AT&T Corp. v. Syniverse Technologies, Inc.

Filing 77

OPINION AND ORDER. Switched access services provided by AT&T's local carrier affiliates did not contribute towards Syniverse's minimum revenue commitment during Year Four of the parties' contract. For Year Four of its contract with AT& T, Syniverse owes the difference between its annual revenue commitment under the 2007 Attachment and its spending, exclusive of switched access services provided by AT&T's local affiliates. Accordingly, the parties shall confer and attempt to st ipulate to damages consistent with this Memorandum. The parties should bear in mind that AT&T may not recover taxes or fees on the shortfall, that AT&T may recover only statutory pre-judgment interest of 9%, that AT&T may not recover for recentl y billed charges that are not yet past due (see Tr. 199:18200:4), and that Syniverse's spending should be calculated net of credits (except for the specific credits considered in our order on summary judgment). If the parties cannot stipulate to damages, then they shall each submit a proposed judgment by October 9, 2015, with each party allowed a response by October 16. IT IS SO ORDERED. (Signed by Judge Naomi Reice Buchwald on 9/9/2015) (rjm)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
----------------------------------------X
AT&T CORP.,
Plaintiff,
– against –

OPINION AND ORDER

SYNIVERSE TECHNOLOGIES, INC.,

12 Civ. 1812 (NRB)

Defendant.
----------------------------------------X
NAOMI REICE BUCHWALD
UNITED STATES DISTRICT JUDGE

Plaintiff (“AT&T”) and defendant (“Syniverse”) are both
large telecommunications companies.

AT&T brought suit against

Syniverse for breach of contract and unjust enrichment, seeking
compensatory

damages,

attorney’s fees.1

pre-judgment

interest

of

12%,

and

Last September, we granted partial summary

judgment to Syniverse.
Our

findings

of

fact

exhibits introduced at trial.
we

hold

that

AT&T

is

derive

from

the

testimony

and

For the reasons set forth below,

entitled

to

damages

for

Syniverse’s

failure to meet the minimum revenue commitment set out in the
parties’ 2007 contract.

We reserve the calculation of damages

and direct the parties to confer and attempt to stipulate to
the proper calculation in light of our holdings.
1

Federal jurisdiction is founded on diversity of citizenship.
It is
uncontested that plaintiff is a New York corporation with its principal
place of business in New Jersey, while defendant is a Delaware corporation
with its principal place of business in Florida.

I. BACKGROUND2
A. Parties
AT&T is a subsidiary of one of the world’s largest and
most famous telecommunications companies.
Among

other

networks

things,

and

sells

communications
affiliated

it

maintains

bandwidth

firms.

with

AT&T

on

high-speed
those

Additionally,
provide

See Egan Aff. ¶ 9.

service

long-distance

networks

to

several

companies

on

local

other

telephone

networks.
Syniverse

provides

services

telecommunications industry.
relevant

to

this

case,

for

the

mobile

See Harshbarger Aff. ¶ 1.

Syniverse

provides

“SS7

As

signaling”

services that provide information about telephone numbers and
calls.
B. The Dispute at Bar
As described in greater detail below, Syniverse contracted
with AT&T for certain telecommunications services, and promised
to spend a minimum amount of services during each year of the
contract.

To the extent that Syniverse failed to meet its

2

In this Memorandum and Order, citations to “___ Aff.” are to the direct
testimony of the specified witness; citations to “___ Dep.” are to
deposition transcripts submitted by AT&T; citations to “Tr.” are to the
trial transcript; citations to “___ Test.” are also to the trial transcript,
and refer to a particular witness’s testimony; citations to “Pl. Ex. ___”
are to AT&T’s exhibits; citations to “Def. Ex. ___” are to Syniverse’s
exhibits; and citations to “Summ. J. Order” are to our Memorandum and Order
granting partial summary judgment, 2014 WL 4412392, 2014 U.S. Dist. LEXIS
125256, Sept. 8, 2014, ECF No. 44.

2

annual

commitment,

Syniverse

was

required

to

pay

AT&T

the

shortfall.
AT&T calculated a shortfall following the year from May
2009 to April 2010.

Syniverse refused to pay the shortfall,

disagreeing with AT&T’s calculation in two principal respects.
First, AT&T did not include certain services that were provided
by

AT&T’s

local

“special

(“switched

services,”

access

affiliates

both

access

described

services”

further

and

below).

Second, AT&T reduced its revenue calculation by the value of
certain credits that AT&T applied against charges on its bills
to Syniverse as a result of overcharges in previous years.
C. Procedural History
On March 12, 2012, AT&T filed a complaint alleging that
Syniverse

owes

contractual

AT&T

for

commitment

the

and

difference

its

actual

between
spending

fourth year of the parties’ 2007 contract term.
ECF No. 1.

ECF

during

the

See Compl.,

Syniverse joined issue and, following discovery,

moved for summary judgment.
J.,

Syniverse’s

No.

29.

We

See Answer, ECF No. 8; Mot. Summ.

granted

Syniverse’s

motion

in

part,

requiring AT&T to include in its calculation of Syniverse’s
spending

the

services.”

value

of

certain

credits

and

“special

access

See Summ. J. Order, 2014 WL 4412392, at *6–8, 2014

U.S. Dist. LEXIS 125256, at *19–23.

However, we found there to

be a disputed question whether spending on “switched access

3

services” should count towards Syniverse’s annual commitment.
See id., 2014 WL 4412392, at *6, 2014 U.S. Dist. LEXIS 125256,
at *18–19.
We held a bench trial on the remaining issues on July 7
and 8, 2015.
and

The parties offered direct testimony by affidavit

witnesses

appeared

live

for

further

examination.

The

following witnesses testified on behalf of AT&T:


Jerry Gilmore is a retired employee of AT&T or AT&T’s
affiliates
managed

who,

at

wholesale

the

times

relevant

long-distance

to

this

accounts.

In

case,
that

capacity, he supervised the sales group responsible for
Syniverse’s account, including Kim Reid.

