Memorandum and Order
These five consolidated class action antitrust cases come before the Court on plaintiffs' motion for offensive application of the doctrine of collateral estoppel to preclude defendants from relitigating certain issues determined by a judgment upon a jury verdict of the United States District Court for the Southern District of New York and affirmed by the United States Court of Appeals for the Second Circuit in the case of Litton Systems, Inc. v. American Telephone & Telegraph Co., 700 F.2d 785 (2d Cir. 1983) (" Litton "). For the reasons set forth below, plaintiffs' motion will be granted. The Court is aware, however, that to do so will have the practical effect of partial summary judgment for plaintiffs, leaving for trial only issues of damages applicable to a class of plaintiffs who have yet to be formally notified of the pendency of the actions. In contemplation of the time and cost associated with class actions generally, and of the fact that if the Court is in error in the preclusive effect it accords to Litton a trial on the merits may be required, any determination of damages will be premature. Therefore, the Court concludes, in accordance with 28 U.S.C., § 1292(b), that the matter involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from this Order may materially advance the ultimate termination of the litigation, and will stay all further proceedings herein for a period of ten (10) days or until such time as the Court of Appeals acts upon a timely application for an appeal hereunder.
Plaintiffs are seven businesses which were required during a 10-year period ending in 1978 to obtain and pay for interface devices or "protective connecting arrangements" ("PCA's") from defendants American Telephone & Telegraph Company ("AT&T") and its several operating companies throughout the United States ("Bell system") in order to connect telephone terminal equipment they had acquired from non-Bell system suppliers to the AT&T telephone network.
They allege that the requirement of the interface device which AT&T imposed by tariff filed with FCC constituted a violation or violations of the Sherman Act, Sections 1 and 2, 15 U.S.C., §§ 1, 2, by which AT&T intended to and did obtain and perpetuate a monopoly in the telephone terminal equipment market.
AT&T has consistently insisted that the PCA's were a necessary prophylaxis against possible harm to the telephone network from defective or inferior terminal equipment not manufactured by the Bell system.
Plaintiffs represent without contradiction by defendants (and the Litton record appears to support them to the extent it is before this Court) that in June, 1976, Litton Systems, Inc., a terminal equipment manufacturer, and two of its subsidiaries sued AT&T, Western Electric Company and Bell Telephone Laboratories, Inc. (AT&T's manufacturing and research subsidiaries, respectively), and seven regional Bell system operating companies in the U.S. District Court for the Southern District of New York alleging identical violations of the Sherman Act in monopolizing and conspiring and attempting to monopolize trade in telephone terminal equipment by imposing an illegal charge to interconnect non-Bell equipment to AT&T's national telephone network. Pretrial proceedings consumed over four years, during which extensive discovery was taken by and of both sides and a comprehensive defense motion for partial summary judgment was denied. 487 F. Supp. 942 (S.D.N.Y. 1980). Trial began in 1980, ran for more than five months, generated 18,000 pages of testimony and 945 exhibits, and concluded with a jury verdict for Litton in January, 1981, for nearly $92 million as a competitor and $268,000 as a customer of AT&T which the trial court then trebled. Motions for judgment n.o.v. and a new trial were denied, 525 F. Supp. 154 (S.D.N.Y. 1981), and on February 3, 1983, the U.S. Court of Appeals for the Second Circuit unanimously affirmed. 700 F.2d 785 (2d Cir. 1983). Rehearing and rehearing en banc were denied, apparently without a dissenting vote, on March 31, 1983.
Plaintiffs here urge that defendants be precluded from relitigating 11 specific issues presented in Litton which, they say, determined their own standing as customers to sue, the relevant product market, defendants' monopoly power and their use of that power anticompetitively, causation, damage, and the invalidity of certain affirmative defenses. They say that each of those issues was actually and necessarily determined adversely to defendants in the proceedings which culminated in the Second Circuit's opinion in Litton.
The Court finds from a review of that decision that such is the case. Judge Oakes' 89-page opinion for the court, affirming in all respects the verdict and judgment for Litton as both competitor and customer, based upon special interrogatories (see Appendix) answered by the jury upon legally sufficient evidence and in accordance with correct instructions as to the law by the trial court, definitively determines, expressly or by necessary implication, each and every one of those issues upon which plaintiffs would be obliged to prevail again here in order to recover. The Second Circuit said:
The gist of Litton's case and the jury's findings is that the interface device was unnecessary and uneconomical and that AT&T at all times knew this was so, and that despite clear prior indications from the FCC that the tariff would be set aside as unreasonable and destructive of competition, AT&T nevertheless proposed and fought to maintain the tariff -- all in bad faith in order to exclude competition in the terminal equipment market.
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