Z-Tel Communications, Inc. v. SBC Communications, Inc.

Citations: 331 F. Supp. 2d 513; 2004 U.S. Dist. LEXIS 15871; 2004 WL 1775940Docket: 5:03 CV 229

Court: District Court, E.D. Texas; August 6, 2004; Federal District Court

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Defendants' Motion to Dismiss in the case of Z-Tel Communications, Inc. v. SBC Communications, Inc. et al. was partially granted and partially denied by the United States District Court for the Eastern District of Texas on August 6, 2004. The Court dismissed Plaintiff's Essential Facilities claim (Count No. 2), Breach of Contract claim (Count No. 11), and several Telecommunications Act claims (Count Nos. 8, 9, and 10) with prejudice for the Essential Facilities claim and without prejudice for the other claims, allowing repleading. The Court specifically noted the Tying claim (Count No. 5) regarding DSL service, which was not dismissed, while dismissing any Tying claim related to broadband internet access without prejudice. The Plaintiff is permitted to replead these claims within 30 days. The Court declined to dismiss state law claims, as not all federal claims were found to fail.

SBC Communications, Inc. and its subsidiaries (collectively "Defendants") filed a Motion to Dismiss on November 24, 2003, which the Plaintiff responded to on January 6, 2004. Following the Supreme Court's decision in Verizon Communications, Inc. v. Law Offices of Curtis V. Trinko, LLP on January 13, 2004, which ruled that consumers could not bring an antitrust claim against Verizon for failing to share its network under the 1996 Telecommunications Act due to a lack of anticompetitive intent, the implications of Trinko became central to the ongoing case. The Defendants argue that Trinko mandates dismissal, while the Plaintiff contends that the facts of the current case differ significantly from those in Trinko. During the hearing on April 8, discussions focused heavily on the impact of Trinko.

Under Rule 12(b)(6) of the Federal Rules of Civil Procedure, the court must accept the well-pleaded factual allegations in the complaint as true and resolve ambiguities in favor of the Plaintiff. Dismissal is only appropriate if no relief could be granted under any conceivable set of facts consistent with the allegations. Motions to dismiss are generally viewed unfavorably and rarely granted, particularly in antitrust cases where dismissals prior to discovery are discouraged. While conclusory allegations cannot prevent dismissal, a Plaintiff is not required to plead antitrust claims with particularity. The Telecommunications Act of 1996 imposes duties on incumbent local exchange carriers (ILECs) to provide access to their facilities and equipment to competitors, mandating interconnection and nondiscriminatory access to essential services and infrastructure.

Under § 251(c) of the Telecommunications Act of 1996, incumbent local exchange carriers (ILECs) have specific obligations, including negotiating interconnection agreements with new carriers, providing unbundled access to network elements, offering retail services for resale at wholesale rates, and enabling collocation. Section 252 outlines the processes for negotiating and arbitrating these interconnection agreements, with mandatory arbitration subject to the duties established in § 251. These provisions mandate that ILECs support new competitors, a shift from previous market practices.

The plaintiff, Z-TEL, established in 1998 as a competitive local exchange carrier (CLEC) in Tampa, Florida, operates on two primary business models. First, it repackages and resells telecommunications services from ILECs, relying on leased access to essential network infrastructure, which is critical for competitive retail telecommunications. The significant capital investment required to duplicate this infrastructure underscores the necessity of network access to foster competition.

Second, Z-TEL offers enhanced services not provided by the defendant, such as internet-accessible voicemail, advanced call-forwarding features, and voice-recognition messaging. The plaintiff asserts that the defendant is resistant to these services due to their potential for generating higher profits. Z-TEL claims it cannot deliver most enhanced services without access to the defendant's Advanced Intelligent Network (AIN), arguing that such access is technologically feasible and would not impede the defendant's service to its customers.

Plaintiff alleges that Defendant has denied access to the Advanced Intelligent Network (AIN), essential for competing in the enhanced services market. Key grievances include: 1) complete denial of access to necessary network facilities for enhanced and basic local services; 2) preventing customers using its DSL service from switching to Plaintiff or competitors; 3) refusal to allow use of essential facilities for local toll calls, contrary to regulatory orders, leading to unnecessary costs; 4) failure to provide timely information regarding customer terminations; 5) issuing false bills for unordered items; 6) engaging in a public campaign to disparage Plaintiff's services; and 7) abusing governmental processes. 

For the monopolization claim, two elements must be established: possession of monopoly power in the relevant market and the willful maintenance of that power, distinct from growth due to superior products or business acumen. Monopoly power is defined as the ability to control prices or exclude competition, with unlawful possession requiring anticompetitive conduct. The relevant product and geographic markets must be defined, focusing on product interchangeability and the area of effective competition where consumers can seek alternatives.

To establish that a defendant holds monopoly power, two methods can be employed: direct evidence demonstrating actual control over prices or exclusion of competitors, and circumstantial evidence indicated by a high market share. Exclusionary conduct, which is not based on competition on the merits, is outlined in four categories: 

1. **Predatory Pricing**: Recognized as generally implausible, as noted in Brooke Group Ltd. v. Brown & Williamson Tobacco Corp.
2. **Product Innovation**: Conduct that creates incompatibility without performance enhancements may be actionable, as established in Northeastern Tel. Co. v. Am. Tel. & Tel. Co.
3. **Refusals to Deal**: This includes denying access to essential facilities.
4. **Monopoly Leveraging**: Gaining power in one market to expand into another can lead to liability, as discussed in Eastman Kodak Co. v. Image Technical Services.

Exclusionary conduct must appear capable of significantly contributing to the maintenance of monopoly power. A finding of such conduct requires evidence that the monopolist's actions are economically irrational without reference to their effects on competitors. In Sherman Act § 2 cases, the legality of a monopolist's conduct is determined through a detailed analysis of the specific facts involved, and antitrust claims are resolved on a case-by-case basis, dismissing legal presumptions based on formalistic distinctions. Moreover, anticompetitive conduct is context-dependent and cannot be exhaustively classified, as demonstrated by cases like Caribbean Broadcasting Systems Ltd. v. Cable & Wireless PLC, which highlighted the fluidity of anticompetitive claims.

Plaintiff's monopolization claim asserts that SBC holds monopoly power in both basic local and enhanced telephony services markets across its service region. SBC is accused of engaging in anticompetitive conduct aimed at maintaining its monopoly, which has hindered Z-TEL's market entry. The relevant product market includes basic local and enhanced telephony services, while the geographic market encompasses SBC's entire service region, covering major U.S. population centers. 

Defendant does not contest the allegation of monopoly power; thus, the Court concludes that the first element of the Grinnell test is met. The viability of the monopolization claim will hinge on defining the anticompetitive conduct attributed to SBC.

Furthermore, the Court addresses the relationship between antitrust liability and telecommunications regulation, noting Defendant's argument that antitrust claims are limited due to the regulatory framework established by the 1996 Telecommunications Act. Defendant references cases that support this view, asserting that Plaintiff's allegations mirror those found insufficient in prior rulings. In response, Plaintiff highlights the Savings Clause of the 1996 Act, which clarifies that the act does not alter the applicability of antitrust laws.

