United States District Court, District of Columbia
D. BATES UNITED STATES DISTRICT JUDGE
Sprint Solutions, Inc. seeks a preliminary injunction
enjoining defendant Mobile Now, Inc. and individual
defendants Robert and Steven Qureshi from further dissipating
what is left of the $11.2 million in funds that Sprint
accidentally transferred to Mobile Now and that Mobile Now
refuses to return. See Sprint's Mot. & Mem.
of Law in Supp. of its Mot. for a TRO & Prelim. Inj.
(“Pl.'s Br.”) [ECF No. 2]. Sprint is pursuing
its claims against Mobile Now through arbitration but seeks a
preliminary injunction to ensure Mobile Now does not further
dissipate the funds before an arbitrator decides the matter.
Id. at 2. Mobile Now and the Qureshis claim that the
money is rightfully theirs and oppose Sprint's motion.
See Defs.' Opp'n to Pl.'s Mot. for a
Prelim. Inj. (“Opp'n Br.”) [ECF No. 16]. For
the reasons explained below, the Court will grant
Sprint's motion for a preliminary injunction, but only
until an arbitration panel decides for itself whether Sprint
should receive interim relief.
and Mobile Now Part Ways
2009 to April 2019, Mobile Now served as one of Sprint's
largest “authorized representatives” distributing
Sprint-branded telecommunications services and related
products. Decl. of Nathan McGrath [ECF No. 16-1] ¶ 4. In
March 2018, the parties executed a new Authorized
Representative Agreement that set forth the terms of the
parties' business arrangement and granted Mobile Now the
right to sell Sprint products and services. See
Authorized Representative Agreement, Tab 1 to Compl.
(“Agreement”) [ECF No. 1-1]. Attached to the
contract was a dispute-resolution agreement, in which the
parties agreed to arbitrate “any controversy, dispute,
or claim of every kind . . . and nature arising out of or
relating to the negotiation, construction, validity,
interpretation, performance, enforcement, operation, breach,
continuation or termination of [the] Agreement, whether
arising out of common law, state or federal law.”
Exhibit E: Dispute Resolution Agreement, Tab 2 to Compl.
(“Arbitration Agreement”) [ECF No. 1-1] ¶ 1.
April 2019, Sprint terminated the Agreement with Mobile Now
“for cause.” McGrath Decl. ¶ 7. In response,
Mobile Now sued Sprint in this Court, seeking close to $90
million in damages for wrongful termination in addition to
$12 million for compensation that it claimed it was owed for
services rendered before Sprint terminated the Agreement.
Decl. of Adam Debernardis [ECF No. 16-2] ¶ 4. Sprint
moved to compel arbitration pursuant to the parties'
Arbitration Agreement, and this Court granted Sprint's
motion and dismissed the case. See Mobile Now, Inc. v.
Sprint Corp., 393 F.Supp.3d 56, 60, 72 (D.D.C. 2019).
Sprint was working to calculate its final payment to Mobile
Now. Decl. of Matt Panther [ECF No. 2-1] ¶ 8. Section
15.2 of the Agreement authorizes Sprint to withhold, for up
to 210 days, “all compensation due to [Mobile Now] by
Sprint pending a final true-up.” Agreement § 15.2.
Under that section, Sprint may “offset all amounts owed
by [Mobile Now] against the outstanding compensation due to
[Mobile Now] by Sprint, and make a final payment, net of the
offsets.” Id. Amounts owed by Mobile Now may
include, for example, “equipment balances, advances,
Losses, Expenses and 180-day deactivation Charge
backs.” Id. Section 6.2 of the Agreement also
provides Sprint a right to “charge or withhold any
amounts owed by [Mobile Now] . . . to Sprint (or any of
Sprint's affiliates or subsidiaries).” Id.
determined that it owed Mobile Now $11, 253, 769.08 plus
$117, 201.45 in prepaid compensation, but then applied
certain deductions equal to $2, 598, 538.40, resulting in a
total sum of $8, 772, 432.13. Panther Decl. ¶ 9; Ex. 1
to Suppl. Decl. of Matt Panther [ECF No. 19-1]. Under Mobile
Now's calculation, Sprint owed it $12.2 million. McGrath
Decl. ¶¶ 12-13. The parties also disagreed as to
whether Sprint could pay Mobile Now's earned compensation
(regardless of whether it was $8.7 million or $12.2 million)
to a third-party Sprint-affiliate named Brightstar, to which
Mobile Now allegedly owed more than $17 million. McGrath
Decl. ¶ 22; Panther Decl. ¶ 11. Both Sprint and
Mobile Now had entered into contractual agreements with
Brightstar, an equipment provider, and Sprint claims that its
contract with Brightstar required Sprint to offset money that
Mobile Now owed to Brightstar before making a “final
payment” to Mobile Now. Panther Decl. ¶ 10;
Debernardis Decl. ¶ 34.
Mistaken Payment of $11.2 Million
having determined that all of the money it owed Mobile Now
needed to be paid towards Mobile Now's debt to
Brightstar, scheduled the $8.7 million offset payment to
Brightstar for November 8, 2019. Panther Decl. ¶ 13. In
doing so, Sprint had to temporarily lift a vendor payment
hold that had been placed on all payments to Mobile Now.
