Cisco, VAR Trade Barbs In Closing Arguments Of Contract Trial

Attorneys for Cisco and one of its solution providers on Friday presented closing arguments to the jury in the breech of contract lawsuit between the two, with the solution provider's attorney characterizing Cisco as purposely throwing its partner overboard and destroying its business and Cisco's attorney claiming the vendor is really the victim.

Infra-Comm, a San Juan Capistrano, Calif.-based solution, alleges Cisco breached its Indirect Channel Partner Agreement (ICPA) and the terms of its deal registration program by passing a potential large deal with the Irvine Company, a property development company, to AT&T. Networking and IP telephony vendor Cisco, in return, is accusing Infra-Comm of harming Cisco's business and misusing its brand name.

Brian Daucher, attorney for Infra-Comm, began his closing argument with the same analogy he used at the beginning of the trial about the fisherman who goes fishing and reels in a big fish, only to have the captain of the boat not only take the fish away but then throw the fisherman overboard for complaining.

He said the trial showed how Infra-Comm reeled in the customer only to be kicked overboard by Cisco. "You saw how Cisco blamed Infra-Comm, destroyed Infra-Comm," he said.

Daucher said that Cisco personnel testified that Infra-Comm was the go-to partner for the Irvine Company for years, and had an exclusive Cisco relationship with the customer, and was awarded Cisco's Trailblazer award because of a $650,000 IP phone router deal with the customer, and that Cisco itself praised Info-Comm for its partnership.

However, Daucher said, Cisco witnesses complained about Infra-Comm during their testimony. "Cisco should have cherished its relationship, not trashed it," he said.

Cisco complained about Infra-Comm despite the solution provider's growing Cisco business until the ICPA was terminated, Daucher said. "Cisco should not complain when its resellers succeed," he said.

Cisco, in its deal registration program, promised to protect partners, and agreed that confidentiality regarding the registration was promised. For instance, Daucher said, Cisco in its deal registration program tells its inside sales reps in all capital letters, "DO NOT PROVIDE EQUAL SPECIAL PRICING TO NON-REGISTERED PARTNERS."

"If partners don't trust Cisco, they won't bring deals to Cisco," he said.

However, Daucher said, Cisco brought AT&T into the deal, and delivered Infra-Comm's bill of materials to AT&T after deleting the solution provider's logo, and then promoted AT&T to the customer. "This is not a case where the Irvine Company asks AT&T to come in," he said. "Instead, Cisco selfishly brought AT&T in."

Cisco also accused Infra-Comm of owing it money for the Cisco Remote Operating Services (CROS) provided to the customer, but never brought in a witness who said Cisco tried to make it work as promised, Daucher said.

Daucher drew on the jurors' sympathies by comparing Cisco's actions to some of the large companies they might deal with by saying that Cisco continued to bill the Irvine Company for the CROS services after Infra-Comm cancelled. "I'm sure you've all been through that when some big company refused to turn off a service," he said.

Daucher also anticipated Cisco's argument that Infra-Comm used the Cisco brand name in its own Internet domain names by pointing out that the use was common knowledge at Cisco for years, but Cisco never filed a complaint until Infra-Comm filed its lawsuit. In fact, Daucher said, Infra-Comm's use of the Cisco name probably increased Cisco's sales.

While Cisco said in an email that it would follow up on Infra-Comm's request to extend the registered deal for another six months within a week, it didn't, and it never explained why not, Daucher said.

When Cisco terminated its ICPA after Infra-Comm filed the lawsuit, it did so under certain clauses in the ICPA which set a term for the contract for one year but which could be terminated without reason, terms which Judge Lewis found "unconscionable" in a ruling on Wednesday, Daucher said.

Instead of having good cause to terminate the ICPA, Cisco instead terminated it for convenience by its own admission, he said.

By terminating the ICPA in response to Infra-Comm's lawsuit, Cisco was making an example of Infra-Comm for its other resellers, Daucher said.

"Access to the court is a fundamental right, not a way to destroy a business. . . . [Infra-Comm is] a head on the spike," he said.

Daucher then asked the jury to award Infra-Comm damages of $6,381,446, which he called a very conservative estimate by an expert witness and attorney based on the amount of business Infra-Comm lost as a result of losing its Cisco ICPA and its business with the Irvine Company.

