Franquicias CallNet SL v. Vertecto Services LLC

Filing 52

MEMORANDUM. Signed by Judge Gregory M. Sleet on 8/21/2015. (mdb)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE

FRANQUICIAS CALLNET SL,
Plaintiff,
v.

VERTECTO SERVICES, LLC,
Defendant.

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C.A. No. 13-459-GMS

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MEMORANDUM

I.

INTRODUCTION
The plaintiff, Franquicias CallNet SL ("CallNet"), filed a Complaint against Defendant

Vertecto Services, LLC ("Vertecto") on March 21, 2013. (D.I. 1.) In its Complaint, CallNet
alleges Breach of Agreement, Conversion, Breach of Fiduciary Duty, and violations of the
Racketeer Influenced and Corrupt Organizations ("RICO") Act, 18 U.S.C. § 1961 et seq. (Id.) On
March 10, 2015, following completion of discovery, 1 CallNet filed a Motion for Summary

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Counsel for Vertecto requested additional discovery in the body of the Answering Brief to CallNet's Motion
for Summary Judgment under Rule 56(d). (See D.I. 46 at iJ 28.) Rule 56(d) was previously numbered as 56(f) and
the court will refer to them interchangeably. Vertecto did not provide an affidavit as required by Rule 56(d). The court
need not decide the issue of constructive compliance. The Third Circuit "generally denies relief under Rule 56(f) if
the purported inadequacy of the record is attributable to the movant's own failure to take advantage of the discovery
period, rather than the other party's lack of cooperation." Bates v. Tandy Corp, 186 Fed. App'x 288, 291 (3d Cir.
2006).
The proffered reasons for Vertecto's failure to comply boil down to a strategic decision and do not amount
to a proper justification for inaction under the rules. As such, the court fmds no good cause to overlook Vertecto's
dilatory activities and re-open discovery. See Dowling v. City ofPhiladelphia, 855 F.2d 136, 139-40 (3d Cir. Aug.
26, 1988) ("This Court has interpreted Rule 56(f) as imposing a requirement that a party seeking further discovery in
response to a summary judgment motion submit an affidavit specifying, for example, what particular information is
sought; how, if uncovered, it would preclude summary judgment; and why it has not previously been obtained.");
Koehnke v. City of McKeesport, 350 F. App'x 720, 723 (3d Cir. Oct. 28, 2009) ("A party that cannot present facts
essential to justify its opposition may-and, indeed, must-show by affidavit, how evidence of such facts would
preclude summary judgment.") (quoting Bradley v. United States, 299 F.3d 197, 206 (3d Cir. 2002)); see also Kop/ove
v. Ford Motor Co., 795 F.2d 15, 18 (3d Cir. 1986) (fmding that party's failure to conduct expert discovery within
given period imposed "obligation to provide the court with a record which affirmatively demonstrates, with specificity,
diligent efforts on his or her part and unusual circumstances which have frustrated those efforts."). Vertecto admits

Judgment pursuant to Federal Rule of Civil Procedure 56(c) (D.I. 38), asserting that Vertecto
cannot present any evidence on motion or at trial. 2 (D.I. 39 at 8.) Presently before the court is
CallNet's Motion for Summary Judgment. (D.I. 38.) For the reasons that follow, the court will
grant CallNet's motion.

II.

BACKGROUND
CallNet is a legal entity organized and existing under the laws of the country of Spain, with

its principal place of business in Madrid, Spain. (D.I. 40, if 3.) CallNet functions as a router of
telecommunication to smaller telecommunication companies that do not have the ability to
efficiently obtain routing of calls through owners of major telecoillmunication infrastructures. (Id.,

if 4.) CallNet's customers route calls to CallNet, and CallNet then routes the calls to the
destinati<?n, which is usually the local telecommunication provider. (Id., if 5.)
Vertecto is a Delaware limited liability company. (D.I. 5, if 2.) Vertecto provides an online
Transaction Protection System ("TPS").
telecommunication capacity to

