United States District Court, N.D. Illinois, Eastern Division
CHRIS GUMINO and ACS CAPITAL PARTNERS, INC. D/B/A SWYPE-NOW, Plaintiffs,
FIRST DATA CORPORATION and IGNITE PAYMENTS, LLC Defendants.
OPINION AND ORDER
L.ELLIS, United States District Judge
Capital Partners, Inc. (“ACS”) and its owner,
Christopher Gumino, allege multiple breach of contract claims
against Ignite Payments, LLC (“Ignite”) and First
Data Corporation (“FDC”). ACS and Gumino allege
that Ignite and FDC failed to make various payments to which
ACS and Gumino were entitled under their contracts with
Ignite and FDC. Ignite and FDC filed a motion to dismiss all
the claims against them . In addition, FDC filed a
separate motion to dismiss all claims against it because it
was not a party to any contracts at issue . Because
Gumino is not a proper plaintiff to this action, the Court
grants in part FDC and Ignite's motion to dismiss.
Additionally, the Court dismisses FDC from this action
because ACS and Gumino fail to plead facts sufficient to
state a claim against FDC as a non-party to the contracts.
an Illinois corporation, owned and operated by Gumino, that
sells credit card processing services to various merchants.
ACS does business in Illinois under the name
Swype-Now.com. Ignite is a California limited liability
company and an Independent Sales Organization of Wells Fargo
Bank that provides credit card processing services and
equipment. FDC, a Delaware corporation, owns Ignite and
performs the credit card processing services provided by
April 2013, ACS entered into a Premier Agent Agreement
(“the Agent Contract”) with Ignite in which ACS
agreed to solicit merchants to purchase Ignite's credit
card processing services and products. The Agent Contract
provides for payments to ACS called “residuals, ”
which are based on the number of merchant accounts opened by
ACS in a given time period. ACS and Ignite also entered into
an additional agreement titled “2011 Premier Agent
Incentive Commissions and Residuals Summary”
(“the Commissions Contract”). The Commissions
Contract outlines specific calculations and policies related
to residual payments and upfront commission payments.
December 2013, Gumino identified an opportunity to sell
Ignite's services to Beauty Counter, a start-up company
that uses individual sales associates rather than brick and
mortar stores to sell beauty products. Beauty Counter would
require thousands of individual accounts and
terminals to process credit card transactions
through Ignite. To secure Beauty Counter's business,
Gumino offered to cover the cost of each terminal, which was
less than $150 per terminal. Gumino could afford this cost if
received $150 in upfront payments from Ignite, as set forth
in the Commissions Contract, for each Beauty Counter account.
On December 20, 2013, Gumino contacted John Barrett, the
President of Ignite, to confirm that ACS would receive the
$150 upfront payments and Barrett responded in the
affirmative. However, negotiations regarding the amount of
the upfront payments continued into 2014. In June 2014,
Gumino communicated with Michael Rossi, an FDC employee,
regarding the upfront payments. On June 9, 2014, Rossi stated
in an email to Gumino, “no matter what, we must pay you
the 150 term minimum even though Brett thinks it is too
risky.” Doc. 1-1 ¶ 25. On June 18, 2014, Rossi
wrote to Gumino “we all agreed that 150 UF is ok and
250 is possible if the volume can support it.” Doc. 1-1
1, 2014, Beauty Counter completed a Merchant Processing
Application and Agreement with Ignite, with Gumino as the
sales representative and ACS as the “agent
office” on the contract. Doc. 1-1 at 49. Relying on the
statements by Rossi, Barrett, and another FDC employee,
Gumino agreed to cover the cost of Beauty Counter's
terminals. However, ACS did not receive $150 in upfront
payments on every account and instead only received partial
upfront payments on some accounts. In addition, ACS did not
receive the 55% residual payments for Beauty Counter accounts
to which it was entitled under the Agent Contract and
Commissions Contract with Ignite.
continued communicating with Rossi and requesting the upfront
and residual payments. In December 2014, Rossi indicated in
an email that certain fees would need to be charged to the
Beauty Counter accounts in order to secure the upfront
payments. Later, in May 2015, Ignite sent ACS an
“Addendum to the Premier Agent Agreement”
(“the Addendum”), which provided $75 upfront
payments for each Beauty Counter account that produced $100
in revenue within six months. Doc. 1-1 at 68. The terms of
the Addendum were to be retroactive and effective from August
1, 2014. Gumino and ACS did not sign the Addendum. In May
2015, ACS secured a promissory note from Ignite for a $66,
000 loan to cover the cost of the Beauty Counter terminals.
2015, Beauty Counter cancelled its contracts with Ignite. ACS
was not paid a residual payment from the closure fee charged
to Beauty Counter. Months later, in December 2015, Gumino
attempted to retire and sell ACS's rights to future
residuals to Ignite under the “offer to purchase upon
retirement” clause set forth in the Agent Contract.
Doc. 1-1 at 23. Ignite denied the request because ACS was
using its residuals as collateral. In January 2016, Ignite
terminated ACS for alleged fraud. Gumino, however, asserts
that he did not partake in any fraudulent, dishonest,
willful, or malicious acts. Gumino believes that Ignite
terminated ACS to relieve itself of any contractual
obligations to pay residual payments to ACS.
motion to dismiss under Rule 12(b)(6) challenges the
sufficiency of the complaint, not its merits. Fed.R.Civ.P.
12(b)(6); Gibson v. City of Chicago, 910 F.2d 1510,
1520 (7th Cir. 1990). In considering a Rule 12(b)(6) motion
to dismiss, the Court accepts as true all well-pleaded facts
in the plaintiff's complaint and draws all reasonable
inferences from those facts in the plaintiff's favor.
