AVAYA INC. v. TELECOM LABS, INC. et al

Filing 482

OPINION. Signed by Judge Joseph E. Irenas on 4/26/2012. (TH, )

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

AVAYA INC.

HONORABLE JOSEPH E. IRENAS
Plaintiff,

CIVIL ACTION NO. 06-2490
(JEI/KMW)

v.

OPINION

TELECOM LABS, INC.,
TEAMTLI.COM CORP., CONTINUANT,
INC., SCOTT GRAHAM, DOUGLAS
GRAHAM, and BRUCE SHELBY,
Defendants.

APPEARANCES:
ARCHER & GREINER, PC
Robert T. Egan
One Centennial Square
Haddonfield, NJ 08033
Counsel for Plaintiff
K&L GATES LLP
Anthony P. Larocco
One Newark Center
10th Floor
Newark, NJ 07201
and
KIRPATRICK & LOCKHART, PRESTON, GATES, ELLIS, LLP
David S. Kwon
One Newark Center
Tenth Floor
Newark, NJ 07102
and
HUGHES, HUBBARD & REED, LLP
Eric K. Blumenfeld
101 Hudson Street
Suite 3601
Jersey City, NJ 07302
Counsel for Defendants
IRENAS, Senior District Judge:

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Presently before the Court are four motions for
reconsideration of three partial summary judgment opinions.

(See

Dkt. Nos. 440, 442, 443, 446) In addition, Avaya moves to certify
an interlocutory appeal. (See Dkt. No. 434) For the following
reasons, the motions will be denied.

I.
This case involves the Defendants’ access to proprietary
maintenance software that Plaintiff Avaya, Inc. (“Avaya”) and its
predecessors developed and embedded in complex telephony systems
that they designed, manufactured, and sold.1 (Def.’s Statement of
Undisputed Material Facts Vol. I (“SUMF”) ¶¶ 1, 7) There are two
types of telecommunications systems: (1) “Private Branch
Exchange” systems, also known as “PBX” systems; and (2)
“Predictive Dialing System” platforms, also known as “PDS”
platforms.
PBX systems are telephone switching systems containing
hardware, firmware, and software. PBX systems are used by mid-tolarge sized companies and other enterprises to connect their
voice communications to the public voice networks. (Fourth
Amended Complaint ¶ 16) Avaya manufactures, sells, and services

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For a more detailed recitation of the factual and procedural history
see Judge Brown’s Opinions and Orders granting in part and denying in part
Avaya’s motions for partial summary judgment. (See Dkt Nos. 415, 426-31)
Familiarity with those Opinions and Orders are presumed.

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PBX systems. According to Counterclaimants, the PBX systems
manufactured, sold, and serviced by Avaya and its predecessors
are commonly referred to as the “Definity” platform.
(Counterclaims ¶ 1) Other manufacturers currently produce and
sell competing PBX systems. (Id. ¶¶ 1, 37)
PDS platforms are hardware and software systems that
“automate dialing and increase dialing efficiency by predicting
call outcomes based upon a number of factors.” (Id. ¶ 50) In
1999, Avaya’s predecessor, Lucent, acquired a company that
manufactured and sold PDS.2 After the acquisition, Lucent began
to manufacture and sell the PDS platform. (Id. ¶ 52) As a result
of its spinoff from Lucent, Avaya took over the manufacture and
sales of the PDS platform. (Id. ¶ 57)
Avaya initiated this action on June 2, 2006 by filing a
complaint against Telecom Labs, Inc. (“TLI”), Continuant, Inc.
(“Continuant”), and TeamTLI.com Corp. (“Team”), asserting ten
causes of action alleging, among other things, that TLI, Team,
and Continuant gained unauthorized access to Avaya systems. (Dkt.
No. 1)
On September 21, 2009, Defendants ultimately counterclaimed
with 13 causes of action: (1) monopolization in the private

