CAMSOFT DATA SYSTEMS INC v. SOUTHERN ELECTRONICS SUPPLY INC LLC (2018)

In this antitrust litigation, various defendants seek reversal of the trial court's judgment granting plaintiff's motion for partial summary judgment on the issue of the antitrust mode of analysis and holding that the per se rule shall apply herein. For the following reasons, we reverse and remand.

FACTUAL AND PROCEDURAL BACKGROUND

After his election in 2002, former New Orleans Mayor C. Ray Nagin announced an initiative to deploy 1,000 video surveillance cameras throughout the City of New Orleans (“Crime Camera Project”). Gregory Meffert, who was the Chief Technology Officer (“CTO”) of the Mayor's Office of Technology (“MOT”) at the time, appointed Christopher Drake as project manager of the Crime Camera Project. Drake was employed by private technology company Imagine Software, LLC (“Imagine”), which was owned in part by Mark St. Pierre, a friend of Meffert, and which had performed work for the City of New Orleans during Meffert's tenure as CTO of the MOT.

Thereafter, Active Solutions, LLC, Southern Electronics Supply Company, Inc. (“Southern Electronics”), and CamSoft Data Systems, Inc. (“CamSoft”) worked together to design, develop, and market a wireless surveillance system for the Crime Camera Project. In January 2004, the MOT granted permission to Active Solutions, Southern Electronics, and CamSoft to conduct a pilot program for the Crime Camera Project in the New Orleans Iberville housing project. The wireless networking features of the system allowed the system's cameras to be controlled remotely from a laptop in the field to adjust the pan, tilt, and zoom features of a camera and to capture video images while a crime was in progress.

Following the success of the pilot program, the City of New Orleans issued a Request for Proposals (“RFP”) for the Crime Camera Project and ultimately awarded the Crime Camera Project contract to Southern Electronics in April 2004. Initially, work on the Crime Camera Project was performed by Southern Electronics through its contract with the City, with participation by Active Solutions and CamSoft.

However, beginning in 2006, during an expansion of the Crime Camera Project, the City of New Orleans began to purchase the necessary wireless networking equipment and video surveillance cameras from Dell, Inc., through its Western State Contracting Alliance (“WSCA”) contract.¹ While Dell supplied the necessary computer equipment, Veracent, LLC, a company owned by St. Pierre, supplied the networking equipment and cameras to Dell for resale to the City. Installation of the surveillance system was billed to the City by Ciber, Inc., through Ciber's federal Government Services Administration Contract (“GSA Contract”).² Ciber, in turn, subcontracted the work to Imagine.

Dell also sold the municipal wireless networking and video surveillance equipment through its WSCA contract to other cities in 2006 and 2007, including Baton Rouge, Lafayette, and Gretna, billing both the equipment and installation work through its WSCA contract. NetMethods supplied the necessary camera and networking equipment to Dell and bundled the installation charges into the various equipment costs in its invoice to Dell. Dell then billed those amounts to the respective cities through its WSCA contract.

In March of 2007, Dell was instructed by the director of Louisiana Office of State Purchasing (as it was called at that time), Division of Administration, (“OSP”) to discontinue the sale of surveillance equipment through its WSCA contract because the sale and installation of that type of equipment was beyond the scope of that contract.

Thereafter, in June 2007, the OSP issued a solicitation for bids for a brand name contract ³ for NetMethods brand name surveillance equipment, and NetMethods bid on and received the brand name contract, allowing it to sell wireless networking and video surveillance equipment labeled as NetMethods brand products to state agencies. The City of Baton Rouge then purchased millions of dollars of equipment and installation from NetMethods through its brand name contract from 2006 through 2009. In October 2009, after NetMethods sold its assets and liabilities to MMR, MMR obtained its own brand name contract for wireless networking and video surveillance equipment and began selling wireless networking and video surveillance systems to numerous state and local governments and private parties through its brand name contract.

Extensive civil and criminal litigation ultimately resulted from the sale of wireless video surveillance systems outlined above and underlying deals and agreements between and among various parties and entities related to those sales. Meffert and St. Pierre were charged in a sixty-three-count federal grand jury indictment with offenses including conspiracy, wire fraud, bribery concerning programs receiving federal funds, money laundering, false statements, and filing false tax returns. Meffert ultimately pled guilty to one count of conspiracy to commit public bribery and one count of filing a false tax return.

