Katel Limited v. AT&T Corp.

09-1575-cv Katel Limited v. AT&T Corp. 1 UNITED STATES COURT OF APPEALS [2] 3 FOR THE SECOND CIRCUIT [4] 5 August Term, 2009 [7] 8 (Argued: February 4, 2010 Decided: May 27, 2010) [9] 10 Docket No. 09-1575-cv [11] 12 - - - - - - - - - - - - - - - - - - - -x [13] 14 KATEL LIMITED LIABILITY COMPANY, [15] 16 Plaintiff-Appellant, [17] 18 - v.- [19] 20 AT&T CORPORATION, [21] 22 Defendant-Appellee. [23] 24 - - - - - - - - - - - - - - - - - - - -x [25] 26 Before: JACOBS, Chief Judge, POOLER and KATZMANN, 27 Circuit Judges. [28] 29 KATEL Limited Liability Company appeals from a judgment 30 entered by the United States District Court for the Southern 31 District of New York (Holwell, J.), dismissing by summary 32 judgment its claims against AT&T Corporation, which allege 33 breach of contract and tortious interference with 34 contractual relations, and seek relief under the 35 International Telecommunications Regulations. We affirm. 1 DAVID J. EDWARDS (Paul J. 2 Yesawich, III, James P. Nonkes, 3 on the brief), Harris Beach 4 PLLC, Pittsford, New York, for 5 Appellant. [6] 7 SUZANNE L. MONTGOMERY, AT&T 8 Services, Inc., Bedminster, New 9 Jersey; Henry Guy Burnett, Sarah 10 E. O’Connell (on the brief), 11 Fulbright & Jaworski L.L.P., New 12 York, New York, for Appellee. [14] 15 DENNIS JACOBS, Chief Judge: [16] 17 In 1993 or 1994 (the date is disputed), AT&T 18 Corporation (“AT&T”) entered into an International 19 Telecommunications Services Agreement (“Agreement”) with 20 KATEL Limited Liability Company (“KATEL”), an international 21 telecommunications carrier, to govern the exchange of phone 22 calls between AT&T in the United States and KATEL in 23 Kyrgyzstan. The essence of the Agreement was that KATEL 24 would build the necessary infrastructure in Kyrgyzstan , and 25 AT&T would use that infrastructure for a fee. The parties 26 began exchanging telecommunications traffic shortly 27 afterward. In 1997, AT&T began sending its 28 telecommunications traffic to Kyrgyztelecom (“KT”), a 29 competitor of KATEL. Soon thereafter, AT&T began using an 30 intermediary service to route its calls to Kyrgyzstan and [2] 1 stopped paying KT; moreover, since it was no longer using 2 KATEL’s services, it was not paying KATEL, either. 3 KATEL bought an assignment of rights from KT, and sued 4 AT&T in the United States District Court for the Southern 5 District of New York (Holwell, J.) on March 28, 2002, 6 claiming breach of contract, tortious interference with 7 contractual relations, and an entitlement to fees pursuant 8 to the International Telecommunications Regulations. The 9 district court granted summary judgment to AT&T on all 10 claims, and this appeal is taken from the judgment. 11 We affirm. [12] 13 I 14 The controversy turns on the interplay between two 15 paragraphs of the Agreement. Paragraph 7 provides, inter 16 alia, that “as soon as KATEL and AT&T establish direct 17 circuits, the parties will begin routing traffic between the 18 Republic of Kyrgyzstan and the United States on these 19 circuits, using the [‘indirect’] transit routes via Russia 20 and Turkey only when direct circuits are not capable of [3] 1 carrying the offered traffic.”1 Paragraph 19, entitled 2 “Non-Exclusive Privileges,” provides that “[n]othing in this 3 Agreement shall be deemed to restrict or prejudice the 4 rights of either party to enter into similar service 5 agreements with other parties.” [6] 7 Transmission arrangements. In 1993 or 1994, AT&T and 8 KATEL entered into the Agreement and began sending 9 telecommunications traffic to one another. In early 1997, 10 AT&T contracted with KT to provide international 11 telecommunications services in Kyrgyzstan; at the same time, 12 AT&T stopped sending traffic to KATEL (and has sent none 13 since). But soon thereafter AT&T stopped paying KT for its 14 call termination services. On October 11, 1999, 15 representatives from AT&T, KATEL, and KT met at AT&T’s New [1] Traffic passes “directly” when it originates in the United States on AT&T’s infrastructure and “terminates” in Kyrgyzstan on KATEL’s infrastructure. AT&T, as the “originating carrier,” would then pay an agreed-upon fee to KATEL as the “terminating carrier.” Traffic passes “indirectly” when AT&T originates a call in the United States and sends it to a third-party carrier, which then sends it along to KATEL. AT&T would pay a fee to KATEL, and AT&T and KATEL would each pay half of the fee owed to the third-party carrier. [4] 1 Jersey headquarters. AT&T conceded that it owed money to 2 KATEL or KT or both, but the parties could not resolve the 3 muddle, and KATEL initiated this litigation. 