United States v. Kemp & Assocs., Inc.
Opinion
*1268
It is axiomatic that federal courts are courts of limited jurisdiction.
See, e.g.
,
Dutcher v. Matheson
,
This appeal presents a clean lesson in the import of such jurisdictional restraint. Of the two questions presented for our review, the first-whether the district court correctly dismissed the criminal indictment at issue as falling outside the applicable statute of limitations-lies cleanly within our jurisdiction granted by
Therefore, while we hold that the indictment here was timely, we also find that we do not have jurisdiction over the district court's rule of reason order, and that mandamus is inappropriate in this circumstance. Therefore we REVERSE the district court's dismissal of the indictment, DISMISS the government's appeal from the rule of reason order for lack of appellate jurisdiction and REMAND for further proceedings consistent with this opinion.
I. BACKGROUND
In reviewing the district court's decision to dismiss the indictment on statute of limitations grounds, "[w]e test the indictment solely on the basis of the allegations made on its face, and such allegations are to be taken as true."
United States v. Reitmeyer
,
On August 17, 2016, a federal grand jury in Utah returned a single count indictment against Kemp & Associates, Inc. ("Kemp") and its Vice President/COO Daniel Mannix (collectively, "Defendants") for knowingly entering into a combination and conspiracy in violation of the Sherman Act. Aplt. App. 16-21 ("Indictment") ¶¶ 1, 2, 8-10. Kemp is an "Heir Location Service," a term used to describe companies that "identify heirs to estates of intestate decedents and, in exchange for a contingency fee, develop evidence and prove heirs' claims to an inheritance in probate court." Id. ¶ 6.
While many intestate estates become the subject of only a single Heir Location Service inquiry, sometimes more than one Heir Location Service begins searching for *1269 the same heirs. In such cases, it is possible that a single potential heir will be contacted by, and receive offers from, more than one competing Heir Location Service. When that happens, the services may "distinguish their offers from those of competitors by offering more attractive contingency fee rates." Id. ¶ 7. In this way, while a niche community, the Heir Location Services industry operates just like any other. When a single firm is vying for a potential client's business, the bounds of its offer are determined only by the price the customer is willing to pay for the service. But where more than one firm seeks a single client's business, then supply, in addition to demand, influences the price ultimately paid by the customer.
In this criminal case the Government alleges that at some point before January 29, 2014, Defendants "knowingly entered into and engaged in a combination and conspiracy with Richard A. Blake, Jr., [a competitor Heir Location Service] and other unindicted co-conspirators to suppress and eliminate competition by agreeing to allocate customers of Heir Location Services sold in the United States." Id. ¶ 9. Under this agreement, when the two companies both contacted a potential heir, "the co-conspirator company that first contacted that heir would be allocated certain remaining heirs to that estate who had yet to sign a contract with an Heir Location Services provider." Id. ¶ 12(b). In return, the company to which heirs were allocated "would pay to the other co-conspirator company a portion of the contingency fees ultimately collected from those allocated heirs." Id. ¶ 11(c). The Government alleges that, in furtherance of this scheme, Defendants "made payments to the co-conspirator company, and received payments from the co-conspirator company, in order to effectuate this agreement." Id. ¶ 11(f). Based on an email from Mannix to other Kemp employees, Defendants claim that any "formal" agreement between the alleged co-conspirators ended sometime before July 30, 2008. Aplt. App. at 219.
In front of the district court, Defendants moved for an order that the antitrust case would proceed pursuant to the rule of reason, as opposed to the per se rule, and to dismiss the indictment. As to the former, the Defendants acknowledged that customer allocation agreements are generally analyzed under the per se rule, but nonetheless they argued that "in the atypical context of the heir location business the [agreement] is far from an ordinary customer allocation, and instead bears more in common with joint ventures analyzed under the rule of reason[.]" Id. at 167.