Vertecto's system allows buyers and sellers of

enter into "Projects" online, by which sellers sell

telecommunication minutes to buyers. (Id.,

if 6.) The Vertecto system is designed such that the

buyers place funds into escrow with Vertecto, and then, upon the seller providing the
telecommunication minutes, the escrow is disbursed to the seller. (Id., i"f 9.)
In August 2012, CallNet and a customer, Azure Telecom ("Azure") entered into an

agreement for CallNet to provide communication transmissions for Azure and its customers. (D.I.
40, if 7.) CallNet and Azure agreed to use the services ofVertecto to route payment between the

that it chose not to pursue discover of its former president-Jeffrey Ellentuck-to avoid making him hostile in the
future. (D.I. 45-2, '1J 20.) Vertecto made a strategic decision and must now deal with the consequences of that choice.
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CallNet's Motion for Summary Judgment pertains to two of the four claims at issue in its ComplaintCounts I and II. Count ID is for "Breach of Fiduciary Duty" and Count IV claims a violation of RICO, 18 U.S.C. §
1962(c).

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entities. (Id.,

if 10.) CallNet established an account with Vertecto and signed the standard

agreement found on the Vertecto website. (D.I. 42 at 2-17.) The escrow system involving Azure
and CallNet as trading partners on Vertecto's system functioned normally until November 21,
2012 at which point two issues arose. (D.1. 40, if 17.) First, records show that CallNet uploaded
an invoice for $94,370.19 directed to Azure. (D.1. 42 at 30.) While the electronic ledger shows a
"Customer Withdrawal" on November 21, 2012 in the amount of $94,350.00 plus fees the funds
were never wired or otherwise transferred by Vertecto to CallNet. (D.I. 40, iii! 19-20.) A second
dispute arose involving a separate sub-project in which Azure had made $87,692.70 available in
escrow to compensate CallNet for its services. (Id.,

if 22; D.I. 42 at 47.) CallNet was entitled to

$73,003.95 based on services it had provided to Azure. (D.1. 42 at 31.) When CallNet attempted
to upload the appropriate invoice it found that it was "locked out" of the Vertecto website. (D.I.
40, if 24.) CallNet requested that Azure wire the money directly to CallNet but could not do so
because Vertecto had similarly "locked" Azure from the website. (Id., if 25.)
III.

STANDARD OF REVIEW
Federal Rule of Civil Procedure 56(c) provides for summary judgment when "the

pleadings, depositions, answers to interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any material fact and that the moving
party is entitled to a judgment as a matter of law." See also Celotex Corp. v. Catrett, 477 U.S.
317, 322 (1986). The moving party bears the burden of proving that no genuine issue of material
fact exists. See Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 585 n.10
(1986). A fact is material if it "could affect the outcome" of the proceeding. Lamont v. New
Jersey, 637 F.3d 177, 181 (3d Cir. 2011). There is a genuine issue "if the evidence is sufficient to

permit a reasonable jury to return a verdict for the non-moving party." Id. When determining

