Verizon Litigation

By Jay Lewis

 Part II

Verizon filed a motion for preliminary injunction based on Defendants’ deceptive acts, which induced customers to purchase non-compliant premium services.  Verizon also claimed that the customers, in turn, threatened to leave the Verizon network because of Defendants’ actions.  The Court granted Verizon’s motion for a preliminary injunction after conducting a hearing. 

The Court cited Winter v. Natural Res. Def. Council, 555 U.S. 7 (2008) for the general factors a plaintiff must show to obtain a preliminary injunction:

  1. A likelihood of success on the merits of the legal claim,
  2. Irreparable harm in the absence of preliminary relief,
  3. The balance of equities tips in the favor plaintiff’s favor, and
  4. The relief is in the public interest.

The Court further cited Alliance for Wild Rockies v. Cottrell, 622 F.3d 1045 (9th Cir. 2010) for the 9th Circuit sliding scale balancing test.  Under this 9th Circuit test, if the balance of hardships tips sharply in the plaintiff’s favor, likelihood of success on the merits becomes less of a factor to consider. Alliance, 1049-53.

Verizon based its request for preliminary injunction on three legal bases:

  1. Arizona Consumer Fraud Act (“ACFA”),
  2. Tortious Interference with Contract, and
  3. Unjust Enrichment.

ACFA, the Court decided, did not apply in this case.  AFCA protects the merchant-consumer relationship.  It provides a means for consumers to bring an action against merchants for deceptive or fraudulent practices.  Here, Verizon was not a purchaser of Defendants services but merely a conduit to the customers.  Therefore, Verizon would not likely succeed on the merits of its AFCA claim.

The Court held that Verizon would likely succeed on the merits of its claim for tortious interference with contractual relations.  The Court affirmatively stated that, under Arizona law, a civil defendant can be held liable for tortious interference with contractual relations if the interference made the plaintiff’s compliance with a contract more expensive. This is an extension of Arizona precedent where the facts of previous tortious interference cases indicate the contract ended in breach or termination.  In Verizon’s case, the Court applies Restatement (Second) of Torts §767 (1979) which punishes tortious actions that merely burden the plaintiff’s performance on an existing contract.  The fact that Verizon paid reimbursement fees to retain customers and monitoring fees to prevent continued deception met the criteria set forth in §767.

The Court found that Verizon’s theory for unjust enrichment would not likely succeed on the merits.  Specifically, Verizon did not suffer the required impoverishment.  In fact, Verizon gained an estimated $24 million from Defendants’ actions.

After determining that Verizon has a likelihood of success on the merits for tortious interference, the Court found the three other factors of a preliminary injunction had been met:

  • Verizon would suffer irreparable harm to its business reputation if Defendants were allowed to continue deceiving customers; damage to goodwill constituted irreparable harm.
  • The balance of harms tipped in Verizon’s favor as Verizon has an interest in protecting its customer relationships and Defendants have no legitimate interest in accessing the network through deceptive means. 
  • The public interest in this matter is to protect contractual relationships from exploitation through improper means.

 Part III shall discuss the Defendants' arguments.