LAW OFFICES v. BELL ATLANTIC CORP.

Judge SACK concurs in part and dissents in part in a separate opinion.

KATZMANN, Circuit Judge.

This is an appeal of a dismissal of a class action brought on behalf of a class consisting of customers who received local phone service in the region served by Bell Atlantic from a company other than Bell Atlantic.1 In recent years, the federal government has changed its policy with respect to the structure of local phone service markets, which had been controlled by state-sanctioned local monopolies. Congress sought to introduce competition to those markets by passing the Telecommunications Act of 1996 (the "Telecommunications Act"), Pub.L. 104-104, 110 Stat. 56, which amended the Communications Act of 1934 (the "Communications Act"), 47 U.S.C. § 151, et seq. The Telecommunications Act requires the carrier with the local phone service monopoly to provide competitors with access to its local network — infrastructure necessary to provide local service that is expensive to duplicate. The Telecommunications Act also sets forth procedures by which telecommunications carriers can negotiate an interconnection agreement, which provides for such access, that must ultimately be approved by state regulators.

The plaintiff claims that it was damaged when the defendant, Bell Atlantic, denied the customers of AT & T, the plaintiff's local phone service provider, equal access to its local network. The plaintiff filed an action alleging that this behavior: (1) violated section 202(a) of the Communications Act; (2) violated subsections (b) and (c) of section 251 of the Telecommunications Act; (3) violated section 2 of the Sherman Antitrust Act (the "Sherman Act"), 15 U.S.C. § 2; and (4) was a tortious interference with contract. The plaintiff sought damages and injunctive relief for the alleged violations of section 202(a) and subsections (b) and (c) of section 251 pursuant to sections 206 and 207 of the Communications Act. It also sought damages and injunctive relief for the alleged violation of section 2 of the Sherman Act pursuant to the Clayton Act, 15 U.S.C. § 15.

The defendant primarily contended and maintains on appeal that the plaintiff's section 202(a) and 251 claims should be dismissed because the plaintiff is not asserting its own rights but is asserting rights that belong to AT & T. The defendant argues that the complaint only alleges a breach of its interconnection agreement with AT & T and that such a breach should be remedied through the administrative process. The defendant claims that allowing an antitrust action based on the plaintiff's allegations would disrupt the regulatory process established by the Telecommunications Act. The district court essentially agreed with these arguments and dismissed the plaintiff's action in its entirety. See Law Offices of Curtis V. Trinko, LLP v. Bell Atlantic Corp., 123 F.Supp.2d 738 (S.D.N.Y.2000).

For the following reasons, we affirm in part, vacate in part, and remand for further proceedings.

BACKGROUND

We review the district court's decision granting the defendant's motion to dismiss de novo, taking all factual allegations in the amended complaint as true and construing all reasonable inferences in favor of the plaintiff. See Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); Conboy v. AT & T Corp., 241 F.3d 242, 246 (2d Cir.2001).

I. The Market for Local Phone Service and the Telecommunications Act

Prior to 1982, AT & T had monopolies in the markets for long-distance phone service, local phone service, and telephone equipment. In that year, AT & T settled an antitrust suit by the United States and agreed to a consent decree that split it from its local subsidiaries in order to encourage competition in the long-distance and equipment markets. In contrast, local phone service markets were left in the hands of AT & T's former local subsidiaries, which were regulated as monopolies by the states and prohibited from entering the long-distance markets. The rationale for allowing monopolies in the local phone service market was the belief that having more than one local provider would lead to unwarranted duplication in the physical connecting wires through which local calls are transmitted. See AT&T Corp. v. Iowa Utils. Board, 525 U.S. 366, 413-14, 119 S.Ct. 721, 142 L.Ed.2d 835 (1999) (Breyer, J., concurring in part, dissenting in part).

Bell Atlantic and NYNEX were two such providers with monopolies in the local phone service markets. In August 1997, NYNEX merged into Bell Atlantic, creating one company that provides local phone service in New England, New York, New Jersey, Pennsylvania, Delaware, Maryland, Virginia, West Virginia, and the District of Columbia. Bell Atlantic controls the "local loop" in its territory. According to the plaintiff, the "local loop is the wireline — a twisted pair of copper wires, coaxial cable, fiber optic cable, or the like — that links the customer's premises to a central switching station," Compl. ¶ 21, from which calls are routed to their ultimate destination. "In plain English, loops are the wires that connect telephones to the switches that direct calls to their destination." AT&T Corp. v. FCC, 220 F.3d 607, 618 (D.C.Cir.2000). The plaintiff alleges that currently a carrier needs access to the "local loop" in order to provide local service because the cost of building a new "local loop" is prohibitively expensive.

Recently, as noted above, national policy with respect to the desirability of allowing competition in the local phone service markets has changed dramatically. In 1996, Congress enacted the Telecommunications Act, which amended the Communications Act. Under the Telecommunications Act, states are no longer permitted to enforce laws that prohibit entry in a local phone service market. See 47 U.S.C. § 253(a). Moreover, the amendment imposes affirmative duties on any local phone service provider, or local exchange carrier ("LEC"), that encourage competition by, for example, requiring the LEC to "afford access to the poles, ducts, conduits, and rights-of-way of such carrier to competing providers...." 47 U.S.C. § 251(b)(4). An incumbent local exchange carrier ("ILEC"), which is the carrier such as Bell Atlantic that had a monopoly in the local phone service market prior to the enactment of the Telecommunications Act, see 47 U.S.C. § 251(h)(1), has additional affirmative duties under the statute. Among other duties, upon the request by another telecommunications carrier, the ILEC is required to provide interconnection with its network "that is at least equal in quality to that provided by the local exchange carrier to itself...." 47 U.S.C. § 251(c)(2)(C).

The plaintiff subscribed for local phone service with AT & T. Pursuant to the Telecommunications Act, AT & T had requested interconnection with the ILEC in the area, NYNEX, which later merged into Bell Atlantic. Upon such a request, section 252 of the Telecommunications Act allows the ILEC and requestor to enter into a binding agreement governing the interconnection arrangement that must ultimately be approved by a state commission. AT & T and NYNEX entered into such an agreement, which the state commission approved. See Order Approving Interconnection Agreement, Case 96-C-0723, 1997 WL 410707 (N.Y.P.S.C. June 10, 1997). Section 16 of the interconnection agreement provides for dispute resolution procedures that are the "exclusive remedy for all disputes between NYNEX and AT & T arising out of this Agreement or its breach." Id. at *23, § 16. The agreement also allows for disputes to be submitted to federal and state regulatory agencies. Id.