AnchorBank, FSB v. Hofer, 649 F.3d 610, 614 (7th
Cir. 2011). To survive a Rule 12(b)(6) motion, the complaint
must not only provide the defendant with fair notice of a
claim's basis but must also be facially plausible.
Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct.
1937, 173 L.Ed.2d 868 (2009); see also Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d
929 (2007). “A claim has facial plausibility when the
plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Iqbal, 556 U.S.
FDC as a Party
argues that the Court should dismiss all four claims against
it because FDC is not a party to the Agent Contract or the
Commissions Contract and a breach of contract action cannot
lie against an entity not party to the contract. Under New
York law, an essential element for a breach of
contract claim is the existence of a contract between the
plaintiff and the defendant. Diesel Props S.r.l. v.
Greystone Bus. Credit II LLC, 631 F.3d 42, 53 (2d Cir.
2011). “Under New York law, a party who is not a
signatory to a contract generally cannot be held liable for
breaches of that contract.” TransformaCon, Inc. v.
Vista Equity Partners, Inc., No. 15-cv-3371, 2015 WL
4461769, at *3 (S.D.N.Y. July 21, 2015) (citing Black Car
& Livery Ins., Inc. v. H & W Brokerage, Inc.,
813 N.Y.S.2d 751, 752 (N.Y.App.Div. 2006); Bellino
Schwartz Padob Adver., Inc. v. Solaris Mktg. Grp., Inc.,
635 N.Y.S.2d 587, 588 (N.Y.App.Div. 1995); Smith v.
Fitzsimmons, 584 N.Y.S.2d 692, 695 (N.Y.App.Div. 1992)).
ACS and Gumino do not argue that FDC is in fact a party to
the contracts at issue. The Agent Contract clearly states
that it is “between Ignite Payments, LLC (‘Ignite
Payments') and ACS Capital Partners Inc.” Doc. 1-1
at 16. The Agent Contract further states:
This Agreement is made for the benefit of Ignite Payments,
[ACS] and their respective successors and assigns. In
addition, Ignite Payments' sponsor bank is a third party
beneficiary of this Agreement and may enforce this Agreement
against [ACS]. No other person or entity has or acquires any
rights by virtue of this Agreement.
Id. at 27. The Commissions Contract does not
identify the specific parties to the contract. Id.
at 39. The complaint alleges only that the Commissions
Contract was “entered into and executed by the Parties
hereto, ” without specifying which parties entered into
and executed the contract. Doc. 1-1 ¶ 15.
Gumino argue that FDC is a proper defendant because FDC can
be held liable for Ignite's breach of contract under New
York's corporate veil-piercing theory. Under certain
circumstances, a corporate relationship between a parent and
its subsidiary can be “sufficiently close to justify
piercing the corporate veil and holding one corporation
legally accountable for the actions of the other.”
Jalili v. Xanboo Inc., No. 11 Civ 1200, 2011 WL
4336690, at *3 (S.D.N.Y. Sept. 15, 2011). Piercing the
corporate veil requires “showing that: (1) the owners
exercised complete domination over the corporation in respect
to the transaction attacked; and (2) that such domination was
used to commit a fraud or wrong against the plaintiff which
resulted in plaintiff's injury.” P.A.C.
Consolidators Ltd v. United Cargo Sys. Inc., No. 10 CV
1981, 2011 WL 3099887, at *4 (E.D.N.Y. July 25, 2011).
However, “[a]ctual domination, rather than the
opportunity to exercise control, must be shown” to
justify piercing the corporate veil. Jalili, 2011 WL
4336690 at *3. To determine “actual domination, ”
a court considers the following factors:
the intermingling of corporate and shareholder funds,
undercapitalization of the corporation, failure to observe
corporate formalities such as the maintenance of separate
books and records, failure to pay dividends, insolvency at
the time of a transaction, siphoning off of funds by the
dominant shareholder, and the inactivity of other officers
Id. The fact that a corporation exerts some control
over another corporation's business affairs does not rise
to the level of actual domination. See Id. Common
management among two corporate entities or duplication of
some or all of the directors or executive officers is also
insufficient to show domination. Capmark Fin. Grp. Inc.
v. Goldman Sachs Credit Partners L.P., 491 B.R.
335, 349 (Bankr. S.D.N.Y. 2013) (citing United States v.
Bestfoods, 524 U.S. 51, 61-62, 118 S.Ct. 1876, 141
L.Ed.2d 43 (1998); In re Digital Music Antitrust
Litig., 812 F.Supp.2d 390, 418 (S.D.N.Y. 2011)).
in support of their veil-piercing theory of liability, ACS
and Gumino allege that “nearly all” of their
communications were with FDC rather than Ignite and that
their interactions with FDC did not indicate that any
individuals from Ignite exerted control over managing
contracts or made decisions. ACS and Gumino base these
allegations on several email exchanges regarding the residual
and upfront payments for ACS's Beauty Counter accounts,
which they attached as exhibits to their complaint. While
these communications demonstrate some control by FDC, they do
not show “actual domination.” FDC's
involvement or authority in determining residual or upfront
payments does not rise to the level of intermingling or
siphoning of funds, undercapitalization, failure to observe
corporate formalities, or Ignite's insolvency or
inactivity. ACS and Gumino's allegations are insufficient
to make out a claim against FDC based on piercing the
corporate veil.See Jalili, 2011 WL 4336690 at *3
(conduct showing some control over a subsidiary's
business affairs that does not rise to the level of ...