U.S. v. Gosselin World Wide Moving, N.V.

• Decision Date: 14 June 2005
• Docket Number: No. 04-4877.,No. 04-4876.,No. 04-4752.,04-4752.,04-4876.,04-4877.
• Citation: 411 F.3d 502
• Parties: UNITED STATES of America, Plaintiff-Appellant, v. GOSSELIN WORLD WIDE MOVING, N.V.; The Pasha Group, Defendants-Appellees. United States of America, Plaintiff-Appellee, v. Gosselin World Wide Moving, N.V., Defendant-Appellant, and The Pasha Group, Defendant. United States of America, Plaintiff-Appellee, v. The Pasha Group, Defendant-Appellant, and Gosselin World Wide Moving, N.V., Defendant.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 502

411 F.3d 502

UNITED STATES of America, Plaintiff-Appellant, v. GOSSELIN WORLD WIDE MOVING, N.V.; The Pasha Group, Defendants-Appellees.

United States of America, Plaintiff-Appellee, v. Gosselin World Wide Moving, N.V., Defendant-Appellant, and The Pasha Group, Defendant.

United States of America, Plaintiff-Appellee, v. The Pasha Group, Defendant-Appellant, and Gosselin World Wide Moving, N.V., Defendant.

No. 04-4752.

No. 04-4876.

No. 04-4877.

United States Court of Appeals, Fourth Circuit.

Argued March 18, 2005.

Decided June 14, 2005.

COPYRIGHT MATERIAL OMITTED

ARGUED:

John J. Powers, III, United States Department of Justice, Antitrust Division, Appellate Section, Washington,

D.C., for the United States. Charles Frederick Rule, Fried, Frank, Harris, Shriver & Jacobson, L.L.P., Washington, D.C., for Gosselin World Wide Moving, N.V., and The Pasha Group.

ON BRIEF:

R. Hewitt Pate, Assistant Attorney General, Makan Delrahim, Deputy Assistant Attorney General, James M. Griffin, Deputy Assistant Attorney General, Andrea Limmer, Hays Gorey, Jr., Mark W. Pletcher, Craig Y. Lee, United States Department of Justice, Antitrust Division, Appellate Section, Washington, D.C., for the United States. Henry W. Asbill, Cozen O'Connor, P.C., Washington, D.C.; C. Allen Foster, Joe R. Reeder, Shirley Z. Johnson, Greenberg Traurig, L.L.P., Washington, D.C., for Gosselin World Wide Moving, N.V. Anthony V. Nanni, Tommy P. Beaudreau, Michael J. Anstett, Franklin M. Rubinstein, Fried, Frank, Harris, Shriver & Jacobson, L.L.P., Washington, D.C., for The Pasha Group.

Before WILKINSON and GREGORY, Circuit Judges, and FREDERICK P. STAMP, JR., United States District Judge for the Northern District of West Virginia, sitting by designation.

Affirmed in part, reversed in part, and remanded for resentencing by published opinion. Judge WILKINSON wrote the opinion, in which Judge GREGORY and Judge STAMP joined.

OPINION

WILKINSON, Circuit Judge.

In this case, we must decide whether defendants are criminally liable for a scheme that raised the prices the Department of Defense ("DOD") pays to transport its personnel's belongings overseas. Defendants have admitted to orchestrating this scheme and have agreed to accept liability under the Sherman Act, 15 U.S.C. § 1 (2000), and the federal anti-fraud statute, 18 U.S.C. § 371 (2000), if we determine that their behavior is not immune from such liability under the Shipping Act, 46 U.S.C. app. §§ 1701-1719 (2000). We hold that the Shipping Act's immunity provisions afford defendants no relief from liability for the antitrust violation and conspiracy to defraud they have admitted. We therefore affirm in part, reverse in part, and remand for resentencing.

I.

A.

When personnel of the DOD are posted to foreign countries, the International Through Government Bill of Lading program ("ITGBL") covers their moving expenses. The DOD contracts with private companies to provide this service. Under the Military Traffic Management Command ("MTMC"), bids are solicited for "through rates" from U.S. freight forwarding companies. A through rate is a payment encompassing all the costs involved in a door-to-door move of DOD personnel's household effects. Bidding for through rates occurs biannually and involves a two step process.

In the first step, or "initial filing," the freight forwarders file a bid for a through rate associated with a particular route, or channel. The low bid that emerges is referred to as the "prime through rate." MTMC publishes this bid and the next four lowest bids. The company that bids the prime is entitled to a set percentage of DOD freight business for the associated channel.

In the second step, other freight forwarders resubmit bids in light of the published prime. The remaining companies may match, or "me-too," the prime for each channel, or they may bid a higher rate. When the channel at issue operates in a competitive market, a forwarder must typically me-too the prime to receive any DOD business. Forwarders that me-too the prime are also entitled to a set portion of DOD business for the cycle and channel for which they have bid.

