NET2GLOBE Intern. v. Time Warner Telecom of N.Y.

Decision Date14 July 2003
Docket NumberNo. 02 Civ.5004 VM.,02 Civ.5004 VM.
PartiesNET2GLOBE INTERNATIONAL, INC., Plaintiff, v. TIME WARNER TELECOM OF NEW YORK, Time Warner Telecom Holdings, Inc., and Time Warner Telecom General Partnership, Defendants.
CourtU.S. District Court — Southern District of New York

Ahmed A. Masoud, Massoud & Pashkoff, P.C., New York City, for plaintiff.

Gail Lee Gottehrer, Thomas G. Rohback, LeBoeuf Lamb Greene & MacRae, Hartford, CT, for defendants.

DECISION AND ORDER

MARRERO, District Judge.

Plaintiff Net2Globe International, Inc. ("N2G") commenced this action against defendants Time Warner Telecom Of New York, L.P., Time Warner Telecom Holdings, Inc., and Time Warner Telecom General Partnership (collectively, "TWTC") alleging violations of the Communications Act of 1934 (the "Communications Act"), as amended, 47 U.S.C. §§ 151 et seq. (2003), and related state law claims including breach of contract and tortious interference with contractual relations. TWTC likewise invokes applicable state law to assert counterclaims against N2G, including breach of contract, unjust enrichment, breach of the implied covenant of good faith and fair dealing, and fraud. Now before the Court are TWTC's and N2G's cross-motions for summary judgment pursuant to Fed.R.Civ.P. 56, and N2G's motion to dismiss the counterclaims pursuant to Fed.R.Civ.P. 12(b)(6). For the reasons set forth below, TWTC's motion is GRANTED and N2G's motion is GRANTED IN PART and DENIED IN PART.

I. BACKGROUND1

N2G is a telecommunications reseller that was certified by the Federal Communications Commission as such on May 10, 2002. TWTC is primarily a domestic telecommunications carrier; it provides very limited international long distance telephone service by subcontracting for access to routes owned and operated by international carriers like AT & T Corp. ("AT & T"), MCI Telecommunications Corporation ("MCI"), and Broadwing Inc. ("Broadwing").2 In March and May 2002, the parties executed certain contracts at issue here, respectively, the Local Exchange Service Agreement dated March 27, 2002 (the "March LSA") (reprinted as Ex. 1.C to Plaintiff's And Counter-Claim Defendant's Motion For Summary Judgment And To Dismiss Counter-Claims), and the Local Exchange Service Agreement dated May 3, 2002 (the "May LSA") (reprinted as Ex. 1.D to Plaintiff's And Counter-Claim Defendant's Motion For Summary Judgment And To Dismiss Counter-Claims). Pursuant to these agreements, TWTC would provide N2G long distance telecommunications carriage for specified twelve-month periods.3

The provisions reflected in the March LSA and May LSA are otherwise essentially the same, and both contracts incorporate TWTC's applicable tariffs, specifically, the Terms and Conditions of International Switched Voice Service Provided by Time Warner Telecom effective January 29, 2002 (the "Tariff") (reprinted as Ex. 8 to Affidavit of Thomas G. Rohback In Support Of Defendants' Motion For Summary Judgment dated February 12, 2003 ("Rohback Aff.")), published in accordance with regulatory and administrative requirements. Service by TWTC to N2G commenced on or around May 10, 2002 and through June 20, 2002, N2G tendered weekly payments to TWTC. As of June 19, 2002, N2G entered into its own service contracts to resell international long distance service to eight third parties.

Shortly after service by TWTC to N2G commenced, however, TWTC discovered that all of the telephone calls initiated through N2G were directed to cellular rather than land-based telephones in Europe. According to TWTC, this circumstance resulted in considerably greater expenses to TWTC than expected because TWTC's international carrier subcontractors began, soon after TWTC commenced service to N2G, to charge much higher rates for calls terminating to cellular telephones in Europe. In turn, these differences in rates charged derived from the subcontractors' response to developments in European telecommunications regulations permitting such differential billing for calls terminating to cellular as opposed to land line telephones (the "European Differential").