He testified

as to the parties’ negotiations, AT&T’s determination
that Syniverse had not met its revenue commitment, and
the nature of “switched access services.”


Kim Reid is an employee of an AT&T affiliate who, at the
times relevant to this case, managed wholesale accounts
for AT&T under the direction of Gilmore.

She testified

as to the parties’ business relationship and the nature
of “switched access services.”


David J. Egan, an accountant employed by an affiliate of
AT&T affiliate, presented AT&T’s calculation of damages.

The following witnesses testified on behalf of Syniverse:

4



Jackie Lee Harshbarger, Jr., is a Syniverse employee
responsible for managing a group that determines what
circuits Syniverse requires.

Harshbarger Aff. ¶ 1.

He

testified as to Syniverse’s performance under its AT&T
contracts and the nature of “switched access services.”


Paula

Krause,

a

paralegal

for

Syniverse’s

counsel,

presented Syniverse’s calculation of damages (assuming
that AT&T wins on the issue of liability).


Patrice Kirkpatrick, an employee in Syniverse’s accounts
payable department, submitted an affidavit to which she
attached

representative

AT&T

invoices.

She

did

not

testify in person.
Additionally,

we

received

excerpts

from

various

depositions, including those of the Syniverse employees, Paul
Corrao and Dellcenia “Cena” Paxton, who negotiated the AT&T
contracts on behalf of Syniverse.
After trial, both parties submitted proposed findings of
fact and conclusions of law, ECF Nos. 75–76.
II. FINDINGS OF FACT
A. The Telephone Industry
It is well-known that AT&T (then known as the American
Telephone

and

Telegraph

Company)

once

controlled

an

overwhelming portion of the long-distance and local telephone

5

service industry in the United States, and that it divested
itself of its local affiliates in the early 1980s in response
to federal antitrust litigation.

See generally Modification of

Final J., United States v. W. Elec. Co., Civ. Action No. 820192

(D.D.C.

Aug.

24,

1982)

(consent

decree

regarding

the

restructuring of AT&T and Western Electric); Gilmore Aff. ¶ 7.
Under the terms of AT&T’s consent decree, telephone service was
split

between

long-distance

companies

and

local

companies.

AT&T remained in the long-distance business, where it continues
to

compete

against

Sprint and Verizon.

other

long-distance

providers,

such

as

AT&T spun off its local operations over to

several successors (the Regional Bell Operating Companies or
“Baby Bells”), whose affiliates, along with a few unrelated
local carriers, separately provided local telephone service in
different regions of the country.
Today, local carriers (called “local exchange carriers” or
“LECs”) compete to offer local telephone service within local
zones (called “local access and transport areas” or “LATAs”)
while

AT&T

between

and

LATAs.3

its

competitors

Following

offer

extensive

long-distance

service

re-consolidation,

many

local carriers are now within the same corporate family as
long-distance carriers.

Gilmore Aff. ¶ 8.

3

To avoid acronyms, we refer to the LECs as “local carriers” and the LATAs
as “local zones” in this opinion.

6

In

particular,

AT&T

has

become

part

structure with several of the Baby Bells.4
AT&T

itself

provides

only

long-distance

of

a

corporate

Gilmore Aff. ¶ 8.

services,

while

its

affiliates provide local services in some local zones.
B. Syniverse’s Usage of Telephone Circuits
Syniverse

provides

mobile

telecommunications

companies

with “SS7 signaling” services that provide information about
telephone numbers and calls.
SS7

signaling

assists

in

Gilmore Aff. ¶ 12.

connecting

and

For example,

disconnecting

phone

calls, in providing caller ID information, and in implementing
the call-return feature commonly known as *69.

Gilmore Test.

145:19–146:10.
Syniverse does not maintain a physical nationwide network
of its own over which to send its signals.

Instead, as is

customary in the industry, Syniverse must purchase bandwidth
along

a

points.

physical

telephone

Reid Aff. ¶ 7.

connection

between

any

two

end-

To send a signal between end-points in

different local zones, Syniverse must purchase two types of
circuits: a long-distance circuit between the two local zones,
and local circuits from each end-point to the terminus of the
long-distance circuit.

Gilmore Aff. ¶ 35.

A dedicated local

connection between the end-point and the point of presence is
4

Although the holding company in AT&T’s corporate structure is now called
“AT&T Inc.,” it was in fact one of the Baby Bells that purchased AT&T,
rather than the other way around. Gilmore Aff. ¶ 8.

7

known as a “special access service.”

Reid Aff. ¶ 13.

Although

local carriers provide this service, long-distance carriers may
purchase special access service from local carriers and re-sell
to customers (such as Syniverse) as part of an integrated local
and long-distance circuit.

Gilmore Aff. ¶ 35.

Syniverse also purchases “switched access services” from
local carriers, although the parties disagree sharply as to
what “switched access services” are.5
According to AT&T, “switched access service” is “an SS7
type service [that] can send signals into a particular LATA.”
Reid Aff. ¶ 15.
carrier

using

These services are provisioned by a local
a

circuit

at

a

“signaling

administered by the local carrier.

transfer

point”

Reid Test. 158:19–159:1.

According to AT&T, these services (unlike special access) can
be purchased only through a local carrier and are not re-sold
by long-distance carriers.

Gilmore Aff. ¶ 36.

Thus, AT&T’s

local affiliates sold switched access services only through a
unified online ordering system, Reid Aff. ¶ 11, and not through
sales teams such as the one that Gilmore led.
Gilmore

Test.

141:15–23.

(Reid

5

Reid Aff. ¶ 11;

testified,

with

some

AT&T’s and Syniverse’s contracts, discussed below, do not mention either
“special access” or “switched access,” nor do they define “Local Channel
Services,” the contractual term that (according to Syniverse) encompasses
both special and switched access.
Furthermore, neither party offered an
expert to testify that any of the terms have generally-accepted definitions
in the industry.
It is possible that AT&T’s Business Services Guide
(referred to in the parties’ 2007 contract) defines these services, but
neither party introduced the Business Services Guide into evidence.

