Opinion
Case no. 01-15472(SMB)
December 11, 2002
DUANE MORRIS, Attorneys for Manhattan Telecommunications, Corporation d/b/a MetTel, New York, New York.
Fran M. Jacobs, Esq., Of Counsel, MAYNE MILLER, ESQ., Attorney for Debtor, New York, New York.
MEMORANDUM DECISION GRANTING IN PART AND DENYING IN PART MOTION FOR PARTIAL SUMMARY JUDGMENT BY MANHATTAN TELECOMMUNICATIONS CORPORATION
Manhattan Telecommunications Corporation ("MetTel") moves for partial summary judgment overruling the objection by the debtor, Best Payphones, Inc. (the "Debtor"), to MetTel's proof of claim in the aggregate liquidated sum of $ 406,157.00, plus an unliquidated amount. For the reasons that follow, MetTel is entitled to summary judgment allowing its claim in the principal amount of $306,906.72, plus interest on each component of its allowed claim, computed in accordance with applicable state law, up to the petition date. In addition, MetTel is entitled to summary judgment declaring the Debtor's liability for certain attorneys' fees and expenses discussed below, but those amounts must be liquidated in future proceedings. The motion for summary judgment is otherwise denied.
BACKGROUND
At all relevant times, the Debtor has been engaged in the business of owning and operating approximately 800 public pay telephones in the City of New York. To operate, the Debtor must obtain dial tone service for its telephones either directly from the local incumbent telephone company (i.e., Verizon), or from resellers of dial tone services. (Debtor's Objection to Proofs of Claim of Manhattan Telecommunications Corporation, dated July 28, 2002 ("Debtor's Objection"), at ¶ 2). The present dispute involves the Debtor's transactions with two dial tone service resellers, the North American Telecommunications Corporation ("NatelCo") and MetTel.
A. NatelCo Agreement #1
In or around December 1998, the Debtor entered into an agreement with Natelco for dial tone services (the "Natelco Agreement # 1".) Natelco billed the Debtor each month for the service that it provided. On February 14, 1999, the Debtor sent Natelco a letter objecting to Natelco's telephone bills on the ground that they did not reflect the proper discount. (Debtor's Objection, Ex. A.) According to the letter, the Debtor paid the undisputed portions, amounting to $61,716.15, and presumably withheld the disputed amounts.
On March 5, 1999, Debtor sent Natelco another letter objecting to the format of the Natelco bills and errors on the spreadsheets accompanying the bills. (Id.) On September 22, 1999, Debtor sent yet another letter to Natelco protesting the bills. The September letter amplified the Debtor's complaints regarding the format of the bills and the difficulty in reviewing them. As a result of the ongoing problem, the Debtor stated that it was switching to another dial tone service provider. The Debtor would continue to pay current bills, while reserving its right to challenge the bills upon receipt of itemizations. (Id.)
On October 1, 1999, Natelco sent an invoice to the Debtor showing current charges in the sum of $61,078.05, and total unpaid charges of $149,056.82. The bill credited the Debtor with a payment of $59,738.22 on or about September 15, 1999, and a discount in the sum of $15,140.98. (See Declaration [of David Aronow] in Support of Objection of Manhattan Telecommunications Corp., dated Sept. 9, 2002 ("Aronow Declaration"), Ex. B.) According to a Natelco bill dated December 1, 1999, the Debtor's obligation to Natelco had been reduced to $26,959.41. (Id.)
MetTel's submissions suggest that the amount due as of December 1, 1999 ($26,959.41) was the same amount that was due in October. (See Aronow Declaration 7) ("In October 1999, when Debtor terminated its agreement with Natelco in order to become a MetTel customer, it owed Natelco $26,959.41 . . . .") Although the Debtor has contested its liability under the Natelco Agreement # 1, it has not challenged Natelco's factual contention that the amounts billed to the debtor that remained unpaid as of October 1, 1999, totaled $26,959.41.
As discussed in the next section, the Debtor switched to MetTel in or about October 1999, but continued to utilize Natelco's dial tone service during the period that the Debtor migrated from Natelco to MetTel. Natelco's monthly usage charges declined during the migration period as the Debtor switched its telephones over to MetTel. Natelco continued to render monthly bills which the Debtor did not pay. (See id.)
According to Natelco's final bill, dated October 15, 2000, the Debtor owed $32,344.12. (See id.) This consisted of $26,959.41 for the pre-migration period and $5,384.71 in unpaid charges incurred during the migration period.
