305 F.

3d 89

LAW OFFICES OF CURTIS V. TRINKO, L.L.P., individually

and on behalf of all others similarly situated, PlaintiffAppellant,
v.
BELL ATLANTIC CORPORATION, Defendant-Appellee.
No. 01-7746.

United States Court of Appeals, Second Circuit.

Argued: January 10, 2002.
Decided: June 20, 2002.
Amended: August 14, 2002.
Errata Filed: August 30, 2002.

COPYRIGHT MATERIAL OMITTED COPYRIGHT MATERIAL

OMITTED Joseph P. Garland, Klein & Solomon, LLP, New York, NY
(Alicia McInerney, Peter S. Linden, Kirby McInerney & Squire, LLP,
New York, NY, Kenneth A. Elan, New York, NY, on the brief), for
Plaintiff-Appellant.
John Thorne, Verizon Communications, Arlington, VA (Richard G.
Taranto, Farr & Taranto, Washington, DC, Marc C. Hansen, Aaron M.
Panner, Kellogg, Huber, Hansen, Todd & Evans, Washington, DC, Henry
B. Gutman, Joseph F. Tringali, Simpson Thacher & Bartlett, New York,
NY, on the brief), for Defendant-Appellee.
Before: SACK, KATZMANN, and B. FLETCHER,* Circuit Judges.
Judge SACK concurs in part and dissents in part in a separate opinion.
KATZMANN, Circuit Judge.

This is an appeal of a dismissal of a class action brought on behalf of a class

consisting of customers who received local phone service in the region served
by Bell Atlantic from a company other than Bell Atlantic.1 In recent years, the
federal government has changed its policy with respect to the structure of local
phone service markets, which had been controlled by state-sanctioned local

monopolies. Congress sought to introduce competition to those markets by

passing the Telecommunications Act of 1996 (the "Telecommunications Act"),
Pub.L. 104-104, 110 Stat. 56, which amended the Communications Act of 1934
(the "Communications Act"), 47 U.S.C. 151, et seq. The Telecommunications
Act requires the carrier with the local phone service monopoly to provide
competitors with access to its local network infrastructure necessary to
provide local service that is expensive to duplicate. The Telecommunications
Act also sets forth procedures by which telecommunications carriers can
negotiate an interconnection agreement, which provides for such access, that
must ultimately be approved by state regulators.
2

The plaintiff claims that it was damaged when the defendant, Bell Atlantic,
denied the customers of AT & T, the plaintiff's local phone service provider,
equal access to its local network. The plaintiff filed an action alleging that this
behavior: (1) violated section 202(a) of the Communications Act; (2) violated
subsections (b) and (c) of section 251 of the Telecommunications Act; (3)
violated section 2 of the Sherman Antitrust Act (the "Sherman Act"), 15 U.S.C.
2; and (4) was a tortious interference with contract. The plaintiff sought
damages and injunctive relief for the alleged violations of section 202(a) and
subsections (b) and (c) of section 251 pursuant to sections 206 and 207 of the
Communications Act. It also sought damages and injunctive relief for the
alleged violation of section 2 of the Sherman Act pursuant to the Clayton Act,
15 U.S.C. 15.

The defendant primarily contended and maintains on appeal that the plaintiff's
section 202(a) and 251 claims should be dismissed because the plaintiff is not
asserting its own rights but is asserting rights that belong to AT & T. The
defendant argues that the complaint only alleges a breach of its interconnection
agreement with AT & T and that such a breach should be remedied through the
administrative process. The defendant claims that allowing an antitrust action
based on the plaintiff's allegations would disrupt the regulatory process
established by the Telecommunications Act. The district court essentially
agreed with these arguments and dismissed the plaintiff's action in its entirety.
See Law Offices of Curtis V. Trinko, LLP v. Bell Atlantic Corp., 123 F.Supp.2d
738 (S.D.N.Y.2000).

For the following reasons, we affirm in part, vacate in part, and remand for
further proceedings.

BACKGROUND
5

We review the district court's decision granting the defendant's motion to

dismiss de novo, taking all factual allegations in the amended complaint as true
and construing all reasonable inferences in favor of the plaintiff. See Conley v.
Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); Conboy v. AT &
T Corp., 241 F.3d 242, 246 (2d Cir.2001).
6I. The Market for Local Phone Service and the Telecommunications Act
7

Prior to 1982, AT & T had monopolies in the markets for long-distance phone
service, local phone service, and telephone equipment. In that year, AT & T
settled an antitrust suit by the United States and agreed to a consent decree that
split it from its local subsidiaries in order to encourage competition in the longdistance and equipment markets. In contrast, local phone service markets were
left in the hands of AT & T's former local subsidiaries, which were regulated as
monopolies by the states and prohibited from entering the long-distance
markets. The rationale for allowing monopolies in the local phone service
market was the belief that having more than one local provider would lead to
unwarranted duplication in the physical connecting wires through which local
calls are transmitted. See AT&T Corp. v. Iowa Utils. Board, 525 U.S. 366, 41314, 119 S.Ct. 721, 142 L.Ed.2d 835 (1999) (Breyer, J., concurring in part,
dissenting in part).

Bell Atlantic and NYNEX were two such providers with monopolies in the
local phone service markets. In August 1997, NYNEX merged into Bell
Atlantic, creating one company that provides local phone service in New
England, New York, New Jersey, Pennsylvania, Delaware, Maryland, Virginia,
West Virginia, and the District of Columbia. Bell Atlantic controls the "local
loop" in its territory. According to the plaintiff, the "local loop is the wireline
a twisted pair of copper wires, coaxial cable, fiber optic cable, or the like
that links the customer's premises to a central switching station," Compl. 21,
from which calls are routed to their ultimate destination. "In plain English,
loops are the wires that connect telephones to the switches that direct calls to
their destination." AT&T Corp. v. FCC, 220 F.3d 607, 618 (D.C.Cir.2000). The
plaintiff alleges that currently a carrier needs access to the "local loop" in order
to provide local service because the cost of building a new "local loop" is
prohibitively expensive.

Recently, as noted above, national policy with respect to the desirability of

allowing competition in the local phone service markets has changed
dramatically. In 1996, Congress enacted the Telecommunications Act, which
amended the Communications Act. Under the Telecommunications Act, states
are no longer permitted to enforce laws that prohibit entry in a local phone
service market. See 47 U.S.C. 253(a). Moreover, the amendment imposes

affirmative duties on any local phone service provider, or local exchange carrier
("LEC"), that encourage competition by, for example, requiring the LEC to
"afford access to the poles, ducts, conduits, and rights-of-way of such carrier to
competing providers...." 47 U.S.C. 251(b)(4). An incumbent local exchange
carrier ("ILEC"), which is the carrier such as Bell Atlantic that had a monopoly
in the local phone service market prior to the enactment of the
Telecommunications Act, see 47 U.S.C. 251(h)(1), has additional affirmative
duties under the statute. Among other duties, upon the request by another
telecommunications carrier, the ILEC is required to provide interconnection
with its network "that is at least equal in quality to that provided by the local
exchange carrier to itself...." 47 U.S.C. 251(c)(2)(C).
10

The plaintiff subscribed for local phone service with AT & T. Pursuant to the
Telecommunications Act, AT & T had requested interconnection with the ILEC
in the area, NYNEX, which later merged into Bell Atlantic. Upon such a
request, section 252 of the Telecommunications Act allows the ILEC and
requestor to enter into a binding agreement governing the interconnection
arrangement that must ultimately be approved by a state commission. AT & T
and NYNEX entered into such an agreement, which the state commission
approved. See Order Approving Interconnection Agreement, Case 96-C-0723,
1997 WL 410707 (N.Y.P.S.C. June 10, 1997). Section 16 of the interconnection
agreement provides for dispute resolution procedures that are the "exclusive
remedy for all disputes between NYNEX and AT & T arising out of this
Agreement or its breach." Id. at *23, 16. The agreement also allows for
disputes to be submitted to federal and state regulatory agencies. Id. Shortly
after entering into the interconnection agreement, AT & T filed complaints with
regulatory authorities concerning lost and delayed orders. On March 9, 2000,
Bell Atlantic entered into a consent decree with the FCC, agreeing to resolve
the problem promptly and pay $3 million to the United States and $10 million
to AT & T and other competitors for their losses. The consent decree was
dissolved in July 2000.

