Sprint Solutions, Inc. et al v. Lafayette et al

Filing 48

ORDER granting in part and denying in part Motion for Default Judgment 47 . Default Judgment is denied as to Defendants Emanuel Lafayette and Marcus S. Hall. Default Judgment is granted as to Defendants Irvin Lafayette and Eddie Danley. Plaintiffs a re entitled to permanent injunctive relief that is enforceable against Defendants Irvin Lafayette and Eddie Danley. Plaintiffs' request for punitive damages is granted. Plaintiffs have supplied insufficient support for their alleged damages. Plaintiffs must file support for their damages not later than July 6, 2018. Signed by Judge Samuel H. Mays, Jr on 6/22/2018. (Mays, Samuel)

IN THE UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF TENNESSEE
WESTERN DIVISION

SPRINT SOLUTIONS, INC. and
SPRINT COMMUNICATIONS
COMPANY, L.P.,
Plaintiffs,
v.
IRVIN BRYAN LAFAYETTE, EDDIE
D. DANLEY, EMANUEL LAFAYETTE,
MARCUS S. HALL, JOHN DOES 12, and JANE DOES 1-20,
Defendants.

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No. 2:15-cv-2595-SHM-cgc

ORDER

Before the Court is Plaintiffs Sprint Solutions, Inc. and
Sprint Communications Company L.P.’s (collectively,
“Plaintiffs” or “Sprint”) unopposed September 12, 2017 Motion
for Default Judgment and Permanent Injunction Against
Defendants Irvin Bryan Lafayette, Eddie D. Danley, Emanuel
Lamont Lafayette, and Marcus S. Hall (collectively,
“Defendants”) (“the Motion”).
unnecessary.

(ECF No. 47.)

Oral argument is

Fed. R. Civ. P. 78(b).

For the following reasons, the Motion is GRANTED in part
and DENIED in part.

I.

Background

Plaintiffs sell wireless phones under the brands Sprint,
Boost Mobile, Virgin Mobile, payLo, and Assurance Wireless for
use on Sprint’s wireless network.

(Compl., ECF No. 1 ¶ 1.)

Plaintiff Sprint Communications Company, L.P. owns federal
trademark registrations for the stylized Sprint® marks, which
are depicted below:

(Id. ¶ 30.)
Plaintiff Sprint Solutions, Inc. has been assigned the
right to use and enforce the Sprint® marks.

(Id.)

Plaintiffs

have also been assigned the right to use and enforce the
standard character and stylized Virgin Mobile, payLo, Assurance
Wireless, and Boost Mobile trademarks, which are depicted
below:

(Id. ¶ 31.)
Plaintiffs sell their phones for substantially less than
their manufacture price.

(Id. ¶ 22.)

Plaintiffs earn revenue

from the sale of Sprint’s wireless service, which customers
2

must use to transmit and receive calls, texts, and data on
Sprint phones.

(Id.)

Plaintiffs offer reduced phone prices

only if the phones are intended for use on the Sprint wireless
network.

(Id. ¶ 26.)

In addition to subsidizing the phones,

Plaintiffs offer customers the option of leasing the phones or
purchasing them through installment payments.

(Id. ¶ 23.)

Those subsidies and investment programs are not offered by
telecommunications carriers outside the United States.

(Id.)

Manufacturers that produce wireless phones for Plaintiffs
install proprietary software to prevent the phones from being
used outside the Sprint network.

(Id. ¶ 26.)

Sprint phones are also sold subject to certain terms and
conditions, which restrict the resale and use of the phones.
(Id. ¶ 24.)

Those terms and conditions are set out in printed

inserts that are included with the purchase of every Sprint
phone.

(Id.)

Customers may manifest their agreement to these

terms and conditions by signing a written contract, orally
acknowledging their agreement over the phone, clicking
appropriate buttons on a website, or, in the case of prepaid
services, by purchasing a phone in a package conspicuously
indicating that the purchase or use constitutes the customer’s
agreement.

(Id. ¶ 25.)

3

Plaintiffs recently discovered that, although large
quantities of their phones are purchased throughout the United
States, a significant number are not being used on the Sprint
network.

(Id. ¶ 34.) 1

Plaintiffs also recently discovered that Defendants
acquired Sprint phones directly or indirectly through coconspirators by illicit means, such as through unauthorized
orders on existing Sprint accounts and diverting Sprint phones
from their intended destinations.

(Id.)

Defendants then sold

the phones for a substantial profit and shipped them directly
overseas, where they can be used on other wireless carriers’
networks, or shipped to other domestic traffickers, who add
them to larger shipments headed overseas.

(Id.) 2

Plaintiffs

refer to this conduct as a “Handset Theft and Trafficking
Scheme.”

(Id. ¶ 1.)

As part of the alleged scheme, Defendants call Sprint
customer care and falsely identify themselves as Sprint
employees who need access to a particular Sprint account for a
legitimate purpose.

(Id. ¶ 40.)

If Defendants succeed in

acquiring account access, they place another call to Sprint and
represent themselves as the account holder or person authorized
to access the account, place orders, and make changes.
1
2

Plaintiffs do not provide a specific date of discovery.
Plaintiffs do not provide a specific date of discovery.

4

(Id. ¶

41.)

Defendants use this unauthorized access to receive

upgrades for new Sprint phones, add lines of service, and place
unauthorized orders for new mobile devices.

(Id.)

Any cost is

charged to the legitimate customer’s account, without the
customer’s knowledge or consent.

(Id.)

Defendants have the

merchandise shipped to addresses in Memphis, Tennessee, to
which they have access, and then resell the merchandise.

(Id.

¶ 42.)
The alleged scheme requires Defendants to call Sprint
thousands of times to change account information and to steal
equipment and services from Sprint and its customers.

(Id. ¶

45.)
Between March 2015 – August 2015, Sprint’s investigators
observed Defendants and their co-conspirators obtain shipments
and subsequently advertise devices matching the shipment
descriptions.

(See id. ¶¶ 45, 49, 50-52, 54.)

Sprint filed a complaint against Defendants on September
10, 2015.

(ECF No. 1.)

The complaint asserts fourteen (14)

counts: (1) unfair competition, (2) tortious interference with
existing and prospective business relationships, (3) common law
and statutory inducement of breach of contract (Tenn. Code Ann.
§ 47-50-109), (4) conspiracy to defraud, (5) unjust enrichment,
(6) common law fraud and fraudulent misrepresentation, (7)
5

trafficking in computer passwords (18 U.S.C. § 1030(a)(6)), (8)
unauthorized access (18 U.S.C. § 1030(a)(5)(C)), (9)
unauthorized access with intent to defraud (18 U.S.C. §
1030(a)(4)), (10) federal trademark infringement (15 U.S.C. §
1114)), (11) federal common law trademark infringement and
false advertising (15 U.S.C. § 1125)), (12) contributory
trademark infringement, (13) conversion, and (14) unfair and
deceptive acts and practices (Tenn. Code Ann. §§ 47-18-101, et
seq.).

The complaint seeks compensatory, consequential,

statutory, and special damages; attorneys’ fees and costs, and
permanent injunctive relief.
Defendants have not responded to the complaint, and the
deadline to do so has passed.

Fed. R. Civ. P. 12(a)(1)(A).

Defendants have not appeared.
On Sprint’s motion, the clerk of court filed an entry of
default against Defendants Irvin Bryan Lafayette and Eddie D.
Danley on November 10, 2015.

(ECF Nos. 24-27.)

On Sprint’s

motion, the clerk of court filed an entry of default against
Defendant Emanuel Lamont Lafayette on April 29, 2016.
Nos. 36-37.)

(ECF

On Sprint’s motion, the clerk of court filed an

entry of default against Defendant Marcus S. Hall on June 9,
2016.

(ECF Nos. 40-41.)

6

On September 12, 2017, Sprint moved for default judgment.
(ECF No. 47.)

