personally ever did anything to
make it look like you were competing on the
jobs where quarterbacking was going on?
A By developing prices with all the manufacturers.
Q You developed prices with all the manufacturers,
that is what you are saying?
A Yes.
Q Why would -- what was the purpose of that?
A Two-fold. To have an idea of the overall value of
the project. And give the manufacturers that
appearance that we were developing
competitive prices on the whole job.
Q Now, Mr. Scott, you personally worked on bids to
Texas Pipe Bending on sales that were
quarterbacked; is that right?
A That is correct.
Q And you also submitted bids to Texas Pipe Bending
on
sales that weren't quarterbacked; is that
right?
A That is correct.
Record on Appeal, vol. 40, at 11-126. Therefore, while the
"winning bidder" did not sell its product directly to the end
user, it knew who its end user was and that it had successfully
deceived that end user into paying a rigged price for its
product. Id.
15
Government Exhibit 13a is a TPB breakdown listing
materials needed to fulfill its cost-plus contracts with a "G",
"C", or "M" beside the entries to indicate which company--Guyon,
Capitol, or MIA--the work was designated to. Some of the entries
are flagged "TPB stock protect", meaning that TPB had the
materials in its inventory, would bid along with the
distributors, and that bidding for these materials would be
rigged so that TPB would win.
-15-
15
participation of a "middle-man", even if that middleman
conceptualized the conspiracy, orchestrated it by bringing the
distributors together around contracts it held with its buyers,
and collected most of the booty.16 We find, therefore, that the
district court did not err by instructing the jury in accordance
with the per se rule and refusing defendants' rule of reason
instruction.
3
Defendants also challenge the district court's jury
instruction on the grounds that the district court should have
instructed the jury on their theories of defense--that is, good
16
The government argues that the case before us is
analogous to United States v. MMR Corp., 907 F.2d 489 (5th Cir.
1990), cert. denied sub nom., 111 S. Ct. 1388 (1991)--a case in
which defendants were also convicted of conspiracy to rig bids in
violation of the Sherman Act after the district court applied the
per se liability rule. There we considered a similar contention:
defendants argued that, since MMR lacked the bonding capacity to
successfully bid the project at issue and, therefore, could not
successfully compete with other conspirators, MMR was not an
actual competitor and per se liability rules did not apply. Id.
at 496-97. We rejected that contention, holding that:
even if MMR is deemed not to be an actual or potential
competitor of Fischbach and the other companies, the
conspiracy was not a meaningless conspiracy between
noncompetitors since [other actors] were
competitors. . . . [A] noncompetitor can join a Sherman
Act bid-rigging conspiracy among competitors. If there
is a horizontal agreement between A and B, there is no
reason why others joining that conspiracy must be
competitors. . . . Second, the facts of this case
illustrate how a company, although arguably unable in
fact to carry out its competitive threat . . . can
nonetheless further a conspiracy among competitors.
Id. at 498. Applying our MMR holding to the case at issue,
even if TPB is deemed not to be an actual competitor, the bid-
rigging conspiracy was not a meaningless conspiracy between
noncompetitors. The distributors were horizontal competitors
and, at least on one occasion, TPB bidded along with them. See
supra note 15.
-16-
16
faith and lack of specific intent. Specifically, they argue
that, "[e]ven assuming, hypothetically, that this case involves a
per se violation of the [S]herman [A]ct, there still must be
evidence that the defendant intended to commit the specific
intent offense charged."17
We recognize that, "[w]hen a defendant properly requests an
instruction on a theory of defense that is supported by some
evidence, it is reversible error not to adequately present the
theory." United States v. Johnson, 872 F.2d 612, 622 (5th Cir.
1989) (reviewing instruction as a whole and holding that
instruction on defense theory of entrapment was adequate); see
also United States v. Schmick, 904 F.2d 936, 943 (5th Cir. 1990)
("It has long been well established in this Circuit that it is
reversible error to refuse a charge on a defense theory for which
there is an evidentiary foundation and which, if believed by the
jury, would be legally sufficient to render the accused
innocent.") (citations omitted), cert. denied sub nom., 111 S.