II. The Plaintiff's Action and its Dismissal by the District Court
11
12

Not long after the consent decree was entered, the plaintiff filed a complaint in
the United States District Court for the Southern District of New York (Sidney
H. Stein, J.) asserting multiple actions against Bell Atlantic: (1) an action
pursuant to sections 206 and 207 of the Communications Act, alleging that Bell
Atlantic violated: (a) section 202(a) of the Communications Act, which
prohibits common carriers from discriminating in rates or services in providing
communications services and (b) its obligations as an ILEC under subsections
(b) and (c) of section 251 of the Telecommunications Act; (2) an action

pursuant to the Clayton Act, alleging that Bell Atlantic violated section 2 of the
Sherman Act; and (3) a state law claim for tortious interference with contract.
13

The plaintiff, a limited liability partnership organized under New York law,
alleges that Bell Atlantic has not afforded competing local exchange carriers
("CLECs") with equal access to its network. The plaintiff claims that as a
result, it has received poor local phone service. The amended complaint alleges:

14

Bell Atlantic has not afforded CLECs access to the local loop on a par with its
own access. Among other things, Bell Atlantic has filled orders of CLEC
customers after fulfilling those for its own local phone service, has failed to fill
in a timely manner, or not at all, a substantial number of orders for CLEC
customers substantially identical in circumstances to its own local phone
service customers for whom it has filled orders on a timely basis, and has
systematically failed to inform CLECs of the status of their customers' orders
with Bell Atlantic.

15

Consequently, the plaintiff claims Bell Atlantic violated the various duties
imposed on it as an ILEC by subsections (b) and (c) of section 251 of the
Telecommunications Act and its duties as a common carrier under section
202(a) of the Communications Act. The amended complaint also alleges that
Bell Atlantic's conduct had no valid business reason and was intended to
exclude competition from the market "by making it difficult for its competitors
to provide service in the Local Phone Service market on the level that Bell
Atlantic is able to provide to its customers in that market." Am. Compl. 52.

16

The plaintiff seeks class certification pursuant to Fed.R.Civ.P. 23(b) on behalf

of the "customers of a company other than Bell Atlantic with respect to the
provision of Local Phone Service in the Geographic Market at any time since
March 10, 1996," Am. Compl. 28, who were damaged by Bell Atlantic's
alleged conduct. The plaintiff seeks damages, including treble damages for its
antitrust claims. Moreover, the amended complaint asks for injunctive relief
"enjoining Bell Atlantic from providing access to the local loop market ... to
providers of Local Phone Service other than itself on terms and conditions that
are not as favorable as those enjoyed by Bell Atlantic...." Am. Compl. at 16.

17

Bell Atlantic moved pursuant to Fed. R.Civ.P. 12(b)(6) to dismiss the

complaint. The district court granted the motion with respect to the
Communications Act and antitrust claims, and declined to retain jurisdiction
over the state law claim.

18

In adjudicating the plaintiff's antitrust claim, the district court in its thorough
opinion initially evaluated Bell Atlantic's argument that the plaintiff did not
have standing to bring an antitrust action because the only damage it suffered
was as an indirect purchaser of services from AT & T. The district court
rejected this argument, reasoning that the plaintiff's alleged harm, "damages
resulting from poorer service than [it] would otherwise have received had Bell
Atlantic acted lawfully, ... is wholly distinct from the harm suffered by [AT &
T]." Trinko, 123 F.Supp.2d at 741. Although the plaintiff had standing to bring
an antitrust action, the district court held that the plaintiff did not sufficiently
allege the "willful acquisition or maintenance" of monopoly power by Bell
Atlantic. The district court noted that even a monopolist does not have a general
duty under the antitrust laws to cooperate with its competitors. Citing the
Seventh Circuit's decision in Goldwasser v. Ameritech Corp., 222 F.3d 390 (7th
Cir.2000), the district court observed that "[t]he affirmative duties imposed by
the Telecommunications Act are not coterminous with the duty of a monopolist
to refrain from exclusionary practices." Trinko, 123 F.Supp.2d at 742.
Characterizing the plaintiff's claim as solely an allegation that Bell Atlantic
violated the Telecommunications Act, the district court found that such an
allegation was insufficient to support an antitrust claim.

19

The district court also dismissed the plaintiff's Communications Act claims.
Initially, the district court rejected Bell Atlantic's argument that the damages
provisions of the Communications Act do not apply to the Telecommunications
Act. The district court concluded that the Telecommunications Act was an
amendment to the Communications Act and that private lawsuits are not
generally incompatible with the regulatory scheme established by the
Telecommunications Act. However, the district court dismissed the claims
based on the doctrine of prudential standing, the judge-made rule that prevents
a third party from asserting the rights of others. The district court reasoned that
section 251 of the Telecommunications Act "imposes duties on incumbent
carriers only as to local competitors, and those rights are triggered only when a
competing carrier requests interconnection." Trinko, 123 F.Supp.2d at 744
(citation omitted). Therefore, a suit brought by the plaintiff alleging violations
of section 251 would impermissibly assert the rights of Bell Atlantic's local
competitor, AT & T. Similarly, the district court explained that section 202(a)
of the Communications Act only imposes duties on a carrier with respect to its
own customers. See id. Thus, the district court concluded that only Bell
Atlantic's customers have a right to bring suit under section 202(a), barring the
plaintiff, which is a customer of AT & T, from bringing suit. The district court
dismissed the plaintiff's section 202(a) claim without prejudice, allowing the
plaintiff to replead its claim within 20 days. Finally, because the district court
dismissed all of the plaintiff's federal claims, it declined to retain supplemental

jurisdiction over the plaintiff's state law tortious interference claim.

20

The plaintiff then moved for reconsideration of the district court's decision.
While the district court denied the motion, it allowed the plaintiff to replead its
antitrust claim in addition to its section 202(a) claim. In its amended complaint,
the plaintiff attempted to retool its section 202(a) claim to avoid the assertion of
a third party's rights. The plaintiff alleged that it had a direct relationship with
Bell Atlantic because AT & T acted as the plaintiff's agent with respect to Bell
Atlantic.2 The plaintiff also characterized its antitrust claim as a monopoly
leveraging claim. Bell Atlantic again filed a motion to dismiss pursuant to
Fed.R.Civ.P. 12(b)(6) and the district court granted the motion. The district
court rejected the plaintiff's amended section 202(a) claim because the plaintiff
failed to allege facts establishing a principal-agent relationship. The district
court also concluded that there was no antitrust claim because the amended
complaint did not describe anticompetitive conduct and only alleged that Bell
Atlantic breached its own contracts with competitors.

21

The plaintiff filed a timely notice of appeal and this appeal ensued.

DISCUSSION
I. The Communications Act Claims
A. General Principles of Standing
22

We first address the district court's dismissal of the plaintiff's Communications

Act claims through application of the prudential standing doctrine. We review a
district court's dismissal of a complaint for lack of standing de novo. See Wight
v. Bankamerica Corp., 219 F.3d 79, 86 (2d Cir.2000).

23

"In essence the question of standing is whether the litigant is entitled to have
the court decide the merits of the dispute or of particular issues. This inquiry
involves both constitutional limitations on federal-court jurisdiction and
prudential limitations on its exercise." Warth v. Seldin, 422 U.S. 490, 498, 95
S.Ct. 2197, 45 L.Ed.2d 343 (1975) (citation omitted); accord Lamont v. Woods,
948 F.2d 825, 829 (2d Cir.1991). Both limits are "founded in concern about the
proper and properly limited role of the courts in a democratic society."
Warth, 422 U.S. at 498, 95 S.Ct. 2197 (citations omitted). The constitutional
dimension of the standing doctrine originates from Article III of the
Constitution, which confines federal courts to adjudicating "cases" and
"controversies." To meet the constitutional test for standing, "[a] plaintiff must
allege personal injury fairly traceable to the defendant's allegedly unlawful

conduct and likely to be redressed by the requested relief." Allen v. Wright, 468
U.S. 737, 751, 104 S.Ct. 3315, 82 L.Ed.2d 556 (1984) (citation omitted).
24

It is undisputed that the plaintiff meets the constitutional limits of standing. The
issue is whether the plaintiff satisfies the judge-created prudential requirements
of standing. "Foremost among the prudential requirements is the rule that a
party must `assert his own legal rights and interests, and cannot rest his claim to
relief on the legal rights or interests of third parties.'" Wight, 219 F.3d at 86
(quoting Warth, 422 U.S. at 499, 95 S.Ct. 2197). "[T]he source of the plaintiff's
claim to relief assumes critical importance with respect to the prudential rules
of standing.... Essentially, the standing question in such cases is whether the
constitutional or statutory provision on which the claim rests properly can be
understood as granting persons in the plaintiff's position a right to judicial
relief." Warth, 422 U.S. at 500, 95 S.Ct. 2197; accord Leibovitz v. New York
City Transit Auth., 252 F.3d 179, 185 (2d Cir.2001). Thus, the issue is whether
the plaintiff has a right to judicial relief under sections 206 and 207 of the
Communications Act for alleged violations of section 202(a) of the
Communications Act and subsections (b) and (c) of section 251 of the
Telecommunications Act.

