Spread Enters., Inc. v. First Data Merch. Servs. Corp.

SPREAD ENTERPRISES, INC., d/b/a OLA BRASIL, individually and on behalf of all others similarly situated, Plaintiff,

v. FIRST DATA MERCHANT SERVICES CORPORATION, a Florida corporation,and WELLS FARGO BANK, N.A., a foreign corporation, Defendants.

11-CV-4743 (ADS)(ETB)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK

Date: August 22, 2012

MEMORANDUM OF DECISION AND ORDER

APPEARANCES:

Kaplan Fox & Kilsheimer, LLP

Attorneys for the Plaintiff

By: Frederic S. Fox, Esq., Of Counsel

Law Office of Lawrence B. Lambert

Attorney for the Plaintiff

By: Lawrence B. Lambert, Esq., Of Counsel

Wites & Kapetan, P.A.

Attorneys for the Plaintiff

By: Marc A. Wites, Esq., Of Counsel

Fox Rothschild

Attorneys for the Defendants

By: David H. Colvin, Esq.,

Scott L. Vernick, Esq., Of Counsel

By: Oksana Gaussy Wright, Esq., Of Counsel

SPATT, District Judge.

The Plaintiff Spread Enterprises, Inc. ("Spread" or "the Plaintiff") commenced this action against the Defendants First Data Merchant Services Corporation ("FDMS") and Wells Fargo Bank, N.A. ("Wells Fargo" and, together with FDMS, "the Defendants"), and former Defendant Bankcard Brokers, Inc. ("Bankcard") alleging claims for breach of contract, breach of the covenant of good faith and fair dealing, unjust enrichment, and violation of New York General Business Law § 349 ("GBL § 349") on behalf of itself and all others similarly situated. The Defendants now move for judgment on the pleadings pursuant to Federal Rule of Civil Procedure ("Fed. R. Civ. P.") 12(c), dismissing the Plaintiff's breach of the covenant of good faith and fair dealing, unjust enrichment, and GBL § 349 claims.

For the reasons set forth below, the Defendants' motion for judgment on the pleadings is granted.

I. BACKGROUND

The Plaintiff Spread is a corporation that operates a website called www.olabrasil.com, through which it sells pre-paid minutes for international phone calls. Customers pay for these minutes via credit card. The Defendant FDMS is a corporation that processes credit cardpayments on behalf of merchants through its "Omaha Platform." The Defendant Well Fargo is a Member Bank of several associations for credit card transactions.

On June 6, 2008, Spread signed a Merchant Processing Application and Agreement with FDMS for the use of FDMS's credit card processing services. Under the agreement, Wells Fargo functions as a Merchant or Member Bank, and accepts credit card payments from card issuer banks on Spread's behalf. Spread agreed to pay several fees in return for these services. The Merchant Agreement is a standard form provided by FDMS, and it incorporates a Program Guide which is allegedly provided on FDMS's website.

According to the Plaintiff, the Merchant Agreement limited per item "Authorization and Capture Transaction Fees" to $0.20 per item. However, according to the Plaintiff, Spread was charged an additional, non-contracted-for, $0.20 per item fee. The Plaintiff alleges that this doubled charge was built in to FDMS's Omaha Platform, and that many of the other Merchants who used FDMS's credit card processing services were also assessed this extra fee. According to the Plaintiff, FDMS shares a portion of these per item fees with Wells Fargo.

On September 28, 2011, Spread commenced the present suit, pursuing claims for breach of contract, breach of the covenant of good faith and fair dealing, unjust enrichment, and violation of GBL § 349. The law suit is filed on behalf of Spread and "[a]ll Merchants nationwide that are parties to Merchant Agreements with Defendant FDMS and were charged Transaction Fees in excess of that allowed by their respective Merchant Agreements." (Am. Compl. 11). On December 14, 2011, Spread filed a notice of voluntary dismissal at to the Defendant Bankcard. On December 16, 2011, Spread filed its amended complaint, removing the Defendant Bankcard from its statement of claims. On February 17, 2012, the Defendant FDMS moved for judgment on the pleadings pursuant to Fed. R. Civ. P. 12(c), dismissing the Plaintiff'sbreach of the covenant good faith and fair dealing, unjust enrichment, and GBL § 349 claims. On March 19, 2012 the Defendant Wells Fargo moved to join the Defendant FDMS's motion for judgment on the pleadings.

II. LEGAL STANDARDS

The Defendants move for judgment on the pleadings pursuant to Fed. R. Civ. P. 12(c). In general, "the standard for addressing a Rule 12(c) motion for judgment on the pleadings is the same as that for a Rule 12(b)(6) motion to dismiss for failure to state a claim." Cleveland v. Caplaw Enters., 448 F.3d 518, 521 (2d Cir. 2006).