As to the statute of limitations, Defendants noted that the limitations period for criminal violations of the Sherman Act is five years, and they argued that the indictment was thus untimely because any agreement between the alleged co-conspirators ended prior to Mannix's email in July of 2008, whereas the charging Indictment wasn't returned until August 17, 2016, and served on defendants on September 1, 2016. Defendants did acknowledge, however, that "for some of the estates subject to the [agreement], certain administration work continued into the five-year period prior to the Indictment, including the recovery of money for heirs, and the payment of the firms themselves." Aplt. App. at 194. Mr. Mannix's counsel echoed this language at oral argument, and went even further to note that the two firms made payments to each other as contemplated by the agreement within the statutory period.
The district court held a hearing on the two motions, and at the conclusion orally granted Defendants' motion for the case to be subject to the rule of reason. The Government subsequently filed a motion to reconsider, as well as a request for a ruling on the motion to dismiss. After that *1270 motion was fully briefed, the court issued the rulings relevant on appeal.
First, the district court adopted without edit Defendants' proposed order regarding the rule of reason. Aplt. App. at 133-36 ("the rule of reason order"). The court also simultaneously issued a longer memorandum decision and order that briefly referenced its rule of reason order, but primarily granted Defendants' motion to dismiss on the grounds that the alleged agreement ended in 2008, and so the 2016 indictment fell outside the five-year limitations window. Aplt. App. at 137-43 ("Dist. Ct. Order") at 3.
The Government timely appealed both orders. Recognizing that our appellate jurisdiction was questionable as to the rule of reason order, the government asked that if we determine we do not have appellate jurisdiction over that order that we "treat the relevant parts of [its] brief as a petition for a writ of mandamus." Aplt. Br. at 12.
II. DISCUSSION
A. Statute of Limitations
We turn first to the district court's order dismissing the indictment as barred by the statute of limitations.
The single charge in this indictment, charging a violation of
When reviewing the scope of the conspiracy at the Motion to Dismiss stage we are bound by the language of the indictment.
United States v. Qayyum
,
The operative question here, then, is whether, on the face of the indictment we can conclude that no overt acts in furtherance of the scope of the alleged conspiracy occurred after August 17, 2011.
1
In granting the Motion to Dismiss, the district court concluded that the purpose of the alleged conspiracy ended in 2008 "when the [agreement was] terminated and all that remained were administrative
*1271
issues related to resolving the estates and payments resulting therefrom." Dist. Ct. Order at 4. In reaching this conclusion, the court relied on language from the indictment stating the purpose of the conspiracy was "to suppress and eliminate competition by agreeing to allocate customers of Heir Location Services sold in the United States."
In so holding, the district court rejected the Government's argument that one object of the conspiracy was "economic enrichment."
Id.
at 5. This theory, according to the court, "confuses the results of a conspiracy with the actual conduct in furtherance of it[,]"
id.
, and if adopted would extend the statute of limitations "indefinitely[,] beyond the period when the unique threats to society posed by a conspiracy are present."
Id.
(quoting
United States v. Doherty
,
We do not agree, however, that the indictment precludes the argument that economic enrichment was an object of the agreement. The obvious reason that two firms would suppress and eliminate competition by agreeing to allocate customers would be to reap the economic benefits of such efficiency. See Indictment ¶ 9. The alleged customer allocation was not an end unto itself, but rather a means to reducing overhead and increasing profit, particularly by giving the conspirators power to charge higher contingency fees unhindered by the competition that allegedly ensues when two Heir Location Services firms contact the same heir. See id. ¶ 7.
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
,
That is exactly what the indictment alleges occurred here. Just as multiple companies in Evans decided which would receive a government contract, here the co-conspirators allegedly decided which would receive the business of unallocated heirs. And similarly to how the conspiracy in Evans continued so long as the "winner" of the rigged contract received payments on that contract, so too did the alleged conspiracy continue here so long as the co-conspirators were receiving and distributing contingency fees among the conspirators on the allocated estates. Because Defendants acknowledge that "ordinary, lawful payments made and administrative tasks undertaken as a result of a prior agreement" occurred within the limitations window, the indictment was not time-barred. See Aple. Br. at 23. 2
Defendants' attempts to distinguish Evans are unpersuasive. Their position amounts to the ipse dixit that while the " central objective" of the agreement in Evans was the distribution of the proceeds earned from the rigged contract, "the 'societal danger' targeted by the Indictment *1272 [here] was the 'suppress[ion] and eliminat[ion] [of] competition by agreeing to allocate customers of Heir Location Services.' " Aple. Br. at 24-25 (quoting Indictment ¶ 9). The missing link in this syllogism is that this elimination of competition allows for the Defendants to charge higher contingency fees unencumbered by a competitive bidding process.
