Clear Wireless, LLC v. Mountain State Cellular, Inc. et al

Filing 38

MEMORANDUM DECISION AND ORDER - NOW THEREFORE IT IS HEREBY ORDERED: 1) Defendants Motion for Summary Judgment (Dkt. 21 ) is GRANTED in part and DENIED in part. 2) Plaintiffs Motion for Partial Summary Judgment (Dkt. 22 ) is GRANTED in part and DENIED in part. Signed by Judge Candy W. Dale. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (cjs)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO

CLEAR WIRELESS, LLC, an Arizona
limited liability company,
Plaintiff,

Case No. 1:16-cv-0002-CWD
MEMORANDUM DECISION AND
ORDER RE:

v.
MOUNTAIN STATE CELLULAR,
INC. an Idaho corporation; and GO
WIRELESS, INC., a Nevada
corporation,
Defendants.

DEFENDANTS’ MOTION FOR
SUMMARY JUDGMENT (DKT. 21);
and
PLAINTIFF’S MOTION FOR
PARTIAL SUMMARY JUDGMENT
(DKT. 22)

INTRODUCTION
Pending before the Court are two competing motions, both seeking summary
judgment on claims raised in the Complaint. (Dkt. 21, 22.) The Court heard oral
argument from the parties on April 11, 2017. After review of the record, consideration of
the parties’ arguments and relevant legal authorities, and otherwise being fully advised,
the Court issues the following memorandum decision and order granting in part and
denying in part both motions.

MEMORANDUM DECISION AND ORDER - 1

FACTUAL BACKGROUND 1
Plaintiff Clear Wireless, LLC (“Clear”), and Defendant Mountain State Cellular,
Inc. (“Mountain State”), 2 were sales agents of Verizon Wireless (“Verizon”). Both
entities operated several brick and mortar locations selling Verizon phones and service
plans. In early November of 2014, Nicasio Jones, owner of Clear, contacted Mountain
State’s sole shareholder, Mark Urness, regarding the potential sale of Clear to Mountain
State. On November 18, 2014, Jones and Urness executed an Asset Purchase Agreement
(“APA”) for Mountain State’s purchase of Clear. (Dkt. 21-7 at 9.)
Due to the entities’ status as Verizon agents, they needed Verizon’s approval of
the sale. Accordingly, they included the following provision within the APA:
4.4.2 Verizon Wireless. Verizon Wireless shall have approved in
writing and consented to the asset purchase and sale transaction subject to
this Agreement, and shall have acknowledged its intent and consent to
continue conducting business with the Buyer and the Business.
APA, § 4.4.2 (Dkt. 21-7 at 7). On December 5, 2014, Verizon approved the APA by
executing the Verizon Agreements Amendment (“VAA”). 3 (Dkt. 21-7 at 47.) The VAA
amended both Mountain State’s and Clear’s independent agent agreements with Verizon.

1

The following facts are undisputed unless indicated otherwise.

2

Mountain State did business as “Mybullfrog.” On June 1, 2015, Mountain State dissolved/merged into Go
Wireless, LLC. To avoid confusion, given the two agreements upon which the breach of contract claims are based
reference the entity Mountain State and not Go Wireless, the Court will refer to Defendants in this order as
Mountain State.

3

Plaintiff refers to this agreement as the “Verizon 3-Way Agreement.” As explained more fully below, the VAA is
one document that amends independent agency agreements: (1) the agency agreement between Verizon and
Mountain State; and (2) the agency agreement between Verizon and Clear.

MEMORANDUM DECISION AND ORDER - 2

In addition, pursuant to the provisions in the VAA, Mountain State assumed specific
rights and obligations from Clear.
The crux of this litigation relates to two alleged instances of breach of contract by
Mountain State regarding the terms of the APA and VAA. To better understand the
parties’ arguments, the Court will outline briefly the parties’ agency relationships with
Verizon and the pertinent provisions of the VAA 4 and APA.
I.

Agent Relationship with Verizon

Verizon agents purchase handset devices (i.e., cell phones and tablets) directly
through Verizon and the costs of those devices are charged to the agent’s individual
Equipment Dymax Account, a system of accounting used by Verizon that allows its
agents to order handset devices on credit. Dec. Urness, p. 57, ll 15-19 (Dkt. 26-2 at 67).
Each agent has a maximum credit allowance with Verizon and, depending on what the
agent orders during a given month, the agent must make monthly payments toward its
Dymax Account balance. Id. at p. 58, ll 2-4. “Iconic Devices” are devices a Verizon agent
does not have in stock and has to order for its customer, for example, newly released
Apple or Samsung devices. (Dkt. 21-4 at 8). Iconic devices, like any other handset
device, are ordered through the agent’s Dymax Account. (Dkt. 21-4 at 6.)
When an agent sells a handset device and Verizon service plan to a customer, the
customer pays the agent for the device and will pay Verizon for the service plan. If a

4

Although the APA was executed before the VAA, to better understand the contractual relationship between the
parties and how the two contracts relate, the Court will discuss the terms of the VAA before discussing the APA.

MEMORANDUM DECISION AND ORDER - 3

customer finances the purchase of the device, Verizon buys the financing plan from the
agent.
A central aspect to the agency relationship with Verizon is how Verizon pays its
agents for the sale of handset devices and service plans. The commissions for these
transactions are paid by Verizon to its agents approximately one month after activation of
the service plan and consists of two components: (1) reimbursement for the expense of
the handset device; and (2) the true commission for the sale of the service plan. 5 Pursuant
to the agent’s agreement with Verizon, to retain the commission Verizon pays on a new
customer account with Verizon, the customer’s account must remain active and payments
current for a period of time, generally 180 days. If a customer cancels his or her service
plan or fails to pay Verizon, Verizon will chargeback the full commission against the
sales agent.
Verizon provides also financial incentives to its sales agents to open new stores
through a program called Market Development Funds (“MDFs”). This program works as
follows. Verizon identifies a location where they want to open a store and reaches out to
an agent who is interested in opening a new location. (Dkt. 26-2 at 10.) To entice the
agent into opening the new store, Verizon offers the agent money, MDFs, to use to
promote the new store. The amount of MDFs paid by Verizon to its agent is based upon
what Verizon anticipates the store’s annual sales will be. If the new store location does

5

For example, if an agent purchases an iPhone for $949 through its Dymax account. Verizon directs its agent to sell
that phone to the customer for $200 if they activate on a two-year service plan (the remainder of the device to be
financed). When the service plan is activated, Verizon pays a commission payment to the agent consisting of: $749
(the remainder expense owed on the phone) + $200 (for the actual commission for activating the service plan). See
Clear 30(b)(6) Depo., at p. 147-148 (Dkt. 26-2 at 42).

