U.S. v. Koppers Co., Inc.

• Decision Date: 29 June 1981
• Docket Number: No. 80-1362,D,No. 915,915,80-1362
• Citation: 652 F.2d 290
• Court: U.S. Court of Appeals — Second Circuit
• Parties: 1981-1 Trade Cases 64,134 UNITED STATES of America, Plaintiff-Appellee, v. KOPPERS COMPANY, INC., Defendant-Appellant. ocket

Page 290

652 F.2d 290

1981-1 Trade Cases 64,134

UNITED STATES of America, Plaintiff-Appellee, v. KOPPERS COMPANY, INC., Defendant-Appellant.

No. 915, Docket No. 80-1362.

United States Court of Appeals, Second Circuit.

Argued March 31, 1981.

Decided June 29, 1981.

John Bodner, Jr., Washington, D.C. (John DeQ. Briggs, III, Robert J. Brookhiser, Howrey & Simon, Washington, D.C., Ira B. Grudberg, David L. Belt, Susan H. Bartholomew, Jacobs, Jacobs & Grudberg, P.C., New Haven, Conn., Barry J. Lipson, Pittsburgh, Pa., of counsel), for defendant-appellant.

George Edelstein, Atty., Dept. of Justice, Washington, D.C. (Sanford M. Litvack, Asst. Atty. Gen., John J. Powers, III, Atty., Dept. of Justice, Washington, D.C., Gary Kimmelman, Jacqueline W. Distelman, Stuart Grabois, Attys., Dept. of Justice, New York City, of counsel), for plaintiff-appellee.

Before FRIENDLY, MANSFIELD, Circuit Judges, and B. NEWMAN, Judge. ^*

MANSFIELD, Circuit Judge:

Defendant, Koppers Company, Inc. ("Koppers"), appeals from a judgment of conviction entered on August 28, 1980, by Judge Ellen Bree Burns of the United States District Court for the District of Connecticut after a jury had found Koppers guilty of a felony violation of § 1 of the Sherman Act, 15 U.S.C. § 1. ¹ The indictment under which Koppers was convicted charged that "(b) eginning sometime prior to January 1970 and continuing until at least March 1975" Koppers and Dosch-King Company, Inc. ("Dosch-King"), had engaged in a conspiracy to rig bids and allocate territories in the sale of road tar to the State of Connecticut and its subdivisions. Dosch-King pleaded nolo contendere, cooperated with the government, and was fined $40,000; Koppers stood trial, was convicted, and was fined $400,000. ²

We affirm. Since the jury was justified in finding that Koppers' conspiratorial conduct constituted a per se violation of § 1 of the Sherman Act, there was no requirement that the jury go on to find that that conduct also resulted in an unreasonable restraint of trade.

In each year of the early 1970s the State of Connecticut solicited bids on an annual Arthur Schuck, Koppers' manager of its eastern road materials district, made a proposal to Dosch-King in 1967 that the two firms divide the state between them so that Dosch-King would be the low bidder in the western part of Connecticut, where its activities were concentrated, and Koppers would be the low bidder in the eastern part, where its storage facility and distribution point were located. To accomplish this, Koppers would communicate its plant-side price and its estimated application cost to Dosch-King prior to the bidding deadline, so that both companies could use these confidential figures as the basis for their bids. Since the two firms were based at opposite ends of the state, the use of a common base price and application cost would have the effect of making each company the low bidder in its half of the state, because of the increasing transportation costs each would incur as they bid on deliveries further and further from home. The companies would, however, continue to submit bids in all 169 Connecticut towns and all four maintenance districts, which would give the impression that they were in direct competition for the state's business even though they would know in advance which of their bids would be successful. After examining Schuck's proposal to make sure that it would in fact result in the approximately even division of the state's road tar business which Schuck had promised, Dosch-King agreed to the proposal. ⁴

                basis for the sale and application of road tar, a substance used to resurface and repair its secondary roads.  3  Any contracts eventually awarded for the purchase of road tar by the 169 towns and four state road maintenance districts in Connecticut had to be based on these bids.  During the period covered by the indictment, Koppers and Dosch-King were the only participants in the road tar bidding.  Koppers, a producer of road tar, had its plant in Kearney, N.J., and distributed its product in Connecticut from a storage facility in Portland, Connecticut, located in the eastern part of the state and owned by Mystic Bituminous Products Co. Dosch-King at all relevant times had its distribution points in Newton and New Haven, located in western Connecticut.  Koppers produced all of the road tar which it sold in Connecticut.  Prior to 1973 Dosch-King purchased most of its road tar from Reilly Tar and Chemical Corporation, occasionally making purchases from Koppers.  Beginning in 1973, Dosch-King started buying all of its road tar from Koppers, and it continued to do so throughout the remaining period of the indictment.  Nevertheless, Dosch-King's bids at all times reflected transportation costs measured from its facilities in the eastern part of Connecticut
                