Defendant argues in its Motion to Dismiss that Plaintiff's antitrust claims under § 2 fail due to insufficient allegations of exclusionary conduct, asserting that antitrust laws do not require lawful monopolists to dismantle operations for competitors, a demand made by Plaintiff Z-TEL. The Defendant cites the Supreme Court case Trinko as a barrier to Z-TEL's claims regarding access to local telephone networks. In response, Plaintiff contends that monopolists can violate antitrust standards through various means, including refusal to deal and the essential facilities doctrine, asserting that it has presented numerous allegations of exclusionary conduct beyond these doctrines. Plaintiff refers the Court to Exhibit A, which compares the factual allegations in Trinko with those in the current case.

The Trinko case addressed whether a complaint regarding an incumbent's duty under the 1996 Telecommunications Act to share its network with competitors could constitute a § 2 violation of the Sherman Act. The Supreme Court emphasized the antitrust Saving Clause in the 1996 Act, which ensures that the Act does not modify antitrust laws, preserving only claims that meet established antitrust standards without creating new claims.

Defendant's reliance on the Goldwasser case is critiqued. The first section of Goldwasser, which allowed plaintiffs to assert claims but found no wrongful conduct independent of the 1996 Act, aligns with the Trinko decision. However, the second section of Goldwasser, stating that the specific provisions of the 1996 Act take precedence over general antitrust laws when they overlap, is inconsistent with Trinko’s broader interpretation of antitrust standards.

The Supreme Court in Trinko established that the 1996 Act does not supersede the Sherman Act, retaining claims that meet existing antitrust standards. The Court concluded that Verizon's actions regarding network access did not reflect monopolistic intent, as the complaint did not indicate that Verizon engaged in voluntary dealings with its rivals without statutory pressure. Thus, Verizon's past conduct does not clarify the motives behind its refusal to cooperate, nor does it suggest anticompetitive intent influenced by regulatory failures. The analysis contrasts Verizon's behavior with that of the defendant in Aspen Skiing, who rejected a pricing proposal that would have reduced the monopoly price, implying a strategy to maintain higher future prices. In the present case, the plaintiff argues that Verizon voluntarily shared its network before the 1996 Act, which, if proven, could support an antitrust claim consistent with Trinko. 

Cavalier Tel. LLC v. Verizon Va. Inc. illustrates that the conduct alleged there would not violate the Sherman Act independently of the Telecommunications Act of 1996, as the plaintiff in Cavalier only asserted breaches of duties established after the Act's enactment. Thus, while Cavalier's reasoning aligns with Trinko, it is not directly applicable to the current case, where the plaintiff seeks to prove violations of pre-existing duties.

In Covad Communications Co. v. BellSouth Corp., the court addressed three types of anticompetitive conduct claims: refusal to deal, essential facilities, and price squeezing. The refusal to deal claim was dismissed due to the mandatory nature of the relationship under the Telecommunications Act, rather than it being a voluntary customer agreement. The essential facilities claim was also dismissed since access to the infrastructure could be compelled by the Act. However, the price squeezing claim was allowed to continue, as it aligned with traditional antitrust principles and was not explicitly barred by existing judicial precedents related to the Telecommunications Act and the Sherman Act.

Judge Barkett highlighted that the interconnection agreement in Trinko was viewed as a mandatory agreement rather than a voluntary one, indicating that the relationship remained competitive despite Verizon's wholesale offerings. The ruling emphasized the coercive nature of the Federal Telecommunications Act (FTCA) on incumbent Local Exchange Carriers (LECs), which must provide network elements to competitors like AT&T, a requirement that would not exist without the FTCA.

The court concluded that Covad's refusal-to-deal claims could not withstand scrutiny under Trinko and thus must be dismissed. It was noted that Trinko alters the refusal-to-deal doctrine, requiring evidence of a unilateral termination of a voluntary business relationship to sustain such claims, unlike Covad's situation. The current plaintiff, however, presented evidence of network sharing prior to any legal obligation, making Covad less directly relevant to the case at hand.

In concluding remarks, the court reaffirmed that antitrust liability remains applicable within regulated telecommunications and emphasized the necessity for the plaintiff's complaint to meet established antitrust standards. The court clarified that it would not adopt the plaintiff's terminology regarding the refusal to deal and essential facilities theories, both of which have established precedents in antitrust law.

Essential facilities are a subset of refusal to deal, with the defendant's obligation in such cases paralleling that seen in the Aspen case, which did not rely on the essential facility doctrine. The Court will focus on the impact of Trinko on both refusal to deal and essential facilities, but does not prioritize these over other exclusionary conduct types. Four clusters of exclusionary conduct alleged by the Plaintiff include:

1. **Product Disparagement**: The Defendant allegedly defamed the Plaintiff by portraying itself as a legitimate company while labeling the Plaintiff as a “flashy” imposter in public advertising.
   
2. **Abuse of Government Processes**: The Plaintiff claims that the Defendant manipulates government processes to burden competitors with challenges regarding the Defendant's noncompliance with state utility commission orders, arguing this behavior is not protected under Noerr-Pennington.

3. **Provision of Faulty Line Loss Information**: The Plaintiff alleges that the Defendant provided inaccurate line loss notifications, with over 60% mislabeling and nearly 90% noncompliance with delivery standards, leading to over 75 complaints from Z-TEL about these issues. This conduct is suggested to be part of a strategy to increase rival churn rates.

4. **False Billing Practices**: The Plaintiff accuses the Defendant of providing inaccurate billing for leased network facilities and call records, resulting in numerous billing disputes and resource drain for Z-TEL. A former employee alleged that they were instructed to create false bills.

The analysis references the challenges in distinguishing between vigorous competition and conduct that may lead to long-term anticompetitive effects, as acknowledged by the Supreme Court in previous rulings. This complexity underscores the need for careful consideration under the Sherman Act regarding unilateral conduct that could threaten monopolization.

In *Spectrum Sports v. McQuillan*, the Court emphasized the importance of avoiding interpretations that could stifle competition, pointing out the challenges in distinguishing between vigorous competition and conduct with potential long-term anticompetitive effects. The distinction between single-firm and concerted activities is crucial, as the latter presents inherent anticompetitive risks. The Supreme Court, in *Aspen Skiing Co. v. Aspen Highlands Skiing Corp.*, defined exclusionary conduct as actions that impair rivals' opportunities without furthering competition or doing so in an overly restrictive manner. In *Eastman Kodak Co. v. Image Technical Servs.*, exclusionary conduct was characterized as the use of monopoly power to undermine competition or harm competitors. 

A further formulation highlighted that conduct motivated by valid business reasons does not constitute monopolization; however, such refusals to deal are only permissible if justified by legitimate competitive reasons. The Fifth Circuit has established that exclusionary conduct must significantly contribute to the maintenance of monopoly power and cannot simply be competition on the merits. The court looks closely at the business justification for the conduct to determine its exclusionary nature. 

