IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA ____________________________________ CUMBERLAND FARMS, INC., et al., : Plaintiffs, : MASTER FILE v. : No. 87-3717 : BROWNING FERRIS INDUSTRIES, INC., : Et al., : Defendants. : : AND RELATED ACTIONS : ___________________________________: : THIS DOCUMENT RELATES TO: : ALL ACTIONS : ___________________________________: PLAINTIFFS' MEMORANDUM IN OPPOSITION TO DEFENDANTS' MOTION FOR SUMMARY JUDGMENT Harold E. Kohn Dianne M. Nast Robert J. LaRocca Steven A. Asher KOHN, SAVERT, KLEIN & GRAFF, P.C. 1101 Market Street Suite 2400 Philadelphia, PA 19107 (215) 238-1700 Attorney for Plaintiffs And Plaintiff Class
TABLE OF CONTENTS
I. INTRODUCTION 1 II.STATEMENT OF FACTS 6 A. The History of The Defendant Corporations 6 B. Defendants' National Pattern of Price Fixing 17 1.Georgia 24 2.Ohio 28 3.Michigan 38 4.Missouri 46 5.Arrowhead Region 53
6.Pennsylvania 57 7.New Jersey 60 8.Texas 63 9.Vermont 67 10.Illinois 69 11.New York 71 12.Florida 72 13.California 73 C.The Highly Centralized Organizational and Pricing Structure of the Defendants Has Facilitated
Implementation of the National Conspiracy 74 II.STATEMENT OF THE LAW 86 A.The Standard For Summary Judgment 86 B.The Existence of A Price Fixing Conspiracy Between BFI and WMI 90
C.BFI and WMI Engaged In Extensive Executive Level
Interfirm Communications 93 D.The Cases Relied Upon By Defendants In Support of
Their Motion for Summary Judgement Are Inapposite 101 E.Plaintiffs Claim Is Not Barred, Either In Whole Or In Part,
By the Statute of Limitations 104 IV.CONCLUSION 110
Plaintiffs submit this memorandum in opposition to the motion of defendants Browning-Ferris Industries, Inc. ("BFI") and Waste Management, Inc. ("WMI") for summary judgment.
Defendants do not deny—nor can they—that they have engaged in an extensive pattern of anticompetitive activity across the United States throughout the relevant time period. Their only defense is that this anticompetitive conduct supposedly consists entirely of "local" conspiracies unconnected to each other, and cannot demonstrate or even permit an inference of national conspiracy. Defendants concede that evidence showing involvement by their regional or headquarters executives in this illegal conduct would be sufficient to demonstrate a national conspiracy, but claim there is no such evidence.
As will be demonstrated herein, the record in this
case is replete with evidence that there is a similar pattern of anticompetitive
conduct throughout the United States which cannot be sheer coincidence.
Moreover, defendants' national and regional officers engineered, encouraged
and directed that conduct. The following are just a few examples
of such knowledge and direction:
2. A government memorandum reported that criminal price-fixing by the defendants in Atlanta "can be attributed to more than overly-aggressive local managers" and was "probably directed by corporate officials from the company headquarters." See p. 25, infra.
3. A sworn declaration from a BFI sales manager describes how John Drury (next hit), then BFI's executive vice-president, orchestrated price-fixing activities in Atlanta. See p. 28, infra.
6. John Drury (next hit), BFI's President, personally appointed John Pinto as vice president to head BFI's northeast region. Pinto had clear ties to organized crime, and was subsequently indicted and pled guilty to bid rigging, price fixing, and bribery of officials. Pp. 62-64, infra.
7. John Drury (next hit), BFI's president, assigned a new district manager to Pittsburgh with instructions that the sales manager report directly to him. The district manager proceeded to engage in price-fixing and bid rigging, and periodically delivered suitcases of cash generated from these activities to Houston for use as payoffs to public officials. See pp. 58-61, infra.
9. Both BFI and WMI encouraged price-fixing by actively promoting employees who engaged in it. Bruce Ranck, for example, was a principal target of both a state antitrust prosecution (which BFI settled for $350,000) and a federal antitrust prosecution (to which BFI pled guilty and paid a $1 million fine). Notwithstanding his involvement in illegal activity, Ranck was promoted and now holds the position of executive vice-president of BFI, with responsibility for all of BFI's North American solid waste operations. P. 38, infra.
10. BFI's vice chairman and national director of marketing, Norman Myers, paid a bribe to defeat a competitor's landfill application, and then attempted to conceal this payment. Pp. 64-69, infra.
Section II-A of this memorandum sets forth a brief history of the defendants, and describes the numerous criminal and civil proceedings in which they have been found to have violated state and federal antitrust laws.
Section II-B of this memorandum sets forth how the defendants' scheme to restrain trade in the waste hauling and disposal industry has operated throughout the United States.
Section II-C responds to BFI's contention that the defendants are basically "localized" operations, and demonstrates that all significant pricing and marketing aspects of defendants' operations throughout the country are tightly controlled and supervised form their respective national corporate headquarters.
Section III-A demonstrates that, under the applicable law, BFI has failed to meet its burden on this motion, and that, accordingly, its motion for summary judgment should be denied.
Section III-B addresses BFI's contention as to the statute of limitations, and demonstrates that, because of persistent acts of document destruction, document alteration and perjury on the part of defendants, plaintiffs have demonstrated a pattern of fraudulent concealment on the part of defendants, and accordingly, plaintiffs are entitled to judgment for the entire 10 year class period.
If a customer serviced by one member scavenger attempts to hire another member scavenger, the latter will either refuse to deal with the customer or quote a price higher than that presently charged, thereby preventing customers from switching to or obtaining the services of another member scavenger;
If bids are to be let by municipalities or other governmental units, or other prospective customers, member scavengers agree among themselves which scavenger is to submit the lowest bid; and
If a member scavenger wishes to raise prices charged to a particular customer, other member scavengers contacted by the customer will either refuse to deal with the customer or quote a higher price.
WMI was incorporated in 1968, and BFI was incorporated the following year. Both companies immediately began acquiring the CSRDC companies, and appointing employees of the CSRDC companies to positions of responsibility throughout the country.1
As members of the Chicago families became absorbed into WMI and BFI, the "Chicago Rules" became a national code of conduct. For example, Richard Evenhouse, who worked as a line manager for BFI in Detroit after his family's company was acquired by WMI, later became a regional manager for the WMI region which included Ohio and Michigan. Ex. 92 at 3, 39, 41. In that latter capacity, he participated with BFI in a classic "Chicago Rules" conspiracy which was subsequently prosecuted by both the State of Ohio and the United States Department of Justice.
Adherence to the Chicago Rules was not without consequences. In 1971, the Illinois Attorney General filed suit against the CSRDC alleging a massive customer allocation and price-fixing agreement in and around Chicago. People of the State of Illinois v. Chicago Suburban Refuse Disposal Corporation, No. 71-1102-G. (Cir. Ct. Dupage County, Ill). The CSRDC and its members settled the action by agreeing not to engage in the anticompetitive practices codified in the rules for a period of ten years, and by paying a fine of $50,000. Ex. 15.
The Illinois prosecution, with a modest fine of $50,000 divided among the CSRDC's 200 members, did not achieve the desired deterrent effect. Rather than concluding that crimes does not pay, WMI and BFI apparently reached the conclusion that, from a risk-benefit analysis, the companies were better off adhering to the "Chicago Rules" than adhering to the Antitrust Laws and other state and federal laws. Thus, in the 19 years which have followed the 1971 Illinois prosecution, both BFI and WMI have continued to violate state and federal laws indiscriminately throughout the country, to pay the comparatively modest fines imposed by the courts, and to reap the immense profits which flowed from these illegal activities.
In 1975, City Disposal Co., a WMI subsidiary, was found guilty of conspiring to fix prices in Madison, Wisconsin. State of Wisconsin v. Waste Management of Wisconsin, Inc.,; d/b/a City Disposal Co., 261 NW 2d 147, 81 WIC. 2d 555 (1978). After denying the company's 171 post-trial motions, a circuit judge imposed a $4,000.00 fine. This ruling was affirmed by the Wisconsin Supreme Court in 1978. Ex. 17.
In 1976, the U.S. Securities and Exchange Commission filed a complaint alleging that H. Wayne Huizenga (the vice chairman of WMI's board of directors) and Earl Eberlin (a WMI regional manager in the southeastern United States) had violated various federal securities laws. SEC v. WMI, Harry Wayne Huizenga and Earl Eberlin, Civ. No. 76-0496 (D.D.C.). According to the SEC's complaint, defendants created and maintained a secret "slush fund" consisting of unrecorded cash receipts from a WMI Florida landfill. Between 1970 and 1976, this fund was "used for political contributions and other purposes certain of which were unlawful." The SEC further alleged that defendants made a $35,000 contribution to a Canadian political party, and that this contribution was improperly capitalized on WMI's books as a landfill permit cost. Concurrent with the filing of the complaint, each defendant consented to the entry of a permanent injunction. Ex. 18, 156, 157, 158.
Later that year, the State of Arizona filed a civil complaint against Universal Waste Control, a WMI subsidiary alleging violations of the state's antitrust laws between 1971 and 1976. State of Arizona v. Universal Waste Control, et al., No. C336221 (Sup. Ct. Maricopa County). Specifically, the complaint alleged that Universal Waste Control and Joseph Klimoski, Universal's general manager, had conspired with other haulers to fix prices and allocate customers in the Phoenix metropolitan area. Universal and Klimoski settled this case by agreeing to cease this conduct and paying fines totaling $17,500. Universal also agreed to refrain from making acquisitions of larger area haulers for a period of five years. Ex. 19.
In 1980, BFI and WMI subsidiaries in Georgia, and employees of those companies; were indicted for conspiring with each other and with other waste haulers. U.S.A. v. BFI of Georgia, Inc., et al., Crim. No. 80-136a (N.D.Ga. Atlanta div.). The indictment (signed by Sanford Litvak, Esquire, BFI's counsel in this action) charged the BFI and WMI subsidiaries with raising and fixing prices, and dividing, allocating and apportioning customers in the Atlanta area, between 1974 and 1979. BFI pled nolo contendere and was fined $350,000. BFI employee James Baker also pled nolo contendere and was sentenced to one year in prison. Both WMI and its employee Raymond Dinkle stood trial and were convicted. WMI was sentenced to pay a fine of $350,000. Dinkle was sentenced to one year in prison. Ex. 4.
In 1981, BFI was sued for conspiring to monopolize the disposal of solid waste in the greater Houston metropolitan area. Conservation Management, Inc. v. BFI, et al., No. H-81-1696 (S.D. Texas, Houston Div.). As part of this conspiracy, BFI secretly paid $25,000 to a state senator for his help in defeating conservation Management's landfill permit application. This case was settled after several days of trial with BFI paying approximately $6 million. Ex. 20, 149.
In 1983, a civil suit was filed which alleged that BFI had engaged in various anti-competitive practices in an effort to gain control of the waste collection business in Pittsburgh and its surrounding areas. Chambers Development Company v. BFI, et al., Civ. No. 83-2384 (W.D. Pa.). this case was ultimately settled by BFI, but the terms of the settlement were never publicly disclosed. Ex. 21.
In 1984, a civil complaint was filed against BFI and its Vermont subsidiary. Kelco Disposal, Inc., and Joseph Kelly v. BFI of Vermont, Inc. and BFI, No. 84-180 (D. Vt.). The complaint alleged that defendants attempted to monopolize the removal of waste in Chittenden County by inter alia, engaging in predatory pricing in order to drive plaintiff out of business. In 1987, a jury awarded plaintiffs $66,082.74 in compensatory damages and $6 million in punitive damages. This award was affirmed by the Supreme Court of the United States in 1989. Ex. 22, 57 U.S.L.W., 4985 (1989).
In 1984, BFI regional vice president John Pinto was indicted for conspiring to fix waste collection prices in New jersey during the period 1970 and 1984. State of New Jersey v. Angelo Miele & Sons, Inc. et al., No. SGJ119-8407(1). This indictment alleged that Pinto and his co-defendants utilized a "property rights" system to allocate customers, and used threats, intimidation and force to assure that other haulers would participate in the conspiracy. The indictment further alleged that Pinto had bribed two New Jersey public officials. Ex. 23. Subsequently, Pinto pled guilty to these charges and paid a fine of approximately $50,000. Ex. 122 at 63-66.
Concurrent with the return of this indictment, the State of New Jersey filed a civil complaint against approximately 100 entities, alleging violations similar to those specified in the indictment in New Jersey, between 1960 and 1984. State of New Jersey v. Arace Brothers, et al., No. L-069569-84 (Sup. Ct. Mercer County). BFI paid the state $3 million by way of settlement in consideration for not being a named a defendant in this action, and for the discharge of all claims against BFI, its subsidiaries, and Frank and John Gentempo, two former BFI employees. Ex. 24.
In Illinois, the operating manager of a WMI subsidiary was indicted in 1985 on charges that he bribed the mayor and a member of the Board of Trustees of the Village of Fox Lake. U.S.A. v. John Horak, No. 85-CR-373 (N.D. Ill. E. Div.). On February 14, 1986, Horak was found guilty of bribery and conspiracy. He was sentenced to 6 months in prison, fined $25,000 and placed on probation for 5 years. Ex. 25.
In New York, Bestway Disposal Corp., a company acquired by WMI in May
1984, was indicted in 1986 for allocating
customers and fixing prices in Rochester between 1978 and late 1984.
U.S.A. v. Bestway Disposal Corp., et al., Crim. No. 86-210-L (W.D.N.Y.).
Bestway pled nolo contendere to these charges and was fined $250,000.
Ex. 26.
In 1986, the Attorney General of the State of Ohio filed a civil complaint against BFI, Waste Management of North America, two of their Ohio subsidiaries, and various individuals employed by or associated with these companies. State of Ohio v. BFI, et al., Civ. No. C86-7387 (N.D. Ohio W. Div.). This complaint alleged that defendants had allocated customers and fixed prices in the greater Toledo metropolitan area from 1981 through at least 1984. The corporate defendants settled this case in 1988, and agreed to pay a fine of $700,000. Ex. 27.
In 1987, criminal informations were filed in Ohio against WMI and BFI subsidiaries for customer allocation and price fixing in the Toledo area in violation of Section 1 of the Sherman Act. U.S.A. v. Ohio Waste Systems, Inc., d/b/a/ Waste Management of Toledo, Crim. No. 87-781 (N.D. Ohio W. Div.) and U.S.A. v. BFI of Ohio and Michigan, Inc., Crim. No. 87-780 (N.D. Ohio W. Div.). WMI and BFI both pled guilty to these charges and each paid a fine of $1 million. Ex. 28; Ex. 29.
