Petition for Writ of Certiorari — Central Payment Co., LLC, Petitioner v. Custom Hair Designs by Sandy, LLC, On Behalf of Itself and All Others Similarly Situated, et al.

APPENDIX

TABLE OF APPENDICES

Appendix A

Opinion of the Eighth Circuit Court of

Appeals, Custom Hair Designs by Sandy,

LLC v. Cent. Payment Co., No. 20-1677

(Dec. 30, 2020) ............................................. App-1

Appendix B

Opinion of the United States District

Court for the District of Nebraska,

Custom Hair Designs by Sandy, LLC v.

Cent. Payment Co., No. 17CV310

(Feb. 11, 2020) ........................................... App-15

Appendix C

Order of the Eighth Circuit Court

of Appeals Denying Petition for

Rehearing, Custom Hair Designs by

Sandy v. Cent. Payment Co., No. 20-1677

(Feb. 11, 2021) ........................................... App-57

Appendix D

Fed. R. Civ. P. 23 ....................................... App-59

App-1

Appendix A

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

________________

No. 20-1677

________________

CUSTOM HAIR DESIGNS BY SANDY, LLC, on behalf of

themselves and all others similarly situated and

SKIP’S PRECISION WELDING, LLC, on behalf of

themselves and all others similarly situated,

v.

Appellees,

CENTRAL PAYMENT CO., LLC,

Appellant.

________________

Appeal from the United States District Court

for the District of Nebraska

Submitted: November 18, 2020

Filed: December 30, 2020

________________

OPINION

________________

Before BENTON, ERICKSON and GRASZ, Circuit

Judges.

BENTON, Circuit Judge.

Custom Hair Designs by Sandy and Skip’s

Precision Welding, LLC brought a class action alleging

breach of contract, state-law fraudulent concealment,

and violation of the Racketeer Influenced and Corrupt

Organizations Act (RICO). 18 U.S.C. §§ 1962(a), (c) &

App-2

(d). The district court certified the proposed class.

Central Payment Co., LLC (CPAY) appeals. Having

jurisdiction under 28 U.S.C. § 1292(e) and Federal

Rule of Civil Procedure 23(f), this court affirms

certification.

“District courts have broad discretion to

determine whether certification is appropriate.”

Harris v. Union Pacific RR Co., 953 F.3d 1030, 1033

(8th Cir. 2020). “In reviewing the district court’s

certification decision, the district court’s rulings on

questions of law are reviewed de novo and its

application of the law is reviewed for an abuse of

discretion.” Id.

The class are over 160,000 small retailers using

CPAY for credit card processing. CPAY does not

employ its (loosely affiliated) agents. They use form

contracts with blanks for the pricing terms, which are

subject to negotiation. Individual retailers can select

from two basic pricing schemes—”pass-through” or

“tiered” (by class of transaction). Both focus on the

price-per-transaction that credit card issuers impose.

Changes to the price-per-transaction must be

approved by the issuing banks under the terms of

CPAY’s form contract.

Plaintiffs allege CPAY misrepresented a number

of fees, added fees with no value to retailers, and

inflated fees without prior approval from issuing

banks. Plaintiffs stress that the FTC previously

barred, for fraud, CPAY’s founders from selling

auction guides. See Federal Trade Comm’n, California

Defendants that Deceptively Marketed and Sold

Auction Information Guides for Homes and Cars Agree

to Pay Consumer Redress to Settle FTC Charges,

App-3

Jan. 17, 2001, https://www.ftc.gov/news-events/pressreleases/2001/01/california-defendants-deceptivelymarketed-and-sold-auction.

CPAY

moved

for

summary judgment. In a single order, the district

court denied summary judgment and certified the

class.

This court has jurisdiction to review only the class

certification, so a searching inquiry of the record is

inappropriate. Postawko v. Missouri Dep’t of Corr., 910

F.3d 1030, 1037 (8th Cir. 2018) (“Merits questions

may be considered to the extent—but only to the

extent—that they are relevant to determining

whether the Rule 23 prerequisites for class

certification are satisfied.”). “Moreover, a defendant

bears a more onerous burden in challenging

certification where the initial certification decision

was carefully considered and made after certificationrelated discovery.” Vogt v. State Farm Life Ins. Co.,

963 F.3d 753, 765 (8th Cir. 2020) (cleaned up).

I.

CPAY argues the district court failed to

adequately explain its certification decision. 1 The

district court must engage in a “rigorous analysis” of

Federal Rule 23 certification. Elizabeth M. v.

Montenez, 458 F.3d 779, 784 (8th Cir. 2006). “The

same analytical principles govern Rule 23(b).”

Comcast Corp. v. Behrend, 569 U.S. 27, 34 (2013). This

1

CPAY emphasizes that the district court’s order

mischaracterizes its position as including “whether the class

members are ‘qualified’ for the position or can be reasonably

accommodated before one can determine the class composition.”

Although careless, this oversight is harmless and does not change

the analysis here.

App-4

court previously rejected a “district court’s

predominance analysis [that] consisted of one short

paragraph, which concluded that the plaintiffs ‘as a

whole do in fact allege and have injury’ and that ‘[t]he

same evidence will be used to establish classwide

proof.’” Harris, 953 F.3d at 1037-38 (second alteration

in original). “[A]t a minimum the rule requires a

district court to state its reasons for certification in

terms specific enough for meaningful appellate

review.” In re Target Corp. Customer Data Sec. Breach

Litig., 847 F.3d 608, 612 (8th Cir. 2017).

CPAY argues Harris requires reversal. The

district court here made specific findings of fact.

Contrary to CPAY’s assertion, the district court’s

decision is specific enough. In Harris, this court did

not reverse due to a procedurally inadequate analysis

of the Rule 23 prerequisites; instead, this court

reached the merits, determining the district court

abused its discretion in certifying. See Harris, 953

F.3d at 1039.

Finally, CPAY ignores that the district court

issued an order that included its denial of summary

judgment. Because the court addressed the merits in

its summary-judgment analysis, and thus mentioned

them only briefly in the class certification section, the

court need not repeat its view of the record in each

section of an order. The district court here engaged in

a sufficiently rigorous analysis.

II.

“Before a class may be certified, Rule 23 requires

that plaintiffs meet all of Rule 23(a)’s requirements

and satisfy one of the three subsections of Rule 23(b).”

Harris, 953 F.3d at 1033. “Rule 23(b)(3) . . . requires

App-5

that ‘questions of law or fact common to class members

predominate over any questions affecting only

individual members, and that a class action is superior

to other available methods for fairly and efficiently

adjudicating the controversy.’” Id., quoting Wal-Mart

Stores, Inc. v. Dukes, 564 U.S. 338, 362 (2011).

A.

CPAY argues that the district court erred in

determining that common questions predominate.

This court begins by “considering the nature of

plaintiffs’ claim to determine whether it is suitable for

class certification.” Id. This court does not need to

conclude whether the theory of liability is viable. Id.

at 1039. This court denies certification only if the

theory of liability “is a highly individualized question

that does not allow class certification under Rule

23(b)(2) and (b)(3).” Id.

Predominance subsumes the commonality

requirement, so both can be analyzed through the lens

of predominance. Amchem Prods., Inc. v. Windsor, 521

U.S. 591, 609 (1997). Predominance gauges “the

relationship between common and individual

questions in a case.” Tyson Foods, Inc. v.

Bouapheakeo, 136 S. Ct. 1036, 1045 (2016). “An

individual question is one where members of a

proposed class will need to present evidence that

varies from member to member, while a common

question is one where the same evidence will suffice

for each member to make a prima facie showing or the

issue is susceptible to generalized, class-wide proof.”

Id. (quotation omitted). “When ‘one or more of the

central issues in the action are common to the class

and can be said to predominate, the action may be

App-6

considered proper under Rule 23(b)(3) even though

other important matters will have to be tried

separately, such as damages or some affirmative

defenses peculiar to some individual class members.’”

Id., quoting 7AA C. Wright, A. Miller, & M. Kane,

Federal Practice and Procedure, § 1778, pp. 123-124

(3d ed. 2005).

1.

Common questions and common answers

predominate here. Dukes, 564 U.S. at 350. First, all

claims deal with either a common scheme of fraud or

a term common to all contracts with CPAY. True, the

negotiated pricing terms are different and some

contracts authorize some fees that plaintiffs allege

were fraudulent. However, all plaintiffs allege failure

to get bank preauthorization. The relevant contract

term was uniform. Compare Webb v. Exxon Mobil

Corp., 856 F.3d 1150, 1156-57 (8th Cir. 2017) (finding

breach of contract insufficiently common where extent

of pollution was property-specific), with McKeage v.

