Wholesale Telecom v. ITC Deltacom

Citation: Wholesale Telecom Corp. v. ITC Deltacom Communications, Inc., 176 Fed. Appx. 76 (11th Cir. 2006).

Background Facts
In January 2003, Wholesale Telecom Corp. (“WTC”) and ITC DeltaCom Communications, Inc. (“ITC”) entered into a contract providing that ITC would transmit WTC's international long-distance calls at “Horizon Level V” retail rates. ITC's flat rate was the main impetus in WTC's decision to contract with ITC. Thus, WTC began routing its calls through ITC's network on February 1, 2003. The contract provided, in relevant part, that “Customer hereby agrees to all the terms and conditions of this Agreement for Service (“Agreement”) and the terms and conditions of the state and federal tariffs of ITC Communications, Inc. (“ITC”), as the same exist or may be modified in the future by ITC. . . .”

Under the contracted rates, WTC incurred a charge of approximately $37,000 through February, 20, 2003, however, ITC's actual cost for routing WTC's traffic for this initial period was approximately $102,000. ITC's retail sales force also added two other reseller customers who, together with WTC, nearly doubled ITC's international traffic. Under these rates, ITC recouped only 36% of its costs of providing service. The cost to ITC for cellular traffic was markedly higher than for landline traffic. ITC was unaware at the time of contracting that this cost differential would exist and were premised on a “misunderstanding about the volume of international cellular traffic to be expected.”

To address this disparity, ITC modified its rates, effective February 21, 2003, by imposing a surcharge on cellular calls. ITC posted these surcharges on its website. ITC also informed WTC and the other two resellers of the new surcharges and offered each of them the option to cancel their ITC contract or to accept a higher rate. WTC refused to accept a rate change and continued to send traffic over ITC's lines after the effective date of the surcharge. ITC thereafter billed WTC at the surcharged rate and required WTC to provide security equal to two months estimated usage. WTC maintained that its agreement with ITC entitled it to the contracted rate without surcharge; it refused the security demand and continued to tender payment at the contracted rate.

WTC filed suit for injunctive relief, specific performance and damages based on the claim that ITC had (i) breached their contractual agreement; (ii) engaged in unjust and unreasonable practices and discrimination, in violation of 47 U.S.C. §§201(b) and 202(a); and (iii) committed fraud. ITC filed a counterclaim for breach of contract and action on an account. ITC terminated services to WTC on May 8, 2003.

Trial Court Proceedings
The district court denied WTC preliminary injunction and found that the “unambiguous language of the agreement entitled ITC to raise its rates through the tariffs posted on its website.” The court entered summary judgment for ITC on the breach of contract counterclaim.

Appellate Court Proceedings
WTC appealed the lower court's ruling. The appellate court noted that the parties did not dispute that the contract was unambiguous, however, they disagreed as to the meaning of the term “tariff” as used in the relevant language of the contract. The court found that no genuine issue of material fact existed as to the binding language of the contract and that “the record [showed] no material dispute about the reasonableness of the rate surcharge or the demand for additional credit or both in the light of ITC's cost structure and its contractual entitlement to adjust charges.” The court further found that the service agreement contained a merger clause that barred any agreements made before the contract was executed. Thus, the lower court made “no reversible error in the order denying partial summary judgment to ITC and granting summary judgment to WTC on its breach of contract counterclaim.”