Global Crossing Bandwith, Inc. v. Ols, Inc.
| Decision Date | 08 July 2008 |
| Docket Number | No. 05-CV-6423L.,05-CV-6423L. |
| Citation | 566 F.Supp.2d 196 |
| Parties | GLOBAL CROSSING BANDWITH, INC., Plaintiff, v. OLS, INC., a Georgia Corporation, TeleUno, Inc., a Delaware Corporation, jointly and severally, Defendants. |
| Court | U.S. District Court — Western District of New York |
Eric A. Linden, Jaffe, Raitt, Heuer & Weiss, P.C., Southfield, MI, for Plaintiff.
Charles Helein, The Helein Law Group, LLP, McLean, VA, Eugene Welch, Harris, Chesworth, O'Brien, Johnstone, Welch & Leone, Rochester, NY, for Defendants.
DECISION AND ORDER
Plaintiff, Global Crossing Bandwith, Inc. ("Global"), brings this action against defendants OLS, Inc. and TeleUno, Inc., alleging claims arising out of the alleged breach of a contract for telecommunications services. Jurisdiction is premised upon diversity of citizenship pursuant to 28 U.S.C. § 1332. Currently pending before the Court are three motions: defendants' motion for summary judgment, plaintiffs cross-motion for "partial" summary judgment, and defendants' motion to strike certain materials that have been filed by plaintiff as part of its motion papers.
Global is a California corporation with its principal place of business in New York. OLS is a Georgia corporation with its principal place of business in Georgia, and TeleUno is a Delaware corporation with its principal place of business in Florida. TeleUno and OLS share at least some common management. See Dkt. # 27 ¶¶ 1, 2, # 29, ¶¶ 1, 2.
Global is telecommunications company that offers wholesale telecommunications services to other carriers. OLS and TeleUno are common carriers that offer basic telephone long-distance service. They are retail long-distance companies that service accounts but must utilize others, wholesale providers like Global who provide the actual communication network.
In August 2000, Global and OLS entered into a carrier service agreement ("OLS Agreement") whereby OLS agreed to purchase from Global certain telecommunications services for resale to OLS's customers. See Complaint Ex. A. The OLS Agreement was amended and renewed on various dates in 2002 and 2003. Id. Global and TeleUno entered into a similar agreement ("TeleUno Agreement") in October 2003. Dkt. # 24 Ex. 1.
Under the agreements, OLS and TeleUno agreed to pay Global certain minimum monthly charges. The OLS Agreement provided that beginning with the third month of the agreement, OLS would be liable for a minimum monthly usage charge ("MMUC") of $100,000, which would increase to $250,000 beginning with the eighth month. OLS Agreement § 3.8. The TeleUno Agreement provided that TeleUno and OLS would be jointly and severally liable for a $150,000 MMUC beginning with the first month of the agreement. TeleUno Agreement § 3.9.
Global submitted monthly invoices to OLS and TeleUno for services provided to them under their respective agreements. Global alleges that both defendants breached the agreements by failing to meet or pay the MMUCs under the agreements. Complaint ¶ 10; Plaintiffs Local Rule 56.1 Statement (Dkt. # 38) ¶ 10. The MMUCs are one of the principal areas of dispute between Global and defendants.
Another significant dispute concerned Global's imposition of charges for disputes involving changes in end-users' long-distance carriers. Generally, if a customer decided to change his primary long-distance service provider (commonly referred to in the industry as a "primary interexchange carrier" or "PIC") from his prior PIC to either TeleUno or OLS, the customer would be assessed a fee for the changeover by the customer's local telephone service provider. If the customer complained that he had never authorized the change, however, the local carrier would impose a charge ("primary interexchange carrier change" or "PICC" charge) on Global, which would then pass those charges on to either TeleUno or OLS.1
Defendants contested over $400,000 in PICC charges, asserting that the relevant records showed that the customers in question had not lodged PICC complaints, or that the customers had in fact selected OLS or TeleUno as their PIC, or long distance provider. Defendants allege that because Global threatened to disconnect their service if the PICC charges were not paid, defendants paid the charges despite their belief that the charges were invalid.
As these and other disputes continued to multiply, the relationship between Global and defendants got progressively worse. The end came in March 2005, when defendants terminated Global's services. Declaration of Geri Eubanks (Dkt. # 27) ¶ 75. Global continued to send invoices based on the MMUCs through June 2005, the enddate of the most recent contract. The unpaid MMUCs total about $1.3 million. Dkt. #25 ¶ 21.
