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EJS-ASOC TICARET VE DANISMANLIK LTD. v. AT&T

December 7, 1994

EJS-ASOC TICARET VE DANISMANLIK LTD. STI, EDWARD J. STACKPOLE, AND ITIR STACKPOLE, Plaintiffs, against AMERICAN TELEPHONE & TELEGRAPH COMPANY AND UNSWORTH TRANSPORT INTERNATIONAL, INC., Defendants.


The opinion of the court was delivered by: SONIA SOTOMAYOR

 SONIA SOTOMAYOR, U.S.D.J.

 Memorandum Opinion and Order

 Defendant American Telephone and Telegraph ("AT&T") moves for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure ("Rule 56"). For the reasons discussed below, the motion for summary judgment is granted.

 Background

 The facts in this case have been fully set forth in an Opinion and Order dated July 28. 1993 by then District Judge (now Circuit Judge) Pierre N. Leval, and in an Opinion and Order by me dated December 30, 1993. See Affidavit of David J. Nathan, sworn to October 12, 1994 ("Nathan Aff."), at Exhibits C and D. I assume familiarity with those opinions, and herein only briefly summarize those facts relevant to the matter now before me.

 Edward and Itir Stackpole own and manage EJS-ASOC Ticaret ve Danismanlik Ltd. Sti. ("EJS"), a company organized in Turkey which imports and distributes telecommunications equipment throughout that country. AT&T and EJS entered into a non-exclusive distribution agreement (the "Agreement"), which provided that AT&T's liability:

 
whether in contract, tort or otherwise shall not exceed the lowest of (i) the direct damages proven, (ii) the repair or replacement costs (including the costs of cover), or (iii) the purchase price of the Product Components, Firmware, Software or Related Documentation that directly gives rise to the claim. In no event shall AT&T or its parent or affiliates be liable to Distributor, any Retailer or any other company or entity for any incidental, reliance, consequential or any other indirect loss or damage (including lost profits or revenues) arising out of or in connection with the sale of Products or the supply of Services pursuant to this Agreement.

 Nathan Aff. at Ex. A, § 1.21 at p. 22.

 On October 8, 1991, EJS placed an order with AT&T for $ 5,562.50 worth of telephone equipment. When AT&T shipped the order, an additional 98 telephone sets not ordered by EJS were included in the shipment. When Turkish customs officials inspected the shipment, they believed that EJS and/or the Stackpoles were trying to smuggle goods into Turkey. The entire shipment was seized by Turkish authorities, and a criminal prosecution ensued. On April 27, 1992, plaintiffs commenced a "negligent misrepresentation" action against AT&T in this Court seeking, inter alia, three quarters of a billion dollars in damages for the financial and emotional losses they suffered as a result of the erroneous shipment.

 I begin by noting the unusual procedural posture of this motion. In moving for summary judgment on the question of damages, AT&T appears implicitly to admits its responsibility for the erroneous shipment, and I proceed on that assumption. AT&T seeks a ruling that, as a matter of law, the determination of the amount of damages owed to EJS is governed by the Agreement, and is limited to the $ 5,562.50 purchase price of the goods actually ordered by EJS. AT&T maintains that under clause (iii) of § 1.21, damages in this case are equal to the $ 5,562.50 purchase price because that is the lowest measure of damages provable in this case. EJS concedes that damages must be calculated in accordance with the terms of the Agreement. See Plaintiff's Memorandum in Opposition to Defendant AT&T's Motion for Summary Judgment (Plaintiff's Memorandum) at 5. EJS, however, argues that AT&T's liability should be measured by clause (i) of § 1.21 only, because that clause yields the highest measure of damages. EJS also seeks to have me interpret clause (iii) as applicable only if the damages alleged result from a defective product. If I accept AT&T's arguments, EJS urges me to find § 1.21's exclusion of consequential damages unconscionable.

 Discussion

 I. Rule 56: Summary Judgment

 Rule 56(c) provides that summary judgment is ...


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