460 F.Supp.3d 560
E.D. Pa.2020Background
- Plaintiffs own two Canters Delis in Las Vegas; Mikhail Siretskiy was an indirect former owner through related entities.
- Plaintiffs contracted with Bank of America for merchant services and with FreedomPay, Inc. (FPI) for secure switching and card terminals; FPI was to configure client info and route settled card funds to Plaintiffs’ deposit accounts.
- Siretskiy opened BOA merchant/deposit accounts in other corporate names, obtained VAR sheets, and provided them to FPI claiming he controlled Plaintiffs; FPI reconfigured switching per those instructions without verifying ownership.
- As a result, card proceeds were routed to Siretskiy’s accounts for multiple business days; Plaintiffs demanded return, terminated the FPI agreements, and sued FPI (BOA dropped) for breach of contract, gross negligence, and concerted tortious conduct/aiding and abetting.
- FPI moved to dismiss under Rule 12(b)(6) and to strike requests for punitive/consequential damages and attorneys’ fees; the court granted dismissal of tort claims and granted in part/denied in part the motion to strike.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §6.1 bars suits because claims relate to third-party services | FPI’s own failures (failing to verify, loading wrong info) were independent breaches, so claims can proceed | §6.1 immunizes FPI for liability "with respect to the performance of third‑party goods or third‑party services" | Not barred — §6.1 limits liability for third‑party performance but does not preclude claims for FPI’s own contractual breaches |
| Whether §6.1 precludes recovery for lost revenue/consequential damages | The diverted funds are direct monetary losses (not consequential) and thus recoverable | §6.1 expressly disclaims liability for "lost revenue" and consequential damages | Court found ambiguity as to "lost revenue" (direct vs consequential) — cannot dismiss on this ground; factual development required |
| Whether breach of covenant of good faith/fair dealing is viable | Plaintiffs assert an independent claim for breach of the covenant | FPI says such a claim is not cognizable apart from contract | Survives — claim is subsumed within viable breach of contract claim and is not stricken |
| Whether punitive/consequential damages and attorneys’ fees must be stricken | Plaintiffs sought punitive/consequential damages on torts and reserved fees pending discovery/statutory claims | §6.1 disclaims punitive/consequential damages; contract and complaint show no basis for fee award | Granted in part: Court struck consequential and punitive damages; attorneys’ fees stricken from complaint |
| Whether tort claims (gross negligence, concerted tortious action/aiding & abetting) survive or are precluded by gist-of-the-action | Plaintiffs characterize failures as torts (recklessness, substantial assistance) separate from contract | FPI argues tort claims merely recast contract breaches and must be dismissed | Dismissed — tort claims barred by gist of the action doctrine; aiding/abetting conversion not recognized as independent Pennsylvania tort here |
Key Cases Cited
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (pleading must state plausible claim)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (legal conclusions not entitled to assumption of truth)
- Bistrian v. Levi, 696 F.3d 352 (3d Cir. 2014) (three‑step plausibility/pleading framework)
- Valhal Corp. v. Sullivan Assoc., Inc., 44 F.3d 195 (3d Cir. 1995) (distinguishing exculpatory clauses from limitation of liability clauses)
- Bruno v. Erie, 106 A.3d 48 (Pa. 2014) (gist‑of‑the‑action test: identify duty breached to classify claim)
- eToll, Inc. v. Elias/Savion Advertising, Inc., 811 A.2d 10 (Pa. Super. Ct. 2002) (precluding tort recovery that merely rephrases contractual breach)
- Atlantic City Associates, LLC v. Carter & Burgess Consultants, Inc., [citation="453 F. App'x 174"] (3d Cir. 2011) (direct vs consequential damages distinction)
- Feleccia v. Lackawanna Coll., 215 A.3d 3 (Pa. 2019) (distinguished by court on exculpatory‑clause grounds)