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Billy Browning, et al v. Data Access Systems

June 5, 2012

BILLY BROWNING, ET AL.,
PLAINTIFFS,
v.
DATA ACCESS SYSTEMS, INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Eduardo C. Robreno, J.

MEMORANDUM

TABLE OF CONTENTS

I. INTRODUCTION..............................................2

II. BACKGROUND................................................3

III. STANDARD OF REVIEW........................................6

IV. DISCUSSION................................................8

A. Res Judicata.........................................8

1. Whether the Delaware Superior Court Dismissal was a Final Adjudication...........................11

a. Plain meaning of Rule 41(b)...............12

b. Whether Judge Silverman specified that dismissal was not an adjudication on the merits....................................19

2. Whether the Parties in the Delaware Action and the Instant Case are the Same or in Privity....23

B. Failure to State a Claim............................30

1. Conversion.....................................31

2. Tortious Interference Claims...................33

3. Third-party Beneficiary Breach of Contract.....35

V. CONCLUSION...............................................38

I. INTRODUCTION

Plaintiffs Billy Browning, B&B Brown, Inc., Onek, L.L.C., Korwit L.L.C, Eagle Visions Corp., Electronic Finance Transfer Corp., and American Cash Machine, L.L.C. (collectively, "Plaintiffs") bring this class action on behalf of themselves and all other similarly situated persons against Defendants-Data Access Systems, Inc., First Bank of Delaware, and Alonzo Primus (collectively, "Defendants"). Plaintiffs' Complaint pleads five counts: (1) conversion; (2) tortious interference with contractual relations; (3) breach of a third-party beneficiary contract; (4) tortious interference with prospective economic advantage; and (5) breach of contract. Defendants-First Bank of Delaware and Alonzo Primus filed a motion to dismiss Plaintiffs' complaint alleging that res judicata bars Plaintiffs' claims, or, in the alternative, that Plaintiffs' Complaint fails to state a claim for which relief can be granted.

For the reasons that follow, the Court will grant Defendants' Motion to Dismiss and dismiss Plaintiffs' claims with prejudice as to Plaintiffs-Billy Browning, B&B Brown, Inc., Onek, L.L.C., Korwit L.L.C, and Eagle Visions Corp, and without prejudice as to Plaintiffs-Electronic Finance Transfer Corp. and American Cash Machine, L.L.C., with leave to re-file.

II. BACKGROUND*fn1

Plaintiffs-Browning, B & Brown ("B&B"), Onek, Korwit, and proposed class members ("Merchant Plaintiffs") are a group of merchants that either own or operate automatic teller machines ("ATMs") located in their businesses. Defendant-Data Access Systems ("DAS") provides the actual ATM system. These particular ATMs do not directly dispense cash, but print out a receipt that the consumer then presents to Merchant Plaintiffs who then gives the consumer the money withdrawn from Merchant Plaintiffs' own cash-on-hand. Merchant Plaintiffs operate the ATMs for profit by using their own cash and then receiving, at a later time, reimbursement of this cash and a portion of the ATM fee. Merchant Plaintiffs contracted with Defendant-DAS to provide for this payment mechanism. Plaintiffs-Eagle Visions Corp, Electronic Finance Transfer Corp. ("EFTC"), American Cash Machine, L.L.P. ("ACM"), and proposed class members function as distributors of Defendant-DAS's ATM systems ("Distributor Plaintiffs"). Distributor Plaintiffs contacted Merchant Plaintiffs to effectuate the sale of Defendant-DAS's ATM services. Distributor Plaintiffs were paid a fee for each ATM transaction that occurred on Merchant Plaintiff's ATMs.

