Opinion
216-2020-CV-00312
01-03-2023
Vermont Telephone Company, Inc. v. FirstLight Fiber, Inc.
ORDER ON SUMMARY JUDGMENT MOTIONS
David A. Anderson, Judge
Plaintiff Vermont Telephone Company, Inc. ("VTel") brought this action against Defendant FirstLight Fiber, Inc. ("FirstLight") arising out of FirstLight's termination of the parties' contract. Plaintiff's amended complaint alleges claims for breach of contract (Count I) and breach of the implied covenant of good faith and fair dealing (Count II). Defendant filed a counterclaim for breach of contract. Plaintiff now moves for partial summary judgment on Count I of its amended complaint and Defendant has filed a cross-motion for summary judgment on its counterclaim. The Court held a hearing on November 1, 2022. For the reasons set forth below, both parties' motions for summary judgment are DENIED.
The Court previously dismissed claims for breach of New Hampshire's and Vermont's Consumer Protection Acts.
Factual Background
The parties entered into a Dark Fiber Lease Agreement (the "Lease") on April 28, 2014. (Combined Statement of Material Facts ("SOMF") ¶ 1.) The Lease provided Plaintiff with access to two strands of dark fiber running along a fixed route between Lebanon, New Hampshire and Boston, Massachusetts. (Id. ¶ 2.) The Lease contained a confidentiality provision that states, in pertinent part:
This Agreement, the terms of transactions conducted under this Agreement, and information communicated between the Parties related to the Agreement and said transactions, as well as any other confidential information relating to a Party's business or customers which is so designated by a Party, or which by its nature would be reasonably understood to be confidential, are propriety ("Confidential Information") and shall not be divulged to any third parties. . . . Both Parties acknowledge and agree that improper disclosure of Confidential Information will cause irreparable harm and injury to the Disclosing Party, and that in addition to any other remedies, the Disclosing Party shall be entitled to seek an injunction.(Id. ¶ 8.)
In June 2019, Sam Coleman, a VTel employee, escorted Colin Meyn, a reporter for VTDigger.com, into two collocation facilities owned by Consolidated Communications. (Id. ¶ 9.) During these visits, Meyn took photographs of equipment belonging to FirstLight. (Id. ¶¶ 12-14.) The parties dispute whether Meyn was deliberately given access to the area in which FirstLight's equipment was stored and whether Coleman was aware that Meyn took photographs. (See id. ¶¶ 10-15.)
On June 24, 2018, Meyn contacted FirstLight's Vice President of Marketing and Product Management and FirstLight's Chief Development Officer, seeking comment on the presence of Huawei equipment in the FirstLight network in Vermont. (Id. ¶ 17.) The Vice President brought the photographs to the attention of FirstLight's Executive Team, including its Chief Network Engineer, Chief Legal Officer, and CEO. (Id. ¶¶ 19-24.) After some investigation and discussion, FirstLight decided not to respond to Meyn's inquiries. (Id. ¶ 26.)
On July 1, 2019, VTDigger.com published an article written by Meyn that included photographs of FirstLight's equipment. (Id. ¶ 31.) FirstLight learned of the article on the morning of July 2, 2019. (Id. ¶ 32.) On July 3, 2019, FirstLight provided VTel with notice that it was terminating the parties' Lease "due to VTel's egregious violations of its non-disclosure and confidentiality agreements with FirstLight legacy entities." (Id. ¶ 34.) The termination notice did not cite any specific provision of the Lease. (Id. ¶ 36.) On November 21,2019, FirstLight sent VTel a Second and Final Notice of Termination, setting December 14, 2019, as the effective date for termination of the Lease. (Id. ¶ 38.) This second termination notice informed VTel that FirstLight was terminating the lease due to VTel's "breach of confidentiality under Section 35 of the [Lease]." (Id. ¶ 39.)