Defendants have not filed a response to Sprint’s

motion for default judgment, and the deadline to do so has
passed.
II.

Jurisdiction & Choice of Law

A. Jurisdiction
A court's default judgment is invalid unless it has
subject-matter and personal jurisdiction.

See, e.g., Citizens

Bank v. Parnes, 376 F. App'x 496, 501 (6th Cir. 2010) (citing
Kroger Co. v. Malease Foods Corp., 437 F.3d 506, 510 (6th Cir.
2006)).
The Court has subject-matter jurisdiction over Sprint’s
federal trademark infringement claims, 15 U.S.C. §§ 1114 and
1125, and Computer Fraud and Abuse Act (CFAA) claims, 18 U.S.C.
§ 1030.

Under 28 U.S.C. §§ 1331, United States district courts

have original jurisdiction “of all civil actions arising under
the Constitution, laws, or treaties of the United States.”
Sprint’s federal trademark infringement claims and CFAA claims
arise under the laws of the United States.
The Court has supplemental jurisdiction over Sprint's
state-law claims under 28 U.S.C. § 1367.

Those claims derive

from a “common nucleus of operative fact” with the federal-law

7

claims.

United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 725

(1966); Soehnlen v. Fleet Owners Ins. Fund, 844 F.3d 576, 588
(6th Cir. 2016); see also 28 U.S.C. § 1367(a).
“Due process requires proper service of process for a
court to have jurisdiction to adjudicate the rights of the
parties.”

O.J. Distrib., Inc. v. Hornell Brewing Co., 340 F.3d

345, 353 (6th Cir. 2003).

Plaintiff bears the burden of

exercising due diligence to perfect service of process and to
show that proper service has been made.

See Byrd v. Stone, 94

F.3d 217, 219 (6th Cir. 1996).
Default judgment is improper where service has not been
effected.

See, e.g., O.J. Distrib, 340 F.3d at 353 (“Due

process requires proper service of process for a court to have
jurisdiction to adjudicate the rights of the parties.
Therefore, if service of process was not proper, the court must
set aside an entry of default.” (citation omitted)).
Summonses issued for Defendants Irvin Bryan Lafayette,
Emanuel Lafayette, Eddie D. Danley, and Marcus S. Hall on
September 10, 2015.

(ECF Nos. 7-10.)

The propriety of service

must be evaluated separately for each Defendant.
Distrib., 340 F.3d at 353.

8

See O.J.

1. Defendants Eddie D. Danley and Irvin Bryan Lafayette
Affidavits of service were filed as to Defendants Eddie D.
Danley and Irvin Bryan Lafayette on October 13, 2015.
Nos. 11-12.)

(ECF

Those affidavits demonstrate that service was

made by delivering a copy of the summons at each Defendant’s
dwelling or usual place of abode with someone of suitable age
and discretion who resided there.

(Id.)

Service of process

was proper for Defendants Eddie D. Danley and Irvin Bryan
Lafayette.
2. Defendant Emanuel Lafayette
A summons was returned executed as to Defendant Emanuel
Lafayette on March 25, 2016.
service is blank.

(ECF No. 33.)

(Id. at 416.)

summons is Eneka Lafayette.

The proof of

The person who signed the

(Id. at 417.)

Plaintiffs have failed to satisfy their burden to
establish proper service on Defendant Emanuel Lafayette.
Lafayette is not a party to this action.

Eneka

It is unclear whether

Eneke Lafayette resided at Defendant Emanuel Lafayette’s
dwelling or usual place of abode.

Service of process is

improper under Federal Rule of Civil Procedure 4(e)(2).

It is

also improper under Federal Rule of Civil Procedure 4(e)(1)
because it fails to satisfy Tennessee service laws.

9

Tennessee Rule of Civil Procedure 4B “permits service on
the secretary of state as the defendant's agent for service of
process, whenever it is constitutionally permissible for the
courts of the state to exercise personal jurisdiction over the
defendant.”

Thompson v. Ameriquest Mortg. Co., No. W2011-

00501-COA-R3CV, 2011 WL 6016892, at *1 (Tenn. Ct. App. Dec. 5,
2011) (quoting Robert Banks, Jr. & June F. Entman, Tennessee
Civil Procedure § 2–5(b), at 2–64 to –65 (3d ed. 2009)).

Under

Rule 4B, the plaintiff must deliver the original and a copy of
the process, duly certified, to the Tennessee Secretary of
State, who then sends it by registered or certified return
receipt mail to the defendant.

Tenn. R. Civ. P. 4B(2).

Rule

4B provides:
Acceptance of such registered or certified mail by
any member of the addressee's family, over the age of
sixteen (16) years and residing in the same dwelling
with him, shall constitute a sufficient delivery
thereof to the addressee.
Tenn. R. Civ. P. 4B(5).
Eneka Lafayette is unidentified.

Without more, service of

process was improper as to Defendant Emanuel Lafayette.
Plaintiff’s Motion against him is DENIED.
3. Defendant Marcus S. Hall
The original summons issued for Defendant Marcus S. Hall
listed Hall’s address as: 2765 Pickering Drive, Apt.3, Memphis,
10

Tennessee 38115.

(ECF No. 10.)

A second summons issued for

Defendant Hall on February 16, 2016.

(ECF No. 31-1.)

That

summons listed the original Memphis address and added three
addresses in Georgia.

(Id.)

On April 4, 2016, Sprint filed what appears to be a Notice
of Service.

(ECF No. 34.)

It says that the Notice and summons

were sent to Defendant Hall at one of the three Georgia
addresses listed in the second summons.

(Id.)

The Notice is

addressed to Defendant Hall from the Tennessee Secretary of
State.

(Id.)

The filing also contains a scanned copy of the

second summons and a letter addressed to Defendant Hall that
has a stamp: “Return to Sender. Unclaimed.”

(Id.)

On May 16, 2016, Sprint filed a “Summons Returned
Executed” as to Defendant Hall.

(ECF No. 38.)

The filing has

a copy of the second summons and an Affidavit and Endorsement
by an agent of the Tennessee Secretary of State.

(Id.)

The

Affidavit states that a notice of service and summons were sent
to Defendant Hall and addressed to a second Georgia address:
370 Northside Drive NW, Atlanta, GA, 30318.

(Id.)

The

certified mail was allegedly returned undelivered, containing
the notation: “Return to Sender.
filed this document twice.

Unclaimed.”

(See ECF No. 39.)

(Id.)

Sprint

The Affidavit

does not state whether the Notice was sent to a specific

11

apartment number.

The second summons lists the second Georgia

address with two separate apartments:
(Id. at 446.)

Apt. 2303 and Apt. 2242.

It is unclear from the Affidavit whether the

Notice and summons was delivered to either of those apartments.
Sprint has not filed any notice or affidavit as to the Memphis
address listed on the second summons.
Sprint’s attempts do not constitute proper service under
Federal Rule of Civil Procedure 4(e)(2) or Tennessee law.

See

Fed. R. Civ. P. 4(e)(1).
Tennessee Rule of Civil Procedure “4B(1), in effect,
permits service on the secretary of state as the defendant's
agent for service of process, whenever it is constitutionally
permissible for the courts of the state to exercise personal
jurisdiction over the defendant.”

Thompson, 2011 WL 6016892,

at *1 (quoting Tennessee Civil Procedure § 2–5(b), at 2–64 to –
65).

Rule 4B(7) provides that, if a plaintiff attempts to make

service on the secretary of state as the defendant’s agent, and
if the secretary of state receives notice that its registered
or certified mail is undelivered, service may be complete if
(1) the undelivered mail, (2) affidavit, and (3) a copy of the
notice are part of the record.

Tenn. R. Civ. P. 4B(7).

None of Sprint’s filings addressing Defendant Hall
satisfies Rule 4B(7).

The April 2016 filing does not include
12

an affidavit.

(See ECF No. 34.)

The May 2016 filing does not

state to which apartment, if any, the summons and notice were
sent, and does not include the undelivered mail or a copy of
the notice.

