Telecom Asset Mgmt., LLC v. Fiberlight, LLC, Case No. 14-cv-00728-SI
| Decision Date | 19 August 2016 |
| Docket Number | Case No. 14-cv-00728-SI |
| Citation | 203 F.Supp.3d 1013 |
| Parties | TELECOM ASSET MANAGEMENT, LLC, Plaintiff, v. FIBERLIGHT, LLC, Defendant. |
| Court | U.S. District Court — Northern District of California |
Alexander Paul Berg, Kollman and Saucier, P.A., Timonium, MD, Frank L. Kollman, Kollman & Saucier, P.A., Baltimore, MD, James Allen Carter, Michelle Q. Carter, Carter Carter Fries & Grunschlag, San Francisco, CA, for Plaintiff.
Julia D. Greer, Mark Luhe Hejinian, Coblentz Patch Duffy Bass LLP, San Francisco, CA, Lawrence Hugh Kunin, Simon Robert Malko, Morris, Manning and Martin, LLP, Atlanta, GA, for Defendant.
VERDICT IN CIVIL CASE: FINDINGS OF FACT AND CONCLUSIONS OF LAW
This is a civil case in which the parties jointly withdrew the jury demand. Dkt. No. 94 (Stip.). Following a three-day bench trial, in consideration of the evidence presented, the Court enters the following findings of fact and conclusions of law.
Plaintiff Telecom Asset Management ("TAM") is a limited liability company with its principal place of business in California. Dkt. No. 129 (Joint Prop. Findings) ¶ 1. TAM is a telecommunications services agent and consultant which uses its relationships and industry information to secure business transactions, in this case between two telecommunication carriers, defendant FiberLight, LLC ("FiberLight") and Verizon Wireless ("Verizon").1 Id.
Steven Strong is TAM's President and Timothy Burks is TAM's Chief Operating Officer ("COO"). Id. at ¶ 2.
FiberLight, LLC is organized in Delaware with its principal place of business in Georgia. Id. at ¶ 3. Among other services, FiberLight builds telecommunication networks for a number of its clients. Id.
Michael Miller served as Chief Executive Officer ("CEO") of FiberLight until the end of his employment on February 4, 2013. Kevin Coyne is FiberLight's Chief Financial Officer ("CFO") and has also served as its President and COO. Benjamin Edmond served as FiberLight's President of Sales & Marketing from November 30, 2010 until October 2012. Id. at ¶ 4.
On October 3, 2011, Strong and Burks of TAM met with Miller and Edmond of FiberLight at an industry conference. Id. at ¶ 11. At the meeting Strong and Burks shared that they were in contact with Verizon, and that Verizon was looking for different products and services to put into its network. Id. at ¶ 12; Dkt. No. 130 (Plaintiff's Prop. Findings) ¶ 9. Miller expressed a strong interest in this work, stating that he would "give his right arm" to do business with Verizon. Dkt. No. 130 ¶ 9. Previous to this, FiberLight had no success penetrating Verizon's channels in order to secure business. Id.
Strong or Burks then asked Miller or Edmond what FiberLight paid its sales agents. Id. at ¶ 10. Miller or Edmond explained that FiberLight's agent commissions were "in line with industry standards." Id. Strong or Burks then asked, "so, 10-15%?" Miller or Edmond responded to this question in the affirmative. The takeaway from the meeting was that Edmond would send to TAM a written agent agreement to formalize the parties' discussions. In other words, at the October 3, 2011 meeting, the parties entered into an "agreement to agree"—the material terms of which would be worked out later.
FiberLight, however, did not deter TAM from commencing work on FiberLight's behalf prior the written agreement being signed. Id. at ¶ 14.
Three days later, on October 6, 2011, Burks contacted Edmond to put in motion the first FiberLight-Verizon deal, hereinafter referred to as the "Houston-Bryan" deal. Dkt. No. 129 (Joint Prop. Findings) ¶ 17. On October 13, 2011, Edmond emailed to TAM a copy of FiberLight's standard written agent agreement. Id. at ¶ 18; see also Plaintiff Exh. 10. This was the first legally operative offer for agent services exchanged between the parties.
Section 4.1.1 of the agreement provided for agent commissions of between 10-15% of monthly recurring revenue, or "MRR," based on a sliding scale, with higher MRR for FiberLight yielding a higher percentage of commissions for the agent responsible. Dkt. No. 129 (Joint Prop. Findings) ¶ 19; see also Plaintiff Exh. 10 at 2.
Section 4.1.6 gave FiberLight the ability to modify the rates set forth in Section 4.1.1 by proposing new or different commission rates "on an individual case basis [ICB] to circuits that require special circumstances, such as construction , equipment or management." Id. (emphasis added). Section 4.1.6 also provided that FiberLight Dkt. No. 129 (Joint Prop. Findings) ¶ 19; see also Plaintiff Exh. 10 at 3.
This form agreement contained no provision for commissions on non-recurring revenue, or "NRR." See Plaintiff Exh. 10.
On or about November 18, 2011, TAM put in motion the second FiberLight-Verizon deal, hereinafter referred to as the "West Texas" deal. Dkt. No. 129 (Joint Prop. Findings) ¶ 24.
