Petition — American Telephone & Telegraph Co. v. United States

Supreme Court brief1978

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VOU | S

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FILED

NOV uy 1978

IN THE

Supreme Court of the United States

OcToBER TERM, 1978

no. €8-761

AMERICAN TELEPHONE AND TELEGRAPH COMPANY;

WESTERN ELeEcTRic Company, INc.; and

BELL TELEPHONE LABORATORIES, INC., Petitioners,

Unitep States oF AMERICA, Respondent.

—_—

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

DISTRICT OF COLUMBIA CIRCUIT

———_

Harowp 8. Levy

Jim G. KILPatric

LEONARD JOSEPH

GrorGE L. SAUNDERS, JR.

195 Broadway

New York, New York 10007

Attorneys for Petitioners

Of Counsel:

F. Mark GARLINGHOUSE

GEORGE V. Cook

WiuiAM L. KEEFAUVER

DEWEY, BALLANTINE, BUSHBY,

PALMER & Woop

SIDLEY & AUSTIN

November 7, 1978

Press oF Byron S. ADAMS PRINTING, INC., WASHINGTON, D. C.

TABLE OF CONTENTS

Page

I NE hie bakc tienes oc ndcb evs cnunseds cece 1

ree ReE anid mene: Jones aeieceseens 2

Wd oi. tnd kee svcacceseces 2

Staturory Provisions INVOLVED .............eesee0% 3

ee, eves wagessceuaenion 3

Reasons For GRANTING THE WRIT ................0+5 17

I The Writ Should Be Granted to Decide an Im-

portant Question of Federal Law Which Has Not

Been, But Should Be, Decided by This Court ... 17

II The Writ Should Be Granted Because the Court

of Appeals Has Sanctioned a Departure by the

District Court From the Accepted and Usual

Course of Judicial Proceedings of a Nature That

Would Deny Petitioners a Fair Opportunity to

Defend Themselves and Thus Calls for an Exer-

cise of This Court’s Power of Supervision ..... 30

ET Soni blnctesGcdpinbetecdcecacsncceeuss 37

hie deeb vichetepanesnnens~<oseeens la

Mich wan ditrinnenkesesedenetceseueess 2a

ES SO ee Pee eee ee eee Tee 8la

EE AAS cee en Sed dwbn anh bacedhine cdbhesde 9la

SIL hs Sew eW NUR h eK cecekie desc ceccteccgce 96a

OL ETT Ee Tee TTT TORE TTT ETT 102a

ii INDEX OF AUTHORITIES

Cases: Page

Alcoa v. United States Department of Justice, 1978-1

Trade Cas. ff 61,824 (D.D.C. 1978) ............ 18, 22

Caldwell-Clements, Inc. v. McGraw-Hill Pub. Co., 11

ems WOW COR ED 5 60a 0b v/s ncbee cuece cs 32

Chamber of Commerce v. Legal Aid Society, 423 U.S.

1309 (1975) (Mr. Justice Douglas, in chambers).. 25

Control Data Corp. v. International Business Machines

Corp., 306 F. Supp. 839 (D. Minn. 1969) ........ 33

Data Digests, Inc. v. Standard @ Poor’s Corp., 57

aes ae CLs: SUE Wah vee iccctbavebe evs

Exaon Corp. v. FTC, 411 F.Supp. 1362 (D.Del. 1976).. 33

GAF Corp. v. Eastman Kodak Co., 415 F.Supp. 129

aA. HE ssh Ka be poe ae’ pate bbaes bee 18, 19

Humphrey’s Executor v. United States, 295 U.S. 602

SE 5t bcnd Wea ne akon nan outs Cau tae sects s 14

In re Cement and Concrete Antitrust Litigation, MDL

Dkt. No. 296, Civ. 76-788A PHX CAM (D.Ariz.).. 18

In re Coordinated Pretrial Proceedings in Western

nD. Asphalt Cases, 18 Fed. R. Serv. 2d 1251

TAs ME Sacld od ncadiesabwesedakdce kiss 18, 23

Kerr v. United States District Court for the Northern

District of California, 426 U.S. 394 (1976) ...... 2

Litton Systems, Inc. v. American Tel. & Tel. Co., No.

Se Ss RE CEE Scbaccre vecicces 8, 15, 24, 35

Martindell v. International Tel. & Tel. Corp., 25 Fed.

R. Serv. 2d 1283 (S.D.N.Y. 1978) .............. 18

MCI Communications et v. American Tel. & Tel.

Co., No. 74 C 633 (N.D.IIL) ..2, 4, 7, 8, 15, 24, 26, 28, 35

Milsen v. Southland Corp., 1972 Trade Cas. {73,865

SE EEE ADRS As th Koma DE Meee ved ewes ovens

Schlagenhauf v. Holder, 379 U.S. 104 (1964) ........ 2

TV Signal Co. of Aberdeen v. American Tel. & Tel.

Co., Civil Action No. 70-6N (D.8.D.) .......... 18, 29

Index of Authorities Continued iii

Page

United States v. American Tel. & Tel. Co., 427 F.Sup

57 (D.D.C. 1976), cert. denied, No. 77-1009 (D.C.

Cir. 1977), cert. denied, 429 U.S. 1071, 434 US.

SO INFN: bescedigl olives cancers Soesdeudsere 6,7

United States v. ARA Services, Inc., 1978-2 Trade

Cas. ] 62,250 (E.D. Mo. 1978) ............-05- 18, 20

United States v. GAF Corp., 1978-1 Trade Cas. {| 62,015

A ME CAS ah dwAWndevebhenDens dunesss

Wardius v. Oregon, 412 U.S. 470 (1973) ............. 33

William Inglis & Sons Baking Co. v. ITT Continental

Baking Co., No. C-71-1906-SW (N.D. Cal.) ...... 18

Wyly Corp. v. American Tel. & Tel. Co., Civil Action

O FOE COMER) saicveddsecccess 9, 18, 20, 22, 28

Zenith Radio Corp. v. Matsushita Electric Industrial

Co., 1978-1 Trade Cas. {] 61,961 (E.D. Pa. 1976) .. 18

Zenith Radio Corp. v. Matsushita Electric Industrial

Co., 1978-2 Trade Cas. J 62,019 (E.D. Pa. 1978) .. 19

FeperaL Statutes:

Communications Act of 1934, 47 U.S.C. § 151 et seg... 3

Federal Rules of Civil Procedure

DE Gee Guetta Legeud Raeerl's 6400 eenee owns 23

PE Sco cUCeLeub ea eeestectheededo bent 3, 12, 23, 30

Kh cael ce subRenyheeeseeN eee 3, 5, 12, 13, 30

PE in dk dese edhoreesetedcbndbsewiews peters 31

eS IED. Sn pcuvscbeseabstnetesdsveescees 1,2

EE 5s Basen deaNesccesdecactwebess 1

i i cis cceersudhae eter eenntes tase 27

MIsceLLANEOUS MATERIALS:

Manual for Complex Litigation ...............+4+. 11, 32

OnLine, April/May 1977 (Computer and Communica-

tions Industry Association) ............-0eeeees

Proposed Amendments to the Federal Rules of Civil

Procedure, 48 F.R.D. 487 (1970) ........... ke

Statement of John H. Shenefield, Assistant Attorne

General, Antitrust Division, in BNA Antitrust

Trade Reg. Rptr., October 13, 1977 ............ 21

IN THE

Supreme Court of the United States

OctToBER TERM, 1978

No.

AMERICAN TELEPHONE AND TELEGRAPH COMPANY;

Western Evectric Company, INc.; and

Bett TELEPHONE Lasoratories, INc., Petitioners,

Unirep States or America, Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

DISTRICT OF COLUMBIA CIRCUIT

Petitioners pray that a writ of certiorari be issued

under 28 U.S.C. §1254(1) to review the judgment of

the United States Court of Appeals for the District

of Columbia Circuit entered in this cause on October

31, 1978, which denied a petition for a writ of man-

damus under 28 U.S.C. §1651(a) to review an order

entered by the United States District Court for the

District of Columbia (Judge Harold H. Greene, pre-

siding) on September 11, 1978.

The judgment of the Court of Appeals dated Octo-

ber 31, 1978, which is not reported, is annexed hereto

as Appendix A. The opinion and orders of the district

court dated September 11, 1978, which are not re-

ported, are annexed hereto as Appendix B. The opin-

ion of the district court denying petitioners’ motion

for reconsideration, dated October 18, 1978, which is

not reported, is annexed hereto as Appendix C. A re-

lated opinion dated October 9, 1978, of the United

States District Court for the Northern District of

Illinois in MCI Communications Corp. v. American

Tel. & Tel. Co., 74 C 633, which is not reported, is an-

nexed hereto as Appendix D.

JURISDICTION

This Court’s jurisdiction is invoked under 28 U.S.C.

§ 1254(1). The judgment of the United States Court

of Appeals for the District of Columbia Circuit was

entered on October 31, 1978. The jurisdiction of this

Court to issue a writ of certiorari under 28 U.S.C.

§ 1254(1) to review the judgment of the court of ap-

peals is established by the following decisions of this

Court:

Schlagenhauf v. Holder, 379 U.S. 104 (1964) ;

Kerr v. United States District Court for the

a District of California, 426 U.S. 394

(1976).

QUESTION PRESENTED

Whether a federal district court may, under Rule 34

of the Federal Rules of Civil Procedure, order the

wholesale production of documents produced in other

litigation, even though the documents contain material

that is irrelevant to the action in which such wholesale

production is required, even though the documents in-

volved reflect the fruits of work done by counsel in

other litigation during a period when discovery was

stayed in the action in which they are required to be

produced, and even though the documents involved

were produced under protective orders which limited

their use to the litigation in which they were originally

produced.

STATUTORY PROVISIONS INVOLVED

The pertinent provisions of the Federal Rules of

Civil Procedure—Rules 26 and 34—are set forth in

Appendix E to this petition.

STATEMENT OF FACTS

The action out of which this petition arises was filed

by the United States against petitioners on November

20, 1974, charging that petitioners have conspired to

monopolize, and monopolized, telecommunications ser-

vice and equipment markets. Shortly after the com-

plaint was filed, the Government embarked upon a mas-

sive discovery program designed to support the broad

charges encompassed within the complaint and the

drastic divestiture relief it is seeking. The Government

initiated this discovery program by filing requests

under Rule 34 of the Federal Rules of Civil Procedure

seeking production of documents from the files of each

of the defendants as well as from each of the operating

telephone companies in which AT&T holds a majority

interest. These broad requests would have required

the Bell System to search more than one-third of all

the System’s files and to produce vast quantities of

this material to the Government for inspection and

possible copying (Affidavit of Mr. F. Fox Stoddard,

filed in the district court on February 18, 1975, p. 6).

Shortly thereafter, defendants filed discovery re-

quests of their own under Rule 34, in which they

sought access to relevant documents in the possession

of governmental agencies, including the agencies that

have regulated the Bell System’s conduct under the

Communications Act (47 U.S.C. § 151 et seq.), agencies

that have attempted to influence regulatory policies,

agencies that have made special demands upon the

Bell System to meet national defense, security and

other needs which influenced Bell System practices,

and numerous other agencies involved in telecommuni-

cations and telecommunications-related matters. The

number of documents called for by defendants’ Rule 34

requests, although far fewer than those sought by the

Government, nonetheless was also substantial.

Given the magnitude of the discovery burdens faced

bv both parties, informal negotiations were commenced

almost immediately in an effort to reduce these bur-

dens and to develop a mutual plan for discovery which

would be fair to both parties and facilitate the dis-

covery process. A number of meetings were held for

this purpose in December of 1974 and in January and

February of 1975. At the outset of these negotiations,

the Government took the position that any agreed dis-

covery plan would have to reflect two fundamental

principies: first, that defendants would make a docu-

ment-by-document search of their files for the material

sought in the Government’s document requests; and,

secondly, that the Government was under no obligation

to produce, or even to preserve, relevant materials in

the possession of governmental agencies other than the

Department of Justice (Letter of February 6, 1975,

from Philip L. Verveer, Esq. to Harold 8. Levy, Esq.).

The defendants found both of these positions unaccept-

able. A document-by-document search of the kind in-

sisted upon by the Government would have cost the

Bell System some $300 million (Stoddard Affidavit,

p. 9) ; defendants suggested, as an alternative, that the

Government accept the discovery approach that was

then already being used in MCI Communications Corp.

ee ee ee ey

ON A EE EN OS Re ee eee skeen

v. American Tel. & Tel. Co., 74 C 633 (N.D. IIll.), in

which the parties had agreed that, where they found

it more convenient to do so, they could simply produce

their files in bulk so that the discovering party could

review them for relevant documents.’ Insofar as the

Government’s position with respect to its own obliga-

tions to produce under Rule 34 was concerned, defend-

ants simply refused to accept such an approach to dis-

coverv because, without discovery from other govern-

mental agencies under Rule 34, defendants did not re-

gard the discovery program advocated by the Govern-

ment as being reciprocal and mutual, or even as one

affording them a fair opportunity to defend themselves.

