Southern Pacific Communications Co. v. American Tel. and Tel. Co.

Decision Date26 June 1984
Docket NumberNo. 83-1102,83-1102
Citation740 F.2d 980,238 U.S.App.D.C. 309
Parties, 1984-2 Trade Cases 66,077 SOUTHERN PACIFIC COMMUNICATIONS CO., et al., Appellant, v. AMERICAN TELEPHONE AND TELEGRAPH CO., et al.
CourtU.S. Court of Appeals — District of Columbia Circuit

Appeal from the United States District Court for the District of Columbia (Civil Action No. 78-0545).

Frederick P. Furth, San Francisco, Cal., with whom Thomas R. Fahrner, Daniel S. Mason, Charles P. Wolff, Michael P. Lehmann, Craig C. Corbitt, San Francisco, Cal., Stephen Ailes, Richard A. Whiting, Richard Diamond and James H. Pipkin, Washington, D.C., were on the brief, for appellant. Edmund W. Burke, Washington, D.C., also entered an appearance for appellant.

George L. Saunders, Jr., Chicago, Ill., with whom Michael S. Yauch, C. John Buresh, Stewart A. Block, Washington, D.C., Howard J. Trienens and Raymond Brenner, New York City, were on the brief, for appellees. Julie D. Nelson, Washington, D.C., also entered an appearance for appellees.

Before WALD and EDWARDS, Circuit Judges, and SWYGERT, * Senior Circuit Judge, United States Court of Appeals for the Seventh Circuit.

Opinion for the Court filed by Circuit Judge HARRY T. EDWARDS.

HARRY T. EDWARDS, Circuit Judge:

This appeal arises out of a private antitrust action brought by Southern Pacific Communications Company and Transportation Microwave Corporation (collectively "SPCC") against the American Telephone and Telegraph Company and the local Bell operating telephone companies (collectively "AT & T"), alleging that AT & T monopolized the market for intercity business telecommunications services in the United States in violation of section 2 of the Sherman Act. 1 Following a lengthy trial, the District Court entered judgment for the defendants and dismissed the case. 2 The plaintiffs appeal from this judgment.

Figuratively speaking, this case is an appellate judge's nightmare. It not only presents an enormous record and poses some extremely difficult and controversial issues of great public importance, but also is lamentably tainted with charges of judicial bias. The central issue at trial was whether AT & T had wrongfully used monopoly power to exclude competition. Yet, in his Memorandum Opinion, the District Judge strongly expressed his personal policy view that an AT & T monopoly, and not competition, is in the public interest in the telecommunications industry. Moreover, in drafting his extremely lengthy Memorandum Opinion, the trial judge simply copied--word-for-word (including even typographical errors)--most of AT & T's proposed findings of fact and conclusions of law. Virtually every assessment of the credibility of witnesses, finding of fact and conclusion of law is in favor of AT & T. Finally, almost as if to ensure a preferred result, the trial court's judgment is supported by layer upon layer of alternative We would be remiss if we did not state our dismay over certain aspects of the trial court's decisionmaking in this case. We are not so naive as to suggest that trial judges should never use proposed findings of counsel; indeed, such a suggestion would be absurd and would belie the reality of trial practice in the United States. Nor do we mean to suggest that trial judges may never tip their hands with regard to possible final judgments in a case. We do not even mean to suggest that trial judges must be devoid of personal views about legal issues. Rather, we mean to intimate that, because of their positions of great public responsibility, District Judges often must walk a very narrow course in the performance of their jobs on the bench. A District Judge, particularly one adjudicating a case of considerable public moment, must scrupulously avoid giving the parties or the public any basis for perceiving that he is deciding the case otherwise than pursuant to an application of controlling law to the facts and in the exercise of his impartial, independent, considered judgment. In our view, the trial judge has raised a serious concern that he failed to heed this precept in the present case.

holdings on the issues of implied antitrust immunity, monopoly power, unlawful maintenance of monopoly power, injury-in-fact and proof of damages.