MEMORANDUM DECISION AND ORDER - 4

not meet defined sales goals during its start-up period (usually 18 months), Verizon will
chargeback a prorated portion of the MDFs it paid to the agent.
II.

Verizon Agreements Amendment

Verizon provided its written approval and consent to the APA by executing the
VAA on December 5, 2014. (Dkt. 21-7 at 47.) Essentially, the VAA is one document that
amends two independent agent agreements: (1) the Verizon agent agreement between
Verizon and Mountain State; and (2) the Verizon agent agreement between Verizon and
Clear. 6 The intent of the parties is expressed in the VAA as follows:
(i) transfer the Clear Locations as approved Locations to [Mountain State];
(ii) assign the Clear Customer Base and Clear [Customer Base Account
Maintenance Fees (“CB AMF”)] to [Mountain State]; (iii) retain
responsibility for the Clear Dymax Debt payment obligations to [Verizon];
(iv) and transfer of Clear’s [Marked Development Fund (“MDF”)] risk to
[Mountain State]; and (v) terminate the Clear Agreement as of midnight of
the day prior to the Amendment Effective Date ….
VAA, Recitals (Dkt. 21-7 at 48).
Pursuant to the terms of the VAA, Mountain State assumed specific rights and
obligations from Clear, including liabilities for chargebacks for customer deactivations
and cancellations and MDFs. Specifically, regarding customer deactivations and
cancellations, the VAA provides:

6

Specifically, the lengthy title of the VAA is as follows:
The Amendment to (1) Verizon Wireless Agent Agreement Between Verizon Wireless and
Mountain State Cellular, Inc. d/b/a Mybullfrog.com Regarding the Addition of Agent Locations
and Assignment of Subscriber Base; (2) Verizon Wireless Agent Agreement Between Verizon
Wireless and Clear Wireless, LLC Regarding the Termination of Said Agreement and Payment of
Equipment Debt and Other Obligations.

VAA, at 1 (Dkt. 21-7 at 48).

MEMORANDUM DECISION AND ORDER - 5

[Mountain State] and Clear hereby agree, acknowledge, confirm and ratify
that the rights and obligations with regard to the Clear Customer Base and
the Clear CB AMF are assigned by Clear to [Mountain State] and are
assumed from Clear by [Mountain State], effective as of the Amendment
Effective Date, including but not limited to all Chargebacks and other offsets
applicable to the Clear CB AMF paid or payable on the Clear Customer Base
assigned and assumed hereunder, [Verizon] hereby consents to such
assignment and assumption and, unless expressly stated herein, releases
Clear from its obligations under the Clear Agreement for the Clear Customer
Base. All terms and conditions of the [Mountain State] Agreement will apply
to the Clear Customer Base, including without limitation (i) the payment of
AMF thereon at the rate set forth in Section D.3., below, and (ii) the customer
service obligations set forth therein. …
VAA, § D (Dkt. 21-7 at 50). Regarding transfer of Clear’s MDF risk, the VAA provides:
E. Transfer of Clear MDF Risk to [Mountain State].
1. For the four (4) Clear Locations identified below, [Verizon]
previously paid to Clear MDF in the amount of $35,000 for each
Location. [Mountain State] agrees to accept potential deduction/
recoupment risks of these MDF monies, as follows. [Mountain State]
agrees that in order to avoid a deduction/recoupment of all or a portion
of the $35,000 for each Clear Location, it assumes the obligation that
Clear undertook to achieve or exceed sales of 1,800 Gross Activations
… during a defined 18-month Period …
2. If [Mountain State] does not achieve the above Minimum
Attainment Level at one or more of the above Clear Locations, then
any deduction/recoupment of monies for each Clear Location shall be
done pursuant to the MDF terms and conditions in Exhibit B of the
[Mountain State] Agent Agreement.
VAA, § E (Dkt. 21-7 at 50).
As a result of the VAA, Clear’s agent agreement with Verizon was terminated as
of December 5, 2014. Essentially, the above VAA provisions permitted Verizon to apply
chargebacks for customer deactivations and MDFs that originated from Clear’s business
against Mountain State’s commission account. With regard to Clear’s Dymax Account
MEMORANDUM DECISION AND ORDER - 6

balance, Clear agreed to “zero-out” its account prior to the termination of its agent
agreement with Verizon, which it did on November 28, 2014.
Pursuant to the VAA, Verizon applied chargebacks against Mountain State
commissions in the amount of $55,553.47, for customer deactivations or cancellations of
service plans that originated from Clear stores prior to closing. 7 Specifically, these
customers had activated their accounts through Clear prior to closing on December 1,
2014, and Clear was paid a commission on these activations. These deactivations and
cancelations occurred and were applied by Verizon for the six months of December 2014
through May 2015. In addition, after closing, Verizon applied two chargebacks against
Mountain State related to MDFs accepted by two of Clear’s locations in the amounts of
$17,500.00 and $4,919.00. The total amount of Verizon chargebacks for customer
deactivations and cancellations and MDFs was $77,972.47.
III.

Asset Purchase Agreement

On December 1, 2014, Clear and Mountain State closed on Mountain State’s
purchase of Clear’s business. Both Clear and Mountain State agree the APA is a valid
and enforceable contract.
Pursuant to the APA, Mountain State agreed to purchase Clear for $2,500,00.00,
plus the value of new and marketable inventory. The parties agreed Mountain State
would structure its payments to Clear pursuant to the following schedule:

7

Verizon is not a party to this action and has not alleged any breach of the VAA.

MEMORANDUM DECISION AND ORDER - 7

Prepayment on November 28, 2014

$500,000.00

Due at closing, December 1, 2014 (less inventory) $1,500,000.00
*Due June 1, 2015

$500,00.00

*Due December 1, 2015

$500,000.00

*Mountain State Cellular, Inc. corporately guarantees all remaining amounts
due. A 5% annual interest rate on funds not paid at closing….
APA, Schedule 1.1 (Dkt. 21-7 at 29).
Mountain State paid $1,500,000.00 to Clear on or before the December 1, 2014
closing date. (Dkt. 21-8.) Mountain State made an inventory payment to Clear on
December 3, 2014, in the amount of $396,000.00. (Id.) On June 1, 2015, Mountain State
paid Clear $394,832.32. (Dkt. 21-8 at 6, 19.) The June 1, 2015 payment consisted of the
scheduled payment due of $500,000.00 plus interest of $24,931.51 and less: $74,235.97 8
for Verizon chargebacks and $55,863.22 for inventory “true-up,” which included credit
for iconic device gross profit.
The issues in dispute relate to whether Mountain State was permitted, pursuant to
the APA, to offset chargebacks from its June 1, 2015 payment to Clear and whether
Mountain State was permitted to set-off from the same payment its inventory
reconciliation. 9 The parties dispute also whether the June 1, 2015 payment included full
payment for iconic devices.

