Benex LC v. First Data Merchant Services Corporation

Filing 38

MEMORANDUM & ORDER granting 34 Motion to Dismiss for Failure to State a Claim; Defendant's motion to dismiss the Amended Complaint (Docket Entry 34) is GRANTED and Plaintiff's claims are DISMISSED WITH PREJUDICE. The Clerk of the Court is directed to enter judgment accordingly and mark this case CLOSED. So Ordered by Judge Joanna Seybert on 11/14/2016. C/ECF (Valle, Christine)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
-------------------------------------X
BENEX LC, on behalf of itself and
all others similarly situated,
Plaintiff,

MEMORANDUM & ORDER
14-CV-6393(JS)(AKT)

-against–
FIRST DATA MERCHANT SERVICES
CORPORATION,
Defendant.
-------------------------------------X
APPEARANCES
For Plaintiff:
Seth Rigrodsky, Esq.
Rigrodsky & Long, P.A.
919 North Market Street, Suite 980
Wilmington, Delaware 19801
Timothy J. MacFall, Esq.
Rigrodsky & Long, P.A.
585 Stewart Avenue, Suite 304
Garden City, New York 11530
For Defendant:

Noah Adam Levine, Esq.
Alan E. Schoenfeld, Esq.
Wilmer Cutler Pickering Hale and Dorr LLP
7 World Trade Center
250 Greenwich Street
New York, New York 10007
Albinas Prizgintas, Esq.
Wilmer Cutler Pickering Hale and Dorr LLP
1875 Pennsylvania Avenue NW
Washington, D.C. 20006
David C. Marcus, Esq.
Wilmer Cutler Pickering Hale and Dorr LLP
350 South Grand Avenue, Suite 2100
Los Angeles, California 90071

SEYBERT, District Judge:
This case involves a contract between Benex LC (“Benex”
or “Plaintiff”), a merchant, and First Data Merchant Services
Corporation (“First Data” or “Defendant”), a payment processor,
for processing credit card and debit card transactions.

Currently

pending before the Court is First Data’s motion to dismiss the
Amended Complaint for failure to state a claim.
Docket Entry 34.)

(Def.’s Mot.,

For the following reasons, First Data’s motion

is GRANTED.
BACKGROUND
I.

Factual Background1
The

Court

assumes

familiarity

with

the

factual

background of this case, which is set forth in its Memorandum and
Order dated March 16, 2016.

See Benex LC v. First Data Merchant

Servs. Corp., No. 14-CV-6393, 2016 WL 1069657 (E.D.N.Y. Mar. 16,
2016).
Benex is a merchant that accepts credit and debit cards,
and First Data is a payment processor that facilitates credit and

The following facts are taken from the Amended Complaint (Am.
Compl., Docket Entry 25) and are presumed to be true for the
purposes of this Memorandum and Order. Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 572, 127 S. Ct. 1955, 1975, 167 L. Ed. 2d
929 (2007) (“[A] judge ruling on a defendant’s motion to dismiss
a complaint must accept as true all of the factual allegations
contained in the complaint.” (internal quotation marks and
citation omitted)).
1

2

debit card transactions.

(Am. Compl. ¶¶ 2, 20.)

In March 2012,

Benex and First Data entered into a contract for payment processing
services, in which First Data would “perform various processing
functions

associated

authorizations,
“Contract”).2

with

batching,

card

transactions

clearing,

and

such

settlement”

as
(the

(Am. Compl. ¶ 2; see Contract, Am. Compl. Ex. B,

Docket Entry 25-2.)

Benex alleges that First Data has failed to

refund “interchange fees,” “dues and assessments” and “network
access fees” to merchants such as Benex.

(Am. Compl. ¶ 1.)

In most credit or debit card transactions, six parties
are involved: (1) the customer, (2) the issuing bank, (3) the
merchant, (4) the payment processor, (5) the acquiring bank, and
(6)

the

network

(i.e.,

Visa,

(collectively, the “Card Brands”)).

