INTERNATIONAL T. & T. CORP. v. General Tel. & Elec. Corp.

• Decision Date: 14 July 1972
• Docket Number: Civ. No. 2754.
• Citation: 351 F. Supp. 1153
• Parties: INTERNATIONAL TELEPHONE AND TELEGRAPH CORPORATION, Plaintiff, v. GENERAL TELEPHONE & ELECTRONICS CORPORATION and Hawaiian Telephone Company, Defendants.
• Court: U.S. District Court — District of Hawaii

351 F. Supp. 1153

INTERNATIONAL TELEPHONE AND TELEGRAPH CORPORATION, Plaintiff, v. GENERAL TELEPHONE & ELECTRONICS CORPORATION and Hawaiian Telephone Company, Defendants.

Civ. No. 2754.

United States District Court, D. Hawaii.

July 14, 1972.

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Vernon F. L. Char, Damon, Shigekane, Key & Char, Honolulu, Hawaii, Howard J. Aibel, Scott E. Bohon, Edwin A. Kilburn, Daniel R. Solin, Robert E. McKee, New York City, Maxwell M. Blecher, Harold R. Collins, Jr., Blecher & Collins, Los Angeles, Cal., for plaintiff.

Marshall M. Goodsill, Martin Anderson, Jenks, Kidwell, Goodsill & Anderson, Honolulu, Hawaii, Thomas R. Mulroy, Mark Crane, William I. Goldberg, Hopkins, Sutter, Owen, Mulroy & Davis, Chicago, Ill., Theodore F. Brophy, James M. Baisley, Donald P. McCormick, Milton Handler, Stanley D. Robinson, Kaye, Scholer, Fierman, Hays & Handler, New York City, for defendants.

DECISION

PENCE, Chief Judge.

In October 1967, International Telephone and Telegraph Corporation (ITT) filed a Clayton § 16¹ complaint in this court against General Telephone & Electronics Corporation (GTE) and Hawaiian Telephone Company (Hawaiian), in essence maintaining that by GTE's acquisition of Leich Electric Company (Leich) in 1950, Automatic Electric Company (AE) in 1955, and Lenkurt Co., Inc. (Lenkurt) in 1959, all being manufacturers and distributors of tele-communications equipment, it became a vertically integrated telephone company, with its telephone operating companies buying almost all of their transmission equipment, switching systems, apparatus and other telephone communications equipment from GTE's own manufacturing subsidiaries. ITT further complained that by GTE's acquisition of telephone operating companies, during the above period and thereafter, particularly the acquisition of California Water and Telephone Company, West Coast Telephone Company, The Southwestern States Telephone Company and Western Utilities Corporation in 1964, Central Iowa Telephone Company (Central Iowa) in April 1967, Hawaiian in May 1967, and Northern Ohio Telephone Company (Northern Ohio) in November 1967, the manufacturing competitors of GTE's subsidiaries AE, Lenkurt and Sylvania Electric Products, Inc. (Sylvania), i. e., the independent manufacturers of telecommunications equipment (Western Electric Company Incorporated (WE) not being included in that category)² have been and will be foreclosed from selling telephone equipment and supplies to GTE's operating companies, to the detriment of actual and potential competition by such manufacturers.

ITT charged that the acts of GTE were in violation of §§ 1 and 2 of the Sherman Act, and § 7 of the Clayton Act, 15 U.S.C. §§ 1, 2 and 18. ITT also charged that the acquisition of Hawaiian violated §§ 2, 5 and 7 of Act 190 of the Hawaii Laws of 1961. ITT requested only equitable relief, including a request that GTE be ordered to divest itself of its interests in Peninsular Telephone Company (Peninsular), the Western Utilities Group, Central Iowa, Hawaiian and Northern Ohio, as well as its manufacturing subsidiaries AE, Lenkurt and Sylvania, to the end that the independent telephone operating companies market for telecommunications equipment (i. e., excluding the American Telephone and Telegraph System (Bell)) would be opened to competition among all the independent telecommunications equipment manufacturing companies.

As indicated, in essence ITT purported to act in the status of a "private attorney general"³ in this action against GTE. ITT asked for no money damages under its federal claims. It did ask for costs and attorneys' fees for its claims under the Hawaiian Act.

GTE answered, denying any violations, and filed a "contingent counterclaim", also under § 16 of the Clayton Act, asking (contingent upon ITT's success) for equitable relief thereunder for violations by ITT of §§ 1, 2, 3 of the Sherman Act and §§ 3 and 7 of the Clayton Act because of ITT's vertical integration through its ownership of Vitelco (Virgin Islands) and Ricotelco (Puerto Rico), telephone operating companies, its acquisitions of companies manufacturing telecommunications equipment, and its interests in telephone operating and manufacturing companies in South America and Europe. ITT responded to this with an amended complaint, adding an additional allegation of foreclosure by GTE of Canada and other foreign telecommunications equipment markets.

