Appendix — Lifschultz Fast Freight, Inc. v. Consolidated Freightways Corp.

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

>NO.92-2523

Plaintiff-Appellant, :

- against -

Consolidated Freightways

Corporation of Delaware,

Yellow Freight Systems, Inc.

and Roadway Express, Inc.

Defendants-Appellees.

Appeal from the United States District

Court for the District of South Carolina,

at Greenville.

Henry M. Herlong, Jr., District Judge.

(CA-87-477)

Argued: June 8, 1993

Decided: July 6, 1993

Before PHILLIPS, LUTTIG, and WILLIAMS,

Circuit Judges.

Affirmed by unpublished per curiam opin-

ion.

Lifschultz Fast Freight, Inc.,

brought this action alleging that the

three Defendant trucking companies, Con-

solidated Freightways, Roadway Express,

and Yellow Freight, conspired with the

International Brotherhood of Teamsters

(Teamsters Union) to destroy competing

regional carriers. Specifically, Lifsch-

ultz claimed that Defendants violated

Sections 1 and 2 of the Sherman Antitrust

Act, 15 U.S.C.A. Sections 1 & 2 (West

Supp. 1993), the Racketeer Influenced and

Corrupt Organizations Act (RICO), 18

U.S.C.A. Sections 1961 - 1968 (West 1984

& Supp. 1993), and the South Carolina

Unfair Trade Practices Act (SCUTPA), S.C.

Code Ann. Sections 39-5-10 to -160 (Law

Co-Op 1985) by conspiring to eliminate

competition in the trucking industry.

The district court granted Defend

ants’ motion to exclude the hearsay tes-

timony of Lifschultz’s two key witnesses,

Ralph Picardo and Glenn Hall, on the

ground that Lifschultz had not presented

sufficient credible evidence of a con-

spiracy to qualify for the co-conspirator

exception to the hearsay rule under Fed-

eral Rule of Evidence 801(d) (2) (E).

Applying the standard of Matsushita Elec~

trical Industrial Co. v. Zenith Radio

Corp., 475 U.S. 574, 588 (1966), the

district court then granted summary judg-

ment to Defendants on the Sherman Act

antitrust conspiracy claim, concluding

that Lifschultz had presented no evidence

that (1)any employee of Defendants was

involved in the alleged conspiracy; (2)

Defendants agreed among themselves to

enter a conspiracy with the Teamsters

Union; (3) the alleged conspiracy would

have been reasonable; (4) Defendants

engaged in below-cost pricing that mean-

ee

ingfully affected competition; (5) Defen-

dants had a rational expectation of real-

izing monopoly profits; or (6) Lifschultz

had suffered any injury because of the

Defendants’ alleged antitrust activity.

The district court granted summary

judgment to Defendants on the RICO claim

because Lifschultz had not proved the

predicate acts of bribery, mail fraud, or

wire fraud! The district court also

held that any link between the alleged

RICO violations and Lifschultz’s injury

was remote and tenuous, that Lifschultz

did not show any detrimental reliance for

the mail and wire fraud allegations, and

that the alleged predicate acts were not

part of a scheme to defraud another of

money or property. The district court

granted summary judgment to Defendants on

1/Lifschultz conceded that there was no

wire or mail fraud.

Lifschultz’s SCUTPA claim because there

was insufficient evidence of a conspiracy

to restrain trade and because Lifschultz

had presented no evidence that Defendants

had acted unfairly or deceptively in any

way.

As an alternative ground for grant-

ing summary judgment to Defendants, the

district court held that Lifschultz’s

Sherman Act, RICO, and SCUTPA claims were

barred by the Keogh* doctrine because

the claims were collateral attacks on the

rates and tariffs set by the Interstate

Commerce Commission (ICC).

We have reviewed the issues, studied

the briefs and the record, heard oral

argument, and given full consideration to

ali of Lifschultz’s contentions. We find

the district court’s opinion to be

2/Keogh v. Chicago & N.W. Ry. Co., 260

U.S. 156 (1922).

thorough and well reasoned and we agree

that summary judgment in favor of the

Defendants was appropriate. Lifschultz

Fast Freight, Inc. v. Consolidated

Freightways Corp., 805 F.Supp. 1277

(D.S.C. 1992). Accordingly, we affirm.

A-7

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF SOUTH CAROLINA

GREENVILLE DIVISION

Lifschultz Fast Freight, Inc.,

CA No.

6:87-477-20

)

Plaintiff, )

)

VS. )

) MEMORANDUM

Consolidated Freightways Corporation ) OPINION

of Delaware, Yellow Freight Systems, _)

Inc., and Roadway Express, Inc., )

)

Defendants.

This matter is before the court on the motions filed by the

defendants, Consolidated Freightways Corporation of Delaware

(“Consolidated”), Yellow Freight Systems, Inc. (“Yellow”), and

Roadway Express, Inc. (“Roadway”), for summary judgment.

The defendants have also moved to exclude certain testimony.

For the reasons stated herein, the court grants the defendants’

motions to exclude testimony and for summary judgment.

I. FACTS AND HISTORY

This case arises out of a dispute involving corporations which

are, or were at one time, competitors in the trucking industry.

The defendants are all motor common carriers: Prior to 1980,

the plaintiff, Lifschultz Fast Freight, Inc. (“Lifschultz”), was

a freight forwarder.? The main difference between a freight

'“ “(M]Jotor common carrier’ means a person holding itself out to the general

public to provide motor vehicle transportation for compensation over regular

or irregular routes, or both.” 49 U.S.C. § 10102(14) (1992).

>“ F ]reight forwarder’ means a person holding itself out to the general public

to provide transportation of property for compensation and in the or-

dinary course of its business-

(Footnote continued)

A-§

forwarder and a motor common carrier is that a freight for-

warder relies on other common carriers to move the freight bet-

ween cities either by rail, motor, or water. When Lifschultz was

a freight forwarder, it generally used railroads to transport

freight between cities. In 1980, Lifschultz became a motor com-

mon carrier and competed directly against the defendants.

Before 1980, the Interstate Commerce Commission (“ICC”),

under the Motor Carrier Act of 1935, strictly regulated motor

common carriers and freight forwarders. In this period, the ICC

controlled rates that could be charged and restricted price com-

petition. Information on the costs of operation was collected

and reviewed by rate bureaus. Rate bureaus are groups of car-

riers operating in particular regions which are sanctioned by

the ICC to develop rate tariffs based upon information on

operating costs submitted by its members.’ Based on these tariffs,

the ICC set the rates that could be charged. The rate bureaus

for freight forwarders were not the same as the rate bureaus

for motor common carriers. Rates for freight forwarders were

(A) assembles and consolidates, or provides for assembling and

consolidating, shipments and performs or provides for break-bulk

and distribution operations of the shiprnents;

(B) assumes responsibility for the transportation from the place

of receipt to the place of destination; and

(C) uses for any part of the transportation a carrier subject to

the jurisdiction of the Interstate Commerce Commission

49 U.S.C. § 10102 (9) (1992).

' Prior to deregulation, there were fifteen major motor common carrier rate

bureaus. In 1992, there are nine rate bureaus: New England MFB; Eastern

Central M.C.A.; Niagara Frontier T.B.; Middle Atlantic Conference; Central

States M.F.B.; Middlewest M.F.B.; Southern M.C.R.B.; Rocky Mountain M.T.B.;

and the Pacific Inland T.B. See The U.S. Motor Carrier Industry Long After

Deregulation, Report by the ICC, Office of Economics at 59 n.50 (1992). The

allegations in this case involve only the Eastern Central M.C.A. and the Rocky

Mountain M.T.B. The Eastern Central region includes the lane or route of

business between New York/New Jersey and Chicago.

A-9

set independently of the rates for motor common carriers.

Lifschultz, however, asserts that rates for freight forwarders

paralleled and were patterned after the rates for motor com-

mon Carriers.

The Motor Carrier Act of 1980 deregulated the trucking in-

dustry. Since deregulation, there has been far greater price com-

petition in the trucking industry. In fact, many carriers have

been unable to compete and have exited the industry since

deregulation. This was one of the objectives of the regulatory

reform. Enhanced competition was intended to drive inefficient

carriers or excess capacity out of the market.* Although the ICC

no longer controls rates, it still has regulatory power over the

trucking industry. Carriers must file tariffs with the ICC which

indicate what rates they are charging. The ICC has maintained

the power to investigate complaints about a carrier and to deter-

mine the reasonableness or lawfulness of a rate that a motor

common carrier proposes to charge. See, e.g., 49 U.S.C. §§ 10321,

10708, 11701, and 11702 (1992).

The portion of the trucking market in question in this case

is the carrying of “less than truckloads” (“LTL’) of freight. LTL

shipments are between 100 and 10,000 pounds. LTL freight must

be consolidated with other shipments of LTL freight to fill a

truck. The LTL market is defined by shipping routes, called

lanes, between cities. A competitor in the LTL market must have

a terminal in each city at the ends of the lanes it services. An

LTL carrier must also have facilities to pick up the freight and

to deliver it to the ultimate receiver of the shipment in the cities

at each end of the lanes.

