KDDI GLOBAL LLC v. FISK TELECOM LLC

Filing 22

OPINION filed. Signed by Judge Brian R. Martinotti on 11/15/2017. (mmh)

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
____________________________________
:
KDDI GLOBAL LLC,
:
:
Civil Action No. 17-5445-BRM-DEA
Plaintiff,
:
:
v.
:
:
OPINION
FISK TELECOM LLC,
:
:
Defendant.
:
____________________________________:
MARTINOTTI, DISTRICT JUDGE
Before the Court are Plaintiff KDDI Global LLC’s (“Plaintiff”) Motion for Permanent
Injunction (ECF No. 5) and Defendant Fisk Telecom LLC’s (“Defendant”) Cross-Motion to
Dismiss the Complaint, pursuant to Federal Rule of Civil Procedure 12(b)(6) (ECF No. 7). All
Motions are opposed. (ECF No. 7 and ECF No. 10.) Pursuant to Federal Rule of Civil Procedure
78(a), the Court heard oral argument on November 15, 2017. 1 For the reasons set forth below,
Defendant’s Motion to Dismiss is GRANTED and Plaintiff’s Motion for Preliminary Injunction
is DISMISSED as MOOT.
I.

BACKGROUND
For the purpose of the Motion to Dismiss, the Court accepts the factual allegations in the

Complaint as true and draws all inferences in the light most favorable to Plaintiff. See Phillips v.
Cty. of Allegheny, 515 F.3d 224, 228 (3d Cir. 2008). Further, the Court also considers any

1

At Oral Argument, the parties informed the Court that they have temporarily stayed their
arbitration pending this decision.
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“document integral to or explicitly relied upon in the complaint.” In re Burlington Coat Factory
Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997) (emphasis in original).
Plaintiff is a limited liability company organized under the laws of the State of Delaware,
with its principle place of business in New Jersey and is wholly owned by KDDI Corporation, a
Japanese corporation with its principal place of business in Japan. (Compl. (ECF No. 1) ¶¶ 1-2.)
Defendant is a limited liability company organized under the laws of the State of New York, with
its principal place of business in New York. (Id. ¶ 3.) All listed members of Defendant are also
residents of the State of New York. (Id. ¶ 4.) Both Plaintiff and Defendant are providers of
international telecommunications service. (Reciprocal Carrier Services Agreement (“Carrier
Agreement”) (ECF No. 1-2, Ex. A, at 1).)
On October 27, 2014, Plaintiff and Defendant entered into the Carrier Agreement, pursuant
to which they agreed to “purchase certain telecommunications services provided” from one
another. (ECF No. 1 ¶ 8 and ECF No. 1-2, Ex. A, at 1.) The Carrier Agreement also contains the
following dispute resolution provisions:
13.1 The Parties desire to resolve disputes arising of or relating to
this Agreement without litigation. Therefore, except for action
seeking a temporary restraining order or an injunction relating to the
purposes of this Agreement, or suit to compel compliance with this
dispute resolution process, the Parties agree to use the following
alternative dispute resolution procedures as the sole remedy with
respect to any controversy or claim arising out of relating to his
Agreement or its breach.
13.2 At the written request of either Party, each Party will appoint a
knowledgeable representative to meet and negotiate in good faith to
resolve any dispute arising out of or relating to this Agreement. The
representatives shall have the discretion to determine the location,
format, frequency and duration of their negotiations, and to utilize
other alternative dispute resolution procedures such as mediation to
assist in the negotiations. All discussions and correspondence
among the representatives shall be treated as confidential
information developed for the purposes of settlement, exempt from

