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SHARTSIS FRIESE LLP FRANK A. CIALONE (Bar #172816) fcialone@sflaw.com LISA A. JACOBS (Bar #230364) ljacobs@sflaw.com One Maritime Plaza, Eighteenth Floor San Francisco, CA 94111-3598 Telephone: (415) 421-6500 Facsimile: (415) 421-2922 Email: fcialone@sflaw.com Email: ljacobs@sflaw.com Attorneys for Plaintiff HEARTLAND PAYMENT SYSTEMS, INC. UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION HEARTLAND PAYMENT SYSTEMS, INC., a Delaware corporation, Plaintiff, Case No. COMPLAINT FOR FALSE ADVERTISING, UNFAIR COMPETITION, INTENTIONAL INTERFERENCE WITH CONTRACT AND PROSPECTIVE ECONOMIC ADVANTAGE
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JURY TRIAL DEMANDED Plaintiff, Heartland Payment Systems, Inc. (Plaintiff or Heartland), hereby alleges and complains as follows: THE PARTIES Plaintiff, Heartland, is a corporation duly organized and existing under the laws of
the state of Delaware, having its principal place of business at 90 Nassau Street, Princeton, New Jersey. 2. Plaintiff is informed and believes that Defendant, Mercury Payment Systems, LLC
(Defendant or Mercury) is a Delaware limited liability corporation, having its principal place of business in Durango, Colorado.
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JURISDICTION AND VENUE 3. This action arises under the Lanham Act, 15 U.S.C. 1125(a)(1)(B), and under the
laws of the State of California. This Court has subject matter jurisdiction over the Lanham Act false advertising claim under 28 U.S.C. 1331 and 28 U.S.C. 1338. This Court has
supplemental jurisdiction over the related California state law claims under 28 U.S.C. 1367(a) and 28 U.S.C. 1338(b). 4. Plaintiff is informed and believes, and on that basis alleges, that this Court has
personal jurisdiction over Defendant because Defendant has extensive contacts with, and conducts business within, the State of California and this judicial district. 5. Venue is proper in this Court pursuant to 28 U.S.C. 1391(b) - (d) because
Defendant is subject to personal jurisdiction in this judicial district and because a substantial part of the events or omissions giving rise to the claim occurred in this judicial district. INTRADISTRICT ASSIGNMENT 6. This action is appropriate for assignment to the San Francisco Division as both
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Plaintiff and Defendant are found and do business in the counties comprising this Division. FACTS COMMON TO ALL ALLEGATIONS PLAINTIFF HEARTLAND PAYMENT SYSTEMS, INC. ENGAGES IN THE PAYMENT PROCESSING BUSINESS 7. Heartland is engaged in the business of electronic payment processing, which
involves processing credit and debit card transactions for merchants who accept such forms of payment. 8. Heartland was founded in 1997 with the plan of building its business through a
differentiated approach to the market, a major element of which involved providing fair, honest, and fully disclosed payment solutions to small businesses. Heartland has dedicated enormous economic resources into building a very strong and respected reputation and is now one of the largest payment processors in the United States. Heartland has a large nationwide sales force that, among other things, contacts potential merchants to engage Heartlands credit card
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processing services and maintains merchant relationships. Heartland has offices and sales people at various locations across the nation, including in California and within this judicial district. 9. Payment processors (or merchant acquirers) such as Heartland provide services
to merchants to ensure that transactions are properly credited to the merchant and charged to the customer through the bank or institution that issued the customers credit or debit card. Thus, each time a customers credit or debit card is swiped through a terminal at a store, restaurant, or other place of business, information is accumulated to be transmitted through the payment processing system so that the merchant can receive the proceeds of the transaction, the issuing institutions (i.e., Wells Fargo, Chase, etc.) and card brands (i.e., Visa, MasterCard, Discover, American Express) can receive their fees, and the consumers account can be correctly and appropriately charged. Payment processors such as Heartland act as intermediaries between these various entities. 10. A substantial part of Heartlands processing business is focused on providing
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services and solutions to small and medium-sized merchants, especially in the restaurant, lodging and hospitality, and retail sectors. The vast majority of Heartlands customers in these sectors are small chains or independent locations, and not part of national chains. These kinds of businesses typically operate on thin profit margins, so that even a small difference in the cost of processing services matters greatly to these merchants. These kinds of business, typically owned and managed by a single or small group of entrepreneurs, are especially vulnerable to the predatory and deceptive practices in which Mercury has engaged, as alleged herein. DEFENDANT MERCURY PAYMENTS SYSTEMS, LLC BECOMES A SIGNIFICANT COMPETITOR IN THE PAYMENT PROCESSING BUSINESS 11. Mercury, like Heartland, is engaged in the business of payment processing for