Analysis
As an initial matter, the parties have filed a number of motions to strike in connection with the pending motions for summary judgment. VTel moves to strike FirstLight's cross-motion for summary judgment, arguing that it is untimely. FirstLight moves to strike certain evidence on the grounds that it constitutes inadmissible hearsay or undisclosed expert testimony. The Court finds all motions are without merit for purposes of this order. First, with respect to the timeliness of FirstLight's cross-motion for summary judgment, the Court finds it complies with Superior Court Rules 12(g)(3) and (6), taking into account the assented-to extensions of the original deadline.
With respect to FirstLight's motions to strike, the Court finds the challenged evidence is not relevant to its analysis of the issues raised in the motions for summary judgment. Specifically, as explained in more detail below, VTel's classification as a Competitive Local Exchange Carrier (CLEC) or an Incumbent Local Exchange Carrier (ILEC) is not a matter the Court needs to resolve at this time. Similarly, Coleman's and Ariana Robinson's statements about whether the photographs at issue posed a security risk to FirstLight are not pertinent to, and were not considered in, the following analysis. Accordingly, for the foregoing reasons, the parties' motions to strike are DENIED. The Court now turns to the merits of the cross-motions for summary judgment.
In ruling on cross-motions for summary judgment, the Court "considers] the evidence in the light most favorable to each party in its capacity as the nonmoving party and, if no genuine issue of material fact exists, [the Court] determine[s] whether the moving party is entitled to judgment as a matter of law." JMJ Properties, LLC v. Town of Auburn, 168 N.H. 127, 129-30 (2015). In order to defeat summary judgment, the nonmoving party "must put forth contradictory evidence under oath sufficient to indicate that a genuine issue of material fact exists." Brown v. Concord Grp. Ins. Co., 163 N.H. 522, 527 (2012). An issue of fact is "material" for purposes of summary judgment if it affects the outcome of the litigation under the applicable substantive law. Macie v. Helms, 156 N.H. 222, 224 (2007) (quoting VanDeMark v. McDonald's Corp., 153 N.H. 753, 756 (2006)). "If there is no genuine issue of material fact, and if the moving party is entitled to judgment as a matter of law, the grant of summary judgment is proper." Town of Barrington v. Townsend, 164 N.H. 241,244 (2012) (quoting Bates v. Vt. Mut. Ins. Co., 157 N.H. 391,394 (2008)); see also RSA 491:8-a, III.
Count I of the first amended complaint states a claim for breach of contract, alleging that FirstLight's termination of the Lease pursuant to Section 35 thereof following publication of the photographs was factually and legally improper. Count II states a claim for breach of the covenant of good faith and fair dealing, alleging that FirstLight terminated the Lease without cause and in bad faith. VTel moves for partial summary judgment on Count I, arguing its conduct did not constitute a material breach of the Lease justifying termination. FirstLight seeks summary judgment on Counts I and II, arguing that VTel materially breached the Lease by escorting Meyn into the collocation facilities and allowing him to take photographs of FirstLight's equipment.
Plaintiff first argues that it did not breach the Lease because it did not "divulge" Defendant's information to Meyn within the meaning of Section 35. Plaintiff argues that the applicable definitions of the word "divulge" indicate some affirmative action is required. See "Divulge." Merriam-Webster's Unabridged Dictionary, Merriam-Webster, https://unabridged.merriam-webster.com/unabridged/divulge. Accessed 15 Nov. 2022. ("[T]o tell or make known (a secret or confidence or what had been previously unknown."). Plaintiff contends that it was Meyn's act of taking and publishing photographs of Defendant's equipment that caused Defendant's harm, not any conduct by Plaintiff or its employees.