In the objection filed bu the Debtor to MetTel's proofs of claim, the Debtor acknowledged that it had received Natelco's bills, (Debtor's Objection ¶ 3), but refused to pay the balance of $32,344.12 because the charges had not been documented to its satisfaction. (Id. ¶ 4.) More recently, the Debtor has implied that it never received the invoices rendered during the migration period. (See Reply [of Michael Chaite] to Declaration of David Aronow Deemed Motion for Summary Judgment on Debtor's Objection to MetTel's Proofs of Claim ("Chaite Reply Declaration"), dated October 11, 2002, at ¶ 16.)
Chaite, the Debtor's president, stated that when MetTel brought a second state court action as Natelco's assignee against the Debtor to recover, inter alia, the $32,344.12 allegedly due under the Natelco Agreement # 1, MetTel never indicated that these bills existed or were sent to the Debtor. (Chaite Reply Declaration ¶ 19). Chaite is wrong. MetTel's complaint alleged that Natelco rendered monthly bills to the Debtor, the final bill to the Debtor showed $32,344.12 as due, and MetTel attached the final bill to its complaint. (Debtor's Objection, Ex. D (Complaint of Manhattan Telecommunications Corporation, N.Y. Co. Index no. 604077/01, dated Aug. 15, 2001), ¶ 5.) The Debtor's Objection omitted the bill from the exhibit. The Debtor's answer denied the allegation in material part, (id., Ex. D (Answer of Best Payphones, Inc., N.Y. Co. Index no. 604077/01, dated Sept. 7, 2001), at ¶ 5) , and shortly thereafter, the second MetTel action was stayed by the chapter 11 filing.
B. The MetTel Agreement
On September 24, 1999, Debtor entered into a written agreement with MetTel to obtain dial tone service (the "MetTel Agreement"). (Aronow Declaration, Ex. A.) Like the Natelco Agreement # 1, the MetTel Agreement was short-lived. In December 2000, MetTel began disconnecting service to the Debtor, (Debtor's Objection ¶ 7), and in February 2001, MetTel sued the Debtor to recover $196,317.27 in unpaid dial tone services, plus the costs and other expenses of the action, including attorneys' fees.
Paragraph 6.1 of the MetTel Agreement provided, in pertinent part:
In the event that any action is brought by either party to enforce any term or condition of this Agreement, the prevailing party shall be entitled to recover its actual legal cost, including attorney's fees, court costs and costs of collection, in addition to whatever other relief a court may award . . . .
On April 24, 2001, the state court ruled from the bench that MetTel was entitled to summary judgment. Thereafter, on May 9, 2001, the state court entered judgment in favor of MetTel, and awarded damages in the amount of $185,205.68, plus interest through February 16, 2001, and costs, for a total judgment of $189,320.39. On June 29, 2001, the state court entered a second judgment awarding attorneys' fees to MetTel in the amount of $20,140.00 (the two judgments are collectively referred to as the "State Court Judgments"). The Debtor appealed the State Court Judgments and posted bonds to stay their enforcement. This Court granted relief from the automatic stay to prosecute the appeals, and while the current motion was sub judice, the Appellate Division unanimously affirmed the State Court Judgments. Manhattan Telecomm. Corp. v. Best Payphones, Inc., 2002 WL 31501273 (N.Y.App.Div. Nov. 12, 2002).
In the interim, the Debtor commenced an action against MetTel in the Nassau County Supreme Court on or about March 23, 2001. The complaint charged MetTel with a variety of improper acts relating to the suspension and interruption of dial tone service, and demanded damages. Because the Debtor was the plaintiff, the automatic stay triggered by the Debtor's filing did not affect the the lawsuit. The record does not reflect whether any proceedings occurred after the commencement of the action.
C. Natelco Agreement #2
As a result of its dispute with MetTel, the Debtor switched back to Natelco for dial tone services. On or about December 8, 2000, the Debtor and Natelco entered into a new Payphone Services Agreement with Natelco (the "Natelco Agreement # 2"). (Aronow Declaration, Ex. C.) On March 13, 2001, Natelco rendered what turned out to be its final bills. On or about that date, Natelco sent two invoices for dial tone service to the Debtor in the total amount of $83,095.90. (Id., Ex. D.) Chaite contended that the Debtor objected to the final bill, apparently in connection with the amount of a discount, (Chaite Reply Declaration ¶ 29), and the Debtor paid all but $41,703.01. (Id. ¶ 9.)
