190 F.3d 775 (7th Cir. 1999), 98-3913, JTC Petroleum v Piasa Motor Fuels

Docket Nº:98-3913, 98-4251
Citation:190 F.3d 775
Case Date:June 22, 1999
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit

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190 F.3d 775 (7th Cir. 1999)




Nos. 98-3913, 98-4251

United States Court of Appeals, Seventh Circuit

June 22, 1999

Argued May 20, 1999

Amended August 17, 1999

Appeals from the United States District Court for the Southern District of Illinois. No. 96-334-GPM--G. Patrick Murphy, Judge.

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Before Posner, Chief Judge, and Easterbrook and Rovner, Circuit Judges.

Posner, Chief Judge.

The plaintiff seeks damages for violations of sections 1 and 2 of the Sherman Act arising out of the road-repair business in southern Illinois. 15 U.S.C. sec.sec. 1, 2. There are two groups of defendants: the road contractors themselves, called "applicators," and producers of the emulsified asphalt that the applicators apply to the surface of the roads. After the plaintiff, itself an applicator, settled with all three of the producers and three of the six applicator defendants, the district court granted summary judgment for the remaining applicator defendants, who are the appellees in this court.

Before going further, we note a problem of appellate jurisdiction, namely that two claims against one of the applicator defendants were dismissed without prejudice, and indeed with express leave to reinstate should this appeal fail. The circuits and indeed the cases in this court are divided over whether this form of dismissal affects the finality of the district court's judgment, but most hold, we think correctly (see also Rebecca A. Cochran, "Gaining Appellate Review by 'Manufacturing' a Final Judgment Through Voluntary Dismissal of Peripheral Claims," 48 Mercer L. Rev. 979 (1997)), that such a form of dismissal does not terminate the litigation in the district court in any realistic sense and so is not a final decision within the meaning of 28 U.S.C. sec. 1291, which authorizes the appeal of such decisions. Compare Union Oil Co. v. John Brown E & C, 121 F.3d 305 (7th Cir. 1997); Horwitz v. Alloy Automotive Co., 957 F.2d 1431, 1435-36 (7th Cir. 1992); Construction Aggregates, Ltd. v. Forest Commodities Corp., 147 F.3d 1334 (11th Cir. 1998) (per curiam); Chappelle v. Beacon Communications Corp., 84 F.3d 652 (2d Cir. 1996); Dannenberg v. Software Toolworks Inc., 16 F.3d 1073 (9th Cir. 1994); Cook v. Rocky Mountain Bank Note Co., 974 F.2d 147 (10th Cir. 1992); Ryan v. Occidental Petroleum Corp., 577 F.2d 298 (5th Cir. 1978), with United States v. Kaufmann, 985 F.2d 884, 890-91 (7th Cir. 1993); Division 241 Amalgamated Transit Union v. Suscy, 538 F.2d 1264, 1266 and n. 1 (7th Cir. 1976) (per curiam); State ex rel. Nixon v. Coeur d'Alene Tribe, 164 F.3d 1102, 1106 (8th Cir. 1999); Hicks v. NLO, Inc., 825 F.2d 118, 120 (6th Cir. 1987) (per curiam). That makes this an interlocutory appeal, and one that does not fit into any of the pigeonholes that permit such appeals in the federal courts. But when we raised this point at argument, the plaintiff's lawyer quickly agreed that we could treat the dismissal of the two claims as having been with prejudice, thus

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winding up the litigation and eliminating the bar to our jurisdiction. Health Cost Controls of Illinois, Inc. v. Washington, 187 F.3d 703, 708 (7th Cir. Aug. 10, 1999). And so we can proceed to the merits of the appeal.

The plaintiff presented evidence both that the applicator defendants had agreed not to compete with one another in bidding on local government contracts and that the producers had agreed not to compete among each other either, both agreements being (if proved) per se violations of section 1 of the Sherman Act. Palmer v. BRG of Georgia, Inc., 498 U.S. 46 (1990) (per curiam); Israel Travel Advisory Service, Inc. v. Israel Identity Tours, Inc., 61 F.3d 1250, 1256 (7th Cir. 1995); Metro Industries, Inc. v. Sammi Corp., 82 F.3d 839, 843-44 (9th Cir. 1996). There is a long history of bid-rigging and related practices of collusion in the road construction and road maintenance business. See, e.g., Gulf Oil Corp. v. Copp Paving Co., 419 U.S. 186 (1974); United States v. Azzarelli Construction Co., 612 F.2d 292 (7th Cir. 1979); In re Western Liquid Asphalt Cases, 487 F.2d 191 (9th Cir. 1973). (In recent years most criminal antitrust prosecutions have been of road contractors.) These are local markets, with a limited number of competitors, selling a rather standardized service to local governments constrained to give their business to the lowest bidder, a constraint that makes it easy for colluding bidders to determine whether one of their number is cheating on the agreement to divide markets. The conditions are thus ripe for effective collusion, making it unsurprising that there is evidence that the applicator defendants in fact colluded with one another to allocate the applicator business in their region. (In discussing the evidence, we emphasize that we are construing it in the light most favorable to the plaintiff, as we are required to do in reviewing the grant of summary judgment to the defendants.)

As for the producers of the asphalt used by these applicators, the record contains evidence that the product is both heavy relative to value and prone to deteriorate when transported long distances, and that as a result the practical radius within which a plant can supply applicators is only about 70 miles. This has limited to three the number of producers that can supply applicators in the region served by the plaintiff and by the applicator defendants. The plants are specialized to the production of emulsified asphalt, meaning that they can't readily be switched to producing other products. This gives the producers an incentive to produce emulsified asphalt up to the capacity of their plants (because there is no profitable use of the plants other than producing this product), and, since it is a fungible product, about the only way of increasing output is by cutting price. But since the demand for emulsified asphalt is inelastic--that is, lower prices do not yield commensurate increases in volume--the effect of price competition would be to diminish profits. So the producers, like the applicators, have much to gain by eliminating competition among themselves. And since the product is standard and the number of competing producers few, an agreement not to compete should not be too difficult to enforce; that is, at the producer level as at the applicator level, cheating should be readily observable and hence quickly checked by a retaliatory price cut. Therefore a cartel agreement would not be quickly eroded by cheating, and so again the conditions for collusion are ripe and again the record contains evidence of such collusion.

But the only defendants remaining in the case are applicators, which is to say the plaintiff's competitors. The producers have settled out. Suppose that all that the plaintiff were complaining about, therefore, was a conspiracy of the applicators to raise prices or (what amounts to the same thing) to allocate customers or markets. The complaint would fail at the threshold. A conspiracy of a firm's competitors to do these things could only help the firm, by providing an umbrella under which it could sell a large quantity at a supracompetitive price generating supracompetitive profits

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just by setting price in between the conspirators' price and the lower, competitive price that would prevail in the absence of the conspiracy. Israel Travel Advisory Service, Inc. v. Israel Identity Tours, Inc., supra, 61 F.3d at 1256-57. You want your...

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