First Data Merchant Services Corporation v. SecurityMetrics, Inc.
1:12-cv-02568
D. MarylandDec 30, 2014Background
- First Data (FDMS and FDC) and SecurityMetrics were long-time contracting parties: SecurityMetrics, an Approved Scanning Vendor, provided PCI DSS compliance services and reported merchant compliance via a START system; First Data is a large acquirer/processor for Level 4 merchants.
- Parties litigated in Utah; they then executed written "Terms of Settlement" including a $5,000,000 payment and a provision allowing SecurityMetrics to "make any use of Merchant Data for the purpose of selling its products and services."
- Dispute arose over whether the Merchant Data right covers only merchants enrolled with SecurityMetrics or all merchants for which SecurityMetrics had received information under prior contracts.
- After termination of the prior reporting relationship, SecurityMetrics changed reporting format and First Data launched a competing service, PCI Rapid Comply (later wound down and transitioned to Trustwave).
- This Maryland action followed; parties filed cross-motions for summary judgment on contract interpretation, Lanham Act and tort claims, and SecurityMetrics asserted numerous counterclaims (including antitrust).
- Court resolved multiple summary judgment and evidentiary issues: it denied SecurityMetrics summary judgment on contract issues (Merchant Data ambiguous), granted First Data summary judgment on most counterclaims (Lanham Act, common-law torts for damages, antitrust), and left certain declaratory and tortious-interference claims for trial.
Issues
| Issue | Plaintiff's Argument (First Data) | Defendant's Argument (SecurityMetrics) | Held |
|---|---|---|---|
| Scope of "Merchant Data" in Settlement (whether limited to enrolled merchants) | Merchant means those "for which SM will provide services," i.e., enrolled only; ambiguity should be resolved against SecurityMetrics | Merchant Data includes all merchant information SecurityMetrics received and can be used for marketing; 2011 amendments show "Enrolled" is subset of "Merchants" | Ambiguous under Utah law; extrinsic evidence creates fact issues for jury — SJ denied for SecurityMetrics |
| Obligation to execute long-form settlement (was First Data bound to First Data’s June 11 draft / did counteroffer make draft irrevocable?) | First Data contends no binding long-form; parties must mutually agree to final form; counteroffer terminated original draft | SecurityMetrics argues enforceable agreement to agree or that First Data’s draft became irrevocable; alleges bad-faith negotiation | Court applies traditional contract rules: SecurityMetrics’ counteroffer rejected June 11 draft; no new law adopted; First Data’s cross-motion granted; SecurityMetrics’ claim for specific performance denied |
| Lanham Act claims (First Data’s claims vs. SecurityMetrics; and SecurityMetrics’ Lanham counterclaims) | First Data alleged false endorsement/advertising by SecurityMetrics; later resolved by consent order for First Data’s Lanham claims | SecurityMetrics challenged First Data’s promotional statements and sought cancellation and other Lanham relief | First Data’s Lanham claims resolved by consent — SecurityMetrics’ motion moot as to Counts 6–8; SecurityMetrics’ Lanham counterclaims dismissed on summary judgment (statements held ambiguous or misleading, not literally false; survey evidence excluded) |
| Tortious interference / common-law tort damages (First Data’s claim for damages; SecurityMetrics’ counterclaims for lost customers) | First Data seeks damages for costs of processing SecurityMetrics’ changed reporting; alleges SecurityMetrics’ reporting caused damages | SecurityMetrics argues prior contract obligations/"mutually determined" fees excuse conduct and that First Data repudiated; SecurityMetrics seeks damages for lost customers but relies on recorded calls/emails | Tortious interference claim survives to trial (genuine factual disputes); SecurityMetrics’ counterclaims for injurious falsehood and tortious-interference damages fail due to inadmissible hearsay and lack of admissible causation evidence — summary judgment for First Data on those counts |
| Antitrust counterclaims (tying, attempted monopolization, harm to competition) | First Data argues SecurityMetrics points only to injury to competitor, not to competition; lacks expert proof of market-wide harm | SecurityMetrics alleges reduced output and impaired price competition after mass migration and loss of merchants | Court grants summary judgment to First Data on antitrust claims: SecurityMetrics failed to show cognizable injury to competition and provided no expert market analysis; antitrust claims dismissed |
Key Cases Cited
- Scott v. Harris, 550 U.S. 372 (summary-judgment standard and viewing facts in light most favorable to nonmovant)
- Anderson v. Liberty Lobby, 477 U.S. 242 (materiality and genuine dispute standard for summary judgment)
- Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (nonmoving party must do more than show metaphysical doubt)
- PBM Products, LLC v. Mead Johnson & Co., 639 F.3d 111 (elements and proof standards for Lanham Act false-advertising claims)
- Scotts Co. v. United Indus. Corp., 315 F.3d 264 (test for literal falsity in advertising)
- Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23 (§43(a) scope and false endorsement principles)
- Cea v. Hoffman, 276 P.3d 1178 (Utah Ct. App. contract offer/counteroffer principles cited by court)