TMBC, LLC, 847 F.3d 992, 999 (8th Cir. 2017) (finding

commonality satisfied where breach arose from form

contract term). Plus, the statements communicating

changes to billing were nearly identical.

Second, any pricing differences would not affect

liability, only damages. If CPAY engaged in a common

scheme to defraud plaintiffs, the difference between

the bank-authorized pass-through costs and CPAY’s

charges measures only the damages to individual class

members. At worst, this requires individual proof at

the damages phase, which the Court approved in

Tyson. Tyson, 136 S. Ct. at 1045. Plus, to measure

damages the plaintiffs plan to use CPAY’s database.

App-7

This mirrors the evidence approved in Tyson, where a

statistical expert determined the average amount of

time employees spent donning and doffing their gear.

Id. at 1046. Slight variation in actual damages does

not defeat predominance if there are common legal

questions and common facts.

Third, that some contracts authorize a “PCI

Noncompliance Fee” or a “TSSNF Fee” does not defeat

predominance. The actual extent of inquiry required

here is cursory. Plaintiffs’ expert, in calculating

damages, need identify only whether a contract

authorized a PCI or TSSNF fee. Because this inquiry

is not highly individualized, it does not defeat

predominance. See id.

Fourth, that changes in bank rates cause tier

shifts does not defeat predominance. Plaintiffs’ claim

is that the issuing banks did not change their

interchange rates, but CPAY moved whole classes of

transactions to a higher-priced tier. If issuing banks

did change interchange fees, plaintiffs’ claim fails. If

no change occurred, CPAY’s defense fails. See Dukes,

564 U.S. at 350.

2.

According to CPAY, RICO claims based on

fraudulent concealment or misrepresentation in

billing are not susceptible to classwide proof of

reliance, especially where contracts authorized the

billing practices. Plaintiffs counter that their RICO

claims stem from misrepresentations in performance,

including misleading justifications for rate increases

as “pass-through” costs.

“[A] plaintiff asserting a RICO claim predicated

on mail fraud need not show, either as an element of

App-8

its claim or as a prerequisite to establishing proximate

causation, that it relied on the defendant’s alleged

misrepresentations.” Bridge v. Phoenix Bond &

Indem. Co., 553 U.S. 639, 661 (2008). “When a court

evaluates a RICO claim for proximate causation, the

central question it must ask is whether the alleged

violation led directly to the plaintiff’s injuries.” Id. at

654, quoting Anza v. Ideal Steel Supply Corp., 547 U.S.

451, 461 (2006). The Court concluded its analysis of

causation under RICO with: “Having rejected

petitioners’ argument that reliance is an element of a

civil RICO claim based on mail fraud, we see no reason

to let that argument in through the back door by

holding that the proximate-cause analysis under

RICO must precisely track the proximate-cause

analysis of a common-law fraud claim.” Id. at 655.

Compare In re United States Foodservice Inc. Pricing

Litig., 729 F.3d 108, 121-22 (2d Cir. 2013) (affirming

RICO certification in pricing case) and Torres v. S.G.E.

Mgmt., LLC, 838 F.3d 629, 639 (5th Cir. 2016) (en

banc) (post-Bridge case certifying RICO class), with

Sandwich Chef of Texas, Inc. v. Reliance Nat’l Indem.

Ins. Co., 319 F.3d 205, 219 (5th Cir. 2003) (pre-Bridge

case reversing RICO certification in pricing case). See

also Poulos v. Caesars World, Inc., 379 F.3d 654, 664

(9th Cir. 2004) (pre-Bridge case declining RICO

certification).

CPAY’s arguments about reliance misstate

current RICO law in the same way as the petitioner in

Bridge. Although reliance is required for common law

fraud, RICO’s predicate is mail or wire fraud, which

did not exist at common law. Bridge, 553 U.S. at 652.

The requirements for common law fraud are not read

into RICO. Id. Thus, plaintiffs are correct that

App-9

overpayments from a pattern of systemic mail fraud in

CPAY’s billing would satisfy RICO’s causation

requirements and be common among all plaintiffs. See

In re Foodservice, 729 F.3d at 122 (holding fees

“created for the purpose of misrepresenting cost and

. . . then kept secret so as to deceive customers about

overbilling” was a question amenable to common

proof).

3.

CPAY argues the statute of limitations defeats

predominance, alleging some claims may be timebarred. Plaintiffs counter that fraudulent concealment

can toll the statute of limitations and is susceptible to

classwide proof.

“If a petition alleges a cause of action ostensively

barred by the statute of limitations, such petition, in

order to state a cause of action, must show some

excuse tolling the operation and bar of the statute.”

L.J. Vontz Constr. Co. v. Dep’t of Roads, 440 N.W.2d

664, 665 (Neb. 1989). “Under the doctrine of

fraudulent concealment, the plaintiff must show that

he or she exercised due diligence to discover his or her

cause of action before the statute of limitations

expired and that the defendant committed some

affirmative act of fraudulent concealment which

prevented the plaintiff from discovering his or her

cause of action. Upah v. Ancona Bros. Co., 521 N.W.2d

895, 902 (Neb. 1994), disapproved on other grounds by

Welsch v. Graves, 582 N.W.2d 312, 316 (Neb. 1998).

Whether CPAY engaged in affirmative acts to

conceal its fraudulent billing practices is a question

susceptible to classwide proof. The question is not

whether each individual defendant was personally

App-10

confused, but whether CPAY’s scheme of billing

prevented discovering the fraud. For example, CPAY

allegedly sent notices telling merchants that bank fees

mandated higher prices. This statement, if false,

would be an affirmative act of fraudulent concealment

to each plaintiff receiving the statement. Thus, the

statute of limitations does not defeat predominance

here.

4.

CPAY argues state-law fraudulent concealment

requires reliance. “In a typical common-law fraud

case, a plaintiff must show that he or she received the

defendant’s alleged misrepresentation and relied on

it.” In re St. Jude Med., Inc., 522 F.3d 836, 838 (8th

Cir. 2008). To prove fraudulent concealment, a

plaintiff must show:

“(1) the defendant had a duty to disclose a

material fact; (2) the defendant, with

knowledge of the material fact, concealed the

fact; (3) the material fact was not within the

plaintiff’s reasonably diligent attention,

observation, and judgment; (4) the defendant

concealed the fact with the intention that the

plaintiff act in response to the concealment or

suppression; (5) the plaintiff, reasonably

relying on the fact or facts as the plaintiff

believed them to be as the result of the

concealment, acted or withheld action; and

(6) the plaintiff was damaged by the

plaintiff’s action or inaction in response to the

concealment.”

Knights of Columbus Council 3152 v. KFS BD, Inc.,

791 N.W.2d 317, 333 (Neb. 2010). “One who makes a

App-11

fraudulent misrepresentation is subject to liability to

the persons or class of persons whom he intends or has

reason to expect to act or to refrain from action in

reliance upon the misrepresentation.” Bank of Valley

v. Mattson, 339 N.W.2d 923, 927 (1983).

Contrary to CPAY’s assertion that agents’

representations to each class member must be

examined, plaintiffs focus on CPAY’s intent to defraud

by concealing their overall plan to raise prices

illegitimately. Agent communications are relevant as

a defense, but only if CPAY could prove agents

disclosed CPAY’s intention to charge higher fees

without issuing bank authorization. CPAY did not

introduce summary judgment evidence suggesting its

agents disclosed its plans.

Plaintiffs could reasonably have relied on CPAY’s

representation that issuing banks authorized rate

changes. See Knights of Columbus, 791 N.W.2d at 333

(sending “false and misleading letters” to customers

qualifies as inducing reliance). Plaintiffs accepted the

validity of rate increases based on CPAY’s

representation that issuing banks authorized the

changes. See id. at 334 (“[W]hen a plaintiff’s inaction

in response to a concealment causes damages, it is

because the concealment of material information

induced the plaintiff’s false belief that action was not

needed.”). Nebraska reliance law does not defeat

predominance.

B.

CPAY argues that the named plaintiffs’ claims are

not typical of class members’. “Typicality is fairly

easily met so long as other class members have claims

similar to the named plaintiff.” Postawko, 910 F.3d at

App-12

1039. “Factual variations in the individual claims will

not normally preclude class certification if the claim

arises from the same event or course of conduct as the

class claims, and gives rise to the same legal or

remedial theory.” Id. When typicality and

commonality arguments overlap significantly, the

analysis for commonality largely determines

typicality. Id. “[T]he potential for minor ‘factual

variations’ does not undermine the district court’s

conclusion that the violation allegedly suffered by the

Named Plaintiffs is typical of that suffered by the class

as a whole.” Id.

