UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
|
JAMES KELLY LAMBERT, ET AL. |
CIVIL ACTION NO. 05-5931 |
|
VERSUS |
SECTION: T (PORTEOUS) MAGISTRATE 4 (ROBY) |
|
Board of CommissionERs of the Orleans Levee
District, ET AL. |
PLAINTIFF’S POST-STATUS CONFERENCE MEMORANDUM
MAY IT PLEASE THE COURT:
I.
INTRODUCTION
The deposition testimony and documentary evidence, detailed hereinafter, prove a conspiracy to monopolize the relevant market of the OLD marinas (Orleans and Southshore) by an exclusive agreement in violation of Louisiana public bid laws and Sections 1 and of the Sherman Act and its Louisiana equivalent, first with Marine Recovery and Salvage (“MRS”) and then, when MRS could not provide salvage services, with Resolve Marine Group (“Resolve”). Resolve then supplanted MRS by direct and dishonest dealings with the Orleans Levee District. The result of this conspiracy, which was enforced by the marina managers, the Levee Board Police and OLD security guards, all acting under color of law, was:
1. Monopolization of salvage services by Resolve,
2. Exclusion of other potential salvors such as Sea Tow,
3. Inclusion of Resolve’s privileged salvors such as St. Tammany/Pearl River, Guinn Bros, and Rose Towing, and
4. Salvage pricing at double the fair price or greater. These supracompetitive fees, which were received by Resolve, were then divided 50% to the outside salvors, such as Guinn, who actually did much of the work. Resolve, out of the fees for work that it did and out of its share of work done by its agents, made payments to OLD representatives to purchase exclusivity and cooperation.
The victims of these schemes, represented by the class representatives, were boat owners, insurers, and other salvors both for their own account, such as Scott, and, other entities, such as BoatUS and Sea Tow, for vessel owners which they had agreed by contract to provide salvage services.
II.
THE APPROPRIATENESS OF CERTIFICATION OF THE CLASS UNDER RULE 23 BECAUSE OF
ALLEGED ANTITRUST VIOLATIONS
A class action is considered a "particularly
appropriate" method for litigation of federal antitrust actions. In re
Carbon Black Antitrust Litig., No. 03-10191-DPW,
2005 U.S. Dist. LEXIS 660 (D. Mass. Jan. 18, 2005) at *44. The Supreme Court
has recognized that antitrust class actions play an important role in
enforcement of private antitrust laws. Reiter v. Sonotone
Corp., 442
A. The Requirements of Rule 23(b)(3) Are Met on the Issue of Predominance
The predominance requirement is readily met in
antitrust actions, like this one, involving a common course of anticompetitive
conduct. Amchem Products, Inc. v.
1. Common Proof of Antitrust violation – conspiracy scheme
Each class member, if pursuing its claims separately,
would have to prove identical issues pertaining to § 1 and § 2 violations of
the Sherman Act, e.g., that Defendants' conduct maintained monopoly power;
that Defendants' conduct substantially foreclosed competition; and that
Defendants' conspiracy occurred and unreasonably restrained trade. Each class
member would need to introduce precisely the same evidence and make the same
arguments to prove these claims whether there were several hundred separate
trials or one unified action. "under [] federal
[] law, the essential elements of a private antitrust action are the
same". Bell Atlantic Corp. v. AT& T Corp., 339
F.3d 294,302 (5th Cir. 2003); see e.g., In re Relafen Antitrust Litig., 221 F.R.D. 260, 276
(D. Mass. 2004); also Stephenson v. Bell Atlantic Corp., 177 F.R.D. 279,2 88 (D. N.J. 1997) ("Because each member
must make the same showing of anticompetitive conduct and monopolistic pricing
in order to prevail on her antitrust claims, the manner of proof will not vary,
and individual issues of fact and law do not predominate").
