Reverses in Pacific Bell v. Linkline
2/25. The Supreme Court
opinion [24 pages in PDF] in Pacific Bell v. Linkline
Communications, reversing the judgment of the
U.S. Court of Appeals
The plaintiffs are LinkLine Communications and other internet service
providers (ISPs) that sell DSL internet access to their retail customers.
However, in order to be able to do this, they purchase access to the facilities
of the defendant, Pacific Bell Telephone Co.
The plaintiffs assert that the wholesale prices which AT&T charges them
(which they assert are too high), combined with the retail prices which AT&T
charges its customers (too low), leave them no room for profit. That is, the
high wholesale prices raise their costs, while AT&T's the low retail price force
them to offer service at the same low price.
In the terminology used by many judges and attorneys in this case, this is a
"price squeeze". Also, wholesale transactions are referred to as "upstream",
while retail sales are referred to as "downstream". Also, Pacific Bell is
referred to as "AT&T", an abbreviated name of its parent company.
The plaintiffs filed a complaint in the
U.S. District Court (CDCal), which
allowed the plaintiffs to proceed under Section 2 of the Sherman Act with a
price squeeze theory.
Section 2, which is codified at
15 U.S.C. § 2, makes it unlawful to
"monopolize, or attempt to monopolize, or combine or conspire
with any other person or persons, to monopolize any part of the trade or
commerce among the several States, or with foreign nations."
AT&T appealed, interlocutorily, to the 9th Circuit, which also allowed the
plaintiffs to proceed under their price squeeze theory.
The 9th Circuit issued its divided opinion, which is reported at 503 F. 3d
876, on September 11, 2007. The majority wrote that the issue is whether the
Supreme Court's January 13, 2004,
[22 pages in PDF] in Verizon v. Trinko, 540 U.S. 398, "bars a
plaintiff from claiming a violation of §2 of the Sherman Antitrust Act by virtue
of an alleged price squeeze perpetrated by a competitor who also serves as the
plaintiff's supplier at the wholesale level, but who has no duty to deal with
the plaintiff absent statutory compulsion." It held that it does
not. Judge Gould wrote a dissenting opinion.
AT&T filed a petition for writ of certiorari with the Supreme Court.
The Supreme Court requested a brief from the Department of Justice's (DOJ)
Office of the Solicitor General (OSG).
titled "Supreme Court Requests Solicitor General Brief in Telecom Antitrust
Case" in TLJ Daily
E-Mail Alert No. 1,704, January 23, 2008.
The OSG submitted an
amicus curiae brief in May in which it urged the Supreme Court to grant
certiorari because the 9th Circuit opinion is contrary to the Supreme Court's
The Supreme Court granted certiorari on June 23, 2008. See, story
titled "Supreme Court Grants Certiorari in Pacific Bell v.
E-Mail Alert No. 1,786, June 25, 2008.
The Supreme Court wrote that the
[PDF] is "Whether a plaintiff states a claim under Section 2 of the Sherman Act
by alleging that the defendant -- a vertically integrated retail competitor with
an alleged monopoly at the wholesale level but no antitrust duty to provide the
wholesale input to competitors -- engaged in a “price squeeze” by leaving
insufficient margin between wholesale and retail prices to allow the plaintiff
AT&T filed its
brief [PDF] on August 28, 2008. LinkLine filed its
brief [PDF] on October 14, 2008.
On September 12, 2008, the OSG filed an
amicus curiae brief
in which it argued that "In the absence of an antitrust duty to deal, an
allegation that a vertically-integrated defendant's wholesale prices are too
high in relation to its retail prices for retail-level rivals to compete does
not allege a claim under Section 2 of the Sherman Act."
The OSG added that "Because petitioners had no antitrust duty to deal with
respondents at the wholesale level, petitioners had no duty under the antitrust
laws to provide respondents with any particular wholesale price terms.
Accordingly, respondents' claim that petitioners' wholesale prices were too high
for respondents to compete at retail fails to state a Section 2 claim."
See, story titled "Solicitor General Files Amicus Brief in Pacific Bell v.
Linkline" in TLJ
Daily E-Mail Alert No. 1,825, September 15, 2008.
Both the OSG and the American
Antitrust Institute (AAI) moved for, and were
granted permission to, participate in oral argument. See, "More Supreme Court
News" in TLJ Daily
E-Mail Alert No. 1,858, November 18, 2008.