Regarding defamation and disparagement claims by Z-Tel, the document notes that such claims fail to establish a basis under Section 2, as any misrepresentations are considered de minimis unless there is substantial proof of falsehood, materiality, likelihood of inducing reliance, and lack of knowledge among buyers.

Z-TEL has failed to identify any false allegations, as noted in the referenced document. The concept of advertising as potential exclusionary conduct is examined through case law. In *Berkey Photo, Inc. v. Eastman Kodak Co.*, the court established that a monopolist's advertising is permissible unless it creates unreasonable barriers to market entry. This principle was reiterated in *Phototron Corp. v. Eastman Kodak Co.*, where the Fifth Circuit concluded that advertising that hinders market entry could be deemed predatory, but emphasized the need for evidence linking such advertising to barriers preventing competition.

The document also introduces a presumption that the competitive impact of misleading advertising is minimal (de minimis). In *National Assoc. of Pharmaceutical Mfrs. Inc. v. Ayerst Labs.*, the Second Circuit held that plaintiffs must overcome this presumption in monopolization claims based on misleading advertising. Similarly, in *American Professional Testing Serv. v. Harcourt Brace Jovanovich Legal*, the Ninth Circuit established a six-part test that plaintiffs must satisfy to rebut this presumption, which includes requirements regarding the falsity, materiality, and impact of the statements made. The Sixth Circuit in *Am. Council of Certified Podiatric Physicians. Surgeons v. Am. Board of Podiatric Surgery, Inc.* confirmed the need for plaintiffs to demonstrate substantial evidence to counter the presumption that misleading advertising has a negligible effect on competition.

The court affirmed the grant of summary judgment to the defendant based on two findings: the advertising was clearly false, and the plaintiff faced significant challenges in countering it. In Aldridge v. Microsoft, the court dismissed the product disparagement claim, noting the plaintiff's inability to demonstrate that the alleged false messages were persistent or not easily explainable. Professors Areeda and Hovenkamp highlighted that deceptive practices by a dominant firm can harm nascent firms entering the market, which struggle to counter such deception due to resource limitations. This situation aligns with the plaintiff's circumstances. The Fifth Circuit in Phototron Corp. v. Eastman Kodak Co. recognized that advertising that creates market entry barriers constitutes exclusionary conduct. Regarding the defendant's litigation efforts under the 1996 Act, Z-Tel acknowledged that these efforts aimed to lessen regulatory obligations and argued there was no antitrust duty to alter their network for competitors. The Noerr-Pennington doctrine, closely tied to the Sherman Act, provides immunity for private individuals seeking governmental action that may be anticompetitive, extending this protection to activities directed at both state and federal agencies and courts.

Noerr-Pennington immunity is granted for efforts to influence local governments, applicable to any concerted action aimed at swaying public officials, regardless of intent. The defendant did not raise this immunity in its Motion to Dismiss, leading the Court to refrain from addressing it. Judge Bork highlights that the abuse of governmental procedures poses a significant threat to competition. 

The defendant argues it has no antitrust obligation to unbundle its network for competitors, but under Section 251(c) of the 1996 Act, it is required to negotiate interconnection agreements, provide unbundled access to network elements, offer retail services for resale at wholesale rates, and allow for collocation. Even if the defendant believes it faces no antitrust liability for refusing interconnection, initiating baseless regulatory proceedings related to its 1996 Act duties could carry liability. The Court does not accept the defendant's claim that the plaintiff's allegations about these proceedings are legally insufficient.

Regarding line loss information, the defendant argues that Z-TEL's complaints about inaccurate data pertain only to customers it has lost, without showing how delayed access impacts competition. However, the plaintiff contends that timely and accurate disconnection information is critical for auditing charges related to leased essential facilities, ensuring Z-TEL is not overcharged. Furthermore, delays in providing line loss information lead to customer complaints, incurring costs for Z-TEL and damaging its reputation. Reputation is recognized as a significant asset in business, and the plaintiff's claims regarding reputational harm fall within the definition of exclusionary conduct, as previously outlined by the Court.

Defendant argues that Z-Tel's claims of inaccurate billing are irrelevant to competition concerns, referencing the case Associated Radio Service Co. v. Page Airways, Inc. to assert that practices lacking substantial competitive impact should not be considered exclusionary. The Defendant further contends that Z-Tel's allegations are overly broad, noting the numerous disputes with SBC, which required significant resources to resolve. Although false billing alone may not constitute a monopolization claim, Z-Tel frames the issue within a broader narrative of systematic conduct aimed at undermining its competitive viability.

Z-Tel cites Continental Ore Co. v. Union Carbide, emphasizing that antitrust cases should not compartmentalize facts, as supported by legal commentary from Professor Hovenkamp. The court will clarify its alignment with the principle that factual aggregation is appropriate when no single claim meets the necessary threshold for proving a violation. Aggregation is deemed improper if essential elements of a claim are not established.

In the narrower context of exclusionary conduct, Hovenkamp notes that a monopolist's actions must be analyzed collectively, as individual instances may seem negligible, but a pattern of behavior strengthens the plausibility of a claim. The United States v. Microsoft case illustrates this principle, demonstrating that multiple acts can cumulatively violate antitrust laws and that various monopolistic strategies can be categorized to reveal a deliberate effort to maintain dominance.

Several actions by Microsoft independently meet the criteria for a monopoly maintenance claim. However, when these actions are considered collectively, the detrimental impact on competition becomes apparent. The court identifies a pattern in the plaintiff's allegations, which include: 1) product disparagement, 2) abuse of government processes, 3) provision of faulty line loss information, and 4) false billing. This holistic view counters the defendant's argument that the monopolization claim should be dismissed. The court does not make any judgment on the validity of these claims at this stage but allows the defendant to challenge the evidence's credibility later. Consequently, the motion to dismiss the plaintiff's monopolization claim regarding these allegations is denied.

The document also discusses legal principles surrounding refusals to deal, emphasizing that while businesses have the right to choose their partners, this right is limited if the refusal supports monopolistic behavior. The Supreme Court case United States v. Colgate Co. underlines that a refusal to deal is permissible unless it aims to establish or maintain a monopoly. The foundational case for unilateral refusals to deal is Aspen Skiing Co. v. Aspen Highlands Skiing Corp., which clarified that monopolists may be held liable for actions deemed anticompetitive, even if there is no absolute duty to cooperate with competitors. The reasoning behind this is that legitimate business reasons could differentiate valid conduct from anticompetitive behavior; however, the Aspen case has faced significant scholarly critique.

Determining the application of Aspen Skiing's principle poses challenges for its supporters, particularly in maintaining control over its implementation. Professor Graglia questions the legality of a rule that penalizes the termination of non-mandatory agreements. The Supreme Court, in Trinko, affirmed that Aspen Skiing's holding on unilateral refusals to deal remains valid, noting the case is at the outer limits of liability. 