Judges certainly may hold personal views on law and policy and may express those views under appropriate circumstances. But the Memorandum Opinion in this case, in which the District Judge held that the antitrust laws do not aply to the defendants' conduct and alternatively that the defendants' conduct did not violate those laws, was an inappropriate place for the Judge to advocate a personal policy view contrary to the policy underlying the antitrust laws. Moreover, it is never justifiable for a judge to abdicate to a party his duty to provide a reasoned explanation for his decision. The misplaced advocacy and extensive copying of findings and conclusions that occurred in this case at least created a danger that the parties and the public would perceive that the Judge impermissibly decided the case on the basis of his personal views rather than on the basis set forth in the Memorandum Opinion.

This is indeed precisely what has occurred in this case: SPCC's principal argument on appeal is that it was denied a fair trial because of the District Judge's legal and policy bias. Because of the questionable circumstances confronting us, we have considered this argument with the greatest of care. Despite our dismay over this matter, we have concluded, for the reasons set forth at length in Part II below, that SPCC has failed to prove that the District Judge allowed his personal, legal and policy views impermissibly to affect his decisionmaking.

Accordingly, we must affirm the District Court's judgment provided that the court's conclusions are based on correct legal standards and the court's findings of fact are not clearly erroneous. We specifically decline to abandon the "clearly erroneous" standard as SPCC advocates: we believe that the type of de novo review suggested by SPCC would be wholly inconsistent with the function of an appellate court. Nevertheless, in light of the special circumstances of this case, we have reviewed the District Court's findings against the record with particular, even painstaking, care. We emphasize, however, that this review is only for the purpose of determining whether the findings of the trial court must be set aside under the "clearly erroneous" standard.

We conclude that the District Court erred in holding that AT & T enjoys implied antitrust immunity with respect to the conduct at issue in this case. We also conclude that the District Court's holding that AT & T lacked monopoly power is based on an erroneous legal analysis. However, we sustain the District Court's alternative holding that AT & T did not maintain its monopoly power by engaging in predatory pricing or other exclusionary conduct. Because this holding is sufficient to affirm the District Court, we uphold the judgment in favor of AT & T without addressing the District Court's alternative holdings on the

issues of injury-in-fact and proof of damages.

A. Competition in the Intercity Private Line Market

Prior to 1969, AT & T had a lawful monopoly in the market for interstate, intercity private line common carrier telecommunications services. 3 AT & T provided these services through its Long Lines Department acting in partnership with the local Bell and independent operating telephone companies. These services were provided over the same nationwide network that was used to provide ordinary switched telephone services. 4

In 1959, the Federal Communications Commission ("FCC") had liberalized the licensing of privately-owned microwave systems in Allocation of Frequencies in the Bands Above 890 Mc, 27 F.C.C. 359 (1959), recon. denied, 29 F.C.C. 825 (1960). The Above 890 decision, however, only permitted entities to build microwave systems in order to provide telecommunications services for their own use. In 1963, Microwave Communications, Inc. ("MCI") took the next step by filing an application with the FCC to build a private microwave system between Chicago and St. Louis in order to provide point-to-point private line telecommunications services to business customers on a common carrier basis. MCI represented in its application that such a specialized carrier system was necessary to make some of the benefits of the Above 890 decision available to small businesses by providing new and innovative specialized point-to-point private line services that were not being provided by the established carriers. The FCC granted MCI's application in 1969. Microwave Communications, Inc., 18 F.C.C.2d 953 (1969), recon. denied, 21 F.C.C.2d 190 (1970). The MCI decision resulted in a deluge of applications from new "specialized common carriers," including SPCC, for authority to construct and operate facilities for similar private line communications systems between other specific city pairs. In response, the FCC instituted a rulemaking proceeding to determine "[w]hether as a general policy the public interest would be served by permitting the entry of new carriers in the specialized communications field." Specialized Common Carriers, 24 F.C.C.2d 318, 327 (1970) (Notice of Inquiry). In Specialized Common Carriers, 29 F.C.C.2d 870 (1971), aff'd sub nom. Washington Utilities & Transportation Commission v. FCC, 513 F.2d 1142 (9th Cir.), cert. denied, 423 U.S. 836, 96 S.Ct. 62, 46 L.Ed.2d 54 (1975), the FCC declared that "a general policy in favor The Specialized Common Carriers decision left a number of significant questions unanswered. First, the decision did not specify what services the "specialized common carriers" were authorized to offer in the "specialized communications field," but noted merely that they would serve "evolving, new, diverse and specialized needs in a dynamic, rapidly growing market." 29 F.C.C.2d at...

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