National Reporting Co. v. ALDERSON REPORTING CO., INC.

• Decision Date: 01 July 1983
• Docket Number: No. 80-1289C(4).,80-1289C(4).
• Citation: 567 F. Supp. 1011
• Parties: NATIONAL REPORTING COMPANY, Plaintiff, v. ALDERSON REPORTING COMPANY, INC., Defendant.
• Court: U.S. District Court — Eastern District of Missouri

567 F. Supp. 1011

NATIONAL REPORTING COMPANY, Plaintiff, v. ALDERSON REPORTING COMPANY, INC., Defendant.

No. 80-1289C(4).

United States District Court, E.D. Missouri, E.D.

July 1, 1983.

COPYRIGHT MATERIAL OMITTED

Andrew F. Puzder and H. Kent Munson, St. Louis, Mo., for plaintiff.

John Gianoulakis, St. Louis, Mo., for defendant.

MEMORANDUM OPINION

CAHILL, District Judge.

I. Introduction

National Reporting Company (National) commenced this antitrust action against Alderson Reporting Company, Inc. (Alderson) seeking damages under § 4 of the Clayton Act, 15 U.S.C. § 15, and a permanent injunction under § 16 of the Clayton Act, 15 U.S.C. § 26. The sole basis of National's complaint is that Alderson violated the federal antitrust laws by submitting a bid that was far below Alderson's average variable costs to obtain a one-year court reporting contract with the United States Tax Court. National alleges that Alderson's bid was "predatory" and that by submitting the bid and obtaining the one-year Tax Court contract, Alderson monopolized, attempted to monopolize, and conspired to monopolize in violation of § 2 of the Sherman Antitrust Act, 15 U.S.C. § 2. The complaint seeks a permanent injunction against Alderson and $3,600,000 in damages.

This case was tried to the Court and the parties presented witness testimony and documentary evidence. The parties also presented extensive pretrial and post-trial legal memoranda. Based on the record before the Bench, the evidence adduced at trial, and the legal memoranda filed by both parties in this action, the Court makes the following Findings of Fact and Conclusions of Law.

II. Findings of Fact

1. National Reporting Company was formed in June, 1972, and is a corporation organized and existing under the laws of Missouri. National was formed to engage in court reporting services, particularly to provide those services exclusively through the use of multi-track tape recording.

2. Alderson Reporting Company is a Delaware corporation with its principal place of business in Washington, D.C., but transacts business within the Eastern District of Missouri. Alderson is also engaged in the court reporting business and has court reporting equipment with multi-track recording capability.

3. The United States Tax Court hears cases in every state of the United States. The court reporters that record the Tax Court sessions travel across state lines, utilize the United States Mail to transmit tapes and typewritten transcripts, and write and receive interstate correspondence, all of which affects interstate commerce.

4. In 1972 National submitted a bid to provide court reporting services for the United States Tax Court. National's bid was lower than the bids of the other court reporting companies in contention. The Tax Court awarded the contract to National for the year 1972. In 1972 all of the bidders except National used conventional methods of court reporting (i.e., stenograph, stenotype, etc.).

5. The Tax Court follows a policy of allowing contractors who perform satisfactorily to renew their contract with the court at the previous year's price level. If the contractor does not wish to renew the contract at the price of the previous year, the court again puts the contract out for bids.

6. In 1973 National again offered its services to the Tax Court for the price it offered in 1972. The Tax Court renewed the contract with National. But, in 1974 the Tax Court again let the court reporting contract out for bids. Many companies submitted bids for the 1974 contract but the Tax Court judges decided to reject all of the bids in order to change the contract specifications.

7. Prior to 1974 the specifications of the Tax Court's court reporting contracts permitted all methods of court reporting. But in 1974 the Tax Court judges decided that electronic court reporting was preferable. The judges decided that electronic court reporting had produced the finest transcripts the court had experienced. The Tax Court had experienced various court reporting methods including shorthand, stenotype, electronic means, and stenomask. The Tax Court judges determined that electronic reporting had consistently produced the highest quality transcripts, and particularly was more accurate than other means of reporting. The judges also concluded that transcripts furnished by the means of electronic reporting were more timely received as opposed to transcripts prepared by conventional methods of reporting. The judges also stressed the desirability of listening to the recorded voices of the parties which enabled the court to recapture the manner in which the words were spoken. Also as part of the new specifications the judges felt that the court reporting contractor should not subcontract any more than ten percent of the court reporting work. As a result, at least ninety percent of the work would have to be performed by the employees of the primary contractor.

