Roller v. Red Payments L.L.C.

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

------------------------------------------------------------------X

BRIAN ROLLER and KALOS STREET, L.L.C.,

Plaintiffs, MEMORANDUM &

ORDER

CV 19-5285 (GRB) (VMS)

-against-

FILED

CLERK

RED PAYMENTS L.L.C., 4:29 pm, Sep   12, 2022

Defendant. U.S. DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

------------------------------------------------------------------X LONG ISLAND OFFICE

GARY R. BROWN, United States District Judge:

Plaintiffs Brian Roller (“Roller”) and Kalos Street L.L.C. (“Kalos Street”) (collectively

“Plaintiffs”) brought this putative class action against Defendant Red Payments L.L.C. (“Red

Payments” or “Defendant”) and First Data Global Leasing1 seeking declaratory relief under the

Declaratory Judgment Act and alleging claims pursuant to the Fair Credit Reporting Act

(“FCRA”) and Electronic Funds Transfer Act (“EFTA”), as well as common law claims for

unjust enrichment, conversion and fraud. By Order dated February 11, 2021, the Court

dismissed certain of Plaintiffs’ claims. Plaintiffs subsequently filed a Second Amended

Complaint seeking declaratory and injunctive relief and alleging claims pursuant to the FCRA as

well as claims for common law fraud. Presently before the Court is Defendant’s motion to

dismiss the Second Amended Complaint pursuant to Rule 12 of the Federal Rules of Civil

Procedure (“Rule 12”). For the reasons set forth below, Defendant’s motion is granted.

1 First Data Global Leasing, formerly a defendant to this action, has been dismissed per stipulation of the parties.

See Docket Entry (“DE”) 81.

BACKGROUND

1. Factual Background

The following facts, drawn from the Second Amended Complaint are assumed to be true

for purposes of the pending motion to dismiss and are viewed in the light most favorable to

Plaintiffs, the non-moving party.

This action concerns payment processing accounts that Red Payments opened in the

name of Kalos Street, which is wholly owned by Roller. DE 86 ¶¶ 39-43, Ex. A. Plaintiffs

contracted with Red Payments in order to obtain point-of-sale (“POS”) equipment for processing

credit or debit card payments, as well as for payment processing and related services connected

to the use of this POS equipment. Id. ¶¶ 22-24, 31-34. While Red Payments enrolls businesses

in these types of contracts, it merely acts as an intermediary; the actual equipment and services

are provided by third parties, such as former defendant First Data Global Leasing (“First Data”).

Id. ¶¶ 2, 31, 34.

On August 22, 2016, Roller executed an “Application & Agreement” on behalf of Kalos

Street with Red Payments to lease a “USB Card Swiper” and “Gateway Virtual Terminal” and

obtain associated payment processing services (the “USB Swiper Agreement”). Id. ¶ 39, Ex. A.

Pursuant to this agreement, Roller opened an account at PNC Bank in his name to facilitate

autopayments for the services under the contract, which Plaintiffs had begun using by the end of

August 2016. Id. ¶¶ 40-41. Within one week, however, Plaintiffs received an additional

package that contained multiple mobile card readers called “VX520s.” Id. ¶ 42. Plaintiffs did

not request this additional equipment, nor was it mentioned in the USB Swiper Agreement. Id.

Nevertheless, Red Payments enrolled Plaintiffs in a separate lease account for this

equipment, which, like their first account, came with associated rental fees. Id. ¶¶ 43, 49. The

Red Payments’ sales representative who arranged the USB Swiper Agreement informed Roller

that this practice – viz. opening new accounts (with associated payment obligations) on top of a

customer’s existing account, without that customer’s knowledge or consent – was a scheme

known in the industry as “slamming.” Id. ¶¶ 4-10, 46. The payment processing services market

is complex, wherein any given payment processing transaction may involve half a dozen

intermediaries or more. Id. ¶¶ 2-3, 23-26. As a result, it is a relatively simple matter for

Defendant to “slam” customers with unauthorized accounts and fees, which the unwary clients

pay due to their ignorance of the payment processing system. Id. ¶¶ 4-10, 27-29.

