HARBORTOUCH PAYMENTS, LLC v. DENALI STATE BANK et al
Filing
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MEMORANDUM OPINION filed. Signed by Judge Freda L. Wolfson on 5/18/2015. (eaj)
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
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HARBORTOUCH PAYMENTS, LLC,
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f/k/a UNITED BANK CARD INC.
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Plaintiff,
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Civil Action No. 14-6049 (FLW)
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v.
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MEMORANDUM OPINION
DENALI STATE BANK,
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Defendant.
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WOLFSON, District Judge.
This is a breach of contract action brought by plaintiff Harbortouch Payments, LLC,
(“Plaintiff”) against Denali State Bank (“Defendant”). 1 Presently before the Court are the
following: (1) a motion by Plaintiff for a preliminary injunction; and (2) Defendant’s motion to
dismiss pursuant to Federal Rule of Civil Procedure 12(b)(2) for lack of personal jurisdiction or,
in the alternative, dismiss the matter in favor of arbitration. For the reasons below, Defendant’s
motion is granted and Plaintiff’s motion is denied.
I. BACKGROUND
Plaintiff is a provider of merchant services, specifically, “Point of Sale” systems,
electronic cash registers and credit card processing terminals. Compl. ¶ 1. Plaintiff enters into
agreements with merchants (referred to herein at times as “Merchant Agreements”) to provide
these services on an ongoing basis. Id.
1
This matter was recently reassigned to the undersigned upon the retirement of the Honorable Joel A. Pisano,
United States District Judge.
In the course of its business, Plaintiff also enters into referral agreements with other
businesses who can refer merchants (i.e., potential clients) to Plaintiff. Id. Defendant, a bank
located in Fairbanks, Alaska, entered into such an agreement with Plaintiff’s predecessor, United
Bank Card Inc. (“United Bank Card”). Id. at ¶ 2, 6-7. Plaintiff and United Bank Card merged on
March 27, 2014. Plaintiff was the surviving corporation of the merger and asserts that it is,
therefore, party to the relevant agreements by operation of law. ECF No. 13 at ¶ 6; ECF No. 15
at 9.
The parties initially entered into a “Referral Bank Agreement” (the “RBA”) on December
21, 2006. Id. at ¶ 6. Thereafter, the parties entered into a Financial Institution Agreement (the
“FIA”), which became effective November 30, 2012. Id. at ¶ 7. The RBA and FIA contain the
same relevant provisions, and it is alleged that Defendant is equally bound under both
agreements. The complaint, and, therefore, the Court herein, refers to the RBA and FIA
collectively as the “Agreement.”
The Agreement “required Defendant to use its best efforts to locate, investigate and refer
potential merchants to Plaintiff.” Id. at ¶ 9. Defendant made a number of referrals to Plaintiff
that ultimately resulted in Merchant Agreements between various merchants and Plaintiff. See
id. at ¶¶ 18-38. In return for its referrals, Defendant received commissions and on-going residual
payments from Plaintiff. Id. at ¶ 10, 13. The Agreement terminated November 1, 2013, after
Defendant gave notice to Plaintiff of its intention not to renew the Agreement. Id. at ¶ 7.
The complaint alleges that beginning in or about April 2014, several merchants with
whom Plaintiff had entered into Merchant Agreements cancelled their accounts with Plaintiff.
According to Plaintiff, the cancellations occurred after Defendant referred the merchants to
another service provider. Compl. ¶¶ 17-37. The complaint specifically references the following
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five accounts: (1) The Electrician LLC, which accounted for an average monthly revenue to
Plaintiff of $233.67; (2) 40-Mile Air Ltd., with average monthly revenue of $1,008.71; (3) RWR
Air Inc., with average monthly revenue of $671.00; (4) Industrial Service Corp., with average
monthly revenue of $525.83; and (5) Hompesch & Evans, APC, with average monthly revenue
of $586.72.
