Government Payment Service v. Lexis Nexis VitalChek

Filing 72

MEMORANDUM OPINION AND ORDER signed by the Honorable Matthew F. Kennelly on 5/29/12. (mk)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

GOVERNMENT PAYMENT
SERVICE, INC., d/b/a GOVPAYNET,
Plaintiff,
vs.
LEXISNEXIS VITALCHEK
NETWORK, INC.,
Defendant.

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Case No. 12 C 1946

MEMORANDUM OPINION AND ORDER
MATTHEW F. KENNELLY, District Judge:
Government Payment Service, Inc., d/b/a GovPayNet (GPN), has sued
LexisNexis VitalChek Network, Inc. (VitalChek). Cook County moved to intervene on
the defense side of the case, and the Court granted the motion.
GPN asserts a claim for false advertising under the Lanham Act as well as state
law claims. VitalChek has moved to dismiss GPN’s claims, and Cook County has
moved to stay the suit pending resolution of related suits in state court. For the reasons
stated below, the Court grants VitalChek’s motion to dismiss and terminates as moot
Cook County’s motion.
Background
The Court accepts the allegations in plaintiff’s complaint as true for purposes of
resolving the motions to dismiss. See Hallinan v. Fraternal Order of Police of Chi.
Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009).

A.

GPN’s business with Cook County
GPN is a credit card processor and provider of bail bond services. As a credit

card processor, it manages credit card and debit card transactions between consumers
and merchants by processing the consumer’s credit or debit card information, working
with a bank to gain approval of the transaction, and conveying the funds from the
cardholder’s account to the merchant. Generally, a card processor charges merchants
a fee for the services that it provides. Some government entities that accept credit
cards, however, insist on terms requiring card processors to charge a convenience fee
directly to the consumer so that the government entity is not charged a fee.
As a credit card processor, GPN is required to comply with rules established by
the credit card issuers and associations. The most demanding rules are those created
by Visa, which is the most commonly used brand of credit card in the United States.
Visa has strict rules governing convenience fees. In particular, GPN claims, Visa’s
rules generally require any convenience fee to be a fixed sum rather than an amount
that depends on the dollar value of the transaction. Visa’s rules also generally forbid
any third-party processor from charging convenience fees. According to GPN, Visa’s
rules permit only a merchant that actually provides a good or service to the credit card
holder to charge a convenience fee. Each of these rules, however, has some
exceptions.
Since 2005, GPN has processed some credit and debit card transactions for
Cook County. Specifically, GPN has processed bail bond payments for the Clerk of the
Circuit Court of Cook County and has processed tax payments and other transactions
for the Cook County Department of Revenue. As part of its bail bond processing, GPN
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also claims to provide other services related to the bail bond process. It describes
these services as follows:
[C]ompletion and processing of bail related reports; validation of
government agency data; discussions with the governmental entity staff;
provision of technological services designed and developed to expedite
bail payments; suggested process improvements; training and support by
GovPayNet field staff; the handling of all chargebacks and card holder
contacts regarding payment status and issues; and following up with
correctional facility staff to ensure that all requirements related to prisoner
release have been met.
1st Am. Compl. ¶ 20.
Cook County imposed a requirement that credit card processing not cost the
County any money, so GPN charged cardholders directly for the services it performed
for the County. Initially, GPN charged a convenience fee equal to a certain percentage
of the transaction. In response to a rule compliance investigation by Visa, however,
GPN changed its practices in 2010. It began charging fixed fees for all transactions it
handled for Cook County’s Department of Revenue and similar government entities.
GPN continued charging percentage fees on bail bond transactions.
Visa initially took the position that GPN’s percentage convenience fees violated
its rules for two reasons. First, Visa believed that GPN was only a third party processor
and thus could not properly charge any convenience fees at all. Second, Visa thought
that GPN’s percentage convenience fees were improper because Visa’s rules allowed
only fixed convenience fees. Eventually, however, GPN convinced Visa that it was a
merchant providing bail bond services and that it could therefore appropriately charge a
percentage fee for those services when processing bail bond payments for Cook
County. Visa also gave GPN a merchant category code (MCC) appropriate for a
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company in the business of handling bail and bond payments. GPN claims that MCCs
reflect the primary business of the merchant.
B.

