Petition — American Telephone & Telegraph Co. v. MCI Communications Corp.

| UL C8 dix

2 3 rm 29 7 ALEXAN RL SLEWVAS,

No. 82- elas

In The

Supreme Court of the United States

October Term, 1982

AMERICAN TELEPHONE AND TELEGRAPH

COMPANY,

Petitioner,

\

MCI COMMUNICATIONS CORPORATION and

MCI TELECOMMUNICATIONS CORPORATION,

Respondents.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES

COURT OF APPEALS FOR THE SEVENTH CIRCUIT

PETITION FOR WRIT OF CERTIORARI

Howarp J. TRIENENS*

Grorat L SAUNDERS, JR

Of Counsel THroporRe N MILLER

Jim G. Kir patee

RAYMOND BRENNER

Siptty & AUSTIN

One birst National Plaza

€ hicago, lino 60603

(412) 8453-7000

Dated July 8, 1983 Counsel for Petitioner

*Counsel of Record

i

QUESTION PRESENTED

Whether, under the Due Process Clause, the Seventh Amend-

ment and the rule of Gasoline Products Co., Inc. v. Champlin

Refining Co., 283 U.S. 494 (1931), a court of appeals, in reversing

a treble damages antitrust judgment and specific jury findings of

liability, may affirm closely related findings on liability and limit

a retrial to damages where: (a) the reviewing court acknowledged

the “possibility” that the jury findings that were affirmed had

been “tainted” by the jury findings that were reversed; and (b) the

jury findings affirmed are so vague that damages cannot reason-

ably be assessed on the basis of those findings, without considera-

tion of substantial evidence relating to liability.

ii

STATEMENT REQUIRED BY RULE 28.1

In addition to wholly-owned subsidiaries, petitioner American

Telephone and Telegraph Company (“AT&T") has ownership

interests in The Southern New England Telephone Company,

Cincinnati Bell, Incorporated and the Cuban American Tele-

phone and Telegraph Company.

TABLE OF CONTENTS

QUESTION PRESENTED o.cccccsccsesicsvecces

STATEMENT REQUIRED BY RULE 28.1.......

TABLE OF AUTHORITIES. .ccsccecsscesssecves

OPTIONS BEOW oc ccc s ccvcswarseveccesvercsns

FUR TSO LHe hese ced i anes Kaeween sven cceanes

CONSTITUTIONAL AND STATUTORY PROVI-

UUPONE CEN VOM TEAR: nb Vb cence denned eset tens bawe

SIATEMENC CH TES CARE vic ceeetsccesducss

A.

B.

an

The Factual Background of This Case .......

The Proceedings in the District Court .......

The Court of Appeals’ Decision ..........4.

REASONS FOR GRANTING THE WRIT .......

The Standard Applied By The Court Of Ap-

peals To Determine Whether The Jury Findings

That Were Affirmed Were Tainted By The Jury

Findings That Were Reversed Cannot Be

Reconciled With Champlin Or With Other Cir-

cuits’ Interpretation Of Champlin ......065.

. A Retrial Limited To Damages Is Directly Pre-

cluded By Champlin Because The Jury Findings

On The Remaining Interconnection Charges

That Were Affirmed Are So Vague That

Damages Cannot Be Assessed On The Basis Of

BOOS PUNIOEE s ikc cd ivcceececneteceacue’s

The Court Of Appeals’ Decision Will Under-

mine The Administration Of Justice.........

CONC LASSGNS 606 Cuvee ce sea saeesnseaennean wee

APPENDIX’

Appendix A Opinion of Court of Appeals for the

I CO na a kas e eee eases

Appendix Bo Order of Court of Appeals Denying Pet

*The Appendix to the Petition for Writ ot Certioran (App

tions for Rehearing, With Suggestions bor

a Perer ry rr errr

separately bound

oauwWwnN Nl

20

2Wa

) has been

iv

TABLE OF AUTHORITIES

Cases

Pages)

Ajax Hardware Manufacturing Corp. v. Industrial

Plants Corp., 569 F.2d 181 (2d Cir. 1977) ......00. 10

Bernstein vy. Universal Pictures, Inc., 79 F.R.D. 59

RL ORR nan ys ose es sha 2 esse ac an 19

Brotherhood of Locomotive Firemen & Enginemen v.

Bangor & A.R.R., 389 U.S. 327 (1967) .......005- Ss

Camalier & Buckley-Madison, Inc. v. Madison Hotel,

Pas Dae esa Ger Ce. Cir, 1987S) ov vcccsicccses 10

Colgrove v. Battin, 413 U.S. 149 (1973) wo... 60.0 ne 9

Eichel vy. New York Central R. R., 319 F.2d 12 (2d Cir.),

rev'd on other grounds, 375 U.S. 253 (1963) ...... 10

E. 1, DuPont de Nemours & Co., v. Berkley & Co., Inc.,

Soe £20 1247 (Ot Cie: 1980) occ ccdccccncceves 17

Fury Imports, Inc. v. Shakespeare Co., 554 F. 2d 1376

ce og ¢ Lae err ras rer 16

Gasoline Products Co., Inc. v. Champlin Refining Co.,

PERC OCNN OE ee ccbieehiceinckoheeeakaacs passim

Geffen v. Winer, 244 F.2d 375 (D.C. Cir, 1957). 0.0... 13

Hamilton-Brown Shoe Co. v. Wolf Bros, & Co., 240 U.S.

SUTURE Raveue kek cae M ease vie wewns balks nf

Hayes v. Solomon, 597 F.2d 958 (Sth Cir. 1979), cert.

