Mobile Satellite Communication, Inc. v. Intelsat USA Sales Corporation

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
_________________________________________
)
MOBILE SATELLITE COMMUNICATIONS, )
INC. d/b/a PITTSBURGH INTERNATIONAL )
TELECOMMUNICATIONS, INC., )
)
Plaintiff, )
)
v. ) Civil Action No. 09-0436 (ESH)
)
INTELSAT USA SALES CORP., et al., )
)
Defendants. )
_________________________________________ )
MEMORANDUM OPINION AND ORDER
Plaintiff Mobile Satellite Communications, Inc., d/b/a/ Pittsburgh International
Telecommunications, Inc., has brought suit against Intelsat Sales Corp. and Intelsat Global
Service Corp. for common law fraud and/or fraudulent inducement and tortious interference with
contract. Defendants have filed a Joint Motion to Dismiss, or in the Alternative, Motion for
More Definite Statement. For the reasons set forth below, the Court denies defendants’ motion.
BACKGROUND
Defendants operate a fleet of telecommunications satellites in geostationary orbit on
which they lease bandwidth to telecommunications and broadcast companies and other entities.
(Compl. ¶ 6.) The companies lease the bandwidth in the form of a transponder - - a broadband
channel that is part of the microwave repeater and antenna system housed onboard the operating
satellite. (Id.) Plaintiff owns and operates a large, privately-owned satellite teleport facility
through which it provides international access for video and data services. (Id. ¶ 7.) Plaintiff’s
facility operates on major domestic and international satellite systems in the C and Ku-bands.
(Id.) In order to serve its clients, plaintiff leases satellite transponder bandwidth from several
providers, including defendants. (Id. ¶ 8.) Defendants lease this bandwidth on both a
preemptible or non-preemptible basis. (Id. ¶ 9.) Non-preemptible service may not be interrupted
to restore other services, while preemptible service may be interrupted in order to restore service
to non-preemptible transponders. (Id.)
According to plaintiff, as a matter of corporate policy, it leases bandwidth only on a non-
preemptible basis unless “clear assurances are provided to guarantee that service would be
functionally comparable to non-preemptible.” (Id.) Beginning in 2001, plaintiff leased non-
preemptible service on two transponders on defendants’ Galaxy 25 satellite. (Id. ¶ 10.) While
Galaxy 25 had suffered solar array “string failures,” causing power outages to several
transponders, the satellite had a specific coverage area that was preferred by many of plaintiff’s
existing and potential customers. (Id.) Thus, in late 2006, plaintiff decided to lease a third
transponder on Galaxy 25. (Id. ¶ 11.)
Defendants wanted to persuade plaintiff to enter into a preemptible lease for the new
transponder (id. ¶ 12), and plaintiff’s representatives and those of defendants had several
discussions regarding this issue:
(1) On or about November 1, 2006, Floyd Ganassi, plaintiff’s
chairman; Michael Asti, its CFO; and Jeffrey Wateska, its Chief Sales Officer;
met with defendants’ agents, Ron Rosenthal, Regional Vice President of North
American Broadcast Solutions; and Jay Norway, Senior Account Manager; to
discuss the possibility of plaintiff leasing an additional transponder. (Id. ¶ 14.)
Plaintiff alleges that during this meeting, Norway and Rosenthal stated that if
plaintiff leased a preemptible transponder, it “would receive the highest priority
service among the other Galaxy 25 preemptible transponders, using words to the
effect that [plaintiff’s] transponder would be ‘last turned off and first turned on in
the event of interruption.’” (Id.) Moreover, plaintiff alleges that Norway
produced a “multi-color spreadsheet to illustrate [plaintiff’s] priority as further
assurance.” (Id.) In the face of plaintiff’s skepticism about signing a preemptible
lease, defendants “persisted, offering extensive assurances that [plaintiff’s]
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transponder would be the last to be preempted and the first to be restored in the
event of preemption.” (Id. ¶ 15.)
