Opinion
Civil Action 19-cv-02902-RM-NYW
08-13-2021
AMERICAN VERIFICATION PROCESSING SOLUTIONS, LLC, Plaintiff, v. ELECTRONIC PAYMENT SYSTEMS, LLC and ESQUIRE MERCHANT SERVICES, LLC, Defendants.
RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
Nina Y. Wang United States Magistrate Judge
This matter is before the court for recommendation on Defendants' Motion for Summary Judgment (or “Motion”) [#47], filed by Defendants Electronic Payment Systems, LLC (“EPS”) and Esquire Merchant Services, LLC (“ESQMS” and collectively, “Defendants”) on October 30, 2020. The presiding judge, the Honorable Raymond P. Moore, referred the Motion to this Magistrate Judge pursuant to 28 U.S.C. § 636(b), the Order Referring Case dated October 15, 2019 [#7], and the Memorandum dated November 3, 2020 [#49].
Having reviewed the Parties' briefing, including the Response by Plaintiff American Verification Processing Solutions, LLC (“Plaintiff” or “AVPS”) [#56] and Defendants' Reply [#59], the entire docket, and being fully advised of the premises, this court respectfully RECOMMENDS that Defendants' Motion for Summary Judgment be GRANTED.
BACKGROUND
On October 11, 2019, Plaintiff initiated this action against ESQMS and EPS. [#1]. Plaintiff is a merchant account provider that supplies point-of-sale equipment, gateway services, and other products that enable merchants to process credit card sales transactions. [Id. ¶ 3]. AVPS also acts as an outside sales organization by referring merchants to credit card processors for a fee via contracts with such companies. [Id.]. Plaintiff has its own credit card processing services and products. [Id. ¶ 16]. EPS is an independent sales organization (“ISO”) and payment processor. [Id. ¶ 5]. Among other things, EPS processes credit card payments for merchants through payment processor services. [Id. ¶ 6].
Plaintiff alleges that in 2014, it began negotiations with EPS to form a relationship where Plaintiff would market and sell credit card payment processing services offered by EPS to merchants and then refer those merchants to EPS to become EPS clients. [Id. ¶ 10]. Plaintiff claims that the principals of EPS, John Dorsey (“Mr. Dorsey”) and Anthony Maley (“Mr. Maley”) formed ESQMS for the purposes of entering into a merchant referral contract with AVPS. [Id. ¶ 11]. That agreement (the “Marketing Agreement”) was allegedly consummated on or about December 31, 2014 and provided for compensation to Plaintiff from ESQMS based on a percentage of credit card processing fees charged on transactions performed by merchants who were referred to ESQMS by AVPS. [Id. ¶¶ 12-13].
In 2015, AVPS and EPS allegedly renegotiated their business relationship and entered into two Merchant Referral Agreements (“2015 Agreements”) so that EPS could earn fees for any merchants that EPS referred to AVPS for credit card processing services. [Id. ¶¶ 17-20]. Plaintiff asserts that the 2015 Agreements, including the Merchant Referral Agreement governing the flow of merchant referrals from AVPS to EPS (“Referral Agreement”), superseded all prior offers, negotiations, and agreements. [Id. ¶ 21]. In 2016, a dispute arose between AVPS and EPS regarding “over limit fees” associated with a particular merchant, CW Botanicals (“CWB”). [Id. ¶¶ 33-43]. This dispute culminated in a demand by EPS for certain fees that Plaintiff characterizes as “a transparent attempt to pressure AVPS to share gateway and other service fees earned by AVPS pursuant to its own independent contractual relationships with EPS merchants to which EPS had no rights or interest under the parties' agreements.” [Id. ¶ 44]. EPS also has not made any residual payments under the 2015 Agreements since October 19, 2016. [Id. ¶ 49].
This action followed. In the Complaint, Plaintiff asserts two claims for relief. In Count I, AVPS alleges that both Defendants breached their contract with it by failing to compensate AVPS in accordance with the controlling agreement. [Id. at 11]. In Count II, AVPS asserts a claim for unjust enrichment against EPS. [Id. at 12]. The Parties proceeded through discovery and, on October 30, 2020, Defendants filed the instant Motion for Summary Judgment and corresponding statement of undisputed material facts [#47, #48 (“MSUMF”)]. Plaintiff responded [#56, #57 (“OSUMF”)] on November 27, 2020; and Defendants replied [#59, #60 (“RSUMF”)] on December 12, 2020. The instant Motion is thus ripe for recommendation.
LEGAL STANDARD
Summary judgment is appropriate only if “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Henderson v. Inter-Chem Coal Co., Inc., 41 F.3d 567, 569 (10th Cir. 1994). “A ‘judge's function' at summary judgment is not ‘to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial.'” Tolan v. Cotton, 134 S.Ct. 1861, 1866 (2014) (quoting Anderson v. Liberty Lobby, 477 U.S. 242, 249 (1986)). Whether there is a genuine dispute as to a material fact depends upon whether the evidence presents a sufficient disagreement to require submission to a jury or, conversely, is so one-sided that one party must prevail as a matter of law. Anderson, 477 U.S. at 248-49. See also Stone v. Autoliv ASP, Inc., 210 F.3d 1132, 1136 (10th Cir. 2000); Carey v. U.S. Postal Serv., 812 F.2d 621, 623 (10th Cir. 1987). A fact is “material” if it pertains to an element of a claim or defense; a factual dispute is “genuine” if the evidence is so contradictory that if the matter went to trial, a reasonable party could return a verdict for either party. Anderson, 477 U.S. at 248. “Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no ‘genuine issue for trial.'” Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (citing First Nat. Bank of Ariz. v. Cities Serv. Co., 391 U.S. 253, 289 (1968)).
In reviewing a motion for summary judgment, the court views all evidence in the light most favorable to the non-moving party. See Garrett v. Hewlett-Packard Co., 305 F.3d 1210, 1213 (10th Cir. 2002). However, the nonmovant “may not rest upon mere allegation or denials of [the] pleadings, but must set forth specific facts showing that there is a genuine issue for trial.” Anderson, 477 U.S. at 256. Conclusory statements based merely on speculation, conjecture, or subjective belief are not competent summary judgment evidence. See Bones v. Honeywell Int'l, Inc., 366 F.3d 869, 875 (10th Cir. 2004). The nonmoving party's evidence must be more than “mere reargument of [its] case or a denial of an opponent's allegation” or it will be disregarded. See 10B Charles Alan Wright, et al., Federal Practice and Procedure § 2738 at 356 (3d ed. 1998). Ultimately, however, the court may not enter summary judgment unless Defendants carry their burden under Rule 56 of the Federal Rules of Civil Procedure. See Reed v. Bennett, 312 F.3d 1190, 1194-95 (10th Cir. 2002). See also Fed. R. Civ. P. 56(a).
UNDISPUTED MATERIAL FACTS
The following undisputed material facts are drawn from the record before the court.
In some instances, a party has disputed the proffered material fact, but an examination of the record finds that such dispute is not properly supported by evidence in the record. Where that is the case, the court has noted the dispute and its analysis.
The Marketing Agreement
1. AVPS and ESQMS entered into a Marketing Agreement on December 31, 2014 (the “Marketing Agreement”). [#48-1; #57 ¶ 1].
2. The Marketing Agreement between AVPS and ESQMS is governed by Colorado law. [#48-1 at 15 § 17(b); #57 ¶ 3].
3. ESQMS and EPS drafted the Marketing Agreement. [#57-4 at 26:13-16; #57 ¶ 64].
When citing to the Electronic Court Filing (“ECF”) system, the court generally uses the convention [#] to refer to the docket and page number assigned by the ECF system. However, when citing to transcripts, this court refers to the ECF number for the document, but the page and line numbers from the original transcript for purposes of consistency and clarity.
4. EPS was not a named party to the Marketing Agreement. [#48-1; #57 ¶ 2].
Plaintiff objects and asserts that “EPS was the successor company to ESQMS.” [#57 ¶ 2 (citing [#57-1 at 38:4-8, 39:6-12, 45:15-24, 74:15-18])]. The testimony to which Plaintiff cites to support this proposition, however, does not state that EPS was ESQMS's successor-in fact, the deponents stated that they did not know the answer to this question. See, e.g., [#57-1 at 45:15-24 (“Q: . . . From the perspective of EPS, does ESQMS have any successors or assigns that you're aware of? A: Again, I think that's a legal question. I don't know how to properly answer that.”)].
