Plus System, Inc. v. New England Network, Inc.

• Decision Date: 23 September 1992
• Docket Number: Civ. A. No. 92-F-1217.
• Citation: 804 F. Supp. 111
• Parties: PLUS SYSTEM, INC., a Delaware corporation, Plaintiff, v. NEW ENGLAND NETWORK, INC., a Connecticut corporation, Defendant.
• Court: U.S. District Court — District of Colorado

804 F. Supp. 111

PLUS SYSTEM, INC., a Delaware corporation, Plaintiff, v. NEW ENGLAND NETWORK, INC., a Connecticut corporation, Defendant.

Civ. A. No. 92-F-1217.

United States District Court, D. Colorado.

September 23, 1992.

COPYRIGHT MATERIAL OMITTED

ORDER REGARDING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

SHERMAN G. FINESILVER, Chief Judge.

This matter comes before the Court on Defendant's Motion to Dismiss for Lack of Subject Matter Jurisdiction, For Lack of Personal Jurisdiction, and For Failure to State a Claim Against the Defendant, filed on September 5, 1992. In its motion, Defendant submitted materials outside of the pleadings. Plaintiff did the same in its response. Accordingly, under Fed.R.Civ.P. 12(b), Defendant's motion will be treated as one for summary judgment.

The litigants have fully briefed the issues contained in the motion. Jurisdiction is based upon 28 U.S.C.A. § 1332 (West 1966 & Supp.1992). For the reasons stated below, the motion is DENIED.

I.

Plaintiff PLUS System, Inc. ("PLUS") brought suit for (1) breach of contract and (2) a declaratory judgment that Defendant New England Network, Inc. ("NENI") violated valid terms of a contract between the parties and that PLUS may therefore terminate the contract.

Plaintiff is a non-stock membership corporation incorporated under the laws of Delaware and having its principal place of business in the City and County of Denver, Colorado.¹ It is comprised of approximately 4500 depository financial institutions and networks owned by them throughout the United States. These institutions issue plastic debit and credit cards bearing the PLUS marks and accept such cards at automatic teller machines ("ATMs") for use in a variety of banking transactions, including account withdrawals, deposits, transfers, and inquiries. Plaintiff administers and provides support for the PLUS shared national ATM network, enabling customers of member financial institutions to access their accounts in participating PLUS ATMs throughout the country.

The PLUS trademarks have been extensively used, advertised, and promoted throughout the United States and the world in association with the financial services offered by PLUS' members. PLUS spends millions of dollars in advertising its PLUS marks, and claims that through advertising and widespread use, the marks have become renowned throughout the country. PLUS claims that the marks have come to be recognized as identifying PLUS System, Inc. and the services offered by its members.

Defendant, NENI, is a membership corporation organized under the laws of Connecticut and having its principal place of business in Wallingford, Connecticut. NENI is comprised of approximately 700 financial institutions in New England which market and promote the NENI regional shared ATM network under the "Yankee 24" service mark. Under an agreement between the parties executed on June 12, 1987, NENI is a "processor" member of PLUS System, Inc., a category of membership created exclusively for regional networks owned by depository financial institutions. As a processor, NENI processes transactions for 24 financial institutions which it has "sponsored" into PLUS System, Inc. NENI is entitled to the use of PLUS marks and applicable services of PLUS subject to PLUS' operating regulations. In return, NENI agreed to be bound by PLUS' by-laws and operating regulations as amended from time to time, and to actively promote the services and systems offered by PLUS.

The interaction of PLUS System, Inc. with the shared ATM networks requires some explanation. Shared ATM networks are relatively sophisticated businesses whose function is to deliver banking services at a variety of locations, both during and after normal banking hours, without the need for a human teller. Since ATMs were first used in the 1960s, financial institutions have become aware of the value of shared networks that enable customers to access their accounts through the ATMs of unrelated banks in the same or different states. By linking the networks of several banks, "regional" ATM networks were formed. Those networks adopted a common trademark to identify their respective services and required that members agree to uniform operating regulations, the most fundamental of which is the promise of each ATM-owning bank to accept at its ATMs those cards issued by every other bank participating in the network.

