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Harbortouch Payments, LLC v. Denali State Bank

United States District Court, D. New Jersey

May 19, 2015



FREDA L. WOLFSON, District Judge.

This is a breach of contract action brought by plaintiff Harbortouch Payments, LLC, ("Plaintiff") against Denali State Bank ("Defendant").[1] Presently before the Court are the following: (1) a motion by Plaintiff for a preliminary injunction; and (2) Defendant's motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(2) for lack of personal jurisdiction or, in the alternative, dismiss the matter in favor of arbitration. For the reasons below, Defendant's motion is granted and Plaintiff's motion is denied.


Plaintiff is a provider of merchant services, specifically, "Point of Sale" systems, electronic cash registers and credit card processing terminals. Compl. ¶ 1. Plaintiff enters into agreements with merchants (referred to herein at times as "Merchant Agreements") to provide these services on an ongoing basis. Id.

In the course of its business, Plaintiff also enters into referral agreements with other businesses who can refer merchants ( i.e., potential clients) to Plaintiff. Id. Defendant, a bank located in Fairbanks, Alaska, entered into such an agreement with Plaintiff's predecessor, United Bank Card Inc. ("United Bank Card"). Id. at ¶ 2, 6-7. Plaintiff and United Bank Card merged on March 27, 2014. Plaintiff was the surviving corporation of the merger and asserts that it is, therefore, party to the relevant agreements by operation of law. ECF No. 13 at ¶ 6; ECF No. 15 at 9.

The parties initially entered into a "Referral Bank Agreement" (the "RBA") on December 21, 2006. Id. at ¶ 6. Thereafter, the parties entered into a Financial Institution Agreement (the "FIA"), which became effective November 30, 2012. Id. at ¶ 7. The RBA and FIA contain the same relevant provisions, and it is alleged that Defendant is equally bound under both agreements. The complaint, and, therefore, the Court herein, refers to the RBA and FIA collectively as the "Agreement."

The Agreement "required Defendant to use its best efforts to locate, investigate and refer potential merchants to Plaintiff." Id. at ¶ 9. Defendant made a number of referrals to Plaintiff that ultimately resulted in Merchant Agreements between various merchants and Plaintiff. See id. at ¶¶ 18-38. In return for its referrals, Defendant received commissions and on-going residual payments from Plaintiff. Id. at ¶ 10, 13. The Agreement terminated November 1, 2013, after Defendant gave notice to Plaintiff of its intention not to renew the Agreement. Id. at ¶ 7.

The complaint alleges that beginning in or about April 2014, several merchants with whom Plaintiff had entered into Merchant Agreements cancelled their accounts with Plaintiff. According to Plaintiff, the cancellations occurred after Defendant referred the merchants to another service provider. Compl. ¶¶ 17-37. The complaint specifically references the following five accounts: (1) The Electrician LLC, which accounted for an average monthly revenue to Plaintiff of $233.67; (2) 40-Mile Air Ltd., with average monthly revenue of $1, 008.71; (3) RWR Air Inc., with average monthly revenue of $671.00; (4) Industrial Service Corp., with average monthly revenue of $525.83; and (5) Hompesch & Evans, APC, with average monthly revenue of $586.72.

Plaintiff alleges that Defendant's actions constituted a breach of certain provisions in the Agreement prohibiting Defendant from soliciting and converting Plaintiff's merchants and from engaging in conduct imposing financial risk or undue economic hardship on Plaintiff. Under the Agreement, it was an "Event of Default" for Defendant to "engage[] in activities which may impose financial risk... or which result in undue economic hardship and/or damage to the goodwill" of Plaintiff. Agreement § 7.3. It is also an Event of Default for Defendant "to make any attempt to convert any Merchant from [Plaintiff] to any other entity performing services similar to [Plaintiff]." Id. Further, the Agreement provides that after termination of the Agreement, the "[Defendant] will not solicit any Merchant to terminate a Merchant Agreement for any reason after termination of this Agreement."

At the time of the filing of the complaint, Plaintiff had 118 active and 6 seasonal[2] merchant accounts that had been referred by Defendant. Id. at ¶ 41. According to Plaintiff, these merchants have a relationship with Defendants, and Plaintiff fears Defendant will seek to convert these merchants to a different service provider.

The Agreement contains an arbitration provision, which provides that "[a]ny dispute or claim arising out of, or in connection with this Agreement will be settled by final and binding arbitration to be held in New Jersey in accordance with the commercial rules of the American Arbitration Association." Agreement, § 10.13. In accordance with this provision, Plaintiff has initiated an arbitration proceeding against Defendant.

The Agreement also contains a forum selection clause designating the "federal or state courts of New Jersey" as the forum for adjudicating any disputes "arising ou[t] of or in connection" with the Agreement. Agreement, § 10.7. Plaintiff commenced the instant matter in New Jersey state court, and it was subsequently removed to this Court. In this action, Plaintiff seeks an injunction prohibiting Defendant "from soliciting and converting" the remaining 124 merchants and from "engaging in other activities that may impose financial risk and undue economic hardship and/or damage the goodwill of Plaintiff" as well as compensatory damages "to the extent the same are not addressed" in the pending arbitration. Compl. at p. 11.


1. Personal Jurisdiction

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