In Florida, two officers of United Sanitation Services, a WMI subsidiary, were indicted for conspiring to restrain trade in the South Florida waste hauling business. U.S.A. v. Lewis R. Goodman, et al., No. 85-6194-CR-Gonzales (S.D. Fla.) and U.S.A. v. David Hoopengardner, No. 84-6107-CR-JLK (S.D. Fla. Ft. Lauderdale Div.). Ex. 30; Ex. 31. Goodman, United's chief operating officer, pled nolo contendere to the charges alleged in Count I of his indictment and was fined $75,000. Ex. 30. Hoopengardner, United's general manager, was found guilty after a jury trial, and was sentenced to two years probation and fined $10,000. Ex. 31.
In 1987, a criminal information was filed against United alleging that United conspired to fix prices and allocate customers in Southern Florida. U.S.A. v. WMI of Florida d/b/a United Sanitation Services, No. 87-658-CR-Nesbitt (S.D. Fla.). United pled nolo contendere to this information, and was sentenced to pay a fine of $1 million. Ex. 32.
In California, several WMI subsidiaries and employees were charged with conspiring to fix prices and allocate customers in three separate criminal proceedings filed between 1987 and 1989. People of the State of California v. Waste management of California, Inc., et al., No. A 952588 (Municipal Ct. Los Angeles, County); U.S.A. v. Waste Management of California, Inc., d/b/a Daily Disposal Service, Crim. No. 90-01-AHS (C.D. Cal); and U.S.A. v. Dewey's Rubbish Service, Crim. No. 89-56-AHS (C.D. Cal.). WMI's subsidiaries and employees either pled guilty or nolo contendere to the allegations made in each of these three prosecutions, and paid fines totaling $2.5 million. Ex. 33; Ex. 34; Ex. 35.
In 1988, a civil complaint was filed in which it was alleged that BFI and WMI had utilized their control over Houston landfills in an effort to monopolize that area's waste hauling and disposal business. Johnson's Disposal Service, Inc. v. BFI, Waste Management of North America, Inc., et al., Case No. H-88-2291 (S.D. Texas, Houston Div.) Ex. 36. This case is currently pending.
In 1988, a civil complaint was filed in Missouri by an WMI salesperson alleging that she had been terminated for refusing to participate in a price fixing conspiracy between BFI and WMI. Cone v. WMI. No. CV88-9463 (Jackson City, Mo.). That case is currently pending.
Within the past five years federal prosecutors convened grand juries to investigate anticompetitive conduct by BFI and/or WMI subsidiaries in Rochester, New York; Toledo, Ohio; Orange County, California; San Diego County, California; Memphis, Tennessee; Birmingham, Alabama; Orlando, Florida; Jacksonville, Florida; Phoenix, Arizona; Kansas City, Missouri; Oahu, Hawaii; Pittsburgh, Pennsylvania; and Columbus, Ohio.
The defendants' risk/benefit analysis proved prescient. Although the defendants did, from time to time, incur multi-million dollar fines and judgments, most penalties were held at or below $1 million.
By contrast, the profits reaped by the defendants and by their key officers as a result of this illegal conduct have been stratospheric. WMI's pretax income shot up from $60 million in 1977 to $850 million in 1989. BFI's pretax income increased from $33 million to $423 million during this same period.2
The key officers and directors of BFI and WMI profited even more handsomely. During the most recent three-year period alone (1987-1989), Dean Buntrock, WMI's chief executive officer, Phillip Rooney, WMI's chief operating officer, and Donald Flynn WMI's treasurer, have received the following compensation, and have seen their shareholdings in WMI increase in value as follows:
1987-89 compensation
Value of WMI shares
(including exercise of
owned as of 1989
stock options)
Buntrock: $12.8 million
Buntrock: $117 million
Flynn: $16.3 million
Flynn: $ 38 million
Rooney: $25.1 million
Rooney: $ 33 million
BFI's key executives also profited from that company's illegal activities. From 1977 through 1988 (when he resigned), Harry Phillips, Sr., BFI's chief executive officer, received compensation of $7,107,708, and had seen the value of his BFI stock rose from $3.3 to $29.4 million. John Drury (next hit), BFI's president and chief operating officer, received compensation from 1977 through 1989 of $5,860,014, and saw his shareholdings increase from $2 million to $14 million. Norman Myers, BFI's chief marketing officer, received compensation during this period of $6,860,790, and saw his BFI stock increase in value from $1.2 million to $15 million during this time.
B. Defendant's National Pattern of Price Fixing
This section details proof of illegal conduct by defendants throughout
the length and breadth of this country. While BFI claims there are
merely "local conspiracies," the evidence shows a pattern of similar anticompetitive
conduct which cannot be shear coincidence, and direction and orchestration
of this activity by the key national officers and directors BFI and WMI.
In addition, these same key national executives also serve as the officers
and directors of all their local operating subsidiaries throughout the
country, which defendants contend are exclusively responsible for their
numerous violations of law.
The ultimate goal of the conspiracy is, in each market, to eliminate competition, thus leaving BFI and WMI to allocate customers and fix prices about competitive levels. A paradigm is Toledo, Ohio where all significant competition was eliminated, and the local managers for BFI and WMI sat down to lunch, allocated all of Toledo's waste hauling customers and raised prices through the roof.
Once customers are allocated, of course, price rises can be implemented at will. If a dissatisfied BFI customer attempts to switch to WMI, he will be quoted a price which is intentionally calculated to discourage switching of haulers. In Kansas City, for example, a BFI customer was quoted a price 70% over list when he tried to switch from BFI to WMI.
There are several other facets to defendants' price fixing scheme. If there are one or more independent haulers in the market, they will act as a competitive presence to bring prices down. Thus, a great deal of the defendants' energies during the class period was devoted to the elimination of competition.
The most prevalent tool for eliminating competition is the acquisition/blitz. BFI, for example, approaches a competitor and offers to buy it out, frequently at a price which is well below market. If the competitor refuses, teams of salespeople are imported from other regions and directed to "blitz" the reluctant hauler's accounts. During the blitz customers will be lured with prices which are below the reluctant hauler's costs. The independent hauler, seeing the rapid erosion of his customer base, is either forced out of business or driven to accept BFI's initial low-ball offer. In Aurora, Illinois, for example, an independent competitor was driven out of business when BFI lured his customers with prices as low as $.66/per yard, when BFI was charging its other customers over $3.00/per yard. In Vermont, BFI told its sales people, with respect to an independent hauler, to "squish him like a bug."
Customers who are lured away from independent haulers with extremely
low prices are required to sign three year contracts. The fine print
in the contracts permits BFI or WMI to raise prices if their costs rise.
These clauses are frequently abused, and defendants' personnel will use
virtually any excuse to raise prices. Supposed "landfill cost increases"
are a favorite device, because it is difficult for customers to determine
the truth (particularly since BFI and WMI own many of the landfills).
The testimony of former BFI employee Collins is particularly revealing:
A. Landfill costs increasing, fuel goes up, cost of living, it didn't matter ….
Q. You could use fuel, whatever you were comfortable doing?
A. I liked the landfill. What does that mean to anybody? They don't know much about landfills, but with fuel you could get tripped up. . . . the safest one I thought was landfill because it was never hard.
Q. Were you told that BFI had in fact incurred landfill price increases or were you told to tell a customer that BFI had incurred landfill price increases?
A. We were told to use those lines. I don't believe it was ever pretended to us that this was something that happened. It was never, ‘okay, now we've had a rise in fuel, so tell your customers.' It was nothing to do with reality."
The lengths to which BFI went as part of its commitment to stay
away from the customers of WMI are described by John Thober, a former BFI
sales representative in Ohio who states:
. . . if I saw a Waste Management Dumpster, I would quote a pricing or above.
BFI and WMI have both admitted that their acquisitions have both the purpose and effect of "stabilizing" prices and eliminating price competition. For example, when BFI president John Drury (next hit) sent William Curtis to Pittsburgh, Mr. Curtis proposed a plan of acquisitions with this objective:
Because landfill control is such an important ingredient in the elimination of competition, and ultimately the collusive raising of prices, the defendants have gone to extraordinary lengths to obtain control of landfills, including the bribing of state officials. In Houston, BFI's national sales director, Norman Myers, paid such a bribe, and then attempted to conceal it from BFI's independent auditors. William Curtis took suitcases of cash from Pittsburgh to Houston so that BFI officials could pay such bribes.
In this section, plaintiffs demonstrate how this pattern of conduct operated throughout the country throughout the class period—from Ohio to California, from Florida to Kansas City, from Chicago to Vermont, from Texas to Michigan. In each area the patterns of conduct were very similar, and cannot be the result of "sheer coincidence."
Defendants contend, of course, that the fact that two tightly controlled national companies engaged in identical illegal conduct throughout the country does not make the combination and conspiracy "national" in scope unless the defendants' regional and national officers had some role in directing the activities. As will be demonstrated in the following pages, national and regional officers of the defendants were directly involved in price-fixing activities throughout the country. Indeed, there is hard, documentary evidence that the highest ranking officers at BFI and WMI met to exchange information regarding future pricing.
A forum for these meetings was known, innocently, as the "Splinter Group of The New York Society." The defendants used these "Splinter Group" meetings to communicate with each other at the highest levels regarding their future national pricing and marketing plans. The 1978 Splinter Group meeting, for example, was attended by Donald Flynn, WMI's Chief Financial officer; Harold Gershowitz, WMI's Senior Vice President; and George R. Farris, BFI's Chief Financial officer. At that meeting, WMI disclosed to BFI its plan for future price increases throughout the United States for the forthcoming year.
The information exchanged was not limited to pricing. The defendants used the Splinter Group meetings to exchange information regarding landfill acquisitions and contracts on which they planned to bid. See, e.c., Ex. 6, 176. As explained by Harry Phillips, Sr., BFI's former Chairman and Chief Executive officer, meetings similar to the New York Splinter Group were held frequently, and were consistently attended by the highest-ranking officers of the defendant corporations. Ex. 75 at 87-92.
The following pages outline some of the evidence in this case showing similar patterns of illegal conduct throughout the country, and the participation of key national and regional officers in that illegal conduct.
1. Georgia
Defendants contend, with respect to Atlanta, that the principal
culprit was BFI employee James Baker, that he "did not discuss his improper
conduct with any BFI personnel outside Atlanta," Def. Mem. P. 6, and that,
therefore, the Atlanta price-fixing "has no bearing on the claim of a national
conspiracy asserted here." Def. Mem. p. 8.
Nothing could be farther from the truth. A memorandum from
the FBI Atlanta field office to the National Director of the FBI stated:
BFI's national management was first alerted to the existence of price-fixing in Atlanta by Gerald Cohen, BFI's district manager in Atlanta. Cohen obtained a copy of a letter which an independent hauler, Leonard Page, sent to his customers describing the existence of price fixing among certain other haulers. Ex. 1. Cohen was so offended by this conduct he immediately alerted his regional manager, Miller Matthews and BFI's national sales manager, Ray Eliff, to the existence of the Atlanta price-fixing. Id.
The reaction of Cohen's superiors was not precisely the reaction that Cohen had anticipated. Rather than report the existence of the Atlanta price-fixing to law enforcement authorities, Cohen's superiors took steps to facilitate BFI's entry into the price-fixing ring.
John Drury (next hit), then BFI's executive vice-president, came to Atlanta and made some important personnel changes to implement BFI's involvement in the price fixing. See Ex. 2. Drury forced Cohen to retire. See Ex. 2. The district manager, Jim Wagner—presumably loyal to Cohen—was also removed and was replaced with Jim Baker. Ex. 2. See also Ex. 84 at 75-76.
Shortly after Baker came to Atlanta, Baker met with Ray Dinkle, Baker's counterpart at Waste Management, and Chick Langello, Baker's counterpart at SCA. Ex. 83 at 20-22. The three of them agreed to fix prices, Ex. 83 at 33-34, allocate customers, Ex. 83 at 36-37, and, in a remarkable show of arrogance, recorded minutes of their price-fixing agreement. Ex. 55 at 97-98, 101, 109. All copies of those minutes were subsequently destroyed. Ex. 2.
The agreements reached between Baker, Dinkle and Langello were soon communicated to all sales personnel. Ex. 55 at 353-56. One salesman reported that shortly after Baker was brought to Atlanta "Baker told me to stop fighting with the competition." Ex. 2.
A WMI salesman in Atlanta, Phil Odom, believed—like Cohen of BFI—that the price-fixing in Atlanta was simply a localized aberration which would quickly come to an end if WMI's national headquarters became aware of the problem. Ex. 55 at 367. Odom called WMI headquarters in Chicago to complain about the Atlanta price-fixing. Ex. 55 at 367. Odom spoke to Paul Quinn, WMI's national sales manager, and told him about the price-fixing involving BFI and WMI in Atlanta. Ex. 55 at 367. Odom's whistle-blowing effort was rebuffed and WMI continued its ongoing participation in the Atlanta price-fixing activity. Ex. 55 at 367-68.
The details of the Atlanta scheme—a classic implementation of the Chicago Rules—was described by a former BFI salesman, Donald Brooks, at the criminal trial of WMI and Ray Dinkle. Brooks testified that in August 1979, soon after Baker was transferred to Atlanta, Brooks was given a new price list. Ex. 85 at 96-97. Brooks protested to Baker that the prices on the list were higher than BFI's current prices, which BFI was already having trouble selling. Ex. 85 at 97-98. Baker assured Brooks that he had met with representatives of WMI and other companies, that they agreed not to take BFI's customers, and that BFI agreed not to take WMI's customers. Ex. 2 at 98-99.
As explained by Brooks:
An overview of the involvement of BFI's key national executives in the price fixing is provided in the declaration of Mr. Brooks. Ex. 2. Mr. Brooks states that Norman Myers sent Brooks to Atlanta from Houston, BFI's headquarters. John Drury, then BFI's vice president, personally installed Baker. And once the price fixing was in place and BFI's profits rose, Harry Phillips, BFI's chief executive officer, Norman Myers, John Drury (next hit) and other key BFI executives came to Atlanta to personally inspect the operation. Ex. 2. This declaration forcefully confirms the FBI memorandum stating that the price fixing was directed from national headquarters. Ex. 3.
Atlanta is a paradigm of the way in which the conspiracy operated throughout the country. Although BFI's brief attempts to blame all of the illegal conduct on "local employees," the fact is that in Atlanta, as in the rest of the country, the conspiratorial conduct was directed by the national officers of the respective companies.
2. Ohio
Like the events in Atlanta, the Ohio price fixing was also known
to and directed by senior management at BFI and WMI.6
By 1976, BFI and WMI were the key waste haulers in Toledo. Ex. 54 at 32-33. Because the profitability of BFI's Toledo office was relatively low, David Yeager was brought in from Sandusky to run the Toledo district. Id. At 16-17. Yeager's aggressive efforts to improve BFI's Toledo office resulted in BFI substantially increasing its market share at the expense of WMI. Because WMI's Toledo office was less well run, its only available method of retaliation, was to lower prices. This resulted in an intense price competition between BFI and WMI. Id. At 52, 55.
