iCore Networks, Inc. v. Alliance, Inc.
Filing
22
MEMORANDUM OPINION Re: 12 MOTION for Summary Judgment by Alliance, Inc. Signed by District Judge James C. Cacheris on 7/26/2012. (stas)
IN THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF VIRGINIA
Alexandria Division
ICORE NETWORKS, INC.,
)
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)
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Plaintiff,
v.
ALLIANCE, INC.,
Defendant.
1:12cv535 (JCC/JFA)
M E M O R A N D U M
O P I N I O N
This matter is before the Court on Defendant Alliance,
Inc.’s Motion for Summary Judgment (the Motion).
[Dkt. 12.]
For the following reasons, the Court will deny Defendant’s
Motion.
I.
Background
A. Factual Background
This case arises out of a dispute over an alleged
contract.
Plaintiff, iCore Networks Inc. (iCore), is a
technology company that provides voice communication services.
(Mem. [Dkt. 13] at 2.)
Defendant, Alliance, Inc. (Alliance), is
a non-profit agency that provides health services and allegedly
entered into a contract with Plaintiff for telecommunications
services.
(Id.)
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In 2011, representatives from iCore visited Alliance’s
offices to market iCore’s telecommunications services.
Marc T. Fratus [Dkt. 13-1] ¶ 2.)
(Aff.
Over a period of months, Marc
Fratus, Alliance’s Director of Technology, met with
representatives from communications providers, including Anthony
Chapa of iCore, to discuss Alliance’s telecommunications needs.
(Id. ¶¶ 3-4.)
On October 28, 2011, Mr. Fratus signed an iCore
document entitled “Customer Service Order Agreement” (CSO or
Agreement).
(CSO [Dkt. 13-2] at 1; Aff. Fratus ¶ 6.)
The
Agreement provides Alliance’s name, address, and phone number in
the section titled “Billing Information.”
(CSO at 1.)
Mr.
Fratus signed in a box that contained the title “Customer
Acceptance and Service Authorization.”
(Id.)
The Agreement states that the term commitment is 36
months and it provides prices for “hosted VoIP” services, “value
added services,” and “connectivity.”
(Id.)
The Agreement is
tailored to Alliance, as it sets forth fees for service at
Alliance’s offices in Dundalk, Belcamp, Rosedale, Baltimore, and
Bel Air.
(Id.)
It also states:
This Customer Service Order Agreement
(‘Service Order’) constitutes the agreement
between iCore Networks, Inc. (‘ICore’) and
the company listed above (the ‘Customer’)
for the provision of services (‘Services’)
ordered by Customer as specified above.
ICore’s Universal Terms and Conditions of
Service (‘Universal Terms’) are part of and
incorporated into this Service Order and set
out at www.icore.com. When Customer signs
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this Service Order, Customer agrees and
acknowledges that it has read the Universal
Terms at www.icore.com as well as the E911
disclosure, also at www.icore.com, and
agrees to be bound by said documents. In
the event of any conflict between the
Universal Terms and this Order Form, the
Universal Terms shall prevail.
(Id.)
The document titled “ICore Networks, Inc. Universal
Terms and Conditions of Service” (Universal Terms Document)
includes a section titled “Term and Termination.”
Terms [Dkt. 13-3] at 3.)
(Universal
There is a provision entitled “Early
Termination” that states as follows:
If this Agreement is terminated by Customer
prior to the expiration of the Initial Term
or any Renewal Term and such termination is
not due to iCore’s breach . . . or if ICore
terminates this Agreement . . . due to
Customer’s breach, Customer shall pay to
ICore an early termination charge, which
Customer agrees is reasonable, equal to all
non-recurring and monthly recurring charges
set forth in the Customer Service Order
Agreement which would otherwise be due
through the end of the Initial Term or
Renewal Term in effect at the time,
including all applicable taxes and fees.
The parties agree that the precise damages
resulting from an early termination by
Customer or termination by ICore due to
Customer’s breach are difficult to ascertain
and the early termination charge . . . is a
reasonable estimate of anticipated actual
damages and not a penalty. The early
termination charge shall be due and payable
within ten (10) days of the effective date
of termination.
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(Id.)
Mr. Fratus submits that he understood that the CSO was
not binding, that Alliance was still free to select any service
provider, and that his signature was only required for the
purpose of holding the lower price quote.
(Aff. Fratus ¶ 6.)
ICore thinks otherwise.
The parties dispute whether iCore contacted Alliance
to begin the installation process.
(Opp. [Dkt. 18] at 8.)
On
March 7, 2012, Mr. Fratus informed iCore that Alliance had
decided to use a different service provider and that it did not
need the services of iCore.
(Aff. Fratus ¶ 10.)
Mr. Chapa then
informed the president of Alliance that he believed Mr. Fratus
had executed a binding contract by signing the Customer
Agreement on October 28, 2011.
