Court of Appeal Anti-Trust Opinion

SANGER & SWYSEN

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[The following is the Opinion of the Court of Appeal as filed on August 15, 2000 published here for educational purposes only. Even though this opinion has been published by the Court, the names of Sanger & Swyen's client and of the co-defendants have been removed for attorney/client and privacy reasons for the purpose of this posting. Do not rely on this opinion as a matter of law. It was certified for partial publication only and is subject to revision, review and interpretation by other courts.]

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

THIRD APPELLATE DISTRICT

(Sacramento)

THE PEOPLE, Plaintiff and Appellant, v. [Client] et al., Defendants and Respondents. C030485 (Super. Ct. No. 95F00913)

APPEAL from a judgment of the Superior Court of

Sacramento County. Richard K. Park, Judge. Affirmed.

Bill Lockyer, Attorney General, David P. Druliner, Chief Assistant Attorney General, Robert R. Anderson, Senior Assistant Attorney General, Harry Joseph Colombo and Margaret E. Spencer, Deputy Attorneys General, for Plaintiff and Appellant.

Sanger & Swysen, Robert M. Sanger, Catherine J. Swysen and Barbara A. Carroll for Defendant and Respondent [Client]; Seagal & Kirby, Malcolm S. Segal for Defendants and Respondents [Co-Defendants]; Blackmon & Snellings, Clyde M. Blackmon, Hill C. Snelling, M. Allen Hopper and Karen L. Hamilton for Defendant and Respondent [Co-Defendant]; and [Co-Defendants], in pro. per.

INTRODUCTION

After defendants were indicted by grand jury on two counts of conspiracy against trade in violation of the Cartwright Act (Bus. & Prof. Code, § 16755) and other offenses, the trial court granted their motions to suppress evidence under Penal Code section 1538.5 (further section references are to the Penal Code unless specified otherwise). Defendants successfully argued such evidence was illegally seized in a general search or developed as a result of that illegal search. Defendants then renewed their motions to dismiss under section 995. The trial court found the successful suppression motions provided changed circumstances to support renewed section 995 motions and further found that without the evidence that had been suppressed, there was insufficient evidence to support the indictment.

The People appeal from the order dismissing the two counts of the Cartwright Act violations. The People contend the trial court erred in applying the exclusionary rule retroactively to redact evidence presented to the grand jury and there were no changed circumstances to support renewal of the section 995 motions. The People further contend that the legally obtained evidence was sufficient to establish probable cause. We affirm.

FACTUAL AND PROCEDURAL BACKGROUND

On February 3, 1995, the grand jury returned an eight-count indictment against defendants. As relevant here, counts one and two alleged violations of the Cartwright Act. Count one alleged that between April 1, 1991, and April 30, 1993, defendants [Client] and [Co-Defendants] “did willfully, unlawfully, and feloniously form a trust and combination, as defined in Section 16720 and made unlawful by Section 16726 of the Business and Professions Code, for the purpose and with the effect of fixing prices and precluding competition by rigging bids for the purchase of various foodstuffs by the State of California.” The indictment alleged defendants engaged in a conspiracy against trade and committed 25 overt acts, all of which were submitting bids to the State of California (the State).

Count two alleged that between March 1, 1993, and April 30, 1994, defendants [Client] and [Co-Defendants] formed an illegal trust and combination to fix prices and preclude competition by rigging bids for the purchase of various foodstuffs by the State. The conspiracy against trade was committed by 21 overt acts, all of which were submitting bids to the State.

Counts three through six were perjury charges (§ 118) against [Client] and [Co-Defendants]. Count seven charged [Client] and [Co-Defendants] with offering false evidence (§ 132) and count eight charged [Client] and [Co-Defendant] with preparing false evidence (§ 134).

Buyers at the Department of General Services, Procurement Division, are responsible for purchasing foodstuffs for State institutions. The buyers compile the commodity requirements and prepare an invitation for bid (IFB). This IFB is sent to a list of prequalified buyers. Other bidders could request a copy of the IFB by calling the department. Certain small businesses are given a five percent preference. The preference is calculated by multiplying the bid of a large company by 1.05. A small business must be certified by the Office of Small and Minority Businesses to receive the five percent preference; the certification is based on the company’s gross annual receipts over three years.