In the meantime, Natelco and several affiliates filed chapter 11 petitions in this Court on February 23, 2001. On or about April 4, 2001, some of the affiliated debtors, including Natelco, entered into an agreement to sell substantially all of their assets to MetTel, subject to higher and better offers. Under the proposed sale agreement, Natelco assigned all of its customer contracts to MetTel as of March 2001, including the $32,344.12 allegedly due under Natelco Agreement #1 and the $41,703.01 remaining due for service through March 1, 2001 under Natelco Agreement #2. (Aronow Declaration ¶ 10.)
The debtors in that case filed a motion pursuant to 11 U.S.C. § 363 to approve the proposed transaction, and the Debtor filed an objection. (See Reply Declaration [of David Aronow] in Support of Motion for Summary Judgment, dated Oct. 18, 2002 ("Aronow Reply Declaration"), Ex. A (Declaration [of Michael Chaite] in Opposition, dated Apr. 18, 2001).) The objection highlighted the poor dial tone service that the Debtor had received from MetTel, (id., Ex. A ¶ 5), and contrasted it with service provided by Natelco:
I found Natelco to be more diligent in pursuing repair orders which had been placed to Verizon, and there were no billing disputes with Natelco as there had been with MetTel. (Id., Ex. A ¶ 6) (emphasis added.)
D. Post Natelco Agreement
As assignee of Natelco's customer contracts, MetTel began to provide service to the Debtor in April 2001 (the "Post Natelco Agreement"). MetTel submitted a bill dated April 1, 2001 to the Debtor in the amount of $40,419.92, apparently representing the charge for April (i.e., MetTel billed in advance). (See Aronow Declaration, Ex. E.) On May 1, 2001, MetTel sent the Debtor an invoice for $73,783.91 for dial tone service, $40,419.92 of which represented the balance due on the April 1, 2001 invoice. The Debtor contends that it objected to the April and May bills, (see Chaite Reply Declaration ¶¶ 33, 35), and did not pay either invoice. (See Aronow Declaration ¶¶ 12-13)
In May 2001, the Debtor terminated the Post Natelco Agreement and transferred to a new carrier. The Debtor alleges that MetTel breached the Post Natelco Agreement by sending the Debtor disconnect notices based on amounts MetTel alleged were owed and Debtor alleges were released under Natelco Agreement #1. ([Debtor's] Counter-Statement Pursuant to Local Rule 7056, dated October 11, 2002, at ¶ 37.) The Debtor also alleges that MetTel did not offer the Debtor the same treatment that it offered other customers acquired by assignment from Natelco. (Debtor's Objection ¶ 22.)
MetTel continued to provide service to the Debtor after May 2001 during the period that the Debtor migrated to the new carrier, and submitted bills to Debtor for service on June 1, 2001 and July 1, 2001. The July 1, 2001 bill gave the Debtor a credit of $17,942.55 and showed a balance due of $148,490.20.
(Aronow Declaration, Ex. H.) On July 30, 2001, the Debtor sent MetTel a letter objecting to the June 1, 2001 and July 1, 2001 billing dates. (Id., Ex. I.) In the main, the Debtor complained that MetTel had not given the Debtor the proper credit for the lines that had not received service. MetTel responded that the Debtor's objection was too conclusory, and was being rejected. (Debtor's Objection, Ex. F.)
E. The Bankruptcy Proceedings
The Debtor filed this case on October 23, 2001. MetTel filed a proof of claim, dated Feb. 8, 2002 (Claim no. 3) in the amount of $406,157.00 "plus unliquidated amount," and filed what appears to be an identical, amended claim, three days later (Claim no. 8). (See Debtor's Objection, Ex. E.) Based upon the information provided by MetTel in connection with the current motion, its claim can be divided into three parts. The first, in the approximate sum of $210,000.00, corresponds to the State Court Judgments. The second seeks approximately $190,000.00 under the Natelco Agreement # 1, the Natelco Agreement # 2 and the Post Natelco Agreement. MetTel has conceded that the Debtor is entitled to a $45,000 credit based on the deposit that it had paid to Natelco, reducing this part of MetTel's claim to approximately $145,000. The third requests unliquidated sums for lost profits arising from the termination of the Natelco Agreement # 2 and attorneys' fees and expenses incurred in connection with the collection of the State Court Judgments and the defense of the Debtor's appeal.
MetTel now claims $84,000.00 in lost profits.
