Judge: Daniel S. Murphy, Case: BC648304, Date: 2023-11-13 Tentative Ruling

Case Number: BC648304    Hearing Date: April 10, 2024    Dept: 32

BACKGROUND

            This action was initiated in January 2017 by Plaintiff Speedy Fuel, Inc., and it arises from losses Plaintiff suffered due to unpaid fuel. Defendant Gilbarco, Inc. allegedly distributed faulty merchant software that caused payments to be rejected, resulting in no payment from customers. In August 2018, trial was separated in the following order: (1) the individual customers were to be tried first; (2) then Gilbarco; (3) then the payment processors (BAMS defendants); and (4) lastly, the customers’ banks. Plaintiff’s claims against the individual customers were tried in March 2019. Plaintiff’s claims against Gilbarco were tried in March 2022.

            The March 2022 trial resulted in a verdict in favor of Speedy, Cross-Defendant FH International Service Station Maintenance, Inc. (FHI), and Cross-Defendant L&S Maintenance (L&S). On July 25, 2022, the Court entered judgment in favor of Speedy against Gilbarco in the amount of $1.3 million. Additionally, FHI was awarded $42,875 against Gilbarco, and L&S was awarded $52,030.55 against Gilbarco.

            Gilbarco appealed the judgment. The BAMS Defendants and Bank of America settled with Plaintiff in December 2022. On June 26, 2023, Plaintiff, Gilbarco, FHI, and L&S entered into a settlement agreement whereby Gilbarco agreed to pay $1 million to Speedy, $42,875 to FHI, and $52,030.55 to L&S in exchange for dismissing its appeal. (Hedrick Decl., Ex. A.)

On August 30, 2023, Defendants Wells Fargo and Chase (the customer banks) filed the instant motion for summary judgment or adjudication in the alternative. Plaintiff filed its opposition on March 26, 2024. Defendants filed their reply on April 4, 2024.

LEGAL STANDARD

The function of a motion for summary judgment or adjudication is to allow a determination as to whether an opposing party cannot show evidentiary support for a pleading or claim and to enable an order of summary dismissal without the need for trial. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843.) Code of Civil Procedure section 437c, subdivision (c) “requires the trial judge to grant summary judgment if all the evidence submitted, and ‘all inferences reasonably deducible from the evidence’ and uncontradicted by other inferences or evidence, show that there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” (Adler v. Manor Healthcare Corp. (1992) 7 Cal.App.4th 1110, 1119.) “The function of the pleadings in a motion for summary judgment is to delimit the scope of the issues; the function of the affidavits or declarations is to disclose whether there is any triable issue of fact within the issues delimited by the pleadings.” (Juge v. County of Sacramento (1993) 12 Cal.App.4th 59, 67, citing FPI Development, Inc. v. Nakashima (1991) 231 Cal. App. 3d 367, 381-382.)

As to each claim as framed by the complaint, the defendant moving for summary judgment must satisfy the initial burden of proof by presenting facts to negate an essential element, or to establish a defense. (Code Civ. Proc., § 437c, subd. (p)(2); Scalf v. D. B. Log Homes, Inc. (2005) 128 Cal.App.4th 1510, 1520.) Once the defendant has met that burden, the burden shifts to the plaintiff to show that a triable issue of one or more material facts exists as to that cause of action or a defense thereto. To establish a triable issue of material fact, the party opposing the motion must produce substantial responsive evidence. (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 166.) Courts “liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party.” (Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 389.)

EVIDENTIARY OBJECTIONS

Plaintiff’s Objections to Defendants’ Evidence

• Plaintiff’s objections are overruled.

Defendants’ Objections to Plaintiff’s Evidence

• Declaration of Grigor Terrmendjian
• The following objections are sustained: 2-4, 7-10.
• The following objections are overruled: 1, 5-6.
• Compendium of Exhibits
• Defendants’ objection to Exhibits F and G is overruled.

