Petition — Cullum Electric & Mechanical, Inc. v. Mechanical Contractors Ass'n

IN THE

MICHAEL RODAK, JR., CLERK

Supreme Court of the United States :

Octoser Term, 1978

27-1733

CULLUM ELECTRIC & MECHANICAL, INC.,

PETITIONER,

versus

MECHANICAL CONTRACTORS ASSOCIATION OF

SOUTH CAROLINA, Responpent

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR

THE FOURTH CIRCUIT

J. KENDALL FEW,

P. O. Box 10085, F.S.,

Greenville, S. C. 29603,

Counsel for Petitioner.

The R. L. Bryan Company, Lege! Printers, Columbie, $. C.

Opinion Below

Jurisdiction

Question Presented

1

2

2

Statutory Provisions Involved LS Be a a ee 3

Statement of Facts 3

Reason for Granting the Writ 5

Conclusion 7

Appendix A (Opinion of Court of Appeals) 11

Appendix B (Opinion of Federal District Court) .

CASE CITATIONS

Mechanical Bid Depository v. eencesese 353 F. ”

817, 820 (10th Cir. 1965) iy 5

Oakland-Alameda County Builders Exchange v. F. P.

Lathrop Const. Co., 93 Cal. Rptr. 602, 482 P. (2d) 226

(S. Ct. Cal. 1971) 5

People v. Association of Contracting Plumbers, 57 Mise.

(d) 256 (Sup. Ct. N. Y. 1968) 5)

People v. Inland Bid aereaind 44 Cal. —_— 206 (D. Ct.

App. Cal. 1965) | 5)

Silver v. New York Stock Exchange, 373 U. S. 341, 10 L.

Ed. (2d) 389, 83 S. Ct. 1246 (1963) 2&7

Swenson Co., Inc., v. E. C. Braun Co., 77 Cal. Rptr. 378

(D Ct. App. Cal. 1969) 5)

IN THE

Supreme Court of the United States

Ocroper Term, 1978

CULLUM ELECTRIC & MECHANICAL, INC.,

PETITIONER,

versus

MECHANICAL CONTRACTORS ASSOCIATION OF

SOUTH CAROLINA, Responpent

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR

THE FOURTH CIRCUIT

The Petitioner, Cullum Electric & Mechanical, Inc., re-

spectfully prays that a Writ of Certiorari issue to review

the judgment and opinion of the United States Court of

Appeals for the Fourth Circuit, entered in this proceeding

on February 2, 1978.

OPINIONS BELOW

The opinion of the Court of Appeals for the Fourth

Cireuit (P. 9, Infra) is reported at 567 F. 2d 821. The opin-

ion of the Federal District Court for the District of South

Carolina (P. 10, Infra) is reported at 436 F. Supp. 418.

2 CULLUM ELecTric & MBCHANICAL, INC., PETITIONER, v.

JURISDICTION

The judgment of the Court of Appeals for the Fourth

Circuit was entered on February 2, 1978. On May 5, 1978,

the Chief Justice signed an order extending the time for

filing this petition for Writ of Certiorari to and including

June 2, 1978. The jurisdiction of this Court is invoked un-

der 28 USC § 1254(1).

QUESTIONS PRESENTED

1. May a non-member of a trade association of mechan-

ical, electrical, plumbing, heating and air conditioning con-

tractors be required to comply with the trade association’s

bid submission deadline rules?

2. May a trade association of mechanical, electrical,

plumbing, heating and air conditioning contractors induce a

general contractor to refrain from using a non-member’s

low bid because the non-member did not comply with the

trade association’s bid submission deadline rules?

3. Does the enforcement by a trade association of me-

chanical, electrical, plumbing, heating and air conditioning

contractors of its bid submission deadline rules on non-

members violate § 1 of the Sherman Act?

4. Is a trade association of mechanical, electrical,

plumbing, heating and air conditioning contractors re-

quired under § 1 of the Sherman Act to notify non-members

of the application of its bid submission deadline rules to a

particular project before enforcing such rules on the non-

member on that particular project?

5. Is a trade association of mechanical, electrical,

plumbing, heating and air conditioning contractors re-

quired under § 1 of the Sherman Act and Silver v. New

York Stock Exchange, 373 U.S. 341, 10 L. Ed. 2d 389, 83 S.

Ct. 1246 (1963) to give a non-member notice and an oppor-

tunity to be heard before enforcing its bid submission dead-

MEcuANICAL CONTRACTORS Assoc. oF 8. C., RESPONDENT 3

line rules on sueh non-member by inducing the general con-

tractor to refrain from using a non-member’s low bid?

6. May a trade association of mechanical, electrical,

plumbing, heating and air conditioning contractors dis-

criminate by imposing different sanctions on non-members

from those imposed on members for violations of its bid

submission deadline rule?

STATUTORY PROVISIONS INVOLVED

Section 1 of The Sherman Act, 15 USC § 1:

“Every 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 declared to be illegal... .”

Section 2 of The Sherman Act, 15 USC § 2:

“Every person who shall monopolize, or attempt to

monopolize, or combine or conspire with any other per-

son or persons, to monopolize any part of the trade or

ecommerce among the several States, or with foreign

nations, shall be deemed guilty of a misdemeanor. .. .”

STATEMENT OF FACTS

The petitioner is a corporation engaged in electrical,

heating and air conditioning contracting work in Green-

wood, South Carolina. It was a member of a trade associa-

tion of mechanical, electrical, plumbing, heating and air

conditioning contractors ealled the Mechanical Contraetors

Association of South Carolina from 1967 throngh 1969

when it discontinued its trade association membership.

Over 75% of the licensed mechanical, electrical, plumbing,

heating and air conditioning contractors in South Carolina

are members of the trade association.

The trade association has a rule called the 5 heur bid

rule. This rule provides that trade association members and

others who file their subbids with Western Union on forms

4 CuLtum Evectric & MECHANICAL, INC., PETITIONER, v.

prescribed by the trade association 5 hours prior to the

deadline for filing general contracts bids may telephone

their bids to the general contractors four hours before the

general contract bid opening deadline. Other who do not

use this procedure must telephone their bids to the general

contractors at least 5 hours prior to the general contract

bid opening deadline. This rule is applicable only when the

trade association has designated the job in question as a

5 hour bid job. These designations are published in a trade

association’s weekly job bulletin which is sent to architects,

general contractors, and trade association members, but

which is not sent to non-members.

On March 25, 1975, the petitioner submitted the low

bid of $442,000.00 on the combined heating, air conditioning

and electrical work for the Lander College Library con-

struction project in Greenwood, South Carolina. The peti-

tioner was not aware that the trade association had desig-

nated this project as a 5 hour bid job, and consequently, did

not telephone its bid to the general contractors 5 hours

prior to the general contract bid deadline. Upon learning

of petitioner’s low bid and its non-compliance with the

trade association’s 5 hour bid rule, and unsuccessful trade

association member-bidder notified the trade association.

As a result, the trade association notified all of the general

contractors bidding on the job who had agreed to abide by

the trade association’s 5 hour bid rule (13 of the 14 general

contract bidders) and advised them that to use the peti-

tioner’s bid would be a violation of the trade association’s

5 hour bid rule.

As a result of these calls, 11 of the 13 general contrac-

tors called, including the successful low bidder, declined to

honor petitioner’s low subbid and instead honored the sub-

bids of two trade association members whose combined bids

were approximately $3,000.00 more than the petitioner’s.

MECHANICAL ConTRACTORS Assoc. or S. C., RESPONDENT 5

Upon learning of this action by the trade association,

the petitioner protested to the trade association and to the

low bidding general contractor. The low bidding general

contractor agreed to honor petitioner’s low bid if the trade

association would withdraw its objection. The trade asso-

ciation refused to withdraw its objection and the mechani-

eal, electrical, heating and air conditioning subcontract

work was awarded to the two trade association members

submitting the next lowest combined subbids.

