IDT Corp., et al., Respondents,v.Tyco Group, S.A.R.L., et al., Appellants.BriefN.Y.April 29, 2014To be Argued by: THOMAS E.L. DEWEY (Time Requested: 30 Minutes) APL-2013-00127 New York County Clerk’s Index No. 652097/10 Court of Appeals of the State of New York IDT CORP. and IDT EUROPE, B.V.B.A., Plaintiffs-Respondents, – against – TYCO GROUP, S.A.R.L., TYCOM (US), INC., TYCO INTERNATIONAL, LTD., TYCO INTERNATIONAL (US) INC., and TYCOM LTD., Defendants-Appellants. BRIEF FOR DEFENDANTS-APPELLANTS DEWEY PEGNO & KRAMARSKY LLP Attorneys for Defendants-Appellants 777 Third Avenue New York, New York 10017 Tel.: (212) 943-9000 Fax: (212) 943-4325 Date Completed: July 26, 2013 DISCLOSURE STATEMENT In compliance with Rule 500.1 (f) of the Rules of Practice for the Court of Appeals of the State of New York, Defendants-Appellants state the following: Defendant-Appellant Tyco Group S.a.r.l., is now doing business as Covidien Group S.a.r.l. and is no longer associated with the Tyco Electronics group of entities. Defendant-Appellant TyCom (US) Inc. is now doing business as Tyco Electronics Subsea Communications LLC ("TE Subsea"). TE Subsea is a directly held, fully owned subsidiary of Tyco Electronics Corporation, and an indirectly held, fully owned subsidiary of Tyco Electronics Corporate Holdings, Inc., Tyco Electronics Holding S.a r.l., TE Connectivity Holding International II S.a r.l., Tyco Electronics Group S.A. and TE Connectivity Ltd. The fully owned direct subsidiaries of TE Subsea are Transoceanic Cable Ship Company LLC and Tyco Electronics Integrated Cable Systems LLC. Defendant-Appellant Tyco International Ltd. is a publicly traded company and is no longer associated with the Tyco Electronics group of entities. Defendant-Appellant Tyco International (US) Inc. has merged with and into Tyco Electronics Corporate Holdings, Inc. ("TEC Holdings"). TEC Holdings is a directly held, fully owned subsidiary of Tyco Electronics Holding S.a r.l., and an indirectly held, fully owned subsidiary of TE Connectivity Holding International II S.a r.l., Tyco Electronics Group S.A. and TE Connectivity Ltd. The fully owned direct subsidiaries of TEC Holdings are Rochester Wire and Cable LLC, Tyco Electronics Netherlands (Gibraltar China) Cooperatief U.A., Tyco Electronics Netherlands (Gibraltar India) Cooperatief U.A. and Wormald Americas, Inc. TEC Holdings also has less than a full interest in Cima de Acuna S.A. de C.V., Kemex Holding Company, S.A. de C.V. and Tyco Electronics Corporation. Defendant-Appellant TyCom Ltd. is now doing business as Tyco Telecommunications Ltd. It is a directly held fully owned subsidiary of Tyco Electronics (Gibraltar) Limited., and an indirectly held fully owned subsidiary of Tyco Electronics (Gibraltar) Holding Limited, TE Connectivity Holding International I S.a r.l., TE Connectivity Holding International II S.a r.l., Tyco Electronics Group S.A. and TE Connectivity Ltd. The fully owned direct subsidiaries of Tyco Telecommunications Ltd. are Tyco Global Networks Ltd., and Tyco Contracting Ltd. TABLE OF CONTENTS Page TABLE OF AUTHORITIES ................................................................................... iv QUESTIONS PRESENTED ..................................................................................... 1 STATEMENT OF JURISDICTION ......................................................................... 2 PRELIMINARY STATEMENT ............................................................................... 3 STATEMENT OF CASE .......................................................................................... 8 A. The Original IDT/Tyco Litigation ........................................................ 8 B. The 2000 Settlement Agreement .......................................................... 9 C. The Pre-2004 Negotiations ................................................................. 10 1. Round One: 2001-2002 Negotiations ....................................... 10 2. Round Two: May 2002 Negotiations ....................................... 12 3. Round Three: 2003 Negotiations ............................................. 13 D. The 2004.Complaint ........................................................................... 14 E. Supreme Court's 2007 Ruling ............................................................ 16 F. The Appellate Division's 2008 Ruling ............................................... 17 G. Proceedings Before this Court on Prior Appeal ................................. 18 H. This Court's Opinion .......................................................................... 19 I. Events in 2010 .................................................................................... 