The AAI argued in its
amicus brief that the "potential
anticompetitive effects of a price squeeze by a vertically integrated
monopolist, like other forms of vertical foreclosure, are significant and well
known" and that "a price squeeze may constitute exclusionary conduct under
However, it also argued that the Supreme
Court should dismiss the case as moot, or in the alternative, not even "decide
whether a price squeeze should ever be an independent basis for a violation of
A group of free market antitrust
scholars, including Greg Sidak, Robert Crandall, and Robert Bork, argued in an
amicus brief [PDF] that "any rule of price-squeeze liability that threatens
liability based on the claim that the difference between a firm's upstream and
downstream prices leaves downstream rivals insufficient margin substitutes a
rule of competitor welfare for consumer welfare".
The also wrote that "a price
squeeze is a regulatory issue, which makes sense only as a rule of price
regulation in an industry already subject to duties to deal and to control by
institutionally competent regulators. Attempting to implement regulatory policy
through Section 2 of the Sherman Act is ill-advised, both because it makes no
sense for courts to re-regulate deregulated or lightly regulated industries, and
because courts lack the institutional competence to implement regulation."
The Supreme Court heard oral argument on December 8, 2008. It issued its
opinion on February 25, 2009.
Supreme Court Opinion. The Supreme Court reversed and remanded to the
9th Circuit. Chief Justice John Roberts wrote the opinion of the Supreme Court,
in which Justices Scalia, Kennedy, Alito and Thomas joined.
The Court first summarized the plaintiffs' claim. They "allege that a
competitor subjected them to a ``price squeeze´´ in violation of §2 of the
Sherman Act. They assert that such a claim can arise when a vertic
ally integrated firm sells inputs at wholesale and also sells finished
goods or services at retail. If that firm has power in the wholesale market, it
can simultaneously raise the wholesale price of inputs and cut the retail price
of the finished good. This will have the effect of ``squeezing´´
the profit margins of any competitors in the retail market. Those
firms will have to pay more for the inputs they need; at the same time, they
will have to cut their retail prices to match the other firm's prices."
The Court then wrote that "The question before us is whether
such a price-squeeze claim may be brought under §2 of the Sherman Act when the
defendant is under no antitrust obligation to sell the inputs to the plaintiff
in the first place."
The Court held that "no such claim may be brought", and
therefore reversed the judgment of the Court of Appeals.
Concurring Opinion. Justice Stephen Breyer wrote a concurring opinion,
in which Justices Stephens, Souter and Ginsburg joined.
He wrote that "I would accept respondents' concession that the Ninth
Circuit majority's ``price squeeze´´ holding is wrong, I would vacate the
Circuit's decision, and I would remand the case in order to allow the District
Court to determine whether respondents may proceed with their ``predatory
pricing´´ claim as set forth in Judge Gould's dissenting Ninth Circuit opinion."
Reaction. The AAI issued a
release [PDF]. It wrote that the Supreme Court "continued its assault on
antitrust", and that "the Court ruled in favor of the defendant for the tenth
straight time in a private antitrust case in the last five years".
Albert Foer, head of the AAI, stated in this release that "The Supreme
Court’s decision is a gift to monopolists and their recently-departed
laissez-faire cheerleaders in the Bush Administration".
He continued that "this decision hands vertically integrated monopolists such as
local telephone companies a potent new tool which will be utilized to cause the
exit of many businesses, some quite large, unless federal regulatory agencies
suddenly become much more favorably disposed to regulating against price
He also argued that "This decision highlights the need for Congress to
resuscitate the antitrust laws, which have been left for dead in the Supreme
Court ... Otherwise, the new administration's plans to reinvigorate antitrust
enforcement may well be stymied by a hostile Supreme Court."
Chris Riley of the Free Press
told TLJ that "the Supreme Court's holding here is a fairly
straightforward and non-controversial extension of the Trinko
precedent -- that's why it went 9-0."
He added that "it clarifies that there is no antitrust check
against extortionate pricing for these services ... To me, the take-home
from this case is that the FCC needs to take a bigger role in investigating
these types of disputes."
He also said that the Supreme Court's statements regarding "robust
competition" in the broadband market are "dicta".
"There is no binding effect here from that language, either on cases
or administrative proceedings -- the weight is merely rhetorical."
This case is Pacific Bell Telephone Company, et al. v. Linkline
Communications, Inc., et al., Supreme Court of the U.S., Sup. Ct. No.
07-512, a petition for writ of certiorari to the U.S. Court of Appeals for
the 9th Circuit. The Court of Appeals case is App. Ct. No. 05-56023. See
also, Supreme Court
|Supreme Court: There Is Robust Competition
in the Broadband Market
2/25. Chief Justice of the United States John Roberts wrote in the
[24 pages in PDF] of the Supreme Court in Pacific Bell v. Linkline
Communications that "DSL now faces robust competition
from cable companies and wireless and satellite services".
