949 F. Supp. 2d 447
S.D.N.Y.2013Background
- Zcom, Verizon Master Agent, renewed a five-year Agency Agreement in 2008 covering store approvals and sub-agent relationships.
- Zcom alleges Verizon directed fraudulent prepaid activations to inflate activations, with Zcom receiving commissions and spiffs later charged back when activations failed to remain active.
- Verizon allegedly instructed use of discarded CPE as prepaid devices, requiring test calls to avoid deactivation within 180 days, creating profits for Verizon at Zcom’s expense.
- Verizon allegedly terminated Zcom’s Agency Agreement in July 2011 for “without cause” reasons, while internal letters suggested “with cause” grounds; the termination was to take effect January 31, 2012.
- After termination, Verizon allegedly froze Zcom’s growth and blocked sales of Zcom’s locations to third parties, while awarding similar rights to chosen purchasers, affecting Zcom’s business and subagents.
- Non-Verizon defendants (Ajay Bhumitra, Shelly Bhumitra, Poonam Sawnhey) were joined in related actions; CAFA removal and later remand decisions governed the posture of claims against different defendants.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| CAFA jurisdiction after amendment | CAFA original jurisdiction remains despite removal and amendment. | Post-removal amendments could destroy or affect CAFA jurisdiction. | CAFA jurisdiction retained; amendments did not destroy jurisdiction. |
| Supplemental jurisdiction over non-CAFA claims | Court should exercise supplemental jurisdiction over related state-law claims. | Exceptional circumstances warrant remand to state court for non-Verizon defendants. | Remand of non-Verizon defendants' claims to state court; court exercised supplemental jurisdiction over Verizon claims. |
| Breach of contract: termination without cause | Verizon breached by terminating without proper grounds, mischaracterizing ‘without cause.’ | Agency Agreement § 8.8 allows termination without cause with six months’ notice; no breach. | Terminating without cause with six months’ notice was permitted; Count IX dismissed. |
| Implied covenant waiver enforceability | Paragraph 10.2’s waiver of implied duties is unenforceable under New York law. | Broad waivers of rights are generally enforceable. | Waiver upheld; even if assumed, no change in outcome; Count X dismissed for lack of specificity. |
| Pre-suit notice / Negotiation requirement damages | Verizon’s failure to provide pre-suit notice caused damages due to transfer of action venue. | Non-occurrence of condition precedent does not automatically grant damages; dismissal appropriate. | Count VIII dismissed; relief limited to dismissal of Parallel Action if applicable. |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (pleading must state plausible claim; no presumption for conclusions)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (plausibility standard for pleadings)
- In re Burlington Northern Santa Fe Ry. Co., 606 F.3d 379 (7th Cir. 2010) (post-removal amendments do not destroy CAFA jurisdiction)
- Moran v. Erk, 11 N.Y.3d 452 (N.Y. 2008) (implied covenant limits not ordinarily read into unambiguous contracts)
- Carvel Corp. v. Noonan, 3 N.Y.3d 182 (N.Y. 2004) (tortious interference and wrongful means; Carvel II discussion)
- White Plains Coat & Apron Co., Inc. v. Cintas Corp., 8 N.Y.3d 422 (N.Y. 2007) (greater protection for existing contracts; wrongful means analysis)
- Itar-Tass Russian News Agency v. Russian Kurier, Inc., 140 F.3d 442 (2d Cir. 1998) (when deciding whether to exercise supplemental jurisdiction, consider rarity)