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Merchant One, Inc. v. TLO, Inc.

United States District Court, S.D. Florida

January 16, 2020

MERCHANT ONE, INC., Plaintiff,
v.
TLO, INC., doing business as PAYMENTCLOUD, SHAWN SILVER, JOHN DOES 1-10, and ABC CORPORATIONS 1-10, Defendants.

          ORDER ON MOTION TO DISMISS

          BETH BLOOM, UNITED STATES DISTRICT JUDGE.

         THIS CAUSE is before the Court upon Defendants TLO, Inc. (“PaymentCloud”) and Shawn Silver's (“Silver”) (together, “Defendants”) Motion to Dismiss, ECF No. [14] (“Motion”). Plaintiff Merchant One, Inc. (“Merchant One” or “Plaintiff”) filed a Response, ECF No. [19] (“Response”), to which Defendants filed a Reply, ECF No. [25] (“Reply”). The Court has carefully considered the Motion, the Response and Reply, the record in this case and the applicable law, and is otherwise fully advised in the premises. For the reasons set forth below, the Motion is granted.[1]

         I. BACKGROUND

         This case arises as a result of alleged breaches of a contract and related fraud perpetrated by Defendants. Merchant One is engaged in the business of providing credit card processing sales and services to merchants across the United States. PaymentCloud is also engaged in the business of providing credit card processing sales and services. Silver is the owner and chief executive officer of PaymentCloud and maintains the daily corporate control of PaymentCloud. Silver was also the owner of National Bank Services, LLC (“NBS”), an entity he sold prior to forming PaymentCloud. In the Complaint, ECF No. [1], Merchant One alleges that it and PaymentCloud are independent sales organizations that have contracts with payment processors and vendors to provide sales and servicing to merchant accounts. In addition, both Merchant One and PaymentCloud have contracts with other independent sales organizations to access processing contracts with other industry members that focus on different market segments or which may have a favorable price structure.

         On November 23, 2013, Merchant One entered a non-exclusive merchant referral agreement with NBS, ECF No. [1-1] (“Agreement”), pursuant to which Merchant One referred various merchant-clients to NBS in order to market merchant accounts considered higher risk. Merchant One's compensation for the accounts referred to NBS consisted of monthly residual income calculated as a percentage of monthly revenue to NBS from the referred merchant accounts. The Agreement provides the applicable terms for calculation and payment of Merchant One's compensation.

         In 2015, Silver sold NBS. As part of the purchase, the purchaser iPayment, Inc. continued to be responsible for Merchant One's portion of the residual compensation on accounts previously referred to NBS. In addition, Merchant One continued an ongoing referral relationship with Silver. In or around February, 2016, Silver informed Merchant One that all new merchant accounts should be referred to PaymentCloud, which Merchant One did, even though Merchant One and PaymentCloud never entered into a new written contract. Instead, Merchant One alleges that it and PaymentCloud agreed to abide by the same terms in the Agreement between Merchant One and NBS, with an agreed adjustment to commission percentages. PaymentCloud provided monthly residual reporting, identifying each referred merchant account, the agreed-to profit percentage and other payment information, some of which Merchant One now contends was falsified. Merchant One further alleges that PaymentCloud/Silver materially altered topline revenue and underpaid Merchant One based on the misrepresented amounts, improperly calculated Merchant One's referral fee based on understated merchant income, misreported expenses that also did not comply with the terms of the agreement between Merchant One and PaymentCloud, and deducted improper amounts from income earned from customers referred by Merchant One.

         When Merchant One reported its discovery of what it contends are fraudulent underpayments to PaymentCloud in October, 2018, PaymentCloud stopped reporting and making residual payments, and continued to withhold residuals in breach of the parties' contractual relationship.

         As a result of PaymentCloud's alleged actions, Merchant One asserts nine claims against Defendants for breach of contract (Count 1), breach of implied covenant of good faith and fair dealing (Count 2), fraud (Count 3), suppression and concealment (Count 4), conversion (Count 5), violation of the Florida Deceptive and Unfair Trade Practices Act (“FDUTPA”), Fla. Stat. 501.201, et seq. (Count 6), unjust enrichment (Count 7), conspiracy (Count 8), and detrimental reliance/promissory estoppel/quantum meruit (Count 9). In the Motion, Defendants seek dismissal of the Complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.

         II. LEGAL STANDARD

         Rule 8 of the Federal Rules requires that a pleading contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). Although a complaint “does not need detailed factual allegations, ” it must provide “more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007); see Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (explaining that Rule 8(a)(2)'s pleading standard “demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation”). In the same vein, a complaint may not rest on “‘naked assertion[s]' devoid of ‘further factual enhancement.'” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 557 (alteration in original)). “Factual allegations must be enough to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555. These elements are required to survive a motion brought under Rule 12(b)(6) of the Federal Rules of Civil Procedure, which requests dismissal for failure to state a claim upon which relief can be granted.

         When reviewing a motion under Rule 12(b)(6), a court, as a general rule, must accept the plaintiff's allegations as true and evaluate all plausible inferences derived from those facts in favor of the plaintiff. Miccosukee Tribe of Indians of Fla. v. S. Everglades Restoration Alliance, 304 F.3d 1076, 1084 (11th Cir. 2002); AXA Equitable Life Ins. Co. v. Infinity Fin. Grp., LLC, 608 F.Supp.2d 1349, 1353 (S.D. Fla. 2009). However, this tenet does not apply to legal conclusions, and courts “are not bound to accept as true a legal conclusion couched as a factual allegation.” Twombly, 550 U.S. at 555; see Iqbal, 556 U.S. at 678; Thaeter v. Palm Beach Cty. Sheriff's Office, 449 F.3d 1342, 1352 (11th Cir. 2006). A court considering a Rule 12(b) motion is generally limited to the facts contained in the complaint and attached exhibits, including documents referred to in the complaint that are central to the claim. Wilchombe v. TeeVee Toons, Inc., 555 F.3d 949, 959 (11th Cir. 2009); see also Maxcess, Inc. v. Lucent Techs., Inc., 433 F.3d 1337, 1340 (11th Cir. 2005) (“[A] document outside the four corners of the complaint may still be considered if it is central to the plaintiff's claims and is undisputed in terms of authenticity.”) (citing Horsley v. Feldt, 304 F.3d 1125, 1135 (11th Cir. 2002)).

