Opinion
Civil Action No. 95-3676 (NHP).
March 1, 2000.
Robert G. Leonard, Esq., Jeffrey Lipkin, Esq., DRINKER, BIDDLE SHANLEY, LLP, Florham Park, N.J., Attorneys for Plaintiff ATT Credit Corporation.
Joseph R. Creighton, Esq., Leonard A. Peduto, Jr., Esq., Patricia A. Cauldwell, Esq., CHAPMAN, HENKOFF, KESSLER, PEDUTO SAFFER, Roseland, N.J., Attorneys for Defendants/Third-Party Plaintiffs Transglobal Telecom Alliance.
James D. Carraway, Howard Spierer, Esq., Edward R. Barillari, Esq. ATT Corp.- Room 1146L1, Basking Ridge, N.J., Attorneys for Third-Party Defendant, ATT Corp.
THE ORIGINAL OF THIS LETTER OPINION IS ON FILE WITH THE CLERK OF THE COURT
Dear Counsel:
This matter comes before the Court on two motions, namely: (1) the motion by third-party defendant ATT Corporation for summary judgment on the Third-Party Complaint filed by defendants/third-party plaintiffs Transglobal Telecom Alliance, Inc. and James Carraway; and (2) the motion by third-party defendant ATT Corporation for partial summary judgment on its counterclaim for failure to make payments for services rendered against defendant/third-party plaintiff Transglobal Telecom Alliance. For the reasons stated herein, the motion by third- party defendant ATT Corporation for summary judgment on the Third-Party Complaint is GRANTED and the Third-Party Complaint filed by defendants/third-party plaintiffs Transglobal Telecom Alliance, Inc. and James Carraway is DISMISSED WITH PREJUDICE. Additionally, the motion by third-party defendant ATT Corporation for partial summary judgment on its counterclaim for failure to make payments for services rendered against defendant/third-party plaintiff, Transglobal Telecom Alliance is GRANTED.
The parties should consult the Order which accompanies this Letter Opinion for more specific instructions regarding ATT's counterclaim.
BACKGROUND
By way of background, on or about July 19, 1994, defendant/third-party plaintiff Transglobal Telecom Alliance, Inc. ("Transglobal") executed a Master Equipment Lease Agreement ("Agreement") which was accepted by plaintiff, ATT Credit Corporation ("ATT Credit"), on August 5, 1994. Pursuant to this Agreement, ATT Credit agreed to lease telephone equipment to Transglobal. At the same time, Transglobal executed Master Equipment Lease Agreement Schedule 00010 ("Schedule 00010"). According to Schedule 00010, ATT Credit leased to Transglobal an ATT Conversant Communications System and other related equipment ("the Leased Equipment") for a lease term of forty-eight months, commencing August 31, 1994, with monthly rental payments of $4,537.41.fn1On or about July 19, 1994, Transglobal executed a document acknowledging that the Agreement, Schedule 00010, and all other agreements constituted the entire agreement between Transglobal and ATT Credit relating to the Leased Equipment. Transglobal also executed a Master Equipment Lease Agreement Commencement Certificate ("Commencement Certificate"), in which Transglobal acknowledged delivery, acceptance, and proper working condition of the Leased Equipment.
Also on or about that same day, defendant/third-party plaintiff James D. Carraway ("Carraway") executed a Master Equipment Lease Agreement Guaranty ("Guaranty"), personally guaranteeing to ATT Credit the full and prompt payment, observance, and performance when due of all obligations of Transglobal under the lease.
Soon after the lease commenced on August 31, 1994, Transglobal's account became delinquent with ATT Credit. Transglobal made its November 1994 payment, but made no further payments. The Agreement and Schedule 00010 (collectively referred to as "the Lease") provided for a series of specific remedies to ATT Credit in the event of Transglobal's default. For example, if Transglobal failed to make any monthly payment within ten days of the due date, Transglobal would be obligated to pay ATT Credit a late charge of 5% of the monthly payment. It also obligated Transglobal to pay ATT Credit interest at a rate of 1½% per month.
In the nascent stages of the case, Transglobal and Carraway denied that they were in default in performing their obligations under the Lease documents and that no payments were due to ATT Credit. They alleged that the reason they had to discontinue their operations was that ATT Corporation ("ATT Corp.") breached its agreement with Transglobal which provided that ATT Corp. would furnish equipment, lines, and minutes to Transglobal to start up its call turnaround ("CTA") business. As a result, Transglobal joined ATT Corp. as a third-party defendant in this case for breach of this alleged agreement.
