Peg Bandwidth TX, LLC v. Texhoma Fiber, LLC

299 F. Supp. 3d 836
CourtDistrict Court, E.D. Texas
DecidedMarch 7, 2018
DocketCivil Action No. 4:16–CV–00815
StatusPublished
Cited by2 cases

This text of 299 F. Supp. 3d 836 (Peg Bandwidth TX, LLC v. Texhoma Fiber, LLC) is published on Counsel Stack Legal Research, covering District Court, E.D. Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Peg Bandwidth TX, LLC v. Texhoma Fiber, LLC, 299 F. Supp. 3d 836 (E.D. Tex. 2018).

Opinion

AMOS L. MAZZANT, UNITED STATES DISTRICT JUDGE

Pending before the Court are Defendant Texhoma Fiber, LLC's Motion for Summary Judgment (Dkt. # 36) and Plaintiff PEG Bandwidth TX, LLC's Motion for Partial Summary Judgment (Dkt. # 37). Having considered the relevant pleadings and evidence, the Court finds that Plaintiff's motion should be granted. The Court further finds that Defendant's motion should be granted in part and denied in part.

BACKGROUND

Plaintiff PEG Bandwidth TX, LLC ("PEG") provides network solutions for cellular telephone carriers. In 2010 and 2011, PEG began discussions with the Hilliary family about providing PEG access to fiber optic cables for the purpose of supplying "backhaul" service to cellular carriers in the Wichita Falls area.1 Defendant Texhoma Fiber, LLC ("Texhoma Fiber") is owned by the Hilliarys. The fiber in Wichita Falls was owned by Community Telephone, a subsidiary of Comcell, Inc. ("Comcell"), which was owned by the Humpert family. The Hilliarys were in discussions to purchase Comcell, but had not finalized the acquisition.

The parties negotiated an agreement whereby Texhoma Fiber would lease to PEG pre-existing fiber in the Wichita Falls area and PEG would pay Texhoma Fiber to build out and extend the Wichita Falls fiber network to make it suitable for PEG to supply backhaul service to its customers.

*839In May 2011, the parties finalized the contract into an agreement called the Dark Fiber Lease Agreement (the "Lease Agreement"). Texhoma Fiber was named as the lessor in the Lease Agreement. The dark fiber leased in the Lease Agreement would eventually connect numerous sites in the Wichita Falls area. Under the Lease Agreement, PEG could connect its equipment to the fiber at each site and thereby use the fiber to transmit data between the sites for the benefit of its customers.2 Specifically, PEG used the fiber leased pursuant to the Lease Agreement in order to service three CMRS [Commercial Mobile Radio Service] carriers-Verizon Wireless, US Cellular, and AT & T. The term of the Lease Agreement was thirty (30) years.

The Lease Agreement stated that "TEXHOMA FIBER owns and operates a continuous fiber optic network between the points identified in Exhibit A." The Lease Agreement defined the location of the fiber in Exhibit A as the "Texhoma Fiber Route." The Lease Agreement provided for PEG to pay Texhoma Fiber $1.6 million in order to design, engineer, and construct a continuous fiber optic network in the Wichita Falls area that PEG could lease for the purpose of serving its cellular telephone customers.

Initially, the network would consist of 48-count fiber optic cable that connected the cell sites described on Exhibit "A" to the Lease Agreement. As amended, the Lease Agreement gave PEG the exclusive right to use only six of those fibers throughout the network.3 Therefore, there were 42 fibers in the bundle to which PEG did not have exclusive access, even though it had largely paid for the construction of the network for those additional fibers. In total, PEG paid Texhoma Fiber $2,240,000 for the Texhoma Fiber Route.

In order to protect PEG's interests, the parties agreed that Texhoma Fiber could lease the other 42 fibers to other lessees subject to a non-circumvention provision:

18.1 NON-CIRCUMVENTION. TEXHOMA FIBER shall not, directly or indirectly through other customers, offer or provide services to licensed CMRS carriers at the sites contained in Exhibit A, without the prior written consent of PEG. Nothing herein shall restrict TEXHOMA FIBER'S right to provide any services to wireless carriers at sites not contained in Exhibit A.