The named plaintiffs’ claims are typical of the

class. CPAY ignores the similarities of the core claims

both named plaintiffs make—the general scheme of

deceptive billing, violation of the bank preauthorization contract requirement, and fraudulent

concealment. Since plaintiffs’ claims resemble the

theories applicable to all class members, minor factual

variations such as differences in rates do not defeat

typicality.

C.

CPAY argues that the named plaintiffs do not

represent class interests adequately. 2 “Where, as here,

Since neither named plaintiff suffered a tier shift, CPAY

argues they cannot adequately represent class interests. See

Amchem Prod., Inc. v. Windsor, 521 U.S. 591, 626 (1997). This

argument misunderstands the injury here. Breach of the preauthorization contract term could be either a tier shift or an

impermissible increase in interchange fees without a tier shift.

Named plaintiffs’ interests align with other members suffering a

slightly different breach of the same contract term. To the extent

named plaintiffs are not representative, the district court may

consider a motion to amend to add named plaintiffs. See Fed. R.

2

App-13

adequacy of class representation is at issue, ‘close

scrutiny’ in the district court is even more important

given the need to protect the due process rights of

absent class members.” Target Corp., 847 F.3d at 612.

In Target this court found recitation of Rule 23(a)(4)

insufficient without explanation or response to

defendants’ claim of an intraclass conflict. Id. at 613.

Despite the defendants’ timely objections, the district

court there never analyzed the intraclass conflict

claims that might have undermined the integrity of

the class as certified. Id.

CPAY’s claims are unlike those in Target. First,

CPAY objects to failure to include members of a

hypothetical class that plaintiffs did not seek to

certify. Target deals only with an overbroad class

certification that includes intraclass conflicts.

Identifying and not including class members does not

create an intraclass conflict, because the claims of

non-class-members are not litigated. The claims

CPAY discusses would thus not be precluded. See

Dicken v. Ashcroft, 972 F.2d 231, 233 (8th Cir. 1992),

citing Gonzales v. Cassidy, 474 F.2d 67, 72 (5th Cir.

1973) (“[I]nadequate representation of class precludes

res judicata from attaching to that judgment and

binding absent class members.”). This case does not

raise the due process concerns in Target, where the

financial interests of actual class members potentially

diverged. The district court did not err in determining

the named plaintiffs adequately represented class

interests.

Civ. P. 15 & 16; In re Milk Prod. Antitrust Litig., 195 F.3d 430,

438 (8th Cir. 1999) (leaving decision to add named plaintiffs to

district court’s discretion).

App-14

D.

CPAY claims the class does not satisfy

superiority. “The superiority requirement involves

showing ‘that a class action is superior to other

available methods for fairly and efficiently

adjudicating the controversy.’” Perras v. H & R Block,

789 F.3d 914, 916 (8th Cir. 2015), quoting Fed. R. Civ.

P. 23(b)(3). Class actions are superior when “the class

members’ claims are generally small and unlikely to

be pursued individually.” Stuart v. State Farm Fire &

Cas. Co., 910 F.3d 371, 377 (8th Cir. 2018).

A class action is the superior mechanism to try

this case. Plaintiffs’ individual claims are for tens or

hundreds of dollars. Absent a class action, no plaintiff

is likely to pursue their claim individually. The

district court did not abuse its discretion in finding a

class action superior here.

*******

The appealed order is affirmed.

______________________________

App-15

Appendix B

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEBRASKA

________________

No. 8:17CV310

________________

CUSTOM HAIR DESIGNS BY SANDY, LLC, on behalf of

themselves and all others similarly situated; and

SKIP’S PRECISION WELDING, LLC, on behalf of

themselves and all others similarly situated,

v.

Plaintiffs,

CENTRAL PAYMENT CO., LLC,

Defendant.

________________

Filed: February 11, 2020

ECF No. 142

________________

MEMORANDUM AND ORDER

________________

This matter is before the Court on multiple

motions: request for class certification, Filing No. 89,

filed by plaintiffs; motion to strike testimony of Karl

J. Borden filed by defendant, Filing No. 99; motion for

summary judgment filed by defendant, Filing No. 117;

and motion to strike evidence filed by defendant,

Filing No. 129.

BACKGROUND

Plaintiffs are merchants that processed credit and

debit transactions through defendant Central

App-16

Payment Co., LLC (CPAY). CPAY processes over

65,000 businesses and over $10 billion in credit sales

annually. Plaintiffs contracted with CPAY from

November 2015 through February 2017 for payment

processing services. Plaintiffs allege that CPAY

charged fees for its payment processing services that

do not coincide with the terms of plaintiffs’ merchant

agreements and Terms and Conditions. Plaintiffs

plead this case as a putative nationwide class action

and argue that CPAY is a multi-year, interstate,

multi-million-dollar

scheme

to

defraud

unsophisticated merchants. Defendants argue that

this is a simple breach of contract case. CPAY

allegedly altered the credit card discount rates which

changed the individual accounts by a few dollars a

month, but on a national level, such scheme applied to

over 200,000 national accounts. Although CPAY did

not incur these fees in its role with merchants, it

allegedly increased the fees, which were not

authorized under contract, forcing the plaintiffs to pay

more.

Those affected by the alleged scheme include:

Bank: During the class period, it was First National

Bank of Omaha (FNBO); Major credit card company:

Visa, Mastercard, etc.; Credit card processing

company: During the class period, it was TSYS;

Merchant acquirer: CPAY; and, Merchants: CPAY’s

customers. TSYS has owned CPAY since April 2018.

CPAY used “independent contractors” who get

commission for each signed customer. The

“independent contractors” also receive training

information.

App-17

STANDARD OF REVIEW

“Summary judgment is appropriate ‘if the movant

shows that there is no genuine dispute as to any

material fact and the movant is entitled to judgment

as a matter of law.’” Foster v. BNSF Ry. Co., 866 F.3d

962, 966 (8th Cir.2017) (quoting Fed. R. Civ. P. 56(a)).

“Summary judgment procedure is properly regarded

not as a disfavored procedural shortcut, but rather as

an integral part of the Federal Rules as a whole, which

are designed ‘to secure the just, speedy, and

inexpensive determination of every action.”‘ Celotex

Corp. v. Catrett, 477 U.S. 317, 327 (1986) (quoting Fed.

R. Civ. P. 1).

“The movant bears the initial responsibility of

informing the district court of the basis for its motion,

‘and must identify those portions of the record] . . .

which it believes demonstrate the absence of a genuine

issue of material fact.’” Torgerson v. City of Rochester,

643 F.3d 1031, 1042, (8th Cir. 2011) (en banc) (quoting

Celotex, 477 U.S. at 323). If the movant meets the

initial burden, “the nonmovant must respond by

submitting evidentiary materials that set out ‘specific

facts showing that there is a genuine issue for trial.’”

Torgerson, 643 F.3d at 1042 (quoting Celotex, 477 U.S.

at 324). “The nonmovant ‘must do more than simply

show that there is some metaphysical doubt as to the

material facts,’ and must come forward with ‘specific

facts showing that there is a genuine issue for trial.”‘

Torgerson, 643 F.3d at 1042 (quoting Matsushita Elec.

Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87

(1986)). “The mere existence of a scintilla of evidence

in support of the [nonmovant’ s] position will be

insufficient; there must be evidence on which the jury

App-18

could reasonably find for the [nonmovant].” Barber v.

C1 Truck Driver Training, LLC, 656 F.3d 782, 791-92

(8th Cir. 2011) (quoting Anderson v. Liberty Lobby,

lnc., 477 U.S. 242, 252 (1986)).

DISCUSSION

I. Filing No. 89, request for class certification

Plaintiffs move to certify a class of merchants who

suffered financial losses due to the alleged scheme by

CPAY from January 1, 2010 to the present. 1 This

class, contends plaintiffs, have suffered damages in

excess of $100 million, although each individual’s

damages do not justify separate actions. Plaintiffs

contend that there are four practices that apply to the

named plaintiffs and to the potential class plaintiffs.

They include: TSSNF Fee; PCI Noncompliance Fee;

raising discount rates; and Tier shifting. Plaintiffs

contend all of these practices have common evidence.

Class actions are designed for “eliminating the

possibility of repetitious litigation and providing small

claimants with a means of obtaining redress for claims

too small to justify individual litigation.” DeBoer v.

Mellon Mortgage Co., 64 F.3d 1171, 1175 (8th Cir.

1995) (citation omitted). A class action “saves the

resources of both the courts and the parties by

1 The Proposed Class is defined as follows:

“All of CPAY’s customers that, from January 1, 2010,

to the present (a) were assessed the TSSNF Fee (a/k/a

TSYS Network Fee); (b) were assessed the PCI

Noncompliance Fee; (c) had their contractual credit

card discount rates increased above their contractual

rate by CPAY; and/or (d) had credit card transactions

shifted by CPAY from lower-cost rate tiers to highercost rate tiers.” Filing No. 89 at 1.