DISCUSSION

I. Breach of Contract

To establish breach of contract, a plaintiff must show: (1) the contract existed, (2) the plaintiff’s performance of the contract or excuse for nonperformance, (3) the defendant’s breach, and (4) the resulting damage to the plaintiff. (Richman v. Hartley (2014) 224 Cal.App.4th 1182, 1186.) The formation of a contract requires mutual assent, or a meeting of the minds. (Civ. Code, § 1550.) “Consent is not mutual, unless the parties all agree upon the same thing in the same sense.” (Id., § 1580.)

Plaintiff’s FAC alleges that between September 1, 2014 and July 9, 2015, Plaintiff entered into 6,696 separate contracts with each of the customers, banks, and BAMS. (FAC ¶ 43.) The contracts allegedly consisted of an oral offer by each customer to purchase certain goods and services (fuel) in exchange for payment using a debit card. (Id., ¶ 43(A).) Plaintiff allegedly accepted each offer conditioned upon BAMS and the banks approving the transaction and agreeing to pay the purchase price. (Id., ¶ 43(B).) Such agreement was allegedly memorialized in electronic transmissions. (Id., ¶ 43(C).) Plaintiff alleges that Defendants breached the agreement by failing to pay the purchase price for the debit card transactions. (Id., ¶ 47.)

Defendants Wells Fargo and Chase argue that they never entered into an agreement to pay the purchase price for each transaction. According to Defendants’ evidence, the Visa transaction process begins with a “pre-authorization” for a certain amount when a customer swipes their debit card. (Def.’s Undisputed Facts (UF) 4.) This pre-authorization is sent to the issuing bank (Wells Fargo and Chase) and merely confirms that the customer has sufficient funds in their account. (Ibid.) The bank sends back either an approval or rejection of the pre-authorization. If the bank issues an approval, the transaction is still not complete until the point-of-sale (POS) system issues a “completion message.” (UF 5.) If the completion message specifies an amount equal to or less than the pre-authorized amount, the completion message is sent to the bank, which then debits the customer’s account and authorizes the delivery of funds. If the bank does not receive a completion message, no funds are debited. Any hold on the funds is released, and any previously approved pre-authorization is deemed expired. (UF 9.)

Defendants contend that for the transactions at issue, Gilbarco’s faulty software generated completion messages with amounts exceeding the pre-authorized amounts, leading First Data (the payment processor) to reject the transactions. (UF 6-7.) Defendants never received the requisite completion messages from First Data and therefore did not transmit any funds. (UF 8.) This resulted in Plaintiff not being paid for the transactions, but Defendants attribute that to Gilbarco’s software and First Data’s rejection. Defendants argue that their approval of pre-authorizations merely confirmed that the customers had sufficient funds in their accounts but did not constitute Defendants’ consent to actually pay the transaction amounts. Defendants did not communicate in writing or orally with Plaintiff regarding the transactions. (UF 3.) There were only electronic transmissions through the Visa payment processing system. (Ibid.)   

The Court of Appeal in Aton Center, Inc. v. United Healthcare Ins. Co. (2023) 93 Cal.App.5th 1214 dealt with similar facts in the medical insurance context. In Aton, a health care provider sought payment from the insurance company to cover underpayment for substance abuse treatment provided to various patients. (Id. at pp. 1218-19.) The provider alleged that “the insurer entered into binding payment agreements during verification of benefits and authorization calls with the provider.” (Id. at p. 1219.) The insurer participated in verification calls with providers to confirm an individual patient’s benefits, copayments, and deductible. (Ibid.) The court affirmed summary judgment for the insurer on the grounds that the insurer’s verification did not manifest a promise to pay. (Id. at pp. 1236.)   