Also, in addition to civil ligation filed by other parties as set forth in this court's prior opinion of CamSoft Data Systems, Inc. v. Southern Electronics Supply, Inc., 2015-1260 (La. App. 1st Cir. 9/23/15), 182 So.3d 1009, 1014, CamSoft filed this suit, alleging the conversion and misappropriation of its confidential technical and business information and trade secrets that resulted in the world's first municipal-scale wireless video surveillance system and subsequent conspiracies by various defendants to market their replica wireless video surveillance system to the cities of New Orleans and Baton Rouge through the illegal use of no-bid government sales contracts and the extensive use of bribes, gratuities, and kickbacks paid to public officials, all for the purpose of circumventing Louisiana public bid laws.⁴ Through original and amending petitions, CamSoft asserted various causes of action, including antitrust claims.

Among the defendants named in the various petitions were: Southern Electronics and its president, Ignace A. Perrin, III; Active Solutions and it owners Brian Fitzpatrick and Jeff Burkhardt; Imagine; NetMethods; St. Pierre; Mark Kurt, a co-owner of Imagine; Drake; Meffert; Dell, Inc. and Dell Marketing, L.P. (collectively referred to as “Dell”); Billy Ridge, an employee of Dell, NetMethods, and MMR; Dell employee Steve Reneker; Ciber; and MMR Constructors, Inc. d/b/a MMR Communications, MMR Group, Inc., and MMR Offshore Services, Inc. (collectively referred to as “MMR”). CamSoft eventually dismissed its claims against Perrin, Active Solutions, Fitzpatrick, Burkhardt, St. Pierre, Kurt, Drake, Ridge, and Reneker.

Following protracted procedural maneuvers by the parties, CamSoft filed a Motion for Partial Summary Judgment on the Legal Question of Antitrust Mode of Analysis, seeking a determination that the antitrust mode of analysis to be applied at trial of this matter was the per se rule.⁵ Contending that the mode of analysis governs the burden of proof at trial and, thus, that the parties must know the applicable burden of proof, Camsoft asserted that the trial court must decide this issue before trial (and before examining defendants' summary judgment attacks on its antitrust claims) and declare as a matter of law that the per se antitrust mode of analysis is applicable herein.

MMR and Dell opposed the motion. Following a hearing on the motion, the trial court signed a judgment on September 17, 2018, granting Camsoft's motion for partial summary judgment, holding as follows:

After hearing and oral argument, the Court having considered the evidence, law, pleadings, and argument of counsel, renders this judgment in conformity with its minute entry dated September 11, 2018 as follows:

“The Court has before it a Motion for Summary Judgment filed on behalf of Camsoft, petitioner herein. The Court is of the opinion that the per say [sic] rule applies in this case inasmuch [as] Dell and MMR acted jointly to retain [sic] trade of Camsoft's turn-key security canopy which has been sold to several cities around the State. Consequently, the turn-key system was meant to put out to bid. Accordingly, the Court finds no genuine issue of material fact. Camsoft is entitled to judgment as a matter of law․”

IT IS ORDERED, ADJUDGED, AND DECREED that CamSoft's Motion for Partial Summary Judgment on the Legal Question of Antitrust Mode of Analysis is GRANTED [.] (R. 1261).

From this judgment, Dell and MMR appeal pursuant to La. R.S. 51:135.⁶

LEGAL PRECEPTS

Summary Judgment

In reviewing a trial court's ruling on a motion for summary judgment, we apply the de novo standard of review. See Gray v. American Nat. Property & Cas. Co., 07-1670 (La. 2/26/08), 977 So.2d 839, 844. In our review, we use the same criteria that govern the trial court's consideration of whether summary judgment is appropriate, i.e., whether there is a genuine issue of material fact and whether the movant is entitled to judgment as a matter of law. See Supreme Services & Specialty Co., Inc. v. Sonny Greer, Inc., 06-1827 (La. 5/22/07), 958 So.2d 634, 638.