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discovery, and shall not be admissible in the arbitration described
below or in any lawsuit without the agreement of the Parties.
13.3 If the negotiations do not resolve the dispute within sixty (60)
days of the initial written request, the dispute shall be submitted to
binding arbitration by a single arbitrator at the office of the
American Arbitration Association (“AAA”) located in Newark,
New Jersey. The arbitration shall be held in accordance with the
AAA’s commercial Arbitration Rules, as may be applicable to the
dispute. The cost of the arbitration, including the fees and expenses
of the arbitrator(s), shall be shared equally by the parties unless the
arbitration award provides otherwise. Each party shall bear the cost
of preparing and presenting its case. The arbitrator(s) are not
empowered to award damages in excess of compensatory damages
and each Party irrevocably waives any damages in excess of
compensatory damages. Te [sic] Parties agree to undertake all
responsible steps to expedite the arbitration process. Judgment upon
any award rendered by the arbitrator may be entered in any court
having jurisdiction.
(ECF No. 1-2, Ex. A, at 9-10.) Moreover, the Carrier Agreement provides:
15.4 Governing Laws. This Agreement shall be governed by the
laws of the State of New York, without reference to its principles of
conflict of laws. Both parties irrevocably consent and submit to
personal jurisdiction in the courts of the State of New York for all
matters arising under this Agreement.
(Id. at 11.)
From November 16, 2014, through May 15, 2016, Plaintiff and Defendant performed under
their reciprocal portions of the Carrier Agreement. (ECF No. 1 ¶ 12.) The amounts owed by
Defendant were offset against the amounts owed by Plaintiff to Defendant and the net balance was
paid by Defendant. (Id.) “However, after the offsets were applied, [Defendant] refused to pay
invoices dated April 16, 2016, April 16, 2016, April 20, 2016, April 20, 2016, May 1, 2016, and
May 16, 2016.” (Id.) Those payments were allegedly due within seven calendar days of being
invoiced. (Id. ¶ 13.) When Defendant did not respond to Plaintiff’s demands for payment of the
above invoices, Plaintiff filed a Demand for Arbitration on August 1, 2016. (Id. ¶ 14.) On March

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31, 2017, Defendant filed an Answer to Plaintiff’s Demand for Arbitration and Counterclaims
against Plaintiff alleging, in relevant part, tortious interference with contract/business relations and
tortious interference with prospective contractual and business relationships. (Id. ¶ 17 and see
Def.’s Answer to Demand (ECF No. 1-1, Ex. 2).) In response to Defendant’s Answer and
Counterclaims, Plaintiff filed a motion to dismiss the Demand with the Arbitrator, arguing the
tortious interference claims were not covered by the Carrier Agreement, and thus not arbitrable
under the Agreement. (ECF No. 1 ¶ 18 and see Pl.’s Mot. to Dismiss (ECF No. 6, Ex. C).) While
the motion to dismiss was pending before the Arbitrator, Defendant requested, and received an
extension to file an amended demand. (ECF No. 1 ¶ 18.)
On June 19, 2017, Defendant filed an Amended Demand for Arbitration, containing eight
causes of action: (1) breach of the Carrier Agreement; (2) breach of other, unspecified, agreements;
(3) promissory/equitable estoppel; (4) unjust enrichment; (5) gross negligence; (6) negligent
misrepresentation; (7) tortious interference with contract/business relations; and (8) tortious
interference with prospective contractual and business relationships. (Id. ¶¶ 19-20.) Plaintiff
concedes the first six causes of action “are premised on allegations arising out of or related to
[Plaintiff’s] sale of telecommunications services to [Defendant] under the Carrier Agreement.” (Id.
¶ 21.) However, it alleges “[t]he seventh and eighth causes of action . . . allege that [Plaintiff]
tortuously interfered with an unrelated transaction with a third-party: specifically, the alleged
prospective sale of a business to [Defendant] by Locus Telecommunications, LLC (‘Locus’).” (Id.
¶ 22.) Locus is also a wholly owned subsidiary of Plaintiff’s parent company, KDDI Corporation.
(Id. ¶ 23.)
As to the tortious interference with contract/business relations claim, Defendant alleged, in
relevant part:

