Blitz Telecom Consulting, LLC v. Peerless Network, Inc.

• Decision Date: 05 August 2016
• Docket Number: Case No: 6:14–cv–307–Orl–40GJK
• Citation: 212 F.Supp.3d 1232
• Parties: BLITZ TELECOM CONSULTING, LLC, Plaintiff/Counter–Defendant, v. PEERLESS NETWORK, INC., Defendant/Counter–Plaintiff.
• Court: U.S. District Court — Middle District of Florida

212 F.Supp.3d 1232

BLITZ TELECOM CONSULTING, LLC, Plaintiff/Counter–Defendant,

v.PEERLESS NETWORK, INC., Defendant/Counter–Plaintiff.

Case No: 6:14–cv–307–Orl–40GJK

United States District Court, M.D. Florida, Orlando Division .

Signed August 5, 2016

Lee W. Marcus, Ernest J. Myers, Marcus & Myers, PA, Stephen Michael Jones, The Stephen M. Jones Law Firm, PLLC, Orlando, FL, Tammy G. Cohen, David S. Sellman, SellmanHoff, LLC, Baltimore, MD, James Christopher Falvey, Eckert, Seamans, Cherin & Mellott, LLC, Washington, DC, for Plaintiff/Counter–Defendant.

Henry T. Kelly, Matthew Charles Luzadder, Michael R. Dover, Kelley, Drye & Warren LLP, Chicago, IL, Ronnie J. Bitman, Karl E. Pearson, Pearson Bitman, LLP, Maitland, FL, for Defendant/Counter–Plaintiff.

ORDER

PAUL G. BYRON, UNITED STATES DISTRICT JUDGE

This cause comes before the Court on Plaintiff's Motion to Amend Final Judgment (Doc. 254), filed April 8, 2016. On April 22, 2016, Defendant responded in opposition. (Doc. 262). Upon consideration, Plaintiff's motion will be granted and Plaintiff's judgment will be amended to include $295,520.97 in prejudgment interest.

I. BACKGROUND

This lawsuit involves a contract dispute between Plaintiff/Counter–Defendant, Blitz Telecom Consulting, LLC ("Blitz"), and Defendant/Counter–Plaintiff, Peerless Network, Inc. ("Peerless"), over Peerless's nonpayment of commissions owed to Blitz for telecommunications traffic Blitz placed on Peerless's networks. On November 9, 2010, the parties entered into an IP Control Agreement (the "Contract")¹ whereby Peerless agreed to assign telephone numbers to Blitz for a fee. The Contract contemplated that Blitz would then use these numbers to place traffic on Peerless's networks. In exchange, Peerless agreed to pay a 30% commission to Blitz each month based on certain revenues Peerless collected on the traffic Blitz placed on its networks. This commission, referred to as the "co-marketing fee," forms the epicenter of the parties' dispute.

From the Contract's inception in November 2010 through June 2012, Peerless accounted for and paid monthly co-marketing fees to Blitz. However, on April 11, 2012, Peerless notified Blitz by mail that it would no longer remit co-marketing fees to Blitz because of an order entered by a Texas federal district court in Southwestern Bell Telephone Co. v. IDT Telecom, Inc. , No. 3:09–CV–01268–P (N.D. Tex. Mar. 9, 2012) (hereinafter referred to as the "IDT Decision"). In its letter to Blitz, Peerless asserted that it was entitled to modify the Contract under a clause which provided, in pertinent part, that the parties could renegotiate the terms of their agreement should any change in law materially affect the ability of either party to perform their contractual obligations. It was Peerless's position that the IDT Decision constituted such a change in law. As a result, Peerless informed Blitz that it would no longer pay co-marketing fees to Blitz because of the IDT Decision. In subsequent communications between the parties, Peerless also stated that it would not collect revenues on Blitz's traffic either.

Unbeknownst to Blitz, and despite Peerless's representations to the contrary, Peerless continued to collect revenues on Blitz's traffic. When Blitz discovered Peerless's conduct in October 2013, Blitz demanded a full accounting of the revenues Peerless had collected. Peerless refused, however, claiming that it had modified the Contract due to the IDT Decision and was no longer obligated to pay Blitz a co-marketing fee for traffic placed on Peerless's networks, regardless of whether Peerless was or was not collecting revenues on that traffic. This lawsuit ensued.

In its Complaint, Blitz sought to recover the value of co-marketing fees to which it believed it was legally entitled. Blitz alleged claims for breach of contract and quantum meruit, and additionally sought a number of declarations from the Court to resolve the parties' rights and obligations relative to the Contract. On summary judgment, the Court granted one such declaration and held that the IDT Decision did not constitute a change in law and did not authorize Peerless to renegotiate or modify the Contract. Peerless also countersued Blitz to recover certain allegedly unpaid charges associated with the services it provided to Blitz under the Contract.