Antitrust Claims

Louisiana Revised Statute 51:122(A) provides, “Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce in this state is illegal.” This statute is virtually identical to Section 1 of the Sherman Antitrust Act, 15U.S.C. § 1, et seq., and federal analysis of the Sherman Antitrust Act is persuasive, though not controlling.⁷ HPC Biologicals, Inc. v. UnitedHealthcare of Louisiana, Inc., 2016-0585 (La. App. 1st Cir. 5/26/16), 194 So.3d 784, 792-793.

The federal and state antitrust laws were intended to be sweeping in breadth, encompassing every conspiracy, contract, or combination that restrains trade. Louisiana Power & Light Co. v. United Gas Pipe Line Co., 493 So.2d 1149, 1154-55 & n.12 (La. 1986). Not every business arrangement that restrains trade in some manner is illegal, however. Rather, La. R.S. 51:122 has been interpreted to prohibit only those agreements or conspiracies that unreasonably restrain trade. See Reppond v. City of Denham Springs, 572 So.2d 224, 230 La. App. 1st Cir.1990), & Clary v. State Farm Mutual Automobile Ins. Co., 2016-168 (La. App. 3rd Cir. 11/23/16), 204 So.3d 1102, 1113, writs denied, 2017-0209, 2017-0197 (La. 2/15/17), 215 So.3d 703, 703. Thus, to establish an antitrust violation, a plaintiff must show both the existence of a conspiracy to restrain trade and that the intended restraint on trade is unreasonable. See Nafrawi v. Hendrick Medical Center, 676 F.Supp. 770, 774 (N.D. Tex. 1987).

As to the threshold element of the existence of an agreement to restrain trade, the plain language of La. R.S. 51:122 requires a plurality of actors. A “contract,” a “combination,” and a “conspiracy” each suggests the participation of more than one person or entity. Louisiana Power and Light Co., 493 So.2d at 1155. Independent parallel conduct, or even conduct among competitors that is consciously parallel, does not alone establish the contract, combination, or conspiracy. Golden Bridge Technology, Inc. v. Motorola, Inc., 547 F.3d 266, 271 (5th Cir. 2008), cert. denied, 556 U.S. 1216, 129 S.Ct. 2055, 173 L.Ed.2d 1149 (2009).

With regard to the second element, whether the restraint of trade is unreasonable, three methods or modes of analysis have been developed for evaluating the reasonableness of a restraint on trade: the rule of reason analysis, the per se analysis, and the quick look analysis. Craftsmen Limousine, Inc. v. Ford Motor Co., 363 F.3d 761, 772 (8th Cir. 2004).

The “rule of reason,” which is used to analyze the reasonableness of most trade-restraining agreements, requires the factfinder to determine whether the questioned practice imposes an unreasonable restraint on competition by considering a variety of factors, including specific information about the relevant business, its condition before and after the restraint was imposed, and the restraint's history, nature, and effect. State Oil Co. v. Khan, 522 U.S. 3, 10, 118 S.Ct. 275, 279, 139 L.Ed.2d 199 (1997).

However, certain agreements are so pernicious and so likely to harm competition that the courts have deemed them to be per se unreasonable. See United States v. General Motors, Corp., 384 U.S. 127, 146, 86 S.Ct. 1321, 1331, 16 L.Ed.2d 415 (1966), and Southern Tool & Supply, Inc. v. Beerman Precision, Inc., 2003-0960 (La. App. 4th Cir. 11/26/03), 862 So.2d 271, 279, writs denied, 2003-3481, 2003-3518, 2003-3536 (La. 3/12/04), 869 So.2d 821, 825, 826. Unlike the rule of reason analysis, the per se analysis does not allow inquiry into the intent behind the restraint, its procompetitive justifications, or its actual effect on competition. Instead, where a restraint is deemed per se unreasonable, a conclusive presumption of illegality applies. Craftsmen Limousine, Inc., 363 F.3d at 773.

