State of Minnesota v. United States Steel Corporation

• Decision Date: 24 February 1971
• Docket Number: No. 20184.,20184.
• Citation: 438 F.2d 1380
• Parties: The STATE OF MINNESOTA et al., Appellees, v. UNITED STATES STEEL CORPORATION et al., Appellants.
• Court: U.S. Court of Appeals — Eighth Circuit

438 F.2d 1380 (1971)

The STATE OF MINNESOTA et al., Appellees, v. UNITED STATES STEEL CORPORATION et al., Appellants.

No. 20184.

United States Court of Appeals, Eighth Circuit.

February 24, 1971.

Robrt A. Albrecht, St. Paul, Minn., for appellants.

Eric R. Miller, Sp. Asst. Atty. Gen., St. Paul, Minn., for appellees.

Before VOGEL, Senior Circuit Judge, MEHAFFY and LAY, Circuit Judges.

LAY, Circuit Judge.

These civil antitrust actions come to us on interlocutory appeal under 28 U. S.C.A. § 1292(b). The suits arise out of an alleged conspiracy to fix prices in the sale of structural steel to plaintiff states for use in bridges on the interstate highway systems.¹ The cases were consolidated as class actions in the District of Minnesota.

In the course of pretrial discovery defendants served on all of the plaintiffs certain interrogatories pertaining to the role of the federal government and its financial involvement with the various states under the Federal-Aid Highway Act, 23 U.S.C.A. ch. 1, by which the federal government assumes up to 90% of highway construction costs. The defendants seek to ascertain the amount of funds made available to the states by the federal government in the construction projects in which structural steel was used.² The plaintiffs objected to the interrogatory on the ground that the information sought is irrelevant and not reasonably calculated to lead to the discovery of admissible evidence. The district court phrased the issue to be "whether the dollar amount of reimbursement by the federal or state government ultimately may be introduced into evidence so as to diminish any recovery" by the plaintiffs. In the leading Supreme Court decision of Hanover Shoe, Inc. v. United Shoe Mach. Corp., 392 U.S. 481, 88 S.Ct. 2224, 20 L. Ed.2d 1231 (1968), this has been characterized as the "passing-on" defense.³

In a scholarly opinion found at 299 F. Supp. 596 (D.Minn.1969), the district court held that the interrogatory requires information that is not relevant as a matter of law and sustained the objection. The court held that the passing-on defense must be rejected and that any grant-in-aid received by plaintiffs is immaterial to their claims under the antitrust laws. The defendants then moved for a partial summary judgment and for the issuance of a certificate under 28 U.S.C.A. § 1292(b) for an interlocutory appeal. The district court granted the certificate and overruled the motion for a partial summary judgment. Upon the basis of the trial court's certificate and the preliminary information presented in the petition to this court, we permitted the interlocutory appeal on both the denial of a partial summary judgment and the ruling on the interrogatory.

The motion for partial summary judgment relates only to the case brought by the State of Minnesota. The legislature of Minnesota has established a state grant-in-aid program to assist counties in highway construction. This program is similar in operation to the federal assistance program. Minn.Stat.Ann. §§ 162.01-162.08. In view of the trial court's rejection of the passing-on defense, defendants sought by the motion to eliminate from Minnesota's statement of damages those amounts paid by the state toward the cost of construction of highway bridges by the counties, where the counties have not joined the class as parties plaintiff.⁴ The district court denied the motion on the ground that to the extent the state advanced funds to the counties it was injured in its business or property. The defendant steel producers argue that the two rulings of the district court are logically inconsistent, i. e. if legal damage is to be considered only as it applies to the party originally injured, the state should not be allowed to claim a damage originally suffered by the counties. In reply the State of Minnesota argues that the state has a vital interest in constructing a state highway system and that as political subdivisions of the state the counties are its agents. As this question deals with the substantive rights and relations of the parties, we reserve ruling on the district court's denial of the pretrial partial summary judgment. After an extensive review of the present record and the applicable law, however, we reverse the ruling of the trial court in sustaining objection to Interrogatory No. 6 on the limited basis that it may ultimately lead to or in fact may itself constitute relevant evidence.

Both sides have presented excellent briefs on the issues involved. The district court has succinctly summarized the existing case law in a thorough opinion. An equally thorough analysis of the passing-on defense has recently been discussed by Chief Judge Lord in Philadelphia Housing Authority v. American Radiator & Standard Sanitary Corp., 50 F.R.D. 13 (E.D.Pa.1970). On interlocutory appeal the parties say that the determination of whether the passing-on defense is available in the present context is a question of law. This may ultimately be true, but the difficulty we encounter at this stage of the proceedings is that the evidentiary facts as to what specific damage is alleged to be passed-on is highly probative to that legal resolution. It is generally alleged that the damage involved is the illegally high price for the steel charged by the steel companies. The present record does not demonstrate, however, the extent to which the allegedly illegal prices were passed-on to the claimant states. The record reveals only that the steel companies dealt with and acted as suppliers for contractors, who entered into public bidding to construct the bridges and highways for the various states. The amicus brief filed by the State of California asserts that the contracts between the states and contractors were "economically similar" to a "cost-plus" contract. The argument is there made that "it is common knowledge that general contractors make bids to contracting agencies on the basis of the cost of materials plus a labor and profit margin figure." The stipulated facts for appeal, however, reveal a markedly different evidentiary approach. This stipulation reflects:

"After the project has been approved by the federal government, the State of Minnesota, as project owner and through its highway department, invites the submission of bids by general contractors for furnishing all of the numerous materials and performing all of the labor necessary for the construction of the entire project and subsequently awards a lump sum general construction contract to a specific general contractor. It is important to note that the general construction contract is not awarded on a cost plus basis.

"After the State of Minnesota has awarded the general construction contract for the project, the successful general contractor awards numerous materials contracts and subcontracts to material suppliers and subcontractors covering various items of material and labor necessary for the construction of the project. Specifically, the successful general contractor will award either a materials contract covering the furnishing of structural steel or a subcontract covering the furnishing and erection of structural steel to one of the many structural steel fabricators competing in the Minnesota market." (Emphasis in original.)

The evidentiary details concerning the supply contracts between the steel companies and the contractors and the corresponding construction contracts between the states and the contractors are not in the present record. The extent to which the contractors passed-on any illegal prices to the claimant states is not disclosed. The issues presented here depend on the initial determination as to whether, in light of the principles of Hanover, supra, and the earlier cases which preceded it,⁵ the damage item could have been asserted only by the contractors or was in fact passed-on by them to the respective states.⁶ Decision of the basic questions presented would require us to proceed on the assumption of fact that the damage asserted was passed-on to the states, whereas the stipulated facts for appeal make resolution of that matter equivocal at best.⁷ On the surface the issue as to whether the states have passed-on the illegal price to the federal government may seem severable, but on close analysis we deem it so interrelated with the issue as to whether the contractors passed-on the damages to the states that we feel the one should not be answered without the other.

Even within a complete factual record the legal issues involved are not simply resolved. The basic problem is overlapped by the considerations of the law of standing, conceivably real party in interest questions,⁸ the collateral source doctrine,⁹ issues concerning treble as opposed to single damages,¹⁰ causation, the relationship of the state and federal governments under the provisions of the highway grant-in-aid program, as well as a proper interpretation of Hanover. We feel that judicial resolution of these complex issues must await the...