X.L.O. Concrete Corp. v. Rivergate Corp.

• Decision Date: 24 March 1994
• Parties: , 634 N.E.2d 158, 1994-1 Trade Cases P 70,546 X.L.O. CONCRETE CORP., Respondent, v. RIVERGATE CORPORATION, Appellant.
• Court: New York Court of Appeals Court of Appeals

Page 786

611 N.Y.S.2d 786

83 N.Y.2d 513, 634 N.E.2d 158, 1994-1

Trade Cases P 70,546

X.L.O. CONCRETE CORP., Respondent, v. RIVERGATE CORPORATION, Appellant.

Court of Appeals of New York.

March 24, 1994.

[83 N.Y.2d 514] [634 N.E.2d 159] Bragar & Wexler, P.C., New York City (Raymond A. Bragar, Paul D. Wexler and Beth A. Willensky, of counsel), for appellant.

Lester Gulitz, Peekskill, for respondent.

[83 N.Y.2d 515] G. Oliver Koppell, Atty. Gen., New York City (George Sampson, Jerry Boone, Robert Hubbard and Joseph Opper, of counsel), pro se, amicus curiae.

OPINION OF THE COURT

CIPARICK, Judge.

The question presented in this action for breach of contract, account stated, and unjust enrichment is whether interposition of an antitrust illegality defense under the Donnelly Act (General Business Law § 340 et seq.) prevents enforcement of the contract between these parties as a matter of law. We conclude that material questions of fact exist which preclude granting summary judgment on defendant's antitrust defense and thus affirm the Appellate Division order which reinstated plaintiff's complaint.

I

The parties, plaintiff X.L.O. Concrete Corp., as subcontractor, and defendant Rivergate Corporation, as general contractor, entered into a written contract on May 12, 1983 for construction of the concrete superstructure and fills of a project located in Manhattan. Plaintiff fully performed its obligations under the contract and sought payment of $844,125.07, the balance due and owing. Defendant refused to pay on the ground that the contract was an integral feature of an extortion and labor bribery operation known as the "Club".

The "Club" was an arrangement between the "Commission" of La Cosa Nostra, a ruling body comprised of four of the five New York City organized crime family bosses, and seven concrete construction companies operating in New York City, and the District Council of Cement and Concrete Workers, Laborers International Union of North America (see, United States v. Salerno, 868 F.2d 524, 528-529, cert. denied 493 U.S. 811, 110 S.Ct. 56, 107 L.Ed.2d 24 [describing the Club and its workings in fuller detail]. The Commission decided which concrete companies would be permitted to undertake construction jobs in New York City worth more than $2 million dollars; contractors who took jobs over $2 million were required to pay the Commission 2% of the contract price for guaranteed "labor peace". The Commission not only approved which companies got which jobs, but also rigged the bidding to ensure that the designated company would submit the lowest bid. The Commission enforced compliance through threatened or actual labor unrest or violence. In May 1981, plaintiff became the last concrete contractor doing business in New York City to join the Club.

The Rivergate project was allocated to plaintiff by the Commission on the assumption that it would not exceed $15 million. Plaintiff's principal, James Costigan, paid the 2% "labor peace" fee to Ralph Scopo, the Commission's representative and the business manager and president of the District Council of Cement and Concrete Workers. Plaintiff then negotiated the terms of the contract with defendant. The parties agreed on a figure of $16,300,000 (later adjusted to $16,544,125.07).

The contract price exceeded the amount approved by the Commission, and Scopo, acting on behalf of the Commission, approached Costigan and requested that his company abandon the project. Costigan refused, arguing that the Commission had not allocated his company any work in over 18 months. Scopo carried Costigan's message back to the Commission and the Commission decided to permit plaintiff to work on the project. Costigan subsequently gave Scopo a $50,000 "gift" for speaking favorably on plaintiff's behalf to the Commission.

The record indicates that defendant negotiated the contract with full knowledge of the Club and its rules. Plaintiff completed the work agreed upon under the contract and, upon defendant's refusal to pay, commenced this action.

Defendant interposed in its answer a "third affirmative defense and first counterclaim" urging dismissal of the complaint on the ground that the contract was an integral element of an antitrust conspiracy in violation of the Donnelly Act. Defendant's "fourth affirmative defense and second counterclaim" sought recovery of monetary damages for injuries sustained allegedly as the result of plaintiff's violations of the Sherman Antitrust Act (15 U.S.C. § 1). A third counterclaim sought attorney's fees and costs under the contract.

Plaintiff moved for summary judgment dismissing defendant's first and second counterclaims on the ground that they were time-barred, and defendant cross-moved for partial summary judgment dismissing the complaint. Supreme Court granted defendant's motion for summary judgment dismissing the complaint, and additionally dismissed defendants' first two counterclaims as time-barred and the third counterclaim on the ground that the contract was void. The Appellate Division modified the order and judgment of Supreme Court to the extent of reinstating plaintiff's complaint, 190 A.D.2d 113, 597 N.Y.S.2d 302. The Appellate Division also reinstated defendant's counterclaims "to the extent of the demand in the complaint", and as so modified, affirmed. This Court now affirms.

II

Defendant's main contention on this appeal is that the contract at issue is so integrally related to an antitrust conspiracy in violation of the Donnelly Act that it is void and unenforceable as a matter of law. We reject this contention, concluding that outstanding material issues of fact exist.

The interposition of antitrust defenses in contract actions is not favored (see, Kelly v. Kosuga, 358 U.S. 516, 518, 79 S.Ct. 429, 430-431, 3 L.Ed.2d 475). The concern is that "successful interposition of antitrust defenses is too likely to enrich parties who reap the benefits of a contract and then seek to avoid the corresponding burdens" (Viacom Intl. v. Tandem Prods., 526 F.2d 593, 599). Nevertheless, antitrust defenses will be upheld in cases where a court's judgment would result in enforcement of the "precise conduct made unlawful by the Act" (Kelly v. Kosuga, 358 U.S. 516, 520, 79 S.Ct. 429, 432, supra; see, Kaiser Steel Corp. v. Mullins, 455 U.S. 72, 79, 102 S.Ct. 851, 857, 70 L.Ed.2d 833). Beyond that point, however, "courts are to be guided by the overriding general policy * * * 'of preventing people from getting other people's property for nothing when they purport to be buying it' " (Kelly, 358 U.S., at 520-521, 79 S.Ct., at 432, supra [quoting Continental Wall Paper Co. v. Voight & Sons Co., 212 U.S. 227, 271, 29 S.Ct. 280, 296, 53 L.Ed. 486] [Holmes, J., dissenting]. Thus, a contract which is legal on its face and does not call for unlawful conduct in its performance is not voidable simply because it resulted from an antitrust conspiracy (see, Kelly, 358 U.S., at 521, 79 S.Ct., at 432, supra; Connolly v. Union Sewer Pipe Co., 184 U.S. 540, 547-550, 22 S.Ct. 431, 434-436, 46 L.Ed. 679; Viacom, 526 F.2d at 598, supra; but see, Continental Wall Paper, 212 U.S. 227, 29 S.Ct. 280, supra).

This Court has held that the Donnelly Act, having been modelled on the Federal Sherman Act of 1890, " 'should generally be construed in light of Federal precedent and given a different interpretation only where State policy, differences in the statutory language or the legislative history justify such a result' " (see,...