Okay, here's a compilation of quotes from the Memorandum Opinion in Card Connect, LLC v. Shift4 Payments, LLC, Case No. 2:23-cv-00267-JDW, aiming for maximum token usage. I've organized them thematically and tried to include a variety of quotes, from factual statements to legal conclusions, to give a comprehensive overview of the document's contents:
I. Introduction and Background:
- "This case concerns a dispute over a contract. Card Connect, LLC sues Shift4 Payments, LLC for breach of contract, declaratory judgment, and promissory estoppel based on Shift4's alleged failure to pay Card Connect residuals pursuant to an Agent Agreement that the parties executed."
- "Shift4 has moved to dismiss the Complaint for failure to state a claim."
- "Card Connect is 'an independent sales organization . . . that solicits and services merchants desiring to accept credit and debit card based transactions from their customers.'"
- "Shift4 is 'a payment processor that partners with [independent sales organizations] such as Card Connect to provide payment processing merchant services across a variety of industries.'"
- "Card Connect alleges that it and Shift4 were parties to an Agent Agreement, which governed the parties’ relationship concerning the referral of merchants, pursuant to which Card Connect would solicit merchants and, if successful, transfer and assign, or cause to be assigned, to Shift4 all of Card Connect's rights, title, and interest, in and to the assigned Merchant Agreements."
- "Card Connect claims that, in exchange, Shift4 agreed to pay Card Connect compensation in the form of 'residuals,' which were to be calculated and paid in accordance with the terms of the Agent Agreement."
- "The parties operated under the Agent Agreement from July 2014 until July 2021, when Shift4 sent Card Connect a termination notice."
- "Card Connect alleges that since then, Shift4 has failed to pay Card Connect all of the residuals that it owes, and that Shift4 has breached the Agent Agreement’s covenant of good faith and fair dealing."
- "The amount in controversy allegedly exceeds $5,000,000."
- "The parties are diverse."
- "Because this is a breach of contract case, the Court exercises diversity jurisdiction. See 28 U.S.C. § 1332."
- "Shift4 now ask the court to dismiss Card Connect’s complaint for failure to state a claim. (ECF No. 20.)"
II. Factual Allegations and Contractual Provisions:
- "On July 1, 2014, Card Connect and Shift4 entered into an Agent Agreement."
- "Pursuant to the Agent Agreement, Card Connect would solicit merchants and, if successful, transfer and assign, or cause to be assigned, to Shift4 all of Card Connect’s rights, title, and interest, in and to the assigned Merchant Agreements[.]"
- "'Merchants' are those 'desiring to accept credit and debit card based transactions from their customers.'"
- "'Merchant Agreement' includes the 'three party merchant processing agreement' and the 'two party merchant processing agreement.'"
- "In return, Shift4 agreed to pay Card Connect residuals, 'calculated and paid in accordance with the terms [of] this Agreement.'"
- "Section 5.5, titled 'Survival,' sets forth a list of provisions that 'shall survive termination of this Agreement.'"
- "Shift4 terminated the contract on July 1, 2021."
- "The Agent Agreement contains a choice of law and venue provision that designates Pennsylvania law and the forum of the Court of Common Pleas of Lancaster County, Pennsylvania, or, if in federal court, the United States District Court for the Eastern District of Pennsylvania."
- Shift4 stated they terminated the contract "based on, among other reasons, breaches of contract by Card Connect". The termination notice was effective immeadiately. Card Connect "hotly disputes the claim that it breached the Agent Agreement." Card Connect states that "since termination, Shift4 failed to pay all amounts due, and in the correct amounts". Card Connect alleges Shift4 is "still providing processing services for Merchant Accounts that Card Connect Referred." The Agent Agreement says "that Card Connect 'irrevocably assigns, transfers, conveys and sets over' to Shift4, 'all of [Card Connect’s] right, title, and interest in and to: (a) all Merchant Agreements originated by [Card Connect], signed by a Merchant and submitted to Shift4; and (b) the applicable Merchant Accounts.”" The Agent Agreement states that "Merchant Accounts submitted to Shift4 by [Card Connect] . . . will be owned by Shift4, and [Card Connect] hereby waives any rights it may have in and to such Merchant Accounts.
- "Section 3.1 provides that 'all compensation due to [Card Connect] under this Agreement shall be calculated and paid in accordance with the terms this Agreement. Shift4 shall pay this compensation within thirty (30) days after the end of each calendar month.'"