The telephone equipment was installed and operational on June 6, 1994.
On May 22, 1997, the Court issued an Amended Letter Opinion and Amended Order granting a motion by ATT Credit for summary judgment against Transglobal and Carraway and denying Transglobal and Carraway's cross-claim to compel discovery responses. The Court further ordered that Transglobal and Carraway were jointly and severally liable in the amount of $250,658.58, plus interest, legal fees, and costs of suit and ordered that ATT Credit take immediate possession of the leased equipment. Specifically, this Court found that a contractual relationship existed between ATT Credit and Transglobal, Transglobal breached the contract, and ATT Credit suffered damages. This Court also found that, because Transglobal breached the Lease and because Carraway personally guaranteed the terms of the agreement, without waiving any affirmative defenses, offsets and counterclaims, summary judgment was also appropriate as to Carraway.
The alleged agreement between Transglobal and ATT Corp. is now the subject of the present motions.
STATEMENT OF FACTS
Transglobal and Carraway filed a Third-Party Complaint against ATT Corp. wherein they alleged: (1) breach of contract; (2) breach of fiduciary duty; (3) fraud; and (4) negligent misrepresentation. See Third-Party Complaint .
The facts relevant to the Third-Party Complaint are provided herein. In Fall 1993, Carraway and his business associate, Michael Clifford ("Clifford"), neither of whom had any significant background in the telecommunications industry, began to explore possible business opportunities in the international long distance market. See Third-Party Complaint at ¶ 15; see also Deposition of Carraway at pages 21, 24, 28. In order to further this possible business opportunity, Clifford contacted several ATT Corp. employees. Eventually, Clifford was referred to Donald W. Smith ("Smith"), an executive of ATT Corp. who was based in South Florida and was responsible for handling ATT Corp.'s relations with foreign telephone companies in Central and South America. See id. at ¶ 16.
Smith agreed to meet with Clifford for the first time at 7:00 a.m. on January 1, 1994. According to Clifford, the meeting lasted approximately three hours during which Smith discussed the CTA business and the problems it was creating for ATT Corp. in his region. See id. at ¶ 17. Clifford also contends that, during this meeting, Smith proposed that ATT Corp. enter into a business relationship with Carraway and Clifford to jointly market and provide CTA service, at a low rate to their company, Transglobal, via a Contract Tariff, in Smith's region. See id. at ¶¶ 17-24; see also Affidavit of Michael K. Clifford at ¶ 11 ("Clifford Affidavit").
Transglobal and Carraway maintain that Clifford "accepted the offer as outlined by Smith." See id. at ¶¶ 24, 25. In his supporting affidavit, Clifford explained more specifically, "[a]fter a three and a half hour meeting, Mr. Smith and I shook hands on our agreement, subject to his meeting with Mr. Carraway and his being satisfied that we had the personal commitment and financial resources needed to implement the joint CTA project." See Clifford Affidavit at ¶ 11. According to Clifford, "Mr. Smith, Mr. Carraway and I met at Mr. Smith's ATT office in Coral Gables on January 5, 1994. Once Mr. Smith was convinced that Carraway and I had both real interest and real money to invest, our negotiations concluded and an agreement was reached." Seeid. at ¶ 12.
In response, ATT Corp. denies that an agreement was reached between the parties at any time.
Transglobal and Carraway filed a Third-Party Complaint wherein their claims against ATT Corp. essentially fall into two categories. First, Transglobal and Carraway contend that ATT Corp. breached an oral agreement, allegedly entered into in January 1994, to join in a partnership or joint venture with Transglobal for the purpose of marketing Transglobal's proposed CTA business. Second, Transglobal and Carraway allege that ATT Corp. breached its obligation pursuant to the oral agreement to provide telecommunications services to Transglobal under a contract tariff.
DISCUSSION
I. Standard of Review
The standard governing a summary judgment motion is set forth in Fed.R.Civ.P. 56(c), which provides, in pertinent part, that:
[t]he judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.
Fed.R.Civ.P. 56(c). A fact is material if it might affect the outcome of the suit under the governing substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).
Procedurally, the movant has the initial burden of identifying evidence that it believes shows an absence of genuine issues of material fact.Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). When the movant will bear the burden of proof at trial, the movant's burden can be discharged by showing that there is an absence of evidence to support the non-movant's case. Id. at 325. If the movant establishes the absence of a genuine issue of material fact, the burden shifts to the non-movant to do more than "simply show that there is some metaphysical doubt as to material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986).
