Sprint Solutions, Inc. et al v. The Cell Xchange, Inc. et al

Filing 100

ORDER granting in part and denying in part 55 motion to dismiss; granting in part and denying in part 61 motion to dismiss; granting in part and denying in part 62 motion to amend/correct; granting in part and denying in part 63 motion to dismiss; granting in part and denying in part 78 motion to dismiss. Signed by Judge James D. Whittemore on 3/6/2015. (KE)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
SPRINT SOLUTIONS, INC. et al.,
Plaintiffs,
Case No. 8:14-cv-00233-T-27AEP

vs.
THE CELL XCHANGE, INC. et al.,
Defendants.

ORDER
BEFORE THE COURT are motions to dismiss the Second Amended Complaint (Dkt. 38)
filed by Defendants James Robert Rathbone and the Cell Xchange ("TCX") (Dkt. 47), Kaitlyn
Hedenstad, Casey Alan Parris, and World Wide Sales LLC (Dkt. 55), Tiffany Barton (Dkts. 61, 62),
Matthew Barton (Dkt. 63), and Cellist LLC and Nathane Trimm (Dkt. 78). Plaintiffs oppose each
of the motions (Dkts. 60, 64, 67, 81). Upon consideration, the motions are GRANTED in part and

DENIED in part.

I.

BACKGROUND

Plaintiffs Sprint Solutions, Inc. and Sprint Communications Company, L.P. sell wireless
telephones at subsidized prices to attract customers to Sprint's network. (Dkt. 38

~~

16, 19-20).

According to Sprint, each of the Defendants participates in a scheme to acquire large numbers of
subsidized Sprint phones, which are 'unlocked' from Sprint's network and then resold, especially
in foreign markets where phones are typically sold without subsidies. (Id.~~ 20-23). Sprint claims
this scheme has damaged its finances and reputation, and violates state and federal law. (See
generally id.).

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Sprint's first two complaints were stricken as shotgun complaints. (See Dkts. 5, 31). Sprint
has now filed a second amended complaint, which all Defendants have moved to dismiss on a variety
of grounds.

II.

STANDARD

A complaint should contain a "short and plain statement of the claim showing that the
pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). This Rule does not require detailed factual
allegations, but a plaintiffs complaint must contain more than unadorned or conclusory accusations
of harm. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The complaint must "plead all facts
establishing an entitlement to relief with more than 'labels and conclusions' or a 'formulaic
recitation of the elements of a cause of action."' Resnickv. AvMed, Inc., 693 F.3d 1317, 1324 (11th
Cir. 2012) (quoting Bell At/. Corp. v. Twombly, 550 U.S. 554, 555 (2007)). "A claim has facial
plausibility when the plaintiff pleaded factual content allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678 (citing

Twombly, 550 U.S. at 556).
All of the factual allegations in a complaint must be accepted as true for the purposes of a
motion to dismiss but this tenet is "inapplicable to legal conclusions." Id. at 678. "While legal
conclusions can provide the framework of a complaint, they must be supported by factual
allegations." Id. at 679. All reasonable inferences must be drawn in the plaintiffs favor. St. George

v. Pinellas Cnty., 285 F.3d 1334, 1337 (11th Cir. 2002.)

III.

DISCUSSION

A. The Second Amended Complaint Is Not a Shotgun Complaint
Notwithstanding Defendants' assertions, the Second Amended Complaint largely complies

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with the rules of pleading and is not subject to dismissal in toto as a shotgun pleading. See Fed. R.
Civ. P. 8 & 1O. While the complaint remains lengthy, this is primarily because of the complexity of
the claims and alleged scheme. Each of the nine claims asserted incorporate relevant factual
allegations, which is appropriate. 1
Defendants also contend that the Second Amended Complaint improperly lumps them
together. All counts are pleaded against all Defendants. However, the Eleventh Circuit has held that
"[w]hen multiple defendants are named in a complaint, the allegations can be and usually are to be
read in such a way that each defendant is having the allegation made about him individually."Crowe
v. Coleman, 113 F.3d 1536, 1539 (11th Cir. 1997). When the allegations are read against each
Defendant individually, they are all on "fair notice" of the nature of most of the claims against them
and the "grounds" on which the claims rest. See Twombly, 550 U.S. at 555 n.3.
Defendants Rathbone and TCX argue that it was improper for Sprint to add additional
defendants in the Second Amended Complaint, but as Sprint responds,joinder at this stage of a case,
before motions to dismiss have been resolved, is proper. See Byrant v. Dupree, 252 F .3d 1161, 1165
(1 lth Cir. 2001) (without evidence of prejudice to defendants, leave to amend pleadings should be

freely granted).