Lease Agreement, at § 18.1.

This 30-year non-compete obligation restricts Texhoma Fiber from directly or indirectly offering or providing any service to any licensed CMRS carriers at any of the sites located on Texhoma Fiber Route (or any other sites that became subject to the Lease Agreement), without first receiving written consent from PEG. The non-circumvention provision allowed Texhoma Fiber to use the other 42 fibers to service customers other than licensed CMRS carriers, such as local businesses seeking to connect multiple sites. It also permitted Texhoma Fiber to use the other *84042 fibers to provide backhaul service to CMRS carriers at locations not subject to the Lease Agreement.

On July 15, 2011, PEG entered into a Master Services Agreement (the "US Cellular Agreement") to provide cellular communication services to United States Cellular Corporation ("US Cellular"). On August 10, 2011, pursuant to the US Cellular Agreement, US Cellular issued a Market Service Order that authorized PEG to provide cell site backhaul services to US Cellular for five years at fourteen new cell sites in the Texhoma Fiber Route.

Texhoma Fiber ultimately never finalized its purchase of Comcell. Because Texhoma Fiber was using fiber owned by Comcell's subsidiary, Community Telephone, apparently without compensating Comcell, Comcell and Community Telephone eventually threatened to disconnect their fiber from the Texhoma Fiber Route. Then, Comcell and Community Telephone filed suit against both Texhoma Fiber and PEG.

Texhoma Fiber settled with Comcell and Community Telephone in 2014. In the settlement, Texhoma Fiber agreed to pay Comcell and Community Telephone $250,000, to assign to Comcell the Lease Agreement, and to convey to Comcell half the fiber in the route served by the Lease Agreement. PEG was not a party to this settlement. On January 1, 2014, Texhoma Fiber, pursuant to § 18.10 of the Lease Agreement, assigned the Lease Agreement to Comcell ("Comcell Assignment"). The relevant assignment provision reads:

Texhoma does hereby assign and transfer unto Comcell, effective as of [January 1, 2014], all of Texhoma's benefits, obligations and liabilities under the PEG Bandwidth Contract, to have and hold the same. Subject to the provisions of Section 1(b) below, Comcell hereby accepts such assignment and transfer and therefore agrees to assume all of Texhoma's benefits, obligations and liabilities under the PEG Bandwidth Contract pursuant to the terms of this Assignment.

(Dkt. # 36, Exhibit 6).

By letter dated March 12, 2014, Texhoma Fiber, pursuant to § 18.10 of the Lease Agreement, notified PEG about the Comcell Assignment, and directed PEG to send all further payments due under the Lease Agreement to Comcell. The notice letter stated, "Texhoma Fiber, LLC assigned to Comcell Inc., all rights, title and interest in the Dark Fiber Lease Agreement .... By this Notice, you are directed to make all future payments due under said Lease and amendments to Comcell, Inc." (Dkt. # 37, Exhibit 21). On July 2, 2014, PEG and Comcell agreed to amend the Lease Agreement for a third time to include Comcell as successor in interest to Texhoma Fiber. After the assignment, the fiber optic sheath in the Texhoma Fiber Route contained 24 fibers owned by Texhoma Fiber and 24 fibers owned by Comcell, with Comcell's fibers servicing PEG (Dkt. # 37, Exhibit 15).

After the assignment, Texhoma leased certain fiber to Dobson Technologies ("Dobson"), which Dobson has used to provide cellular communication services to US Cellular at some of the US Cellular Sites (Dkt. # 39 at p. 7). In 2016, US Cellular did not renew its contract with PEG.

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Bluebook (online)
299 F. Supp. 3d 836, Counsel Stack Legal Research, https://law.counselstack.com/opinion/peg-bandwidth-tx-llc-v-texhoma-fiber-llc-txed-2018.