REASON FOR GRANTING THE WRIT

1. The decision below is in direct conflict with Mechan-

ical Bid Depository v. Christiansen, 353 F. 2d 817, 820 (10th

Cir. 1965) and Oakland-Alameda County Builders’ Ex-

change v. F. P. Lathrop Const. Co., 93 Cal. Rptr. 602, 482

P. 2d 226 (S. Ct. Cal. 1971).

In Mechanical Bid Depository v. Christiansen, on

almost identical facts, the Tenth Circuit held that the trade

association’s bid submission deadline rules, whose basic

purpose and effect were identical to those of the trade asso-

ciation in this case, violated both §§ 1 and 2 of the Sherman

Anti-Trust Act. The court concluded that the enforcement

of the bid submission deadline rules in that case had the

effect of barring non-members from a substantial segment

of the mechanical contracting market and that the entire

purpose of .he bid submission deadline rule was to restrict

and control commerce. Other cases reaching the same con-

clusion include and enlist Oakland-Alameda County Build-

ers’ Exchange v. F. P. Lathrop Const. Co., 93 Cal. Rptr.

602, 482 P. 2d 226 (S. Ct. Cal. 1971); Swenson Co., Ince., v.

E. C. Braun Co., 77 Cal. Rptr. 378 (D. Ct. App. Cal. 1969) ;

People v. Association of Contracting Plumbers, 57 Mise.

2d 256 (Sup. Ct. N. Y. 1968); People v. Inland Bid Deposi-

tory, 44 Cal. Rptr. 206 (D. Ct. App. Cal. 1965). The Fourth

Cireuit’s opinion and decision in this case is contrary to this

6 Cutsem Evecresx & Mecuanicas, inc., Perirsongs, v.

line of well-settled authority and to the letter and spirit of

the Sherman Anti-Trust Act. If allowed to stand, it will

create a sharp division between 2 United States Courts of

Appeals on the same point.

2. The opinion below is in conflict with this Court’s

holding in Silver v. New York Stock Exchange, 373 U. S.

341, 10 L. Ed. 389, 83 S. Ct. 1246 (1953).

In Silver v. New York Stock Exchange this court held

that the basic nature of the rights of a party under the anti-

trust laws required that a party be afforded notice, a hear-

ing, and an opportunity to answer charges prior to the

party being denied a valuable right. 373 U. S. 365, 83 S. Ct.

1261, Footnote No. 17. There is no reference to this case in

the Fourth Cireuit’s opinion. Although the District Court

does mention Silver v. New York Stock Exchange in pass-

ing (436 F. Supp. 431, P. 22 infra), its treatment of the case

may have been inflneneed by its observation that “the law

in Washington, however, is quite different from the law in

the rest of the country.” (436 F. Supp. 428, P. 19 infra).

The opinions and order below are in direct conflict with

the letter and spirit of Silver v. New York Stock Exchange.

3. The Fourth Circuit’s order and opinion will have the

inevitable effeet of trade associatioa members monopoliz-

ing the mechanical, electrical, plumbing, heatmg and air

conditioning contracting industry in the Fourth Cireuit and

im all other circuits electing to fellow the Fourth Cirenit

rather than the Teath Circuit in Christiansen.

Onee a non-member realizes that he may be fereed to

comply with rales of which he has no notice by a trade as-

sociation of which he is not a member without the benefits

of the procedural safeguards of Sliver v. New York Stock

Eachange, the non-member will more likely than not realize

the futility of non-membership and join the trade associa-

tion. The result is contrary to the purposes of the anti-trust

MECHANICAL ConTRACTORS Assoc. oF S. C., RESPONDENT 7

laws and to procedural safeguards laid down in Silver v.

New York Stock Exchange and other cases

CONCLUSION

For these reasons, a Writ of Certiorari should be

issued to review the judgment and opinion of the United

States Court of Appeals for the Fourth Circuit.

Respectfully submitted,

/s/ J. KENDALL FEW,

P. O. Box 10085, F.S.,

Greenville, S. C. 29603,

Counsel for Petitioner.

May 23, 1978.

APPENDIX

APPENDIX A

CULLUM ELECTRIC & MECHANICAL, INC.,

APPELLANT,

versus

MECHANICAL CONTRACTORS ASSOCIATION OF

SOUTH CAROLINA, Apre.Liee

No. 76-2074

United States Court of Appeals

Fourth Circuit

Argued April 5, 1977

Decided Feb. 2, 1978

J. Kendall Few, Greenville, S. C. (Robert M. Erwin, .Jr.,

Greenwood, S. C., on brief), for appellant.

L. G. Funderburk and L. Henry McKellar, Columbia, 8. C.,

for appellee.

Before CLARK, Associate Justice *, HAYNSWORTH,

Chief Judge, and RUSSELL, Cireuit Judge.

HAYNSWORTH, Chiet Judge:

These claims of a violation of Sections 1 and 2 of the

Sherman Act arose out of the defendant’s insistence that

general contractors submitting bids for the construction of

a college library not use mechanical subcontractors’ bids

submitted less than five hours before the deadline for sub-

mission of the general contractors’ bids, or less than four

hours before the general contractors’ submission time if

more than five hours before that time the subcontractor had

filed his bid with Western Union. The arrangement was

embodied in agreements entered into by the Mechanical

Contractors Association and general contractors.' The pro-

cedure was designed to avoid the chaotic situation resulting

*Tom C. Clark, Associate Justice of the United States Supreme

Court, (Ret.), sitting by designation. Mr. Justice Clark participated in

the ry< gy this case, but died before an opinion had nm prepared.

1 All one of the contractors submitting bids on this

project had subscribed to the qgpeaeens. Importantly, the general con-

tractor who got the job and who did not use the plaintiff's bid was a

signatory.

(11)

12 CuLLuM ELectric & MECHANICAL, INC., PETITIONER, v.

when general contractors received bids from subcontractors

only minutes before the deadline for submission of the bids

of general contractors, while guarding against the use of

one subcontractor’s bid to prevail upc another to revise

his bid to a still lower figure.

While once a member of the MCA, the plaintiff was

not a member at the time of this bidding. It received no

direct notice from the MCA that the five-hour rule was in

effect on this job, but the district court found that it either

knew, or, upon inquiry, could have found that it was. More-

over, the procedures embodied in the agreement between

the MCA and the general contractors applied equally to

members and non-members of the MCA. If a member or

non-member did not comply with the time requirements, the

participating general contractors had obligated themselves

not to use the bid.

The plaintiff filed its bid with the winning general ¢on-

tractor three hours and fifty-five minutes before the time

for opening the bids of the general contractors; it had not

filed a message containing the bid with Western Union. The

bid of $442,000.00 for the heating, air conditioning and elec-

trical work was slightly less than $3,000.00 less than the

next lowest combination of bids, but the suecessful genera!

contractor did not use it, when the defendant insisted that

its use would be in violation of the general contractors’

agreement.

In this appeal the plaintiff contests some of the fact-

finding by the district judge, but we find his findings, to the

extent they have a material bearing upon the legal rights

of the parties, supported by substantial evidence and not

clearly erroneous. His conclusions that the procedures em-

bodied in the agreements are not an arrangement to fix

prices, nor to effect a group boycott, nor discriminatory

against non-members of the MCA are clearly correct and

appropriate as applied to the facts in this case.

The judgment is affirmed substantially ior the reasons

stated by the district court. Cullum Electric & Mechanical,

Inc. v. Mechanical Contractors Association of South Caro-

lina, 436 F. Supp. 418 (D.C.S.C. 1976).

AFFIRMED.

MECHANICAL CONTRACTORS Assoc. or S. C., RESPONDENT—APPENDIX 13

CULLUM ELECTRIC & MECHANICAL, INC..

PLAINTIFF,

versus

THE MECHANICAL CONTRACTORS ASSOVUIATION

OF SOUTH CAROLINA, Derenpast

Civ. A. No. 75-980

United States District Court,

D. South Carolina,

Greenwood Division

July 5, 1976

J. Kendall Few, Anderson, S. C., Robert M. Erwin, Jr.,

Greenwood, S. C., for plaintiff.

