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T-Mobile USA, Inc. v. Chong

United States District Court, W.D. Washington, Seattle

April 4, 2014

T-MOBILE USA, INC., Plaintiff,
v.
ANDREW CHONG, Defendant.

ORDER

RICHARD A. JONES, District Judge.

I. INTRODUCTION

This matter comes before the court on Plaintiff's second motion for default judgment. Dkt. #20. For the reasons stated below, the court GRANTS the motion in part and DENIES it in part. This order includes a permanent injunction that will apply to Defendant Andrew Chong once he is served with this order. The court directs the clerk to enter judgment in accordance with this order. The court dismisses without prejudice all of T-Mobile's claims on which it does not enter judgment.

II. BACKGROUND

Plaintiff T-Mobile USA, Inc. ("T-Mobile") brought this action after discovering that Andrew Chong[1] sells T-Mobile branded cellular phones and "SIM cards." Mr. Chong does not have T-Mobile's permission to resell any T-Mobile products. T-Mobile sued not only to stop him from reselling T-Mobile products, but to recover damages it sustained as a result of his past sales.

Mr. Chong has never appeared in this action or indicated an intent to defend himself. T-Mobile has already attempted to obtain a default judgment and permanent injunction, but in a July 11, 2013 order, the court declined to award any relief. Dkt. #17.

T-Mobile has now renewed its motion, although it has substantially narrowed the scope of the default judgment it seeks. It seeks judgment only as to four of the fourteen causes of action it attempted to state in its complaint. It asks for judgment on its claim for breach of the "T-Mobile Terms and Conditions, " the 10-page service contract (hereinafter "T-Mobile Contract") that binds those who activate its cellular phones. It also asks for judgment on its claim that Mr. Chong's resales violate the prohibition on false designation of the origin of goods found in a portion of the Lanham Act. 15 U.S.C. ยง 1125(a). It also asks for judgment on its claims for violation of Washington's Consumer Protection Act and Washington's common law of unfair competition, although it concedes that these claims are wholly derivative of its Lanham Act claim.

As explained below, the court concludes that T-Mobile is entitled to default judgment solely as to its breach of contract claim. Because T-Mobile has not provided adequate evidence or allegations of damages arising from Mr. Chong's breaches of the T-Mobile Contract, the court will award only nominal damages. This order includes a permanent injunction prohibiting Mr. Chong from further breaches of the T-Mobile Contract.

III. ANALYSIS

The court's role in reviewing a motion for default judgment is not ministerial. It must accept all well-pleaded allegations of the complaint as fact, except facts related to the amount of damages. TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987). Where those facts establish a defendant's liability, the court has discretion, not an obligation, to enter a default judgment. Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980); Alan Neuman Productions, Inc. v. Albright, 862 F.2d 1388, 1392 (9th Cir. 1988). The plaintiff must submit evidence supporting a claim for a particular sum of damages. TeleVideo Sys., 826 F.2d at 917-18; see also Fed.R.Civ.P. 55(b)(2)(B). If the plaintiff cannot prove that the sum it seeks is "a liquidated sum or capable of mathematical calculation, " the court must hold a hearing or otherwise ensure that the damage award is appropriate. Davis v. Fendler, 650 F.2d 1154, 1161 (9th Cir. 1981).

Before considering T-Mobile's claims against Mr. Chong, it recounts Mr. Chong's wrongdoing, relying solely on the allegations of T-Mobile's complaint.

Mr. Chong traffics in T-Mobile's prepaid cellular phones. As the terminology suggests, customers who buy these phones prepay T-Mobile for minutes of cellular airtime. Although the customer also pays a monthly fee to use a prepaid phone, he or she is not obligated to continue paying such fees.

T-Mobile sells phones to prepaid customers only at authorized retailers. All of those phones contain SIM cards, which apparently store information, including information about airtime, that enable T-Mobile to control its prepaid services. T-Mobile subsidizes the sale of its phones by selling them at a retail price below their cost, with the hope that the customers who purchase the phones will eventually make T-Mobile's subsidy profitable by purchasing additional months of service and additional airtime. As an additional inducement to purchase, the subsidized phones often (or perhaps always) come with SIM cards that are pre-loaded with an allotment of airtime minutes. In order to use the SIM cards, customers must "activate" their phones. Often, this process takes place with the assistance of the authorized retailer who sells the phone. Sometimes, customers activate their phones through a T-Mobile website by using activation codes that are packaged along with the phones.

Mr. Chong subverts T-Mobile's expectations in two ways. First, he and "runners" acting at his direction buy prepaid T-Mobile phones. Although the complaint does not explain how, it appears they are able to do so without activating the phones through the authorized retailers from whom they buy them. Mr. Chong then sells the phones to customers both overseas and domestically. To do so, he "unlocks" the phone, which is to say that he disables or modifies software or hardware embedded in the phones that is designed to ensure that the phones are ...


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