(Id.)
On March 16, 2012, Tanya
Ownens of iCore sent Alliance a letter, referencing the
Universal Terms and demanding payment.
[Dkt. 13-5.]
The
parties were unable to come to an agreement and on April 27,
2012, iCore commenced this suit by filing a Complaint in the
Circuit Court of Fairfax County, Virginia.
[Dkt. 1-4.]
ICore
seeks damages for breach of contract in the amount of
$278,789.00 plus interest, late fees, costs, and attorneys’ fees
pursuant to the terms of the Agreement.
(Compl. ¶¶ 12-14.)
B. Procedural Background
This case was properly removed from the Circuit Court
of Fairfax County, Virginia to this Court on May 16, 2012.
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[Dkt. 1.]
2012.
Defendant filed an Answer to the Complaint on May 22,
[Dkt. 9.]
Summary Judgment.
On June 15, 2012, Defendant filed a Motion for
[Dkt. 12.]
an Opposition to the motion.
Defendant filed a Reply.
On June 29, 2012, Plaintiff filed
[Dkt. 18.]
[Dkt. 20.]
On July 5, 2012,
On July 20, 2012, this
Court held a hearing on the Motion.
Defendant’s Motion is now before this Court.
II.
Standard of Review
Summary judgment is appropriate only if the record
shows that “there is no genuine dispute as to any material fact
and that the movant is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(a); see also Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 247-48 (1986); Evans v. Techs. Apps. & Serv. Co.,
80 F.3d 954, 958-59 (4th Cir. 1996) (citations omitted).
The
party seeking summary judgment has the initial burden of showing
the absence of a material fact.
U.S. 317, 325 (1986).
Celotex Corp. v. Catrett, 477
A genuine issue of material fact exists
“if the evidence is such that a reasonable jury could return a
verdict for the non-moving party.”
Anderson, 477 U.S. at 248.
Once a motion for summary judgment is properly made
and supported, the opposing party must come forward and show
that a genuine dispute exists.
See Matsushita Elec. Indus. Co.,
Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986).
party opposing summary judgment may not rest upon mere
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allegations or denials.
Rather, the non-moving party “must set
forth specific facts showing that there is a genuine issue for
trial.”
Anderson, 477 U.S. at 250 (quotation omitted).
Unsupported speculation is not enough to withstand a
motion for summary judgment.
See Ash v. United Parcel Serv.,
Inc., 800 F.2d 409, 411-12 (4th Cir. 1986).
Summary judgment is
appropriate when, after discovery, a party has failed to make a
“showing sufficient to establish the existence of an element
essential to that party’s case, and on which that party will
bear the burden of proof at trial.”
Celotex, 477 U.S. at 322.
In reviewing the record on summary judgment, the court “must
draw any inferences in the light most favorable to the nonmovant” and “determine whether the record taken as a whole could
lead a reasonable trier of fact to find for the non-movant.”
Brock v. Entre Computer Ctrs., Inc., 933 F.2d 1253, 1259 (4th
Cir. 1991) (citations omitted).
III.
Analysis
Alliance is not entitled to summary judgment.
Plaintiff, iCore, claims a breach of contract.
A federal court
sitting in diversity jurisdiction must apply the choice of law
rules of the forum state, Colgan Air, Inc. v. Raytheon Aircraft
Co., 507 F.3d 270. 275 (4th Cir. 2007), and “[t]he law of
Virginia favors contractual choice of law provisions, giving
them full effect except in unusual circumstances,” Ettinger v.
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Milvets Sys. Tech., Inc., 38 F. App’x 962, 965 (4th Cir. 2002)
(citing Tate v. Hain, 25 S.E.2d 321, 324 (Va. 1943)).
The
disputed contract here specifies it should be “governed by and
enforced according to the laws of the Commonwealth of Virginia.”
(Universal Terms at 6.)
Thus, to establish a breach of
contract, Plaintiff iCore must establish “(1) a legally
enforceable obligation of [Alliance] to [iCore]; (2)
[Alliance’s] violation or breach of that obligation; and (3)
injury or damage to [iCore] caused by the breach of obligation.”
Filak v. George, 594 S.E.2d 610, 619 (Va. 2004) (reciting the
elements of a breach of contract claim under Virginia law).
Considering the evidentiary record “in the light most favorable
to” iCore, Brock, 933 F.2d at 1259, the Court concludes that “a
reasonable trier of fact [could] find for” iCore, id., as to
each element of its claim.
For the purpose of its summary judgment motion,
Alliance makes only one argument: that any agreement it had with
iCore was subject to a condition precedent that was never met.
(Mem. [Dkt. 13] at 8.)
Since “the initial burden” is on the
party moving for summary judgment, Celotex, 477 U.S. at 325, the
Court will limit discussion to that contention -- a contention
the Court ultimately finds unpersuasive.
