U.S. v. Suntar Roofing, Inc.

• Decision Date: 27 February 1990
• Docket Number: Nos. 89-3113,89-3114,s. 89-3113
• Parties: 1990-1 Trade Cases 68,936, 29 Fed. R. Evid. Serv. 1170 UNITED STATES of America, Plaintiff-Appellee, v. SUNTAR ROOFING, INC.; and David Kevin Pratt, Defendants-Appellants.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 469

897 F.2d 469

1990-1 Trade Cases 68,936, 29 Fed. R. Evid. Serv. 1170

UNITED STATES of America, Plaintiff-Appellee, v. SUNTAR ROOFING, INC.; and David Kevin Pratt, Defendants-Appellants.

Nos. 89-3113, 89-3114.

United States Court of Appeals Tenth Circuit.

Feb. 27, 1990.

Laura Heiser (James F. Rill, Asst. Atty. Gen., and Judy L. Whalley, Deputy Asst. Atty. Gen., Dept. of Justice, Washington, D.C.; Diane C. Lotko-Baker, Ann M. Gales, and Kent Brown, Dept. of Justice, Chicago, Ill., with her on the brief), for plaintiff-appellee.

J. Lawrence Louk, of Fox & Partee (Byron Neal Fox, P.C., and Ronald E. Partee, P.C., on the brief), Kansas City, Mo., for defendants-appellants.

Before LOGAN, TACHA, and BRORBY, Circuit Judges.

BRORBY, Circuit Judge.

Appellants Suntar Roofing, Inc. (Suntar), and David Kevin Pratt (Pratt), president and part-owner of Suntar, appeal their convictions for unreasonably restraining interstate Appellants were indicted along with fellow defendants Ronan's Roofing, Inc. (Ronan's Roofing), and its president, Michael T. Ronan (Ronan). Additionally, in its bill of particulars the government identified three unindicted co-conspirators: (1) Tom Keaton (Keaton), a part-owner of Suntar and another roofing company, Keaton Brothers Roofing and Siding, Inc.; (2) Andy Boxley (Boxley), a Suntar employee during the alleged conspiracy; and (3) Samuel K. "Bud" Fleenor (Fleenor), an employee of Ronan's Roofing. At all relevant times, Suntar and Ronan's Roofing were Kansas corporations engaged in the business of constructing and installing cedar shake (shingle) roofs on single and multi-family homes in and around Kansas City, Kansas.

trade and commerce in violation of Sec. 1 of the Sherman Act (15 U.S.C. Sec. 1).

The indictment charged that the defendants and co-conspirators engaged in a continuing agreement, understanding and concert of action to allocate and divide among themselves customers for the construction and installation of roofs on new single and multi-family homes in the Kansas City, Kansas metropolitan area. The indictment further charged that commencing in or about June 1985 and continuing through mid-1986, the defendants and co-conspirators met to discuss prices, individual roofing projects, and the means to allocate specific customers between the two companies. The government alleged that they agreed to stop competing and refrained from competing for the business of each company's established customers.

The jury returned a verdict of not guilty as to defendants Ronan's Roofing and Ronan and a verdict of guilty as to defendants Suntar and Pratt. Appellants now challenge their convictions on the following bases: (1) that the trial judge erroneously treated the alleged activity as a "per se" violation of the Sherman Act; (2) that the jury instructions erroneously described the elements of the offense charged and that there was insufficient evidence to establish each element; (3) that the trial judge improperly admitted evidence of similar acts under Fed.R.Evid. 404(b); and (4) that the trial judge violated appellants' Sixth Amendment right to effective counsel by failing to require Suntar's counsel to withdraw because of a conflict of interest. We affirm.

ANALYSIS

A. Per Se Violation of the Sherman Act

Appellants contend that the trial court erred when it sustained the government's pre-trial motion to prevent the defendants from offering evidence of the reasonableness and/or economic justification for the alleged activities or evidence of the defendants' lack of intent to violate the law or to restrain trade. Thus, appellants allege that they were deprived of any opportunity to present evidence that the conduct charged was permissible under "rule of reason" analysis and that the jury was deprived of its factfinding function to determine whether the charged conduct unreasonably restrained competition.

Section 1 of the Sherman Act prohibits "[e]very contract, combination ..., or conspiracy, in restraint of trade or commerce." Generally, courts apply a "rule of reason" analysis to determine whether particular practices or conduct come within the ambit of the statute. Under "rule of reason" analysis, the factfinder weighs all of the circumstances of a case to decide whether a restrictive practice should be prohibited as imposing an unreasonable restraint on competition. Continental T.V., Inc. v. GTE Sylvania, Inc., 433 U.S. 36, 49, 97 S.Ct. 2549, 2557, 53 L.Ed.2d 568 (1977).

