U.S. v. Cadillac Overall Supply Co.

• Decision Date: 28 February 1978
• Docket Number: No. 77-5076,77-5076
• Parties: 1978-1 Trade Cases 61,892 UNITED STATES of America, Plaintiff-Appellee, v. CADILLAC OVERALL SUPPLY COMPANY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1078

568 F.2d 1078

1978-1 Trade Cases 61,892

UNITED STATES of America, Plaintiff-Appellee, v. CADILLAC OVERALL SUPPLY COMPANY, Defendant-Appellant.

No. 77-5076.

United States Court of Appeals Fifth Circuit.

Feb. 28, 1978.

Patrick B. McCauley, Detroit, Mich., Michael P. Chase, North Miami Beach, Fla., for defendant-appellant.

Gary D. Flack, Atty., John T. Orr, Jr., Antitrust Division, Dept. of Justice, Atlanta, Ga., Barry Grossman, William D. Coston, John H. Shenefield, Acting Asst. Atty. Gen., Dept. of Justice, Antitrust Div., Washington, D. C., for plaintiff-appellee.

Appeal from the United States District Court for the Southern District of Florida.

Before THORNBERRY, Circuit Judge, SKELTON, Senior Judge ^* and HILL, Circuit Judge.

JAMES C. HILL, Circuit Judge:

This is a criminal anti-trust case. Appellant Cadillac Overall Supply Company (Cadillac) appeals, following a bench trial, from the verdict and judgment finding it guilty of conspiring to restrain interstate commerce by allocating customers in the rental of industrial garments in several counties in South Florida in violation of Section One of the Sherman Act. 15 U.S.C. § 1.

Cadillac presents seven enumerations of error. These are:

(1) That the trial court erred in ruling that the indictment sufficiently alleged a restraint of interstate commerce.

(2) That there was insufficient evidence to establish at trial that the restraint occurred in the flow of or substantially affected interstate commerce.

(3) That the evidence was insufficient to establish that the defendant-appellant was a participant in the customer allocation conspiracy.

(4) That the trial court erred in holding that the conspiracy to allocate customers constituted a per se violation of the Sherman Act.

(5) That the trial court erred in imputing the acts of the corporate employees to the corporate defendant.

(6) That the trial court erred in admitting into evidence certain records maintained by the defendant's coconspirators.

(7) That the trial court erred in denying the defendant's request to use the prosecutor's witness interview summaries for cross-examination and impeachment in violation of the Jencks Act and the standing discovery order of the District Court.

We affirm.

Before proceeding to the issues presented, we briefly state the facts necessary for an understanding of this case.

Cadillac Overall Supply Company is a corporation engaged in the industrial garment industry. It supplies uniforms, industrial cloths and other products to its customers on a rental basis. When it secures a new customer, Cadillac must make a capital investment in purchasing the industrial garments which will be ordered according to the style, color, sizes, business and employee names requested by the customer. According to the stipulation of the parties, over 50 percent of the garments ordered are shipped from out of state sources to Cadillac which is located in South Florida.

Following the initial delivery of the garments to the customer, Cadillac performs further services such as laundering the garments on a periodic basis and replacing those which become worn out or damaged. Customers are generally charged according to the number of garments rented and by the frequency with which they must be cleaned.

In the early 1950's only two companies, Neway Uniform and Towel Supply of Florida (Neway) and Mechanics Uniform Service (Mechanics), conducted a significant amount of business in the South Florida market. Initially, both companies competed with each other on an open basis.

However, at some point in the later 1950's, Neway and Mechanics made an agreement whereby each would refrain from encouraging the other's customers from changing over to it. In addition to refraining from soliciting the other's customers, the arrangement called for active discouragement of the customer from changing suppliers. For example, if a customer of Neway expressed to a Mechanics agent that it was dissatisfied with the services rendered by Neway and was contemplating a change to Mechanics as a supplier, the sales manager of Mechanics would call the manager of Neway and inform him of the customer's complaint. Mechanics would cooperate with Neway, encourage Neway to satisfy the customers complaint, and try to discourage the customer, by means of increased price or the like, from changing over to Mechanics.

If a dissatisfied customer would still insist on changing suppliers, and ultimately did so, the managers of the suppliers would meet and trade customer accounts until the volume of business exchanged was equivalent. For example, if Neway had lost a customer to Mechanics, despite their joint efforts to the contrary, Neway would accept the account of a disgruntled Mechanics customer.

In the 1960's the evidence established that Uniforms for Industry joined the arrangement. Later in the 1960's American Uniform Service, Sanitary Uniform Rental Service Co., and Cascade Linen Services joined the arrangement.

