State v. Julius Nasso Concrete Corp.

• Decision Date: 01 August 1998
• Docket Number: CENTURY-MAXIM,Docket Nos. 98-9218,TRANSIT-MIX
• Citation: 202 F.3d 82
• Parties: (2nd Cir. 2000) STATE OF NEW YORK, Plaintiff-Appellant-Cross-Appellee, v. JULIUS NASSO CONCRETE CORP.; NASSO/S&A, a Joint Venture; and NICHOLAS AULETTA, Defendants-Appellees-Cross-Appellants, EDWARD J. HALLORAN; S&A CONCRETE CO., INC.; S&A STRUCTURES, INC.; A&S STRUCTURES, INC.; A&S CONCRETE CO.; and ALVIN O. CHATTIN, Defendants-Appellees, CEDAR PARK CONCRETE CORP.; CEDAR PARK CONSTRUCTION CORP.; CERTIFIED CONCRETE, CO.; JOSEPH DEPAOLA; DIC CONCRETE CORP; DIC INDUSTRIES, INC.; WALTER GOLDSTEIN; ILJ ENTERPRISE, INC.; UNDERHILL INDUSTRIES; LIZZA INDUSTRIES, INCORPORATED; MARINE POLLUTION; JOSEPH MARTINELLI; NORTH BERRY CONCRETE CORP.; UNDERHILL CONSTRUCTION CORP.;CONCRETE CORPORATION; FRANK PHELAN; andCONSTRUCTION CORP., Defendants. (L), 98-9226(XAP), 98-9262(XAP)
• Court: U.S. Court of Appeals — Second Circuit

Page 82

202 F.3d 82 (2nd Cir. 2000)

STATE OF NEW YORK, Plaintiff-Appellant-Cross-Appellee, v. JULIUS NASSO CONCRETE CORP.; NASSO/S&A, a Joint Venture; and NICHOLAS AULETTA, Defendants-Appellees-Cross-Appellants, EDWARD J. HALLORAN; S&A CONCRETE CO., INC.; S&A STRUCTURES, INC.; A&S STRUCTURES, INC.; A&S CONCRETE CO.; and ALVIN O. CHATTIN, Defendants-Appellees,

CEDAR PARK CONCRETE CORP.; CEDAR PARK CONSTRUCTION CORP.; CERTIFIED CONCRETE, CO.; JOSEPH DEPAOLA; DIC CONCRETE CORP; DIC INDUSTRIES, INC.; WALTER GOLDSTEIN; ILJ ENTERPRISE, INC.;

UNDERHILL INDUSTRIES; LIZZA INDUSTRIES, INCORPORATED; MARINE POLLUTION; JOSEPH MARTINELLI; NORTH BERRY CONCRETE CORP.; UNDERHILL CONSTRUCTION CORP.; TRANSIT-MIX CONCRETE CORPORATION; FRANK PHELAN; and CENTURY-MAXIM CONSTRUCTION CORP., Defendants.

Docket Nos. 98-9218(L), 98-9226(XAP), 98-9262(XAP)

August Term, 1998

UNITED STATES COURT OF APPEALS

SECOND CIRCUIT

Argued: April 28, 1999

Decided: Jan. 25, 2000

Appeal from memorandum order and judgment of the United States District Court for the Southern District of New York (Preska, J.). Appellant, the State of New York ("State"), claims that the district court erred in rejecting the State's expert testimony on damages and dismissing its complaint. Appellees Julius Nasso Concrete Corp., Nasso S&A, a joint venture, (collectively the "Nasso defendants") and Nicholas Auletta cross-appeal, claiming that the district court erred in according the State the benefit of collateral estoppel on the issue of antitrust liability.

Affirmed in part, vacated and remanded in part.

ROBERT L. HUBBARD, Ass't Atty. Gen. (Eliot Spitzer, Attorney General of the State of New York) New York, NY, for Plaintiff-Appellant-Cross-Appellee.

RICHARD L. GOLD, Morelli & Gold, LLP, New York, NY, for Defendants-Appellees.

Before: WALKER and POOLER, Circuit Judges and MOTLEY, District Judge^*.

POOLER, Circuit Judge:

The State appeals from the judgment of the United States District Court for the Southern District of New York (Loretta A. Preska, Judge), which dismissed its complaint following a trial on damages because the court rejected the State's expert damages testimony as unreliable. The Nasso defendants and Nicholas Auletta appeal from the district court's grant of summary judgment to the State on the issue of antitrust liability based on the collateral estoppel effect of a prior criminal conviction establishing defendants' participation in a bid rigging conspiracy. For the reasons that follow, we affirm the district court's grant of summary judgment to the State on antitrust liability, vacate the ruling on damages and remand for a new trial on both causation and damages.

BACKGROUND

Both this lawsuit and a parallel criminal action ("Salerno II") stem from the State's investigation of an alleged big-rigging conspiracy in which the "Commission," the governing body of New York's five organized crime families, allocated all major concrete superstructure construction jobs in New York City to selected contractors, who were members of an entity known as the "Club." The State filed this antitrust lawsuit in 1985, alleging that between 1978 and 1985 Club members received all concrete construction jobs with a value of at least $2 million. The State also alleged that the dearth of competition due to the conspiracy drove construction prices up by as much as 15%. The State sought injunctive relief and damages against defendants related to overcharges in construction work for the New York Exposition and Convention Center (now known as the Jacob Javits Convention Center).

