Carter v. American Telephone & Telegraph Company

• Decision Date: 17 August 1966
• Docket Number: No. 23556,23557.,23556
• Citation: 365 F.2d 486
• Parties: Thomas F. CARTER and Carter Electronics Corporation, Appellants, v. AMERICAN TELEPHONE & TELEGRAPH COMPANY et al., Appellees. Thomas F. CARTER and Carter Electronics Corporation, Appellants, v. Honorable Joe E. ESTES, Chief Judge, United States District Court, Northern District of Texas, et al., Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

365 F.2d 486 (1966)

Thomas F. CARTER and Carter Electronics Corporation, Appellants, v. AMERICAN TELEPHONE & TELEGRAPH COMPANY et al., Appellees.

Thomas F. CARTER and Carter Electronics Corporation, Appellants, v. Honorable Joe E. ESTES, Chief Judge, United States District Court, Northern District of Texas, et al., Appellees.

Nos. 23556, 23557.

United States Court of Appeals Fifth Circuit.

August 17, 1966.

COPYRIGHT MATERIAL OMITTED

Ray Besing, Ray Pearce, William Van-Dercreek, Bill Brice, Geary, Brice & Lewis, Dallas, Tex., for appellants.

Leroy Jeffers, Houston, Tex., Frank M. Ryburn, Jr., H. W. Strasburger, H. Sam Davis, Jr., Burford, Ryburn & Ford, Dallas, Tex., for appellees.

Before BROWN and COLEMAN, Circuit Judges, and DAWKINS, District Judge.

JOHN R. BROWN, Circuit Judge:

At issue here is whether a District Court in a private antitrust action for triple damages and injunctive relief should invoke the doctrine of primary jurisdiction to refer a question of tariff validity to the regulatory agency. It comes to us from a denial of a preliminary injunction. We agree with the District Court's primary jurisdiction reference to the Federal Communications Commission and affirm.

I.

At the outset we conclude that we have jurisdiction of the appeal under 28 U.S.C.A. § 1292(a) (1) as a denial of a preliminary injunction and the Telephone Company's motion to dismiss the appeal must accordingly be denied.

We need only briefly sketch the chronology. The complaint, filed November 29, 1965, was accompanied by a separate formal motion for preliminary injunction. The plaintiffs-appellants requested an early setting which would include the application for preliminary injunction. Thereafter by an exchange of letters among counsel and the Court and an informal pretrial conference in mid-December, the Judge extended the time for the defendants' responsive motions or answers to January 14, 1966. The defendants filed a motion to dismiss on the dual ground (a) asserting primary jurisdiction in the FCC and (b) failure to state a claim. The Court subsequently fixed a hearing for February 7, 1966, and by the Court's direction, this hearing was to be (and was) confined to the motions to dismiss. At the conclusion of the extended hearing February 7, the Judge announced orally his decision denying the motion to dismiss for failure to state a claim, but holding the case in abeyance until determination of the tariff's validity by the FCC. This was followed February 8 by a formal written memorandum order. Subsequently on February 16, the plaintiffs-appellants filed separate motions for rehearing and for a hearing on the motion for preliminary injunction. On February 24, each motion was denied.¹

Thus there is no doubt that both by the initial prayer in the complaint and by formal motion, the plaintiffs-appellants sought a preliminary injunction. Equally uncontradicted is the fact that such injunction was not granted. But, appellees argue, it is not that simple. On their theory, the Court having on February 8 put the case in abeyance pending reference to the FCC, the application for preliminary injunction was but a part of the case thus deferred, for the Court did not deny the preliminary injunction, only the hearing thereon. Consequently, the argument runs, the formal motion for a preliminary injunction was but a paper means of casting the primary jurisdiction reference ruling into an appealable form and not, as it really was, a mere stay order. This rests, in turn, on the generally accepted proposition that orders merely staying further action pending some event are not generally appealable.²