Ct. 782 (1991). However, when considering such a jury
instruction challenge on appeal, we read the district court's
instruction as a whole to determine whether it accurately
reflects the law. See United States v. Daniel, 957 F.2d 162, 169
(5th Cir. 1992) (viewing jury instruction as a whole and holding
that lack of good faith instruction and inclusion of instruction
on deliberate ignorance does not constitute reversible error);
United States v. Hagmann, 950 F.2d 175, 180 (5th Cir. 1992)
17
Midco Reply Brief at 16.
-17-
17
("When a charge is challenged on appeal, we evaluate it in its
entirety, looking to see whether the charge as a whole was
correct."); United States v. Featherson, 949 F.2d 770, 777 (5th
Cir. 1991) ("The standard of review for jury instructions is
usually whether the court's charge, as a whole, is a correct
statement of the law and plainly instructs the jurors as to the
principles of law applicable to the fact issues confronting
them."), cert. denied sub nom., __ S. Ct. __ (1992).
We have found that it was proper for the district court to
instruct the jury in accordance with the per se rule. See supra
Part II.A.1-2. Therefore, the government's only burden was to
prove that the per se agreement alleged was in fact made and that
-18-
18
defendants knowingly and intentionally joined that agreement.18
The district court instructed the jury as follows:
18
A price fixing conspiracy under the Sherman Act is not
a crime requiring proof of a "specific intent" to restrain trade
or to violate the law. See American Tobacco Co. v. United
States, 328 U.S. 781, 809-10, 66 S. Ct. 1125, 1139 (1946) ("No
formal agreement is necessary to constitute an unlawful
conspiracy. . . . Where the circumstances are such as to warrant
a jury in finding that the conspirators had a unity of purpose or
a common design and understanding, or a meeting of minds in an
unlawful arrangement, the conclusion that a conspiracy is
established is justified."); Interstate Circuit, Inc. v. United
States, 306 U.S. 208, 227, 59 S. Ct. 467, 474 (1939) ("Acceptance
by competitors, without previous agreement, of an invitation to
participate in a plan, the necessary consequence of which, if
carried out, is restraint of interstate commerce, is sufficient
to establish unlawful conspiracy under the Sherman Act."). The
intent element of a per se offense is established by evidence
that the defendant agreed to engage in conduct that is per se
illegal; the government is not required to prove that the
defendant knew his actions were illegal or that he specifically
intended to restrain trade or to violate the law. See United
States v MMR Corp., 907 F.2d 489, 495 (5th Cir. 1990), cert.
denied sub nom., 111 S. Ct. 1388 (1991):
The government . . . is not required to prove a formal,
express agreement with all the terms precisely set out
and clearly understood by the conspirators. . . . It
is enough that the government shows that the defendants
accepted an invitation to join in a conspiracy whose
object was unlawfully restraining trade.
See also United States v. Young Brothers, Inc., 728 F.2d 682, 687
(5th Cir.) ("In order to prove that appellant actually intended
to enter into the bidrigging conspiracy, the government was
required to show that appellant knowingly joined or participated
in the conspiracy."), cert. denied, 469 U.S. 881, 105 S. Ct. 246(1984); United States v. Brown, 936 F.2d 1042, 1045-46 (9th Cir.
1991) (holding that district court did not err in "holding that
it was unnecessary to instruct the jury that intent to produce
anticompetitive effects is an element of the offense of which
[defendants] were convicted."); United States v. W.F. Brinkley &
Sons Constr. Co., 783 F.2d 1157, 1161-62 (4th Cir. 1986) ("The
word `knowingly' as that term has been used from time to time in
these instructions means that the act was done voluntarily and
intentionally and not because of mistake or accident."); United
States v. Koppers Co., 652 F.2d 290, 294 (2d Cir.) ("In cases
involving behavior such as bid rigging . . . the Sherman Act will
be read as simply saying: `An agreement among competitors to rig
bids is illegal.'") (citation omitted), cert. denied, 454 U.S.
1083, 102 S. Ct. 639 (1981).