To effectuate the reimbursement to Plaintiffs, Defendant-DAS contracted with nonparty TranSend, L.L.C. ("TranSend") to gain access to the Visa and Mastercard networks to complete the ATM transactions. TranSend, in turn, had a contract with Defendant-First Bank of Delaware ("First Bank") to deposit the funds into Defendant-DAS's account with Defendant-First Bank. Defendant-First Bank housed the funds for Plaintiffs' ATM transactions and sent those funds to nonparty Great Northern Bank ("Great Northern"). Defendant-DAS directed Great Northern to distribute funds pursuant to Defendant-DAS's contracts with Plaintiffs. This system of middlemen and reimbursement worked without incident for several years. In 2009, however, Visa and Mastercard discovered security breaches on Defendant-DAS's ATM system. As a result, Defendant-First Bank (not Defendant-DAS) was required to pay fines to atone for these breaches. Thereafter, Defendant-First Bank, by its then-president and CEO Defendant-Alonzo Primus, terminated its relationship with Defendant-DAS. Defendant-First Bank then froze all funds held in connection with Defendant-DAS's ATM services thereby preventing the reimbursement of Merchant Plaintiffs and fee payment to Distributor Plaintiffs.

Defendant-DAS eventually filed an action against Defendant-First Bank in the Delaware Court of Chancery. Merchant Plaintiffs moved to intervene in that suit. Now- Chancellor Strine presided and ordered Defendant-First Bank to pay the frozen money to Merchant Plaintiffs. After this payment, Merchant Plaintiffs' action against Defendants-DAS and First Bank was transferred to the Delaware Superior Court. In the Superior Court case, Distributor Plaintiff-Eagle Visions joined Merchant Plaintiffs. These Plaintiffs filed three Amended Complaints in the Delaware Superior Court. Plaintiffs' Third Amended Complaint alleged five counts against Defendants-First Bank and DAS: (1) conversion; (2) negligence; (3) tortious interference with contractual relations; (4) breach of a third party beneficiary contract; and (5) tortious interference with prospective economic advantage. Defendant-First Bank filed a motion to dismiss the Third Amended Complaint for failure to state a claim upon which relief could be granted.

On January 31, 2011, Judge Fred S. Silverman granted Defendant-First Bank's motion and dismissed all counts of Plaintiffs' Third Amended Complaint against Defendant-First Bank. See Browning v. Data Access Sys., Inc., No. 09C-10-248, 2011 WL 2163555, at *1 (Del. Super. Ct. Jan. 31, 2011). Eventually, Plaintiffs stipulated to dismissal of Defendant-DAS in the Delaware action.

After this dismissal, Plaintiffs filed a complaint in the Court of Common Pleas of Philadelphia County against Defendants. Defendants timely removed to this Court. ECF No. 1. Defendants-First Bank and Primus (who was not a defendant in the Delaware action) then filed the instant motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) arguing that res judicata bars Plaintiffs' claims, or, in the alternative, that Plaintiffs' Complaint fails to state a claim upon which relief can be granted. ECF No. 3. Plaintiffs' opposed this motion. ECF No. 5. Defendants filed a motion for leave to file a reply brief. ECF No. 8. The Court held oral argument. The motion is now ripe for disposition.

III. STANDARD OF REVIEW

A party may move to dismiss a complaint for failure to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). When considering such a motion, the Court must "accept as true all allegations in the complaint and all reasonable inferences that can be drawn therefrom, and view them in the light most favorable to the non-moving party." DeBenedictis v. Merrill Lynch & Co., Inc., 492 F.3d 209, 215 (3d Cir. 2007) (internal quotation marks omitted). To withstand a motion to dismiss, the complaint's "[f]actual allegations must be enough to raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). This "requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Id. Although a plaintiff is entitled to all reasonable inferences from the facts alleged, a plaintiff's legal conclusions are not entitled to deference and the Court is "not bound to accept as true a legal conclusion couched as a factual allegation." Papasan v. Allain, 478 U.S. 265, 286 (1986).

The pleadings must contain sufficient factual allegations so as to state a facially plausible claim for relief. See, e.g., Gelman v. State Farm Mut. Auto. Ins. Co., 583 F.3d 187, 190 (3d Cir. 2009). "'A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.'" Id. (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). In deciding a Rule 12(b)(6) motion, the Court is to limit its inquiry to the facts alleged in the complaint and its attachments, matters of public record, and undisputedly authentic documents if the complainant's claims are based upon these documents. ...


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