Opinion
No. X06-CV04-4008409 S
August 23, 2006
MEMORANDUM OF DECISION
The plaintiff Bridgeport Harbour Place I, LLC, has filed this action to recover damages for violation of the Connecticut Antitrust Act, General Statutes § 35-24 et seq, against the city of Bridgeport, Joseph P. Ganim, its former mayor, and fourteen others, alleging that the defendants conspired by means of bribery and other corrupt acts to cause the plaintiff to lose the opportunity to develop waterfront property in Bridgeport, known as Steel Point, for a project called Bridgeport Harbour Place. The defendants Charles J. Willinger, Jr., and Willinger, Willinger Bucci, P.C. (Willinger defendants) have filed a motion to strike the complaint on the grounds that their activities in connection with the municipal development project are entitled to immunity from antitrust liability pursuant to General Statutes § 35-31b. In addition, the Willinger defendants together with the defendants Joseph P. Ganim, Joseph Kasper, Alfred Lenoci, Sr., Michael Schinella, United Properties, Ltd., Crescent Avenue Development Co., LLC, Alfred Lenoci, Jr., and United Environmental Redevelopment have moved to strike the complaint for failing to state a legally sufficient antitrust claim.
The law governing the court's consideration of a motion to strike is well established. "The purpose of a motion to strike is to contest the legal sufficiency of the allegations of any complaint to state a claim upon which relief can be granted. In ruling on a motion to strike, the court is limited to the facts alleged in the complaint. The court must construe the facts in the complaint most favorably to the plaintiff." (Citations and internal quotation marks omitted.) Novametrix Medical Systems v. BOC Group, Inc., 224 Conn. 210, 214 (1992). "It is fundamental that in determining the sufficiency of a complaint challenged by a defendant's motion to strike, all well-pleaded facts and those facts necessarily implied from the allegations are taken as admitted." Suffield Devel. Assoc. L.P. v. National Loan Inv., 64 Conn.App. 192, 197 (2001). "The role of the trial court is to examine the complaint, construed in favor of the plaintiffs, to determine whether the pleading party has stated a legally sufficient cause of action." Dodd v. Middlesex Mutual Assurance Company, 242 Conn. 375, 378 (1997).
The plaintiff's complaint alleges the following facts. On October 9, 1997, the plaintiff was chosen by the city of Bridgeport as the developer of a deteriorated section of waterfront property, known as Steel Point. During the development of the project, the defendant Joseph P. Ganim, the mayor of Bridgeport, was involved with various defendants, including the Willinger defendants, Lenoci Sr., Lenoci Jr. and Schinella, in a massive conspiracy to illegally profit from city contracts through the payment of kickbacks, bribes and illegal payments. The plaintiff alleges that the defendants successfully blocked plaintiff's attempts to develop Steel Point by various corrupt and illegal means, including by imposing unreasonable and arbitrary demands, by improperly diverting project funds and by withholding information, in order to steal the development rights for their own benefit.
I
The Willinger defendants first assert that their actions with respect to the development of the Steel Point property by the city of Bridgeport are immune from antitrust liability pursuant to General Statutes § 35-31b. General Statutes § 35-31(b) provides that the requirements of the state antitrust statute do not apply to actions directed or required by state or federal statutes. It states that: "Nothing contained in this chapter shall apply to those activities of any person when said activity is specifically directed or required by a statute of this state, or of the United States." The Willinger defendants contend that, because General Statutes § 7-483(b) authorizes a municipality to enter into contracts for the development of properties upon any terms and conditions it deems reasonable, their actions related to the Steel Point development project were specifically directed or required by statute and therefore immune from antitrust liability. I do not agree.
General Statutes § 7-483(b) authorizes municipalities "[t]o construct, reconstruct, rehabilitate, improve, alter, equip, maintain or repair or provide for the construction, reconstruction, improvement, alteration, equipment or maintenance or repair of any development property and let, award and enter into construction contracts, purchase orders and other contracts with respect thereto upon such terms and conditions as the municipality shall determine to be reasonable, including but not limited to reimbursement for the planning, designing, financing, construction, reconstruction, improvement, equipping, furnishing, operation and maintenance of any such development property and the settlement of any claims arising therefrom and the establishment and maintenance of reserve funds with respect to the financing of such development property."
This issue is controlled by our Supreme Court's decision in Miller's Pond Co., LLC v. New London, 273 Conn. 786 (2005). In CT Page 15339 Miller's Pond Co., LLC, the court rejected a claim by the defendants town of Waterford, city of New London and their respective water pollution control authorities that their activities regarding the plaintiff's development of a privately owned man-made lake were immune pursuant to § 35-31(b) from liability for violations of the state Antitrust Act because of the comprehensive statutory and regulatory scheme governing municipal water companies and municipal water supply systems. The Supreme Court, relying on the language of § 35-31(b) which exempts from liability only those activities "specifically directed or required by a statute," held that "§ 35-31(b) immunity from antitrust liability will attach only if the statute under which protection is sought speaks directly to the challenged conduct." Miller's Pond Co., LLC v. New London, supra, 273 Conn. 825. The court found that, because the facts proffered by the plaintiff "allege anticompetitive conduct well beyond the pale of the statutes," the defendants' actions did not qualify for immunity under § 35-31(b). Id., 832.
