The opinion of the court was delivered by: RAMBO
[EDITOR'S NOTE: The following court-provided text does not appear at this cite in 562 F. Supp.]
IT IS HEREBY ORDERED THAT:
1. The motions for judgment of acquittal of defendants' H & M, Inc., William H. Quigley, Jr., RSE, Inc., D. Robert Rimmer and Walter E. Rimmer are denied.
2. The motions of defendants H & M, Inc., William H. Quigley, Jr., RSE, Inc., D. Robert Rimmer and Walter Rimmer for a new trial are denied.
3. The motions in arrest of judgment of defendants H & M, Inc., and William H. Quigley, Jr. are denied.
4. The Probation Office is directed to begin the presentence investigations.
The four individual defendants and two corporations in this action were charged with a conspiracy in unreasonable restraint of interstate trade and commerce in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. The trial of all defendants resulted in a jury verdict of guilty against all defendants. On September 3, 1982 defendant Jack D. Murphy died. On October 1, 1982 a joint motion of dismissal of the charges and an abatement of the proceedings as to Jack D. Murphy was filed. The motion was granted by order of this court on the same date.
Section 1 of the Sherman Act prohibits contracts, combinations and conspiracies "in restraint of trade or commerce among the several States." 15 U.S.C. § 1 (1976). This phrase both defines the conduct prohibited by the Statute and its jurisdictional reach. Western Waste Service Systems v. Universal Waste Control, 616 F.2d 1094, 1096 (9th Cir.) cert. denied, 449 U.S. 869, 66 L. Ed. 2d 88, 101 S. Ct. 205 (1980). The jurisdictional requirement may be satisfied under either the "effect on commerce" or the "in commerce" theory. McLain v. Real Estate Board of New Orleans, 444 U.S. 232, 242, 62 L. Ed. 2d 441, 100 S. Ct. 502 (1980).
Defendants have moved this court to find that the Government has neither sufficiently alleged in the indictment nor proved at trial that motopaving in the four-county area of Dauphin, Cumberland, Perry and Lebanon affected interstate commerce or was in the flow of commerce. Specifically, defendants H & M, Inc., Quigley, contend that the indictment must allege either that the complained of activities affected interstate commerce or that the conspiracy involved a product in the flow of interstate commerce. Defendants RSE, Inc. and the Rimmers contend the evidence was insufficient at trial to show the requisite interstate nexus. The court will first examine defendants' arguments concerning the affect on commerce test.
In McLain1 the Court held that it was unnecessary for the alleged antitrust violations to have affected interstate commerce as long as defendants' business activities, independent of the violations, affected interstate commerce. The Court stated:
To establish jurisdiction a plaintiff must allege the critical relationship in the pleadings and if these allegations are controverted must proceed to demonstrate by submission of evidence beyond the pleadings either that the defendants' activity is itself in interstate commerce or, if it is local in nature, that it has an effect on some other appreciable activity demonstrably in interstate commerce . . . To establish the jurisdictional element of a Sherman Act violation it would be sufficient for petitioners to demonstrate a substantial effect on interstate commerce generated by respondents' brokerage activity. Petitioners need not make the more particularized showing of an effect on interstate commerce caused by the alleged conspiracy to fix commission rates, or by those other aspects of respondents' activity that are alleged to be unlawful. 444 U.S. at 242, 243.
The McLain Court then used a two part test to examine the record as it stood to determine if petitioners had a sufficient basis to proceed to trial to establish Sherman Act jurisdiction. The Court first found that an appreciable amount of interstate commerce was involved in the financing of residential property in the Greater New Orleans area and in the insuring of titles to such property. The Court then examined whether the defendants' activities "which allegedly had been infected by a price-fixing conspiracy . . . " [had] "as a matter of practical economics" . . . a not insubstantial effect on the interstate commerce involved." 444 U.S. at 246 (citation omitted). The Court found that:
The McLain decision has not been interpreted consistently by the circuit courts. The Ninth Circuit has held that Sherman Act jurisdiction exists when any business activity of a defendant affects interstate commerce. Western Waste Service, 616 F.2d at 1097; Ronwin v. State Bar of Arizona, 686 F.2d 692 (9th Cir.1981). Under a more conservative view of McLain, the Tenth and First Circuits have stated that a plaintiff must point to the relevant channels of interstate commerce logically affected by the defendant's unlawful conduct. Crane v. Intermountain Health Care, Inc., 637 F.2d 715 (10th Cir. 1980); Cordova & Simonpietri Ins. v. Chase Manhattan Bank, 649 F.2d 36 (1st Cir. 1981).