L. G. Funderburk, Funderburk & Derrick, P. A., L. Harry

McKellar, Columbia, S. C., for defendant.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

HEMPHILL, District Judge.

Plaintiff in this action is located in Greenwood, South

Carolina and is engaged in contracting for the installation

of various electrical, heating and air conditioning equip-

ment and systeins. Defendant is a trade association whose

members include the majority of the licensed mechanical

contractors in South Carolina who compete with plaintiff.

This suit arose out of plaintiff's failure to secure the con-

tract for mechanical work on the Lander College Library

for which construction commenced in Greenwood, South

Carolina in 1975. The complaint alleges that the regula-

tions and conduct of the Mechanical Contractors Associa-

tion (hereinafter MCA), in connection with this and other

construction jobs, violate Sections 1 and 2 of the Sherman

Act, 15 U.S.C. §§ 1 and 2, and plaintiff seeks actual mone-

tary damages trebled pursuant to 15 U.S.C. § 15 and in-

vokes 15 U.S.C. § 26 for injunctive relief from defendant's

allegedly illegal conduct.

There is little dispute between the parties concerning

the relevant facts, and the majority of the evidence was

placed before the court in plaintiff's proposed transeript of

1m Cuawm Exacrax & MECHANICAL, INC., PETITIONER, v.

record, to which both parties agreed at a pretrial confer-

ence held March 22, 1976. The court, sitting without a jury.

heard live testimony on March 24, 1976 at Greenville, South

Carolina, at which time the parties agreed to have the rec-

ord include all discovery depositions taken by both parties

and filed with the court prior to trial. On the basis of the

testimony and evidence thus presented, the court now pub-

lishes the following:

FINDINGS OF FACT

1. The defendant, Mechanical Contractors Association

of South Carolina is an organization composed of contrac-

tors in the electrical, heating, air conditioning and plumb-

ing trades. Of the 400 licensed mechanical contractors in

South Carolina, approximately 306 are members of the Me-

chanical Contractors Association of South Carolina (here-

after referred to as MCA). Its bylaws list a number of gen-

eral objectives of the MCA, such as serving mechanical

specialty contractors as “an effective agency through which

to express their collective voice,” fostering harmonies rela-

tions between general and mechanical! contractors, cultivat-

ing a cooperative spirit among members, and promot-

ing ethics, fair competition, and quality service. The only

specific objective of the MCA, however, is stated as follows:

“To provide a bid procedure to eliminate sharp, unfair, and

unethical bid practices.”

2. All mechanical contractors (or mechanicals),

whether MCA members or not, can be generally categorized

as subcontractors who are engaged by so-called general

contractors to perform particular portions of the work on

a larger project which the general contractor has contracted

to complete. General contractors (hereinafter generals) are

typically awarded contracts on the basis of competitive bids

submitted pursuant to plans and specifications drawn or

written for the project involved. The general submitting

the lowest bid for the specified work is ordinarily awarded

the contract, but the prices which generals quote in their

bids depend largely upon the prices which various subcon-

tractors have previous!y quoted to the general for particu-

lar segments of the overall project. Generals therefore

MECHANICAL Cosrmmactors Assoc. or S. C., RESPOMEENT—AFPENDIX 15

solieit bids from the subcontractors in much the same inan-

ner as they are required to sebmit their own bids. The ob-

vious result of this procedure is that MCA members and

non-member mechanieals depend epon competitive bidding

to secure a major portion of their business.

3. Individuals and organizations soliciting bkls from

generals invariably establish a deadline for the submission

of bids, and the common practiee in the construction indus-

try at one time allowed subcontraetors to submit their bid

to generals at any time prior to the deadline for submission

of genera! bids. The result was a chaotic situation for the

generals, who might be inundated by subcontraetors’ bids

mumediately prior to the genera! filing deadline and thus

lack sufficient time to evaluate the subcontract bids ade-

uately prior to submission of the general bid.

4. To combat this apparent problem, the numerous

members of the Associated General Contractors of America

(hereinafter AGC) devised the so-called “four hour” bid

procedure designed “to create a system of receiving prices

on subeontracts and materials in sufficient time to allow the

general contractor to analyze and evaluate sub-bids and

material prices, and his own bid, prior to the general bid

filing.” Adherence to the four hour procedure by AGC mem-

bers requires that, in the case of al) construction projects

designated as “four hour bid jobs” in a weekly AGC bulle-

tin, they refused to receive sub-bids after four hours prior

to the time of the general bid filing.’ It appears that the

four hour procedure was instituted by AGC members in

North and South Carolina in approximately 1957 and has

heen in effect continuously since that date.

5. The four hour procedure apparently solved most of

the problems which generals encountered in the bidding

process, but subcontractors, including mechanicals, were

encountering additional difficulties. The chief complaint of

the mechanicals (and presumably other subcontractors as

well) was that generals were engaged in what is known as

} There are some variations in the four hour time limitation. For

caamaple, if tho gunaral Sting deadline is ext carty in the day, sub-bide

~~ G pT, .f4_, —aee © & aa

y. For purposes x “four heur” procedure

yt Fy Pd-4 iby, Le

16 CuLLuM ELectric & MECHANICAL, INC., PETITIONER, v.

“bid peddling,” i. e., disclosure of the bids of one or more

mechanicals in an effort to pressure others into reducing,

prior to the four hour deadline, the bids which they had

already submitted or were in the process of submitting.”

6. In an attempt to eliminate bid peddling and other

related unethical practices, the MCA devised a “five hour

bid procedure” which it began to employ in addition to the

four hour procedure adopied by the AGC. The five hour

procedure was instituted in approximately 1957 and has

been in effect continuously since that date. It is described

in the MCA Directory as follows:

Members and associate bidders of the Mechanical

Contractors Association register an exact duplicate of

the bids they are submitting to the General Contractors

with Western Union. This registration must take place

at least five hours prior to advertised general bid open-

ing and once registered cannot be changed. The me-

chanieal contractors then have one hour to communi-

cate their bids to the general contractors. One hour

after general bid opening, Western Union transmits

these bids to the Mechanical Contractors Association

State Office for tabulation and disbursement to the bid-

ding mechanical contractors.

General contractors cooperate with the Five Hour

Bid Plan by becoming signatories to the Code For

Ethical Practice and Procedure For Receiving Sub

Bids. They agree not to accept bids from non-members

of the Mechanical Contractors Association unless those

bids are received prior to the five hour deadline. Over

300 general contractors are participating in the plan.

Association members and associate bidders are also

signatories of the Code For Ethical Practice.

Since the five hour plan deals with acceptance of sub-

bids by general contractors, it obviously would be ineffec-

2 The sub-bidding procedure may at age Ae be plagued by other un-

ethical practices such as “bid shopping,” in which generals submit their

own bids and thereafter “shop” for a mechanical or other subcontractor

who will meet a given price, and “bid p in which a subcontractor

will use the valuable information con in a competitor’s already-

filed bid a8 a starting point for the preparation of his own bid. The dis-

ee <a ae mechanical contracting industry in

this action, however, focused almost entirely upon bid peddling.

MECHANICAL CONTRACTORS Assoc. or S. C., RESPONDENT—APPENDIX 17

tive unless the general contractors in the state agreed to

abide by it. The MCA therefore has cansed its five hour bid

procedure to be printed in the form of an agreement for

execution by the various general contractors in South Car-

olina under which they “endorse and adopt” a “procedure

for receiving bids on contracts from mechanical contrac-

tors.” It provides in relevant part:

1. On jobs where the time of General Bid Filing is

1:00 P. M., or later, we as a General Contractor will not

accept bids from any Mechanical Contractors, in the

above stated classification {those projects designated

as five hour bid jobs], unless they are received five

hours prior to the time of General Bid Filing, provided,

however, in the event the Mechanical Contractors file

their bids with a Western Union Office five hours prior

to the time of Bid Opening, then and in such event, we

as a General Contractor will accept such filing in lieu

of the five hour provision above stated, and require the

Mechanical Contractors bids be received not later than

four hours prior to the time of the General Bid Filing.