merchants. Also like Heartland, Mercury provides payment services nationwide, including in California and within this judicial district. 12. Heartland is informed and believes that Mercury was founded in 2001. In 2010,
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concentrates its efforts: providing processing services to small and medium-sized merchants, particularly restaurants and retail stores. 14. Heartland is informed and believes that Mercury has grown dramatically over the
past few years. According to an industry source, from 2008 through 2012 Mercurys processing volume (in dollar terms) nearly quadrupled, as did the number of merchant outlets to which Mercury provides processing services. 15. Unlike Heartland, which uses a network of regional sales representative to contact
potential merchants and manage merchant relationships, Heartland is informed and believes that Mercury, in addition to its website and other internal marketing strategies, partners with certain Point Of Sale (POS) dealers which solicit potential merchants for Mercurys services on Mercurys behalf. These dealers sell, install and maintain POS systems and related software that manage the merchants business and also enable the merchants to process credit and debit card transactions. They will sign merchants up for Mercurys services at the time they sell to or set-up the POS equipment for the merchants. On information and belief, the POS dealers who solicit merchants on Mercurys behalf and sell Mercurys card processing services are acting as Mercurys agents in the course of such activities. PAYMENT PROCESSING SERVICES ARE OFTEN SOLD TO MERCHANTS ON AN INTERCHANGE PLUS BASIS 16. Processing services are sold with a variety of pricing approaches for merchants,
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including flat and tiered discount rates. However, in recent years, and in large part led by Heartland, small and medium-sized merchants have increasingly been priced on a cost-plus basis. Issuing institutions charge certain fees when cards that they issued are used, generally calculated as a percentage of the transaction plus a per-transaction fee. Those fees vary based on the type of card used (e.g., a merchant will pay a different fee for transactions in which a basic bank credit card is used than for transactions in which a rewards card, for which the user gets airline miles or similar benefits, is used; similarly, the merchant will pay a much lower fee for a debit card transaction than a credit card transaction). Those fees, charged by the card issuers, are referred to
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as interchange fees. The card networks (e.g., Visa and MasterCard) also charge fees, including fees that are assessed on a per-transaction basis. For example, Visa charges a fee known as the APF (or Acquirer Processing Fee), and MasterCard charges a fee known as the NABU (or Network Access Brand Usage) fee. The card brands charge additional fees for particular kinds of transactions or events, such as transactions in which a customers credit card is declined. All of those fees, charged by the card brands, are known as network fees. As interchange and network fees are established by the card networks, apply identically, regardless of the acquirer of the transaction, and are outside the control of those acquirers (or the merchants), they are often combined colloquially and described as interchange fees. Thus, the interchange-plus pricing model that Heartland and others offer to merchants means that the acquirer (1) will pass through at cost the uncontrollable interchange and network fees to the merchant, and (2) will add a separate mark-up, usually in some combination of basis points and cents-per-transaction, that is supposed to represent the amount the acquirers are being paid for their services. As network fees and interchange fees can be adjusted or reset as often as twice a year, a merchant on interchangeplus pricing would expect to see changes in their fees based on those adjustments, but would not and should not expect to see any change in the spread paid to the acquirer. 17. As part of its commitment to merchants, particularly the small and medium-sized
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merchants on which much of its business efforts are focused, Heartland has promulgated a Merchant Bill of Rights. Among other things, the Merchant Bill of Rights discusses the issue of undisclosed fee markups by processors. As the Merchant Bill of Rights states, when the card brands such as Visa and MasterCard adjust fees, many processors seize the opportunity to inflate them even more -- and then deceptively blame the increase on the card brands. As alleged below, this is precisely the kind of conduct in which Mercury has engaged: Inflating the network fees charged by card brands, deceptively passing those inflated fees on to their merchants by falsely characterizing them as part of Mercurys uncontrollable (i.e., controlled by the card networks) costs and retaining the inflated amount as pure profit.