The parties have not cited any opinions from the Third Circuit Court of Appeals interpreting McLain.2 This court concludes that the Ninth Circuit's approach is consistent with McClain's language and application. McElhinney v. Medical Protective Co., 549 F. Supp. 121, 127 (E.D. Ky. 1982). Contra, Pao v. Holy Redeemer Hospital, 547 F. Supp. 484 (E.D. Pa. 1982). The court therefore rejects defendants' contentions that the conspiratorial activities themselves must affect interstate commerce. The court will now examine the indictment and the Government's proof at trial under McLain as interpreted by the Ninth Circuit to determine if the "affect on commerce test" has been met.
The allegations of the indictment pertaining to the connection between the alleged conspiracy and interstate commerce are as follows:
During the period of time covered by this indictment the defendants and co-conspirators performed motopaving work in the four county area. In that area they bid for motopaving contracts let by various governmental bodies including townships and boroughs.
During the period of time covered by this indictment, there was a substantial, continuous and uninterrupted flow of liquid bituminous material from suppliers outside the Commonwealth of Pennsylvania to job sites in the four county area and to processing plants in the Commonwealth of Pennsylvania for use by the defendants and co-conspirators, for motopaving projects within the four county area.
During the period of time covered by this indictment, essential equipment was used in the business of motopaving by defendants and co-conspirators, in the four county area, which equipment had been purchased and transported from locations outside the Commonwealth of Pennsylvania.
During the period of time covered by this indictment, the activities of the defendants and co-conspirators which are the subject of this indictment were within the flow of, and substantially affected, interstate commerce.
At trial the government proved the following facts. Crushed aggregate and liquid asphalt are the two major ingredients in motopaving (N.T. p. 45). The bulk, if not all, of the asphalt used by the motopaving companies in the four-county area came from refineries in Baltimore, Maryland (N.T. pp. 52, 56, 156-57, 262-265, 337, 571, 1135). The asphalt is the most expensive product of the blacktop mix (N.T. pp. 1063, 1135). There was evidence that on some days no trucks delivered the asphalt, on some days as many as four or five trucks would be dispatched to jobs (N.T. p. 53). Each truck load carried approximately 5000 gallons (N.T. pp. 53, 1265) with a cost of about $1500.00 in 1977. The cost varied during the years from 1972 to 1980 from .15 cents to .75 cents per gallon (N.T. p. 266).
Evidence was also presented to show that some bonding companies used by motopaving contractors in the four-county area for bid, performance and payment bonds were located outside the Commonwealth of Pennsylvania.
See e.g. Gov't. Ex. 311-E and Gov't. Exs. 300-E, F, G and H. One motopaving contractor testified that the cost of the performance bonds was one percent of the contract price (N.T. p. 130).
In addition there was testimony that the equipment used in motopaving in the four-county area was purchased out of state (N.T. pp. 46-47, 151, 266, 1030-31). While there was no testimony indicating how often equipment was purchased, there was testimony that the cost of one machine was $135,000. (N.T. p. 84).
Applying the two step analysis of McLain, it is evident that an appreciable amount of interstate commerce is involved in motopaving in the four-county area specified in the indictment. This commerce consists of liquid asphalt purchased from Baltimore, performance bonds purchased from companies located in New Jersey and New Hampshire, and essential motopaving equipment purchased from companies in Indiana, New York and Massachusetts. Furthermore, it is clear that defendants' activities, i.e. motopaving in the four-county area, which allegedly have been infected by a conspiracy to allocate customers, rig bids and fix prices on motopaving projects in the same area, have as a matter of practical economics, a not insubstantial effect on the previously identified channels of interstate commerce. The above testimony established the effect of defendants' motopaving activities on the purchase of interstate liquid asphalt, performance bonds and essential equipment. The Government's evidence was sufficient to prove the nexus between interstate commerce and motopaving in the four-county area. The court concludes that the effect on commerce has been met.
