Judge blocks telecom software provider from shutting off phone service to millions

SAN DIEGO (CN) — A federal judge on Thursday ordered a company that maintains telecommunications equipment to temporarily hold off on leaving millions without phone service by ending its contract with a service provider.

Impact Telecom LLC, a company that provides services that allow users to make phone calls over the internet, filed suit in San Diego federal court on Monday against Sansay Inc., a company that sells, licenses and maintains telecommunications equipment and software for communications service providers. Impact accuses Sansay of breach of contract and violation of California’s Unfair Competition Law.

From 2014 to 2019, Impact purchased equipment and software from Sansay. In its complaint, Impact claims the contracts were renewed annually without any problems. But when a Impact Telecom software engineer logged in to work on New Year’s Eve to find a message warning him that the company’s product licenses were going to expire on Jan. 6, 2025.

What followed where back-and-forth negotiations between the two companies during which Impact claims Sansay’s CEO unilaterally and unlawfully tried to pressure the company into a 12-month maintenance agreement “in which case the CEO would then consider whether to maintain Impact’s product licenses,” according to the complaint.

If its product license is terminated, Impact’s 300 carriers and millions of users, including municipalities, emergency services like 911 operators and health care and mental health crisis hotlines will lose access to telephone services, the company claims.

“Under these circumstances, granting plaintiff’s application for a temporary restraining order serves the public interest,” wrote U.S. District Judge Todd W. Robinson, a Donald Trump appointee, in his order granting the Impact’s motion to temporarily stop Sansay from ripping up the contract and terminating Impact’s license.

Impact had been using product licenses acquired from Sansay for a decade until last year, when Impact was acquired by another company called 46 Labs — a direct competitor with Sansay — that requested to terminate the maintenance services Impact had with Sansay. After Impact why the product licenses were being terminated and what could be done to keep them, Sansay suggested signing a 12-month maintenance contract and even then Sansay would have to think about keeping the licenses, Robinson noted in the order.

“From this, the court can infer that defendant terminated the product licenses to recapture the benefits of the previously terminated maintenance contract and harm a direct competitor,” Robinson wrote. “Consequently, plaintiff is likely to establish that defendant breached the covenant of good faith and fair dealing.”

Representatives of Impact Telecom and Sansay did not respond to requests for comment by press time.

A hearing on the court’s order for Sansay to show cause is set for Jan. 17.