25

B. Sections 206 and 207 of the Communications Act

26

The district court assumed that the plaintiff's rights under the Communications
Act could only arise from duties defined by the substantive provisions of the
Act. Because the plaintiff could not identify a duty to it arising directly from
sections 202(a) or 251, the district court held that the plaintiff was
impermissibly attempting to assert the rights of third parties.

27

In determining whether the plaintiff has a right under the Communications Act,
the proper focus is not sections 202(a) or 251, but the Act's liability and
damages provisions, sections 206 and 207. The plaintiff's right to bring an
action under the Communications Act originates from sections 206 and 207 of
that Act. Section 206 makes a common carrier "liable to the person or persons
injured" as a result of the common carrier's violation of the Communications
Act. 47 U.S.C. 206.3 Section 207 gives the person damaged by the common
carrier's violation of the Act the right to bring an action in federal court. See 47
U.S.C. 207.4 Sections 206 and 207 are broadly written and explicitly
encompass all of the substantive provisions of the Communications Act. While
a particular substantive provision may not provide the plaintiff with a particular
right, if the violation of that provision injures the plaintiff, sections 206 and
207 of the Communications Act confer upon the plaintiff the right to bring an
action to recover for its injuries.

C. Section 202(a) of the Communications Act

28

The plaintiff alleges that the defendant violated section 202(a) of the
Communications Act. Section 202(a) provides:

29

It shall be unlawful for any common carrier to make any unjust or unreasonable
discrimination in charges, practices, classifications, regulations, facilities, or
services for or in connection with like communication service, directly or
indirectly, by any means or device, or to make or give any undue or
unreasonable preference or advantage to any particular person, class of persons,
or locality, or to subject any particular person, class of persons, or locality to
any undue or unreasonable prejudice or disadvantage.

30

47 U.S.C. 202(a). "An inquiry into whether a carrier is discriminating in

violation of 202(a) involves a three-step inquiry: (1) whether the services are
`like'; (2) if they are, whether there is a price difference between them; and (3)
if there is, whether that difference is reasonable." Competitive Telecomm. Ass'n
v. FCC, 998 F.2d 1058, 1061 (D.C.Cir.1993); see also National
Communications Ass'n, Inc. v. AT & T, 238 F.3d 124, 127 (2d Cir.2001)
(assuming that this three-step inquiry applies in this Circuit). "[T]he
Congressional concern in enacting ... 202(a) specifically, was to eliminate the
use of monopolistic power to stifle competition." National Communications,
238 F.3d at 131 (citations omitted).

31

The discrimination described in the complaint suffices to state a claim under

section 202(a). In National Communications Ass'n, Inc. v. AT&T, we upheld a
finding of discrimination under section 202(a) where a telecommunications
carrier favored its own end-user customers over resellers. 238 F.3d 124, 127-28
(2d Cir.2001). The plaintiff has also alleged that CLECs such as AT & T
obtaining services under the resale provisions of 251 received
telecommunications services inferior to those supplied to the defendant's own
end-users.

32

Although the plaintiff alleged a cognizable form of discrimination by the

defendant, the district court dismissed the plaintiff's section 202(a) action based
on the doctrine of prudential standing. In doing so, the district court assumed
that the plaintiff's right to bring suit under the Communications Act originates
from section 202(a). While the text of section 202(a) broadly prohibits
discrimination against "any particular person, class of persons, or locality," 47
U.S.C. 202(a), the district court characterized section 202(a) as only creating
a duty between a communications provider and its direct customer. The district

court concluded that the plaintiff has no action under section 202(a) because it
was not a direct customer of Bell Atlantic, and was instead a customer of AT &
T, which was a customer of Bell Atlantic. Under the district court's theory, only
AT & T would have a section 202(a) action against Bell Atlantic.
33

But as we explained earlier, the plaintiff's right to sue does not stem from
section 202(a). It originates from sections 206 and 207, which makes parties
who violate the Communications Act liable to parties they injure through such
violations. Bell Atlantic does not dispute on appeal that there is arguably a
violation of section 202(a) with respect to its dealings with AT & T. The
plaintiff alleges that it was injured by this violation of the Communications Act
because it received poor local phone service. As an entity that contends that it
was injured by Bell Atlantic's alleged violation of section 202(a), the plaintiff
plainly meets the requirements for having an action under sections 206 and 207.
The plaintiff is asserting its own rights. Therefore, the district court erred in
dismissing the case based on the doctrine of prudential standing.

34

To support its argument for dismissal, the defendant points to the absence of
published cases involving actions by indirect purchasers allegedly injured by
railroad rates that were regulated by the now repealed Interstate Commerce Act
("ICA"). Because "[s]ections 206 and 207 of the Communications Act were
expressly modeled on the enforcement provisions of the ICA," this Court has
"held that decisions construing the ICA are persuasive in establishing the
meaning of the Communications Act...." Conboy, 241 F.3d at 250; see also
AT&T Corp. v. Central Office Tel., Inc., 524 U.S. 214, 222, 118 S.Ct. 1956, 141
L.Ed.2d 222 (1998); H.R.Rep. No. 73-1850, at 6 (1934).5

35

Although we have found no indirect purchaser case brought under the ICA, the
defendant does not point to any authority barring such a suit. In light of the
unambiguous language of sections 206 and 207, the absence of such a case is
insufficient to establish that such an action is not permitted. Moreover, the
Supreme Court did state in L.T. Barringer & Co. v. United States, 319 U.S. 1,
13, 63 S.Ct. 967, 87 L.Ed. 1171 (1943), that shippers, who tend to be the
parties most directly injured by discriminatory rates, were not the only entities
that could bring actions for discriminatory rates under the ICA. The discussion
in L.T. Barringer is consistent with the language of sections 206 and 207,
which provides that any party injured by conduct that violates the
Communications Act has the right to bring an action.

36

Bell Atlantic contends that the plaintiff cannot bring suit because its injury is
wholly derivative of the injury suffered by AT & T. In the RICO context, it is
well-established that a plaintiff must establish that the defendant's conduct was

a proximate cause of its injury in order to have standing to bring a RICO action.
See Holmes v. Securities Investor Prot. Corp., 503 U.S. 258, 267-70, 112 S.Ct.
1311, 117 L.Ed.2d 532 (1992); Laborers Local 17 Health and Benefit Fund v.
Philip Morris, Inc., 191 F.3d 229, 234 (2d Cir.1999). We have noted that "to
plead a direct injury is a key element for establishing proximate causation...."
Laborers Local, 191 F.3d at 235. But we have not held that sections 206 and
207 of the Communications Act contain a requirement of proximate cause. We
need not resolve the difficult issue of whether there is such a requirement,
however, because on this record the plaintiff sufficiently alleges that it suffered
a direct injury. In discussing the question of antitrust standing, the district court
found that "[t]he harm that these customers are alleging damages resulting
from poorer service than they would otherwise have received had Bell Atlantic
acted lawfully is wholly distinct from the harm suffered by the competitors."
Trinko, 123 F.Supp.2d at 741. The plaintiff alleges that it suffered a direct
harm, poor phone service, as a result of the defendant's misconduct.6 While the
district court may find otherwise after discovery and a motion for summary
judgment, it is too early to conclude on this record that the plaintiff only
suffered a wholly derivative injury.
37

Bell Atlantic asserts a number of other arguments for dismissal that the district
court did not consider. Specifically, it claimed that the case should be dismissed
under the filed rate doctrine and because the plaintiff has not pleaded specific
damages. These are grounds that the district court did not address in its
decision, which solely relied on the doctrine of prudential standing in
dismissing the case, and we will not decide those issues in the first instance on
this appeal.

38

We are of the view that the district court erred in dismissing the plaintiff's
section 202(a) claim based on the doctrine of prudential standing. Because the
discrimination described in the complaint would violate section 202(a) of the
Communications Act and allegedly caused a direct injury to the plaintiff, the
plaintiff is asserting its own rights under sections 206 and 207 of the
Communications Act. We therefore reverse the district court's dismissal of the
plaintiff's section 202(a) claim based on the doctrine of prudential standing.

