Pope v. Intermountain Gas Co.

• Decision Date: 21 May 1982
• Docket Number: Nos. 13173,13436,s. 13173
• Citation: Pope v. Intermountain Gas Co., 103 Idaho 217, 646 P.2d 988 (Idaho 1982)
• Court: Idaho Supreme Court
• Parties: , 1982-2 Trade Cases P 64,783 Ron POPE and Lynn Potthast, dba P & P Insulation & Siding, Grant Frederickson, dba Frederickson's Insulation Co.; Gene Hamilton, dba Hamilton Insulation & Roofing; Chris Clayville, dba Clayville Insulation; Bud Moore, dba Moore Insulation; and all other persons in the same class and like situations, Plaintiff-respondents, v. INTERMOUNTAIN GAS CO., an Idaho corporation, Defendant-appellant, and R. D. Grimm, President; Robert B. Hodge, Vice-president; Walter Smith, Vice-president; Reed Penning, Vice-president; Virginia Smith, Vice-president; and William Glynn, Defendants.

Page 988

646 P.2d 988

103 Idaho 217, 1982-2 Trade Cases P 64,783

Ron POPE and Lynn Potthast, dba P & P Insulation & Siding, Grant Frederickson, dba Frederickson's Insulation Co.; Gene Hamilton, dba Hamilton Insulation & Roofing; Chris Clayville, dba Clayville Insulation; Bud Moore, dba Moore Insulation; and all other persons in the same class and like situations, Plaintiff-respondents, v.INTERMOUNTAIN GAS CO., an Idaho corporation, Defendant-appellant andR. D. Grimm, President; Robert B. Hodge, Vice-president; Walter Smith, Vice-president; Reed Penning, Vice-president; Virginia Smith, Vice-president; and William Glynn, Defendants.

Nos. 13173, 13436.

Supreme Court of Idaho.

May 21, 1982.

Rehearing Denied June 24, 1982.

R. B. Rock and Jeffrey A. Strother of Moffatt, Thomas, Barrett & Blanton, Boise, for defendant-appellant.

Lloyd J. Walker, of Walker & Spink, Twin Falls, for plaintiffs-respondents.

BAKES, Chief Justice.

I

Intermountain Gas Company appeals a judgment imposing treble damages against it for antitrust violations.In August, 1976, Intermountain Gas Company began selling and installing residential and commercial insulation.On October 1, 1976, Intermountain Gas created an internal non-utility division known as HomeGuard to operate the insulation business.HomeGuard first operated out of Boise, and in February, 1977, Twin Falls and Pocatello offices were established.However, there is also some evidence indicating that business was done in the Twin Falls and Pocatello areas prior to the establishment of separate offices.Competing insulators filed a class action against Intermountain Gas and its officers on January 19, 1977, alleging antitrust violations of I.C. §§ 48-101,¹ -102,² and seeking treble damages pursuant to I.C. § 48-114.³ Later at trial, plaintiffs' complaint was amended to include I.C. § 48-104⁴ as an additional basis for the action.The material allegation made by the plaintiffs against defendant in the complaint is as follows:

"The sales and installations of insulation have at times been below the cost of materials and labor to the corporate defendant....The corporate defendant's conduct in establishing sales in the private sector by a regulated utility at prices below which they could reasonably expect to yield a profit is designed to restrain trade or to attempt to restrain trade and to monopolize or to attempt to monopolize the sale and installation of insulation in the State of Idaho."

In addition, theories involving cornering the fiberglass insulation market and contracting to pay less than I.C.C. trucking rates for delivery of insulation were developed as the action progressed.Ninety-three potential class members were notified, of which forty-three eventually requested exclusion from the suit.⁵ Eleven of the insulators appeared and testified at trial.⁶

On June 1, 1977, Intermountain Gas transferred all of the equipment being used by HomeGuard to Intermountain Gas Company Properties (IGCP), a separate corporation and wholly owned subsidiary of Intermountain Gas, which thereafter assumed the operation of the insulation business under the HomeGuard name.Intermountain Gas financed IGCP's insulation business by transfers of cash and payment of bills.The boards of directors for both IGCP and Intermountain Gas were the same.The officers for IGCP were also officers of Intermountain Gas.In March, 1978, due to continuing losses claimed to be the result of high overhead, IGCP closed out the insulation business.

The trial was held during May, 1978.At the conclusion of plaintiffs' case in chief, plaintiffs were permitted to amend their complaint to join IGCP as a defendant in the action.⁷Following trial, the court found that Intermountain Gas was liable for antitrust violations.The court did not find any violations or liability on the part of IGCP or the individual defendants, and judgment was rendered solely against Intermountain Gas, and not against the individual defendants or IGCP.Pertinent findings of fact and conclusions of law by the court were as follows:

"HomeGuard operated in the same territory as did Intermountain.

"At times HomeGuard sold and installed insulation at prices below their cost of materials and labor and below the costs of individual competitors.