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HEARTLAND LEARNS THAT MERCURY HAS USED DECEPTIVE AND UNFAIR PRACTICES TO GROW ITS BUSINESS 18. Mercury uses the interchange-plus pricing model with many of the merchants for
which Mercury provides processing services. Heartland is informed and believes that Mercury represents to those merchants that Mercury will pass interchange fees through at cost, and will charge an additional, disclosed, mark-up on a per transaction basis (in addition to other fees, such as monthly flat rate fees). In fact, however, as alleged below, Mercury is significantly inflating the interchange fees over cost. 19. Heartland is informed and believes that Mercury makes these representations to
merchants and potential merchants in merchant applications in which Mercury discloses the pricing that will be applied to a particular merchant as being on an interchange or cost-plus basis. Mercury further makes such representations through certain third parties, who act as Mercurys agents and sell services on Mercurys behalf, who confirm that interchange fees are fees charged by the issuing banks and card brands and that Mercury passes those fees through at cost, on its website and in other advertising and promotional materials distributed to merchants and potential merchants throughout the country in which Mercury likewise represents that interchange fees are fees charged by issuing banks and card brands, i.e., not by Mercury. 20. Heartland is informed and believes that Mercury makes these representations to
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many if not most of the merchants and potential merchants Mercury solicits throughout the United States. Mercury also makes these representations on its website, which can be accessed by any potential merchant in the United States with internet access. 21. In its Operating Guide, published on its website and expressly incorporated by
reference into all merchants agreements with Mercury, Mercury represents to merchants and potential merchants that interchange fees are fees set and charged by the issuing banks and the card brands: the fees associated with exchange of transaction data between the card processing bank and Card Issuer in accordance with the Card Organization Rules. It is the fee that Card Organizations charge to clear your transaction to the Cardholder bank. The interchange fee is actually paid to the Card Issuer while Merchants bank is charged the interchange fee.
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Mercury further represents that the card brands, set the fees and have different rates under different circumstances. Specifically: Visa, MasterCard and Discover have different interchange requirements based on industry type and method of transmission. Transactions that do not meet these requirements are billed at mid-qualified or non-qualified rates. Mercury advises merchants to [r]eview the Visa, MasterCard, and Discover Interchange Qualification Criteria to ensure your transactions are being processed correctly and further advises merchants as to how to qualify for the lowest interchange rates for particular transactions. Mercury also represents to merchants and potential merchants that the Discount Rate is: Comprised of a number of dues, fees, assessments, network charges and mark-ups, Merchants are required to pay for accepting credit and debit cards, the largest of which is the interchange fee. However, some assessments will be billed separately from the Discount Rate, such as: Brand Discover MasterCard Visa Visa Visa Visa Statement Description DISC NETWORK ACCESS FEE MC NETWORK ACCESS FEE VISA APF FEE VS MISUSE OF AUTH SYSTEM FEE VISA NETWORK ACCESS FEE VS ZERO FLOOR LIMIT FEE
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These representations lead merchants to conclude that interchange fees, including the above separately billed assessments, are fees set and charged by the issuing banks and card brands, not by Mercury, and that the merchant would have to pay such fees regardless of which merchant acquirer it chooses to purchase processing services from. 22. Contrary to Mercurys representations that it is passing through interchange fees at
cost, Mercury is in fact substantially inflating these fees without disclosing these additional markups to merchants. To date, Heartland has reviewed nearly 300 monthly statements from Mercury to merchants in various locations throughout the United States, including a number of statements from merchants who are located in the San Francisco Bay Area. Based on this review, Heartland is informed and believes that, beginning in or before July 2011, Mercury began a widespread practice of charging inflated network fees to its interchange-plus merchants. Specifically,
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instead of charging merchants a fee of less than 2 cents per transaction, the actual network fee, Mercury is regularly charging its merchants up to nearly 6 cents per transaction, without informing them of the mark-up. Mercury disguises these inflated fees by identifying them as specific interchange or network fees. Heartland is informed and believes that Mercury engages in this practice with many, if not most, of the merchants to which it provides card processing services. 23. While a mark-up of 4 cents per transaction may not seem significant in the
