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First Data Merchant Services Corporation v. Oxford Management Services

March 30, 2011


The opinion of the court was delivered by: Mauskopf, United States District Judge:


Plaintiff First Data Merchant Services Corp. ("FDMS" or "Plaintiff") brings this action against Oxford Management Services, Inc. ("Oxford" or "Defendant"), seeking damages for Defendant's alleged breach of contract. Currently before the Court is Plaintiff's motion for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. For the reasons stated below, Plaintiff's motion for summary judgment is GRANTED.


The following facts are either undisputed or described in the light most favorable to the Defendant. See Capobianco v. City of N.Y., 422 F.3d 47, 50 n.1 (2d Cir. 2001). Plaintiff is a corporation that processes credit and debit card transactions for merchants on behalf of VISA U.S.A. and MasterCard International. (Pl. 56.1 Stmt. (Doc. No. 37) ¶ 2.) Defendant is a debt collection agency. (Id. ¶ 4.) The parties contractual relationship dates from November 2001. (Def. 56.1 Cntrstmt. (Doc. No. 41) ¶ 32; Def. Mem. in Opp. to Pl. Mot. for Summ. J. ("Def. Mem.") (Doc. No. 38) Exs. A, B.)

The parties entered into a Collection Service Agreement ("Agreement") in June 2004, in which Defendant agreed to perform collection services with respect to certain delinquent receivables ("Accounts Receivable") on Plaintiff's behalf. (Id. ¶ 6.) According to the Agreement: "For the collection of Accounts Receivable from Debtors and/or Guarantors whose accounts have been placed with [Defendant] by [Plaintiff], [Defendant] is entitled to a fee of 25% of the gross amount collected by [Defendant] on the Account Receivable." (Def. 56.1 Cnrstmt. ¶ 10; see also Agreement § 3(a).)

The Agreement provides, inter alia, that Defendant must "establish a single Client Trust Account under the name of First Data Merchant Services and deposit all Accounts Receivable payments made by any debtor, guarantor, or other payor into the account immediately upon receipt." (Pl. 56.1 Stmt. ¶ 7; see Compl. (Doc. No. 1) Ex. A ("Agreement") § 7.) Defendant was also obligated to adhere to two general reporting requirements,*fn2 and to "fully and accurately report all funds received on account of the Accounts Receivable." (Pl. 56.1 Stmt. ¶ 12; see also Agreement § 4(f).)

Either party was entitled to terminate the Agreement upon thirty days written notice. (Pl. 56.1 Stmt. ¶ 9; Agreement § 14.) Further, "within three (3) business days of the effective date of termination of this Agreement, or cessation of any service with respect to an Account Receivable, [Defendant] shall return to [Plaintiff] all information with respect to such Account Receivable . . . and a report identifying the payment, if any, received with respect to such Receivable. In addition, any and all funds in the Client Trust Account(s) shall be immediately transferred to the [Plaintiff]." (Pl. 56.1 Stmt. ¶ 15; see also Agreement § 15.)

The Agreement contains an integration clause governing other possible agreements between the parties: "This Agreement constitutes the entire Agreement between the parties and may not be amended changed or modified unless in writing signed by both parties. This agreement supersedes all prior written or oral agreements between [Plaintiff] and [Defendant], and governs all outstanding accounts referred to [Defendant], by [Plaintiff] prior to the effective date of this Agreement." (Pl. 56.1 Stmt. ¶ 13; see also Agreement § 11.)

Defendant collected Accounts Receivable payments on Plaintiff's behalf from October 2004 through December 2005. (Pl. 56.1 Stmt. ¶ 22.) However, Defendant did not establish a Client Trust Account, deposit any of the Accounts Receivable payments in a Client Trust Account, or remit the funds in gross to Plaintiff, as contemplated by the Agreement. (Id. ¶¶ 23-26.) Instead, Defendant commingled the Accounts Receivable payments with other funds and withheld some Accounts Receivable payments from Plaintiff in the amount of $1,301,777.04. (Id. ¶¶ 27-28.) Defendant admits that it collected this sum, and did not remit it to Plaintiff for more than five years. (Id. ¶¶ 39-45, 235.)

Plaintiff first argues that Defendant breached the Agreement by failing to establish a Client Trust Account in which Plaintiff's funds could be segregated, failing to timely remit those payments in gross to Plaintiff, and failing to remit all funds collected on Plaintiff's behalf within three days of termination of the contract. Second, Plaintiff contends that Defendant's material breaches preclude it from collecting the usual 25% commission on the $1,301,777.04 of withheld funds, in the amount of $325,444.25. Third, Plaintiff notes that Defendant's cross-claim regarding entitlement to 25% of so-called direct payments, for which Defendant has not moved for summary judgment, cannot defeat Plaintiff's summary judgment claim as to breach.

Defendant does not dispute the facts put forward by Plaintiff showing material breach. Instead, it disclaims liability by alleging that the Agreement was amended by the parties during the course of performance. Defendant further defends the withholding of payments by claiming that it did so as an "offset" in response to Plaintiff's alleged failure to pay Defendant commission on certain "direct payments," the subject of Defendant's cross-claim. (Id. ¶¶ 239-40.) Defendant claims that, in the fall of 2004, Plaintiff was receiving direct payments -- the proper meaning of which is disputed by the parties*fn3 -- on the basis of a review of transaction records at Plaintiff's offices, and in 2005 demanded 25% commission on certain direct payments it identified. (Pl. 56.1 Stmt. ¶ 29, 36.) It is undisputed that Plaintiff intermittently paid Oxford a commission on some form of direct payments, a decision made by Plaintiff's upper management "on a case-by-case basis." (Id. ¶ 35.) However, it is also undisputed that the Agreement does not contain any reference to direct payments, and does not provide that Defendant is entitled to any commission for direct payments.*fn4 It " provides only that Oxford will be paid a commission on amounts that Oxford collected." (Id. ¶ 33.)

Plaintiff filed suit for breach of contract, quantum meruit/unjust enrichment, and an accounting, seeking to recover in excess of $289.000.00. Defendant, by counterclaim, sought to recover $155,000.00 based on allegations that Plaintiff had not remitted to Defendant 25% commission on direct payments. During discovery, Plaintiff found that Defendant had withheld far in excess of the amount originally sought, in the amount of $1,301,777.04. Defendant admits that it withheld this amount, but interposes a counterclaim for $1,280,102.30. (Def. 56.1 Cntrstmt. ¶ 245.) Plaintiff moves now for Summary Judgment for breach of contract and for an accounting, requesting that this Court enter judgment in its favor and against Defendant in the amount of $1,301,777.00, or partial judgment on the issue of liability.*fn5


Summary judgment is appropriate when the pleadings, depositions, interrogatories, admissions, and affidavits demonstrate that there are no genuine issues of material fact in dispute and that one party is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). A genuine issue of material fact exists "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc.,477 U.S. 242, 248 (1986).

In deciding a summary judgment motion, a district court must draw all reasonable inferences in favor of the nonmoving party. See id. at 249 (citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59 (1970)); Castle Rock Entm't, Inc. v. Carol Publ'g Grp., Inc., 150 F.3d 132, 137 (2d Cir. 1998). The court must not "weigh the evidence but is instead required to view the evidence in the light most favorable to the party opposing summary judgment, to draw all reasonable inferences in favor of that party, and to eschew credibility assessments." Amnesty Am. v. Town of W. Hartford, 361 F.3d 113, 122 (2d Cir. 2007) (quoting Weyant v. Okst, 101 F.3d 845, 854 (2d Cir. 1996)). Any evidence ...

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