Petition — Brighton Building & Maintenance Co. v. United States

* Supreme Court, U. &

FILED \|

JUN 18 1979

IN THE

SUPREME COURT OF THE UNITED STATES

Octoser TERM, 1979

Nc. @8-18 72

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BRIGHTON BUILDING & MAINTENANCE CO.,

WESTERN ASPHALT PAVING CO., and

THOMAS J. BOWLER,

Petitioners

Vv.

UNITED STATES OF AMERICA,

Respondent

—-

—

JOINT PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Don H. Revsen

VALENTINE A. WEBER, JR.

Reuben & Proctor

11 South LaSalle Street

Chicago, Illinois 60603

(312) 558-5500

Counsel for Petitioners

June 18, 1979

EGE AIEEE. SIE PRATT BA RIOR a RR OR TT NONE ETE INET,

La Salle Street Press — Chicago Printed In U.S.A.

=

—_—

IN THE

SUPREME COURT OF THE UNITED STATES

OcrosEr Term, 1979

BRIGHTON BUILDING & MAINTENANCE co.,

WESTERN ASPHALT PAVING CO., and

THOMAS J. BOWLER,

Petitioners

Vv.

UNITED STATES OF AMERICA,

Respondent

——— ed

JOINT PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Petitioners respectfully pray that a writ of certiorari

issue to review the judgment and opinion of the United

States Court of Appeals for the Seventh Circuit entered in

this proceeding on May 18, 1979,

OPINION BELOW

The Court of Appeals’ opinion, reported at 1979-1 Trade

Cases {[ 62,637 (7th Cir. 1979), appears as Appendix A

hereto.

2

JURISDICTION

The judgment below was entered on May 18, 1979, and

this petition is timely filed, in accordance with Rules 22(2)

and 34(1) of this Court. Jurisdiction is invoked under 28

U.S.C. § 1254(1).

QUESTION PRESENTED

Whether the jury was properly instructed that proof be-

yond a reasonable doubt of specific intent is a necessary

element in a criminal case charging a price-fixing violation

under $1 of the Sherman Anti-Trust Act (15 U.S.C. §1).

STATUTE AND RULE INVOLVED

United States Code, Title 15:

§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 ... .”

Rules of the Supreme Court of the United States:

Rule 46. “Parties interested jointly, severally, or other-

wise in a judgment may join in an appeal or a petition

for writ of certiorari therefrom; or, without summons

and severance, any one or more of them may appeal

or petition separately or any two or more of them may

join in an appeal or petition.”

STATEMENT OF CASE

Petitioners were convicted by a jury of one count of con-

spiracy and combination in restraint of trade in violation

of Section 1 of the Sherman Anti-Trust Act (15 U.S.C. 41)

and thirty-seven counts of mail fraud (18 U.S.C. § 1341).

The convictions stemmed from an alleged combination and

conspiracy to suppress competition by filing bids in a

3

prearranged fashion on contracts for the part construction

of Federal-Aid Interstate Highway No. 55 within the State

of Illinois. (App. A-2).

Five contracts were involved, numbered 82, 83, 84, 85

and 88. Corporate defendants Brighton Building & Main-

tenance Company and Krug Excavating Company bid

jointly, under the name B-K, Corporate defendants Palumbo

Excavating Company, Thomas M. Madden Company and

J. M. Corbett Company bid jointly, under the name PMC.

Corporate defendant Arcole Midwest Corporation (“Ar-

cole”) bid separately.

Arcole pleaded guilty prior to trial, and the government’s

case rested principally on the testimony of Ernest Beder-

man, president of Arcole. Bederman testified that the chief

executive officers of the various corporate defendants agreed

to file their bids in a prearranged fashion. Bederman testi-

fied that the “agreement” provided that B-K would be the

only or low bidder on jobs 82 and 83, PMC on 84, and Arcole

on 85 and 88. In fact, the actual bids were inconsistent with

any such agreement: B-K “submitted a bid on 84 as well,

lower than the PMC bid, and B-K was awarded the con-

tract.” (App. A-3).

Petitioner Bowler, who broke the alleged Bederman

agreement by submitting the accepted low bid on Project

84, was sentenced to a prison term and he and the corporate

defendants were fined. On appeal, petitioners’ challenges

included the contention that the jury was not properly in-

structed on the issue of intent. (App. A-5). The trial judge’s

charge to the jury, given in November, 1977, included the

following instruction:

“Tt is not necessary to find a specific intent to violate

the law, for the parties are deemed to have intended

the necessary and direct consequences of their acts.”

(App. A-25).

4

Petitioners argued below that this instruction violated

the specific intent holding in United States v. United States

Gypsum Co., 438 U.S. 422 (1978), and earlier cases cited

therein. The lower court, in affirming the convictions, er-

roneously distinguished Gypsum:

An agreement for price maintenance is an unreason-

able restraint unlawful per se under the Sherman Act.

We do not read Gypsum as indicating that once de-

fendants are proved to have intentionally made an

agreement which is unlawful per se, there must be an

instruction that the defendants cannot be convicted un-

less they are found to have intended to restrain trade

or commerce. (App. A-8-9) (Citation omitted).

REASON FOR GRANTING THE WRIT

THE DECISION BELOW CONFLICTS WITH THIS

COURT'S DECISION IN UNITED STATES v. UNITED

STATES GYPSUM CoO., 438 U.S. 422 (1978).

This Petition presents the question whether or not the

intent element was correctly explained to the jury. One

year ago this Court, stating its “unwilling[ness] to construe

the Sherman Act as mandating a regime of strict liability

criminal offenses,” held that “the criminal offenses defined

by the Sherman Act should be construed as including intent

as an element.” United States v. United States Gypsum Co.,

supra at 436, 443. Anchoring its decision in fundamental

principles of Anglo-American criminal jurisprudence, /d.

at 436-37, this Court required proof that the anti-competitive

effects stemmed from “action undertaken with knowledge of

its probable consequences,” Jd. at 444. Though a jury can

infer the requisite intent from the evidence before it, this

Court in Gypsum held that the decision to draw such an

inference could not be taken from the trier of fact through

reliance on a legal presumption of wrongful intent:

5

Although an effect on prices may well support an in-

ference that the defendant had knowledge of the proba-

bility of such a consequence at the time he acted, the

jury must remain free to consider additional evidence

before accepting or rejecting the inference. Therefore,

although it would be correct to instruct the jury that it

may infer intent from an effect on prices, ultimately

the decision on the issue of intent must be left to the

trier of fact alone. Id. at 4

Before the ink was dry on US., the official report of

United States v. United States Gypsum Co. (“Gypsum”),

the Third’ and Seventh Circuits had already carved out an

exception to the basic holding in Gypsum—an exception

that threatens to eviscerate what this Court has described

as an “indispensable element of a criminal offense.” Jd. at

437. Both Circuits, in effect, ignore this Court’s Gypsum

holding when the alleged conduct constitutes a per se vio-

lation of the Sherman Act.

In this case, the Court of Appeals considered a jury in-

struction nearly identical to the instruction held to invade

the jury’s fact finding function in Gypsum, supra. The trial

court below instructed the jury as follows:

It is not necessary to find a specific intent to violate the

law, for the parties are deemed to have intended t!:e

necessary and direct consequences of their acts. [A] p.

A-5].?

1 United States v. Gillen, 1979-1 Trade Cases { 62, 627 (8rd Cir.

1979) (Opinion appears as Appendix B).

2 Compare with the jury instruction struck down by this Court

in Gypsum:

The law presumes that a person intends the necessary and

natural consequences of his acts. Therefore, if the effect of the

exchanges of price information was to raise, fix, maintain and

stabilize prices, then the parties to them are presumed, as a

matter of law, to have intended the result.

438 U.S. at 430.

6

Distinguishing this case from Gypsum on the grounds that

this case involved a per se violation of the Sherman Act, the

Court of Appeals held the challenged jury instruction to be

proper.

Petitioners submit that this decision cannot be reconciled

with the logic and the holding in Gypsum. There is nothing

in the policy or history underlying the per se rule that even

remotely suggests that the @ypsum specific intent require-

ment can be disregarded when a per se violation is charged.

Indeed, the broad language of the Sherman Act and the

resulting indeterminancy of the borders of the conduct it

regulates, coupled with the battery of penalties alternative

to the criminal ones contained in the Act, militate against a

regime of strict liability. Gypsum, supra at 438-43. See

Supreme Court, 1977 Term, 92 Harv. L. Rev. 57, 296 (1978).

