Nat'l Communications Ass'n v. AT&T Corp.

• Decision Date: 07 February 2000
• Docket Number: Docket Nos. 98-9673,99-7023
• Citation: 238 F.3d 124
• Parties: (2nd Cir. 2001) NATIONAL COMMUNICATIONS ASSOCIATION, INC., Plaintiff-Appellee-Cross-Appellant, v. AT&T CORP., Defendant-Appellant-Cross-Appellee. August Term 2000 Argued:
• Court: U.S. Court of Appeals — Second Circuit

Page 124

238 F.3d 124 (2nd Cir. 2001)

NATIONAL COMMUNICATIONS ASSOCIATION, INC., Plaintiff-Appellee-Cross-Appellant, v. AT&T CORP., Defendant-Appellant-Cross-Appellee.

Docket Nos. 98-9673, 99-7023

August Term 2000

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

Argued: February 7, 2000

Decided: January 12, 2001

Appeal from a February 27, 1998 judgment of the United States District Court for the Southern District of New York (Loretta A. Preska, District Judge), as supplemented on June 11, 1999, awarding plaintiff-appellee $2,194,431.84 in damages and pre-judgment interest after a jury found that defendant-appellant had unreasonably discriminated against plaintiff-appellee in the provision of like communication services in violation of 47 U.S.C. § 202(a).

Affirmed.

RICHARD C. YESKOO and THOMAS T. TAMLYN, JR., Fabricant & Yeskoo, LLP, New York, NY, and Maxwell M. Blecher, Alicia G. Rosenberg, and William C. Hsu, Blecher & Collins, P.C., Los Angeles, CA, for Plaintiff-Appellee.

FREDERICK L. WHITMER, Esq., Pitney, Hardin, Kipp & Szuch, New York, N.Y., and David W. Carpenter, Charles W. Douglas, and D. Cameron Findlay, Sidley & Austin, Chicago, IL, for Defendant-Appellant.

Before: WALKER, Chief Judge, MESKILL, and SOTOMAYOR, Circuit Judges.

JOHN M. WALKER, Jr., Chief Judge:

Plaintiff-appellee National Communications Association, Inc. ("NCA") brought suit in the United States District Court for the Southern District of New York (Loretta A. Preska, District Judge), alleging, inter alia, that defendant-appellant AT&T Corp. ("AT&T") had unreasonably discriminated against NCA in the provision of like communication services in violation of 47 U.S.C. § 202(a).

At trial, the jury found for NCA and awarded $1.8 million in damages. The district court supplemented the judgment to include pre-judgment interest, for a total award of $2,194,431.84. The district court denied AT&T's motions for judgment as a matter of law and for a new trial. See National Communications Ass'n v. AT&T Corp., No. 92 Civ. 1735, 1998 WL 851588 (S.D.N.Y. Dec. 8, 1998) ("NCA II"). On appeal, AT&T argues principally that the evidence supporting the jury verdict was insufficient and that the district court erroneously instructed the jury regarding the burden of proof in a § 202(a) claim. We disagree with both contentions and now affirm.

BACKGROUND

AT&T is a "common carrier" subject to the requirements of Title II of the Communications Act of 1934 ("CA" or "the Act"), 47 U.S.C. § 201 et seq. 47 U.S.C. § 153(10) (defining "common carrier"). Section 202 of the Act prohibits unreasonable discrimination by common carriers in the provision of like communication services. See 47 U.S.C. § 202(a). Pursuant to that statute, the FCC has promulgated regulations requiring common carriers to provide services to resellers on the same terms that such services are provided to end users. See Regulatory Policies Concerning Resale and Shared Use of Common Carrier Services and Facilities, 60 F.C.C.2d 261 (1976) ("Resale Rules"); see also AT&T Corp. v. FCC, 572 F.2d 17 (2d Cir. 1978) (upholding the FCC Resale Rules).

AT&T offers a long-distance service called Software Defined Network ("SDN") which it introduced in 1985 in order to provide dedicated network long distance service to large corporations. A few years later, AT&T began to offer a new technology, so-called "switched access," that allows users to access SDN through regular phone lines. Through this process SDN calls are sorted and routed through the local exchange carrier, rather than through special dedicated lines.

This innovation had an unintended consequence: it enabled a new group of resellers, those with no routing facilities of their own, known as "switchless" resellers, to provide SDN services to end-users. Due in part to AT&T's volume discounts, switchless resellers were then able to provide SDN services to small businesses for less than AT&T's direct price to those same end-users, while still making a profit. See National Communications Ass'n v. AT&T Corp., No. 92 Civ. 1735, 1998 WL 118174, at *13-14 (S.D.N.Y. March 16, 1998) ("NCA I") (describing NCA's resale of SDN). As a result, a large number of switchless resellers began subscribing to SDN in 1989-90.

