Suit states American Tower uses illegal tactics
with landowners during negotiations
Update: February 27, 2015 - According to court documents filed in Federal court in Dallas, Tex., all claims have been dismissed by both parties.
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February 27, 2012 - In a lawsuit filed in Texas Circuit Court on Feb. 16, TriStar Investors, Inc. is accusing American Tower Corporation of unfair competition and false advertising.
The complaint follows what appears to be a failed attempt by TriStar to sell American Tower property rights underlying over 300 tower locations leased or subleased by the Boston-based company.
Labeling American Tower Corporation the "Goliath" of the tower industry, the attorneys for David - in this case David Ivy, Chairman, CEO and co-founder of TriStar - submitted seven counts against American Tower: Violation of the Lanham Act, 15 U.S.C. 1125(a); Unfair Competition; Business Disparagement; Tortious Interference with Existing Contract; Tortious Interference with Prospective Business Relations; Breach of Contract.
In their Application for Permanent Injunction charge, the Pittsburgh-based plaintiff stated that "TriStar has been and will continue to be severely injured by American Tower’s unfair and unlawful actions throughout the United States. American Tower’s false statements and misrepresentations about TriStar will continue to cause a loss of reputation, goodwill, and competitiveness in the market, which cannot be adequately compensated by monetary damages."
In addition to the injunction, TriStar is requesting a monetary judgment for damages, costs and attorney’s fees; interest; and any further relief that might be accorded them following their requested jury trial.
TriStar said in the filing that "American Tower, a massive corporation, has resorted to unfair and illegal tactics in negotiations with landowners for cell tower sites when faced with competition from a tiny competitor, TriStar. Rather than competing fairly and acquiring sites through superior offers, American Tower has systematically misinformed and deceived landowners to acquire sites under less favorable economic terms than those offered by TriStar, to the material detriment of TriStar and landowners nationwide."
Branding itself a minute lease acquisition firm in the lawsuit, TriStar has acquired over 600 tower locations in the nation.
According to an industry analyst, if TriStar was successful in taking over ownership of these towers at the expiration of the ground lease, they would be worth a minimum of $750,000 apiece, assuming there were three carriers on each tower - valuing TriStar's assets at approximately $450 million.
A blanket buy of TriStar's easements turned down
Although TriStar doesn't state in the lawsuit that it had approached American Tower to sell approximately 300 lease interests they own underneath the company's towers, an outside counsel for American Tower said there was an offer.
In an unrelated lawsuit filed by American Tower against Wisdom Four LLC, a subsidiary of TriStar, American Tower's Arkansas attorney, Edward T. Ogelsby, stated in a Nov. 9, 2011 email to Wisdom Four's counsel, H. Bradley Walker, "...with respect to your assertion that American Tower has recently 'made overtures' about potentially acquiring TriStar, we note that Tri Star offered to sell American Tower all of the easements it has acquired under American Tower cell towers (not TriStar itself) and American Tower has informed TriStar in writing that it has no interest in any such acquisition."
Lawsuit: ATC says it will run TriStar out of business
"American Tower has published and continues to publish disparaging words against TriStar’s economic interests to third parties. Among other things, American Tower has disparaged TriStar by telling landowners that American Tower will run TriStar out of business, that TriStar is currently unable to meet its financial obligations, and that TriStar is unable to sustain its business in the foreseeable future," their lawsuit alleges.
In the 39-page lawsuit, TriStar starts with a roadmap of their facts, the direction of their concern and the type of case it is.
But then it meanders into a telecom primer coupled with a lengthy sales brochure and even a short economics lesson alerting U.S. District Court Judge Barbara M. Lynn to the fact that American Tower is not competing fairly to seek and acquire sites through "equivalent or superior financial offers, which competition is the very essence of capitalism, or American Tower could simply walk away and concede the site to TriStar’s superior offer."
The lawsuit also weaves in emails from a troubled American Tower client and a satisfied TriStar landlord.
One unidentified American Tower landlord said she was concerned about what American Tower might do if she didn't renew her lease with them, and her nurse told her that she should solve that problem quickly because it was aggravating her Multiple Sclerosis.
