Sprint Nextel Corp. v. Middle Man, Inc.

• Decision Date: 10 May 2016
• Docket Number: No. 15–3108.,15–3108.
• Citation: 822 F.3d 524
• Parties: SPRINT NEXTEL CORPORATION, Plaintiff Counter Defendant–Appellee, v. The MIDDLE MAN, INC., Defendant Counterclaimant–Appellant, and Brian K. Vasquez, Defendant Counterclaimant.
• Court: U.S. Court of Appeals — Tenth Circuit

822 F.3d 524

SPRINT NEXTEL CORPORATION, Plaintiff Counter Defendant–Appellee

v. The MIDDLE MAN, INC., Defendant Counterclaimant–AppellantandBrian K. Vasquez, Defendant Counterclaimant.

No. 15–3108.

United States Court of Appeals, Tenth Circuit.

May 10, 2016.

Charles R. Price, Tandum Legal Group, LLC, Washington, D.C. (James J. Kernell, Erickson, Kernell, Derusseau & Kleypas, LLC, Leawood, KS, with him on the briefs), for Defendant Counterclaimant–Appellant.

Dean A. Morande (Stacey K. Sutton and James B. Baldinger, with him on the brief), Carlton Fields Jorden Burt, P.A., West Palm Beach, FL, for Plaintiff Counter Defendant–Appellee.

Before TYMKOVICH, Chief Judge, LUCERO, and BACHARACH, Circuit Judges.

BACHARACH

, Circuit Judge.

This appeal grew out of a conflict between the business models of Sprint Nextel Corporation and The Middle Man, Inc. Sprint sells mobile telephones and service plans, intending for the purchasers to use the telephones on the Sprint network (rather than resell them). Middle Man buys mobile telephones, including Sprint's, and tries to resell them at a profit. The two business models collided, and Sprint brought the present action for breach of contract.¹ Middle Man counterclaimed, seeking a declaration that its business model does not violate the contract that accompanies the purchase of Sprint telephones. On each set of claims, Sprint and Middle Man filed dispositive motions.²

Both sets of claims and dispositive motions involved interpretation of the contract. Sprint argued that the contract prohibited Middle Man from reselling Sprint's telephones regardless of whether they were active on the Sprint network. Middle Man argued that the contract unambiguously allowed resale of Sprint telephones if they were not active on the Sprint network. In the alternative, Middle Man asserted that the contract (1) was ambiguous regarding the right to resell Sprint telephones and (2) should be construed against Sprint as the drafting party.

In deciding these motions, the district court held as a matter of law that the contract unambiguously prohibited Middle Man from selling new mobile telephones purchased from Sprint regardless of whether they were active on Sprint's network. In light of this holding, the district court (1) granted judgment on the pleadings to Sprint on Middle Man's counterclaim for a declaratory judgment and (2) granted summary judgment to Sprint on its breach of contract claim, awarding Sprint nominal damages of $1.

Middle Man appeals, contending that the entry of judgment on Sprint's claim and Middle Man's counterclaim was erroneous and that the district court should have awarded judgment to Middle Man on both claims. In the alternative, Middle Man contends that we should vacate the district court's ruling that the contract unambiguously prohibits Middle Man from reselling Sprint telephones. We reverse the entry of judgment but reject Middle Man's request for us to order judgment in its favor.

1. This appeal turns on issues involving justiciability, contractual interpretation, and civil procedure.

The appeal presents three sets of issues.

The first set of issues involves justiciability. In its opening brief, Middle Man stated that this appeal involves principle rather than money. Seizing on this language, Sprint argues that

• Middle Man lacks appellate standing and

• the action is prudentially moot.

Notwithstanding Middle Man's rhetoric in its opening brief, the dispute is justiciable. Under our precedent, Sprint's award of nominal damages constitutes an injury in fact to Middle Man, and the doctrine of prudential mootness does not apply because Sprint obtained an award of damages rather than equitable relief.

The second set of issues involves the meaning of contractual language. The contract stated that Middle Man could not resell Sprint's “Services” and that “customer devices” were not for resale. Sprint argues that these clauses unambiguously prohibited Middle Man from reselling Sprint telephones; Middle Man argues that the clauses are ambiguous on whether the telephones can be resold if not active on the Sprint network. We agree with Middle Man. The term “Services” does not necessarily cover telephones that are not active on the Sprint network, and the “customer devices are not for resale” clause may simply have referred to Sprint's intent.

The third set of issues relates to Middle Man's motion to alter or amend the judgment. On appeal, Middle Man argues that the contract could not restrict resale of Sprint telephones because that restriction would constitute an impermissible restraint on Middle Man's title to the telephones. In district court, Middle Man did not raise this argument until its motion to alter or amend the judgment. By then, the argument was too late. The district court rejected the argument on the ground that it should have been presented earlier. This ruling fell within the district court's discretion.