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In October 1996, American Telephone and Telegraph Company (“AT&T”)
spun off various telecommunication business units to form Lucent Technologies,
Inc. (“Lucent”). (Counterclaims ¶ 41) In September of 2000, Lucent spun off
its “enterprise networking group” to form Avaya. (Counterclaims ¶ 1, 56)

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branch exchange (“PBX”) market in violation of Section 2 of the
Sherman Act; (2) attempted monopolization in the PBX market in
violation of Section 2 of the Sherman Act; (3) tying PBX
maintenance and patches in violation of Section 1
of the Sherman Act; (4) tying PBX maintenance and upgrades in
violation of Section 1 of the Sherman Act; (5) monopolization in
the PDS market in violation of Section 2 of the Sherman Act; (6)
attempted monopolization in the PDS market in violation of
Section 2 of the Sherman Act; (7) tying PDS maintenance and
patches in violation of Section 1 of the Sherman Act; (8) typing
PDS maintenance and upgrades in violation of Section 1 of the
Sherman Act; (9) illegal conspiracy in violation of Section 1 of
the Sherman Act; (10) tortious interference with
business/contractual relations; (11) tortious interference with
prospective business or economic advantage; (12) injurious
falsehood/trade libel or slander; and (13) breach of the implied
covenant of good faith and fair dealing.
In Opinions and Orders dated January 25, 2012, Judge Brown
denied Avaya’s motion for summary judgment on Counterclaimants’
first through ninth counts except to the extent that the third
count alleged “tying as to SS (Software Support) and patches” and
the fourth count alleged “tying of PBX upgrades and maintenance.”
(See Opinion at 33-34, Dkt. No. 430) Judge Brown further granted
Avaya’s motions for summary judgment on counterclaimants’ tenth

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through thirteenth counts.

(See Dkt. Nos. 427, 429) On April 20,

2012, this case was reassigned to this Court.

II.
A motion for reconsideration may be granted on the
ground that (1) an intervening change in the controlling law has
occurred; (2) evidence not previously available has become
available; or (3) vacating the Order is necessary to correct a
clear error of law or manifest injustice.

North River Ins. Co.

v. CIGNA Reinsurance Co., 52 F.3d 1194, 1218 (3d Cir. 1995).

The

parties argue that Judge Brown’s Opinions contain clear errors of
law or fact.

III.
Both Avaya and Counterclaimants have each filed two separate
motions for reconsideration that attack various holdings of Judge
Brown’s three Opinions granting in part and denying in part
Avaya’s four motions for partial summary judgment.

A.
Avaya’s first motion seeks reconsideration based on a clear
error of law because (1) supracompetitive pricing is a necessary
element to the existence of a relevant single-brand aftermarket
but was treated only as a factor in the Opinion’s analysis; (2)
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customer reliance on the ability to use Independent Service
Providers (“ISPs”) for post-purchase equipment maintenance was a
necessary element to establish the relevant aftermarket but was
treated only as a factor in the Opinion’s analysis; (3)
Counterclaimants failed to present evidence that customers based
their decision to purchase PBX or PDS from Avaya based on the
ability to obtain equipment maintenance from ISPs. (Dkt. No. 440)
With respect to the first and second arguments, Judge Brown
did not commit clear error in holding that both supracompetitive
pricing and customer reliance are merely factors in determining
the existence of th relevant single-brand aftermarket. See
Harrison Aire, Inc. v. Aerostar Intern., Inc., 423 F.3d 374, 384
(3d Cir. 2005) (noting that many non-dispositive factors affect
the Kodak analysis including supracompetitive pricing).
Therefore, the Court will not grant the Motion on this basis.
Moreover, Judge Brown directly addressed Avaya’s third
argument. “[T]he record indicates that some PBX or PDS owners did
expect to, or indeed did enter into, maintenance contracts with
ISPs.” (Opinion at 24, Dkt. No. 430) Mere disagreement with the
holding of an opinion is an issue to be raised on appeal, not on
a motion for reconsideration. Accordingly, Avaya has failed to
establish a clear error of law and Avaya’s first motion will be
denied.

