Global Crossing Telecommunications, Inc. v. CCT Communications, Inc. (In Re CCT Communications, Inc.)
464 B.R. 97
Bankr. S.D.N.Y.2011Background
- Global Crossing contracted to provide telecom services to CCT, which resold them to customers; RCA included a broad limitation on damages (§ 6.2) excluding indirect, consequential, and certain lost-damages claims.
- An AYCE amendment in Dec 2006 created a flat-fee pricing for certain destinations, with separate order forms; the amendment did not modify § 6.2.
- Global Crossing later blocked Caribbean/international traffic and threatened termination to pressure CCT to sign the amendment; CCT did not sign, and Global Crossing halted international traffic (except Canada) around Jan 17, 2007.
- CCT filed for bankruptcy (Jan 28, 2007) and Global Crossing commenced this adversary proceeding seeking declaratory relief, with CCT counterclaims including breach of contract and Communications Act damages.
- Count VII sought to nullify or limit § 6.2 as a damages shield; Global Crossing moved for partial summary judgment seeking enforcement of § 6.2 and its scope; CCT opposed on grounds of willful misconduct and severability.
- The court awarded partial summary judgment: § 6.2 is enforceable for state-law claims and CA damages, but the full scope of the clause (whether it bars direct/general damages) is unresolved and may require trial.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 6.2 is enforceable under New York law. | § 6.2 is a valid, mutual limitation of liability freely bargained between sophisticated parties. | Public policy bars broad exculpation for willful misconduct/gross negligence; may render § 6.2 invalid or severable. | § 6.2 is enforceable under NY law as to state-law and CA damages, subject to public-policy exception for willful misconduct/gross negligence. |
| Whether § 6.2 bars damages under the Communications Act. | NY law should govern interpretation and § 6.2 should limit CA damages as a contract term. | CA claims may be limited by contract when no willful misconduct/gross negligence; detariffing supports enforcing liability limits. | § 6.2 is enforceable against § 206 damages, applying NY-law interpretation of the clause. |
| Whether Global Crossing's conduct was willful misconduct to defeat § 6.2. | Global Crossing acted with malice or willful intent to harm CCT. | Actions were economically motivated self-help; no malice or intent to injure beyond economic self-interest. | Global Crossing’s actions were economically motivated; no willful misconduct or gross negligence proven; public-policy exception not satisfied. |
| What is the scope of § 6.2 (are direct damages barred as well as consequential damages). | § 6.2 bars all non-restitution damages, including direct losses. | Second clause ambiguous; may not bar direct damages; could cover lost revenues/profits only. | § 6.2 bars consequential/indirect damages; its full scope remains ambiguous and may require extrinsic evidence; direct damages not conclusively barred. |
| Severability of § 6.2 from the RCA. | If § 6.2 is invalid, it should be severed and not affect the remainder. | If willful misconduct/gross negligence found, § 6.2 not applicable regardless of severability. | Severability deemed moot given potential enforceability absent willful misconduct/gross negligence; in any event, § 6.2 remains enforceable absent such misconduct. |
Key Cases Cited
- Metropolitan Life Ins. Co. v. Noble Lowndes Int'l, Inc., 84 N.Y.2d 430 (N.Y. 1994) (limitation clauses subject to public policy exception for willful/gross negligence)
- Kalisch-Jarcho, Inc. v. City of New York, 461 N.E.2d 416 (N.Y. 1983) (public policy limits exculpatory clauses for willful or grossly negligent acts)
- Sommer v. Fed. Signal Corp., 593 N.E.2d 1365 (N.Y. 1992) (public policy against exculpatory clauses in gross negligence cases)
- Berner v. British Commonwealth Pac. Airlines, Ltd., 346 F.2d 532 (2d Cir. 1965) (willful misconduct included where tortious intent to injure exists; discussed in NY context)
- Am. Tel. & Tel. Co. v. Cent. Office Tel., Inc., 524 U.S. 214 (U.S. 1998) (detariffing and file-rate doctrine; tariffs and liability limits under Communications Act)
- Ryder Communications, Inc., 18 F.C.C.R. 13603 (FCC 2003) (enforcing contract-based liability limitations against CA claims under §206)
- Tractebel Energy Mktg., Inc. v. AEP Power Mktg., Inc., 487 F.3d 89 (2d Cir. 2007) (lost profits/consequential damages framework under contract law)
- Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, 473 U.S. 614 (U.S. 1985) (principle against waiving statutory remedies in arbitration/foreign forum contexts)