App-19

permitting an issue potentially affecting every class

member to be litigated in an economical fashion[.]”

Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 155 (1982)

(quotations and modifications omitted). The district

court may grant certification only after conducting a

“rigorous analysis” confirming that the requirements

are met. Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338,

351 (2011). However, “Rule 23 grants courts no license

to engage in free-ranging merits inquiries at the

certification stage.” Amgen Inc. v. Conn. Ret. Plans &

Trust Funds, 568 U.S. 455, 466 (2013). “Merits

questions may be considered to the extent—but only

to the extent—that they are relevant to determining

whether the Rule 23 prerequisites for class

certification are satisfied.” Id.

Rule 23 of the Federal Rules of Civil Procedure

governs the requirements for establishing and

maintaining certification for a class action lawsuit. “In

order to obtain class certification, a plaintiff has the

burden of showing that the class should be certified

and that the requirements of Rule 23 are met.”

Coleman v. Watt, 40 F.3d 255, 258-59 (8th Cir. 1994).

Rule 23(a) provides:

One or more members of a class may sue or

be sued as representative parties on behalf of

all members only if:

(1) the class is so numerous that joinder

of all members is impracticable;

(2) there are questions of law or fact

common to the class;

App-20

(3) the claims or defenses of the

representative parties are typical of the

claims or defenses of the class; and

(4) the representative parties will fairly

and adequately protect the interests of

the class.

Fed. R. Civ. P. 23(a).

The United States Supreme Court has

summarized the four basic requirements as:

(1) numerosity; (2) commonality; (3) typicality; and

(4) adequacy of representation. Amchem Prods., Inc. v.

Windsor, 521 U.S. 591, 613 (1997). The determination

under Rule 23(a) is not perfunctory, “the court must

conduct a ‘rigorous analysis’ to ensure that the

prerequisites of Rule 23 are satisfied.” Elizabeth M. v.

Montenez, 458 F.3d 779, 784 (8th Cir. 2006) (quoting

Gen. Tel. Co. of the S.W. v. Falcon, 457 U.S. 147, 161

(1982)). “Frequently that rigorous analysis will entail

some overlap with the merits of the plaintiff’s

underlying claim.” Wal-Mart Stores, Inc. v. Dukes, 564

U.S. 338, 351 (2011) (internal citations omitted).

“Plaintiffs must meet all requirements of Rule

23(a) and fall within one of the categories of Rule 23(b)

to certify their . . . claims as a class action.” Blades v.

Monsanto Co., 400 F.3d 562, 568-69 (8th Cir. 2005)

(citing Amchem, 521 U.S. at 614). Rule 23(b) allows a

class action if (1) there is otherwise a risk of

(a) inconsistent adjudications or (b) impairment of

interests for non-class members; (2) the defendant’s

conduct applies generally to the whole class; or

(3) questions of law or fact common to members of the

class predominate and the class action is a superior

method for adjudication. See Fed. R. Civ. P. 23(b).

App-21

In addition to the Rule 23(a) and (b) requirements,

pursuant to Rule 23(c)(1)(B): “An order that certifies a

class action must define the class and the class claims,

issues, or defenses, and must appoint class counsel

under Rule 23(g).” Fed. R. Civ. P. 23(c). The plaintiffs

propose a class action on behalf of four classes

pursuant to Fed. R. Civ. P. 23.

A. Waiver

Defendant contends that each contract has a

waiver provision wherein each individual merchant

has agreed to waive its rights to file a class action. The

Terms and Conditions in the merchant agreements,

stated:

Waiver of Jury Trial and Covenant Not to

Participate

in

a

Class

Action. . . .

MERCHANT ALSO COVENANTS NOT TO

BRING OR PARTICIPATE IN ANY CLASS

ACTION AGAINST BANK BASED UPON

ANY CLAIMS ARISING FROM THIS

AGREEMENT. IF A CLASS PROCEEDING

IS

INITIATED

AGAINST

BANK,

MERCHANT MAY NOT JOIN THAT

PROCEEDING OR PARTICIPATE AS A

MEMBER OF THAT CLASS.

Filing No. 106-1, Ex. 15, at Page ID #2384. The

Supreme Court has indicated that mandatory

arbitration provisions are enforceable and stop parties

from asserting class claims.

Two Circuits have already affirmed the

certification of classes in fraudulent overbilling cases.

In re U.S. Foodservice, 729 F. 3d 108 (2d Cir. 2013);

Klay v. Humana, Inc., 382 F.3d 1241, 1255 (11th Cir.

2004), abrogated in part on other grounds by Bridge v.

App-22

Phoenix Bond & Indem. Co., 553 U.S. 639 (2008). The

Courts have likewise done the same in the

Racketeering Influenced and Corrupt Organizations

Act (RICO) cases. See, e.g., Huyer v. Wells Fargo & Co.,

295 F.R.D. 332, 348 (S.D. Iowa 2013); Murphy v.

Gospel for Asia, Inc., 327 F.R.D. 227, 240 (W.D. Ark.

2018).

Next, plaintiffs also argue that the contract

waiver language only precludes class actions brought

against First National Bank. The parties are governed

by the Merchant Application. The parties include the

merchant, the bank and CPAY. The language in the

agreement and application states: “MERCHANT

ALSO COVENANTS NOT TO BRING OR

PARTICIPATE IN ANY CLASS ACTION AGAINST

BANK BASED UPON ANY CLAIMS ARISING

FROM THIS AGREEMENT.” Filing No. 106-1, Ex. 15,

at Page ID #2384 § 13.3 (emphasis added). Each party

has a separate signature box, indicating separate

entities. Defendant contends that the language in the

Merchant agreement states that: “To the extent that

BANK has assigned and/or delegated rights and/or

obligations to TMS under any particular provision of

this AGREEMENT, references to BANK in such

provisions shall include TMS.” Filing No. 106-1,

Ex. 15, p. 2, Page ID 2378, Recitals § F (emphasis

added).

This argues defendant, means the term BANK

also includes CPAY. Plaintiffs claim this language at

most means that in some cases TMS and BANK will

mean the same, but it does not support a construction

that the term BANK always includes CPAY. There is

no ambiguity, argues plaintiffs.

App-23

The Court agrees with the plaintiff. The class

waiver by its language applies to the BANK and not to

claims by the merchants against CPAY. If this is in

any way deemed ambiguous, which the Court does not

believe, the law is clear that any ambiguity goes to the

drafter, which is certainly not the merchants. “Where

there is a question as to a contract’s meaning, [courts]

apply the general rule that the contract will be

construed against its drafter—here, the corporation.”

Home Fed. Sav. & Loan v. McDermott & Miller, 497

N.W.2d 678, 681 (Neb. 1993). The Court finds that

CPAY is not authorized under the contract to utilize

the class waiver provision, particularly against the

merchants.

B. Rule 23(a) Requirements

1. Numerosity

The first prerequisite the plaintiffs must meet

under Rule 23(a) is numerosity. Amchem, 521 U.S. at

613. Rule 23(a)(1) requires “the class [be] so numerous

that joinder of all members is impracticable.” See Fed.

R. Civ. P. 23(a)(1). Rule 23(a) requires only the

impracticality, not the impossibility, of joinder. U.S.

Fid. & Guar. Co. v. Lord, 585 F.2d 860, 870 (8th Cir.

1978). The plaintiffs need only show “that joining all

members of the class would be difficult.” Caroline C.

By & Through Carter v. Johnson, 174 F.R.D. 452, 462

(D. Neb. 1996) (citations omitted). “There is no magic

number for proving numerosity, but courts have

stated as few as forty class members is sufficient to

show joinder is impracticable.” Harris v. D. Scott

Carruthers & Assoc., 270 F.R.D. 446, 450 (D. Neb.

2010) (citing Hale v. AFNI, Inc., 264 F.R.D. 402, 404

(N.D. Ill. 2009)). “The Eighth Circuit has not

App-24

established strict requirements regarding the size of a

proposed class.” Estate of Mahoney v. R.J. Reynolds

Tobacco Co., 204 F.R.D. 150, 153 (S.D. Iowa 2001).

“Although mere allegations of numerosity are

insufficient to meet this prerequisite, a plaintiff need

not show the precise number of members in the class

. . . .” Cortez v. Nebraska Beef, Inc., 266 F.R.D. 275,

289 (D. Neb. 2010) (quoting Evans v. U.S. Pipe &

Foundry Co., 696 F.2d 925, 930 (11th Cir. 1983)).

