TV Signal Co. of Aberdeen v. American Telephone and Telegraph

• Decision Date: 20 March 1980
• Docket Number: No. 79-1280,79-1280
• Parties: 1980-1 Trade Cases 63,242 TV SIGNAL COMPANY OF ABERDEEN, a corporation, Appellant, v. AMERICAN TELEPHONE & TELEGRAPH, a corporation, and Northwestern Bell Telephone Company, a corporation, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1302

617 F.2d 1302

1980-1 Trade Cases 63,242

TV SIGNAL COMPANY OF ABERDEEN, a corporation, Appellant, v. AMERICAN TELEPHONE & TELEGRAPH, a corporation, and Northwestern Bell Telephone Company, a corporation, Appellees.

No. 79-1280.

United States Court of Appeals Eighth Circuit.

Submitted Oct. 9, 1979.

Decided March 20, 1980.

Daniel Stark, Washington, D. C., for appellant; Alan Raywid, Burt A. Braverman, and Frances J. Chetwynd, Washington, D. C., and Joseph M. Butler, Bangs, McCullen, Butler, Foye & Simmons, Rapid City, S. D., on the brief.

John D. French, Faegre & Benson, Minneapolis, Minn., for appellees; James Fitzmaurice, John F. Beukema, Minneapolis, Minn., Harold C. Doyle, May, Johnson, Doyle, Becker & Fisher, Sioux Falls, S. D., and Donald R. Shultz, Lynn, Jackson, Shultz & Lebrun, Rapid City, S. D., on the brief.

Before LAY, Chief Judge, ^* and HEANEY and HENLEY, Circuit Judges.

LAY, Chief Judge.

TV Signal Company of Aberdeen, a South Dakota corporation, appeals the dismissal of its action brought under the antitrust laws against American Telephone & Telegraph (AT&T) and Northwestern Bell Telephone Company (Bell). It originally filed a complaint alleging that the defendants had refused to allow TV Signal to attach its cable, used for transmitting CATV signals, to the defendants' poles. The complaint alleged facts showing that defendants entered into an illegal conspiracy the effect of which was to unreasonably restrain trade in violation of section 1 of the Sherman Act. In addition, it alleged violations of section 2 of the Sherman Act and the Robinson-Patman Act. The district court, the Honorable Axel J. Beck presiding, dismissed the action for failure to state a claim on which relief could be granted. TV Signal Co. v. American Telephone & Telegraph, 324 F.Supp. 725 (D.S.D.1971).

This court reversed and remanded for plenary trial on the alleged violations of sections 1 and 2 of the Sherman Act. TV Signal Co. v. American Telephone & Telegraph Co., 462 F.2d 1256 (8th Cir. 1972). We held that the allegations of the complaint were sufficient to state a claim under both sections 1 and 2 of the Sherman Act. In doing so we stated that because CATV had broadband potential, the threat of competition was sufficiently alleged: ¹

CATV is "one important gateway to entering the broadband market." . . . The dangers of monopolization have been recognized by the Federal Communications Commission which has said, . . .

" * * * by reason of their control over utility poles or conduits, the telephone companies were in a position to preclude or substantially delay an unaffiliated CATV system from commencing service and thereby eliminate competition."

Id. at 1260.

Upon remand, trial on the issue of liability proceeded before the Honorable Andrew W. Bogue, sitting without a jury. ² At the conclusion of all of the evidence, the district court made findings of fact and conclusions of law and entered judgment for the defendants. The trial court held that plaintiff lacked standing to sue and that it had failed to establish the relevant market as required under sections 1 and 2 of the Sherman Act. The court did not make findings on whether the defendants conspired to unreasonably restrain trade or monopolized the market; the court did not consider the other aspects of relevant market once it determined that plaintiff was not a competitor of defendants. We reverse and remand for further proceedings.

Facts.

In 1969 TV Signal Company of Aberdeen sought to obtain permission from Bell to attach a coaxial cable to telephone and utility poles within the City of Aberdeen, South Dakota in order to transmit CATV signals. Bell had previously entered into contracts with other utilities which gave it exclusive control over all available communication space on the poles. The Bell System (AT&T and its subsidiaries) had a policy at that time which allowed only one attachment per pole. Bell had already granted to another cable TV operator the right to attach its cable to Bell's poles and on that basis refused to allow TV Signal the right to attach its cable to defendants' poles. Bell offered to build a distribution system and lease it back to plaintiff for distribution of plaintiff's signals. TV Signal refused. In May of 1969 it contracted with Anaconda Electronics Company to build an underground system at a rate of $5,000 per mile. In October of 1969 when defendants abandoned their one per pole policy because of government rulings, Bell acceded to TV Signal's request and allowed it to attach cable to Bell's poles. The cost of constructing the remainder of the distribution system by attaching cable to the poles was only $3,650 per mile. The entire distribution system was 63.34 miles in length; 15.10 miles of cable were attached to the defendants' poles and 48.24 miles of cable were placed underground.