21 J. The 2010 Complaint ........................................................................... 22 K. Justice Schweitzer's Opinion .............................................................. 24 L. The 2012 Appellate Division Decision .............................................. 26 M. Tyco' s Motion for Reargument or Leave to Appeal .......................... 29 ARGUMENT .......................................................................................................... 30 I. THIS COURT'S OPINION ENDED THIS CASE ...................................... 30 A. This Court's Holding that Conditions Precedent Were Not Met Through No Fault ofTyco Discharged the Parties' Remaining Obligations .......................................................................................... 30 B. The Appellate Division Misconstrued Prior Rulings and the Applicable Law ................................................................................... 34 C. This Court's Holding Is Consistent with Duty to Negotiate Caselaw .............................................................................. 39 II. IDT's COMPLAINT IS BARRED BY RES JUDICATA AND COLLATERAL ESTOPPEL ........................................................................ 45 A. IDT's 2010 Complaint is Barred By Res Judicata ............................. 45 B. The Appellate Division's Basis for Rejecting Res Judicata Is Wrong ............................................................................................. 50 C. IDT's 2010 Complaint Is Also Barred by Collateral Estoppel .......... 53 III. THE DOCUMENTARY EVIDENCE ESTABLISHES THAT IDT'S COMPLAINT FAILS ................................................................................... 58 A. IDT Cannot State a Claim For Breach of Duty to Negotiate ............. 58 B. Documentary Evidence Establishes that Tyco Did Not Anticipatorily Breach the 2000 Settlement Agreement ............................................. 61 11 1. The Appellate Division Incorrectly Found a "Definite and Final Communication" ............................................................. 61 CONCLUSION ....................................................................................................... 67 111 TABLE OF AUTHORITIES Cases 2004 McDonald Ave. Realty, LLC v. 2004 McDonald Ave. Corp., No. 30839/06, 2007 WL 6889356 (Sup. Ct. Kings Cnty. June 4, 2007) ........................ 45n. 6 Adjustrite Sys., Inc. v. GAB Bus. Servs., Inc., 145 F.3d 543 (2d Cir. 1998) .......................... : ........................................... 7, 40 Allbrand Disc. Liquors, Inc. v. Times Square Stores Corp., 60 A.D.2d 568, 399 N.Y.S.2d 700 (2d Dep't 1977) ..................................... 61 Altegra Credit Co. v. Tin Chu, 29 A.D.3d 718, 816 N.Y.S.2d 140 (2d Dep't 2006) ..................................... 53 Aniero Concrete Co., Inc. v. N.Y. City Constr. Auth., No. 94 Civ. 3506, 2000 WL 863208 (S.D.N.Y. June 27, 2000) ............. 32-33 Aviles v. Liberty Mut. Ins. Co., 300 A.D.2d 70, 750 N.Y.S.2d 752 (1st Dep't 2002) .................................... 49 Baldo v. Marine Midland Bank, N.A., 219 A.D.2d 807, 632 N.Y.S.2d 359 (4th Dep't 1995) .................................. 46 BDO Seidman LLP v. Strategic Res. Corp., 70 A.D.3d 556, 896 N.Y.S.2d 15 (1st Dep't 2010) ....................................... 53 Beal Sav. Bank v. Sommer, 8 N.Y.3d 318, 834 N.Y.S.2d 44 (2007) ........................................................ 58 Beattie v. Brown & Wood, 243 A.D.2d 395, 663 N.Y.S.2d 199 (1st Dep't 1997) .................................. 60 Best Payphones, Inc. v. Manhattan Telecomm. Corp., 432 B.R. 46 (S.D.N.Y. 2010) .................................................................. 62, 63 Bunny v. Coughlin, 187 A.D.2d 119, 593 N.Y.S.2d 354 (3d Dep't 1993) ................................... 56 IV Cases Capezzuto v. Iascone, No. 07060528, 2007 WL 3375869 (Just. Ct., Monroe Cnty., Nov. 13, 2007) ..................................................... 66 Chadbourne & Parke LLP v. Warshaw, 287 A.D.2d 119, 733 N.Y.S.2d 168 (1st Dep't 2001) .................................. 55 Cauff Lippman & Co. v. Apogee Fin. Group, Inc., 807 F. Supp. 1007 (S.D.N.Y. 1992) ............................................................. 41 Cole v. Mack/owe, 64 A.D.3d 480, 882 N.Y.S.2d 417 (1st Dep't 2009) .................................... 65 Colonial Pac. Leasing Corp. v. Brown, No. 601980/09, 28 Misc.3d 1214(A), 2010 WL 2927283 (Sup. Ct. N.Y. Cnty. July 21, 2010) .............................................................. 35 Dingley v. Oler, 117 u.s. 490 (1886) ...................................................................................... 