Gabe, GAG UT: SOTE CIGUO) cg wi Sic nc teuccccner 11

ILC Peripherals Leasing Corp. v. IBM Corp., 458 F.

Supp. 423 (N.D. Cal. 1978), aff'd on other grounds,

636 F.2d 1188 (9th Cir, 1980), cert. denied, 452 U.S.

EEEEOY WeVE VU borin ones Un bap eh keke oni 19

In re Japanese Electronics Products Antitrust Litigation,

BFE Pee Se Re EL BOOOD Kacncnwecndinn coee

Johnson v. Greer, 477 F.2d 101 (Sth Cir. 1973).......

Land v. Dollar, 330 U.S. 731 (1947) wc... cece ccc cee

Larson v. Domestic & Foreign Commerce Corp., 337

SA UC ETOD 0606s UNSC ek vara Nan du kpaseuawan

EMER CSASASY sae ScuwsnwbeUses ca@bakenepesenen

Mertens v. Flying Tiger Line, Inc., 34) F.2d 851 (2d Cir. ),

cert. denied, 382 U.S. 816 (1965) ....... cece eeees

Northeastern Tel. Co. v. American Tel. & Tel. Co., 65)

F.2d 76 (2d Cir. 1981), cert. denied, 455 U.S. 943

Cae 6:0 tol bts wi hee Caan eee eka eee

Panhandle Eastern Pipe Line Co. vy. Michigan Public

Service Comm'n, 341 U.S. 329 (1951)... ccc cece ee

Parker v. Wideman, 380 F.2d 433 (Sth Cir, 1967) ....

Romer v. Baldwin, 317 F.2d 919 (3d Cir. 1963) 2.2...

Simmons v. Fish, 210 Mass. 563 (1912)........000065

Southern Pacific Communications Co. v. American Tel

& Tel. Co., 556 F.Supp. 825 (D.D.C, 1983)........

Specialized Common Carriers, 29 F.C.C. 2d 870 (1971),

aff'd sub nom. Washington Utilities & Transportation

Comnr'ny, FOC, S13 F.2d 1142 (9th Cir. ), cert. denied,

GES RP COC IDV OD 6 iw eek ca wd be ccaensnweeu

Thompson v, Camp, 167 F.2d 733 (6th Cir.), cert. denied,

SFR ak: CEP UPPED is nwa scene «waned waniaeeaw wan

Vaglev. Pickands Mather & Co., 611 F.2d 1212 (8th Cir.

1979), cert. denied, 444 U.S. 1033 (1980) 2.2.0.0...

Vizziniv. Ford Motor Co., 869 F.2d 754 (3d Cir. 1977)...

Williams v. Slade, 43) bk.2d 608 (Sth Cir, 1970)......

Pages)

19

vi

Miscellaneous

Pageis)

Burger, Remarks to Meeting of Conference of Chief Jus-

tices (August 7, 1979) (U.S. Supreme Court Public In-

a) eR Eyer re er eee rte Tree Oe 19

Note, The Right toa Jury Trial in Complex Civil Litiga-

fon, 92 TIARY. ©. REV. SPB CIGTS) once vcctvanars 19

R. STERN & E. GRESSMAN, SUPREME COURT PRACTICE

RY PPE kart bb eae eR PRS OR ah ao reo eee 7]

No. 82-

In The

Supreme Court of the United States

October Term, 1982

AMERICAN TELEPHONE AND TELEGRAPH

COMPANY,

Petitioner,

V.

MCI COMMUNICATIONS CORPORATION and

MCI TELECOMMUNICATIONS CORPORATION,

Respondents.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES

COURT OF APPEALS FOR THE SEVENTH CIRCUIT

OPINIONS BELOW

The opinion of the Court of Appeals (App. A, 2a), as modified

by its order of April 11, 1983, denying rehearing, is not yet

officially reported. The opinion is unofficially reported at 1982-83

Trade Cas. ©65,137. The order of the Court of Appeals denying

petitions for rehearing (App. B, 240a) is not reported. The Dis-

trict Court did not directly address the questions presented, how-

ever, its instructions to the jury and the jury's special verdict are

an Appendix to the Court of Appeals’ opinion (App. A, 210a-

238a).

2

JURISDICTION

The judgment of the Court of Appeals was entered on January

12, 1983. Timely petitions for rehearing, with suggestions for

rehearing en banc, were denied on April 11, 1983 (App. B, 240a).

The jurisdiction of this Court is invoked pursuant to 28 U.S.C.

§1254(1).

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED

United States Constitution, Amendment V:

“No person shall be . . . deprived of life, liberty, or proper-

ty, without due process of law... .”

United States Constitution, Amendment VII:

“In Suits at common law, where the value in controversy

shall exceed twenty dollars, the right of trial by jury shall be

preserved... .”

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

“Every person who shall monopolize... any part of the

trade or commerce among the several States . . . shall be

deemed guilty of a felony... .”

Section 4 of the Clayton Act, 15 U.S.C. §IS:

“Any person who shall be injured in his business or proper-

ty by reason of anything forbidden in the antitrust laws

may sue therefor in any district court of the United States...

and shall recover threefold the damages by him sustained

STATEMENT OF THE CASE

This petition presents a narrow, recurring, and vitally impor-

tant question of procedure and practice for jury trials in civil ac-

tions. Following a jury trial of this complex antitrust case, the

Seventh Circuit here reversed tindings that were critical to the

judgment entered against petitioner (“Bell”) on the ground

that the findings were unsupported as a matter of law. However,

the Seventh Circuit affirmed other, related liability findings and

remanded the case for a retrial limited to such damages as were

sustained by respondent (“MCI”). The court reasoned that the

jury's liability findings it affirmed had not been “so clearly

tainted” by the liability findings it reversed as to require a new

trial on the remaining liability issues and that it would be possible

for a second jury, on retrial limited to damages, to ascertain what

conduct the first jury had found to be unlawful.

