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Law Offices of Curtis V. Trinko, LLP v. Verizon Communications Inc.

September 27, 2006

LAW OFFICES OF CURTIS V. TRINKO, LLP, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFF,
v.
VERIZON COMMUNICATIONS INC., DEFENDANT.



The opinion of the court was delivered by: Sidney H. Stein, U.S. District Judge

OPINION & ORDER

I.Introduction

In the classic Guy de Maupassant tale The Necklace, a once-proud social climber toils and travails for ten years to replace a diamond necklace she had borrowed and lost. Only years later, with her life ruined, does the protagonist learn that the diamonds were fakes. Similarly here, after six years of contentious and costly litigation, it has come to light that plaintiff's claims have been based on a false premise and need be dismissed.

From the beginning, plaintiff -- the law offices of Curtis V. Trinko, LLP -- set forth the following story: as a new customer of AT&T, which had recently started to compete with Verizon*fn1 for local phone customers as a result of the Telecommunications Act of 1996, Trinko received inferior phone service because Verizon was not affording AT&T equal access to the "local loop" of Verizon-controlled telephone wires. Trinko first made this allegation in its original complaint, filed in 2000, and has stuck with this basic narrative through two dismissals by this Court and subsequent appeals to the United States Court of Appeals for the Second Circuit and the U.S. Supreme Court. Trinko's theory is that by discriminating against customers of AT&T, Verizon violated the Federal Communications Act and tortiously interfered with those customers' contracts with AT&T.

Now that the relevant discovery has been completed, however, it is clear that the allegedly "discriminatory" service problems Trinko complained of lasted for only four months, ending in February 1999. This might be enough to survive dismissal, but for one crucial wrinkle: plaintiff did not become a customer of AT&T until five months afterwards, in July of that year. Thus, there is no evidence that Trinko ever suffered as a result of Verizon's purported discriminatory conduct, which is the only basis for Trinko's claims. For this reason, defendant's motion for summary judgment is granted.

II.Background

According to Trinko, the genesis of this action dates back to 1982, when American Telephone and Telegraph ("AT&T") lost its decades-long domination of the telecommunications market by entering into a consent decree with the United States Department of Justice requiring it to split from its local subsidiaries, known as "Baby Bells," through which it had provided local telephone service. (Second Amended Complaint ("SAC") ¶¶ 4-5.) Although the decree encouraged competition in the long distance telephone service and equipment markets, it failed to make similar competitive reforms in the markets for local telephone services, which the Baby Bells controlled. (Id. ¶¶ 5-6.)

Congress attempted to plug this regulatory loophole by passing the Telecommunications Act of 1996 (the "1996 Act"), Pub. L. No. 104-104, 110 Stat. 56, which amended the Federal Communications Act of 1934, 47 U.S.C. § 151 et seq., and endeavored to divest the Baby Bells of monopoly control over local telephone services in their respective markets. See Verizon Commc'ns Inc. v. FCC, 535 U.S. 467, 488, 122 S.Ct. 1646, 152 L.Ed. 2d 701 (2002); SAC ¶ 8. The 1996 Act dubbed the Baby Bells incumbent "Local Exchange Carriers" ("LECs") and required them to undertake certain efforts to allow newcomers, styled as "competitive" LECs, to enter the marketplace as providers of local telephone services. See 47 U.S.C. § 251(c); Verizon Commc'ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 402, 124 S.Ct. 872, 157 L.Ed. 2d 823 (2004).

One of the Act's provisions enables competitive LECs to use elements of an incumbent's local network on an "unbundled" basis. 47 U.S.C. § 251(c)(3); see Trinko, 540 U.S. at 402. The competitors can combine these unbundled network elements with elements from their own networks to provide local telephone service to the public. 47 U.S.C. § 251(c)(3); see Trinko, 540 U.S. at 402. One of the elements that incumbents must unbundle and provide nondiscriminatory access to is the "local loop" -- i.e., the copper telephone wire leading from a residence to a switching center that allows customers to make and receive local calls. See 47 C.F.R. § 51.319; Decl. of Beth A. Abesamis dated Nov. 4, 2005 ("Abesamis Decl.") ¶ 6.