The same is true here. The plaintiff in this case alleges that the Willinger defendants were part of an illegal conspiracy involving bribery and kickbacks. The plaintiff specifically alleges that the Willinger defendants were hired by Bridgeport to represent Bridgeport in the Steel Point project and, in their capacity as attorneys for Bridgeport, they interfered with the plaintiff's development rights by imposing unreasonable and improper conditions and requirements on the plaintiff's development plans, by failing to disclose appropriate information and by causing delays in order to facilitate the award of the development rights to persons or entities who would make illegal payments to Mayor Ganim. These facts extend well beyond any conduct authorized by § 7-483(b) which merely authorizes municipalities to construct and rehabilitate development property and to enter into development contracts upon such terms and conditions as the municipality shall determine to be reasonable. Accordingly, the conduct of the Willinger defendants alleged by the plaintiff in its complaint is not cloaked with immunity from a claim of antitrust violations.
II
The Willinger defendants and the defendants Joseph P. Ganim, Joseph Kasper, Alfred Lenoci, Sr., Michael Schinella, United Properties, Ltd., Crescent Avenue Development Co., LLC, Alfred Lenoci, Jr., and United Environmental Redevelopment have moved to strike the complaint for failing to state a legally sufficient antitrust claim. Specifically, the defendants assert that the plaintiff has failed to allege any "antitrust injury," that is, the plaintiff has not alleged facts which demonstrate that the defendants' actions have had an actual adverse effect on competition as a whole in the relevant market. The plaintiff contends that it has appropriately alleged an antitrust injury. The plaintiff further asserts that it has alleged in its complaint unlawful price discrimination in violation of General Statutes § 35-45, which does not require a showing of a competitive injury. I agree with the defendants that the plaintiff has failed to allege facts sufficient to establish a violation of the Connecticut Antitrust Act.
The plaintiff asserts that it has alleged in its complaint an unlawful restraint of trade in violation of General Statutes §§ 35-26, 35-27 and 35-28. The legislative history of the Connecticut Antitrust Act clearly establishes that it was intentionally patterned after the antitrust law of the federal government. Vacco v. Microsoft Corp., 260 Conn. 59, 72 (2002). In fact, the General Assembly amended the Antitrust Act in 1992 to make explicit its intent that the judiciary shall interpret the Connecticut Antitrust Act in accordance with the federal courts' interpretation of federal antitrust law. See General Statutes § 35-44b ("It is the intent of the General Assembly that in construing sections 35-24 to 35-46, inclusive, the courts of this state shall be guided by interpretations given by the federal courts to federal antitrust statutes.").
Section 35-26 provides that "Every contract, combination, or conspiracy in restraint of any part of trade or commerce is unlawful."
Section 35-27 provides that "Every contract, combination, or conspiracy to monopolize, or attempt to monopolize, or monopolization of any part of trade or commerce is unlawful."
Section 35-28 provides that "Without limiting section 35-26, every contract, combination, or conspiracy is unlawful when the same are for the purpose, or have the effect of: (a) Fixing, controlling, or maintaining prices, rates, quotations, or fees in any part of trade or commerce; (b) fixing, controlling, maintaining, limiting, or discontinuing the production, manufacture, mining, sale, or supply of any part of trade or commerce; (c) allocating or dividing customers or markets, either functional or geographical, in any part of trade or commerce; or (d) refusing to deal, or coercing, persuading, or inducing third parties to refuse to deal with another person."
The plaintiff seeks treble damages for the alleged antitrust violations pursuant to General Statutes § 35-35 Section 35-35 is modeled after Section 4 of the Clayton Act, 15 U.S.C. § 15. Vacco v. Microsoft Corp., supra, 260 Conn. 65. To recover damages under Section 4 of the Clayton Act, a plaintiff must prove the existence of "antitrust injury, which is to say injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants' acts unlawful." Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 334 (1990). An antitrust injury must also be shown to establish a violation of either Section 1 or Section 2 of the Sherman Antitrust Act. George Haug Co., Inc. v. Rolls Royce Motor Cars, Inc., 148 F.3d 136, 139 (2d Cir. 1998). The requirement that a plaintiff demonstrate that it has suffered antitrust injury exists notwithstanding a claim that the defendants' conduct constitutes a per se violation of the antitrust act. Atlantic Richfield Co. v. USA Petroleum Co., supra, 495 U.S. 341-46. "The antitrust injury requirement obligates a plaintiff to demonstrate, as a threshold matter, that the challenged action has had an actual adverse effect on competition as a whole in the relevant market, to prove it has been harmed as an individual competitor will not suffice." (Emphasis in original.) (Internal quotation marks omitted.) George Haug Co., Inc. v. Rolls Royce Motor Cars, Inc., supra, 148 F.3d 139. Here, the plaintiff has not alleged any facts which establish an actual adverse effect on competition as a whole in the relevant market. All it has done is allege harm to itself through the loss of its right to develop the Steel Point property. While such claims may be sufficient to allege a business tort or breach of contract, they are insufficient to allege a violation of the antitrust act. See Comet Mechanical Contractors, Inc. v. E.A. Cowan Construction, Inc., 609 F.2d 404 (10th Cir. 1980) in which the court ruled that allegations that the plaintiff failed to secure a subcontract regarding the construction of two public buildings because it failed to provide a kickback to the Governor of Oklahoma were insufficient to state an antitrust violation. See also Federal Paper Board Company, Inc. v. Giacinto, 693 F.Sup. 1376, 1383 (D.Conn. 1988) in which the court held that allegations of commercial bribery were insufficient to establish an antitrust injury under the Sherman Act.
