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Star Direct Telecom, Inc. and, United States Telesis, Inc v. Global Crossing Bandwidth

December 31, 2010

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

and

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 in violation of 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.

By Decision and Order dated January 18, 2007, I dismissed 14 of the 21 counts of the original Complaint. Thereafter, the defendant Answered the Complaint and filed Counterclaims against the plaintiffs.

Global Crossing now moves for summary judgment against the plaintiffs with respect to the remaining counts of the plaintiffs' Complaint. Global Crossing contends that there are no material facts in dispute, and that as a matter of law, it is entitled to judgment in its favor. Global Crossing further moves for summary judgment against Telesis with respect to its Counterclaim seeking $1,281,590.11 for amounts due and owing from Telesis. Plaintiff Telesis opposes defendant's motion. On September 18, 2009, plaintiff Star Direct filed for Chapter 7 Bankruptcy in the Central District of California. According to counsel for Star Direct, Star Direct has no assets, and therefore, has discontinued any participation in this action. (See Docket item no. 179)

For the reasons set forth below, I grant in-part and deny in-part the defendant's motion for summary judgment.

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.

On December 1, 2000, Star Direct entered into a carrier services agreement with Global Crossing pursuant to which Global Crossing agreed to provide certain telecommunications services to Star Direct under agreed-upon terms and rates. (hereinafter the "Star Direct Agreement"). Almost two years later, On October 18, 2002, Telesis and Global Crossing entered into a Carrier Services Agreement, pursuant to which Global Crossing provided, for a fee, certain telecommunications services to Telesis (hereinafter the "Telesis Agreement"). The Star Direct and Telesis Agreements are virtually identical with respect to the services to be provided by Global Crossing. Each agreement included "minimum monthly usage" provisions, pursuant to which Telesis and Star Direct agreed to use a minimum amount of Global Crossing's services, or pay a monetary penalty for failing to meet the minimum usage requirements. Although the Carrier Services Agreements were largely identical, Telesis contends that Star Direct received preferential pricing in its agreement. According To Telesis, it acquired Star Direct in April, 2004, for the purpose of gaining access to the favorable rates available to Star Direct.

After Telesis' acquisition of Star Direct, Global Crossing entered into a Concurrence Agreement with Star Direct and Telesis pursuant to which the parties purportedly agreed to transfer the terms of Star Direct's Agreement to Telesis, and Telesis agreed to become responsible for payment of the account. Global Crossing simultaneously entered into an agreement with Star Direct in which the parties agreed to terminate Star Direct's Carrier Services Agreement. According to Telesis, the purpose of the Concurrence Agreement and the Star Direct Termination Agreement was to combine Star Direct and Telesis' accounts into one account with one monthly minimum usage requirement, and to apply Star Direct's favorable rates to the new, combined account. Global crossing contends that the monthly minimum usage provisions were not changed by the Concurrence Agreement.

Telesis claims that after the parties entered into the Concurrence Agreement, Global Crossing failed to implement the Agreement, and instead, continued to bill both Telesis and Star Direct (despite having terminated the Star Direct Agreement); continued to apply the higher Telesis rates rather than the lower Star Direct rates; and continued to enforce monthly usage minimums for both Star Direct and Telesis, all in breach of the Concurrence Agreement, the Star Direct Termination Agreement, and the Telesis Agreement. Global Crossing contends that it did apply the lower Star Direct rates, that Telesis failed to properly dispute any claims of overcharges pursuant to the Telesis Agreement, and that because the Concurrence Agreement did not change the monthly minimum usage requirements for Star Direct and Telesis, it was entitled to enforce each monthly minimum usage provision.

One of the services provided by Global Crossing to Star Direct and Telesis pursuant to their respective Carrier Services Agreements was the carrying of telecommunications traffic from the United States to the United Kingdom. Telesis alleges that Global Crossing breached the Telesis Agreement by refusing to carry Telesis's traffic to the United Kingdom. According to the Complaint, Global Crossing refused to carry Telesis' traffic because Global Crossing itself was purchasing services from other providers to carry the traffic, and was unable to pay for the services it was purchasing.

Global Crossing contends that it stopped carrying Telesis' traffic to the United Kingdom because Telesis' traffic was disrupting its network, and the network of British Telecom, which was receiving the traffic, all in violation of the Telesis Agreement. Specifically, Global Crossing contends that from January to March, 2005, Telesis began sending an unusually high number of short-duration calls to the United Kingdom, which had the effect of disrupting, or potentially disrupting the communications network of Global Crossing and British Telecom (Global Crossing's partner) which was receiving all of the Telesis Traffic. Global Crossing contends that pursuant to the Telesis Agreement, it had the discretion and authority to discontinue traffic received from Telesis if that traffic threatened to or did in fact disrupt its communications network, or the communications network of its partner British Telecom. According to Global Crossing, it warned Telesis on several occasions to reduce the volume of short-duration calls to the United Kingdom or face interruption or discontinuation of service. Global Crossing contends that Telesis refused to reduce the calls, and therefore, Global Crossing had no other option than to reduce, and then cancel, Telesis' service to the United Kingdom.

Telesis alleges that as a result of having its service to the United Kingdom discontinued by Global Crossing, in alleged breach of Telesis Agreement, it suffered damages in that it was forced to find another service provider and pay higher rates for service to the United Kingdom.

Telesis further contends that Global Crossing breached an oral agreement to apply lower interstate calling rates to certain calls, and instead applied higher intrastate calling rates to those calls. Global Crossing denies entering into such an agreement, contends that there is no record of such an agreement, and further argues that even if there were an oral agreement to change rates, such an agreement is invalid under the Telesis Agreement, which specifically precludes oral modification of the Telesis Agreement.

In its Counterclaims, Global Crossing alleges that Telesis breached the Telesis Agreement by failing to maintain, or pay a penalty in lieu of maintaining, a monthly minimum usage of Global Crossing's services. Specifically, Global Crossing alleges that in consideration of receiving lowered rates, Telesis agreed to minimum usage requirements every month, and agreed to monetary penalties if it failed to meet its minimum usage requirements. Global Crossing alleges that Telesis failed to meet the minimum usage requirements, and failed to pay the monetary penalties assessed against it for failing to meet the usage requirements. Global Crossing further alleges that Telesis has failed to pay for services it has used, Star Direct also entered into a carrier services agreement with Global Crossing pursuant to which Global Crossing agreed to provide certain telecommunications services to Star Direct under agreed-upon terms and rates. (hereinafter the "Star Direct Agreement"). The parties entered into the Star Direct Agreement on December 1, 2000. 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 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, Star Direct contends that Global Crossing failed to include traffic and usage generated by the Star Direct account towards the minimum usage requirement contained in the Telesis Agreement. Star Direct claims that as a result of Global Crossings failures to abide by the new agreement, Telesis incurred financial penalties for failing to meet its minimum usage requirement. ...


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