A third method of analyzing whether a conspiracy is unreasonable is the abbreviated “quick-look” analysis under the rule of reason, which is applied when “an observer with even a rudimentary understanding of economics could conclude that the arrangements in question would have an anticompetitive effect on customers and markets.” California Dental Ass'n v. Fed. Trade Comm'n, 526 U.S. 756, 770, 119 S.Ct. 1604, 1612, 143 L.Ed.2d 935 (1999). The quick-look approach does not require an elaborate industry analysis. Rather, when the restraint is not per se unreasonable, but the likelihood of anticompetitive effects is obvious, the proponent of the restraint must show some competitive justification for it. Thus, once the restraint is deemed facially anticompetitive, the burden shifts to its proponent for justification on procompetitive grounds. Realcomp II, Ltd. v. Fed. Trade Comm'n, 635 F.3d 815, 825 (6th Cir.), cert. denied, 565 U.S. 942, 132 S.Ct. 400, 181 L.Ed.2d 257 (2011).

The character or nature of the conspiracy or agreement in restraint of trade controls the mode of analysis to be applied to the determination of whether the conspiracy is unreasonable. See Southern Tool & Supply, Inc., 862 So.2d at 279-80. As a general rule, horizontal agreements, those involving coordination between competitors at the same level of a market structure, are considered to be per se unreasonable, whereas vertical agreements, created between parties at different levels of a market structure, are analyzed under the rule of reason. Van Hoose v. Gravois, 2011-0976 (La. App. 1st Cir. 7/7/11), 70 So.3d 1017, 1022.

DISCUSSION

As set forth above, in its motion for partial summary judgment, CamSoft sought a determination that the per se rule applies at the trial of this matter. Through its original and reply memoranda, CamSoft argued that selection of the appropriate mode of antitrust analysis is the first step in all antitrust analyses and that the issue of applicability of the per se mode of analysis is a question of law that the court “must resolve” prior to trial or disposition of the claim on summary judgment because the mode of analysis regulates CamSoft's burden of proof.

Summary judgment may be rendered or affirmed only as to those issues set forth in the motion under consideration by the court at that time. La. C.C.P. art. 966(F); Bryant v. Premium Food Concepts, Inc., 2016-0770 (La. App. 1st Cir. 4/26/17), 220 So.3d 79, 83, writ denied, 2017-0873 (La. 9/29/17), 227 So.3d 288. While CamSoft asserted in the court below that the selection of the mode of analysis is the first issue to be decided in all antitrust analyses, the threshold element of CamSoft's antitrust claim is, in fact, the existence of a conspiracy (or conspiracies) by defendants in restraint of trade. Indeed, the mode of analysis to be applied to an antitrust claim is entirely dependent upon the defining aspects of the underlying conspiracy. See In re Wholesale Grocery Products Antitrust Litigation, 752 F.3d 728, 733-34 (8th Cir. 2014) (where the existence and terms of an anticompetitive agreement had not yet been established, the court could not determine whether the per se rule or the rule of reason applied).

Notably, although CamSoft claimed that there was no genuine issue of material fact as to the illegal use of no-bid contracts by Dell, NetMethods, and MMR and that “there exist[ed] a verified evidentiary basis for the bribery, fraud and unethical bidding procedures,” CamSoft did not request in its motion that the trial court make any finding or determination that it had established the first element of its claim, i.e., the existence of a conspiracy (or conspiracies) in restraint of trade. Indeed, while CamSoft, in support of its motion and in reply to Dell and MMR's oppositions, generally discussed various teaming arrangements and actions it alleges were in restraint of trade, CamSoft specifically stated that it was not seeking to have the court decide whether it had stated an antitrust claim, but rather sought a determination only as to “the applicable burden of proof.”⁸

Before seeking a determination as to the appropriate mode or modes of analysis by which to judge the reasonableness of any alleged conspiracy or conspiracies, it was incumbent upon CamSoft to place before the court for determination the issues of the existence, characterization, and effect of the alleged conspiracies (and to establish the absence of any issues of fact as to the alleged conspiracies). Because CamSoft's motion for partial summary judgment failed to clearly do so, the court cannot determine the appropriate mode of analysis to be applied to any such conspiracies.

Moreover, while the selection of the antitrust mode of analysis is a question of law, underpinning that purely legal question are numerous factual questions, such as the terms of the allegedly anticompetitive agreement. In re Wholesale Grocery Products Antitrust Litigation, 752 F.3d at 733-34. Even assuming that through its motion CamSoft properly sought a determination of the existence, characterization, and effect of the alleged conspiracies, CamSoft failed to establish the absence of genuine issues of material fact as to these alleged conspiracies.