The specific arguments against strict liability in criminal

antitrust cases are buttressed when placed within the con-

text of fundamental principles of criminal jurisprudence:

[T]he contention that an injury can amount to a crime

only when inflicted by intention is no provincial or

transient notion. It is as universal and persistent in

mature systems of law as belief in freedom of human

will and a consequent ability and duty of the normal in-

dividual to choose between good and evil.

Morissette v. United States, 342 U.S. 246, 250 (1952), quoted

in Gypsum, supra at 436. These specific arguments and

general principles combined in Gypsum to produce a clear

requirement that intent be proved—a requirement to which

this Court made no exceptions:

[W]e conclude that the criminal offenses defined by the

Sherman Act should be construed as including intent

as an element. 438 U.S. at 443 (footnote omitted).

}

7

That the government must meet its burden of establishing

intent in cases involving per se violations of the Sherman

Act seemed clear to Cireuit Judge Adams in his concurring

opinion in United States v. Gillen (App. B-14, et seq.) :

As I understand the Gypsum opinion, it instructs that

whether the criminal offense charged under Section 1

of the Sherman Act is a per se violation or whether at

the other end of the spectrum it approaches ‘‘the

gray zone of socially acceptable and economically justi-

fiable conduct,” the government must meet its burden of

establishing intent. . . . Moreover, in establishing

knowledge, the government, under the guidelines set

forth in Gypsum, may not rely on a presumption that a

defendant intends the necessary and direct conse-

quences of his act, although an anti-competitive effect

“may well support an inference that the defendant had

knowledge of probability of such a consequence at the

time he acted. (footnotes omitted) (App. B-16).

Nevertheless, the majorities in both Gillen, supra, and this

case disregarded the unambiguous holding in Gypsum.

Petitioners contend that Judge Adams’ analysis of Gypsum

is correct. Judge Adams, having sat on the Gypsum court

at the intermediate appellate stages, is particularly famil-

iar with that case and its holding.

Unlike the Gypsum defendants, petitioners here are sub-

ject to the recently increased criminal penalties for viola-

tion of the Sherman Act. Individual violations are now

treated as felonies punishable by a fine not to exceed

$100,000.00, or by imprisonment for up to 3 years, or both.

Corporate violators are subject to a $1,000,000.00 fine.

Pub.L. 93-528, § 3, 88 Stat. 1708, Dee. 21, 1974, amending

15 U.S.C. § 1. As this Court stated in Gypsum, the “severity

of these sanctions provide further support for our con-

clusion that the Sherman Act should not be construed as

8

creating strict liability crimes.” 438 U.S. at 442 n.18. An

individual, such as petitioner Bowler, faced with the pros-

pect of 3 years incarceration, is entitled to have the funda-

mental issue of intent decided by a jury of his peers.

Even if Congress had not recently increased the criminal

penalties for violation of the Sherman Act, the stigma and

the loss of freedom that follow a criminal conviction would

alone constitute powerful reasons for prohibiting a regime

of strict liability in per se violation cases:

In its conventional and traditional application, a crim-

inal conviction carries with it an ineradicable connota-

tion of moral condemnation and personal guilt. Society

makes an essentially paras’tic, and hence illegitimate,

use of this instrument when it uses it as a means of

deterrence (or compulsion) of conduct which is morally

neutral. This would be true even if a statute were to be

enacted proclaiming that no criminal conviction here-

after should ever be understood as casting any reflection

on anybody. For statutes cannot change the meaning of

words and make people stop thinking what they do

think when they hear the words spoken. But it is doubly

true—it is ten-fold, a hundred-fold, a thousand-fold

true—when society continues to insist that some crimes

are morally blameworthy and then tries to use the same

epithet to describe conduct which is not. Hart, The

Aim of the Criminal Law, 23 Law & Contemporary

Problems 401, 424 (1959).

The government can hardly claim that a requirement of

intent will be overly burdensome. Indeed, the requisite in-

tent will be easier to prove when the alleged conduct con-

stitutes a per se violation of the Sherman Act. However,

“nowhere else in the criminal law is the probable, or even

the certain, guilt of nine men regarded as sufficient warrant

for the conviction of a tenth. In the tradition of Anglo-

é

ee enn

9

American law, guilt of crime is personal. The main body of

the criminal law, from the Constitution on down, makes

sense on no other assumption.” Hart, supra at 422-423.

CONCLUSION

For these reasons, a writ of certiorari should issue to

review the judgment and opinion of the Seventh Circuit.

Respectfully submitted,

Don H. Revusen

VALENTINE A. WEBER, JR.

Reuben & Proctor

11 South LaSalle Street

Chicago, Illinois 60603

Counsel for Petitioners

June 18, 1979

CERTIFICATE OF SERVICE

I hereby certify that on this 18th day of June, 1979, the

undersigned caused three copies of the Petition for Writ of

Certiorari to be hand delivered to counsel for respondent,

the United States of America. I further certify that all par-

ties required to be served have been served.

/s/ VaLENTINE A. WEBER, JR.

Valentine A. Weber, Jr.

Reuben & Proctor

11 South LaSalle Street

Chicago, Illinois 60603

APPENDIX

Opinion by Judge Fairchild

’ UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Chicago, Illinois 60604

May 18, 1979

Before

Hon. THOMAS E. FAIRCHILD, Chief Judge

Hon. ROBERT A. SPRECHER, Circuit Judge

Hon. WILLIAM J. BAUER, Circuit Judge

Nos. 77-2295, 77-2296, 77-2297, 77-2299

UNITED STATES OF AMERICA, ¢

Plaintiff-Appellee,

vs. Appeal from the

Date ar

BRIGHTON BUILDING & MAINTE- | for the Northern

NANCE CO, KRUG EXCAVATING | _ District of

COMPANY, WESTERN ASPHALT § gastern Division

PAVING CO., UNION CONTRACT-| No. 77-Cr-192

ING & MATERIALS CO., THOMAS J.

BOWLER, GEORGE B. KRUG, SR., | JOEL Mm. FLAUM,

J. M. CORBETT CO., THOS. M. Judge

MADDEN CO. and PALUMBO EXCA-

VATING CO.,

Defendants-A ppellants. )

This cause came on to be heard on the transcript of the

record from the United States Circuit Court for the North-

ern District of Illinois, Eastern Division, and was argued

by counsel.

On consideration whereof, it is ordered and adjudged by

this court that the judgment of the said District Court in

this cause appealed from be, and the same is hereby,

AFFIRMED, in accordance with the opinion of this court

filed this date.

ye ke OT Ore gp —

A-1

IN THE

UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

(Caption Omitted in Printing)

Before Faircui., Chief Judge, and Sprecuer and Bauer,

Circuit Judges.

Farrcuitp, Chief Judge. This is an appeal from judg-

ments upon conviction of defendants, Brighton Building &

Maintenance Co., Krug Excavating Co., Western Asphalt

Paving Co., Union Contracting & Materials Co., Thomas

J. Bowler, George B. Krug, Sr., J. M. Corbett Co., Thos.

M. Madden Co. and Palumbo Excavating Co. of one count

of conspiracy and combination in unreasonable restraint

of interstate trade in violation of Section 1 of the Sherman

Anti-Trust Act (15 U.S.C. §1) and thirty-seven counts of

mail fraud (18 U.S.C. § 1341). Two additional defendants,

Arcole Midwest Corp. and Crown-Trygg Co. were also

indicted. Arcole Midwest pleaded guilty and did not par-

ticipate in trial. The remaining defendants pleaded not

guilty. On November 2, 1977, the jury found Crown-Trygg

not guilty on all counts and the remaining defendants

guilty on all counts. The individual defendants, Bowler

A-2

and Krug, were sentenced to prison terms. They and the

corporate defendants were fined.

I

The indictment alleged that the State of Illinois let con-

tracts on July 29, 1975 for the construction of Federal-Aid

Interstate Route No. 55; that this was to be done by com-

petitive bidding as required by law; that defendants and

others engaged in a combination and conspiracy to suppress

and eliminate competition in unreasonable restraint of

trade by agreeing among themselves to allocate two proj-

ects to defendants Brighton, Krug Excavating, and West-

ern (B-K), one project to a joint venture composed of de-

fendants Palumbo, Madden, and Corbett (PMC), and two

projects to defendant Arcole, and to submit collusive bids

on those projects.

Count I charged that the combination and conspiracy

were a violation of the Sherman Act, 15 U.S.C. §1. The

other counts charged the creation of a scheme to defraud

the State and the United States of money and the right

to competition in the awarding of contracts, and each count

charged a mailing for the purpose of executing the scheme,

in violation of 18 U.S.C. § 1341.