“[W]here the numerosity question is a close one, a

balance should be struck in favor of a finding of

numerosity, since the court has the option to decertify

pursuant to Rule 23(c)(1).” Id. Typically, the court may

rely on the pleadings, however “it may be necessary

for the court to probe behind the pleadings to ensure

that the prerequisites of Rule 23 have been met.”

Chesher v. Neyer, 215 F.R.D. 544, 546 (S.D. Ohio 2003)

(citing Gen. Tel. Co. of S.W., 457 U.S. at 160).

In the instant case, the plaintiffs have presented

evidence of potentially 160,000 class members who

have been allegedly “swindled” for over $100 million

dollars. Defendant disputes this exact number but

does not dispute that plaintiffs have met the

numerosity requirement. Plaintiff’s expert, Arthur

Olsen, reviewed the potential class members and

determined that the 161,519 CPAY customers were

subjected to at least one discount-rate increase from

January of 2012 to October of 2018. Plaintiffs contend

that number will increase as they look deeper into the

documents.

After consideration of the number of persons in

the proposed class, the nature of the action, the

inconvenience of trying individual suits, and other

App-25

factors relevant to the practicality of joining all the

putative class members, the court finds the plaintiffs

satisfy the numerosity requirement.

2. Commonality

Second, the plaintiffs must prove the element of

commonality. Amchem, 521 U.S. at 613. Rule 23(a)(2)

requires there be “questions of law or fact common to

the class.” See Fed. R. Civ. P. 23(a)(2). “Rule 23 is

satisfied when the legal question ‘linking the class

members is substantially related to the resolution of

the litigation.’” DeBoer v. Mellon Mortg. Co., 64 F.3d

1171, 1174 (8th Cir. 1995) (quoting Paxton v. Union

Nat. Bank, 688 F.2d 552, 561 (8th Cir. 1982)).

However, “[t]he rule does not require that every

question of law or fact be common to every member of

the class.” Paxton, 688 F.2d at 561. “[T]he

commonality requirement imposes a very light burden

on the Plaintiff seeking to certify a class and is easily

satisfied.” In re Hartford Sales Practices Litig., 192

F.R.D. 592, 603 (D. Minn. 1999). Nevertheless, Rule

23(a)(2) “language is easy to misread, since ‘[a]ny

competently crafted class complaint literally raises

common “questions’”. Wal-Mart Stores, 564 U.S. at

349 (quoting Richard A. Nagareda, Class Certification

in the Age of Aggregate Proof, 84 N.Y.U. L. Rev. 97,

132 (2009)). The Court stated in Wal-Mart Stores:

What matters to class certification . . . is not

the raising of common ‘questions’—even in

droves—but, rather the capacity of a class

wide proceeding to generate common answers

apt to drive the resolution of the litigation.

Dissimilarities within the proposed class are

App-26

what have the potential to impede the

generation of common answers.

Id. at 350 (citing Nagareda, supra, at 132).

Plaintiffs point out, though, that it may not be

necessary to analyze this issue, as Courts have held

that the commonality requirement under Rule

23(b)(3) is subsumed by the predominance inquiry.

Amchem Prods., Inc., 521 U.S. at 609 (stating that

“Rule 23(a)(2)’s ‘commonality’ requirement is

subsumed under, or superseded by, the more stringent

Rule 23(b)(3) requirement that questions common to

the class ‘predominate over’ other questions”); Browne

v. P.A.M. Transp., Inc., No. 5:16-CV-5366, 2019 WL

333569, at *2 (W.D. Ark. Jan. 25, 2019) (same);

Hanson v. Acceleration Life Ins. Co., No. CIV A3-97152, 1999 WL 33283345, at *9 (D.N.D. Mar. 16, 1999)

(same); see also In re Target Corp. Customer Data Sec.

Breach Litig., 309 F.R.D. 482, 486 (D. Minn. 2015)

(describing commonality and predominance as

“related and somewhat interdependent concepts”).

Defendant disagrees and argues that the

commonality and typicality criteria are not met,

because there must be a determination of whether the

class members are “qualified” for the position or can

be reasonably accommodated before one can

determine class composition. This will vary, argues

defendant, based on the individual merchant and the

individual job.

In this case, the Court finds that the standard can

be easily met. The predominance arguments apply

here. Further, the allegations show that CPAY

systematically raised discount and contractual rates

and participated in shifting transactions to different

App-27

tiers and creating unfounded fees. The plaintiffs have

met their burden in this regard. “A sufficient nexus is

established if the claims or defenses of the class and

the class representatives arise from the same event or

pattern or practice and are based on the same legal

theory.” Kornburg v. Carnival Cruise Lines, Inc., 741

F.2d 1332, 1337 (11th Cir. 1984).

3. Typicality

Third, the class representatives have the burden

to show typicality of their claims in relation to the

other putative members of the class. Amchem, 521

U.S. at 613. Rule 23(a) requires a named plaintiff to

have claims or defenses which “are typical of the

claims or defenses of the class.” See Fed. R. Civ. P.

23(a)(3). The Eighth Circuit, “long ago defined

typicality as requiring a demonstration that there are

other members of the class who have the same or

similar grievances as the plaintiff.” Chaffin v. Rheem

Mfg. Co., 904 F.2d 1269, 1275 (8th Cir. 1990) (internal

quotations and citations omitted). “Factual variations

in the individual claims will not normally preclude

class certification if the claim arises from the same

event or course of conduct as the class claims and gives

rise to the same legal or remedial theory.” Alpern v.

UtiliCorp United, Inc., 84 F.3d 1525, 1540 (8th Cir.

1996). The burden to establish typicality is “fairly

easily met so long as other class members have claims

similar to the named plaintiff.” DeBoer v. Melon Mtge.

Co., 64 F.3d 1171, 1174 (8th Cir. 1995). However,

“[t]he presence of a common legal theory does not

establish typicality when proof of a violation requires

individualized inquiry.” Elizabeth M. v. Montenez, 458

F.3d 779, 787 (8th Cir. 2006).

App-28

The Court finds the claims and defenses are

typical of the class. Plaintiffs are alleging the same

legal theories, as those that will be brought by the

class, including fraudulent concealment; breach of

contract and duty of good faith and fair dealing and

the RICO violation. The claims are clearly typical of

the class pursuant to Fed. R. Civ. P. 23(a)(3).

4. Adequacy of Representation

The fourth prerequisite a plaintiff must meet

under Rule 23(a) for class certification is adequacy of

representation. Amchem, 521 U.S. at 613. Rule

23(a)(4) requires that “the representative parties will

fairly and adequately protect the interests of the

class.” See Fed. R. Civ. P. 23(a)(4). “The focus of Rule

23(a)(4) is whether: (1) the class representatives have

common interests with the members of the class, and

(2) whether the class representatives will vigorously

prosecute the interests of the class through qualified

counsel.” Paxton v. Union National Bank, 688 F.2d

552, 562-63 (8th Cir. 1982) (citing Gonzales v. Cassidy,

474 F.2d 67, 72 (6th Cir. 1973)).

The plaintiffs have shown they share a common

interest with the putative class members and that, as

the class representatives, they will vigorously

prosecute the interests of the class through qualified

counsel. There is no indication, as the defendants

argue, the plaintiffs’ interests are divergent or

opposed. The plaintiffs demonstrated a strong

understanding of their case, their responsibilities to

the class, and the expectations as class

representatives. The plaintiffs have already produced

documents, responded to discovery requests, and been

deposed. The Court believes that counsel will also

App-29

fairly and adequately represent the class members,

and they are experienced and competent to lead this

case. Wagstaff & Cartmell LLP is a Kansas City based

law firm with more than 30 attorneys and more than

100 employees. The firm has a national practice

handling complex litigation, including major multidistrict litigation and class actions. Furthermore,

prior to his confirmation the trial judge litigated cases

against the firm and found it to be experienced and

competent.

C. Rule 23(b)(3) Requirements

For class certification, the plaintiffs must also

prove this action may be maintained under Rule

23(b)(1), (2), or (3). Under Rule 23(b)(3), the court must

find “that the questions of law or fact common to class

members predominate over any questions affecting

only individual members, and that a class action is

superior to other available methods for fairly and

efficiently adjudicating the controversy.” See Fed. R.

Civ. P. 23(b)(3). “The requirements of ‘predominance’

and ‘superiority’ are stated in Rule 23(b)(3) in the

conjunctive; both must be present for an action to be

maintained under that provision.” Bryant v. Bonded

Accounts Serv./Check Recovery, 208 F.R.D. 251, 261

(D. Minn. 2000).