In March of 1987, Lifschultz filed this action claiming that

the defendants had violated the Sherman Anti-trust Act, 15

U.S.C. §§ 1 and 2, by conspiring to eliminate competition in

the trucking industry. On September 29, 1988, Lifschultz filed

its Second Amended Complaint in which it added four claims

* See The U.S. Motor Carrier Industry Long After Deregulation, Report by

the ICC, Office of Economics at 42 and 46-57 (1992).

——————————

A-10

under the Racketeer Influenced and Corrupt Organizations Act

(“RICO”), 18 U.S.C. § 1861 et seg., and a claim under the South

Carolina Unfair Trade Practices Act (“SCUTPA”), S.C. Code

Ann. § 39-5-10 et seq. (Law. Co-op. 1976).

Lifschultz’s claims are based upon an alleged conspiracy

among the defendants and involving the International

Brotherhood of Teamsters (“Teamsters”), more commonly known

as the Teamsters Union, and upon actions allegedly taken by

the defendants in furtherance of this conspiracy. Lifschultz

alleges that in the mid 1960s, the Teamster’s president, Jimmy

Hoffa, decided that concentration of the LTL market in a small

number of trucking companies would be in the best interest of

the Teamsters. Lifschultz alleges that based upon this determina-

tion, in approximately 1965, the Teamsters entered into a con-

spiracy with the defendants to eliminate competitors from the

LTL market. The conspiracy is alleged to have been executed

by different tactics at different time periods. In the period prior

to deregulation, Lifschultz asserts that the defendants conspired

to create a price squeeze to reduce or eliminate the profits of

their competitors. The defendants allegedly provided false or

misleading information to the rate bureaus. The rate bureaus

developed tariffs based upon this information and sent this in-

formation to the ICC, which set the rates for the trucking in-

dustry. Lifschultz alleges that, although the rates were set above

operating costs, they allowed very little profit and were below

what the rates should have been without the false or misleading

information. The Teamsters then allegedly agreed to give the

defendants lower labor costs, to stage strikes against the defen-

dants’ competitors, and not to strike against the defendants. This

would raise the costs of operations of the defendants’ com-

petitors. According to Lifschultz’s allegations, this rise in costs

combined with small profit levels because of the rates being set

artificially low was intended to have, and did have, the effect

of reducing or eliminating the profits of the defendants’

competitors.

After deregulation in 1980, Lifschultz alleges that the means

by which the conspiracy was conducted changed. In this time

A-1]

period, the defendants allegedly worked together to provide false

information to the rate bureaus and the ICC which would allow

the defendants to charge below cost rates to certain customers

and in certain areas of the country. Lifschultz alleges that these

rates were part of a scheme of predatory pricing by the defen-

dants and were designed to force the defendants’ competitors

out of the LTL market.

ll. EVIDENCE OF CONSPIRACY

A. Direct Evidence

In its memorandum in opposition to the defendants’ motion

for summary judgment, Lifschultz states that it has presented

the court with “compelling, almost chilling, direct testimony

of the organization and operation of the defendants’ conspiracy

to eliminate competition in the LTL industry.”* This “direct

testimony” consists of the depositions and affidavits of Ralph

Picardo (“Picardo”) and Glenn Hall (“Hall”). Lifschultz’s claim

of an antitrust conspiracy hinges upon the testimony of these

two men.

l. Picardo

Picardo has admitted to committing perjury and has been

convicted of conspiracy to commit murder. Most of his testimony

is based upon statements allegedly made to him over 17 years

ago by his associates in the Provenzano Organized Crime Group.“

In his deposition, Picardo testified about the existence of a con-

spiracy between the Teamsters and the three defendants to drive

other trucking companies out of business. He asserts that the

Teamsters aided the defendants by ensuring labor peace,

‘ Plaintiffs memorandum at 19

*“(Tlhe Provenzano Group was. . . a constituent part of the Genovese Crime

Family and was subject to the direction and control of the Family's hierar-

chy.” United States v. Local 560 (1.B.T.), 694 F. Supp. 1158, 1170 (D.N.J.), affd

mem., 865 F.2d 253 (3d Cir. 1988), cert. denied, 489 U.S. 1068 (1989).

A-12

providing them breaks in arbitration, and allowing the defen-

dants to use nonunion labor. Despite his allegations that the con-

spiracy was widespread, Picardo failed to name a single

employee of the defendants who participated in this conspiracy.

Picardo testified that Yellow gave Teamster officials payoffs

to obtain labor advantages. Picardo stated that he was told this

by a vice president of Yellow’s operation, but he could not supply

the name of the Yellow official or the date of the conversation.

Picardo testified that he was told by a Teamster shop steward

at Roadway that Roadway had paid the steward to obtain favors

from the Teamsters. Again, Picardo could give neither the date

of the conversation nor the name of the steward who told him.

Furthermore, Picardo testified that he actually saw a Roadway

shop steward make payoffs to Salvatore Briguglio (“Briguglio”).’

Nevertheless, Picardo again could not supply the name of the

shop steward, the location of the terminal, or the dates of the

payoffs. According to Picardo, Briguglio and Armand Faugno*

told him that they had received bribes from Consolidated in ex-

change for labor peace. Picardo told of a meeting where Con-

solidated officials discussed the conspiracy. Picardo admitted,

however, that he was not in the room when the alleged conver-

sation took place but asserts he was told of it later by his

associates.

Picardo testified that the Teamsters had created a “hit list”

of targeted carriers, which was shown to the defendants. At one

point in his deposition, Picardo stated that he did not remember

which companies were on the “hit list.” At a later point in the

deposition, however, Picardo contradicted himself and asserted

that Lifschultz was on the list.

According to Picardo’s testimony, the Teamsters not only

allowed the favored carriers, such as the defendants, to use

’ Salvatore Briguglio, a convicted felon, was indicted with Anthony Proven-

zano for the murder of Anthony Castellito. Briguglio was murdered in 1978

while under indictment.

* Armand Faugno was indicted for loansharking and counterfeiting. He disap-

peared in 1972 while under indictment.

A-13

nonunion labor, but the union itself helped the carriers set up

nonunion companies for their use. Picardo stated that he per-

sonally set up some nonunion trucking compauies to be used

by the favored carriers, but admitted that he never established

such a company for any of the defendants.

In another of his many unsupported statements, Picardo

testified that he knew the defendants operated at a loss in cer-

tain areas of the country in order to undercut their competitors’

prices. Picardo stated that he was told by Anthony Provenzano’

and Briguglio that Roadway operated at a loss in the New

York/New Jersey area in the 1970s. Once again, Picardo sup-

plied neither the date nor the location of that conversation.

Picardo stated that ne knew Consolidated operated at a loss in

the New York and Chicago areas. Nevertheless, no one at Con-

solidated told him this; he knew it because “[i]t was public

knowledge in the industry.” The record, however, contains a great

number of financial documents of the defendants which the

defendants assert demonstrate that they did not operate below

cost in any area of the country or to any single customer to any

significant degree. Lifschultz has failed to point to any part of

this documentation in the record that supports its claim that

the defendants operated below costs.

Picardo claims that Briguglio and the Provenzano brothers

told him that Yellow was part of the conspiracy. Picardo testified

that he himself worked for Yellow as a part-time driver sometime

between 1977 and 1984. During this time he claims to have seen

bills of lading showing that Yellow had been allowed by the

Teamsters to misclassify freight in order to circumvent union

pay conditions. He could not state the exact nature of the cargo

or the identity of the shippers. Additionally, while working for

Yellow, he contends that he loaded freight for customers whose

bills showed that they were receiving allowances for doing the

loading themselves, thus indicating that the customers received

* Anthony Provenzano was a convicted murderer and a meinber of the Genovese

Crime Family. He died while in prison in 1985. He was the brother of Nunzio

Provenzano, a convicted felon.

A-14

a discounted freight rate. Citing security concerns, however,

Picardo refused to pinpoint the time he worked for Yellow and

refused to disclose the alias he assumed while working there

2. Hall

Hall is a long-time trucker and a former Teamster. Despite

never holding any union office higher than local shop steward,

Hall asserts that he was an intimate friend of Jimmy Hoffa's.

In his deposition, he testified that the conspiracy among the

defendants and the Teamsters began in the 1950s. He allegedly

was told of the conspiracy by Jimmy Hoffa himself, and over

the years discussed the conspiracy with three Teamsters

presidents: Jimmy Hoffa; Frank Fitzsimmons; and Roy B.

Williams. According to Hall, it was the Teamsters’ goal to reduce

the trucking industry to a few large unionized companies. Hall

testified that he furthered the conspiracy by bribing shippers

with bottles of liquor with hundred dollar bills wrapped around

their necks. Hall stated that pick-up and delivery drivers told

him that Yellow allowed customers to misclassify freight, but

Hall could not give the names of any of the drivers, the names

of any of the customers who received this benefit, or the dates

this misclassification took place. He claims that he was also told

by unidentified Roadway drivers that Roadway did the same

thing.