8

With regard to Verizon chargebacks for MDFs, Mountain State removed 3/18th of the chargeback amount and
reduced the offset by $3,736.50. At the time of the APA closing date, two Clear stores were in month 15 of the 18month start-up period. As such, Mountain State took responsibility of a portion of the MDFs.

9

The parties do not dispute the accuracy of the calculations of the offset and set-off amounts.

MEMORANDUM DECISION AND ORDER - 8

1. Verizon Wireless Chargebacks
The APA expressly identifies “Customer Returns” and “Verizon Wireless
Chargebacks” as “Seller’s Retained Liabilities.” APA, § 2.12 (Dkt. 21-7 at 12). With
respect to “Customer Returns” the APA provides:
2.12.4 Customer Returns. All of Seller’s Customer’s returned goods
and services including, without limitation, cellular telephone units, cellular
telephone service contracts cancellations, and related cellular telephone
merchandise, goods, accessories and equipment arising out of or in
connection with Seller’s ownership, possession, operation and management
of the Business prior to through closing-; and as more particularly provided
in paragraph 2.12.7 below, Seller shall be liable for one hundred percent
(100%) of all Verizon Wireless chargeback costs and risk incurred by seller
and arising out of or in connection with Seller’s ownership, possession,
operation and management of the Business prior to and through closing.
(Id. at 13.) With regard to “Verizon Wireless Chargebacks,” the APA provides:
2.12.7 Verizon Wireless Chargebacks. Seller shall be liable for one
hundred percent (100%) of all Verizon Wireless chargeback costs and risk
incurred by Seller and arising out of or in connection with Seller’s ownership,
possession, operation and management of the Business prior to and through
closing date -. All chargeback costs shall be documented and invoiced from
Buyer to Seller and paid by Seller, at the rate of one hundred percent (100%),
to Buyer within ten (10) business days of Seller’s receipt of such invoice.
Buyer shall be entitled to offset the amount of any invoice for Verizon
Wireless chargeback costs not paid by Seller within ten (10) days against
payment of the Purchase Price.
(Id.)
2. Inventory
Pursuant to the APA, Mountain State agreed to purchase Clear’s new, current, and
marketable Verizon phone units and accessory inventory as of the December 1, 2014
closing date. Specifically, “Article 2 Transfer of Assets” of the APA provides:

MEMORANDUM DECISION AND ORDER - 9

2.4 Inventory. Buyer will purchase from Seller at pricing
commensurate with—current Indirect Pricing, all new, current and
marketable Verizon Wireless cellular telephone units, merchandise, goods,
equipment & accessories for future sale, in the ordinary course of business –
on the closing date of December 1, 2014 or earlier.
APA, § 2.4 (Dkt. 21-7 at 11). Pursuant to the APA, “Inventory” did not include certain
“Obsolete Inventory; Returned and Warranty Items:”
2.12.8 Obsolete Inventory; Returned and Warranty Items. All obsolete,
defective or returned inventory owned by Seller prior to closing date shall be
identified and separated from current marketable inventory….
APA, § 2.12.8 (Dkt. 21-7 at 14).
“Article 3—Purchase Price and Additional Consideration” of the APA set forth a
process for valuing Clear’s current and marketable inventory:
3.2 Inventory. Subject to the provisions of paragraphs 2.12.6 and
1.12.7 above, all phone & accessory inventory will be deemed marketable &
appropriate by buyer & shall be preliminarily valued cooperatively between
Buyer and Seller within 3 business days prior to closing. After closing and
within 3 business days thereafter, Buyer will pay Seller for all inventory,
separate from purchase price above.
APA, § 3.2 (Dkt. 21-7 at 14). In addition, the APA included a representation and
warranty from Clear to Mountain State that:
12.1.16 All Due Diligence Materials and other data and information
regarding the Business provided by Seller and disclosed to Buyer shall be
and is certified and confirmed by Seller to be true, accurate and correct,
without exception, as of the Effective Date and as of the Closing Date.
APA, § 12.1.16 (Dkt. 21-7 at 22).

MEMORANDUM DECISION AND ORDER - 10

And, Schedule 1.1 of the APA, under the headline “Inventory payment” provides
the following:
Total amount of payment to CLEAR Wireless is based on purchase of current
and saleable items in store or en route at current market price as of the closing
date.
Total purchase price for Seller for CLEAR Wireless assets and amount paid
for purchase of inventory will be applied first and immediately to pay all
Verizon Wireless DYMAX debt, then any debt secured by assets or cash flow
of Clear Wireless.
Pricing of serialized inventory to be determined by Buyer with agreement of
Seller, and will be consistent with most current Indirect Pricing.
APA, Schedule 1.1 (Dkt. 21-7 at 29).
The President of Mountain State, Urness, acknowledged it was Mountain State’s
responsibility to determine the marketability of Clear’s in-stock inventory. Mountain
State 30(b)(6) Depo., p. 155-156 (Dkt. 26-2 at 92). On or about November 18, 2014,
Clear provided administrative access by Mountain State to Clear’s electronic point of sale
system so Mountain State could begin to evaluate the in-stock inventory at Clear’s seven
locations. (Id. at 21.) The accuracy of inventory in an agent’s point of sale system is
dependent upon its operator, the Verizon agent, to keep the system up to date by
eliminating “dead inventory.” Because the inventory valuation from the point of sale
system is not always reliable, Mountain State needed to verify Clear’s inventory as
represented in the point of sale system by conducting a physical count in-store. (Id. at
84.)
On or about November 30, 2014, Urness and approximately 14 to 18 Mountain
State employees travelled to Arizona to do a physical inventory count at Clear’s seven
MEMORANDUM DECISION AND ORDER - 11

locations. According to Urness, the state of Clear’s inventory across its seven store
locations was not organized, which made it difficult to sort through and categorize the
inventory to determine what was marketable. 10 (Id. at 92.) The physical inventory process
continued through December 1, 2014; however, Mountain State was unable to complete
the task. (Id. at 93.) Because most of the brick and mortar locations would continue to
operate, Mountain State left in Arizona the marketable inventory that it was able to
account for during the physical inventory process. The rest of the inventory was boxed up
and shipped to Boise, Idaho, for a final evaluation. It is disputed whether the inventory
shipped to Boise included any marketable inventory from any of the store locations in
Arizona.
Pursuant to the December 3, 2014 payment deadline for inventory as required by
the APA, the parties needed to negotiate a price. On the morning of December 3, 2014,
President of Finance and Operations for Mountain State, Matt Jeffries, emailed Jones of
Clear the following:
Just keeping you posted on a couple of items.
Teresa Vander Veen, is our person who is in charge of the inventory and is
in your market. She was working on an amount today. It may need trued up
but Mark asked her to get a preliminary number done so we can share it with
you.