8

exasperation

in

her

voice,

that

she

had

told

Syniverse

employees several times that AT&T could not provided Syniverse
with switched access services.
According

to

Reid Test. 176:1–19.)

Harshbarger’s

affidavit

on

behalf

of

Syniverse, “switched access service” is akin to a “lane” on the
“highway” of a special access circuit.6
25;

Harshbarger

Harshbarger
apparent
“switched

drew

in

Test.
a

his

24:24–25:5,

distinction

affidavit,

services.”

in

Harshbarger Aff. ¶¶ 9,

248:25–249:2.
his

between

Harshbarger

oral

However,

testimony,

“switched
Test.

access”

not
and

251:7–254:18.

Harshbarger further opined at one point that “switched access”
included “everything.”

Harshbarger Test. 250:7–9.

Harshbarger

also testified that he believed switched access services could
be

purchased

from

long-distance

carriers

as

well

as

local

carrier, although he also acknowledged that Syniverse had never
bought switched access services from AT&T.

Harshbarger Test.

77:23–25; 238:24–239:2, 239:22–25.
Only one of the many invoices in the record appears to
correspond to the services under dispute.

See Def. Ex. 18.7

This invoice describes a typical service as follows:

6

More technically, a special access circuit is a “T1” or “DS1” circuit,
which consists of multiple lower-speed “DS0” channels.
Harshbarger
testified that the DS0 channels within a special access circuit is a
switched access circuit.
7 The invoice offered as defense exhibit 18 was billed to account number 120165-2504-416, which neither Egan nor Krause took into account in calculating
Syniverse’s shortfall without switched access services.
See Egan Aff.

9

1 PT8SX

No

witness

/TRN 0004/TSC AM825079
/DES CFA 101 T1Z7F 04
KSCYMO55HI2
KSCYMO55K04
INTER 100%
(
500.00 X
1)
explained

what

this

means,

and

the

invoice’s

“English language glossary” barely helps a lay reader.

We can

make out from information elsewhere in the invoice that the
service

code

“PT8SX”

means

“port

termination,”

that

both

KSCYMO55HI2 and KSCYMO55K04 are physical locations (probably in
Kansas City, Missouri), and that “INTER 100%” indicates that
100%

of

this

service bucket.
provided

by

particular

charge

fell

into

an

“interstate”

The invoice also recited that services were

“Southwestern

Bell

Telephone,

L.P.

d/b/a

AT&T

Missouri,” a local carrier affiliated with AT&T.
Neither AT&T’s nor Syniverse’s explanation of “switched
access services” is entirely satisfactory.

It is not clear how

AT&T’s explanation of switched access services squares with the
invoice’s description, which appears to refer to an interstate
connection between two points.

However, Harshbarger’s shifting

explanations of “switched access” or “switched access service”
are

even

less

convincing.

It

does

not

make

sense

that

Syniverse would buy switched-access “lanes” in addition to the
¶¶ 22–23, 31; Krause Aff. ¶ 2.
The other invoices in evidence relate to
account numbers that both Egan and Krause included in their calculations.
See Long Distance Invoices, Pl. Exs. 20–37, Def. Exs. 57–74; Special Access
Invoices, Pl. Exs. 38–73, Def. Exs. 21–56.

10

private special-access “highways” that those lanes supposedly
constitute, especially given that Syniverse has always bought
switched
special

access
access

from
from

local

carriers

long-distance

while

sometimes

resellers.

And

buying

it

goes

without saying that the parties’ precisely drawn contract was
not intended to count “everything” towards Syniverse’s revenue
commitment.
We therefore adopt AT&T’s position that switched access
service

is

a

usage-based

circuit

that

can

be

ordered

only

through local carriers, and that switched access service is
utterly distinct from special access service.
C. Agreements Between the Parties
1. Earlier Agreements
Syniverse has contracted with AT&T and its affiliates for
telecommunications services since at least 2002.
Restated

AT&T

Master

Carrier

Agreement

See Am. &

(“2009

Master

Agreement”) at 1, Pl. Ex. 2 (referring to a Master Carrier
Agreement dated May 9, 2002).
In 2006, the parties executed an agreement for AT&T to
provide services similar to those under consideration in the
present case.

See AT&T Data Service Terms and Pricing Att.

(“2006 Attachment”), Pl. Ex. 4.

Although the 2006 Attachment

does not govern this dispute, we briefly describe its annual
revenue

commitment

provisions,

11

which

shed

light

on

corresponding terms in subsequent contracts.

For the first

year, Syniverse committed to purchase $4,700,000 in services;
for the second and third years, Syniverse committed to purchase
$3,000,000 each year; for the fourth year, Syniverse made no
commitment.

See 2006 Att. at ¶ 3(A)(1).

Eligible charges

“consist[ed] of the gross Monthly Recurring Charges, prior to
the

application

of

any

discounts

or

credits,”

services, including “Local Channel Services.”

for

certain

2006 Att. at

¶ 3(A)(2) (emphasis added).
2. The 2007 Agreement
In 2007, the parties resolved a dispute regarding data
services by executing a new agreement in October 2007, the 2007
AT&T

Data

Service

Terms

Attachment”), Pl. Ex. 3.

and

Pricing

Attachment

See Gilmore Aff. ¶¶ 27–28.

(“2007
This new

agreement was to be effective retroactively for a term of four
years, from May 2006 to April 2010.8

See 2007 Att. at ¶ 2.

In the new 2007 Attachment, the parties once again agreed
that Syniverse would commit to purchase a certain amount of
services from AT&T each year.

See 2007 Att. at ¶ 3.

For the

Year One (which had already passed), Syniverse committed to
spend $4,700,000 in eligible services (the same dollar amount
as the 2006 Attachment had specified for the same period).

8

For

We refer to the four contract years as Year One, Year Two, Year Three, and
Year Four.

12

the Year Two, Three, and Four, Syniverse committed to spend
$3,545,000 in eligible services each year.