1. Predominance

As to the first prong of the inquiry, the Supreme

Court has ruled the “predominance inquiry tests

whether proposed classes are sufficiently cohesive to

warrant adjudication by representation.” Amchem,

521 U.S. at 623 (citing 7A Charles Alan Wright,

Arthur R. Miller, & Mary Kay Kane, Federal Practice

and Procedure § 1777, p. 518-19 (2d ed. 1986)). “In

App-30

order to ‘predominate,’ common issues must constitute

a significant part of the individual cases.” Jenkins v.

Raymark Indus., Inc., 782 F.2d 468, 472 (5th Cir.

1986). “Where there is an essential factual link

between all class members and the defendants, for

which the law provides a remedy, questions of law or

fact common to the class exist.” D’Alauro v. GC Servs.

Ltd. P’Ship, 168 F.R.D. 451, 458 (E.D.N.Y. 1996)

(citation omitted). “[W]hen one or more of the central

issues in the action are common to the class and can

be said to predominate, the action will be considered

proper under Rule 23(b)(3) even though other

important matters will have to be tried separately.”

Harris v. D. Scott Carruthers & Assoc., 270 F.R.D. 446,

453 (D. Neb. 2010) (quoting Jenkins, 782 F.2d at 472)

(alteration in original).

Defendant disagrees relying on the Ebert and

Amchem analysis. “The requirement of predominance

under Rule 23(b)(3) is not satisfied if individual

questions … overwhelm the questions common to the

class.” Ebert v. General Mills, Inc., 823 F.3d 472, 47879 (8th Cir. 2016). “In contrast to Rule 23(a)(2), the

issue of predominance under Rule 23(b)(3) is

qualitative rather than quantitative.” Id. Indeed, “the

predominance criterion is far more demanding” than

commonality. Amchem, 521 U.S. at 624. “The

predominance inquiry tests whether proposed classes

are sufficiently cohesive to warrant adjudication by

representation … and goes to the efficiency of a class

action as an alternative to individual suits.” Ebert, 823

F.3d at 479 (internal citations and quotations

omitted).

App-31

Defendant contends that individual questions

overwhelm any common ones. “An individual question

is one where ‘members of a proposed class will need to

present evidence that varies from member to member,’

while a common question is one where ‘the same

evidence will suffice for each member to make a prime

facie showing [or] the issue is susceptible to

generalized, class-wide proof.’” Tyson Foods v.

Bouaphakeo, 577 U.S. __, 136 S.Ct. 1036, 1045 (2016)

(quoting 2 W. Rubenstein, Newberg on Class Actions

§ 4:50, pp. 196-97 (5th ed. 2012)). “If to make a prima

facie showing on a given question, the members of a

proposed class will need to present evidence that

varies from member to member, then it is an

individual question.” Avritt v. Reliastar Life Insr. Co.,

615 F.3d 1032, 1035 (8th Cir. 2010) (quoting Blades v.

Monsanto Co., 400 F.3d 562, 566 (8th Cir. 2005)).

Defendant argues that plaintiffs’ individual

claims and factual issues overwhelm the individual

issues. Thus, argues defendant, this is not a superior

method of adjudication. Further, defendant contends

that a mere finding of liability cannot be used to

determine punitive damages in the first stage. That

determination argues defendant must be made at the

individual stages of the litigation. Allison v. Citgo

Petroleum Corp., 151 F.3d 402, 434 (5th Cir. 1998);

Equal Employment Opportunity Comm’n v. JBS USA,

LLC, No. 8:10CV318, 2011 WL 13137568, at *2–3 (D.

Neb. May 31, 2011) (quoting Allison and similarly

concluding “that punitive damages should be part of

the Phase II litigation”).

The Court finds that “questions of law or fact in

this case are common to the class members and

App-32

predominate over any questions affecting only

members.” Fed. R. Civ. P. 23(b)(3). The proposed

classes are sufficiently cohesive as to the alleged

pattern of the class, more so than to the individuals.

The class is easily ascertainable with or without the

expert work of Mr. Olsen, and the class will become

more obvious once defendant provides all the

necessary data. See, e.g., McKeage v. TMBC, LLC, 847

F.3d 992, 999 (8th Cir. 2017) (affirming certification

though it required “an intensive file-by-file review

process” to determine class members). The plaintiffs,

as a whole, do in fact allege and have injury. The same

evidence will be used to establish class-wide proof.

Further, the common issues predominate over the

individual issues. The important evidence will be

ascertainable from CPAY’s files, testimony and expert

reports. The legal theories all turn on the same

evidence. Assuming the general allegations are true,

the plaintiffs in this case have made a prima facie case

based on the common evidence. In re Zurn Pex

Plumbing Prod. Liab. Litig., 644 F.3d 604, 618 (8th

Cir. 2011) (quoting Blades v. Monsanto Co., 400 F.3d

562, 566 (8th Cir. 2005)). The only possible variations

that the Court sees at this time is the computation of

any damages. However, “[W]here damages can be

computed according to some formula, statistical

analysis, or other easy or essentially mechanical

methods, the fact that damages must be calculated on

an individual basis is no impediment to class

certification.” Klay v. Humana, Inc., 382 F.3d 1241,

1259-60 (11th Cir. 2004) (footnotes omitted). Here, it

appears that Mr. Olsen can make such calculations

based on CPAY’s billing records and such would be

App-33

ministerial in nature. For these reasons, the Court

finds predominance requirement is clearly met.

2. Superiority

For the second prong of the Rule 23(b)(3) inquiry,

the class action must be “superior to other available

methods for the fair and efficient adjudication of the

controversy.” See Fed. R. Civ. P. 23(b)(3). “Implicit in

the satisfaction of the predominance test is the notion

that the adjudication of common issues will help

achieve judicial economy.” Estate of Mahoney v. R.J.

Reynolds Tobacco Co., 204 F.R.D. 150, 161 S.D. Iowa

2001) (quoting Valentino v. Carter-Wallace, Inc., 97

F.3d 1227, 1234 (9th Cir. 1996)). “Having to engage in

separate threshold inquiries for each class member

prior to reaching the common issues does not promote

such economy. . . . [It] will create judicial dis

economy.” Estate of Mahoney, 204 F.R.D. at 161

(quoting Smith v. Brown & Williamson Tobacco Corp.,

174 F.R.D. 90, 94 (W.D. Mo. 1997)) (emphasis in

original).

The central issues are common to the class and

can fairly be said to predominate over individual

issues. Class-action treatment is not prohibited just

because there may be some matters that will have to

be tried separately. The plaintiffs challenge a single

cohesive policy and could arguably provide relief to

each member of the class. Also, the court has tools at

its disposal for management of class actions and it

may turn out that a class action is the “superior”

method of adjudicating the controversy. The case is

potentially a candidate for hybrid class action

treatment under Rule 23(c)(4).

App-34

As Judge Posner once stated, “[t]he realistic

alternative to a class action is not 17 million

individual suits, but zero individual suits, as only a

lunatic or a fanatic sues for $30.” Carnegie v.

Household Int’l, Inc., 376 F.3d 656, 661 (7th Cir. 2004).

The same principle applies in this case. The amount of

damages allegedly is over $100,000 million dollars.

The damages for these two plaintiffs are

approximately $200.00. A class action seems to be the

superior method of challenging the actions of the

defendant. There is no other way for the plaintiffs to

address CPAY’s alleged behaviors.

3. Filing No. 129, Motion to file a Surreply

brief or strike evidence

Defendant argues that Thomas Payne, owner of

plaintiff Skip Merchant, has changed his testimony

regarding the PCI Non-Compliance Fee. This

declaration, argues defendant, conflicts with prior

sworn testimony, first arguing that Payne challenged

the fee and later saying he sued because it is pure

profit for CPAY. Similar changes have been

disregarded under the sham affidavit rule. See, e.g.,

Camfield Tires, Inc. v. Michelin Tire Corp., 719 F.2d

1361, 1365-66 (8th Cir. 1983) (noting that “[a] party

should not be allowed to create issues of credibility by

contradicting his own earlier testimony”). Defendant

contends five additional exhibits were submitted and

plaintiffs have abandoned the theory of fraud in the

inducement in favor of fraud in the performance of

their contracts.

Plaintiffs contend that these are not new

responses and striking the evidence will not change

the outcome in any event. The Court agrees. Plaintiff’s

App-35

responded to the arguments of CPAY. Any new

arguments appear to have occurred during and after

the filing of the Amended Complaint and not in this

reply brief. After reviewing the reply brief, the Court

does not believe the plaintiffs’ changed their theories

of the case. Likewise, the Court does not believe that

the testimony by Mr. Payne constituted a “sham

affidavit” as it does not, for purposes of this motion,

essentially change the theory of the case. The Court

finds this motion is not supported by the claims and

will deny the same. See, e.g., Liberty Legal Found. v.