Suspicious of the unrequested equipment, Plaintiffs reached out to Red Payments and

First Data to request the application and related paperwork that should have accompanied the

new account, to no avail. Id. ¶¶ 47-48. Despite multiple attempts to resolve this issue with both

Red Payments and First Data, Plaintiffs were unable to obtain either a copy of a contract for the

additional account, or a cancelation or refund for the mobile card readers and related payment

processing charges. Id. ¶¶ 47-49. Defendants nevertheless continued to charge Plaintiffs for the

account. Id. ¶ 52. Plaintiffs refused to pay these charges and ultimately closed their bank

account at PNC Bank in February 2017. Id. ¶¶ 50, 52. Sometime during this process, Red

Payments assessed a $499.00 cancelation fee on their accounts and referred the uncollected

invoices to debt collectors. Id. ¶¶ 51-52. As a result, Plaintiffs aver they have received notices

from collection agencies seeking to collect the unpaid fees and may have had their credit scores

harmed because of these collection efforts. Id. ¶ 53.

2. Procedural Background

On May 1, 2018, Plaintiffs, filing as “Brian Roller, d/b/a Kalos Street L.L.C.,”

commenced this class action against Defendants First Data and Red Payments in the United

States District Court for the Eastern District of Pennsylvania. DE 1. In July 2018, pursuant to an

order of Judge Mitchell S. Goldberg in the Eastern District of Pennsylvania, Red Payments

produced a copy of the contract establishing the VX520 mobile card reader account (the “VX520

Agreement”). DE 15; DE 65 ¶ 44. According to Plaintiffs, however, this document was

inauthentic: the VX520 Agreement was both “unsigned [and] unacknowledged” and “an obvious

forgery.” DE 65 ¶¶ 44-45, 48-49, Ex. B. In September 2018, First Data moved to transfer the

case to this Court pursuant to 28 U.S.C. §1404(a), which was granted by Judge Goldberg on

August 12, 2019. DE 49.

Following the transfer, Plaintiffs Roller and Kalos Street filed a First Amended

Complaint against Defendants First Data and Red Payments, asserting substantially the same

claims as set forth in the original complaint, but now including new allegations concerning the

purportedly fictitious VX520 Agreement. DE 65. The case was reassigned from Judge Margo

K. Brodie to the undersigned on January 29, 2020.

On May 19, 2020, Defendant First Data was dismissed from the case. DE 81. Defendant

Red Payments moved to dismiss the First Amended Complaint pursuant to Rule 12, and on

February 11, 2021, the Court granted in part2 and denied in part3 the motion. DE 83. Plaintiffs

filed a Second Amended Complaint on March 17, 2021, asserting claims under the FCRA and

state law and seeking declaratory and injunctive relief. DE 86.

At a pre-motion conference held before the undersigned on May 4, 2021, the Court

stayed Defendant’s application for leave to file a motion to dismiss the Second Amended

Complaint pursuant to Rule 12 pending resolution of the issue of whether or not First Data

2The Court dismissed with prejudice the third and fourth declarations in Count I and the claims under the EFTA in

Count IV. The Court dismissed without prejudice the claims for unjust enrichment in Count II, violation of the

FCRA in Count III, conversion in Count V, and common law fraud in Count VI. Id.

3The Court denied the motion with respect to the first two declarations sought in Count I for declaratory relief.

and/or Red Payments had obtained a credit report for Plaintiffs for the allegedly fraudulent

account. DE 89. The Court thereafter dismissed Plaintiffs’ FCRA claim with prejudice for

failure to obtain records of the credit inquiries at issue. See Order dated November 16, 2021; see

also DE 93. On December 2, 2021, the Court granted the parties’ proposed briefing schedule for

Defendant’s motion to dismiss the remaining claims for common law fraud and declaratory and

injunctive relief. See DE 94.

On February 21, 2022, Defendant Red Payments filed the instant motion to dismiss the

Second Amended Complaint (hereinafter the “complaint”) pursuant to Rule 12(b)(6) of the

Federal Rules of Civil Procedure. DE 95. This Order follows.

