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AT&T Corp. v. JMC Telecom

December 1, 2006

AT&T CORP.
v.
JMC TELECOM, LLC, APPELLANT



On Appeal from the United States District Court for the District of New Jersey District Court No. 99-cv-02578 District Judge: Hon. Mary Little Cooper.

The opinion of the court was delivered by: Roth, Circuit Judge

PRECEDENTIAL

Argued on March 7, 2006

Before: GREENBERG and ROTH*fn1, Circuit Judges BUCKWALTER*fn2, District Court Judge.

OPINION

JMC Telecom, L.L.C., was a wholesaler, marketer, and designer of prepaid telephone cards with experience in the maritime market.*fn3 This appeal arises from a suit for breach of contract brought by AT&T Corporation against JMC. JMC counterclaimed for antitrust, federal common law, and state law violations. The District Court dismissed the antitrust counterclaim and granted summary judgment to AT&T on its contract claims and against JMC on its remaining counterclaims. For the reasons stated below, we will affirm the decision of the District Court.

I. Background

In September 1998, AT&T and JMC entered into an agreement under which AT&T would provide prepaid calling services to JMC and JMC in turn would sell the services as prepaid telephone cards to end-users in the maritime market.*fn4 The maritime sector represented a new market for AT&T and, more importantly, a way to expand its business in the international market for prepaid phone cards, which give the end-user a preset amount of telecommunications services. According to JMC, the two companies had an implicit agreement that restricted JMC's sales territory for the cards to the maritime sector.

AT&T and JMC executed four documents to set up the agreement: the Contract Tariff Order Form, the Professional Services Agreement, Contract Tariff No. 10344, and an Addendum. The documents outlined the price JMC would pay for the telecommunications services behind the cards, as well as establishing a minimum annual revenue commitment (MARC) on the part of JMC. The Professional Services Agreement provided that JMC would design and print the cards while AT&T would provide funding in part for card production. The Addendum stated that, if a business downturn beyond JMC's control caused JMC to fail to meet the MARC, the parties would cooperate to develop a mutually agreeable solution.

In accordance with federal law, AT&T filed with the Federal Communications Commission (FCC) the executed Contract Tariff Order Form, Contract Tariff No. 10344, and AT&T FCC Tariff No. 1, which was a tariff previously filed with the FCC by AT&T and which was referred to in the other two documents. The Addendum was never filed with the FCC despite AT&T's alleged promise to do so. In addition, JMC asserts that, pursuant to Contract Tariff No. 10344 and AT&T Tariff No. 1, AT&T would be the exclusive provider of the services needed to complete calls using the cards. CT 10344 lists "Other Participating Carriers" as "NONE."

JMC soon developed concerns with both the quality of service provided by AT&T and the cards themselves. Specifically, JMC contends that the cards were often printed with duplicate identification numbers and incorrect instructions for foreign origination calls, i.e., calls between two foreign countries.*fn5 JMC estimated that sales of the cards fell by 50% because of the problems with foreign origination calls.

Moreover, cardholders complained about AT&T's customer service, or lack thereof. Finally, users were frequently unable to complete calls from the United States to the Philippines, which was one of the more important selling points of the cards. JMC estimated that it lost 25% of its business due to the initial problems in completing calls to the Philippines. This particular problem was corrected after AT&T switched card traffic away from the original local country carrier, Pacific Gateway Exchange (Pacific).

Per the agreement, AT&T sent JMC invoices for its services. AT&T received a one-time, partial payment on November 2, 1998, of $400,000. JMC made no further payments to AT&T.

Due to JMC's concerns with service and other related problems, JMC sought more competitive rates from AT&T. The negotiations pursuant to the Addendum were unsuccessful, and AT&T filed a complaint against JMC on June 4, 1999, for the balance owed from cards already sold and the amount JMC owed under the MARC. JMC filed a counterclaim, alleging violations by AT&T of state law, the Sherman Act, and federal common law.*fn6 The District Court dismissed JMC's antitrust counterclaim under FED. R. CIV. P. 12(b)(6) and granted summary judgment pursuant to FED. R. CIV. P. 56(c) on AT&T's complaint and against JMC on all of its remaining counterclaims.*fn7 This appeal followed.

II. Jurisdiction and Standard of Review

The District Court had original jurisdiction pursuant to 28 U.S.C. §§ 1331, 1332 and 1337, and 15 U.S.C. §§ 15 and 26. Also, the District Court had supplemental jurisdiction over JMC's state law claims under 28 U.S.C. § 1367. We have jurisdiction over the District Court's ...


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