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T-Mobile Usa, Inc. v. Wholesaler212, Inc.

United States District Court, E.D. New York

March 31, 2014

T-MOBILE USA, INC., Plaintiff,
v.
WHOLESALER212, INC., et al., Defendants.

MEMORANDUM AND ORDER

SANDRA L. TOWNES, District Judge.

In mid-November 2012, plaintiff T-Mobile USA, Inc. ("Plaintiff" or "T-Mobile") commenced this action for damages and injunctive relief against defendants Wholesaler212 Inc., Unlocking 4 Less, Guy Sultan a/k/a Guy Sultana and Haim Tourjman (collectively, "Defendants"), alleging that Defendants engaged in a "Subsidy Theft Scheme" involving T-Mobile prepaid wireless telephones. On November 30, 2012, Defendants, proceeding pro se, stipulated to the entry of a preliminary injunction and an "Order Granting Expedited Discovery and Order to Preserve Evidence." See Stipulation for Entry of Preliminary Injunction, Expedited Discovery and an Order to Preserve Evidence, dated Nov. 30, 2012, p. 1. Defendants took no action thereafter, however, and in January 2013, the Clerk of Court entered a default against all four Defendants pursuant to Fed.R.Civ.P. 55(a).

In March 2013, Plaintiff moved for a default judgment pursuant to Fed.R.Civ.P. 55(b)(2), seeking injunctive relief, money damages of $1, 047, 254.64, and leave to file a petition for an award of reasonable attorneys' fees and costs. In a memorandum and order dated February 11, 2014, and February 20, 2014 (the "Prior M&O"), this Court stated that, although it was "satisfied that Plaintiff is entitled to injunctive relief, " it was "not satisfied, based on the documents attached to Plaintiff's Memo, that Plaintiff is entitled to $1, 047, 254.64 in damages." Prior M&O at 2. Accordingly, the Court directed Plaintiff to file supplemental submissions in support of its request for damages. The Court deferred decision on whether it would be appropriate to grant attorneys' fees and costs but, in the interests of expedience, granted Plaintiff leave to file a petition for an award of reasonable attorneys' fees and costs along with the supplemental submissions.

In response to the Prior M&O, Plaintiff has submitted, inter alia, a declaration from Ronald Oh, the Business Analysis Manager in Plaintiff's Operations Investment Analytics Department (hereafter, the "Oh Declaration") and a declaration from Stuart Drobny, the President of Stumar Investigations ("Stumar")-a firm hired by Plaintiff to investigate the business practices of Defendants (hereafter, the "Drobny Declaration"). The Oh Declaration explains the basis for Plaintiff's assertion that it lost $276.00 for each wireless handset "trafficked" by Defendants, while the Drobny Declaration explains how Plaintiff calculated the number of wireless handsets "trafficked" by Defendants. In addition, Plaintiff has submitted a "Petition for an Award of Reasonable Attorneys' Fees and Costs, " which posits that this is one of the "exceptional cases" in which an award of attorneys' fees and costs is merited under section 35(a) of the Lanham Act, 15 U.S.C. § 1117(a).

The Oh Declaration

The Oh Declaration explains that the $276.00 per handset figure is comprised of two components: an "Average Market Invest/Lost Subsidy" of $21.67 per handset and "average lost revenue" of $254.33. The former reflects the average cost to Plaintiff of selling each handset, which includes both the lost subsidy and "various marketing, sales, customer service and other costs" incurred by Plaintiff in selling a handset. Oh Declaration, ¶ 6(b). The latter reflects the profits which a particular phone would be expected to generate for T-Mobile if it were in the hands of a legitimate T-Mobile customer. Id., ¶ 6(a).

Plaintiff is entitled to recover the "Average Market Invest/Lost Subsidy" of $21.67 per handset. As Mr. Oh explains, Defendants' activities deprived Plaintiff of "the opportunity to recoup the subsidy and other costs associated with" an individual phone. Id., ¶ 4. Plaintiff should be compensated for these losses.

