Rockaway Beverage, Inc. v. Wells Fargo & Co.
| Decision Date | 29 March 2019 |
| Docket Number | 18-CV-579 (PKC) (SJB) |
| Citation | 378 F.Supp.3d 150 |
| Parties | ROCKAWAY BEVERAGE, INC. and Mario A. Tapias, Plaintiffs, v. WELLS FARGO & COMPANY, Wells Fargo Merchant Services, LLC, Wells Fargo Bank, N.A., First Data Merchant Services LLC f/k/a First Data Merchant Services Corporation, ABC Inc., XYZ Corp., Jane Doe, and John Doe, Defendants. |
| Court | U.S. District Court — Eastern District of New York |
Daniel A. Singer, The Law Offices of Daniel A. Singer PLLC, New York, NY, for Plaintiffs.
Ronald Marc Daignault, Polsinelli PC, New York, NY, John Peterson, Pro Hac Vice, Polsinelli PC, Nashville, TN, for Defendants.
PAMELA K. CHEN, United States District Judge Plaintiffs Rockaway Beverage, Inc. ("Rockaway") and Mario A. Tapias ("Tapias") (collectively, "Plaintiffs") brought this action against Defendants Wells Fargo & Company ("WFC"), Wells Fargo Merchant Services, LLC ("WFMS"), Wells Fargo Bank, N.A. ("WFB"), First Data Merchant Services, LLC f/k/a First Data Merchant Services Corporation ("First Data") (collectively, "Defendants"), and certain unknown business entities and individuals, alleging breach of contract, fraud, and negligence in connection with an agreement to provide credit card processing services to Rockaway for use in its beverage sales business. Before the Court is Defendants' motion to dismiss Plaintiffs' Second Amended Complaint for failure to state a claim. For the reasons that follow, Defendants' motion is granted in part and denied in part.
Plaintiff Tapias serves as the President and CEO of Plaintiff Rockaway, a retail and wholesale provider of beverages opened in August 2014. (Second Amended Complaint ("SAC"), Dkt. 28, ¶ 16–17.)1 During a November 2014 visit to another beverage distributor in Yonkers, New York, Plaintiff Tapias met an individual named Lewis Maresca ("Maresca"). (Id. ¶ 18.) At this meeting, Maresca told Tapias that he worked as an agent for "First Data" and "Wells Fargo," businesses that offered credit card processing services. (Id. ¶¶ 19–20.) Tapias advised Maresca that he had recently opened Rockaway and was interested in obtaining credit card processing services to facilitate the business's retail sales. (Id. ¶ 24.)
Subsequently, Tapias and Maresca met a second time at Rockaway's place of business in Jamaica, New York on December 12, 2014. (Id. ¶ 25.) At this second meeting, Plaintiffs allege that Maresca, acting on Defendants' behalf, entered into an implicit (unwritten) agreement ("the Implied Agreement") between Rockaway and Defendants. (Id. ¶ 26.) Under the Implied Agreement, Defendants agreed to provide credit card processing services in exchange for a portion of the revenue generated by Plaintiff Rockaway through credit card sales. (Id. ) In addition to the Implied Agreement, Plaintiffs allege that at the December 12, 2014 meeting, Tapias also signed a written agreement ("the Written Agreement"), on Rockaway's behalf, relating to "the use and/or provision of credit card processing equipment and/or software." (Id. ¶ 29.) Plaintiffs have not produced the Written Agreement, as they never received a copy, nor can they recall its terms. (Id. ¶¶ 29–30.) According to Plaintiffs, the Written Agreement was never signed by any Defendant. (Id. ¶ 32.)
Approximately one week after the December 12, 2014 meeting, Maresca returned to Rockaway's place of business to install credit card processing equipment. (Id. ¶ 50.) After the equipment was installed, Plaintiffs began establishing accounts with retail customers, including the Jabar Star Deli ("Jabar"). (Id. ¶¶ 53–55.) From December 2014 until September 2016, Plaintiffs conducted business using the credit card processing equipment provided by Defendants without incident. (Id. ¶ 57.)
Between September 13, 2016 and September 19, 2016, however, a frequent, large-volume purchaser named Fareek Ali made a series of seven in-person credit card purchases on behalf of Jabar, totaling $ 47,000 ("the Ali transactions"). (Id. ¶¶ 57–58.) The Ali transactions were approved by the credit card processing system provided by Defendants. (Id. ¶ 59–61.) Despite the apparent approval of the Ali transactions through Defendants' system, Ali's bank later denied payment on the transactions, claiming that they were either erroneous or fraudulent. (Id. ¶ 65.) Tapias then contacted Defendant First Data about the denial of payment. (Id. ¶¶ 62–67.) First Data advised him that Rockaway would not receive payment for the Jabar transactions; rather, First Data was going to charge Rockaway $ 47,000 for the fraudulent transactions. (Id. ¶ 68.) On September 28, 2016, First Data informed Rockaway that its account would be closed and First Data would no longer provide credit card services to Rockaway. (Id. ¶ 69.) When Tapias attempted to dispute this termination, he was directed to contact Defendants WFMS and WFC. (Id. ¶¶ 70–71.)
