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State Thruway Authority v. Level 3 Communications

March 30, 2012

STATE THRUWAY AUTHORITY, PLAINTIFF,
v.
LEVEL 3 COMMUNICATIONS, LLC, DEFENDANT.



DECISION and ORDER

I. INTRODUCTION

Plaintiff New York State Thruway Authority ("Plaintiff" or "NYSTA") commenced the instant action against Defendant Level 3 Communications, LLC ("Defendant"), seeking to recover for a breach of contract concerning the installation of a fiber optic network along the New York State Thruway right-of-way. Presently before the Court is Plaintiff's Motion for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. Dkt. No. 21 ("Motion"). Defendant opposes the Motion. Dkt. No. 22 ("Opposition"). For the reasons set forth below, Plaintiff's Motion is denied in part and granted in part.

II. BACKGROUND

In 1995, Plaintiff awarded Adesta LLC ("Adesta")*fn1 a contract to construct, maintain, and manage a 550-mile fiber optic network ("the Network") along the New York State Thruway. Plaintiff's Statement of Material Facts (Dkt. No. 21-10) ("PSMF") ¶ 1. Upon completion of the Network, Adesta entered into user agreements with various telecommunications providers that allowed the providers to use all or a portion of the Network. Id. ¶¶ 2-3. The telecommunications providers paid Adesta a fee for twenty years to use the Network and an annual fee to maintain the conduits, fiber optic cable, and regeneration facilities. Id. ¶ 4.

In 1999, Williams Communications, Inc. ("Williams"), Defendant's predecessor in interest, became one of the eight telecommunications providers that negotiated a user agreement with Adesta. Id. ¶ 5. Adesta and Williams executed a user agreement ("the Agreement"), pursuant to which Williams contracted to use the Network for the fee specified in the Agreement. Id. ¶ 6. Thereafter, Williams sought to obtain additional access points to the Network, but this required approvals from NYSTA.*fn2 Id. ¶ 8. Between 2000 and 2001, NYSTA and Williams entered into a series of seventeen Riders to Occupancy Permit Applications (the "Riders") that set forth the terms and conditions of Williams' additional fiber access connections to the Network at specified locations.*fn3 Id. ¶ 10. Williams agreed to pay, and did pay, an annual per fiber fee for additional access points for the Network and an annual set fee to access additional regeneration facilities. Id. ¶¶ 16-17.

In April 2002, Williams filed for protection under Chapter 11 of the Bankruptcy Code. PSMF ¶ 12. In October 2002, Williams emerged from bankruptcy as WilTel Communications Group ("WilTel"). Id. ¶ 13. In December 2005, Defendant acquired WilTel and took ownership of Williams' interest in the Network. Id. ¶ 14. In 2006, Defendant stopped making payments, but continued to use the Network and the access provided under the Riders. Id. ¶ 17.

In July 2009, NYSTA demanded payment of $2,070,266.36, which it claimed was owed under the Riders. PSMF ¶ 18. NYSTA further advised that if payment was not forthcoming within thirty days, it would commence legal action. Id. ¶ 19. Defendant did not make any additional payments to NYSTA, and filed a Petition for a Declaratory Ruling with the Federal Communications Commission on July 23, 2009. Id. ¶ 20.

On October 14, 2009, NYSTA commenced a collection action in New York state court seeking payment and interest and the matter was removed to this Court. Id. ¶ 21; Dkt. No. 1 ("Notice of removal"). NYSTA's initial Complaint sought damages for breach of contract as well as collection fees of twenty-two percent pursuant to Section 18 of the New York State Finance Law. Dkt. No. 1-1. On March 3, 2010, NYSTA submitted an Amended Complaint that included both its original causes of action and also sought damages for anticipatory breach and a declaratory judgment that: (1) NYSTA "has satisfied its obligations under the Agreements and that the Agreements are valid and enforceable"; (2) Defendant "is not excused from making payments under the Agreements"; and (3) Defendant "is estopped from asserting the enforceability of the Agreements based upon the grounds asserted in this litigation." Dkt. No. 8 ¶¶ 21-54. Following a conference with the parties, the Honorable Randolph F. Treece, United States Magistrate Judge, entered an Order staying discovery pending resolution of the present Motion. Dkt. No. 20.

III. STANDARD OF REVIEW

Rule 56 instructs a court to grant summary judgment if "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(c).

Although "[f]actual disputes that are irrelevant or unnecessary" will not preclude summary judgment, "summary judgment will not lie if . . . the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); see also Taggart v. Time, Inc., 924 F.2d 43, 46 (2d Cir. 1991). Further, "[w]here a plaintiff uses a summary judgment motion . . . to challenge the legal sufficiency of an affirmative defense--on which the defendant bears the burden of proof at trial," Fed. Deposit Ins. Corp. v. Giammettei, 34 F.3d 51, 54 (2d Cir. 1994), that plaintiff must show "that there is an absence of evidence to support [an essential element of] the [non-moving party's] case." DiCola v. SwissRe Holding (N. Am.), Inc., 996 F.2d 30, 32 (2d Cir. 1993) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986)) (alterations in original).

If the moving party has shown that there is no genuine dispute as to any material fact, the burden shifts to the non-moving party to demonstrate "the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex, 477 U.S. at 323. This requires the non-moving party to do "more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Corp., 475 U.S. 574, 586 (1986). At the same time, the Court must resolve all ambiguities and draw all reasonable inferences in favor of the non-moving party. Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000); Nora Beverages, Inc. v. Perrier Grp. of Am., Inc., 164 F.3d 736, 742 (2d Cir. 1998). The Court's duty in reviewing a motion for summary judgment is "carefully limited" to finding genuine disputes of fact, "not to deciding them." Gallo v. Prudential Residential Servs., 22 F.3d 1219, 1224 (2d Cir. 1994).

IV. DISCUSSION

To sustain a breach of contract claim, NYSTA must demonstrate: (1) the existence of a contract; (2) performance of the contract by one party; (3) breach by the other party; and (4) damages suffered as a result of the breach. First Investors Corp. v. Liberty Mut. Ins. Co., 152 F.3d 162, 168 (2d Cir. 1998). NYSTA has alleged a prima facie breach of contract claim: (1) a contract exists because the Agreement and Riders were signed by Williams and acquired by Defendant; (2) NYSTA performed the contract by providing the additional access points to Defendant; (3) Defendant has discontinued making any payments pursuant to the Riders; and (4) NYSTA has not realized the monies to which it is entitled under the terms of the Riders. However, Defendant asserts the following affirmative defenses: (1) there was no mutual assent because its predecessor Williams acted under economic duress; ...

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