39

D. Section 251 of the Telecommunications Act

40

The plaintiff's attempt to bring a claim for alleged violations of section 251 of
the Telecommunications Act is problematic.7 We agree that the claim should
be dismissed but for different reasons than the district court gave.

41

The plaintiff alleges that the defendant violated its duties as an ILEC as defined

41

The plaintiff alleges that the defendant violated its duties as an ILEC as defined
by subsections (b) and (c) of section 251 of the Telecommunications Act.
Section 251 seeks to open local telecommunications markets to competition.
While section 251 establishes a number of broadly stated duties that can be
construed as substantive norms of behavior, the Telecommunications Act
allows an ILEC to substantially fulfill its duties under subsections (b) and (c) of
section 251 by entering into interconnection agreements with
telecommunications carriers seeking to enter the local market. These
agreements are reached primarily through a process of negotiation and must
ultimately be approved by a state commission. The parties may ask the state
commission to arbitrate any disputes that arise in the negotiating process. After
the state commission approves such an agreement, the Telecommunications Act
intends that the ILEC be governed directly by the specific agreement rather
than the general duties described in subsections (b) and (c) of section 251.

42

In this case, AT & T and Bell Atlantic have negotiated an interconnection

agreement. During this process they submitted a number of issues to the state
commission for arbitration. Those disputes were resolved and the entire
agreement has been approved by the state commission. This agreement
provides for a dispute resolution mechanism that the parties have utilized. At
best, the plaintiff's section 251 claim only describes conduct by the defendant
that would violate the interconnection agreement. Therefore, the plaintiff has
no cause of action pursuant to sections 206 and 207 of the Communications Act
for injury stemming from a violation of section 251.

43

Initially, we note that the district court was correct in concluding that section
251 defines duties between telecommunications carriers. It is clear that the
duties enumerated in section 251 regulate the relationships between
telecommunications carriers, especially those that are seeking to enter the
market for local phone service, rather than the relationships between
telecommunications carriers and consumers. In fact, the Committee Report
notes that section 251 "imposes a general duty to interconnect directly or
indirectly between all telecommunications carriers...." H.R. Conf. Rep. 104458, 1996 WL 46795, at *121 (1996), U.S.Code Cong. & Admin.News 1996,
pp. 10, 132 (emphasis added). While the Telecommunications Act and
legislative history often refer to the fact that consumers will ultimately benefit
from competitive communications markets, that is only a collateral effect of the
implementation of these duties by telecommunications carriers.

44

It could be argued that if the plaintiff has a right to bring suit for a violation of
the Telecommunications Act, such a right would arise from sections 206 and
207 of the Communications Act. On this view, if the plaintiff has such a right,
the district court's dismissal of the plaintiff's section 251 claim based on the

doctrine of prudential standing would have been in error. However, we need not
reach the issue of whether the plaintiff has the right under sections 206 and 207
to bring suit for a violation of the Telecommunications Act because the
plaintiff does not describe conduct by the defendant that would violate section
251 of the Telecommunications Act.
45

While the duties regulating ILECs enumerated in subsections (b) and (c) of
section 251 appear at first glance to be free-standing, in practice, section 251
envisions that these duties will be implemented through state approved
contracts between the carrier requesting interconnection and the ILEC. Section
251 requires the ILEC and requesting carrier to "negotiate in good faith in
accordance with section 252... agreements to fulfill the duties described in
paragraphs (1) through (5) of subsection (b) of this section and this subsection."
47 U.S.C. 251(c)(1). In other words, an ILEC can meet its obligations under
subsections (b) and (c) by entering into an interconnection agreement with a
requesting carrier through the procedures outlined in section 252. Such
interconnection agreements do not necessarily reiterate the duties enumerated in
section 251. Instead, the ILEC and requesting carrier have the option of
contracting around the obligations set forth in subsections (b) and (c) of section
251. Section 252(a)(1) of the Telecommunications Act provides: "[u]pon
receiving a request for interconnection, services, or network elements pursuant
to section 251 of this title, an incumbent local exchange carrier may negotiate
and enter into a binding agreement with the requesting telecommunications
carrier or carriers without regard to the standards set forth in subsections (b)
and (c) of section 251...." 47 U.S.C. 252(a)(1) (emphasis added).

46

Section 252 also provides for regulation of interconnection agreements by state

commissions. For example, if there are disputes in the negotiation of an
interconnection agreement, the parties can request arbitration by the state
commission to decide any open issues. See 47 U.S.C. 252(b)(1). The state
commission is required to resolve such disputes through reference to section
251. See 47 U.S.C. 252(c)(1). The state commission must also ultimately
approve the interconnection agreement. In evaluating parts of an
interconnection agreement for approval, the statute requires the state
commission to use different criteria depending on whether the portion of the
agreement was negotiated or arbitrated. The state commission may only reject
negotiated portions of an interconnection agreement if they discriminate against
a non-party telecommunications carrier or if the implementation of the
agreement goes against the public interest. See 47 U.S.C. 252(e)(2)(A). On
the other hand, when parts of the interconnection agreement go through the
arbitration procedure, the state commission may only reject an arbitrated
portion of the agreement if it does not comply with section 251. See 47 U.S.C.

252(e)(2)(B).
47

NYNEX, which later merged with Bell Atlantic to form the defendant, and AT
& T used the procedures described in section 252 to enter into an
interconnection agreement that was ultimately approved by the state. Because
they disagreed on a number of issues, the parties submitted certain disputes to
the New York Public Service Commission for arbitration. See Order Approving
Interconnection Agreement, 1997 WL 410707, at *1. The New York Public
Service Commission resolved the disputes and ultimately approved the
agreement as compliant with section 251 and consistent with the public interest.
See id. at *4.

48

The issue before us is whether conduct that breaches the defendant's

interconnection agreement with AT & T can also be considered a violation of
subsections (b) and (c) of section 251. We conclude that in this case it does not.
Once the ILEC "fulfill[s] the duties" enumerated in subsection (b) and (c) by
entering into an interconnection agreement in accordance with section 252, 47
U.S.C. 251(c)(1), it is then regulated directly by the interconnection
agreement. Moreover, the fact that the Telecommunications Act allows parties
to negotiate interconnection agreements without regard to subsections (b) and
(c) of section 251, see 47 U.S.C. 252(a)(1), indicates that Congress
envisioned the possibility that the negotiated parts of the interconnection
agreement could result in a different set of duties than those defined by the
statute. To read the Telecommunications Act in a way such that ILECs are
governed exclusively by the broadly worded language of section 251 would
make the option of negotiating interconnection agreements without regard to
subsections (b) and (c) of section 251 superfluous.

49

The elaborate process of negotiation and arbitration set forth in section 252
indicates that Congress sought to allow ILECs and their competitors to govern
their interconnection relationships directly through specific interconnection
agreements rather than the broadly outlined duties described in subsections (b)
and (c) of section 251. Interconnection agreements are necessary because the
particular ways in which the broadly framed duties enumerated in section 251
are implemented may differ depending on the circumstances. Rather than
primarily regulating the relationships between entering carriers and the
incumbent ILEC through abstract duties enforceable in court, Congress chose
to give the parties the option to negotiate particular agreements with the aid and
ultimate approval of state regulatory bodies, which have specialized expertise in
the area of telecommunications. This option offers telecommunications carriers
the choice to use a regulatory process that might be more efficient than other
alternatives. If ILECs were governed by the abstract duties described in section

251 despite the existence of a particular interconnection agreement that was

approved by the state commission after an extensive process of negotiation and
arbitration, they would have diminished incentive to enter into such
agreements. A requesting carrier could end-run the carefully negotiated
language in the interconnection agreement by bringing a lawsuit based on the
generic language of section 251.8
50

The particular interconnection agreement entered into by the defendant and AT

& T requires the parties to resolve any disputes through procedures set forth in
the agreement. We take judicial notice of the fact that the dispute between Bell
Atlantic and AT & T arising out of the factual allegations in the complaint has
been resolved through these procedures. The defendant fulfilled its duties as an
ILEC under subsections (b) and (c) of section 251 by entering into a state
approved interconnection agreement with AT & T through the procedures
described in section 252. While the defendant may have breached its
obligations under the interconnection agreement, because its duties as an ILEC
are directly defined by that agreement, there was no underlying violation of
subsections (b) and (c) of section 251.9 Without an underlying violation of
section 251, the plaintiff has no cause of action under sections 206 and 207,
even if it were permitted to bring a suit for violations of section 251 pursuant to
sections 206 and 207.10

II. The Antitrust Claim

51

Finally, we address the district court's dismissal of the plaintiff's antitrust claim.
We agree that the plaintiff has standing to bring an antitrust claim. However,
we reverse the district court's dismissal of the plaintiff's antitrust claim pursuant
to Fed. R.Civ.P. 12(b)(6).
A. Standing

52

Initially, we review the district court's conclusion that the plaintiff has standing
to bring an antitrust suit. The Clayton Act provides an action for "any person ...
injured in his business or property by reason of anything forbidden in the
antitrust laws...." 15 U.S.C. 15. To have standing to bring an action under the
Clayton Act, the plaintiff must show "antitrust injury, which is to say injury of
the type the antitrust laws were intended to prevent and that flows from that
which makes defendants' acts unlawful." Volvo N. Am. Corp. v. Men's Inter.
Prof'l Tennis Council, 857 F.2d 55, 66 (2d Cir.1988) (internal quotations and
citations omitted).

