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AW ACQUISITION v. SOUTHWESTERN BELL MOBILE SYSTEMS

January 6, 2005.

AW ACQUISITION CORP., an Illinois Corporation, Plaintiff,
v.
SOUTHWESTERN BELL MOBILE SYSTEMS, LLC, d/b/a CINGULAR WIRELESS, Defendant.



The opinion of the court was delivered by: WAYNE ANDERSEN, District Judge

MEMORANDUM OPINION AND ORDER

This case is before the Court on the Defendant Southwestern Bell Mobile Systems, LLC, d/b/a Cingular Wireless' Motion to Dismiss Counts II, III, and V of the Plaintiff's First Amended Complaint pursuant to FED. R. CIV. P. 9(b) and 12(b)(6). The jurisdiction of this Court is based upon 28 U.S.C. ยง 1332 because the parties are citizens of different states and the amount in controversy exceeds the statutory minimum of $75,000, exclusive of interest and costs. For the following reasons, the Court grants the Defendant's motion in part and denies it in part.

BACKGROUND

  I. The Agreement

  On or about October 1, 1997, Areawide Cellular, Inc. and the Defendant's predecessor, Southwestern Bell Mobile Systems, Inc. d/b/a Cellular One (hereinafter the named Defendant, Southwestern Bell Mobile Systems, LLC d/b/a Cingular Wireless, and Southwestern Bell Mobile Systems, Inc. d/b/a Cellular One are collectively referred to as "Cingular"), entered into an "Authorized Sale and Service Agreement" ("Agreement") whereby Areawide Cellular, Inc. became a licensed sales and service dealer of Cingular wireless services. The parties subsequently amended the Agreement on or around October 20, 1997, which altered the original payment structure. The parties operated under the Agreement until April 7, 2003, when Areawide Cellular, Inc. filed for bankruptcy protection. Thereafter, AW Acquisition Corp. purchased the assets of Areawide Cellular, Inc. (hereinafter Areawide Cellular, Inc. and AW Acquisition Corp. are collectively referred to as "Areawide").

  Pursuant to the Agreement, Areawide became a nonexclusive, authorized agent of Cingular to sell Cingular services. In particular, Section 3 of the Agreement, which lays out the parameters of the parties' relationship, states in relevant part:
[Cingular] hereby appoints [Areawide] as a nonexclusive, authorized agent in the Area to solicit and contract, on behalf of [Cingular], with Subscribers for the Authorized Services, subject to all of the terms and conditions hereof.
During the term of this Agreement or thereafter, [Cingular] reserves the right without obligation or liability to [Areawide] to market the Authorized Services and CPE in the same geographical areas served by [Areawide], whether through [Cingular's] own representatives or through others, including, but not limited to other authorized agents, retailers, resellers and distributors.
Upon enrollment of a particular Subscriber, that Subscriber shall become a customer of [Cingular] and [Cingular] shall offer and furnish such customer billing services as [Cingular] deems appropriate. [Cingular] shall be responsible to collect any charges for Authorized Services from Subscribers.
Furthermore, Section 1 of the Agreement sets forth the following pertinent definitions:
Authorized Services. Those Services provided by [Cingular] that [Areawide] is authorized hereunder to sell on behalf of [Cingular], including CRS and any other Services set forth on Exhibit A hereto. Cellular Radio Services (CRS). Any and all service (including resale of said service) authorized by the Federal Communications Commissions . . .
CPE. The customer premise equipment, including cellular terminal equipment, that a Subscriber needs for using CRS and other Authorized Services.
Subscriber. A customer of an Authorized Service provided by [Cingular]. The CRS telephone number or other service access number assigned to a customer of [Cingular's] Authorized Services is deemed to be a separate Subscriber, regardless of how many CRS telephone numbers or service access numbers may be used by one customer.
Accordingly, Areawide agreed to act as Cingular's agent with respect to the sale of Authorized Services to Subscribers (this opinion hereinafter refers to the customers to whom Areawide sold the Cingular Authorized Services as "Areawide-originated Subscribers").