The parties were unable to resolve these differences.’

Accordingly, on February 18, 1975, defendants filed a

*The document request served upon the defendants in the MCI

case was almost as broad as the requests served by the Government,

the principal difference being that the MCI request did not require

the production of documents from Western Electric or Bell Lab-

oratories. Despite the breadth of this request, the Bell System had

agreed to produce, without objection, the documents requested

under a protective order agreed to by the parties, and entered as

an order of the district court in that case on August 6, 1974

(App. F), which provided that all discovery in the case was to be

used ‘‘solely in the preparation or trial of this action’’ (id. at 105a).

* During the course of these negotiations, specifically at a

meeting of counsel on December 19, 1974, Government counsel

expressly declined to coordinate discovery in the Government case

with discovery in the MCI case. Moreover, adverting to a sugges-

tion that apparently had previously been made to Government

counsel directly by counsel for MCI that the Government share the

burdens and expenses of the document selection process with MCI,

Government counsel stated categorically that the Department of

Justice intended to conduct and rely exclusively upon its own

discovery in United States v. American Tel. & Tel. Co., and that

it had no interest in the discovery being conducted by MCI (Affi-

davit of Harold S. Levy, filed in the district court on May 5, 1978,

pp. 3-4).

motion asking the district court to establish discovery

procedures. In that motion, defendants specifically

asked the district court to resolve the controversy over

the need for a document-by-document search, as well

as the controversy over defendants’ right to discovery

from other governmental agencies under Rule 34. At

a hearing on February 20, 1975, however, the district

court declined to rule on these aspects of petitioners’

motion. Instead, the court stated that based upon a

review of the pleadings it had concluded ‘‘that there

are certain defenses that have been raised that prob-

ably should be considered before discovery progressed’’

(Transcript of Proceedings in the district court, Feb-

ruary 20, 1975, p. 3) and ordered the parties to file

memoranda directed to ‘‘whether this action is barred

in whole or in part by virtue of the Communications

Act and other federal and state regulatory statutes

and by the regulations over activities of defendants’’

(Pretrial Order No. 2, entered by the district court on

February 27, 1975).* In the interim, the district court,

on its own motion, stayed all discovery pending its

action on the jurisdictional memoranda of the parties

(Pretrial Order No. 3, entered by the district court on

February 27, 1975). With minor interruptions, this

stay remained in effect until November 28, 1977,‘ dur-

*The court also directed the parties to address the issue of

whether the action was barred in whole or part by the 1956 consent

decree which terminated a 1949 antitrust suit by the Government

against petitioners.

* Because of the importance of the jurisdictional issue, the dis-

trict court requested a series of supplemental memoranda on that

issue from the parties and memoranda from the Federal Communi-

cations Commission as amicus curiae. For this reason, the court did

not reach a decision on the jurisdictione| issue until November 16,

1976, at which time the court ruled that it was ‘‘satisfied that it

has antitrust jurisdiction of at least some of the aspects of the

ease’’ (427 F. Supp. 57, 61 (D.D.C. 1976)). Thereafter, the Bell

ing which period no discovery whatever was conducted

by either party.

At the same time, however, document production con-

tinued virtually to completion in the MCI case under

the protective order that had been entered in that case

(App. F). The Bell System alone produced more than

seven million pages of documentary material from its

files—including virtually all of the files of many of its

top executives and the files of the various policy com-

mittees and councils of the Bell System—of which MCI

copied approximately 1.5 million pages, and thousands

of pages of deposition testimony were taken from Bell

System officers, managers and consultants. Because of

the blanket coverage afforded by the protective order,

the defendants did not pre-screen for relevancy or con-

fidentiality much of the documentary material pro-

duced to MCI; nor did they seek rigidly to confine the

depositions taken by MCI to relevant and proper lines

_of questioning.

In addition, while the jurisdictional issue was pend-

ing and discovery was stayed in United States v. Amer-

tcan Tel. & Tel. Co., other private antitrust actions

against the Bell System were filed, and discovery com-

System sought review of this jurisdictional ruling both in this

Court and in the Court of Appeals for the District of Columbia

Circuit pursuant to petitions for a writ of certiorari. Discovery

was once again stayed by the Court of Appeals, first, on its own

motion, on February 3, 1977, pending disposition of the petition

for certiorari pending before it (Order, February 3, 1977, Amer-

ican Tel. & Tel. Co. v. United States, D.C. Cir., No. 77-1009), and,

subsequently, on petitioners’ motion on August 11, 1977, pending

disposition of a petition for writ of certiorari by this Court (Order,

August 11, 1977, American Tel. & Tel. Co. v. United States, D.C.

Cir., No. 77-1009). This Court ultimately denied review (434 U.S.

966 (1977)), and the final stay of ‘‘all proceedings’’ in the dis-

trict court expired on November 28, 1977.

menced in those cases. In virtually every one of these

cases, a protective order of some kind was entered

which limited the use of documents subject to the or-

der to the preparation and trial of that particular case.

Among these cases was Litton Systems, Inc. v. Amert-

can Tel, & Tel. Co., No. 76 Civ. 2512 (S.D.N.Y.)—

another case involving massive discovery requests by

the plaintiff.’

The complaint in the Litton case was filed on June

7, 1976, and the protective order in that case was en-

tered on December 20, 1976 (App. G). Discovery com-

menced shortly thereafter, and during the course of

that discovery process, the Bell System produced some

five million pages of documentary material, of which

one million pages were copied by Litton. In addition,

extensive deposition testimony was taken, Discovery

is now also near completion in the Litton case.

The protective orders in these two cases have been

a matter of public record throughout the periods in-

volved, Nevertheless, the Government did not object to,

or move to modify, either of the protective orders at

the time it filed its own suit, or at any time during or

soon after the discussions with defendants’ counsel.

Instead, it waited nearly three years—three years in

‘The Litton case differs from the MCI case in that MCI involves

an attack by a specialized common carrier principally focused upon

the intercity services tariffs of the Bell System whereas Litton

involves an attack by a terminal equipment manufacturer upon

state tariffs and manufacturing and marketing practices of the Bell

System companies, Hence, although involving considerable over-

lap insofar as discovery against the Bell System’s top execu-

tives, the discovery request in Litton largely complemented the

request in MCI, with heavy emphasis on document production

from Western Electric, Bell Laboratories, and operating telephone

companies with respect to matters with which MCI was not prin-

cipally concerned,

which discovery by MCI and Litton against the Bell

System proceeded to the point of virtual completion

under the protective orders in those cases—and then

announced a radical change in its entire approach to

discovery. Rather than conducting independent discov-

ery as it had originally stated its intention to do, the

Government adopted a new strategy for preparing its

case against the Bell System which consisted primarily

of attempting to appropriate for its own use the fruits

of discovery from the MCI, Litton and other private

cases pending against the Bell System and which rele-

gated any discovery to be obtained directly in the

Government’s own case in accordance with the Fed-

eral Rules of Civil Procedure to filling any remaining

‘evidentiary gaps’’ (Memorandum for the United

States in Support of Motion to Permit Access to Pre-

trial Discovery, filed November 17, 1977, in MCI Com-

munications Corp. v. American Tel. & Tei. Co., pp. 3-4).

Moreover, the Government’s new strategy went beyond

the mere gaining of access to discovery materials in

these cases and included an effort to obtain from plain-

tiffs’ counsel any analyses or indices of the discovery

materials which they might be willing to share with the

Government, thus creating the possibility that the Gov-

ernment might be able to obtain—in fully organized

form ready for presentation at trial—substantial parts

of its case.’

*This new strategy became clear shortly before the stay of dis-

covery was lifted in United States v. American Tel, & Tel. Co.

when the Government appeared in both the MC/ and Litton cases

to request that the protective orders in those cases be modified to

allow private counsel to turn over the discovery material in those

cases to the Government and to cooperate with Government coun-

sel, and when the Government, in a more recently tiled case—

Wyly Corp. v. American Tel, & Tel. Co., Civil Action No. 76-1544

The purpose and effect of this new strategy of the

Government were clear. If the Government could ob-

tain access to broad discovery conducted by private

parties during the period in which discqvery had been

stayed in United States v. American Tel. & Tel. Co., it

could effectively avoid the impact of those stays upon

its trial preparations and put itself into a position as

good as—if not better than—the position it would have

been in had the stays not been entered. The defendants,

however, had no such alternative open to them. No

discovery against governmental agencies had been con-

ducted prior to the expiration of the stays in United

States v. American Tel. & Tel. Co., either by the Bell

System or by private plaintiffs in cases against the

Bell System.’ Even now, the only discovery the Bell

System has been able to obtain against the Government

is some limited discovery against the Department of

Justice itself.’

In these circumstances, petitioners filed motions with

the district court on November 28, 1977—the very day

on which the stay of discovery in United States v.

American Tel. & Tel. Co. expired—seeking to prohibit

(D.D.C.)—supported plaintiffs’ motion for entry of a protective

order which would have allowed plaintiffs to trade the documents

they discovered in that case with other plaintiffs in pending cases

against the Bell System, including specifically the Government,

’The Bell System defendants had sought discovery from the

FCC in the fall of 1977 in the MCI case, but the FCC resisted

this discovery, and the MCI court has not yet ruled on cross-

motions to enforce or to quash the subpoena served in that case,

*The Government has refused even to respond to the document

requests served by the defendants with respect to other govern.

mental agencies. (Transcript of October 6, 1978, pp. 51, 57). A

motion to compel production of the documents called for in those

requests has been filed in the district court but has not yet been

ruled upon,

the Government from further resort to extra-legal dis-

covery processes to obtain the fruits of discovery con-

ducted in other cases and to establish a phased discovery

program in accordance with the Federal Rules of Civil

Procedure and the Manual for Complex Litigation.

The Government filed counter-motions, essentially ask-

ing the court to sanction and implement the new dis-

covery approach that it had been pursuing. In these mo-

tions, the Government asked the district court to order

the defendants to turn over their copies of all discov-

ery materials generated in certain designated cases—

including both documentary and deposition material

—and to approve their efforts to obtain from plaintiffs’

counsel in those cases access to any analyses or indices

that they might be willing to make available (Motion

of the United States, filed December 12, 1977). These

motions eventually resulted in the district court’s opin-

ion and pretrial orders of September 11, 1978, as to

which petitioners now seek review.

In Pretrial Order No. 11, the district court approved

the linchpin of the Government’s scheme of appropri-

ating wholesale the fruits of discovery in the private

cases as the Government’s principal means of trial

preparation. Pretrial Order No. 11 requires peti-

tioners to turn over to the Government microfilm reels

containing copies of all documents selected by plain-

tiffs from the Bell System’s files in the MCI and Litton

cases.” These reels contain approximately 2.5 million

*The Government originally sought access to documents in five

other antitrust cases and three regulatory proceedings in which pe-

titioners are or were involved (App. B, pp. 43a, 56a n.91), The dis-

trict court’s order did not approve governmental access to the dis-

covery in these proceedings; however, in its opinion, the district

court strongly indicated an intention ultimately to permit the Gov-

pages of material, distilled through the work product

of the attorneys for the private plaintiffs from 12 mil-

lion pages of documents produced by the Bell System.

The order gives no recognition to petitioners’ right to

review these materials for relevancy and even requires

the provisional production of documents which have

been ruled to be privileged in the MCI and Litton

cases.”

The order does not reach the deposition transcripts

requested by the Government nor does it approve the

Government’s efforts to obtain the analyses and in-

dices of private counsel. However, in its accompanying

ee ——_ —_

ernment access to the fruits of discovery in these proceedings as

well, Thus, the court stated (id.): ‘‘Should the government desire

to press its request for documents produced in other private law-

suits or regulatory proceedings, it may do so by special application

showing the precise circumstances which establish the appropriate-

ness and necessity of ordering their production.’’

‘In the opinion which accompanied the order (App. B),

the district court reasoned that the Government was entitled to

these materials because of its status as a pprty to this litigation.

Thus, the district court concluded that hs a defendant in this

litigation, AT&T's duty to produce is squarely resolved by Rules

26 and 34... which provide for the production of relevant docu-

ments within a party’s possession, custody and control’’ (id, at

45a-46a). The court specifically held that the fact that the microfilm

reflects the work product of private counsel ‘‘make no difference un-

der the Rules’’ (id, at 46a), The court also concluded that the docu-

ments produced by defendants in MCJ and Litton would be ‘‘a

fortiori . . . relevant here’’ because the Government's case would

‘‘subsume’’ the MCI and Litton cases (id, at 50a), Although it

recognized that at least some of the documents produced would be

irrelevant to this lawsuit, the court stated that it was ‘‘ difficult to

envision what prejudice could ensue’’ from the production of a

handful of irrelevant documents (id, at 52a), The district court

also rejected the defendants’ contention that Pretrial Order No, 11

would place them at a discovery disadvantage vis-a-vis the Gov-

ernment (id, at 53a n.86),

opinion, the district court made it clear that it was not

rejecting the Government’s strategy in either of these

aspects. With respect to the depositions, the district

court denied the Government’s request ‘‘without pre-

judice to a subsequent submission of an appropriately

supported application’’ (App. B, p. 57a n.91). And al-

though the court did not directly address the Govern-

ment’s request for approval of its plan to seek access to

the analyses and indices of private counsel, it indicated

that it does not regard petitioners as having any right

whatever to object to the Government’s obtaining access

to the work product of counsel for other parties in

other litigation (id. at 47a).

