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CCT Communications Inc. v. Zone Telecom Inc.

Supreme Court of Connecticut

February 21, 2017

CCT COMMUNICATIONS, INC.
v.
ZONE TELECOM, INC.

          Argued November 7, 2016

          Joseph K. Scully, with whom was Jeffrey P. Mueller, for the appellant (plaintiff).

          William M. Murphy, for the appellee (defendant).

          Rogers, C. J., and Palmer, Eveleigh, McDonald, Espinosa and Robinson, Js.

          OPINION

          EVELEIGH, J.

         The plaintiff, CCT Communications, Inc., appeals from the judgment of the trial court rendered in favor of the defendant, Zone Telecom, Inc., [1]on the plaintiff's complaint and the defendant's counterclaim for damages. The case arises from a purchase agreement (purchase agreement) entered into by the parties in which the plaintiff was to provide various telecommunications equipment, software, and services to the defendant for a switch room located in Los Angeles, California (switch room). On appeal, the plaintiff claims that the trial court incorrectly rendered judgment in favor of the defendant on its complaint and the defendant's counterclaim. Specifically, the plaintiff asserts that the trial court incorrectly: (1) concluded that it breached the purchase agreement; (2) failed to award the plaintiff certain damages on count one of its complaint; and (3) awarded damages, costs and attorney's fees in excess of a limitation of liability clause in the purchase agreement.[2] We disagree with the plaintiff and, accordingly, affirm the judgment of the trial court.

         The following facts, as found by the trial court, are relevant to the issues on appeal. ‘‘The plaintiff . . . and the defendant . . . first began doing business together in September, 2005. [The plaintiff] provided various telecommunications equipment, software, and services to [the defendant for the switch room]. This relationship was memorialized in an original contract and subsequent modifications by way of letters of intent.

         ‘‘By September, 2006, the relationship was deteriorating. [The plaintiff] is the alter ego of Dean Vlahos, its president. He was and is the sole decision maker, negotiator, and overseer of [the plaintiff]. . . . Vlahos met with [the defendant's] decision makers on September 14, 2006, at [the defendant's] Cherry Hill, New Jersey office. Present at the meeting . . . were Daniel Boyn-ton [the defendant's senior vice president] and Eamon Egan [the defendant's vice president and chief legal counsel]. The meeting grew heated and ended without an agreement to continue to do business together. Over the ensuing weeks, however, the parties finally reached a meeting of the minds to restructure their relationship.

         ‘‘The new contract was memorialized in[the purchase agreement, which was] dated November 1, 2006. . . . This is the sole document that requires reference regarding all of the terms and conditions of the parties' agreement. . . .

         ‘‘[T]here is a third entity that was involved in the activities that underlie this case. It interrelated with both [the plaintiff] and [the defendant] but never was made a party, namely, Global Crossing Telecommunication, Inc. [Global].

         ‘‘[Global] is a supplier of long-distance telephone service, providing national and international long-distance [calling] as well as . . . toll-free service. [Global] markets its product to industry by varying rates depending on what services the customer requires. If [a customer] contracts for [Global's] services, then calls made under [that] contract would be run through a . . . DS-3 circuit [circuit], which would be provided as part of the transaction for the services. [A circuit] normally is purchased by the consumer as part of [an] agreement to use [Global's] long-distance services and rates.

         ‘‘[Global] was a vital component to the fulfillment of the [purchase agreement] . . . . By virtue of the [purchase] agreement, [the plaintiff] was acting as a middle man in providing long-distance . . . service to [the defendant]. What [the plaintiff] ‘sold' to [the defendant] was two . . . circuits [that the plaintiff] owned located in the [switch room]. In return for [the plaintiff's] purchase and ownership of the . . . circuits, [the defendant] purchased from [the plaintiff] its long-distance . . . service at the rates enumerated in the [purchase agreement] for the specified geographical areas. [The defendant] needed [one of these circuits] to enable it to run long-distance service to [Global] for placement of calls for [the defendant's] clients. [The plaintiff] was providing [the defendant] with long-distance service through its own agreement with [Global]. Stated differently, [Global] sold long-distance service to [the plaintiff] at a certain rate per minute, and [the plaintiff] resold that long-distance service to [the defendant] at a marked up rate. Even the marked up rate proved to be favorable to [the defendant], as it was not a rate that [the defendant] itself could have acquired from [Global]. [The plaintiff] profited from the marked up amount that it was charging to [the defendant] above the rate it was being charged by [Global]. [The defendant] in turn provided long-distance service at a marked up rate per minute based on what it was paying [the plaintiff] for those minutes. More facts will be provided as needed in this decision concerning the interplay between the parties' reliance on [Global's] circuitry and the performance of the [purchase agreement].

         ‘‘The [purchase agreement] . . . was executed and effective on November 1, 2006. Long-distance service to be provided by [the plaintiff] to [the defendant] was to commence on December 1, 2006. The [purchase agreement] had a minimum usage guarantee . . . on a ‘take or pay' basis. What this means is that [the defendant] was to pay a set amount per month as a minimum for long-distance service to be provided by [the plaintiff]. Any usage above the minimum required amount would be billed to [the defendant] at the agreed rate per minute. Also, because the price for use was on a ‘take or pay' basis, [the defendant] was not required to use or run any traffic over [its circuit]. Even if [the defendant] did not run any calls through [its circuit] or failed to run enough minutes to satisfy the monthly [minimum usage guarantee, the defendant] nevertheless would be obligated to pay [the minimum usage charge].

