Quantcast

Court dismisses suit claiming credit card processor violated RICO Act

FLORIDA RECORD

Sunday, December 22, 2024

Court dismisses suit claiming credit card processor violated RICO Act

Lawsuits
General court 07

shutterstock.com

MIAMI – The U.S. District Court for the Southern District of Florida recently decided to partly grant a motion to dismiss a suit claiming a credit card processing company committed multiple acts of fraud by reprogramming credit card machines to send payment to themselves.

In the case, TouchSuite, owned by Florida-based American Bancard, and AB SPE II LLC sued East Payment Solutions Inc. (EPS), FBS Payment Solutions LLC, and principals Michael Ben-Simon and Jacob Ben-Simon claiming violations of the Racketeering Influenced and Corrupt Organizations (RICO) Act, fraud and fraudulent misrepresentation, breach of sales agreement, civil theft, civil conspiracy and conversion.

The defendants filed a motion to dismiss the case, and U.S. District Judge Beth Bloom, in her Aug. 3 ruling, granted the motion to dismiss in part for failing to meet requirements of the RICO Act, and dismissing the other counts in the case for lack of subject matter jurisdiction. “Plaintiffs remain unable to plead two of the required elements as a matter of law,” the ruling said.

Bancard hired EPS in 2014 to help solicit clients for their credit card processing equipment. In 2016, Michael and Jacob Ben-Simon formed FBS Payment Solutions with nonparty Michael Forst, also entering into an agreement with Bancard. Bancard claims EPS and FBS signed multiple agreements with disclosures that they would not solicit Bancard merchants.

The complaint alleges that in 2017, EPS began sending fewer clients to Bancard, instead sending them to other vendors, and failing to pay AB SPE II for residuals owed. Bancard claims that as part of a scheme, EPS went to Bancard’s merchants and pretended to be employees of Bancard. The complaint states that EPS told merchants there was an issue with the hardware and changed the credit card terminals to EPS equipment, reprogramming them to forward all payments to EPS instead of Bancard. Bancard, which was alerted by merchants that EPS had changed the terminals, filed a first complaint and then amended the complaint.

Bancard alleged damages for monthly lease amounts, residual payments and loss of multiple merchant accounts from EPS’ alleged illegal transfer of the American Bancard accounts to themselves. The defendants sought to dismiss the entire complaint.

Judge Bloom stated that although the plaintiffs sufficiently showed causation, Bancard failed to meet the other requirements for the RICO claim. The order stated that Bancard “candidly admitted they have no information and need discovery to provide more specificity in their pleading,” but that the particularity requirement for a mail fraud claim does not allow for discovery.

The court order stated that Bancard also failed to sufficiently allege wire fraud because “the wire was not used in furtherance of the scheme as the purported fraud,” and that the amended complaint failed to “adequately allege enterprise as the allegations.” Bloom stated that Bancard’s attached exhibits inferred that the “corporate person and the alleged enterprise here appear to be one in the same.”

The RICO Act claim was dismissed with prejudice, and the other counts were dismissed without prejudice, stating “the court has no subject-matter jurisdiction over the remaining state-law claims, requiring their dismissal.”

U.S. District Court for the Southern District of Florida case number 18-cv-80681-BLOOM/Reinhart

More News