Recognizing that bank customers often travel outside of the geographic area served by any one regional ATM network, a group of 26 U.S. financial institutions joined in 1982 to form PLUS System, Inc., a shared ATM network designed to be national in scope. Customers determine whether they can use an ATM by matching one of the trademarks appearing on the machine with the trademark appearing on the card issued by their bank or regional network. A shared network transaction involves four parties: the bank that issues the card, the customer, the ATM-owning bank, and the ATM network itself. In a transaction involving a customer and a bank other than the bank which issued the card (i.e., a "foreign transaction"), the customer initiates the transaction by inserting his or her card in an ATM of a participating network member. The transaction is routed from the ATM-owning bank through the PLUS computer switch to the bank that issued the card. If the ATM receives authorization from the customer's bank, the customer is free to engage in a variety of transactions.

At the end of each day, the PLUS switch "settles" all accounts on the network. In settlement of accounts, the PLUS switch summarizes and calculates for each ATM member bank the transactions performed by its customers. For its routing and settling services, among others, PLUS is paid a small fee per transaction by the bank issuing the customer's card. PLUS' central processing computer located in Denver, Colorado, processes over 12 million such transactions per month. To protect its substantial investment in the services and PLUS marks, and to ensure that it benefits from its goodwill and name recognition, PLUS' board enacted Operating Regulation 2.15 ("the royalty rule"), requiring that each ATM member pay a royalty of $.03 to PLUS on transactions that do not use the PLUS System switch but in which the PLUS mark is the only mark that appears on both the customer's card and the ATM. Plaintiff PLUS claims that the intent of the regulation is to prevent "free-riding" on the renowned PLUS mark and name.

In this action, Plaintiff claims that Defendant is responsible, as processor of the regional network "Yankee 24," for implementing the royalty rule in the Yankee 24 network. Plaintiff wrote a letter to Defendant demanding compliance with the rule, to which Defendant responded by saying that it did "not intend to implement" the rule. Citing concerns over the costs of free-riding and the integrity of all of its contracts with regional networks around the country, Plaintiff brought this action for declaratory judgment and damages. On motion for summary judgment, Defendant claims that Plaintiff lacks subject matter jurisdiction, lacks personal jurisdiction, and has failed to state a claim because Defendant is not an ATM member subject to the rule.

II.

Granting summary judgment is appropriate when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed. R.Civ.P. 56(c); Ash Creek Mining Co. v. Lujan, 934 F.2d 240, 242 (10th Cir.1991); Metz v. United States, 933 F.2d 802, 804 (10th Cir.1991), cert. denied, ___ U.S. ___, 112 S.Ct. 416, 116 L.Ed.2d 436 (1991); Continental Casualty Co. v. P.D.C., Inc., 931 F.2d 1429, 1430 (10th Cir.1991). A genuine issue of material fact exists only where "there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party." Merrick v. Northern Natural Gas Co., 911 F.2d 426, 429 (10th Cir.1990). Only disputes over facts that might affect the outcome of the case will properly preclude the entry of summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Allen v. Dayco Prods., Inc., 758 F.Supp. 630, 631 (D.Colo.1990).

In reviewing a motion for summary judgment, the court must view the evidence in the light most favorable to the party opposing the motion. Newport Steel Corp. v. Thompson, 757 F.Supp. 1152, 1155 (D.Colo.1990). All doubts must be resolved in favor of the existence of triable issues of fact. Boren v. Southwestern Bell Tel. Co., 933 F.2d 891, 892 (10th Cir.1991); Mountain Fuel Supply v. Reliance Ins. Co., 933 F.2d 882, 889 (10th Cir.1991).

In a motion for summary judgment, the moving party's initial burden is slight. In Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S.Ct. 2548, 2555, 91 L.Ed.2d 265 (1986), the Supreme Court held that the language of rule 56(c) does not require the moving party to show an absence of issues of material fact in order to be awarded summary judgment. Rule 56 does not require the movant to negate the opponent's claim. Id. at 323, 106 S.Ct. at 2553. The moving party must allege an absence of evidence to support the opposing party's case and identify supporting portions of the record. Id.

Once the movant has made an initial showing, the burden of proof shifts to the opposing party. The nonmovant must establish that there are issues of material fact to be determined. Id. at 322-23, 106 S.Ct. at 2552-53. The nonmovant must go beyond the pleadings and designate specific facts showing genuine issues for trial on every element challenged by the motion. Tillett v. Lujan, 931 F.2d 636, 639 (10th Cir.1991). Conclusory allegations will not establish issues of fact sufficient to defeat summary judgment. McVay v. Western Plains Serv. Corp., 823 F.2d 1395, 1398 (10th Cir.1987).

In reviewing the evidence submitted, the court should grant summary judgment only when there is clearly no issue of material fact remaining. In Anderson, 477 U.S. at 249-50, ...