In the context of the refusal to deal argument, the defendant distinguishes its situation from Aspen, emphasizing that it has not voluntarily engaged in prior dealings with rivals or set retail prices for DSL services, which require permission from CLECs to provide. Implementing changes to accommodate requests would entail significant costs and efforts, a burden antitrust law does not impose.

The plaintiff interprets Trinko as establishing two necessary conditions for a refusal to deal claim: 1) the defendant must have previously voluntarily provided the product, and 2) the defendant must have made the product available to non-competitors but not to competitors. 

While the defendant's argument regarding voluntariness has merit, the Supreme Court's mention of "discrimination" in Trinko aligns with the plaintiff's terminology. However, the services in question are not marketed or available to the public, contrasting with the situation in Otter Tail Power Co., where services were provided to some customers but withheld from others. The court clarifies that the plaintiff's use of "discrimination" pertains to the differentiation in service provision among customer groups, as highlighted in Trinko.

Evidence suggests that before the 1996 Act, the Defendant voluntarily shared its network, potentially to appease regulators during the SBC and Ameritech merger discussions, rather than for profit. However, under a motion to dismiss, allegations are viewed favorably for the non-movant, indicating the Plaintiff adequately claims the Defendant ceased a profitable practice previously engaged in voluntarily.

The Plaintiff also claims that the Defendant currently offers discriminatory access to local service providers, specifically mentioning access to Valor Telecom in Texarkana and to non-competitor Intrado for 911 services. Again, when viewed favorably, these allegations suggest possible discriminatory practices aligning with Supreme Court interpretations in Trinko and Otter Tail.

In referencing the case Stein v. Pacific Bell, the Defendant cited an unpublished order where the court granted summary judgment to the defendant on similar claims. However, distinctions between summary judgment and a motion to dismiss are emphasized, with the Court noting that the Plaintiffs in Stein were consumers of DSL services, while the Plaintiff in the current case does not fit this definition. The Plaintiff's argument hinges on the notion that the Defendant’s prior voluntary network sharing falls within the Aspen Skiing exception, which the Court finds unconvincing, particularly since the Defendant was statutorily required to provide certain information under the Telecommunications Act.

The fundamental holding of Stein establishes that the plaintiff's allegations are similar to those in Trinko, specifically regarding a failure to comply with a newly mandated legal duty. The Stein Court's commentary is distinct from the present case, as it pertains to the refusal to deal doctrine, which does not apply here. Unlike Aspen Skiing, where a dominant partner ended a joint venture, the defendants in this case merely failed to adhere to regulatory requirements without terminating a prior voluntary arrangement. This Court concurs with Judge Illston's perspective that the Aspen Skiing exception is narrowly defined. The plaintiff faces a challenging legal hurdle, but claims that the defendant ended a voluntary business relationship initiated without any legal obligation. 

Additionally, the defendant raised a belated argument on July 21, 2004, misinterpreting the Trinko decision regarding the requirement that a termination of business arrangements must involve the plaintiff. This argument was not previously presented in the motion to dismiss and is inconsistent with the principles of civil procedure, which dictate that replies should only address issues raised by the opposing party. The Court emphasizes that the Trinko text cited by the defendant does not support the assertion that cessation of voluntary dealings must be with the plaintiff to meet Aspen Skiing standards, highlighting the critical misreading of the case.

Liability for refusal to cooperate with competitors is primarily analyzed through the lens of the Aspen Skiing case. The complaint does not indicate that Verizon engaged voluntarily in dealings with its rivals without statutory pressure. Consequently, Verizon's alleged insufficient assistance in providing services to competitors does not constitute a valid antitrust claim under established refusal-to-deal precedents. The Supreme Court's consistent reference to "rival" suggests that termination of cooperation with a plaintiff alone does not suffice for a claim. Although the plaintiff faces a significant doctrinal challenge in invoking Aspen Skiing's narrow exception, the court acknowledges that the plaintiff's claims of pre-compulsory network sharing may fall within that exception. Therefore, the defendant's motion to dismiss the monopolization claim related to refusal to deal is denied.

The essential facilities doctrine, a subset of refusal to deal, pertains to monopolists withholding access to crucial resources needed by competitors to enter markets with substantial capital requirements. This doctrine aims to prevent monopolists from leveraging their control over essential facilities to extend monopolistic power across different production stages or markets. However, the Supreme Court has repeatedly declined to formally recognize the essential facilities doctrine, indicating that its validity remains contentious within antitrust law.

Every federal circuit court interprets the monopolization standard to require antitrust duties for monopolists to engage with rivals when sharing is feasible and their product is deemed "essential" for competition, which cannot be practically duplicated. The Fifth Circuit's Mid-Texas Communications Systems v. AT&T established the essential facilities doctrine, asserting that a monopolist controlling a critical resource must provide reasonable access to competitors. To succeed in an essential facilities claim, a plaintiff must demonstrate: (1) the defendant is a monopolist; (2) the facility is essential; (3) the monopolist's control contravenes the Sherman Act; (4) duplicating the facility is impractical; (5) the plaintiff was denied access; and (6) access could be feasibly provided. 

In Trinko, it was noted that the essential facilities doctrine applies only when access is unavailable; if access exists, the doctrine is moot. The ruling implies that if a regulatory agency can compel sharing, essential facilities claims should be dismissed. The 1996 Act's provisions for access negate the need for judicial enforcement of forced access, contradicting the respondent's arguments. Z-Tel's claims under the essential facilities doctrine are distinguished by the assertion that the Telecom Act does not regulate the enhanced services market, which Z-Tel contends is relevant to their case. Despite regulatory orders for access, SBC allegedly continued to deny Z-Tel shared transport. Z-Tel's complaint indicates that enhanced services rely on underlying infrastructure, which suggests that regulatory gaps may exist due to the non-existence of such services at the time of the Telecom Act's enactment.

Network access is essential for the creation of enhanced services, making Plaintiff's distinction from the Trinko case ineffective. The argument regarding the "effective power" of regulatory agencies is deemed more suitable for legislative consideration rather than judicial. Consequently, Defendant's Motion to Dismiss Plaintiff's Essential Facilities claim (Count No. 2) has been granted, resulting in a dismissal with prejudice.

For the claim of attempted monopolization, the legal standards require proof of predatory conduct, specific intent to monopolize, and a dangerous probability of achieving monopoly power. The Defendant has not specifically addressed the attempted monopolization in either the Motion to Dismiss or its reply, limiting its arguments to the legal sufficiency of Plaintiff's anticompetitive conduct allegations. Since the Defendant did not challenge the specific intent or dangerous probability elements, the Court will not analyze these aspects. Thus, the Motion to Dismiss Plaintiff's Attempted Monopolization claim (Count No. 3) is denied.

Regarding monopoly leveraging, the Defendant's argument cites the Trinko decision, which rejected the theory as inconsistent with Supreme Court precedent under Section 2. The Court of Appeals had considered the possibility of a monopoly leveraging claim but erred in dismissing the requirement for a dangerous probability of success in monopolizing a second market. Monopoly leveraging presupposes anticompetitive conduct, specifically a refusal-to-deal claim, which has already been rejected. Although the Supreme Court's earlier decisions hinted at the leverage theory, later rulings have clarified that Section 2 addresses actual monopolization or a significant threat thereof.