Commitment-eligible

services consisted of
the net Monthly Recurring Charges, after the
application of any discounts or credits, for
Private Line Services, . . . [and] Local
Channel Services . . . provided under this
Attachment,
as
well
as
net
charges
identified in other Attachments . . . and
services provided under other Customer AT&T
Data Service Terms and Pricing Attachments
as
Data
MARC
[Minimum
Annual
Revenue
Commitment] Eligible Charges for purposes of
the Data MARC under this Attachment.
¶ 3(A)(2) (emphasis added).
The

2007

Services,”

but

Attachment
provided

did

not

certain

define

examples:

“Local
“AT&T

Channel

Terrestrial

1.544 Mbps [megabits per second] Local Channel,” “AT&T ACCUNET
Generic Digital Access (AGDA) Services,” and “Terrestrial 45
Mbps (T45) Local Channel Service.”

The contract set monthly

and per-mile charges that, at least to some degree, depended on
the

mileage

used.

See

¶¶ 11–12.

The

contract

apparently

contemplated that other Local Channel Services would be priced
with reference to the AT&T Business Service Guide, which is not
in the record.

Cf. ¶ 11 (“In lieu of the rates and discounts

specified in the AT&T Business Service Guide, the following
Monthly Recurring Charges apply for the listed services.”).
According

to

his

testimony,

not

consider

switched access services to be commitment-eligible.

Gilmore

13

Gilmore

did

Test.

258:23–259:4.

This

opinion

is

consistent

with

other

testimony of Gilmore’s that Gilmore and Reid’s business group
was not involved with the sale or billing of switched access.
Gilmore Test. 84:8–85:4.

We rely on Gilmore’s description of

the negotiations both because we find Gilmore’s testimony to be
credible

and

because

Syniverse

did

not

offer

any

witnesses

(such as Corrao or Paxton) who had been personally involved in
the 2007 negotiations.
The parties further agreed on a set of monthly discounts,
a package of installation charge waivers, and a one-time credit
of $300,000 to be applied in the 21st month of the contract
term (i.e., January 2008).

See 2007 Att. at ¶¶ 14–15.

These

were the “only” discounts, waivers, and credits to be applied
to services provided under the 2007 Attachment.
In

negotiating

commitments,

the

the
parties

new

2007

relied

Id.

Attachment’s
on

information

Syniverse’s historical annual spending or “run rate.”

revenue
about
Gilmore

Aff. ¶ 29; Gilmore Test. 136:25–137:5; Paxton Dep. 20:24–24:14;
Email from Paxton to AT&T, Pl. Ex. 6.

The parties intended to

set Syniverse’s annual commitment for Years Two through Four
equal to its 2006 run rate plus $200,000 per year.

Gilmore

Aff. ¶ 29; Gilmore Test. 136:25–137:5; Email from Paxton to

14

AT&T, Pl. Ex. 6.9

According to Gilmore’s testimony, which we

credit,10

accidentally

Gilmore

included

Syniverse’s

2006

spending on special access services (but not switched access
services) in the 2006 run rate.

Gilmore Aff. ¶ 29.

3. The 2009 Agreements
In 2009, the parties superseded their 2007 agreement with
respect

to

certain

services

by

signing

the

2009

AT&T

Data

Service Terms and Pricing Attachment (“2009 Attachment”), Pl.
Ex. 10.
terms

This new agreement set forth new pricing and other

for

Private

Line

Services,

Access

Channel

Services,

International Satellite Services, and Frame Relay Service, but
not for Local Channel Services or other services covered by the
2007 Attachment.

See 2009 Att. at ¶ 1.

This agreement also

provided a minimum monthly revenue commitment of $0 in net
charges

per

Attachment.

month

for

services

provided

under

the

2009

See 2009 Att. at ¶ 3.

9

AT&T highlights that Paxton wrote, “[W]e would exclude all pass through
spend or any related to SBC which we made.” AT&T argues that “pass through
spend” referred to amounts that Syniverse spent with AT&T’s affiliates.
Equally plausible, though, is Paxton’s own explanation that “pass through
spend” referred to amounts that Syniverse paid to AT&T on behalf of
Syniverse’s customers.
See Paxton Dep. 23:7–17.
Neither the rest of
Paxton’s email nor Paxton’s deposition supplies sufficient context for us to
adopt AT&T’s theory.
10 We find Gilmore to be a credible witness.
He generally appeared to be
candid, and he openly admitted his own errors in 2006–2009 regarding the
treatment of Special Access Services and other details in the calculation of
Syniverse’s spending. Furthermore, he was plainly knowledgeable concerning
the technical subject matter of his testimony from years of working for AT&T
and other telecommunications companies.
By contrast, Syniverse did not
present any witness, such as Corrao and Paxton, with personal knowledge of
the 2007 negotiations.

15

At

the

same

time

that

the

parties

executed

the

2009

Attachment, they also executed the 2009 Master Agreement, which
listed both the 2007 Attachment and the 2009 Attachment in its
Table of Documents.

The 2009 Master Agreement recited that

“[t]his Agreement consists of . . . the documents listed in the
Table of Documents . . . .”

2009 Master Agreement at page 1 of

cover sheet.
4. Provisions Concerning Interest and Legal Fees
In 2007, the parties agreed to a Supplemental Terms and
Conditions Attachment that included the following terms:11
1. Section 3 [of the General Terms and
Conditions] is deleted in its entirety and
replaced with the following:
3S. Non-Payment.
AT&T may add interest
charges to any past due undisputed amounts
at the lower of 12.0% per year or the
maximum rate allowed by law.
[Syniverse]
shall
reimburse
AT&T
for
reasonable
attorney’s
fees
and
any
other
costs
associated with collecting delinquent or
dishonored payments. . . .
Pl. Ex. 15 (emphasis added).

11

The 2009 Master Agreement included a somewhat broader provision that “AT&T
may add interest charges to any past due amounts” at 1.5% per month.
Pl.
Ex. 2 at § 3 (emphasis added).
However, the same Master Agreement also
incorporated the 2007 Supplemental Terms, see Pl. Ex. 2, Table of Docs., and
AT&T appears to concede that the Supplemental Terms’ customized interest
provision remained in force.
See Egan Aff. ¶ 36 (quoting Supplemental
Terms).