4 In the meantime, AT&T continued sending direct and 5 indirect traffic to KT until May 2002, at which point it 6 adopted a different method of routing calls into Kyrgyzstan: 7 “refile.” Under a refile arrangement, the originating 8 carrier (AT&T) sends the traffic to a third-party carrier, 9 and pays it; the third-party carrier then sends the traffic 10 into the terminating country and pays the terminating 11 carrier. (The FCC has recognized refile as an economically 12 rational way for an international telecommunications 13 provider to structure its business dealings with other 14 carriers. See In re Int’l Settlement Rates, 12 F.C.C.R. 15 19806, 19811-12 (Aug. 18, 1997)). Thus AT&T delivers the 16 calls to the third party and does not deliver the calls to 17 Kyrgyzstan directly or indirectly. In short, AT&T washed 18 its hands of business in Kyrgyzstan. [19] 20 Litigation. On March 28, 2002, KATEL sued AT&T in the 21 Southern District of New York. Recognizing that KT might be 22 a necessary party, KATEL unsuccessfully invited KT to join 23 the litigation. To forestall any possible Rule 12(b)(7) [5] 1 motion, KATEL bought an assignment of KT’s rights against 2 AT&T (through May 2002). KATEL and KT executed a six-page 3 “Russian Language Assignment,” and (on the same day) an 4 “English Language Assignment” that was intended to replicate 5 the Russian Language Assignment and that could be used by 6 KATEL to defeat a Rule 12(b)(7) motion. 7 On September 4, 2003, KT intervened in the KATEL-AT&T 8 lawsuit and moved to compel arbitration against KATEL 9 pursuant to the terms of the Russian Language Assignment.2 10 (KATEL contends that KT’s intervention was inspired by 11 AT&T.) AT&T then moved to file an interpleader counterclaim 12 by which it would deposit with the district court the sum of 13 $1,120,199.04, the amount that all parties agreed was owed 14 to KATEL and/or KT for the period 1997 through May 2002. 15 The court granted AT&T’s motion; the parties stipulated that 16 this was the amount owed; and the KATEL-KT litigation was 17 stayed pending the outcome of their arbitration, which was 18 to determine how the interpleaded funds would be divided 19 between them. The arbitrator ultimately ruled that KATEL 20 was entitled to the full amount, and on October 31, 2006, [2] KT also brought other claims against KATEL and AT&T. Those claims are not relevant to the issues presented in this appeal. [6] 1 the district court ordered that the funds be disbursed to 2 KATEL. 3 Meanwhile, in the KATEL-AT&T litigation, the parties 4 had filed cross-motions for summary judgment. At oral 5 argument on February 9, 2006, KATEL argued that: (1) AT&T 6 breached the Agreement by failing to adhere to Paragraph 7’s 7 requirement that it use KATEL’s infrastructure to send calls 8 to Kyrgyzstan; (2) AT&T tortiously interfered with KATEL’s 9 business relations with KT; and (3) AT&T owed reimbursement 10 to KATEL for traffic sent by AT&T to Kyrgyzstan--even for 11 periods when AT&T did not use KATEL’s equipment or services 12 --by virtue of the International Telecommunications 13 Regulations (“ITRs”). 14 In an oral decision, the district court ruled for AT&T 15 on all claims. As to breach of contract, the court 16 concluded that Paragraph 19 makes the Agreement a non- 17 exclusive contract that allows AT&T to use other means to 18 route traffic into Kyrgyzstan; that absent any such 19 obligation to send a specific amount of traffic through 20 Katel, AT&T did not breach the Agreement when it stopped 21 using KATEL’s circuits; and that Paragraph 7 concerns how 22 traffic will be routed--not whether AT&T is required to [7] 1 offer any traffic to KATEL. 