GTT Americas Breached Commission Contract With Warner Telecom, Says Complaint

GTT Americas has attempted to avoid its obligation to make commission payments to Warner Telecomm under a 20-year-old master sales agreement, alleged a fraud complaint Wednesday (docket 5:24-cv-00253) in U.S. District Court for Eastern North Carolina.

Warner entered into the agreement in 2004 with Access Point, which GTT acquired in 2018, the complaint said. Over the past 20 years, Warner has generated “numerous customers” that brought “millions of dollars” in revenue to GTT and Access Point, it alleged. The “plain language” of the agreement entitled Warner to commission payments approaching $250,000 per year, it said.

Though GTT assumed Access Point’s obligations under the agreement -- and agreed to secure new customers in exchange for payment of commissions -- the managed network provider has tried to avoid its obligation under the agreement by changing its commission structure and policies to “artificially reduce the commissions due Warner,” the complaint said. GTT also tried to alter its obligation by “purporting to exercise a contractual forfeiture provision” allowing it to stop paying commissions to Warner while continuing to receive revenue from the plaintiff’s customers, it said.

Warner’s commissions were to be calculated on a percentage of revenue generated at rates from 13% to 20% per month, alleged the complaint. The agreement requires GTT to pay commissions to Warner for as long as GTT continues to receive revenue from Warner customers. A section in the agreement, commission forfeiture, is the only exception to the commission structure and provides eight “specific grounds” on which GTT can terminate the agreement for cause, including fraud, misrepresentation and policy violations that “are not applicable here,” said the complaint.

When GTT assumed Access Point’s obligations, it “unilaterally changed” Warner’s commission rates in violation of the agreement, alleged the complaint. It stopped paying Warner commissions on revenue generated by a national “chicken wing and sports bar franchise” by “improperly seeking to characterize it as a ‘direct’ account,” when the account was one generated by “Warner’s efforts and fully covered by the Agreement,” the complaint said.

On Feb. 23, GTT purported to exercise its right to terminate the agreement for cause and invoked the commission forfeiture provision of the agreement “to cease paying commissions to Warner” for alleged violation of section 12.1, said the complaint. That section allows for termination if Warner fails to meet responsibilities described under sections on minimum base and sales volume requirements, it said.

Warner has met its base revenue requirement every year the agreement has been in effect, said the complaint. In January, Warner’s customers generated revenue that exceeded the base revenue requirement by over 300%, it said. Warner didn't violate the agreement, but GTT has refused to pay Warner commissions earned February-April, the complaint alleged.

The plaintiff is unable to calculate the exact amount of commissions due, “but for GTT’s breaches because the information necessary to make those calculations is solely within GTT’s control," the complaint said. In the 18 months prior to February, GTT paid Warner an average $41,672 monthly in commissions, and GTT’s online portal shows Warner earned $38,207 in March commissions, it said. In total, GTT’s breaches have damaged Warner in an amount over $120,000, with damages continuing to accrue, it said.

Warner asserts claims of breach of contract and unjust enrichment. It requests compensatory damages of over $75,000, costs of the action and attorneys’ fees, plus interest on amounts owed at the maximum rate, the complaint said.