Kimmelman v. Henkels & McCoy, Inc.

• Decision Date: 22 July 1987
• Citation: 527 A.2d 1368,108 N.J. 123
• Parties: , 56 USLW 2129, 1987-2 Trade Cases P 67,674 Irwin I. KIMMELMAN, Attorney General of the State of New Jersey, Plaintiff- Appellant, v. HENKELS & McCOY, INC., Defendant-Respondent, and Straco Construction Co.; and Agabiti Bros., Inc.; and Armando A. Agabiti, each individually, Defendants.
• Court: New Jersey Supreme Court

Page 123

108 N.J. 123

527 A.2d 1368, 56 USLW 2129, 1987-2

Trade Cases P 67,674

Irwin I. KIMMELMAN, Attorney General of the State of New

Jersey, Plaintiff- Appellant, v. HENKELS & McCOY, INC., Defendant-Respondent, and Straco Construction Co.; and Agabiti Bros., Inc.; and Armando A. Agabiti, each individually, Defendants.

Supreme Court of New Jersey.

Argued Feb. 2, 1987.

Decided July 22, 1987.

Laurel A. Price, Deputy Atty. Gen., for plaintiff-appellant (W. Cary Edwards, Atty. Gen. of New Jersey, attorney).

Steven A. Asher, Philadelphia, Pa., a member of the Pennsylvania bar, for defendant-respondent (LaBrum and Doak, attorneys).

The opinion of the Court was delivered by

GARIBALDI, J.

This case requires us to determine the scope and applicability of the civil remedies set forth in N.J.S.A. 56:9-10c for violations of the New Jersey Antitrust Act (the "Antitrust Act" or "Act"), N.J.S.A. 56:9-1 to -19.

I

The Attorney General filed a civil complaint against Henkels & McCoy, Inc. (H & M), Straco Corporation Co. (Straco), Agabiti Bros., Inc. (Agabiti), and Armando Agabiti, alleging that they had violated N.J.S.A. 56:9-3 ¹ by conspiring to rig bids, fix prices, and allocate territories for certain construction work performed for Public Service Electric & Gas Co. and Elizabethtown Gas Co.

After the completion of discovery, the trial court granted the Attorney General's motion for summary judgment. In granting the motion for summary judgment, the trial court made the following relevant findings of fact:

The overwhelming weight of the evidence satisfies the Court as a matter of law that the plaintiff has established a loose, but persistent, agreement among the defendants, beginning prior to the effective date of the act (May 21, 1970) and continuing until late 1982, to exchange bids about to be submitted to Public Service, and, in at least one instance, Elizabeth Gas Co., for a variety of general construction work.... At some point prior to 1970 a practice began whereby an employee of Straco and Henkels conferred on their respective bids on the annual blanket contracts to be awarded by Public Service Electric and Gas Co. It is unclear who instigated these discussions or whether they were conducted initially by phone or in person but Straco sought to protect its Camden "territory." Few in person meetings were necessary as it became a simple matter to agree by phone on the percentage increase for the new "blankets" for each year as they came up for bid.

The basic technique was simple: Henkels would bid high on Camden contracts relative to Straco and it, in turn, would do likewise on Burlington work thus guaranteeing at least between them which company would get the work in those counties. At some point Agabiti also joined the plan although it is not clear exactly when.

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This conspiracy continued up to and after the passage of the State Antitrust Act essentially unchanged but for the company personnel who carried it out until some point in the middle 1970's when, for a three year period, there was a "hiatus" during which it was essentially "every man for himself" due to scarcity of work. After this hiatus a meeting of the principals took place and the arrangement resumed full scale until it finally dissolved at some point prior to 1983.

During this entire time the participants, all of whom testified at depositions, met less than 10 times face-to-face but conferred by phone annually to adjust blanket bids and, as necessary, to decide on the individual gas main bids. None of the participant witnesses could pinpoint the date of any of the face-to-face meetings or phone calls or specifically which of the contracts awarded were actually the product of a rigged bid. Furthermore, according to them there was no guarantee that bidders not part of the scheme would not win a bid. [No. C-1038-83 slip. op. at 3-5.]

The Attorney General requested the trial court to impose civil penalties against the defendants of $2.1 million--representing $500 for each day that the conspiracy continued after the effective date of the Antitrust Act. ² Instead, the trial court imposed a civil penalty of $100,000 on H & M and a penalty of $20,000 on Agabiti. ³ Although the court acknowledged that "$100,000 is probably inadequate to deter a company the size of Henkels and McCoy, which experienced a gross profit of over $44,000,000 in 1982, from further violations of the law," it felt that it was precluded from imposing a greater fine by "certain conceptual and practical difficulties."

The Appellate Division affirmed substantially for the reasons stated by the trial court. 208 N.J.Super. 508, 506 A.2d 381 (1986). We granted certification, 105 N.J. 533, 523 A.2d 574 (1986), limited solely to the issue of whether in its imposition of civil penalties the trial court properly construed N.J.S.A. 56:9-10c.

