United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
December 3, 2003
FOR THE FIFTH CIRCUIT
Charles R. Fulbruge III
__________________________ Clerk
No. 02-20843
__________________________
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
THERM-ALL, INC., and
SUPREME INSULATION, INC.,
Defendants-Appellants.
___________________________________________________
Appeals from the United States District Court
For the Southern District of Texas
___________________________________________________
Before REAVLEY, JONES, and CLEMENT, Circuit Judges.
EDITH BROWN CLEMENT, Circuit Judge.
This case concerns an alleged price-fixing agreement between two fiberglass insulation
companies, Therm-All, Inc. (“Therm-All”) and Supreme Insulation, Inc. (“Supreme”). The issues on
appeal are whether the government must prove that a defendant committed an overt act during the
statute of limitations period in order to prove that a price-fixing agreement existed during that time,
and if so, whether in the instant case the Government introduced evidence sufficient to prove such
an overt act beyond a reasonable doubt. Because we hold that the government must prove such an
act, and that here, the Government failed to do so, we reverse, vacate, and remand.
1
I. FACTS AND PROCEEDINGS
Therm-All and Supreme (collectively, the “Defendants”) sell laminated fiberglass insulation
to metal building manufacturers and contractors for use in metal buildings. During the 1990’s, five
companies, Therm-All, Supreme, Bay Insulation Supply Company (“Bay”), Mizell Brothers Company
(“Mizell”), and CGI Silvercote (“CGI”), dominated the metal building insulation industry. In January
1994, the President of Therm-All, Robert Smigel (“Smigel”), allegedly agreed with the national sales
manager for Mizell, Wally Rhodes (“Rhodes”), the President of Supreme, Tula Thompson
(“Thompson”), and the sales manager of Bay, Mark Maloof (“Maloof”) to increase product prices.
Soon thereafter, CGI allegedly joined the agreement. The conspirators set prices within a marginal
bracket, taking care not to set prices at the exact same level. No sales person was permitted to
deviate from the prices as set forth on pricing sheets that the companies shared.
Therm-All, Smigel, Supreme, and Thompson were indicted on May 31, 2000 for conspiring
to fix prices in violation of Section 1 of the Sherman Antitrust Act (15 U.S.C. § 1). A seven-week
trial ensued. During the trial, the Government introduced convincing evidence regarding the factual
allegation that a price-fixing agreement existed from January 1994 to May 1995. Specifically, the
Government showed that four significant price increases occurred within the industry in February
1994, July 1994, December 1994, and March 1995. In an apparent attempt to show that the
conspiracy continued into June 1995, the Government produced testimony from a manager for Bay,
Janne Smith (“Smith”). Smith stated that she “guessed” the conspiracy lasted until June 1995. Smith
also stated that in June 1995, Maloof instructed her to lie to the grand jury regarding the price-fixing
agreement. Similarly, Rhodes testified that the conspiracy lasted until June 1995, and that in June
1995, after receiving a grand jury subpoena, he instructed a plant manager to conceal documents
2
which could implicate the manager.
The jury acquitted Smigel and Thompson, but found Therm-All and Supreme guilty. Therm-
All and Supreme filed motions for judgment of acquittal and new trial, but the district court denied
those motions. Thermal-All and Supreme timely appeal.
II. STANDARD OF REVIEW
This Court reviews de novo the denial of an appellant’s motion for acquittal. United States
v. Medina, 161 F.3d 867, 872 (5th Cir. 2002). A motion for a judgment of acquittal challenges the
sufficiency of the evidence to convict. See FED. R. CRIM. P. 29(a). In ruling on the motion for
acquittal, this Court reviews the evidence, all reasonable inferences drawn from it, and all credibility
determinations in the light most favorable to the Government. Glasser v. United States, 315 U.S. 60,
80 (1942); Medina, 161 F.3d at 872. This Court reviews the denial of a motion for new trial for
abuse of discretion. Miss. Chem. Corp. v. Dresser-Rand Co., 287 F.3d 359, 365 (5th Cir. 2002).
