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. REPLY 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: October 11, 2013 TABLE OF CONTENTS TABLE OF AUTHORITIES .................................................................................... ii PRELIMINARY STATEMENT ............................................................................... 1 ARGUMENT ............................................................................................................ 9 I. THIS COURT'S OPINION ENDED THIS CASE ........................................ 9 A. This Court's Holding That a Condition Precedent Was Not Fulfilled Without Fault by Tyco Discharged the Parties' Obligations .......................................................................................... 10 B. The Law of the Duty to Negotiate is Consistent with These Principles ............................................................................................ 18 II. THIS COURT'S 2009 OPINION HAS PRECLUSIVE EFFECT AND BARS IDT'S 2010 COMPLAINT ...................................................... 24 A. Res Judicata Bars IDT' s Current Claim ............................................. 24 B. Collateral Estoppel Also Bars IDT's Current Claim .......................... 27 III. THE DOCUMENTARY EVIDENCE ESTABLISHES THAT IDT'S COMPLAINT FAILS ........................................................................ 32 A. Tyco Did Not Breach the 2000 Settlement Agreement.. .................... 33 B. IDT Cannot State a Claim for Anticipatory Repudiation and the Appellate Division Created Unprecedented Reservation of Rights Law ..................................................................................... 38 CONCLUSION ....................................................................................................... 43 1 TABLE OF AUTHORITIES Cases Page(s) Abacus Real Estate Fin. Co. v. P.A.R. Constr. & Maint. Corp., 115 A.D.2d 576, 496 N.Y.S.2d 237 (2d Dep't 1985) ................................... 34 Adjustrite Sys., Inc. v. GAB Bus. Serv., Inc., 145 F.3d 543 (2d Cir. 1998) ............................................................................ 6 Am. Auto. Mfrs. Ass 'n v. Cahill, 53 F. Supp. 2d 174 (N.D.N.Y. 1999) ............................................................ 32 Aniero Concrete Co., Inc. v. N.Y. City Constr. Auth., No. 94 Civ. 3506, 2000 WL 863208 (S.D.N.Y. June 27, 2000) .................. 10 Ari v. Cohen, 107 A.D.3d 516, 968 N.Y.S.2d 31 (1st Dep't 2013) .................................... 29 Best Payphones, Inc. v. Manhattan Telecomm. Corp., 432 B.R. 46 (S.D.N.Y. 2010) .................................................................... 8, 39 Borde lay v. City of New York, 158 A.D.2d 322, 551 N.Y.S.2d 9 (1st Dep't 1990) ...................................... 28 Bunny v. Coughlin, 187 A.D.2d 119, 593 N.Y.S.2d 354 (3d Dep't 1993) ................................... 28 Cauff Lippman & Co. v. Apogee Fin. Group, Inc., 807 F. Supp. 1007 (S.D.N.Y. 1992) ............................................................... 6 City of New York v. Stack, 178 A.D.2d 355, 577 N.Y.S.2d 406 (1st Dep't 1991), lv. denied, 80 N.Y.2d 753, 587 N.Y.S.2d 905 (1992) .................................. 29 Cole v. Macklowe, 64 A.D.3d 480, 882 N.Y.S.2d 417 (1st Dep't 2009) .................................... 42 11 Cases Page(s) 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) .............................. 11 Credit Suisse First Boston v. Utrecht-America Finance Co., 915 N.Y.S.2d 531, 80 A.D.3d 485 (1st Dep't 2011) .................................... 19 Devlin v. Video Servs. Acquisition, 188 A.D.2d 370, 591 N.Y.S.2d 775 (1st Dep't 1992) .................................. 34 Diffusion Fin. S.A.R.L. v. Smith, No. 95 Civ. 2140, 1997 WL 272391 (S.D.N.Y. May 22, 1997) .................... 5 Dingley v. Oler, 117 U.S. 490 (1886) ...................................................................................... 39 Ellan Corp., Inc. v. Dongkwang Int'l Co., Ltd., No. 09 Civ. 414,2011 WL4343844 (S.D.N.Y Aug. 15, 2011) ................... 15 Emigrant Bank v. UBS Real Estate Sec., Inc., No. 602173/2006, 2007 WL 5650108 (Sup. Ct. N.Y. Cnty. Mar. 14, 2007) ............................. 36 EQT Infrastructure Ltd. v. Smith, 861 F. Supp. 2d 220 (S.D.N.Y. 2012) .......................................................... 19 Estate of Drake, 4 A.3d 450 (D.C. 2010) ................................................................ 17 Fanarofv. Dember Constr. Corp., 195 A.D.2d 346, 600 N.Y.S.2d 226 (1st Dep't 1993) .................................. 13 Flores v. E. W. Bliss Co., 18 A.D.2d 1058, 239 N.Y.S.2d 1 (1st Dep't 1963), aff'd, 14 N.Y.2d 708 (1964) .......................................................................... 31 Ga Nun v. Palmer, 202 N.Y. 483, 96 N.E. 99 (1911) .................................................................. 38 111 Cases Goldoff v. Peck Slip Assoc. Group, LLC, No. 1501882013, Page(s) 2013 WL 3856359 (Sup. Ct. N.Y. Cnty. July 23, 2013) .............................. 26 Goodstein Constr. Corp. v. City of New York, 80 N.Y.2d 366, 590 N.Y.S.2d 425 (1992) ................................................ 6, 22 Habenicht v. Nassau Cnty. Dep 't of Soc. Servs., 123 A.D.2d 667, 506 N.Y.S.2d 957 (2d Dep't 1986) ................................... 34 Haines v. City of New York, 41 N.Y.2d 769,396 N.Y.S.2d 155 (1977) .................................................... 17 Hall v. People to People Health Found., Inc., 493 F.2d 311 (2d Cir. 1974) .......................................................................... 16 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) ...................................... 10 Hifn, Inc. v. Intel Corp., No. Civ.A. 1835-VCS, 2007 WL 1309376 (Del. Ch. May 2, 2007) ............ 39 Honess 52 Corp. v. Town of Fishkill, 266 A.D.2d 510, 698 N.Y.S.2d 718 (2d Dep't 1999) ................................... 27 Honig v. St. George Tower & Grill Owners Corp., 217 A.D.2d 572, 629 N.Y.S.2d 285 (2d Dep't 1995) ............................... 8, 28 In re Hunter, 4 N.Y.3d 260, 794 N.Y.S.2d 286 (2005) ...................................................... 27 In re Reilly v. Reid, 45 N.Y.2d 24, 407 N.Y.S.2d 645 (1978) ................................................ 26, 27 Kenneth R. v. Roman Catholic Diocese of Brooklyn, 229 A.D.2d 159, 654 N.Y.S.2d 791 (2d Dep't 1997) ................................... 36 lV Cases Page(s) Levy v. Friedman, 216 A.D.2d 18, 628 N.Y.S.2d 265 (1st Dep't 1995) .................................... 15 Marcel Fashions Group, Inc. v. Lucky Brand Dungarees, Inc., No. 11 Civ. 5523, 2012 WL 4450992 (S.D.N.Y. Sept. 25, 2012) ................ 26 Mark Hampton, Inc. v. Bergreen, 173 A.D.2d 220, 570 N.Y.S.2d 799 (1st Dep't 1991) .................................. 35 McGarr v. Guardian Life Ins. Co. of Am., 19 A.D.3d 254, 799 N.Y.S.2d 19 (1st Dep't 2005) ...................................... 29 Merritt Hill Vineyards Inc. v. Windy Heights Vineyard, Inc., 61 N.Y.2d 106, 472 N.Y.S.2d 592 (1984) .................................................... 10 MHR Capital Partners LP v. Presstek, 12 N.Y.3d 640, 884 N.Y.S.2d 211 (2009) .............................................. 10, 14 Misicki v. Caradonna, 12 N.Y.3d 511, 882 N.Y.S.2d 375 (2009) .................................................... 34 Mode Contempo, Inc. v. Raymours Furniture Co., Inc., 80 A.D.3d 464, 915 N.Y.S.2d 528 (1st Dep't 2011) .................................... 38 N.R.P. Holdings LLC v. City of Buffalo, No. 11-CV-472S, 2012 WL 2873899 (W.D.N.Y. July 12, 2012) ................ 19 NFL Ins. Ltd. v. B&B Holdings, Inc., 874 F. Supp. 606 (S.D.N.Y. 1995) ............................................................... 10 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) .................................... 34 Omath Holding Co., Inc. v. City of N.Y., 149 A.D.2d 179, 545 N.Y.S.2d 557 (1st Dep't 1989) .................................. 17 People ex rel. City of New York v. Yale, 249 N.Y. 150, 163 N.E. 132 (1928) .............................................................. 33 v Cases Page(s) Perna v. Desai, 101 A.D.2d 857,457 N.Y.S.2d 883 (2d Dep't 1984) ................................... 17 Preferred Mortgage Brokers, Inc. v. Byfield, 282 A.D.2d 589, 723 N.Y.S.2d 230 (2d Dep't 2001) ................................... 15 Pullman Grp., LLC v. Prudential Ins. Co. of Am., 288 A.D.2d 2, 733 N.Y.S.2d 1 (1st Dep't 2001) .......................................... 36 Record Club of Am., Inc. v. United Artists Records, Inc., 643 F. Supp. 925 (S.D.N.Y. 1986), vacated on other grounds, 890 F.2d 1964 (2d Cir. 1989) ............................ 40 Rotella v. Rotella, 178 A.D.2d 755,577 N.Y.S.2d 342 (3d Dep't 1991) ............................. 15, 16 Roth v. Robbins, 117 A.D.2d 794, 499 N.Y.S.2d 617 (2d Dep't 1986) ................................... 34 Scavenger, Inc. v. GT Interactive Software Corp., 289 A.D.2d 58,734 N.Y.S.2d 141 (1st Dep't 2001) .................................... 39 Schwanbeck v. Federal-Mogul Corp., 578 N.E.2d 789 (Mass. App. Ct. 1991), rev'd on other grounds, 592 N.E.2d 1289 (Ma. 1992) ................................. 20 SHS Baisley LLC v. RES Land, Inc., No. 13931109,2009 N.Y. Misc. LEXIS 6472 (Sup. Ct. Queens Cnty. Dec. 8, 2009) ........................................................... 22 Snakepit Auto. Inc. v. Superperformance Int'l, LLC, No. 5402-07, 859 N.Y.S.2d 906, 2008 WL 899024 (Sup. Ct. Nassau Cnty. Mar. 31, 2008) .................... passim Solutia Inc. v. FMC Corp., 456 F. Supp. 2d 429 (S.D.N.Y 2006) ....................................................... 