CHRISTENSEN, District Judge.
The plaintiff, a mechanical specialty contractor,
has sued the defendant, The Utah Mechanical Contractors Bid Depository,
for damages and injunctive relief in reliance upon the Sherman AntiTrust Act, 15 U.S.C. §§ 1, 2, and § 15. The members of the Depository comprise a majority of the mechanical contractors in the State of Utah, and receive most of the important mechanical contracts bid within the State. The controversy mainly involves the validity of rules under which general contractors obtain sub-bids through the Depository.
Detailed Findings of Fact and Conclusions of Law are being filed with this Memorandum Decision; they may be deemed supplemented by the views herein expressed. It is sufficient now to state only limited background for explanation and resolution of the legal questions presented.
The Depository was organized for the avowed purpose “to promote the principles of competitive free enterprise and
to eliminate as far as possible unfair bidding practices. * * * ” Among the practices against which relief was sought were those termed “bid shopping and bid peddling”. Members submitted their bids to general contractors through the Depository under regulations which were designed to discourage direct negotiations for lower prices. General contractors accepting bids through the Depository were required to let these mechanical subcontracts to Depository members.
The latter restrictive provisions incorporated by amendment on November 12, 1962, together with certain other supplementing provisions, were unacceptable to the plaintiff, who had theretofore been a member and officer of the Depository. Fie thereupon discontinued his affiliation and later sued for damages to his business as a mechanical contractor.
Plaintiff claims that the rules in question are in restraint of trade and tend to create a monopoly. He further asserts that the administration of the Depository has been arbitrary and unfair, that opportunity has been afforded for collusion between bidders, with the result that general contractors do not necessarily secure the benefit of the lowest bids; that mechanical contractors can determine in advance who is bidding a particular project and that they have opportunity to tamper with the price or rig their bids, and that other abuses beyond the purport of the rules of the Depository have been perpetrated.
I have concluded that the latter contentions have not been sufficiently sustained, beyond the purport and expressed intent of the formal Depository rules themselves, to establish Sherman Act liability.
In fact, in some respects the administration of the rules was businesslike, circumspect and considerate. Evidence of minor abuses was sufficient to-suggest that the Depository plan involved certain disadvantages even to members, and was to a degree ineffectual to curb-bid shopping and peddling, thus mitigating the necessity and reasonableness of the specific rules under attack. The rules themselves, however, constitute the agreement or combination in restraint, of trade or in furtherance of monopoly upon which liability, if it exists, primarily must be founded. To their specific provisions we now turn.
Under the rules and regulations of the defendant corporation, general contractors who desire mechanical bids from; the Depository are required to request such bids at least forty-eight hours prior to the time set for bid openings. Rule V further provided;
“It is to be explicitly understood that the depository will forward bids, to general contractors making request therefor with the understanding that the general contractor will use only bids thus received from the-depository in preparing his bid. * * *
>’
A form for required use by the general contractor in requesting bids from the Depository contains the following: undertaking:
“We are familiar with the depository rules numbers five, six and seven (as revised on November 12,.
1962) regarding the request for, and the acceptance of depository bids, and agree to comply therewith”.
The rules of the Depository further provide:
“Any member, after a hearing, and who has been found by a majority of the committee to have failed to comply with the rules and regulations of the depository, may be assessed a sum not to exceed $300.00 for each specific violation. Also, upon recommendation by the committee he may be suspended from the depository, and further membership denied. General contractors found to have been engaged in unfair bidding practices, or rules violations, may only upon recommendation by the committee, continue to use the services of the depository as long as they comply with the rules and regulations of the depository”.
Rule III provided as follows:
“All bids must be submitted on forms supplied by the depository. * * * It is the intent of the depository to provide complete mechanical quotations on all projects bid. Bid splitting such as plumbing only, heating only, etc. will not be acceptable”.
