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AT&T suit against SBC axed
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November 12, 1998: 5:44 p.m. ET
Texas court dismisses case regarding conflicting interests of auditing firm
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NEW YORK (CNNfn) - A Texas court Thursday dismissed AT&T Corp.'s lawsuit against SBC Communications Inc. regarding the services of auditing firm Ernst & Young and ordered the company to pay SBC's costs incurred in the suit.
The court ruled that SBC acted legally when it tried to determine whether a potential business conflict existed between AT&T and SBC's auditing firm Ernst & Young.
AT&T has said it will appeal the decision.
AT&T filed suit against SBC in State District Court in June after Ernst & Young decided to stop working for the communications giant on a project to develop operating support systems, following an inquiry by SBC about the nature of the work.
Ernst & Young withdrew from the project on the grounds it had knowledge of sensitive SBC business information while the company was locked in a hotly contested regulatory proceeding with AT&T.
"We are in a very competitive telecommunications market in Texas, so it was only natural that we would ask our auditing firm what it was doing for a major competitor of ours," David Cole, president of Southwestern Bell-Texas, said.
AT&T had claimed that Ernst & Young's withdrawal would slow their ability to develop their OSS capabilities and consequently, their ability to compete in Texas.
"AT&T disagrees with the judge's decision and will appeal," Ed Rutan, a vice president of the company, said. "The fact remains that Ernst & Young dropped its consulting work with AT&T within one hour after being contacted by SBC and AT&T's local entry efforts have been delayed by having to find a replacement."
AT&T contends big auditing and consulting firms routinely work for different clients in the same industry.
SBC stock (SBC) fell 5/16 at 47-15/16 on the New York Stock Exchange Thursday afternoon, while shares of AT&T (T) gained 1/4 to 62-15/16. 
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SBC Communications
AT&T
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