The Debtor filed its objection to MetTel's proof of claim on or about July 28, 2002. The specific grounds for the objection are discussed below to the extent they are relevant to the resolution of the pending motion. MetTel filed a response to the objection, asserting that certain components of its claim should be allowed as a matter of law. MetTel supported its response with an affidavit executed by its president, documentary evidence and a memorandum of law. In light of the nature and content of MetTel's opposition, I entered an order on September 20, 2002, treating MetTel's response as a motion for partial summary judgment pursuant to Rule 7056 of the Federal Rules of Bankruptcy Procedure. The order established a schedule for the submission of papers consistent with the treatment of the motion, and both sides supplemented their prior submissions.
DISCUSSION
A. Standards Governing Summary Judgment
Rule 56 of the Federal Rules of Civil Procedure, made applicable to this adversary proceeding by F.R.Bankr.P. 7056, governs summary judgment motions. A court must grant summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits . . . 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). The moving party bears the initial burden of showing that the undisputed facts entitle him to judgment as a matter of law. Rodriguez v. City of New York, 72 F.3d 1051, 1060-61 (2d Cir. 1995). If the movant carries this initial burden, the nonmoving party must set forth specific facts that show triable issues, and cannot rely on pleadings containing mere allegations or denials. Fed.R.Civ.P. 56(e). Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586-587 (1986); see Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). In deciding whether material factual issues exist, the Court must resolve all ambiguities and draw all reasonable inferences against the moving party. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. at 587.
B. The State Court Judgments
As noted, the portion of the MetTel claim based on the MetTel Agreement has been reduced to judgment, and the judgment has been affirmed by a unanimous panel of the Appellate Division. The Debtor agrees that final State Court Judgments would bar the Debtor from challenging the allowance of the claims through the claims objection process. The Debtor contends, however, that the State Court Judgments are not final, and accordingly, res judicata does not prevent the Debtor from objecting to the underlying claim.
At the time that the Debtor made this argument, the Appellate Division had not yet decided the appeal. The recent affirmance, however, does not alter the issue. Although the debtor cannot appeal the unanimous decision of the Appellate Division as a matter of right, see N.Y.C.P.L.R. § 5601(a), it may still seek leave to appeal. Id. § 5602.
Under 28 U.S.C. § 1738, every United States Court must give full faith and credit to the "acts, records and judicial proceedings" of any state, territory or possession to the same extent they have in their own courts. Thus, the Court must look to state law — here, New York's — to determine the effect of the judgment now under appeal. Under New York law, a judgment pending appeal is entitled to the same res judicata effect as a final judgment. Petrella v. Siegel, 843 F.2d 87, 90 (2d Cir. 1988) (a determination of the New York State Supreme Court is entitled to res judicata effect, even if under appeal); Cieszkowska v. Grayline New York, 2001 WL 1131990, at *3 n. 1 (S.D.N.Y. Sept. 24, 2001); Chariot Plastics, Inc. v. United States, 28 F. Supp. 874, 881 (S.D.N.Y. 1998); Kandekore v. State of New York, 1998 WL 150660, at *1 (S.D.N.Y. March 31, 1998) ("under New York law, the mere pendency of an appeal does not deprive a challenged judgment of its res judicata effects").
The Debtor's contrary position is based upon a single case, A to Z Assocs. v. Cooper, 626 N.Y.S.2d 143 (N.Y.App.Div. 1995), which is inapposite. The plaintiffs in that case were the former lawyer and psychiatrist of Gloria Vanderbilt Cooper ("Vanderbilt"), the well-known artist and designer. The plaintiffs contended that Vanderbilt had breached an agreement that granted them the right to exploit and market her name and designs. A to Z Assocs. v. Cooper, 613 N.Y.S.2d 512, 515 (N.Y.Sup.Ct. 1993). Vanderbilt asserted counterclaims for fraud, breach of fiduciary duty and rescission. Id.
Vanderbilt eventually moved for summary judgment dismissing the complaint. She also sought summary judgment on her counterclaims. She contended that the report of the hearing panel of the Disciplinary Committee of the First Judicial Department, which had been confirmed by the Appellate Division, was dispositive of all of the issues. Id. The supreme court agreed in principle, dismissed the complaint and awarded summary judgment to Vanderbilt on her first and third counterclaims. Id. at 520.
The Appellate Division subsequently affirmed the ensuing judgment. It agreed that the report of the Disciplinary Committee collaterally estopped A to Z from contesting the merits of its complaint or the first and third counterclaims. Although the order confirming the report was admittedly final, see 626 N.Y.S.2d at 1434 (noting that the report had been confirmed by the Appellate Division, and leave to appeal had been denied by the New York Court of Appeals), the Appellate Division did not suggest, in dicta, that a non-final judgment would not be entitled to collateral estoppel effect. In short, the issue was never considered — much less decided — by the court.