At the same time, the district court issued three addi-

tional orders governing discovery in the case, Prétrial

Order No. 10 fixed the discovery obligations of the

United States under Rule 34 in this action to include

all ‘‘agencies, departments, and subdivisions of the

Executive Branch of the United States government”’

but not the FCC or other independent regulatory agen-

cies (App. B, p. 70a). Pretrial Order No, 12 established

a plan for progressively limiting the scope of discov-

ery in the case over an exceedingly short period ending

with an absolute cut-off of all discovery in 18 months

(App. B, pp. 75a-77a), During this period, petitioners

are required to file a series of Statements of Conten-

tions and Proof—including lists of witnesses and docu-

mentary evidence. The first of these statements is due

on January 1, 1979, well prior to the receipt of any sig-

nificant number of documents by petitioners or even the

start of a deposition program, and the second statement,

due only four months later, will substantially bind pe-

titioners with respect to both contentions and prospec-

tive proofs. Thus, while the court’s opinion with respect

to Pretrial Order No. 10 recognizes the importance of

discovery from the Government (App. B, pp. 36a-37a),

petitioners’ ability to obtain and use this material is

severely curtailed by Pretrial Order No. 12.”

Following the district court’s decision and the entry

of its pretrial orders on September 11, 1978, the Gov-

ernment renewed its requests in the MCI and Litton

courts that the protective orders in those cases be

modified so as to permit the Government full access to

all discovery materials in those cases amd to grant the

Government the right freely to share the analyses and

indices of plaintiffs’ counsel in those cases (Letter of

September 14, 1978, from K. Anderson, Esq. to Hon.

John F, Grady; Letter of September 14, 1978, from

K. Anderson, Esq. to Hon. William C, Conner). The

defendants in those cases opposed these requests and,

on October 2, 1978, petitioners filed with the district

court in United States v. American Tel. & Tel. Co.

their motion for reconsideration of Pretrial Order No.

11, as well as other aspects of the court’s decision and

orders of September 11, 1978.”

The remaining order, Pretrial Order No, 13, appointed a

magistrate to ‘‘supervise all pretrial discovery and adjudicate

all discovery disputes’’ (App. B, p. 79a).

'’ Defendants also sought reconsideration of Pretrial Order No,

10 with respect to the exclusion of the FCC and independent

regulatory agencies from the discovery obligations of the United

States under Rule 34 on the ground that such exclusion was

based on @ misinterpretation of this Court’s decision in Hum-

phrey’s Executor v, United States, 295 U.S. 602 (1935), and

would unduly burden defendants’ efforts to obtain essential dis-

covery. And defendants sought reconsideration of the severe

limitations imposed on the seope and time allowed for discovery

in Pretrial Order No. 12, pointing out that that order imposed 4

highly restrictive ‘‘material’’ to the ‘‘issues’’ standard for dis-

The Litton court has not yet acted on the Govern-

ment’s request for modification of the protective or-

der in that case. However, on October 9, 1978, the MCI

court granted the Government’s request and held that

“MCI may forthwith make available to the United

States Department of Justice all discovery materials

obtained in this case’’ and that ‘‘counsel for MCI may

also cooperate with the Department of Justice by fur-

nishing any explanatory material or information which

would be helpful to an understanding of the items pro-

duced”’ (App. D, p. 95a). In reaching that decision, the

MCI court simply brushed aside the possibility of

prejudice arising from petitioners’ reliance on the pro-

tective orders or the Government’s representation that

it would conduct its own discovery (id. at 93a). Relying

heavily upon the decision of the district court here, the

MCT court reasoned that since the Bell System had

been ordered to produce from its own files ‘‘all of the

documents it produced for MCI,” no interference with

Judge Greene’s control over this case would arise from

allowing the Government access to all the discovery

materials, including documents, deposition transcripts,

and exhibits referred to in the MCI depositions, as well

as the indices and analyses of MCI’s counsel (id. at

92a). Although it noted that the court in United States

vy. American Tel. & Tel. Co. had denied the Govern-

ment’s request for access to the deposition transcripts

and documentary exhibits, the MCI court expressed

its view that a ‘‘court should not only encourage the

sharing of discovery in cases with common fact ques-

tions but order it on its own motion even where the par-

ties do not suggest it’’ (id.), and it authorized MCI

covery which is inconsistent with Rule 26(b). This latter problem

was substantially alleviated by the liberal construction placed on

Pretrial Order No. 12 by the district court in its opinion on recon-

sideration (App. C, p. 88a).

to make such material available to the Government

(id. at 95a).

On October 16, 1978, petitioner AT&T, together with

the other Bell System defendants in the MCI case,

filed an appeal from the order modifying the protec-

tive order in that case. Simultaneously, these compa-

nies filed their brief on appeal and a motion for a stay

of the order involved pending appeal. The Government

indicated its desire to file papers opposing that stay

and, by order dated October 18, 1978, it was allowed to

do so. However, the Court of Appeals for the Seventh

Jireuit stayed the effectiveness of the MCI court’s

order until November 6, 1978, and on November 6,

1978, upon consideration of the Government’s opposi-

tion, stayed that order pending expedited consideration

of the merits of the appeal.

Also on October 18, 1978, the district court in United

States v. American Tel. & Tel. Co. denied petitioners’

motion for reconsideration of its September 11, 1978,

opinion and orders in this case (App. C). In a memo-

randum decision in which it relied heavily upon the

October 9, 1978 decision of the MUJ court and adopted

certain findings of fact made by that court, the district

court rejected petitioners’ contentions that the pro-

tective orders in MCI and Litton and the Government’s

express representations that it had no interest in the

discovery in those cases required vacation of Pretrial

Order No. 11.

On October 25, 1978, petitioners filed a petition for

writ of mandamus in the United States Court of Ap-

peals for the District of Columbia Circuit seeking an

order requiring the district court to vacate Pretrial

Order No. 11. Simultaneously, petitioners filed a mo-

tion for a stay of the district court’s Pretrial Order

No. 11, pending disposition of the petition for man-

ES a

damus. By order dated October 27, 1978, the Court of

Appeals directed the Government to file a response to

the petition for mandamus on November 9. However,

on October 31, 1978, before this response was filed, the

Court of Appeals (Bazelon, J. and Tamm, J.), acting

in response to the Government’s opposition to petition-

ers’ motion for a stay, entered an order denying the

petition for mandamus but staying the district court’s

order for 48 hours to permit an application for stay in

this Court (App. A). By order dated November 2, 1978,

Mr. Chief Justice Burger continued the stay of the

Court of Appeals, required the Government to file a

response to the motion for stay pending disposition of

this petition for writ of certiorari by November 7, 1978,

and indicated that the motion would be considered by

the entire Court at its conference on November 10,

1978.

REASONS FOR GRANTING THE WRIT

I. THE WRIT SHOULD BE GRANTED TO DECIDE AN IM-

PORTANT QUESTION OF FEDERAL LAW WHICH HAS

NOT BEEN, BUT SHOULD BE, DECIDED BY THIS COURT.

The question presented by the instant petition is one

of unusual importance, not only from the standpoint

of the need for lawful and fair procedures in United

States v, American Tel. & Tel. Co., but also from the

standpoint of the administration of justice generally.

The Antitrust Division of the Department of Justice

and other government agencies involved in antitrust

enforcement have been attempting for several years

to change the established interpretation of, and prac-

tice under, the Federal Rules of Civil Procedure, so as

to make it possible for these agencies to obtain access

to discovery in private antitrust suits for use in their

own investigations and litigation. At least twelve differ-

ent courts had considered various aspects of the fun-

damental question raised by this new governmental

strategy before the decision of the district court in

United States v. American Tel. & Tel. Co., and each of

those courts concluded that this strategy was improper

and unlawful. Data Digests, Inc. v. Standard & Poor’s

Corp., 57 F.R.D. 42 (S.D.N.Y. 1972) ; In re Coordinated

Pretrial Proceedings in Western Liquid Asphalt Cases,

18 Fed. R. Serv. 2d 1251 (N.D. Cal. 1974); William

Inglis & Sons Baking Co, v. ITT Continental Baking

Co., No, C-71-1906-SW (N.D. Cal.) (Transcript, Sep-

tember 30, 1974); GAF Corp. v. Eastman Kodak Co.,

415 F. Supp. 129 (S.D.N.Y. 1976) ; Zenith Radio Corp.

v. Matsushita Electric Industrial Co., 1978-1 Trade

Cas. 161,961 (E.D. Pa. 1976) ; Wyly Corp. v. American

Tel. & Tel. Co., Civil Action No. 76-1544 (D.D.C.) (Or-

der of July 20, 1978) ; Alcoa v. United States Depart-

ment of Justice, 1978-1 Trade Cas. 161,824 (D.D.C.

1978) ; Martindell v. International Tel. & Tel. Corp.,

25 Fed. R. Serv. 2d 1283 (S.D.N.Y. 1978); United

States v. GAF Corp., 1978-1 Trade Cas. 11 62,015 (S.D.

N.Y. 1978) ; United States v. ARA Services, Inc., 1978-

2 Trade Cas. 1 62,250 (E.D. Mo. 1978); 7'V Signal Co.

of Aberdeen v. American Tel. & Tel. Co., Civil Action

No. 70-6N (D.S.D.) (Order of July 14, 1978); In re

Cement and Concrete Antitrust Litigation, MDL Dkt.

No, 296, Civ. 76-788A PHX CAM (D. Ariz.) (Order,

June 1978).

The views of the courts with respect to the unlawful-

ness of this strategy were unequivocal. In one fre-

quently cited case, Zenith Radio Corp. v. Matsushita

Electric Industrial Co., 1978-1 Trade Cas. 161,961

(E.D. Pa. 1976), for example, Judge Higginbotham

branded the Government’s strategy as a distortion of

the compulsory processes of the courts (td. at 74,069) :

“Here, the USITC seeks wholesale access to the

fruits of plaintiffs’ discovery. Clearly, if the in-

stant actions had not been filed, plaintiffs Zenith

and NUE, against whom the USITC is now pro-

ceeding, would never have acquired the documents

the USITC is seeking. Just as clearly, the proper

discovery route for the USITC ts to proceed di-

rectly against defendants, as if the instant action

had never been filed. This Court will not be a party

to a distortion of the purposes of its compulsory

process.’’ (Emphasis supplied.)”

In yet another case, GAF Corp. v. Eastman Kodak Co.,

415 F, Supp. 129 (8.D.N.Y. 1976), which is perhaps the

leading case on the subject, Judge Frankel condemned

the Government’s new strategy as fraught with the

‘potential for oppression”’ (td. at 132) :

‘*Volunteered resources employed at large private

expense are added to the authorized Government

energies available against Kodak. That this par-

ticular defendant is a corporate giant (assailed by

a plaintiff who is no pigmy) cannot obviate the

unease engendered by the alliance. Congress, de-

ciding authoritatively for all of us, has allocated

resources to law enforcement, both civil and crim-

inal. Sometimes it has given express encourage-

ment to informants and other adjuncts... . It is

‘* Similarly, in a later phase of the same proceeding, Zenith

Radio Corp. v. Matsushita Electric Industrial Co., 1978-1 Trade

Cas. 62,019 (E.D. Pa. 1978), the court reached the same result

when a private party sought to obtain discovery under the same

circumstances, emphasizing that to allow a wholesale appropria-

tion of the fruits of discovery from another proceeding would be

nothing less than ‘‘an abuse of the discovery process’’ (id, at

74,367-68) :

‘*Tt is an abuse of the discovery process to order a defendant

in the instant litigation to produce all documents which he

had submitted in another case under the judicial imprimatur

that those documents when submitted, were judicially pro-

tected as confidential.’’

quite another thing for a court to sanction, and

thus to encourage, the use of private litigants’ de-

vices as reinforcements for federal prosecutors,

whether civil or criminal. The potential for oppres-

sion against enterprises large and small, or against

individuals, is not rendered imaginary by our in-

ability to forecast it with clarity.’’ (Emphasis sup-

plied. )

The district court here simply brushed these decisions

aside. Apparently motivated by the belief that the

long period during which discovery was stayed in this

case requires and justifies unusual short-cut proce-

dures that may make up some of the time lost,"* the

court condoned the Government’s strategy without even

attempting to deal with the considerations that had led

other courts consistently to condemn that strategy.”

