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May 22, 1997

TRANSGLOBAL TELECOM ALLIANCE, INC., AND JAMES CARRAWAY, Defendants/Third Party Plaintiffs, v. AT&T CORP., Third Party Defendant.

The opinion of the court was delivered by: POLITAN

 Dear Counsel:

 This matter comes before the Court on the motion of plaintiff, AT&T Credit Corporation ("AT&T Credit"), for summary judgment against defendants Transglobal Telecom Alliance ("Transglobal") and James Carraway ("Carraway") (collectively referred to as "defendants") seeking a determination that defendants breached the terms of a lease agreement and guaranty between AT&T Credit and the defendants. AT&T Credit also seeks an award of damages and a determination that it is entitled to possession of the equipment it leased to Transglobal. Defendants brought a cross-claim to compel discovery responses.

 Oral argument was heard in this matter on February 24, 1997. Based upon a review of the record and the arguments of counsel, and as more fully set forth below, AT&T Credit's motion for summary judgment is GRANTED. The Court, however, declines to certify the judgment as final due to the remaining claims in the case between defendants and AT&T Corporation, a third-party defendant.


 On or about July 19, 1994, Transglobal executed a document acknowledging that the Agreement, Schedule 00010, and all other agreements constituted the entire agreement between Transglobal and AT&T Credit relating to the Leased Equipment. Transglobal also executed a Master Equipment Lease Agreement Commencement Certificate ("Commencement Certificate"), in which Transglobal acknowledged delivery, acceptance, and proper working condition of the Leased Equipment.

 Also on or about that same day, defendant Carraway executed a Master Equipment Lease Agreement Guaranty ("Guaranty"), personally guaranteeing to AT&T Credit the full and prompt payment, observance, and performance when due of all obligations of Transglobal under the lease.

 Soon after the lease commenced on August 31, 1994, Transglobal's account became delinquent with AT&T Credit. Transglobal made its November 1994 payment, but made no further payments. The Agreement and Schedule 00010 (collectively referred to as "the Lease") provide for a series of specific remedies to AT&T Credit in the event of Transglobal's default. If Transglobal fails to make any monthly payment within ten days of the due date, Transglobal is obligated to pay AT&T Credit a late charge of 5% of the monthly payment. It also obligates Transglobal to pay AT&T Credit interest at a rate of 1 1/2% per month.

 Paragraph 20 of the Agreement is a liquidated damages provision, which provides that if default occurs, AT&T Credit has the right to recover damages in the amount of the Lessor's Return, which is defined as the sum of the following amounts:

(a) the aggregate amount of delinquent rental payments (including late fees and interest); plus
(b) the present value of all rental payments due for the remaining term of the lease, discounted at 5%; plus
(c) the present value (discounted at 5%) of the casualty value of the equipment.

 As of May 2, 1996, AT&T Credit calculated that amount as $ 250,658.58. The Agreement also provides for the payment of costs to AT&T Credit, and allows AT&T Credit to take possession of or render unusable the Leased Equipment.

 Defendants deny that they are in default in performing their obligations under the Lease documents and that any payments are due to AT&T Credit. Defendants allege that the reason they had to discontinue their operations was that AT&T Corp. breached its agreement with Transglobal. AT&T Corp. and Transglobal had entered into an agreement which provided that AT&T Corp. would provide equipment, lines, and minutes to Transglobal to start up its call turnaround ("CTA") business. *fn2"

 Transglobal joined AT&T Corp. as a third-party defendant in this matter for breach of this agreement. There are several allegations against AT&T, with one being that AT&T Corp. continued amending the agreement after Transglobal had begun operations at an agreed-upon rate. Most simply put, Transglobal contends that the equipment lease with AT&T Credit was merely a component of a complex business arrangement with AT&T Corp. and that Transglobal and Carraway have valid defenses to the enforcement of the Agreement and the Guaranty.


 The standard for a summary judgment motion is set forth in Federal Rule of Civil Procedure 56(c), which provides in pertinent part:

the judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.

 Fed. R. Civ. P. 56(c). A fact is material if it might affect the outcome of the suit under the governing substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, ...

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