Supreme Court Grants Certiorari in Verizon v. Trinko

March 10, 2003. The Supreme Court granted certiorari in Verizon v. Trinko, a case involving the application of Section 2 of the Sherman Antitrust Act, 15 U.S.C. § 2, in the context of telecommunications. The Court's Order List [14 pages in PDF], at page 4, states that "The petition for a writ of certiorari is granted limited to the following Question: ``Did the Court of Appeals err in reversing the District Court's dismissal of respondent's antitrust claims?´´" 

The law office of Curtis Trinko filed a complaint in U.S. District Court (SDNY) against Bell Atlantic (now Verizon), an incumbent local exchange carrier (ILEC), alleging that Verizon denied the customers of AT&T, Trinko's local phone service provider, equal access to its local network in violation of the anti-discrimination requirements of the Communications Act, codified at 47 U.S.C. § 202(a), and the interconnection requirements of the Communications Act, codified at 47 U.S.C. § 251 (b) and (c). Trinko also alleged violation of Section 2 of the Sherman Antitrust Act, 15 U.S.C. § 2. Finally, he alleged tortious interference with contract. Trinko sought class action status.

The District Court dismissed Trinko's claims. It held that he lacked standing to bring claims under the Communications Act; those claims belong to AT&T. It also held, based upon the Seventh Circuit's opinion in Goldwasser v. Ameritech, 222 F.3d 390 (7th Cir. 2000), that Trinko did not have an antitrust claim. Trinko appealed to the Court of Appeals.

The U.S. Court of Appeals (2ndCir) issued its opinion on June 20, 2002, affirming in part, vacating in part, and remanding. The Appeals Court held that Trinko lacked standing to sue under the Communications Act. It wrote that Verizon, "fulfilled its duties as an ILEC under subsections (b) and (c) of section 251 by entering into a state approved interconnection agreement with AT&T through the procedures described in section 252. While the defendant may have breached its obligations under the interconnection agreement, because its duties as an ILEC are directly defined by that agreement, there was no underlying violation of subsections (b) and (c) of section 251." (Footnote omitted.)

However, the Court of Appeals reversed the District Court's dismissal of the antitrust claim. That part of the Appeals Court opinion is the only issue in the present preceding before the Supreme Court.

The Appeals Court wrote that "In Goldwasser, the Seventh Circuit dismissed similar allegations of monopolistic conduct for two reasons. First, it found that the claim was "inextricably linked" to allegations by the Goldwasser plaintiff that section 251 of the Telecommunications Act had been violated. Thus, the claim was merely an allegation that the Telecommunications Act was violated and not a freestanding antitrust action. But there is no requirement that an allegation that otherwise states an antitrust claim must not rely on allegations that might also state a claim under another statute. Congress, of course, can indicate that such a statute provides an implicit immunity from the antitrust laws. Conduct that merely describes a violation of a statute that is meant to immunize a regulated industry from antitrust scrutiny could not support an antitrust action. But we do not lightly find that a statute provides such an implicit immunity."

The Court added that "There is no ``plain repugnancy´´ between the antitrust laws and the Telecommunications Act." The Court also concluded that "It is unlikely that allowing antitrust suits would substantially disrupt the regulatory proceedings mandated by the Telecommunications Act."

On December 16, 2002, the The Federal Trade Commission (FTC) and the Department of Justice (DOJ) filed a joint brief [26 pages in PDF], as amici curiae, urging the Supreme Court to grant the petition for writ of certiorari, and reverse the Second Circuit.

The amicus brief states that the question presented is "Whether, in reversing the dismissal of a complaint for failure to state a claim upon which relief may be granted under Section 2 of the Sherman Act, 15 U.S.C. 2, the court of appeals erred by relying on a standard of liability that does not require predatory or exclusionary conduct."

The brief elaborates that "The Second Circuit's decision in this case dramatically expands antitrust liability for failure to assist rivals. It conflicts with the decisions of other courts of appeals, including Goldwasser v. Ameritech Corp., 222 F.3d 390 (7th Cir. 2000), which held that ``similar allegations of monopolistic conduct´´ did not state a claim upon which relief may be granted. ... The Second Circuit’s decision is erroneous. And it will have significant practical consequences, particularly for the telecommunications industry as it adapts to the fundamental regulatory changes wrought by the Telecommunications Act of 1996."

The FTC/DOJ brief continues that "The 1996 Act requires incumbent telecommunications carriers to assist their rivals by providing them with access to their networks under legislatively and administratively developed conditions and formulae. [citing Verizon v. FCC] This Court has recognized the importance of that complex legislation and the industry it restructures by granting review in two cases raising statutory interpretation issues. See Verizon v. FCC, supra; AT&T v. Iowa Utils. Bd., 525 U.S. 366 (1999). This case raises similarly important issues. In the courts of appeals, the United States and the FCC have filed briefs as amici curiae urging, among other things, the rejection of any construction of the 1996 Act that would render it an implied repeal of the antitrust laws in this important sector of the economy. Well-established principles preclude recognition of such immunity absent clear repugnancy between the antitrust laws and a regulatory statute, Carnation Co. v. Pacific Westbound Conference, 383 U.S. 213, 218 (1966); Otter Tail Power Co. v. United States, 410 U.S. 366, 372-375 (1973), and any implied repeal would contravene the 1996 Act’s declaration that it should not ``be construed to modify, impair, or supersede the applicability of any of the antitrust laws.´´ See 47 U.S.C. 152 note. The Second Circuit in this case, like the Seventh Circuit in Goldwasser, correctly concluded that the 1996 Act does not immunize petitioner's conduct from scrutiny under the antitrust laws. ..."

"Nonetheless, the 1996 Act's imposition of new duties to assist rivals -- coupled with the increasing number of antitrust lawsuits predicated on alleged noncompliance with the 1996 Act -- have given new urgency to careful examination of the circumstances under which antitrust law requires a dominant firm to provide such assistance. The Second Circuit's decision unduly expands those circumstances by endorsing essential facilities and monopoly leveraging theories that are uncabined by any requirement that the challenged conduct be exclusionary or predatory -- i.e., that the refusal not make economic sense except as an effort to diminish competition. That approach improperly trivializes the antitrust laws and encourages litigants to seek antitrust remedies for ordinary commercial and regulatory disputes. The decision and the many lawsuits based on the theories it endorses, moreover, could threaten substantial disruption of the telecommunications industry. Accordingly, the petition for a writ of certiorari should be granted", the FTC/DOJ brief concludes.

ILECs are pleased with the Supreme Court's decision to review the Second Circuit's opinion. Lawrence Sarjeant, of the U.S. Telecom Association (USTA), a group that represents ILECs, such as Verizon, stated in a release that the "USTA is pleased that the Supreme Court has agreed to review the decision of the Second Circuit Court of Appeals in the Trinko case. USTA believes that the Second Circuit’s decision conflicts with well established Supreme Court precedent and if left uncorrected, could produce significant negative consequences for the telecommunications industry."

Similarly, BellSouth, another ILEC, stated in a release that "The lower court's decision would wrongly create a conflict between the antitrust law and the Telecommunications Act of 1996. The administrative framework of the Telecom Act was designed to handle the myriad disputes that come from contractual agreements between competitors that have been reached through compulsory good-faith negotiation and sometimes arbitration. We believe the Supreme Court should clarify that the Congressionally designated regulators, not juries, should resolve these complex disputes. The Act expressly provided that the newly articulated administrative standards would not 'modify' or otherwise extend the federal antitrust laws."