Defendant argues that Coleman's act of giving Meyn access to the collocation facilities was an affirmative act that was the functional equivalent of divulging Defendant's confidential information. Defendant maintains that each collocation facility is heavily secured and that Coleman had to take Meyn through several locked gates and doors in order to access the areas in which its equipment was stored. (See Doc. 140 ¶¶ 68-70.) Defendant also argues that the record indicates Plaintiff's CEO was talking to a reporter at VTDigger.com about FirstLight's use of Huawei equipment approximately six months before the tour. Plaintiff concedes that Coleman brought Meyn to the facilities for the purpose of taking photographs, but maintains that Meyn was only intended to take photographs of VTel's equipment. At his deposition, Coleman testified that he did not know that Meyn took any photographs of FirstLight equipment during the tour or witness him doing so. (Pl.'s Mot. Summ. J., Ex. E at 143, 152-53.)
To the extent Defendant is able to show at trial that Plaintiff purposely invited Meyn to the collocation facilities with the intent of allowing him to take and publish photographs of FirstLight's equipment, the Court finds this would constitute "divulging" FirstLight's confidential information within the meaning of Section 35 of the Lease. This would require resolution of certain disputes of fact that cannot be resolved on summary judgment, such as VTel's purpose in inviting Meyn to the collocation facilities and the credibility of Coleman's testimony that he was not aware that Meyn took photographs. As a result, the Court cannot determine, as a matter of law, that Plaintiff did not breach the Lease.
In support of its argument that VTel did breach the Lease, FirstLight argues that VTel, as a collocator in facilities belonging to Consolidated Communications, was subject to certain security guidelines that provided, in pertinent part: "The CLECcustomer does not have the right or authority to grant or permit access to the building to any person(s) not approved by CCI in advance. Any infractions must be reported to CCI Corporate Security." (Warecki Aff., Ex. B § 2.3.) These security guidelines are incorporated in a tariff governing Consolidated's facilities. While the parties dispute whether VTel is subject to this tariff and the security guidelines, the Court assumes for purposes of this order that it is.
The parties dispute whether VTel is a CLEC or an ILEC or even subject to the security guidelines. Because the Court finds that a breach of the security guidelines does not constitute a breach of the Lease at issue in this case, it need not decide this issue.
Following publication of the photographs, Consolidated found that Coleman and VTel were "in clear violation of the requirements of the Tariff and the Security Guidelines" as a result of allowing Meyn to access the facilities without prior authorization. (Warecki Supp. Aff., Ex. 51.) As a result, Consolidated revoked Coleman's access to all Consolidated collocation facilities. (Id.) At the hearing, FirstLight represented that Coleman subsequently regained his privileges after signing a document certifying that he had read the security guidelines and would follow them.
FirstLight essentially argues that this breach of the security guidelines automatically equates to a material breach of the Lease. The Court disagrees. The Tariff and the security guidelines are separate contracts that have no direct relation to the Lease. VTel and Coleman were in violation of the security guidelines because they permitted Meyn to access the facilities and did not report the security breach to Consolidated. This would have been a violation whether Meyn took photographs or not. VTel readily admits that Coleman escorted Meyn through the collocation facilities, but maintains it was for an innocent purpose. As discussed above, there is a question of fact as to whether this conduct constituted a breach of the Lease. In order for VTel to have "divulged" FirstLight's confidential information, there must have been some intent and/or knowledge of Meyn taking the photographs of FirstLight's equipment. Therefore, VTel's breach of the security guidelines does not automatically constitute a breach of Section 35 of the Lease.
Plaintiff next argues that even if it did breach the Lease, said breach was not material as a matter of law. "For a breach of contract to be material, it must go to the root or essence of the agreement between the parties, or be one which touches the fundamental purpose of the contract." Found. for Seacoast Health v. Hosp. Corp. of Am., 165 N.H. 168, 181-82 (2013). "A breach is material if: (1) a party fails to perform a substantial part of the contract or one or more of its essential terms of conditions; (2) the breach substantially defeats the contract's purpose; or (3) the breach is such that upon a reasonable interpretation of the contract, the parties considered the breach as vital to the existence of the contract." Id. at 182. "Whether a breach of contract is material is a question of fact." Id. at 181.