Rule VIII (of the revision) provides:
“After bids for a specific project have been opened, there shall be no further bidding on said project for a period of 90 days, by members who did not submit bids in the first instance, unless plans and specifications have been revised in an amount exceeding 25% of the value of work and materials shown on the original plans and specifications”.
Other provisions of the Depository rules are under attack. Apart from their support and implementation of Rules III, V and VIII quoted above, I do not think that they have exceptional antitrust implications. No ruling is made, however, as to their validity in other context.
I have concluded in view of established principles
that the three rules specifically referred to, representing as they do^ an agreement of the Depository with its members and the general contractors requesting Depository bids, implemented and activated, as the evidence shows they have been, by the concerted program of the Depository and its officers and committees, constitute a conspiratorial contract and combination in restraint of interstate commerce. They are thus proscribed by § 1 of the Sherman Act. I am also of the opinion that by means of the rules specifically referred to, the defendant corporation has attempted to monopolize, and has conspired with other persons to monopolize, a part of the commerce among the several states, contrary to § 2 of the Act.
The Depository argues that these restraints are reasonable and thus justified by a rule of reason.
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CHRISTENSEN, District Judge.
The plaintiff, a mechanical specialty contractor,
has sued the defendant, The Utah Mechanical Contractors Bid Depository,
for damages and injunctive relief in reliance upon the Sherman AntiTrust Act, 15 U.S.C. §§ 1, 2, and § 15. The members of the Depository comprise a majority of the mechanical contractors in the State of Utah, and receive most of the important mechanical contracts bid within the State. The controversy mainly involves the validity of rules under which general contractors obtain sub-bids through the Depository.
Detailed Findings of Fact and Conclusions of Law are being filed with this Memorandum Decision; they may be deemed supplemented by the views herein expressed. It is sufficient now to state only limited background for explanation and resolution of the legal questions presented.
The Depository was organized for the avowed purpose “to promote the principles of competitive free enterprise and
to eliminate as far as possible unfair bidding practices. * * * ” Among the practices against which relief was sought were those termed “bid shopping and bid peddling”. Members submitted their bids to general contractors through the Depository under regulations which were designed to discourage direct negotiations for lower prices. General contractors accepting bids through the Depository were required to let these mechanical subcontracts to Depository members.
The latter restrictive provisions incorporated by amendment on November 12, 1962, together with certain other supplementing provisions, were unacceptable to the plaintiff, who had theretofore been a member and officer of the Depository. Fie thereupon discontinued his affiliation and later sued for damages to his business as a mechanical contractor.
Plaintiff claims that the rules in question are in restraint of trade and tend to create a monopoly. He further asserts that the administration of the Depository has been arbitrary and unfair, that opportunity has been afforded for collusion between bidders, with the result that general contractors do not necessarily secure the benefit of the lowest bids; that mechanical contractors can determine in advance who is bidding a particular project and that they have opportunity to tamper with the price or rig their bids, and that other abuses beyond the purport of the rules of the Depository have been perpetrated.
I have concluded that the latter contentions have not been sufficiently sustained, beyond the purport and expressed intent of the formal Depository rules themselves, to establish Sherman Act liability.
In fact, in some respects the administration of the rules was businesslike, circumspect and considerate. Evidence of minor abuses was sufficient to-suggest that the Depository plan involved certain disadvantages even to members, and was to a degree ineffectual to curb-bid shopping and peddling, thus mitigating the necessity and reasonableness of the specific rules under attack. The rules themselves, however, constitute the agreement or combination in restraint, of trade or in furtherance of monopoly upon which liability, if it exists, primarily must be founded. To their specific provisions we now turn.
Under the rules and regulations of the defendant corporation, general contractors who desire mechanical bids from; the Depository are required to request such bids at least forty-eight hours prior to the time set for bid openings. Rule V further provided;
“It is to be explicitly understood that the depository will forward bids, to general contractors making request therefor with the understanding that the general contractor will use only bids thus received from the-depository in preparing his bid. * * *
>’
A form for required use by the general contractor in requesting bids from the Depository contains the following: undertaking:
“We are familiar with the depository rules numbers five, six and seven (as revised on November 12,.
