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Star Direct Telecom, Inc. v. Global Crossing Bandwidth

January 18, 2007

STAR DIRECT TELECOM, INC. AND, UNITED STATES TELESIS, INC., PLAINTIFFS,
v.
GLOBAL CROSSING BANDWIDTH, INC., DEFENDANT.



The opinion of the court was delivered by: Michael A. Telesca United States District Judge

ORDER

INTRODUCTION

Plaintiffs Star Direct Telecom, Inc., ("Star Direct") and United States Telesis, Inc., ("Telesis"), bring this action against defendant Global Crossing Bandwidth, Inc., ("Global Crossing") claiming that the defendant engaged in unjust, unreasonable, and discriminatory conduct pursuant to Sections 201 and 202 of the Communications Act (codified at 47 U.S.C. §§ 201, 202); breached several contracts, and committed various torts against the plaintiffs and plaintiffs customers. Specifically, plaintiffs allege in a Twenty-one Count Complaint that Global Crossing, inter alia: breached contracts in which it agreed to carry plaintiffs' telecommunications traffic to the United Kingdom; breached agreements with the plaintiffs with respect to the prices that Global Crossing would charge for its services; fraudulently induced plaintiffs to enter into agreements with Global Crossing; made material and fraudulent misrepresentations to the plaintiffs regarding its services and pricing; engaged in deceptive business practices; and tortiously interfered with plaintiffs' contractual, business, and prospective business relations.

DECISION

Defendant denies plaintiffs' allegations, and moves to dismiss the Complaint for lack of subject matter jurisdiction and for failure to state a claim. Specifically, defendant contends that plaintiffs can not state a federal cause of action pursuant to Sections 201 or 202 of the Communications Act, and therefore this court lacks federal question jurisdiction over the dispute. Defendant asserts that because there is no viable federal cause of action present, the court should decline to exercise supplemental jurisdiction over plaintiffs' state law claims. Global Crossing further argues that even if the plaintiffs may proceed pursuant to Sections 201 and 202 Communications Act, they have failed to state a cause of action pursuant to those sections, and therefore their claims must be dismissed. Finally, Global Crossing seeks dismissal of many of plaintiffs' state law claims for failure to state a cause of action.

BACKGROUND

According to the Complaint, plaintiffs Star Direct and Telesis, along with defendant Global Crossing, are companies engaged in the business of providing telecommunication services to other companies and consumers. The three companies are "common carriers" as that term is defined in the Communications Act ("the Act"), and as such are subject to many of the Act's rules and regulations.

I. The Telesis Agreement

On October 18, 2002, Telesis and Global Crossing entered into a contract pursuant to which Global Crossing agreed to provide certain telecommunications services to Telesis, including services allowing Telesis to provide telecommunication service to the United Kingdom (hereinafter the "Telesis Agreement"). After two years of proceeding under the Telesis agreement, Telesis, in December, 2004, requested a rate reduction form Global Crossing for telecommunication traffic provided to the United Kingdom. According to Telesis, Global Crossing agreed to the rate reduction request, and e-mailed confirmation of its agreement on January 5, 2005.

Shortly after Global Crossing agreed to the rate reduction for telecommunication traffic to the United Kingdom, Global Crossing allegedly shut down two of the four facilities used by Telesis to deliver calls to the United Kingdom, thereby compromising Telesis' ability to deliver such calls. When Telesis attempted to determine why Global Crossing shut down the facilities, Global Crossing allegedly demanded that Telesis agree to stop carrying any traffic to the United Kingdom, and threatened that if Telesis did not agree to such an arrangement, Global Crossing would terminate all service--including domestic service--being provided to Telesis.

Faced with losing its ability to provide domestic telephone services, Telesis allegedly agreed to Global Crossing's demand. Because Telesis lost its capability to provide calls to the United Kingdom via Global Crossing, Telesis was required to contract with alternative service providers at substantially greater rates, including rates higher that Telesis was able to charge its customers. According to Telesis, the reason that Global Crossing abruptly stopped Telesis' service to the United Kingdom is because Global Crossing itself was purchasing services from other providers, and was unable to pay for those services. Telesis further contends that defendant breached an agreement to apply lower interstate calling rates to certain calls, and instead applied higher intrastate calling rates to those calls.