Furthermore, the Indictment alleges on its face that as part of the unlawful agreement the companies agreed "that the co-conspirator company to which heirs were allocated would pay to the other co-conspirator company a portion of the contingency fees ultimately collected from those allocated heirs." Indictment ¶ 11(c). The Indictment further alleges that these payments between the companies actually occurred. Id. ¶ 11(f).
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. Regardless of how narrow one wants to define the scope of the alleged conspiracy, that scope would certainly include the distribution of funds acquired by one firm pursuant to a non-competitive process and distributed to the other in exchange for not having submitted a bid for the estate in question.
Accordingly, the August 17, 2016, indictment was not barred by the statute of limitations. The district court order dismissing the Indictment on statute of limitations grounds is REVERSED.
B. Jurisdiction over the Rule-of-Reason Order
We next turn to the district court's rule of reason order. While the text of the Sherman Act could perhaps be interpreted to proscribe all contracts, the Supreme Court has "repeated time and again that § 1 'outlaw[s] only unreasonable restraints' " of trade.
Leegin Creative Leather Prods., Inc. v. PSKS, Inc.
,
Notwithstanding this general rule, there are "certain agreements or practices which because of their pernicious effect on competition and lack of any redeeming virtue are conclusively presumed to be unreasonable and therefore illegal without elaborate inquiry as to the precise harm they have caused or the business excuse for their use."
Northern Pac. Ry. Co. v. United States
,
"Per se liability is reserved for only those agreements that are 'so plainly anticompetitive that no elaborate study of the industry is needed to establish their illegality.' "
Texaco Inc. v. Dagher
,
It is undisputed that "an agreement to allocate or divide customers between competitors within the same horizontal market, constitutes a per se violation of § 1 of the Sherman Act."
United States v. Suntar Roofing, Inc.
,
The district court here concluded that, notwithstanding the labels used by the government in the Indictment, the per se rule did not apply to the conduct alleged in this case. The court based its ruling on the facts that the alleged agreement was (1) "structured in an unusual way," (2) "affected a small number of estates," and (3) "occurred in a relatively obscure industry (heir location services) with an unusual manner of operation." Aplt. App. at 135. Ultimately, the court concluded that because the agreement applied "only where two firms had already invested significant resources investigating the same estate," and "provided for firms to integrate their efforts going forward, specifically in administering the probate process of the estate, which needed to be done only once," the agreement "on [its] face would not necessarily restrict competition or decrease output, but instead contained efficiency-enhancing potential."
Id.
at 135. The Government contends this was error under our precedents, specifically
Suntar
,
Before we can assess this issue, however, we must first satisfy ourselves that we have appellate jurisdiction to review this order. In criminal cases, the government is denied the right of appeal absent express statutory authority to do so,
*1274
United States v. Hines
,
Relevant to this case, that section authorizes the government to appeal "from a decision, judgment, or order of a district court dismissing an indictment or information or granting a new trial after verdict or judgment ... except that no appeal shall lie where the double jeopardy clause of the United States Constitution prohibits further prosecution."
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
,
The key difference between
Bergman
and the present case is in the conclusiveness of the connection between the relevant orders and the "practical effect" of dismissal. In
Bergman
, the order appealed was one "denying a new trial date" after the government's previous conviction of a defendant had been reversed.
In the case before us, the sole charge in the Indictment, a criminal conspiracy in violation of § 1 of the Sherman Act, remains actionable and immediately triable following the district court's order. Unlike in
Bergman
, the Government here may have the case set for trial. The only effect of the order is to foreclose the Government's
preferred
avenue for trying the case, instead requiring the Government to prove its case under the rule of reason. This preference, even when strongly held, does not rise to the level of being "tantamount" to dismissal in the same way the order in
Bergman
foreclosed the possibility of ever presenting the charges to a jury.