20, 9 Vl Cases Page(s) Staebell v. Bennie, 83 A.D.2d 765, 443 N.Y.S.2d 487 (4th Dep't 1981) .................................... 39 Stanton v. Power, 254 A.D.2d 153, 679 N.Y.S.2d 293 (1st Dep't 1998) .................................. 15 Teachers Ins. and Annuity Ass'n of Am. v. Tribune Co., 670 F. Supp. 491 (S.D.N.Y. 1987) ..................................................... 7, 14, 20 Tenavision, Inc. v. Neuman, 45 N.Y.2d 145, 408 N.Y.S.2d 36 (1978) .................................................. 8, 38 Vemics, Inc. v. Meade, No. 06 Civ. 8716, 2009 WL 2191334 (S.D.N.Y. July 23, 2009) ............................................... 10 Statutes & Other Authorities 10 JOHN A. GEBAUERET AL., CARMODY-WAIT2d § 70:108 ........................................................................ 34 11 JEFFERSON JAMES DAVIS & RACHEL M. KANE, CARMODY-WAIT 2d § 71:112 ....................................................................... 33 CALAMARI & PERILLO, CONTRACTS § 11-3 at 384 (2d ed. 1977) ...................... 10, 11 RESTATEMENT (SECOND) OF CONTRACTS§ 251(2) (1979) ........................................ 5 Vll PRELIMINARY STATEMENT IDT' s brief to this Court-like the case it has constructed-is an exercise in sophistry. It deliberately distorts the issues in, and rulings made during, the prior litigation; mischaracterizes the applicable law; and ignores the extensive evidence that undercuts its current story. Not surprisingly, therefore, its efforts to defend the Appellate Division's decision-a clearly wrong statement of New York law on multiple different issues-fails. First, we begin with the obvious: at no time since the telecom "crash" more than a decade ago has IDT actually had any interest in completing the IRU Agreement and receiving the capacity. Rather, it has been trying to construct a lawsuit, in order to assert (again) its fanciful claim for "many millions of dollars". (IDT Br. at 55). Though IDT tells the Court that "IDT has never abandoned its interest in the telecommunications capacity" (IDT Br. at 34), it conspicuously fails to address: • This Court's conclusion that the prior negotiations "flagged after a sharp drop in the market greatly reduced the value of the capacity" to IDT (R. 48); • The Appellate Division's observation that negotiations only continued in "desultory fashion" after the telecom "crash" (R. 265); • Its own, persistent refusal to accept Tyco's standard agreement (e.g., R. 78 ("This agreement is based on TyCom's standard IRU terms and conditions that we use with our customers as was agreed between the parties during the Settlement discussions.")); • Its own repeated statements in its securities filings that "the Company [IDT] currently has no plans to purchase and install the equipment necessary to utilize these [IRU] rights" (IDT Corp. Annual Report, Amendment No. 1 (Form 10-K/A), at 23 (Sept. 3, 2003)); • Its own, equally unequivocal statements in those securities filings that IDT did not "anticipate making use of the TyCom IRUs in the near term." ( id.); • Its own decision internally to "write down" the value of the capacity to -$700,000 (R. 186 n.15); • Its own requests that Tyco simply pay it off, rather than provide the capacity (e.g., Original R. 1 2894 (IDT offer to accept "$33 million" as a "quick resolution of the open issues"); R. 149 ("[IDT] wanted options to have options for everything, which they subsequently changed"); and • Its own efforts to manufacture a "breach", by re-raising issues on which the parties previously had disagreed (even after IDT had ultimately agreed with Tyco's position (e.g., R. 48 "IDT eventually acquiesced in a decommissioning provision."). Second, the record shows that Tyco tried to consummate the definitive agreements contemplated by the 2000 Settlement Agreement (indeed, as we explain below, this Court necessarily so found as to the prior negotiations). Tyco agreed to vary the terms of the 2000 Settlement Agreement in ways that were favorable to IDT (Original R. 2847, R. 130); reserved capacity for IDT's use when the network was sold (R. 183); and indicated that it would consider alternative means of resolving the dispute (R. 150). And even after this Court's decision 1 As in our Opening Brief, "Original R." refers to the Record on Appeal in the original case before this Court. For the convenience of the Court and IDT, Tyco has provided copies of Original Record pages and other documents previously submitted to the Court cited herein. 2 terminated any remaining obligations under the 2000 Settlement Agreement, and notwithstanding the bitter history between the parties, Tyco re-engaged with IDT, offering to assign to IDT the agreement by which it had reserved capacity for IDT (R. 296; IDT Br. at 11-13), or reconstruct the 2002 draft IRU, which was essentially final when IDT walked away from that round of negotiations. (R. 104 (IDT' s admission in prior negotiations that "the difficult business issues are behind us.")). IDT's answer to all these alternatives: No. Third, IDT reprises its mischaracterizations of the prior litigation, asking this Court to believe-as, incredibly, the Appellate Division did-that that litigation actually resolved nothing at all. Thus, IDT repeatedly cites and relies on the language in both the 2008 Appellate Division decision and this Court's prior decision holding that the parties were free to "merely propose" terms inconsistent with the 2000 Settlement Agreement. As we explained in our Opening Brief (Tyco Br. at 19-21, 42-43), it is of course true that, not surprisingly, both the Appellate Division and this Court did so rule. However, that claim was only one of IDT' s three claims in the prior litigation (and a minor one at that): IDT also claimed that Tyco was obligated to hand over the capacity even absent an IRU-a claim the Court rejected ("the clear intent of the parties was that it [the IRU] had to be executed before any handover of capacity" (R. 49B)); and that Tyco had negotiated in bad faith by insisting on terms inconsistent with the 2000 Settlement 3 Agreement-a claim the Court also rejected ("the record does not support a finding that Tyco breached any of its obligations." (R. 49C)). Indeed, it would have been astonishing had the Court not addressed these claims, since they were the central claims in the case. Forced to acknowledge that these issues were critical to the prior litigation, IDT-through new counsel with no involvement in the prior litigation-has concocted another, related fiction: that this Court actually held that, because Tyco supposedly had not insisted on any of the disputed terms, there had not yet been a breach, so the Court was not obliged to reach the "merits" of the disputed provisions. Here, again, as we explained in our Opening Brief (Tyco Br. at 30-39), this argument is belied by common sense, the record and this Court's Opinion: • Common sense: how could sophisticated parties spend three years negotiating with each other without ever insisting on any provision? • The record: the parties had essentially completed a lengthy, complex IRU and other agreements, after months of negotiations between them and their counsel; IDT strenuously argued in the prior litigation that Tyco insisted on terms that were inconsistent with the 2000 Settlement Agreement (e.g., R. 318 (IDT argued to this Court: "Tyco's Demand for Inconsistent Terms Was in Bad Faith") (IDT Br. at 327); and the evidence showed (and Tyco did not deny) that Tyco had insisted on multiple provisions (e.g., Original R. 169 (statement from Tyco that Tyco's position on certain issues was "non-negotiable"); R. 134 (statement from Tyco attorney that "[w]e are not willing to provide a Tyco International guaranty and will not entertain any further discussion on the subject")). • This Court's Opinion: after holding that both sides were required under the 2000 Settlement Agreement to negotiate in good faith, the Court 4 concluded its Opinion by holding that "the record does not support a finding that Tyco breached any of its obligations", and affirmed a summary judgment for Tyco dismissing all IDT's claims. (R. 49C). • Had the Court intended to hold instead (however implausibly, given the record) that, "because Tyco has not yet insisted on any provision, IDT' s claims of breach are not ripe, and the parties should therefore continue negotiations", it could have said so-but of course its Opinion says nothing of the kind. Fourth, IDT's tactic of citing reams of cases in footnotes (IDT Br. at 31-33, 45, 49, 53-54) cannot obscure the fact that the Appellate Division's decision is starkly at odds with basic principles of commercial law. For example, it has been settled law for decades that if a "condition precedent does not occur and is not excused according to the express or implied terms of the contract, the conditional duty is discharged." Diffusion Fin. S.A.R.L. v. Smith, No. 95 Civ. 2140, 1997 WL 272391 (S.D.N.Y. May 22, 1997) (citing RESTATEMENT (SECOND) OF CONTRACTS § 251(2) (1979)). Here, this Court held that a condition precedent-completion of the IRU-had not been satisfied, despite three years of effort, through no fault of Tyco. Yet rather than respect the conclusion that inexorably flows from this Court's holding-discharge of the parties' respective obligations-the Appellate Division held that the discharge principle only applies when the condition's performance must occur by a "date certain", and that, because the 2000 Settlement Agreement allegedly did not have "an expiration date" (R. 342), this Court had sentenced the parties to negotiate in perpetuity. That