-19-
19
To establish the required intent the Government
must prove beyond a reasonable doubt that the
defendants knowingly and willfully did something which
the law forbids. In this case, that means that the
Government must prove beyond a reasonable doubt that
the defendants knowingly and willfully formed, joined
or participated in a combination or conspiracy to rig
bids. Since a combination or conspiracy to rig bids is
unreasonable and illegal as a matter of law, the
Government does not have to prove that the defendants
specifically intended to unreasonably restrain trade or
that such conduct is an unreasonable restraint of
trade.19
We find that, read as whole, this instruction accurately reflects
the law--that is, the district court correctly instructed the
jury that the government had to establish beyond a reasonable
doubt that (1) the bid rigging conspiracy charged in the
indictment was knowingly and willfully formed, (2) each defendant
knowingly and willfully became a member of that conspiracy, and
(3) the conspiracy affected or occurred in the flow of interstate
commerce.20 Moreover, because the bid-rigging agreement alleged
19
Record Excerpts of Defendants-Appellants at tab 30,
United States v. All Star Industries, Inc., No. 91-2439 (5th Cir.
filed Oct. 16, 1991) (jury instruction No. 12) ["Record
Excerpts"].
20
See Jury Instruction No. 9, in Record Excerpts at tab
30. The district court also instructed the jury as to: the
elements of a conspiracy (Jury Instruction No. 10) ("A conspiracy
under Section I of the Sherman Act is an unlawful agreement by
two or more persons or corporations to accomplish a common
objective which would result in an unreasonable restraint of
interstate commerce."); what constitutes "knowing" and "willful"
and that "the Government must prove beyond a reasonable doubt
that the defendants knowingly and willfully formed, joined or
participated in a combination or conspiracy to rig bids (Jury
Instruction Nos. 11-12); what constitutes bid rigging and the
significance of such a finding (Jury Instruction No. 13) ("In
this case, if you find beyond a reasonable doubt that a defendant
was a member of a conspiracy to rig bids as alleged in the
indictment, then you need not decide whether such conspiracy was
-20-
20
by the government was per se illegal, defendants' other theories
of defense--theories incorporated in defendants' proposed
instructions which the district court rejected--were irrelevant,
and we find that the district court did not err in rejecting
them.21
reasonable or unreasonable because . . . an agreement among
competitors not to compete for contracts by submitting collusive
bids is per se unreasonable and a violation of the Sherman
Act."); that good faith is no defense (Jury Instruction No. 15:
"A conspiracy to rig bids in or affecting interstate trade and
commerce is unlawful, even though the conspiracy may be formed or
engaged in for what appear to the conspirators to be laudable
motives.") (Jury Instruction No. 20: ". . . the fact that a
defendant may have believed, in good faith, that what was being
done was not unlawful would not be a defense."). Id.21
Defendants assert that their actions caused no economic
harm. Specifically, they assert that, "if the end users were
unhappy with the bids that TPB solicited, they could reject them.
Some did. If they were unhappy with the entire program, they
could have negotiated for a fixed price contract. If offended by
TPB's allocation, they could have proceeded against TPB for
breach of contract." Midco Brief at 13. Defendants also assert
that, even if end users were harmed, the distributors did not
benefit from the price-rigging arrangement since TPB collected
all the conspiracy profits: "If a price is raised 15% and then a
15% rebate is made, the supplier would make no more profit than
if none of that occurred." Midco Reply Brief at 8. They also
assert that their "involvement in the alleged conspiracy . . .
occurred after the end users had already reaped the benefits of
competition, the negotiated low percentage plus on their cost-
plus contracts. Therefore Midco's acts were not likely to cause
harm, not plainly anticompetitive and not properly subject to per
se analysis." Id. at 13.
Where there is a per se illegal price-fixing agreement, it
is no defense that the agreement at issue did not have
anticompetitive effects, or that defendant's motives were
benevolent. See N.C.A.A. v. Board of Regents of Univ. of Okl.,
468 U.S. 85, 109-110, 104 S. Ct. 2948, 2964-65 (1984) (Holding
that, "when there is an agreement not to compete in terms of
price or output, `no elaborate industry analysis is required to
demonstrate the anticompetitive character of such an
agreement.'") (citation omitted); United States v. Socony-Vacuum
Oil Co., 310 U.S. 150, 224 n.59, 60 S. Ct. 811, 845 n.59 (1940)
(citation omitted):
But that does not mean that both a purpose and a power
-21-
21
to fix prices are necessary for the establishment of a
conspiracy under § 1 of the Sherman Act. That would be
true if power or ability to commit an offense was
necessary in order to convict a person of conspiring to
commit it. But it is well established that a person
"may be guilty of conspiring, although incapable of
committing the objective offense."