Defendants also contend that the Government failed to allege and prove that motopaving was in the flow of commerce and that the court, by charging the jury on this theory, committed reversible error. The court finds no grounds requiring a new trial on these allegations.
The pertinent aspects of the indictment and testimony discussing interstate commerce have been set forth above. The Government contends that testimony as to the composition and manufacturing process of motopaving plus testimony about the source of liquid asphalt used for motopaving clearly established that liquid asphalt and thus motopaving itself was within the flow of interstate commerce. Specifically, the Government points to testimony from Ward Wilson which established that the sole ingredients of motopaving are crushed stone and liquid asphalt (N.T. p. 45). Wilson also described the motopaving process as follows:
There is a dump truck in front of it (the motopaver). The dump truck in front is dumping stone into the front hopper. That stone travels through into the middle of the paver to the mixer. There's a big tank on the front here. You fill that tank with liquid asphalt before you start and also each time it runs empty.
Inside the paver, there's a mixer. It is a paddle type thing that beats around. The two materials both flow into that, are mixed together. They come out and are spread with augers to each side of the machine and comes (sic) out the back ready to roll. (N.T. p. 49)
Previously cited testimony established that liquid asphalt, which the Government contends was the principal ingredient in terms of cost, came from Baltimore. The Government argues that the only intervening step between importation of the liquid asphalt from Baltimore and its placement on the road was the addition of the stone. No testimony was offered to establish that the physical characteristics of the asphalt were altered by the motopaver. On these facts, the Government analogizes to, among other cases, Rasmussen v. American Dairy Association, 472 F.2d 517 (9th Cir.), cert. denied, 412 U.S. 950, 37 L. Ed. 2d 1003, 93 S. Ct. 3014 (1973) to support its theory that the alleged restraint occurred within the flow of commerce.
Defendants RSE, Inc. and the Rimmers argue in their reply brief that the above facts and case law fail to establish that motopaving was in the flow of commerce. They contend that the liquid asphalt component of motopaving has undergone more than negligible processing and that its character has appreciably been altered. They cite this court's previous decision in RSE, Inc. v. Pennsy Supply, Inc., 489 F. Supp. 1227 (M.D. Pa. 1980) in support of their argument. This court finds its earlier opinion arguably distinguishable. In RSE, Inc., the court addressed the processing and components of asphaltic concrete known as hot mix to determine if the sale of liquid asphalt purchases were sufficient to place the sale of stone aggregate in the stream of commerce. The court cited the following descriptive statement from Gulf Oil Corporation v. Copp Paving Company, Inc., 419 U.S. 186, 42 L. Ed. 2d 378, 95 S. Ct. 392 (1974) concerning the processing of hot mix:
Asphaltic concrete is a product used to surface roads and highways. It is manufactured at "hot plants" by combining at temperatures of approximately 375 degrees F, about 5% liquid petroleum asphalt with about 95% aggregate and fillers. The substance is delivered by truck to construction sites, where it is placed at temperatures of about 275 degrees F. Because it must be hot when placed and because of its great weight and relatively low value, asphaltic concrete can be sold and delivered profitably only within a radius of 35 miles or so from the hot plant. 489 F. Supp. at 1235.
This court further stated in RSE, Inc. that to make the hot mix, stone, asphalt cement and other ingredients were mixed and treated to produce an entirely different product. 489 F. Supp. at 1235 (emphasis added). The court finds the above processing description of hot mix arguably distinguishable from the processing of motopaving described by witnesses Wilson and Rimmer (N.T. pp. 49, 1054, 1056, 1060). Furthermore, defendants point to no testimony addressing the alteration of the physical characteristics of the liquid asphalt. This court also notes that the Seventh Circuit in United States v. Azzarelli Construction Co., 612 F.2d 292, 295 (7th Cir. 1979) stated that "It is doubtful whether, even under the 'flow' theory such a change (chemical and molecular change or the creation of a new product, when crude oil and asphaltic cement were combined to make bituminous concrete) would suffice to render § 1 of the Sherman Act inapplicable." While the Seventh Circuit did not definitively decide if bituminous concrete was within the flow, this court finds its statement helpful.
