United States v. American Telephone & Telegraph Co., Civ. A. No. 74-1698.

Citation461 F. Supp. 1314
Decision Date18 October 1978
Docket NumberCiv. A. No. 74-1698.
PartiesUNITED STATES of America, Plaintiff, v. AMERICAN TELEPHONE & TELEGRAPH COMPANY, Western Electric Co., Inc., Bell Telephone Laboratories, Inc., Defendants.
CourtUnited States District Courts. United States District Court (Columbia)

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Kenneth C. Anderson, Washington, D. C., argued and on brief, for plaintiff; Jules M. Fried, Peter B. Kenney, Jr., U. S. Dept. of Justice, Washington, D. C., on brief.

George L. Saunders, Jr., Chicago, Ill., for defendants; Harold S. Levy, Edward F. Barnicle, Jr., Leonard Joseph, New York City, George L. Saunders, Jr., Robert D. McLean, Chicago, Ill., Richard J. Flynn, Washington, D. C., on brief; F. Mark Garlinghouse, George V. Cook, New York City, William L. Keefauver, Dewey, Ballantine, Bushby, Palmer & Wood, New York City, Sidley & Austin, Chicago, Ill., of counsel.

Randolph May, for Federal Communications Commission as amicus curiae; Robert R. Bruce, John E. Ingle, Lawrence S. Schaffner, Charles L. Spencer, Federal Communications Commission, Washington, D. C., on brief.

OPINION

HAROLD H. GREENE, District Judge.

The motions before the Court address the Court's jurisdiction and they raise fundamental issues concerning the discovery that should govern the future path of this antitrust litigation. A recapitulation of the history of this case will be helpful to an understanding of these issues.

The complaint was filed on November 20, 1974. It alleges violations of Section 2 of the Sherman Act, 15 U.S.C. § 2, by the American Telephone and Telegraph Company (AT&T),1 Western Electric Company, Inc. (Western Electric),2 and Bell Telephone Laboratories, Inc. (Bell Labs).3 In sweeping language the complaint alleges that an unlawful combination and conspiracy exists and has existed for many years among the defendants and certain co-conspirators (primarily the Bell Operating Companies),4 designed to permit AT&T to maintain control over Western Electric, Bell Labs, and the Bell Operating Companies; to restrict competition from other telecommunications5 systems and carriers and from other manufacturers and suppliers of telecommunications equipment; and to cause Western Electric to supply substantially all the telecommunications requirements of the Bell System.

The complaint explains that the defendants are violating the antitrust laws by various monopolistic practices including the refusal to sell terminal equipment to subscribers of Bell System telecommunications service, the creation of obstructions to the interconnection of various carriers with the Bell System, and the maintenance of a monopolistic manufacturing and purchasing relationship between Western Electric and the Bell System. It is further alleged that, as a consequence of these practices (1) defendants have achieved and are maintaining a monopoly of telecommunications service and equipment; (2) competition in these areas has been restrained; and (3) purchasers of telecommunications service and equipment have been denied the benefits of a free and competitive market. Among other relief, the action seeks the divestiture by AT&T of all Western Electric stock; the separation of some or all of the Long Lines Department of AT&T from the Bell Operating Companies; the divestiture by Western Electric of its manufacturing and other assets sufficient to insure competition in the manufacture and sales of telecommunications equipment; and such relief against Bell Labs as the Court may find appropriate.

Defendants' Answer, and the Court sua sponte, raised two threshold defenses: (1) that a decree entered in 1956 by the U.S. District Court for the District of New Jersey (United States v. Western Electric Co., Civil Action No. 17-49 (D.N.J.1956)) is res judicata, and (2) that the matters complained of by the government are within the exclusive jurisdiction of the Federal Communications Commission and therefore immune from scrutiny under the antitrust laws. On October 1, 1976, the Court rejected the claim of res judicata, and on November 24, 1976, it ruled that defendants do not possess blanket immunity from antitrust liability by virtue of the Communications Act of 1934 or their regulation by the Federal Communications Commission. In rejecting the plea that the FCC has exclusive jurisdiction over the subject matter of this litigation, the Court further stated, however, that it might in the future refer particular issues to the Commission under the so-called doctrine of primary jurisdiction. United States v. Am. Tel. & Tel. Co., 427 F.Supp. 57 (D.D.C.1976) (Waddy, J.), cert. denied, 429 U.S. 1071, 97 S.Ct. 824, 50 L.Ed.2d 799 (1977), cert. denied, No. 77-1009 (D.C.Cir. May 27, 1977), cert. denied, 434 U.S. 966, 98 S.Ct. 507, 54 L.Ed.2d 452 (1977).

