Antitrust Law Daily Wrap Up, ANTITRUST—M.D. Fla.: Florida telecom provider’s antitrust, RICO claims fail against Verizon, (Oct 28, 2013)

By Tobias J. Gillett, J.D., LL.M.

Claims that Verizon Communications, Inc. and Verizon Florida, LLC committed antitrust and RICO violations against a provider of telephone and Internet services while competing for Florida telecommunications customers failed, the federal district court in Tampa has ruled (Astro Tel, Inc. v. Verizon Florida, LLC, October 25, 2013, Covington, V.).

Astro Tel, Inc. competed with Verizon, Daystar, Bright House, and Comcast to provide telephone and internet services to customers in Florida. Astro Tel also purchased services and network facilities on a wholesale basis from Verizon. In an affidavit, Astro Tel’s principal, Mike Ray, alleged that Verizon provided unsatisfactory customer service to Astro Tel’s customers when Astro Tel resold Verizon’s services, and that Verizon inappropriately used Astro Tel’s customer information to solicit Astro Tel’s customers. Verizon allegedly made telemarketing calls to those customers in which Verizon indicated that Astro Tel resold Verizon’s products, and sent them marketing materials. Finally, Ray alleged that Verizon inaccurately invoiced Astro Tel, leading to service disruptions, but that an arbitrator’s decision on the dispute requiring Astro Tel to pay Verizon $500,000 in unpaid invoices led to Astro Tel’s bankruptcy.

Astro Tel asserted claims against Verizon for monopolization, attempted monopolization, and monopoly leveraging in violation of Section 2 of the Sherman Act; violation of the RICO Act; and various common law claims. Verizon moved for summary judgment.

Antitrust Claims

The court granted Verizon’s motion as to the monopolization claims. The court explained that, at the summary judgment stage in the Eleventh Circuit, “construction of the relevant market and a showing of monopoly power must be based on expert testimony.” Here, Astro Tel provided only lay testimony, not expert testimony.

The court rejected Astro Tel’s argument that Verizon was “by definition the incumbent local exchange carrier (’ILEC’),” and therefore an expert was not required in order to show that Verizon was in a position of monopoly power. Expert testimony was required because Astro Tel competed with multiple providers, including Verizon, Daystar, Bright House, and Comcast, to provide the telecommunications services at issue. Moreover, Astro Tel had to compete with wireless providers such as Vonage, AT&T, Sprint, and T-Mobile. Astro Tel also had interconnection agreements with BellSouth, Embarq, and Northeast Florida Telephone, and resold telecommunications services from companies other than Verizon, such as Century Link and AT&T. The “complex web of telecommunications providers” and the “varied products and services offered to consumers” necessitated expert testimony to define relevant product and geographic markets.

RICO Claims

The court explained that, to prove a civil RICO claim, “a plaintiff must show: (1) that the defendant (2) through the commission of two or more acts (3) constituting a ‘pattern’ (4) of ‘racketeering activity’ (5) directly or indirectly participates in the specific prohibited activity in (6) an ‘enterprise’ (7) the activities of which affect interstate or foreign commerce.”

Pattern of racketeering activity. The court concluded that Astro Tel had not alleged conduct that constituted a “pattern of racketeering activity.” Verizon did not engage in “deceptive conduct” by informing Astro Tel’s customers that Astro Tel was a reseller of Verizon’s services, because Astro Tel had maintained throughout its action that it was in fact “a reseller of Verizon’s services,” according to the court. Moreover, the court noted that Verizon’s submission of marketing materials to Astro Tel’s customers “does not constitute mail fraud or wire fraud.”

RICO conspiracy. The court also granted summary judgment to Verizon on Astro Tel’s RICO conspiracy claim based on an alleged conspiracy between Verizon and a telemarketing company to provide false information to telecommunications customers. Astro Tel did not provide sufficient evidence to support this claim, and Verizon had required its telemarketing agents to sign an agreement barring them from making disparaging or inaccurate statements about its customers’ products. Therefore, even if the court were to accept Astro Tel’s contention that the telemarketer had made misrepresentations about Astro Tel, there was no evidence that the telemarketer had done so at Verizon’s direction.

RICO enterprise. Verizon was also entitled to summary judgment on the claim that Verizon had violated the RICO Act by acquiring or maintaining through a pattern of racketeering activity “any interest in or control of any enterprise.” Astro Tel had not shown that Verizon had engaged in a “pattern of racketeering activity,” and had not shown an injury from Verizon’s alleged maintenance of the enterprise that was “distinct from the injury caused by the predicate acts.”

Causation. Finally, the court concluded that Verizon was also entitled to summary judgment on the RICO claims because Astro Tel had not offered evidence of causation. Astro Tel had not shown that it had lost any business or suffered any other cognizable injury from the alleged RICO violations.

The case is No. 8:11-cv-2224-T-33TBM.

Attorneys: Christine R. Sensenig (Sensenig Law Firm) and Herbert Roy Donica (Donica Law Firm, PA) for Astro Tel, Inc. Aaron M. Panner (Kellogg, Huber, Hansen, Todd, Evans & Figel, PLLC) for Verizon Florida, LLC.

Companies: Astro Tel, Inc.; Verizon Communications, Inc.; Verizon Florida, LLC

Cases: Antitrust RICO FloridaNews