This opinion added, "the market for high-speed Internet service is now quite
competitive; DSL providers face stiff competition from cable companies and
wireless and satellite providers."
Proponents of various types of regulation of broadband internet access
services, and video services, argue that there is little competition between
service providers in the retail market for broadband internet access because in
most places there is only a cable company and a phone company, with either DSL
service over copper lines, or faster service over fiber optic cable.
Some proponents of network neutrality mandates, and other forms of
regulation, argue that this two provider duopoly is not real competition.
The just released Supreme Court opinion states otherwise.
Kyle McSlarrow, head of the National Cable and
Telecommunications Association (NCTA), lamented during a panel discussion in
Washington DC on February 26, 2009, that critics once complained that there was
no competition in video or phone service. He continued that now that cable and
phone companies engage in competition, critics still complain that they are a
duopoly. He predicted that with a third major competitor these critics will
complain about the "terrible triumvirate".
There remains the question of whether the Supreme Court's statements regarding
broadband competition set legal precedent that is binding upon the Supreme
Court, other courts, and agencies under the doctrine of stare decisis, or are
non-binding obiter dicta.
This article offers an explanation and analysis for why these statements are
The Supreme Court reversed the judgment of the Court of Appeals. The basis of
this holding is that a plaintiff cannot bring a price squeeze claim under
Section 2 of the Sherman Act when the defendant (Pacific Bell, a
subsidiary of AT&T) is under no antitrust obligation to sell the inputs to the
plaintiff (Linkline and other ISPs that sell DSL service by obtaining access to
AT&T's facilities) in the first place.
In the Supreme Court's reasoning, whether or not there is an
obligation to sell inputs depends upon whether the defendant had a antitrust
duty to deal.
The Supreme Court wrote that "businesses are free to choose the parties with
whom they will deal, as well as the prices, terms, and conditions of that
dealing". But, "there are rare instances in which a dominant firm may incur
antitrust liability for purely unilateral conduct", such as "below-cost prices
that drive rivals out of the market and allow the monopolist to raise its prices
later and recoup its losses".
The Supreme Court added that "it seems quite unlikely that AT&T would have an
antitrust duty to deal with the plaintiffs. Such a duty requires a showing of
However, the Supreme Court's reasoning was not quite so simple as AT&T is not
a broadband monopoly, therefore it has no duty to deal, and therefore there is
no price squeeze claim under Section 2. Had this been the Court's reasoning, the
conclusion that there is "robust competition" would have been part of the
holding, and arguably, binding precedent.
Rather, the Supreme Court broke down the price squeeze claim into two
components -- operating in the wholesale market (selling access to ISPs), and
operating in the retail market (selling DSL service to consumers).
It explained that a price squeeze occurs when one company that operates in
both markets raises the price of wholesale inputs, while lowering the price that
it charges to its own retail customers, thereby raising the costs of ISPs that
purchase wholesale inputs, forcing them to lower their retail prices be
competitive, and thereby squeezing out their ability to make a profit.
The Supreme Court reasoned that its 2004
opinion [22 pages in PDF] in Verizon v. Trinko forecloses any
challenge under Section 2 to AT&T conduct in wholesale transactions.
It wrote that "the defendant has no antitrust duty to deal with its
rivals at wholesale; any such duty arises only from FCC regulations, not
from the Sherman Act."
titled "Supreme Court Holds That There is No Sherman Act Claim in Verizon v.
Trinko" in TLJ
Daily E-Mail Alert No. 815, January 14, 2004.
The Supreme Court then analyzed the retail transactions. It concluded that
there is no Section 2 claim for charging retail customers too low of a price,
except when the elements of a predatory pricing claim are met, and AT&T did not
Finally, the Supreme Court wrote that the "Plaintiffs' price-squeeze claim,
looking to the relation between retail and wholesale prices, is thus nothing
more than an amalgamation of a meritless claim at the retail level and a
meritless claim at the wholesale level. If there is no duty to deal at the
wholesale level and no predatory pricing at the retail level, then a firm is
certainly not required to price both of these services in a manner that
preserves its rivals' profit margins." (Footnote omitted.)
Notably, neither the conclusion as to the wholesale component, or the retail
component, depend on the statement that there is "robust competition".
The wholesale transaction conclusion turned on an application of Trinko, and
whether or not AT&T had an antitrust duty to deal, which for the purpose of this
analysis turned on FCC regulations, not whether or not there is competition in
this wholesale market, or in the retail market. The retail transaction
conclusion turned upon whether or not AT&T engaged in predatory pricing, not
whether or not it is a monopoly.