10

Urness provided the following example of the state of Clear’s inventory in Mountain State’s 30(b)(6) deposition:
[F]or instance, if there is a thousand of a certain type of [cell phone] case, and if we get there and
we find in each store 100 cases in a box, and we can quantify it, then it is fairly simple. When we
get there, if there is [sic] a thousand cases strewn amongst seven stores in no particular order, and
we have to search them out, now it becomes a significant task. And this is what we found.

(Dkt. 26-2 at 92.)

MEMORANDUM DECISION AND ORDER - 12

***
Thanks, I will be in touch with you later today Nic.
Dec. Jefferies, Ex. B (Dkt. 21-8 at 11.) Later that morning, Jones responded:
From my report we showed about $110k in accessory inventory, about $220240k in handset inventory and about 80k in demo inventory (my
understanding after clarification is part of inventory [as opposed to fixtures])
should total about $410k-$430k.
Let me know when it gets finalized on your end.
(Id.)
Sometime after Jones sent his message, Jones and Urness had a verbal discussion
regarding the inventory payment due that day. (Dkt. 26-2 at 86.) Ultimately, Mountain
State offered to pay $396,000.00 (90% of $430,000.00) and wired the payment to Clear.
Mountain State notified Clear of its payment via email the same day, stating: “I sent a
wire for 396k for the ‘preliminary’ inventory dollar amount. I know we will have some
truing up to do over the next week.” (Dkt. 21-8 at 13). At 4:46 p.m., Jones responded:
“Received…Thank you!” (Id. at 14.)
After reconciliation and ascertaining what value it could for the inventory taken
out of the Clear stores and shipped to Boise, Mountain State determined that the total
value of all the inventory was $337,484.51. 11 This inventory calculation was $55,863.22
less than what Mountain State paid to Clear for the inventory on December 3, 2014.
Therefore, Mountain State set-off $55,863.22 from its scheduled June 1, 2015 payment. 12

11

Or $340,136.78 if including iconic device gross profit of $2,652.27.

12

(Original inventory of payment $396,000) – [(True value of inventory $337,484.51) + (credit for iconic device
gross profit $2,652.27)] = (Set-off amount $55,863.22)

MEMORANDUM DECISION AND ORDER - 13

3. Iconic Devices
Pursuant to Schedule 1.1 of the APA, the parties agreed to account for iconic
device orders separately from in-stock marketable inventory. Specifically, the APA
provides the following regarding iconic device orders:
Clear Wireless had orders placed for customers with [Verizon] for the
purchase of iconic devices, primarily, but not exclusively, Apple iPhone 6
and 6 Plus. It is agreed that the sale, expense and profit from the sale of these
devices will remain in favor of Clear Wireless regardless of the date these
devices are delivered. All chargebacks are the responsibility of Clear
Wireless and will be promptly paid to Buyer within ten (10) business days of
written notice.
APA, Schedule 1.1 (Dkt. 21-7 at 30). The process for handling iconic device orders and
sales follows:
1. Clear Wireless will provide Buyer with a detailed list of all firm orders
placed via [Verizon Wireless’s] iconic order portal.
2. As devices arrive, Seller will receive them and inform the customer that
the device has arrived. Buyer will make every attempt to finalize each
transaction with the customer.
3. Any incidental sales of devices, insurance or accessories will remain in
favor of the Buyer.
4. [Verizon Wireless] will charge all equipment (costs of goods) and
commissions earned to Buyers [sic] account.
5. Buyer will collect entire purchase price and tax from the customer. In the
event the customer pre-paid a deposit with the Seller, only the remaining
amount owed from the customer will be collected.
6. At the end of each month all iconic sales will be reconciled and reviewed
with Seller for accuracy.
7. All gross profit from all iconic sales will be paid to Seller, less
chargebacks and yet to be activated equipment charges, by the 23rd of the
month following activation.
MEMORANDUM DECISION AND ORDER - 14

8. Buyer is not responsible for customers that do not return to activate
equipment they ordered via the iconic portal.
(Id.)
Before closing, Clear placed 41 iconic device orders via its Dymax Account with
Verizon. Pursuant to the APA, Clear paid off its Dymax Account balance on December 1,
2014. Accordingly, the expenses of these devices (approximately $31,800) were paid by
Clear. (Dkt. 26-2 at 44.) As the iconic devices ordered by Clear arrived after the closing
date, Mountain State contacted the customers who ordered the devices and worked to
finalize each transaction. Mountain State collected the purchase price from the customer
and Verizon paid Mountain State for the commissions on these sales.
Mountain State calculated the gross profit of the iconic device orders (i.e., the true
commission) as $2,652.27. Mountain State alleges it credited the gross profit of the
device orders against the set-off it took from its June 1, 2015 installment purchase
payment due Clear per the schedule in the APA.
STANDARDS OF LAW
I.

Summary Judgment Standard
Summary judgment is appropriate where a party can show that, as to any claim or

defense, “there is no genuine dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56(a). One of the principal purposes of the
summary judgment “is to isolate and dispose of factually unsupported claims....” Celotex
Corp. v. Catrett, 477 U.S. 317, 323-24 (1986). It is “not a disfavored procedural
shortcut,” but is instead the “principal tool[ ] by which factually insufficient claims or
MEMORANDUM DECISION AND ORDER - 15

defenses [can] be isolated and prevented from going to trial with the attendant
unwarranted consumption of public and private resources.” Id. at 327. “[T]he mere
existence of some alleged factual dispute between the parties will not defeat an otherwise
properly supported motion for summary judgment.” Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 247-48 (1986). There must be a genuine dispute as to any material fact – a fact
“that may affect the outcome of the case.” Id. at 248.
The evidence must be viewed in the light most favorable to the non-moving party,
and the Court must not make credibility findings. Id. at 255. Direct testimony of the nonmovant must be believed, however implausible. Leslie v. Grupo ICA, 198 F.3d 1152,
1159 (9th Cir. 1999). On the other hand, the Court is not required to adopt unreasonable
inferences from circumstantial evidence. McLaughlin v. Liu, 849 F.2d 1205, 1208 (9th
Cir. 1988).
The Court must be “guided by the substantive evidentiary standards that apply to
the case.” Liberty Lobby, 477 U.S. at 255. If a claim requires clear and convincing
evidence, the question on summary judgment is whether a reasonable jury could conclude
that clear and convincing evidence supports the claim. Id.
When cross-motions for summary judgment are considered, the Court must
independently search the record for factual disputes. Fair Housing Council of Riverside
County, Inc. v. Riverside Two, 249 F.3d 1132, 1136 (9th Cir. 2001). The filing of crossmotions for summary judgment – where both parties essentially assert there are no
material factual disputes – does not vitiate the Court's responsibility to determine whether
disputes as to material fact exist. Id.
MEMORANDUM DECISION AND ORDER - 16