The Court rejects the Defendant's argument that a monopoly leveraging claim is inconsistent with Supreme Court precedent under Section 2 of the Sherman Act, noting that prior cases, Kodak and Spectrum Sports, did not involve a leverage claim. The Court finds that most of the Plaintiff's allegations of anticompetitive conduct are sufficient to survive the motion to dismiss stage, in contrast to the analysis presented in Trinko, where the absence of anticompetitive conduct was decisive. Consequently, the Defendant's Motion to Dismiss the Plaintiff's monopoly leveraging claim (Count No. 4) is denied.

Regarding the Plaintiff's Tying claim, it alleges that SBC unlawfully requires customers of its DSL service to buy basic local service exclusively from SBC, thereby maintaining its monopoly in the basic local and enhanced services markets. If a customer attempts to switch to a competitor, SBC either terminates their DSL access or blocks the competitor from providing service. The tying arrangement creates high switching costs for customers, preventing them from choosing alternatives to SBC, thereby preserving SBC's monopoly power. Additionally, SBC enforces a tying scheme between its basic local and enhanced services, making it impossible for customers to purchase one without the other.

A tying arrangement is defined as a seller's refusal to sell a desired product unless the buyer also purchases an undesired second product. This definition is supported by precedents, including Eastman Kodak Co. v. Image Technical Services.

To establish an illegal "tying" arrangement, the plaintiff must demonstrate five key elements: (1) the existence of two separate and distinct products, rather than components of a single product; (2) that the products were tied together, coercing customers into purchasing the tied product; (3) the seller's substantial economic power over the tying product; (4) an anticompetitive effect on the tied market; and (5) that the tie affected a significant volume of commerce. 

The defendant argues it cannot be liable for not offering service over a line exclusively controlled by the plaintiff, asserting that when Z-Tel provides voice service, it leases the local loop, and under FCC regulations, defendants no longer have any rights to provide services over that line. This regulation grants Z-Tel exclusive control over network facilities, allowing them flexibility to offer new services. The defendant contends that Z-Tel's tying claim fails because the defendant's local exchange carriers (ILECs) lack the right to use the lines leased by Z-Tel without permission.

Additionally, the defendant references the case of Levine v. Bellsouth, where a similar tying claim was dismissed. In that case, the defendant argued it could not create the alleged tie because it was required to surrender the entire loop to the competitive local exchange carrier (CLEC). The plaintiff countered that CLECs do not prevent the defendant from providing DSL service, suggesting the defendant's practices stemmed from its own decisions rather than restrictions from CLECs or regulators.

The court found the plaintiff's arguments insufficient regarding the feasibility of a Competitive Local Exchange Carrier (CLEC) preventing BellSouth from providing DSL service. The plaintiff failed to provide adequate facts supporting claims that BellSouth could offer DSL over the same or a standalone loop. In its reply, the defendant introduced new arguments asserting that the Trinko case bars Z-Tel's claims, stating that BellSouth does not offer standalone DSL services and would face significant costs to accommodate Z-Tel's demands. The defendant emphasized that antitrust law does not impose such obligations. Additionally, the FCC had previously rejected Z-Tel's position, indicating that imposing such duties would hinder competition and innovation.

In response, the plaintiff argued that BellSouth could sell DSL to Z-Tel's customers if it chose to, claiming that BellSouth avoids potentially higher profits from non-SBC customers to maintain its local service monopoly. The plaintiff further asserted that BellSouth's refusal to provide DSL when customers switch to Z-Tel is a tactic to stifle competition, as BellSouth could benefit from both wholesale and retail DSL revenues. The plaintiff's sur-reply also noted that BellSouth provides DSL through a separate subsidiary, countering the defendant's claim that it cannot serve Z-Tel's customers due to leased lines.

SBC, as a condition of its merger with Ameritech, was mandated to establish a subsidiary that would act as a competitive DSL provider, authorized to partner with other competitive Local Exchange Carriers (LECs) for xDSL services. The Court assumes any potential differences between "xDSL" and standard DSL are immaterial. 

The Plaintiff alleges a valid claim regarding the feasibility of the Defendant providing DSL to Z-Tel's local service customers. The Defendant argues that once the Plaintiff uses a line for voice services, FCC regulations prohibit them from providing any services over that line, necessitating the disconnection of DSL customers switching to the Plaintiff. The Plaintiff counters that the Defendant's decision to forgo profits implies the existence of profit opportunities, which the Defendant's argument fails to dismiss.

Additionally, the Defendant's reliance on the Trinko case is deemed misplaced. The Court notes that Trinko primarily addressed the incumbent's duty under the 1996 Act and does not diminish antitrust liability in other contexts. Therefore, the Defendant's argument to dismiss the Plaintiff's Tying claim based on Trinko is rejected.

Lastly, the Defendant argues that the FCC's Triennial Review Order found no competitive benefit in requiring Incumbent Local Exchange Carriers (ILECs) to provide retail DSL service over lines leased by Competitive Local Exchange Carriers (CLECs), suggesting that such a requirement would harm investment and innovation. However, since the Plaintiff claims that the Defendant provides DSL through a separate subsidiary, this contradicts the Defendant's argument and leads to the rejection of the third argument to dismiss the Tying claim. The Plaintiff clarifies that the relevant market for their claim concerns either DSL services or broadband internet access.

Plaintiff opposes Defendant's Motion to Dismiss, asserting that Defendant only disputes the DSL allegations while not contesting the tying claim related to broadband internet services. The Court disagrees, stating that the term "alternatively" suggests that Plaintiff's tying claim must be assessed based on a DSL service market. Consequently, the claim regarding the broadband internet access market is DISMISSED without prejudice, allowing for potential repleading. 

In examining the breach of contract claim (Count No. 11), Defendant argues for dismissal on the basis that it falls outside the Court's subject matter jurisdiction, claiming that the Telecommunications Act mandates such issues be resolved by regulatory agencies. Defendant further contends that if the breach of contract claim fails, other related claims will also fail. The Court prioritizes this breach of contract claim, which pertains to an interconnection agreement.

Defendant's argument relies on the Southwestern Bell Tel. Co. v. PUC case, asserting that disputes regarding interconnection agreements fall under state jurisdiction as per Section 252 of the Telecommunications Act. Additionally, Defendant cites six district court decisions to support their position that the claims should be handled by state commissions rather than in federal court.

In response, Plaintiff challenges Defendant's interpretation, arguing that Section 252(e)(6) does not strip federal courts of jurisdiction under 28 U.S.C. §§ 1331 and 1367. Plaintiff contends that the Fifth Circuit in Southwestern Bell did not mandate that these contract claims be exclusively submitted to state commissions before being brought to federal court. Instead, it indicated that such claims could be presented to a state commission first. Plaintiff also cites three Supreme Court cases to argue that exclusive jurisdiction must be explicitly stated in a statute and cannot be inferred.