In a written report to WMI's regional and corporate headquarters, WMI's local managers in Toledo stated that the WMI Toledo office was losing money and that the only way to correct the "large operating losses" was with "substantial and aggressive price increases and an easing of the competitive market situation." Ex. 87 at 3.
In the period prior to the end of 1980, BFI's corporate headquarters also began to grow uneasy with the price competition.7 Bruce Ranck, BFI's regional vice president for the region which encompassed Toledo, received an internal report from Bill Booth, his regional sales manager, advising that the price competition was still "ongoing." Ex. 88. Ranck met with Harry Phillips, Sr., the chairman of BFI, several times during the year regarding Toledo. Ex. 89. As the Toledo situation deteriorated, Dean Buntrock, WMI'' chairman, requested a weekend meeting with Phillips, his counterpart at BFI, which was held on August 9, 1980 in a suburb of Chicago. Ex. 75 at 67-68, 71; Ex. 76. Significantly, two weeks prior to the meeting, as reflected in Ranck's calendar, Phillips met with Drury (next hit) and Ranck regarding Toledo and Yeager. Ex. 77.
Certain individuals from BFI headquarters were then enlisted to
encourage Yeager to fix prices with WMI. Charles Mooney, BFI's vice
president for labor relations, whose responsibility encompassed activities
in all 50 states, suggested to Yeager that he meet with the general manager
from WMI Toledo office and agree to end the price competition:
A. There were—he was involved in a lot of labor negotiations and problems that we had in Toledo at the time.
Q. And what did Mr. Mooney say to you on the subject of your competition with Waste Management?
A. The specific instance that is clear in my mind, he said words to the effect, Dave, the only one that wins in a price war is a customer, why don't you get together with Waste Management and work something out.
A. Then is just about verbatim, that's my best recollection.
John Harper, national outside labor counsel to BFI, also suggested to Yeager in 1980 that he meet with WMI, under the pretense that he was discussing landfills, and end the price war:
On several occasions Ranck offered his assistance to Yeager in ending the price competition. Id. At 70-73. Yeager, however, did not act upon those orders at that time. Id. At 126-28.
By January 1989, BFI concluded that subtle hints to Yeager would not suffice. Ranck's calendar indicates that he spoke with Harper and Mooney. Ex. 152; Ex. 144. A few days later, at a meeting of the region's district managers, Ranck told Yeager that something had to be done about the price competition. Even though BFI was making money in Toledo and WMI was not, Ranck told Yeager that BFI had "more to lose than to gain" by competing with WMI. Exhibit 54 at 74. Yeager described his conversation with Ranck as follows:
Thereafter, Ranck advised BFI president John Drury (next hit)—who, as indicated, was also a vice president of BFI's local subsidiary in Toledo—that he was going to meet with Richard Evenhouse,9 the WMI manager whose responsibility included Toledo.10 Ex. 90 at 195, 198-99. Ranck, whose office was located in Baltimore, traveled to Detroit, renter a car and proceeded to Evenhouse's office for the meeting. Id. At 201-04, 219. Upon returning from Detroit, Ranck wrote the note "Yeager" with a check mark net to it on the January 27, 1981 page of his daytimer. Ex. 95.
At our about the same time, Bill Booth, BFI's regional sales manager, met with Yeager, who advised that an end to the competition was imminent. Thereafter, Booth reported to the regional office that the price war "seem[s] to be easing or possibly coming to an end. Both company's price increasing and selling at higher prices." A copy of this report was sent to Ed Crane, BFI's national sales manager in Houston. Ex. 96.
On the evening of Sunday, February 1, 1981, Ranck telephoned Yeager at home and instructed him that Evenhouse would be calling the following day and that they should arrange a meeting for the purpose of ending the price war. Ex. 54 at 75-76; See also Ex. 90 at 358-62; Ex. 97 at 4.
In February 2, 1981, Evenhouse telephoned Yeager as scheduled and stated that he had "kicked it around with Bruce" and suggested that they get together.11 Ex. 54 at 581. A meeting was arranged for that Thursday, February 4, 1981 at the Holiday Inn in Monroe, Michigan. Ex. 54 at 76-78, 578-83; Ex. 92 at 117-21.
Ranck corroborates virtually every detail of Yeager's story. He admits travelling to Detroit and meeting with Evenhouse, Ex. 90 at 203-04; 219; telephoning Yeager at home on or about February 1, 1981, Id. At 358, 360 and Ex. 97 at 4, and telling Yeager that Evenhouse would be calling, Ex. 90 at 358. Although Ranck denies instructing Yeager to meet with Evenhouse and end the price competition, Ranck was unable to offer a plausible explanation for his meeting with Evenhouse.12
The meeting between Yeager and Evenhouse occurred, as planned, on February 4, 1981 at which time they agreed that the price competition should end. It was understood that neither company would solicit the other's customers and that, in the event a customer attempted to switch haulers, both companies would quote high prices to the customer in order to discourage it from switching haulers. Ex. 54 at 78-82, 109; Ex. 92 at 121-23, 131-33. In subsequent meetings, pricing information was exchanged to ensure that quotes to the other hauler's customers were sufficiently high. See, e.c., Ex. 54 at 558-65.
Initially, Evenhouse was the only person at WMI with whom Yeager could communicate. Over time, Jack Nichols, a marketing manager, and Greg Asciutto, the WMI division manager, met and spoke with Yeager for the purpose of discussing rates and rigging bids. Ex. 54 at 88-95, 99-106, 111-14.
At BFI, Yeager advised Ranck of the call from Evenhouse and the subsequent meeting. Ex. 54 at 77-78, 87-88.. Bill Booth, Ranck's regional sales manager, visited Toledo and reported to Ranck and to Ed Crane (BFI's national sales manager) that the price war was over. Ex. 96. Thereafter, Ranck met with BFI chairman Harry Phillips to discuss the Toledo situation. Ex. 142.
BFI argues that the price-fixing in Toledo was entirely the responsibility of Yeager, and that the anticompetitive conduct ceased as soon as Yeager left BFI. Def. Mem. at 8-9. As defendants testified at their depositions, however, the price-fixing in Toledo continued without interruption after Yeager left.
Ranck promoted John Taddonio, previously the district sales manager in BFI's Detroit company, to be Yeager's replacement. Ex. 90 at 59. Also promoted from Detroit was Jeff Peckham, who became BFI's district sales manager in Toledo. Ex. 99 at 65-66. Both Taddonio and Peckham were experienced in the ways of anticompetitive conduct from their previous work under Ranck in Detroit, where WMI and BFI had fixed the market. See, e.c., Ex. 99 at 127.
Contacts between BFI and WMI in Toledo continued with Taddonio and Asciutto holding meetings to rig bids and fix prices. Ex. 104 at 75-80; Ex. 100; Ex. 98 at 131-33, 139-141; Ex. 101. In order to hide the fact of his meetings, Taddonio falsified expense reports and entered the fictitious name "John Thompson," in place of Asciutto, as the person with whom he as meeting. Ranck was fully aware of the meetings between Taddonio and Asciutto, the first of which occurred shortly after Taddonio arrived in Toledo. Ex. 90 at 386-87. 13
In one instance, BFI and WMI had prepared bids for a contract
to service a particular customer. When Peckham learned that
BFI's bid was lower than WMI's, contrary to what had been previously arranged,
he was frantic in his demand that the bid be re-prepared at a higher price.
WMI subsequently won the bid. Ex. 103. Other significant bids,
e.c., the University of Toledo bid and the Foodtown supermarket chain bid,
were also rigged by BFI and WMI in Toledo. Ex. 102 at 41-42, 69-71.
As demonstrated, the events in Toledo were known to and directed at
every stage by persons at the national headquarters levels of BFI and WMI.
Yeager testified unambiguously that he was asked by Charles Mooney and
John Harper to terminate the price competition. BFI does not deny
these assertions and, revealingly, did not include in its motion an affidavit
from either Harper or Mooney denying their involvement.
When the subtle pressure imposed by Harper and Mooney did not suffice, Yeager's boss, Bruce Ranck, was required to bring the full measure of his authority to bear on the situation. Ranck made clear to Yeager that his refusal to go along with the fix would have serious career implications for Yeager. Ranck's urgings were given added authority by virtue of Ranck's close personal relationships with John Drury, (next hit) BFI's president, with whom Ranck conferred throughout Ranck's efforts to end the price competition.
Perhaps the most telling endorsement of the events in Toledo by the national leadership of BFI and WMI was the way in which the active conspirators were dealt with by their respective companies.
Peckham, Taddonio and Asciutto, about whom the evidence of price-fixing is extensive, were never suspended or censured by their respective companies and have continued to rise within the ranks of their respective companies. Ex. 90 at 59; see also Ex. 99 at 65-66; Ex. 104 at 6.
Bruce Ranck, the architect of the Toledo events, was rewarded by BFI with a promotion to executive vice president with responsibility for all of BFI's solid waste operations in North America. Ex. 90 at 7. Bill Hulligan, who was sent by WMI to Toledo "on special assignment" during the period that Yeager and Evenhouse negotiated the fix, was rewarded by WMI with the presidency of WMI of North America. Ex. 87 at 2; Ex. 105 at 5.
Indeed, the only Toledo conspirators who were terminated as a result of their involvement were Rich Evenhouse and jack Nichols—whose termination was only at the government's insistence. Ex. 16 at 147-48. While BFI attempts to mislead the Court into thinking that Yeager was fired by BFI as a result of his anticompetitive conduct in Toledo, Def. Mem. at 9, this is simply not the case and, indeed, Bruce Ranck testified that Yeager was not fired. Ex. 90 at 57-58.
3. Michigan
In Detroit, there was an agreement between WMI and BFI to refrain
from soliciting each other's customers. Ex. 56 at 15-17, 38-39.
In the event that a customer of one such hauler initiated contact with
the other hauler, prohibitively high prices were to be quoted to that customer
in order to discourage it from switching haulers. Id. At 41-42. 14
Indoctrination into the customer allocation system began for new
employees when they first joined the company. One former BFI salesperson,
Francine Collins, testified as follows:
A. Yes, definitely, there were several. I can tell you who.
Q. Sure.
A. We were not allowed to call on Waste Management, SCA. It changed frequently over the period I was there, but, it was always Waste Management and SCA that we could not ever call on.
Q. And who told you that you could not call on Waste Management or SCA?
A. In the beginning it was John Taddonio.
Q. And after Mr. Taddonio left Detroit, who told you that you couldn't call on Waste Management accounts?
A. Bill Keenan, Larry Arnold.
Sales representatives, whose compensation was based on a commission structure, frequently complained to Taddonio and Larry Arnold about not being able to call on WMI and SCA accounts (SCA was subsequently acquired by WMI). Ex. 56 at 33. The aggressiveness of BFI and WMI in enforcing the conspiracy is vividly demonstrated in an incident related by Ms. Collins. Collins explained that she called on a customer who, she believed, was being serviced by a hauler known as "Johnny Welch." Ms. Collins visited the customer and made a proposal. The customer asked her to come back the next day and Collins left. A few minutes later Collins was paged on her car phone by the BFI office and put in touch with Taddonio. The customer, apparently, had called Johnny Welch to see if it could match BFI's offer. Johnny Welch, however, had in fact been acquired by WMI. WMI, in turn, immediately contacted Taddonio at BFI, who chastised Collins for soliciting a WMI account. Although Collins protested that she was not aware that Johnny Welch was part of WMI, Taddonio admonished her: ". . . don't ever do that again." Ex. 56 at 18-19.
There were times when the customer of one defendant hauler would
approach another defendant to seek a lower price or better service:
A. Well, we were given various little speeches to help us get rid of them, but the gist of it was you just get rid of them, whatever you have to say, but I can remember there were three or four different methods, just different words and like I started to say, I mostly remember my favorite one because it was the only one that I could handle, just simply that our routes were booked and that always worked pretty well.
Some of the others were to quote extremely high prices, but we had a fear of that because the prices of those competitors that we couldn't call on were so extremely high to begin with that you had no idea how extremely high this particular person was paying, so if you figured out a figure in your mind thinking this is exorbitant, it still might be less than what they're paying, so you could get into a box where they could say okay, we'll take you.
It is clear from the record that, knowledge of the anticompetitive conduct in Detroit was not limited to local personnel. At a regional sales meeting the Detroit salespersons approached Bruce Ranck—the mastermind of the Ohio price fixing scheme—to complain about the prohibition against soliciting Waste Management customers. Ranck became extremely uncomfortable with this conversation and immediately cut it off. Collins testified as follows:
Q. A group of sale representatives?
A. A small group of sales representatives having attempted to make that conversation with him and him pretty much squelching it.
Q. Did the sales representatives who approached Mr. Ranck, were they the ones who told you about that encounter?
A. Yes.
Q. Do you recall what they said?
A. We tried to talk to Bruce Ranck about why we can't call on anybody else, but—I certainly can't quote, but the gist of it was that we made this attempted to open the lines of communication to Bruce Ranck.
We thought we would go to the top since we had the chance, he was in town and he pretty much said, "I don't want to be talking about this."
The A-B-C pricing scheme was intended to mollify the salespersons' complaint that they were restricted from calling on certain accounts:
A. I think it was Bill Keenan, seems to be Bill Keenan. He had taken over the meeting, but he made it very clear that the point of this meeting was to instruct us that he did not ever want to hear anyone say again that we could not call on everyone, that we could call on anyone, that we were to be very careful not to say that we couldn't call on anybody. He did not want to hear anyone say those words again.
BFI and WMI endeavored to eliminate other competitors in Detroit,
who might interfere with their price fixing scheme. In dealing with
small non-conspiring haulers, predatory prices were quoted to their customers.
BFI sales representatives were instructed to quote extremely low prices
and to do whatever it took to induce the targeted customer to switch haulers.
There were times—ask them what they would pay and cut it in half and those haulers were cheap, the service was cheap, it wasn't high, but we were told just to do whatever it took including calling the office and find out what you can give if you've gone to all these other lengths and you still haven't gotten the customer.
The heart of the price-fixing conspiracy was the incessant increase in prices to customers. BFI sales persons were instructed to raise prices often. Ex. 56 at 59-63. Sales reps were instructed to use fictitious reasons to justify the price increases:
A. Landfill costs increasing, fuel goes up, cost of living, it didn't matter. These were aids. These were suggestions, whatever you could—it's amazing how nice people are if you go in there. It doesn't hardly matter what you say, actually do it, but it doesn't always work that way if you just do it through the mail.
People don't like that, but a new person going in and giving any kind of explanation at all.
Q. The reasons were, just to recount them from your testimony, landfill price increases?
A. Uh-huh.
Q. Cost increases?
A. Right.
Q. You could use fuel, whatever you were comfortable doing?
A. I liked landfill. What does that mean to anybody? They don't know much about landfills, but with fuel you could get tripped up. Maybe it was down a little bit or somebody would talk about the expenses in their business and how they couldn't necessarily raise their price 10%, so the safest one I thought was landfill because it was never hard.