The Debtor's challenge to the underlying merits of the State Court Judgments is also barred by the Rooker-Feldman doctrine. The doctrine is a form of abstention. It prevents a party that has lost in state court from seeking what amounts to appellate review of the state court judgment in a United States court, except through the grant of a petition for a writ of certiorari by the United States Supreme Court. Johnson v. De Grandy, 512 U.S. 997, 1005 (1994); see District of Columbia Court of Appeals v. Feldman, 460 U.S. 462, 482 (1983); Rooker v. Fidelity Trust Co., 263 U.S. 413, 416 (1923). The Rooker-Feldman doctrine is closely related to the doctrines of issue and claim preclusion, see Moccio v. New York State Office of Court Admin., 95 F.3d 195, 199 (2d Cir. 1996); In re Goetzman, 91 F.3d 1173, 1177 (8th Cir. 1996) cert. denied, 519 U.S. 1042 (1996), and applies to the bankruptcy court. Id.
Here, the state court has decided the merits of MetTel's claims, and granted summary judgment against the Debtor. The Debtor appealed the judgment to the Appellate Division which affirmed in a unanimous opinion. The Debtor may have further appellate rights, but the only federal court that can review the State Court Judgments is the United States Supreme Court.
Accordingly, MetTel is entitled to summary judgment on the issues decided by the State Court Judgments, to wit, the Debtor's liability under the MetTel Agreement. The state court entered judgment on the principal claim ($189,320.39) on May 9, 2001, and on the claim for attorneys' fees ($20,140.00) on June 29, 2001. (See Debtor's Objection, Ex. E.) These judgments bear interest at the rate of 9% per annum from the dates of entry, N.Y. C.P.L.R. §§ 5003, 5004 (McKinney 1995), until the date of the filing of this chapter 11 case, and this portion of MetTel's claim is allowed. In the event that the State Court Judgments are modified or reversed, the Debtor may seek reconsideration of this part of the Court's decision to the extent permitted under 11 U.S.C. § 502(j).
The Debtor's confirmed plan also provides for the payment of post-petition interest. Nothing stated in this decision is intended to limit any right that MetTel may have in that respect.
C. The Account Stated
The State Court Judgments did not rule on MetTel's claims for $32,344.12 under Natelco Agreement #1,$41,703.01 under the Natelco Agreement #2, or $148,490.20 under the Post-Natelco Agreement. MetTel nonetheless seeks summary judgment on these claims as well. It argues that it has established an account stated for each of the three components of this part of the claim.
MetTel concedes that Debtor is entitled to a $45,000.00 credit for a deposit that it had paid to Natelco.
To recover under a theory of an account stated, the plaintiff must show that the defendant received and retained the plaintiff's invoices, and failed to object within a reasonable time or made a partial payment. LeBoeuf, Lamb, Greene MacCrae, L.L.P. v. Worsham, 185 F.3d 61, 64 (2d Cir. 1999); In re Rockefeller Center Properties, No. 00 Civ. 647(LAP), 2002 WL 22051, *4 (S.D.N.Y. Jan. 8, 2002); Carey v. Mui-Hin Lau, 140 F. Supp.2d 291, 298 (S.D.N.Y. 2001); Kramer, Levin, Nessen, Kamin Frankel v. Aronoff, 638 F. Supp. 714, 721 (S.D.N.Y. 1986).
The doctrine applies to unitemized bills, O'Connell Aronowitz v. Gullo, 644 N.Y.S.2d 870, 871-872 (N.Y.App.Div. 1996); Fink, Weinberger, Fredman, Berman Lowell, P.C. v. Petrides, 437 N.Y.S.2d 1, 1-2 (N.Y.App.Div. 1981); Shea Gould v. Burr, 598 N.Y.S.2d 261, 261 (N.Y.App.Div. 1993), and the detail of the bills is merely one factor to be analyzed in the context of others. See In re Rockefeller Center Properties, 2002 WL 22051, at *4.