“The district court did not, in its opinion of September 11,

1978, rely upon the existence of these stays as a ground for its

decision, However, in denying petitioners’ motion for a stay in an

order issued on October 27, 1978, the court made it plain that the

effect of these stays were very much in the forefront of its con-

sideration of the issne:

‘*(3) The public interest will not be served by the issu-

ance of a stay pending the outcome of the application for

writ of mandamus, the case having been under stay for almost

three years of its four-year history, with a substantial portion

of the stays being related to previous attempts to obtain

extraordinary relief from interlocutory orders.’’

‘© The court distinguished GAF on the ground that ‘‘In GAF, the

government was not engaging in the discovery process as 4 party to

that or any other litigation involving GAF or Eastman Kodak’’

(App. B, p. 45a), without regard to the fact that such a distinction

in no way satisfied Judge Frankel’s reasoning, and without even ac-

knowledging that in other cases in which the Government was in-

volved in ongoing litigation with the party whose documents were

sought, access was denied in decisions based in part upon reliance

on GAF, See, ¢.g., Wyly Corp. v. American Tel. & Tel. Co., Civil

Action No. 76-1544 (D.D.C.) ; United States v. ARA Services, Inc.,

1978-2 Trade Cas. {| 62,250 (E.D. Mo. 1978). Moreover, the distine-

tion relied upon by the district court is patently unsound for it

Petitioners submit that there can be no doubt that

this decision raises an important federal question that

should be resolved by this Court. Indeed, the Govern-

ment itself has publicly stated this view. Thus, when

it was faced with a consistent line of decisions con-

demning its new strategy, the Antitrust Division an-

nounced its intention to take an appeal from one of

these adverse decisions and, if that failed, to seek

legislation from Congress:

‘*. ,. at some point in the right situation, and I

don’t think this [the Zenith Radio litigation] is it,

but in the right situation, we will appeal one of

those things. We will go in and try to aah it, and

appeal it, and, one hopes, win that way. If we do

not win that way, then I think we have to go to

Congress and get legislation.” *

Moreover, when the ramifications of the Government’s

new strategy are considered, it is apparent that review

by this Court is imperative, for that strategy would

change the whole nature of discovery under the Fed-

eral rules and render important provisions of those

Rules unworkable.

The purpose of discovery under the Federal Rules

is to permit a party to prepare its case for trial through

access to relevant documents and facts. Discovery is

not a vehicle to sift through an opponent’s files (and

depose an opponent’s employees) to collect documents

makes no sense whatever to give the Government access to material

only after it files a suit. Such a rule could only stimulate unneces-

sary litigation, since it would permit private plaintiffs to entice the

Government to file suits based upon inflated descriptions of the

kind of evidence that would be available after suit was filed.

1° Statement of John H. Shenefield, Assistant Attorney General,

Antitrust Division, in BNA Antitrust & Trade Reg. Rptr., October

13, 1977, pp. A-2, A-6.

and determine facts for some purpose other than the

action in which the discovery is taken." This simple and

indisputable principle has rarely, if ever, been ques-

tioned; indeed, it forms the foundation of the frame-

work of pretrial discovery under the present Federal

Rules of Civil Procedure and in modern litigation pro-

cedure generally.

The drastic liberalization of the scope of discovery

which was one of the significant milestones in the de-

velopment of modern civil procedure was intended to

assure that all relevant facts for the trial of an action

would be developed and to speed the process of pretrial

discovery by reducing the number of disputes between

litigants about discovery questions. The success of this

liberalization of discovery is now established. Yet this

liberalization of discovery could never have taken

place—and, indeed, it would collapse today—if the

general rule were that a party who was engaged

‘The district courts have repeatedly stressed that ‘‘the pur-

pose of discovery is ‘to enable the parties to prepare for trial with

respect to their own bona fide existing claims’ ’’ (Milsen v, South-

land Corp., 1972 Trade Cas. {| 73,865, at 91,629 (N.D. Til. 1972))

and have entered protective orders to prevent parties from abusing

discovery for the purpose of revealing discovered information for

use in other actions. Thus, in Milsen the court entered a protec-

tive order because ‘‘plaintiffs’ counsel has represented that she

intends to reveal copies of such documents to other franchisees of

defendants, including those who have another action pending

against defendant Southland’’ (id.). Likewise, in Wyly Corp. v.

American Tel, & Tel. Co., Civil Action No, 76-1544 (D.D.C.)

(order of July 20, 1978), the court limited discovery to use in the

action despite the plaintiff’s expressed desire, supported by the

Government, to trade documents with the Government and other

litigants; and in Alcoa v. United States Department of Justice,

1978-1 Trade Cas. {61,824 (D.D.C. 1978), the court granted

Alcoa’s request for a protective order prohibiting the Government

from disclosing any document or information without the consent

of Alcoa or the prior order of the Court.

in discovery from an adversary in one litigated

matter could transmit that discovery, without limita-

tion, to persons who are not parties, for their own use

in their contemplated, threatened, or pending actions

against the common adversary. Such a possibility would

drastically change that common adversary’s calculus

of risks and benefits in deciding whether to cooperate

in, or to resist, pretrial discovery on the enormous scale

which the Federal Rules allow; for if a litigant believes

that expeditious discovery from its files in one case

will spawn a large number of additional cases in which

the discovery previously obtained will create disad-

vantages to it in dealing with other unnamed, and pos-

sibly unknown adversaries, the litigant will drastically

restrict its cooperation in discovery in the first case

brought against it.

The Government’s new strategy of seeking access to

discovery in other litigation for use in its own investi-

gations and litigation not only directly collides with the

purpose of discovery under the Federal Rules but also

would undercut—indeed, render virtually useless—pro-

tective orders issued under Rule 26 to enforce the pur-

pose of the Rules. The district judges responsible for

supervising and trying the vast explosion of complex

litigation filed in the last decade have found it in-

creasingly desirable and necessary to use protective

orders as a means of expediting the conduct of pretrial

discovery in the cases before them and of reducing the

burden which discovery disputes would otherwise im-

pose upon the courts.” Thus, protective orders govern-

“In this type of litigation the fundamental purpose of the

Federal Rules—‘‘to secure the just, speedy, and inexpensive de-

termination of every action’’ (Federal Rule of Civil Procedure 1)

—has been promoted by such orders. As expressed by one seasoned

district judge (In re Coordinated Pretrial Proceedings in Western

ing the use of information learned in discovery have

been employed in virtually every case discussed in this

petition in order to conserve the time and energy of

the court and to expedite pretrial proceedings.

If the Government’s new strategy is permitted to

succeed, protective orders simply will not be able to

perform these functions. No party will be willing vol-

untarily to sacrifice its rights under the Federal Rules

in reliance upon a protective order that can be broken

at will hy the Government. And the district courts will

aah Asphalt Cases, 18 Fed, R. Serv. 2d 1251, 1252 (N.D. Cal.

)):

‘The purpose of this litigation is to determine whether the

defendants are liable to the plaintiffs under the antitrust laws

and, if so, in what amounts. That in itself is difficult enough.

The protective order was issued so that I would be spared the

duty of deciding applications for protective orders during the

course of the discovery. Massive quantities of documents have

been furnished by defendants under the umbrella of the pro-

tective order and I have been spared such problems.’’

The protective orders entered in litigation brought against the

petitioners were designed to serve precisely these ends, The pro-

tective orders in MC/ and Litton recognize that ‘‘the public in-

terest in the prompt and orderly administration of justice requires

that production of the voluminous documents and other discovery

materials involved in the discovery requested in this case proceed

as expeditiously as possible’’ (App. F, p. 108a; App. G, p. 108a)

and establish ‘‘procedures . . . which will expedite the discovery

process’’ (App. F, p. 108a; App. G, p. 108a). Moreover, a protective

order entered by the district court below in United States v, Ameri-

can Tel, & Tel, Co, recognized that ‘‘the need for prompt and

orderly discovery’’ required the establishment of a mechanism by

which the United States and the Bell System could speed pretrial

proceedings relating to the production of documents without waiv-

ing or relinquishing their rights to assert claims of privilege as to

those documents (App. B, p. 53a), Indeed, the district court con-

ceded the value of the protective order in the Government's case

and even relied on that protective order as a basis for expediting

the discovery and review of documents (App. B, p. 52a n.84).

ee a et te —

not be able to rely upon protective orders as a justifi-

cation for compelling the expedition of discovery un-

der circumstances where a party’s full rights cannot

reasonably be protected.”

Thus, the consequences of the district court’s order

upon the administration of justice could well be deva-

stating. Under the district court’s order, regardless of

any provisions of any protective order issued over the

signature of a United States District Judge, and re-

gardless of any representations made by counsel for the

United States or any other litigant, a party facing

massive document production in an antitrust or other

complex case would have no way to protect its rights

other than to produce not a single document, and to

permit not a single deposition question, which exceeded

in even the most minor respect the strictly constrained

boundaries of relevance to the action. This in itself

would drastically slow the discovery process and lead

to delay and substantial additional expense in viola-

tion of the purpose of the Federal Rules of Civil Pro-

cedure. In addition, disputes as to the precise minimum

boundaries of discovery would inevitably arise between

experienced and competent counsel dedicated to pre-

serving the rights of their clients, and these disputes

would all uitimately have to be resolved by the district

courts.

Moreover, the adverse consequences of the district

court’s order on the fair and orderly administration of

1° Of. Chamber of Commerce v. Legal Aid Society, 423 U.S, 1309,

1312 (1975) (opinion in chambers), in which Mr, Justice Douglas

relied upon a protective order as a factor eliminating the possi-

bility of irreparable injury.

justice in the federal courts extends even beyond the

severe impairment of the use of broad protective or-

ders to expedite discovery in large and complex cases.

By effectively circumventing the protective orders en-

tered in the MCI and Litton cases, Pretrial Order No.

11 creates a situation which could impair the control

of the district courts over discovery in many cases and

subject litigants to the danger of having to obey con-

flicting orders from different courts.

Court orders governing the scope of discovery, the

timing of discovery, and the terms and conditions of

discovery could all be indirectly nullified through or-

ders permitting litigants to share discovery materials

from other cases.” Instead of an orderly and fair proc-

ess in which the scope of discovery is determined by

the subject matter in each case and the timing and pro-

cedures for discovery are controlled by the responsible

courts, confusion and unfairness would result with the

discovery rulings of any court being injected into re-

mote proceedings and effectively circumventing the

supervision of the court responsible for the case.” In-

deed, under the procedures sanctioned by the district

wae ee

* For example, Judge Greene’s denial of the Government's mo-

tion in this case to compel the Bell System to produce the depo-

sition transcripts and exhibits from the MC/ case was directly

undereut by the subsequent decision by the MC/ district court

which disregarded the limitations which Judge Greene had im-

posed and permitted MCI to make those same deposition tran-

scripts and exhibits available to the Government, Similarly, if

sharing is freely permitted, a discovery cut-off or subject matter

limitation could be evaded by obtaining the desired materials

through another litigant in another case against the same adversary.

** Although the MCI court relied upon the concept of multi-

district litigation as justifying and requiring its modification of the

protective order in that case so as to permit sharing of the fruits

court, discovery materials obtained from the files of

major corporations could become highly marketable

commodities which would be bought and sold as pre-

packaged lawsuits.” In such circumstances, suits could,

and doubtless would, be brought for the principal pur-

pose of obtaining acecss to corporate files for subse-

quent sale and profit in other litigation and to encour-

age potential plaintiffs to bring additional litigation.

Finally, conflicts between various courts will be

inevitable, as is illustrated by this very case, The docu-

ments which Pretrial Order No. 11 directs petitioners

to produce to the Government were obtained by MOT

of discovery, that concept bears little resemblance to the situation

involved here, Sharing of discovery is permissible in a multidis-

trict context precisely because that whole process is subject to

statutory controls specifically designed to assure fairness to the

parties and control by the courts. Cases are not multidistricted uni-

laterally by one judge who believes there may be common fact

questions, but only after the Judicial Panel on Multidistriet Liti-

gation has made such a determination supported by findings of fact

and conclusions of law and has also accorded the parties an oppor-

tunity by brief or hearing to demonstrate why, in the interests of

justice, cases in which common fact questions do exist should

nevertheless not be multidistricted (28 U.S.C, § 1407), Moreover,

if the Panel determines that multidistrict litigation is appropriate,

the cases are then transferred to une judge who controls discovery

in all the cases and who can assure fairness to the parties, Docu-

ment sharing in other contexts is nothing less than ad hoc multi-

districting without any of these procedural safeguards,

"As the Court is doubtless aware, there is already an active

trade in such materials based largely upon evidence developed at

trial in large antitrust litigation, See, ¢.g., OnLine, April/May

1977 (published by the Computer and Communications Industry

Association), p, 8, If discovery materials are made freely avail-

able to those engaged in this trade, it will doubtless rapidly ex-

pand and substantially contribute to the flood of litigation already

facing the courts.

and Litton under protective orders issued by the re-

spective courts precluding the parties to those cases

from disclosing those documents to anyone not involved

in the preparation or trial of the respective cases. Pe-

titioners are thus ordered to turn over to the Govern-

ment a particular set of documents the very existence

of which is a result of litigation in other courts and

the disclosure of which by the party creating that set

of documents is directly prohibited by orders entered

by those courts. Since Pretrial Order No. 11 operates

directly only upon petitioners’ copies of these docu-

ments, and not upon copies in the possession of private

plaintiffs, no direct conflict with existing protective

orders is involved; but the purpose of the protective

orders is unquestionably undercut. Hence, the currently

effective orders of two different federal courts are

plainly at cross purposes.”