Cook County’s bid process
Changes in Illinois law obligated Cook County to begin accepting credit card

payments for real estate taxes by the beginning of 2012. As a result, in 2011 Cook
County sought bids from credit card processors to process credit card payments made
to the County Treasurer, Circuit Clerk, and Department of Revenue. GPN already
handled credit card transactions for the Circuit Clerk and Department of Revenue, but
the County wanted a single processor for all credit card transactions.
Cook County issued a request for quotes (RFQ) that established the bid process
for credit card processors. In the first stage, interested companies could submit
proposals to the County, and the County would judge if they were qualified to offer the
services the County needed. In the second stage, the qualified companies could
specify the fees that they would charge to process transactions. Cook County made
clear that it would pay nothing for the credit card services and that the winning bidder
would have to charge cardholders directly. The RFQ and its addenda contained other
requirements. All bidders had to agree to accept all major credit cards, obey the card
associations’ rules, and handle chargebacks, which are essentially refunds to
cardholders.
After the first stage of the bidding process, the County found four companies
qualified, including GPN and VitalChek. The County invited each of those companies
to submit a bid indicating the amount that it would charge customers to process credit
card transactions. The County made clear that the winning bidder would be the
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company that submitted the lowest percentage convenience fee. No provisions were
made for charging a fixed convenience fee.
VitalChek submitted a bid indicating that it would charge a 2.24% convenience
fee. Its bid included, however, a footnote stating that Visa regulations did not permit the
charging of percentage convenience fees in cases that did not involve tax payments
and that in some face-to-face transactions Visa did not permit any convenience fees at
all. VitalChek asked if it could submit proposed fixed convenience fees and also asked
whether the County was willing to forego acceptance of Visa cards when Visa rules
would not allow a processor to charge convenience fees.
GPN also submitted a bid. Its bid was more complicated, to account for the
complexity of Visa rules, but it included a 7% service fee for bail bond transactions, a
combination of fixed fees and percentage fees for tax transactions, and fixed fees for
other transactions. GPN asserts that its bid fully complied with Visa’s rules. GPN
informed the County that it did not believe that any of the other bidders could charge
percentage convenience fees for payments to the County, except with regard to tax
payments. GPN also described the benefits that the County would receive from bail
bond services that GPN would provide in addition to credit card processing, claiming
that these services would save the County substantial amounts of money.
In September 2011, Cook County’s Chief Purchasing Officer, Maria Lourdes
Coss, recommended to the Cook County Board that it award the credit card processing
contract to VitalChek. The Board did not immediately approve the recommendation,
and it referred the matter to a committee. One county commissioner raised several
questions about VitalChek, including whether the company would be able to charge
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percentage fees and still comply with Visa’s and MasterCard’s rules. Nancy Horodecki,
a Cook County procurement employee, contacted Jeffrey Piefke, VitalChek’s Vice
President, to ask if VitalChek was certified to process bail bond payments. GPN claims
that Piefke knew there was no special certification for processing bail bond payments
but that he nonetheless sent Horodecki documents to indicate that VitalChek was
certified under Payment Card Industry Data Security Standards (PCI DSS) and falsely
suggested that this certification related to bail bond payment processing. In fact, PCI
DSS certification means only that VitalChek met certain standards for protecting
cardholder information; it is unrelated to bail bond payment processing.
In October 2011, Cook County asked the four companies to submit new bids.
Specifically, the County requested more detailed bids and required the companies to
provide both a percentage rate and a schedule of fixed fees. The percentage rate