is simply not the law of 5 conditions precedent. E.g., Cauff Lippman & Co. v. Apogee Fin. Group, Inc., 807 F. Supp. 1007, 1023 (S.D.N.Y. 1992) ("Had negotiations broken down in good faith over terms not dictated by the [] contract, the non-existence of this condition precedent would absolve [defendant] of its obligations under the contract."). Fifth, the Appellate Division's holding is, if anything, even more clearly at odds with the law of the duty to negotiate, as developed since this Court's opinion in Goodstein Constr. Corp. v. City of New York, 80 N.Y.2d 366, 590 N.Y.S.2d 425 (1992). IDT contends that the "Appellate Division agreed with th[e] fundamental proposition" that: When parties enter into an agreement to negotiate final terms and one party sues the other for breach of contract, and the court of final instance determines that no breach has taken place, the contract remains operative unless circumstances have materially changed. Under such circumstances, the parties are to return to the bargaining table and continue to negotiate, unless performance has become impossible or moot. .. (IDT Br. at 34-35). IDT is quite correct that the Appellate Division agreed with this principle. The principle, however, is a manifestly erroneous statement of New York law: once parties bound to negotiate have made a good faith effort to reach agreement, the duty to negotiate ends. E.g., Adjustrite Sys., Inc. v. GAB Bus. Serv., Inc., 145 F.3d 543, 548 (2d Cir. 1998) ("if [parties bound to negotiate] fail to reach such a final agreement after making a good faith effort to do so, there is no further 6 obligation"); Teachers Ins. and Annuity Ass 'n of Am. v. Tribune Co., 670 F. Supp. 491, 505 (S.D.N.Y. 1987) ("no enforceable rights would survive" if "through no fault on either party[] no final contract were reached"); Snakepit Auto. Inc. v. Superpeiformance Int'l, LLC, No. 5402-07, 859 N.Y.S.2d 906, 2008 WL 899024, at *5 (Sup. Ct. Nassau Cnty. Mar. 31, 2008) (parties negotiated in good faith by exchanging "several drafts" of agreement "[d]espite these negotiations, [the parties] were unable to reach an agreement"). Here, this Court's Opinion at an irreducible minimum reflects a finding that Tyco negotiated in good faith for three years. Nothing further is required. Sixth, IDT largely concedes that the Appellate Division's principal basis for rejecting Tyco's preclusion argument-that the conduct occurred after this Court's Opinion-is incorrect, implicitly acknowledging (as our cases establish) that repetition of conduct found lawful cannot be unlawful. (IDT Br. at 37) ("IDT has no issue with Tyco' s recitation of the principles of res judicata or collateral estoppel"). Instead, it reprises its argument that this Court did not resolve the merits of the issues presented on the prior appeal, hence there cannot be preclusion-wrong, as discussed above. IDT also contends (for the first time ever) that Tyco's behavior was "different" in the most recent negotiations (IDT Br. at 42)-without providing a single specific example of any "different" substantive position and while simultaneously arguing that the Court is disabled from assessing 7 that claim because of the procedural posture. (IDT Br. at 37). But preclusion issues are routinely decided on threshold motions (see, e.g., Honig v. St. George Tower & Grill Owners Corp., 217 A.D.2d 572,629 N.Y.S.2d 285 (2d Dep't 1995) (res judicata and collateral estoppel preclude plaintiff from relitigating issues already determined; motion to dismiss properly granted)); IDT's Complaint itself purports to describe the negotiations in detail (R. 27-32); and the documents in the record, from both IDT and Tyco, establish just the opposite (R. 296-297, 299-301). Seventh, IDT struggles at length to salvage the Appellate Division's extraordinary ruling that, because Tyco preserved its legal position that it had no remaining obligation to IDT, IDT can adequately allege that Tyco anticipatorily breached the 2000 Settlement Agreement-though Tyco in fact negotiated (again) with IDT for months. (IDT Br. at 46-55). We leave to one side the unusual nature of a finding of "anticipatory breach" of an Agreement that called for capacity handover in 2002. None of the (threadbare) cases that IDT cites, or its efforts to muddy (or disparage) the documentary evidence demonstrating Tyco' s efforts actually to end this dispute, can distract from the unprecedented nature of the Appellate Division's holding. Tenavision, Inc. v. Neuman, 45 N.Y.2d 145, 150, 408 N.Y.S.2d 36, 38 (1978) ("[T]he announcement of an intention not to perform [must be] positive and unequivocal.") (emphasis added); Best Payphones, Inc. v. Manhattan Telecomm. Corp., 432 B.R. 46, 58 (S.D.N.Y. 2010) (defendant's 8 demand for payment of the unrelated judgment was not an unequivocal repudiation of the contract because the defendant "invited further dialogue" with plaintiff and thus left open the prospect of continued service). The judgment below must be reversed and Supreme Court's dismissal of the Complaint reinstated. ARGUMENT I. TIDS COURT'S OPINION ENDED TIDS CASE As explained in our Opening Brief (Tyco Br. at 30-34), this Court's Opinion involved a straightforward application of the law of conditions precedent, affirming a summary judgment for Tyco and ending this case. That result is also consistent with the law of the duty to negotiate, see, e.g., 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. "')-an important point, since the specific "condition" at issue, completion of the IRU, mandated good faith negotiations. Rather than directly confront these arguments, or the Appellate Division's plainly erroneous rejection of them, IDT tries to "spin" the record and the applicable law. Its efforts fail. 9 A. This Court's Holding That a Condition Precedent Was Not Fulfilled Without Fault by Tyco Discharged the Parties' Obligations First, as noted above, the law is clear that, when a condition precedent is not fulfilled through no fault of the charged party, the conditional duty is terminated. See, e.g., See MHR Capital Partners LP v. Presstek, 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, 106, 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".); HGCD Retail Servs., LLC v. 44-45 Broadway Realty Co., 37 A.D.3d 43, 50, 826 N.Y.S.2d 190, 196 (1st Dep't 2006) (no obligation to pay commission under brokerage agreement since condition precedent not satisfied); Vemics, Inc. v. Meade, No. 06 Civ. 8716,2009 WL 2191334, at* 2 (S.D.N.Y. July 23, 2009) ("If the condition precedent does not occur ... the conditional duty is discharged.") (quoting CALAMARI & PERll..LO, CONTRACTS § 11-3 at 384 (2d ed. 1977)); NFL Ins. Ltd. v. B&B Holdings, Inc., 874 F. Supp. 606, 612 (S.D.N.Y. 1995) ("[l]fthe condition does not occur ... then the agreement is terminated"); Aniero Concrete Co., Inc. v. N.Y. City Constr. Auth., No. 94 Civ. 3506, 2000 WL 863208, at *6 (S.D.N.Y. June 27, 2000) ("[T]he failure of the condition precedent means that the parties have no 10 contractual obligations towards each other."); Colonial Pac. Leasing Corp. v. Brown, No. 601980/09, 28 Misc.3d 1214(A), 2010 WL 2927283, at *4 (Sup. Ct. N.Y. Cnty. July 21, 2010) ("A condition precedent is an event that, upon the ... non-happening of which ... discharges an absolute duty to perform."). This Court's Opinion expressly found that there was a condition that had not been satisfied, through no fault of Tyco, and despite three years of negotiation. (R. 49B; see also R. 17 (Supreme Court quoting this Court's Opinion: '"the IRU was never executed' ... Therefore, 'Tyco' s obligations never became enforceable.'"). The only conclusion that can flow from that finding is that the conditional duty was discharged. Second, IDT now grudgingly concedes that courts "have discharged parties from ongoing obligations under contracts as a result of unfulfilled conditions precedent." (IDT Br. at 28). This slightly understates the matter: courts always find that non-fulfillment of a condition discharges the conditional duty-it is (literally) hornbook contract law. See CALAMARI & PERILLO, CONTRACTS § 11-3 at 384 (2d ed. 1977) ("If the condition precedent does not occur ... the conditional duty is discharged."). IDT has nowhere cited any case where non-fulfillment of a conditional duty results in anything other than a discharge; Supreme Court was exactly correct when it ruled that, had this Court intended to depart from this rule it would surely have said so (R. 18 ("If [this Court] intended to reserve a future right 11 of action in IDT, it would have indicated as much.")); and IDT's (and the Appellate Division's) apparent view that this Court was ignorant of contract law is meritless. Third, IDT tries (again) to put a gloss on this Court's Opinion that does not exist. IDT argues that "this Court concluded that Tyco was not required at that time to hand over the telecommunications capacity" (IDT Br. at 22) (emphasis added). The Appellate Division bought this "spin" hook, line and sinker, holding that this Court's Opinion actually means that "the plaintiffs' complaint did not articulate a breach at the time the action was commenced given the non-occurrence of a condition precedent". (R. 340) (emphasis added). Needless to say, the words "at the time" or "at that time" nowhere appear in this Court's Opinion. (See R. 17- 18 (Supreme Court holding that "[n]owhere did the court say that Tyco's obligation has not yet become enforceable or that the IRU has not yet been executed.")). Rather, the Court squarely held that the conditional duty "never became enforceable", despite good faith efforts by Tyco to fulfill the condition. 