abstract, any single Mercury merchant may have hundreds of credit and debit card transactions per day. Assuming just 100 transactions per day, this results in a $4.00 per day overcharge to the merchant. Assuming the merchant is open for business 25 days a month, the result is a monthly overcharge of $100 for that single merchant. In 2012, Mercury provided payment processing services for nearly 76,000 merchants. 24. For the type of merchants serviced by Mercury, small and medium sized
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restaurants and stores, the inflated network charges result in increased costs that eat significantly into the merchants profit margins. This is especially true for merchants with a large volume of small transactions, such as a coffee or sandwich shop, where card transactions are often in amounts of less than $10.00. These types of merchants are disproportionately impacted by Mercurys fraudulent and deceptive billing practices. 25. Heartland, which competes with Mercury in the small and medium sized restaurant
and retail market, has lost and will continue to lose merchants to Mercury as a result of its fraudulent and deceptive billing practices. Merchants, unaware of the inflated network fees, are electing to use Mercurys service because Mercury is claiming to charge a lower cost-plus markup than Heartland and other processors. In other cases, Heartland has had to reduce its cost-plus mark-up, and therefore reduce its profit margin, in order to retain merchants who have been quoted deceptively low and false pricing by Mercury. However, Mercury is in fact charging significantly more than Heartland as a result of these disguised, inflated network fees. The merchants are being deceived because they are unaware of what the actual network fees are and cannot easily determine based on Mercurys statements that those fees have been inflated.
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Although many merchants elect not to inform Heartland of their reasons for cancelling Heartlands services, Heartland has been able to identify nearly 30 merchants who have cancelled their contracts with Heartland to switch to Mercury, in the past six month alone. Heartland was able to retain additional merchants by lowering Heartlands pricing to compete with Mercurys claimed pricing. 26. In late 2008, a California-based restaurant chain to which Heartland then provided
processing services decided to bid out to various payment processing companies. Heartland submitted a bid in response, as did Mercury. 27. Heartland stated in its bid that it would charge the restaurant chain its costs -- i.e.,
interchange and network fees -- plus 7 cents per transaction (plus .02% of the dollar value of transactions and a $7.50 monthly service fee). Heartland is informed and believes that Mercury represented that it would charge costs plus 6.5 cents per transaction (and plus .02% of the dollar value of transactions and a similar monthly service fee). In October 2008, the headquarters of the chain announced that it had recently switched our preferred credit processing company from Heartland Payment Systems to Mercury Payment Systems because, in part, Mercury by far provided the best rates. As a result, 50 of the 57 outlets in the restaurant chain switched their processing business from Heartland to Mercury. 28. In November 2013, a Heartland representative spoke to the manager at one
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California outlet of the above-discussed restaurant chain that had switched processors to Mercury. The representative asked to see an example of Mercurys monthly statement to the merchant, and the merchant provided it. That statement showed that Mercury was charging its plus of 6.5 cents per card transaction -- but that Mercury falsely inflated network charges to impose an additional 4 cent fee per card transaction. While Mercury had represented to the merchant that it would charge less than Heartland -- 6.5 cents per transaction, versus Heartlands charge of 7 cents -- Mercury in fact was charging significantly more -- 10.5 cents per transaction, versus Heartlands proposed charge of 7 cents. Heartland is informed and believes that Mercury
represented to the merchant that it would charge interchange and network fees at costs and did not
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disclose to the merchant that it intended to mark-up those fees beyond the 6.5 cents per card transaction that it offered in response to the merchants bid request. 29. Mercury deceived the merchant by falsely disguising the additional charges as part
of the card brand or network fees. During the period covered by the statement in question, MasterCards NABU fee was $.0195 per transaction, while Visas APF fee was $.0195 per credit card transaction and $.0155 per debit card transaction. However, Mercury inflated these fees in the statement to the merchant, claiming that the MasterCard and Visa fees were actually $.0595 per transaction. Mercurys Operating Guide, as described in paragraph 21 above, represent that these particular fees are card brand assessments that are separately billed. Based on Mercurys representations, the merchant would conclude that these were the actual fees charged by the card brands, which Mercury was passing through at cost as represented, when in fact the fees were significantly inflated by Mercury. 30. The inflated fees may seem small -- 4 cents per transaction (or 4.4 cents per Visa