5. Under the terms of the Marketing Agreement, “ESQMS or Esquire Merchants Services, LLC” refers to ESQMS and its successors and assigns. [#48-1; #57-11 at 2; #60 ¶ 61].
6. ESQMS had the right to assign, transfer, or delegate its duties without notice to or consent of AVPS. [#48-1; #57-11 at 8; #60 ¶ 63].
7. EPS performed all of the services required of ESQMS under the Marketing Agreement; ESQMS delegated its duties to EPS under the Marketing Agreement; and EPS was the underlying source of the Marketing Agreement. [#57-11 at 16:2-6, 31:5-7, 52:17-21; #60 ¶ 77].
8. ESQMS is no longer in existence, did not have a bank account, never generated any revenue, and never paid residual fees to AVPS. [#57-12 at 12:14-24; #57-1 at 39:6-12; #60 ¶ 76].
9. The Marketing Agreement permitted ESQMS to terminate the contract for any reason with 30 days' notice. [#48-1 at 13 § 13].
Plaintiff objects and states that the termination language in the Marketing Agreement is not controlling because the Marketing Agreement is not the operative contract between the Parties for purposes of the present dispute. [#57 ¶ 4 (citing [#57-2 at 4 § 5.G; #57-3 at 1; #57-4 at 39:4-17, 49:12-15; #57-14])]. Plaintiff raises the same objection verbatim for every subsequent statement of fact concerning the terms of the Marketing Agreement. See [id. ¶¶ 4-11 (citing [#57-2 at 4 § 5.G; #57-3 at 1; #57-4 at 39:4-17, 49:12-15; #57-14])]. These objections do not make the facts properly disputed because Plaintiff's assertion does not rebut the undisputed facts that specific terms are expressly included in the Marketing Agreement. At summary judgment, the non-movant must come forward with specific facts, supported by admissible evidence, to demonstrate a disputed material fact and cannot simply rely on denials or reargument of its case. Fed.R.Civ.P. 56(e) (“If a party fails . . . to properly address another party's assertion of fact as required by Rule 56(c), the court may: . . . consider the fact undisputed for the purposes of the motion.”). Conclusory statements or those based on speculation, conjecture, or surmise provide no probative value on summary judgment, see Nichols v. Hurley, 921 F.2d 1101, 1113 (10th Cir. 1990); nor may the nonmovant rely on “mere reargument of his case or a denial of an opponent's allegation, ” see 10B Charles Alan Wright, et al., Federal Practice and Procedure § 2738 at 356 (3d ed. 1998).
10. The Marketing Agreement also provides that ESQMS could terminate the Marketing Agreement immediately, without notice if AVPS “breaches any representation, warranty or covenant set forth herein or is default of any section, covenant or provision of this Agreement.” [Id.].
See supra note 4; [#57 ¶ 5].
11. Under the terms of the Marketing Agreement, AVPS represented and warranted that it would abide by the policies and procedures of ESQMS. [Id. at 9 §§ 7.3, 7.4].
See supra note 4; [#57 ¶ 6].
12. AVPS also represented and warranted that it would not engage in any illegal, fraudulent, or deceptive acts in violation of any Applicable Laws or Regulations. [Id.].
See supra note 4; [#57 ¶ 6].
13. Per the terms of the Marketing Agreement, failure to abide by the representations and warranties contained therein constitutes a material breach of the Marketing Agreement. [Id. § 7.5].
See supra note 4; [#57 ¶ 7].
14. ESQMS was also permitted to terminate the contract immediately, without notice, if AVPS failed to comply with the Sales Standards and Procedures for Independent Sales Representatives (“Sales Standards and Procedures”). [Id. at 22].
See supra note 4; [#57 ¶ 8].
15. The Sales Standards and Procedures provide that “it is imperative that [AVPS] comply with ESQMS sales standards, guidelines, policies, procedures, and Visa/MasterCard rules and regulations.” [Id.].
See supra note 4; [#57 ¶ 11].
16. Pursuant to the Sales Standards and Procedures, ESQMS was permitted to terminate the Marketing Agreement if AVPS was misleading to a merchant, including but not limited to the non-disclosure of all fees. [Id.].
See supra note 4; [#57 ¶ 9].
17. The Sales Standards and Procedures also permitted ESQMS to terminate the contract immediately if there was any “indiscretion in the handling of Merchant funds.” [Id. at 23].
See supra note 4; [#57 ¶ 10].
18. Under the terms of the Marketing Agreement, upon termination AVPS would be entitled to payment for only interests vested at the time of such termination. [Id. at 13 § 13].
See supra note 4; [#57 ¶ 4].
19. According to the Marketing Agreement, the Contractor (i.e., AVPS) “shall assist ESQMS in marketing and selling the Processing Service by soliciting potential Merchants and calling on existing Merchants who are not at the time of solicitation Merchants of ESQMS upon the terms and conditions set forth below.” [Id. at 4 ¶ 1].
Though this provision is not specifically cited by the Parties, this court may consider other materials in the record, including the totality of the Marketing Agreement. See Fed. R. Civ. P. 56(c)(3).
20. With respect to each of the merchants at issue, AVPS handled negotiations concerning merchant processing agreements with the merchants before sending them on to ESQMS and EPS for application approval. [#48-3 at 89:14-22].
Plaintiff challenges this assertion, but its proffered evidence does not dispute that AVPS sent merchants to Defendants with an agreement in place (i.e., Defendants were not involved in negotiations). Rather, Plaintiff simply adds that Defendants ultimately had to approve the (AVPS-negotiated) applications. [#57 ¶ 23 (citing [#57-4 at 36:18-21, 17:6-11, 20:3-8])].
21. Under the Marketing Agreement, AVPS provided full application packages to Defendants. [#57-4 at 27:1-25; #60 ¶ 72].
While Plaintiff asserts that AVPS provided full application packages to Defendants under both the Marketing and Referral Agreements, the cited testimony concerns only the Marketing Agreement and makes no mention of the Referral Agreement. [#57 ¶ 72 (citing [#57-4 at 27:1- 25])].
22. AVPS had various addendums to these merchants' applications, to which neither ESQMS nor EPS were parties. [#48-7 at 6:16-25; #57 ¶ 25].
23. AVPS's addendums with the merchants included “gateway fee addendums” and, for some merchants, “merchant miscellaneous addendums.” [#48-6 at 47:4-9, 54:18-55:5; #57 ¶ 24].
24. The merchant miscellaneous addendum stated that a merchant would be charged an “over limit fee” if the merchant exceeded its stated monthly volume of credit card processing. [#48-6 at 47:4-9, 54:18-55:5; #57 ¶ 24].
25. The over limit fee is not a gateway service provided by AVPS. [#48-7 at 7:1-4; #57 ¶ 26].
26. Neither the Marketing Agreement nor the Referral Agreement expressly allowed for or discussed the over limit fee AVPS was charging merchants. [#48-6 at 103:2-9].
Contrary to Plaintiff's position, see [#57 ¶ 59], the fact that the Marketing and Referral Agreements are both “silent” on the issue does not dispute the fact that the over limit fee was not provided for or discussed in the Agreements.
27. More than 100 merchants were signed up for services and opened prior to September 25, 2015 (the date EPS and AVPS signed the Referral Agreement). [#48-4; #57 ¶ 12].
28. Among these merchants was Stanley Brothers Social Enterprise, LLC d/b/a CW Botanicals (“CWB”), which signed up for merchant services on February 26, 2015, prior to the date of the Referral Agreement. [#48-8; #57 ¶ 27].
Plaintiff asserts that this fact is “[p]artially disputed” because “CWB was initially signed up under the 2014 marketing agreement, but upon the signing of the 2015 referral agreement, which superseded the 2014 marketing agreement, all merchants signed up under the 2014 agreement were transferred to the 2015 referral agreement.” [#57 ¶ 27 (citing [#57-4 at 106:5-9; #57-2 at 4 § 5.G; #57-4 at 39:4-17; #57-5 at 18:11-25])]. Plaintiff appears to concede that CWB may have first signed up for services under the Marketing Agreement, but argues that CWB was later “transferred” to the Referral Agreement. Whether CWB was later “transferred” does not dispute this fact, and is an issue discussed in greater detail infra.
