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ASSOCIATED TEL. ANSWERING EXCHANGES, INC. v. AT&T

June 24, 1980

ASSOCIATED TELEPHONE ANSWERING EXCHANGES, INC.
v.
AMERICAN TELEPHONE AND TELEGRAPH COMPANY and Bell Telephone Company of Pennsylvania.



The opinion of the court was delivered by: GREEN

MEMORANDUM

In this antitrust action plaintiff Associated Telephone Answering Exchanges, Inc. (ATAE) has sued defendants American Telephone and Telegraph Company (AT&T) and Bell Telephone Company of Pennsylvania (Bell of Pa.) under Section 16 of the Clayton Act, 15 U.S.C. § 26. Plaintiff seeks both a preliminary and permanent injunction because allegedly certain planned conduct of defendants will violate Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2. *fn1" Now before the Court is defendants' motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(1) and 12(b)(6) for lack of subject matter jurisdiction and for failure to state a claim upon which relief can be granted. For the reasons discussed in this memorandum, at this time I will deny the motion to dismiss. Under the principles of the doctrine of primary jurisdiction, however, I will stay the proceedings in this matter pending a decision by the Pennsylvania Public Utility Commission (PUC) on the proposed tariff which is the cause of the present dispute.

 The factual background of this case is as follows. Plaintiff is a trade association composed of telephone answering services located in each of the fifty states as well as in parts of Canada, the Virgin Islands and some foreign countries. Defendant AT&T is a corporation, which according to plaintiff, manufactures and distributes equipment used to furnish telephone services. Defendant Bell of Pa., a wholly-owned subsidiary corporation of AT&T, provides telephone service within the Commonwealth of Pennsylvania and is a regulated public utility under the jurisdiction of the Pennsylvania PUC.

 The members of plaintiff provide telephone answering services to subscribers. In order to provide these services, the answering services companies must rent or buy equipment manufactured by subsidiaries of AT&T. In addition, they must rent the use of telephone lines of telephone companies such as defendant Bell of Pa. ATAE further alleges that in recent years defendant Bell of Pa. has continuously sought and obtained from the PUC rate increases for the rental equipment and services it provides plaintiff answering services with the consequence that the profitability of the telephone answering service business has decreased.

 At issue in this suit is a proposed tariff, filed with the PUC on May 8, 1980, for a new service known as Custom Calling Services II (CCSII) to be provided by Bell of Pa. CCSII would offer two new services to Bell of Pa. customers: (1) "advance calling", which allows the recording of a message of up to one minute for subsequent forwarding to a designated telephone number within the following twenty-four hours, either at a specified or a non-specified time and (2) "call answering", which provides for the automatic answering of up to two simultaneous calls to a telephone when the telephone is busy or not answering and permits a caller to leave a recorded message for later retrieval by a customer. *fn2"

 ATAE asserts that permitting Bell of Pa. to offer the call answering service would result in violations of Sherman 1 and 2. *fn3" The gravamen of plaintiff's argument is that by entering into the telephone answering business defendants will be in direct competition with ATAE members and at the same time the defendants will enjoy an unfair advantage. Allegedly, Bell of Pa., and in the future other telephone companies controlled by AT&T, *fn4" because of their knowledge of ATAE members' clientele, their monopolistic position and the vast research and advertising resources of AT&T available to them, is offering and will be able to offer CCSII at an artificially low price. The consequence of all this, plaintiff argues, is that the unfair competitive tactics of defendants will drive ATAE answering services out of business. *fn5"

 The relief sought by the complaint is an injunction prohibiting defendants from offering CCSII to customers of Bell of Pa. As an alternative form of relief, plaintiff requests the Court to fashion an injunction requiring the defendants to establish a separate subsidiary, which would not be allowed to capitalize on any of the resources of AT&T. In its memorandum in opposition to the motion to dismiss as well as in oral argument on the motion, plaintiff asked the Court to enter an injunction removing any telephone answering service engaged in by the defendants from the jurisdiction of the PUC or any other state regulatory agency.

 DOCTRINE OF STATE ACTION IMMUNITY

 Defendants premise their motion to dismiss on the theory that the CCSII tariff is subject to regulation by the PUC and thus is immune from an antitrust challenge under the state action doctrine first stated in Parker v. Brown, 317 U.S. 341, 63 S. Ct. 307, 87 L. Ed. 315 (1941). In the Parker case, the Supreme Court found that a State of California program designed to restrict competition among growers of raisins and maintain prices in the distribution of raisins to packers constituted state action immune from attack under the federal antitrust laws. In a series of recent opinions, *fn6" the Supreme Court has sought to define the limits and the applicability of this doctrine. In the most recent of these opinions, California Retail Liquor Dealers Association v. Midcal Aluminum, Inc., 445 U.S. 97, 100 S. Ct. 937, 63 L. Ed. 2d 233 (1980), the Court observed that there are two standards which must be met before the doctrine of Parker v. Brown applies. The Court, quoting the City of Lafayette opinion, described the two part standard as follows:

 
First, the challenged restraint must be "one clearly articulated and affirmatively expressed as state policy'; second, the policy must be "actively supervised' by the State itself. 100 S. Ct. at 943.

 Similarly, in the case of Mobilfone of Northeastern Pennsylvania, Inc. v. Commonwealth Telephone Co., 571 F.2d 141 (3 Cir. 1978), an opinion relied on heavily by the defendants as support for their motion to dismiss, the Third Circuit set forth a tripartite test for determining whether the defendant is protected by the Parker rule. According to Mobilfone, the defendant must show that 1) the state has an independent regulatory interest in the subject matter of the antitrust controversy; 2) there exists a clear and affirmative articulation of the state's policy regarding that interest; and 3) the state supervision is active. Id. at 144.

 Pointing to the undisputed fact that Bell of Pa. is a public utility subject to the comprehensive system of rate regulation established by the Pennsylvania Public Utility Code, defendants assert that the CCSII tariff now challenged by plaintiff ATAE is immune from any antitrust attack under both of the standards described above. Defendants urge that provisions of the Public Utility Code clearly show that not only does the Commonwealth have an expressed interest in regulating the delivery of the services provided by Bell of Pa., but it actively supervises the delivery of such services.

 Crucial to defendants' argument is the finding that CCSII, particularly the call answering service, is in fact a telephone service, which would be regulated by the PUC pursuant to the provisions of the Public Utility Code, rather than a "side business" as plaintiff argues. I believe, however, that the determination of whether the services known as CCSII are telephone services subject to regulation by the PUC is a factual finding which should be made initially by the Commission rather than by this Court.

 The fact that the PUC has not yet considered or ruled on the CCSII tariff is an issue which arose during oral argument on the motion to dismiss. Continuing their reliance on the Mobilfone decision, defendants argued that the Court should simply dismiss the case and allow PUC to decide whether or not it would accept the proposed tariff. However, my interpretation of Mobilfone differs from that of the defendants. I believe that the fact that the Pennsylvania PUC had already considered and rejected the contentions raised by the antitrust suit was crucial to the Third Circuit's decision to affirm the dismissal of ...


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