Moreover, by effectively inviting the Government to

expand its request to include ‘‘documents produced im

other private lawsuits’’ in addition to MCI and Litton

(App. B, p. 56a n.91), the court below created the pros-

pect of a similar situation with respect to the outstand-

ing orders of at least two other district courts which

had previously rejected the very scheme sanctioned by

Judge Greene in this proceeding. Thus, in Wyly Corp.

v. American Tel. & Tel. Co., Civil Action No, 76-1544

*° The subsequent order of Judge Grady in the MCI case modify-

ing the protective order in that case to permit the disclosure of the

Bell System documents produced to and copied by MCI does not

avoid this conflict of purpose, even as to those documents, since that

order has been stayed by the Court of Appeals for the Seventh

Circuit pending review. Moreover, Judge Greene specifically stated

in his October 18, 1978 opinion on reconsideration that Pretrial

Order No. 11 was in no way conditioned upon the consent of the

courts involved in MCI and Litton (App. C, p. 87a n.8).

(D.D.C.), another pending antitrust case in which

AT&T is the defendant, Judge Gasch entered a protec-

tive order, over the objection of both Wyly and the De-

partment of Justice, appearing as amicus curiae, which

specifically precludes the sharing of the fruits of dis-

covery by Wyly with the Government and restricts the

use of all discovery materials in that case to ‘‘the prep-

aration or trial of this action’’ (Order dated July 20,

1978). Similarly, in 7'V Signal Co. of Aberdeen v.

American Tel. & Tel, Co., Civil Action No. 70-6N

(D.S.D.), the court entered an order after trial spe-

cifically prohibiting the plaintiff from turning over

discovery material obtained in the course of that litiga-

tion to the Department of Justice (Order dated July

14, 1978).

The approach adopted by the district court in Pre-

trial Order No. 11 threatens both of these protective or-

ders. If Pretrial Order No. 11 is extended to the Wyly

and 7T'V Signal cases—and, under the district court’s

reasoning, there is certainly no basis for believing that

it will not be—petitioners will be in a position of having

to produce to the Government their copies of sets of

documents which the courts in Wyly and 7'V Signal

have expressly found the Government is not entitled

to obtain.” Such cireumvention of the lawful orders of

other federal district court judges, with its attendant

* The protective orders in Wyly and 7'V Signal, like those in

MCI and Litton, apply only to the particular sets of documents

selected for copying by the plaintiffs in thoes cases and do not in

any way impair the right of the Government to obtain, through

an appropriate request, copies of any document in petitioners’

possession that may happen to be among those sets of documents.

There is thus no basis for the district court’s assertion that adop-

tion of petitioners’ position would mean they would be ‘‘immu-

nized’’ from making full discovery available to the Government or

that ‘‘meaningful discovery from defendants in this case must

await the day’’ when all of the other pending actions—including

playing off of one court against another,”* cannot be

tolerated if cases are to proceed smoothly through the

courts in which they are filed.

Il. THE WRIT SHOULD BE GRANTED BECAUSE THE COURT

OF APPEALS HAS SANCTIONED A DEPARTURE BY THE

DISTRICT COURT FROM THE ACCEPTED AND USUAL

COURSE OF JUDICIAL PROCEEDINGS OF A NATURE

THAT WOULD DENY PETITIONERS A FAIR OPPORTUNITY

TO DEFEND THEMSELVES AND THUS CALLS FOR AN

EXERCISE OF THIS COURT’S POWER OF SUPERVISION.

In addition to the principles and considerations dis-

cussed above, this Court should grant the instant peti-

tion in order to consider the impact of the district

— a oe ee eee

MCI and Litton—are concluded (App. C, p, 86a). Petitioners do

not contend—and have not contended—that the existence of a

protective order in one case in any way precludes production of

the same documents in another pending case. Thus, the Govern-

ment can obtain ail of the documents to which it is entitled under

Rules 26 and 34 of the Federal Rules, whether or not some of

those documents have previously been produced to MCI, Litton or

anyone else, Although the district court’s memoranduin on recon-

sideration is permeated with confusion on this point, that court

was plainly aware in its September 11 opinion that petitioners

were not resisting their obligation to produce the documents pro-

duced to MCI and Litton. Thus, in that opinion, the court asserted

that ‘‘defendants here do not .. . dispute that in the normal

course of discovery in this litigation the government would be

entitled to production of . . . documents . . . produced in the

Litton and MCI lawsuits’’ and took the position that it would

‘defeat the purpose of the Rules pear plaintiff in this case

to proceed laboriously, and possibly @t the cost of several years’

delay, to duplicate the document selection process conducted by

the plaintiffs in Litton and MCI when the fruits of that process

are readily available... .’’ (App. B, p. 48a).

*° Such a process is inherent in the Government’s strategy, as is

evident from this case, Before the district court in this case, the

Government claimed it was only seeking ‘‘documents (or micro-

film copies of documents) produced by AT&T to the private plain-

tiffs, and selected for use by the private plaintiffs’ (App. B, p.

Se ee

ee Be

court’s order on petitioners’ ability to prepare a de-

fense in this case, If Pretrial Order No, 11 is permitted

to take effect, the Bell System’s right to reciprocal and

equivalent discovery—and thus its ability to prepare

an adequate defense to the Government’s charges—will

be severely prejudiced.

The microfilm reels that would be produced under

Pretrial Order No. 11 reflect the product of consider-

able effort by counsel for MCI and Litton during the

same period in which petitioners’ counsel were pre-

vented from engaging in discovery in United States v.

American Tel, & Tel. Co. by virtue of the stays that

were entered in that case. The 2.5 million pages of docu-

mentary material contained on those reels were selected

over a long period of time by a large number of lawyers

and supporting personnel from more than 12 million

pages of material produced in response to document re-

quests in those cases. Moreover, the microfilm reels also

inevitably reflect some organization of the materials

involved—again, work done by, or under the supervi-

sion of, lawyers representing MCI and Litton at a time

when petitioners’ counsel were prevented from engag-

ing in discovery against the Government.

— eee oe

42a). Before the MCI court, on the other hand, the Government

suught access to all discovery materials in the possession of MCI,

including deposition transcripts and exhibits and the right to full

cooperation with MCI’s counsel, and argued that the action of the

district court here in granting it access to such documents re-

quired such a result (Letter from K, Anderson, Esq, to Judge

Grady, dated September 14, 1978). Two days after the MCI court’s

order granting such access was stayed by the Court of Appeals for

the Seventh Circuit on October 18, 1978, however, the Government

returned to the district court'in this case for an order under Rule

87 compelling production by the Bell System of the very deposi-

tion transcripts and exhibits which had been excluded from the

scope of Pretrial Order No. 11 and to which access had been

' blocked by the Seventh Circuit’s stay.

If the Government is allowed to obtain all of the

documents produced to plaintiffs in the Litton and

MCI cases, it—and it alone—will avoid the impact of

the stays of discovery entered in United States v. Amer-

ican Tel. & Tel. Co. Thus, the Government will be per-

mitted access to the organized product of more than

four years of discovery before petitioners are allowed

effectively even to begin their discovery. This advantage

violates the principle of reciprocal and orderly dis-

covery adopted in the 1970 amendments to the Federal

Rules—amendments which sought to eliminate the tac-

tical advantage created by the priority practice that was

prevalent before 1970 and which the district court has

in effect resurrected by its order.”* Moreover, in light

*° The Federal Rules of Civil Procedure were amended in 1970 to

eliminate the prior common practice of giving ‘‘priority’’ to the

party who first initiated discovery and to substitute therefor a pro-

vision allowing discovery by both sides to proceed concurrently.

The Advisory Committee found the priority practice to be ‘‘unsat-

isfactory and unfair in its operation,’’ and stated that the better

practice was the one in effect in some jurisdictions where arrange-

ments were typically made for alternation in the taking of deposi-

tions, Proposed Amendments to the Federal Rules of Civil Proce-

dure, 48 F.R.D, 487, 507 (1970). As an example of the practice of

which it approved, the Committee cited Caldwell-Clements, Inc. v.

McGraw-Hill Pub. Co., 11 F.R.D. 156, 158 (S.D.N.Y. 1951), a case

in which the court rejected the priority rule:

‘This Court does not believe that any of the litigants should

be rendered sterile with the necessary preparation of its case

while the other party is conducting its examination, simply

because one got the jump on the other in serving notice,

especially so, where the other under the Rules was in no po-

sition to make a similar move. The Court is of the opinion

that the interests of justice will be served in the present situ-

ation if the examinations proceed apace under the following

te ae for alternate examination periods.’’ (Emphasis sup-

plied,

Similarly, the Manual for Complex Litigation provides that all

parties should ‘‘proceed simultaneously with discovery’’ (§ 0.50)

since ‘‘any other course . . , may prejudice the party first to make

a a

of the pretrial program established by the district

court’s Pretrial Order No. 12, the Government’s four-

year advantage in the discovery in this case constitutes

a threat to petitioners’ right to a fair trial. See War-

dius v. Oregon, 412 U.S. 470 (1973).”"

Pretrial Order No. 12 imposes an 18-month limita-

tion upon discovery in United States v. American Tel.

& Tel. Co., a discovery cut-off which establishes what

the Government itself concedes is an exceedingly tight

schedule. Consequently, Pretrial Order No. 11, and

even more so the MCI court’s order allowing the Gov-

ernment access to all of the discovery materials in

MCI and analyses of those materials by MCI’s lawyers,

affords the Government an effective period of dis-

covery far longer than petitioners will ever be afforded.

Moreover, in plain disregard of the broad discovery

which the Government has had for a substantial pe-

riod,” Pretrial Order No. 12 severely limits the scope

ee oe -_--—— a

discovery or the party whose discovery is deferred’’ (id.). These

precepts have been widely followed by the courts in large anti-

trust cases. See, e.g., Control Data Corp. v. International Business

Machines Corp., 306 F. Supp. 839, 849 (D. Minn. 1969).

** In Wardius v. Oregon, a criminal case involving a state ‘‘no-

tice-of-alibi’’ rule, this Court pointed out that the ‘‘Due Process

Clause .. . does speak to the balance of forces between the accused

and his accuser’’ and held that ‘‘in the absence of a strong show-

ing of state interests to the contrary, discovery must be a two-way

strect’’ (412 U.S. at 474-75). Subsequently, in Exzron Corp. v.

FTC, 411 F, Supp. 1362 (D, Del. 1976), the court, while not de-

ciding whether Wardius applies in civil proceedings, construed the

holding in that case as requiring ‘‘reciprocal discovery’’ on

grounds of ‘‘fundamental fairness’’ (id, at 1371).

*“*In addition to the four-year priority provided by Pretrial

Order No, 11, the Government has had the benefit of extensive

requests for documents served on the Bell System under its civil

investigative demand authority. These requests covered materials

of petitioners’ discovery.” Finally, Pretrial Order No.

12 virtually compels petitioners to begin restricting

their defenses, and the evidence in support of those

defenses, for use at the trial of this case at the outset

of discovery °—-an extraordinary plan consistent with

the Government’s present posture after years of in-

vestigatory discovery, supplemented, as it now devel-

ops, by more than four years of active discovery con-

ducted on its behalf by private plaintiffs in other

lawsuits against the petitioners, but one which was

adopted by the district court without any considera-

tion of petitioners’ inability even to commence discov-

ery in this lawsuit.

dating back to the early 1960’s and many thousands of pages of

material were produced by the Bell System in response (see Memo-

randum for the United States in Support of Motion to Permit

Access to Pretrial Discovery, filed in the MCI case on November

17, 1977, p. 3).

** Prior to its effective modification on reconsideration, Pretrial

Order No. 12 limited discovery almost completely to evidence ad-

missible at trial. Even after clarification on reconsideration, how-

ever, the order severely limits allowable discovery.