This decision flatly conflicts with the decisions of this Court

and virtually every Court of Appeals. Where, as here, there is a

“possibility of spillover” such that the jury’s liability findings

which were affirmed could have been tainted by findings which

were reversed, a retrial extending to liability on the issues remain-

ing is mandatory. Similarly, where, as here, the first jury's liabili-

ty findings which were affirmed are so imprecise that a second

jury may not assess damages, and there are questions of mitiga-

tion that will require the introduction of substantial liability

evidence before damages may be assessed, a retrial limited to

damages is improper.

A. The Factual Background of This Case.

The issues presented to the jury in this case grow directly out of

controversies that arose following a dramatic change in the

regulatory policies of the Federal Communications Commission

that began to evolve in 1971 with the decision in Specialized

Common Carriers, 29 FCC 2d 870 (1971). aff'd sub nom

Washington Ltilities & Transportation Commnv FOC, S13

F.2d 1142 (9th Cir), cert, demed, 4230S 846 (1975) In that

decision, the FCC authorized, for the tirst time, the general entry

of new carriers like MCT to provide “specialized” private line ser

vices in competition with ATA T The decision, however, did not

detine the specialized services in which it authorized the new

carriers to engage. nor did it define the obligations which AT&T

4

and the other established carriers were expected to assume in

relation to the new carriers. In this respect, the Specialized Com-

mon Carriers decision was, as the Court of Appeals recognized,

“hardly a model of clarity” (App. A, 12a); indeed, the trial court

characterized it as an “abomination” and “one of the worst exam-

ples of legal draftsmanship I have ever seen” (App. A, 12a n.13).

The meaning of the Specialized Common Carriers decision im-

mediately became a source of controversy within the industry.

The early disputes involved interconnection. These interconnec-

tion controversies were of two broad kinds. The first related to the

scope of the “specialized services” the new carriers were autho-

rized to provide and the extent of AT&T's corresponding obliga-

tion to provide interconnections for such services to these carriers.

This issue arose in the context of whether AT&T was required to

provide MCI access to Bell switching machines to enable MCI to

offer services known as FX (Foreign Exchange) and CCSA

(Common Control Switching Arrangements). The second related

to the determination of a fair price for the local interconnections

(known as local loops) provided by Bell to enable MCI to reach

the premises of its customers.’

Questions also arose as to the pricing policies that AT&T

would be permitted to pursue with respect to services competi-

tive with those offered by MCI and other specialized carriers.

These pricing controversies were also of two kinds. The first re-

lated to the rate level and rate structure of an AT&T tariff known

as Telpak, which provided large quantities of private line chan-

nels to business and government users at reduced rates and had

been subject to continuous FCC investigation since being in-

troduced in 1961. The second related to the rate level and rate

Specialized carriers such as MCI operated microwave radi systems

that transmitted communications between terminals in the cities the

carriers served In order to complete the communications from their ter-

minal to their customers, the specialized carriers had to use Bell's local

facilities (App A. 88a)

+

structure of a tariff known as Hi/Lo, which was AT&T's compe-

titive response to MCI’s entry and which, upon taking effect in

1974, deaveraged AT&T's single-channel private line rates to

conform more closely to costs.

B. The Proceedings in the District Court.

MCI filed the complaint in this case on March 6, 1974, alleging

violations of Sections | and 2 of the Sherman Act. At that time,

none of the controversies described above had been definitively re-

solved by the FCC. The complaint was broad, alleging a course of

illegal monopolization that consisted of 22 separate charges, all of

which fell into one of the following categories: (1) a pattern of al-

legedly predatory pricing, including the Telpak and Hi/Lo tariffs;

(2) the imposition of allegedly excessive and discriminatory prices

for local loops MCI needed to offer its customers a complete end-

to-end service; and (3) the imposition of allegedly unlawful re-

strictions upon MCI's right to obtain certain kinds of intercon-

nections, including FX and CCSA.

MCI's case against AT&T was tried and submitted to the jury

as a single course of conduct to monopolize, in which the same anti-

competitive intent was alleged to have motivated AT&T's action

with respect to both interconnection and pricing. MCI consistently

claimed throughout the presentation of evidence and in its dam-

ages study = that all of the charges were illustrative of a single an-

ticompetitive intent (see, e.g. App. A, 146a-147a). Likewise, in

responding to MCI’s case, AT&T presented what was essentially

a unitary defense, defending the charge of unlawful interconnec-

tion refusals on the same theory as tt defended the Hi/Lo tariff: in

both instances, ATAT pointed to its nationwide averaged rate

structure and the threat of creamskimming

This Court recognized the inevitable, adverse effect of selective,

specialized competition directed at the “cream” of the business of a gen-

eral service public utility in Panhandle bastern Pipe Line Co vo Michi-

Footnote continued on next page

6

Atthe close of MCI’s case, the District Court dismissed seven of

the original 22 charges, but the remaining fifteen ultimately went

to the jury. MCI asked that the case be submitted under a general

verdict on the theory that a single violation was alleged, but the

trial court submitted the case pursuant to a special verdict requir-

ing the jury to answer several separate questions. Nevertheless,

the court directed the jury to consider “each distinct aspect of

AT&T's conduct... in the context of all AT&T's conduct” (Inst.