would be used when permitted by the credit card associations, such as for tax
transactions. That same percentage fee would also be used for “[p]ayments to post bail
where the Contractor is required to be the merchant.” 1st Am. Compl., Ex. 6 at 49. The
fixed fee schedule to be submitted by the bidding companies would be used when the
credit card associations did not allow percentage fees. The bid request made clear that
the County would award the contract solely on the basis of the percentage fee bid. The
fixed fee schedule submitted by the winning bidder would bind the bidder but would not
be a basis for determining the low bid. In response to a question from one of the
bidders, the County stated that to be eligible, a bidder had to be a merchant for bail
bond transactions and that the winning bidder had to accept Visa cards for processing
bail bond payments and could charge only a percentage fee on those transactions.
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VitalChek submitted a bid in which it proposed to charge a percentage rate of
2.13%. It also submitted a fixed fee schedule. It included a limitation for both its
percentage rate and its fee schedule in which it stated that “[VitalChek] will charge
credit card consumers no more than the listed rate/fee for credit card transactions
processed. [VitalChek] reserves the right to not process credit card transactions where
credit card regulations do not allow the credit card consumer to be charged a
convenience fee of any kind.” Def. Ex. 5; see 1st Am. Compl. ¶ 69.1
GPN claims that by submitting a bid, VitalChek implicitly represented that it was
a merchant providing bail bond services and that it could charge a percentage fee on
bail bond transactions without violating Visa’s rules. GPN asserts that neither of these
representations is true. Further, in December 2011, Piefke told Cook County in a letter
that VitalChek could act as a “merchant of record” for the County when processing
credit card payments. 1st Am. Compl., Ex. 13. According to GPN, Piefke’s statement
deceptively indicated to Cook County that VitalChek was a merchant with regard to bail
bond processing and that it could charge bail bond customers a percentage fee.
Finally, in January 2012, Piefke e-mailed additional PCI DSS certification documents to
Cook County procurement employees. GPN asserts that this amounted to another
attempt to mislead the County into believing that this certification meant that VitalChek
was a merchant with regard to bail bond payment processing.
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The Court considers the rebid submitted by VitalChek in resolving the motion to
dismiss, even though it is a defense exhibit not attached to GPN’s complaint, because
GPN cites to and quotes from the rebid in its complaint. See Geinosky v. City of
Chicago, 675 F.3d 743, 745 n.1 (7th Cir. 2012) (in resolving a motion to dismiss, court
can consider documents referred to in complaint, even if they are not attached to the
complaint).
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In February 2012, the Cook County Board awarded the credit card processing
contract to VitalChek. GPN asserts that by June 22, 2012, VitalChek will take over the
credit card processing functions that GPN has previously provide for the County.
Discussion
A plaintiff “has stated a claim only if it has alleged enough facts to render the
claim facially plausible, not just conceivable.” Fednav Int’l Ltd. v. Cont’l Ins. Co., 624
F.3d 834, 837 (7th Cir. 2010). “When analyzing the sufficiency of a complaint, [the
Court] construe[s] it in the light most favorable to the nonmoving party, accept[s] wellpleaded facts as true, and draw[s] all inferences in the nonmoving party’s favor.” Id.
“Where [plaintiff’s] allegations are contradicted by written exhibits that [plaintiff] attached
to [the] complaint, however, the exhibits trump the allegations.” Abcarian v. McDonald,
617 F.3d 931, 933 (7th Cir. 2010).
GPN asserts four claims against VitalChek: (1) false advertising under the
Lanham Act; (2) an Illinois common law claim of tortious interference with a prospective
advantage; (3) violation of the Illinois Consumer Fraud and Deceptive Business
Practices Act (ICFA); (4) violation of the Illinois Uniform Deceptive Trade Practices Act
(DTPA). VitalChek contends, among other arguments, that the conduct alleged by
GPN does not implicate the Lanham Act and that it did not make any false statements
or, if it did, they were not false statements of fact.
A.

