Verizon Litigation

Written by Jay Lewis

Cellco Partnership d/b/a Verizon Wireless v. Jason Hope, et al., CV11-0432-PHX-DGC (D. Ariz. 2011)

In the United Stated District Court for the District of Arizona, Verizon Wireless (“Verizon”) filed a complaint and motion for preliminary injunction against Jason Hope, Wayne Destefano, and Eye Level Holdings, LLC, d/b/a JAWA (“Defendants”) to prevent ongoing deceptive practices. The court granted Verizon’s motion.  The facts are as follows:

Verizon operates a wireless telephone network.  Defendants market and sell premium short message service (“PSMS”) on Verizon’s network.  PSMS sends content to the user’s wireless device such as ring tones, horoscopes, recipes, celebrity gossip and news alerts for a standard monthly fee.  The fee appears on the customer’s Verizon bill.

Verizon requires that companies who seek access to Verizon’s customers comply with guidelines for marketing practices developed by the Mobile Marketing Association (“MMA Best Practices”).  Under the guidelines, content providers like the Defendants, must submit details of their marketing and sales programs to Verizon through a third-party, known as an aggregator.  Once approved, the content provider can begin to provide services like PSMS on the Verizon network.  After the services begin, Verizon uses a third-party auditor, Aegis, to ensure that the provider is not violating the MMA Best Practices.

Previous to this lawsuit, the Defendants had been suspended from the Verizon network for violating the MMA Best Practices.  As a result of the suspension, Verizon required Defendants to identify themselves as Hope and Destefano when submitting a marketing and sales plan to the aggregator.  Instead, the Defendants set up separate limited liability companies in the names of other employees with principal places of business at various UPS stores throughout the country. This was a ploy to prevent Verizon from associating the LLCs and their applications for network access with the named Defendants.  The Defendants were successful in regaining access to the Verizon network and its customers.

Defendants sell their services through their websites.  A customer will visit one of Defendants’ websites and enter information to sign up for the premium services.  Verizon requires these websites to be MMA Best Practices compliant.  This includes details on price, terms, conditions, cancellation policy, as well as requirements for font size and font color.  The MMA Best Practices also requires that certain disclosures appear on the first page of the site.  The third-party auditor, Aegis, monitors the sites for compliance.

At first, the Defendants operated websites that were MMA Best Practices compliant. However, they soon began dropping prices from the site, reducing font size, failing to provide termination information, and removing terms and conditions from the first page.  In order to avoid detection, Defendants used either a firewall or cloaking software to prevent Aegis from viewing the non-compliant landing pages.  When an Aegis auditor attempted to review the Defendants non-compliant website, the software would detect the auditor’s Internet Protocol address and redirect that auditor to a compliant site.

Aegis and Verizon eventually caught on to Defendants’ actions and barred them from the Verizon network.  Verizon also took remedial steps in satisfying customer complaints by refunding subscription fees and increasing the costs of monitoring the Defendants’ actions.

PART II will discuss the legal aspects of this case.