62 Dorli, Inc. v. RGA Accessories, Inc., 136 A.D.2d 465, 523 N.Y.S.2d 103 (1st Dep't 1988) .................................. 49 Elias v. Rothschild, 29 A.D.3d 448, 815 N.Y.S.2d 89 (1st Dep't 2006) ...................................... 46 Ellan Corp., Inc. v. Dongkwang Int'l Co., Ltd., No. 09 Civ. 414, 2011 WL 4343844 (S.D.N.Y Aug. 15, 2011) .................. 37 Ellis v. Ellis, 294 A.D.2d 168, 742 N.Y.S.2d 225 (1st Dep't 2002) .................................. 52 EQT Infrastructure Ltd. v. Smith, 861 F. Supp. 2d 220 (S.D.N.Y. 2012) .......................................................... 44 Exhibitors Poster Exch., Inc. v. Nat'! Screen Serv. Corp., 517 F.2d 110 (5th Cir. 1975) ........................................................................ 57 v Cases Ga Nun v. Palmer, 202 N.Y. 483, 96 N.E. 99 (1911) ............................................................ 61, 65 Goodstein Constr. Corp. v. City of N.Y., 67 N.Y.2d 990, 502 N.Y.S.2d 994 (1986) .................................................... 40 Haines v. City of New York, 41 N.Y.2d 769, 396 N.Y.S.2d 155 (1977) ................................................ 6, 38 Hall v. People to People Health Found., Inc., 493 F.2d 311 (2d Cir. 1974) ........................................................... 6, 33-34,39 HGCD Retail Servs., LLC v. 44-45 Broadway Realty Co., . 37 A.D.3d 43, 826 N.Y.S.2d 190 (1st Dep't 2006) ...................................... 32 Matter of Hofmann, 287 A.D.2d 119, 733 N.Y.S.2d 168 (1st Dep't 2001) .................................. 57 Honess 52 Corp. v. Town of Fishkill, 266 A.D.2d 510, 698 N.Y.S.2d 718 (2d Dep't 1999) ................................... 56 HP Hotel Sponsor, LLC v. Strategic Capital Solutions, LLC, No. 603707/08, 2010 WL 3815242, (Sup. Ct. New York Cnty. Aug. 26, 2010) ............................................. 44 n.6 Huck v. Dawson, 106 F.3d 45 (3d Cir. 1997) ........................................................................ 7, 52 In re Hunter, 4 N.Y.3d 260,794 N.Y.S.2d 286 (2005) ................................................. 45-46 Juanes v. Lyzwinski, 875 F. Supp. 2d 155 (N.D.N.Y. 2012) .................................................... 44 n.6 Levy v. Friedman, 216 A.D.2d 18, 628 N.Y.S.2d 265 (1st Dep't 1995) .................................... 37 VI Cases Marcel Fashions Group, Inc. v. Lucky Brand Dungarees, Inc., No. 11 Civ. 5523, 2012 WL 4450992 (S.D.N.Y. Sept. 25, 2012) ........... 50-51 McCloud v. Torres, No. 03 Civ. 1514, 2006 U.S. Dist. LEXIS 97914 (E.D.N.Y. Oct. 31, 2006) .............................................................................. 49 Merritt Hill Vineyards Inc. v. Windy Heights Vineyard, Inc., 61 N.Y.2d 106, 472 N.Y.S.2d 592 (1984) ................................................ 6, 32 MHR Capital Partners v. Presstek Inc., 12 N.Y.3d 640, 884 N.Y.S.2d 211 (2009) .......................................... 6, 32, 33 Mode Contempo, Inc. v Raymours Furniture Co., Inc., 80 A.D.3d 464, 915 N.Y.S. 2d 528 (1st Dep't 2011) ................................... 60 NAS Elec., Inc. v. Transtech Elec. PTE Ltd., 262 F. Supp. 2d 134 (S.D.N.Y. 2003) .......................................................... 49 NFL Ins. Ltd. By Lines v. B&B Holdings, Inc., 874 F. Supp. 606 (S.D.N.Y. 1995) ............................................................... 32 Norman v. Niagra Mohawk Power Corp., 873 F.2d 634 (2d Cir. 1989) .......................................................................... 52 NRP Holdings LLC v. City of Buffalo, No. 11-CV-472S, 2012 WL 2873899 (W.D.N.Y. July 12, 2012) ................ 44 O'Donnell, Fox & Gartner, P.C. v. R-2000 Corp., 198 A.D.2d 154, 604 N.Y.S.2d 67 (1st Dep't 1993) .................................... 60 Oppenheimer & Co., Inc. v. Opennheim, Appel, Dixon & Co., 86 N.Y.2d 685 (1995) ................................................................................... 20 Parker v. Blauvelt Volunteer Fire Co., 93 N.Y.2d 343, 690 N.Y.S.2d 478 (1999) .................................................... 53 Vll Cases Perna v. Desai, 101 A.D.2d 857, 475 N.Y.S.2d 883 (2d Dep't 1984) ................................... 38 Preferred Mortgage Brokers, Inc. v. Byfield, 282 A.D.2d 589, 723 N.Y.S.2d 230 (2d Dep't 2001) ................................... 37 Pricaspian Dev. Corp. v. Royal Dutch Shell, PLC, No. 09-2857-cv, 382 Fed. Appx. 100, 2010 WL 2588193 (2d Cir. June 29, 2010) ................................................................................. 51 Rachmani Corp. v. 9 E. 96th St. Apartment. Corp., 211 A.D.2D 262, 629 N.Y.S.2d 382 (1st Dep't 1995) ................................. 62 Ramallo Bros. Printing, Inc. v. El Dia, Inc., 490 F.3d 86 (1st Cir. 2007) ........................................................................... 