DISCUSSION

Standard of Review

Generally, motions to dismiss are decided under the well-established standard of review

for such matters, as discussed in Burris v. Nassau County District Attorney, No. 14-5540 (JFB)

(GRB), 2017 WL 9485714, at *3-4 (E.D.N.Y. Jan. 12, 2017), adopted by 2017 WL 1187709

(E.D.N.Y. Mar. 29, 2017), and incorporated by reference herein. See also Lynch v. City of New

York, 952 F.3d 67, 74-75 (2d Cir. 2020). The gravamen of that standard, of course, is the

question of whether, assuming the allegations of the complaint to be true solely for the purposes

of the motion, the complaint sets forth factual material to render the claims plausible.

Analysis

Plaintiffs assert claims of common law fraud4 based on both affirmative

misrepresentations and omissions. DE 86 ¶¶ 84-97. In addition, Plaintiffs seek declaratory and

injunctive relief. Id. ¶¶ 69-75.

4 Pennsylvania law governs Plaintiffs’ common law fraud claims. See United States Bank Nat’l Ass’n v. Bank of

Am. N.A., 916 F.3d 143, 154 (2d Cir. 2019) (“Transfers under § 1404(a) by a court that has jurisdiction are

(1) Common Law Fraud

To plead fraud under Pennsylvania law, Plaintiffs must allege: “(1) a representation; (2)

which is material to the transaction at hand; (3) made falsely, with knowledge of its falsity or

recklessness as to whether it is true or false; (4) with the intent of misleading another into relying

on it; (5) justifiable reliance on the misrepresentation; and (6) that the resulting injury was

proximately caused by the reliance.” Shuker v. Smith & Nephew, PLC, 885 F.3d 760, 778 (3d

Cir. 2018) (internal quotation marks and citation omitted). Moreover, “[a] fraud claim based on

intentional non-disclosure (i.e. omission) has the same elements as fraud, except that ‘an

omission is actionable as fraud only where there is an independent duty to disclose the omitted

information.’”5 Bucci v. Wachovia Bank, N.A., 591 F. Supp. 2d 773, 783 (E.D. Pa. 2008)

(quoting Duquesne Light Co. v. Westinghouse Elec. Corp., 66 F.3d 604, 612 (3d Cir. 1995))

(holding “Pennsylvania Courts have adopted the duty to speak requirement in fraud by omission

cases.”); see also Chiarella v. U.S., 445 U.S. 222, 228 (1980) (holding “[w]hen an allegation of

fraud is based upon nondisclosure, there can be no fraud absent a duty to speak”). Plaintiffs’

fraud claims are also governed by the heightened pleading standard of Rule 9(b) of the Federal

Rules of Civil Procedure (“Rule 9(b)”), which requires a party alleging fraud to “state with

particularity the circumstances constituting fraud.” Fed. R. Civ. P. 9(b). This standard requires a

adjudicated in the transferee state under the law of the transferor state.”). Although the transfer order in this case

was occasioned by a forum selection clause in the USB Swiper Agreement, this has no bearing on the proper §

1404(a) venue analysis. See Atlantic Marine Const. Co. v. U.S. Dist. Court for W. Dist. of Texas, 571 U.S. 49, 57

(2013).

5Although Plaintiffs reassert in the Second Amended Complaint that Red Payments “failed to disclose material

facts” (i.e., the fact that it intended to open additional accounts), DE 89, the complaint is again devoid of any

allegations of a confidential or fiduciary relationship between the parties and instead only describes “a typical

transactional setting.” De Lage Landen Fin. Servs, Inc. v. Rasa Floors, LP, 792 F. Supp. 2d 812, 843 (E. D. Pa.