” Pretrial Order No. 12 requires the parties to file four succes-

sive Statements of Contentions and Proof, each to become pro-

gressively more specific than the last, with the final statement

required to be a definitive presentation of all of the evidence to be

presented at trial. Petitioners must submit their first two state-

ments well prior either to the start of a deposition program or to

the receipt of any substantial number of documents by the peti-

tioners from the Government, and, under the terms of Pretrial

Order No, 12, those submissions will substantially bind petitioners

with respect to both contentions and prospective proofs (App. B,

p. 77a). Moreover, Pretrial Order No, 12 is designed to restrict

discovery as each Statement is filed, thus compounding the restric-

tions on petitioners’ discovery and effectively limiting many aspects

of that discovery to substantially less than the overall 18-month

discovery period.

ai ie

ee eed

The district court’s only attempt to deal with this

serious prejudice to petitioners—prejudice inherent in

its orders—was its unsupported assertion that petition-

ers would suffer no discovery disadvantage due to the

Government’s access to the documents in MCI and Lit-

ton because they have had corresponding discovery in

those cases (App. B, p. 53a n. 86). Nothing could be

further from the fact. Discovery by petitioners in the

MCT and Litton cases focused almost exclusively upon

the businesses of MCI and Litton and the causes of

their alleged damages during relatively limited time

frames—material which has little relevance to the is-

sues raised by the Government’s complaint, which re-

late to industry-wide conduct over more than thirty

years and to the central role of the Government in the

conduct being attacked.

Indeed, in the principal area of evidentiary over-

lap between the Government’s complaint and the com-

plaints in MCI and Litton—the role of the Government

in the conduct which forms the basis for claims of both

the Government and the private plaintiffs—petitioners

have obtained no discovery whatever. Thus, to date the

Bell System has been unable to obtain, in either the

MCI or Litton cases, discovery from the Federal Com-

munications Commission, the very discovery which is

most essential to petitioners’ defense in the Govern-

ment’s case. In contrast, the discovery which the Gov-

ernment would receive under Pretrial Order No. 11 was

broadly based, and that part of it which is relevant at

all relates directly to the issues raised by the Govern-

ment in the present case—petitioners’ policies and

practices with respect to terminal equipment and inter-

city telecommunications services.

In these circumstances, the prejudicial impact of Pre-

trial Order No. 11 is clear. Moreover, the prejudice

engendered by that order in this case is not uniquely

the product of the particular pretrial orders entered

by the district court. Rather, it is the consequence of

the policy underlying Pretrial Order No. 11 of freely

circumventing protective orders. Thus, the prejudicial

impact of that policy in this case demonstrates in bold

relief the utter unlawfulness of the new litigation

strategy for which the Government has sought and re-

ceived approval from the court below and provides this

Court with an ideal case in which to review that

strategy.

CONCLUSION

In view of the wholly unprecedented nature of the

district court’s order, the seriously disruptive conse-

quences of that order to the administration of justice

under the Federal Rules of Civil Procedure, and the

impact of the order upon the ability of petitioners to

defend themselves against the charges involved in

United States v. American Tel. & Tel. Co., the petition

for certiorari should be granted.

Respectfully submitted,

Haroip 8. Levy

Jim G. KILpatric

LEONARD JOSEPH

Grorce L. SAUNDERS, JR.

195 Broadwa

New York, New York 10007

Attorneys for Petitioners

Of Counsel:

F. Mark GARLINGHOUSE

Grorag V. Cook

WituiAM L. K&rEFAUVER

Dewey, BALLANTINE, BuSHBY,

PaLMER & Woop

SipLey & AUSTIN

November 7, 1978

APPENDIX

eee _——- —

APPENDIX A

UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

September Term, 1978

No. 78-2050

In Re:

AMERICAN TELEPHONE AND TELEGRAPH COMPANY; WESTERN

Exvecrric Company, Inc.; anD Bett TeLepHone Lasora-

roriges, Inc., Petitioners

Civil Action 74-1698

Berore: Bazeton and Tamm, Circuit Judges

Order

(Filed October 31, 1978)

On consideration of petitioners’ petition for writ of man-

damus, of petitioners’ motion for stay pending disposition

of petition for mandamus, and of the response filed to the

motion for stay, it is

OrpereD by the Court that the petition for writ of man-

damus is denied. It is

FurtTHER Orperep by the Court that petitioners’ motion

for stay is granted for a period of forty-eight (48) hours

from the time this order is filed on condition that counsel

submit an appropriate application for relief to the Supreme

Court of the United States.

Per Curiam

APPENDIX B

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLUMBIA

Yivil Action No. 74-1698

Unitep States or America, Plaintiff,

Vv.

American TeverHone & TreLecrapH Company; WESTERN

Evectrric Co., Inc.; Bett TecepnHone Lasoratorigs, Inc.,

Defendants.

Opinion

(Filed September 11, 1978)

The motions before the Court address the Court’s juris-

diction and they raise fundamental issues concerning the

discovery that should govern the future path of this anti-

trust litigation. A recapitulation of the history of this case

will be helpful to an understanding of these issues.

The complaint was filed on November 20, 1974. It alleges

violations of Section 2 of the Sherman Act, 15 U.S.C. § 2,

by the American Telephone and Telegraph Company

(AT&T),' Western Electric Company, Inc. (Western Elec-

* Aceording to the government, AT&T is organized under the

laws of the State of New York, with the stock of Western Electric,

fifty per cent of the stock of Bell Labs, and all or part of the

stock of the 23 Bell Operating Companies as its principal assets.

It is divided operationally into two major divisions: Long Lines

and the General Departments. Long Lines, which has a certificate

of convenience and necessity from the Federal Communications

Commission, provides interstate telephone service, and files tariffs

with the Commission governing the terms, rates, and conditions

of its service. The General Departments provide AT&T, Western

Electric, Bell Labs, and the Bell Operating Companies with vari-

ous kinds of advice and assistance. The General Departments have

no federal or state certificates of public convenience and they file

no tariffs.

tric),* and Bell Telephone Laboratories, Inc. (Bell Labs).’

In sweeping language the complaint alleges that an unlaw-

ful combination and conspiracy exists and has existed for

many years among the defendants and certain co-conspira-

tors (primarily the Bell Operating Companies),‘* designed

to permit AT&T to maintain contivi over Western Electric,

Bell Labs, and the Bell Operating Companies; to restrict

competition from other telecommunications* systems and

carriers and from other manufacturers and suppliers of

telecommunications equipment; and to cause Western Elec-

tric to supply substantially all the telecommunications re-

quirements of the Bell System.

The complaint explains that the defendants are violating

the antitrust laws by various monopolistic practices, includ-

ing the refusal to sell terminal equipment to subscribers of

Bell System telecommunications service, the creation of

obstructions to the interconnection of various carriers with

the Bell System, and the maintenance of a monopolistic

manufacturing and purchasing relationship between West-

ern Electric and the Bell System. It is further alleged that,

* Western Electric is the 12th largest individual corporation in

the United States, with sales of over $7 billion. It owns fifty per

cent of the stock/of Bell Labs, and it has at least one wholly owned

subsidiary. It is not regulated by any federal or state regulatory

authority. See pp. 12-14, infra.

* Bell Labs is owned in equal parts by AT&T and Western Elec-

tric. [t conducts research and development, primarily for AT&T,

Western Electric, and Bell Operating Corapanies, Like Western

Electric, it is not regulated by any federal or state regulatory

authority. See pp, 12-14, infra.

* There are 23 Bell Operating Companies which, along with many

other non-Bell companies, provide primarily intrastate, and some

interstate service, pursuant to certificates of public convenience

and necessity.

* Telecommunications is defined as the electronic and electro-

magnetic transmission of voice, data, and other communications

by wire, cable, microwave radio, and communications satellite.

as a consequence of these practices (1) defendants have

achieved and are maintaining a monopoly of telecommuni-

cations service and equipment; (2) competition in these

areas has been restrained; and (3) purchasers of telecom-

munications service and equipment have been denied the

benefits of a free and competitive market. Among other re-

lief, the action seeks the divestiture by AT&T of all West-

ern Electric stock; the separation of some or all of the

Long Lines Department of AT&T from the Bell Operating

Companies; the divestiture by Western Electric of its man-

ufacturing and other assets sufficient to insure competition

in the manufacture and sales of telecommunications equip-

ment; and such relief against Bell Labs as the Court may

find appropriate.

Defendants’ Answer, and the Court sua sponte, raised

two threshold defenses: (1) that a decree entered in 1956

by the U.S. District Court for the District of New Jersey

(United States v. Western Electric Co., Civil Action No.

17-49 (D.N.J. 1956) ) is res judicata, and (2) that the mat-

ters complained of by the government are within the ex-

clusive jurisdiction of the Federal Communications Com-

mission and thvrefore immune from scrutiny under the

antitrust laws. On October 1, 1976, the Court rejected the

claim of res judicata, and on November 24, 1976, it ruled

that defendants do not possess blanket immunity from anti-

trust liability by virtue of the Communications Act of 1934

or their regulation by the Federal Communications Com-

mission. In rejecting the plea that the FCC has exclusive

jurisdiction over the subject matter of this litigation, the

Court further stated, however, that it might in the future re-

fer particular issues to the Commission under the so-called

doctrine of primary jurisdiction. United States v. Am, Tel.

& Tel. Co., 427 F. Sypp. 57 (D.D.C. 1976, Waddy, J.), cert.

denied, 429 U.S. 1071 (1977), cert. denied, No. 77-1009 (D.C.

Cir. May 27, 1977), cert. denied, 434 U.S. 977 (1977).

Shortly after the filing of the complaint, in November

of 1974, and while these legal issues were being litigated,

the parties began to engage in discovery.’ Defendants served

a request for production of documents upon the govern-

ment, as well as a comprehensive set of interrogatories.

The government, for its part, filed numerous discovery

requests upon defendants and each of the operating tele-

phone companies in which AT&T holds a majority interest,

and it began fairly extensive third party discovery. Dis-

putes arose almost immediately, however, with each side

accusing the other of making unduly broad requests and of

engaging in obstructive conduct in relgtion to opposing

requests.

These controversies became moot in relatively short or-

der, as the course of discovery was stayed pending resolu-

tion of the jurisdictional issues.’ Eventually, and contem-

poraneously with its ruling on these issues, the Court issued

an order vacating the stay that had been in effect for al-

most 22 months,’ and shortly thereafter, pursuant to stipu-

lation of the parties, it issued a number of other pretrial

orders, which established machinery for the recommence-

° As early as 1973, prior to the institution of this action, the

government had issued an extensive civil investigative demand,

and the Bell System in fact produced documents pursuant to that

demand. In addition, according to an attachment to plaintiff’s

response to defendants’ first set of interrogatories, the Justice

Department had a number of interviews and contacts with poten-

tial witnesses prior to the filing of the complaint.

"For that reason, the Court did not become extensively involved

with discovery at that time, and it issued only one order which

dealt expressly with the discovery process, That order (Pretrial

Order No, 1) in essence preserved the status quo with respect to

the existence of documents, by requiring plaintiff to retain and

secure from destruction all documents requested by defendants

from over forty government agencies, and by compelling defend-

ant to retain and secure from destruction all its files which might

be relevant to this action.

® Pretrial Order No. 4.

ment of discovery. Almost immediately upon the entry

of these orders, defendants sought review of the Court’s

ruling on the jurisdictional issues by petitioning both the

U.S. Court of Appeals and the U.S. Supreme Court for

writs of certiorari,’ and during the pendency of these

petitions in the appellate courts, all proceedings in this

Court, including discovery, were again stayed, this time,

with one brief interruption, from January 25, 1977, to

November 28, 1977.**

When the last certiorari petition was denied, and the

stays were dissolved, the parties filed a number of pro-

posed orders concerning pretrial discovery,’ and the Court,

® Pretrial Orders 5-8, inter alia, fixed certain dates for the filing

of interrogatories; set up voluntary procedures governing the pro-

duction of documents by the parties pursuant to Rule 34 and for

Rule 45 discovery relating to non-parties; required discovery re-

quests to be specific; established an explicit definition of ‘‘pro-

tected’’ documents and a comprehensive scheme for treatment of

such documents, including the appointment of a special master to

pass on claims of privilege; and provided that the voluntary Rule

34 discovery procedures were revocable by any party upon fifteen

days’ notice to the other party. In addition, on that date, the

Court issued a ‘‘Stipulation and Order Concerning Documents

in the Possession, Custody, or Control of Agencies other than the

Department of Justice.’’ This document set up a procedure for

the voluntary production of documents from those agencies to

defendants.

§ 1651, but, as noted supra, both courts ultimately declined to

entertain defendants’ petitions,

“The U.S, Court of Appeals issued two stays of the proceedings.

On January 25, 1977, it entered a stay on its own motion until

the matters raised in defendants’ petition could be adequately

briefed and ruled upon, and on August 11, 1977, it entered a

stay on defendants’ motion for the period required to seek cer-

tiorari in the Supreme Court.