Thus, one could make the argument that the Supreme Court's statements about
"robust competition", and the "now quite competitive" retail broadband market, are
dicta. And, in the context of the retail broadband market, while the Supreme
Court stated that there is competition, since it based its decision on the FCC's
decision to change its rules in August of 2005, the FCC may change those rules,
and the Supreme Court would then rely on those new rules.
The FCC adopted these rules in its proceeding titled "In re Appropriate
Framework for Broadband Access to Internet over Wireline Facilities". See,
titled "FCC Classifies DSL as Information Service" in
TLJ Daily E-Mail
Alert No. 1,190, August 8, 2005. See also, related stories in the same issue
titled "Reaction to the FCC's Classification of DSL" and "FCC Adopts a Policy
Statement Regarding Network Neutrality". The FCC released the
text [133 pages in PDF] of this item on September 23, 2005. It is FCC 05-150
in CC Docket Nos. 02-33, 01-337, 95-20, 98-10, and WC Docket No. 04-242.
|Commentary: Impact of
Pacific Bell v. LinkLine
2/25. The Supreme Court
opinion [24 pages in PDF] in Pacific Bell v. Linkline
Communications, reversing the judgment of the
U.S. Court of Appeals
This is a Sherman Act, Section 2, case involving a price squeeze theory of
This article advances five likely impacts of this opinion. First, this
opinion is a victory for AT&T, Verizon, and other phone companies that sell
access to their facilities. Second, this opinion contains notable dicta about
"robust competition" in the broadband market. Third, this opinion will impact
the threat posed by Section 2 price squeeze claims to IP based companies, and
companies that sell product bundles to consumers. Fourth, this opinion comes
close to overturning U.S. v. Alcoa. Fifth, this opinion adds to the
divergence between the US and the EU on antitrust.
First, this is a victory for AT&T and other phone companies that are involved
in both wholesale and retail transactions of the sort involved in this case.
Second, this opinion includes dicta about "robust competition" in the market
for broadband services. This is only dicta. See, related story in this issue
titled "Supreme Court: There Is Robust Competition
in the Broadband Market".
However, it is a statement of the Supreme Court. It is likely to be cited in
judicial and regulatory proceedings, and invoked in legislative and policy
debates. It may have persuasive effect in some proceedings and debates.
Effect on Other Business Practices. Third, this case will impact other
industries where companies might be subjected to price squeeze claims.
"This opinion is bad for the price squeeze theory in any area," Harold Feld,
a telecommunications lawyer and consultant, told TLJ.
Also, Abbott Laboratories, which holds pharmaceutical patents, filed an
amicus curiae brief [PDF] with the Supreme Court in support of AT&T.
This opinion could impact patent based businesses. For example, a patent
holder can exclude others from using their patented technology for the duration
of the term of the patent. They have a monopoly. It is a legal monopoly. And,
they can charge a monopoly price for licensing that patent. The rationale for
this is that it is the pursuit of these monopoly revenues that incent investment
and effort in inventive activities, and bring about discoveries and innovations,
that advance consumer welfare.
However, IP based companies may also integrate patented technologies into
products that they then sell at retail. Under the 9th Circuit's opinion a
company that licenses a patent (upstream or wholesale) to other companies, and
also sell products to consumers that incorporate that patent (downstream or
retail) might have found itself subjected to Section 2 price squeeze claims from
Under the Supreme Court's opinion, such companies would not be subjected to
Section 2 price squeeze liability, absent some further showing, such as
This opinion may also affect bundling of consumer products, which are common
in the telecommunications and technology sectors.
Verizon filed an
amicus brief [PDF] with the Supreme Court. It wrote that "the problems are
still worse given the prevalence of ``bundling´´ throughout the economy -- the
offering of several ``products´´ together at a single price different from the
sum of the prices of each ``product´´ offered alone. In the telecommunications
world, the efficiency reasons that drive bundling generally, including shared
costs and transactional savings, have produced familiar bundles of services:
e.g., voice (landline or wireless); Internet access; video." (Parentheses in
Verizon argued that "In this common situation, there is uncertainty even
about determining at the threshold what the effective prices of the defendant
are, on a product specific basis, let alone what they ``should´´ be on some
price squeeze theory.
No amicus parties filed briefs addressing whether spectrum leasing and
selling wireless phone service might have given rise to price squeeze claims.
U.S. v. Alcoa. Fourth, the Supreme Court stopped just short of
expressly overruling the relevant portion of the landmark 1945 opinion of the
U.S. Court of Appeals (2ndCir),
written by Judge Learned Hand, in U.S. v. Alcoa, 148 F. 2d 416.
The Supreme Court wrote that "In that case, the Government alleged that Alcoa
was using its monopoly power in the upstream aluminum ingot market to squeeze
the profits of downstream aluminum sheet fabricators."
