Filed: January 29, 2016
Opinion by: Catherine Blake
Holding: Under Maryland’s "economic loss rule" courts have limited
remedies if the loss is purely economic and the parties were engaged in
arms-length commercial bargaining.
Facts: Plaintiff operated a restaurant that allowed customers to
pay with American Express Credit Cards. Plaintiff alleged that Defendant, a
merchant payment card processor, mixed up the customer identification number and this mistake resulted in
$349,395.14 being routed incorrectly to John Doe/ ABC Co. Plaintiff sued Defendant,
American Express, and John Doe/ABC Co. to recover payments made by customer’s
credit cards.
Plaintiff sued Defendant for negligence and breach of
contract. Defendant filed a motion to dismiss for failure to state a claim. Parties
agreed, per the terms of the contract, to apply NY law for the breach claim. The
Court applied the Erie doctrine, choice of law, and outcome determinative test.
Maryland law controlled the negligence claim and NY law controlled the breach
of contract claim.
Analysis: The Court relied on Jacques v. First Nat'l Bank of Md., to determine if a duty exists. The
Jacques test balances the nature of
the harm that is likely to result from a failure to exercise due care and the nature
of the relationship between the parties. When the failure to exercise due care
creates only a risk of economic loss courts generally require an intimate nexus
between the parties to impose tort liability. Plaintiff argued that, like in Jacques, it had a special relationship
with Defendant which trumps the economic loss rule.
A special
relationship exists when: (i) the business is affected with the public interest;
(ii) the plaintiff is an individual consumer who is particularly vulnerable and
dependent upon the other parties' exercise of due care; (iii) there is a disparity
in strength of bargaining position; (iv) and one party more sophisticated than
the other.
The Court disagreed. Specifically, it distinguished this
matter from Jacques in two ways. First, Defendant in this matter is a
merchant payment card processor, not a bank. Second, and more importantly, Jacques centered upon the fiduciary
relationship a bank has to the individual clients. The Defendant conducts a sophisticated
commercial enterprise with the same bargaining power as the Plaintiff. The
Court ruled that a credit card payment processor does not have the same fiduciary
relationship to a vendor that a bank has to individual consumers.
The Court determined
that the economic loss doctrine applies for the negligence claim and granted Defendant’s
motion to dismiss the negligence claim.
The full opinion
is available in PDF.