AT&T Inc is turning to the federal courts to thwart an effort led by law firm Bursor & Fisher to derail AT&T's $39 billion takeover bid for Deutsche Telekom AG's T-Mobile.
In eight lawsuits filed last week, AT&T accused Bursor & Fisher and a second plaintiffs' firm, Faruqi & Faruqi, of trying to pressure AT&T into "an extortionate settlement" by encouraging AT&T customers to file multiple claims against the merger.
Bursor & Fisher launched a "Fight the Merger" campaign in July, saying the megadeal would violate federal antitrust law and restrict competition. So far, Bursor & Fisher has filed 26 arbitration demands and more than 900 notices of dispute on behalf of AT&T customers who oppose the merger.
In the lawsuits filed last week, AT&T argued that the claims, brought under antitrust law, could not be decided in arbitration. AT&T accused the firms of "taking a thousand bites at the apple" in hopes of finding one arbitrator willing to block the merger.
The suits are a dramatic turnaround for AT&T, which just last November argued strongly in favor of arbitration in the U.S. Supreme Court case, AT&T v. Concepcion.
There, customers had sued AT&T for allegedly advertising discounted cell phones, but charging sales tax on the full price. The Supreme Court sided with AT&T in April, finding that customers who signed phone contracts containing mandatory arbitration clauses waived their right to bring class action lawsuits against the company. Customers, the court held, had to resolve their disputes with the company in arbitration.
By filing close to a thousand individual arbitration claims, Bursor & Fisher is trying to circumvent the Supreme Court's ruling, AT&T's lawyers said in the eight complaints, which were filed in federal courts across the country.
The complaints point to specific language from customer contracts, which state that customers can only bring claims in their "individual capacity" and "not as a plaintiff or class member in any purported class or representative proceeding."
AT&T argued that although the arbitrations were filed by individual customers, they are not seeking damages for any personal harm they suffered. Rather, they're seeking an injunction to block a $39 billion merger that would affect more than 120 million wireless customers, one complaint said.
"Our arbitration agreement prohibits any form of class-wide relief. The Supreme Court upheld that," AT&T's lawyer, Andrew Pincus, told Reuters. Pincus, of Mayer Brown, also argued the Concepcion case before the Supreme Court.
Scott Bursor, the lawyer behind the "Fight the Merger" campaign, said the American Arbitration Association has already overruled AT&T's objections and moved forward with the arbitration process.
"AT&T's filing of these lawsuits appears to be an act of desperation, since AT&T now realizes it faces substantial likelihood that one or more of these arbitrations will stop the takeover from happening," he said in an email, describing the company's legal arguments as "frivolous."
Richard Brunell, the director of legal advocacy at the American Antitrust Institute, described AT&T's legal action as "ironic," given AT&T's prior arguments in the Concepcion case. The problem with the lawsuits, he said, is that AT&T would also prevent customers from filing lawsuits in federal court. "So their preferred position is that consumers not be able to bring class actions anywhere, which divests consumers of their right to challenge anti-competitive
But Pincus argued that a single arbitrator should not be able to make a decision that affects "the whole world," preempting official reviews by the U.S. Federal Communications Commission, the U.S. Department of Justice and numerous state regulators. Arbitration is not the appropriate venue for an "extremely complicated" analysis of relevant markets, potential effects of the merger on competition and prices and possible enhancements of technological innovation, the complaint said.
Michael Hausfeld, a lawyer who has represented plaintiffs in unrelated antitrust arbitrations, said he knew of no merger that has ever been blocked by an arbitration filed by an individual customer. A pending Department of Justice investigation would likely prevent arbitration proceedings from moving forward, he said.
A representative lawsuit is AT&T Mobility v. Gonnello et al, U.S. District Court, Southern District of New York, No. 11-5636.
(Reporting by Terry Baynes; Editing by Eddie Evans and Gerald E. McCormick)