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4Connections LLC v. Optical Communications Group

March 27, 2009

4CONNECTIONS LLC, PLAINTIFF,
v.
OPTICAL COMMUNICATIONS GROUP, INC., DEFENDANT.



The opinion of the court was delivered by: Dora L. Irizarry, United States District Judge

MEMORANDUM AND ORDER

Plaintiff 4Connections LLC seeks to dismiss four counterclaims brought by defendant Optical Communications Group, Inc. arising out of an alleged breach of a telecommunications services contract for providing fiber-optic cables between sites in New York and New Jersey.*fn1

According to these counterclaims: (1) plaintiff failed to provide the cables by the agreed-upon date established in the contract; (2) the cables that plaintiff eventually did provide failed to meet the specifications set forth in the contract; (3) plaintiff fraudulently induced defendant into entering the contract; and (4) plaintiff's fraudulent misrepresentations violated the New York Public Service Law. Plaintiff moved to dismiss these counterclaims under Fed. R. Civ. P. 12(b)(6). For the reasons set forth below, the court holds that the counterclaims for plaintiff's failure to deliver the correct cables and fraudulent inducement survive the motion to dismiss. The remaining counterclaims are dismissed.

BACKGROUND

Defendant is a provider of wholesale telecommunications services to telecommunications carriers and other businesses. In order to provide such services, defendant uses inputs such as dark-fiber cables. One of defendant's customers is a company called Level 3. Defendant entered an agreement with Level 3 to provide connectivity between 60 Hudson Street, New York, New York, and 165 Halsey Street, Newark, New Jersey. Under this agreement, if defendant failed to establish this connectivity by a certain date in 2007, Level 3 would have the right to rescind their agreement.

In order to fulfill this obligation to Level 3, defendant contracted with plaintiff to provide two single-mode dark-fiber cables between the two sites. Before entering into the contract, defendant explained that its arrangement with Level 3 depended on plaintiff's timely delivery of the cables. Defendant claims that plaintiff orally promised to provide the cables by April 26, 2007, and the parties memorialized this promise in the 4Connections LLC Service Order Form ("Service Order") as the "Targeted Completion date." (Pl.'s Mem. Ex. A.) The Service Order also sets forth the required specifications for the cables. The Service Order became effective on April 9, 2007.

The parties do not dispute that the Service Order is part of their agreement; however, the parties do dispute whether a separate document, the 4Connections LLC Communications Service Tariff on file with the New Jersey Board of Public Utilities ("Tariff"), is also part of the parties' agreement. The Service Order provides that the transaction shall be "upon terms and conditions set forth in this Service Order and in the Company's tariff ('Tariff') on file with the New Jersey Board of Public Utilities ('BPU')." (Id.) The Service Order also explains that the Tariff, along with other documents, "shall constitute the 'Agreement' between the Parties in connection with the provision by the Company to Customers of the Services." (Id.) According to the Service Order, "[t]he terms, conditions and regulations of the . . . Tariff, are specifically incorporated herewith as if set forth in fully [sic] at length herein." (Id.)

Under the Tariff, plaintiff may deliver the cables up to 180 days after the Targeted Completion date without penalty. That provision states:

"the failure to deliver the Service(s) by . . . [the Targeted Completion date] shall not be an Event of Default under this Tariff or a Service Order. . . . [And] if 4Connections fails to deliver the service(s) on or before one hundred eighty (180) days after the Targeted Completion Date(s) set forth in a particular Service Order, Customer shall have the right, in Customer's sole discretion and as its sole and exclusive remedy, to terminate the Service Order in writing . . . ." (Id.) The Tariff also limits consequential damages in the event of a material breach, providing that:

"[i]n no event will [plaintiff] . . . be liable to [defendant] . . . for: (a) any loss of profit or revenue, or for any indirect, consequential, incidental, punitive or similar or additional damages, whether incurred or suffered as a result of unavailability of service(s) or facilities, performance or non-performance, termination, breach, or other action or inaction under this tariff . . . even if [defendant] advises [plaintiff] of the possibility of the loss or damage . . . except as specifically provided in this section with regard to outage credits." (Id.)

On its face, the Tariff appears to apply only to transactions occurring within New Jersey. It explicitly states that "[t]his tariff applies only for the use of the Company's Service(s) for communications between points in the State of New Jersey . . . ." (Id.) The Tariff, however, also contains a provision stating that "in the event that terms and conditions of a Service Order shall be inconsistent with this Tariff, the terms and conditions of the individual case base ("ICB") arrangement set forth in the Service Order will control." (Id.) The Service Order provides for "Single Mode Fibers delivered over a Dark Fiber lateral point to point" between "60 Hudson St, New York NY" and "165 Halsey St, Newark NJ." (Id.)

According to defendant, prior to entering the agreement, plaintiff misrepresented that it "was duly authorized to provide the services, and that Plaintiff had the ability to actually provide those services." (Def.'s Mem. at 18; see also Def.'s Answer and Counterclaims at ¶¶ 74-76.) Defendant also claims that plaintiff's website falsely represented that plaintiff was licensed to provide telecommunications services "nationwide." (Def.'s Mem. at 5.) At the time, plaintiff was not licensed to provide telecommunications services in New York.

Based on these representations, defendant believed that plaintiff would be able to deliver the cables by the Targeted Completion date. Therefore, defendant took on a $123,000 obligation to construct a collocation cabinet to house the cables. Plaintiff did not, however, provide the cables until August 5, 2007, over three months after the Targeted Completion date. Moreover, those cables failed to meet the agreed-upon specifications set forth in the Service Order. When plaintiff failed to deliver on the Targeted Completion date, defendant tried, but was unable to obtain the cables from another provider in time to satisfy its obligations to Level 3. Defendant claims that, as a result, Level 3 rescinded their agreement. Defendant now seeks to recover: (1) ...


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