44, App. A, 231a), and instructed the jury that the test to be ap-

plied to each charge submitted was AT&T's subjective intent.

Moreover, with respect to antitrust injury, the verdict form did not

relate the jury's finding to the specific charges of misuse of mo-

nopoly power: instead, the jury was instructed to find injury from

“any one or more of the defendant's acts” (Int. 6, App. A, 238a).

With respect to the fifteen specific conduct charges, the jury

found in AT&T's favor on five, including the charges that the

Telpak tariff was predatory and that local loop prices were unlaw-

ful (App. A, 2. a-238a). The jury found in MCI's favor on two

charges related to the Hi/Lo tariff and eight charges related to

the interconnection disputes (id.). The jury found that MCI had

been injured as a result of “one or more of defendant's acts” and

found damages in the amount of $600 million. The District Court

entered judgment for trebled damages of $1.8 billion.

C. The Court of Appeals’ Decision.

On cross-appeals, the Court of Appeals upheld the jury's

finding in AT&T's favor with respect to Telpak and, in addition,

(Footnote continued from previous page)

gan Public Service Comm'n, 341 US 329 (1951). In upholding an

order of the Michigan Public Service Commission precluding selective

competition by an interstate gas supplier, the Court reasoned (341 U.S.

at 334)

“Appellant asserts a right to compete for the cream of the volume

business without regard to the local public convenience or necessity.

Were appellant successful in this venture, it would no doubt be

reflected adversely in Consolidated’s overall costs of service and its

rates to Customers whose only source of supply is Consolidated.”

set aside the jury's findings and rendered judgment for AT&T on

the charges involving the Hi/Lo tariff. Thus, the Seventh Circuit

eliminated entirely the charge that AT&T engaged in predatory

pricing. The court also upheld the jury's finding that Bell's local

loop prices were lawful, And it rejected MCI's damage study as

being based upon unsupported assumptions regarding MCI's

average revenues, costs, and volume of business.

At the same time, however, the court upheld six of the eight

jury findings against AT&T with respect to interconnection, The

court remanded the case for a new trial limited to damages on

those interconnection charges, stating that “[a] new trial on

liability is unwarranted since this court has affirmed liability for

monopolization on the basis of most of AT&T's actions involving

interconnection with MCI” (App. A, 1 54a).

In response to AT&T's argument in its petition for rehearing

that the partial retrial order conflicted with this Court's decision

in Gasoline Products Co., Inc. vy. Champlin Refining Co., 283

U.S, 494. (1931), the Seventh Circuit modified its earlier decision

to add several footnotes, two of which are relevant here (App. B,

24la-242a),

hirst, the court addressed ATA T's argument that “the intent

evidence presented on the predatory pricing claims, which we

reject, Was inextricably interrelated with the intent evidence ap-

plicable to the findings on the interconnection claims which we

approve’ and thus that those predatory pricing findings “neces-

sarily tainted” the interconnection findings (App. B, 2414). The

court rejected this argument as based upon “unfounded specula-

tion about the jury's mental processes,” and, even though it recog-

nized the “possibility of spillover among claims,” held that “the

jury's determination that Hi-Lo was predatory did not so clearly

taint its ability to decide the interconnection claims” (id.)

“On the face of things, because reductions in price, unlike

the denial of interconnections, may be pro-competitive as

8

well as anticompetitive, we think the ‘intent’ relevant to pric-

ing is not necessarily closely linked to the ‘intent’ relevant to

refusals of interconnection. Further, the jury itself exonerat-

ed AT&T on the important Telpak pricing claim while

finding monopolistic intent in the denials of interconnection,

Particularly in the context of this unusual case, we believe we

should balance the possibility of spillover among claims

against the prejudice to the prevailing party in the overturn-

ing of the jury's findings. The jury's determination that Hi-

Lo was predatory did not so clearly taint its ability to decide

the interconnection claims that justice would be served by

overturning the jury verdicts on these interconnection

claims,’ (Emphasis supplied. )

Second, the court addressed AT&T's argument that the jury's

answers Jo the special verdict questions did not define the conduct

found unlawful “with sufficient clarity to separate the issue of

damages from the .. . issue of liability so as to permit a new trial

limited to the question of damages alone” (App. B, 241a-242a),

The court also rejected this argument, holding (d.):

"As indicated, we believe that the district court and counsel

can, on the basis of the record and in accordance with the

procedure in this opinion, sufficiently identify the conduct

found unlawful by the first jury to separate the issues

relevant to damages for trial.” (Emphasis supplied, )

