Trifecta Mktg. Group, LLC v American Credit Card Processing Corp.

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Trifecta Mktg. Group, LLC v American Credit Card Processing Corp. 2012 NY Slip Op 31601(U) June 4, 2012 Supreme Court, Nassau County Docket Number: 5221-12 Judge: Timothy S. Driscoll Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication. [* 1] SUPREME COURT - STATE OF NEW YORK SHORT FORM ORDER Present: HON. TIMOTHY S. DRISCOLL Justice Supreme Court ------------------------------------------------------------------- x TRIFECTA MARKETING GROUP , LLC, TRIAL/IAS PART: 16 NASSAU COUNTY Plaintiff, Index No: 5221- - against - Motion Seq. No. Submission Date: 5/21/12 AMERICAN CREDIT CARD PROCESSING CORPORATION, AMERICAN CREDIT CARD PROCESSING CORPORATION II , AMERICAN CREDIT CARD PROCESSING CORPORATION III and MERRCK BANK, N. Defendants. --------------- --------------------------------------------------- x The following papers have been read on this Order to Show Cause Order to Show Cause , Affrmation in Support Affidavit in S u ppo rt an d Exhibits......................................................... Affidavit in Opposition and Exhibits............................................ Affirmation in Opposition and Exhibit........................................... This matter is before the Court for decision on the Order to Show Cause filed by Plaintiff Trifecta Marketing Group, LLC (" Trifecta" or " Plaintiff' ) on April 24 , 2012 and submitted on May 21 , 2012. 1 For the reasons set forth below , the Court denies Plaintiffs Order to Show Cause in its entirety and vacates the temporary restraining order issued on April 24 , 2012 and 1 Pursuant to a so-ordered stipulation dated April 30 , 2012 (" Stipulation ) (Ex. B to Murray Aff. in Opp. the caption was amended to change the Plaintiff's name from Trifecta Marketing Group, Inc. to Trifecta Marketing Group, LLC. In addition , pursuant to the Stipulation , Plaintiff discontinued this action , without prejudice , against Defendants American Credit Card Processing Corporation II and American Credit Card Processing Corporation II. [* 2] amended on April 30 , 2012. BACKGROUND Relief Sought A. Plaintiff moves for an Order directing Defendants to 1) retract the 1099 forms for tax year 2011 issued to Plaintiffs or distribute the income set forth therein; 2) provide to Plaintiff an accounting of all monies received on its behalf; and 3) cease and desist from charging consumers without authorization on behalf of Plaintiff, that once did business with Plaintiff. The Stipulation , which amended the temporar restraining order issued by the Court on April 24 , 2012 , also provides that Defendants may process credit card transactions on behalf of Plaintiff, but may not debit the Plaintiff in any way other than from the Plaintiff s funds that Defendants currently acknowledge holding (" TRO" Defendants oppose Plaintiff s Order to Show Cause B. The Paries ' History The Verified Complaint (" Complaint" ) (Ex. A to Sklavos Aff. in Supp. ) alleges as follows: 2 Defendant American Credit Card Processing Corporation (" ACCPC" ) is engaged in business as a merchant account holder. In or about June of 20 11 , Plaintiff hired ACCPC to act as a merchant account receiving credit card payments on behalf of Plaintiff. Pursuant to that ACCPC arrangement , the credit card payments were received by ACCPC on Plaintiffs behalf. received the money as the Plaintiffs agent and agreed to remit it to Plaintiff, after deducting fees related to credit card processing. ACCPC currently holds approximately $200 000 in credit card payments belonging to Plaintiff and refuses to release those funds to Plaintiff despite Plaintiffs request. In the first cause of action , Plaintiff alleges that Defendants have converted those funds. In the second cause of action , Plaintiff alleges that Defendants have breached their contract with Plaintiff. 3 2 In light of the discontinuance of the action against ACCPC II and ACCPC II , the Court has not outlined the allegations in the Complaint against those entities. 