Verizon Wireless won a preliminary injunction against a Texas wireless reseller that it claims reneged on its agreement to be an exclusive Verizon Wireless dealer. Meanwhile, the dealer claims that Verizon Wireless lured it away from a successful relationship with Cingular Wireless L.L.C. while failing to disclose policies that have pushed the company to the brink of bankruptcy.
CellTex Cellular Inc., which does business under the name Bee Wireless and has counted as many as 70 stores in several states, called Verizon Wireless’ indirect dealer program “fundamentally flawed.”
CellTex said in court filings that it was wooed by Verizon Wireless for two years as the national carrier tried to convince the fast-growing dealer to leave the former Cingular and become a Verizon Wireless exclusive dealer. While the dealer anticipated some setbacks, the company claims that Verizon Wireless failed to disclose a number of fine-print details that have pushed it to near insolvency.
In particular, CellTex claimed Verizon Wireless’ “extremely high rate of credit refusals of CellTex’s potential customers” limited its ability to score new subscribers, even while Verizon Wireless extended more liberal credit policies at its company-owned stores. CellTex also complained that Verizon Wireless stacked other authorized dealers in the same malls it was serving, and that the carrier raided Bee Wireless employees.
CellTex also claimed that it isn’t the only authorized Verizon Wireless dealer to have such problems, although it did not offer evidence to back up its claims.
“Based upon the failure of other authorized dealers, it is clear that Verizon withheld these facts in order to induce CellTex into converting its wireless business from Cingular to Verizon,” CellTex said in a letter to the national carrier in November.
CellTex demanded $9 million in damages from Verizon Wireless, claiming the figure is what the company would have been worth if CellTex had stayed with Cingular and continued to grow.
CellTex declared that its collapse “is a direct result of Verizon’s fundamentally flawed indirect dealer model.” The company said it gave Verizon Wireless notice that it was terminating the exclusive agreement in late November. Verizon Wireless shot back late last month with a lawsuit claiming breach of contract and violation of its trademarks, since Bee Wireless stores began selling other carriers’ products alongside those of Verizon Wireless.
The national carrier has been granted a preliminary injunction against Bee Wireless stores selling Verizon Wireless products while the case is arbitrated.
Verizon Wireless spokesman Jeffrey Nelson reiterated the carrier’s position as laid out in its filings, and added “We value our retail partners very, very much and have great, strong relationships with them, and that means commitments from both sides. That is what’s worked so well for us over the years.”
Legal representatives for CellTex could not immediately be reached for comment.
