Vt. Tel. Co. v. FirstLight Fiber, Inc.
| Decision Date | 09 December 2020 |
| Docket Number | Docket No. 216-2020-CV-00312 |
| Parties | Vermont Telephone Company, Inc. v. FirstLight Fiber, Inc. |
| Court | New Hampshire Superior Court |
Plaintiff, Vermont Telephone Company, Inc. ("VTel"), has brought this action against Defendant, FirstLight Fiber, Inc. ("FirstLight"), arising out of FirstLight's termination of the parties' contract. The original complaint alleged claims for breach of contract (Count I), breach of the implied covenant of good faith and fair dealing (Count II), violation of the New Hampshire Consumer Protection Act (Count III), and attorney's fees (Count IV). On July 23, 2020, the Court granted FirstLight's motion to dismiss Count III, but gave VTel leave to amend. On August 24, 2020, VTel filed an amended complaint, in which it replaced Count III with a claim for violation of Vermont's Consumer Protection Act ("VCPA"). FirstLight again moves to dismiss Count III. VTel objects. For the reasons set forth below, FirstLight's motion to dismiss is GRANTED.
Factual Background
Because the amended complaint is virtually identical to the original, and because FirstLight seeks to dismiss a substantively similar claim, the Court incorporates herein the recitation of facts set forth in its prior order. On April 28, 2014, VTel entered into a lease agreement with 186 Communications, LLC ("186"), whereby VTel agreed to lease two dark fiber optic lines from 186. The lines run between Lebanon, New Hampshire and Boston, Massachusetts. The lease agreement was initially for two years but contained fourteen automatic options to renew, each for a two-year term.
Sometime after the execution of the lease, FirstLight acquired 186 and became 186's successor under the terms of the lease. In 2018, FirstLight sought to enter into an interconnection agreement with VTel. However, VTel had concerns about FirstLight's use of equipment manufactured by a company called Huawei Technologies Co., Ltd. ("Huawei"). Because Huawei was under scrutiny by the United States government related to potential national security threats, VTel asked FirstLight to represent and warrant that it would not use Huawei products while the parties' interconnection agreement was in effect. Rather than provide the requested representation and warranty, FirstLight filed a petition with the Vermont Public Utilities Commission ("VPUC"), seeking arbitration of the dispute. The arbitration proceedings received attention from Vermont-based news companies, such as Vermont Public Radio and VTDigger.org ("VTDigger").
On February 19, 2019, Vermont's Agency of Digital Service issued a cybersecurity directive, Directive 19-01, prohibiting the acquisition or use of Huawei equipment in Vermont's information technology or telecommunications systems, or by any vendor that provides services to the State of Vermont. A few days after Directive 19-01 went into effect, FirstLight withdrew its arbitration petition and notified VTel that it no longer sought an interconnection agreement between the companies.
After FirstLight withdrew its petition, the Managing Editor of VTDigger, Colin Meyn, contacted the CEO of VTel, Michel Guite, to ask about FirstLight's use of Huaweiequipment in its network. During this conversation, Guite offered to show Meyn VTel's network facilities in Montpelier and Stowe, Vermont. At the time that Meyn toured the facilities in June 2019, FirstLight was maintaining some of its equipment in the facilities. Some of this equipment was manufactured by Huawei. Because the equipment was in plain view, Meyn was able to take photographs of it. On July 1, 2019, VTDigger published an article that included pictures of the equipment and accused FirstLight of using banned Huawei equipment.
On July 3, 2019, FirstLight notified VTel that it would be terminating the lease agreement due to VTel's violation of the non-disclosure and confidentiality provisions of the agreement. Upon receipt of this notice, VTel filed a complaint with the VPUC and moved for a preliminary injunction to prevent FirstLight from terminating the lease. On November 6, 2019, the VPUC determined that it lacked jurisdiction over the dispute and dismissed the complaint. On November 21, 2019, FirstLight sent a final notice to VTel, stating that FirstLight was terminating the lease agreement because VTel "breached its duty of confidentiality to FirstLight set forth in Section 35 of the Agreement when it invited a reporter with the VTDigger publication into the secure central offices . . . to view FirstLight's collocated network equipment." (Am. Compl., Ex. 4.) FirstLight explained that it could not allow VTel a chance to cure its breach, because the disclosure of confidential information had already occurred.
