Spread Enterprises, Inc. v. First Data Merchant Services Corp.
298 F.R.D. 54
E.D.N.Y2014Background
- Spread Enterprises, Inc. d/b/a Ola Brasil sued FDMS, Wells Fargo, and CoCard for overcharging merchants on unauthorized/extra-contractual transaction fees.
- CoCard was dismissed from the case on December 16, 2011; FDMS and Wells Fargo remained as defendants.
- Plaintiff asserted four causes of action in the amended complaint; only breach of contract survived a prior court ruling.
- Plaintiff sought class certification under Rule 23 for a nationwide class of merchants under Merchant Processing Agreements with FDMS/Wells Fargo.
- Plaintiff alleged fees were charged via FDMS platforms (Omaha vs Nashville) and via third‑party gateway Authorize.net, leading to alleged overcharging.
- Court addressed CAFA/jurisdiction issues and ultimately denied class certification and dismissed the case for lack of subject matter jurisdiction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Class certification under Rule 23(b)(3) feasibility | Spread seeks certification of four subclasses for breach of contract. | Defendants contend issues are individualized due to varying Merchant Processing Agreements and platforms. | Denied: Rule 23 requirements not met (numerosity, commonality, predominance) and no CAFA jurisdiction. |
| Whether Contested SubClass 1/2 are impermissible fail-safe classes | Subclasses capture merchants charged certain fees. | Definitions rely on whether fees are excessive, creating a liability-dependent class. | Denied: Court redefined subclasses to remove fail-safe language; still fails Rule 23 requirements. |
| Whether the court has subject matter jurisdiction after ruling on class certification | CAFA jurisdiction could sustain the case. | No complete diversity; CAFA not applicable if class is not certified. | Dismissal without prejudice for lack of subject matter jurisdiction. |
| Numerosity and commonality under Rule 23(a) | Large merchant base with Omaha Platform usage supports numerosity; common questions exist about per-item fee interpretation. | Evidence is speculative; not all merchants share substantively identical contracts; common injury not shown. | Numerosity not proven; commonality/predominance not satisfied; class action inappropriate. |
Key Cases Cited
- Wal‑Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011) (requires commonality and a classwide resolution of the central issue)
- In re American Int’l Group, Inc. Sec. Litig., 689 F.3d 229 (2d Cir. 2012) (applies Rule 23 analysis and predominance considerations in complex class actions)
- Robidoux v. Celani, 987 F.2d 931 (2d Cir. 1993) (standard for Rule 23 adequacy and typicality in class actions)