Digital Strategists, LLC v. Leap Payments, Inc.

          File Date: July 17, 2018

          MEMORANDUM AND ORDER ON DEFENDANTS’ MOTION TO DISMISS AND SCHEDULING ORDER

          Kenneth W. Salinger, Justice of the Superior Court

          Digital Strategists, LLC, alleges that it "provides strategic management for digital and website development to business and individuals worldwide." Digital and its president and owner Debra Lessard retained Leap Payments, Inc., and Elavon, Inc., in February 2018 to process credit card and debit card payments. Defendants terminated Plaintiffs’ account five and half weeks later, on March 18, 2018. This lawsuit arises from that brief business relationship.

         Defendants have moved to dismiss all claims under Mass.R.Civ.P. 12(b)(6).

         The Court concludes that Digital has stated viable claims for violation of c. 93A, breach of contract, and intentional interference with contractual relations. The facts alleged in the complaint plausibly suggest that Defendants engaged in unfair trade practices and did not act in good faith when they told Northeastern University that they were investigating Digital for fraud, that as a result Digital lost Northeastern as a customer and lost profits on that account, and that Defendants understood it was substantially certain that their communications with Northeastern would have such a result.

         However, the court will allow the motion to dismiss with respect to Plaintiffs’ claims of negligence and fraud. Digital’s negligence claim is barred by the "economic loss" rule. And Plaintiffs’ fraud claims fail because the facts alleged do not plausibly suggest that Defendants’ purportedly false promises caused any compensable injury.

         1. Legal Standard

         To survive a motion to dismiss under Rule 12(b)(6), a complaint must allege facts that, if true, "plausibly suggest" the plaintiff has a viable claim. Lopez v. Commonwealth, 463 Mass. 696, 701 (2012), quoting Iannacchino v. Ford Motor Co., 451 Mass. 623, 636 (2008), and Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557 (2007). In deciding this motion, the Court must assume that the factual allegations in the complaint are true and must draw "every reasonable inference in favor of the plaintiff" from those allegations. Rafferty v. Merck & Co., Inc., 479 Mass. 141, 147 (2018). In so doing, however, it must "look beyond the conclusory allegations in the complaint and focus on whether the factual allegations plausibly suggest an entitlement to relief." Maling v. Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, 473 Mass. 336, 339 (2015), quoting Curtis v. Herb Chambers I-95, Inc., 458 Mass. 674, 676 (2011).

         2. Factual Allegations

         Plaintiffs allege the following facts in their complaint.

         Digital retained Defendants on February 8, 2018, to provide payment processing services. Plaintiffs did so in reliance on false promises by Leap to provide same-day payment processing of credit and debit card payments, that Plaintiffs would only have to deal with Leap for their payment processing services, and that all material terms of the agreement had been disclosed. Leap knew that these promises were false. More specifically, Leap knew that it could not process payments on the same day it received a transaction, that Leap was marketing payment processing services that would actually be provided by Elavon, and that Elavon’s terms of service included a mandatory arbitration provision that was never disclosed to Plaintiffs, who were not allowed to view Elavon’s terms of service before contracting with Leap.

          Digital processed and transmitted to Defendants a credit card payment by Northeastern University, which was a significant new client of Digital.

         Instead of processing the payment, Defendants contacted Northeastern and said they were conducting a fraud investigation of Digital. Defendants asserted that Digital had provided a fake address and telephone number and was not operating under its own website. Those accusations were false. Defendants made no attempt to investigate those charges before making these false accusations to Northeastern. Northeastern responded to Defendant’s misrepresentations by terminating its contract with Digital.

         Plaintiffs repeatedly complained to Defendants about their failure to provide same-day payment processing. Defendants responded to these complaints by ...