Z-Tel Communications v. Sbc Communications
| Decision Date | 06 August 2004 |
| Docket Number | No. 5:03 CV 229.,5:03 CV 229. |
| Citation | 331 F.Supp.2d 513 |
| Parties | Z-TEL COMMUNICATIONS, INC. Plaintiff v. SBC COMMUNICATIONS, INC, Ameritech Corporation, Pacific Telesis Group, Illinois Bell Telephone Company, Indiana Bell Telephone Company Incorporated, Michigan Bell Telephone Company, Nevada Bell Telephone Company, the Ohio Bell Telephone Company, Pacific Bell Telephone Company, Wisconsin Bell, Inc., and Southwestern Bell Telephone, L.P., Defendants. |
| Court | U.S. District Court — Eastern District of Texas |
Nicholas H. Patton, Robert W. Schroeder, III, Patton, Tidwell & Schroeder, Texarkana, TX, Layne E. Kruse, William R. Pakalka, David J. Van Susteren, Darryl W. Anderson, Fulbright & Jaworski, Houston, TX, Christopher V. Goodpastor, Chief Legal
Counsel, Z-Tel Communications, Inc., Tampa, FL, for Plaintiff.
Damon Michael Young, John Michael Pickett, Young Pickett & Lee, Texarkana, TX, Aaron M. Panner, Colin S. Stretch, Eugene M. Paige, Mark C. Hansen, Michael K. Kellogg, Neil M. Gorsuch, Kellogg Huber Hansen Todd & Evans, Washington, DC, Martin E. Grambow, William M. Schur, San Antonio, TX, for Defendants.
TABLE OF CONTENTS: ORDER ON DEFENDANTS' MOTION TO DISMISS
SECTION PAGE
I. Introduction ...................................................................518
II. 12(b)(6) Standard ..............................................................518
III. The Telecommunications Act of 1996 .............................................519
IV. Overview of Plaintiff's Complaint ..............................................519
V. Monopolization: Prevalent Legal Standards ......................................521
VI. The First Prong of Grinnell is Satisfied .......................................522
VII. The Intersection of Antitrust Liability and Telecommunications Regulation
Defendant's Most Sweeping Argument for Dismissal .............................523
VIII. Monopolization: Analysis of Plaintiff's Allegations of Exclusionary Conduct
Falling Into Categories Not Addressed in Trinko ..............................527
IX. Monopolization: Refusals to Deal ...............................................535
X. Essential Facilities ...........................................................539
XI. Attempted Monopolization .......................................................541
XII. Monopoly Leveraging ............................................................542
XIII. Tying ..........................................................................543
XIV. Subject Matter Jurisdiction and the Breach of Contract Claim ...................548
XV. Subject Matter Jurisdiction and the § 251 Claim ................................550
XVI. Telecommunications Act § 202 ...................................................554
XVII. Telecommunications Act § 222 ...................................................556
XVIII. RICO ...........................................................................557
XIX. Filed Tariff Doctrine ..........................................................563
XX. Lanham Act .....................................................................564
XXI. Conclusion .....................................................................566
Before the Court is Defendants' Motion to Dismiss. (Doc. No. 7). A hearing was held on this motion April 8, 2004. After considering the motion and all subsequent briefing thereto, and the applicable law, the Court grants in part and denies in part.
Defendants' motion is GRANTED as to A) Plaintiff's Essential Facilities claim (Count No. 2), B) Breach of Contract claim (Count No. 11), and C) Telecommunications Act claims (Count Nos. 8, 9, and 10). Plaintiff's Essential Facilities Claim is DISMISSED with prejudice. By contrast, Plaintiff's "Breach of Contract" and Telecommunications Act claims are DISMISSED without prejudice to repleading.
The Court draws special attention to the Tying claim. (Count No. 5). As explained in Part XIII, E.4, infra, Defendants' motion is denied as to the Tying claim with a tying market defined as DSL service. Through its use of the disjunctive word "alternatively" Plaintiff's Complaint indicates that an alternative market for broadband internet access need not be considered. So as to avoid any confusion, Plaintiff's Tying claim involving a tying market for broadband internet access is DISMISSED without prejudice to repleading.
If Plaintiff chooses to replead any of the claims which are being dismissed without prejudice, it shall do so within thirty (30) days of the entry of this Order.
On all other claims, Defendants' motion is DENIED. Defendants urge dismissal of the state law claims if the federal causes of action fail. Not all of the federal causes of action having been found to fail, the state law claims receive no discussion in the Court's analysis.
