Alpha Lyracom Space Communications, Inc. v. Communications Satellite Corp., 977

• Decision Date: 30 September 1991
• Docket Number: No. 977,D,977
• Parties: , 1991-2 Trade Cases P 69,608 ALPHA LYRACOM SPACE COMMUNICATIONS, INC., a Delaware Corporation; Reynold V. Anselmo, an individual, doing business as Pan American Satellite, a sole proprietorship, Plaintiffs- Appellants, v. COMMUNICATIONS SATELLITE CORPORATION, Defendant-Appellee. ocket 90-7893.
• Court: U.S. Court of Appeals — Second Circuit

Page 168

946 F.2d 168

60 USLW 2248, 1991-2 Trade Cases P 69,608

ALPHA LYRACOM SPACE COMMUNICATIONS, INC., a Delaware Corporation; Reynold V. Anselmo, an individual doing business as Pan American Satellite, a sole proprietorship Plaintiffs- Appellants, v. COMMUNICATIONS SATELLITE CORPORATION, Defendant-Appellee.

No. 977, Docket 90-7893.

United States Court of Appeals Second Circuit.

Argued April 22, 1991.

Decided Sept. 30, 1991.

Joseph M. Alioto, San Francisco, Cal. (Alioto and Alioto, San Francisco, Cal., Daniel R. Shulman, Gray, Plant, Mooty, Mooty & Bennett, Minneapolis, Minn., and David L. Marks, Marks and Marks, New York City, on the brief), for plaintiffs-appellants.

A. Duncan Whitaker, Washington, D.C. (Alan M. Wiseman, Mark D. Wegener, Jerrold J. Ganzefried, Howrey & Simon, Washington, D.C., Thomas J. Sweeney, III, Davis, Markel & Edwards, New York City, and Willard R. Nichols, Warren Y. Zeger, Keith H. Fagan, Communications Satellite Corp., Washington, D.C., on the brief), for defendant-appellee.

Before NEWMAN and KEARSE, Circuit Judges, and STANTON, District Judge. ^*

JON O. NEWMAN, Circuit Judge:

This appeal concerns primarily the issue whether the Communications Satellite Corporation ("COMSAT") is immune from antitrust liability for activity undertaken in its role as the United States representative to the International Telecommunications Satellite Organization ("INTELSAT"). The issue arises on an appeal from the September 14, 1990, judgment of the District Court for the Southern District of New York (John F. Keenan, Judge) dismissing the complaint of plaintiffs Alpha Lyracom Space Communications, Inc. and Reynold V. Anselmo, doing business as Pan American Satellite, (collectively "PanAmSat") alleging that COMSAT violated the antitrust laws and tortiously interfered with their relations with prospective customers. COMSAT, a private corporation created by the Communications Satellite Act of 1962 ("CSA"), 47 U.S.C. § 701 et seq. (1988), serves as the United States' "signatory" to INTELSAT. INTELSAT and its 119 nation members and their designated signatories collectively maintain and operate an international network of telecommunications satellites, ground stations, and other satellite support facilities. PanAmSat, owner and operator of the first international commercial communications satellite outside of INTELSAT, brought suit alleging that COMSAT, through INTELSAT and in conjunction with other signatories, engaged in a variety of anticompetitive practices in the market for international commercial satellite telecommunications services. We conclude that dismissal on the ground of immunity was proper, but because appellants are entitled to an opportunity to amend their complaint to replead allegations that might not encounter an immunity defense, we reverse and remand.

Background

The Regulatory Framework. Congress enacted the Communications Satellite Act of 1962 to implement the national policy of establishing "in conjunction and in cooperation with other countries, as expeditiously as practicable a commercial communications satellite system." 47 U.S.C. § 701(a). Rather than relying solely on governmental efforts, Congress sought to "provide for the widest possible participation by private enterprise," 47 U.S.C. § 701(c), by creating COMSAT, a publicly held, private corporation, 47 U.S.C. §§ 731, 734(a), to act "subject to appropriate governmental regulation," 47 U.S.C. § 701(c), as the "United States participa[nt] in the global system." Id. Under the Act, COMSAT assumed responsibility for planning, constructing, and operating the satellite system, including satellite terminal stations, 47 U.S.C. § 735(a)(3), "itself or in conjunction with foreign governments," 47 U.S.C. § 735(a)(1), and for leasing space satellite telecommunications channels to communications common carriers, 47 U.S.C. § 735(a)(2).

