Court asks AT&T, Broadcom to resolve VMware dispute
A New York State Supreme Court judge gave AT&T and Broadcom until Dec. 13 to file a settlement, which attorneys say is forthcoming despite recent negotiation spats.
This article was originally published Oct. 23, 2024
AT&T and Broadcom said they've begun drafting a settlement over VMware support contracts ahead of the New York State Supreme Court adjudicating on AT&T's request for an injunctive relief.
Attorneys for AT&T and Broadcom wrote to the court on Nov. 21, stating they've reached a "settlement-in-principle" but requested an extension to Dec. 13 to file a joint letter regarding their positions.
Justice Jennifer Schecter, who is presiding over the case, filed an order that same day extending the deadline.
Schecter previously ordered attorneys for AT&T and Broadcom, the owners of VMWare, to write to the court by Nov. 22 to update her on negotiations. She had also issued Broadcom a temporary restraining order to continue providing VMware support services to AT&T pending a decision.
"I'm not going to issue indefinite, wait-out-the-clock relief," Schecter said during initial oral arguments on Oct. 23 for a lawsuit that AT&T filed in late August over breach of contract.
Contract context
AT&T attorneys have argued its contract with VMware was negotiated prior to Broadcom's acquisition of the company and included a two-year extension for support services that Broadcom would not honor.
Broadcom countered that the services covered in the contract do not exist anymore given changes the company has made to VMware's catalog and its transition to a software subscription model. It also claimed the scope of AT&T's argued damages for not honoring the contract is inaccurate.
Attorneys for AT&T and Broadcom indicated in an Oct. 11 court filing that the two companies had made progress in settlement discussions but said at the time those discussions fell apart.
AT&T's arguments against Broadcom echo a similar contract struggle faced by other VMware customers, according to Marc Staimer, president and founder of Dragon Slayer Consulting. While some might be emboldened in negotiations should AT&T win, few have the resources for lengthy litigation, he said.
"If they are big enough, I think they could do something similar," Staimer said. "But for most, not so much."
Tangible support
Broadcom attorneys stated in prior court filings that AT&T was attempting to "rewind the clock" so it could access VMware's catalog of products that existed before Broadcom's acquisition.
Broadcom attorney Alison Plessman of Hueston Hennigan LLP said in the Oct. 23 hearing that AT&T is exaggerating how much of its VMware environment is at risk if support runs out.
"They've said that if there's one glitch in their software, that would bring down the entire network," she said. "[With] companies that are as sophisticated as AT&T, there wouldn't be one glitch that would bring down the network."
AT&T hasn't provided Broadcom with an audit on specific VMware software running in its environment, she said. Support for some products might have been discontinued entirely following the Broadcom acquisition, and there wouldn't be a service to offer, she added.
"These support services are gone," she said. "It's a new deal offering different products. It's not as though you're repackaging these support services. … They're gone."
Are the individuals who work at Broadcom unable to render support services?
Jennifer SchecterJudge, New York Supreme Court
Schecter questioned why the services couldn't exist as Broadcom should have some VMware employees familiar with software purchased by AT&T.
"I don't understand. Are the individuals who work at Broadcom unable to render support services?" she asked during the Oct. 23 hearing. "Do they not have the technological capability to do the exact same work they did [before]?"
AT&T attorney Jonathan Pressment of Baker & Hostetler LLP said AT&T is not planning to remain with Broadcom's VMware offering. He said the company is looking to transition off the software but did not specify a timeline.
Legal action was the only way to force Broadcom to negotiate the contract after threatening price increases anywhere between $3 million to $9 million a year, he said.
"Without the threat, there's really no way Broadcom will become more reasonable," he said. "We're asking them to continue providing the same support services today."
Tim McCarthy is a news writer for TechTarget Editorial covering cloud and data storage.
