CBD Product Seller’s Case Against Payment Administrators Partly Survives MTD

A Missouri federal court has largely granted defendants JPMorgan Chase Bank, N.A. (Chase), its subsidiary Paymentech, LLC, Visa USA, Inc.’s and, G2 Web Services, LLC’s motions to dismiss a complaint alleging that certain defendants improperly withheld payments, engaged in anticompetitive behavior, and defamed the plaintiff, MNG 2005, Inc. (MNG). The claims stem from the allegedly wrongful termination of the merchant agreement between Chase/Paymentech and the plaintiff coupled with Chase’s blacklisting of MNG from its credit card processing services.

According to the opinion, the plaintiff operates an online CBD and hemp cooking-oil business. In April 2018, MNG entered into a contract with Chase and Paymentech for credit card processing services (the merchant agreement). Under the merchant agreement’s terms and conditions, MNG agreed to comply with its “Payment Brand Rules.”

The order states that less than a month after agreement was consummated, Chase first withheld payments then stopped processing MNG’s credit card transactions. MNG transactions “‘tend[ed] to create harm or loss to the good will of the payment brand,’” Chase determined. The plaintiff alleged that Chase then “‘placed MNG on a blacklist,’” its terminated merchant list.

The order explains that in the second of several amended complaints, MNG added defendant G2, contending that “Visa contracts with G2 to monitor and identify companies accepting Visa payments for conduct that violates the Merchant Agreement and assists in maintaining Visa’s ‘Terminated Merchant’ list.” The operative complaint, the fourth amended version, brought several claims against the defendants, anticompetitive business practices by Paymentech, Chase, Visa, and G2; breach of contract by Paymentech and Chase; unjust enrichment by Paymentech and Visa; and libel and slander by Visa and Chase.

The court first considered G2’s argument that the court lacked personal jurisdiction. Judge John A. Ross dismissed G2 from the suit, finding G2’s purported ties to Missouri wanting. The court then analyzed the plaintiff’s federal antitrust claims under Section 4 of the Clayton Act and Sections 1 and 2 of the Sherman Act.

The court found that MNG failed to satisfactorily plead antitrust injury and that the allegations were not sufficiently specific. Too, the court explained, Visa’s refusal to process sales for MNG, even while continuing to process sales of similar products for larger companies, “is not evidence of market-wide anticompetitive behavior.” As to MNG’s Section 2 claim, the court determined that it relied upon “conclusory allegations of anticompetitive conspiracy and monopoly.”

The court allowed MNG’s unjust enrichment claim to proceed against Visa, but not Paymentech. The claim centered on allegations that “Paymentech improperly withheld $66,000 from Plaintiff and gave the money to Visa based on an improper determination that Plaintiff was engaged in illegal sales.”

As to Paymentech, the court held that their contractual relationship via the merchant agreement required MNG to pursue the claim as a breach of contract, not quasi-contract. As to Visa, the court reasoned that MNG and Visa “do not have a contractual relationship which would bar recovery under a quasi-contract theory.” In turn, it held that it would not dismiss the claim against Visa “merely because it relates to a contract to which Visa was not a party.”

The final claim, defamation, survived as to Visa but not Chase. As to the former, the court allowed the claim to move forward because the plaintiff “specifically allege[d] that Visa’s statements cast doubt upon Plaintiff’s character in the business community and resulted in losing access to the banking system.” As to Chase, the court explained that MNG failed to allege that Chase made a defamatory statement. Thus, the defamation claim against it was dismissed.

The plaintiff is represented by Nathan S. Cohen, G2 by Barnes & Thornburg LLP, and Chase, Visa and Paymentech by Thompson Coburn LLP.