REASONS FOR GRANTING THE WRIT

AT&T recognizes that there is no tinal judgment of the Court

of Appeals against it in this case and that full review at this stage

might therefore be considered premature. See Brotherhood of

Locomotive Firemen & Enginemen vy. Bangor & A. R. R., 389

U.S. 327, 328 (1967); Hamilton-Brown Shoe Co. v. Wolf Bros. &

Co., 240 U.S. 251, 288 (1916). Accordingly, AT&T does not seek

review at this time of any of the Court of Appeals’ substantive

findings or ask this Court to engage in any review of the factual

record. The present petition addresses an extremely narrow, but

manifestly serious, error of law in the order entered by the Court

9

of Appeals, which, although not technically final, is plainly within

this Court's power to review and can be reviewed without undue

burden upon the Court. Moreover, there is every reason that this

narrow question, which is “fundamental to the further conduct of

the case,’ should be reviewed now, R. STERN & E, GRESSMAN,

SUPREME COURT PRACTICE, $4.19 at 301 (Sth ed. 1978), See also

Larson vy, Domestic & Foreign Commerce Corp., 337 U.S, 682,

685 n.3(1949); Land v. Dollar, 330 U.S. 731, 734.2 (1947), Un-

less this Court addresses the scope of the retrial to which AT&T

is entitled, not only a second but a third trial of this complex

action may be required, This would seriously affect the ad-

ministration of justice and would defeat the very objectives which

the Court of Appeals apparently was attempting to achieve,

1. The Standard Applied By The Court Of Appeals To

Determine Whether The Jury Findings That Were

Affirmed Were Tainted By The Jury Findings That

Were Reversed Cannot Be Reconciled With Cham-

plin Or With Other Circuits’ Interpretation Of

Champlin.

In Gasoline Products Co., Ine. vy. Champlin Refining Co,, 283

U.S, 494(1931), this Court held that it is constitutionally permis-

sible to remand for a new trial limited to damages only in narrow-

ly restricted circumstances (id. at SOO);

“[A] partial new trial... may not properly be resorted to un-

less it clearly appears that the issue to be retried is so dis-

tinct and separable from the others that a trial of it alone

may be had without injustice. . Here the question of

damages on the counterclaim is so interwoven with that of

liability that the former cannot be submitted to the jury in-

dependently of the latter without confusion and uncertainty,

which would amount to a denial of a fair trial.’ Cemphasis

supplied. )

This substantial limitation derives from the Seventh Amendment

right to a “fair and equitable resolution of factual issues” by the

jury. Colgrove v. Battin, 413 U.S. 149, 157 (1973). Ttis a right

10

which supersedes even the unquestionably legitimate interest in

saving “the parties and the commonwealth . . . the expense, an-

noyance and delay of a retrial.” Simmons v. Fish, 210 Mass. 563,

565 (1912), relied upon in Gasoline Products Co., Inc. vy. Cham-

plin Refining Co., supra, 203 U.S. at 500-01.

In recognition of the unequivocal mandate of Champlin, the

Courts of Appeals have required c/ear proof that reversed findings

could not have tainted the remaining findings before allowing re-

trial of damages or liability only, The D.C. Circuit, in Camalier

& Buckley-Madison, Inc. y. Madison Hotel, Inc., 513 F.2d 407,

422 (D.C, Cir, 1975), ordered a new trial on damages as well as

liability because the court “/ack/ed/ reasonable assurance” that

the sustainable findings were not tainted (emphasis supplied).

The Second Circuit, too, has ordered full retrial where it “cannot

be said that there ‘clearly’ was no relationship” between the er-

roneous findings and those which otherwise would have been up-

held. Ajax Hardware Manufacturing Corp. v. Industrial Plants

Corp., 569 F.2d 181, 1&5 (2d Cir. 1977) (emphasis supplied).

Most recently, the Second Circuit in Northeastern Tel. Co. v.

American Tel. & Tel. Co,, 651 F.2d 76, 94-95 (2d Cir, 1981),

cert, denied, 455 U.S, 943 (1982), ordered a full new trial on the

remaining charge because jt could not “be certain that the jury

based its verdict exclusively on the one remaining practice, with-

out any spill-over from the practices we have found not to have

been anticompetitive” (emphasis supplied ).’

The Fifth Circuit has also adopted a “clear” absence of taint

standard. In Williams y. Slade. 431 F.2d 605, 608 (Sth Cir.

1970), the court stated that, under Champlin,

_ a court May properly award a partial new trial only

when the issue affected by the error could have in no way

‘In another case, the Second Circuit upheld a partial retrial order

because there was “no possibility of confusion and uncertainty in sepa-

rating the two issues, as there was in the Gasoline Products case.” Fichel

v. New York Central Rik 319 F.2d 12, 20 (2d Cir.), rev'd on other

grounds, 375 US. 253 (1963) (emphasis supplied)

influenced the verdict on those issues which will not be in-

cluded in the new trial. If the decision on the other issues

could in any way have been infected by the error then a new

trial must be had on all issues.’ (Emphasis supplied. )*

The Eighth Circuit has similarly required that the court be able

to “state with reasonable assurance that the [error]... did not

influence or materially affect the jury's verdict.” Vagle v. Pick-

ands Mather & Co., 611 F.2d 1212, 1219 (8th Cir. 1979), cert.

denied, 444 U.S. 1033 (1980) (emphasis supplied). And the

Third and Sixth Circuits have ruled that partial new trials should

be granted “ ‘only in those cases where it is plain that the error

which has crept into one element of the verdict did not in any way

affect the determination of any other issue. * Romer vy. Baldwin,

317 F.2d 919, 922-23 (3d Cir. 1963), quoting Thompson vy.

Camp, 167 F.2d 733, 734 (6th Cir.), cert. denied, 335 U.S, 824

(1948) (emphasis supplied).