1962) regarding the request for, and the acceptance of depository bids, and agree to comply therewith”.
The rules of the Depository further provide:
“Any member, after a hearing, and who has been found by a majority of the committee to have failed to comply with the rules and regulations of the depository, may be assessed a sum not to exceed $300.00 for each specific violation. Also, upon recommendation by the committee he may be suspended from the depository, and further membership denied. General contractors found to have been engaged in unfair bidding practices, or rules violations, may only upon recommendation by the committee, continue to use the services of the depository as long as they comply with the rules and regulations of the depository”.
Rule III provided as follows:
“All bids must be submitted on forms supplied by the depository. * * * It is the intent of the depository to provide complete mechanical quotations on all projects bid. Bid splitting such as plumbing only, heating only, etc. will not be acceptable”.
Rule VIII (of the revision) provides:
“After bids for a specific project have been opened, there shall be no further bidding on said project for a period of 90 days, by members who did not submit bids in the first instance, unless plans and specifications have been revised in an amount exceeding 25% of the value of work and materials shown on the original plans and specifications”.
Other provisions of the Depository rules are under attack. Apart from their support and implementation of Rules III, V and VIII quoted above, I do not think that they have exceptional antitrust implications. No ruling is made, however, as to their validity in other context.
I have concluded in view of established principles
that the three rules specifically referred to, representing as they do^ an agreement of the Depository with its members and the general contractors requesting Depository bids, implemented and activated, as the evidence shows they have been, by the concerted program of the Depository and its officers and committees, constitute a conspiratorial contract and combination in restraint of interstate commerce. They are thus proscribed by § 1 of the Sherman Act. I am also of the opinion that by means of the rules specifically referred to, the defendant corporation has attempted to monopolize, and has conspired with other persons to monopolize, a part of the commerce among the several states, contrary to § 2 of the Act.
The Depository argues that these restraints are reasonable and thus justified by a rule of reason.
I doubt that Rule V, as implemented by the required agreement on the part of general contractors bidding through the Depository, can be deemed anything but a per se vio
lation.
But standing alone, or in combination with the other provision of the integrated regulations, in my opinion this rule is restrictive of competition to an unreasonable degree and in an unreasonable manner.
The defendant corporation, we are told, was organized, and the regulations in •question were designed, to cope with the “evils of bid shopping and bid peddling”. These practices may be somewhat uncertain in definition
and the opprobrium they bear in the contracting fraternity and elsewhere may be excessive in substance
in view of basic competitive realities and standards.
Nonetheless, sound systems of competitive bidding no doubt are entitled to reasonable protection as a part of ordered competition. The difficulty in defendant’s position is that even though the integrity of its bidding system were in practice assured by its rules and regulations, the system itself would still be an exclusionary one, resulting not primarily in the protection of competition but in its restraint.
The rules tend to compel general contractors to affiliate with the Depository because of economic pressure in obtaining representative bids and to boycott subcontractors not bidding through the Bid Depository. They further encourage mechanical subcontractors bidding through the Bid Depository to boycott general contractors who do not sign the Depository agreement. Also, they tend to limit and narrow the freedom of the general contractor to select his mechanical subcontractors. They preclude the subcontractors who have not submitted bids through the Bid Depository from submitting bids to those general contractors who sign a Depository agreement.
Infractions of the Depository rules and regulations were to be submitted to a Fair Practice Committee composed of
members of the corporation. Members were subject to fine, probation or expulsion from membership for violations. Infraction of the rules by a general contractor entailed possible disciplinary action by the Fair Practice Committee, notice of the infraction to be sent to the membership. This procedure has operated in the past, and is designed to operate essentially, as an implied blacklist, fostering boycott.
