Peter Marco, LLC v. Banc of Am. Merch. Servs.
| Decision Date | 09 March 2023 |
| Docket Number | Civil Action 3:22-CV-00227-RJC-DSC |
| Parties | PETER MARCO, LLC d/b/a PETER MARCO JEWELRY and PETER VOUTSAS, Plaintiffs, v. BANC OF AMERICA MERCHANT SERVICES, LLC, FIRST DATA MERCHANT SERVICES, LLC, FIRST DATA CORPORATION, FIRST DATA GLOBAL LEASING, FIRST DATA MERCHANT SERVICES CORPORATION and BANK OF AMERICA, N.A., Defendants. |
| Court | U.S. District Court — Western District of North Carolina |
MEMORANDUM AND RECOMMENDATION
THIS MATTER is before the Court on Defendants Banc of America Merchant Services, LLC, First Data Merchant Services LLC, First Data Corporation, First Data Global Leasing, First Data Merchant Services Corporation, and Bank of America N.A.'s Motion to Dismiss (Doc. 38), and the parties' briefs and exhibits.
This matter has been referred to the undersigned Magistrate Judge pursuant to 28 U.S.C. § 636(b)(1) and the Motion is now ripe for the Court's consideration.
Having fully considered the arguments, the record, and the applicable authority, the undersigned respectfully recommends that Defendant's Motion to Dismiss be granted in part and denied in part.
All facts alleged in the First Amended Complaint are accepted as true. Plaintiff Peter Marco, LLC is a limited liability company organized and existing under the laws California with its principal place of business in Beverly Hills, California. Peter Marco was founded by Plaintiff Peter Voutsas, who is the sole member of Peter Marco. Peter Marco sells jewelry at a prominent retail location on Rodeo Drive in Beverly Hills.
Defendant Banc of America Merchant Services, LLC (“BAMS”) is a limited liability company organized and existing under the laws of Delaware. Defendant is owned and managed by Defendant Bank of America N.A. BAMS is engaged in the business of providing electronic payment processing services including credit and debit card processing services, to businesses throughout the United States.
Defendant First Data Merchant Services, LLC (“FDMS”) is a limited liability company organized and existing under the laws of Florida. Defendant FDMS provides front and back-end payment processing services for Defendants BAMS and Bank of America. Defendant First Data Corporation (“FDC”) is a corporation organized and existing under the laws of Delaware. Defendant FDC is an assignee and/or assignor related to FDMS's rights under the agreement in dispute. FDC also owns Defendant First Data Global Leasing (“FDGL”), which is a wholly owned subsidiary of FDC.
To accept card payments, a merchant like Peter Marco must first open an account for payment processing services with a payment processor/acquirer and a member bank that is contracted with payment card brands. An acquirer must perform underwriting prior to approving a merchant account for processing and must continue to underwrite and monitor accounts. Member Alert to Control High Risk (“MATCH”) is a database of previously terminated merchants created and maintained by MasterCard and relied upon by payment brands to screen and regulate merchant access to the payment system. When a merchant is placed on the MATCH list, the business name, principals, and any business partners are all recorded on file and banned from opening any new merchant accounts elsewhere.
On or about August 28, 2015, Peter Voutsas visited a local Bank of America branch and met with a representative to discuss payment processing for Peter Marco. The representative provided Voutsas with an application for a merchant account for Peter Marco and worked with him to complete it. The representative also helped Voutsas lease a credit card processing machine under an equipment lease agreement with FDGL. BAMS contracted with FDMS as a service provider with respect to its card processing and specifically all Peter Marco card processing.
The application was approved, and the parties entered into a merchant processing agreement (“MPA”) wherein a merchant account was created in the name of Peter Marco. The MPA that Voutsas received consists of five pages and does not explain where to access any of the other related documents. The MPA refers to a program guide, but it does not state where that document can be accessed nor which version applies. The program guide contains forumselection and choice-of-law clauses for the Western District of North Carolina and state law of North Carolina. Approximately a week after the August 2015 application submission, the Peter Marco merchant account was activated and Defendants began providing program services under the MPA.