29. AVPS and CWB subsequently entered into a Gateway Fee Agreement. [#48-6 at 47:23-48:1; #48-9; #57 ¶ 28].
30. The Gateway Fee Agreement did not contain a merchant miscellaneous addendum. [#48-6 at 47:23-48:1; #48-9; #57 ¶ 28].
31. The Gateway Fee Agreement did not permit AVPS to charge CWB an “over limit fee.” [#48-7 at 47:23-48:1; #48-10 at 16:21-17:3; #57 ¶ 29].
32. AVPS did not have an oral agreement with CWB to permit AVPS to charge CWB an over limit fee. [#48-7 at 13:12-15; #57 ¶ 30].
The Referral Agreement
33. In 2015, AVPS and EPS began discussions to enter into an agreement whereby EPS would bring merchants to AVPS for merchant processing services. [#57-3 at 1; #57-10 at 22:3-7; #60 ¶ 65].
34. On September 25, 2015, AVPS and EPS entered into two Merchant Referral Agreements, only one of which is at issue in this action (the “Referral Agreement”). [#48-2 at 1; #48-3 at 75:18-24; #57 ¶ 13].
35. The Referral Agreement is governed by Colorado law. [#48-2 at 4 § 5.E; #57 ¶ 15].
36. Under the Referral Agreement, AVPS would refer merchants to EPS for bankcard services. [#57-2; #60 ¶ 68].
37. ESQMS is not a party to the Referral Agreement. [#48-2; #60 ¶ 14].
38. Section 1.A of the Referral Agreement provides: “Nothing in this Agreement shall be interpreted to require any marketing of merchant services by Referrer.” [#48-2 at 1 § 1.A; #57 ¶ 17].
39. Section 5.G (or “the merger clause”) of the Referral Agreement provides:
This Agreement contains the entire understanding between the parties with respect to this subject matter, and shall supersede and cancel all prior offers, negotiations and agreements between the parties thereon, whether written or oral. Accordingly, this Agreement now constitutes the complete and exclusive statement of the terms and conditions between the parties covering the performance hereof, and may not be altered, modified or supplemented except by a writing duly executed by each party . . . .[#48-2 at 4 § 5.G; #57 ¶ 20].
40. The merger clause was drafted by AVPS and contains the same relevant language as other agreements used by AVPS. Compare [#48-2 at 4 ¶ 5.G] with [#48-5 at 5 (AVPS Sample Agreement) § 5.G]. See also [#48-5 at 49: 4-11; #57 ¶ 21].
41. AVPS intended for the Referral Agreement to supersede the Marketing Agreement between AVPS and ESQMS. [#57-14 ¶ 7; #60 ¶ 70].
42. Neither ESQMS nor EPS intended for the Referral Agreement to supersede the Marketing Agreement. [#48-3 at 82:15-83:3; #48-17].
In arguing that a genuine dispute of fact exists, Plaintiff points to evidence that EPS wanted “one agreement covering the flow of business in both directions, ” and Defendants' use of the term “Universal agreement” when referring to the Merchant Referral Agreement. [#57 ¶ 16 (citing [#57-2; #57-3 at 1; #57-4 at 39:4-17, 49:12-15; #57-14])]. But Defendants' evidence unequivocally shows that, when placed in context, the language cited by Plaintiff concerning a single, “Universal” agreement, was not used in reference to the Marketing Agreement. See, e.g., [#48-3 at 82:15-83:3 (“Q: And is it EPS's position that the term ‘universal agreement' did not mean to supersede the 2014 agreement? A: It did not. Q: Okay. And that's EPS's position in this case, is that the 2015 agreement did not supersede the 2014 agreement? A: I don't know why you keep saying ‘position.' It's covering two different types of agreements - - one to market and sell it, and the other one is to refer it to someone. They're not the same thing, Scott. This refers to - - this universal agreement refers to the referral portion of it. Marketing and selling is different than referring.”)]. Accordingly, Plaintiff's evidence fails to create a genuine dispute of fact.
CWB's 2016 Discovery
43. Lynn Kehler (“Mr. Kehler”) was a contractor for CWB from October 2014 through October 2018. [#48-10 at 5:19-6:8; #57 ¶ 33].
44. Mr. Kehler's job duties included executive management and corporate finance. [#48-10 at 5:19-6:8; #57 ¶ 33].
45. At some point, Mr. Kehler noticed that AVPS was charging CWB what Mr. Kehler felt was a “really high” fee for credit card processing. [#48-10 at 9:13-10:2; #57 ¶ 34].
46. An over limit fee is a charge associated with process transactions over a certain monthly volume of credit card transactions. [#60 ¶ 24]. Despite the absence of any written or oral agreement permitting it to do so, AVPS charged CWB over limit fees totaling $264,524.69. [#48-6 at 70:15-71:12; #57 ¶ 31].
47. When Mr. Kehler confronted AVPS about these charges in approximately June 2016, he was told that the contract between CWB and AVPS permitted these over limit fee charges. [#48-10 at 24:20-24; #48-6 at 71:13-21; #48-7 at 20:13-16; #48-19 at 10:13-11:6, 24:20- 25:17].
Plaintiff objects and asserts that it “assumed that it had a merchant miscellaneous addendum with CWB and that the fees were warranted. Upon learning that a signed agreement was not in place and after confirming the amount inadvertently charged, Plaintiff refunded the money to CWB.” [#57 ¶ 34 (citing [#57-6 at 9:6-10; #57-5 at 9:4-8; #57-4 at 106:18-107:1])]. But neither Plaintiff's assertion nor the testimony to which AVPS cites disputes Mr. Kehler's testimony that AVPS told him that an addendum was in place. AVPS testified that Ms. Segura was the individual that spoke with Mr. Kehler [#57-6 at 71:16-21]; Ms. Segura testified that she could not recall the content of any conversation with Mr. Kehler [#48-7 at 20:13-16]; and Mr. Kehler testified that Ms. Segura told him that CWB's contract permitted AVPS's over limit fee charges. [#60-3 at 10:21-12:12].
48. When Mr. Kehler requested a copy of the agreement permitting AVPS to charge CWB an over limit fee, he was told that a copy of the agreement had already been provided to him. [#48-10 at 14:1-13].
In challenging this fact, Plaintiff repeats the same objection set forth in note 20 supra. Plaintiff's assertion and evidence do not dispute the fact that Mr. Kehler requested a copy of the over limit fee agreement and was told by AVPS that it had already been provided to him. See id.
49. Contrary to AVPS's assertions to Mr. Kehler, AVPS never provided an agreement permitting it to charge CWB over limit fees to Mr. Kehler. [Id.; #57 ¶ 80].
50. Mr. Kehler is not aware of any agreement between CWB and AVPS supporting over limit fee charges, and believes AVPS was charging CWB an over limit fee without any agreement authorizing AVPS to do the same. [#48-10 at 16:21-17:3, 25:11-17; #57 ¶¶ 39-40].
51. Per AVPS policy, it sought to ensure that merchants had a merchant miscellaneous addendum in place to prevent the wrongful debiting of funds from merchant accounts. [#48-6 at 103:14-19].
52. Per AVPS protocol, fees would not be charged if a correlating fee agreement did not exist. [#48-7 at 20:1-12; #57 ¶ 48].
53. Despite this protocol and the absence of any over limit fee agreement, AVPS still charged CWB over limit fees. [#48-7 at 20:1-12; #57 ¶ 48].
54. The 5% over limit fee was deducted from CWB's account on purpose. [#48-6 at 100:5-7].
Plaintiff asserts that this fact is “[p]artially disputed, ” [#57 ¶ 56 (citing [#57-6 at 9:6-10; #57-4 at 106:18-107:1])], but the testimony to which Plaintiff cites merely attempts to justify why the over limit fee was taken. Such testimony does not dispute Ms. Beswick's unequivocal testimony that the fee was deducted on purpose.