2 Fourth, implicitly criticizing this Court, IDT contends that "courts ... typically identify the factual reasons for discharging the party in question from future obligations." (IDT Br. at 28). But this Court did so, in its finding that the 2 IDT argues that the Court used the word "became" because it was referring to past events (IDT Br. at 22). It is of course true that, when referring to past events, one generally employs the past tense. The point, however, is that had the Court intended to say that the conditional duty "had not yet become enforceable" or "ripened" (IDT Br. at 22)-as IDT and the Appellate Division would have it-it would have done so. It did not. 12 condition precedent had not been fulfilled. No more is necessary or required. E.g., Fanarofv. Dember Constr. Corp., 195 A.D.2d 346, 348, 600 N.Y.S.2d 226, 228 (1st Dep't 1993) ("Since the condition precedent to plaintiff's right to receive payment under the subcontracts did not take place, without fault on defendant's part .... defendant's cross motion for summary judgment dismissing the complaint should have been granted."). Fifth, and relatedly, IDT reprises its contention that "Tyco Never Raised the Issue of Discharge in the Prior Litigation." (IDT Br. at 24; see also IDT Br. at 28 ("no party ... raised the issue in the Prior Litigation")). This is technically true, but highly misleading: because neither the parties nor the prior Appellate Division panel viewed the case as a condition precedent case, no party raised the issue of "discharge" in those terms. However, it was Tyco's position throughout the prior litigation, including in this Court, that because it had negotiated in good faith for three years, it had no further obligations under the 2000 Settlement Agreement. (Tyco Br. at 35-36). And while IDT is correct that some of Tyco's (many) assertions of that position were raised in connection with Tyco's counterclaims (IDT Br. at 24-25)- themselves largely "mirror images" of IDT' s claims concerning the negotiations- lOT conspicuously fails to address (for example) Tyco's argument on summary judgment that "there can be no dispute that TyCom satisfied each and every 13 obligation it had under the Settlement Agreement" (Addendum B to Tyco's 4/16/09 Court of Appeals Brief (Tyco's 4/24/07 Mem. of Law in Opp. to IDT's Summary Judgment Motion at 12), that "Tyco complied with every obligation required of it under the terms of the Settlement Agreement" (R. 164) and in its Brief to this Court that Tyco had ''performed its obligations under the [Settlement] Agreement". Tyco's 4/16/09 Court of Appeals Brief at 22 (emphases added). It is hardly surprising that this Court so found.3 · Sixth, IDT next attempts to muddy the waters by distorting the law, arguing that a conditional duty is only discharged where it is literally impossible to perform the condition because, for example, a date certain has passed (such as in MHR and Teachers), and that, because there is no "date certain" here, Tyco must negotiate in perpetuity. (IDT Br. at 28-34; see also R. 342 (Appellate Division decision holding that Tyco's obligation "did not have an expiration date")). Wrong again. As an initial matter, it is not so clear that there was no "date certain": the handover dates were in 2002 and 2003, and IDT' s refusal to accept the capacity on any reasonable terms for years after those dates have passed has created any number of practical problems, both for Tyco and the current owner of the network.4 3That is all the more so since Tyco cited these same cases, holding good faith efforts to complete negotiations are sufficient, in its prior Brief to this Court. (See, e.g., Tyco Br. to Court of Appeals dated 4/16/09 at 35 (citing Snake pit Auto., 2008 WL 899024, and Solutia, 456 F. Supp. 2d. 429). 4No good deed going unpunished, IDT argues that Tyco essentially ceded this point by stating in the prior litigation that "the Wavelengths remain available for IDT today". (IDT Br. at 36). 14 In any event, while it is of course true that in many cases there will be a "date certain", it is equally true that in many case there is no "date certain"-yet in case after case without a "date certain" courts have nonetheless found a discharge. See, e.g., Preferred Mortgage Brokers, Inc. v. Byfield, 282 A.D.2d 589, 589, 723 N.Y.S.2d 230, 231 (2d Dep't 2001) (complaint dismissed because contract required defendants to pay plaintiffs fee "directly upon [the] signed acceptance" of a mortgage commitment, but defendants never accepted commitment); Stanton v. Power, 254 A.D.2d 153, 153, 679 N.Y.S.2d 293, 294 (1st Dep't 1998) (complaint dismissed because defendants' obligation to pay plaintiff was conditioned upon plaintiffs presentation of potential merger candidates, and plaintiff failed to satisfy that condition); Levy v. Friedman, 216 A.D.2d 18, 18, 628 N.Y.S.2d 265, 265 (1st Dep't 1995) (complaint dismissed because contract provided that plaintiffs commission "'will not be deemed earned or due or payable until and unless title actually closes pursuant to a signed written contract"', but defendants never executed a contract); Ellan Corp., Inc. v. Dongkwang Int'l Co., Ltd., No. 09 Civ. 414, 2011 WL 4343844, at *3 (S.D.N.Y Aug. 15, 2011) (finding no distribution agreement for failure to fulfill condition precedent). Further, as Tyco noted in its Opening Brief, cases have applied this very principle in the settlement context. (Tyco Br. at 33-34). Rotella v. Rotella, 178 However this is not evidence of a lack of a "date certain"; instead, it is evidence that Tyco was trying to negotiate in good faith by reserving the capacity to hand over to IDT. 15 A.D.2d 755, 757, 577 N.Y.S.2d 342, 343-44 (3d Dep't 1991) (court found no remaining duties under the settlement agreement because conditions precedent were unfulfilled, noting "it is clear that the settlement was contingent upon and conditioned upon performance of specific acts by the parties"); Hall v. People to People Health Found., Inc., 493 F.2d 311, 313 (2d Cir. 1974) (settlement agreement "abandoned" because of party's failure to perform required condition and finding that "a delay of five months" in fulfilling condition was unreasonable as a matter of law). Notably, IDT buries its citation of Rotella in a footnote (IDT Br. at 32); and does not dispute the core holding of Hall, merely observing that that Court expressly found that five months was a "reasonable time". (IDT Br. at 33- 34 ). Here, of course, IDT' s apparent suggestion that the three plus years during which this Court found the negotiations continued (R. 49B) was not a "reasonable time" to conclude an IRU is simply absurd.5 And the law could hardly be otherwise. If, as IDT would have it, it actually were the law that, absent a defined "expiration date", a conditional duty lasts forever, commercial parties would never have any certainty in their business 5 IDT again mischaracterizes Tyco's argument in exactly the same way that the Appellate Division did by stating that Tyco was arguing that the parties were discharged "apparently by the mere passage of time." (IDT Br. at 27, see also R. 342 ("The defendants' obligations in this case did not have an expiration date, nor, as the defendants urge, did one arise through the mere passage oftime.")). Tyco has never argued that the "mere passage oftime" discharged its obligations. Rather, Tyco's argument has always been that because Tyco negotiated in good faith for an extended period of time, it obligations were discharged (as we believe this Court ruled). 16 relationships. Not surprisingly, therefore, cases from this Court and other New York courts have expressly rejected that notion. E.g., Haines v. City of New York, 41 N.Y.2d 769, 772, 396 N.Y.S.2d 155, 157 (1977) ("the law will not imply that a contract calling for continuing performance is perpetual in duration"); see also Omath Holding Co., Inc. v. City of N.Y., 149 A.D.2d 179, 185, 545 N.Y.S.2d 557, 560-61 (1st Dep't 1989) (parties did not intend that agreement "would remain in force indefinitely" and finding that because reasonable time had passed, agreement was terminated as a matter of law); Perna v. Desai, 101 A.D.2d 857, 858, 457 N.Y.S.2d 883, 884 (2d Dep't 1984) (same). And the law in other jurisdictions is the same. E.g., Estate of Drake, 4 A.3d 450, 454 (D.C. 2010) (affirming finding that ten years passage since settlement agreement signed "constituted an unreasonable period of time for the satisfaction ... of the condition precedent"). Finally, since conditions commonly arise in all manner of transactions, the consequences of the requirement to fulfill a condition until one of the parties essentially drops (IDT Br. at 9 (parties required to "continue negotiations over the documentation of the IRU unless they reached agreement or one of the parties committed an anticipatory breach of the Settlement Agreement") are very real- and will reverberate if the Appellate Division's ruling is left uncorrected. 