Global Crossing v. Locus Telecommunication

• Decision Date: 10 July 2009
• Docket Number: No. 06-CV-6078L.,06-CV-6078L.
• Citation: 632 F.Supp.2d 224
• Parties: GLOBAL CROSSING BANDWIDTH, INC., a California Corporation, Plaintiff, v. LOCUS TELECOMMUNICATION, INC., a Delaware Corporation, Defendant.
• Court: U.S. District Court — Western District of New York

632 F.Supp.2d 224

GLOBAL CROSSING BANDWIDTH, INC., a California Corporation, Plaintiff, v. LOCUS TELECOMMUNICATION, INC., a Delaware Corporation, Defendant.

No. 06-CV-6078L.

United States District Court, W.D. New York.

July 10, 2009.

COPYRIGHT MATERIAL OMITTED

Eric A. Linden, Jaffe, Raitt, Heuer & Weiss, P.C., Southfield, MI, for Plaintiff.

Charles H. Helein, Helein & Marashlian, LLC, McLean, VA, Eugene Welch, Harris, Chesworth, O'Brien, Johnstone, Welch & Leone, Rochester, NY, for Defendant.

DECISION AND ORDER

DAVID G. LARIMER, District Judge.

Plaintiff, Global Crossing Bandwidth, Inc. ("Global"), brings this diversity action against Locus Telecommunications, Inc. ("Locus"), seeking damages occasioned by Locus's alleged breach of a contract for telecommunications services between Global and Locus. Locus in turn has asserted several counterclaims against Global.

Both Global and Locus have moved for summary judgment. See Dkt. # 40, # 47. For the reasons that follow, Global's motion is granted in part and denied in part, and Locus's motion is granted in part and denied in part.

FACTUAL BACKGROUND

Global is a California corporation with its principal place of business in New York. Locus is a Delaware corporation with its principal place of business in New Jersey.

On May 26, 2000, Global and Locus entered into a carrier service agreement ("Agreement"), by which Global agreed to provide, and Locus agreed to purchase, network transport and other telecommunications services for one year. Complaint Ex. A. The Agreement was amended and extended several times, and was eventually continued on a month-to-month basis. Id.

At various times during the parties' contractual relationship, disputes arose about certain matters, the particulars of which will be addressed later in this decision. At least in part because of those disputes, on October 6, 2005, Nelson Gomez, Locus's Senior Director of Risk Management, sent Global a letter informing Global of Locus's intention to terminate the Agreement effective January 5, 2006. Gomez added that "Locus will continue to abide by its obligations under the Agreement until the Termination Date." Dkt. # 48-3 ¶ 29 and at 26.

On November 29, 2005, Global sent Locus a letter which stated, in part, "This letter serves as a notice of default for Locus Telecommunications, Inc." Id. ¶ 20 and at 19. The letter stated that there was a past-due balance on Locus's account of over $1.6 million, which Global said "must be paid within 48 hours." The letter also stated that if Locus did not "cure this breach" by paying that amount in full by 5:00 p.m. on Thursday, December 1, 2005, Global "may pursue its remedies" under the Agreement. Global added that those remedies "may include service termination" and that "[s]hould termination result, Global Crossing will immediately terminate services as of 5:00 PM EDT Thursday, December 1...." Id.

In a second letter dated the next day, November 30, 2005, however, Global informed Locus that "Global Crossing hereby revokes the Notice of Default served upon Locus Telecommunications, Inc. on November 29, 2005 and serves this notice in its place." Id. ¶ 22 and at 21.¹ That letter stated that "[a]though [Locus's] account ... has a total past due balance greater than $915,140.14, this is the amount that must be paid by 5:00 PM EST Monday, December 5, 2005." Except for the change of date from December 1 to December 5, the letter contained language identical to that in the November 29 letter concerning the possibility that Global might pursue its available remedies, including immediate termination of its services.

It appears that the parties may have made some attempt to resolve their disputes, but those efforts were not successful, and the Agreement, and Global's services under the Agreement, were terminated.²

Global commenced this action on February 6, 2006. The complaint asserts four causes of action, the first three of which seek $1.9 million in damages. The first cause of action asserts a claim for breach of contract, alleging that Locus failed to pay for services rendered by Global under the Agreement. The second cause of action is premised on theories of quantum meruit, unjust enrichment, and constructive trust, and alleges that Locus has received benefits under the contract for which it has not compensated Global. The third cause of action asserts an accountstated claim based upon Global's invoices to Locus.