(See ECF No. 38-39.)

Service of process was

improper as to Defendant Marcus S. Hall.

Plaintiff’s Motion

against him is DENIED.
B. Choice of Law
Plaintiffs explicitly invoke Tennessee law.
1; see also ECF No. 47-1.)

Defendants have not challenged the

application of Tennessee law.
substantive law.

(See ECF No.

The Court will apply Tennessee

See GBJ Corp. v. E. Ohio Paving Co., 139 F.3d

1080, 1085 (6th Cir. 1998) (finding courts need not analyze
choice-of-law questions sua sponte).
III. Standard of Review
Rule 55(b)(2) of the Federal Rules of Civil Procedure
governs default judgments.

See Fed. R. Civ. P. 55(b).

“When a

party against whom a judgment for affirmative relief is sought
has failed to plead or otherwise defend, and that failure is
shown by affidavit or otherwise, the clerk must enter the
party's default.”

Fed. R. Civ. P. 55(a).

Once the Court Clerk

enters default, all well-pleaded allegations are deemed
admitted, except those concerning damages.

See Antoine v.

Atlas Turner, Inc., 66 F.3d 105, 110-11 (6th Cir. 1995).
13

As to damages, “[t]he allegations in the complaint . . .
are not deemed true.

The district court must instead conduct

an inquiry in order to ascertain the amount of damages with
reasonable certainty.”

Vesligaj v. Peterson, 331 F. App’x 351,

355 (6th Cir. 2009) (quoting Credit Lyonnais Sc. (USA), Inc. v.
Alcantara, 183 F.3d 151, 155 (2d Cir. 1999)); see also Fed. R.
Civ. P. 55(b)(2).

A court may reach a reasonable certainty on

the correct amount of damages from the record without
conducting a hearing.

See Vesligaj, 331 F. App’x at 355.

A hearing under Rule 55(b)(2) is not necessary where there
is sufficient evidence in the record to make a determination as
to damages.

See, e.g., id; Boards of Trustees of Ohio

Laborers' Fringe Benefit Programs v. Akron Insulation & Supply,
Inc., No. 2:15-CV-2864, 2017 WL 749202, at *3 (S.D. Ohio Feb.
27, 2017).
IV.

Analysis
A. Causes of Action
1. Count 1: Common Law Unfair Competition

To establish a claim for unfair competition under
Tennessee law, a plaintiff must establish that: (1) the
defendant engaged in conduct that “passed off” its organization
or services as those of the plaintiff; (2) in engaging in such
conduct, the defendant acted with intent to deceive the public
14

as to the source or services offered or authority of its
organization; and (3) the public was actually confused or
deceived as to the source of the services offered or authority
of its organization.

Sovereign Order of St. John of Jerusalem,

Inc. v. Grady, 119 F.3d 1236, 1243 (6th Cir. 1997).
Tennessee's law of unfair competition differs from the federal
law of unfair competition (i.e., the Lanham Act § 43(a)) only
in that Tennessee law requires a showing of “actual confusion,”
but the latter requires only a showing of a “likelihood of
confusion.”

Id.

The complaint alleges that Defendants’ actions were
intentional.

(Compl., ECF No. 1 ¶ 74.)

Defendants, in some

instances, resold Sprint phones to customers who believed the
Sprint phones included all the attendant benefits, but the
phones were no longer under warranty or did not work on
Sprint’s network because of how the phones were acquired or how
they were altered.

(Id. ¶ 61.)

The complaint also alleges that “Defendants’ conduct leads
to post-sale confusion by causing consumers who purchase Sprint
Phones altered by Defendants to believe that they are
purchasing handsets approved by Sprint that can be activated on
the Sprint network and containing original warranties.”
205.)

15

(Id. ¶

Because these well-pled allegations are admitted, see
Antoine, 66 F.3d at 110-11, Plaintiffs have sufficiently shown
Defendants engaged in conduct that “passed off” Sprint’s
services, acted with an intent to deceive the public as to the
source of the services offered or authorized, and facilitated
actual confusion.

Plaintiffs are entitled to default judgment

on this claim.
2. Count 2: Tortious Interference with Existing and
Prospective Business Relationships
To state a claim for interference with business
relationships, the plaintiff must show: “(1) an existing
business relationship with specific third parties or a
prospective relationship with an identifiable class of third
persons; (2) the defendant’s knowledge of that relationship and
not a mere awareness of the plaintiff’s business dealings with
others in general; (3) the defendant’s intent to cause the
breach or termination of the business relationship; (4) the
defendant’s improper motive or improper means.”

Trau-med of

America v. Allstate Ins. Co., 71 S.W.3d 691, 701 (Tenn. 2002);
S. Transportation, Inc. v. Lyft, Inc., No. 16-02669, 2017 WL
2838207, at *3 (W.D. Tenn. June 30, 2017).
Plaintiffs sufficiently establish their claim for tortious
interference with business relationships.

Plaintiffs allege

that Sprint had economic relationships with its authorized
16

dealers, retailers, and prospective customers that carried a
high probability of future economic benefit. (Compl., ECF No. 1
¶¶ 77-80.)

Plaintiffs allege that, by intentionally and

unlawfully acquiring Sprint phones for resale, Defendants’
scheme creates an insufficient supply of Sprint phones.
¶¶ 81-82.)

(Id.

That insufficient supply “substantially harm[s]

Sprint and its relationship with its authorized dealers and
retailers because Sprint is unable to supply dealers with
sufficient Phones to satisfy the demands from legitimate
consumers.”

(Id. ¶ 83.)

Plaintiffs allege that Defendants

knew of these relationships and understood that their conduct
would disrupt these relationships.

(Id. ¶¶ 84, 86.)

Because these well-pled allegations are admitted, see
Antoine, 66 F.3d at 110-11, Plaintiffs have established
tortious inference with business relationships.

Plaintiffs are

entitled to relief on this claim.
3. Count 3: Common Law and Statutory Inducement of Breach
of Contract
The elements of a claim for common law or statutory
inducement to breach a contract under § 47-50-109 of the
Tennessee Code are identical.
[T]o establish either a claim for common law or
statutory inducement to breach a contract, a party
must establish that (1) a legal contract existed; (2)
the defendant was aware of the contract; (3) the
17

defendant intended to induce a breach of contract;
(4) the defendant acted with malice; (5) a breach of
the contract occurred; (6) the breach was a proximate
result of the defendant’s conduct; and (7) the breach
injured the plaintiff.
Givens v. Mullikin, 75 S.W.3d 383, 405 (Tenn. 2002).
The complaint alleges that there were legal contracts
between Sprint and its authorized dealers, retailers, and
customers.

(Compl., ECF No. 1 ¶¶ 92-93.)

The complaint

alleges that Defendants knew of those contracts and knowingly
and intentionally facilitated a conspiracy to induce breach of
those contracts.

(Id. ¶¶ 94-96.)

The complaint alleges that

Defendants acted with malice by willfully inducing breach of
contract.

Prime Co. v. Wilkinson & Snowden, Inc., No. W2003-

00696-COA-R3CV, 2004 WL 2218574, at *4 (Tenn. Ct. App. Sept.
30, 2004)( “[M]alice is ‘the wilful violation of a known
right.’” (quoting Crye-Leike Realtors, Inc. v. WDM, Inc., No.
02A01-9711-CH-00287, 1998 WL 651623 (Tenn. Ct. App. Sept. 24,
1998)).

The complaint alleges that Defendants induced the

breach of contracts between Sprint and its authorized dealers,
retailers, and customers.

(Compl., ECF No. 1 ¶ 95.)

The

complaint represents that “Sprint has been proximately damaged
and continues to be damaged as a result of Defendants’
interference.”

(Id. ¶ 98.)