AT&T's own end-user customers ("commercial customers") were serviced by a division of AT&T called the Business Sales Division ("BSD"). Initially, switchless resellers ("resellers") were also served by the BSD, but as the volume of resellers increased, AT&T moved the processing of reseller orders to a division called the Channel Development Operations Center ("CDOC"). The CDOC exclusively serviced resellers, while the BSD exclusively serviced commercial customers.

NCA, a reseller, signed a subscription agreement with AT&T on March 11, 1990 and placed its first orders for SDN in April of that year. Although AT&T told NCA that it would take approximately three months to set up its SDN network and an additional 30 days to add customers, AT&T admits that it did not provision NCA's orders as quickly as it had predicted. By the end of 1990, AT&T had processed only a fraction of NCA's orders. In 1991 and 1992, its provisioning speed improved.

NCA filed this action on March 10, 1992 claiming that AT&T had unjustifiably favored its own end-user customers over resellers such as NCA in processing orders for SDN. After pre-trial proceedings, its case consisted of various claims that AT&T had violated 47 U.S.C. §§ 201(b) and 202(a), as well as the FCC's Resale Rules.¹ See NCA II, 1998 WL 851588, at *1. A single § 202(a) discrimination claim is at issue in this appeal.

In support of its § 202(a) discrimination claim, NCA argued at trial that AT&T's answer to the arbitrage threat that resellers posed to its own SDN retail business was to intentionally discriminate against the resellers. It had, for example, given far fewer resources to CDOC than to the BSD. As a result of this and other discriminatory practices, NCA argued, orders from resellers took up to nine months to provision, as opposed to 30 to 40 days for orders from commercial customers. AT&T countered that the deluge of SDN orders it received in 1989 and 1990 resulted in equal delays for resellers and commercial customers.

On February 23, 1998, the jury, while rejecting NCA's claims under the resale rules and § 201(b), found for NCA on its § 202(a) claim and awarded $1.8 million in damages. In an opinion filed December 8, 1998, the district court denied AT&T's motions for judgment as a matter of law and for a new trial under Fed. R. Civ. P. 50(b) and 59. On June 11, 1999, the court entered a supplemental judgment awarding pre-judgment interest in the amount of $394,431.84, for a total judgment of $2,194,431.84. This appeal followed.

DISCUSSION

We review de novo the denial of a motion under Rule 50(b), see DiSanto v. McGraw-Hill, Inc., 220 F.3d 61, 64 (2d Cir. 2000) (per curiam), and review the denial of a Rule 59 motion for abuse of discretion, see Daily v. Societe Generale, 108 F.3d 451, 458 (2d Cir. 1997) (following a jury verdict, "an appellate court will reverse a trial court's denial of a new trial motion if the denial constitutes an abuse of discretion").

Section 202(a) provides:

It shall be unlawful for any common carrier to make any unjust or unreasonable discrimination in charges, practices, classifications, regulations, facilities, or services for or in connection with like communication service, directly or indirectly, by any means or device, or to make or give any undue or unreasonable preference or advantage to any particular person, class of persons, or locality, or to subject any particular person, class of persons, or locality to any undue or unreasonable prejudice or disadvantage.

47 U.S.C. § 202(a). The district court instructed the jury, and the parties do not dispute, that a § 202(a) claim consists of three elements: (1) whether the services are "like"; (2) if so, whether the services were provided under different terms or conditions; and (3) whether any such difference was reasonable. See NCA II, 1998 WL 851588, at *1; see also MCI Telecomms. Corp. v. FCC, 917 F.2d 30, 39 (D.C. Cir. 1990). AT&T's principal arguments on appeal, and the only ones that merit discussion, are that: (1) the district court should have granted its motions to dismiss and for a new trial because there was insufficient evidence to support the jury's § 202(a) verdict, and (2) the district court erroneously instructed the jury that the burden of proving the third element of a § 202(a) claim rested with AT&T.² We disagree with both contentions.

I.

In moving for judgment as a matter of law, AT&T faces a high bar:

Judgment as a matter of law may not properly be granted under Rule 50 unless the evidence, viewed in the light most favorable to the opposing party, is insufficient to permit a reasonable juror to find in her favor. In deciding such a motion, the court must give deference to all credibility determinations and reasonable inferences of the jury, and it may not itself weigh the credibility of witnesses or consider the weight of the evidence. Thus, judgment as a matter of law should not be granted unless (1) there is such a complete absence of evidence supporting the verdict that the jury's findings could only have been the result of sheer surmise and conjecture, or (2) there is such an overwhelming amount of evidence in favor of the movant that reasonable and fair minded persons could not arrive at a verdict against it.

DiSanto, 220 F.3d at 64 (quoting Galdieri Ambrosini v. Nat'l Realty & Dev. Corp. 136 F.3d 276, 289 (2d Cir. 1998)) (alterations omitted).

On appeal, AT&T argues only in passing, and unconvincingly, that the SDN services it provided to resellers and to commercial customers were not "like." The district court noted that "throughout the trial no one disputed that NCA was attempting to purchase the same SDN service . . . that commercial customers purchased." See NCA...