AT & T Corp. v. United States

MEMORANDUM OPINION AND ORDER

BRADEN, Judge.

RELEVANT FACTS AND PROCEDURAL BACKGROUND

On May 6, 2005, the Government filed a Motion to Transfer and Suggestion of the Appropriateness of Consolidation (“Gov’t Mot.”), requesting the transfer of Lucent Technologies Inc. v. United States (“Lucent”), No. 04-1511C, from the undersigned judge to the Honorable Charles F. Lettow, because Lucent is “directly related,” within the meaning of RCFC 40.2(a), to two cases that then were pending before Judge Lettow, and, therefore, “[A]ll three cases ... should be handled by a single Judge in order to ‘conserve judicial resources and promote an efficient determination of these actions.’” See Gov’t Mot. at 1 (quoting RCFC 40.2(a)(4)); see also AT & T Corp v. United States, 03-2258C (“AT & T I”) and AT & T Corp. v. United States (“AT & T II”), 04-1512C. The Government’s motion also requested that Lucent and AT & T II be consolidated, pursuant to RCFC 42(a).

On May 18, 2005, Plaintiff filed a Response to Government’s Motion advising the court that the Plaintiff did not object to the transfer of Lucent to Judge Lettow, or, in the alternative, the transfer of AT & TI and AT & T II to the undersigned judge, assuming the Government would not seek to consolidate AT & TI with Lucent. Since the issue of consolidation was premature before the Government’s Motion to Transfer was resolved, Plaintiff did not address the substantive merits of consolidation, but requested an opportunity to do so when the issue became ripe.

On October 13, 2005, Judge Lettow granted the Government’s Motion to Transfer and Suggestion of the Appropriateness of Consolidation, in part, and transferred AT & T I and AT & T II to the undersigned judge, without ruling whether the cases should be consolidated. See Order Reassigning Case, Oct. 13, 2005. On November 1, 2005, the undersigned judge ordered Plaintiff to file a response addressing the Government’s request that Lucent and AT & TII be consolidated. In addition, the court ordered the Plaintiff to address whether AT &T I should be consolidated with Lucent.

On November 21, 2005, in all three eases AT & T filed an identical Response to the Government’s Motion (“AT & T Resp.”) agreeing that Lucent and AT & TII should be consolidated, but opposing the consolidation of Lucent or AT & TII with AT & TI. On November 21, 2005, Lucent Technologies, Inc., filed a Response to the Government’s Motion (“Lucent Resp.”) supporting consolidation of Lucent and AT & TII, but arguing that it would not be appropriate for either Lucent or AT & TII to be consolidated with AT & T I. On December 12, 2005, the Government filed a Reply arguing that AT & T II and Lucent should be consolidated in the interest of judicial economy, but not with AT &TI.

DISCUSSION

A. Standard Of Decision On Motion For Consolidation Pursuant To RCFC 42(a).

Rule 42(a) of the United States Court of Federal Claims provides:

When actions involving a common question of law or fact are pending before the court, it may order a joint hearing or trial of any or all the matters in issue in the actions; it may order all the actions consolidated; and it may make such orders concerning proceedings therein as may tend to avoid unnecessary costs or delay.

RCFC 42(a) (emphasis added).

It is within the Court’s “broad discretion” to order consolidation of cases. See Cienega Gardens v. United States, 62 Fed.Cl. 28, 32 (2004). Two inquiries are required to determine whether consolidation should be granted. First, whether a “common question of law or fact” exists in both cases. Id. Second, whether considerations regarding “the interest of judicial economy” outweigh “the potential for delay, confusion and prejudice that may result from consolidation.” Id.

B. Resolution Of The Government’s Motion To Consolidate.

The Government argues that consolidation of AT & TII and Lucent is appropriate because:

All three eases relate to the application of the same legal standard (CAS 413.50(c)(12)) to the transfer of largely the same operating assets, pension assets, and pension liabilities from one entity to another — in 1996, from AT & T to Lucent as part of the Spin-Off Transaction at issue in No. 03-2258C, and then again, in 1997, from Lucent to [General Dynamics].

Gov’t Mot. at 7; see also Gov’t Reply at 2 (“For the reasons previously stated in Defendant’s Motion, we believe that the two later-filed cases (Lucent and AT & T II) should be consolidated in the interests of promoting judicial efficiency. In that way, all of the parties having an interest in the resolution of the issues in common between these two cases — AT & T, Lucent, and the Government — would be parties to the same action, and issues relating to scheduling, discovery, any motions practice, and the like could be resolved in a single action without the need for coordination with any other case.”).

