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GLICTRONIX CORP. v. AT&T

October 4, 1984

GLICTRONIX CORPORATION, on behalf of itself and all others similarly situated, Plaintiff,
v.
AMERICAN TELEPHONE AND TELEGRAPH COMPANY, et al., Defendants



The opinion of the court was delivered by: DEBEVOISE

 Plaintiff Glictronix Corporation filed this action against the American Telephone and Telegraph Company and its other affiliated defendants alleging violations of Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2.

 Now pending are plaintiff's motions (1) for class certification and (2) for partial summary judgment to preclude relitigation of issues decided adversely to AT & T in Litton Systems, Inc. v. American Tel. & Tel. Co., 76 Civ. 2512 (S.D.N.Y.1981), aff'd, 700 F.2d 785 (2d Cir.1983), cert. denied, 464 U.S. 1073, 104 S. Ct. 984, 79 L. Ed. 2d 220 (1984).

 Facts

 Plaintiff, Glictronix Corporation ("Glictronix") a retailer of telephone terminal equipment, alleges that the defendants (hereinafter collectively referred to as "AT & T") engaged in a course of anticompetitive and predatory conduct with respect to the distribution, sale, rental and/or lease of telephone terminal equipment in the geographic markets serviced by the two defendant operating companies, New Jersey Bell Telephone Company and New York Telephone Company. Glictronix alleges that defendants' acts constitute monopolization, attempt to monopolize and conspiracy to monopolize, all in violation of Section 2 of the Sherman Act and a conspiracy to restrain trade in violation of Section 1 of the Sherman Act.

 The products at issue in this case are two types of telephone terminal equipment: private branch exchange telephone systems ("PBXs") and key telephone systems ("key systems"). A PBX is used for transmitting and receiving telephone calls and switching such calls to a number of connected individual telephones. A key telephone system is used to connect a single telephone station to telephone trunk lines by manipulation of buttons on the face of the telephone.

 Reference to the history of AT & T's control over the telephone terminal equipment market is necessary to an understanding of Glictronix's claims. *fn1" Until 1968, AT & T held an absolute, governmentally recognized monopoly over terminal equipment. It issued tariffs which were filed with the Federal Communications Commission ("FCC"), prohibiting telephone customers from installing any such equipment not obtained from AT & T. *fn2"

 In 1968, the FCC ruled that these tariffs were unlawful. In the Matter of Use of the Carterfone Device in Message Toll Telephone Service, 13 F.C.C.2d 420, recon. denied, 14 F.C.C.2d 571 (1968). Following this decision, AT & T imposed new tariffs which required that telephone customers who obtained terminal equipment from AT & T's competitors use an "interface device" or "protective connecting arrangement" ("PCA"), to be interposed as a barrier between the AT & T network and the non-AT & T equipment. The PCA had to be leased from and installed by AT & T. The ostensible purpose of the PCA was to protect the network from non-AT & T equipment which might damage it.

 When AT & T filed the PCA tariff in 1968, the FCC permitted enforcement of the tariff without either approving or disapproving it. Carterfone, supra, 14 F.C.C.2d 571 (1968).

 However, in November, 1975, the FCC generally rejected the PCA tariff in favor of a certification system. Proposals for New or Revised Classes of Interstate and Foreign Message Toll Telephone Services (MTS) and Wide Area Telephone Service (WATS), 56 F.C.C.2d 593 (1975). Although excluded from this ruling in 1975, the equipment at issue in this case was later included in the certification program. Interstate and Foreign Toll Telephone Service, 58 F.C.C.2d 736 (1976); Interstate and Foreign MTS and WATS, 67 F.C.C.2d 1255 (1978).

 The FCC's 1975 ruling stated in unequivocal terms that the PCA tariff provisions "impose[d] an unnecessarily restrictive limitation" and "constitute[d] an unjust and unreasonable discrimination both among users . . . and among suppliers of terminal equipment." After cataloging the extensive reports, recommendations and other material the FCC had considered, the filing also concluded that "there has been no demonstration of network harm resulting from the interconnected operation of some 1600 independent local telephone companies and the Bell System . . . many of whom purchase and connect without benefit of carrier-supplied connecting arrangements the identical independently manufactured terminal equipment for which the individual user must lease carrier-supplied connecting arrangements." Proposals for New or Revised Classes of Interstate and Foreign Message Toll Telephone Service (MTS) and Wide Area Telephone Service (WATS), 56 F.C.C.2d 593, 598 (1975) (first Report & Order). In affirming the FCC's extension of a certification system to PBXs and key systems which had their own protective circuitry, the Fourth Circuit termed the PCA requirement an attempt to preserve "the carriers' private lawmaking authority over independent manufacturers." North Carolina Utilities Commission v. F.C.C., 552 F.2d 1036, 1051 (4th Cir.), cert. denied, 434 U.S. 874, 98 S. Ct. 222, 54 L. Ed. 2d 154, 98 S. Ct. 223 (1977).