As a consequence of terminating Rockaway's account, Defendants reported Plaintiffs to MATCH, a watchlist maintained by Mastercard and utilized by major credit card companies to identify potentially high-risk merchants. (Id. ¶¶ 72–74.) Plaintiffs became aware of this fact when they attempted to open up a second credit processing account with JP Morgan Chase Bank, N.A. ("Chase"). (Id. ¶ 72.) Chase initially allowed Rockaway to open an account, but subsequently closed it. (Id. ) In notifying Rockaway that its new account would be closed, Chase informed Plaintiffs that Rockaway had been placed on the MATCH list for "money laundering." (Id. ¶¶ 72, 76.) Rockaway also applied to open a credit card processing account with Integrity Payment Systems, LLC, but was similarly denied due to the fact that it was on the MATCH list. (Id. ¶ 79.)
In search of an explanation for why Plaintiffs were placed on the MATCH list, Tapias contacted Defendant WFMS. (Id. ¶ 80.) In response, Joseph Claybaugh, a WFMS Merchant Service Specialist, informed Tapias that on December 14, 2016 Plaintiffs had been placed on the MATCH list because they had "forced through" the Ali transactions. (Id. ) Claybaugh also informed Tapias that Ali could not be contacted and that Ali's bank was unable to confirm any information about him. (Id. ¶ 82.)
Following this conversation, Plaintiffs filed a complaint against Ali with law enforcement, and criminal charges were later filed. (Id. ¶ 86.) Ali eventually pleaded guilty to petit larceny in violation of New York Penal Law § 155.25 and executed a confession of judgment in favor of Plaintiffs in the amount of $ 54,105.57. (Id. ¶ 87.) Despite obtaining this confession of judgment, Plaintiffs have not collected any funds from Ali. (Id. ¶ 89.) Plaintiffs claim they are unable to obtain cost-effective credit card processing services so long as they appear on the MATCH list, and their retail profits have decreased by around $ 5,000 per week due to an inability to process credit card sales. (Id. ¶¶ 91–92.) Mastercard has advised Plaintiffs that only Defendants can initiate a removal of Plaintiffs' names from the MATCH list, but, to date, Defendants have refused to do so. (Id. ¶¶ 97–98.)
Plaintiffs filed the initial complaint in this matter in Queens County Supreme Court on December 26, 2017. (Dkt. 1-1, Exhibit A.) Defendants filed a notice of removal on January 26, 2018, invoking this Court's diversity jurisdiction. (Dkt. 1, ¶ 4.) Defendants filed their first motion to dismiss on February 2, 2018. (Dkt. 5.) In response, Plaintiffs sought, and were granted, leave to file an amended complaint, which was filed on June 26, 2018. (Dkt. 17.) Defendants filed the instant motion to dismiss on August 2, 2018. (Defendants' Motion ( ), Dkt. 18.)
In support of their motion, Defendants submitted an affidavit provided by Lewis Maresca, a sales agent for In-Store Marketing Services, Inc. (Maresca Affidavit ("Maresca Aff."), Dkt. 20-1.) Attached to the Maresca affidavit are two form contracts, both titled "Merchant Processing Application and Agreement." (Dkts. 20-3, 20-4.) The first form contract ("the Partial Form") is incomplete and lacks a signature page, but is partially filled out and indicates "Rockaway Beverage Inc." as the subject client. (Partial Form, Dkt. 20-3, at 1.) Maresca's affidavit indicates that he has been unable to locate a complete copy of the Partial Form. (Maresca Aff., ¶ 5.) The second form contract ("the Standard Form") is a blank copy of the same contract as the Partial Form, but with all pages attached, including the signature page. (Standard Form, Dkt. 20-4.) Tapias maintains that the Partial Form was not filled out or executed by him (First Tapias Declaration ("First Tapias Decl."), Dkt. 21-3, ¶ 2), and he states that he has never seen the Standard Form prior to this litigation (Second Tapias Declaration ("Second Tapias Decl."), Dkt. 25-1, ¶ 8). (See also SAC, ¶¶ 35–36 ().)
The Court held oral argument on Defendants' motion to dismiss on September 20, 2018. Based on the discussion at oral argument, the Court granted Plaintiffs' leave to file a second amended complaint in order to add a claim for fraud and excise any futile claims. (Sept. 20, 2018 Minute Entry.) Plaintiffs' Second Amended Complaint was filed on October 22, 2018 (SAC, Dkt. 29), and Defendants supplemented their motion to dismiss on November 19, 2018 (Defendants' Supplemental Brief ( ), Dkt. 31.) Defendants' motion to dismiss was fully briefed on December 24, 2018. (Dkt. 33.)
To survive a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), "a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). A "claim has facial plausibility when the...
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