STATE Ex Rel. COOPER v. McCLURE

State ex rel. Cooper v. McClure, 2007 NCBC 24

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE

SUPERIOR COURT DIVISION

COUNTY OF WAKE 03 CVS 5617

State of North Carolina, ex rel. Roy )

Cooper, Attorney General, and North )

Carolina Department of Environment )

and Natural Resources, )

)

Plaintiffs, )

)

)

v. )

)

)

Darin M. McClure, Thomas A. Proctor, )

Mid-Atlantic Associates, P.A., )

Catherine A. Ross, CBM Environmental )

ORDER ON PLAINTIFFS’ MOTION FOR

Services, Inc., Keith A. Anthony, Shield )

SUMMARY JUDGMENT AND JUDGMENT

Engineering, Inc., William A. Quarles, )

Matthew R. Einsmann, S&ME, Inc., )

Michael D. Shaw, SEI Environmental, )

Inc., )

the North Carolina Environmental )

Service Providers Association, d/b/a )

NCESPA, James H. Hays, )

Environmental Conservation )

Laboratories, Inc., d/b/a ENCO, Peter I. )

Byer, South Atlantic Environmental )

Drilling and Construction Company, )

Inc., d/b/a SAEDACCO, John A. Hill,

Almes & Associates, Inc., and John Does

1 through 100,

Defendants.

{1} This case arises out of Plaintiffs’ claim that Defendants engaged in illegal

business practices in their efforts to influence prices paid under state contracts for

environmental services. This matter comes before the Court on Plaintiffs’ Motion

for Summary Judgment.

{2} After considering the briefs and oral arguments, the Court GRANTS

Plaintiffs’ Motion for Summary Judgment on the grounds that Defendants

participated in a conspiracy in restraint of trade. Plaintiffs may recover damages in

the amount of $350,434.74 from Defendants.

Office of the Attorney General by K.D. Sturgis and Kimberly W. Duffley for

Plaintiffs State of North Carolina, ex rel. Roy Cooper, Attorney General, and

North Carolina Department of Environment and Natural Resources.

Richard H. Tomberlin for Defendants CBM Environmental Services, Inc. and

Catherine Ross Bateman.

Tennille, Judge.

I.

PROCEDURAL BACKGROUND

{1} This action was filed in Wake County Superior Court on April 28, 2003.

The case was designated “exceptional” under Rule 2.1 of the General Rules of

Practice for the Superior and District Courts and assigned to the undersigned

Special Superior Court Judge for Complex Business Cases by order of the Chief

Justice of the Supreme Court of North Carolina dated August 11, 2003.

{2} The Complaint named the following organizations as defendants: North

Carolina Environmental Service Providers Association (“NCESPA”); Mid-Atlantic

Associates, P.A. (“Mid-Atlantic”); CBM Environmental Services, Inc. (“CBM”);

Shield Engineering, Inc. (“Shield”); S&ME, Inc. (“S&ME”); SEI Environmental, Inc.

(“SEI”); Environmental Conservation Laboratories (“ENCO”); South Atlantic

Environmental Drilling and Construction Company (“SAEDACCO”); and Almes &

Associates, Inc. (“Almes”).

{3} The Complaint named the following individuals as defendants: Darin M.

McClure, president and co-owner of Mid-Atlantic and president of NCESPA;

Thomas A. Proctor, vice president and co-owner of Mid-Atlantic; Catherine A. Ross1 ,

chief executive officer of CBM and vice president and director of NCESPA; Keith A.

Anthony, vice president of Shield and director of NCESPA; William A. Quarles,

assessment and remediation services manager at S&ME and director of NCESPA;

Matthew R. Einsman, environmental engineering manager at S&ME and director of

NCESPA; Michael D. Shaw, senior geologist at SEI and director of NCESPA; James

H. Hays, employee of ENCO and treasurer and director of NCESPA; Peter I. Byer,

president of SAEDACCO and director of NCESPA; and John A. Hill, employee of

Almes and director of NCESPA.

{4} NCESPA, Mid-Atlantic, S&ME, Shield, SEI, ENCO, SAEDACCO, Almes,

McClure, Proctor, Anthony, Quarles, Einsmann, Shaw, Hays, Byer, and Hill all

later entered into consent judgments and dismissals with Plaintiffs. Those

Defendants paid a total of $735,000 to settle the claims against them. Bateman and

CBM are the only remaining Defendants.

{5} In 2004, Bateman and CBM brought motions to dismiss under Rule

12(b)(6) of the North Carolina Rules of Civil Procedure. The Court granted the

motions in part and denied them in part. See State ex rel. Cooper v. McClure

(McClure I), 2004 NCBC 8 ¶ 79 (N.C. Super. Ct. Dec. 14, 2004),

http://www.ncbusinesscourt.net/opinions/2004%20NCBC%208.htm. Plaintiffs

subsequently filed a motion for reconsideration of three rulings in the Court’s

December 14, 2004 Order and Opinion, including (1) the dismissal of Plaintiffs’

claims under section 75-1.1 of the General Statutes of North Carolina; (2) the

dismissal of Plaintiffs’ damages claims against Defendant Bateman on the basis of

nonprofit immunity under section 55A-8-60(a) of the General Statutes for her role

as an officer and director of NCESPA and (3) the dismissal of all damages claims

against Bateman and CBM under section 133-28 of the General Statutes. The

Court denied the motion for reconsideration of the dismissal of all unfair and

1 When the complaint was filed in this action, Defendant Bateman was known as Catherine A. Ross.

She married during the course of the litigation and is now known as Catherine Ross Bateman and

will be referred to as “Bateman” throughout the remainder of this Order.

deceptive trade practices claims, denied the motion for reconsideration of the

dismissal of Bateman under section 55A-8-60(a), and granted the motion for

reconsideration of the dismissal of all claims for damages against Bateman and

CBM based on section 133-28. State ex rel. Cooper v. McClure (McClure II), 2005

NCBC 6 (N.C. Super. Ct. Oct. 28, 2005),

http://www.ncbusinesscourt.net/opinions/2005%20NCBC%206.htm. Following the

Court’s ruling on the motion for reconsideration, discovery proceeded on the section

133-28 claims. Plaintiffs filed a motion for summary judgment on November 13,

2006. The Court heard oral arguments on the motion on January 26, 2007. The

only issues presently before the Court are those related to the section 133-28 claims

for damages against Bateman and CBM.

