On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. Crim. No. 84-00313-01/02/03/04)
Before ADAMS, GIBBONS and STAPLETON, Circuit Judges
The United States appeals, pursuant to 18 U.S.C. § 3731 (1982), a district court order dismissing on double jeopardy grounds an indictment for violation of section 1 of the Sherman Act, 15 U.S.C. § 1 (1982). We reverse.
District Court Proceedings
On July 19, 1984, a grand jury in the Eastern District of Pennsylvania returned an indictment charging Sargent Electric Company (Sargent), Lord Electric Company (Lord), W.V. Pangborne and Co. (Pangborne) and Pangborne's Executive Vice-President, J.A. Bruce Pinney, with violating section 1 of the Sherman Act by conspiring to rig bids for electrical construction work at the Fairless Hills Works of United States Steel Corporation in Bucks County, Pennsylvania (Fairless Hills). The four defendants moved to dismiss the indictment, all asserting that it was barred by the double jeopardy clause of the United States Constitution.
The first two defendants, Sargent and Lord, contended that the offense charged in the July 19, 1984 indictment was the same as that for which they previously had been convicted in the Western District of Pennsylvania. That conviction resulted from an indictment returned by a grand jury in the Western District of Pennsylvania on July 1, 1983, which charged that Sargent, Lord, and other electrical contractors had, for approximately seven years from 1974 to 1981, conspired to rig bids for electrical construction work at the Western Pennsylvania Works of U.S. Steel (Western Works). See Joint Appendix at 1230. This court affirmed judgments fining Sargent and Lord one million dollars each, the statutory maximum for violation of section 1 of the Sherman Act. United States v. Fischbach & Moore, Inc., 750 F.2d 1183 (3d Cir. 1984), cert. denied, 470 U.S. 1029, 105 S. Ct. 1397, 84 L. Ed. 2d 785 (1985).
With respect to the second two defendants, Pangborne and Pinney, they contended that the offense charged in the July 19, 1984 indictment was the same as that for which they had pleaded nolo contendere in the Eastern District of Pennsylvania. Those pleas followed a March 8, 1984 indictment that charged that Pangborne, Pinney, and other electrical contractors, "beginning in or about the late 1970's and continuing thereafter into about 1982," had conspired to rig bids for electrical construction work at a Gulf Oil Company refinery in Philadelphia, Pennsylvania. See Joint Appendix at 1130. The district court accepted the pleas from Pangborne and Pinney on June 5, 1984 and sentenced them on July 19, 1984.
On the basis of these contentions, the district court ruled on November 13, 1984 that the four defendants had established prima facie cases of nonfrivolous double jeopardy claims and scheduled an evidentiary hearing on those claims. The court ordered the United States to disclose to the defendants all grand jury testimony regarding alleged illegal bid-rigging on steel and refinery jobs involving the indicted and unindicted co-conspirators named in the July 19, 1984 indictment. It then held a lengthy hearing and subsequently filed a memorandum concluding that there was at all relevant times one general understanding among all the participating electrical contractors that they would rig bids when circumstances permitted regardless of whether the job was at Western Works, at Fairless Hills, at the Gulf Oil refinery, or at several other locations. United States v. Sargent Electric Co., Crim. Action No. 84-00313 (E.D. Pa. March 26, 1985). "Bid rigging at each of these facilities," the court concluded, "did not reflect separate conspiracies but simply separate manifestations of the same unlawful agreement to rig bids wherever and whenever possible." Id., slip op. at 30. The district court therefore dismissed the indictment. This appeal followed.
The United States does not dispute the district court's ruling that the four defendants made out nonfrivolous claims of double jeopardy. Consequently, there is no question that once the defendants advanced their claims, the government assumed the risk of nonpersuasion of demonstrating by a preponderance of the evidence that the double jeopardy clause did not bar the challenged indictment. United States v. Inmon, 568 F.2d 326, 331-32 (3d Cir. 1977).
While the parties agree upon the applicability of Inmon to the proceedings in the district court, they disagree as to the scope of our review of that court's holding. The defendants urge that the district court's conclusion that "[b]id rigging did not reflect separate conspiracies but simply separate manifestations of the same unlawful agreement to rig bids wherever and whenever possible" is a factual determination that we cannot reverse on appeal without finding that the determination was clearly erroneous. The United States, on the other hand, contends that whether it met its burden of proving separate offenses is a question of law as to which this court exercises plenary review.