MasterCard,

or

Discover

The issuing bank issues a

credit or debit card to a customer, who uses it to purchase goods
or services from a merchant like Benex.

(See Am. Compl. ¶¶ 2,

20.) The acquiring bank is the “bank that does business with [the]

The Contract incorporates First Data’s Program Terms and
Conditions (the “Program Guide”) by reference. (Contract at 14
(“Client further acknowledges reading and agreeing to all terms
in the Program Guide, which shall be incorporated into Client’s
Agreement.”).) The Program Guide details the parties’
obligations and defines the majority of the Contract terms.
(Program Guide, Section 38, Am. Compl. Ex. F, Docket Entry 256); see also Payments Indus. Glossary (“Glossary”), Am. Compl.
Ex. G, Docket Entry 25-7 (defining various industry terms).)
2

3

merchants[.]”3

(Glossary

at

3.)

First

Data,

the

payment

processor, “make[s] it possible for merchants to accept credit and
debit card payments from their customers.”

(Am. Compl. ¶ 2.)

First

the

Data

submits

the

transaction

to

network

for

authorization, and the transaction is routed to the issuing bank.
(See Am. Compl. ¶ 2.)

The network then requests that the issuing

bank authorize or decline the transaction.

If the transaction is

approved, the issuing bank transmits the funds to the acquiring
bank, which credits the merchant’s account.4

Before crediting the

merchant’s account, the acquirer deducts various fees incurred
during processing, including a fee paid to the issuing bank to
process the transaction (the “Interchange Fee”) and fees paid to
the Card Brands known as “dues and assessments” and “network access
fees” (the “Card Brand Fees”).

(Am. Compl. ¶¶ 5-6.)

First Data, as the payment processor, receives a fee for
its services from merchants such as Benex.
Merchants have two pricing options.

(Am. Compl. ¶ 9.)

The first is a discount rate

The Court will use the pagination utilized by the Electronic
Case Filing System when referring to the Exhibits.
4 Ramon P. DeGennaro, 91 Fed. Reserve Bank of Atlanta Econ. Rev.
27 (2006), at 32-33, available at https://www.frbatlanta.org/-/
media/Documents/research/publications/economic-review/
2006/vol91no1_degennaro.pdf?la=en (“The processor’s system reads
the information and sends the authorization request to the
specific issuing bank through the card network. The issuing
bank . . . either grant[s] or den[ies] authorization. The
[acquiring bank] receives the response and relays it to the
merchant.”)
3

4

option (the “Discount Rate”), which charges merchants either a
percentage rate or a specified amount to process all of its
“qualifying

daily

Credit

transactions . . . .”

Card

and

Non-PIN

(Program Guide at 29.)

Debit

Card

The second option

is an interchange-plus option, also referred to as IC Pass Thru,
(the

“Interchange-Plus

Option”)

pursuant

to

which

First

Data

charges the merchant for the actual Interchange Fees incurred for
each transaction, plus a markup.

(Contract at 5.)

Benex selected the Discount Rate, which is 2.69% for the
Card Brands.5

(See Am. Compl. ¶ 20; Contract at 5.)

Rate is “[b]ased on [G]ross Transaction Volume.”

The Discount

(Contract at 5.)

The Program Guide defines “Gross” as “refer[ing] to the total
amount of Card sales, without set-off for any refunds or Credits.”
(Program Guide § 38 at 29 (emphasis added).)
In addition, the Contract contains what appears to be a
notice of claim provision.
Contract,

Benex

agreed

(See Contract ¶ 4 at 14.)
to

“promptly

and

Under the

carefully

review

statements or reports . . . reflecting Card transaction activity.”
(Program Guide § 18.10 at 16.)

Benex also agreed to notify First

Data of any billing issues “within 60 days of the date where the
charge or funding appears.”