(2) On or about December 19, 2006, Norway, Rosenthal, and Kurt
Riegelman, defendants’ Senior Vice President of North American Sales, visited
plaintiff’s main facility. (Id. ¶ 16.) In response to plaintiff’s concerns about a
preemptible lease, Norway, Rosenthal, and Riegelman once again assured
plaintiff that its transponder would be the last turned off and the first turned on in
the event of preemption. (Id.)
(3) During or around the week of April 9 -12, 2007, Wateska and Norway
discussed the possibility of plaintiff leasing transponder K23 on Galaxy 25. (Id. ¶
17.) In response to Wateska’s preemption concerns, Norway again provided
assurances that K23 would be the last turned off and the first turned on in the
event of preemption. (Id.)
In reliance on these representations, plaintiff signed a preemptible Lease Service Order
for K23, dated April 12, 2007 (the “K23 Lease”), which incorporates by reference the
preexisting Nonexclusive Service Agreement No. 03445-000, dated October 1, 2003 (the
“NESA”) between the parties.1 (Id. ¶ 18; see also Defs.’ Mot. to Dismiss Exhs. A, B.)
Moreover, plaintiff also (1) repeated defendants’ representations to its own customers and
structured its services to its customers based thereon; (2) placed high-credit-quality customers on
K23; and (c) refrained from making arrangements that would have made it easier to transition
customers between K23 and plaintiff’s other transponders. (Compl. ¶ 19.)
The K23 Lease had an option to upgrade from preemptible to non-preemptible service at
any time. (Id. ¶ 20.) However, to induce plaintiff not to exercise this option, defendants
continued to assure plaintiff of the priority of K23. (Id..)
On or about September 18, 2007, Wateska contacted Norway regarding K23’s priority as
compared to K01, a preemptible transponder that had recently been leased to plaintiff’s
1
The only other party to the K23 Lease and the NESA is Intelsat USA Sales Corp. While
plaintiff identifies various individuals as representatives or agents of both Intelsat USA Sales
Corp. and Intelsat Global Service Corp., neither plaintiff nor defendants explain the relationship
between the two parties.
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competitor, RRSat Global Communications Network Ltd. (“RRSat”) (Id. ¶ 21.) Plaintiff alleges
on information and belief that RRSat, a publicly-traded company, “generally receives favorable
treatment [from defendants] compared to [plaintiff].” (Id.) Norway assured plaintiff that RRSat
held the lowest priority, stating words to the effect that RRSat’s K01 was “one second
preemptible,” meaning that K01 would be turned off on one second’s notice, and plaintiff’s K23
would be restored before K01 in the event of preemption. (Id.) At a dinner in New York on or
about October 10, 2007, Norway again assured Wateska and Missy Gralish, another
representative of plaintiff, that plaintiff had a higher priority transponder than RRSat and others.
(Id. ¶ 22.)
On June 25, 2008, plaintiff entered into a contract with G.S.N. GoSat Distribution
Network Ltd. (“GoSat”) to provide Ku-band service to GoSat on the K23 transponder. (Id. ¶ 24.)
That contract permitted GoSat to terminate the agreement in the event that the K23 transponder
service was unavailable for a consecutive period of 24 hours. (Id.)
On September 26, 2008, the Galaxy 25 satellite experienced a solar array string failure.
(Id. ¶ 25.) To conserve power, defendants took two Ku-band and two C-band transponders
offline, including K23, which was taken down at 2:43 a.m. EDT. (Id.) Defendants did not
restore K23 to partial power until October 1, 2008 at 4:00 p.m. EDT and did not restore the
transponder to full power until October 9, 2008. (Id.) However, defendants restored service to
RRSat’s K01 on September 27, 2008 at approximately 11:23 a.m. EDT; thus, K01 suffered only
about 24 hours of downtime. (Id. at ¶ 27.)
Due to the delay in restoration of K23’s service, GoSat exercised its right to terminate
service with plaintiff and moved its account to RRSat. (Id. ¶28.) Moreover, plaintiff alleges that
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it lost other customers as well, costing it $2 million in profits, and that it incurred the expenses of
moving customers to other transponders in order to minimize the disruption. (Id. ¶¶ 27-28.)