55. AVPS also told Mr. Kehler that EPS or Esquire Bank approval was required before CWB could increase its processing volumes. [#48-10 at 16:3-9; #57 ¶ 36].
56. Contrary to AVPS's representations, CWB did not need EPS's permission to raise its processing limits. [#48-3 at 155:2-18].
Plaintiff challenges this fact, arguing that a merchant is “set up to process an initial amount of volume, and if the merchant wants to go higher, the merchant needs bank approval.” [#57 ¶ 37 (citing [#57-5 at 11:24-12:9, 12:17-25; #57-14 ¶ 11])]. Plaintiff's assertion and evidence on which it relies dispute only whether CWB needed bank approval to raise its processing limits. [#57-5 at 11:24-12:9 (“A: . . . [I]f a merchant wants to go higher, they have to get bank approval.”)]. And Ms. Vaughan simply avers that “[r]equesting approval from the bank or processor for an increase in monthly transaction volume is standard practice in this industry, ” [#57-14 at ¶ 11]. The fact that CWB needed bank approval does not dispute the fact that CWB did not need EPS's permission.
57. At some point, CWB contacted EPS and explained the circumstances surrounding the AVPS over limit fee charges. [#48-10 at 31:11-32:7; #57 ¶ 41].
58. On November 22, 2016, EPS sent a letter to AVPS stating that EPS was investigating the report made by CWB and demanding AVPS provide certain documents. [#48-12; #57 ¶ 42].
59. In that same letter, EPS notified AVPS that EPS considered AVPS in breach of the Agreement(s). [#48-12; #57 ¶ 43].
60. One week later, EPS notified AVPS via email that AVPS's actions with CWB and other merchants violated various Rules and Regulations. [#48-11 at 2-3; #57 ¶ 44].
Plaintiff challenges this statement of fact by arguing that “Defendant's own expert witness, Jeffrey DePetro, testified that he does not know if Plaintiff's actions were a violation of the subject rules and regulation [sic].” [#57 ¶ 44 (citing [#57-5])]. Defendants counter that Plaintiff's proffered evidence does not dispute the fact that EPS informed AVPS that its actions violated Rules and Regulations. [#60 ¶ 44]. This court respectfully agrees with Defendants.
61. The following day, EPS sent AVPS a letter demanding that AVPS cease and desist all activities outside the merchant processing agreements and that EPS considered these actions to be theft and fraud. [#48-13; #57 ¶ 45].
62. CWB was finally reimbursed for the over limit fees on December 15, 2016. [#48-10 at 31:11-20; #57 ¶ 46].
63. The very next day, CWB terminated its business relationship with AVPS. [#48-14; #57 ¶ 47].
64. ESQMS and EPS cancelled their respective agreements with AVPS. [#48-2 at 117:16-125:5; #48-3 at 117:16-125:5; #57 ¶¶ 49, 50; #60 ¶ 49].
While Plaintiff challenges whether the cancellation of the Marketing and Referral Agreements was justified, it does not dispute that the Agreements were cancelled. [#57 ¶¶ 49-50].
65. ESQMS and EPS have not made any payments to AVPS since October 19, 2016, following cancellation of the Parties' respective agreements. [#1 ¶ 49; #57 ¶ 50].
66. ESQMS and EPS asserted that AVPS breached the agreements by (a) charging merchants outside of the Merchant Processing Agreements; (b) misleading merchants regarding fees; (c) charging an over limit fee without permission from the sponsor bank (Esquire); (d) breaching its warranties and representations under the Marketing Agreement; and (d) illegally taking money from a merchant. [#48-2 at 117:16-125:5].
Plaintiff challenges this statement by arguing (and citing to evidence in support of its arguments) against the various bases for cancellation asserted by Defendants. [#57 ¶ 49]. In so doing, however, Plaintiff fails to raise a genuine dispute with respect to the reasons asserted by EPS and ESQMS for their cancellation.
67. AVPS claims it is owed fees of $3,038,786 from October 2016 to April 2020, $2,622,094 of which is from CWB processing. [#48-16; #57 ¶ 60].
ANALYSIS
Defendants seek summary judgment on all of Plaintiff's claims. AVPS asserts a claim for breach of contract against both Defendants, and a claim for unjust enrichment against EPS. This court now turns to consider whether summary judgment is warranted on each of Plaintiff's claims in turn.
I. Breach of Contract
A threshold issue in this action is which of two contracts governs the Parties' dispute. I address this question first before turning to whether Plaintiff's breach of contract claim survives summary judgment. Contrary to the suggestion of Plaintiff, see [#56 at 6], there are no genuine issues of material fact that prohibit the court from considering and deciding this issue on summary judgment as the outcome turns on contract interpretation-a legal issue that lies with the court.
A. Which Agreement Controls?
Plaintiff claims that the 2015 Referral Agreement between AVPS and EPS superseded the 2014 Marketing Agreement between AVPS and ESQMS-thus, Plaintiff argues that the Referral Agreement is the operative contract for purposes of Plaintiff's breach of contract claim. See generally [#1; #56]. Plaintiff's position is premised on the applicability of a merger clause in the second-in-time Referral Agreement. The merger clause provides that:
This Agreement contains the entire understanding between the parties with respect to this subject matter, and shall supersede and cancel all prior offers, negotiations and agreements between the parties thereon, whether written or oral. Accordingly, this Agreement now constitutes the complete and exclusive statement of the terms and conditions between the parties covering the performance hereof, and may not be altered, modified or supplemented except by a writing duly executed by each party . . . .[UMF ¶ 39; #48-2 at 4 § 5.G; #57 ¶ 20].
Defendants maintain that the Marketing Agreement was neither merged with nor superseded by the Referral Agreement, and argue that the Marketing Agreement controls. [#47 at 7-11]. Specifically, Defendants argue that the merger clause does not apply to the Marketing Agreement because the two agreements neither concern the same subject matter nor apply to the same parties. [Id.]. Because a finding in Defendants' favor on either one of the foregoing arguments renders the merger clause inapplicable to the Marketing Agreement, my analysis begins and ends with whether the Referral Agreement concerns the same subject matter as the Marketing Agreement.
Application of Merger Clause.
The Parties disagree as to whether the respective Agreements encompass the same subject matter. Plaintiff argues that the agreements involve the “same subject matter which was bringing merchants to EPS for their bankcard/processing services through Esquire Bank, and there is no difference between marketing/selling Defendants' services to merchants and referring merchants to Defendants for the merchants to utilize Defendants' services.” [#56 at 10]. Defendants dispute Plaintiff's assertion that “marketing” and “referring” are synonymous in the credit card processing industry, and point to another provision of the Referral Agreement to support their position.
Contract interpretation is a question of law requiring application of well-settled principles of contract interpretation to the facts. Rich v. Ball Ranch P'ship, 345 P.3d 980, 983 (Colo.App. 2015). In interpreting contracts, the court aims to “discern and effectuate the parties' intent.” Sch. Dist. No. 1 in Cty. of Denver v. Denver Classroom Teachers Ass'n, 433 P.3d 38, 41 (Colo. 2019). To do so, the court “should give effect to the plain and generally accepted meaning of the contractual language, while also examining the entire instrument without viewing clauses or phrases in isolation.” Platt v. Winnebago Indus., Inc., __ F.3d __, 2020 WL 2893227, at *3 (10th Cir. June 3, 2020) (brackets omitted) (quoting Copper Mountain, Inc. v. Indus. Sys., Inc., 208 P.3d 692, 697 (Colo. 2009)); Level 3 Commc'ns, LLC v. Liebert Corp., 535 F.3d 1146, 1154 (10th Cir. 2008) (contract terms “‘must be examined and construed in harmony with [their] plain and generally accepted meaning' unless there is some indication that the parties intended otherwise”) (quoting East Ridge of Fort Collins, LLC v. Larimer & Weld Irrigation Co., 109 P.3d 969, 1154 (Colo. 2005)). If “a written contract is complete and free from ambiguity, [the court] will deem it to express the intent of the parties, and [the court] will enforce it according to its plain language.” In re United W. Bancorp, Inc., __ F.3d __, 2020 WL 2702425, at *2 (10th Cir. May 26, 2020) (quoting Klun v. Klun, 442 P.3d 88, 92 (Colo. 2019)). Indeed, the court “must enforce an unambiguous contract in accordance with the plain and ordinary meaning of its terms.” DTC Energy Grp., Inc. v. Hirschfeld, 912 F.3d 1263, 1273 (10th Cir. 2018) (emphasis added) (quoting USI Props. East, Inc. v. Simpson, 938 P.2d 168, 173 (Colo. 1997)). “The mere fact that the parties differ on their interpretations of an instrument does not itself create an ambiguity.” Fibreglas Fabricators, Inc. v. Kylberg, 799 P.3d 371, 374 (Colo. 1990).