II.

FACTUAL BACKGROUND

A.

THE PARTIES

{6} Plaintiff Roy Cooper is the duly elected Attorney General of North

Carolina.

{7} Plaintiff North Carolina Department of Environmental and Natural

Resources (“DENR”) administers various programs under North Carolina law to

prevent and cure damage to the environment and natural resources of the state.

{8} Defendant Catherine Ross Bateman was, at times relevant to this action, a

resident of Charlotte, North Carolina. She has subsequently established a

residence in Florida. At times relevant to this action she was owner and chief

executive officer of CBM.

{9} Defendant CBM is a corporation organized and existing under the laws of

the State of North Carolina with its principal place of business located in Fort Mill,

South Carolina. CBM is engaged in the environmental consulting business. It

maintains an office in Greenville, North Carolina.

{10} All other defendants to this action have been dismissed.

B.

BACKGROUND

{11} The facts giving rise to this action were set out as follows in a previous

order:

This case centers on the bidding process between the State of

North Carolina and contractors of environmental services. More

specifically, the matter arises in the context of the statutory

framework created by the North Carolina General Assembly to fund

the cleanup of underground storage tanks (“USTs”). The framework

requires that the North Carolina Department of Environment and

Natural Resources (“DENR”) reimburse tank owners or operators

(“responsible parties”) for the reasonable and necessary costs incurred

in cleaning up the aftermath from leaking USTs. Funds for paying the

cleanup costs come from fees charged to all tank owners. The fund

created by these fees seldom suffices to meet the needs of DENR for

cleanup reimbursements.

As a means of controlling its reimbursement expenses, DENR

sets specific rates for environmental services. Those rates are

published in its Reasonable Rate Document (“RRD”). DENR solicits

the typical billing rates of engineers, geologists and other

environmental consultants in order to calculate the reimbursement

rates for these costs. DENR then issues the RRD providing the

reimbursement rates for the services that the responsible parties

employ in the cleanup processes. While private parties contract for

services at different rates, the rates contained in the RRD have a

significant influence on marketplace pricing. Thus, the rates set in the

RRD affect both DENR reimbursement and nongovernmental

marketplace pricing.

In addition to the reimbursement method, DENR also must

contend with the cleanup of UST leaks on property whose owners

cannot be located. DENR contracts with specific environmental

consultants to carry out the cleanup of these contaminated properties.

These environmental consultants obtain the contracts, referred to as

“state lead work,” through a bidding process in which bidders respond

to a request for proposals (“RFPs”). This process also affects

marketplace pricing. DENR uses information obtained in connection

with these RFPs in setting rates in the RRD.

In 2001 DENR published proposed revisions to the RRD that

potentially would have affected environmental consultants, engineers

and geologists by setting rates paid for environmental services at a

level that was unsatisfactory to defendants. Shortly thereafter, the

State requested RFPs for some state lead work.

In response to the potential changes, a group of environmental

consultants, engineers and geologists created an informal association

referred to in the briefs as the “Stakeholders Group.” In 2002

members of the Stakeholders Group formed a nonprofit corporation

under North Carolina law officially named the North Carolina

Environmental Service Providers Association. NCESPA accordingly

elected a board of directors that included McClure and Hill [and

Bateman].

Defendants are alleged to have taken two specific actions to

cause DENR to raise the rates from those proposed in the 2001

revision. First, the State alleges that defendants provided a

reasonable rate survey that contained false, inflated billing

information. Second, the State alleges that the defendants sought to

improperly influence the prices submitted in RFPs for the state lead

work. The State alleges that defendants believed DENR would use the

information gathered through the RFPs for the state lead work to set

rates in the RRD, and that if inflated bids were submitted, the RRD

rates would be higher.

Before the incorporation of NCESPA, the leader of the

Stakeholders Group, McClure, requested that the persons and entities

associated with the Stakeholder Group complete a “reasonable rate

survey.” Plaintiffs allege that McClure engaged in an e-mail campaign

to inflate the RRD by having the Stakeholders submit artificially

inflated rate information. McClure later stated in text within the

distributed survey, however, that responses to the survey should

include the true and reasonable rates of environmental service

providers so that the revised RRD would reflect the typical industry

billing rates.

The Stakeholder[s] Group . . . then submitted the reasonable

rate survey results to DENR. Contention exists as to whether (1)

NCESPA falsified these surveys and (2) DENR actually considered the

survey in calculating rates that it would pay environmental service

providers. Defendants, however, conceded during oral arguments that

for the most part they knew that the rates they provided on the

surveys were false. . . .

In August 2002, DENR published a[n] RFP for state lead work.

The parties dispute NCESPA’s reaction to the RFP and related

motivations. Plaintiffs allege that McClure and NCESPA responded to

the RFP with a “two pronged course of action.” First, plaintiffs allege

that defendants organized a boycott of the RFP based on the claim that

the request violated the Mini-Brooks Act. Second, defendants

allegedly fixed the bids by having firms submit bids at the rates

determined by NCESPA and its members. Plaintiffs allege that

defendants’ motivation in these two actions was to inflate the rates

paid to the parties to whom the State awarded the contract and to

impact the rate-setting process by preventing the State from using

good faith bid information to set the RRD rate. . . .

Defendants claim that plaintiffs’ allegations misrepresent

defendants’ actions. They claim to have legitimate concerns that

DENR’s RFP did indeed violate the Mini-Brooks Act. NCESPA

members claim that they did not suggest rates to its members but

merely attached the aforementioned reasonable rate survey which

contained artificially inflated prices. Defendants concede that some

NCESPA members submitted responses to the RFP with rates from

the artificially inflated reasonable rate survey, while others did not

respond or submitted rates not based on the survey.

Plaintiffs allege the responses were coordinated and nefarious

and that defendants submitted bids at NCESPA-constructed rates.

CBM, moreover, submitted a bid with NCESPA rates marked up by

20%. Defendants Hill and Almes, Hill’s employer at the time, did not

respond to the RFP. Plaintiffs also assert that bids submitted by

defendants included a certification, under oath, of non-collusion by the

bidders. DENR claimed that the coordinated use of the NCESPA rates

and boycott constituted collusive behavior and hence subjected

defendants to penalties because the signed certification by defendants

violates N.C.G.S. § 143-54.

McClure I, 2004 NCBC 8 ¶¶ 7–18.

III.

MOTION FOR SUMMARY JUDGMENT

A.