Shortly after entering into the interconnection agreement, AT & T filed complaints with regulatory authorities concerning lost and delayed orders. On March 9, 2000, Bell Atlantic entered into a consent decree with the FCC, agreeing to resolve the problem promptly and pay $3 million to the United States and $10 million to AT & T and other competitors for their losses. The consent decree was dissolved in July 2000.

II. The Plaintiff's Action and its Dismissal by the District Court

Not long after the consent decree was entered, the plaintiff filed a complaint in the United States District Court for the Southern District of New York (Sidney H. Stein, J.) asserting multiple actions against Bell Atlantic: (1) an action pursuant to sections 206 and 207 of the Communications Act, alleging that Bell Atlantic violated: (a) section 202(a) of the Communications Act, which prohibits common carriers from discriminating in rates or services in providing communications services and (b) its obligations as an ILEC under subsections (b) and (c) of section 251 of the Telecommunications Act; (2) an action pursuant to the Clayton Act, alleging that Bell Atlantic violated section 2 of the Sherman Act; and (3) a state law claim for tortious interference with contract.

The plaintiff, a limited liability partnership organized under New York law, alleges that Bell Atlantic has not afforded competing local exchange carriers ("CLECs") with equal access to its network. The plaintiff claims that as a result, it has received poor local phone service. The amended complaint alleges:

Consequently, the plaintiff claims Bell Atlantic violated the various duties imposed on it as an ILEC by subsections (b) and (c) of section 251 of the Telecommunications Act and its duties as a common carrier under section 202(a) of the Communications Act. The amended complaint also alleges that Bell Atlantic's conduct had no valid business reason and was intended to exclude competition from the market "by making it difficult for its competitors to provide service in the Local Phone Service market on the level that Bell Atlantic is able to provide to its customers in that market." Am. Compl. ¶ 52.

The plaintiff seeks class certification pursuant to Fed.R.Civ.P. 23(b) on behalf of the "customers of a company other than Bell Atlantic with respect to the provision of Local Phone Service in the Geographic Market at any time since March 10, 1996," Am. Compl. ¶ 28, who were damaged by Bell Atlantic's alleged conduct. The plaintiff seeks damages, including treble damages for its antitrust claims. Moreover, the amended complaint asks for injunctive relief "enjoining Bell Atlantic from providing access to the local loop market ... to providers of Local Phone Service other than itself on terms and conditions that are not as favorable as those enjoyed by Bell Atlantic...." Am. Compl. at 16.

Bell Atlantic moved pursuant to Fed. R.Civ.P. 12(b)(6) to dismiss the complaint. The district court granted the motion with respect to the Communications Act and antitrust claims, and declined to retain jurisdiction over the state law claim.

In adjudicating the plaintiff's antitrust claim, the district court in its thorough opinion initially evaluated Bell Atlantic's argument that the plaintiff did not have standing to bring an antitrust action because the only damage it suffered was as an indirect purchaser of services from AT & T. The district court rejected this argument, reasoning that the plaintiff's alleged harm, "damages resulting from poorer service than [it] would otherwise have received had Bell Atlantic acted lawfully, ... is wholly distinct from the harm suffered by [AT & T]." Trinko, 123 F.Supp.2d at 741. Although the plaintiff had standing to bring an antitrust action, the district court held that the plaintiff did not sufficiently allege the "willful acquisition or maintenance" of monopoly power by Bell Atlantic. The district court noted that even a monopolist does not have a general duty under the antitrust laws to cooperate with its competitors. Citing the Seventh Circuit's decision in Goldwasser v. Ameritech Corp., 222 F.3d 390 (7th Cir.2000), the district court observed that "[t]he affirmative duties imposed by the Telecommunications Act are not coterminous with the duty of a monopolist to refrain from exclusionary practices." Trinko, 123 F.Supp.2d at 742. Characterizing the plaintiff's claim as solely an allegation that Bell Atlantic violated the Telecommunications Act, the district court found that such an allegation was insufficient to support an antitrust claim.

The district court also dismissed the plaintiff's Communications Act claims. Initially, the district court rejected Bell Atlantic's argument that the damages provisions of the Communications Act do not apply to the Telecommunications Act. The district court concluded that the Telecommunications Act was an amendment to the Communications Act and that private lawsuits are not generally incompatible with the regulatory scheme established by the Telecommunications Act. However, the district court dismissed the claims based on the doctrine of prudential standing, the judge-made rule that prevents a third party from asserting the rights of others. The district court reasoned that section 251 of the Telecommunications Act "imposes duties on incumbent carriers only as to local competitors, and those rights are triggered only when a competing carrier requests interconnection." Trinko, 123 F.Supp.2d at 744 (citation omitted). Therefore, a suit brought by the plaintiff alleging violations of section 251 would impermissibly assert the rights of Bell Atlantic's local competitor, AT & T. Similarly, the district court explained that section 202(a) of the Communications Act only imposes duties on a carrier with respect to its own customers. See id. Thus, the district court concluded that only Bell Atlantic's customers have a right to bring suit under section 202(a), barring the plaintiff, which is a customer of AT & T, from bringing suit. The district court dismissed the plaintiff's section 202(a) claim without prejudice, allowing the plaintiff to replead its claim within 20 days. Finally, because the district court dismissed all of the plaintiff's federal claims, it declined to retain supplemental jurisdiction over the plaintiff's state law tortious interference claim.

The plaintiff then moved for reconsideration of the district court's decision. While the district court denied the motion, it allowed the plaintiff to replead its antitrust claim in addition to its section 202(a) claim. In its amended complaint, the plaintiff attempted to retool its section 202(a) claim to avoid the assertion of a third party's rights. The plaintiff alleged that it had a direct relationship with Bell Atlantic because AT & T acted as the plaintiff's agent with respect to Bell Atlantic.2 The plaintiff also characterized its antitrust claim as a monopoly leveraging claim. Bell Atlantic again filed a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) and the district court granted the motion. The district court rejected the plaintiff's amended section 202(a) claim because the plaintiff failed to allege facts establishing a principal-agent relationship. The district court also concluded that there was no antitrust claim because the amended complaint did not describe anticompetitive conduct and only alleged that Bell Atlantic breached its own contracts with competitors.