In arguing that the merger clause does not apply to the subject matter of the Marketing Agreement (i.e., marketing), Defendants point to a separate provision of the Referral Agreement. Section 1.A of the Referral Agreement expressly states: “Nothing in this Agreement shall be interpreted to require any marketing of merchant services by Referrer.” [UMF ¶ 38; #48-2 at 1 § 1.A; #57 ¶ 17]. Plaintiff counters that “marketing” and “referring” are interchangeable terms in the contract.
This court's analysis begins and ends with the plain language of the Parties' contract (and within the four corners of the Referral Agreement) because “Plaintiff['s] interpretation of the contract is belied by the plain language of the Agreement.” Cockriel v. Allstate Ins. Co., No. 14-cv-01064-KLM, 2015 WL 3826790, at *5 (D. Colo. June 18, 2015) (quoting Figuli v. State Farm Mut. Fire & Cas., 304 P.3d 595, 598 (Colo.App. 2012) (“In contract interpretation, we begin by giving words used their plain and ordinary meaning . . . .”)). First, the two terms are not ordinarily interchangeable. As commonly used, the act of “referring” encompasses conduct more passive than “marketing.” Indeed, the plain meaning of “referral” is “the act, action, or an instance of referring, ” see https://www.merriam-webster.com/dictionary/referral, and to “refer” means “to send or direct for treatment, aid, information, or decision, ” see https://www.merriam-webster.com/dictionary/refer. The term “marketing” is defined as “the process or technique of promoting, selling, and distributing a product or service.” See https://www.merriam-webster.com/dictionary/marketing.
Insofar as Plaintiff cites contracts it maintains with unrelated non-parties to provide similar services as those provided to Defendants under either the Marketing Agreement or Referral Agreement as evidence of the Parties' intent, or that Defendants invoked the Referral Agreement in the correspondence to Plaintiff regarding CWB [#48-12; #48-13], such parol evidence is not properly before the court unless this court finds ambiguity. See Boyer v. Karakehian, 915 P.2d 1295, 1300 (Colo. 1996) (en banc). Because it finds no such ambiguity in the Referral Agreement, this court declines to consider evidence beyond the four corners of the contract with respect to application of the merger clause.
Second, this court must interpret the Referral Agreement as a whole and cannot view the merger clause in isolation. In addition to the merger clause, the Referral Agreement explicitly states in Section 1.A that “Nothing in this Agreement shall be interpreted to require any marketing of merchant services by Referrer.” [UMF ¶ 38; #48-2 at 1 § 1.A; #57 ¶ 17] (emphasis added). This provision expressly provides that the Referral Agreement does not encompass marketing. Accepting Plaintiff's proffered interpretation of “marketing” and “referral” as synonymous, Section 1.A would be read to mean “Nothing in this Agreement shall be interpreted to require any [referral of] merchant services by Referrer.” Adopting such an interpretation would render a clearly disharmonious result: a Referral Agreement that would not require AVPS to market or refer EPS's merchant services.
Third, other provisions demonstrate that the substance of the work under the respective agreements are not co-extensive. The Marketing Agreement required AVPS to market and sell ESQMS's Processing Service through making presentations, completing marketing surveys and/or Merchant Application paperwork, instructing Merchants on deposit or other related requirements of the Processing Service, and forwarding any and all paperwork, see [UMF ¶ 19; #48-1 at 4 § 1.3], while the Referral Agreement only required AVPS to provide “merchant leads” and provide EPS with “a legible copy of all relevant documents pertaining to the past processing activity, current financial condition or current business practices of any merchant so referred which has been doing business with Referrer at the time of the referral.” [#48-2 at 1 §§ 1.A and B], without any marketing.
“Processing Service” is defined as “a credit/debit card processing service, check guarantee/verification processing service, check conversion processing service, card and check processing equipment, business and personal Internet and web site development services including but not limited to credit/debit card processing on the World Wide Web, Warranty programs and other related services . . . .” [#48-1 at 1].
Both the plain language of the Agreement and application of the principle that “all parts of a contract should be construed ‘by giving effect to all provisions so that none is rendered meaningless, '” Cockriel, 2015 WL 3826790, at *6 (quoting Newflower Mkt., Inc. v. Cook, 229 P.3d 1058, 1061 (Colo.App. 2010)), confirm that the “subject matter” of the Referral Agreement excludes the marketing of merchant services. By its unambiguous terms, the Referral Agreement governs referrals for-but not marketing of-merchant services.
Merchant Transfer.
Plaintiff also seems to suggest that, independent of the merger clause, merchants signed up under the Marketing Agreement were “transferred” to the Referral Agreement and thus, that the terms of the Referral Agreement control the Plaintiff's rights to payment for residual fees. [#56 at 8-9]. First, Plaintiff asserts that under both contracts, AVPS “provided full application packages to Defendants.” [#57 ¶ 72 (citing [#57-4 at 27:1-25])]. But the fact that Plaintiff provided full application packages to Defendants does not necessarily address whether the Parties agreed to assign existing merchants from ESQMS under the Marketing Agreement to EPS under the Referral Agreement. Second, there is no genuine dispute with respect to the fact that the merchants relevant to this action all signed up under the Marketing Agreement. Plaintiff cites to AVPS testimony that it “presumed” that merchants were transferred from the Marketing Agreement to the Referral Agreement “because they were still part of the residual report.” [#57 ¶ 22 (citing [#57-4 at 39:4-17, 106:5-9; #57-2 at 4 § 5.G; #57-5 at 18:11-25])]. Defendants counter that this testimony “is not evidence of a transfer, but a guess.” [#59 at 5]. Finally, Plaintiff points to Defendants' own correspondence invoking the Referral Agreement as the basis for its investigation of AVPS's conduct and withholding of compensation as evidence of the transfer of merchants from the Marketing Agreement to the Referral Agreement. [#56 at 8-9 (citing [#48-12; #48-2])]. That correspondence refers to “section 3.A” and “Agreement(s)” with EPS, not ESQMS. [#48-12].
It is undisputed that there is no § 3.A of the Marketing Agreement, but a § 3.A does exist under the Referral Agreement. [#48-1]. But neither Agreement addresses the “transfer” of merchants from the Marketing Agreement to the Referral Agreement. [#48-1; #48-2]. Plaintiff has not come forward with contemporaneous evidence, such as communication between the Parties, to reflect an express transfer of merchants from the Marketing Agreement to the Referral Agreement. Plaintiff also cites no legal authority-other than the merger clause-to establish that CWB, specifically, was transferred from the Marketing Agreement to the Referral Agreement.
Thus, what this court is left with is EPS's invocation of § 3.A of the Merchant Referral Agreement in its November 22, 2016 letter informing Plaintiff of its investigation into CWB's allegations of billing irregularities. [#48-12]. Defendants fail to address EPS's representation that their investigation and withholding of fees was based on § 3.A of the Referral Agreement. [#59].
But even viewing this evidence in the light most favorable to Plaintiff, without further evidentiary context to connect the dots, this court finds that it is insufficient to create a genuine issue of material fact that CWB was transferred from the Marketing Agreement to the Referral Agreement. At this juncture, “[e]vidence, including testimony, must be based on more than mere speculation, conjecture, or surmise, ” Pioneer Cenres Holding Co. Emp. Stock Ownership Plan and Trust v. Alerus Fin., NA, 858 F.3d 1324, 1334 (10th Cir. 2017), and the “mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff.” Anderson, 477 U.S. at 252, 106 S.Ct. at 2512, 91 L.Ed.2d 202. Accordingly, the court turns to considering whether there is a genuine issue of material fact with respect to breach of the Marketing Agreement.