Plaintiff alleges that defendants (1) intentionally misrepresented that K23 would have
priority in the event of preemption in order to induce plaintiff to enter into the K23 Lease and to
refrain from exercising its option to convert K23 to non-preemptible status so that defendants
could obtain operational flexibility, secure revenue and profit by selling more space on existing
bandwidth, and justify discrimination among preemptible lessees on the basis of favoritism and
business needs and (2) intentionally took actions they knew would cause plaintiff’s customers to
terminate their contracts with plaintiff in order to assist RRSat, one of defendants’ preferred
customers. (See id. ¶¶ 33-35, 42.)
ANALYSIS
I. Standard of Review
When ruling on a motion to dismiss filed pursuant to Federal Rule of Civil Procedure
12(b)(6), a court must accept as true all of the factual allegations contained in the complaint.
Atherton v. Dist. of Columbia Office of Mayor, 567 F.3d 672, 681 (D.C. Cir. 2009) (quoting
Erickson v. Pardus, 551 U.S. 89, 94 (2007)). “‘So long as the pleadings suggest a ‘plausible’
scenario to show that the pleader is entitled to relief, a court may not dismiss.’” Id. (quoting
Tooley v. Napolitano, 556 F.3d 836, 839 (D.C. Cir. 2009) (edits omitted)). However,
[t]o survive a motion to dismiss, a complaint must contain sufficient factual
matter, accepted as true, to state a claim to relief that is plausible on its face. A
claim has facial plausibility when the plaintiff pleads factual content that allows
the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged. The plausibility standard is not akin to a “probability
requirement,” but it asks for more than a sheer possibility that a defendant has
acted unlawfully. Where a complaint pleads facts that are merely consistent with
a defendant’s liability, it stops short of the line between possibility and
plausibility of entitlement to relief.
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Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (internal quotation marks and citations omitted).
In deciding the motion, the court “may consider only the facts alleged in the complaint, any
documents either attached to or incorporated in the complaint and matters of which [courts] may
take judicial notice.” E.E.O.C. v. St. Francis Xavier Parochial School, 117 F.3d 621, 624 (D.C.
Cir. 1997).
II. Choice of Law
Federal courts sitting in diversity must apply the choice-of-law rules of the forum state.
Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941); YWCA v. Allstate Ins. Co., 275
F.3d 1145, 1150 (D.C. Cir. 2002). Under District of Columbia law, “parties to a contract may
specify the law they wish to govern, as part of their freedom to contract, as long as there is some
reasonable relationship with the state specified.” Norris v. Norris, 419 A.2d 982, 984 (D.C.
1980). In this case, the NESA contains a choice of law provision, which specifies that New York
law will govern the “validity, interpretation, operation, and effect” of the contract. (NESA §
21.1.) The parties do not dispute the applicability of New York law to the interpretation of the
contract, and plaintiff avers that agents for the parties met in New York at least once (see Compl.
¶ 22). Accordingly, the Court will apply the parties’ choice of New York law to the
interpretation of the contract.
The parties do dispute, however, which law governs plaintiff’s common law causes of
action. Plaintiff contends that either New York or Pennsylvania law governs this action, while
defendant claims that either the District of Columbia or Pennsylvania law governs. Restatement
(Second) of Conflict of Laws §§ 145, 148 are relevant to this analysis. Section 145 of the
Restatement sets forth general principles governing tort cases, while § 148 sets forth factors
specifically applicable in cases of fraud and misrepresentation. The District of Columbia Court
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of Appeals, however, has applied § 145 even in cases of fraudulent misrepresentation. See,
e.g.,Washkoviak v. Student Loan Mktg. Ass’n, 900 A.2d 168 (D.C. 2006). Under District of
Columbia law, courts employ “a modified governmental interests analysis which seeks to
identify the jurisdiction with the most significant relationship to the dispute.” Id. at 180 (internal
quotation marks omitted). Under this analysis, the court must “evaluate the governmental
policies underlying the applicable laws and determine which jurisdiction’s policy would be more
advanced by the application of its law to the facts of the case under review.” Id. As part of this
analysis, courts also consider the factors enumerated in § 145 of the Restatement: (1) the place
where the injury occurred; (2) the place where the conduct causing the injury occurred; (3) the
domicile, residence, nationality, place of incorporation and place of business of the parties; and
(4) the place where the relationship is centered. Id.
