Simpson v. Us West Communications, Inc.

• Decision Date: 29 January 1997
• Docket Number: Civil No. 96-456-RE.
• Citation: 957 F.Supp. 201
• Parties: Scott SIMPSON and Stephanie Simpson, on behalf of themselves and all others similarly situation, Plaintiffs, v. US WEST COMMUNICATIONS, INC., a corporation, Defendant.
• Court: U.S. District Court — District of Oregon

957 F.Supp. 201

Scott SIMPSON and Stephanie Simpson, on behalf of themselves and all others similarly situation, Plaintiffs, v. US WEST COMMUNICATIONS, INC., a corporation, Defendant.

Civil No. 96-456-RE.

United States District Court, D. Oregon.

January 29, 1997.

COPYRIGHT MATERIAL OMITTED

John J. Carey, Joseph P. Danis, Carey & Danis, L.L.C., St. Louis, MO, Dan W. Clark, Dole, Coalwell & Clark, P.C., Roseburg, OR, for Plaintiffs.

Michael H. Simon, Andrew J. Bowman, Perkins Coie, Portland, OR, for Defendant.

OPINION

REDDEN, District Judge:

BACKGROUND

Plaintiffs, Scott and Stefanie Simpson, filed this class action lawsuit against defendant, US West Communications, Inc., challenging defendant's marketing and sale of optional inside wire maintenance service plans (IWMS) to its telephone customers in Oregon. The parties have stipulated and the court has ordered that the matter of class certification would be addressed, if necessary, following the ruling on defendant's summary judgment motion. Therefore, the procedural posture of the litigation at this time is a case of two individual plaintiffs asserting personal claims against the defendant. See Wright v. Schock, 742 F.2d 541, 545 (9th Cir.1984).

Plaintiffs allege six claims for relief: monopolization and attempted monopolization in violation of Section 2 of the Sherman Act, 15 U.S.C. § 2 (Claim 1); fraudulent misrepresentation and omission (Claim 2); breach of contract (Claim 4); unjust enrichment (Claim 6); restitution (Claim 7); and declaratory and injunctive relief (Claim 8). Pursuant to this court's Order dated August 15, 1996, Claim 3 (negligent misrepresentation) and Claim 5 (breach of the implied covenant of good faith and fair dealing) were dismissed. Defendant's summary judgment motion is granted and this case is dismissed.

The facts are not in dispute here. I rely on the "Agreed Facts" set forth separately as Exhibit A attached to the Pretrial Order (filed December 9, 1996), p. 13-16.

STANDARDS

Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The materiality of a fact is determined by the substantive law on the issue. T.W. Electrical Service, Inc. v. Pacific Electrical Contractors Assoc., 809 F.2d 626, 630 (9th Cir.1987). The authenticity of a dispute is determined by whether the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986).

The moving party has the burden of establishing the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986). If the moving party shows the absence of a genuine issue of material fact, the nonmoving party must go beyond the pleadings and identify facts which show a genuine issue for trial. Id. at 324, 106 S.Ct. at 2553.

Special rules of construction apply to evaluating summary judgment motions: (1) all reasonable doubts as to the existence of genuine issues of material fact should be resolved against the moving party; and (2) all inferences to be drawn from the underlying facts must be viewed in the light most favorable to the nonmoving party. T.W. Electrical, 809 F.2d at 630.

CLAIMS

VIOLATION OF § 2 OF THE SHERMAN ACT — CLAIM ONE

Plaintiffs contend that prior to 1987, defendant maintained a monopoly for IWMS in Oregon pursuant to a monopoly franchise with Oregon that permitted defendant to "bundle" IWMS with basic telephone services. Defendant was later directed by the FCC and the OPUC to unbundle IWMS in order to create effective competition for the service.

Plaintiffs contend that defendant's deceptive and misleading solicitations for IWMS — including announcements sent to telephone customers — effectively coerced customers into purchasing IWMS from defendant by: (a) misleading customers into believing that they needed IWMS; and (b) leading customers to believe that defendant was the only effective provider of the service.

To prove a claim for monopolization, a plaintiff must establish two elements: (1) the possession of monopoly power in the relevant market; and (2) the "willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident." Alaska Airlines, Inc. v. United Airlines, Inc., 948 F.2d 536, 541 (9th Cir.1991), cert. denied, 503 U.S. 977, 112 S.Ct. 1603, 118 L.Ed.2d 316 (1992) (quotation omitted). In addition, "antitrust injury" must also be proven in all private antitrust actions. Rebel Oil Co., Inc. v. Atlantic Richfield Co., 51 F.3d 1421, 1433 (9th Cir.), cert. denied, ___ U.S. ____, 116 S.Ct. 515, 133 L.Ed.2d 424 (1995) (citation omitted).

