Scranton Const. Co., Inc. v. Litton Industries Leas. Corp.

• Decision Date: 25 June 1974
• Docket Number: No. 73-1980.,73-1980.
• Citation: 494 F.2d 778
• Parties: SCRANTON CONSTRUCTION COMPANY, INC., and Clegg Concrete, Inc., Plaintiffs-Appellants, v. LITTON INDUSTRIES LEASING CORPORATION et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

494 F.2d 778 (1974)

SCRANTON CONSTRUCTION COMPANY, INC., and Clegg Concrete, Inc., Plaintiffs-Appellants, v. LITTON INDUSTRIES LEASING CORPORATION et al., Defendants-Appellees.

No. 73-1980.

United States Court of Appeals, Fifth Circuit.

May 31, 1974.

Rehearing and Rehearing Denied June 25, 1974.

Norman L. Breland, Boyce Holleman, Gulfport, Miss., for plaintiffs-appellants.

William T. Jones, John M. Grower, Jackson, Miss., for United Cement.

Charles E. Foster, Beverly Hills, Cal., Karl Wiesenburg, Pascagoula, Miss., Edward E. Vaill, Beverly Hills, Cal., for Litton Systems, Inc.

Before COLEMAN, CLARK and GEE, Circuit Judges.

Rehearing and Rehearing En Banc Denied June 25, 1974.

GEE, Circuit Judge:

Plaintiffs-appellants' federal antitrust suit, with joined state-law claims, was terminated by summary judgment. We affirm.

Plaintiffs are Mississippi and Louisiana corporations which sought, as joint venturers, the ready-mix concrete subcontract involved in the construction of a shipyard in Pascagoula, Mississippi.

In 1967, Defendant Litton Systems, Inc. (Litton), by its wholly owned subsidiary,¹ agreed with the State of Mississippi to build a large² shipyard at Pascagoula for the state. Litton hired Defendant Ralph M. Parsons, Inc. (Parsons), a Nevada corporation qualified in Mississippi, to be a sort of general construction superintendent³ at a fixed fee, but reserved to Litton the award and method of award of the ready-mix subcontract and all others of financial significance. Litton's contract with Mississippi and Parsons' contract with Litton both contained "Buy Mississippi" preference clauses.

In due course, Parsons solicited quotes for 300,000 yards of ready-mix concrete, specifically reserving the rights to reject any and all bids and to furnish to the winner cement, sand and aggregate at its discretion. The bid evaluation committee, composed of two Litton men and one from Parsons, found plaintiffs' bid lowest and best and recommended its acceptance. Litton, however, exercised its prerogative and required rebids by plaintiffs and the second lowest bidder, a venture composed of two Mississippi concerns. These produced a second low bid by plaintiffs and a second recommendation by the committee that plaintiffs receive the work. Litton, however, again rejected all bids and thickened the plot by introducing to it the third and last defendant, United Cement Company, Inc. (United).

United, the wholly owned Mississippi subsidiary of a Texas corporation, was the child of its General Manager Reese's dream of developing the vast Selma Chalk deposits in Northeast Mississippi for portland cement production. Reese had long coveted the subcontract in question and had supported the shipyard project and taken other appropriate measures with this in mind. Among his recommendations for the job was one of peculiar quality: he had earned Litton's gratitude by refusing to submit to a bid-rigging and kickback scheme operating among Litton's lower echelons and had courageously exposed it to top management and aided in its extirpation.⁴ Consistent with Mississippi preference, out of gratitude for Reese's commendable action, and pursuant to an understanding that Reese would be given a "fair shot" at the cement contract,⁵ Litton arranged a meeting between Reese and the two low bidders so that Reese could quote each "a special low price" for cement to enable him to reduce his bid on the ready-mix. This was, and was known to Reese and Litton beforehand to be, a farce: Reese merely quoted to each bidder the cement price⁶ which he had already stated in his last bid, having been warned by his counsel that to do otherwise would be to alter their competitive status and violate the antitrust laws. Litton had pressed Reese to "cross-reference" the prices, but Reese refused to do so, fearing suit. Plaintiffs assert that this rather curious procedure established United as a "sole supplier," and we so assume for summary judgment purposes. At any rate, after the Reese conference plaintiffs agreed to use only United's cement if awarded the contract, and the competitor agreed to use half of it.⁷

In the ensuing third round of bids, plaintiffs quoted $11.67 per cubic yard. But the next day Litton handed the competitor a slip of paper on which was written "$11.62." The competitor took this to be plaintiffs' bid, bid $11.61, and received the contract. A later, lower bid by plaintiffs was rejected by Litton, and this suit followed.

