The opinion of the court was delivered by: Lamberth, district Judge.
Now before the Court are numerous dispositive motions. The underlying
dispute concerns the defendants' provision of long distance phone service
to the plaintiffs' pay phones. The plaintiffs allege that the defendants'
behavior in the provision of long distance services gives rise to claims
for fraud, breach of contract, and civil RICO. The defendants counter
that the plaintiffs conspired to violate and did in fact violate
non-disclosure clauses in the phone service contracts.
After a full review of the parties' pleadings and memoranda, the
applicable law, and for the following reasons, the holds the following:
With respect to the breach of contract issue, the Court GRANTS the
plaintiffs' motion for summary judgement with respect to Cleartel and
DENIES the defendants' motion for summary judgment with respect to
Cleartel. Further, the Court DENIES the plaintiffs' motion for summary
judgment with respect to Mark Parrella, and correspondingly GRANTS the
defendants' motion with respect to the individually-named defendants.
With respect to the fraud issue, the Court DENIES the plaintiffs'
motion for summary judgment and GRANTS the defendants' motion for summary
With respect to the RICO issue, the Court DENIES the defendants' motion
for summary judgment.
With respect to the defendants' counter-claims, the Court GRANTS the
plaintiffs' motion for summary judgment.
A. Regency, Actel, Cleartel, and the Contracts for Long Distance Service
At issue in the instant case are the compensation terms of the parties'
contracts. Regency's compensation was a specified portion of "all call
charges . . . captured, billed, and collected by Cleartel" for each long
distance call. Contract, § 2.1. Long distance charges generally are
of two types, the "tariff charges" and "location surcharges." The tariff
charge is the amount charged to actually transmit the phonecall, and the
location surcharge is any regulatory fee applicable to the pay phone
being used. Under the Regency/Cleartel contracts, Regency was to be paid
approximately 50% of each call's tariff charge, and 100% of any location
surcharge. For example, a long distance call with tariff charges of $3.00
and a surcharge of $1.00 would result in a total payment to Cleartel of
$4.00. Cleartel would then pay Regency approximately $2.50 (50% of the
tariff charges and 100% of the surcharge).
Because Regency's revenue under the agreement was tied to the charges
for each phonecall, the contracts required Cleartel to "provide [Regency
with] a summary of gross long distance calls, minutes, and charges by
originating phone number." Contract § 2.4.
B. Mr. Parrella's Phonecall and the Ensuing Investigation
In August 1996, Regency president Mark Parrella made a long distance
phone call from a Regency-owned pay phone. Cleartel billed Mr. Parrella
$6.72 for the personal phonecall. When, pursuant to section 2.4 of the
applicable contract, Cleartel provided Regency with a "summary of gross
long distance calls, minutes, and charges by originating phone number,"
Regency discovered that Cleartel recorded the charge for Mr. Parrella's
phonecall as $6.22. As such, Regency's compensation from Cleartel would be
based on an amount $.50 less than the amount actually charged.
Based on this event, a broader investigation into Cleartel's billing
and payment practices was undertaken. On July 16, 1998, Arthur Cooper,
president of co-plaintiff Actel, Inc., had 21 phonecalls placed from 21
separate pay phones owned by Actel and served by Cleartel. When Actel
compared the end-user charge to Cleartel's reported charge, Actel
discovered that Cleartel was consistently charging the end-user
$.60-$1.00 more than was reported to Actel. This meant that Cleartel's
payments to Actel would based on an amount lower than actually charged.
C. Regency's Allegations, Cleartel's Counterclaims, and the Instant
Also based on the foregoing events, Cleartel makes two counterclaims:
(1) Regency breached the long distance service contracts by violating the
nondisclosure clauses therein, and (2) Regency and its co-defendants
conspired to violate the nondisclosure clause of the contracts.
Each side has made dispositive motions. Regency moves for summary
judgement on two of its own allegations: the breach of contract claim and
the fraud claim. Regency also moves for summary judgment on both of
Cleartel's counterclaims: the breach of contract claim and the civil
conspiracy claim. Cleartel moves for judgment on the pleadings, or in the
alternative, for summary judgment on Regency's breach of contract,
fraud, and RICO claims.
Thus, the Court faces four separate issues: the cross dispositive
motions on (1) Regency's breach of contract claim, (2) Regency's fraud
claim, and (3) Regency's RICO claims; as well as Regency's dispositive
motions on (4) Cleartel's counterclaims. The Court now considers these
A. Jurisdiction and Choice of Law
The Court has jurisdiction over the plaintiffs' claims and the
defendants' counterclaims pursuant to 28 U.S.C. § 1332. Each
plaintiff is a citizen of a state other than states in which the
defendants are citizens. As well, the amount in controversy exceeds
$75,000. The Court also has jurisdiction over the plaintiffs' RICO claims
pursuant to 28 U.S.C. § 1331. All contracts in question in this case
contain a choice of law provision designating the law of the District of
Columbia as the law applicable to all disputes over the contract. To the
extent the dispute presents a federal question, the Court will apply
All of the motions now before the Court are, in effect, summary
judgment motions.*fn3 Federal Rule of Civil Procedure 56(c) provides
that a district court shall grant summary judgment "if the pleadings,
depositions, answers to interrogatories, and admissions on file, together
with the affidavits, if any, show that there is (1) no genuine issue as
to any material fact and that (2) the moving party is entitled to
judgment as a matter of law." See Fed. R.Civ.P. 56(c); Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202
(1986); Diamond v. Atwood, 43 F.3d 1538, 1540 (D.C.Cir. 1995). To survive
a motion for summary judgment, the nonmovant must make a "sufficient
showing to establish the existence of an element essential to that
party's case." ...