Id. A technical glitch then caused Sprint's
accounts payable vendor's software to misread the
authorization for the $8.7 million offset payment as
also authorizing the full $11.2 million that had
been listed in the system as owed to Mobile Now before
accounting for Sprint's deductions and the offset payment
to Brightstar. Id. As a result, on November 8,
Mobile Now wired the $8.7 million to Brightstar on Mobile
Now's behalf and wired $11.2 million to Mobile
Now's account at Capital One bank, putting Sprint out
almost $20 million in total. Id. ¶ 14. The
funds were credited to Mobile Now's account on November
Now had received notification of the incoming payment on
November 8 along with a detailed “Payment Advice”
listing invoice dates and amounts being paid. McGrath Decl.
¶¶ 24- 25. On November 13, Mobile Now
“immediately accepted the payment” and applied
the funds “to pay down Sprint's outstanding
liabilities and unpaid invoices.” Id. ¶
29. Mobile Now used the funds to repay advances that Mobile
Now's principals had made from their own personal funds
so that Mobile Now could pay its employees and cover its
leases. Id. Of the $11.2 million that was
transferred, only about $4 million remains in an account
maintained by Mobile Now's principals, id.
¶ 30, though some additional amount may remain in the
Qureshis' accounts, see Proposed Order [ECF No.
22-1] ¶ 2.
Efforts to Reclaim its Mistaken Payment
did not discover its $11.2 million-dollar error until
November 19. Panther Decl. ¶ 15. At that time, Sprint
did not contact Mobile Now about the mistaken payment.
McGrath Decl. ¶ 32. Instead, Sprint tried to reverse the
wire transfer, Panther Decl. ¶ 15, and when that
didn't work, Sprint tried to recover some of the funds by
initiating direct debits for various amounts against Mobile
Now's bank account. Id. ¶ 16. It is Mobile
Now's understanding that the bank referred Sprint's
actions to its Fraud Department and alerted federal law
enforcement. McGrath Decl. ¶ 35.
not until December 4 that Sprint informed Mobile Now of the
mistaken payment and requested the return of funds.
See Dec. 4, 2019 Letter, Tab 4 to Compl. [ECF No.
1-1] at 1- 2. Mobile Now refused. See Dec. 6, 2019
Letter, Tab 5 to Compl. [ECF No. 1-1] at 1-3. At that point,
Sprint made a demand for arbitration, alleging that Mobile
Now's decision to retain the funds constitutes a breach
of contract, as well as wrongful trover, conversion, and
unjust enrichment. Demand for Arbitration, Tab 3 to Compl.
[ECF No. 1-1] at 1-2. On December 19, Sprint also filed a
complaint against Mobile Now in this Court for refusing to
return the $11.2 million, alleging the same claims it seeks
to arbitrate: (1) breach of contract, (2) trover and
conversion, and (3) quantum meruit and/or unjust enrichment.
Compl. [ECF No. 1] ¶¶ 38-63. However, Sprint
explained that it did not want this Court to decide the
merits of those claims, and it instead sought only a
temporary restraining order and preliminary injunction
enjoining Mobile Now from dissipating the funds pending an
arbitration panel's decision. Id. ¶ 70;
Pl.'s Br. at 1-2.
Now agreed not to further dissipate the funds until after
January 13, 2020, allowing this Court to dismiss the motion
for a temporary restraining order as moot and decide only
Sprint's motion for a preliminary injunction.
See Order, Jan. 7, 2020 [ECF No. 11] at 1-2. The
parties are proceeding with arbitration. While no arbitration
panel has been appointed yet, an initial conference was set
for January 3 and then continued to January 14, 2020.
Sprint's Reply in Supp. of its Mot. for a Prelim. Inj.
(“Reply Br.”) [ECF No. 18] at 5. Thus, the
question before this Court is whether it should grant
Sprint's preliminary injunction and enjoin defendants
from further dissipating the funds until an arbitration panel
decides Sprint's underlying claims, or even just until an
arbitration panel decides, for itself, Sprint's request
for interim relief.
preliminary injunction is “an extraordinary remedy that
may only be awarded upon a clear showing that the plaintiff
is entitled to such relief.” Sherley v.
Sebelius, 644 F.3d 388, 392 (D.C. Cir. 2011) (quoting
Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7,
22 (2008)). “A plaintiff seeking a preliminary
injunction must establish  that he is likely to succeed on
the merits,  that he is likely to suffer irreparable harm
in the absence of preliminary relief,  that the balance of
equities tips in his favor, and  that an injunction is in
the public interest.” Aamer v. Obama, 742 F.3d
1023, 1038 (D.C. Cir. 2014) (internal quotation omitted).
“When seeking a preliminary injunction, the movant has
the burden to show that all four factors, taken together,
weigh in favor of the injunction.” Abdullah v.
Obama, 753 F.3d 193, 197 (D.C. Cir. 2014) (internal
in the event that “parties have agreed to arbitrate a
dispute, a court may issue an injunction if, in addition to
the usual equitable concerns, the integrity of the
arbitration process would be threatened absent interim
relief.” TK Servs., Inc. v. RWD Consulting,
LLC, 263 F.Supp.3d 64, 71 (D.D.C. 2017) (quoting Am.
Postal Workers Union, AFL-CIO v. U.S. Postal Serv., 372
F.Supp.2d 83, 90-91 (D.D.C. 2005)). Such “an injunction
in aid of arbitration is appropriate . . . only when
the actual or threatened harm to the aggrieved party amounts
to a frustration or vitiation of arbitration, ” such
that a favorable decision by an arbitrator “would be
but an empty victory.” Am. Postal Workers
Union, 372 F.Supp.2d at 90-91. “The arbitral
process, however, is not rendered meaningless by the
inability of an arbitrator to completely restore the status
quo ante or by the existence ...