Defendants [Client] and [Co-Defendant] are partners in [Client's Business], a large company that has bid on the State foodstuffs contracts for many years. The [Co-Defendant] own [Co-Defendant] Foods; [Co-Defendant] owns [Co-Defendant] Distributors; the [Co-Defendants] own [Co-Defendant] Seafood; and the [Co-Defendants] own [Co-Defendant] Foods, and [Co-Defendant] is the general manager. These companies are small companies entitled to the five percent preference for small companies submitting bids on the State contracts.

The People’s theory of the case is that [Client] and [Co-Defendant] entered into an agreement with the other defendants whereby [Client] and [Co-Defendant] informed the others of the price at which [Client's Business] was prepared to sell various foodstuffs to the State. The remaining defendants could use this information to submit bids in accordance with an agreed upon formula, that was not more than five percent above [Client's Business]’s bid. The People claimed [Client's Business] disclosed its bid price to “subvert the purpose of the small business preference system to the benefit of [Client's Business].” “[T]he motive for [Client's Business] to disclose its bid prices to the other defendants was to attempt to ensure that if [Client's Business] was the low bidder, so long as one of its co-conspirators had bid within five percent of [Client's Business]’s bid, there was some reasonable assurance that the co-conspirator would win the bid based on the small business preference.”

At a hearing on a motion to dismiss for discriminatory prosecution, the People conceded that bidding to provide an item to the State and also supplying it to a competing bidder was not a crime and was a common practice. The People also conceded that there was usually a very small margin between the first four or five bidders. In explaining the prosecution’s theory of the case, the prosecutor indicated that if all she knew was that A and B consistently bid the same product with prices within five percent of each other, she would not initiate a prosecution.

To support the indictment, the People presented to the grand jury copies of the bid documents for 22 instances in which [Client's Business] and one, or more commonly two, of the small company defendants submitted bids for the same State contract. In most instances, the small company bid the same brands as [Client's Business]. However, on one occasion, [Co-Defendant] Distributors bid a different brand and on another [Co-Defendant] Foods bid a different brand. On three occasions when [Client's Business] submitted alternate bids offering different brands, [Co-Defendant] Foods did the same. On another occasion [Client's Business] submitted an amended bid and [Co-Defendant] Foods and [Co-Defendant] Seafood did likewise. In most of the bids, the small company’s bid was a few percentage points, less than five, above [Client's Business]. On one occasion [Co-Defendant] Distributors bid over five percent above [Client's Business]. Twice [Co-Defendant] Foods underbid [Client's Business] and once [Co-Defendant] Distributors did.

In several instances, [Co-Defendant] Foods or [Co-Defendant] Distributors was awarded the contract, due to the five percent preference. In some cases the contract went to [Client's Business], despite a bid by a small company. In other instances, a third party won the contract. In no case did [Co-Defendant] Foods or [Co-Defendant] Seafood receive the contract; usually they were noncompliant with the bid requirements.

In none of the cases where a defendant small company submitted a bid was that company on the list of pre-approved vendors who were sent the IFB. In endeavoring to show the defendant small companies got their bid forms, as well as price information, from [Client's Business], the People called a questioned document examiner to testify. David Moore examined the bid documents submitted. He concluded there were 23 instances of common copier defects, showing the forms had been run through the same copier, but not the copier at the State. All but two of these were associated with [Client's Business]. The common copier defects occurred seven times with [Co-Defendant] Foods, eleven times with [Co-Defendant] Seafood and/or [Co-Defendant] Foods, six times with [Co-Defendant] Foods and seven times with [Co-Defendant] Distributors. In addition, there was handwritten or typed information on four of [Client's Business]’ bids that also appeared twice on [Co-Defendant] Foods’ bids and twice on [Co-Defendant] Seafood’s bids. There was handwritten information on 14 of [Client's Business]'s bids, that appeared five or six times on bids from [Co-Defendant] Foods, on four bids from [Co-Defendant] Seafood, on one [Co-Defendant] Foods’s bid, and on three bids from [Co-Defendant] Distributors. On several bids there was information from [Client's Business] that had been partly obliterated before the small company bid was submitted. The People and the [Co-Defendants] stipulated that no questioned documents examiner had formed an opinion as to when the obliterations were made or by whom. Further, no such expert had stated, in a written report or testimony, that any prices were obliterated, as between [Co-Defendant] Seafood and [Client's Business]. Counsel for [Client] later stated, without objection, that this stipulation applied to all defendants.