On this reading, the Judge was simply declining to entertain any requests until after the reference. But we read it differently. In the colloquy at the end of the February 7 hearing the Judge made it plain that the plaintiffs could file and he would consider all motions desired. The Judge did not treat the reference order as a ground merely for not considering the request for preliminary injunction. Rather, he treated the reference order as the reason why the injunction should be denied. It is, of course, the denial of a preliminary injunction, not the validity of the reasons therefor, which triggers the interlocutory appeal as a matter of right under § 1292(a) (1). Our conclusion is not in any sense at odds with Allied Air Freight, Inc. v. Pan American World Airways, 2 Cir., 1965, 340 F.2d 160, cert. denied, 381 U.S. 942, 85 S.Ct. 1560, 14 L.Ed.2d 683, or American Airlines, Inc. v. Forman, 3 Cir., 1953, 204 F.2d 230, cert. denied, American Airlines, Inc. v. Slick Airways, 346 U.S. 806, 74 S.Ct. 54, 98 L.Ed. 336. In Allied Air Freight the unsuccessful plaintiffs in a triple damage action (not injunction) sought to make the stay a vicarious granting of a preliminary injunction. On familiar principles, see note 2, supra, this would not work. In American Airlines the defendant sought to appeal from a denial of its motion to dismiss on the ground that primary jurisdiction was in the CAB. Not unexpectedly the Court of Appeals found no appealable order and also denied relief by mandamus.

The serious question of primary jurisdiction reference is therefore properly before us.³

II.

In analyzing the plaintiffs' complaint, it is well to bear in mind their blunt, bold position. The appellants claim that the trial Court by applying the doctrine of primary jurisdiction has effectively precluded them from obtaining the antitrust relief which they seek. Further, it is their position that the doctrine of primary jurisdiction does not apply because administrative agency approval does not immunize the Telephone Company's conduct from the operation of the antitrust laws, especially where the violation of those laws is claimed to be per se since an administrative determination of reasonableness would be irrelevant, and because there are no issues relevant to a disposition of the case at bar which require administrative expertise for their determination.

The complaint sought triple damages and injunctive relief under the antitrust laws. 15 U.S.C.A. §§ 15, 22. Only two defendants were named and served, A.T. &T. and General.⁴ These two along with 26 other named, but nonparty, telephone companies, 19 of which are owned and controlled by A.T.&T. were alleged to have jointly and severally conspired as a part of a common design to prevent the plaintiffs from marketing and distributing their Carterphone device.

The Carterphone, developed by the individual plaintiff Carter and manufactured and distributed by the corporate plaintiff, Carter Electronics, is a device for use with the traditional telephone handset. When in use, the telephone receiver handset is placed on a cradle which forms part of the Carterphone unit and by the process of induction, without any electrical connection or wiring or physical attachment, the Carterphone unit activates a two-way radio communication system to permit the telephone caller to converse with another person who may be located miles away from the telephone receiver handset. Similarly, the device works in the opposite direction to permit further transmission by land-lines of voice signals originating by mobile radio transmitter.

A substantial market throughout the United States has been developed competing in the product-relevant-market of the manufacture and sale of devices permitting private subscribers from regulated telephone companies to transmit telephone calls to and from points beyond the handset. Despite this economic demand the defendant Telephone Companies acting in concert with one or more or all of the named nonparties have taken concerted action to monopolize interstate commerce. These Telephone Companies sell and lease mobile radio-telephone units to their subscribers throughout the United States. These mobile units perform a function essentially similar to that afforded by the Carterphone and thus both are directly competitive. In violation of the antitrust laws, the Telephone Companies are undertaking to exclude the plaintiffs and other similar competitors from manufacturing or selling devices which would compete with Telephone Company-furnished mobile units.

To bring this about the Telephone Companies as sellers and lessors have required private subscribers, as buyers and lessees, not to deal with the Carterphone unit. Such requirements, conditions and understandings constitute concerted action which have no reasonable purpose but which do have a damaging effect on competition. The Telephone Companies with the specific intent to restrain trade and commerce have deliberately and purposefully issued instructions to their agents and those of the nonparty Telephone Companies to forbid the use of the Carterphone device by their private subscriber customers. Each of the Telephone Companies, due to its size and economic resources, has both the power to control the prices of competitive communication devices and the power to exclude competitors. The Telephone Companies in conspiracy and combination with each other as well as the named nonparty companies have exercised their economic power within the relevant market to require their customers to refrain from purchasing or using the Carterphone.

At this point in the complaint, the plaintiffs, wisely we think, anticipated the matter of regulatory tariffs. They expressly allege in Paragraph XI that the Telephone Companies "in order to accomplish the violation of the federal antitrust laws heretofore set forth, have published a regulatory tariff which purports to prevent the use of a device similar to the Carterphone * * *. Such tariffs are similar or identical to * * AT&T tariff FCC No. 132," a copy of which was annexed to the complaint "and incorporated herein."⁵

The plaintiffs then go on to allege that "although the Plaintiffs deny that such tariff is a valid tariff and that such tariff is applicable to the Carterphone, regardless of its validity and its...