On Friday, January 23, the Supreme Court granted certiorari in
two cases of interest to the business community and issued a slightly expedited
briefing schedule in those cases. Amicus briefs in support of the petitioners
are due on March 4, 1998, and amicus briefs in support of the respondents are
due on March 30. In addition, on its regular January 26 order list, the Court
granted and consolidated a total of eight petitions and cross-petitions arising
out of a single case. Amicus briefs in support of the petitioners are due on
March 12, and amicus briefs in support of the respondents are due on April 13
(because April 11 is a Saturday). Any questions about these cases should be
directed to Evan Tager (202-778-0618) or Alan Untereiner (202-778-0656) in our
Washington office. The Court will be in recess until February 23, 1998.
1. Telecommunications — FCC Regulations
Implementing Local Competition Provisions. The Telecommunications Act of
1996 represents the most comprehensive revision of the regulatory system for
telephone service in more than 60 years. Among other things, it abolishes
restrictions on competitive entry into local telephone service and compels
incumbent carriers to open their networks to competitors in certain defined
ways. In its first major rulemaking concerning the 1996 Act's local competition
provisions, the Federal Communications Commission (FCC) issued a 700-page order.
In two decisions, the Eighth Circuit vacated several regulations imposed in that
order. 120 F.3d 753, 124 F.3d 934 (1997).
The Supreme Court granted the petition for certiorari in
AT&T Corp. v. Iowa Utilities Board, No. 97-826, and seven
related petitions and cross-petitions, to resolve several questions relating to
the local competition provisions of the Act. See 47 U.S.C. §§ 251-252. In
particular, the Court will address the obligations of incumbent local telephone
companies (1) to interconnect their networks with those of competitors
("interconnection"), (2) to resell their services to new competitors ("resale"),
and (3) to allow those competitors to purchase the incumbents' "network elements
on an unbundled basis" (47 U.S.C. § 251(c)(3)) ("unbundled network elements").
The Court consolidated four petitions, including one submitted by the FCC and
the United States, and four conditional cross-petitions, and assigned a total of
one hour of argument. Barring additional action by the Court, the case will be
heard in October.
In resolving the most-publicized question, the Court will
decide whether the FCC has statutory authority to set detailed nationwide
standards with respect to certain local competition obligations set forth in the
1996 Act, including precise formulas for the prices that an incumbent carrier
may charge for interconnection, resale, and unbundled network elements. The
Eighth Circuit held that, in light of the presumption against FCC jurisdiction
over intrastate communications services (47 U.S.C. § 152(b)), state commissions,
and not the FCC, have jurisdiction to implement those local competition
provisions where the Act does not expressly assign responsibility to the FCC.
The court of appeals relied on Louisiana Public Service Comm'n v.
FCC, 476 U.S. 355 (1986), as well as provisions of the 1996 Act that
appeared to assign pricing matters, among other responsibilities, explicitly to
"State commission[s]." See, e.g., 47 U.S.C. § 252(d)(1)-(3).
The Court will also consider the validity of several FCC
regulations interpreting narrower provisions of the Act. It will review the
Eighth Circuit's invalidation of a regulation interpreting the statutory
requirement that incumbent carriers "make available any interconnection,
service, or network element provided under an agreement" with a competing
carrier "to any other requesting telecommunications carrier upon the same terms
and conditions as those provided in the agreement." 47 U.S.C. § 252(i). The FCC
derived from this one-way ratcheting provision an additional obligation to
permit requesting carriers to cherry-pick more favorable aspects of an
incumbent's agreement with another carrier without having to accept the
remaining "terms and conditions" in the agreement. The Eighth Circuit held that
this "pick and choose" regulation was unreasonable because it would discourage
the trade-offs of negotiation when future parties could enjoy the benefits of an
agreement without providing the consideration that motivated the agreement.
The remaining questions involve the unbundled network element
obligation, which allows competitors to lease parts of the incumbent's network
rather than constructing entire competing networks or purchasing finished
telecommunications services for resale. See 47 U.S.C. § 251(c)(3). The statutory
pricing standard for unbundled network elements (cost-based plus, at the
regulator's option, a reasonable profit) in practice has produced prices much
lower than the standard for resale (retail price less avoided costs).