2. Class-Wide Common Evidence of the Existence of a Contract, Combination or Conspiracy:
Proof of the existence of a contract, combination or conspiracy would also be common to the class. The issue of whether Defendants engaged in a contract, combination or conspiracy will focus on Defendant’s conduct. See, e.g., In re Universal Servo Fund Tel. Billing Practices, 219 F.R.D. 661 (D. Kan. 2004) (proof of conspiracy is susceptible to generalized proof because the focus is on defendants' actions); In re Playmobil Antitrust Litig., 35 F. Supp.2d 231, 245 (E.D.N.Y. 1998) (existence of conspiracy would be proven by evidence common to the class); In re Catfish Antitrust Litig., 826 F. Supp. 1019, 1039 (N.D. Miss. 1993) (proof of conspiracy would be "pertinent and common to all plaintiffs." The inquiry focuses on the existence of Resolve's contracts with OLD, through MRS and would not involve any individual questions relating to any class members.
B. Class-Wide Damage and Numerosity/Adequacy Requirements Are Met
1. Numerosity:
The numerosity requirement
is easily satisfied here. "Exact figures ... of course, are not needed to
satisfy rule 23(a)(I)," Screws, 91 F.R.D. at 55,13 and under Rule 23(a)(l),"[i]mpossibility of joinder is not
required. Extreme difficulty or impracticability of joinder is sufficient."
Dale Electronics, Inc. v. R.C.L.
Electronics, Inc., 53 F.R.D. 531 (D. N.H. 1971) at 534. Courts have found that classes of
40 members, or even fewer, have satisfied the numerosity
requirement. "[C]ourts in this district have
noted that a 40 person class is 'generally found to establish numerosity.'" McLaughlin v.
As set forth hereinafter, more than a hundred people/owners complained to Leckey, Augustin, and Maureau that the prices that Resolve charged were too high and about everything related to the salvage of their vessels. Many people complained about improperly moving their vessels.
Rule 23(a) requires only that "there are
questions of law or fact common to the class."FED. R. CIV. P. 23(a)(2) (emphasis added). The commonality requirement has been
characterized as a "low hurdle." Swack v. Credit Suisse
First
The commonality requirement is easily met in an
antitrust case alleging monopolization or conspiracy. See, e.g.,
In an antitrust case, commonality is often established
on the issue of the violation alone. Here, all class members will necessarily
use the same evidence to prove the alleged conduct regarding the existence of a
conspiracy and the improper maintenance of a monopoly. See, e.g., In re Lupron Marketing & Sales Practices Litig., 228 F.R.D. 75 (D.
There are numerous common issues of law and fact, including whether:
(a) Resolve,
through MRS and OLD, obtained, maintained and/or
possessed market and/or monopoly power in the market for Salvage operation at
the
(b) Resolve, through MRS and OLD, obtained and/or maintained its market and/or monopoly power through willful, anticompetitive and/or unlawful activity;
(e) Resolve, through MRS and OLD, engaged in illegal agreements, contracts, combinations, and/or conspiracies, the purpose and effect of which was to unreasonably restrain competition in the Salvage operation at the Orleans and South Shore Marinas during and after Katrina; and
(d) Resolve' s illegal agreements, contracts, combinations, and/or conspiracies have caused Plaintiff and the members of the class to suffer antitrust injury.
In sum, the very nature of antitrust cases brought
under the Sherman Act has led courts routinely, and almost uniformly, to find
that commonality exists. See, e.g. Buspirone
Patent & Antitrust Litig., 210 F.R.D. 43 (S.D.N.Y. 2002) at 57;
2. Typicality
"[A] plaintiff s claim
is typical if it arises from the same event or practice or course of conduct
that gives rise to the claims of other class members, and if his or her claims
are based on the same legal theory." Carbon Black, 2005
Typicality is generally easily met in antitrust cases,
and is clearly met here. In re Sugar Industry Antitrust Litig., 73 F.R.D. 322,336 (E.D. Pa. 1976).
As the court stated in Priest v. Zayre,
118 F.R.D. 552, 555 (D. Mass. 1988):
[P]laintiffs need not show substantial identity between their claims and those of absent class members, but need only show that their claims arise from the same course of conduct that gave rise to the claims of the absent members.... The question is simply whether a named plaintiff, in presenting his case, will necessarily present the claims of the absent plaintiffs.