In this matter, there are no genuine issues of material fact and therefore, summary judgment is appropriate.
II. Joint Marketing Contract
Transglobal and Carraway contend that ATT Corp. breached an oral agreement, allegedly entered into in January 1994, to join in a partnership or joint venture with Transglobal for the purpose of marketing Transglobal's proposed CTA business. In response, ATT Corp. denies that an oral agreement to enter into a joint venture was ever reached between the parties.
"A contract arises from offer and acceptance, and must be sufficiently definite `that the performance to be rendered by each party can be ascertained with reasonable certainty.'" Weichert Co. Realtors v. Ryan, 128 N.J. 427, 435 (1992) (citations omitted). Accordingly, if the parties agree on the "essential" terms and also manifest an intent to be bound by those essential terms, an enforceable contract will be created. See id.See also Graziano v. Grant, 326 N.J. Super. 328, 339-40 (N.J.Super.Ct. App. Div. 199 9). "Where the parties do not agree to one or more essential terms, however, courts generally hold that the agreement is unenforceable." Id. (citing Heim v. Shore, 56 N.J. Super. 62, 72-73 (N.J.Super.Ct. App. Div. 1959)).
This Court finds that there is no evidence that the parties even articulated, much less, agreed to the essential terms of an agreement to form a partnership- either verbally or in writing. In fact, the uncontroverted written evidence in this case demonstrates that the discussions between ATT Corp. and Transglobal regarding a joint marketing arrangement in the CTA business, either in Smith's region or anywhere else, never advanced beyond the preliminary stages of discussion. For example, in a letter dated January 6, 1994, Clifford, at the suggestion of Smith, wrote to Robert Baulch ("Baulch"), the ATT employee responsible for the negotiation of possible partnerships, seeking to open "further dialog" on the possibility of an alliance between Transglobal and ATT Corp. See Appendix of Exhibits and Excerpts of Deposition in Support of ATT Corp.'s Motion for Summary Judgment, Exhibit 1 at page 1. Clifford wrote that, based on "a couple of brief meetings with Mr. Donald W. Smith," Transglobal was "of the opinion that [its] Call Turnaround (CTA) business . . . would be a much more successful venture if we formed an alliance with ATT." See id. at page 1 (emphasis added). Clifford further noted that "an alignment with ATT would give our company a wonderful entre" into the business. See id. (emphasis added). Acknowledging that Transglobal " would look to ATT" to provide them with the best possible rates in order for the venture to be competitive, Clifford stated that it was Transglobal's" intent to structure a relationship with ATT and the Foreign Telephone Administrations that is a clear `win win' situation for all parties involved." See id. at pages 1- 2 (emphasis added). Clifford concluded that letter by suggesting that Baulch give him a call "to discuss a possible next step." See id. at page 2 (emphasis added).
In a letter dated January 31, 1994 from Clifford to Baulch and Mary Jane McKeever ("McKeever"), the ATT employee responsible for negotiating a contract tariff with Transglobal, Clifford stated that Transglobal planned "to work in a dedicated, exclusive alliance with a U.S. Carrier" and "[w]e would strongly prefer that alliance be with ATT due to the superior quality of your network and the known ethical behavior of your management." See id., Exhibit 2 at page 3. Clifford then identified the "benefits that we see for ATT entering into this `preferred provider' or `co-marketing' agreement with [Transglobal]" and listed Transglobal's "requests from ATT" as "lowest possible rates," "technical support," "and "marketing support." See id. at pages 4-5. He then concluded by stating that: "[w]e propose that ATT enter into this venture with us;" "[w]e propose a simple Letter of Intent be created, possibly as a `co-marketing' agreement of `key vendor' agreement, in order to proceed;" and "[w]e do hope we can work together on this venture." See id., Exhibit 2 at pages 6-7 (emphasis added).
Later correspondence between ATT Corp. and Transglobal demonstrates that the joint marketing proposal was never accepted by ATT Corp. For example, on March 10, 1994, Baulch wrote to Clifford confirming that he would be the sole person at ATT responsible for matters relating to "any potential partnership" between ATT and Transglobal." See id., Exhibit 4 (emphasis added). Clifford responded to Baulch by letter dated March 18, 1994 wherein he asserted that Transglobal" will not misrepresent to any party that a partnership with ATT is eminent [sic] or in the making . . ." while ATT continued to work to see if indeed a partnership is in both our mutual best interests." See id., Exhibit 5 at page 1 (emphasis added).