Moreover, Collins made it clear that BFI's conduct in Detroit was comparable to similar conduct throughout the country. Ex. 56 at 38-39. While attending training sessions with BFI sales representatives from other districts, Collins was continually told by them that they also were not permitted to solicit WMI accounts.
A. It was very clear that everyone was under some set of restrictions. The big restrictions seems to be Waste management and SCA. . . .
Collins explained that prior to going out of town, she and the other sales representatives were instructed to not discuss the fact of the anticompetitive restrictions on solicitation. Despite these directives, the nature of the agreement was the "hot topic" during the entire trip. Id. At 39-40.
3. Missouri
BFI entered the Kansas City market by purchasing American Container Service Corporation in 1971. Ex. 151. By 1972, BFI was operating a wholly-owned subsidiary known as BFI Waste Systems of Kansas City Missouri, Inc. Ex. 148. 15
When BFI first acquired American Container, there was price competition among the Kansas City waste haulers. BFI immediately contacted all of the competing haulers and arranged a "Chicago Rules" truce, whereby the competing haulers agreed to refrain from soliciting each other's customers. A BFI memorandum explained these events:
By 1985, most of the competing Kansas City haulers had been eliminated, and the remaining haulers, including BFI and WMI, embarked upon a second phase of anticompetitive activity. This second phase of price fixing has been recently documented by sworn testimony in Kansas City. Diane Cone was employed as a salesperson in the Kansas City office of WMI from 1985 to 1988. Ex. 109 at 17, 24-25, 35. Throughout her tenure, Ms. Cone was given two price lists. Ex. 109 at 38-39. One was a competitive price list for customers who did not currently have a contract with a waste hauler or who were doing business with one of Kansas City's smaller waste haulers. Ex. 108. See also Ex. 113 at 177-78; Ex. 143 at 58-59. The second price list, with prices inflated 35% above the competitive price, was for quotations to customers of BFI or the other major haulers, Deffenbaugh Ex. 108. See also Ex. 113 at 177-78; Ex. 143 at 58-59.
Ms. Cone and Sandy Blackman, a fellow WMI sales representative, were told by Linda Epstein, WMI's Sales manager, that they "had to use the 35 percent more price sheet which goes against Deffenbaugh and BFI." Ex. 109 at 38. Ms. Blackman told Ms. Cone that "(s)he was given high prices when going against Deffenbaugh or BFI only because we wanted to keep them happy and get the prices up in Kansas City." Ex. 109 at 39.
Ms. Blackman also testified as to the existence of the two price lists. She recounted an instance where she asked her superiors, Mr. McMurtrey and Ms. Epstein, for permission to quote a competitive price to a BFI customer who had asked WMI for a competitive quotation, and was instructed instead to double the 35%--i.e., to give a price that was inflated 70% above the competitive prices:
Q. What did you say?
A. I, in turn--I don't know if I said this or if I felt this, but I knew I wasn't going to get it. It was almost laughable to call the people back.
Q. but did you do that?
A. Of course.
Q. And you doubled the price?
A. Of course.
Q. And you didn't get the business?
A. You're right.
Q. You concluded from that that the sales manager didn't want that business?
A. Obviously.
Q. And there was no other reason for not wanting that business that you know of except that it was BFI's account?
A. I believed I was told at the time that Joe [McMurtrey] didn't want BFI mad at us.
Q. . . . do you remember being told that?
A. Yes.
Q. Who told you that?
A. Joe [McMurtrey] and Linda [Epstein].
Both Ms. Cone and Ms. Blackman were occasionally given the authority by Joe McMurtrey to deviate from the standard price lists. However Ms. Cone cannot remember being allowed to give a cheaper price when bidding against BFI or Deffenbaugh. Ex. 109 at 97-98. On one occasion, Ms. Blackman was told that the reason the bid for Grandy's was so high was because WMI did not want to make BFI unhappy and WMI wanted to get the prices up in Kansas City. Ex. 109 at 42. See also Ex. 113 at 59-61.
In the fall of 1987, a WMI sales meeting attended by Epstein, Cone and Blackman was held in Kansas City. At that time Epstein informed the group of the existence of this class action and stated that "Waste Management was sued in Philadelphia for price fixing." Ex. 109 at 117-118. On December 8, 1987, Ms. Cone delivered the following letter to Joe McMurtrey, District Manager of WMI in Kansas City.
A meeting immediately ensued among Ms. Cone, Mr. McMurtrey, and Ms. Epstein. Ms. Cone testified:
Mr. McMurtrey, according to Ms. Cone, stated that "he would into it [her allegations] and see if it was price-fixing. Ex. 109 at 151.
B. what did he say he would check into?
A. He would check into it and see if it was price fixing. And I asked that he get back with me, he said he would do that. I told him that at the sales seminar in St. Louis that the attorneys spoke of--anyone who was caught doing this illegal act could either get three years or, I'm not sure how big the fine was, something like--a large fine, I'm not sure how big the fine was at this time. I told him that, that I was just trying to help him out if nothing else, you know, if he didn't know he was doing something wrong, that he should change, and he said he would check into it and get back with me.
Q. Did he tell you that he would check into see whether this was legal or illegal?
A. Yes.
That same day, Mr. McMurtrey locked all of the files, preventing Diane Cone and Sandy Blackman from having access. Ex. 112 See also Ex. 113 at 122-123 and Ex. 114.
During her tenure as a WMI employee, Ms. Cone kept written notes of her daily activities at WMI. Ex. 109 at 43-47. This fact was well known by her fellow WMI employees. On January 7,1988, someone broke into Ms. Cone's car and stole her briefcase which contained approximately two weeks worth of these handwritten notes, leaving other valuables untouched. Ex. 115.
On January 19, 1988, Ms. Cone was told by Mr. McMurtrey that she was
being laid off because of budgetary reasons. Ex. 109 at 25-28. The next
day, January 20, 1988, WMI installed a paper shredder and began shredding
documents. Ex. 116. Ms. Blackman, who was still employed after Ms. Cone
was terminated, testified:
A. Yes, the day after she left.
Q. What was the significance of calling her to say that?
Mr. McMurtrey confirmed the shredding of documents, and testified:
A. . . . Usually, reports, billing reports, account retention reports that would list all of our customers and that would also list addresses and prices as far as their revenue generation.
Thus, additional evidence of the price-fixing scheme by BFI and WMI in Kansas City was surely destroyed.
4. Arrowhead Region
BFI's Arrowhead Region includes Colorado, Nebraska, Iowa, Wisconsin, Minnesota, North and South Dakota, Wyoming, Montana, as well as several Canadian provinces. Ex. 71.
BFI engaged in overt price fixing within the Arrowhead Region, at the direction of Ed Drury, the head of the Arrowhead regional office. Mr. Drury was a member of the Board of Directors of BFI, and was listed in a BFI proxy statement as president of four BFI subsidiaries. Drury, at that time, was one of BFI's seven highest paid executives. Ex. 154 at 2-4.
On April 30, 1974, Bill Johnson of BFI's Winnipeg office wrote a comprehensive memorandum on conditions in that area addressed to Harry Phillips (then president and director of BFI), Ed Drury, and the "Waste Systems Staff." Ex. 7. That memorandum reported that price competition existed:
Mr. Johnson predicted that this price competition would "taper off" in the near future, and that BFI would be able to implement a substantial "across the board" price increase by July 1, 1974, only 2 ½ months later:
To predict the "tapering off" of competition, and an across the board price increase, in the middle of severe price competition could only mean one thing--that BFI was in the process of reaching agreement on prices with those competitors.
Sure enough, on May 15, 1974, only 15 days later, BFI and its two competitors met and reduced to writing an explicit price-fixing agreement. Ex. 155 at 4142-44. The purpose of the meeting was to discuss:
2. The establishment of some guidelines under which each company might agree to operate.
Id. The price-fixing memorandum detailed similar agreed upon prices for other types of services, including garbage compaction (pick-up charges from $6 to $12 depending on size) and roll-off systems.17
Q. He was general manager, and you answered to him as a salesman?
A. I answered to Mr. Bryson who was sales manager, and Mr. Johnson.
Q. In any event, Mr. Johnson then instructed you of what?
A. That the prices that we were to charge at that time were established on the rate sheet which he gave us and that those were the only prices we were to charge, and we could not make any lower prices without permission from Mr. Johnson.
A. This is when the rates take effect, but we were advised of it on May 13th in the morning.
Q. In the morning two days before the date was to be effective?
A. That's correct.
A. Yes.
Q. What was the explanation they gave to you?
A. Well, his explanation to me, privately, was that he had been advised by a superior of his.
Q. Can you name the superior?
A. Yes, the name was Ed Drury.
Q. Ed Drury, who was he?
A. He was president of the Arrowhead region for BFI at that time.
Q. Where was he from?
A. Minneapolis.
A. he told me that he was advised that we were not making any money with the prices that we were charging and that it was necessary to stop the war. . . .
The testimony is clear and direct that Ed Drury implemented this price-fixing conspiracy. The inference is strong that Harry Phillips--co-recipient of the April 30th memorandum--had also participated.
5. Pennsylvania
John Drury, (next hit) BFI's Executive Vice President in Houston and Vice President of BFI Industries of Pennsylvania, Inc. (BFI's wholly-owned subsidiary in charge of Pennsylvania),18 sent William Curtis to head the BFI Pittsburgh office. Curtis had been a salesman in BFI's Winnipeg office where extensive price fixing had occurred, and knew how it was done. (see Section 5, supra.) Curtis admitted that he reported directly to Drury at national headquarters.19 Curtis stated that he was sent to Pittsburgh to break the unions, to put a competing hauler out of business, and to control the small haulers. (Ex. 164 at 229-230).
One method of controlling the haulers involved acquiring landfills. On October 29, 1979, Curtis wrote to Norman Myers, BFI's National Director of Marketing in Houston, concerning acquisition of landfills, stating:
"It is our considered opinion that the above acquisition would stabilize the market and allow us to maintain our price guidelines in the Pittsburgh area.."
Ex. 165.20 Myers was Vice Chairman of the Board, and Chief Marketing Office, who worked closely with John Drury (next hit) and who reported directly to Harry Phillips, Sr. Ex. 136 at 6.
BFI began to systematically eliminate the small haulers, taking their customers by predatory pricing, and then offering to stop if they would join BFI in price fixing. One hauler testified regarding a conversation with Edward Benko, BFI's district sales manager:
Ex. 137 at 40. BFI stated it would "call [its] dogs off" if a particular independent hauler would stay away from BFI stops. Id. at 40-41. Thus, BFI attempted to coerce these small haulers into illegal price fixing activity.
BFI used its predatory pricing selectively. Where it wanted to eliminate
a hauler, it would provide below-cost pricing. Ex. 137 at 123. In areas
where it faced no competition, it priced its services 400% higher:
Id. at 217.
An internal BFI memorandum to regional manager Loren Beck confirms that Curtis engaged in price fixing of customer accounts. Ex. 5 at ¶12. It also confirms that Curtis forced an independent landfill owner (Mr. Bailey) to raise his dumping fees to small haulers, or else BFI would not do business at that landfill. Id. at ¶13. Curtis arrogantly stated that the writer worried too much about the laws in [his] country." Id. at ¶12.
William Curtis also admitted that BFI had bribed the Pennsylvania Department of Environmental Resources (DER) to defeat a permit for a competitive landfill:
Ex. 138 at 366 (emphasis supplied).
BFI and Curtis then acquired a controlling interest in a competing hauler, Mazzaro, Inc., and used that interest to rig bids.21
Curtis also used the company in Pittsburgh to skim money, and take it in suitcases to BFI corporate headquarters in Houston. Curtis stated that he was taking it to Houston for a cash slush fund to pay off officials. Ex. 164 at 288-89. On one occasion, Curtis had [ Text missing from legal filing, perhaps redacted ] Ex. 138 at 438-440.
6. New Jersey
On October 18, 1989, a New Jersey grand jury returned an indictment alleging that Angelo Miele & Sons, Inc., Carmine Pucillo, L. Pucillo & Sons, Frank Stamato & Co., Inc., and John A. Pinto conspired to fix waste collection prices between 1970 and 1984 in an eight county area in New Jersey. The indictment charged that these defendants employed a property rights system to allocate customers, and used threats, intimidation, and physical force to coerce other haulers into joining, or remaining in, the conspiracy. The defendants also allegedly agreed not to bid on certain collection contracts, and submitted collusive or rigged bids to customers. In addition, the indictment alleged that Pinto provided money and other benefits to two New Jersey public officials, Donald West and Max Auerbach, in order to induce them to use their positions to eliminate competition for waste collection. State of New Jersey v. Angelo Miele & Sons, Inc., et al., No. SGJ119-84-7(1). Ex. 23.
Pinto, one of the defendants in the Miele indictment, was a vice president of BFI's New Jersey Region from approximately 1975 through 1979, and co-regional vice president of the East Central Region (which encompassed New Jersey) from 1979 until he left BFI in 1981. Ex. 122 at 17-21.
As set forth in testimony before the New York State Assembly Standing Committee, Pinto had clear ties to organized crime, and was personally appointed by BFI President John Drury (next hit):
During the time he served as co-regional vice president, all district managers in the region reported to Pinto, and he reported directly to John Drury (next hit). Ex. 122 at 36-37. Pinto pled guilty to the allegations set forth in the Miele indictment and paid a fine of approximately $50,000. Id. at 63-66.
In January 1981, Pinto took early retirement from BFI. Id. at 11-12. under the terms of an oral agreement with Drury (memorialized in a January 27, 1981 memo from Drury to Steve Thomas) Ex. 123, Pinto continued to receive annual compensation of approximately 4125,000 from BFI from January 1981 until he went on full retirement in September 1984. During this time period, Pinto performed no work for BFI. Ex. 122 at 14-16.
Thereafter, the State of New Jersey filed a civil complaint against approximately one hundred entities, alleging violations similar to those specified in the Miele indictment. State of New Jersey v. Arace Brothers, et al., No. L-069569-84 (Sup. Ct. Mercer County) Ex. 24. In a settlement agreement dated October 18, 1984, BFI agreed to pay $3,000,000 in exchange for not being named in the Arace Brothers action, and for the discharge of all other claims against BFI, its New Jersey subsidiaries and employees. Ex. 24.
BFI's New Jersey operations were conducted through a wholly-owned subsidiary known as Browning-Ferris Industries of New Jersey, Inc. The directors of this operation were George Farris (BFI's CFO), Stephen L. Thomas (BFI's vice president, operations administration) and Norman Myers (BFI's chief marketing officer. The president of this corporation was John Drury (next hit) (BFI's President and CEO). Vice Presidents of this corporation included Farris, Thomas, Bruce Ranck and Howard S. Hoover, Jr. (BFI's senior vice president and general counsel). See Exhibit 147.
