Amicus Brief — American Telephone & Telegraph Co. v. MCI Communications Corp.

Otfice-Supreme Court, U.S,

FILLED

"

AUG 13 1983

oe 8900000 0-8 ——

IN THE SUPREME COURT

OF THE UNITED STATES

October Term, 1983

AMERICAN TELEPHONE AND TELEGRAPH COMPANY,

Petitioner,

Ve

MCI COMMUNICATIONS CORPORATION and

MCI TELECOMMUNICATIONS CORPORATION,

Respondents.

“MCI COMMUNICATIONS CORPORATION and

MCI TELECOMMUNICATIONS CORPORATION,

Petitioners,

Ve

AMERICAN TELEPHONE AND TELEGRAPH COMPANY,

Respondent.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES

COURT OF APPEALS FOR THE SEVENTH CIRCUIT

BRIEF AMICUS CURIAE OF THE

STATE OF WASHINGTON AND WASHINGTON

UTILITIES AND TRANSPORTATION COMMISSION

Brief Submitted Pursuant To Rule 36

KENNETH O. EIKENBERRY

Attorney General

DOUGLAS N. OWENS

Temple of Assistant Attorney

Justice General

Olympia,WA 98504 Attorneys for Amicus

(206) 753-2282 Curiae

Nos. 83-21 and 83-32

IN THE SUPREME COURT

OF THE UNITED STATES

October Term, 1983

AMERICAN TELEPHONE AND TELEGRAPH COMPANY,

Petitioner,

Ve

MCI COMMUNICATIONS CORPORATION and

MCI TELECOMMUNICATIONS CORPORATION,

Respondents.

MCI COMMUNICATIONS CORPORATION and

MCI TELECOMMUNICATIONS CORPORATION,

Petitioners,

Ve

AMERICAN TELEPHONE AND TELEGRAPH COMPANY,

Respondent.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES

COURT OF APPEALS FOR THE SEVENTH CIRCUIT

BRIEF AMICUS CURIAE OF THE

STATE OF WASHINGTON AND WASHINGTON

UTILITIES AND TRANSPORTATION COMMISSION

Brief Submitted Pursuant To Rule 36

KENNETH O. EIKENBERRY

Attorney General

DOUGLAS N. OWENS

Temple of Assistant Attorney

Justice General

Olympia,WA 98504 Attorneys for Amicus

(206) 753-2282 Curiae

TABLE OF CONTENTS

Page

INTEREST OF THE STATE OF

WASHINGTON AND WASHINGTON

UTILITIES AND TRANSPORTATION

COPE EOMe ccc ccc oacccecccececee l

REASONS FOR GRANTING

THE WRIiTcccccccccceseccecccccs 5

rrr errr eee ee 8

CONGUE LONMe ccc cc eceeceesececces 13

aie

INDEX OF AUTHORITIES

Page

Execunet (MCI Telecommuni-

cations Corp., 60 F.C.C.2d

25 (1976) ccccccccccescceseseccs 13

Specialized Common

Carriers, 29 F.C.C.2d

870 (1971) ccccccccccccscces 6, 7) 9,

10, 12, 13

U.S. vs. AT&T, D. DC.

Misc. No. 82-0025

(July 8, it) KD POWER EEREEELEE EE 3

WUTC v. FCC, 513 F.2d

1142 (9th Cir. 1975),

cert. denied. 423

U.S. >. OwreveePOTTTTTTrTrTTT © 3, 12

alte

STATUTES

Page

Chapter 49, § 1, Laws of

Washington of 1967, lst

Ex. Sess., RCW 80.01.075......4. 2

Communications Act of 1934...... 8

-iii-

Nos. 83-21 and 83-32

IN THE

SUPREME COURT of the UNITED STATES

(October Term, 1983)

AMERICAN TELEPHONE AND TELEGRAPH

COMPANY,

Petitioner,

Ve

MCI COMMUNICATIONS CORPORATION and

MCI TELECOMMUNICATIONS CORPORATION,

Respondents,

MCI COMMUNICATIONS CORPORATION and

MCI ‘'TELECOMMUNICATIONS CORPORATION,

Petitioner,

Vv.

AMERICAN TELEPHONE AND TELEGRAPH,

Respondent.

~ ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES

COURT OF APPEALS FOR THE SEVENTH CIRCUIT

RIE ICUS CURT H

STATE OF WASHINGTON AND WASHINGTON

UTILITIES AND TRANSPORTATION COMMISSION

Brief Submitted Pursuant To Rule 36

AND WASHINGTON UTILITIES AND

TRANSPORTATION COMMISSION

Washington and WUTC repre-

sent the interests of the state, its

ele

businesses and general public in pro-

ceedings before federal courts in which

there is at issue matters affecting

rates or practices for utility services.