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whether a genuine issue of material fact exists, the district court must view the evidence in a light
most favorable to the nonmoving party and draw inferences in that party's favor. See Wishkin v.
Potter, 476 F.3d 180, 184 (3d Cir. 2007). If the moving party is able to demonstrate an absence
of disputed material facts, the nonmoving party must then "come forward with 'specific facts
showing that there is a genuine issue for trial."' Matsushita, 475 U.S. at 587 (citing FED. R. CN.
P. 56(e)).
Importantly, the mere existence of some evidence in support of the nonmoving party will
not prove sufficient for denial of a summary judgment motion. See Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 249 (1986). Rather, the nonmoving party must present enough evidence to
enable a jury to reasonably find for it on that issue. Id. Specifically, the party opposing summary
judgment "must present more than just 'bare assertions, conclusory allegations or suspicions' to
show the existence of a genuine issue." Podobnik v. U.S. Postal Serv., 409 F.3d 584, 594 (3d Cir.
2005) (quoting Celotex Corp., 4 77 U.S. at 325). Thus, a nonmoving party asserting that a material
fact is in dispute must support this assertion by: "(A) citing to particular parts of materials in the
record, including depositions, documents, electronically stored information, affidavits or
declarations, stipulations, ... admissions, interrogatory answers, or other materials; or (B) showing
that the materials cited [by the opposing party] do not establish the absence ... of a genuine dispute
.... " See FED. R. Cw. P. 56(c)(l). If the nonmoving party fails to make a sufficient showing on
an essential element of its case for which it has the burden of proof, the moving party is entitled to
judgment as a matter oflaw. See Celotex Corp., 477 U.S. at 322.

IV.

DISCUSSION
As a preliminary matter, CallNet asserts that Vertecto cannot present any evidence on

motion or at trial. (D.I. 39 at 8.) Vertecto failed to comply with its discovery obligations and

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produced next to no documents in the case. 3 Inexcusably, Vertecto failed to identify any person
with knowledge. As to the substantive claims, CallNet asserts that it is entitled to summary
judgment under Count I (Breach of Agreement) and Count II (Conversion). Vertecto argues that
CallNet's supporting documents are inadmissible and cannot be considered on a motion for
summary judgment. (D.I. 45 at 7-9.)
The court examines the parties' arguments below.

A.

Vertecto Breached its Agreement with CallNet

Vertecto twice breached the parties' agreement.

First by failing to wire the sum of

$94,350.00 to CallNet. (D.I. 39 at 10.) Second, by precluding access to CallNet to recover its
agreed-upon payment by Azure escrowed on the Vertecto TPS in the amount of $73,003.95. (Id
at 10-11.)

As discussed above, Vertecto provides no admissible evidence to support the finding

of a genuine issue of material fact. Accordingly, the court concludes that CallNet has established
it is owed under the contract damages in the amount of $167,353.95 plus prejudgment interest
pursuant to 6 Del. C. § 2301.

B.

Vertecto Converted CallNet's Funds

Conversion is the "act of dominion wrongfully exerted over the property of another, in
denial of his right, or inconsistent with it." Triton Const. Co. v. E. Shore Elec. Servs., Inc., 2009
WL 1387115, at *24 (Del. Ch. May 18, 2009) affd, 988 A.2d 938 (Del. 2010) (citations omitted).
A claim of conversion is proper if the plaintiff can establish that it made a demand for the property
and the defendant refused to deliver. Id; see also CIT Comm. Finance Corp. v. Level 3 Comm.,

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Vertecto attached two inadmissible pieces of evidence in its opposition .brief to CallNet's Motion for
Summary Judgment. First, Vertecto filed a declaration of its litigation counsel containing legal contentions, not
admissible evidence that even ifthe court were to consider misstates key dates. (D.I. 45-2.) Second, Vertecto attached
HSBC Bank records first presented in its answering brief in opposition. Vertecto failed to disclose the documents to
CallNet at any point during discovery. The court concludes that this failure was unjustified. See F.R.C.P. 37(c)(l).

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LLC, 2008 WL 2586694, at *2 (Del. Super. June 6, 2008); Drug, Inc. v. Hunt, 168 A. 87, 94 (Del.
1933).
As previously stated, there is no genuine dispute as to any material fact. Vertecto' s belated
attempts to include undisclosed evidence have failed. CallNet provides evidentiary support for its
conversion claim and further delay is unwarranted.

Accordingly, the court concludes that

summary judgment is appropriate as to CallNet's breach of agreement and conversion claims
because there is no evidence in the record to support V ertecto' s defense.
V.

CONCLUSION
For the aforementioned reasons, the court will grant CallNet's Motion for Summary

Judgment (D.I. 38.)

Dated:

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