Evidence Not at Risk, Says Reseller, Opposing XM's Expedited Discovery

There’s “no evidence” that any of the discovery information that Xfinity Mobile seeks from defendants SellLocked, Guru Holdings and their owner Jakob Zahara in its complaint to thwart allegedly illegal trafficking in stolen phones “is at risk of being destroyed,” said the defendants’ response to XM’s motion for expedited discovery Friday (docket 2:22-cv-01950) in U.S. District Court for the District of Arizona in Phoenix.

Seeking to expedite discovery in its Nov. 29 motion (see Ref:2211300025]), XM especially sought permission to serve subpoenas on several nonparties it said “have significant evidence relevant to this case that they are otherwise under no duty to preserve and may destroy pursuant to their corporate document retention policies.” But the motion should be denied because the requested discovery is “not narrowly tailored,” said the defendants. XM asks to serve “an unlimited number of subpoenas seeking unspecified documents,” they said: “There is no indication that any of the information from FedEx, UPS, DHL, Amazon, eBay, PayPal or Craigslist is in imminent danger of being destroyed.”

XM’s Nov. 16 lawsuit “was only recently served,” and the defendants haven't had a chance to respond to the complaint, they said. XM alleged Zahara’s company and “its co-conspirators are perpetrators of an unlawful scheme to enrich themselves by stealing XM phones” and financial incentives intended to benefit legitimate consumers who use XM’s network, “thereby causing significant harm” to the plaintiffs and their customers.

XM alleged the defendants are “handset traffickers,” who use XM’s financial incentives to buy phones via “unlawful methods” to circumvent policies that are intended to protect the company and its customers, and then resell the phones “for a substantial profit.” The complaint said the defendants use fake or stolen identities to access customer accounts or set up fraudulent ones with the purpose of “obtaining as many phones as possible for resale.”

The defendants also use fraudulent identities and credit cards to pay for phones, XM alleged. XM will only ship phones to a recognized customer account address, it said, but “traffickers will intercept the fraudulent orders from the delivery company or before delivery to the legitimate customer,” it said. Phones end up in a foreign country where they can be sold at higher prices and where “wireless service providers do not provide financial incentives” toward cell phone purchases.

In their response, the defendants countered XM’s claim that it's illegal for them to buy financed phones. “There is no reason the legal and rightful owner of a device cannot sell it before it is fully paid off,” they said. Carriers routinely offer buy-one-get-one plans where a customer may legally own a second device that is of no use to them, they said. “Although this device would technically be under finance in the eyes of the carrier, there is no reason the customer could not legally sell their second phone,” said the defendants.

XM’s subpoenas to UPS and PayPal came from a private investigator XM hired in a “sting operation,” said the defendants. The operation “failed because the only thing the investigator discovered” was that the defendants were “in the business of buying cell phones from their legal owners,” they said.

XM took ordinary cell phone transactions and “turned them into a 39-page complaint alleging 12 separate causes of action,” said the defendants. Among the causes of action in XM’s complaint are unfair competition, tortious interference with contractual relations, civil conspiracy, unjust enrichment, common law fraud, trafficking in computer passwords, federal trademark infringement and false advertising.