The Tenth Circuit faced two issues on appeal in the criminal market allocation indictment in the Heir Locators case. The first issue was whether the district court properly dismissed the indictment on statute of limitations grounds? The second questions was, if the case was not properly dismissed, did the district court err in ruling that the government would have to proceed with the prosecution under the Rule of Reason? The Court found that the prosecution was not barred by the statute of limitations, but that it did not have jurisdiction to hear the appeal of the rule of reason opinion. TenthCircuitkempruling
A full exposition of the facts can be found in the indictment, Judge Sam’s Memorandum Decision and Order, the government’s opening brief in the Tenth Circuit, and the defendants’ response. But in short, the relevant facts are these:
- There was a written allocation agreement between competing heir location service companies to divide certain customers.
- On July 30, 2008, defendant Mannix wrote to Kemp & Associates colleagues in an email: “The ‘formal’ agreement that we have had with [Blake & Blake] for the last decade is over.”
- There were in fact no other heirs allocated after July 30, 2008.
- Payments made by previously allocated customers, however, occurred within the Sherman Act five-year statute of limitations period preceding the indictment.
See, Cartel Capers post of February 21, 2018, Was Heir Locator’s Indictment a Hair Too Late?
From that Blog post:
“In our opinion the [district court] judge was grasping at straws to distinguish (and extinguish) this case from Evans to avoid application of the payments theory. Payments by allocated heir locator customers seem like payments made on rigged contracts…. [T]here was simply no record for the judge to base a finding that the payments made and accepted by defendants and their co-conspirators within the statute were merely administrative tasks that “bore no relation to customer allocation.”
The Tenth Circuit agreed:
“Despite Defendants’ assertions to the contrary, Evans controls the outcome of this appeal. In holding that the conspiracy there continued so long as the firms received payments on the unlawfully obtained contracts, we adopted the Eighth Circuit’s holding that a “Sherman Act violation [is] ‘accomplished both by the submission of noncompetitive bids, and by the request for and receipt of payments at anti-competitive levels.’” Evans, 839 F.2d at 661 (quoting United States v. N. Improvement Co., 814 F.2d 540, 543 n.2 (8th Cir. 1987)).”
The Tenth Circuit applied blackletter statute of limitation law in finding the case should not have been dismissed on statute of limitations grounds: “When the two firms distributed money amongst each other pursuant to the terms of the alleged agreement after 2011, they committed overt acts in furtherance of the alleged conspiracy within the limitations period.”
District Court’s Appliacation of the Rule Of Reason
Since the indictment was not dismissed, the Tenth Circuit turned to the district court’s holding that the case would be tried, if tried at all, under the rule of reason. The Tenth Circuit punted on this question, finding that it did not have jurisdiction to consider the ruling:
“With an eye toward liberal construction, we have held that some orders having the practical effect of dismissing an indictment, even if they do not formally do so, are appealable pursuant to §3731. See, e.g., United States v. Bergman, 746 F.3d 1128, 1131 (10th Cir. 2014) (“[D]istrict court actions and orders, bearing the practical effect of dismissing an indictment are subject to appeal under §3731 even if they do not formally ‘dismiss’ an indictment or happen to be labeled that way.”). The Government argues this is such a case. We are not so persuaded.”
The Court found that no matter how sincere the Government was in asserting that it would not try the case under the rule of reason as a matter of policy as set forth in the U.S. Dep’t. of Justice, Antitrust Division Manual, at III-12 (5th Ed. 2018), “as the Government itself acknowledges, that is simply a matter of prosecutorial discretion.”
The Antitrust Division may elect to proceed with the indictment and try to change the district court’s mind on the rule of reason. While the Tenth Circuit did not reach the question of whether the per se rule, not the rule of reason should apply, the Court of Appeals made it pretty clear they thought the district court ruling was wrong: “To be sure, were the merits of the rule of reason order before us we might very well reach a different conclusion than did the district court.” After citing many cases applying the per se rule to similar facts, the Tenth Circuit concluded: “For these reasons, given the further exposition of these issues that occurred in front of this Court, it is possible the district court may decide to reassess its rule of reason order on remand.”
The Antitrust Division could ask for reconsideration of the rule of reason ruling and then dismiss the case if unsuccessful in persuading the district court in changing his mind. Another course of action, to borrow a line from Monty Python, would be to “Run Away.” This is a relatively insignificant case, the district court judge is clearly hostile to the prosecution, and the facts are a bit different (though not in a dispositive way) from a typical per se agreement. The risk/reward of pursuing this case tilts strongly towards “Run Away!”
PS. A blog is not a great place to discuss complicated constitutional issues, but a quick thought is that I think a criminal Sherman Act rule of reason prosecution would be unconstitutionally vague:
Compare: “[T]he terms of a penal statute […] must be sufficiently explicit to inform those who are subject to it what conduct on their part will render them liable to its penalties… and a statute which either forbids or requires the doing of an act in terms so vague that men of common intelligence must necessarily guess at its meaning and differ as to its application violates the first essential of due process of law.” Connally v. General Construction Co., 269 U.S. 385, 391 (1926)
With (the jury charge in a “criminal” rule of reason case):
“Under this rule, the factfinder weighs all of the circumstances of a case [after the fact] in deciding whether a restrictive practice should be prohibited as imposing an unreasonable restraint on competition.” Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 49 (1977).
The per se rule was developed by the Supreme Court to provide the bright line rule of what conduct can result in criminal charges. The rule of reason gives an ever shifting line based on a wide ranging historical study of an industry. The Supreme Court has said that “problem presented by the language of [section] 1 of the Sherman Act is that it cannot mean what it says” National Soc’y of Prof. Engineers v. United States, 435 U.S. 679, 687 (1978). Not a great basis for a criminal statute. The per se rule helps.
Thanks for reading
Bob Connolly firstname.lastname@example.org