The defendant points out that the restrictive form of Rule Y was changed in April, 1963, so as not to preclude the letting of bids to non-depository members by general contractors initially requesting bids through the Depository. However, the evidence demonstrates, and I so find, that the Depository continued to carry out the original intent of Rule V, and that there was no actual abandonment of the conspiratorial agreement in this respect.
Indeed, continued observance of at least the spirt of Rule V seems the sine qua non of defendant’s entire method and justification of controlling bidding through the Depository in an endeavor to “eliminate bid peddling and shopping”.
The proscription of bid splitting in the context of the other controls, was a further restriction upon the essential free
dom of competition. Mechanical contractors in a position to advantageously bid on one line could not do so because of the enforced tying arrangement imposed, not at the request of the general contractors soliciting the bids, but at the insistence of the Depository. A mechanical contractor operating under this rule was required to submit his bid covering all of the mechanical work even though part of it was outside the field in which he normally operated and in which he could most efficiently perform. The record indicates that this restriction has now been abandoned.
The prohibition of further bidding on a project for a period of ninety days by a member who does not submit bids in the first instance, unless plans and specifications have been revised in an amount exceeding twenty-five percent of the value of the work and materials shown on the original plans and specifications is a further competitive control not reasonably justified. Manifestly if the basic control of the Depository were to be accepted, some of the implementing features would be helpful. However, this provision does not seem to me to be inherently reasonable.
Even a reasonable implementation of unreasonable controls cannot be reasonably justified.
Even though improper bid practices had developed in the industry, the situation would not justify the defendant company and its members in combining together to regulate and restrain interstate commerce in violation of federal law for the purpose of combat-ting recognized evils. Fashion Originators’ Guild v. Federal Trade Com’n, supra. Good intent in and of itself is no defense to an unreasonable combination or conspiracy in restraint of trade. United States v. New Orleans Insurance Exchange, D.C.E.D.La., 148 F.Supp. 915 (1957). The notion has long been dispelled that restrictive by-laws should be treated as beyond the reach of the Sherman Act upon the claim of freedom of association. Associated Press v. United States, supra. The attempted elimination of what a trade association may justly regard as a trade abuse or an unfair practice cannot place an association in a preferred position with respect to unlawful agreements or combinations in restraint of trade.
Were the latter propositions not valid, the thousands of active trade associations throughout the country could virtually ingest, absorb and eliminate the antitrust laws of the United States in their otherwise laudible programs of trade protection and industrial reform.
If the dangers of bid splitting and shopping are so serious as to commend a departure from the policy of the Sherman Act, Congress should authorize the exception. Thus far, although related proposals have been under study for several years, it has not done so. Under existing law there
are, of course, even some immediately salutary objects which trade associations are not empowered to achieve and some means which they, in common with less formal combinations, may not utilize.
Various restrictive provisions for the promotion of common interests of association members and to regulate the conduct of their businesses have been upheld in the past as reasonable. Anderson v. U. S., 171 U.S. 604, 19 S.Ct. 50, 43 L.Ed. 300 (1898); Appalachian Coals v. United States, 288 U.S. 344, 53 S.Ct. 471, 77 L.Ed. 825 (1933); Board of Trade of City of Chicago v. United States, supra; United States v. Bakersfield Associated Plumbing Contractors, D.C.S.D.Cal.1958 (1958 Trade Cases ¶ 69,087 and 1959 Trade Cases ¶ 69,266).
The Supreme Court decisions last cited are not deemed controlling because of somewhat different states of fact
and because of later qualification of their doctrine implicit in Fashion Originators’ Guild v. Federal Trade Com’n, supra. Prohibitions against bid splitting and rebidding were disapproved in United States v. Bakersfield Associated Plumbing Contractors, supra, and with this I agree. On the other hand, a rule somewhat resembling Rule V was approved. While the reasons do not clearly appear from the decision, there apparently were some significant differences which deprive the conclusions in the California decision of persuasive force here.