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144. At all relevant times, [Plaintiff] had knowledge of the
contractual and business relationships and obligations between
[Defendant] and Locus.
145. Despite said knowledge, [Plaintiff] intentionally, improperly,
wrongfully, and tortuously interfered with said contractual and
business relationship by inducing Locus or attempting to induce
Locus to violate or repudiate its contractual and business obligations
to sell its calling card business to [Defendant].
146. Upon information and belief, [Plaintiff], through Ed Kim, CEO
of [Plaintiff], and others, learned of the impending sale of Locus’
calling card division to [Defendant] in or about October 2015.
147. Ed Kim breached the confidentiality provisions of the Carrier
Agreement by sharing [Defendant]’s proprietary and confidential
information with Locus.
148. In addition, [Plaintiff] breached the terms of the Carrier
Agreement by providing inferior services to [Defendant]. [Plaintiff]
did so in order to reduce the amount of traffic sent by [Defendant]
to [Plaintiff].
149. [Plaintiff] then told Locus, among other things, not to sell the
calling card division to [Defendant] because [Defendant]’s traffic
was diminishing. [Plaintiff] also shared [Defendant]’s confidential
information with Locus in breach of the terms of the Carrier
Agreement to further induce and interfere with the sale of the calling
car division to [Defendant].
....
159. [Plaintiff], therefore, interfered with and inflicted injury upon
[Defendant] and [Defendant]’s business, business relationships and
prospective business relationships by its intentional, tortious, and
malicious activities, all of which it undertook by wrongful means,
including, but not limited to, using [Defendant]’s proprietary and
confidential business information without any excuse or
justification.
160. [Plaintiff]’s wrongful interference was not merely an incident
of healthy competition but, rather, a willful effort to misappropriate
information and deceptively using that information to provide for its
own ends.

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(ECF No. 1-1, Ex. 3 ¶¶ 144-49, 159-60.) As to the tortious interference with prospective
contractual and business relationships, Defendant alleged, in relevant part:
164. At all relevant times, [Plaintiff] had knowledge of the
prospective contractual and business relationships and obligations
between [Defendant] and Locus concerning the sale of the calling
card division.
165. Upon information and belief, [Plaintiff], through Ed Kim, CEO
of [Plaintiff], and others, learned of the impending sale of Locus’
calling card division to [Defendant] in or about October 2015.
166. [Plaintiff], through Ed Kim, breached the confidentiality
provisions of the Carrier Agreement by sharing [Defendant]’s
proprietary and confidential information with Locus without any
excuse or justification.
167. In addition, [Plaintiff] breached the terms of the Carrier
Agreement by providing inferior services to [Defendant]. [Plaintiff]
did so in order to reduce the amount of traffic sent by [Defendant]
to [Plaintiff].
(Id. ¶¶ 164-67.)
On July 26, 2017, Plaintiff filed a Complaint and a Motion for a Temporary Restraining
Order (“TRO”) and Preliminary Injunction. (ECF No. 1.) Plaintiff’s Motion for a TRO and
Preliminary Injunction sought to enjoin the arbitration of Defendant’s tortious interference
counterclaims in his Amended Demand. (ECF No. 1-3.) On that same day, the Court denied
Plaintiff’s Motion for temporary restraints, directed Plaintiff to re-file the motion as a formal
motion on the Court Docket, and asked Defendant to respond to Plaintiff’s Motion for a
Preliminary Injunction. (ECF No. 4.) On July 26, 2017, Plaintiff re-filed its motion as a Motion
for Preliminary Injunction. (ECF No. 5.) On September 8, 2017, in response to the Motion for
Preliminary Injunction, Defendant filed an opposition and Cross-Motion to Dismiss. (ECF No. 7.)

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II.

LEGAL STANDARDS
A. Motion to Dismiss
In deciding a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), a