However, since the passage of the Sherman Act, the courts have formulated and applied a per se rule of illegality for certain restrictive practices that are deemed to be manifestly anticompetitive. Id. at 50, 97 S.Ct. at 2557. As the Supreme Court explained in Northern Pac. R. Co. v. United States, 356 U.S. 1, 5, 78 S.Ct. 514, 518, 2 L.Ed.2d 545 (1958), "there are certain agreements or practices which because of their pernicious effect on competition and lack of any redeeming virtue are conclusively presumed to be unreasonable and therefore illegal without elaborate inquiry as to the precise harm they have caused or the business excuse for their use." Here, appellants argue that the indictment in this case did not justify the trial court's application of per se analysis in that the restraint charged is not clearly "pernicious" as a matter of law.

In its pre-trial motion, the government argued that the conduct charged in the indictment, a "horizontal" customer allocation agreement, ¹ represented conduct which is illegal per se. Prior to trial, the trial court ruled that the indictment did in fact allege a per se violation of the Sherman Act, and that, assuming the government could present evidence establishing the violation charged in the indictment, the defendants would therefore be precluded from introducing evidence of reasonableness or justification at trial. At trial, the court concluded that the government had established the violation charged and therefore precluded defendants' additional evidence.

Consistent with the analysis of the Supreme Court and previous holdings of this court and of other circuits, we concur with the determination of the trial court and hold that the activity alleged in the indictment in this case, an agreement to allocate or divide customers between competitors within the same horizontal market, constitutes a per se violation of Sec. 1 of the Sherman Act. See United States v. Topco Assocs., Inc., 405 U.S. 596, 608, 92 S.Ct. 1126, 1133, 31 L.Ed.2d 515 (1972) ("[o]ne of the classic examples of a per se violation of Sec. 1 is an agreement between competitors at the same level of the market structure to allocate territories in order to minimize competition"); United States v. Goodman, 850 F.2d 1473, 1476 (11th Cir.1988) ("customer allocation agreement alone is a per se violation of 15 U.S.C. Sec. 1") (citing United States v. Cadillac Overall Supply Co., 568 F.2d 1078, 1090 (5th Cir.), cert. denied, 437 U.S. 903, 98 S.Ct. 3088, 57 L.Ed.2d 1133 (1978)); United States v. Cooperative Theatres of Ohio, Inc., 845 F.2d 1367, 1372 (6th Cir.1988) ("customer allocation ... is the type of 'naked restraint' which triggers application of the per se rule of illegality"); Mid-West Underground Storage, Inc. v. Porter, 717 F.2d 493, 497-98 n. 2 (10th Cir.1983) ("[t]he essence of a market allocation violation ... is that competitors apportion the market among themselves and cease competing in another's territory or for another's customers"); United States v. Koppers Co., 652 F.2d 290, 293 (2d Cir.), cert. denied, 454 U.S. 1083, 102 S.Ct. 639, 70 L.Ed.2d 617 (1981).

B. The Instructions and Sufficiency of the Evidence

Appellants next challenge the court's instructions to the jury as to each element of the violation charged and contend that the government failed to present sufficient evidence to establish each element. When examining a challenge to jury instructions, we review the record as a whole to determine whether the instructions state the law that governs and provided the jury with an ample understanding of the issues and standards applicable. Big Horn Coal Co. v. Commonwealth Edison Co., 852 F.2d 1259, 1271 (10th Cir.1988). Additionally, so long as the charge as a whole adequately states the law, the refusal to give a particular requested instruction is not an abuse of discretion. United States v. Hines, 696 F.2d 722, 733 (10th Cir.1982).

When reviewing the sufficiency of evidence underlying a verdict in a criminal case, we must affirm if, viewing all the direct and circumstantial evidence in the light most favorable to the government, a reasonable trier of fact would find the essential elements of the crime beyond a reasonable doubt. United States v. Culpepper, 834 F.2d 879, 881 (10th Cir.1987) (citing Jackson v. Virginia, 443 U.S. 307, 318- 19, 99 S.Ct. 2781, 2788-89, 61 L.Ed.2d 560 (1979)).

1. Conspiracy

a. The instructions. Appellants first challenge the charge to the jury as to the conspiracy element of the Sherman Act violation, contending that the instructions failed to properly instruct the jury that a corporation cannot "conspire" with its owners, officers or employees. Appellants correctly point out that the law will not recognize a conspiracy when the only possible "conspirators" are a company and its employee, officer or owner, see Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 769, 104 S.Ct. 2731, 2740, 81 L.Ed.2d 628 (1984); Holter v. Moore & Co., 702 F.2d 854, 855 (10th Cir.), cert. denied, 464 U.S. 937, 104 S.Ct. 347, 78 L.Ed.2d 313 (1983). Thus, in the instant case, Pratt could not be convicted of conspiracy if his only possible fellow conspirator was Suntar.

However, instruction No. 15 adequately addresses this aspect of the law concerning conspiracy. The instruction stated that "[a] conspiracy to allocate customers is an agreement or understanding between competitors not to compete for the business of a particular customer or customers" (emphasis...