Opinion
01 Civ. 0255 (LAK)
March 11, 2002
ORDER
This action was tried to the Court on January 16, 2002. At the conclusion of the trial, the Court made findings of fact on the record, but the question whether the record adequately supported plaintiffs' claims for "other charges" and interest as set forth on their bills to the defendant remained open pending further briefing, as counsel were unable to explain the basis for those charges during trial. Plaintiffs submitted a post-trial memorandum of law on these open issues. Defendant did not submit any papers.
Plaintiffs now have shown that the applicable tariffs state in relevant part that
"If a customer does not give MCI written notice of a dispute with respect to MCI's charges within six months from the date the invoice was rendered, such invoice shall be deemed to be correct and binding on the customer."
PX 21 § B.7.05, at 12.3.3.2; see PX 22 § 2.5.3, at 23.
The MCI Telecommunications Corp. Tariff F.C.C. No. 1 (the "MCI Tariff") (PX 21) governs plaintiffs' provision of private line services. WorldCom Technologies, Inc. Tariff F.C.C. No. 1 (the "WorldCom Tariff") (PX 22) governs plaintiffs' provision of On-Net services.
The applicable tariffs are the law. Marcus v. AT T Co., 138 F.3d 46, 56 (2d Cir. 1998). The evidence at trial established that defendant did not give plaintiffs written notice of a dispute with respect to its charges as required by the tariffs. Accordingly, plaintiffs are entitled to recover (a) $170,902.20 for private line services, and (b) $149,162.30 for On-Net services.
As plaintiffs candidly point out, this amount includes a service charge of 18 percent interest, as provided by the private line agreement. Despite the fact that this rate is usurious under New York law, as discussed below, plaintiffs became entitled to this billed amount by virtue of the combination of Section B.7.05 of the MCI Tariff and defendant's failure to submit written notice of a dispute.
The issue of prejudgment interest remains. As a general matter, plaintiffs are entitled to prejudgment interest on the monies owed to them for private line and On-Net services. Delta Traffic Serv., Inc. v. Appco Paper Plastics Corp., 931 F.2d 5, 7 (2d Cir. 1991). The amount of such prejudgment interest presents a tougher question.
With respect to the private line services, defendant agreed to pay "the lesser of an annual rate of interest of 18% . . . or the maximum rate allowed by law on all accounts that are delinquent." PX 4, attach. A, ¶ 3. New York's civil usury laws prohibit interest in excess of 16 percent, with exceptions not relevant here. N.Y. GEN. OBLIG. LAW § 5-501 (McKinney 2001); N Y BANKING LAW § 14-a(1) (McKinney 2001); see In re Venture Mortgage Fund, L.P., No. 01-5010, 2002 WL 318299 (2d Cir. Mar. 1, 2002). Defendant contracted to pay 16 percent on delinquent accounts because that is the maximum rate allowed by law. Plaintiffs would be entitled to prejudgment interest at that contract rate of interest from December 19, 2000. See Astoria Fed. Sav. Loan Ass'n v. Ramblakos, 49 A.D.2d 715, 372 N.Y.S.2d 689 (2d Dept. 1975) (contract rate, rather than statutory rate, applies when agreement provides that interest shall be paid at specified rate until the principal is extinguished). However, inasmuch as plaintiffs seek interest at the lower rate of 9 percent, the Court will hold them to their demand.
The MCI Tariff is silent on choice of law regarding payment arrangements, as is the parties' private line agreement, PX 4. Neither defendant nor plaintiffs have suggested that the law of another state applies to this issue. Thus, in the absence of a showing of conflict, the Court applies the law of the forum. See, e.g., Employers Ins. of Wasau v. Duplan Corp., 899 F. Supp. 1112, 1118 (S.D.N.Y. 1995) ("The choice between the law of New York and that of another state is a consideration only where a conflict exists between New York and foreign law.").
