Court Opinion

ID: 2995369
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:19:59.106552+00
Date Added: 2024-06-11T11:45:25.121808
License: Public Domain

In the
United States Court of Appeals
For the Seventh Circuit

No. 00-3864

South Austin Coalition Community Council, et al.,

Plaintiffs-Appellants,

v.

SBC Communications Inc.,

Defendant-Appellee.

Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 99 C 7232--Blanche M. Manning, Judge.

Submitted November 14, 2001/*--Decided December 19, 2001

  Before Easterbrook, Kanne, and Evans,
Circuit Judges.

  Easterbrook, Circuit Judge. SBC
Communications and Ameritech--two of the
Baby Bells created by the breakup of AT&T
in 1983--merged in 1999 after receiving
approval from the Federal Communications
Commission and several state regulators.
The Antitrust Division of the Department
of Justice declined to file suit. But
this did not deter the plaintiffs in this
case, which have sued twice. The first
suit, filed before SBC and Ameritech had
obtained the necessary administrative
approvals, was dismissed as premature.
191 F.3d 842 (7th Cir. 1999). This second
suit, filed immediately after the
approvals, has been dismissed for want of
standing. 2001 U.S. Dist. Lexis 9850 (N.D.
Ill. June 22, 2001).

  When the local-service subsidiaries of
AT&T were spun off in the 1980s, most
people assumed that local phone service
is a natural monopoly. This was a premise
of the divestiture, and each Baby Bell
was constituted as a monopoly in its
service area. By the time of the merger
the technological basis of this natural-
monopoly assumption had come into serious
question, and the legal barriers to
competition also were in the process of
being dismantled. Thus the antitrust
objection to the merger was based on
potential rather than ongoing
competition. The agencies were concerned-
-and in this suit the plaintiffs contend-
-that, had SBC and Ameritech not merged,
each would have entered the other’s core
markets and created extra competition to
consumers’ benefit. The complaint
alleges, for example, that but for the
merger SBC would have begun to offer
local phone service in Chicago (part of
Ameritech’s original territory), and
Ameritech would be offering local service
in St. Louis, an area assigned to SBC in
the AT&T divestiture. The FCC and the
Antitrust Division concluded that, even
if this is so, many other rivals remain--
and that as a practical matter there is
effective competition between land lines
and cellular service, so that competition
prevails even in markets that have a
single land-line local-service provider.
But official approval does not immunize a
phone merger against private antitrust
challenge; sec.7 of the Clayton Act, 15
U.S.C. sec.18, confers immunizing power
on the Surface Transportation Board, the
Federal Power Commission, and several
other bodies, but not on the FCC or the
Antitrust Division. So private plaintiffs
are free to seek divestiture. See
California v. American Stores Co., 495
U.S. 271 (1990).

  Plaintiffs allege that the merger has
reduced long-run competition. This
implies not only injury-in-fact (the core
of the Article III standing requirement)
but also "antitrust injury." That is to
say, these plaintiffs complain about the
kind of injury (reduced output and higher
prices) against which the antitrust laws
are directed. See Atlantic Richfield Co.
v. USA Petroleum Co., 495 U.S. 328
(1990); Cargill, Inc. v. Monfort of
Colorado, Inc., 479 U.S. 104 (1986);
Brunswick Corp. v. Pueblo Bowl-O-Mat,
Inc., 429 U.S. 477 (1977). Nonetheless,
the district court dismissed the
complaint for want of standing. The
court’s opinion summarizes at length the
conclusions of the administrative
agencies approving the merger and then
states, without additional reasoning,
that the allegations of the complaint are
too "speculative and vague" to justify
putting the administrative conclusions to
the test. This approach has nothing to do
with standing. Complaints need not be
elaborate, and in this respect injury
(and thus standing) is no different from
any other matter that may be alleged
generally. See Lujan v. Defenders of
Wildlife, 504 U.S. 555, 561 (1992). The
district court’s approach amounts to a
conclusion that the complaint fails to
state a claim on which relief may be
granted--and this is how SBC (the
surviving firm in the merger) chooses to
treat it. It does not attempt to defend
the district court’s standing rationale
but argues instead that antitrust
complaints must be more thorough than the
normal civil complaint, the better to
curtail the high cost of antitrust
litigation by facilitating early
disposition.

  That is not correct. A pleading is
sufficient if it contains

(1) a short and plain statement of the
grounds upon which the court’s
jurisdiction depends, unless the court
already has jurisdiction and the claim
needs no new grounds of jurisdiction to
support it, (2) a short and plain
statement of the claim showing that the
pleader is entitled to relief, and (3) a
demand for judgment for the relief the
pleader seeks.