The plaintiff filed a timely notice of appeal and this appeal ensued.

DISCUSSION

I. The Communications Act Claims

A. General Principles of Standing

We first address the district court's dismissal of the plaintiff's Communications Act claims through application of the prudential standing doctrine. We review a district court's dismissal of a complaint for lack of standing de novo. See Wight v. Bankamerica Corp., 219 F.3d 79, 86 (2d Cir.2000).

"In essence the question of standing is whether the litigant is entitled to have the court decide the merits of the dispute or of particular issues. This inquiry involves both constitutional limitations on federal-court jurisdiction and prudential limitations on its exercise." Warth v. Seldin, 422 U.S. 490, 498, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975) (citation omitted); accord Lamont v. Woods, 948 F.2d 825, 829 (2d Cir.1991). Both limits are "founded in concern about the proper — and properly limited — role of the courts in a democratic society." Warth, 422 U.S. at 498, 95 S.Ct. 2197 (citations omitted). The constitutional dimension of the standing doctrine originates from Article III of the Constitution, which confines federal courts to adjudicating "cases" and "controversies." To meet the constitutional test for standing, "[a] plaintiff must allege personal injury fairly traceable to the defendant's allegedly unlawful conduct and likely to be redressed by the requested relief." Allen v. Wright, 468 U.S. 737, 751, 104 S.Ct. 3315, 82 L.Ed.2d 556 (1984) (citation omitted).

It is undisputed that the plaintiff meets the constitutional limits of standing. The issue is whether the plaintiff satisfies the judge-created prudential requirements of standing. "Foremost among the prudential requirements is the rule that a party must `assert his own legal rights and interests, and cannot rest his claim to relief on the legal rights or interests of third parties.'" Wight, 219 F.3d at 86 (quoting Warth, 422 U.S. at 499, 95 S.Ct. 2197). "[T]he source of the plaintiff's claim to relief assumes critical importance with respect to the prudential rules of standing.... Essentially, the standing question in such cases is whether the constitutional or statutory provision on which the claim rests properly can be understood as granting persons in the plaintiff's position a right to judicial relief." Warth, 422 U.S. at 500, 95 S.Ct. 2197; accord Leibovitz v. New York City Transit Auth., 252 F.3d 179, 185 (2d Cir.2001). Thus, the issue is whether the plaintiff has a right to judicial relief under sections 206 and 207 of the Communications Act for alleged violations of section 202(a) of the Communications Act and subsections (b) and (c) of section 251 of the Telecommunications Act.

B. Sections 206 and 207 of the Communications Act

The district court assumed that the plaintiff's rights under the Communications Act could only arise from duties defined by the substantive provisions of the Act. Because the plaintiff could not identify a duty to it arising directly from sections 202(a) or 251, the district court held that the plaintiff was impermissibly attempting to assert the rights of third parties.

In determining whether the plaintiff has a right under the Communications Act, the proper focus is not sections 202(a) or 251, but the Act's liability and damages provisions, sections 206 and 207. The plaintiff's right to bring an action under the Communications Act originates from sections 206 and 207 of that Act. Section 206 makes a common carrier "liable to the person or persons injured" as a result of the common carrier's violation of the Communications Act. 47 U.S.C. § 206.3 Section 207 gives the person damaged by the common carrier's violation of the Act the right to bring an action in federal court. See 47 U.S.C. § 207.4 Sections 206 and 207 are broadly written and explicitly encompass all of the substantive provisions of the Communications Act. While a particular substantive provision may not provide the plaintiff with a particular right, if the violation of that provision injures the plaintiff, sections 206 and 207 of the Communications Act confer upon the plaintiff the right to bring an action to recover for its injuries.

C. Section 202(a) of the Communications Act

The plaintiff alleges that the defendant violated section 202(a) of the Communications Act. Section 202(a) provides:

47 U.S.C. § 202(a). "An inquiry into whether a carrier is discriminating in violation of § 202(a) involves a three-step inquiry: (1) whether the services are `like'; (2) if they are, whether there is a price difference between them; and (3) if there is, whether that difference is reasonable." Competitive Telecomm. Ass'n v. FCC, 998 F.2d 1058, 1061 (D.C.Cir.1993); see also National Communications Ass'n, Inc. v. AT & T, 238 F.3d 124, 127 (2d Cir.2001) (assuming that this three-step inquiry applies in this Circuit). "[T]he Congressional concern in enacting ... § 202(a) specifically, was to eliminate the use of monopolistic power to stifle competition." National Communications, 238 F.3d at 131 (citations omitted).

The discrimination described in the complaint suffices to state a claim under section 202(a). In National Communications Ass'n, Inc. v. AT&T, we upheld a finding of discrimination under section 202(a) where a telecommunications carrier favored its own end-user customers over resellers. 238 F.3d 124, 127-28 (2d Cir.2001). The plaintiff has also alleged that CLECs such as AT & T obtaining services under the resale provisions of § 251 received telecommunications services inferior to those supplied to the defendant's own end-users.

Although the plaintiff alleged a cognizable form of discrimination by the defendant, the district court dismissed the plaintiff's section 202(a) action based on the doctrine of prudential standing. In doing so, the district court assumed that the plaintiff's right to bring suit under the Communications Act originates from section 202(a). While the text of section 202(a) broadly prohibits discrimination against "any particular person, class of persons, or locality," 47 U.S.C. § 202(a), the district court characterized section 202(a) as only creating a duty between a communications provider and its direct customer. The district court concluded that the plaintiff has no action under section 202(a) because it was not a direct customer of Bell Atlantic, and was instead a customer of AT & T, which was a customer of Bell Atlantic. Under the district court's theory, only AT & T would have a section 202(a) action against Bell Atlantic.

But as we explained earlier, the plaintiff's right to sue does not stem from section 202(a). It originates from sections 206 and 207, which makes parties who violate the Communications Act liable to parties they injure through such violations. Bell Atlantic does not dispute on appeal that there is arguably a violation of section 202(a) with respect to its dealings with AT & T. The plaintiff alleges that it was injured by this violation of the Communications Act because it received poor local phone service. As an entity that contends that it was injured by Bell Atlantic's alleged violation of section 202(a), the plaintiff plainly meets the requirements for having an action under sections 206 and 207. The plaintiff is asserting its own rights. Therefore, the district court erred in dismissing the case based on the doctrine of prudential standing.