The Court will decide whether new entrants may obviate the need
to purchase services for resale by gaining access to all network elements needed
to provide a particular retail service using the cost-based unbundled network
element regime, and whether the incumbent must provide combinations of
"unbundled" elements on a preassembled basis. The Eighth Circuit upheld an FCC
rule allowing entrants to lease all elements without providing any part of the
network independently, but vacated a rule that required incumbents to offer
purportedly "unbundled" network elements already combined into a finished
Finally, the Court will decide whether the Eighth Circuit
correctly sustained FCC rules broadly defining the network elements that must be
offered on an unbundled basis. The Act requires the Commission, in deciding what
elements are subject to that obligation, to consider (1) whether any elements
that are proprietary are also "necessary" to provide competing service, and (2)
whether failing to provide access to a particular element would "impair" the
ability of a competitor to provide service. The FCC's response, upheld by the
Eighth Circuit, was to conclude that all network elements met this standard
whether or not the same elements could be economically purchased from other
sources. The FCC also identified as "network elements" several network and
telecommunications services, including caller ID, call waiting, operator
services, directory assistance, and operational support systems.
This case may determine the shape of telecommunications
competition and is accordingly of broad interest. Mayer, Brown & Platt is
counsel to Ameritech Corporation, a respondent and cross-petitioner.
2. Title VII — Sexual Harassment — Standard
for Quid Pro Quo Claim.
The Court granted certiorari in Burlington
Industries, Inc. v. Ellerth, No. 97-569, to decide whether a claim of
quid pro quo sexual harassment is actionable under Title VII of the Civil
Rights Act of 1964, 42 U.S.C. § 2000e-2(a)(1), when the plaintiff employee has
neither submitted to the sexual advances of the alleged harasser nor suffered
any tangible effects on compensation, terms, conditions or privileges of
employment as a consequence of refusing to submit to those advances.
Kimberly Ellerth brought suit against her former employer,
Burlington Industries, alleging employment discrimination and constructive
discharge. Specifically, Ellerth charged, inter alia, that a male
supervisor had made sexual advances to her over a period of approximately one
year and from time to time intimated that she would not be promoted or otherwise
do well at the company unless she submitted to his advances. The U.S. District
Court for the Northern District of Illinois granted summary judgment to
Burlington Industries, reasoning that, absent any evidence in the record that
her supervisor actually had withheld tangible employment benefits in connection
with Ellerth's refusal to submit to his sexual advances, Ellerth was unable to
prevail on a theory of quid pro quo sexual harassment under Title VII.
912 F. Supp. 1101 (1996). A panel of the Seventh Circuit reversed, holding that
Ellerth had presented sufficient evidence of quid pro quo sexual
harassment to raise a genuine issue of material fact.
On rehearing en banc, the full Seventh Circuit issued a per
curiam opinion reversing the district court. 123 F.3d 490 (1997). Unable to
agree on a single rationale, the various members of the majority issued a
"welter" of opinions explaining their reasons for concurring in the result. They
nevertheless agreed that "liability for quid pro quo harassment is strict even
if the supervisor's threat does not result in a company act," i.e., an
adverse employment consequence. Id. at 495. Based on this principle, the
Seventh Circuit found the allegations of the supervisor's sexual propositions to
be sufficient to defeat summary judgment on Ellerth's quid pro quo claim.
The Seventh Circuit's decision conflicts with decisions of
eight other Circuits holding that a claim for quid pro quo sexual
harassment under Title VII requires proof that the harassment tangibly affected
aspects of the terms and conditions of employment. See, e.g., Gary
v. Long, 59 F.3d 1391 (D.C. Cir.), cert. denied, 116 S. Ct. 569 (1995);
Ellert v. University of Texas at Dallas, 52 F.3d 543, 545 (5th
Cir. 1995); Cram v. Lamson & Sessions Co., 49 F.3d 466 (8th
Cir. 1995); Sauers v. Salt Lake County, 1 F.3d 1122 (10th Cir.
1993); Kaufman v. Allied Signal, Inc., 970 F.2d 178 (6th
Cir.), cert. denied, 506 U.S. 1041 (1992); Spencer v. General Electric
Co., 894 F.2d 651 (4th Cir. 1990); Lipsett v. University of Puerto
Rico, 864 F.2d 881 (1st Cir. 1988); Sparks v. Pilot Freight
Carriers, Inc., 830 F.2d 1554 (11th Cir. 1987). Consistent with the Seventh
Circuit's approach, however, two Circuits have stated in dicta that a
supervisor's threat of retaliation linked to sexual advances is sufficient to
state a quid pro quo claim under Title VII. See Robinson v.