CamSoft initially averred that six competing technology companies (i.e., horizontal competitors) had “conspired to sell turnkey [wireless video surveillance] systems through no-bid contracts ․ to circumvent the competitive public bidding regulations prescribed by Louisiana's Public Bid Laws.” While this assertion seems to suggest that six companies conspired together in one scheme in restraint of trade, CamSoft's evidence in support of its motion simply does not support a finding of an overall conspiracy by all defendants in restraint of trade.

Rather, CamSoft actually alleges a series of different conspiracies between different actors, in different cities, and at different times. In its memoranda filed below, CamSoft asserted conspiracies between or among Dell and various actors in New Orleans, as well as a “teaming arrangement” between Dell and NetMethods in Baton Rouge, Gretna, Lafayette, and Westwego, to sell video surveillance security systems through the improper use of no-bid contracts, bribery, and corrupt influencing contracts. It also alleged that NetMethods and thereafter MMR improperly circumvented public bidding requirements through the use of brand name contracts that each was awarded by the OSP. Thus, each alleged conspiracy must be specifically defined, proven, and analyzed as to its characteristics and effects on trade before any determination can be made as to the mode of antitrust analysis to be applied to each. CamSoft has failed to do so on summary judgment.

Initially, we note that CamSoft relies heavily upon the affidavits of Meffert, St. Pierre, and Drake to establish the existence of the alleged conspiracies. However, any averments in these affidavits about agreements between or among various parties for work outside of the state of Louisiana are peripheral to the alleged restraints of intrastate commerce asserted by CamSoft in this suit. See La. R.S. 51:121 & 51:122.

Moreover, there are unanswered questions as to the knowledge and acquiesce of various actors as to the payment of bribes and gratuities by NetMethods to different public officials. Disputed issues of fact also exist as to whether the payment of gratuities by NetMethods actually resulted in the award to Dell and NetMethods of any contracts by the City of Baton Rouge. Additionally, there are unresolved questions as to whether similar payments to public officials in Lafayette resulted in any improper no-bid sales. And as to MMR, CamSoft's evidence in support of its motion does not establish that MMR conspired with any public official or other entity for improper no-bid sales that should have been competitively bid.

CamSoft also failed to establish through the evidence offered in support of its motion that these alleged conspirators are indeed competitors, rather than merely suppliers of different goods and services at different market levels, facts relevant to the determination of whether the alleged conspiracies are in fact horizontal or vertical. Aside from general averments as to the activities of these businesses, the exact nature of the business activities of the various actors involved and the goods or services each provided in the course of their businesses was not established. While issues of fact remain as to the relationships of these actors to one another in the market structure, the evidence presented suggests that certain companies were supplying equipment or services that other companies would have been unable to provide in the absence of some type of teaming arrangement, which would not support CamSoft's contention that these actors were horizontal competitors.

Most importantly, to prove a conspiracy or conspiracies between or among actors, the evidence must establish that these actors had “a conscious commitment to a common scheme designed to achieve an unlawful objective.” HPC Biologicals, Inc., 194 So.3d at 793 (quoting Marucci Sports, L.L.C. v. National Collegiate Athletic Association, 751 F.3d 368, 373-74 (5th Cir. 2014). Thus, at the core of CamSoft's claims related to these alleged conspiracies are issues of motive and intent. A motion for summary judgment is rarely appropriate for disposition of a case requiring judicial determination of subjective facts such as intent, motive, malice, good faith, or knowledge. Further, issues that require the determination of reasonableness of acts and conduct of parties under all facts and circumstances of the case cannot ordinarily be disposed of by summary judgment. Greater Lafourche Port Comm'n v. James Const. Group, L.L.C., 2011-1548 (La. App. 1st Cir. 9/21/12), 104 So.3d 84, 88. In light of the many unanswered or contested issues of fact herein, any determination that the parties to the various alleged conspiracies had a “conscious commitment to a common scheme designed to achieve an unlawful objective” is simply inappropriate on summary judgment.