Subsequently this court ordered that ITT's claims in chief re the United States and Canadian markets, as well as the Virgin Islands and Puerto Rico aspects of GTE's counterclaims, would be tried together. The problem of ITT's "other foreign markets" was continued for later disposition.

After a multitude of motions had been disposed of,⁴ extensive discovery had been completed and a trial date set, in April 1970 GTE moved under Rule 19 that ITT be required to join as defendants other vertically integrated United States telephone companies, including Bell, United Utilities, Incorporated (United) and Continental Telephone Corporation (Continental). This motion was resisted by ITT as well as by Bell. After a hearing at which Bell appeared as amicus in opposition, this court in an oral bench decision, in substance held that because of the 1956 Consent Decree filed in United States v. Western Electric Co., 1956 Trade Cases 68,246 (D.N.J.1956), Bell's vertical integration and its operating and manufacturing activities had been encapsulated and severed apart from that of the remaining telephone operating and equipment manufacturing companies in the U. S., commonly called the "independents" or "nonBell",⁵ and it was not necessary for the determination of ITT's action or GTE's counterclaim that Bell and the other two named telephone companies be made parties to the suit.

After even more intensive and extensive pretrial preparation,⁶ four years after it was filed this matter was tried in January and February 1971.⁷ Thereafter extensive post-trial briefs and proposed findings were also filed by the parties.

But the legal cannons were not yet stilled. After "the tumult and the shouting" had subsided, and this court had started writing its decision, in May 1971 GTE filed a motion to dismiss ITT's complaint for failure to state a claim upon which relief could be granted (F.R.Civ.P. 12(b)(6)) and alternatively claimed that the court lacked subject matter jurisdiction. GTE urged that ITT's suit was barred by the proviso of Clayton § 16,⁸ insisting that the Federal Communications Commission (FCC), as successor in the communications field to the Interstate Commerce Commission (ICC), had sole regulatory power over GTE and only the U. S. could possibly bring a Clayton § 7 divestiture action against GTE. This was argued and taken under submission in June 1971.

On the state of the pleadings, therefore, both GTE's motion raising the issue of subject matter jurisdiction and motion to dismiss must first be decided.

Application of § 16 Proviso

The proviso of § 16 of the Clayton Act which GTE maintains is an "inseparable bar to relief" sought by ITT, in essence states that no "private attorney general" may sue under the provisions of § 16 for equitable relief against any common carrier subject to the Commerce Act of February 4, 1887, whose acts are under the jurisdiction of the ICC; only the U. S. may be plaintiff.

GTE's position is that it is being sued as a telephone common carrier subject to the provisions of the Communications Act of 1934, that the relief requested by ITT is directed toward matters subject to the regulation, supervision, or jurisdiction of the FCC, and despite the absence of any specific reference to the FCC in the § 16 proviso, that Congress nevertheless intended the proviso also to bar private injunctive suits under § 16 against FCC regulated carriers in the same manner as it applies to ICC regulated carriers.

Subject Matter Jurisdiction

GTE's motion to dismiss for want of subject matter jurisdiction is denied. Jurisdiction vis-á-vis merits must not be confused.

"By jurisdiction we mean power to entertain the suit, consider the merits and render a binding decision thereon; and by merits we mean the various elements which enter into or qualify the plaintiff's right to the relief sought. There may be jurisdiction and yet an absence of merits citations omitted, as where the plaintiff seeks preventive relief against a threatened violation of law of which he has no right to complain, either because it will not injure him or because the right to invoke such relief is lodged exclusively in an agency charged with the duty of representing the public in the matter. Whether a plaintiff seeking such relief has the requisite standing is a question going to the merits, and its determination is an exercise of jurisdiction. Citations omitted. If it be resolved against him, the appropriate decree is a dismissal for want of merits, not for want of jurisdiction." (Emphasis added.) General Investment Co. v. New York Central Railroad Co., 271 U.S. 228, 230-31, 46 S.Ct. 496, 497, 70 L.Ed. 920 (1926).

Here, too, GTE's motion to dismiss is an attack on ITT's standing,⁹ as a "private attorney general", to seek injunctive relief against defendant. Although "lack of standing" does not, as a conceptual matter, neatly fit into the category of "failure to state a claim upon which relief can be granted", General Investment would authorize treating the motion as such.¹⁰

Failure to State a Claim

GTE's motion to dismiss for failure to state a claim upon which relief could be granted is likewise denied. As indicated above, there is no mention whatsoever in the proviso of § 16 of telephone companies, the Communications Act of 1934, or of the FCC. GTE nevertheless asserts that the proviso is applicable to and dispositive of this...