City of Pittsburgh, 120 F.3d 1286 (3d Cir. 1997); Nichols v.
Frank, 42 F.3d 503 (9th Cir. 1994).
Burlington Industries is the fourth sexual harassment
case accepted for briefing, argument, and decision in the 1997 Term. The other
cases involve whether there is a cause of action under Title VII for same-sex
sexual harassment (Oncale v. Sundowner Offshore Services, Inc.,
No. 96-568), the standard for an employer's liability for the harassing acts of
its supervisory employees (Faragher v. City of Boca Raton, No.
97-282), and the standard for holding a school system liable for acts of sexual
harassment perpetrated by a teacher against a student (Doe v. Lago
Vista Independent School District, No. 96-1866). In addition, on today's
Order List the Court requested the views of the Solicitor General as to whether
to grant certiorari in a fifth sexual harassment case, Davis v. Monroe
County Board of Education, No. 97-843, which presents the question whether a
school board can be held liable under Title IX for student-on-student sexual
Given the increasing frequency of claims of sexual harassment
in the workplace, this fourth case in the series should be of interest to all
3. COBRA — Cancellation of Continuing Health
The Consolidated Omnibus Budget Reconciliation Act of
1986 (COBRA), 29 U.S.C. §§ 1161-1162, requires group health plans to offer
temporary continuation of coverage to individuals who lose insurance coverage
due to events such as termination of employment. A plan may cancel coverage,
however, on "[t]he date on which the qualified beneficiary first becomes, after
the date of the election" of continuation benefits, covered under another group
health plan that does not exclude or limit coverage for pre-existing conditions.
Id. § 1162(2)(D). The Supreme Court granted certiorari in Geissal
v. Moore Medical Corp., No. 97-689, to determine whether cancellation is
permissible if, at the time the beneficiary elects continuation benefits, the
beneficiary is already entitled to benefits under an alternate group health plan
offering substantially equivalent benefits.
James Geissal was employed by the Moore Medical Corporation and
covered under its group health care plan. Geissal was also a beneficiary under a
group health care plan offered by his wife's employer. Geissal's employment was
terminated, and he elected continuation coverage under Moore's plan. After
accepting six months of premiums, Moore informed Geissal that he was ineligible
for benefits because of his dual coverage at the time of election. Geissal filed
suit against Moore and the plan seeking continuation benefits; his wife was
substituted as plaintiff after his death.
The district court granted partial summary judgment in favor of
the defendants. 927 F. Supp. 352 (E.D. Mo. 1996). The Eighth Circuit affirmed,
holding that under the plain language of Section 1162(2)(D) Moore was entitled
to cancel Geissal's continuation coverage because Geissal was eligible for
coverage under another group health plan at the time of election. 114 F.3d 1458
(1997). The court held that a beneficiary in these circumstances could receive
continuation coverage only if there was a "significant gap" in coverage between
the plan sought to be continued and the alternate plan, and concluded that
Geissal had not satisfied his burden to show a significant gap. The Eighth
Circuit's holding accords with decisions of the Fifth and Eleventh Circuits (see
Brock v. Primedica, Inc., 904 F.2d 295 (5th Cir. 1990);
National Cos. Health Benefit Plan v. St. Joseph's Hosp., Inc., 929
F.2d 1558 (11th Cir. 1991)), but conflicts with decisions of the Seventh and
Tenth Circuits, which have held that an employer may cancel continuation
benefits only if a beneficiary first becomes eligible for coverage under an
alternate group health plan after he has elected continuation benefits
but not if he has dual coverage at the time of election (see Lutheran Hosp.,
Inc. v. Business Men's Assurance Co. of Am., 51 F.3d 1308 (7th Cir.
1995); Oakley v. City of Longmont, 890 F.2d 1128 (10th Cir.
This case is of obvious interest to private and governmental
employers with group health plans subject to COBRA.
Copyright 1995 Mayer, Brown & Platt. This Mayer, Brown
& Platt publication provides information and comments on legal issues and
developments of interest to our clients and friends. The foregoing is not a
comprehensive treatment of the subject matter covered and is not intended to
provide legal advice. Readers should seek specific legal advice before taking
any action with respect to the matters discussed herein.
This Mayer, Brown, Rowe & Maw Supreme Court Docket Report provides information and
comments on legal issues and developments of interest to our clients and
friends. The foregoing is not a comprehensive treatment of the subject matter
covered and is not intended to provide legal advice. Readers should seek
specific legal advice before taking any action with respect to the matters