2 As to tortious interference, the district court ruled 3 that the declaration of KATEL principal Ross Jacoby (on 4 which KATEL wholly relied) offered no more than conclusory 5 allegations that AT&T had sought to “drive a wedge” between 6 KATEL and KT. Separately, the court held that AT&T had a 7 reasonable basis to believe that KT rather than KATEL was 8 authorized to do business in Kyrgyzstan, and to act upon 9 that belief. 10 As to the ITRs, the court held that they confer no 11 private right of action. 12 At a status hearing two weeks after this summary 13 judgment ruling, the district court ordered KATEL to submit 14 in writing the nature of any remaining claims it had against 15 AT&T. KATEL responded that its only remaining claim 16 concerned payment it believed AT&T owed for the period 17 January 1, 2000 through April 30, 2001. After some 18 additional discovery, AT&T moved for summary judgment, which 19 the district court granted on the ground that KATEL offered 20 no evidence that AT&T owed anything other than the sum it 21 had already lodged with the court. In addition, the 22 district court denied a motion by KATEL to reopen discovery [8] 1 for the purpose of disclosing Jacoby as an expert witness on 2 the custom and practice of the international 3 telecommunications industry. [4] 5 This appeal. KATEL raises five arguments on appeal: 6 (1) AT&T breached the Agreement by not using KATEL’s 7 services to terminate calls in Kyrgyzstan; (2) even if AT&T 8 was not in breach, industry custom and practice required 9 AT&T to pay KATEL for calls terminating in Kyrgyzstan; (3) 10 KATEL presented sufficient evidence on its tortious 11 interference claim; (4) the ITRs provide a private right of 12 action; and (5) the district court abused its discretion in 13 denying KATEL’s motion to reopen discovery for the purpose 14 of disclosing Jacoby as an expert witness. 15 Analyzing the arguments seriatim, we affirm. [16] 17 II 18 KATEL contends that AT&T breached the Agreement by 19 sending telecommunications traffic to Kyrgyzstan by means 20 other than the AT&T-KATEL link referenced in Paragraph 7 of 21 the Agreement. 22 Our interpretation of the Agreement is governed by New [9] 1 York law. See Konikoff v. Prudential Ins. Co. of Am., 234 [2] F.3d 92, 98 (2d Cir. 2000). Under New York contract law, 3 “‘the intent of the parties governs.’” Crane Co. v. Coltec 4 Indus., Inc., 171 F.3d 733, 737 (2d Cir. 1999) (quoting Am. 5 Express Bank Ltd. v. Uniroyal, Inc., 562 N.Y.S.2d 613 , 614 6 (1st Dep’t 1990)). “[W]e ascertain this intent ‘from the 7 plain meaning of the language employed’ in the agreements, 8 rather than from extrinsic evidence.” Crane, 171 F.3d at 9 737 (quoting Tigue v. Commercial Life Ins. Co., 631 N.Y.S.2d 10 974, 975 (4th Dep’t 1995)). In so doing, we must “give full 11 meaning and effect to all of its provisions.” Am. Express, [12] 562 N.Y.S.2d at 614 ; see also Gonzalez v. Norrito, 682 13 N.Y.S.2d 100 , 101 (2d Dep’t 1998). “Where the intent of the 14 parties can be determined from the face of the agreement, 15 interpretation is a matter of law and the case is ripe for 16 summary judgment.” Am. Express, 562 N.Y.S.2d at 614 . 17 The Agreement provides the terms and conditions that 18 govern business dealings between AT&T and KATEL. Of the two 19 provisions that bear on the present dispute, one gives broad 20 rights that the other (in part) takes away, so that they 21 must be read together: Paragraph 7 provides that the traffic 22 will be routed on the AT&T-KATEL direct circuits (and may be [10] 1 routed indirectly via Russia or Turkey “only when direct 2 circuits are not capable of carrying the offered traffic”); 3 but Paragraph 19 says that “either party [may] enter into 4 similar service agreements with other parties.” Thus 5 Paragraph 7 can grant no right that requires exclusive 6 dealing. To begin with, nothing in Paragraph 7 requires the 7 parties to do business with one another at all: It is not a 8 requirements contract, and it imposes no minimum volume. 