Lanham Act claim
“Section 43(a)(1)(B) of the Lanham Act . . . forbids the use of any false or

misleading description of fact, or false or misleading representation of fact, which in

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commercial advertising or promotion, misrepresents the nature, characteristics, or
qualities of the seller’s or another person’s goods.” Schering-Plough Healthcare Prods.
v. Schwarz Pharma, Inc., 586 F.3d 500, 503 (7th Cir. 2009) (brackets and ellipses in
original omitted). VitalChek argues that the alleged false statements it made in this
case did not amount to commercial advertising or promotion.
The Seventh Circuit has stated that the term commercial advertising and
promotion, as used in the Lanham Act, refers to communications with anonymous
recipients and does not include face-to-face communication. First Health Group Corp.
v. BCE Emergis Corp., 269 F.3d 800, 803–04 (7th Cir. 2001) (suggesting that
statements made by defendant’s executives while negotiating a contract, as well as
statements in the contract itself, are not commercial advertising and promotion). The
Seventh Circuit has also stated that letters sent to current customers do not amount to
commercial advertising and promotion. ISI Int’l, Inc. v. Borden Ladner Gervais LLP,
316 F.3d 731, 733 (7th Cir. 2003); see McDavid Knee Guard, Inc. v. Nike USA, Inc.,
No. 08 C 6584, 2010 WL 3000178, at *5 (N.D. Ill. July 28, 2010) (personal statements
made to customers who already had a preexisting relationship with defendant were not
commercial advertising or promotion).
The false statements that GPN contends VitalChek made were all made to Cook
County and its employees in response to Cook County’s solicitation of bids for credit
card payment processing. VitalChek’s statements are not commercial advertising or
promotion, because they were not made to anonymous recipients. Accordingly, the
Court dismisses GPN’s Lanham Act claim.

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GPN cites several cases from other circuits reaching conclusions differentfrom
those in First Health and ISI Int’l, but the Court is bound by those decisions. GPN also
cites three cases from district courts within the Seventh Circuit to argue that its Lanham
Act claim is legally sufficient. One of them, Johnson Controls, Inc. v. Exide Corp., 152
F. Supp. 2d 1075 (N.D. Ill. 2001), predates First Health and thus does not reflect how
courts should apply First Health and ISI Int’l. In another, Chicago Consulting Actuaries,
LLC v. Scrol, No. 05 C 1320, 2005 WL 819555 (N.D. Ill. Apr. 6, 2005), the court
concluded that “personal sales calls” and “person-to-person promotional encounters”
were not commercial advertising and promotion. Id. at *3. VitalChek’s alleged
statements are similar. Its e-mails, letters, personal contact, and sealed bid were sent
in response to Cook County’s requests and questions and do not amount to commercial
advertising and promotion. Finally, in Derby Indus., Inc. v. Chestnut Ridge Foam, Inc.,
202 F. Supp. 2d 818 (N.D. Ind. 2002), the court decided that a video sent to seven
potential clients of the defendant, five of which were not defendant’s customers before
or after the video was sent, amounted to commercial advertising and promotion. Id. at
822–23. The situation in this case is distinguishable. VitalChek did not make
unsolicited statements to numerous potential clients with which it had no relationship.
Instead, VitalChek made the allegedly false statements only to Cook County, after the
County requested bids for credit card processing services.
B.

False statements
VitalChek contends that it did not make any false statements to Cook County

and that all of GPN’s state law claims, which the parties agree are premised on the

