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Sprint Nextel Corporation v. Wireless Buybacks Holdings, LLC

United States Court of Appeals, Fourth Circuit

September 5, 2019

SPRINT NEXTEL CORPORATION; SPRINT COMMUNICATIONS COMPANY L.P., Plaintiffs - Appellees,
v.
WIRELESS BUYBACKS HOLDINGS, LLC; WIRELESS BUYBACKS, LLC, Defendants - Appellants, and SIMPLE CELL INC.; VAUGHN SOLUTIONS, LLC; HALO BRANDED SOLUTIONS, INC.; MARSHA LAVAIGE; MELISSA LAVAIGE; KEVIN A. LOWE; CHRISTOPHER E. METZGER; KEVIN EDWARD SALKELD; BRENDAN T. SKELLY; SHANNON A. SKELLY; NICHOLAS F. SKELLY; BRETT VAUGHN, Defendants.

          Argued: May 9, 2019

          Appeal from the United States District Court for the District of Maryland, at Baltimore. Catherine C. Blake, District Judge. (1:13-cv-00617-CCB)

         ARGUED:

          Charles Randolph Price, TANDEM LEGAL GROUP, LLC, Washington, D.C., for Appellants.

          Jay E. Heidrick, POLSINELLI PC, Kansas City, Missouri, for Appellees.

         ON BRIEF:

          Russell S. Jones, Jr., John M. Challis, POLSINELLI PC, Kansas City, Missouri, for Appellees.

          Before DIAZ, FLOYD, and RICHARDSON, Circuit Judges.

          RICHARDSON, CIRCUIT JUDGE

         Sprint is a cell-phone service provider.[1] Besides providing cellular service, it also sells phones to its customers. This includes offering "upgraded" phones at steep discounts, typically in exchange for customers renewing their contracts. The discounts are so steep that Sprint winds up selling the phones for less than they can command on the second-hand market. Several businesses across the country have sought to profit from this price differential by engaging in arbitrage: they buy "upgraded" phones from customers and then resell them at higher prices.

         Sprint thinks that these arbitrageurs are interfering with its business and has brought lawsuits across the country to stop them. This is one such case. While Sprint brought several claims against multiple defendants, the only remaining claim on appeal is one for tortious interference against Wireless Buybacks, one such arbitrageur. Sprint asserts that its written contract with customers categorically prohibits them from reselling their phones, and that Wireless Buybacks has wrongfully induced customers to do just that. Wireless Buybacks argues that the contract is ambiguous at best regarding when customers may sell their phones.

         The district court found that the contract unambiguously barred resale and granted partial summary judgment for Sprint. We disagree. We therefore vacate the relevant portion of the district court's summary-judgment order and remand for further proceedings.

         I.

         A.

         Sprint, like other cell carriers, offers customers upgraded phones at heavily discounted prices. For example, Sprint has offered new iPhones to customers for as little as $199. See J.A. 220. This is far below what Sprint pays for the phones (much less the retail price); it claims that these price discounts amount to over $400 per phone on average. J.A. 725. In exchange for these discounts, Sprint requires customers to sign up for fixed-term contracts, often lasting as long as two years. Upgraded phones thus serve as a loss-leader: Sprint sells them at heavily discounted prices to entice new customers to sign up and existing customers to renew their contracts. Sprint ultimately profits because the earnings from these service contracts more than offset the discounts on the phones. In this way, upgraded phones are like the "doorbuster" deals that brick-and-mortar retailers use to get customers in the door.