18

Because these well-pled allegations are admitted, see
Antoine, 66 F.3d at 110-11, Plaintiffs have established
statutory and common law inducement of breach of contract.
Plaintiffs are entitled to relief on this claim.
4. Count 4: Conspiracy to Defraud
To prove conspiracy to defraud under Tennessee law, the
plaintiff must establish:
a common purpose, supported by a concerted action to
defraud, that each has the intent to do it, and that
it is common to each of them, and that each has the
understanding that the other has the purpose.
The
agreement need not be formal, the understanding may
be a tacit one, and it is not essential that each
conspirator have knowledge of the details of the
conspiracy.
Taylor v. George, No. E201400608COAR3CV, 2015 WL 1218658, at *7
(Tenn. Ct. App. Mar. 16, 2015) (quoting Dale v. Thomas H.
Temple Co., 208 S.W.2d 344 (Tenn. 1948)).
The complaint alleges that Defendants engaged in a common
purpose to unlawfully acquire, market, and sell unlawfully
acquired and altered Sprint phones.

(Compl., ECF No. 1 ¶ 101.)

The complaint also alleges that “[e]ach Defendant knowingly
agreed to engage, and did engage, in one or more overt acts in
pursuit of the conspiracy. . . .”

(Id. ¶ 102.)

Defendant Emanuel Lafayette regularly communicated with
the co-Defendants and called Sprint to check on the shipment
19

status of fraudulent orders that Defendants had placed on
legitimate Sprint customer accounts and that Defendants were
having shipped to themselves.

(Id. ¶ 47.)

Defendant Emanuel

Lafayette posted pictures of himself on his Facebook page
prominently displaying new phones for sale that matched the
make and model of the recently delivered Sprint phones.

(Id.)

Defendant Irvin Lafayette and another co-conspirator
retrieved a fraudulent delivery from a vacant house and drove
to a subsequent location in Memphis, Tennessee, that served as
a drop off where the Sprint phones were collected and processed
by Defendants and their co-conspirators for resale.

(Id. ¶

51.)
Defendant Marcus Hall fraudulently ordered Sprint iPhones
sent to his residence.

(Id. ¶ 52.)

by Defendants for a profit.

Those phones were resold

(Id.)

Because these well-pled allegations are admitted, see
Antoine, 66 F.3d at 110-11, Plaintiffs have established
conspiracy to defraud.

Plaintiffs are entitled to relief on

this claim.
5. Count 5: Unjust Enrichment
Under Tennessee law, a plaintiff must prove three elements
to recover for unjust enrichment: (1) “[a] benefit conferred

20

upon the defendant by the plaintiff,’ (2) ‘appreciation by the
defendant of such benefit,’ and (3) ‘acceptance of such benefit
under such circumstances that it would be inequitable for him
to retain the benefit without payment of the value thereof.’”
Freeman Indus., LLC v. Eastman Chem. Co., 172 S.W.3d 512, 525
(Tenn. 2005) (citation omitted); Patterson v. Patterson, No.
M201600886COAR3CV, 2017 WL 1433310, at *9 (Tenn. Ct. App. Apr.
20, 2017).

“[T]he underlying principle of the doctrine of

unjust enrichment is that a party who receives a benefit that
he or she desires, under circumstances rendering retention of
the benefit without providing compensation inequitable, must
compensate the provider of the benefit.”
at 525.

Freeman, 172 S.W.3d

A benefit is defined as “any form of advantage that

has a measurable value,” and it need not be conferred on the
defendant directly by the plaintiff.

Id.

The complaint alleges that Defendants fraudulently
acquired Sprint phones and resold those phones for a profit to
potential Sprint customers.

(Compl., ECF No. 1 ¶¶ 112-14.)

Because these well-pled allegations are admitted, see
Antoine, 66 F.3d at 110-11, Plaintiffs have established unjust
enrichment.

Plaintiffs are entitled to relief on this claim.

21

6. Count 6: Common Law Fraud and Fraudulent
Misrepresentation
Under Tennessee law, a plaintiff must establish
four elements to prove fraud: (1) an intentional
misrepresentation with regard to a material fact; (2)
knowledge of the representation’s falsity . . . .;
(3)
the
plaintiff
reasonably
relied
on
the
misrepresentation and suffered damage; and (4) the
misrepresentation relates to an existing or past
fact, or, if the claim is based on promissory fraud,
the misrepresentation “must embody a promise of
future action without the present intention to carry
out the promise.”
McMillin v. Lincoln Mem’l Univ., No. E2010–01190–COA–R3–CV,
2011 WL 1662544, at *5 (Tenn. Ct. App. May 3, 2011) (quoting
Shahrdar v. Global Housing, Inc., 983 S.W.2d 230, 237 (Tenn.
Ct. App. 1998)).
The complaint alleges that each of the Defendants,
directly or indirectly through co-conspirators, misrepresented
to Sprint that he was a Sprint employee, was a legitimate
Sprint account holder, or was authorized to access and make
changes or place order on Sprint accounts.
¶ 117.)

(Compl., ECF No. 1

The Defendants also allegedly misrepresented that the

Sprint phones they acquired would be used for legitimate
purposes -- to be used on Sprint’s wireless network and to be
used in accordance with the Terms and Conditions.

(Id.)

Sprint relied on those misrepresentations and suffered damages
as a result.

(Id. ¶¶ 120, 122-23.)

22

Because these well-pled allegations are admitted, see
Antoine, 66 F.3d at 110-11, Plaintiffs have established fraud
and fraudulent misrepresentation.

Plaintiffs are entitled to

relief on this claim.
7. Counts 7-9: Violation of the Computer Fraud and Abuse
Act (CFAA)
Sprint’s complaint states three CFAA claims: (1)
Trafficking in Computer Passwords under 18 U.S.C. § 1030(a)(6)
(Count 7); (2) Unauthorized Access under 18 U.S.C.
§ 1030(a)(5)(C) (Count 8); and (3) Unauthorized Access With
Intent to Defraud under 18 U.S.C. § 1030(a)(4) (Count 9).
a. § 1030(a)(4) and § 1030(a)(5)(C)
To state a claim under § 1030(a)(4), Plaintiffs must
allege that Defendants (1) knowingly and with intent to defraud
(2) accessed a protected computer without authorization, (3)
obtained anything of value, and (4) caused loss and damages
aggregating at least $5,000 in any one-year period.
U.S.C. § 1030(a)(4).

See 18

To state a claim under § 1030(a)(5)(C),

Plaintiffs must allege that Defendants (1) intentionally
accessed a protection computer (2) without authorization and,
(3) as a result of such conduct, causes damage and loss.
18 U.S.C. § 1030(a)(5)(C).

23

See

Sprint phones are connected to and activated on Sprint’s
protected computer networks when they are originally acquired
from Sprint.

(Compl., ECF No. 1 ¶¶ 129, 130, 144.)

The phones

also contain codes and passwords that access this network,
allowing consumers to make calls and transmit data.
126, 143.)

(Id. ¶¶

The phones act as a “gateway” to Sprint’s protected

computer networks.

(Id. ¶ 126.)

Plaintiffs allege that, by

using these confidential codes and passwords, Defendants
intentionally gain unauthorized access to Sprint’s networks for
two purposes.

(Id. ¶¶ 129, 130.)

First, Defendants perform

various tests to confirm the phone is, in fact, active on
Sprint’s wireless network.

(Id. ¶ 130.)

Second, Defendants

unlock the Sprint phone, which requires the manipulation and
deletion of the phone’s proprietary software as well as
unauthorized changes to Sprint’s protected computer networks.
(Id.)

Plaintiffs also allege they have suffered various losses

and damages that satisfy the requirements of CFAA. 3
Defendants’ actions allegedly caused Sprint to incur
investigation costs, harmed the integrity of Sprint’s protected
computer networks, and deprived Sprint of expected profits.
3

Under CFAA, the term “damage” means “any impairment to the integrity
or availability of data, a program, a system, or information[.]” 18 U.S.C.
§ 1030(e)(8). The term “loss” means “any reasonable cost to any victim,
including the cost of responding to an offense, conducting a damage
assessment, and restoring the data, program, system, or information to its
condition prior to the offense, and any revenue lost, cost incurred, or
other consequential damages incurred because of interruption of service[.]”
18 U.S.C. § 1030(e)(11).