This Court upholds a jury verdict if “a rational trier of fact could have found that the evidence
established the essential elements of the offense beyond a reasonable doubt.” United States v. Lopez,
74 F.3d 575, 577 (5th Cir. 1996).
III. DISCUSSION
The central issue in this case is whether the Government has produced any evidence of a
Section 1 violation of the Sherman Act which was committed within the applicable statute of
limitations period. According to 18 U.S.C § 3282, the government must prove that a defendant
committed an o ffense within five years prior to a grand jury’s indictment. Here, the grand jury
indicted the Defendants on May 31, 2000, so the Government must produce evidence showing that
a price-fixing agreement existed subsequent to May 31, 1995.
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A. Legal basis for requiring an overt act
In most crimes of conspiracy, the government must show an overt act in furtherance of the
conspiracy. See, e.g., Grunewald v. United States, 353 U.S. 391, 396-97 (1957) (requiring an overt
act in furtherance of a conspiracy to defraud the United States through tax evasion); United States
v. Manges, 110 F.3d 1162, 1169 (5th Cir. 1997) (holding that the government must show an overt
act in furtherance of a conspiracy to defraud the United States through mail fraud); United States v.
Girard, 744 F.2d 1170, 1172 (5th Cir. 1984) (recognizing the necessity of the government’s burden
to show an overt act in furtherance of a conspiracy to defraud the United States through bid rigging).
The Defendants rely on the overt act requirement of these cases to argue that the Government must
prove that the Defendants committed an overt act in furtherance of the price-fixing conspiracy during
the statute of limitations. The Defendants assert that the Government has not presented evidence of
any overt act in furtherance of the conspiratorial agreement.
The Defendants’s argument is misstated in the context of a Section 1 violation of the Sherman
Act. Section 1 does not require proof of an overt act in furtherance of the conspiracy. United States
v. Socony-Vacuum Oil Co., 310 U.S. 150, 224 n.59 (citing Nash v. United States, 229 U.S. 373, 378
(1913)). “The heart of a Section 1 violation is the agreement to restrain; no overt act, no actual
implementation of the agreement is necessary to constitute an offense.” United States v. Flom, 558
F.2d 1179, 1183 (5th Cir. 1977); accord United States v. Tarpon Springs Sponge Exch., 142 F.2d
125, 126 (5th Cir. 1944) (holding that an overt act is not necessary to consummate a conspiracy to
restrain trade). Under Section 1, the price-fixing agreement itself constitutes the conspiracy crime.
Socony-Vacuum, 310 U.S. at 224 n.59; Flom, 558 F.2d at 1183. Thus, the Government need not
prove an overt act in furtherance of the price-fixing conspiracy.
4
Nevertheless, because the price-fixing agreement itself constitutes the crime, the Government
must still show that the agreement existed within the statute of limitations time period. See United
States v. Hayter Oil Co., 51 F.3d 1265, 1270 (6th Cir. 1995). Failing to require the Government to
show that the conspiracy existed during the statute of limitations period would create a presumption
that the price-fixing conspiracy continued throughout that period. This would effectively extend the
statute of limitations indefinitely, thereby obviating the statute of limitations requirement. To avoid
such an outcome, the Government must offer sufficient evidence that the price-fixing agreement
continued to exist within the limitations period.
The Government attempts to infer t he agreement’s continued existence from the fact that
prices remained at the same level a month after the last overt act occurred. This inference is doubtful.
Merely showing that prices remain at a specific level does not prove beyond a reasonable doubt that
a price-fixing conspiracy continues to exist. Prices are not perfectly elastic. Products usually have
inelastic costs of production such that an immediate increase in output is not feasible. If a conspiracy
ceases to exist, prices would not immediately decrease because output must at least temporarily
remain the same. Thus, prices may remain unchanged a short time after the last act of conspiracy
merely because of a product’s price elasticity. Inferring a conspiracy based on the fact that prices
remain unchanged shortly after the last overt act is therefore problematic.