Like the verification calls in Aton, the pre-authorization approvals here did not “objectively manifest[] contractual offers or promises of payment.” (Aton, supra, 93 Cal.App.5th at p. 1236.) Verifying that a customer had a certain amount of funds in their account is not an objective manifestation of assent to pay for the final amount owed. Defendants “did not know at the verification stage what services would ultimately be provided or the rates the provider would charge for those services.” (Id. at p. 1231.) At the pre-authorization stage, the banks do “not agree to pay at a specific reimbursement rate or promise to pay a certain amount, nor does [Plaintiff] learn how much it will be paid for a particular [fueling session].” (Ibid.) Defendants’ evidence shows that Defendants were not obligated to disperse any funds until the POS issued a completion message for an amount not exceeding the pre-authorized amount. The evidence also shows that there were no offers, acceptances, or negotiations between Plaintiff and Defendants. Therefore, Defendants have satisfied their initial burden of establishing that there was no mutual assent for Defendants to pay for the affected transactions.  

In opposition, Plaintiff argues that Defendants received the requisite completion messages through their “agent,” First Data. “Agency exists when a principal engages an agent to act on the principal's behalf and subject to its control.” (Church Mutual Ins. Co., S.I. v. GuideOne Specialty Mutual Ins. Co. (2021) 72 Cal.App.5th 1042, 1062.) “The essential elements necessary to establish an agency relationship are manifestation of consent by one person to another that the other shall act on his or her behalf and subject to his or her control, and consent by the other so to act.” (Ibid.) Plaintiff cites no evidence demonstrating that First Data acted as Defendants’ agent in processing payments. Plaintiff’s conclusory statements do not raise a factual dispute.    

Plaintiff also argues that it was not bound by the Interlink Rules and Protocols (the Rules) which set forth the pre-authorization and completion message standards. Plaintiff argues that it was not required to submit a completion message as a prerequisite to receiving payment. However, whether Plaintiff was required to follow the Rules does not affect the reality of how the Visa transaction system operates. It does not change the fact that a pre-authorization merely confirms the existence of a certain amount in a customer’s account and is not an objective manifestation of assent to pay. Plaintiff has no evidence that a pre-authorization means anything more than a confirmation of a certain amount of funds in a customer’s account.

Plaintiff simply concludes, through the declaration of its CEO, that the pre-authorization approvals constitute agreements to pay for the fuel purchases. (See, e.g., Terrmendjian Decl. ¶ 13.) Plaintiff argues that it “expected that if it received approval from Wells and Chase and thereafter provided the goods to the customer, it would be paid.” (Opp. 8:14-16.) However, Plaintiff’s subjective belief in the existence of a contract is immaterial because mutual assent is an objective standard. (Chicago Title Ins. Co. v. AMZ Ins. Services, Inc. (2010) 188 Cal.App.4th 401, 422.) Plaintiff does not cite any authority or evidence supporting its theory that the automated electronic pre-authorizations constitute an objective manifestation of assent to pay. Therefore, Plaintiff fails to raise a triable dispute of material fact. This warrants summary adjudication of the breach of contract claim.

II. Goods Sold and Delivered

“To recover on a claim for the reasonable value of services under a quantum meruit theory, a plaintiff must establish both that he or she was acting pursuant to either an express or implied request for services from the defendant and that the services rendered were intended to and did benefit the defendant.” (Ochs v. PacifiCare of California (2004) 115 Cal.App.4th 782, 794.) “When a common count is used as an alternative way of seeking the same recovery demanded in a specific cause of action, and is based on the same facts, the common count is demurrable if the cause of action is demurrable.” (McBride v. Boughton (2004) 123 Cal.App.4th 379, 394.)

Here, Plaintiff’s claim for goods sold and delivered is based on the same 6,696 transactions underlying its breach of contract claim. (FAC ¶ 51.) Plaintiff seeks the same recovery—payment for the transactions. (Id., ¶ 52.) As discussed above, the contract claim fails. Therefore, the derivative common count fails as well. (See McBride, supra, 123 Cal.App.4th at p. 394.)  

CONCLUSION

            Defendants Wells Fargo’s and Chase’s motion for summary judgment is GRANTED.