24

(Id. ¶¶ 136-37, 138.)

Plaintiffs also allege that Defendants’

conduct causes injury “substantially in excess of $5,000 over a
one-year period[,]” including economic losses and investigation
costs.

(Id. ¶ 134.)

Because the allegations in the complaint

are admitted, Plaintiffs have established CFFA claims under
§§ 1030(a)(4) and 130(a)(5)(C).
b. § 1030(a)(6)
Plaintiffs also claim Defendants trafficked passwords in
violation of § 1030(a)(6).

To state a claim under §

1030(a)(6), Plaintiffs must allege that the defendant (1)
knowingly (2) trafficked in (3) a computer password (4) in a
manner that affects interstate commerce.
1030(a)(6).

See 18 U.S.C. §

Plaintiffs allege that Defendants intentionally

transfer confidential Sprint codes and passwords to other
unauthorized users, and that this conduct substantially affects
interstate commerce by allowing the sale and purchase of
counterfeit and unlocked phones throughout the United States.
(Compl., ECF No. 1 ¶¶ 126-29.)

Because the allegations in the

complaint are admitted, Plaintiffs have established a CFAA
claim under § 1030(a)(6).
8. Count 10: Federal Trademark Infringement
To establish liability for trademark infringement,
Plaintiffs must show that (1) they own a valid, protectable
25

trademark; (2) Defendants used that mark in commerce without
Plaintiffs’ consent; and (3) there was a likelihood of
confusion.

15 U.S.C. § 1114(1); Ford Motor Co. v. Lloyd Design

Corp., 22 F. App’x 464, 468 (6th Cir. 2002).
Under the first-sale doctrine, the “resale by the first
purchaser of the original trademarked item is generally neither
trademark infringement nor unfair competition.”

Brilliance

Audio, Inc. v. Haights Cross Communications, Inc., 474 F.3d
365, 369 (6th Cir. 2007) (citing Prestonettes, Inc. v. Coty,
264 U.S. 359, 368–69 (1924)); Tumblebus Inc. v. Cranmer, 399
F.3d 754, 766 (6th Cir. 2005) (“The first-sale doctrine
provides that ‘a purchaser who does no more than stock,
display, and resell a producer's product under the producer's
trademark violates no right conferred upon the producer by the
Lanham Act.’”) (quoting Sebastian Int'l, Inc. v. Longs Drug
Stores Corp., 53 F.3d 1073, 1076 (9th Cir. 1995), cert. denied,
516 U.S. 914 (1995)). 4

“The rationale for the rule ‘is that

trademark law is designed to prevent sellers from confusing or
4

Whether the first-sale doctrine is an affirmative defense is
disputed. Compare Hi-Tech Pharm., Inc. v. Demelo, No. CIV.
A.1:07CV1934RWS, 2009 WL 901156, at *5 (N.D. Ga. Mar. 31, 2009) (quoting
Taylor Made Golf Co. v. MJT Consulting Group, 265 F.Supp.2d 732, 739 (N.D.
Tx. 2003))and Am. Airlines, Inc. v. Despegar.com USA, Inc., No. 13-22773CIV, 2013 WL 12064859, at *4 (S.D. Fla. Nov. 13, 2013)with Samsung Elecs.
Am., Inc. v. Yang Kun Chung, No. 3:15-CV-4108-D, 2017 WL 635031, at *4
(N.D. Tex. Feb. 16, 2017).
The Sixth Circuit has not answered this question. The Court adopts
the view that the first-sale doctrine is not an affirmative defense, but
“an area of commerce beyond the reach of trademark law.” Hi-Tech Pharm.,
2009 WL 901156, at *5 (internal quotation marks and citation omitted).

26

deceiving consumers about the origin or make of a product,
which confusion ordinarily does not exist when a genuine
article bearing a true mark is sold.’”

Id. (quoting NEC Elecs.

v. CAL Circuit Abco, 810 F.2d 1506, 1509 (9th Cir. 1987)).
The first-sale doctrine is not without exception.

For

example, the doctrine provides no defense when the reseller
sells trademarked goods that are materially different from
those sold by the trademark owner.

Id. at 370.

“To be

material, a difference must be ‘one that consumers consider
relevant to a decision about whether to purchase a product.’”
Id. (quoting Davidoff & CIE, S.A. v. PLD Int'l Corp., 263 F.3d
1297, 1302 (11th Cir. 2001)).

However, “‘[b]ecause a myriad of

considerations may influence consumer preferences, the
threshold of materiality must be kept low to include even
subtle differences between products.’”
263 F.3d at 1302).

Id. (quoting Davidoff,

Thus, “the question of materiality is a

fact-based inquiry requiring an examination of the products and
markets at issue.”

Id.

“Sprint uses the Sprint Marks on and in connection with
its telecommunications products and services.”
No. 1 ¶ 32.)
62.)

(Compl., ECF

Sprint affixes its marks to the phones.

(Id. ¶

Sprint’s marks are used in offering phones for use on

Sprint’s wireless network.

27

Defendants allegedly obtain Sprint phones by ordering them
while impersonating Sprint account owners or authorized users.
Sprint identifies phones connected with theft, fraud, or other
loss, and logs those phones into its system with specific
electronic serial numbers –- labeled “Bad ESNs.”

(Id. ¶ 36.)

Sprint phones with Bad ESNs cannot be used on Sprint’s network.
(Id.)

Phones with Bad ESNs are materially different from

Sprint phones.

Defendants’ sale of phones with Bad ESNs causes

confusion, because a purchaser from Defendants would be
precluded from using the service associated with Sprint’s
marks.

Although the inconsistency between the phones stems

from Sprint’s practices rather than some technological
limitation, the sale of the phones constitutes infringement.
See Original Appalachian Artworks, Inc. v. Granada Elecs.,
Inc., 816 F.2d 68, 73 (2d Cir. 1987) (concluding Cabbage Patch
dolls sold abroad were materially different from United States
dolls because of “the United States fulfillment houses’
inability or unwillingness to process Jesmar’s adoption papers
or mail adoption certificates”).
It is less clear whether an unlocked Sprint phone that
does not have a Bad ESN is precluded from using Sprint’s
network.

See Sprint Sols., Inc. v. iCell Guru, Inc., No.

14CV3539FBRER, 2016 WL 3198248, at *3 (E.D.N.Y. June 7, 2016)

28

(“It is not clear, however, whether unlocked phones can be used
on Sprint's network.

The issue is further complicated by the

2014 change in the law and industry practice.

Given those

changes, Sprint may not be able to refuse service for an
unlocked phone even if it wanted to.” (citations omitted)).
Sprint’s complaint, however, represents that “the process of
unlocking and reselling a Sprint Phone voids the manufacturer’s
warranty on the device.”

(Compl., ECF No. 1 ¶ 61.)

Although

Sprint is not the manufacturer, courts have found that
reselling products with inferior warranties constitutes a
material difference.

See, e.g., TracFone Wireless, Inc. v.

Bequator Corp., No. 10-CV-21462 WMH, 2011 WL 1427635, at *8
(S.D. Fla. Apr. 13, 2011); Perkins School for the Blind v.
Maxi–Aids, Inc., 274 F.Supp.2d 319, 324 (E.D.N.Y. 2003); Movado
Group, Inc. v. Matagorda Ventures, Inc., 2000 WL 1855120, *4
(S.D.N.Y. 2000).

The material difference exception to the

first-sale doctrine applies.
Sprint’s complaint sufficiently alleges that (1) it owns
valid, protectable trademarks; (2) Defendants used those marks
in commerce without Plaintiffs’ consent; and (3) there was a
likelihood of confusion.

Sprint is entitled to default

judgment on its federal trademark infringement claim.