In response to this state of affairs, TWTC migrated N2G's traffic from its primary international carrier subcontractor, AT & T, to networks operated by MCI and then Broadwing. It took such action allegedly because the latter two carriers implemented the European Differential in their pricing schemes after AT & T did. TWTC also invoked a safety valve clause in its Tariff, namely, § 2.2.4, to pass on to N2G the additional expenses resulting from the increased fees charged to TWTC by its international carrier subcontractors by reason of the European Differential. In the Statement Of Telephone Account dated July 1, 2002 (reprinted as Ex. 12 to Rohback Aff.), TWTC re-invoiced service already supplied to N2G to incorporate the European Differential, and it applied the adjusted expenses to future invoices (of which there was only one, the Statement Of Telephone Account dated August 1, 2002 (reprinted as Ex. 17 to Rohback Aff.)). N2G refused to pay the expenses appearing in these invoices, citing a clause in the March and May LSAs providing that the rates as specified in the parties' agreement would remain unchanged for the term of service (the "Fixed Rates Provision"). As of July 13, 2002, TWTC terminated service to N2G purportedly on account of N2G's non-payment.

The parties' cross-motions address numerous issues implicating various specific factual matters presented by the evidence. Accordingly, additional details will be provided as necessary in the course of the Court's discussion of the parties' arguments.

II. DISCUSSION
A. STANDARD OF REVIEW

A motion for summary judgment should be granted where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). See Rodriguez v. Hahn, 209 F.Supp.2d 344, 346 (S.D.N.Y.2002) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). All ambiguities and reasonable inferences presented by the underlying facts must be resolved in the light most favorable to the party opposing the motion. See Weinstock v. Columbia Univ., 224 F.3d 33, 41 (2d Cir. 2000); Trans Sport, Inc. v. Starter Sportswear, Inc., 964 F.2d 186, 188 (2d Cir.1992); Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 11 (2d Cir.1986).

The moving party bears the initial burden of "informing the district court of the basis for its motion" and identifying the matter that "it believes demonstrate[s] the absence of a genuine issue of material fact." Celotex, 477 U.S. at 323, 106 S.Ct. 2548. The nonmoving party "must support with specific evidence his assertion that a genuine dispute as to material fact does exist," id. at 324, 106 S.Ct. 2548, and "may not rely on conclusory allegations or unsubstantiated speculation," Scotto v. Almenas, 143 F.3d 105, 114 (2d Cir.1998); Heublein, Inc. v. United States of America, 996 F.2d 1455, 1461 (2d Cir.1993); Trans Sport, Inc., 964 F.2d at 188. The opposing party's showing of a genuine dispute must be grounded in concrete evidence sufficient to support a reasonable jury's rendering a verdict in his favor, and "[t]he mere existence of a scintilla of evidence in support of the [non-movant's] position will be insufficient." Anderson v. Liberty Lobby, 477 U.S. 242, 248, 256, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Heublein, Inc., 996 F.2d at 1461; Board of Managers of Soho Int'l Arts Condominium v. City of New York, No. 01 Civ. 1226, 2003 WL 21403333, at *6 (S.D.N.Y. June 17, 2003). Ultimately, "[]f the evidence is merely colorable, or is not significantly probative, summary judgment may be granted." Anderson, 477 U.S. at 249-50, 106 S.Ct. 2505; Mattel, Inc. v. Adventure Apparel, No. 00 Civ. 4085, 2001 WL 1035140, at *2 (S.D.N.Y. Sept.7, 2001); Ninacci Diamond & Jewelry Co. v. R.A.V. Investigative Servs., Inc., No. 95 Civ. 9302, 1998 WL 299926, at *4 (S.D.N.Y. June 9, 1998), aff'd, 173 F.3d 845, 1999 WL 220107 (2d Cir. 1999).

B. CHARGE INCREASE

The most logical starting point for the Court's analysis of the parties' claims concerns the construction of TWTC's Tariff § 2.2.4 and the Fixed Rates Provision because the interplay between these provisions implicates multiple arguments raised by the parties. Tariff § 2.2.4 provides:

The Company reserves the right to discontinue service, limit service, or to impose requirements as required to meet changing regulatory or statutory rules and standards, or when such rules and standards have an adverse material affect [sic] on the business or economic feasibility of providing service, as determined by the Company in its reasoned judgment.

The Fixed Rate Provision states, in relevant part, that

The agreed upon rate for the United Kingdom is $0.054 per minute anytime and will not rise during the term of the agreement. All other tariffed international rates in effect at the time of contract signing (list provided) will remain in effect and will not rise during the term of the agreement. Rates provided are for any and all calls to terminating countries.

As described earlier, TWTC is a domestic telecommunications carrier. (Deposition of Richard R. Davis dated September 5, 2002 ("Davis Dep.") at 150.) It owns no cable lines or routes to Europe, and augments its domestic service in order to provide international long distance service by subcontracting for such service with other carriers that do own and operate international routes and cables. (Affidavit of Richard R. Davis In Support Of Defendants' Opposition To Plaintiff And Counterclaim-Defendant's Motion...

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