LEGAL STANDARD

{12} Summary judgment is proper “if the pleadings, depositions, answers to

interrogatories, and admissions on file, together with the affidavits, if any, show

that there is no genuine issue as to any material fact and that any party is entitled

to judgment as a matter of law.” N.C.R. Civ. P. 56(c). “It is not the purpose of the

rule to resolve disputed material issues of fact but rather to determine if such issues

exist.” N.C.R. Civ. P. 56 cmt. The burden of showing a lack of triable issues of fact

falls upon the moving party. See, e.g., Pembee Mfg. Corp. v. Cape Fear Constr. Co.,

313 N.C. 488, 491, 329 S.E.2d 350, 353 (1985). Once this burden has been met, the

nonmoving party must “produce a forecast of evidence demonstrating that [it] will

be able to make out at least a prima facie case at trial.” Collingwood v. Gen. Elec.

Real Estate Equities, Inc., 324 N.C. 63, 66, 376 S.E.2d 425, 427 (1989). The Court

must exercise caution in granting a motion for summary judgment. N.C. Nat’l Bank

v. Gillespie, 291 N.C. 303, 310, 230 S.E.2d 375, 379 (1976).

{13} In McClure II, the Court set forth its expectations for summary judgment

in this matter:

It will be incumbent on the State to show that the CBM bid was

submitted as part of a conspiracy to permit one of the conspirators to

obtain the contract at an artificially inflated price or for some other

unlawful purpose which injured the State. That determination is best

made at a later stage. Depending on the development of the facts,

there may also be an issue of what DENR can recover under the

statute [N.C. Gen. Stat. § 133-28] even if it is a strict liability statute.

All the other defendants have settled and paid money to the State. If

the monies paid thus far exceed ten percent of the contract price or the

total actual damages, may DENR recover an amount in excess of that

amount? For example, if there are twenty defendants can DENR sue

each one for ten percent and recover two hundred percent of the

contract price? If an amount equal to ten percent has already been

collected, may DENR still recover more from CBM and Ross? Given

DENR’s position that there was price suppression it may well have to

prove that a bid more than ten percent lower than the accepted bid

would have been submitted. It may be able to do so. The

reinstatement of this claim may muddy the waters in other respects.

CBM and Ross could assert contribution rights against the other

named defendants. What will be the result if they have already paid

more than it is determined that CBM and Ross owe? Development of a

record will assist this Court and the appellate courts in addressing

these issues. For the foregoing reasons, the Court believes it erred in

dismissing these claims at this time and will reinstate them.

2005 NCBC 6. Based on the record that has been developed, the Court grants

Plaintiffs’ Motion for Summary Judgment for the reasons explained below.

B.

CONSPIRACY IN RESTRAINT OF TRADE

{14} Section 133-28 of the General Statutes of North Carolina allows “any

governmental agency entering into a contract which is or has been the subject of a

conspiracy prohibited by G.S. 75-1 or 75-2” to sue the conspirators for damages.

The existence of a conspiracy prohibited by sections 75-1 or 75-2 is a prerequisite to

the applicability of section 133-28.

{15} Section 75-1 states that “[e]very . . . conspiracy in restraint of trade or

commerce in the State of North Carolina is hereby declared to be illegal.” Section

75-2 adds that any such conspiracy “which violates the principles of the common

law” is considered a violation of section 75-1. The meaning of the term “conspiracy

in restraint of trade or commerce” is found in judicial interpretations of section 75-1.

{16} First, “it is clear that North Carolina’s substantive law of civil conspiracy .

. . applies in the context of G.S. 75-1.” Cameron v. New Hanover Mem’l Hosp., Inc.,

58 N.C. App. 414, 443, 293 S.E.2d 901, 918 (1982). Civil conspiracy consists of four

elements: “(1) an agreement between two or more individuals; (2) to do an unlawful

act or to do a lawful act in an unlawful way; (3) which agreement results in injury to

the plaintiff inflicted by one or more of the conspirators; and (4) pursuant to a

common scheme.” Privette v. Univ. of N.C., 96 N.C. App. 124, 139, 385 S.E.2d 185,

193 (1989). Injury to the plaintiff is an express element of civil conspiracy. The

mere existence of a conspiracy does not result in civil liability. Rather, “[t]he gist of

the civil action for conspiracy is the act or acts committed in pursuance thereof—the

damage—not the conspiracy or the combination.” Reid v. Holden, 242 N.C. 408,

414, 88 S.E.2d 125, 130 (1955).

{17} To violate section 75-1, the civil conspiracy must be “in restraint of trade.”

In determining whether a conspiracy is “in restraint of trade,” the Court looks to a

body of federal and state cases analyzing the meaning of that phrase. The federal

cases are relevant because the language of section 75-1 is similar to language found

in the Federal Sherman Anti-Trust Act, which states that “[e]very contract,

combination in the form of trust or otherwise, or conspiracy, in restraint of trade or

commerce among the several States, or with foreign nations, is hereby declared to

be illegal.” Sherman Anti-Trust Act § 1, 15 U.S.C.S. § 1 (LEXIS through Pub. L. No.

110-25). The North Carolina Supreme Court has noted that “the body of law

applying the Sherman Act, although not binding [on North Carolina courts] in

applying G.S. 75-1, is nonetheless instructive in determining the full reach of that

statute.” Rose v. Vulcan Materials Co., 282 N.C. 643, 655, 194 S.E.2d 521, 530

(1973). Both the federal and state cases make clear that the Court’s primary focus

in determining whether a conspiracy is prohibited by section 75-1 should be the

impact of the conspiracy on the competitive environment. In Standard Oil Co. of

New Jersey v. United States, 221 U.S. 1 (1911), the United States Supreme Court

construed the Sherman Act to reach the following:

[A]ll contracts or acts which were unreasonably restrictive of

competitive conditions, either from the nature or character of the

contract or act or where the surrounding circumstances were such as to

justify the conclusion that they had not been entered into or performed

for the legitimate purpose of reasonably forwarding personal interest

or developing trade, but on the contrary were of such a character as to

give rise to the inference or presumption that they had been entered

into or done with the intent to do wrong to the general public and to

limit the right of individuals, thus restraining the free flow of

commerce and tending to bring about the evils, such as enhancement

of prices, which were considered to be against public policy.