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B.
Avaya’s second motion for reconsideration argues clear error
insofar as (1) Avaya’s conduct cannot be deemed anticompetitive
and (2) Counterclaimants failed to establish antitrust injury or
causation. (Dkt. No. 443)
As to the first argument, Avaya has not persuaded this Court
that Judge Brown clearly erred. Indeed, one section of Avaya’s
brief is entitled “Counterclaimants Cannot Meet Their Burden.”
(Br. Avaya 11, Dkt. No. 444-1) However, it is Avaya - not
Counterclaimants - that carry a heavy burden to succeed on a
motion for reconsideration. Avaya falls well-short of carrying
that burden.
Avaya’s second argument fails because it again attempts to
elevate supracompetitive pricing to a necessary element. Judge
Brown did not clearly err in holding that supracompetitive
pricing is but a non-dispositive factor in the analysis. See
Harrison Aire, 423 F.3d at 384. Accordingly, Avaya’s second
motion for reconsideration will be denied.

C.
Counterclaimants’ first motion for reconsideration argues
that the Court committed clear error in dismissing
Counterclaimants’ tenth and eleventh claims for tortious
interference because (1) the Court applied the wrong causation
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standard under New Jersey law and (2) the Court impermissibly
disregarded the opinion of Counterclaimants’ expert and made
factual inferences in favor Avaya. (Dkt. No. 446)
First, Counterclaimants argue that the Court applied a “sole
cause” standard when New Jersey law merely requires but-for
causation. Counterclaimants further argue that in situations
where multiple but-for causes could independently cause the harm,
courts must apply the substantial factor test. However,
Counterclaimants candidly acknowledge that no New Jersey case has
discussed whether the substantial factor test applies to claims
for tortious interference. (Br. Counterclaimants at 7, Dkt. No.
447) A clear error of law cannot be made where the Court declines
to extend the law to accommodate a party’s argument.
Counterclaimants next argue that the Court impermissibly
disregarded the expert opinion of Glenn Pomerantz and decided
issues of fact in favor of Avaya. These facts, Counterclaimants
argue, had they been considered, would have established
causation. This Court disagrees. Judge Brown did not disregard
facts, but decided that the record identified “multiple reasons
why a PBX or PDS customer chose not to enter into a maintenance
contract with TLI or Continuant.” (Opinion at 21, Dkt. No. 426)
No one reason identified by Counterclaimants rose to the level of
but-for causation. Far from disregarding facts, Judge Brown
applied the facts to the legal standard and determined that

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Counterclaimants had failed to carry their burden with respect to
causation. Therefore, Judge Brown did not commit a clear error
and Counterclaimants’ first motion for reconsideration will be
denied.

D.
Counterclaimants’ second motion for reconsideration argues
that the Court committed clear error in dismissing
Counterclaimants’ twelfth and thirteenth claims for trade libel
because (1) the Court applied the wrong special damages causation
standard and (2) the Court should not have disregarded
Pomerantz’s expert opinion. (Dkt. No. 442)
Counterclaimants first argue that the Court should have
applied the substantial factor test from Patel v. Soriano, 369
N.J.Super. 192, 248 (App.Div. 2004). Instead, the Court applied
“the natural and direct result” standard of causation from
Mayflower Transit, LLC v. Prince, 314 F.Supp.2d 362, 378 (D.N.J.
2004). Considering both causation standards have been applied to
trade libel claims in this jurisdiction, Judge Brown did not
clearly err by applying the natural and direct result standard
here.
Counterclaimants next argue that the Court should not have
disregarded the expert opinion and report of Pomerantz absent a
Daubert hearing. Counterclaimants contend that Pomerantz’s report

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provides ample basis to show causation based on Avaya’s allegedly
unlawful misrepresentations to customers. Contrary to
Counterclaimants’ assertions, however, the Court was able to
avoid the admissibility issue because several factors fueled
former and potential customers’ decisions to seek maintenance
contracts with parties other than Counterclaimants. (Opinion at
18, Dkt. No. 428) Therefore, Judge Brown held that even if
Pomerantz’s report were admissible, the allegedly false
publication would not have naturally and directly caused the
alleged special damages. Accordingly, the Court did not commit a
clear error and Counterclaimants’ second motion for
reconsideration will be denied.