57 Record Club of Am., Inc. v. United Artists Records, Inc., 643 F. Supp. 925 (S.D.N.Y. 1986) ............................................................... 66 Matter of Reilly v. Reid, 45 N:Y.2d 24, 407 N.Y.S.2d 645 (1978) ................................................ 46, 52 RNK Capital LLC v. Natsource LLC, No. 603483/06, 2008 WL 8981921 (Sup Ct. N.Y. Cnty. Jan. 30, 2008) ..... 45 Rotella v. Rotella, 178 A.D.2d 755, 577 N.Y.S.2d 342 (3d Dep't 1991) ................................... 33 Ryan v. N.Y. Telephone Co., 62 N.Y.2d 494, 478 N.Y.S.2d 823 (1984) .................................................... 53 Sawabeh Info. Servs. Co. v. Brody, 832 F. Supp. 2d 280 (S.D.N.Y. 2011) ..................................................... 44-45 Sandhu v. Mercy Med. Ctr., 54 A.D.3d 928, 864 N.Y.S.2d 124 (2d Dep't 2008) ..................................... 46 Vlll Cases Scavenger, Inc. v. GT Interactive Software Corp., 289 A.D.2d 58, 734 N.Y.S.2d 141 (1st Dep't 2001) ................................ 7, 62 Scooper Dooper, Inc. v. Kraftco Corp., 494 F.2d 840 (3d Cir. 1974) .......................................................................... 57 Smith v. Russell Sage College, 54 N.Y.2d 185,445 N.Y.S.2d 68 (1981) ................................................ 46,47 Snakepit Auto. Inc. v. Superpeiformance Int'l, LLC, No. 5402-07, 859 N.Y.S.2d 906, 2008 WL 899024 (Sup. Ct. Nassau Cnty. Mar. 31, 2008) ......................................................... 40 Solutia Inc. v. FMC Corp., 456 F. Supp. 2d 429 (S.D.N.Y. 2006) ...................................................... 7, 40 Staebell v. Bennie, 83 A.D.2d 765,443 N.Y.S.2d 487 (4th Dep't 1981) .................................... 62 · Stanton v. Power, 254 A.D.2d 153, 679 N.Y.S.2d 293 (1st Dep't 1998) .................................. 37 Sterngass v. Soffer, 27 A.D.3d 549, 810 N.Y.S.2d 362 (2d Dep't 2006) ..................................... 50 Strassberg v. New York Hotel & Motel Trades Council, No. 99 Civ. 10150, 2001 WL 103427 (S.D.N.Y. Feb. 7, 2001) ................... 48 Teachers Ins. and Annuity Ass'n of Am. v Tribune Co., 670 F Supp. 491 (S.D.N.Y. 1987) ................................................................ 40 Tenavision, Inc. v. Neuman, 45 N.Y.2d 145, 408 N.Y.S.2d 36 (1978) ...................................................... 61 Vemics, Inc. v. Meade, No. 06 Civ. 8716, 2009 WL 2191334 (S.D.N.Y. July 23, 2009) ................. 32 IX Cases Venture Assocs. Corp. v. Zenith Data Sys. Corp., 96 F.3d 275 (7th Cir. 1996) .......................................................................... 60 Waldman v. Village of Kiryas Joel, 207 F.3d 105 (2d Cir. 2000) .......................................................................... 51 Williamson, Picket, Gross, Inc. v. L VMH, Inc., No. 602339/06, 873 N.Y.S.2d 238, 2008 WL 4138474 (Sup. Ct. N.Y. Cnty. Aug. 4, 2008) ........................................................ 45 n.6 Wohlers v. Wohlers, 46 A.D.3d 1444, 847 N.Y.S.2d 501 (4th Dep't 2007) .................................. 55 York Agents, Inc. v. Bethlehem Steel Corp., 36 A.D.2d 62, 318 N.Y.S2d 157 (1st Dep't 1971) ....................................... 65 Statutes & Other Authorities 18 Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, FEDERAL PRACTICE AND PROCEDURE § 4417 (2d ed. 2002) ................................................... 57 Calamari & Perillo, CONTRACTS §11-3 at 384 (2d ed. 1977) ................................. 32 X QUESTIONS PRESENTED 1. Did the Appellate Division err by reversing Supreme Court's dismissal of the complaint? 2. Did the Appellate Division err in concluding that the parties remained obligated to continue negotiations after this Court's Opinion in IDT v. Tyco, 13 N.Y.3d 209 (Oct. 22, 2009) (R. 46-49C)? 3. Did the Appellate Division incorrectly hold that the duty to negotiate can never be extinguished absent a contractual end point? 4. Did the Appellate Division incorrectly hold that the law of preclusion does not apply to claims and issues arising after an adjudication, even where those claims and issues are identical to the claims and issues already adjudicated? 5. Did the Appellate Division ignore documentary evidence establishing that IDT cannot state a claim for breach of the duty to negotiate in good faith? 