In addition to the provisions quoted above, the follow-

ing material from the bylaws of the MCA appears relevant

to the.issues raised here:

II. It is not to be construed that this bid procedure

is to eliminate or exclude other mechanical contractors

bidding in the areas established under the By Laws; to

the contrary, such mechanical contractors are invited

and urged to utilize such bid procedure; however, it is

expected that the By Laws of the Association be com-

plied with.

Plaintiff argues that the effect of the five-hour rule es-

tablished through the subscription of general contractors to

the MCA plan * is to require all non-member mechanicals to

bid directly to the generals prior to the five hour Western

Union filing deadline which applies to MCA members. At

this point non-members can presumably have their bids

peddled until the five hour deadline for Western Union fil-

3% Approximately 249 general contractors in South Carolina had

signed MCA’s five hour bid procedure as of September 1, 1975.

18 Cuttem Enporarc & MECHANICAL, INC., Prrrrioven, v.

ings. The MCA by-laws, however, specifically state that

non-members may utilize the Western Union filing proee-

dure, although compliance with the MCA by-laws is “ex-

pected,” and the deseription of the five hour procedure in

the MCA Directory refers to the participation of “mem-

bers and associate bidders” in filing bids with Western

Union. Moreover, the text of the agreenrent signed by all

cooperating generals does not require the signing general

to refuse to accept a mechanical’s bid for noneomplhiance

with the MCA by-laws; rather it requires the general to

refuse any bid filed less than five hours prior to the general

filbng deadline unless the mechanical submitting the bid has

filed it with a Western Union office five hours prior to the

general deadline. Under these circumstances, and beeause

there is no evidence to support a contrary conclusion, the

court is compelled to find as a matter of fact that, regard-

less of the validity of plaintiff’s coneerm that its bid might

be peddled if it were called into the contractor directly

prior to the five hour Western Union filing deadline, there

is nothing to prevent any non-member of the MCA who

wishes to from filing its bid with Western Union prior to

the five hour deadline, subsequently calling the bid in to the

generals prior to the four hour deadline, and having the bid

accepted by the successful general contractor without vio-

lation of the general’s agreement with the MCA.

7. Plaintiff has also questioned the nature and ade-

quacy of the MC A’s criteria and procedures for designating

particular construction projects as “five hour bid jobs.” An

exammation of the entire record does reveal that defendant

was unable to establish with any degree of specificity ex-

actly what its criteria and procedures were. It does appear

to be uncontradicted, however, that the Lander College

Library projeet out of which this suit arose involved ap-

proximately $500,000.00 of mechanical work. In addition,

the evidence establishes that a job of this magnitude, in-

volving considerable potential profit, would have been des-

ignated by the MCA as a five hour bid job as a matter of

course since the inception of the five hour tule. Therefore,

despite the perhaps nebulous criteria and procedures em-

ployed by the MCA in designating five hour bid jobs, the

MECHAN®ICAB Comrveracrogs Assoc. or 8S. C., RESFONSENT—APrPENDIX 19

decision to make the Lander College Library project a five

hour bid job would normally have been reached by the MCA

in aceordanee with its long-established practice.

8. Once a construction preject has been designated as

a five hour bid job, it is listed in the MCASC Weekly Bulle-

tin. This bulletin is mailed to all members of the Mechanical

Contractors Association of South Carolina and to al! gen-

eral contractors who have signed the agreement to abide by

the five hour bid procedure. In addition, the bulletin is

mailed to all arehitects and AGC planning rooms which

have jobs listed in the bulletin. The bulletins are posted in

the AGC Plan Room for inspection, and it appears undis-

puted that ary mechanical could determine whether a job

had been designated a five hour bid job by asking the arehi-

tect, any general cuntractor bidding the job, or any nember

of the MCA. It does not appear, however, that either the

MCA or anyone else makes any effort to notify non-mem-

bers of the status of particular jobs, and non-members are

apparently expected to find out this information on their

own.

9. As has been previously stated, plaintiff Cullum

Electric and Mechanical, Inc., is a meehanical contractor

located in Greenwood, South Carolina. Plaintiff was a mem-

ber of the MCA for approximately two years from Novem-

ber 1967 through November 1969. At the time of the Lander

College Library bid, however, plaintiff was not an MCA

member.

10. The Lander College Library was scheduled to be

constructed during 1975, and bids on the project from gen-

eral contractors were scheduled to be submitted on March

25, 1975. The job involved approximately $500,000.00 of |

mechanical work and was designated by the MCA as a five

hour bid job. For the three weeks immediately prior to

March 25, 1975, the Lander College Library project was

listed as a five hour bid job in the MCA Weekly Bulletin,

which stated that bids would be submitted to Western

Union at 9:00 a. m. and to the general contractors at 10:00

a. m., and that the general opening was at 2:00 p. m. The

bulletin listed 14 general contractors bidding on the Lan-

20 CuLLuM Evectric & MECHANICAL, INC., PETITIONER, v.

der job, and all but one of these generals had agreed to ad-

here to the MCA five hour bid procedure.

11. Plaintiff’s president testified that plaintiff did not

receive a copy of the MCA bulletin, was not rotified by any

one that the Lander job had been designated a five hour bid

job by the MCA, and did not know that the job had been

designated as a five hour bid job at the time its bid was sub-

mitted. Plaintiff in fact began calling its combined electri-

eal, heating and air conditioning bid in to general contrac-

tors around 10:00 a. m. on March 25, 1975. Plantiff’s bid

was received by telephone by Triangle Construction Com-

pany of Greenville, South Carolina, at 10:05 a. m. on March

25, 1975. It also appeared that the bid of Mae Reeves Com-

pany was called in to Triangle Construction Company at

10:05 a. m., the same time that plaintiff’s bid was called in;

Mae Reeves Company had filed its bid with Western Union

at 9:01 a. m. on March 25, 1975, one minute after the 9:00

a. m. deadline established by the MCA five hour bid proce-

y og Mac Reeves Company was an MCA member on that

ate.

12. At approximately 10:30 a. m. on March 25, 1975,

the vice president of F & D Electrical Company, a subcon-

tractor and MCA member bidding on the Lander College

Library job, was informed wy a representative of a general

contractor that Cullum Electrie was “putting out bids after

the deadline.” James F. Collier, F & D’s Vice President,

next obtained information from a relative employed by an-

other general contractor that F & D’s bid was the lowest

submitted by an MCA member. Collier next called Mrs.

Darlene Asbill, a secretary for the MCA, and informed her

of what he believed to be Cullum Electrie’s ate bid. Mrs.

Asbill was instructed by Joseph Albers, Managing Director

of the MCA, to call the general contractors bidding the Lan-

der College Library job and remind them of their signed

agreement with the MCA and that using plaintiff’s bid

would be a violation of that agreement. Plaintiff has cor-

rectly pointed out that Mae Reeves Company, an MCA

member, failed to comply with the MCA bidding procedure

but was not the subject of any similar telephone calls from

the MCA office. There is no evidence, however, that the

MECHANICAL CONTRACTORS Assoc. or S. C., RESPONDENT—APPENDIX 21

MCA office or any other MCA member was aware of \lac

Reeves’ noncompliance at the time the calls concerning Cul-

lum Electric were made. Moreover, any action that might

have been taken by the MCA at a later time was obviously

rendered unnecessary by the fact that Mac Reeves had not

submitted the low bid on the Lander College job and would

not have been selected by any of the general contractors.