         ‘‘By December 1, 2006, the . . . circuit[s] that [the plaintiff] purchased [were] moved . . . to [the switch room] to handle [the defendant's] long-distance service. [The defendant] did run enough long-distance service through [its] circuit in the month of December, 2006, to meet its minimum usage requirement.

         ‘‘Also, in December, 2006, [the plaintiff] and [Global] amended their retail customer agreement [retail customer agreement]. After execution of [this amendment], [the plaintiff] began to run more long-distance service through [Global]. . . .

         ‘‘By mid-January, 2007, there was an ongoing dispute between [Global] and [the plaintiff] about the amount and scope of the long-distance service being sent by [the plaintiff] through [Global]. [Global] was concerned that [the plaintiff] was violating the amended retail customer agreement and taking unfair advantage to exploit [Global].

         ‘‘The result of [the plaintiff] pushing so many longdistance calls through the . . . circuit[s] [was] that there were increasing numbers of service problems . . . . The calls would not complete . . . would continue to ring, or the call would result in a fast busy signal or dead air. These issues were brought to [Global's] attention by way of ‘trouble tickets.' [Global] was receiving trouble tickets from many of the [plaintiff's] calls. [The defendant] was authorized by the purchase agreement . . . to open trouble tickets directly with [Global] if [the defendant] had service problems. During January, 2007, [the defendant] filed trouble tickets with [Global] because of service problems with calls being routed through the . . . circuit to their service. These service issues included calls not completing, fast busy signals, [and] intermittent no ring back . . . .

         ‘‘[Global] had grown concerned with [the plaintiff's] activities by January, 2007. [The plaintiff] had not been current with payment [for] the long-distance services being provided by [Global]. By [January], 2007, [the plaintiff] owed [Global] approximately $2 million . . . . In addition, [the plaintiff] was attempting to run more and more calls through . . . circuits, which . . . was creating service problems with the calls.

         ‘‘These issues [regarding traffic and service] patterns being exploited by [the plaintiff], as well as [the plaintiff] exceeding its credit limits with [Global], were memorialized in a letter from [Global] to [Vlahos] on January 11, 2007. . . . [Global] also put [the plaintiff] on notice that if a resolution of these problems was not achieved, [Global] would terminate all services to [the plaintiff] on January 25, 2007.

         ‘‘Between January 11, 2007, and January 25, 2007, [the plaintiff] continued to increase international and domestic long-distance traffic through the . . . circuits, causing additional service problems . . . . [Global] reacheda point when it began to ‘throttle down' [the plaintiff's] access to its service. By [January 17, 2007], [Global] had blocked any further service to [the plaintiff] for international long-distance calls. The domestic long-distance calls were being pushed through at an excessive rate by [the plaintiff] after [that date]. This influx of domestic long-distance calls caused major service issues for [Global]-192, 000 [calls would not complete] on [January 19, 2007] and 142, 000 [calls would not complete] on January [20 and 21, 2007]. [Global] blocked all calls generated through [the plaintiff] on January 26, 2007. . . .

         ‘‘On January 25, 2007, [Egan, who had since become the defendant's] chief financial officer, sent a letter to [the plaintiff] advising [it] of multiple service issues for long-distance calls being transmitted through [the] circuit. [The defendant] complained of ‘dead air, which eventually goes to a fast busy.' [The defendant] requested assistance from [the plaintiff] to resolve these issues; otherwise, [the defendant] would not be committed by [the purchase agreement] to pay the [minimum usage charge] for January 2007, due to unacceptable service quality. . . .

         ‘‘Also, on January 26, 2007, [Global] sent a letter to [the plaintiff] terminating their relationship, claiming that [the plaintiff was in breach of contract] because [it] was reselling the services . . . in contravention of [the retail customer agreement]. . . . This termination notice . . . was [faxed to the defendant's] switch room [by Global]. [Global] had been given the . . . switch room fax number as an additional fax number for [the plaintiff]. This number no longer was [the plaintiff's], so [the defendant's] receipt of this notice from [Global] was informative but unintended.

         ‘‘As a result of the termination of service by [Global], which shut down all of [the plaintiff's] circuits, [the plaintiff] on January 29, 2007, filed a voluntary . . . petition [pursuant to chapter 11 of the United States Bankruptcy Code; see 11 U.S.C. § 1101 et seq.; in the United States Bankruptcy Court for the Southern District of New York]. Because of the bankruptcy stay provisions, the filing of the bankruptcy petition compelled [Global] to reconnect [the] circuits by January 31, 2007.

         ‘‘On February 5, 2007, [the defendant] notified [the plaintiff] by letter . . . that it was exercising its right to terminate their [contractual relationship] . . . pursuant to [§] 7 (b) of the purchase agreement. This section provided that either party may terminate the [purchase] agreement upon thirty days written notice if either party had certain events take place, including the filing of a voluntary bankruptcy petition. ...


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