- "Shift4, however, contends that that section 3.1 does not contain a survivability clause, meaning that the obligation to pay residuals does not survive past termination."
- "Section 3.3 of the Agent Agreement provides that '[i]f at any time Shift4 does not receive its fees for processing services from a merchant, it shall not be obligated to pay [Card Connect] any residual compensation related to such merchant.'"
- "Section 5.1 of the Agent Agreement, titled “Termination,” enables Shift4 to terminate the agreement under a number of circumstances."
- "Shift4 can terminate for cause under 5.1(a)."
- "Shift4 can terminate immediately with written notice if Card Connect 'breaches any material provision, term, condition, covenant, representation, or warranty.'"
- "[i]f any of the representations or warranties made by [Card Connect] herein shall prove to be untrue or inaccurate in any material respect at any time."
- "[i]f [Card Connect] breaches any material provision, term, condition, covenant, representation, or warranty of this Agreement, and fails to cure the breach to Shift4’s satisfaction within thirty (30) days after written notice of such breach from Shift4."
- "Shift4 also has various “for cause” termination rights under Section 5.1(b) that do not require notice or an opportunity to cure."
- Shift4 can also terminate without cause "upon ninety (90) days’ prior written notice to [Card Connect]."
III. Legal Arguments and Analysis (Shift4's Arguments):
- "Shift4 argues that Card Connect's breach of contract claim fails for four reasons."
- "First, the obligation to pay residuals does not survive termination of the Agent Agreement."
- "Second, even if the obligation to pay residuals survives, Shift4's obligation is limited to (a) amounts due during the term of the Agent Agreement, and (b) residuals for which it receives processor fees."
- "Third, because Shift4 did not receive Card Connect's interest in post- termination merchants, it has no obligation to pay residuals for those merchants."
- "Fourth, Card Connect fails to identify the contractual basis for the claim that Shift4 underpaid its pre-termination residuals."
- "Shift4 contends Section 5.5's list is exclusive, and because Section 3.1, the provision setting forth Shift4's obligation to pay residuals, is not on that list, Shift4's obligation to pay residuals did not survive the Agent Agreement's termination."
- "Shift4 argues that because it did not acquire the merchant agreements for any merchants Card Connect referred to processors other than Shift4, Card Connect did not assign its rights to these post-termination merchants, and Shift4 therefore had no obligation under Section 1.7 to pay Card Connect residuals for these merchants."
- "Shift4 argues that Card Connect has failed to plead (1) what residuals it claims it was underpaid prior to termination; (2) which Merchant Accounts those underpayments relate to; (3) what the calculation of those underpayments should have been; and (4) which provisions of the Agent Agreement govern such calculations."
- "Shift4 argues that Reading Terminal supports its argument that its duty to pay residuals terminated because of the fact that when parties agree a contract is terminable upon notice[,] obligations (other than those in a survivability clause) end at termination."
- "Shift4 argues that the Agent Agreement limited the definition of “residuals” to fees for processing services that it received from merchants."
- "Shift4 argues that, as in Reading Terminal, its obligation to pay Card Connect residuals ended upon the Agent Agreement’s termination."
IV. Legal Arguments and Analysis (Card Connect's Arguments, and Court's Reasoning):
- "Card Connect argues that Shift4's obligation to pay residuals did survive, relying on Reading Terminal and the Agent Agreement itself."
- "Card Connect argues that the Agent Agreement gave Card Connect a vested interest in the assigned merchant agreements, and because that interest had already vested, the termination of a separate, executory agreement does not terminate the vested right See Reading Terminal, 2003 WL 21653851 at 5 (distinguishing Birdsall* based on a theory that one party’s “contingent right” never vested)."
- "Card Connect argues that Section 6.1 is not the only section that reveals that the parties intended for Shift4's obligation to pay residuals to survive."
- "Card Connect argues that its claim stems from Section 1.7 of the Agent Agreement, which required CardConnect to assign to Shift4 all rights, title, and interest in Merchant Agreements that CardConnect originated with merchants"
- "Card Connect distinguishes Birdsall on four bases... First, Card Connect claims that although Birdsall concerned commissions, and this case concerns residuals, the two forms of payments are not 'substantively different'..." "Second, Card Connect argues that unlike in Birdsall, it 'referred merchant clients to Shift4,' '“assigned all of its rights, title, and interest in the merchant contracts for those clients at the time the clients were referred.”'" "Third...the contract in Birdsall was terminable at will." *"Fourth...the commissions in Birdsall were contingent."