WUTC vs. FCC, 513 F.2d 1142 (9th Cir.

1975), Chapter 49, § 1, Laws of Wash-

ington of 1967, lst Ex. Sess., RCW

80.01.075. The decision of the District

Court, which was affirmed in part by the

Court of Appeals on the issue of liabi-

lity, was the result of the submission

by the District Court of a key legal

issue determining liability to the jury.

The state and the WUTC are concerned

that this procedure subjects antitrust

damage suits to the vagaries of lay

legal interpretation. The decision may

result in the imposition of substantial

unproductive costs on an exchange tele-

phone company within the jurisdiction of

-2-

WUTC. The Court of Appeals remanded the

proceeding to the District Court for a

new trial limited to the issue of

damages. The judgment entered by the

District Court against AT&T was in the

amount of $1.8 billion. Under the order

of Judge Greene in U.S. vs. AT&T, D. OW.

Misc. No. 82-0025, July 8, 1983, lia-

bilities of AT&T for pre-divestiture

activities leading to antitrust damage

judgments will be shared by the local

Bell operating companies after divesti-

ture, in proportion to the assets of

each operating company compared to the

assets left to AT&T.

The WUTC opposed the applica-

tion of MCI to build a competing

interstate network before the Ninth

Circuit Court of Appeals, WUTC v. FCC,

513 F.2d 1142 (1975), on the ground that

=3<

allowing MCI to under cut the average

price system threatened the universal

service which had been national policy

Since 1934.

An increase in unproductive

capital costs in the magnitude involved

here which could result in increased

rates for local consumers for Pacific

Northwest Bell's service, would be

inimical to the purposes of efficiency

and consumer benefit which underlie the

antitrust laws. Such an increase would

also curtail the ability of the State of

Washington to secure for itself, its

businesses and general public, quality

telephone service at rates which are

fair, just, reasonable and sufficient.

The State of Washington and WUTC support

AT&T's petition and cross petition, for

these reasons.

+e

ae +s)

REASONS FOR GRANTING THE WRIT

Two petitions for certiorari

have been filed. AT&T's petition seeks

reversal of the Court of Appeals' deci-

sion to limit the remand on the

remaining interconnection charges to

damages only. MCI's petition seeks

review of the Court of Appeals' pricing

and damages determinations. Moreover,

ATsT is filing a cross petition seeking

review of the Court of Appeals' affirm-

ance of the liability findings on

interconnections.

It is the position of the

State of Washington and ''UTC that this

case should be reviewed by the Court and

reversed with either judqment being

rendered tor AT&T or at the very least

with a new trial being granted on

issues of both liability and damages.

-5-

Accordingly, we are supporting AT&T's

petition and cross petition.

The petitioney AT&i has pre-

sented a narrow question for review

which, in light of the massive impact

of the potential liability involved in

this proceeding on many millions of

local exchange ratepayers nationwide,

at a time when the forces of change in

the telecommunications industry are

affecting local exchange rates, should

be examined by this Court. The Court of

Appeals erred in weighing the effect of

federal and state regulation of the

telephone service provided by AT&T on

the issues pertaining to liability under

the antitrust laws. The Court of

Appeals erred in upholding the sub-

mission to the jury of the issue of

the meaning of the Specialized Common

-6-

Carriers decision, 29 F.C.C.2d 870

(1971), as it bore on the question of

the reasonableness of AT&T'S conduct

in refusing to interconnect certain

facilities with respondent MCI,

If the holding of the Court

of Appeals is permitted to stand, a

judgment against AT&T after a new trial

could produce an obligation on Pacific

Northwest Bell, the Bell operating

company which serves in Washington,

of millions of dollars for its Washing-

ton operations. As a regulated utility,

Pacific Northwest Bell is constitu-

tionally entitled to rates sufficient

to cover its capital costs incurred in

providing services, Antitrust liability

judgments can affect capital costs by

increasing those costs.

ARGUMENT

The Court of Appeals erred in

not being sufficiently sensitive to the

convulsive changes which are in progress

in the of telecommunications industry.

Although the Court of Appeals recognized

the subtle, and at times paradoxical,

relationship between the policies which

led Congress to enact the Communications

Act and those which led to the antitrust

laws, the court below failed to address

this relationship, declaring instead

that regulators and Congress would deal

with the broader issues. The result of

this approach is to ignore the fact that

"drastically modifying” the regulatory

judgment which has guided the telecom-

munications industry for more than

seventy-five years, at the stroke of a

pen, can produce unintended harsh

results on the consumers if slavish

devotion is paid to the form, rather

than the substance of the “populist”

principles embodied in the antitrust

laws. (Appendix, at 42a), When the

regulatory agency which is spurring

change fails to speak clearly, the

requisite notice of forbidden conduct

which would support antitrust liability

is absent. The fact that MCI, the

plaintiff below, interpreted the

agency's decision in opposite ways on

this point, depending on the court and

MCI's purpose, justifies reversing the

Court of Appeals' decision upholding the

liability judgment.

