-RER Madison Who's Who of Excutive and Professional Throughout the World, Inc. v. Securenet Payment Systems, LLC, No. 1:2010cv00364 - Document 9 (E.D.N.Y. 2010)

Court Description: ORDER granting 4 Motion to Dismiss. Ordered by Senior Judge I. Leo Glasser on 5/24/2010. (Keller, Matthew)

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-RER Madison Who's Who of Excutive and Professional Throughout t...urenet Payment Systems, LLC Doc. 9 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK ------------------------------------------------x MADISON WHO’S WHO OF EXECUTIVES AND PROFESSIONALS THROUGHOUT THE WORLD, INC., Plaintiff, MEMORANDUM AND ORDER 10 -CV-364 (ILG) -againstSECURENET PAYMENT SYSTEMS, LLC and MARC POTASH, Defendants. ------------------------------------------------x GLASSER, United States Senior District J udge: In this diversity action plaintiff Madison Who’s Who of Executives and Professionals Throughout the World, Inc. (“Madison”) alleges that defendant SecureNet Paym ent System s, LLC and its President and Chief Executive Officer Mark Potash (collectively, “SecureNet”) wrongfully withheld funds from Madison and wrongfully charged the credit cards of Madison’s custom ers, causing Madison to suffer the loss of both its custom ers and its good reputation. Madison seeks dam ages in excess of $ 75,0 0 0 and declaratory and equitable relief. SecureNet now m oves to dism iss the action pursuant to Fed.R.Civ.P. 12(b)(3) and (6) or, in the alternative, to transfer venue to the district court of the District of Maryland pursuant to 28 U.S.C. § 140 4. As a second alternative, SecureNet m oves for a stay pending arbitration pursuant to 9 U.S.C. § 3. For the reasons set forth below, SecureNet’s m otion to dism iss is GRANTED. BACKGROU N D The facts as set forth below are drawn from the com plaint, the allegations of which the Court accepts as true, except where otherwise noted, solely for purposes of this m otion to dism iss. Madison is a New York corporation in the business of “providing business-to-business and sm all business networking directories” to its custom ers. Com plaint ¶ 1. SecureNet is a 1 Dockets.Justia.com Maryland corporation which provides credit card processing services for m erchants. Id. ¶ 13. In Septem ber 20 0 7, Madison entered into an agreem ent with SecureNet whereby SecureNet becam e the processor for credit card transactions between Madison and its custom ers. See id. Ex. A (“Merchant Agreem ent”). Three of the pages attached to the com plaint as the Merchant Agreem ent contain the signatures of Madison’s principals Matthew Schwartz or Scott Minuta. On the first of these signed pages (Ex. A at 2) the m erchant is instructed to “Sign and attach the DISCLOSURE FORM provided with the TERMS AND CONDITIONS FOR MERCHANTS.” Messrs. Schwartz’s and Minuta’s signatures appear on this page. On the last signed page (Ex. A at 6), the Agreem ent states in pertinent part: As the m erchant you are responsible for ensuring that you stay com pliant with cardholder data security and storage requirem ents, as well as m aintaining fraud and chargebacks below thresholds. As the Merchant you are also responsible for reviewing and understanding the term s of your Merchant Agreem ent and following the guidelines set forth in your Merchant Operating Guide. ... By signing below, I agree that I have received a copy of m y Term s & Conditions for Merchants along with a copy of the Merchant Operating Guide, which is a part of your SecureNet Merchant Agreem ent. I agree to adhere to all of the guidelines outlined in the Term s & Conditions for Merchants and all of the transaction rules outlined in the Merchant Operating Guide. Should I have any questions regarding these docum ents and the inform ation contained within I m ay contact m y Sales Agent or I m ay contact SecureNet directly. Id. Mr. Schwartz’s signature appears directly below this excerpt. The Term s & Conditions for Merchants (“Terms & Conditions”) referenced above contains m any additional provisions, the m ost directly applicable to the m otions at hand being section 16.10 which contains choice of law and forum selection clauses stating in pertinent part: This Agreem ent will be governed by and construed in accordance with the laws of the State of Maryland without reference to conflict of law provisions. Any action, proceeding, arbitration, or m ediation relating to or arising from this Agreem ent m ust be brought, held or otherwise occur in the federal judicial district that includes Montgom ery County, Rockville, Maryland. 