If the opposing party contends that he objected orally to the invoice or bill that forms the basis for the account stated, the law requires specificity. "Bald allegations of oral protests" are insufficient to raise an issue of fact or defeat a motion for summary judgment. Darby Darby, P.C. v. VSI Int'l, Inc., 716 N.Y.S.2d 378, 382 (N.Y. 2000); accord Ruskin, Moscou, Evans, Faltischek, P.C. v. FGH Realty Credit Corp., 644 N.Y.S.2d 206, 207-08 (N.Y.App.Div. 1996) (belated and self-serving conclusory objections and allegations that an unidentified person objected to bills was insufficient to defeat summary judgment). Instead, the opposing party must relate when and to whom the oral protests were made, and specify the substance of the conversations. Shea Gould v. Burr, 598 N.Y.S.2d at 261; Fink, Weinberger, Fredman, Berman Lowell, 437 N.Y.S.2d at 1-2.
1. The Natelco Agreement # 1
The Debtor has raised several objections to summary judgment on the claims under the Natelco Agreement # 1. First, the Debtor contends that Natelco waived the claims before they were ever assigned to MetTel. According to Chaite, the Debtor reached an agreement with Natelco regarding all of the disputed claims under the Natelco Agreement # 1 when the parties reestablished their relationship in December 2000. Under this agreement, Natelco was required to produce accurate and detailed statements relating to the disputed charges. If it did, the Debtor would pay 50%; if it didn't, the entire amount would be forgiven. (Chaite Reply Declaration ¶ 20.) The Debtor maintains that Natelco never produced the information, (id.), and therefore waived the claim. (Id. ¶ 21.)
The record on this motion plainly shows that this unsupported defense is newly minted and demonstrably false. On or about August 15, 2001, MetTel brought a second state court action against the Debtor in Supreme Court, New York County to recover, inter alia, the $32,344.12 balance due under the Natelco Agreement # 1. (See Debtor's Objection, Ex. D, MetTel Complaint, ¶¶ 20-22.) The Debtor denied the material allegations, but never raised the affirmative defense of waiver or any similar defense. (See id., Ex. D, Debtor's Answer.)
In fact, failure to affirmatively plead the defense of waiver arguably resulted in the waiver of the defense. See McIntosh v. Niederhoffer, Cross Zeckhauser, Inc., 483 N.Y.S.2d 807, 809 (N.Y.App.Div. 1984) ("waiver is an affirmative defense and, since defendant did not plead it as an affirmative defense, it was waived") (internal citations omitted)); accord In re New York City Transit Authority, 537 N.Y.S.2d 867, 868 (N.Y.App.Div. 1989).
Eleven months later, the Debtor objected in this case to MetTel's claim under the Natelco Agreement # 1 on the ground that the Natelco bills contained numerous errors, and the charges had not been properly substantiated. (Debtor's Objection ¶¶ 3-4.) Furthermore, when the Debtor paid a $45,000.00 deposit to Natelco at the inception of the Natelco Agreement # 2,
the Debtor maintained its position that NATelco's claim for $32,344.12 dating back to 1999 was unsubstantiated. NATelco made no further effort to collect or substantiate said claim.
(Id. ¶ 10.) Once again, the Debtor never mentioned that Natelco had waived the debt.
In fact, the defense of waiver was never mentioned until Chaite's reply declaration. Chaite indicated further that the waiver agreement had been reduced to writing, and should be in MetTel's files. (Id. ¶ 20.) The Debtor never produced a copy, failed to indicate what efforts it made to obtain a copy, and never requested the opportunity to obtain a copy through discovery in order to defend against MetTel's summary judgment motion. See Fed.R.Civ.P. 56(f). Thus, Chaite's claim of a written agreement is wholly unsubstantiated.
Chaite also stated that the agreement was confirmed by e-mail, (id. ¶ 21), and the Debtor produced a copy of the e-mail during the oral argument of this motion. The e-mail was actually an exchange of e-mails that occurred on February 20, 2002, between the Debtor's attorney, Glenn J. Sobel, Esq., and Fred Horton, Jr., Natelco's attorney. According to Sobel, when the Debtor entered into the Natelco Agreement # 2, Natelco insisted on a $45,000.00 deposit. Chaite consented provided that Natelco segregated the deposit, and did not apply it to any "services rendered prior in time and disputed by Best." Sobel thought that the agreement regarding the application of the deposit had been memorialized, and asked Horton if he had a copy.
Horton responded that he no longer had access to Natelco's records. He did, however, recall delivering a letter to Chaite describing the use of the deposit, but did not recall any agreement regarding past arrears. Nevertheless, he speculated that Natelco would not have entered into the new agreement unless the past arrears were paid or the parties had entered into an agreement regarding how the dispute would be handled.
