Davis v. Southern Bell Tel. & Tel. Co.

• Decision Date: 04 February 1991
• Docket Number: No. 89-2839-Civ.,89-2839-Civ.
• Parties: Linda DAVIS, David Efron, Linda Martens, and Genevieve Williams, individually and on behalf of all others similarly situated, Plaintiffs, v. SOUTHERN BELL TELEPHONE & TELEGRAPH COMPANY, a Georgia corporation, Defendant.
• Court: U.S. District Court — Southern District of Florida

755 F. Supp. 1532

Linda DAVIS, David Efron, Linda Martens, and Genevieve Williams, individually and on behalf of all others similarly situated, Plaintiffs, v. SOUTHERN BELL TELEPHONE & TELEGRAPH COMPANY, a Georgia corporation, Defendant.

No. 89-2839-Civ.

United States District Court, S.D. Florida.

February 4, 1991.

Jesse C. Jones, Guy B. Bailey, Jr., Bailey & Hunt, P.A., Miami, Fla., Anne K. Bingaman, Powell, Goldstein, Frazer & Murphy, Washington, D.C., for plaintiffs.

Richard M. Leslie, Maxine M. Long, Shutts & Bowen, Harris R. Anthony, Gary

S. Franklin, Southern Bell Tel. & Tel. Co., Miami, Fla., for defendant.

ORDER GRANTING PARTIAL SUMMARY JUDGMENT

NESBITT, District Judge.

THIS CAUSE comes before the Court upon the motion of Defendant Southern Bell Telephone & Telegraph Company ("Southern Bell") to dismiss, or, in the alternative, for summary judgment. Defendant moves for dismissal of the antitrust claims brought by Plaintiffs, customers of Southern Bell, on the grounds that the Plaintiffs lack antitrust standing. In the alternative, Defendant seeks summary judgment on the antitrust claims on the grounds that its conduct is immune from antitrust liability under the state action doctrine. For the reasons stated below, the Court denies the motion to dismiss for lack of antitrust standing and grants the Defendant partial summary judgment with respect to the antitrust claims based on the state action doctrine. The Court defers ruling on Defendant's motion with respect to the state law claims until the federal antitrust issues have been resolved.

I. STATEMENT OF THE CASE

Plaintiffs, customers of Southern Bell, initiated this class action¹ seeking monetary damages for violations of the antitrust laws, Florida Civil Remedies for Criminal Practice Act ("Florida RICO"), restitution, breach of duty of good faith and fair dealing, and other statutory violations under Florida law.² The only federal claims stated are for monopolization and attempted monopolization in violation of § 2 of the Sherman Act, 15 U.S.C. § 2. The Court has pendent jurisdiction over the remaining claims.

This suit arises out of the terms upon which Southern Bell furnished inside wire maintenance service ("IWMS") to its customers in the State of Florida since 1983. Inside wire is the telephone wire within the customer's home or office which connects the telephone jack to the telephone company's outside plant. It includes the telephone jacks, but not the customer's telephone equipment. The class of Plaintiffs allegedly consists of all residential and business customers of Southern Bell in the State of Florida who have paid for Southern Bell's optional IWMS between the time the service became optional through the date of class certification.

The complaint alleges the following facts. Prior to 1983, Southern Bell maintained all the inside wiring for residential and business customers. IWMS was part of, or was "bundled with," basic telephone service provided by Southern Bell pursuant to a monopoly franchise from the State of Florida and regulated by the Florida Public Service Commission ("PSC").³ In 1982, the PSC ordered that IWMS be separated, or "unbundled," from basic telephone service. The PSC intended to promote competition in the IWMS market.

In June of 1983, Southern Bell for the first time offered its customers IWMS as a separate service, through a "negative option" contract announced in a billing insert. Plaintiffs allege that the insert contained untrue, deceptive, or misleading statements and omissions; specifically, it failed to inform customers that it was a contract offer and implied that repairing inside wire was a difficult task that could not be undertaken by the customer. Pursuant to the terms of the negative option contract, customers were to continue to receive IWMS from Southern Bell unless they affirmatively requested otherwise, and were charged $.55 per month for the service. The new $.55 charge for IWMS was included in the charge for local telephone service.

From February to June of 1987, Southern Bell sent out two or more billing inserts to its customers, including a ballot check-off which provided that Southern Bell would continue to provide IWMS if the customer so requested. These inserts allegedly contained the same types of misrepresentations and omissions as the 1983 insert.

In March 1988, Southern Bell sent its customers another billing insert containing a second negative option contract for IWMS which increased the cost of service from $.55 per month to $1.00 per month. Customers would accept the new "offer" if they did not act. The billing insert contained defects similar to those contained in prior inserts. Another negative option contract mailed to customers in the late Spring of 1989 raised the charge for IWMS to $1.50 per month.