B. Is There a Genuine Issue of Material Fact as to a Breach of the Marketing Agreement?
As an initial matter, this court notes that the Complaint in this action only appears to allege breach of contract of the Referral Agreement [#1], which this court has already determined is not the applicable contract at issue. However, Rule 15(b)(2) allows a court to conform the pleadings to the evidence “[w]hen an issue not raised by the pleadings is tried by the parties' express or implied consent.” Fed.R.Civ.P. 15(b)(2). Defendants make no argument that Plaintiff is precluded from arguing that they breached the Marketing Agreement, [#47, #59], and this court perceives no prejudice in proceeding.
In Colorado, a plaintiff attempting to recover on a breach of contract claim must prove: (1) the existence of a contract; (2) performance by the plaintiff or some justification for nonperformance; (3) breach by the defendant; and (4) resulting damages. Western Distrib. Co. v. Diodosio, 841 P.2d 1053, 1058 (Colo. 1992) (en banc) (internal citations omitted). Defendants argue that they are entitled to summary judgment on Plaintiff's breach of contract claim because Plaintiff cannot show that the contract was breached by Defendants-instead, ESQMS simply terminated the Marketing Agreement as it was specifically permitted to do under its terms. [#47 at 11-14]. Specifically, Defendants assert two primary bases for termination of the Marketing Agreement: Plaintiff (1) materially breached the contract by engaging in illegal, fraudulent, or deceptive action [id. at 12-13]; and (2) failed to comply with the Sales Standards and Procedures section of the Marketing Agreement [id. at 13].
Burden of Proof.
Before turning to the substantive consideration of Defendants' argument of contract termination, this court also pauses briefly to consider the applicable burden of proof- an issue not raised by either Party. Under Rule 56 of the Federal Rules of Civil Procedure, where the non-moving party bears the burden of proof, the moving party may discharge its burden on summary judgment “by showing-that is, pointing out to the district court-that there is an absence of evidence to support the nonmoving party's case.” Celotex Corp., 477 U.S. at 325 (internal quotations omitted).
For affirmative defenses, however, a nonmoving party need not come forward with evidence to satisfy each and every element of its causes of action; “to defeat a motion for summary judgment, a plaintiff, upon the defendant raising and supporting an affirmative defense, need only identify a disputed material fact relative to the affirmative defense.” Hamric v. Wilderness Expeditions, Inc., No. 20-1250, -- F.4th --, 2021 WL 3152006, at *10 (10th Cir. July 26, 2021). An affirmative defense is a defendant's assertion of facts and argument that, if true, will defeat the plaintiff's claim, even if all the allegations in the complaint are true. See Bailey v. State Farm Mut. Auto. Ins. Co., 429 P.3d 109, 113 (Colo.App. 2018). Rules 8 of the Federal Rules of Civil Procedure and the Colorado Rules of Civil Procedure provide non-exhaustive lists of affirmative defenses, including accord and satisfaction; arbitration and award; assumption of risk; contributory negligence; duress; estoppel; failure of consideration; fraud; illegality; injury by fellow servant; laches; license; payment; release; res judicata; statute of frauds; statute of limitations; and waiver. Fed.R.Civ.P. 8(c); C.R.C.P. 8(c).
Neither side argues that Defendants' contention that the Marketing Agreement was properly terminated is a general defense or an affirmative defense. This court need not decide this issue because, under either standard, Plaintiff has failed to proffer sufficient facts to create a genuine issue of material fact that Defendants owed it any residual fees on October 19, 2016 (or anytime thereafter) under the Marketing Agreement-either to satisfy the elements of the breach of contract claim requiring an existing contract or breach, or to raise a dispute of fact with respect to the contract termination, if considered an affirmative defense.
Illegal, Fraudulent, or Deceptive Action.
Plaintiff contends that there is a genuine issue of material fact as to whether it engaged in illegal, fraudulent, or deceptive activities [#56 at 14]. This court respectfully agrees. While Defendants cite Colo. Rev. Stat. § 18-4-401 and 18 U.S.C. § 1344(2) in asserting that AVPS engaged in illegal activity, they concede that AVPS was not charged-and thus not convicted-of any crime. [#47 at 12]. In addition, the elements of fraud and deception vary depending on the precise cause of action, but typically require knowledge of the wrongdoing and/or wrongful intent. See, e.g., Husky Int'l Elecs., Inc. v. Ritz, 578 U.S. 882, 136 S.Ct. 1581, 1586, 194 L.Ed.2d 655 (2016). In addition, Plaintiff has come forward with evidence that AVPS believed it could properly charge CWB over limit fees, see [#57 ¶ 56 (citing [#57-6 at 9:6-10; #57-4 at 106:18-107:1]); id. ¶ 80 (citing [#57-6 at 9:6-10])], and returned the funds in full [id. ¶ 79 (citing [#57-8 at 1, 3])]. Based on this record, this court concludes that there are genuine issues of material fact that preclude this court from concluding as a matter of law that Defendants properly terminated the Marketing Agreement for illegal, fraudulent, or deceptive activities.
Failure to Comply With the Sales Standards and Procedures.
The next inquiry is whether-under unambiguous terms of the contract-Plaintiff's actions constituted sufficient grounds for Defendants to terminate the Marketing Agreement. Pursuant to the Sales Standards and Procedures, argue Defendants, they were permitted to terminate the Marketing Agreement because AVPS (a) failed to disclose over limit fees to CWB; (b) misled CWB with respect to both the need for EPS's approval to raise CWB's processing limits, and the existence of an over limit fee agreement between AVPS and CWB; and (c) exercised indiscretion in handling CWB's funds. See generally [#47]. Defendants assert that any one of the foregoing constitutes a sufficient basis for Defendants to cancel the Marketing Agreement and cease payment to Plaintiff.
The Sales Standards and Procedures section of the Marketing Agreement provides that “it is imperative that [AVPS] comply with ESQMS sales standards, guidelines, policies, procedures, and Visa/MasterCard rules and regulations.” [UMF ¶ 15; #48-1 at 22]. Pursuant to the Sales Standards and Procedures, ESQMS was permitted to terminate the Marketing Agreement if AVPS was misleading to a merchant, including but not limited to the non-disclosure of all fees. [UMF ¶ 16; #48-1 at 22]. The Sales Standards and Procedures also permitted ESQMS to terminate the contract immediately if there was any “indiscretion in the handling of Merchant funds.” [UMF ¶ 17; #48-1 at 23]. The Marketing Agreement expressly permits termination of the Agreement immediately, without notice, upon any “breaches of any representation, warranty or covenant set forth [in the Marketing Agreement] or is in default of any section, covenant, or provision of this Agreement.” [UMF ¶ 10; #48-1 at 13 § 13]. The Sales Standards and Procedures also provide that “[a] substantiated Termination Breach will lead to immediate termination of the Contractor.” [UMF ¶ 14; #48-1 at 22].
Because the term “mislead” is not defined in the Marketing Agreement and neither party offers any specific definition of the term, I construe the term by its common meaning. To mislead is “to lead astray” or “give a wrong impression.” See https://www.merriam-webster.com/dictionary/mislead (v., intransitive). This court notes that this definition requires no mal-intent. Other than asserting that the Merchant Referral Agreement superseded the Marketing Agreement, Plaintiff does not offer any evidence to dispute the fact that the Marketing Agreement, and the Sales Standards and Procedures set forth therein, permit unilateral termination of the Marketing Agreement-without notice-for, inter alia, the non-disclosure of fees, misleading a merchant, or indiscretion with respect to a merchant's funds. [UMF ¶¶ 10-14; #48-1]. Further, Plaintiff's arguments meaningfully address only Defendants' third basis for termination asserted under the Sales Standards and Procedures-the Response is silent with respect to the nondisclosure of fees, and mentions only briefly whether AVPS otherwise misled merchants. See [#56 at 14-15].
Failure to Disclose Fees.
