Harbortouch Payments, LLC v. Denali State Bank

HARBORTOUCH PAYMENTS, LLC,f/k/a UNITED BANK CARD INC. Plaintiff, v. DENALI STATE BANK, Defendant.

Civil Action No. 14-6049 (FLW)

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY

May 19, 2015

MEMORANDUM OPINION

WOLFSON, District Judge.

This is a breach of contract action brought by plaintiff Harbortouch Payments, LLC, ("Plaintiff") against Denali State Bank ("Defendant").¹ Presently before the Court are the following: (1) a motion by Plaintiff for a preliminary injunction; and (2) Defendant's motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(2) for lack of personal jurisdiction or, in the alternative, dismiss the matter in favor of arbitration. For the reasons below, Defendant's motion is granted and Plaintiff's motion is denied.

I. BACKGROUND

Plaintiff is a provider of merchant services, specifically, "Point of Sale" systems, electronic cash registers and credit card processing terminals. Compl. ¶ 1. Plaintiff enters into agreements with merchants (referred to herein at times as "Merchant Agreements") to provide these services on an ongoing basis. Id.

In the course of its business, Plaintiff also enters into referral agreements with other businesses who can refer merchants (i.e., potential clients) to Plaintiff. Id. Defendant, a bank located in Fairbanks, Alaska, entered into such an agreement with Plaintiff's predecessor, United Bank Card Inc. ("United Bank Card"). Id. at ¶ 2, 6-7. Plaintiff and United Bank Card merged on March 27, 2014. Plaintiff was the surviving corporation of the merger and asserts that it is, therefore, party to the relevant agreements by operation of law. ECF No. 13 at ¶ 6; ECF No. 15 at 9.

The parties initially entered into a "Referral Bank Agreement" (the "RBA") on December 21, 2006. Id. at ¶ 6. Thereafter, the parties entered into a Financial Institution Agreement (the "FIA"), which became effective November 30, 2012. Id. at ¶ 7. The RBA and FIA contain the same relevant provisions, and it is alleged that Defendant is equally bound under both agreements. The complaint, and, therefore, the Court herein, refers to the RBA and FIA collectively as the "Agreement."

The Agreement "required Defendant to use its best efforts to locate, investigate and refer potential merchants to Plaintiff." Id. at ¶ 9. Defendant made a number of referrals to Plaintiff that ultimately resulted in Merchant Agreements between various merchants and Plaintiff. See id. at ¶¶ 18-38. In return for its referrals, Defendant received commissions and on-going residual payments from Plaintiff. Id. at ¶ 10, 13. The Agreement terminated November 1, 2013, after Defendant gave notice to Plaintiff of its intention not to renew the Agreement. Id. at ¶ 7.

The complaint alleges that beginning in or about April 2014, several merchants with whom Plaintiff had entered into Merchant Agreements cancelled their accounts with Plaintiff. According to Plaintiff, the cancellations occurred after Defendant referred the merchants to another service provider. Compl. ¶¶ 17-37. The complaint specifically references the followingfive accounts: (1) The Electrician LLC, which accounted for an average monthly revenue to Plaintiff of $233.67; (2) 40-Mile Air Ltd., with average monthly revenue of $1,008.71; (3) RWR Air Inc., with average monthly revenue of $671.00; (4) Industrial Service Corp., with average monthly revenue of $525.83; and (5) Hompesch & Evans, APC, with average monthly revenue of $586.72.

Plaintiff alleges that Defendant's actions constituted a breach of certain provisions in the Agreement prohibiting Defendant from soliciting and converting Plaintiff's merchants and from engaging in conduct imposing financial risk or undue economic hardship on Plaintiff. Under the Agreement, it was an "Event of Default" for Defendant to "engage[] in activities which may impose financial risk ... or which result in undue economic hardship and/or damage to the goodwill" of Plaintiff. Agreement § 7.3. It is also an Event of Default for Defendant "to make any attempt to convert any Merchant from [Plaintiff] to any other entity performing services similar to [Plaintiff]." Id. Further, the Agreement provides that after termination of the Agreement, the "[Defendant] will not solicit any Merchant to terminate a Merchant Agreement for any reason after termination of this Agreement."

At the time of the filing of the complaint, Plaintiff had 118 active and 6 seasonal² merchant accounts that had been referred by Defendant. Id. at ¶ 41. According to Plaintiff, these merchants have a relationship with Defendants, and Plaintiff fears Defendant will seek to convert these merchants to a different service provider.

The Agreement contains an arbitration provision, which provides that "[a]ny dispute or claim arising out of, or in connection with this Agreement will be settled by final and binding arbitration to be held in New Jersey in accordance with the commercial rules of the AmericanArbitration Association." Agreement, § 10.13. In accordance with this provision, Plaintiff has initiated an arbitration proceeding against Defendant.