2011) (“[A] duty to disclose does not normally arise between parties to a particular transaction unless there is a

confidential or fiduciary relationship between the parties, which, in turn, rarely arises in a typical transactional

setting unless one party surrenders substantial control over some portion of its affairs to the other.”). Accordingly,

Plaintiffs’ fraud claim based on an omission fails and is dismissed.

plaintiff to “(1) specify the statements that plaintiff contends were fraudulent, (2) identify the

speaker, (3) state where and when the statements were made, and (4) explain why the statements

were fraudulent.” Daniel v. Mondelez Int’l, Inc., 287 F. Supp. 3d 177, 183 (E.D.N.Y. 2018)

(internal quotation marks and citation omitted).

Defendant seeks to dismiss the fraud claims, contending principally that Plaintiffs have

failed to plausibly allege (a) justifiable reliance on an alleged false statement; or (b) damages

proximately caused by an alleged false statement. The Court agrees.

(a) Justifiable Reliance

“Before fraud will be found, a plaintiff must demonstrate that he justifiably relied on the

false statement.” Chase v. Creegan, No. 1681 WDA 2015, 2017 WL 1240046, at *5 (Pa. Super.

Ct. Apr. 4, 2017); see also Restatement (Second) of Contracts § 164, Comment d (“A

misrepresentation, even if relied upon, has no legal effect unless the recipient’s reliance on it is

justified.”). To be justified, reliance upon the representation of another must be reasonable. See

Drelles v. Manufacturers Life Ins. Co., 881 A.2d 822, 840 (Pa. Super. Ct. 2005). It is not

sufficient “to merely assert that a statement is fraudulent and that reliance on the statement

induced some action on the party’s behalf, nor is it enough to aver that a knowingly false

statement was made for the purpose of misleading another into reliance upon it.” Gordan v.

McManus, No. 972 EDA 2013, 2014 WL 10917627, at *18 (Pa. Super. Ct. June 30, 2014)

(internal quotation marks and citations omitted). Whether reliance on the representation is

justified “depends on whether the recipient knew or should have known that the information

supplied was false.” Porreco v. Porreco, 811 A.2d 566, 571 (Pa. 2002). The recipient of a

misrepresentation is required to use his senses and is barred from recovery if he “blindly relies

upon a misrepresentation the falsity of which would be patent to him if he utilized his

opportunity to make a cursory examination or investigation.” Silverman v. Bell Savings & Loan

Ass’n, 533 A.2d 110, 115 (Pa. Super. Ct. 1987) (internal quotation marks and citations omitted).

Plaintiffs assert that Red Payments made the following material misrepresentations: (i) the

fictitious VX520 Application that misled others, including First Data into relying upon it, DE 86

¶ 86; (ii) sending the box of unwanted equipment with the intent of misleading others, including

First Data, into relying upon it, id. ¶ 87; and (iii) sending written statements reflecting bills for the

second account, including termination charges, with the intent of misleading others, id. ¶ 88. None

of these representations state an actionable fraud claim.

First, with respect to the VX520 Application, the Second Amended Complaint alleges the

following:

The phony Application attached hereto as Exhibit B is an affirmative misrepresentation

that amounts to fraud and fraud in the inducement. The phony Application was doctored

up to look like the customer provided consent for the additional account: that is false,

something Red Payments knew was false at the time because it perpetrated or recklessly

disregarded whether it was true or not. Red Payments did so with the intent of

misleading others, including First Data, into relying upon it, which caused injury to the

Plaintiffs. A forged agreement does not create an agreement. Nor is it even a business or

a personal transaction. Rather, a forged agreement is a material misrepresentation, and a

definitive, detailed, specific proof of fraud.

DE 86 ¶ 86.

Plaintiffs concede that they were not aware of the Application until after the instant

lawsuit had commenced and Red Payments produced it pursuant to a Court order in the Eastern

District of Pennsylvania. See id. ¶ 47 (“The phony VX520 Agreement (Ex. B) was only

produced by Red Payments after ordered to do so by the PA Court.”). Upon receipt of the

Application, its falsity was obvious -- Plaintiffs averred the Agreement was unsigned, contained

“sloppily applied white out,” and was an “obvious forgery.” See id. ¶ 44. Thus, Plaintiffs'

reliance on the fraudulent representation was not justified. Cf. Porreco, 811 A.2d at 571 (stating

“we hesitate to find reliance justified where the party claiming reliance had an adequate

opportunity to verify the allegedly fraudulent statements”); see also Drelles, 881 A.2d at 840

(holding that the “recipient of a fraudulent misrepresentation is not justified in relying upon its

truth if he knows that it is false or its falsity is obvious to him”). Plaintiffs’ assertion that they

were injured by First Data’s reliance on Red Payment’s misrepresentation is equally unavailing.

