| News from December 26-31, 2004 |
People and Appointments
12/31. William Kovacic, the former General Counsel of the Federal Trade Commission (FTC), left the FTC on December 31, 2004. He will return to the George Washington University Law School. See, FTC release. John Graubert, who has been the Principal Deputy General Counsel of the FTC since 2001, will be the acting General Counsel. He joined the FTC in June of 1998. See also, TLJ story titled "Antitrust Lawyer Named to Top Spot at Federal Trade Commission", June 16, 1998.
More News
12/30. The Copyright Office published a notice in the Federal Register that announces the voluntary negotiation period for the purpose of determining the royalty fees for analog signals to be paid by satellite carriers under the satellite carrier compulsory license. This period commences on December 30, 2004, and concludes on January 10, 2005. See, December 30, 2004, Vol. 69, No. 250, at Pages 78482 - 78483.
Appeals Court Reverses Summary Judgment in Software Counterfeiting Case
12/29. The U.S. Court of Appeals (10thCir) issued its opinion in Microsoft v. MBC Enterprises, reversing the District Court's summary judgment for Microsoft in a case in which Microsoft alleges that defendants bought and sold counterfeit Microsoft software.
MBC Enterprises is a wholesale distributor of software based in Salt Lake City, Utah. It buys Microsoft software, but not from Microsoft, or any distributor licensed by Microsoft. It then resells the software. It insists that it carefully inspects the software that it buys to determine that it is not counterfeit. The individual defendants are owners and managers of MBC.
Microsoft asserts that MBC purchased counterfeit software from a company named Bantech, and resold it. The evidence includes information obtained by an FBI raid of Bantech that it acquired Microsoft from Singapore at below market prices, that it possessed counterfeit software, including 300 units of counterfeit Windows software that were packaged and labeled for FedEx shipment to MBC's address, and that the sales price was below market price.
Microsoft also asserts that MBC sold certain other counterfeit software to another company named Mr. Software. The evidence included the deposition testimony of an employee of Mr. Software.
Microsoft filed a complaint in U.S. District Court against MBC alleging copyright infringement and federal trademark infringement. The District Court held that there were no material facts in dispute, and granted summary judgment to Microsoft.
The Court of Appeals reversed. It held that there are material facts in dispute, reversed the summary judgment, and remanded to the District Court.
The Court of Appeals characterized the facts presented by Microsoft with respect to Bantech as circumstantial. It reasoned that the facts did not actually establish that MBC purchased counterfeit software, or how much.
MBC had also sought a malicious discovery order from the District Court. It asked for, and received from the Magistrate Judge, an order compelling Microsoft to disclose "all methods and manners Microsoft employ[ed] to detect counterfeit software". This and related information covered by the order, if made public, would have compromised Microsoft's anti-counterfeiting efforts. The Judge of the District Court modified the magistrate's order, and relieved Microsoft of the obligation to disclose such information. And, on appeal, the Court of Appeals affirmed the District Court.
The Appeals Court, having reversed the summary judgment, also vacated the award of attorneys fees and permanent injunction. The case goes back to the District Court, where Microsoft may yet prevail upon trial on the merits.
The Court of Appeals also wrote, without explanation, or apparent reason, that "This order and judgment is not binding precedent".
The case is Microsoft Corporation v. MBC Enterprises, James D. Craghead, Steve Blackburn, and Marianne Blackburn, U.S. Court of Appeals for the 10th Circuit, App. Ct. No. 04-4017, an appeal from the U.S. District Court for the District of Utah, D.C. No. 2:00-CV-217-PGC. Mary Briscoe wrote the opinion of the Court of Appeals, in which Judges Kelly and Baldock.
Powell Says FCC Plans to Auction 3G Spectrum in Summer of 2006
12/29. Federal Communications Commission (FCC) Chairman Michael Powell sent a letter [PDF] to National Telecommunications and Information Administration (NTIA) head Michael Gallagher in which he stated that the FCC "plans to commence the auction of licenses in the 1432-1435 MHz band and the 1710-1755 MHz band as early as June 2006". See, full story.