district court is “required to accept as true all factual allegations in the complaint and draw all
inferences in the facts alleged in the light most favorable to the [plaintiff].” Phillips, 515 F.3d at
228. “[A] complaint attacked by a . . . motion to dismiss does not need detailed factual allegations.”
Bell Atl. v. Twombly, 550 U.S. 544, 555 (2007). However, the Plaintiff’s “obligation to provide
the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and conclusions, and a
formulaic recitation of the elements of a cause of action will not do.” Id. (citing Papasan v. Allain,
478 U.S. 265, 286 (1986)). A court is “not bound to accept as true a legal conclusion couched as a
factual allegation.” Papasan, 478 U.S. at 286. Instead, assuming the factual allegations in the
complaint are true, those “[f]actual allegations must be enough to raise a right to relief above the
speculative level.” Twombly, 550 U.S. at 555.
“To survive a motion to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim for relief that is plausible on its face.’” Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 570). “A claim has facial plausibility when the
pleaded factual content allows the court to draw the reasonable inference that the defendant is
liable for misconduct alleged.” Id. This “plausibility standard” requires the complaint allege “more
than a sheer possibility that a defendant has acted unlawfully,” but it “is not akin to a ‘probability
requirement.’” Id. (citing Twombly, 550 U.S. at 556). “Detailed factual allegations” are not
required, but “more than ‘an unadorned, the defendant-harmed-me accusation” must be pled; it
must include “factual enhancements” and not just conclusory statements or a recitation of the
elements of a cause of action. Id. (citing Twombly, 550 U.S. at 555, 557).

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“Determining whether a complaint states a plausible claim for relief [is] . . . a contextspecific task that requires the reviewing court to draw on its judicial experience and common
sense.” Iqbal, 556 U.S. at 679. “[W]here the well-pleaded facts do not permit the court to infer
more than the mere possibility of misconduct, the complaint has alleged—but it has not
‘show[n]’—‘that the pleader is entitled to relief.’” Id. at 679 (quoting Fed. R. Civ. P. 8(a)(2)).
While as a general rule, a court many not consider anything beyond the four corners of the
complaint on a motion to dismiss pursuant to 12(b)(6), the Third Circuit has held “a court may
consider certain narrowly defined types of material without converting the motion to dismiss [to
one for summary judgment pursuant under Rule 56].” In re Rockefeller Ctr. Props. Sec. Litig., 184
F.3d 280, 287 (3d Cir.1999). Specifically, courts may consider any “document integral to or
explicitly relied upon in the complaint.” In re Burlington Coat Factory Sec. Litig., 114 F.3d at
1426.
B. Preliminary Injunction
“Preliminary injunctive relief is an ‘extraordinary remedy, which should be granted only
in limited circumstances.’” Ferring Pharms., Inc. v. Watson Pharms., Inc., 765 F.3d 205, 210 (3d
Cir. 2014) (quoting Novartis Consumer Health, Inc. v. Johnson & Johnson-Merck Consumer
Pharms. Co., 290 F.3d 578, 586 (3d Cir. 2002)). “A plaintiff seeking a preliminary injunction must
establish that he is [1] likely to succeed on the merits, [2] that he is likely to suffer irreparable harm
in the absence of preliminary relief, [3] that the balance of equities tips in his favor, and [4] that
an injunction is in the public interest.” Ferring, 765 F.3d at 210 (quoting Winter v. Natural
Resources Defense Council, Inc., 555 U.S. 7, 20 (2008)). The movant bears the burden of showing
these four factors weigh in favor of granting the injunction, and a failure to establish any one factor
will render a preliminary injunction inappropriate. Id.

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III.

DECISION
A. Motion to Dismiss
Defendant argues Plaintiff’s Complaint should be dismissed on four grounds: (1) the

Carrier Agreement contains a forum selection clause mandating that any disputes must be brought
in New York State Court; (2) New York and New Jersey law require arbitration of Defendant’s
tortious interference claims; (3) the question of arbitrability should be decided by the Arbitrator;
and (4) Plaintiff waived its right to judicial determination of arbitrability by affirmative
participation in the arbitration. (See ECF No. 6.) Plaintiff argues venue is proper in the District of
New Jersey because the forum selection clause in the Carrier Agreement is permissive, not
mandatory. (ECF No. 10 at 2-6.) Plaintiff further contends the Court is to decide issues of
arbitrability and that tortious interference claims are outside the scope of the Carrier Agreement’s
arbitration clause. (See id. at 6-11.) Lastly, Plaintiff argues Defendant’s waiver argument is
misplaced and raised in bad faith. (Id. at 11-13.)
Defendant does not contend Plaintiff failed to meet its burden of stating a claim, but rather
that the arbitration provision in the Carrier Agreement requires the claim to be arbitrated. Indeed,
the parties agree the Carrier Agreement’s arbitration provision is valid, but disagree as to whether
the agreement covers Defendant’s tortious interference claims. Because the Court finds the issue
of arbitrability is to be decided by the Arbitrator, it need not determine whether this matter should
have been brought in New York State Court or whether Plaintiff waived its right to judicial
determination of arbitrability by affirmative participation in the arbitration.
Generally, pursuant to the Federal Arbitration Act (“FAA”), the issue of arbitrability
should be decided by the courts. First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943-45
(1995); Contec Corp. v. Remote Solution, Co., 398 F.3d 205, 208 (2d Cir. 2005). “However, the