TriStar is also letting Judge Lynn know that one of their landowners was pleased with their operation. "No, I’m glad I didn’t wait any longer because I gained money by going with TriStar then. They paid me more rent in order to operate my tower in the future. . .I love the revenue sharing," said the unnamed individual.
Tower teardown threat is a primary concern of TriStar
TriStar states that American Tower repeatedly has told landowners that if they sign a deal with TriStar instead of extending their leases with American Tower, American Tower will tear down the tower on the land and the landowner would lose its income stream from the site.
"First, a number of the towers American Tower manages - including a significant number of its towers in Texas - are owned by AT&T, and American Tower’s rights with respect to these towers are defined and limited by a sublease agreement," the complaint states.
"American Tower has no right to purchase a tower subleased from AT&T if the ground lease has expired. It is therefore unambiguously false for American Tower to represent to landowners that it will or can tear down towers if the landowners do not extend their leases with American Tower because those towers are owned by AT&T, and American Tower has no legal right to purchase the towers after the ground lease expires."
The lawsuit also states that many other American Tower-controlled sites are owned by Verizon under the terms of an AirTouch sublease and the company has no legal right to tear down those towers.
TriStar: A quarter of American Tower's steel is not owned by them
TriStar's complaint states that more than 25% of American Tower’s towers in the U.S. are subleased.
American Tower has an agreement with SBC Communications Inc. - now AT&T - for the lease or sublease of approximately 2,500 towers.
In 1999, American Tower purchased the sublease rights for 2,100 Vodafone Airtouch P.L.C. towers. Voadaphone Airtouch was purchased the same year by Verizon Wireless.
In 2000, American Tower entered into an agreement with Alltel - now Verizon Wireless - to acquire 1,800 towers through a sublease agreement.
In 1998, Crown Castle formed a joint venture with Bell Atlantic to market their 2,019 towers, but Crown Castle bought out Verizon Communication's interest in 2004 and now owns those structures.
Crown Castle also struck a deal in 1999 to lease out BellSouth Corporation's 1850 towers
Crown Castle mentored most of TriStar's execs
Since its founding in 2005, most of TriStar's leadership team is comprised of former Crown Castle International executives.
TriStar's Chairman, CEO and co-founder, David Ivy, previously served as President of Crown Castle. While Vice Chairman and a board member he was directly responsible for the acquisition of over 14,000 towers.
Ed Wallander, TriStar's President and Co-Founder was also a President and Chief Operating Officer at Crown Castle.
Vice President of Site Acquisitions John Armour was Crown Castle's national sales director.
Jerry Vogl, TriStar's Vice President Property Management held the same position when he was at Crown Castle.
Vice President of Engineering Mark Uminski was Crown Castle's chief technology officer.
It might be expected that TriStar, with its intimate knowledge of Crown Castle's structures, policies and locations, would deeply farm the nation's largest tower owner's landowners to acquire their ground leases and a greater portion of their leases would be from Crown Castle.
However, it is not identified in Crown Castle's SEC filings whether the company has re-purchased any leasehold interests from TriStar. It is also unknown whether there is an agreement in place for TriStar to not solicit Crown Castle's landowners.
American Tower appears to be the target of choice
Since TriStar states in its lawsuit that it has acquired property rights underlying over 300 tower locations leased or subleased by American Tower, representing over half of their portfolio, it might appear that American Tower is being targeted since its structures only represent approximately 22% of the industry's towers.
A number of TriStar's investors have strong ties to Crown Castle and SBA Communications, the country's first and third largest public tower companies.
TriStar's primary investor, Centennial Ventures, provided the seed capital to launch Crown Castle. It also funded tower owner Optasite, bought out by SBA Communications Corp. in 2008 for $430 million.
TriStar investor Highland Capital Partners had also invested in Optasite.
SBA owns a significant stake in ExteNet Systems Inc., a distributed antenna network company where Centennial is also a heavy investor. TriStar investor Columbia Capital also funds ExteNet and had previously invested in Optasite.