2 Defendants’Motion to Dism iss, or in the Alternative to Transfer or Stay Proceedings (“Mot.”), Ex. 1 at 10 .1 In August 20 0 9, a dispute arose with respect to SecureNet’s processing of certain credit card transactions authorized by Madison’s custom ers. SecureNet had charged the custom ers’ credit cards for purchases of Madison’s goods an d services, but SecureNet did not subsequently turn these charged am ounts over to Madison. Com pl. ¶¶ 22-23. In addition, SecureNet rem oved $ 19,776.30 from Madison’s bank account. Id. SecureNet’s explanation for these actions was that it was establishing a “reserve account” composed of $ 10 6,0 0 0 of Madison’s assets in the event that one of Madison’s custom ers initiated a “chargeback.”2 Id. ¶ 25. Madison alleges that, without access to this $ 10 6,0 0 0 , it could not fulfill its custom ers’ orders and was forced to refund $ 10 4,425 in custom er purchases. Id. ¶¶ 31-32. Madison then inform ed SecureNet of its intention to term inate the Merchant Agreem ent. Id. ¶¶ 33-34. In response, SecureNet threatened to im pose a $ 360 ,0 0 0 term ination fee and began charging Madison’s clients’ credit cards for goods and services even though Madison had already inform ed SecureNet that these transactions had been cancelled and refunded. Id. ¶¶ 3738. Madison alleges that, because these charges appeared in Madison’s nam e on its clients’ credit card statem ents, it appeared to them that they were being inappropriately charged by Madison. Id. ¶ 40 . As a result of these charges, Madison claim s that it has lost approxim ately 20 9 clients, approxim ately $ 1,70 5,770 .22 in present and future sales as well as dam ages to its nam e, reputation and goodwill. Id. ¶¶ 41-47. The com plaint pleads causes of action for (1) fraud; (2) conversion, civil theft and m isappropriation; (3) unjust enrichm ent; (4) constructive trust; (5) 1 While the Court is norm ally confined to factual m atter contained in or attached to the com plaint, in this case the Court finds it appropriate to consider the Term s & Conditions included in SecureNet’s m otion. See infra at 6-7. 2 According to the Term s & Conditions a chargeback is “a reversal of a Card sale [the m erchant] previously presented. . . .” Term s & Conditions § 17.5. 3 m oney had and received; (6) breach of fiduciary duty; (7) tortious interference with contract; (8) tortious interference with business relations; and (9) violation of New York State General Business Law § 349. SecureNet now m oves the Court to dism iss this action based upon the forum selection clause (“FSC”) contained in § 16.10 of the Term s & Conditions. In the alternative, SecureNet seeks a transfer of venue (also pursuant to the FSC) to the United States District Court for the District of Maryland and, as a second alternative, a stay pending arbitration. SecureNet has already initiated an arbitration under the Merchant Agreem ent before the National Arbitration Forum . Mot. Ex. 2. D ISCU SSION To determ ine the appropriate resolution of th e m otions before the Court it m ust answer three questions. First, whether the Term s & Conditions and the provisions contained therein are part of the agreem ent that exists between Madison and SecureNet and, if so, whether the FSC contained in those Term s & Conditions applies to this action. If the answer to these two questions is yes, then the Court m ust decide whether to dism iss the action so that it m ay be brought in an appropriate forum pursuant to the Merchant Agreem ent or to transfer the action to the federal district court in Maryland. The Court answers each of these questions seriatim . As an initial m atter, Madison contends that the Court m ay not consider the Term s & Conditions at all in resolving these m otions because it did not include them in its com plaint. The Court disagrees. It is true that on a m otion to dism iss the Court’s attention is confined to the com plaint. However, the com plaint “is deem ed to include any written instrum ent attached to it as an exhibit or any statem ents or docum ents incorporated in it by reference.” Int’ Audiotext Network, Inc. v. Am erican Tel. and Tel. Co., 62 F.3d 69, 72 (2d Cir. 1995) (citing Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 47 (2d Cir. 1991)). As discussed m ore fully infra the m ultiple references to the