Alfa Consult SA v. TCI International, Inc.

Background

Alfa Consult SA, a Luxembourg corporation involved in information-technology construction projects, and TCI International, Inc., a California-based supplier of spectrum-monitoring equipment, discussed and entered agreements concerning bids to Iraq’s Communications and Media Commission (CMC). After the CMC canceled a 2016 request for proposals, the parties entered a February 2017 Territory Agreement concerning an Iraqi project. The agreement said it would be exclusive within Iraq, but also said TCI could deal directly with customers through its own personnel or other representatives and did not create a partnership or agency relationship.

In 2018, the CMC issued another request for proposals for a similar system. TCI told Alfa it would pursue Iraqi opportunities separately, then partnered with Al Zaman Group (AZG). Alfa nevertheless submitted a bid listing TCI as its supplier. TCI informed the CMC that Alfa’s bid was unauthorized. The CMC later canceled Alfa’s maintenance contracts, blacklisted Alfa from CMC contracting for three years, disqualified Alfa’s bid, and awarded the project to AZG. Alfa sued TCI in this case, asserting breach of contract, breach of the implied covenant of good faith and fair dealing, and several interference-related claims.

TCI moved for summary judgment, arguing that Alfa’s claims were barred by its earlier Iraqi litigation, that the Territory Agreement imposed no exclusivity obligation on TCI, that Alfa lacked evidence of improper influence and causation, and that Alfa’s claimed damages were speculative.

Preclusion arguments

The court denied summary judgment based on claim and issue preclusion. Claim preclusion generally prevents a party from pursuing the same cause of action against the same party after a qualifying prior judgment. Issue preclusion generally prevents relitigation of an issue that was actually and necessarily decided in an earlier case.

The court held that TCI had not shown that the Iraqi decisions were final, conclusive, and enforceable in Iraq, as required for recognition under the California-law framework discussed in the opinion. Alfa submitted expert testimony that Iraqi law does not recognize preclusion in the same way, but the court found that testimony inconclusive. The court also held that, even assuming the Iraqi decisions were recognizable, they did not decide whether TCI or AZG bribed the CMC. The Iraqi decisions addressed Alfa’s exclusion from the bid based on a bidding requirement, not the alleged bribery or collusion. TCI therefore did not establish either claim or issue preclusion.

Territory Agreement and exclusivity

The court denied summary judgment on TCI’s argument that the Territory Agreement imposed no exclusivity obligation on TCI. The agreement was ambiguous because its main text stated that the agreement would be exclusive within the project country, while another provision allowed TCI to deal directly with customers through its own personnel or representatives. The court concluded that the provisions could reasonably be read either to impose mutual exclusivity concerning the project or to permit TCI’s direct dealings outside the project.

Because the agreement was ambiguous, the court considered extrinsic evidence—evidence outside the final contract that may help explain an unclear term. That evidence included an earlier draft containing a provision allowing TCI to pursue opportunities through additional representatives and a later version that omitted the provision after Alfa objected that it conflicted with an exclusive agreement. The court held that this evidence could be considered and that summary judgment was inappropriate on the exclusivity issue.

The court also rejected TCI’s argument that the Territory Agreement unambiguously covered only the canceled 2016 request for proposals and not the 2018 request. The agreement was signed after the 2016 request had been canceled and remained valid until December 31, 2019. The court concluded that the agreement did not unambiguously refer only to the 2016 opportunity, so summary judgment was not appropriate on that issue.

Improper influence and causation

The court denied summary judgment on whether Alfa had evidence of unlawful or improper influence. Evidence included a TCI email referring to AZG’s costs for “government services” and lobbying, TCI’s receipt through AZG of sensitive information about the developing request for proposals, and TCI’s receipt of bid amounts before the official opening. The court held that a jury could reasonably infer from this evidence that TCI received information resulting from a bribe or other improper conduct by AZG and that TCI tacitly approved of that conduct.

The court nevertheless granted summary judgment in part on causation. It found that Alfa had not produced enough evidence to create a genuine factual dispute over whether TCI’s or AZG’s improper conduct caused the CMC to blacklist Alfa or disqualify its bid. Establishing that connection would require multiple inferences, including that TCI bribed or knew about a bribe to unidentified CMC personnel, that the bribe rather than Alfa’s unauthorized bid caused the blacklisting, and that the unidentified personnel had enough influence to cause that result. The court concluded that Alfa’s evidence required speculation rather than reasonable inferences.

Based on that ruling, the court dismissed Alfa’s claims for tortious interference with prospective economic advantage, aiding and abetting that interference, negligent interference with prospective economic advantage, tortious interference with contract, and aiding and abetting that interference. The court also dismissed Alfa’s breach-of-contract and implied-covenant claims to the extent they were based on TCI’s alleged unlawful or improper conduct causing the CMC to blacklist Alfa and cancel its contracts.

The court did not dismiss the contract and implied-covenant claims to the extent they were based on TCI’s alleged violation of exclusivity obligations by partnering with AZG instead of Alfa. The court also denied TCI’s argument that the implied-covenant claim was duplicative of the contract claim, explaining that a claim based on bad faith may not be duplicative and that TCI had not submitted evidence addressing its good faith.

Damages

The court granted summary judgment in part on damages claimed for the second and third phases of the project. Those phases had not yet been announced, so the court found damages based on them impermissibly speculative.

The court found a genuine factual dispute about damages from the lost first phase of the project. Alfa submitted evidence that the CMC was required to award the project to the lowest-priced technically compliant bid and that Alfa’s bid would have met that description. The court also found that Alfa had submitted sufficient evidence of expected earnings from the two canceled maintenance contracts—$495,000 for one and $420,000 for the other—to defeat summary judgment on the amount of those damages, if Alfa could first establish the required causal connection.

Order

The court denied TCI’s motion on claim and issue preclusion, denied it on whether the Territory Agreement imposed exclusivity obligations on TCI, and denied it on whether Alfa could show unlawful influence. The court granted the motion in part on the causation theory involving unlawful or improper conduct, dismissing the five interference claims and part of Alfa’s contract and implied-covenant claims. It granted the motion in part as to damages for the second and third project phases. The motion was otherwise denied, leaving the contract and implied-covenant claims based on alleged exclusivity obligations and seeking damages for the first project phase and the maintenance contracts.