- " Card Connect argues that the Assignment clause’s use of “irrevocably” conveys that Card Connect, immediately at assignment, relinquishes all of its rights."
- "Card Connect argues that Shift4’s position—that it had the unfettered ability to terminate, without cause, and retain all of Card Connect’s merchant relationships without further payment—would lead to “absurd and unreasonable results.”"
- "Card Connect contends that even if the Court determines the contract is ambiguous, the Court should resolve that ambiguity against Shift4 because Shift4 drafted the agreement."
- "Card Connect has identified a provision of the contract that creates a plausible claim for ongoing residuals—the assignment clause"
V. Court's Conclusions and Rulings:
- "The Court concludes that the Agent Agreement is ambiguous as to whether the obligation to pay residuals survives termination."
- "The Court cannot determine, as a matter of law on a motion to dismiss, that Shift4's obligation to pay residuals did not survive the Agent Agreement's termination."
- "Because the Court concludes that the Agent Agreement is ambiguous with respect to whether Shift4 had a continuing obligation to pay Card Connect residuals, the Court will deny Shift4's motion to dismiss as to Card Connect's breach of contract claim."
- "The Court agrees with Shift4 that Card Connect has not identified a contractual basis for the allegation that Shift4 underpaid Card Connect prior to termination. Because Card Connect fails to allege facts that constitute a breach based on underpayments pre-termination, the Court will grant Shift4's motion in that respect."
- "The court notes that the Agent Agreement’s provision on the termination 'without cause' states that Shift4 could terminate 'without cause.'"
- "Because the Court cannot conclude as a matter of law that the obligation to pay residuals does not survive, Shift4's motion is denied in part in that respect."
- "The Court will deny Shift4’s motion to dismiss Card Connect’s claim (punitive damages)." The court held that "Because Card Connect’s breach of contract and promissory estoppel claims survive, the Court will not dismiss its claim for punitive damages."
- "The Court will, however, grant its motion in part, dismissing the underpayment breach of contract claim concerning pre- termination underpayments."
- "The Court will also dismiss the claim for a declaratory judgment and the claim for breach of the covenant of good faith and fair dealing"
- "For the reasons set forth above, the Court will grant in part and deny in part Shift4's motion. An appropriate Order follows."
- "The Court will dismiss Count II, seeking a declaratory judgment that Shift4 must pay post-termination residuals, because it duplicates Count I."
- "The Court will grant Shift4's motion to dismiss Count III, asserting a breach of the covenant of good faith and fair dealing, because Card Connect has not alleged that Shift4 exercised a contractual right in bad faith."
- "The Court will deny Shift4’s motion with respect to Count IV, promissory estoppel, because...the Court cannot conclude as a matter of law that the contract covers the dispute, and therefore, Card Connect may plead promissory estoppel in the alternative."
- "At this early stage, the Court, viewing the allegations in the light most favorable to Card Connect, cannot conclude that the contract unambiguously forecloses Card Connect’s claim." (Emphasis added). * "Therefore, at the motion to dismiss stage, the Court will not bar alternative pleading". * "Because at this stage, and viewing the facts in the light most favorable to it, Card Connect has stated a claim for breach of contract ... the Court denies Shift4’s request to dismiss Card Connect’s claim for punitive damages concerning the alleged breach".
VI. Declaratory Judgment & Good Faith/Fair Dealing: * "Card connect brings a claim for declaratory relief requesting a declaration from this court confirming that Shift4 remains obligated to pay Residuals related to merchant accounts Card Connect referred to it" * "it merely seeks a declaration of the same rights asserted in its breach of contract claim" * "Card Connect does not identify any specific discretionary authority that Shift4 is alleged to have misused, relying only on vague assertions that Shift4 acted in bad faith, depriving it of “the benefit of its bargain.” "The Court is hesitant, however, to find that a party’s choice to terminate a contract pursuant to a “no cause” termination clause—which renders the contract terminable at will—can constitute bad faith."
This extensive collection of quotes provides a detailed picture of the case's core issues, the parties' arguments, and the court's reasoning. It highlights the central ambiguity in the contract and the court's decision to allow the case to proceed to discovery, except the limited dismissal of the pre-termination underpayment claim, the declaratory judgement and the good faith/fair dealing claim. And allowing the claim for punitive damages to proceed.