The moving party bears the initial burden of demonstrating the absence of a
genuine dispute as to material fact. Devereaux v. Abbey, 263 F.3d 1070, 1076 (9th Cir.
2001) (en banc). To carry this burden, the moving party need not introduce any
affirmative evidence (such as affidavits or deposition excerpts) but may simply point out
the absence of evidence to support the nonmoving party's case. Fairbank v. Wunderman
Cato Johnson, 212 F.3d 528, 532 (9th Cir. 2000).
This shifts the burden to the non-moving party to produce evidence sufficient to
support a jury verdict in its favor. Deveraux, 263 F.3d at 1076. The non-moving party
must go beyond the pleadings and show by “affidavits, or by the depositions, answers to
interrogatories, or admissions on file” that a genuine dispute of material fact exists.
Celotex, 477 U.S. at 324.
However, the Court is “not required to comb through the record to find some
reason to deny a motion for summary judgment.” Carmen v. San Francisco Unified Sch.
Dist., 237 F.3d 1026, 1029 (9th Cir. 2001) (quotation omitted). Instead, the “party
opposing summary judgment must direct [the Court's] attention to specific triable facts.”
So. Cal. Gas Co. v. City of Santa Ana, 336 F.3d 885, 889 (9th Cir. 2003).
I.

Breach of Contract
Pursuant to Idaho law, to establish breach of contract, the plaintiff must prove the

following: “(a) the existence of the contract, (b) the breach of the contract, (c) the breach
caused damages, and (d) the amount of those damages.” Path to Health, LLP v. Long,
383 P.3d 1220, 1227 (Idaho 2016) (internal citations omitted).

MEMORANDUM DECISION AND ORDER - 17

DISCUSSION
Clear alleges in its Complaint two breach of contract claims. The first claim
asserts Mountain State breached the APA by deducting from its June 1, 2015 payment to
Clear offsets for Verizon chargebacks and also taking the set-offs for its inventory
reconciliation. In addition, Clear alleges Mountain State breached the APA when it failed
to provide a separate payment to Clear for iconic devices. The second claim asserts
Mountain State breached the VAA by not assuming Clear’s liabilities for Verizon
chargebacks billed after the closing date.
Both parties filed motions for summary judgment. Mountain State seeks summary
judgment on all counts raised in the Complaint. (Dkt. 21.) Clear seeks partial summary
judgment on its breach of the VAA claim, and also on its breach of APA claim as it
relates to deductions for chargebacks and inventory from Mountain State’s June 1, 2015
payment to Clear.
I.

Breach of Verizon Agreements Amendment
Mountain State contends Clear has failed to demonstrate any breach or damage

related to the VAA, because Clear is not a party to Mountain State’s agency agreement
between it and Verizon. To the contrary, Clear argues it is a party to the VAA, and
Mountain State breached the VAA when it “paid itself back” $77,972.47 for the Verizon
chargebacks from the June 1, 2015 scheduled payment Mountain State owed to Clear.
For the following reasons, the Court finds no breach as a matter of law occurred with
respect to the VAA.

MEMORANDUM DECISION AND ORDER - 18

Pursuant to the unambiguous terms of the VAA, the VAA is one document that
amends two independent agent agreements: (1) the Verizon agent agreement between
Verizon and Mountain State; and (2) the Verizon agent agreement between Verizon and
Clear. In the paragraph above the recitals, the VAA identified the Verizon and Mountain
State agency agreement by Contract Number 707-10606-2009, identified the Verizon and
Clear agency agreement by Contract Number WA-0047-2013, and referred to them
collectively as the “Agreements.” (Dkt. 21-7 at 48.) The VAA expressly indicated that
the purpose of the VAA was to amend the “Agreements.” (Id.) The VAA makes no
express reference to the APA between Mountain State and Clear, nor does it purport to
amend the APA.
With regard to the VAA’s effect on the Verizon-Clear agency agreement, Clear
agreed to assign certain liabilities to Mountain State, leaving Clear with no ongoing
obligations to Verizon, and Verizon terminated its agency agreement with Clear. See
VAA, § F (Dkt. 21-7 at 51). With regard to the VAA’s effect on the Verizon-Mountain
State agency agreement, Mountain State agreed to assume liabilities for Clear’s
chargebacks for customer deactivations and cancellations and MDFs. Specifically, with
regard to customer deactivation chargebacks, the VAA provides:
[Mountain State] and Clear hereby agree, acknowledge, confirm and ratify
that the rights and obligations with regard to the Clear Customer Base and
the Clear CB AMV are assigned by Clear to [Mountain State] and are
assumed from Clear to [Mountain State], effective as of the Amendment
Effective Date, including but not limited to all Chargebacks and other offsets
applicable to the Clear CB AMV paid or payable on the Clear Customer Base
assigned and assumed hereunder.
VAA, § D.1 (Dkt. 21-7 at 50). And, with regard to MDFs, the VAA provides:
MEMORANDUM DECISION AND ORDER - 19

For the four (4) Clear Locations identified below, [Verizon] previously paid
to Clear MDF in the amount of $35,000 for each Location. [Mountain State]
agrees to accept potential deduction/recoupment risks of these MDF monies,
as follows. [Mountain States] agrees that in order to avoid a
deduction/recoupment of all or a portion of the $35,000 for each Clear
Location, it assumes the obligation that Clear undertook to achieve or exceed
sales of 1,800 Gross Activations and/or Upgrades of Postpay Service….
VAA, § E.1 (Dkt. 21-7 at 50-51).
The parties agree that these paragraphs allowed Verizon to apply chargebacks for
customer deactivations and MDFs that originated from Clear against Mountain State’s
commission account with Verizon. The total amount of these chargebacks from Mountain
State’s commissions was $74,235.97. Mountain State fulfilled its obligation pursuant to
the VAA and incurred the costs of the chargebacks when Verizon reduced its
commissions to Mountain State accordingly. Mountain State offset the costs of these
chargebacks against the June 1, 2015 scheduled installment purchase price payment owed
to Clear. Although this is the action Clear alleges constituted a breach of the VAA,
Clear’s claim is flawed.
Clear has failed to establish a genuine issue of fact with regard to breach of the
VAA. The VAA, in effect, constituted Verizon’s approval of the buy-sell agreement
between Mountain State and Clear as it related to Verizon’s ongoing relationship with
Mountain State and the termination of its relationship with Clear. To terminate its agency
agreement with Clear, Verizon needed to ensure someone was on the hook for the
outstanding liabilities Clear otherwise owed to Verizon. As such, Mountain State agreed
with Verizon to assume Clear’s chargeback liabilities—Mountain State upheld its bargain
with Verizon by incurring the costs of the chargebacks when Verizon reduced its
MEMORANDUM DECISION AND ORDER - 20

commission. The VAA neither permitted nor precluded Mountain State and Clear from
entering into a separate agreement that provided for Mountain State to recoup from Clear
the chargeback liabilities it assumed under the terms of the VAA. Accordingly, no breach
of the VAA occurred in this regard.
II.

