This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (1994)

STATE OF MINNESOTA

IN COURT OF APPEALS

C9-95-2110

C1-95-2263

State of Minnesota, by Hubert H. Humphrey, III,

its Attorney General,

Appellant,

vs.

Road Constructors, Inc., et al.,

Respondents,

North Star Asphalt Company, et al.,

Respondents.

Filed May 21, 1996

Affirmed in part and reversed in part

Schumacher, Judge

Olmsted County District Court

File No. C9-90-814

Hubert H. Humphrey, III, Attorney General, Helen G. Rubenstein, Susan C. Gretz, Assistant Attorneys General, 900 NCL Tower, 445 Minnesota Street, St. Paul, MN 55101 (for Appellant)

Timothy D. Kelly, Maret R. Olson, Kelly & Berens, P.A., 3720 IDS Center, 80 South Eighth Street, Minneapolis, MN 55402 (for Respondents Road Constructors, Inc., et al.)

Theodore J. Collins, Dan C. O'Connell, Thomas E. McEllistrem, Collins, Buckley, Sauntry & Haugh, P.L.L.P., W-1100 First National Bank Building, 332 Minnesota Street, St. Paul, MN 55101 (for Respondents North Star Asphalt Company, et al.)

Considered and decided by Huspeni, Presiding Judge, Crippen, Judge, and Schumacher, Judge.

U N P U B L I S H E D O P I N I O N

SCHUMACHER, Judge

Appellant State of Minnesota brought a civil antitrust action against respondents Road Constructors, Inc. and William Quick, its president, (Road Constructors) and respondents North Star Asphalt Company and Mark Hindermann, its treasurer, (North Star). The district court concluded that the state had failed to meet its burden of proving an unreasonable restraint of trade. We affirm but reverse the court's denial of disbursements to Road Constructors and North Star as the prevailing parties.

FACTS

Road Constructors and North Star are two companies that ordinarily compete in the road contracting business. In February 1989, the state solicited bids for work on Highway 63 in Rochester, Minnesota. The project had a disadvantaged business enterprise goal of five percent.

On March 24, 1989, the bids were opened, and it was determined that the state engineer had estimated a cost of $3,043,794.11 for the project. Road Constructors' bid of $2,643,974.30 was the lowest, but it did not comply with the disadvantaged business enterprise goal. The next-lowest bid of $2,693,920.19, which complied with the disadvantaged business enterprise goal, was submitted by a sister company of North Star, Rochester Sand & Gravel, Inc. The only other bid was submitted by W. Hodgman & Sons for $3,116,288.58.

Eventually, the state rejected the March bids and re-advertised the project without the disadvantaged business enterprise requirement. The anticipated starting date for the project was pushed back three weeks. The re-let date was April 28, 1989.

Approximately two weeks before April 28, representatives of Road Constructors and North Star began discussing the formation of a joint venture to bid on the Highway 63 project and also on a Highway 52 project that the state had recently advertised. An attorney advised North Star that the joint venture would be legal, but that the state would likely investigate. [1] Road Constructors and North Star decided to proceed with the joint venture, which they kept secret from their competitors.

The joint venture was not awarded the Highway 52 project. On April 28, the bids were opened for the Highway 63 project. The Road Constructors/North Star joint venture had submitted the only bid, of $2,892,595. The state accepted the bid, knowing that it was higher than either of Road Constructors' or Rochester Sand & Gravel's previous bids but lower than the state engineer's March estimate. It is undisputed that both Road Constructors and North Star lost money on the Highway 63 project.

In February 1990, the state brought a civil antitrust action against Road Constructors and North Star. The district court granted summary judgment in favor of Road Constructors and North Star. The state appealed, and we affirmed the conclusion that Road Constructors and North Star's joint bid agreement did not constitute a per se price fixing violation. State v. Road Constructors, Inc., 474 N.W.2d 224, 226 (Minn. App. 1991), review denied (Minn. Oct. 31, 1991). We remanded for further proceedings on the question whether the joint bid agreement constituted an unreasonable restraint of trade. Id.

On remand, the district court conducted a trial and issued extensive findings of fact supporting its decision that the state had failed to prove an unreasonable restraint of trade.