Standing.

The district court held that TV Signal did not intend nor was it able to compete in the area of broadband services and that plaintiff lacked standing because it failed to show that it was a potential competitor of Bell's. It held that there was no proof of any compensable damage to the plaintiff. TV Signal Co. v. American Telephone & Telegraph Co., 465 F.Supp. at 1092. The district court concluded that in spite of the fact that plaintiff was forced to install an underground system at a greater cost, such a system "would have resulted in the complete offset of the initially higher construction costs within a two-year period." ³ Id. at 1093. The court further reasoned that plaintiff was not damaged since it ultimately sold its business at a $340,000 profit. The district court held that plaintiff had failed to establish standing because of its failure to prove injury in fact, and proximate cause.

We respectfully disagree with this analysis. The notion that a business could not have been injured if it was sold for a profit finds little legal support. It is well recognized that even a profitable business may sustain damage to its property or business by reason of illegal restraints of trade. See, e. g., Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 89 S.Ct. 1562, 23 L.Ed.2d 129 (1969); Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. 481, 88 S.Ct. 2224, 20 L.Ed.2d 1231 (1968); Chattanooga Foundry & Pipe Works v. Atlanta, 203 U.S. 390, 27 S.Ct. 65, 51 L.Ed. 241 (1906). The Sherman Act "does not require a plaintiff to retain possession of a business oppressed by anti-trust violation until the business is bankrupted or directly shut down by the violator." Pollock & Riley, Inc. v. Pearl Brewing Co., 498 F.2d 1240, 1244 (5th Cir. 1974) (footnote omitted), cert. denied, 420 U.S. 992, 95 S.Ct. 1427, 43 L.Ed.2d 673 (1975); accord, Lehrman v. Gulf Oil Corp., 464 F.2d 26 (5th Cir.), cert. denied, 409 U.S. 1077, 93 S.Ct. 687, 34 L.Ed.2d 665 (1972).

The district court held that the additional cost of an underground system would be offset by ensuing benefits. Even if this were true, ⁴ it does not foreclose plaintiff from seeking damages under the antitrust law. Smith v. Pro-Football, Inc., 193 U.S.App.D.C. 19, 21, 593 F.2d 1173, 1175 n.2 (D.C.Cir.1979); see also Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 120, 89 S.Ct. 1562, 1574, 23 L.Ed.2d 129 (1969). Conspiracies which result in higher initial costs have a tendency to keep competing forces out of the market. Entrants who might otherwise be able to move into the market may be foreclosed because they are not able to raise the additional start-up capital.

Plaintiff urges that the "forced sale" of its business was not the allegation of its injury. ⁵ The most obvious damage to TV Signal in this case is the increased construction cost which was the result of being forced to go underground rather than attaching the cable to defendants' poles. Plaintiff urges that by reason of Bell's policy of excluding independent CATV operators from its poles, they were forced to either lease channel service from Bell or to go underground. If independent operators chose to lease from Bell, the telephone company would benefit by increased revenues and own the system; if they chose to use other means to construct the system, as TV Signal did, the operator would have to pay more. Plaintiff's evidence established that the higher cost of burying the cable would have a tendency to force operators to lease Bell's distribution system or in some cases forego the business opportunity altogether. This proven injury is "something more than remote, is not derivative but direct, and is the proximate result of (defendants') misdoing." ⁶ Sanitary Milk Producers v. Bergjans Farm Dairy, Inc., 368 F.2d 679 689 (8th Cir. 1966). See also Reiter v. Sonotone Corp., 579 F.2d 1077, 1081-82 n.9 (8th Cir. 1978), rev'd, 442 U.S. 330, 99 S.Ct. 2326, 60 L.Ed.2d 931 (1979).

The district court also held that plaintiff lacked standing since it failed to prove that it was either a competitor or potential competitor in the communications market. The district court found that the evidence indicated the projected market had not yet developed; that defendants' one per pole policy had no effect on the development of broadband services; that TV Signal had only minimal intent to engage in any business other than basic CATV services; and that it had not taken any preparatory steps which would have allowed it to provide other services. Id. at 1097-98.

The district court reasoned that in order to have standing there must be overt and objective preparations to expand an existing business into a new market, relying on N. W. Controls, Inc. v. Outboard Marine Corp., 333 F.Supp. 493, 507 (D.Del.1971). We find the district court's analysis does not fully address the precise issue presented here.

A. Broadband Services.

Internal AT&T memoranda demonstrate that the distribution of CATV signals was only the first step in the development of broadband services. This evidence affirmatively establishes d...