U.S. v. Gaev, 93-1643

• Decision Date: 19 January 1994
• Docket Number: No. 93-1643,93-1643
• Parties: 1994-1 Trade Cases P 70,578 UNITED STATES of America v. Louis J. GAEV, Louis Gaev, Appellant. . Submitted Pursuant to Third Circuit LAR 34.1(a)
• Court: U.S. Court of Appeals — Third Circuit

Page 473

24 F.3d 473

1994-1 Trade Cases P 70,578

UNITED STATES of America v. Louis J. GAEV, Louis Gaev, Appellant.

No. 93-1643.

United States Court of Appeals, Third Circuit.

Submitted Pursuant to Third Circuit

LAR 34.1(a)

Jan. 19, 1994.

Decided April 29, 1994.

Sur Petition for Rehearing May 26, 1994.

Carl D. Poplar, Poplar & Eastlack, Turnersville, NJ, for appellant.

John J. Powers, III, Andrea Limmer, U.S. Dept. of Justice, Washington, DC, for appellee.

Before: SLOVITER, Chief Judge, SCIRICA and LEWIS, Circuit Judges.

OPINION OF THE COURT

SCIRICA, Circuit Judge.

Defendant Louis J. Gaev appeals his conviction for conspiring to fix prices in violation of the Sherman Anti-Trust Act, 15 U.S.C. Secs. 1-7 (1988). Although Gaev alleges numerous trial errors, we will discuss only one in detail, that the plea agreements of his co-conspirators were improperly admitted into evidence. We will affirm the judgment of conviction and sentence.

I.

On August 12, 1992, Louis J. Gaev was indicted for conspiring to fix prices of new steel drums offered for sale to customers in the eastern United States, in violation of Section 1 of the Sherman Act, 15 U.S.C. Sec. 1. ¹ The indictment charged that for a period of at least four years, generally from April, 1986 through March, 1990, Gaev, as Director of National Sales for the Russell-Stanley Corporation, together with co-conspirators, violated the Act by: discussing and agreeing to increase prices on new steel drums to individual customers and to coordinate timing of those price changes; participating in meetings and telephone conversations with co-conspirators to determine prices and terms of sales to individual customers; issuing price quotations in accordance with agreements reached; and concealing conspiratorial contacts through various means, including the use of aliases.

II.

Steel drums are large steel packing containers used to store or transport chemical and petroleum products. They come in different sizes and gauges, with different types of closures, with or without linings, particular finishes and surface designs or logos. A customer orders by designating a code number for a particular set of specifications, which helps suppliers to quote a price. Most customers prefer multiple suppliers over a single supplier to insure an uninterrupted supply, wider choice and more competitive pricing. Most order prices are negotiated, but some are open to competitive bidding.

Russell-Stanley Corporation ("Russell-Stanley"), Van Leer Containers, Inc. ("Van Leer"), and Mid Atlantic Container Corporation ("Mid Atlantic") were the three major suppliers of new 55 gallon steel drums in the eastern region of the United States between 1986 and 1990. During that time, each company announced price increases on steel drums twice a year. The price increases were announced within a few weeks of each other and all were similar or identical in amount and effective date.

Officers of two of the corporations testified at Gaev's trial that they had participated with him in a price-fixing conspiracy. They were Victor Bergwall, General Manager of Sales for Van Leer, William McEntee, President of Mid Atlantic, and Herbert Stickles, Executive Vice President of Mid Atlantic. Their testimony was corroborated by documentary evidence, including telephone records, expense reports, price announcements, and handwritten memoranda.

Victor Bergwall testified that he was unhappy with the price-cutting that prevailed in the industry in the mid-1980's. In 1986, Bergwall and Herbert Stickles discussed the volatility of the steel drum market and decided it would be better to compete on the basis of quality and service rather than price. The two men began calling each other to verify whether their mutual customers were telling the truth when they claimed to one of them that the other would give a better price on a particular drum. These conversations soon turned to discussions of future prices. Each time a general price increase was announced, Bergwall and Stickles discussed when to put Bergwall testified that, early in 1986, he commenced similar discussions with Gaev at Russell-Stanley. Bergwall knew he should not be talking to competitors about pricing, but he wanted to "stabilize the market" and believed that Russell-Stanley, who was the largest supplier, had to be part of the agreement. Bergwall and Gaev discussed customers and locations to which they supplied the same drums. These included their largest accounts. The purpose of these agreements was to stabilize prices and make a "reasonable margin of profit."

it into effect and how much of it to implement with specific customers.