It is undisputed that Plaintiff charged CWB over limit fees totaling $264,524.69, despite the fact that CWB never agreed to that fee. [UMF ¶ 46; #48-6 at 70:15-71:12; #57 ¶ 31]. Defendants argue that this amounts to non-disclosure. [#47 at 13]. According to Defendants, “[i]f Plaintiff took a fee from CWB without CWB ever agreeing to it or knowing about it, then it is clear that Plaintiff did not disclose that fee to CWB.” [#59 at 9]. Plaintiff fails to address this basis for termination in its Response. [#56 at 14-15 (“Regarding the sales standards contained in the 2014 marketing agreement, ” Plaintiff's arguments are limited to its “dispute[] that there was any indiscretion regarding the handling of merchant funds”)]. But as discussed above, “indiscretion” is not the appropriate inquiry. Rather, the Sales Standards and Procedures expressly contemplate that misleading the merchant can include instances of nondisclosure of all fees, and there is no genuine issue of material of fact that, regardless of intent, CWB did not have a separate agreement with Plaintiff that contemplated the over limit fee CWB was charged. [UMF ¶¶ 30-32; #60 ¶¶ 29-31].
Additional Misleading Statements.
In addition, there is no genuine dispute of material fact that Plaintiff made other misleading statements to CWB. There are three alleged misleading statements underlying Defendants' argument.
First, it is undisputed that Plaintiff told CWB that it needed EPS's permission to raise CWB's processing limits. [UMF ¶ 55; #48-10 at 16:3-9; #57 ¶ 36]. It is also undisputed that this statement was untrue, [UMF ¶ 56; #48-3 at 155:2-18], and Plaintiff has offered no evidence to the contrary.
See supra note 23. To the extent Plaintiff asserts that the veracity of its statement to CWB “is irrelevant to the determination of this case and this motion, ” [#56 at 14], without any additional argument or authority, this court respectfully disagrees.
Second and third, it is undisputed that Plaintiff told CWB that there was an addendum permitting Plaintiff to charge the over limit fee to CWB. Mr. Kehler testified that Ms. Segura, president of AVPS, informed him that (a) such an agreement was in place, and (b) a copy had already been sent to Mr. Kehler. [UMF ¶¶ 47-49; #48-10 at 14:1-13, 24:20-24; #48-6 at 71:13- 21; #48-7 at 20:13-16; #48-19 at 10:13-11:6, 24:20-25:17]. While Plaintiff points to the testimony of Ms. Vaughan, AVPS's general counsel, who testified that she did not tell CWB that an over limit fee agreement existed, there is no conflict between Ms. Vaughan's and Mr. Kehler's testimonies. And Ms. Segura did not deny having this conversation with Mr. Kehler-instead, she testified that she could not remember the substance of her conversation(s) with him. Neither Ms. Vaughan's nor Ms. Segura's testimony creates a genuine dispute of fact with respect to the fact that Ms. Segura told Mr. Kehler an agreement existed when it did not. Nor does Plaintiff make any argument or proffer any evidence to suggest that Mr. Kehler's testimony is not credible.
See supra notes 20, 21.
Even if there was an issue of Mr. Kehler's credibility that could not be determined on summary judgment, the other undisputed instances of “Misleading the Merchant” would be sufficient under the Marketing Agreement to permit ESQMS to unilaterally terminate the Marketing Agreement, without notice. [#48-1 at 22].
Based on the record before the court, there is no genuine issue of material fact that, regardless of intent, Plaintiff misled CWB (i.e., gave CWB the wrong impression) regarding the over-limit fees. There is also no genuine issue of material fact that the Marketing Agreement provides that upon a breach of its terms, ESQMS could unilaterally terminate the Marketing Agreement, without notice. [UMF ¶¶ 10-14; #48-1 at 13 § 13]. This negates Plaintiff's argument that the Marketing Agreement is “potentially still in place.” [#56 at 4 n.1].
Plaintiff points out that ESQMS does not identify the precise date on which it terminated the Marketing Agreement. [Id.]. While the court is troubled by this lack of precision, even construing the facts in favor of Plaintiff, this court cannot rewrite a contract for the parties. Ark. Valley Drilling, Inc. v. Cont'l W. Ins. Co., 703 F.Supp.2d 1232, 1240 (D. Colo. 2010). Contrary to Plaintiff's assertion that the agreements “are potentially still in place, ” [#56 at 4 n.1], the Marketing Agreement allows for unilateral termination without notice to AVPS upon breach of any representation, warranty, or covenant set forth in the Marketing Agreement or default of any section, covenant, or provision, [UMF ¶ 10; #48-1 at 13 § 13], and both Parties considered the Marketing Agreement terminated, see [UMF ¶ 64; #57 ¶¶ 49-50]. And considering the record as a whole, viewing the facts in the light most favorable to Plaintiff, Plaintiff does not come forward with any theory of breach of the Marketing Agreement or evidence that creates a genuine issue of material fact that the Marketing Agreement could not have been terminated, unilaterally and without notice, as of (and upon AVPS's breach of its terms, which necessarily predate) October 19, 2016. Accordingly, this court respectfully RECOMMENDS that Defendants' Motion for Summary Judgment be GRANTED as to Plaintiff's breach of contract claim.
II. Unjust Enrichment
Having determined that the Marketing Agreement controls the relationship between AVPS and ESQMS as to CWB, this court now turns to whether AVPS can state an unjust enrichment claim against EPS. [#1 ¶ 60 (“Defendant EPS' unjust enrichment has damaged Plaintiff in an amount exceeding $75,000.”)]. To establish its claim for unjust enrichment, AVPS must show that (1) EPS received a benefit, (2) at AVPS's expense, (3) under circumstances that would make it unjust for EPS to retain the benefit without paying. See Robinson v. Colo. State Lottery Div., 179 P.3d 998, 1007 (Colo. 2008). Generally, a party may not recover under a theory of unjust enrichment when there is an express contract addressing the subject of the alleged obligation to pay. Interbank Invs., LLC v. Eagle River Water & Sanitation Dist., 77 P.3d 814, 816 (Colo.App. 2003). That is, unless “(1) the express contract fails or is rescinded, or (2) the claim covers matters that are outside of or arose after the contract.” Pulte Home Corp., Inc. v. Countryside Cmty. Ass'n, Inc., 382 P.3d 821, 833 (Colo. 2016) (internal citation omitted). Defendants assert that summary judgment should be granted to EPS on Plaintiff's unjust enrichment claim because (a) “it is not an available cause of action when a contract covers the same issues, ” and (b) there is no evidence to support the elements of Plaintiff's claim. [#47 at 16].
With respect to its first argument, Defendants rely on Interbank Investments and its progeny for the proposition that Plaintiff's unjust enrichment claim is barred because an express contract covers the same issues. [Id.]. Plaintiff counters that because “EPS is not an express party” to the Marketing Agreement, “the case law regarding unjust enrichment claims being precluded when an express contract exists on the subject is inapplicable.” [#56 at 19]. Though not cited by Plaintiff, case law provides that a party can recover on a quasi-contract when (a) the implied-in-law contract covers conduct outside the express contract or matters arising subsequent to the express contract; or (b) the party will have no right under an enforceable contract. Robert W. Thomas & Anne McDonald Thomas Revocable Tr. v. Inland Pac. Color., LLC, No. 11-CV-03333-WYD-KLM, 2012 WL 2190852, at *5 (D. Colo. June 14, 2012).
For the reasons that follow, this court respectfully disagrees with Plaintiff, and finds Plaintiff's unjust enrichment claim barred “because an express contract between the parties covers the same subject matter as the unjust enrichment claim.” First Horizon Merchant Servs. v. Thoma Cressey Equity Partners, Inc., No. 02-cv-3831, 2006 WL 3877834, ¶¶ 107, 108 (Colo. Dist. Ct. Apr. 24, 2006) (dismissing plaintiff's unjust enrichment claim against non-contracting parties after determining that the contract claim failed because defendants were not alter-egos of the now-defunct contracting party) (citing Interbank Invs., 77 P.3d at 816-17); see also Hoyt v. Marriott Vacations Worldwide Corp., No. 12-3093 (DSD/JJK), 2014 WL 5795034, at *1-3 (D. Minn. Nov. 6, 2014) (addressing whether an unjust enrichment claim under Colorado law is viable against non-contracting parties when the conduct underlying the claim is authorized by contract).
