This adversarial proceeding arose from the Chapter 11 bankruptcy of Paniolo Cable Company, LLC, which owns undersea telecommunications infrastructure connecting five Hawaiian Islands. The dispute was between the Chapter 11 Trustee, David C. Farmer, and the defendant, Clearcom, Inc. Clearcom had entered into a Master Services Agreement and an Emergency Service Order with Time Warner Entertainment Co. (Charter) concerning access to the Paniolo infrastructure. When Clearcom failed to make payments, the Trustee sought recovery. The bankruptcy court awarded partial summary judgment to the Trustee, and the Bankruptcy Appellate Panel affirmed that decision. Clearcom appealed to the Ninth Circuit, arguing that the agreements had terminated and that there were disputes of material fact regarding the scope of the contracts and the amount owed.
The Ninth Circuit applied de novo review to legal conclusions and clear error to factual findings. On the breach of contract claim, the court analyzed the Master Services Agreement, which stated it would terminate after thirty-six months but continued unless terminated by written notice. The court found that a reasonable factfinder could conclude the agreement remained in effect until written notice was filed. Similarly, the Emergency Service Order was found to involve a lease of access to the infrastructure, evidenced by references to a Monthly Recurring Charge and receipts for payments as late as February 2022. Because the Trustee established a prima facie case, the burden shifted to Clearcom to demonstrate a genuine dispute of material fact. Clearcom failed to introduce evidence showing the agreements covered assets other than the Paniolo infrastructure or that they had terminated. The court rejected Clearcom's declarations as conclusory and self-serving. Regarding unjust enrichment, the court noted that under Hawaii law, the retention of payments for leasing access constitutes unjust enrichment. Clearcom's argument that some payments were unrelated to the infrastructure only affected the calculation of the restitution amount, not the liability itself. Finally, the court addressed the motion for reconsideration, finding no abuse of discretion in the bankruptcy court's denial because Clearcom did not explain why it could not have used formal discovery processes like subpoenas to secure testimony from a Charter employee.
The decision leaves the bankruptcy court's ruling in favor of the Trustee intact and binding on the parties. Clearcom is liable for breach of contract and unjust enrichment. However, the case is remanded regarding the specific calculation of damages for unjust enrichment, allowing Clearcom to introduce evidence challenging the amount of restitution it owes. The ruling clarifies that under the specific language of the Master Services Agreement, the contract does not automatically terminate after a set period without written notice.