248 F.3d 1109 (11th Cir. 2001), 00-10292, Telecom Italia v Wholesale Telecom Corp.

Docket Nº:00-10292
Citation:248 F.3d 1109
Party Name:TELECOM ITALIA, SPA, Plaintiff-Counter-Defendant, v. WHOLESALE TELECOM CORPORATION, Defendant-Counter-Claimant- Third-Party-Plaintiff-Appellee, Page 1110 TELEMEDIA INTERNATIONAL U.S.A., INC., Third-Party-Defendant-Appellant.
Case Date:April 18, 2001
Court:United States Courts of Appeals, Court of Appeals for the Eleventh Circuit
 
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Page 1109

248 F.3d 1109 (11th Cir. 2001)

TELECOM ITALIA, SPA, Plaintiff-Counter-Defendant,

v.

WHOLESALE TELECOM CORPORATION, Defendant-Counter-Claimant- Third-Party-Plaintiff-Appellee,

Page 1110

TELEMEDIA INTERNATIONAL U.S.A., INC., Third-Party-Defendant-Appellant.

No. 00-10292

IN THE UNITED STATES COURT OF Appeals, FOR THE ELEVENTH CIRCUIT

April 18, 2001

Appeal from the United States District Court for the Southern District of Florida

D.C. Docket No. 99-00834-CV-KMM

Before EDMONDSON, FAY and NEWMAN[*], Circuit Judges.

Page 1111

JON O. NEWMAN, Circuit Judge:

This interlocutory appeal concerns the arbitrability of a tort claim alleged to be related to a contract containing an arbitration clause. Telemedia International U.S.A., Inc. appeals from the order of the District Court for the Southern District of Florida (K. Michael Moore, District Judge), denying its motion to dismiss or alternatively to stay proceedings pending arbitration. We agree that arbitration was not required, and we therefore affirm.

Background

I. Facts

The three actors in this case are (1) Telecom Italia, SpA ("Telecom Italia"), (2) Appellant Telemedia International U.S.A., Inc. ("TMI"), a Florida corporation, which is a wholly- owned subsidiary of Telecom Italia, and (3) Appellee Wholesale Telecom Corp. ("WTC"). Telecom Italia and TMI operate telecommunications networks internationally and in the United States, respectively; WTC is a reseller of telecommunications services.

WTC, the party asserting the tort claim at issue, alleged in a third-party complaint the following facts, which we assume are true for purposes of this appeal. Beginning in July 1998, Telecom Italia began routing calls on behalf of WTC under an oral agreement. In September 1998, Telecom Italia and WTC discussed an expanded, more formal arrangement, whereby WTC would pay market rates to Telecom Italia to route calls through Telecom Italia's switch in Rome to any place in the world, and WTC would invest in expensive switching equipment to process more call volume from the United States. Telecom Italia was supposed to draw up a contract based on a written contract Telecom Italia had executed with another reseller. Instead, Telecom Italia sent WTC an agreement in October 1998 that was materially different in several respects from the template agreed to in September. WTC objected to these differences and did not sign the altered agreement.

Telecom Italia is not legally authorized to transport calls in the United States, and during the September negotiations Telecom Italia pressured WTC to lease circuits from TMI, the United States subsidiary of Telecom Italia, to get the calls from the United States to Rome. In October 1998, TMI and WTC executed a written lease of TMI's circuits for a substantial rental. The lease provides: "In the event of any dispute arising out of or relating to this service agreement, the dispute shall be submitted to and settled by arbitration in the City of New York, in accordance with the rules of the American Arbitration Association." Leases for additional circuits were signed in the next few months.

Meanwhile, notwithstanding the apparent absence of a formal, written agreement between Telecom Italia and WTC, Telecom Italia continued to provide telecommunications services to WTC from July 1998 to March 1999, and WTC made a number of costly investments in equipment and marketing on the assumption that Telecom Italia would honor the terms that were allegedly agreed to at the September 1998 meeting. WTC further alleged that during this period, the quality of service provided by Telecom Italia was seriously below the levels agreed to at the September meeting.