The appellants claim that there was insufficient evidence

on which to make a finding of the conspiracy and scheme;

that there was error in the instructions with respect to

intent and theories of defense; that there were other trial

errors.

IT

Five construction projects are involved in this case. They

were numbered 82, 83, 84, 85, and 88.

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Ernest Bederman was president of defendant Arecole, a

highway contractor, and was the government’s key witness.

Corporate defendants Brighton and Krug Excavating

bid jointly, and are referred to as B-K. Defendant Thomas

Bowler was chief executive of Brighton and defendant

George Krug, Sr., was president of Krug Excavating. Cor-

porate defendants Palumbo (of which Peter Palumbo was

president), Madden (of which Robert Madden was presi-

dent), and Corbett (of which James C. Corbett was presi-

dent) bid jointly and are referred to as PMC. Arcole also

bid.

There was evidence, very largely supplied by Bederman,

that before the bids were submitted, Bowler and Krug,

Palumbo, Madden and Corbett, and Bederman had reached

agreement that the bids would be filed in such pre-arranged

fashion that B-K would be the only or the low bidder on

jobs 82 and 83, Arcole on 85 and 88, and PMC on 84.

As “security” for performance of the agreement, B-K

wanted Bederman to take possession of the PMC bidding

books (the documents needed to make a bid) on 82 and 83.

PMC wanted Bederman to take possession of the B-K

bidding book on 84. Bederman testified that he did take

possession of all these books, but that B-K must surrepti-

tiously have taken back its bidding book on 84. B-K sub-

mitted a bid on 84 as well, lower than the PMC bid, and

B-K was awarded the contract. Krug told Bederman they

had “dumped” 84, but had not “bothered” Arcole’s jobs.

There is no question but that Bederman’s testimony

traced the making of an agreement. He met first with

Bowler and Krug and later with Palumbo, Madden, and

Corbett. He testified that he reported back to Bowler and

Krug, awd on the morning of J uly 29, Bederman, Palumbo

A4

and Madden were together with Bowler and Krug in the

hotel quarters of the latter. He testified that all agreed to

the plan of collusive bids.

Defendants question Bederman’s testimony that after

meeting with PMC he reported back to B-K so as to accom-

plish an agreement, and they further question his testimony

that he had on the table in front of him at the hotel quarters

the B-K bidding book on 84 as well as the PMC bidding books

on 82, 83, 85, and 88, and that by distracting him in some

way B-K “got their proposal book out of the stack of pro-

posals in front of me.” We are unable to say that the testi-

mony is inherently incredible. The jury could decide, as

they apparently did, that it was true.

Counts II through XXXVIII were the mail fraud counts.

Each count charged defendants with causing a mailing by a

third party, usually the State of Illinois. The mailings all

occurred after July 29, 1975 and contained returns of bid-

ding documents, awards of contracts, and payments for

work performed.

The PMC defendants argue that they cannot be convicted

of these uses of the mails because the mailings occurred

after the PMC defendants were no longer members of any

conspiracy to carry out the scheme. These mailings by the

State were, however, virtually inevitable results of activity

on and before July 29. The PMC defendants could properly

be found to be jointly responsible with others for setting

the scheme in motion up to that time, and thus causing the

mailing by third parties. Thus defendants could be found

criminally liable for the mailings which necessarily resulted

from earlier activity which these defendants conspired to

bring about.

Defendants have not challenged the proposition that these

mailings advanced the execution of the scheme.

A-5

Ill

Defendants contend that the jury was not sufficiently and

properly instructed on the element of intent. Excerpts from

the instructions, bearing on that point, were as follows:

“Under Section 1 [of the Sherman Act], it is a crime

for any person or corporation to make any contract,

or engage in any combination or conspiracy in un-

reasonable restraint of interstate commence. To con-

vict a defendant under this section of the law the

Government must establish beyond reasonable doubt

that a defendant made a contract, or that a defendant

was knowingly and intentionally a member of a com-

bination or conspiracy; that the purpose of the con-

tract, or of the conspiracy was to achieve an objective

that would create an unreasonable restraint on inter-

state commerce.

“Tt is not necessary to find a specific intent to violate

the law, for the parties are deemed to have intended the

necessary and direct consequences of their acts.

“... To convict a defendant of this crime the Govern-

ment must prove beyond a reasonable doubt that he was

a member of a conspiracy whose purpost was to effect

an unreasonable restraint on interstate or foreign com-

merce.

Mees A conspiracy under Section 1 of the Sherman Act

is an agreement—is an agreement by two or more per-

sons or corporations to accomplish a common objective

which would result in an unreasonable restraint of in-

terstate commerce.

“To be a member of the conspiracy a party must know

of it, and intentionally assist in its furtherance... .

“Certain types of conduct are regarded as unreasonable

per se. This means that the mere doing of the act itself

constitutes an unreasonable restraint in interstate com-

A-f

merce, and it is not necessary to consider why the acts

were committed, or their effect on the industry, or any

other explanatory matter. Conduct regarded as un-

reasonable per se includes price fixing, division of

markets and bid rigging.

“Where conduct unreasonable per se is shown, it can-

not be justified or excused by the elimination of com-

petitive evils, or the good motives of the conspirators,

or the fact that prices were not unreasonably high or

arbitrary.”

We think it is a fair summary of these instructions that

in order to convict defendants, it must be proved that they

intentionally agreed or formed a combination or conspiracy

for the purpose of rigging the bids and thus allocating the

contracts among themselves; that because an agreement,

combination, or conspiracy to rig the bids and allocate the

contracts is per se an unreasonable restraint of trade, it

is not necessary that the government prove that such con-

duct is an unreasonable restraint of trade; that it is un-

necessary for the government to prove that the defendants

knew that the agreement, combination, or conspiracy to rig

the bids and allocate the contracts was a violation of the

law.’

Defendants challenge the sufficiency of the instructions

with respect to the element of intent. The B-K defendants

expressly concede that the instructions on this subject were

in accord with the interpretation of the “pre-1974 case law.”

All defendants argue that the law must necessarily have

1 Although knowledge that intended conduct was unlawful need

not be proved, the government points out that each bid was accom-

panied by an affidavit that the bidder and its agents have not di-

rectly or indirectly entered into any agreement, participated in any

collusion, or otherwise taken any action in restraint of free com-

petitive bidding in connection with the bid.

A-7

changed at the time Congress increased the maximum pen-

alties for § 1 violation from one year imprisonment and a

$50,000 fine to three years imprisonment and a $1,000,000

fine, and raised the offense from a misdemeanor to a felony.

Pub. L. 93-528, § 3, 88 Stat. 1708, Dee. 21, 1974, amending

15 U.S.C. §1.

Defendants relied in part on United States v. United

States Gypsum Co., 550 F.2d 115 (3d Cir. 1977). After

oral argument in the case before us, we had the benefit of

the decision of the Supreme Court in Gypsum, 46 L.W. 4937.

Defendants’ briefs on appeal have not set out, nor pointed

out in the record, the text of any instruction they requested.

We do find in the record Instruction No. C-21, apparently

requested by the PMC defendants, but refused by the court.

C-21 asserts that proof of “specific intent” is required, and

that “To establish specific intent the Government must prove

that the defendant knowingly did an act which the law for-

bids, purposely intending to violate the law.” Defendants

were not entitled to an instruction which included the last

phrase. “A requirement of proof not only of this knowledge

of likely effects, but also of a conscious desire to bring them

to fruition or to violate the law would seem, particularly in

such a context, both unnecessarily cumulative and unduly

burdensome.” Gypsum, 46 L.W. at 4944.

The alleged offense in Gypsum occurred before the 1974

amendment. The Supreme Court noted the 1974 increase

in penalties and reasoned that “The severity of these sanc-

tions provide further support for our conclusion that the

Sherman Act should not be construed as creating strict

liability crimes.” 46 L.W. at 4943, footnote 18. Although the

Court observed at that point that the increased penalties

were not applicable to the charges before it, there is no

suggestion that the intent requirement would be different

in offenses committed after the amendment.

A-8

Defendants all argue that the jury must be instructed

that in order to convict, the jury must find that defendants

acted with intent to restrain trade or commerce.’

Of course Gypsum does support the general proposition,

contended for by defendants, that intent is an element of

the offense. “For these reasons, we conclude that the crim-

inal offenses defined by the Sherman Act should be con-

strued as including intent as an element.” 46 L.W. at 4943.

There is a difference, however, between the case before

the Supreme Court in Gypsum and the case before us. We

consider the difference significant.