B. Motion to Exclude Testimony

The defendants have moved to exclude the testimony of Picar-

do and Hall, claiming that it is inadmissible hearsay and thus

barred by rule 802 of the Federal Rules of Evidence. The basis

for this argument is that their testimony consists of statements

made by other individuals” that a conspiracy between the

Teamsters and the defendants existed. Lifschultz argues that their

testimony is admissible under the coconspirator exception to the

hearsay rule Fed. R. Evid. 801(d)(2)(E). That rule provides that

an admission by a party-opponent is not hearsay if the “statement

* Picardo and Hail fail to name most of their sources and many of those they

do identify are now dead

A-15

is offered against a party and is. . . a statement by a cocon-

spirator of a party during the course and in furtherance of the

conspiracy.” Lifschultz asserts that the people who told Picar-

do and Hall about the conspiracy were coconspirators with the

defendants and were making statements during the course and

in furtherance of the conspiracy.

“The party proffering statements as nonhearsay under Rule

801(d)(2)(E), must demonstrate the existence of a conspiracy and

that the statements were made in the course of and in fur-

therance of that conspiracy.” Precision Piping & Instruments Inc.

v. E. I. du Pont de Nemours & Co., 951 F.2d 613, 621 (4th Cir.

1991) (citing United States v. Jackson, 863 F.2d 1168, 1171 (4th

Cir. 1989)). The court need not look only to independent

evidence when deciding whether a conspiracy existed. Instead,

a court, “in making a preliminary factual determination under

Rule 801(d)(2)(E), may examine the hearsay statements sought

to be admitted.” Bourjaily v. United States, 483 U.S. 171, 181

(1987) (citing Fed. R. Evid. 104(a) for the proposition that in

determining questions of admissibility, the court is not bound

by the rules of evidence, except those with respect to privileges,

and may therefore consider hearsay). In deciding whether to

admit the disputed testimony as staternents of coconspirators,

this court is free to examine all the evidence, including the

testimony itself, to determine if a conspiracy did in fact exist.

Therefore, in order to demonstrate that the testimony of Hall

and Picardo is admissible, Lifschultz must show that (1) a con-

spiracy existed; (2) that the declarants and the defendants were

members of the same conspiracy; and (3) that the statements

were made in the course of and in furtherance of that conspiracy.

See Jackson, 863 F.2d at 1171. The offering party, Lifschultz,

must prove these preliminary facts by a preponderance-of the

evidence. See Bourjaily, 483 U.S. at 175-76.

Considering the evidence in the light most favorable to the

plaintiff, this court finds that Lifschultz has not proven by a

preponderance of the evidence that a conspiracy did in fact ex-

ist among the defendants and the Teamsters. The court reaches

this conclusion even after carefully considering the disputed

A-16

testimony of Picardo and Hall. Because Lifschultz has failed to

demonstrate the existence of a conspiracy, the testimony of Picar-

do and Hall cannot be admitted as an exception to hearsay under

Fed. R. Evid. 801(d)(2)(E). The defendants’ motion to exclude

their testimony is hereby granted.

Il. ANTI-TRUST

Under Federa! Rule of Civil Procedure 56(e), only admissi-

ble evidence may be offered in opposition to a motion for sum-

mary judgment. See 10 A Charles A. Wright, Arthur R. Miller

& Mary K. Kane, Federal Practice and Procedure § 2722 (1983).

Because the antitrust conspiracy claim is based upon the inad-

missible testimony of Picardo and Hall, the court must grant

summary judgment as to this issue.

Even if the testimony were admissible, however, summary

judgment would still be appropriate as to this cause of action.

In examining the antitrust conspiracy cause of action, the court

is guided by the United States Supreme Court case of Matsushita

Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574

(1986), which is factually similar to the one before the court.

In Matsushita, the plaintiffs were American television manufac-

turers who claimed that Japanese television makers were engag-

ing in predatory pricing in the United States. The plaintiffs

claimed that the Japanese could afford to sell televisions so

cheaply in this country because they were overpriced in Japan.

The Court held that in an antitrust conspiracy case, in order

to survive a motion for summary judgment, the plaintiffs must

establish a question of material fact as to whether the defen-

dants entered into an illegal conspiracy which caused the plain-

tiffs to suffer a cognizable injury. A “plaintiff seeking damages

for a violation of § 1 [of the Sherman Act] must present evidence

‘that tends to exclude the possibility’ that the alleged conspirators

acted independently. . .. Respondents in this case, in other words,

must show that the inference of conspiracy is reasonable in light

of the competing inferences of independent action or collusive

action that could not have harmed respondents.” Matsushita,

475 U.S. at 588.

A-17

Even if the testimony of Picardo and Hall were admissible.

it is simply too incredible to support Lifschultz’s conspiracy

theory. Their testimony consists primarily of gossip and rumors

passed on to them by often unidentified individuals. Even when

the individuals are identified, dates, locations, and other such

pertinent information is usually not provided. Most importantly,

not once does either Picardo or Hall name a single employee

of the defendants involved in the alleged conspiracy, and not

once does either man present evidence that the defendants agreed

among themselves to the schemes allegedly devised by the

Teamsters. While the testimony of Picardo and Hall may be

evidence of illegal deals between Teamster officials and truck-

ing companies, it provides no evidence of a conspiracy among

the defendants to drive Lifschultz, or any other company, out

of business.

A. Oxenfeldt Report

Lifschultz’s circumstantial evidence of a conspiracy is theo-

rized in the Oxenfeldt Report. This report describes the motive

and opportunity of the defendants to enter into the conspiracy.

The report surmises that the present composition of the truck-

ing industry would be different if it were not for the alleged

conspiracy. Oxenfeldt’s findings read more like a cheap novel

than an economic report. For the most part, the report is mere-

ly a series of unsupported conclusions. When Oxenfeldt does

support his conclusions, they are often based upon the testimony

of Hall and Picardo. The following are examples of Oxenfeldt’s

unsupported speculation. As to the pre-1980 part of the con-

spiracy, Oxenfeldt writes: “We strongly doubt that the cartel

members ever reached a formal agreement that was reduced

to writing. Nonetheless, the cartel members realized that they

had agreed to cooperate with the union and knew that other

large carriers did the same.” This is not circumstantial evidence

of a conspiracy. It is unsupported opinion on the part of Ox-

enfeldt. Later, when explaining how the defendants carried out

the conspiracy before 1980, Oxenfeldt writes the following:

" Oxenfeldt Report at 3-3

A-18

The conspirators could take customers away from

rivals by conducting intensive sales efforts which were

directed at their rivals’ most valuable customers. That

could be done by, among other things, spending large

sums on lavish entertainment, gifts for prospective

customers, bribes of traffic managers, misclassifica-

tions of freight, phony allowances, charging less than

the legally filed rate, and the like. In addition, they

could defame their rivals and deprecate their service

and reliability. (emphasis added).”

This paragraph, like much of the report, is written in the con-

ditional, stating not what the defendants did, but what they |

could have done. As evidence of the defendants’ post-1980

predatory pricing, Oxenfeldt points to the fact that the defen-

dants increased market share after deregulation.

The most striking feature of the defendants’ plan to

increase market share after deregulation in 1980 was

the environment in which it occurred. The legislation

aimed to increase competition by facilitating entry of

newcomers to the industry — therefore, the defen-

dants should have expected great difficulty even in

maintaining their present market shares. Thev never-

theless were determined to increase them. In light of

large, strong competitors like [Lifschultz], this deter-

mination necessarily required predatory pricing to

succeed."

This statement, like most of the conclusions in the report, is

nothing more than mere speculation. Oxenfeldt gives no firm

evidence of the existence of a conspiracy to drive Lifschultz and

other trucking companies out of busihess. Furthermore, Ox-

enfeldt admitted in his deposition that economists are not com-

petent to render opinions concerning the existence of a con-

spiracy. This being the case, his report provides no support for

Lifschultz’s antitrust conspiracy claim against the defendants.

* Oxenfeldt Report at 3-17

* Oxenfeldt Report at 4-10

A-19

In addition, the very fact that the trucking industry was strict-

ly regulated until 1980 makes such a conspiracy implausible.

The ICC set the shipping rates, and if the defendants somehow

managed to have the rates set too low, the other trucking com-

panies would surely have complained. At the summary judg-

ment hearing, Lifschultz estimated that during the pre-1980

stage of the conspiracy, the defendants controlled forty percent

(40 % ) of the market. If this is so, then the defendants’ “targets”

controlled the majority of the market. To believe that the ICC

could be manipulated by three trucking companies at the ex-

pense of all the other trucking companies stretches the bounds

of believability.

B. Reasonableness of the Conspiracy

The most profound flaw in Lifschultz’s conspiracy theory is

that it is simply not reasonable. Lifschultz asks this court to

believe that the Teamsters and the defendants entered into a

conspiracy in the mid 1960s (or the 1950s, if one believes the

testimony of Hall) that endured for decades. For such a con-

spiracy to exist, the conspirators would have to have had the

patience of Job. If one believes Lifschultz, the Teamsters were

allegedly willing to make major concessions to the defendants

year after year, in exchange for bribes to individual Teamster

officials, for the hope that one day in the distant future the

Teamsters would reach the promised land where the entire truck-

ing industry would be unionized. Throughout the passage of

time and changes in union leadership, the Teamsters were

allegedly willing to make concessions even though 15 years passed

without any real evidence that the conspiracy was working.”

Such an idea is preposterous.’ As the Supreme Court stated in

“ For example, as of 1980, roughly fifteen years after the conspiracy began,

Lifschultz was still making a profit.

