A federal judge today agreed to allow evidence alleging a potential conspiracy between American Telephone and Telegraph and International Business Machines Corp. to be introduced in Litton Industries' antitrust suit against the telephone company.
In a brief, but dramatic open meeting in his chambers, U.S. District Court Judge William Conner rejected last-minute pleas by IBM and AT&T to bar from open court a series of controversial documents outlining the relationship between the two giant companies.
Litton, which is seeking $600 million in damages in its suit against AT&T, has charged that coercion and pressure by AT&T was an important factor in an IBM decision not to market telephone equipment in the United States.
Connor said Litton has charged that "IBM was in danger of losing all or a large part of upwards of $100 million" in annual business that AT&T had been giving to IBM.
"If the pressure could be proven it could possibly constitute a violation of civil if not criminal laws," Conner said. He immediately asked that those particular remarks be stricken from the record.
With an attorney from the team of Justice Department lawyers handling the government's suit against AT&T on hand, Conner said he is "inclined to believe that the evidence should be presented."
After reviewing documents and briefs submitted by the three companies, and taking the rare step of informally discussing the matter with other federal judges, Conner said there is "no question" that the IBM-AT&T relationship is "enough of an issue to go to the jury."
Conner said the test of the value of the evidence should be whether the IBM-AT&T relationship is of substantial "probative value" to the primary monopolization issues of the case. "I think it has," Conner said.
Conner said he reviewed the materials and concluded that they do show a "substantial suspicion that pressure was applied by AT&T to IBM." Attorneys for both IBM and AT&T vigorously responded to the decision in presentations to Conner. Calling the issue a "red herring," AT&T lead counsel Leonard Joseph likened the issue to "a dead fish . . . When you put it into the courtroom, it is going to smell."
Only pieces of the story of the IBM-AT&T relationship have been made public in this case. IBM placed into the public record last week a series of documents outlining the story that Litton attorneys hoped to present to a jury here soon.
All Litton documents and briefs on the matter have remained under seal, although it is expected that when the issue goes to the jury, much of that information will be made public.
Ironically, both AT&T and IBM are the targets of a major pending government antitrust suits. A settlement of the Justice Department case against AT&T may be announced within the next several weeks, and a federal judge here is expected to issue a decision in the IBM case later this year.
An AT&T spokesman, Jay Grossman, immediately responded to the Conner decision. Obviously, we are disappointed with a decision to admit the material," Grossman said. "Both IBM and AT&T counsel pointed out there is no basis for any findings of coercion on the part of the companies."
"The case is comlex and places a heavy burden on the jury," Grossman said. "Injection of these matters will increase the burden on the jury." Officials of both the Litton trial team and IBM headquarters refused to comment on the decision.
Both IBM and AT&T have argued that a 1973 IBM decision not to market Carnation telephone equipment, known in the industry as PBX equipment, was a business conclusion stemming from IBM experience during tests of the product in Europe. During the 1969-to-1973 period, IBM was just getting the program off the ground and failed to meet market expectations, the companies' lawyers said.
Litton is arguing that as a result of a series of meetings between top officials of IBM and AT&T and the ultimate awarding by AT&T of a major computer contract to IBM, AT&T "coerced" IBM to drop it plans.