Sprint customer contract found ambiguous

Where Sprint argued that Wireless Buybacks, by purchasing phones from Sprint’s customers for resale, tortiously interfered with contracts between Sprint and its customers, the contracts were found to be ambiguous on whether the practice was forbidden.

Background

Besides providing cellular service, Sprint also sells phones to its customers. This includes offering “upgraded” phones at steep  discounts, typically in exchange for customers renewing their contracts. 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 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. The district court agreed and granted partial summary judgment for Sprint. The district court’s order did not resolve the amount of Sprint’s damages.

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 $26.9 million for Sprint’s tortious interference claim.”  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.”

Appellate jurisdiction

We conclude that the parties here entered into a valid stipulation providing a damages amount predicated on the scope of liability. We asked for supplemental briefing because the judgment seems to say that the parties’ damages stipulation is conditioned on the outcome of this appeal. In their briefs, both parties disavow such an interpretation of the judgment.

This stipulation is real and will remain binding on remand (unless, as noted above, there is some lawful basis for relieving the parties from the stipulation). If Wireless Buybacks is ultimately found liable for all four categories of phones, then damages will be at the stipulated amount.

Tortious interference claim

The main issue in this appeal is whether Sprint’s contract with its customers forbade them from reselling phones owned by customers outright but not active on Sprint’s network. The parties agree that this issue is governed by Maryland law, which follows an “objective” approach to contract interpretation.

The district court agreed with Sprint that, based on several terms of the contract, it unambiguously prohibited Sprint customers from reselling all Sprint phones. Wireless Buybacks argues that the contract is ambiguous, relying on the Tenth Circuit’s decision  in Sprint Nextel Corp. v. Middle Man, Inc., 822 F.3d 524 (10th Cir. 2016), which interpreted the same contractual language before us. Whether the contract is ambiguous presents an issue of law that we review de novo. Based on our review, we agree with Wireless Buybacks that the contract is ambiguous.

Sprint also argues that it is entitled to summary judgment even if the contract is ambiguous. It claims that Wireless Buybacks has introduced no extrinsic evidence showing that Sprint customers interpreted the contract to permit them to resell their phones, meaning there is no genuine issue of material fact to present to a jury. Here too, we find Sprint’s argument uncompelling.

Sprint also seeks to invoke a different promise: it claims that Sprint customers agreed to activate their upgraded phones on Sprint’s network. Customers allegedly violated this promise when they sold the phones to Wireless Buybacks without activating them. Sprint’s challenge lies in proving that customers ever made such a promise. According to a declaration submitted by one of Sprint’s employees, this promise appears in Sprint’s written contract. But the declaration is patently wrong: the contract contains no such promise.

Vacated and remanded.

Sprint Nextel Corp. v. Wireless Buybacks Holdings LLC, Appeal No. 18-1729, Sept. 5, 2019. 4th Cir. (Richardson), from D. Md. at Baltimore (Blake). Charles Randolph Price for Appellants, Jay E. Heidrick for Appellees. VLW No. 019-2-249. 35 pp.