On the other hand, the D.C. Court of Appeals also has held that § 148 of the Restatement
“provides a useful framework for selecting the law which applies to multi-state misrepresentation
claims.” Hercules & Co. v. Shama Rest. Corp., 566 A.2d 31, 43 (D.C. 1989). Under that
section, the relevant factors are: (1) the place, or places, where plaintiff acted in reliance on
defendant’s representations; (2) the place where plaintiff received the representations; (3) the
place where defendant made the representations; (4) the domicile, residence, nationality, place of
incorporation and place of business of the parties; (5) the place where a tangible thing which is
the subject of the transaction between the parties was situated at the time; and (6) the place
where plaintiff is to render performance under a contract which he has been induced to enter by
the false representations of defendant.
Based on the record before the Court, it concludes that Pennsylvania has the most
significant relationship to this dispute. Plaintiff is a Pennsylvania corporation with its principal
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place of business there; it was injured there as a result of defendant’s alleged misrepresentations,
which induced it to enter the K23 Lease; and it was in that jurisdiction that plaintiff acted on the
alleged misrepresentations.2 Pennsylvania has an interest in protecting its corporate citizens
from fraudulent misrepresentations made there. See Hercules, 566 A.2d at 43 (“We think that
the District has a compelling interest in protecting a District of Columbia entrepreneur from
fraudulent and negligent misrepresentations, most of them allegedly made in the District, by
another business entity based in the capital.”) By contrast, the sole connection to the District
appears to be that it is the location of defendants’ principal place of business. In any event, as set
forth below, the Court does not believe that the choice of either Pennsylvania or District of
Columbia law changes the outcome of this case.
III. Count I: Fraud
A. Rule 9(b)
Federal Rule of Civil Procedure 9(b) requires plaintiffs to plead “the circumstances
constituting fraud” with particularity. To satisfy this requirement, a plaintiff must “state the
time, place, and content of the false representations, the fact misrepresented and what was
retained or given up as a consequence of the fraud[,] . . . and identify individuals allegedly
involved in the fraud.” U.S. ex rel. Williams v. Martin-Baker Aircraft Co., 389 F.3d 1251, 1256
(D.C. Cir. 2004) (citing Kowal v. MCI Commc’ns Corp., 16 F.3d 1271, 1278 (D.C. Cir. 1994)).
Defendants allege that plaintiff has not met this standard because the complaint does not identify
which defendant “is alleged to have done what act.” (Mot. to Dismiss at 5.)
2
While one misrepresentation was allegedly made in New York in order to induce plaintiff
to refrain from converting its lease to a non-preemptible one (see Compl. ¶ 22), this appears to be
the sole contact with New York.
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With respect to the identification of the individuals allegedly involved in the fraud, the
complaint pleads that Rosenthal, Norway, and Riegelman, as agents of both corporate
defendants, made specific misrepresentations to plaintiff’s representatives. (See Compl. ¶¶ 14,
16-17, 21-23, 32.) By alleging an agency relationship, plaintiff is claiming that each defendant
engaged in the alleged fraudulent representations through their identified representatives. These
allegations are sufficient under Rule 9(b).3 See McWilliams Ballard, inc. v. Broadway Mgmt.
Co., No. 08-1670, 2009 U.S. Dist. LEXIS 58020, at *10 (holding that “[p]laintiff may base its
fraud claims against [defendant corporations] on their vicarious liability for the alleged false
statements and omissions made by their agents or officers”).
B. Parol Evidence Rule
Defendants contend that plaintiff’s fraud claim is barred by the parol evidence rule. (See
Reply at 5-8.) Under Pennsylvania law, the parol evidence rule declares that
where the parties, without any fraud or mistake, have deliberately put their
engagements in writing, the law declares the writing to be not only the best, but
the only evidence of their agreement[;] that [a]ll preliminary negotiations,
conversations and verbal agreements are merged in and superceded by the
subsequent written contract[;] and that unless fraud, accident, or mistake be
averred, the writing constitutes the agreement between the parties, and its terms
cannot be added to nor subtracted from by parol evidence.