Even if the Government could prove that prices remained at a raised level for a longer period
than is necessary according to the price elasticity for laminated fiberglass insulation,1 inferring that
a conspiracy extends into the statute of limitations is still problematic. Products differ with respect
1
Demonstrating a product’s price elasticity would be extremely difficult given the myriad
of market factors that affect any product’s supply and demand curves.
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to their specific price elasticities. Were this Court to allow an inference of conspiracy based on a
particular product’s price elasticity, this Court would effectively create a different statute of
limitations for every individual product. Furthermore, exogenous market variables that are wholly
independent from a price-fixing agreement may affect the supply or demand levels even while such
an agreement is in effect. In such circumstances, prices would be permanently changed from their
original level independent of the agreement. If the price-fixing agreement were to cease, prices would
not return to their prior level, and could remain at the same level as under the agreement.
Consequently, the fact that prices remain at a specific level could simply indicate a natural market
behavior. The Government must do more than show that a few prices correspond with a level set
prior to the limitations period in order to show the continued existence of a price-fixing agreement.
To show the continued existence of a price-fixing conspiracy, the Government must show an
overt act of, or in furtherance of, the alleged conspiracy. The Supreme Court has stated that while
Section 1 does not require showing an act in furtherance of the conspiracy, the act of conspiring is
itself a condition of liability. Nash, 229 U.S. at 378. Thus, to prove a conspiracy during a certain
time period, the Government must produce evidence of an overt act that implies the existence of the
alleged conspiracy during that time, regardless of whether the act be in furtherance of or an actual
part of the conspiracy.
This standard is consistent with the holdings that our sister circuits have applied in similar
cases. In Hayter Oil Company, the Sixth Circuit upheld a jury verdict that found the defendants
guilty of conspiring to fix prices prior to the statute of limitations. 51 F.3d at 1265. While the court
acknowledged that Section 1 did not require proof of an overt act, the court sti ll required the
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government to show that an agreement existed within the statute of limitations period.2 Id. at 1270.
The government did so by producing phone records and testimony showing that within the limitations
period, a conspirator repeatedly telephoned another conspirator to discuss increasing prices. Id. at
1271. Of particular significance was the fact that the testimony specifically detailed the conspiratorial
subject matter of the telephone conversations. Id.
Likewise, in United States v. Brown, the Ninth Circuit ruled that a district court correctly
stated the law when the court instructed the jury both (1) that the government did not need to show
an overt act in furtherance of a price-fixing conspiracy, and (2) that the government must show an
overt act in order to establish that the price-fixing conspiracy existed within the statute of limitations
period. 936 F.2d 1042, 1048 (9th Cir. 1990).3
This Court’s holding in another conspiracy context also implies that an overt act is necessary
to show the continued existence of a price-fixing conspiracy within the statute of limitations. In
2
In dictum, the court attempted to bolster its position that the government produced
sufficient evidence to show the continued existence of a conspiracy within the limitations period
by stating that a conspiracy “is presumed to continue until there is an affirmative showing that it
has been abandoned.” Hayter Oil, 51 F.3d at 1270-71. However, this statement seems incorrect
in the context of proving that a conspiracy exists within the limitations period. The presumption
of a continuing conspiracy seems limited to inferring a price-fixing agreement once an agreement
has already been established within the limitations period. See United States v. Kissel, 218 U.S.
601, 608 (1910). Indeed, the court’s analysis in Hayter Oil seems to support this conclusion,
despite the cited statement. The court examined whether the government had produced sufficient
evidence to show the conspiracy’s continued existence. Hayter Oil, 51 F.3d at 1271. Yet had the
cited statement been correct, the court should have examined whether the defendants had
produced any evidence that they had abandoned the price-fixing agreement. Thus, the court’s
analysis of the facts strongly suggests that the reason the court held that the price-fixing
agreement existed within the limitations period was because evidence of conspiratorial overt acts
existed. Id.
3
While the Ninth Circuit reached this conclusion under plain error review, the court
nevertheless explicitly stated that “the law was correctly stated.” Brown, 936 F.2d at 1048.