221 U.S. at 58; see also United Roasters, Inc. v. Colgate-Palmolive Co., 485 F. Supp.

1041, 1049 (E.D.N.C. 1979) (applying North Carolina law and noting that “[c]ases

applying the Sherman Act stress that the proper focus is upon the challenged

restraint’s impact on competitive conditions). As Adam Smith observed, a system of

market exchange is fueled by self-interest:

Give me that which I want, and you shall have this which you want . . .

it is in this manner that we obtain from one another the far greater

part of those good offices which we stand in need of. It is not from the

benevolence of the butcher, the brewer, or the baker, that we expect

our dinner, but from their regard to their own interest. We address

ourselves, not to their humanity but to their self-love, and never talk to

them of our own necessities but of their advantages.

Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations 15

(Edwin Cannan ed., Modern Library 1994) (1776). In a market economy,

individuals and businesses are expected to pursue their own self-interest. When

they do not, expectations are frustrated and competition suffers. The pursuit of

personal interest is an important part of our economy, which the Supreme Court

acknowledged by characterizing it as “legitimate” in the Standard Oil case. See 221

U.S. at 58. The specter of improper anticompetitive behavior is raised when firms

counterintuitively neglect their self-interest.

{18} Standard Oil also reflects the common law “rule of reason” that a

conspiracy to restrain trade must operate to the prejudice of the public in order to

be actionable. Indeed, a “combination is not objectionable if the restraint is such

only as to afford fair protection to the parties thereto and not broad enough to

interfere with the interest of the public.” Rose, 282 N.C. at 656, 194 S.E.2d at 531.

{19} One of the clearest examples of an activity in restraint of trade is an

agreement or conspiracy between competitors in an industry to fix prices. In fact, “a

combination formed for the purpose and with the effect of raising, depressing,

fixing, pegging, or stabilizing the price of a commodity in interstate or foreign

commerce is illegal per se” under the Sherman Act. United States v. Socony-

Vacuum Oil Co., 310 U.S. 150, 223 (1940). The concept of price fixing under the

antitrust laws is very broad. Explicit agreements to fix prices would clearly be

illegal under the Sherman Act, “[b]ut so would agreements to raise or lower prices

whatever machinery for price-fixing was used.” Id. at 222.

C.

ANALYSIS

{20} In this case, the machinery for price fixing came in the form of an

orchestrated effort to submit artificially high bids in response to a solicitation for

bids from a state agency. The factual record developed by the parties shows that

there is no genuine issue of material fact as to whether Defendants engaged in a

conspiracy prohibited by section 75-1. The Court’s conclusion is based on a careful

review of the record before it.

{21} In order for there to be a conspiracy, there must be an agreement to do an

unlawful act. Here, the record demonstrates that Defendants agreed with others to

unlawfully restrain trade. This was accomplished in two ways. First, the

Stakeholders Group submitted an inaccurate reasonable rate survey to DENR.

Second, NCESPA characterized the survey as representing “fair market rates” and

strongly encouraged members to quote those rates to DENR during the RFP.

1.

SURVEY

{22} This Court has already observed that “Defendants . . . conceded during oral

arguments [on the motion to dismiss] that for the most part they knew that the

rates they provided on the surveys were false.” McClure I, 2004 NCBC 8 ¶ 14.

Defendant Bateman was one of nine industry representatives who “agreed to take

the lead in developing proposed new rates and backup that will be presented to

DENR.” (McClure Aff. Ex. 6.) From its earliest days, the leaders of the

Stakeholders Group were concerned that the new rates would adversely affect the

bottom lines of environmental service providers. In a November 28, 2001 e-mail to

the Stakeholders Group, Bateman said “[t]he time has come for us to help ourselves

. . . . In case you haven’t calculated, the new rates [which DENR planned to

implement on January 1, 2002] will result in a net decrease to those who perform

work in the program.” (Bateman Dep. Ex. 10, May 30–31, 2006.)

{23} The leaders of the Stakeholders Group knew that “DENR is required to

consider typical billing rates when determining what is reasonable and necessary.”

(McClure Aff. Ex. 3.) However, Defendants were part of an agreement to use the

survey results not to reflect true market rates, but to present DENR with a set of

rates that were above market. They were of the opinion that “[c]ompetition is

healthy, but in some way this industry’s competitiveness has been destructive.”

(McClure Aff. Ex. 8B.) Defendants sought to curb this destructiveness by

coordinating the industry’s response to the survey and subsequent RFP. While the

survey was out, McClure reminded the Stakeholders that “the reasonable rate

document will be your checkbook for at least a year if not more.” (Bateman Dep. Ex.

9.) When asked if there was “any effort to make sure that the rates that were

reported were genuine market rates,” Bateman responded that “the purpose of the

survey was to find out what the market rates were,” but did not otherwise indicate

that any measures were taken to ensure the accuracy of the survey. (See Bateman

Dep. 38: 7–11.)

{24} After the survey results were returned, representatives of several

environmental consulting firms, including CBM president Ken Czoer, met to review,

compile, and refine responses to the survey. (McClure Aff. ¶ 3.) After removing the

outliers, the group rounded most of the averages upward. (McClure Aff. ¶ 4.) The

survey results were characterized as “fair market rates” and submitted to DENR on

January 11, 2002. (McClure Aff. Ex. 43; Bateman Dep. Ex. 18.) Defendant

Bateman agreed with the characterization of the survey results and the submission

to DENR. (Bateman Dep. 133:5.)

{25} Scott Ryals, an employee of the Trust Fund Branch for the Underground

Storage Tank Section of DENR’s Division of Waste Management testified that “[t]he

rates in the survey provided to DENR in January 2002 were approximately forty

percent (40%) higher than the RRD then in effect,” not including the twenty percent

markup that NCESPA was requesting be added to the rates provided. (Ryals Aff. ¶

8.)

{26} The survey was not what it purported to be. It was presented to NCESPA

members and DENR as a survey of “fair market rates,” but actually presented

above market rates. As shown below, the survey results were attached to an e-mail

sent to NCESPA members in advance of the RFP (McClure Aff. Ex. 43) and were

the basis of bids submitted to DENR by various firms.

2.

BROADCAST E-MAILS

{27} The second aspect of the conspiracy was an agreement and scheme on the

part of Defendants and others to have firms submit bids at the “fair market” rates

determined by NCESPA as a result of the survey. This was accomplished by

sending e-mails to environmental service providers (“ESPs”) in advance of a bidding

process for the state lead contract. Defendant Bateman was part of the group

responsible for drafting these e-mails (see McClure Aff. Exs. 13–42 (series of e-mails

between NCESPA directors discussing the broadcast e-mail)) and ultimately gave

her approval to the final version (McClure Aff. Ex. 42 (stating “I am in, send it”)).

