First Data Merchant Services Corp. v. SecurityMetrics, Inc.
672 F. App'x 229
| 4th Cir. | 2016Background
- First Data (acquirer/processor) and SecurityMetrics (third-party PCI compliance vendor) were business partners; First Data charged merchants a PCI compliance fee and paid SecurityMetrics for services while listing it as a preferred vendor.
- In 2012 First Data launched its own compliance service, ordered SecurityMetrics to stop contacting Level 4 merchants, and SecurityMetrics stopped providing weekly data feeds; First Data sued in Utah and the parties signed a "Terms of Settlement" but never executed a final agreement.
- First Data later sued in Maryland alleging post-settlement misconduct; SecurityMetrics counterclaimed on multiple theories (including Lanham Act false advertising, tortious interference, and antitrust), and both sides moved for summary judgment.
- The district court (December Order) granted summary judgment to First Data on three SecurityMetrics counterclaims (Lanham Act false advertising, tortious interference, antitrust) and reserved a narrow trial on the meaning of "Merchant Data," which SecurityMetrics won at bench trial.
- First Data sought attorneys’ fees under the Utah Truth in Advertising Act (UTIAA) for prevailing on the UTIAA counterclaim; the district court (September Order) denied fees overall, finding First Data was not the prevailing party in the litigation as a whole.
Issues
| Issue | Plaintiff's Argument (SecurityMetrics) | Defendant's Argument (First Data) | Held |
|---|---|---|---|
| Lanham Act false advertising — were First Data’s statements literally false? | Ads stating merchants "still will need to pay" First Data’s fee in addition to third-party vendor fees were false because First Data sometimes refunded merchants who complained, so the ads were misleading or false-by-necessary-implication. | Ads were facially true: First Data always charged a compliance fee; refunds were discretionary and not automatic, so the statements cannot be deemed unambiguously false. | Court affirmed summary judgment for First Data: ads not unambiguously false; refund practice did not render them literally false. |
| Tortious interference with business relations (causation) | SecurityMetrics: First Data’s conduct and communications caused loss of ~280,000 customers; customer calls/emails and expert report establish causation. | First Data: SecurityMetrics offered inadmissible hearsay (customer communications) and its expert did not opine on legal causation; no admissible evidence of causation. | Court affirmed summary judgment for First Data: district court properly excluded customer statements as hearsay and the expert report did not opine on causation. |
| Antitrust claims — antitrust standing/antitrust injury (reduced output or harm to price competition) | SecurityMetrics: lost customers (280,000) show reduced output and harm to price competition; some customers went to First Data. | First Data: no evidence linking merchant departures to First Data’s conduct; many alternative explanations; no predatory pricing alleged. | Court affirmed summary judgment for First Data: plaintiff failed to plead or produce evidence of cognizable antitrust injury to competition. |
| UTIAA attorneys’ fees — whether First Data was a "prevailing party" entitled to mandatory fees | First Data: statutory language mandates fees to the prevailing party on the UTIAA claim; it prevailed on UTIAA, so fees should be awarded. | SecurityMetrics: overall litigation produced mixed results; First Data had limited success and lost at trial on central issue (Merchant Data), so it was not the prevailing party for the entire action. | Court affirmed denial of fees: applying Utah precedent, the district court properly considered the litigation as a whole and exercised discretion to deny fees despite First Data prevailing on the UTIAA count. |
Key Cases Cited
- Askew v. HRFC, LLC, 810 F.3d 263 (4th Cir.) (standard for reviewing summary judgment in this circuit)
- CorTel Va., LLC v. Verizon Va., LLC, 752 F.3d 364 (4th Cir.) (nonmovant's burden at summary judgment)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (Supreme Court) (summary judgment standards regarding evidence and credibility)
- PBM Prods., LLC v. Mead Johnson & Co., 639 F.3d 111 (4th Cir.) (elements of a Lanham Act false advertising claim)
- Scotts Co. v. United Indus. Corp., 315 F.3d 264 (4th Cir.) (literal falsity and false-by-necessary-implication doctrine)
- Design Res., Inc. v. Leather Indus. of Am., 789 F.3d 495 (4th Cir.) (limitations on characterizing implicit or suggestive claims as literally false)
- Minter v. Wells Fargo Bank, N.A., 762 F.3d 339 (4th Cir.) (abuse-of-discretion review for evidentiary rulings)
- Thompson Everett, Inc. v. Nat’l Cable Adv., L.P., 57 F.3d 1317 (4th Cir.) (antitrust standing requires injury to competition, not merely competitors)
- Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477 (Supreme Court) (antitrust standing and cognizable antitrust injury)
- Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328 (Supreme Court) (predatory pricing as the pricing practice with requisite anticompetitive effect)
- Neff v. Neff, 247 P.3d 380 (Utah) (factors for determining "prevailing party" and awarding attorney fees under mixed-results litigation)