Plaintiffs cannot prove monopoly power. Defendant supplies less than 44% of its customers with IWMS. Although that evidence is not controlling, it is persuasive, particularly when considered with evidence that anyone, including consumers themselves, can participate in this market and provide substitute wire repair service. See Dimmitt Agri Industries, Inc. v. CPC International, Inc., 679 F.2d 516, 528 (5th Cir.1982), cert. denied, 470 U.S. 1082, 103 S.Ct. 1770, 76 L.Ed.2d 344 (1983); and United States v. E.I. Du Pont De Nemours & Co., 351 U.S. 377, 395, 399, 76 S.Ct. 994, 1007, 1009, 100 L.Ed. 1264 (1956). Further, plaintiffs fail to submit an affidavit from any competitor or potential competitor in support of their statement that competitors face "overwhelming barriers to entry" into the market of providing customers with IWMS. Plaintiffs also fail to offer any case authority or expert witness affidavits for their statement that a wire maintenance service plan can be a relevant market under the antitrust laws. I find that the relevant market is inside wire repair, not inside wire repair "plans."

I find no evidence that defendant engaged in exclusionary or predatory conduct as to plaintiffs' claims for actual monopolization or attempted monopolization.

Section 2 does not prohibit vigorous competition on the part of a monopoly[.] What Section 2 does prohibit is "exclusionary" conduct defined as "behavior" that not only (1) tends to impair the opportunities of rivals, but also (2) either does not further competition on the merits or does so in an unnecessarily restrictive way.

Ocean State Physicians Health Plan, Inc. v. Blue Cross & Blue Shield of Rhode Island, 883 F.2d 1101, 1110 (1st Cir.1989), cert. denied, 494 U.S. 1027, 110 S.Ct. 1473, 108 L.Ed.2d 610 (1990) (quotations omitted)

Defendant's marketing and sales practices for IWMS in Oregon do not constitute exclusionary or predatory conduct. Defendant marketed inside wire service in Oregon only through "positive option" marketing, never through a "negative option." The mere fact of raising prices, or even charging supracompetitive prices, is not anticompetitive and is not unlawful in and of itself.

[U]nless the monopoly has bolstered its power by wrongful actions, it will not be required to pay damages merely because its prices may later be found excessive. Setting a high price may be a use of monopoly power, but it is not in itself anticompetitive.

Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263, 294 (2d Cir.1979), cert. denied, 444 U.S. 1093, 100 S.Ct. 1061, 62 L.Ed.2d 783 (1980).

I find no evidence of impairment of rivals. As early as 1983, Pacific Northwest Bell (PNB) told customers in writing that they had "several options" for maintaining their inside wiring, including "have PNB (or someone else) charge you for actual time spent." More recently, in 1993, in a notice defendant sent to its customers informing them of an upcoming price increase, defendant stated:

Basic Wire Maintenance, Line-Backer and Line-Backer Plus are optional services. You are not required to purchase this service in order to have basic telephone service. If you wish to cancel the service at any time, you may do so at no charge. You do have options for repair of inside telephone wire. You may hire another company, do it yourself, or call [the defendant].

Defendant provided these same disclosures in its announcement of its 1996 price increase.

Davis, relied on by plaintiffs, is distinguished. Davis involved the use of "negative option" contracts to enroll customers in Southern Bell's inside wire maintenance service. An earlier decision by the court in this case held, "The [FCC] has stated that default procedures, or negative options, such as the ones used by Southern Bell, are anticompetitive." Davis v. Southern Bell Telephone & Telegraph Co., 755 F.Supp. 1532, 1533 (S.D.Fla.1991). The percentage of Southern Bell's customers who were enrolled in its inside wire maintenance plans was approximately 85%, versus less than 44% in our case. Finally, those plaintiffs submitted three expert witness affidavits describing the specific competitive situation in that particular market. No such evidence exists here.

Finally, I find no evidence of antitrust injury, specifically, I find no evidence that plaintiffs' alleged injury "flow[s] from aspects of the defendant's conduct" that are adverse to competition. Rebel Oil Co., 51 F.3d at 1433 ("If the injury flows from aspects of the defendant's conduct that are beneficial or neutral to competition, there is no antitrust injury, even if the defendant's conduct is illegal per se").

Contrary to plaintiffs' argument, the Supreme Court has held that a "forced purchase" of an unwanted product is not an "antitrust injury."

When a purchaser is "forced" to buy a product he would not have otherwise bought even from another seller in the tied-product market, there can be no adverse impact on competition because no...