bills, applications and manuals can be commercial speech

Heartland Payment Systems, Inc. v. Mercury Payment Systems, LLC, 2014 WL 5812294, No. C 14–0437 (N.D. Cal. Nov. 7, 2014)
Heartland and Mercury compete to provide electronic payment processing to small and medium-sized merchants through point of sale (POS) systems, which allow merchants to accept credit cards and debit cards. POS systems, allow banks and credit card companies to receive their fees, merchants to receive the proceeds from sales, and consumers to have their accounts charged. Both companies use an “interchange-plus pricing model”: banks and credit card brands charge a fee, typically as a percentage of the transaction plus a per-transaction fee. POS systems providers then charge an additional fee to the merchants as their price.  POS systems providers can’t control the interchange fee, but do control the plus fee, which is “usually in some combination of basis points and cents-per-transaction.”  Both plus and interchange fees can be reset as often as twice per year.
Heartland alleged that Mercury took advantage of the interchange fee adjustment to increase its fees and deceptively blame increases on the credit card brands.  Mercury allegedly falsely told merchants that it would pass on the interchange fees at cost, with no markup.  Heartland alleged that the deceptions worked through Mercury’s merchant application; the representations of third-party POS dealers who sell Mercury’s product; its website; and “other advertising and promotional materials distributed to merchants and potential merchants.” Moreover, Heartland alleged that Mercury’s Operating Guide contained deceptive language that misrepresents how Mercury bills its merchants.  In its review of nearly 300 of Mercury’s monthly billing statements, Heartland alleged, it found that in 75% Mercury actually charged a fee higher than disclosed.  Heartland alleged that merchants didn’t know the actual network fees and couldn’t easily determine them based on Mercury’s statements.  Further, Heartland identified thirty merchants who switched from Heartland to Mercury, and believed that its bid was deceptively undercut.  The resulting statement allegedly showed Mercury’s bid-upon amount as the “plus” fee, but also “falsely inflated network charges to impose an additional four cent fee per card transaction.”
Heartland sued for false advertising under the Lanham Act and state law, and related business torts. The court first determined that Rule 9(b) applied to all claims, because Heartland alleged “a unified course of fraudulent conduct” as the basis of its claims, and sought punitive damages based on Mercury’s allegedly intentional and willful conduct.
Mercury argued that it wasn’t engaged in “advertising and promotion.”  First, Mercury argued that its monthly statements weren’t ads, because they “memorialize transactions that have already occurred”; that the Merchant Application was a contract, and not promotional; and that the Operating Guide, despite being on its website, is a mere “technical manual.”  (It seems to me that monthly statements don’t have to be ads; it’s the alleged misrepresentations that got merchants to engage in the transaction that are the core problem, and the statements then allegedly prevent the merchants from realizing the prior deception.)
The court found that, with respect to alleged oral statements, Heartland failed to plead with the requisite particularity.  Heartland didn’t disclose the name of the merchant it allegedly identified as a victim, or any other merchant.  It also didn’t allege facts to support the idea that a Mercury employee or representative made false statements, or engaged in commercial speech.  However, Heartland had no way to know exactly which employee drafted the written ads, so to the extent the complaint relied on written documents, Heartland didn’t need to identify exactly who wrote them and when.
The court did find that the monthly statements “could induce merchants to continue using Mercury’s services, and hence could be considered commercial speech designed to propose a continued business relationship.” Similarly, the Operating Guide “could be seen to propose a commercial transaction by providing information to a potential merchant who may be considering using Mercury’s services.” And the Merchant Application could be viewed as proposing a commercial transaction—not a contract, but an offer to enter into a contract. Thus, the complaint adequately alleged Mercury’s commercial speech.
The complaint still failed because Heartland didn’t allege sufficient facts to show that Mercury disclosed its pricing as Heartland alleged, or that Mercury charged something different from what it disclosed.  It needed to identify specific language to show that there wasn’t sufficient disclosure of pricing and fees.
For basically the same reasons, the UCL, FAL, and intentional interference with contract/prospective economic advantage claims were dismissed, with leave to amend.

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