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United States v. Girard, this Court determined that because of an overt act, a conspiracy to defraud
the United States extended into the limitations period. 744 F.2d 1170, 1173 (5th Cir. 1984). There,
a plumbing company allegedly rigged the bidding process for a contract with the city housing
authority before the five-year statute of limitations period had begun to run. Id. at 1171. The
housing authority then paid the plumbing company for its contract services after the limitations period
commenced. Id. This Court reasoned that the fulfillment of the conspiracy objective to earn profits
under the contract was sufficient to show that the conspiracy itself existed within the statute of
limitations. Id. at 1173. Pivotal to this conclusion was the fact that the incriminating economic
benefit was a clear product of the conspiracy. Id. The plumbing company’s overt act of accepting
and retaining payment therefore extended the conspiracy into the statute of limitations period. Id.
The following factors thus support the conclusion that the government must show an overt
act in the limitations period: (1) Nash’s recognition of the necessity of an act in a price-fixing
conspiracy; (2) the Sixth and Ninth Circuits’s holdings in the same context; and (3) this Court’s
holding in an analogous context. We therefore hold that where a party has entered into a conspiracy
in violation of Section 1, but has done so prior to the statute of limitations period, the government
must show that during the limitations period, the defendant either committed an overt act of
conspiring activity, or alternatively, committed an overt act in furtherance of the conspiracy.
B. Sufficiency of the Government’s evidence of an overt act
The Government failed to offer evidence of any overt act supporting the inference that the
conspiracy continued to exist after May 31, 1995. The five pieces of evidence that it did offer into
evidence fall short of satisfying this requirement. A summation of this evidence follows.
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First, the Government offered conclusory testimony. Rhodes opined that the agreement lasted
until June 1995; Smith testified that she “guessed” the agreement lasted until subpoenas were issued
in June 1995. But neither Rhodes nor Smith testified about any acts occurring after May 31, 1995
to substantiate their opinions. Neither witness’s testimony offers evidence of any overt act within the
statute of limitations.
Second, the Government attempts to show an overt act by introducing t estimony that a
Therm-All employee, Mr. Engebretson, transmitted a facsimile to an employee of CGI in June 1995.
This evidence is inconclusive. “When the government attempts to prove the existence of a conspiracy
by circumstantial evidence, each link in the inferential chain must be clearly proven.” United States
v. Galvan, 693 F.2d 417, 419 (5th Cir. 1982). Based on this principle, this Court has stated that
“telephone records are insufficient evidence to support a conspiracy conviction unless the
government can show who participated in the calls and the substance of their conversation.” United
States v. Williams, 264 F.3d 561, 574 (5th Cir. 2001) (emphasis added). In Galvan, this Court
determined that evidence of telephone conversations between conspirators was not, by itself,
sufficient to prove that the conspirators discussed the criminal activity. 693 F.2d at 419. In the
instant case, Mr. Engebretson simply testified that a facsimile transmission occurred. No evidence
suggested that the subject of the facsimile concerned product pricing. While the transmission was
certainly an overt act, the Government did not demonstrate that the act was in any way relevant to
the alleged conspiracy. In accordance with Galvan and Williams, the record of the facsimile
transmission is insufficient to prove the existence of the alleged conspiracy.
Third, the Government offered invoices dat ed in June 1995 from four of the conspiring
companies. The prices listed on the invoices corresponded with the pricing sheets that were
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conspiratorially promulgated prior to May 31, 1995. The Government claims that these invoices
show that the conspirators were realizing an economic benefit of the conspiracy within the statute of
limitations time period. Relying on Girard, the Government argues that the realization of this
economic benefit establishes that the conspiracy existed within the relevant time period.