Fed. R. Civ. P. 8(a). Plaintiffs’
complaint does all of these things and
may not be dismissed just because it does
not do more. Rule 9 sets out special
pleading requirements for some matters,
such as fraud and admiralty, but it does
not require extra detail for antitrust
suits--and the Supreme Court insists that
courts not add to the requirements of
Rule 8. See, e.g., Leatherman v. Tarrant
County, 507 U.S. 163 (1993); Gomez v.
Toledo, 446 U.S. 635, 640 (1980); cf.
Crawford-El v. Britton, 523 U.S. 574
(1998). Doubtless antitrust litigation is
expensive, but Congress has not responded
to this expense with extra pleading
requirements--as it did, for example, in
the field of private securities
litigation. See 15 U.S.C. sec.78u-4(b).
As long as Rule 8 stands unaltered, and
there is no antitrust parallel to the
Private Securities Litigation Reform Act,
courts must follow the norm that a
complaint is sufficient if any state of
the world consistent with the complaint
could support relief. See Hishon v. King
& Spalding, 467 U.S. 69, 73 (1984); see
also, e.g., Conley v. Gibson, 355 U.S.
41, 45-46 (1957). It is not necessary
that facts or the theory of relief be
elaborated. See Walker v. National
Recovery, Inc., 200 F.3d 500 (7th Cir.
1999); Bennett v. Schmidt, 153 F.3d 516
(7th Cir. 1998). District courts may
mitigate the expense of litigation by
resolving motions for summary judgment
early in the case--in advance of
discovery, if appropriate, for summary
judgment may be sought at any time. See
Fed. R. Civ. P. 56.

  Still, a pleader may volunteer enough to
show that the claim cannot succeed, and
then dismissal under Rule 12(b)(6)
follows. See American Nurses’ Association
v. Illinois, 783 F.2d 716 (7th Cir.
1986). Plaintiffs have done just this by
alleging that before the merger both SBC
and Ameritech were regulated common
carriers, each a monopolist of land-lines
service in its assigned territory. Thus
plaintiffs allege a diminution in
potential competition, rather than a
merger between firms currently competing
in overlapping markets. And this is fatal
to the suit, because an exception to
sec.7 of the Clayton Act carves out of
its scope a merger of common carriers
that do not directly compete. The
critical portion of sec.7 reads:

Nor shall anything herein contained be
construed to prohibit any common carrier
subject to the laws to regulate commerce
from aiding in the construction of
branches or short lines so located as to
become feeders to the main line of the
company so aiding in such construction or
from acquiring or owning all or any part
of the stock of such branch lines, nor to
prevent any such common carrier from
acquiring and owning all or any part of
the stock of a branch or short line
constructed by an independent company
where there is no substantial competition
between the company owning the branch
line so constructed and the company
owning the main line acquiring the
property or an interest therein, nor to
prevent such common carrier from
extending any of its lines through the
medium of the acquisition of stock or
otherwise of any other common carrier
where there is no substantial competition
between the company extending its lines
and the company whose stock, property, or
an interest therein is so acquired.

15 U.S.C. sec.18. Both SBC and Ameritech
were common carriers. The last clause of
this sentence allows "such common
carrier" to "extend" its lines by merger,
provided that "there is no substantial
competition between the company extending
its lines and the company whose stock,
property, or an interest therein is so
acquired." "[S]uch common carrier" must
refer back to the introductory clause--a
"common carrier subject to the laws to
regulate commerce". Do telecommunications
carriers meet that description? They are
subject to many laws regulating
interstate commerce, but the context of
this phrase, with its reference to
"branches or short lines," coupled with
the date of its enactment (1914), raises
the possibility that it covers only
railroads subject to the jurisdiction of
the Interstate Commerce Commission (now
morphed into the Surface Transportation
Board). But that would not be the right
reading, as we concluded in Navajo
Terminals, Inc. v. United States, 620
F.2d 594 (7th Cir. 1979), when applying
this language to a merger of motor
carriers. Section 7 has a separate
exemption for railroad mergers approved
by the Surface Transportation Board; the
sentence we have quoted thus would be
surplusage if read as limited to
railroads. And the legislative history--
the enactment history, not the fog of
words generated by legislators--shows
that "common carrier" means all common
carriers. The version of sec.7 that
passed by the House used the word
"railroad"; the Senate amended this to
"common carrier", a broader designation;
the House acceded to the Senate’s
amendment. The Senate’s committee report
observed that this change was made
precisely to "apply to any common
carrier, thus including telephone and
pipe lines". See Earl W. Kintner,
Legislative History of the Federal
Antitrust Laws and Related Statutes 1748,
2466 (1978), which collects this and
related background material. We rely on
the legislative deeds, not the
accompanying explanation that restates
the obvious. Understandably, in light of
this history, plaintiffs do not contend
that the phrase "common carrier subject
to the laws to regulate commerce" is
limited to those entities regulated by
the Interstate Commerce Commission in
1914.

