Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—W.D. Wash.: Former MetroPCS dealer enjoined from violating non-compete clause, (Jun 25, 2015)

By Jody Coultas, J.D.

MetroPCS Pennsylvania, LLC was granted an injunction to bar a telephone dealer from violating the non-compete and non-solicitation terms of a dealer agreement between the parties by the federal district court in Seattle (MetroPCS Pennsylvania, LLC v. Arrak, June 24,2015, Robart, J.).

MetroPCS is a wireless telephone carrier that focuses on offering pay-in-advance or “prepaid” plans and relies on its dealers to market and sell its products and provide service to its customers. City Wireless, Inc., in a dealer agreement with MetroPCS, agreed not to solicit or divert MetroPCS customers during the term of the Dealer Agreement and for six months after its termination and agreed not to compete with MetroPCS within a two-mile radius of CWI’s MetroPCS storefronts during the same period.

After CWI breached the dealer agreement, MetroPCS terminated the agreement. However, MetroPCS learned that one of CWI’s former MetroPCS stores “was still open” and “selling competing wireless . . . services for Boost Mobile,” a competitor of MetroPCS. MetroPCS sought injunctive relief to enforce the non-compete and non-solicitations clauses.

MetroPCS was likely to show that the non-compete and non-solicitation provisions were enforceable and violated by CWI, according to the court. Both provisions operated for only six months after termination of the agreement, and the non-compete provision operated only within a two-mile radius of CWI’s former MetroPCS storefronts. The restrictions were reasonably necessary to maintain MetroPCS’s customer base and preventing appropriation of and damage to its goodwill.

The court found it was likely MetroPCS would suffer irreparable harm absent an injunction. The nature of the prepaid cell phone business made MetroPCS vulnerable to losing customers after its relationship with a dealer ends. CWI was likely exploiting that vulnerability by offering competing products and services at their former MetroPCS storefront.

Balancing the equities and public interest, the court found an injunction was warranted. MetroPCS demonstrated that was at risk of losing customers and sustaining damage to its goodwill absent an injunction, while an injunction threatens CWI only with the inability to compete with MetroPCS within a small area for a few months.

The case is No. C15-0769JLR.

Attorneys: Timothy Michael Moran (Kipling Law Group PLLC) for MetroPCS Pennsylvania, LLC.

Companies: MetroPCS Pennsylvania, LLC; City Wireless, Inc.

Cases: FranchisingDistribution WashingtonNews