Defendants RSE, Inc. and the Rimmers also seek to discredit the Government's reliance on Rasmussen. The court finds no significant distinctions. In Rasmussen, the principal ingredients of the filled milk product "Go" traveled in interstate commerce. Only water which made up the major portion of "Go" in terms of volume and weight was locally supplied. The court found that "Go" was "in" commerce. In the instant case, liquid asphalt which travels in interstate commerce makes up, in economic terms, the major portion of motopaving (See N.T. pp. 53, 266). Although defendants allege that stone aggregate was carefully considered in calculating the price of motopaving and thus cannot be considered economically de minimus as was the water in Rasmussen, this court disagrees. While testimony established that the cost of stone was a factor in calculating bids (N.T. pp. 90-91, 797, 1054, 1057-58) the only figure given in those portions of testimony was an estimate of 18 cents per ton for 1-B stone (N.T. p. 1054). No further specific costs have been cited by defendants. On this basis, the court is justified in concluding that the cost of stone, in comparison to liquid asphalt was de minimus. The court finds these facts sufficient to warrant congressional regulation of interstate commerce under § 1 of the Sherman Act.
II. Jury Instructions on Interstate Commerce
Defendants H & M and Quigley further contend that the court erred in instructing the jury on the "flow" test because the facts failed to support such a theory. The relevant portions of the court's instructions are set forth at N.T. pp. 1459-1464. Defendants RSE, Inc. and the Rimmers contend that the court's charge on the "flow" test amounted to a directed verdict because it failed to include the defendants' contention that motopaving could not be considered in the flow of interstate commerce.
Assuming without deciding that the court erred in instructing the jury on the "flow" test, no reversible error was committed. The general rule is that where alternative theories are presented to the jury, one erroneous and prejudicial, and the other correct, the error is prejudicial since it is impossible to tell which theory the jury followed. Nicola v. United States, 72 F.2d 780, 787 (3d Cir. 1934).
There is no prejudice, however, when, in order for the jury to find an essential element of crime based on the erroneous instruction, it must necessarily have found every fact essential to support a finding of the same element based on the alternative, correct charge. See United States v. Jacobs, 475 F.2d 270 (2d Cir. 1973), cert. denied, sub nom., Lavelle v. United States, 414 U.S. 821, 94 S. Ct. 116, 38 L. Ed. 2d 53 (1974). In Jacobs, the court stated:
Whether the jury found Lavelle and Jacobs guilty on the first [incorrect] theory submitted to it, or on the second [correct theory], or on both, there is thus no uncertainty that the jury found every fact necessary for a valid conviction. . . . 475 F.2d at 283-84.
The case at hand provides identical circumstances to those in Jacobs. For the jury to have found interstate commerce on the basis of the court's instruction on the "flow of interstate commerce" theory, it must necessarily have found that a principal ingredient of motopaving in the four-county area was liquid asphalt which was transported in interstate commerce. Such finding of facts also establishes every element necessary to a finding of interstate commerce under the court's instruction on the "affect on interstate commerce" theory. Consequently, regardless of the theory on which the jury based its finding, it is evident that the jury found every fact necessary to establish the requisite nexus between motopaving in the four-county area and interstate commerce.
III. Jury Instruction on Continuing Conspiracy
Defendants RSE, Inc. and the Rimmers further contend that the court erred in its charge with regard to adequately informing the jury of the Government's burden of proving defendants' membership in one continuing conspiracy. In support of their allegation, defendants cited two portions of the court's charge. One citation dealt with the statute of limitations and was taken out of context (N.T. pp. 1456-1457).
The adequacy of jury instructions is determined by examining the instructions as a whole. U.S. v. Palmeri, 630 F.2d 192, 201 (3d Cir. 1980), cert. denied, 450 U.S. 967, 67 L. Ed. 2d 616, 101 S. Ct. 1484 (1981). The pertinent parts of the court's instruction on the contested issue are as follows:
The indictment defines the exact nature of the charge against these defendants. The defendants are entitled to rely upon the indictment as a fair statement of the issues of this case, and none of them may be convicted upon other allegations or charges for which they have not been indicted (N.T. p. 1442).
You are, therefore, to evaluate the evidence in this case in relation to the charge made in the indictment. That is, you must determine whether it is proved to your satisfaction beyond a reasonable doubt that any, some, or all of the defendants are guilty of the charges specified in the indictment.