(Contract ¶ 4 at 14; see also Program

The Contract includes different columns for each pricing
method. The Discount Rate column is the only one completed.
(Contract at 5.)
5

5

Guide § 18.10 at 16 (“If you believe any adjustments should be
made . . . you must notify us in writing within sixty (60) days
after any debit or credit is or should have been effected . . .
.”).)

If Benex fails to do so, First Data “shall not have any

obligation

to

investigate

or

effect

any

such

adjustments.”

(Program Guide § 18.10 at 16.)
II.

Procedural History
Benex

commenced

this

lawsuit

on

October

29,

2014,

asserting three causes of action: (1) breach of the implied
covenant of good faith and fair dealing, (2) conversion and (3)
unjust enrichment.

(Compl., Docket Entry 1, ¶¶ 67-84.)

offered two theories.

Benex

First, it alleged that First Data failed to

return Interchange and Card Brand Fees, among others, when Benex
provided refunds to its customers or when the Issuing Bank issued
chargebacks.6

(See, e.g., Compl. ¶¶ 1, 72.)

Second, it alleged

that First Data improperly charged an “additional discount rate on
. . . returned transaction[s].”
marks omitted).)

(Compl. ¶ 1 (internal quotation

First Data moved to dismiss the Complaint,

arguing that the terms of the Contract barred Benex’s recovery,
the conversion claim was duplicative, and the unjust enrichment

A “chargeback” is a “transaction that is challenged by a
cardholder or card issuing bank and is sent back through
interchange to the merchant bank for resolution.” (Glossary
at 5.)
6

6

claim could not be maintained in light of the parties’ Contract.
(See Def.’s Br., Docket Entry 15, at 10-20.)
On March 16, 2016, this Court granted First Data’s motion
and dismissed Benex’s conversion and unjust enrichment claims with
prejudice.

See Benex, 2016 WL 1069657, at *6.

Specifically, the

Court dismissed the conversion claim because “it [was] duplicative
of its implied covenant claim,” and held that “[the] unjust
enrichment claim [was] barred by the existence of the Contract.”
Benex, 2016 WL 1069657, at *5-6.

However, the Court dismissed

Benex’s implied covenant of good faith and fair dealing claim
without prejudice and granted leave to replead.

Id. at 6.

Because the Court’s analysis of the implied covenant
claim is relevant to the instant motion, a brief summary is
necessary.

In regard to Benex’s first theory--that First Data

breached the implied covenant of good faith and fair dealing by
failing to refund Interchange and Card Brand fees--this Court held
that “the Contract’s plain terms bar[] Benex’s recovery.”
at *4.

Id.

The Court explained that (1) “Benex agreed to pay the

Discount Rate” for First Data’s services, (2) the Discount Rate is
“[b]ased on [G]ross Transaction Volume” and (3) the Program Guide,
incorporated by reference into the parties’ agreement, specifies
that “gross” refers to the “total amount of Card Sales, without
set-off for any refunds or Credits.”
marks

and

citations

omitted)

(Id. (internal quotation

(alterations
7

and

emphasis

in

original); see supra n. 2.)

This Court also held that Benex’s

claim was barred because it failed to give notice pursuant to the
notice

of

claim

provision

and

specifically

rejected

Benex’s

argument that it could not have known that First Data was retaining
these fees.

Benex, 2016 WL 1069657, at *4.

Benex’s Complaint

included excerpts from its Card Processing Statement for February
2013 which showed a credit reversal of $35.24, but the statement
did not indicate any refund of the Interchange, Card Brand, and
other processing fees.

Id.; see also (Compl. ¶¶ 64-66.)

As such,

the Court held that “[t]his example alone should have triggered
the notice of claim provisions.”

Benex, 2016 WL 1069657, at *4.

As to Benex’s second theory–-“that First Data improperly and
without

any

authority

charges

its

merchant-customers

a[n]

additional discount rate on the amount of the return transaction”–
-the Court held that Benex failed to provide First Data sufficient
notice of the claim against it.
marks omitted).

Id. at *5 (internal quotation

Benex failed to “define what the additional

discount rate [was]” or “allege that it paid this additional
discount rate.”