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debit card transaction) -- but they are significant. For just one of this merchants locations for a single month, the inflated fees resulted in more than $54.00 in additional and improper charges to the merchant for that month. As discussed above, Mercury won the business of 50 outlets of this restaurant chain by underbidding Heartland -- or falsely advertising that it was underbidding Heartland -- by a half-cent per transaction, when in fact Mercury ended up charging the merchant an extra 4 cents or more per transaction by secretly inflating the network fees. 31. Mercurys conduct is not limited to a single merchant or a single statement, but is
widespread. Mercury broadly promotes itself as a low-cost provider of processing services, through means including its website, social media, and direct communication with merchants through solicitations and bids made through authorized third-party agents of Mercury. For example, Mercury represents on its website and through its agents that its payment processing services are low cost and that it offers a Best Rate Promise or a rate match guarantee. Merchants are likely to be deceived by such statements into believing that interchange fees will be the same no matter which acquirer they go with and that Mercurys lower disclosed mark-ups and/or monthly fees will therefore result in an overall lower cost to the merchant.
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32.
Mercury also compares its pricing to Heartlands pricing, falsely claiming that
Mercury provides processing services at a cost lower than does Heartland. Through these means, Mercury has caused merchants to terminate or not renew contracts with Heartland and to contract with Mercury rather than Heartland to provide processing services. In other cases, Heartland has had to reduce its own interchange-plus mark-up, and therefore reduce its profit margin, in order to retain merchants who have been quoted deceptively low and false pricing by Mercury. 33. Heartland has obtained hundreds of Mercury statements to merchants in which
Mercury falsely represents the network fees, showing rates that are significantly higher than the actual fees set by the card brands. A random sampling of Mercury merchant statements from recent months indicates that Mercury inflates and falsely represents network fees to at least 75% of the merchants to which it provides processing services. 34. Even when merchants learn that Mercury has been unfairly and deceptively
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inflating network fees, they are unable to change to Heartland or another processor that honestly represents its fees and actually charges less than Mercury. This is because Mercury imposes significant costs and barriers to changing providers. These costs and barriers include, but are not limited to, contractual terms such as a substantial early termination fee if the merchant switches processors during the term of its contract with Mercury. 35. In addition, Heartland is informed and believes that Mercury and certain of its
agents falsely inform merchants that Mercury is the only processor that supports the POS equipment the merchants have purchased, in order to further lock the merchants into Mercurys payment processing services. Mercury uses this deceptive conduct to compete unfairly with Heartland, by convincing merchants that the equipment they have purchased will only work with Mercurys processing system, and not with Heartlands. 36. In instances where Heartland has been able to convince merchants that this is not
true, that Heartlands services are compatible with the merchants POS equipment, Mercury and certain of its agents either perpetuate the misrepresentation, falsely informing the merchant that Heartlands services are not compatible with their equipment or, alternatively, charge or threaten
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to charge the merchants thousands of dollars to connect the merchants POS equipment to Heartlands services -- a process that in fact takes only minutes. 37. Mercury has leveraged the inflated network charges, and the inflated profits it
makes through such misconduct, into a further unfair competitive advantage. When a merchant acquirer works with POS dealers to sell processing services, the acquirer typically shares a portion of the revenue that it receives from the merchant with the POS dealer. On several occasions, Heartland has sought to partner with POS dealers in order to expand Heartlands sales efforts, but Heartland has been unable to do so because, according to the POS dealers, the revenue share they receive from Mercury is greater than what Heartland can offer. Heartland is informed and believes that Mercury is able to outbid Heartland solely because Mercury is charging inflated network fees to merchants, thus inflating its revenues per transaction, and using that inflated revenue to secure relationships with POS dealers that Mercury would be unable to secure if it were not deceptively passing inflated network charges onto its merchants. 38. Heartland is further informed and believes that Mercury may be securing
