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United States v. Kemp & Associates, Inc.

United States Court of Appeals, Tenth Circuit

October 31, 2018

UNITED STATES OF AMERICA, Plaintiff - Appellant.
v.
KEMP & ASSOCIATES, INC.; DANIEL J. MANNIX, Defendants - Appellees.

          Appeal from the United States District Court for the District of Utah (D.C. No. 2:16-CR-00403-DS-1)

          Andrew C. Finch, Principal Deputy Assistant Attorney General, Antitrust Division (Makan Delrahim, Assistant Attorney General, Marvin N. Price Jr., Acting Deputy Assistant Attorney General, Kalina M. Tulley, Robert M. Jacobs, Ruben Martinez, Jr., Molly A. Kelley, Kristen C. Limarzi, James J. Fredricks, Adam D. Chandler, Jonathan H. Lasken, Attorneys, with him on the briefs), Department of Justice, Washington, DC, appearing for appellant.

          James A. Mitchell (Mark R. Gaylord, Jason D. Boren, Ballard Spahr LLP, Salt Lake City, Utah, and Michael J. Grudberg, Tarter Krinsky & Drogin LLP, New York, New York, with him on the briefs), Ballard Spahr LLP, New York, New York appearing for appellee Kemp & Associates, Inc.

          Richard F. Albert (Devin M. Cain with him on the briefs), Morvillo Abramowitz Grand Iason & Anello, P.C., New York, New York appearing for appellee Daniel J. Mannix.

          Before PHILLIPS, EBEL, and MORITZ, Circuit Judges.

          EBEL, CIRCUIT JUDGE.

         It is axiomatic that federal courts are courts of limited jurisdiction. See, e.g., Dutcher v. Matheson, 733 F.3d 980, 984 (10th Cir. 2013). Bounded first by the strictures of Article III and further by the limits of statutory jurisdiction given to us by Congress, we are powerless to rule on even meritorious questions that lie beyond our purview.

         This appeal presents a clean lesson in the import of such jurisdictional restraint. Of the two questions presented for our review, the first-whether the district court correctly dismissed the criminal indictment at issue as falling outside the applicable statute of limitations-lies cleanly within our jurisdiction granted by 18 U.S.C. § 3731. The second, however, is more complex. That question-whether the district court erred in ruling that the criminal antitrust trial contemplated by this indictment would proceed according to a rule of reason analysis rather than under the per se rule-does not fall within § 3731, which closely guards the circumstances under which the government may appeal a district court's rulings in a criminal case.

         Therefore, while we hold that the indictment here was timely, we also find that we do not have jurisdiction over the district court's rule of reason order, and that mandamus is inappropriate in this circumstance. Therefore we REVERSE the district court's dismissal of the indictment, DISMISS the government's appeal from the rule of reason order for lack of appellate jurisdiction and REMAND for further proceedings consistent with this opinion.

         I. BACKGROUND

         In reviewing the district court's decision to dismiss the indictment on statute of limitations grounds, "[w]e test the indictment solely on the basis of the allegations made on its face, and such allegations are to be taken as true." United States v. Reitmeyer, 356 F.3d 1313, 1316-17 (10th Cir. 2004) (internal quotation omitted).

         On August 17, 2016, a federal grand jury in Utah returned a single count indictment against Kemp & Associates, Inc. ("Kemp") and its Vice President/COO Daniel Mannix (collectively, "Defendants") for knowingly entering into a combination and conspiracy in violation of the Sherman Act. Aplt. App. 16-21 ("Indictment") ¶¶1, 2, 8-10. Kemp is an "Heir Location Service," a term used to describe companies that "identify heirs to estates of intestate decedents and, in exchange for a contingency fee, develop evidence and prove heirs' claims to an inheritance in probate court." Id. ¶ 6.

         While many intestate estates become the subject of only a single Heir Location Service inquiry, sometimes more than one Heir Location Service begins searching for the same heirs. In such cases, it is possible that a single potential heir will be contacted by, and receive offers from, more than one competing Heir Location Service. When that happens, the services may "distinguish their offers from those of competitors by offering more attractive contingency fee rates." Id. ¶ 7. In this way, while a niche community, the Heir Location Services industry operates just like any other. When a single firm is vying for a potential client's business, the bounds of its offer are determined only by the price the customer is willing to pay for the service. But where more than one firm seeks a single client's business, then supply, in addition to demand, influences the price ultimately paid by the customer.

