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Ibasis Global, Inc v. Diamond Phone Card

October 21, 2011

IBASIS GLOBAL, INC., PLAINTIFF,
v.
DIAMOND PHONE CARD, INC., NASREEN GILANI, AND SAMSUDDIN PANJWANI, DEFENDANTS.



The opinion of the court was delivered by: Spatt, District Judge.

MEMORANDUM OF DECISION AND ORDER

The plaintiff, iBasis Global Inc. (the "Plaintiff" or "iBasis") commenced this action against the defendants, Diamond Phone Card, Inc. ("Diamond"), and its principals Nasreen Gilani, and Samsuddin Panjwani (collectively "the Defendants"), asserting a cause of action for breach of contract. Presently pending before the Court is the Defendants' motion pursuant to Federal Rule of Civil Procedure 14(a) ("Fed. R. Civ. P. 14(a)") to implead IP Horizon, LLC, Voice Solutions, LLC d/b/a DCI Voice Solutions, STX Communications, LLC, STX II, LLC, and Diamond Prepaid Phone Cards, LLC, and for leave to file a third-party complaint against them. For the following reasons, the Court grants in part and denies in part the Defendants' motion.

I. BACKGROUND

A. The Parties and the Agreements

The following facts are drawn from the complaint and the version of the proposed third-party complaint that the Defendants submitted on July 13, 2011.

1. The Parties

Plaintiff iBasis is a Delaware corporation with its principal place of business in Burlington, Massachusetts, whose business includes a variety of telephone related products and services, including providing international telephone call termination services. Defendant and proposed third-party plaintiff Diamond is a New York corporation, co-owned by New York residents Panjwani and Gilani. Diamond is a distributor of prepaid telephone products including calling cards.

The proposed third party defendants are: (1) IP Horizon, LLC, a limited liability company organized and existing under the laws of the State of Maryland ("IP Horizon"); (2) Voice Solutions, LLC d/b/a DCI Voice Solutions, a limited liability company organized and existing under the laws of the State of Maryland and an affiliate of IP Horizon ("DCI"); (3) STX Communications LLC, a limited liability company organized and existing under the laws of the State of New York ("STX"); (4) STX II LLC, a limited liability company organized and existing under the laws of the State of New York, which is alleged to have been formed by STX on February 26, 2009 ("STX II"); and (5) Diamond Prepaid Phone Cards LLC, a limited liability company organized and existing under the laws of the State of New York, and is alleged by the Defendants to be a wholly owned subsidiary of STX and/or STX II ("Diamond Prepaid").

2. The Service Contract

At an unspecified time, IP Horizon and Diamond entered into a contract for the provision of telecommunications services (the "Service Contract"). iBasis describes the Service Contract as an agreement whereby IP Horizon agreed to provide "call termination services" to Diamond in exchange for payment. (Compl., ¶ 9.) By contrast, the Defendants describe the Service Contract as an agreement by IP Horizon to provide Diamond with the telecommunication network and minutes associated with "Diamond Phone" brand products. Regardless of how the Service Contract is characterized, there is no dispute that at an unspecified time, IP Horizon assigned its agreement with Diamond, including all of its accounts receivable under the Service Contract, to DCI.

The Court notes that because DCI is the predecessor-in-interest to IP Horizon, for the time period following the execution of the Service Contract, the Defendants refer to the two entities interchangeably and iBasis cites actions by "IP Horizon and/or DCI". Accordingly, for the purposes of this motion, the Court will refer to IP Horizon and DCI with respect to any facts or allegations following the execution of the Service Contract as IP Horizon/DCI.

As part of a settlement of a dispute between iBasis and DCI, DCI assigned to iBasis its right to payment by Diamond under the Service Contract, as well as its right of action against Diamond for the money owed. According to iBasis, the Defendants breached the Service Contract by failing to pay IP Horizon/DCI more than $3.4 million for the call termination services.

For their part, the Defendants contend that as part of the agreement, IP Horizon "promised to provide its telecommunications services to Diamond at fixed usage rates and without local access fees" and "further promised that it would not disable the service affiliated with prepaid calling cards that were previously sold to Diamond by IP Horizon's exclusive distributor". (TPC ¶ 14.) According to the Defendants, although IP Horizon/DCI provided services under the Service Contract, it was not at the agreed upon rates, and therefore IP Horizon/DCI breached the Service Contract. In addition, the Defendants contend that IP Horizon/DCI breached the Service Contract by failing to honor the portion of the Service Contract obligating them to continue the services affiliated with the prepaid callings cards sold to Diamond by IP Horizon's exclusive agent. Finally, the Defendants argue that IP Horizon fraudulently induced them into entering into the Service Contract by falsely representing that the rates for their services would be capped.

3. The Consulting Agreement

On March 10, 2009, Diamond, Gilani, and Panjwani entered into an agreement with STX II whereby STX II was to take over Diamond's day-to-day operations in New York and New Jersey, and Gilani and Panjwani would act as fulltime consultants in exchange for "twenty-five percent (25%) of the profit of the cost of the goods" and, for the first eighteen months, "a minimum compensation of twenty-five thousand ($25,000.00) Dollars per month" (the "Consulting Agreement"). (TPC ¶ 23.) In addition, the Consulting Agreement named STX II as Diamond's "exclusive agent" responsible for the collection and management of Diamond's accounts receivable and the payment of Diamond's accounts payable. After STX II paid off Diamond's accounts payable, the Defendants were entitled to recover the remaining accounts receivable.

The Defendants allege that STX II and its related entities STX and Diamond Prepaid (collectively "the STX Parties") breached the Consulting Agreement by failing to pay Gilani and Panjwani for their consulting services, and by failing to assist Diamond with the collection of Diamond's accounts receivable and the payment of its accounts payable. As a result of this ...


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