6. Did the Appellate Division incorrectly announce a new rule of law that a party cannot reserve its rights yet continue to negotiate? STATEMENT OF JURISDICTION This Court has jurisdiction to entertain this appeal pursuant to CPLR 5602(b)(1) because leave to appeal was granted by the Appellate Division, First Department, by order entered May 21, 2013. (R. 332). The Appellate Division certified, pursuant to CPLR 5713, the following question of law to this Court: "Was the order of this Court, which reversed the order of Supreme Court, properly made?" (R. 332). This appeal is timely because Defendants-Appellants filed a motion for leave to appeal with the Appellate Division, First Department on January 31, 2013, within 30 days of receipt of notice of entry of the Appellate Division's order reversing the order of Supreme Court, New York County. See CPLR 5513(b). All questions raised herein were raised in Tyco' s motion to dismiss the complaint, the accompanying briefs, the briefs filed in the Appellate Division, First Department, the Appellate Division's December 27, 2012 Decision and in the record on appeal. (E.g., R. 6-18,20-35, 46-49C, 56-77, 102-03, 134, 152-58, 193- 261' 262-65, 296-98, 299-302, 307-08, 311-321, 322-29). 2 PRELIMINARY STATEMENT In 2000, Tyco and IDT entered into a Settlement Agreement (the "2000 Settlement Agreement") resolving multiple pending lawsuits. That agreement required the parties to dismiss all their pending claims-Tyco' s claim sought $1 billion from IDT-against each other (which they did); and to negotiate the terms of several additional agreements, including an Indefeasible Right to Use ("IRU") Agreement, 1 so that IDT could receive the right to use telecommunications capacity on the Tycom Global Network (the "Network"). (R. 47). The parties thereafter engaged in three separate rounds of negotiations for almost three years, but were unable to reach agreement. In 2004, IDT sued Tyco, claiming that Tyco had breached the 2000 Settlement Agreement because it "failed to meet its obligations under the Settlement Agreement to provide to IDT the use of the Wavelengths by the applicable Handover Dates." (R. 155). IDT also argued that Tyco had breached the 2000 Settlement Agreement by insisting on terms in the definitive agreements that were allegedly inconsistent with the 2000 Settlement Agreement. (R. 48). In October 2009, this Court unanimously affirmed a (unanimous) ruling by the Appellate Division, First Department granting Tyco's summary judgment 1In the telecommunications industry, an. IRU is a legal interest created by contractual agreement that confers an indefeasible and exclusive right of access to some or all of the capacity in a telecommunications cable system. An IRU is an intangible bundle of rights, not a physical object. The capacity is basically a beam of light. 3 motion dismissing IDT's complaint with prejudice (the "Opinion"). The Court rejected IDT's argument that Tyco was obligated simply to hand over the capacity even without an IRU Agreement. (R. 49B). This Court also held that the 2000 Settlement Agreement "contemplated the occurrence of numerous conditions, i.e., the negotiation and execution of four additional agreements, most importantly, the IRU." (R. 49B). The Court observed that "the parties were required to negotiate the terms of the IRU and other agreements in good faith"; that "each side had the right to require conformance with Tyco's standard agreements, except to the extent that any term conflicted with the settlement agreement"; and that though the parties "negotiated various open terms on and off for almost three years", they never executed the IRU. (R. 49B-C). The Court concluded its Opinion by holding that "the record does not support a finding that Tyco breached any of its obligations." (R. 49C). Less than one month later, IDT demanded that Tyco "provide IDT with the Wavelengths." (R. 270-71). Tyco responded that this Court's Opinion, dismissing IDT' s complaint with prejudice and holding that conditions precedent had not been satisfied through no fault of Tyco, established that the parties had no remaining obligations under the 2000 Settlement Agreement. (R. 299). Tyco nonetheless attempted to resolve the issues with IDT, but those discussions foundered on the same issues that had thwarted the prior negotiations. In 2010, IDT sued Tyco, 4 again claiming that Tyco violated the 2000 Settlement Agreement by, among other things, "fail[ing] to meet their obligations under the Settlement Agreement to provide to IDT the use of the Wavelengths by the applicable Handover Dates" (R. 25) and taking positions that were allegedly inconsistent with the 2000 Settlement Agreement. (R. 32). Supreme Court (Schweitzer, J.S.C.) dismissed the case, concluding that "the language of the court [of appeals'] decision makes it clear that Tyco does not have any further obligations under the Settlement Agreement". (R. 18). That court ruled that if this Court had "intended to reserve a future right of action in IDT, it would have indicated as much" (R. 18) and that Tyco "does not have any further obligations under the