D E C I S I O N

Initially, we note that the facts of this case strongly support North Star's claim that the state waived its right to claim an antitrust violation by accepting the joint bid upon the advice of counsel, knowing most of the relevant circumstances surrounding the joint venture. But in light of our decision that the joint bid was not illegal, we need not address the waiver issue.

"A contract, combination, or conspiracy between two or more persons in unreasonable restraint of trade or commerce is unlawful." Minn. Stat. § 325D.51 (1994). "Minnesota antitrust law is to be interpreted consistently with the federal courts' construction of federal antitrust law." State v. Alpine Air Prods., 490 N.W.2d 888, 894 (Minn. App. 1992). aff'd 500 N.W.2d 788 (Minn. 1993).

The test for determining whether there has been an antitrust violation is whether the challenged action was unreasonably restrictive of competition. National Soc'y of Professional Eng'rs v. United States, 435 U.S. 679, 691, 98 S. Ct. 1355, 1364 (1979) (citing Standard Oil Co. v. United States , 221 U.S. 1, 58, 31 S. Ct. 502, 515 (1910)). An agreement that is not illegal "per se" may be evaluated "by analyzing the facts peculiar to the business, the history of the restraint, and the reasons why it was imposed." National Soc'y, 435 U.S. at 693, 98 S. Ct. at 1365. The court must consider the impact on competitive conditions. Id. at 691, 98 S. Ct. at 1365.

The courts have recognized that it may be difficult to prove the actual market effects of challenged conduct. Accordingly, a plaintiff may choose to offer proof of a defendant's "market power" that has been gained as a result of the challenged conduct. "Market power" is "the ability to raise prices above those that would be charged in a competitive market." National Collegiate Athletic Ass'n v. Board of Regents of Univ. of Okla., 468 U.S. 85, 110 n.38, 104 S. Ct. 2948, 2964 n.38 (1984).

It is undisputed that the state's regulations allow it to award contracts to joint ventures on road construction projects; the question is whether Road Constructors and North Star's joint venture constituted an "unreasonable restraint of trade." The district court examined the facts peculiar to the road construction business, the history of the joint venture, and the reasons why it was formed. The court determined that the state had not proved a violation of the antitrust laws. The court also found that the state had not proven that the joint venture had market power. [2]

"Whether a restraint is unreasonable is a question of fact." Hough Transit, Ltd. v. National Farmers Org., 472 N.W.2d 358, 360 (Minn. App. 1991) (citing Minnesota-Iowa Television Co. v. Watonwan T.V. Improvement Ass'n, 294 N.W.2d 297, 307 (Minn. 1980)). To overturn the district court's factual findings, we "must have a definite and firm conviction that a mistake has been made." Minnesota-Iowa Television, 294 N.W.2d at 307.

The court found that the joint venture reduced the number of potential bidders by one. The court found that the joint venture was anti-competitive "to that extent." The court found that the joint venture was "especially suspect when considered in the context of [Road Constructors' and North Star's] earlier aggressive bids." But the court concluded: "Suspicion and speculation are not enough to support a verdict."

The court did not believe that Road Constructors and North Star raised their bid because they believed that nobody else would bid against them. The court found that the joint venture could not have determined how many companies would submit bids at the re-let. The court found that there were 14 to 16 other possible bidders at the March let and the April re-let. The court found:

Nothing about the joint venture affected the ability or likelihood that any other contractor would bid on the Highway 63 project, or the amount of any bid they might have submitted.

In a memorandum, the court explained:

The fact that there were no other bidders at the April letting must be explained by other market factors. It is not a result of anything the Defendants did in creating the joint venture or submitting their joint bid.

Thus, essentially, the court found that the joint bid had no actual effect on competition. This finding is supported by the fact that Road Constructors and North Star kept the existence of the joint venture secret from any potential competitors.

The court also found that the state had not proved that the increase in the amount of the joint bid over the parties' prior bids was attributable to an antitrust violation. The court found that "legitimate considerations are just as likely to have affected [the joint bid] price as any probable illegal factors." The court found that even in the absence of the joint venture, three possible factors could have legitimately resulted in an increase in the April bid: (1) a decision by Road Constructors or North Star to bid less aggressively because of the later bid date; (2) an intuitive element in the bidding process; and/or (3) the fact that the state engineer's March estimate was higher than either Road Constructors' or Rochester Sand & Gravel's bid.

