Complaint for Declaratory and Injunctive
IN THE UNITED STATES DISTRICT COURT
COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF
1 . Plaintiff Cable and Wireless plc ("Cable & Wireless") brings this action to enforce obligations of a contract entered into between Cable & Wireless and defendant MCI TeleCommunications Corporation ("MCI Telecom") for the sale of MCI Telecom's Internet backbone service business (the "iMCI Business"). Cable & Wireless seeks (1) an injunction prohibiting MCI Telecom, its parent, defendant MCI Communications Corporation ("MCI"), and defendant WorldCom Inc. ("WorldCom") from providing to any third party information regarding, soliciting any offers or proposal from any third parties for, or entering into any agreement or engaging in any discussion with any third parties with respect to, sale of all or a portion of the iMCI Business, and (2) a declaration that the contract requires MCI Telecom to negotiate in good faith with Cable & Wireless, and no other party, for the sale of the iMCI Business, with modified terms to address additional or adjusted assets.
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2. MCI Telecom entered into negotiations with Cable & Wireless to sell the iMCI Business in an effort to satisfy antitrust concerns raised by the United States Department of Justice (the "DoJ") and the Merger Task Force ("MTF") of the European Commission (the "EC") with respect to a consolidation of MCI Telecom's parent, MCI, with WorldCom (the "Merger"). These negotiations resulted in an agreement for the sale of the iMCI Business to Cable & Wireless. That agreement, dated May 27, 1998, is appended to this Complaint as Exhibit A.
3. A provision in this contract addresses the circumstance that the divestiture of assets contemplated by the contract might not satisfy the DoJ or the MTF. The contract obligates MCI Telecom to negotiate modifications to the agreement in good faith with Cable & Wireless, and only Cable & Wireless, if MCI Telecom, MCI, and WorldCorn do not receive necessary government approvals for closing of the sale of the iMCI Business or of the Merger and if MCI Telecom reasonably believes (a) that a modification of the terms of the iMCI sale would facilitate those approvals, or (b) that consummation of the sale of the iMCI Business to Cable & Wireless will not satisfy the concerns of DoJ or the MTF.
4. MCI and WorldCom have not received the necessary government approvals for closing their Merger. In addition, officials of DoJ and MTF have publicly and privately expressed dissatisfaction with the breadth of the assets to be sold by MCI to Cable & Wireless. In these circumstances, MCI Telecom has reasonable basis for belief (a) that a modification of the terms of the sale of the iMCI Business would facilitate approval by DoJ and the EC, and (b) that consummation of the sale of the iMCI Business to Cable & Wireless without modification will not satisfy the concerns of DoJ and the EC. Indeed, Cable & Wireless has been informed by representatives of MCI Telecom that MCI, MCI Telecom, and representatives of DoJ and MTF have had discussions over the past several days (June 8 and 9, 1998) regarding a [begin page 3] package of internet assets that might be sold by MCI Telecom that would satisfy the concerns of DoJ and MTF.
5. Notwithstanding the satisfaction of contractual conditions that require MCI Telecom to negotiate modifications to the agreement to purchase the iMCI Business in good faith with Cable & Wireless, and only Cable & Wireless, MCI, MCI Telecom, and WorldCom intend to provide third parties with information regarding the iMCI Business, to solicit offers and proposals from those third parties, and to enter into agreements or engage in discussions with at least some third parties about the sale of the iMCI Business.
6. In sum, MCI, MCI Telecom, and WorldCom have reopened or intend to reopen negotiations for the sale of the iMCI Business in violation of their contract with Cable & Wireless, resulting in immediate, severe, and irreparable harm to Cable & Wireless. This harm has no adequate remedy at law. Accordingly, Cable & Wireless seeks injunctive and declaratory relief.
7. This Court has jurisdiction over this matter under 28 U.S.C. § 1332. This dispute is between a citizen of a State and a citizen of a foreign state and the amount in controversy exceeds the sum or value of $75,000, exclusive of interest and costs.
8. The value of Cable & Wireless' right to conduct its business free from the breach of its contract with MCI Telecom. to purchase the iMCI Business is reflected in the provision of the contract (Ex. A, Tenn Sheet, p. 13, "Breakup Fee") that requires MCI Telecom to pay $25,000,000 in liquidated damages for terminating the contract, subject to certain provisos.
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9. Venue is proper in this district under 28 U.S.C. § 1391(a). MCI Telecom has its principal place of business in this judicial district, the contract was in principal part negotiated in this judicial district, and many of the events or omissions giving rise to the claim occurred in this judicial district.
10. Plaintiff Cable & Wireless is a corporation organized under the laws of the United Kingdom with its principal place of business in London, England. Cable & Wireless provides a broad range of telecommunications services to customers worldwide.
11. Defendant MCI Telecom is a Delaware corporation with its headquarters and principal place of business in Washington, D.C. MCI Telecom provides a broad range of telecommunications services to customers throughout the United States and abroad. MCI Telecom is a principal provider of Internet backbone and other services and it is the second largest facilities-based long-distance carrier in the United States. Defendant MCI is defendant MCI Telecom's corporate parent.
