United States v. American Soc. of Civil Engineers

• Decision Date: 04 August 1977
• Docket Number: No. 72 Civ. 1776 (JMC).,72 Civ. 1776 (JMC).
• Citation: 446 F. Supp. 803
• Parties: UNITED STATES of America, Plaintiff, v. AMERICAN SOCIETY OF CIVIL ENGINEERS, Defendant.
• Court: U.S. District Court — Southern District of New York

446 F. Supp. 803

UNITED STATES of America, Plaintiff, v. AMERICAN SOCIETY OF CIVIL ENGINEERS, Defendant.

No. 72 Civ. 1776 (JMC).

United States District Court, S. D. New York.

August 4, 1977.

Thomas E. Kauper, Asst. Atty. Gen., U.S. Dept. of Justice, Antitrust Div. and Bernard M. Hollander, Chief, Judgment Enforcement Section, Washington, D.C., for plaintiff United States Government; Stephen F. Sonnett, Kenneth L. Jost, Ruth Dicker, Washington, D.C., of counsel.

Cleary, Gottlieb, Steen & Hamilton, Washington, D.C., for defendant American Society of Civil Engineers; Fred D. Turnage, Kenneth L. Bachman, Jr., John S. Magney, Washington, D.C., of counsel.

OPINION AND ORDER

CANNELLA, District Judge:

The Government's motion for an order adjudging defendant, the American Society of Civil Engineers "ASCE" or "Society", in contempt of a consent decree entered on June 1, 1972, is hereby granted.

FACTS

On May 1, 1972 the United States filed suit against the American Society of Civil Engineers alleging that Section 1 of the Sherman Act, 15 U.S.C. § 1, had been violated and requesting that ASCE be enjoined from enforcing any provision of its Code of Ethics that had as its purpose or effect the restriction of price competition among Society members. On the same day the parties executed a stipulation settling the litigation. Pursuant to this stipulation and a consent judgment entered into thereunder, the Society was, inter alia,

enjoined and restrained from adopting any plan, program or course of action which prohibits members of the defendant from at any time submitting price quotations for engineering services.

On February 7, 1975 Franklin Y.K. Sunn, president of Metcalf & Eddy Limited "M&E" and George K. Tozer, vice president of M&E, were found guilty of violating Article 3 of the ASCE Code of Ethics and suspended from the Society for periods of three and two years, respectively. Article 3 of the Code provides that

it shall be considered unprofessional and inconsistent with honorable and dignified conduct and contrary to the public interest for any member . . . :

To attempt to supplant another engineer in a particular engagement after definite steps have been taken toward his employment.

Also implicated was paragraph 1 of Article 3 of the Society's Guide to Professional Practice Under the Code of Ethics, which states that

a member shall not continue to seek employment on a specific engagement after being advised that another engineer has been selected subject to approval of detailed arrangements.

The Government contends that Messrs. Sunn and Tozer were disciplined under these "attempt to supplant" provisions for doing nothing more than submitting price quotations, an activity that is protected under the May 1, 1972 agreement and subsequent judgment. The Society defends its actions and argues that the submission of price quotations by Sunn and Tozer constitutes an "attempt to supplant," an independent violation of the Code of Ethics that is punishable notwithstanding the 1972 consent decree.

This being the posture of the case, an examination of the events that gave rise to the disciplinary proceedings is in order. The following chronology is reconstructed from the proceedings before the ASCE Board of Direction¹ and other documents before the Court.

On December 26, 1972 the Board of Directors of the Metropolitan Water Works Authority of Bangkok, Thailand "MWWA" or "Authority" established a committee and authorized it to begin negotiations with a joint venture composed of Black & Veatch International Ltd. "BVI" and Camp Dresser & McKee Ltd. "CDM", two engineering firms, regarding supervision of a proposed water works construction project. The joint venture was called BVI-CDM Associates "BVI-CDM". Formal negotiations began on February 7, 1973 and a tentative accord was reached on July 11, 1973. On July 19 the MWWA Board of Directors empowered the Authority to engage BVI-CDM as the engineering concern for supervision of the construction project and to issue a letter of intent to that effect.²

After formal negotiations with BVI-CDM had commenced, but before the joint venture was actually hired by the Authority, Metcalf & Eddy received a telegram from an engineering consulting firm known as Thai Engineering Consultants Co., Ltd. "TEC" advising M&E of an available "water supply construction supervision contract" in Bangkok, Thailand and inquiring if it was interested.³ Sunn immediately wired back, expressing M&E's enthusiasm.⁴ As a consequence, TEC tendered its projection of the maximum man-months required for the project and requested that M&E submit an estimate of the man/month cost per job classification. After receiving still another Telex apparently designed to further whet its appetite and encourage a streamlined cost estimate,⁵ M&E answered TEC's inquiry with the sought-after information.

