Intelsat USA Sales Corp. v. Juch-Tech, Inc.
| Citation | 24 F.Supp.3d 32 |
| Decision Date | 10 March 2014 |
| Docket Number | Civil Action No.: 10–2095 RC |
| Parties | Intelsat USA Sales Corp., Plaintiff and Counter-Defendant, v. Juch-Tech, Inc., Defendant and Counter-Claimant. |
| Court | U.S. District Court — District of Columbia |
David I. Bledsoe, David I. Bledsoe, Esq., Alexandria, VA, for Plaintiff and Counter-Defendant.
Stephanie Ann Joyce, Jonathan E. Canis, Arent Fox LLP, Julia Kim Whitelock, Mark Leonard Shaffer, The Shaffer Law Firm, PLLC, Washington, DC, for Defendant and Counter-Claimant.
Granting in Part and Denying in Part Intelsat's Motion to Dismiss
In this contract dispute between two satellite communications companies, the defendant and counter-claimant alleges breach of contract, breach of the implied covenant of good faith and fair dealing, and fraud in the inducement. The plaintiff and counter-defendant moves to dismiss all three claims. For the reasons set forth below, the Court will grant the motion in part and deny it in part.
Plaintiff and Counter-Defendant Intelsat USA Sales Corp. (“Intelsat”) and Defendant and Counter-Claimant Juch-Tech, Inc. (“JTI”) are companies that operate in the satellite communications industry. In 2005, the parties entered into a contractual agreement titled the Non-Exclusive Service Agreement, 1st Am. Compl. Ex. 1, ECF No. 3 (“NESA”), under which JTI leased satellite capacity from Intelsat on two satellites so that JTI could provide its customers with communications services. See Am. Answer 1st Am. Compl. & Am. Countercls. ¶ 26, ECF No. 30.
In early 2009, the parties entered into an additional agreement, Am. Countercls. Ex. A, ECF No. 30–1 (the “Transition Agreement”), and a companion agreement, Service Order No. 22165, under which JTI agreed to lease additional satellite capacity from Intelsat in exchange for, among other things, Intelsat's sale of a Linkstar Hub (the “Atlanta Hub”) and assignment of Intelsat's contracts with the customers who were using that satellite capacity at the time. See Am. Answer 1st Am. Compl. & Am. Countercls. ¶¶ 27–28. JTI was to lease capacity on the IS1R satellite, which was already in orbit at the time, and then transition to IS–14, a satellite that would become operational several months later. See id. ¶ 27.
According to the allegations contained in its amended counterclaims, JTI claims that it did not need the additional capacity for itself, but was induced to enter the Transition Agreement and Service Order No. 22165 as a result of certain representations about the value of the customer contracts that Intelsat would assign. See id. ¶ 28. JTI alleges that Intelsat, through its agents, represented that once customers on IS1R were migrated to IS–14, there would be little capacity left on the IS–14 satellite. See id. ¶ 54. JTI also alleges that Intelsat provided JTI with a financial analysis of the contracts to be assigned under the Transition Agreement, showing that the revenues from the contracts would exceed the cost of JTI's lease, resulting in a profit for JTI. See id. ¶ 56.
But, JTI alleges, not everything was as it seemed. According to the allegations of JTI's amended counterclaims, Intelsat knew, but failed to disclose, that certain customers were not paying their bills and would not renew their contracts, others had been complaining about the poor service on the Atlanta Hub and IS1R for some time, and still others were threatening to terminate their contracts due to poor service. See id. ¶ 59. Moreover, JTI alleges that, once the Transition Agreement was executed, Intelsat failed to conduct the transition from IS1R to IS–14 in a manner that would minimize disruption of service, and failed to correct other technical problems that made it difficult for JTI to obtain customers and serve existing clients. See id. ¶¶ 33, 42.
JTI then fell behind on its payments to Intelsat. See id. ¶ 34. The companies entered a period of renegotiation between July and September of 2010, but JTI alleges that during that period Intelsat approached current and potential JTI customers in order to convince them to abandon JTI and sign on with Intelsat or another provider. See id. ¶ 35–36. JTI alleges that some of the statements Intelsat made to these clients about JTI were false or incomplete. See id. ¶ 47.