13. Plaintiff’s bid of $442,000.00 for combined electri-

eal, heating, and air conditioning work was the low bid re-

ceived by the 14 general contractors bidding on the job. The

next closest combined electrical, heating, and air condition-

ing bid was that of Thad Coleman Company of Greenville,

South Carolina (heating and air conditioning—$243,571.00)

and F & D Electrical Company of Columbia, South Caro-

lina (electrical—$201,365.00). The combined bid of F & D

Electrical and Thad Coleman Company was $444,936.00, or

$2,936.00 more than Cullum Electric’s combined bid of

$442,000.00. Triangle Construction Company, the general

contractor eventually awarded the Lander College Library

job, had previously used Cullum Electric as a subecontrac-

tor, and has done so since the Lander College job; Trian-

gle’s representatives acknowledged that Cullum Electrie

was a qualified licensed electrical, heating, and air condi-

tioning contractor and that its bid would have been used

by Triangle on the Lander College Library job if it had not

been for the MCA telephone call and for Triangle’s signed

agreement with the MCA. '

14. In a continuing effort to secure the Lander College

Library job on the basis of its bid, plaintiff contacted Lan-

der College, Triangle Construction Company, and the MCA

on various occasions following March 25, 1975. The result

of these contacts, which took place prior to the filing of this

suit, may be summarized to indicate that Lander College

had no objection to the use of plaintiff’s bid and that Tri-

angle Construction Company was willing to use plaintiff's

bid unless the MCA continued to maintain its position that

Triangle’s use of Cullum Electrie’s bid would violate the

Triangle-MCA agreement concerning the five hour bid pro-

cedure. These subsequent efforts on behalf of the plaintiff

appeared to have been made almost entirely in the form of

2? CumaM E.scrmc & Mecnamicas, INc., PEEETIONER, 0.

written correspondence, and the contacts between plaintiff

and defendant appeared to have been made by the respec-

tive attorneys for each party. No formal hearing, evicden-

tiary or otherwise, seems to have been heki comeerning

plaintiff's case, but no such hearmg seems to have been de-

manded by plaintiff or its attorney. It further appears that

both parties were in possession of the full facts coneerning

the controversy as a result of the correspondence between

them. The MCA, however, chose not to alter its position,

and shortly after May 1, 1975, Triangle Construetion Com-

pany awarded the electrical subcontract for the Lander

College Library job to F & D Electrieal and awarded the

heating and air conditioning subcontract to Thad Coleman

Company.

15. On the basis of the evidence presented to the court,

and in light of the findings of fact already published above,

the court is also compelled to find as a fact the following:

Although Cullum Electric was not specifically notified by

the MCA or anyone else that the Lander College Library

project had been designated a five hour bid job by the MCA,

the knowledge acquired by plaintiff during its two year

tenure as an MCA member, in addition to its subsequent

experience in the mechanical subcontracting industry, was

more than adequate to provide plaintiff with knowledge of

the virtual certainty that the Lander College Library job

would in fact be designated by the MCA as a five hour bid

job. Plaintiff’s failure to submit its bid in compliance with

the standards established in the MCA five hour bid proce-

dure therefore cannot be attributed to any failure on the

part of the MCA to notify plaintiff that the Lander College

Library job had been designated a five hour bid job.

MECHAN®SAL ConTractoas Assoc. or 5. C., RESPONDENT—APPENDIX 23

CONCLUSIONS OF LAW

[1, 2] Plaintiff's allegations in this action originally

constituted an attack on the MCA on two fronts. The com-

plaint alleged both an attempt to monopolize and a conspir-

acy to monopolize under Section 2 of the Sherman Aet,* and

also an illegal group boycott and illegal price-fixing activity

under Section 1 of the Sherman Act.® Since the legal argu-

ments and evidence presented by the plaintiff during and

after the trial of this action have been direeted entirely to-

ward proving a violation of Section 1, it appears that plain-

tiff has effectively abandoned its efforts to establish any

violation of Section 2. The elements necessary to prove an

attempt to monopolize as a violation of Section 2 may be

generally summarized as: (1) indieation of a “dangerous

probability” of monopoly by showing that the defendant

has sufficient power to create a monopoly and has commit-

ted overt acts in furtherance of that goal; (2) establish-

ment of the relevant market; and (3) proof of specific

intent to monopolize. To establish the existence of a combi-

nation or conspiracy to monopolize in violation of Section

2, a plaintiff must prove the following elements: (1) the

existence of a combination or conspiracy; (2) overt acts

done in furtherance of the combination or conspiracy; (3)

an effect upon a substantial amount of interstate com-

merece; and (4) the existence of specific intent to monopo-

lize. As indicated previously, it appears that plaintiff has

actually abandoned its efforts to establish a violation of

Section 2, but the court nevertheless feels compelled to

state its conclusion that, as a matter of law, plaintiff has

failed to introduce evidence sufficient to prove the neces-

sary elements of either an attempt to monopolize or a com-

bination or conspiracy to monopolize under Section 2 of the

Sherman Act.

4 Section 2 of the Sherman Act, 15 U.S.C. § 2 renders illegal the

conduct of “every person who shall monopolize, or attempt to monopo-

lize, or combine or conspire with any other person or persons, to monop-

olize any part of the trade or commerce among the several States, or

with foreign nations.”

5 Section 1 of the Sherman Act, 15 U.S.C. § 1 provides in relevant

part: “Every contract, combination in the form of trust or otherwise,

or conspiracy, in restraint of trade or commerce along the several

States, or with foreign nations, is hereby declared to be illegal.”

eR ere eS ee nT

24 CuLtuM EL vectric & MECHANICAL, INC., PETITIONER, v.

Plaintiff’s allegations of Section 1 violations raise the

significant issnes in this case, and those allegations are the

following:

(1) By restricting the time when a general con-

tractor may receive and negotiate for competitive sub-

bids it (the MCA procedure) limits and restrains com-

petition to the end that the owner (in this ease the tax-

payers of South Carolina) is required to pay a higher

price for the construction.

(2) By requiring general contractors to refrain

from receiving and using sub-bids not submitted in

com tance with the prescribed procedure, the proce-

dure constitutes a combined refusal to deal or an agree-

ment to boycott, the purpose of which is to coerce all

subeontractors to comply with the anti-competitive

procedures of the association.

(3) By treating members of the association more

favorably than non-members, the procedure constitutes

unfair and discriminatory trade practices with the

natural tendency of depriving non-members of a fair

and equal opportunity to compete and to deprive them

of their ordinary means of earning a livelihood.

All of these allegations have the effect of charging vio-

lations of Section 1 of the Sherman Act, but only the first

and second appear to merit the serious consideration of the :

court at this stage in the litigation. Proof of the third alle-

gation could indeed be a basis for Section 1 liabili y, but

the previously published findings of fact indicate that plain-

tiff has failed to establish the most significant portion of

this charge—that the five-hour bid procedure treats mem-

bers of the MCA more favorably than non-members.°

(3] Plaintiff’s first allegation is not the one upon

which it seems to rely most strongly, but since it, in effect,

charges that MCA members and general contractors have

engaged in concerted action which resulted in price fixing,

® It is conceivable that the five-hour bid procedure of the MCA

could have certain adverse effects upon non-member mechanical con-

tractors in a case factaally different from this one. This —_— prob-

lem, which relates to che MCA’s provisions for notice an arings on

complaints, is considered later in this order.

MECHANICAL CONTRACTORS Assoc. or S. C. RESPONDENT—APPENDIX 25

this allegation deserves careful scrutiny. There is certainly

no doubt that there has been concerted action in this case

by MCA members and general contractors; the existence of

the written five-hour bid procedure agreements precludes

any contrary conclusion. In addition, perhaps the’ clearest

maxim in all anti-trust law is that any arrangement be-

tween two or more competitors which interferes with the

setting of prices by free market forces is both unreasonable

and per se unlawful. In the leading case of United States v.

Socony-Vacuum Oil Company, 310 U. S. 150, 60 S. Ct. 811,

84 L. Ed. 1129, rehearing denied, 310 U. S. 658, 60 S. Ct.

1091, 84 L. Ed. 1421 (1940), Mr. Justice Douglas stated on

behalf of the Court:

Any combination which tampers with price strue-

tures is engaged in an unlawful activity. Even though

the members of the price-fixing group were in no posi-

tion to control the market, to the extent that they

raised, lowered, or stabilized prices they would be di-

rectly interfering with the free play of market forces.