Now, the indictment charges that beginning at least as early as 1967 and continuing thereafter until at least September of 1977, the defendants and other co-conspirators engaged in a combination and conspiracy in unreasonable restraint of trade and commerce in violation of Section 1 of the Sherman Act and that this combination and conspiracy consisted of a continuing agreement, understanding and concert of action among the defendants and co-conspirators (N.T. pp. 1443-44).
What must be proved beyond a reasonable doubt is that the alleged conspiracy was knowingly formed and that two or more persons, including one or more of the defendants on trial now, knowingly became members of the conspiracy charged in the indictment.
In arriving at your decision in this case, you must determine both whether there is a conspiracy as charged in the indictment and whether any of the defendants were members of that conspiracy (N.T. p. 1449).
Defendants now on trial are entitled to a trial on the merits based on the evidence and the law of this case. What you should consider here is the charge as it is contained in the indictment against the defendants now on trial . . .
Thus, if you should find beyond a reasonable doubt from the evidence in the case that the conspiracy charged in the indictment was knowingly formed and that the defendants or any of them knowingly became members of the conspiracy as charged, then the fact that a defendant may have believed in good faith that what was being done was not unlawful would not be a defense (N.T. p. 1456).
If it appears beyond a reasonable doubt that the evidence in the case, that the conspiracy alleged in the indictment was knowingly formed, that the accused knowingly became a member or members of the conspiracy, either at the beginning of the plan or scheme or thereafter, then the success or failure of this conspiracy to accomplish its common object or purpose in whole or in part is immaterial.
I caution you that you are here to determine the guilt or innocence of the accused and [sic] the evidence in this case. The defendants are not on trial for any act or conduct or offense not alleged in the indictment (N.T. 1466-67).
In addition to the preceding instructions given by the court at the close of trial, during its deliberations the jury requested a re-explanation of the definition of conspiracy. After the court reread its entire charge as to conspiracy it was brought to the court's attention that it had omitted a paragraph in the re-explanation of the charge. The court continued with this statement:
THE COURT: Ladies and gentlemen of the jury, there is one additional item that I omitted in reviewing the notes. That is before you may find any Defendant guilty, the government must prove beyond a reasonable doubt that the Defendant was a member of the single conspiracy charged in the indictment. That is a conspiracy to allocate customers or rig bids or fix prices on motopaving work in the counties of Lebanon, Dauphin, Cumberland and Perry during the period from at least 1967 to at least September of 1977.
Transcript of Proceedings of Jury Trial -- Jury Questions and Verdict, pp. 14-15.
Supplemental charges must be considered as an addition to the original instructions and not as an independent charge. U.S. v. Blevins, 555 F.2d 1236, 1239 (5th Cir. 1977), cert. denied, 434 U.S. 1016, 54 L. Ed. 2d 761, 98 S. Ct. 733 (1978).
The court's instructions when viewed as a whole sufficiently defined for the jury the Government's burden with respect to proving a single, continuing conspiracy as charged in the indictment.
IV. Admissability of Donald Snyder Statement
Defendants contend that the court erred in admitting the testimony of F. Murray Bryan concerning a statement made in his presence by Donald F. Snyder. The court permitted the testimony pursuant to Rule 804(b)(3) of the Federal Rules of Evidence.
Rule 804(b)(3) states in pertinent part:
Hearsay exceptions. The following are not excluded by the hearsay rule if the declarant is unavailable as a witness:
In U.S. v. Palumbo, 639 F.2d 123 (3d Cir.) cert. denied, 454 U.S. 819, 70 L. Ed. 2d 90, 102 S. Ct. 100 (1981), Judge Adams in a concurring opinion set out a three prong test for the admissibility of inculpatory declarations against interest:
The statement is receivable only if (1) the declarant is unavailable as a witness; (2) the statement is so far contrary to the declarant's pecuniary, proprietary or penal interest that a reasonable person in his position would not have made the statement unless he believed it to be true; and (3) the trustworthiness of the statement is corroborated by the attendant circumstances. Id. at 131.
This court will apply the three prong analysis to the facts of this case.