8. To meet all of the demands of the new contract specifications, the court limited the means of recording to four-track electronic recording systems and specifically excluded all types of conventional court reporting methods.

9. After drafting the new specifications, the Tax Court again let the court reporting contract out for bids. Because National was the only company able to meet the new specifications required by the Tax Court, only National sought the 1974 contract. The initial costs and problems of any court reporting company trying to meet the new Tax Court specifications were prohibitive. Court reporting companies seeking the Tax Court contract had to be capable of recording fourteen separate sessions in fourteen different places in the United States at the same time. The company would also have to provide back-up equipment that had the same features as the primary equipment for each Tax Court session. The company would also have to acquire at least seven additional four-track tape recorders to transcribe the tapes previously recorded. As a result, a court reporting company would have to acquire at least 35 four-track recorders at a cost of about $1,300 each. In addition, the company would have to purchase numerous microphones and tapes. The court reporting company would also have to hire and train employees who would have to be willing to travel on short notice for two or three weeks at a time.

10. Again, because National was the only company that submitted a bid for the 1974 contract under the new specifications, the Tax Court awarded it the court reporting contract for that year.

11. In response to the new Tax Court specifications for court reporting contracts, one company, CSA, emerged to contest the new requirements. CSA filed a protest with the office of the Comptroller General of the United States claiming that the new restrictions violated certain federal statutes. CSA argued that federal law limits electronic reporting in the United States District Courts to an augmenting rather than primary role. CSA further offered that another federal statute provides for court reporting through stenographic means and that both sections apply to the Tax Court. CSA concluded that the requirements of electronic reporting and the limit on subcontracting to ten percent of all recorded sessions were unjustified. The Comptroller General rejected the arguments of CSA and held that the federal provisions cited by CSA do not apply to the United States Tax Court.

12. The court reporting companies that utilized conventional means of reporting were affiliated with the "National Reporting Council, Inc." Alderson was also a member of that organization. There is evidence before the Court that the companies in the National Reporting Council viewed the electronic method of court reporting as a threat to conventional means of reporting. There is also evidence before the Court that members of the National Reporting Council resolved to take some action to compete with the development of electronic methods of court reporting. Hal Alderson, who was once president of Alderson Reporting, wrote a letter dated September 20, 1974, that apprised the members of the National Reporting Council of the legislative activity that was going on in the United States Congress dealing with the court reporting issue. The letter asked the members of the council to write to their respective congressional representatives and to lobby the congressmen for passage of a law which would prohibit the Tax Court from imposing the requirements of electronic recording. Hal Alderson's letter viewed electronic reporting as "not only as a matter of precedent but in actual fact ... the greatest blow the reporting profession has received in the past thirty years."

13. In 1976 Hal Alderson and Ira Sharp, vice president of Alderson Reporting at the relevant times herein, met with officers of National Reporting to discuss the court reporting matter. At that meeting Hal Alderson indicated an interest in working with National in some type of a joint venture, merger, or buyout. The National officers stated that National would be open to discussing any formal proposal that Alderson wished to make, including the terms of a buyout. Hal Alderson indicated that a group of reporting companies were willing to provide the money for a buyout and that he would advise National on such action in a short time. However, the National officers did not discuss any transactions with Hal Alderson after that initial meeting.

14. In 1977 Ira Sharp again contacted National on numerous occasions seeking to further discuss a joint venture or buyout. National's response was again that it would consider any formal proposal submitted by Alderson. But any probability of a business transaction between National and Alderson was clouded by a court proceeding in 1979 where Alderson pleaded guilty in the United States District Court for the District of Columbia to criminal charges of conspiracy to allocate contracts and to fix...