  What plaintiffs do argue is that the
world has changed since 1914. When sec.7
was enacted, regulated common carriers
rarely competed, and then did so only by
sufferance of the agencies after securing
certificates of public interest,
convenience, and necessity. Today most
regulated industries, including
telecommunications, have been deregulated
in whole or in substantial part; the
Telecommunications Act of 1996 plus the
advent of wireless phone technology have
brought competition to the local phone
market, and plaintiffs argue that we
should not read the exceptions to sec.7
to reduce the force of this competition.
The factual premise of this contention is
doubtful. In 1914 railroad lines often
competed; even when tracks were laid far
apart, shippers had a choice of lines.
Grain, livestock, and steel could go west
from Chicago through St. Louis and the
Union Pacific, or over the Northern
Pacific lines through Minnesota and the
northern tier, or could go by the
Illinois Central (or barge down the
Mississippi) to the Gulf of Mexico and
then by ship through the Panama Canal.
Competition among common carriers is not
an invention of the late Twentieth
Century. Even if competition among common
carriers were a novelty, however, this
would not affect the meaning of sec.7.
The world may have changed, but the
statute has not. As the Supreme Court
remarked in National Broiler Marketing
Association v. United States, 436 U.S.
816 (1978), when dealing with an
antitrust exemption dating to 1920, a
change in economic conditions is a
challenge to Congress, not the courts;
and if the legislature leaves exemptions
alone, they must be enforced as written.
The Supreme Court has not embraced Judge
Calabresi’s proposal, see Guido
Calabresi, A Common Law for the Age of
Statutes (1982), that old enactments be
treated no differently from common law,
equally subject to judicial upkeep.

  This leaves plaintiffs’ argument that
potential competition should be treated
as "substantial competition between the
company extending its lines and the
company whose stock, property, or an
interest therein is so acquired" for
purposes of sec.7. Yet this would leave
no work for the exemption to do. It would
rewrite sec.7 so that mergers of common
carriers are exempt from scrutiny if and
only if the merger would not violate
sec.7 in the first place. The only
function of this exemption must be to
distinguish potential-competition from
actual-competition cases. If the merging
common carriers do not compete actually
or potentially, they face no antitrust
risk. If they currently (and
substantially) compete, then the
exemption is inapplicable by its terms.
Only potential competition remains to be
affected by the exemption; this is the
respect in which common carriers differ
from, say, manufacturers or financial
intermediaries. If two banks merge, the
court must consider any reduction in
potential competition as well as the
reduction in ongoing competition. See,
e.g., United States v. Marine
Bancorporation, Inc., 418 U.S. 602
(1974). But if two common carriers merge,
only the reduction in existing
competition matters. That’s all the
exemption in sec.7 does; to end its
application to potential competition is
to wipe the exemption off the books.
Leaving potential competition among
common carriers to agencies rather than
juries is hardly such a surprising step
that courts should struggle against the
reading. Assessing the significance of
potential competition is difficult for
the best economists and would be nearly
impossible as a subject for trial--
especially when regulatory agencies
exercise so much control over how common
carriers interact.

  Plaintiffs’ complaint concerns potential
competition, for it acknowledges that SBC
and Ameritech had lawful monopolies in
local land-line service at the time of
the merger. What plaintiffs want the
district court to examine is the economic
effect of eliminating each Baby Bell as a
potential entrant into the other’s
territory. That is exactly the line of
inquiry that the common-carrier exemption
to sec.7 forecloses. Thus although we do
not agree with the district court’s
opinion, its judgment may be sustained on
other grounds. The judgment is modified
to dismiss the complaint on the merits
rather than for lack of jurisdiction,
and, as so modified, is

affirmed.

FOOTNOTE

/* This appeal has been assigned to the panel that
resolved the initial appellate proceedings con-
cerning this merger. See Operating Procedure
6(b). The panel has concluded that a second oral
argument is not necessary.