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existence of false statements of fact, are therefore deficient. See Randazzo v. Harris
Bank Palatine, N.A., 262 F.3d 663, 671 (7th Cir. 2001) (ICFA claim requires
misrepresentation or concealment of a material fact); 815 ILCS 510/2 (DTPA requires
deceptive trade practice that creates “a likelihood of confusion or misunderstanding”);
Soderlund Bros. v. Carrier Corp., 278 Ill. App. 3d 606, 615–16, 663 N.E.2d 1, 8 (1995)
(competitor cannot be liable for intentional interference with prospective advantage
because it is privileged to compete, unless competition involved wrongful means such
as fraud or deception).
GPN asserts in its amended complaint that VitalChek made several
misstatements to Cook County. Principally, GPN claims that VitalChek submitted its
rebid to the County and by doing so implied that it could comply with the requirements
of the County’s contract, it could comply with the Visa rules, and it could charge a
percentage convenience fee. GPN contends that all of these representations were
false. In addition, GPN states that VitalChek made several other misrepresentations to
convince the County that it could comply with Visa rules and charge a percentage fee to
customers. According to GPN, VitalChek provided PCI DSS certification documents to
Cook County, falsely representing that the documents involved being certified as a
merchant for processing bail bonds payments, and that VitalChek told the County that it
could serve as a merchant of record, even though that term is unrelated to being a
merchant for bail bond payments.
GPN’s central claim is that unlike GPN, VitalChek is not a merchant offering bail
bond services and thus cannot charge a percentage convenience fee to bail bond
customers. VitalChek argues that even if it must offer the exact bail bond services that
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GPN offers in order to be permitted to charge a percentage convenience fee, it can do
so. VitalChek contends that there is no Visa rule, nor is there any provision of the bid
that it submitted to Cook County, that would prevent it from offering the services that
GPN currently provides, which allow it to charge a service fee. Accordingly, even if
VitalChek does not offer those services currently in other locations (which GPN
suggests but does not expressly allege in its complaint), it can offer bail bond services
once it begins handling Cook County’s credit card processing and can charge a
percentage service fee for bail bond payment processing in the same way that GPN
currently does.
GPN does not dispute that VitalChek could offer the same services that GPN
now offers, even if VitalChek is not currently offering those services anywhere. As GPN
states in its amended complaint, there is no special certification required of a merchant
before it can act as a merchant in bail bond transactions. 1st Am. Compl. ¶ 56.
Although GPN asserts that Visa has assigned it a merchant category code (MCC)
reflecting that it provides bail and bond payments, GPN does not contend that only a
company with that MCC can provide bail bond services to customers. Id. ¶¶ 29–30.
Rather, MCCs are used by Visa to “classify suppliers into market segments” and are
“assigned based on the supplier’s primary line of business.” Id., Ex. 3 at 2. Therefore,
a merchant may provide services that, if performed by different companies, would fit
into several MCCs, and Visa’s rules account for that situation. See id., Ex. 2 at 2 (Visa
rule stating that “[i]f the Merchant sells several products or services, the MCC that best
describes the majority of the sales must be assigned.”).
GPN contends that Cook County’s RFQ required all of the bidders to be
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merchants providing bail bond services. The RFQ requested a percentage rate that
each bidder would charge for “[p]ayments to post bail where the Contractor is required
to be the merchant.” Id., Ex. 6 at 49. In addition, the RFQ included a provision allowing
the bidders to submit questions and ask for clarification. Id., Ex. 6 at 4. Cook County
answered some of those questions in ways that indicated that each bidder would be
required to act as a merchant when processing bail bond payments:
9. Will the County accept bids from non-merchants for provision of bail
payment services?
Answer: No. Per the [RFQ], the credit card processor for bail payment
services must be the merchant.
...
31. . . .
c. If Visa’s requirements do not allow the charging of a percentage fee for
processing payments (other than tax payments), does the County’s
request for a rate for processing bail payments mean that the County
does not intend to accept Visa?
Answer: No, the County, intends to accept all major credit cards. For
bail payment transactions, the vendor must be the merchant and will be
limited to charging the percentage fee it bid.
d. What does County mean by the phrase “where the Contractor is
required to be the merchant”? Does it mean, “merchant” as used for
credit card processing purposes?
Answer: Yes.
Id., Ex. 7 at 3, 7. The County’s RFQ and the answers it provided to questions reflect
that the County expected the winning bidder to act as the merchant when processing
bail bond credit card payments.
As discussed above, however, there is no basis to believe that VitalChek cannot
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act as a merchant when processing bail bond payments. Cook County stated that it
was using the term merchant “as used for credit card processing purposes.” Id. at 7.
Visa rules define a merchant as “[a]n entity that contracts with [a bank that processes
credit card payments] to originate Transactions and that is eligible to display a VisaOwned Mark.” Id., Ex. 1 at 1177. Even if, as GPN contends, VitalChek must offer the
same services as GPN to qualify as a merchant who can charge a percentage fee to
customers, GPN does not allege that VitalChek cannot begin to do so. Accordingly,
after taking into account the uncontested fact that VitalChek could begin to offer bail
bond services to customers, GPN has not plausibly alleged that VitalChek made a false
statement when it submitted a bid that implied that it could charge a percentage fee to
customers and act as the merchant when processing bail bond payments.
GPN alleges in its amended complaint that, at the time the second bids were
submitted, “VitalChek did not . . . intend to provide cardholders paying bond with any
bona fide bond payment services.” Id. ¶ 71. Of course, VitalChek has not yet begun to
perform its contract with the County, so it is unclear whether it will fail to provide bail
bond services or act as a merchant for bail bond transactions. More importantly,
“promissory fraud, i.e., a false statement of intent regarding future conduct rather than
present or past facts, is generally not actionable under Illinois law unless the plaintiff
also proves that the act was part of a scheme to defraud.” Trade Fin. Partners., LLC v.
AAR Corp., 573 F.3d 401, 413 (7th Cir. 2009) (fraud claimed failed when plaintiff had
not alleged a scheme to defraud or any misrepresentations apart from an unfulfilled
promise); see Avery v. State Farm Mut. Auto. Ins., 216 Ill. 2d 100, 169, 835 N.E.2d 801,