Section 22 of the lease agreement provides, in pertinent part:
Lessee shall be in default if . . . Lessee breaches any . . . material term or obligation hereunder and fails to cure such breach within thirty (30) days of receipt notice from [FirstLight] . . . . Following the expiration of the thirty (30) day cure period provided for in this section, [FirstLight] may . . . terminate the affected Fibers and recover the Fibers, the [FirstLight] Cable System and any other facilities without further notice.
(Am. Compl., Ex. 1 at 13.) Moreover, Section 35 provides that:
[a]ny other confidential information relating to a Party's business or customers which is so designated by a Party, or which by its nature would be reasonably understood to be confidential, are proprietary . . . and shall not be divulged to any third parties.
(Id. at 16.) The lease agreement also contains a choice of law provision, which states that the agreement shall be governed by New Hampshire law. In addition to the foregoing, the Court notes the following facts from the amended complaint that are pertinent to the present motion: FirstLight holds itself out to the public as a seller or lessor of dark fiber, and markets dark fiber to consumers.
Analysis
In ruling on a motion to dismiss, the Court determines "whether the allegations contained in the pleadings are reasonably susceptible of a construction that would permit recovery." Pesaturo v. Kinne, 161 N.H. 550, 552 (2011). The Court rigorously scrutinizes the facts contained on the face of the complaint to determine whether a cause of action has been asserted. In re Guardianship of Madelyn B., 166 N.H. 453, 457 (2014). The Court "assume[s] the truth of the facts alleged by the plaintiff and construe[s] all reasonable inferences in the light most favorable to the plaintiff." Lamb v. Shaker Reg'l Sch. Dist., 168 N.H. 47, 49 (2015). The Court "need not, however, assume the truth of statements that are merely conclusions of law." Id. "The trial court may also consider documents attached to the plaintiff's pleadings, or documents the authenticity of which are not disputed by the parties[,] official public records[,] or documents sufficiently referred to in the complaint." Beane v. Dana S. Beane & Co.,P.C., 160 N.H. 708, 711 (2010). "If the facts do not constitute a basis for legal relief, [the Court will grant] the motion to dismiss." Graves v. Estabrook, 149 N.H. 202, 203 (2003).
In Count III of its amended complaint, VTel maintains that FirstLight's conduct surrounding the termination of the lease agreement violated the Vermont Consumer Protection Act, 9 V.S.A. § 2451 et seq. FirstLight argues Count III ought to be dismissed on two grounds: (1) it is barred by res judicata or collateral estoppel; and/or (2) the conduct complained of did not occur in commerce, and VTel is not a "consumer" as contemplated by the statute. The Court shall address each argument in turn.
Res judicata seeks to "avoid repetitive litigation in order to promote judicial economy and a policy of certainty and finality in our legal system." Osman v. Gagnon, 152 N.H. 359, 362 (2005). Thus, "[r]es judicata precludes the litigation in a later case of matters actually decided, and matters that could have been litigated, in an earlier action between the same parties for the same cause of action." Meier v. Town of Littleton, 154 N.H. 340, 342 (2006). A "cause of action" is "the underlying right that is preserved by bringing a suit or action." In re Estate of Bergquist, 166 N.H. 531, 535 (2014). It encompasses "all theories upon which relief could be claimed on the basis of the factual transaction in question." Id. (brackets omitted). "Thus, if several theories of recovery arise out of the same transaction or occurrence, they amount to one cause of action." Finn v. Ballentine Partners, LLC, 169 N.H. 128, 147 (2016). Three conditions must be met for res judicata to apply: "(1) the parties must be the same or in privity with one another; (2) the same cause of action must be before the court in both instances; and (3)a final judgment on the merits must have been rendered in the first action." Meier, 154 N.H. at 342.
"Collateral estoppel may preclude the relitigation of findings by an administrative board, provided that the following requirements are satisfied: (1) the issue subject to estoppel must be identical in each action; (2) the first action must have resolved the issue finally on the merits; (3) the party to be estopped must have appeared in the first action or have been in privity with someone who did; (4) the party to be estopped must have had a full and fair opportunity to litigate the issue; and (5) the finding must have been essential to the first judgment." Barry v. N.H. Dep't of Health and Human Servs., 170 N.H. 364, 367 (2017). Collateral estoppel should not be mechanically applied, but "should be employed with reason, equity, and fundamental fairness as ultimate goals." Id. at 368.
FirstLight argues that VTel raised a claim under the VCPA before the VPUC and maintains that the VPUC's dismissal of the claim constituted a final determination on the merits, preventing VTel from raising it again in...
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