Breach-of-Contract Lawsuit Against Global Payments

Global Payments Inc. may be on the hook for more than $135 million following a jury verdict in a breach-of-contract lawsuit filed by an independent sales organization against the Atlanta-based processor.

A jury in the Superior Court of DeKalb County in Georgia found that Global Payments breached parts of its merchant-service agreement with Frontline Processing Corp., a Bozeman, Mont.-based ISO. The jury on Sept. 23 awarded the ISO more than $24 million in direct damages and $109.8 million in consequential damages. It also awarded Frontline more than $1 million to cover its costs and attorney fees. Judge Linda W. Hunter signed the judgment Sept. 30.

Global Payments intends to appeal the decision. “We believe this case is completely without merit and will appeal it immediately,” says a statement from the processor to Digital Transactions News. “The outcome is inconsistent with the facts and well-settled law, and we fully expect to prevail on appeal. We will not stop until this gross miscarriage of justice is reversed.”

Frontline filed the suit in 2015 after Global Payments withheld funds to cover its legal costs in a lawsuit the Consumer Financial Protection Bureau brought against the processor and two ISOs, Frontline and Pathfinder Payment Solutions Inc., for allegedly providing payment services to malicious merchants. That case was dismissed in 2017.

Pathfinder was dismissed by the DeKalb County court as a plaintiff in 2018 when it could not provide an attorney to represent it, says Joe Gleason, Frontline co-counsel and partner at Atlanta-based Gleason Law LLC.

The dispute between Frontline and Global Payments actually preceded the CFPB action, Gleason tells Digital Transactions News. In 2013, Frontline and Global Payments were negotiating to extend their contract, but Global Payments wanted to add terms that Frontline was not willing to agree to, Gleason says.

In 2014, after shopping around, Frontline agreed to a similar deal with First Data Corp. and told Global Payments it would stay if it could match First Data’s pricing. “Global did not match the pricing,” Gleason says.

Under Frontline’s agreement with Global Payments, merchants that Frontline refers to the processor are portable. Global Payments would not allow that, Gleason says, making it one of the breach claims.

“Then the CFPB case comes along and becomes a convenient excuse to destroy Frontline by withholding Frontline’s funds, by withholding merchant-reserve funds, by locking Frontline out of Global’s computer systems,” Gleason says. That effectively cut Frontline out of the picture, he says, placing Global in direct dealings with the referred merchants, another breach allegation.

“In our view, the breach-of-contract cases did not start with the CFPB lawsuit,” Gleason says. “Instead, it was just one more step.”

Frontline contended that neither the merchant-services agreement nor referral agreement the ISOs had with Global Payments allowed the processor to “deduct as expense or withhold from compensation owed to Pathfinder or Frontline Global’s legal fees incurred in defending itself in the CFPB action.”