Paniolo Cable Company Trustee Sues A Telecom Service Provider for Alleged Breach of Contract and Unjust Enrichment

February 10, 2021, District of Hawaii – Last week, Trustee Michael Katzenstein for the bankruptcy estate of Paniolo Cable Company, brought an action against Defendant Clearcom, Inc. for breach of contract, unjust enrichment, and turn over of funds.

Debtor Paniolo Cable Company owns and operates certain submerged marine and terrestrial fiber telecommunications cable networks in the State of Hawaii. Defendant Clearcom is a competitive local exchange carrier licensed to provide telecommunication and broadband services throughout the State of Hawai’i and is an affiliate of Sandwich Isles Communications, Inc. (“SIC”). Defendant maintains a network to service SIC’s customers.

According to the Trustee, Paniolo had leased space on its cable network exclusively to SIC in exchange for a payment of quarterly rent, on which SIC defaulted. Per the 2019 settlement agreement, SIC was prohibited to permit or use capacity on the Paniolo cable system other than the two pairs of fiber reserved to SIC. Allegedly, in violation of the agreement, SIC allowed Clearcom to use and sublet capacity on the Paniolo cable network without the knowledge, permission, or authority of the Trustee. Clearcom supposedly contracted with another company and permitted it to use capacity on the Paniolo cable network without permission or authority of Paniolo or the Trustee. Clearcom also received monies from the company in exchange for permitting it to use the Paniolo space.  

The Trustee brought an action, alleging that Clearcom breached the terms of the settlement agreement with the Trustee by failing to disclose the existence of its agreement. Further, the Trustee argues Clearcom was unjustly enriched through its receipt of monies from the company, for which it must make restitution to the Trustee. Thus, The Trustee contends that Clearcom must turn over all funds collected in respect of its use of capacity and in respect of the use by third-parties who contracted with or otherwise gained access to the Paniolo Cable System by, through, or under the SIC Parties.

The case is In re Paniolo Cable Company, LLC in the United States Bankruptcy Court for the District of Hawaii under case no. 18-01319.

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