The plaintiff enjoyed prior to the adoption of Rule V, a substantial part
of the business awarded through the Depository on equal terms with other mechanical contractors. Because of his unwillingness to identify himself with the Depository following the adoption of Rule V, he was substantially excluded from the opportunity of competing in the business bid through the Depository by general contractors, who in turn were required generally to give their business to members of the Depository. In one sense the impact — and an adverse one— upon his business cannot be denied. But the proof in my judgment is insufficient to authorize the award of damages for general loss of profits. While it tended to establish, and I have found, that he would have made approximately $15,000 more through bids submitted through the Depository had it not been for the restrictive effect against his business of Rule V, yet the evidence also demonstrates that in the non-depository segment of the market in which he came to specialize, other competition was lessened through the operation of Rule V.
I cannot accept the theory of the defendant, assumed in Professor Randa’s economic testimony, that plaintiff should be permitted to recover the general profits which he would have received through Depository bidding had he not been excluded therefrom with no consideration being given to increased profits obtained through non-depository bidding. His operations in both areas were integrated and commingled. It was established from plaintiff’s income tax returns that his net earnings from mechanical specialty work during 1962 greatly exceeded his net income for the years 1960 and 1961 when the Depository was not in existence. The evidence further indicated that during the period Rule V was in effect plaintiff received a higher percentage of the total contracts awarded to Depository and non-depository bidders than he received during the eleven months of 1962 before Rule V was adopted. Plaintiff declined to give any estimate as to his income for 1963 (audited figures not being complete at the time of trial) but he did testify that according to his records he had his fair share of bids for 1963, “not in the Bid Depository, but all of the jobs”.
Notwithstanding the proper liberality of the rule on proof of damages in antitrust cases when the fact of damage has been established, Bigelow v. RKO Radio Pictures, 327 U.S. 251, 66 S.Ct. 574, 90 L.Ed. 652 (1946) ; Kobe, Inc. v. Dempsey Pump Co., 10th Cir., 198 F.2d 416 (1952), there is no room here for the application of that rule. One having a right of action for injury to his business or property cannot recover unless it is shown that as a result of defendant’s acts damages in some amount susceptible of expression in figures resulted; damages must be proved by facts from which their existence is logically and legally inferrable, and cannot be supplied by conjecture. Keogh v. Chicago & N. W. Ry. Co., 260 U.S. 156, 43 S.Ct. 47, 67 L.Ed. 183 (1922). Damages to one’s business or property from violations of the Sherman Act constitute the measure of any recovery, and the mere amount of illegal exactions does not establish pecuniary loss to a business or property when counterveiling elements are present. Clark Oil Co. v. Phillips Petroleum Co., D.C.D.Minn., 56 F. Supp. 569 (1944); aff’d, 8th Cir., 148 F.2d 580 (1945).
But as to special damages resulting from the application of Rule V, I have concluded that the preponderance of the evidence has established that plain
tiff was unlawfully deprived of the mechanical contract for the Salt Lake City Library because he was not a member of the Depository and because in the implementation of Rule V the defendant brought pressure to bear upon Culp Construction Company to award the contract to a Depository member. I have further concluded that while the proof was not sufficient to authorize the award of damages for general loss of profits, recovery may be had for this special injury. The line between these classes of recovery may be fine, but to disregard it I believe would not be in recognition of any essential or sound rule on damages but in unwarranted minimization of the policy of Congress for enforcement aid through private suits. Cf. Osborn v. Sinclair Refining Company, 4th Cir., 324 F.2d 566 (1963), cert. dnd. 366 U.S. 963, 81 S.Ct. 1924, 6 L.Ed. 1255. Here the damage was proximate and direct, its impact elearcut, its effect non-speculative and its amount clearly provable. Nor is there any offsetting factors which are not themselves speculative or conjectural in contrast.