Plaintiff alleges that Defendant’s actions constituted a breach of certain provisions in the
Agreement prohibiting Defendant from soliciting and converting Plaintiff’s merchants and from
engaging in conduct imposing financial risk or undue economic hardship on Plaintiff. Under the
Agreement, it was an “Event of Default” for Defendant to “engage[] in activities which may
impose financial risk … or which result in undue economic hardship and/or damage to the
goodwill” of Plaintiff. Agreement § 7.3. It is also an Event of Default for Defendant “to make
any attempt to convert any Merchant from [Plaintiff] to any other entity performing services
similar to [Plaintiff].” Id. Further, the Agreement provides that after termination of the
Agreement, the “[Defendant] will not solicit any Merchant to terminate a Merchant Agreement
for any reason after termination of this Agreement.”
At the time of the filing of the complaint, Plaintiff had 118 active and 6 seasonal 2
merchant accounts that had been referred by Defendant. Id. at ¶ 41. According to Plaintiff, these
merchants have a relationship with Defendants, and Plaintiff fears Defendant will seek to convert
these merchants to a different service provider.
The Agreement contains an arbitration provision, which provides that “[a]ny dispute or
claim arising out of, or in connection with this Agreement will be settled by final and binding
arbitration to be held in New Jersey in accordance with the commercial rules of the American
2
Seasonal accounts are those that are temporarily inactive but are reactivated during the business season. Compl ¶
63.
3
Arbitration Association.” Agreement, § 10.13. In accordance with this provision, Plaintiff has
initiated an arbitration proceeding against Defendant.
The Agreement also contains a forum selection clause designating the “federal or state
courts of New Jersey” as the forum for adjudicating any disputes “arising ou[t] of or in
connection” with the Agreement. Agreement, § 10.7. Plaintiff commenced the instant matter in
New Jersey state court, and it was subsequently removed to this Court. In this action, Plaintiff
seeks an injunction prohibiting Defendant “from soliciting and converting” the remaining 124
merchants and from “engaging in other activities that may impose financial risk and undue
economic hardship and/or damage the goodwill of Plaintiff” as well as compensatory damages
“to the extent the same are not addressed” in the pending arbitration. Compl. at p. 11.
II. ANALYSIS
1. Personal Jurisdiction
Defendants moves for dismissal under Federal Rule of Civil Procedure 12(b)(2), arguing
that the Court lacks personal jurisdiction over Defendant, a bank chartered in Alaska with its
principal place of business in Alaska. Defendant argues that it has insufficient contacts with the
State of New Jersey for the Court to exercise jurisdiction.
Where, as here, a federal court has diversity jurisdiction pursuant to 28 U.S.C. § 1332, a
“‘federal district court may assert personal jurisdiction over a non-resident of the state in which
the court sits to the extent authorized’” by that state’s law. Fisher v. Teva PFC SRL, 212 Fed.
Appx. 72, 75 (3d Cir. 2006) (quoting Provident Nat'l Bank v. Cal. Fed. Sav. & Loan Assoc., 819
F.2d 434, 436 (3d Cir. 1987)). To that end, the New Jersey Long-Arm Statute grants jurisdiction
over non-residents to the full extent of the Due Process Clause of the United States Constitution.
Miller Yacht Sales, Inc. v. Smith, 384 F.3d 93, 96 (3d Cir.2004) (citing N.J. Court Rule 4:4–4(c)).
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Under the Due Process Clause of the Fourteenth Amendment, a federal court has personal
jurisdiction over a non-resident defendant only where the defendant has “certain minimum
contacts with [the forum] such that the maintenance of the suit does not offend ‘traditional
notions of fair play and substantial justice.’” Provident Nat'l Bank, 819 F.2d at 436–37 (quoting
Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945)).