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relationships with POS dealers through deceptive practices that are to the detriment of Heartland, as well as to the detriment of such dealers. Merchant acquirers often pay POS dealers with a percentage-based commission (i.e., a percentage of the revenue that the merchant acquirer earns from a particular merchant). On information and belief, Mercury promotes itself to POS dealers by pointing to its high profit margins, and suggesting that POS dealers will share in those margins through the commissions they will receive. Mercury does not disclose, however, that a
substantial portion of those profit margins consists of inflated interchange fees. Because those inflated interchange fees are characterized as pass-through costs on merchant statements, rather than as part of Mercurys own mark-up, they are not included in the revenue shared with the POS dealer, and the POS dealer does not receive the benefits it expected to receive. FIRST CAUSE OF ACTION (False Advertising in Violation of 15 U.S.C. 1125(a)(1)(B)) 39. Plaintiff hereby adopts and incorporates by reference each of the allegations
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40.
Defendants action described above and herein constitute unfair competition and
false advertising in violation of 15 U.S.C. 1125(a)(1)(B). 41. Plaintiff is informed and believes and on that basis alleges that Defendant has
made and will continue to make, in commercial advertising or promotion throughout the United States including in California, false and/or misleading statements of fact that misrepresent the nature, characteristics and/or qualities of Defendants and Plaintiffs services, including the representations alleged above. 42. Defendants representations have deceived and/or have a tendency to deceive a
substantial segment of the relevant public to whom the statements have been made. 43. Defendant representations have influenced and/or are likely to influence relevant
customers to purchase services from Defendant instead of from Plaintiff or other payment processors. 44. By reason of the foregoing, Defendant has intentionally and willfully violated 15
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U.S.C. 1125(a)(1)(B). 45. As an actual and proximate result of Defendants wilful and intentional actions,
Plaintiff has suffered damages in an amount to be proven at trial, and unless Defendant is enjoined, Plaintiff will continue to suffer irreparable harm. 46. Pursuant to 15 U.S.C. 1117, Plaintiff is entitled to recover damages in an amount
to be determined at trial, profits made by Defendant, and the costs of this action. Furthermore, because Defendants actions were undertaken willfully and maliciously, Plaintiff is entitled to recover exemplary damages up to three times the amount of actual damages, as well as attorneys fees. SECOND CAUSE OF ACTION (Unfair Competition in Violation of Bus. & Prof. Code 17200 et. seq.) 47. Plaintiff hereby adopts and incorporates by reference each of the allegations
contained in paragraphs 1 through 46 above, as though set forth in full herein. 48. Defendants acts and practices as described herein constitute unfair competition in
violation of California Business & Professions Code 17200, et seq. in the following respects:
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(a)
They are unlawful in that they violate Section 5 of the Federal Trade
Commission Act and constitute false advertising under the Lanham Act and California Business & Professions Code 17500; (b) They are unfair in that they threaten an incipient violation of a consumer or
antitrust law, including but not limited to Section 5 of the Federal Trade Commission Act, violate the policy or spirit of such law, and/or otherwise significantly threaten or harm competition; (c) (d) They are fraudulent in that they are likely to mislead the general public; They constitute acts of untrue and misleading advertising, which are, by
definition, violations of Business & Professions Code 17200. 49. Defendants unlawful, unfair, and fraudulent business acts and practices and its
unfair, deceptive, untrue, and misleading advertising presents a continuing threat to members of the public in that merchants who purchase payment processing services from Mercury are paying inflated network fees which were not disclosed to them and/or are being dissuaded from switching to other processors as a result of false statements and cost-prohibitive termination and switching charges. 50. As a direct and proximate result of the foregoing conduct, Plaintiff has suffered
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damages, including damage to reputation, lost goodwill, disruption to business, and lost profits, and is entitled to restitution of all profits unjustly gained by Defendant, or alternatively, all sums lost by Plaintiff. 51. Defendants wrongful acts, unless and until enjoined and restrained by order of
this Court, will cause irreparable injury to Plaintiff. Plaintiff has no adequate remedy at law in that damages may be difficult to ascertain, and monetary damages alone will be inadequate to compensate Plaintiff for the harm caused by the Defendant if the Defendant is not enjoined. THIRD CAUSE OF ACTION (False Advertising in Violation of Bus. & Prof. Code 17500 et. seq.) 52. Plaintiff hereby adopts and incorporates by reference each of the allegations
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53.
