Reply Brief — AT&T Corp. v. RLH Industries, Inc. (No. 05-1493)

SUpreiic Gout, WS.

FILED

(4) JUL 5 - 2096

: CTFICE CE THE CLERK

No. 05-1493

IN THE

Supreme Court of the Gnited States

AT&T INC. (F/K/A SBC COMMUNICATIONS INC.),

Petitioner,

Vv.

RLH INDUSTRIES, INC..

Respondent.

On Petition for a Writ of Certiorari

to the Court of Appeal of the State of California

REPLY BRIEF FOR PETITIONER

en

JAVIER AGUILAR MICHAEL K. KELLOGG

WILLIAM M. SCHUR Counsel of Record

AT&T SERVICES, INC. SEAN A. LEV

175 E. Houston Street PRIYA R. ATYAR

4th Floor KELLOGG, HUBER, HANSEN,

San Antonio, Texas 78205 TODD, EVANS & FIGEL,

(210) 351-3409 PLLC.

1615 M Street, N.W.

Suite 400

Washingten, D.C. 20036

(202) 326-7900

Counsel for Petitioner

July 5, 2006

CORPORATE DISCLOSURE STATEMENT

Petitioner’s Statement pursuant to Rule 29.6 was set

forth at page ii of the petition for a writ of certiorari, and

there are no amendments to that Statement.

ii

TABLE OF CONTENTS

Page

CORPORATE DISCLOSURE STATEMENT..................... i

FAR I FART BNE CAI cnprccsetersctesernenniasidscerebocinvterwes iil

ARGUMENT:

I. The Court Has Jurisdiction To Review The

EE: RON cisusheiasechariisisiaicicleiibshddabisintenadiachipiitbteciaiints 1

II. The Circuits Are In Square Conflict Over

Whether Direct Regulation Of Wholly Ex-

traterritorial Conduct Is A Per Se Violation

Ce ee RS I icc scantccivnicincinesdiermeenseicass 5

III. The Decision Below Conflicts With Control-

eae aa CONES BI cc icciccicceecintarienctnniricieeniconn 7

IV. This Case Is A Superior Vehicle For The

SNE FINE in, haskesicosccicrnicnecaeontnbencbaebesmnestes 8

CFIA scvihiscnisrnisiesteinbialiinssiccdaiidinieidicdiinaa 10

ill

TABLE OF AUTHORITIES

; Page

CASES

ACLU v. Johnson, 194 F.3d 1149 (10th Cir. 1999)......... 5, 6

American Booksellers Found. v. Dean, 342 F.3d 96

Ee i. Oe sccsisicdectbacecnneeapitbemsienkianubicnianidiateensiian 5, 6

Batson v. Kentucky, 476 U.S. 79 (1986) ..............cccssseseeeeeees 5

Belknap, Inc. v. Hale, 463 U.S. 491 (1988) «0.0... eee 4

Beretta U.S.A. Corp. v. District of Columbia, 126 S.

ie IEE CI IPIIUEE cassiic en: ioeucdspiccceurspdbees punbdnuiadednpeentnanaamebavewiant 10

Brown-Forman Distillers Corp. v. New York State

Liquor Auth., 476 U.S. 573 (1986)..........ccsccccrsessscceeeeees 7

Cotto Waxo Co. v. Williams, 46 F.3d 790 (8th Cir.

RP RR tach Sind NEM La Occ WNC TS SR SIPC NOE 7

Cox Broadcasting Corp. v. Cohn, 420 U.S. 469

SIDE ITE shiinhcitiieidiinlanadadisdiinshbbipempanenephivaaeanamnudcaiedicomeces 1, 2, 3, 4

District of Columbia v. Beretta U.S.A. Corp.,

872 A.2d 633 (D.C.), cert. denied, 126 S. Ct. 399

EESTI" SRR Oe er Roe es SORES Pe Pee ets 10

Paes @. Gato, SET UD. GEO CIGSDD svcesccccsevereteecicosisves 4,5

Goodyear Atomic Corp. v. Miller, 486 U.S. 174 (1988)....... 4

Grant’s Dairy-Maine, LLC v. Commissioner of Maine

Dep't of Agric., 232 F.3d 8 (1st Cir. 2000) ..................... 7

Healy v. The Beer Institute, 491 U.S. 324 (1989)............ 7,8

Hudson Distribs., Inc. v. Eli Lilly & Co., 377 US.