Discovery in the case has been extensive and exhaustive; and it, together with unrefuted affidavits, establishes further particular facts which we will notice at appropriate points. We note at the outset that we are not called upon to, and do not, consider or pass judgment on Litton's business ethics. Our concern is with other issues. Two defendants — Litton and United — remain actively before us, plaintiffs having dismissed Parsons and conceded that another, Litton Industries Leasing Corporation was erroneously sued.

Plaintiffs' Sherman Act and Clayton, Robinson-Patman Act claims against Litton and United proceed upon four actions and inferences of conspiracy based upon them: (1) the repeated rebidding required by Litton, (2) designation of United by Litton as the "sole source" of cement, (3) United's offer of different prices to the two competing bidders, and (4) the inducement of an artifically low bid from plaintiffs' competitor by causeing it to believe plaintiffs' bid was $11.62 when in fact it was $11.67. Before taking up the merits of these claims, we consider subject-matter jurisdiction.

Jurisdiction

The court below concluded, in its careful and wide-ranging opinion that it lacked jurisdiction under both the Clayton, Robinson-Patman Act and the Sherman Act. Bearing in mind the deservedly high mortality rate of summary dispositions of such litigation as this,⁸ and the disfavor with which such dispositions are viewed,⁹ we conclude that plaintiffs show arguable jurisdiction under the Sherman Act, stemming from the magnitude of the intrastate ready-mix sale and its close nexus to the construction of the shipyard, a massive instrumentality of interstate and foreign commerce — a showing sufficient, at any rate, to make us unwilling to dispose of those claims on jurisdictional grounds. As to Clayton, Robinson-Patman, however, plaintiffs clearly fall short.

They properly concede that their competitor's only sale of concrete here involved was entirely intrastate;¹⁰ though ingredients which had travelled interstate, such as cement, were involved, ". . . all the interstate ingredients were mixed together within the confines of Pascagoula, Mississippi, and delivered to Litton there." This is fatal. Littlejohn v. Shell Oil Co., 483 F.2d 1140 (5th Cir. 1973); Hiram Walker, Inc. v. A & S Tropical, Inc., 407 F.2d 4 (5th Cir. 1969), cert. denied, 396 U.S. 901, 90 S.Ct. 212, 24 L.Ed.2d 177 (1969). Nor does the interstate movement of mere ingredients suffice. Belliston v. Texaco, Inc., 455 F.2d 175 (10th Cir. 1972), cert. denied, 408 U.S. 928, 92 S.Ct. 2494, 33 L.Ed.2d 341 (1972). And though we recognize that the Supreme Court has granted certiorari in a second-line injury case where our Brethren of the Ninth Circuit have dispensed with the requirement of interstate sale on the ground that sales of a commodity to be used in constructing an instrumentality of interstate commerce were involved,¹¹ and that thus a new deliverance in this area may soon come, we are not disposed to depart from our recent decision, supported by well-nigh universal precedent, that interstate sales must be involved for jurisdiction to attach under these acts. Littlejohn v. Shell Oil Co., 483 F.2d 1140 (5th Cir. 1973); Cf. Mayer Paving & Asphalt Co. v. General Dynamics Corp., 486 F.2d 763 (7th Cir. 1973), cert. denied, 414 U.S. 1146, 94 S. Ct. 899, 39 L.Ed.2d 102 (1974). We therefore pretermit further discussion of the Clayton, Robinson-Patman Act claims.

The Sherman Act Claims

We have searched the record in vain for evidence supporting plaintiffs' allegations of a combination or conspiracy against them between Litton and anyone in the area of plaintiffs' claims. Proof of this is, of course, essential to plaintiffs' case under § 1 of the Sherman Act and to its conspiracy claims under § 2. First Nat'l Bank v. Cities Service Co., 391 U.S. 253, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968); Albrecht v. Herald Co., 390 U.S. 145, 88 S.Ct. 869, 19 L. Ed.2d 998 (1968); Crummer Co. v. Du Pont, 223 F.2d 238 (5th Cir. 1955), cert. denied, 350 U.S. 848, 76 S.Ct. 85, 100 L. Ed. 755 (1955). Facing defendants' sworn challenge to the existence of such a conspiracy, it was up to plaintiffs to produce significant probative evidence — by affidavit or deposition — demonstrating that a genuine issue of fact existed as to this element of the complaint, if summary judgment was to be avoided. First Nat'l Bank v. Cities Service Co., 391 U.S. 253, 289-290, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968). The evidence indicates conduct by Litton, albeit pursued in a roughshod way, consistent with its own business purposes,¹² not in concert with but rather at the expense of plaintiffs' competitor and at cross purposes with United.

Taking up in order the four Litton actions of which plaintiffs primarily complain,¹³ the repeated rebidding and terminal...