7. Texas
In Texas, BFI has also used its control over landfills to drive smaller rivals out of business. In Houston, BFI owns the Holmes Road landfill and the Whispering Pines landfill. Ex. 171 at 16. WMI owns other landfills. Ex. 170 at 26. An independent competitor, Johnson Disposal, testified that BFI and WMI simultaneously raised their landfill dumping charges dramatically after WMI came into this market:
A. Yes, sir.
Q. Did the prices then start to be raised by both of them [BFI and Waste Management]?
A. Skyrocketed. Every six months.
Q. And this occurred at the time Waste Management opened Atascocita?
A. Browning Ferris had periodic raises before Atascocita got here, but after Atascocita came, it seemed that they were more regular then.
This is the converse of what competition should produce, and supports an inference of collusion. This inference is buttressed by the admission of BFI's James Mattley, Regional Vice President for the Southwest Region, who confirmed discussions with his counterpart at WMI, Fred Ferrera, concerning landfills. Ex. 169 at 14-17. Hence BFI and WMI had the opportunity and motive to discuss landfill pricing as well, and clearly did so, as witnessed by the simultaneous price increases they implemented. Ex. 170 at 94-97.
BFI admits that it provides a dumping fee discount to BFI haulers at BFI landfills, which discount is not given to smaller, independent companies. BFI's Henry Russell testified:
A. Educated guess, year and a half or two years after I have got here.
Q. so you believe it was about 1981 or so?
A. Yeah.
As a result of this preferential discount given by BFI to its own hauling company, many of the small competitors like Johnson Disposal could not compete, and were forced out of business. Ex. 170 at 18.
The ultimate purpose of BFI's assault on the smaller haulers was to be able to raise prices after competition had been reduced or eliminated. Former BFI employee Donald Roseberry who had been a BFI salesman in Houston, testified that BFI engaged in "price gouging" of customers. Browning-Ferris Industries, Inc. v. Donald Roseberry, III, Case No. 84-03163, 281st Judicial District, Harris County, Texas. Mr. Roseberry had been accused by BFI of taking "trade secrets" with him when he left. He testified that BFI had only two "trade secrets," one of which was "price gouging."
A. Yes, sir, I have.
Q. What were you given?
A. Basically, and as you put it, there were two trade secrets. One would be the terminology known as a blitz. and, the second would be known as price gouging.
He testified that "price gouging" consisted of BFI charging customers two or three times above cost:
He also testified that BFI had instructed him to lie to customers:
A. Yes, I was.
Q. What were you told in that regard?
A. To never tell the customer the truth, and when they called up, and
in regards to something that had to do with twice as much money as they
should have been paying.
There is also evidence that BFI bribed a Texas state senator, Jack Go, by paying him $25,000 to help defeat the landfill application of a rival company, Conservation Management. Ex. 149 at 82, 88-89. BFI subsequently settled the lawsuit by paying Conservation Management approximately $6 million. Conservation Management v. BFI, No. 81-1696 (S.D. Texas)., Ex. 174 at 172-74. See also Ex. 149 at 82.
In brief outline, BFI paid Senator Ogg $25,000 to defeat CMI's landfill application for the Katz landfill. Norman Myers, BFI's national marketing director and vice president, admitted that the fee was only to be paid after the Conservation Management application had been decided. Ex. 150 at 37. See also Ex. 173 at 99.
Ogg and BFI then engaged in efforts to cover up and conceal BFI's payment to Ogg. Ogg submitted a false invoice to Norman Myers, claiming the $25,000 was for legal work concerning the acquisition of Tex-Haul and Southwestern, two companies which BFI purchased. Ex. 160. Myers testified that he knew the invoice was not in fact for those services. Ex. 173 at 108-18, 126-127. Myers took no steps to correct the statement, and secretly had a bookkeeper pay it, circumventing normal procedures. Ex. 173 at 102-03. Myers then misrepresented to BFI's auditors, Arthur Anderson & Co., that the payment to Ogg involved two completely different matters (i.e., drafting a landfill acquisition agreement). Ex. 162. See also Ex. 175 at 15-19.
Norman Myers then committed apparent perjury about his misrepresentation
to Arthur Anderson at his deposition in Kelco Disposal, Inc., et al.
v. Browning-Ferris Industries of Vermont, Inc., et al., Civil No. 84-180
(VT.), denying that he had given two entirely different explanations for
this same invoice:
A. No.
Q. You are sure of that?
A. I'm sure I didn't lie to anybody about anything, no.
Norman Myers, Vice Chairman of the Board and Chief Marketing officer of BFI, is one of the "key executives" upon whose veracity BFI relies in its summary judgment motion. In its memorandum, pp. 12-13, note 11, BFI prominently cites his denial of having engaged in anticompetitive conduct. The sequence of events outlined above seriously erodes any reliance BFI may place upon Mr. Myers' credibility.
8. Vermont
In the area of Burlington, Vermont, BFI only faced competition from Kelco Disposal, owned by Joseph Kelly. Ex. 134 at 37. BFI implemented a plan to put Kelly out of business in order to increase prices.23
As in Atlanta, BFI made management changes to implement this scheme. Robert Mowbray was sent in as district manager, Ex. 130, at 6-8; Richard Rudolph was brought in as a salesman, Ex. 131 at 11-12, and Michael Gustin became Division Vice President of BFI's Northeast Region. Ex. 132 at 14.
Gustin instructed Mowbray to put Kelly out of business. Ex. 130 at 27-29. As recounted by Rudolph in his deposition:
This strategy did not immediately succeed, because Kelly continued to compete. BFI then put Kelly on a list of "worst competitors you face." Ex. 133; Ex. 134 at 37. BFI attempted to acquire Kelly and to eliminate him as a competitor, but Kelly rejected BFI's offer of $145,000. Ex. 132 at 94.
At his point, Gustin instructed his forces to put Kelly out of business by cutting prices. Ex. 134 at 39. Once Kelly was eliminated, BFI would have the area to itself and could raise prices at will. Mowbray testified about this second meeting with Gustin:
A. Gustin told me to put him out of business.
A. Put him out of business. Do whatever it takes. Squish him like a bug.
A federal jury determined that BFI had violated the Sherman Act by attempting to eliminate competition. Kelco, Inc. v. BFI, 845 F.2d 404 (2d Cir. 1988), aff'd on other grounds, 57 U.S.L.W. 4985 (1989).
8. Illinois
The western suburbs of Chicago provide a microcosm of how WMI and BFI eliminate competition in a market and then, having eliminated competition, allocate customers among themselves.24
Prior to 1985 there were five waste hauling companies in the Aurora-Naperville area which was served by the Green Valley landfill. Ex. 167 ¶5. In 1985 BFI embarked upon a campaign to eliminate all competitors in the area other than WMI. Id. ¶7. In 1985, BFI acquired Rot's Disposal Service; in 1987 BFI acquired Grove Disposal Service. As a result of these acquisitions, A & A was the only waste hauling company, other than BFI and WMI, operating in the area served by the Green Valley landfill. A & A competed most directly against Rot's Disposal Service. Id. ¶7, 8.
Initially, representatives of Rot's, now a subsidiary of BFI, approached A & A and proposed that Rot's and A 7 A agree to refrain from competing for each other's customers. A 7 A declined this invitation. Id. ¶8.
BFI next proposed to acquire A & A. Id. ¶9. Although waste hauling companies are generally sold for 18 x gross monthly revenues, BFI offered to purchase A & A for 5 x monthly gross revenues. Id. ¶10.
Having failed in its efforts to acquire A & A, or to persuade A 7 A to join in a customer allocation conspiracy, BFI decided simply to put A 7 A out of business. Id. ¶11. BFI contacted 140 of A 7 A's customers and offered to do their hauling for prices which were substantially below the prices which A & A would need to break even. Id. ¶11.
During the period of time that BFI was raising A & A's customer base, BFI did not contact a single customer of WMI. Id. ¶15. Indeed, the owner of A & A, Joe DeVries, is not aware of a single BFI customer switching to WMI, or a single WMI customer switching to BFI, during the entire period that he worked in the Aurora-Naperville area. Id. ¶15.
As a result of BFI's predatory pricing, A & A was forced out of business. Id. ¶17.
9. New York
The Niagara/Buffalo area vividly demonstrates the pattern of acquisitions by the defendants, and the manipulation of landfill pricing to benefit BFI and WMI.25
In 1979, there were approximately eleven major private waste haulers in this area (Niagara Sanitation, Cataract Disposal, Rapid Disposal, Amherst disposal, Amherst Ash, J & I Disposal, Joe Ball, Modern Disposal, CID, Clinton and Downing). Ex. 72 at 55. BFI acquired most of these haulers. Id. at 26, 56-57. Waste Management acquired Downing. Id. at 61. BFI also acquired three landfills and four "transfer stations" (staging areas prior to landfill dumping). Id. at 29-31. By controlling both the haulers, the landfills, and the staging areas, BFI was able to acquire control of this market.
BFI charged its own subsidiaries less than the gate rate (i.e., the list price) to dump at the landfill, while independent companies had to pay the full gate rate. An examination of dozens of invoices for the month of July 1986, an admitted "typical month", vividly demonstrated this discrimination. Id. at 85-87. However, WMI's division, Downing, was also given a discount from the gate rate by BFI:
A. . . . [T]he invoice is Downing Containers, the Division of Waste Management, New York. . . .
Q. . . . The rate they are paying is less than the gate rate?
A. Yes.
This testimony strongly supports an inference of collusion between BFI and Waste Management.
10. Florida
In South Florida, United Sanitation Service ("United"), a WMI subsidiary, entered into an agreement with Industrial Waste Service ("IWS") another waste hauler to adhere to a property rights system. See Ex. 141 at 42-43; Ex. 140 at 61-62. Under the property rights system, customers of a waste company were considered to be the property of that company. Id. Each participant in the arrangement was restricted from soliciting the other hauler's customers, and would turn away (or quote extraordinarily high prices to) dissatisfied customers who attempted to switch companies. Ex. 139 at 56-58. When a customer somehow managed to switch companies, despite efforts to discourage it from doing so, the two companies would later meet and exchange customers to "even things out" and compensate the company which had lost the business. Ex. 126 at 60-65.
Lewis Goodman, the president of United, was responsible for administering the property rights system in South Florida. Ex. 140 at 61-62. He was also a participant in several key meetings held to compensate IWS for customers that had been gained or lost. Miles David Hoopengardner and Anthony Capperelli, the general manager and sales manager of United, also participated actively in the maintenance and enforcement of the property rights system in South Florida. See, e.c., Ex. 66 at 59-61; Ex. 140 at 61-62.
At Capperelli's express direction, Donald Blair, a United employee, altered and destroyed evidence of United's illegal activities after such evidence had been subpoenaed by a federal grand jury. Ex. 71 at 15-20.
John Lawson was secretary, treasurer, and part owner of IWS until 1981, when he left to form his own company, Imperial Waste Co. ("Imperial"). Lawson, both an IWS and Imperial, adhered to and participated in the property rights system. See Ex. 66 at 259-61. Lawson was present at several meetings during which compensatory "trades" were made. Ex. 126 at 64.
13. California
In Southern California, WMI's subsidiaries in that area entered into arrangements with several local haulers to engage in a pattern of illegal conduct designed to prevent competition among the haulers. The means utilized to accomplish this included agreements to refrain from soliciting other hauler's customers, exchange of price lists, trading customers, maintaining competition logs, sales blitzing of uncooperative hauler accounts, and the use of restitution for "paying back" the hauler whose account was taken by another hauler. Ex. 33.
The individuals from WMI involved in this scheme were Clifford R. Chamblee, general manager of WMI/Gardena (Ex. 124 at 7.), and Wiley A. Scott, Jr., sales manager and later operations manager of WMI/Sun Valley. Ex. 125 at 9-12.
Similar arrangements were implemented by WMI subsidiaries in Orange and San Diego counties. Dewey's Rubbish Service and Daily Disposal Service, the WMI subsidiaries in Orange and San Diego counties, agreed with local haulers to refrain from competing for commercial accounts, to allocate customers, and to submit non-competitive price quotations to customers wishing to change waste haulers. ex. 34 and 35.
BFI's representatives, however, have proven to be patently false. Discovery has confirmed that, far from being an aggregation of autonomous regions and districts, defendants' operations are highly centralized, with senior executives from corporate headquarters monitoring, controlling, dictating and enforcing pricing and marketing strategies, and virtually every important aspect of field operations.
While it is true that BFI conducts its business through subsidiaries located throughout the country, the officers and directors of these subsidiaries are, for the most part, BFI's national officers based in Houston. Ex. 147.
Thus, BFI's assertion that the supposedly "{autonomous" operating structure of its subsidiaries somehow raises "practical obstacles to the implementation of a national conspiracy" is belied by the fact that the same people who run BFI also run its "autonomous" subsidiaries. These individuals serve as the senior corporate directors and officers of BFI corporate, and through their status as corporate directors and officers of the operating subsidiaries, extend the control of BFI's headquarters throughout the country.
This highly centralized corporate structure maintains firm control over pricing policies throughout the country. BFI has identified its highest ranking, headquarters level executives as "KEY PEOPLE - PRICING". Ex. 58 at 54670. These "key people" are: Harry J. Phillips, Jr. (Executive V.P., Solid Waste Operations, North America), Ed Crane (V.P., General Sales Manager), Steve Thomas (V.P., Operations Administration), John Bradley (Divisional Vice President, Operations and Training), Frank Montfort (Divisional Vice President, Operations and Analysis).27 Id.
As a result of corporate strategy and management, BFI headquarters maintains a "hands on" approach to the management of its subsidiaries. As John Drury (next hit) himself made clear to his Regional Vice Presidents:
District pricing and financial data is under constant review and is reported by the districts to Houston, either directly or through the region. Ex. 39 at 55-56. Houston directs the districts with regard to expected profit, guidelines and minimums. Id. at 59. Directives are not optional and district audits are routinely conducted in order to benchmark results. Id. at 59-60. See generally Ex. 10, 57, 69, 70, 101, 118, 127 and 128.
BFI headquarters actually dictates the pricing and profit margin formulae to be applied by the BFI regions and districts nationally.28 BFI has developed internal accounting and pricing mechanisms known as "EBINT" and "VEBINT." EBINT is an acronym which stands for "earnings before interest, national overhead and taxes." Ex. 43 at 104-05. VEBINT refers to EBINT divided by gross assets deployed. Ex. 44 at 46. it is expressed as a percentage and reflects profitability as a measure of return on investment. Ex. 45 at 80-81. VEBINT has therefore been accurately described by BFI as "our own pricing tool." Ex. 161 at 1.