16

D. The Parties’ Course of Performance
1. Year One
Year One (May 2006 to April 2007) was over before the
parties

executed

the

2007

Attachment.

Although

the

2007

Attachment nominally applied a $4.7-million revenue commitment
retroactively to Year One, it is undisputed that Syniverse did
not come close to spending $4.7 million on the services that
AT&T

accepts

as

eligible.

A

spreadsheet

attached

to

Harshbarger’s affidavit appears to show that Syniverse spent
approximately $3.44 million on such services in Year One and an
additional $1.01 million on switched access services that AT&T
asserts do not contribute to Syniverse’s commitment.
Ex. 12 at 1.12
Syniverse

spent

services in 2006.

See Def.

(Gilmore testified to his recollection that
approximately

$5

million

Gilmore Aff. ¶ 31.

on

switched

access

Unlike most of Gilmore’s

testimony, this particular recollection is not credible because
12

This spreadsheet and similar ones submitted by Syniverse (see Def. Exs.
13–14) are confusing in that they break up Syniverse’s spending into
categories called “Contract ‘8’ Accounts,” “Local Channel Services,” “Local
Channel Services (Ports),” and “Data Transactions” that do not obviously
correspond to the categories we have dealt with in this case. We interpret
“Contract ‘8’ Accounts” to mean services ordered through accounts associated
with the 2007 Attachment (which are indisputably eligible), “Local Channel
Services” to mean special access services ordered through local carrier
affiliates (which, for purposes of this trial, AT&T acknowledges are
eligible), and “Local Channel Services (Ports)” to mean the switched access
services that are in dispute. We need not determine (and do not pretend to
know) what “Data Transactions” are because Syniverse did not spend anything
in this category. Our interpretation of Syniverse’s spreadsheet is based on
AT&T’s interpretation (see Pl. Ex. 17), Harshbarger’s quotation of an amount
spent on switched access circuits that corresponds to the data in the
exhibit’s “Local Channel Services (Ports)” row (see Harshbarger Aff. n.2),
and defense counsel’s description of Exhibit 12 (see Tr. 39–40).

17

it is not supported by data and is not close to Syniverse’s
later spending levels.

Accordingly, we accept that Syniverse’s

raw data for Year One are roughly accurate.)
The

parties

offer

different

explanations

for

the

2007

Attachment’s inclusion of a retroactive revenue commitment that
Syniverse had already failed to meet.

Syniverse argues that

switched access services must have been intended as eligible
(and that certain credits were also intended as eligible), so
that

Syniverse’s

commitment-eligible

exceeded $4.7 million.

spending

in

Year

One

AT&T argues that the parties simply

carried over the $4.7 million figure from the 2006 Attachment
without bothering to consider whether Syniverse attained its
commitment under the new “net” calculation.
Altogether,

we

three main reasons.

find

AT&T’s

explanation

more

likely

for

First, the $4.7 million figure in the 2007

Attachment is precisely equal to the corresponding figure in
the 2006 Attachment.

Second, the email correspondence between

AT&T and Syniverse leading up to the 2007 Attachment does not
discuss

the

Year

One

commitment

at

all.

Instead,

the

discussion focuses on how to calculate what eventually became
the commitment level for Years Two through Four.

See, e.g.,

Pl. Ex. 5 (Cena Paxton: “The[] way I understand the proposal
. . . is that we agree to take our spend number for 2006[,]
multiply

by

3

and

then

add

the

18

$600K.”).

Third,

Gilmore

testified

credibly

Syniverse’s

that

attainment

already passed.

he

did

for

not

Year

go

One

back

and

because

calculate

Year

One

had

Gilmore Aff. ¶ 28.

Syniverse’s

theory

has

two

main

problems.

First,

Syniverse relies heavily on the fact that the 2006 Attachment’s
commitment

referred

Attachment’s

to

commitment

gross

spending

referred

to

while

net

the

spending.

2007
This

observation, if anything, bolsters AT&T’s view that the parties
simply

carried

over

the

$4.7

million

figure

from

the

2006

Attachment without focusing on whether the 2006 Attachment’s
level

was

Second,

appropriate

Syniverse’s

absurdity.

to

include

theory

does

in
not

the

2007

resolve

Attachment.

the

supposed

Even counting the services that Syniverse believes

to be eligible, it appears that Syniverse failed to spend $4.7
million in Year One.
AT&T

did

not

See Def. Ex. 12.
charge

Syniverse

for

the

shortfall,

even

though Syniverse did not (at least in AT&T’s view) reach its
revenue

commitment

Gilmore’s

in

explanation

Year
that

One.
he

This

never

is

consistent

calculated

with

Syniverse’s

attainment for a year that, by late 2007, had already passed.
2. Years Two and Three
Excluding switched access services from the calculation,
Syniverse

spent

less

than

its

minimum

annual

commitment

$3.545 million in both Year Two and Year Three.

19

of

Including

switched

access

services,

Syniverse

spent

more

See Def. Exs. 13–14; Pl. Ex. 7.13

commitment.

than

its

Nevertheless,

AT&T did not report a shortfall (or indeed any calculation of
Syniverse’s annual spending) to Syniverse and has not sought to
collect on the shortfall.14

Gilmore Aff. ¶ 22; Harshbarger Aff.

¶ 21.
Gilmore offered a plausible explanation for why he did not
report

a

According

shortfall
to

him,

to
he

Syniverse
made

two

in

Years

errors

Two

when

and

he

Three.

initially

calculated Syniverse’s spending in Years Two and Three.
Gilmore Test. 107:25–108:1, 110:6.

First, Gilmore mistakenly

included special access spending in his calculations.
Test. 109:16–19.

See

Gilmore

Second, Gilmore double-counted approximately

$360,000 per year in “frame relay service”——once as its own
category, and again within the more general “data” category.15
See Gilmore Test. 111:7–18, 118:2–7.