'S Furthermore, Lifschultz employed no Teamster workers in the New York

New Jersey area, the center of his operation. Teamsters were employed in the

Chicago area, but only a smal! number. With such a small number of Teamster

employees, it is absurd to think that the Teamsters could have much effect

on Lifschultz’s costs.

A-20

the Matsushita case, “if the factual context renders respondents’

claim implausible . . . respondents must come forward with

more persuasive evidence to support their claim than would

otherwise be necessary.” Id. 475 U.S. at 587. The Lifschultz has

failed to provide the persuasive evidence required.

C. Predatory Pricing

Lifschultz alleges that after deregulation in 1980, the defen-

dants implemented predatory pricing to obtain its goal of driv-

ing Lifschultz out of business. Predatory pricing has two stages.

In the first, those engaged in the antitrust conspiracy cut their

prices to below cost levels, thus sustaining a loss in an effort to

drive competitors out of business.* After the competitors are

eliminated, the predators have achieved an oligopoly,” and the

second stage begins. At this point they dramatically increase their

prices to regain their earlier losses.

[I]t is not enough simply to achieve monopoly power,

as monopoly pricing may breed quick entry by new

competitors eager to share in the excess profits. The

success of any predatory scheme depends on maintain-

ing monopoly power for long enough both to recoup

the predator’s losses and to harvest some additional

gain. Absent some assurance that the hoped-for

monopoly will materialize, and that it can be sus-

tained for a significant period of time, [t]he predator

must make a substantial investment with no assurance

that it will pay off.

Matsushita, 475 U.S. at 589 (quotations omitted) (emphasis in

original). In a recent Fourth Circuit case, the court held that

’* Although a single seller can use predatory pricing in an attempt to obtain

monopoly power, in light of the facts of the case, predatory pricing is analyzed

as it is carried out by more than one seller.

" “An oligopoly is a market situation in which a few producers control the

demand from many buyers.” Webster's Seventh New Collegiate Dictionary

588 (1967).

erence cecil

A-21

“predatory pricing must involve, in addition to some level of

below-cost pricing that is harmful to competition, the rational

expectation of later realizing monopoly profits.” Liggett Group,

Inc. v. Brown & Williamson Tobacco Corp., 964 F.2d 335, 339

(4th Cir. 1992).

In support of its predatory pricing claim, Lifschultz looks at

the defendants’ prices in several lanes and concludes that they were

below cost. Lifschultz points out that in some years the defen-

dants lost money on some of their lanes. Nevertheless, it is the

usual practice of LTL trucking companies to sell their services not

on a lane-by-lane basis, but rather on a national basis. Thus, the

trucking companies quote prices to shippers that apply to all

the places the goods will be delivered. In his deposition, David

Lifschultz, the president of the plaintiff, admitted that truck-

ing companies generally negotiate rates for all destinations and

did not offer different prices for different areas. This being the

case, the pertinent inquiry is not did the defendants lose money

in specific lanes, but did they lose money on specific shippers.

1. Below-cost pricing

Lifschultz has failed to demonstrate that the defendants of-

fered across the board below-cost prices to any shipper.

“[P]redatory pricing has as its aim the elimination of competi-

tion.” Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104,

118 (1986). For a plaintiff to maintain an action for predatory

pricing, the below-cost pricing must threaten competition in the

industry. See Morgan v. Ponder, 892 F.2d 1355 (8th Cir. 1989).

Accepting Lifschuitz’s “evidence” of below-cost pricing as ac-

curate, it-affected only a minute amount of business. In 1985,

for example, the total amount of Lifschultz’s business allegedly

affected was Nine Hundred Ninety-Eight Thousand Fifty-Four

Dollars ($998,054.00). That amount is three percent (3%) of

Lifschultz’s total business for that year, and is only twenty-six

one hundredths of one percent (.26%) of the LTL business ex-

isting in Lifschultz’s markets in 1985." This insignificant amount

* These figures were provided by the defendants. Lifschultz did not object

to their accuracy.

A-22

of business allegedly affected by predatory pricing could have

no meaningful effect on competition.

2. Expectation of recouping losses

Even if Lifschultz were able to prove below-cost pricing that

adversely affected competition, it has completely failed to

demonstrate that the defendants had a rational expectation of

recouping their losses by realizing monopoly profits. “[A] con-

spiracy, which could not hope to recoup its expenses incurred

from alleged below-cost pricing and [is] therefore economical-

ly senseless, [does] not violate the antitrust laws.” Matsushita,

475 U.S. at 597-98. Recoupment would be impossible because

there are no significant barriers to entrance into the LTL truck-

ing business. If the defendants attempted to raise prices

dramatically, new companies would enter the business and

quickly undercut the defendants’ prices, effectively “stealing”

their customers. In 1982, the ICC concluded that “[t here is little

likelihood of [predatory pricing] in the motor carrier industry

.... [P]redation by motor carriers [is] uneconomic, since entry

costs are so low that a predator could never long enjoy its

monopoly price.” Petition for a Declaratory Order — Lawfulness

of Volume Discount Rates by Motor Common Carriers of Prop-

erty, 365 I.C.C. 711, 714 (1982).

Finally, Lifschultz has failed to present evidence that it has

suffered injury brought about by the defendants’ alleged an-

titrust activity. Lifschultz claims that the conspiracy and price

squeeze between the 1960s and 1980 hurt its business. Never-

theless, as of 1980, Lifschultz was still realizing a profit.

Lifschultz started losing money after 1980 and blames its losses

on predatory pricing. But in 1980 the industry was deregulated,

and about this time Lifschultz changed from being a freight

forwarder to a common carrier. Either of these changes or simply

bad management could have been detrimental to Lifschultz.

Conduct as consistent with permissible competition as with il-

legal conspiracy does not, standing alone, support an inference

of antitrust conspiracy. Matsushita, 475 U.S. at 588; See also

Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752, 764

A-23

(1984). Antitrust injury is an essential element of an antitrust

claim. Atlantic Richfield Co. v. U.S.A. Petroleum Co., 495 U.S.

328 (1990). “To survive a motion for summary judgment... ,

a plaintiff . . . must present evidence ‘that tends to exclude the

possibility’ that the alleged conspirators acted independently.”

Matsushita, 475 U.S. at 588 (quoting Monsanto Co. v. Spray-

Rite Service Corp., 465 U.S. 752, 764 (1984)).

Simply put, Lifschultz has not presented evidence which

creates a question of material fact as to the existence of a con-

spiracy among the defendants to drive small trucking companies

such as Lifschultz out of business. For this reason, summary judg-

ment us to the antitrust cause of action is appropriate.

IV. RICO

Lifschultz has asserted four claims for violations of RICO.

The claims are for violations of 18 U.S.C. §§ 1962(a), (b), (c),

and (d).

18 U.S.C. § 1962 imposes liability on those who engage in a

pattern of racketeering activity if they also do the following:

invest income derived from the pattern of racketeering activity

in the operation of an enterprise engaged in interstate commerce

(§ 1962(a)); acquire or maintain, through the pattern of

racketeering activity, any interest in or control over such an

enterprise (§ 1962(b)); or conduct the affairs of such an enter-

prise through a pattern of racketeering activity (§ 1962(c)). Sec-

tion 1962(d) makes it a crime to conspire to violate §§ 1962(a),

(b), or (c). To establish a civil RICO claim for the violation of

§ 1962, Lifschultz must prove “(1) conduct (2) of an enterprise

(3) through a pattern (4) of racketeering activity.” Sedima,

S.PR.L. v. Imrex Co., 473 U.S. 479, 496 (1985) (footnote omit-

ted). Lifschultz must also prove that it was “injured in [its]

business or property by reason of the alleged violation of sec-

tion 1962.” Brandenburg v. Seidel, 859 F.2d 1179, 1187 (4th Cir.

1988) (citing 18 U.S.C. § 1964(c)). Therefore, Lifschultz is re-

quired to make two closely related showings: (1) that it suffered

injury to its business or property; and (2) that this injury was

caused by the predicate acts that make up the violation of

A-24

§ 1962. Id. at 1187. In this case, the defendants assert that there

is no evidence of racketeering activity and that the alleged viola-

tion was not the proximate cause of Lifschultz’s injuries.

A. Predicate Acts

The predicate acts that constitute “racketeering activity”

under RICO are listed in 18 U.S.C. § 1961(1). In this case, the

alleged predicate acts are (1) bribery in violation of 18 U.S.C.

§ 1952, (2) mail fraud in violation of 18 U.S.C. § 1341, and (3)

wire fraud in violation of 18 U.S.C. § 1343.

l. Bribery

Lifschultz alleges that acts of bribery are presented in the

depositions of Donna Spinelli|* Picardo,” and Hall." Donna

Spinelli (“Spinelli”) is a former employee of Lifschultz. Her testi-

mony relates only to Yellow. Her testimony is hearsay testimony

of what she was told by Frank Rapacelli (“Rapacelli”) of

Dynamic Classics and Ed Fowler (“Fowler”) of Florasyth, two

former customers of Lifschultz who had moved their business

to Yellow. Spinelli asserts that Rapacelli told her that Yellow pro-

vided employees of Dynamic Classics with a trip to Atlantic City

for an evening of dinner, shows, and some gambling. Spinelli

also states that Rapacelli told her that Yellow provided Dynamic

Classics with rate discounts that Lifschultz could not offer.

