Blitz Telecom Consulting, LLC v. Peerless Network, Inc.

Court of Appeals for the Eleventh Circuit·Decided March 5, 2018·No. 16-11622·Unpublished

Opinion

[DO NOT PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

No. 16-11622

D.C. Docket No. 6:14-cv-00307-PGB-GJK

BLITZ TELECOM CONSULTING, LLC, a Florida Limited Liability Company,

Plaintiff - Counter Defendant - Appellee, versus

PEERLESS NETWORK, INC., an Illinois Corporation,

Defendant - Counter Claimant - Appellant.

Appeal from the United States District Court for the Middle District of Florida

(March 5, 2018)

Before ROSENBAUM, JILL PRYOR, and RIPPLE, ∗ Circuit Judges. PER CURIAM:

This appeal marks the latest chapter in a tumultuous business relationship between Defendant-Appellant Peerless Network, Inc. (“Peerless”), and Plaintiff- Appellee Blitz Telecom Consulting, LLC (“Blitz”). For the better part of four years, Blitz and Peerless have litigated claims related to the non-payment of “co- marketing” fees owed under a contract between the parties.

In this latest installment, after a trial in the district court, a federal jury found in favor of Blitz on a claim that Peerless breached the contract by failing to remit the co-marketing fee, and awarded Blitz over $2 million in compensatory damages. Peerless now appeals that judgment, contending the district court committed legal error on three separate occasions before and during the trial. After careful consideration, we affirm the district court’s judgment in full.

I.

A.

Appellant Peerless is a telecommunications company whose subsidiaries operate as “local exchange carriers.” Through its subsidiaries (collectively

Honorable Kenneth F. Ripple, United States Circuit Judge for the Seventh Circuit, sitting by designation.

“Peerless”), Peerless provides traditional land-line telephone service.1 Specifically, Peerless operates transmission networks that facilitate telephone calls between end-users, or, in other words, a caller and a receiver.

Appellee Blitz is a buyer and seller of telephone numbers. Its business involves purchasing telephone numbers from telecommunications carriers, like Peerless, and reselling those numbers in bulk to companies who, in turn, provide discount telephone service to end-use consumers. Some, but not all, of the companies to which Blitz resells telephone numbers are prepaid calling-card service providers.

On November 9, 2010, Blitz and Peerless entered into an “IP Control Agreement” (the “Contract”). The Contract contemplated that Blitz would “place” telecommunication traffic on Peerless’s networks, for which Peerless would be compensated by other carriers. See Contract §§ 3.5, 7.4. In exchange, Peerless agreed to pay Blitz a 30% commission each month.2 See Contract App. A § 1.1. This commission, known as a “co-marketing fee,” is the basis for the parties’ present dispute.

1 Peerless also offers some wireless services.

2 The Contract states that co-marketing fees are “based on collected revenues on InterLata CABS (carrier access billing) charges for Interstate and Intrastate traffic terminating to or associated with the local telephone numbers” assigned to Blitz. Contract App. A § 1.1. “InterLATA” is a statutory term defined as “telecommunications between a point located in a local access and transport area and a point located outside such area.” 47 U.S.C. § 153 (26).

By all accounts, both parties performed under the Contract throughout 2011 and early 2012. Blitz directed traffic onto Peerless networks, and Peerless accounted for and paid Blitz the monthly co-marketing fee.

Then, in April 2012, Peerless notified Blitz by letter that it was invoking the Contract’s “Change in Law” provision and would no longer remit the co-marketing fee. In relevant part, the Change in Law provision provides that, in the event of “any legislative, regulatory, judical [sic] or other legal action that materially affects the ability of a Party to perform any material obligation,” Blitz or Peerless can, on 30 days’ written notice, “require that the affected provision(s) be renegotiated, or that new terms and conditions be added to this Agreement.” Contract § 23.

The action Peerless relied on to invoke this provision was a March 9, 2012, unpublished partial summary-judgment order issued by the United States District Court for the Northern District of Texas. Peerless asserted that this order constituted a change in telecommunications law that “materially affect[ed] the ability of Peerless to perform in paying [the co-marketing fee] to [Blitz] for prepaid calling card traffic.” The order, issued in a case captioned Southwestern Bell Telephone Co. v. IDT Telecom, Inc., No. 3:09-cv-01268-P (N.D. Tex. Mar. 9, 2012), 2012 U.S. Dist. LEXIS 190775 (the “IDT Decision”), involved a dispute between several local exchange carriers (not including Peerless) and a number of prepaid calling-card providers. The carriers brought suit on claims that they were

owed certain “access charge fees” by the prepaid calling-card companies who used the carrier networks to transmit calls. Id., 2012 U.S. Dist. LEXIS 190775, at *2- *7. The district court granted partial summary-judgment in favor of the carriers on the issue of liability, ruling that the prepaid calling-card “traffic [was] subject to access charges.”3 Id. at *18. According to Peerless, the IDT Decision changed how much Peerless was compensated by third-party carriers on prepaid calling- card traffic, thereby lowering Peerless’s collections from these carriers, and so constituted a change in law entitling Peerless to cease paying Blitz co-marketing fees. Blitz disagreed that the IDT Decision amounted to a change in law under the Contract, and the instant litigation ensued.

Meanwhile, as these events were unfolding in late 2011 and early 2012, Blitz was also exploring the possibility of selling its business. Though Peerless initially expressed interest in acquiring Blitz, the parties never reached an agreement for Peerless to do so. Blitz entertained other offers and eventually entered a tentative purchase agreement with a third party. As it turned out, Peerless and the third-party buyer were direct competitors.

Upon learning about the potential sale and eager to retain Blitz’s business, Peerless approached Blitz with an alternative solution. Under the proposal, Blitz would establish and obtain licensing for a separate entity that would operate as a

3 The case subsequently settled on the issue of damages. See Dollar Phone Access, Inc.

v. AT & T Inc., No. 14-CV-3240-SLT-LB, 2015 WL 430286 at *3 (E.D.N.Y. Feb. 2, 2015).

local exchange carrier like Peerless. Peerless and the new entity would then enter a contractual relationship for certain telecommunication services, ostensibly to the financial benefit of both.

Blitz alleges that it was in the midst of finalizing a purchase agreement with the third party but was swayed by Peerless’s proposal and backed out. Blitz created the new entity—Local Access, LLC (“Local Access”)—and Local Access and Peerless entered into a contractual agreement known as a “Homing Tandem Service Agreement” (the “Homing Agreement”). Under the terms of the Homing Agreement, Local Access agreed to pay Peerless for the right to “sublet” a portion of Peerless’s transmission network, and Peerless agreed to divert a portion of call traffic to Local Access. Blitz was not a party to the Homing Agreement.

Local Access contends that while it performed under the Homing Agreement, Peerless breached the contract from the outset. In Local Access’s view, Peerless never intended to perform and instead merely proposed the Homing Agreement in order to prevent the sale of Blitz to a competitor. Eventually, Local Access and Blitz filed a separate action against Peerless on claims related to the Homing Agreement.

B.

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