Thomson Reuters News & Insight
Featured Content from WESTLAW

Legal

  •  
  •  

Gavel 001 No Credit stockexpert image_Small

Appeals court revives IDT suit against Tyco over fiber optic network

12/27/2012 COMMENTS (0)

By Daniel Wiessner

NEW YORK, Dec 27 (Reuters) - A New York appeals court has revived IDT Corp's breach of contract claims against Tyco International Ltd over the use of a globe-spanning fiber optic communications network.

In a unanimous decision, the Appellate Division, First Department, on Thursday rejected Tyco's argument that a 2000 settlement between the companies was "extinguished" by a 2009 Court of Appeals decision.

That decision, which dismissed separate breach of contract claims by IDT, required Tyco to continue good-faith negotiations over IDT's use of the network, the court said.

Tyco's "obligations in this case did not have an expiration date, nor, as (Tyco urges), did one arise through the mere passage of time," Justice James Catterson wrote for the court.

The ruling is the latest twist in a 12-year battle between the two companies.

In 1999, IDT and Tyco agreed to form a joint venture to build a multibillion-dollar undersea fiber optic cable. It would have spanned more than 70,000 kilometers and connected more than 25 cities in Europe, North America and Asia, the court said.

The venture failed and the companies in 2000 entered into a settlement. IDT agreed to abandon a number of lawsuits against Tyco in exchange for the right to use a different fiber optic network for 15 years, the court said.

Tyco also agreed to provide administration and maintenance of the fiber optic "wavelengths" that IDT would use, according to the court. The settlement required the companies to eventually craft a set of specific agreements but did not provide a deadline.

SETTLEMENT

After years of unsuccessful negotiations, the court said, IDT in 2004 sued Tyco for breach of contract, arguing that Tyco had not upheld its end of the agreement. A state Supreme Court justice granted IDT's motion for partial summary judgment, allowing the case to move forward.

Tyco appealed, and the First Department in 2008 reversed and dismissed the case, finding that while Tyco was obligated under the settlement to negotiate in good faith, the impasse did not constitute a breach of contract.

IDT appealed, and the Court of Appeals in 2009 affirmed.

The following year, IDT again sued for breach of contract, claiming that Tyco had failed to continue negotiating in good faith, as the courts had directed.

Tyco moved to dismiss the case, arguing that the Court of Appeals decision "extinguished" its obligation to IDT. Specifically, Tyco seized on a single line in the ruling that said its "obligation to furnish (network) capacity never became enforceable because agreed-upon conditions were not met."

Manhattan Supreme Court Justice Melvin Schweitzer in 2011 agreed with Tyco and dismissed the case.

The First Department on Thursday reversed, finding that Schweitzer had "misconstrued" the 2009 decision to mean that Tyco "had no further obligations under the settlement agreement."

Instead, Catterson wrote, the Court of Appeals said only that IDT could not sue for breach of contract until the parties entered into a final agreement.

Catterson was joined by Justices Rolando Acosta and Peter Tom. Justices David Friedman and Helen Freedman concurred in a separate opinion.

Hillel Parness, who argued the appeal for IDT, said on Thursday that the company "is very pleased with the decision of the appellate court."

Tyco's attorney, Thomas Dewey, and a spokesman for Tyco did not return requests for comment.

The case is IDT Corp v. Tyco Group, New York State Supreme Court, Appellate Division, First Department, No. 7481.

For IDT: Hillel Parness, Richard Mescon and Oren Langer of Robins, Kaplan, Miller & Ciresi.

For Tyco: Thomas Dewey of Dewey, Pegno & Kramarsky.

Follow us on Twitter @ReutersLegal | Like us on Facebook 


Register or log in to comment.

© 2013 Thomson Reuters