Breach of Asset Purchase Agreement (APA)
Clear alleges three breaches of the APA. First, Clear contends Mountain State

breached the APA by offsetting Verizon chargebacks from the June 1, 2015 installment
purchase payment. Second, Clear contends Mountain State breached the APA by
applying a unilateral set-off when it made reductions for the true value of inventory from
this June 1, 2015 payment. Last, Clear alleges Mountain State breached the APA by not
providing a separate payment for iconic devices.
Mountain State contends the offset for Verizon chargebacks is expressly
permitted by the APA, and thus does not constitute a breach. Mountain State contends
further the set-off for inventory discrepancies is equitable and permitted by Idaho law.
With regard to iconic devices, Mountain State admits it did not follow the payment
process pursuant to the APA; however, Mountain State contends Clear can prove no
damages for iconic devices because Mountain State credited Clear for iconic device gross
profit in its inventory reconciliation. Clear disagrees on all fronts. The Court will set forth
contract interpretation principles before addressing the chargeback offset, the set-off for
inventory reconciliation, and iconic device discrepancies separately below.

MEMORANDUM DECISION AND ORDER - 21

A. Contract Interpretation
When interpreting a written contract pursuant to Idaho law, the Court must begin
with the language in the document. Potlatch Educ. Ass'n v. Potlatch Sch. Dist. No. 285,
226 P.3d 1277, 1280 (Idaho 2010). “In the absence of ambiguity, the document must be
construed in its plain, ordinary and proper sense, according to the meaning derived from
the plain wording of the instrument.” Id. (citing C & G, Inc. v. Rule, 25 P.3d 76, 78
(Idaho 2001). “A contract term is ambiguous when there are two different reasonable
interpretations or the language is nonsensical. Whether a contract is ambiguous is a
question of law, but interpreting an ambiguous term is an issue of fact.” Id.
“Parol evidence may be considered to aid a trial court in determining the intent of
the drafter of a document if an ambiguity exists.” Steel Farms, Inc. v. Croft & Reed, Inc.,
297 P.3d 222, 229 (Idaho 2012) (citing In re Estate of Kirk, 907 P.2d 794, 801 (Idaho
1995)). “If a written contract is complete upon its face and unambiguous, and no party
alleges any fraud or mistake, ‘extrinsic evidence of prior or contemporaneous
negotiations or conversations is not admissible to contradict, vary, alter, add to, or detract
from the terms of the contract.’” City of Meridian v. Petra Inc., 299 P.3d 232, 242 (Idaho
2013) (citing Howard v. Perry, 106 P.3d 465, 467 (Idaho 2005)).
B. Offset of Chargebacks
Mountain State contends the APA expressly provides that Clear is responsible for
Verizon chargebacks against Mountain State that arose from Clear’s business “prior to
and through” the December 1, 2014 closing date. Mountain State argues this
responsibility included chargebacks related to services provided and MDFs accepted by
MEMORANDUM DECISION AND ORDER - 22

Clear before the closing date, but issued by Verizon after the closing date. To the
contrary, Clear contends the language of the APA limited the timeframe of Clear’s
retained liabilities arising from commissions and MDF chargebacks issued by Verizon
prior to and through closing, but not after closing. For the following reasons, the Court
finds Clear’s liabilities under the APA extend to chargebacks issued after the closing
date.
The APA provides the following regarding chargebacks:
2.12.7 Verizon Wireless Chargebacks. [Clear] shall be liable for one
hundred percent (100%) of all Verizon Wireless chargeback costs and risk
incurred by [Clear] and arising out of or in connection with [Clear’s]
ownership, possession, operation and management of the Business prior to
and through closing date -. All chargeback costs shall be documented and
invoiced from [Mountain State] to [Clear] and paid by [Clear], at the rate of
one hundred percent (100%), to [Mountain State] within ten (10) business
days of [Clear’s] receipt of such invoice. [Mountain State] shall be entitled
to offset the amount of any invoice for Verizon Wireless chargeback costs
not paid by [Clear] within ten (10) days against payment of the Purchase
Price.
(Dkt. 21-7 at 7.)
The Court has reviewed the plain language of the APA and Clear’s retained
liability as it relates to Verizon chargebacks and finds the language unambiguous. There
are two critical aspects to Section 2.12.7 of the APA: (1) the substance of Clear’s retained
liability; and (2) the temporal aspect related to the liability.
With regard to the substance of Clear’s retained liability, Section 2.12.7 of the
APA indicates that Clear is one hundred percent liable for chargeback costs and
chargeback risks incurred by Clear. Costs and risks are distinct liabilities. The plain
meaning of “cost” is “the amount paid or charged for something.” Cost, Black's Law
MEMORANDUM DECISION AND ORDER - 23

Dictionary (10th ed. 2014). Thus, Clear retained one hundred percent liability for
chargeback invoices issued by Verizon for sales made by Clear before closing.
The plain meaning of risk is: “the uncertainty of a result, happening, or loss; the
chance of injury, damage, or loss; esp., the existence and extent of the possibility of
harm,” or “liability for injury, damage, or loss if it occurs.” Risk, Black's Law Dictionary
(10th ed. 2014). Each time a Verizon agent activates a new service contract and is paid
for the commission of the sale, there is a possibility the customer may default or cancel
their plan and, thus, a risk that Verizon will chargeback the commission if a cancellation
or default occurs within 180 days of activation. Likewise, when a Verizon agent accepts
MDFs from Verizon, there is a possibility the agent will not establish set sales goals and,
thus, a risk that Verizon will chargeback a prorated portion of the MDFs it advanced to
its agent. Accordingly, Clear retained one hundred percent liability for chargebacks that
Verizon could issue later if customers cancelled service plans or if store sales goals were
not met.
With regard to the temporal aspect of Clear’s retained liability, Section 2.12.7 of
the APA indicates Clear is liable for chargeback costs and risks “incurred by Seller and
arising out of or in connection with Seller’s ownership, possession, operation and
management of the Business prior to and through closing date.” The “prior to and
through closing date” language relates to when Clear incurred the chargeback costs and
risk from Verizon. The word “incur” is a verb, meaning, “[t]o suffer or bring on oneself
(a liability or expense).” Incur, Black's Law Dictionary (10th ed. 2014). Clear incurred a
chargeback “cost” when Verizon issued an invoice to Clear. Clear incurred a chargeback
MEMORANDUM DECISION AND ORDER - 24