Although this court did not address in Inmon the scope of review issue that this case raises, we did do so in United States v. Felton, 753 F.2d 276 (3d Cir. 1985). In Felton, in which we reviewed a district court's denial of a motion to dismiss an indictment on double jeopardy grounds, the United States, as appellee, urged a position similar to that which the defendants here espouse. We rejected that argument, observing,
We find it necessary to reiterate that on review the trial court's findings of narrative or historical facts are measured by the clearly erroneous test, but as to the legal component of its conclusion, this court has plenary review. Accordingly, what we must examine here is whether the district court correctly determined that as a matter of law the government met its burden of proving the separate conspiracies by a preponderance of the evidence. Such an inquiry requires us to examine the basic facts of record and the permissible inferences that may be drawn therefrom.
Id. at 278 (citation omitted). Thus Felton has classified as a legal issue, subject to plenary review, the question whether, from the narrative or historical facts the government established to the satisfaction of the district court, an inference of multiple conspiracies rather than a single conspiracy was permissible.
The procedural posture of this case is not identical with Felton, however, because in this case the district court granted the defendants' motion to dismiss. In Felton we held that the government failed to establish a prima facie case on the existence of conspiracy. Here, in order to reverse, we must hold not only that the United States made out a prima facie case on the existence of multiple conspiracy, but also that an inference of a single conspiracy was on this record clearly erroneous as a matter of fact or legally impermissible. Such a conclusion involves a much greater assertion of authority to set aside rulings of the court of first instance than was made in Felton. There may be cases where it would be possible to hold that as a matter of law no inference other than that of multiple conspiracies was permissible. In most cases, however, in which the government has made out a case satisfying the Felton threshold, competing inferences may be logically permissible, and in such cases the inference drawn by the court of first instance should stand.
Of course a district court's decision, even when couched in terms of inference drawing, may be predicated upon legal assumptions such as the elements of the offenses charged in successive indictments. As to such legal assumptions our reviewing function is obviously plenary. If, however, we should disagree with the district court's legal assumptions of the elements of the offenses charged--here Sherman Act conspiracies--such disagreement would not necessarily permit us to select among competing permissible inferences. At most such a disagreement would require a remand for reconsideration. See United States v. Young, 503 F.2d 1072, 1076 (3d Cir. 1974).
Thus for the United States to prevail in this appeal we must (1) hold that the district court misunderstood the elements of a Sherman Act conspiracy or (2) hold that the court's findings on historical or narrative facts are clearly erroneous, or (3) hold that the only inference that may be drawn from those facts is that the bid-rigging conspiracy aimed at Fairless Hills was separate from those aimed at Western Works and Gulf's Philadelphia refinery.
Elements of an Antitrust Conspiracy
Unlike statutes such as 18 U.S.C. § 371 (1982) and 21 U.S.C. § 846 (1982) that speak of conspiracy to commit crimes defined in other federal statutes, section 1 of the Sherman Act is self-contained. It makes illegal contracts, combinations, or conspiracies "in restraint of trade" and punishes as a felony every contract, combination, or conspiracy "hereby declared to be illegal." 15 U.S.C. § 1 (1982). Thus unlike other federal conspiracy statutes section 1 of the Sherman Act does not refer us elsewhere for the substantive elements of the prohibited conduct. As in all conspiracy statutes, concert of action is a substantive element, but under governing caselaw more than mere concert of action is required. The illegal object of a Sherman Act conspiracy must be identified in terms of an intended or achieved effect upon commerce in a relevant market, a market not defined by statute.
When the concerted action is price-fixing or bid-rigging, the Sherman Act caselaw shortcuts the inquiry into market effect, by treating such concerted actions as per se violations. These activities are deemed to be per se illegal, in the sense that the court will not consider evidence that their effects upon commerce in a relevant market might have had a pro-competitive purpose and effect. The bid-rigging activities charged in the several indictments before us fall within that per se category. But while the per se rule proscribes inquiry into competitive effects, it does not excuse identification of relevant markets. An agreement among persons who are not actual or potential competitors in a relevant market is for Sherman Act purposes brutum fulmen. An agreement "to rig bids wherever and whenever possible" is meaningless for Sherman Act purposes unless there are in the real world of the marketplace some "whens" and "wheres."