See also Swack v. Credit Suisse First Boston, 230 F.R.D. 250, 260 (D. Mass. 2005) (claims of class representatives do not have to be identical to absent class members' claims). In fact, "even relatively pronounced factual differences will generally not preclude a finding of typicality where there is a strong similarity of legal theories or where the claim arises from the same practice or course of conduct." Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154, 184 (3d Cir. 2001) (citations omitted). See also In re Warfarin Sodium Antitrust Litig., 391 F.3d 516,531-32 (3d Cir. 2004) ("typicality, as with commonality, does not require 'that all putative class members share identical claims"'); Rivera-Feliciano v. Acevedo-Vila, No. 05-1910, 2005 U.S. Dist. LEXIS 33781, *5 (D. P.R. Sep. 7,2005) (typicality requirement is met where plaintiff s claim "arises from the same practices by defendants based on the same legal theory with regard to others of the class members").
Further, varying purchasing practices of class members
do not hinder typicality. See In re Bulk Graphite Products Antitrust Litig., No.
02-6030, 2006 U.S. Dist. LEXIS 16619, *17-18 (D. N.J. April 4, 2006); In re
NASDAQ Market-Makers Antitrust Litig., 169 F.R.D. 493, 511 (S.D.N.Y. 1996)
(millions of class members who engaged in transactions regarding over 1600 different
securities). As the court in
The named class members' claims as well as the claims of the proposed classes, arise from the alleged price-fixing scheme perpetrated by defendants. The overarching scheme is the linchpin of plaintiffs' amended complaint, regardless of the product purchased, the market involved or the price ultimately paid. Furthermore, the various products purchased and the different amount of damage sustained by individual plaintiffs do not negate a fmding of typicality, provided the cause ofthose injuries arises from a common wrong.
Here, all class members' claims arise out of a common wrong: a core pattern of alleged anticompetitive conduct that would have similarly injured each of them by overcharging salvaging prices due to an exclusive dominant position. All class members seek to prove the same course of conduct and rely on the same legal theories to demonstrate that they paid artificially inflated prices. Therefore, the typicality requirement is clearly satisfied.
III.
THE ADDITIONAL INFORMATION GATHERED IN THE RECENT DISCOVERY SUPPORTS CLASS
CERTIFICATION
A. MRS Is Created by the Co-Conspirators to
Monopolize the Trade
and Commerce in Salvage at the Two OLD Marinas
Exclusive Authorization from OLD without Public Bid
On September 8, 2005, Scott Carmouche, then working as
a law clerk for his father[1] and
sharing his father’s residence[2] with OLD
President, Jim Huey, [3]
was introduced to Michael Mayer (Mayer Yachts) by Huey outside of their common
office building,[4]
where the idea of creating MRS was conceived. MRS was to receive a monopoly on salvage operations at the
marinas[5] in
violation of the
The importance of OLD’s authorization and color of law is demonstrated by the agreed split.[7] Despite his total lack of salvage experience, Scott Carmouche, as the “administrative officer,” was to get 70% and Michael Mayer, as the “logistics officer” only 30%.[8] Scott Carmouche’s legal research of on the same day on whether OLD had an obligation to clear the harbor and marina of sunken vessels in time of emergency was billed to OLD by his father.[9]
On September 9, MRS submitted a letter request[10] to OLD addressed to Max Hearn, Executive Director. By letter of September 12, MRS was exclusively authorized by OLD to conduct the salvage operations on its behalf.[11] Despite mandatory public bid laws, there was no public bid. This failure to publicly bid, defended by Louis Capo, then OLD internal auditor, because these were not normal times[12] does not explain giving an exclusive to a newly formed company with no experience, who could do nothing and who did nothing.
