AT&T Can Cut Rebate Payments, Court Rules

(CN) - The 5th Circuit lifted an order barring AT&T from reducing its reimbursements to local carriers for a $50 promotional rebate. The lower court lacked jurisdiction to issue the injunction, the court ruled, because the antitrust claims brought by smaller local carriers did not raise questions of federal law.

Budget Prepay and other local carriers argued that AT&T improperly applied a complicated pricing model to its Win-back Cash Back promotion, which waived connection fees and gave a $50 rebate to any customer who switched to AT&T. The model takes into account the fact that many customers don't claim the rebate and sets the "economic value" of the promotion passed on to local carriers as low as $3.74 in some states.

Local carriers argued that AT&T had to reimburse them the full amount of the rebate under the Telecommunications Act. They sought, and won, a preliminary injunction barring AT&T from using the pricing model or filing any collection actions against Budget Prepay and other local carriers.

The district court denied AT&T's motion to dismiss the case for lack of subject-matter jurisdiction, among other reasons, but the federal appeals court in New Orleans reversed.

"[I]t is apparent that Budget Prepay's claim does not arise under federal law," Judge Edith Brown Clement wrote.

Clement said the district court ultimately had to decide if AT&T's pricing model was an "unreasonable limitation on resale," which the parties' contract prohibited.

"It raises an issue of state law contract interpretation," Clement wrote.

The 5th Circuit panel reversed the denial of AT&T's motion to dismiss and vacated the injunction.

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