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question of arbitrability is one for an arbitrator and not for the courts if there is ‘clear and
unmistakable evidence’ that the parties intended to submit the question for arbitration.” Offshore
Expl. & Prod. LLC v. Morgan Stanley Private Bank, N.A., 986 F. Supp. 2d 308, 315 (S.D.N.Y.
2013), aff’d, 626 F. App’x 303 (2d Cir. 2015) (quoting Contec Corp., 398 F.3d at 208); see
Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002). New York State law, which applies
to the contracts in this case, follows the same rules with respect to the presumption relating to
arbitrability. 2 Offshore Expl. & Prod. LLC, 986 F. Supp. 2d at 315; Shaw Grp. Inc. v. Triplefine
Int’l Corp., 322 F.3d 115, 121 (2d Cir. 2003) (“New York law follows the same rule, i.e., it
acknowledges the ‘well settled proposition that the question of arbitrability is an issue generally
for judicial determination,’ but at the same time it recognized an ‘important legal and practical
exception’ when parties ‘evince[] a “clear and unmistakable” agreement to arbitrate arbitrability.’”
(quoting Smith Barney Shearson Inc. v. Sacharow, 689 N.E.2d 884, 886 (1997)).
When “parties explicitly incorporate [into arbitration agreements] rules that empower an
arbitrator to decide issues of arbitrability, the incorporation serves as clear and unmistakable
evidence of the parties’ intent to delegate such issues to an arbitrator.” Contec, 398 F.3d at 208;
see also Shaw Grp. Inc., 322 F.3d at 121; In re Smith Barney Shearson Inc. v. Sacharow, 689
N.E.2d 884, 888 (N.Y. 1997); Life Receivables Trust v. Goshawk Syndicate 102 at Lloyd’s, 66
A.D.3d 495 (N.Y. App. Div. 2009). In Contec, the Court of Appeals held the parties had clearly
and unmistakably demonstrated their intent to let an arbitrator determine arbitrability by stating
that arbitration should proceed “in accordance with the Commercial Arbitration Rules of the
American Arbitration Association” because the American Arbitration Association Commercial

2

The Carrier Agreement provides that it “shall be governed by the laws of the State of New York,
without reference to its principles of conflict of laws.” (ECF No. 1-2 at 11.) Indeed, the parties do
not dispute New York law applies.
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Arbitration Rule 7 commits threshold questions of arbitrability to the arbitrator. 398 F.3d at 208–
11.
The arbitration provision at issue in this case provides:
13.3 If the negotiations do not resolve the dispute within sixty (60)
days of the initial written request, the dispute shall be submitted to
binding arbitration by a single arbitrator at the office of the
American Arbitration Association (“AAA”) located in Newark,
New Jersey. The arbitration shall be held in accordance with the
AAA’s Commercial Arbitration Rules, as may be applicable to the
dispute. The cost of the arbitration, including the fees and expenses
of the arbitrator(s), shall be shared equally by the parties unless the
arbitration award provides otherwise. Each party shall bear the cost
of preparing and presenting its case. The arbitrator(s) are not
empowered to award damages in excess of compensatory damages
and each Party irrevocably waives any damages in excess of
compensatory damages. Te [sic] Parties agree to undertake all
responsible steps to expedite the arbitration process. Judgment upon
any award rendered by the arbitrator may be entered in any court
having jurisdiction.
(ECF No. 1-2, Ex. A, at 9-10 (emphasis added).) Most importantly, the arbitration provision states
“[t]he arbitration shall be held in accordance with the AAA’s Commercial Arbitration Rules, as
may be applicable to the dispute.” Rule 7(a) of the AAA’s Commercial Arbitration Rules provides:
“The arbitrator shall have the power to rule on his or her own jurisdiction, including any objections
with respect to the existence, scope, or validity of the arbitration agreement or to the arbitrability
of any claim or counterclaim.” American Arbitration Association, Commercial Arbitration Rules,
Rule 7 (Oct. 1, 2013). This language mirrors exactly the language held to constitute clear and
unmistakable evidence of the parties’ intent to submit arbitrability to arbitration in Contec, 398
F.3d at 208 and Offshore Expl. & Prod. LLC, 986 F. Supp. 2d at 315. Plaintiff’s argument that the
parties did not intended for an arbitrator to determine arbitrability because “the Carrier Agreement
expressly reveals the parties’ intent to exclude this type of matter from arbitration” is misguided.
(ECF No. 10 at 6-7.) The question of whether an arbitrator has the power to decide issues of

