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Peoples Bank of South v. Fiserv Solutions, Inc.

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

December 16, 2016

PEOPLES BANK OF THE SOUTH, Plaintiff,
v.
FISERV SOLUTIONS, INC., Defendant.

          MEMORANDUM

          ALETA A. TRAUGER United States District Judge.

         The court conducted a two-day bench trial in this breach of contract action on December 6-7, 2016. In accordance with Rule 52 of the Federal Rules of Civil Procedure, the court sets forth herein its findings of fact and conclusions of law. For the reasons discussed more fully below, the court will enter judgment in favor of the plaintiff, Peoples Bank of the South, in the amount of $148, 700, plus attorney's fees and costs.

         CLAIMS

         The Complaint contains the following five counts: Count I alleges that the defendant breached the de-conversion fee schedule in a data processing agreement entered into between the plaintiff bank and a predecessor-in-interest to the defendant (the “Core Services Agreement”); Count II alleges the defendant's breach of a separate, independent contract between the plaintiff and the defendant for electronic fund transfer services (the “EFT Agreement”); Count III alleges the defendant's breach of an oral agreement between the plaintiff and the defendant to modify yet another contract between the plaintiff and a predecessor-in-interest to the defendant for software licensing (the “Licensing Agreement”); Count IV alleges that the defendant collected improper charges from the plaintiff related to an anticipated contract that was never signed by the plaintiff (the nature of which was not clarified in the Complaint but that was referred to at trial as the “Accell Network Charges”);[1] and Count V alleges the defendant's breach of the covenant of good faith and fair dealing. (Docket No. 1-1.)

         Count II was dismissed by the court following the pre-trial conference on December 2, 2016, due to a binding arbitration clause in the EFT Agreement. (Docket No. 88.)

         During opening statements at trial, counsel for the plaintiff withdrew Count III and stated that Count V had been dismissed by the court on Summary Judgment and was no longer at issue.[2]

         Thus, the only claims that were tried before the court are Count I for breach of the Core Services Agreement and Count IV for the Accell Network Charges.

         FINDINGS OF FACT[3]

         I. The Core Services Agreement

David Reynolds, President and CEO of the plaintiff bank, testified that the plaintiff contracted with Financial Data Technology Corporation (“Fi-Data”) to provide the plaintiff's data processing, through a series of agreements beginning in 1994. On July 26, 2007, the plaintiff entered into its final written contract with Fi-Data, according to which Fi-Data (as the Processor) would provide data processing services to the plaintiff (as the Customer) for a five-year term, beginning on October 1, 2007 (this is the Core Services Agreement). (Plaintiff's Ex. 1.) The Core Services Agreement contemplates renewal by mutual agreement and states: “In the event Customer wishes to discontinue this Agreement, Customer agrees to provide Processor notice of non-renewal at least one hundred [sic] (180) days prior to the expiration of the term.” (Id. at § 1.b.) The Core Services Agreement further provides as follows:

Upon termination of this Agreement, whether for reasons of expiration, non-renewal, or termination under Section 1 of the Agreement, Customer may obtain from Processor relevant data files and records for the purpose of de-conversion to an alternative data processing system by a machine-readable media. Processor hereby agrees to provide reasonable and customary levels of transition assistance if Customer decides to convert to other automation alternatives. Except as provided in Section 3d, the de-conversion activities constitute services that create fees payable to Processor. Such fees are enumerated in Schedule A--De-conversion Fee Schedule.

(Id. at § 3.a-c.) The exception identified in Section 3-d of the Core Service Agreement provides, simply, that the Customer is not required to pay any de-conversion fees if the agreement is terminated as a result of the Processor's breach and is not relevant to this action. (Id. at § 3.d.) Finally, the Core Services Agreement states that “[a] party in breach of this Agreement agrees to reimburse the other party for any expenses, including reasonable attorney's fees, that such party incurs in enforcing its remedies for breach of contract under this section.” (Id. at § 2.)

         Schedule A, which is attached to the Core Services Agreement, provides as follows with respect to de-conversion fees:

Demand Deposit

$500 plus $.20 per account0

Savings

$500 plus $.20 per account

Certificates

$500 plus $.20 per account

IRA's

$500 plus $.20 per account

Loans

$500 plus $.20 per account

         Any additional applications, such as general ledger accounting, etc., will be additional cost of $500. Incidental requests such as standard reports, etc., will be billed at $50 per report.

(Id. at p. 11.) Nowhere in the Core Services Agreement - including Schedule A or any other attachment - is there any indication that the de-conversion process must either begin or end within any specified time period in order for Schedule A to apply, or that the customer must provide the processor with the identity of its new provider within any specified period of time in order for Schedule A to govern the de-conversion fees whenever the process begins. This fact was conceded by Jean Ramsey, the President of Fi-Data at the time, who drafted the Core Services Agreement and was the main Fi-Data point of contact for the plaintiff throughout the course of their relationship.

         Both Mr. Reynolds and Ms. Ramsey testified that, in 2011, Fi-Data filed for Chapter 11 bankruptcy relief and, beginning at that point in time, the parties had concerns about maintaining their ongoing relationship. On February 29, 2012, following the bankruptcy court's appointment of an external trustee rather than allowing Fi-Data to proceed with Chapter 11 as a debtor-in-possession, the plaintiff gave written notice to Fi-Data of non-renewal of the Core Services Agreement. (Plaintiff's Ex. 4.) This was within 180 days of the expiration of the contract term on October 1, 2012 and, therefore, the plaintiff provided the defendant with proper notice of non-renewal under the terms of the Core Services Agreements. Mr. Reynolds and Ms. Ramsey both testified that, upon receiving the notice of non-renewal, Ms. Ramsey asked for the plaintiff's patience while Fi-Data went through the bankruptcy process, ...


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