In re Worldcom, Inc., Case No. 02-13533 (AJG). (Confirmed Cases) (Bankr. S.D.N.Y. 7/9/2007)
| Decision Date | 09 July 2007 |
| Docket Number | Case No. 02-13533 (AJG). (Confirmed Cases),Adv. Proc. No. 04-04338 (AJG). |
| Parties | In re WORLDCOM, INC., et al., Chapter 11, Debtors. MCI WORLDCOM COMMUNICATIONS, INC., f/k/a WORLDCOM TECHNOLOGIES, INC., Plaintiff, v. COMMUNICATIONS NETWORK INTERNATIONAL, LTD., Defendant. |
| Court | U.S. Bankruptcy Court — Southern District of New York |
STINSON MORRISON HECKER LLP Attorney for Plaintiff Kansas City, MO.
W. Dennis Cross, Esq. Mark A. Shaiken, Esq. Jodi M. Hoss, Esq. Of Counsel
FLAMM, BOROFF & BACINE, P.C. Attorney for Defendant Blue Bell, PA.
W. Mark Mullineaux, Esq. Howard Gershman, Esq. Of Counsel
Before the Court are two motions. Plaintiff, MCI WorldCom Communications, Inc. ("WorldCom"), moves for summary judgment (the "Motion") against Communications Network International, Ltd. ("CNI") and CNI moves for leave to file a sur-reply memorandum (the "CNI Sur-reply") in opposition to the Motion (the "CNI Motion").1
Having reviewed the parties' pleadings and exhibits appended thereto and having held a hearing on this matter on March 6, 2007 (the "Hearing"), the Court grants the Motion in part regarding CNI's breach of a valid and binding contract and denies the Motion in part regarding the alleged amount of damages incurred by WorldCom. The CNI Motion is granted in part only insofar as it addresses WorldCom's argument that CNI failed to timely dispute certain charges. The Court denies the CNI Motion in part regarding all other issues raised in the motion.
The background information about WorldCom and its business relationship and litigation with CNI are set out in detail in the Court's earlier opinion. See MCI WorldCom Commc'ns, Inc. v. Commc'ns Network Int'l, Ltd. (In re WorldCom, Inc.), No. 02-13533 (AJG), Adv. Proc. No. 04-04338 (AJG), 2006 WL 693370, at **1-3 (Bankr. S.D.N.Y. Mar. 13, 2006). An abbreviated summary will suffice here.
CNI resells, to its own customers, telecommunications services from common carriers like WorldCom. In December 1997, WorldCom and CNI entered into a written "Intelenet Agreement" which, according to CNI, was eventually deemed inappropriate for the parties' relationship by WorldCom. In November 1998, CNI provided WorldCom with a copy of the WorldCom Rebiller2 Service Agreement (the "Rebiller Agreement") signed only by CNI. On January 29, 1999, WorldCom gave to CNI a copy of the Rebiller Agreement signed by both parties. On that same day, CNI signed an amendment to the Rebiller Agreement that WorldCom subsequently signed on February 4, 1999. WorldCom invoiced CNI monthly for services provided pursuant to the Rebiller Agreement.
On February 14, 2001, WorldCom filed suit against CNI in the United States District Court for the Eastern District of Pennsylvania to recover unpaid amounts for telecommunications services (the "Pennsylvania Action"). WorldCom based its claims on theories of contract, negotiable instrument, quantum meruit, and unjust enrichment. CNI answered only the contract claim and counterclaimed for fraud in the inducement, intentional nondisclosure, breach of contract, defamation, and punitive damages. On July 21, 2002 and November 8, 2002, WorldCom and certain of its direct and indirect subsidiaries commenced cases under the Bankruptcy Code.
Subsequent to WorldCom's bankruptcy petition, CNI filed a timely proof of claim that reasserted its counterclaims in the Pennsylvania Action. WorldCom objected to the claim and initiated an adversary proceeding against CNI, reasserting the claims in the complaint that WorldCom had filed in the Pennsylvania Action. CNI filed an answer that again only responded to WorldCom's contract claim. On February 22, 2005, WorldCom moved for judgment on the pleadings seeking dismissal of all the claims in CNI's counterclaim. WorldCom also moved for judgment on the issue of CNI's liability regarding its claims based on negotiable instrument, quantum meruit, and unjust enrichment, all of which CNI had failed to answer. CNI moved to file responses nunc pro tunc to the negotiable instrument, quantum meruit, and unjust enrichment counts of the complaint and also cross-moved for judgment on the pleadings.