See
Bergman
,
Practically, the Government's preference to proceed under a per se rule is not just strongly held, it is a matter of institutional decree. The current version of the United States Attorney's Antitrust Manual states that "current [Antitrust] Division policy is to proceed by criminal investigation and prosecution in cases involving horizontal, per se unlawful agreements[.]" U.S. Dep't of Justice, Antitrust Div., Antitrust Division Manual, at III-12 (5th Ed. 2018). And the Government indicated before the district court that "[t]he United States has long eschewed prosecuting conduct subject to the rule of reason, and it has no interest in doing so here." Aplt. App. at 249.
But, as the Government itself acknowledges, that is simply a matter of prosecutorial discretion. That the Government avers it will not proceed with an action given a preliminary order about how the case may proceed-regardless how sincere that
*1275
averment is-does not mean dismissal is a "necessary result" of the targeted order.
See
Carroll v. United States
,
United States v. Lavallee
,
The Government's last volley is that its allegation of a per se violation is a "discrete theory of liability," and that the dismissal of such a theory is appealable under § 3731. Aplt. Br. at 50; Reply Br. 29-30. But as the Supreme Court has noted, "per se and rule-of-reason analysis are but two methods of determining whether a restraint is 'unreasonable,'
i.e.
, whether its anticompetitive effects outweigh its procompetitive effects."
Atlantic Richfield Co. v. USA Petroleum Co.
,
We are sympathetic to the Government's position. Based on its longstanding practice of not pursuing criminal antitrust prosecutions under a rule of reason analysis, this order may have the practical effect of dismissing this case unless the government chooses to depart from its position of declining to prosecute this release under a rule of reason approach.
But government appeals of interlocutory orders in criminal cases often tread into thorny constitutional areas. For this reason *1276 one leading treatise cautions that interlocutory appeals from non-final decisions "will remain rare in light of the generally strict enforcement of the perception that the policies of finality weigh with special force against allowing interlocutory appeals by the government in criminal cases." 15B Charles Alan Wright, Arthur P. Miller & Edward H. Cooper, Fed. Prac. & Proc. § 3919.4, at 636-37 (2d ed. 2018).
Accordingly, we hold that the district court's rule of reason order does not fall within our interlocutory appellate jurisdiction to review.
C. Mandamus over the Rule of Reason Order
Cognizant that we might so hold, the Government asks us to interpret its brief, in the alternative, as a petition for a writ of mandamus. At the outset we note that a writ of mandamus is an "extraordinary remedy," and is "not a substitute for an appeal."
In re Cooper Tire & Rubber Co.
,
The second approach we have used involves five "nonconclusive guidelines." Id.
(1) whether the party has alternative means to secure relief; (2) whether the party will be damaged in a way not correctable on appeal; (3) whether the district court's order constitutes an abuse of discretion; (4) whether the order represents an often repeated error and manifests a persistent disregard of federal rules; and (5) whether the order raises new and important problems or issues of law of the first impression.
In re Qwest Commc'ns
,
While we may have used both approaches in isolation in the past, they unfold similarly in practice. Furthermore, they are best understood as providing an analytical framework which guides our assessment of whether a given case calls for the extraordinary remedy of a writ of mandamus.
Turning to the first "condition," from In re Cooper , which largely tracks the first two guidelines from In re Qwest , we are persuaded that the Government has no further grounds for relief. First and foremost, the Government has represented both to us and to the district court that it intends to follow the guidance contained in the U.S. Attorney's Antitrust Manual which instructs that antitrust prosecution of claims such as this one is only appropriate when the alleged restraint is governed by the per se rule.
The other mandamus conditions and guidelines, however, do not militate so cleanly in favor of issuing the writ. Under
In re Cooper
, the petitioner's right to the writ must be "clear and indisputable."
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 all, "an agreement to allocate or divide customers between competitors within the same horizontal market, constitutes a per se violation of § 1 of the Sherman Act,"
Suntar Roofing, Inc.