There is no question as to Donald Snyder's unavailability. Mr. Snyder died in 1980. In determining whether the statements made by Donald Snyder on September 20, 1979 were against his interest, the court held a voir dire examination of Snyder's attorney, James K. Thomas, II, who was present at the time Snyder made the statement in the presence of F. Murray Bryan. Thomas testified that he was personally retained by Snyder after Snyder received a deposition subpoena to testify in connection with a civil antitrust suit.
Snyder told Thomas that he had participated with other people in setting prices for FB-1 paving work (motopaving). Thomas recognized the criminal nature of the conduct Snyder had described and advised him of the potential consequences of testifying at the deposition. He then advised Snyder as to his options, including the availability of his fifth amendment privilege not to testify. According to Thomas, Snyder decided he could not, in good conscience, assert the fifth amendment and if called to testify, would have to testify as to what occurred. Snyder, with Thomas' advice, then decided to attempt to meet informally with the civil defense counsel (N.T. pp. 546-47).
Snyder, accompanied by Thomas, subsequently met with civil defense counsel, including F. Murray Bryan, on September 20, 1979, at which time he gave the statement at issue. Snyder gave his statement with the understanding that he would not be subpoenaed by civil defense counsel to give deposition testimony and that he reserved the right to assert his fifth amendment privilege at trial if he desired to do so (N.T. pp. 548-49). Bryan testified that defense counsel also agreed to try to keep Snyder from involvement in the civil suit, and that they would not file a counterclaim against him in that civil suit or bring a separate suit against him (N.T. p. 576). Thomas and Bryan both testified that defense counsel specifically reserved the right to subpoena Snyder to testify at the civil trial (N.T. pp. 549, 576-77).
Defendants contend that Snyder's statement fails to satisfy the against-interest portion of the test set out above. They point to that part of the agreement reached by Snyder and the civil defense lawyers in which the latter agreed not to bring suit against Snyder through either a counterclaim or a separate suit. Defendants allege Snyder's statements sought to curry favor with the civil defense attorneys to avoid civil liability and thus were made in his pecuniary interest. The court disagrees. The Snyder statements are on their face admissions of direct participation in a criminal conspiracy and therefore are statements against his penal interest. Even though the civil defendants agreed to keep Snyder as far away from the civil suit as possible, they reserved the right to call him as a witness at the trial. Snyder knew that the information he would give to Mr. Bryan would make it inevitable that he would be called as a witness if the civil suit went to trial. Snyder had already decided in the presence of his attorney, Mr. Thomas, that if called as a witness at trial he would have to testify as to what occurred. This decision was made before he met with Mr. Bryan and thus before Snyder could have known that the civil defendants would forego bringing suit against him in exchange for his voluntarily meeting with them. Furthermore, even though Snyder obtained an agreement from the civil defendants whereby the latter agreed to forego suit against him, such an agreement would still not preclude the municipalities that were victims of the motopaving conspiracy in which Snyder admitted participation from filing suit against him. Additionally, Snyder's statements would not preclude the Government from filing criminal action against him for his conspiratorial activities. Therefore, even assuming Snyder reduced some of his civil liability, his statements still tended to subject him to criminal liability as well as to other civil liability. Such statements satisfy the against-interest exception. United States v. Alvarez, 584 F.2d 694, 699 (5th Cir. 1978).
Defendants cite U.S. v. L'Hoste, 640 F.2d 693 (5th Cir. 1981) in support of their contentions that Snyder's statements should not have been admitted on the grounds that the statements were in, not against, his pecuniary interest. In L'Hoste, one Condon was a defendant in both a criminal and civil suit arising from the same underlying factual situation. Condon gave statements in his criminal trial which were contradicted by statements later given in his deposition for the civil trial. Defendant L'Hoste (a codefendant of Condon in the criminal case) attempted to use Condon's deposition statement in support of L'Hoste's motion for a new trial. Condon had refused to testify at a hearing on L'Hoste's motion. The trial and appellate courts denied L'Hoste the right to use Condon's civil deposition on the grounds the statements, while against Condon's penal interest, were in his pecuniary interest. The circumstances of L'Hoste are quite different from the case at bar. In L'Hoste, Condon was a party to a criminal and civil suit and his statements were clearly in his pecuniary interest. Here, Snyder was not, at the time of his statement, a party to any suit. Furthermore, Condon had given two contradictory statements and ...