Armed with this data, TEC approached General Charusathira Prapass, Thailand's Minister of the Interior and Chairman of the Board of the MWWA, with a suggestion that a joint venture between TEC and either Metcalf & Eddy or another engineering firm could be substituted for BVI-CDM on the water works project at a substantial savings.⁶ On July 23, 1973 TEC sent a similar, albeit more detailed, letter to General Prapass. In essence, this letter indicated that TEC and one of two named engineering consultants (one being Metcalf & Eddy) could provide the required supervisory services with no loss of expertise and little loss of time at a greatly reduced cost. The next day, apparently because of TEC's intervention, Prapass instructed the MWWA to study BVI-CDM's proposed fee in comparison with that of "a local firm." On July 25 the MWWA requested that TEC get confirmation from M&E that it would participate in a joint venture with TEC on the water works project and that it would do so for the previously quoted fee. TEC forwarded this request to M&E, on whose behalf Tozer responded, confirming both the cost estimate and M&E's enthusiasm about the project.

On September 12, 1973, as a result of the comparison between BVI-CDM's proposed fee and the figures submitted by TEC, the MWWA decided to reject the BVI-CDM proposal because "the fees quoted far exceed reasonable estimates for such services,"⁷ and solicit one from TEC and M&E. BVI-CDM was notified of this decision by letter dated September 20, 1973; a letter dated September 21, 1973 so informed M&E. Negotiations ensued and on December 24, 1973 the joint venture composed of TEC and M&E was formally selected for design review and construction supervision of the water works project. On February 11, 1974 MWWA issued a letter of intent authorizing M&E and TEC to proceed.

Based upon the above events, both Sunn and Tozer were charged with and found guilty of violation of the ASCE Code of Ethics because they

approved joining with the firm of Thai Engineering Consultants Co., Ltd., in submitting a proposal for engineering work to the Metropolitan Water Works Authority (MWWA), Bangkok, Thailand, with the knowledge and understanding that negotiations between MWWA and the Joint Venture of Black & Veatch International Ltd. — Camp Dresser & McKee, Inc. (BVI-CDM) were in progress.

DISCUSSION

Civil Contempt Standard

Civil contempt is established when it is proved by clear and convincing evidence⁸ that there is a lawful order and that such order was violated. United States v. Greyhound Corp., 363 F.Supp. 525, 570 (N.D.Ill. 1973). Wilfulness need not be shown. McComb v. Jacksonville Paper Co., 336 U.S. 187, 191, 69 S.Ct. 497, 93 L.Ed. 599 (1949); United States v. Greyhound Corp., supra. The existence of a lawful order is not contested by the defendant.⁹ Thus, the only issue for the Court's adjudication is whether defendant's actions violated the consent decree.

Violation of the Order

In very simple terms, Section III of the consent judgment enjoins the defendant "from adopting any plan, program or course of action which prohibits members of the defendant from at any time submitting price quotations for engineering services." (emphasis added).

At the threshold, defendant argues that neither Sunn nor Tozer were disciplined for submitting price quotations, but rather for an independent ethical code violation, an attempt to supplant. Referring to a provision of the code of ethics of the American Institute of Certified Public Accountants,¹⁰ ASCE argues that otherwise unethical conduct remains subject to disciplinary sanctions "regardless of whether or not such unethical conduct is preceded by, associated with, or followed by a submission of price quotations. . . ." Although the Court agrees with this proposition, it has no application where, as here, no otherwise unethical conduct was preceded by, associated with or followed by the submission of price quotations. Sunn and Tozer did no more than submit a price quotation, M&E's estimated charge for a job requiring a particular number of man/months.¹¹

The fee quoted by Metcalf & Eddy in the June 12 Telex was merely a response to an inquiry regarding the cost of a project on which certain employees of M&E would be required to devote a specified amount of time. M&E had no information regarding the magnitude of the job or the amount of work involved. The July 26, 1973 letter from Tozer to Prakob Dej Udom¹² essentially confirmed the cost estimate and reiterated M&E's position that it would not become further involved until the MWWA broke off negotiations with BVI-CDM.

Likewise, the two letters sent by TEC to General Prapass merely stated that TEC, together with a qualified foreign consultant (to wit, M&E), could supervise the water works project as well as BVI-CDM, but at a substantial savings. This was in essence the submission of a price quotation. Thus, it cannot be maintained that Sunn and Tozer were suspended for doing anything more than supplying price information for engineering services.¹³

ASCE also maintains that the 1972 consent decree...