3
The cases on which defendants rely, which involved vague and nonspecific complaints
that did not involve allegations regarding the existence of an agency relationship, are inapposite.
See Sofi Classic S.A. de C.V. v. Hurowitz, 444 F. Supp. 2d 231, 248 (S.D.N.Y. 2006) (complaint
against two individuals insufficient under Rule 9(b) where it failed to specify content of alleged
false statements, where and when the statements were made, or identify which defendant made
each statement or omission); Ellison v. Am. Image Motor Co., 36 F. Supp. 2d 628 (S.D.N.Y.
1999) (securities fraud claims against law firm and three of its partners insufficient under Rule
9(b) where complaint failed to (1) allege factual allegations giving rise to an inference of
fraudulent intent, (2) allege any fraudulent or manipulative act, and (3) differentiate what
conduct was attributable to each defendant).
Moreover, because the Court finds that the complaint is sufficient, it will deny
defendants’ motion for a more definite statement.
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Toy v. Metro. Life Ins. Co., 928 A.2d 186, 204 (Pa. 2007) (quoting Yocca v. Pittsburgh Steelers
Sports, Inc., 854 A.2d 425, 436 (Pa. 2004) (internal quotation marks omitted) (alterations in
original)). For the parol evidence rule to apply, “there must be a writing that represents the
parties entire contract, [which] is determined by assessing whether the writing appears to be a
contract complete in itself, importing a complete legal obligation without any uncertainty as to
the object or extent of the parties’ engagement.” Id. (citing Yocca, 854 A.2d at 436). Moreover,
“an integration clause that states that the writing to meant to represent the parties’ entire
agreement is a clear sign” that the contract is fully integrated. Id.
While fraud in the execution of the contract is an exception to the Pennsylvania parol
evidence rule, fraud in the inducement, as alleged here, is not. Yocca, 854 A.2d at 437 n.26
(“[W]hile parol evidence may be introduced based on a party’s claim that there was a fraud in
the execution of the contract, i.e., that a term was fraudulently omitted from the contract, parol
evidence may not be admitted based on a claim that there was fraud in the inducement of the
contract, i.e., that an opposing party made false representations that induced the complaining
party to agree to the contract.” (citations omitted)). Thus, defendants contend that plaintiff’s
claim that it was fraudulently induced to enter into the K23 Lease by defendants’
misrepresentations concerning the priority of plaintiff’s transponder is barred under Pennsylvania
law by the parol evidence rule.
In this case, the NESA, which was incorporated by reference into the K23 Lease,
contains the following integration clause:
This Agreement constitutes the entire agreement of the Parties and supercedes all
prior correspondence, representations, proposals, negotiations, understandings,
and agreements of the Parties, oral or written, with respect to the subject matter
hereof. Except in the case of fraud, no Party shall have any right of action against
the other Party hereto arising out of or in connection with any draft, agreement,
undertaking, representation, warranty, promise, assurance or arrangement of any
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nature whatsoever, whether or not in writing, relating to the subject matter of this
Agreement made or given by any person at any time prior to the date of this
Agreement except to the extent that it is repeated in this Agreement.