3 The Complaint does not specify which allegations are asserted against ACCPC and which are asserted against Defendant Merrick Bank , N. A. (" Merrick Bank" ) and refers to " Defendant(s)" in all of the allegations in the Complaint. [* 3] In support of the motion , counsel for Plaintiff (" Plaintiff s Counsel" ) affrms that Defendant entered into a contract with Plaintiff to process the credit card purchases by Plaintiffs customers , and to credit Plaintiffs account with the proceeds. Plaintiff has clients who authorized Plaintiff to charge their credit cards for various sums in exchange for providing services , specifically monthly memberships to a discount club and other ventures. The clients credit cards were charged but the clients ' money was never provided to Plaintiff. Instead , after ACCPC processed the credit card charges , Defendants wrongfully kept those funds although it was the clients ' intent to give those funds to Plaintiffs. Plaintiffs Counsel affirms further that through its agent ACCPC , Merrick Bank was the bank handling the banking transactions at issue. Plaintiff s Counsel suggests that Defendants wil argue that there were certain chargebacks " (Sklavos Aff. in Supp. at 6). A charge back occurs when a credit charge is reversed after it has been processed as a valid charge. Generally, if a consumer makes a complaint or disputes a charge , he is issued a credit. Plaintiff s Counsel affirms that Defendant has advised Plaintiffs Counsel of its position regarding the charge backs , specifically that Defendants are permitted to withhold payments from Plaintiff due to excessive chargeback activity. Plaintiffs Counsel affirms , however , that Plaintiff ceased using the services of ACCPC as of September of 2011. Plaintiff s Counsel affirms , fuher , that Plaintiff has learned that the chargebacks to which ACCPC refers were "the result of their own il-advised activity" (Sklavos Aff. in Supp. at 8). Instead of providing Plaintiffs customers with refunds after a chargeback occurred , ACCPC , without Plaintiffs authorization , continues to charge Plaintiffs customers for purchases that they do not want. Plaintiffs Counsel notes that Defendants have access to Plaintiffs bank accounts , and affirms that disputed chargebacks have not been deducted from the monies held by the Defendants , but rather have been deducted directly from Plaintiff s individual ban account. Plaintiff s Counsel submits that if Defendants continue to charge Plaintiff s customers in this fashion , Plaintiff will go out of business. Plaintiffs Counsel avers , September of2011. further , that no funds have been released to Plaintiff since Plaintiffs Counsel submits that the requested injunctive relief is appropriate to ensure that Defendants do not charge any additional clients of Plaintiff, particularly in light of [* 4] the fact that Plaintiff has terminated its relationship with ACCPC. Plaintiff s Counsel affirms that in February of 20 12 , Merrick Bank issued 1099 forms to the Plaintiff totaling $272 209. 00 (Ex. E to Sklavos Aff. in Supp. ). Plaintiffs Counsel argues that Defendants have advised the Internal Revenue Service and New York State that it has distributed those funds when , in fact , they have not. Alois R. Rubenbauer (" Rubenbauer ), a principal of Plaintiff, affirms the truth of the affirmations in the Affirmation in Support of Plaintiff s Counsel. He affrms that Defendants , as Plaintiffs agent , have accepted payments from Plaintiffs clients but have refused to provide Plaintiff with an accounting regarding those payments. With respect to Defendants ' claims that they are holding the funds due to certain chargebacks, Rubenbauer notes that Defendants have not deducted funds from the funds they are holding, but rather from Plaintiff s own operating account. Rubenbauer affirms that these funds are crucial to the continued viability of Plaintiff. In opposition , Michael Murray (" Murray ), a manager of ACCPC , affirms that the Court should deny Plaintiffs application on several grounds. ACCPC is a credit card processor for Visa and MasterCard. On June 15 2011 , Plaintiff entered into three (3) credit card Visa and MasterCard processing agreements (" Agreements ) with ACCPC (Ex. A to Murray Aff. in Opp. ). Almost immediately, ACCPC received chargeback claims in which Plaintiffs customers claimed that their credit card transactions with the Plaintiff were fraudulent , or that the services that they purchased had not been provided. Under ACCPC's Agreement with Visa and MasterCard , ACCPC