Although the Government did not explain why it was not also seeking consolidation of AT & T I, the Government observed that, “the first filed case AT & T I (No. 03-2258C) is somewhat procedurally more advanced than the two later-filed cases.” Id. at 8; see also Gov’t Reply at 2 (“By contrast, no party proposes consolidation of the remaining case {AT & T I) with either of the other cases. We have not previously sought consolidation of that case with either of the later-filed cases (Lucent or AT & T II), and do not do so now.”).

Plaintiff does not object to the consolidation of Lucent and AT & T II. See AT & T Resp. at 2-3; Lucent Resp. at 1. AT & T, however, argues that consolidation of AT & T I is not appropriate:

None of the considerations justifying consolidation under RCFC 42(a) is [sic] present here. AT & TI involves many different factual and legal issues than those involved in AT & T II and Lucent. See Entergy Nuclear Indian Point 2, LLC v. United States, 62 Fed.Cl. 798, 802-04 (2004). There is also not even a risk of inconsistent judgments in the cases because all three cases are before Judge Braden. See Karuk Tribe of Calif. v. United States, 27 Fed.Cl. 429, 433, (1993).

AT & T Resp. at 2.

Lucent concurs:

Lucent believes it would be inappropriate to consolidate AT & T I with Lucent because the factual and legal issues are materially different and the current procedural posture of these eases is sufficiently different so that the likely delay and confusion resulting from consolidation would outweigh any judicial economy.

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The claims involved in AT & T I and Lucent are not based upon the same operative facts because each case relates to different transactions that were executed more than a year apart. Specifically, the transaction in AT & TI involves the spinoff of a business unit that occurred as a result of AT & T executing a separation and distribution agreement, dated February 1, 1996, which lead to an initial public offering and subsequent distribution of stock to shareholders of AT & T on September 30, 1996. In contrast, the transaction in Lucent involves the sale of some of Lucent’s assets to General Dynamic Corporation (“GD”) pursuant to an asset purchase agreement, executed August 20, 1997.

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Lucent raises two significant legal questions not raised in AT & T I, which, in part, are a result of the different facts discussed above. First, and foremost, Lu-cent has raised the issue of whether a segment closure occurred. This threshold legal question is the basis for Lucent’s motion for summary judgment currently pending before this Court. The question is significant in that, should Lucent prevail on its motion for summary judgment, then the government has no claim against Lu-cent under CAS 413 and the litigation would end. See 48 C.F.R. § 9904.413. AT & T I does not involve this same significant legal question.

Second, Lucent also involves the legal question of whether the government should reimburse Lucent for costs incurred under its government contracts relating to Post Retirement Benefits (“PRBs”). This is a legally significant issue because it relates to whether the government has liability regarding deferred and unfunded PRB costs existing as of the date of the alleged segment closure. AT & TI does not include the legal question of whether AT & T is entitled to costs relating to PRBs. Thus, Lucent involves two legal questions that distinguish it from AT & T I, rendering consolidation inappropriate.

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The differences in the facts and legal considerations in Lucent and AT & T I have placed these cases in different procedural postures. Most notably, as Lucent understands the posture of AT & T I, AT & TI is already at the point in the litigation of determining the quantum of the governments entitlement (because segment closure is not an issue) and discovery is ongoing on that issue. In Lucent, however, the threshold legal question of whether the government has entitlement because a segment closed remains to be decided pursuant to Lucent’s pending motion for summary judgment.

Lucent Resp. at 1-7.

Based on the parties’ representations, the court has determined that consolidation of AT & T II and Lucent is appropriate, because both cases involve common questions of law and fact and judicial economies may be achieved. The consolidation of AT & T I with Lucent and AT & TII, however, is not appropriate. First, although in a broad sense AT & T I and Lucent stem from the same series of transactions, AT & T I and Lucent do not share common questions of law and fact sufficient to warrant consolidation under RCFC 42(a). Indeed, Lucent presents dispositive legal issues that are not present in AT & T I. Second, the distinct procedural postures of AT & TI and Lucent vitiate any judicial economy that might be gained by consolidation. Therefore, consolidation of AT & TI fails to meet the requirement of RCFC 42(a).

CONCLUSION

For these reasons, the Government’s Motion to Consolidate Lucent with AT & TII is GRANTED. AT & T I, however, is not consolidated with Lucent and AT & T II.

IT IS SO ORDERED.