NESA § 23.1 (emphasis added). Defendants contend that this integration clause evinces the
parties’ intent to bar parol evidence and that the fraud exception refers only to fraud in the
execution of the contract documents, for otherwise, the integration clause would be rendered
meaningless. (See Reply at 7 n.3, 13-14.) By contrast, plaintiff contends that the fraud
exception evinces the parties’ intent that the contract not be fully integrated in the event that one
party made fraudulent misrepresentations. (Pl.’s Opp’n at 12.) The problem with defendants’
argument is that a number of states, including New York (whose law governs the interpretation
of the contract at issue here), hold that a general integration clause such as the one here is
ineffective to bar fraud claims. See, e.g., Mfrs. Hanover Trust Co. v. Yanakas, 7 F.3d 310, 315
(2d Cir. 1993); Fierro v. Gallucci, No. 06-5189, 2008 U.S. Dist. LEXIS 38513, at *37-46
(E.D.N.Y. May 12, 2008); Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Wise Metals Group,
LLC, 798 N.Y.S.2d 14, 16 (N.Y. App. Div. 2005); see also Kronenberg v. Katz, 872 A.2d 568,
592 & n.45 (Del. Ch. 2004) (noting that “many learned authorities state that typical integration
clauses do not operate to bar fraud claims based on factual statements not made in the written
agreement” and citing such authorities). Given this governing law, the Court cannot agree with
defendants’ position. Rather, the integration clause is, at best, ambiguous as to whether it bars
only fraud in the execution claims.4 Therefore, the Court cannot say as a matter of law that the
contract is fully integrated or that parol evidence bars plaintiff’s claim.5
4
Under both New York and Pennsylvania law, parol evidence is admissible to clarify the
meaning of an ambiguous contract term. See Korff v. Corbett, 794 N.Y.S.2d 374, 377; Yocca,
854 A.2d at 498. Moreover, for these same reasons, even if the Court were to conclude that
District of Columbia law applied, it could not, as defendants urge (see Mot. to Dismiss at 7-10),
conclude as a matter of law that plaintiff’s reliance on defendants’ alleged misrepresentations
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C. Promise to Perform an Act in the Future
Defendants also argue that plaintiff’s fraud claim is barred because, under Pennsylvania
law, a promise to perform an act in the future is not actionable in fraud. (See Reply at 4-5.)
Read in the light most favorable to plaintiff, as the Court must do at this stage, the complaint
alleges that defendants represented to plaintiff that they maintained a set order of priority for
restoring service to preemptible transponders and that plaintiff’s transponder was at the top of the
list so that it would be “the last turned off and the first turned on in the event of preemption.”
(Compl. ¶¶ 16-17.) The complaint alleges that, in order to induce plaintiff to enter into a
preemptible lease, defendants produced to plaintiff a “multi-color spreadsheet” to illustrate
plaintiff’s priority and, after the parties executed the K23 Lease, assured plaintiff that it “had a
higher priority transponder” than its competitors. (See Compl. ¶¶ 14, 21-22.) These are present
misrepresentations, albeit with future consequences; therefore, defendants’ argument must fail.6
See Jairett v. First Montauk Sec. Corp., 203 F.R.D. 181, 185-86 (E.D. Pa. 2001) (allegation that
bank fraudulently represented that checks would not be drawn upon cross-claimants’ account
without two signatures was a representation that procedures existed to prevent the drawing of
such checks, when, in fact, adequate procedures did not exist and, as such, was not a promise
perform an act in the future but rather a misrepresentation of an existing fact). Accordingly, the
was objectively unreasonable or that the alleged representations were immaterial because they
were not included in the contract.
5
Moreover, the parol evidence rule applies only to pre-contract negotiations and
representations. Cottman Transmission Sys., LLC v. Kershner, 536 F. Supp. 2d 543, 554 (E.D.
Pa. 2008). In this case, plaintiff also alleges additional misrepresentations after signing of the
contract. Thus, while these additional alleged misrepresentations may be barred for some other
reason, they are not barred by the parol evidence rule.
6
For the same reason, defendants’ similar argument under District of Columbia law fails.
(See Defs’ Mot. to Dismiss at 10-11.)
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cases on which defendants rely, which all involve simple promises to do something in the future,
are inapposite. See Krause v. Great Lakes Holdings, Inc., 563 A.2d 1182 (Pa. Super. Ct. 1989)
(oral promise to assume debt obligation in exchange for a three-year moratorium on payments
and forbearance from immediate legal action); Shoemaker v. Commonwealth Bank, 700 A.2d
1003, 1187 (Pa. Super. Ct. 1997) (oral promise of mortgagee to obtain insurance on mortgagors’
home); Edelstein v. Carole House Apartments, Inc., 286 A.2d 658, 661 (Pa. Super. Ct. 1971)
(oral promise to relieve person of liability on loans if the proceeds of the loans were found to
have been used in a certain project).
D. Gist of the Action Doctrine
Defendants also contend that plaintiff’s fraud and tortious interference claims are barred
by Pennsylvania’s gist of the action doctrine. This doctrine “is designed to maintain the
conceptual distinction between breach of contract claims and tort claims [by] preclud[ing]
plaintiffs from re-casting ordinary breach of contract claims into tort claims.” eToll, Inc. v.