B. Fraud Is Insufficiently Pied
However, more specific allegations are necessary for claims alleging fraud. See F .R.C.P. 9(b);
Ambrosia Coal & Constr. Co. v. Pages Morales, 482 F.3d 1309, 1317 (11th Cir. 2007) ("[I]n acase
involving multiple defendants ... the complaint should inform each defendant of the nature of his
alleged participation in the fraud."). Here, Count V sounds in fraud, but fails to include the requisite

1 With

the exception of Count VI, as explained infra.

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specificity as to each Defendant's conduct. (See Dkt. 38 ~~ 60-61) ("[All] Defendants regularly and
systematically misrepresent to Sprint that the Phones are being purchased for a legitimate purpose,
that the Phones will be used by Defendants or other legitimate consumers on Sprint's wireless
network .... [But] Defendants ... do not intend to use the Phones for a legitimate purpose ....").
Similarly, Count III is a claim for civil conspiracy, including conspiracy to commit fraud, but also
fails to meet the heightened pleading standards. (Id.

~~

53-54). See Am. United Life Ins. Co. v.

Martinez, 480 F .3d 1043, 1067-1068 (11th Cir. 2007) (In Florida, "where a conspiracy claim alleges
that two or more parties agreed to commit fraud, the plaintiffs must plead this act with specificity.")
Accordingly, Counts III and V will be dismissed with leave to amend.

C. Other Claims
1. Trademark-Related Claims (Counts I, VII, VIII, and IX)
Counts I and VII-IX are all based on Sprint's allegations that it is has valid trademarks that
Defendants are infringing or encroaching on in some way. Count I brings a state law unfair
competition claim, under Florida common law and the Florida Deceptive and Unfair Trade Practices
Act, Fla. Stat. § 501.201 et seq. This claim is essentially based on the same facts as Count VII, which
alleges infringement of Sprint's trademarks underthe Lanham Act, 15 U.S.C. § 1114.2 To establish
federal trademark infringement, a plaintiff must show that it has a valid trademark, which a
defendant has used in a fashion likely to deceive or cause confusion or mistake. 15 U.S.C.
§1114(1)(a); 15 U.S.C. § 1125(a)(l)(A). In the Second Amended Complaint, Sprint adequately

2 Courts use the same legal analysis for federal trademark and state unfair competition law. See Suntree
Technologies, Inc. v. ECOSENSE INTERNATIONAL, 693 F.3d 1338, 1345 (11th Cir. 2012); Custom Mfg. and
Eng'g, Inc. v. Midway Servs., Inc., 508 F.3d 641, 652 (I Ith Cir. 2007); Pepsico, Inc. v. Distribuidora La
Matagalpa, Inc., 510 F. Supp. 2d 1110, 1114 (S.D. Fla. 2007) (applying same analysis to FDUTPA). "Courts may
use an analysis of federal infringement claims as a 'measuring stick' in evaluating the merits of state law claims of
unfair competition." Planetary Motion, Inc. v. Techsplosion, Inc., 261 F.3d 1188, 1193 n. 4 (I Ith Cir. 2001).

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alleges its possession of a protectable trademark and that Defendants' use of the mark is likely to
cause confusion or deceive. (See Dkt. 38

~~

16-17 (ownership of marks);

~~

42, 83, 88, 97

(Defendants' use of marks)).
Also related is Count VIII, which alleges a false advertising claims under the Lanham Act,
15 U.S.C. §1125(a)(l)(A), (B). The elements of a false advertising claim are (1) false or misleading
advertisements, (2) which deceived or could deceive customers, (3) having a material effect on
purchasing decisions, (4) in interstate commerce, and (5) injuring the plaintiff. Johnson & Johnson

Vision Care, Inc. v. 1-800 Contacts, Inc., 299 F.3d 1242, 1247 (11th Cir. 2002). Sprint's allegations,
that Defendants have used Sprint's trademarks in advertisements to misrepresent the nature of
Defendants' products are sufficient to state a claim for false advertising. (See Dkt. 38 ~~ 90, 92).
Count IX is a claim for contributory trademark infringement. An individual or entity may be
liable for contributory trademark infringement if a third party infringes a trademark and the
defendant intentionally induced the third party to infringe the trademark, or the defendant knowingly
participated in the scheme. Optimum Technologies, Inc. v. Henkel Consumer Adhesives, Inc., 496
F.3d 1231, 1244 (11th Cir. 2007) (citing Mini Maid Servs. Co. v. Maid Brigade Sys., Inc., 967 F.2d
1516, 1522 (1 lth Cir. 1992)). Here, Sprint states a claim for contributory trademark infringement,
by alleging Defendants' scheme aided sellers of phones that infringed the Sprint marks, and by
causing infringing devices to be sold to the public. (See Dkt. 38 ~~ 95-97).