“risk” when it activated a service plan for a Verizon customer or accepted MDFs from
Verizon.
Clear contends that, had the parties intended for chargebacks occurring after
closing to be Clear’s responsibility, Section 2.12.7 would have used forward looking
language to otherwise extend its liability into the future. The Court finds this argument
unconvincing. Had Section 2.12.7 read that Clear retained liability for only chargeback
costs, then Clear’s argument might be viable. Costs were the debts and liabilities known
to Clear before the closing date. 13 However, Section 2.12.7 indicates Clear retained
liability also of the chargeback risk. The risk, although present from the inception of
Clear’s acceptance of MDFs or activation of customer service plans, was the possibility
of debts and liabilities yet to occur or that may never occur. The use of the word “risk” in
Section 2.12.7 inherently implies Clear would retain liability that extended beyond the
closing date and into the future. 14 It is undisputed that the chargebacks at issue arose from
Clear’s activation of service plans and acceptance of MDFs from Verizon prior to the
closing date.
Moreover, with regard to the right to offset, the Court finds Section 2.12.7
expressly and unambiguously permits Mountain State to offset the amount of
chargebacks invoiced by Verizon. Specifically, the provision directed Mountain State to

13

For example, if Verizon charged-back a commission to Mountain State, designated with a date of December 1,
2014 or earlier, Mountain State could request that Clear pay that cost.
14

Clear’s retained liability for chargeback risk was not indefinite. The risk for commission chargebacks extended
only 180 days into the future. Likewise, the risk for MDF chargebacks extended through the specified start-up
period (there was about 3 months of the startup period left at the time of closing for two of the former Clear
locations). Interestingly, the next installment purchase payment after the closing date was due exactly 180 days out.

MEMORANDUM DECISION AND ORDER - 25

document and invoice all chargeback costs to Clear, and if Clear did not pay within ten
business days, Mountain State was “entitled to offset the amount of any invoice…against
payment of the Purchase Price.” Pursuant to the above provisions, Mountain State offset
from its June 1, 2015 payment to Clear, $74,235.97 for chargebacks issued by Verizon
against Mountain State over 180 days after closing. The amount of chargebacks is not
disputed by the parties.
As discussed above, the Court finds no genuine issue of fact with regard to the
whether Mountain State was permitted to offset $74,235.97 of Verizon chargebacks
against its June 1, 2015 installment purchase payment to Clear.
C. Set-off for Inventory True-Up
Clear contends Mountain State breached the APA when it deducted $55,863.22
from its June 1, 2015 scheduled payment to Clear to account for inventory reconciliation.
In support of its argument, Clear argues the language in the APA does not expressly
permit any reduction for inventory reconciliation. Mountain State contends the reduction
was permitted because Clear violated the due diligence provision of the APA when Clear
represented to Mountain State the value of its inventory without first deducting obsolete
inventory. Mountain State argues that, pursuant to Idaho law, it was permitted to
equitably set-off the inventory overpayment from its June 1, 2015 installment purchase
payment to Clear.
The Court finds Mountain State breached the APA when it unilaterally deducted
$55,863.22 from June 1, 2015 scheduled payment to Clear, as the APA does not
expressly permit such a deduction for inventory. But, the inquiry or analysis does not stop
MEMORANDUM DECISION AND ORDER - 26

here, as Clear must prove damages. As discussed more fully below, genuine issues of
material facts remain as to whether the December 3, 2014 inventory payment was final,
whether the December 3, 2014 payment was for marketable inventory only or for all
inventory, and whether Mountain State is entitled to a set-off to reflect the true value of
the inventory it purchased from Clear.
“If the terms used in the contract are ambiguous, then the court may turn to
extrinsic evidence of the contracting parties' intent to define the terms. For a term to be
ambiguous, there must be at least two different reasonable interpretations of the term or
the language is nonsensical.” Erickson v. ING Life Ins. & Annuity, Co., No. CV09-204-SEJL, 2011 WL 6056902, at *6 (D. Idaho Dec. 6, 2011) (citing Armstrong v. Farmers Ins.
Co. of Idaho, 139 P.3d 737 (Idaho 2006)). “There are two types of ambiguity, patent and
latent. A patent ambiguity is an ambiguity clear from the face of the instrument in
question.” Knipe Land Co. v. Robertson, 259 P.3d 595, 601 (Idaho 2011). “A latent
ambiguity exists where an instrument is clear on its face, but loses that clarity when
applied to the facts as they exist.” Id. “Although parol evidence generally cannot be
submitted to contradict, vary, add or subtract from the terms of a written agreement that
is deemed unambiguous on its face, there is an exception to this general rule where a
latent ambiguity appears.” Id. “Whether a contract is ambiguous is a question of law, but
interpreting an ambiguous term is an issue of fact.” Erickson, No. CV09-204-S-EJL,
2011 WL 6056902, at *7 (D. Idaho Dec. 6, 2011) (citing Knipe, 259 P.3d at 601).

MEMORANDUM DECISION AND ORDER - 27

The APA provides the following regarding inventory:
3.2 Inventory…. [A]ll phone & accessory inventory will be deemed
marketable & appropriate by buyer & shall be preliminarily valued
cooperatively between Buyer and Seller within 3 business days prior to
closing. After closing and within 3 business days thereafter, Buyer will pay
Seller for all inventory, separate from purchase price above.
The Court has reviewed Section 3.2 and finds its language is latently ambiguous.
Specifically, ambiguity exists regarding how the parties extrapolate from the preliminary
valuation of marketable inventory to the payment for all inventory due three days after
closing. Ambiguities exist as to whether the payment was final and what type of
inventory (marketable or all inventory) the December 3, 2014 payment included. If the
December payment was not final or if did not include all inventory, the APA does not
indicate how the parties are to account for these additional payments. Accordingly, the
Court will consider the extrinsic evidence of the parties’ intent when the APA was
negotiated to determine how the parties intended the inventory to be valued.
According to Clear owner Jones, he recalls from pre APA oral negotiations with
Urness, that Urness explained there could be up to three inventory payments made to
Clear. Describing each category of inventory as a “bucket,” Jones explained during
Clear’s 30(b)(6) deposition the process in which he understood inventory was to be
valued:
The first bucket would be the things that [Mountain State] would keep in
stores, those are current and marketable inventory. [Urness] said [Mountain
State] would value that, and [Mountain State] would make [Clear] that
payment on or about December 3rd; that’s where the $396,000 payment
came from.

