Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Tex.: False advertising claims against cell tower operator proceed, antitrust claims dismissed, (Apr 4, 2014)

By Linda O’Brien, J.D., LL.M.

A cellular communication tower operator sufficiently alleged false advertising claims against a competing cellular tower operator in an action involving the acquisition of property rights in land on which the cellular towers were located, the federal district court in Dallas has ruled. Genuine issues of fact precluded summary judgment on the competing tower operator’s counterclaims for misappropriation of trade secrets. However, summary judgment dismissing the tower operator’s antitrust claims and the competitor tower operator’s antitrust and RICO counterclaims was granted (Tristar Investors, Inc. v. American Towers Corporation, April 3, 2014, Lynn, B.).

TriStar Investors and American Tower Corporation (ATC) operate cellular communication tower sites that are leased by wireless carriers to provide cellular telephone service. The majority of the tower sites are located on property leased from individual landowners for a specific period of time. TriStar’s business model is to acquire interests in land under cell towers upon the expiration of the incumbent tower operator’s property interest. In August 2013, TriStar had acquired property rights in land on which almost 600 cell towers currently or formerly operated by ATC were located. In response to TriStar’s strategy, ATC began to acquire property interests at its tower sites to control use of the site after its current leases expired. TriStar filed suit against ATC engaged in sham litigation in an attempt to exclude TriStar from the market and effectuate a monopoly and made false and misleading statements to landowners in violation of the Lanham Act. ATC filed counterclaims, asserting misappropriations of trade secrets and violations of RICO and Sections 1 and 2 of the Sherman Act. TriStar and ATC each moved for summary judgment on their respective claims.

Lanham Act. The court found that statements made by ATC during negotiation with landowners for property rights were sufficiently connected to the provision of services to landowners and wireless carriers in interstate commerce to support a Lanham Act claim by TriStar. To establish a claim for false advertising under the Act, a plaintiff must show that (1) a false or misleading statement was made in connection with goods or services; (2) that statement deceived potential consumers; (3) the deception was material; (4) the product was in interstate commerce; and (5) the plaintiff was likely to be injured as a result of the statement. In this case, the statements were made in connection with services to landowners in interstate commerce. The landowners could be characterized as consumers for purposes of the claims. Also, ATC’s statements to landowners were important because ATC required the property rights to do business with wireless carriers and, without property to locate its towers, ATC could not obtain a major source of revenue.

Trade secrets. The court found that issues of material fact existed as to whether the lease rates contained in copies of ATC leases obtained by TriStar during property interest negotiations with landowners qualified as trade secrets. To show a claim for misappropriation of trade secrets, the plaintiff must establish (1) the existence and ownership of a trade secret; (2) breach of a confidential relationship or improper discovery of a trade secret; (3) use or disclosure of the trade secret; and (4) damages to the owner. The leases differed in their definitions of proprietary information and it was unclear whether pricing was included within the definition. Moreover, there were additional fact issues as to whether ATC would have able to reduce amounts paid if TriStar had not obtained its lease rates during negotiations, the court determined.

Sherman Act. The court found that ATC failed to show injury-in-fact or an antitrust injury to establish standing to bring its antitrust counterclaims. Standing to pursue an antitrust suit exists only if the plaintiff shows an injury proximately caused by the defendant’s conduct and an antitrust injury. ATC argued that TriStar entered into “standstill” agreements with two competitor tower operators, SBA Communications and Crown Castle International, by which TriStar agreed not to seek property rights in land under cell towers owned or controlled by SBA or Crown. ATC claimed the agreements restrained trade by removing TriStar as a rival competing for sites and lowering the costs for SBA and Crown to obtain property rights. According to the court, ATC benefited, rather than suffered harm, from the reduction in bidders for property rights and prospect of lower costs for acquiring property rights. In rejecting ATC’s argument that it was injured as a landowner, the court noted that ATC would not have done business with TriStar even if TriStar had been a bidder for property interests in land owned by ATC. As a result, TriStar’s absence in the bidding process would have no impact on ATC as a landowner.

Additionally, ATC’s allegation that it was injured because the standstill agreements increased its costs for property rights by funding TriStar’s efforts to acquire property rights at ATC sites at supra-competitive prices was not the type of injury that antitrust laws were designed to prevent. ATC did not allege that it was harmed as a tower operator by a reduction in competition or any other anti-competitive effect of the standstill agreements. Further, ATC did not produce evidence to link the funds TriStar obtained from the agreements and any conduct by TriStar with respect to ATC.

Monopolization. TriStar failed to adequately state a claim for monopolization or attempted monopolization by ATC. The court determined that the appropriate scope for the relevant market was the national market for property interests at cell tower sites. Since there was evidence that ATC’s market share for approximately 17 percent of the current market for property rights, there was no “dangerous probability” that ATC would successfully monopolize the national market, given its market share and robust competition provided by TriStar, SBA and Crown in the national market, according to the court.

RICO claims. The court determined that any alleged pattern of racketeering activities did not proximately cause any alleged injuries to ATC. To establish standing under RICO, a claimant must demonstrate causation and injury. ATC alleged that TriStar violated RICO by committing wire and mail fraud when they allegedly misled landowners to obtain property rights under ATC towers in order to obtain leverage to demand a buyout of those rights from ATC. According to the court, it was undisputed that TriStar, either directly or by subcontract, operated the towers and made its required payments to landowners. Any merger or acquisition plans by TriStar with ATC did not make any statements to landowners about operating the towers false. Since ATC refused to deal with TriStar, TriStar’s attempts to deal with ATC could not have proximately caused RICO injuries to ATC. Moreover, ATC failed to show reliance by the landowners on the alleged false promises made by TriStar because any oral representations that TriStar would operate the towers was expressly contradicted by the agreements signed by the landowners and that reliance on such representations was abrogated as a matter of law, the court concluded.

The case is No. 3:12-cv-0499-M.

Attorneys: William D. Sims, Jr. (Vinson & Elkins) for TriStar Investors Inc. David M. Rownd (Thompson Coburn LLP), Andrew P. Fishkin (Fishkin Lucks LLP) and Christina M. Berish (Thompson Coburn LLP) for American Tower Corp. and American Towers LLC.

Companies: TriStar Investors, Inc.; American Tower Corporation; Spectrasite Communications, LLC

Cases: Antitrust Advertising RICO TexasNews