Id.

On April 15, 2016, Benex filed an Amended Complaint,
alleging that First Data breached the implied covenant of good
faith and fair dealing.

(Am. Compl., ¶¶ 68-77.)

Benex also

asserts an additional cause of action for breach of contract,
claiming

that

First

Data

has

breached
8

its

agreements

with

Mastercard, and as third party beneficiaries of those agreements,
Benex and members of the class have been “deprived of the benefits
intended for them.”

(Am. Compl. ¶ 83.)

On July 21, 2016, First

Data filed a motion to dismiss for failure to state a claim.

(See

Def.’s Mot., Docket Entry 35.)
DISCUSSION7
I.

Legal Standard
To survive a motion to dismiss, a complaint must plead

“enough facts to state a claim to relief that is plausible on its
face.”

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S. Ct.

1955, 1974 (2007). A claim is plausible “when the plaintiff pleads
factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.”
Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 1949, 173
L.

Ed.

2d

868

(2009).

Although

the

Court

must

accept

all

allegations in the Amended Complaint as true, this tenet is
“inapplicable to legal conclusions.”

Id.

Thus, “[t]hreadbare

recitals of the elements of a cause of action, supported by mere
conclusory statements, do not suffice.”

Id. (citation omitted).

Ultimately, the Court’s plausibility determination is a “contextspecific task that requires the reviewing court to draw on its

Under the Contract’s choice of law provision, New York law
controls. (Program Guide § 36.1 at 28.)
7

9

judicial experience and common sense.”

Id. at 679, 129 S. Ct. at

1950.
In deciding a motion to dismiss, the Court is generally
confined to “the allegations contained within the four corners of
[the] complaint.”

Pani v. Empire Blue Cross Blue Shield, 152 F.3d

67, 71 (2d Cir. 1998).

However, the Court may consider “any

written instrument attached to [the complaint] as an exhibit,
materials incorporated in it by reference, and documents that,
although

not

complaint.”

incorporated

by

reference,

are

integral

to

the

Sira v. Morton, 380 F.3d 57, 67 (2d Cir. 2004)

(internal quotation marks and citation omitted); see also Chambers
v. Time Warner, Inc., 282 F.3d 147, 153 (2d Cir. 2002) (observing
that a document is “integral” if the complaint “relies heavily
upon its terms and effect”) (internal quotation marks and citation
omitted).
II.

Breach of Contract
As a preliminary matter, First Data previously argued

that the new breach of contract claim is “procedurally improper”
and “outside the scope of the Court’s Order.”
Docket Entry 28, at 3.)

(Def.’s Ltr. Mot.,

Benex has failed to address why this Court

should allow its breach of contract claim to go forward in light
of its prior Order, which clearly held that Benex was “granted
leave to replead only its implied covenant claim.”
1069657, at *6 (emphasis supplied).
10

Benex, 2016 WL

Further, “[d]istrict courts

in

this

Circuit

have

routinely

dismissed

claims

in

amended

complaints where the court granted leave to amend for a limited
purpose and the plaintiff filed an amended complaint exceeding the
scope of the permission granted.”

Palm Beach Strategic Income, LP

v. Salzman, 457 F. App’x 40, 43 (2d Cir. 2012); see also Pagan v.
N.Y. State Div. of Parole, No. 98-CV-5840, 2002 WL 398682, at *3
(S.D.N.Y.

Mar.

13,

2002)

negligent

misrepresentation,

(dismissing
and

wrongful

intentional

termination,

infliction

of

emotional distress claims after district court granted leave to
replead

only

employment

discrimination

claims).

Therefore,

Plaintiff’s breach of contract claim is DISMISSED WITH PREJUDICE.
III. Implied Covenant of Good Faith and Fair Dealing
As discussed, Benex alleges two theories.

First, it

alleges that First Data breached the implied covenant of good faith
and fair dealing by “failing to remit Interchange and Card Brand
fee refunds to merchants in the event of a merchant-issued refund
or chargeback.”

