On November 25, the United States District Court for the Eastern District of New York denied a plaintiff’s motion for a preliminary injunction barring U.S. Alliance Group (“USAG”) from paying “residual” credit card fee payments to one of its competitors, CardFlex. In 2008, CardFlex – an independent sales organization that processes credit card transactions – acquired the rights to use a bank identification number (BIN) to facilitate the handling of certain transactions. USAG later acquired those rights in 2011 and began processing the transactions. USAG agreed, however, to pay residuals to CardFlex, which had retained the right to reassign the rights to the BIN.
A competing sales organization, Pivotal Payments, Inc. (“Pivotal”), brought suit in August 2014 alleging breach of contract, conversion, and fraud. In essence, Pivotal claimed to be owed $1.8 million in net residual payments under a 2013 agreement in which it claimed to have acquired rights to the BIN and residuals from USAG for $3.1 million. In its November 25 ruling, the court found that Pivotal had shown neither irreparable harm nor likely success on its preliminary injunction motion. The court ruled that, although certain case law justified the securing of assets to satisfy a potential judgment where a defendant is on the brink of “likely or imminent” insolvency, the court rejected its application to this case. Instead, the court found that CardFlex was not insolvent and remained an “ongoing, viable business.” The court also found that the co-defendants, Phillips and USAG, were not facing any threat of financial difficulties.
The case is Pivotal Payments v. Phillips, et al., Civil Action No. 14-4910 (E.D.N.Y. 2014).