Municipality of Anchorage v. Hitachi Cable, Ltd., A 81-347 Civ.

• Citation: 547 F. Supp. 633
• Decision Date: 16 September 1982
• Docket Number: No. A 81-347 Civ.,A 81-347 Civ.
• Parties: MUNICIPALITY OF ANCHORAGE, a Municipal Corporation, and Anchorage Telephone Utility, A Public Agency and Instrumentality of the Municipality of Anchorage, Plaintiffs, v. HITACHI CABLE, LTD., Hitachi Ltd. of Japan, Richard L. McBride, Forrest Ellis, Naoto Kudo, Hajime Noda, Takao Shiomi and Yoshitoki Kato, Defendants and Third Party Plaintiffs, v. MARUBENI CORPORATION, a Japanese corporation, and Marubeni America Corporation, a New York corporation, Third Party Defendants.
• Court: U.S. District Court — District of Alaska

547 F. Supp. 633

MUNICIPALITY OF ANCHORAGE, a Municipal Corporation, and Anchorage Telephone Utility, A Public Agency and Instrumentality of the Municipality of Anchorage, Plaintiffs, v. HITACHI CABLE, LTD., Hitachi Ltd. of Japan, Richard L. McBride, Forrest Ellis, Naoto Kudo, Hajime Noda, Takao Shiomi and Yoshitoki Kato, Defendants and Third Party Plaintiffs, v. MARUBENI CORPORATION, a Japanese corporation, and Marubeni America Corporation, a New York corporation, Third Party Defendants.

No. A 81-347 Civ.

United States District Court, D. Alaska.

September 16, 1982.

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Ronald G. Birch of Birch, Horton, Bittner, Monroe, Pestinger & Anderson, Anchorage, Alaska, for plaintiffs.

Paul L. Davis of Boyko & Davis, Anchorage, Alaska, William McD. Miller, A. Raymond Hamrick, III and Karl K. Ransom of Musick, Peeler & Garrett, Los Angeles, Cal., for defendants.

OPINION AND ORDER

FITZGERALD, District Judge.

The Municipality of Anchorage and its telephone utility have made a claim in this action for damages arising out of Hitachi Cable, Ltd.'s bribery of two municipal employees, Richard McBride and Forrest Ellis.¹ The Municipality seeks the remedies available for violations of the Sherman Act, 15 U.S.C. §§ 1, 2, the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1962, the Robinson-Patman Act, 15 U.S.C. § 13(c), and pleads additionally several pendent state law causes of action.² At issue now are motions by Hitachi Cable to dismiss the Robinson-Patman Act claim for lack of standing and by the Municipality for summary judgment on its claims under RICO, the Sherman Act, and the Robinson-Patman Act.

The Anchorage Telephone Utility is the municipal department that constructs, maintains, and operates the Anchorage telephone system. Between 1970 and 1978, the Utility, following competitive bidding, awarded two year contracts for supplying telephone cable. The bid requests typically covered approximately 125 different types of cable and required prospective bidders to list their price per thousand feet of each item. The Utility evaluated the bids by multiplying bid prices by a factor, known as an evaluation quantity, representing the Utility's anticipated need for each type of cable. The resulting product was said to be the extended price. A total package price was derived by summing up the extended prices of all cable types, and the contract would ordinarily be awarded to the bidder offering the lowest package price. Bidders were required to conform to the several specifications contained in the bid invitation, however, and bids failing to meet specifications could be rejected.

The Utility's bid solicitation did not obligate the Utility to purchase a fixed amount of any particular cable and many types were not likely to be needed by the Utility during the contract period. Bids were requested on these "non-buy" items only to guard against the possibility that some quantities of that type might be needed. Under this system a bidder with inside information could generate a low package price while bidding high on types of cable likely to be ordered. In short, the structure of the Utility's bidding system lent itself admirably to price rigging.

Hitachi Cable, Ltd. is a Japanese corporation engaged in the manufacture and sale of industrial cables. During the period of time covered by this action Hitachi Cable manufactured telephone cables which it sold to Marubeni Corporation. In turn, Marubeni resold the cable to an American corporation, Marubeni of America, which sold to the Municipality.

Responsibility for administering the Utility's bidding procedures, for approving the bids, and for supervising contract performance rested with the Assistant Manager for Outside Plant Engineering and Construction. In particular, the Assistant Manager was responsible for compiling lists of evaluation quantities and non-buy items, determining which bids met Utility specifications, and making the final recommendation on the bid to be accepted. Between 1968 and 1978 Richard McBride was Assistant Manager of Outside Plant Engineering and Construction. His predecessor in the position was Forrest Ellis.