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844 (2005) (holding that breach of contract could not be basis for ICFA claim because
“[w]e believe that a deceptive act or practice involves more than the mere fact that a
defendant promised something and then failed to do it. That type of misrepresentation
occurs every time a defendant breaches a contract.” (internal quotation marks omitted)).
A scheme to defraud requires that the fraud be “particularly egregious or, . . . [be]
embedded in a larger pattern of deceptions or enticements that reasonably induces
reliance and against which the law ought to provide a remedy.” J.H. Desnick v. Am.
Broadcasting Cos., 44 F.3d 1345, 1354 (7th Cir. 1995).
GPN does not argue that VitalChek’s implied promises in its bid were part of a
scheme to defraud, and it does not allege other misstatements sufficient to suggest a
scheme to defraud. See Ass’n Benefit Servs., Inc. v. AdvancePCS Holding Corp., No.
04 C 3271, 2004 WL 2101928, at *2 (N.D. Ill. Sept. 21, 2004) (in a case where
defendant repeatedly promised to pay a certain commission and then reneged, scheme
to defraud requirement can be satisfied by “a series of unfulfilled promises”). GPN
claims that VitalChek made several other false statements to Cook County beyond the
bid itself, but the exhibits GPN cites disprove its assertions. GPN claims that Piefke,
VitalChek’s vice president, falsely represented to County employees that VitalChek was
certified to process bail bond payments even though no such certification existed. The
letter GPN cites, however, does not say that. It states:
This will confirm our conversation today concerning cash bail payments.
This will further confirm that we can process cash bail payments as part of
our integrated solution. We currently process these types of payments,
for example, at the Maryland District Courts (Integrated solution for all
District Courts in the State of Maryland) and Davidson County (Nashville)
Tennessee. As part of the implementation process, we will work with your
court personnel to work out specific steps to most conveniently integrate
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these payments into your current system. Further, the PCI Certification
documents we sent to you relate to all of our card processing activities.
Def. Ex. 3; see 1st Am. Compl. ¶ 56. Although the letter mentions both bail bond
payments and PCI DSS certification, it contradicts GPN’s allegations that VitalChek
deceptively suggested that its PCI certification has any sort of special relationship to the
bail bond payment process. Indeed, the letter states that the certification applies to all
of its card processing activities. Although GPN alleges that this letter was sent in
response to a question from Cook County regarding whether VitalChek was certified
specifically for bail bond payments, the letter does not state that VitalChek is so
certified. Rather, the letter states that VitalChek can process bail bond payments, and,
as discussed above, there is no basis to believe this statement is untrue.
Similarly, GPN claims that in January 2012, Piefke sent two e-mails to Cook
County employees that included PCI DSS certification documents and falsely implied
that these documents related to bail bond payments. 1st Am. Compl. ¶ 75. But neither
of the e-mails mentions bond payment processing at all. Id., Ex. 14. Further, the first of
the two e-mails explains what the PCI standards are and reflects that they are unrelated
to bail bond payments. Id. at 1, 5–7. The e-mail states that PCI standards are
separate from the regulations of card associations such as Visa and that the standards
concern security. Id. at 5. The e-mail continues by listing the six requirements of PCI
certification: “Build and maintain a secure network,” “[P]rotect cardholder data,”
“Maintain a vulnerability management program,” “Implement strong access control
measures,” “Regularly monitor and test networks,” and “Maintain an information security
policy.” Id. at 5–6. Piefke’s e-mail makes clear that PCI certification relates to security,
