B-162652, NOVEMBER 27, 1967, 47 COMP. GEN. 309

B-162652: Nov 27, 1967

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HIGHWAYS - CONSTRUCTION - FEDERAL AID HIGHWAY PROGRAM - ANTITRUST VIOLATION RECOVERIES ALTHOUGH THE UNITED STATES IS ENTITLED TO A PRO RATA SHARE OF THE ACTUAL DAMAGES. RECOVERED BY A STATE HIGHWAY DEPARTMENT IN ANTITRUST PROCEEDINGS IN WHICH AN AWARD OF TREBLE DAMAGES WAS MADE ON THE BASIS THE AWARD OF ACTUAL DAMAGES REDUCED THE COST OF THE FEDERALLY AIDED HIGHWAY PROJECTS THAT INCORPORATED THE PRODUCTS ON WHICH FIXED PRICES WERE CONSPIRED. THE PARTNERSHIP ARRANGEMENT UNDER WHICH THE FEDERAL-AID HIGHWAY PROGRAM IS PROSECUTED DOES NOT REACH BEYOND THE PROJECT COSTS SHARED BY THE FEDERAL AND STATE GOVERNMENTS. THAT IT HAD BEEN DAMAGED BY REASON OF HIGHER HIGHWAY CONSTRUCTION CONTRACT PRICES THAN WOULD OTHERWISE HAVE PREVAILED.

B-162652, NOVEMBER 27, 1967, 47 COMP. GEN. 309

HIGHWAYS - CONSTRUCTION - FEDERAL AID HIGHWAY PROGRAM - ANTITRUST VIOLATION RECOVERIES ALTHOUGH THE UNITED STATES IS ENTITLED TO A PRO RATA SHARE OF THE ACTUAL DAMAGES, LESS OUT-OF-POCKET EXPENSES, RECOVERED BY A STATE HIGHWAY DEPARTMENT IN ANTITRUST PROCEEDINGS IN WHICH AN AWARD OF TREBLE DAMAGES WAS MADE ON THE BASIS THE AWARD OF ACTUAL DAMAGES REDUCED THE COST OF THE FEDERALLY AIDED HIGHWAY PROJECTS THAT INCORPORATED THE PRODUCTS ON WHICH FIXED PRICES WERE CONSPIRED, THE FEDERAL GOVERNMENT MAY NOT SHARE IN THE RECOVERY OF PUNTIVE DAMAGES, SUCH DAMAGES NOT REFLECTING UPON THE COST OF THE HIGHWAY PROJECTS, FOR ABSENT SPECIFIC AUTHORITY, THE PARTNERSHIP ARRANGEMENT UNDER WHICH THE FEDERAL-AID HIGHWAY PROGRAM IS PROSECUTED DOES NOT REACH BEYOND THE PROJECT COSTS SHARED BY THE FEDERAL AND STATE GOVERNMENTS.

TO THE ADMINISTRATOR, FEDERAL HIGHWAY ADMINISTRATION, NOVEMBER 27, 1967:

BY LETTER OF OCTOBER 6, 1967, MR. LAWRENCE S. CASAZZA, INTERIM DIRECTOR OF ADMINISTRATION, TRANSMITTED CERTAIN CORRESPONDENCE FROM THE NORTH DAKOTA STATE HIGHWAY DEPARTMENT CONCERNING RECOVERY MADE BY THE STATE IN ANTITRUST PROCEEDINGS AGAINST ARMCO STEEL CORPORATION.

BECAUSE ARMCO CONSPIRED TO FIX PRICES UPON CORRUGATED CULVERTS, STRUCTURAL PLATE PIPES, AND METAL END SECTIONS USED IN HIGHWAY CONSTRUCTION WORK, THE STATE OF NORTH DAKOTA ALLEGED IN AN ACTION UNDER SECTION 15 OF TITLE 15, U.S.C. THAT IT HAD BEEN DAMAGED BY REASON OF HIGHER HIGHWAY CONSTRUCTION CONTRACT PRICES THAN WOULD OTHERWISE HAVE PREVAILED. JUDGMENT OF $775,065 IN TREBLE DAMAGES AND AN ATTORNEY'S FEE ALLOWANCE OF $72,500 WERE AWARDED THE STATE AND AFFIRMED ON APPEAL. ADDITIONAL ATTORNEY'S FEE OF $5,000 WAS ALLOWED FOR THE APPEAL TOGETHER WITH THE COST OF PRINTING THE SUPPLEMENTAL RECORD FILED BY THE STATE ON THE APPEAL. SEE ARMCO STEEL CORPORATION V. STATE OF NORTH DAKOTA (1967) 376 F.2D 206.

