Roller v. Red Payments L.L.C.
| Decision Date | 11 February 2021 |
| Docket Number | CV 19-5285 (GRB)(VMS) |
| Parties | BRIAN ROLLER AND KALOS STREET L.L.C., Plaintiffs, v. RED PAYMENTS L.L.C., Defendant. |
| Court | U.S. District Court — Eastern District of New York |
Plaintiffs Brian Roller ("Roller") and Kalos Street, L.L.C. ("Kalos Street") (collectively, "Plaintiffs") bring this putative class action against Defendant Red Payments L.L.C. ("Red Payments" or "Defendant").1 Plaintiffs seek declaratory relief under the Declaratory Judgment Act and assert federal claims pursuant to the Fair Credit Reporting Act ("FCRA") and Electronic Funds Transfer Act ("EFTA"), as well as state law claims for unjust enrichment, conversion, and fraud. Before the Court is Defendant's Motion to Dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. For the reasons set forth below, Defendant's motion is GRANTED IN PART and DENIED IN PART.
The factual background, as alleged in Plaintiffs' Amended Complaint ("FAC"), DE 65, along with the exhibits attached thereto, is as follows:
This action concerns certain payment processing accounts that Red Payments opened in the name of Kalos Street, which is wholly owned by Roller. DE 65 ¶¶ 40-44; DE 65-1. Plaintiffs contracted with Red Payments in order to obtain point-of-sale ("POS") equipment for processingcredit or debit card payments, as well as for payment processing and related services connected to the use of this POS equipment. DE 65 ¶¶ 23-26, 32-35. While Red Payments enrolls businesses in these types of contracts, it merely acts as an intermediary; the actual equipment and services are provided by third parties (such as former defendant First Data Global Leasing ("First Data")). Id. ¶¶ 2, 32, 35.
On August 22, 2016, Roller executed an "Application & Agreement" on behalf of Kalos Street with Red Payments to lease a "USB Card Swiper" and "Gateway Virtual Terminal" and obtain associated payment processing services (the "USB Swiper Agreement"). DE 65 ¶ 40; DE 65-1. Pursuant to this agreement, Roller opened an account at PNC Bank in his name to facilitate autopayments for the services under the contract, which Plaintiffs had begun using by the end of August 2016. DE 65 ¶¶ 41-42. Within one week, however, Plaintiffs received an additional package that contained multiple mobile card readers called "VX520s." Id. ¶ 43. Plaintiffs did not request this additional equipment, nor was it mentioned in the USB Swiper Agreement. Id. Nevertheless, Red Payments enrolled Plaintiffs in a separate lease account for this equipment, which, like their first account, came with associated rental fees. Id. ¶¶ 44, 50. The Red Payments sales representative who arranged the USB Swiper Agreement soon informed Roller that this practice - i.e., opening new accounts (with associated payment obligations) on top of a customer's existing account, without that customer's knowledge or consent - was a scheme perpetrated by Defendants known in the industry as "slamming." Id. ¶¶ 4-9, 47. Apparently, this particular market is particularly complex, wherein any given payment processing transaction may involve half a dozen intermediaries or more. Id. ¶¶ 2-3, 24-27. As a result, it is a relatively simple matter for Red Payments to "slam" customers with additional, unauthorized accounts, which the unwary clients end up paying the fees for simply out of ignorance of the details of the payment processing system. Id. ¶¶ 4-9.
Suspicious of this unrequested equipment, Plaintiffs reached out to Red Payments and First Data to request the application and related paperwork that should have accompanied the new account, to no avail. Id. ¶¶ 48-49. Despite multiple attempts to resolve this issue with both RedPayments and First Data, Plaintiffs were unable to obtain either a copy of a contract for the additional account, or a cancelation or refund for the mobile card readers and related payment processing charges. Id. ¶¶ 48-50. Defendants nevertheless continued to charge Plaintiffs for the account; Plaintiffs refused to pay these charges and ultimately closed their bank account at PNC Bank altogether in February 2017. Id. ¶¶ 51, 53. Sometime during this process, Red Payments assessed a $499.00 cancelation fee on Plaintiffs' accounts and ultimately referred the uncollected charges to debt collectors. Id. ¶¶ 52-53. As a result, Plaintiffs have now received notices from collection agencies seeking to collect these unpaid fees, and may have had their respective credit scores harmed as a result of these collection efforts. Id. ¶ 54.
