T-Mobile is plausibly liable for acts of explicitly authorized dealers

City of New York v. T-Mobile USA, Inc., 2020 WL 1498522, No. 451540/2019 (Sup. Ct. N.Y. Mar. 23, 2020)

The City of New York and the New York City Department of Consumer Affairs (DCA) sued T-Mobile, its subsidiary MetroPCS New York, and 42 dealers, alleging violations of the Consumer Protection Law and regulations. The court refused to dismiss the action against T-Mobile and MetroPCS.

T-Mobile allegedly deceptively targeted lower income consumers under its “lower-priced prepaid (no contract) wireless brand” Metro by T-Mobile, formerly known as MetroPCS. The allegedly deceptive practices included “selling used phones as though they were new”; “deceiving consumers about financing”; “overcharging consumers”; “providing defective receipts”; “failing to provide a receipt”; and “making deceptive representations about the Metro by T-Mobile refund policy.” (NYC rules provide that receipts must be offered for any consumer purchase over $20, and must be provided on request for $5-20 purchases.)

T-Mobile argued that it couldn’t be held liable for the alleged unlawful conduct by independent dealers because T-Mobile has no contract with those dealers giving them actual authority to act on behalf of T-Mobile, and the facts didn’t support a theory of apparent authority. DCA sought to hold T-Mobile liable for two types of deception: (1) its “30-Day Guarantee” was, in fact, only a limited 7-day return policy with several conditions; and (2) the “Virtual Chat Assistant” on the T-Mobile website (which was obviously T-Mobile’s responsibility) failed to fully and correctly disclose the return policy. First, DCA sufficiently alleged that T-Mobile was liable for deceptive acts by the Corporate Stores run directly by T-Mobile’s subsidiary MetroPCS because those stores create the impression of agency based on the relationship between the parties. And at a minimum, the pleadings created a factual question whether T-Mobile is liable under the apparent authority doctrine for the conduct of the dealers who were labeled “authorized” not only in their signs but on the website and via conduct in the stores.

DCA also alleged deception by MetroPCS in its stores: selling used phones as if new; financing terms that double the cost of the phone; overcharges via improper taxes and activation payments; failure to provide receipts; and defective receipts. MetroPCS apparently accepted responsibility for Corporate Stores, and it acknowledged that it executed Indirect Dealer Agreements giving dealers actual authority to act on behalf of MetroPCS, but it argued that their limited actual authority didn’t extend to wrongful conduct. But that couldn’t be resolved at the pleading stage: MetroPCD didn’t show as a matter of law that the dealers were at all times “acting antagonistically” to the interests of MetroPCS.