Under any of these formulations, this case necessarily would

have been remanded for a new trial on both the damages and

liability aspects of the remaining interconnection issues. The

predatory pricing and interconnection charges were so inextrica-

bly intertwined throughout all stages of the trial that there cannot

possibly be any “reasonable assurance” that the jury's findings

with respect to the pricing of Hi/Lo which the Court of Appeals

properly held should never have been before the jury did not

taint the findings on the interconnection charges. Indeed, the

‘See also Haves v. Solomon, $897 F.2d 958, 98S (Sth Cir, 1979), cert,

denied, 444. U.S. 1078 (1980) (retrial on liability and damages required

even though one claim had “its own separate theoretical viability”

because of “the very real likelihood that the jury may have utilized an

unproven or improper theory of liability’); Johnson vy. Greer, 477 F.2d

101, 108 (Sth Cir, 1973) (reversal is the “only sure course” to preserve

jury process for both parties)

The conclusion that the jury's adverse Hi/Lo finding tainted its inter-

connection findings is unaffected by the Court of Appeals’ statement in

(Footnote continued on next page)

12

jury was expressly instructed to consider each of MCI’s charges

“in the context of all of AT&T's conduct” (Inst. 44, App. A,

231a), and the specific instruction on Hi/Lo necessarily tied that

charge to the interconnection charges. Under the Hi/Lo instruc-

tion, if the jury found Hi/Lo to be below cost, it was entitled to

infer predatory intent (Inst. 42, App. A, 230a). Thus, once the

jury found against AT&T with respect to Hi/Lo, it could hardly

have found anything but predatory intent with respect to the in-

terconnection charges, which under the instructions also turned

on intent.”

The Seventh Circuit did not order a retrial of the remaining in-

terconnection issues, however, because it applied a different and

(Footnote continued from previous page)

its order denying rehearing that “the jury itself exonerated AT&T on the

important Telpak pricing claim while finding monopolistic intent in the

denials of interconnection” (App. B, 241a). As the court recognized in

its decision, unlike Hi/Lo which was developed “concurrent with MCT's

entry,” Telpak was filed in 1961 — over 10 years before MCI first went

into business between Chicago and St. Louis (App. A, |}8a-19a). Thus,

unlike Hi/Lo, the filing of Telpak could not have given rise to any infer-

ence concerning AT&T's intent toward MCI in the critical 1971-74

time period,

“Given the nature of the parties’ positions, no distinction at the trial

was drawn between AT&T's intent with respect to the interconnection

issues and AT&T's intent with respect to the predatory pricing issues.

As an example of the way the issues were intertwined, Charles Marshall,

then President of Illinois Bell, testified on direct examination that MCT’s

interconnection charges made no sense because MCI could never make

a profit selling EX and CCSA services in competition with the very low

Telpak bulk rates under which AT&T provided most of these services;

he demonstrated that point by showing that after MCI began offering FX

and CCSA services, its revenue per circuit mile dropped precipitously.

On cross-examination, however, MCI's counsel sought to explain the

drop in revenue as the consequence, not of FX and CCSA, but of

AT&T's implementation of Hi/Lo in June 1974 (Marshall, Tr, 5044-

45). Thus, MCI asked the jury to reyect AT&T's contention that the

denial of FX/CCSA interconnections could not rationally be viewed as

a tactic to put MCT out of business, arguing that AT&T combined its

denial of interconnections with the filing of Hi/Lo and that these tactics

together caused MCI to become unprofitable.

13

irreconcilable standard, Instead of requiring a retrial extending

to liability and damages unless there is a “clear absence” of taint,

the Seventh Circuit ordered a retrial limited to damages while ex-

pressly admitting “the possibility of spillover.” In the Court of

Appeals’ view, this possibility of taint was not entitled to control-

ling weight because the various findings were “not necessarily

closely linked” and could not be so considered without “specula-

tion about the jury’s mental processes.” Rather, the Seventh Cir-

cuit found this to be an “unusual case,” and therefore decided to

“balance” the prejudice to AT&T against MCI’s interests in hav-

ing the interconnection findings upheld.

There is nothing “unusual” about this case that can justify the

Seventh Circuit's departure from the prevailing rule of law, The

Champlin principle has been universally applied to a// partial re-

trial situations, including those where every bit as much, if not

more, “speculation about the jury’s mental processes” is

required. Moreover, when partial retrials have been permitted

under the Champlin standard, it has most often been in cases in

which the sole error lay in the damages formulation, And even in

those cases, courts have recognized that their “power in this

regard is to be exercised with caution.” Geffen v, Winer, 244 F.2d

375, 376 (D.C, Cir. 1957).

Nor would there be any unfairness to MCT if the remaining in-

terconnection charges were remanded for a new trial extending to

both liability and damages. Those charges raise very close ques-

tions. Indeed, when the same interconnection issues were tried to

the court sitting without a jury in Southern Pacific Communica-

tions Co. v, American Tel. & Tel. Co., 556 F. Supp. 825, 985-

1052 (D.D.C, 1983), the court found that none of AT&T's con-

duct violated the antitrust laws. Given this situation, MCT is not

entitled to the benefit of the favorable liability findings on the

‘See, e.g, Parker v. Wideman, 380 F.2d 433, 437 (Sth Cir, 1967)

(where appeal taken only on amount of damages, retrial on lability un-

necessary); Mertens v. Flying Tiger Line, Inc., 341 F.2d 851, 887-58 (2d

(Footnote continued on next page)

14

remaining interconnection charges that may have been the

product of “spillover” from the pricing issues that should not have

been before the jury, particularly where no trier of fact has found

AT&T's conduct at issue here to violate the antitrust laws in the

absence of such “spillover.”

The Seventh Circuit's holding thus markedly departs from the

holding in Champlin and the prevailing rule in other Circuits.

This Court's review is necessary in order to resolve this conflict.

Il. A Retrial Limited To Damages Is Directly Preclud-

ed By Champlin Because The Jury Findings On

The Remaining Interconnection Charges That

Were Affirmed Are So Vague That Damages Can-

not Be Assessed On The Basis Of Those Findings.