Computer programs enable districts to determine, from their local computer terminals which are linked to Houston's centralized computer, the actual prices necessary to achieve various VEBINT levels in each hauling system. Ex. 50 at 28-32. Because the age and cost of capital assets varies among districts, the same VEBINT percentage will yield a different actual price for the same service in different districts. However, it is the VEBINT--which governs rates of profit and earnings to be derived from services and thus establishes a price range for such services--which Houston headquarters sets, controls and monitors. By controlling and dictating the mandatory VEBINT and EBINT levels, and by compelling increases or decreases to mandatory VEBINT levels, Houston headquarters controls when price increases (or decreases, as the case might be), will occur.
In June 1979, John Drury (next hit) communicated directly to all BFI district managers and ordered that
[text appears to be redacted]. Drury advised the district managers that corporate directives must be adhered to:
Ex. 46 at 2.
Drury also wrote directly to his district managers in connection with upcoming price increases:
In March of 1980, BFI headquarters in Houston determined that the minimum VEBINT the districts must achieve would be raised from [ text appears to be redacted ]. Drury advised the field that:
Ex. 48. all corporate officers were copied on the instructions. Ex. 48.
Drury ordered that no district could have more than [ ] of its customers at below [ ] VEBINT after a specified deadline date:
Ex. 49.
These deadlines were immediately translated into action at the field level. Indeed, in a July 5, 1985 memorandum to his District managers, Bruce Ranck stated:
Ex. 60 at 4.
Lest there be any misunderstanding regarding adherence to the prescribed pricing levels, John Drury drove home the point once again in an August 6, 1985 memorandum to all BFI's Regional Vice Presidents:
Ex. 62 at 1.
Following the June meeting, steps were immediately taken to implement headquarters' pricing directives. John Bradley and Frank Montfort, two of BFI's "Key People" for pricing, and a group of five corporate/headquarters managers made "pricing trips" to seven of the regional headquarters of BFI. Ex. 61; Ex. 50 at 63-64. The cities visited included Youngstown ,Ohio (Steel Region), Boston, Massachusetts (Northeast Region), Baltimore, Maryland (East Central Region), Minneapolis, Minnesota (Arrowhead Region), San Jose, California (Pacific Region), and Atlanta, Georgia (Southeast Region).
As a result of the foregoing efforts to maintain control over pricing, W.C. Fatjo, Jr., the son of one of the founders of BFI, was able to submit a sworn statement wherein he states:
The high degree of centralized control exercised by BFI headquarters over pricing and other marketing activities of its regional and district offices is also apparent in headquarters' vice-like grip over virtually every other aspect of local operations. BFI headquarters acts as a "bank" for the districts and concentrates all funds received by all subsidiaries. Ex. 39 at 98. On a daily basis, all monies received by the district are extracted from the local bank accounts and pooled into two "national office bank accounts." Ex. 38 at 32-33. all bills, including the local payroll, are forwarded to Houston for payment. Ex. 39 at 55-56. At most $1,000 may be left each night in a district's operating account. Ex. 38 at 37; Ex. 39 at 102. Houston headquarters handles all accounting services directly for the districts, Ex. 39 at 95-96, and also handles all legal matters on behalf of the districts, Ex. 37 at 161 and Ex. 40, including the payment of settlements and judgments from the national funds. Ex. 37 at 31; 103-104.
Thus, it is not surprising there have also been judicial determinations about the national nature of BFI's business. In Tiger Trash v. Browning-Ferris Industries, Inc., 560 F.2d 818, 823 (7th Cir. 197), BFI challenged venue in Indiana where one of its subsidiaries operated. The court found BFI to be present there due to the control it exercised over its subsidiary:
Thus, we submit that the evidence in this case points undeniably to the conclusion that BFI's highly centralized control over the pricing activities of its regions and districts is ideally suited to the effective implementation of an effective national conspiracy.
WMI is, in many respects, a mirror image of BFI. Practically all major corporate decisions affecting WMI, are made by the same management committee which has been in place since 1978. Ex. 16 at 96-98.
Corporate policy emanates from WMI's Policy and Procedure Manual ("PAP") which is distributed to all regions and divisions within WMI. Ex. 73 at 198-200. Only the management committee can make changes to PAP, while neither the districts nor the regions have the ability to supplement policy. Ex. 73 at 200; Ex. 74 at 87-88.
The evidence could not be clearer that WMI's pricing is directed from corporate headquarters in Oak Brook, Illinois. In May of 1978, Don Flynn (WMI's CFO) and Harold Gershowitz (WMI's Senior Vice President) appeared before the "Splinter Group of the New York Society" and announced that "[t]hey expect to raise prices 4-5 percent this year." Ex. 6. This demonstrates vividly the national control over pricing. Likewise, on August 8, 1985, Dean Buntrock issued a written directive entitled "Assumptions for 1986 Budgeting and Strategic Planning," in which the following directives were set for WMI, a company-wide:
See Ex. 181 at 2.
Nor can there be any doubt about the mandatory nature of these corporate directives. For example, a 1986 memorandum which Jerry Girsch urged all Regional Controllers to send stated, in pertinent part, as follows:
Oak Brook also keeps a tight reign on the company's finances. All monies over $3500 are wired to corporate headquarters, Ex. 73 at 222-23; all employee pay checks are processed in Oak Brook, Ex. 73 at 226-227; raw accounting information is fed to headquarters in Oak Brook nightly via phone, Ex. 182 at 108; and all decisions regarding acquisitions are totally centralized at corporate headquarters. See Ex. 73 at 13-14.
A second means of substantive corporate control is through Quarterly Operating Report ("QOR") reviews which take place at Oak Brook. Ex. 73 at 282-84. The Monthly Operating Report ("MOR"), like the QOR, is based at the division level and is used to monitor all financial operations of the divisions. Ex. 74 at 33-34. Girsch and Rooney review the MORS on a regular basis. Ex. 73 at 299-300.
Thus, the evidence clearly demonstrates that, like BFI, WMI has a highly centralized organizational and pricing structure that facilitated implementation of defendants' national conspiracy.
A. The Standard For Summary Judgment
A motion for summary judgment should be granted only if "there is no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 569c); See generally Miller v. Indiana Hospital, 843 F.2d 139, 143 (3d Cir. 1988), cert. denied, 109 S. Ct. 178; Fragale & Sons Beverage Co. v. Dill, 760 F.2d 469, 472 (3d Cir. 1985); Tunis Bros., Inc. v. ford Motor Co., 696 F.Supp. 1056, 1058 (E.D.Pa. 1988). See generally Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986) (summary judgment is inappropriate where "there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party"). The Court of Appeals for the Third circuit ha held that "[w]hether antitrust defendants have engaged in a 'contract, combination or conspiracy' to restrain trade is a question of fact." Weiss v. York Hospital, 745 F.2d 786, 814 n. 47 (3d Cir. 1984).
In support of their motions for summary judgment, defendants rely principally upon the Supreme Court's decision in Matsushita Electrical Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 596-97 (1986) ("Matsushita"), apparently taking the view that the mere invocation of the word "Matsushita" mandates the automatic entry of summary judgment in any antitrust case. However, this is certainly not the law. In fact, the holding of Matsushita is quite specific. In that case the court dealt with an alleged twenty year conspiracy by Japanese television manufacturers to eliminate their American competitors through predatory pricing, and then to recoup their losses by charging anti-competitive monopoly prices. In the absence of direct evidence of such a conspiracy, plaintiffs endeavored to avoid summary judgment by asserting that a jury could infer the existence of a conspiracy through the existence of purely circumstantial evidence.
The court began its analysis by noting the complete implausibility of the alleged conspiracy. It simply made no sense for a conspirator to intentionally lose money for twenty years, in the hope that it would begin to recoup its losses in the twenty-first year. The court then held that in cases which are wholly implausible, when the defendants "had no rational economic motive to conspire, and if their conduct is consistent with other, equally plausible explanations, the conduct does not give rise to an inference of conspiracy." 475 U.S. 596, 97.
Since Matsushita, the third Circuit has made clear that the Supreme Court's holding therein applies only where the alleged conspiracy makes no economic sense and where plaintiff's claim is premised exclusively on ambiguous, circumstantial evidence. See Arnold Pontiac-GMC, Inc. v. Budd Baer, Inc., 826 F.2d. 1335, 1338 (3d Cir. 1987), cert. denied, 484 U.S. 1060 (1988); Pa. Dental Ass'n v. Medical Service Ass'n of Pa., 815 F.2d 270, 272 (3d Cir.), cert. denied, 484 U.S. 851 (1987). Indeed, as the third Circuit has held, after Matsushita, when the unique factual scenario at issue in Matsushita does not exist, "[t]he summary judgment standard is no different in antitrust litigation than in any other." Miller v. Indiana Hospital, supra, 843 F.2d at 143. Indeed, after Matsushita the Third Circuit explicitly rejected the notion that any elevated burden of proof exists in an antitrust action, holding that such a practice "has no place in an antitrust case where Congress has given the jury the responsibility of resolving disputed factual issues." Id.
After Matsushita, numerous courts within this Circuit--including the Court of Appeals itself--have found that summary judgment was not appropriate. See Miller v. Indiana Hospital, supra, 843 F.2d at 145; Arnold Pontiac-GMC, Inc. v. Budd Baer, Inc., supra, 826 F.2d at 339; Tunis Bros., Inc. v. Ford Motor Co., supra, 823 F.2d at 50-51.29
Contrary to defendants' arguments, therefore, Matsushita and other recent Supreme Court cases do not dispense with the need for a fact-specific inquiry to determine the propriety of summary judgment in a given case. Indeed, as the Court of Appeals for the third Circuit has held:
Credibility determinations are not the functions of the judge; rather, "[t]he evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor."
Miller v. Indiana Hospital, supra, 843 F.2d at 143. See also, Minpeco, S. A. v. Conticommodity Services, Inc., et al., supra, 673 F. Supp. at 687 (quoting Anderson v. Liberty Lobby, 477 U.S. 242, 255 (1986)).3030
Matsushita is inapplicable to this case. First and foremost,
plaintiffs have "produced direct evidence of a conspiracy." Arnold Pontiac-GMC,
Inc. v. Budd Baer, Inc., supra, 826 F.2d at 1338. Moreover,
defendants' conspiracy could not be more plausible. Defendants work together
to eliminate competition in a given area. And then, after eliminating competition,
they are free to raise prices as they see fit. Thus, as in Arnold Pontiac-GMC,
Inc. v. Budd Baer, Inc., supra, "[w]e need not report to the
type of learned treatises referred to in Matsushita to recognize
that here, unlike in that case, there was a 'plausible motive' for the
alleged concerted action." 826 F.2d at 1339.
It is axiomatic that "(a)n explicit agreement between the co-conspirators is not required for the law to have been violated. It is enough that there exists an implicit agreement to carry out the illegal scheme." Eiberger v. Sony Corp. of America, 459 F. Supp. 1276, 1284 (S.D.N.Y. 1978), aff'd in part, rev'd in part on other grounds, 622 F.2d 1068 (2d Cir. 1980) (citing United States v. General Motors Corp., 384 U.S. 127 (1966). See also Ambrook Enterprises v. Time Inc., 612 F.2d 604, 616 (2d Cir. 1979), cert. dismissed, 448 U.S. 914 (1980).
A conspiracy can be established by circumstantial evidence, since "[c]onspiracy, by its very nature, is almost never susceptible to direct proof. It is most often a matter of inference, apprehended and proven circumstantially." Trist v. First Federal Savings & Loan Ass'n of Chester, 466 F. Supp. 578, 590 (E.D. Pa. 1979). See also Interstate Circuit, Inc. v. United States, supra, 334 U.S. at 142; Apex Oil Co. v. DiMauro, supra, 822 F.2d at 255; Minpeco, S.A. v. Conticommodity Services, Inc., supra, 673 F. Supp. at 687-89; Brokers' Assistant, Inc. v. Williams Real Estate Co., supra, 646 F. Supp. 1110, 1118-19 (S.D.N.Y. 1986).31 Thus, at this Court has recognized, "evidence of . . . a[n] [antitrust] conspiracy may be implied from a course of dealing or other circumstances, such as the conduct of the parties." United States v. Continental Group, Inc., supra, 456 F.Supp. at 715, aff'd, 603 F.2d at 455.
Furthermore, "[a] single act will suffice to show participation [in a price-fixing conspiracy] if the circumstances permit the inference that the act was intended to advance the ends of the conspiracy." United States v. Franzen, [1989-2] Trade Case. (CCH) ¶68,693 at 61,641 (4th Cir. 1989); United States v. Vega, 860 F.2d 779, 795 (7th Cir. 1988).
Moreover, as the Third Circuit has held, "[t]he existence of some competitive activity among alleged co-conspirators is not sufficient to negate the existence of an illegal conspiracy" to violate the antitrust laws. United States v. Continental Group, Inc., supra, 603 F.2d at 467. (emphasis added). See also United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 225 n.59 (1940); In re Yarn Processing Patent Validity Litigation, 541 F.2d 1127, 1136-37 (5th Cir. 1976); Plymouth Dealers' Association v. United States, 279 F.2d 128, 132 (9th cir. 1960).
Additionally, the Supreme Court has ruled that, when assessing the sufficiency of evidence to establish an antitrust conspiracy, courts should accord plaintiffs "the full benefit of their proof without tightly compartmentalizing the various factual components and wiping the slate clean after scrutiny of each." Continental Ore Co. v. Union Carbide and Carbon Corp., 370 U.S. 690, 699 (1962).
As former Chief Judge Lord stated in Trist v. First Federal Savings & Loan Ass'n, supra, 466 F. Supp. at 585, "plaintiffs are entitled to the possibilities of interlay between the various elements of their case. . . We therefore reject defendants' divide-and-conquer approach to plaintiffs' contentions . . . and will consider plaintiffs' allegations in their entirety" (citation omitted). Similarly, as the Second Circuit has recently emphasized in reversing the entry of summary judgment in an antitrust action:
When considered in light of these applicable legal standards, the evidence in this case, viewed as it must be in its entirety with all reasonable inferences drawn in favor of plaintiffs, compels denial of defendants' motion.
The evidence shows that senior management at the headquarters level of both WMI and BFI met and exchanged future pricing plans. The most significant of these high level contacts occurred at meetings of an organization known as the "Splinter Group of the New York Society.' Ex. 6. At these meetings, WMI's Chief Financial officer (Donald Flynn) and its Senior Vice President (Harold Gershowitz) discussed WMI's plans for future price increases and its other significant future marketing plans with senior BFI personnel, such as George Farris, BFI's Chief Financial officer, who recorded the following in a memorandum to the file regarding WMI:
In addition, Harry Phillips, Sr., Chief Executive officer of BFI, and Dean Buntrock, WMI's Chairman of the Board admit to numerous meetings with each other over the post 25 years. Ex. 75 at 67-68. See also Ex. 16 at 158.
