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Peoples Bank of South v. Fiserv Solutions, Inc.

United States District Court, M.D. Tennessee, Nashville Division

June 1, 2015



ALETA A. TRAUGER, District Judge.

Pending before the court is defendant Fiserv Solutions, Inc.'s ("FSI") Motion for Partial Summary Judgment (Docket No. 28), to which plaintiff Peoples Bank of the South ("Peoples") has filed a Response (Docket No. 37), and FSI has filed a Reply (Docket No. 41). For the following reasons, the motion will be granted in part and denied in part.


This is a breach of contract action. Peoples is a Tennessee banking corporation with its principal offices in Campbell County, Tennessee. FSI is a Wisconsin corporation doing business in Tennessee.

Peoples and Financial Data Technology Corporation ("Fi-Data") entered into a Services Agreement dated July 26, 2007 (the "Services Agreement"). Under the Services Agreement, Fi-Data rendered data processing services to Peoples relating to various accounts maintained by Peoples's customers. The Services Agreement provided that, in the event of termination, Fi-Data would de-convert Peoples's data, and Peoples would pay Fi-Data the de-conversion fees set forth on Schedule A of the Services Agreement. In 2012, FSI purchased certain assets of Fi-Data, including the Services Agreement. In connection with the Fi-Data asset purchase, FSI assumed all obligations of Fi-Data under the Services Agreement.

On September 30, 2008, Peoples and FSI entered into an Electronic Transaction Services Agreement (the "EFT Agreement"). The EFT Agreement had an initial term of sixty-five months.

Peoples terminated the Services Agreement on December 31, 2012.

Peoples terminated the EFT Agreement on January 23, 2013, prior to the expiration of the initial term. Peoples's early termination of the EFT Agreement entitled FSI to early termination fees. FSI asserts that these fees totaled $43, 946.00 under the EFT Agreement. See Statement of Undisputed Material Facts ("SUMF") No. 11. However, Peoples maintains that FSI subsequently lowered the early termination fees to $38, 053.00. See Response to SUMF No. 11; Response Br. at p. 4 n.1.

After Peoples terminated the contracts between itself and FSI, FSI de-converted Peoples's data and transferred it to a new service provider effective July 12, 2013. At the time of the de-conversion, Peoples had approximately 15, 000 customer accounts. David Reynolds ("Reynolds"), Peoples's president and CEO, testified at deposition that Peoples incurred de-conversion fees under the Services Agreement of at least $5, 500, calculated as follows: five categories of customer accounts listed on Schedule A at $500 per category ($2, 500); plus 15, 000 customer accounts at $0.20 per account ($3, 000).

Peoples also entered into several software license agreements (collectively, the "Software License Agreements") with FSI or FSI's predecessor-in-interest. Each of the Software License Agreements required Peoples to pay in advance annual licensing and maintenance fees. Peoples's position as to these fees in this litigation is somewhat murky. On the one hand, Peoples maintains that it only incurred licensing and maintenance fees under the Software License Agreements through the de-conversion date of July 12, 2013. See Response to SUMF No. 17 (admitting liability for fees under Software License Agreements through de-conversion date of July 12, 2013); Response Br. at p. 3 (noting that "at most" Reynolds thought Peoples would have to pay license fees only through the conversion date). On the other hand, Peoples also maintains that FSI represented to Reynolds that it would not have to pay these licensing fees at all. See Response to SUMF No. 19 (asserting that, at various times, FSI's representatives informed Reynolds that Peoples would not have to pay any license fees); Response Br. at pp. 2-3 (stating same and noting that Peoples had no choice but to pay the license fees in advance under protest and reserve the right to seek a full refund). FSI represents that the pro-rated amount owed by Peoples to FSI for software licensing and maintenance fees through July 12, 2013 was $24, 410.50. See SUMF No. 19. Peoples has agreed to this calculation in the event it is determined to have incurred pro-rated fees.

Reynolds has also admitted during his deposition that Peoples incurred ATM de-conversion fees in the amount of $2, 050, network de-conversion fees in the amount of $2, 575, and a charge for "cardbase tapes in EFT format" in the amount of $1, 500.

The gist of this action is that Peoples alleges that (1) FSI "held hostage" all of Peoples's de-converted data until and unless Peoples paid FSI many types of excessive and improper fees over the course of the de-conversion process; (2) Peoples paid those fees in order to recover its data, but reserved all rights to seek to recover the fees; and (3) and Peoples now seeks to recover those excessive fee payments from FSI under theories of breach of contract and bad faith. To that end, on December 17, 2014, Peoples filed suit against FSI in Campbell County Chancery Court. (Docket No. 1-1.) FSI removed the action to this court on January 14, 2015. (Docket No. 1.) The Complaint brings five counts against FSI. Count One seeks the return of "$158, 700 less legitimate charges" per the Services Agreement for de-conversion fees that Peoples believes it was overcharged. Count Two seeks the return of $11, 884.07 of excess de-conversion fees paid under the EFT Agreement. Count Three seeks the return of software licensing fees paid in the amount of $31, 277.85. Count Four seeks the return of $10, 000 for a "Service Request" that Peoples claims was made pursuant to a contract it never executed. Finally, Count Five alleges a breach of the covenant of good faith and fair dealing imposed by Tennessee law in all contracts.

Peoples filed the pending motion on March 31, 2015. (Docket No. 28.) The court retroactively granted permission for Peoples to do so, upon motion, on April 2, 2015. (Docket No. 36.) On April 24, 2015, Peoples filed its Response. (Docket No. 27.) On April 30, 2015, FSI filed its Reply. (Docket No. 41.) The parties subsequently reported to the court that they had been unable to resolve this dispute through private mediation. The court ...

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