Defendant asserts that Z-Tel fails to address six federal cases indicating that claims related to the 1996 Act's interconnection agreements must initially be directed to state commissions rather than federal courts. While affirming that federal district courts retain federal question jurisdiction, Defendant argues that the 1996 Act limits this jurisdiction concerning issues not first presented to state public service commissions (PSCs), with federal court review being limited to state commission determinations.

In Plaintiff's sur-reply, a citation from United States v. American Tel. Tel. Co. is presented, suggesting that the primary jurisdiction doctrine allows courts to reserve ultimate decision-making while requesting initial determinations from regulatory agencies. However, the court highlights that Plaintiff's reliance on this case is misguided, as it emphasizes that federal courts must await regulatory agency decisions—aligning with Defendant's argument.

The Telecommunications Act assigns state regulatory bodies the authority to make initial determinations on disputes regarding interconnection agreements, with required submissions for approval. A party aggrieved by a state commission's decision may then seek federal court review to assess compliance with the Act. 

Furthermore, the court clarifies that the Fifth Circuit's ruling in Southwestern Bell Tel. Co. v. PUC confirms that state agencies play a primary role in adjudicating claims under the Act, and the FCC expects state commissions to handle enforcement disputes post-approval. Other courts have corroborated this approach, establishing that parties must first present their claims to state PSCs before federal jurisdiction is available.

A breach of two interconnection agreements was brought before the district court under diversity jurisdiction. The court dismissed the claim, stating that without a prior determination by the state Public Service Commission (PSC), federal court jurisdiction is lacking. The Plaintiff, while not explicitly naming a violation of 47 U.S.C. § 252, was effectively alleging such a violation through the breach of contract claim related to the interconnection agreement governed by that section. The court granted the Defendant's motion to dismiss the breach of contract claim without prejudice, stipulating that if the Plaintiff refiles, it must demonstrate that the state regulatory agency has made a determination and that the Plaintiff is "aggrieved" by this determination.

In the subject matter jurisdiction section, the Defendant argued that the Plaintiff's complaint had already been adjudicated by the FCC and is currently under appeal, asserting that Section 207 prohibits simultaneous complaints to both the FCC and federal court. Additionally, the Defendant claimed that principles of claim preclusion barred the Plaintiff's claim. The Plaintiff countered that the reliance on Section 207 was incorrect, as their complaint was brought under Section 208, which allows for general complaints to the FCC. The Plaintiff maintained that their FCC complaint did not seek damages, thus avoiding Section 207's restrictions, and argued that claim preclusion was not applicable since the case involved "supplemental relief."

In reply, the Defendant reiterated its position regarding Section 207 and highlighted the Plaintiff's expressed intent to seek damages in their FCC complaint. The Plaintiff strongly asserted that their complaint did not involve a damages claim, framing the case as a bifurcated determination of liability and damages, distinguishing it from previous cases cited by the Defendant, which involved claimants who had received determinations on both liability and damages.

The analysis noted that FCC rules do not address bifurcation as the Plaintiff suggested, referencing 47 C.F.R. § 1.722, which allows parties to request bifurcation of liability and damage questions.

FCC regulations specify that when a party elects to pursue damages, the damages proceeding is distinct and follows the liability complaint. Importantly, this does not imply that the damages proceedings must occur in federal court. If a complainant files a supplemental complaint for damages, the Enforcement Bureau may designate the issues for hearing or the parties can opt for mediation with a Commission Administrative Law Judge. The selection of this judge can occur by mutual agreement or, if not, by designation from the Chief Administrative Law Judge.

Plaintiff argues that its claim falls under Section 208, not Section 207. Section 208 allows any individual or body to petition the Commission regarding actions by common carriers that violate the Act. The Commission must send the complaint to the carrier, which must respond within a specified timeframe. If the carrier resolves the issue within that time, it is exempt from further liability. If not, the Commission has a duty to investigate the complaint. Complaints cannot be dismissed due to lack of direct damages.

The Commission is required to conclude any investigation within specified timeframes, with final orders subject to appeal under Section 402. This section outlines the process for judicial review of Commission orders, emphasizing that appeals are distinct from initiating new damage claims in district court. Therefore, the Plaintiff's reliance on Section 208 for its claim is deemed misplaced.

Fifth Circuit precedent clarifies that the distinction between formal and informal complaints, as discussed in Cancall PCS, LLC v. Omnipoint Corp., is not applicable under Section 207. The court interprets Section 207 to prohibit a complainant from pursuing claims in federal court once an administrative complaint has been filed with the FCC, regardless of the complaint's formality. Key cases, including Stiles v. GTE Southwest, emphasize that the statute's language is clear: a complainant may choose to file with either the FCC or federal court, but not both, and this choice does not differentiate between complaint types.

The plaintiff's recent FCC filing raises questions related to claim preclusion, particularly since it explicitly stated that damages were not sought in that proceeding, as indicated in Exhibit H attached to the plaintiff's opposition to the motion to dismiss. However, the complaint's language does not consistently reflect this claim. The court notes the ambiguity regarding whether the issues in the FCC complaint overlap with those in the current action. Ultimately, Section 207 bars federal court actions after filing with the FCC, affirming the ruling from Stiles that applies to both formal and informal complaints.

Plaintiff's complaint may proceed if it does not overlap with issues from a prior FCC action, though there is confusion regarding the identification of Plaintiff's FCC complaint. Consequently, Defendant's Motion to Dismiss Count 8 (regarding 251 claims) is granted without prejudice, allowing Plaintiff to replead by demonstrating distinct issues from the prior FCC action. The Court, having ruled on subject matter jurisdiction, does not address Defendant's claim preclusion argument.

Regarding Count 9, which alleges a violation of the Telecommunications Act under 47 U.S.C. 202, Plaintiff claims SBC discriminates against Z-Tel by providing better line loss and billing information to its own customers, leading to a perceived service advantage. 

Defendant presents two arguments for dismissing this claim: 
1. The activities complained of do not qualify as "communication services" under Section 202, citing the Fifth Circuit's ruling in *Brittan Communications* which determined that certain billing and collection services not using common carrier lines are not regulated under Title II of the Communications Act.
2. Plaintiff fails to allege discrimination among similarly situated customers, arguing that Plaintiff's claims only indicate SBC's preferential treatment towards itself compared to Z-Tel, lacking evidence of disparate treatment among comparable customer classes.

In response, Plaintiff argues that *Brittan* is distinguishable based on the wording "in connection with," seeking to clarify its application to the current case.

Brittan and SWBT lacked a contractual relationship, with the charges in question being those of Brittan to consumers, which SBC included in its billing. Consequently, SBC was not providing a "communication service" to Brittan regarding the billing service. The court rejected Brittan's interpretation of the case, emphasizing that while the FCC has shifted its stance on billing and collection services, it has not recognized these services as falling under Title II when provided by local exchange carriers (LECs) to unaffiliated long-distance providers. The court noted that existing FCC decisions do not support Brittan’s claims, specifically referencing that billing and collection services are only relevant to a carrier's own operations and do not constitute a communication service when related to unaffiliated carriers.