Se NE sittin si decectesnid bodaa i Micekc's a cucacomsshabaca Reseed 4

Ingersoll-Rand Co. v. McClendon, 498 U.S. 133

Fea ESE PAP SEN ce ABE: RP Re aD RRB WE Se EER OP ONY TS Ne 4

Johnson v. California, 541 U.S. 428 (2004) ...... ee 5

Local No. 438 Constr. & Gen. Laborers’ Union uv.

Ss SF kA ric OEE CE ED uate csacsciccemaiasidokieisbasinsiccens 4

iv

Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,

BTR 78 CLOG ciakisiscstivs cansessansatnesteseatoteks waited. 8,9

Mercantile Natl Bank v. Langdeau, 371 U.S. 555

EC RIIIENE csctavenscuvanesdccbacdatindonscruabschicnsd anemia eelaeEunamimaceee 4

Mississippi Power & Light Co v. Mississippi ex rel.

Moere, ABT US. S64 CABS) s cccsiininscicnonsnind 4

National Solid Wastes Mgmt. Ass’n v. Meyer, 63 F.3d

Be Cree CE RID eekcsncscicectshensbineehuhseleucrsusmbaietan 5, 6

NCAA v. Miller, 10 F.3d 633 (9th Cir. 1998) ................. 5, 6

New York Life Ins. Co. v. Head, 234 U.S. 149

CFE GY aici veniscsisiceinccvavimebchcaotccvannigecdesenaterkccinpeamadnaatiaduan 3

Pharmaceutical Research & Mfrs. of Am. v. Con-

cannon, 249 F.3d 66 (1st Cir. 2001), aff'd, 538

SFB. OG CO sieiaiveksidssdsecicchsaciede uke natmeainned 6, 7

Pike v. Bruce Church, Inc., 397 U.S. 137

Pe icc senicaestncsnsikck sive tombaccuenaiaba taken aka 5

Southern Union Co. v. Missouri Pub. Serv. Comm’n,

BAO FBG BOS COG GaP. BOD) viciinsensica cvccdsectousticnionsreces 6, 7

Southland Corp. v. Keating, 465 U.S. 1 (1984)... 4

State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S.

Be I visas casei ntanehcddiduadhachackcaipetpienivaiedionicketstocahicina 4

ss

CONSTITUTION AND STATUTES

U.S. Const.:

Art. I, § 8, Cl. 3 (Commerce Clause)...... 1, 2, 3, 5, 7, 8, 10

Art. IV, § 1 (Full Faith and Credit Clause)..................... 3

TAGS sciccsnessststnseninichilatdinihetidibapennasiediataheiapibinuitevantererse 4

Amend. V (Due Process Clause) ...............c::ccceeeeceeeeeseeees 3

Employee Retirement Income Security Act of 1974,

ee Oe EDI, nncdocercesrtctdaretccctcsqiuiinobesteitens 4

Federal Arbitration Act, 9 U.S.C. §§ 1 et seq. ............ eee 4

National Labor Relations Act, 29 U.S.C. §§ 151

GE IGE. cnseneinisccndictaninicevendtiedesiideieen (cetiibaiaabadiiedinbaninpaiintines 4

Sherman Act, 15 U.S.C. §§ 1 ef s€q. .......ccccssceccossssseccecees 4,8

Ba Pes OO CID - roeqvatsec ecbinnininnsiabeeetleatiavnaneveinntietitienidassia 1

The lower court in this case held that, under the Com-

merce Clause, there is no per se bar on States directly

regulating commerce occurring wholly outside their bor-

ders. That decision conflicts with the controlling decisions

of this Court, as well as the law in several federal courts

of appeals. It does, however, accord with the law in the

First and Eighth Circuits. This Court’s intervention is

necessary to resolve the conflict among the lower courts as

to a fundamental and recurring constitutional issue.