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and it does not suggest that it has anything to do with bail bond payments.
GPN also alleges that VitalChek told Cook County that it would act as a
merchant of record for all credit card processing that it handled for the County. Id. ¶ 73
& Ex. 13. GPN acknowledges that VitalChek could serve as a merchant of record on at
least some transactions. It argues, however, that VitalChek’s blanket statement was
false because VitalChek did not address specifically whether it could act as the
merchant for bail bond transactions, whether it could provide bail bond services to
customers, or whether it could charge a percentage convenience fee and still comply
with Visa rules. As discussed above, however, GPN does not allege that VitalChek is
unable to provide the same services that GPN currently provides. As a result,
VitalChek would be able to act as the merchant for bail bond transactions and charge a
percentage fee by providing the same services that GPN provides. Accordingly,
VitalChek’s statement that it could act as a merchant of record is not false.
Finally, GPN alleges that beyond the alleged misstatements to Cook County,
VitalChek makes similar misstatements in connection with other contracts with
government entities and promotional material sent to those entities. GPN provides one
concrete example, a page from VitalChek’s website on which it states that it can
“[i]mprove[ ] payment processing and reduce[ ] agency processing fees by acting as the
merchant and handling all credit card fees and charge backs.” Id., Ex. 15 at 1. This
statement is not false, because GPN concedes that VitalChek can act as a merchant in
some instances. Id. ¶ 73. Rather, GPN argues only that VitalChek cannot act as a
merchant in bail bond cases, which are not mentioned on the page of the website that
GPN cites. Further, as discussed above, GPN does not dispute that VitalChek could
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offer services similar to what GPN offers and thereby act as a merchant for bail bond
payments.
GPN also alleges “on information and belief” that VitalChek misrepresents its
ability to act as a merchant in bail bond transactions in its contracts with other
government entities and in its promotional materials. Id. ¶¶ 85–86. Generally,
however, a plaintiff cannot comply with Federal Rule of Civil Procedure 9(b), which
requires that allegations of fraud be plead with particularity, by alleging facts on
information and belief. Pirelli Armstrong Tire Corp. Retiree Med. Benefits Trust v.
Walgreen Co., 631 F.3d 436, 442–43 (7th Cir. 2011); see Gros v. Midland Credit
Mgmt., 525 F. Supp. 2d 1019, 1029 (N.D. Ill. 2007) (applying heightened pleading
standard to fraud-based ICFA claims); Int’l Star Registry v. ABC Radio Network, Inc.,
451 F. Supp. 2d 982, 990 n.10 (N.D. Ill. 2006) (applying Rule 9(b) to DTPA claim to the
extent it alleged fraud). A plaintiff may plead based upon information and belief in a
case involving Rule 9(b) only if “(1) the facts constituting the fraud are not accessible to
the plaintiff and (2) the plaintiff provides the grounds for his suspicions.” Pirelli
Armstrong Tire, 631 F.3d at 443 (internal quotation marks omitted). GPN offers no
grounds for its suspicions, except that it asserts that compliance with credit card
association rules, including Visa’s, is a standard term in government credit card
processing contracts. 1st Am. Compl. ¶ 85. This asserted ground does not render
GPN’s information and belief allegations “plausible,” and thus it cannot support GPN’s
state law claims. Pirelli Armstrong Tire, 631 F.3d at 443 (emphasis omitted).
For these reasons, the Court dismisses GPN’s three state law claims.

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Conclusion
For the reasons stated above, the Court grants VitalChek’s motion to dismiss
[docket no. 61]. The Court terminates Cook County’s motion to stay [docket no. 58]
without prejudice. The case remains set for a status hearing on May 31, 2012 at 9:30
a.m.

s/ Matthew F. Kennelly
MATTHEW F. KENNELLY
United States District Judge

Date: May 29, 2012

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