With minor variations not relevant here, the two parties followed the same basic pattern in making bids each year from 1968 to 1975. Each January Schuck would meet with Dosch-King officials to give them Koppers' plant-side base price and to assure them that Koppers was planning to adhere to the conspiracy. On the day before bids were due, Schuck would meet with Dosch-King personnel in Hartford. At these meetings, Schuck would give Dosch-King the bids which Koppers was going to make on the four maintenance districts, as well as the application rate which Koppers would be using in its town bids. With these figures in hand, Dosch-King was able to calculate exactly how much Koppers would be bidding in each town and maintenance district. In 1968, Dosch-King's bids were In January, 1975, the companies once again submitted their bids in the normal manner but the State of Connecticut rejected them and called for a second round of bidding. When Dosch-King personnel contacted Schuck prior to the second round in order to get Koppers' base price, Schuck gave it to them, but informed them that the price would also be made available to the public. When Schuck was asked by Dosch-King whether this meant that "the deal we have had is over," he confirmed that it did. This second round of bidding, untainted by the Koppers/Dosch-King conspiracy, resulted in a notably different pattern of awards: Koppers ended up winning no awards at all, while Dosch-King's bids were somewhat lower than the ones it had submitted in January.

based on the formula worked out with Schuck. In later years Dosch-King simply calculated Koppers' bid for each town, and then adjusted its own bids so that it would win in the west and lose in the east. The result was that from 1968 through 1974 Koppers and Dosch-King succeeded in covertly dividing up the Connecticut road tar business on a roughly 50-50 basis.

DISCUSSION

On this appeal Koppers' principal challenge is to the charge given by Judge Burns on the question of per se violations of the Sherman Act:

"The Sherman Act is violated only by 'unreasonable' restraints of trade. Not all restraints of trade are unreasonable; however, certain types of conduct are regarded as unreasonable per se. This means that the mere doing of the act itself constitutes an unreasonable restraint on commerce and it is not necessary to consider why the acts were committed or what effect it had on the industry. Agreements among competitors to rig bids or allocate customers are such per se unreasonable restraints of trade and illegal.

"In this case, members of the jury, if you find beyond a reasonable doubt that the defendant was a competitor of Dosch-King Company in the submission of bids to the State of Connecticut for road tar and became party to the conspiracy charged in the indictment, then you do not have to decide whether such conspiracy was reasonable or unreasonable because as I have just explained, an agreement among competitors to allocate customers and territories and not to compete for customers by submitting collusive bids is a per se violation of the Sherman Act."

Koppers argues that this charge improperly withdrew the question of reasonableness from the jury by the use of a conclusive presumption, namely, that bid rigging and customer allocation are unreasonable per se. This argument asks us in effect to overrule the Supreme Court's decisions in United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 60 S.Ct. 811, 84 L.Ed. 1129 (1940), and in United States v. Topco Associates, Inc., 405 U.S. 596, 92 S.Ct. 1126, 31 L.Ed.2d 515 (1972). We decline the invitation, not only because we lack the power but also because the record here reveals the wisdom and applicability to this case of the per se rule established in those decisions.

In Socony-Vacuum, which was a criminal case, the Court held that an agreement among competitors to purchase surplus gasoline on the spot market in order to check the then current rapid decline in prices violated § 1 of the Sherman Act, 15 U.S.C. § 1, which, without using the term "unreasonable," declares unlawful "(e)very contract, combination ... or conspiracy, in restraint of trade or commerce." Although the Supreme Court had earlier interpreted this language as limited by the rule of reason, Standard Oil Co. v. United States, 221 U.S. 1, 31 S.Ct. 502, 55 L.Ed. 619 (1911); American Tobacco Co. v. United States, 221 U.S. 106, 31 S.Ct. 632, 55 L.Ed. 663 (1911), it concluded in Socony-Vacuum that certain types of conduct, including price-fixing, are so patently anticompetitive that they violate the Act without proof of unreasonableness in each case and accordingly held that "(u)nder the Sherman Act a combination formed for the purpose and with the effect of raising, depressing, fixing, pegging, or stabilizing the price of a commodity in interstate or foreign commerce is illegal per se," 310 U.S. at 223, 60 S.Ct. at 844. The Court, applying the principle adopted by it in United States v. Trenton Potteries Co., 273 U.S. 392, 47 S.Ct. 377, 71 L.Ed. 700 (1927), explained the reasoning behind the per se rule:

"Ruinous competition,...