17 B. The Law of the Duty to Negotiate is Consistent with These Principles It is common ground that Tyco and IDT were bound to negotiate the IRU and the other, required definitive agreements in good faith. (R. 49B ("under the settlement agreement, the parties were required to negotiate the terms of the IRU and other agreements in good faith."); R. 264-65 ("the parties did what the settlement agreement required: they negotiated the open terms."); R. 17 (Supreme Court observed, "The court further recognized that the parties were required to negotiate the terms of the IRU and other agreements in good faith.")). It is also common ground that, despite three plus years of on and off negotiations, no agreement was reached. (R. 49C) ("the IRU was never executed."). Finally, in the face of IDT' s aggressive claims that Tyco breached the agreement by insisting that several specific terms be included in those agreements, this Court concluded that "the record does not support a finding that Tyco breached any of its obligations." (R. 49C). That this Court was referring to Tyco' s duty to negotiate when it held that Tyco had not "breached any of its obligations" is clear because that sentence is textually linked to the Court's discussion of the duty to negotiate: [U]nder the settlement agreement, the parties were required to negotiate the terms of the IRU and other agreements in good faith. Despite the fact that (1) the parties negotiated various open terms on and off for almost three years and (2) each side had a right to require 18 (R. 49B-C). conformance with Tyco' s standard agreements, except to the extent that any term conflicted with the settlement agreement-i.e., the parties had an alternative mechanism for determining those terms if the negotiations were unsuccessful: the IRU was never executed. Finally, the record does not support a finding that Tyco breached any of its obligations. IDT nowhere satisfactorily explains what else the Court could have meant by its last sentence.6 Indeed, before the Appellate Division's decision, courts had interpreted this Court's decision to mean exactly that, namely that there had been no breach of the duty to negotiate by Tyco. See, e.g., N.R.P. Holdings LLC v. City of Buffalo, No. 11-CV-472S, 2012 WL 2873899, at *5 n. 11 (W.D.N.Y. July 12, 2012) ("While the [Court of Appeals] further found that the agreement bound the parties to negotiate in good faith, the parties, according to the court, did not breach this obligation."); EQT Infrastructure Ltd. v. Smith, 861 F. Supp. 2d 220, 226 n. 7 (S.D.N.Y. 2012) ("The /DTcourt answered [whether there was a binding good faith obligation] affirmatively, and also found that the parties did not breach their good faith obligation, without analysis."). Since other than by walking away from negotiations (which IDT repeatedly has, but Tyco has not), a party may only breach the duty to negotiate by insisting on inconsistent terms, Credit Suisse First Boston v. Utrecht-America Finance Co., 915 N.Y.S.2d 531, 534, 80 A.D.3d 485, 6 Indeed, IDT appears to suggest that that critical aspect of this Court's holding is actually surplusage. (IDT Br. at 7-9, 38, 41). 19 487 (1st Dep't 2011) (the obligation to negotiate in good faith 'bar[s] a party from . . . insisting on conditions that do not conform to the preliminary agreement"'), a finding that Tyco did not breach "any of its obligations" can mean nothing else. (R. 49C (emphasis added)). Thus, given that this Court held that Tyco had not breached its duty to negotiate, the parties' obligations were discharged: "[i]f the parties 'fail to reach such a final agreement after making a good faith effort to do so, there is no further obligation."' Solutia, 456 F. Supp.2d at 443; Teachers, 670 F. Supp. at 505 ("no enforceable rights ... survive" if parties "in good faith failed to agree on the open secondary terms"); Snakepit, 859 N.Y.S.2d 906, 2008 WL 899024, at *5 (parties negotiated in good faith by exchanging "several drafts" of agreement "[d]espite these negotiations, [the parties] were unable to reach agreement"); Schwanbeck v. Federal-Mogul Corp., 578 N.E.2d 789, 798 (Mass. App. Ct. 1991) (obligation to negotiate in good faith satisfied even though no final agreement was reached), rev'd on other grounds, 592 N.E.2d 1289 (Ma. 1992); Cf. Cauff, 807 F. Supp. at 1023 ("Had negotiations broken down in good faith over terms not dictated by the [] contract, the non-existence of this condition precedent would absolve [defendant] of its obligations under the contract."). IDT' s efforts to recast the law of the duty to negotiate-adopted wholesale by the Appellate Division-are equally unavailing. First, IDT claims that the prior 20 Appellate Division panel and this Court determined only that either side could "merely propos[e]" allegedly inconsistent terms. As explained above, however, that part of the two prior opinions addressed only one of IDT' s arguments, namely its claim that the mere act of sending a first draft with allegedly inconsistent terms violated the 2000 Settlement Agreement. Understandably, this Court rejected that claim. The actual focus of the litigation was on whether Tyco' s positions on multiple different terms in the subsequent negotiations were or were not justified (Tyco Br. at 42-44), with the Court determining that Tyco's positions did not breach the obligation to negotiate in good faith. (R. 49C). While it is of course true that a court need not decide all the issues before it to dispose of a case (IDT Br. at 38), it is equally true that a court cannot determine that a defendant did not breach a contractual duty-and affirm a summary judgment to that effect-without deciding that the defendant did not breach in any of the ways claimed by the plaintiff. Second, IDT claims that this Court somehow found only that Tyco had not actually insisted on the disputed provisions and therefore did not reach the issue of whether the duty to negotiate had been fulfilled. As noted, though, the Court's Opinion says nothing of the kind; IDT previously argued that Tyco had insisted on these provisions; and Tyco did not deny that it had so insisted (and, indeed, several of the allegedly offensive provisions were agreed to by IDT, before it walked away 21 from the negotiations and sued). In short, this was simply not what the Court said, nor would such a holding have made any sense given the record. Third, IDT tries to distinguish some of our cases because they allegedly involve "less binding" agreements. (IDT Br. at 32-33). While some of our cases arise in the context of what federal courts classify as Type II preliminary agreements, there is no analytical distinction between those cases and the New York State duty to negotiate cases, such as Goodstein and its progeny. Snakepit, 859 N.Y.S.2d 906, 2008 WL 899024, at *5 (parties negotiated in good faith by exchanging "several drafts" of agreement "[d]espite these negotiations, [the parties] were unable to reach agreement"). In both instances, there is a concededly binding obligation to negotiate in good faith; and no one has ever disputed that there was such a fully binding commitment in the 2000 Settlement Agreement (along with the other obligations, which have all been fulfilled). Not surprisingly, therefore, so-called Type II cases and state cases applying the duty to negotiate (before the Appellate Division decision) arrive at the same conclusion, namely that once good faith negotiations have occurred without resolution, the duty is discharged. /d. Fourth, against all these authorities IDT cites an unpublished trial court decision, SHS Baisley LLC v. RES Land, Inc., No. 13931109,2009 N.Y. Misc. LEXIS 6472 (Sup. Ct. Queens Cnty. Dec. 8, 2009), asserting that IDT's 22 "interpretation" of the Court of Appeals' decision is consistent with that court's "read[ing]" of the decision. (IDT Br. at 35-36). However, the Baisley court did not even purport to discuss this Court's decision, simply citing it without discussion or analysis; Baisley is obviously factually distinguishable on any number of grounds (the parties had been at odds for a matter of months, and had a separate, ongoing contractual relationship); and the cited section of the Baisley opinion is likely dictum, since the court's holding was that a factual question existed whether a settlement had been reached. Moreover, that the Baisley court directed the parties, on the facts of that case, to resume negotiations proves the point: there is no language-none-to suggest that this Court contemplated (much less directed) any further negotiation between the parties. Fifth, and finally, IDT makes a half-hearted effort to claim that affirmance will not establish an infinite duty to negotiate. (IDT Br. at 3-4). IDT misses the point. Under the Appellate Division's misinterpretation of this Court's Opinion, there is no limiting principle: that is, absent a defined "expiration" date, parties will be bound to negotiate forever, as, according to the Appellate Division, Tyco and IDT were and are. That cannot be, and is not, the law. 23 II. TIDS COURT'S 2009 OPINION HAS PRECLUSIVE EFFECT AND BARS IDT'S 2010 COMPLAINT We explained in our Opening Brief that the doctrines of res judicata and collateral estoppel each provide a separate, independently sufficient basis to uphold Supreme Court's ruling. (Tyco Br. at 45-58). Nothing in IDT's brief undercuts those arguments. A. Res Judicata Bars IDT's Current Claim IDT' s contract claim in the prior litigation was that Tyco had some freestanding obligation to hand over the capacity, even absent an IRU. (R. 155) ("Tyco and TyCom have failed to meet their obligations under the Settlement Agreement to provide to IDT the use of the- Wavelengths by the applicable Handover Dates."). Both the Appellate Division and this Court squarely rejected that claim, holding that "the negotiation and execution of further agreements [was] a pre-condition to the parties' obligation" (R. 46; see also R. 49A ("Although there was a valid settlement agreement in this case, Tyco' s obligation to furnish capacity never became enforceable because agreed-upon conditions[] were not met.")). Yet that same exact claim is repeated, verbatim, in