In Gypsum, the government proved defendants’ practice

of telephoning a competing producer to determine the price

at which gypsum board was currently being offered to a

specific customer. That practice was not, by itself, an un-

reasonable restraint, unlawful per se. The government

contended that these price exchanges were part of an agree-

ment and had the effect of stabilizing prices and policing

agreed upon price increases. The offending instruction was

that the defendants’ purpose in the price verification prac-

tice was essentially irrelevant if the jury found that the

effect of verification was to raise, fix, maintain, or stabilize

prices.

An agreement for price maintenance is an unreasonable

restraint, unlawful per se under the Sherman Act. U.S. v.

Socony-Vacuum Oil Co., 310 U.S. 150, 218 (1940). We do

not read Gypsum as indicating that once defendants are

proved to have intentionally made an agreement which is

2 We do not find any requested instruction to this effect. The

government does not claim failure to preserve the issue. We have

not attempted to trace this subject through the conference on in-

structions and objections noted, but address the issue as properly

before us.

A-9

unlawful per se, there must be an instruction that the de-

fendants cannot be convicted unless they are found to have

intended to restrain trade or commerce.

The conduct directly proved in Gypsum, the practice of

price verification, was not per se unlawful. The Supreme

Court held that in terms of criminal liability it was not

enough to find price stabilization as a consequence of the

practice, without also finding that these consequences were

intended, at least at the level of knowledge of the proba-

bility of those consequences.

In the case before us the jury was instructed that in

order to convict it must find that defendants were knowing

members of a conspiracy whose purpose was to effect an

unreasonable restraint on interstate or foreign commerce

and that bid-rigging is regarded as unreasonable per se.

A conspiracy to submit collusive, non-competitive, rigged

bids is a per se violation of the statute. United States v.

Flom, 558 F.2d 1179, 1183 (5th Cir. 1977) ; United States v.

Finis P. Ernest, Inc., 509 F.2d 1256 (7th Cir. 1975), cert.

denied 423 U.S. 874 and 893; United States v. Champion

Intern, Corp., 557 F.2d 1270 (9th Cir. 1977), cert. denied

434 U.S. 938.

As the government put it in its brief, “Since the per se

rules define types of restraints that are illegal without

further inquiry into their competitive reasonableness, they

are substantive rules of law, not evidentiary presumptions.

It is as if the Sherman Act read: ‘An agreement among

competitors to rig bids is illegal.’ ”

Defendants do not challenge the sufficiency of the evi-

dence of the interstate character of trade or commerce

affected, nor do they claim instructions on that issue were

erroneous.

A-10

We conclude that the issue of intent was adequately sub-

mitted here where the court instructed that, in order to

convict it must be proved that defendants knowingly agreed

or formed a combination or conspiracy for the purpose of

rigging the bids, and intentionally assisted in its further-

ance.

IV

A,

The district court instructed in part:

“Defendants ... have presented a theory of defense that

none of them entered into any agreement to submit col-

lusive, non-competitive, highway construction bids, as

charged against them in the indictment.”

This indeed was their attempted defense. They en-

deavored to support it by showing circumstances designed

to demonstrate that the bids were more probably the result

of economic factors, independently considered, than of

agreement among defendants. B-K considers that it was

entitled to have the court alert the jury to this theory of

the relevancy of such circumstances.

B-K successively requested two instructions far longer

than the portion given, and above quoted, and longer than

would have been required to alert the jury to the support-

ing proposition just referred to. The requested instructions

listed a number of categories of “economic factors and

operating costs” explanatory of the bids and also instructed

that the jury may consider several particular items or

categories of evidence.

Judge Flaum had invited revision of the first request

and apparently, and understandably, did not consider the

second an improvement. We think the requests went con-

siderably beyond a statement of the theory of defense. We

;

;

A-11

find no abuse of discretion in rejecting all but the portion

given. See United States v. Bessesen, 445 F.2d 463, 467 (7th

Cir. 1971).

B.

Defendants express concern that the jury may have based

the guilty verdict on the undisputed fact that defendants

met and talked about the highway construction jobs without

being convinced that they reached an agreement to rig the

bids. They wanted an instruction that a conversation be-

tween competitors which does not give rise to an agreement

is not, taken alone, a violation of the antitrust laws. Two of

the three requested and refused instructions on that subject

came fairly close to the mark.

The district court did, however, make it abundantly clear

that there was an offense only if defendants knowingly made

a contract or agreement. As we view the case, and in the

light of this emphasis, we see no possibility that the jury

was misled into believing that the meeting and discussion,

without agreement, was an offense.

C.

The district court gave an instruction on the subject of

withdrawal from a conspiracy by one who has previously

been a member. The instruction was requested by the

government because of the circumstances of B-K’s decision,

after the alleged formation of the conspiracy to bid Job 84.

Objections were somewhat equivocal. PMC offered its own

version of a withdrawal instruction.

B-K now points out that a withdrawal defense is mean-

ingless in the context of a charge of conspiracy arising

under the Sherman Act, unless, as is not true here, a de-

fendant claimed that the statute of limitations had run

since his withdrawal.

A-12

B-K now argues that the instruction was not only in-

appropriate, but prejudicial because it misled the jury

“into believing that the defendants were relying on a weak

and legally insufficient defense.”

The jury noticed this portion of the instructions, for they

sent a note during deliberations quoting a sentence from it

and asking for a definition of a phrase. The court denied

the request for elaboration. It seems probable that the jury

was considering whether either B-K or PMC had with-

drawn before the bids were filed, and their consideration of

that question was surely not prejudicial to B-K.

We cannot conclude that the giving of the withdrawal

instruction was prejudicial.

V

The district court sent a copy of his instructions to the

jury room. Defendants contend this was an abuse of dis-

cretion because the government and most of the defendants

objected.

Sending a copy of the instructions to the jury room is

approved in this circuit. United States v. Silvern, 484 F.2d

879, 883 (7th Cir. 1973) ; United States v. Donner, 497 F.2d

184, 194 (7th Cir. 1974).

We find no abuse of discretion here. We do not agree,

moreover, that the two notes of inquiry sent by the jury

demonstrate that the practice generated confusion.

VI

Robert J. Madden, James C. Corbett, Peter Palumbo, and

George B. Krug, Jr. were not defendants, but were officers

of corporate defendants. They had been granted use im-

munity under 18 U.S.C. §4§ 6002-6003 and had testified before

ee

A-13

the grand jury. They were called as witnesses at trial, and

where they gave testimony favorable to defendants and in-

consistent with their grand jury testimony, the grand jury

testimony was admitted in evidence. Under Rule 607, Fed-

eral Rules of Evidence, the government was permitted to

impeach the witness it had called by introducing the incon-

sistent grand jury testimony. Such testimony was also sub-

stantive evidence. Under Rule 801(d)(1)(A) the prior state-

ments were not hearsay at a trial where the declarants were

subject to cross-examination.

There were numerous and significant instances where

the grand jury testimony tended to convict and the trial

testimony did not.

Defendants say they do not attack the validity of Rule

801(d)(1)(A), nor claim the grand jury testimony was

irrelevant or outside the literal scope of the Rule. Rather,

they call for exclusion under Rule 403, permitting the

court to exclude relevant evidence “if its probative value

is substantially outweighed by the danger of unfair preju-

dice, confusion of the issues, or misleading the jury... .”

Defendants observe that when persons in the situation

of these witnesses are called before the grand jury “their

statements may be influenced by the subtle and not-so-

subtle pressures which the prosecutor may apply in the

isolation of the Grand Jury room.” The suggested unfair-

ness seems to rest on an inherent probability that witnesses

in this situation would come closer to the truth in the trial

setting than before the grand jury, and that the government

should therefore be denied the procedure it followed here.

We are not persuaded.

vil

PMC argues that the use immunity provided Robert J.

Madden, James C. Corbett, and Peter Palumbo was vio-

A-14

lated when their testimony was used in a criminal case

against their corporations. The corporations were closely

held. These men were the managing officers and owned

large percentages of stock.

Defendants cite no authority for the proposition that a

criminal case against a closely held corporation is a crim-

inal case against its principal stockholder. Doubtless con-

viction of the corporation impairs the financial interests of

the stockholder, but we conclude that the use of the stock-

holder’s testimony in a criminal case against the corpora-

tion is not use in a criminal case against the stockholder.

Vill

The government asked Bederman:

“Mr. Bederman, prior to engaging in the conversations

which you have related, what was your knowldege of

grand jury investigations and prosecutions in the high-

way industry in Illinois?”

The court sustained a defense objection, struck the ques-

tion, and instructed the jury then and, generally, later, to

disregard stricken material.