in violation of California Business & Professions Code 17500, et seq. 54. Defendant violated Business & Professions Code section 17500 by publicly
making or disseminating untrue or misleading statements, and/or by causing untrue or misleading statements to be made or disseminated to the public, in or from California, with the intent to induce members of the public to purchase credit card processing and other services from Defendant. 55. As a direct and proximate result of the foregoing conduct, Plaintiff has suffered
damages, including damage to reputation, lost goodwill, disruption to business, and lost profits, and is entitled to restitution of all profits unjustly gained by Defendant, or alternatively, all sums lost by Plaintiff. 56. Defendants wrongful acts, unless and until enjoined and restrained by order of
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this Court, will cause irreparable injury to Plaintiff. Plaintiff has no adequate remedy at law in that damages may be difficult to ascertain, and monetary damages alone will be inadequate to compensate Plaintiff for the harm caused by the Defendant if the Defendant is not enjoined. FOURTH CAUSE OF ACTION (Intentional Interference With Contractual Relations) 57. Plaintiff hereby adopts and incorporates by reference each of the allegations
contained in paragraphs 1 through 56 above, as though set forth in full herein. 58. By virtue of its reputation, goodwill and hard work, Plaintiff has developed
valuable contractual relationships with its merchants to provide credit and debit card processing services for them. 59. Plaintiff is informed and believes and thereon alleges that Defendant, with
knowledge of these contractual relationships, engaged in intentional actions to interfere with them by inducing merchants to terminate their contracts with Heartland and instead engage the services of Defendant.
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60.
contractual relationships, Plaintiff has suffered and will continue to suffer substantial injury and damage to its business, goodwill, reputation and profits in an amount to be proven at trial. 61. Plaintiff is informed and believes and thereon alleges that the acts of Defendant, in
interfering with Plaintiffs contractual relations with its merchants, were willful and malicious and designed to obtain an unfair competitive advantage over Plaintiff. Plaintiff is therefore entitled to recover exemplary and punitive damages in a sum sufficient to punish Defendant. FIFTH CAUSE OF ACTION (Intentional Interference With Prospective Economic Advantage) 62. Plaintiff hereby adopts and incorporates by reference each of the allegations
contained in paragraphs 1 through 61 above, as though set forth in full herein. 63. By virtue of its reputation, goodwill and hard work, Plaintiff has developed
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valuable business relationships with its merchants to provide credit and debit card processing services for them, as well as prospective opportunities which are likely to benefit Plaintiff in the future. 64. Plaintiff is informed and believes and thereon alleges that Defendant, with
knowledge of these business relationships and future economic opportunities, engaged in wrongful and intentional actions to interfere with them by inducing existing and prospective merchants to sever their present or prospective business relationships with Plaintiff and instead engage the services of Defendant. 65. As a proximate result of such wrongful actions, Plaintiff has suffered and will
continue to suffer substantial injury and damage to its business, goodwill, reputation and profits in an amount to be proven at trial. 66. Plaintiff is informed and believes and thereon alleges that the acts of Defendant, in
interfering with Plaintiffs business relationships and future economic opportunities as described herein, were willful and malicious and designed to obtain an unfair competitive advantage over Plaintiff. Plaintiff is therefore entitled to recover exemplary and punitive damages in a sum sufficient to punish Defendant.
