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The 2nd U.S. Circuit Court of Appeals dealt a major blow to Verizon Communications on Thursday, ruling that customers can sue the company for poor local phone service. Finding that customers had standing to bring an action under federal antitrust and telecommunications laws, the 2nd Circuit reversed the ruling of U.S. District Judge Sidney H. Stein of the Southern District of New York. Law Offices of Curtis V. Trinko v. Bell Atlantic Corp., 01-7746, arises from a class action suit brought on behalf of customers of AT&T Corp. in the region served by Bell Atlantic, including New York, New England and the Mid-Atlantic states. After the suit was filed, Bell Atlantic merged with GTE Corp. to form Verizon, the nation’s largest local telephone company. Under the 1996 Telecommunications Act, Verizon and other local phone companies are obligated to open their networks to competing local exchange carriers such as AT&T. The complaint alleges that Verizon discriminated against customers of other carriers using its network by putting service orders for its own customers first. The plaintiff claimed this was anti-competitive behavior that violated � 202(a) of the Communications Act; subsections 251(b) and (c) of the Telecommunications Act and � 2 of the Sherman Antitrust Act. Verizon countered that the law office plaintiff lacked standing to bring the claim, since it was not asserting its own rights under either the Communications Act or the Telecommunications Act but was asserting rights that belonged to AT&T. Noting that it was the first court to look at the issue, Judge Robert A. Katzmann, writing for the panel, rejected Verizon’s arguments, ruling that the plaintiff could proceed with its claims under both statutes. Even more significantly, the court rejected Verizon’s assertion that allowing an antitrust action in the case would disrupt the regulatory process established by the Telecommunications Act. The panel distinguished a 2000 7th Circuit decision, Goldwasser v. Ameritech Corp., 222 F.3d 390, finding that “absent a ‘plain repugnancy’, we will not assume that a regulatory statute implicitly repeals the antitrust laws.” Numerous federal district courts, including the lower court here, had relied on Goldwasser to throw out similar antitrust claims, said Alice McInerney, a partner at New York’s McInerney & Squire who represents the plaintiff. Joseph P. Garland, McInerney’s co-counsel and a partner at New York’s Klein & Solomon, said he was not surprised by the ruling. “All the provisions under which we sued share a common purpose of enhancing competition,” he said. The plaintiff’s lawyers described the decision as “very significant.” Without recourse to the statutory remedies, telephone customers are “basically left hung out to dry,” said Garland. Verizon’s lawyer, John Thorne, disagreed with both the reasoning of the decision and any allegations that Verizon had failed to properly service its competitor’s customers. Thorne said the 2nd Circuit and 7th Circuit decisions directly contradicted each other. Noting that similar cases are pending before three other circuits, he said it could be an issue for the U.S. Supreme Court. He added, however, that Verizon had not decided whether to seek certification to the High Court. He also said he considered it “ironic that people would think to bring an antitrust case against us.” Of all the local phone companies, Verizon has done the most to open its local markets to competition, he said. “We are a week away from getting 74 percent of our lines approved by the Federal Communications Commission as opened for competition,” he said, adding that this was the highest percentage in the industry. “We are antitrust good guys,” he said. 9th Circuit Judge Betty Fletcher, sitting by designation, joined in the opinion. Judge Robert D. Sack concurred in part and dissented in part. In addition to Garland and McInerney, Peter S. Linden of Kirby McInerney & Squire and Kenneth A. Elan represented the plaintiff. Other lawyers for the defense were Henry B. Gutman and Joseph F. Tringali of Simpson Thacher & Bartlett; Richard G. Taranto, of Farr & Taranto in Washington, D.C.; and Marc C. Hansen and Aaron M. Panner, of Kellogg, Huber, Hansen, Todd & Evans in Washington, D.C.

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