         III. DISCUSSION

         A. Shotgun pleading

         In the Motion, Defendants argue first that the Complaint is an impermissible shotgun pleading. Upon review, the Court agrees.

         The Eleventh Circuit has repeatedly and unequivocally condemned shotgun pleadings as a waste of judicial resources. “Shotgun pleadings, whether filed by plaintiffs or defendants, exact an intolerable toll on the trial court's docket, lead to unnecessary and unchanneled discovery, and impose unwarranted expense on the litigants, the court and the court's para-judicial personnel and resources. Moreover, justice is delayed for the litigants who are ‘standing in line,' waiting for their cases to be heard.” Jackson v. Bank of Am., N.A., 898 F.3d 1348, 1356-57 (11th Cir. 2018) (quoting Cramer v. Fla., 117 F.3d 1258, 1263 (11th Cir. 1997)). Overall, shotgun pleadings fail to make the connection between “the substantive count and the factual predicates . . . [such that] courts cannot perform their gatekeeping function with regard to the averments of [the claim].” Wagner v. First Horizon Pharm. Corp., 464 F.3d 1273, 1279-80 (11th Cir. 2006).

         Despite Plaintiff's contentions to the contrary, the Complaint here is a shotgun pleading that does not conform to federal pleading standards.

Though the groupings cannot be too finely drawn, we have identified four rough types or categories of shotgun pleadings. The most common type-by a long shot-is a complaint containing multiple counts where each count adopts the allegations of all preceding counts, causing each successive count to carry all that came before and the last count to be a combination of the entire complaint. The next most common type, at least as far as our published opinions on the subject reflect, is a complaint that does not commit the mortal sin of re-alleging all preceding counts but is guilty of the venial sin of being replete with conclusory, vague, and immaterial facts not obviously connected to any particular cause of action. The third type of shotgun pleading is one that commits the sin of not separating into a different count each cause of action or claim for relief. Fourth, and finally, there is the relatively rare sin of asserting multiple claims against multiple defendants without specifying which of the defendants are responsible for which acts or omissions, or which of the defendants the claim is brought against. The unifying characteristic of all types of shotgun pleadings is that they fail to one degree or another, and in one way or another, to give the defendants adequate notice of the claims against them and the grounds upon which each claim rests.

Weiland v. Palm Beach Cty. Sheriff's Office, 792 F.3d 1313, 1321-23 (11th Cir. 2015) (footnotes omitted). The Complaint in this case is noteworthy in that it qualifies under each of the four categories of shotgun pleading.

         First, each of the nine counts asserted begins with the same sentence reincorporating all preceding allegations into each subsequent count. See ECF No. [1] ¶¶ 46, 52, 57, 63, 69, 73, 77, 82, 88. Such reincorporation of all preceding counts is confusing, especially where Plaintiff attempts to plead certain claims in the alternative, such as breach of contract and unjust enrichment. Second, the Complaint contains numerous general allegations regarding the payment processing industry and Merchant One's efforts to cross-reference payments involving PaymentCloud in detail, which are not material to stating Merchant One's claims nor are they connected to any particular cause of action. Third, Count 9, in which Plaintiff purports to assert a cause of action for detrimental reliance/promissory estoppel/quantum meruit, lumps together distinct causes of action with different elements.[2] See Morse, LLC v. United Wisc. Life Ins. Co., 356 F.Supp.2d 1296, 1300 (S.D. Fla. 2005) (“A cause of action for promissory estoppel contains three elements: that the plaintiff detrimentally relied on the defendant's promise, that the defendant reasonably should have expected the promise to induce reliance in the form of action or forbearance by the plaintiff, and that injustice can only be avoided by enforcement of the promise.”) (citation omitted); Merle Wood & Assocs., Inc. v. Trinity Yachts, LLC, 714 F.3d 1234, 1237 (11th Cir. 2013) (“Florida law prescribes four elements for quantum meruit and unjust enrichment claims. First, the plaintiff must have conferred a benefit on the defendant. Second, the defendant must have knowledge of the benefit. Third, the defendant must have accepted or retained the benefit conferred. Fourth, the circumstances must be such that it would be inequitable for the defendant to retain the benefit without paying fair value for it.”) (internal citations and quotations omitted).[3] Fourth, all counts are asserted against both Defendants; however, other than the general allegation that Silver was acting in his individual capacity and as a representative of PaymentCloud, the Complaint contains no other allegations delineating each Defendant's alleged actions.

         As such, despite Plaintiff's explanations to the contrary, the Complaint constitutes an impermissible shotgun pleading. Especially where a party is represented by counsel, it is not the Court's duty to expend precious time and resources in attempting to decipher a pleading that can be clarified by more conscientious drafting. The Complaint is therefore due to be dismissed upon this ground alone.

         B. Remaining substantive arguments

         Nevertheless, to the extent that Plaintiff's claims are discernible, Defendants have raised substantive challenges to the causes of action asserted. In the interests of efficiency and ...


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