29

9. Count 11: Federal Common Law Trademark
Infringement and False Advertising
Federal courts do not recognize a claim for federal common
law trademark infringement.

See, e.g., Int'l Order of Job's

Daughters v. Lindeburg & Co., 633 F.2d 912, 915 (9th Cir.
1980); Jae Enterprises, Inc. v. Oxgord Inc., No. 5:15-CV-228TBR, 2016 WL 865328, at *13 (W.D. Ky. Mar. 2, 2016).

Sprint

cites no case law in this circuit, and the Court finds none,
that recognizes a claim of federal common law trademark
infringement.

Sprint is not entitled to default judgment on

that claim.
The Sixth Circuit considers claims for unfair competition
and false advertising under 15 U.S.C. § 1125 using the same
factors for trademark infringement claims under 15 U.S.C. §
1114.
claims.

The likelihood of confusion is the essence of the
Audi AG v. D'Amato, 469 F.3d 534, 542 (6th Cir. 2006)

(explaining that the same test is used to determine “whether
there has been trademark infringement [and] unfair competition
. . . the likelihood of confusion between the two marks.”).
The Sixth Circuit has established a five-part test for
establishing a false advertising claim under the Lanham Act:
1) the defendant has made false or misleading
statements of fact concerning his own product or
another's; 2) the statement actually deceives or
tends to deceive a substantial portion of the
intended audience; 3) the statement is material in
30

that it will likely influence the deceived consumer's
purchasing decisions; 4) the advertisements were
introduced into interstate commerce; 5) there is some
casual link between the challenged statements and
harm to the plaintiff.
Grubbs v. Sheakley Group, Inc., 807 F.3d 785, 798 (6th Cir.
2015) (citing American Council of Cert'd Podiatric Physicians
and Surgeons v. American Board of Podiatric Surgery, Inc., 185
F.3d 606, 613 (6th Cir. 1999)).
The complaint alleges that Defendants made “false
representation[s] that the products and business of Defendants
have some connection, association or affiliation with Sprint .
. . [which] is likely to mislead the trade and public into
believing that Defendants’ products and services originate
from, are affiliated with, or are sponsored, authorized,
approved or sanctioned by Sprint.”

(Compl., ECF No. 1 ¶ 194.)

The complaint also alleges that “confused customers, relying on
Defendants’ representations and the Sprint Marks on the Phones
they purchased from Defendants, look to Sprint to resolve their
questions.

Sprint incurs substantial costs associated with

calls to its customer relations and department to resolve the
issues created by Defendants.”

(Id. ¶ 62.)

Sprint has established its claim for false advertising and
is entitled to default judgment on that claim.
10. Count 12: Contributory Trademark Infringement
31

“[A] manufacturer or distributor [who] [(1)] intentionally
induces another to infringe a trademark, or. . .[(2)] continues
to supply its product to one whom it knows or has reason to
know is engaging in trademark infringement,. . .is
contributorially responsible for any harm done as a result of
the deceit.”

Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S.

844, 853-54 (1982).

The Sixth Circuit has expanded application

of the contributory infringement doctrine to defendants who
were not distributors or manufacturers when the defendant
supplied a product or service to the infringer.

Coach, Inc. v.

Goodfellow, 717 F.3d 498 (6th Cir. 2013) (finding flea market
operator contributorially liable for trademark infringement
where he continued to supply product or service to vendors he
knew or had reason to know were engaging in trademark
infringement).
The complaint alleges that “Defendants knowingly aided and
enabled distributors and/or sellers of their products to market
them to members of the general public in a way that infringes
at least one of the Sprint Marks by placing in the hands of
distributors and/or sellers an instrument of consumer
deception.”

(Compl., ECF No. 1 ¶ 203.)

Plaintiffs have

established a claim for contributory trademark infringement and
are entitled to default judgment on that claim.

32

11. Count 13: Conversion
In Tennessee, “‘a party seeking to make out a prima facie
case of conversion must prove (1) the appropriation of
another's property to one's own use and benefit, (2) by the
intentional exercise of dominion over it, (3) in defiance of
the true owner's rights.’”

Thompson v. Thompson, No. W2008–

00489–COA–R3–CV, 2009 WL 637289, at *14 (Tenn. Ct. App. Mar.
12, 2009) (quoting H & M Enters., Inc. v. Murray, No. M1999–
02073–COA–R3–CV, 2002 WL 598556, at *3 (Tenn. Ct. App. Apr. 17,
2002)).

“[T]he defendant must intend to convert the

plaintiff's property.”

Id.

Plaintiffs allege ownership of the Sprint phones, and that
Defendants appropriated the Sprint phones for their own
benefit, and intentionally exercised dominion over the phones,
in defiance of Plaintiffs’ rights.

(Compl., ECF No. 1 ¶¶ 201-

15.)
Based on the allegations of the complaint, Plaintiffs have
established a claim for conversion against Defendants.
Plaintiffs are entitled to default judgment on that claim.
12. Count 14: Unfair and Deceptive Acts and Practices
A plaintiff may recover under the Tennessee Consumer
Protection Act (“TCPA”) by establishing “(1) that the defendant
engaged in an unfair or deceptive act or practice declared
33

unlawful by the TCPA and (2) that the defendant's conduct
caused an ‘ascertainable loss of money or property. . . .’”
Tucker v. Sierra Builders, 180 S.W.3d 109, 115 (Tenn. Ct. App.
2005) (quoting Tenn. Code Ann. § 47-18-109(a)(1)).
A “deceptive” act or practice is “one that causes or tends
to cause a consumer to believe what is false or that misleads
or tends to mislead a consumer as to a matter of fact.”
Tucker, 180 S.W.3d at 116.

An “unfair” act or practice is one

“likely to cause substantial injury to consumers which is not
reasonably avoidable by consumers themselves and not outweighed
by countervailing benefits to consumers or to competition.”
Id. at 116-17 (citation omitted). 5
“An ascertainable loss is a deprivation, detriment, or
injury that is capable of being discovered, observed, or
established.”

Discover Bank v. Morgan, 363 S.W.3d 479, 495

(Tenn. 2012).

“A loss is ascertainable if it is measurable,

even though the precise amount of the loss is unknown.”

Id. at

496 (quoting State v. New Beginning Credit Ass'n, Inc., No.
M1999-00461-COA-R3CV, 2006 WL 1472284, at *8 (Tenn. Ct. App.
5

A substantial injury “must be more than trivial or speculative;” it
“usually involves monetary injury or unwarranted health and safety risks.”
Tucker, 180 S.W.3d at 117 (internal citations omitted). “Even if an act or
practice causes or is likely to cause substantial injury, it will not be
considered unfair unless the injury is not reasonably avoidable by
consumers themselves.” Id. “Practices that unreasonably interfere with
consumer decision-making include (1) withholding important information from
consumers, (2) overt coercion, or (3) exercising undue influence over a
highly susceptible class of consumers.” Id.

34

May 25, 2006)).

An ascertainable loss in the trademark

infringement context that includes the trademark owner’s lost
ability to control its brand image and reputation is not an
ascertainable loss without evidence of damages.