Elias/Savion Adver., Inc., 811 A.2d 10, 14 (Pa. Super. Ct. 2002) (citation omitted). The reason
for the distinction is that “tort actions lie for breaches of duties imposed by law as a matter of
social policy, while contract actions lie only for breaches of duties imposed by mutual consensus
agreements.” Id. (quoting Bash v. Bell Tel. Co., 601 A.2d 825, 829 (Pa. Super. Ct. 1992)). In
eToll, because the alleged acts of fraud “arose in the course of the parties’ contractual
relationship,” the alleged fraud involved duties that “were created and grounded in the parties’
contract” and the damages claimed would be “compensable in an ordinary contract action,” the
court concluded that the fraud was “not so tangential to the parties’ relationship so as to make
fraud the gist of the action.” Id. at 20-21.
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By contrast, plaintiff alleges here that defendants made fraudulent misrepresentations that
both induced it to enter into a preemptible lease and to refrain from subsequently converting the
lease to non-preemptible service by misrepresenting that plaintiff’s transponder had the highest
priority for continued operation and restoration in the event of preemption. Defendants’ duty to
abide by this priority protocol arose from the representation, not from the parties’ contract. In
fact, plaintiff has not even alleged a breach of contract. Thus, it cannot be said that plaintiff’s
fraud claims are “inextricably intertwined” with contract claims, and plaintiff’s fraud claim is not
barred.7 eToll, 811 A.2d at 21; see also Binary Semantics Ltd. v. Minitab, Inc., No. 07-1750,
2008 U.S. Dist. LEXIS 28602, at *32-33 (M.D. Pa. Mar. 20, 2008) (noting that “it would be a
strange result if plaintiff was not able to bring a fraudulent inducement claim because of the ‘Gist
of the Action’ doctrine when there is no breach of contract claim”), vacated in part on other
grounds, 2008 U.S. Dist. LEXIS 36575 (M.D. Pa. May 1, 2008); Sullivan v. Chartwell Inv.
Partners, LP, 873 A.2d 710, 720 (Pa. Super. Ct. 2005) (because plaintiff’s tort claims did not
relate to defendant’s failure to perform its contractual obligations but to defendant’s fraudulent
promises that induced plaintiff to enter the contracts, tort claims were collateral to performance
of contracts and therefore not barred).
IV. Count II: Tortious Interference with Contract
Under Pennsylvania law, the elements of tortious interference with contract are “(1) the
existence of a contractual relationship between the plaintiff and a third party; (2) purposeful
action on the part of the defendant intended to harm the relationship; (3) the absence of privilege
or justification on the part of the defendant; and (4) actual damages resulting from the
defendant’s conduct.” Stoeckinger v. Presidential Fin. Corp. of Del. Valley, 948 A.2d 828, 834
7
For the same reason, plaintiff’s tortious interference claim is not barred by the gist of the
action doctrine.
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(Pa. Super. Ct. 2008) (citation omitted). Defendants claim that plaintiff has failed to state a
claim for tortious interference because it failed to allege either purposeful action by defendant
intended to harm plaintiff’s contractual relationships nor the lack of privilege or justification.
Indeed, defendants argue that plaintiff cannot allege these elements because “Intelsat merely
exercised its undisputed contractual right to preempt PIT’s service.” (Reply at 9.)
In fact, the complaint alleges that
Intelsat was aware that PIT has valid contracts with customers such as GoSat that
could be terminated by the customer in the event of a satellite service outage
exceeding 24 hours, or certainly an outage that exceeded 13 days in total.
Intelsat intentionally took actions it knew would cause PIT’s customers to
terminate contracts with PIT and seek service from PIT’s competitors, including
RRSat. It did so to assist RRSat, one of Intelsat’s preferred customers, at the
expense of PIT.
(Compl. ¶¶ 41-42.) These allegations suffice to allege purposeful action by defendant intended
to harm plaintiff. Moreover, plaintiff does not dispute Intelsat’s right to preempt plaintiff’s
service under the K23 Lease. Instead, plaintiff contends that defendants were obligated to
restore plaintiff’s service first pursuant to their representations regarding the priority of
restoration of service in the event of interruption.