Furthermore, the court found that Brittan misinterpreted the Telecom Int'l Am. case, which discusses using a carrier's provision of services to itself to assess service quality. The court clarified that the focus on service quality is pertinent only in the context of services offered to other customers. The court outlined a three-part test for determining unlawful discrimination by a carrier, which includes assessing whether the services are similar and if there are price or condition discrepancies. Overall, Brittan’s claims regarding billing and line-loss services did not meet the legal standards necessary to support a Section 202 claim.

The inquiry under Section 202 pertains specifically to customer discrimination, which the Plaintiff has not adequately alleged, resulting in the Court granting the Defendant's motion to dismiss this claim (Count No. 9) without prejudice, allowing for the possibility of repleading. 

In relation to the Telecommunications Act, Section 222 outlines that telecommunications carriers must protect proprietary information of other carriers and use such information solely for the intended telecommunications services, not for marketing. The Plaintiff, Z-Tel, asserts that SBC misused proprietary information acquired from Z-Tel to solicit Z-Tel’s customers for SBC's retail services, leading to some customers switching to SBC.

The Defendant contends that Section 222(b) only restricts the use of information obtained from "another carrier," and the information Z-Tel claims was misused pertains to customers who had already transitioned to another service, which is information SBC is permitted to use. The Defendant argues that Z-Tel's allegations do not specify what proprietary information was misused, merely echoing the statutory language without clarity.

The Court concludes that the Plaintiff’s allegations are insufficient and lack specificity, thus failing to establish a legally cognizable claim under Section 222. Consequently, the Defendant's motion to dismiss Count No. 10 is also granted without prejudice to repleading.

Plaintiff's RICO claim centers on allegations that Defendant submitted false invoices and misleading line loss data, constituting mail and wire fraud as predicate acts of racketeering. Plaintiff asserts that all Defendants collaborated in this scheme, with subsidiary Defendants playing a role in concealing the fraud. To establish a RICO claim under 18 U.S.C. § 1962, a plaintiff must demonstrate (1) conduct, (2) of an enterprise, (3) through a pattern, and (4) of racketeering activity. Defendant contends that Plaintiff has not sufficiently alleged elements (2) and (4). 

Specifically, Defendant argues there is no evidence of intent to deceive, citing case law that indicates a failure to fulfill contractual obligations does not imply fraudulent intent. Additionally, Defendant asserts that Plaintiff did not demonstrate reasonable reliance on the alleged fraudulent statements, as evidenced by Plaintiff's numerous complaints regarding service issues, suggesting Plaintiff was aware of the alleged inaccuracies. 

Furthermore, Defendant claims Plaintiff has not provided adequate allegations that SBC acquired its subsidiaries through the fraudulent scheme, noting that these acquisitions predated the alleged fraud. Defendant also argues that a corporation cannot simultaneously be the enterprise and the perpetrator of RICO violations, thus challenging the inclusion of its subsidiaries as RICO persons.

In response, Plaintiff emphasizes that intent can be generally asserted under Federal Rule of Civil Procedure 9(b) and is typically a factual question. Additionally, Plaintiff argues that merely questioning certain representations does not equate to knowledge of fraud concerning other invoices that may have been paid without knowledge of their falsity.

Defendant misinterprets the Office Outfitters case, while Plaintiff contends that merely alleging actions taken to enhance or protect value suffices. Plaintiff also identifies distinct roles played by subsidiary defendants, referencing Williams v. Ford Motor Co. to support its claims of association-in-fact. 

In analyzing racketeering activity, the court notes that intent to deceive is typically proven through circumstantial evidence, as direct proof is rare. Although Rule 9 of the Federal Rules of Civil Procedure requires particularity in alleging wire and mail fraud, it should be harmonized with Rule 8, which allows for a more general statement of the claim. Consequently, the court finds that Plaintiff has adequately alleged circumstances suggesting Defendant's intent to deceive at the start of the interconnection agreement, and has not yet had the chance to present evidence of this intent at the motion to dismiss stage.

Regarding reasonable reliance, RICO's "by reason of" language necessitates establishing that fraud was both the "but for" and proximate cause of the injury. Knowledge of the truth negates a fraud claim. Plaintiff argues that questioning some invoice representations does not equate to knowing other invoices were fraudulent at the time of payment. Since objections were raised regarding only a portion of the invoices, and because it is plausible that falsity existed in others without Plaintiff's knowledge, the court concludes that Plaintiff has made credible allegations of reasonable reliance on at least some invoices.

Finally, under the RICO statute, it is unlawful to acquire or maintain control of an enterprise through racketeering activity. Defendant asserts that Plaintiff has not sufficiently alleged that it acquired its subsidiaries through the alleged RICO violations.

Plaintiff does not effectively contest Defendant's argument regarding the lack of a valid "acquisition" claim since the subsidiaries were obtained prior to Plaintiff's corporate operation. Although acquisition may not be a necessary condition for a RICO claim, the statute allows for claims based on either "acquire" or "maintain." Defendant points out that while Plaintiff claims the alleged RICO scheme enhanced or protected the value of its subsidiaries, it fails to assert that the scheme allowed SBC to maintain ownership of those subsidiaries. This maintenance allegation is referenced in paragraph 124 of Plaintiff's complaint. 

The court cites *Office Outfitters v. A.B. Dick Co.*, noting that allegations of enhancing or protecting cash-in value are sufficient under RICO, as illustrated by the claim that Defendant's actions enabled it to unjustly capture illegal profits. The court also states that if Defendant's conduct increased the value of the business, it satisfies the maintenance requirement. 

Defendant contends that Plaintiff has not sufficiently alleged a distinct acquisition or maintenance injury apart from those stemming from the predicate acts, but the court rejects this argument. At the pleading stage, general allegations of injury may suffice, as established in *Lujan v. Defenders of Wildlife*, where the Supreme Court indicated that minimal allegations can support a RICO claim. Additionally, the court references *Nat'l Org. for Women v. Scheidler*, affirming that allegations of conspiratorial actions causing injury are adequate for standing. 

The court also dismisses Defendant's claim that Plaintiff's RICO damages are indistinguishable from damages related to tariffs or contracts, finding insufficient authority supporting the claim that the Filed Tariff Doctrine limits RICO damages. Ultimately, the court concludes that Plaintiff has presented a valid claim regarding racketeering activity.

A corporation cannot simultaneously be considered both the enterprise and the RICO perpetrator; the "person" and the "enterprise" must be distinct, as supported by various case law, including 972 F.2d 580 and 802 F.2d 122. Although the defendant acknowledges this legal principle, it misapplies it to the plaintiff's claims. The plaintiff asserts that SBC's subsidiaries had distinct roles in the alleged fraudulent activities, contrary to the defendant's interpretation. The court references the Office Outfitters case, emphasizing that allegations of misrepresentations by subsidiaries can suffice to resist dismissal. The defendant cites Bucklew v. Hawkins, arguing that a parent and its wholly owned subsidiaries lack sufficient distinctness to trigger RICO liability unless operating through subsidiaries facilitated unlawful activities, which the defendant contends hasn't been shown. However, the plaintiff alleges that the subsidiaries actively concealed and facilitated the fraud, positioning itself within the exception outlined in Bucklew. The court clarifies that it does not assess the truth of these allegations at this stage, but finds the claims sufficient to survive a motion to dismiss.