13

Our understanding of plaintiff’s exhibit is that the “TOTAL” column
indicates Syniverse’s spending through accounts associated with AT&T, and
that “LOCAL DATA” indicates Syniverse’s spending on special access service
through accounts associated with AT&T affiliates.
Thus, the two columns
together represent Syniverse’s spending without switched access service.
We do not rely on any of these exhibits to be precisely accurate.
Both exhibits are explained poorly, and plaintiff’s exhibit (along with the
similar Exhibit 16) has been substantially corrected with respect to Year
Four. See Pl. Ex. 92.
14 AT&T may not bill Syniverse for charges more than 120 days after the
charges are incurred. See Supp. Terms & Conditions, Pl. Ex. 15 ¶ 5.
15 Gilmore did not preserve his original or corrected calculations, and the
parties have not presented intelligible reconstructions.
Nevertheless, we
find Gilmore’s detailed and forthright testimony of his own errors to be
credible.
Gilmore’s explanation is at least plausible, given that

20

3. Year Four
In

mid-2009

Harshbarger
spending

(i.e.,

participated

on

leased

near
in

the

an

beginning

effort

circuits.

Harshbarger Test. 228:15–229:16.

to

of

Year

reduce

Harshbarger

Four),

Syniverse’s
Aff.

¶ 17;

Syniverse requested bids on

certain services, and Gilmore became aware of Syniverse’s bid
requests by August 3, 2009, at the latest.
¶ 17;

Gilmore

Syniverse’s

Test.

bids

as

121:2–4.
an

At

the

opportunity

Harshbarger Aff.

time,

for

AT&T

Gilmore
to

viewed

earn

more

business, although Syniverse ultimately chose to move circuits
away from AT&T, see Gilmore Test. 121:11–13; Email from Gilmore
to John Wick, Aug. 24, 2009, Pl. Ex. 8 (“Our current effort
should

address

[Syniverse’s

projected

revenue

shortfall].”);

Harshbarger Aff. ¶ 17.
In

July

2009,

“appreciably.”
123:14–20.

Syniverse’s

spending

with

AT&T

dropped

Gilmore Test. 107:14–16; see also Gilmore Test.

This decline, combined with inquiries about the

revenue commitment from Syniverse manager John Wick, provoked
Gilmore to examine Syniverse’s revenue more closely.16

Gilmore

Syniverse’s spending (including special access services) came within
$500,000 of its commitment. Harshbarger Aff. ¶ 23.
16 Syniverse maintains that its spending did not decrease materially during
Year Four.
See Harshbarger Aff. ¶¶ 19–20.
It is difficult to determine
whether Gilmore’s or Harshbarger’s recollection is accurate on this point,
as neither party presented a well-organized summary of Syniverse’s spending
over the four years.
Regardless, it is clear that something provoked
Gilmore to probe into Syniverse’s spending, and there is nothing

21

Test. 106:17–22, 107:16–18.
reconciliation”

revealed

According to Gilmore, his “full

the

two

errors

in

his

earlier

calculations of Syniverse’s spending.
Later in August 2009, Gilmore informed Wick that Syniverse
was on track for a shortfall of approximately $295,000 in Year
Four

(May

2009

124:14–17;

to

Email

April

from

2010).

Gilmore

to

Gilmore
Wick,

Pl.

Test.
Ex.

114:22–23,
8.

Wick’s

reaction was to say, in essence, “It sounds like we need some
more data.”

Gilmore Test. 137:19–22.

Syniverse, however, did

not increase its data usage sufficiently to meet its revenue
commitment
Syniverse
that

according
spent

Gilmore

only

to

Gilmore’s

approximately

considered

to

be

methodology.
$2.5

million

Instead,
on

commitment-eligible

approximately $600,000 on special access services.17
Aff. ¶¶ 32–34, Def. Exs. 75–76.

services
and

See Egan

The amount that Syniverse

spent on AT&T affiliates’ switched access services is not in
the

record,

switched

but

access

AT&T

appears

spending

was

to

concede

sufficient

to

that

Syniverse’s

bridge

the

gap

between Syniverse’s other spending and its revenue commitment.
illegitimate about an account manager’s attempt to better understand his
customer’s spending patterns.
17
The parties’ calculations are very close to each other.
The main
difference is that AT&T deducted the value of certain credits that were
grouped into a “One-Time Charges/Credits” bucket on AT&T’s invoices even
though these credits offset charges in the “Monthly Charges” bucket that
Syniverse included in its calculation. See, e.g., Pl. Ex. 92 (chart showing
discrepancies); July 2009 Invoice at 7, Def. Ex. 57 (invoice for account
number 8001-188-0269 showing service assurance warranty credit as a one-time
credit offsetting monthly circuit charge).

22

Based

on

Gilmore’s

optimism

about

Syniverse’s

bidding

process, Wick’s response to Gilmore’s email about the projected
shortfall, and Reid’s testimony that she wished to cultivate a
long-term relationship with Syniverse (see Reid Test. 177:13–
19), we reject Syniverse’s suggestion that AT&T concocted a
shortfall

in

order

to

pressure

Syniverse

into

buying

more

services in the short-term.
At

the

end

of

Year

Four,

AT&T

billed

Syniverse

for

a

shortfall of $1,407,624 plus unspecified taxes and regulatory
fees.

Invoice, Pl. Ex. 9.

shortfall
dispute

and

contested

resolution

Syniverse refused to pay the billed
the

charge

protocol.

Egan

through
Test.

AT&T’s

internal

195:16–19.

AT&T

denied Syniverse’s dispute, and has continued to bill Syniverse
for the shortfall.

Meanwhile, Syniverse has paid new charges

but not the shortfall.

See Pl. Ex. 91.

III. CONCLUSIONS OF LAW
A. The 2007 Attachment’s Revenue Commitment Was Still in
Effect During Year Four.
Contrary to Syniverse’s contention, the 2009 Attachment
did not displace the 2007 Attachment’s minimum annual revenue
commitment.

First, the 2009 Master Agreement, by listing the

2007 Attachment in its list of documents, indicated that the
2007 Attachment remained in effect to the extent that it was
not inconsistent with the later 2009 Attachment.