Spinelli states that Fowler told her that Yellow provided better

entertainment to its customers than Lifschultz. Spineili states

that she tried to give Fowler a bottle of scotch at Christmas,

but Yellow had already given him a case of scotch. Also, Spinelli

tried to give Fowler two tickets for grandstand seats to a New

York Mets baseball game, but Yellow had already given him six

" Lifschultz cites to pages 40-43, 59-60, 62, 68-71, and 75-79 of Spinelli’s deposi-

tion taken Thursday, August 25, 1988.

* Lifschultz cites to pages 36-41, and page 326 of Picardo’s deposition taken

July 13, 1989.

* Lifschultz cites to pages 120-121 of Hall's deposition taken June 27, 1990.

A-25

tickets for box seats. Spinelli also asserts that she attempted to

take Fowler to lunch, but he would not go because Yellow pro-

vided dinner.

Spinelli’s testimony does not demonstrate any bribe. Even if

the court ignores the hearsay problem, Spinelli’s testimony mere-

ly reveals that Yellow placed more emphasis on customer enter-

tainment than did Lifschultz. This is particularly evident from

the testimony regarding Fowler. Lifschultz attempted to give

him gifts and to provide entertainment for him. Spinelli com-

plains because Yellow had a larger budget for gifts and enter-

tainment so that her attempts to gain favor with Fowler through

gifts and entertainment were unsuccessful. It is clear that

Lifschultz engaged in the same type of conduct in regards to

entertainment and gifts which it asserts is bribery when done

by the defendants. Therefore, if the court were to find Yellow’s

alleged conduct constituted bribery, Lifschultz’s conduct would

also constitute bribery, or at least attempted bribery. The court

cannot agree with Lifschultz’s definition of bribery. The court

finds that entertaining customers and prospective customers and

giving Christmas gifts as presented in Spinelli’s testimony is not

sufficient to support an allegation of bribery in violation of 18

U.S.C. § 1952.”

As has been demonstrated previously, Picardo’s and Hall’s

testimony is generally a series of unsupported allegations. Never-

theless, even when the problem with their reliability is disregard-

ed. Picardo’s and Hall's testimony is insufficient to support

Lifschultz’s allegations of bribery.

Picardo stated in his deposition that he was aware that Yellow

and Roadway were paying cash bribes to traffic managers of

companies in order to get their business. He stated that he did

not recall if Consolidated paid such bribes. When he was asked

2 This conclusion is further supported by 49 C.F.R. § 1207.1(36) (1991), which

presents a list of acceptable business entertainment expenses and indicates

which expenses may be included in a trucking company’s operating Costs. Each

of the activities involved in this case is included on this list of acceptable business

entertainment expenses.

A-26

how he was aware of the alleged payments, Picardo stated that

when he was working as a salesman for a competitor of the

defendants, traffic managers for certain companies told him that

he had to pay a bribe to get their business. Picardo then states

that all three of the defendants did business with these certain

companies. From this testimony, Lifschultz concludes that the

defendants must have paid bribes to the traffic managers. Such

a conclusion requires a tremendous leap of faith, which this court

will not make. The fact that certain traffic managers allegedly

attempted to extort bribes from Picardo does not prove that these

managers attempted the same thing with the defendants, much

less that the defendants paid any such bribes.

Hall states that a friend of his, Harvey Cole, told Hall that

he had gone with an unnamed official of Yellow in 1955 or 1956

to deliver a check for about Two Thousand Dollar ($2000.00)

to a shipper, Armco Steel. This is clearly hearsay testimony. Also

it is ten years before Lifschultz asserts that the conspiracy was

formed.” Therefore, the court finds that there is no evidence

that would allow a rational trier of fact to find that the alleged

predicate act of bribery occurred.

2. Mail and wire fraud

The alleged predicate acts of mail fraud and wire fraud are

closely connected. They involve the transmission of allegedly

false or misleading information to the rate bureaus, to customers,

and to prospective customers. The mail and wire fraud statutes

make it unlawful ta.use the mail or wire, radio, or television

to execute or attempt to execute “any scheme or artifice to

defraud, or for obtaining money or prdperty by means of false

or fraudulent pretenses, representations, or promises ....” 18

U.S.C. §§ 1341 and 1343 (1989)(the quoted language appears

in both § 1341 and § 1343). At the hearing, Yellow’s attorney

stated that there was no evidence of any false statements to the

* See Plaintiffs memorandum at 7-8 (Stating that the conspiracy was formed

in the “mid 1960s.”).

A-27

rate bureaus or anyone else.” Lifschultz’s attorney responded

that the evidence of false statements was that the United States

Department of Justice has asked the ICC to investigate the rate

bureaus. and Lifschultz’s attorney believes that the Department

of Justice has asked the ICC to suspend the anti-trust immuni-

ty for the rate bureaus.” Then, in response to a question from

the court. Lifschultz’s attorney stated that he was not aware of

any other evidence of false statements being made to the rate

bureaus.® After an examination of the record, the court also is

not aware of, and is unable to find, any other evidence that in-

dicates that any statement made, representation given, or in-

formation provided by the defendants to the rate bureaus, the

ICC. or customers was false or fraudulent. In the complaint,

Lifschultz lists nine letters or communications that allegedly are

examples of mail and wire fraud by the defendants. However,

Lifschultz has not demonstrated in any of the voluminous briefs

or reports submitted in this case how any statement or represen-

tation in any of these letters or communications is false or

fraudulent. Because there is a lack of evidence that any false

or fraudulent representation was made by the defendants, a ra-

tional trier of fact could not find that the defendants commit-

ted the predicate acts of mail or wire fraud.

As stated previously, an essential element of a civil RICO claim

is a “pattern of racketeering activity.” Sedima, S.P.R.L. v. Im-

rex Co., 473 U.S. 479, 496 (1985). A “pattern” of racketeering

activity consists of at least two acts of racketeering activity com-

mitted within ten years of each other. 18 U.S.C. § 1961(5) (1984).

Since the record cannot support the conclusion that any

predicate acts of racketeering activity occurred, a pattern of

racketeering activity could not have existed. Therefore,

Lifschultz has failed to present evidence of racketeering activity,

* Transcript of Motions Hearing at 116-17.

* Transcript of Motions Hearing at 119, lines 7-11

* Transcript of Motions Hearing at 119, line 22.

A-28

much less a pattern of racketeering activity, both of which are

essential elements to Lifschultz’s civil RICO claims. For this

reason, summary judgment must be granted as to the RICO

claims.’

B. Proximate Cause

To bring a RICO action, a person must be “injured in his

business or property by reason of a violation of section 1962

28 U.S.C. § 1964(c). The Supreme Court has interpreted this

language to require that the violation of RICO be the proximat«

cause of the injury. Holmes v. Securities Investor Protection

Corp., — U.S. _., U2S.Ct. 1311, 7 L.Ed. 2d 532 (1992). There

must be “some direct relation between the injury asserted and

the injurious conduct alleged.” Jd. 112 S.Ct. at 1318. The plain

tiff must show that it has suffered injury to its business or prop-

erty and that this injury was caused by the predicate acts of

racketeering activity that make up the violation of § 1962.

Brandenburg v. Seidel, 859 F.2d 1179, 1187 (4th Cir. 1988)

Lifschultz is no longer in business. It, therefore, has suffered

an injury. The defendants assert that there is no evidence that

the alleged violations of RICO were the proximate cause of any

injury to Lifschultz. The defendants point out that Lifschultz

ceased being a profitable corporation immediately after the

trucking industry was deregulated and immediately after it was

converted from a freight forwarder into a motor common car-

rier. Lifschultz contends that the fact that the defendants grew

in size when large numbers of carriers, including Lifschultz,

were going out of business is circumstantial evidence that the

defendants must have conspired to restrain competition and is

sufficient to create a genuine issue of fact as to the cause of

Lifschultz’s injuries. The determination of legal or proximate

cause is properly one of law for the court, taking into considera-

tion such factors as the foreseeability of the particular injury,

Although the court grants summary judgment as to the RICO claims based

on the lack of evidence of racketeering activity, the court will address some

of the other arguments as alternate grounds upon which summary judgment

should be granted

A-29

the intervention of other independent causes, and the factual

directness of the causal connection. /d. at 1189 (citing Restate-

ment (Second) of Torts § 548A comments a, b). In this case, any

link between the alleged violations and the injury is at best

remote and tenuous. The alleged predicate acts were all directed

at third parties, the rate bureaus, the ICC, and customers. Any

harm from the alleged conspiracy would be purely contingent

on how the rate bureaus and the ICC acted based on the alleged

predicate acts and then the customers’ taking action based on

the ICC action. “The general tendency of the law, in regard to

damages at least, is not to go beyond the first step.” Holmes v.

Securities Investor Protection Corp., — U.S. —_, 112 S.Ct. 131],

1319. 1I7 L.Ed. 2d 532 (1992)(citations and footnote omitted).