To support its argument for dismissal, the defendant points to the absence of published cases involving actions by indirect purchasers allegedly injured by railroad rates that were regulated by the now repealed Interstate Commerce Act ("ICA"). Because "[s]ections 206 and 207 of the Communications Act were expressly modeled on the enforcement provisions of the ICA," this Court has "held that decisions construing the ICA are persuasive in establishing the meaning of the Communications Act...." Conboy, 241 F.3d at 250; see also AT&T Corp. v. Central Office Tel., Inc., 524 U.S. 214, 222, 118 S.Ct. 1956, 141 L.Ed.2d 222 (1998); H.R.Rep. No. 73-1850, at 6 (1934).5

Although we have found no indirect purchaser case brought under the ICA, the defendant does not point to any authority barring such a suit. In light of the unambiguous language of sections 206 and 207, the absence of such a case is insufficient to establish that such an action is not permitted. Moreover, the Supreme Court did state in L.T. Barringer & Co. v. United States, 319 U.S. 1, 13, 63 S.Ct. 967, 87 L.Ed. 1171 (1943), that shippers, who tend to be the parties most directly injured by discriminatory rates, were not the only entities that could bring actions for discriminatory rates under the ICA. The discussion in L.T. Barringer is consistent with the language of sections 206 and 207, which provides that any party injured by conduct that violates the Communications Act has the right to bring an action.

Bell Atlantic contends that the plaintiff cannot bring suit because its injury is wholly derivative of the injury suffered by AT & T. In the RICO context, it is well-established that a plaintiff must establish that the defendant's conduct was a proximate cause of its injury in order to have standing to bring a RICO action. See Holmes v. Securities Investor Prot. Corp., 503 U.S. 258, 267-70, 112 S.Ct. 1311, 117 L.Ed.2d 532 (1992); Laborers Local 17 Health and Benefit Fund v. Philip Morris, Inc., 191 F.3d 229, 234 (2d Cir.1999). We have noted that "to plead a direct injury is a key element for establishing proximate causation...." Laborers Local, 191 F.3d at 235. But we have not held that sections 206 and 207 of the Communications Act contain a requirement of proximate cause. We need not resolve the difficult issue of whether there is such a requirement, however, because on this record the plaintiff sufficiently alleges that it suffered a direct injury. In discussing the question of antitrust standing, the district court found that "[t]he harm that these customers are alleging — damages resulting from poorer service than they would otherwise have received had Bell Atlantic acted lawfully — is wholly distinct from the harm suffered by the competitors." Trinko, 123 F.Supp.2d at 741. The plaintiff alleges that it suffered a direct harm, poor phone service, as a result of the defendant's misconduct.6 While the district court may find otherwise after discovery and a motion for summary judgment, it is too early to conclude on this record that the plaintiff only suffered a wholly derivative injury.

Bell Atlantic asserts a number of other arguments for dismissal that the district court did not consider. Specifically, it claimed that the case should be dismissed under the filed rate doctrine and because the plaintiff has not pleaded specific damages. These are grounds that the district court did not address in its decision, which solely relied on the doctrine of prudential standing in dismissing the case, and we will not decide those issues in the first instance on this appeal.

We are of the view that the district court erred in dismissing the plaintiff's section 202(a) claim based on the doctrine of prudential standing. Because the discrimination described in the complaint would violate section 202(a) of the Communications Act and allegedly caused a direct injury to the plaintiff, the plaintiff is asserting its own rights under sections 206 and 207 of the Communications Act. We therefore reverse the district court's dismissal of the plaintiff's section 202(a) claim based on the doctrine of prudential standing.

D. Section 251 of the Telecommunications Act

The plaintiff's attempt to bring a claim for alleged violations of section 251 of the Telecommunications Act is problematic.7 We agree that the claim should be dismissed but for different reasons than the district court gave.

The plaintiff alleges that the defendant violated its duties as an ILEC as defined by subsections (b) and (c) of section 251 of the Telecommunications Act. Section 251 seeks to open local telecommunications markets to competition. While section 251 establishes a number of broadly stated duties that can be construed as substantive norms of behavior, the Telecommunications Act allows an ILEC to substantially fulfill its duties under subsections (b) and (c) of section 251 by entering into interconnection agreements with telecommunications carriers seeking to enter the local market. These agreements are reached primarily through a process of negotiation and must ultimately be approved by a state commission. The parties may ask the state commission to arbitrate any disputes that arise in the negotiating process. After the state commission approves such an agreement, the Telecommunications Act intends that the ILEC be governed directly by the specific agreement rather than the general duties described in subsections (b) and (c) of section 251.

In this case, AT & T and Bell Atlantic have negotiated an interconnection agreement. During this process they submitted a number of issues to the state commission for arbitration. Those disputes were resolved and the entire agreement has been approved by the state commission. This agreement provides for a dispute resolution mechanism that the parties have utilized. At best, the plaintiff's section 251 claim only describes conduct by the defendant that would violate the interconnection agreement. Therefore, the plaintiff has no cause of action pursuant to sections 206 and 207 of the Communications Act for injury stemming from a violation of section 251.

Initially, we note that the district court was correct in concluding that section 251 defines duties between telecommunications carriers. It is clear that the duties enumerated in section 251 regulate the relationships between telecommunications carriers, especially those that are seeking to enter the market for local phone service, rather than the relationships between telecommunications carriers and consumers. In fact, the Committee Report notes that section 251 "imposes a general duty to interconnect directly or indirectly between all telecommunications carriers...." H.R. Conf. Rep. 104-458, 1996 WL 46795, at *121 (1996), U.S.Code Cong. & Admin.News 1996, pp. 10, 132 (emphasis added). While the Telecommunications Act and legislative history often refer to the fact that consumers will ultimately benefit from competitive communications markets, that is only a collateral effect of the implementation of these duties by telecommunications carriers.

It could be argued that if the plaintiff has a right to bring suit for a violation of the Telecommunications Act, such a right would arise from sections 206 and 207 of the Communications Act. On this view, if the plaintiff has such a right, the district court's dismissal of the plaintiff's section 251 claim based on the doctrine of prudential standing would have been in error. However, we need not reach the issue of whether the plaintiff has the right under sections 206 and 207 to bring suit for a violation of the Telecommunications Act because the plaintiff does not describe conduct by the defendant that would violate section 251 of the Telecommunications Act.