The Eighth Circuit in Fogie determined that insufficient distinction existed between a parent company and its subsidiary to establish RICO liability under 1962(c). The court noted that while a parent and subsidiary are legally separate entities, this alone does not satisfy the distinctiveness requirement necessary for RICO claims. The court emphasized that a more substantial distinction is required beyond their separate legal status, as failing to do so would undermine the distinctiveness requirement within RICO. In the present case, the plaintiffs did not demonstrate enough distinctiveness among the related entities—THORN Americas, TEMINAH, and THORN EMI, plc—operating under common control, leading to the affirmation of the District Court's summary judgment in favor of the defendants.

The plaintiffs argued that Fogie is not precedent in the Fifth Circuit and cited Atkinson v. Anadarko Bank & Trust Co. as a relevant case. In Atkinson, the court found no evidence of an association apart from the bank’s operations, concluding that the plaintiffs failed to demonstrate a separate enterprise. The alleged racketeering involved mail fraud solely connected to bank activities, with no evidence of a continuing unit or separate entity involvement. Consequently, the district court correctly overturned the jury’s RICO violation finding. The text concludes by noting that plaintiffs face a significant challenge in distinguishing their case due to established legal doctrine, while still allowing room for evidence of a valid enterprise.

Defendant argues that a simple contract dispute cannot constitute a RICO violation, a position supported by legal precedent. However, when assessing a motion to dismiss, the Court must consider Plaintiff's allegations favorably, which assert that Defendant engaged in a pattern of intentional wrongdoing by misusing its network and submitting false business materials, thereby undermining Plaintiff's market competitiveness. The Court emphasizes that it does not evaluate the truth of these claims but concludes that Plaintiff's allegations suggest conduct that exceeds mere contract breach, leading to the denial of Defendant's Motion to Dismiss the RICO claim.

In addition, Defendant presents a separate argument regarding the Filed Tariff Doctrine as it pertains to both the RICO claim and claims under the Telecommunications Act. The Court previously addressed the relationship between the Filed Tariff Doctrine and the RICO claim, determining it to be ineffective. Under Section 203(a) of the Telecommunications Act, local exchange carriers must file tariffs with the FCC detailing charges and regulations. The Filed Rate Doctrine states that once a rate is approved, it represents the exclusive rights and liabilities between the carrier and customer, barring claims for speculative damages in antitrust suits. However, this doctrine does not apply to non-rate-related cases, such as breach of contract disputes. Defendant attempts to extend the Filed Tariff Doctrine to encompass all of Plaintiff's claims, but the Court clarifies that this argument is specifically aimed at the RICO and Telecommunications Act claims.

The court did not address the Defendant's Filed Tariff Doctrine argument regarding the Telecommunications Act claims since those claims were dismissed on other grounds. If the Plaintiff amends these claims to correct the identified errors, the Defendant may reassert this argument in future motions.

Regarding the Lanham Act, the Plaintiff alleges that SBC, while providing basic and enhanced services, used false and misleading representations in interstate commerce, violating 15 U.S.C. § 1125(a). Specific accusations include SBC misrepresenting the nature and quality of Z-Tel's services through misleading line loss information and fraudulent billing practices, which distort consumer perception of Z-Tel’s customer service. SBC's advertisements disparage competing carriers, labeling them as "parasites" and "middlemen" and implying that they do not invest in networks, while claiming SBC makes substantial investments for consumers.

The Defendant counters with three arguments: (1) the allegations of faulty line loss information and fraudulent billing do not constitute false statements of fact in commercial advertising; (2) the descriptions of competitors as "parasites" and "middlemen" are opinions, not facts; and (3) the Plaintiff's claims about consumer purchasing influence do not meet the legal threshold for a motion to dismiss. The court finds the Defendant's first argument unconvincing, noting that the case cited (Seven-Up Co. v. Coca-Cola Co.) supports a broad interpretation of "advertising" and "promotion" under the Lanham Act, suggesting that the terms should be understood in their ordinary meanings.

In *Novelty, Inc. v. Drew Pearson Marketing, Inc.*, the court clarifies the application of Section 43(a) of the Lanham Act, stating that while it addresses a wide range of misrepresentations, its scope is confined to false advertising as traditionally understood. The court emphasizes that representations must meet specific criteria to qualify as "commercial advertising or promotion": they must be (1) commercial speech, (2) made by a competitor of the plaintiff, (3) aimed at influencing consumer purchases, and (4) sufficiently disseminated to the relevant purchasing public. The court finds that the plaintiff's allegations include conventional advertising, connecting this to the broader context of false claims about the nature and quality of the plaintiff's customer service.

Further, the document discusses the distinction between statements of fact and opinion under Section 43(a). It asserts that only statements that are specific, measurable, and capable of being proven true or false can support a claim under the Lanham Act, as established in case law. The plaintiff alleges that the defendant made specific claims about the plaintiff's lack of investment and contribution, which can be empirically verified. The court notes that such claims, if proven false, could substantiate the plaintiff's claims under the Lanham Act.

Defendant's second argument is rejected. In addressing Defendant's third argument concerning the impact of misleading advertising on purchasing decisions, legal standards establish that a plaintiff must demonstrate actual deception to recover monetary damages for non-literally false advertising. This requires evidence of consumer reactions or surveys indicating a significant number of consumers were misled. The plaintiff must provide direct evidence, such as testimonies, or circumstantial evidence like surveys.

The court emphasizes that it cannot demand evidence of consumer confusion while simultaneously restricting the plaintiff's ability to gather such evidence. The plaintiff's claims of being labeled a "parasite" seeking "short term profits" are seen as damaging assertions that could negatively affect their market demand.

The court ultimately denies Defendant's motion to dismiss the Lanham Act claim (Count No. 7). However, the motion is granted regarding the Essential Facilities claim (Count No. 2), the Breach of Contract claim (Count No. 11), and the Telecommunications Act claims (Count Nos. 8, 9, and 10), with the Essential Facilities claim dismissed with prejudice and the other two dismissed without prejudice to allow repleading.

Special attention is given to the Tying claim (Count No. 5), which involves DSL service, noting that the plaintiff does not need to consider an alternative broadband market. This Tying claim is dismissed without prejudice to repleading. The plaintiff has 30 days to amend any claims dismissed without prejudice. The court notes that since not all federal causes of action have been dismissed, state law claims are not discussed, despite the defendant's request for their dismissal contingent on the federal claims. Additionally, it is noted that tie-ins may violate Section 3 of the Clayton Act, but this act pertains to goods rather than services involved in this case.