FCC Publishes Notice in Federal Register of Report & Order Re Reaccommodation of Government Users in the 1710-1755 MHz band
12/29. The Federal Communications Commission (FCC) published a notice in the Federal Register that describes, recites, and sets the effective date (January 28, 2005) of its Seventh Report and Order (7thR&O) which pertains to the reaccommodation of federal government users in order to make the 1710-1755 MHz band available for auction for wireless broadband services (also known as 3G or AWS).
This 7thR&O is FCC 04-246 in ET Docket No. 00-258 and WT Docket No. 02-8. The FCC adopted this item at its meeting of October 14, 2004, and released it on October 21, 2004. See, story titled "FCC Adopts Report and Order Re 1710-1755 MHz Band" in TLJ Daily E-Mail Alert No. 997, October 15, 2004.
See, Federal Register, December 29, 2004, Vol. 69, No. 249, at Pages 77938 - 77950.
This 7thR&O largely adopts the proposals contained in the FCC's Fourth Notice of Proposed Rulemaking [49 pages in PDF]. See, stories titled "FCC Releases NPRM Regarding Allocating Spectrum to DOD to Replace Spectrum Allocated for 3G Services" in TLJ Daily E-Mail Alert No. 694, July 9, 2003, and "FCC Sets Deadlines for Comments Regarding Spectrum Reallocations Relating to 3G Services" in TLJ Daily E-Mail Alert No. 731, September 3, 2003.
TLJ has published numerous stories related to making another 90 MHz of spectrum available for broadband wireless services. See, for example, the following TLJ stories, and hyperlinks therein:
More FCC News
12/29. The Federal Communications Commission (FCC) published a notice in the Federal Register that describes, recites, and sets the effective date (January 28, 2005) for its final rule regarding the unbundling obligations of incumbent local exchange carriers (ILECs). The FCC adopted its Order on Remand at its December 15, 2004 meeting. See, story titled "FCC Adopts Unbundling Order" in TLJ Daily E-Mail Alert No. 1,039, December 16, 2004. This item is FCC 04-290 in WC Docket No. 04-313 and CC Docket No. 01-338.
12/29. The Federal Communications Commission (FCC) published a notice in the Federal Register that describes, recites, and sets the compliance date (September 1, 2005) for its final rule that extends and modifies the FCC Form 477 local competition and broadband data gathering program. See, Federal Register, December 29, 2004, Vol. 69, No. 249, at Pages 77912 - 77938. The FCC adopted its Report and Order on November 9, 2004. This item is FCC 04-266 in WC Docket No. 04-141. See also, story titled "FCC to Collect More Data with Form 477" in TLJ Daily E-Mail Alert No. 1,016, November 11, 2004.
12/15. The Federal Communications Commission (FCC) published a notice in the Federal Register that describes and sets comment deadlines for its Further Notice of Proposed Rulemaking (FNPRM) regarding wireless services in rural areas. Comments are due by January 14, 2005. Reply comments are due by February 14, 2005. On September 27, 2004, the FCC released the text [137 pages in PDF] of its Report and Order and Further Notice of Proposed Rulemaking. The FCC adopted, but did not release, this item at its July 8, 2004 meeting. This item is 04-166 in WT Docket Nos. 02-381, 01-14, and 03-202. See, Federal Register, December 15, 2004, Vol. 69, No. 240, at Pages 75174 - 75185. The FCC also published a separate notice in the Federal Register that describes, recites and sets the effective date (February 14, 2005 for most provisions) of its final rule regarding wireless services in rural areas. See, Federal Register, December 15, 2004, Vol. 69, No. 240, at Pages 75143 - 75173.