While the duties regulating ILECs enumerated in subsections (b) and (c) of section 251 appear at first glance to be free-standing, in practice, section 251 envisions that these duties will be implemented through state approved contracts between the carrier requesting interconnection and the ILEC. Section 251 requires the ILEC and requesting carrier to "negotiate in good faith in accordance with section 252 ... agreements to fulfill the duties described in paragraphs (1) through (5) of subsection (b) of this section and this subsection." 47 U.S.C. § 251(c)(1). In other words, an ILEC can meet its obligations under subsections (b) and (c) by entering into an interconnection agreement with a requesting carrier through the procedures outlined in section 252. Such interconnection agreements do not necessarily reiterate the duties enumerated in section 251. Instead, the ILEC and requesting carrier have the option of contracting around the obligations set forth in subsections (b) and (c) of section 251. Section 252(a)(1) of the Telecommunications Act provides: "[u]pon receiving a request for interconnection, services, or network elements pursuant to section 251 of this title, an incumbent local exchange carrier may negotiate and enter into a binding agreement with the requesting telecommunications carrier or carriers without regard to the standards set forth in subsections (b) and (c) of section 251...." 47 U.S.C. § 252(a)(1) (emphasis added).

Section 252 also provides for regulation of interconnection agreements by state commissions. For example, if there are disputes in the negotiation of an interconnection agreement, the parties can request arbitration by the state commission to decide any open issues. See 47 U.S.C. § 252(b)(1). The state commission is required to resolve such disputes through reference to section 251. See 47 U.S.C. § 252(c)(1). The state commission must also ultimately approve the interconnection agreement. In evaluating parts of an interconnection agreement for approval, the statute requires the state commission to use different criteria depending on whether the portion of the agreement was negotiated or arbitrated. The state commission may only reject negotiated portions of an interconnection agreement if they discriminate against a non-party telecommunications carrier or if the implementation of the agreement goes against the public interest. See 47 U.S.C. § 252(e)(2)(A). On the other hand, when parts of the interconnection agreement go through the arbitration procedure, the state commission may only reject an arbitrated portion of the agreement if it does not comply with section 251. See 47 U.S.C. § 252(e)(2)(B).

NYNEX, which later merged with Bell Atlantic to form the defendant, and AT & T used the procedures described in section 252 to enter into an interconnection agreement that was ultimately approved by the state. Because they disagreed on a number of issues, the parties submitted certain disputes to the New York Public Service Commission for arbitration. See Order Approving Interconnection Agreement, 1997 WL 410707, at *1. The New York Public Service Commission resolved the disputes and ultimately approved the agreement as compliant with section 251 and consistent with the public interest. See id. at *4.

The issue before us is whether conduct that breaches the defendant's interconnection agreement with AT & T can also be considered a violation of subsections (b) and (c) of section 251. We conclude that in this case it does not. Once the ILEC "fulfill[s] the duties" enumerated in subsection (b) and (c) by entering into an interconnection agreement in accordance with section 252, 47 U.S.C. § 251(c)(1), it is then regulated directly by the interconnection agreement. Moreover, the fact that the Telecommunications Act allows parties to negotiate interconnection agreements without regard to subsections (b) and (c) of section 251, see 47 U.S.C. § 252(a)(1), indicates that Congress envisioned the possibility that the negotiated parts of the interconnection agreement could result in a different set of duties than those defined by the statute. To read the Telecommunications Act in a way such that ILECs are governed exclusively by the broadly worded language of section 251 would make the option of negotiating interconnection agreements without regard to subsections (b) and (c) of section 251 superfluous.

The elaborate process of negotiation and arbitration set forth in section 252 indicates that Congress sought to allow ILECs and their competitors to govern their interconnection relationships directly through specific interconnection agreements rather than the broadly outlined duties described in subsections (b) and (c) of section 251. Interconnection agreements are necessary because the particular ways in which the broadly framed duties enumerated in section 251 are implemented may differ depending on the circumstances. Rather than primarily regulating the relationships between entering carriers and the incumbent ILEC through abstract duties enforceable in court, Congress chose to give the parties the option to negotiate particular agreements with the aid and ultimate approval of state regulatory bodies, which have specialized expertise in the area of telecommunications. This option offers telecommunications carriers the choice to use a regulatory process that might be more efficient than other alternatives. If ILECs were governed by the abstract duties described in section 251 despite the existence of a particular interconnection agreement that was approved by the state commission after an extensive process of negotiation and arbitration, they would have diminished incentive to enter into such agreements. A requesting carrier could end-run the carefully negotiated language in the interconnection agreement by bringing a lawsuit based on the generic language of section 251.8

The particular interconnection agreement entered into by the defendant and AT & T requires the parties to resolve any disputes through procedures set forth in the agreement. We take judicial notice of the fact that the dispute between Bell Atlantic and AT & T arising out of the factual allegations in the complaint has been resolved through these procedures. The defendant fulfilled its duties as an ILEC under subsections (b) and (c) of section 251 by entering into a state approved interconnection agreement with AT & T through the procedures described in section 252. While the defendant may have breached its obligations under the interconnection agreement, because its duties as an ILEC are directly defined by that agreement, there was no underlying violation of subsections (b) and (c) of section 251.9 Without an underlying violation of section 251, the plaintiff has no cause of action under sections 206 and 207, even if it were permitted to bring a suit for violations of section 251 pursuant to sections 206 and 207.10

II. The Antitrust Claim

Finally, we address the district court's dismissal of the plaintiff's antitrust claim. We agree that the plaintiff has standing to bring an antitrust claim. However, we reverse the district court's dismissal of the plaintiff's antitrust claim pursuant to Fed. R.Civ.P. 12(b)(6).

A. Standing

Initially, we review the district court's conclusion that the plaintiff has standing to bring an antitrust suit. The Clayton Act provides an action for "any person ... injured in his business or property by reason of anything forbidden in the antitrust laws...." 15 U.S.C. § 15. To have standing to bring an action under the Clayton Act, the plaintiff must show "antitrust injury, which is to say injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants' acts unlawful." Volvo N. Am. Corp. v. Men's Inter. Prof'l Tennis Council, 857 F.2d 55, 66 (2d Cir.1988) (internal quotations and citations omitted).