The People also presented certain documents seized in the searches of defendants’ residences. Included in these documents was a letter from [Client] to [Co-Defendant], in which [Client] proposed quoting a price for the purchase, warehousing, assembly and delivery of orders. He suggested [Co-Defendant] could mark up the price two percent for his bid. He noted the bidding was too competitive to allow a full five percent markup. [Co-Defendant] responded, “This relationship sounds good to me.” Also included was a memo entitled “[Client's] Short Course in State Economics.” In this memo [Client] explained his pricing, including delivery charges. He would quote a small company a price slightly higher than his own bid to the State. He figured in a two percent profit and indicated he thought small companies should also be satisfied with two percent. There were other faxes from [Client] in which he suggested a particular markup.

During the search of the [Client] residence, [Client] wrote a note and faxed it. The note said, “Lock your house & leave.”

After the indictment was returned, defendants filed numerous motions to dismiss. The first of these were two filed by [Client] and the [Co-Defendants]. [Client] argued the grand jury was improperly instructed as to the law. He asserted that the conduct alleged was not a per se violation of the Cartwright Act. This motion was denied. The [Co-Defendants] argued there was insufficient probable cause to indict as there was no evidence of price sharing. The trial court denied the motion, finding that price fixing was a per se violation of the Cartwright Act and the evidence of the bids and faxes permitted a reasonable inference that [Client's Business] shared its actual bids. While price sharing alone is not necessarily a violation of the Cartwright Act, the court found that together with the other evidence it was circumstantial evidence of an agreement to affect prices.

Other motions to dismiss were filed, based on theories of the failure to present exculpatory evidence, selective prosecution, and discovery abuse.

At the same time as the original motions to set aside the indictment, Hofer filed a motion to suppress all evidence obtained in the search of [Client's Business]. One of his arguments was that the search was an impermissible general search. The [Co-Defendants] filed a similar motion.

The trial court found the search of [Client's Business] was a general search and granted the motion as to [Client] and [Co-Defendant]. It denied the [Co-Defendants]’s motion.

Defendants [Co-Defendant] and the [Co-Defendants] filed a motion to suppress evidence obtained in a search, which was granted. The [Co-Defendants] and [Co-Defendants] filed a similar motion to suppress and a motion to dismiss for destruction or loss of evidence. Both motions were granted and the counts against the [Co-Defendants] and [Co-Defendant] were dismissed. The [Co-Defendants] were allowed to reopen their suppression motion, which was then granted.

The defendants remaining in the case moved to suppress all evidence developed after the illegal searches. The court granted the motion as to [Client] and [Co-Defendants]. It was denied as to [other Co-Defendants].

By stipulation, the perjury counts, three, four, five and six, were dismissed for insufficient evidence.

After the suppression motions were granted, the [Co-Defendants] moved again to set aside the indictment under section 995. They claimed that in the aftermath of the suppression motion, there was no longer sufficient evidence to support the indictment. They also claimed the large amount of inadmissible evidence presented to the grand jury violated their due process rights under People v. Backus (1979) 23 Cal.3d 360.

The other defendants filed similar motions to set aside the indictment.

In opposition to these motions the People referred to their previous recitation of all the evidence, including that which was suppressed. They provided no analysis that the nonsuppressed evidence was sufficient to support the indictment.