6th Circuit Applies Noerr Pennington Doctrine in Dispute Between Cable Operators
12/29. The U.S. Court of Appeals (6thCir) issued its opinion [3 pages in PDF] in Knology v. Insight Communications, a dispute between cable companies in which one company (Knology) alleged that the litigation activities of the other (Insight) violated, among other things, the Sherman Act. The District Court held that Insight has immunity under the Noerr-Pennington doctrine for some, but not all, of Knology's claims. The Court of Appeals held that the Noerr-Pennington doctrine gives Insight immunity as to all of the claims.
Knology and Insight Communications are both cable TV and broadband companies. In 1998 the City of Louisville, in the state of Kentucky, granting Insight a franchise to provide cable services. Moreover, the relevant ordinance provided that the grant was not exclusive, and that the city might grant other franchises to other operators.
In 2000 the city granted Knology a franchise. However, the relevant ordinance also provided that if Insight challenged this grant, then it "shall be suspended pending a final and nonappealable decision resolving the issue".
Insight did challenge the 2000 grant of a franchise to Knology. It filed a complaint in state court, and lost. It appealed, and lost. And, the state supreme court denied its discretionary appeal. All the while, Knology's franchise was suspended.
Knology then filed a complaint in U.S. District Court (WDKent) against Insight alleging that Insight's lawsuit and its invocation of the provision suspending Knology's franchise violated the Sherman Act, the Cable Act, and the First Amendment, and that Knology was therefore entitled to damages under the Sherman Act and 42 U.S.C. § 1983.
The Appeals Court summarized the District Court's action. "The district court, ruling on a motion for partial summary judgment, viewed Insight’s one act -- filing suit -- as two acts, warranting two contrary holdings: Insight was immune under the Noerr-Pennington doctrine for its act of filing the state court action, but not immune for its invocation of the franchise suspension provision (by its act of filing the state court action). The district court also ruled Insight was not immune from Knology's § 1983 claims, because it was a “state actor” when it invoked the suspension. That reasoning led the court to enter summary judgment for Knology on its § 1983 First Amendment claim." (Parentheses in original.)
See, Eastern R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961) and United Mine Workers v. Pennington, 381 U.S. 657 (1965).
The Appeals Court wrote that "The Noerr-Pennington doctrine allows businesses to combine and lobby to influence the legislative, executive, or judicial branches of government or administrative agencies without antitrust or § 1983 liability, because the First Amendment’s right of petition protects such activities. ... The doctrine immunizes parties from liability under antitrust laws or § 1983 for actions taken when petitioning authorities to take official action, even where the petitioning activity has the intent or effect of depriving another of property interests, except ... where parties use the petitioning process, rather than the outcome of that process, as an anticompetitive weapon."
The Appeals Court stated that Insight's action did not fit within this exception. It wrote that "we see filing the lawsuit and invoking the suspension provision as a single petitioning activity protected by the First Amendment and Noerr-Pennington. That this petitioning caused an anticompetitive result is irrelevant to Noerr-Pennington analysis."
Hence, it concluded "that Insight engaged in nothing more than legitimate petitioning. As a result, Noerr-Pennington bars all of Knology’s claims for damages against Insight arising out of the stay, foreclosing relief on the other issues raised on appeal."
This case is Knology, Inc. v. Insight Communications Company, LP, et al., U.S. Court of Appeals for the 6th Circuit, App. Ct. No. 03-6390, an appeal from the U.S. District Court for the Western District of Kentucky, at Louisville, D.C. No. 00-00723, Judge Thomas Russell presiding. Judge Cook wrote the opinion of the Appeals Court, in which Judges Nelson and Sargus (SDOhio, sitting by designation) joined.
Financial Regulators Publish Notice of Final Rule Implementing Section 216 of FACT Act
12/28. The Department of the Treasury's (DOT) Office of the Comptroller of the Currency (OCC), the DOT's Office of Thrift Supervision (OTS), the Federal Reserve System, and the Federal Deposit Insurance Corporation (FDIC) published a notice in the Federal Register that recites, describes and sets the effective date (July 1, 2005) for their final rule implementing Section 216 of the Fair and Accurate Credit Transactions Act of 2003, which is also known as the FACT Act.