The plaintiff was the low bidder on the mechanical contract for the Salt Lake City Library. Culp Construction Company used plaintiff’s bid in preparing its general bid to the owner. The bid solicited from the defendant Bid Depository and from the plaintiff on the Salt Lake City Library by Culp Construction Company called for a bid on the sprinkling system in connection with the plumbing, heating and air conditioning systems. Justin White, an officer of the defendant Bid Depository, with the assistance and cooperation of other officers of the defendant, split his bid on the Salt Lake City Library in such a manner as to withdraw the bid on the sprinkling system portion and to arrange for Culp Construction Company to contract directly for such sprinkling system work with the Southwest Fire and Protection Company so as to reduce the remaining portion of Justin White’s bid below that of plaintiff.
It is true that plaintiff is in a position to object neither to the failure of the Depository to insist that bids be not split, nor to the splitting of the bid by White, for the regulation prohibiting bid splitting has been determined to be invalid. But this gambit does not avoid the fact that Culp awarded the contract to White as the proximate result of Rule V and the pressure brought to bear by officers and members of the Depository and certain general contractors upon Culp to refrain from awarding the bid to a non-depository member in violation of the rule.
Whether a conspiratorial agreement, or some other factor, was the proximate cause of the loss of this business is a question of fact for a determination from a preponderance of the evidence. Story Parchment Co. v. Patterson Parchment Paper Company et al., 282 U.S. 555, 51 S.Ct. 248, 75 L.Ed. 544 (1931). I have found that the combination bid of the plaintiff on the library job, which was invited in such combination by the Culp Construction Company, and which was submitted in combination by the plaintiff, would have been accepted had it not been for the enforcement of Rule V by the Depository, its officers, agents and others acting in concert with them. White’s maneuver with respect to the splitting of his bid, again in an effort to implement the restrictions against non-depository bidders, does not alter the situation, for this was made effective by bringing in a new subcontractor after the bids were opened, and would not have been determinative had it not been for Rule V.
Culp’s testimony that without reference to Rule V he probably would have awarded the bid to White as the low bidder after the sprinkling schedule was eliminated, is not persuasive in view of the circumstances of the transaction and his other testimony.
There is no merit in defendant’s argument that plaintiff is barred from recovery by reason of discriminating quotations to other bidders. It is true that Culp, originally a party defendant in this suit, was dismissed upon his contention that a recovery by plaintiff in effect would have amounted to the enforcement of a violation of the RobinsonPatman Act in that a company controlled by plaintiff gave plaintiff a quotation on the sprinkling system, incorporated in his bid, which was less than those given to White and other mechanical specialty bidders. Whether that ruling was right or wrong, I find nothing either in the proof or the argument now before me which indicates that the doctrine of Kentucky Rural Elec. Coop. Corp. v. Moloney Elec. Co., 6th Cir., 282 F.2d 481 (1960), could apply to Christiansen’s claim against the Depository. The connection between the quotations of plaintiff’s separate company and the defendant is remote rather than direct; we are concerned with sub-bids for labor and services in reference to a sprinkler system which possibly are not even touched by the Robinson-Patman Act, much less being within the rationale of the Kentucky Rural Electric case, supra; and any possible tenuous or indirect implications in this connection must yield to redress for the clear, direct impact of the established Sherman Act violation. See Bruce’s Juices v. American Can Co., 330 U.S. 743, 67 S.Ct. 1015, 91 L.Ed. 1219 (1947).
Plaintiff claims that he was deprived of $33,250 in anticipated profits as a result of being deprived of the library job. I cannot accept this figure. It is based upon a profit factor included in plaintiff’s initial bid as a mere hope, includes items of overhead, and disregards the data in evidence indicating a net profit of substantially less in actual practice.
Using a factor based more nearly upon plaintiff’s probable net profits from actual operations, I have found his damages to be $20,000, to be trebled in accordance with the statute. I have further concluded that the plaintiff is entitled to be awarded his reasonable counsel fees and expenses and appropriate injunctive relief, which will be fixed and determined at the time the form of judgment is settled.