The trial court granted the motion as to counts one and two. It noted that as a result of the successful suppression motions most of the evidence relied on to show an agreement to bid on a coordinated basis was gone, as was the “[Client's] Short Course in State Economics” memo showing how the small business preference could be used to their mutual advantage. The People now relied upon the bid documents and the testimony of the document examiner. This evidence indicated the small companies’ bid forms came from [Client's Business]. The closeness of the bid prices and that the same brands were usually bid was insufficient to raise a strong suspicion of guilt. The market for state food procurements was very competitive and bids within five percent of each other were expected, not unusual. Further, companies often bid the same brands because of the narrowness of the specifications or price considerations. The common copier defects and the evidence of partial obliterations were insufficient to show price sharing as it could not be shown when the obliterations occurred or whether they contained bid prices. In light of the suppression orders, the People had no evidence, direct or circumstantial, of an agreement to coordinate bids. “At best the prosecution has evidence from which it can reasonably be inferred that [Client's Business] both quoted the prices it would charge to supply the commodities to the other defendants if they were the winning bidders as well as submitted its own bids for those products, but the People have conceded this is a commonplace practice, is not a crime, and is not the basis of the indictment. Insufficient evidence remains to support the anti-trust claims.”

The motion was denied as to counts seven and eight.

DISCUSSION

The People first attack the procedural vehicle by which counts one and two were dismissed. They assert that the exclusionary rule cannot be applied retroactively to redact evidence received by the grand jury. Accordingly, they argue, since the illegally seized evidence should not have been redacted, there were no changed circumstances to warrant a renewal of the motions to set aside the indictment.

Section 939.6, subdivision (b) provides: “The grand jury shall not receive any evidence except that which would be admissible over objection at the trial of a criminal action, but the fact that evidence which would have been excluded at trial was received by the grand jury does not render the indictment void where sufficient competent evidence to support the indictment was received by the grand jury.”

The People argue that illegally seized evidence, subject to suppression under the exclusionary rule, is not evidence that is inadmissible at trial. They claim such evidence, because it is relevant and probative, is not incompetent and inadmissible, but merely excluded as a court-ordered sanction for violation of Fourth Amendment rights. The People appear to claim that an indictment may be based on illegally seized evidence. They are wrong. It has long been the law of California “that evidence obtained by such unconstitutional means [illegal arrests, searches, and seizures] is inadmissible at the trial [citations] and incompetent to support an accusatory pleading [citation].” (People v. Valenti (1957) 49 Cal.2d 199, 203.)

The People contend the exclusionary rule cannot be applied retroactively to redact evidence received by the grand jury. Since a defendant cannot move to suppress evidence prior to the grand jury proceeding (People v. Prewitt (1959) 52 Cal.2d 330, 335), the People’s position would allow an indictment to stand although based on illegally obtained evidence. “If the illegally obtained evidence is the sole basis of an indictment or information, defendant is held without reasonable or probable cause; his motion to set aside the accusatory pleading should be granted by the court . . . .” (People v. Valenti, supra, 49 Cal.2d at p. 203.)

In People v. Govea (1965) 235 Cal.App.2d 285, three indictments were returned for violations of narcotics laws. Defendants moved to set aside the indictments on the basis that all of the evidence used to support probable cause was obtained by illegal searches. The trial court granted the motions. On appeal, the reviewing court reversed the dismissal of the first two indictments, finding the searches were legal. (Id. at pp. 299-302.) The court found, however, that the third search was illegal and all of the evidence obtained against defendants in the third indictment was the product of the illegal search. Since there was no competent evidence to support the indictment, it must be set aside under section 995. (Id. at p. 305.) The order to that effect was affirmed. (Ibid.) Thus, the court applied the exclusionary rule retroactively to grand jury proceedings to determine if there was probable cause to indict defendants.

In their reply brief, the People refine their argument to indicate that the exclusionary rule can be applied in a section 995 sufficiency review only where the transcript of the grand jury proceedings alone shows the evidence that is the sole basis of the indictment was obtained illegally. The People rely on a series of cases that held where the determination of the legality of the contested search cannot be made based on the transcript of the grand jury proceedings, legality should be presumed and the ultimate decision on admissibility of evidence will be resolved at trial. In People v. Prewitt, supra, 52 Cal.2d at pages 335-336, the court stated: “When the prosecution is by indictment, however, the defendant has no opportunity to object to the introduction of evidence before the grand jury, and accordingly, there can be no waiver of the right to challenge the legality of the evidence to support the indictment based on a failure to object to its introduction. Although he has no opportunity to develop facts that may show that essential evidence was illegally obtained, if the record is silent on this question, it must be presumed that the officers acted lawfully. [Citation.] In such a case, just as in the case when the evidence before the magistrate is conflicting on the question of legality or no objection is made to the evidence seized, ‘the ultimate decision on admissibility can be made at the trial on the basis of all of the evidence bearing on the issue.’ [Citation.]”