IDT' s 2009 Complaint, as if this Court's Opinion did not exist. (R. 25) ("Tyco and TyCom have failed to meet their obligations under the Settlement Agreement to provide to IDT the use of the Wavelengths by the applicable Handover Dates."). Indeed, this conduct is so extreme that even IDT grudgingly, albeit indirectly, acknowledges this Court's 24 ruling (e.g. IDT Br. at 21)-but still will not acknowledge the obvious: that this is the same claim, for breach of the same agreement, by the same party, that the Court rejected, and hence is clearly barred by res judicata. The same is true with respect to IDT' s claims for breach of the duty to negotiate. To take the most extreme example, during the prior negotiations IDT complained about a proposed "decommissioning" provision (a standard term in Tyco's agreements to which all the other capacity rights-holders had agreed). IDT complained about the provision, Tyco insisted on it (Original R. 169 ("Our position on things like decommissioning are non negotiable.")), and in the final draft IR U exchanged by the parties IDT agreed. Years later, however, and throughout the original litigation, IDT nonetheless identified the "decommissioning" provision on which Tyco had insisted as one of the key breaches during the negotiations. (E.g., R. 206 (IDT counsel argued at summary judgment hearing: "The two most important violations of the agreement are the remedies provision and the decommissioning provision."); (R. 313-14 (IDT counsel argued to this Court in the prior litigation that Tyco "refused to budge" on decommissioning provision)). This Court itself noted that IDT had acquiesced in the provision (R. 48), and that Tyco "had not breached any of its obligations". (R. 49C). Yet in the 2009 negotiations, IDT again claimed that the decommissioning provision was a breach. (R. 272). If res judicata is to have any meaning, IDT 25 cannot be permitted to re-assert this claim. See In re Reilly v. Reid, 45 N.Y.2d 24, 28-29, 407 N.Y.S.2d 645, 648 (1978) ("Considerations of judicial economy as well as fairness to the parties mandate, at some point, an end to litigation."). And IDT's answers to these points are no answers at all. Notably, even IDT does not bother to defend the primary basis for the Appellate Division's rejection of res judicata, namely that because IDT' s claims "arise from the alleged actions and omissions of the defendants after the Court of Appeals decision ... the conduct complained of now could not have been the basis for the breach of contract action previously dismissed by this Court and the Court of Appeals." (R. 345-46). As explained in our Opening Brief (Tyco Br. at 50-52), this is simply wrong. See also Marcel Fashions Group, Inc. v. Lucky Brand Dungarees, Inc., No. 11 Civ. 5523, 2012 WL 4450992, at *4 (S.D.N.Y. Sept. 25, 2012) (res judicata barred claims based upon acts that post -date first action if claims are "nothing more than additional instances of what was previously asserted" and second action is based "principally upon the common nucleus of operative facts shared with the first.") (alteration and quotation omitted). Notably, the Appellate Division's erroneous decision has already been relied on by other courts on this point. Goldoffv. Peck Slip Assoc. Group, LLC, No. 1501882013, 2013 WL 3856359, at *3 (Sup. Ct. N.Y. Cnty. July 23, 2013) ("[c]urrent claims arising from acts or 26 omissions that occur after a decision has been rendered could not have been the basis for actions settled in a prior action" and citing Appellate Division decision). IDT does rely on its argument, rebutted above, that this Court's prior Opinion decided nothing at all about the "merits" of the dispute, namely that five years of litigation was necessary to establish the (self-evident) principle that a party bound to negotiate is free to merely propose an inconsistent term. But, as explained, this Court's 2009 Decision cannot reasonably be construed as anything other than a "judgment on the merits" "from a prior action between the same parties involving the same subject matter." See In re Hunter, 4 N.Y.3d 260, 269, 794 N.Y.S.2d 286, 291 (2005); see also In re Reilly, 45 N.Y.2d at 31, 407 N.Y.S.2d at 649 ("[T]he essential identity of petitioner's two causes of action requires invocation of the doctrine of claim preclusion. To conclude otherwise would be to afford petitioner a second opportunity to obtain substantially the same relief he was denied in the prior proceeding".). B. Collateral Estoppel Also Bars IDT's Current Claim IDT' s current Complaint is also barred by collateral estoppel. Many of the same reasons that the Appellate Division's reasoning is incorrect on res judicata apply also to collateral estoppel. For example, "after arising" conduct is barred by collateral estoppel if, as is the case here, the conduct is the same conduct previously ruled on. Honess 52 Corp. v. Town of Fishkill, 266 27 A.D.2d 510, 511, 698 N.Y.S.2d 718, 719 (2d Dep't 1999) ("collateral estoppel bars the plaintiff from relitigating in this action matters which were clearly raised and decided against it in the prior CPLR article 78 proceeding"); Bunny v. Coughlin, 187 A.D.2d 119, 122-23, 593 N.Y.S.2d 354, 357 (3d Dep't 1993) (collateral estoppel barred claim by inmate complaining that restrictions on wearing Rastafarian crown violated constitutional rights where factual issue of wearing crown was "necessarily and actually litigated in the prior Federal class action"). Put another way, repetition of conduct found lawful cannot be unlawful. Conceding the point, IDT raises two arguments-neither has merit. First, IDT claims that this Court is somehow barred from examining a collateral estoppel defense because the current record "contains almost none of the actual correspondence between the parties" (IDT Br. at 42) and the case arises on a motion to dismiss based on documentary evidence. (IDT Br. at 46-50). While it is understandable that IDT would seek to "hide the ball" from the Court-since, as discussed below, the issues in the prior litigation are exactly the same as the issues now-this is not correct. Courts routinely decide preclusion issues on pre-answer motions (See, e.g., Honig, 217 A.D.2d at 572, 629 N.Y.S.2d at 286 (res judicata and collateral estoppel preclude plaintiff from relitigating issues already determined; motion to dismiss properly granted); Bordelay v. City of New York, 158 A.D.2d 322, 322, 551 N.Y.S.2d 9, 10 (1st Dep't 1990) (same)); the record in 28 the previous litigation is clear and readily available; and the record of the parties' 2009-2010 negotiations-recited at length in IDT's own Complaint (R. 20-35)-is also clear (and effectively undisputed). Second, implicitly conceding that the Court can actually determine whether the cases involve the same issues, IDT next claims that "Tyco' s behavior was meaningfully and materially different in the 2009-2010 time period". (IDT Br. at 43). In fact, IDT has never made this argument before, so it is waived. Ari v. Cohen, 107 A.D.3d 516,517,968 N.Y.S.2d 31,32 (1st Dep't 2013) (improper to raise issue for first time on appeal that could have been factually countered in trial court); McGarr v. Guardian Life Ins. Co. of Am., 19 A.D.3d 254, 255, 799 N.Y.S.2d 19, 20-21 (1st Dep't 2005) (plaintiffs fact-based argument was improperly raised for first time on appeal and court declined to consider it); City of New York v. Stack, 178 A.D.2d 355, 355, 577 N.Y.S.2d 406, 406 (1st Dep't 1991) (court refused to consider arguments raised for first time on appeal and that could have been factually countered had they been raised before trial court), lv. denied, 80 N.Y.2d 753,587 N.Y.S.2d 905 (1992). Even were the Court to address this waived claim, it is plainly wrong. IDT conspicuously fails to cite any substantive differences between the issues in the two litigations (contenting itself with the "alternate reality" assertion that Tyco was somehow more insistent during the recent negotiations). Nor could it. 29 Thus, in addition the never-ending dispute about "decommissioning" (see supra at 26-27), IDT complains here that Tyco breached its duty to negotiate when Tyco refused to provide IDT with ''the ability to enforce its rights under the Settlement Agreement against each of the Tyco entities ... that signed the Settlement Agreement." (R. 296). But IDT raised exactly this issue in this Court in the prior litigation (R. 323-24 (asserting that Tyco's proposal "that only one of the five Tyco signatories to the Settlement Agreement-TyCom[]-sign the IRU document" was "inconsistent with the Settlement Agreement"; R. 327 ("Tyco insisted on terms that were utterly inconsistent" with the Settlement Agreement, including "refusal of Tyco International and three other Tyco entities to guarantee the IRU document, although they had agreed to be signatories to the Settlement Agreement.")). IDT specifically argued to this Court in the previous litigation that Tyco unlawfully rejected this term in violation of the 2000 Settlement Agreement, the Record makes clear that Tyco stood firm (in fact, "insisting" that this term not be included because it was not required by the 2000 Settlement Agreement), and this Court found that Tyco did not breach "any of its obligations" (R. 49C). Similarly, IDT argues now that Tyco refused to provide IDT "with transatlantic capacity that terminates in London as is required by the Settlement Agreement." (R. 296). IDT also raised that precise issue in this Court in the prior litigation. (R. 316 (asserting that Tyco "refus[ed] to perform its obligations under 30 the 2000 Settlement