Matt Newton, TriStar's Vice Chairman, Mergers and Acquisition, previously served on the board of directors of Optasite and ExteNet Systems. He was also a partner for 14 years with Columbia Capital.
TriStar Chairman David Ivy also served on Optasite's Board of Directors.
TriStar shares a more hospitable relationship with Crown
In the lawsuit, TriStar states that its business model is to not renew leases with American Tower when they expire, but instead to operate each tower site for wireless communications purposes upon expiration of the respective lease - either by acquiring rights to the existing tower or constructing a replacement tower at the same location.
But it appears that the company will partner with Crown Castle.
On Dec. 7, 2010, in Concord, N.Y., Crown Castle representative Andrew Bazinet appeared before the town's planning board with an application for a special use permit for the construction of a new cell tower at 7607 Genesee Rd.
He stated that Crown Castle cannot go directly to the current property owner because the lease was owned by TriStar after the lease was sold for cash, but his company was in the process of purchasing the lease back to resolve a fall zone issue.
The tower was approved at a town council meeting on Feb. 10, 2011.
Neither TriStar nor their law firm, Vinson & Elkins LLP of Houston, responded to Wireless Estimator's questions.
Crown Castle did not reply to a request to discuss the lawsuit. Matt Peterson, Vice President, Communications for American Tower, said that the company has a policy of not commenting on pending litigation.
The Lyle Company and others singled out in complaint
Founded in 1989, The Lyle Company, one of the industry's largest network and infrastructure builders, was identified in the complaint as a company that assists American Tower in promoting deceptive information.
"American Tower has also utilized third-party agents, such as The Lyle Company, to approach landowners with false and misleading information on behalf of American Tower and negotiate lease extensions on behalf of American Tower. Further, upon information and belief, such third-party agents lacked appropriate real estate brokerage licenses to undertake such efforts, in violation of state laws," TriStar said in its lawsuit.
Lyle's President, Pat Poling, was American Tower's Director of Development for the Western Region prior to joining the company in 2004.
Poling said that Lyle would not comment upon the lawsuit at this time.
The Lyle Company is one of only three lease negotiation agents that Crown Castle uses.
"American Tower has implemented a nationwide business strategy of instructing its agents and representatives to make these false statements as part of American Tower’s commercial advertising and promotion to landowners," the lawsuit states.
Suit shows the lessening of landowner's revenue
TriStar also provides the disparity of income between the tower owner and the landowner: "Since the formation of the cell tower industry in the mid-1990s, the total cash flow produced by a typical cell tower has increased by more than $50,000 per year, while the total cash flow received by a typical landowner in the form of ground rent has increased by less than $10,000 per year. Whereas the typical landowner previously received approximately 40% of a cell tower location’s total cash flow, landowners now typically receive less than 15% from the tower companies. Over the course of the past 15 years, the total cash flow from a typical cell tower has increased by more than 400%, while the share of total cash flow that is typically received by a landowner has declined by more than 50%."
"A typical cell tower operated by American Tower produces annual gross cash flow in excess of $80,000 for the company, whereas the landowner of such site typically receives less than $15,000," according to the lawsuit.
Begin the billable hours
TriStar's complaint could result in an expensive and protracted lawsuit, and might see an aggressive countersuit by American Tower.
Although TriStar has employed the services of a 750-plus attorney law firm, Vinson & Elkins LLP, American Tower's outside firm, literally a handshake away from their corporate office, is equally as formidable.
Edwards Angell Palmer & Dodge LLP, a high powered 650-attorney Boston firm handles most of American Tower's major lawsuits.
The firm is currently defending American Tower in a $69 million-plus lawsuit from Horse-Shoe Capital in respect to Horse Shoe's sale of XCEL Telecom Private Limited.
American Tower's largest ever settlement occurred in 2008 when the U.S. District Court for the District of Massachusetts approved a $14 million cash settlement in a class action lawsuit against the company.
The lawsuit alleged that current and former officers and directors improperly backdated the company's stock option grants and made materially false and misleading statements to the public concerning the company's financial results and option grant policies and accounting, causing damages to investors.