Sprint Nextel Corporation v. Middle Man, Inc., The et al

Filing 119

MEMORANDUM AND ORDER denying 109 Middle Man's Motion to Certify Class; and denying 110 Middle Man's Motion for Sanctions. Signed by District Judge J. Thomas Marten on 3/18/14. (mss)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
SPRINT NEXTEL CORPORATION,
Plaintiff,
v.

Case No. 12-2159-JTM

THE MIDDLE MAN, INC., AND
BRIAN K. VAZQUEZ,
Defendants.
MEMORANDUM AND ORDER
The court has before it the defendants’ Motion to Certify Class (Dkt. 109) and
Motion for Sanctions (Dkt. 110). After reviewing the parties’ briefs, the court denies
both motions for the following reasons.
I. Background
Sprint filed suit against defendants The Middle Man, Inc. and Brian K. Vazquez
(owner of The Middle Man, Inc.) on March 14, 2012, alleging, among other things,
breach of contract and trademark infringement. See Dkt. 1. The defendants filed their
Motion to Dismiss on May 4, 2012, which the court denied on October 16, 2012. Dkts. 16
& 30. On November 7, 2012, the defendants filed an answer to Sprint’s complaint, which
included a counterclaim. Dkt. 37. Count I of the counterclaim sought a declaratory
judgment that Sprint’s Terms & Conditions cannot prevent a Sprint customer from
reselling their Sprint phone. Id. at 20–21. Count II of the counterclaim sought a
declaratory judgment that the defendants are not liable for trademark infringement for
either reselling pre-owned Sprint phones that are labeled with the Sprint name and

trademark, or for identifying the network on which the pre-owned phone was
originally programmed to operate. Id. at 21–22.
On Sprint’s motion, the court dismissed Count II of the defendants’
counterclaim, finding it redundant to their affirmative defenses. Dkt. 85. The court also
granted judgment on the pleadings to Sprint on Count I of the defendants’
counterclaim,1 finding that Sprint’s Terms & Conditions unambiguously restrict Sprint
customers from reselling the phones they purchase from Sprint. Dkt. 118.
The defendants filed a motion seeking class certification on counts I and II of
their counterclaim on November 27, 2013. Dkt. 109. They previously sought class
certification solely on Count I, which the court denied for failing to meet the numerosity
requirement of Federal Rule of Civil Procedure 23(a). See Dkts. 81 & 105. The defendants
renew their motion and add Count II, arguing that they can now fulfill the numerosity
requirement.
On the same day they filed their motion for class certification, the defendants
also filed a Motion for Sanctions (Dkt. 110), which the court takes up at this time.
II. Motion for Class Certification
The court denies the defendants’ motion seeking class certification for the simple
reason that the claims on which defendants seek class certification are no longer in play.
Defendants seek class certification on counts I and II of their counterclaim. However, as

1The court originally granted partial judgment to the defendants on Count I in its order dated October 31,
2013. Dkt. 106. On November 14, 2013, Sprint filed a Motion for Reconsideration (Dkt. 107) regarding this
order. The court granted Sprint’s motion, and in reconsidering the motion, granted judgment to Sprint on
February 25, 2014. The defendants filed their Motion to Certify Class in the interim between Sprint filing
its Motion for Reconsideration and the court’s ruling on that motion.

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stated above, the court granted judgment on the pleadings to Sprint on Count I and
dismissed Count II as redundant to the defendants’ affirmative defenses.
At the time the defendants filed this motion, the court had granted them partial
summary judgment on Count I. However, the court recently granted Sprint’s Motion
for Reconsideration (Dkt. 107) and, in reconsidering the Motion for Judgment on the
Pleadings (Dkt. 90), granted Sprint judgment on the pleadings on Count I. See Dkt. 118.
Class certification would be inappropriate for a claim that has already been resolved.
The result is the same for Count II of the defendants’ counterclaim. In their reply
brief, the defendants admit that the court dismissed Count II for redundancy, but they
request that the court “revise” this ruling “so that the Count can be asserted on behalf of
the class.” Dkt. 114, at 10. The defendants argue that the other class members “do not
have the luxury of asserting the same affirmative defense,” and so ought to be given the
chance to join the counterclaim. This argument does not convince the court. Count II
has been resolved and the court will not revive it for the sole purpose of justifying class
certification.
The court’s dispositive rulings on counts I and II effectively render the
defendants’ Motion for Class Certification moot. Accordingly, the court denies the
motion.
III. Motion for Sanctions
The defendants seek sanctions against Sprint pursuant to Rule 11, arguing that
Sprint knowingly alleged false facts in its complaint as part of a baseless litigation