 Even after these decisions, PCAs are still required for equipment that does not meet FCC registration standards and for equipment which is not properly installed. Interstate and Foreign MTS and WATS, supra, 67 F.C.C.2d at 1256, 1272 n. 21.

 Glictronix alleges that AT & T violated § 2 of the Sherman Act, by adopting the PCA tariff and opposing the adoption of certification standards. It alleges that AT & T's imposition of the PCA tariff was unlawful in light of the alleged facts that:

 
1. the PCA was unnecessary to protect the network from harm;
 
2. the direct cost of the PCA created an artificial economic barrier to competition in the terminal equipment market; and
 
3. the tariff was adopted and pressed on the FCC as a delaying tactic, designed to suppress competition in the terminal equipment market until AT & T developed products which could compete effectively in that market.
 
Glictronix also alleges that AT & T: disparaged the telephone terminal equipment distributed by their competitors (Complaint para. 33(a)); prematurely announced to telephone customers the availability of new terminal equipment in order to persuade such customers not to purchase competitive equipment (id. at P 33(b)); delayed installation of and improperly installed and maintained PCAs required to interconnect the equipment distributed by plaintiff and other class members (id. at P 33(d)); engaged in the practice of reciprocal trading, whereby defendants would purchase goods and services upon the condition that the supplier of such goods and services would obtain its telephone equipment from defendants (id. at P 33(g)); "refuse[d] to sell inside wiring at all, refuse[d] to sell the inside wiring at a reasonable price, refuse[d] to negotiate the sale of inside wiring in good faith, refuse[d] to make timely responses to purchase requests and otherwise sabotage[d] inside wiring obtained by plaintiffs" (Plfs., Brief at 26); and "subjected competitors to unfair and expensive cut-over tactics by failing to acknowledge or claiming non-receipt of customer cut-over instruction letters; by continuously changing cut-over dates; by delivering the wrong Bell trunk line or tie line equipment; by refusing to remove defendants' equipment or lines; by insisting incorrectly that customer difficulties were due to the customer equipment; by installation personnel leaving a job site unfinished; by their destruction of cable on the customer's premises; and by improperly making the cut-over to competitor's equipment" (Plfs. Brief at 27-28).

 AT & T contends that the equipment included under the headings of PBXs and key systems is diverse. It claims that the design and functions of PBXs vary greatly, with different variations handling from fewer than 30 to thousands of telephone lines. During the relevant period, PBXs could operate through "radically different technologies." The generic term "key telephone system" also encompasses a wide variety of equipment having varying capacities and using varying technologies. Glictronix marketed only a few of the many PBX and key systems in existence during the relevant period. (Glick Dep. at 91-93). Glictronix concentrated its sales efforts on customers seeking equipment for fewer than 200 lines (Id. at 96).

 AT & T asserts that these different makes and models of PBXs and key systems possessed different potentials for causing harm to the AT & T network. As noted by AT & T, even when the FCC permitted direct connection of PBXs and key systems to the network in 1978, it ruled that PCAs would continue to be required for equipment that did not conform to registration standards, 67 F.C.C.2d 1255, 1272 n. 21 (1978).

 One difference among various makes and models of PBXs and key systems found significant by the FCC in its registration orders was the ability of the power supply transformer to prevent power surges from passing through the equipment into the network. According to AT & T, some, but not all manufacturers of terminal equipment, used power supplies listed by Underwriters Laboratories as safe for use with commercial power supplies. AT & T implies that the equipment manufactured by some of the class members would not meet FCC registration requirements, and that, despite the advent of registration standards, these manufacturers would still be required to use a PCA. AT & T asserts that these manufacturers cannot show they were damaged by AT & T's maintenance of the PCA requirement. In addition, the FCC ruled that PBXs and key systems without protective circuitry -- even ones that met registration standards -- could not be considered harmless until the specific installation of the equipment at the customer's premised was inspected and certified, 67 F.C.C.2d 1255. For example, because telephone lines within a PBX or key system can come into contact with commercial power lines, causing hazardous voltages on the network, the FCC mandated that each non-AT & T installation be certified unless a PCA were used. 67 F.C.C.2d at 1277. AT & T argues that any AT & T competitor whose installation would not pass inspection would require a PCA and cannot maintain that it was injured by AT & T's PCA tariff.

