Telecom International America, Ltd. v. AT&T Corp.

Telecom International America, Ltd. (TIA) (plaintiff) was an undercapitalized subsidiary of the second-largest Japanese telephone company. TIA signed a series of equipment contracts and other writings (the equipment contracts) with the American telecommunications corporate giant AT&T Corporation (AT&T) (defendant). AT&T agreed to provide a Diamond Net telecom system to TIA. On the one hand, the equipment contracts contained express warranties of end-to-end service, a high rate of call completion, and equipment sufficiently reliable and high-speed for TIA’s purposes. On the other hand, the equipment contracts contained warranty-disclaimer clauses and an integration clause. A dispute arose between the parties concerning alleged problems with the system. TIA claimed that, despite the equipment contracts’ terms, AT&T guaranteed the operation of the system at a higher level of quality of a working, unified system. TIA sued AT&T for breach of contract and breach of express warranty for failing to operate the system at the purportedly promised level of quality. TIA argued that the equipment contracts did not represent the parties’ entire agreement and sought to introduce evidence of AT&T’s proposal, oral representations of AT&T executives, and internal communications of AT&T employees. The district court ruled that the parol-evidence rule precluded TIA’s breach-of-contract claim and denied TIA’s breach-of-express-warranty claim. On appeal, TIA argued that the district court improperly failed to consider its parol evidence in determining whether the parties had a single integrated agreement. Alternatively, TIA argued that the parol-evidence rule did not apply because the equipment contracts were not complete and unambiguous. Further, TIA argued that AT&T’s disclaimers were ineffective considering AT&T’s express warranties.