“Under Pennsylvania law, only a person who himself detrimentally relied on the

misrepresentation in question may bring a fraud action.” Feingold v. Graff, No. 12-1090, 2012

WL 2400998, at *4 (E.D. Pa. June 26, 2012) (holding “a plaintiff who alleges that he was injured

by someone else’s detrimental reliance on a false statement has no cause of action in fraud”); see

Kester v. Zimmer Holdings, Inc., No. 2:10-cv-523, 2010 WL 4103553, at *4 (W.D. Pa. Oct. 18,

2010) (allegations that plaintiff suffered injury based on others’ reliance on misrepresentations

are insufficient to state a cause of action for fraud).

Likewise, Plaintiffs have failed to allege justifiable reliance on the receipt of unwanted

equipment. The Second Amended Complaint alleges:

Sending the box of unwanted equipment is also an affirmative misrepresentation that

amounts to fraud and fraud in the inducement. The equipment was never asked for or

consented to; sending it on the basis of it being authorized is a false action that is false,

something Red Payments knew was false at the time because it perpetrated or recklessly

disregarded whether it was true or not. Red Payments did so with the intent of

misleading others, including First Data, into relying upon it, which caused injury to the

Plaintiffs. It is a material misrepresentation, and a definitive, detailed, specific proof of

fraud.

DE 86 ¶ 87. However, Plaintiffs were not misled: (i) they “were immediately suspicious of the

unwanted equipment;” (ii) “no one touched the equipment;” and (iii) the equipment “was left in

the box it came from, where it remains today.” Id. ¶ 45. Inasmuch as Plaintiffs were aware of

the falsity of the representation and took no action in reliance upon the receipt of the unwanted

equipment, Plaintiffs cannot assert that their reliance on the misrepresentation was reasonable.

See Klemow v. Time Inc., 352 A.2d 12, 16 n.17 (Pa. 1976) (holding “[t]he successful

maintenance of a cause of action for fraud includes, inter alia, a showing that plaintiff acted in

reliance on the defendant’s misrepresentations”); see also Townsend v. City of Chester, No. CV

19-1023, 2020 WL 4347368, at *11 (E.D. Pa. July 29, 2020) (dismissing fraud claim where

plaintiff failed to assert he acted in reliance on the false representation and suffered to his

detriment). Nor, as discussed above, can Plaintiffs maintain a claim for common law fraud based

on others’ reliance, including First Data. See Tulp v. Educational Comm’n for Foreign Med.

Grads., 376 F. Supp. 3d 531, 544 (E.D. Pa. 2019) (holding plaintiff “cannot maintain a cause of

action for fraud based on others’ reliance”); see also Feingold, 2012 WL 2400998, at *4.

Finally, Plaintiffs have failed to plead justifiable reliance upon the receipt of invoices for

the second account. The Second Amended Complaint asserts:

Sending written statements reflecting bills for the second account, including charges

required to terminate the unwanted and never-consented-to account, is also an affirmative

misrepresentation that amounts to fraud. Plaintiffs received statements that reflect bills

for the second account, including termination charges. Authorizing, causing or

permitting these bills to be sent, while knowing that the second account was not

consented-to and there was no reasonable, rational basis for charging the customer, is a

material misrepresentation done with the intent of misleading others, and amounts to

fraud.