* Plaintiff and defendants each submitted five proposed pretrial

orders,

by its order of February 7, 1978, referred the case to Magis-

trate Lawrence 8. Margolis to direct the preparation of a

discovery schedule (see p. 55, infra). At the same time,

it denied two pretrial orders (Nos. 9 and 12) submitted by

defendants which again raised the issue of the Court’s

jurisdiction; denied proposals for pretrial orders (Nos.

10 and 11) which would have dealt in various ways with

documents generated in private antitrust proceedings in

which AT&T is a defendant; and referred to the Magis-

trate defendants’ proposed Pretrial Order No. 13 which

would have established that all agencies and departments

of the United States government are party plaintiffs in

this suit for purposes of discovery. All of these matters,

which are still pending, are discussed in detail below.

Pursuant to the authority vested in him by the Court,

Magistrate Margolis on April 27, 1978, issued two discovery

orders.” Defendants objected to the second of these orders,

and appealed it to the Court (28 U.S.C. § 636(b)(1)(A))

which approved a provision establishing a mechanism for

the voluntary production of documents from government

agencies, but otherwise stayed the effect of the order.*

*? Discovery Order No. 1 ordered defendants to produce docu-

ments requested by the government on February 3, 1977, after

the first Court of Appeals stay had been entered, and also ordered

the Justice Department to commence production of documents

from its own files. Diseovery Order No. 2 established explicit pro-

cedures for discovery of documents generated in private antitrust

suits in which AT&T was a defendant as well as in federal and

state regulatory proceedings involving defendants, and it set up

procedures for voluntary discovery by AT&T from government

agencies other than the Justice Department. The order also pro-

vided for a comprehensive discovery schedule, including the setting

of dates for preliminary orders of proof and for termination of

discovery.

%* The Court also consolidated the issue concerning defendants’

proposed Pretrial Order No. 13 with the appeal from the Magis-

strate’s Discovery Order No. 2 for purposes of disposition.

Since that time, there has been little activity,’® and such

discovery as has been attempted has been the subject of

intense controversy.

The case was assigned to this Court on June 22, 1978.

On July 6, 1978, the parties were directed to file status

memoranda on all outstanding issues, and on August 21,

1978, argument was heard on these matters.'* While these

issues arose in varying procedural contexts, they may con-

veniently be discussed under four headings: (1) jurisdic-

tion, (2) the nature of the plaintiff, (3) the government’s

effort to secure access to documents collected in several

private antitrust suits brought against defendants in other

districts, and (4) the future course of this action, including

the scheduling of proceedings and the authority of the

Magistrate and the Special Masters.

In all of their submissions to this Court, defendants have

vigorously and consistently raised the jurisdictional issue.

** However, on June 29, 1978, the Court, acting pursuant to

Rule 53, F_R.Civ.P., and the still viable Pretrial Order No. 7 to

which the parties had stipulated, appointed Professors Paul Rice

of American University and Geoffrey Hazard of Yale University

as Special Masters to deal with claims of privilege in the discovery

process. The order of reference charged the Special Masters with

making ‘‘findings of fact and conclusions of law with respect to

the matters presented to them by the parties and report expedi-

tiously to the court pursuant to Rule 53(e) ... ;’’ permitted them

to make all arrangements necessary to accomplish those duties;

provided that the decisions of the Special Masters would be subject

to review de novo by the Court upon timely application of the

parties, and directed that any matter upon which the Special

Masters could not agree would be submitted to the Court for

resolution.

” Because of the illness and death of Judge Joseph C. Waddy,

to whom the case had originally been assigned, several motions

were reargued to this Court.

They insist that an irreconcilable conflict exists between

the antitrust laws and the regulatory scheme established

by the relevant statutes,’ that when there is such a conflict

the antitrust laws must give way, and that therefore the

Court lacks jurisdiction over this action. While in many

respects defendants’ contentions constitute rearguments of

matters rejected by Judge Waddy in his order of Novem-

ber 24, 1976, in view of the importance of this issue, and

since a claim of lack of jurisdiction may be raised and en-

tertained at any time (Rule 12(h)(3), F.R.Civ.P.), I have

independently considered the jurisdictional issues. Upon

such reconsideration, I concur with Judge Waddy’s conclu-

sion that regulation by the Federal Communications Com-

mission and state regulatory bodies does not immunize de-

fendants from this antitrust action.

Telecommunications carriers clearly do not enjoy an ex-

press statutory immunity from antitrust enforcement with

respect to the activities here involved. While Congress has

not hesitated in so many words to exempt the practices of

other industries from the antitrust laws,’* and while it has

statutorily exempted some activities of telephone companies

from those laws,’* it has not done so with respect to the

conduct which is the subject matter of this complaint. Like-

wise, defendants have cited nothing in the legislative his-

tory of the statutes regulating the telecommunications in-

dustry which would lead to the conclusion that an antitrust

immunity was contemplated when those statutes were en-

*7 Principally the Communications Act of 1934, 47 U.S.C. § 151,

et seq.

* E.g., insurance (McCarran-Ferguson Act, 15 U.S.C, § 1012) ;

air transportation (Federal Aviation Act, 49 U.S.C. § 1384); ex-

port trade associations (Webb-Pomerene Act, 15 U.S.C. § 62);

ron transportation (Reed-Bulwinkle Act of 1948, 49 U.S.C.

56(9)).

*47 U.S.C. §§221(a) and 222(c)(1) exempt certain FCC-

approved consolidations and mergers of telephone companies.

10a

acted. Thus, if the Court lacks jurisdiction, it could only be

because defendants enjoy an immunity by implication, re-

sulting from an incompatibility between the antitrust laws

and the statutes which regulate the telecommunications in-

dustry.

The problem created by the tension between the antitrust

laws and economic regulation has been long recognized. See,

e.g., United States v. Trans-Missouri Freight Association,

166 U.S. 290 (1879); 2 A. Kahn, The Economics of Regula-

tion: Principles and Institutions 1, 4-5 (1971). Broadly

speaking the antitrust laws are rooted in the proposition

that the public interest is best protected by competition,

free from artificial restraints such as price-fixing and mo-

nopoly.”® The theory of regulation, on the other hand, pre-

supposes that with respect to certain areas of economic

activity the judgment of expert agencies may produce re-

sults superior to those of the marketplace,”' and that for

this reason competition in a particular industry will not

necessarily serve the public interest.** Because of these

divergent objectives, it could be, and has been, argued that

whenever the Congress has established a scheme of regula-

tion through an independent commission, it must be deemed

*° The antitrust laws are a ‘‘comprehensive charter of economic

liberty’’ (Northern Pac. R. Co. v, United States, 356 U.S. 1, 4

(1958) ) whose goals have been described in many ways, from the

advancement of consumer welfare (Bork, The Antitrust Paradox

(1978), pp. 50-66) to the more radical objective of the diffusion

of power in economic decision-making (A. Neale, The Antitrust

Laws of the USA (2d ed. 1970), pp. 427-432; and Mr. Justice

Douglas’ dissent in United States v. Columbia Steel Co., 334 U.S.

495, 536 (1948). See also, P. Areeda and D. Turner, Antitrust

Law, vol. 1, par, 103, et seq. (1978).

*! However, regulatory agencies sometimes seek to achieve their

objectives, at least in part, through the fostering of competition.

*2 This may be so because the market is one of natural monopoly,

in that it is incapable effectively to support more than one firm,

or because of other economic, public policy, or political reasons.

lla

to have determined that the antitrust laws should not apply

to the industry thus being regulated. That, however, is not

the law.

The Supreme Court has repeatedly noted that “repeals

of the antitrust laws by implication from a regulatory

statute are strongly disfavored, and have only been found

in cases of plain repugnancy between the antitrust and

regulatory provisions.” Otter Tail Power Co. v. United

States, 410 U.S. 366, 373 (1973), quoting United States v.

Philadelphia National Bank, 374 U.S. 321 (1963). Accord,

Federal Maritime Commission v. Seatrain Lines, Inc., 411

U.S. 726, 733 (1973); Merrill Lynch, Pierce, Fenner &

Smith v. Ware, 414 U.S. 117, 126 (1973) ; Carnation Co. v.

Pacific Westbound Conference, et al., 383 U.S. 213, 217-8

(1966); Silver v. New York Stock Exchange, 373 U.S. 341,

357-8 (1963); United States v. Borden Co., 308 U.S. 188,

198-9 (1939).

Regulated industries “are not per se exempt from the

Sherman Act” (Georgia v. Pennsylvania R. R. Co., 324

U.S. 439, 456 (1945) ),** and they are not necessarily exempt

even if the conduct complained of in an antitrust context

has been expressly approved by the agency charged with

regulating the particular industry.

In United States v. Radio Corporation of America, 358

U.S. 334 (1959), a decision by the Federal Communica-

tions Commission specifically approving an exchange of

television stations was asserted as a defense to an anti-

*° The antitrust laws apply notwithstanding regulation in such

industries as the production of natural gas (California v. Federal

Power Commission, 369 U.S. 482 (1962)); generation and trans-

mission of electric power (Otter Tail Power Co. v. United States,

supra); national banking (United States v. Philadelphia National

Bank, supra); securities and commodities exchanges (Silver v.

New York Stock Exchange, supra; Ricci v. Chicago Mercantile

Exchange, 409 U.S. 289 (1973)); and broadcasting (United States

v. Radio Corporation of America, 358 U.S. 334 (1959)).

l2a

trust divestiture action. The Supreme Court rejected that

contention, holding, as Mr. Justice Harlan expressed it in

his concurring summary of the Court’s decision (358 U.S.

at 353), “a Commission determination of ‘public interest,

convenience, and necessity’ cannot either constitute a bind-

ing adjudication upon any antitrust issues that may be in-

volved in the Commission’s proceeding or serve to exempt

a licensee pro tanto from the antitrust laws... .” ** See also

California v. Federal Power Commission, 369 U.S. 482

(1962) ; United States v. Philadelphia National Bank, supra;

Otter Tail Power Co. v. United States, swpra.*

These principles have been applied to the area of juris-

diction of the Federal Communications Commission

(United States v. Radio Corporation of America, supra)

and to telephone companies specifically. E.g., Industrial

Communications Systems, Inc. v. Pacific Tel. & Tel., 505

F.2d 152, 156 (9th Cir. 1974); International Tel. & Tel. v.

_——

**If the law were otherwise, the specific statutory immunity

granted, for example, to telephone companies with respect to cer-

tain FCC-approved mergers (see Note 19, supra), would be re-

dundant and unnecessary. See Wilderness Society v. Morton, 156

U.S. App. D.C. 121, 479 F.2d 842, 856 (1973), cert. denied, 411

U.S. 917 (1973); National Railroad Passenger Corp. v. National

Association of Railroad Passengers, 414 U.S, 453 (1974).

*° Otter Tail involved a District Court decree which required an

electric power utility company to remedy its antitrust violations

by establishing certain power interconnections. In response to the

company’s argument that by reason of the Federal Power Act it

was not subject to the antitrust laws, the Supreme Court stated

that, absent a direct conflict between the federal judicial decree

and an order of the Federal Power Commission concerning specific

interconnectious, antitrust jurisdiction was not ousted. ‘‘It will be

time enough to consider whether the antitrust remedy may over-

ride the power of the [Federal Power] Commission under § 202(b)

as, if, and when the Commission denies the interconnection and

ba" ne Court nevertheless undertakes to direct it’’ (410 U.S.

at .

l3a

General Telephone & Electronics Corp., 351 F. Supp. 1153,

1182 (D. Hawaii, 1972), aff’d. in part and rev’d. in part,

518 F.2d 913, 918-20 (Sth Cir. 1975) ; Macon Products Corp.

v. Am. Tel. & Tel. Co., 359 F. Supp. 973 (C.D. Cal. 1973).

Regulated conduct is, however, deemed to be immune by

implication from the antitrust laws in two ” relatively nar-

row instances: (1) when a regulatory agency has, with

congressional approval, exercised explicit authority over

the challenged practice itself (as distinguished from the

general subject matter) in such a way that antitrust en-

forcement would interfere with regulation (Pan American

World Airways v. United States, 371 U.S. 269 (1963) ;

Gordon v. New York Stock Exchange, 422 U.S. 659 (1975) ;

United States v. National Association of Security Dealers,

422 U.S. 694 (1975) ), and (2) when regulation by an agency

over an industry or some of its components or practices is

so pervasive that Congress is assumed to have determined

competition to be an inadequate means of vindicating the

public interest. Otter Tail Power Co. v. United States,

supra, 410 U.S. at 373-78; United States v. National Assoct-

ation of Security Dealers, supra; Silver v. New York Stock

Exchange, supra.

Gordon v. New York Stock Exchange, supra, upon which

defendants heavily rely, and United States v. National Asso-

ciation of Security Dealers (NASD), supra, decided the

same day, are the most recent Supreme Court expressions

on the kind of analysis that must be applied in determining

when an antitrust suit will lie against a member of a regu-

lated industry.

