Antitrust Law Daily Wrap Up, ANTITRUST—E.D. Mich.: Subcontractor’s antitrust, RICO claims alleging bid rigging conspiracy revived, (Aug 31, 2015)

By Linda O’Brien, J.D., LL.M.

A water and sewer subcontractor bidding for government contracts sufficiently alleged an injury to pursue antitrust and Racketeer Influenced and Corrupt Organizations Act (RICO) claims against competitors who had allegedly fraudulently excluded bidders outside of their conspiracy from being awarded contracts, the federal district court in Detroit has decided. Thus, the defendants’ motions to dismiss were vacated in part and the plaintiffs’ claims were reinstated (Willie McCormick & Associates, Inc. v. Lakeshore Engineering Services, Inc., August 28, 2015, Tarnow, A.).

Willie McCormick & Associates was a water and sewer contractor that had done work for the Detroit Water and Sewerage Department (DWSD). McCormick brought an antitrust and RICO action, alleging that defendants—consisting of a number of competing contractors—had engaged in a secret scheme involving bribes, kickbacks, and bid-rigging. They allegedly conspired to distribute Detroit water and sewer subcontracts among themselves to the exclusion of subcontractors, such as McCormick that were not part of the conspiracy, regardless of whether their bid was lowest during the contract bidding process.

In December 2013, the court ruled that McCormick lacked standing to bring its claims. Before the court was McCormick’s motion for relief from the order or for leave to file an amended complaint.

Antitrust injury. The court found that, in contrast to its prior order, the plaintiff sufficiently alleged an antitrust injury. In Associated General Contractors of California, Inc. v. California State Council of Carpenters, 459 U.S. 519 (1983), the U.S. Supreme Court found that a competitor’s loss may constitute antitrust injury where it stemmed from the competitor’s exclusion from a market, the court explained. Under Associated General Contractors of California, McCormick’s claim of injury — that the loss of profits from DWSD contract work due to the conspiracy’s exclusion of honest subcontractors from the market — was an antitrust injury and McCormick was an appropriate antitrust plaintiff, the court concluded.

RICO injury and proximate cause. McCormick’s allegations that the loss of DWSD work resulted in a loss of profits was an injury to “business or property” sufficient to sustain a RICO claim. Although the plaintiff had no entitlement to contract work, McCormick’s allegations that it lost government contracts due to nonparticipation in the bribery scheme constituted a sufficient RICO injury.

Furthermore, McCormick sufficiently pleaded a direct relation between the injury and the alleged RICO scheme. McCormick alleged that the contractor defendants engaged in a pattern of bribery and extortion with the effect of funneling DWSD work away from honest subcontractors and to themselves. The plaintiff’s harm was not contingent upon any harm suffered by DWSD, as McCormick was injured by losing work to the defendants even if the defendants charged DWSD fair prices, the court concluded.

The case is No. 12-15460.

Attorneys: Robert G. Lahiff (Foster Meadows & Ballard, PC) for Willie McCormick and Associates, Inc.

Companies: Willie McCormick & Associates, Inc.

Cases: Antitrust RICO MichiganNews