The fourth cause of action, captioned "Enforcement of Security Interest," alleges that on August 20, 2001, Global and Locus entered into a security agreement by which Locus gave Global a security interest in Locus's existing and future accounts receivable, contract rights, and other assets, as security for Locus's obligations under the Agreement. See Complaint Ex. C (Dkt. # 1-4). Global alleges that because Locus has breached the Agreement, Global is entitled to enforce the security agreement and take possession of the collateral.

In its answer, Locus has asserted a three-count counterclaim, alleging that Global has improperly or erroneously imposed and sought to collect various charges against Locus. Locus asserts claims for breach of contract, violation of the Federal Communications Act ("FCA" or "Act"), and for attorney's fees under the Act. Locus seeks damages in an amount to be determined at trial.

PARTIES' MOTIONS

Global contends, first, that Locus's counterclaims are barred by certain events that occurred in the course of Global's bankruptcy proceedings. The relevant facts are described in more detail below, but in short, Global filed for Chapter 11 protection in January 2002, and its bankruptcy plan became effective in December 2003. Global now asserts that the bankruptcy court's confirmation of Global's plan, as well as a certain "cure order" issued by the bankruptcy court during the bankruptcy proceedings, bar all of Locus's counterclaims in this action.

Second, Global asserts that Locus failed to dispute Global's invoices in accordance with the procedures prescribed by the Agreement. Under the terms of the Agreement, Global argues, Locus has thereby waived its right to contest those invoices, and the invoices are binding on Locus.

Global also raises several arguments pertaining to the individual charges in dispute. For instance, Global seeks summary judgment dismissing one of Locus's counterclaims, which is sometimes referred to as the "inbound minutes" claim, in which Locus alleges that Global improperly billed Locus for calls delivered to Locus's switch, even if the calls were never completed to the party being called. Global contends that this counterclaim is flatly refuted by the terms of the Agreement, which, according to Global, provided that Global was entitled to bill Locus for such calls.

Similarly, Global seeks summary judgment on a claim concerning outbound calls to the United Kingdom ("UK"), in which Locus alleges that Global improperly billed it at wireless rates, which were higher than the rates applicable to landline calls. Global contends that this claim is defeated by the undisputed evidence showing that the calls in question did terminate at wireless phones in England. Global also advances other arguments relating to particular components of the claims at issue, which will be addressed below.

In its cross-motion, Locus contends that its counterclaims are not barred by Global's bankruptcy proceedings, because the counterclaims are based on a theory of recoupment. Locus contends that both relevant case law and Global's bankruptcy plan itself permit the survival of claims sounding in recoupment against a party in bankruptcy.

In addition, Locus argues that Global, through its course of dealing with Locus, effectively modified the Agreement, by never seeking to enforce the dispute procedures that Global now claims Locus failed to follow. Locus contends that Global has, therefore, implicitly waived any claims or defenses it might have had based upon Locus's alleged failure to comply with the dispute procedures called for by the Agreement.

Locus further contends that: Global's own breaches of the Agreement preclude it from recovering on its breach of contract claim; none of the charges for which Global seeks recovery are valid; Global's claim for unjust enrichment is precluded by Global's claim for breach of contract; Global has failed to establish the elements of an account-stated claim; all of Global's claims for charges due on or before February 5, 2004 are time-barred under the FCA; Global's calculations of its alleged damages are erroneous; and the minimum monthly usage charges imposed by Global are unenforceable.

DISCUSSION

I. Effect of Global's Bankruptcy Proceedings

On January 28, 2002, Global's parent corporation, Global Crossing Ltd., and fifty-four of its subsidiaries, including Global, filed a voluntary Chapter 11 petition in the United States Bankruptcy Court for the Southern District of New York. An automatic stay of all claims against Global and the other debtors in that action took effect on that date pursuant to 11 U.S.C. § 362.

The debtors' Plan of Reorganization ("Plan") became effective on December 9, 2003. The Plan provided, in part, that upon its effective date, all entities holding claims against the debtors as of that date would be permanently enjoined from commencing or continuing any action or proceeding to collect any property from the debtors on account of such claims. Dkt. # 41-14 ¶ 9.5(a). The Plan further stated that "[i]n no event shall the [debtors, following their reorganization pursuant to the Plan] have any liability or obligation for any Claim against ... the Debtors arising prior to the Effective Date, other than the Assumed Liabilities." Id.

In addition, on December 13, 2002, the bankruptcy court issued an order ("cure order") authorizing the debtors to assume certain executory contracts, and fixing the "cure cost" with respect to each of those contracts, i.e., the...