is required to investigate those claims and , if ACCPC is not satisfied with the documentation supplied by the Plaintiff, ACCPC must return the funds to the customers. Murray affrms that the chargebacks continued to increase and , within a few months totaled 91 , all of which resulted in full refunds to the customers. Murray describes this as exorbitant" number of claims (Murray Aff. in Opp. at ~ 3(c)). Accordingly, Murray spoke with a representative of Plaintiff and advised him that ACCPC would have to maintain a reserve to protect ACCPC , Visa and MasterCard , and referred Plaintiffs representative to paragraphs 12 and 20 in the Agreements. Pursuant to those provisions , if ACCPC receives excessive retrieval requests or chargebacks , then a reserve account will be held for 6 to 12 months, or as long as a chargeback is possible in an amount that ACCPC determines is reasonable. ACCPC is curently [* 5] holding $103 000. Paragraph 20 of the Agreement , titled " Reserve Account " provides as follows: ACCPC may establish (with or without notice to merchant) and merchant unconditionally agrees to fund a reserve account to be held by ACCPC intended to secure merchant' s obligation and protect ACCPC against potentially fraudulent card transactions , potentially disputed transactions subject to potential chargebacks anticipated charge backs or against potential failure to meet merchant obligations. The reserve shall be held for 6- 12 months , or as long as a chargeback is possible and the amounts determined reasonably by ACCPC. Events occurring in paragraph 9 (Events of Default) shall also allow a reserve to be established by ACCPC. In addition to the 91 chargebacks initially received , ACCPC subsequently received an additional 130 chargebacks for the same reasons , all of which resulted in refunds to Plaintiffs customers. Moreover , in addition to the 221 chargebacks initiated by Plaintiffs customers due to alleged fraud , ACCPC received requests from the Plaintiff to issue refunds from the reserve to an additional 874 customers. Murray affirms that this represents approximately 25% of the sales and " is a red flag in our business " (Murray Aff. in Opp. at n. 1). In response to every chargeback claim , and due to the large number of chargeback complaints , ACCPC refused to process further Visa or Mastercard charges for Plaintiff. In addition , ACCPC specifically demanded , pursuant to paragraph 20 of the Agreement , that Plaintiff supply ACCPC with its invoices , order forms and proof of deli very of their products or services to their customers for all transactions that ACCPC processed , so that ACCPC could ensure that there would not be further chargebacks. To date , Plaintiff has refused to respond to those requests , which refusal also constitutes a breach of Plaintiffs obligations under paragraph 12 of the Agreement. Murray affrms that ACCPC , as processor for Visa and MasterCard , is contractually responsible for the chargebacks , and any potential furher charge backs or claims, and must protect itself, as well as Visa and MasterCard. Murray believes that Plaintiff is no longer in business and that all future chargebacks wil be the responsibility of ACCPC. Murray submits that , in light of the fact that the Agreement specifically authorizes ACCPC to hold funds for between 6 and 12 months , and given Plaintiffs failure to provide proof of sales as requested , it is clear that Plaintiff has breached the Agreement and will not succeed in this action. Thus [* 6] injunctive relief is not appropriate. In further opposition to Plaintiff s application , counsel for Merrick Ban submits that Plaintiff, in filing this action , has ignored the plain language of the Agreement , more paricularly paragraph 19 of the Agreement which authorizes ACCPC to establish a reserve account. Counsel submits that , given the high volume of chargebacks and disputed transactions involving Plaintiffs merchant accounts , Defendants are "fully within their rights to hold the funds Plaintiff presently demands " (Regan Aff. in Opp. at ~ 4). Counsel submits that Plaintiff have not alleged any facts demonstrating that Defendants are improperly or unreasonably withholding funds. C. The Paries ' Positions Plaintiff submits that it has demonstrated its right to the requested injunctive