The FACT Act was HR 2622 in the 108th Congress. It is now Public Law No. 108-159. Section 216 of the FACT Act adds a new Section 628 to the Fair Credit Reporting Act (FCRA) that pertains to protecting consumers against the risks associated with unauthorized access to information about the consumer contained in a consumer report, such as fraud and related crimes, including identity theft. The FCRA is codified at 15 U.S.C. § 1681 et seq. The new section is codified at 15 U.S.C. § 1681w.
The statute requires certain federal agencies to promulgate regulations "requiring any person that maintains or otherwise possesses consumer information, or any compilation of consumer information, derived from consumer reports for a business purpose to properly dispose of any such information or compilation."
See, Federal Register, December 28, 2004, Vol. 69, No. 248, at Pages 77610 - 77621.
DC Circuit Rules in NJTV v. FCC
12/28. The U.S. Court of Appeals (DCCir) issued its opinion [6 pages in PDF] in NJTV v. FCC, an appeal of final order dismissing NJTV's application to build a low-power television broadcast station.
NJTV asked the FCC to keep the application on file and give it preferential consideration if the channel becomes available again. The Court of Appeals dismissed this part of the appeal, for lack of standing. NJTV also asked for displacement relief on appeal, but it failed to raise this before the FCC.
The Court also wrote that "The FCC has in fact read § 309(j) as placing low-power stations within the auction process. ... We of course do not prejudge the validity of this conclusion, ..."
This case is New Jersey Television Corporation v. Federal Communications Commission, U.S. Court of Appeals for the District of Columbia Circuit, App. Ct. No. 03-1444. Judge Williams wrote the opinion of the Court, in which Judges Henderson and Rogers joined.
State Court Rules Employer Can Consent to Search of Computer Used By Employee
12/28. The Court of Appeals of the State of Washington issued a non-precedential opinion in Washington v. Lack, an appeal from a criminal conviction involving whether the search of a computer, without a warrant, violated the Lack's 4th Amendment rights.
The state searched a computer used by the defendant, Jack Lack, at his place of employment. The computer was owned by his employer, but Lack was the primary user of the computer. His employer gave the state permission to search the computer. Lack did not. The state found evidence of crimes on the computer, which it introduced into evidence. Lack was convicted following a bench trial.
The Appeals Court concluded that the employer "had control of both the ... office and computer and could solely consent to the search".
It should also be noted that this is a state court opinion, that it is designated non-precedential, and that Lack was a volunteer for one week, rather than a full time employee.
This case is Washington v. Jack Leck, Court of Appeals Division II, State of Washington, No. 30714-6-II.
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12/28. The U.S. Court of Appeals (7thCir) issued its opinion [PDF] in Sutter Insurance v. Applied Systems, a contract dispute regarding the sale of business software. Sutter is an insurance company that purchased a commercial software program from Applied Systems. This is an appeal from the U.S. District Court (NDIll). It exercised jurisdiction based upon diversity of citizenship. The law involved is entirely contract law of the state of Illinois. The District Court rejected both Sutter's claim, Applied System's counterclaim. The Court of Appeals vacated and remanded. This case is Sutter Insurance Company v. Applied Systems, Inc., U.S. Court of Appeals for the 7th Circuit, App. Ct. No. 04-1871, an appeal from the U.S. District Court for the Northern District of Illinois, Eastern Division, D.C. No. 02 C 5849, Judge Matthew Kennelly presiding. Judge Richard Posner wrote the opinion of the Court of Appeals, in which Judges Bauer and Rovner joined.