B. Nothing Good Was Done by MRS from September 12 Until September 29:
Scott Carmouche admittedly had no salvage experience,[13] but never told the representative of BoatUS that MRS was not prepared to do any salvage without the assistant of a major salvor.[14] From September 12 until Resolve came onsite, nothing was physically done by MRS[15] to perform salvage.[16] When tenants complained about MRS’s spray painting boats, OLD asked Scott Carmouche and MRS to post a message on OLD’s web site with pictures of boats and a notice to tenants explaining that MRS was the entity to deal with.[17]
C. Resolve, through MRS, Became the Exclusive Salvor and Completely Disregarded OLD’s Standard Salvor Policy Other Than Insurance:
When MRS realized it could not competently salvage vessels because of lack of experience and equipment and without informing OLD of this, [18] Scott Carmouche went on line to try to find a salvor that could do this large-scale salvage work[19] and contacted Resolve on September 22, 2005.[20] Resolve’s Farrell and Leckey[21] arrived on site the next day. MRS never informed the OLD that MRS was going to hire Resolve.[22]
Although no written authorization from OLD was ever issued for Resolve to do salvage work on behalf of MRS, the OLD marina staff were told by their superiors, either Huey or Hearn, that Resolve was authorized. The only evidence supporting this authorization was the September 12 letter to MRS.[23]
Under normal circumstances, according to Scott Carmouche, Resolve could have simply gone to OLD and asked for permission after providing proof of insurance. [24] Resolve did not because Resolve had to go through MRS, the holder of the exclusive from OLD to salvage vessels in the marinas, a dominant position.
Tim Erickson, Resolve’s co-project manager, [25] described the situation upon his arrival at Southshore and first meeting with Mayer as major chaos.[26] The only thing done by MRS, spray painting boats, demonstrated that MRS could not run a salvage operation. His thought was that Resolve was coming in to take over a salvage gone wrong.[27] Erickson recalls being told by Mayer that MRS (most likely Mayer Yacht personnel) used a wrecker, a terrible salvage technique.[28] In Erickson’s opinion, Mayer had overestimated his own experience/ability.[29]
The Court may be excused if it wonders how OLD, a fiduciary supposed to protect the interest of the public and its own tenants, could have authorized exclusivity to a company that not only was incapable of doing any salvage but was even damaging the boat of OLD tenants as per complaints reported by the marina managers to OLD Board members for several weeks in September of 2005.[30]
Leckey testified that Resolve made certain of MRS’s authority to hire Resolve and would not have entered into a contractual relationship with MRS if Resolve were not sure to be the only or the major salvor in the two marinas.[31] Leckey also testified that de facto, at least in Southshore, from the beginning of their agreement with MRS on September 29 through October 20, Resolve was the only salvor working on site.[32] His understanding was that Resolve had an exclusive right during that period at least at Southshore.[33]
D. OLD Imposed Its Choice on the Marina Staff:
According to Capo, “there was no contract between OLD and someone [Resolve]. That contract was never ratified.”[34] For him, it may not have seemed unreasonable at the that time for the Levee Board to five an exclusive salvage authority.[35]
Maureau never authorized Resolve, so that Resolve “is not working for the Levee District and that [the boat owners] should take it up with them.”[36] As he returned to the marinas on October 4, 2005 and had not been able to contact OLD for a long time, he was not consulted about the salvage operations by either Hearn or Huey.[37] When he arrived, he found out that that a salvage company he never heard of, Resolve, had taken over salvage operations[38] without being able to show any contract and/or authorization from the Levee Board.[39] Maureau was offended that MRS and Resolve were on site without his approval which is not the way OLD usually worked.[40]
As per the letters to tenants posted on the OLD web site and signed by marina management, salvage companies must comply with four requirements: 1) provide proof of insurance with OLD named as additional insured, 2) provide a list of vessels to be salvaged including the owner’s name with written authorization from the company insuring the vessel, 3) receipt of written authorization for OLD, 4) must schedule salvage operations with the marina manager.[41]
Neither MRS nor Resolve ever showed Maureau any authorization from the vessel owners prior to salvage operations although this was OLD policy.[42]
Although he constantly expressed his unhappiness to the Board[43] and requested that a contract be produced, Hearn showed him only the September 12, 2005 authorization from the OLD to MRS as a proof of Resolve’s right to be on site.[44] Hearn told Maureau that he “had no choice, of his letter.”[45] Hearn’s boss was the Board, whose president was Huey.