MEMORANDUM DECISION AND ORDER - 28

[E]verything outside [what is deemed marketable] would be put in bucket 2,
where [Mountain State] would take back to Boise and [Mountain State]
would try to sell it [to] third-part[ies] through other small retailers…. [The]
money from [bucket 2] would go directly to [Clear] in a second inventory
payment.
[A]nything that couldn’t be sold would be put in bucket 3. And that bucket 3
would - - [Mountain State] would part it, they would piece it, they would
throw it away, I don’t know what they would do with it, but if there was any
value to it, [any income on those items] would also be sent to [Clear] as a
[third] payment.
(Dkt. 26-2 at 21.) According to Jones, the $396,000 payment on December 3, 2014, was
payment for marketable inventory and that payment was final, i.e., not open to further
negotiation or deduction. He understood Clear could get up to two additional payments
from Mountain State for inventory (per buckets 2 and 3).
According to Urness’s 30(b)(6) deposition testimony on behalf of Mountain State,
he confirmed that he had described the inventory categorization process to Jones in terms
of “buckets.” However, Urness’s understanding of Mountain State’s payments for
inventory to Clear was quite different than described by Jones. Urness contends that,
during the conversation he had with Jones on December 3, 2014, Urness verbally asked
Jones if $396,000 for inventory would be an acceptable payment “for now.” Urness
contends he explained to Jones that Mountain State would take the yet-to-be valuated
inventory back to Boise “and really give it our full attention and make sure that we got
[Clear] full market value.” (Dkt. 26-2 at 83.) Urness explained that it was Mountain
State’s intent when singing the APA to:

MEMORANDUM DECISION AND ORDER - 29

[C]ome up with as accurate a number [for marketable inventory] as possible
[by December 3, 2014] so that Nic could be mostly whole on the inventory
and did not have to cover any material amount of inventory costs while we
went through the reconciliation process.
(Dkt. 26-2 at 82.)
When Mountain State wired the December 3, 2014 inventory payment to Clear,
Mountain State notified Clear of it payment via email “I sent a wire for 396k for the
‘preliminary’ inventory dollar amount. I know we will have some truing up to do over the
next week.” Dec. Jefferies, Ex. B (Dkt. 21-8 at 13). At 4:46 p.m., Jones responded:
“Received…Thank you!” (Dkt. 21-8 at 14.)
Upon consideration of the above, the Court finds the intent of the parties regarding
the finality and the type of inventory the December 3, 2014 encompassed (marketable or
for all inventory (including iconic devices)) are disputed issues of material facts which
precludes summary judgment on this claim. The finder of fact could find that the intent of
the parties was for Mountain State to make up to three inventory payments, and the first
payment on December 3, 2014 was a non-negotiable payment for current and marketable
inventory. On the other hand, the finder of fact could conclude that the December 3, 2014
payment was intended as a placeholder payment to be adjusted later once Mountain State
was able to value all of Clear’s inventory.
Likewise, genuine issues of material fact remain as to Mountain State’s
affirmative defense that it is entitled to a set-off to account for the true value of the
inventory it purchased from Clear. According to the Idaho Supreme Court, “the right of
setoff exists except where denied or limited.” Dawson v. Eldredge, 8405 P.2d 754, 758
MEMORANDUM DECISION AND ORDER - 30

(Idaho 1965) (citing Brown v. Porter, 245 P. 398, 398 (Idaho 1926)). The Idaho Code
does not limit or deny a defendant from asserting an affirmative defense for set-off in a
breach of contract action. Equitable set-off “is based on the principle that where two
parties are mutually indebted, justice requires that the debts be set off and that only the
balance is recoverable.” Int'l Equip. Serv., Inc. v. Pocatello Indus. Park Co., 695 P.2d
1255, 1258 (Idaho 1985) (citing 20 Am. Jur. 2d Counterclaim, Recoupment, and Set Off §
7 (1965)).
As indicated above, genuine issues of material fact exist as to whether the parties
are mutually indebted to each other. If the December 3, 2014 payment for inventory was
not intended to be the final transaction for all inventory between the parties, Mountain
State may be entitled to a set-off.
D. Iconic Devices
Mountain State contends that, pursuant to the “Iconic Order Agreement” in
Schedule 1.1 of the APA, it owed Clear a payment for iconic device gross profit (i.e., not
the entire commission from Verizon covering the expense of the handset device).
Mountain State admits it breached the APA by not processing its obligation for iconic
devices separately from the other inventory; however, it contends no damage occurred to
Clear because Mountain State credited to Clear in its inventory reconciliation reduction
the gross profit for iconic devices. Clear argues that, due to Mountain State’s failure to
separately process iconic devices, this breach resulted in “a severe underpayment to
Clear.” Clear contends it was entitled to the full Verizon commission, which included
reimbursement for the expense of the devices, of which Clear paid in full when it paid off
MEMORANDUM DECISION AND ORDER - 31

its Dymax account at closing. For the following reasons, the Court will deny Mountain
State’s motion for summary judgment as it relates to iconic devices.
An ambiguity exists with regard to the reimbursement amount Mountain State
owed to Clear for Clear’s sales of iconic devices that preceded the APA. The beginning
of the “Iconic Order Agreement” indicates that: “it is agreed that the sale, expense and
profit of the sale of [iconic devices] will remain in favor of Clear….” However, in the
following “process” section for iconic devices, Step 7 of the process provides: “[a]ll gross
profit from all iconic sales will be paid to Seller, less chargebacks and yet to be activated
equipment charges….”
The first provision indicates Clear is entitled to full commissions, in this case,
approximately $31.800.00. However, the second provision indicates Clear is entitled to
only gross profit of the iconic devices, in this case, $2,652.27. Both interpretations are
reasonable, and the contract and the record are silent as to which calculation the parties
agreed upon. Accordingly, the Court will deny Mountain State’s summary judgment on
this claim.
CONCLUSION
For the reasons articulated above, the Court finds Mountain State did not breach
the VAA and did not breach the APA when it offset Verizon Chargebacks from its June
1, 2015 payment to Clear. As such, with regard to these claims, Mountain State’s motion
for summary judgment will be granted and Clear’s motion for partial summary judgment
will be denied.

MEMORANDUM DECISION AND ORDER - 32

Further, the Court finds Mountain State breached the APA when it deducted its
inventory reconciliation from the June 1, 2015 installment purchase payment, as the APA
did not clearly permit such a deduction. Mountain State also breached the APA when it
failed to make a separate payment for iconic devices. However, genuine issues of
material fact exist with regard to damages. Therefore, with regard to these claims, the
Court will deny Mountain State’s motion for summary judgment and will grant in part
and deny in part Clear’s partial motion for summary judgment accordingly.
ORDER
NOW THEREFORE IT IS HEREBY ORDERED:
1) Defendants Motion for Summary Judgment (Dkt. 21) is GRANTED in
part and DENIED in part.
2) Plaintiff’s Motion for Partial Summary Judgment (Dkt. 22) is GRANTED
in part and DENIED in part.

May 12, 2017

MEMORANDUM DECISION AND ORDER - 33