Buntrock testified additionally that at meetings of the National Solid Waste Management Association ("NSWMA") he met and spoke with Phillips. Id. at 157-58. Further, Phillips admitted to having telephone conversations with Buntrock. Ex. 75 at 74. Another meeting between Buntrock and Phillips occurred on November 16, 1977 in Buntrock'' hotel room over cocktails. Ex. 78.
One especially significant meeting occurred on August 9, 1980 in Delavin, Wisconsin. Ex. 75 at 67-69; See also Ex. 76. This Saturday meeting took place two weeks after Phillips had met with Bruce Ranck and john Drury regarding "Toledo" and "Dave Yeager." Ex. 76. A few months after these meetings, competition between BFI and WMI in the Toledo market was eliminated.
By letter dated April 20, 1983 Buntrock again invited Phillips to a meeting, this time a May 10, 1983 meeting in San Francisco, in connection with a NSWMA convention. Ex. 79. Phillips' expense report indicates that he was indeed in San Francisco from May 9 to 13, 1983 in connection with the NSWMA convention. Ex. 80.
There is additional evidence of specific meetings between Buntrock and Phillips, although the exact dates are unclear. Ex. 81. See also Ex. 82. In addition, Bruce Ranck, a BFI Vice president, and Richard Evenhouse, a WMI Vice President, have met on numerous occasions. Ex. 90 at 251-52. See also Ex. 91; Ex. 92 at 82.
In addition, the record reveals instances of senior-level communications between BFI and WMI as participants in joint management-labor negotiation teams. See Ex. 59 at 18-24.
The evidence adduced in this case thus reveals that defendants, in the words of former Chief Judge Lord, "had regular and frequent opportunities to exchange information, make agreements, give signals, etc. without having to make any extraordinary efforts to communicate and without leaving a paper trail." Trist v. First Federal Savings & Loan Ass'n, supra, 466 F. Supp. at 586. This is precisely the type of evidence recognized by the courts as being a "plus' factor probative of the existence of a Section 1 conspiracy.
Thus, defendants' discussions, at the highest levels, have had an obvious " 'tendency to picture a business setting and relationship which invites inferences favorable to [plaintiffs'] position.'" Trist, supra, 466 f. Supp. at 587 (quoting Standard Oil Co. of California v. Moore, supra, 251 F.2d at 209.32 See generally In re Plywood Antitrust Litigation, supra, 655 F.2d at 634.33 Given the existence of these private meetings and gatherings, coupled with the other factors detailed at length in this brief, a jury might reasonably find that, "[a] concert of action [was] contemplated and that the defendants conformed to this arrangement," Ambrook Enterprises v. Time, Inc., supra, 612 f.2d at 614 (quoting United States v. Paramount Pictures, Inc., 334 U.S. 131, 142 (1948)). See generally Port Terminal & Warehousing Co. v. John S. James Co., 695 f.2d 1328, 1332 (11th Cir. 1983).
Another factor the courts have considered in determining the propriety of summary judgment is the credibility of the moving party's witnesses. Thus:
Here, there are several instances where defendants' witnesses have given sworn testimony that is contradicted by evidence. For example, the testimony of Loren E. Beck, former Vice-President of BFI's "Steel Region" when he was deposed in this litigation squarely contradicts the testimony given by Mr. Beck in the Chambers v. BFI litigation, Civil No. 83-2384 (W.D. Pa.). In Chambers, Beck testified that the price list utilized by BFI field personnel were prepared at the Region Level:
A. Price lists have been prepared at the regional level and given to the districts.
Q. If the price lists are prepared at the regional level, what function does the district manager then perform in the pricing?
A. He is responsible for supervising it and he is also responsible for making any determination of deviating from that price list.
When the time came for Beck to be deposed in this case, however, he realized that the testimony he gave in 1985 was inconsistent with BFI's argument in this case that all pricing decisions are made at the district level. Rather than attempt to reconcile his prior testimony, however, Beck simply changed it after coaching by his counsel:
BFI counsel: I object to the form. He described how pricing was done at the district level. I don't understand
Thus, the very testimony upon which defendants rely for their assertion that pricing is made at the "district" level rather than the national level (see Def. mem. 28 at n.18)--is a defense manufactured for this litigation, and prompted during the depositions, thus subjecting the witnesses to charges of perjury.34
In addition, false affidavits and testimony have also been used by defendants to conceal their conspiracy. In February 1984, Mr. Taddonio swore to an affidavit wherein he stated that "I have never discussed BFI pricing or other business practices . . . with any representatives of any competing waste hauling business." Ex. 183. Mr. Taddonio was examined in this case in 1989 and, for a second time, gave sworn testimony that he never discussed prices with a competitor.
Mr. Taddonio's persistent perjury was revealed on October 10, 1989 when Greg Asciutto testified in this case regarding a meeting with John Taddonio to rig a bid for the University of Toledo. Ex. 104 at 75-80. Mr. Asciutto's testimony clearly and unambiguously contradicts that of Mr. Taddonio. Moreover, because Mr. Asciutto was, at the time he gave the testimony, an employee of defendant WMI, his incriminating testimony is inherently credible.
Further, the evidence squarely and irreconcilably contradicts BFI's
assertion that its field operation are too "locally autonomous" to support
an inference of an effective national conspiracy.
However, as indicated above, the record is replete with clear, convincing and compelling evidence that defendants' widespread pattern of anticompetitive activity was authorized, directed, condoned and rewarded at the highest levels of BFI.
The principal case relied upon by defendants is In re Fine Paper Antitrust Litigation, 685 F.2d 810 (3d Cir. 1982), cert. denied, 459 U.S. 1156 (1983). In Fine Paper, the court affirmed the entry of a directed verdict in favor of certain defendants in an action alleging a nationwide price fixing conspiracy among manufacturers and merchants of fine paper. The manufacturers were in a horizontal relation to each other. The merchants were in vertical relation to the manufacturers. Hence, plaintiffs sought to prove both horizontal and a vertical price fixing conspiracies. The "only" evidence offered by the plaintiffs in support of the existence of the alleged manufacturer/merchant conspiracy was "communication among merchants [which did not involve the manufacturers] relating to retail prices." 685 F.2d at 822. (emphasis added). The court was therefore understandably reluctant to permit evidence of communications among one set of defendants (i.e., the merchants) to serve as the basis for inferring that another set of defendants (i.e., the manufacturers) participated in a conspiracy. Thus, the sole basis for the Third Circuit's decision was the Court's view that there was no evidence in the record to link the manufacturers to the merchants' conspiracy would therefore necessarily be based on "guesswork and conjecture." 685 F.2d at 822.
This is far different from the evidence presented here. Defendants do not, as indeed they cannot, contest the existence of the compelling evidence linking BFI and WMI in a pattern of anticompetitive activity. Nor can defendants deny the extensive evidence of price and marketing communication between BFI and its co-conspirators at every level of their respective corporate leaders. Fine paper could not be more distinguishable.
The defendants also rely at pp. 34-36 on a series of criminal cases, including Blumenthal v. United States, 317 U.S. 49 (1942). These cases are inapposite because they implicate constitutional rights (e.g., double jeopardy) not present here.
BFI fails to cite the seminal case in the Circuit on that very issue, Your Honor's decision in United States v. Continental Group, Inc., supra, 456 F.Supp. at 715-16,aff'd, 603 F.2d at 444.
This court held that under Blumenthal and Braverman:
Similarly distinguishable is Hobson v. Wilson, 737 F.2d 1, 54-55 (D.C. Cir. 1984), where the court held that a municipality could not be held liable under the federal civil rights laws for the conduct of its agents because the court held:
Here, of course, the evidence shows extensive and systematic involvement of supervising personnel in the anticompetitive activity at issue, that such activity was for more than a "scattering" of isolated and unconnected events, and that the illegal activity was impliedly and/or tacitly approved and encouraged by BFI. Thus, to the extent Hobson is relevant at all, it supports plaintiffs' position that BFI engaged in the national conspiracy.
The evidence of defendants' fraudulent concealment includes the following:
In early 1983, Donald Blair, a WMI employee, was asked by his superior, Anthony Caparelli, to alter cards containing incriminating information , which cards were required to be submitted to a Federal Grand Jury. Ex. 71 at 51-20. Blair was instructed to retype the cards in order to eliminate the incriminating information. Id. The "new" cards were then produced in response to the federal grand jury subpoena. Lewis Goodman, and David Hoopengardner, two WMI supervisory personnel, were aware of these altered records prior to their submission to the grand jury. Id. at 19-20.
Jerry Stith, a sales representative at United Sanitation Services, a division of WMI, utilized a shredder maintained in his office's computer room to periodically destroy copies of his correspondence. Ex. 139 at 21-25. Stith has stated that he was shredding documents dated as late as 1987. Id.
As Previously described, Norman Myers, BFI Vice Chairman and National Marketing Director concealed a bribe that blocked a rival's landfill application and then misrepresented this bribe to BFI's independent auditors.
Donald Brooks submitted a declaration that a document embodying an explicit price fixing agreement between BFI and WMI had been destroyed. Ex. 2.
John Taddonio of BFI used false names on his expense reports in order to conceal evidence of meetings with WMI employees. On a December 1, 1982 expense account form the name "John Thompson" was used to hide the fact that Taddonio had met with Greg Asciutto of WMI. Ex. 100 at BFI 30001, 30005. Taddonio stated that he used the name John Thompson to conceal Asciutto's identity from his secretary, Lorna Hackett, because he did not know her well and was unsure of how she would react. Ex. 98 at 132-33. The name "J. Thompson" was used on a January 31, 1983 expense account form to conceal the identity of Matt Davies, another WMI employee with whom Taddonio had lunch. Ex. 100 at BFI 30 001, 30 010.
Jack Nichols, a WMI district manager, used the false name "Mr. Niles" when leaving phone messages for David Yeager at Yeager's office at BFI in order to conceal his identity from BFI clerical personnel. Ex. 67 at 113-14.
Another method used by the defendants to conceal evidence of violations consisted of rehiring former employees who had previously been separated from the company in order to secure their favorable testimony. Hans Thumm, for example, intentionally destroyed an entire fleet of BFI trucks and was fired by the company. Ex. 166 at 55. However, at or about the time that a grand jury was convened in Toledo, Thumm was rehired by BFI as a result of the direct intervention of Bruce Ranck. Id at 87.
The technique of hiring back employees in order to elicit favorable testimony has proven effective. For example, after leaving the employ of BFI, Beverly Dick gave sworn testimony regarding BFI's anti-competitive conduct in an extended deposition and two affidavits. See Ex. 42 at 23-27; Ex. 14; Ex. 13; Ex. 12; Ex. 11. After being re-employed by BFI, however, and at the possible personal risk of committing perjury, she contradicted portions of her prior sworn testimony in an effort to soften her prior incriminating statements regarding BFI's violations of law. Id. See also Ex. 42 at 9-10.
Fraudulent concealment of anti-competitive conduct also occurred in the form of giving false statements to customers. If, for example, a BFI customer called WMI for a price quotation, the WMI salesperson was required to give a false reason why WMI could not service the customer's account. The customer would be told that the customer's location was outside the route of WMI's trucks, or that WMI did not have sufficient equipment to service the customer. The same false reasons were given by BFI salespersons who were contacted by WMI customers. See, e.g., Ex. 56 at 41-42. At no time did BFI or WMI salespersons disclose to potential customers the existence of the illegal agreement between BFI and WMI to allocate customers.
An additional technique used by defendants to conceal facts regarding their antitrust violations was the continued payment of salaries to persons with knowledge of the companies' antitrust violations long after they had left the company. For example, after retiring from BFI in January 1981, John Pinto continued to draw a salary from BFI in the amount of $125,000 per year until September 1984, notwithstanding the fact that he performed no work for BFI. Ex. 122 at 14-16. Pinto was indicted for antitrust violations in October 1984, and subsequently pled guilty to these allegations and paid a fine of approximately $30,000. Id. at 63-66. Another former BFI officer, George Farris, was intimately familiar with the operations of BFI at the highest levels. When the company decided to replace Farris, it awarded him a salary of approximately $260,000 per year, paid for an office for Farris which was separate from corporate headquarters, and supplied Farris with a secretary. Ex. 145 at 19-20, 95-96.
Defendants' limited attempt to deal with the foregoing are entirely unpersuasive and serve, at best, to create issues of fact.
With respect to the perjury of John Taddonio, which perjury continued during the deposition in this case, defendants do not deny that it occurred.35 Defendants' only argument within respect to the foregoing perjury is that it did not serve to conceal evidence of a national conspiracy. However, as set forth, the events in Toledo were known by, directed and orchestrated by Charles Mooney, Bruce Ranck and John Drury at BFI headquarters.
Similarly disingenuous is BFI's denial that Hans Thumm was rehired for the sole purpose "buying his testimony. A jury could certainly infer from the unique circumstances surrounding Thumm's rehire--that a local maintenance man who was fired for intentionally destroying an entire fleet of trucks was personally rehired by a regional vice-president at the time that a grand jury was being convened--that Thumm was rehired in order to buy his testimony. Thumm's "denial" that he was hired in order to buy his testimony simply creates a triable issue of fact.
Defendants cite Texas v. Allan Construction Company, 851 F.2d 1526, 1528-1 (5th Cir. 1988), for the proposition that antitrust conspiracies are not self-concealing, but that additional evidence of concealment must be adduced. Defendants omit, however, to note that the Court in Allan held that even minimal evidence of concealment, e.g., signing a non-collusion statement in a bid application, would constitute additional evidence of conspiracy. Indeed, the court in Allan specifically noted that the kind of overt conduct present here easily qualifies as fraudulent concealment ("if Allan employees had shredded incriminating books and records the day before the last bid was let, this act would surely be pertinent to the fraudulent concealment inquiry . . .). Id.
As demonstrated, the conduct alleged here--some of which has already
supported a criminal conviction for obstruction of justice--easily meets
the standards for fraudulent concealment. Accordingly, plaintiffs should
be permitted to recover damages for the entire class period.
For the reasons set forth herein, the motion of defendants for summary judgment should be denied in all respects. Partial summary judgment on liability should be entered for plaintiffs and the plaintiff class.
Respectfully submitted, Dated: July 27, 1990 _________________________________
I hereby certify that copies of the foregoing memorandum in opposition to defendants' motion for summary judgment were served via Federal Express upon:
Sanford M. Litvack, Esquire
Dewey, Ballantine, Bushby, Palmer & Wood
140 Broadway
New York, NY 10005
and by first-class mail, postage prepaid upon all other counsel on Friday, July 27, 1990.