However, it concluded that "Given developments in economic theory and
antitrust jurisprudence since Alcoa, we find our recent decisions in
Trinko and Brooke Group more pertinent to the question before us."
US EU Differences. Fifth, this opinion may reflect a widening gap
between the U.S. and the European Union on their fundamental approaches to
antitrust. A basic premise of the U.S. is that the purpose of antitrust is to
protect consumers, and advance consumer welfare, as opposed to protecting
competitors. A basic premise of the EU is that protecting competitors is a
purpose of antitrust.
Greg Sidak, who filed an
amicus brief [PDF], told TLJ that the "gulf between the European approach
and the American approach is wider now".
This opinion reflects a strict adherence to the consumer welfare approach.
Moreover, while it is a consumer welfare based opinion, the opinion does not
bother to set forth the importance of consumer welfare. It would appear that it
is so settled in the minds of the Justices that it is no longer requires
Yet, it should be noted that while the shift to a consumer welfare based
antitrust system has been developing in the U.S. courts, Antitrust Division, and
Federal Trade Commission for decades, it remains to be seen how committed
President Obama's appointees to the FTC and DOJ will be to this approach. In
contrast, Chief Justice Roberts and his colleagues have life tenure.
This issue contains the following items:
• Supreme Court Reverses in Pacific Bell v. Linkline
• Supreme Court: There Is Robust Competition in the Broadband
• Commentary: Impact of Pacific Bell v. LinkLine
• En Banc Panel Affirms Nacchio Conviction
• 8th Circuit Applies Filed Rate Doctrine in Cable Case
• Consumer Group Complains About Google
|Washington Tech Calendar
New items are highlighted in red.
The Senate will meet at 9:30 AM.
The House will not meet.
FULL. 12:15 - 1:30 PM. The
Federal Communications Bar Association's
(FCBA) Legislative, Wireless and Wireline Committees will host a brown
bag lunch titled "Broadband and the Economy: What should be the
role of Broadband in Stimulating U.S. Economic Recovery".
Location: USTelecom, Suite 400, 607 14th St., NW.
Deadline to submit reply comments to the Federal
Communications Commission (FCC) in response to its notice of proposed
rulemaking (NPRM) regarding application of the closed captioning rules
to digital broadcasting, specifically to broadcasters that choose to use
their digital allotment to multicast several streams of programming. The
FCC adopted this item on November 3, 2008, and released the
text [57 pages in PDF] on November 7, 2008. It is FCC 08-255 in CG
Docket No. 05-231. See,
the Federal Register, January 13, 2009, Vol. 74, No. 8, at Pages
Deadline to submit initial comments to the Federal Communications
Commission (FCC) to assist it in preparing a report to the Congress on the
status of competition in markets for the delivery of video programming.
The FCC engaged in the legal fiction of adopting a Notice of Inquiry (NOI) on
November 27, 2007. It did not release the
text [41 pages in PDF] of a NOI until January 16, 2009. It is FCC 07-207
in MB Docket 07-269. This NOI requests comments regarding "changes in the
marketplace between 2006 and 2007". See,
notice in the
Federal Register, February 11, 2009, Volume 74, No. 27, at Pages 6875-6882.
The House will meet at
The Senate will meet at
2:00 PM. It will begins consideration of HR 1105
the "Omnibus Appropriations Act, 2009".
10:00 - 11:30 AM. The
Interactive Advertising Bureau (IAB)
will host an event titled "Political Online Advertising in the
2008 Election: Politics Will Never Be the Same Again". See,
and registration page. Location: Venable, 575 7th St., NW.
10:00 AM. Deadline for foreign governments
to submit comments to the Office of the
U.S. Trade Representative (OUSTR) regarding countries that deny
adequate and effective protection of intellectual property rights or
deny fair and equitable market access to U.S. persons who rely on
intellectual property protection. These comments assist the OUSTR in
fulfilling its obligations under Section 182 of the Trade Act Act of 1974. See,
in the Federal Register, January 23, 2009, Vol. 74, No. 14, Page
Deadline to submit comments to the Federal
Communications Commission (FCC) regarding possible revision or
elimination of rules under the Regulatory Flexibility Act. See,
the Federal Register, December 30, 2008, Vol. 73, No. 250, at Pages
EXTENDED TO MARCH 16.
submit FCC Form 477to
the Federal Communications Commission (FCC). This is the FCC semi-annual
form for collection of data on local telephone and broadband internet
access lines. See also, February 12, 2009,
Public Notice [2 pages in PDF]. See, February 23, 2009,
order [3 pages in PDF].
