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Entertainment USA, Inc. v. Moorehead Communications, Inc.

United States Court of Appeals, Seventh Circuit

July 26, 2018

Entertainment USA, Inc., Plaintiff-Appellant,
Moorehead Communications, Inc., Defendant-Appellee.

          Argued February 21, 2018

          Appeal from the United States District Court for the Northern District of Indiana, Fort Wayne Division. No. 12-CV-116 - Robert L. Miller, Jr., Judge.

          Before Ripple, Kanne, and Hamilton, Circuit Judges.

          Hamilton, Circuit Judge.

         In 2006, plaintiff Entertainment USA sold cellular telephones and service contracts in central Pennsylvania through a network of retail dealers. Defendant Moorehead Communications, an Indiana company, sought to break into that geographic market by offering dealers the chance to sell Verizon products and services. Without aid of counsel, the two companies signed a two-page "referral agreement" connecting Moorehead with a number of Entertainment USA's dealers. The agreement promised Entertainment USA a "referral fee" for every Verizon activation or upgrade that resulted.

         Six years later, this referral agreement became the subject of litigation in the Northern District of Indiana. Entertainment USA alleged that Moorehead breached the agreement by discontinuing the referral payments. After a bench trial, the district court agreed that Moorehead had breached, but in much narrower ways than Entertainment USA had claimed. The court also found, however, that Entertainment USA had failed to prove the amount of its damages with reasonable certainty. The court therefore awarded no damages to Entertainment USA. Entertainment USA, Inc. v. Moorehead Communications, Inc., 2017 WL 3432319 (N.D. Ind. Aug. 9, 2017). We affirm.

         I. Factual Background and Procedural History

         A. The Referral Agreement

         This case is about selling cell phones. More specifically, it is about who sells cell phones. When a customer walks into a cellular telephone retail store, depending on the store, the customer may have a choice of wireless carrier service contracts with different companies (e.g., AT&T, T-Mobile, etc.), or the store may offer only one option (e.g., only Verizon or only Sprint). Whether the customer has a choice of carrier or not depends on the licensing status of the store owner and its wholesaler, and the licensing policies of the various carriers.

         In 2006, plaintiff Entertainment USA-doing business as One Wireless World or "OWW," as the parties' documents sometimes called it-operated as a cell phone wholesaler and licensor. It had a network of affiliated dealers and retail stores in central Pennsylvania.[1] At that time, the stores affiliated with Entertainment USA offered their customers service contracts through several different carriers, including AT&T, Sprint, and T-Mobile. Entertainment USA did not have a relationship with Ver i z o n, however, so its stores could not offer customers Verizon service. Around this time, defendant Moorehead Communications, a Verizon master agent based in Indiana, sought to expand its presence in central Pennsylvania by signing up dealers and their stores with Verizon.

         Entertainment USA had the kind of stores Moorehead sought to do business with, but Entertainment USA would probably lose out on some revenue from offering service through other carriers if its stores added Verizon to its lineup. So the parties made a deal: the referral agreement whereby Entertainment USA agreed to refer some of its stores to Moorehead for consideration as potential new Verizon locations. In return, Moorehead agreed to pay Entertainment USA a "referral bonus" for each new Verizon activation that eventually resulted from this arrangement, whether or not the referred stores continued to offer service with other carriers. Representatives for both sides worked together to draft a two- page contract formalizing this arrangement in January 2006, though neither side engaged counsel. The relevant portions of the referral agreement are as follows:

         The proposed referral fee is designed to compensate OWW for location handoffs and offset loss incurred from adding another carrier to their Branded Store's existing lineup. This will also include any locations, other than the current list of Branded stores that are approved through Verizon and signed up under Moorehead Communications in the future that are referred directly to us by the OWW group.

         Moorehead is proposing the follo wing:

-For all handoffs / referrals from OWW, dating back to Jan 1, 2006 and any locations that are approved following that date as a direct result of an OWW referral, we will pay a referral bonus in the amount described below.
Monthly Activations for the referred group
*** 20$ per activation (New Activations Only) to assist with ramp up period which will remain in effect 6 months from the date this agreement is signed by both parties. After which, referral bonus will be adjusted to the appropriate tier. (See Below)
50-150 per month - 10$ referral bonus per activation
151-250 per month - 15$ referral bonus per activation
251-350 per month - 20$ referral bonus per ...

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