See also United States v. Cargo Service Stations, Inc., 657 F.2d
676, 683-84 (5th Cir. 1981), cert. denied, 455 U.S. 1017, 102 S.
Ct. 1712 (1982) (defendants need only knowingly and intentionally
join conspiracy to rig bids) (per se rule condemns conspiracies
never implemented, as well as those that fail to achieve their
objectives and produce no anticompetitive effects); id. at 683("We think it follows that if price fixing is inevitably an
unreasonably restraint of trade, the intent to fix prices is
equivalent to the intent to unreasonably restrain trade.").
Moreover, there is evidence in the record that distributors
ended up charging end users prices inflated 10 to 15 percent
above competitive prices. Record on Appeal, vol. 37, at 8-34
(testimony of Bruce Painchaud, an MIA employee from 1978 through
1987). Although, as pointed out by defendants, the bidding
arrangement between end users and TPB allowed the end users to
reject the distributors' bids, we cannot fault the end users for
accepting them. The end users took precautions to insure that
the specialty steel bids incorporated into TPB contracts were
competitive by requiring TPB to provide at least three bids--
precautions which were overcome by conspiracy.
And finally, although TPB may have reaped most of the
rewards from this markup, the distributors still benefited from
the bid-rigging arrangement in that their participation
guaranteed them a share of the contracts:
-- Consider the testimony of Robert Cohn, executive
vice- president and then president of Midco during the
years 1981-1984:
Q Why did you protect those prices as requested by
Mr.
Palma?
A Because Mr. Palma was our agent and he was on the
scene and we assumed he knew what he was
doing and we followed his instructions.
* * *
Q Why did protecting another competitor's price help
Midco get business with Texas Pipe?
A Well, I don't believe that every order would go to
one single company because we, Midco couldn't
get every piece of business. And someone
else
might have had a better inventory of a
commodity or a better price.
-22-
22
B
As a condition of probation, the district court ordered the
corporate defendants jointly and severally liable for restitution
to the victims of their conspiracy in the amount of $859,935.22
MIA now asserts that the district court abused its discretion by:
Record on Appeal, vol. 39, 10-41.
-- Rossetti's testimony further substantiates that the
distributors benefited from the conspiracy arrangement:
Q Why did Midco put down protected numbers on some
of
its bids to Texas Pipe Bending Company?
A Well, we were told to, and the only way we would
get
business was by participating on this basis.
* * *
Q How did you know this was the only way you would
get
business?
A Because this was the way it was happening and we
were getting it on that basis.
Record on Appeal, vol. 38, at 9-171 to 9-172; id. at 9-
163 (quoted more extensively supra note 12):
Q After Midco entered into this agreement with All
Star and Mr. Palma, was there a change in
Midco's ability to make sales to the Texas
Pipe Bending Co?
* * *
Q Not to quibble with you, but if you had one sale
before, a hundred percent increase would make
it two sales. How big an increase was it?
A Astronomical.
22
The district court ordered this restitution pursuant to
section 3651 of the Probation Act. 18 U.S.C. § 3651 (1985).
While this section has been repealed, the Probation Act which
predated the Sentencing Reform Act still applies to offenses
committed before November 1, 1987. See United States v. Balboa,
893 F.2d 703, 706 (5th Cir. 1990) (holding that, although
probation statute was repealed by Sentencing Reform Act, old
provision continued to apply to offenses which occurred before
effective date of Act, Nov. 1, 1987).
-23-
23
(1) ordering restitution that covers injuries occurring
outside the limitations period for antitrust
violations,
(2) failing to credit Mannesmann for payments made to
settle civil claims involving the same conduct and
parties, and
(3) making restitution a joint and several obligation
against Mannesmann since Mannesmann was not involved in
several projects for which restitution was awarded.