Similarly, Baulch wrote to Clifford that he was "continuing to work" on the issue of an ATT and Transglobal partnership. See id., Exhibit 6. Significantly, Baulch also pointed out that "[u]ntil we have concluded our evaluation and formalized any potential partnerships, no introduction by ATT to foreign PTTs can occur." See id. (emphasis added). In response, Clifford provided Baulch with Transglobal's "initial `wish list'" regarding their proposed co-marketing or partnership agreement between ATT and Transglobal. See id., Exhibit 7 at page 1. Therein, Clifford listed the same items which Transglobal presently claims were part of the January 1994 oral contract. See id.
ATT's internal documents also make clear that no partnership or co-marketing agreement was ever agreed to by the parties. For example, in an internal memorandum dated February 25, 1994, Baulch summarized the discussions between ATT and Transglobal by stating that "ATT was recently approached by a venture company to partner with them in a call turnaround business." See id., Exhibit 11 at page 3. More specifically, Baulch noted that Transglobal "has made a verbal proposal to ATT to enter into this partnership" but "[a]t this time ATT has made no response" to Transglobal." See id. (emphasis added); see also Internal Memorandum from Meiling Chin of ATT dated March 8, 1994 (Exhibit 12 at page 2) (" no agreement for a co-marketing relationship or exclusivity has been made"); Internal Memorandum from Meiling Chin of ATT dated March 9, 1994 (Exhibit 13 at page 2) (Transglobal "is not to infer the existence of any co- marketing arrangement with ATT. Currently, there isnone . . .") (emphasis supplied).
On April 14, 1994, Baulch wrote to J.R. McFarland and T. Luciano that the ATT team which was evaluating Transglobal as a " prospective partner for ATT" in the CTA business "reached a consensus that they did not wish to develop a partnership with [Transglobal] but rather wished to proceed in having ATT enter the [call turnaround] market on its own in partnership with select correspondents." See id., Exhibit 14 (emphasis added). A copy of this memorandum was forwarded to Transglobal's attorney, "Bill" Potter. See id., Exhibit 44 at page 386. See also Clifford Affidavit, ¶ 51.
Documents relating to Clifford's dealings subsequent to the date of the aforementioned memorandum confirm that no partnership or co-marketing agreement was ever entered into. For example, in a letter dated June 3, 1994, Clifford wrote to McKeever that Transglobal's attorney would be sending a " proposed co-marketing agreement" to ATT for review. See id., Exhibit 15 at page 2 (emphasis added). Clifford also wrote that he hoped that ATT would find Transglobal's" proposed co-marketing or partnership agreement" attractive. See id. (emphasis added).
On July 11, 1994, Clifford forwarded what he described as the "long overdue" Cooperative Marketing Agreement "proposed" by Transglobal. See id., Exhibit 16 at page 1. The Cooperative Marketing Agreement was not executed by ATT. See id.
The Court is satisfied that the uncontroverted written evidence in this case demonstrates that the discussions between ATT Corp. and Transglobal regarding a joint marketing arrangement in the CTA business, either in Smith's region or anywhere else, never advanced beyond the preliminary stages of discussion. Any cooperation which existed between the parties was a necessary means for attempting to negotiate a contract and, contrary to what Transglobal would have this Court believe, did not create the terms of a contract.
Furthermore, both Carraway and Clifford, in their self- serving and noticeably unsubstantiated affidavits, do not even purport to reference a single document executed by both parties which actually reflects the terms of an agreement to enter into a partnership for marketing the CTA service. Although Carraway asserts in his affidavit that "[v]arious segments of the agreement did require separate legal instruments which were later drafted or executed," he does not identify these documents for the Court. See Carraway Affidavit, ¶ 16. Overall, the statements contained in the affidavits of both Carraway and Clifford only indicate that there was a significant amount of discussion about whether ATT and Transglobal would enter into a partnership to provide CTA service.
II. Contract Tariff
A. January 1994
Transglobal and Carraway also allege that ATT Corp. breached its obligation pursuant to the oral agreement in January 1994 to provide telecommunications services at a low rate to Transglobal under a contract tariff.As aforementioned, it is clear that the negotiation of a contract tariff for the supply of telecommunications services to Transglobal was a matter separate and distinct from the discussions involving a joint partnership or co-marketing arrangement. For example, on March 10, 1994, Baulch wrote to Clifford confirming that McKeever would be the person at ATT responsible for the negotiation of a contract tariff while Baulch would be the person to contact regarding any potential partnership. See Appendix of Exhibits and Excerpts of Deposition in Support of ATT Corp.'s Motion for Summary Judgment, Exhibit 4. See also Internal Memorandum from Mary Jane McKeever of ATT dated March 14, 1994 (Exhibit 19 at ¶ 7) (Transglobal "agreed to continue discussions with Bob Baulch" on the ATT and Transglobal relationship); Memorandum from Clifford of Transglobal to Baulch of ATT dated March 18, 1994 (Exhibit 5 at page 1) ("[w]e are in agreement that we will indeed work with Mary Jane regarding all issues concerning the supply services of our business . . . and with you regarding any interface responsibility for issues regarding potential partnership.").