DE 86 ¶ 88. Contrary to acting in reliance on the fraudulent billing statements, Plaintiffs

“refused to pay the invoices received for the unwanted account and rental of unwanted

equipment and switched to a new payment processor.” Id. ¶ 50. Plaintiffs’ assertions reflect that

they knew the representations were false, and therefore reliance on the purported

misrepresentations cannot be said to be reasonable. See Klemow, 352 A.2d at 16 n.17; see also

Townsend, 2020 WL 4347368, at *11. To the extent Plaintiffs aver that “others” relied on the

billing statements, as discussed, Plaintiffs cannot maintain a claim for fraud based on others’

reliance. See Tulp, 376 F. Supp. 3d at 544; see also Feingold, 2012 WL 2400998, at *4; Kester,

2010 WL 4103553, at *4.

In sum, because each of the alleged misrepresentations is not coupled with any

subsequent reasonable reliance undertaken by Plaintiffs, no claim of fraud arises. Accordingly,

Plaintiff’s common law fraud claims against Red Payment cannot survive Defendant’s motion to

dismiss.

Plaintiffs’ fraud claims also fail on the injury prong, viz. damages proximately caused by

reliance on the alleged false statements.

(b) Damages

“Damages for fraud are limited to what losses were immediately and proximately caused

by the fraud.” Lokay v. Lehigh Valley Co-op. Farmers, Inc., 492 A.2d 405, 410 (Pa. Super. Ct.

1985) (citation omitted). Plaintiffs are therefore “entitled to all pecuniary losses which result as

a consequence of [their] reliance on the truth of the representations.” Delahanty v. First

Pennsylvania Bank, N.A., 464 A.2d 1243, 1257 (Pa. Super. Ct. 1983); see Crawford v. Pituch, 84

A.2d 204, 207 (Pa. 1951).

Plaintiffs allege the following injuries arising out of Red Payments’ purported fraud: (i)

fees incurred for the second VX520 account and a $499.99 termination fee on the accounts, DE

86 ¶¶ 49-52, 88; (ii) issuance of a negative credit report against them, id. ¶¶ 81, 83; (iii) receipt

of notices from collection agencies seeking unpaid fees allegedly owed, id. ¶ 53; and (iv) harm to

their credit scores, id. Plaintiffs have failed to plead cognizable injury.

With respect to fees incurred for the VX520 account, Plaintiffs aver that Red Payments

“continued to charge Plaintiffs for the account even though they were not being used,” and “then

added a $499.99 cancellation fee on the accounts.” Id. ¶¶ 50-52. However, Plaintiffs do not

allege that they were injured from any amounts paid to Defendant. To the contrary, Plaintiffs

state that they “refused to pay the invoices received for the unwanted account and rental of the

unwanted equipment and switched to a new payment processor.” DE 86 ¶ 50.

In addition, there is no indication of a negative credit report generated against Plaintiffs

based on the allegations of this case. At the pre-motion conference held before the undersigned

on May 4, 2021, the Court ordered Plaintiffs to file a letter within 90 days stating whether or not

First Data and/or Red Payments had, in fact obtained a credit report for Plaintiffs for the

allegedly fraudulent account. DE 89, 90. Thereafter, the Court provided Plaintiffs an additional

90 days to obtain the records of credit inquiries at issue and advised Plaintiffs that failure to

obtain such records by November 9, 2021 would result in dismissal of the FCRA claims with

prejudice. See Status Report Order dated August 11, 2021. On November 16, 2021, the Court

dismissed Plaintiffs’ FCRA claims with prejudice for failure to obtain records of any negative

credit report. See Order dated November 16, 2021.

Further, Plaintiffs have not plead cognizable damages arising from the alleged receipt of

notices from collection agencies seeking unpaid fees. DE 86 ¶¶ 52-53. Although Plaintiffs

assert in their opposition papers that “the Second Amended Complaint alleges circumstances,

including the issuance of overdue invoices and debt collection notices,6 from which the Court

can plausibly and confidently infer negative impact on Plaintiffs’ credit,” DE 95-5 at 5, the

assertions are deficient of any specific facts and fail to set forth damages that are “immediate and

proximate consequences” of the alleged deceit practiced on the Plaintiffs. Lokay, 492 A.2d at

6Notably, examination of a debt collection notice sent to Plaintiffs seeking unpaid fees allegedly

owed which Plaintiffs attached to their response in opposition to Defendants’ prior motion to

dismiss indicated that the creditor listed in the debt collection letter was not Red Payments, but

rather First Data Global Leasing. DE 22-1 ¶ 6, Ex. A.