The plaintiff alleges that it received poor local phone service because of Bell Atlantic's attempt to maintain its monopoly power by refusing to provide equal access to its local network. The defendant asserts that the plaintiff has no antitrust standing because it only suffered an indirect injury. According to the defendant, its alleged actions only directly injured its direct customer, AT & T. The plaintiff could only have been injured incidentally, through its purchase of inferior services from AT & T. The defendant thus contends that the plaintiff is essentially an indirect purchaser who cannot recover antitrust damages under Illinois Brick Co. v. Illinois, 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977), which held that a customer of a customer who is overcharged by a monopolist does not have antitrust standing. The rationale for the Illinois Brick rule is that it is difficult to calculate the damages suffered by an indirect purchaser. See id. at 737-47, 97 S.Ct. 2061. The indirect purchaser is only damaged to the extent that the direct purchaser passes on to it the overcharge resulting from the anticompetitive conduct. Any such calculation would be imprecise and could result in double recovery if both the direct and indirect purchasers sue and the calculations in their suits differed.

The problem with simply applying the Illinois Brick rule to this case is that AT & T cannot be characterized solely as a customer of Bell Atlantic. While AT & T purchases access to the local network from Bell Atlantic, it is also a competitor of Bell Atlantic in the retail market for selling local phone service to consumers. Consequently, this is a case where the anticompetitive conduct has allegedly damaged the customer of a competitor who would have antitrust standing under Blue Shield of Virginia v. McCready, 457 U.S. 465, 102 S.Ct. 2540, 73 L.Ed.2d 149 (1982). In McCready, the Supreme Court found that an individual who was denied coverage for treatment by a psychologist as a result of an alleged conspiracy between his health plan and a group of psychiatrists had antitrust standing. The defendants in that case alleged that the conspiracy only injured the competitors of the psychiatrists, the psychologists. The Supreme Court, however, found that a customer of a competitor can suffer a direct injury from an anticompetitive scheme aimed principally at the competitor. To illustrate this principle, the Supreme Court used a simple example. As a result of the scheme to exclude psychologists from the market, the person seeking coverage for treatment by a psychologist has two choices: (1) visit a psychologist and not receive reimbursement; or (2) visit a psychiatrist. While the second choice hurts the psychologist in its role as a competitor of psychiatrists, the first choice directly hurts the customer of the psychologist. See McCready, 457 U.S. at 483-84, 102 S.Ct. 2540. As a result of an alleged monopoly scheme, the plaintiff in this case had a similar set of choices: (1) stay with AT & T and receive inferior local service; or (2) switch to Bell Atlantic. While the second choice would hurt AT & T as a competitor, the first choice directly injures the plaintiff as a consumer. In this case, the plaintiff made the first choice and suffered the requisite antitrust injury.

The defendants in Illinois Brick were alleged price-fixers. Illinois Brick assumes a case where customers and customers of customers are only affected by the anticompetitive scheme through the imposition of prices higher than prices in a competitive market. In such a case, the only harm suffered by the customer of the customer is that part of the higher prices are passed on to it. In this case, Bell Atlantic was not simply charging higher prices, it was also allegedly trying to interfere with AT & T's opportunity to compete with it. Thus, there is more at stake here than the imposition of higher prices, which are indirectly passed on to others. There is allegedly conduct that is meant to drive a competitor out of the market. Action meant to injure a competitor can directly harm the consumer who chooses to do business with the competitor. In this case, allegedly the plaintiff was harmed directly when it received poor phone service because it chose to do business with AT & T.

The district court correctly concluded that the plaintiff has antitrust standing.

B. The Sherman Act Claim

Generally, a plaintiff can establish that a defendant violates section 2 of the Sherman Act by proving two elements "(1) the possession of monopoly power in the relevant market; and (2) the willful acquisition or maintenance of that power, as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident." Volvo N. Am. Corp., 857 F.2d at 73 (citations omitted); accord Tops Mkts., Inc. v. Quality Mkts., Inc., 142 F.3d 90, 97 (2d Cir.1998).

The district court dismissed the plaintiff's antitrust claim, finding that the plaintiff did not state a claim with respect to the second element. The district court reasoned that a monopolist does not have a general duty to cooperate with its competitors. Relying on Goldwasser v. Ameritech Corp., 222 F.3d 390 (7th Cir.2000), the district court concluded that at most the plaintiff had only alleged that the defendant breached section 251 of the Telecommunications Act.

While it is true that a monopolist has no general duty to cooperate with its competitors, "[a] monopolist may not, of course, use its market power, whether obtained lawfully or not, to prevent or impede competition in the relevant market." United States Football League v. National Football League, 842 F.2d 1335, 1360-61 (2d Cir.1988) (citations omitted). As the Supreme Court has explained:

Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 601, 105 S.Ct. 2847, 86 L.Ed.2d 467 (1985). For example, a monopolist has a duty to provide competitors with reasonable access to "essential facilities," facilities under the monopolist's control and without which one cannot effectively compete in a given market. See Southern Pac. Communications Co. v. AT&T, 740 F.2d 980, 1009 (D.C.Cir.1984) ("access to essential facilities [must] be afforded to competitors `upon such just and reasonable terms and regulations as will, in respect of use, character and cost of service, place every such company upon as nearly an equal plane as may be with respect to expenses and charges as that occupied by the proprietary companies.'") (quoting United States v. Terminal R.R. Assoc., 224 U.S. 383, 411, 32 S.Ct. 507, 56 L.Ed. 810 (1912)); see also Twin Labs., Inc. v. Weider Health & Fitness, 900 F.2d 566, 568-69 (2d Cir.1990) (discussing essential facilities theory).

While it is clear that a plaintiff would not state an antitrust claim against a defendant simply by alleging that the defendant violated its duties under section 251, the plaintiff's antitrust claim does not merely allege that the defendant violated section 251. In fact, it does not mention section 251 at all. The allegations in the amended complaint describe conduct that may support an antitrust claim under a number of theories. While some of this conduct might also violate section 251, these are not merely allegations that section 251 has been violated.