Nat’l Democratic Party of the USA, Inc., 875 F. Supp.

2d 791, 797 (W.D. Tenn. 2012) (sur-replies are “highly

disfavored, as they usually are a strategic effort by the

nonmoving party to have the last word on a matter”).

4. Filing No. 99, Motion to strike the report

and testimony of Karl J. Borden

Defendant moves to strike this report and

testimony pursuant to Fed. R. Evid. 702. Federal Rule

of Evidence Rule 702 allows for the admission of

expert opinions. Under Rule 702,

A witness who is qualified as an expert by

knowledge, skill, experience, training, or

education may testify in the form of an

opinion or otherwise if:

(a) the expert’s scientific, technical, or

other specialized knowledge will help the

trier of fact to understand the evidence or

to determine a fact in issue;

(b) the testimony is based on sufficient

facts or data;

App-36

(c) the testimony is the product of reliable

principles and methods; and

(d) the expert has reliably applied the

principles and methods to the facts of the

case.

Fed. R. Evid. 702; see Daubert v. Merrell Dow Pharms.,

Inc., 509 U.S. 579, 592-93 (1993) (holding that when

faced with a proffer of expert testimony, trial judges

are charged with the “gatekeeping” responsibility of

ensuring that all expert evidence admitted is both

relevant and reliable). Daubert applies to all expert

testimony, not only scientific expert testimony.

Kumho Tire Co. v. Carmichael, 526 U.S. 137, 141

(1999).

In light of Daubert and Kumho Tire, this Court

must screen proffered expert testimony for relevance

and reliability. See Bland v. Verizon Wireless, (VAW)

L.L.C., 538 F.3d 893, 896 (8th Cir. 2008). A reliable

opinion must be based on scientific methodology

rather than on subjective belief or unsupported

speculation. See Turner v. Iowa Fire Equip. Co., 229

F.3d 1202, 1208 (8th Cir. 2000). In assessing

reliability, the Court should consider factors including

whether the proposed expert’s theory, methodology or

technique: 1) can be and has been tested; 2) has been

subjected to peer review; 3) has a known or potential

rate of error; and 4) is generally accepted by the

relevant community. Bland, 538 F.3d at 896. This list

of factors is not exclusive, and this Court is allowed

“great flexibility” in its analysis. Jaurequi v. Carter

Mfg. Co.,173 F.3d 1076, 1082 (8th Cir. 1999). Doubts

regarding expert testimony should generally be

resolved in favor of admissibility. United States v.

App-37

Finch, 630 F.3d 1057, 1062 (8th Cir. 2011). The

expert’s information or opinion must also assist the

trier of fact in understanding or determining a fact in

issue. Fed. R. Evid. 702(a). “This condition goes

primarily to relevance.” Daubert, 509 U.S. at 591.

Defendant contends that Mr. Borden fails to

qualify as a proper expert under Rule 702. It argues

that Borden, who is not an attorney, intends to give a

legal opinion regarding class certification. In re Blood

Reagents Antitrust Litig., 783 F.3d 183, 187-88 (3d Cir.

2015) (“We join certain of our sister courts to hold that

a plaintiff cannot rely on challenged expert testimony,

when critical to class certification, to demonstrate

conformity with Rule 23 unless the plaintiff also

demonstrates, and the trial court finds, that the expert

testimony satisfies the standard set out in Daubert”).

The legal opinions include: first, CPAY is liable and

plaintiffs are typical of the class of merchants injured

by CPAY’s fees; second, his opinions were formed by

reading internal CPAY emails and basing his opinions

on intent; and third, his opinions opine on the state of

mind of CPAY’s former principals or non-parties. 2

2 Plaintiffs asked the following questions of their expert: (1) Did

CPAY impose charges or collect fees from Plaintiffs and others in

the proposed Class that were deceptive, wrongful, or contrary to

contract terms or industry standards? (2) Can evidence that is

common to all merchants adversely impacted — as opposed to

evidence unique to individual merchants — be used to

sufficiently identify the imposition of the wrongful charges and

fees in question, to prove the wrongfulness of the charges and fees

in question, to identify which merchants were imposed such

charges and fees, and to prove in what amounts such charges or

fees were paid by each affected merchant? (3) Are the named

Plaintiffs — Skip and Sandy’s — typicaland representative of the

App-38

Borden received a Doctor of Education degree

from the University of Massachusetts in 1975. Filing

No. 91-2, Borden Report, App’x A at 1 Page ID #1211.

He completed coursework in financial economics at

the University of Cincinnati but did not earn a degree

in financial economics. Filing No. 104-1, Ex. 13,

Borden Dep. at 38:19-39:4. None of the coursework

Borden completed, argues CPAY, was regarding

payment processing systems. Id. at 39:8-10. He

currently serves as a professor at the University of

Nebraska at Kearney. Filing No. 91-2, Borden Report

¶ 10. He teaches courses on treasury management

systems and working capital management, which

includes value transfer systems. He worked for

NXGEN which is a merchant acquirer like CPAY and

whose owner was Borden’s colleague. He previously

testified in a case concerning damages calculations,

one in a wrongful death case and one in a personal

injury case.

Borden testified that to reach his conclusions, he

(1) analyzed over 300 million merchant charge records

for over 60,000 merchants; (2) worked with a

professional systems engineer to put CPAY’s fee data

and transaction history records into a searchable

database; (3) reviewed the standard form Merchant

Processing Application & Agreement; (5) reviewed

CPAY’s data records which resulted in the billing

statements; (6) reviewed CPAY’s statements to

merchants as compared to internal records;

(7) reviewed the deposition testimony of one CPAY

representative; (8) reviewed internal emails by the

broader group of merchants similarly impacted by CPAY’s

actions? Borden Report ¶ 17.

App-39

executives of CPAY; (9) calculated the yield; and

(10) applied his education, experience, knowledge and

training. Filing No. 91-2, Borden Report ¶ 18.

Defendant contends, however, that Borden relied on

his son, Jason Borden, to pull data together.

CPAY contends that Borden is not qualified to

render his opinions under Daubert. See In re

Wholesale Grocery Prods. Antitrust Litig., No. 09-MD2090 ADM/AJB, 2012 WL 3031085 *6 (D. Minn. July

25, 2012), aff’d, 752 F.3d 728 (8th Cir. 2014) (“The

Daubert inquiry at the class certification stage is to

guard against certification of a class based on an

expert opinion so flawed that it is inadmissible as a

matter of law”). Second, CPAY argues the opinions are

inadmissible legal opinions in any event, arguing that

all three of the questions posed to Borden by the

plaintiff call for legal conclusions. In re Acceptance Ins.

Companies Sec. Litig., 423 F.3d 899, 905 (8th Cir.

2005) (“When the expert opinions are little more than

legal conclusions, a district court should not be held to

have abused its discretion by excluding such

statements”). CPAY contends that the first question

and answer go to the ultimate liability issue; and the

other two answers parrot elements of Rule 23 class

certification analysis and just says those requirements

have been satisfied. Third, with regard to Borden’s

methodology, CPAY contends it is unreliable.

Plaintiffs argue that a comprehensive Daubert

analysis is not required. In re Zurn Pex Plumbing

Prod. Liab. Litig., 644 F.3d 604, 613 (8th Cir. 2011).

Further, plaintiffs contend that that Dr. Borden is a

qualified expert in the credit card processing industry;

his opinions are relevant; and his opinions are

App-40

reliable. Also, plaintiffs argue that “Dr. Borden has

significant knowledge, education, training, and

experience in payment processing systems as a

professor of finance for the last 33 years and his own

personal involvement as both a merchant who accepts

credit card payments and as a merchant acquirer, like

Defendant CPAY, who manages his own customer

book.” Filing No. 113 at 1. In addition, CPAY has not

designated an expert to dispute the opinions of Dr.

Borden. 3

First, the Court points out that it need not rely on

Dr. Borden’s opinions to support the decision

regarding class certification. As noted above there is

ample evidence in the record to support plaintiffs’

request for class certification. It is clear from the

record as well as the testimony presented thus far in

the case. However, with that said, Dr. Borden has

been a Professor of Financial Economics at the

University of Nebraska at Kearney for over 30 years.

He is on the Graduate Faculty of the University of

Nebraska system and is recognized by the American

Association of Collegiate Schools of Business (AACSB)

as “academically” and “professionally” qualified. He

specializes in corporate finance and has authored

several publications. He has been a merchant acquirer

for over fifteen years. For this reason, the Court finds

his general testimony meets the criteria necessary for

this motion.