(Am. Compl. ¶ 74.)

Second, it alleges that First

Data further breached the implied covenant by “charging merchants
a fee on the reversal of a sales transaction.”

(Am. Compl. ¶ 74.)

The Court will summarize the relevant law and address each theory
in turn.
In every contract, parties have an implicit duty of good
faith and fair dealing.

Creative Waste Mgmt., Inc. v. Capitol

Envtl. Servs., Inc., 429 F. Supp. 2d 582, 609 (S.D.N.Y. 2006).
11

Under this implied covenant, “neither party to a contract shall do
anything which has the effect of destroying or injuring the right
of the other party to receive the fruits of the contract.”

M/A-

COM Sec. Corp. v. Galesi, 904 F.2d 134, 136 (2d Cir. 1990).

Thus,

one party may invoke the implied covenant of good faith and fair
dealing where the other party “complied with the literal terms of
the contract” but did “so in a way that undermines the purpose of
the contract.”

In re HSBC Bank, USA, N.A., 1 F. Supp. 3d 34, 51

(E.D.N.Y. 2014) (internal quotation marks and citation omitted).
Yet it bears emphasizing that “[t]he implied covenant ‘can only
impose an obligation consistent with other mutually agreed upon
terms in the contract.’”

Broder v. Cablevision Sys. Corp., 418

F.3d 187, 198-99 (2d Cir. 2005) (quoting Geren v. Quantum Chem.
Corp., 832 F. Supp. 728, 732 (S.D.N.Y. 1993)).

Moreover, the

implied covenant cannot impose new duties outside the scope of the
contract.

Id. at 199; see also Gaia House Mezz LLC v. State Street

Bank & Trust Co., 720 F.3d 84, 93 (2d Cir. 2013) (“The covenant
cannot be used . . . to imply an obligation inconsistent with
other terms of a contractual relationship.”).
A.

Failure to Refund Interchange and Card Brand Fees
Benex alleges that when a return transaction occurs, the

Issuing Bank and the Card Brand refund the Interchange and Card
Brand fees to First Data and First Data “retains the fees despite
the fact that it has no contractual authority or other authority
12

to do so.”

(Am. Compl. ¶ 11.)

First Data argues that this is

“exactly the same theory based on exactly the same material
allegations” as the original Complaint.
35, at 7.)

(Def.’s Br., Docket Entry

As a result, First Data urges, “[these] allegations

fare no better now than they did . . . when the Court expressly
rejected them.”

(Def.’s Br. at 8.)

Further, First Data argues

that Benex’s legal arguments, including their arguments regarding
the meaning of “Gross Transaction Volume,” must be rejected based
on the Court’s prior Order and the law of the case.
at 10-11.)

(Def.’s Br.

Benex argues that First Data ignores several new

allegations in the Amended Complaint, including the allegation
that the phrase “Discount Fees (based on Gross Transaction Volume)”
in the Contract is a heading, and the Contract specifies that
headings “shall not in any way affect the meaning or construction”
of the Contract.

(Pl.’s Opp., Docket Entry 36, at 1).

Further,

it argues that the allegations in the Amended Complaint “show that
Defendant’s

interpretation

of

the

Agreement

is

overbroad

and

inconsistent with the express provisions of the Agreement.” (Pl.’s
Opp. at 9.)
At the outset, the Court declines to consider Benex’s
legal arguments--couched as factual allegations--regarding the
interpretation of the Contract. (See, e.g., Am. Compl. ¶¶ 41-44.)
This

Court

previously

held

that

the

Contract

barred

Benex’s

recovery; Benex agreed to pay the Discount Rate for First Data’s
13

services based on Gross Transaction Volume, and Gross Transaction
Volume is not “set-off for any refunds or Credits.”
WL 1069657, at *4.

Benex, 2016

Benex cannot use the opportunity to file an

amended complaint to re-litigate these issues.

See Weslowski v.