This matter proceeded to a jury trial beginning on March 2, 2016. On March 9, 2016, the jury returned a verdict finding that Peerless breached the Contract and a subsequent modification to the Contract by failing to pay co-marketing fees to Blitz. The jury determined that Peerless's breach caused Blitz $2,347,704.43 in damages. The jury also found in favor of Blitz on both of Peerless's counterclaims. The Court thereafter entered judgment according to the jury's verdict. Blitz now moves to amend that judgment to include an award of prejudgment interest.²

II. DISCUSSION

As an initial matter, the parties disagree as to which state's law applies to Blitz's request for prejudgment interest. Because this Court sits in diversity, the law of the forum state, Florida, conceivably applies. However, the Contract through which Blitz prevailed contains a choice of law provision which mandates that Illinois law governs. Blitz represents that it is not certain whether Florida law or Illinois law controls the award of prejudgment interest and makes its case under both. On the other hand, Peerless maintains that the Contract's choice of law clause, and therefore Illinois law, must resolve the issue. The Court is therefore tasked in the first instance with ascertaining the applicable law, upon which the Court will then turn to whether Blitz is entitled to prejudgment interest and, if so, how much.

A. Whether Florida or Illinois Law Applies

A federal court exercising diversity jurisdiction must perform a two-step inquiry to determine the applicable law. Allstate Ins. Co. v. Stanley , 282 F.Supp.2d 1342, 1343 (M.D. Fla. 2003). First, the court must ask whether the issue in dispute is substantive or procedural under Erie Railroad Co. v. Tompkins . Id. If the issue is procedural, federal procedural law applies and the inquiry ends. Id. If the issue is substantive, the court must then look to the forum state's choice of law rules and ask whether the forum state's law or the law of some other jurisdiction applies. Md. Cas. Co. v. Williams , 377 F.2d 389, 393 n.1 (5th Cir. 1967).³ This second inquiry requires the court to again characterize the issue as substantive or procedural according to the forum state's choice of law rules. Id. Where the forum state views the issue as substantive, the court must apply the substantive law as dictated by the forum state's choice of law rules. Id. Where the forum state views the issue as procedural, the court must apply the forum state's procedural law. Id. ; see also Klaxon Co. v. Stentor Elec. Mfg. Co. , 313 U.S. 487, 496–97, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941) (explaining the significance of recognizing the distinction between substance and procedure under the forum state's choice of law rules). Importantly, each step of this two-step inquiry is independent of the other; whether an issue is substantive for Erie purposes does not answer the second question of whether the issue is substantive according to the forum state for choice of law purposes and vice versa. Williams , 377 F.2d at 393 n.1.

Here, the first step of the inquiry is easy, as it is well-settled that prejudgment interest is substantive for Erie purposes. Schwan's Sales Enters., Inc. v. SIG Pack, Inc. , 476 F.3d 594, 595 (8th Cir. 2007). The Court will therefore look to the choice of law rules of the forum state, Florida, to identify the source of law which governs Blitz's claim to prejudgment interest. In doing so, the Court must next characterize the issue of prejudgment interest as either substantive or procedural according to Florida law. If Florida views prejudgment interest as substantive, then the parties' contractual agreement to be bound by Illinois substantive law controls because Florida courts enforce valid choice of law clauses such as the clause involved in this case. SeeMazzoni Farms, Inc. v. E.I. DuPont De Nemours & Co. , 761 So.2d 306, 311 (Fla. 2000). However, if Florida views prejudgment interest as procedural, then Florida procedural law controls. See Williams , 377 F.2d at 393 n.1.

Blitz contends that prejudgment interest in Florida is likely procedural. Blitz describes the award of prejudgment interest as a purely ministerial function which requires the trial court to do nothing more than calculate the amount of prejudgment interest due when entering judgment. Conversely, Peerless argues that prejudgment interest in Florida is substantive, as prejudgment interest forms a part of a plaintiff's substantive claims and remedies. Both parties acknowledge that there is no case law directly commenting on how Florida courts characterize the award of prejudgment interest. This Court is therefore called to answer the question as a matter of first impression.

The Florida Supreme Court has provided ample guidance in deciphering whether an issue is substantive or procedural under Florida law:

Substantive law has been defined as that part of the law which creates, defines, and regulates rights, or that part of the law which courts are established to administer. It includes those rules and principles which fix and declare the primary rights of individuals with respect towards their persons and property. On the other hand, practice and procedure encompass the course, form, manner, means, method, mode, order, process or steps by which a party enforces substantive rights or obtains redress for their invasion. Practice and procedure may be described as the machinery of the judicial process as opposed to the product thereof. It is the method of conducting litigation involving rights and corresponding defenses.

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