II

The language of the Antitrust Act and the fundamental public policy underlying the Act lead us to conclude that the decisions of the lower courts in this case were based on a misinterpretation of the applicable law. We find that the Legislature intended to authorize courts to impose per diem penalties that in the aggregate may exceed $100,000.

In construing a statute we first consider its plain language. Renz v. Penn Cent. Corp., 87 N.J. 437, 440, 435 A.2d 540 (1981); Sheeran v. Nationwide Mut. Ins. Co., Inc., 80 N.J. 548, 556, 404 A.2d 625 (1979). N.J.S.A. 56:9-10c provides that any person who violates the Antitrust Act "shall be liable to a penalty of not more than the greater of $100,000.00 or $500.00 per day for each and every day of said violation" (emphasis added). Thus, the plain meaning of the statute discloses that the Legislature authorized the imposition of either a lump sum penalty of up to $100,000, or a per diem penalty of up to $500 a day, whichever is greater.

This interpretation is totally consistent with the Legislature's intent. In discerning that intent we consider not only the particular statute in question, but also the entire legislative scheme of which it is a part. State v. Wright, 107 N.J. 488, 497, 527 A.2d 379 (1987); Denbo v. Moorestown Township, 23 N.J. 476, 481, 129 A.2d 710 (1957); State v. Brown, 22 N.J. 405, 415, 126 A.2d 161 (1956). Although the legislative history of the Antitrust Act is sparse, the full title of the Act indicates the underlying policy of the Act:

An Act to promote the unhampered growth of commerce and industry throughout the State by prohibiting restraints of trade which are secured through monopolistic practices and which act or tend to act to decrease competition between and among persons engaged in commerce and trade, whether in manufacturing, distribution, financing, and service industries or in related for profit pursuits, and making an appropriation therefore. [L.1970, c. 73.]

Moreover, N.J.S.A. 56:9-18 provides that the Antitrust Act "shall be construed in harmony with ruling judicial interpretations of comparable [f]ederal antitrust statutes." An examination of federal law as well as state law is therefore instructive as to the underlying policy reasons for imposing civil penalties in antitrust matters and the scope of per diem penalties.

Today, the "civil money penalty has unquestionably come of age. Disillusioned with cumbersome criminal, injunctive, and license-removal sanctions, students of regulation have increasingly turned to the civil fine in their search for a more effective enforcement device." Driver, "The Assessment and Mitigation of Civil Money Penalties by Federal Administrative Agencies," 79 Colum.L.Rev. 1435, 1436 (1979) (hereinafter referred to as Driver, Civil Money Penalties) (footnotes omitted). Civil monetary penalties deter future unlawful behavior by the defendant and those similarly situated. Id. at 1456. Federal courts have held that a per diem civil penalty is particularly suited for deterring such antitrust practices as conspiracies to fix prices that occur "continuously" over a period of time. See United States v. ITT Continental Baking Co., 420 U.S. 223, 231, 95 S.Ct. 926, 931, 43 L.Ed.2d 148, 158 (1975); United States v Phelps Dodge Indus., Inc., 589 F.Supp. 1340, 1361 (S.D.N.Y.1984) ("[e]ffective deterrence requires daily penalties" for conspiring to fix prices).

Civil penalties also can compensate society at large for the harm it has suffered at the hands of the violators and compensate the government for the cost of enforcing the applicable law. Driver, Civil Money Penalties, supra, 79 Colum.L.Rev. at 1468-69. See In re Garay, 89 N.J. 104, 114, 444 A.2d 1107 (1982) (fines for medicaid fraud constitute "liquidated damages" for the state's costs in investigating fraud and bringing legal action).

Another reason for favoring civil penalties is the difficulty involved in proving a criminal antitrust case. In State v. Lawn King, Inc., 84 N.J. 179, 215, 417 A.2d 1025 (1980), we recognized the "enormous difficulties entailed in a criminal antitrust prosecution, attributable primarily to the intractable complexities intrinsic to the subject matter, the principles of law involved ... and ... the heavy burden of proof on the State in a criminal case." Indeed, in that case we questioned "whether the important interests sought to be vindicated by this criminal prosecution could not have been more appropriately protected through civil suits under the State Antitrust Act." Id. at 215, 417 A.2d 1025.

Moreover, from the State's standpoint the results of civil and criminal antitrust actions are essentially identical. In many antitrust cases it is necessary to immunize the principal actors in the underlying conspiracy in order to prove its existence. Such was the case here. Once the actors within the conspiracy have been immunized, the only parties left for prosecution are corporations. Obviously a corporation cannot be incarcerated. Accordingly, the only remedy that can be imposed after a criminal prosecution is a fine. Unless the State...