He closed by implying that the lawsuit is a case where a small company is trying to stand up for its rights against a larger company.

"It's a miracle [that this case] got this far," he said. "You have to have owners that are courageous. . . . Many would have given up. But every year, someone has to get up and lock the door against the bullies."

Next: Cisco Makes Its Case

Next up was Rollin Chippey, attorney for Cisco, who laid out Cisco's closing arguments before the jury.

Chippey told the jurors that Infra-Comm would have them believe Cisco and its representatives got together to hurt Infra-Comm and deprive it of an opportunity, and then come in an lie about it for four weeks.

Instead, Chippey said, Cisco has been doing its best to help Infra-Comm, but in the end Infra-Comm did not have the ability to carry out such a large project in the customer's eyes.

Chippey also said that there are no damages involved because Infra-Comm was unable to do the deal in the first place.

He also said Cisco was the victim. Because Infra-Comm did not pay for CROS services, it abused Cisco personnel, and it misappropriated Cisco intellectual property, he said.

Cisco personnel, rather than breaking any pledges to Infra-Comm, instead followed the Golden Rule, Chippey said. "They said they will support Infra-Comm until the customer says different," he said.

Cisco is in a very competitive business environment, with a lot of manufacturers and resellers vying for contracts, meaning the customer makes the decision, not Cisco, Chippey said. And Infra-Comm itself testified that the customer had other choices, he said.

However, the Irvine Company wanted the deal, which was the biggest in Infra-Comm's history, to be done with Cisco resources instead of taking a chance with the solution provider, meaning that Infra-Comm would never have gotten the deal in any case, Chippey said. Therefore, he said, the customer required Cisco to participate in the deal's Master Services Agreement, a requirement that was noted by Infra-Comm itself, he said.

The customer also told Cisco it had a "Plan B" if Cisco did not participate: It would consider working with the incumbent phone vendor, Nortel, Chippey said. And it testified that it told Cisco that AT&T was the only company with the technical resources to do the deal, he said.

"That wasn't coming from Cisco," he said. "That was coming from the customer."

Furthermore, because the customer chose to work with AT&T instead of Nortel, Infra-Comm actually benefitted by handling the "rack and stack" portion of the deployment, business it would not have otherwise received, Chippey said.

Cisco's deal registration plan does not provide exclusivity to Infra-Comm, and does not say Cisco cannot share the bill of material or talk about the deal with another reseller, Chippey said. It only prevents the disclosure of the identity of the registered partner and the terms of the offering, he said.

Cisco asserts that the bill of material was actually prepared by Cisco and sent to Infra-Comm, and that it was not based on any confidential information from Infra-Comm, Chippey said.

Regarding CROS, Chippey said that Infra-Comm agreed to provide the customer both canned and "ad hoc" reports per the customer request, but that the customer was dissatisfied with the service. Infra-Comm eventually pulled the plug on the service so that it would not be responsible for issues, and to pave the way for it to sign a different monitoring service for which it was paid much more than it made with CROS, he said.

Cisco also showed that Infra-Comm's attitude towards Cisco personnel became hostile, with Infra-Comm at one point writing, "Go to hell!" in email to Cisco, and otherwise intimidating Cisco personnel, Chippey said.

Furthermore, when asked by Cisco to propose a realistic proposal to solve the differences between the two companies, Infra-Comm did not respond, he said.

Chippey closed by looking at the damages requested by both parties.

Cisco is requesting damages of $1,063,998 due to unpaid CROS services and a CROS termination fee, Chippey said.

He also said that Infra-Comm's request for over $6 million in damages was excessive, amounting to 12 times the solution provider's total profits between 2000 and 2007. Also, he said, any damages should be limited to profits, not revenue.

In any case, Infra-Comm could only request damages for the first two phases of the multi-phase project for the Irvine Company, revenue for which totaled $1.6 million, not $6.43 million, he said.

And while Infra-Comm is not entitled to any damages by Cisco's thinking, if such damages were awarded, Chippey said that would only total between $505,052 and $1,022,787 according to the terms of deal registration and the ICPA.

Chippey also said that Infra-Comm did not take steps to protect its business because that would have been too expensive. Instead, he said, "they decided to invest in the lottery ticket of litigation and get money it couldn't get on its own."

The jury began deliberation late on Friday, and will continue its deliberation on Monday.