Telecom Italia began sending invoices to WTC in January 1999. WTC claims that these invoices were the opening salvo in a joint effort by TMI and Telecom Italia to get rid of WTC. The first invoice arrived

Page 1112

just after a meeting between TMI and WTC, in which TMI allegedly urged WTC to terminate WTC's agreement with Telecom Italia, so that TMI could replace WTC in marketing international long distances services. Moreover, WTC alleged that the first invoice charged rates that were grossly in excess of the rates agreed to in September 1998. Telecom Italia eventually sent invoices seeking a total of more than $13 million from the period July 1998 and March 1999. Acting on its theory that the rates were grossly inflated, WTC paid only what it considered were the undisputed parts of the invoices (several hundred thousand dollars, at most).

In February 1999, Telecom Italia responded by terminating WTC's use of two of the three TMI circuits needed to route calls to Rome. In March, Telecom Italia terminated WTC's use of the last TMI circuit, effectively shutting WTC down. Telecom Italia had been WTC's sole provider of telephone services.

II. Procedural History

In March 1999, Telecom Italia filed a complaint against WTC in the District Court, alleging breach of contract, based on WTC's failure to pay Telecom Italia's $13 million worth of invoices for calls made between July 1998 and March 1999. In August 1999, WTC answered Telecom Italia's complaint, and counterclaimed against Telecom Italia. The counterclaim alleged the events described above: the oral agreement in place in summer 1998, the September 1998 "agreement" that was never successfully executed, the large investments by WTC in reliance on the September agreement, and finally the written, fully executed leases with TMI, entered into at Telecom Italia's insistence. The counterclaim alleged that Telecom Italia breached the price, quality, and prompt invoicing terms of the September agreement. The counterclaim also alleged that Telecom Italia caused TMI to increase the rate for use of its circuits, and that Telecom Italia caused its subsidiary, TMI, to terminate WTC's access to the TMI circuits in March 1999. The counterclaim alleged breach of contract, "fraud in the inducement," and a "conspiracy" between Telecom Italia and TMI to put WTC out of business.

In September 1999, WTC filed a third-party complaint against TMI, alleging two causes of action--tortious interference with contract and civil conspiracy. The third-party complaint alleges that TMI tortiously interfered with WTC's contract with Telecom Italia. The basic accusation was that TMI and Telecom Italia had colluded to blind-side WTC with demands for payments in unexpected amounts, so as to induce WTC to abandon or breach its contract with Telecom Italia, and to enable TMI to sell long- distance services directly to the market that WTC had invested so much to develop. These unexpectedly onerous demands for payment were included in the TMI-WTC contract itself, in conditions later added to the contractual arrangement, and in Telecom Italia's grossly excessive and delayed invoices to WTC. Specifically, TMI allegedly took the following actions with Telecom Italia's knowledge and support, all in an attempt to drive WTC away from its contract with Telecom Italia:

*Under the circuit lease, TMI charged grossly excessive rates for use of TMI circuits, taking advantage of an earlier agreement between WTC and Telecom Italia that allegedly permitted TMI to set its rates unilaterally.

*TMI demanded payment of an onerous security deposit to TMI after the first circuit had already been activated. The intent of these excessive

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rate and security deposit demands was "to make WTC's performance of its contract with Telecom Italia expensive and burdensome, and with the intent to cause WTC to be forced to withdraw from its contractual relationship with Telecom Italia." It is unclear whether this security deposit is actually part of the express terms of the circuit contract.

*"Telecom Italia, acting in concert with TMI, wrongfully terminated WTC's access" to the TMI circuits in February and March 1999.

*TMI persuaded Telecom Italia to delay in the submission of invoices to WTC, and to inflate those invoices, so as to shock WTC and persuade WTC to abandon its contract with Telecom Italia. Telecom Italia allegedly sent its first invoice to WTC immediately after a January 1999 meeting between TMI and WTC, at which TMI urged WTC to withdraw from its contract with Telecom Italia, so that TMI could take WTC's place.

TMI moved to dismiss the third-party complaint on the ground that WTC failed to state a claim, or...

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