Two types of personal jurisdiction exist: general and specific. Helicopteros Nacionales de
Colombia S.A. v. Hall, 466 U.S. 408, 414, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984). Not long ago,
the Supreme Court refined the standard for finding general jurisdiction in Daimler AG v.
Bauman, --- U.S. ---, ---, 134 S.Ct. 746, 751, 187 L.Ed.2d 624 (2014). According to Bauman,
general jurisdiction refers to a court's power to “hear any and all claims” against an out-of state
entity or person when its “affiliations with the State are so continuous and systematic as to render
[it] at home in the forum state.” Id. (internal quotation marks and citation omitted) (emphasis
added). By contrast, specific jurisdiction exists when the plaintiff's claim arises out of the
defendant's activities within the forum such that the defendant could reasonably anticipate being
haled into the state's courts. Vetrotex Certainteed Corp. v. Consl. Fiber Glass Prods. Co., 75
F.3d 147 (3d Cir.1995). When a jurisdictional defense is raised, “the plaintiff bears the burden
of establishing with reasonable particularity sufficient contacts between the defendant and the
forum state to support jurisdiction.” Provident Nat'l Bank v. California Federal Sav. & Loan
Assoc., 819 F.2d 434, 437 (3d Cir. 1987) (citing Gehling v. St. George's School of Medicine,
Ltd., 773 F.2d 539, 542 (3d Cir.1985)).
In opposition to Defendant’s motion, Plaintiff points to the forum selection clause in the
Agreement in support of its assertion that the Court may exercise personal jurisdiction over
Defendant. Personal jurisdiction is waivable, and a party can give “express or implied consent to
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the personal jurisdiction of the court” through a “variety of legal arrangements,” which include
forum selection clauses in agreements executed by the parties. Ins. Corp. of Ir., Ltd. v.
Compagnie des Bauxites de Guinee, 456 U.S. 694, 703, 102 S.Ct. 2099, 72 L.Ed.2d 492 (1982)
(quoting Nat'l Equip. Rental, Ltd. v. Szukhent, 375 U.S. 311, 316, 84 S.Ct. 411, 11 L.Ed.2d 354
(1964)) (internal quotation marks omitted). In the instant matter, the parties’ Agreement
provides that “[t]he exclusive forum and venue for the adjudication of any rights, claims or
disputes arising out of or in connection with this Agreement shall be the federal and state courts
of New Jersey.” Agreement § 10.7.
It is well established that a forum selection clause is “prima facie valid and should be
enforced unless enforcement is shown by the resisting party to be ‘unreasonable’ under the
circumstances.” The Bremen v. Zapata Off–Shore Co., 407 U.S. 1, 10, 92 S.Ct. 1907, 32 L.Ed.2d
513 (1972). To show that a forum selection clause is unreasonable, the resisting party must
establish: “(1) that it is the result of fraud or overreaching, (2) that enforcement would violate a
strong public policy of the forum, or (3) that enforcement would in the particular circumstances
of the case result in litigation in a jurisdiction so seriously inconvenient as to be unreasonable.”
Cadapult Graphic Systems, Inc. v. Tektronix, Inc., 98 F.Supp.2d 560, 564 (D.N.J. 2000) (quoting
Coastal Steel Corp. v. Tilghman Wheelabrator Ltd., 709 F.2d 190, 202 (3d Cir. 1983)).
In their reply to Plaintiff’s argument that the forum selection clause permits this Court’s
exercise of personal jurisdiction over Defendant, Defendant advances the sole argument that
Plaintiff should not be permitted to “benefit” form the forum selection clause. Defendant asserts
that the merger between United Bank Card and Plaintiff effected an assignment 3 of the
Agreement and, although the Agreement expressly permitted assignment by United Bank Card,
3
Because no party disputes the issue, the Court assumes, without deciding this issue, that the merger effected an
assignment.