12/28. The Department of Homeland Security (DHS) announced that it selected Electronic Data Systems Corporation (EDS) as the vendor for the DHS's eTravel Services (eTS) program. The DHS stated in a release that "EDS will provide a web-based reservation service as well as implementation support, and training and customer support. The eTS program scope includes travel planning, cost estimating, approval processing, reservation booking, and activity reporting. EDS is also committed to integrating their solution with the eMerge2 and MAXHR programs."
12/28. The Copyright Office published a notice in the Federal Register that recites, describes and sets the effective date (January 27, 2005) of its final rule regarding reconsideration procedure. See, Federal Register, December 28, 2004, Vol. 69, No. 248, at Pages 77636 - 77637.
12/28. The Federal Trade Commission (FTC) released an Order Reopening and Modifying Order [7 pages in PDF] that modifies its 1996 order in its proceeding titled In the Matter of Time Warner, Inc., et al., FTC Docket No. C-3709. This modifies the original order as it applies to Liberty Media Corporation and its continuing ownership of Time Warner stock during the term of the order. See also FTC release and FTC release of September 3, 2004 announcing Liberty's petition.
DHS's National Infrastructure Advisory Council Meeting to Cover Cyber Security
12/27. The Department of Homeland Security's (DHS) National Infrastructure Advisory Council (NIAC) will hold a meeting on January 11, 2005, from 1:00 - 4:00 PM. See, notice in the Federal Register, December 27, 2004, Vol. 69, No. 247, at Pages 77259 - 77260.
The scheduled government speakers may include Tom Ridge (Secretary of Homeland Security), Frank Libutti (Under Secretary for Information Analysis and Infrastructure Protection), and Robert Liscouski (Assistant Secretary for Infrastructure Protection). The scheduled government speakers will include Nancy Wong (DHS) and Frances Townsend (Special Assistant to the President for Critical Infrastructure).
John Chambers (Ch/CEO of Cisco Systems) and Gilbert Gallegos (Police Chief of the City of Albuquerque) are scheduled to give a status report on "Intelligence Process and Work Products Regarding Critical Infrastructures".
Thomas Noonan (P/CEO of Internet Security Systems) and Martha Marsh (P/CEO of Stanford Hospital and Clinics) will give a status report on "Risk Management Approaches Protection".
Alfred Berkeley (e-Xchange Advantage Corp.) and Linwood Rose (President of James Madison University) are scheduled to give a status report on "Assuring Adequate National Intellectual Capital to Secure Cyber-Based Critical Infrastructures".
Patrick Morrissey (Deputy Director for Law Enforcement and Intelligence of the DHS's National Cyber Security Division) will give a presentation on the "DHS/DOJ Cyber Security Survey".
The meeting will be open to the public. It will be held at the Hamilton Crowne Plaza, 14th & K Streets, NW.
FCC Sets Comment Deadlines on 2FNPRM Regarding Secondary Markets for Spectrum
12/27. The Federal Communications Commission (FCC) published a notice in the Federal Register that describes and sets comment deadlines for the Second Further Notice of Proposed Rulemaking (NPRM) regarding reducing barriers to secondary markets for spectrum rights.
This 2ndFNPRM seeks public comments on what additional policies could facilitate the deployment of new technologies through secondary market arrangements such as spectrum leasing and private commons.
FCC Chairman Michael Powell discussed the private commons model in a speech [5 pages in PDF] on October 26, 2004. See, story titled "Powell Addresses Spectrum Policy and Proceedings" in TLJ Daily E-Mail Alert No. 1,006, October 28, 2004.
He said that "I introduced an innovative approach to allow users of smart equipment to gain access to spectrum that is underutilized by licensees -- the private commons model. Under these rules, licensees can set aside an entire license or a portion of a license for an arrangement in which users can access that spectrum under technical rules and other conditions set by the licensees." (See, page 4.)
He added that "This new option has the potential to provide spectrum for ad hoc and mesh, peer-to-peer networks that can be used to offer wireless broadband services. The model also may be particularly valuable to users of the unlicensed bands, such as wireless ISPs, who may find those bands congested and may be looking for a source of additional spectrum to supplement their existing operations."