23

Second, as we

noted

in

our

summary

judgment

opinion,

“there

is

nothing

inherently contradictory about having a minimum annual revenue
commitment

of

$3,545,000

commitment of $0.

and

a

minimum

monthly

revenue

Such an arrangement would merely require

Syniverse to order at least $3,545,000 worth of services during
the year while allowing it total flexibility on when it could
order those services.”
2014

U.S.

Dist.

LEXIS

Summ. J. Order, 2014 WL 4412392, at *5,
125256,

at

*16.

Third,

the

2007

Attachment covered a broader set of products than the 2009
Attachment, so the 2007 Attachment’s minimum revenue commitment
provision was compatible with a lower revenue commitment on the
2009 Attachment’s narrower set of products.

Fourth, Syniverse

has not provided evidence that the parties, in negotiating the
2009

Attachment,

commitment,
Syniverse

which
with

intended

to

cancel

had

the

basis

been

discounted

rates.

Syniverse’s
for

Thus,

AT&T
we

to

revenue
provide

conclude

that

Syniverse was obligated to spend $3,545,000 in revenue covered
by the 2007 Attachment during Year Four.
B. Syniverse Fell Short of Its Revenue Commitment in
Year Four.
1. Local Channel Services
We

conclude

for

several

reasons

that

switched

access

services provided by AT&T affiliates are not “Local Channel
Services” under the 2007 Attachment.

24

First,
Channel

the

contract

Services”

or

does

include

not

explicitly

sufficient

“Local Channel Services” implicitly.

define

context

to

“Local
define

Hence, we must consider

extrinsic evidence.
Second,

we

credit

Gilmore’s

access

testimony

services

to

that

be

he

“Local

never

considered

switched

Channel

Services.”

On this basis, he did not include switched access

services as part of the “run rate” calculation that AT&T and
Syniverse used as the basis for the 2007 Attachment’s annual
revenue commitment.

This distinguishes switched access from

special access services, which were included in the run rate,
regardless of whether sold by local carriers or re-sold by
AT&T.
Third, even if switched access services are “local channel
services”

in

the

sense

of

being

“services”

on

a

“local

channel,” the switched access services under dispute in this
case were simply not provided by AT&T.

Unlike special access

services, switched access services were never re-sold by AT&T
and could not be ordered through AT&T’s long-distance office.
That

AT&T’s

Syniverse

in

customer

service

agents

resolving

problems

related

sometimes
to

AT&T

assisted

affiliates’

products (see Reid Aff. ¶ 10; Harshbarger Aff. ¶ 22; Reid Test.
179:18–24) does not alter the conclusion that the local carrier
affiliates——and

not

AT&T

itself——provided

25

switched

access

services.

A

reasonably
products

major

expect
across

customer

its
the

of

a

relationship
entire

large

enterprise

manager

enterprise

to

without

will

help

with

regard

to

should

be

corporate formalities.
2. Equitable Estoppel
Syniverse

argues

alternatively

that

AT&T

equitably estopped from excluding switched access services from
AT&T’s

revenue

4412392,

at

calculation.

*7,

2014

See

U.S.

Dist.

Summ.

J.

LEXIS

Order,

125256,

2014

at

WL

*22–23

(applying equitable estoppel to special access services).

The

gist of this argument is that Syniverse could have obtained the
same switched access services in a commitment-eligible way (or
perhaps could have increased its spending on other products),
if

AT&T

had

not

switched

access

example,

in

led

Syniverse

services

the

would

context

of

to
be

believe

that

Syniverse’s

commitment-eligible.

special

access

services,

For
AT&T

included special access services in its run rate during the
2007

negotiations,

causing

Syniverse

to

expect

access services would be commitment-eligible.

that

special

If Syniverse had

known that AT&T did not consider special access services to be
commitment-eligible

when

purchased

through

local

affiliates,

then Syniverse could have purchased the same services through
AT&T instead of through AT&T’s local affiliates.

26

This argument fails for two reasons.
lead

Syniverse

to

believe

that

First, AT&T did not

Syniverse’s

switched

access

services would be commitment-eligible, as AT&T did not include
switched access services in the run rate that AT&T provided to
Syniverse as the basis for the 2007 Attachment.

Second, once

AT&T projected a shortfall in 2009 (again excluding switched
access

services),

switched-access

Syniverse

spending

to

did

not

attempt

to

commitment-eligible

move

its

accounts

or

otherwise act to increase its spending on commitment-eligible
services.
3. Syniverse’s “Immaterial Breach” Theory
Syniverse

argues

switched

access

eligible

AT&T

affiliates.

that

services
accounts

Syniverse
through

instead

could

Syniverse’s

of

through

have

ordered

commitmentAT&T’s

local

Thus, according to Syniverse, the shortfall really

pertains to the “immaterial breach” of ordering through the
“wrong” entity.

This theory contradicts our factual conclusion

that

could

Syniverse

through the affiliates.

only

order

switched

access

services

Syniverse’s error was not that it

ordered switched access services the wrong way, but that it
spent money on services that could not have come within the
scope of the 2007 Attachment.
4. Conclusion

27

Without

including

switched

access

services,

Syniverse

spent approximately $2,500,000 on services billed through AT&T
and approximately $600,000 on special access services billed
through AT&T’s local affiliates.
75–76.

See Egan Aff. ¶ 34; Def Exs.

This places Syniverse’s shortfall between $400,000 and

$500,000.
C. Syniverse’s Spending Should Be Counted Net of Credits.
Throughout

Year

Four,

AT&T

applied

miscellaneous

(relatively small) credits to certain charges in Syniverse’s
bills.

We conclude that these credits should be deducted from

the gross billing amount when comparing Syniverse’s spending to
its revenue commitment.

This conclusion follows from the text

of the 2007 Attachment, which sets out a commitment for net
rather than gross spending.
with

Egan’s

unrebutted

This conclusion is also consistent
testimony

transitioned

to

net

because

net

calculations

the

calculations
more

that
in

the

easily

AT&T

“generally

mid-2000’s
correlate

. . .
to

the

actual charges to a customer as shown on AT&T’s invoices.”
Egan Aff. ¶ 14.
Syniverse

maintains

that

its

billing

credits

should

be

disregarded because the 2007 Attachment permitted only a single
credit of $600,000 in month 21 of the agreement.