Term s & Conditions in the portions of the Merchant Agreem ent 4 attached to the com plaint are m ore than sufficien t in this case to incorporate by reference the form er into the latter. I. W h e th e r th e FSC Is Part o f th e Agre e m e n t Be tw e e n th e Partie s Madison repeatedly presses the argum ent that it cannot be bound by the FSC in the Term s & Conditions because that docum ent is not a part of its agreem ent with SecureNet. Madison alleges that it never received a copy of the Term s & Conditions and that, accordingly, the agreem ent consists only of the signed pages Madison attached to the Com plaint and “no term s, conditions or other docum ents were part of the contract between Plaintiff and Defendants.” Opp. at 5. This argum ent ignores the fundam ental precept of contract law that docum ents m ay be incorporated by reference into an executed agreem ent. See PaineWebber Inc. v. Bybyk, 81 F.3d 1193, 120 1 (2d Cir. 1996) (“‘a paper referred to in a written instrum ent and sufficiently described m ay be m ade a part of the instrum ent as if incorporated into the body of it’”) (quoting J ones v. Cunard S.S. Co., 238 A.D. 172, 173 (2d Dep’t 1933) (New York law); Housing Authority for Prince George’s County v. William s, 784 A.2d 621, 625 (Md. App. 20 0 1) (“It is a long recognized rule that where a writing refers to another docum ent, that other docum ent is to be interpreted as part of the writing.”) (quoting Wheaton Triangle Lanes, Inc. v. Rinaldi, 20 4 A.2d 537, 540 (Md. 1964)) (Maryland law). Here, it is apparent that the Term s & Conditions were incorporated by reference into the Merchant Agreem ent. There are two references to the Term s & Conditions in the signed pages that Madison attached to the com plaint. On the second page of Exhibit A of the com plaint, just inches below the signatures of Messrs. Schwartz and Minuta, appear the words: “Sign and attach the DISCLOSURE FORM provided with the TERMS AND CONDITIONS FOR MERCHANTS.” On the last page of that exhibit, Mr. Schwartz’s signature appears below language stating that, by that signature, he agreed that he had received a copy of the Term s & Conditions and that he 5 would adhere to all of the guidelines outlined therein. Accordingly, the Term s & Conditions were incorporated by reference into the Merchant Agreem ent and thereby becam e a part of that agreem ent. The facts here are distinguishable from Martin v. Citibank, N.A., 64 A.D.3d 477 (1st Dep’t 20 0 9), upon which Madison relies. The issue in Martin was whether there was a triable issue of fact as to whether the plaintiff received prior to execution one page of a m ulti-page lease. Unlike the facts of this case, the plaintiff steadfastly m aintained that he had not received the page. In contrast, Madison explicitly agreed when it signed the Merchant Agreem ent that it had received the Term s & Conditions and would abide by its provisions.3 In Generale Bank, New York Branch v. Wassel, 779 F.Supp. 310 (S.D.N.Y. 1991), J udge Leisure of the Southern District of New York rem arked upon the recurring problem in the courts “of people seeking to avoid the legal im pact of their signatures.” He quoted an old decision of the New York Court of Appeals: Ordinarily, the signer of a deed or other instrum ent, expressive of a jural act, is conclusively bound thereby. That his m ind never gave assent to the term s expressed is not m aterial. If the signer could read the instrum ent, not to have read it was gross negligence; if he could not read it, not to procure it to be read was equally negligent; in either case, the writing binds him . . . . Id. at 315 (quoting Pim pinello v. Swift & Co., 253 N.Y. 159 (1930 )) (citations om itted in original). Madison cannot avoid the natural consequences of its signature on the Merchant Agreem ent affirm ing that it had received the Term s & Conditions and agreeing to adhere to it. 4 3 Madison’s citation to Kargo, Inc. v. Pegaso PCS, S.A. de C.V., No. 0 5 Civ. 10 528, 20 0 7 WL 1490 124 (S.D.N.Y.May 21, 20 0 7) in support of allowing discovery on this issue is unavailing. That case appears to have involved attem pts by Magistrate J udge Eaton of the Southern District of New York to resolve a com plicated discovery issue in a case where discovery was already in progress. The only docum ent necessary to the resolution of the present m otions is the Merchant Agreem ent attached to the com plaint in which Madison by its signature