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4th Circuit sides with phone resale business in lawsuit with Sprint

Sprint’s terms and conditions do not clearly prohibit customers from reselling their phones, a federal appeals court ruled Thursday.

The 4th U.S. Circuit Court of Appeals ruling reverses a decision that had given the cell phone provider a win in its litigation across the country against businesses that buy upgraded phones from Sprint customers. U.S. District Judge Catherine C. Blake had granted partial summary judgment in favor of Sprint Nextel Corp. in 2017.

The parties eventually agreed to a stipulated judgment of $26.9 million in damages on the tortious interference claim and proceeded to the 4th Circuit to argue liability.

Sprint sued Odenton-based Wireless Buybacks Holdings LLC in 2013 alleging tortious interference based on the Odenton firm’s business model of purchasing “upgraded” phones from Sprint customers and selling them at a higher price, according to the opinion.

Wireless Buybacks interfered with the contractual relationship between Sprint and its customers, according to Sprint, and induced customers to violate their terms and conditions. Wireless Buybacks contended customers who own their phones outright were permitted to sell them as long as they were not active on Sprint’s network or provided through a lease agreement.

The three-judge 4th Circuit panel, in a published opinion, sided with Wireless Buybacks and held that Sprint’s contract is ambiguous.

“Obviously, we’re very happy with the result,” said Charles R. Price, an attorney for Wireless Buybacks. “It was a good decision.”

Price, of the Tandem Law Group LLC in Washington, said the case will resume at the district court level and the issue of contract ambiguity should go to a jury.

Wireless Buybacks is one of several businesses that market themselves to commercial customers who buy multiple phone lines for employees but do not always take upgrade offers, according to the opinion, written by Judge Julius N. Richardson. Wireless Buybacks contacts these companies, evaluates their cell service contracts and facilitates upgrades, then purchases the new phones from them.

Sprint offers upgraded phones at steep discounts in exchange for customers’ signing fixed-term contracts, according to the opinion, and makes money because the earnings from the contracts offset the phone discounts.

Sprint alleged that businesses like Wireless Buybacks harm the company because Sprint loses money when it provides new phones to customers who would not otherwise have upgraded. At the same time, Sprint also argues that customers who continue to use old devices see their service suffer and have lower customer satisfaction, which may cause them to leave Sprint.

Sprint’s “Nature of our Service” clause says the company’s “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,” according to the opinion. The court found the language is a background statement of intent and not an enforceable promise not to resell Sprint phones.

Another provision states customers “cannot in any manner resell the Services to another party,” but the parties debated the meaning of “services,” according to the opinion, and the court concluded that the most logical reading of the contract excludes phones owned by the customer and not active on the network.

“Looking at the record before us, we do not see any extrinsic evidence so clear that a reasonable jury would have to resolve the ambiguous definition of ‘Services’ in Sprint’s favor,” Richardson wrote. “We therefore cannot affirm the district court’s grant of summary judgment on this basis.”

There was also insufficient evidence that Sprint customers had promised to activate their phones when they purchased them, according to the opinion.

The judgment of the district court judge was vacated and the case was remanded.

Attorneys for Sprint from Polsinelli P.C. in Kansas City, Missouri, deferred to Sprint for comment. A spokesman did not immediately respond Friday.

The case is Sprint Nextel Corporation et al. v. Wireless Buybacks Holdings LLC et al., No. 18-1729.

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