Maureau did not find it “unusual” that MRS was founded by Scott Carmouche as his father, George, was heavily involved with the Board: “the way the Board did business, they could do anything without a reason, without getting a competitive bid.”[46] Although Maureau presented himself as protective of the tenants’ rights, he never followed up on the tenants’ complaints concerning pricing, because there was nothing he could do about it.[47]
Despite this disregard of OLD policy and procedure, Maureau could not challenge the authority of the Board and so let Resolve continue to have access to the marinas and perform salvage.[48] There was never a discussion of the part that MRS would play as opposed to that of Resolve.[49]
E. Class-Wide Common Evidence of Substantial Foreclosure of Competition and/or Unreasonable restraint of Trade in the Relevant Market
1. OLD’s policy was to bar other salvors:
After the September 12 letter, the marina staff received instructions from the Board by telephone and/or this letter that MRS was the authorized salvor.[50] During her visit to the Baton Rouge OLD office marina manager, Beth Augustin, was personally advised by Huey which salvors to let in.[51] She was shown Hearn’s September 12 letter of authorization[52] without any explanation of who MRS was and whether it had salvage qualifications or expertise.[53] She was told that MRS was the only one authorized salvor, and this sole authorization continued.[54]
Augustin was subsequently
told by Jim Huey that she should turn away a salvage company whose barge was at
the Penick Dock in the
2. The only way for competitors to enter the market was to become a subcontractor to Resolve:
The only other salvage companies that entered the marinas[57] were Resolve subcontractors. According to Erickson, Resolve, at least at Southshore, [58] never had any competitors.[59] As to Orleans Marina, less devastated and thus less profitable in terms of salvage operations, but protected by an exclusive through MRS, Resolve hired St Tammany/Pearl River (who hired other subcontractors like Guinn Brothers,[60] Rose Towing, and Verizon Freight).[61]
Sea Tow, a competent and reputable salvage company[62] and a
well known national franchise that had previously salvaged vessels at both
marinas,[63]
applied for permission to conduct salvage operations at Southshore.
But only after negotiating and contracting with Resolve to pay Resolve prices
and use Resolve’s services were they able to remove boats from the marina[64]
although the marina manager, Bob Maureau, said that
Sea Tow would not have had any objection from him for authorization to salvage
boats on its own.[65] BoatUS was in a similar position.[66] Salvors
far more competent and experienced than MRS could not
enter the market except through MRS and Resolve with
financial compensation to them. When Erickson was asked if those salvors tried,
in order to avoid this dominant position, to move any of their assets into
3. MRS’ role is more than confusing in the scheme:
According to the MRS/Resolve contract, MRS was to arrange for and manage the storage of salvaged vessels at the Naval Reserve Station.”[69] According to OLD, although the lease on the Naval Reserve site was never ratified by OLD, MRS had de facto the authority until ratification.[70] This sole activity of MRS was pursuant to a lease that was repudiated and the lease payments returned.