53

The plaintiff alleges that it received poor local phone service because of Bell

53

The plaintiff alleges that it received poor local phone service because of Bell
Atlantic's attempt to maintain its monopoly power by refusing to provide equal
access to its local network. The defendant asserts that the plaintiff has no
antitrust standing because it only suffered an indirect injury. According to the
defendant, its alleged actions only directly injured its direct customer, AT & T.
The plaintiff could only have been injured incidentally, through its purchase of
inferior services from AT & T. The defendant thus contends that the plaintiff is
essentially an indirect purchaser who cannot recover antitrust damages under
Illinois Brick Co. v. Illinois, 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707
(1977), which held that a customer of a customer who is overcharged by a
monopolist does not have antitrust standing. The rationale for the Illinois Brick
rule is that it is difficult to calculate the damages suffered by an indirect
purchaser. See id. at 737-47, 97 S.Ct. 2061. The indirect purchaser is only
damaged to the extent that the direct purchaser passes on to it the overcharge
resulting from the anticompetitive conduct. Any such calculation would be
imprecise and could result in double recovery if both the direct and indirect
purchasers sue and the calculations in their suits differed.

54

The problem with simply applying the Illinois Brick rule to this case is that AT
& T cannot be characterized solely as a customer of Bell Atlantic. While AT &
T purchases access to the local network from Bell Atlantic, it is also a
competitor of Bell Atlantic in the retail market for selling local phone service to
consumers. Consequently, this is a case where the anticompetitive conduct has
allegedly damaged the customer of a competitor who would have antitrust
standing under Blue Shield of Virginia v. McCready, 457 U.S. 465, 102 S.Ct.
2540, 73 L.Ed.2d 149 (1982). In McCready, the Supreme Court found that an
individual who was denied coverage for treatment by a psychologist as a result
of an alleged conspiracy between his health plan and a group of psychiatrists
had antitrust standing. The defendants in that case alleged that the conspiracy
only injured the competitors of the psychiatrists, the psychologists. The
Supreme Court, however, found that a customer of a competitor can suffer a
direct injury from an anticompetitive scheme aimed principally at the
competitor. To illustrate this principle, the Supreme Court used a simple
example. As a result of the scheme to exclude psychologists from the market,
the person seeking coverage for treatment by a psychologist has two choices:
(1) visit a psychologist and not receive reimbursement; or (2) visit a
psychiatrist. While the second choice hurts the psychologist in its role as a
competitor of psychiatrists, the first choice directly hurts the customer of the
psychologist. See McCready, 457 U.S. at 483-84, 102 S.Ct. 2540. As a result of
an alleged monopoly scheme, the plaintiff in this case had a similar set of
choices: (1) stay with AT & T and receive inferior local service; or (2) switch to
Bell Atlantic. While the second choice would hurt AT & T as a competitor, the
first choice directly injures the plaintiff as a consumer. In this case, the plaintiff

made the first choice and suffered the requisite antitrust injury.
55

The defendants in Illinois Brick were alleged price-fixers. Illinois Brick

assumes a case where customers and customers of customers are only affected
by the anticompetitive scheme through the imposition of prices higher than
prices in a competitive market. In such a case, the only harm suffered by the
customer of the customer is that part of the higher prices are passed on to it. In
this case, Bell Atlantic was not simply charging higher prices, it was also
allegedly trying to interfere with AT & T's opportunity to compete with it.
Thus, there is more at stake here than the imposition of higher prices, which are
indirectly passed on to others. There is allegedly conduct that is meant to drive
a competitor out of the market. Action meant to injure a competitor can directly
harm the consumer who chooses to do business with the competitor. In this
case, allegedly the plaintiff was harmed directly when it received poor phone
service because it chose to do business with AT & T.

56

The district court correctly concluded that the plaintiff has antitrust standing.
B. The Sherman Act Claim

57

Generally, a plaintiff can establish that a defendant violates section 2 of the

Sherman Act by proving two elements "(1) the possession of monopoly power
in the relevant market; and (2) the willful acquisition or maintenance of that
power, as distinguished from growth or development as a consequence of a
superior product, business acumen, or historic accident." Volvo N. Am. Corp.,
857 F.2d at 73 (citations omitted); accord Tops Mkts., Inc. v. Quality Mkts.,
Inc., 142 F.3d 90, 97 (2d Cir.1998).

58

The district court dismissed the plaintiff's antitrust claim, finding that the
plaintiff did not state a claim with respect to the second element. The district
court reasoned that a monopolist does not have a general duty to cooperate with
its competitors. Relying on Goldwasser v. Ameritech Corp., 222 F.3d 390 (7th
Cir.2000), the district court concluded that at most the plaintiff had only
alleged that the defendant breached section 251 of the Telecommunications
Act.

59

While it is true that a monopolist has no general duty to cooperate with its
competitors, "[a] monopolist may not, of course, use its market power, whether
obtained lawfully or not, to prevent or impede competition in the relevant
market." United States Football League v. National Football League, 842 F.2d
1335, 1360-61 (2d Cir.1988) (citations omitted). As the Supreme Court has

explained:
60

[t]he absence of an unqualified duty to cooperate does not mean that every time
a firm declines to participate in a particular cooperative venture, that decision
may not have evidentiary significance, or that it may not give rise to liability in
certain circumstances. The absence of a duty to transact business with another
firm is, in some respects, merely the counterpart of the independent
businessman's cherished right to select his customers and his associates. The
high value that we have placed on the right to refuse to deal with other firms
does not mean that the right is unqualified.

61

Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 601, 105
S.Ct. 2847, 86 L.Ed.2d 467 (1985). For example, a monopolist has a duty to
provide competitors with reasonable access to "essential facilities," facilities
under the monopolist's control and without which one cannot effectively
compete in a given market. See Southern Pac. Communications Co. v. AT&T,
740 F.2d 980, 1009 (D.C.Cir.1984) ("access to essential facilities [must] be
afforded to competitors `upon such just and reasonable terms and regulations as
will, in respect of use, character and cost of service, place every such company
upon as nearly an equal plane as may be with respect to expenses and charges
as that occupied by the proprietary companies.'") (quoting United States v.
Terminal R.R. Assoc., 224 U.S. 383, 411, 32 S.Ct. 507, 56 L.Ed. 810 (1912));
see also Twin Labs., Inc. v. Weider Health & Fitness, 900 F.2d 566, 568-69 (2d
Cir.1990) (discussing essential facilities theory).

62

While it is clear that a plaintiff would not state an antitrust claim against a
defendant simply by alleging that the defendant violated its duties under section
251, the plaintiff's antitrust claim does not merely allege that the defendant
violated section 251. In fact, it does not mention section 251 at all. The
allegations in the amended complaint describe conduct that may support an
antitrust claim under a number of theories. While some of this conduct might
also violate section 251, these are not merely allegations that section 251 has
been violated.