See CFE Racing

Prod., Inc. v. BMF Wheels, Inc., 793 F.3d 571, 596 (6th Cir.
2015)(“[L]oss of control over one's reputation is neither
calculable nor precisely compensable.” (internal citations and
quotation marks omitted)); see also Taylor v. Thomas, No. 2:122309-JPM-CGC, 2013 WL 12033168, at *6 (W.D. Tenn. Dec. 17,
2013)(quoting La Quinta Corp. v. Heartland Properties LLC, 603
F.3d 327, 343 (6th Cir. 2010)(finding plaintiff’s loss of
control of its service mark that led to the loss of value of
that mark and evidence of damages was sufficient to establish
ascertainable loss under the TCPA).
The complaint alleges that Defendants violated the TCPA
by:
a.
Causing
a
likelihood
of
confusion
or
misunderstanding as to the source, sponsorship,
approval, or certification of goods or services;
b.
Causing
a
likelihood
of
confusion
or
misunderstanding as to the affiliation, connection or
association between Sprint and Defendants;
c. Using deceptive representations in connection with
goods or services;
d.
Representing
their
goods
or
services
have
sponsorship, approval, uses, benefits, or quantities
that they do not have or that they have sponsorship,
35

approval, status, affiliation,
Sprint that they do not have;

or

e. Representing that the goods
authentic, new condition; and,

are

f. Representing that their goods
original,
authentic,
authorized
products when they are not.
(Compl., ECF No. 1 ¶ 217.)

connection
in

to

original,

or services are
Sprint
quality

The complaint sufficiently states a

deceptive act under the TCPA.
The complaint also alleges that “Defendants’ actions have
deprived Sprint of the means to control the quality of its
product and service. . . .”

(Id. ¶¶ 158, 176.)

That

deprivation, alone, is incapable of being fully quantified.
See Discover Bank, 363 S.W.3d at 495; see also Taylor, 2013 WL
12033168, at *6.

Plaintiffs have failed to establish an

ascertainable loss arising from Defendants’ deceptive acts.
Plaintiffs are not entitled to default judgment on this claim.
B. Remedies
Plaintiffs seek a permanent injunction, $1,561,081.77 in
trebled damages for its trademark infringement claims, and
punitive damages.

(ECF No. 47-1 at 498.)

1. Injunctive Relief
Plaintiffs seek a permanent injunction under the Lanham
Act and CFAA.

(Id.)

The Lanham Act gives courts the “power to

grant injunctions, according to the principles of equity and

36

upon such terms as the court may deem reasonable, to prevent
the violation of any right” protected under the Act.
§ 1116(a).

15 U.S.C.

CFAA provides that “[a]ny person who suffers damage

or loss by reason of a violation of [the Act] may maintain a
civil action against the violator to obtain . . . injunctive
relief or other equitable relief.”

See 18 U.S.C. § 1030(g).

“A plaintiff seeking a permanent injunction must
demonstrate that it has suffered irreparable injury, there is
no adequate remedy at law, that, considering the balance of
hardships between the plaintiff and defendant, a remedy in
equity is warranted, and that it is in the public's interest to
issue the injunction.”

Audi AG, 469 F.3d at 550 (internal

quotation marks omitted).

District courts “should limit the

scope of [an] injunction to the conduct which has been found to
have been pursued or is related to the proven unlawful
conduct.”

Howe v. City of Akron, 801 F.3d 718, 753 (6th Cir.

2015); see also CFE Racing Products, 793 F.3d at 595 (“Courts
must closely tailor injunctions to the harm that they address.”
(internal quotation marks omitted)).
First, Plaintiffs have established irreparable harm.

The

undisputed allegations in the complaint show that the
Defendants unlawfully acquire, unlock, and sell Sprint phones
outside the Sprint wireless network.

37

Plaintiffs allege that

they have suffered economic losses, dilution of the Sprint
marks, and harm to their business reputations and relationships
with retailers, dealers, and customers.

Calculating

reputational damage and lost sales is inherently difficult, if
not impossible, and therefore constitutes irreparable harm and
establishes the inadequacy of monetary damages.

See Tom

Doherty Assoc. v. Saban Entm't, Inc., 60 F.3d 27, 37–38 (2d
Cir. 1995) (noting that “a loss of prospective goodwill can
constitute irreparable harm”); see also Coxcom, Inc. v.
Chaffee, 536 F.3d 101, 112 (1st Cir. 2008) (granting permanent
injunction and finding irreparable harm based on the relative
inability to detect cable piracy and the magnitude of lost
programming revenues); DISH Network L.L.C. v. Whitcomb, No. 11CV-0333 W (RBB), 2011 WL 1559825, at *3 (S.D. Cal. Apr. 25,
2011) (concluding that lost profits and subscribers resulting
from the sale of DISH Network piracy devices constitutes
irreparable harm); Macrovision v. Sima Prods., Corp., No. 05
Civ. 5587 (RO), 2006 WL 1063284, at *3 (S.D.N.Y. Apr. 20, 2006)
(“If [the plaintiff] is unable to prevent the circumvention of
its technology, its business goodwill will likely be eroded,
and the damages flowing therefrom extremely difficult to
quantify.”).

38

Second, Plaintiffs have established that remedies
available at law are inadequate to compensate for their
injuries.

Absent permanent injunctive relief, Defendants could

continue to infringe under the Lanham Act or CFAA.
scheme is ongoing.

Defendants’

Their failure to appear suggests that their

wrongful conduct will not cease absent a permanent injunction.
There is no adequate remedy at law where there is a potential
future harm from infringement.

Audi AG, 469 F.3d at 550.

Third, the balance of hardships weighs strongly in
Plaintiffs’ favor.

Plaintiffs are threatened with irreparable

injury in the absence of a permanent injunction.

Injunctive

relief would merely serve to force Defendants’ compliance with
the law.

See Am. Auto. Ass'n v. AAA Recovery & Towing, LLC,

No. 3:15-CV-00211, 2017 WL 1207592, at *2 (E.D. Tenn. Mar. 31,
2017); Benko v. Clearing Sols., LLC, No. 1:16 CV 300, 2016 WL
1621972, at *1 (N.D. Ohio Apr. 21, 2016).
Fourth, Plaintiffs have demonstrated that injunctive
relief would serve the public interest.

An injunction

enjoining Defendants from using Sprint’s Marks would advance
the purposes of trademark law by preventing consumer confusion
and deception in the marketplace and by protecting Plaintiffs’
property interests in the Marks.

39

All four factors weigh in

favor of issuing permanent injunctive relief.

Plaintiffs are

entitled to a permanent injunction against Defendants.
Plaintiffs seek to permanently enjoin Defendants from the
following:
1. [A]cquiring, purchasing, selling, unlocking,
reflashing, altering, advertising, soliciting
and/or shipping, directly or indirectly, any
Sprint Phones or Products (including services);
2. [S]upplying Sprint Phones to or facilitating or in
any way assisting other persons or entities who
Defendants know or should know are engaged in the
purchase or sale of Sprint Phones or hacking,
altering, erasing, tampering with, deleting or
otherwise disabling the software installed in
Sprint Phones;
3. [E]ngaging in any of the conduct described in the
Complaint as the “Handset Theft and Trafficking
Scheme;”
4. [A]ccessing Sprint’s computer networks either
directly or through a Sprint representative,
customer and/or a third-party;
5. [C]ontacting Sprint Customer Service, Sprint
Telesales, and/or any other Sprint business,
division, service or customer assistance
departments, directly or indirectly, intentionally
or unintentionally, to obtain Sprint Phones and/or
Sprint Products and/or Sprint services and/or
Sprint customer information;
6. [C]ontacting Sprint or any of Sprint’s third party
vendors, including without limitation United
Parcel Service (UPS), directly or indirectly, for
the purpose of acquiring Sprint Products,
rerouting Sprint shipments, and/or obtaining or
attempting to obtain information about Sprint
shipments or their intended destinations;
7. [O]btaining or being in possession of any Sprint
Phones, Products (including services) or Sprint
customer information of any type;
8. [K]nowingly using the Sprint Marks or any other
trademark, service mark, trade name and/or trade
dress owned or used by Sprint now or in the
future, or that is likely to cause confusion with
40

Sprint’s Marks, without Sprint’s prior written
authorization;
9. [H]olding themselves out as being associated with,
employed by or on behalf of, or acting as an
agent, representative or authorized partner of
Sprint; and,
10. [S]upplying Sprint Products to or facilitating
or in any way assisting, aiding or cooperating
with other persons or entities who Defendants know
or should know are engaged in any of the acts
prohibited under this Permanent Injunction,
including, without limitation, the acquisition of
Sprint Phones or Products (including services) or
contacting any division, department, employee,
agent, or affiliate of Sprint for the purpose of
obtaining Sprint Phones and/or Sprint Products
and/or Sprint services and/or Sprint customer
account information.
(Proposed Order ¶ 9.)
Plaintiffs are entitled to permanent injunctive relief.
Given Defendants’ conduct, the scope of the proposed permanent
injunction is appropriate.