The court recognized that the standard for proving the amount of damages is lower than the ordinary preponderance-of-the-evidence standard that is required to prove the existence of an antitrust violation. National Farmers Org., Inc. v. Associated Milk Producers, Inc., 850 F.2d 1286, 1293 (8th Cir. 1988). But the amount of damages need not be determined if the state has failed to prove the existence of an antitrust violation. See J.Truett Payne Co. v. Chrysler Motors Corp., 451 U.S. 557, 569, 101 S. Ct. 1923, 1930 (1981) (stating that before lower standard of proving injuries may be applied, plaintiff must first prove antitrust violation).

The court concluded that the state had not proved an antitrust injury by a preponderance of the evidence. The court applied a correct standard of proof, and under our narrow standard of review, we will not reverse the court's factual findings.

In light of our decision that the state did not prove an antitrust violation, we need not address the state's argument that it is entitled to a civil penalty of up to $50,000 from both Road Constructors and North Star. Minn. Stat. § 325D.56, subd. 1 (1988).

At the conclusion of the trial, Road Constructors moved to join the joint venture as a party and then moved for attorney fees under the Minnesota Equal Access to Justice Act (MEAJA). Minn. Stat. § 15.472 (1994). The district court denied the motion, concluding that the joint venture was not the type of "party" contemplated by the MEAJA. We agree.

The MEAJA defines "party" as "an unincorporated business, partnership, corporation, association, or organization," which, at the time the action was filed, had no more than 50 employees and annual revenues not exceeding $4,000,000. Minn. Stat. § 15.471, subd. 6(a)(1), (2) (1994). "Because 'the MEAJA is a limited waiver of sovereign immunity, courts should strictly construe its language.'" State v. Baillon Co., 503 N.W.2d 799, 802 (Minn. App. 1993) (quoting Donovan Contracting v. Minnesota Dep't of Transp., 469 N.W.2d 718, 720 (Minn. App. 1991), review denied (Minn. Aug. 2, 1991)).

The MEAJA is "specifically targeted toward small businesses." McMains v. Commissioner of Pub. Safety, 409 N.W.2d 911, 914 (Minn. App. 1987); see also Robert J. Hennessey and Andrew J. Mitchell, When David Beats Goliath -- the Equal Access to Justice Acts, 59 Henn. L. 3, at 5 (Jan.-Feb. 1990) (stating that "act is strictly focused on small businesses * * *. "). Characterizing the joint venture as a small business would improperly "expand the various class of persons named by the legislature as persons eligible for benefits under the [MEAJA]" McMains, 409 N.W.2d at 914-15.

The district court did not believe that Road Constructors and North Star were "prevailing" parties for purposes of awarding disbursements. Minn. Stat. § 549.04 (1994). The district court has the discretion to determine who is the prevailing party. Kusniryk v. Arrowhead Regional Corrections Bd., 413 N.W.2d 182, 184 (Minn. App. 1987); Reichert v. Union Fidelity Life Ins. Co., 360 N.W.2d 664, 668 (Minn. App. 1985). But the court "does not have discretion to deny costs and disbursements to the prevailing party." Quade & Sons Refrigeration v. Minnesota Mining & Mfg. Co., 510 N.W.2d 256, 260 (Minn. App. 1994), review denied (Minn. March 15, 1994); see Jostens, Inc. v. National Computer Sys., 318 N.W.2d 691, 704 (Minn. 1982) (concluding that "shall" means that if party is clearly prevailing party, that party is entitled to disbursements).

The district court concluded that neither party had completely prevailed because the state had established the likelihood of a violation of the antitrust laws but had not proved damages. We disagree. The state did not meet its burden of proving an antitrust injury; therefore, Road Constructors and North Star were the prevailing parties and are entitled to disbursements. We reverse and remand on this issue to enable the award of appropriate costs and disbursements.

Affirmed in part and reversed in part.


Footnotes

[1] Apparently, both Road Constructors and North Star had been prosecuted and acquitted in the 1980's for bid rigging.

[2] The court noted that if the joint venture had market power, it was unclear why that same market power would not have also affected the Highway 52 project. The state never claimed that the joint venture had an anti-competitive effect on the Highway 52 project.