U.S. v. NYNEX Corp.

• Decision Date: 12 November 1993
• Docket Number: No. 93-3019,93-3019
• Citation: 8 F.3d 52
• Parties: , 1993-2 Trade Cases P 70,417 UNITED STATES of America, appellee, v. NYNEX CORPORATION, appellant.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 52

8 F.3d 52

303 U.S.App.D.C. 399, 1993-2 Trade Cases P 70,417

UNITED STATES of America, appellee, v. NYNEX CORPORATION, appellant.

No. 93-3019.

United States Court of Appeals District of Columbia Circuit.

Argued Sept. 15, 1993.

Decided Nov. 12, 1993.

On Appeal from the United States District Court for the District of Columbia (No. 90cr00238).

Guy M. Struve, New York City, argued the cause, for appellant. With him on the briefs were Scott W. Muller, Linda Chatman Thomsen, J. Andrew Heaton and Seth Richard Lesser, Washington, DC.

Nancy C. Garrison, Atty., U.S. Dept. of Justice, Washington, DC, argued the cause, for appellee. With her on the brief were Anne K. Bingaman, John J. Powers, III, Constance K. Robinson and Carl Willner, Attys., U.S. Dept. of Justice, Washington, DC.

Before: EDWARDS, WILLIAMS and RANDOLPH, Circuit Judges.

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

HARRY T. EDWARDS, Circuit Judge:

Under the so-called "AT & T Consent Decree," a number of Regional Companies were spun off in the divestiture of the American Telephone and Telegraph Company. See United States v. AT & T, 552 F.Supp. 131 226-34 (D.D.C.1982) (containing the "modification of final judgment" with respect to AT & T's reorganization). Pursuant to section II(D)(1) of the Consent Decree, Regional Companies were prohibited, directly or through any affiliated enterprise, from providing "information services." ¹ 552 F.Supp. at 227. Section IV(J) of the Consent Decree defined "information service" to mean:

the offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information which may be conveyed via telecommunications.

Id. at 229. Under this provision, an "information service" did not include "any use of any such capability for the management, control, or operation of a telecommunications system or the management of a telecommunications service." Id. For purposes of this case, however, the most important exception to section II(D) was found in section VIII(A) of the Consent Decree, which provided that, "[n]otwithstanding the provisions of section II(D)(2), [Regional Companies] shall be permitted to provide, but not manufacture, customer premises equipment." Id. at 231. ²

NYNEX Corporation was one of the Regional Companies created at the occurrence of the divestiture of AT & T. Thus, under the terms of the Consent Decree, NYNEX is a Bell Operating Company ("BOC") fully subject to the terms of the Decree. See section IV(C) of the Consent Decree, 552 F.Supp. at 228. On May 31, 1990, NYNEX was indicted for criminal contempt, under 18 U.S.C. § 401(3) (1988), for allegedly providing "information services" through a subsidiary, Telco Research Corporation ("Telco"), to MCI Communications Corporation ("MCI") in violation of section II(D)(1) of the Consent Decree. NYNEX requested a jury trial, but this request was denied by the District Court. Following a four-day trial, the District Court judge found NYNEX guilty of criminal contempt for willfully violating the proscription against "information services." The District Court then imposed a fine of one-million dollars ($1,000,000.00). United States v. NYNEX Corp., 814 F.Supp. 133 (D.D.C.1993). NYNEX now appeals from the verdict and judgment of the District Court.

On appeal, NYNEX raises a number of challenges to its conviction, including a significant objection to the District Court's denial of the request for a jury trial. We need not reach most of the issues that have been raised, however, for we find one to be dispositive. In our view, the record does not substantiate the District Court's finding that the Consent Decree's prohibition against information services was sufficiently clear or specific to sustain a conviction for criminal contempt. Relying solely on that ground, we reverse.

I. BACKGROUND

In April 1986, NYNEX acquired Telco. Telco is a company that provides telecommunications-related products and services. At the time of acquisition, Telco was providing MCI with an interactive remote-access data processing service (the "MCI service bureau") pursuant to a contract entered into between Telco and MCI in 1985. See Master Agreement for Software License, Maintenance & Enhancement, and Equipment Purchase for Computer Software and/or Hardware, reprinted in Joint Appendix ("J.A.") 489. As part of the agreement, Telco licensed MCI to use Telco's "Voice Network Architect" computer program on a MicroVAX computer owned by Telco and housed on its premises in Nashville, Tennessee. MCI used the service to conduct long distance network design studies. J.A. 487-510.