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PRAYER WHEREFORE, Plaintiff Heartland prays for judgment against Defendant Mercury as follows: 1. That Defendant and all of its respective officers, agents, servants, representatives,
employees, attorneys, and all other persons acting in concert with them be enjoined from: (a) representing to merchants that Mercury is passing through interchange fees
on an at cost basis, when Mercury is marking up those fees; (b) (c) charging merchants with undisclosed inflated interchange fees; disparaging Heartland or the services Heartland provides, including falsely
claiming that Heartlands services are more expensive than Mercurys or that Heartland marks-up interchange and network fees more than does Mercury; (d) representing to merchants that the merchants POS equipment cannot be
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connected to Heartlands processing system; and (e) taking any other actions or making any other false representation to
merchants that would prevent the merchant from switching from Mercurys services to Heartlands. 2. That Defendant be ordered to correct any erroneous impressions persons may have
derived concerning the characteristics and qualities of Defendants services or the characteristics and qualities of Plaintiffs services, including without limitation the sending of a registered letter (with a copy to Plaintiff) to all merchants currently using Defendants services informing them: (a) (b) that Mercury has been inflating certain interchange fees; that unlike Mercury some of its competitors, including Heartland, pass
those interchange fees through at cost which could result in the merchant paying less; (c) that contrary to what the merchants may have been told by Mercury or its
agents, the merchants POS equipment may be compatible with those of other card processing companies, including Heartland, and can be switched over at minimal cost; and (d) that Mercury has been adjudged to have competed unfairly against
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3.
That Defendant file, within ten (10) days from entry of an injunction, a declaration
with this Court signed under penalty of perjury certifying the manner in which Defendant has complied with the terms of the injunction; 4. That Plaintiff be awarded damages pursuant to 15 U.S.C. 1117, sufficient to
compensate it for the damage caused by Defendants false and misleading statements; 5. That Plaintiff be awarded Defendants profits derived by reason of said acts under
15 U.S.C. 1117; 6. That such damages and profits be trebled and awarded to Plaintiff and that Plaintiff
be awarded its costs, attorneys fees and expenses under 15 U.S.C. 1117, as a result of Defendants willful, intentional, and deliberate acts in violation of the Lanham Act; 7. That Defendant be adjudged to have unlawfully and unfairly competed under the
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laws of the State of California, Cal. Bus. & Prof. Code 17200, et seq.; 8. That Defendant be adjudged to have unlawfully and unfairly competed by
engaging in false or misleading advertising under the laws of the State of California, Cal. Bus. & Prof. Code 17500, et seq.; 9. For an accounting, disgorgement and/or restitution of all gains, profits, and
advantages derived by Defendant from the activities alleged in this Complaint; 10. On the Fourth and Fifth Causes of Action, that Plaintiff be awarded compensatory
and consequential damages against Defendant, according to proof; 11. On the Fourth and Fifth Causes of Action, that Plaintiff further be awarded
exemplary and punitive damages against Defendant in a sum sufficient to punish and make an example of said Defendant; 12. 13. 14. and proper. That Plaintiff be granted prejudgment and post judgment interest; That Plaintiff be granted costs of suit; and That Plaintiff be granted such other and further relief as the Court may deem just
- 18 COMPLAINT
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Attorneys for Plaintiff HEARTLAND PAYMENT SYSTEMS, INC. DEMAND FOR JURY TRIAL In accordance with Rule 38(b) of the Federal Rules of Civil Procedure, Plaintiff Heartland Payment Systems, Inc. hereby demands a trial by jury on all issues triable by a jury. Dated: January 29, 2014 SHARTSIS FRIESE LLP /s/ Frank A. Cialone By: FRANK A. CIALONE
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- 19 COMPLAINT