63

First, the amended complaint may state a claim under the "essential facilities"
doctrine. The plaintiff alleges that access to the local loop is essential to
competing in the local phone service market, and that creating independent
facilities would be prohibitively expensive. The defendant allegedly has failed
to provide its competitor, AT & T, reasonable access to these facilities.11 The
plaintiff claims it was injured when the local phone service it purchased from
AT & T was disrupted as a result of this alleged violation of the antitrust laws.12
Although the defendant may ultimately be able to show that the local loop is

not an essential facility, or that it provided the plaintiff with reasonable access
to the local loop, these are issues that the district court should consider in the
first instance.
64

Second, the plaintiff may have a monopoly leveraging claim. To have such a
claim, the plaintiff must show that the defendant "(1) possessed monopoly
power in one market; (2) used that power to gain a competitive advantage ... in
another distinct market; and (3) caused injury by such anticompetitive
conduct." Virgin Atl. Airways v. British Airways, 257 F.3d 256, 272 (2d
Cir.2001). The amended complaint alleges that the defendant has monopoly
power over a wholesale market in which it sells access to the local loop to
telecommunications carriers. It also alleges that the defendant used that power
to gain a competitive advantage in a retail market in which telecommunications
carriers sell local phone service to consumers. See, e.g., M.A.P. Oil Co. v.
Texaco, Inc., 691 F.2d 1303, 1307 (9th Cir.1982) (noting that distinct
customers and distinct prices are factors useful in identifying a distinct market)
(citing Brown Shoe Co. v. United States, 370 U.S. 294, 325, 82 S.Ct. 1502, 8
L.Ed.2d 510 (1962)). Finally, the plaintiff alleges that it was injured by this
anticompetitive conduct. Again, the defendant ultimately may be able to refute
these claims on summary judgment, but we cannot resolve them on the merits
at this stage of the litigation.13

65

In Goldwasser, the Seventh Circuit dismissed similar allegations of

monopolistic conduct for two reasons. First, it found that the claim was
"inextricably linked" to allegations by the Goldwasser plaintiff that section 251
of the Telecommunications Act had been violated. Thus, the claim was merely
an allegation that the Telecommunications Act was violated and not a
freestanding antitrust action. But there is no requirement that an allegation that
otherwise states an antitrust claim must not rely on allegations that might also
state a claim under another statute. Congress, of course, can indicate that such a
statute provides an implicit immunity from the antitrust laws. Conduct that
merely describes a violation of a statute that is meant to immunize a regulated
industry from antitrust scrutiny could not support an antitrust action. But we do
not lightly find that a statute provides such an implicit immunity. Absent a
"plain repugnancy," we will not assume that a regulatory statute implicitly
repeals the antitrust laws. See Northeastern Tel. Co. v. AT&T, 651 F.2d 76, 8283 (2d Cir.1981). If there is no such implicit immunity, as long as a set of
allegations states an antitrust action on its own terms, the fact that it closely
resembles an action brought under another statute in itself is unproblematic.

66

There is no "plain repugnancy" between the antitrust laws and the

Telecommunications Act. In fact, the purpose of the Act is to "provide for a

pro-competitive, de-regulatory national policy framework designed to

accelerate rapidly private sector deployment of advanced telecommunications
and information technologies and services to all Americans by opening all
telecommunications markets to competition...." H.R. Cong. Rep. 104-458, 1996
WL 46795, at *1 (1996), U.S.Code Cong. & Admin.News 1996, at p. 124; 1A
PHILLIP E. AREEDA & HERBERT HOVENKAMP, ANTITRUST LAW
162-63 (2000) ("The 1996 [Telecommunications] Act goes very far toward
throwing all aspects of the industry open to competition and thus antitrust
analysis."). Moreover, the Act contains a specific savings clause, which
specifies that "nothing in this Act or the amendments made by this Act ... shall
be construed to modify, impair, or supersede the applicability of any of the
antitrust laws." 47 U.S.C. 152, Historical and Statutory Notes. The meaning
of the statutory provision is plain on its face and must guide our analysis. See
Lebron v. Russo, 263 F.3d 38, 41 (2d Cir.2001) (per curiam). The savings
clause unambiguously establishes that there is no "plain repugnancy" between
the Telecommunications Act and the antitrust statutes. We thus find that the
Telecommunications Act does not provide an "implicit immunity" from the
antitrust laws.14
67

The Goldwasser court's conclusion also rested on the assumption that "[t]he
antitrust laws would add nothing to the oversight already available under the
1996 law." Goldwasser, 222 F.3d at 401. But in this case, which involves an
individual consumer seeking damages, the antitrust laws serve an important
role. One of the purposes of the Clayton Act is "to compensate victims of
antitrust violations for their injuries." Illinois Brick Co., 431 U.S. at 746, 97
S.Ct. 2061 (citation omitted). Because this plaintiff has no remedy under the
Telecommunications Act for a violation of subsections (b) and (c) of section
251, the antitrust laws are the only place where it has a remedy for damage
caused by the allegedly anticompetitive behavior described in the amended
complaint. Thus, in this case, the antitrust laws serve the purpose of affording
the consumer compensation that the Telecommunications Act does not provide.

68

The second reason the Goldwasser court gave for dismissing the suit was that
allowing an antitrust suit based on allegations arising out of the alleged refusal
of an ILEC to grant an LEC equal access to its network "would ... force us to
confront the question whether the procedures established under the 1996 Act
for achieving competitive markets are compatible with the procedures that
would be used to accomplish the same result under the antitrust laws."
Goldwasser, 222 F.3d at 401. Goldwasser raises the issue of whether the
Telecommunications Act is "specific legislation that must take precedence over
the general antitrust laws, where the two are covering precisely the same field."
Id.

69

But the Telecommunications Act, while meant to create significant change in a

market, is not unprecedented as a legislative attempt to open markets to
competition. In Otter Tail Power Co. v. United States, 410 U.S. 366, 93 S.Ct.
1022, 35 L.Ed.2d 359 (1973), the Supreme Court held that the antitrust laws
apply to at least one other industry regulated by a statute that was intended to
encourage competition in the industry. In reviewing a finding of antitrust
liability against an electric utility company for its refusal to sell energy at a
wholesale price to competing providers, the Supreme Court evaluated the
utility's argument that it was not subject to antitrust regulation because of the
Federal Power Act. The Court noted that the Act embodied "an overriding
policy of maintaining competition to the maximum extent possible consistent
with the public interest." Id. at 374, 93 S.Ct. 1022. To achieve this end, section
202 of the Federal Power Act not only encouraged voluntary interconnections
of power but also gave the Federal Power Commission the authority to order
interconnections. See id. at 373, 93 S.Ct. 1022. The Telecommunications Act is
like the Federal Power Act in that both statutes govern interconnection
relationships "in the first instance by business judgment and not regulatory
coercion." Id. at 374, 93 S.Ct. 1022. Sections 251 and 252 of the
Telecommunications Act allow ILECs to negotiate voluntarily interconnection
agreements with CLECs. Under section 271 of the Telecommunications Act,
ILECs can meet one of the requirements of providing long distance service if
they negotiate a voluntary interconnection agreement that is approved by a state
regulatory agency. See 47 U.S.C. 271(c)(1)(A). The role of the state agency is
not to mandate particular interconnection arrangements but to oversee the
process of voluntary negotiations. While the state regulatory agency is required
to approve interconnection agreements, it may only reject an interconnection
agreements in certain circumstances. See 47 U.S.C. 252(e)(2). Although the
regulatory process envisioned by the Federal Power Act may not have been as
complex and comprehensive as the procedures enumerated in the
Telecommunications Act, the statutes have similar purposes and primarily rely
on voluntary negotiations. And despite a specific regulatory structure that was
meant to encourage competition through interconnection, the Court found that
the Federal Power Act did not preclude an antitrust suit against the regulated
utility. Thus, controlling case law does not support the theory that specific
legislation meant to encourage competition necessarily takes precedence over
the general antitrust laws.

70

Moreover, there is a factual similarity between this case and Otter Tail Power.
In Otter Tail Power, the Supreme Court affirmed a lower federal court that
ordered the defendant to "wheel electric power over its transmission lines from
other electric power lines to [] cities and towns [in its service area]." Otter Tail
Power, 410 U.S. at 375, 93 S.Ct. 1022. Because the Federal Power

Commission was not permitted under the Federal Power Act to order such
wheeling, the Supreme Court noted that the district court's order did not
conflict with the Commission's authority. See id. While the Federal Power
Commission had the power to "direct a public utility ... to establish physical
connection of its transmission facilities with the facilities [of other sellers of
electricity]," id. at 375 n. 7, 93 S.Ct. 1022, it did not have the authority to
mandate the particular remedy that the district court had ordered. Similarly, in
this case, while state regulatory agencies have the power under the
Telecommunications Act to reject interconnection agreements under certain
circumstances, they do not have the authority to award the particular remedy
that the plaintiff is seeking. The Telecommunications Act does not give state
regulatory agencies the power to award consumers compensation for injury
caused by service disrupted by an ILEC that is unlawfully attempting to
maintain its local monopoly. Thus, if the district court were to find the
defendant liable for violating antitrust law and award the plaintiff damages,
such an order would not conflict with the authority of the relevant state
regulatory agency.
71

It is unlikely that allowing antitrust suits would substantially disrupt the

regulatory proceedings mandated by the Telecommunications Act. In
discussing the impact such suits would have on the regulatory process, it is
useful to discuss separately suits seeking damages and suits for injunctive
relief. Awarding damages for the willful maintenance of monopoly power
would not substantially interfere with the regulatory scheme envisioned by the
Telecommunications Act. In contrast, injunctive relief in this area may have
ramifications that require particular judicial restraint.

