American Tel. & Tel. Co. v. MCI Communications

Citation736 F. Supp. 1294
Decision Date03 May 1990
Docket NumberCiv. A. No. 90-66.
CourtU.S. District Court — District of New Jersey
PartiesAMERICAN TELEPHONE & TELEGRAPH COMPANY, Plaintiff, v. MCI COMMUNICATIONS CORPORATION and Pioneer TeleTechnologies, Inc., Defendants.

COPYRIGHT MATERIAL OMITTED

Alan E. Kraus and Michael R. Cole, Riker, Danzig, Scherer, Hyland & Perretti, Morristown, N.J., for plaintiff American Tel. & Tel. Co.

Robert M. Axelrod, Sills Cummis Zuckerman Radin Tischman Epstein & Gross, Newark, N.J., for defendant MCI Communications Corp.

Edward J. Dauber, Greenberg, Dauber & Epstein, Newark, N.J., for defendant Pioneer TeleTechnologies, Inc.

OPINION

LECHNER, District Judge.

The American Telephone and Telegraph Company ("AT & T") initiated this action against MCI Communications Corporation ("MCI") and Pioneer TeleTechnologies, Inc. ("Pioneer") (collectively the "defendants") for alleged violations of the deceptive practices provisions of section 43(a) the Lanham Act, 15 U.S.C. § 1125(a), and violations of the New Jersey common law of unfair competition, interference with prospective economic advantage and product disparagement. Subject matter jurisdiction is founded on 15 U.S.C. § 1121, 28 U.S.C. §§ 1331 & 1338(b) and 28 U.S.C. § 1332(a).

This opinion addresses the motions of the defendants to dismiss portions of the action or to transfer the entire action to the United States District Court for the District of Columbia.1 Pioneer has moved to dismiss for lack of personal jurisdiction pursuant to Fed.R.Civ.P. 12(b)(1).2 MCI has made a forum non conveniens motion to transfer pursuant to 28 U.S.C. § 1404(a). MCI has also moved to dismiss AT & T's state law claims as preempted under federal law and to refer AT & T's claims of unauthorized customer switching to the Federal Communications Commission ("FCC") under the doctrine of primary jurisdiction.3 AT & T has opposed the motions of the defendants.4

At oral argument on 26 March 1990, MCI was directed to submit additional material in support of the transfer motion5 and AT & T was given leave to submit material in opposition to the additional submissions of MCI.6 The transfer motion was reargued in light of the additional submissions of the parties on 12 April 1990. However, upon the request of AT & T, further submissions were permitted in support of and in opposition to the transfer motion.7 The final argument on the transfer motion in light of the complete record was held on 3 May 1990.

For the reasons which follow, Pioneer's motion to dismiss is denied. MCI's motion to transfer this action to the District of Columbia is granted. The other motions of MCI are not addressed and may be presented to the transferee court.

I. BACKGROUND
A. The Parties

AT & T is a New York corporation with its principal place of business in New York City. New Jersey, however, is the home of every major AT & T division and is the center of AT & T's long distance business. AT & T is the largest private employer in New Jersey and has more employees here than in any other state in the nation. Tutton Cert. at ¶¶ 5-7.

AT & T provides long distance telephone services through AT & T Communications, Inc. ("AT & T Communications"), which has its principal place of business in Basking Ridge, New Jersey. For at least fifteen years, AT & T's long distance activities have been operated from facilities in this state, including a core telecommunications facility in Bedminster, New Jersey. Each weekday, the Bedminster facility routs more than seventy five million long distance telephone calls throughout the nation and the world. In addition, AT & T maintains New Jersey facilities for research and off-shore or over-seas cable communications. Id. at ¶¶ 6-9.

MCI is a Delaware corporation with its principal place of business in Washington, D.C. MCI is the largest competitor of AT & T in the residential long distance telecommunications market. Although MCI is registered to do business and does business in New Jersey, the record does not reveal that MCI maintains any presence in this state.

Pioneer was incorporated and has its principal place of business in Iowa. It is a technology firm which provides various sales services, including telemarketing,8 to clients. Since 1985, Pioneer or its predecessors have provided telemarketing services to MCI, which is currently Pioneer's largest client. Decisions regarding telemarketing strategy, such as whom should be called and what the sales pitch should be, are determined by MCI, not Pioneer. Pioneer reports verified sales to MCI, but does not actually switch customers to MCI. Winkel Dec. at ¶¶ 2-5.