"Intermountain purchased fiberglass insulation from Owens Corning Glass Company in volume lots and then sold back to Owens Corning at a profit.This occurred at a time when the independent insulators herein were either unable to get insulation from Owens Corning or were on a sharply limited quota basis.

"Intermountain contracted with McBride Insulation Company, Heyburn, Idaho, for McBride to haul insulation from the West Coastat 6% above cost, plus McBride's estimated hauling costs-about 50% of I.C.C. freight rates."

"Intermountain used funds acquired through its sanctioned monopoly in an attempt to create a subsidiary monopoly in the insulation business.All of its acts in this respect were in violation of Sections 48-101and48-102, Idaho Code.

"Intermountain conspired with its HomeGuard subsidiary in violation of Sections 48-101and48-102, Idaho Code.

"Intermountain violated Section 48-104, Idaho Code, by selling at a loss, by cornering the output of Owens Corning, and by its contract with McBride Trucking."

Damages were calculated as follows.The gross sales from the insulation business operated both by Intermountain Gas and IGCP beginning in August, 1976, and ending in March, 1978, were found to be $1,333,316.69.Since the trial court found that the insulation business had been operated at an overall loss of 5.33% totaling $75,137.43 during the entire period, the gross sales figure was increased by that sum to yield what the court apparently concluded should have been a break-even gross sales figure-$1,408,454.12, and that figure in turn was increased by 15%, apparently to obtain a gross sales figure which the insulation business would have achieved had it operated at a profit level which the court felt was reasonable.The resulting adjusted gross sales figure was $1,619,722.24.The court concluded that this figure represented the amount of business which the other insulators had been deprived due to the activities of Intermountain Gas.The court then proceeded to allocate that $1,619,722.24 among the other insulators, apparently on the theory that by violating the antitrust laws the defendant had either forfeited its right to be in the insulation business, or that but for the antitrust violations the defendant would not have obtained any business.

The formula used by the trial court consisted of the court dividing the adjusted gross sales figure, $1,619,722.24, among four submarket pools, i.e., Boise, Nampa, Twin Falls and Pocatello, based upon estimates by those plaintiff insulators who testified as to the proportion of southern Idaho insulation business done in each of those geographical areas.For example, one or more witnesses estimated that the Twin Falls area insulators had about 30% of southern Idaho business.The Twin Falls pool was therefore established as 30% of $1,619,722.24, or $485,916.66.The court then determined the share of each submarket that the testifying plaintiffs⁸ claimed to have possessed and multiplied the submarket pool by that figure.Thus, it was found that the "Twin Falls plaintiffs" had 90% of the Twin Falls area business, ⁹ and "thus lost $437,324.99 of gross sales," i.e., 90% of $485,916.66 from the Twin Falls submarket pool.Again, apparently finding that 15% was a reasonable net profit, the court took 15% of each of the adjusted submarket pools to establish the net profit lost in each submarket by the plaintiffs.Those figures were then trebled pursuant to I.C. § 48-114.¹⁰Finally, the court concluded by stating that "(a)fter final judgment herein the plaintiffs may either by stipulation or separate proof obtain an allocation of specific amounts for each plaintiff from such pools."As mentioned, the judgment was rendered against Intermountain Gas Company only, and not against IGCP or the directors of the two corporations who were also named as defendants.

On appeal, Intermountain Gas asserts that neither the law nor the evidence supports a finding of liability under I.C. §§ 48-101, -102, or -104.¹¹In addition, appellant claims that the court's method of assessing damages is speculative and improper, and that there is also insufficient proof of damages under I.C. § 48-114 to permit a recovery by plaintiffs.Based on our review of the record, we conclude (1) that the evidence does not support the trial court's findings and conclusions as to the liability of Intermountain Gas for violation of the Idaho antitrust laws, and (2) that in any event there was insufficient proof of damages to support a judgment against Intermountain Gas.Consequently, the judgment of the trial court must be reversed.We will address the liability and damages issues separately.

IILIABILITY

A.Conspiracy :

The trial court found that "Intermountain conspired with its HomeGuard subsidiary in violation of sections 48-101and48-102, Idaho Code."¹²This finding is unsustainable for several reasons, not the least of which is its ambiguity.HomeGuard never was a subsidiary of Intermountain Gas.Rather, it was an internal division of Intermountain Gas.IGCP, on the other hand, was a subsidiary of Intermountain Gas, but was not known as HomeGuard.Instead, HomeGuard was likewise an internal division of IGCP following HomeGuard's transfer by Intermountain Gas on June 1, 1977.Thus, one is unable to determine from the court's finding whether Intermountain Gas was supposed to have conspired with its own internal division (HomeGuard prior to June 1, 1977), IGCP, or both.Such a serious ambiguity in an important finding would of itself require at least a remand for clarification.The problems with this conclusion, however, do not end there.

As a matter of law, no conspiracy...