9:00 AM - 5:15 PM. Day one of a two day meeting
of the Department of Energy's (DOE)
Advanced Scientific Computing Advisory
Committee (ASCAC) will meet. The agenda for March 3 includes "View
from Washington", "ASCR Update", "Changes to INCITE Program", "Update on
Extreme Scale Science Workshops", "Cyber Security R&D Planning", "Realizing
Petascale Computing", "ESnet Update", "ASCAC Subcommittee Updates", and
"Public Comment". See,
the Federal Register, February 10, 2009, Vol. 74, No. 26, at Page 6608.
Location: American Geophysical Union
(AGU), 2000 Florida Ave., NW.
10:00 AM. The
House Judiciary Committee's
(HJC) Subcommittee on Commercial and Administrative Law will hold a
hearing titled "Circuit City Unplugged: Why
Did Chapter 11 Fail To Save 34,000 Jobs?". See,
notice. The HJC will webcast this hearing. Location: Room 2141,
The Department of Energy (DOE) Office of
Electricity Delivery and Energy Reliability (OE) will hold a conference
titled "Design Concepts of Future Electric Transmission".
in the Federal Register, February 2, 2009, Vol. 74, No. 20, at Page 5826.
9:00 AM - 4:15 PM. The
U.S.-China Economic and Security
Review Commission will hold a meeting titled "China's Military and
Security Activities Abroad". See,
notice in the
Federal Register, February 2, 2009, Vol. 74, No. 20, at Pages 5896-5897.
Location: Room 562, Dirksen Building, Capitol Hill.
9:00 AM - 12:00 NOON. Day one of a two day meeting
of the Department of Energy's (DOE)
Advanced Scientific Computing Advisory
Committee (ASCAC) will meet. The agenda for March 4 includes "Gordon
Bell Petascale Application -- Superconductors International Collaboration",
"INCITE User Perspective", and "Public Comment". See,
the Federal Register, February 10, 2009, Vol. 74, No. 26, at Page 6608.
Location: American Geophysical Union (AGU), 2000 Florida
10:00 AM. The
House Judiciary Committee
(HJC) will hold a hearing on HR 848
the "Performance Rights Act". See,
notice. The HJC will webcast
this hearing. See also, story titled "Performance Rights Act Reintroduced" in
TLJ Daily E-Mail Alert No. 1,896, February 10, 2009. Location: Room 2141,
2:00 PM. The
Senate Judiciary Committee
(SJC) will hold a hearing titled "Getting to the Truth Through a
Nonpartisan Commission of Inquiry". The SJC will webcast this
notice. Location: Room 226, Dirksen Building.
3:00 - 5:00 PM. The Federal Communications
Commission's (FCC) Consumer Advisory Committee will meet. See, FCC
notice [PDF] and
the Federal Register, February 17, 2009, Vol. 74, No. 30, at Page 7435.
Location: FCC, Commission Meeting Room (Room TW-C305), 445
12th St., SW.
TIME? The Office
of the U.S. Trade Representative (OUSTR) will hold a hearing
regarding its plans to initiate negotiations on a Trans-Pacific
Partnership free trade agreement with Singapore, Chile, New Zealand,
Brunei Darussalam, Australia, Peru and Vietnam. See,
the Federal Register, January 26, 2009, Vol. 74, No. 15, at Pages
Deadline to register for the
National Institute of Standards and
Technology's (NIST) Office
of Law Enforcement Standards' (OLES) March 11, 2009, meeting via the
internet to bring Project 25 Compliance Assessment Program stakeholders
together to discuss what the process will be to assess software based
test tools for the Project 25 Compliance Assessment Program. See,
the Federal Register, February 17, 2009, Vol. 74, No. 30, at Pages
9:30 - 11:00 AM. The
Information Technology and Innovation
Foundation (ITIF) will host an event titled "The Need for
Speed: The Importance of Next-Generation Broadband Networks".
Location: ITIF, Suite 200, 1250 Eye St., NW.
The Federal Communications Commission (FCC) will hold
an event titled "Open Meeting". Location: FCC, Commission
Meeting Room (Room TW-C305), 445 12th St., SW.
10:00 AM. The U.S.
Court of Appeals (FedCir), Panel I, will hear oral argument in
Digital Impact v. Bigfoot Interactive, App. Ct. No.
2008-1255, a patent case regarding e-mail distribution technology. See,
Federal Circuit oral argument
March, 2009. Location: Courtroom 201, 717 Madison Place, NW.
|5-4 En Banc Panel
Affirms Nacchio Conviction
2/25. An en banc panel of the
U.S. Court of Appeals (10thCir) issued its divided
pages in PDF] in U.S. v. Nacchio, affirming the District Court's
conviction of Joseph Nacchio, a former CEO of
Qwest Communications International, and a former Chairman of the
Telecommunications Advisory Committee.