Lifschultz is, at best, the second step from the alleged predicate

acts, and more probably is best described as three or four steps

removed from the alleged predicate acts. “Allowingsuits by those——

injured only indirectly would open the door to massive and

complex damages litigation, which would not only burden the

courts. but also undermine the effectiveness of treble-damages

suits.” Id. 112 S.Ct. at 1321 (citation omitted). Accordingly, the

court finds that the alleged predicate acts were not the prox-

imate cause of Lifschultz’s injuries and summary judgment must

be entered.

1. Detrimental reliance

The defendants’ have specifically argued that Lifschultz has

not alleged a sufficient causal connection between the RICO

predicate acts of mail and wire fraud and its injuries. In rela-

tion to the proximate cause of an injury based on a RICO

predicate act of mail fraud, the United States Court of Appeals

for the Fourth Circuit has stated that “while . . . it is not

necessary to establish detrimental reliance by the victim in order

to make out a violation of the federal mail fraud statute, such

reliance is necessary to establish injury to business or property

‘by reason of a predicate act of mail fraud ....” Brandenburg

v. Seidel. 859 F.2d 1179, 1188 n.10 (4th Cir. 1988); Morley v.

Cohen. 888 F.2d 1006, 1011 (4th Cir. 1989); See also Professionals,

Inc. v. Berry, 959 F.2d 231 (4th Cir. 1992)(table; text found in

A-30

Westlaw).* Because the alleged mail and wire fraud was directed

at the rate bureaus and at customers or prospective customers,

Lifschultz did not detrimentally rely on any representations.

Lifschultz asserts that Brandenburg merely requires reliance by

“someone” and that reliance need not be by the plaintiff.

Lifschultz contends that the reliance by the rate bureau is suf-

ficient. The court disagrees. In support of the assertion that

Lifschultz did not need to rely, Lifschultz cites Armco Indus.

Credit Corp. v. SLT Warehouse Co., 782 F.2d 475 (5th Cir. 1986);

SJ] Advanced Technology & Mfg Corp. v. Junkunc, 627 F.Supp.

572 (N.D.III. 1986); and Pearlstine Distributors, Inc. v. Freix-

enet, U.S.A., Inc., 678 F.Supp. 133 (D.S.C. 1988).” Although each

of these cases appears to allow a RICO claim when the alleged

misrepresentations were made to and relied upon by a third par-

ty, the court finds that these cases do not state the law of the

Fourth Circuit as it presently exists. The language from Branden-

burg states that “detrimental reliance by the victim” is not

necessary to present a violation of the mail fraud statute.

Brandenburg, 859 F.2d at 1188 n.10; Morley, 888 F.2d at 1011.

The language then provides that “such reliance” is necessary to

establish a civil RICO claim based upon the predicate acts of

mail fraud. Brandenburg, 859 F.2d at 1188 n. 10; Morley, 888

F.2d at 1011. It is clear from this language that “such reliance”

refers to “detrimental reliance by the victim.” Therefore,

Lifschultz, as the alleged victim, must establish that it detrimen-

tally relied on some representation by the defendants. See Mylan

Laboratories Inc. v. Akzo, N.V., 770 F.Supp. 1053, 1074 (D.Md.

* The citation to an unpublished case is disfavored. Fourth Circuit I.0.P. 36.5

Nevertheless, because of the lack of published case law involving this issue

of detrimental! reliance and because Professionals, Inc. v. Berry is instructive

in the interpretation of this issue, the court finds that citation to Berry is ap

propriate. The text of the Berry opinion can also be found at 1992 U.S. App

Lexis 6219

* Only Pearlstine is from the Fourth Circuit. Also, Pearlstine was decided prior

to Brandenburg, and the question of whether reliance was required was not

the focus of that court. The court in Pearlstine dismissed the RICO claims

for a failure to properly allege two predicate acts of racketeering activity

because of a failure to plead with particularity. Pearlstine, 678 F.Supp. at 138

A-31

1991)(holding that the person allegedly deceived by the

misrepresentation must be the person injured by the misrepresen-

tations). Because Lifschultz has not and cannot demonstrate

detrimental reliance, it cannot show injury to business or prop-

erty “by reason of” the alleged predicate acts of mail and wire

fraud.

Even if the court were to adopt Lifschultz’s interpretation

of the language from Brandenburg, Lifschultz has failed to

establish the necessary reliance. Brandenburg clearly states a

requirement for “detrimental” reliance. Even if false statements

were made and even if the rate bureaus and the ICC relied upon

these statements, Lifschultz has presented no evidence how this

reliance was detrimental to the rate bureaus or the ICC. For

these reasons, summary judgment must be granted as to the

RICO claims insofar as they rely on predicate acts of mail and

wire fraud.

2. Causation for § 1962(a)

Lifschultz cites Ouknine v. MacFarlane, 897 F.2d 75 (2d Cir.

1990) for the proposition that it does not need to show that its

injury resulted from the alleged predicate acts to show a viola-

tion of § 1962(a). This is a mischaracterization of the holding

in Ouknine. Ouknine adopted the “investment use” rule and held

that “to state a claim for civil damages under § 1962(a), a plain-

tiff must allege injury from the defendants’ investment of

racketeering income in an enterprise.” Id. at 83. In reaching this

holding, the Second Circuit expressly rejected the argument that

“a plaintiff asserting a claim for damages under § 1962(a) need

allege injury only from the predicate acts, not from the defen-

dants’ investment of racketeering income.” Id. at 82. The Fourth

Circuit has rejected the “investment use” rule. Busby v. Crown

Supply, Inc., 896 F.2d 833 (4th Cir. 1990)(holding that a claim

under § 1962(a) may be maintained by merely showing an in-

jury from the RICO predicate acts). Therefore, the court finds

that Ouknine is completely inapplicable to this case.

However, even if Lifschultz can properly assert a § 1962(a)

claim without demonstrating any injury from the predicate acts,

Lifschultz is required to demonstrate that it was injured by

A-32

reason of a violation of § 1962(a). Lifschultz has failed to pro-

duce any evidence which demonstrates that the defendants il-

legally obtained any income through racketeering activity or

that the defendants invested any such income in an enterprise.

Therefore, Lifschultz cannot show that the defendants violated

§ 1962(a), much less that it was injured by reason of such a viola-

tion. For this reason, summary judgment must be entered as

to the § 1962(a) claim.

C. MeNally

The defendants further assert that they are entitled to sum-

mary judgment because Lifschultz has failed to demonstrate that

the alleged predicate acts of mail and wire fraud were part of

a scheme to defraud which was intended to deprive another of

money or property. See McNally v. United States, 483 U.S. 350,

358-61 (1987).*

1. Government property

The primary objects of the alleged predicate acts of mail and

wire fraud were the rate bureaus and the ICC. The defendants

contend that the rate bureaus and the ICC were not deprived

of any property interest, but at most were deprived of an in-

tangible interest, as regulators, in properly regulating the

* Thee holding of McNally was limited by Congress in 18 U.S.C. § 1346, which

ai.ow s an action based on a scheme to deprive another of the intangible right

of nonest service. Nevertheless. the claims in this case are governed by McNally

-omuse the statute did not become effective until after these RICO claims

were brought and § 1346 has no retroactive effect. See Kehr Packages, Inc

t. Fidelcor Inc., 926 F.2d 1406, 1417 n.4 (3d Cir. 1991); United States v. Telink

Inc., 910 F.2d 598, 601 n.2 (9th Cir. 1990); United States v. Granberry, 908

F.2d 278, 281 n. | (8th Cir. 1990); McEvoy Travel Bureau, Inc. v. Heritage

Travel, Inc., 904 F.2d 786, 791 (Ist Cir.), cert. denied _ U.S. _., ll] S.Ct.

536, 112 L.Ed. 2d 546 (1990); Lomelo v. United States, 891 F.2d 1512, 1514

n.6 (llth Cir. 1990); United States v. Bush, 888 F.2d 1145, 1146 (7th Cir. 1989);

Corcoran v. American Plan Corp., 886 F.2d 16, 19 (2d Cir. 1989); United States

t. Davis, 873 F.2d 900. 902 (6th Cir.), cert. denied 493 U.S. 923 (1989); United

States vt. Stewart, 872 F.2d 957, 960 n. 2 (10th Cir. 1989)

A-33

trucking industry. This interest in proper regulation is not a suf-

ficient deprivation of property under the wire and mail fraud

statutes. See McNally v. United States, 483 U.S. 350, 356-59 &

n.8 (1987)(the mail fraud statute does not protect the “intangi-

ble right of the citizenry to good government”; and “any benefit

which the Government derives from the statute must be limited

to the Government's interests as property holder.”); McEvoy

Travel Bureau, Inc. v. Heritage Travel, Inc., 904 F.2d 786, 792-93

(Ist Cir. 1990)(representations to the air industry's self-regulatory

associations to induce regulatory action did not constitute a

deprivation of property under the mail and wire fraud statutes. );

United States v. Evans, 844 F.2d 36, 42 (2d Cir. 1988)(“the

United States’s [sic] interest in regulating foreign resales of arms

is not a property right for wire and mail fraud purposes.”); Mylan

Laboratories, Inc. v. Akzo, N.V., 770 F.Supp. 1053, 1071-73

(D.Md. 1991)(FDA’s interest in approving and regulating new

drugs is not property within the meaning of the federal mail

and wire fraud statutes.). Therefore, to the extent that

Lifschultz’s allegations of mail and wire fraud rely on the defen-

dants’ defrauding the rate bureaus and the ICC, they are not

sufficient, and summary judgment must be granted.