         In this criminal case the Government alleges that at some point before January 29, 2014, Defendants "knowingly entered into and engaged in a combination and conspiracy with Richard A. Blake, Jr., [a competitor Heir Location Service] and other unindicted co-conspirators to suppress and eliminate competition by agreeing to allocate customers of Heir Location Services sold in the United States." Id. ¶ 9. Under this agreement, when the two companies both contacted a potential heir, "the co-conspirator company that first contacted that heir would be allocated certain remaining heirs to that estate who had yet to sign a contract with an Heir Location Services provider." Id. ¶ 12(b). In return, the company to which heirs were allocated "would pay to the other co-conspirator company a portion of the contingency fees ultimately collected from those allocated heirs." Id. ¶ 11(c). The Government alleges that, in furtherance of this scheme, Defendants "made payments to the co-conspirator company, and received payments from the co-conspirator company, in order to effectuate this agreement." Id. ¶ 11(f). Based on an email from Mannix to other Kemp employees, Defendants claim that any "formal" agreement between the alleged co-conspirators ended sometime before July 30, 2008. Aplt. App. at 219.

         In front of the district court, Defendants moved for an order that the antitrust case would proceed pursuant to the rule of reason, as opposed to the per se rule, and to dismiss the indictment. As to the former, the Defendants acknowledged that customer allocation agreements are generally analyzed under the per se rule, but nonetheless they argued that "in the atypical context of the heir location business the [agreement] is far from an ordinary customer allocation, and instead bears more in common with joint ventures analyzed under the rule of reason[.]" Id. at 167.

         As to the statute of limitations, Defendants noted that the limitations period for criminal violations of the Sherman Act is five years, and they argued that the indictment was thus untimely because any agreement between the alleged co-conspirators ended prior to Mannix's email in July of 2008, whereas the charging Indictment wasn't returned until August 17, 2016, and served on defendants on September 1, 2016. Defendants did acknowledge, however, that "for some of the estates subject to the [agreement], certain administration work continued into the five-year period prior to the Indictment, including the recovery of money for heirs, and the payment of the firms themselves." Aplt. App. at 194. Mr. Mannix's counsel echoed this language at oral argument, and went even further to note that the two firms made payments to each other as contemplated by the agreement within the statutory period.

         The district court held a hearing on the two motions, and at the conclusion orally granted Defendants' motion for the case to be subject to the rule of reason. The Government subsequently filed a motion to reconsider, as well as a request for a ruling on the motion to dismiss. After that motion was fully briefed, the court issued the rulings relevant on appeal.

         First, the district court adopted without edit Defendants' proposed order regarding the rule of reason. Aplt. App. at 133-36 ("the rule of reason order"). The court also simultaneously issued a longer memorandum decision and order that briefly referenced its rule of reason order, but primarily granted Defendants' motion to dismiss on the grounds that the alleged agreement ended in 2008, and so the 2016 indictment fell outside the five-year limitations window. Aplt. App. at 137-43 ("Dist. Ct. Order") at 3.

         The Government timely appealed both orders. Recognizing that our appellate jurisdiction was questionable as to the rule of reason order, the government asked that if we determine we do not have appellate jurisdiction over that order that we "treat the relevant parts of [its] brief as a petition for a writ of mandamus." Aplt. Br. at 12.

         II. DISCUSSION

         A. Statute of Limitations

         We turn first to the district court's order dismissing the indictment as barred by the statute of limitations.

         The single charge in this indictment, charging a violation of 15 U.S.C. § 1, is subject to a five-year statute of limitations. See 18 U.S.C. § 3282(a); United States v. Evans & Assocs. Const. Co., 839 F.2d 656, 661 (10th Cir. 1988). A Sherman Act conspiracy, such as the one alleged here, remains actionable "until its purpose has been achieved or abandoned, and the statute of limitations does not run so long as the co-conspirators engage in overt acts designed to accomplish its objectives." United States v. Inryco, Inc., 642 F.2d 290, 293 (9th Cir. 1981) (citing United States v. Kissel, 218 U.S. 601, 607 (1910)). By way of example, if several construction companies unlawfully conspire to rig the bidding process on a series of construction projects, the conspiracy does not end when the last bid is submitted. Instead the statute of limitations is tolled as long as the firm that ultimately received the rigged bid receives payments on the unlawfully obtained contract. Evans, 839 F.2d at 661. The "crucial question . . . is the scope of the conspiratorial agreement, for it is that which determines both the duration of the conspiracy, and whether the act relied on as an overt act may properly be regarded as in furtherance of the conspiracy." Grunewald v. United States, 353 U.S. 391, 397 (1957).

         When reviewing the scope of the conspiracy at the Motion to Dismiss stage we are bound by the language of the indictment. United States v. Qayyum, 451 F.3d 1214, 1218 (10th Cir. 2006). "We test the indictment solely on the basis of the allegations made on its face, and such allegations are to be taken as true." Id. (quoting United States v. Reitmeyer, 356 F.3d 1313, 1316-17 (10th Cir. 2014)). We review de novo both the district court's determination as to the scope of the alleged conspiracy, and its ...


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