Supreme Court Denies Certiorari in Covad v. BellSouth

March 7, 2005. The Supreme Court denied certiorari in Covad v. BellSouth. See, Order List [14 pages in PDF] at page 7. This is a case with a long history. It involves the Communications Act, the Sherman Antitrust Act, and the Supreme Court's January 13, 2004 opinion [22 pages in PDF] in Verizon v. Trinko.

This denial of certiorari lets stand the judgment of the U.S. Court of Appeals (11thCir). The Court of Appeals issued its opinion [18 pages in PDF] on June 25, 2004. It held that most, but not all, of Covad's claims are barred by the holding in the Trinko case.

This is the second petition for writ of certiorari in this case. The Supreme Court, citing Trinko, granted several petitions for writ of certiorari in January of 2004 in several related cases, vacating, and remanding for further consideration in light of Trinko.

The Supreme Court held in Trinko that a claim alleging a breach of an incumbent local exchange carrier's (ILEC) duty under the 1996 Telecom Act to share its network with competitors does not state a violation of Section 2 of the Sherman Act. See, story 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.

However, the plaintiffs in the Trinko case and in the present case did not allege identical conduct by the defendant ILECs. Hence, the Court of Appeals addressed in its July 2004 opinion which antitrust claims are barred by the holding in Trinko.

Covad is sells DSL service, using BellSouth telephone lines. BellSouth is an ILEC that also sells DSL service.

Covad filed a complaint in U.S. District Court (NDGa) against BellSouth alleging conduct that violates the Sherman Antitrust Act (refusal to deal, essential facilities, and price squeezing), violation of the Communications Act (misappropriation of confidential customer information), violation of state anti-monopoly statutes, breach of contract, and tortious interference with business relations.

The relevant language in Covad's complaint regarding price squeezing alleges that "The wholesale prices BellSouth offers to ISPs for DSL service, as well as its retail prices for combined DSL and Internet access service, are set so low relative to its unbundled wholesale loop prices that Covad cannot meet BellSouth’s wholesale or retail prices and still make a reasonable return on its investment. If Covad charged retail DSL/Internet access customers the same price as BellSouth does, or charged comparable wholesale DSL prices, Covad could not recover the cost of providing the service, e.g., loop costs, collocation costs, transport costs, corporate overhead and sales and market costs."

In its July 2004 opinion on remand the Court of Appeals held that Covad's refusal to deal claims do not survive Trinko and must be dismissed. It also held that Covad's allegations under the essential facilities doctrine fail to survive Trinko.

However, it wrote that "We believe Covad's price squeezing claim survives because it is based on traditional antitrust doctrine and is not specifically barred by Trinko."

The Court of Appeals also affirmed the District Court's dismissal of Covad's Communications Act and state law breach of contract claims. And, it reversed the District Court's dismissal of Covad's tortious interference with business relations claim. The Court of Appeals held that this claim is not based upon the interconnection agreement, and hence, is unaffected by the Trinko case.

The case now goes back to the District Court. Covad's price squeezing claim survives a motion to dismiss for failure to state a claim upon which relief can be granted, but the other antitrust claims do not. Of course, whether Covad will prevail on this claim, or on the tortious interference claim, at trial is another question.

This case is Covad Communications Company, et al. v. BellSouth Corporation, et al., Sup. Ct. No. 04-727, a petition for writ of certiorari to the U.S. Court of Appeals for the 11th Circuit. The Court of Appeals No. is 01-16064. The Docket No. in the U.S. District Court for the Northern District of Georgia is D.C. No. is 00-03414-CV-BBM-1.