__________________________
Robert J. LaRocca
Dated: July 27, 1990
1 For example, Van Der Molen Chicago disposal Company was acquired by BFI in 1972. Ex. 64 at 10. Everett Van Der Molen, a member of the family, became a BFI regional vice president in 1972 and vice president of the Illinois region in 1975. Ex. 64 at 8-9. In addition, three of Van Der Molen's sons were employed by BFI: Richard, by the Illinois region, and Robert and Daniel by the Melrose Park District. Ex. 64 at 21-22. DeBoer Brothers, Inc., another Chicago hauler, was acquired by WMI. Ex. 16 at 30-32. James DeBoer, a member of the family, became a WMI district manager. Id. At 37-38. Other individuals involved in CSRDC companies who subsequently held positions with one of the defendants were Larry Beck, Jake Meyer, Tom Tibstra, Eddie Evenhouse, Harry Ketter, and Ed Evenhouse. Id., at 36-38.
2 All figures in this and the next two paragraphs are derived from the defendants' SEC filings, specifically from 10K's and proxy statements.
3 Even the exchange of present or past prices is a strong indicator of price fixing. U.S. v. Container Corp., 393 U.S. 333 (1969).
4 Stanford Litvack, Esq., BFI's chief counsel in this litigation, was Assistant Attorney General in charge of the Antitrust Division at the time of the Atlanta prosecution. Livack signed the indictment and issued the press release. Ex. 4.
5 Indeed, at the time of the Atlanta price fixing, George Farris BFI's CFO), Stephen L. Thomas (BFI's vice president operations administration), Norman Myers (BFI's chief marketing officer, John Drury (BFI's executive vice president, solid waste) and Howard S. Hoover (BFI's senior vice president and general counsel) served as vice presidents of BFI Industries of Georgia Inc., BFI's wholly owned subsidiary in charge of Atlanta. Farris, Thomas and Myers served as the three corporate directors of this corporation. See Ex. 147.
6 Indeed, at the time of the Ohio price fixing, George Farris (BFI's CEO), Stephen L. Thomas (BFI's vice president, operations administration), John Drury (BFI's President and CEO) and Howard S. Hoover (BFI's senior vice president and general counsel) served as vice presidents of BFI Industries of Ohio and Michigan, Inc., BFI's wholly owned subsidiary in charge of Toledo. Farris, Thomas and Norman Myers (BFI's chief marketing officer) served as the three corporate directors of this corporation. See Ex. 147.
7 It is likely that BFI's uneasiness about Toledo was not because of the results being achieved there. Clearly, BFI would have won the price competition had it continued (WMI was experiencing large losses and was desperate to "break even"). Ex. 54 at 56; Ex. 87 at 3. Rather it appears more likely that BFI's concern was with not disturbing the entente in other areas of the country.
8 In a recent deposition in another action in which BFI's anticompetitive conduct is in issue, Mooney admitted under oath that he spoke with Yeager and discussed the situation between BFI and WMI in Toledo. See Ex. 59 at 40.
9 Richard Evenhouse was indeed a friend of Ranck's who Ranck "worked with in other areas" and "could be trusted." In the mid-1970's Eenhouse had worked for BFI and reported to Ranck. Ex. 92 at 40-41, 44; Ex. 90 at 193, 251. Evenhouse subsequently left BFI and ultimately worked for WMI. Ex. 90 at 251-52; see also Ex. 91, Ex. 92 at 82. Over the years, Ranck and Evenhouse kept in contact. In addition, despite Ranck's testimony that he telephoned Evenhouse only one time, Evenhouse admitted that Ranck called him numerous times. Ex. 90 at 195; Ex. 92 at 94. Further, Evenhouse phoned Ranck on numerous occasions. Ex. 93.
10 Ranck was deliberate in his effort to conceal the fact of this particular meeting. He made sure that he did not write down the Evenhouse meeting in his Daytimer—where he normally records each and every one of his meetings and appointments. He did, however, in late January 1981 write the code word "Leslie" net to a phone number in the book. Leslie, it turns out, was Evenhouse's secretary; the telephone number was Evenhouse's. Ex. 94; Ex. 90 at 73-4, 223-25; See also Ex. 93.
11 Yeager had been instructed by Charles Mooney of BFI's headquarters to tape his phone calls. Yeager followed Mooney's advice and recorded this critical conversation with Evenhouse.
12 Ranck stated that the purpose of the meeting was to discuss Evenhouse's interest in BFI's rights under a landfill lease. At his deposition, however, Ranck admitted that he had never seen the lease and had no familiarity with any of the terms of the lease. Moreover, John Layman, the BFI landfill manager who would have had specific knowledge of the pertinent terms of the lease, and who was located in Detroit, was not at the meeting. Ex. 90 at 195-208, 258-259.
13 At his deposition, Ranck initially denied knowledge of such meetings; however, after being shown his prior testimony to the contrary, he admitted the same.
14 Indeed, at the time of the Detroit price fixing, George Farris (BFI's CEO), Stephen L. Thomas (BFI's vice president, operations administration), John Drury (BFI's President and CEO) and Howard S. Hoover (BFI's senior vice president and general counsel) served as vice presidents of BFI industries of Detroit, Inc., BFI's wholly owned subsidiary in charge of Detroit. Farris, Thomas and Norman Myers (BFI's chief marketing officer) served as the three corporate directors of this corporation. See Ex. 147.
15 At the time of the anticompetitive activity in Kansas City, George Farris (BFI's CEO), Stephen L. Thomas (BFI's vice president, operations administration), John Drury (BFI's President and CEO) and Howard S. Hoover (BFI's senior vice president and general counsel) served as vice presidents of BFI Industries of Kansas City, inc., BFI's wholly owned subsidiary in charge of Kansas City. Farris, Thomas and Myers served as the three corporate directors of this corporation. See Ex. 147.
16 This document was obtained by Canadian governmental authorities from BFI's office in Winnipeg. The document, which directly concerns price-fixing within the United States, clearly should have been—but was not—produced by BFI in this litigation.
17 An indictment brought by the Canadian Government for price fixing against BFI and the others was subsequently dismissed because the Canadian Combines Act did not at that time prohibit the price fixing of "services" as opposed to "goods", and BFI successfully argued that the price fixing was of a "service" (By contrast, the Sherman antitrust Act covers the price fixing of both goods and services). In addition, although BFI and its two co-conspirators controlled 95% of the commercial market, they successfully argued that the "residential" services provided by the City of Winnipeg had to be taken into account and their market share proportionately decreased. The Sherman Antitrust act has no requirement for showing monopoly market share by price fixers.
18 At the time of the anticompetitive activity in Pittsburgh, George Farris (BFI's CEO), Stephen L. Thomas (BFI's vice president, operations administration), Drury (BFI's President and CEO) and Howard S. Hoover (BFI's senior vice president and general counsel) served as Vice President of BFI Industries of Pennsylvania, Inc., BFI's wholly owned subsidiary in charge of Pittsburgh. Farris, Thomas and Myers served as the three corporate directors of this corporation. See Ex. 147.
19 This fact was learned through a deposition summary of the deposition of Carol Mazzaro Nicoletti taken in Chambers v. BFI, Civil No. 83-2384 (W.D.Pa.), deposition of 3/17/86 at pp. 1916-17. Plaintiffs have not yet received this transcript. Throughout this litigation, BFI strenuously resisted producing those transcripts. Plaintiffs have petitioned the court in Pittsburgh to have them released, which motion is currently pending.
20 Plaintiffs have not yet been supplied with Mr. Curtis' letter to Myers of April 29, 1979, quoted above and marked as Exhibit 9 to this Beck deposition.
21 Plaintiffs have not yet been supplied the transcript documenting this. See footnote on p. 58 supra, no. 19.
22 In a submission to the United States Senate, the New Jersey Division of Criminal Justice has also documented substantial involvement of organized crime in the waste disposal industry. Ex. 185.
23 at the time this plan was implemented, George Farris (BFI's CFO), Stephen L. Thomas (BFI's vice president, operations administration), John Drury (BFI's President and CEO) and Howard S. Hoover (BFI's senior vice pr4sident and general counsel) served as Vice President of BFI Industries of Vermont, Inc., BFI's wholly owned subsidiary in charge of Vermont. Harry Phillips, Sr. (Chairman and CEO of BFI) served as President of this corporation. Farris, Thomas and Myers served as the three corporate directors of this corporation. See Ex. 147.
24 Indeed, at the time of the anticompetitive activity in Chicago, George Farris (BFI's CEO), Stephen L. Thomas (BFI's vice president, operations administration), John Drury (BFI's President and CEO) and Howard S. Hoover (BFI's senior vice president and general counsel) served as Vice President of BFI Industries of Illinois, Inc., BFI's wholly owned subsidiary in charge of Chicago. Farris, Thomas and Myers served as the three corporate directors of this corporation. See Ex. 147.
25 Again, at the time of this activity, George Farris (BFI's CFO), Stephen L. Thomas (BFI's vice president, operations administration) and Howard S. Hoover (BFI's senior vice president and general counsel) served as Vice President of BFI Industries of Buffalo, Inc., BFI's wholly owned subsidiary in charge of Buffalo. Farris,, Thomas and Myers served as the three corporate directors of this corporation. See Ex. 147.
26 See Defendants' Memorandum In Opposition to Plaintiffs' Consolidated Motion For Class Action Certification at 8.
27 This is the same Mr. Montfort who has represented to the Court that: "all pricing of BFI's waste collection services is done strictly on a local level;" "the day-to-day management of the districts is carved our in a highly decentralized manner;" "the Houston Sales Department of BFI "has nothing to do with pricing;" and has "virtually no direct responsibility for what are traditionally viewed as marketing and sales functions." See Montfort Affidavit, ¶¶3, 6, 8 and 25 (emphasis added).
28 Correspondingly, the evidence shows that WMI headquarters executives also spoke in terms of nationally mandated and budgeted price increases, in identical amounts in every part of the country, thereby further discrediting defendants' argument that their pricing is too locally controlled to support the inference of an effective national conspiracy.
29 In re Petroleum Products Antitrust Litigation, [Current] Trade Cas. (CCH) ¶69, 066 at 63, 862 (ith Cir., June 22, 1990); Apex Oil Co. v. DiMauro, supra, 822 F.2d 246 (2nd Cir.), cert. denied, 484 U.S. 977 (1987); Transnor (Bermuda) Limited v. B P. North American Petroleum, [Current] Trade Cas. (CCH) ¶68, 998 at 63, 463-64 (S.D.N.Y. 1990); Minpeco, S.A. v. conticommodity Services, Inc., et al., 673 F. Supp. 684, 699 (S.D.N.Y. 1987). See also DeLong Equipment Co. v. Washington Mills Abrasive Co., [1989-2] Trade Cas. (CCH) ¶68,844 at 62,438 (11th Cir. 1989) (each reversing the entry of summary judgment in Section 1 conspiracy cases, distinguishing Matsushita).
30 Accord Apex Oil Co. v. DiMauro, supra, 822 F.2d at 252-53. ("[summary judgment] should not be regarded as a substitute for trial. . . . [W]hile some assessing of the evidence is necessary in order to determine rationally what inferences are reasonable and therefore permissible, it is evident that the question of what weight should be assigned to competing permissible inferences remains within the province of the fact-finder at a trial.").
31 See generally In re Plywood Antitrust Litigation, 655 F.2d 627, 634 (5th Cir. 1981), cert. dismissed, 462 U.S. 1125 (1983); Bogosian v. Gulf Oil Corp., 561 F.2d 434, 446 (3d Cir. 1977) cert. denied, 434 U.S. 1086 (1978); Precision Piping & Instruments, Inc. v. E.I. DuPont DeNemours & Co., 707 F. Supp. 225, 229 (S.D. W. Va. 1989).
32 Accord Brav v. Safeway Stores, Inc., et al., [1975-1] Trade Cas. (CCH) ¶60,193 at 65,657 (N.D. Cal. 1975) (sustaining sufficiency of evidence of a price-fixing agreement based, inter alia, upon evidence of trade association meetings involving executives of the alleged co-conspirators, nothing that since there was opportunity to discuss the object of an antitrust conspiracy at a trade association meeting, "the jury could have reasonably concluded that, by a preponderance of the evidence the. . . [trade association] was, o could have been, a vehicle through which the conspiracy was nurtured and implemented.") Id. at 65,663. The court so ruled, despite the fact that "there was no direct evidence of anything illegal having transpired at the meeting." Id. at 65,662. Accord Standard Oil Co. v. Moore, 251 F.2d 188, 209 (9th Cir. 1957), cert. denied, 356 U.S. 975 (1958); C-O-Two fire Equipment co. v. United States, 197 F.2d 489, 493 (9th Cir. 1952); Precision Piping & Instruments, Inc. v. E.I. DuPont De Nemours & Co., supra, 707 F. Supp. at 229; James Jullian, Inc. v. Raytheon Co., 557 F. Supp. 1058, 1065 (D. Del. 1983); Vandervelde v. Put and Call Brokers and Dealers' Ass'n, 344 F. Supp. 118, 155 (S.D.N.Y. 1972).
33 Defendants' attempt, at p. 16 of their brief, to minimize the significance of these opportunity contacts in the context of this case is unavailing, as the cases they cite involve factual scenarios that are demonstrably distinguishable from those presented herein. For example, in International Distribution Centers, Inc. v. Walsh Trucking, 812 F.2d 786 (2d Cir.), cert. denied, 482 U.S. 915 (1987), the court directed the entry of j.n.o.v. in a Section 1 conspiracy case where "[a] careful search of the record reveals no evidence of . . . anticompetitive conduct." 812 f.2d at 794. (emphasis added). The court understandably concluded that, under such circumstances (which are not presented herein) opportunity contacts, standing alone were insufficient to infer the existence of a conspiracy among the defendants. Here, unlike in Walsh Trucking, the record is replete with evidence of anticompetitive conduct.
Similarly distinguishable in Souza v. Estate of Bishop, 821 f.2d 1332, 1335 (9th Cir. 1987), where the court held that four meetings attended by certain of the defendants (in May 1946, May 1954, September 1955, and August 1967) were insufficient, in and of themselves, to raise a genuine question of fact as to whether all of the defendants engaged in a Section 1 conspiracy to restrict the sale of residential lots in Hawaii. here, of course, plaintiffs are not relying upon four isolated meetings beginning over 40 years ago. moreover, plaintiffs herein do not contend, as the defendants contended in Souza, that isolated and sporadic interfirm communications, standing alone, are sufficient to raise a genuine issue of fact regarding the existence of a conspiracy. Here, the executive level interfirm communications were continuous and ongoing.
34 In view of the foregoing, BFI went to extraordinary lengths to prevent plaintiffs from receiving the transcripts of the Chambers litigation, beginning with briefs to the Special master in the spring of 1989, continuing with a series of lengthy letters to the Special Master in the fall and winter of 1989, and culminating in briefs to this Honorable Court in the winter and spring of 1990.
35 Although the government agreed not to prosecute BFI employees for antitrust violations in Toledo during the period covered by the indictment, the government specifically reserved the right to prosecute BFI employees for the crime of perjury, 18 U.S.C. § 1621.
* (Note in original text of this document,
these footnotes appear on the page where the reference was placed -- as
is standard in legal filings).