72

While allowing damages actions would mean that ILECs would to some extent
be subject to both the antitrust laws and their interconnection agreements, the
defendant points to no specific areas where the two sets of obligations would
conflict.15 The defendant contends that its conduct should only be viewed as a
breach of its interconnection agreement with AT & T that should exclusively be
remedied by the regulatory process. However, there is no authority for the
proposition that entering into an interconnection agreement exempts a
telecommunications carrier from the antitrust laws.16 To the contrary, if the
defendant's conduct did violate the antitrust laws, the fact that the regulatory
commission also condemned the conduct of the defendant may indicate that the
purposes of the two schemes are in synch, reinforcing our conclusion that there
is no "plain repugnancy" between the statutes. As the plaintiff points out, the
breach of such an agreement may in some cases be a means by which the ILEC
improperly excludes competition from the market. In this case, the main
difference in the two frameworks is that AT & T may seek remedy through the

regulatory process while the consumer may seek remedy under the antitrust
laws. The two schemes complement rather than contradict each other.
73

While ideally, the regulatory process alone would be enough to bring

competition to the local phone service markets,17 it is possible that the antitrust
laws will be needed to supplement the regulatory scheme, especially with
respect to injury caused to consumers.18 See Reiter v. Sonotone Corp., 442 U.S.
330, 344, 99 S.Ct. 2326, 60 L.Ed.2d 931 (1979) ("private [antitrust] suits
provide a significant supplement to ... enforc[ement] [of] the antitrust laws and
deterring violations.").19 Moreover, at this stage, the record does not allow us to
conclude that the regulatory process has successfully eliminated the risk of
anticompetitive behavior in this particular market. There has been no discovery
and the evidence has not been developed with respect to this issue.

74

Additionally, courts are suited to the task of assessing the extent of damages
allegedly caused by unlawful behavior. Damages can be tailored to award onetime relief to retroactively compensate individuals for injuries caused by past
misconduct. The award of such damages would not substantially interfere with
the broader regulatory process. See, e.g., Carnation Co. v. Pacific Westbound
Conference, 383 U.S. 213, 222, 86 S.Ct. 781, 15 L.Ed.2d 709 (1966) (noting
that award of treble antitrust damages would not interfere with future action by
regulatory agency).

75

On the other hand, the possibility of injunctive relief in this case may be more
problematic than an award of damages. Courts may not be suited to order
particular actions by telecommunications carriers to make the local markets
more competitive, particularly when there is a specific regulatory scheme
meant to serve the same purpose. An overly broad injunction might interfere
with the regulatory framework. But this is not a reason to dismiss the suit at this
stage, especially because the plaintiff may no longer be asserting claims for
injunctive relief. The possibility of an injunction that conflicts with the
regulatory framework will not be an issue until the end of the litigation if there
is a finding of liability. It is possible that court intervention could be
appropriate in some limited circumstances. However, courts must be both
mindful and wary of the strong possibility that injunctive relief could have the
unintended consequence of disrupting the regulatory scheme. We have
confidence that courts will exercise their discretion with restraint in any case
where such relief is appropriate, consistent with respect for the overarching
regulatory regime that Congress has created.

76

Therefore, we reverse the district court's dismissal of the plaintiff's antitrust

claim.

CONCLUSION
77

For the reasons stated above, we affirm the district court's dismissal of the
plaintiff's section 251 claim. The judgment of the district court is vacated with
respect to its dismissal of the plaintiff's other claims, and the case is remanded
for further proceedings consistent with this opinion.

Notes:
*

The Honorable Betty Fletcher, Judge of the United States Court of Appeals for
the Ninth Circuit, sitting by designation

Bell Atlantic later merged with GTE Corporation to form Verizon

Communications

The plaintiff did not assert this theory on appeal

Section 206 provides in full:

In case any common carrier shall do, or cause or permit to be done, any act,
matter, or thing in this chapter prohibited or declared to be unlawful, or shall
omit to do any act, matter, or thing in this chapter required to be done, such
common carrier shall be liable to the person or persons injured thereby for the
full amount of damages sustained in consequence of any such violation of the
provisions of this chapter, together with a reasonable counsel or attorney's fee,
to be fixed by the court in every case of recovery, which attorney's fee shall be
taxed and collected as part of the costs in the case.
47 U.S.C. 206

Section 207 provides in full:

Any person claiming to be damaged by any common carrier subject to the
provisions of this chapter may either make complaint to the Commission as
hereinafter provided for, or may bring suit for the recovery of the damages for
which such common carrier may be liable under the provisions of this chapter,
in any district court of the United States of competent jurisdiction; but such
person shall not have the right to pursue both such remedies.
47 U.S.C. 207.

Prior to passage of the Communications Act, the communications industry was

regulated by the ICA. In 1910, Congress extended regulation to
communications common carriers through the Mann-Elkins Act, which
amended the ICA to bring such carriers under the jurisdiction of the Interstate
Commerce Commission. In 1934, the Communications Act created the FCC to
regulate the communications industrySee Iowa Utils. Board, 525 U.S. at 40304, 119 S.Ct. 721 (Thomas, J. concurring in part and dissenting in part); Glen
O. Robinson, The Federal Communications Act: An Essay on Origins and
Regulatory Purpose, in A LEGISLATIVE HISTORY OF THE
COMMUNICATIONS ACT OF 1934 3, 3 (Max D. Paglin, ed., 1989).

The defendant contends that the plaintiff essentially describes an overcharge

claim, which only resulted in an indirect injury. While the plaintiff's alleged
receipt of poor service means that it paid too much for the service it received,
the plaintiff's claim for damages cannot be narrowly pigeon-holed into the
category of an excessive charge. The plaintiff contracted for a basic level of
adequate service with the expectation that it would receive such service.
Instead, the defendant's misconduct allegedly disrupted these expectations, and
perhaps damaged the plaintiff's business. Such allegations describe a direct
injury

Subsections (a), (b), and (c) of Section 251 read:

251. Interconnection
(a) General duty of telecommunications carriers
Each telecommunications carrier has the duty
(1) to interconnect directly or indirectly with the facilities and equipment of
other telecommunications carriers; and
(2) not to install network features, functions, or capabilities that do not comply
with the guidelines and standards established pursuant to section 255 or 256 of
this title.
(b) Obligations of all local exchange carriers
Each local exchange carrier has the following duties:
(1) Resale

The duty not to prohibit, and not to impose unreasonable or discriminatory

conditions or limitations on, the resale of its telecommunications services.
(2) Number portability
The duty to provide, to the extent technically feasible, number portability in
accordance with requirements prescribed by the Commission.
(3) Dialing parity
The duty to provide dialing parity to competing providers of telephone
exchange service and telephone toll service, and the duty to permit all such
providers to have nondiscriminatory access to telephone numbers, operator
services, directory assistance, and directory listing, with no unreasonable
dialing delays.
(4) Access to rights-of-way
The duty to afford access to the poles, ducts, conduits, and rights-of-way of
such carrier to competing providers of telecommunications services on rates,
terms, and conditions that are consistent with section 224 of this title.
(5) Reciprocal compensation
The duty to establish reciprocal compensation arrangements for the transport
and termination of telecommunications.
(c) Additional obligations of incumbent local exchange carriers
In addition to the duties contained in subsection (b) of this section, each
incumbent local exchange carrier has the following duties:
(1) Duty to negotiate
The duty to negotiate in good faith in accordance with section 252 of this title
the particular terms and conditions of agreements to fulfill the duties described
in paragraphs (1) through (5) of subsection (b) of this section and this
subsection. The requesting telecommunications carrier also has the duty to
negotiate in good faith the terms and conditions of such agreements.