Plaintiffs allege that by this conduct, Southern Bell willfully either acquired or maintained, or attempted to acquire or maintain, monopoly power in the IWMS markets, which resulted in unlawful monopoly profits for Southern Bell.

The facts presented in connection with the motion to dismiss, or, in the alternative, for summary judgment provide additional information about the events Plaintiffs describe in the complaint. The parties agree that the PSC considered the unbundling of IWMS and new charges for the service at great length during the first half of 1983. Moreover, Jack Shreve, Esq., Public Counsel appointed by the State legislature to provide representation for the people of the State of Florida in proceedings before the PSC, participated fully in the decision-making process. It is uncontroverted that Southern Bell had to obtain the approval of the staff of the PSC to use the billing insert containing the 1983 negative option contract prior to mailing the insert to customers. The staff did in fact approve the billing insert prior to mailing. Plaintiffs, however, have raised a genuine issue as to whether the Commissioners themselves ever considered the manner in which Southern Bell would offer IWMS to customers.

Finally, it is clear that by Order dated December 31, 1986, Order No. 17040, the PSC deregulated the IWMS market, effective January 1, 1987. By that Order (in conjunction with an Amendatory Order, dated January 28, 1987, Order No. 17040A) the PSC directed Southern Bell to give each customer receiving IWMS from Southern Bell since July 3, 1983 a chance to affirmatively "opt in" to Southern Bell's IWMS program.⁴

II. DISCUSSION

A. Antitrust Standing

Defendant first contends that the federal and state antitrust claims should be dismissed because Plaintiffs lack antitrust standing. Specifically, Defendant argues that Plaintiffs lack standing because they have not alleged an antitrust injury, that is, an injury "attributable to an anti-competitive aspect of the practice under scrutiny...." Atlantic Richfield Co. v. USA Petroleum Co., ___ U.S. ___, 110 S.Ct. 1884, 1889, 109 L.Ed.2d 333 (1990). Plaintiffs contend that as consumers paying excessive monopoly prices, they clearly have standing under Reiter v. Sonotone Corp., 442 U.S. 330, 99 S.Ct. 2326, 60 L.Ed.2d 931 (1979), to raise violations of § 2 of the Sherman Act.

In determining whether Plaintiffs have standing to bring this antitrust action, the Court is bound by the four corners of the complaint. Mr. Furniture v. Barclays American/Commercial, Inc., 919 F.2d 1517, 1520 (11th Cir.1990); Austin v. Blue Cross and Blue Shield, 903 F.2d 1385, 1387 (11th Cir.1990).⁵ Viewed in the light most favorable to the Plaintiffs, the salient portions of the complaint allege that subsequent to the decision of the PSC to introduce competition in the IWMS market, Southern Bell willfully acquired and maintained a monopoly in the IWMS market through anticompetitive acts. The anticompetitive behavior includes offering IWMS to Southern Bell's customers through negative option contracts and making untrue, deceptive, and misleading representations of the service offered by Southern Bell. The complaint further alleges that Plaintiffs were injured by paying monopoly overcharges for IWMS from Southern Bell.

Section 4 of the Clayton Act, 15 U.S.C. § 15, which creates a private right of action for antitrust violations, provides that "any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue...." As noted by the United States Court of Appeals for the Eleventh Circuit, the concept of antitrust standing "has proved to be somewhat elusive." Mr. Furniture, 919 F.2d at 1520 (citing Blue Shield of Virginia v. McCready, 457 U.S. 465, 102 S.Ct. 2540, 2547, 73 L.Ed.2d 149 (1982). The Court must assess a series of interrelated factors to determine whether Plaintiffs have been injured "by reason of" an antitrust violation under the Clayton Act: "1) the existence of a causal connection between the antitrust violation and the alleged injury; 2) the nature of the plaintiff's alleged injury; 3) the directness or indirectness of the asserted injury and the related inquiry of whether the damages are speculative; 4) the potential for duplicative recovery or complex apportionment of damages; and finally, 5) the existence of a more direct victim of the alleged anticompetitive conduct." Austin, 903 F.2d at 1388 (citing Associated General Contractors v. California State Council, 459 U.S. 519, 103 S.Ct. 897, 74 L.Ed.2d 723 (1983)); see also Mr. Furniture, 919 F.2d at 1520 (listing four similar factors).⁶

Defendant focuses primarily on the first of the five factors listed above. And indeed, a review of the case law reveals that the application of the remaining four factors favors a finding of antitrust standing in this case: the Supreme Court has held that direct consumers have standing to sue for injury resulting from prices "artificially inflated by reason of.... anticompetitive conduct...." Reiter, 99 S.Ct. at 2332. As in Reiter, Plaintiffs in this case are direct consumers of the...