Respondent RLH Industries, Inc. (““RLH”) offers no con-

vincing defense of the California court’s decision and, de-

spite its efforts to sow confusion, cannot obscure the clear

split between the circuits or the purely legal character of

the question presented. RLH’s only argument against the

Court’s exercise of jurisdiction is that leaving the decision

below in place would not seriously erode federal policy.

That argument fails under this Court’s precedents. De-

nial of review would allow California, at the behest of any

of its residents, to control commerce occurring wholly out-

side its borders and, in so doing, trump the law of the

other States where the commerce is occurring. Such ex-

traterritorial regulation threatens not only the free flow of

interstate commerce, but also the basic premises of our

constitutional structure. The decision at issue here thus

imperils federal policy in a much more fundamental and

broadly applicable way than the many state-court pre-

emption decisions over which this Court has previously

exercised jurisdiction under the same doctrine that RLH

concedes is controlling here.

I. The Court Has Jurisdiction To Review The Deci-

sion Below

Section 1257(a) authorizes this Court’s review of any

“[f]inal judgment[] or decree[{}] rendered by the highest

court of a State in which a decision could be had.” 28

U.S.C. § 1257(a). In Cox Broadcasting Corp. v. Cohn, 420

U.S. 469 (1975), the Court explained that “the require-

ment of finality is to be given a practical rather than a

technical construction.” Jd. at 478 n.7 (:nternal quotation

2

marks omitted). Cox recognized “at least four categories

of .. . cases” in which the Court had jurisdiction to review

a state-court decision on a federal issue “without awaiting

the completion of the additional proceedings anticipated

in the lower state courts.” Jd. at 477.' The fourth such

category consists of cases where: (1) “the federal issue has

been finally decided in the state courts with further pro-

ceedings pending in which the party seeking review might

prevail on the merits on nonfederal grounds, thus render-

ing unnecessary review of the federal issue by this Court”;

(2) “reversal of the state court on the federal issue would

be preclusive of any further litigation on the relevant

cause of action”; and (3) “a refusal immediately to review

the state court decision might serious'y erode federal pol-

icy.” Id. at 482-83.

Under this Court’s prior decisions, this case falls

squarely within the fourth Cox category. It is undisputed

that the federal issue — whether direct extraterritorial

regulation is per se invalid under the Commerce Clause —

“has been finally decided in the state courts,” with the

California Court of Appeal resolving the issue against

AT&T, and the California Supreme Court denying review.

It is further undisputed that, if the Court does not grant

review now, AT&T “might prevail on the merits on non-

federal grounds, thus rendering unnecessary review of the

federal issue by this Court.” See Opp. 9 (conceding that,

“[s]hould AT&T prevail on any of its state law defenses,

the federal issues could be mooted”). Finally, it is undis-

puted that reversal of the California court on the federal

issue “would be preclusive of any further litigation” on

RLH’s causes of action against AT&T's out-of-state sub-

sidiaries. Each of those causes of action seeks to apply

California law to conduct occurring outside of California.

' Cox did not require that the additional proceedings involve only

state-law issues. See 420 U.S. at 477 (‘[i}n most, if not all, of the cases

in these categories, these additional proceedings would not require the

decision of other federal questions that might also require review by

the Court at a later date”) (emphasis added).

3

If the Court agrees with AT&T that this extraterritorial

regulation violates the Commerce Clause per se, that deci-

sion will end litigation of RLH’s claims.

RLH’s sole jurisdictional argument is thus that denial

of review would not risk “seriously erod{ing] federal pol-

icy.” Cox, 420 U.S. at 483; see Opp. 10.2 That assertion is

demonstrably incorrect: failure to review the California

court’s decision would have particularly acute conse-

quences for federal policy. The principle that a State may

regulate only within its jurisdiction is fundamental to our

constitutional structure, finding expression in three sepa-

rate constitutional provisions: the Commerce Clause, the

Due Process Clause, and the Full Faith and Credit

Clause. See Pet. 14 n.4; New York Life Ins., 234 U.S. at

161 (“[Ijt would be impossible to permit the statutes of

Missouri to operate beyond the jurisdiction of that state

... without throwing down the constitutional barriers...

upon the preservation of which the government under the

Constitution depends.”). As the Chamber of Commerce

and Verizon have properly emphasized in their amicus

brief (at 19-20) “[m]Jore than 150 years of Dormant Com-

merce Clause jurisprudence makes it clear that, until

Congress says otherwise, no State may dictate to the

other 49 a set of nationwide commercial rules.”