Although Plaintiff acknowledges that the question of whether a breach is material is generally one of fact, it nevertheless maintains that its conduct did not result in any damages to Defendant. See id. at 182 ("Although the absence of proof of damages is not dispositive of whether a breach is material, where a breach causes no damages or prejudice to the other party, it may be deemed not to be material." (citation omitted)). To the contrary, Defendant represented at the hearing that the photographs exposed information that would have told a third party how to remotely access the equipment, requiring a retrofit at all of its facilities across the network. In addition, Defendant represented that security breaches such as this one pose significant potential for reputational harm in the industry. Plaintiff maintains that these damages were the result of Meyn's publication of the photographs, not Plaintiff's act of escorting Meyn through the collocation facilities. As noted above, depending on the resolution of certain factual issues, Plaintiff's conduct could be found to be a direct cause of Defendant's damages. Moreover, whether such damages are material such that they justify termination of the Lease is a question of fact for the jury. Id. at 181.
Plaintiff finally argues that if there was a material breach, said breach was effectively negated by Defendant's failure to provide notice of the breach and an opportunity to cure it. Pursuant to Section 7.5 of the Lease:
This contract may be terminated by either party in the event of a breach of contract terms by the other party, subject to the following allegation and cure procedure: (a) if either party perceives or alleges a breach by the other party, the party alleging the breach must state the cause or presence of the breach in writing, delivered to the other party by FedEx or the Post Office requiring a signed receipt, further evidenced by a telephone call and email; . . . (c) if the alleged breach is for other than non-payment of a normally due invoice, the breaching party shall have 30 days to cure the breach, but if the breaching party is making continuous and substantial efforts to cure the breach then the contract cannot be unilaterally terminated by the other party while such efforts to cure are ongoing.(Guite Aff., Ex. 1 at 6.) Further, Section 22 provides that Plaintiff will be in default under the Lease if it breaches a material term and fails to cure the breach within thirty days of receipt of notice, but that:
In the event that any such breach hereunder cannot reasonably be cured within such thirty (30) day cure period, Lessee shall not be in default if it has (a) acted diligently to begin curing the breach, (b) made reasonable progress towards curing the breach, and (c) continues diligent efforts and reasonable progress towards curing the breach.(Id. at 12-13.)
Defendant first learned of the existence of the photographs on June 24, 2019, when Meyn reached out for comment. While Defendant undertook internal discussions about the photographs, its CEO ultimately decided not to engage with the reporter. At the hearing, Defendant represented that Meyn never mentioned the prospect of publication in his communications, and thus it did not believe that Meyn would actually publish the photographs. Once the photographs were published on July 1,2019, Defendant did reach out to VTDigger.com and attempt to have the photographs taken down, but the publication refused. At that point, the damage was done, and there were arguably no means by which Plaintiff could cure the breach.
Therefore, any meaningful opportunity to cure must have come before publication, and would have consisted of, at a minimum, Plaintiff convincing Meyn not to publish the photographs. This raises the question of whether such efforts would have been futile, particularly considering Defendant's accusation that Plaintiff purposely arranged for Meyn to take the photographs in the first place. See Skyco Res., LLP v. Family Tree Corp., 512 P.3d 11,23 (Wyo. 2022) (finding genuine issue of material fact on "whether it was impossible for [the defendant] to cure the defects"); Centerplan Constr. Co. v. City of Hartford, 274 A.3d 51,82 (Conn. 2022) (holding that "when breaches are truly incurable, a cure notice may be unnecessary" and that such matters are for the jury to decide). There is also a question of fact as to whether Defendant's belief that Meyn would not publish the photographs was a reasonable one.
Because of the numerous questions of material fact identified above, the Court finds summary judgment is inappropriate on the question of whether VTel or FirstLight breached the Lease and its implied covenant of good faith and fair dealing. Accordingly, both parties' motions for summary judgment are DENIED.
SO ORDERED.