AT & T v. Winback & Conserve Program
| Decision Date | 12 May 1994 |
| Docket Number | No. 93-5456.,93-5456. |
| Citation | 851 F. Supp. 617 |
| Parties | AMERICAN TELEPHONE AND TELEGRAPH COMPANY v. WINBACK & CONSERVE PROGRAM, INC., and Alfonse G. Inga. |
| Court | U.S. District Court — District of New Jersey |
Frederick L. Whitmer, Francine A. Franklin, Pitney, Hardin, Kipp & Szuch, Morristown, NJ, for plaintiff.
H. Curtis Meanor, Lawrence S. Coven, Podvey, Sachs, Meanor, Catenacci, Hilder & Cocoziello, P.C., Newark, NJ, Charles H. Helein, Richard H. Waysdorf, Helein, Waysdorf & Mandigo, Washington, DC, for defendants.
This matter comes before the Court on plaintiff's application for a preliminary injunction. For the reasons discussed below, plaintiff's application is DENIED.
Plaintiff, American Telephone and Telegraph Company, ("AT & T"), is engaged in the business of marketing and providing a wide variety of telecommunications services. AT & T markets its long distance telecommunications services under a variety of service marks and trademarks including its initials "AT & T" and its "globe" symbol. Defendant, Winback & Conserve Program, Inc., ("WCPI" or "Winback"), is an aggregator of 800 inbound telecommunications services which offers end users access to the AT & T 800 inbound network at a discounted price. Defendant, Alfonse G. Inga, ("Inga"), is President of WCPI.
The advent of resale and aggregation in the telecommunications industry can be traced to the 1976 ruling of the Federal Communications Commission, (the "FCC"), that required AT & T to offer for resale its long distance telecommunications services. See Resale and Shared Use of Common Carrier Domestic Public Switched Network Services, 60 F.C.C.2d 261 (1976); 83 F.C.C.2d 167 (1980); see also AT & T v. FCC, 572 F.2d 17, 20 (2d Cir.), cert. denied, 439 U.S. 875, 99 S.Ct. 213, 58 L.Ed.2d 190 (1978). The FCC requirement that AT & T offer its long distance telecommunications services for resale created the opportunity for businesses, such as WCPI, to subscribe to a high volume/high discount long distance telecommunications service that uses access to AT & T's long distance network to provide its own long distance service to its own customers.
WCPI does not employ any individuals on its staff who engage in the marketing and sale of the Winback product. Instead, WCPI utilizes a network of sales or marketing representatives to market its 800 service discount plan. The network consists of approximately 50 different marketing/sales agencies. Those agencies in turn employ and/or contract with the individual sales representatives, numbering approximately 1000. The agencies generally market a wide array of telephone services offered by various parties, including other aggregators and in some instances the agency's own aggregation plan. The sales representatives do not work at WCPI locations. They are not reimbursed for nor are they provided with any supplies or equipment necessary to operate the office. They do not receive salaries from WCPI but rather are compensated on a pure commission basis by WCPI for the sales which they make. They are not told how to select customers. They are not obligated to WCPI in terms of quotas, hours, length of commitment, etc.
They are, however, supplied with two forms from WCPI which make reference to WCPI in some way and which are required by AT & T to effectuate the transfer of service from the existing carrier to WCPI. Additionally, there was testimony to the effect that at least one of the representatives contacts Inga on a periodic basis for advice concerning the marketing of the product. Inga testified that he has taken steps and believes that it his responsibility to take such steps to "police" the representatives in the marketing of the product to avoid misrepresentations in the solicitations.
Essentially, the process works as follows: The sales representative makes the contact with the end user and offers to the end user an opportunity to join the WCPI discount plan. The benefit of joining the WCPI plan is to allow the end user to maintain its current access or to gain access to the AT & T 800 inbound network at a rate below the end user's current rate or a rate that the end user could not obtain on its own individual account. If the end user is interested in joining the WCPI plan, the sales representative forwards various forms to the end user, including a facsimile cover sheet, various informational documents, a Transfer of Service Agreement and Notification form ("transfer form") and a Main Billed Telephone Numbers Location List ("main billed form"). The end user then fills out the transfer form and the main billed form and returns them to the sales representative. The representative will then forward the forms to the primary marketing or sales agency. The agency forwards the forms on to the appropriate carrier or aggregator, in this case WCPI. WCPI then forwards the transfer form and main billed form to AT & T.