Sometime in December 2011, TAM put in motion the third FiberLight-Verizon deal, hereinafter referred to as the "Lubbock-Schertz" deal, as well as the fourth FiberLight-Verizon deal, hereinafter referred to as the "Central Texas" deal. Id. at ¶ 25; Dkt. No. 130 (Plaintiff's Prop. Findings) ¶ 24; Dkt. No. 131 (Def. Prop. Findings) ¶ 17.
FiberLight and Verizon signed a written letter of intent for the West Texas deal on or about January 4, 2012. Dkt. No. 129 (Joint Prop. Findings) ¶ 30.
There was still no contract for agent services in place between TAM and FiberLight.
On January 13, 2012, TAM provided a written redline to Edmond's initial written offer. Id. at ¶ 32; see also Plaintiff Exh. 32. This was TAM's first legally operative counteroffer, which extinguished FiberLight's initial offer. The redline retained the sliding scale of 10-15% MRR commissions and added a blank "[____]" for NRR. Dkt. No. 129 (Joint Prop. Findings) ¶ 32; see also Plaintiff Exh. 32 at 3-4. TAM's redline also retained the provision that projects requiring construction could be individually negotiated, or ICB. Dkt. No. 129 (Joint Prop. Findings) ¶ 32; see also Plaintiff Exh. 32 at 5.
On or about February 14, 2012, Strong emailed Edmond a summary of all of the projects TAM had brought to FiberLight along with a spreadsheet showing TAM's commissions at a rate of 15% of MRR and 15% of NRR. See Plaintiff Exh. 43. Edmond immediately replied to Strong's email, denying that the parties had agreed to "a flat 15% on everything." Id. ; see also Dkt. No. 129 (Joint Prop. Findings) ¶ 33.
The next day, Edmond sent a written redline back to TAM. Dkt. No. 129 (Joint Prop. Findings) ¶ 34. This redline extinguished TAM's counteroffer and became a new legally operative offer. The redline retained the 10-15% sliding scale commission payments for MRR, but provided for 2% of NRR.2 See Redline Agent Agreement 2/15/2012 (Def. Exh. 156-A and Def. Exh. 157) at 3-4. The requirement that any ICB Commission be made in writing prior to customer agreements being signed remained in the document. Def. Exh. 156-A and Def. Exh. 157 at 6.
The parties' negotiations eventually broke down, although the parties made various efforts through December 2012 to negotiate TAM's compensation in lieu of a signed agreement. Dkt. No. 129 (Joint Prop. Findings) ¶ 52. TAM continued to work on FiberLight's behalf for almost all of 2012. Dkt. No. 130 (Plaintiff's Prop. Findings) ¶ 52.
There are four deals for which TAM contends it is owed commissions: (1) Houston-Bryan; (2) West Texas; (3) Central Texas; and (4) Lubbock-Schertz. Dkt. No. 129 (Joint Prop. Findings) ¶ 38. The Court finds that, at all relevant times, TAM was acting in an agent role for FiberLight's benefit at FiberLight's request, despite the absence of a contract. Contra Dkt. No. 131 ¶¶ 16, 22.
The Houston-Bryan and Lubbock-Schertz deals were similar projects, under which FiberLight agreed to provide lit services with the option to convert to dark fiber. Dkt. No. 129 (Joint Prop. Findings) ¶ 39. Ultimately, both deals required monthly recurring payments (MRR) from Verizon to FiberLight, and they were solely MRR deals. Dkt. No. 131 ¶¶ 8, 15. The Houston-Bryan deal terminated in July 2016, the Lubbock-Schertz deal terminated in December 2015. Id. at ¶ 26.
The West Texas and Central Texas deals were similar projects, in that they involved large scale networks on which FiberLight would be paid for a twenty-year term for thousands of route miles of dark fiber. Dkt. No. 129 (Joint Prop. Findings) ¶ 40. The contracts for both West and Central Texas had large, non-recurring revenue (NRR) payments at the outset by Verizon to FiberLight to cover costs such as construction, in addition to monthly recurring revenue (MRR) to cover costs such as maintenance. See Dkt. No. 131 ¶¶ 13, 20. Unlike Houston-Bryan and Lubbock-Schertz, the MRR payments on West and Central Texas are to be paid over 20 years. Id.
FiberLight and Verizon executed Master Service Agreements on or about March 4, 2012. Dkt. No. 129 (Joint Prop. Findings) at ¶ 41. FiberLight and Verizon executed a service order form (SOF) for Houston-Bryan on or about March 30, 2012. Id. at ¶ 42. FiberLight and Verizon executed an SOF for Lubbock-Schertz on or about March 30, 2012. Id. at ¶ 43. FiberLight and Verizon executed an indefeasible right of use (IRU) agreement and SOF for West Texas on or about June 28, 2012. Id. at ¶ 44. FiberLight executed an IRU agreement and SOF for Central Texas on or about November 27, 2012. Id. at ¶ 45. Both Edmond and Miller testified that the Houston-Bryan, West Texas, and Lubbock-Schertz projects between FiberLight and Verizon would not have...
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