The trial in the Justice Department's six-year-old antitrust suit against American Telephone & Telegraph Co. was recessed for two weeks yesterday after both sides indicated they were near settlement on the case.
Lawyers for both sides have agreed to what they describe as a concrete settlement package that would end the suit on the eve of the calling of the first witness in the case.
U.S. District Harold Greene announced that he would delay the trial until Feb. 2, unless attorneys for the government and the Bell System file formal statements with the court indicating that the pact can be completed by the beginning of March, in which case he would give them more time.
Just last week Greene had refused to delay the trial when both sides requested time to try to work out a settlement.
Neither the Greene decision nor a transcript released by Greene of a private meeting held Wednesday in his chambers discussed the specific terms of the settlement.
The transcript did disclose, however, that under the agreement both sides would ask a federal court in New Jersey to modify or vacate a 1956 consent decree between the government and AT&T that ended a previous suit and bars AT&T from competing in unregulated businesses.
But knowledgable sources said the agreement called for a restructuring of AT&T's Western Electric Co. subsidiary and the possible establishment of an arm's-length relationship between the AT&T and its long-distance subsidiary, generally referred to as AT&T Long Lines.
Further, the company also would divest itself of at least one of its 23 local telephone companies, probably Pacific Telephone & Telegraph Co., sources said.
Under federal law, interested parties would have an opportunity to comment on any settlement agreement before Greene signs. It is likely that Bell competitors will fight any settlement that falls short of the divestiture which the government has sought publicity.
An AT&T spokesman, Pickard Wagner, said the recess will give the company a chance to "discuss the basic issues with the officials" of the incoming Reagan administration to avoid a "long and costly trial." Wagner also noted that a proposed agreement also would have to be formally approved by the top management of AT&T.
Greene and the two sides met Wednesday morning and Thursday night. Greene placed a transcript of the Thursday meeting under seal. But Greene, in what may be a reference to matters discussed Thursday, said the two sides "have proposed a method for determining the attitude and commitment of the new administration regarding this agreement." There is no reference to this "method" in the transcript.
Howard Trienens, the top AT&T lawyer, told Greene that the two sides "have no complex or controversial features remaining to be resolved in substance" but noted that there are drafting problems with the proposal settlement. The lead government attorney in the case, Gerald Connell, agreed that there is a "concrete proposal."
The rush to settle the case appears to be based largely on AT&T's fear that, if settlement is presented after the first witness takes the stand, the testimony could be used by plaintiffs in private antitrust suits against the phone company.
Announcements of the delay was contained in an order issued immediately after George Saunders, the lead attorney for AT&T, completed a 5 1/2-hour opening statement.