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the Agreement required United Bank Card to provide notice to Defendant within 60 days of any
assignment. RBI and FIA at § 10.1. Defendant states that Plaintiff failed to provide timely
notice and, as a result, “cannot seek to benefit from the choice of forum language in the United
Bank Card-Denali Agreement.” ECF No. 16 at 3. Notably, Defendant does not argue that
failure to provide notice invalidated any purported assignment or the Agreement. Defendant is
simply arguing that because Plaintiff allegedly breached the Agreement by failing to provide
notice of an assignment within the 60-day window, it should not be permitted to enforce the
forum selection clause.
In support of its argument, Defendant cites just a single case, Jon Feingersh
Photography, Inc. v. Houghton Mifflin Harcourt Publ’g Co., No. 13-2378, 2014 WL 716723
(E.D. Pa. Feb. 25, 2014). This case does not, however, support Defendant’s that Plaintiff should
not “benefit” from the parties’ choice of forum. The case and, in particular, the passage quoted
by Defendant, stands for the unremarkable proposition that a plaintiff bringing a breach of
contract action must abide by the forum selection clause contained in the contract that the
plaintiff wishes to enforce. It does not support the proposition that a party who allegedly
breached a contract cannot “benefit” from the forum selection clause contained in the contract
allegedly breached. In fact, Jon Feingersh Photography supports precisely the opposite
conclusion. In that case, a breach of contract action, the district court enforced a forum selection
clause on motion of the defendant (the allegedly breaching party) and transferred the case to a
different venue.
The forum selection clause in the Agreement is unambiguous and Defendant has not
shown it to be unenforceable. Defendant, having agreed to litigate disputes under the Agreement
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in this forum, the Court may exercise personal jurisdiction over Defendant. Defendant’s motion
to dismiss under Rule 12(b)(2) is therefore denied.
2. Injunctive Relief
Defendant next argues this matter should be dismissed in favor of the arbitration that
Plaintiff has commenced pursuant to the arbitration clause in the agreement. Plaintiff counters
that the arbitration notwithstanding, it has the ability to seek injunctive relief from this Court.
Plaintiff is correct that a district court has the authority to grant injunctive relief in an arbitrable
dispute, so long as the prerequisites for such relief are satisfied. Ortho Pharm. Corp. v. Amgen,
Inc., 882 F.2d 806, 812 (3d Cir. 1989). Defendant does not dispute Plaintiff’s right to seek
injunctive relief, but rather contends that the matter should be dismissed because Plaintiff cannot
show entitlement to the preliminary injunctive relief sought. The Court, therefore, turns next to
Plaintiff’s motion for a preliminary injunction.
“[A] preliminary injunction is an extraordinary and drastic remedy, one that should not be
granted unless the movant, by a clear showing, carries the burden of persuasion.” Figueroa v.
Precision Surgical, Inc., 423 Fed. Appx. 205, 208 (3d Cir. 2011) (quoting Mazurek v.
Armstrong, 520 U.S. 968, 972, 117 S.Ct. 1865, 138 L.Ed.2d 162 (1997)). It is well-settled that a
party seeking a preliminary injunction must establish the following: (1) a likelihood of success
on the merits; (2) that he will suffer irreparable harm if the injunction is denied; (3) that granting
preliminary relief will not result in even greater harm to the nonmoving party; and (4) that the
public interest favors such relief. Kos Pharms. Inc. v. Andrx Corp., 369 F.3d 700, 708 (3d Cir.
2004). All four factors must favor preliminary relief. Lanin v. Tenafly, 515 Fed. Appx. 114, 117
(3d Cir. 2013) (citing Duraco Products, Inc. v. Joy Plastic Enterprises, 40 F.3d 1431, 1438 (3d
Cir. 1994). “A plaintiff's failure to establish any element in its favor renders a preliminary
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injunction inappropriate.” NutraSweet Co. v. Vit–Mar Enters., Inc., 176 F.3d 151, 153 (3d Cir.
1999) (emphasis supplied).
