Sprint loses another cellphone trafficking case, takes a tongue-lashing from judge

Sprint has lost another cellphone trafficking case, and this defeat included a tongue-lashing from a federal judge.

A federal jury in Fort Myers, Fla., rejected Sprint’s claims, including that Deborah and Dennis Skelly and their company, 4 U Cell LLC, had violated Florida’s law against deceptive and unfair trade practices and were unjustly enriched by their dealings.

Sprint similarly had lost its cellphone trafficking lawsuit against The Middle Man Inc., a business in Kansas City, Kan., owned by Brian Vazquez. Vazquez battled the lawsuit, which had boiled down to a breach of contract claim at trial, for nearly five years before a jury found in his favor last month.

Both cases started out using similar language, including Sprint’s claim of a “bulk handset trafficking scheme” that defrauded the wireless carrier. Sprint has declared publicly that at one point, it had filed 42 lawsuits against 152 traffickers and had gotten permanent injunctions 37 times and final judgments totaling $93 million.

After the Florida jury rejected Sprint’s claims, U.S. District Judge Paul A. Magnuson took his turn, addressing his remarks to Clint Breithaupt, a witness for Sprint in the case.

Breithaupt’s LinkedIn page describes him as the “corporate representative for federal handset trafficking cases at Sprint” and as the company’s fraud program manager IV.

“I’m going to tell you, Mr. Breithaupt, that quite honestly, I’m critical of Sprint in this case, and I want the Sprint people to know it,” Judge Magnuson said shortly after noon April 7, according to a transcript of the proceeding.

The business of 4 U Cell, in part, involved buying second-hand phones and selling them to their son’s business, which had a contract to supply devices to Best Buy, said Jim Kernell, the Leawood attorney who represented Vazquez and worked with the Skellys as well.

To resell the phones, 4 U Cell checked the devices’ electronic serial numbers, or ESNs, with a source that Kernell said had been recommended by Best Buy. Checking would ensure the device was available to be activated by the buyer.

Sprint, Kernell said, complained that the couple should have used a different website.

“That’s what Sprint kept saying over and over and over,” Kernell said. “They said you guys didn’t even call Sprint to find out what’s the best site to check ESNs.”

Magnuson, reflecting on the website issue, told Breithaupt in open court that a one-week trial costs the government roughly $1 million. It was a staggering amount, given that Magnuson said it could have been avoided at the cost of a stamp.

“You’re completely free to bring lawsuits,” the judge said according to the transcript, “but I’m still convinced that for a $0.50 stamp you could have sent a letter to the Skellys, told them what the proper website was, and this entire case would have been avoided.”

The judge also urged Breithaupt to consider other means to resolve such problems.

“I caution you not to go out and file these big blanket lawsuits but rather try a little bit of a soft hand,” Magnuson said, “and I think it will work in the long haul.”

Sprint declined to comment on the judge’s remarks, spokeswoman Lisa Belot said by email Monday. Belot said Sprint was disappointed in the Florida verdict and disagrees with the outcome, especially given its victories in other cases.

“In contrast, the majority of similar cases have resulted in outcomes in Sprint’s favor, including one earlier this month,” Belot said. “We do not contest that there is a legitimate secondary market for devices, but we continue to believe that consumers are harmed by the activities challenged in these cases.”

A partial victory came when a federal judge in Maryland granted, by summary judgment, Sprint’s claims of breach of contract and tortious interference against Wireless Buybacks LLC, the business owned by the Skelly’s son. The case continues.

Sprint also has asked for a retrial in the Middle Man case. Vazquez has sued Sprint, saying the company is involved in a “fraudulent litigation scheme.”

This story was originally published April 17, 2017 at 4:36 PM with the headline "Sprint loses another cellphone trafficking case, takes a tongue-lashing from judge."