People v. Prewitt, supra, 52 Cal.2d 330 and the other cases on which the People rely pre-date the adoption of section 1538.5. (Stats. 1967, ch. 1537, § 1, p. 3652.) This section now provides a vehicle for challenging before trial the legality of a search and the admissibility of evidence obtained therefrom. Indeed, this pretrial procedure is advantageous to the prosecution because it permits the determination of the legality of searches and seizures and the appeal of any adverse ruling before jeopardy attaches at trial. (People v. Superior Court (Edmonds) (1971) 4 Cal.3d 605, 610.)

Defendants availed themselves of this procedure and were successful. The People do not challenge the trial court’s ruling that the evidence obtained in the searches of defendants’ residences or developed thereafter should be suppressed. Generally, after a successful section 1538.5 motion, the People, or the court on its own motion, will move to dismiss the matter under section 1385. (People v. Superior Court (Kusano) (1969) 276 Cal.App.2d 581, 585.) Here, the perjury counts were so dismissed, but neither the People nor the trial court dismissed the Cartwright Act violations.

The question presented by this case, therefore, is what remedy a defendant has after a successful motion to suppress evidence under section 1538.5 where he believes there is no longer probable cause to support the indictment, but neither the prosecution nor the court dismisses the case. The People appear to argue that such a defendant has no remedy, but must proceed to trial. Such result is contrary to the purpose of section 1538.5, which is to reduce the waste of unnecessary court time in resolving search and seizure questions and to provide the prosecution with an opportunity to appeal adverse rulings before jeopardy attaches. (People v. Superior Court (Edmonds), supra, 4 Cal.3d 605, 610.)

We reject the People’s position that defendants must proceed to trial without challenging the indictment. Rather, where defendant has been indicted based on evidence which is ruled to have been illegally obtained and which must be suppressed at trial, defendant must have an opportunity to receive a determination whether the indictment rests upon competent, legally obtained evidence. In People v. Superior Court (Kusano), supra, 276 Cal.App.2d at page 585, the court suggested a defendant could ask the court to dismiss under section 1385. Section 1538.5 provides for such a dismissal: “Nothing contained in this subdivision shall prohibit a court, at the same time as it rules upon the search and seizure motion, from dismissing a case pursuant to Section 1385 when the dismissal is based upon the court’s own motion and is based upon an order at the special hearing granting the defendant’s motion to return property or suppress evidence.” (§ 1538.5, subd. (l).)

Section 1385 provides for dismissal of a case in furtherance of justice upon the court’s own motion or upon application of the prosecuting attorney. It does not provide for a motion to dismiss by the defendant. The Supreme Court has warned that a suggestion by defendant that the court exercise its power under section 1385 “could prove a dangerous game: if the defendant’s ‘suggestion’ is deemed to be in effect a motion, the People could appeal from the ensuing dismissal (§ 1238, subd. (a)(8)) and might obtain a reversal on this ground alone.” (People v. Laiwa (1983) 34 Cal.3d 711, 722, fn. 6.) Thus, using section 1385 as the remedy is not satisfactory.

Two other remedies are possible. Defendant could bring a nonstatutory motion to dismiss, based on the ground that he has been denied a substantial right, that is, not to be held over absent probable cause determined on the basis of competent, legally obtained evidence. “It is well established that the validity of procedures underlying a felony indictment or information may in appropriate cases be tested by motion or application independent of section 995 on the basis of facts outside the grand jury or preliminary examination record. [Citations.]” (People v. Aguirre (1987) 193 Cal.App.3d 1168, 1171, fn. 1; see also Murgia v. Municipal Court (1975) 15 Cal.3d 286, 294, fn. 4 [“Although no clear California statutory authority provides for such a pretrial motion to dismiss, we have no doubt in light of the constitutional nature of the issue [discriminatory prosecution] as to the trial court’s authority to entertain such a claim.”]) Thus, even if section 995 was not the proper procedure, the trial court still had authority to grant relief.