It is also clear from the relevant documentation that an agreement was not reached in early January 1994 to provide Transglobal with the "lowest possible international long distance rates" for its proposed CTA business. Although there is little dispute that it was a subject of conversation amongst the parties, once again, the documentation reveals that the parties did not even begin negotiating the essential terms of the contract tariff until after the initial meeting in January 1994. For example, on April 11, 1994, ATT Corp. submitted a proposed letter of intent to enter into a contract tariff to Transglobal entitled "ATT Proposal for Switched Services." See id., Exhibit 21. This proposal was signed and agreed to by Clifford on behalf of Transglobal on April 12, 1994. See id., Exhibit 21 at page 3. The letter of intent also provided that: "these terms require a tariff filing and regulatory approval and will not be available until FCC approval ." See id., Exhibit 21 at page 3 (emphasis added). The parties then renegotiated some of the terms of the contract tariff and ATT Corp. began drafting the contract tariff. See id., Exhibits 24, 25; see also Complaint ¶ 58.
The CTA business exploits the differential between the lower rates charged for international and long distance telephone service provided by major United States telecommunications carriers and the substantially higher rates charged for such service by the government-controlled foreign telephone administrations or postal, telephone, or telegraph authorities. CTA technology allows a telephone customer in a foreign country to place an international or long distance call at a rate available from a CTA provider by using international outbound service to call an established CTA telephone number in the United States.
On June 6, 1994, Transglobal signed a Contract Tariff Order ("CTO") which provided that ATT Corp. would take steps to file a contract tariff with the Federal Communications Commission ("FCC") consistent with the terms and conditions described in Attachment A to the CTO. See id., Exhibit 26, ¶ 3. The CTO also provided that Transglobal could, as its sole remedy, terminate the Agreement at any time before the Contract Tariff became effective if, without the consent of Transglobal, ATT Corp. failed to file the Contract Tariff within 30 days, or if the Contract Tariff as filed was not consistent with Attachment A to the CTO, or if the Contract Tariff did not go into effect within 120 days after filing with the FCC. See id., Exhibits 26, 30. Significantly, the CTO also contained an integration clause which expressly provided that all prior agreements between the parties were superseded and that the CTO constituted the "entire agreement" between the parties with respect to the services as described in the CTO. See id., Exhibit 30.
See also Exhibit 14 (Transglobal "signed the letter of intent on 4-12-94."). The letter of intent specifically provided that: "[t]his offer is not predicated upon any co-marketing agreement with ATT or any other contingencies not specified in this offer." See id., Exhibit 21 at page 3. See also Internal Memorandum from Jim Pagos of ATT to Gail McGovern of ATT dated June 8, 1994 (Exhibit 22) (stating that "the possibility of any co-marketing or partnering agreement has been positioned as a completely separate activity from the recent contract tariff.").
On June 6, 1994, the same day it executed the CTO, Transglobal began providing CTA service. See Third-Party Complaint, ¶ 63. Transglobal acknowledges that it was aware that "[i]f the Contract Tariff containing the reduced rates was not in effect, then [Transglobal] would be charged according to ATT's `Megacom rates' as required under Federal law." See Complaint, ¶ 61. Transglobal also recognized that it would suffer a monetary loss if it became operational pursuant to the Megacom rates since it contends that it was committed to selling its customers rates below that which it would be required to pay ATT. See id. Nonetheless, Transglobal began providing CTA service on June 6, 1994 because it contends that ATT represented that it would file a revised tariff which would "include a special cash allowance to reimburse [Transglobal] for the estimated difference between the billed amount at Megacom Rates and the Contract Tariff rates." See id.
