Law Offices of Curtis V. Trinko v. Bell Atlantic

• Decision Date: 20 June 2002
• Docket Number: Docket No. 01-7746.
• Citation: 294 F.3d 307
• Parties: LAW OFFICES OF CURTIS V. TRINKO, L.L.P., individually and on behalf of all others similarly situated, Plaintiff-Appellant, v. BELL ATLANTIC CORPORATION, Defendant-Appellee.
• Court: U.S. Court of Appeals — Second Circuit

294 F.3d 307

LAW OFFICES OF CURTIS V. TRINKO, L.L.P., individually and on behalf of all others similarly situated, Plaintiff-Appellant, v.BELL ATLANTIC CORPORATION, Defendant-Appellee.

Docket No. 01-7746.

United States Court of Appeals, Second Circuit.

Argued: January 10, 2002.

Decided: June 20, 2002.

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Joseph P. Garland, Klein & Solomon, LLP, New York, NY (Alicia McInerney, Peter S. Linden, Kirby McInerney & Squire, LLP, New York, NY, Kenneth A. Elan, New York, NY, on the brief), for Plaintiff-Appellant.

John Thorne, Verizon Communications, Arlington, Virginia (Richard G. Taranto, Farr & Taranto, Washington, DC, Marc C. Hansen, Aaron M. Panner, Kellogg, Huber, Hansen, Todd & Evans, Washington, DC, Henry B. Gutman, Joseph F. Tringali, Simpson Thacher & Bartlett, New York, NY, on the brief), for Defendant-Appellee.

Before: SACK, KATZMANN, and B.

FLETCHER,^* Circuit Judges.

Judge SACK concurs in part and dissents in part in a separate opinion.

KATZMANN, Circuit Judge.

This is an appeal of a dismissal of a class action brought on behalf of a class consisting of customers who received local phone service in the region served by Bell Atlantic from a company other than Bell Atlantic.¹In recent years, the federal government has changed its policy with respect to the structure of local phone service markets, which had been controlled by state-sanctioned local monopolies.Congress sought to introduce competition to those markets by passing the Telecommunications Act of 1996 (the "Telecommunications Act"), Pub.L. 104-104,110 Stat. 56, which amended the Communications Act of 1934 (the "Communications Act"), 47 U.S.C. § 151, et seq.The Telecommunications Act requires the carrier with the local phone service monopoly to provide competitors with access to its local network — infrastructure necessary to provide local service that is expensive to duplicate.The Telecommunications Act also sets forth procedures by which telecommunications carriers can negotiate an interconnection agreement, which provides for such access, that must ultimately be approved by state regulators.

The plaintiff claims that it was damaged when the defendant, Bell Atlantic, denied the customers of AT & T, the plaintiff's local phone service provider, equal access to its local network.The plaintiff filed an action alleging that this behavior: (1) violated section 202(a) of the Communications Act;(2) violated subsections (b) and (c) of section 251 of the Telecommunications Act;(3) violated section 2 of the Sherman Antitrust Act(the "Sherman Act"), 15 U.S.C. § 2; and (4) was a tortious interference with contract.The plaintiff sought damages and injunctive relief for the alleged violations of section 202(a) and subsections (b) and (c) of section 251 pursuant to sections 206and207 of the Communications Act.It also sought damages and injunctive relief for the alleged violation of section 2 of the Sherman Act pursuant to the Clayton Act,15 U.S.C. § 15.

The defendant primarily contended and maintains on appeal that the plaintiff's section 202(a)and251 claims should be dismissed because the plaintiff is not asserting its own rights but is asserting rights that belong to AT & T.The defendant argues that the complaint only alleges a breach of its interconnection agreement with AT & T and that such a breach should be remedied through the administrative process.The defendant claims that allowing an antitrust action based on the plaintiff's allegations would disrupt the regulatory process established by the Telecommunications Act.The district court essentially agreed with these arguments and dismissed the plaintiff's action in its entirety.SeeLaw Offices of Curtis V. Trinko, LLP v. Bell Atlantic Corp.,123 F.Supp.2d 738(S.D.N.Y.2000).

For the following reasons, we affirm in part, vacate in part, and remand for further proceedings.

BACKGROUND

We review the district court's decision granting the defendant's motion to dismissde novo, taking all factual allegations in the amended complaint as true and construing all reasonable inferences in favor of the plaintiff.SeeConley v. Gibson,355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80(1957);Conboy v. AT & T Corp.,241 F.3d 242, 246(2d Cir.2001).

