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Frontline Processing Corp. v. Merrick Bank Corp.

United States District Court, S.D. New York

March 3, 2014

FRONTLINE PROCESSING CORP., Plaintiff,
v.
MERRICK BANK CORP., Defendant.

Bradford James Brown, Crowley, Fleck, LLP, Bozeman, MT,

Chester R. Ostrowski, Seiger Gfeller Laurie LLP, New York, NY.

Jeffery J. Oven Crowley, Fleck, LLP, Billings, MT, Counsel for Defendant.

Daniel George Gurfein Satterlee Stephens Burke & Burke LLP, New York, NY.

James J. Regan Satterlee Stephens Burke & Burke LLP, New York, NY,

Philip B. Condra Milodragovich Dale Steinbrenner & Nygren, Missoula, MT.

OPINION & ORDER

ROBERT P. PATTERSON, Jr., District Judge.

On February 13, 2013, Plaintiff Frontline Processing Corporation ("Frontline" or the "Plaintiff") filed a Complaint and Jury Demand ("Complaint") against Defendant Merrick Bank Corporation ("Merrick" or the "Defendant") for compensatory damages and punitive damages based on claims for: (1) twelve breaches of contract; (2) breach of the implied covenant of good faith and fair dealing; (3) conversion; (4) fraud/fraudulent inducement; (5) constructive fraud; (6) negligent misrepresentation; and (7) deceit. (Compl., ECF No. 5.)

On July 25, 2013, the Defendant moved under Federal Rule of Civil Procedure 12(b)(6) to dismiss the Complaint with prejudice. (Def.'s Mot. to Dismiss ("Def.'s Mot."), ECF No. 27.) On August 22, 2013, the Plaintiff opposed the motion to dismiss and asked, in the alternative, for leave to amend the pleadings. (Pl.'s Opp'n to Mot. to Dismiss ("Pl.'s Opp'n"), ECF No. 36.) The Defendant replied on September 11, 2013. (Def.'s Reply Mem. of Law in Further Supp. of Mot. to Dismiss ("Def.'s Reply"), ECF No. 37.) Oral argument was held on this motion on October 24, 2013. (Tr. of Oct. 24, 2013 Hearing ("Tr. 10/24/13").)

For the foregoing reasons, Merrick's motion to dismiss the breach of contract claim alleged in paragraph 7(f) is DENIED. Merrick's motion to dismiss the breach of contract claims alleged in paragraphs 7(a)-(e), (g)-(l), and paragraph eight is GRANTED. Frontline's request for leave to amend the breach of contract claims alleged in paragraphs 7(a)-(e), (g)-(l), and paragraph eight is GRANTED.

Merrick's motion to dismiss the breach of the implied covenant of good faith and fair dealing claim, the conversion claim, the fraud/fraudulent inducement claim, the constructive fraud claim, the negligent misrepresentation claim, and the deceit claim is GRANTED. Leave to amend the Montana law constructive fraud claim and the Montana law negligent misrepresentation claim is GRANTED. Leave to amend the breach of the implied covenant of good faith and fair dealing claim, the conversion claim, the fraud/fraudulent inducement claim, and the deceit claim is DENIED.

I. BACKGROUND

On August 3, 2012, Frontline, a Nevada corporation with a principal place of business in Montana, entered into a Merchant Independent Sales Organization Agreement ("Agreement") with Merrick, a Utah-based industrial loan bank, for the purpose of establishing a business relationship related to selling Merrick's services for credit card processing. (See Compl., Ex. A ("Agreement") 1, ECF No. 5.) Merrick is a member bank of the Visa, MasterCard, and Discover credit and debit card networks (the "Card Brands"), and its role is to clear and settle merchants' credit and debit card transactions authorized by the Card Brands. (Id.) Frontline is an Independent Sales Organization ("ISO"), which contracted to market Merrick's services to merchant businesses who want to engage in credit and debit card transactions. (Id.) As part of the Agreement, Frontline agreed to recruit merchants and provide support services to those merchants in exchange for a portion of the transaction fees associated with its merchants' credit and debit card transactions. (Def.'s Mot. at 6.) Frontline asserts that Merrick breached the Agreement. In its Complaint, Frontline seeks compensatory damages and punitive damages based on twelve purported breaches of the Agreement as well as claims for an alleged breach of the covenant of good faith and fair dealing, conversion, fraud/fraudulent inducement, constructive fraud, negligent misrepresentation, and deceit. (Compl.¶¶ 2-59.)

On February 13, 2013, Frontline filed the Complaint in Montana state court. (Id. ¶¶ 1-2.) Merrick removed the case to the United States District Court for the District of Montana pursuant to 28 U.S.C. § 1441. (Notice of Removal, ECF No. 1.) The United States District Court has jurisdiction under 28 U.S.C. § 1332 because this is a civil action between citizens of different states in which the matter in controversy exceeds the sum of $75, 000.00, exclusive of interest and costs. The case was transferred to the Southern District of New York after the Montana District Court granted Defendant's motion to transfer venue under 28 U.S.C. § 1404(a), finding that the Agreement contains an enforceable forum selection clause. (Order, May 29, 2013, ECF No. 19.) Currently pending before this Court is the Defendant's motion to dismiss the Complaint.

II. MOTION TO DISMISS THE BREACH OF CONTRACT CLAIMS

A. Legal Standard

"To survive a motion to dismiss, 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 (2009) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570 (2007)). This standard is met "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id . A court should not dismiss a complaint for failure to state a claim if the factual allegations sufficiently "raise a right to relief above the speculative level." Twombly , 550 U.S. at 555.

To survive a motion to dismiss for a breach of contract claim under New York law, the complaint must allege facts which show: "(1) the existence of an agreement, (2) adequate performance of the contract by plaintiff, (3) breach of the contract by defendant, and (4) damages." Eternity Global Master Fund Ltd. v. Morgan Guar. Trust Co. of N.Y. , 375 F.3d 168, 177 (2d Cir. 2004). Conclusory allegations that a defendant breached an agreement are insufficient to support a breach of contract claim. See Berman v. Sugo LLC , 580 F.Supp.2d 191, 202 (S.D.N.Y. 2008) (Patterson, J.) (collecting cases). In adjudicating a motion to dismiss, the court may properly consider any documents attached as exhibits to the pleadings, or incorporated by reference therein. See Fed.R.Civ.P. 10(c); Chambers v. Time Warner, Inc. , 282 F.3d 147 (2d Cir. 2002); Int'l Audiotext Network, Inc. v. Am. Tel. & Tel. Co. , 62 F.3d 69 (2d Cir. 1995) (per curiam). In this case, therefore, it is proper to consider the parties' Agreement, which was attached to the Complaint.

B. Discussion

The Complaint lists twelve purported breaches of the Agreement by Merrick, (Compl. ¶¶ 7(a)-(l)), and makes a request for damages in the amount of $100, 000.00 together with prejudgment interest, costs, and "such additional damages incurred as a result of the breaches of contract." (See Pl.'s Opp'n at 7 (citing Compl. ¶ 8).) For the reasons discussed below, only the breach of contract alleged in paragraph 7(f) survives the motion to dismiss. (Id. ¶ 7(f).) The remainder of the breach of contract claims, found in paragraphs 7(a) through 7(e) and paragraphs 7(g) through 7(l), are dismissed and leave to amend is granted. (Id. ¶¶ 7(a)-(e), ...


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