Plaintiff is not entitled to recover "average lost revenue, " however. Although Mr. Oh claims that Defendants' activities deprived Plaintiff of "the opportunity to earn profits if [ sic ] expected to earn by providing wireless service to a legitimate T-Mobile customer, " id., there is no proof that Defendants' actions prevented any potential legitimate customers from obtaining a T-Mobile prepaid phone. To be sure, Mr. Oh states that "[i]llicit acquisition and resale of handsets pursuant to the Subsidy Theft... results in shortages from time to time of T-Mobile handsets in retail stores." Id. at ¶ 5. However, there is no evidence that Defendants' activities, which involved only a few hundred phones, resulted in these shortages or that Plaintiff lost any legitimate customers because of a shortage attributable to Defendants. Moreover, there is no proof that Defendants' customers would have become T-Mobile customers absent Defendants' actions.

The Drobny Declaration

The Drobny Declaration indicates that, with the exception of the 15 Samsung T-139 phones which Stumar purchased on August 23, 2012, Plaintiff lacks actual knowledge of precisely how many T-Mobile prepaid phones Defendants purchased. Rather, Mr. Drobny estimates the number based on e-mail advertisements sent by Wholesaler212 and/or Sultan. According to Mr. Drobny, who has "conducted hundreds of handset trafficking investigations" and is "intimately familiar with all facets of their operations, " Drobny Declaration at ¶ 4, traffickers do not advertise a specific quantity of a certain type of phone unless they have the phones in their inventory. See id. at ¶¶ 7, 10. Thus, while Stumar only purchased 15 T-139 telephones on August 23, 2012, Mr. Drobny assumes that Defendants also had at least another 85 T-139 telephones because Sultan's e-mail to Stumar's investigator stated that Wholesaler212 had 100 T-139 telephones for sale. Using this same analysis, Mr. Drobny estimates that Defendants purchased 1, 166 T-Mobile telephones by totaling the number of telephones advertised in Defendants' e-mails. Copies of those e-mail advertisements appear as Exhibit C to Plaintiff's complaint, and are painstakingly summarized in Exhibit 1 to the Drobny Declaration.

This Court accepts the commonsense proposition that Defendants would not advertise telephones that they did not actually have. However, this Court is not prepared to accept the assumption that each subsequent advertisement relates to phones other than those which were advertised before. Rather, this Court has scrutinized both Exhibit 1 to the Drobny Declaration and the advertisements themselves and, for the reasons explained below, concludes that the evidence provided by Plaintiff establishes that Sultan and/or Wholesaler212 purchased a total of 702 telephones.

Exhibit 1 indicates that on August 16, 2012, Sultan issued an e-mail advertisement stating that Wholesaler212 had 300 Samsung Galaxy Blaze telephones, 100 Samsung Galaxy S2 telephones, and 100 Samsung Galaxy S3 telephones for sale. Less than two weeks later, on August 28, 2012, Sultan sent out a second e-mail advertisement, stating that Wholesaler212 had 50 of each of the three types of telephones listed above. On August 30, 2012, and on September 4, 2012, Sultan sent additional e-mail advertisements which again stated that Wholesaler212 had 50 of each type of telephone.

Mr. Drobny's analysis assumes that the telephones advertised on August 16, 2012, are distinct from the telephones which were advertised in the subsequent e-mails. Similarly, Mr. Drobny assumes that the 50 telephones advertised on August 28, 2012, are not the same telephones which were advertised two days later on August 30, 2012, and that the telephones in Sultan and/or Wholesaler212's possession on September 4, 2012, had never been advertised previously. However, there is no evidence to substantiate these assumptions. Indeed, it seems as likely-if not more likely-that Sultan and/or Wholesaler212 had 300 Samsung Galaxy Blaze telephones, 100 Samsung Galaxy S2 telephones, and 100 Samsung Galaxy S3 telephones in inventory as of August 16, 2012, and had yet to sell 50 of each of these phones by September 4, 2012.

On September 5, 2012, Sultan advertised that he had at least two Samsung Galaxy S2 telephones available-at least one in both black and white-and at least two Samsung Galaxy S3 telephones available-at least one in both blue and white. The S2 telephones were priced $10 to $20 higher than the S2 telephones which Sultan and/or Wholesaler212 had offered previously, while the S3 telephones were priced $20 to $30 higher. Since electronic equipment generally does not appreciate in value as it ages, this Court will accept Mr. ...


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