Beyond the manifest taint that vitiates the first jury’s findings

of liability on the six interconnection issues, the court’s remand

for a trial limited to damages also violates the Champlin require-

ment that the first jury’s verdict must be sufficiently precise to as-

sure a fair trial on damages before a second jury (283 U.S, at 499-

500):

“| T}he question remains whether the issue of damages ts so

distinct and independent of the others, arising on the coun-

terclaim, that it can be separately tried.”

* . *

“Where the practice permits a partial new trial, it may not

properly be resorted to unless it clearly appears that the issue

to be retried is so distinct and separable from the others that

a trial of it alone may be had without injustice... .” (Em-

phasis supplied. )

In Champlin, this Court reversed a lower court decision

remanding that case for a trial on damages because the Court

(Footnote continued from previous page)

Cir.), cert. denied, 382 U.S. 816 (1965) (where error concerned only a

maximum recovery instruction, retrial on lability unnecessary), May

Department Stores Co. v. Bell, 61 F.2d 830, 842-43 (Sth Cir, 1932) (er-

ror in damage instruction does not require full retrial where no indica-

tion that the error tainted liability findings)

15

found that the first jury’s findings were not sufficiently precise to

permit a jury to assess damages without retrying substantial parts

of the liability case.” While the Court of Appeals here failed to

address the issue except in conclusory terms (App. B, 241a-242a),

it is obvious that none of the six interconnection findings which

the Court of Appeals affirmed is sufficiently precise to allow a

second jury to assess damages without the consideration of sub-

stantial evidence that relates equally to liability.

One damages-related issue which bears equally on each of the

six liability findings is the question of whether MCI could have

mitigated its damages by raising the interconnection matters

sooner with the FCC. The trial court’s mitigation instruction

provided in part that if “MCI could have avoided some or all of its

economic losses by complaining to the FCC and that MCI acted

unreasonably in failing to complain to the FCC, you cannot

award MCI the damages it could have avoided” (Inst. 56, App.

A, 234a-235a). Given the Court of Appeals’ recognition that

AT&T had made clear to MCI as early as 1971 that it would not

voluntarily provide MCI connections to Bell switching machines

for FX and CCSA (App. A, 12a-13a), that the FCC and MCI

told the Ninth Circuit in 1972 that switched services (such as FX

and CCSA) were not within the scope of the Specialized Com-

mon Carriers decision (App. B, 240a), and further, that MCI did

not take its complaint to the FCC unti autumn of 1973 (App. A,

“The Court explained (283 U.S. at 499-500):

“The verdict on the counterclaim may be taken to have established

the existence of a contract and its breach. Nevertheless, upon the

new trial, the jury cannot fix the amount of damages unless also ad-

vised of the terms of the contract; and the dates of formation and

breach may be material, since it will be open to petitioner to insist

upon the duty of respondent to minimize damages.”

. * *

“But the present verdict, awarding as damages on the counterclaim

less than the total of the items claimed by respondent, exclusive of

alleged loss of profits, cannot be taken as establishing any of these

material facts.”

16

15a-16a), AT&T would be entitled to prove that MCI could and

should have gone to the FCC sooner but failed to do so because of

its own recognition that the FCC might not grant the relief MCI

requested. But this proof relevant to mitigation also bears directly

on the critical question of whether AT&T acted reasonably, in

good faith, or both, and if not, over what time period it acted un-

reasonably,

Thus, this case is in precisely the same posture as Champlin,

where this Court held that the issue of mitigation of damages

required a retrial on both liability and damages. There is no basis

for treating the first jury's finding as a determination that AT&T

acted in bad faith from the very beginning: instead, the jury could

very well have concluded that AT&T should have received the

FCC's message later, but there is no way of knowing when. At

whatever point this is, however, MCI also should have gotten the

message and sought relief from the FCC. If the second jury were

to award damages to MCI for AT&T's interconnection conduct,

the time period selected by the second jury would be crucial to the

determination of those damages, yet it is also inextricably inter-

woven with the evidence on and determination of liability.’

Similar problems are apparent on the face of each of the liabili-

ty findings. For example, there is no way a new jury could proper-

ly determine damages from the finding that AT&T provided

“inappropriate or ineflicient equipment or procedures for inter-

"See also Fury Imports, Inc. v. Shakespeare Co., 854 F.2d 1376, 1388

(Sth Cir. 1977) (remand for a new trial on both lability and damages on

the grounds that “the question of causation is so intimately tied to the

question of damages” and that “the jury's verdict on damages at the first

trial suggests some rather fundamental confusion, the source of which ts

impossible to trace”); Vizzini v. Ford Motor Co., 569 F.2d 754, 761 (3d

Cir. 1977) (reversal for new trial on both liability and damages because

“it is difficult to say that allowing a second jury to determine the issue of

damages in isolation of the whole of the circumstances surrounding the

case was not an injustice’); Northeastern Tel. Co. v. American Tel. &

Tel. Co., supra, 65) F.2d at 95 (reasonableness of AT&T's conduct is a

“crucial issue at both the liability and damages phases of any further

proceedings’).

17

connection” (Int. 5(h), App. A, 237a) (emphasis supplied). MCI

introduced evidence on such matters as the type of signalling

provided to MCI, the types of connecting blocks provided to MCI,

the kind of design information made available to MCI, the use of

Bell’s regular trouble reporting procedures instead of establishing

a special procedure for MCI, the refusal to engage in joint testing

with MCI, and MCI’s access to Bell's equipment rooms (see App.