(2) Interconnection
The duty to provide, for the facilities and equipment of any requesting
telecommunications carrier, interconnection with the local exchange carrier's
network
(A) for the transmission and routing of telephone exchange service and
exchange access;
(B) at any technically feasible point within the carrier's network;
(C) that is at least equal in quality to that provided by the local exchange carrier
to itself or to any subsidiary, affiliate, or any other party to which the carrier
provides interconnection; and
(D) on rates, terms, and conditions that are just, reasonable, and
nondiscriminatory, in accordance with the terms and conditions of the
agreement and the requirements of this section and section 252 of this title.
(3) Unbundled access
The duty to provide, to any requesting telecommunications carrier for the
provision of a telecommunications service, nondiscriminatory access to network
elements on an unbundled basis at any technically feasible point on rates,
terms, and conditions that are just, reasonable, and nondiscriminatory in
accordance with the terms and conditions of the agreement and the
requirements of this section and section 252 of this title. An incumbent local
exchange carrier shall provide such unbundled network elements in a manner
that allows requesting carriers to combine such elements in order to provide
such telecommunications service.
(4) Resale
The duty
(A) to offer for resale at wholesale rates any telecommunications service that
the carrier provides at retail to subscribers who are not telecommunications
carriers; and
(B) not to prohibit, and not to impose unreasonable or discriminatory conditions

or limitations on, the resale of such telecommunications service, except that a

State commission may, consistent with regulations prescribed by the
Commission under this section, prohibit a reseller that obtains at wholesale
rates a telecommunications service that is available at retail only to a category
of subscribers from offering such service to a different category of subscribers.
(5) Notice of changes
The duty to provide reasonable public notice of changes in the information
necessary for the transmission and routing of services using that local exchange
carrier's facilities or networks, as well as of any other changes that would affect
the interoperability of those facilities and networks.
(6) Collocation
The duty to provide, on rates, terms, and conditions that are just, reasonable,
and nondiscriminatory, for physical collocation of equipment necessary for
interconnection or access to unbundled network elements at the premises of the
local exchange carrier, except that the carrier may provide for virtual
collocation if the local exchange carrier demonstrates to the State commission
that physical collocation is not practical for technical reasons or because of
space limitations.
47 U.S.C. 251(a)-(c).
8

Because the interconnection agreement in this case is closely linked to section

251 of the Telecommunications Act, the dissent argues that the defendant's
failure to fulfill its obligations under the agreement may also support a right of
action under 47 U.S.C. 206 & 207, which may provide a right of action for
violations of the Telecommunications Act. While it is true that the New York
Public Service Commission found that the interconnection agreement in this
case "does not violate the requirements of the Act," this finding was "subject to
clarifications discussed below [in the text of the Commission's Order
Approving Interconnection Agreement]."See Order Approving Interconnection
Agreement, 1997 WL 410707, at *3. The Commission's language confirms that
the particular form of the duties defined by the interconnection agreement in
this case do not simply reiterate the general duties imposed by section 251.

The complaint does not allege that Bell Atlantic violated subsection (a) of
section 251. Moreover, subsection (a) only requires basic interconnection and
compatibility of standards. The complaint does not describe conduct by Bell
Atlantic that would violate these duties

10

We stress that because this is a case where an interconnection agreement has

been entered into by the parties and approved by the state, we do not decide
whether a plaintiff can bring suit for a violation of the duties under section 251
when there is no such agreement. Moreover, we emphasize that our analysis is
limited to section 251 of the Telecommunications Act and does not address
other provisions of that Act

11

We do not suggest that any or every disruption in local phone service would
support an essential facilities claim. For example, a minor, isolated, and
accidental disruption in access to an essential facility would be insufficient as a
matter of law to establish an antitrust violation. There must be sufficient
evidence to conclude that the defendant controlling the essential facility denied
or disrupted a competitor's access to that facility with the intention of
maintaining its monopoly power

12

We observe that while the defendant must be a competitor of the entity to

which it denies reasonable access to the essential facility for there to be a
violation of section 2 of the Sherman Act,see Official Airline Guides, Inc. v.
Federal Trade Comm'n, 630 F.2d 920, 926 (2d Cir.1980), the Clayton Act, 15
U.S.C. 15, provides a consumer plaintiff directly injured by such an antitrust
violation with a cause of action regardless of whether the consumer plaintiff is
a competitor of the defendant.

13

The plaintiff has also asserted an attempted monopolization claim. To establish

such a claim, a plaintiff must show that the defendant "(1) engaged in
anticompetitive or predatory conduct with (2) specific intent to monopolize and
(3) a dangerous probability of achieving monopoly power."AD/SAT v.
Associated Press, 181 F.3d 216, 226 (2d Cir.1999). This claim is derivative of
the monopoly leveraging and essential facilities claims. If the plaintiff
demonstrates that the defendant engaged in monopoly leveraging, or denied it
reasonable access to an essential facility, then it has established the first
element of the attempted monopolization claim that the defendant engaged in
anticompetitive behavior. Based on our reading of the amended complaint,
however, the plaintiff does not describe any additional predatory or
anticompetitive conduct that would establish the first prong of an attempted
monopolization claim. While on remand, the plaintiff may add allegations that
would describe additional predatory behavior, at this point, the plaintiff has not
established a separate attempted monopolization claim.

14

Citing Justice Breyer's partial concurrence and partial dissent inAT&T Corp. v.
Iowa Utils. Bd., 525 U.S. at 428-29, 119 S.Ct. 721, the defendant generally
asserts that duties requiring sharing of infrastructure may actually reduce
competition. But Justice Breyer's point was made in the context of an argument

for applying an "essential facilities" standard to the sharing requirements of the

Telecommunications Act. Justice Breyer only contended that sharing might
reduce competition when the sharing involved a resource that was not an
"essential facility." In the case at hand, in contrast, the plaintiff alleges that the
local network is an "essential facility."
15

Under section 252, an ILEC could theoretically negotiate an interconnection

agreement that defined its duties in a way that conflicts with subsections (b)
and (c) of section 251See 47 U.S.C. 252(a)(1). But the defendant has not
contended that this particular interconnection agreement conflicts with
principles of antitrust law. Moreover, it seems unlikely to us that the LEC
entering the market would agree to an interconnection agreement that would in
some way reduce competition in the market by restricting the LEC's access to
the local loop. If such a conflict were to arise, the state regulatory commission
would resolve the dispute, using section 251 as a guideline. See 47 U.S.C.
252(c)(1).

16

In contrast, there is specific statutory authority that the negotiation of such an

agreement fulfills the telecommunication carrier's duties under subsections (b)
and (c) of section 251See 47 U.S.C. 251(c)(1).

17

The defendant citesTown of Concord v. Boston Edison Co., 915 F.2d 17 (1st
Cir.1990), an opinion written by Justice Breyer when he was a circuit judge,
for the general proposition that regulation inherently reduces the risk of
antitrust harm. Town of Concord, however, must be read in light of its particular
context, a claim alleging a price squeeze in the public utilities industry where
regulators had the authority to maintain prices at "reasonable" levels. Id. at 2526. The subject matter of this litigation focuses on the issue of equal access to
networks. On this appeal from an order granting a motion to dismiss, we cannot
assess the effectiveness of regulation in this industry. In contrast, Town of
Concord was an appeal after a jury trial where the First Circuit had a complete
record to make this determination.

18

In this case, the relevant regulatory action was directed at AT & T's injuries, not
the alleged injuries of AT & T's consumers. Thus, this is not a case likePan Am.
World Airways, Inc. v. United States, 371 U.S. 296, 313 n. 19, 83 S.Ct. 476, 9
L.Ed.2d 325 (1963), where a civil antitrust suit was dismissed because an
administrative agency may have had the power to award the same remedy
being pursued in that suit. The defendant has not argued that the plaintiff could
and should seek an administrative remedy in this case. Moreover, there is no
evidence that any regulatory body has the authority to compensate the plaintiff
for its injuries.

19

We note that this is an action brought by an injured consumer and not an LEC.
Our decision does not address whether LECs seeking to enter the market may
ever bring antitrust suits against the ILEC. In this case, we note that the
interconnection agreement requires the parties to the agreement to resolve their
disputes through arbitration and the administrative processSee Order Approving
Interconnection Agreement, 1997 WL 410707, at *23, 16.
We also note that the Telecommunications Act provides telecommunications
carriers with incentives to negotiate interconnection agreements and utilize the
regulatory process. ILECs who wish to enter the long distance market are
required to meet certain requirements. Some of those requirements can be met
by successfully negotiating an interconnection agreement. See 47 U.S.C.
271(c)(2)(A)(i)(I). The LEC may have the incentive to proceed through
negotiating such an agreement because the regulatory process is likely to
provide access to the local network sooner than the court system. Thus, we do
not believe that allowing antitrust actions by injured consumers to proceed will
necessarily cause telecommunications carriers to avoid the regulatory process.