Shortly thereafter, ATT identified certain changes it wished to make in the language of the proposed Contract Tariff. See id., Exhibit 27. ATT informed Transglobal of those changes and requested that it formally agree to them in writing. See id. By letter dated July 12, 1994, Transglobal's attorney expressed certain "concerns" about ATT's proposed revisions to the Contract Tariff and suggested some further changes to the proposed tariff language. See id., Exhibit 28. ATT responded to Transglobal's letter on July 14, 1994. See id., Exhibit 29. Among other things, ATT noted that in order for the Contract Tariff to be effective on August 1, 1994, the date contemplated by the parties, it must be filed by July 18, 1994. See id. Transglobal agreed to the changes in the Contract Tariff proposed by ATT and an ATT representative signed the CTO on July 21, 1994. See id., Exhibit 30. Ultimately, the revised version of the Contract Tariff, known as "CT 1387," was filed with the FCC on July 18, 1994. See id., Exhibits 30, 31.
In early August 1994, however, the FCC requested that certain changes be made to the Contract Tariff. See id., Exhibit 32. ATT Corp. informed Transglobal of the changes that needed to be made pursuant to the FCC's requirement and also suggested some additional changes it believed were needed. See id. Transglobal agreed to the FCC changes and the other proposed changes on August 26, 1994. See id., Exhibit 35.
On September 20, 1994, William Potter, Esq., on behalf of Transglobal, then forwarded a letter to ATT regarding "significant issues" which needed to be resolved in order to "complete the contractual arrangements" between the parties. Seeid., Exhibit 36. ATT viewed this letter as an attempt to renegotiate many of the terms of the Contract Tariff. See id., Exhibit 17. As a result of its conclusion that there was not a "meeting of the minds," ATT withdrew CT 1387. See id.
Based upon the foregoing, it is clear that the parties did not reach an oral agreement in January 1994 to provide telecommunications services at a low rate to Transglobal under a contract tariff. There is no evidence of an agreement as to any of the terms prior to the date upon which the parties signed and initially filed the Contract Tariff with the FCC (which, in any event, was later rejected by the FCC). In fact, the documentation submitted by both Transglobal and ATT Corp. reveals that extensive negotiations took place after the initial meeting in January 1994 in an effort to reach agreement on many different issues relating to the CTA service.
B. Contract Tariff 1387
Interstate telecommunications carriers are regulated by the ("FCC") pursuant to Title II of the Communications Act of 1934, as amended. See 47 U.S.C. § 201, et seq. (West 1999). Because ATT Corp. provides long distance telecommunications services as a "common carrier" it falls within the purview of the Communications Act of 1934. See 47 U.S.C. § 153(10) ; 47 U.S.C. § 201, et seq. (West 1999). As such, it is required to provide its services to any person upon reasonable request on terms that are just, reasonable, and nondiscriminatory. See 47 U.S.C. § 201; 47 U.S.C. § 202(a) (West 1999).
As AT described to the Court in Telecom International America v. ATT Corp., 67 F. Supp.2d 189 n. 3 (S.D.N.Y. 1999), "a contract tariff order is an agreement pursuant to which ATT agrees to file with the FCC a relevant contract tariff which describes the services to be provided by the common carrier . . . Unlike a contract tariff, the contract tariff order does not need to be filed with the FCC and it is not considered to be part of the substantive terms of the filed contract tariff."
The duties owed by common carriers are regulated through tariffs. Pursuant to § 203, a common carrier such as ATT Corp. is required to file "schedules" with the FCC, commonly referred to as "tariffs," "showing all charges" for its services and "the classifications, practices, and regulations affecting such charges." 47 U.S.C. § 203(a) (West 1999). See also MCI Telecommunications Corp. v. Graphnet, Inc., 881 F. Supp. 126, 132 (D.N.J. 1995). Once the tariffs have been filed and permitted by the FCC to become effective, the common carrier is precluded by statute from deviating from the terms of its filed tariffs. According to the statute: "No carrier shall . . . extend to any person any privileges or facilities in such communication, or employ or enforce any classifications, regulations, or practices affecting such charges, except as specified in such schedule." 47 U.S.C. § 203(c). Thus, pursuant to the "filed rate doctrine/filed tariff doctrine," the filed rates are binding on both the carrier and the public. See Marco Supply Co. v. ATT, 875 F.2d 434, 436 (4th Cir. 1989) (citations omitted). See alsoSee Fax Telecommunicaciones, Inc. v. ATT, 138 F.3d 479, 488 (2d Cir. 1998);MCI Telecommunications Corp. v. Graphnet, Inc., 881 F. Supp. 126, 132 (D.N.J. 1995). Despite the fact that strict adherence to the filed rate/filed tariff doctrine oftentimes produces harsh results, it is the operative doctrine to be applied by the courts. See Fax Telecommunicaciones, Inc. v. ATT, 952 F. Supp. 946 (E.D.N.Y. 1996),aff'd, 138 F.3d 479 (2d Cir. 1998).