On May 17, 2019, the series of transactions at issue began when a person by the name of Abel A. Galvez Carrillo visited Voutsas at the Peter Marco store. Carrillo represented to Voutsas that he was acting as an attorney-in-fact for Linda Montano Cano to make a large purchase of jewelry. Carrillo presented Voutsas with a copy of a power of attorney, his driver's license, Cano's passport, and other documentation evidencing that a pre-loaded Visa debit card with several million United States dollars would be used to make the purchase. Carrillo wanted to purchase six items of jewelry for $4,502,867.00. Carrillo requested that Voutsas process separate charges to pay for approximately forty percent of the total purchase price. He would pay the remaining balance by wire transfer or with the Visa debit card.
Voutsas informed Carrillo that Peter Marco would process the initial payment only if Cano came to the store to confirm her identify and approve the charges. Voutsas also informed Carrillo that the charges would have to be approved by the appropriate officers at the Bank of America branch located near the Peter Marco store as representatives and agents of BAMS and FDMS. Voutsas, Cano, and Carrillo visited the Bank of America branch located at 9454 Wilshire Boulevard in Beverly Hills and spoke with Assistant Manager Zhanna Tatevosyan. Voutsas explained the sale to Tatevosyan and emphasized how important it was that each individual transaction be verified before he submitted them for authorization. Voutsas also emphasized that he would only submit them for processing if Bank of America as representatives and agents of BAMS and/or FDMS approved them in advance.
During the meeting, Cano and Carrillo submitted the following documents to Tatevosyan: Carrillo's driver's license, power of attorney for Cano, a copy of Cano's passport, copies of the documents evidencing that the Visa debit card account was pre-loaded and funded, and copies of the invoices for the jewelry. Cano also used her mobile phone to access the bank account associated with the debit card and showed Tatevosyan the balance in the account. It reflected sufficient funds to make the contemplated payments. Only after the meeting with Tatevosyan and obtaining her approval of the transactions did Voutsas submit them for processing through the Peter Marco merchant account. Twenty-eight transactions were submitted in the total amount of $2,322,846.23. BAMS took no issue with running the transactions in different intervals.
Soon after, and for reasons that remain unclear to Voutsas, Cano initiated a total of twenty-eight chargebacks in the amount of $2,322,846.23. Bank of America informed Voutsas that the transaction was frozen. Bank of America placed the chargeback amount in a reserve account and then returned it to the sender. Plaintiffs proceeded to ensure Defendants would suffer no loss as a result of the transactions. They did not revoke the ACH authorization Peter Marco gave Defendants. Plaintiffs also left the direct deposit account of Peter Marco open so that Defendants could debit fees, which totaled approximately $99,000.
On or about June 5, 2019, Voutsas was informed in a letter from BAMS that Peter Marco's merchant account was being terminated. BAMS did not provide any facts in support of its decision to terminate the merchant account. In the letter, BAMS informed Voutsas that it intended to hold in a reserve account the sum of $317,607.73 until “.. .the expiration of all chargeback periods and after we have determined that there is no further exposure or liability to us arising from the transactions that you have submitted through us.” Doc. 10 at ¶ 42. BAMS and/or FDMS terminated the Peter Marco account and placed Plaintiffs' names on MATCH because of the May 2019 transactions. Voutsas continued to make monthly payments on the lease to FDGL, even though the equipment had become unusable as a result of the termination. Following termination and placement on the MATCH list, Voutsas was unable to accept electronic payments from his customers. His business and reputation were damaged.
Plaintiffs demanded removal from the MATCH list, release of the $317,607.73 being held in reserve, and a refund of the $99,000 in fees. Defendants did not acquiesce and Plaintiffs filed this action in Los Angeles County Superior Court on February 2, 2022. Doc. 1, Ex. 1. Defendants removed the action to the United States District Court for the Central District of California on March 4, 2022. Doc. 1. Plaintiffs amended their Complaint on March 25, 2022. Doc. 10. The Central District of California transferred the action to the Western District of North Carolina on May 20, 2022. Doc. 36. Plaintiffs bring claims for breach of contract (Count I), breach of the covenant of good faith and fair dealing (Count II), breach of fiduciary duty (Count III), aiding and abetting breach of fiduciary duty (Count IV), fraud (Count V), California Unfair Business Practices § 17200 (Count VI), negligence (Count VII), and declaratory relief (Count VIII). Defendant moved to dismiss the Complaint in its entirety on June 3, 2022. Doc. 38.
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