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Supreme Court puts limits on telephone consumer lawsuits

From Bill Mears
CNN Washington Bureau

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Antitrust Issues
Telecommunications Services
Supreme Court
Justice and Rights

WASHINGTON (CNN) -- A unanimous Supreme Court ruled Tuesday there are limits to when consumers can sue over inadequate phone service, in an antitrust case worth potentially billions of dollars among competing telecom companies.

At issue was whether federal antitrust regulations allow class-action lawsuits against utilities such as phone companies.

So-called "baby Bell" regional phone companies own the lines and infrastructure that go to homes and offices. Their installation from the early days of phone service more than a century ago was never duplicated by other companies because of the prohibitive cost it would involve. Until 1996, most local phone service was provided by a monopoly in a given area.

But under an antitrust settlement that led to the breakup in the 1980s of "The Bell System" phone monopoly, the various regional Bells were forced to lease their lines to phone companies hoping to provide competitive local service.

Those companies have since complained of deliberately poor service on the leased lines. AT&T was one such company that accused Verizon, formerly called Bell Atlantic, of providing "insufficient assistance" to upgrade what were considered outdated phone lines.

A New York lawyer stepped in, claiming he was a direct victim of poor local service, and filed a lawsuit.

Curtis Trinko, an AT&T customer, claims his business was hurt by repeated outages and missed dial tones at his office. Verizon had said the problem was a software malfunction, as compared to say, obsolete "hardware" due for replacement.

Trinko argued federal law allows for consumer protection for victims of antitrust violations. A federal court had allowed the suit to proceed.

But the Supreme Court rejected Trinko's argument. Justice Antonin Scalia, writing for the majority, concluded, "Verizon's alleged insufficient assistance in the provision of service to rivals is not a recognized antitrust claim."

Solicitor General Theodore Olson warned the Court about broader implications, and said a ruling against Verizon could open a floodgate of lawsuits and "threaten substantial disruption of the telecommunications industry." Other companies argued competition would be stifled if companies were forced to share assets with less efficient rivals.

Scalia agreed, writing "an antitrust court is unlikely to be an effective day-to-day enforcer of these detailed sharing obligations."

This case could serve as a benchmark for consumer rights, and the ability of individuals to take legal action over things like phone service. Legal and financial experts question whether such "vital" services as utilities deserve special judicial protection.

The case is Verizon Communications v. Trinko (02-0682).

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