Horton's speculation was not enough to cure the lack of any evidence regarding an agreement by Natelco to waive the past due debt. In fact, Sobel referred to the old debt as "disputed," and the Debtor's concern, at the time, was that Natelco would apply the deposit to reduce the disputed debt. The Debtor would not have been concerned about the application of the deposit if Natelco had agreed to waive the old debt. Moreover, Sobel certainly would have mentioned the waiver in his e-mail if Natelco had made the agreement that Chaite now says it did. Finally, Horton replied that he didn't recall any agreement regarding the old debt.
Thus, neither of the lawyers involved in the transaction attested to any agreement, let alone a written agreement, which involved a waiver by Natelco or forgiveness of the debt due under the Natelco Agreement # 1. The Debtor failed to raise a triable issue regarding the existence of a waiver, and the defense must be rejected as a matter of law.
Second, the Debtor contends that it objected to the bills that form the basis for the account stated. It is true that during 1999, Chaite sent three letters, objecting primarily to the format of the Natelco bills. (See Chaite Reply Declaration, Ex. A.) There is no evidence, however, that the Debtor ever protested the final bill rendered on October 1, 1999. In any event, any disputes in 1999 were obviously resolved. When the Debtor opposed the sale of Natelco to MetTel in April 2001, Chaite submitted a declaration in which he stated that there were no billing disputes between the Debtor and MetTel.
The final letter, dated September 22, 1999, purported to enclose additional letters of protest, but the Debtor did not provide copies. (See Chaite Reply Declaration, Ex. A.)
A party cannot defeat a summary judgment motion with conclusory declarations that contradict the declarant's prior statements. See, e.g., Buttry v. General Signal Corp., 68 F.3d 1488, 1493 (2d Cir. 1995) (quoting Mack v. United States, 814 F.2d 120, 124(2d Cir. 1987) ("it is well settled in this circuit that a party's affidavit which contradicts his own prior deposition testimony should be disregarded on a motion for summary judgment"); Jones v. General Motors Corp., 939 F.2d 380, 385 (6th Cir. 1991) ("a plaintiff may not create a factual issue for the purpose of defeating a motion for summary judgment by filing an affidavit contradicting a statement the plaintiff made in a prior deposition"); S.E.C. v. Research Automation Corp., 585 F.2d 31, 34 (2d Cir. 1978) (rejecting nonmovant's affidavit stating that it had purchase orders for its machines where the affiant had previously stated, under oath, that the company had never sold a machine and had no intention of entering into any sales contracts until it established production facilities).
Chaite cannot defeat MetTel's motion for summary judgment by contradicting his prior declaration and insisting that the Natelco Agreement # 1 charges are in dispute. The Debtor acknowledges that it received the Natelco bills, at least up to the beginning of the migration period, and even paid a substantial portion of those bills. MetTel has therefore established an account stated in the sum of $26,959.41.
Chaite's attorney suggested at oral argument that Chaite's statement was made in light of his belief that Natelco had waived the claim. Chaite's declaration, however, was absolute, and did not mention a waiver by Natelco. His silence on the existence of a waiver was consistent with the Debtor's answer in the second MetTel action and the Debtor's claim objection.
The Debtor's concession in the Natelco bankruptcy case arguably entitles it to judgment on the balance of the Natelco Agreement #1 claim. MetTel, however, moved for summary judgment on an account stated theory, and had the burden of demonstrating that the Debtor received the bills. Chaite, however, denied receipt. The law presumes, in this regard, that a properly addressed, properly mailed item is received by the addressee. In re O.W. Hubbell Sons, Inc., 180 B.R. 31, 34 (N.D.N.Y. 1995); In re Alexander's, Inc., 176 B.R. 715, 721 (Bankr.S.D.N.Y. 1995); In re R.H. Macy Co., 161 B.R. 355, 359 (Bankr.S.D.N.Y. 1993). Personal knowledge of the mailing is not required provided that a witness with personal knowledge testifies to the regular office procedures. See Meckel v. Continental Resources Co., 758 F.2d 811, 817 (2d Cir. 1985) (manager's testimony as to regular office procedure established prima facie evidence of the mailing and created a rebuttable presumption as to receipt); Mount Vernon Fire Ins. Co. v. East Side Renaissance Assoc., 893 F. Supp. 242, 246 (S.D.N.Y. 1995) (testimony of two public health officials with personal knowledge of the regular office procedure was sufficient to establish the presumption where both testified that it was the regular procedure to mail notices of violations to the managing agent).
