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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 I
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. II
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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