Divided court rules against long-distance companies (June 23, 2008)

The Supreme Court held that the assignment of a legal claim to an intermediary, who will not benefit directly from the lawsuit, nonetheless gives the intermediary standing to sue.

Under Article III of the U.S. Constitution, all federal lawsuits must be brought by a plaintiff who has “standing” to sue. In order to have standing, a plaintiff must have suffered an actual injury that is traceable to the defendant’s conduct and that would be redressed by a favorable decision.

The case at hand revolves around a dispute over whether third-party companies hired by pay-phone operators to collect compensation for coinless long-distance calls have standing to sue telecommunication companies over the amount of the fees.

In 1996, the Federal Communications Commission moved to require long-distance carriers to compensate pay-phone companies for so-called coinless phone calls. Last year, the Supreme Court ruled in Global Crossing Telecommunications, Inc. v. Metrophones Telecommunications, Inc., that pay-phone operators could sue for greater compensation.

Nonetheless, petitioners Sprint and AT&T argued that in this case, respondents APCC Services, and other intermediaries, had “no stake in the outcome of the case” because, under the terms of the assignment, any compensation from a favorable judgment or settlement would go directly to the pay-phone companies.

The district court initially agreed and dismissed the aggregators’ suit. But on respondents’ motion for reconsideration, the court reversed itself, concluding that it was sufficient that “the assignment transfers legal title to the claim [rather than] merely transfer[ing] a power of attorney.”

Last summer, a divided panel of the U.S. Court of Appeals for the District of Columbia agreed, with the majority noting that the assignment transferred the “entire interest” of the payphone owners’ legal claims. The appeals court concluded that, as a matter of law, the assignment of a legal right to bring a claim gives the assignee a personal stake in the litigation sufficient to confer standing.

On June 23, a divided Supreme Court upheld the appeals court ruling.

"Because the federal system permits aggregation by other means, we do not think that the pay-phone operators should be denied standing simply because they chose one aggregation method over another," Justice Stephen G. Breyer wrote for the 5-4 majority.

In dissent, Chief Justice John G. Roberts Jr., criticizes the majority for reaching a conclusion "by reference to a historical tradition that is, at best, equivocal."

"That history does not contradict what common sense should tell us: There is a legal difference between something and nothing. Respondents have nothing to gain from their lawsuit. Under settled principles of standing, that fact requires dismissal of their complaint."