American Telephone & Telegraph Co. and the regional Bell operating companies agreed to pay MCI Communications Corp. an undisclosed sum yesterday to finally settle two multibillion-dollar lawsuits filed by MCI in 1974 and 1979.
MCI had alleged in the suits that the Bell System had stifled competition in the long-distance marketplace by denying MCI crucial services needed to complete and initiate long distance calls over the phone network.
"It's always better to settle a legal action than to prosecute it," said MCI Senior Vice President Howard Crane. "We're happy to devote our full resources to providing services instead of litigating lawsuits."
AT&T spokesman Herb Linnen said, "We welcome the opportunity to put this litigation behind us; it has been costly and time consuming and covered a period that is now history. We want to look ahead, not back."
In the 1974 case, MCI initially sought $5.8 billion in damages. It originally was awarded $600 million, trebled to $1.8 billion under antitrust law. But a retrial was ordered by an appeals court in 1983, and in 1985, MCI was awarded only $37.8 million, trebled to $113.4 million. The jury directed AT&T, and the seven regional companies spun off from it, to pay MCI for denying the company access to local telephone lines in the early 1970s.
Both sides had expressed an intent to appeal the verdict.
The 1979 lawsuit never went to trial and was still in the discovery process. The $37.8 million award and the second suit are moot under terms of the settlement.
Other details of the settlement were not disclosed, but will include cash, products and services, such as billing, that are still to be determined, MCI officials said.
One source close to AT&T said the reason the suit was settled was because of the "nuisance, the legal fees and it takes care of the evidence." The source said any evidence that would have become public record in a second trial could have helped other companies litigate against AT&T on anticompetitive grounds.
For example, AT&T agreed to an out-of-court settlement of the suit the Justice Department brought against it "to avoid future litigation," the source said. The source said AT&T had been spending hundreds of millions of dollars for litigation of the MCI case, and several hundred million more on "a whole slew of suits over a decade."
"It became very apparent, AT&T had spent over $200 million and it had cost MCI $50 to $100 million a year," the source said. "They were likely not to get much out of a suit, and both sides say they should settle."
U S West, one of the Bell regional companies involved in the case because they were part of AT&T when the suits were filed, settled with MCI prior to the resolution of the first trial by paying the company $63 million.
Bell Atlantic Corp., parent of the Chesapeake & Potomac Telephone Co., also had come to a partial settlement with MCI by paying the company $30 million. Both the regional companies had promised to provide certain products and services to MCI. Cash settlements from Bell Atlantic and the other regional phone companies will be received "over several years," MCI said.
MCI also had settled suits against Alltel Corp., Continental Telecom Inc., Centel Corp., GTE Corp. and Lincoln Telephone & Telegraph Co., but still has suits pending against United Telephone Co., the United States Telephone Association and other small independent phone companies.