660 F.Supp.3d 453
W.D.N.C.2023Background
- Plaintiff Peter Marco, LLC (owned by Peter Voutsas) sold high-value jewelry; in 2019 it accepted a $4.5M sale paid in 28 Visa transactions after a Bank of America/BAMS representative approved a split-payment arrangement.
- The cardholder later initiated 28 chargebacks, reversing $2,322,846.23; plaintiffs were charged ~$99,000 in fees, had $317,607.73 held in reserve, had their processing account terminated, and were placed on Mastercard’s MATCH list.
- Plaintiffs sued BAMS, Bank of America, and several First Data entities asserting breach of the Merchant Processing Agreement (MPA), breach of the implied covenant, fraud, negligence, breach of fiduciary duty, aiding and abetting, California UCL, and declaratory relief.
- Defendants moved to dismiss under Rule 12(b)(6); the Magistrate Judge recommended dismissing some claims but allowing breach of contract, fiduciary duty, fraud, and negligence to proceed; defendants objected and sought dismissal of all claims.
- The district court (1) treated the Program Guide as incorporated into the MPA, (2) concluded plaintiffs failed to plead viable claims for breach of contract, fiduciary duty, fraud, and negligence for the reasons explained below, (3) granted the motion to dismiss and dismissed the case without prejudice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Liability of First Data entities under MPA | First Data allegedly involved in processing and thus bound or third‑party beneficiary | First Data defendants are not parties to the MPA; plaintiffs pleaded no facts showing they were parties or intended beneficiaries | Dismissed: plaintiffs fail to show First Data parties to MPA or facts of involvement; no third‑party beneficiary theory pleaded |
| Voutsas’s individual contract claim | Voutsas signed documents and seeks relief individually | He signed only in corporate capacity; no privity with defendants | Dismissed: no contract between Voutsas and defendants; contract claim fails for lack of privity |
| Breach of contract by BAMS/Bank | Defendants failed to monitor, defend, or prevent chargebacks; unreasonably held funds and assessed fees | MPA (and incorporated Program Guide) allocates chargeback risk to merchant, authorizes reserves, fees, and MATCH reporting; many alleged acts consistent with contract terms | Dismissed: terms of MPA/Program Guide negate plaintiffs’ breach theory; plaintiffs did not identify breached provision |
| Breach of fiduciary duty | Defendants held funds and oversaw processing, creating fiduciary obligations | Relationship is contractual; ordinary business contract does not create fiduciary duties absent special facts | Dismissed: plaintiffs plead only a contractual relationship; no special trust or superiority alleged to create fiduciary duty |
| Fraud / Misrepresentation | Defendants (BAMS reps) made assurances about safety, monitoring, and recovery of funds; plaintiffs relied and suffered loss | Fraud must be pleaded with particularity and reliance must be reasonable; alleged oral statements conflict with written MPA so reliance was unreasonable | Dismissed: fraud inadequately pleaded as to most defendants; against BAMS, reasonable reliance fails because statements contradict the MPA |
| Negligence | Defendants negligently failed to underwrite, monitor, defend, or supervise agents, causing economic loss | Claims arise from contractual obligations and seek purely economic losses | Dismissed: barred by North Carolina economic‑loss rule; no extra‑contractual duty alleged |
Key Cases Cited
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (pleading must state a plausible claim)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (legal conclusions not accepted as true on a motion to dismiss)
- Philips v. Pitt County Memorial Hospital, 572 F.3d 176 (4th Cir. 2009) (documents integral to the complaint may be considered on Rule 12(b)(6))
- Goines v. Valley Community Services Board, 822 F.3d 159 (4th Cir. 2016) (exhibits attached to complaints prevail over conflicting bare allegations)
- Orpiano v. Johnson, 687 F.2d 44 (4th Cir. 1982) (scope of de novo review of magistrate recommendations)
- Diamond v. Colonial Life & Accident Insurance Co., 416 F.3d 310 (4th Cir. 2005) (when no objection is filed, district court need only satisfy itself there is no clear error)
- Poor v. Hill, 530 S.E.2d 838 (N.C. Ct. App. 2000) (elements of breach of contract)
- Sykes v. Health Network Solutions, Inc., 828 S.E.2d 467 (N.C. 2019) (contractual relationships do not typically create fiduciary duties)
- Crescent University City Venture, LLC v. Trussway Mfg., Inc., 852 S.E.2d 98 (N.C. 2020) (North Carolina economic‑loss rule bars tort recovery for purely economic losses)
- Terry v. Terry, 273 S.E.2d 674 (N.C. 1981) (fraud pleading requires time, place, content, speaker, and what was obtained)