To some extent, of course, a horizontal agreement tends to define the relevant market, for it tends to show that the parties to it are at least potential competitors. If they were not, there would be no point to such an agreement. Thus its very existence supports an inference that it would have an effect in a relevant market. Where, as here, however, the disputed issue is the existence or scope of the alleged horizontal agreement that is to be inferred from circumstantial evidence, the first inquiry must be whether or not each firm alleged to have been a party to it was an actual or potential competitor in that market. Membership in a bid-rigging conspiracy aimed at Western Woods, for example, would not have any actual or potential effect upon Gulf Oil Company's Philadelphia refinery unless there was actual or potential competition for electrical work at that refinery by the Western Works conspirators.*fn1
The district court's analysis placed principal reliance upon evidence that all alleged conspirators had a common objective: the elimination of price competition whenever and wherever possible. But as we note above, that common purpose is not alone sufficient to establish a violation of section 1 of the Sherman Act. Thus the district court's focus upon facts suggesting such common purpose arguably ignored the essential market element of a Sherman Act offense and gave insufficient weight to the government's proofs respecting that element.
Because Sherman Act conspiracies involve a relevant market and that market may vary over time, the government's task in drafting indictments is somewhat more complex than in other conspiracy contexts. The difficulty is illustrated by the contrasting positions taken by Sargent and Lord in this case and in their appeal from the sentence imposed in the Western District of Pennsylvania. In that case the indictment charged a conspiracy to fix the prices at which electrical construction projects at Western Works were bid. Sargent argued on appeal that there was a fatal variance between the indictment and the proofs at trial in that they failed to establish that all bids at Western Works were rigged. Alternatively Sargent argued that the government had proved not one continuing conspiracy, but a series of independent conspiracies. 750 F.2d at 1189. Lord also argued that the government proved fourteen separate conspiracies, while the indictment charged one. See id. at 1190. This court held that the indictment alleged a single conspiracy to rig bids at Western Works and that proof of fourteen instances of such bid-rigging permitted the jury to conclude that the conspiracy encompassed all bids. Id. In this appeal, on the other hand, Sargent and Lord both allege that the trial of the prior indictment put them in jeopardy with respect to a conspiracy that was aimed at different steel mills of U.S. Steel and different corporations over extended time periods. Had the government known about bid-rigging at other locations when the July 19, 1984 indictment was drawn and had it drawn that indictment to charge an agreement to rig bids "wherever and whenever possible," we may be certain that the defendants would have urged prior to trial that the indictment should be stricken as prejudicially duplicitous. Had the July 19, 1984 indictment been drawn with a separate count addressed to the bid-rigging activities of the defendants at different locations, both their pretrial and posttrial claims would have been that the indictment was multiplicitous.
For purposes of the double jeopardy clause it is appropriate to consider how the government could have drawn the first indictments. None of the four defendants before us in this appeal was acquitted in a prior proceeding. Thus they cannot rely upon the collateral estoppel component of the double jeopardy defense announced in Green v. United States, 355 U.S. 184, 2 L. Ed. 2d 199, 78 S. Ct. 221 (1957) and applied to the states in Ashe v. Swenson, 397 U.S. 436, 25 L. Ed. 2d 469, 90 S. Ct. 1189 (1970). They rely on two different and complementary aspects of double jeopardy: protection against more than one prosecution for the same offense, In re Nielsen, 131 U.S. 176, 187, 9 S. Ct. 672, 33 L. Ed. 118 (1889), and protection against multiple punishments for the same offense. Ex Parte Lange, 85 U.S. (18 Wall.) 163, 168-69, 21 L. Ed. 872 (1873). The standard of these aspects of double jeopardy is no different pretrial and posttrial.*fn2 The defendants' position, if accepted, means that in their initial prosecution the same grand jury could not have charged them with separate Sherman Act offenses. Our inquiry now is no different, legally, than that which would have faced the district court had multiple counts been pleaded in the initial indictment against each defendant. We must determine whether there was a conspiracy aimed at a single relevant market or conspiracies aimed at several separate markets. To put the same question in slightly different words, we must determine whether charging several Sherman Act violations was multiplicitous.