In determining whether a defendant’s conduct was improper for purposes of setting forth
a cause of action for tortious interference with contract, Pennsylvania courts look to § 767 of the
Restatement (Second) of Torts. See, e.g., Gerstadt v. Lehigh Valley Infectious Disease
Specialists, No. 08-4869, 2009 U.S. Dist. LEXIS 26452, at *10-11 (E.D. Pa. Mar. 30, 2009);
Triffin v. Janssen, 626 A.2d 571, 574 (Pa. Super. Ct. 1993). That section sets forth the following
factors for consideration: (1) the nature of the actor’s conduct; (2) the actor’s motive; (3) the
interests of the other with which the actor’s conduct interferes; (4) the interests sought to be
advanced by the actor; (5) the social interests in protecting the freedom of action of the actor and
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the contractual interests of the other; (6) the proximity or remoteness of the actor’s conduct to the
interference; and (7) the relations between the parties. In this case, plaintiff has alleged
fraudulent conduct by defendants intended to give economic advantage to their preferred
customers who are plaintiff’s competitors. Cf. Triffin, 626 A.2d at 574 (noting, as part of its
decision that defendants’ alleged conduct was not improper, that the conduct was not unlawful,
did not violate any standards of professional conduct and involved no deceit or
misrepresentation). Accordingly, the Court cannot say as a matter of law that plaintiff can prove
no set of facts that would entitle it to relief.8
V. Damages Barred by Contract
Defendants also argue that the contract between the parties precludes the recovery of
damages. (See Mot. to Dismiss at 12-13, Reply at 15-16.) Pursuant to § 13.3 the NESA:
In no event shall either Party be liable for any indirect, special, punitive,
incidental or consequential damages whatsoever arising out of or under this
Agreement whether under contract, warranty, tort or otherwise, including, without
limitation, loss of revenue or profits, regardless or the foreseeability of such
damages.
Thus, because the contract bars consequential damages for lost revenue or profits and punitive
damages, both of which plaintiff seeks here, defendants contend that the complaint must be
dismissed.
Because defendants’ contention requires determination of the operation and effect of the
limitation of liability clause, the issue is governed by New York law. (See NESA § 21.2.) As
8
The Court also notes that, contrary to defendants’ assertion (see Mot. to Dismiss at 11-12,
Reply at 8-9), plaintiff would not be required to establish breach of a third-party contract to
maintain a tortious interference claim under District of Columbia law. See Casco Marina Dev.,
L.L.C. v. D.C. Redevelopment Land Agency, 834 A.2d 77, 84 (D.C. 2003) (“[W]hile we have
articulated the third element of tortious interference as procurement of breach, . . . a ‘breach’ as
such is not required, but merely a failure of performance, whether by the terms of the contract in
question or not.”)
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plaintiff correctly argues, under New York law, limitation of liability clauses cannot shield a
party from liability for fraud and other intentional wrongdoing. See Tomoka Re Holdings, Inc. v.
Loughlin, No. 03-4904, 2004 U.S. Dist. LEXIS 8931, *16 (S.D.N.Y. May 19, 2004 (“[U]nder
New York law, a party may not insulate itself contractually from liability for fraud or gross
negligence.” (citations omitted)); Kalisch-Jarcho, Inc. v. New York, 448 N.E.2d 413, 416-17
(N.Y. 1983) (“[A]n exculpatory clause is unenforceable when, in contravention of acceptable
notions of morality, the misconduct for which it would grant immunity smacks of intentional
wrongdoing. This can be explicit, as when it is fraudulent, malicious or prompted by the sinister
intention of one acting in bad faith.”) Accordingly, this claim is not subject to dismissal at this
stage.
CONCLUSION
For the foregoing reasons, defendants’ Joint Motion to Dismiss, or in the Alternative,
Motion for More Definite Statement [Dkt. #5] is DENIED. This matter is set for an Initial
Scheduling Conference on October 2, 2009, at 10:15 a.m.
/s/
ELLEN SEGAL HUVELLE
United States District Judge
Date: August 21, 2009
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