I.The Market for Local Phone Service and the Telecommunications Act

Prior to 1982, AT & T had monopolies in the markets for long-distance phone service, local phone service, and telephone equipment.In that year, AT & T settled an antitrust suit by the United States and agreed to a consent decree that split it from its local subsidiaries in order to encourage competition in the long-distance and equipment markets.In contrast, local phone service markets were left in the hands of AT & T's former local subsidiaries, which were regulated as monopolies by the states and prohibited from entering the long-distance markets.The rationale for allowing monopolies in the local phone service market was the belief that having more than one local provider would lead to unwarranted duplication in the physical connecting wires through which local calls are transmitted.SeeAT & T Corp. v. Iowa Utils. Board,525 U.S. 366, 413-14, 119 S.Ct. 721, 142 L.Ed.2d 835(1999)(Breyer, J., concurring in part, dissenting in part).

Bell Atlantic and NYNEX were two such providers with monopolies in the local phone service markets.In August 1997, NYNEX merged into Bell Atlantic, creating one company that provides local phone service in New England, New York, New Jersey, Pennsylvania, Delaware, Maryland, Virginia, West Virginia, and the District of Columbia.Bell Atlantic controls the "local loop" in its territory.According to the plaintiff, the "local loop is the wireline — a twisted pair of copper wires, coaxial cable, fiber optic cable, or the like — that links the customer's premises to a central switching station," Compl. ¶ 21, from which calls are routed to their ultimate destination."In plain English, loops are the wires that connect telephones to the switches that direct calls to their destination."AT & T Corp. v. FCC,220 F.3d 607, 618(D.C.Cir.2000).The plaintiff alleges that currently a carrier needs access to the "local loop" in order to provide local service because the cost of building a new "local loop" is prohibitively expensive.

Recently, as noted above, national policy with respect to the desirability of allowing competition in the local phone service markets has changed dramatically.In 1996, Congress enacted the Telecommunications Act, which amended the Communications Act.Under the Telecommunications Act, states are no longer permitted to enforce laws that prohibit entry in a local phone service market.See47 U.S.C. § 253(a).Moreover, the amendment imposes affirmative duties on any local phone service provider, or local exchange carrier ("LEC"), that encourage competition by, for example, requiring the LEC to "afford access to the poles, ducts, conduits, and rights-of-way of such carrier to competing providers...."47 U.S.C. § 251(b)(4).An incumbent local exchange carrier ("ILEC"), which is the carrier such as Bell Atlantic that had a monopoly in the local phone service market prior to the enactment of the Telecommunications Act, see47 U.S.C. § 251(h)(1), has additional affirmative duties under the statute.Among other duties, upon the request by another telecommunications carrier, the ILEC is required to provide interconnection with its network "that is at least equal in quality to that provided by the local exchange carrier to itself...."47 U.S.C. § 251(c)(2)(C).

The plaintiff subscribed for local phone service with AT & T.Pursuant to the Telecommunications Act, AT & T had requested interconnection with the ILEC in the area, NYNEX, which later merged into Bell Atlantic.Upon such a request, section 252 of the Telecommunications Act allows the ILEC and requestor to enter into a binding agreement governing the interconnection arrangement that must ultimately be approved by a state commission.AT & T and NYNEX entered into such an agreement, which the state commission approved.SeeOrder Approving Interconnection Agreement, Case96-C-0723, 1997 WL 410707(N.Y.P.S.C.June 10, 1997).Section 16 of the interconnection agreement provides for dispute resolution procedures that are the "exclusive remedy for all disputes between NYNEX and AT & T arising out of this Agreement or its breach."Id. at *23, § 16.The agreement also allows for disputes to be submitted to federal and state regulatory agencies.Id.

Shortly after entering into the interconnection agreement, AT & T filed complaints with regulatory authorities concerning lost and delayed orders.On March 9, 2000, Bell Atlantic entered into a consent decree with the FCC, agreeing to resolve the problem promptly and pay $3 million to the United States and $10 million to AT & T and other competitors for their losses.The consent decree was dissolved in July 2000.

II.The Plaintiff's Action and its Dismissal by the District Court

Not long after the consent decree was entered, the plaintiff filed a complaint in the United States District Court for the Southern District of New York(Sidney H. Stein, J.) asserting multiple actions against Bell Atlantic: (1) an action pursuant to sections 206and207 of the Communications Act, alleging that Bell Atlantic violated: (a)section 202(a) of the Communications Act, which prohibits common carriers from discriminating in rates or services in providing communications services and (b) its obligations as an ILEC under subsections (b) and (c) of section 251 of the Telecommunications Act;(2) an action pursuant to the Clayton Act, alleging that Bell Atlantic violated section 2 of the Sherman Act; and (3) a state law claim for tortious interference with contract.

The plaintiff, a limited liability partnership organized under New York law, alleges that Bell Atlantic has not afforded competing local...