There is ample evidence in the record demonstrating that the intent of the e-mail

was to unite ESPs in an effort to present bids that were driven by the NCESPA

survey, not by market forces or the self-interest of the individual firms competing

for the contract. The board believed that DENR’s ulterior motive in issuing the

RFP was to use the bids as data in creating a new RRD. John Hill stated early on

that “[m]y opinion is they are looking for backup material for STF reasonable rates.”

(McClure Aff. Ex. 9.) McClure agreed that

they will certainly use any rates they receive on this as ammunition

against us for Reasonable Rate Document discussions. It will also

validate their belief that in the end they can divide us by pitting us

against us in a bidding war. In my opinion, the best thing that could

happen would be for noone [sic] to respond to this.

(McClure Aff. Ex. 9.) The first line of the broadcast e-mail seemed to discourage

any response at all by warning ESPs that “the recent solicitation for State lead

contractors (RFP 16-N03001) by NCDENR may be in violation of the Mini-Brooks

Act.” (McClure Aff. Ex. 43.) The Mini-Brooks Act restricts public works contracts

from requiring bids for certain engineering and other work. See N.C. Gen. Stat. §

143-64.31 (LEXIS through 2007 legislation). However, the directors had concluded

prior to sending the e-mail that “[t]he solicitation itself is not in violation of Mini-

Brooks.” (McClure Aff. Ex. 19.) Yet NCESPA never communicated this conclusion

to its members. (Bateman Dep. 104:11–12.) Rather it left them with the

impression that DENR’s solicitation might have been illegal.

{28} NCESPA treated the RFP not as a competitive bidding process, but as an

opportunity to prove itself a formidable organization to DENR. In an August 13,

2002 e-mail to the board, McClure noted that

if any firms responds [sic] to this solicitation and submits prices at or

below the current reasonable rate document, it will begin to undermine

everything we are fighting for. If a NCESPA member firm submits

anything less than what we have proposed as reasonable rates, I think

it severely undermines our position. I think this is one of the first

instances where we will see if NCESPA has any teeth to it. The

response the State gets on this will go a long way in how they view us

as an organization.

(McClure Aff. Ex. 13.) McClure also believed that “[t]he best show of strength for

our organization would be to have multiple firms submit the fair market rates

determined by NCESPA.” (McClure Aff. Ex. 33.) Defendant Bateman also viewed

the RFP as a chance to prove NCESPA’s strength, noting in an August 15, 2002 e-

mail that “I think they are watching to see how strong we will be.” (McClure Aff.

Ex. 32.) The broadcast e-mail ultimately stated that

NCESPA feels that submittal of costs that are below fair market rates

under this solicitation or any similar solicitation could ultimately be

used in development of the reasonable rate document (RRD). When

considering your response to this solicitation, we strongly encourage

our members to keep these points in mind along with the considerable

amount of work performed by NCESPA with respect to the RRD. The

fair market rates researched and developed by NCESPA are attached

to this e-mail.

(McClure Aff. Ex. 43.) The “fair market rates” came from the survey, which had

been manipulated.

{29} The intent of the e-mail was to influence the bids submitted by ESPs to the

State. The NCESPA rates were attached to the e-mail. Language in the e-mail

implied that if a firm pursued its self-interest by bidding lower than the NCESPA

rates, that firm would be hurting the entire industry.

{30} The drafters of the broadcast e-mail knew they were on thin ice and were

aware of the shadow cast by the antitrust laws. At the NCESPA interim board of

directors meeting on May 7, 2002, the group “discussed the need for a disclaimer

about price fixing before each meeting” (Bateman Dep. Ex. 15), but never approved

such a disclaimer (Bateman Dep. 53: 21). An early draft of the broadcast e-mail

stated, “NCESPA advises its non-engineering services providers who wish to

respond to submit the reasonable rates researched and endorsed by NCESPA.”

(McClure Aff. Ex. 16.) John Hill advised the directors to “LET US be very careful.

This is an open bid and we can not [sic] go around talking about rates or how we

should respond.” (McClure Aff. Ex. 10.) Keith Anthony was concerned that “we

might come off as looking like we are all in collusion by all of us (NCESPA) sending

in the same rate structure or even suggesting as much in an e-mail or worse yet the

web site.” (McClure Aff. Ex. 14.) McClure brushed aside these concerns, asking “so

what if we get accused of collusion? Is that a bad thing? It shows that we are

strong and united as a group.” (McClure Aff. Ex. 16.) He went on to say, “I doubt

very seriously that the State will attempt to sue anyone over this.” (McClure Aff.

Ex. 16.)

{31} The language was ultimately softened. The e-mail “strongly encouraged”

members to remember “the considerable amount of work performed by NCESPA

with respect to the RRD.” (McClure Aff. Ex. 43.) Members were reminded that

“[t]he fair market rates researched and developed by NCESPA are attached to this

e-mail.” (McClure Aff. Ex. 43.) Although the final e-mail does not explicitly direct

members to submit the NCESPA rates, the implication is clear. The drafters

intended to imply as much as possible without overtly telling members what rates

to submit, as indicated by the following comment by Pete Byers: “In addressing

John’s comments regarding telling nonengineering firms to respond to the RFP with

the NCESPA rates, I feel we can accomplish this by informing them of these rates

and how they were obtained . . . . However, I would lean away from telling anyone

what rates to submit.” (McClure Aff. Ex. 29.) Defendant Bateman advocated edits

that would “steer us further away from discussing rates, markups, and providing a

fresh copy of the rates.” (McClure Aff. Ex. 34.) It was not necessary to explicitly tell

firms to submit the NCESPA rates because “[t]he work and rates are known by

those to whom we will send this message.” (McClure Aff. Ex. 34.) In the final draft,

McClure “tried to soften this proposal . . . while still getting our point across.”

(McClure Aff. Ex. 33.) The point was to get multiple firms to submit the NCESPA

rates. Overall the board was oblivious to the possible consequences of their actions.

Any concerns over collusive behavior were quickly brushed aside as the board

agreed to transmit the broadcast e-mail.