,
Nor does the Heir Location Services industry appear to be as
sui generis
as Defendants would have us believe. The gravamen of the indictment is that prior to the agreement an heir could be contacted by two companies, who would then compete for the heir's business by offering lower contingency fees. After the agreement, the companies would no longer have to compete for these heirs, thereby erasing the incentive to reduce their fees. It seems, then, that this is largely indistinguishable from a traditional customer allocation agreement, which can and does appear in many iterations custom tailored to the industry involved.
See
Topco
,
Defendants argue that this particular agreement should be reversed under a rule of reason analysis because it is a market inefficiency to have two firms chasing after the same customers, and the agreement ostensibly incentivizes companies to look for new lines of heirs rather than fighting over a shrinking pie. But Supreme Court jurisprudence is clear: where the per se rule applies, it is of no consequence that an agreement could potentially bring net economic benefits to some part of the market-here to the alleged conspirators. The per se rule recognizes that "[f]or the sake of business certainty and litigation efficiency, we have tolerated the invalidation of some agreements that a fullblown inquiry might have proved to be reasonable."
Maricopa Cty. Med. Svcs.
,
But even if the district court's ruling holding otherwise was in error, it does not seem to be the gross "abuse of discretion" contemplated by
In re Qwest
,
Finally, the fourth and fifth
In re Quest
mandamus guidelines ask whether the order represents a repeated error, or whether
*1278
it raises new and important questions of first impression.
All told, we cannot conclude that mandamus is appropriate under these circumstances.
See
In re Cooper
,
Perhaps on remand the district court will reconsider its rule of reason order. After all, the parties' dispute before this court has allowed this issue to be more fully explored and assessed. 7 We are acutely aware that we write with the benefit of detailed briefing and abundant time, while the district court here was incentivized to rule from the bench on this complicated issue.
The order defendants drafted that was ultimately adopted by the district court first reasons that the per se rule is inapplicable because the agreement was "structured in an unusual way" in that it only applied to new customers. On remand, the district court should consider
Palmer
,
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. However, because we do not have jurisdiction over the order and because we do not believe the case presents issues appropriate for mandamus, we DISMISS the government's appeal of the district court's rule of reason order.
III. CONCLUSION
When our founders set out to establish the coordinate branches of government they took pains to establish limits on each.
Here, the district court's order dismissing the indictment as outside the statute of *1279 limitations clearly falls within the ambit of our authority. Because overt acts in furtherance of the alleged conspiracy occurred within the statutory period, we find that dismissal was inappropriate. But we are powerless, even if we were to conclude it appropriate, to offer relief from the district court order declining to allow the government to pursue this antitrust indictment under a per se approach. Accordingly we REVERSE the order dismissing the indictment, DISMISS the appeal regarding the rule of reason order for lack of appellate jurisdiction, and REMAND for further proceedings consistent with this opinion.
Five years prior to the indictment's date of August 17, 2016.
Both the district court and Defendants explain how holding this indictment time-barred accomplishes the purposes of the statute of limitations because of the amount of time it can take to unwind an estate and disburse its assets. Dist. Ct. Order at 6; Aple. Br. at 16-17, 27-28. Perhaps this is correct as a policy matter, although we take no position on that question, but it does nothing to distinguish the on-point authority offered by Evans .
While not relevant to this appeal, the government is also authorized to appeal from an order "suppressing or excluding evidence or requiring the return of seized property[,]" an order adjusting the confinement status of a person charged with, or convicted of, a crime,
Carroll
dealt with an adverse suppression ruling. Today, unlike in 1957, adverse suppression rulings are specifically appealable.
See
The Government argues that this "could have been charged separately" rule is not the test, relying on a case from the First Circuit. Reply Br. at 29-30 (citing
United States v. Levasseur
,
United States v. Terry
,
Cf.
Fed. R. Civ. P. 54(b) ("[A]ny order or other decision, however designated, that adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties ... may be revised at any time before the entry of a judgment[.]");
Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp.
,
Reference
- Full Case Name
- UNITED STATES of America, Plaintiff-Appellant. v. KEMP & ASSOCIATES, INC.; Daniel J. Mannix, Defendants-Appellees.
- Cited By
- 9 cases
- Status
- Published