2. The appeal is justiciable.

The threshold issue is whether the appeal is justiciable, for Sprint argues that Middle Man lacks appellate standing and that the appeal is prudentially moot. We reject both arguments.

A. Middle Man has appellate standing because it suffered an “injury in fact. ”

The U.S. Constitution provides that to appeal, one must have standing. Arizonans for Official English v. Arizona, 520 U.S. 43, 64, 117 S.Ct. 1055, 137 L.Ed.2d 170 (1997)

. Constitutional standing entails multiple elements, including an injury in fact. See

Lujan v. Defenders of Wildlife, 504 U.S. 555, 560, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992).³ In addition, prudential limitations restrict standing even when an appellant satisfies the constitutional elements. Sec'y of State v. Joseph H. Munson Co., 467 U.S. 947, 955, 104 S.Ct. 2839, 81 L.Ed.2d 786 (1984). These limitations prevent parties from appealing “to enforce the rights of others.” RMA Ventures Cal. v. SunAmerica Life Ins. Co., 576 F.3d 1070, 1073 (10th Cir.2009).

In Sprint's view, Middle Man has admitted the absence of an injury in fact to itself and boasted that victory in the appeal would serve only to benefit others. These arguments are based primarily on four statements in Middle Man's opening brief:

• “On its face, this appeal is almost purely academic.”

• Middle Man purports to appear “on principle,” “on behalf of many.”

• “In the typical sense,” Middle Man “has nothing to gain and nothing to lose” in the appeal.

• Middle Man's “goal is to save others from having to suffer.”

Appellant's Opening Br. at 2, 23. These rhetorical flourishes do not strip Middle Man of standing.

Under Article III, Middle Man must show an injury in fact, consisting of a concrete, particularized invasion of a legally protected interest. Tennille v. W. Union Co., 809 F.3d 555, 560 (10th Cir.2015)

. Regardless of Middle Man's characterization of what is at stake, the district court's rulings created an injury in fact by subjecting Middle Man to nominal damages and rejecting Middle Man's counterclaim for a declaratory judgment.

First, Middle Man was ordered to pay nominal damages. This award of nominal damages creates an injury in fact. See Utah Animal Rights Coal. v. Salt Lake City Corp., 371 F.3d 1248, 1257 (10th Cir.2004)

(holding that “a complaint for nominal damages could satisfy Article III's case or controversy requirements, when a functionally identical claim for declaratory relief will not”).⁴

Because the nominal damages award was imposed on Middle Man rather than a third party, we also reject Sprint's prudential-standing argument. Middle Man is not appealing solely to protect the rights of others; having lost in district court, Middle Man bore the burden of paying the nominal damages award.

Second, the district court's ruling would interfere with Middle Man's alleged business model. In its counterclaim, Middle Man alleged that its business included the resale of Sprint mobile telephones. Appellant's App'x at 210. Because Sprint took the position that these resales constituted a contractual breach, Middle Man sought a declaratory judgment to provide “guidance as to how [its] business can and must operate going forward.” Id. at 215. The district court entered judgment for Sprint on Middle Man's counterclaim for a declaratory judgment. The district court's ruling allegedly imperiled Middle Man's alleged business model by holding that the contract prohibited resale of Sprint telephones.

For both reasons, the district court's rulings created an injury in fact for purposes of appellate standing.

B. The appeal is not prudentially moot.

Sprint argues not only that Middle Man lacks standing but also that this appeal is prudentially moot. This argument is invalid as a matter of law. Ordinarily an action can become prudentially moot only when the claim involves prospective equitable or declaratory relief. Bldg. & Constr. Dep't v. Rockwell Int'l Corp., 7 F.3d 1487, 1492 (10th Cir.1993)

. By definition, an award of nominal damages involves a remedy that is “legal,” not “equitable.” See

Griffith v. Colo., Div. of Youth Servs., 17 F.3d 1323, 1327 (10th Cir.1994) (stating that nominal damages are legal, not equitable). Thus, the doctrine of prudential mootness would ordinarily not apply.

A limited exception is sometimes recognized, rendering a damage award prudentially moot when it is uncollectible. 13B Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure § 3533.3 (3d ed.2008)

. Sprint does not invoke this exception. As a result, we apply the general rule, declining to consider Sprint's claim as prudentially moot.

3. The contract is ambiguous.

Because this dispute is justiciable, we must address the merits. On the merits, the parties disagree over the meaning of two contractual provisions.

Under the first provision, Middle Man cannot “resell the services to another party.” Appellant's App'x at 57–58. The contract defines the term “Services” to include “Devices on [Middle Man's] account with [Sprint].” Id. In turn, the contract defines “Dev...