 AT & T has offered no evidence that any class member's equipment has actually failed to meet FCC registration standards and has been required to be used with a PCA. Similarly, AT & T has offered no evidence that any class member's installations have failed to pass FCC inspection. Nor has Glictronix offered evidence to the contrary.

 In 1976, Litton, a terminal equipment manufacturer filed suit alleging the same antitrust violations as are alleged here. The litigation dealt with the same product categories as are in issue here. In Litton, AT & T stipulated that PBXs and key systems constituted a relevant product market under the antitrust laws. See Litton, supra, 700 F.2d at 791.

 The extensive nature of the Litton litigation was aptly summarized in Jack Faucett Assoc. v. American Tel. & Tel. Co., 566 F. Supp. 296, 298 (D.C.Dist.Col.1983), rev'd, 240 U.S. App. D.C. 103, 744 F.2d 118 (D.C.Cir.1984) another case in which a plaintiff interconnect company sought to have the Litton findings applied collaterally against AT & T:

 
Trial began in 1980, ran for more than five months, generated 18,000 pages of testimony, and 945 exhibits, and concluded with a jury verdict for Litton in January, 1981, for nearly $92 millions as a competitor and $268,000 as a customer of AT & T which the trial count then trebled. . . . On February 3, 1983 the U.S. Court of Appeals for the Second Circuit unanimously affirmed. 700 F.2d 785 (2d Cir.1983). Rehearing and rehearing en banc were denied, apparently without a dissenting vote, on March 31, 1983.

 After the Jack Faucett trial court rendered its decision, the United States Supreme Court denied certiorari in Litton, 464 U.S. 1073, 104 S. Ct. 984, 79 L. Ed. 2d 220 (1984).

 Glictronix submits that AT & T should be precluded from relitigating the following issues which were decided in Litton :

 Relevant Product Market

 (1) The relevant product market is the sale and lease of telephone terminal equipment consisting of PBX Telephone Systems and Key Telephone Systems.

 (2) Defendants possessed monopoly power in the relevant market.

 (3) Defendants had a specific intent to obtain monopoly power in the relevant market.

 (4) There was a dangerous probability that defendants would obtain monopoly power in the relevant market.

 Anticompetitive or Predatory Conduct

 (5) Defendants attempted to obtain and did wilfully maintain their monopoly power in the relevant market through the following anticompetitive or predatory conduct:

 (a) They filed the tariffs requiring a Protective Connecting Arrangement in bad faith;

 (b) They opposed certification of telephone terminal equipment in bad faith;

 (c) They intentionally delayed the provision and installation of Protective Connecting Arrangements;

 (d) They refused, in bad faith, to sell inside wiring at all or on a reasonable basis; and

 (e) They delayed, in bad faith, in making cutovers to customer provided telephone terminal equipment.

 Standing to Sue

 (6) The class plaintiffs in this case have standing to sue for damages as competitors of defendants in the relevant market.

 Defenses

 (7) The Protective Connecting Arrangement was not necessary to protect the telephone network from harm, and any claim that it was necessary is baseless.

 (8) The Noerr-Pennington doctrine is inapplicable to the anticompetitive or predatory conduct of defendants at issue in this case.

 (9) The "sham" exception to the Noerr-Pennington Doctrine is applicable to the anticompetitive or predatory conduct of defendants at issue in this case.

 The proposed class of plaintiffs is defined as:

 
"all persons who engaged in the business of distributing, selling, renting and/or leasing PBX Systems, both automatic and otherwise, and key telephone systems, of various manufacturers, to subscribers of telephone service in interstate commerce provided by the defendants, New Jersey Bell Telephone Company and New York Bell Telephone Company, and who sustained damages as a result of defendants' violations of the antitrust laws."

 (Complaint para. 5). According to Glictronix, there are approximately 600-800 identifiable members of the proposed class. The class members include companies with a wide variety of sizes, structures and marketing philosophies.

