The opinion of the court was delivered by: Arcara, District Judge.
Currently before the Court is the motion of defendants NYNEX
Corporation, NYNEX Material Enterprises ("MECo"), and New York
Telephone ("NYT"), (referred to collectively herein as "NYNEX"),
pursuant to Rules 12(b)(6) and 56 of the Federal Rules of Civil
Procedure, for summary judgment dismissing the complaint. Oral
argument on the motion was held on January 21, 2000. After
reviewing the submissions of the parties and hearing oral
argument from counsel, the Court grants defendants' motion for
This case involves the sale to telephone companies of "removal
services" — i.e., the dismantling and hauling away of telephone
switching equipment from telephone company central offices.
Plaintiff Discon, Incorporated ("Discon"), a company formed in
1984, see Second Amended Complaint at ¶ 36, sold such services
to NYNEX beginning in 1984, when NYNEX became independent of
American Telephone and Telegraph Company ("AT & T") in the Bell
System breakup. See United States v. American Tel. & Tel. Co.,
552 F. Supp. 131 (D.D.C. 1982), aff'd sub nom., Maryland v.
United States, 460 U.S. 1001, 103 S.Ct. 1240, 75 L.Ed.2d 472
(1983).*fn1 In 1986, NYNEX decided to use AT & T Technologies,
rather than Discon, as a supplier of removal services.*fn2
Discon brought this action against NYNEX in 1990, asserting,
inter alia, several antitrust claims based on the 1986
termination of Discon as a supplier to NYNEX. The gist of
Discon's challenge is that this choice, alleged to have been made
pursuant to an agreement with AT & T Technologies, was designed
improperly to raise the rates that regulators would allow NYNEX
to charge its customers for telephone service. This Court
dismissed Discon's initial complaint, with leave to refile.
Discon, Inc. v. NYNEX Corp., 1992 WL 193683 (W.D.N.Y. June 23,
1992). Discon then filed an amended complaint, which the Court
subsequently dismissed with prejudice. Discon, Inc. v. NYNEX
Corp., Decision and Order, 90-CV-546A (W.D.N.Y. June 7,
On appeal, the Second Circuit affirmed the dismissal of all but
two of Discon's antitrust claims, as to which it reversed.
Discon, 93 F.3d at 1058-62. With respect to § 1 of the Sherman
Act, 15 U.S.C. § 1, the Second Circuit agreed with this Court in
rejecting Discon's theories alleging a horizontal agreement and
vertical price-fixing, thereby recognizing that the case involves
only an alleged non-price, vertical (supplier-purchaser)
agreement between NYNEX and AT & T Technologies. See id. at
1060 n. 5. The Second Circuit, however, revived the § 1 claim
under a different legal theory from that argued by Discon,
holding that "Discon has alleged a
cause of action under, at least, the rule of reason, and possibly
under the per se rule applied to group boycotts . . ., if the
restraint of trade has no purpose except stifling competition."
Id. at 1061 (internal quotations omitted). In distinguishing
this case from the "vast majority of cases" involving a buyer's
"decision to discriminate in favor of one supplier over another,"
the Second Circuit focused only on the alleged ratepayer
exploitation, concluding that NYNEX's alleged decision to choose
"a more costly supplier in order to overcharge rate-paying
customers" could itself constitute "entirely anticompetitive"
conduct. Id. The Second Circuit did not examine the removal
services market or discuss any grounds for inferring a
market-wide anticompetitive effect from the challenged conduct.
As to Discon's claims under § 2 of the Sherman Act,
15 U.S.C. § 2, that NYNEX had monopolized and attempted to monopolize the
alleged market for removal services, the Second Circuit affirmed
the dismissal, explaining that NYNEX was not even a competitor,
let alone an actual or threatened monopolist, in that market.
Discon, Inc., 93 F.3d at 1062. But, the Second Circuit revived
the third of Discon's § 2 claims, specifically, that NYNEX had
engaged with AT & T Technologies in a "conspiracy to monopolize."
Id. Although Discon asserted that the conspiracy was intended
to make a monopolist out of NYNEX, the Second Circuit disagreed
and revived the claim on the ground that Discon had sufficiently
alleged that NYNEX had instead conspired to make a removal
services monopolist out of AT & T Technologies, which was
allegedly Discon's principal rival in the provision of removal
The Supreme Court vacated the Second Circuit's judgment and
remanded for further proceedings. NYNEX Corp. v. Discon, Inc.,
525 U.S. 128, 119 S.Ct. 493, 142 L.Ed.2d 510 (1998). With respect
to the § 1 claim, the Supreme Court held that "the per se group
boycott rule does not apply" to "a buyer's decision to buy from
one seller rather than another," even "when that decision cannot
be justified in terms of ordinary competitive objectives." Id.
at 130, 119 S.Ct. 493. The Court stated:
[T]he specific legal question before us is whether an
antitrust court considering an agreement by a buyer
to purchase goods or services from one supplier
rather than another should (after examining the
buyer's reasons or justifications) apply the per se
rule if it finds no legitimate business reason for
that purchasing decision. We conclude no
boycott-related per se rule applies and that the
plaintiff here [Discon] must allege and prove harm,
not just to a single competitor, but to the
competitive process, i.e., to competition itself.
