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Entertainment USA Inc. v. Cellular Connection LLC

United States District Court, N.D. Indiana, Fort Wayne Division

May 16, 2019

ENTERTAINMENT USA, INC., Plaintiff,
v.
THE CELLULAR CONNECTION, LLC f/k/a MOOREHEAD COMMUNICATIONS, INC., Defendant.

          OPINION AND ORDER

          HOLLY A. BRADY JUDGE

         The Defendant, The Cellular Connection, LLC f/k/a Moorehead Communications, Inc. (Moorehead), has moved to dismiss the Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) on res judicata grounds. Moorehead argues that the litigation repeats allegations that the Plaintiff, Entertaining USA, Inc. d/b/a One Wireless World (OWW)[1] filed against Moorehead in 2012, which were resolved in favor of Moorehead and affirmed on appeal.

         For the reasons stated in this Opinion and Order, the Court will deny Moorehead's Motion to Dismiss [ECF No. 7].

         BACKGROUND AND COMPLAINT ALLEGATIONS

         OWW operated as a cell phone wholesaler and licensor. It had a network of affiliated dealers and retail stores in central Pennsylvania. OWW was a wholesaler for ATT/Cingular and Sprint/Nextel, later focusing exclusively on Sprint Nextel.

         Moorehead is a Verizon master agent based out of Indiana. Moorehead wanted to expand its presence in central Pennsylvania. Partnering with OWW could accomplish this goal, but if OWW added Verizon to its offerings, OWW might lose revenue to be gained from offering services through other carriers. In 2006, the parties entered into a “referral agreement” (the Agreement) intended to memorialize their understanding that OWW would refer some of its stores to Moorehead as potential Verizon stores. In return, Moorehead agreed to pay OWW a “referral bonus” for each new Verizon activation that resulted, regardless of whether the referred stores continued to offer service with other carriers.

         A. The 2012 Litigation

         In 2012, OWW sued Moorehead in federal district court, alleging that it breached the Agreement by discontinuing payments in 2008. OWW also requested an equitable accounting, and claimed that Moorehead had been unjustly enriched. The terms of the contract were litigated and decided through partial summary judgment and a bench trial.

         Although the findings on liability could have entitled OWW to recovery, OWW failed to prove its damages with any certainty, as was required by Indiana law. “[OWW] hasn't proved that it was paid any less than it should have been. This record doesn't support a damages award in any amount.” Entm't USA, Inc. v. Moorehead Commc'ns, Inc., No. 1:12-CV-116 RLM, 2017 WL 3432319, at *16 (N.D. Ind. Aug. 9, 2017). Because the plaintiff failed to prove its damages with any certainty, despite the full use of the discovery process, the district court also denied an equitable accounting. Id. at *17. As a result, the district court ruled that “Entertainment USA, Inc. . . . shall take nothing by its complaint.” Id.

         On appeal, the Seventh Circuit focused on the damages issue as a dispositive one that was “sufficient to decide virtually all of this appeal.” Entm't USA, Inc. v. Moorehead Commc'ns, Inc., 897 F.3d 786, 792 (7th Cir. 2018). It concluded that, “[r]egardless of the scope of potential liability under the referral agreement, Entertainment USA did not show the district court that it was entitled to any recovery.” Id. at 795. Because OWW had not proven its damages with reasonable certainty, despite “equal means of knowledge” through discovery, it was not entitled to the equitable remedy of an accounting as a “second attempt at proving its damages.” Id. at 796. The Seventh Circuit added the following footnote:

At oral argument we raised the possibility that under the district court's duration analysis-that the referral agreement remained in force “as long as any referred location was producing activations, ” 2017 WL 3432319, at *6-Moorehead may have had an ongoing post-trial duty to pay referral fees in 2016 and beyond that an equitable accounting would reveal. Entertainment USA did not fail to “make the substantive argument” on this point in either the district court or on appeal, so the argument has not been forfeited. See Dixon v. ATI Ladish LLC, 667 F.3d 891, 895 (7th Cir. 2012), citing Elder v. Holloway, 510 U.S. 510 (1994), and FDIC v. Wright, 942 F.2d 1089, 1094-95 (7th Cir. 1991). However, given that an equitable accounting is a remedy left to the sound discretion of the trial court in the first instance, and given that Entertainment USA did not ask the district court to clarify the prospective implications of its ruling, we decline to reach that issue here. We do not express an opinion on this question beyond observing that the general rule in Indiana is that “a contract containing no specific termination date is terminable at will.” See City of East Chicago, Ind. v. East Chicago Second Century, Inc., 908 N.E.2d 611, 623 (Ind. 2009), citing House of Crane, Inc. v. H. Fendrich, Inc., 256 N.E.2d 578 (1970).

Id. at 796 n.5 (parallel citations omitted).

         B. The Current Litigation

         On October 4, 2018, Entertainment USA, Inc., which does business as OWW, filed a Complaint against The Cellular Connection, LLC f/k/a Moorehead Communications, Inc. The Complaint sets forth the same General Allegations contained in the 2012 complaint. Additionally, the Complaint recites findings the district court made in the 2012 Litigation, including the finding that the parties intended the Agreement to live on as long as any referred location was producing activations. The Complaint identifies four locations that OWW referred to Moorehead and alleges that, following the trial in the 2012 litigation, these four “Referred Locations were open and producing activations and upgrades” that warranted payment of a referral fee. (Compl., ¶ 16.) According to the Complaint, “[d]espite multiple ...


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