The Municipality suggests that between 1970 and 1978 Hitachi, in conspiracy with the two Marubeni corporations, paid bribes of approximately $250,000 to Ellis and McBride for information concerning evaluation quantities and non-buy items and for their assistance in obtaining cable contracts with the Utility. Hitachi did not directly pay its share of bribes. Instead Hitachi factored into its price to Marubeni a sum representing the bribe for cable. Marubeni, in turn, paid Ellis a "commission" which Ellis then split with McBride. In concept the scheme was simple and straightforward and well suited to accomplish its purpose of corruption. I turn to the claims.

A. The Robinson-Patman Act

1. Standing

Section 2(c) of the Robinson-Patman Act makes it unlawful for any person engaged in commerce to accept compensation for services not rendered in connection with the sale or purchase of goods. 15 U.S.C. § 13(c).³ While enacted primarily to curb price discriminations disguised as brokerage arrangements, section 2(c) has been interpreted to encompass commercial bribery "tending to undermine the fiduciary relationship between a buyer and its agent ... in a transaction involving the sale or purchase of goods." Rangen, Inc. v. Sterling Nelson & Sons, 351 F.2d 851, 858 (9th Cir. 1965), cert. denied 383 U.S. 936, 86 S.Ct. 1067, 15 L.Ed.2d 853 (1966). The fact that the Municipality has chosen to call the payments to Ellis commercial bribes rather than unlawful commissions or brokerage fees thus has little significance. The substance of the transaction controls.

Hitachi's principal objection to the section 2(c) claim is that the Municipality lacks standing to sue. Hitachi suggests that when a seller bribes a buyer's agent, only competitors of the seller suffer competitive injury and have standing to sue. Furthermore, since the Utility is a regulated monopoly and has no competitors, it cannot suffer a competitive injury.

The authorities relied upon by Hitachi begin with Computer Statistics, Inc. v. Blair, 418 F.Supp. 1339 (S.D.Tex.1976). The principal business of Computer Statistics, Inc. was performing data processing services for others on machines which it leased or bought. As an extension of its data processing business, Computer Statistics regularly bought, sold and leased out equipment ancillary to computer operation. On occasion the company also bought computers and leased them to others, although it was not in the business of doing so.

Blair was chairman of the board of Computer Statistics. He and Davis, Computer Statistics' president, paid substantial bribes to employees of computer and data processing equipment firms to obtain business opportunities for their own benefit. Following a change of management, Computer Statistics learned of the dealings and brought an action to recover on various theories including section 2(c).

The district court held that section 2(c) applies not only to cases of price discrimination but also includes commercial bribery cases not involving price discrimination. Id. at 1347; See also Calnetics Corp. v. Volkswagen of America, Inc., 532 F.2d 674, 696 (9th Cir. 1976); Rangen, 351 F.2d at 858. While acknowledging there were many cases holding proof of an adverse effect on competition may be unnecessary for establishing liability under section 2(c), the court nevertheless concluded that "... some anticipated effect is necessary and ... a plaintiff who cannot show competitive injury lacks standing to complain about payments although they literally fall within the language of the statute." 418 F.Supp. at 1347. Since Computer Statistics was not in the business of selling or leasing computers, it was not a competitor and claims relating to computer sales and purchases were dismissed.

The Fifth Circuit in Larry R. George Sales Co. v. Cool Attic Corporation, 587 F.2d 266 (5th Cir. 1979), adopted the rule of Computer Statistics that only competitors have standing to sue for a violation of the Robinson-Patman Act. The defendants in George Sales were in the business of manufacturing and distributing motorized attic fans. George Sales alleged an oral contract with the defendants requiring payment of a 4% commission on all sales of motorized fans made by defendants to the S. S. Kresge Company. According to the claim, Cool Attic conspired with Kresge's agent to divert commissions from George Sales to the agent's son, an employee of George Sales. The commissions were alleged to be commercial bribes since the agent threatened to withhold purchases by Kresge if the commissions were not continued.

The Fifth Circuit agreed that the district court's dismissal of the section 2(c) claim was correct and adopted the trial court's memorandum and order as its own. The issue turned on the standing requirements of 15 U.S.C. § 15. It was held that only plaintiffs who fall within the target area of an antitrust violation have standing to sue for damages. Anyone not "within that section of the economy which is endangered by a breakdown of competitive conditions in a particular industry" is barred from recovery.⁴ Since the court found the anti-competitive conduct of the defendants to affect only the attic fan and ventilator industry, George Sales, which was not in that industry, was without standing to sue. The opinion concluded "only if plaintiff was in the same business and in competition with S. S. Kresge Company or the defendants would he have standing under 15 U.S.C. § 15." Id. at 272.

The most recent and perhaps the most restrictive interpretation requiring competitive injury for section 2(c) standing is contained in Bunker Ramo Corporation v. Cywan, 511 F.Supp. 531 (N.D.Ill.1981). That case holds that absence of competitive injury is fatal to an antitrust claim...