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Discount Payment Processing, Inc v. Applied Card Systems

October 28, 2011

DISCOUNT PAYMENT PROCESSING, INC., PLAINTIFF,
v.
APPLIED CARD SYSTEMS, INC., DEFENDANT.



The opinion of the court was delivered by: Terrence F. McVerry United States District Court Judge

MEMORANDUM OPINION AND ORDER OF COURT

Presently before the Court are three related discovery motions:

(1) APPLIED CARD SYSTEMS, INC.‟S MOTION TO COMPEL (Document No. 52) and DISCOUNT PAYMENT PROCESSING, INC.‟S RESPONSE IN OPPOSITION TO DEFENDANT‟S MOTION TO COMPEL (Document No. 54);

(2) APPLIED CARD SYSTEMS, INC.‟S MOTION TO COMPEL (Document No. 53) and the RESPONSE IN OPPOSITION OF DEPENDABLE PAYMENT PROCESSING, INC. TO DEFENDANT‟S MOTION TO COMPEL COMPLIANCE WITH RULE 45 SUBPOENA TO PRODUCE DOCUMENTS (Document No. 55); and

(3) JOINT MOTION OF PLAINTIFF DISCOUNT PAYMENT PROCESSING, INC. AND NON-PARTY DEPENDABLE PAYMENT PROCESSING, INC. TO QUASH SUBPOENA AND MOTION FOR A PROTECTIVE ORDER, with brief in support (Document Nos. 56 and 57) and APPLIED CARD SYSTEMS, INC.‟S OPPOSITION TO JOINT MOTION OF PLAINTIFF DISCOUNT PAYMENT PROCESSING, INC. AND DEPENDABLE PAYMENT PROCESSING, INC. TO QUASH SUBPOENA AND MOTION FOR PROTECTIVE ORDER (Document No. 61).

Background

Although the parties are familiar with the background of this case, a brief recitation of the background is necessary in order to put these discovery disputes in perspective. On August 8, 2011, Defendant Applied Card Systems, Inc. ("Applied Card") filed a Motion for Leave to Amend its Answer to add a counterclaim and add Dependable Payment Processing, Inc. ("Dependable") as a counterclaim defendant. The proposed counterclaim was based upon an alleged failure to disclose and/or concealment of certain information by Plaintiff Discount Payment Processing, Inc. ("Discount") during the Due Diligence Period following the parties having signed a Letter of Intent. Specifically, Applied Card alleged that Discount "purposefully failed to disclose and/or intentionally misrepresented" to Applied Card that the Minimum Fees required to market the Merchant Portfolio were comprised of fees generated by both Discount and Dependable. Thus, even though Applied Card stands firm in its position that no contract exists between the parties, to the extent that the Court determines that a contract does exist, Applied Card asserted that had the information about Dependable been disclosed, it would not have purchased the Merchant Portfolio or, in the alternative, Applied Card would have negotiated a purchase on different terms.

While the Motion for Leave to Amend was pending, on August 21, 2011, Applied Card deposed Thomas Shanley, the owner and principal officer of both Discount and Dependable.

Mr. Shanley testified that he was the most knowledgeable person concerning the business and operations of both Discount and Dependable. He was questioned concerning both entities, the income volume of each entity, the existence and nature of processing contracts between each entity and First Data, and any inter-relationship between these two entities in the conduct of their respective businesses. The deposition extended over a seven (7) hour period, commencing at 9:30 AM and concluding at 4:52 PM.

On September 16, 2011, Applied Card issued a Subpoena to Produce Documents, Information or Objects or to Permit Inspection of Premises in a Civil Action to Dependable, commanding that the requested documents be produced to attorneys for Applied Card on September 30, 2011 at 9:00 AM.

On September 20, 2011, the Court entered its Memorandum Opinion and Order in which the Motion for Leave to Amend was denied. The Court found that Applied Card had failed to show good cause to allow the amendment, especially in light of the uncontested assertion that the information about the terms of the Marketing Agreement, including the involvement of Dependable, was known to Applied Card as of June 1, 2010, the day the parties signed the Letter of Intent.

On October 5, 2011, Applied Card filed a Motion to Compel in which it moved the Court for an order compelling Discount to (1) produce financial statements and residual reports from January 1, 2007 to December 31, 2008; (2) produce tax returns from 2007 through present; and (3) produce the unspecified documents which Discount has been withholding on the grounds of overbreadth. (Document No. 52).

The next day, on October 6, 2011, Applied Card filed a second Motion to Compel in which it moved the Court for an order compelling Dependable, a non party, to produce documents responsive to the subpoena for production of documents served upon it by Applied Card. (Document No. 53).

Four (4) days later, on October 10, 2011, Applied Card contemporaneously served upon Discount a Notice of Deposition under Rule 30(b)(6) and upon Dependable a separate deposition subpoena. Both the 30(b)(6) deposition notice and the deposition subpoena call for the giving of testimony by Discount and Dependable on the same date, time and place, to wit: October 21, 2011 at 10:00 AM in the offices of Reed Smith, 225 Fifth Avenue, Suite 1200, Pittsburgh, PA. On October 14, 2011, ...


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