First, the amended complaint may state a claim under the "essential facilities" doctrine. The plaintiff alleges that access to the local loop is essential to competing in the local phone service market, and that creating independent facilities would be prohibitively expensive. The defendant allegedly has failed to provide its competitor, AT & T, reasonable access to these facilities.11 The plaintiff claims it was injured when the local phone service it purchased from AT & T was disrupted as a result of this alleged violation of the antitrust laws.12 Although the defendant may ultimately be able to show that the local loop is not an essential facility, or that it provided the plaintiff with reasonable access to the local loop, these are issues that the district court should consider in the first instance.

Second, the plaintiff may have a monopoly leveraging claim. To have such a claim, the plaintiff must show that the defendant "(1) possessed monopoly power in one market; (2) used that power to gain a competitive advantage ... in another distinct market; and (3) caused injury by such anticompetitive conduct." Virgin Atl. Airways v. British Airways, 257 F.3d 256, 272 (2d Cir.2001). The amended complaint alleges that the defendant has monopoly power over a wholesale market in which it sells access to the local loop to telecommunications carriers. It also alleges that the defendant used that power to gain a competitive advantage in a retail market in which telecommunications carriers sell local phone service to consumers. See, e.g., M.A.P. Oil Co. v. Texaco, Inc., 691 F.2d 1303, 1307 (9th Cir.1982) (noting that distinct customers and distinct prices are factors useful in identifying a distinct market) (citing Brown Shoe Co. v. United States, 370 U.S. 294, 325, 82 S.Ct. 1502, 8 L.Ed.2d 510 (1962)). Finally, the plaintiff alleges that it was injured by this anticompetitive conduct. Again, the defendant ultimately may be able to refute these claims on summary judgment, but we cannot resolve them on the merits at this stage of the litigation.13

In Goldwasser, the Seventh Circuit dismissed similar allegations of monopolistic conduct for two reasons. First, it found that the claim was "inextricably linked" to allegations by the Goldwasser plaintiff that section 251 of the Telecommunications Act had been violated. Thus, the claim was merely an allegation that the Telecommunications Act was violated and not a freestanding antitrust action. But there is no requirement that an allegation that otherwise states an antitrust claim must not rely on allegations that might also state a claim under another statute. Congress, of course, can indicate that such a statute provides an implicit immunity from the antitrust laws. Conduct that merely describes a violation of a statute that is meant to immunize a regulated industry from antitrust scrutiny could not support an antitrust action. But we do not lightly find that a statute provides such an implicit immunity. Absent a "plain repugnancy," we will not assume that a regulatory statute implicitly repeals the antitrust laws. See Northeastern Tel. Co. v. AT&T, 651 F.2d 76, 82-83 (2d Cir.1981). If there is no such implicit immunity, as long as a set of allegations states an antitrust action on its own terms, the fact that it closely resembles an action brought under another statute in itself is unproblematic.

There is no "plain repugnancy" between the antitrust laws and the Telecommunications Act. In fact, the purpose of the Act is to "provide for a pro-competitive, de-regulatory national policy framework designed to accelerate rapidly private sector deployment of advanced telecommunications and information technologies and services to all Americans by opening all telecommunications markets to competition...." H.R. Cong. Rep. 104-458, 1996 WL 46795, at *1 (1996), U.S.Code Cong. & Admin.News 1996, at p. 124; 1A PHILLIP E. AREEDA & HERBERT HOVENKAMP, ANTITRUST LAW 162-63 (2000) ("The 1996 [Telecommunications] Act goes very far toward throwing all aspects of the industry open to competition and thus antitrust analysis."). Moreover, the Act contains a specific savings clause, which specifies that "nothing in this Act or the amendments made by this Act ... shall be construed to modify, impair, or supersede the applicability of any of the antitrust laws." 47 U.S.C. § 152, Historical and Statutory Notes. The meaning of the statutory provision is plain on its face and must guide our analysis. See Lebron v. Russo, 263 F.3d 38, 41 (2d Cir.2001) (per curiam). The savings clause unambiguously establishes that there is no "plain repugnancy" between the Telecommunications Act and the antitrust statutes. We thus find that the Telecommunications Act does not provide an "implicit immunity" from the antitrust laws.14

The Goldwasser court's conclusion also rested on the assumption that "[t]he antitrust laws would add nothing to the oversight already available under the 1996 law." Goldwasser, 222 F.3d at 401. But in this case, which involves an individual consumer seeking damages, the antitrust laws serve an important role. One of the purposes of the Clayton Act is "to compensate victims of antitrust violations for their injuries." Illinois Brick Co., 431 U.S. at 746, 97 S.Ct. 2061 (citation omitted). Because this plaintiff has no remedy under the Telecommunications Act for a violation of subsections (b) and (c) of section 251, the antitrust laws are the only place where it has a remedy for damage caused by the allegedly anticompetitive behavior described in the amended complaint. Thus, in this case, the antitrust laws serve the purpose of affording the consumer compensation that the Telecommunications Act does not provide.

The second reason the Goldwasser court gave for dismissing the suit was that allowing an antitrust suit based on allegations arising out of the alleged refusal of an ILEC to grant an LEC equal access to its network "would ... force us to confront the question whether the procedures established under the 1996 Act for achieving competitive markets are compatible with the procedures that would be used to accomplish the same result under the antitrust laws." Goldwasser, 222 F.3d at 401. Goldwasser raises the issue of whether the Telecommunications Act is "specific legislation that must take precedence over the general antitrust laws, where the two are covering precisely the same field." Id.