Id. at 135, 119 S.Ct. 493. Thus, in sum, the Supreme Court held
that, even assuming NYNEX's decision to deal exclusively with AT
& T Technologies emanated from some corrupt or improper motive,
Discon cannot succeed on its § 1 claim unless it alleges and
proves that NYNEX's action caused harm, not just to Discon
itself, but to competition as a whole in the relevant market. The
Court held that this requirement to allege and prove market-wide
anticompetitive effects applied to both the § 1 and § 2
conspiracy claims. Id. at 139, 119 S.Ct. 493.
Further parting company with the Second Circuit, the Supreme
Court found that any harm to telephone ratepayers resulting from
NYNEX's behavior was not sufficient to prove harm to competition,
because any such consumer injury naturally flowed from the
exercise of market power that is lawfully in the hands of a
monopolist, namely NYNEX. Id. at 136, 119 S.Ct. 493. The Court
also rejected Discon's reliance on what Discon alleged to be a
"special anticompetitive motive" to "drive Discon from the market
lest Discon reveal [MECo's] behavior to [NYT] or to the relevant
regulatory agency," noting that, as a logical matter, terminating
at least as likely to provoke exposure of the regulatory
misconduct, as it was to promote a cover-up. Id. at 137-38, 119
S.Ct. 493. Finally, the Supreme Court pointed out that Discon's
own First Amended Complaint "suggests the presence of other
potential or actual competitors, which fact, in the
circumstances, could argue against the likelihood of
anticompetitive harm." Id. at 138-39, 119 S.Ct. 493. In this
regard, the Court made specific reference to allegations: (1)
that NYNEX itself was a potential competitor able to perform its
own removals; (2) that "other nearby small local telephone
companies needing removal services must have worked out some way
to supply them;" and (3) that "entry [into the removal business]
was easy, perhaps to the point where other firms, employing
workers who knew how to remove a switch and sell it for scrap,
might have entered that business almost at will." Id. at 139,
119 S.Ct. 493. The existence of these other actual or potential
competitors "might have provided roughly similar checks upon
`equipment removal' prices and services with or without Discon,"
and argued against any harm to competition arising from Discon's
Despite NYNEX's request that it do so, the Supreme Court
declined to rule on the adequacy of Discon's allegations of
market-wide anticompetitive effects because, in the Court's view,
such a ruling was beyond the scope of the questions presented in
NYNEX's certiorari petition. Id. at 140, 119 S.Ct. 493.
Accordingly, the Supreme Court remanded the case to the Second
Circuit for further proceedings consistent with its opinion.
On remand, the Second Circuit decided, in turn, to remand the
case to this Court for further proceedings. Discon, Inc. v.
NYNEX Corp., 184 F.3d 111, 114 (2d Cir. 1999). The Second
Circuit emphasized the Supreme Court's requirement that Discon
"`must allege and prove harm, not just to a single competitor,
but to the competitive process, i.e., to competition itself.'"
Id. (quoting NYNEX, 525 U.S. at 135, 119 S.Ct. 493). The
Second Circuit instructed this Court to afford Discon the
opportunity to amend its complaint to refine its allegations in
light of the Supreme Court's decision, while leaving NYNEX "free
to challenge whatever showing Discon can make." Id. The Second
Circuit noted that "[i]t may well be difficult for Discon to
resist a motion by NYNEX for summary judgment on the issue of
lack of an adequate showing of injury to competition . . ." Id.
On October 18, 1999, Discon filed its Second Amended Complaint.
The Second Amended Complaint asserts claims under §§ 1 and 2 of
the Sherman Act and various state law claims. On November 18,
1999, NYNEX moved for summary judgment.
A. Summary Judgment Standard
"By avoiding wasteful trials and preventing lengthy litigation
that may have a chilling effect on pro-competitive market forces,
summary judgment serves a vital function in the area of antitrust
law." Tops Mkts., Inc. v. Quality Mkts., Inc., 142 F.3d 90, 95
(2d Cir. 1998) (citations omitted). "The standard for summary
judgment applies equally to antitrust cases as to any other
case." United Air Lines, Inc. v. Austin Travel Corp.,
867 F.2d 737, 742 (2d Cir. 1989) ...