Stickles testified that his discussions with Gaev and Bergwall began after Mid Atlantic's owner, Daniel Milikowsky, told him to call the other two companies for any information that his salesmen might need about prices and to "be receptive to their calls" as well. After Milikowsky told Stickles that "the channels [of communication] had been opened," Stickles called Gaev and Bergwall on a regular basis to ascertain the prices they quoted to mutual customers. After receiving a competitor's price for a particular drum, Mid Atlantic offered its drum at the same price or a slightly higher price (to avoid buyer suspicion). Stickles passed on similar information to Gaev. When Stickles was unavailable, Mid Atlantic's President, Bill McEntee, exchanged information with the others.

Every time there was a general announcement of a price increase, Bergwall and Stickles talked to Gaev and agreed on the amount and timing of increases for specific customers. When one called another for a price, it was understood that the caller could meet, but not undercut, the other's price. Thus, they understood that they would compete for the customers only on the basis of service and quality, not on the basis of price. Price levels "improved" in 1987 after these agreements were in place, and by mid-1988, Van Leer internal documents reported a "stable market with higher prices."

Bergwall estimated he made hundreds of calls to Gaev and Stickles to discuss their prices, primarily at the time of price increase announcements. He estimated he talked to Gaev and Stickles about 10 times a week normally and 20-30 times a week at the time the semi-annual price increases were announced. He testified Gaev was concerned that frequent calls between competitors might appear suspicious and suggested the conspirators use aliases when calling each other. In response, the others adopted aliases when calling Gaev. In addition to conferring by telephone, Bergwall and Stickles testified they occasionally met separately with Gaev to discuss important accounts, usually at the time of price increases. Mid Atlantic records corroborate that Gaev, Bergwall, Stickles and McEntee exchanged information not only on current prices but on future prices as well. Although Gaev did not testify at his trial, his attorney, in his opening statement, acknowledged there were phone calls and meetings during the four year period; but he claimed the parties only exchanged historical price information and verified current prices and did not set future prices.

At trial, the court allowed the government to introduce evidence of its plea agreements with Bergwall, Stickles and McEntee. When Bergwall's plea agreement was introduced, over counsel's objections, the trial judge gave the following limiting instruction: ²

[Y]ou have just heard evidence that this witness has pled guilty to a charge of conspiring to fix prices with the defendant now on trial in this case.

I caution you that although you may consider this evidence in assessing the credibility and testimony of this witness, giving it such weight as you feel it deserves, you may not consider this evidence against the defendant on trial, nor may any inference be drawn against him by reason of this witness' plea.

In his final charge to the jury, the judge reiterated and elaborated on that instruction:

I instruct you, as I previously instructed you after the conclusion of each of their The trial judge went on to give extensive and detailed instructions on how the jury should consider the testimony of accomplices and admitted felons who had entered into plea agreements with the government.

testimony or direct examination, that you are instructed that you are to draw no conclusions or inferences of any kind about the guilt of the defendant on trial from the facts that a prosecution witness pled guilty to similar charges. That witness' decision to plead guilty was a personal decision about his own guilt. It may not be used by you in any way as evidence against or unfavorable to the defendant on trial here.

III.

The trial court's decision to admit plea agreements of co-conspirators is an evidentiary ruling which we review for abuse of discretion. Government of the Virgin Islands v. Pinney, 967 F.2d 912, 914 (3d Cir.1992); United States v. Leo, 941 F.2d 181, 188 (3d Cir.1991).

It is well established that the plea agreements of co-conspirators cannot be used as evidence of a defendant's guilt. As we stated in United States v. Gambino, 926 F.2d 1355 (3d Cir.), cert. denied, --- U.S. ----, 112 S.Ct. 415, 116 L.Ed.2d 436 (1991):

There are strong considerations against using a co-conspirator's guilt as substantive evidence of another defendant's guilt. "The foundation of [this] policy is the right of every defendant to stand or fall with the proof of the charge made against him, not against somebody else.... The defendant ha[s] a right to have his guilt or innocence determined by the evidence presented against him, not by what has happened with regard to a criminal prosecution against someone else." Bisaccia v. Attorney General of New Jersey, 623 F.2d 307, 312 (3d Cir.) (quoting United States v. Toner, 173 F.2d 140, 142 (3d Cir.1949)), cert. denied, 449 U.S. 1042, 101 S.Ct. 622, 66 L.Ed.2d 504 (1980). In Bisaccia, a habeas corpus proceeding, we...