In setting aside this core principle, the lower court’s de-

cision has the immediate effect of permitting any Califor-

nia plaintiff to bring suit undzr California law to chal-

lenge conduct occurring wholly ‘n another State based on

the claim that alleged “benefits” to California (e.g., bene-

fits to a single California seller) outweigh the burdens of

extraterritorial regulation under a standardless balancing

test. The decision similarly invites plaintiffs in all other

States to bring suits under their States’ laws, thus ena-

bling all States to regulate commerce extraterritorially as

“ RLH misquotes Cox in stating that the “fourth Cox exception ts

only available when delaying review would ‘seriously erode . . . Consti-

tutional! policy, Cox, 420 U.S. at 483.” Opp. 10.

4

long as the plaintiff can assert some effect on a claimed .

interest of the State. Failure to grant review would thus

seriously erode the “basic principle of federalism . . . that

each State may make its own reasoned judgment about

what conduct is permitted or proscribed within its bor-

ders.” State Farm, 538 U.S. at 421-22.

This Court has consistently found decisions involving

less fundamental federal interests to be within the fourth

Cox category. Contrary to RLH’s suggestion that this

category is limited to First Amendment cases, see Opp. 10,

the Court has regularly granted review under Cox to safe-

guard particular federal statutes from state encroach-

ment. See, e.g., Mississippi Power & Light Co. v. Missis-

sippti ex rel. Moore, 487 U.S. 354, 370 n.11 (1988) (taking

jurisdiction to address whether FERC order preempted a

state agency from inquiring into the prudence of a plant);

Goodyear Atomic Corp. v. Miller, 486 U.S. 174, 179-80

(1988) (taking jurisdiction to address whether federal law

barred an additional workers’ compensation award based

on state standards); Belknap, Inc. v. Hale, 463 U.S. 491,

497 n.5 (1983) (reviewing a state-court decision regarding

preemption under the National Labor Relations Act).°

The threat to federal policy is significantly greater here,

where the issue is not the preemptive scope of a single

federal law, but the basic rules of the road limiting what

States may regulate under our constitutional structure.

The two cases relied upon by RLH are readily distin-

guishable. In Flynt v. Ohio, 451 U.S. 619 (1981) (per cu-

riam), the Court found “no identifiable federal policy that

* See also Ingersoll-Rand Co. v. McClendon, 498 U.S. 133 (1990)

(Employee Retirement Income Security Act preemption); Southland

Corp. v. Keating, 465 U.S. 1, 6-7 (1984) (Federal Arbitration Act pre-

emption); Hudson Distribs., Inc. v. Eli Lilly & Co., 377 U.S. 386, 389

n.4 (1964) (exemption of state fair trade act from prohibitions of the

Sherman Act); Mercantile Natl Bank v. Langdeau, 371 U.S. 555, 557-

58 (1963) (venue under national banking legislation); Local No. 438

Constr. & Gen. Laborers’ Union v. Curry, 371 U.S. 542, 548-51 (1963)

(National Labor Relations Act preemption).

5

will suffer if the state criminal proceeding goes forward”

because there was “no reason to treat this selective prose-

cution claim differently than we would treat any other

claim of selective prosecution.” /d. at 622-23. Johnson v.

California, 541 U.S. 428 (2004) (per curiam), involved a

Batson claim, and the Court concluded that “petitioner

can make no convincing claim of erosion of federal policy

that is not common to all decisions rejecting a defendant’s

Batson claim.” Id. at 430. Unlike Flynt and Johnson, this

case does not involve the application of a well-settled con-

stitutional rule to particular facts. Rather, it involves a

purely legal question of enormous general policy signifi-

cance: whether direct extraterritorial regulation is a per

se violation of the Commerce Clause.