It is correct

that 2007 Attachment itself did not contemplate any credits
beyond the $600,000 lump sum in month 21.

28

However, the 2007

Attachment did not bar AT&T from offering further credits, and
the

2007

Attachment’s

“net”

calculation

is

not

limited

to

credits that AT&T was required to offer by the 2007 Attachment.
Syniverse

also

argues

that

our

Summary

Judgment

disposed of this question in Syniverse’s favor.

Order

This is not

correct.

Syniverse’s summary judgment motion, and hence our

decision,

pertained

only

to

AT&T’s

practice

of

crediting

Syniverse for overpayments during previous months.

See Def.’s

Mem. of Law in Supp. of Mot. Summ. J. at 15 n.4, ECF No. 31.
In

this

services

situation,
that

the

Syniverse

credit

does

purchased

not

alter

during

the

the

value

period

of

under

consideration; the credit indicates that Syniverse effectively
paid too soon.
account

when

Therefore, the credit should not be taken into
calculating

Syniverse’s

revenue

attainment.

Syniverse’s spending calculation should be based on the amount
that was properly billed for services on each month’s bill.
By

contrast,

interruption

(for

Syniverse
example),

receives
it

a

means

credit
that

for

service

Syniverse

has

actually received and paid for less service than otherwise.
This is not an issue of payment timing.

In this context,

Syniverse’s spending should be measured as the net spending on
services rendered, net of the service interruption credit.

29

D. AT&T May Not Recover Taxes and Regulatory Fees.
In 2010, AT&T included a considerable amount of taxes and
regulatory fees in its bill for Syniverse’s shortfall.
Monthly Invoice at p. 4 item no. 000005, Pl. Ex. 9Q.
disclaimed

any

intention

to

recover

taxes

and

See

AT&T has

fees

on

the

shortfall amount and has not submitted evidence of such taxes
and fees.

See Tr. 186:12–187:7.

Accordingly, AT&T may not

recover any such taxes or fees.
E. AT&T May Not Recover Pre-Judgment Interest at 12%.
The Supplemental Terms which AT&T and Syniverse specially
bargained for, provide that pre-judgment interest is charged at
12% only for undisputed past-due payments.
trial

that

payments

the

that

word

are

“undisputed”

subject

to

resolving customer disputes.
word

“undisputed”

connotes

AT&T suggested at

refers

AT&T’s

specifically

internal

mechanism

to
for

To the contrary, the unqualified
any

kind

of

good-faith

dispute,

including good-faith litigation.
The present litigation proceeded in good faith.

Syniverse

prevailed in part at summary judgment and presented colorable
arguments on the remaining issues at trial.
AT&T

may

Instead,

not
New

apply

12%

York’s

interest
standard

to
9%

provisions apply to the shortfall.
(Consol. 2008).

30

In this context,

Syniverse’s
pre-judgment

shortfall.
interest

See N.Y. C.P.L.R. 5001

F. AT&T May Not Recover Attorney Fees.
The

Supplemental

reasonable

attorney

Terms

fees

provide

for

that

“delinquent”

Terms & Conditions Att., Pl. Ex. 15.

AT&T

may

recover

payments.

Supp.

Although “delinquent” can

simply mean “past due” (see, e.g., Delinquent (adj. 3), Black’s
Law Dictionary (10th ed. 2014) (“past due or unperformed”)), it
appears in this context to mean a payment that is seriously
past-due

without

cause.

We

reach

this

interpretation

for

several reasons.
First,

the

Supplemental

Terms

use

both

“past

due”

and

“delinquent” in fairly close proximity, suggesting that they
mean different things.

“Delinquent” tends to connote bad faith

or irresponsibility to a greater extent than “past due,” and so
we

conclude

that

“delinquent”

distinctively

indicates

an

unexcused failure to pay.
Second, the word “delinquent” is used in the context of
collections

and

“delinquent”

payments

check,

can

be

“dishonored”
are

collected

payments,

payments
without

that,

serious

suggesting
like

a

that

dishonored

litigation

on

the

merits.
Third, New York law allows fee-shifting only when “‘the
intention to do so is unmistakably clear’ from the language of
the contract.”

Oscar Gruss & Son, Inc. v. Hollander, 337 F.3d

186, 199 (2d Cir. 2003) (quoting Hooper Assocs., Ltd. v. AGS

31

Computers,
(1989)).

Inc.,

74

N.Y.2d

487,

492,

548

N.E.2d

903,

905

The Supplemental Terms, at the very least, do not

“unmistakably” provide for AT&T to receive attorney’s fees on
account of Syniverse’s partially successful, good-faith effort
to challenge AT&T’s invoices in court.
IV. CONCLUSION
Switched access services provided by AT&T’s local carrier
affiliates

did

not

contribute

towards

Syniverse’s

minimum

revenue commitment during Year Four of the parties’ contract.
For Year Four of its contract with AT&T, Syniverse owes the
difference between its annual revenue commitment under the 2007
Attachment

and

its

spending,

exclusive

of

switched

access

services provided by AT&T’s local affiliates.
Accordingly,
stipulate

to

the

damages

parties

shall

consistent

with

confer
this

and

attempt

Memorandum.

to
The

parties should bear in mind that AT&T may not recover taxes or
fees on the shortfall, that AT&T may recover only statutory
pre-judgment interest of 9%, that AT&T may not recover for
recently billed charges that are not yet past due (see Tr.
199:18–200:4),

and

calculated

of

net

that
credits

Syniverse’s

spending

(except

the

for

considered in our order on summary judgment).

should

specific

be

credits

If the parties

cannot stipulate to damages, then they shall each submit a

32

proposed judgment by October 9, 2015, with each party allowed a
response by October 16.

IT IS SO ORDERED.

Dated:

£---:1)
-~-' L 6:::d;

New York, New York
September ~, 2015

NAOMI REICE BUCHWALD
UNITED STATES DISTRICT JUDGE

33