Under the now well-established Twombly standard, a complaint should be dismissed only if it does not contain enough allegations of fact to state a claim for relief that is "plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S. Ct. 1955, 167 L.Ed.2d 929, 570 (2007). The Second Circuit has explained that, after Twombly, the Court's inquiry under Rule 12(b)(6) is guided by two principles. Harris v. Mills, 572 F.3d 66 (2d Cir. 2009) (citing Ashcroft v. Iqbal, 556 U.S. 662, 129 S. Ct. 1937, 1949, 173 L.Ed.2d 868 (2009)).

"First, although 'a court must accept as true all of the allegations contained in a complaint,' that 'tenet' 'is inapplicable to legal conclusions,' and '[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.'" Id. at 72 (quoting Iqbal, 129 S. Ct. at 1949). "'Second, only a complaint that states a plausible claim for relief survives a motion to dismiss' and '[d]etermining whether a complaint states a plausible claim for relief will ... be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.'" Id. (quoting Iqbal, 129 S. Ct. at 1950). Thus, "[w]hen there are well-pleaded factual allegations, a court should assume their veracity and ... determine whether they plausibly give rise to an entitlement of relief." Iqbal, 129 S. Ct. at 1950.

In considering a motion to dismiss, this Court accepts as true the factual allegations set forth in the complaint and draws all reasonable inferences in the Plaintiff's favor. Zinermon v. Burch, 494 U.S. 113, 118, 110 S. Ct. 975, 979, 108 L.Ed.2d 100 (1990); In re NYSE Specialists Secs. Litig., 503 F.3d 89, 91 (2d Cir. 2007). Only if this Court is satisfied that "the complaint cannot state any set of facts that would entitle the plaintiff to relief" will it grant dismissal pursuant to Rule 12(b)(6). Hertz Corp. v. City of N.Y., 1 F.3d 121, 125 (2d Cir. 1993). The issue on a motion to dismiss is "not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Todd v. Exxon Corp., 275 F.3d 191, 198 (2d Cir. 2001) (quoting Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S. Ct. 1683, 40 L.Ed.2d 90 (1974)).

III. DISCUSSION

A. Motion for Joinder

As an initial matter, the Court addresses the Defendant Wells Fargo's motion for joinder in and with the Defendant FDMS's motion for judgment on the pleadings. The Plaintiff does not oppose the motion for joinder (though, of course, the Plaintiff opposes the motion for judgment on the pleadings itself). As such, Wells Fargo's motion for joinder is granted.

B. Breach of the Covenant of Good Faith and Fair Dealing

The Defendants move for judgment on the pleadings with respect to the Plaintiff's claim for breach of the covenant of good faith and fair dealing, asserting that it is duplicative of the Plaintiff's breach of contract claim.

New York law implies a covenant of good faith and fair dealing "pursuant to which neither party to a contract shall do anything which has the effect of destroying or injuring the right of the other party to receive the fruits of the contract." Thyroff v. Nationwide Mut. Ins.Co., 460 F.3d 400, 407 (2d Cir. 2006) (citation omitted). The covenant "can only impose an obligation consistent with other mutually agreed upon terms in the contract. It does not add to the contract a substantive provision not included by the parties." Broder v. Cablevision Sys. Corp., 418 F.3d 187, 198-99 (2d Cir.2005) (citation omitted).

Under New York law, a claim for breach of an implied covenant of good faith and fair dealing does not provide a cause of action separate from a breach of contract claim. "[P]arties to an express contract are bound by an implied duty of good faith, but breach of that duty is merely a breach of the underlying contract." Harris v. Provident Life & Accident Ins. Co., 310 F.3d 73, 80 (2d Cir. 2002) (citing Fasolino Foods Co., Inc., v. Banca Nazionale del Lavoro, 961 F.2d 1052, 1056 (2d Cir. 1992)); see also L-7 Designs, Inc. v. Old Navy, LLC, 647 F.3d 419, 433 n. 17 (2d Cir. 2011) ("[B]reach of [the duty of good faith and fair dealing] is merely a breach of the underlying contract.") (internal citations and quotations omitted)).

A claim for breach of the covenant of good faith and fair dealing will be duplicative of a breach of contract claim where they are based on the same allegations or where the same conduct is the predicate for both claims. McGee v. State Farm Mut. Auto. Ins. Co., No. 09-CV-3579, 2011 WL 5409393, at *8 (E.D.N.Y. Nov. 8, 2011) ("New York law does not recognize a separate claim for breach of the implied duty of good faith and fair dealing based on the same facts as a claim for breach of contract") (internal citations omitted); L-7 Designs, 647 F.3d at 433 n. 17 ("Because L-7's claim for breach of the implied covenant of good faith and fair dealing (Count IV) is based on the same facts as its claim for breach of contract, it should have been dismissed as redundant.") (citing Harris, 310 F.3d at 81 ("New York law, as discussed above, does not recognize a separate cause of action for breach of the implied covenant of good faith and fair dealing when a breach of contract claim, based upon the same facts, is also pled")); Hallv. Earthlink Network, Inc., 396 F.3d 500, 508 (2d Cir. 2005) ("If the allegations do not go...