Comcast Cable Communications Management, LLC v. CX360, Inc.
Opinion
COURT OF CHANCERY OF THE STATE OF DELAWARE
LORI W. WILL LEONARD L. WILLIAMS JUSTICE CENTER VICE CHANCELLOR 500 N. KING STREET, SUITE 11400 WILMINGTON, DELAWARE 19801-3734
November 14, 2024
Susan W. Waesco, Esquire Matthew F. Davis, Esquire Thomas P. Will, Esquire David A. Seal, Esquire Courtney Kurz, Esquire Callan R. Jackson, Esquire Taylor A. Christensen, Esquire Adriane M. Kappauf, Esquire Morris Nichols Arsht & Tunnell LLP Potter Anderson & Corroon LLP 1201 North Market Street 1313 North Market Street Wilmington, Delaware 19801 Wilmington, Delaware 19801
RE: Comcast Cable Communications Management, LLC v. CX360, Inc., C.A. No. 2024-0991-LWW
Dear Counsel:
I write regarding your submissions on the bond that Comcast Cable
Communications Management, LLC must post in connection with the status quo
order I previously entered.
On October 22, I issued a Letter Order outlining that the bond would be
equivalent to the difference between (1) what Comcast would pay CX360, Inc. under
the parties’ Master Services Agreement (the “MSA”) through its February 28, 2025
termination date (the “MSA Amount”), and (2) what Comcast would pay under the
proposed Novation Agreement during the same period (the “Novation Agreement C.A. No. 2024-0991-LWW November 14, 2024 Page 2 of 6
Amount”).1 I explained that the bond should also account for $1,400,000 of
employee retention costs that CX360 anticipates incurring to perform under the
MSA while the status quo order is in place.2
Based on this formulation, CX360 submits that Comcast should post a
$4,482,000 bond.3 It calculates that Comcast would owe $9,246,000 under the
Novation Agreement for November 2024 through February 2025, inclusive of
Comcast’s quarterly prepayments for certain “Non-Managed IVR” services.4 It then
subtracts $6,164,000 it estimates Comcast would owe under the MSA from
November 2024 through February 2025, based on an estimated $1,541,000 monthly
payment.5 Finally, CX360 adds back the $1,400,000 in employee retention costs.6
Using the same formula, Comcast concludes that the bond should total
$2,927,120.7 Comcast’s figure includes the $1,400,000 in employee retention costs.
1 Dkt. 48 at 2 (“Letter Order”). 2 Id. 3 Letter from David A. Seal, Esq., Regarding Bond (Dkt. 53) (“CX360 Bond Letter”) 4. 4 Id. 5 Id. 6 Id. at 5. 7 Letter from Susan W. Waesco (Dkt. 52) (“Comcast Bond Letter”) 1. C.A. No. 2024-0991-LWW November 14, 2024 Page 3 of 6
But its calculation of the amounts owed under the Novation Agreement and the MSA
diverge from CX360’s assessment.
With regard to the proposed Novation Agreement, Comcast estimates its
monthly payment—$2,000,280—and multiplies this number by four.8 This amount
includes the Novation Agreement’s $1,541,000 fixed monthly rate, plus estimated
professional service hours (charged separately under the Novation Agreement) and
additional expenses (such as SMS and outbound calling).9 In its calculations,
Comcast considered its actual and projected use of these services and the applicable
rates under the Novation Agreement.10 It did not consider the quarterly prepayment
structure outlined in the Novation Agreement.
For the MSA, Comcast’s estimated $6,474,000 payment is $310,000 higher
than CX360’s estimate. To arrive at this figure, Comcast calculates a monthly
payment with three components: (1) its use of “Fully-Managed IVR” services
charged at MSA’s $150 hourly rate; (2) the amount owed for additional expenses
such as SMS and outbound calling; and (3) a monthly “true-up” for the two
remaining months in 2024 based on the annual true-up anticipated under the current
8 Id. at 3. 9 Id. 10 Id. at 3 nn.5 & 6. C.A. No. 2024-0991-LWW November 14, 2024 Page 4 of 6
agreement.11 Based on this calculation, it computes a $1,681,000 monthly payment
for November and December 2024 and a $1,556,000 monthly payment for January
and February 2025.12 Since CX360 does not explain how it arrived at the $1,541,000
monthly payment it estimates Comcast will owe under MSA, I cannot analyze the
differences between the parties’ numbers.
After considering the parties’ submissions, I believe the appropriate Novation
Agreement Amount is $10,259,944. Per the terms of the Novation Agreement, I am
inclined to incorporate the prepayment structure for the Fully-Managed IVR services
into my estimate. Comcast will be required to pay for these services for six months,
at the fixed monthly rate of $1,541,000 per month, for a total payment of $9,246,000.
I also find compelling CX360’s point that the Novation Agreement excludes certain
services it anticipates using, including professional services and other expenses.
Since these payments are not subject to the prepayment structure, Comcast need only
pay these amounts for the four month period from November 2024 through February
2025. In total, these estimated payments add an additional $506,972.
11 Id. at 2. 12 Id. The difference in monthly payments comes from the true-up amount and a higher monthly payment for Fully-Managed IVR services in 2024 projected by Comcast. Id. at 2 n.1. C.A. No. 2024-0991-LWW November 14, 2024 Page 5 of 6
Again, because CX360’s estimate lacks specificity, it is challenging to
understand how its calculations differ from Comcast’s. Comcast’s detailed
calculation appears reasonable. Accordingly, I adopt $6,474,000 as the MSA
Amount.
Based on these values, and inclusive of the $1,400,000 in employee retention
costs, Comcast must post a bond of $5,185,944.13 As I acknowledged in the Letter
Order, “[t]he value of a bond acts as a cap on the damages recoverable by a
wrongfully enjoined party.”14 Thus, “the court should ‘err on the high side’ in setting
the bond.”15 The bond to be posted serves these ends. It will adequately compensate
CX360 for any harm suffered if the status quo order proves improvidently granted.
For completeness, I have also considered CX360’s argument that the
formulation of the bond outlined in the Letter Order is flawed and fails to protect it
from potential losses.16 CX360 did not move for reconsideration of the Letter Order.
Its request that I do so in response to its letter submission is procedurally improper.
13 $10,259,944 - $6,474,000 + $1,400,000 = $5,185,944. 14 Leon v. Orlando, 2024 WL 2862452, at *2 (Del. Ch. June 5, 2024). 15 Letter Order 2 (citing Guzzetta v. Serv. Corp. of Westover Hills, 7 A.3d 467, 470 (Del. 2010)). 16 CX360 Bond Letter 1-2. C.A. No. 2024-0991-LWW November 14, 2024 Page 6 of 6
Regardless, I reject the argument. CX360’s position hinges on Schedule A of
the proposed Novation Agreement, which would require Comcast to accept—or at
least pay for—CX360’s services through the end of 2025.17 According to CX360,
by assuming in my bond formulation that it will cease providing services to Comcast
in February 2025, I assume Comcast will not sign the Novation Agreement in its
current form.18
Though CX360’s position has some logic, it is inconsistent with the core
issues before me. This lawsuit concerns whether CX360 had the right to terminate
the MSA after Comcast chose another service provider. If CX360 prevails on its
arguments under the MSA, Comcast might choose to sign the Novation Agreement.
Or it might not. As such, I decline to order Comcast to post a bond presuming the
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