Once the end user joins the WCPI plan, the end user becomes the customer of WCPI while WCPI is the customer of AT & T. Notwithstanding this transfer of service, however, AT & T directly bills the end user and the end user makes payment directly to AT & T. Additionally, Inga testified that in many cases WCPI executes letters of agency which essentially allow the end users to receive the services associated with access to the AT & T network directly from AT & T. At the end of each month, AT & T forwards to WCPI a check in the amount of the difference between the discount earned by WCPI and the average discount that WCPI passes on to the end user. WCPI similarly sends a commission check to the marketing representatives for its share of the sales on a monthly basis.
The instant dispute arises out of the solicitation of end users by various sales representatives who market the Winback program. AT & T alleges that in contacting and soliciting end users for the Winback plan various sales representatives either improperly state that they are with AT & T or falsely mislead the end user into believing that the Winback plan is an official AT & T program which is offered by or affiliated with AT & T. AT & T contends that WCPI and the sales representatives are engaging in the unauthorized practice of using the letter designation AT & T and the AT & T globe symbol predominantly and pervasively throughout Winback advertisements, other marketing materials and forms provided to the end users. Complaint ¶ 17, 24. AT & T further claims that various materials being circulated and used by WCPI and the various sales representatives indicate that the forms would be submitted to a nonexistent "AT & T Input Department." Id. ¶ 23. AT & T also claims that WCPI and the sales representatives in the marketing of the Winback product regularly make oral misrepresentations to end users indicating that they are "the marketing arm of AT & T," id. ¶ 25, are from AT & T or are affiliated with AT & T.
AT & T came before the Court in December of 1993 seeking a Temporary Restraining Order ("TRO") and an Order of Contempt against defendant Inga for violation of a final Consent Order entered May 7, 1992 in the related case of AT & T v. One Stop Financial, Inc., Civil Action No. 92-1489. In support of its application AT & T presented to the Court, inter alia, approximately ten certifications from various end users who claim to have been misled as to the origin of the product offered by the sales representatives who were marketing the Winback program. On that day, this Court indicated that the contempt proceeding would not be heard until discovery had been completed. The Court did, however, hear the parties on plaintiff's application for a TRO. Finding substantial credible evidence that instances of infringement were occurring, this Court was persuaded at the time that the imposition of temporary restraints was necessary. See Transcript of Proceedings 12/15/93 at 57-66.
The restraints placed upon defendants, together with their officers, agents, servants, employees, attorneys and all persons in active concert or participation with them, or who market under the name of WCPI, at that time included a prohibition on the use of any oral or written communication falsely designating defendants' goods and services as being those of AT & T, sponsored by AT & T, or affiliated with AT & T. Similarly, defendants were enjoined and restrained from engaging, producing, creating, encouraging, aiding or abetting any oral communication, advertisement, label, sign, flyer, envelope, correspondence or any other oral or written communication which enables defendants to pass off their goods or services as being those of AT & T. The Order also included a mechanism whereby defendants were required to serve the Order upon all persons identified on a list as WCPI's primary agents. The so-called primary agents were then required to serve the Order on each and all persons or entities whom the primary agents had authorized to market under the name, mark, or authority of WCPI.
The parties consented to the extension of the TRO until such time as discovery was completed with respect to the preliminary injunction application and this Court's decision thereon. During discovery the depositions were taken of each of the approximately ten end users whose certifications were submitted in support of the TRO application. All certifications and depositions were made a part of the record for the Court to consider in determining the instant motion.1 Additionally, at the hearing on the preliminary injunction application, Inga and Thomas Salzano, the President of Agency Services Group, Inc., one of the marketing agencies with whom Inga deals, testified. Because the issue before the Court is extremely fact sensitive, a brief summary of the proofs adduced in the record is necessary.
Debra Dahl Vogel, the Telecommunications Network Coordinator for a concern ...
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American Tel. and Tel. Co. v. Winback and Conserve Program, Inc., 94-5305
...control over the sales representatives to justify the imposition of liability upon Winback and Inga. AT & T v. Winback & Conserve Program, 851 F.Supp. 617 (D.N.J.1994) ("Winback "). Because we find that the district court committed errors of law in denying AT & T's motion for a preliminary ......