Although the Government is correct that realization of an economic benefit can show the
existence of a conspiracy within the limitations period, the economic benefit must nonetheless be
clearly tied to the conspiracy. In Girard, the sole reason that the conspirators received the contract
benefit was because of the conspiracy. 744 F.2d at 1172-73. Here, however, the economic benefit
stated on the invoices cannot clearly be tied to the Defendants’ former price-fixing agreement. The
Government produced only 90 invoices from all four companies’ combined records to prove that a
price-fixing agreement continued into June 1995.4 These invoices constituted only five percent of
sales during that time. Five percent of sales correspo nding with the prior agreement is hardly
sufficient to infer the agreement’s continued existence. This evidence does not demonstrate that the
companies were at that point developing, carrying out, or reaping the fruit of the prior agreement.
Indeed, the dearth of corresponding prices strongly suggests that the agreement no longer existed.
It seems eminently likely that more than five percent of sales would have reflected conspiratorial
behavior had the companies continued pricing according to the agreed-upon marginal brackets.
It is also noteworthy that the Government did not produce the invoices at trial to prove price-
fixing within the limitations period. The Defendants stipulated to the invoices for the sole purpose
of showing interstate commerce activity. As an afterthought on appeal, the Government relies on the
4
Ironically, the Government did not provide this Court with the invoices that did not
correspond to the price-fixing sheets because of the burden that such a “voluminous exhibit”
would create.
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invoices to argue a point outside the scope of the stipulation. This fact, combined with the blatant
absence of corresponding prices, is more than sufficient to conclude that the 90 invoices fail to prove
beyond a reasonable doubt that the conspiracy existed during the limitations period.
Fourth, the Government produced evidence that Maloof and Rhodes attempted to conceal
the conspiracy in June 1995. Specifically, Smith testified that in June 1995, Maloof instructed Smith
not to tell the grand jury that the companies had ever entered a price-fixing agreement. At about the
same time, Rhodes testified that after receiving a grand jury subpoena, he told a plant manager to
conceal documents which could implicate the manager. The Government contends that these acts
of concealment show that the conspiracy existed in June 1995.
Acts of concealment may constitute overt acts indicating the existence of a conspiracy.
Grunewald, 353 U.S. at 405. Such acts must be “done in furtherance of the main criminal objectives
of the conspiracy” rather than those done “for the purpose only of covering up after the crime.” Id.
This Court has applied this principle in United States v. Mann, 161 F.3d 840, 859 (5th Cir. 1998).
In Mann, this Court held that an act of concealment evinced an overt act for limitations purposes
because “[t]he central aim of the conspiracy extended to concealing the fraudulent nature of the
transaction.” Id. There, the indictment alleged a conspiracy to “hide and keep concealed . . . true
facts and circumstances surrounding the acquisition, financing, operat ion, and management of [a
financial institution]; [and] to hinder and defeat the [IRS] in the ascertainment . . . of income tax . .
. .” Id. “[T]he purpose of the main conspiracy . . . by its very nature, called for concealment.” Id.
Furthermore, this Court held that to be an overt act, statements of concealment must be “made solely
to aid the concealment . . . [,] made during and in furtherance of the charged conspiracy.” Id.
In the instant case, at the outset of a price-fixing conspiracy, conspirators do not contemplate
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making such statements of concealment as those which Maloof and Rhodes made. Their statements
instructing others to lie to a grand jury and to conceal conspiratorial documents do not fulfill the main
purpose of a price-fixing agreement—to raise and maintain prices. Indeed, their statements seem to
cover up the main conspiracy, indicating “nothing more than that the conspirators [did] not wish to
be apprehended—a concomitant, certainly, of every crime . . . .” Grunewald, 353 U.S. at 406. The
statements do not show the continued existence of a price-fixing conspiracy.
Fifth, the Government offers tape-recorded conversations of May 4, 2003 and May 5, 2003
showing that the conspiracy was effective on those dat es. It also offers testimony of a Mizell
salesman that he submitted a bid on May 15, 2003 which was based on a conspiracy pricing sheet.
This evidence is highly persuasive that the conspiracy existed up through May 15, 1995. It is
impotent in showing that the conspiracy existed past May 31, 1995. The Government thus fails to
produce evidence of an overt act occurring after the critical limitations date.