1
MIA raises an assertion before this court that it did not
raise below--that, because the statute of limitations for
antitrust violations is five years, MIA cannot be made to pay
restitution for losses occurring more than five years before the
return of the indictment. Because this contention was not raised
below, we review it only for plain error--that is, we look to see
whether "our failure to consider the question results in
`manifest injustice.'" United States v. Gerald Vonsteen, 950
F.2d 1086, 1092 (5th 1992) (citation omitted); see United States
v. Sherbak, 950 F.2d 1095, 1101 (5th Cir. 1992) ("[I]ssues raised
for the first time on appeal `are not reviewable by this [c]ourt
unless they involve purely legal questions and failure to
consider them would result in manifest injustice.") (citations
omitted).23
23
See also United States v. Campbell, 942 F.2d 890, 894
n.2 (5th Cir. 1991) ("Because Campbell raises this claim for the
first time on appeal, the issue is deemed waived."); United
States v. Jackson, 700 F.2d 181, 190 (5th Cir.), cert. denied,
464 U.S. 842, 104 S. Ct. 139 (1983) ("We have long held that,
absent a showing of manifest injustice, a litigant may not raise
a theory on appeal that was not presented to the district
court.").
-24-
24
A Sherman Act conspiracy is a partnership in crime that
continues until all its objectives have been accomplished or
abandoned. See United States v. Kissel, 218 U.S. 601, 607-08, 31
S. Ct 124, 126 (1910) ("A conspiracy to restrain or monopolize
trade by improperly excluding a competitor from business
contemplates that the conspirators will remain in business, and
will continue their combined efforts to drive the competitor out
until they succeed.") ("A conspiracy is a partnership in criminal
purposes . . . . [and] an overt act of one partner may be the act
of all without any new agreement specifically directed to that
act."). MIA was convicted of participating in a single
continuing conspiracy that began more than five years before the
indictment was returned, but which did not end until 1984--a time
within the five-year period of limitations. Under the Probation
Act,24 the only limits on restitution are that repayment must
relate (i) to the particular offense of which the defendant was
convicted and (ii) to the actual losses suffered by the victim.
See United States v. Boswell, 565 F.2d 1338, 1343 (5th Cir.) ("As
a condition of probation a district court undoubtedly has the
authority to require that a defendant make restitution to injured
parties for the actual loss or damage caused by the offense for
which he stands convicted . . . .") (citations omitted) (emphasis
in original), cert. denied, 439 U.S. 819, 99 S. Ct. 81 (1978);
see also United States v. Stuver, 845 F.2d 73, 76 (4th Cir. 1988)
(holding that precise amount of loss for restitution purposes
24
See supra note 22.
-25-
25
must be legally determined in the underlying criminal
proceeding); United States v. Johnson, 700 F.2d 699, 701 (11th
Cir. 1983) ("The amount of restitution cannot exceed the actual
losses flowing from the offense for which the defendant had been
convicted."). The restitution order in this case did not exceed
those bounds and, therefore, does not constitute "manifest
injustice."
2
MIA also claims that the restitution order should be reduced
by the amount of money MIA paid to settle a civil class action
suit alleging "the same form of conspiracy for which Mannesmann
was convicted in this case."25 We disagree.
While a court may offset restitution in a criminal case by
the amount of a civil settlement to avoid double recovery by
victims, the availability of such an offset
depends upon what payment was made in the settlement,
whether the claims settled involved the same acts of
the defendants as those that are predicates of their
criminal convictions, and whether the payment satisfies
the penal purposes the district court sought to impose.
United States v. Rico Industries, Inc., 854 F.2d 710, 715 (5th
Cir. 1988), cert. denied, 489 U.S. 1078, 109 S. Ct. 1529 (1989).
In the civil case, plaintiffs alleged a 20-year price fixing
conspiracy beginning in 1966, that affected hundreds of projects,
fabricators, engineering companies, and end users.26 The
criminal case at issue concerns a four-year bid rigging
25
MIA Brief at 28.
26
Record Excerpts at tab 33.
-26-
26
conspiracy involving sales made through a single fabricator, TPB.