410; cf. Malibu Media, LLC v. Doe, 238 F. Supp. 3d 638, 646 (M.D. Pa. 2017) (dismissing fraud

claim where cursory allegations of injury based on lost “time, money, and embarrassment” were

devoid of factual support” and lacked “particularity”).

Finally, Plaintiffs’ “belief” that their credit scores have been “harmed as a result of Red

Payments’ efforts to collect on unpaid fees,” id. ¶ 53, without further factual support falls well

short of both Rule 9(b) and Rule 12 standards. See Crawford, 84 A.2d at 207 (holding that

“consequential, speculative, and even conjectural” damages are not recoverable in a fraud action

and only those damages that are “immediate and proximate consequences of the deceit practiced

upon the plaintiffs” may be recovered); Metcalf v. Lynch, No. 4:11-cv-127, 2011 WL 13087090,

at *13 (M.D. Pa Oct. 31, 2011) (same); cf. Gruenwald v. Advanced Computer Applications, Inc.,

730 A.2d 1004, 1014 (Pa. Super. Ct. 1999) (holding plaintiff’s “belief, in and of itself, is simply

insufficient to prove a claim of fraud”).

Inasmuch as Plaintiffs have not pled any legally cognizable damages proximately caused

by reliance on the alleged false statements, Plaintiffs’ fraud claims fail on this additional ground.

Accordingly, Defendant’s motion to dismiss Plaintiffs’ common law fraud claims is

granted.

(2) Declaratory and Injunctive Relief

Plaintiffs seek both declaratory and permanent injunctive relief. Specifically, Plaintiffs

seek declarations that “(1) the unauthorized phony application (Ex. B) is not a binding contract,

and (2) Plaintiffs and the Class are therefore not bound by any of the terms set forth in the

document.” DE 86 ¶ 75. Plaintiffs also seek a permanent injunction “enjoining Red Payments

from performing further unfair and unlawful acts as alleged” in the Second Amended Complaint.

Id. at 22.

a. Declaratory Judgment

The Declaratory Judgment Act authorizes a court to “declare the rights and other legal

relations of any interested party . . . whether or not further relief is or could be sought” where

there is an “actual controversy” within the court’s jurisdiction. 28 U.S.C. § 2201(a). Declaratory

judgment is a form of relief, not a substantive cause of action. See National Union Fire Ins. Co.

of Pittsburgh, Pa. v. Karp, 108 F.3d 17, 21 (2d Cir. 1997) (The Act “is procedural in nature, and

merely offers an additional remedy to litigants”). “By the Declaratory Judgment Act, Congress

sought to place a remedial arrow in the district court’s quiver; it created an opportunity, rather

than a duty, to grant a new form of relief to qualifying litigants.” Wilton v. Seven Falls Co., 515

U.S. 277, 288 (1995). “A district court has broad discretion to decide whether to render a

declaratory judgment.” In re Orion Pictures Corp., 4 F.3d 1095, 1100 (2d Cir. 1993). However,

“[a] plaintiff cannot maintain a claim for declaratory judgment where the underlying substantive

claim has been dismissed since the Declaratory Judgment Act only created a procedural

mechanism and not an independent cause of action.” Limtung v. Thomas, No. 19-CV-3646

(RPK), 2021 WL 4443710, at *9 (E.D.N.Y. Sept. 28, 2021) (internal quotation marks and

citation omitted); see Chevron Corp. v. Naranjo, 667 F.3d 232, 244 (2d Cir. 2012) (holding that

the Declaratory Judgment Act “gives a district court the discretion to declare the legal rights and

other legal relations of any interested party seeking such declaration. But that discretion does not

extend to the declaration of rights that do not exist under law. Like a preliminary injunction, a

declaratory judgment relies on a valid legal predicate”); see also Travis v. Navient Corp., 460 F.