The injunction is enforceable

against Defendants Eddie D. Danley and Irvin Bryan Lafayette,
not against Defendants Emanuel Lafayette and Marcus S. Hall.
2. Damages
Under the Lanham Act, a prevailing plaintiff on a
trademark infringement “shall be entitled, . . . subject to the
principles of equity, to recover (1) defendant's profits, (2)
any damages sustained by the plaintiff, and (3) the costs of
the action.”

15 U.S.C. § 1117(a).

“The court shall assess

such profits and damages or cause the same to be assessed under
its direction.”

Id.

Plaintiffs seek an award of damages.
41

“The general proof and measure of damages in a
trademark action is governed by the law of damages of
tort actions.”
Broan Mfg. Co., Inc. v. Assoc.
Distrib., Inc., 923 F.2d 1232, 1235 (6th Cir. 1991).
“Under
general
tort
principles
.
.
.
the
infringer/tortfeasor is liable for all injuries
caused to plaintiff by the wrongful act, whether or
not actually anticipated or contemplated by the
defendant
when
it
performed
the
acts
of
infringement.” Id. (citation and internal quotation
marks omitted).
“[D]amages are not permitted which
are remote and speculative in nature.” Id. (citation
and internal quotation marks omitted).
“[I]n
trademark cases courts draw a sharp distinction
between proof of the fact of damage and proof of the
amount of damage.”
Id.
Thus, “[t]he plaintiff is
held to a lower standard of proof in ascertaining the
exact amount of damages,” and, “‘[o]nce the existence
of damages has been shown, all that an award . . .
requires is substantial evidence in the record to
permit a factfinder to draw reasonable inferences and
make a fair and reasonable assessment of the amount
of damages.’”
Chain, L.P. v. Tropodyne Corp., Nos.
99–6268/6269, 238 F.3d 421, 2000 WL 1888719, at *4
(6th Cir. Dec.20, 2000) (unpublished table decision)
(quoting Broan Mfg. Co., 923 F.2d at 1236).
La Quinta Corp., 603 F.3d at 342 (alternations in original).
Substantial evidence is “such relevant evidence as a reasonable
mind might accept as adequate to support a conclusion.”
Richardson v. Perales, 402 U.S. 389, 401 (1971) (additional
citation and internal quotation omitted).
Plaintiffs base their damages calculation on the
declaration of Clint Breithaupt, a Manager in the Fraud
Management Department of Sprint Corporation.

(ECF No. 47-2.)

Breithaupt represents that “Defendants acquired at least 1,320
new Sprint devices.”

(Id. ¶ 5.)

42

Breithaupt also represents

that “Defendants have fraudulently acquired and resold at least
646 smartphones, 423 feature phones, and 251 accessory
devices.”

(Id. ¶ 6.)

Breithaupt states that losses to Sprint

on the smartphones were $385,789.82, on the feature phones were
$94,684.45, and on the accessory devices were $39,886.32.
¶¶ 8-10.)

(Id.

Breithaupt does not explain his calculation or his

valuation of the phones and accessories.

He cites no evidence,

and there are no exhibits attached to his affidavit.

A

reasonable mind could not accept Breithaupt’s affidavit alone,
without explanation and evidence, to support Plaintiffs’
damages calculation adequately. 6
The basis for Plaintiffs’ damages is within their
knowledge and control.

To demonstrate a reasonable basis for

damages, Plaintiffs must submit detailed calculations with
supporting financial records or explanations.
should clearly state their methodology.

Plaintiffs

See Taylor v. Thomas,

624 F. App'x 322, 328 (6th Cir. 2015) (acknowledging lower
standard of proof as to damages amount and accepting evidence
proved at trial); see also Yah Kai World Wide Enterprises, Inc.
v. Napper, 292 F. Supp. 3d 337, 368 (D.D.C. 2018) (using tax

6

Plaintiffs seek treble damages under 15 U.S.C. § 1117. The Lanham
Act provides that a court may enter judgment “for any sum above the amount
found as actual damages, not exceeding three times such amount.” 15 U.S.C.
§ 1117(a). Without clarity as to Plaintiffs’ actual damages arising from
Defendants’ trademark infringement alone, the Court cannot calculate treble
damages or determine the propriety of that enhancement.

43

returns to calculate lost profits).

Plaintiffs must file

support for their damages not later than July 6, 2018.
Plaintiffs also seek punitive damages under Tennessee law.
To recover punitive damages in Tennessee, Plaintiffs must show
by clear and convincing evidence that Defendants acted
intentionally, fraudulently, maliciously, or recklessly.
Hodges v. S.C. Toof & Co., 833 S.W.2d 896, 901 (Tenn. 1992);
see also Rogers v. Louisville Land Co., 367 S.W.3d 196, 211
n.14 (Tenn. 2012) (noting that an award of punitive damages is
limited to “the most egregious cases” and is proper only where
there is clear and convincing proof that the defendant has
acted either “intentionally, fraudulently, maliciously, or
recklessly” under Hodges).

A default judgment is not itself

clear and convincing evidence.
462 (6th Cir. 2001).

See March v. Levine, 249 F.3d

A default judgment, however, “impliedly

constitutes an admission of all the properly pleaded material
allegations of fact contained in the complaint, except the
plaintiff's unliquidated damages.”

Discover Bank, 363 S.W.3d

at 495.
A person acts intentionally when it is the
person’s conscious objective or desire to engage in
the conduct or cause the result. Cf. T.C.A. § 39–11–
302(a) (1991) (criminal definition of “intentional”).
A person acts fraudulently when (1) the person
intentionally misrepresents an existing, material
fact or produces a false impression, in order to
mislead another or to obtain an undue advantage, and
44

(2) another is injured because of reasonable reliance
upon that representation.
See First Nat’l Bank v.
Brooks Farms, 821 S.W.2d 925, 927 (Tenn. 1991).
A
person acts maliciously when the person is motivated
by ill will, hatred, or personal spite.
A person
acts recklessly when the person is aware of, but
consciously
disregards,
a
substantial
and
unjustifiable risk of such a nature that its
disregard constitutes a gross deviation from the
standard of care that an ordinary person would
exercise under all the circumstances.
Cf. T.C.A. §
39–11–302(c)
(1991)
(criminal
definition
of
“reckless”).
Hodges, 833 S.W.2d at 901.
The complaint alleges that Defendants fraudulently acquire
Sprint phones and sell them to be used on other wireless
carriers’ networks.

(Compl., ECF No. 1 ¶ 34.)

The complaint

alleges that Defendants secure the Sprint phones by
masquerading as legitimate Sprint customers or employees.
id. ¶¶ 37-41.)

(See

Defendants make thousands of calls to Sprint to

obtain access to employee or customer accounts.

(Id. ¶ 45.)

Defendants devise methods of securing the devices through a
network of individuals.

(Id. ¶¶ 42, 48.)

The devices are then

dropped off and processed for resale by Defendants.
50-54.)

(Id. ¶¶

Those allegations are admitted by Defendants.

See

Discover Bank, 363 S.W.3d at 495.
The admitted allegations are sufficient to show by clear
and convincing evidence that Defendants acted intentionally,
fraudulently, and recklessly.

Plaintiffs are entitled to

45

punitive damages.

Their request for punitive damages is

GRANTED.
V.

Conclusion
For the foregoing reasons, Sprint’s motion for default

judgment is GRANTED in part and DENIED in part.

So ordered this 22nd day of June, 2018.
/s/ Samuel H. Mays. Jr.
SAMUEL H. MAYS, JR.
UNITED STATES DISTRICT COURT JUDGE

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