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Mayer Brown's Supreme Court and Appellate Practice Group distributes a Docket Report whenever the Supreme Court grants certiorari in a case of interest to the business community. We also email the Docket Report to our subscribed members and if you don't already subscribe to the Docket Report and would like to, please click here.

October Term 2007 - No. 14 - June 23, 2008

The Supreme Court granted certiorari today in two cases of interest to the business community:

Antitrust/Telecommunications—Section 2 Price Squeeze Claims

The confluence of the Sherman Act and the interconnection provisions of the Telecommunication Act of 1996 prompted the Supreme Court’s decision in Verizon Communications, Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398 (2004). In Trinko, the Court held that a plaintiff did not state a claim under Section 2 of the Sherman Act against a monopolist that refused to offer its facilities to a competitor despite a statutory and regulatory requirement that it do so where no independent antitrust duty existed. Trinko, however, left open the question whether a plaintiff was also barred from bringing a price squeeze claim against a regulated telecommunications provider. The courts of appeals are divided on the issue, and the Supreme Court today granted certiorari in Pacific Bell Telephone Co. v. linkLine Communications, Inc., No. 07-512, to resolve the lower court conflict.

The Court’s resolution of this matter is of significant interest to the business community, particularly to companies operating in regulated industries. If the Court allows price squeeze claims to proceed, it will expose regulated monopolists to burdensome antitrust suits, thereby deterring socially desirable vertical integration and ultimately harming consumers who will be deprived of the foregone economic efficiencies.

Pacific Bell, doing business as AT&T California, sold wholesale DSL access to independent internet service providers while also providing DSL access on a retail basis to consumers. Accordingly, AT&T California served as both a supplier and a competitor to the plaintiff, linkLine Communications, which alleged that AT&T California created a price squeeze by charging it a high wholesale price relative to the prices at which AT&T California provided retail DSL services. AT&T California moved to dismiss the claim under Trinko. It acknowledged that FCC regulations required it to provide DSL services to rivals such as linkLine, but it argued that Trinko barred the price squeeze claim because it had no antitrust duty to deal with a competitor. The district court denied the motion, but certified the issue for interlocutory review.

A divided Ninth Circuit affirmed, concluding that Trinko did not undermine an earlier Ninth Circuit opinion holding that price squeeze claims are viable against regulated monopolists because Trinko itself did not involve assertions of a price squeeze. Moreover, the majority found that any concerns about imposing antitrust standards on a regulated industry were allayed by requiring proof of “specific intent.” Furthermore, the Ninth Circuit found that DSL services are only “partially regulated”; although the FCC regulated the wholesale prices AT&T California charged linkLine, it did not control the prices charged to retail consumers.

Absent extensions of time, amicus briefs in support of the petitioners are due on August 14, 2008, and amicus briefs in support of respondent are due September 15, 2008. Any questions about this case should be directed to Steve Shapiro (+1 302 701 7327) in our Chicago office.

Title VII—Pregnancy Discrimination Act—Treatment of Preenactment Leaves

In response to General Electric Co. v. Gilbert, 429 U.S. 125 (1976), Congress passed the Pregnancy Discrimination Act of 1978 (“PDA”) to amend Title VII of the Civil Rights Act of 1964 to cover discrimination “because of or on the basis of pregnancy, childbirth, or related medical conditions.” 42 U.S.C. § 2000e(k). The Supreme Court today granted certiorari in Hulteen v. AT&T Corp., No. 07-543, to determine whether Title VII is violated when employers fail to credit pregnancy leaves taken by employees before the PDA’s effective date of April 29, 1979 when calculating seniority-based pension and other benefits.

The Court’s decision will be of importance to employers who use seniority-based pension calculations that treated pregnancy leave differently from temporary disability leave, as a large number of female employees who took pregnancy leave before the adoption of the PDA are expected to retire in coming years. The case will determine whether the pregnancy leave taken by those employees must be credited towards their seniority in order to satisfy Title VII.

Under AT&T’s policies, pregnancy leaves taken before the PDA became effective were counted as personal leave and therefore subject to a cap on the number of days counted as credited service. Hulteen, who retired from AT&T in 1994, and other current and recently retired employees, sued AT&T to recover the increased pension benefits they would have received if their full pregnancy leaves had been counted towards their seniority. The district court granted summary judgment to the plaintiffs, holding that it was bound by the Ninth Circuit’s prior decision in Pallas v. Pacific Bell, 940 F.2d 1324 (9th Cir. 1991), which found a Title VII violation on similar facts. A Ninth Circuit panel reversed on the grounds that Pallas was inconsistent with subsequent Supreme Court decisions limiting the retroactive application of statutes.

On en banc review, a divided Ninth Circuit reinstated the district court’s judgment for the plaintiff. It held that Pallas did not implicate the retroactivity of the PDA, because a company “engages in intentional discrimination each time it applies the [prior] policy in a [post-PDA] benefits calculation for an employee affected by pregnancy.” Hulteen v. AT&T Corp., 498 F.3d 1001, 1007 (9th Cir. 2007) (emphasis removed). The en banc decision also refused to accord AT&T’s determination protection under 42 U.S.C. § 2000e-2(h), which allows differential treatment of employees pursuant to a “bona fide seniority or merit system.” Four dissenting judges found AT&T’s present policy to be facially nondiscriminatory and thus would have applied Supreme Court precedent indicating that “an act . . . that gives present effect to past discriminatory acts, without more, does not give rise to a current violation.” Hulteen, 498 F.3d at 1021. The dissenters also argued that, in light of Gilbert’s holding that Title VII did not cover discrimination based on pregnancy, AT&T’s pre-PDA system could only be considered discriminatory if the PDA were given “impermissible retroactive effect.” Id. at 1023. The decision perpetuated a split with both the Seventh Circuit, see Ameritech Benefit Plan Committee v. Communication Workers of America, 220 F.3d 814 (7th Cir. 2000), and the Sixth Circuit, see Leffman v. Sprint Corp., 481 F.3d 428 (6th Cir. 2007).

At the Court’s invitation, the Solicitor General filed an amicus brief in support of certiorari, agreeing with the en banc dissenters that the Ninth Circuit’s decision was inconsistent with Supreme Court authority and wrongly accorded retroactive effect to the PDA.

Absent extensions of time, amicus briefs in support of the petitioner will be due on August 14, 2008, and amicus briefs in support of the respondents will be due on September 15, 2008. Any questions about this case should be directed to Andrew Tauber (+1 202 263 3324) in our Washington, D.C. office.

Mayer Brown Supreme Court Docket Reports provide information and comments on legal issues and developments of interest to our clients and friends. They are not a comprehensive treatment of the subject matter covered and are not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed.

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