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ITT WORLD COMMUNS., INC. v. WESTERN UNION TEL. CO.

December 6, 1984

ITT WORLD COMMUNICATIONS, INC., et al., Plaintiffs, against THE WESTERN UNION TELEGRAPH COMPANY, Defendant; RCA GLOBAL COMMUNICATIONS, INC., Plaintiff, against THE WESTERN UNION TELEGRAPH COMPANY, Defendant.


The opinion of the court was delivered by: LASKER

LASKER, D.J.

In earlier determinations, plaintiffs *fn1" motions for partial summary judgment were granted on the issue of defendant Western Union Telegraph Co.'s ("WU") liability to them for violating the Communications Act of 1934. 47 U.S.C. §§ 201-22 (1976). *fn2" Plaintiffs now move for summary judgment awarding ITT and RCA respectively: (1) approximately $1.2 million and $1 million in actual damages; and (2) pre-judgment interest on those amounts. WU does not di the actual damage amounts but opposes an award of pre-judgment interest. For the reasons discussed below, the motion is granted as to actual damages and pre-judgment interest.

 I.

 The facts and history of this case are set forth in the opinions cited in the margin below and in ITT World Communications, Inc. v. FCC, 635 F.2d 32, 45 (2d Cir. 1980). This litigation resulted from WU's unlawful entry into the market for international telecommunications services in September of 1979 -- an act prohibited under Section 222 of the Communications Act, 47 U.S.C. §§ 222(c)(2) & (e) (1976), *fn3" as made manifest by the Court of Appeals for the Second Circuit in Western Union International, Inc. v. FCC, 544 F.2d 87, 92 (2d Cir. 1976), cert. denied, 434 U.S. 903, 54 L. Ed. 2d 189, 98 S. Ct. 299 (1977)("Mailgram"). Although the Federal Communications Commission ("FCC") issued a December, 1979 order sanctioning WU's conduct, the Court of Appeals set aside that order and emphasized that its Mailgram opinion had "firmly settled" the rule prohibiting WU from engaging in "international telegraph operations" at any time. ITT World Communications Inc. v. FCC, supra, 635 F.2d at 40. When WU continued to solicit customers for its international service even after the Court of Appeals had ruled, the company was cited by the court for its "contemptuous conduct." Id. at 47.

 RCA subsequently filed its suit captioned above to recover damages under the Communications Act which, in an opinion published at 521 F. Supp. 998, survived defendant's motion to dismiss. Following that decision, three ITT subsidiaries amended their pending antitrust complaint against WU to include Communications Act claims. Summary judgment as to WU's liability under the Communications Act was granted to both groups of plaintiffs by way of unpublished endorsements dated February 26, 1982. *fn4" Plaintiffs in both actions have now jointly moved for summary judgment to obtain awards of actual damages and pre-judgment interest.

 II.

 WU does not oppose the actual damage amounts sought by plaintiffs and that portion of their motion is accordingly granted.

 WU does, however, vigorously oppose an award of pre-judgment interest on several grounds: that the company obtained no "windfall" from its illegal conduct; that because the amount of damages in dispute was not independently ascertainable by WU an award of prejudgment interest is "inappropriate as a matter of law;" that such an award is also "inappropriate" because WU resisted plaintiff's claims based upon substantial legal defenses and acted without any "dark or evil purpose;" that an award of attorney's fees under the Communications Act is sufficient; that a prejudgment interest award based upon the daily prime interest rate is excessive; and that equitable principles do not favor an award.

 With respect to the last point, WU contends that a number of factors have inflated the size of plaintiffs' damage claims.WU concedes that plaintiffs' claims are based upon the WU's own study of its contingent liability. It argues, however, that, because RCA's share of that market has consistently declined since 1959, plaintiffs have overstated their losses resulting from WU's illegal entry into the international telecommunications market and that any loss of market share should be attributed to that decline, not WU's unlawful entry.WU also refers to ITT internal memoranda which suggest that ITT's losses from WU's market entry were less than half of its claimed actual damages. WU further asserts that its market entry did not cause plaintiffs to lose shares of the market in question because it offered its service at a lower price than RCA and ITT, thereby expanding demand, and the market, for international telecommunications. In addition, WU claims plaintiffs exaggerated the size of their market shares when they calculated their actual damages because the presence of "pirate" international telecommunications carriers makes the acutal market for these services larger than the one plaintiffs assume exist. Finally, WU contends that plaintiffs' claims are overstated because they are based only upon estimates of lost revenues, do not take into account the cost of handling additional telecommunications, and because the rates which the plaintiffs rely upon to develop their damage estimates are too high.

 Plaintiffs do not address WU's economic arguments. They rely, rather on the substantial weaknesses in WU's legal defense which supported the conclusion in the earlier opinion that "[r]ather than relying on any rule of law [to justify its entry into the international telecommunications market], it would appear that WU begain its overseas operation in blatant violation to the extant law." RCA Global Communications, Inc. v. Western Union Telegraph Co., supra, 521 F. Supp. at 1005.Plaintiffs have also appended to their reply memorandum a copy of a full page WU advertisement which ran in major newspapers in October of 1979 introducing their unlawful service and stating "Western Union would like to go overseas directly, but the law [,namely, the Communications Act,] says we can't. To prove a point about this obsolete law . . . Western Union has recently decided to work out an alternative solution." As discussed above, however, the Court of Appeals held that the "solution" in question was prohibited by the law then in force. See ITT World Communications Inc. v. FCC, supra, 635 F.2d at 40. In addition, plaintiffs note that WU was cited for contempt for its refusal to abide by the Court of Appeals' decision. See id. at 47.

 Plaintiffs also assert that the amount of damages in dispute was readily ascertainable, as evidenced by WU's study of its own possible liability to the plaintiffs, and that even if this were not the case, they are not precluded as a matter of law from recovering pre-judgment interest. Plaintiffs argue that the equities of the case support such an award to compensate them for revenues which otherwise would have been available for their use. They also point out that equitable considerations justify an award in this instance in light of, inter alia, WU's knowing violation of the Communications Act, its citation for contempt by the Court of Appeals, and its unnecessary delay in providing documents to expedite a determination of its actual liability.

 III.

 We find, contrary to WU's assertions, that it is not "inappropriate" as a matter of law to award plaintiffs pre-judgment interest. Indeed, the cases which the company relies upon in support of this proposition are in harmony with the Court of Appeals view that a pre-judgment interest award

 "in cases arising under federal law has in the absence of a statutory directive been placed in the sound discretion of the district courts." Lodges 743 & 1746, International Association of Machinists v. United Aircraft Corp., 534 F.2d 422, 446 (2d Cir. 1975), cert. denied, 429 U.S. 825, 97 S. Ct. 79, 50 L. Ed. 2d 87 (1976). Consistent with this general principle, we have repeatedly recognized the power of district courts to award pre-judgment interst. See, e.g., id. at 446-47; Chris-Craft Industries, Inc. v. Piper Aircraft Corp., 516 F.2d 172, 191 (2d Cir. 1975), rev'd on other grounds, 430 U.S. 1, 97 S. Ct. 926, 51 ...


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