Cellphone minute reseller can sue other resellers, not intermediary

Platinumtel Communications, LLC v. Zefcom, LLC, 2008 WL 5423606 (N.D. Ill.)

Plaintiff Platinumtel and defendants EZ Stream and U.S. Mobile sell cellphones and prepaid wireless services to consumers in Chicago. Platinumtel purchases minutes directly from Sprint PCS, while EZ Stream and U.S. Mobile purchase minutes from defendant Telispire, which acquires them from Sprint and gives the other defendants the necessary technological support. Platinumtel alleged that EZ Stream and U.S. Mobile, with Telispire’s knowledge and assistance, “misrepresent the connection fee charged for calls made on their prepaid wireless plans and arbitrarily deduct additional minutes from their customers’ accounts,” so that they advertise but do not deliver below-market rates, in violation of the Lanham Act and state law. Platinumtel’s affidavits recite some pretty persuasive evidence of actual minute charges that contradict defendants’ advertised charges. (Price is supposed to be easily verifiable, but not when it comes to services!)

Telispire moved for dismissal on standing grounds. The Seventh Circuit hasn’t ruled on the Conte Bros. standing test, though some district courts have required direct competition between the parties. Even if Conte Bros. were Seventh Circuit law, the court ruled, Telispire’s involvement in the harm here is too remote, indirect, and speculative to satisfy the standing test.

Telispire also argued that it hadn’t made any false statements, but the issue here is joint tortfeasor liability—whether Telispire is liable for other defendants’ false statements. (This would seem to make standing somewhat beside the point; if the requirements of joint liability were satisfied, then the lack of direct competition shouldn’t matter.)

However, in this case, Platinumtel failed to allege a sufficient theory of joint liability, which would require knowing that another’s conduct constituted a breach of duty and giving substantial assistance or encouragement for the breach. Although Telispire was responsible for the technology that allows the other defendants to set rates, coordinate billing, prepare call detail reports and deduct minutes from customer accounts, that doesn’t make it aware of the false advertising. Even though Platinumtel told Telispire about the arbitrary billing, it failed to allege that it made Telispire aware of the content of the other defendants’ ads. Moreover, the court held that simply providing the technological platform for the allegedly distorted billing did not count as “substantial assistance.” (Compare to copyright cases.) The state law claims, governed by the same standards, also failed against Telispire.

The court held that Platinumtel had pled false advertising sufficiently against the other defendants. By identifying the types of ad materials, the persons to whom the misrepresentations were made (the investigators it used), the date, and the context (in connection with the purchase of specific phones), Platinumtel successfully described the who, what, when, where and how as required by Rule 9(b).