310 U.S. at 221, 60S. Ct. at 843.

In support of its generalized allegations of indirect

price tampering, plaintiff relies heavily upon a series of

California cases decided under that state’s Cartwright Act,

which is patterned after the federal Sherman Act. The lead-

ing case in this series for ovr purposes is Oakland-Alameda

County Builders’ Exchange v. F. P. Lathrop Construction

Company, 4 Cal. 3d 354, 93 Cal. Rptr. 602, 482 P. 2d 226

(1971) (en banc), involving the operation by a builders’ ex-

change of a so-called “bid depository” which plaintiff con-

tends is substantially similar to the MCA five-hour bid pro-

cedure. In Oakland-Alameda the California Supreme Court

held that the bidding procedures in question were unen-

forceable because they constituted per se violations of the

Cartwright Act, both as an illegal group boycott and as an

unlawful price fixing arrangement. The court’s decision.

which reversed a 1971 decision of the California Court of

Appeal reported in 8 Cal. App. 3d 75, 87 Cal. Rptr. 129

(1970), is indicative of the recent tendency of the California

courts to disapprove of any bidding procedure which places

ee

a)

26 Cutsem Exvectmic & Mecuanicas, Inc., Perrrioum, «.

time restrictions upon subcontracters in the submission

of their bids to generals. For example, a procedure similar

to the four-hour rule which is in effect but not cha!-

lenged in this case was held violative of the Cartwright Act

in People v. Inland Bid Depository, 233 Cal. App. 2d 851,

44 Cal. Rptr. 206 (1965). In Oakland-Alameda the purpose

of the bid depository was found to be identical to the prinei-

pal purpose of the MCA five-hour rule, i. e., to prevent bid

peddling. The court, however, made the following observa-

tions about bid peddling:

Instead of being a vice, however, it is readily ap-

parent that the practice defined as “bid peddling” is

illustrative of open price competition in its purest

form. To the extent that general contractors disclose

the lowest subbids to competing subcontractors and

thereby induce the subcontractors to make still lower

subbids, the general contractors are able to offer lower

prime bids to the awarding authority. The awarding

authority, the taxpayers in the case of public projects

and consumers in other instances, are the true benefi-

ciaries. To obtain the lowest possible bid is the object

of competitive bidding.

After examining the rules of the bid depository, the

court then reached the following conclusions:

Thus, neither general contractors nor interested

subcontractors who used the Depository are able to

exercise initiative to instigate open price competition

among subcontractors and by that means to stimulate

lower subbids. .. . In essence, the rules constitute an

agreement by subscribing subcontractors not to en-

gage in open price competition in the submission of

their bids to general contractors and an agreement by

participating general contractors not to deal with sub-

contractors who do not cooperate.

On this basis, the court coneluded that the depository

rules were unenforceable because they constituted a per se

illegal agreement to fix or tamper with prices.

[4] Despite the reasoning of the California Supreme

Court, this court is not prepared to assume on the record

ee ee

MECHANICAL ConwTRAcTors Assoc. or S. C. RESPONDENT—APPENDIX 27

before it that bid peddling is essential to the purity of open

price competition and that any attempt to eliminate it is

per se illegal. Moreover, an allegaion that time restrictions

on bid submission are tantamount to price fixing (which is

what plaintiff seems to claim here) attacks not only the five-

hour bid procedure in effect here, but also the entire strue-

ture of competitive bidding in the construction industry. A

more reasonable approach to such allegations can be found

in the opinion of the Court of Appeal in Oakland-Alamedz,

where the court upheld a provision similar to the four-hour

rule involved in this case and commented:

Trade and commerce by definition imply that at

some time a bargain will be struck. The system of com-

petitive bidding is well recognized as, and is mandatory

in connection with most public contracts as, a method

of securing the performance of work at the lowest com-

petitive price. It is obvious that there must be some

interval between the time the general contractor re-

ceives the ultimate bid from a subcontractor, and the

time he computes and makes his bid to the awarding

authority. An agreement to make this period uniform

for general and subcontractors alike is certainly a re-

straint on trade, but it cannot be considered an unrea-

sonable restraint on trade without indicting the whole

competitive bidding process. 8 Cal. App. 3d at 89, 87

Cal. Rptr. at 141.

The esserice of the system of competitive bidding for

construction contracts and subcontracts is indeed to obtain

the lowest possible price for the quality of work desired.

When a subcontractor submits a bid to a general, he has

presumably caleulated and submitted a price which will

allow him to complete the job in accordance with the labor

and material specifications and at the same time earn a

profit which will be fair to the subcontractor and competi-

tive with that sought by other subcontractors bidding the

same job. If it is assumed that some or all subcontractors

will lower their bids during a period of bid peddling, the

only sources from which these reductions can come are the

reduction of the subeontractor’s profit margin or the redue-

28 CuLLuM Evectric & MECHANICAL, INC., PETITIONER, v.

tion of his costs on the project. The former would obviously

result in an ultimate savings to the consumer, but the latter

would just as inevitably result in a reduction of the quality

of the materials or performance supplied by the subcon-

tractor. The court’s conclusion in Oakland-Alameda not-

withstanding, it appears that the bidding procedures under

the five-hour and/or four-hour rules are self-regulating and

conducive to open price competition. A bidding subcontrac-

tor willing to provide quality work and materials for a

lower price than his competitors undoubtedly will be

awarded the contract by a general contractor with full au-

thority to aecept or reject any and all bids. This is the es-

sence of open price competition, and it does not appear to

be jeopardized by the bidding procedures now in effect in

South Carolina.

There are also numerous other price-related factors

which could be affected by the presence or absence of a reg-

ulated bidding procedure. For example, the Court of Ap-

peal in Oakland-Alameda made the following observations:

From all that appears from the pleadings in this

case it may be shown that subcontractors are dissuaded

from bidding until the last possible interval of time in

the absence of the orderly system provided by a bid de-

pository; that bids are purposely high to compensate

for bid shopping or bid peddling; and that the number

of subeontractors bidding on any particular job is re-

duced in the absence of conditions enhancing the fair

competition.

[5] The record before the court in this case is devoid

of any indication that the five-hour bid procedure was de-

vised by the MCA with any intention whatsoever of fixing

prices. More significantly, however, the record also fails to

reflect that the five-hour bid procedure has had any effect

whatsoever upon prices, whether to raise, lower or stabilize

them. Plaintiff has simply failed to establish that general

contractors are paying the same amount, or a greater or

lesser amount for mechanical work than they would pay

under a system not regulated to eliminate such practices as

bid peddling. In this regard, the observation of the Su-

EN a ee

MECHANICAL CONTRACTORS Assoc. or S. C. RESPONDENT—APPENDIX 29

preme Court in White Motor Co. v. United States, 372 U.S.

253, 83 S. Ct. 696, 9 L. Ed. 2d 738 (1963), is of some signifi-

cance. Despite its previous disapproval of horizontal terri-

torial restrictions in Timken Roller Bearing Co. v. United

States, 341 U. S. 593, 71 S. Ct. 971, 95 L. Ed. 1199 (1951),

the Court concluded in White Motor Co., when reviewing

the granting of a summary judgment, that:

This is the first case involving a territorial restrie-

tion in a vertical arrangement; and we know too little

of the actual impact of both that restriction and the one

respecting customers to reach a conclusion on the bare

bones of the documentary evidence before us. 372 U.S.

at 261, 83 S. Ct. at 701 (emphasis added).

Despite the existence of a full record in this ease, it is

similarly unwise and impossible to reach a conclusion of

illegality. This court knows too little because plaintiff has

proved too little concerning the impact of the five-hour bid

procedure on prices for mechanical construction work. It

is therefore the conclusion of the court that plaintiff has

failed to prove a violation, a per se or otherwise, of Section

1 of the Sherman Act based upon any action of defendant

to fix prices in the mechanical subcontracting field.