II. The Circuits Are In Square Conflict Over

Whether Direct Regulation Of Wholly Extra-

territorial Conduct Is A Per Se Violation Of

The Commerce Clause

Nothing in RLH’s opposition brief diminishes the sharp

conflict between the circuits on the question whether ex-

traterritorial regulation is unconstitutional per se. The

Second, Seventh, Ninth, and Tenth Circuits have clearly

endorsed the per se rule, finding it unnecessary to rely on

the balancing test of Pike to invalidate a state statute con-

trolling conduct occurring wholly outside the State. See

American Booksellers Found., 342 F.3d at 103-04 (2d Cir.)

(“no need to apply the Pike balancing test” because Ver-

mont had “projected its legislation into other States” and

“directly regulated commerce therein, in violation of the

dormant Commerce Clause”) (internal quotation marks

omitted); National Solid Wastes, 63 F.3d at 657-60 (7th

Cir.) (invalidating statute that “essentially controls the

conduct of those engaged in commerce occurring wholly

outside the State of Wisconsin and therefore directly regu-

lates interstate commerce” without engaging in Pike bal-

ancing); NCAA, 10 F.3d at 639-40 (9th Cir.) (Nevada stat-

ute with “extraterritorial effect” was “a per se violation of

the Commerce Clause”); ACLU, 194 F.3d at 1161 (10th

6

Cir.) (New Mexico statute “represents an attempt to regu-

late interstate conduct occurring outside New Mexico’s

borders, and is accordingly a per se violation of the Com-

merce Clause”). RLH attempts to muddy the issue by

claiming that these decisions invalidated statutes after

determining that in “practical effect” the statutes “unduly

burdened” interstate commerce. Opp. 12-14. RLH is

wrong. Each of these decisions held that, because the

statute at issue regulated wholly extraterritorial conduct,

it was invalid per se. See American Booksellers, 342 F.3d

at 104; National Solid Wastes, 63 F.3d at 658; NCAA, 10

F.3d at 640; ACLU, 194 F.3d at 1161.

These circuit court decisions thus squarely conflict with

the decision below, which conceded that RLH’s lawsuit

sought to control commercial conduct outside of Califor-

nia, but held that its constitutionality nevertheless turned

on the outcome of a balancing test. See Pet. App. 15a-16a.

Indeed, the lower court believed that this Court’s per se

rule against direct extraterritorial regulation was re-

stricted to the context of price-affirmation statutes, a

proposition that the Second and Seventh Circuits have

specifically rejected. Compare id. at 13a with American

Booksellers, 342 F.3d at 103-04, and National Solid

Wastes, 63 F.3d at 659-60.

Like the California court, the First and Eighth Circuits

have refused to recognize the per se rule against direct

extraterritorial regulation. See Grant’s Dairy, 232 F.3d at

19 (“thle] reference to direct regulation as a basis for in-

validation has not been repeated in subsequent Supreme

Court opinions and it does not fit into the West Lynn

framework”) (citations omitted); Southern Union, 289

F.3d at 508 (“liJn its recent Commerce Clause decisions,

the Supreme Court has limited its per se rule of invalidity

to provisions that patently discriminate against interstate

trade”) (internal quotation marks omitted). RLH does not

deny that these decisions reject the per se rule; rather,

RLH argues that the First Circuit’s position is better en-

capsulated in Pharmaceutical Research & Manufacturers

7

of America v. Concannon, 249 F.3d 66 (1st Cir. 2001),

aff'd, 538 U.S. 644 (2003), than in Grant’s Dairy, and that

the Eighth Circuit’s position is better represented in Cotto

Waxo Co. v. Williams, 46 F.3d 790 (8th Cir. 1995), than in

Southern Union (despite the fact that Southern Union is

the more recent case). Concannon, however, dealt with a

statute that it found did not regulate transactions or con-

duct occurring wholly outside the State, see 249 F.3d at

81-82; thus, it did not have to hold that such direct extra-

territorial regulation was or was not per se unconstitu-

tional. Similarly, because Cotto Waxo found that the

statute at issue did not have “extraterritorial reach,” 46

F.3d at 793-94, it too did not need to hold that direct ex-

traterritorial regulation was or was not per se invalid.