In 1991, the FCC adopted rules and regulations authorizing carriers to establish "contract tariffs" with their customers. See Fax Telecommunicaciones, Inc. v. ATT, 138 F.3d 479, 482 (2d Cir. 1998) (citing In the Matter of Competition in the Interstate Interexchange Marketplace, 6 F.C.C.R. 5880 (1991) (hereinafter "Interstate Interexchange Marketplace"); on reconsideration, 6 F.C.C.R. 7569 (1991); on further reconsideration, 7 F.C.C.R. 2677 (1992), on further reconsideration, 10 F.C.C.R. 4562 (1995)). A contract tariff contains individually negotiated and tailored services arrangements reached between a common carrier and its customer. See Telecom International America, Ltd. v. ATT Corp., 67 F. Supp.2d 189, 196 n. 4 (S.D.N.Y. 1999); National Communications Association, Inc. v. American Telephone Telegraph Co., No. 92 Civ. 1735, 1998 WL 118174 *27 n. 31 (S.D.N.Y. March 16, 1998). The rules and regulations surrounding contract tariffs were designed to "increase flexibility for customers and promote competition among carriers." Fax Telecommunicaciones, 138 F.3d at 482.
In Fax Telecommunicaciones, the United States Court of Appeals for the Second Circuit explained the process whereby contract tariffs become effective. First, "[a]t least one customer must enter into a contract with the carrier pursuant to the new tariff in order for the carrier to file the contract tariff." Id. (citing 47 C.F.R. § 61.3(m)). Furthermore, the contract tariff must be filed at least fourteen days prior to the effective date of the contract and must include "the terms of the contract, a description of the services to be provided, the price for these services, the minimum volume commitments for each service, any volume discounts, as well as other classifications, practices, and regulations affecting the contract rate thereby complying with the filing requirements of 47 U.S.C. § 203(a)." Id. (citing Interstate Interexchange Marketplace at ¶¶ 91, 121, 122). Upon expiration of the fourteen days, the contract tariff is effective so long as neither the FCC nor any member of the public objects. Id. (citing 47 C.F.R. § 61.58(c)(6), 61.42(c)(8)). Finally, in order not to violate the Act's prohibition against discrimination, the carrier must then make the contract tariff generally available to other similarly situated customers. Seeid. (citing Interstate Interexchange Marketplace at ¶¶ 91, 129).
Here, it is undisputed that CT 1387 was not an effective tariff under federal law inasmuch as the FCC did not approve the tariff, as it was initially filed. See Opposition Brief filed on behalf of Transglobal and Carraway at page 31 ("True, it could not use CT 1387 rates because that tariff was not in effect."). Furthermore, ATT failed to file CT 1387 even after Transglobal agreed to the FCC changes because of its belief that there was no "meeting of the minds" on core issues. As a result, Transglobal began receiving service on June 6, 1994 pursuant to the Megacom tariff, the effective tariff on file with the FCC. Therefore, any claim either by Transglobal or Carraway that they are entitled to be charged the rates as set forth in CT 1387 is without merit.
Moreover, any claim by Transglobal that this Court should enforce the alleged promise by ATT to file CT 1387, as amended by the parties, is equally without merit. Under circumstances similar to those presented in the matter at bar, the Court in Fax Telecommunicaciones explained that if the Court were to enforce ATT's promise to file the rate structure in CT 1387 as amended by the parties, it would have to be done retroactively, thereby giving Transglobal the benefit of the rates promised. But, the Court reasoned that "this is no different in effect than asking the court to enforce the [CT 1387] rates directly," which it cannot do because the tariff was never filed. Fax Telecommunicaciones, 138 F.3d at 490.
In addition, despite Transglobal's attempt to recharacterize its claim, the relief it seeks would provide it with a discount over other Megacom customers (the filed tariff which it knowingly used and was billed for) in violation of the nondiscrimination strand of the filed rate doctrine. The Fax Telecommunicaciones Court concluded that a party in Transglobal's position "may not indirectly accomplish that which it may not do directly." Id.
C. Contract Tariff Order
Assuming arguendo that Transglobal and Carraway are attempting to take their breach of contract claim one step further and argue that ATT breached the terms of the CTO signed by both parties by July 27, 1994, this claim too must fail. The terms of the CTO expressly bar any claim for damages for ATT's failure to file the Contract Tariff. Specifically, the CTO provides that if, without the consent of Transglobal, ATT Corp. failed to file the Contract Tariff within 30 days, or if the Contract Tariff as filed was not consistent with Attachment A, or if the Contract Tariff did not go into effect within 120 days after filing with the FCC, Transglobal "may, as its sole remedy , terminate this Agreement without liability." See Exhibit 30.