{32} Bateman approved the final draft of the broadcast e-mail. (McClure Aff.

Ex. 42.) She testified that before she gave her approval, she consulted with Morris

Caddell, a Charlotte attorney who frequently advised CBM on a number of issues,

and forwarded to him a series of e-mails between the NCESPA directors which

included the proposed broadcast e-mail. According to Bateman, “Morris told me

that he saw no problem with what was being proposed as far as sending out . . . the

broadcast e-mail.” (Bateman Dep. 192: 18–20.) She did not approve the broadcast

e-mail until after she heard from Mr. Caddell because she “wanted his opinion

before [she] entered into any discussions related to this or agreed to send out any

broadcast e-mails.” (Bateman Dep. 193: 8–10.) But Mr. Caddell testified that the

purpose of his conversations with Bateman regarding the e-mails was to advise her

on a course of action for CBM alone. (Caddell Dep. 17:2–6.) According to Caddell,

It was more of a conversation about what would be the issues, because

I would have had to do some in-depth research to actually give a legal

opinion, a final yay or nay on whether or not it was legally valid to

send it [the broadcast e-mail] out or not, and I had not done that kind

of research. And I didn’t think I was being requested to, but again, I

think it was more just general sort of bringing me up to speed that . . .

[the broadcast e-mail was] being kicked around, but it probably wasn’t

going to go out.

(Caddell Dep. 16: 15–25.)

{33} Some of the most compelling evidence of the NCESPA board’s agreement

to restrain trade comes after the broadcast e-mail was sent and firms began to

respond to the RFP. First, the board members’ firms submitted the NCESPA rates.

In a September 6, 2002 e-mail to the board, Defendant Bateman notified them that

she was “going to send the NCESPA rates plus 20%.” (McClure Aff. Ex. 55B.)

Keith Anthony responded that “I too am submitting the NCESPA rates plus 20%.”

According to Bateman, she notified the others of the amount of her bid because the

bid was submitted to DENR “for informational purposes only.” (Bateman Dep. Ex.

34.) This informational bid was sent to DENR, but CBM requested that DENR

return it unopened because DENR had clarified issues regarding the Mini-Brooks

Act in the interim. (Bateman Dep. 147: 3–10.) Bateman instructed CBM employee

Kim Freeman “[t]o remove the letter stating that it was a non-bid and re-submit it

in the bid package as required.” (Bateman Dep. 177: 4–9.) The consequence of all

this is that Bateman had informed the other NCESPA board members how CBM

was going to respond to the RFP. (See Bateman Dep. 149: 10–13.)

{34} Other firms clearly got the message that they were to use the NCESPA

rates. Representatives from two firms even called McClure to ask whether to use

the proposed NCESPA rates or the proposed rates plus 20%. (McClure Aff. Ex. 44.)

These inquiries indicate that at least some member firms’ submissions were guided

by the NCESPA rates, rather than their professional judgment as to what rate

would be best for their business and give them the best chance of obtaining the

state lead contract.

{35} The NCESPA board clearly did not want members to pursue their self-

interest as they normally would in a competitive environment. After the bidding

had opened, McClure wanted to obtain the bid results in order to find out what

members had bid. He stated that “[i]f some firms did go in and undermine our

efforts, I think it would be good to know who is ‘on our team’ and in it for the long

haul and who is out for themselves and short term gain.” (McClure Aff. Ex. 57.) In

a competitive market, there are no “teams” of firms. Rather, firms are supposed to

be “out for themselves.” Defendant Bateman agreed with McClure that it would be

a good idea to try and obtain the bids through the Freedom of Information Act or

other public records laws. (Bateman Dep. 164:16 (stating “I did not disagree with

getting the FOI”).) Keith Anthony said that “I submitted the NCESPA rates and I

want to know what members lowballed it.” (McClure Aff. Ex. 63.) Bateman

testified that she believed she was tasked with requesting the bid information

under the Freedom of Information Act, although the actual request may have been

sent in by someone else. (Bateman Dep. 164: 3–6.)

{36} All of this evidence leads to the conclusion that the NCESPA board,

including Defendant Bateman and her company, CBM, entered into an agreement

to restrain trade as that phrase has been defined by the courts. As a result of the

broadcast e-mails, the bidding process for the state lead contract was not

competitive. Firms were essentially told what rates to submit. Those that did not

submit these rates were branded traitors to the cause, and were sought out by the

NCESPA leadership for retribution. The cases make clear that an agreement to

raise or lower prices violates the antitrust laws “whatever machinery for price fixing

was used.” Socony-Vacuum, 310 U.S. at 222. Here, the machinery consisted of an

inflated survey of purportedly “fair market” rates and a coercive e-mail encouraging

members to submit those rates.

{37} The term “restraint of trade” is broad enough to include collusively

providing false market data that will be used to set prices. In Knevelbaard Dairies

v. Kraft Foods, Inc., 232 F.3d 979 (9th Cir. 2000), the plaintiff milk producers

claimed that the defendant cheese makers conspired to depress the prices they paid

for milk produced in California. Id. at 982. In that case, the California Department

of Food and Agriculture used the bulk cheese price from the National Cheese

Exchange in its formula for setting the minimum price for California milk. Id. The

cheese makers allegedly rigged the price for bulk cheese in order to both decrease

the cost of bulk cheese and California milk. Id. The Ninth Circuit reversed the

District Court’s order dismissing the plaintiff milk producers’ claims. The court

noted that “[r]estrictions on price and output are the paradigmatic examples of

restraints of trade that the Sherman Act was intended to prohibit.” Id. at 986

(quoting NCAA v. Board of Regents, 468 U.S. 85, 107–8 (1984)).

{38} In Socony-Vacuum, prices of gasoline sold by major oil companies were

controlled by spot market prices. The oil companies engaged in buying programs

that “at least contributed to the price rise and the stability of the spot markets, and

to increases in the price of gasoline sold in the Mid-Western area during the

indictment period.” Id. at 219. In Socony-Vacuum, “[c]ompetition was not

eliminated from the markets; but it was clearly curtailed, since restriction of the

supply of gasoline, the timing and placement of the purchases under the buying

programs and the placing of a floor under the spot markets obviously reduced the

play of the forces of supply and demand.” Id. at 220. Justice Douglas also noted

that

prices are fixed . . . if the range within which purchases or sales will be

made is agreed upon, if the prices paid or charged are to be at a certain

level or on ascending or descending scales, if they are to be uniform, or

if by various formulae they are related to the market prices. They are

fixed because they are agreed upon. And the fact that . . . they are

fixed at the fair going market rate is immaterial. For purchases at or

under the market are one species of price-fixing.