Pioneer does not have offices or personnel in New Jersey and it is not licensed to do business in this state. During 1989, Pioneer made over seventy five million telephone calls for MCI, two percent of which—or approximately one and one-half million calls—were made to New Jersey residents. Pioneer has no relationship with New Jersey beyond the telemarketing calls made to New Jersey residents at the direction of MCI.

B. Pending Litigation

AT & T and MCI are commonly recognized suppliers of long distance and other telephone services to residential and business customers. Although AT & T is the dominant presence in the market, competition for customers between these two companies is intense. That competition unfortunately appears to have spilled into the courts. This lawsuit is one of three proceedings filed in recent months which arises from the marketing practices and promotional activities of AT & T and MCI.

The first lawsuit in the series was commenced by MCI in the United States District Court for the District of Columbia in October 1989 (the "District of Columbia Action"). At issue in the District of Columbia Action is MCI's claim that AT & T has engaged in a course of deceptive advertising through various promotional activities aimed at persuading MCI customers to switch to AT & T. AT & T filed a counterclaim in the District of Columbia Action asserting similar claims against MCI and putting its promotional activities in issue.

In January 1990, AT & T commenced the instant action against MCI (the "New Jersey Action"). AT & T pursues two claims in the New Jersey Action alleging that: (1) the telemarketing program of MCI, as implemented by Pioneer, employs false and deceptive representations to persuade AT & T customers to switch to MCI and (2) MCI illegally switches long distance customers of AT & T without their consent.

On the same date, AT & T filed a petition with the FCC to change the regulations by which a long distance carrier is authorized to switch customers (the "FCC Action"). In the FCC Action, AT & T has proposed regulations which would reverse the current practice of permitting customers to be switched on verbal consent and adopt a rule that would require written consent.

1. The New Jersey Action

As previously mentioned, the issue in the New Jersey Action involves the telemarketing practices of MCI and its agent9 Pioneer. The Complaint alleges two forms of allegedly wrongful conduct on the part of the defendants. First, AT & T claims MCI directs Pioneer telemarketing representatives to make false or deceptive statements to AT & T customers. These misrepresentations allegedly involve statements that the customer will be or has been switched to MCI for one of the following reasons: AT & T is going out of business, is no longer providing long distance services, does not provide services to the area, has merged with MCI or has authorized the switch. AT & T Transfer Opp. at 9-10. Second, AT & T alleges the defendants have directed local exchange companies to switch customers without their consent. This practice is known as "slamming" in industry parlance.

AT & T seeks preliminary and permanent injunctive relief on its misrepresentation claims in the New Jersey Action.10 It also seeks an injunction preventing MCI from using telemarketing to switch AT & T customers "without the knowledge, agreement and express authorization of the customer." Complaint at 11. AT & T seeks compensatory damages for injury caused by MCI's allegedly wrongful actions and seeks to have MCI disgorge its profits resulting from such conduct together with pre- and post-judgment interest, costs and attorneys fees. AT & T seeks punitive damages and requests treble damages under the Lanham Act as a result of the alleged misrepresentations. AT & T is not seeking redress in the New Jersey Action for any false and deceptive representations that MCI may have made concerning comparisons in prices of AT & T and MCI products. Cole Aff. at ¶ 4.

As to AT & T's decision to bring the New Jersey Action in this district, Merrill Tutton, a vice president of AT & T, submitted a certification stating that the District of New Jersey is the most convenient forum in which to litigate AT & T's telemarketing claims. Tutton Cert. at ¶ 12. Tutton states virtually all of the AT & T employees who are likely to testify in this case are located in Basking Ridge, New Jersey, including Tutton and five other individuals. Id. at ¶¶ 13-15. Tutton further indicates nearly all of the relevant documents, including customer data and records of customer inquiries, are located in New Jersey. Id. at ¶¶ 17-21. Finally, the Tutton Certification states "all of the documents being produced by MCI in the District of Columbia Action are being produced in Basking Ridge. Virtually all of the documents being produced by AT & T in that action are being produced in Basking Ridge." Id. at ¶ 17 n. 3.

MCI has submitted an affidavit which states four of its witnesses are located in the District of Columbia and none of its witnesses are located in New Jersey. Fraser Cert. at ¶ 7. This affidavit also indicates that discovery in the District of Columbia Action involves documents and witnesses scattered around the nation.

2. The District of Columbia Action

In the District of Columbia Action, MCI alleges AT & T began investing large amounts of...

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