A, 121a-124a). The jury interrogatory, framed in the disjunctive,

allowed the jury to find for plaintiffs on less than all of these dis-

putes. See £./. DuPont de Nemours & Co. v. Berkley & Co., Inc.,

620 F.2d 1247, 1257-58 (8th Cir. 1980). And as in Champlin, the

jury's damage award was iess than the total damages claimed

and, consequently, “cannot be taken as establishing any of these

material facts.” 283 U.S. at 500. Under these circumstances, a

second jury cannot possibly te!! what “equipment or procedures”

the first jury actually found io be “inappropriate or inefficient”

(emphasis supplied ).

Similarly, the jury’s finding with respect to the size of the geo-

graphic areas in which Bell provided local distribution facilities to

MCI does not indicate to a second jury in what cities the local dis-

tribution area (LDA) was found to be unreasonable or what

would have been a reasonable LDA, only that LDAs drawn by

AT&T were “unreasonable” (Int. 5(1), App. A, 237a). Given the

vast differences in the size of the LDAs to reflect differing local

conditions from city to city, it is not at all unlikely that the jury

found the LDA reasonable in some cities and unreasonable in

others. Thus, any new trial on damages stemming from AT&T's

drawing of LDAs necessarily requires the second jury to deter-

mine what would be a reasonable LDA and in which cities the

LDAs were unreasonable; but that determination lies at the heart

of the liability issue that the Court of Appeals would treat as con-

clusively established by the first jury.

In short, the liability findings on the remaining interconnection

charges in this case are simply too ambiguous to permit fair cal-

18

culation of damages by a second jury. No matter how much dis-

cretion the trial court retains to admit “liability” evidence bear-

ing upon damages," the parties can never reconstruct the jury's

liability findings without denying AT&T its right to fair and rea-

soned consideration of the issues. For this additional reason, the

decision below conflicts with Champlin.

Ill. The Court Of Appeals’ Decision Will Undermine

The Administration Of Justice.

By replacing the “clear absence of taint” standard which other

courts have held is required by Champlin with a “balancing” test,

and by adopting a procedure that essentially requires a second

jury to guess what a previous jury may have found, the Seventh

Circuit effectuates the precise situation Champlin was intended to

prevent: elevation of the convenience of the court and the

prevailing party over the defendant's constitutional right to a

fair trial. The court apparently believed this reversal of priorities

was justified by the “unusual” size and complexity of this case.

But, if anything, such considerations dictate even more vigilant

enforcement of the right to a fair trial not less. Where a

complex case is presented, multiple errors may occur, and this is

"In its order denying rehearing, the Court of Appeals declined even to

confront the question of ambiguity in the findings, except to offer the

Suggestion that the trial court could minimize any possible prejudice to

AT&T by employing “the procedures described in this Opinion” for

separating “the issues relevant to damages for trial” (App. B, 242a).

Neither the “procedures” set forth in the decision nor the availability of

later judicial review will prevent a denial of AT&T's rights should the

present order stand. The “procedures” upon which the court rested its

decision are no more than the following (App. A, 1S6a)

“To the extent it is necessary to educate the fact finder on these

issues [relating to settled liability questions}, evidence which might

normally be associated with a determination of liability may have

to be introduced or reintroduced.”

At most, this affords the trial court the discretion to admit selected

liability evidence; it is obviously no substitute for affording AT&T the

right of retrial. Furthermore, the decision authorizes admission for only

a limited purpose: to show ammount of damages, not fact of liability.

19

particularly true when the case is tried to a jury.'' And antitrust

cases in particular, with the punitive trebling of damages, demand

the utmost effort to assure that a defendant has a full and fair

opportunity to defend itself.

The goal of judicial economy is laudable. If it is allowed to take

precedence over a party's fundamental right to a fair trial, how-

ever, the administration of justice will surely suffer. Indeed, if the

Court of Appeals’ decision goes unreviewed at this time, the ul-

timate outcome may be a third trial to remedy the improper limi-

tations which the Court of Appeals imposed on the second trial.

This Court should grant certiorari as to this limited issue to as-

sure that such a result does not occur.

"Cf. Burger, Remarks to Meeting of Conference of Chief Justices

(August 7, 1979) (US. Supreme Court Public Information Office). See

also In re Japanese Electronics Products Antitrust Litigation, 631 F.2d

1069, 1084-90 (3d Cir, 1980), Bernstein vy. Universal Pictures, Inc., 79

F.R.D. 89, 67-71 (SDNY. 1978), ILO Peripherals Leasing Corp. v

IBM Corp, 458 F. Supp. 423, 444-49 (ND. Cal. 1978), aff'd on other

grounds, 646 Fld LISS (9th Cir 1980), cert, denied, 482 US. 972

(1981). See generally Note, The Right toa Jury Trial in Complex Civil

Litigation, 92 Harry L. Rey. 898 (1979)

20

CONCLUSION

For the reasons set forth above, this Court should grant the pe-

tition for writ of certiorari and reverse the judgment below insofar

as it limits the retrial of the remaining interconnection issues to

damages alone.

Respectfully submitted,

Howarp J. TRIENENS®

GEORGE L. SAUNDERS, JR.

Of Counsel: THEODORE N. MILLER

Jim G. Kivpatee

RAYMOND BRENNER One First National Plaza

Siptey & AUSTIN Chicago, Hlinois 60603

(312) 883-7000

Dated: July 8, 1983

Counsel for Petitioner

* Counsel of Record