As discussed above, this court concluded that it is undisputed that AVPS and ESQMS entered into the Marketing Agreement that covered the relationship with CWB. The Marketing Agreement obligated ESQMS to pay residual fees to AVPS in exchange for AVPS's services. [#48-1]. Indeed, Plaintiff argues that even though “EPS is not an express party to the 2014 marketing agreement, . . . an implied contract existed between EPS and AVPS under the terms of the 2014 agreement, as EPS performed all of the obligations associated with the 2014 agreement.” [#56 at 19 (citing [#57 ¶ 95])]. See also [id. at 12 (“[A]t the very least there was an implied contract between EPS and AVPS with the terms delineated in the 2014 agreement.”) (citing [#57 ¶ 77])]. Plaintiff even argues that “EPS cannot avoid liability for breaching the agreements by . . . pointing the finger at [ESQMS] that is no longer in existence, ” [id. at 13], and claims that it would be “inequitable for EPS to retain the benefit of those referrals without paying AVPS the residuals to which it is entitled, ” [id. at 20]. In so doing, Plaintiff makes clear that its unjust enrichment claim is a repackaging of its breach of contract claim.
Plaintiff's entitlement to the residual fees is entirely premised on the Marketing Agreement, and EPS's relationship with AVPS as to CWB, if any, stems from ESQMS's delegation of its duties under the Marketing Agreement to EPS. Thus, Plaintiff's only legal basis for challenging either ESQMS's or EPS's non-payment of residual fees is “delineated in” the Marketing Agreement. [#56 at 12; #57 ¶ 77]; see also First Horizon Merchant Servs., 2006 WL 3877834, ¶ 107; Hoyt, 2014 WL 5795034, at *2. And as set forth above, Plaintiff's entitlement to residual fees terminated upon termination of the Marketing Agreement.
Insofar as Plaintiff attempts to distinguish this case by asserting that EPS is not an “express party” to the Marketing Agreement, “[t]he fact that Plaintiff brings this claim against [EPS], a nonpart[y] to the [Marketing] Agreement, does not save the claim.” First Horizon Merchant Servs., 2006 WL 3877834, ¶ 108. Plaintiff's only factual basis for asserting the unjust enrichment claim against EPS is EPS's relationship to ESQMS as a party to the Marketing Agreement. Therefore, the claim is still subject to the Marketing Agreement. See Id. Given the asserted legal and factual bases for Plaintiff's unjust enrichment claim, I find the claim barred by the Marketing Agreement's coverage of the same subject matter. See, e.g., id.; Interbank Invs., 77 P.3d at 816-17; Cross Country Land Servs., Inc. v. PB Telecomm'cns, Inc., 276 Fed. App'x 825, 834-35 (10th Cir. 2008) (affirming dismissal of unjust enrichment claim against a non-party to the subject contract as a “repackaging” of the plaintiff's dismissed contract claim).
Lack of Evidence.
Defendants' lack-of-evidence arguments with respect to the elements of Plaintiff's unjust enrichment claim further support summary judgment in favor of EPS. First, Defendants argue that “there is no evidence to support [the] second element of the unjust enrichment claim” because “Plaintiff cannot point to any loss that it suffered or rights that were violated outside of the fees that are the basis of the breach of contract claim” [#47 at 18]. Rather than counter this argument in Response, Plaintiff appears to underscore it. See, e.g., [#56 at 19 (“[A]n implied contract existed between EPS and AVPS under the terms of the 2014 agreement . . . .”); id. at 12 (“[T]here was an implied contract between EPS and AVPS with the terms delineated in the 2014 agreement.”); id. at 13 (“EPS cannot avoid liability for breaching the agreements by . . . pointing the finger at [ESQMS.]”) (emphasis added); id. at 20 (arguing it would be “inequitable for EPS to retain the benefit of those referrals without paying AVPS the residuals to which it is entitled [under the contract]”)].
Defendants also contend that the third element fails because “there would not be anything unjust about permitting EPS to keep the fees generated by the merchants.” [#47 at 18]. Generally, conduct authorized by contract cannot form the basis of an unjust enrichment claim against third parties. See, e.g., Monus v. Colo. Baseball 1993, Inc., 103 F.3d 145 (Table), 1996 WL 723338, at *15 (10th Cir. Dec. 17, 1996) (rejecting unjust enrichment claim because the plaintiff “received the consideration contemplated by the written contract. Having received the benefit of the bargain he agreed to, plaintiff has made no showing that there are inequitable circumstances justifying his claim of unjust enrichment”). AVPS entered into a contract whereby (a) ESQMS was expressly permitted to delegate its duties under the agreement; (b) ESQMS was permitted to immediately and unilaterally terminate the agreement, without notice, if AVPS misled a merchant; and (c) upon termination AVPS would be entitled to payment for only interests vested at the time of such termination. [#48-1 at 13 § 13; id. at 22]. As set forth above, the Marketing Agreement was properly terminated. And despite AVPS's attempts to argue that-by performing ESQMS's obligations under the Marketing Agreement-EPS entered a separate, implied contract with AVPS, it is undisputed that such performance was expressly contemplated by the contract. See, e.g., [#48-1; #57-11 at 8; #60 ¶ 63].
Plaintiff's claim to the unpaid fees rises and falls with a finding that Defendants breached- rather than rightfully terminated-the Parties' contract. Given this court's conclusion that Plaintiff has failed to show a genuine dispute of fact on that issue, Plaintiff's unjust enrichment claim must also fail. See Hoyt, 2014 WL 5795034, at *3 (citing Cleary v. Philip Morris Inc., 656 F.3d 511, 517 (7th Cir. 2011) (“[I]f an unjust enrichment claim rests on the same improper conduct alleged in another claim, then the unjust enrichment claim will be tied to this related claim - and, of course, unjust enrichment will stand or fall with the related claim.”)). Having received the benefit (and downfall) of the bargain it agreed to, AVPS cannot show that the result of that very bargain justifies its claim of unjust enrichment. Monus, 103 F.3d 145 (Table), 1996 WL 723338, at *15. There is simply no inequity or injustice to resolve.
Accordingly, I respectfully RECOMMEND that Defendants' Motion for Summary Judgment be GRANTED as to Count II.
CONCLUSION
For the reasons stated herein, I respectfully RECOMMEND that:
(1) Defendants' Motion for Summary Judgment [#47] be GRANTED;
(2) Summary judgment be entered in FAVOR of Defendants and AGAINST Plaintiff; and
(3) Plaintiffs claims be DISMISSED with prejudice.
Within fourteen days after service of a copy of the Recommendation, any party may serve and file written objections to the Magistrate Judge's proposed findings and recommendations with the Clerk of the United States District Court for the District of Colorado. 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72(b); In re Griego, 64 F.3d 580, 583 (10th Cir. 1995). A general objection that does not put the District Court on notice of the basis for the objection will not preserve the objection for de novo review. “[A] party's objections to the magistrate judge's report and recommendation must be both timely and specific to preserve an issue for de novo review by the district court or for appellate review.” United States v. One Parcel of Real Prop. Known As 2121 East 30th Street, 73 F.3d 1057, 1060 (10th Cir. 1996). Failure to make timely objections may bar de novo review by the District Judge of the Magistrate Judge's proposed findings and recommendations and will result in a waiver of the right to appeal from a judgment of the district court based on the proposed findings and recommendations of the magistrate judge. See Vega v. Suthers, 195 F.3d 573, 579-80 (10th Cir. 1999) (District Court's decision to review a Magistrate Judge's recommendation de novo despite the lack of an objection does not preclude application of the “firm waiver rule”); Int'l Surplus Lines Ins.e Co. v. Wyo. Coal Refining Sys., Inc., 52 F.3d 901, 904 (10th Cir. 1995) (by failing to object to certain portions of the Magistrate Judge's order, cross-claimant had waived its right to appeal those portions of the ruling); Ayala v. United States, 980 F.2d 1342, 1352 (10th Cir. 1992) (by their failure to file objections, plaintiffs waived their right to appeal the Magistrate Judge's ruling). But see Morales-Fernandez v. INS, 418 F.3d 1116, 1122 (10th Cir. 2005) (firm waiver rule does not apply when the interests of justice require review).