Zugibe, 96 F. Supp. 3d 308, 317 (S.D.N.Y. 2015), aff’d, 626 F.
App’x 20 (2d Cir. 2015) (“The mere filing of an Amended Complaint
does not entitle Plaintiff to relitigate his claims absent new
factual allegations.”).
Without these arguments, Benex’s Amended Complaint is
substantially similar to the original Complaint and offers few new
factual allegations, none of which can save its claim.

For

example, Benex alleges that the retention of the Interchange and
Card Brand fees by First Data results in a windfall “approximately
five

and

one-half

transaction.”
the

Contract

times

more

than

(Am. Compl. ¶ 73.)
continue

to

operate

it

made

on

the

original

However, the express terms of
as

a

bar

to

Benex’s

regardless of the amount of the so-called windfall.

claim

Therefore,

Benex’s recovery on this theory is barred by the express language
of the Contract.

See Gaia House Mezz LLC, 720 F.3d at 93 (holding

that there was no breach of the implied covenant when plaintiff
sought to imply “obligations [which] conflict with the express
language of the [a]greement”).

14

B.

Additional Fee for Return Transactions
Benex alleges that First Data “imposes the same charge

twice on merchants . . . in the event of refunds or chargebacks.”
(Am. Compl. ¶ 54.)

Specifically, Benex alleges that First Data

charges a “MC/V/Discover Network Auth & Ret Trans Fee” for each
credit card sale, and if the transaction is reversed, First Data
charges the same fee again, (Am. Compl. ¶ 54), despite the fact
that the Contract lists “MC/V/Discover Ntwk Auth & Return Trans
Fee” as a single fee (Contract at 5).

The Amended Complaint

includes an excerpt of Benex’s February 2013 Statement which shows
charges for “MASTERCARD AUTH FEE” and “MASTERCARD CREDITS TRANS
FEE.”

(Am. Compl. ¶ 54; Feb. 2013 Stmt. Am. Compl. Ex. E, Docket

Entry 25-5, at 5.)
First Data contends that the Contract allows it to charge
a “Ntwk Auth & Return Trans Fee” of $0.20 for each authorization
and each return transaction.

(Def.’s Br. at 12.; Contract at 5.)

It argues that processing the authorization and processing the
return are separate services performed at different points in time.
(Def.’s Br. at 12.)

Further, First Data points out that Benex

does not dispute that the Contract permits First Data to charge
this fee for authorizations, (Am. Compl. ¶ 54), and as such, First
Data is permitted to charge “a fee for th[e] additional work—namely,

processing

the

‘Return’

15

transaction—-subsequently,

separately, and apart from any prior authorizations.”

(Def.’s Br.

at 13.)
The Court finds that Benex’s recovery on this theory is
also barred by the language of the Contract.

The Contract lists

the “MC/Visa/Discovery Ntwk Auth & Return Trans Fee” in the pricing
schedule, and the name of the fee clearly indicates that the fee
is imposed for authorizations and returns.
(emphasis supplied).)

(See Contract at 5

Although Benex contends that First Data is

charging “the same fee twice,” this argument is not supported by
the February 2013 Statement.

(Pl.’s Opp. at 14.)

The Statement

lists “MASTERCARD AUTH FEE” and “MASTERCARD CREDITS TRANS FEE,”
indicating that the $0.20 fee is imposed for different services-one when the transaction is authorized and one when a return
occurs.

(See Am. Compl. ¶ 54; Feb. 2016 Stmt. at 5.)
To the extent Benex argues that the relevant contractual

provisions are ambiguous and such ambiguities must be construed
against First Data, that argument also fails.
21.)

(Pl.’s Opp. at 20-

As discussed above, the Court finds that the Contract is

clear regarding the retention of Interchange and Card Brand fees
and

the

$0.20

fee

for

return

transactions,

and

it

is

well

recognized that “a written agreement that is complete, clear and
unambiguous on its face must be enforced according to the plain
meaning of its terms.”

