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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition
- **Published:** January 1, 1978
- **Citation:** 439 U.S. 910

## Text

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.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385005_1116%3A1. Public record. Not legal advice.