The Agreement also contains a forum selection clause designating the "federal or state courts of New Jersey" as the forum for adjudicating any disputes "arising ou[t] of or in connection" with the Agreement. Agreement, § 10.7. Plaintiff commenced the instant matter in New Jersey state court, and it was subsequently removed to this Court. In this action, Plaintiff seeks an injunction prohibiting Defendant "from soliciting and converting" the remaining 124 merchants and from "engaging in other activities that may impose financial risk and undue economic hardship and/or damage the goodwill of Plaintiff as well as compensatory damages "to the extent the same are not addressed" in the pending arbitration. Compl. at p. 11.

II. ANALYSIS

1. Personal Jurisdiction

Defendants moves for dismissal under Federal Rule of Civil Procedure 12(b)(2), arguing that the Court lacks personal jurisdiction over Defendant, a bank chartered in Alaska with its principal place of business in Alaska. Defendant argues that it has insufficient contacts with the State of New Jersey for the Court to exercise jurisdiction.

Where, as here, a federal court has diversity jurisdiction pursuant to 28 U.S.C. § 1332, a "'federal district court may assert personal jurisdiction over a non-resident of the state in which the court sits to the extent authorized'" by that state's law. Fisher v. Teva PFC SRL, 212 Fed. Appx. 72, 75 (3d Cir. 2006) (quoting Provident Nat'l Bank v. Cal. Fed. Sav. & Loan Assoc., 819 F.2d 434, 436 (3d Cir. 1987)). To that end, the New Jersey Long-Arm Statute grants jurisdiction over non-residents to the full extent of the Due Process Clause of the United States Constitution. Miller Yacht Sales, Inc. v. Smith, 384 F.3d 93, 96 (3d Cir.2004) (citing N.J. Court Rule 4:4-4(c)).Under the Due Process Clause of the Fourteenth Amendment, a federal court has personal jurisdiction over a non-resident defendant only where the defendant has "certain minimum contacts with [the forum] such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.'" Provident Nat'l Bank, 819 F.2d at 436-37 (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945)).

Two types of personal jurisdiction exist: general and specific. Helicopteros Nacionales de Colombia S.A. v. Hall, 466 U.S. 408, 414, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984). Not long ago, the Supreme Court refined the standard for finding general jurisdiction in Daimler AG v. Bauman, --- U.S. ---, ---, 134 S.Ct. 746, 751, 187 L.Ed.2d 624 (2014). According to Bauman, general jurisdiction refers to a court's power to "hear any and all claims" against an out-of state entity or person when its "affiliations with the State are so continuous and systematic as to render [it] at home in the forum state." Id. (internal quotation marks and citation omitted) (emphasis added). By contrast, specific jurisdiction exists when the plaintiff's claim arises out of the defendant's activities within the forum such that the defendant could reasonably anticipate being haled into the state's courts. Vetrotex Certainteed Corp. v. Consl. Fiber Glass Prods. Co., 75 F.3d 147 (3d Cir.1995). When a jurisdictional defense is raised, "the plaintiff bears the burden of establishing with reasonable particularity sufficient contacts between the defendant and the forum state to support jurisdiction." Provident Nat'l Bank v. California Federal Sav. & Loan Assoc., 819 F.2d 434, 437 (3d Cir. 1987) (citing Gehling v. St. George's School of Medicine, Ltd., 773 F.2d 539, 542 (3d Cir.1985)).

In opposition to Defendant's motion, Plaintiff points to the forum selection clause in the Agreement in support of its assertion that the Court may exercise personal jurisdiction over Defendant. Personal jurisdiction is waivable, and a party can give "express or implied consent tothe personal jurisdiction of the court" through a "variety of legal arrangements," which include forum selection clauses in agreements executed by the parties. Ins. Corp. of Ir., Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 703, 102 S.Ct. 2099, 72 L.Ed.2d 492 (1982) (quoting Nat'l Equip. Rental, Ltd. v. Szukhent, 375 U.S. 311, 316, 84 S.Ct. 411, 11 L.Ed.2d 354 (1964)) (internal quotation marks omitted). In the instant matter, the parties' Agreement provides that "[t]he exclusive forum and venue for the adjudication of any rights, claims or disputes arising out of or in connection with this Agreement shall be the federal and state courts of New Jersey." Agreement § 10.7.

It is well established that a forum selection clause is "prima facie valid and should be enforced unless enforcement is shown by the resisting party to be 'unreasonable' under the circumstances." The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972). To show that a forum selection clause...