T-Mobile is plausibly liable for acts of explicitly authorized dealers

City of New York v. T-Mobile
USA, Inc., 2020 WL 1498522, No. 451540/2019 (Sup. Ct. N.Y. Mar. 23, 2020)
The City of New York
and the New York City Department of Consumer Affairs (DCA) sued T-Mobile, its subsidiary
MetroPCS New York, and 42 dealers, alleging violations of the Consumer
Protection Law and regulations. The court refused to dismiss the action against
T-Mobile and MetroPCS.
T-Mobile allegedly deceptively
targeted lower income consumers under its “lower-priced prepaid (no contract)
wireless brand” Metro by T-Mobile, formerly known as MetroPCS. The allegedly
deceptive practices included “selling used phones as though they were new”; “deceiving
consumers about financing”; “overcharging consumers”; “providing defective
receipts”; “failing to provide a receipt”; and “making deceptive
representations about the Metro by T-Mobile refund policy.” (NYC rules provide
that receipts must be offered for any consumer purchase over $20, and must be
provided on request for $5-20 purchases.)
T-Mobile argued that
it couldn’t be held liable for the alleged unlawful conduct by independent
dealers because T-Mobile has no contract with those dealers giving them actual
authority to act on behalf of T-Mobile, and the facts didn’t support a theory
of apparent authority. DCA sought to hold T-Mobile liable for two types of
deception: (1) its “30-Day Guarantee” was, in fact, only a limited 7-day return
policy with several conditions; and (2) the “Virtual Chat Assistant” on the
T-Mobile website (which was obviously T-Mobile’s responsibility) failed to
fully and correctly disclose the return policy. First, DCA sufficiently alleged
that T-Mobile was liable for deceptive acts by the Corporate Stores run
directly by T-Mobile’s subsidiary MetroPCS because those stores create the
impression of agency based on the relationship between the parties. And at a
minimum, the pleadings created a factual question whether T-Mobile is liable
under the apparent authority doctrine for the conduct of the dealers who were
labeled “authorized” not only in their signs but on the website and via conduct
in the stores.
DCA also alleged
deception by MetroPCS in its stores: selling used phones as if new; financing
terms that double the cost of the phone; overcharges via improper taxes and
activation payments; failure to provide receipts; and defective receipts. MetroPCS
apparently accepted responsibility for Corporate Stores, and it acknowledged
that it executed Indirect Dealer Agreements giving dealers actual authority to
act on behalf of MetroPCS, but it argued that their limited actual authority didn’t
extend to wrongful conduct. But that couldn’t be resolved at the pleading
stage: MetroPCD didn’t show as a matter of law that the dealers were at all
times “acting antagonistically” to the interests of MetroPCS.

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