Judges dismisses suit alleging fraud in used-cellphone business deal

By Charmaine Little | Oct 18, 2018

MIAMI – The United States District Court for the Southern District of Florida recently dismissed a fraud suit filed by a Deerfield Beach-based cellphone wholesale distributor against a used cellphone seller in a partnership gone wrong.

In a ruling filed Oct. 9, U.S. District Judge Beth Bloom granted the motion to dismiss, agreeing that Reagan Wireless Corp. failed to properly state a claim in its suit against defendants Apto Soutions Inc. and Tom Willig that accused them of committing fraud when Apto sold Reagan more than 14,000 used Google phones. 

According to court filings, Reagan paid approximately $2.4 million for the phones and later found that more than half the phones had burnt pixels, also known as burn-in, despite Willig telling Reagan the phones didn’t have burn-in.

The legal fight started after Apto sold Reagan the Google phones, court filings said. Before the actual sell, Reagan had a concern that the phones would have burn-in. To help ease Reagan’s concerns, Apto said it would give Reagan the chance to return any product that it took issue with for a full refund. Willig also told a Reagan representative that the phones Apto would sell to Reagan did not have burn-in. When Reagan received the phones, the company found more than half had burn-in after the staff conducted several tests.

 Apto has yet to refund Reagan, and Apto’s president said the company didn’t have enough money because it never predicted having to return such a large amount of the product, court filings said. Reagan then filed the lawsuit, claiming fraud.

Apto and Willig, in thier motion to dismiss, pointed out Reagan’s claims of fraud based on representations for the quality of the product and Apto’s ability to give a refund of the faulty phones is blocked by the independent tort doctrine. 

Reagan subsequently argued that fraudulent claims are allowed to co-exist with breach of contract allegations considering the fraud is independent of the contract.

While the district court agreed with Reagan that fraud and breach of contract don’t have to be exclusive, in this case the fraud isn’t separate from the contract, considering they go hand-in-hand.

“While the initial representation that the phones did not have burn-in may have been inaccurate, or perhaps even fraudulent, the parties specifically agreed in the purchase agreement" that Reagan would be able to return any product, according to the opinion. The court went on to point out that Reagan never claimed Apto didn’t accept the returned phones.

Reagan admitted that the contract doesn’t give a time frame that Apto would have to issue the refund. Reagan doesn’t say that Apto said it would never give a refund, it just said it has yet to. Considering this, Reagan doesn’t have any standing to claim fraud, so the court dismissed the case.

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