agreed that it had received the Term s & Conditions and would abide by its term s. 4 To the extent that the com plaint alleges that Madison never received the Term s & Conditions, see Com pl. ¶¶ 5, 19-21, 92, the Court need not accept as true “those allegations that are contradicted by the docum ents” attached to the com plaint. Fowlkes v. Rodriguez, 584 F. Supp. 6 Im m ediately above Mr. Schwartz’s signature the Merchant Agreem ent advised the m erchant that it could either contact a sales agent or SecureNet directly if it had any questions about the Term s & Conditions. If Madison agreed to abide by this docum ent without first securing a copy of it for review or even contacting SecureNet for any inform ation then such an om ission of due diligence was negligent and will not relieve Madison of its obligations under the agreem ent. The Court finds that the Term s & Conditions, including the FSC therein, are a part of the agreem ent between the parties. II. W h e th e r th e FSC is Ap p licable to th is Actio n By its term s, the FSC in this case encom passes “[a]ny action, proceeding, arbitration, or m ediation relating to or arising from this Agreem ent” and, as to those proceedings, requires a forum “in the federal judicial district that includes Montgom ery County, Rockville, Maryland.” The Court has little difficulty in concluding that this action both relates to and arises from the Merchant Agreem ent. It is sufficient m erely to point out that Madison attached the Merchant Agreem ent to its com plaint and that agreem ent form s the sole basis for a legal relationship between the parties with respect to the transactions com plained of. Madison’s attem pt to avoid operation of the FSC sim ply by om itting a cause of action sounding in breach of contract is futile. The Second Circuit has previously rejected a claim that “only allegations of contractual violations fall within the scope of” forum selection clauses sim ilar to the FSC contained in the Merchant Agreem ent. See Roby v. Corporation of Lloyd’s, 996 F.2d 1353, 1361 (2d Cir. 1993). Accordingly, the FSC in the Merchant Agreem ent applies to this action. 2d 561, 574 (E.D.N.Y. 20 0 8); Lin v. Interactive Brokers Group, Inc., 574 F. Supp. 2d 40 8 , 416 (S.D.N.Y. 20 0 8); Steinberg v. PRT Group, Inc., 8 8 F. Supp. 2d 294, 30 0 (S.D.N.Y. 20 0 0 ). Madison’s signature directly underneath language affirm ing that it had received and would abide by the Term s & Conditions plainly contradicts the allegations of the com plaint suggesting otherwise. 7 III. W h e th e r th e Co u rt Sh o u ld D is m is s th is Actio n o r Tran s fe r it to th e D is trict o f Marylan d Having found that the FSC is valid and applies to this action, the Court m ust determ ine the appropriate procedure for its enforcem ent. SecureNet asks for dism issal in the first instance and for a transfer of venue as an alternative rem edy. “The court m ust weigh in each case whether dism issal or transfer is the m ost efficient and just m eans of enforcing” a forum selection clause. Licensed Practical Nurses, Technicians and Health Care Workers of N. Y., Inc. v. Ulysses Cruises, Inc., 131 F.Supp.2d 393, 40 9 (S.D.N.Y. 20 0 0 ). The Court finds that under the circum stances of this case dism issal is the appropriate rem edy. SecureNet has already filed an arbitration proceeding against Madison asserting claim s for breach of the Merchant Agreem ent. Madison m ay prefer to litigate its claim s against SecureNet as counterclaim s in that proceeding or it m ay choose to re-file this action in the federal judicial district of Maryland pursuant to the FSC. The Court will not presum e to select a proper forum for Madison; it is enough for presen t purposes that the Court finds that this forum is an im proper one. Accordingly, SecureNet’s motion to dism iss is granted. CON CLU SION For the reasons set forth above, the defendants’ motion to dism iss is GRANTED. SO ORDERED. Dated: Brooklyn, New York May 24, 20 10 / s/ I. Leo Glasser United States Senior District J udge 8 Co p ie s o f th e fo re go in g m e m o ran d u m a n d o rd e r w e re e le ctro n ically s e n t to : Counsel for the Plaintiff J onathan C. Uretsky Phillipson & Uretsky, LLP 111 Broadway, 8th Floor New York, NY 10 0 0 6 Counsel for the Defendant J am es Patrick Gillece Whiteford Taylor & Preston LLP Seven St. Paul Street Baltim ore, MD 2120 2 9

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