Defendants argue that a mistrial was necessary because

the question, though unanswered, had already left with the

jury the prejudicial inference “that the road building in-

dustry in Illinois was honeycombed with corruption and

price-fixing, and that these defendants were an integral

part of it.”

The government contends that it was intending to show

the conspirators’ knowledge of investigations and prosecu-

tions in order to demonstrate actual knowledge that their

scheme was unlawful. In any event we cannot agree that

Py ae renee

A-15

the court’s action was insufficient to avoid any possible

prejudicial interpretation of the question.

IX

Defendants contend that the prosecutor improperly asked

the jury to give weight to the guilty plea of another cor-

porate defendant, Bederman’s Arcole Midwest.

In answering defense attacks on Bederman’s credibility,

the prosecutor observed that “Bederman admits the guilt

of his own company in this bid-rigging conspiracy. In his

own mind it was and is guilty of the offenses charged. If

one is to believe the defendants, no agreement was ever

reached. If that is true, then Bederman must literally be

off his rocker to come into this court and at this trial admit

his company’s guilt. But that is what the defendants ask

you to believe. .. .” He went on to stress the improbability

that Bederman would say his company was party to an

unlawful agreement and expose it to liability if there was

no agreement.

The court gave appropriate instructions at the end of

the argument that a plea of guilty by one defendant is not

evidence of the guilt of another.

The guilty plea had been made known to the jury by the

defense. In cross-examination of Bederman they had used

provisions of the plea agreement for impeachment. Beder-

man’s testimony at trial was an admission of unlawful con-

duct by him and his company, and it was legitimate to

argue that his testimony was credible because strongly

against self-interest. The prosecutor was not asking the

jury to consider the guilty plea of an absent defendant

except as part of a demonstration that Bederman was

A-16

speaking against self-interest and should be deemed cred-

ible.

Under the circumstances, we do not consider the argu-

ment improper.

The judgment appealed from is AFFIRMED.

A true Copy:

Testee:

Clerk of the United States Court of

Appeals for the Seventh Circuit

PRS ete enerreneseseerreerenaerenmers

B-1

United States v. Thomas J. Gillen.

U.S. Court of Appeals, Third Circuit. No. 78-2082. Filed

May 8, 1979. On Appeal from U.S. District Court, Middle

District of Pennsylvania.

Case No. 2587, Antitrust Division, Department of Justice.

Before: Aupisert, ApAMs and HiccinsporHaM,

Circuit Judges.

Opinion

Hiceinsporuam, Cir. J.: The appellant, Thomas J. Gillen,

was found guilty of conspiring to fix prices in violation of

Section 1 of the Sherman Act. 15 U. S. C. $1. He argues

that the district court erred in not making specific findings

on intent and that the evidence is insufficient to support the

judgment of conviction. We disagree and affirm.

I

Gillen was charged, along with James J. Tedesco, with

conspiring to fix, stabilize and maintain prices of anthracite

coal in unreasonable restraint of interstate trade and com-

merce in violation of Section 1 of the Sherman Act from

1966 through 1973.1 The companies named in the indictment

were engaged in the mining, processing and marketing of

anthracite coal and were among its major producers and

1 Tedesco pleaded nolo contendere. Six corporations and three

individuals were also named in the indictment as co-conspirators:

Blue Coal Corporation, Glen Burn Colliery, Inc., Greenwood Strip-

ping Corporation, Lehigh-Navigation-Dodson Company, Lehigh

Valley Coal Sales Company, Inc., Reading Anthracite Coal Com-

pany, William R. Dougan, Joseph A. Frank, and Carl J. Tomaine.

Each of the companies and two of the individuals named in the

indictment as co-conspirators pleaded nolo contendere in a related

case. M. D. P. Crim. No. 76-149. The case against one of the in-

dividuals was dismissed because of his poor health.

B-2

sellers in the United States.? Substantial quantities of

anthracite coal were sold and shipped to customers located

outside of Pennsylvania.

From 1961 through November, 1973, the Anthracite Pro-

ducers Advisory Board, composed of representatives of

the major anthracite organizations, met monthly to consider

and recommend the total anthracite production quota as

provided in the federally authorized Production Control

Plan for the Anthracite Industry. Four or five times a year,

after adjournment of the Advisory Board meetings, the

same company representatives who constituted the Advisory

Board would discuss and reach tentative agreements on the

prices each represented company would charge for the vari-

ous sizes of coal for the ensuing months.* In addition, agree-

ments were reached at these so-called “after meetings” on

the timing of the price change as well as the company to

initiate the change. After the tentative agreement was

reached, the representatives would report to their superiors

for their approval. When approved, as they generally were,

anthracite price circulars were issued by the companies.‘

2 Virtually all anthracite coal produced in the United States dur-

ing the period in issued, 1961 through November, 1973, was mined

and processed in Pennsylvania. It was estimated that total sales per

year exceeded fifty million dollars.

3 These “after meetings” were held a month or so prior to the

time price circulars would be issued. No mention of these price dis-

cussions was ever made in the official minutes of the Advisory

Board. These “after meetings” were not authorized by the Produc-

tion Control Plan and were not part of the Advisory Board’s

function.

+“Tn almost all instances all companies agreed to the same price.’

District Court Memorandum of Deeision at 5-6. It was understood,

however, that some of the prices printed by one or more of them

could, at times, vary somewhat from the others if necessary to com-

pensate for a peculiar market or inventory situation or other prob-

lems that a producing company might be encountering.

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B-3

These circulars which were issued three or four times a

year were price lists for the sale of coal to line dealers.5

These line dealers were dealers who were not located in the

immediate vicinity of the colliery and who generally re-

ceived coal shipments by rail or truck.

Gillen became president of Blue Coal Corporation in 1967

and continued as such until late 1973. He was also a part

owner of Blue Coal from 1966 until November 26, 1973. The

government’s chief witness, Carl Tomaine, was Blue Coal’s

vice president in charge of domestic and retail sales from

1968 through 1973. The court below found that Tomaine as

sales representative for Blue Coal reported what occurred

at the “after meetings” to Gillen, who was then president

of the company. It found further that Gillen knew and ap-

proved of the actions of Tomaine in the agreements reached

at these meetings. It concluded that Gillen was a knowing

participant in the price-fixing conspiracy from 1966 to No-

vember 2, 1973. Gillen was sentenced to a suspended prison

term of six months, a $35,000 fine and two years probation.

II

A. Precepts of Law

With commendable vigor, Gillen’s present counsel con-

tends that “The district court erred in holding that intent

is not an element of a criminal price-fixing conspiracy

charge.” The validity of appellant’s argument depends on

whether the United States Supreme Court in United States

v. United States Gypsum Co., 98 S. Ct. 2864 (1978) changed

5 The circular represented the published price for the sizes of coal

listed thereon, and the prices at which the companies actually sold

it. At times, however, the companies sold above or below the circular

price. When sales were made below the circular price, however, the

circular price was used as the level from which discounts were

determined.

B-4

the law of more than four decades on proof of intent in a

price-fixing conspiracy case. Gypsum was decided a week

after the trial judge filed his Memorandum of Decision con-

taining findings of fact and verdict of guilty. We must

nevertheless consider Gypsum because we must apply the

law in effect as of the time we render this decision. Bradley

v. School Board of City of Richmond, 416 U. S. 696 (1974).

In determining the applicability of Gypsum to the instant

case we have within the “hierarchy of legal precepts” a

situation where “the rule of law is clear and the sole ques-

tion is application to the facts at bar.” Aldisert, Writing

Judicial Opinions, ITI-2 (1979) (unpublished manuscript).

See also Aldisert, The Judicial Process, 59-71 (1976).

B. The Different Factual Situations

At issue in Gypsum was whether an exchange of price

information for purposes of compliance with the Robinson-

Patman Act, 15 U. S. C. § 13, was exempt from Sherman

Act scrutiny. The defendants claimed that the purposes of

these price exchanges were to permit them to take advantage

of the “meeting competition” defense of Section 2(b) of the

Robinson-Patman Act and to prevent customer fraud. The

government alleged that this system of interseller price

verification had the effect of stabilizing the price of gypsum

board in violation of section 1 of the Sherman Act. The

Court concluded that interseller price verification could not

be used to establish a good faith defense under Section 2(b)

by sellers with “lying buyers.”

Thus Gypsum was not a situation where the parties agreed

that a certain price would be charged; at most the parties

sought information on what price had been or was being

6 On June 21, 1978, the trial judge filed his Memorandum finding

Gillen guilty as charged. The Supreme Court decided Gypsum on

June 29, 1978.