Following the passage of the 1996 Act, Verizon was the incumbent LEC serving New York City, where Trinko was located. (SAC ¶ 17.) On March 9, 2000, Verizon entered into a consent decree with the Federal Communications Commission pursuant to which the company paid a $3 million fine to end an investigation into its alleged failure to provide adequate access to local phone service competitors in New York as required by the 1996 Act. See Press Release, http://www.fcc.gov/eb/News_Releases/bellatl.html (last visited Aug. 14, 2006); Law Offices of Curtis V. Trinko, LLP v. Bell Atlantic Corp., 123 F. Supp. 2d 738, 740 (S.D.N.Y. 2000). Trinko filed its initial complaint in this action the next day.

That first complaint was brought on behalf of Trinko and a class of "all those who were customers of a company other than [Verizon] with respect to the provision of Local Phone Service in the Geographic Market at any time since February 6, 1996 and who were damaged by the conduct complained of herein." (Compl. ¶ 35.) Trinko alleged that customers of competitive LECs had been harmed because Verizon provided them with "a level of service that is materially below the level that is accorded customers of [Verizon] in functionally identical circumstances." (Compl. ¶12.) The complaint asserted that such "discrimination" and "anticompetitive" use of Verizon's "monopoly power" over the local loop it controlled amounted to violations of sections 251 and 202(a) of the Communications Act of 1934 and section 2 of the Sherman Antitrust Act, as well as tortious interference with the prospective class members' contracts with Verizon's rivals. (Compl. ¶¶ 43-77.)

The Court dismissed that complaint for (1) failure to state a claim pursuant to the Sherman Act because Verizon's alleged conduct was not "anticompetitive" within the meaning of the antitrust laws; and (2) lack of prudential standing as to the Communications Act claims because that law prohibits only discrimination against a carrier's own customers and does not cover damages based on the rights of a third party such as a competitive LEC. See Law Offices of Curtis V. Trinko, LLP v. Bell Atlantic Corp., 123 F. Supp. 2d 738 (S.D.N.Y. 2000). The Court also denied Trinko's subsequent motion for reconsideration. See Law Offices of Curtis V. Trinko LLP v. Bell Atlantic Corp., No. 00 Civ. 1910, Order (S.D.N.Y. Jan. 9, 2001).

Trinko then filed its First Amended Complaint ("FAC"), which in most respects was identical to the first but also specified that Trinko was a customer of AT&T and had "suffered injury to its business" as a result of Verizon's alleged discriminatory conduct. (FAC ¶ 23.)

The Court dismissed the FAC for essentially the same reasons that it dismissed the original complaint. See Law Offices of Curtis V. Trinko LLP v. Bell Atlantic Corp., No. 00 Civ. 1910, Order (S.D.N.Y. Apr. 26, 2001).

Trinko appealed that decision to the U.S. Court of Appeals for the Second Circuit, which affirmed the dismissal of Trinko's claim pursuant to section 251 of the Communications Act but reinstated its claims pursuant to section 202(a) of the Communications Act, which prohibits "unreasonable discrimination" in the provision of telephone services, and section 2 of the Sherman Act. Law Offices of Curtis V. Trinko, LLP v. Bell Atlantic Corp., 305 F.3d 89 (2d Cir. 2002); 47 U.S.C. ยง 202(a). With regard to the Communications Act, the Second Circuit reasoned that the doctrine of prudential standing did not bar Trinko's section 202(a) claim because Trinko's right to sue stemmed from sections 206 and 207 of the Act, which make parties who violate other of its provisions, including section 202(a), liable to parties they injure through such violations. Id. at 99. Because Trinko alleged that (1) Verizon violated section 202(a) by discriminating against AT&T's customers and (2) Trinko was directly injured by this conduct "because it received poor local phone service," Trinko had properly stated a claim pursuant to the Communications Act. Id. at 99-100. ...


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