Only two of the 28 defendants named in the civil suit--MIA and
Guyon--were involved in the criminal conspiracy. Most
importantly, in settling its civil case, MIA paid a total of
$814,000 to a significantly broader class of victims for a
significantly broader number of projects, and MIA has offered no
accounting to show how the victims of its criminal conspiracy
received restitution through that civil conspiracy settlement.27
Accordingly, we find no reason to diminish the amount of the
district court's restitution order.
3
Finally, MIA asserts that, since its involvement in the
conspiracy was limited, the district court's award of joint
restitution is patently unfair to MIA. Specifically, MIA argues
that:
[i]f MIA were a major player in the conspiracy, it
would have been involved in a larger share of the
number of allegedly rigged inquiries. The government
introduced evidence of bids on 72 different projects.
MIA submitted a total of eleven (11) bids on all of the
projects. The 72 projects ultimately became jobs. The
evidence at trial indicated that MIA participated in
only eight total jobs. . . . In short, the government
attempts to place responsibility on MIA's shoulder's
for a volume of commerce that exceeded $5,000,000. The
projects for which MIA allegedly sold pipe had a total
27
MIA's civil settlement does not limit MIA's payments to
victims injured by bid rigging in this criminal case; rather,
that settlement extends to all purchasers of specialty steel
piping material in the United States who purchased under cost-
plus contracts between 1966 and 1985 from numerous fabricators in
addition to TPB. Record Excerpts at tab 34, pp. 3-4; MIA Brief at
28.
-27-
27
of just $1,842,693 in volume of commerce allegedly
affected by the conspiracy.28
MIA's assertion is based on the claim that, while it is
financially able to pay and the other defendants are not, the
other defendants' culpability is demonstratably greater.
The government charged, and the jury found, that defendants
engaged in a single, continuing conspiracy to rig bids on certain
cost-plus contracts between 1981 and 1984. It is well-
established that, as a participant in this conspiracy, MIA is
legally liable for all the acts of its coconspirators in
furtherance of this crime. See United States v. Kissel, 218 U.S.
601, 608, 31 S. Ct. 124, 126 (1910) ("[T]he conspiracy continues
up to the time of abandonment or success.") ("A conspiracy is a
partnership in criminal purposes . . . [and] an overt act of one
partner may be the act of all without any new agreement
specifically directed to that act."); see also Hyde v. United
States, 225 U.S. 347, 369, 32 S. Ct. 793, 803 (1912) (the
liability of an individual conspirator continues until the
conspiracy accomplishes its goals or that conspirator withdraws,
the latter of which requires an affirmative action).
Accordingly, the district court did not abuse its discretion in
holding MIA jointly and severally liable for all losses to the
victims of the four-year conspiracy proved at trial. See United
States v. Haile, 795 F.2d 489, 491 (5th Cir. 1986) (Section 3651
28
MIA Reply Brief of Defendants-Appellants Mannesman
International Alloys, Inc. and Richard A. Brazzale at 10, United
States v. All Star Industries, Inc., No. 91-2439 (5th Cir. filed
Dec. 13, 1991) (citations and footnotes omitted).
-28-
28
of the Probation Act "gives broad authority to district courts to
impose conditions of probation that in the judgment of the
sentencing judge serve to rehabilitate the criminal or secure
compliance with court orders, and otherwise are in the public
interest.") (holding, however, that Probation Act precludes
monetary penalties other than those enumerated in the statute);
United States v. Van Cauwenberghe, 827 F.2d 424, 435 (9th Cir.
1987) (holding that joint and several liability for entire actual
loss could have been imposed on each fraud defendant as condition
of probation), cert. denied, 484 U.S. 1042, 108 S. Ct. 773(1988); United States v. Tzakis, 736 F.2d 867, 871 (2d Cir. 1984)
(holding that district court did not abuse its discretion by
imposing on defendant, as condition of probation, joint and
several liability with codefendant for restitution of full amount
of losses caused by their crime); see also United States v. Hand,
863 F.2d 1100, 1106 (3d Cir. 1988) (Holding that, in ordering
restitution under the Victim & Witness Protection Act, the fact
that burden of restitution lay entirely on one defendant where
two codefendants were equally culpable did not offend
Constitution and "certainly . . . did not constitute an abuse of
discretion.").
III
For the foregoing reasons, we AFFIRM.
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29