Global filed the complaint in this action on August 9, 2005. Global asserts five causes of action. The first two are against OLS and TeleUno, respectively, alleging breach of contract for failing to pay MMUCs and other fees. The remaining causes of action are asserted, in the alternative, against both defendants: a claim based on theories of quantum meruit, unjust enrichment, and constructive trust, alleging that defendants have not compensated Global for the full value of the services rendered to them by Global; an "account stated" claim based on Global's statements of account and invoices issued to defendants; and a claim based on OLS's guaranty of TeleUno's performance under the TeleUno Agreement, and on both defendants' agreement that they would be jointly and severally liable for all MMUCs and termination fees imposed under the agreements. Based on these claims, Global seeks an award of the sums allegedly owed to it by defendants, together with costs, interest and attorney's fees pursuant to the agreements. Global also seeks the imposition of a constructive trust on revenues received by defendants derived from the services provided to them by Global, and other similar relief. Complaint at 8.
On October 10, 2005, defendants filed their answer in this action, together with nine counterclaims. The first counterclaim is for breach of contract, based on the events giving rise to the PICC charges, and various alleged improprieties in Global's billing and collection practices with respect to defendants. Dkt. # 5 ¶¶ 111-48. The second and third counterclaims are for tortious interference with contracts and tortious interference with prospective business relations, respectively, based on defendants' allegations that Global's various breaches of the agreements interfered with defendants' relationships with their existing and prospective customers. Id. ¶¶ 149-76. The remaining causes of action are for violations of the Federal Communications Act, 47 U.S.C. § 201, violations of New York General Business Law § 349, and other New York common law claims. Id. ¶¶ 177-211.
As stated, defendants have moved for summary judgment in their favor on their counterclaims, and dismissing Global's claims against them. Global has crossmoved for summary judgment dismissing defendants' counterclaims, and in Global's favor on its claims concerning the MMUCs and PICC charges.
Both sides have moved for summary judgment on the MMUC issue. Defendants contend that the MMUCs are an unenforceable penalty. Global contends that the MMUCs are a valid component of a bargained-for contractual provision, and that Global is entitled to collect these fees. I agree that Global is entitled to recover these fees.
The OLS Agreement provides at § 3.8 that if during any month to which an MMUC applies, OLS's net charges for services are less than the applicable MMUC, "OLS shall pay the shortfall." The agreement also provides that if it "is terminated prior to the time the Minimum Charge becomes effective (other than termination by OLS for an uncured breach by Global Crossing), OLS shall be liable for" an amount equal to the MMUC for the remaining portion of the unexpired term of the agreement. See OLS Agreement § 5.5. The MMUCs sought by Global in this action include both fees for months in which there was a shortfall and fees for the months remaining on the contracts after their termination by defendants. See Affidavit of Michael Lord (Dkt. # 37-3) ¶¶ 9-14.
In exchange for that commitment by OLS, Global agreed that, provided that the MMUCs and certain other commitments were met, OLS would receive a $25,000 credit commencing at the fourth billing cycle, and again commencing at the seventh billing cycle. OLS Agreement § 3.9. OLS also expressly agreed that the MMUCs for which it was liable were' "based on agreed upon minimum commitments on its part and corresponding rate concessions on Global Crossing's part, and are not penalties or consequential or other damages...." OLS Agreement § 3.11. The TeleUno Agreement contained similar provisions. See TeleUno Agreement §§ 3.9-3.11.
Notwithstanding these provisions, defendants contend that the MMUCs are unenforceable under both New York and federal law. Although defendants did not object during the several year terms of the contracts, they now argue that "the inherent character of the MMUC is a penalty," Defendants' Mem. of Law (Dkt. # 24) at 14, and that defendants should not be held liable for the MMUCs because they met their overall minimum commitments. In other words, defendants contend, their total usage over the entire term of the agreements exceeded the total MMUCs agreed to, so that they should not be penalized for failing to meet the MMUCs in any given month.
Although the agreements here are quite specific as to the payment terms of the contract, and they do not use the term "liquidated damages," that is what, on their face at least, the provisions allowing Global to collect the total unpaid MMUCs in the event of a breach by defendants provide for. See United Air Lines, Inc. v. Austin Travel Corp., 867 F.2d 737, 740 (2d Cir.1989) (...
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