The question remains whether a section 995 sufficiency review may encompass consideration of the result of a section 1538.5 motion. Section 995, subdivision (a)(1) provides that an indictment shall be set aside: “(A) Where it is not found, endorsed, and presented as prescribed in this code. [¶] (B) That the defendant has been indicted without reasonable or probable cause.”

The basis of defendants’ argument that the indictment should be set aside -- that after the successful suppression motions, the indictment was without probable cause -- falls within the scope of section 995. Section 995, therefore, appears to be the proper procedural vehicle to test the sufficiency of the indictment. The People argue that section 995’s scope is limited to a review of the sufficiency of the pleadings based on the record before the grand jury, and that evidence outside that record is not to be considered. Accordingly, they argue, section 995 cannot be used to test the sufficiency of the indictment.

“Although section 995 does not expressly confine its scope to errors present in the preliminary hearing record, it has, with one exception, been uniformly so construed. [Citation.]” (Currie v. Superior Court (1991) 230 Cal.App.3d 83, 90, footnote omitted.) “The purpose of a motion to set aside the accusatory pleading under Penal Code section 995 is to review the sufficiency of the indictment or information on the basis of the record made before the grand jury in the one case or the magistrate at the preliminary hearing in the other. A section 995 motion does not contemplate the introduction of evidence at the hearing on the motion. [Citation.]” (People v. Crudgington (1979) 88 Cal.App.3d 295, 299.)

Here, no evidence needed to be introduced; that had already happened at the hearing on the section 1538.5 motion. The court needed only to review the sufficiency of the indictment in light of its earlier ruling on the suppression motion. Under these circumstances we see no compelling reason, and the People do not provide one, why the review of the sufficiency of the indictment for probable cause cannot include consideration of the court’s ruling on the suppression motion.

[Client] and the [Co-Defendants] had brought prior motions under section 995 to dismiss that were denied. “Ordinarily, a motion under section 995 should not be renewed unless changed circumstances are shown which have a significant bearing on the question whether a defendant was indicted or committed without probable cause. (Cf. Code Civ. Proc., § 1008.) Such circumstances might exist, for example, if there were a substantial change in the law between the time of the first and second motions, which made inadmissible much of the testimony considered by the grand jury or magistrate.” (In re Kowalski (1971) 21 Cal.App.3d 67, 70.) Here, the ruling suppressing much of the evidence presented to the grand jury was a sufficient change in circumstances to warrant renewal of the motions under section 995.

Turning to the merits of the case, the People argue the trial court erred in ruling that the legally obtained evidence was insufficient to provide probable cause for the indictment.

“The grand jury shall find an indictment when all the evidence before it, taken together, if unexplained or uncontradicted, would, in its judgment, warrant a conviction by a trial jury.” (§ 939.8.) The standard of proof under this section is probable cause. (Cummiskey v. Superior Court (1992) 3 Cal.4th 1018, 1029.) “‘[P]robable cause’ ‘“means such a state of facts as would leave a man of ordinary caution or prudence to believe, and conscientiously entertain a strong suspicion of the guilt of the accused. ‘Reasonable and probable cause’ may exist although there may be some room for doubt.”’ [Citations.]” (Ibid., original italics.)

“A reviewing court may not substitute its judgment for that of the grand jury or magistrate in determining the sufficiency of the evidence and must draw all reasonable inferences in support of the indictment or information. [Citations.]” (People v. Backus, supra, 23 Cal.3d 360, 391.)

The indictment charged defendants with two counts of a conspiracy against trade. (Bus. & Prof. Code, § 16755, subd. (a).) “A criminal conspiracy exists where it is established that there was an unlawful agreement to commit a crime between two or more people, and an overt act in furtherance of the agreement. [Citation.] To sustain a conviction for conspiracy the prosecution must show not only that the conspirators intended to agree but also that they intended to commit the elements of the offense. [Citation.] In proving a conspiracy, however, it is not necessary to demonstrate that the parties met and actually agreed to undertake the unlawful act or that they had previously arranged a detailed plan. The evidence is sufficient if it supports an inference that the parties positively or tacitly came to a mutual understanding to commit a crime. Therefore, conspiracy may be proved through circumstantial evidence inferred from the conduct, relationship, interests, and activities of the alleged conspirators before and during the alleged conspiracy. [Citation.]” (People v. Prevost (1998) 60 Cal.App.4th 1382, 1399.)