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arbitrability is separate from the question of whether or not Defendant’s tortious interference
claims fall within the arbitration provision. Therefore, the parties have manifested their clear and
unmistakable intent to delegate to the arbitrator the threshold question of arbitrability.
Plaintiff’s argument that section 13.1 of the Carrier Agreement provides an exception to
section 13.3 and therefore requires this Court to decide whether or not the tortious interference
claims are arbitrable is misplaced. That provision states:
13.1 The Parties desire to resolve disputes arising of or relating to
this Agreement without litigation. Therefore, except for action
seeking a temporary restraining order or an injunction relating to
the purposes of this Agreement, or suit to compel compliance with
this dispute resolution process, the Parties agree to use the following
alternative dispute resolution procedures as the sole remedy with
respect to any controversy or claim arising out of relating to his
Agreement or its breach.
(ECF No. 1-2 at 9 (emphasis added).) Plaintiff brought this matter through an Order to Show
Cause seeking Temporary Restraints to compel compliance with this dispute resolution process
articulated in the Carrier Agreement. However, the Carrier Agreement explicitly and
unequivocally requires an Arbitrator to decide the issue of arbitrability. Accordingly, Defendant’s
Motion to Dismiss is GRANTED.
B. Preliminary Injunction
Plaintiff argues preliminary injunctive relief is appropriate because Plaintiff did not agree
to arbitrate disputes unrelated to the Carrier Agreement, and Defendant’s tortious interference
claims do not arise out of or relate to the Carrier Agreement because they deal with third parties.
(ECF No. 5-3 at 5-9.) The Court, having found the parties manifested their clear and unmistakable
intent to delegate to the arbitrator the threshold question of arbitrability and having granted
Defendant’s Motion to Dismiss Plaintiff’s Complaint, DISMISSES Plaintiff’s Motion for a
Preliminary Injunction as MOOT. See Pascarella v. Swift Transp. Co., 643 F. Supp. 2d 639, 653

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(D.N.J. 2009) (dismissing the plaintiff’s motion for a preliminary injunction as moot because the
Court granted the defendant’s motion to dismiss); Twp. of W. Orange v. Whitman, 8 F. Supp. 2d
408, 434 (D.N.J. 1998) (dismissing the plaintiff’s motion for a preliminary injunction as moot
because the Court granted the defendant’s cross-motion to dismiss the complaint under Federal
Rule of Civil Procedure 12(b)(6)). 3
IV.

CONCLUSION
For the reasons set forth above, Defendant’s Motion to Dismiss is GRANTED and

Plaintiff’s Motion for Preliminary Injunction is DISMISSED as MOOT.

Date: November 15, 2017

/s/ Brian R. Martinotti___________
HON. BRIAN R. MARTINOTTI
UNITED STATES DISTRICT JUDGE

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At Oral Argument, the parties conceded that if the Motion to Dismiss was granted, the
preliminary injunction application was moot.
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