The Act imposes a duty on COMSAT to "comply ... with all provisions of th[e] chapter," 47 U.S.C. § 743(c), and authorizes a district court, on application of the Attorney General, to enjoin COMSAT from taking any action or adopting any practices or policies inconsistent with "the policy and purposes declared in section 701" of the Act, id. § 743(a). Section 701(c) declares the general intent of Congress to foster competition in the operation of, and provision of equipment, services, and access to, the satellite network. Section 701(c) concludes with the so-called "antitrust consistency clause," which provides that:

[T]he activities of the corporation created under this chapter and of the persons or companies participating in the ownership of the corporation shall be consistent with the Federal antitrust laws.

In 1964, two years after passage of the Act, the United States and ten other nations entered into an interim executive agreement that created the International Telecommunications Satellite Organization (INTELSAT). See Agreement Establishing Interim Arrangements for a Global Communications Satellite System, Aug. 20, 1964, 15 U.S.T. 1705. The member-nations later executed two additional executive agreements formalizing the ground rules for INTELSAT's control and management of the international satellite network and related support facilities. These agreements are known as "the Definitive Agreement" and "the Operating Agreement." The Definitive Agreement (officially, Agreement Relating to the International Telecommunications Satellite Organization 'INTELSAT' " ) was executed by the government of each member-nation. It established a three-tiered organizational structure for INTELSAT, comprising the Assembly of Parties, the Meeting of Signatories, and the Board of Governors. Each member-nation or "Party" has a seat on the Assembly of Parties, and each member's designated "Signatory" to the Operating Agreement (officially, Operating Agreement Relating to the International Telecommunications Satellite Organization 'INTELSAT' " ) is represented in the Meeting of Signatories and the Board of Governors. The United States designated the State Department as its representative to the Assembly of Parties and COMSAT as its signatory and representative to the Meeting of Signatories.

Together, the Definitive and Operating Agreements give the Assembly of Parties, the Meeting of Signatories, and the Board of Governors virtually plenary authority to set rates for use of INTELSAT satellite capacity, Definitive Agreement Arts. V(d), VIII(b)(v)(C), X(a)(viii); Operating Agreement Art. 8(a), to approve INTELSAT's purchases of goods and services, Definitive Agreement Arts. X(a)(ii), XIII; Operating Agreement Art. 16, and to approve proposals to establish international and domestic telecommunications satellite systems separate from INTELSAT. In particular, an applicant for a separate system providing international satellite service must engage in "consultation" with the Assembly of Parties and the Board of Governors to ensure the technical compatibility of its system with INTELSAT and to guard against the possibility that the competing system might result in "significant economic harm" to INTELSAT. Definitive Agreement Art. XIV(d). Those seeking to provide separate domestic satellite services need "consult" only with the Board of Governors to ensure technical compatibility. Id. Art. XIV(c).

In 1976, the United States, as host country of INTELSAT, entered into an agreement with INTELSAT known as the Headquarters Agreement. Among other things, this agreement includes an immunity provision central to this litigation.

After the creation of INTELSAT, the Executive Branch continued to exercise its substantial authority under the Communications Satellite Act to oversee and regulate COMSAT's management and operation of the system and its relations with foreign governments and their designated satellite management entities, 47 U.S.C. §§ 721, 732-33, 742. Pursuant to the directive in section 721(a)(4) to oversee COMSAT's relations with foreign governments, Executive Order No. 12,046 specifies that "[w]ith respect to telecommunications, the Secretary of State shall exercise primary authority for the conduct of foreign policy, including the determination of United States positions and the conduct of United States participation in negotiations with foreign governments and international bodies." 43 Fed.Reg. 13,349, 13,354 (1978). In particular, the Secretary should "instruct[ ] [COMSAT] in its role as the designated United States representative to [INTELSAT]" and "direct the foreign relations of the United States with respect to actions under the Communications Satellite Act of 1962." Id.; see also Procedures for U.S. Government Instruction of the Communications Satellite Corporation in its Role as U.S. Representative to the Interim Communications Satellite Commission, 77 F.C.C.2d 564 (1980); 1984 Memorandum of Understanding among the Departments of State and Commerce and the Federal Trade Commission.

The Definitive and Operating Agreements each include provisions that contemplate the possible imposition of legal liability against INTELSAT signatories. Article XV(c) of the Definitive Agreement provides:

Each Party other than the Party in whose territory the headquarters of INTELSAT is located [the United States] shall grant in accordance with the Protocol referred to in this paragraph, and the Party in whose territory the headquarters of INTELSAT is located [the United States] shall grant in accordance with the Headquarters Agreement ... the appropriate privileges, exemptions and immunities to INTELSAT, to its officers, and to those categories of its employees specified in such Protocol and Headquarters Agreement, to Parties and representatives of Parties, to Signatories and representatives of Signatories and to persons participating in arbitration proceedings. In particular, each Party shall grant to these individuals immunity from legal process in respect of acts done or words written or spoken in the exercise of...