IV.
Avaya seeks to certify two legal issues for interlocutory
appellate review:
1. Can an antitrust claimant establish the presence
of an economically relevant single-brand “aftermarket”
for
equipment
maintenance
without
evidence
of
supracompetitive pricing of such maintenance?
2.
Can
an
antitrust
claimant
establish
an
economically relevant single-brand aftermarket for
equipment maintenance without proof of supracompetitive
pricing and without proof that owners reasonably relied
at the time of equipment purchase on the availability of
a maintenance alternative unaffected by the challenged
conduct?
(Br. Avaya at 1, Dkt. No. 435-1)
To exercise the discretion to certify an interlocutory
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appeal, the district court’s order must: “(1) involve a
controlling question of law, (2) offer substantial ground for
difference of opinion as to its correctness, and (3) if appealed
immediately materially advance the ultimate termination of the
litigation.”

Katz v. Carte Blanche Corp., 496 F.2d 747, 754 (3d

Cir. 1974) (internal quotations omitted); see also 28 U.S.C. §
1292(b). “The decision whether or not to grant certification is
entirely within the district court’s discretion, and even if all
three criteria under Section 1292(b) are met, the district court
may still deny certification.” Krishanthi v. Rajaratnam, 2011 WL
1885707, *2 (D.N.J. 2011) (internal quotations omitted) (quoting
Morgan v. Ford Motor Co., 2007 WL 269806, *2 (D.N.J. 2007).
Both issues Avaya seeks to certify for review presume that
Counterclaimants have failed to present - and will later be
barred from presenting - evidence of supracompetitive pricing in
the relevant aftermarket. Support for this view comes from a
single line of Judge Brown’s Opinion: “As to the listed factors,
although Counterclaimants did not present sufficient evidence of
supracompetitive pricing, they did present evidence of the other
factors.”

(Opinion at 23, Dkt. No. 430) (parenthetical omitted)

This failure, Avaya argues, requires dismissal of the antitrust
claims.
Counterclaimants respond by arguing that (1) Avaya did not
raise the issue of supracompetitive pricing in its motion for

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summary judgment and (2) at the time briefing closed on Avaya’s
first motion for summary judgment, discovery had not yet expired
for expert witnesses. Therefore, Counterclaimants argue they
would not be precluded from establishing supracompetitive pricing
at trial, even if such proof were required to establish the
claim. This Court agrees.
An interlocutory appeal is designed to save resources and
expedite the termination of litigation. None of these purposes
would be furthered here by an interlocutory appeal. First, this
Court does not read Judge Brown’s decision to bar evidence of
supracompetitive pricing at trial. Second, if Counterclaimants
establish supracompetitive pricing in the relevant aftermarket at
trial, then the legal issues Avaya proposes to certify for an
interlocutory appeal would be moot. Finally, regardless of the
resolution of the legal issues Avaya seeks to certify, the
remaining claims will nonetheless require the parties to present
many of the same facts at trial. An interlocutory appeal thus
would not conserve significant resources but would only unduly
delay a trial. See Bachowski v. Usery, 545 F.2d 363, 369 (3d Cir.
1976) (“by interdicting most interlocutory appeals, we deprive
litigants of a tool that could possibly be used to harass parties
with lesser resources, and to drive them into submission.”).
Accordingly, this Court declines to exercise its discretion to
certify Avaya’s proposed legal issues for an interlocutory appeal

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and will deny the motion.

IV.
For the reasons set forth above, the parties’ motions will
be denied.

Dated: 4/26/12

/s/ Joseph E. Irenas
JOSEPH E. IRENAS, S.U.S.D.J.

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