ALG OPEL TORRES ol, + BES Ry ey

PROT re yer NP ee eo

B-5

charged with no agreement or request for information on

the price a competitor would charge in the future. In con-

trast, we have parties in the instant case who met three or

four times a year “to discuss the coal prices that would

appear on the circulars”... and to “reach a tentative agree-

ment concerning the prices to be charged by the companies.

...” Memorandum, Findings of Fact and Verdict, p. 2.

C. The Precepts Announced by the Trial Court

and the Supreme Court

The trial judge, relying on United States v. Patten, 226

U.S. 525 (1912) and United States v. Griffith, 334 U. S. 100

(1947), held:

There is no need to show any specific intent to re-

strain trade if a conspiracy to fix prices is shown to

exist in an industry, the very nature of which involves

large shipments of coal from the District in Pennsyl-

vania to other states. See U. S. v. Griffith, 334 U. S.

100, 105[,] 92 L. Ed. 1236, 1242 (1947); U. S. v. Patten,

226 U. 8. 525, 543[,] 57 L. Ed. 333, 342 (1919). In the

Patten case it was said:

“.. [t]he conspirators must be held to have intended

the necessary and direct consequences of their acts, and

cannot be heard to say the contrary. In other words, by

purposely engaging in a conspiracy which necessarily

and directly produces the result which the statute is

designed to prevent, they are, in legal contemplation,

chargeable with intending that result.”

“Proof that there was a conspiracy, that its purpose

was to raise prices, and that it caused or contributed

to a price rise is proof of the actual consummation or

execution of a conspiracy under 41 of the Sherman

Act.” U. S. v. Socony-Vacuum Oil Co., 310 U. 8. 150, 84

L. Ed. 1129 (1939) at 1166.

The above holding by the trial court stated the principles

set forth in cases for more than four decades. Thus Judge

B-6

Herman was merely following the traditional precepts long

accepted in price-fixing cases, most notably in United States

v. Socony-Vacuum Oil Co., 310 U. 8. 150 (1940) which he

explicitly cited.

Appellant contends that, regardless of the prior law, the

trial judge erred because the Supreme Court in Gypsum,

speaking through Chief Justice Burger, announced a dif-

ferent principle of law when it stated:

[A] defendant’s state of mind or intent is an element

of a criminal antitrust offense which must be estab-

lished by evidence and inferences drawn therefrom and

cannot be taken by the trier of fact through reliance on

a legal presumption of wrongful intent from proof of

an effect on prices.

98 S. Ct. at 2872.

Thus the ultimate issue is whether this language changed

the long-established rule of law on price-fixing cases by

requiring a more stringent burden of proof on the issue of

intent.

Recognizing that the parameters of the conduct regulated

by the Sherman Act may be at times elusive, we believe the

Supreme Court’s statement in Gypsum on intent was born

out of a concern for borderline violations and was not meant

to modify past precedent on price-fixing conspiracies, for

the Court stated:

With certain exceptions for conduct regarded as per

se illegal because of its unquestionably anticompetitive

side effects, see, e.g., United States v. Socony-Vacuum

Oil Co., 310 U. 8. 150, 60 S. Ct. 811, 84 L. Ed. 1129, the

behavior proscribed by the Act is often difficult to dis-

tinguish from the gray zone of socially acceptable and

economically justifiable business conduct. Indeed, the

type of conduct charged in the indictment in this case—

the exchange of price information among competitors—

is illustrative in this regard. The imposition of criminal

B-7

liability on a corporate official, or for that matter on a

corporation directly, for engaging in such conduct

which only after the fact is determined to violate the

statute because of anticompetitive effects, without in-

quiring into the intent with which it was undertaken,

holds out the distinct possibility of overdeterrence;

salutary and procompetitive conduct lying close to the

borderline of impermissible conduct might be shunned

by businessmen who chose to be excessively cautious in

the face of uncertainty regarding possible exposure to

criminal punishment for even a good-faith error of

judgment. (emphasis added)

Id. at 2875-76.

We submit that the Court did not intend any extraor-

dinary change in the rules of law on price-fixing cases be-

eause by its very citation of Socony-Vacuum the court ac-

knowledged that price-fixing cases are an exception. More-

over, price-fixing is clearly not “conduct which only after

the fact is determined to violate the statute.” Jd.

Price-fixing is an area of the law in which people either

can or ought to be able to predict the legal consequences of

their actions. Price fixers do not even approach “the gray

zone of socially acceptable and economically justifiable busi-

ness conduct,” 98 S. Ct. at 2875, for the Supreme Court

nearly forty years ago created a bright-line prohibition by

declaring:

Any combination which tampers with price structures

is engaged in an unlawful activity. Mven though the

members of the price-fixing group were in no position

to control the market, to the extent that they raised,

lowered, or stabilized prices they would be directly in-

terfering with the free play of market forces. The Act

places all such schemes beyond the pale and protects

that vital part of our economy against any degree of

interference. Congress has not left with us the deter-

mination of whether or not particular price-fixing

schemes are wise or unwise, healthy or destructive.

B-8

Under the Sherman Act a combination formed for

the purpose and with the effect of raising, depressing,

fixing, pegging, or stabilizing the price of a commodity

in interstate or foreign commerce is illegal per se.

United States v. Socony-Vacuum Oil Co., 319 U.S. 150, 221,

223 (1940).

Thus in price-fixing conspiracies, where the conduct is

illegal per se, no inquiry has to be made on the issue of

intent beyond proof that one joined or formed the con-

spiracy. The conduct at issue in Gypsum concededly was of

such a nature at to warrant a further inquiry into intent.

The Supreme Court’s concern with those who unwittingly

violate antitrust laws has no place here. Here, defendants

have fixed prices, “probably the clearest violation of the

antitrust laws and the one most obnoxious to the underlying

policy of free competition.”* The act of agreeing to fix

prices is in itself illegal; the criminal act is agreement.

7 Mid-west Paper Products v. Continental Group, Inc. Nos. 78-

1736, 78-1746, 78-1776, 78-1796, slip. op. at 44 (3rd Cir. Mar. 26,

1979) (Higginbotham, J., dissenting).

The Supreme Court recently reemphasized:

“In construing and applying the Sherman Act’s ban against con-

tracts, conspiracies, and combinations in restraint of trade, the Court

has held that certain agreements or practices are so “plainly anti-

competitive,” National Society of Professional Engineers v. United

States, 485 U. S. 679, 692 (1978); Continental TV, Inc. v. GTE

Sylvania Inc. 433 U. S. 36, 50 (1977), and so often “lack .. . any

redeeming virtue.” Northern Pac. R. Co. v. United States, 356 U. S.

1, 5 (1958), that they are conclusively presumed illegal without

further examination under the rule of reason generally applied in

Sherman Act cases.”’

Broadcast Music, Inc. v. CBS, Inc. 47 U. S. L. W. 4359, 4361

(Apr. 17, 1979).

B-9

Moreover, even if read to apply here, Gypsum does not

require a reversal because the intent requirements will

always be met in a case involving a price-fixing conspiracy.

If a defendant intends to fix prices, he necessarily intends

to restrain trade. In Gypsum, the element lacking was a

finding that the defendants knew that the exchanges of

price information would have the probable effect of fixing

or establishing prices. 98 S. Ct. at 2877. In defining the

standard, the Court held that knowledge that the actions

will result in restraining trade is enough. Here, where their

actions were nothing less than price-fixing, the violators

cannot be heard to argue that they did not know that their

meetings and discussions of prices would result in an un-

reasonable restraint on trade.

Additionally, the mere existence of a price-fixing agree-

ment establishes a defendant’s illegal purpose. As the Court

stated in United States v. Trenton Potteries Co., 273 U.S.

392, 397 (1926), “The aim and result of every price-fixing

agreement, if effective, is the elimination of one form of

competition.” Thus, the conscious object of every price-

fixing conspiracy is an illegal act. :

Unlike Gypsum where the defendants allegedly did not

appreciate the consequences of their actions, here the law

is clear and the conduct egregious. The conspirators met

and set prices. They did not engage in any subtle or soph-

isticated scheme; their actions were in no way ambiguous.

We agree that fairness requires caution in presuming in-

tent from a mere effect on prices where the defendant’s

actions might reasonably be considered not to violate the

antitrust laws. But where, as here individuals have fixed

prices in a most unequivocal and flagrant manner, ques-

tions of knowledge of probable consequences and indeed of

“conscious object” appear clearly answered.

B-10

On review, we must determine whether there is substan-

tial supportive evidence for the district court’s findings on

the ultimate factual question of guilt. United States v.