Gordon was an action brought by small investors who

challenged a system of fixed stock exchange commission

rates sanctioned by the SEC. In its decision, the Court re-

affirmed what it had held many times before: that repeal of

26 The two categories are not clearly distinct, and they sometimes

merge in their analysis and application.

l4a

the antitrust laws is not favored; that repeal will be im-

plied only where there is a plain repugnancy between anti-

trust and regulatory provisions and then only to the mini-

mum extent necessary; that in the absence of regulatory

supervision there can be no conflict; and that both the

presence of a pervasive regulatory scheme and the exist-

ence of regulatory action under a specific regulatory pro-

vision are factors in finding a repeal of the antitrust laws

by implication (422 U.S. at 682-689). The Court then went

on to find regulation by the SEC to be such regulatory

action, and section 19(b)(9) of the Securities Exchange Act

of 1934, 15 U.S.C. § 785(b), which grants to the Commission

review power over the fixing of commission rates, to be

such a specific regulatory provision.

: The Court indicated that in making that determination

it was heavily influenced by two factors: (1) by granting to

the SEC permission to approve the fixing of commission

rates after the Court’s decision in United States v. Trenton

Potteries Co., 273 U.S. 392 (1927) (which had held this

kind of rate fixing to be a per se violation of the Sherman

Act), the Congress had made a deliberate choice to give the

agency the authority to supervise self-regulation with re-

spect to commission rate fixing (422 U.S. at 681, 685), and

(2) the Commission had ‘‘taken an active role in review of

proposed rate changes during the last 15 years’’ (422 U.S.

at 685). Thus it concluded (422 U.S. at 681),

The statutory provision authorizing regulation, § 19(b)

(9), the long regulatory practice, and the continued

congressional approval illustrated by the new legisla-

tion, point to one, and only one, conclusion. The Se-

curities Exchange Act was intended by Congress to

leave the supervision of the fixing of reasonable rates

of commission to the SEC, Interposition of the anti-

trust laws, which would bar fixed commission rates as

per se violations of the Sherman Act, in the face of

positive SEC action, would preclude and prevent the

operation of the Exchange Act as intended by Congress

l5a

and as effectuated through SEC regulatory activity.

Implied repeal of the antitrust laws is, in fact, neces-

sary to make the Exchange Act work as it was in-

tended; failure to imply repeal would render nugatory

the legislative provision for regulatory agency super-

vision of exchange commission rates.

Similarly, in NASD, supra, the Court held that vertical

restrictions in secondary market activities designed to

maintain prices in brokerage transactions of specified mu-

tual fund shares were precisely among the kinds of restric-

tions on competition that Congress might have thought

were ‘necessitated by the unique problems of the mutual

fund industry ... (422 U.S. at 729) when it enacted section

22(f) of the Investment Company Act of 1940, 15 U.S.C.

§ 80a-1 et seq. With respect to the alleged horizontal com-

bination and conspiracy to prevent the growth of a second-

ary dealer market in the purchase and sale of mutual fund

shares, the Court found the SEC’s exercise of regulatory

authority to be so pervasive as to confer an implied iramu-

nity. The Court held ‘‘fatal’’ to the government’s complaint

that the SEC had consistently and for nearly 35 years ap-

proved the restrictive agreements to which the activities

the antitrust action sought to curb were ancillary (422 U.S.

733-4), and it found significant the SEC’s urging that its

authority would be seriously compromised if the agree-

ments were deemed actionable under the Sherman Act (422

U.S. at 729).

2" Hughes Tool Co. v. Trans World Airlines, Inc., 409 U.S. 363

(1972), and Pan American World Airways v. United States, supra,

also relied on by defendants in this proceeding, involved similarly

explicit regulatory schemes. In Hughes Tool, the Court found

that the challenged transactions fell precisely within the detailed

scheme for administrative treatment established by Congress in

section 408 of the Federal Aviati~n Act of 1958, 49 U.S.C. § 1378,

and that, inasmuch as the Civil Aeronautics Board had issued an

order under that section approving them, the transactions were

immunized from the antitrust laws by section 414 of the Act, 49

l6a

Thus, the inquiry in this case must focus upon (1)

whether the activities which are the subject of this com-

plaint were required or approved by the Federal Commu-

nications Commission, pursuant to explicit statutory au-

thority, in a way that is incompatible with antitrust en-

forcement, and (2) whether these activities are being so

‘‘pervasively’’ regulated that an immunity from antitrust

action must be assumed. In my judgment, these questions

must be answered in the negative.

We do not start with a clean slate, neatly balancing

whether there should or should not be antitrust jurisdiction.

The complaint alleges serious violations of the Sherman

Act, and if the government is able to prove these allega-

tions, it follows that a substantial violation of that funda-

mental charter of American economic life has occurred. The

burden is on defendants to demonstrate that they or their

practices were intended to be exempt or immune from the

broad mandate of the Act. To carry that burden, defendants

rely on the Supreme Court decisions discussed above which

found certain companies to be immune from the antitrust

laws based upon a degree of regulation by government

agencies which, as a practical matter, left them no choice

but to follow the regulatory schemes and orders, But such

regulation is not present in this case.

At the outset, it must be noted that two of the defendants

in the instant action, Western Electric and Bell Labs, are

not subject to direct regulation by the Federal Communi-

cations Commission at all. Defendants’ assertion that ‘‘each

of the general charges of alleged conduct... relates to mat-

ters which are within the jurisdiction of the regulatory

agencies’ (Status Memorandum, p. 5), is contradicted by

U.S.C. § 1384, Similarly, in Pan American Airways, the Court

held that section 411 of the Federal Aviation Act of 1948, 49 U.S.C.

§ 1381, had granted to the CAB the very jurisdiction (over unfair

competition in air traffic) that was at the heart of the antitrust

complaint.

17a

the more precise and more accurate statement of the Fed-

eral Communications Commission (Memorandum as amicus

curiae, filed December 30, 1975, pp. 21-25) that it ‘‘has no

direct regulatory responsibility for . .. Western Electric

and Bell Laboratories,’’ although it may indirectly affect

them through its determination of the reasonableness of

expense and rate base items claimed by AT&T. See Smith

v. Illinois Bell Telephone Co., 282 U.S. 133 (1930). Legisla-

tive history over the years shows that congressional concern

over AT&T’s intra-corporate structure never matured be-

yond directing the Federal Communications Commission to

conduct a study. Once that study was completed (Federal

Communications Commission, Report on the Investigation

of the Telephone Industry in the United States, H.R. Doc.

No. 340, 76th Cong., lst Sess. (1939)), Congress took no

further action, nor was the Commission given authority to

take further action.

Consequently, it has been the Federal Communications

Commission’s consistent position that it has no authority to

alter, regulate, or otherwise to interfere with AT&T’s in-

ternal structure, including its relationships with Western

Electric and Bell Labs. See Federal Communications Com-

mission, Report on the Investigation of the Telephone In-

dustry in the United States, supra, at 487-589; Consent De-

cree Program of the Department of Justice, Hearings be-

fore the Antitrust Subcommittee of the House Committee

on the Judiciary, 85th Cong., 2d Sess. Part II-Vol. IT

(1958) ;** Consent Decree Program of the Department of

Justice, Hearings before the Antitrust Subcommittee of the

House Committee of the Judiciary, 85th Cong., 2d Sess.

28 A letter dated November 30, 1955, from Chairman George C.

McConnaughey of the Federal Communications Commission to the

Attorney General, introduced at the 1958 hearings, states that ‘‘the

operations of Western, including its prices and profits, are, of

course, not subject to direct control by any regulatory authority.’’

Consent Decree Program of the Department of Justice, supra,

vol. IT at 2233-34.

18a

Part II-Vol. III (1958) ;* Antitrust Problems of the Space

Satellite Communications System, Hearings before the Sub-

committee on Antitrust and Monopoly of the Senate Com-

mittee on the Judiciary, 87th Cong., 2d Sess. 281 (1962) ;*°

AT&T Charges for Interstate Telephone Service (Phase

II) 64 FCC.2d 1 (1977), pp. 15, 18, 20, 27; and see /nter-

national Tel. & Tel. Co. v. General Telephone & Electronics

Corp., 518 F.2d 913 (9th Cir. 1975). Beyond broad general

statements, defendants have cited nothing to the contrary.

In view of this history, it is difficult to see on what basis

Western Electric, Bell Labs, or the relationships involving

them, could be considered immune from the antitrust laws

on any theory.

AT&T’s Long Lines Department and the Bell Operating

Companies are in a somewhat different posture, for they

are subject to FCC regulation in a variety of ways, and the

Commission has to a substantial extent exercised this au-

thority. See, e.g., Specialized Common Carrier Services,

29 FCC.2d 870, 31 FCC.2d 1106 (1971), aff’d. sub nom.,

Washington Utilities and Transportation Commission v.

Federal Communications Commission, 513 F.2d 1142 (9th

Cir. 1975), cert. denied sub nom., National Association of

Regulatory Utility Commissioners v. Federal Communica-

tions Commission, 423 U.S. 836 (1975); MCI Communica-

tions Corp. v. Am. Tel, & Tel. Co., 496 F.2d 214 (3rd Cir.

** Bernard Strassburg, Chief of the Telephone Division of the

Federal Communications Commission, testified in those hearings

that the Commission lacks the authority to directly regulate West-

ern Electric. Consen’ Necree Program of the Department of Jus-

tice, supra, vol. III at 4446, 3543-44.

*° Chairman Newton N. Minow of the Federal Communications

Commission testified before the Committee in 1962 that ‘‘we have

no statutory authority to regulate the prices charged by Western

Electric for its equipment sales to the American Telephone &

Telegraph Co.’’ Antitrust Problems of the Space Satellite Com-

munications System, supra at 283.

19a

1974). But there is nothing in either the Communications

Act or the related statutes to suggest that, with respect to

the activities and relationships” which are significant to

this case, Congress intended to vest in the Federal Commu-

nications Commission such pervasive regulatory authority

as to override antitrust considerations, nor is there any-

thing to indicate that the antitrust laws are incompatible

with the operation of these regulatory statutes as intended

by the Congress.

‘The situation here is thus considerably different from

that presented in Gordon v. New York Stock Exchange,

supra. In Gordon the Supreme ‘Court said that the anti-

trust laws could not be applied where the Congress had

given the Securities and Exchange Commission exclusive

jurisdiction to supervise the fixing of rates of commission

for transactions on the stock exchanges and where the Se-

curities and Exchange Commission had in fact exercised

that jurisdiction. By contrast, the Federal Communications

Commission has not been granted exclusive jurisdiction

over what may be called the interconnection areas,” but by

* .g., relationships with private mobile radio systems, radio

common carriers, miscellaneous common carriers, specialized com-

mon carriers, and manufacturers and sellers of termina] equip-

ment for communications systems,

**The distinction is significant inasmuch as Gordon, and its

companion case United States v. National Association of Security

Dealers, represent the outer limits of the Supreme Court’s appli-

cation of the implied immunity doctrine, Other Supreme Court

law is even more hospitable to the antitrust laws and less apt to

imply an immunity,

** In addition to certain claimed violations with respect to manu-

facturing, research, and sales and purchases of the fruits of manu-

facturing and research, much of this suit involves defendants’

alleged failure to allow various types of entities to interconnect.

20a

statute shares that jurisdiction with the courts. 47 U.S.C.

§ 406."

More importantly, the regulatory charter of the Com-

mission itself, while broad in many respects, is at the same

time relatively weak. For example, telephone tariffs—a pri-

mary regulatory tool—become effective upon filing by the

carrier after 90 days notice without the necessity for Com-

mission serutiny or approval (47 U.S.C. § 203(b)(1)); a

carrier may file a new or revised tariff at any time (47

U.S.C. § 204) ; and the power of the Commission to suspend

a tariff is limited to a five-month maximum (47 U.S.C.

§ 204). The weakness of the regulatory scheme is reinforced

by a volume of tariff filings beyond the capacity of the

Commission to handle. During the 12-month period from

September 1974 through August 1975, the Commission re-

ceived 1,371 tariff filings totaling 11,491 pages, and because

of this volume, it was able to investigate only a small per-

centage of the tariffs. Thus, it is not surprising that the

Commission has concluded that ‘‘rate filings generally pro-

ceed from the carrier’s independent judgment... .’’ Mem-

orandum of FCC, filed December 30, 1975, pp. 19-20.

The statutory weaknesses, the general inability of the

Commission to scrutinize all the tariffs submitted to it, and

perhaps other factors (¢.g., the lack of adequate resources

effectively to regulate AT&T, a corporate giant),” have

** Section 406 provides that ‘‘the district courts of the United

States shall have jurisdiction ... [of allegations of] any violation,

by a carrier subject to this chapter which prevent the relator from

receiving service in interstate or foreign communication by wire

or radio, or in interstate or foreign transmission of energy by radio,

from said carrier at the same charges, or upon terms or conditions

as favorable as those given by said carrier for like communication

or transmission under sim’ + conditions to any other persons.’’