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

October 15, 2012


The opinion of the court was delivered by: Michael A. Telesca United States District Judge



Plaintiff United States Telesis, Inc., ("Telesis"), brings this action against defendant Global Crossing Bandwidth, Inc., ("Global Crossing") claiming that the defendant engaged in unjust and unreasonable conduct pursuant to Section 201 of the Communications Act (codified at 47 U.S.C. § 201), and committed breach of contract and fraud by silence 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.

The Complaint in this action, which was originally brought by plaintiffs Star Direct Telecom, Inc., ("Star Direct"), and Telesis in 2005, included 21 Causes of Action. On September 18, 2009, Star Direct filed for Chapter 7 bankruptcy protection, and by letter dated February 24, 2010, counsel for Star Direct indicated that it would no longer be participating in this case (Docket item no. 179). Indeed all claims raised by Star Direct against Global Crossing were dismissed pursuant to my December 31, 2010 Decision and Order. Moreover, 17 of the 21 original claims asserted in the Complaint have been dismissed. By Decision and Order dated January 18, 2007, 14 claims were dismissed, and by Decision and Order dated December 31, 2010, three additional counts of the Complaint were dismissed.

Telesis' remaining causes of action allege violation of Section 201 of the Telecommunications Act (as set forth in Count 2 of the Complaint); breach of contract (as set forth in Counts 5 and 6 of the Complaint)*fn1 ; and fraud by silence (as set forth in Count 13 of the Complaint). Telesis now moves for Summary Judgment on Counts Two, Five and Six of the Complaint on grounds that Global Crossing has admitted, and this court has found, that Global Crossing has breached the Carrier Services Agreement and the Concurrence Agreement, and therefore, Global Crossing is liable for breach of contract. Telesis contends that because it has established that Global Crossing breached the contracts, and that Telesis has suffered damages as a result of Global Crossing's breach, it is entitled to summary judgment in its favor. Telesis also seeks summary judgment dismissing Global Crossings' counterclaims for breach of contract, unjust enrichment, action on account stated, and enforcement of a security interest.

Global Crossing opposes plaintiff's motion on grounds that there has been no judicial finding of a breach of contract; Global Crossing has not admitted any material breach of contract; Telesis has failed to establish that it was damaged by any alleged breach of contract; and finally, that there are numerous material questions of fact in dispute as to whether it breached the contracts, and whether any alleged breach constituted a material breach.

For the reasons set forth below, I find that questions of fact exist as to whether Global Crossing committed a material breach of contract which preclude granting plaintiff's motion for summary judgment. I further find that plaintiff is entitled to summary judgment with respect to Count II of defendant's counterclaim.


Telesis and Global Crossing are companies engaged in the business of providing telecommunication services to other companies and consumers. The 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 (hereinafter the "Telesis Agreement"), pursuant to which Global Crossing provided, for a fee, certain telecommunications services to Telesis. 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, Star Direct received preferential pricing under the terms of its agreement.

Telesis sought to obtain the preferential rates that Star Direct was receiving from Global Crossing, and in April, 2004, it acquired Star Direct. On April 27, 2004, after Telesis had acquired 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 (particularly the favorable rates) to Telesis, and Telesis agreed to become responsible for payment of the account. At the time the Concurrence Agreement was entered into, Global Crossing also 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 (equivalent to Telesis' previous monthly minimum requirement), and to apply Star Direct's favorable rates to the new, combined account. Global Crossing contends that upon the signing of the Concurrence Agreement, the monthly minimum usage provisions of Star Direct and Telesis were combined into one larger monthly minimum usage requirement.

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) and continued to enforce monthly minimum usage requirements 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 to the Telesis account, and that because the Concurrence Agreement did not change the monthly minimum usage requirements for Star Direct and Telesis, it was entitled to enforce a combined monthly minimum usage provision. Telesis further ...

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