 Glictronix contends that it can establish many essential elements of its case by evidence common to the class. (See Plaintiff's Class Certification Brief at 3-5). Among the issues Glictronix believes it can establish by common evidence are the relevant product and geographic markets; AT & T's monopoly power in those markets; its claims based on AT & T's promulgation of the PCA requirement and opposition to certification standards; its claims based on alleged anticompetitive practices by AT & T including delay in provision and installation of PCAs, refusal to sell inside wiring at all or on a reasonable basis, delay in interconnection to the AT & T network of competitors' terminal equipment; the fact of injury to each member of the class; and the appropriate measure of damages as to each member of the class.

 Glictronix has submitted several reports by experts in support of its motion for class certification. These reports deal exclusively with the effects on the class of the PCA requirement and of the delay in adoption of certification standards.

 One of these experts, Thomas R. Pratt, concluded that the imposition of the PCA tariff on all AT & T competitors: (a) resulted in a significant competitive disadvantage and loss of profits to each proposed plaintiff-competitor; (b) impeded development of the terminal equipment market and reduced competitive activity in that market, and; (c) imposed major constraints on the profitability of each competitor.

 Mr. Pratt asserts that the members of the plaintiff class incurred damages in two ways. First, the PCA requirement significantly reduced the volume of sales for AT & T's competitors since the device added significant costs to using and installing competitors' equipment. Since the class members could have earned profits on these lost sales, they have all been damaged to the extent of the lost profits. (Pratt Report at 2-3).

 Second, Pratt claims the class members lost profits because the added cost of the PCA forced them to lower their prices in order to stay competitive with AT & T. The need to price their equipment lower resulted in lower profits for each unit of equipment they did sell. (Id.)

 Pratt served as an expert for Litton in its case against AT & T and was one of the principal participants in the creation of a damage study presented by Litton. That study concluded:

 
The plaintiffs were all damaged by the interface device because it stifled the development of the market and thereby reduced the level of sales and profits. The device also damaged the plaintiffs by necessitating an additional reduction in selling prices in order to compete, and by increasing selling, installation, and maintenance costs for each sale. The overall effect of the device was equivalent to the imposition of a discriminatory tariff against each of the plaintiffs which resulted in lost sales and profits for each of the plaintiffs.

 (Pratt Report at 4, Appendix to Plaintiff's Brief in Support of Class. Cert.) These findings are generally supported by reports submitted by Dr. Les Seplaki, a professor of economics at Rutgers, and by Samuel M. DeLuca, an independent consultant in the telecommunications industry and a former employee of New Jersey Bell.

 According to Glictronix's experts, the PCA requirement gave AT & T an opportunity to affect every sale of terminal equipment attempted by competitors. Since non-AT & T equipment could only be connected through a PCA provided and installed by a defendant operating company (Plaintiff's Ex. 23, A-307), AT & T was involved every time a non-AT & T sale was attempted.

 AT & T activities vis-a-vis competitors in the terminal equipment market are recorded in Competitive Activity Reports, which were compiled on an individual basis for each customer when a Bell operating company was faced with competition for a customer's terminal equipment business. The information in the Competitive Activity Reports included the number of the customers' lines, the nature of the terminal equipment, the number of stations, detailed cost comparisons, reasons for the customer's choice between Bell and the competitor, and a general comments section (See para. CC ex. 0, A-1083). In addition, a Computerized Economic Comparison -- comparing the costs of Bell and non-Bell proposals -- was commonly prepared and distributed to customers.

 Mr. Pratt's report presents a methodology for calculating damages and allocating damages among the proposed class members. The Competitive Activity Reports provide much of the crucial information on which the method rests. Glictronix contends that calculation of damages is made manageable by the fact that defendants maintained "quite complete records" of every competitive situation. A formal program of competitive activity reporting was commenced on a nationwide basis by AT & T in 1974 (Gear Dep. at 24-16 to 25-5). But monthly competitive analyses for both New York and New Jersey were compiled throughout the entire period of issue here. According to Glictronix, the periodic analyses of the competitive market provide much of the data necessary to determine the size of the market, the extent of competitive efforts and the amount of the market obtained by competitors.

 The Pratt damage methodology provides for allocation among the class members on a yearly basis dependent upon their pro rata share of the available market. According to the report, the pro rata share is readily ascertainable from the monthly reports. AT & T's reports provided information on the most active competitors and a "wins to attempts ratio" allowing comparison of the competitors' relative effectiveness. Although competitive ranking was done only for the top few companies, both the underlying data and software programming is available to rank the competitive effectiveness of every competitor in the market place. (December 12, 1983 2 Weigman Dep. at 129-25 to 131-16).