On March 13, 2006, the Court granted WorldCom's motion for judgment on the pleadings to the extent that CNI's counterclaims were dismissed. See In re WorldCom, Inc., 2006 WL 693370, at *12. WorldCom's motion was denied, however, as to CNI's liability for unpaid services. See id. The Court also granted CNI's motion to file responses nunc pro tunc to WorldCom's negotiable instrument, quantum meruit, and unjust enrichment claims, and denied CNI's cross-motion for judgment on the pleadings. Id.
On April 26, 2006, CNI filed an answer responding to WorldCom's non-contract claims. On May 1, 2006, CNI filed a motion for leave to appeal. That motion was denied on December 6, 2006 by the United States District Court for the Southern District of New York. On January 1, 2007, WorldCom filed the Motion, which included WorldCom's Statement of Material Facts As To Which There Are No Genuine Issues To Be Tried (the "SOF"). CNI's response to the Motion did not specifically controvert the facts set forth in the SOF in correspondingly numbered paragraphs as required by rules 7056-1(c) and (d) of the Local Bankruptcy Rules for the Southern District of New York. CNI did, however, annex a declaration (the "First Declaration") from its secretary, Curtis Cooke, which addressed the issues in general. On February 28, 2007, WorldCom replied to CNI's response (the "WorldCom Sur-reply"). The CNI Motion was filed on March 5, 2007 — one day before the Hearing — contemporaneously with a Second Declaration of Curtis Cooke (the "Second Declaration") and a numbered response to the SOF.
The Motion reiterates WorldCom's contentions regarding the contract claim. WorldCom argues that CNI had a duty under the Rebiller Agreement to pay for services that WorldCom provided and that CNI breached this duty by failing to pay all the amounts owed to WorldCom since April 1999 despite WorldCom's demands to do so. WorldCom further asserts that it has been injured by CNI's breach in the amount of $500,886.353 plus reasonable attorneys' fees and costs.4 This amount is supported by the statement of account that was submitted as Exhibit A (the "Chart") to the Motion.
WorldCom asserts that it is entitled to summary judgment as a matter of law because of the Court's dismissal of CNI's counterclaims. Specifically, WorldCom claims that CNI is left with no defense as a result of the Court's previous ruling that rejected CNI's argument that its relationship with WorldCom is not governed by the Rebiller Agreement because of an alleged verbal agreement or because the Rebiller Agreement is unenforceable.
CNI claims that the facts do not support WorldCom's allegations that CNI breached the Rebiller Agreement or that CNI caused damages to WorldCom. Paramount to CNI's argument is a written agreement between CNI and Bruce Donahue, Sales Manager of WorldCom, providing that as of March 1, 1999, after the payment of $66,398.45, the balance due to WorldCom from CNI would be $0.00 (the "Donahue Agreement"). The Donahue Agreement also contains a clause stating that WorldCom will provide CNI "with a credit to be applied against the April 1999 bill for March charges for PIC-C overcharges back to and including the month of January 1998 through and including those of the April 1999 billing for March 1999." (First Declaration, Ex. B.) CNI appears to interpret this clause as a contingency agreement where WorldCom would pay $120,000.00 to CNI in credit after CNI pays the $66,398.45 balance. According to the First Declaration and CNI's response to the Motion, CNI remitted a check for $66,398.45 to WorldCom, but withdrew authorization for the check when WorldCom refused to apply the credits in accordance with the Donahue Agreement.
Additionally, CNI challenges WorldCom's alleged damages by highlighting various inconsistencies in the Chart, claiming that WorldCom "doctored" certain entries. In particular, CNI claims that charges specified as "Usage Amount" and "Unused Minimum" should be deducted from WorldCom's demand because these charges occurred after June 2, 1999, the alleged date that WorldCom terminated its relationship with CNI and cut off all services to CNI's customers. CNI also dismisses three other items on the Chart: "Other Charges" is challenged as an unidentified service for which CNI has no obligation to pay, "Finance Charge" for late payments is contested on grounds that WorldCom could not accurately determine the proper amount owed by CNI, and the charge for "Taxes" is disputed on grounds that the parties never entered into an agreement wherein CNI would pay taxes. CNI argues that based on the inconsistencies of the Chart and WorldCom's breach of the Donahue Agreement, CNI does not owe any money to WorldCom and is actually owed $98,484.00 by WorldCom.
WorldCom argues that the facts set forth in the SOF are deemed admitted given CNI's failure to properly respond to the SOF and that, accordingly, there exists no genuine issues of material fact. WorldCom further asserts that there are no doctored entries and argues that although Donahue signed the Donahue Agreement, he also wrote on the agreement that "all information must be reviewed by the account team to confirm all above listed." WorldCom supports this claim by attaching pages from a deposition taken of Donahue where he confirms his handwritten note on the Donahue Agreement. WorldCom then asserts that the account team did not confirm the Donahue Agreement. Finally, WorldCom argues that even if the Donahue Agreement exists, the filed-rate doctrine...
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