2. Convergence of deceived and injured

The defendants argue that, under McNally, a violation of the

mail and wire fraud statutes is shown only when property is

obtained from the person who is deceived. “ ‘If a scheme to

defraud must involve the deceptive obtaining of property, the

conclusion seems logical that the deceived person must lose money

or property. That is, there must be a convergence of the deceived

and the injured.” Mylan Laboratories, Inc. v. Akzo, N.V., 770

F.Supp. 1053, 1073 (D.Md. 1991)(quoting United States v. Evans,

844 F.2d 36, 39 (2d Cir. 1988); citation and footnote omitted);”

See also United States v. Lew, 875 F.2d 219, 221 (9th Cir.

1989) (“the Court made it clear [in McNally] that the intent must

be to obtain money or property from the one who is deceived”);

United States v. Shelton, 848 F.2d 1485, 1495 (10th Cir. 1988)

” Although this theory was not the basis of the holding in Evans, the language

is instructive.

inttieee ee

A-34

(“Under McNally, instructions on the elements of mail fraud

must require the jury to find that the victim of the scheme was

itself defrauded of money or property.” (emphasis in original));

United States v. Keane, 678 F.Supp. 708, 711 (N.D.III. 1987),

affd 852 F.2d 199 (7th Cir. 1988), cert. denied 490 U.S. 1084

(1989) (“McNally serves to tighten up the concept of ‘victim. That

is, to constitute fraud, the entity to be deceived must also be

the entity that is to part with property.” (emphasis in original)).

This reasoning is not universally accepted. Lifschultz argues

that the person deceived is not required to be the same party

from whom the property is obtained. In support of this argu-

ment, it cites Armco Indus. Credit Corp. v. SLT Warehouse Co.,

782 F.2d 475, 482 (5th Cir. 1986)(stating that “the intended vic-

tim need not even have been defrauded for liability to attach

under the mail fraud statute.”) and Polycast Technology Corp.

v. Uniroyal, Inc., 728 F.Supp. 926, 947 (S.D.N.Y. 1989) (finding

that communications made among defendants or their

employees were sufficient to support mail and wire fraud).

This court finds that the better reasoned rule is to require a

convergence of the identity of the injured and the deceived. That

is, the person allegedly injured by the misrepresentations must

be the person allegedly deceived by the misrepresentations. Also,

the language in Brandenburg, which requires detrimental

reliance on the part of the victim, supports this rule. Branden-

burg, 859 F.2d at 1188 n.10; Morley, 888 F.2d at 1011. Therefore,

because there is no convergence of the deceived and the injured

in this case, summary judgment must be granted as to

Lifschultz’s RICO claims which are based on allegations that

it was injured by the defendants’ submission of information to

the rate bureaus, the ICC, or customers.

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Vv. KEOGH DOCTRINE

The defendants assert that they are entitled to summary judg-

ment because the Keogh doctrine” bars Lifschultz’s claims. The

Keogh doctrine bars collateral attack of tariffs subject to ICC

regulation. In Keogh v. Chicago & N.W. Ry. Co., 260 U.S. 156

(1922), the Court held that the extensive regulatory structure

of the Interstate Commerce Act provides the damage remedies

for those aggrieved by regulated carrier rate-making, so that

a private anti-trust action was not allowed. Id. at 161-62. The

Court stated four reasons for this holding. First, when the ICC

determines that a rate is illegal or unreasonable, the injured party

can recover damages under the Interstate Commerce Act. Id.

at 162. Second, the Interstate Commerce Act was intended to

prevent unjust discrimination, and to allow recovery under an-

titrust laws might defeat this purpose by giving the recovering

party an advantage over his competition. Id. at 163. Third, an

anti-trust plaintiff would have to show that the ICC would have

approved the rate that he asserts would have prevailed without

the alleged anti-competitive activity. Id. at 163-64. Finally, the

amount of a plaintiff's damages are speculative. Jd. at 164. Under

the filed rate doctrine, tariffs filed with the ICC are binding,

have the force of law, and are lawful for all purposes, unless

declared unlawful or unreasonable by the ICC. Id. at 163.

Although the validity of the Keogh doctrine has been questioned,

recently it has been affirmed and applied in Square D Co. v.

Niagara Frontier Tariff Bureau, Inc., 476 U.S. 409 (1986) and

Maislin Indus., U.S., Inc. v. Primary Steel, Inc., 497 U.S. 116

(1990).

A. Fraudulent Manipulation

Lifschultz asserts that the Keogh doctrine does not apply in

this case because it is challenging the “fraudulent manipulation

® At times the parties refer to the “filed rate doctrine.” The Keogh doctrine

is a more specific statement of the filed rate doctrine. The Keogh doctrine

applies to rates filed with the ICC. The “filed rate doctrine” applies to rates

filed with any regulatory body. For purposes of this order, the court uses the

terms interchangeably

ial

A-36

of the ICC,” and not the rates. Lifschultz’s injuries did not result

from the alleged acts of fraudulent manipulation. The injuries

allegedly occurred as a result of the defendants’ and Lifschultz’s

charging rates that were set and tariffs that were filed based

on the fraudulent information. It is clear to the court that

Lifschultz is attempting to collateraily attack the lawfulness or

reasonableness of the rates. This is exactly what the Keogh doc-

trine was created to prevent. The fact that the rates were alleged-

ly set based on fraudulent information is immaterial. Even when

a rate is allegedly fraudulently obtained, the filed rate doctrine

applies. Taffet v. Southern Co., 967 F.2d 1483, 1494 (11th Cir.

1992): See also H.J. Inc. v. Northwestern Bell Tel. Co., 954 F.2d

485 (8th Cir. 1992), cert. denied __ US. 112 S.Ct. 2306, 119

L.Ed. 2d 228 (1992).

_—9

B. Action by Competitor

Lifschultz also argues that the filed rate doctrine applies only

in actions between a carrier and a customer. It cites Groton v.

Connecticut Light & Power Co., 662 F.2d 921 (2d Cir.

1981)(refusing to apply the Keogh doctrine to an action by a

competitor because the Keogh case involved an action by a

customer) and Essential Communications Systems, Inc. v.

American Telephone & Telegraph Co., 610 F.2d 1114 (3d Cir.

1979) (refusing to apply the Keogh doctrine because the FCC

tariff was not intended to protect competitors). The Sixth Cir-

cuit, however, in a well reasoned opinion, has determined that

the Keogh doctrine can apply in actions between competitors.

Pinny Dock & Transport Corp. v. Penn Central Corp., 838 F.2d

1445 (6th Cir.), cert. denied 488 U.S. 880 (1988). This position

is further supported by the fact that in Georgia v. Pennsylvania

R.R. Co., 324 U.S. 439 (1945), the Court applied the Keogh doc-

trine in a case in which Georgia was both a customer and a

competitor.

* Groton involved an electrical utility, and Essential Communications involved

the telephone communications industry. It should be noted that at the time

of these cases, the piaintiffs had no other competitors than the defendant in

each case

A-37

In Pinny, the Sixth Circuit points out that three of the four

reasons for the Keogh doctrine favor the application of the doc-

trine to actions by competitors as well as customers. Pinny, 838

F.2d at 1457. In determining the reasonableness of rates, the

ICC must not only protect against a carrier's overcharging a

captive customer, but it must also consider the economic costs

of the transportation service. The ICC, therefore, is the sole

source of any rights relating to an injury caused by a filed rate

for not only customers, but for the entire public, including com-

petitors. See Pinny at 1457. Lifschultz had the right under the

Interstate Commerce Act to complain to the ICC that the rates

were illegal and unreasonable. It chose not to pursue that right.

Lifschultz also would be required at trial to show that the rate

that would have prevailed without the alleged conspiracy would

have been approved by the ICC and that such a rate would not

have injured Lifschultz. Additionally, the amount of damage

that is attributable to the rates being allegedly set by the defen-

dants’ submitting fraudulent information would be complete-

ly speculative. These are the exact problems that the Court in

Keogh foresaw and sought to avoid. The court, therefore, finds

that the filed rate doctrine applies to actions by competitors as

well as customers.

C. Keogh and RICO

Lifschultz next argues that the Keogh doctrine does not apply

to its RICO claims. It asserts that the Keogh doctrine applies

only to anti-trust actions. Lifschultz cites County of Suffolk v.

Long Island Lighting Co., 907 F.2d 1295 (2d Cir. 1990)” as sup-

port for this argument. LILCO, however, addressed the “clear

statement doctrine” not the filed rate doctrine. The court,

therefore, finds LILCO inapplicable to the facts of this case.