12. Defendant WorldCom is a Georgia corporation with its headquarters and principal place of business in Jackson, Mississippi. WorldCom provides Internet, long-distance, and local telecommunications services in the United States and abroad. Through subsidiaries, affiliates, and divisions, WorldCom also is a principal provider of Internet backbone and other services.
13. MCI Telecom and Cable & Wireless signed a contract on May 27, 1998 for the sale of the iMCI Business. See Letter of Agreement attached as Exhibit A. Under the [begin page 5] explicit terms of the offer by Cable & Wireless and the acceptance by MCI Telecom, "this letter agreement, incorporating the terms and conditions of the [accompanying] Term Sheet shall constitute a binding agreement between [Cable & Wireless and MCI Telecom] for the purchase and sale of the iMCI Business under the terms and conditions set forth in the Term Sheet and with WorldCom with respect to its rights and obligations as set forth in the Term Sheet." Ex. A, p. 1.
14. The contract sets forth various obligations required of both parties related to the transaction contemplated by the contract ('the Transaction"), as well as conditions precedent to the closing of the Transaction. One such condition precedent is the satisfaction of all conditions precedent for the closing of the Merger between WorldCom and MCI. The contract further establishes obligations in the event that certain conditions precedent are not satisfied.
15. In particular, if governmental approvals required for the Merger are not received and if MCI Telecom reasonably believes modifications to the contract with Cable & Wireless will facilitate DoJ or EC approval, or if consummation of the Transaction will not satisfy concerns of the DoJ or EC, the contract requires MCI Telecom to negotiate in good faith with Cable & Wireless to modify the Transaction. Ex. A, Term Sheet at 12 (the "Modification Provision" in the paragraph headed "Conditions Precedent").
16. This Modification Provision controls the parties' relationship in the event the Transaction fails to satisfy DoJ and EC concerns. Although the contract provides for liquidated damages in certain circumstances not relevant there (Ex. A, Term Sheet at 13), the liquidated-damage provision does not provide a basis to supplant good faith negotiations.
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17. The contract separately also provides that neither MCI, MCI Telecom, nor WorldCom, nor any of their representatives and affiliates, may solicit any offers or proposals for, or enter into any agreement or engage in discussions with respect to, or provide to any third party information respecting, the sale of all or a portion of the iMCI business. See Ex. A, Term Sheet at 13, last sentence (the "No-Shop Provision").
18. Pursuant to the contract, this No-Shop provision is effective so long as the contract is in force.
19. On information and belief, DoJ and the EC do not view the Transaction sufficient to permit regulatory approval of the Merger.
20. On information and belief, MCI Telecom reasonably believes that a modification of the terms of the Transaction will facilitate approval by the DoJ and the EC.
21. On information and belief, MCI Telecom reasonably believes that consummation of the Transaction as it stands at present will not satisfy concerns of DoJ or the EC.
22. Accordingly, on information and belief, MCI, MCI Telecom, and WorldCom intend to divest additional Internet assets related to the iMCI Business in an effort to obtain the necessary approvals.
23. Cable & Wireless has performed its obligations related to the Transaction as provided in the contract and is both willing and able to perform any and all remaining obligations related to the Transaction.
24. MCI, MCI Telecom, and WorldCom are able to perform their obligations related to the Transaction as provided for in the contract.
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25. Nevertheless, officials of MCI, MCI Telecom, and WorldCom have advised Cable & Wireless that they intend to offer assets related to and including the iMCI Business for sale to parties other than Cable & Wireless without engaging in good faith negotiations with Cable & Wireless for a modification of the Transaction.
26. The actions of MCI, MCI Telecom, and WorldCom breach the Modification and No-Shop Provisions of the contract and have caused, and will continue to
cause, serious and irreparable harm to Cable & Wireless including, but not limited to, Cable & Wireless' loss of opportunity costs and its loss of the right to acquire the iMCI Business subject to good faith negotiations regarding modifications of the Transaction sufficient to obtain necessary government approvals.
27. MCI's, MCI Telecom's, and WorldCom's breach of provisions of the contract will result in Cable & Wireless' loss of both transactional and opportunity costs.
28. Money damages would not adequately compensate Cable & Wireless for a breach of the contract, because the Modification and No-Shop provisions of the contract protect Cable & Wireless' interests in consummation of the Transaction rather than in the assets to be transferred.
CLAIM FOR RELIEF
29. Cable & Wireless hereby incorporates by reference and repeats and realleges the allegations contained in paragraphs 1 through 28 above.
30. The refusal to negotiate in good faith with Cable & Wireless regarding modifications to the Transaction and the negotiation with third parties regarding the sale of the iMCI Business constitute a breach by MCI, MCI Telecom, and WorldCom of obligations provided for in the contract.
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31. The injury resulting from this breach of the contract leaves Cable & Wireless with no adequate remedy at law. Cable & Wireless has suffered and will continue to suffer irreparable injury as a result of the acts of defendants complained of herein. That injury will continue unless and until these actions are declared to be unlawful and enjoined by this Court.
WHEREFORE, Plaintiff respectfully prays for declaratory and injunctive relief against Defendants as follows: