District Court Denies Payment Processor’s Motion to Dismiss in Merchant Overcharging Suit

The District Court for the District of New Jersey recently denied a credit card service company’s motion to dismiss a complaint alleging the company overcharges merchants who use its platform. 

The plaintiffs had asserted claims that the defendant service company had overcharged the merchants processing fees related to transactions in the state.  The defendant service company had attempted to dismiss the case on personal jurisdiction grounds claiming it is not domiciled in New Jersey and did not have “continuous and systematic contacts” with the state.  The defendant attempted to dismiss the claims, or in the alternative compel arbitration, under the terms of the parties’ operative contract, which the defendant had amended once during the parties’ relationship.  The defendant had changed the forum-selection clause and processing charge provisions and added the arbitration clause through the amendments in question.  The plaintiff opposed these motions asserting that jurisdiction was proper per the initial agreement’s forum-selection clause and that dismissing its claims would be improper because defendant failed to provide proper notice of changes to the forum-selection clause and authorization provisions and the addition of the arbitration clause under New Jersey law.

The court agreed with the plaintiff merchants, holding that personal jurisdiction was proper in New Jersey and that it could not grant the motion to dismiss for failure to state a claim or the motion to compel arbitration because the initial agreement’s change-in-terms clause was ambiguous.  Under New Jersey law, “where the terms of a contract are clear and unambiguous, there is no room for interpretation or construction and the courts must enforce those terms as written.”  Namerow v. PediatriCare Assoc., LLC, 218 A.3d 839, 843 (N.J. Super. Ct. App. Div. 2018).  Nevertheless, an “ambiguity in a contract exists[, however,] if the terms of the contract are susceptible to at least two reasonable alternative interpretations.”  Cooper River Plaza East, LLC v. Briad Grp., 820 A.2d 690, 697 (N.J. Super. Ct. App. Div. 2003).  The change-in-terms clause permitted the defendant to “change the terms of or add new terms” to the agreement at “any time in accordance with applicable law,” which would be effective when the defendant gave notice “either through written communication” or though posting the changed agreement on its “website located at [a specified link]” per the change-in-terms clause.  However, another provision of the initial agreement provided that notice would be “deemed delivered when mailed first-class,” creating tension over what the agreement required for notice.

The court reasoned that even though the change-in-terms clause in the initial agreement expressly provided that the defendant “may unilaterally revise” the initial agreement, it could only do so with proper notice, and the change-in-terms clause was ambiguous to the exact notice required under the agreement.  The court reasoned that because the defendant provided that notice had to be “provided by first class mail” in one provision in the agreement or by “written communication” or by posting the amended agreement to the defendant’s “website” in another provision that the initial agreement was ambiguous to what constituted “proper notice.”  As such, “[b]y alleging that an ambiguity exists in the First Agreement as to what notice is required for Defendant to unilaterally modify the first agreement,” the Court was obligated to credit Plaintiffs’ interpretation of the ambiguity at the motion to dismiss stage.  Thus, this contractual ambiguity prevented the defendant from dismissing the claims or compelling arbitration.

The case is Black Ship, LLC v. Heartland Payment Systems, Inc., No. 3:21-cv-13855 (D. N.J. May 22, 2023).