* This case is referred to as LILCO

* The clear statement doctrine requires a clear statement from Congress before

the federal courts assume that Congress intended to alter the usual constitu-

tional balance of power in areas “traditionally regulated by the States.” Hilton

t. South Carolina Public Ry. Comm'n, __ U.S. _, 112 S.Ct. 560, 116 L.Ed

2d 560 (1991)

——————

A-38

To support their argument that the Keogh doctrine applies

to RICO claims, the defendants cite H.J. Inc. v. Northwestern

Bell Tel. Co., 954 F.2d 485 (8th Cir. 1992)(holding that the filed

rate doctrine does apply in a RICO action). Also, the court finds

persuasive the case of Taffet v. Southern Co., 967 F.2d 1483 (11th

Cir. 1992) which holds that the filed rate doctrine applies to

a RICO claim. Based on the reasoning of H.J. Inc. and Taffet,

the court finds that the Keogh doctrine applies to bar RICO

claims.

Based on the foregoing, the court finds that the Keogh doc-

trine bars Lifschultz’s antitrust claim and RICO claims. Sum-

mary judgment must be granted as to those claims.

VI. SCUTPA

Lifschultz has asserted a claim under the SCUTPA alleging

that the defendants used unfair methods of competition and un-

fair or deceptive acts or practices in the conduct of trade or com-

merce in violation of S.C. Code Ann. § 39-5-20 (Law. Co-op.

1976).

A. Public Interest

The defendants assert that Lifschultz has failed to demonstrate

that the alleged unfair or deceptive practices “affect the public

interest” as required by Noack Enterprises, Inc. v. Country Cor-

ner Interiors, Inc., 290 S.C. 475, 351 S.E.2d 347 (Ct. App. 1986).

A disappointed competitor unable to show harm to couneti-

tion from the alleged deceptive and unfair trade practices ‘oes

not have a claim. Steuer v. National Medical Enterprises, Inc..,

672 F.Supp. 1489, 1521-22 (D.S.C. 1987). Nevertheless, “a find-

ing of conspiracy to restrain competition is tantamount to a fin-

ding that the underlying conduct has ‘an impact upon the public

interest. " Omni Outdoor Advertising Inc. ». Columbia Out-

door Advertising Inc., 891 F.2d 1127, 1143 (4th Cir. 1989), rev'd

on other grounds sub nom. City of Columbia v. Omni Outdoor

Advertising Inc., _. U.S. __, lll S.Ct. 1344, 113 L.Ed. 2d 382

(1991). Lifschultz argues that its allegations of conspiracy are

sufficient to create a question of fact as to the SCUTPA claim.

A-39

The court does not agree. The court has previously ruled that

there is not sufficient evidence for a rational jury to find a con-

spiracy to restrain trade. Therefore, all that is present in this

case is a disappointed competitor with no impact upon the public

interest. Additionally, the court finds that Lifschultz has failed

to present evidence that any acts committed by the defendants

were unfair or deceptive in any way. For these reasons, sum-

mary judgment must be granted as to the SCUTPA claim.

B. Keogh Doctrine

The defendants assert that the Keogh doctrine applies to bar

Lifschultz’s SCUTPA claim. Neither the defendants nor Lif-

schultz have cited a case in which a court has applied the Keogh

doctrine to bar a state law claim or refused to apply the Keogh

doctrine, thus allowing the state law claim. The court finds the

rationale for the Keogh doctrine” applies to the SCUTPA claims

as well as to anti-trust claims and RICO claims. First, the In-

terstate Commerce Act provides an adequate remedy to

Lifschultz. Second, Lifschultz would be required to show that

it was harmed by the rates that were set and that the ICC would

have approved rates that would not have harmed Lifschultz if

the alleged deceptive acts had not occurred. Finally, Lifschultz’s

damages would be speculative. Therefore, the SCUTPA is barred

by the Keogh doctrine, and summary judgement must be

granted.

VII. SUMMARY JUDGMENT STANDARD

In ruling on a motion for summary judgment pursuant to Rule

56 of the Federal Rules of Civil Procedure, the court must view

the facts in the light most favorable to the nonmoving party.

United States v. Diebold, Inc., 369 U.S. 654 (1962). A motion

for summary judgment shall be granted “if the pleadings, deposi-

tions, answers to interrogatories, and admissions on file, together

with the affidavits, if any, show that there is no genuine issue

of material fact and that the moving party is entitled to a

* The rationale behind the Keogh doctrine is stated in section V of this opinion

A-40

judgment as a matter of law.” Fed. R. Civ. P 56(c). “By its very

terms, this standard provides that the mere existence of some

alleged factual dispute between the parties will not defeat an

otherwise properly supported motion for summary judgment;

the requirement is that there be no genuine issue of material

fact.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48

(1986)(emphasis in original). Only disputes over facts that might

affect the outcome of the suit will be considered material so as

to preclude the entry of summary judgment. Id. at 248. Also,

“summary judgment will not lie if the dispute about a material

fact is ‘genuine, that is, if the evidence is such that a reasonable

jury could return a verdict for the nonmoving party.” Jd. Sum-

mary judgment is appropriate where the record taken as a whole

could not lead a rational trier of fact to find for the nonmoving

party. Matsushita Electric Industrial Co. v. Zenith Radio Corp.,

475 U.S. 574, 587 (1986).

It is clear that the moving party bears the burden to show

that there is no genuine issue of material fact. Anderson, 477

U.S. at 256. Nevertheless, “Rule 56(e) itself provides that a par-

ty opposing a properly supported motion for summary judg-

ment may not rest upon mere allegation or denials of his

pleading, but must set forth specific facts showing that there

is a genuine issue for trial.” Jd. “The mere existence of a scin-

tilla of evidence in support of the [nonmoving party's] position

will be insufficient; there must be evidence on which the jury

could reasonably find for the [nonmoving party].” Jd. at 252.

Also, “[i]f the evidence is merely colorable or is not significant-

ly probative, summary judgment may be granted.” Jd. at 249-50

(citations omitted). In relation to the sufficiency of the evidence,

the Supreme Court has stated that:

[T jhe plain language of Rule 56(c) mandates the

entry of summary judgment, after adequate time for

discovery and upon motion, against a party who fails

to make a showing sufficient to establish the existence

of an element essential to that party’s case, and on

which that party bears the burden of proof at trial.

In such a situation, there can be “no genuine issue as

A-41

to any material fact,” since a complete failure of proof

concerning an essential element of the nonmoving par-

ty’s case necessarily renders all other facts immaterial.

Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).

The party against whom summary judgment is sought “must

do more than simply show that there is some metaphysical doubt

as to the material facts.” Matsushita, 477 U.S. at 586. “A trial,

after all, is not an entitlement. It exists to resolve what reasonable

minds would recognize as real factual disputes.” Ross v. Com-

munications Satellite Corp., 759 F.2d 355, 364 (4th Cir. 1985).

In the case sub judice, Lifschultz has charged the defendants

with seriously egregious conduct, alleged to have occurred for

a period of at least twenty-five (25) years. The conspiracy as

alleged by Lifschultz is of monstrous proportions. Although the

parties have undertaken extensive discovery, Lifschultz has been

unable to produce plausible evidence that supports its allega-

tions. In deciding whether there is an issue of material fact, the

court has considered “the record taken as a whole.” In contrast

with the length and breadth of the alleged conspiracy, the

evidence which allegedly supports Lifschultz’s posit. »n is simply

insufficient to raise a genuine question of material fact.

VII, CONCLUSION

Based on the foregoing, the court hereby grants the defen

dants motions for summary judgment as to all causes of action

and grants the defendants’ motion to exclude testimony

il IS SO ORDERED.

s/s Henry M. Herlong Jr

Henry M. Herlong, Jr

United States District Judge

Greenville, South Carolina

October 29. 1992

~~

A-43

\ THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF SOUTH CAROLINA

GREENVILLE DIVISION

Litschultz Fast Frei¢ht. Inc..

Plaintiff. ) CA No.

) 6:87-477-20

) ORDER

Consolidated Freightways Corporation )

of Delaware, Yellow Freight Systems,

Inc., and Roadway Express, Inc..

Defendants. )

For the reasons stated in the memorandum opinion filed

herewith, the defendants’ motion to exclude testimony is granted.

Further, the defendants’ motions for summary judgment are

granted and the case is dismissed.

IT IS SO ORDERED.

_s/s Henry M. Herlong Jr.

Henry M. Herlong, Jr.

United States District Judge

Greenville, South Carolina

October 29. 1992

FILED

OCT 29 1992

ANN A. BIRCH, CLERK

U.S. DISTRICT COURT

A-44

United States Bistrict Court

DISTRICT OF

SOUTH CAROLINA GREENVILLE DIVISION

Lifschultz Fast Freight, Inc., JUDGMENT IN A

CIVIL CASE

Vv.

Consolidated Freightways Corporation

of Delaware, Yellow Freight Systems, CASE NUMBER:

Inc., and Roadway Express, Inc. 6:87-477-20

Jury Verdict. This action came before the Court for a

trial by jury. The issues have been tried and the jury has

rendered its verdict.

kx Decision by Court. This action came to hearing before

the Court. The issues have been heard and a decision

has been rendered. having granted defendants’ motions

for Summary Judgment

IT IS SO ORDERED AND ADJUDGED that Summary

Judgment is entered for the defendants, Consolidated

Freightways Corporation of Delaware, Yellow Freight

Systems, Inc., and Roadway Express, Inc.

October 29, 1992 ANN A. BIRCH

Date Clerk

s/s Susan James

(By) Deputy Clerk Susan James