Shortly after the filing of the complaint, in November of 1974, and while these legal issues were being litigated, the parties began to engage in discovery.6 Defendants served a request for production of documents upon the government, as well as a comprehensive set of interrogatories. The government, for its part, filed numerous discovery requests upon defendants and each of the operating telephone companies in which AT&T holds a majority interest, and it began fairly extensive third party discovery. Disputes arose almost immediately, however, with each side accusing the other of making unduly broad requests and of engaging in obstructive conduct in relation to opposing requests.

These controversies became moot in relatively short order, as the course of discovery was stayed pending resolution of the jurisdictional issues.7 Eventually, and contemporaneously with its ruling on these issues, the Court issued an order vacating the stay that had been in effect for almost 22 months.8 and shortly thereafter, pursuant to stipulation of the parties, it issued a number of other pretrial orders, which established machinery for the recommencement of discovery.9 Almost immediately upon the entry of these orders, defendants sought review of the Court's ruling on the jurisdictional issues by petitioning both the U.S. Court of Appeals and the U.S. Supreme Court for writs of certiorari,10 and during the pendency of these petitions in the appellate courts, all proceedings in this Court, including discovery, were again stayed, this time, with one brief interruption, from January 25, 1977, to November 28, 1977.11

When the last certiorari petition was denied, and the stays were dissolved, the parties filed a number of proposed orders concerning pretrial discovery,12 and the Court, by its order of February 7, 1978, referred the case to Magistrate Lawrence S. Margolis to direct the preparation of a discovery schedule (see p. 1348, infra). At the same time, it denied two pretrial orders (Nos. 9 and 12) submitted by defendants which again raised the issue of the Court's jurisdiction; denied proposals for pretrial orders (Nos. 10 and 11) which would have dealt in various ways with documents generated in private antitrust proceedings in which AT&T is a defendant; and referred to the Magistrate defendants' proposed Pretrial Order No. 13 which would have established that all agencies and departments of the United States government are party plaintiffs in this suit for purposes of discovery. All of these matters, which are still pending, are discussed in detail below.

Pursuant to the authority vested in him by the Court, Magistrate Margolis on April 27, 1978, issued two discovery orders.13 Defendants objected to the second of these orders, and appealed it to the Court (28 U.S.C. § 636(b)(1)(A)) which approved a provision establishing a mechanism for the voluntary production of documents from government agencies, but otherwise stayed the effect of the order.14 Since that time, there has been little activity,15 and such discovery as has been attempted has been the subject of intense controversy.

The case was assigned to this Court on June 22, 1978. On July 6, 1978, the parties were directed to file status memoranda on all outstanding issues, and on August 21, 1978, argument was heard on these matters.16 While these issues arose in varying procedural contexts, they may conveniently be discussed under four headings: (1) jurisdiction, (2) the nature of the plaintiff, (3) the government's effort to secure access to documents collected in several private antitrust suits brought against defendants in other districts, and (4) the future course of this action, including the scheduling of proceedings and the authority of the Magistrate and the Special Masters.

I

In all of their submissions to this Court, defendants have vigorously and consistently raised the jurisdictional issue. They insist that an irreconcilable conflict exists between the antitrust laws and the regulatory scheme established by the relevant statutes,17 that when there is such a conflict the antitrust laws must give way, and that therefore the Court lacks jurisdiction over this action. While in many respects defendants' contentions constitute rearguments of matters rejected by Judge Waddy in his order of November 24, 1976, in view of the importance of this issue, and since a claim of lack of jurisdiction may be raised and entertained at any time (Rule 12(h)(3), F.R.Civ.P.), I have independently considered the jurisdictional issues. Upon such reconsideration, I concur with Judge Waddy's conclusion that regulation by the Federal Communications Commission and state regulatory bodies does not immunize defendants from this antitrust action.

Telecommunications carriers clearly do not enjoy an express statutory immunity from antitrust enforcement with respect to the activities here involved. While Congress has not hesitated in so many words to exempt the practices of other industries from the antitrust laws,18 and while it has statutorily exempted some activities of telephone companies from those laws,19 it has not done so...

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