Agreement" since "the Settlement Agreement required Tyco to provide IDT with connectivity on the Transatlantic Network all the way to the terminus in London")). This Court-holding that "[t]he record does not support a finding that Tyco breached any of its obligations" (R. 49C)-necessarily rejected that claim as well. And the claim is obviously meritless: the 2000 Settlement Agreement on its face provides that "TGN Phase I landing points and cities subject to change at the sole discretion of[Tyco]." (R. 77 (emphasis added)). Finally, IDT is reduced to arguing that, because this Court did not engage in a detailed textual discussion of each and every one of the (ever-expanding) list of breaches it claimed in the prior litigation, collateral estoppel should not apply. (IDT Br. at 41) ("one would reasonably expect that if this Court had made a decision on the various disputed issues relating to consistency, there would have been a discussion of these points in the decision."). We know of no principle establishing that this Court is obligated to give chapter and verse on every disputed issue; the law is in fact to the contrary. See Flores v. E. W Bliss Co., 18 A.D.2d 1058, 1059, 239 N.Y.S.2d 1, 2-3 (1st Dep't 1963) (finding that on earlier appeal court must have made a particular finding; "Indeed, this was defendant's principal argument and a new trial was requested only as an alternative. It is inescapable, then, that the Court reached, rejected, and passed the contention that plaintiffs complaint should be dismissed for failure to 31 make out a prima facie case."), aff'd, 14 N.Y.2d 708, 709 (1964); Am. Auto. Mfrs. Ass'n v. Cahill, 53 F. Supp. 2d 174, 182 (N.D.N.Y. 1999) (district court bound by Second Circuit decision as law of the case since issues necessarily decided in prior appeal). And the Court did specifically address the two claimed breaches- decommissioning and limitation of liability-that IDT had litigated throughout the pnor case. In summary, IDT claimed that Tyco had breached the 2000 Settlement Agreement by insisting on multiple different, allegedly inconsistent provisions. Tyco claimed that those provisions were proper, hence no breach. This Court affirmed a summary judgment for Tyco, finding that Tyco had not breached any of its obligations. Because this Court necessarily determined all those issues adversely to IDT, IDT cannot now relitigate those issues. See Bunny, 187 A.D.2d at 122, 593 N.Y.S.2d at 357. III. THE DOCUMENTARY EVIDENCE ESTABLISHES THAT IDT'S COMPLAINT FAILS In our Opening Brief, we pointed out that the Appellate Division had simply assumed that Tyco might have taken positions so unreasonably consistent with the 2000 Settlement Agreement as to rise to the level of bad faith, finding that that "neither the complaint nor the record are specific as to the 10 inconsistencies in the IRU proposed by defendants". (Tyco Br. at 27-28, 58-59). In fact, the record precisely itemizes those points-and there is no way that Tyco's positions on those 32 issues could rationally be viewed as a breach of the 2000 Settlement Agreement at all (assuming, arguendo, there were any extant obligations). (R. 296-98, 299-302). We also noted that the Appellate Division's holding that a reservation of rights amounted to an anticipatory repudiation is flatly inconsistent with established law. (Tyco Br. at 61-66). Here, again, IDT' s answers to these arguments are no answers at all. A. Tyco Did Not Breach the 2000 Settlement Agreement First, IDT does not deny that the Appellate Division's conclusion that the record was silent as to the alleged breaches is wrong, or that that assumption drove that court's holding that IDT' s Complaint might theoretically state a claim. IDT nonetheless claims that Tyco' s challenge to IDT' s pleading is an "unpreserved argument" made "for the first time on this appeal." (IDT Br. at 46). We leave to one side the question of why the Appellate Division was addressing whether or not IDT' s Complaint was barred by documentary evidence if the issue was, in fact, never raised below. In any event, this Court may review an error by the Appellate Division, even if the issue was not raised before the Appellate Division. People ex rei. City of New York v. Yale, 249 N.Y. 150, 153, 163 N.E. 132, 133 (1928); 11 JEFFERSON JAMES DAVIS &RACHELM. KANE, CARMODY-WAIT 2d § 71:112 (where error occurred in Appellate Division and did not exist at time of appeal to that court, it may be considered by Court of Appeals even though not raised in 33 Appellate Division); 10 JOHN A. GEBAUERET AL., CARMODY-WAIT2d § 70:108 (same).7 Second, IDT argues that the procedural posture of the case-a motion to dismiss based on documentary evidence-means that the Court must simply believe what IDT says, totally irrespective of the documentary record, and that IDT "has not had the opportunity to conduct discovery". (IDT Br. at 47-48). Yet even the Appellate Division implicitly recognized that IDT must have some colorable factual basis for asserting that Tyco actually breached the 2000 Settlement Agreement; IDT and its counsel themselves participated in the negotiations-so it is entirely unclear what light "discovery" would shed on events that are fully documented in the record; and, contrary to IDT' s claim, the entire point of the "documentary evidence" defense is to dispose of claims that are plainly legally insufficient. O'Donnell, Fox & Gartner, P.C. v. R-2000 Corp., 198 A.D.2d 154, 7 IDT's cases (IDT Br. at 46-47) stand only for the general proposition that appellate courts do not consider arguments raised for the first time on appeal, not for the rule that this Court may review an error by the Appellate Division even if the issue was not raised previously. Misicki v. Caradonna, 12 N.Y.3d 511, 519, 882 N.Y.S.2d 375, 381 (2009) (defendant "never so much as hinted much less claimed before us that section 23-9.2 (a) is inapplicable to the grinder involved in plaintiffs accident") (emphasis in original); Devlin v. Video Servs. Acquisition, 188 A.D.2d 370, 370, 591 N.Y.S.2d 775, 776 (1st Dep't 1992) ("We have not considered plaintiffs arguments ... since these arguments are raised for the first time on appeal); Habenicht v. Nassau Cnty. Dep't of Soc. Servs., 123 A.D.2d 667, 668, 506 N.Y.S.2d 957 (2d Dep't 1986) ("it improperly seeks to raise a new argument not previously presented to that court, which we decline to consider"); Roth v. Robbins, 117 A.D.2d 794,499 N.Y.S.2d 617 (2d Dep't 1986) ("an argument raised by the plaintiff on appeal was not raised before Special Term. Therefore, that argument is not properly before this court."); Abacus Real Estate Fin. Co. v. P.A.R. Constr. & Maint. Corp., 115 A.D.2d 576, 577,496 N.Y.S.2d 237, 238 (2d Dep't 1985) ("This claim was not raised at Special Term and therefore cannot be raised on appeal."). 34 154, 604 N.Y.S.2d 67, 68 (1st Dep't 1993) ("bare legal conclusions and factual claims, which are either inherently incredible or flatly contradicted by documentary evidence ... , are not presumed to be true on a motion to dismiss for legal insufficiency"); Mark Hampton, Inc. v. Bergreen, 173 A.D.2d 220, 220, 570 N.Y.S.2d 799, 799 (1st Dep't 1991) (same). Third, IDT goes on at length about the October 14 email from Tyco to IDT. (IDT Br. at 48-50). Initially, of course, that document is hardly the only basis for Tyco' s argument on this point: IDT' s Complaint itself contains a detailed recitation of the parties' negotiations, 8 and IDT' s own counsel described the parties' extensive negotiations (and IDT' s claimed breaches) in an email dated August 17, 2010, which was placed in the record by IDT' s own counsel. (R. 296- 98). In any event, IDT' s focus on the October 14 email strikingly illustrates IDT' s complete inability to keep its story straight. IDT would have the Court fail to consider that document, which summarizes the points then under discussion, when (a) it is IDT that first relied on that document by placing it in the record (see 8 The Complaint notes that IDT and Tyco exchanged numerous draft IR.Us (e.g, R. 29 'II 36 (Tyco rejected a proposed IR U because "it is not based on the Settlement Agreement", R. 30 'II 40 ("Tyco then sent to IDT a copy of an IRU", R. 30 'II 41 ("On or about July 23, 2010, Tyco sent IDT a redline of IDT' s proposed ... IRU draft"); R. 31 'II 44 (Tyco asked IDT to send redlined comments to Tyco's redlined comments); R. 31 'II 46 (Tyco again asked IDT for redlined comments to Tyco's comments)) and requested and attended meetings with IDT to discuss the draft IRU (see, e.g., R. 29 'II 38-39 (Tyco requested a meeting with IDT to discuss draft IRU and subsequent fact-to-face meeting); R. 31 'II 50 (telephonic meeting between parties). 