But the Telecommunications Act, while meant to create significant change in a market, is not unprecedented as a legislative attempt to open markets to competition. In Otter Tail Power Co. v. United States, 410 U.S. 366, 93 S.Ct. 1022, 35 L.Ed.2d 359 (1973), the Supreme Court held that the antitrust laws apply to at least one other industry regulated by a statute that was intended to encourage competition in the industry. In reviewing a finding of antitrust liability against an electric utility company for its refusal to sell energy at a wholesale price to competing providers, the Supreme Court evaluated the utility's argument that it was not subject to antitrust regulation because of the Federal Power Act. The Court noted that the Act embodied "an overriding policy of maintaining competition to the maximum extent possible consistent with the public interest." Id. at 374, 93 S.Ct. 1022. To achieve this end, section 202 of the Federal Power Act not only encouraged voluntary interconnections of power but also gave the Federal Power Commission the authority to order interconnections. See id. at 373, 93 S.Ct. 1022. The Telecommunications Act is like the Federal Power Act in that both statutes govern interconnection relationships "in the first instance by business judgment and not regulatory coercion." Id. at 374, 93 S.Ct. 1022. Sections 251 and 252 of the Telecommunications Act allow ILECs to negotiate voluntarily interconnection agreements with CLECs. Under section 271 of the Telecommunications Act, ILECs can meet one of the requirements of providing long distance service if they negotiate a voluntary interconnection agreement that is approved by a state regulatory agency. See 47 U.S.C. § 271(c)(1)(A). The role of the state agency is not to mandate particular interconnection arrangements but to oversee the process of voluntary negotiations. While the state regulatory agency is required to approve interconnection agreements, it may only reject an interconnection agreements in certain circumstances. See 47 U.S.C. § 252(e)(2). Although the regulatory process envisioned by the Federal Power Act may not have been as complex and comprehensive as the procedures enumerated in the Telecommunications Act, the statutes have similar purposes and primarily rely on voluntary negotiations. And despite a specific regulatory structure that was meant to encourage competition through interconnection, the Court found that the Federal Power Act did not preclude an antitrust suit against the regulated utility. Thus, controlling case law does not support the theory that specific legislation meant to encourage competition necessarily takes precedence over the general antitrust laws.

Moreover, there is a factual similarity between this case and Otter Tail Power. In Otter Tail Power, the Supreme Court affirmed a lower federal court that ordered the defendant to "wheel electric power over its transmission lines from other electric power lines to [] cities and towns [in its service area]." Otter Tail Power, 410 U.S. at 375, 93 S.Ct. 1022. Because the Federal Power Commission was not permitted under the Federal Power Act to order such wheeling, the Supreme Court noted that the district court's order did not conflict with the Commission's authority. See id. While the Federal Power Commission had the power to "direct a public utility ... to establish physical connection of its transmission facilities with the facilities [of other sellers of electricity]," id. at 375 n. 7, 93 S.Ct. 1022, it did not have the authority to mandate the particular remedy that the district court had ordered. Similarly, in this case, while state regulatory agencies have the power under the Telecommunications Act to reject interconnection agreements under certain circumstances, they do not have the authority to award the particular remedy that the plaintiff is seeking. The Telecommunications Act does not give state regulatory agencies the power to award consumers compensation for injury caused by service disrupted by an ILEC that is unlawfully attempting to maintain its local monopoly. Thus, if the district court were to find the defendant liable for violating antitrust law and award the plaintiff damages, such an order would not conflict with the authority of the relevant state regulatory agency.

It is unlikely that allowing antitrust suits would substantially disrupt the regulatory proceedings mandated by the Telecommunications Act. In discussing the impact such suits would have on the regulatory process, it is useful to discuss separately suits seeking damages and suits for injunctive relief. Awarding damages for the willful maintenance of monopoly power would not substantially interfere with the regulatory scheme envisioned by the Telecommunications Act. In contrast, injunctive relief in this area may have ramifications that require particular judicial restraint.

While allowing damages actions would mean that ILECs would to some extent be subject to both the antitrust laws and their interconnection agreements, the defendant points to no specific areas where the two sets of obligations would conflict.15 The defendant contends that its conduct should only be viewed as a breach of its interconnection agreement with AT & T that should exclusively be remedied by the regulatory process. However, there is no authority for the proposition that entering into an interconnection agreement exempts a telecommunications carrier from the antitrust laws.16 To the contrary, if the defendant's conduct did violate the antitrust laws, the fact that the regulatory commission also condemned the conduct of the defendant may indicate that the purposes of the two schemes are in synch, reinforcing our conclusion that there is no "plain repugnancy" between the statutes. As the plaintiff points out, the breach of such an agreement may in some cases be a means by which the ILEC improperly excludes competition from the market. In this case, the main difference in the two frameworks is that AT & T may seek remedy through the regulatory process while the consumer may seek remedy under the antitrust laws. The two schemes complement rather than contradict each other.

While ideally, the regulatory process alone would be enough to bring competition to the local phone service markets,17 it is possible that the antitrust laws will be needed to supplement the regulatory scheme, especially with respect to injury caused to consumers.18 See Reiter v. Sonotone Corp., 442 U.S. 330, 344, 99 S.Ct. 2326, 60 L.Ed.2d 931 (1979) ("private [antitrust] suits provide a significant supplement to ... enforc[ement] [of] the antitrust laws and deterring violations.").19 Moreover, at this stage, the record does not allow us to conclude that the regulatory process has successfully eliminated the risk of anticompetitive behavior in this particular market. There has been no discovery and the evidence has not been developed with respect to this issue.

Additionally, courts are suited to the task of assessing the extent of damages allegedly caused by unlawful behavior. Damages can be tailored to award one-time relief to retroactively compensate individuals for injuries caused by past misconduct. The award of such damages would not substantially interfere with the broader regulatory process. See, e.g., Carnation Co. v. Pacific Westbound Conference, 383 U.S. 213, 222, 86 S.Ct. 781, 15 L.Ed.2d 709 (1966) (noting that award of treble antitrust damages would not interfere with future action by regulatory agency).

On the other hand, the possibility of injunctive relief in this case may be more problematic than an award of damages. Courts may not be suited to order particular actions by telecommunications carriers to make the local markets more competitive, particularly when there is a specific regulatory scheme meant to serve the same purpose. An overly broad injunction might interfere with the regulatory framework. But this is not a reason to dismiss the suit at this stage, especially because the plaintiff may no longer be asserting claims for injunctive relief. The possibility of an injunction that conflicts with the regulatory framework will not be an issue until the end of the litigation if there is a finding of liability. It is possible that court intervention could be appropriate in some limited circumstances. However, courts must be both mindful and wary of the strong possibility that injunctive relief could have the unintended consequence of disrupting the regulatory scheme. We have confidence that courts will exercise their discretion with restraint in any case where such relief is appropriate, consistent with respect for the overarching regulatory regime that Congress has created.

Therefore, we reverse the district court's dismissal of the plaintiff's antitrust claim.

CONCLUSION

For the reasons stated above, we affirm the district court's dismissal of the plaintiff's section 251 claim. The judgment of the district court is vacated with respect to its dismissal of the plaintiff's other claims, and the case is remanded for further proceedings consistent with this opinion.