9 Paragraph 7 fixes a preference for direct transmission of 10 telecommunications that go from AT&T and terminate with 11 KATEL, but (particularly in light of Paragraph 19) that does 12 not bar AT&T from sending calls toward Kyrgyzstan other than 13 via KATEL. Rather, as the district court correctly 14 concluded, paragraph 7 describes only how the 15 telecommunications services covered by the Agreement will be 16 provided and does not concern whether telecommunications 17 services so provided are covered by the Agreement. 18 KATEL argues that, under Paragraph 7, its direct 19 circuits are the “primary” means for sending AT&T-originated 20 calls into Kyrgyzstan, and AT&T may route traffic indirectly 21 only if these direct circuits fail. The Agreement itself 22 does not use the word “primary.” But, more fundamentally, [11] 1 such an understanding cannot be squared with the right of 2 the parties (under Paragraph 19) “to enter into similar 3 service agreements with other parties.” Two “similar 4 service agreements” could not compatibly require two 5 Kyrgyzstani companies to provide “primary” termination 6 services to the same place.3 KATEL’s interpretation of the 7 Agreement therefore leads to an illogical result, and we 8 decline to endorse it. Cf. Long Island Lighting Co. v. 9 Allianz Underwriters Ins. Co., 749 N.Y.S.2d 488, 495 (1st 10 Dep’t 2002) (avoiding a contractual interpretation that 11 would lead to an illogical result); PNC Capital Recovery v. 12 Mech. Parking Sys, Inc., 726 N.Y.S.2d 394, 397 (1st Dep’t 13 2001) (same). 14 Accordingly, we agree with the district court that the 15 Agreement imposed no obligation on AT&T to send traffic to 16 KATEL. It follows that AT&T was not in breach by electing 17 to send traffic to Kyrgyzstan by other carriers and other 18 means. [3] See The Random House Dictionary of the English Language 1142 (Unabridged ed. 1971) (defining “primary” as “first” or “highest in rank or importance”). [12] 1 III 2 KATEL next argues that, even if AT&T is not liable for 3 breach of contract, AT&T must nonetheless pay KATEL for all 4 AT&T-originated calls that terminated in Krygyzstan. 5 On April 26, 2006, AT&T, KATEL, and KT entered into a 6 stipulation (which took the form of a court order) providing 7 that, for the period January 1997 through May 2002, AT&T 8 owed $1,120,199.04 for termination services in Kyrgyzstan. 9 AT&T lodged that sum with the district court, to be 10 distributed according to the result of the ensuing KATEL-KT 11 arbitration (which KATEL won in full). But though the payee 12 was in doubt, the sum was rendered certain by the 13 stipulation. 14 “[A] stipulation is generally binding on parties that 15 have legal capacity to negotiate, do in fact freely 16 negotiate their agreement and either reduce their 17 stipulation to a properly subscribed writing or enter the 18 stipulation orally on the record in open court.” McCoy v. 19 Feinman, 99 N.Y.2d 295, 302 (N.Y. 2002); see also Calvin 20 Klein Ltd. v. Trylon Trucking Corp., 892 F.2d 191, 194 (2d 21 Cir. 1989). “[C]ourts should not disturb a valid 22 stipulation absent a showing of good cause such as fraud, [13] 1 collusion, mistake or duress[,] or unless the agreement is 2 unconscionable or contrary to public policy[,] or unless it 3 suggests an ambiguity indicating that the words did not 4 fully and accurately represent the parties’ agreement.” 5 McCoy, 99 N.Y.2d at 302 (internal citations omitted). KATEL 6 has offered no reason why it should not be bound by its 7 stipulation. Accordingly, we hold that through May 2002, 8 KATEL has no entitlement to additional fees from AT&T. 9 Nor is KATEL owed money for events that occurred after 10 May 2002. At that time, AT&T stopped sending international 11 calls directly or indirectly to any carrier in Kyrgyzstan; 12 instead, it exclusively used the refile method of traffic 13 termination. Under refile, AT&T’s payment obligation was to 14 a third-party carrier, and that third-party carrier was in 15 turn responsible for paying KATEL, KT, or any other 16 Kyrgyzstani carrier. AT&T had no payment obligation to 17 KATEL (or KT). 