35 Record Table of Contents at iv-v (Affirmation of Joseph P. LaSala, then-counsel for Plaintiffs, in Opposition to Motion [to Dismiss], dated Feb. 18, 2011, Exhibit 8)); (b) IDT has failed to plead or even identify any respect in which that document is an inaccurate summary of the negotiations; and (c) on the very next page of its Brief IDT simultaneously relies on that same email for its claim of breach (IDT Br. at 49 ("the October 14 email is the same email that confirms IDT's allegations")). IDT cannot have it both ways. See generally Emigrant Bank v. UBS Real Estate Sec., Inc., No. 602173/2006, 2007 WL 5650108 (Sup. Ct. N.Y. Cnty. Mar. 14, 2007) (motion to dismiss granted based on emails that were "documentary proof' that parties did not reach an enforceable agreement); Pullman Grp., LLC v. Prudential Ins. Co. of Am., 288 A.D.2d 2, 3, 733 N.Y.S.2d 1, 2 (1st Dep't 2001) (affirming dismissal where documents incorporated by reference in complaint demonstrated that plaintiff lacked standing); Kenneth R. v. Roman Catholic Diocese of Brooklyn, 229 A.D.2d 159, 162, 654 N.Y.S.2d 791, 794 (2d Dep't 1997) (affirming dismissal where documentary evidence showed that plaintiff had failed to state a claim for relief). Fourth, the actual reason for IDT' s protracted focus on procedural issues is clear: it cannot plausibly allege that Tyco breached the 2000 Settlement Agreement. As we noted in our Opening Brief, as to six of the specific issues Tyco indicated its willingness either to accede to IDT's position (e.g., R. 300 ("we 36 will agree to the definition of 'Similarly Situated Customers' contained in the Settlement Agreement") or continue discussion (e.g., R. 300 ("we have asked you to provide a counterproposal [regarding the cap on limitation of liability]")). Conceding as much, IDT seizes on the fact that "there is no mention in the October 14 email of four of the ten points of contention." (IDT Br. at 50). But those "four ... points of contention" are clearly spelled out in the record (R. 296-97), and indeed were directly addressed in Tyco's Opening Brief (Tyco Br. 59 n.7). And there is a reason that IDT is so shy about discussing them-they are ridiculous claims. Thus, one of the four "points of contention" is IDT' s claim that Tyco refused to provide IDT "with transatlantic capacity that terminates in London as is required by the Settlement Agreement." (R. 296). This Court previously rejected that claim, and with good reason: the 2000 Settlement Agreement on its face provides that "TGN Phase I landing points and cities subject to change at the sole discretion of[Tyco]." (R. 77 (emphasis added)). Similarly, IDT complains that Tyco breached its duty to negotiate when Tyco refused to provide IDT with "the ability to enforce its rights under the Settlement Agreement against each of the Tyco entities ... that signed the Settlement Agreement." (R. 296). But, here, again on the face of the 2000 Settlement Agreement it was only TyCom (which owned the network at the time) 37 that was responsible for negotiating and providing the capacity to IDT (R. 58)- there is no basis to compel other Tyco entities to be responsible for that specific obligation. Fifth, and finally, completely unable to identify any substantive term required by Tyco that actually breached the 2000 Settlement Agreement, IDT is reduced to repeating its argument that Tyco' s mere reservation of rights establishes a breach. (IDT Br. at 50-54). This, too, is simply not correct. See infra 38-42. In summary, IDT' s Complaint is barred by the very documentary evidence on which it relies. Cf Mode Contempo, Inc. v. Raymours Furniture Co., Inc., 80 A.D.3d 464, 465, 915 N.Y.S.2d 528, 529 (1st Dep't 2011) ("[S]imply because ... negotiations ultimately failed, it cannot be said that defendant acted in bad faith."). B. IDT Cannot State a Claim for Anticipatory Repudiation and the Appellate Division Created Unprecedented Reservation of Rights Law The law in New York is clear that a claim of anticipatory repudiation requires "some express and absolute refusal to perform." Ga Nun v. Palmer, 202 N.Y. 483, 489, 96 N.E. 99, 101 (1911). "[T]he announcement of an intention not to perform [must be] positive and unequivocal." Tenavision, 45 N.Y.2d at 150, 408 N.Y.S.2d 36 at (citation omitted) (emphasis added). A "mere assertion that the party ... will refuse to perform his contract is not sufficient [to establish 38 repudiation]. It must be a distinct and unequivocal absolute refusal to perform the promise .... " Dingley v. Oler, 117 U.S. 490, 502-03 (1886) (citations omitted). Courts therefore hold that there can be no "definite and final" communication where, as Tyco did here, a party expresses its belief that a contract has been terminated yet invites further performance under that contract. Best Payphones, Inc., 432 B.R. at 55, 58 (defendant's demand for payment of the unrelated judgment was not an unequivocal repudiation of the contract because the defendant "invited further dialogue" with plaintiff and thus left open the prospect of continued service); 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); Staebell v. Bennie, 83 A.D.2d 765, 765, 443 N.Y.S.2d 487, 488 (4th Dep't 1981) ("In order to constitute an abandonment, however, there must be a repudiation of the contract and refusal to perform it.") (emphasis added, citation omitted); Hifn, Inc. v. Intel Corp., No. Civ.A. 1835-VCS, 2007 WL 1309376, *7, 15 (Del. Ch. May 2, 2007) (rejecting as repudiation defendants' expressed desire to put agreement "on ice" after performance dates were missed because defendant also stated that "it was open to hearing any counter proposal"). Despite the requirement of a "positive and unequivocal" statement of an intent not to perform under a contract, the Appellate Division nonetheless held that 39 IDT's Complaint stated a claim for anticipatory repudiation "even though [the Complaint alleged that] the parties apparently continued to negotiate". (R. 343). The Appellate Division's holding that a party that continues to perform under an agreement can ever express a "positive and unequivocal" intention not to perform under the agreement is literally unprecedented-and IDT cites no case to show otherwise. Unable to counter the clear law on anticipatory repudiation, IDT instead claims for the first time (again)-as this theory was presented nowhere in the Complaint (and is in fact contradicted by it) or below-that Tyco had declared the 2000 Settlement Agreement dead and, as a result, was negotiating free and clear of the constraints of the 2000 Settlement Agreement. (IDT Br. at 11, 52-53). IDT's new theory is a desperate attempt to wedge this case into the holding of Record Club of Am., Inc. v. United Artists Records, Inc., 643 F. Supp. 925, 936 (S.D.N.Y. 1986), vacated on other grounds, 890 F.2d 1964 (2d Cir. 1989). That effort fails. In Record Club, the court found an anticipatory repudiation where the party said that the agreement '"was over"' and that the parties "had no contract" but where the party continued to supply goods "only as an accommodation during the pendency of negotiations for a new contract" on new terms. /d. IDT' s contention that Tyco was, as in Record Club, refusing to perform under the 2000 Settlement Agreement and performing as a courtesy until a new settlement agreement was 40 negotiated is an outrageous falsehood: If in fact Tyco had unequivocally communicated to IDT that it "had no contract", Tyco would have ceased negotiations and refrained from trying to provide IDT with capacity at all. IDT' s own allegations in the Complaint, however, show just the opposite. They show that Tyco was continuing to negotiate with IDT (R. 28 ')[ 34-R.32 ')[50) and continuing to try to provide IDT with the capacity, and they show that IDT understood that these negotiations were all taking place under the 2000 Settlement Agreement. Thus, for example, the Complaint alleges that "[o]n or about August 25, 201 0" IDT "invited Tyco to a meeting ... so that the parties could attempt to agree on an IRU that was consistent with the parties' obligations under the Settlement Agreement". (R. 31 ')[ 45) (emphasis added). That IDT understood Tyco to be negotiating under the 2000 Settlement Agreement throughout the entire 2009-2010 negotiation period (until IDT walked away from the table) is further evinced by the Complaint's description of the parties' last meeting on October 13, 2010, as designed to "determine if the parties could reach agreement on an IRU that was consistent with the parties' obligations under the Settlement Agreement".9 (R. 32 ')[ 50) (emphasis added). 9 The emails on which IDT relies to make its allegations in the Complaint also show that Tyco understood itself to be negotiating under the Settlement Agreement, (e.g., R. 300 "we will agree to the definition of 'Similarly Situated Customers' contained in the Settlement Agreement"; "we 41 Further, the sole case cited by the Appellate Division, Cole v. Macklowe, 64 A.D.3d 480,480, 882 N.Y.S.2d 417,419 (1st Dep't 2009), also does not establish that IDT adequately pled a claim for anticipatory repudiation. (IDT Br. at 53). Unlike the situation here, that case did not involve further performance on the contract once the defendant "indicated to plaintiff that he did not consider the agreement binding", 882 N.Y.S.2d at 419-that is, it did not involve, as here, a simple reservation of rights by the defendant. Finally, IDT's assertion that Tyco's argument that it was reserving its rights is "revisionist gloss" (IDT Br. at 50) is flatly contradicted by Tyco's statements during the 2009-2010 negotiations that "Tyco reserves all of its rights." (R. 301). There therefore is no question that IDT did not-and cannot-adequately plead a cause of action for anticipatory repudiation. Its claim should be dismissed with prejudice. will include the 'Resale of Capacity' /'Next In Inventory' language from the Settlement Agreement in the IRU Agreement") thus completely deflating IDT's baseless allegations. (IDT Br. at 53). 42 CONCLUSION For all the above reasons, the December 27 Decision and Order of the Appellate Division should be reversed, and the order of Supreme Court granting Tyco' s motion to dismiss should be reinstated. Dated: New York, New York October 11, 2013 Respectfully Submitted, DEWEY PEGNO & KRAMARSKY LLP By: 7'- ~ ~ Thomas E. L. Dewey 777 Third A venue New York, NY 10017 (212) 943-9000 (212) 943-4325 (Facsimile) Attorneys for Defendants-Appellants 43
