T-Mobile Uses ‘Tactical and Vexatious Litigation Pattern,' Say EBS License Defendants

Defendants WCO Spectrum, its founder Gary Winnick and CEO Carl Katerndahl seek an order staying discovery in the fraud case brought by T-Mobile pending resolution of their forthcoming motion to dismiss, said their memorandum Thursday (docket 2:23-cv-04347) in U.S. District Court for Central California in Los Angeles. The case involves educational broadband service wireless spectrum in the 2.5-GHz band that the FCC historically has licensed to schools (see 2306030002).

T-Mobile leased much of that spectrum from the schools that hold the licenses so it could build its nationwide cellular and data network. T-Mobile alleges WCO, Winnick and Katerndahl conspired with five co-defendants to form an illegal enterprise in which they make “sham offers” to schools to buy spectrum licenses “intended to be conveyed to T-Mobile.” It alleges WCO simultaneously makes “secret side agreements” with the schools in which WCO “pockets a kickback,” and the conduct defrauded the company out of more than $10 million.

But WCO's memorandum calls the matter “a business dispute.” WCO is an investment company interested in buying FCC spectrum licenses held by educational nonprofits, “many of which serve underrepresented minorities and first-generation students,” it said. WCO’s potential license purchases “constitute an existential threat” to T-Mobile, it said. T-Mobile leases bandwidth from the nonprofits at “bargain basement rates,” and holds “a virtual monopoly in the space,” WCO said.

T-Mobile can’t afford for these leases to pass from “cash-strapped, not-for-profit schools and colleges to commercial firms that would charge T-Mobile market-rate prices for that bandwidth when the leases expire, said the memorandum. Those rates can be more than 30 times higher than what T-Mobile pays now to lease bandwidth from the schools, it said. “Nor can T-Mobile afford to purchase the licenses outright,” it said. So T-Mobile resorted to threats, intimidation and litigation “to hamstring these schools” and to thwart the defendants’ transactions with the schools, it said.

Though this is the first time T-Mobile sued the defendants in this court, “the parties are not strangers,” said the memorandum. This lawsuit is at least the seventh that T-Mobile brought to “interfere” with WCO’s license purchases, it said. T-Mobile’s allegations “twist fair competition and shrewd investment strategy” into an “implausible, nonsensical, and self-defeating racketeering scheme,” it said.

T-Mobile’s claims are “meritless,” and the defendants “will soon move to dismiss them entirely,” said the memorandum. But T-Mobile’s “tactical and vexatious litigation pattern is designed to advance its true aims,” it said. One of T-Mobile’s goals is to gain access to the defendants’ business strategies and trade secrets “through abuse of the discovery process,” it said. Another is to protect its virtual monopoly “by abusing legal process” to intimidate, harass and oppress the defendants “and the largely minority and underprivileged educational institutions stuck under T-Mobile’s yoke,” it said.

T-Mobile has proven its willingness to file civil actions “as a pretext to seek invasive corporate strategic and financial discovery from WCO six times over,” said the memorandum. All the other courts faced with the question “refused to allow T-Mobile’s improper and abusive discovery tactics,” it said. This court shouldn’t permit “a seventh try,” it said. The defendants seek a protective order staying discovery until their forthcoming motion to dismiss is decided, it said.