The People’s case against defendants was based on the allegation that [Client] and [Co-Defendant] shared price information with the other defendants so that they could also bid on State contracts pursuant to an agreed upon formula. An agreement between competitors pursuant to which bids are made or withheld is bid rigging and a per se violation of anti-trust laws. (United States v. W.F. Brinkley & Son Construction Company, Inc. (4th Cir. 1986) 783 F.2d 1157, 1160.) “Under both California and federal law, agreements fixing or tampering with prices are illegal per se.” (Oakland-Alameda County Builders’ Exchange v. F. P. Lathrop Constr. Co. (1971) 4 Cal.3d 354, 363.)

The People contend the testimony of the questioned document examiner as to the common copier defects on defendants’ bid forms and that some information on [Client's Business]’s bid form was obliterated on the forms of the small companies before submission to the State “is sufficient at the very least to establish a strong suspicion that [Client's Business] not only apprised selected competitors of the existence of a business opportunity, i.e., a bid solicitation published by the Office of Procurement, but also disseminated to said competitors the information contained on its own bid documents, namely, prices and brand specifications.” (Fn. omitted.) The People further contend this conclusion is bolstered by the small companies bidding the same products, amending their bid when [Client's Business] did, and bidding the contracts within a small percentage of [Client's Business]’s price.

Defendants retort this evidence is insufficient to establish probable cause to believe defendants committed the crimes charged. At most, they argue, this evidence shows [Client's Business] provided the other defendants with bid forms for State contracts and offered to supply the commodities for those contracts. Thus, it is not surprising that these defendants bid the same products and their prices were only a few percentage points above those of [Client's Business]’s bid. As the People conceded in the trial court, such conduct is not a crime and is a common practice.

Defendants further contend the obliteration of some information on [Client's Business]’s bid forms cannot be used to draw an inference of price sharing because the People stipulated it could not be determined when or by whom the obliteration was made or that pricing information was obliterated.

While the People’s case requires evidence of an agreement to make coordinated bids, the People are not required to prove an express agreement. “An agreement may be inferred from circumstantial evidence of a ‘common design and understanding, or a meeting of minds in an unlawful arrangement. . . .’ [Citation.] Nevertheless, when relying solely on circumstantial evidence, a plaintiff must present evidence from which an inference of conspiracy is more probable than an inference of independent action. [Citation.]” (Wilcox v. First Interstate Bank of Oregon (9th Cir. 1987) 815 F.2d 522, 525.)

“Where the evidence is wholly circumstantial and in every aspect is reasonably consistent with innocence, the mere fact that the circumstances may also be reconciled with guilt will not justify an indictment. The grand jury may not resolve all implications in favor of guilt by substituting a presumption of guilt for one of innocence.” (Jensen v. Superior Court (1950) 96 Cal.App.2d 112, 117.)

Defendants contend the evidence is wholly consistent with innocence. The evidence can be explained by [Client's Business] providing small companies with bid forms from its copier, and offering to provide them the commodities. Accordingly, the small companies bid the same products and amend their bid when their supplier did. Further, understanding the five percent preference, their markup from the price offered by [Client's Business] had to be less than five percent to be competitive.

“In determining whether an agreement can be inferred from circumstantial evidence, a series of ‘plus factors’ have been considered. [Citation.] Such factors may include price parallelism, product uniformity, exchange of price information, and opportunity to meet to form anti-competitive policies. [Citation.]” (Wilcox v. First Interstate Bank of Oregon, supra, 815 F.2d at pp. 825-826.)

In their reply brief, the People argue the evidence of parallel pricing with “plus factors” is sufficient to establish probable cause. They cite three factors: exceptionally strong price parallelism in an unconcentrated market, the common motive to collude, and the high level of communications among defendants. The first and third of these factors are explained by [Client's Business] being the supplier for the small companies, [Client's Business] providing them the bid forms, and the workings of the five percent small business preference. In the absence of any evidence as to when or by whom the information was obliterated from the bid forms, or that such obliterations included price information, this evidence is insufficient to establish probable cause.