 AT & T officials have admitted that, by and large, "If a vendor made a number of sales, he would appear on the list" (McNamara Dep. at 112-113). The Competitive Activity reports provide the best available source for quantitatively and qualitatively assessing AT & T's competitors in the terminal equipment market.

 AT & T also submits expert testimony, in the form of a report by Dr. Almaris Phillips, a professor of public policy and of economics and law at the University of Pennsylvania. Dr. Phillips contends that the conclusion of Mr. Pratt and Dr. Seplaki that each class member lost sales and profits it would have obtained in the absence of the PCA requirement is predicated on two incorrect assumptions. He defines these assumptions:

 
"(1) the assumption that, but for the PCA requirement in the Bell System's post-Carterfone tariffs, the particular PBX and key telephone systems marketed by each potential class member would have been directly connected to the network without protective circuit; and
 
"(2) the assumption that each potential class member would make more sales and more profit in the increased competitive environment that plaintiff assumes would accompany the earlier advent of registration."

 Phillips also suggests that for some class members the cost of compliance with FCC design and installation requirements could be more expensive than the use of protective circuitry. He cites an FCC report as evidence of this proposition. 67 F.C.C.2d 1255, 1256, 1275-76 (1978).

 This suggestion is also made in AT &T's brief, which states that "one interconnect company complained to the FCC that its competitors were choosing to use PCAs rather than comply with the registration requirements. . . . Customer Provided Equipment and Connecting Arrangement, 85 F.C.C.2d 868, 883 (1981)." (AT & T's OC brief, p. 45, note.) Glictronix apparently investigated the circumstances of this FCC decision and discovered that the company in question did not deal with PBXs or key systems and therefore was involved in a different product market.

 In deposition, Glictronix's expert Pratt did agree that the FCC's 1978 registration program did impose costs on interconnect companies, and admitted that he did not know what all the components of those costs were or whether they were more or less than the PCA requirement for particular types of equipment (Pratt Dep. at 91, 98-99). However, Mr. Pratt points out in his reply affidavit, that even if there were costs associated with the registration program, those costs are imposed on all manufacturers of PBX and key systems equipment. In contrast, the PCA cost was imposed on all manufacturers except the defendants (Pratt Reply Affidavit para. 7, Supplemental Appendix to Brief in Support of Class Certification, Vol. II, Tab 6).

 Phillips also takes issue with what he terms Glictronix's second assumption: that each potential class member would have made more sales and/or more profit absent the PCA requirement. Phillips interprets Pratt and Seplaki to have argued that in the absence of the PCA requirement, the AT & T competitors would have been able to raise their prices and thereby obtain higher profits. Phillips attacks this notion under the general economic principle that competition will tend to reduce prices to the marginal cost of the efficient competitor (Phillips Report at 13). He suggests that:

 
[some] competitors -- probably those with better financing, better equipment, expandable sources of supply, better management, and adequate service organization -- may have improved their sales, whereas those with higher costs and unattractive products would probably have tendered to suffer reduced sales or complete failure.

 (Phillips Report at 17-18). Consistent with Phillips' view was the damage model prepared for the Litton case, which Mr. Pratt participated in creating. That model predicted that there would have been a large shake-out of existing interconnect companies that would have been unable to survive if the FCC had adopted registration standards in 1973 (Id.)

 Pratt and Seplaki respond to Phillips' charge in different ways. Pratt states that he believed that plaintiffs lost profits because of lost sales, not because they could have raised prices in the absence of the PCA requirement. (Pratt Reply Affidavit, para. 11, Appendix to Brief in Support of Class Certification, Supplemental Vol. II, Tab 6). Seplaki states that lost profits were due not to an inability to make more sales, but due to "the necessity of reducing per-unit profit margins as a result of the PCA requirement." (Seplaki Reply Affidavit, Id. at Tab 7).

 Phillips also assails Pratt's methodology for establishing and allocating damages. He identifies "two serious flaws that render it unworkable and contrary to the interests of many of the potential class members." (Phillips Report at 19). Phillips first criticizes the model because it "allocate[s] damages among class members based on their actual market share for each year from 1970-1978 in the real world." (Id.) He contends that strong companies, which might have increased their market share in the absence of the PCA requirement, will be foreclosed from making this showing under Pratt's model. Similarly, AT & T will be foreclosed from arguing that weaker companies' share of the market would have shrunk in a freely competitive environment. Second, Phillips contends that the model fails to account for companies which dropped out of the market. Under Pratt's method these companies would be foreclosed from showing what market share they would have captured if they had not been driven from the market. Similarly, companies which delayed their entry into the market because of AT & T's conduct would not be permitted to show what market share they would have won had they entered sooner. For these reasons, Phillips believes allocating damages in this case will place class members in conflict with one another and would have to be done on an individualized basis.