MetTel's proof on this issue fell short. Kathy Beattie, the payphone accounts manager for Natelco from January 1999 until April 2001, stated in an affidavit that the Natelco bills were "prepared and sent to Debtor, together with detailed back-up information, under my supervision." (Reply Declaration [of Kathy Beattie] in Support of Motion for Summary Judgment, dated October 18, 2002, at ¶ 2.) Beattie did not say that she mailed the bills, or that she saw someone else mail them. Further, her declaration did not indicate that she had personal knowledge of Natelco's customary office procedures, or that Natelco followed those procedures in this case. Accordingly, this aspect of Natelco's motion for summary judgment is denied since Natelco failed to carry its initial burden of showing that the Debtor received the migration period bills. The Court will schedule a hearing to determine whether these bills were actually sent and received.
2. Natelco Agreement #2
The Debtor did not dispute that it received the bills sent during the period covered by the Natelco Agreement #2. In fact, the Debtor paid most of the final bill rendered on March 13, 2001, withheld $41,703.01, (Aronow Declaration ¶ 9), and according to Chaite, objected to the balance of bill. (Chaite Reply Declaration ¶ 29.) His conclusory statement of objection is insufficient, however, to defeat the otherwise valid account stated claim. Furthermore, only one month later, in April 2001, Chaite signed a declaration that there were no billing disputes with Natelco. Accordingly, MetTel is entitled to summary judgment allowing this part of its claim.
3. Post-Natelco Agreement
After MetTel purchased Natelco's assets, it continued to provide dial tone service to the Debtor for approximately four months. MetTel rendered bills in April and May 2001, which the Debtor did not pay. Although Chaite maintains that the Debtor also objected to these bills, (see Chaite Reply Declaration ¶¶ 33, 35), his conclusory statements are again insufficient to defeat summary judgment. MetTel concedes that the Debtor is entitled to a credit of $45,000 for the deposit that it had paid to Natelco. Hence, after the $45,000 credit, MetTel is entitled to summary judgment allowing the debt, in the aggregate sum of $28,783.91, relating to the April and May 2001 bills.
On the other hand, the record contains evidence that the Debtor objected in writing to the bills dated June 1 and July 1, 2001. (See Aronow Declaration, Ex. I.) Accordingly, MetTel failed to establish the elements of its account stated for these invoices, and summary judgment is denied.
D. Other Matters
MetTel's motion for summary judgment on the issue of lost profits is denied. MetTel's claim did not mention lost profits, and it was not until the current motion that it asserted a liquidated claim for lost profits in the sum of $84,000.00 arising from the Debtor's premature termination of the Natelco Agreement # 2. (See Aronow Declaration ¶ 16.) The Debtor opposed summary judgment on the lost profits claim on several grounds including public policy, MetTel's failure to identify the claim in the proof of claim, and the inability to quantify the amount of lost profits. (Preliminary Reply to David Aronow Opposing Debtor's Objection to Proofs of Claim Filed By Manhattan Telecommunications Corporation, dated Sept. 11, 2002 ("Debtor's Reply"), at ¶¶ 32-35.)
This aspect of the motion suffers from at least two shortcomings. First, MetTel failed to demonstrate that liability for lost profits was within the contemplation of the parties at the time that they entered into the Natelco Agreement # 2. Second, MetTel, as assignee of that agreement, failed to prove the amount of lost profits. The only evidence on this point came from a conclusory statement that the claim of lost profits in the sum of $84,000.00 was based on MetTel's "historical experience." (Aronow Declaration ¶ 16.)
MetTel also seeks summary judgment on its claim for attorneys' fees and legal expenses incurred in executing on the State Court Judgments and opposing the Debtor's appeal in state court. As noted, the MetTel Agreement includes a clause that permits the prevailing party to recover its "actual legal costs, including attorney's fees, court costs and costs of collection," in any action to enforce a term or condition of that agreement. (Aronow Declaration, Ex. A, ¶ 6.1.)
The Debtor did not contest MetTel's right to attorneys' fees or legal expenses incurred in connection with collecting the State Court Judgments or defending the Debtor's appeal. The Debtor only challenged the billing rates charged by MetTel's attorneys, and hence, the amount of the fees. (Debtor's Reply ¶ 19.) Accordingly, MetTel is entitled to partial summary judgment on the issue of liability, but must prove the amount of its attorneys' fees and legal expenses in subsequent proceedings.
Finally, the Debtor is entitled to expunge Claim no. 3 as duplicative of Claim no. 8. The Court has considered the other arguments raised by the parties, and concludes that they lack merit. The parties are directed to settle an order consistent with this opinion. The order should include a separate schedule that explains the computation of interest on the allowed claims.