The network design work was conducted in four steps. MCI would begin by mailing computer tapes containing customer telephone calling pattern data to Telco. Upon receipt of this information, Telco employees would load the data onto its computer and, if necessary, convert the information into a format which could be read by the Telco software. The data was then transferred to the MicroVAX computer where it was stored. Following transfer of the converted data, MCI personnel could perform network studies by accessing the MicroVAX computer via phone lines. The results were either mailed to MCI or retrieved by MCI via telephone.

Two employees of NYNEX Development Company (a wholly-owned subsidiary of NYNEX)--Gad Selig and Victor Cunningham--brought the MCI service bureau to the attention of Thomas Hearity, a lawyer in the NYNEX legal department. Hearity, in turn, discussed the matter with Gerald Murray, the senior antitrust lawyer at NYNEX. According to NYNEX, Hearity and Murray initially concluded that the MCI service bureau could be defended as customer premises equipment ("CPE") under section VIII(A) of the Consent Decree.

After further consideration, NYNEX officials concluded that the MCI service bureau might be prohibited by the Consent Decree, and decided to take steps to transfer legal title and possession of the computer in order to remove any doubt about the service's legality. In conjunction with its decision to make these changes, NYNEX contacted Michael Altschul, a Department of Justice ("DOJ") Antitrust Division lawyer. Altschul stated that if both the title and the location of the computer were changed, it was difficult to see how anyone could charge NYNEX with providing an information service; but, in Altschul's view, if the location of the computer was unchanged, the MCI service bureau would be more susceptible to being challenged. Deposition of Thomas Hearity, reprinted in J.A. 398, 408.

The District Court found that Cunningham, Selig, and Hearity knew or should have known that the MCI service bureau violated the Decree, and that, despite this knowledge, they nevertheless continued to operate the service. NYNEX, 814 F.Supp. at 139-40. In support of its conclusion, the District Court found that Hearity informed both Selig and Cunningham that the MCI service bureau was an information service and illegal under the Consent Decree, and that Cunningham so informed other NYNEX and Telco employees. Id. The trial judge found it significant that, although the three NYNEX officials discussed possible modifications, they never took affirmative steps to insure that the problem was corrected. NYNEX, 814 F.Supp. at 141.

On May 31, 1990, NYNEX was indicted for criminal contempt in violation of 18 U.S.C. § 401(3) (1988). NYNEX's request for a jury trial was denied. A bench trial was conducted from April 6 through April 9, 1992. On February 16, 1993, the District Court convicted NYNEX of criminal contempt for willfully violating section II(D)(1) of the Consent Decree and imposed a fine of $1,000,000, as requested by the Government.

II. DISCUSSION

There are three essential elements of criminal contempt under 18 U.S.C. § 401(3): (1) there must be a violation (2) of a clear and reasonably specific order of the court, and (3) the violation must have been willful. United States v. Turner, 812 F.2d 1552, 1563 (11th Cir.1987). The Government carries the burden of proof on each of these elements, and the evidence must be sufficient to establish guilt beyond a reasonable doubt. Id. (citing Michaelson v. United States ex rel. Chicago, St. Paul, Minneapolis & Omaha Railway Co., 266 U.S. 42, 66, 45 S.Ct. 18, 20, 69 L.Ed. 162 (1924)).

From our vantage point, the heart of the problem in this case is that the District Court apparently assumed that, because several NYNEX officials feared that the MCI service bureau might be a prohibited information service, the Consent Decree was undoubtedly clear with respect to the question at issue. See NYNEX, 814 F.Supp. at 139. In other words, the District Court seemed to think that if NYNEX officials acted willfully they necessarily violated a clear order of the court. This reasoning improperly conflates the elements of criminal contempt, and it unacceptably alters the Government's burden of proof.

In a case such as this, the Government must prove each and every element of the offense, and " 'contempt will lie only if the putative contemnor has violated an order that is clear and unambiguous....' " Armstrong v. Executive Office of the President, Office of Admin., 1 F.3d 1274, 1289 (D.C.Cir.1993) (quoting Project B.A.S.I.C. v. Kemp, 947 F.2d 11, 16 (1st Cir.1991)). That NYNEX may have acted willfully satisfies one element of criminal contempt, but cannot relieve the Government of its obligation to prove each of the remaining elements. See Turner, 812 F.2d at 1568 ("In the case of a crime consisting of three essential elements, of which wilfulness is third, a substantially supported finding of wilfulness is insufficient to support a conviction if substantial evidence is absent as to either or both of the first and second essential elements."). We find insufficient evidence to support the District Court's conclusion that the clarity element was proven beyond a reasonable doubt.

All parties...