In 1960, Cadillac Overall Supply Company, headquartered in Detroit, Michigan, acquired the assets of Atlantic Coverall Supply Company and entered the South Florida market.

In a finding, which we shall review, the trial judge found that Cadillac also joined the customer allocation conspiracy and engaged in the nonsolicitation and account balancing scheme.

I. Was a Restraint on Interstate Commerce Alleged?

In its first enumeration of error, appellant contends that the indictment failed to allege a restraint by the appellant on interstate commerce in violation of the Sherman Act.

In this case, the indictment charged that the defendant and its co-conspirators by entering into the customer allocation arrangement had unreasonably restrained interstate commerce. The indictment stated that the effects of the conspiracy were to curtail competition in the uniform rental industry, restrict the free choice of the consumer, and stabilize prices at an artificial and noncompetitive level. The indictment more specifically alleged that:

Uniform rental companies located in South Florida regularly purchase or otherwise obtain for the use of their customers industrial garments from manufacturers whose plants are located outside of the state of Florida. Defendants purchase substantial quantities of cleansing supplies and packaging materials from suppliers located outside the state of Florida. Thus, during the period covered by this indictment, there was a continuous and uninterrupted flow of industrial garments, cleansing supplies and packaging materials from plants located in states other than Florida to uniform rental companies, including the defendants, within the state of Florida, and then to their customers.

In reviewing the sufficiency of an indictment, we must view the document in a practical sense, and as a whole, United States v. Smith, 523 F.2d 771 (5th Cir. 1975), cert. denied, 429 U.S. 817, 97 S.Ct. 59, 50 L.Ed.2d 76 (1976) to determine whether it sets forth the elements of the offense charged in order that the constitutional right of the defendant not to be placed in double jeopardy will be insured and so that the right of the defendant to be informed of the accusation may be afforded. Hamling v. United States, 418 U.S. 87, 94 S.Ct. 2887, 41 L.Ed.2d 590 (1974); United States v. Driscoll, 454 F.2d 792 (5th Cir. 1972). Fed.R.Crim.P. Rule 7.

In this Circuit, we have held that, ordinarily, the pleading of the allegations in terms of the statute is sufficient to fulfill this dual requirement. United States v. Lester, 541 F.2d 499 (5th Cir. 1976).

Under Section 1 of the Sherman Act, two theories may be used to satisfy the requisite and jurisdictional interstate commerce nexus. These theories are the "affecting commerce" and "flow of commerce" theories. Mandeville Island Farms Inc. v. American Crystal Sugar Co., 334 U.S. 219, 68 S.Ct. 996, 92 L.Ed. 1328 (1948); Las Vegas Merchant Plumbers Ass'n v. United States, 210 F.2d 732 (9th Cir. 1954).

In the instant case, our review of the sixth allegation of the indictment, when read in light of the above standards, convinces us that the indictment sufficiently alleged a restraint on interstate commerce under the " flow of commerce" theory.

While the indictment was somewhat conclusory in alleging the effect of the defendant's actions on interstate commerce, we hold that the indictment, when read as a whole and in a practical sense, adequately informed the defendant of the charges against it and was sufficient to protect the defendant from double jeopardy. The defendant has failed to show any prejudice flowing from any lack of specificity. United States v. Gates, 528 F.2d 1045 (5th Cir. 1976), cert. denied, 429 U.S. 839, 97 S.Ct. 110, 50 L.Ed.2d 106 (1976).

It must be remembered that in testing the sufficiency of an indictment, a court must not pierce the pleadings and make a premature resolution of the merits of the allegations. See United States v. South Florida Asphalt Company, 329 F.2d 860 (5th Cir. 1964). Rather, as when confronted with a motion to dismiss a civil complaint for failure to state a claim, the court must look to the allegations and, taking the allegations to be true, determine whether a criminal offense has been stated.

Appellants' reliance on the case of United States v. Allied Maintenance Corp., 1976-1 Trade Cases § 60,924 (S.D.N.Y.1976), is misplaced. Our reading of the case indicates that the Court substituted its prediction of the outcome on the merits rather than determining whether the allegations, accepted as true, stated a violation of the Sherman Act. We therefore decline to accept appellants' suggestion that we adopt the Allied Maintenance case as authority to dismiss the indictment. Appellants enumeration of error is meritless.

II. Was a Restraint on Interstate Commerce Proven?

All parties recognize that the mere pleading of a restraint on interstate commerce is insufficient to sustain a conviction under the Sherman Act. Rather, the...