Section 35-35 states that "The state, or any person, including, but not limited to, a consumer, injured in its business or property by any violation of the provisions of this chapter shall recover treble damages, together with a reasonable attorneys fee and costs."
The plaintiff argues that it need do no more than allege the loss of its development rights because a government contract put out to bid for a particular project is itself a relevant market. The plaintiff cites as support for this proposition the case of Tower Air, Inc. v. Federal Express Corporation, 956 F.Sup. 270 (E.D.N.Y. 1996). Tower Air Inc. does not stand for so broad a proposition. In Tower Air, Inc., the plaintiff Tower Air, Inc. brought an action against the defendant Federal Express Corporation claiming violations of the Sherman Antitrust Act. The government contract at issue involved the congressionally established "Civil Reserve Air Fleet" or "CRAF Program" under which the Department of Defense could call upon private air carriers to supply aircraft resources in times of national emergency to augment existing military capabilities. Tower Air, Inc. and Federal Express entered into a complicated joint venture in order to participate in the CRAF program. In its lawsuit, Tower Air, Inc. claimed that Federal Express engaged in antitrust violations when it reneged on the terms of the joint venture. Pending before the court was Federal Express' motion for summary judgment. In support of its motion, Federal Express argued that a single government contract cannot create a market for antitrust purposes. The court rejected that argument and concluded that "The fact that the Government is the sole domestic purchaser and regulates this sale does not mean that no market exists." Id., 281. The court then determined that the existence of numerous disputed facts concerning the particular relevant market prevented it from entering summary judgment. Id. Contrary to the plaintiff's assertion, the court in Tower Air, Inc. did not hold that the government contract itself constituted the relevant market. Moreover, to the extent such a position can find support in the court's opinion, the unique government contract at issue in that case is readily distinguishable from the government contract at issue here. While one could argue that a government contract involving the provision of private aircraft to supplement military aircraft in times of national emergencies is sui generis and so unique as to constitute a market of its own, the same cannot be said of a municipal real estate development contract. The plaintiff further contends that it is not necessary for its complaint to contain allegations of antitrust injury because the plaintiff's complaint also alleges a violation of General Statutes § 35-45(a). As the defendants point out, however, any claim of a violation of § 35-45 founders on the shoals of the statute's requirement that a claim of price discrimination involve at least two contemporaneous sales to different purchasers.
Section 35-45(a) states in pertinent part that "No person engaged in commerce, in the course of such commerce, either directly or indirectly, shall discriminate in price between different purchasers of commodities of like grade and quality, where either or any of the purchases involved in such discrimination are in commerce, where such commodities are sold for use, consumption or resale within Connecticut; and where the effect of such discrimination may be to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them . . ."
Section 35-45 is modeled after Section 2(a) of the Clayton Act, as amended by the Robinson-Patman Act, 15 U.S.C § 13. Both statutes make it unlawful for any person engaged in commerce, in the course of such commerce, either directly or indirectly, to "discriminate in price between different purchasers of commodities of like grade and quality." The purpose of the Robinson-Patman Act was to curb and prohibit all devices by which large buyers gain discriminatory preferences over small ones by virtue of their greater purchasing power. FTC v. Henry Broch Co., 363 U.S. 166, 168 (1960). A claim of price discrimination in violation of the Robinson-Patman Act requires at least two transactions. Bruce's Juices, Inc. v. American Can Co., 330 U.S. 743, 755 (1947). The statute has been further interpreted to require contemporaneous sales to different purchasers. Rutledge v. Electric Hose Rubber Co. 327 F.Sup. 1267, 1275 (C.D.Cal. 1971), aff'd, 511 F.2d 668 (9th Cir. 1975). See also 4 J. von Kalinowski, Antitrust Laws and Trade Regulation § 24.03 (2d Ed. 1996) (Section 2(a) of the Robinson-Patman Act will not apply unless there are at least two sales transactions and the sales are contemporaneous).
Here, the plaintiff in its complaint has failed to allege two contemporaneous sales involving differing prices. Rather, the plaintiff has merely alleged that the defendants interfered with its attempts to develop the Steel Point property because it refused to participate in a scheme to pay bribes and kickbacks to the Mayor. Such allegations are insufficient to constitute a claim of price discrimination in violation of General Statutes § 35-45.
In light of the above, the defendants' motions to strike the plaintiff's complaint are hereby granted.