Both parties agree that their contractual relationship was terminated in October 2010. See 1st Am. Compl. ¶ 8; Am. Answer 1st Am. Compl. & Am. Countercls. ¶ 8. Intelsat initiated this litigation against JTI, filing a complaint for breach of contract and unjust enrichment on the theory that Intelsat performed all of its contractual obligations but that JTI refused to pay for the services rendered. See generally 1st Am. Compl. JTI filed a counterclaim alleging eleven causes of action, ranging from breach of contract under New York law to unfair competition under Canadian trademark law. See generally Answer 1st Am. Compl. & Countercls., ECF No. 10. After the Court granted in part and denied in part Intelsat's motion to dismiss JTI's original counterclaims, see generally Intelsat USA Sales Corp. v. Juch – Tech, Inc., 935 F.Supp.2d 101 (D.D.C.2013) (ECF No. 22), JTI filed an amended counterclaim that included seven counts: (1) breach of contract under New York law; (2) breach of the implied covenant of good faith and fair dealing under New York law; (3) fraud in the inducement under D.C. law; (4) tortious interference with contractual relations under D.C. law; (5) tortious interference with business relations under D.C. law; (6) defamation under D.C. law; and (7) unfair competition under the Canadian Trademark Act. See generally Am. Answer 1st Am. Compl. & Am. Countercls. By consent of the parties, Counts IV through VII have been dismissed. See Stipulation, ECF No. 42 (Counts VI and VII); Minute Order, Dec. 13, 2013 (Counts IV and V). Intelsat now moves to dismiss Counts I through III. See generally Intelsat's Mot. Dismiss Am. Countercls., ECF No. 37.
The Federal Rules of Civil Procedure require that a complaint contain “a short and plain statement of the claim” in order to give the defendant fair notice of the claim and the grounds upon which it rests. Fed.R.Civ.P. 8(a)(2) ; accord Erickson v. Pardus, 551 U.S. 89, 93, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007) (per curiam). A motion to dismiss under Rule 12(b)(6) does not test a plaintiff's ultimate likelihood of success on the merits; rather, it tests whether a plaintiff has properly stated a claim. See Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974). A court considering such a motion presumes that the complaint's factual allegations are true and construes them liberally in the plaintiff's favor. See, e.g., United States v. Philip Morris, Inc., 116 F.Supp.2d 131, 135 (D.D.C.2000). It is not necessary for the plaintiff to plead all elements of her prima facie case in the complaint. See Swierkiewicz v. Sorema N.A., 534 U.S. 506, 511–14, 122 S.Ct. 992, 152 L.Ed.2d 1 (2002) ; Bryant v. Pepco, 730 F.Supp.2d 25, 28–29 (D.D.C.2010).
Nevertheless, “[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). This means that a plaintiff's factual allegations “must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact).” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555–56, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (citations omitted). “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements,” are therefore insufficient to withstand a motion to dismiss. Iqbal, 556 U.S. at 678, 129 S.Ct. 1937. A court need not accept a plaintiff's legal conclusions as true, see id. nor must a court presume the veracity of the legal conclusions that are couched as factual allegations. See Twombly, 550 U.S. at 555, 127 S.Ct. 1955.
Federal Rule of Civil Procedure 9(b) requires that, “[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.” Fed.R.Civ.P. 9(b). The complaint must therefore “state the time, place and content of the false misrepresentations, the fact misrepresented and what was retained or given up as a consequence of the fraud.” Kowal v. MCI Commc'ns Corp., 16 F.3d 1271, 1278 (D.C.Cir.1994) (quoting United States ex rel. Joseph v. Cannon, 642 F.2d 1373, 1385 (D.C.Cir.1981) ). Rule 9(b), in other words, “requires that the pleader provide the ‘who, what, when, where, and how’ with respect to the circumstances of the fraud.” Anderson v. USAA Cas. Ins. Co., 221 F.R.D. 250, 253 (D.D.C.2004) (quoting DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7th Cir.1990) ).
If a pleading fails to satisfy the heightened requirements of Rule 9(b), courts should freely grant leave to amend. See Firestone v. Firestone, 76 F.3d 1205, 1209 (D.C.Cir.1996) (per curiam). Accordingly, courts “should reserve dismissal with prejudice for extreme situations where the pleader has had the opportunity to cure any deficiencies but either has not or cannot do so.” Anderson, 221 F.R.D. at 253 (internal quotation marks omitted).
JTI's breach of contract claim contains four theories of breach, alleging that Intelsat (1) failed to provide JTI the services agreed to in Service Order No. 22165 in the manner required by the NESA; (2) failed to remedy service failures as required by the NESA; (3) failed to conduct the transition of services from IS–1R to IS–14 in the period required to mitigate disruption; and (4) failed to deliver the customers it...
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