X.L.O. Concrete Corp. v. Rivergate Corp.

Ciparick, J. The question presented in this action for breach of contract, account stated, and unjust enrichment is whether interposition of an antitrust illegality defense under the Donnelly Act . . . prevents enforcement of the contract between these parties as a matter of law. . . .

The parties, plaintiff X.L.O. Concrete Corp., as subcontractor, and defendant Rivergate Corporation, as general contractor, entered into a written contract on May 12, 1983 for construction of the concrete superstructure and fills of a project located in Manhattan. Plaintiff fully performed its obligations under the contract and sought payment of $ 844,125.07, the balance due and owing. Defendant refused to pay on the ground that the contract was an integral feature of an extortion and labor bribery operation known as the "Club".

The "Club" was an arrangement between the "Commission" of La Cosa Nostra, a ruling body comprised of four of the five New York City organized crime family bosses, and seven concrete construction companies operating in New York City, and the District Council of Cement and Concrete Workers, Laborers International Union of North America. The Commission decided which concrete companies would be permitted to undertake construction jobs in New York City worth more than $ 2 million dollars; contractors who took jobs over $ 2 million were required to pay the Commission 2% of the contract price for guaranteed "labor peace". The Commission not only approved which companies got which jobs, but also rigged the bidding to ensure that the designated company would submit the lowest bid. The Commission enforced compliance through threatened or actual labor unrest or violence. In May 1981, plaintiff became the last concrete contractor doing business in New York City to join the Club.

The Rivergate project was allocated to plaintiff by the Commission on the assumption that it would not exceed $ 15 million. Plaintiff's principal, James Costigan, paid the 2% "labor peace" fee to Ralph Scopo, the Commission's representative and the business manager and president of the District Council of Cement and Concrete Workers. Plaintiff then negotiated the terms of the contract with defendant. The parties agreed on a figure of $ 16,300,000.

The contract price exceeded the amount approved by the Commission, and Scopo, acting on behalf of the Commission, approached Costigan and requested that his company abandon the project. Costigan refused, arguing that the Commission had not allocated his company any work in over 18 months. Scopo carried Costigan's message back to the Commission and the Commission decided to permit plaintiff to work on the project. Costigan subsequently gave Scopo a $ 50,000 "gift" for speaking favorably on plaintiff's behalf to the Commission.

The record indicates that defendant negotiated the contract with full knowledge of the Club and its rules. Plaintiff completed the work agreed upon under the contract and, upon defendant's refusal to pay, commenced this action. . . .

Defendant's main contention on this appeal is that the contract at issue is so integrally related to an antitrust conspiracy in violation of the Donnelly Act that it is void and unenforceable as a matter of law. We reject this contention. . . .

The interposition of antitrust defenses in contract actions is not favored. The concern is that "successful interposition of antitrust defenses is too likely to enrich parties who reap the benefits of a contract and then seek to avoid the corresponding burdens."Nevertheless, antitrust defenses will be upheld in cases where a court's judgment would result in enforcement of the "precise conduct made unlawful by the Act." Beyond that point, however, "courts are to be guided by the overriding general policy * * * 'of preventing people from getting other people's property for nothing when they purport to be buying it'. . . . "Thus, a contract which is legal on its face and does not call for unlawful conduct in its performance is not voidable simply because it resulted from an antitrust conspiracy.

We note that the contract sought to be enforced is legal on its face and does not contemplate or require conduct in violation of the antitrust laws in its performance. Moreover, the mere fact that the contract is related to an antitrust conspiracy does not automatically render it unenforceable. Rather, the critical question is whether the contract is so integrally related to the agreement, arrangement or combination in restraint of competition that its enforcement would result in compelling performance of the precise conduct made unlawful by the antitrust laws. This question we cannot answer on the record before us. Whether the contract was an indivisible, effectuating component of an illegal arrangement that would be consummated by granting the judgment sought in this action is a question that requires further development at trial.

The extent to which the contract price is excessive and discriminatory and fails to reflect fair market value at the contract date because of an unlawful attempt to stifle competition is an important issue requiring development. The unlawful use of market power to inflate the contract price, and the resulting anticompetitive effects, must be assessed in determining whether granting the judgment sought "would be to make the courts a party to the carrying out of one of the very restraints forbidden by the [antitrust laws]."

Additionally, the equities of the parties must be examined. Courts should avoid upholding antitrust defenses in contract cases where doing so would work a substantial forfeiture on one party while unjustly enriching the other. . . A relevant consideration is whether sustaining the illegality defense would render the contract void in its entirety or whether recovery could still be had on a quantum meruit basis. Additionally, the relative culpability, bargaining power, and knowledge of the parties to the contract should also be considered in assessing the possibility of unjust enrichment.

Finally, the public policy in favor of frustrating or discouraging unlawful schemes such as the Club must not be deprecated. However, such a danger is reduced where statutory remedies exist and the State Attorney- General can directly attack the alleged antitrust violations.

In light of our analysis, the Court rejects defendant's remaining contention that the contract should be held per se illegal under the Donnelly Act. . . .

. . . Order affirmed.