IV. CONCLUSION
Because the Government failed to provide evidence that the conspiracy existed beyond May
31, 1995, the district court should have granted the Defendants’s motion for acquittal. We therefore
REVERSE and VACATE the judgment, and remand for a ruling not inconsistent with this holding.
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REAVLEY, Circuit Judge, dissenting:
I respectfully dissent. The jury was instructed that the government had t o prove “that the
conspiracy charged in the indictment continued after May 31, 1995,” and that it could so find “only
if the government has proven that some action was taken by a conspirator in furtherance of the
conspiracy after that date.” I do not understand the majority or appellants to find any fault with the
court’s instructions relevant to limitations, and I would hold that a rational jury could have found
beyond a reasonable doubt that action in furtherance of the conspiracy occurred after May 31, 1995.
In the case of a price-fixing agreement, the exchange of pricing information by the
conspirators, and the charging to customers of artificially inflated prices made possible by the
conspirators’ illegal collusion, constitute acts in furtherance of the conspiracy. This jury could find
that such overt acts in furtherance of the conspiracy did occur within the limitations period.
The government proved a highly successful conspiracy to fix prices for an essentially fungible
product sold by appellees and other conspirators. The agreement made possible a series of price
increases above the prices that would have prevailed in a competitive environment, as evidenced by
proof that prices and profit margins rose significantly after the agreement was reached, and prices
dropped significantly after the government issued subpoenas to the conspirators. It is logical to
believe that the conspirators, once having decided to break the law for financial gain, would continue
to charge illegally fixed prices until they were caught. Hence, the Sixth Circuit has stated that “once
a conspiracy has been established, it is presumed to continue until there is an affirmative showing that
it has been abandoned.” United States v. Hayter Oil, Inc., 51 F.3d 1265, 1270-71 (6th Cir. 1995).
Even if the law of our circuit does not presume as a matter of law, for limitations purposes, that a
price-fixing conspiracy continues until the participants are caught, and even if the jury in the pending
case was not so instructed, the jury could have reasoned that the participants would have no reason
to abandon their profitable conspiracy until such time. Indeed, the conspirators managed three rounds
of coordinated price increases in 1994, and a separate price increase for unfaced insulation in 1995.
They apparently had no interest in voluntarily abandoning their illegal pact and returning to a
competitive market.
The jury heard evidence that (1) the conspirators entered into a horizontal price-fixing
agreement, the most blatant of Sherman Act violations; (2) the conspirators engaged in an extensive,
organized effort to maintain the agreement by exchanging ongoing pricing information, and to conceal
the agreement by charging slightly different prices; (3) the agreement was successful at raising prices
and profits for the conspirators; (4) in June 1995 the conspirators continued to charge customers
pursuant to price lists agreed upon under the price-fixing agreement, as evidenced by numerous
examples of invoices and corresponding price lists admitted at trial; (5) prices dropped after the
issuance of subpoenas in June of 1995, and had “dropped dramatically” according to one witness by
the time of trial; (6) Mark Engebretson of Therm-All was an active participant in the conspiracy, was
involved in the exchange of pricing information and fixing of prices, had talked to Roger Ferry of CGI
about pricing, and had communicated with Ferry by fax and phone into June 1995, although the
contents of the June 1995 communications were not explicitly revealed at trial; (7) when asked when
the price-fixing agreement ended, Jaane Smith of Bay, the whistleblower, testified, “I guess after
people started getting served subpoenas” in June of 1995, and later testified, with respect to what was
“happening in the marketplace” after the subpoenas issued, that “[t]hings started returning to how
they were before and things started becoming more competitive again;” and (8) Huber Rhodes, a
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Mizell vice president, active participant in the conspiracy, and key government witness, testified that
the price-fixing agreement continued until June of 1995, “when the FBI came in Mizell Brothers with
a subpoena from the Justice Department.” This evidence was sufficient to prove that overt acts in
furtherance of the conspiracy, especially the continued charging of agreed, artificially high prices to
customers, as well as the continued exchange of pricing information, occurred within the limitations
period.
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