Delerme, 457 F.2d 156, 160 (3d Cir. 1972). With respect

to the elements of the crime, the Supreme Court has held

“that a corporate officer is subject to prosecution under § 1

of the Sherman Act whenever he knowingly participates in

effecting the illegal contract, combination, or conspiracy—

be he one who authorizes, ordors, or helps perpetrate the

crime.” United States v. Wise, 370 U.S. 405, 416 (1962).

As a result, we must determine whether there is substantial

evidence of knowing participation by Gillen in the price-

fixing conspiracy. Our review of the evidence satisfies us

that substantial supportive evidence of such knowing par-

ticipation exists.

First, it is undisputed that a price-fixing conspiracy

existed. Second, we think that there is substantial evidence

to support thé district court’s finding that Gillen knew of

the conspiracy. Tomaine, sales representative for Blue

Coal, reported to Gillen what occurred at the “after meet-

ings” keeping Gillen abreast of coal pricing. Tomaine

8 By Mr. Currier:

“Q. From 1966 to the end of 1973, to your knowledge did Blue

Coal ever issue a circular without your attending one of these

meetings?

“A. Not that I can recall.

“Q. Did you inform anyone at Blue Coal about these price

meetings?

“A. Yes.

“Q. Who was that?

“A. Well, if Mr. Gillen was available, I spoke to him about it.

iome—eaahdll

B-11

testified that he informed Gillen at the “after meetings”

they had “agreed to go along on certain prices.” ®

Finally, with regard to Gillen’s participation in the con-

spiracy, Joseph J. Fauzio, President of the Greenwood

Stripping Company, and one of the unindicted co-conspira-

tors, testified that:

Q. On the occasion of the Anthracite Committee meet-

ings, Mr. Fauzio, do you recall any discussion on the

“Q. When did you begin telling him of these meetings?

“A. I would just have to assume sometime after he became Presi-

dent.

“Q. For how long thereafter did you talk to him about these

meetings?

“A. Throughout 1973 whenever he was available I would talk to

him about it.

“Q. I didn’t understand your answer, sir.

' “A. Throughout 1973 whenever he was available I would talk to

him about it, yes.

“Q. Did you speak to him in years prior to that about it?

“A. Yes.

“Q. What would you tell Mr. Gillen during these discussions?

“A. The proposed price increase or decrease.

Transcript 379-380.

® [By the Court]

“Q. Did you ever explain to him that you were up there agreeing

on prices?

“A. I explained to him that we were up there discussing prices

and what we were going to do for the coming circular whether there

was an increase or decrease.

“Q. You told them you were discussing prices?

“A. And we agreed to go along on certain prices, yes sir.

“Q. And you told them that you were—these were the prices that

you were going to charge at Blue Coal?

“A. Yes, sir.”

Transcript 468.

B-12

occasion of such meetings either before, during or after

with regard to the topic of price circulars?

A. The only discussion would be in a social atmos-

phere, whereas, someone would make the statement that

it’s about time that the boys get together and start think-

ing about the circular. This was done, to my knowledge,

it had been mentioned by Mr. Tedesco, Mr. Ulmer, Mr.

Gillen and myself.

J. What is the full name of Mr. Gillen that you are

referring to?

A. Mr. Tom Gillen.

Transcript 41-42.

Additional evidence of direct involvement by Gillen is the

testimony of several witnesses regarding a meeting in the

winter of 1966-1967 at Brutico’s Restaurant, Old Forge,

Pennsylvania. The meeting was attended by owners, pro-

ducers and sales representatives who agreed to re-establish

price stability by attempting closer adherence to the cir-

cular price. Gillen was present and actively participated in

criticizing the sales people for their price cutting activities.’

Furthermore, as president of the company, Gillen was in

a position to order the price-fixing halted, but did not do so.

When a company president has knowledge that his company

10 Gillen contended that this was merely a “social gathering”

during which concerned coal executives met to advocate a stabiliza-

tion of a depressed industry. The government characterized the

meeting as a mechanism for shoring up deviations from the price

stability promoted by the circular “after meetings.” After having

been exposed to these conflicting scenarios, Judge Herman was

apparently persuaded that the Brutico meeting was an indication

that Gillen was a participant in the overall conspiracy. (See Ap-

pendix at 58; Memorandum Decision at 12). Several witnesses de-

scribed the nature of the meeting and testified that Gillen attended.

RN Nee omy Oh Bre Bees a

PSP 95>

B-13

is involved in a price-fixing conspiracy and takes no action

to stop it, he may not insulate himself from liability by

leaving the actual execution of the scheme to his subordi-

nates. See United States v. Wise, 370 U. S. 405 (1962). If

this were not the rule, the highest corporate officers would,

in effect, be beyond the reach of the antitrust laws even

when their companies are actively engaged in price-fixing.

B.

For the first time on appeal, Gillen pointed to an apparent

ambiguity in the transcript with respect to testimony relied

on by the Government in support of an affirmance:

Q. Did you ever explain to him that you were up there

agreeing on prices?

A. I explained to him that we were up there discussing

prices and what we were going to do for the coming cir-

cular whether there was an increase or decrease.

Q. You told them you were discussing prices?

A. And we agreed to go along on certain prices, yes, sir.

Q. And you told them that you were—these were the

prices that you were going to charge at Blue Coal?

A. Yes, sir.

Transcript 468 (emphasis added).

Defendant argues that the references to “them” make the

testimony too vague and unclear to support a finding of

knowledge of the conspiracy. Alternatively, counsel for

Gillen urged at oral argument a remand to clear up the

record on this point. We disagree. First, the trial judge in

fact considered the matter during the closing argument con-

cluding that “It doesn’t say to him but it’s implied,” and

“I don’t believe I said them, I was intending to say did you

B-14

tell him.”"! It seems clear from the context, and Judge

Herman so indicated, that the witness understood what was

meant. Second, despite the discussion of this matter by the

trial judge and government counsel, Gillen’s trial counsel

did not object to the trial judge’s determination of the

question and alluded to it only in passing in his brief on

appeal. It is not this Court’s practice to allow arguments of

this nature to be raised on appeal if they were not pressed

below. See United States v. Dansker, 537 F.2d 40, 64 (3d

Cir. 1976).

C.

Finally, we find Gillen’s argument of withdrawal totally

without merit. He argues that he began removing himself

in 1972 from Blue Coal except for labor negotiations and

his efforts to sell the company. From this he argues that

the government was required to prove his continuous par-

ticipation in the conspiracy by introducing evidence of

continued overt acts. The burden is, however, on the de-

fendant to prove “[a]ffirmative acts inconsistent with the

object of the conspiracy and communicated in a manner

reasonably calculated to reach co-conspirators.” United

States v. United States Gypsum Co., 98 S. Ct. at 2887;

United States v. Heckman, 479 F.2d 726, 729 (3d Cir. 1973).

In addition, Tomaine testified that he continued to inform

Gillen of the price-fixing meetings until the business was

sold in late 1973.1?

For these reasons, the judgment of sentence will be

affirmed.

[Concurring Opinion]

Apams, Cir. J., concurring: I concur in the judgment of

this Court and join in parts J and III of the Court’s opinion.

11 Transcript of Proceedings on Argument at 8-11.

12 Transcript, supra, note 8.

B-15

However, because the majority’s discussion regarding the

issue whether intent must be shown in a price-fixing case

diverges from my understanding of the present state of

the law on this important subject, I have undertaken a

separate statement.

Specifically, the majority appears to adhere to the posi-

tion that intent is not a necessary element in establishing

a price-fixing violation under $1 of the Sherman Act.

Rather, the majority asserts that “the Supreme Court’s

statement in United States v. United States Gypsum Co.,

98 S. Ct. 2864 (1978) on intent was born out of a concern

for borderline violations and was not meant to modify past

precedent on price-fixing conspiracies.” ! In my view, this

stance cannot be squared with the explicit conclusion ar-

rived at in Gypsum: “The criminal offenses defined by the

Sherman Act should be construed as including intent as an

element.”? This conclusion by the Supreme Court was

specifically grounded on its “unwilling[ness] to construe

the Sherman Act as mandating a regime of strict liability

criminal offenses.” ®

Accordingly, whereas under the majority’s approach a

defendant who is prosecuted for participating in a price-

fixing conspiracy or in any other combination that con-

stitutes a per se violation of the Act would not be entitled

to a jury charge on intent, I regard such an instruction,

when requested, to be mandatory after Gypsum. However,

in Gillen’s case it appears that the failure of the trial judge

—who sat without a jury and operated without the benefit

of the Gypsum pronouncement—to make an explicit de-

termination regarding intent did “not affect the substantial

1 Typed opinion at 6-7.

298 S. Ct. at 2876 (footnote omitted).

3 Td. at 2872-73 (footnote omitted).

B-16

rights of” Gillen.t Therefore, I join the majority in its

affirmance of the judgment of the district court.