Once Resolve began the salvage operations pursuant to the September 29, 2005 contract, MRS disappeared and did not even act as liaison with OLD.[71] When asked to explain how Resolve could have dealt with the OLD staff on site when MRS was the only salvor to be authorized by OLD, Erickson, once again, invoked the Fifth Amendment.[72] Erickson invoked the Fifth Amendment eleven times during his deposition, inter alia, as to discussions with Maureau about events in the marinas, Resolve’s exclusive right at the marinas, and the relationship with MRS.[73]
4. Missing discovery relevant to the certification of the class:
The computer used by Augustin and her paper files[74] contained much information on the class showing the description of the salvaged boats,[75] when boats were salvaged and the salvors who submitted their insurance documents,[76] any instructions to OLD in that regard.[77] This computer is supposedly located at the Orleans Marina[78] but Augustin, nor Maureau, nor anybody from OLD has been able to produce it. These files did not get water damaged.[79] According to Maureau, Augustin’s computer may have been picked up by the “OLD people”.[80]
F. Common Proof of Anti-Trust
Injury or Impact –
Resolve Pricing: “they could charge what they pleased.”[81]
Fact of antitrust injury, or impact, will also involve
predominantly class-wide proof. Proof of antitrust impact, or "fact of
damage," requires a showing of some loss in business or property due to a
defendant's antitrust violations. See Zenith Radio Corp. v. Hazeltine Research, 395
Resolve would charge more money if the boat is a valuable boat and their risk where the boat can be further damaged because Resolve:
at the end of it, when they’re looking at this and they’re watching us what we do, once again, if we destroy or we do something to that boat, that guy is going to get a lawyer and they’re going to come back and sue me for their damage probably that we did to that boat. That’s why we charge more money.[82]
Erickson, on behalf of Resolve, negotiated 90 percent of the contracts with the boat owners and insurance agents.[83] He testified that the laptop which contained all of the information pertaining to the salvage contracts crashed and invoked the fifth as to any other document/media with any of that information.[84]
As negotiated with MRS, Resolve charged a different price for under and over twenty six feet and a different price for in the water and for in the parking lot but revised their pricing as the insurance companies did not like the idea of a lump sum per foot.[85] Resolve charged the insurance companies a higher price than the boat owners who did not have insurance.[86] The range of prices were $150 per foot from below 25 feet and $200 a foot over. Some prices were $250 a foot and $350 a foot.[87] But Resolve often deviated from those range of prices because certain insurance companies which refused to pay a lump sum. But instead of discounting these prices, Resolve admitted that, at the end, they charged them more with the additional costs that are not included in a lump sum.[88]
Shortly after their meeting with George Carmouche, representing MRS, the USBoat representative and his counsel also complained to MRS about the high prices. Scott Carmouche answered that his source on which he relied to publish the price rates was Mayer and Resolve.[89] Other than reference to Resolve, Scott Carmouche never checked if these prices were fair market or national fair market prices and never investigated further.[90]
The subcontractors, such as Guinn, performed the salvage work for 50% of the amount charged by Resolve.[91] Had outside salvors been allowed on premises, it may be assumed that they would have charged a similar amount. This was also the experience of the plaintiffs.
CONCLUSION
As may be seen from the foregoing, plaintiffs have overwhelmingly demonstrated compliance with Rule 23(a) as well as 23(b)(3) for the damage class. The declaratory action class adequately meets the requirements of Rule 23(b)(2). The motion should be granted. In like manner, there is no basis for denying the filing of the currently proposed complaint, which combines, consolidates, and simplifies all of the allegations of prior complaints and bring the complaint up to the discovery.
/s/Adam S. Lambert
ADAM S.
LAMBERT (#25134)
Tel.: (504) 433-0289
Fax: (504) 433-0840
Email: LSULawyer@aol.com
Co-Counsel for the plaintiff
AND
KOERNER LAW FIRM
/s/Louis R. Koerner, Jr.
Louis R. Koerner, Jr.
Louisiana Bar 7817
Telephone:
985-580-0350
Telecopier:
985-580-0980
(Cellular)
985-232-7547
e-mail:
koerner@koerner-law.com
URL:
http:/www.koerner-law.com
CERTIFICATE
I hereby certify that a copy of the foregoing pleading has been served upon all interested counsel by ECF filing on March 20, 2008. All counsel who are not CM/ECF participants will be served a true and complete copy of the foregoing via U.S. Mail.
/s/Louis
R. Koerner, Jr.
Louis R. Koerner, Jr.
EXHIBITS
|
Ex. |
Description |
Date |
|
A |
George Carmouche spreadsheet to OLD |
09/30/05 |
|
B |
Letter from MRS to OLD |
09/09/05 |
|
C |
Letter from OLD to MRS |
12/09/05 |
|
D |
Notice to |
21/09/05 |
|
E |
Guinn Brothers responses to Plaintiffs’ notice of deposition for documents only |
02/27/08 |
|
F |
Agreement and amended agreement between MRS and Resolve |
09/29/05 and 10/06/05 |