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Katel Limited Liability Co. v. AT&T Corp.

May 27, 2010



KATEL Limited Liability Company appeals from a judgment entered by the United States District Court for the Southern District of New York (Holwell, J.), dismissing by summary judgment its claims against AT&T Corporation, which allege breach of contract and tortious interference with contractual relations, and seek relief under the International Telecommunications Regulations. We affirm.

The opinion of the court was delivered by: Dennis Jacobs, Chief Judge

Argued: February 4, 2010

Before: JACOBS, Chief Judge, POOLER and KATZMANN, Circuit Judges.

In 1993 or 1994 (the date is disputed), AT&T Corporation ("AT&T") entered into an International Telecommunications Services Agreement ("Agreement") with KATEL Limited Liability Company ("KATEL"), an international telecommunications carrier, to govern the exchange of phone calls between AT&T in the United States and KATEL in Kyrgyzstan. The essence of the Agreement was that KATEL would build the necessary infrastructure in Kyrgyzstan, and AT&T would use that infrastructure for a fee. The parties began exchanging telecommunications traffic shortly afterward. In 1997, AT&T began sending its telecommunications traffic to Kyrgyztelecom ("KT"), a competitor of KATEL. Soon thereafter, AT&T began using an intermediary service to route its calls to Kyrgyzstan and stopped paying KT; moreover, since it was no longer using KATEL's services, it was not paying KATEL, either.

KATEL bought an assignment of rights from KT, and sued AT&T in the United States District Court for the Southern District of New York (Holwell, J.) on March 28, 2002, claiming breach of contract, tortious interference with contractual relations, and an entitlement to fees pursuant to the International Telecommunications Regulations. The district court granted summary judgment to AT&T on all claims, and this appeal is taken from the judgment.

We affirm.


The controversy turns on the interplay between two paragraphs of the Agreement. Paragraph 7 provides, inter alia, that "as soon as KATEL and AT&T establish direct circuits, the parties will begin routing traffic between the Republic of Kyrgyzstan and the United States on these circuits, using the ['indirect'] transit routes via Russia and Turkey only when direct circuits are not capable of carrying the offered traffic."*fn1 Paragraph 19, entitled

"Non-Exclusive Privileges," provides that "[n]othing in this Agreement shall be deemed to restrict or prejudice the rights of either party to enter into similar service agreements with other parties."

Transmission arrangements. In 1993 or 1994, AT&T and KATEL entered into the Agreement and began sending telecommunications traffic to one another. In early 1997, AT&T contracted with KT to provide international telecommunications services in Kyrgyzstan; at the same time, AT&T stopped sending traffic to KATEL (and has sent none since). But soon thereafter AT&T stopped paying KT for its call termination services. On October 11, 1999, representatives from AT&T, KATEL, and KT met at AT&T's New Jersey headquarters. AT&T conceded that it owed money to KATEL or KT or both, but the parties could not resolve the muddle, and KATEL initiated this litigation.

In the meantime, AT&T continued sending direct and indirect traffic to KT until May 2002, at which point it adopted a different method of routing calls into Kyrgyzstan: "refile." Under a refile arrangement, the originating carrier (AT&T) sends the traffic to a third-party carrier, and pays it; the third-party carrier then sends the traffic into the terminating country and pays the terminating carrier. (The FCC has recognized refile as an economically rational way for an international telecommunications provider to structure its business dealings with other carriers. See In re Int'l Settlement Rates, 12 F.C.C.R. 19806, 19811-12 (Aug. 18, 1997)). Thus AT&T delivers the calls to the third party and does not deliver the calls to Kyrgyzstan directly or indirectly. In short, AT&T washed its hands of business in Kyrgyzstan.

Litigation. On March 28, 2002, KATEL sued AT&T in the Southern District of New York. Recognizing that KT might be a necessary party, KATEL unsuccessfully invited KT to join the litigation. To forestall any possible Rule 12(b)(7) motion, KATEL bought an assignment of KT's rights against AT&T (through May 2002). KATEL and KT executed a six-page "Russian Language Assignment," and (on the same day) an "English Language Assignment" that was intended to replicate the Russian Language Assignment and that could be used by KATEL to defeat a Rule 12(b)(7) motion.

On September 4, 2003, KT intervened in the KATEL-AT&T lawsuit and moved to compel arbitration against KATEL pursuant to the terms of the Russian Language Assignment.*fn2 (KATEL contends that KT's intervention was inspired by AT&T.) AT&T then moved to file an interpleader counterclaim by which it would deposit with the district court the sum of $1,120,199.04, the amount that all parties agreed was owed to KATEL and/or KT for the period 1997 through May 2002. The court granted AT&T's motion; the parties stipulated that this was the amount owed; and the KATEL-KT litigation was stayed pending the outcome of their arbitration, which was to determine how the interpleaded funds would be divided between them. The arbitrator ultimately ruled that KATEL was entitled to the full amount, and on October 31, 2006, the district court ordered that the funds be disbursed to KATEL.

Meanwhile, in the KATEL-AT&T litigation, the parties had filed cross-motions for summary judgment. At oral argument on February 9, 2006, KATEL argued that: (1) AT&T breached the Agreement by failing to adhere to Paragraph 7's requirement that it use KATEL's infrastructure to send calls to Kyrgyzstan; (2) AT&T tortiously interfered with KATEL's business relations with KT; and (3) AT&T owed reimbursement to KATEL for traffic sent by AT&T to Kyrgyzstan--even for periods when ...

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