Co-authored by Brian Schmidt

The U.S. Court of Appeals for the Second Circuit has affirmed a district court ruling that held that the “plain meaning” of the contract between AT&T Corporation and KATEL Limited Liability Company with respect to the exchange of telephone calls between the United States and Kyrgyzstan did not require exclusivity.

KATEL sued AT&T for, among other things, breach of contract. The two companies had contracted so that KATEL would build and own the necessary infrastructure for the telecommunications traffic in Kyrgyzstan and AT&T would use it for a fee. Although AT&T used KATEL’s service for several years, it switched to another company in Kyrgyzstan several years after the contract was signed. AT&T subsequently stopped using the other company, choosing instead to send the traffic to a third-party carrier who then took care of the routing.

The case turned on the interplay between two contractual provisions: one section in the parties’ agreement required that all communications traffic from AT&T be routed directly on the AT&T-KATEL circuits, unless the direct circuits could not handle the traffic; the other section permitted each company to enter into “similar service agreements with other parties.” KATEL argued that the first provision gave it the exclusive right to handle all AT&T calls to Kyrgyzstan. The district court rejected KATEL’s argument and the Second Circuit affirmed, ruling that KATEL’s interpretation of the first section could not be reconciled with the other terms in the agreement. As the Second Circuit explained, the contractual provision allowing the parties to enter into “similar service agreements with other parties” is inconsistent with an exclusive dealing arrangement. Thus, although the first provision appeared to give KATEL broad rights, because interpreting that provision broadly in light of the plain meaning of the second provision would lead to an “illogical result,” it could not be accepted. (KATEL Ltd. Liab. Co. v. A.T&T. Corp., No. 09-1575-CV, 2010 U.S. App. LEXIS 10806 (2d Cir. May 27, 2010))