2.

Count II: Tortious Intelference with Business Relationships

Sprint also brings a claim based on tortious interference with a business relationship. The
elements of this cause of action are (1) the existence of a business relationship, (2) defendant's
knowledge thereof, (3) defendant's intentional and unjustified interference with the relationship, and

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(4) damage to plaintiff. Ethan Allen, Inc. v. Georgetown Manor, Inc., 647 So. 2d 812, 814 (Fla.
1994) (citing Tamiami Trail Tours, Inc. v. Cotton, 463 So.2d 1126, 1127 (Fla. 1985)).
The Second Amended Complaint alleges sufficient facts to state a claim of tortious
interference with a business relationship. A business relationship existed between Sprint and its
authorized dealers, as well as between Sprint and consumer end-users, and Defendants were on
notice of the existence of these relationships. (Dkt. 38

~~

44-48). Defendants' scheme induced

purchasers of Sprint phones to breach their contracts with Sprint, which allegedly damaged Sprint.
(Id

~~

49-51 ).

3.

Count IV: Unjust Enrichment

Sprint's next claim is for unjust enrichment. The elements of unjust enrichment are: "( 1) the
plaintiff has conferred a benefit on the defendant; (2) the defendant voluntarily accepted and retained
that benefit; and (3) the circumstances are such that it would be inequitable for the defendants to
retain it without paying the value thereof." Virgilio v. Ryland Group, Inc., 680 F .3d 1329, 133 7 (11th
Cir. 2012) (citations omitted); Florida Power Corp. v. City of Winter Park, 887 So.2d 1237 (Fla.
2004).
Here, Sprint alleges that Defendants purchased phones from Sprint at a subsidized cost,
which conferred a benefit on Defendants. Sprint contends it would be inequitable for Defendants to
retain this benefit. (Dkt. 38 ~~ 57). These allegations are sufficient to state a claim for unjust
enrichment.

4.

Count VI: Violations of the Computer Fraud and Abuse Act

The final claim is based on the Computer Fraud and Abuse Act, 18 U.S.C. § 1030 et seq.
Sprint alleges the Defendants have violated three separate provisions of the CFAA. First, Sprint
contends that the Defendants trafficked in computer passwords to gain access to Sprint's
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telecommunication and computer networks, in violation of18 U.S.C. § 1030(a)(6). (Dkt. 38 'il'il 6566, 68-71, 74, 78-80). Second, Sprint claims the Defendants accessed its protected network without
prior authorization, which is prohibited by 18 U.S.C. § 1030(a)(5)(c). (Dkt. 38 'il'il 65-70, 80). Finally,
Sprint alleges Defendants accessed its network with intent to defraud, in violation of 18 U.S.C. §
(a)(4).
Because all three violations of the CFAA are pied within the same count, it is difficult to
determine which behavior by which defendant allegedly satisfied the elements of each of the CFAA
claims. Accordingly, Count VI will be dismissed without prejudice, and Sprint will be granted leave
to amend to clearly link the relevant facts to the alleged violations of three separate sections of the
CFAA.

5.

Sanctions

Finally, the request for sanctions by Defendants TCX and Rathbone is denied. As stated, the
complaint is not subject to dismissal as a shotgun complaint, and many of the counts are now
properly pled. However, Sprint is on notice that the Eleventh Circuit has approved dismissal with
prejudice on a third unsuccessful attempt to plead a cause of action. See Has bun v. Recontrust Co.,

NA., 508 Fed. App'x 941, 942 (11th Cir. 2013); Nettles v. City ofLeesburg-Police Dep 't, 415 Fed.
App'x 116 (1lthCir.2010);Andersonv. Vanguard Car Rental USA, Inc., 304 Fed. App'x 830 (11th
Cir. 2008).
IV.

CONCLUSION

Accordingly,
1) The motions to dismiss (Dkts. 55, 61, 62, 63, 78) are GRANTED in part and DENIED

in part.

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•·

.
2) Counts III, V, and VI are DISMISSED without prejudice.
2) Plaintiffs are GRANTED leave to file a third amended complaint within 14 (fourteen)
days of the date of this Order. 3

DONE AND ORDERED this

~ 1ay of March, 2015.

Copies to: Counsel of Record

3 Plaintiffs are also directed to correct the misnumbering of paragraphs in the Second Amended Complaint.
(See Dkt. 60 at I).

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