18 KATEL suggests that industry custom and practice 19 entitle it to payment. Under New York law, evidence of 20 custom or practice may be admissible only “if the agreement 21 is found to be ambiguous.” Milonas v. Pub. Employment 22 Relations Bd., 648 N.Y.S.2d 779, 785 (3d Dep’t 1996); see [14] 1 also W. Union Tel. Co. v. Am. Commc’ns Ass’n, C.I.O., 299 [2] N.Y. 177, 184 (1949); Polyfusion Elecs., Inc. v. AirSep 3 Corp., 816 N.Y.S.2d 783, 785 (4th Dep’t 2006). Moreover, 4 such evidence “should not be admitted to create an ambiguity 5 in an otherwise clear and unambiguous agreement.” Milonas, [6] 648 N.Y.S.2d at 785 . Because the Agreement is unambiguous, 7 there is no occasion to consider evidence of custom or 8 practice. [9] 10 IV 11 KATEL contends that AT&T tortiously interfered with its 12 (KATEL’s) business relationship with KT. New York law 13 governs our analysis. See Konikoff, 234 F.3d at 98. “In 14 order to prevail on a cause of action for tortious 15 interference with contractual relations, a plaintiff must 16 establish the existence of a valid contract between 17 plaintiff and a third party, the defendant’s intentional and 18 unjustified procurement of the third party’s breach of the 19 contract, the actual breach of the contract[,] and the 20 resulting damages.” Jim Ball Chrysler LLC v. Marong 21 Chrysler-Plymouth, Inc., 796 N.Y.S.2d 804, 805 (4th Dep’t 22 2005). [15] 1 In the district court and again on appeal, KATEL relies 2 principally on paragraph 39 of Jacoby’s declaration to 3 substantiate its claim for tortious interference. That 4 paragraph states in full: 5 [T]hroughout the entire history of [the 6 Agreement,] and at least since 1995, AT&T has 7 taken every opportunity to drive a wedge between 8 KATEL and [KT]. By negotiating behind KATEL’s 9 back with [KT]--a KATEL Joint Venture participant 10 --AT&T has seriously damaged KATEL’s relationship 11 with [KT]. Indeed, KATEL’s shareholders, 12 including the Ministry, were forced to vote [KT] 13 out of the joint venture in 1998. By poisoning 14 this relationship with [KT], AT&T created a 15 hostile atmosphere in which KATEL must now conduct 16 business in the Kyrgyz Republic. It has also 17 created tensions between KATEL and [KT]. This 18 relationship is critical to KATEL’s well being, as 19 the parties[’] networks are interfaced. KATEL’s 20 subscribers must have access to [KT]’s subscribers 21 and vice versa. AT&T’s actions have also, on more 22 than one occasion, prompted [KT] either to deprive 23 KATEL of access to its equipment, or to extract 24 payments from KATEL of AT&T’s debt (which only 25 resulted in a further dispute with [KT] over the 26 scope of the guarantee in the form of the 27 assignment that has also been the subject of 28 litigation before this Court). In sum, AT&T[’s] 29 actions in dealing with [KT] have resulted in 30 [KT], KATEL’s substantial Kyrgyz participant, 31 severing all partnership ties with KATEL. [32] 33 As the district court concluded, this evidence is too 34 conclusory to withstand summary judgment. There is nothing 35 that points to any instance, manner, or method of 36 interference; nor is there a reference to a document, [16] 1 conversation, or communication that would allow an inference 2 of tortious interference. “A party opposing summary 3 judgment does not show the existence of a genuine issue of 4 fact to be tried merely by making assertions that are 5 conclusory. . . .” Major League Baseball Props., Inc. v. 6 Salvino, Inc., 542 F.3d 290, 310 (2d Cir. 2008). [7] 8 V 9 KATEL argues that the International Telecommunications 10 Regulations (“ITRs”) afford it a private right of action 11 against AT&T. This is a matter of first impression for this 12 Court. 