Recently, the U.S. District Court for the Southern District of Ohio trimmed several claims in a lawsuit brought by two online merchants against a national bank and its payment processor. The merchants accused the defendants of misrepresenting fees, failing to follow card network rules and mishandling chargebacks.
The court dismissed the merchants’ negligence-based claims, citing the “Economic Loss Rule,” which limits recovery for purely financial losses unless there is associated property damage or personal injury. The court also dismissed the direct fraud claim against the bank, finding that the complaint did not allege specific fraudulent conduct by the bank upon which relief could be granted.
However, the ruling allowed the fraud claim against the payment processor to proceed, given the court’s finding that the complaint detailed sufficient allegations. The court also ruled that the bank could be held vicariously liable for the processor’s alleged fraud, based on the principal-agent relationship between the bank and the processor, as described in the complaint. Finally, the court allowed the merchants’ conversion claim, alleging the bank wrongfully withheld funds from successful chargeback disputes, to proceed.
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