WV AG Morrisey files lawsuit against paving companies

 

West Virginia Attorney General Patrick Morrisey’s office on Wednesday became the latest to file a lawsuit against paving and asphalt companies accused of pushing out competition and making room for inflated prices.

“This is collusion, plain and simple,” Morrisey said during a news conference.

The antitrust lawsuit was filed Wednesday in Kanawha County Circuit Court on behalf of the state Department of Transportation and Division of Highways.

The 33-page complaint filed by Morrisey’s office on Wednesday contains a few key changes that weren’t included in the previous complaint filed on behalf of DOH by Charleston law firm Bailey & Glasser.

First, the new complaint names CRH, plc, an Ireland-based corporation that’s described as the “ultimate owner” of the other listed subsidiaries, including West Virginia Paving and its sister companies.

The lawsuit also lists Oldcastle, Inc. and Oldcastle Materials, Inc., both of which are principal subsidiaries of CRH incorporated in Delaware and headquartered in Atlanta.

It alleges the defendants, CRH and its subsidiaries, Kelly Paving Inc. and American Asphalt & Aggregate Inc., operated under non-compete agreements throughout West Virginia. CRH is the largest producer of asphalt in the United States, according to the complaint.

“For well over 15 years, the defendants and numerous subsidiaries have been on a quest to enhance their power, to reduce competition in the Department of Highways approved asphalt market,” Morrisey said during Wednesday’s news conference.

The complaint alleges the defendants illegally established market dominance through practices such as buying out smaller companies and then shuttering their asphalt plants, requiring other companies to sign non-compete agreements and threatening to cut off supply of aggregate and liquid asphalt to competitors.

A similar lawsuit filed in October 2016 was voluntarily dismissed by the state Division of Highways, Morrisey said.

The Division of Highways’ lawsuit is separate from one filed by four cities in West Virginia, including Charleston, which is still pending.

DOH officials were wrong to have hired outside counsel and filed their own lawsuit without assistance from the attorney general’s office, Morrisey said Wednesday.

“That action was flatly prohibited under the law,” Morrisey said, adding DOH officials and lawyers with the Charleston-based Bailey & Glasser firm should know that.

“Under our state’s antitrust act, the [Division] of Highways has no jurisdiction — let me repeat that, they have no jurisdiction to bring an action for injunctive relief. That power belongs to the attorney general’s office and our office alone,” he said. “I’ve steadfastly maintained a no-exceptions policy with respect for competitive bidding. It’s one of the core things I ran on in 2012. This is a rule that should’ve been well known to Highways and Bailey & Glasser and I do not intend to deviate from it now.”

Mike Folio, a lawyer for the DOH, said Wednesday that Morrisey has assured him that lawyers for the DOH will be allowed to participate in the selection of choosing outside counsel. Folio said his office has been investigating the alleged paving scheme for more than a year.

“We’re grateful for the attorney general in finally deciding to proceed with an antitrust suit,” Folio said.

Wednesday’s filing and news conference indicate the first time Morrisey’s office has become involved in the lawsuit, originally filed by Bailey & Glasser on behalf of DOH on Oct. 14.

It’s still unclear when Morrisey became aware that the firm was pursuing legal action on behalf of the municipalities, or if he was asked to file a similar suit on behalf of DOH previously.

Morrisey spokesman Curtis Johnson did not respond to additional questions from the Gazette-Mail on Wednesday.

Also on Wednesday, the attorney general’s office issued a request for proposals in search of outside counsel to represent the plaintiffs on Morrisey’s behalf.

“It is not feasible or cost-effective for the Office of the Attorney General to provide the requested legal services without the assistance of outside counsel at this time,” according to a memo announcing the request for proposals from Morrisey’s office.

Attorney Mike Hissam, of Bailey & Glasser, said on Wednesday that the firm will submit a bid.

The Attorney General’s complaint includes data that exposes the level to which the defendants allegedly dominated the asphalt and paving markets in the state, and specifies the South (Raleigh, Wyoming, Summers, Monroe, Mercer and McDowell), Southwest (Putnam, Kanawha, Cabell, Wayne, Lincoln, Boone, Logan, Mingo) and West Central (Wood, Ritchie, Wirt, Calhoun, Roane, Jackson, Mason) asphalt markets as being the “relevant geographic area.”

According to the complaint, CRH, through its subsidiaries or joint ventures, owns or controls all of the DOH-approved asphalt manufacturing plants serving the state’s southwest and west central asphalt markets, and all but one of those plants serving the south asphalt market.

“For approximately the past six weeks, we have been working closely and diligently with the Attorney General’s office to provide to them the data that will show corporate conspiracy in West Virginia’s asphalt market,” Folio said.

The new allegations in the Attorney General’s complaint include the following:

n CRH and Kelly Paving account for nearly 80 percent of the West Central asphalt market. In 2006, West Virginia Paving (a CRH subsidiary) entered into a joint venture with Kelly Paving to form Camden Materials.

n From 2010 to 2014, CRH’s market share for DOH asphalt paving projects in the southwest market increased from about 60 percent to about 93 percent by dollar volume.

n From 2010 to 2014, CRH averaged 95 percent of the market share for paving projects in the south market, which totalled $35.1 million in contracts. During the same time period, four competitors to CRH in that market — Teays River Construciton, Inc.; Triton Construction Inc.; Ahern & Associates, Inc. and Pro Contracting Group — stopped bidding on or failed to win any DOH paving contracts.

n During that same period, CRH (through its subsidiaries or joint ventures) was the sole bidder on 63 of 72 DOH paving contracts in the south asphalt market. Of those 72 contracts, 97 percent received only one or two bidders.

n From 2010 to 2014, CRH’s market share for such projects increased from about 60 percent to roughly 93 percent, as measured in dollars. During that time, CRH averaged 79 percent of the market share, which totaled $87.2 million in contracts. Also during that period, three outside competitors in the southwest asphalt market — MAC Construction & Excavating; Blacktop Industries and Appalachian Paving & Aggregate — stopped bidding or failed to win any DOH asphalt paving contracts.

West Virginia Paving President Bob Brookover released a statement Wednesday afternoon in response to the new filing.

“We were disheartened to once again learn of a lawsuit filed against West Virginia Paving through media outlets. We have offered to work with, and were hoping for cooperation with the West Virginia Attorney General’s Office, but we are disappointed to learn of yet another lawsuit being filed,” the statement says.

It continues, “We will continue to fight these unfounded, slanderous allegations that threaten the livelihood of our 350 hard-working West Virginians and the safety of our roads that our friends, families and fellow West Virginians drive on every day. While we maintain our commitment to West Virginia, it’s these types of lawsuits that continue to make this state a difficult place to operate a business.”

Also named as defendants in the lawsuit filed Wednesday are Oldcastle Inc., Oldcastle Materials Inc., West Virginia Paving, Southern West Virginia Asphalt, Kelly Paving Inc., Camden Materials, American Asphalt of West Virginia LLC, and Blacktop Industries and Equipment Company.

Reach Kate White at kate.white@wvgazettemail.com, 304-348-1723 or follow @KateLWhite on Twitter.

Reach Elaina Sauber at elaina.sauber@wvgazettemail.com, 304-348-3051 or follow @ElainaSauber on Twitter.