MHR Capital Partners LP v. Presstek, Inc.,

12 N.Y.3d 640, 645, 912 N.E.2d 43, 47, 884 N.Y.S. 2d 211 (2009).
16

C.

Notice of Claim Provision
Even

if

Benex’s

Amended

Complaint

stated

a

claim,

failure to comply with the Contract’s notice of claim provision
bars any recovery.

Under New York law, “[e]xpress conditions must

be literally performed; substantial performance will not suffice.”
MHR Capital Partners, 12 N.Y.3d at 645, 912 N.E.2d at 47; see also
D.C.R. Trucking & Excavation, Inc. v. Aetna Cas. and Sur. Co., No.
96-CV-3995, 2002 WL 32096594, at *6 (E.D.N.Y. Oct. 31, 2002)
(“Failure

to

strictly

comply

with

contractual

notice

and

documentation provisions has been held to constitute a waiver of
any claim for damages.”).
Here, the Program Guide clearly requires Benex to notify
First Data of any billing issues “within 60 days of the date of
the statement where the charge or funding appears.”

(Contract ¶ 4

at 14; see also Program Guide § 18.10 at 16 (“If you believe any
adjustments should be made . . . you must notify us in writing
within sixty (60) days after any debit or credit is or should have
been effected . . . .”).)
Data of any liability.

The failure to do so relieves First

(Program Guide § 18.10 at 16 (stating that

if Benex fails to notify First Data within the applicable time
period, First Data “shall not have any obligation to investigate
or effect any such adjustments”).)
With respect to the first theory, Benex argues that the
Amended Complaint contains specific allegations demonstrating that
17

“the February 2013 account statement . . . did not show that the
Interchange and Card Brand Fees . . . had been refunded by the
Card Issuer and Card Brand,” and as a result, it could not have
known to provide notice.

(Pl.’s Opp. at 2.)

However, this Court

rejected this argument in its prior Order and held that the credit
reversal of $35.24 in February 2013 should have triggered the
notice of claim provision.

Benex, 2016 WL 1069657, at *4.

The

allegations in the Amended Complaint do not change this result.
Benex alleges that First Data retained the Interchange and Card
Brand fees associated with the same credit reversal of $35.24.
(Am. Compl. ¶ 49.) In addition, Benex alleges that “[t]he refunded
fee activity is completely invisible to the Plaintiff” because it
is not noted on the statement, and First Data “did not apprise
Plaintiff that the Card Brand had refunded the . . . [f]ees in
connection with the reversal of the February 14, 2013 sales
transaction, nor did [First Data] indicate that it was retaining
the refunded . . . fees.”

(Am. Compl. ¶¶ 50, 52.)

In light of

this Court’s prior ruling and Benex’s concession that it was
“obviously aware that it had not received the refunded fees,” (Am.
Compl. ¶ 53), this argument fails.
With respect to the second theory, Benex asserts that
“because the[ ] [fees] are shown as two separate fees on the
account statements, Plaintiff d[id] not, and could not, know that
it was assessed the same fee twice in connection with reversed
18

transactions.”

(Am. Compl. ¶ 55.)

As a result, it maintains that

“merchants . . . were precluded from providing notice.”
Compl. ¶ 55.)

(Am.

However, the February 2013 Statement contains all

the information necessary for Benex to provide the required notice.
Under “Fees Charged,” the statement contains an itemized list which
shows that a “MASTERCARD AUTH FEE” and a “MASTERCARD CREDIT TRANS
FEE” were charged on February 28, 2013.

Thus, the notice of claim

provision was triggered on February 28, 2013, when Benex concedes
that the fees “distinctly” appeared on its statement.
¶ 54.)

(Am. Compl

Further, the Court agrees with First Data that even if

Benex did not understand the charges, nothing prevented it from
giving notice and disputing or requesting clarification of the
fees charged.

(Def.’s Br. at 13.)