The Court of Appeals erred in

upholding the trial court's submission

to the jury of the issue of the meaning

of the Specialized Common Carriers

decision, 29 F.C.C.2d 870 (1971).

In the Court of Appeals'

opinion, which is remarkable for its

silence on the bizarre result produced

at trial, the Court offhandedly, and

erroneously, upheld the submission of a

iegal issue, namely the construction of

an administrative rulemaking order, to a

jury. It is the duty of the court to

find and apply the law. It cannot be

dismissed as “harmless error" to charge

a jury to construe a legal document

issued by a regulatory agency of the

United States government which the

District Court described as an “abomina-

tion." (Appendix, at 12a). The trial

court abdicated the judicial function,

and the Court of Appeals upheld such

abdication. If the FCC's decision in

the Specialized Common Carriers case was

-10-

so murky that the judge could not

construe it to answer the question

whether AT&T was legally required to

interconnect MCI to foreign exchange

(FX) and common control switching

arrangement (CCSA) facilities, then the

judge should have directed a verdict in

favor of AT&T, on either of the two

grounds submitted to the jury, i.e.,

that by its terms the 1971 decision

did not explicitly order interconnec-

tion, or that the context in which the

interconnection was ordered was so vague

that AT&T did not know it was ordered.

The court's finding that the order was

"extremely opaque" (Appendix, at 89a), is

at war with a finding that refusals to

interconnect violated the antitrust

laws.

The status quo before the

elie

decision in the Specialized Common

Carriers case was that MCI had no

authority to provide service requiring

FX and CCSA interconnection. The unin-

telligible Specialized Common Carriers

decision, then, could not be presumed

to change the status quo. In fact,

during the appeal of the Specialized

Common Carriers decision to the Ninth

Circuit Court of Appeals, both MCI and

the FCC advised that court in their

briefs that no connections to the

switched network were contemplated

by the decision. WUTC vs. FCC, 513

F.2d 1142 (9th Cir. 1975), cert.

denied., 423 U.S. 836. (Appendix 240a).

The important point is that

AT&T's refusal to provide interconnected

service to MCI did not violate the

antitrust laws, notwithstanding the

-12-

later Execunet decision, [MCI Telecom-

munication Corp, 60 F.C.C.2d 25 (1976)],

because even the trial court could not

understand the Specialized Common Carriers

decision. Alleged bad faith on the part

of AT&T in denying interconnection is

irrelevant, as long as an objective

assessment of the relevant circumstances

indicated that MCI did not have the

clear legal power to provide the service

for which it was seeking connections,

CONCLUSION

This Court should grant the

Petition for Certiorari and should

reverse the decision of the Court of

Appeals below, to the extent the latter

affirmed liability against AT&T. The

question presented has continuing

vitality for administrative decision-

making and antitrust law. Also, the

@-13-

outcome of the battle between financial

giants may have unforeseen results on

consumers of local telephone service.

Dated this 10th day of

August, 1983.

Respectfully submitted,

KENNETH O. EIKENBERRY

Attorney General

Assistant Attorney General

Attorneys for Amicus

Curiae State of Washington

and Washington Utilities

and Transportation

Commission

Temple of Justice

Olympia, WA 98504

(206) 753-2282

-14-

CERTIFICATE OF SERVICE

I, Douglas N. Owens, ama

member of the Bar of this Court and am

one of the attorneys representing

State of Washington and Washington

Utilities and Transportation Commission.

Pursuant to Rule 28.5, I hereby certify

that I have caused three copies of the

Brief Amicus Curiae of the State of

Washingt: : and Washington Utilities

and Transportation Commission to be

served by placing the same in properly

addressed envelops with first-class

postage prepaid, in the United States

mail on this 10th day of August, 1983

to: Chester T. Kamin, Jenner & Block,

One IBM Plaza, Chicago, Illinois 60611;

Alfred Y. Kirkland, Jr., Brady, McQueen,

Martin, Collins & Jensen, 80 Fountain

Square Plaza, Elgin, Illinois 60120;

Raymond C. Fay, Haley, Bader & Potts,

77 West Washington Street, Chicago,

Illinois 60602; John R. Worthington,

MCI Communications Corporation, 1133

i9th Street, N.W., Washington, D.C.

20036; and Theodore N. Miller, Sidley

& Austin, One First National Plaza,

Chicago, Illinois 60603. I further

certify that all parties required to

be served have been served,

Assisf€ant Attorney General

August 10, 1983