On May 1, 2018, Plaintiffs, filing as "Brian Roller, d/b/a/ Kalos Street L.L.C.," filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania. DE 1. Plaintiffs asserted substantially the same claims in the original complaint as in the FAC. Compare DE 1 ¶¶ 67-109 with DE 65 ¶¶ 70-112. In July 2018, upon the order of Judge Mitchell S. Goldberg of the Eastern District of Pennsylvania, Red Payments produced a copy of the contract establishing the VX520 mobile card reader account (the "VX520 Agreement"). See DE 15; DE 65 ¶ 44. According to Plaintiffs, however, this document was inauthentic: Plaintiffs claim that the purported contract was both "unsigned [and] unacknowledged" and "an obvious forgery." DE 65 ¶¶ 44-45, 48-49, Ex. B. In September 2018, First Data moved to transfer the case to this Court pursuant to 28 U.S.C. § 1404(a), which motion was granted by District Judge Goldberg on August 12, 2019. See DE 49. Subsequent to the transfer, Plaintiffs filed the FAC, asserting the same claims but now including new allegations addressing the purportedly fictitious VX520 Agreement. On May 13, 2020, Red Payments filed the instant motion to dismiss claims I through VI pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.2 See DE 79. This Order follows.
"The court, in deciding a Rule 12(b)(6) motion to dismiss a complaint, is required to accept all 'well-pleaded factual allegations' in the complaint as true." Lynch v. City of New York, 952 F.3d 67, 74-75 (2d Cir. 2020) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009)). "The court must also construe all reasonable inferences that can be drawn from the complaint in the light most favorable to plaintiff." Id. at 75 (citation omitted). However, "a plaintiff's obligation . . . requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). This "plausibility standard" is "not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570). Therefore, "[a] dismissal pursuant to Rule 12(b)(6) 'is inappropriate unless it appears beyond doubt that plaintiff can prove no set of facts which would entitle him or her to relief.'" Blue Tree Hotels Inv. (Canada), Ltd. v. Starwood Hotels & Resorts Worldwide, Inc., 369 F.3d 212, 217 (2d Cir. 2004) (quoting Sweet v. Sheahan, 235 F.3d 80, 83 (2d Cir. 2000)).
While the court "may also look to public records, including complaints filed in state court, in deciding a motion to dismiss," the court is "generally limited to the facts and allegations that are contained in the complaint and in any documents that are either incorporated into the complaint by reference or attached to the complaint as exhibits." Blue Tree Hotels, 369 F.3d at 217.
Citing to 15 U.S.C. §§ 1681b, 1681n, and 1681o, plaintiff Roller seeks recovery under the FCRA based upon Defendant presumedly obtaining a consumer credit report in connection with the unauthorized VX520 account. The FCRA "protects consumers from 'person[s]' who obtain consumer reports for an impermissible purpose."3 Belfon v. Credit Check TotalConsumerinfo.com, Inc., No. 218CV00408ADSSIL, 2018 WL 4778906, at *4 (E.D.N.Y. Oct. 1, 2018) (citing 15 U.S.C. § 1681b(f)). As alleged by Roller, Defendant obtains consumer reports about each potential "consumer or merchant entity" client as part of a routine practice whenever opening a new payment processing account See DE 65 ¶ 84. Roller therefore concludes (at least, by implication) that such a report was necessarily obtained without a permissible purpose under the FCRA when Red Payments opened the unauthorized VX520s account. Id. ¶¶ 85-88.
In its motion to dismiss, Red Payments argues that, because Roller did not specifically allege that Defendant obtained his personal credit report, rather than Kalos Street's, his FCRA claim fails for insufficiency. See DE 79-1 at 10. There is no dispute that plaintiff Roller failed to make such an allegation. In Plaintiffs' opposition brief, they fail to point to any allegation in the complaint clearly indicating that Red Payments specifically obtained Roller's report. Rather, as Red Payments observes, "[a]t most, Plaintiff Roller alleges generally . . . that '[e]ach time that Defendants open a new payment protection account or starts a new financial service, they obtain, review, and use a "consumer report," ... about the consumer or merchant entity for whom the account is opened or the service started.'" Id. (emphasis in the original) (quoting DE 65 ¶ 84). Roller fails even to allege that Defendants specifically obtained a "consumer report" in connection with either payment processing account at issue here - let alone that Defendants obtained his credit report instead of Kalos Street's.
Plaintiff Roller argues that it would be "inappropriate to weigh competing inferences at the Rule 12(b)(6) stage." DE 79-9 at 9. Yet the only relevant allegation made by the plaintiff, as set out above, contains precisely the kind of "conclusions, and [ ] formulaic recitation of the elements" against which Twombly cautions. Suffice it to say that where plaintiff Roller attempts to recover under the FCRA for...
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