Lastly, given that Dell was no longer selling wireless video surveillance systems through its WSCA contract after directed by the OSP to cease such sales in March 2007 and that MMR did not begin making similar sales through its own brand name contract until 2009, any potential conspiracy between these two entities as specifically found by the trial court in its judgment is not supported by the evidence presented.

In sum, CamSoft's claims are fact intensive and rest heavily on the conduct of many different actors. Even if properly raised in its motion, CamSoft has failed to show the absence of any material issues of fact as to the threshold issue of the existence of a conspiracy or conspiracies it alleges herein. Thus, summary judgment declaring that the per se mode of antitrust analysis will apply to any alleged conspiracy was inappropriate. See In re Wholesale Grocery Products Antitrust Litigation, 752 F.3d at 733 (the federal appellate court, in concluding that summary judgment as to the antitrust mode of analysis was not appropriate, reasoned that the crucial factual question therein was the terms of the allegedly anticompetitive agreement, a question for which factual issues remained, and further noted that the plaintiff had “confuse[d] the real issue by arguing the undisputed evidence establishes a per se violation of the antitrust laws”).

CONCLUSION

For the above and foregoing reasons, the September 17, 2018 judgment granting CamSoft's Motion for Partial Summary Judgment on the Legal Question of Antitrust Mode of Analysis and declaring that the per se rule applies in this matter is reversed. This matter is remanded for further proceedings consistent with the views expressed herein. Costs of this appeal are assessed against CamSoft Data Systems, Inc.

REVERSED AND REMANDED.

FOOTNOTES

1.   The WSCA is an alliance of state purchasing directors who seek to obtain better pricing for computer equipment through greater volume purchasing power. It seeks proposals from manufacturers for competitive, discount pricing for direct equipment sales. Public entities within the participating states can then purchase computer equipment directly from the manufacturer at pre-arranged discounted prices. A WSCA contract will specify particular equipment that can be sold pursuant to the contract, but does not specify a particular brand name for the equipment. After participating in the WSCA proposal and approval process, Dell executed a WSCA contract for the sale of certain computer equipment in August 2004, and the state of Louisiana executed a participating addendum with Dell in December 2004. Purchasing the wireless surveillance network equipment directly through Dell's WSCA contract avoided the competitive bid process. See La. R.S. 38:2212.1(F).

2.   It appears that “Government Services Administration” is intended to refer to the federal “General Services Administration.” See La. R.S. 39:1702(A) & 38:2212.1(E). Nonetheless, in June of 2004, the mayor of New Orleans signed an executive order granting Meffert authority to directly contract with companies possessing approved GSA rates. Thus, Meffert was able to contract with companies such as Ciber without going through the process of obtaining competitive bids.

3.   Regarding brand name contracts, the OSP would issue a solicitation for bids for a particular brand of products, and the contract would be awarded to the lowest bidder meeting the specifications. Any entity bidding to receive a brand name contract must either manufacture those products or have a relabeling agreement with the manufacturer, allowing the entity to relabel the product as the brand name. When selling products through a brand name contract, the brand name contract holder can supply to a state agency only products of that particular brand and must warranty the equipment. Thus, only those entities that manufactured NetMethods brand surveillance equipment or those with relabeling agreements with NetMethods could bid on the solicitation for bids for NetMethods surveillance equipment.

4.   CamSoft's allegations are thoroughly detailed in this court's prior opinion. CamSoft Data Systems, Inc., 182 So.3d at 1011-1014.

5.   The extensive procedural history of this matter and CamSoff's attempted involvement in related civil litigation is also detailed in this court's prior opinion. CamSoft Data Systems, Inc., 182 So.3d at 1014-1015.

6.   As set forth in La. R.S. 51:135, all interlocutory judgments in cases involving antitrust claims shall be appealable within five days and shall be heard and determined within twenty days after the appeal is lodged.

7.   The Louisiana statute applies to intrastate commerce, whereas the Sherman Antitrust Act applies to interstate commerce and foreign trade. See La. R.S. 51:121, La. R.S. 51:122, & 15 U.S.C. § 1.

8.   In its memorandum in reply to MMR's opposition, CamSoft specifically acknowledged that “MMR will not admit it violated the antitrust laws” and “a jury will make the ultimate determination.”

THERIOT, J.