         Wireless Buybacks is one of several businesses that has tried to turn upgraded phones into profits. Its business model was simple arbitrage: buy low and sell high. Wireless Buybacks explained the details in a promotional video aimed at commercial customers. These customers purchase multiple lines of cell service for use by their employees but do not always take advantage of upgrade offers from their service providers. Yet they are effectively paying for these unused upgrades through their regular service charges. Wireless Buybacks offered businesses a way to "leverage" unused upgrades and "turn [them] into cash." When contacted by a business, Wireless Buybacks did the following: (1) performed a free analysis of the business's account with its cell-phone carrier; (2) explained to the business how many upgrades they had available and how much money Wireless Buybacks would pay for them; (3) gave the business instructions on how to order the upgraded phones from the carrier; and (4) once the phones arrived, bought them from the business, paying cash. The video said that there was "really no catch," except that cell carriers expect businesses to renew their service contracts in exchange for the upgraded phones. The video also explained how Wireless Buybacks made money: by reselling the phones at higher prices.[2]

         Sprint claims that it is harmed by this practice of reselling phones in several ways. Most obviously, Sprint loses money when it sells upgraded phones to customers who would otherwise maintain their existing service without ordering upgrades. Sprint also advances a subtler theory of harm. Customers who use new phones with the latest technology get better service. When customers resell their upgraded phones, that means they are continuing to use old phones-leading to lower customer satisfaction. In some cases, Sprint claims, customers cancel their service as a result.

         Sprint's theory of liability is contractual. It claims that its customers promised not to resell the phones when they agreed to Sprint's terms and conditions of service, the written contract here. Businesses like Wireless Buybacks, Sprint asserts, tortiously interfered with that contractual relationship by inducing customers to resell upgraded phones in violation of the terms and conditions.

         The contract allegedly prohibits reselling phones in these provisions:

• "Nature of our Service. Our rate plans, customer devices, services and features are not for resale and are intended for reasonable and non-continuous use by a person using a device on Sprint's networks." J.A. 741.
• "Basic Definitions In this document: . . . (3) 'Device' means any phone, aircard, mobile broadband device, any other device, accessory, or other product that we provide you, we sell to you, or is active on your account with us; and (4) 'Service' means Sprint-branded or Nextel-branded offers, rate plans, options, wireless services, billing services, applications, programs, products, or Devices on your account with us. 'Service(s)' also includes any other product or service that we offer or provide to you that references these General Terms and Conditions of Service ('Ts&Cs')." J.A. 744.
• "Restrictions On Using Services . . . . You cannot in any manner resell the Services to another party." J.A. 746.

         The "Nature of our Service" clause, Sprint argues, unambiguously prohibits the resale of any "customer devices," which include phones. And so too does the "Restrictions On Using Services" clause because the definition of "Services," in Sprint's view, unambiguously includes upgraded phones. Or at least, the contract prohibits resale during the two-year renewal period that follows an upgrade-Sprint has appeared, at times, to advance this narrower proposition. See J.A. 894 (Sprint employee declaration stating that the resale prohibition no longer applies "after the customer has completely satisfied its financial obligations with Sprint"). Wireless Buybacks disagrees and argues that customers who own their phones outright are free to resell them.

         There are some phones, however, that both Sprint and Wireless Buybacks agree customers cannot resell. They agree that customers cannot resell phones that are active on Sprint's network. They also agree that customers cannot resell phones that Sprint has provided pursuant to lease and installment-billing agreements. The agreement governing leased phones tells customers that they cannot resell the phones "unless and until you exercise your purchase option." J.A. 868. The installment-billing agreement gives Sprint a security interest in the phones and forbids resale "while the Goods remain subject to our security interest." J.A. 869. The parties therefore agree that, at least until these phones are fully owned by the customer, they cannot be resold.

         B.

         Sprint filed this lawsuit in 2013 against Wireless Buybacks and other companies that bought and sold upgraded phones, as well as individuals who owned and worked for those companies. The complaint asserted several different causes of action, including claims for tortious interference, fraud, conversion, and trademark infringement. The district court rejected the fraud claims on a motion to dismiss but permitted Sprint's other claims to go forward. Over time, many of the defendants settled with Sprint, and some consented to permanent injunctions forbidding them from reselling Sprint phones. See, e.g., J.A. 150-56. Wireless Buybacks did not settle.