Settlement Agreement. This includes no further duty to negotiate the terms of the IRU Agreement .... " (R. 18). The Appellate Division, however, reversed and reinstated IDT's 2010 Complaint. (R. 334-50). Unfortunately, that court's decision misstated, variously, the issues in the prior litigation, this Court's holding and the applicable law: • the court ruled that this Court had simply ruled that "the parties had not yet entered into final agreements", and the conditional duty still existed (R. 340)-though nothing in this Court's Opinion so states and this Court expressly held that "Tyco' s obligation to furnish capacity never became enforceable because agreed-upon conditions were not met" (R. 49A); • the court ruled that Tyco had never argued that its duty to negotiate had been discharged (R. 346)-though Tyco did argue in the 2004 litigation that "Tyco has no further obligations under the Settlement Agreement"; 5 • the court held that this Court did "not previously determine the issue of whether defendants' proposals were a breach of the duty to negotiate in good faith" (R. 346)-though this Court expressly recognized that the parties were bound to negotiate in good faith and that "the record does not support a finding that Tyco breached any of its obligations" (R. 49C); and • the court rejected the contention that almost three years of prior good faith negotiation (not to speak of the additional year of negotiation following this Court's Opinion) constituted a "reasonable time" to fulfill the condition (R. 341-42), but see Hall v. People to People Health Found., Inc., 493 F.2d 311, 313 (2d Cir. 1974) (failure to consummate settlement agreement in five months unreasonable as matter of law). These rulings place these parties in a commercially impossible position, negotiating fruitlessly over an IRU agreement when more than 11 years of that IRU's term have already passed. More broadly, however, if left uncorrected by this Court, the Appellate Division's holdings threaten to introduce substantial confusion into several different areas of commercial law. For example: • the court's holding that the non-occurrence of a condition precedent, without fault of the party under the conditional obligation, does not discharge the conditional duty is at odds with decades of well-established law, MHR Capital Partners v. Presstek Inc., 12 N.Y.3d 640, 643, 884 N.Y.S.2d 211, 213 (2009) ("defendant's obligation to perform ... did not arise because [the] express condition precedent was not fulfilled"); Merritt Hill Vineyards Inc. v. Windy Heights Vineyard, Inc., 61 N.Y.2d 106, 113, 472 N.Y.S.2d 592, 596 (1984) ("[A] contracting party's failure to fulfill a condition excuses performance by the other party whose performance is so conditioned".); • the court's ruling that, unless there is an express "expiration date", parties who are subject to a duty to negotiate must continue to negotiate indefinitely (R. 342), is equally at odds with established law, Haines v. City of New York, 41 N.Y.2d 769,772,396 N.Y.S.2d 155, 157 (1977) ("[T]he law will not imply that a contract calling for continuing 6 performance is perpetual in duration."); Solutia Inc. v. FMC Corp., 456 F. Supp. 2d 429, 443 (S.D.N.Y. 2006) ("If the parties 'fail to reach such a final agreement after making a good faith effort to do so, there is no further obligation."') (quoting Adjustrite Sys., Inc. v. GAB Bus. Servs., Inc., 145 F.3d 543, 548 (2d Cir. 1998)); • the court's rejection of Tyco' s res judicata and collateral estoppel arguments because the relevant conduct occurred after this Court's Opinion (R. 346) is at odds with authorities clearly holding that preclusion applies when the conduct is the same, Huck v. Dawson, 106 F.3d 45, 49-50 (3d Cir. 1997) (plaintiff's claims barred by res judicata because conduct "is precisely the same conduct challenged in the earlier suit"); and • the court's holding that a reservation of rights constitutes anticipatory repudiation (R. 342-43) is wholly unprecedented, Scavenger, Inc. v. GT Interactive Software Corp., 289 A.D.2d 58, 59, 734 N.Y.S.2d 141, 142 (1st Dep't 2001) (no unequivocal repudiation where letter included opportunity to cure). In short, we respectfully submit that the Appellate Division's ruling cannot stand. The Court should reverse and reinstate Supreme Court's ruling dismissing the complaint. 