LHR, Inc. v. T-Mobile USA, Inc.

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This case arose when SunCom Wireless (later acquired by T-Mobile) breached a purchase agreement with LHR, Inc. The appellate division modified the supreme court’s order below and affirmed the otherwise modified order.

From 2005-2008 defendant SunCom Wireless entered into six purchase agreements with plaintiff LHR, Inc. Each contract involved the sale of delinquent customer accounts. Four of the six agreements involved a single debt portfolio. However, the other two contained “forward flow” agreements. These forward flow agreements provided for the transfer of debt portfolios on a continual, monthly basis. Each purchase agreement contained an indemnification clause which limited Defendant’s total liability to $200,000. In 2008, SunCom became a subsidiary of T-Mobile USA, Inc. (T-Mobile), which breached all six purchase agreements.

Plaintiff sued T-Mobile for negligently failing to preserve documents, intentional interference with contract, and conversion. The Fourth Department, on a prior appeal, dismissed the negligence claim. Afterward, Defendants moved to limit damages to $1.2 million, or $200,000 for each of the six breached purchase agreements. Defendants also moved to dismiss Plaintiff’s intentional interference and conversion claims. The supreme court granted Defendants’ motions to dismiss the intentional interference claim and to limit damages to $1.2 million for all six contracts, but refused to dismiss the conversion claim. Both parties appealed the lower court’s ruling.

The appellate division upheld the ruling that the indemnity clauses applied to this action. The language of the indemnity clauses was unambiguous and worded to encompass first-party claims like the one between the parties. The Fourth Department upheld the clauses even though the result might be unfair and economically unreasonable. However, it ruled that there was an issue of fact as to whether the $200,000 damages applied to each of the twenty-eight monthly forward flow transactions that arose under the purchase agreements. The court ruled that each of the forward flow agreements could be subject to the indemnification clause. Therefore, it remanded the issue for a trier of fact to resolve.

The court also upheld the lower court’s dismissal of Plaintiff’s tortious interference with contract claim. As T-Mobile was SunCom’s successor-in-interest to the contracts, it could not be liable for interference. In addition, the court reversed the lower court’s denial of Defendants’ motion for partial summary judgment on the conversion claim. It reasoned that a plaintiff cannot recover for conversion when the defendant merely breached a contract. Since Plaintiff failed to show that Defendants did anything beyond breaching the purchase agreements, the court dismissed the case.

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977 N.Y.S.2d 816 (2013)

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