Prejudgment interest should accrue from December 19, 2000 on the private line arrearage because the November 27, 2000 invoices are the last invoices for which WorldCom seeks damages in connection with its provision of private line services, and the MCI Tariff provides that amounts not paid within 21 days after the date of invoice are deemed past due. PX 21 § 7.03, at 12.3.3.1.
Pl. Post-Trial Mem. 4, 7.
Because the agreement governing On-Net services is silent on interest charges but purports to choose New York law, see PX 5, plaintiffs assume that New York statutory law applies to the question of prejudgment interest on the On-Net arrearage. See N.Y. C.P.L.R. § 5004. Unlike the MCI Tariff, however, the WorldCom Tariff speaks to the issue of prejudgment interest. Thus, the parties' agreement purporting to choose New York law for purposes of calculating interest charges would be unenforceable to the extent inconsistent with the WorldCom Tariff. See Fax Communicaciones, Inc. v. AT T, 138 F.3d 479, 488 (2d Cir. 1988) ("'The rights as defined by the tariff cannot be varied or enlarged by either contract or tort of the carrier.'" (citing Keogh v. Chicago N.W. Ry. Co, 260 U.S. 156, 163 (1922))); Am. Tel. Tel. Co. v. New York City Human Res. Admin., 833 F. Supp. 962, 970 (S.D.N.Y. 1993).
Section 2.2.3(B) of the WorldCom Tariff states:
"Any legal action or proceeding with respect to the collection of charges due under this Tariff is governed by and interpreted according to the laws of the state of Mississippi applicable to Mississippi agreements, except to the extent that the Communications Act of 1934, as amended, as interpreted and applied by the Federal Communications Commission, applies."
PX 22, § 2.2.3(B), at 16. Complicating matters somewhat, Section 2.5.3 of the same tariff, which purports to apply to "payment arrangements," states in relevant part:
"Accounts not paid within 30 days from the invoice date will be considered delinquent. Delinquent payments may result in the imposition of a late fee at the rate of one and one-half percent (1.5%) of the unpaid balance per month or the maximum allowable under applicable state law (with the exception of Florida and Georgia, where the rate will be at 1.2%)."
PX 22, § 2.5.3, at 23.
At first blush, Section 2.2.3(B) suggests that Mississippi law governs prejudgment interest on the On-Net arrearage. However, that would be inconsistent with Section 2.5.3, which acknowledges applicability of other law, and, in any case, is a more specific provision and thus controls Section 2.2.3(B) as to prejudgment interest.
The question remains what state law is "applicable state law" in this case. As noted above, absent a demonstrated conflict, New York law applies. Employers Ins. of Wasau, 899 F. Supp. at 1118. The "maximum allowable" under New York law is 16 percent, and plaintiffs would be entitled to prejudgment interest at this rate from March 25, 2001 on the On-Net arrearage by virtue of Section 2.2.3(B) of the WorldCom Tariff. Again, inasmuch as plaintiffs seek interest at the lower rate of 9 percent, the Court will hold them to their demand.
Prejudgment interest should accrue from March 25, 2001 on the On-Net arrearage because the February 25, 2001 invoices are the last invoices for which WorldCom seeks damages in connection with its provision of On-Net services, and the WorldCom Tariff provides that amounts not paid within 30 days after the date of invoice are deemed delinquent. PX 22 § 2.5.3., at 23.
Pl. Post-Trial Mem. 4, 7.
In conclusion, plaintiffs shall have judgment against defendant for a sum equal to the total of (a) $170,902.20 together with interest on that sum from December 19, 2000 to the date of entry of judgment at the rate of 9 percent, and (b) $149,162.30 together with interest on that sum from March 25, 2001 to the date of entry of judgment at the rate of 9 percent.
This order, together with the findings on the record at the conclusion of trial, contains the Court's findings of fact and conclusions of law. The Clerk shall enter judgment and close the case.
SO ORDERED.