  In consideration of Areawide's sales efforts, Cingular agreed to compensate Areawide under a series of tiered commissions. The amendment to the Agreement explicitly sets forth the structure of payment, but it shall suffice for the purposes of this opinion to note that Areawide was to receive set commissions based upon each activated Areawide-originated Subscriber and the type of Authorized Services provided to that subscriber. Furthermore, Areawide was to receive monthly residual commissions that were, generally speaking, equal to five percent of the total recurring base charges and local airtime charges billed by Cingular to Areawide-originated Subscribers.

  II. Allegations Regarding Cingular's Conduct

  Areawide avers that on numerous occasions, Cingular directly contacted Areawide-originated Subscribers and encouraged those subscribers to end their relationship with Areawide. Furthermore, Areawide alleges that Cingular offered to ship cellular telephones directly to Areawide-originated Subscribers in an effort to induce them to leave Areawide. According to the complaint, Cingular also attempted to establish a new relationship with the Areawide-originated Subscribers through its own internal channels of distribution.

  In addition, the complaint claims that beginning in 1998, and continuing throughout the duration of the Agreement, four specific Cingular employees falsely represented that Cingular was selling equipment to Areawide "at cost" and Areawide had access to the same level of pricing and equipment discounts as Cingular's internal channels of distribution. Moreover, Areawide alleges these Cingular personnel falsely represented that residual commissions paid to Areawide would not be affected when Cingular sold a replacement phone directly to an Areawide-originated customer. As set forth in the complaint, the above-mentioned Cingular employees made these representations to Areawide either in person or over the telephone.

  Areawide further asserts that the Cingular employees knew at the time that the representations were false and were intended to prevent Areawide from purchasing cellular equipment from other providers at a lower cost and to conceal the fact that Cingular was withholding residual commissions due to Areawide. Based upon the purportedly false representations, Areawide claims that it continued to purchase equipment from Cingular and refrained from purchasing equipment from other sources at lower rates. Moreover, Areawide asserts that Cingular's allegedly false representations induced it to refrain from pursuing potential claims for residual commissions. This reliance was reasonable and justified, according to Areawide, because Cingular was in a superior position of knowledge with respect to its own pricing and residual policies. III. The Counts

  Cingular now asks this Court to dismiss Counts II, III, and V. The disputed counts are summarized as follows: Count II alleges that Cingular, by contacting Areawide-originated Subscribers, breached the duty of good faith and fair dealing that is implied in the parties' Agreement; Count III raises allegations of common law fraud; and Count V alleges tortious interference with a prospective economic advantage. At this point in the litigation, Cingular does not seek the dismissal of Count I (breach of contract for failure to pay commissions purportedly owed to Areawide); Count IV (violation of the Illinois Franchise Disclosure Act); or Count VI (defamation).

  DISCUSSION

  When deciding a motion to dismiss, this Court accepts as true all "well-pleaded factual allegations and view[s] them, along with the reasonable inferences to be drawn from them, in the light most favorable to [the plaintiff]." Cornfield v. Consolidated High School Dist. No. 230, 991 F.2d 1316, 1324 (7th Cir. 1993). Moreover, under the federal notice pleading standards, a complaint does not fail to state a claim simply because it does not set forth a complete and convincing picture of the purported wrongdoing. American Nurses' Association v. State of Illinois, 783 F.2d 716, 727 (7th Cir. 1986). At the same time, this Court is not bound by the legal characterizations that the plaintiff assigns to the alleged facts. Republic Steel Corp. v. Pennsylvania Engineering Corp., 785 F.2d 174, 183 (7th Cir. 1986); Prudential Insurance Co. of America v. Sipula, 776 F.2d 157, 159 (7th Cir. 1985). Furthermore, ...


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