Benex’s remaining arguments related to its failure to
provide notice--including that First Data hindered its ability to
provide notice and that notice was futile—-also fail.
at 17-18).

(Pl.’s Opp.

For example, Benex relies on Kaiser Foundation Health

Plan, Inc. v. MedQuist, Inc., No. 08-CV-4376, 2009 WL 961426 (D.
N.J. Apr. 8, 2009), to argue that its failure to provide notice
should be waived under the prevention doctrine.
18.)

(Pl’s Opp. at 17-

Under New York law, this doctrine provides that “a party to

a contract cannot rely on the failure of another to perform a
condition precedent where he has frustrated or prevented the
occurrence of the condition.”

Kooleraire Serv. & Installation
19

Corp. v. Bd. of Ed. of City of N.Y., 28 N.Y.2d 101, 106, 268 N.E.2d
782, 784, 320 N.Y.S.2d 46 (1971).

In Kaiser, plaintiffs alleged

that defendants “actively concealed the nature of the inflated
billings,” “refus[ed] to release information to [plaintiff] about
the manner in which its invoices were calculated” and “purposely
frustrated their ability to act.”

Kaiser, 2009 WL 961426, at *5.

The court held that the claims could proceed despite the fact that
plaintiffs failed to give notice pursuant to the terms of the
contract.

Id.
Unlike in Kaiser, the Amended Complaint does not allege

that

First

Data

“wrongfully”

withheld

information

about

applicable fees or provided misleading billing statements.

the
See

Cauff, Lippman & Co. v. Apogee Fin. Grp., Inc., 807 F. Supp. 1007,
1022 (S.D.N.Y. Aug. 7, 1992) (“The doctrine of prevention excuses
a

condition

precedent

when

a

party

wrongfully

prevents

that

condition from occurring.”) (internal quotation marks and citation
omitted).
“could

In its opposition brief, Benex argues that First Data

have

informed”

Plaintiff

that

it

retained

refunded

Interchange and Card Brand fees and “could have used the same term”
for the additional return fee to prevent confusion.
18.)

(Pl’s Opp. at

Even if Benex was permitted to pursue these allegations--

which do not appear in the Amended Complaint--these allegations
are

insufficient

to

establish

that

First

Data

purposely

wrongfully prevented Benex from giving the proper notice.
20

and
See

Wright v. Ernst & Young LLP, 152 F.3d 169, 178 (2d Cir. 1998)
(declining to consider claim that was alleged in opposition to
motion to dismiss but not in complaint).
Finally, Benex argues that notice was futile because “if
such

notice

is

given,

any

determination

by

[First

Data]

is

discretionary” and the Contract states that “it shall not have any
obligation to . . . effect any such adjustments.”
19

(ellipsis

in

original);

Program

Guide

(Pl.’s Opp. at

§

18.10

at

16.)

Specifically, Benex maintains that since First Data has retained
the Interchange and Card Brand fees, it has “already determined
that it was entitled to those refunds under the Agreement” and
providing notice would have been futile.

(Pl.’s Opp. at 19.)

Benex has mischaracterized the relevant language.

Section 18.10

of the Program Guide states that if a merchant notifies First Data
more than sixty days after the adjustment should have been made,
First

Data

may,

in

its

discretion,

investigate the billing irregularity.

assist

the

merchant

and

(See Program Guide § 18.10

at 16.)
Therefore, the Court finds that in addition to the
express terms of the Contract, Benex’s failure to comply with the
notice of claim provision bars any recovery.
covenant claim is DISMISSED WITH PREJUDICE.

21

Benex’s implied

CONCLUSION
Defendant’s motion to dismiss the Amended Complaint
(Docket Entry 34) is GRANTED and Plaintiff’s claims are DISMISSED
WITH PREJUDICE.

The Clerk of the Court is directed to enter

judgment accordingly and mark this case CLOSED.

SO ORDERED.
/s/ JOANNA SEYBERT
Joanna Seybert, U.S.D.J.
Dated:

November
14 , 2016
Central Islip, New York

22