Supp. 3d 269, 286 (E.D.N.Y. 2020) (holding “a request for a declaratory judgment is not a cause

of action; it is a request for a remedy that does not exist independent of a plausible underlying

claim for relief”) (internal quotation marks and citation omitted).

Because Plaintiffs’ underlying substantive claims are dismissed for failure to state a

claim,7 Plaintiffs are not entitled to independent declaratory relief. See, e.g., Prignoli v.

Bruczynski, No. 20-CV-907 (MKB), 2021 WL 4443895, at *13 (E.D.N.Y. Sept. 28, 2021)

(holding plaintiff is not entitled to independent declaratory relief where the court dismissed the

underlying substantive claims); KM Enters., Inc. v. McDonald, No. 11 CV 5098 (ADS), 2012

WL 4472010, at *19 (E.D.N.Y. Sept. 25, 2012) (stating that “[a]s to the only remaining causes of

action in the Amended Complaint – namely, the counts for declaratory judgment and an

injunction – the Plaintiff cannot survive a motion to dismiss by relying on these claims as

independent causes of action”), aff’d 518 F. App’x 12 (2d Cir. 2013); see also Brainbuilders

LLC v. EmblemHealth, Inc., No. 21 Civ. 4627 (KPF), 2022 WL 3156179, at *17 (S.D.N.Y. Aug.

8, 2022) (holding that where “a plaintiff’s substantive claims are dismissed, a standalone claim

for declaratory judgment is properly dismissed as well”) (collecting cases).

Accordingly, Defendant’s motion to dismiss Plaintiffs’ remaining declaratory judgment

cause of action is granted.

b. Permanent Injunctive Relief

Similarly, it is well settled that “a request for injunctive relief is not a separate cause of

action.” Milligan v. GEICO Gen. Ins. Co., 2022 WL 433289, at *6 (2d Cir. Feb. 14, 2022)

(internal quotation marks and citation omitted). “[R]ather, the injunction is merely the remedy

7 Notably, the factual predicates for the Court’s preservation of the two requested declarations in the undersigned’s

prior Memorandum and Order, DE 83 at 8, are no longer present. Having found no evidence that the alleged

issuance of overdue notices and calls from collection agencies had a negative impact on Plaintiffs’ credit scores or

that they suffered other cognizable injury, the Court dismissed Plaintiffs’ FCRA claims. Moreover, the alleged

underlying debt no longer exists as Red Payments released Plaintiffs “from any obligations owed under the

Merchant Application and Agreement attached as Exhibit B to the Second Amended Complaint.” See DE 94.

Further, putative class members cannot be bound by an alleged Agreement between Red Payments and Plaintiffs.

See Diesel Props S.r.l. v. Greystone Bus. Credit II LLC, 631 F.3d 42, 52 (2d Cir. 2011) (holding that in order for a

party to be bound or liable under a contract there must be a contract between the parties). Finally, to the extent

Plaintiffs invoked the “phony application” and its terms as part of their fraud claims, their request for a declaratory

judgment cannot be maintained as they failed to set forth a cognizable cause of action for fraud.

sought for the legal wrongs alleged in the . . . substantive counts.” Id.; see also KM Enters., Inc.,

2012 WL 4472010, at *20 (same). That is to say, an injunction relies on a valid legal predicate.

Prignoli, 2021 WL 4443895, at *12 (“injunctions are remedies, not causes of action”). Thus, in

light of the dismissal of Plaintiffs’ underlying substantive claims for failure to state a claim,

Plaintiffs are not entitled to independent injunctive relief.

Accordingly, Defendant’s motion to dismiss Plaintiffs’ remaining cause of action for

injunctive relief is granted.

CONCLUSION

Based on the foregoing, the Court grants Defendant’s motion in its entirety and

dismisses the Second Amended Complaint. The Clerk of the Court is directed to enter

judgment and close the case.

Dated: Central Islip, New York

September 12, 2022

/s/ Gary R. Brown

HON. GARY R. BROWN

United States District Judge