Because through rates are unitary, they encompass many costs, all of which the U.S. forwarders become responsible for when the DOD accepts their bids. Some of these costs relate to moving services undertaken by other firms along the channel. Costs of this sort cover five general categories of service: the carriage of goods between inland U.S. cities and U.S. ports, services performed at U.S. ports, ocean transportation between U.S. and foreign ports, foreign port services, and carriage of goods between foreign ports and foreign inland points. U.S. freight forwarders must naturally consider these costs in setting their bids.

B.

Defendant Gosselin World Wide Moving N.V. ("Gosselin"), a Belgian corporation, and defendant The Pasha Group ("Pasha"), a U.S. corporation, operate in the channels between the United States and Germany. Both companies provide a package covering local German moving agent services, European port services, and ocean transport services in this market. Defendants thus deal with goods shipments between German points of origin (the households of DOD personnel abroad) and U.S. ports of destination. Gosselin and Pasha offer a "landed rate," which is a fee that covers all the moving costs involved in the portion of the channels they service.

Defendants also act as the exclusive agents of the International Shippers' Association ("ISA"), a conference of freight forwarders organized to negotiate collectively with shippers operating in the through transportation market. Many of the U.S. freight forwarders who place bids in the MTMC are also ISA members. In their capacity as ISA agents, Gosselin and Pasha negotiate service contracts with the Trans Atlantic American Flag Line Operators ("TAAFLO"), a group of U.S. ocean carriers. TAAFLO's service contract with the ISA entitles all ISA members to ocean transportation with TAAFLO member-carriers at a predetermined rate.

In late 2001, initial filings for the summer bidding cycle of 2002 occurred. A U.S. freight forwarder ("FF1") filed prime through rates with the MTMC for twenty-six of the channels between Germany and the U.S. FF1 did not use the landed rate offered by either defendant. Instead, by negotiating separately with each service provider at every step of the transportation chain, FF1 was able to undercut its competitors by three dollars per hundredweight in twelve of the twenty-six channels. In December 2001, DOD published FF1's prime bid along with the next four lowest. The remaining forwarders then had until January 12, 2002 to file their second round bids.

Gosselin was evidently alarmed that FF1 had been able to low-bid for the twelve channels without using Gosselin's landed rate. Later in December, Gosselin's managing director sent an email to another landed rate provider, inviting the provider to collude with Gosselin to prevent the me-too rates for the twelve routes at issue from converging to the prime. Such convergence was likely, as we have noted, because of the competitiveness of the US-Germany through transportation market. The Gosselin managing director observed that by "not taking [FF1's bid] into consideration we would increase the rate level with an average of [$3.63]." The director opined that "[t]his is the only thing that in my mind can happen." In a reply email sent the same day, an executive at the competitor concurred, noting that "if we do not react and give [the] industry a clear message which rate to base the [me-too bids] on, then everyone will use the low rate and later expect us to reduce our rates so those carriers can work under their [me-too] rates."

Shortly after this exchange, Gosselin's managing director forwarded the emails to the president of Pasha. The Gosselin executive identified the twelve channels, which had "quite some money on the table," and inquired "what rate levels would you be able to support if those [channels] would go to second level?" The director stressed that "it is important we [ ] move rather quickly now." Pasha later indicated its willingness to cooperate.

Defendants faced a difficult task in preventing the imminent me-too bids from converging to the prime. FF1 had already demonstrated that defendants' landed rates could be undercut by contracting separately for each transportation segment along the twelve channels. Defendants therefore had to take preemptive action to prevent the remaining U.S. forwarders from following FF1's lead. In early January 2002, the managing director of Gosselin agreed in writing to pay twelve of the largest German moving agents a specified fee. The German agents, for their part, agreed not to handle business from freight forwarders in those channels unless the forwarders submitted me-too bids at the second lowest level (the "second low") or above. Gosselin thereafter arranged a telefax to U.S. freight forwarders who were finalizing their second-step bids advising them of the German agents' undertaking.

Not content with securing their share of the DOD business designated for the second-round bids, defendants set about eliminating FF1's prime rate in the twelve channels at issue. First, they persuaded FF1 to cancel its bid with the MTMC if the remaining freight forwarders would file second-step bids at or above the second-low level. Defendants then secured such an agreement from the remaining forwarders. The forwarders overwhelmingly honored this agreement, and those who strayed below the second-low level were persuaded to withdraw their competitive bids.

As a result of defendants' scheme, a good deal of household goods shipments during the 2002 summer cycle in the twelve channels occurred at or above the second-low rate. The net financial effect of the conspiracy was to cause the DOD to pay substantially more than if FF1's original prime rate had prevailed.

C.

The Department of Justice ("DO...