Plaintiff’s remaining allegation is that the five-hour

bid procedure is illegal per se under Section 1 of the Sher-

man Act because it constitutes a group boycott. It must be

conceded that the United States Supreme Court has, in a

number of cases, | eld that a particular boycott was a per se

violation of Section 1 of the Sherman Act. See, e. g., United

States v. General Motors Corp., 384 U.S. 127, 86S. Ct. 1321,

16 L. Ed. 2d 415 (1966); Radiant Burners, Inc. v. Peoples

Gas, Light & Coke Co., 364 U. S. 656, 81 S. Ct. 365, 5 L. Ed.

2d 358 (1961); United States v. Parke, Davis & Co., 362

U.S. 29, 80 S. Ct. 503, 4 L. Ed. 2d 505 (1960): Klor’s, Inc.

v. Broadway-Hale Stores, Inc., 359 U. S. 207, 79 S. Ct. 705,

3 L. Ed. 2d 741 (1959); Northern Pacific Ry. v. United

States, 356 U.S. 1, 78S. Ct. 514, 2 L. Ed. 2d 545 (1958) ; As-

sociated Press v. United States, 326 U.S. 1, 65 S. Ct. 1416,

89 L. Ed. 2013 (1945) ; Fashion Originators’ Guild of Amer-

ica, Inc. v. FTC, 312 U.S. 457, 61 S. Ct. 703, 85 L. Ed. 949

30 Cuttom Eecrric & MBCHANICAL, INC., PETITIONER, v.

(1941); Eastern States Retail Lumber Dealers’ Ass'n r.

United States, 234 U. S. 600, 34 S. Ct. 951, 58 L. Ed. 1490

(1914). In light of these decisions, it is quite understand-

able that many courts and commentators have contended

and do contend that all group boycotts are per se violations

of Section 1.

Despite the pronouncemenis of the Supreme Court, a

multitude of lower corrts have continued to evaluate

alleged boycotts under a “rule of reason” analysis rather

than by the per se doctrine employed by the Supreme Court

in the aforementioned cases. As one commentator has ob-

served, “the law in Washington, however, is quite different

from the law in the rest of the country.” Woolley, Js a Boy-

cott a Per Se Violation of the Antitrust Laws? 27 Rutgers

L. Rev. 773 (1974). The article cited above catalogs and

discusses a large collection of lower court decisions which

eniploy various theories to qualify the per se rule; these

cases, however, involve many factual situations which

might arguably appear to fall well within the category of

boyeotts which the Supreme Court would consider per se

illegal. This apparent dichotomy between the Supreme

Court and lower court views of the law applicable to group

boycotts has prompted many other articles as well. E. ¢.,

Barber, Refusals to Deal Under the Federal Antitrust

Laws, 103 U. Pa. L. Rev. 847 (1955); Byrd, Sherman

Act Limitations on Non Commercials Concerted Refusals

to Deal, 1970 Duke L. J. 247; Note, 48 Temple L. Q. 126

(1974); Case Note, 27 Ark. L. Rev. 722 (1973): Comment.

13 B.C. Ind. Comm. L. Rev. 484 (1972): Note, 66 Colum. L.

Rev. 1486 (1966) ; Note, 71 Harv. L. Rev. 1531 (1958). These

sources contain numerous citations to decisions in which

lower courts, in one way or another, have declined to ad-

here to the application of a per se rule of illegality in eases

involving allegations of group boycotts. Reported decisions

also indicate that this trend has continued since the publica-

tion of the most recent of the articles cited above. While a

discussion of all of these decisions might not prove to be a

totally impossible undertaking, it would certainly be fruit-

less to attempt to reconcile the various approaches taken

therein. To state that the law concerning group boycotts

TO __———————————

MECHANICAL CONTRACTORS Assoc. or S. C. RESPONDENT— APPENDIX 31

and Section 1 of the Sherman Act lacks consistency would

be to understate the truth by a wide margin.

[6] Plaintiff urges that the MCA five-hour bid proce-

dure to which many general contractors have agreed con-

stitutes an illegal group boyectt because it either places

non-members of the MCA at « severe competitive disad-

vantage or excludes them from the bidding process alto-

gether. This position is untenable, however, because the

court has previously found as a fact that non-members of

the MCA appear to have as great an opportunity as mem-

bers to file their bids with Western Union and participate

in the bidding process without violating the five-hour rule.

Plaintiff’s alternative contention seems to be that, regard-

less of the existence of any distinctions between members

of the MCA and non-members, Cullum Eleetrie was still the

victim of illegal concerted action constituting a group boy-

cott. Under either of plaintiff's theories, the type of boveott

alleged must be regarded as secondary, in the sense that one

sroup (the MCA) has allegedly exerted some sort of per-

suasive force upon another group (general contractors) in

order to produce an ultimate effect upon certain other par-

ties (e. g., Cullum Electric), Defendant has repeatedly eon-

tended that it has no means of exerting economic leverage

against the general contractors in order to compel them to

adhere to its five-hour bid proeedure; it further contends

that it has absolutely no means of enforcing the general’s

promise other than to appeal to the sense of moral obliga-

tion which sometimes arises out of so-called gentlemen’s

agreements. Nevertheless, the absence of such coercion, eco-

nomic or otherwise, does not appear to be a valid defense to

a charge of group boycotting. This issue appears to have

been settled at least since the decision of the United States

Supreme Court in Duplex Printing Press Co. v. Deering,

254 U.S. 443, 41 S. Ct. 172, 65 L. Ed. 349 (1921), where the

Court held that “a restraint produeed by peaceable persua-

sion is as much within the prohibition (of the Sherman Act)

as one accomplished by force or threats of foree.”

Both parties seem to have structured their arguments

around the presumption that some form of beyeott is in-

deed present and that the critical issue of law in the case

32 CuLLUM Euecrric & MECHANICAL, INC., PETITIONER, v.

is whether this court will adhere to a rule of per se illegal-

ity for group boycotts or apply a “rule of reason” analysis

to the conduct in question here. As indicated by the numer-

ous cases and articles referred to above, the court would

not suffer for lack of reference material in the decision of

this issue. There is actually little, if any, middle ground be-

tween a per se rule of illegality for group boycotts and the

application of a rule of reason analysis. Many courts have

nevertheless attempted to manufacture a workable compro-

mise, but their efforts have not met with any notable degree

of suecess. The application of a per se rule in any area of

judicial decision necessarily results in the proseription of

a broad range of possible activity. Within this range, some

activity can easily be labeled as totally reprehensible. Other

activity, however, will lie at the other end of the spectrum,

and the decision to brand it as automatically illegal may be

open to serious question. Defendant understandably urges

that the action in question here should not fall under the

blanket of per se illegality, and that this is an appropriate

ease for the application of a rule of reason. It is apparent

that the Supreme Court has not yet considered a case

marked by the facts present here, and while the Court

might consider this case appropriate for the application of

a rule of reason if it were making the decision, it is

extremely difficult for a court at this level to challenge pro-

nouncements of per se illegality as strong and as clear as

some of those which have appeared in existing decisions of

the Supreme Court. Defendant, however, continues to urge

rather convincingly that its conduct has in fact been “rea-

sonable,” and correctly points out that the use of the five-

hour bid procedure involves a minimal risk of economic

harm to mechanical contractors.

[7, 8] Despite the parties’ view of the principal issue

involved in this case, the court must conclude that its deei-

sion should not be based upon a choice between the rule of

reason and the doctrine of per se illegality. There is an in-

herent risk of criticism in deciding any case without reach-

ing an admittedly complex legal issue which both parties

have fully argued, briefed, and assumed to be critical to

their success in the case. Nevertheless, the factual situation

ee

MECHANICAL CONTRACTORS Assoc. or S. C. RESPONDENT—APPENDIX 33

in this case is such that the court cannot reach the initial

conclusion that a group boycott exists or has existed as a

result of the MCA’s five-hour bid procedure. The absence

of a group boycott of course prevents defendant’s conduct

from being held per se illegal and indeed renders it not ille-

gal at all, even assuming arguendo that the Supreme Court

has pronounced the per se illegality of all group boyeotts.