A SUBSTANTIAL NUMBER OF THE HIGHWAY PROJECTS INTO WHICH THE PRODUCTS OF ARMCO WERE INCORPORATED WERE FINANCED WITH FEDERAL-AID FUNDS MADE AVAILABLE TO THE STATE UNDER THE PROVISIONS OF TITLE 23, UNITED STATES CODE.

WE ARE REQUESTED TO FURNISH AN OPINION AS TO WHETHER A PRO RATA SHARE OF THE AWARD RECEIVED BY THE STATE OF NORTH DAKOTA SHOULD BE RECOVERED FROM THE STATE BY YOUR ADMINISTRATION; AND, IF SO, WHETHER THE AMOUNT TO BE RECOVERED SHOULD BE BASED ON ACTUAL DAMAGES OF $258,355 OR TREBLE DAMAGES OF $775,065.

IN A SIMILAR SITUATION WITH RESPECT TO THE STATE OF MISSOURI, IN WHICH ACTUAL DAMAGES BUT NOT TREBLE DAMAGES WERE RECOVERED, WE ADVISED YOU IN LETTER DATED OCTOBER 11, 1967, B-162539, THAT:

"THERE WOULD NOT APPEAR TO BE ANY REASON FOR CONSIDERING THE RECOVERY MADE BY THE STATE AS OTHER THAN A REDUCTION IN THE COST OF THE VARIOUS HIGHWAY PROJECTS TO WHICH IT APPLIES. IN REALITY, ONLY A PORTION OF THE FUNDS RECOVERED CONSTITUTES RECOVERY OF OVERPAYMENTS BY THE STATE OF STATE FUNDS, SINCE THE REMAINING PORTION HAD BEEN PREVIOUSLY REIMBURSED THE STATE BY THE FEDERAL GOVERNMENT PURSUANT TO THE FEDERAL-AID HIGHWAY PROGRAM. TO ALLOW THE STATE TO RETAIN THE FULL AMOUNT RECOVERED WOULD BE TO DENY THE FEDERAL INTEREST THEREIN AND WOULD PERMIT THE STATE A PROFIT TO THE EXTENT OF THAT FEDERAL INTEREST.

"ON THE OTHER HAND, IT MUST BE RECOGNIZED, EQUITABLY, THAT THE STATE INCURRED CERTAIN OUT-OF-POCKET EXPENSES IN EFFECTING THE SETTLEMENT REACHED. FULL RECOGNITION OF THE PARTNERSHIP ARRANGEMENT BETWEEN THE STATE AND THE FEDERAL GOVERNMENT WITH RESPECT TO THE RECOVERY EFFECTED DICTATES THAT THE OUT-OF-POCKET EXPENSES INCURRED ALSO BE SHARED PROPORTIONALLY.'

WHAT WE SAID IN CONNECTION WITH THE MISSOURI CASE IS EQUALLY APPLICABLE HERE, SO FAR AS CONCERNS THE ACTUAL DAMAGES RECOVERED AND ANY OUT-OF- POCKET EXPENSES INCURRED. HOWEVER, THE PUNITIVE DAMAGES RECOVERED BY THE STATE OF NORTH DAKOTA DO NOT IN ANY WAY REFLECT UPON THE COST OF HIGHWAY PROJECTS IN WHICH THE FEDERAL GOVERNMENT PARTICIPATED. WE DO NOT BELIEVE THAT THE PARTNERSHIP ARRANGEMENT UNDER WHICH THE FEDERAL-AID HIGHWAY PROGRAM IS PROSECUTED MAY PROPERLY BE SAID, IN THE ABSENCE OF SPECIFIC GOVERNING PROVISIONS, TO REACH BEYOND THE PROJECT COSTS SHARED BY THE FEDERAL AND STATE GOVERNMENTS.