SPRINT NEXTEL CORPORATION v. AT&T, INC. et al

Filing 42

Civil Statement Statement of the Case from Defendants. (Wade, James)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
__________________________________________
)
SPRINT NEXTEL CORPORATION ,
)
)
Plaintiff,
)
)
v.
)
)
AT&T INC., et al.,
)
)
Defendants.
)
__________________________________________)

Case No. 1:11-cv-01600-ESH

DEFENDANTS’ STATEMENT OF THE CASE
Defendants AT&T Inc. (“AT&T”), AT&T Mobility LLC, T-Mobile USA, Inc. (“TMobile”), and Deutsche Telekom AG (“DT”) (jointly, “Defendants”) hereby file their Statement
of the Case pursuant to the Court’s Order for Initial Scheduling Conference (Nov. 2, 2011) [DN
30].
A.

On March 20, 2011, AT&T entered into a stock purchase agreement to acquire T-

Mobile from its parent company, DT, and to merge AT&T’s and T-Mobile’s mobile wireless
telecommunications services businesses. On September 6, 2011, Plaintiff Sprint Nextel
Corporation (“Sprint”) filed an action under section 16 of the Clayton Act, 15 U.S.C. § 26,
seeking to permanently enjoin the transaction. See Compl. ¶ 11 (Sept. 6, 2011) [DN 1].
Defendants moved to dismiss Sprint’s complaint. On November 2, 2011, the Court
granted in part and denied in part Defendants’ motion. The Court dismissed, inter alia, Sprint’s
claim that the transaction will result in anticompetitive effects in markets for mobile wireless
services because Sprint, as a competitor to the merging parties, could not prove antitrust injury
based on those effects. See Mem. Op. at 14 (Nov. 2, 2011) [DN 28]. The Court determined that

Sprint had antitrust standing to assert only one claim regarding the transaction: The Court ruled
that Sprint had standing to pursue the allegation that the transaction will give AT&T monopsony
power such that AT&T could dictate terms to manufacturers of mobile wireless devices and
“impair plaintiffs’ access to these necessary inputs.” Mem. Op. at 21. The Court thus made
clear that Sprint’s claim was limited to “threatened loss or damage in the market for mobile
wireless devices.” Mem. Op. at 21 (emphasis added).
Sprint will not be able to prove that claim. First, the geographic market for mobile
wireless devices is global, so the size of the combined company will not endow it with market
power, let alone monopsony power. Second, Sprint will not be able to demonstrate that there is a
greater likelihood of exclusive handset arrangements in the future in light of the dynamic
competition and innovation that characterize the mobile device market. Third, with respect to
any isolated exclusive handset arrangements that might arise, those arrangements, like similar
exclusive arrangements in other markets, have acknowledged procompetitive benefits. Sprint
will not be able to demonstrate that any restrictions on access are sufficient to outweigh these
benefits. Fourth, even to the extent that Sprint is able to demonstrate a net anticompetitive effect
stemming from potential exclusive handset arrangements, any such threatened anticompetitive
effects would be far outweighed by the efficiencies that will result from the transaction. Finally,
even if Sprint were to prove that it will suffer some cognizable harm with respect to exclusive
handset arrangements that would not be outweighed by the transaction’s efficiencies, enjoining
the entire transaction would not be an appropriate remedy for that harm.
B.

In the Local Rule 16.3 Report submitted on December 2, 2011, Sprint argued that

“the fact discovery in the DOJ Action should serve as the vast majority of discovery in the
Private Actions” because Sprint’s complaint raises “the very same Section 7 violation that the

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U.S. Department of Justice (‘DOJ’) is seeking to establish.” See Joint Report Regarding Local
Rule 16.3(c) at 3-4 (Dec. 2, 2011) [DN 40]. Sprint is fundamentally mistaken about the scope
and content of the claims and defenses in this action. A private plaintiff such as Sprint may
enforce section 7 of the Clayton Act only insofar as “the acts violating the” statute threaten to
cause it “antitrust injury.” 2A Phillip E. Areeda et al., Antitrust Law ¶ 335a, at 61-62 (3d ed.
2007). DOJ has alleged that AT&T’s acquisition of T-Mobile would violate section 7 because
“the effect of such acquisition may be substantially to lessen competition,” 15 U.S.C. § 18, in
markets for “[m]obile wireless telecommunications services,” DOJ Sec. Am. Comp. ¶ 12, United
States v. AT&T, No. 11-cv-1560 (D.D.C. Sept. 30, 2011) [DN 39]. Following settled law, this
Court held that Sprint lacks antitrust standing to pursue that claim. See Mem. Op. at 12-14; see
also, e.g., 2A Areeda ¶ 335f, at 73 (“antitrust injury is absent when a plaintiff complains that its
competitors’ merger was illegal because it increased market concentration unduly”).
Instead, the Court determined that Sprint’s complaint provided a basis for antitrust
standing only insofar as it involved an alleged violation of section 7 “in the market for mobile
wireless devices.” Mem. Op. at 21 (emphasis added). DOJ has not alleged a violation in that
market. See DOJ Sec. Am. Comp. ¶¶ 11-13. Therefore, the claims and defenses in the DOJ
Action and this action involve different alleged violations of section 7 in different markets. The
two cases accordingly will involve very different evidentiary records, and discovery in this case
will not be “duplicative” of discovery in the DOJ Action, as Sprint asserts. DN 40 at 5.
In any event, the most efficient way to address this disagreement over the scope of
Sprint’s remaining claim is through the discovery process. Under Defendants’ Proposed Case
Management Plan, Sprint will have the ability to serve discovery requests on Defendants seeking
documents which it believes are relevant to its remaining claim. Defendants will provide