7 STATEMENT OF CASE A. The Original IDT/Tyco Litigation In 1999, IDT and Tyco negotiated a potential business venture concerning the construction of an undersea fiber optic telecommunications network. The venture never materialized and in January 2000 IDT sued Tyco in New Jersey federal court. IDT' s complaint alleged that Tyco had breq_ched a Memorandum of Understanding, claiming, among other things, failure to negotiate in good faith. IDT sought compensatory damages of $1 billion and punitive damages of $3 billion. In June 2000, the federal court granted Tyco' s motion to dismiss the complaint without prejudice. (R. 53-54, 56). In March 2000, Tyco filed a complaint in Supreme Court, New York County, alleging that IDT had filed a baseless lawsuit, improperly disclosed confidential information to the press and otherwise obstructed efforts to build the TyCom Global Network. Tyco's complaint sought compensatory damages of at least $1 billion, punitive damages and declaratory and injunctive relief. (R. 54). IDT filed a motion to dismiss the complaint, which was denied in June 2000. (R. 56). In June 2000, IDT filed another complaint, this time in New Jersey Superior Court, raising factual allegations and legal claims similar to those raised in its 8 earlier complaint, which had been dismissed. (R. 54). In August 2000, the New Jersey court granted Tyco's motion to dismiss without prejudice. (R. 57). B. The 2000 Settlement Agreement On October 10, 2000, IDT and Tyco entered into the 2000 Settlement Agreement. (R. 56-77). The 2000 Settlement Agreement, which encompassed all actual and potential claims in the pending lawsuits, obligated both parties to dismiss all their respective actions with prejudice. IDT and Tyco thereafter discontinued their pending claims. The 2000 Settlement Agreement also contemplated that Tyco2 would grant IDT the right to use a certain amount of capacity on the TyCom Global Network, through an IRU. When the 2000 Settlement Agreement was signed, the TyCom Global Network had not been completed and Tyco had not yet developed a standard form of IRU Agreement; the 2000 Settlement Agreement therefore stated that IDT and Tyco would negotiate the remaining terms of the IRU Agreement and (other) "definitive" agreements. (See R. 58 ("The IRU shall be documented pursuant to definitive agreements to be mutually agreed upon, and, in any event, containing terms and conditions consistent with those described herein.")). These 2 Of the five "Tyco" defendants, TyCom was the only Tyco entity that was actually in the business of constructing undersea fiber optic telecommunications networks and was the only Tyco entity under the 2000 Settlement Agreement that could provide access to undersea fiber optic capacity. Tyco's corporate structure has changed since 2000 (and since the prior briefing and decisions in this case), but the parties and the courts have generally referred to TyCom as Tyco. We will continue to do so here. 9 further definitive agreements, and the IRU Agreement, "were to be in writing and consistent with Tyco's standard agreements with similarly situated customers." (R. 47). Further, while Tyco initially was to provide the IRU and associated Operations, Administration and Management "free of charge", the 2000 Settlement Agreement contemplated that IDT would pay for other equipment and services. (E.g., R. 60 (Tyco to provide Network Provisioning Equipment to IDT "at the lowest rate or prices which [Tyco] is offering to its other Similarly Situated Customers.")). C. The Pre-2004 Negotiations For almost three years after the 2000 Settlement Agreement was signed, and in three separate rounds, Tyco and IDT engaged in negotiations to complete the IRU and related agreements. Those negotiations were fruitless. 1. Round One: 2001-2002 Negotiations On June 12, 2001, Tyco submitted a proposed IRU Agreement to IDT. (R. 78-101). Tyco's covering note stated that the proposed IRU Agreement was (R. 78). based on [Tyco's] standard IRU terms and conditions that we use with our customers as was agreed between the parties during the Settlement discussions. Nothing has been modified from our standard [agreement] except those unique areas identified by the Settlement Agreement itself (Resale of Capacity, Portability). 10 Over the next eight months, the parties and their counsel intensively negotiated the terms of the IRU Agreement, so that IDT could begin to use the first of the four wavelengths on the scheduled January 7, 2002 hand-over date. (R. 102). In October 2001, for example, IDT's then outside counsel, Latham & Watkins, sent Tyco a heavily edited IRU-including edits that directly conflicted with the 2000 Settlement Agreement. (Compare R. 58, Section 2 (IRU "may not be assigned or transferred to any third party" other than to an IDT affiliate or Net2Phone, Inc.) with Original R.3 2621,126.1 (IDT proposed IRU Agreement stating that IDT "may assign some or all of its rights and obligations hereunder and/or under any of the Assignment Documents to any financing sources (or agents thereof) who have provided financing to [IDT]")). Tyco responded that its position on certain terms, including "decommissioning", was "non-negotiable".4 Negotiations continued thereafter, with the parties specifically discussing dozens of commercial terms, including decommissioning, resale, portability, parental guarantees and limitation of liability. By January 2002, the parties had resolved most of these issues, including an agreed 3 "Original R." refers to the Record on Appeal in the original case before this Court, IDT Corp. v. Tyco Group, S.a.r.l., New York County Clerk's Index No. 601321/04, submitted on March 2, 2009. 