This 2ndFNPRM is a part of a larger item that the FCC adopted on July 8, 2004, and released on September 2, 2004. See, story titled "FCC Adopts Second Secondary Markets Report and Order" in TLJ Daily E-Mail Alert No. 934, July 9, 2004; and story titled "FCC Releases Second Secondary Markets Report and Order" in TLJ Daily E-Mail Alert No. 969, September 3, 2004.
Comments are due by January 18, 2005. Reply comments are due by February 17, 2005. This item is FCC 04-167 in WT Docket No. 00-230. See, Federal Register, December 27, 2004, Vol. 69, No. 247, at Pages 77560 - 77568.
More FCC News
12/27. The Federal Communications Commission (FCC) published a notice in the Federal Register that announces, describes and sets the effective date (February 25, 2005 for most provisions) of its Second Report and Order and Order on Reconsideration regarding reducing barriers to secondary markets for spectrum rights. The FCC adopted this item at its July 8, 2004 meeting, and released the text [PDF] of this item on September 2, 2004. See, story titled "FCC Adopts Second Secondary Markets Report and Order" in TLJ Daily E-Mail Alert No. 934, July 9, 2004; and story titled "FCC Releases Second Secondary Markets Report and Order" in TLJ Daily E-Mail Alert No. 969, September 3, 2004. This second report and order is FCC 04-167 in WT Docket No. 00-230. See, Federal Register, December 27, 2004, Vol. 69, No. 247, at Pages 77521 - 77559.
12/27. The Federal Communications Commission (FCC) published a notice in the Federal Register announcing and setting the effective date (December 27, 2004) of it final rule regarding its implementation of the Controlling of the Assault of Non-Solicited Pornography and Marketing Act of 2003, which is also known as the CAN-SPAM Act. See, Federal Register, December 27, 2004, Vol. 69, No. 247, at Pages 77141 - 77143. The FCC released its order back on August 12, 2004.
11th Circuit Affirms RICO Judgment Against AT&T for Fraudulently Billing Gambling Charges as Long Distance
12/27. The U.S. Court of Appeals (11thCir) issued its opinion [21 pages in PDF] in Kemp v. AT&T., a case regarding AT&T's fraudulent billing of gambling charges as long distance charges.
Following a jury trial, the District Court entered judgment against AT&T for fraudulent billing practices and the collection of illegal gambling debts in violation of the federal and Georgia RICO statutes, and awarded actual damages of $115.05, and punitive damages of $1,000,000. The Appeals Court affirmed the District Court in all things, except the size of the punitive damages award, which it ordered reduced to $250,000.
This case dates back to 1992. It is case involving wireline gambling, and not internet gambling. The gambling service was terminated in 1992. Also, AT&T's conduct included mislabelling gambling charges as long distance changes.
Felix Kemp was a long distance phone customer of AT&T, and a local phone customer of BellSouth. His grandson used his phone to gamble.
Teleline, Inc. created a game titled "Let's Make a Deal Telephone Game" that enabled callers to gamble via a 900 phone call. It resembled a television program titled "Let's Make a Deal" (LMAD). Callers heard prerecorded messages, and selected options using their touchtone phone buttons. Callers were billed $3.88 per minute, and in return played the game that gave them a remote change of winning money. AT&T carried the calls, played the messages, and billed callers for long distance phone calls.
This case has been in the federal courts since 1992. Although, the present Appeals Court opinion does not reflect most of this long history. The case before the Court of Appeals involves one plaintiff, Kemp. He was not originally the sole plaintiff. There is now only one defendant, AT&T. The plaintiffs had originally also named Teleline and USA Networks as defendants. The only issues before the Court of Appeals are the denial of AT&T's motions for judgment as a matter of law and for a reduction of the punitive damages award.