Id. at 222.

{39} Defendants’ actions are a restraint of trade as that term is defined in the

Knevelbaard Dairies and Socony-Vacuum cases. Defendants participated in

drafting and approving the transmission of an e-mail to a number of ESPs that

were going to be participating in a state lead contract. The intent of this e-mail was

to influence the prices the firms submitted. The evidence shows that a number of

firms, including Defendant CBM, submitted the NCESPA rates, rather than a rate

they determined to be in their best interest. As noted above, the NCESPA rates

were inflated. But as Socony-Vacuum makes clear, Defendants’ acts would still be

in restraint of trade even if the survey was an accurate reflection of the fair market

rates. Competition consists of firms pursuing their self-interest and submitting

bids that will give them the best chance of obtaining the contract. When all firms

get together beforehand and agree to submit similar prices, competition is stifled.

In her deposition, Defendant Bateman noted that CBM submitted a bid because “it

was real prices for real work, and I wanted them to look at it,” not because she

thought CBM would be awarded the contract. (See Bateman Dep. 317:16–17.) One

of her reasons for submitting the bid was so that it would be before DENR in the

event they used the bids to create the new RRD. (Bateman Dep. 317:23–318:1.)

The bid ultimately submitted by CBM was based on the NCESPA rates, rather than

the rates CBM was then charging its customers, as reflected in the following

exchange from Bateman’s deposition:

Q. Why in your second submission did you not submit the CBM rates?

A. Because we submitted the NCESPA rates. They were reasonable for

the work that was going to be done supposedly.

Q. But they were not your rates at the time?

A. That’s right.

(Bateman Dep. 246:15–21.) Here, the State was deprived of competition in the

RFP and provided with inflated bids in order to affect DENR’s determination of the

RRD.

{40} Defendant Bateman was a participant in the conspiracy. Throughout her

deposition, she claims to have disagreed with the thoughts and attitudes of her

fellow board members on many occasions; but on no occasion does she appear to

have made her disagreement known to the board or anyone else. Furthermore, she

was complicit in the board’s actions by assenting to them, giving her seal of

approval, and in some cases helping to carry the board’s plans into action. There

are several examples of this pattern.

{41} On May 17, 2002, Bateman sent an e-mail to the new NCESPA group that

included a letter from NCESPA president Darin McClure (Bateman Dep. Ex. 16.)

In the letter and as noted above, McClure stated that “[c]ompetition is healthy but

in some ways this industry’s competitiveness has been destructive.” (Bateman Dep.

Ex. 16.) The letter was from McClure but also included the names and telephone

numbers of the NCESPA board of directors, including Bateman. When asked

whether the board approved the letter, Bateman responded “I don’t know that we

went through a formal board meeting for approval.” (Bateman Dep. 54: 17–20.)

She also testified that she disagreed with McClure’s choice of words that

competition had been destructive in the ESP industry. (Bateman Dep. 54:25–55:7.)

Bateman testified that she “probably” voiced her concerns, but couldn’t recall

specifically whether she made her concerns known. (Bateman Dep. 55: 8–12.)

Despite “absolutely” disagreeing with McClure’s statement, Batemen sent the e-

mail anyway, with her name and telephone number listed at the bottom. (See

Bateman Dep. 56: 7–11.)

{42} Bateman also testified that she disagreed with a number of things said in

e-mails between NCESPA board members in August of 2002. On August 13,

McClure wrote that

if any firms responds [sic] to this solicitation and submits [sic] prices at

or below the current reasonable rate document, it will begin to

undermine everything we are fighting for. If a NCESPA member firm

submits anything less than what we have proposed as reasonable

rates, I think it severely undermines our position. I think this is one of

the first instances where we will see if NCESPA has any teeth to it.

The response the State gets on this will go a long way in how they view

us as an organization.

(McClure Aff. Ex. 13.) Once again, Bateman testified that she disagreed with these

statements. (Bateman Dep. 119:5–25.) However, the next e-mail in the record

from Bateman to the NCESPA board (Bateman Dep. Ex. 26) contains no

statements that she disagreed with the writings of McClure and others. Bateman

testified that she disagreed with the ideas being discussed in the e-mails, but

couldn’t recall where she voiced her disagreement. (Bateman Dep. 120: 11–19.)

Bateman also testified that she disagreed with Keith Anthony’s statements

reflecting his anger at firms who had “low-balled” the bid. However, she didn’t

know whether she responded to his e-mail or if she communicated her

disagreement to any other members of the board. (Bateman Dep. 169: 4–14.)

{43} Bateman’s counsel asked her, “do you know of any rule or requirement by

NCESPA or any other organization that you belong to that you have to agree or

disagree with statements made by someone else in writing, verbally, or otherwise?”

(Bateman Dep. 186: 18–22.) Bateman responded in the negative. (Bateman Dep.

186: 23.) Although such a requirement may not have been in place, Plaintiffs’

Motion for Summary Judgment requires the Court to evaluate the evidence before

it. Bateman has testified that she disagreed with various acts of NCESPA board

members, but her actions are not in conformity with such disagreement. Bateman

has presented the Court with no documents reflecting her disagreement. In her

deposition testimony, she is unable to specify when or if she made her disapproval

known to the rest of the board. Most troubling of all, Bateman approved the

NCESPA board’s actions in spite of her disagreement. She sent the e-mail to

potential NCESPA members along with the letter from McClure, and allowed her

name to be included on the letter stating that competition in the ESP industry had

been destructive. She approved the transmission of the broadcast e-mail and its

recommendation to use the NCESPA rates despite her concerns about collusion.

She submitted CBM’s bid with the NCESPA rates in compliance with the

conspiracy. She took part in the efforts to locate firms who low-balled the bid. The

record here clearly indicates that Bateman and CBM participated in the conspiracy.