4 Decommissioning was a standard term in Tyco's IRU Agreements (R. 78, 83-84) and was a decision by the users of capacity on the Network-including IDT-to take the Network out of service if it became technically obsolete, damaged or beyond its useful life, thereby protecting capacity rights-holders (like IDT) from incurring ongoing costs. (R. 83-84). 11 decommissioning provision, leading IDT's then-counsel from Latham &Watkins to tell Tyco that "[h]opefully, you will concur with our assessment that the majority of the open items which remain are drafting or minor legal points, and that the difficult business issues are behind us." (R. 104). At the 11th hour, however, IDT changed course on an issue already agreed, demanding a parental guarantee from Tyco International-a term not contained in Tyco' s standard agreement and not required by the 2000 Settlement Agreement. This request led IDT' s own counsel to apologize to Tyco. (R. 134 ("I can only say that the decision to pursue this point came from them [IDT], not me .... Thank you for your patience.")). IDT abruptly cut off negotiations shortly thereafter. 2. Round Two: May 2002 Negotiations In May 2002, IDT contacted Tyco about "closing out the IRU." (R. 130). Tyco had reserved capacity on the Network for IDT's use in early 2002 and told IDT that it was prepared to hand over the capacity after execution of an IRU Agreement. (R. 134). After this exchange, IDT (again) ceased negotiations. (R. 137("[d]iscussions completely stopped.")) . • As this Court later observed, IDT' s termination of negotiations coincided with the telecom "crash," which greatly reduced the capacity's value. (R. 48) ("Negotiations continued to be active, but flagged after a sharp drop in the market greatly reduced the value of the capacity .... '')). 12 3. Round Three: 2003 Negotiations In August 2003, IDT resurfaced without explanation and sought to resume discussions. (R. 140). In response, Tyco answered IDT' s commercial and technical questions, and stated that "a definitive IRU Agreement is necessary." (R. 102). The parties again exchanged drafts of the IRU Agreement (Original R. 2863- 90) (IDT to Tyco: "Attached please find our comments to your IRU template.") and met again in October to discuss terms. In November, IDT changed course, abandoning the 2000 Settlement Agreement entirely and seeking a "credit bucket" for the capacity (Original R. 2893), and thereafter requested $33 million as a "quick resolution of the open issues". (Original R. 2894; R. 149 (IDT "just wanted monetary equivalent later on")). IDT's securities filings from this period stated that "[i]t is currently less expensive to purchase or lease similar capacity than it is to purchase and install the equipment necessary to place our rights in the Tyco network in service .... we do not anticipate making use of the TyCom IRUs in the near term". (IDT Corp., Annual Report, Amendment No. 1 (Form 10-K/A), at 23 (Sept. 3, 2003)). Because Tyco planned to sell (and eventually sold) the Network, Tyco offered to pay IDT a cash amount equal to a percentage of the sale value of the Network, based on the percentage that IDT' s Wavelengths represented of the total 13 Network capacity. (R. 150). IDT rejected that offer and ended negotiations (again). In June 2005, Tyco sold the Network to VNSL. As part of the sale, Tyco entered into an IRU Agreement with VNSL, reserving the Wavelengths for IDT's use. D. The 2004 Complaint On May 5, 2004, IDT sued Tyco. IDT's single-count 2004 Complaint alleged breach of the 2000 Settlement Agreement, asserting that the Tyco defendants had "failed to meet their obligations under the Settlement Agreement to provide to IDT the use of the Wavelengths by the applicable Handover Dates." (R. 155). Tyco, in tum, asserted in its Answer and Counterclaims that "[b ]y refusing to accept the standard product offering, plaintiffs [IDT] materially breached their obligations under the Settlement Agreement, relieving all defendants in this action from any further obligations under the Settlement Agreement." (Original R. 2939 (Tyco 3/11105 Answer and Counterclaims,