Summary. This opinion contains 106 pages of arguments regarding
whether or not the District Court judge committed reversible error in excluding
from testifying an expert witness proferred by the defense at trial.
The witness in question is not one of the many charlatans who are routinely
allowed to testify as expert witnesses in the U.S. District Courts, but a law
professor at a leading law school who has published a huge volume of scholarly
articles in leading legal, business and economics journals.
Moreover, the District Court judge decided to exclude him, without notice,
without allowing an opportunity for the defense to be heard, and without
following applicable criminal trial procedure. The exclusion gutted the
defense's case. The jury convicted on 19 of 42 counts.
And now, by a 5-4 vote, the conviction is allowed to stand. Nacchio's only
recourse is to petition the Supreme Court for writ of certiorari.
District Court. The Department of
Justice (DOJ) criminally prosecuted Nacchio for securities fraud. It charged
insider trading based upon allegations that he traded shares of Qwest while
knowing that the company was unlikely to continue to meet its announced
At trial the District Court prevented him from presenting the testimony of an
expert witness, Daniel
Fischel, a professor at the University of Chicago law school, whose
testimony would have provided economic analysis of Nacchio's trading patterns,
and the economic importance of the allegedly material inside information.
On April 19, 2007, a trial jury returned a verdict of guilty on 19 counts of
violation of federal securities laws involving insider trading. It acquitted
Nacchio on 23 other counts.
On July 27, 2007, the District Court imposed a sentence of 72 months in
Three Judge Panel. Nacchio appealed. On March 17, 2008, a three Judge
panel issued its divided opinion reversing the conviction of the District Court.
It held that the District Court committed reversible error in excluding the
See, story titled "10th Circuit Reverses Nacchio's Conviction" in
TLJ Daily E-Mail
Alert No. 1,732, March 18, 2008.
En Banc Majority. The just released en banc opinion vacates the panel
opinion. Nacchio's conviction stands. He goes to prison for six years.
These opinions are lengthy discussions of whether or not the District
Court should have allowed Nacchio's expert witness to testify. The majority
concluded that the District Court properly performed its gatekeeping role
in excluding Fischel's testimony as inadmissible for lack of reliability
under Rule 702, Federal Rules of Evidence.
The five member majority wrote that "the district court's exclusion
of the testimony was not arbitrary, capricious, whimsical, or manifestly
unreasonable; nor are we convinced that the district court made a clear
error of judgment or exceeded the bounds of
permissible choice in the circumstances."
Judge Jerome Holmes wrote the opinion of the en banc panel, in which Judges
Deanell Tacha, Mary Briscoe, Carlos Lucero and Harris Hartz joined.
En Banc Dissents. The four member dissent wrote that the District
Court "judge disqualified the witness without hearing argument from defense
counsel or testimony from the witness regarding the reliability of his
methodology. The judge based this ruling on what is now agreed was a mistaken
interpretation of the rules of criminal procedure. The panel reversed that
ruling, and in its petition for rehearing en banc the government did not even
attempt to defend the district court's rationale. Instead, the government argues
-- and the en banc majority agrees -- that the exclusion of this witness was the
defendant’s fault, for failing to establish the foundation for his testimony in
advance of putting him on the stand or to file a motion for permission to
establish the foundation through testimony."
"The flaw in the government’s argument is that the rules of
criminal procedure, unlike the rules of civil procedure, do not require a
criminal defendant to establish the foundation for expert testimony through
advance written submissions", wrote the dissenters. "It was the district judge,
not defense counsel, who misunderstood the procedural rules. We dissent on the
ground that the defense did everything it was required to do -- but that even if
counsel somehow slipped up, it was an abuse of discretion for the court to shut
down the primary line of defense in a criminal case on the basis of what was at
worst an understandable and inconsequential mistake."
Judge Kelly wrote an additional dissent with less courtesy towards the
other judges. He wrote that "It is indeed unfortunate that the court
chooses expediency over due process. It is equally unfortunate that the
court attempts to spin the facts".
After recapping the actions of the District Court, he concluded that "Our
founders must have had similar scenarios in mind when they wrote ``nor shall any
person ... be deprived of life, liberty, or property, without due process of law
He reminded them that "We reverse judgments when a district
court exercises its discretion on a material matter based upon an incorrect view
of the law and when a defendant has not been given an adequate opportunity to be
heard -- that is what happened here."
Judge Michael McConnell wrote a 44 page dissenting opinion, in
which Chief Judge Robert Henry, and Judges Paul Kelly, and Michael Murphy
joined. Judge Kelly also wrote a separate dissent. Judge Henry also wrote a
separate dissent, in which Judge Kelly joined.