13 The ITRs have treaty status and were promulgated by the 14 International Telecommunications Union (the “Union”). S. 15 Treaty Doc. 102-13 (Melbourne 1988). See Cable & Wireless 16 P.L.C. v. FCC, 166 F.3d 1224, 1230 (D.C. Cir. 1999). The 17 Union is a specialized United Nations agency responsible for 18 international telecommunications issues. See ITU TELECOM 19 FAQs, available at http://www.itu.int/ITUTELECOM/faq.html. 20 There are currently 191 member states, including the United 21 States and Kyrgyzstan. Id. (follow hyperlink “191 Member 22 States”). [17] 1 The United States and Kyrgyzstan both adopted the ITRs. 2 See International Telecommunications Regulations (ITRs), 3 available at http://www.itu.int/ITU-T/itr/ (follow hyperlink 4 “Status of ratification of ITRs”). The ITRs “establish 5 general principles which relate to the provision and 6 operation of international telecommunication services 7 offered to the public as well as to the underlying 8 international telecommunication transport means used to 9 provide such services.” See Int’l Telecomms. Regulations, 10 Art. 1, § 1.1(a). 11 There is a presumption that “treaties do not create 12 privately enforceable rights in the absence of express 13 language to the contrary.” Mora v. New York, 524 F.3d 183 , 14 201 (2d Cir. 2008) (internal quotation marks omitted); see 15 also id. at 202 n.25 (citing cases from other circuits); id. 16 at 201-02 (“Our precedents recognize a presumption against 17 inferring individual rights from treaties.”). If a State 18 that is party to a treaty wishes to create a private right 19 of action, “we would ordinarily expect expression of these 20 obligations to be unambiguous.” Id. at 202 . “Even when 21 treaties are self-executing . . . the background presumption 22 is that international agreements, even those directly [18] 1 benefiting private persons, generally do not create 2 private rights or provide for a private cause of action in 3 domestic courts.” Id. at 200 (quoting Medellin v. Texas, [4] 552 U.S. 491 , 506 n.3 (2008)). 5 No wording in the ITRs creates a private right of 6 action, and KATEL cites none. Instead, KATEL argues that, 7 because the treaty is binding on the United States (as a 8 member state and signatory to the ITRs), it provides KATEL a 9 private right of action ipso facto. However, membership in 10 the Union is limited to sovereign entities (not private 11 corporations such as KATEL). See Union Const., Art. 2. 12 Furthermore, the Union’s Constitution provides for the 13 “Settlement of Disputes” only by “Member States,” not by 14 private entities in those member states. Id. at Art. 56. 15 Whether a Member State has rights under the treaty, or is 16 bound by it, says nothing about whether a private party in 17 that Member State has a private right of action. See 18 Medellin, 552 U.S. at 506 n.3. [19] 20 VI 21 KATEL moved to reopen discovery for the purpose of 22 designating Jacoby as an expert witness who would testify [19] 1 that industry custom and practice required AT&T to pay a fee 2 to KATEL for calls terminating in Kyrgyzstan, regardless of 3 whether AT&T had any contractual obligation to make those 4 payments. The district court denied the motion, and our 5 review is for abuse of discretion. See In re Merrill Lynch 6 Ltd. P’ships Litig., 154 F.3d 56, 58 (2d Cir. 1998). 7 In the district court, KATEL argued that discovery 8 should be reopened because “expert disclosure in connection 9 with Mr. Jacoby’s proposed testimony [had] not [previously] 10 appear[ed] necessary.” See Memorandum of Law in Support of 11 KATEL’s Motion to Reopen Discovery at 4. On appeal, 12 however, KATEL abandons that argument and raises for the 13 first time the argument that its failure to designate Jacoby 14 was a result of having to attend to the KATEL-KT 15 arbitration, which lasted years and which was allegedly 16 provoked as part of AT&T’s scheme to disrupt the business 17 relations between the two Kyrgyzstani phone companies. 18 An argument raised for the first time on appeal is 19 typically forfeited. See In re Nortel Networks Corp. Sec. 20 Litig., 539 F.3d 129, 132 (2d Cir. 2008). True, this rule 21 is prudential, not jurisdictional, and we may consider a 22 forfeited argument if there is a risk that “manifest [20] 1 injustice” would otherwise result. Id. at 133. But there 2 is no such risk here. [3] 4 CONCLUSION 5 For the foregoing reasons, we affirm the judgment of 6 the district court.