relief by 1) establishing a likelihood of success on the merits by demonstrating that Defendants are improperly withholding payments from Plaintiff, and establishing that Defendants ' reliance on the charge backs is misplaced in light of the fact that Plaintiff ceased using Defendants ' services in September of 20 11 , which was over 6 months prior to the date of Plaintiff s Order to Show Cause; 2) demonstrating that Plaintiff wil suffer irreparable harm without the requested injunctive relief because Plaintiff will be unable to remain in business; and 3) demonstrating the a balancing of the equities favors Plaintiff because Defendants have acted improperly, Defendants wil incur no harm if the Court grants injunctive relief, and Plaintiff s business wil be adversely affected without the requested injunctive relief. Defendants ACCPC and Merrick Ban oppose Plaintiffs application , submitting that the clear language of the Agreement authorizes Defendants to establish a reserve account , which Defendants have done properly in light of the numerous number of chargebacks on Plaintiff s account , allegedly due to fraud and customer dissatisfaction. Thus , Defendants argue , Plaintiff cannot demonstrate a likelihood of success on the merits and is not entitled to injunctive relief. RULING OF THE COURT A. Preliminar Injunction Standards A preliminar injunction is a drastic remedy and wil only be granted if the movant establishes a clear right to it under the law and upon the relevant facts set forth in the moving papers. v. Wiliam M Blake Agency, Inc. Corbin 275 A. 2d 35 v. Leon 283 A. 2d 423 424 (2d Dept. 2001); Peterson 36 (2d Dept. 2000). Injunctive relief will lie where a movant demonstrates a likelihood of success on the merits , a danger of irreparable harm unless the [* 7] v. Aetna Ins. Co. Capasso injunction is granted and a balance of the equities in his or her favor. 75 N. Y.2d 860 (1990); v. WT. Grant Co. Romaine 295 AD. 2d 431 (2d Dept. 2002); Srogi 52 N. Y.2d 496 Neos v. Lacey, Merscorp, Inc. 517 (1981); 291 AD. 2d 434 (2d Dept. 2002). The decision whether to grant a preliminary injunction rests in the sound discretion of the Doe Supreme Court. v. Axelrod 73 N. Mid- Hudson Waste, Inc. 50 ADJd 2d 748 , 750 (1988); 1073 (2d Dept. 2008); Automated Waste Disposal, Inc. v. City of Long Beach American Capital, LLC 40 AD. 3d 902 , 903 (2d Dept. 2007); Ruiz v. Meloney, Sterling 26 AD. 3d 485 (2d Dept. 2006). A plaintiff has not suffered irreparable har warranting injunctive relief where its alleged See White Bay Enterprises injuries are compensable by money damages. v. Newsday, 258 AD. 2d 520 (2d Dept. 1999) (lower court' s order granting preliminary injunction reversed where Schrager v. Klein record demonstrated that alleged injuries compensable by money damages); 267 AD. 2d 296 (2d Dept. 1999) (lower court' s order granting preliminary injunction reversed where record failed to demonstrate likelihood of success on merits or that injuries were not compensable by money damages). B. Application of these Principles to the Instant Action The Court denies Plaintiffs Order to Show Cause in its entirety, and vacates the TRO. issued on April 30 , 2012 and amended in the Stipulation. In light of the language in the Agreement , which clearly authorizes the establishment of the reserve account at issue , the number of chargebacks on Plaintiff s merchant account for alleged fraud and customer dissatisfaction , Plaintiffs alleged failure to provide supporting documentation to Defendants as requested , and the lack of evidence that Defendants have acted improperly with respect to the establishment of the reserve account , Plaintiff has not demonstrated a likelihood of success on the merits. In light of the foregoing, the Court denies Plaintiffs Order to Show Cause in its entirety and vacates the TRO as issued on April 30 , 2012 and amended in the Stipulation. \-- [* 8] \ \ All matters not decided herein are hereby denied. This constitutes the decision and order of the Court. Counsel for the parties are reminded of their required appearance before the Court for a Preliminar Conference on September 6 , 2012 at 9:30 a. ENTER DATED: Mineola , NY June 4 2012 ENTERED .:0 \J COUNT 0 \ d. NASSAU COUNTY -"'''50 CLEAK' S 0.

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