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Nationaleft, Inc., A California Corporation v. Checkgateway

February 15, 2013

NATIONALEFT, INC., A CALIFORNIA CORPORATION,
PLAINTIFF,
v.
CHECKGATEWAY, L.L.C., AN ARIZONA LIMITED LIABILITY COMPANY; JOHN KIRCHHEFER, AN INDIVIDUAL; BRIAN BONFIGLIO, AN INDIVIDUAL; AND DOES 1 THROUGH 50, INCLUSIVE, DEFENDANTS.



The opinion of the court was delivered by: Hayes, Judge:

ORDER

The matter before the Court is the Motion to Dismiss the First Amended Complaint Under Rules 12(b)(2), 12(b)(3) and 12(b)(6) and, Alternatively, Motion to Transfer Venue ("Motion to Dismiss"). (ECF No. 15).

I. Background

On June 19, 2012, Plaintiff NationalEFT, Inc. initiated this action by filing a Complaint against Defendants Checkgateway, L.L.C., John Kirchhefer and Brian Bonfiglio. (ECF No. 1).

On August 10, 2012, all Defendants jointly filed a motion to dismiss, or, alternatively, transfer venue. (ECF No. 12). Defendants contended, inter alia, that the Complaint should be dismissed because the Court does not have personal jurisdiction over Defendants.

On September 4, 2012, Plaintiff filed a First Amended Complaint. (ECF No. 13).

A. Allegations of the First Amended Complaint

Plaintiff is a California corporation with its principal place of business in San Diego, California. Id. ¶ 1. Defendant Checkgateway has its principal place of business in Maricopa County, Arizona, "doing business in all states including in the State of California, and the successor in interest to First American Payment Processing, Inc." Id. ¶ 2. Defendants Kirchhefer and Bonfiglio are employees of Checkgateway with principal places of residence in Maricopa County, Arizona. Id. ¶¶ 4-5, 7.

Checkgateway "is an Automated Clearing House (ACH) that processes electronic payments or the electronic movement of funds from one entity or person to another ('ACH transactions')." Id. ¶ 8. "ACH transactions are used for credit and debit payments, direct deposit payroll, and other common payments. Both the government and private businesses (both hereafter referred to as 'Merchants') use ACH transactions." Id. ¶ 9. "The ACH transactions serviced by [Checkgateway] originate when a consumer makes a credit or debit card payment to a Merchant.... The Merchant, directly or through accounting software, electronically sends the transaction data to [Checkgateway] to facilitate the transfer of money from the consumer's [bank] to the Merchant." Id. ¶ 11. Checkgateway "charges Merchants fees for payment processing and authentication services." Id. ¶ 13.

"Most Merchants do not have the time, skill, market knowledge, or desire to shop or negotiate ACH services.... Such Merchants utilize the services of consultants (Merchant Consultants) to assist Merchants in the development and management of their electronic payment systems." Id. ¶ 15. Checkgateway "relies on Merchant Consultants (called ISO's by [Checkgateway]) for over 90% of its business.... In exchange for these referrals, [Checkgateway] agrees to pay transaction based fees and commissions to the Merchant Consultant." Id. ¶ 16.

In March 2002, Plaintiff was a Merchant Consultant doing business in San Diego, California. Id. ¶ 19. Beginning in March 2002, Checkgateway directly solicited Plaintiff via e-mail to "court Plaintiff to purchase its services and become an ISO for" Checkgateway. Id.

¶ 21. "Plaintiff began using [Checkgateway]'s services in December of 2002." Id.

Checkgateway "engaged substantial, continuous and systematic activities within the State of California," including: Checkgateway "contracted for and conducted continuous and long term ACH service activities with California based Merchants and Merchant Consultants, including but not limited to Plaintiff"; Checkgateway "provided ACH transaction services to consumers, Merchants and Merchant Consultants on ACH transactions originating throughout California"; Checkgateway "actively and directly solicited California Merchants and Merchants Consultants including but not limited to Plaintiff, via a webpage, through a direct e-mail, telephone contact, trade publications and regular attendance at trade shows and conventions in California where CGW make direct, fact-to-face contact with California Merchants and Merchants Consultants including but not limited to Plaintiff"; and Checkgateway "maintained a secure online active website accessed from and relied upon by California Merchants and Merchant Consultants, including Plaintiff to conduct and monitor business with [Checkgateway]." Id. ¶ 22.

The First Amended Complaint alleges 20 claims for fraud, tortious interference with prospective economic advantage, conversion, breach of fiduciary duty, breach of contract, and breach of the covenant of good faith and fair dealing. The claims allege that Checkgateway improperly failed to pay or underpaid commissions for two named merchants ("Blue Hippo" and "EFTCanada") and other unnamed merchants in violation of the contract between Plaintiff and Checkgateway. Id. ¶¶ 83-88, 145-49. The First Amended Complaint alleges that Checkgateway "open[ed] separate House Account(s) for [merchants referred by Plaintiff or Plaintiff's 'sub-agents'] through which [Checkgateway] would process [merchant] transactions separate from [Checkgateway]'s referral agreement with Plaintiff and without accounting or payment to Plaintiff." Id. ¶ 32. The First Amended Complaint requests compensatory and punitive damages.

B. Motion to Dismiss

On September 21, 2012, Defendants filed the Motion to Dismiss on the following grounds: (1) this Court lacks personal jurisdiction over all Defendants; (2) venue is improper in this District; (3) "all of [Plaintiff]'s tort claims are barred by the economic loss rule"; Plaintiff's "claim for intentional interference with prospective economic advantage fails to state a claim because [Plaintiff] has not alleged an independent contractual relationship with a third party"; Plaintiff's "claim for negligent misrepresentation against the Individual Defendants fails to state a claim because the Individual Defendants owe no independent duty to [Plaintiff]"; Plaintiff's "request for punitive damages fails because none of its tort claims survives dismissal and California law prohibits the recovery of punitive damages for claims arising out of a contract"; and, "[a]ny claims that survive dismissal should be transferred to the District of Arizona pursuant to ...


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