II. The Star Direct Agreement

On December 1, 2000, plaintiff Star Direct and Global crossing entered into an agreement under which Global Crossing agreed to provide certain telecommunications services to Star Direct under agreed-upon terms and rates. (hereinafter the "Star Direct Agreement"). In April, 2004, Star Direct and Global Crossing entered into a memorandum of understanding pursuant to which the parties agreed to transfer Star Direct's account to Telesis. Essentially, under the terms of the memorandum of understanding, Telesis was to "take over" the Star Direct account, and the services formerly provided by Global Crossing to Star Direct would then be provided to Telesis under the terms and conditions set forth in the Telesis Agreement.

According to the Complaint, Global Crossing, despite agreeing to the transfer, never effectuated the transfer, and instead continued to bill Star Direct for services that were to have been transferred to Telesis. Moreover, Global Crossing failed to include traffic and usage generated by the Star Direct account towards the minimum usage requirement contained in the Telesis Agreement. As a result, Telesis incurred financial penalties for failing to meet its minimum usage requirement. Telesis claims that it would not have incurred those penalties had Global Crossing properly effectuated the transfer of Star Direct's account to Telesis. Although Telesis allegedly disputed the penalties and overcharges in accordance with the Telesis Agreement, in October, 2005, Global Crossing threatened to terminate service to Telesis unless Telesis payed the disputed charges. Global Crossing did not issue such a threat to Star Direct. After Telesis refused to pay the allegedly unauthorized penalties and overcharges, Global Crossing, on November 8, 2005, began terminating both Telesis and Star Direct's services. By December 1, 2005, Global Crossing had terminated all service to the plaintiffs.

DISCUSSION

I. Defendants' Motion to Dismiss

Rule 12(b)(1) of the Federal Rules of Civil Procedure provides for dismissal of the Complaint where the Court lacks subject matter jurisdiction over the dispute. Rule 12(b)(6) of the Federal Rules of Civil Procedure provides for dismissal of the Complaint where the plaintiff has failed to state a claim upon which relief can be granted. When evaluating a Rule 12(b)(6) motion, the court must ascertain, after presuming all factual allegations in the pleading to be true and viewing them in the light most favorable to the plaintiff, whether or not the plaintiff has stated any valid ground for relief. Ferran v. Town of Nassau, 11 F.3rd 21, 22 (2d Cir. 1993), cert. denied, 513 U.S. 1014 (1994). The court may grant a Rule 12(b)(6) motion only where "`it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'" Allen v. WestPoint-Pepperell, Inc., 945 F.2d 40, 44 (2d Cir. 1991) (quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957)).

In the instant case, defendant moves to dismiss the Complaint on grounds that the plaintiffs have failed to state a federal cause of action, and therefore this court lacks subject matter jurisdiction over the dispute. Global Crossing further contends that if the Court dismisses plaintiffs' federal causes of action, the Court should decline to exercise supplemental jurisdiction over plaintiffs' state law claims. In the alternative, defendant contends that certain of plaintiffs' state law claims fail to state a cause of action, and therefore, those cause of action should be dismissed.

II. This Court has Jurisdiction Over Plaintiffs' Communications Act Claims

Plaintiffs allege that Global Crossing's actions violated Sections 201(b) and 202(a) of the Communications Act. Section 201(b) of the Communications Act provides in relevant part that "[a]ll charges, practices, classifications, and regulations for and in connection with [] communication service [provided pursuant to this section] shall be just and reasonable ...." 47 U.S.C. § 201(b). Section 202(a) of the Communications Act provides that:

It shall be unlawful for any common carrier to make any unjust or unreasonable discrimination in charges, practices, classifications, regulations, facilities, or services for or in connection with like communication service, directly or indirectly, by any means or device, or to make or give any undue or reasonable preference or advantage to any particular person, class of persons, or locality, or to subject any particular person, class of persons, or locality to any undue or unreasonable prejudice or disadvantage.

47 U.S.C. 202(a). Plaintiffs contend that Global Crossing's rates and practices were unreasonable and discriminatory, and therefore in violation of the Communications Act. According to the plaintiffs, because the defendant violated the Communications ...


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