Ill. The Decision Below Conflicts With Controlling

Supreme Court Law

RLH does not dispute that this Court has endorsed a

two-tiered approach to dormant Commerce Clause juris-

prudence: a state statute that “directly regulates . . . in-

terstate commerce” is unconstitutional “without further

inquiry,” while a statute that “has only indirect effects on

interstate commerce and regulates evenhandedly” is un-

constitutional if “the burden on interstate commerce

clearly exceeds the local benefits.” Brown-Forman, 476

U.S. at 579 (emphases added). As the Court explained in

Healy, “the Commerce Clause ... precludes the applica-

tion of a state statute to commerce that takes place wholly

outside of the State’s borders, whether or not the com-

merce has effects within the State.” 491 U.S. at 336 (em-

phasis added; alteration in original).

Nevertheless, RLH contends that the lower court “cor-

rectly applied the first tier of this Court’s two-tier Com-

merce Clause analysis.” Opp. 17. That is manifestly

false. The lower court simply ignored the per se “first tier”

of the Court’s analysis by stating that, in all cases,

Commerce Clause jurisprudence “focuses on the balance

between the state law’s benefits to local commerce and

its burdens upon interstate commerce, not simply on

8

the location of the challenged conduct.” Pet. App. 15a

(emphasis added). RLH’s argument that the lower court

sanctioned extraterritorial regulation only when out-of-

state conduct causes harm in California, see Opp. 19, is

beside the point. Controlling wholly out-of-state conduct

is impermissible “whether or not the commerce has effects

within the State,” Healy, 491 U.S. at 336 (emphasis

added; internal quotation marks omitted).

RLH’s suggestion that other jurisdictions have upheld

state antitrust statutes with “incidental effects” on inter-

state commerce, Opp. 19-20, is similarly irrelevant. The

impact on interstate commerce here is direct, rather than

an “incidental” consequence of regulation of in-state activ-

ity. See Pet. 11-12.

Finally, contrary to RLH’s assertion, AT&T never con-

ceded “that a nexus between out-of-state anticompetitive

conduct and in-state impact upon consumers or markets”

would prevent extraterritorial regulation from violating

the Commerce Clause. Opp. 22. Rather, AT&T explained

that direct regulation of wholly extraterritorial conduct

is impermissible even when that conduct has in-state

effects, but that the lower court also erred in concluding

that any injury to RLH from the alleged conduct of

AT&T’s out-of-state subsidiaries amounted to a substan-

tial effect on California commerce. See Pet. 12-13. In any

event, the distinction between an impact on markets and

an impact solely on a potential plaintiff is hardly a “dis-

tinction without a difference,” Opp. 22, in antitrust law.

Matsushita specifically found that an injury to plaintiffs,

which were U.S. companies, did not amount to an effect

on U.S. commerce warranting application of the Sherman

Act. 475 U.S. at 582 & n.6. Similarly, an injury to RLH is

not a substantial effect on California commerce.

IV. This Case Is A Superior Vehicle For The Ques-

tion Presented

This case cleanly presents a pure question of law:

whether direct regulation of wholly extraterritorial con-

duct is a per se violation of the Commerce Clause, or

9

whether its constitutionality turns on the outcome of a

balancing test. RLH attempts to obscure the question

presented by distorting the facts of the case. RLH first

suggests that the claims at issue in this petition are based

on RLH’s efforts to sell HVP devices in California. See

Opp. 3. That is false: RLH asserted claims based on its

activities in California only against Pacific Bell, the local

telephone company in California. RLH could not assert

such claims against AT&T’s out-of-state subsidiaries,

which do not provide local telephone service in California,

and thus could not have prevented California customers

from purchasing RLH’s equipment through any alleged

tying arrangement. The claims against Pacific Bell have

been dismissed and are not at issue here. See Pet. 4 n.2.

