Compact v. Metro. Gov. of Nashville & Davidson Cty., 3-84-0853.

• Decision Date: 18 October 1984
• Docket Number: No. 3-84-0853.,3-84-0853.
• Citation: 594 F. Supp. 1567
• Parties: COMPACT, et al., Plaintiffs, v. The METROPOLITAN GOVERNMENT OF NASHVILLE & DAVIDSON COUNTY, TN., et al., Defendants.
• Court: U.S. District Court — Middle District of Tennessee

594 F. Supp. 1567

COMPACT, et al., Plaintiffs, v. The METROPOLITAN GOVERNMENT OF NASHVILLE & DAVIDSON COUNTY, TN., et al., Defendants.

No. 3-84-0853.

United States District Court, M.D. Tennessee, Nashville Division.

October 18, 1984.

Avon N. Williams, Jr., Williams & Dinkins, Russell T. Perkins, Nashville, Tenn., for plaintiffs.

Jack Robinson, Joel Leeman, Gullett, Sanford & Robinson, Nashville, Tenn., for defendants Gresham, Smith & Partners.

George E. Barrett, Barrett & Ray, Nashville, Tenn., for defendants Williams, Russell & Johnson.

Barry L. Howard, Wade B. Cowan, Gracey, Maddin, Cowan & Bird, Susan Emery McGannon, Donelson, Stokes & Bartholomew, P.A., Samuel W. Bartholomew, Nashville, Tenn., for defendants Metro Nashville Airport Authority and its members Mathews, DeWitt, Miller, Lanier, Gorrell, Wilt, Wilson, Fulghum and Moore.

William F. Howard, Deputy Director, Donald W. Jones, Nashville, Tenn., for defendants Metropolitan Government of Nashville & Davidson County and Fulton.

James D. Luther, Nashville, Tenn., for defendants Metro Bd. of Educ. and its members Weeks, Gupton, Bentrup, Branstetter, Northern, Lambert, Hightower, Gann, Denney, Frazier and Wise.

Peter H. Curry, Boult, Cummings, Conners & Berry, Nashville, Tenn., for defendant Hart-Freeland-Roberts.

MEMORANDUM

WISEMAN, Chief Judge.

The present case examines the limits of lawful commercial conduct by minority businessmen in seeking meaningful participation in contracts for the construction of large government projects. This Court must decide whether all black architectural firms in a particular geographic area, who claim to have consistently been denied all but token shares on public works, may unite in a "joint venture" to demand participation as a group, refusing to deal with prime contractors in their individual capacities but only on the terms negotiated exclusively by the coalition. This Court concludes that such concerted action, despite its compelling motive to overcome racial discrimination, violates the antitrust laws of the United States and is unequivocally destructive to competition and consumer welfare in the marketplace. For this reason, the Court grants the defendants' motion for partial summary judgment as to those claims in which the plaintiffs' conspired by doing business as COMPACT.

I. Facts

In 1981 the Metropolitan Nashville Airport Authority MNAA began construction to expand the airport which services the City of Nashville, Tennessee. Early in 1984 MNAA entered the design development phase for the new terminal facility. During the spring of 1984, Gresham and Smith, a large architectural firm based in Nashville, was awarded the contract as the principal contractor for developing the design of the new terminal. Gresham and Smith was selected from among a group of other architectural firms; a number of minority business enterprise MBE firms were represented in the group whose bids were rejected.

In May of 1984 the three minority-owned architectural firms in Middle Tennessee — McKissack, McKissack & Thompson Architects & Engineers, Inc.; L. Quincy Jackson (doing business as a sole proprietor); and Harris Associates — entered into an agreement to form the Coalition for Equitable Minority Participation In Architectural Contracts in Tennessee COMPACT.¹ COMPACT was formed with the purpose of ameliorating the effects of racial discrimination against black architects in Tennessee. Its members believed each individual firm's failure to win the principal contractor position on the design phase of the airport project was attributable directly to racial discrimination by MNAA. Accordingly, the members of COMPACT agreed to band together in a "joint venture" to present a united front for negotiating contracts on projects seeking minority business participation.

Pursuant to the joint venture agreement, COMPACT retained the right to target construction projects it desired to pursue and, once chosen, its members covenanted not to pursue work on such projects in their individual capacities or to associate themselves in any way with the project except in their role as members of COMPACT. Section 5 of the COMPACT agreement provides:

5. COMPACT shall delineate specifically and in writing the areas of marketing for architectural contracts which it wishes to pursue on a joint venture basis for the benefit of its members and shall also designate specifically the areas which members are free to pursue in their own private marketing activities apart from COMPACT. No member shall pursue or accept as an individual firm without agreement of all members of COMPACT in writing in advance, any project which COMPACT has targeted or is pursuing in any way as a potential project for COMPACT.

