State of Tex. v. Allan Const. Co., Inc.

• Decision Date: 17 August 1988
• Docket Number: No. 87-1766,87-1766
• Citation: 851 F.2d 1526
• Parties: , 1988-2 Trade Cases 68,183 The STATE OF TEXAS, Plaintiff-Appellant, v. ALLAN CONSTRUCTION COMPANY, INC., et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1526

851 F.2d 1526

57 USLW 2161, 1988-2 Trade Cases 68,183

The STATE OF TEXAS, Plaintiff-Appellant, v. ALLAN CONSTRUCTION COMPANY, INC., et al., Defendants-Appellees.

No. 87-1766.

United States Court of Appeals Fifth Circuit.

Aug. 17, 1988.

Allene D. Evans, Asst. Atty. Gen., Jim Mattox, Atty. Gen., Austin, Tex., for plaintiff-appellant.

Paul J. Van Osselaer, Geoffrey Amsel, Judith Northcutt Osborne, Shapiro, Edens & Cook, Austin, Tex., for defendants-appellees.

Appeal from the United States District Court for the Western District of Texas.

Before BROWN, KING, and HIGGINBOTHAM, Circuit Judges.

PATRICK E. HIGGINBOTHAM, Circuit Judge:

In this antitrust action, the State of Texas alleges that the defendants participated in a scheme to rig the bidding on state highway construction projects. The district court granted summary judgment for defendants, finding that the action was barred by the statute of limitations. The court rejected the State's contention that the statute was tolled by fraudulent concealment, finding that the State's only evidence of concealment, certain acts undertaken at the time of the conspiracy and in its furtherance, could not be considered acts of concealment. Unpersuaded that the doctrine of fraudulent concealment is so limited, we reverse.

I

In October 1980, a federal grand jury in Austin, Texas, began to investigate allegations that construction companies had conspired for several years to fix the bid price for highway construction contracts. According to federal prosecutors, the companies involved in the scheme made secret agreements to inflate their bids and to restrict the number of bidders on each project. As part of the conspiracy, the companies falsely swore in affidavits submitted with each bid that they had taken no action "in restraint of free competitive bidding." The grand jury issued its first indictments in November 1981, naming twelve contracting firms and ten individuals as conspirators.

Although the criminal prosecution proceeded under federal antitrust and mail fraud statutes, State officials participated in the investigation from its inception. The grand jury heard testimony from officials in the State Highway Department, including Ted Ziller, an engineer responsible for supervising the bidding process. Ziller, along with engineer Bobbie Templeton, also assisted federal prosecutors in gathering information before the grand jury convened, meeting with government attorneys as early as August 1980. At the request of the United States, the Highway Department also provided records pertaining to the State's dealings with particular companies. However, the State Highway Department made no record of which companies were under investigation.

The grand jury proceedings were widely publicized in Texas. In particular, an article printed in the October 7, 1980, edition of the San Antonio Express News specifically noted that Allan Construction Company, along with approximately twenty other firms, had been subpoenaed to produce documents related to bidding activities. This article, like many others concerning the investigation, was circulated throughout the Highway Department.

The Texas Attorney General's office also was aware of the investigation even before the grand jury first met. In the summer of 1980, Assistant State Attorney General Katherine Bond spoke with federal prosecutors about the inquiry. Sometime in 1980 or early 1981, the Attorney General's office retained an economist to use bid statistics to identify which firms were involved in bid-rigging. This effort was unsuccessful, as were the State's requests that federal investigators disclose the identity of suspected contractors.

The grand jury never indicted Allan Construction Company or any of its employees. On April 6, 1982, however, the grand jury returned an indictment against Price Construction Company. Shortly thereafter, an attorney for one of Price's employees provided the State Attorney General's office with a list of those contractors the employee might identify as part of the conspiracy. Allan Construction Company was on that list.

The State had further evidence of Allan's possible involvement in May 1982, when Travis Jenkins, an employee of C.H. Allison Company, signed a sworn statement for the Attorney General's office. In the statement Jenkins said that an Allan employee had agreed on at least one occasion to refrain from bidding on a project as part of the ongoing scheme.