SBC Communications, Inc. (hereinafter referred to with its subsidiaries as "Defendant" or "Defendants") filed its Motion to Dismiss on November 24, 2003. (Doc. No. 7). Plaintiff filed its Response on January 6, 2004. (Doc. No. 22). On January 13, 2004, the Supreme Court handed down its decision in Verizon Communications., Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 124 S.Ct. 872, 157 L.Ed.2d 823 (2004) (hereinafter, "Trinko"). Justice Scalia delivered the Court's Opinion; Justice Stevens authored a concurrence joined by Justices Souter and Thomas. Trinko is a landmark case. In this order, the holding and implications of Trinko will be discussed at length. Briefly, the Court said that consumers could not make an antitrust claim against Verizon, the nation's largest regional bell operating company ("RBOC"), because it allegedly violated a requirement to share its network with rivals, as required by the 1996 Telecommunications Act. The linchpin of the Trinko opinion was the issue of anticompetitive intent.
There are obvious parallels between the issues the Supreme Court addressed in Trinko and the issues presented by the case at bar. Not surprisingly, in the briefs filed after the Supreme Court handed down its opinion, Defendants are emphatic that Trinko compels the conclusion that dismissal is warranted. Plaintiff is equally emphatic that Trinko bears only a facial similarity to the instant set of facts. At the April 8 hearing, arguments addressing the impact of Trinko occupied nearly all of the time allotted to the motion to dismiss.
When considering a motion to dismiss under Fed.R.Civ.P. 12(b)(6), the court must take the well-pleaded factual allegations of the complaint as true. "All questions of fact and any ambiguities in the current controlling substantive law must be resolved in the plaintiff's favor." Lewis v. Fresne, 252 F.3d 352, 357 (5th Cir.2001). "Given the Federal Rules' simplified standard for pleading, [a] court may dismiss a complaint only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514, 122 S.Ct. 992, 152 L.Ed.2d 1 (2002) (quotation omitted). Motions to dismiss for failure to state a claim are viewed with disfavor and are rarely granted. See Southern Christian Leadership Conference v. Supreme Court, 252 F.3d 781, 786 (5th Cir.2001). "However, `conclusory allegations or legal conclusions masquerading as factual conclusions will not suffice to prevent a motion to dismiss.'" Id. (quoting Fernandez-Montes v. Allied Pilots Ass'n, 987 F.2d 278, 284 (5th Cir.1993)).
A plaintiff need not plead its antitrust claims with particularity. See MCM Partners, Inc. v. Andrews-Bartlett & Assocs., 62 F.3d 967, 976 (7th Cir.1995) () (citations omitted). FED. R. CIV. P. 8(a), requiring plaintiff to provide a short and plain statement of its claim showing that it is entitled to relief, "applies with equal force in antitrust cases." Delaware Health Care, Inc. v. MCD Holding Co., 893 F.Supp. 1279, 1284 (D.Del.1995). The Supreme Court has stated, "in antitrust cases, where the proof is largely in the hands of the alleged conspirators, dismissals prior to giving the plaintiff ample opportunity for discovery should be granted very sparingly." Hospital Bldg. Co. v. Trustees of Rex Hosp., 425 U.S. 738, 746, 96 S.Ct. 1848, 48 L.Ed.2d 338 (1976) (citations and internal quotations omitted).
To further its local-competition goal, the Telecommunications Act imposes duties on incumbent local exchange carriers ("ILECs") to provide access to their facilities and equipment to competing carriers. 47 U.S.C. § 251. More particularly, in § 251(a) and (b), the 1996 Act imposes on every telecommunications carrier an affirmative duty to interconnect with other carriers, to follow stated rules regarding resale, and to provide nondiscriminatory access to telephone numbers and operator services, telephone poles, ducts, conduits, and rights-of-way. Id. § 251(a), (b). Under § 251(c), the incumbent local exchange carrier bears additional duties, including the duty to negotiate interconnection agreements with any new carrier so requesting, to provide access to its network elements on an unbundled basis, to offer its retail telecommunications services for resale at wholesale rates, and to provide for collocation. Id. § 251(c).
Section 252 governs negotiation and arbitration of interconnection agreements. Id. § 252. Agreements voluntarily made may be entered into without regard to the specific duties imposed by § 251(b) and (c). Section 252 identifies the procedure for agreements reached through mandatory arbitration, which are not exempted from the requirements outlined in § 251. In short, §§ 251 and 252 of the 1996...
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