The Court finds at the threshold that Plaintiff has failed to establish the element of
irreparable harm, which the Supreme Court has described as “the traditional prerequisite to
obtaining an injunction.” See Younger v. Harris, 401 U.S. 37, 46, 91 S.Ct. 746, 751, 27 L.Ed.2d
669 (1971). In order to demonstrate irreparable harm, a plaintiff must show “potential harm
which cannot be redressed by a legal or an equitable remedy following a trial,” and “the
preliminary injunction must be the only way of protecting the plaintiff from harm.” Instant Air
Freight Co. v. C.F. Air Freight, Inc., 882 F.2d 797, 801 (3d Cir. 1989) (citing Weinberger v.
Romero–Barcelo, 456 U.S. 305, 312, 102 S.Ct. 1798, 1803, 72 L.Ed.2d 91 (1982); Continental
Group, Inc. v. Amoco Chemicals Corp., 614 F.2d 351, 356 and n.9 (3d Cir. 1980)). Irreparable
harm exists only when the injury is “of a peculiar nature, so that compensation in money
damages cannot atone for it.” Goadby v. Phila. Elec. Co., 639 F.2d 117, 121 (3d Cir. 1981)
(stating that irreparable harm exists only when “damages are difficult to ascertain or are
inadequate”). Thus, the crucial question here is whether absent an injunction money damages
would provide an adequate remedy at law for Plaintiff, as “[t]he availability of adequate
monetary damages belies a claim of irreparable injury.” Frank’s GMC Truck Ctr., Inc. v. Gen.
Motors Corp., 847 F.2d 100, 102 (3d Cir. 1988). The Court finds that money damages would
provide an adequate remedy for Plaintiff.
There are 124 merchants that were referred by Defendant that presently have accounts
with Plaintiff. Plaintiff claims that it would be irreparably harmed if it were to lose any of these
merchant accounts because “of the difficulty in ascertaining the monetary value of [the] lost
business.” ECF No. 6-1 at 17. Plaintiff claims that it has a “relationship of trust” with each
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merchant and that it would be difficult or impossible to regain any accounts that are lost. Id.
Plaintiff also alleges, albeit in a conclusory fashion, that its reputation and goodwill would suffer
if it lost merchants. Id.
The heart of Plaintiff’s argument for an injunction is that it stands to lose merchants and,
therefore, profits. Economic loss is not irreparable, as the harm flowing from any such loss is
compensable with money damages. The Third Circuit has consistently held that economic injury
does not constitute irreparable harm necessary to support an award of injunctive relief. See, e.g.,
Acierno v. New Castle County, 40 F.3d 645, 653 (3d Cir. 1994) (“Economic loss does not
constitute irreparable harm....”). As both the Supreme Court and Third Circuit have noted, “it
seems clear that the temporary loss of income, ultimately to be recovered, does not usually
constitute irreparable injury.” Instant Air Freight, 882 F.2d at 801 (quoting Sampson v. Murray,
415 U.S. 61, 90, 94 S.Ct. 937, 953, 39 L.Ed.2d 166 (1964). “The possibility that adequate
compensatory or other corrective relief will be available at a later date, in the ordinary course of
litigation, weighs heavily against a claim of irreparable harm.” Id.
Despite Plaintiff’s assertions to the contrary, there would appear to be no difficulty in
ascertaining compensatory damages here should Defendant become liable to Plaintiff for the
alleged potential harm. In Instant Air Freight, the Third Circuit held that there was no
irreparable harm where the defendant terminated a longstanding contractual relationship with
plaintiff, because any resulting harm from the termination of the parties’ contract could be
estimated based on the prior business generated through the relationship. Id. at 798, 802.
Likewise, the resulting harm from the termination of any Merchant Agreements would be
ascertainable based on the prior business generated by that account. Indeed, this is clearly shown
by the allegations in the complaint. The complaint describes five merchant accounts that were
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allegedly “converted” by Plaintiff to other merchant services providers. The complaint details
the length of time each merchant had an account with Plaintiff along with the average monthly
income Plaintiff earned from each account down to the penny. Compl. ¶¶ 18-37.