One year after the State filed this lawsuit, the United States brought a criminal action in district court, charging several defendants, including Nicholas Auletta, Edward J. Halloran, and others involved in the Convention Center project with racketeering in connection with bid rigging in the concrete superstructure industry in violation of RICO. See United States v. Salerno, 86 CR 245 ("Salerno II"). Familiarity with that case is assumed, but we review the pertinent facts here. Salerno II was the third such organized crime prosecution relating to the bid-rigging conspiracy.¹ The Salerno II indictment also charged Auletta and others with using their interests in S&A Concrete to facilitate the conspiracy. The evidence in Salerno II demonstrated that the criminal defendants participated in a scheme to allocate the major concrete work in New York City to members of the Club. The Commission chose which member of the Club would receive a particular job. In return for a contract, the selected contractor paid the Commission two percent of the contract price. In order to maintain the illusion of competition, however, other members of the Club who knew they were not slated to receive the job would submit inflated bids. Alternatively, other Club members would simply refrain from submitting a bid. As a means of enforcing the arrangement, the Commission controlled the supply of ready-mixed concrete and labor. At trial, the government introduced evidence of bid solicitations, bids and contracts for numerous construction projects, including the New York Convention Center.

After the verdict in Salerno II, which found the individual defendants involved in both this action and Salerno II guilty, the State moved for summary judgment in the instant antitrust action as to liability and the fact of damages. The State claimed that the guilty verdicts in Salerno II collaterally estopped defendants from relitigating those issues in the civil case. The district court (Preska, J.) found that, to prevail, New York would have to demonstrate that "(1) a bid rigging conspiracy occurred; (2) the bid rigging Conspiracy had an impact on the state; and (3) the state suffered damages by reason of that conspiracy." State of New York v. Cedar Park Concrete Corp., 1997 WL 306909, at *7 (S.D.N.Y. 1997). Judge Preska found that Salerno II collaterally estopped defendants from contesting their involvement in the bid rigging conspiracy and the conspiracy's impact on the State. See id. at *7-9. However, the court denied summary judgment as to "the fact of damages" and left that determination for trial. See id. at *9. In examining the effect of Salerno II on this case, Judge Preska noted that the jury instructions, evidence at trial and jury verdict established that the criminal defendants participated in a scheme to allocate concrete superstructure construction jobs and that a cartel known as the "Club" was formed. Furthermore, the district court found that the testimony of Louis Corbetta confirmed that the scheme worked in part because the conspirators controlled the supply of concrete and labor. See Cedar Park, 1997 WL 306909, at *3-4. Judge Preska concluded that the jury's verdict that the criminal defendants in Salerno II were guilty of a RICO violation had preclusive effect as to the individual defendants who were named in the instant civil case because the jury made a specific finding that bid rigging had occurred in connection with numerous construction jobs, including the New York Convention Center. See id. at *8. Applying the principles of respondeat superior, the court also found that the verdicts against the individual defendants also barred the corporations they controlled. See id. at *10. In a special verdict on forfeiture, the jury found that the conspirators used certain entities - - including S&A Concrete, S&A Structures, Inc., A&S Structures, Inc., A&S Concrete Inc., and Nasso - S&A, a joint venture - -as instruments of the conspiracy.

After the district court granted summary judgment as to defendants' participation in the bid rigging scheme but denied summary judgment on the "fact of damages," most of the defendants reached a settlement with the State, leaving only the State's claims against the Nasso defendants to be tried. After a bench trial, Judge Preska rejected the States's expert testimony on damages because it was unreliable and therefore concluded as a matter of law that the State failed to prove damages proximately caused by the Nasso defendants. The State appeals, and the Nasso defendants and Nicholas Auletta cross-appeal from the district court's summary judgment order.

DISCUSSION

I. Collateral Estoppel

We first consider whether the district court properly granted partial summary judgment to the State on antitrust liability based on collateral estoppel. The Nasso defendants urge us to vacate the district court's collateral estoppel ruling because Nicholas Auletta's conviction in Salerno II does not prove that the Nasso defendants were part of the Club or that the State suffered damages as a result of its activities. The State argues that Judge Preska properly found that Nicholas Auletta (a principal in S&A) and the Nasso defendants are collaterally estopped from challenging liability based on their criminal RICO convictions in Salerno II.

We review de novo the district court's grant of summary judgment based on collateral estoppel, construing the record and drawing all inferences in favor of the non-moving party. See Hemphill v. Schott, 141 F.3d 412, 415 (2d Cir. 1998). To prevail, the moving party must show that there are no genuine issues of material fact and that the moving party is entitled to judgment as a matter of law. See Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). "[A] criminal conviction, whether by jury verdict or guilty plea, constitutes estoppel in favor of the United States in a subsequent civil proceeding as to those matters determined by the judgment in the criminal case." United States v. Podell, 572 F.2d 31, 35 (2d Cir. 1978). In order for collateral estoppel to apply the court must determine that "(1) the issues in both proceedings are identical, (2) the issue in the prior proceeding was actually litigated and actually decided, (3) there was full and fair opportunity to litigate in the prior proceeding, and (4) the issue previously litigated was necessary to support a valid...