Gucci America, Inc. v. Frontline Processing Corporation et al

Filing 77

DECLARATION of Rhonda Lemos (with exhibits) in Opposition re: 66 MOTION for Summary Judgment.. Document filed by Woodforest National Bank. (Mentlik, William)

Gucci America, Inc. v. Frontline Processing Corporation et al

Doc. 77

Document Filed Electronically UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK GUCCI AMERICA, INC. Plaintiff, v. FRONTLINE PROCESSING CORPORATION; WOODFOREST NATIONAL BANK; DURANGO MERCHANT SERVICES LLC d/b/a NATIONAL BANKCARD SYSTEMS OF DURANGO; ABC COMPANIES; and JOHN DOES, Defendants. : : : : : : : : : : : : : x Civil Action No. 09-6925-HB District Judge Harold Baer, Jr.

DECLARATION OF RHONDA LEMOS IN SUPPORT OF DEFENDANT WOODFOREST'S OPPOSITION TO PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT I, RHONDA LEMOS, declare and state as follows: 1. I am the Vice President of Risk Management of Delta Card Services, Inc. I have

personal knowledge of the facts and matters discussed in this declaration, and if called as a witness, could and would testify to the matters set forth below. 2. Replica merchants were but a small subset of the high-risk merchants serviced by

Delta Card. Delta Card has only been able to identify approximately twenty merchants that may have been selling replica products that it serviced in the last five years. This represented less than one-tenth of one percent of our merchants. 3. Today, Delta Card has no replica merchants because we decided in early Attached as

May 2008 no longer to accept any new merchants selling replica products.

Exhibit A is a true and accurate copy of the e-mail of May 5, 2008, from Francisco Rivera setting forth this policy. This decision was made solely due to the high amount of charge backs for

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nonreceipt of merchandise associated with these types of merchants. The memorandum also says that MasterCard prohibits replicas to ensure that our employees follow the policy, even though MasterCard has not changed its policy. Our decision not to approve additional Internet merchants selling replicas was made before any notice from Gucci or knowledge about the allegations against the Laurette company, which was first received over two months later in July 2008. 4. Woodforest makes very little money off of its involvement in credit card

processing. Woodforest's entire compensation in all cases is two cents per transaction. This amount is not affected by the size of the transaction, the type of goods or services sold by the merchant, or the merchant's classification as high risk or not. In the case of Laurette, the total gross revenue received by Woodforest for the entire time Delta Card provided processing services was $69.46. 5. Even if one includes along with Woodforest the other companies associated with

the processing credit card payments for Laurette, very little revenue was received by the entire group. Attached as Exhibit B is a chart of the revenues for all processing for Laurette. The maximum revenues received by Woodforest and Delta Card were $16,505.86, as set forth in the far right column on the chart. 6. Delta Card has policies in place which prohibit it from accepting merchants These policies prevent Delta Card from accepting merchants

engaged in illegal activities.

engaged in such illegal sales activities over the Internet as child pornography, firearms, drugs, alcohol, and tobacco. 7. Delta Card's policies did not prohibit us from accepting merchants who were said I understand that this policy is consistent with the policies of Visa and

to sell replicas.

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MasterCard which allow their credit cards to be listed for replica merchants, but not for counterfeiters. 8. On or about November 13, 2006, Delta Card accepted an application for the

Laurette Company. I understand that the Laurette Company was an Internet merchant which advertised replica handbags for sale. Delta Card's policies would not have prohibited us from accepting credit card processing services at that time for Internet merchants selling replicas. Laurette was the first replica merchant that was approved for processing by Delta Card. 9. Delta Card began processing credit card payments for the Laurette Company in At this time, Laurette's Web site had been fully completed and was in

November 2006.

operation. We understood that the Web site had been approved for credit card processing by another bank, Frontline. We were never informed that Laurette's Web site had been closed down before its application to us for any reason. 10. Neither Woodforest nor Delta Card had any involvement in setting up the

Web site or the content of the Web site. We continued to process payments for Laurette until about July 8, 2008, at which time we understand that Gucci obtained a "freeze order," prohibiting the Laurette Company from doing further business on its Web site. 11. Before we accept a new merchant, a reviewer from Delta Card is required to fill

out a checklist. The reviewers who perform this job do not have the training, sophistication, or experience to make determinations about issues of trademark infringement. They are not trained to make judgments as to whether products shown on a Web site are counterfeit products as opposed to replicas. Our reviewers are paid in the range of $15-18 per hour. The checklist requires that a Web site must be reviewed, and has a box for the reviewer to determine whether it has a "complete description of the goods or services offered." A copy of the checklist for

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Laurette's Web site is attached as Exhibit C. The reviewer checks the goods or services shown on the Web site to determine whether they match the goods for which the merchant applied. For example, if a merchant submitted an application for handbags, and a review of the Web site determined that the merchant was selling tobacco products, the reviewer would indicate this, and the application would be rejected. 12. I also understand, based on my review of documents, that during the period from

November 2006 until May 2008, Delta Card accepted applications from other Internet merchants offering replica products. Over this entire period of time, Delta Card never received a single notice, letter, complaint, lawsuit, or subpoena from any trademark owner complaining that the products sold on these Web sites were counterfeit Gucci products, and not just replicas. During this entire period of time, Delta Card proceeded under the belief, confirmed by the absence of any complaint about the sales on these Web sites, that there was nothing illegal with the replicas sold on these Web sites. 13. Had Delta Card received a notice from Gucci establishing that TheBagAddiction

was selling counterfeit Gucci goods, we would have investigated the issue. If we had determined that the client was selling illegal merchandise, Delta Card would have canceled our services. 14. At no time while Woodforest was processing credit card payments for the

Laurette Company were we informed that the products of TheBagAddiction were not replicas, but counterfeit products. 15. Delta Card also has procedures in place to monitor Internet merchants' Web sites

for illegal or prohibited merchandise or services. We contract the services of a company called G-2. On a monthly basis, G-2 scans the Web sites of all of our Internet merchants to identify merchants that may be selling prohibited products or services (e.g., drugs, firearms, or tobacco),

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