Finally, Plaintiff has not made a showing of irreparable harm based upon harm to
reputation or a loss of goodwill. Plaintiff’s bald assertion that “the loss of Merchants as
customers causes Plaintiff’s reputation to suffer” is simply insufficient to support a finding of
irreparable harm. ECF No. 6-1 at 16. Furthermore, Plaintiff’s reliance on Pappan Enters., Inc.
v. Hardee's Food Sys., Inc., 143 F.3d 800 (3d Cir. 1998) is misplaced. Id. at 805 (noting that
“grounds for irreparable injury includes loss of control of reputation, loss of trade, and loss of
goodwill”). Pappan is a trademark case and relied on the special harms inherent in claims of
trademark infringement, which are not present here. Id. (finding irreparable harm where there
was the likelihood that consumers would be confused by similar trademark).
Consequently, the Court finds Plaintiff is not entitled to a preliminary injunction. 4
Plaintiff’s motion for preliminary injunctive relief is, therefore, denied.
3. Arbitration
Under the Federal Arbitration Act (“FAA”),
[i]f any suit or proceeding be brought in any of the courts of the United States
upon any issue referable to arbitration under an agreement in writing for such
arbitration, the court in which such suit is pending, upon being satisfied that the
issue involved in such suit or proceeding is referable to arbitration under such an
agreement, shall on application of one of the parties stay the trial of the action
until such arbitration has been had in accordance with the terms of the agreement,
providing the applicant for the stay is not in default in proceeding with such
arbitration.
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Because Plaintiff has failed to establish the element of irreparable harm, the Court need not examine the other
prerequisites to injunctive relief. See Lanin, 515 Fed. Appx. at 118 (affirming denial of preliminary injunction on
the basis of failure to show irreparable harm, and noting that because all four factors must favor preliminary relief, it
was unnecessary to reach other factors).
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9 U.S.C. § 3. As noted earlier, the Agreement contains an arbitration provision that requires
“[a]ny dispute or claim arising out of, or in connection with this Agreement” to be submitted to
arbitration. Agreement, § 10.13. Indeed, Plaintiff has already commenced an arbitration action
against Defendant seeking compensatory and injunctive relief. ECF No. 12-1, Ex. A. The only
grounds Plaintiff has raised against dismissal of this matter in favor of arbitration is its request
for preliminary injunctive relief. ECF No. 15 at 9-11. The Court having found that Plaintiff is
not entitled to the issuance of a preliminary injunction, there is no further basis for this Court to
exercise authority over this matter.
The FAA speaks in terms of a “staying” of an action pending arbitration. See 9 U.S.C. §
3. Here, neither party has requested that this matter be stayed pending arbitration. Because all of
Plaintiff’s remaining claims are subject to arbitration, the Court sees no reason why a stay would
be warranted. FlexiVan Leasing, Inc. v. Through Transport Mut. Ins. Ass’n Ltd., 108 Fed. Appx.
35, 38 (3d Cir. 2004) (affirming district court's dismissal of suit where all claims were arbitrable
and moving party did not request a stay); Rhodia Inc. v. Bayer Cropscience Inc., Civ. No. 04–
6424, 2007 WL 3349453, *5 (D.N.J. Nov. 7, 2007) (“If all the claims in an action are arbitrable,
a court may dismiss the action instead of staying it.”). The complaint, therefore, shall be
dismissed to permit the parties to proceed with arbitration.
III. CONCLUSION
For the reasons above, Plaintiff’s motion for a preliminary injunction is denied.
Defendant’s motion to dismiss is granted. An appropriate Order accompanies this Opinion.
/s/ Freda L. Wolfson
FREDA L. WOLFSON, U.S.D.J.
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