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

September 28, 2012

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

INTRODUCTION

Plaintiff 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 pursuant to Sections 201 and 202 of the Communications Act (codified at 47 U.S.C. §§ 201, 202), and committed breach of contract and various torts against Telesis and its customers. Global Crossing brings counterclaims against Telesis claiming that Telesis, inter alia, failed to pay for services it received from Global Crossing.

By Order dated February 22, 2007, this case was referred to Magistrate Judge Marian W. Payson for pretrial proceedings. On July 8, 2011, defendant Global Crossing moved to preclude plaintiff Telesis from introducing evidence at trial (through Telesis' expert witness on damages) of alleged consequential damages, including lost profits, on grounds that such damages are prohibited under the contracts entered into by the parties. Specifically, Global Crossing alleges that the Carrier Services Agreement ("CSA") entered into by the parties contains specific, enforceable, limitations on damages which precludes Telesis from claiming or recovering consequential damages. Global Crossing contends that because Telesis' potential damages are limited to those damages specified in the CSA, the testimony of Telesis' proposed damages expert must be limited to only those damages allowable under the parties' agreement.

By Report and Recommendation dated March 22, 2012, Judge Payson recommended that Telesis be precluded from offering expert testimony on the issue of consequential damages. Specifically, Judge Payson determined that the limitation of liability clause set forth in the Carrier Services Agreement was valid and enforceable, and was not modified or abrogated by the parties' subsequent Concurrence Agreement. Judge Payson further determined that Telesis had failed to offer evidence that the limitation of liability clause was nullified by any gross negligence on the part of Global Crossing. Judge Payson recommended that because the limitation of liability clause is valid, Telesis should be limited to offering evidence of damages that are allowable under the contract, and should be precluded from offering evidence of consequential damages.

On April 9, 2012, Telesis timely filed objections to Judge Payson's Report and Recommendation, arguing that Judge Payson erred in recommending that its expert be precluded from testifying as to plaintiff's consequential damages. Specifically, Telesis contends that Judge Payson failed to consider evidence of gross negligence submitted by Telesis throughout these proceedings which would support a finding that the limitation of liability clause was invalidated as a result of Global Crossing's conduct. Telesis further argues that the issue of whether or not Global Crossing engaged in grossly negligent conduct, and thereby nullified the limitation of liability clause, is a question of fact to be decided by the trier of fact. Telesis contends that if the trier of fact determines that Global Crossing acted with gross negligence, then the testimony of its expert as to consequential damages would be relevant, and therefore should be allowed at trial.

For the reasons set forth below, I affirm and adopt Judge Payson's Report and Recommendation in its entirety, and grant defendant's motion to preclude.

STANDARD OF REVIEW

Pursuant to 28 U.S.C. § 636(b)(1), after the filing of a Report and Recommendation, any party may serve and file written objections to such proposed findings and recommendations. After such filing, [a] judge of the court shall make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made. A judge of the court may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge. 28 U.S.C. § 636(b)(1). I apply this standard to the following analysis.

DISCUSSION

The factual background of the relationship and disputes between the parties to this case have been set forth in several previous decisions issued by this court. For purposes of this motion to preclude, the salient facts are set forth as follows.

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. Telesis alleges that Global Crossing breached the agreement, and that as a result, it is entitled to damages.

The Carrier Services Agreement entered into by Telesis and Global Crossing contains a limitation of liability clause, which limits the type of damages that either party to the contract can recover in the event of a breach. Specifically, the CSA provides that:

In no event shall either Party be liable to the other Party for incidental and consequential damages, loss of goodwill, anticipated profit, or other claims for indirect damages in any ...


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