The People contend defendants’ common motive to conspire strengthens the conclusion that they coordinated their bids. The probative value of this evidence, however, also depends on whether it can be explained as a legitimate business decision. “The law is settled that proof of consciously parallel business behavior is circumstantial evidence from which an agreement, tacit or express, can be inferred but that such evidence, without more, is insufficient unless the circumstances under which it occurred make the inference of a rational, independent choice less attractive than that of concerted action. [Citations.]” (Bogosian v. Gulf Oil Corp. (3rd Cir. 1977) 561 F.2d 434, 446.) Those circumstances are shown where defendants act in contradiction of their own economic interests and a motive to enter an agreement is demonstrated. (Ibid.) The People assert that [Client's Business]’s sharing of information about the brands and prices it would bid was irrational and a suicidal business behavior that can only be explained as part of a collusive scheme. We disagree. In its dual role as bidder and supplier, it would make little or no economic difference to [Client's Business] whether it supplied the commodities to the State as the successful bidder or as the supplier to a company receiving the five percent preference. Thus, the sharing of information is not in contradiction of [Client's Business]’s economic interests and does not make “the inference of rational, independent choice less attractive than that of concerted action. [Citations.]” (Bogosian v. Gulf Oil Corp., supra, 561 F.2d 434, 446.)

The trial court properly set aside the indictments on counts one and two as defendants were not indicted on probable cause.

III

Defendants also assert their due process rights were violated by the indictment. In People v. Backus, supra,

23 Cal.3d 360, at pages 392-393, the Supreme Court held a defendant has a right to due process during grand jury proceedings. The court noted that state law required the prosecutor to reveal to the grand jury the existence of exculpatory evidence. It then concluded: “If the grand jury cannot fulfill its obligation to act independently and to protect citizens from unfounded obligations [citation] when not advised of relevant exculpatory evidence, neither can it do so if it is invited to indict on the basis of incompetent and irrelevant evidence. It follows therefore that when the extent of incompetent and irrelevant evidence before the grand jury is such that, under the instructions and advice given by the prosecutor, it is unreasonable to expect that the grand jury could limit its consideration to the admissible, relevant evidence [citation], the defendants have been denied due process and the indictment must be dismissed notwithstanding Penal Code section 939.6.” (Id. at p. 393.)

In Backus, the court found the presentation to the grand jury of some inadmissible evidence did not prejudice defendants. The nature and extent of the inadmissible evidence was not such as to compromise the independence of the grand jury as the inadmissible evidence was cumulative or helpful to the defense. (People v. Backus, supra, 23 Cal.3d at pp. 393-396.)

Defendants argue here the amount of inadmissible evidence presented to the grand jury -- that is, the evidence that was ordered suppressed -- compromised the grand jury’s independence and denied them due process. The People’s concession that the similarities of the bidding alone were insufficient to show a Cartwright Act violation indicates the People relied heavily on the faxes and memos found in the illegal searches. In opposing the original motion to set aside the indictment, the People placed great emphasis on these documents as “unequivocal communications regarding price coordination” from which the jury’s inference of pricing agreements was nearly compelled.

The denial of due process provides an alternative basis for setting aside the indictment. Defendants were denied the due process right to have the grand jury consider whether there was probable cause to indict them based solely on evidence that would be admissible at trial. (§ 939.6, subd. (b).) The illegally seized evidence was inadmissible and incompetent to support the indictment. (People v. Valenti, supra, 29 Cal.2d at p. 203.) The presentation of the inadmissible evidence removed from the grand jury’s consideration the difficult question the case presented. The grand jurors were not required to decide whether the admissible evidence of the bidding pattern, [Client's Business]’ supplying bid forms, and the partial obliterations on the bid forms, was sufficient to entertain a strong suspicion of defendants’ guilt. Given the People’s heavy reliance on the suppressed evidence, “it is unreasonable to expect that the grand jury could limit its consideration to the admissible, relevant evidence [citation], the defendants have been denied due process and the indictment must be dismissed . . . .” (People v. Backus, supra, 23 Cal.3d at p. 393.)

DISPOSITION

The judgment is affirmed. (CERTIFIED FOR PARTIAL PUBLICATION.)

MORRISON , J.

We concur:

SCOTLAND , P.J.

RAYE , J.

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