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appropriate responses to such discovery based on their understanding of the scope of Sprint’s
remaining claim. If the parties fail to reach agreement on Defendants’ obligations to respond to
Sprint’s requests, Sprint can move to compel further production. This process, by focusing on
specific requests for particular types and categories of documents, will clarify the differences in
the parties’ positions and enable this Court (or a Special Master if ordered by the Court) to
resolve any disputes promptly and efficiently.
The parties also disagree fundamentally on the appropriate pretrial schedule for the
remaining narrow claim. Defendants’ proposed schedule comports with this Court’s
observations that Plaintiff’s claim regarding the transaction should not be permitted to “gum up”
the efficient resolution of the DOJ Action, regardless of the timeline for the DOJ Action. See Tr.
of Sept. 21, 2011 Status Hearing at 63:8 and 65:8-9 (rejecting Plaintiffs’ request to have
wholesale access to all discovery in DOJ Action). Plaintiff’s proposed schedule, in contrast,
departs from that paramount objective, substituting instead a process in this case that is
guaranteed to tie up judicial and party resources and distract from efficient discovery and trial
preparation in the DOJ Action.
Indeed, Sprint acknowledges that, even under its (incorrect) theory of the case, some
additional discovery – Sprint says “streamlined discovery,” DN 40 at 3 – will be required in this
case. Such discovery necessarily will consume the time and energy of many of the same
employees of Defendants who are critical witnesses in the DOJ Action. Particularly if the parties
are permitted to engage in deposition, expert, and non-party discovery during the pendency of
the DOJ Action, discovery in this case threatens to interfere significantly with the litigation and
trial of the DOJ Action. And that interference will result in prejudice to Defendants. To avoid
interference with the litigation and trial of the DOJ Action, and the resulting prejudice to

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Defendants, the Court should adopt Defendants’ Proposed Case Management Plan, which
provides for immediate party document discovery in this case, followed by a scheduling
conference seven days after a dispositive ruling or other final disposition in the DOJ Action. The
Court and the parties will be in a far better position at that time to determine the timing and
scope of any necessary further proceedings in this case. 1

1

Contrary to Sprint’s assertion in the Local Rule 16.3 Report, the schedule for this
litigation need not depend on the timing for the closing of the transaction; the Court has power to
grant effective relief post-merger to redress any proven antitrust violation. See generally
California v. Am. Stores Co., 495 U.S. 271, 283-85, 295-96 (1990); see also Ford Motor Co. v.
United States, 405 U.S. 562, 573 (1972); F.T.C. v. Whole Foods Mkt., Inc., 548 F.3d 1028, 103334 (D.C. Cir. 2008).
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Dated:

December 6, 2011

By: /s/ James R. Wade
James R. Wade (No. 412538)
Richard A. Ripley (No. 412959)
Nora L. Whitehead (No. 988897)
HAYNES AND BOONE, LLP
1615 L Street, N.W.
Suite 800
Washington, D.C. 20036
Telephone: [phone]
Facsimile: [phone]
[e-mail]
[e-mail]
[e-mail]
A. Michael Warnecke
(pro hac vice)
HAYNES AND BOONE, LLP
2323 Victory Avenue
Suite 700
Dallas, Texas 75219
Telephone: [phone]
Facsimile: [phone]
[e-mail]
Mark C. Hansen (No. 425930)
Michael K. Kellogg, (No. 372049)
Brendan J. Crimmins (No. 497273)
KELLOGG, HUBER, HANSEN, TODD,
EVANS & FIGEL, P.L.L.C.
1615 M Street, NW, Suite 400
Washington, DC 20036
Telephone: [phone]
Facsimile: [phone]
[e-mail]
[e-mail]
[e-mail]
Counsel for AT&T Inc. and AT&T Mobility LLC

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George S. Cary (No. 285411)
Mark W. Nelson (No. 442461)
CLEARY GOTTLIEB STEEN & HAMILTON LLP
2000 Pennsylvania Avenue, NW
Washington, DC 20006
Telephone: [phone]
Facsimile: [phone]
[e-mail]
[e-mail]
Richard G. Parker (No. 327544)
O’MELVENY & MYERS LLP
1625 Eye Street, NW
Washington, DC 20006
Telephone: [phone]
Facsimile: [phone]
[e-mail]
M. Evan Corcoran (No. 440027)
John B. Wyss (No. 199335)
WILEY REIN LLP
1776 K Street, N.W.
Washington, D.C. 20006
Telephone: [phone]
Facsimile: [phone]
[e-mail]
[e-mail]
Counsel for T-Mobile USA, Inc. and
Deutsche Telekom AG

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CERTIFICATE OF SERVICE
I hereby certify that on December 6, 2011, I caused the foregoing document to be filed
with the Clerk of the Court using the CM/ECF system, which will send e-mail notification of
such filings to counsel of record. This document is available for viewing and downloading on
the CM/ECF system.

/s/ James R. Wade_______________
James R. Wade

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