{44} Furthermore, the conspiracy they helped advance injured the public. A

conspiracy to restrain trade must operate to the prejudice of the public in order to

be actionable. In this case, the public was injured because a state agency was

deprived of a competitive bidding process as the result of an agreement between

firms in the environmental services industry. There existed an intent to artificially

inflate the RRD rates as well. According to Dexter Matthews, Director of the

Division of Waste Management of DENR, the agency “was made aware if the

allegations against certain companies surrounding their bids to the August 8, 2002

RFP, but determined that it was in the best interest of DENR to move forward with

the information collected from the RFP, because comparison of the competitive

market data collected from responses to the RFP to the RRD then in effect showed

that the rates needed to be adjusted downward to reflect market prices.” (Matthews

Aff. ¶ 8.) The “competitive market data” was comprised of the bids after the

collusive bids were removed. However, Mr. Matthews concluded that even the

noncollusive bids were skewed upward because “the recipients of the emails who

responded to the RFP knew that there was a concerted effort to get engineering

firms not to respond and to get responding firms to submit inflated bids, and

therefore that competition for the contracts would likely be blunted.” (Matthews

Aff. ¶ 9.) DENR used upwardly skewed numbers to formulate the revised RRD,

and was also damaged by the suppression of competitive bidding on the RFP.

{45} The record also contains sufficient evidence to conclude that there was

injury as a result of the conspiracy. Testimony indicates that a number of firms

would have submitted lower bids in the absence of a conspiracy. McClure stated

that “[i]n the absence of concerns about DENR’s use of the responses to the RFP in

formulating a new Reasonable Rate Document, Mid-Atlantic likely would have

submitted at least some lower figures in response to that RFP than it ultimately

submitted.” (McClure Aff. ¶ 6, Ex. 12.)

{46} In sum, the facts show that there was a conspiracy in violation of section

75-1 and 75-2. Defendants Bateman and CBM have not presented the Court with

any evidence to call these facts into question or to rebut the evidence of their

participation in the conspiracy. The existence of the conspiracy is admitted by the

other conspirators. The goal of the conspiracy was to artificially inflate the market

price information DENR used to set its rates for reimbursement and for state lead

work. In short, the conspirators sought to inflate prices by artificially and

dishonestly manipulating the information used to establish the RRD.

IV.

DAMAGES

{47} Based on the foregoing, DENR entered “into a contract which is or has

been the subject of a conspiracy prohibited by G.S. 75-1 or 75-2 . . . .” See N.C. Gen.

Stat. § 133-28(a). The specific contracts DENR entered into were pursuant to the

RFP, the bids for which were improperly influenced by NCESPA. DENR awarded

two contracts pursuant to the RFP, one to Force Environments Service Company,

LLC and another to Geological Resources, Inc. (Ryals Aff. ¶ 15.) Under section 133-

28(b), DENR is allowed to choose the measure of damages, which “shall be either

the actual damages or ten percent (10%) of the contract price which shall be trebled

as provided in G.S. 75-16.”

{48} In this case, DENR has elected to recover ten percent of the contract price,

trebled. (Mem. Supp. Pls.’ Mot. Summ. J. 23.) The total contract price is equal to

the sum of the amounts paid under the Force Environmental and Geological

Resources contracts:

$852,008.37 Force Environmental Contract

+ 916,107.44 Geological Resource Contract

1,768,115.81 Total Contract Price

Ten percent of the total contract price is $176,811.58. Trebled, this amount comes

to $530,434.74.

{49} Thus, ten percent of the contract price trebled is $530,434.74. This is the

amount owed to DENR under section 133-28. The Court has no discretion to adjust

this amount. Ten percent of the contract price is trebled “as provided in G.S. 75-

16.” N.C. Gen. Stat. § 133-28(b). Section 75-16 states that “if damages are assessed

. . . judgment shall be rendered in favor of the plaintiff against the defendant for

treble the amount fixed by the verdict.” In Marshall v. Miller, 302 N.C. 539, 276

S.E.2d 397 (1981), the North Carolina Supreme Court concluded “that the

Legislature intended trebling of any damages assessed to be automatic once a

violation is shown.” Id. at 547, 276 S.E.2d at 402. Automatic trebling of damages

leaves no room for judicial discretion. Atl. Purchasers, Inc. v. Aircraft Sales, Inc.,

705 F.2d 712, 715 (4th Cir. 1983).

{50} Although the amount of damages is fixed by statute and the State’s

election thereunder, the Court must consider that a portion of the damages has

already been paid by some of the former Defendants in this action. In a Consent

Decree and Order of Dismissal dated December 13, 2004, Defendants McClure,

Proctor, and Mid-Atlantic agreed to pay civil penalties to the North Carolina

Department of Justice and damages to DENR as follows:

Defendant Penalties Damages

Mid-Atlantic $100,000 80,000

McClure 60,000

Proctor 10,000

The damages amount paid by Mid-Atlantic included “$60,000 to resolve DENR’s

statutory damages claims under N.C.G.S. § 133-28.” (Consent Degree and Order of

Dismissal Regarding Darin M. McClure, Thomas A. Proctor, and Mid-Atlantic

Associates, Inc., Dec. 13, 2004 § IV.)

{51} Defendants Shield Engineering and S&ME also entered into consent

degrees and each agreed to pay $60,000 to resolve DENR’s claims under section

133-28. (Ryals Aff. ¶ 16.) Thus the total amount paid so far in satisfaction of the

133-28 claims is $180,000. 2 The amount remaining to be paid is as follows:

$530,434.74 Ten percent of contract price, trebled

- 180,000.00 Already paid in settlement

350,434.74 Remaining to be paid

DENR is entitled to recover this amount from Defendants Bateman and CBM, who

are jointly and severally liable as the only remaining defendants in this action. The

other defendants were free to negotiate settlements with the State. The Mid-

Atlantic group paid a total of $250,000 in settlement of the State’s claims for civil

penalties and damages. Shield and Anthony paid a total of $210,000. S&ME,

Quarles, and Einsman paid a total of $180,000. Other defendants paid a total of

$95,000 in settlement of the State’s claims for civil penalties. The State may

recover the remainder of its statutory damages from Defendants Bateman and

CBM.

V.

CONCLUSION

{52} Based on the foregoing, it is hereby ORDERED, ADJUDGED, and

DECREED that Plaintiffs’ Motion for Summary Judgment is GRANTED. Plaintiffs

may recover damages in the amount of $350,434.74 from Defendants Bateman and

CBM and Judgment is hereby entered in favor of Plaintiff DENR in that amount.

2 In settling its section 133-28 claims with the Mid-Atlantic, Shield, and S&ME for $180,000, the

State ensured it would recover at least ten percent of the contract price.

IT IS SO ORDERED, this the 19th day of July, 2007.