         After discovery, Sprint moved for partial summary judgment, [3] and the district court granted the motion in part. As is relevant for our purposes, it held that Wireless Buybacks was liable for tortious interference with contract. The court reasoned, first, that Sprint's contract with its customers unambiguously prohibited the resale of all Sprint phones. The district court then concluded that Wireless Buybacks' business involved inducing Sprint customers to resell their phones, even though it knew that Sprint's contract prohibited resale. Finally, the court held that Sprint was harmed as a result. The court therefore found Wireless Buybacks liable for tortious interference.

         The district court's order did not resolve the amount of Sprint's damages, and the parties began to prepare for a trial on that issue. They soon ran into disagreement on how to implement the district court's order. In Wireless Buybacks' view, Sprint had to make an individualized showing of unlawful inducement for each customer from whom Wireless Buybacks had bought a Sprint phone. In Sprint's view, it merely had to identify how many Sprint phones Wireless Buybacks acquired and prove how much harm it suffered as a result. The parties resolved this dispute among themselves, stipulating that, "[t]o establish damages at trial, Sprint need only show the amount it has been damaged and is not again required to show that [Wireless Buybacks] induced the breach of the Terms & Conditions between Sprint and every customer." J.A. 642.

         Ultimately, the parties decided to avoid the cost and expense of trial by way of a stipulated judgment. The judgment explained that, "[i]n order to facilitate appeal of the Court's Summary Judgment Order without the need for trial, Defendants consent to damages in the amount of $26, 900, 000 for Sprint's tortious interference claim." J.A. 678. A footnote added: "Plaintiffs and Defendants both expressly reserve all rights to appeal the Court's rulings regarding liability, and any prior rulings in this case. The Parties further reserve the right, as may be allowed by law, to contest the amount of damages in the event that Defendants' appeal on liability is successful." J.A. 678 n.1. Accordingly, the judgment awarded Sprint $26.9 million in damages for tortious interference. The judgment also (1) entered judgment for Sprint on Wireless Buybacks' counterclaims, (2) dismissed all of Sprint's other claims against Wireless Buybacks with prejudice, and (3) dismissed all of Sprint's claims against the three remaining individual defendants (all officers and employees of Wireless Buybacks) with prejudice.

         Wireless Buybacks timely appeals from the district court's order awarding Sprint partial summary judgment. J.A. 680.

         II.

         We begin by examining our appellate jurisdiction. With a few exceptions, we generally may review district-court judgments only once they have become "final." 28 U.S.C. § 1291. The exceptions do not apply here, and so our jurisdiction turns on whether the stipulated judgment entered by the district court was, in fact, final. There are various reasons why a district-court order might not be considered final; for example, orders that dispose of only some of the claims in the lawsuit typically are not final and appealable. A different set of finality problems can arise when civil actions are disposed of by the parties' consent. Appeals courts generally do not treat private settlements as reviewable final judgments (again, with exceptions; for example, we sometimes review settlements of class actions and other cases in which individual parties represent someone other than just themselves).

         Our finality concerns here arise from the fact that the parties seek appellate review of a stipulated judgment entered at their request. While both sides agree that appellate jurisdiction exists, we must assure ourselves of jurisdiction regardless of their wishes. Because the judgment below bears at least a passing similarity to one the Sixth Circuit found insufficiently final to confer appellate jurisdiction in Board of Trustees v. Humbert, 884 F.3d 624 (6th Cir. 2018), we ordered supplemental briefing on the jurisdiction question. Upon review, however, we conclude that this case is distinguishable from Humbert and that we have appellate jurisdiction.

         The Supreme Court recently addressed § 1291's finality requirement in Microsoft v. Baker, 137 S.Ct. 1702 (2017), a class action. In that case, the district court denied class certification. The plaintiffs then voluntarily dismissed their individual claims "with prejudice," but with the caveat that they could resume their individual claims if the class-certification decision were reversed. Id. at 1710-11. Emphasizing that "'finality is to be given a practical rather than a technical construction, '" the Court found no appellate jurisdiction because the plaintiffs' "dismissal device subverts the final-judgment rule." Id. at 1712-13 (quoting Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 171 (1974)). The Court noted that this device "invites protracted litigation and piecemeal appeals" and permits plaintiffs to turn any class-certification decision they do not like into a final, ...


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