IDT Corp. v. TYCO Grp., S.A.R.L.
| Decision Date | 05 June 2014 |
| Citation | 991 N.Y.S.2d 574,2014 N.Y. Slip Op. 04044,15 N.E.3d 329,23 N.Y.3d 497 |
| Parties | IDT Corp. et al., Respondents, v. TYCO GROUP, S.A.R.L., et al., Appellants. |
| Court | New York Court of Appeals Court of Appeals |
Dewey Pegno & Kramarsky LLP, New York City (Thomas E.L. Dewey of counsel), for appellants.
Robins, Kaplan, Miller & Ciresi, L.L.P., New York City (Hillel I. Parness, Richard A. Mescon and Oren D. Langer of counsel), for respondents.
For the last 15 years, the parties to this case have alternately negotiated and litigated over the development and use of a
telecommunications system. This lawsuit is the second to come to us in which IDT Corp. claims that Tyco International, Ltd. breached its obligation under a 2000 settlement agreement to negotiate additional agreements in good faith. In the previous lawsuit, we held IDT's claim to be unsupported by the record (IDT Corp. v. Tyco Group, S.A.R.L., 13 N.Y.3d 209, 215, 890 N.Y.S.2d 401, 918 N.E.2d 913 [2009] ). More negotiations took place after our decision, and IDT sued Tyco again in 2010.
We again reject IDT's claim. Parties who agree to negotiate are not bound to negotiate forever. It is clear on this record that the parties have reached an impasse and that IDT has no valid cause of action.
The relationship between the parties goes back at least to 1999, when IDT and Tyco (terms we use to include the parent corporations, IDT Corp. and Tyco International, Ltd., and their subsidiaries and affiliates) signed a memorandum of understanding relating to a joint venture that would develop an undersea fiber optic telecommunications system. Three lawsuits arising out of this proposed transaction were brought in 2000, and were settled by a Settlement Agreement dated October 10, 2000. Two later lawsuits, the one we decided in 2009 and the one we decide today, arose out of the Settlement Agreement.
As we explained in our earlier opinion:
(IDT Corp., 13 N.Y.3d at 212, 890 N.Y.S.2d 401, 918 N.E.2d 913 [footnote omitted] ).
In a round of negotiations stretching from 2001 to 2004, the parties failed to reach the “definitive agreements” by which the IRU was to be “documented.” In the course of the negotiations, Tyco proposed terms that were, in IDT's view, inconsistent with the terms of the Settlement Agreement. We said in our previous opinion, summarizing the record before us: (id. ). IDT sued Tyco in May of that year.
We affirmed a grant of summary judgment dismissing IDT's 2004 complaint. We agreed with IDT that the 2000 Settlement Agreement “was a fully enforceable contract” (id. at 213, 890 N.Y.S.2d 401, 918 N.E.2d 913 ), but held that Tyco's obligation under that contract to furnish IDT with capacity was subject to conditions—most important among them the negotiation and execution of the IRU—that were never met. We recognized the parties' obligation “to negotiate the terms of the IRU and other agreements in good faith” (id. at 214, 890 N.Y.S.2d 401, 918 N.E.2d 913 ), but held that Tyco had not breached its obligation merely by proposing (as distinct from insisting upon) terms allegedly inconsistent with the Settlement Agreement. We concluded that “the record does not support a finding that Tyco breached any of its obligations” (id. at 215, 890 N.Y.S.2d 401, 918 N.E.2d 913 ).
Five weeks after our decision, counsel for IDT sent a letter to Tyco demanding that Tyco “immediately comply with [its] obligations” under the 2000 Settlement Agreement by providing fiber optic capacity to IDT. Tyco replied that it had no further obligations under the Settlement Agreement—a position that it reaffirmed several times in the following months—but nevertheless agreed to negotiate. This round of negotiations was no more successful than the previous one, and IDT brought the present case in November of 2010, asserting separate causes of action for breach of contract and for breach of Tyco's duty to negotiate in good faith.
IDT's new complaint recounts a series of written and oral communications between IDT and Tyco in 2009 and 2010. This narrative concludes with the allegation that in an October 13, 2010 telephone conversation:
“Tyco continued to insist on terms that conflicted with the Settlement Agreement and made a definite and final communication to IDT of Tyco's intent to forgo its obligations under the Settlement Agreement, including its obligation to provide to IDT the use of the Wavelengths described in the Settlement Agreement for fifteen years and in a manner fully consistent with that described in the Settlement Agreement.”
The complaint is not more specific about what Tyco representatives allegedly said on October 13. The only document in the record that purports to summarize the October 13 conversation is an email sent the following day by Tyco's counsel. The email does not support the complaint's description of the conversation; it neither makes any nonnegotiable demands nor suggests that Tyco is unwilling to continue negotiating.
On Tyco's motion pursuant to CPLR 3211, Supreme Court, interpreting our previous decision to mean “that Tyco has no further obligations under the Settlement Agreement,” dismissed IDT's 2010 complaint for failure to state a cause of action (2011 N.Y. Slip Op. 33843[U], *6 [2011] ). The Appellate Division reversed, concluding that Tyco's “obligations ... did not have an expiration date” and that “the parties were obligated to continue to negotiate until either side insisted that the open terms be as set forth in [Tyco's] standard agreements” (IDT Corp. v. Tyco Group, S.A.R.L., 104 A.D.3d 170, 176, 957 N.Y.S.2d 309 [1st Dept.2012] ). The Appellate Division also held that “the defendants' statements that they had no further obligations to negotiate” were “an anticipatory breach of the contract” (id. at 176–177, 957 N.Y.S.2d 309 ), and that the result of the previous action did not bar IDT's present claims under the doctrine of res judicata or collateral estoppel (id. at 178, 957 N.Y.S.2d 309 ). Two Justices concurred in the result, agreeing that our decision in the previous action did not bar the present one and finding IDT's allegation, quoted above, that Tyco had insisted on terms in conflict with the Settlement Agreement to be sufficient “at this pre-discovery stage of the proceeding” to withstand a motion to dismiss (id. at 179, 957 N.Y.S.2d 309 [Friedman, J., concurring] ).
The Appellate Division granted Tyco leave to appeal, certifying to us the question of whether its order was properly made (2013 N.Y. Slip Op. 74325[U] [2013] ). We answer in the negative, reverse and reinstate Supreme Court's dismissal of the complaint.
As our 2009 decision makes clear, parties may enter into a binding contract under which the obligations of the parties are conditioned on the negotiation of future agreements. In such a
case, the parties are obliged to negotiate in good faith. But that obligation can come to an end without a breach by either party. There is such a thing as a good faith impasse; not every good faith negotiation bears fruit. As then-District Judge Leval explained in Teachers Ins. & Annuity Assn. of Am. v. Tribune Co., 670 F.Supp. 491, 505 (S.D.N.Y.1987) :
“[I]f, through no fault on either party, no final contract were reached, either because the parties in good faith failed to agree on the open secondary terms, or because, as often happens in business, the parties simply lost...
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