It is true as Alliance
points out that, “[w]hen a contact provides for the performance
of special conditions precedent before a party is entitled to
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payment, the conditions must be performed unless the other party
prevents or waives their performance.”
Co., 315 S.E.2d 193, 195 (Va. 1984).
Winn v. Aleda Constr.
But the provision that,
according to Alliance, creates the condition precedent cannot
bear the weight that Alliance would have it bear.
Alliance argues that the Early Termination provision
contains a condition precedent because it states, “[i]f this
Agreement is terminated by Customer prior to the expiration of
the Initial Term . . . .”
Alliance points out that according
to the Universal Terms Document, the Initial Term “shall begin
on the Service Activation Date,” which is the date when the
communications services were made available to Alliance.
at 9.)
(Mem.
Thus, Alliance submits that the commencement of the
Initial Term is a condition precedent to Alliance’s obligation
to pay.
(Id. at 10.)
And, since iCore never commenced service,
Alliance does not have an obligation to pay.
The Early Termination provision is unambiguously a
liquidated damages provision that does not contain a condition
precedent to the performance of the contract.
“The question
whether the language of a contract is ambiguous is a question of
law . . . .”
Eure v. Norfolk Shipbuilding & Drydock Corp.,
Inc., 561 S.E.2d 663, 667 (Va. 2002).
In considering “the words
at issue within the four corners of the [Universal Terms
Document] itself,” id. at 668, the Early Termination provision
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is a liquidated damages provision.
Such a provision exists when
“parties to a contract [] agree in advance about the amount to
be paid as compensation for loss or injury which may result from
a breach of the contract ‘[w]hen the actual damages contemplated
at the time of the agreement are uncertain and difficult to
determine with exactness and when the amount fixed is not out of
all proportion to the probable loss.’”
Boots, Inc. v. Singh,
649 S.E.2d 695, 697 (Va. 2007) (quoting O'Brian v. Langley
School, 507 S.E.2d 363, 365 (Va. 1998)).
The Early Termination provision’s statement that “[i]f
this Agreement is terminated by Customer prior to the expiration
of the Initial Term,” simply provides that if Alliance breaches
the contract prior to the expiration of the Initial Term -- the
term of service in the Customer Service Order Agreement, here 36
months -- Alliance shall pay an early termination charge.
(Universal Terms at 3.)
Alliance would pay that charge because
the parties agreed in advance that damages are uncertain and
difficult to determine.
The Court finds that such language
unambiguously establishes a liquidated damages clause.
“Contract language is ambiguous when ‘it may be
understood in more than one way or when it refers to two or more
things at the same time.’”
Eure, 561 S.E.2d at 668 (quoting
Granite State Ins. Co. v. Bottoms, 415 S.E.2d 131, 134 (Va.
1992).
Although one might construe the Early Termination
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provision to provide that commencement of service is necessary
in order for the the early termination liquidated damages clause
to have effect, nothing in the plain meaning of the language of
the provision or the Universal Terms Document suggests that
commencement of service is a condition precedent for the
agreement itself.
If the commencement of service was actually a
condition precedent to the agreement, as Alliance submits, it
would make the entire contract an illusory promise.
It would be
such that Alliance had no obligation to pay iCore unless it
decided to pay iCore.
Or that Alliance had no obligation to use
iCore’s services unless it decided to use iCore’s services.
If
the condition precedent is within the control of one of the
parties, then it renders any agreement illusory.
Here, the statement “[i]f this Agreement is terminated
by Customer prior to the expiration of the Initial Term,”
describes the circumstances under which Alliance might owe
liquidated damages, not the circumstances under which
performance is excused.
That is unambiguous.
And, “[w]hen an
agreement is plain and unambiguous on its face, the Court will
not look for meaning beyond the instrument itself.”
S.E.2d at 667.
Eure, 561
As a result, the Court will not consider parol
evidence in order to determine the intent of the parties.
To succeed on its claim, iCore will have to prove a
legally enforceable obligation.
Evidence in the record is
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sufficient to support the conclusion that Alliance entered a
contract to purchase 36 months’ worth of telecommunications
services from iCore on October 28, 2011, when Mr. Fratus,
Alliance’s Director of Technology, signed a “Customer Service
Order Agreement.”
And, Alliance’s argument that commencement of
service is a condition precedent to the agreement fails for the
reasons discussed above.
As a result, the Court finds Alliance
has not shown that there is no genuine issue for trial.
IV.
Conclusion
For the reasons stated above, the Court will deny
Defendant’s Motion for Summary Judgment.
An appropriate Order will issue.
July 26, 2012
Alexandria, Virginia
/s/
______________
James C. Cacheris
UNITED STATES DISTRICT COURT JUDGE
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