(emphasis added). In similar language, Article V of the COMPACT Bylaws empowers COMPACT to target contracts and restrict competition between its individual members.

Although the COMPACT agreement did not limit the Coalition's scope, the initial targets selected were the Metropolitan Nashville Airport Terminal and the Nashville Convention Center — both public projects. More than just the large expenditures budgeted, COMPACT's members knew that the probable involvement of federal funds made procurement of minority business enterprise participation a condition precedent to a state agency and/or principal contractor's reimbursement by the federal government for performance on the contract.² In the context of the Nashville airport contract, MNAA had adopted and implemented an affirmative action program creating MBE set-aside guidelines consistent with the standards prescribed by federal law. Deposition of Mr. Thomas L. Mertins and Exhibit 1 (August 23, 1984).

On July 3, 1984, a meeting was held at MNAA's office. In attendance were members of COMPACT, and representatives of MNAA, the Federal Aviation Administration and Gresham and Smith. Among the topics discussed — and made clear — was the requirement that there be sufficient MBE participation in the design phase subcontracts let out by Gresham and Smith. Deposition of William D. Schock at 7-10 (August 23, 1984). The situation, therefore, was ripe for COMPACT to test its new marketing strategy.

Prior to commencing the terminal design phase of the project, MNAA had maintained an average of nine (9) percent MBE participation across the other construction contracts. Deposition of Thomas L. Mertins at 52-53, exhibit No. 4 (August 23, 1984). However, by uniting all minority architects in the area under COMPACT, and with the knowledge of MNAA's preference for local contractors, the individual members expected to exert monopolistic leverage on Gresham and Smith to force it to accede to COMPACT's demand for a more substantial participation share of the design contract. Testimony of L. Quincy Jackson, transcript at 117, 131-32. Mr. Jackson testified that he refused to accept any correspondence sent by Gresham and Smith which was addressed to him in his individual capacity; he and the other black architects in Nashville would negotiate on participation only through COMPACT. Id. at 87, 97, 146.

When members of COMPACT finally did meet with Gresham and Smith, COMPACT rejected an offer to "associate" on the project (i.e., to perform a subcontract constituting 10 percent or less of the value of the entire project), and demanded a "joint venture." Although members of COMPACT varied in their interpretation of the meaning of "joint venture," this Court understands the term to contemplate if not a 50 percent interest then one carrying substantial responsibility and decision making authority. Compare Testimony of Leatrice McKissack, transcript at 56-57; with Testimony of L. Quincy Jackson, transcript at 118; and Testimony of Harold Thompson, transcript at 164. Faced with the demand to "split the pie in half," Gresham and Smith simply went elsewhere.³ It reached an agreement with Williams, Russell & Johnson, a minority-owned architectural firm based in Atlanta licensed to practice in Tennessee.

MNAA's selection of Gresham and Smith over all of the minority firms, followed by Gresham and Smith's selection of Williams, Russell & Jackson over COMPACT precipitated the instant case. COMPACT and its members filed suit claiming violations of their civil rights under 42 U.S.C. §§ 1981, 1982, 1983, 1985, 1986, 1988, 2000d; 15 U.S.C. § 1, et seq.; T.C.A. § 47-25-101; and other applicable laws. Following the issuance of a temporary restraining order prohibiting Gresham and Smith from retaining Williams, Russell & Jackson as associate architects, this Court heard testimony on the propriety of a preliminary injunction, at which time the possible antitrust implications of the COMPACT agreement became apparent. The Court dissolved the TRO and refused issuance of a preliminary injunction. On direction by the Court both sides briefed the antitrust issue, the defendants submitting their position in the form of a motion for summary judgment. Following oral argument on the defendants' motion and after consideration of the already voluminous documents, transcripts, depositions and pleadings in the case, and the testimony of witnesses in open court, the Court concludes that the COMPACT agreement constitutes a per se violation of Section 1 of the Sherman Act and, accordingly, grants the defendants' motion for partial summary judgment dismissing the plaintiffs' claims regarding construction of the airport.

II. Minority Business Enterprise Participation as a Discrete Submarket in Public Contracts

To gain insight on the competitive impact of COMPACT's operation, one must first examine the market in which Tennessee architects do business and the reasons minority architects may have felt compelled to band together to form COMPACT. The majority of architectural services in Middle Tennessee are performed by white-owned firms. A variety of factors may explain why white firms are dominant, but chief among them is the simple fact that of the 341...