On November 5, 1985, the State filed suit in federal district court against Allan Construction Company and William Allan, Jr., its president during the alleged conspiracy. The complaint alleged that the defendants had violated federal antitrust laws by participating in a conspiracy to rig construction bids. The district court granted summary judgment for defendants on the basis of the statute of limitations. In doing so, the court rejected the State's contention that the statute of limitations had been tolled by the defendants' fraudulent concealment of illegal activity. According to the district court, the State failed to show "affirmative acts of concealment" other than those acts--such as the submission of false affidavits--done "in furtherance of the conspiracy." The court also concluded that the State failed to show that it had diligently pursued its claims against Allan. In particular, the court found that in light of the Highway Department's involvement in the federal investigation and the Express News article naming Allan as a potential suspect, no reasonable jury could conclude that the State did not have adequate inquiry notice of its claim as early as 1980.

II

The parties agree that in the absence of fraudulent concealment, the State's suit is time-barred. An antitrust action must be brought within four years from the date on which it accrues. ¹ In a conspiracy action, that period begins with an overt act done pursuant to the conspiracy. ² The last contract bid in which the State alleges wrongdoing was let on February 13, 1980, but the suit was not filed until November 5, 1985. In order to avoid the statute, then, the State must demonstrate that fraudulent concealment tolled the running of the limitations period until November 5, 1981, at the earliest.

As the district court correctly recognized, a plaintiff may invoke the fraudulent concealment doctrine only by proving two elements: first, "that the defendants concealed the conduct complained of, and second, that [the plaintiff] failed, despite the exercise of due diligence on his part, to discover the facts that form the basis of his claim." ³ The district court concluded that the State established neither element in this case. We deal with each element in turn.

A. Acts of Concealment

To prove the first element--that Allan "concealed the conduct complained of"--the State offered evidence that Allan conducted covert meetings, submitted affidavits that falsely denied any collusion, and submitted intentionally high complementary bids to make other inflated bids appear legitimate. If these acts do not suffice to toll the statute, the State argues, then the bid-rigging conspiracy was "inherently self-concealing," thus eliminating the requirement of specific acts of concealment. Because these aspects of the fraudulent concealment doctrine have occasioned confusion in federal courts, we review the cases in some detail.

1. Self-Concealing Conspiracy. As most courts have stated the test, the statute of limitations is tolled only if the defendant has engaged in "affirmative acts" of concealment. ⁴ As we have stated, "Concealment by defendant only by silence is not enough. [The defendant] must be guilty of some trick or contrivance tending to exclude suspicion and prevent inquiry." ⁵

However, several courts also have stated that if the underlying wrong is "self-concealing," the plaintiff need not show affirmative acts. For example, in a fraud case, Bailey v. Glover, ⁶ the Supreme Court wrote that

when there has been no negligence or laches on the part of a plaintiff in coming to the knowledge of the fraud which is the foundation of the suit, and when the fraud has been concealed, or is of such character as to conceal itself, the statute does not begin to run until the fraud is discovered by, or becomes known to, the party suing.... ⁷

This is consistent with the general rule that in a fraud case, the plaintiff need only aver the underlying fraud in order to toll the statute of limitations until such time as the plaintiff had some notice of the wrong; fraud is, by its very nature, self-concealing. ⁸ We recognized the distinction in Prather v. Neva Paperbacks, Inc., ⁹ a case in which the plaintiff sought to apply the fraudulent concealment doctrine to a copyright infringement action. We stated that "[the fraudulent concealment] doctrine, which is applicable to any cause of action, should not be confused with the doctrine applicable where the gist of the action itself is fraud, and the concealment is inherent in the fraud." ¹⁰

Other circuits have held that the "self-concealment" notion may extend to wrongs that are not based in fraud, but which contain an element of deception. In Hobson v. Wilson, ¹¹ the plaintiffs alleged that FBI agents had infringed on their first amendment rights by disseminating false information about the plaintiffs' political affiliations. The D.C. Circuit held that a wrong is "self-concealing" for the purpose of fraudulent concealment if "the deception, misrepresentation, trick or contrivance is a necessary step in carrying out the illegal act" rather than "separate from the illegal act and intended only to cover up the act." ¹² Because secrecy and deception were essential to the disinformation scheme alleged in Hobson, the court found that summary judgment for defendants on the statute of limitations issue was inappropriate.

A few examples illustrate the D.C. Circuit's "self-concealment" analysis. To steal an antique vase is not a...