As I understand the Gypsum opinion, it instructs that

whether the criminal offense charged under section 1 of the

Sherman Act is a per se violation or whether at the other

end of the spectrum it approaches “the gray zone of socially

acceptable and economically justifiable business conduct,” ®

the government must meet its burden of establishing intent.

Gypsum declares that the prosecution may meet this re-

sponsibility under one of two standards. If a defendant is

charged with engaging in illegal conduct the anticompeti-

tive effects of which did not come to fruition, Gypsum

directs that an “elevated standard of intent” must be satis-

fied before criminal liability may be imposed—namely, that

the defendant had the specific intent or cornstious purpose

to produce the anticompetitive consequences.* On the other

hand, if anticompetitive effects actually resulted from the

defendant’s actions, the government need prove only that

the defendant had knowledge of the probable consequences

of his acts.? Moreover, in establishing knowledge, the gov-

ernment, under the guidelines set forth in Gypsum, may

not rely on a presumption that a defendant intends the

necessary and direct consequences of his acts, although an

anticompetitive effect “may well support an inference that

the defendant had knowledge of the probability of such a

consequence at the time he acted.” ®

4 See 28 U. S. C. § 2111 (harmless error rule).

Also, inasmuch as no plain error was committed by the district

judge, reversal would not appear to be warranted since no request

was made at trial for a determination regarding intent. See note 22

and accompanying text infra.

5 98 S. Ct. at 2875.

8 Td. at 2877 n. 21.

7 Id.

8 Td. at 2878.

B-17

In sum, the Supreme Court held in Gypsum “that a de-

fendant’s state of mind or intent is an element of a criminal

antitrust offense which must be established by evidence and

inferences drawn therefrom and cannot be taken from the

trier of fact through reliance on a legal presumption of

wrongful intent from proof of an effect on prices.’® Con-

trary to the majority’s reading of Gypsum, these two as-

pects of the holding appear to have clarified an unsettled

area of law and to have overruled prior precedent that had

developed in the wake of United States v. Patten, 226 U.S.

525 (1913). The Supreme Court stated in that early case,

which reversed the dismissal of a criminal indictment:

And that there is no allegation of a specific intent to

restrain such trade or commerce does not make against

this conclusion (sic), for, as is shown by prior decisions

of this court, the conspirators must be held to have

intended the necessary and direct consequences of their

acts and cannot be heard to say the contrary. In other

words, by purposely engaging in a conspiracy which

necessarily and directly produces the result which the

statute is designed to prevent, they are, in legal con-

templation chargeable with intending that result.

Patten had been regarded, first, as negating a requirement

of specific intent in criminal antitrust cases ;1! indeed, it

had been thought, as the district corrt’s jury charge in

Gypsum attests, that no intent whatsoever need be estab-

lished in criminal antitrust cases when it is shown that the

defendant’s conduct had anticompetitive effects.'2 Patten

has also been cited for the proposition that it may be con-

clusively presumed that a defendant intends the necessary

® Td. at 2872.

10 226 U.S. at 543.

11 See, e. g., United States v. Champion Int'l Corp. 557 F. 2d 1270,

1274 (9th Cir.), cert. denied, 434 U. 8. 938 (1977).

12 See Gypsum, supra, 98 S. Ct. at 2872.

B-18

and direct consequences of his acts.’* Neither of these in-

terpretations of Patten would appear to survive Gypsum

intact. The first—that proof of specific intent is not re-

quired—now applies only to cases where anticompetitive

effects have been demonstrated. The second—that a de-

fendant may be conclusively presumed to intend the neces-

sary consequences of his acts—has been discarded al-

together."

Turning to the present case, it appears that there was no

need for the prosecution to establish that Gillen had a

conscious purpose to achieve anticompetitive results—the

level of intent required in cases where anticompetitive

effects cannot be shown. Rather, it was sufficient for the

government to demonstrate that Gillen knew that the price-

fixing conspiracy would produce such effects. This is so

because the district court found that Gillen and the other

parties named in the indictment knowingly entered into a

conspiracy to fix prices, whereby the prices contained in the

corporate defendants’ price lists during the years 1966-73

were set by agreement among competitors.’® Such a price-

fixing arrangement is a per se violation of the Sherman Act,

which means that there necessarily are anticompetitive

effects, since the per se characterization is reserved for those

combinations “which because of their pernicious effect on

competition and lack of any redeeming virtue are conclu-

sively presumed to be unreasonable.’!* And, inasmuch as

an ongoing price-fixing scheme spanning at least seven

13 See, e.g., United States v. Hilton Hotels Corp., 467 F. 2d 1000,

1002 (9th Cir. 1972), cert. denied, 409 (U. S. 1125 (1973).

14See Handler, Antitrust—1978, 78 Colum. L. Rev. 1363, 1399

(1978).

15 See United States v. Gillen, Crim. No. 77-72-2, typed opinion at

5-9 (M. D. Pa., June 21, 1978) (memorandum).

16 Northern Pacific Ry. Co. v. United States 356 U.S. 1, 5 (1958).

B-19

years was found to exist rather than an incipient conspiracy

that had not yet borne fruit, it cannot be said that the anti-

competitive effects “did not [yet] come to pass” so as to

necessitate the establishment by the government of the “ele-

vated standard of intent.’’!’

The Supreme Court has narrowly circumscribed the sit-

uations in which a fact-finder may reasonably conclude that

a defendant lacked the requisite knowledge to support crim-

inal liability for violating section 1 of the Sherman Act.

Under the Court’s teaching in Gypsum, all that is demanded

for purposes of satisfying the knowledge requirement is

that the defendant have a rudimentary awareness of eco-

nomic cause and effect, and therefore “that the defendant

had knowledge of the probability of ... [the anticompeti-

tive] consequence at the time he acted.”?* Thus the govern-

ment need not prove that the defendant knew that the effects

of the conduct or the conduct itself were proscribed, since

mistake or ignorance of the law is no defense.'® Nor is it

generally essential under this lesser intent standard that

the prosecution prove that the defendant engaged in the

illegal conduct with an improper purpose in mind.?°

~

Where, as here, the conspirators have been found to have

met systematically and periodically for at least seven years

to fix prices, it is not fairly plausible that they did not know

that they were tampering with the supply and demand

curve of the competitive market. To paraphrase the Supreme

Court, “[t]he business behavior which [gave] rise to crim-

inal antitrust charges [here] is conscious behavior normally

undertaken only after full consideration of the costs, bene-

17 See Gypsum, supra, 93 S. Ct. at 2877 n. 21.

1898 S. Ct. at 2878.

19 See The Supreme Court, 1977 Term, 92 Harv. L. Rev. 1, 297-98

(1978).

20 See 98 S. Ct. at 2879 n. 23.

=

B-20

fits and risks.” 21 Accordingly, I cannot say on the record

before us that the omission by the trial judge of a specific

finding that the defendants knew that their conduct would

produce anticompetitive resuits affected the substantial

rights of Gillen so as to warrant a reversal, particularly

where such a finding was not requested.?* Therefore, I con-

cur in the judgment of the Court.

21 Gypsum, supra, 98 S. Ct. at 2878. In this respect, the conduct

involved here is to be distinguished from the exchange of price in-

formation that marked Gypsum, where it may well be doubted

whether the defendants knew that anti-competitive consequences

could be expected to flow from their activity. See id. at 2875 & n. 16.

See also Handler, supra note 14, at 1399-1400.

22See note 4 supra. Gillen’s defense, which was predicated in

large measure on the assertion that he had no knowledge of, and

never authorized or ratified the price-fixing agreements entered into

by Tomaine, his company’s sales representative, addressed the dif-

ferent question whether Gillen knowingly joined the conspiracy.

As the Supreme Court explained in Gypsum, “[i]n a conspiracy,

two different types of intent are generally required—the basic in-

tent to agree, which is necessary to establish the existence of the

conspiracy, and the more traditional intent to effectuate the object

of the conspiracy. See LaFave and Scott, Criminal Law 464-465

(1972). Our discussion here focuses only on the second type of

intent.” 98 S. Ct. at 2876 n. 20. With respect to the first type of

intent—whether the defendants in this case intended to agree upon

a conspiratorial course of conduct, the district court determined

both that a conspiracy was knowingly formed and that Gillen was

a knowing participant. The trial judge also held that there was no

need for the government to prove specific intent to restrain trade, a

holding that properly reflects the law even after Gypsum. Typed

opinion of the district court at 9-13.