Most alleged boycotts fall so clearly within the mean-

ing of that term that courts are seldom either disposed or

required to define it. Reference to the dictionary reveals

the following definition of “boycott”:

A conspiracy or confederation to prevent the ear-

rying on of business, or to injure the business of any-

one by preventing potential customers from doing busi-

ness with him or employing the representatives of said

business, by threats, intimidation, coercion, ete. Black's

Law Dictionary.

_ The Supreme Court’s significant opinion in United

States v. General Motors Corp., 384 U. S. 127, 86 86 S. Ct.

1321, 16 L. Ed. 2d 415 (1966), provides some insight in its

statement that:

There can be no doubt that the effect of the com-

bination or conspiracy here was to restrain trade and

commerce within the meaning of the Sherman et.

Elimination, by joint collaborative action, of diseount-

ers from access to the market is a per se violation of

the Act. 384 U.S. at 145, 86S. Ct. at 1330.

by joint collaborative action, of discounters from access to

the market is a per se violation of the Act. 384 U.S. at 145,

86S. Ct. at 1330.

It seems fair to infer from this language that the Court

considers to be a group boycott any joint action which actu-

ally or effectively eliminates any competitor from access to

the market. Perhaps the fairest and most complete defini-

tion of a group boycott is found in Barber, Refusals to Deal

Under the Federal Antitrust Laws, 103 U. Pa. L. Rey. 847

(1955), a significant article cited above and also cited by the

34 CuLtum Execrretc & MB&CHANICAL, INC., PETITIONER, v.

Court in General Motors. Barber defines a group boycott

in the following fashion:

The distinguishing feature of the group boycott

cases is group action to coerce third parties to conform

to the pattern of conduct desired by the group or to

secure their removal from competition. . . . Such

action offends the concept of a free market because it

places inveluntary restraints on the trading opportuni-

ties of strangers to the group.

Under any of these definitions, the existence of a group

boycott simply cannot be established upon the facts pre-

sented concerning the MCA five-hour bid procedure. There

is no eontention that there is any restriction whatsoever

upon membership in the MCA, but even so, non-members

are just as free to use the Western Union filing procedures

as MCA members are. There is no boycott inherent in the

rules because all mechanical contractors regardless of MCA

affiliation are free to compete in the bidding process under

identical regulations. Plaintiff would have the court con-

strue the generals’ agreement with the MCA as an agree-

ment to boycott non-members, but that is simply not what

the pact is. It is not an exercise in legal hair-splitting to

interpret the agreement according to the language it con-

tains, and that language says that the signing generals will

adhere to a policy of accepting only certain types of bids,

i. e., those that are on time under the five-hour rule. All

mechanical contractors, members and non-members alike,

are subject to the rule and none are foreclosed from access

to the market unless they elect not to comply with the time

limitation. Failure to comp!y with the five-hour rule creates

a result identical to that produced by a mechanical’s viola-

tion of the general contractors’ four-hour rule—that me-

chanical’s bid will not be accepted.

The element of coercion “to conform to the pattern of

conduct desired by the group” must also be considered in

this case, but it is the nature of the “desired” conduct here

which seems most significant. The five-hour bid procedure

requires al] mechanical contractors, without exception, to

submit bids aceording to the same time limitation. Regard-

less of the source of this limitation, it appears little more

MECHANICAL CONTRACTORS Assoc. or S. C. RESPONDENT—APPENDIX 35

restrictive than any of a number of other administrative

requirements which the general contractors might estab-

lish for themselves, such as submission of bids in typewrit-

ten form, placing of all bids on 814 by 11 inch paper, presen-

tation of a specified number of extra copies of each bid, or

even mailing or otherwise communicating the substance of

each bid to a particular location and no other. Perhaps the

legal guidelines are and may always be hazy, but there is

a distinction between conduct which constitutes a boycott

and conduct which does not. The Supreme Court may have

alluded to this distinction in Silver v. New York Stock Ex-

change, 373 U.S. 341, 83 S. Ct. 1246, 10 L. Ed. 2d 389 (1963),

where a per se illegal group boycott was found when the

New York Stock Exchange directed certain of its member

firms to discontinue private wire connections with two non-

member over-the-counter securities broker-dealers, without

assigning any reason therefor or giving the non-members

notice or an opportunity to be heard. The Court stated:

The concerted action of the Exchange and its mem-

bers here was, in simple terms, a group boyeott depriv-

ing petitioners of a valuable business service which

they needed in order to compete effectively as broker-

dealers in the over-the-counter securities market. . .

Without membership in the network of simultaneous

communication, the over-the-counter dealer loses a

significant volume of trading with other members of

the network which would come to him as a result of his

easy accessibility. These important business advan-

tages were taken away from petitioners by the group

action of the Exchange and its members. Such “con-

certed refusals by traders to deal with other traders

... have long been held to be in the forbidden category,”

Klor’s, Inc. v. Broadway-Hale Stores, Inc. (359 U.S.

at 212, 79 S. Ct. at 709), of restraints which “because

of their inherent nature or effect . . . injuriously

restrain trade,” United States v. American Tobacco

Company, 221 U. S. 106, 179, 31 S. Ct. 632, 55 L. Ed.

663, 694.

. In this case, the five-hour rule itself has not deprived

plaintiff of an important or even an unimportant business

36 CuLLUM ELectric & MECHANICAL, INC., PETITIONER, v.

advantage. Plaintiff might complain about having to sub-

mit its bids five hours ahead of the general deadline rather

than four, but MCA members are subject to the same rule

and have standing to raise the same complaints about the

procedure. Plaintiff has cited cases involving bidding re-

strictions which were held to constitute illegal boycotts but

without exception, those decisions involve bid depositories

or other procedures, such as that present in Oakland-

Alameda, supra, which are far more restrictive and ex-

clusive than the system in this case. The conduct of which

plaintiff complains, the institution of the five-hour bid pro-

cedure at the request of the MCA, simply does not consti-

tute a group boycott, violative of Section 1 of the Sherman

Act or of any other statute, and this court so concludes as

a matter of law.

{9} A most significant issue in this case thus becomes

plaintiff’s alleged lack of knowledge that the Lauder Col-

lege Library job had been designated a five-hour bid job

by the MCA. The court has already found as a fact, how-

ever, that plaintiff knew or should have known that the

Lander College Library job had been so designated. Were

this not the case, the court would consider with the greatest

care plaintiff’s allegations that the five-hour bid procedure

violates Section 1 because the MCA makes either insufficient

efforts, or no efforts at all, to notify non-member mechan-

ical contractors of the designation of certain construction

projects as five-hour bid jobs. In this regard also, there

appears to be possible merit in plaintiff’s allegations that

the MCA’s lack of a hearing procedure for disputes involv-

ing non-members jeopardizes the legality of the five-hour

rule. Plaintiff has cited such cases as Silver, supra, and

Blalock v. Ladies Professional Golf Association, 359 F.

Supp. 1260 (N. D. Ga. 1973) as illustrative decisions in

these areas of the law, and the court has reviewed them

with interest. Nevertheless, the court also has previously

found in this case that the communications between plain-

tiff and the MCA concerning their dispute adequately in-

formed each party of the other’s position, and that plaintiff

did not request a hearing of a more formal nature than the

communications which actually occurred. Therefore, al-

nt re

MECHANICAL CONTRACTORS Assoc. or S. C. RESPONDENT—APPENDIX 37

though a different result might be required in the case of

a plaintiff without plaintiff’s knowledge of MCA procedure,

the court concludes as a matter of law that this plaintiff,

Cullum Electric, has failed to establish the validity of any

cause of action based upon defects in the notice and heari

procedures employed by the MCA in connection with the

five-hour bid rule.

CONCLUSION

Since plaintiff has failed to establish that it is entitled

to recover on any of the causes of action advanced in its

complaint, the Clerk of this Court is directed to enter judg-

ment in favor of the defendant in this action, and plaintiff

shall take nothing.

AND IT IS SO ORDERED.