 Nothing in plaintiff's experts' reports addresses how Glictronix's damage claims arising from AT & T's anticompetitive practices (such as delaying the interconnection of competitors' equipment to the network) can be proven by evidence common to the class.

 Conclusions of Law

 I. Collateral Estoppel

 Glictronix seeks to preclude AT & T from relitigating numerous issues determined adversely to AT & T by the Litton jury and by the Second Circuit on AT & T's appeal. The doctrine of collateral estoppel provides that "once an issue is actually and necessarily determined by a court of competent jurisdiction, that determination is conclusive in subsequent cases based on a different cause of action involving a party to the prior litigation." Montana v. U.S., 440 U.S. 147, 153, 99 S. Ct. 970, 973, 59 L. Ed. 2d 210 (1979).

 Although Glictronix was not a party to the Litton case, all of the defendants here were. Glictronix moves to preclude relitigation of the Litton findings under the non-mutual, offensive application of the collateral estoppel doctrine set forth in Parklane Hosiery Co. v. Shore, 439 U.S. 322, 99 S. Ct. 645, 58 L. Ed. 2d 552 (1979).

 Before application of collateral estoppel can be deemed appropriate, the court must find that:

 1. the party to be estopped must have been a party or in privity with a party to the prior action;

 2. the issues to be estopped must be the same as the issues determined in the prior action;

 3. the issues must have been actually litigated and necessary to the prior judgment; and

 4. application of collateral estoppel will not be unfair because:

 (a) the party to be estopped had little incentive to vigorously litigate the first action;

 (b) the first judgment is inconsistent with other judgments on the issue to be estopped;

 (d) application of collateral estopped would not otherwise be unfair to the defendant. See Parklane Hosiery Co. v. Shore, 439 U.S. 322, 99 S. Ct. 645, 58 L. Ed. 2d 552 (1979).

 AT & T contends that collateral estopped should not be applied because many of these criteria cannot be met.

 A. Conditions Met.

  Defendant do not contest that several of the prerequisites for the application of collateral estopped have been met. The party against whom collateral estopped is asserted must have been a party or in privity with a party to the prior action. Blonder-Tongue Laboratories, Inc. v. University of Illinois Foundation, 402 U.S. 313, 328-29, 91 S. Ct. 1434, 1442-43, 28 L. Ed. 2d 788 (1971). The defendants here were all parties to the Litton litigation.

  Second, there must have been a final judgment on the merits on the issues to be collaterally estopped. Montana v. United States, 440 U.S. 147, 153, 99 S. Ct. 970, 973, 59 L. Ed. 2d 210 (1979). A final judgment on the merits was rendered by the Litton jury. That judgment was affirmed on appeal and defendants exhausted their right of appeal when the United States Supreme Court denied certiorari. Litton Systems, Inc. v. America Tel. & Tel. Co., 76 Civ. 2512 (S.D.N.Y.1981), aff'd, 700 F.2d 785 (2d Cir.1983), cert. denied, 464 U.S. 1073, 104 S. Ct. 984, 79 L. Ed. 2d 220 (1984).

  Third, there is no question that AT & T vigorously litigated the Litton case. Beyond these points, each criterion for application of collateral estopped is contested.

  B. Same or Different Issues

  To support application of collateral estoppel, the issues as to which a party seeks preclusion must be "identical" or "in substance the same" as the issues determined in the prior litigation. Montana v. United States, 440 U.S. 147, 155, 99 S. Ct. 970, 974, 59 L. Ed. 2d 210 (1979); Blonder-Tongue, supra, 402 U.S. at 323, 91 S. Ct. at 1439.

  Defendants contend that the issues here are different from those decided in Litton because the equipment at issue is not the same. The terms PBX and key system are generic and encompass a wide variety of equipment. Defendants contend that the Litton judgment is inapplicable to models of PBXs and key systems not at issue in Litton. The different models should be treated differently, the argument goes, because they have widely differing potentials for harming the network. Since the PCA is still required by the FCC for equipment which does not meet registration standards, defendant assert that it is important to distinguish among types of ...


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