This case has also been styled Sykes v. AT&T in the past. For more of the facts and procedural history of this case, see the February 13, 2002 opinion of the Court of Appeals that reversed the District Court's class certification order.
The plaintiffs filed a complaint in U.S. District Court (SDGa) against AT&T. They also sought class action status. The complaint alleged numerous causes of action. However, for the purposes of the present Appeals Court opinion, two are pertinent: (1) civil violation of the federal Racketeer Influenced and Corrupt Organizations Act, which is codified at 18 U.S.C. §§ 1961-1968, and (2) civil violation of the Georgia Racketeer Influenced and Corrupt Organizations Act, which is codified at O.C.G.A. § 16-14-1 et seq. The plaintiffs requested, among other relief, actual damages and punitive damages.
The trial jury returned a verdict that AT&T had engaged in fraudulent billing practices and the collection of illegal gambling debts in violation of the federal and Georgia RICO statutes.
18 U.S.C. § 1962(c) provides that "It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt."
In the present case the predicate activities were the mail or wire fraud statutes and Georgia's state law regarding unlawful debts and illegal gambling.
18 U.S.C. § 1962(d) also provides that "It shall be unlawful for any person to conspire to violate any of the provisions of subsection (a), (b), or (c) of this section."
18 U.S.C. § 1964(c) then provides a private right of action. It states that "Any person injured in his business or property by reason of a violation of section 1962 of this chapter may sue therefor in any appropriate United States district court and shall recover threefold the damages he sustains and the cost of the suit, including a reasonable attorney's fee, except that no person may rely upon any conduct that would have been actionable as fraud in the purchase or sale of securities to establish a violation of section 1962. The exception contained in the preceding sentence does not apply to an action against any person that is criminally convicted in connection with the fraud, in which case the statute of limitations shall start to run on the date on which the conviction becomes final."
AT&T then brought a motion for judgment as a matter of law (JMOL) seeking to set aside a jury verdict, and a motion to reduce the award of punitive damages. The District Court denied both. AT&T appealed.
The Court of Appeals affirmed the District Court's denial of the JMOL. However, it reversed the denial of the motion to reduce the punitive damages award, ordered the District Court to reduce the punitive damages award from $1,000,000 to $250,000, and remanded the case back to the District Court.
The Appeals Court held that "In order to bring a RICO claim where mail or wire fraud serves as the predicate activity, it is necessary to show that (1) the defendant intentionally participated in a scheme to defraud another of money or property, (2) the defendant used the mails or wires in furtherance of that scheme, and (3) the plaintiff relied to his detriment on the defendant’s misrepresentations."
The Court added that "The nondisclosure of material information, even in the absence of any patently false statements, can also constitute a violation of the mail and wire fraud statutes where a defendant has a duty to disclose." It also wrote that "the LMAD charges were not long distance charges but were gambling debts owed only to Teleline", and that AT&T "had the duty to correct the mistaken impression it had fostered that the LMAD debts were for long distance charges."
The Court concluded that Kemp submitted sufficient evidence to the jury on each of the elements of a RICO claim based upon mail or wire fraud to support the jury's verdict.
The Court of Appeals also upheld the jury's RICO verdict based upon the predicate activity of violation of the state of Georgia's illegal lottery statute.
Finally, the Court of Appeals held that the award of punitive damages was appropriate, but that $1,000,000 was excessive. It ordered a reduction to $250,000, which is close to the $287,360.59 in revenues that AT&T collected.
This case is Felix Kemp v. AT&T, U.S. Court of Appeals for the 11th Circuit, App. Ct. No. 03-15189, an appeal from the U.S. District Court for the Southern District of Georgia, D.C. No. 92-00147-CV-6. Judge Rosemary Barkett wrote the unanimous opinion of the three judge panel, in which Judges Cox and Birch joined.
More News
12/27. The U.S. Patent and Trademark Office (USPTO) published a notice in its web site regarding increases in trademark fees that will take effect on January 31, 2005.