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Stx Ii, LLC v. Union Telecard Alliance

May 4, 2011

STX II, LLC,
PLAINTIFF,
v.
UNION TELECARD ALLIANCE, LLC, AND IDT TELECOM, INC., DEFENDANTS.



The opinion of the court was delivered by: Hon. Stanley R. Chesler

NOT FOR PUBLICATION

OPINION

CHESLER, U.S.D.J.

This matter comes before the Court upon the motion for partial summary judgment, pursuant to Federal Rule of Civil Procedure 56, by third party Plaintiffs Union Telecard Alliance, LLC and IDT Telecom, Inc. (collectively, the "TPPs"). The Court heard oral argument on the motion on May 2, 2011. For the reasons stated below, the motion will be granted.

The TPPs move for partial summary judgment on the counterclaims asserted by third party Defendants Diamond Phone Card, Inc., Nasreen Gilani, and Samsuddin Panjwani (collectively, the "TPDs"). The TPDs have asserted five counterclaims: 1) breach of contract by failure to provide the best rates; 2) detrimental reliance on a guarantee; 3) breach of contract by failure to satisfy the debts of King Distributors; 4) tortious interference with contract; and 5) breach of contract by deactivating calling cards.

The TPPs contend that the counterclaims all arise out of the former business operations of Diamond Phone Card, Inc., which bought and sold phone cards, and that Diamond sold all these claims to an entity named STi. The TPPs argue that, therefore, the TPDs have no remaining legal interest in the counterclaims they have asserted, and therefore lack standing to bring these claims.

In opposition, the TPDs contend that "Diamond did not surrender any claims or causes of action related to calling cards distributed by UTA when it sold its intellectual property." (TPD's Opp. Br. 21.) The TPDs point to the provisions of the Asset Purchase Agreement dated February 27, 2009 (the "Agreement"). The Agreement provides that the sellers, the TPDs, convey to the purchaser, STi Prepaid, LLC, "[a]ll Intellectual Property owned or used in connection with the Business." (Zielinski Dec. Ex. I at § 2.01(a).) The Agreement also provides for the transfer of the following:

Except for the Excise Tax Claim, all claims, causes of action, rights of recovery and rights of set-off of any kind pertaining to or arising out of and accruing to the benefit of Seller and relating to the Purchased Assets. (Id. at § 2.01(c).)

The brief submitted by the TPDs does not persuade this Court that the Agreement did not cover calling cards distributed by UTA. The brief does no more than make the assertion in one conclusory heading. The TPDs do offer the 30(b)(6) deposition testimony of Samsuddin Panjwani, who testified that Diamond did not sell anything but its "labels." (TPD's Opp. Br. 22.) The TPDs do not define what Mr. Panjwani meant by the word "labels," but, given the provisions of the Agreement, it would appear that he meant the trademarks and intellectual property associated with the phone card business.

This testimony raises no material factual issue. The language of the Agreement is clear and unambiguous. The seller conveyed all intellectual property used in connection with the phone card business to the purchaser. Given that the scope of the sale of intellectual property was total, the only way that TPDs could persuade that the UTA card business lies outside the scope of this provision would be to have provided evidence that the UTA cards were not associated with any intellectual property. The TPDs have offered no such evidence, and not even an explanation, to support the proposition that the UTA cards were not associated with any intellectual property, such that this part of the intellectual property of the business was not conveyed by the Agreement.

There is no dispute as to the existence or contents of the Asset Purchase Agreement. The clear language of the Agreement states that the TPDs conveyed all intellectual property used in connection with their business, as well as all claims pertaining to those purchased assets. The TPDs have offered no reason for this Court not to conclude that, under the Asset Purchase Agreement, "all" means all, and that the intellectual property associated with all calling cards, including the UTA cards, was conveyed to the purchaser.

The sole remaining question for this Court is whether the counterclaims asserted by the TPDs pertain to or relate to the intellectual property conveyed under the Asset Purchase Agreement. The First Counterclaim asserts that Diamond contracted with UTA and IDT for the purchase of calling cards, and that UTA and IDT breached a provision of this contract by failing to provide the best credit and discount rates. This claim pertains to, or relates to, the calling cards Diamond purchased from UTA and IDT, and the intellectual property associated with those calling cards. The Agreement conveyed the right to assert this counterclaim.

The Second and Third Counterclaims assert that UTA and IDT promised to guarantee the debts of King Distributors to Diamond and failed to do so. The Amended Answer asserts that King Distributors purchased calling cards from Diamond. (Am. Answ. ¶ 172.) A guarantee of debts incurred by the purchase of calling cards from Diamond pertains to, or relates to, the calling cards Diamond purchased from UTA and IDT, and the intellectual property associated with those calling cards. The Agreement conveyed the right to assert these counterclaims.

The Fourth Counterclaim asserts that UTA and IDT tortiously interfered with contracts Diamond had with customers by deactivating calling cards. This claim pertains to, or relates to, the calling cards Diamond purchased from UTA and IDT, and the intellectual property associated with those ...


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