Nor does AT&T “fail[] to acknowledge that its conduct

has caused injury to California commerce,” Opp. 4. The

only injury from the alleged anticompetitive conduct of

AT&T's out-of-state subsidiaries identified by RLH is to

RLH itself, and an injury to a California plaintiff is not an

injury to California commerce. Even now, RLH relies on

the “‘ripple’ effects” of the harm to RLH on RLH’s employ-

ees and suppliers. Opp. 5 n.3. But if such “ripple effects”

of injury sustained by a California resident in its efforts to

compete outside the State constitute an injury to Califor-

nia commerce, then the “ripple effects” of injuries to the

plaintiffs in Matsushita would surely have constituted an

effect on U.S. commerce. On that theory, any State would

be able to regulate commerce occurring in other States

that has a financial impact on one of its residents.‘

* RLH is also wrong to suggest that “California was the locus of part

of the allegedly wrongful conduct” described in RLH’s complaint. Opp.

4. RLH did allege in its Second Amended Comp/aint that an employee

of “PacBell and/or SBC” based in California, Don Murray, participated

in a uniform decision by AT&T's non-California subsidiaries not to ap-

prove use of RLH’s HVP equipment. Pet. App. 32a (€ 24). However, it

is undisputed that Mr. Murray was in fact an employee of a third

party, SBC Services, Inc., not of SBC Communications Inc. or of Pacific

Beli. Before the Court of Appeal, RLH did not rely on any alleged in-

state conduct by Mr. Murray as a basis for application of California law

10

RLH further errs in suggesting that any factual dis-

putes regarding the status of filed tariffs in other States

bear on the Court’s consideration of the question pre-

sented. While the existence of these tariffs illustrates the

inconsistent regulation that results when States govern

extraterritorially, it is irrelevant to the question whether

RLH’s lawsuit violates the Commerce Clause per se. The

point of a per se rule is precisely that constitutionality

does not turn on the extent of the conflict in a particular

case.

RLH’s next error is to claim that the decision below is of

limited practical significance. In fact, the decision is

highly significant because it squarely rejects the core

principle that a State may not regulate conduct occurring

wholly outside its borders. The lower court’s decision is of

particular concern because it is not restricted to the con-

text of state antitrust statutes. Indeed, the court held

that the per se rule against direct extraterritorial regula-

tion was itself restricted to the context of price-

affirmation statutes. See Pet. App. 13a. The decision

thus has enormous practical import: it requires compa-

nies across the nation that conduct no business in Cali-

fornia or with California consumers to conform their ac-

tions to California law, given the possibility that a Cali-

fornia resident may believe itself injured by conduct out-

side the State. See Pet. 19-23.°

CONCLUSION

The petition for a writ of certiorari should be granted.

to the activity of AT&T's non-California subsidiaries. See Appellant's

Reply Br. at 17-25. The court itself similarly did not rely on any al-

leged conduct by Mr. Murray.

° RLH suggests in passing that the Court's denial of certiorari in

Beretta U.S.A. Corp. v. District of Columbia, 126 S. Ct. 399 (2005) (No.

05-118), means that it should deny review here. The lower court in

Beretta, however, found that the state statute at issue did not directly

regulate commerce outside the State. See District of Columbia v.

Beretta U.S.A. Corp., 872 A.2d 633, 657 (D.C. 2005). Thus, Beretta did

not squarely present the issue raised in this petiiion.

JAVIER AGUILAR

WILLIAM M. SCHUR

AT&T SERVICES, INC.

175 E. Houston Street

4th Floor

San Antonio, Texas 78205

(210) 351-3409

Respectfully submitted,

MICHAEL K. KELLOGG

Counsel of Record

SEAN A. LEV

PRIYA R. AIYAR

KELLOGG, HUBER, HANSEN,

TODD, EVANS & FIGEL,

P.L.L.C.

1615 M Street, N.W.

Suite 400

Washington, D.C. 20036

(202) 326-7900

Counsel for Petitioner

July 5, 2006