The U.S. Supreme Court said Monday it will review an appeals court ruling that found competitive phone companies and consumers have the right to sue the heavily regulated regional Bell operating companies based on antitrust legislation.
The nine justices could hear arguments in October and issue a decision late this year or in early 2004, lawyers involved in the case say.
If the Supreme Court upholds the appeals court decision in Bell Atlantic vs. Trinko, it could allow dozens of antitrust cases to proceed and “send a message” to the Bells that “they have to obey the law and let people compete with them,” says Maxwell Blecher, a partner for Blecher Collins, who has been practicing antitrust law since 1956.
Some antitrust lawyers say the incumbent phone companies have blocked local phone competition ever since Congress passed the Telecommunications Act of 1996. The incumbents have jerked competitors "around until they basically ran out of capital, went out of business,” says Blecher.
The Bells say such criticism lacks merit.
“Verizon has done more than any other telephone company to open its local markets to competition,” says John Thorne, senior vice president and deputy general counsel of Verizon Communications Inc., Bell Atlantic’s successor, which asked the nation’s highest court to review the Trinko case.
In June the U.S. Court of Appeals for the Second Circuit in New York recognized the right of companies and consumers to sue the phone giants for antitrust damages, diverging from a former appeals court ruling in the Seventh Circuit.
Specifically, the three judges on the Second Circuit unanimously found that the plaintiff, Curtis V. Trinko, could sue Verizon based on Section 2 of the Sherman Antitrust Act (passed in 1890) and Section 202a of the Communications Act of 1934, says Joseph Garland, one of the lawyers representing Trinko.
In 2000, Trinko -- a New York attorney -- filed the antitrust case against Verizon in the U.S. District Court for the Southern District of New York. The alleged problem: When Trinko’s law firm ordered services from its local provider, AT&T Corp., Trinko experienced periods “where he was without phone service for a while,” says Garland. Trinko alleges AT&T’s network supplier, Verizon, was making things difficult. Consequently, the argument goes, Trinko suffered as a result of antitrust violations.
Lawyers say the Trinko decision flies in the face of a previous appeals court decision: In Goldwasser vs. Ameritech the U.S. Court of Appeals for the Seventh Circuit in Chicago found plaintiffs could not litigate an antitrust suit against the Bells. Judge Diane Wood, an antitrust law professor and former Antitrust Division official, decided the matter. Her two colleagues, judges Richard Posner and Frank Easterbrook, did not rule on the case as appeals court judges frequently split the workload.
Posner and Easterbrook are “two of the most respected antitrust judges in the country,” says Garland.
Some lawyers say Wood made her finding because the Bells are so heavily regulated under the ’96 Telecom Act.
The “antitrust laws would add nothing to the oversight already available under the 1996 law,” Verizon quotes Wood.
Thorne said earlier this year the Seventh Circuit ruled the Bells are under no duty “to affirmatively assist our rivals.”
In recent years judges throughout the country have tossed out antitrust suits filed against the Bells, citing the Goldwasser ruling. However, the Second Circuit’s decision emboldened antitrust lawyers. Thorne has counted about 36 antitrust cases. While lower courts have dismissed some antitrust cases, at least a few are under appeals court reviews, he says.
Daniel Berninger, managing director of watchdog organization pulver.com Inc., says the Bells could go bankrupt if the Supreme Court upholds the Second Circuit. Under antitrust law, a company can be liable for triple damages.
“I basically think the Bells will be broken up within 24 months,” he says. “The amount of bad acts that took place after the Telecom Act until today is just unprecedented.”
The Supreme Court’s decision will have ramifications extending beyond the telecommunications industry. For instance, consumer groups have filed 16 class action suits against the United Parcel Service in New York for antitrust violations because they didn’t provide an option on their shipping form for people to choose an alternative insurance provider, Thorne says. The consumers cite the Trinko case.
The YES network (Yankees Entertainment & Sports LLC), which carries The New York Yankees and New Jersey Nets, is suing Cablevision Systems Corp. for antitrust claims for refusing to carry YES as a basic service, says Garland.
The YES network also cites the Trinko case, according to Verizon’s filing with the Supreme Court. Garland says the case is pending before the U.S. District Court for the Southern District of New York.