Other Issues. The en banc panel only considered the expert testimony
issue. Neither the just released en banc opinion, nor the March 17, 2008, panel
opinion address whether or not the DOJ brought criminal charges against Nacchio
in retaliation for refusal to comply with National
Security Agency (NSA) requests for customer call record data in violation of
47 U.S.C. § 222.
Nor do these opinions address whether or not Nacchio's claims regarding
Qwest's business prospects were anticipated contracts with the NSA, or whether
those contracts were also withheld in retaliation.
Judges Terrence O'Brien, Neil Gorsuch, and Timothy Timkovich did not
participate in the en banc panel.
There was no partisan pattern in the Judges' voting. Three members of the
majority were appointed by Republican Presidents (Holmes, Tacha, and Hartz), and
two were appointed by Clinton (Briscoe and Lucero). Two members of the dissent
were appointed by the Republicans (McConnell and Kelly), and two were appointed
by Clinton (Henry and Murphy).
This case is U.S.A. v. Nacchio, U.S. Court of Appeals for the 10th
Circuit, App. Ct. No. 07-1311, an appeal from the U.S. District Court for the
District of Colorado, D.C. No. 05-CR-545-N.
|8th Circuit Applies
Filed Rate Doctrine in Cable Case
2/25. The U.S. Court of Appeals (8thCir) issued its
[5 pages in PDF] in Crumley v. Time Warner Cable. The District
Court, and Court of Appeals, held that the filed rate doctrine applies to rates
filed by cable companies with state regulators.
This is a class action in which the plaintiff, Patricia Crumley, a Time
Warner Cable (TWC) customer, alleges that TWC overcharged her and others for
The Cable Act of 1992 give cable regulatory authority to local franchising
authorities (LFAs). However, it precludes the regulation of cable rates as long
cable system is subject to effective competition, as determined by the Federal
Communications Commission (FCC).
TWC filed a form with the City of Minneapolis, the relevant LFA, adding a
network upgrade surcharge to its regulated service rates for basic cable
service, without having completed the required upgrades to support the upgrade
surcharge. The LFA took no action.
Crumley objects to charges disclosed in this form.
Crumley filed a complaint in the U.S. District Court (DMinn) against TWC
alleging unjust enrichment and violation of the Minnesota Prevention of Consumer
Fraud Act. The District Court dismissed the complaint for failure to state a
claim, reasoning that the filed rate doctrine precludes this action.
The Court of Appeals affirmed. In so doing, it held that the filed rate
doctrine encompasses rates filed with state regulatory agencies, and that it
applies to rates filed by cable companies.
It wrote that the filed rate doctrine "forbids a regulated entity from
charging a rate for its services other than the rate on file with the
appropriate regulatory authority". It added that its purpose is to preserve the
regulatory authority of the regulatory agency "primary jurisdiction over
reasonableness of rates and the need to insure that regulated companies charge
only those rates". Moreover, it applies "equally to the regulation of rates for
cable service in areas lacking ``effective competition´´ as controlled by the
Cable Act. And furthermore, there is no fraud exception to the filed rate
This case is Patricia Crumley v. Time Warner Cable, Inc., U.S. Court
of Appeals for the 8th Circuit, App. Ct. No. 08-2212, an appeal from the U.S.
District Court for the District of Minnesota.
Complains About Google
2/23. Jamie Court, head of the
Consumer Watchdog (CW),
[PDF] to Eric
Schmidt, CEO of Google, in which he alleged that Bob Boorstin, Google's
Director of Corporate and Policy Communications, wrote to a group that
funds CW requesting that its end its financial support for CW. Jamie Court
describes CW as a "consumer group critical of your lack of privacy
Court wrote that "Goliath companies always believe they can crush
their critics, but they give more power to reformers by ignoring their
concerns, when our criticisms are based on important, popular values like
Court also made this statement: "As our staff and other consumer
advocates sought stronger privacy protections in the stimulus bill on Capitol
Hill, they were told Google was lobbying to weaken the current prohibition on
the sale of medical records and shave off protections."
"For a company that states ``our corporate mission is to
organize the world’s information and make it universally accessible and
useful,´´ the degree of secrecy that surrounds Google's public policy positions
about privacy issues is deeply troubling", said Court.
He also asked, "Why will Google not disclose all the specific
public policy communications it makes to Congress, regulatory agencies and
the white house on matters of medical and personal privacy? Failing to do
so is incompatible with the portrait Google paints of itself
publicly." He added that he wants Google to "publish all of its
correspondence and policy communications to legislators".
Other companies and interest groups do not make such disclosures.
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