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scheme employed solely to drive competitors out of the market. The court denies the
motion for the reasons below.
A. Legal Standard
When a party is represented by counsel, the Federal Rules of Civil Procedure
require an attorney of record to sign “[e]very pleading, written motion, and other
paper . . . .” FED. R. CIV. P. 11(a). In signing a filed document, an attorney certifies that
“to the best of the person’s knowledge, information, and belief,” it is not brought for
any improper purpose, the contentions are warranted by existing law and the factual
contentions have evidentiary support or will likely have such support after discovery.
FED. R. CIV. P. 11(b). “If, after notice and a reasonable opportunity to respond, the court
determines that Rule 11(b) has been violated, the court may impose an appropriate
sanction on any attorney, law firm, or party that violated the rule or is responsible for
the violation.” FED. R. CIV. P. 11(c).
To avoid sanctions under Rule 11, an attorney must meet a standard of objective
reasonableness. Scott v. Boeing Co., 204 F.R.D. 698, 700 (D. Kan. 2002) (citing White v.
Gen. Motors, Inc., 908 F.2d 675, 680 (10th Cir. 1990)). An attorney’s subjective good faith
belief in the merit of an argument does not suffice to meet this standard. Id. (internal
citation omitted). Instead, the attorney’s belief must be “in accord with what a
reasonable, competent attorney would believe under the circumstances.” White, 908
F.2d at 680. It is within the discretion of the court to determine whether the claim or
argument is warranted by law. Augustine v. Adams, 88 F. Supp. 2d 1169, 1174 (D. Kan.
2000) (internal citation omitted).
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B. Analysis
In their motion, the defendants contend that Sprint has provided no facts in
support of the allegations in its complaint and that Sprint has brought this lawsuit for
the sole purpose of driving competitors out of the market. Both of these arguments fail.
Although the court finds certain factual allegations made by Sprint to be
unsupported by the evidence, these allegations are immaterial to the claims. For
example, in its breach of contract claim, Sprint alleged the defendants use “runners” to
purchase phones on the defendants’ behalf, entering into contracts with Sprint. Sprint
has not provided any evidence that the defendants employ runners. However, the
defendants’ use of runners is not essential to Sprint’s breach of contract claim. And
Sprint has provided evidence that shows that defendant Brian Vazquez personally
entered into contracts by purchasing Sprint phones, which Sprint alleges he sold in
violation of the Sprint Terms and Conditions. Additionally, Sprint has advised the
defendants that if discovery does not bear out its allegation of using runners, Sprint will
consider amending its complaint to reflect that result.
In another example of the defendants’ misplaced overstatements, they argue that
Sprint accused them of selling phones overseas with no basis for such an allegation. The
language of Sprint’s complaint accuses the defendants of running a bulk purchase
scheme that ultimately results with the phones they have sold being shipped overseas.
The complaint does not directly assert that the defendants are selling phones overseas;
rather, it holds the defendants indirectly responsible for such a result because of their
actions. Interpreting the defendants’ actions as fitting such a scheme was not
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unreasonable for Sprint officials and attorneys, who have experience with precisely
these types of activities. Additionally, the factual allegation of overseas sales is only
present in Count Two of the complaint, which alleges unfair competition based on the
defendants’ taking advantage of Sprint’s subsidy. This allegation does not rest on
overseas sales but second-hand sales of Sprint phones in general, which is the admitted
purpose of the defendants’ business. Whether the defendants are responsible for
overseas sales is not a requirement of Sprint’s unfair competition claim.
The court understands the defendants’ concern that Sprint is simply trying to run
them out of business in order to decrease its competition. And if Sprint brought baseless
claims for only that purpose, the motion for sanctions would be warranted. However,
as the court explained when it denied the defendants’ motion to dismiss, Sprint has
alleged facts that state proper legal claims. Further, Sprint has provided enough facts to
overcome allegations of a spurious lawsuit. Even if Sprint’s true purpose were to close
down a competitor, it is not subject to sanctions so long as it provides an objectively
reasonable claim.
Rule 11 sanctions are reserved “for the rare and exceptional case where the action
is clearly frivolous, legally unreasonable or without legal foundation . . . .” Operating
Engineers Pension Trust v. A-C Co., 859 F.2d 1336, 1344 (9th Cir. 1988). The defendants
have not shown that Sprint’s claims meet any of these criteria. Accordingly, the court
denies the motion.
Finally, the court notes that Sprint has requested an award against the
defendants for expenses and fees incurred in opposing the motions, as warranted by
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Rule 11(c)(1)(A). The court denies this request and recommends that the parties opt for
a more civil manner of litigation in this case than the eye-for-an-eye style so apparent in
recent briefs.
IT IS THEREFORE ORDERED this 18th day of March, 2014, that Middle Man’s
Motion to Certify Class (Dkt. 109) and Motion for Sanctions (Dkt. 110) are each denied.

s/ J. Thomas Marten
J. THOMAS MARTEN, JUDGE

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