According to the Act,
The term "common carrier" or "carrier" means any person engaged as a common carrier for hire, in interstate or foreign communication by wire or radio or in interstate or foreign radio transmission of energy, except where reference is made to common carriers not subject to this chapter, but a person engaged in radio broadcasting shall not, insofar as such person is so engaged, be deemed a common carrier.47 U.S.C. § 153(10) (West 1999).
III. General Megacom Tariff
ATT Corp. filed a counterclaim against Transglobal for: (1) failure to make payments for services rendered (Count One); (2) quantum meruit (Count Two); and (3) breach of Master Building Space License Agreement (Count Three). See Counterclaim. Essentially, ATT Corp. contends that, because CT 1387 was not in effect, Transglobal purchased service under ATT's Megacom tariff and therefore understood that if the Contract Tariff containing the reduced rates was not in effect, then Transglobal would be charged according to ATT's Megacom rates as required under Federal law. See Complaint, ¶ 61. ATT Corp. is not seeking summary judgment on Count Three.
Based upon the facts of this case, the Court also finds that Transglobal and Carraway have failed to articulate a claim for breach of fiduciary duty, fraud, and negligent misrepresentation. See generally ATT v. Central Office Telephone, Inc., 524 U.S. 214, ; 118 S.Ct. 1956, 1962-63 (1998); Alexander v. CIGNA Corp., 991 F. Supp. 427, 438 (D.N.J. 1998), aff'd 172 F.3d 859 (3d Cir. 1998); Fax Telecommunicaciones, 138 F.3d 479, 490 (2d Cir. 1998).
On September 2, 1994, ATT Corp. wrote a letter to Transglobal wherein it stated that Transglobal owed a total balance of $51,200.46. See id., Exhibit 37. Therein, ATT also noted that unless the "overdue" balance was paid, "ATT will no longer accept orders for additional similarly tariffed services from Transglobal." See id. In response, Transglobal paid ATT Corp. a lesser amount that it estimated it would have owed if the Contract Tariff had been in effect on June 6, 1994. See id., Exhibit 39 ("I am forwarding with this letter a check for the amount that I estimate is due under the rates provided by the Contract Tariff."). In October 1994, ATT advised Transglobal that its Megacom service would be terminated as a result of its failure to pay what ATT believed was due and owing.
Pursuant to Count One, ATT Corp. seeks actual and consequential damages no less than $379,030.06, prejudgment interest, costs of suit, and any other relief as the Court may deem just and proper. In Count Two, ATT Corp. seeks the value received by Transglobal (which it contends is no less than $379,030.06), prejudgment interest, costs of suit, and any other relief as the Court may deem just and proper. Finally, in Count Three, ATT Corp. seeks actual and consequential damages of no less than $63,900.00, prejudgment interest, costs of suit, and any other relief as the Court may deem just and proper.
It is undisputed that CT 1387 never became an effective tariff. See Opposition Brief filed on behalf of Transglobal and Carraway at page 31. Accordingly, any contention by Transglobal that it is entitled to the rates in CT 1387 is misplaced. It is also undisputed that if the Contract Tariff containing the reduced rates was not in effect, then Transglobal would be charged according to ATT's Megacom rates. Therefore, the filed tariff doctrine bars Transglobal's claims that it was entitled to any rates or terms of service other than those contained in ATT Corp.'s filed and effective Megacom tariff. Clearly, Transglobal accepted the risk by beginning business before the date the Contract Tariff was filed and effective. Therefore, Transglobal must pay for the services rendered.
Prior to the Court entering a final judgment in this matter, it is ordered that ATT provide to Transglobal and Carraway an accounting of the services rendered. The accounting should be in the form of a sworn affidavit and served by March 10, 2000. A copy should also be provided to the Court. By March 20, 2000, Transglobal and Carraway shall determine if there is a factual dispute as to the accounting for services rendered. If there is no dispute, then the parties will submit a proposed Order to the Court on March 20, 2000 reflecting the amount Transglobal and Carraway must pay to ATT Corp. for services rendered. If there is a dispute as to the accounting, the parties will contact the Court on March 20, 2000 to schedule a plenary hearing on this issue.
An appropriate Order accompanies this Letter Opinion.
NICHOLAS H. POLITAN U.S.D.J.