3 “CPAY’s expert Ratner conceded in his deposition that he was

not retained as a liability expert and offers no opinions about

whether or not plaintiffs can use common evidence to establish

liability in this case. Ratner Dep. Tr., Pltfs’ Ex. 49, 160:1-20;

181:1-4.” Filing No. 113 at 2.

App-41

Further, the Court agrees that there is no need for

a Daubert motion at this juncture in this litigation.

“The main purpose of Daubert exclusion is to protect

juries from being swayed by dubious scientific

testimony.” In re Zurn Pex Plumbing Prod. Liab.

Litig., 644 F.3d at 613; see also, Klein, 2018 WL

1187411 at *3; Bassett v. Credit Mgmt. Servs., Inc., No.

8:17CV69, 2018 WL 3159791, at *7 (D. Neb. June 28,

2018). “That interest is not implicated at the class

certification stage where the judge is the decision

maker.” Id. The Court is able to review the evidence

and rule without that testimony. With that said, the

Court will not consider any opinions regarding

Bordon’s purported legal conclusions in reviewing his

testimony. In re Acceptance Ins. Cos. Sec. Litig., 423

F.3d 899, 905 (8th Cir. 2005). With regard to the

reliability of Borden’s analytical methodology, his use

of primarily documents, rather than personal

conversations or reliance on deposition testimony,

goes to the weight of this evidence. Again, Borden can

rely on the facts he has compiled from the documents,

but he cannot give an expert opinion espousing

conclusions invading the province of the jurors. This

includes statements about whether the defendant’s

conduct was right or wrong. “Personal views on

corporate ethics and morality are not expert opinions.”

In re Baycol Prod. Litig., 532 F. Supp. 2d 1029, 105354 (D. Minn. 2007) (“Plaintiffs agree that an expert

witness’ personal ethical leanings are inappropriate.

Plaintiffs thus agree that [their expert] should be

precluded from . . . using the word ‘ethics’ and its

cognates”). Likewise, Borden may not offer any

opinions on the defendant’s state of mind. Kruszka v.

App-42

Novartis Pharm. Corp., 28 F. Supp. 3d 920, 931 (D.

Minn. 2014).

Accordingly, the Court will deny the motion to

strike this evidence at this point in the case.

5. Filing No. 117, motion for summary

judgment

Defendant asks the Court to grant summary

judgment on all counts of the First Amended Class

Action complaint pursuant to Fed. R. Civ. P. 56. CPAY

argues that all of its merchant agreements are

individualized. First, defendant argues that

notwithstanding that the merchant charges were

consistent with the terms of the contract, the claims

for breach of contract are time barred, because there

is a 90-day notice provision that plaintiffs failed to

provide to defendant.

Second, defendant argues that they are entitled to

summary judgment on plaintiffs’ RICO claims. There

is, argues defendant, no predicate act of wire fraud or

mail fraud, which are the two predicate acts for

plaintiffs’ claims.

Third, defendant contends there is no evidence to

support the claim of fraudulent concealment. The fees,

says defendant, were conspicuously disclosed on the

face of the Merchant Applications, or were the subject

of proper notice per the terms of the agreements.

a. Breach of Contract claim

A breach of contract claim under Nebraska law

requires (1) the existence of a promise, (2) its breach,

(3) damage, and (4) compliance with any conditions

precedent that activate the defendant’s contractual

duty. Phipps v. Skyview Farms, Inc., 610 N.W.2d 723,

App-43

730 (Neb. 2000). “[T]he meaning of a contract and

whether a contract is ambiguous are questions of law.”

Frohberg Elec. Co. v. Grossenburg Implement, Inc.,

900 N.W.2d 32, 37 (Neb. 2017); Windstream Corp. v.

Da Gragnano, 757 F.3d 798, 803 (8th Cir. 2014)

(“Construction of an unambiguous contract is ‘a

question of law appropriate for summary judgment’”).

“A contract written in clear and unambiguous

language is not subject to interpretation or

construction and must be enforced according to its

terms.” Frohberg, 900 N.W.2d at 38.

CPAY argues that plaintiff entered into a binding

Merchant Agreement. However, defendant contends

that plaintiffs failed to notify CPAY of these claims,

which it argues is a condition precedent to brining the

claims. See Intervision Sys. Techs., Inc. v. Intercall,

Inc., 872 N.W.2d 794, 800 (Neb. Ct. App. 2015) (“[T]he

majority of courts in other jurisdictions addressing

contract provisions that require notice of a dispute . . .

have found them to be enforceable”). The Court also

determined that the parties agreed to be bound by the

terms of the contract, so the provision was not

unconscionable, and the court could not “rewrite the

contract to exclude it.” Id. at 800. See, e.g., Zam & Zam

Super Market LLC, 736 F. App’x at 278, * 278 (2nd Cir.

2018) (“[W]e conclude as a matter of law that it is not

grossly unreasonable to expect a merchant to review

its bill and provide written notice of any disputed

charges within sixty days”); Cobra Tactical, Inc., 315

F. Supp. 3d 1342, 1350-51 (N.D. Georgia 2018)

(concluding 60-day notice provision in merchant

agreement was not “exculpatory,” “substantively

unconscionable,” or “procedurally unconscionable”

under Georgia law). This is true, argues defendants,

App-44

in the case before this Court. Plaintiffs did not give

notice of the fee disputes in accordance with the

Merchant Agreement, and thus, contends defendant,

this suit must fail. Further, defendant contends that

the Term and Conditions state that FNBO has

delegated its responsibility under the agreement to

TMS and CPAY. Thus, defendant contends that any

references to the BANK include CPAY.

Plaintiffs contend that the Notice Provision4 does

not bar plaintiffs’ breach of contract as a matter of law.

First, argues plaintiffs, the notice provision only

applies to “SALES or SERVICES activity. 5 It does not

mention FEES which is separately defined. PL SOF

¶¶ 33-38. Davenport Ltd. Partnership v. 75th & Dodge

I, L.P., 780 N.W.2d 416, 427 (Neb. 2010) (“A court is

4 The Notice Provision states: Section 7.5 states:

MERCHANT is supplied with monthly reports by

BANK regarding MERCHANT’s SALES or SERVICES

activity. It is MERCHANT’s sole responsibility to

report any error or discrepancies detected by

MERCHANT in writing to BANK within ninety (90)

days following the end of the monthly reporting period.

After such period, MERCHANT will be deemed to have

accepted the monthly reports as delivered.

Terms, § 7.5 (emphasis added); Filing No. 134, Pl SOF ¶ 33 at

Page id #3247.

“SALES” are the sales transactions resulting from the

merchant’s acceptance of financial service cards. Id., Pl. SOF ¶ 37

at Page ID #3248. “SERVICES” are the “transaction processing

and other services and products in relation to financial service

cards” provided by BANK to the merchant. Id., at #3247, Pl. SOF

¶ 36. “FEES” are “the fees as set forth in the Merchant

Application and all other sums owed to BANK for SALES and

SERVICES as set forth in the Agreement as amended from time

to time.” Id. at 3248, Pl. SOF ¶ 38.

5

App-45

not free to rewrite a contract or to speculate as to

terms of the contract which the parties have not seen

fit to include. And a contract is viewed as a whole in

order to construe it. Whatever the construction of a

particular clause of a contract, standing alone, may be,

it must be read in connection with other clauses, and

all writings forming part of the same transaction are

interpreted together”) (citations omitted). Second, it

requires plaintiffs to provide written notice of any

discrepancies to the BANK, not to CPAY. Third, even

if the notice provision required timely written notice,

plaintiffs contend that CPAY failed to provide them

with information regarding the “fee manipulations,”

information that they contend was concealed by

CPAY. Further, plaintiffs argue that CPAY urged

customers to “call” with discrepancies, which

apparently did not constitute notice. Finally, this was

a continuing scheme to defraud the merchants, but

assessing upcharges by use of a secretive overbilling

scheme to increase profits, while cheating the

merchants, argues plaintiffs, thus making the

agreement unconscionable.

Plaintiffs also argue that the language referring

to “errors or discrepancies” in the notice provision

cover only mistaken charges and not those that are

willful efforts by CPAY to change the fees. Next,

plaintiffs contend that the exculpatory clause is

unconscionable and unenforceable under Nebraska

law. Plaintiffs also argue that the provision only gives

App-46

the bank6 and not CPAY the right to change fees. 7

Plaintiffs further submit that CPAY had no right

under the contract to charge or add merchant fees.

Only the BANK, says plaintiff, had the right to charge

or change or add additional fees 8, and even the

Plaintiff argues that this is a good example of CPAY

attempting to articulate a good faith basis for increases,

suggesting a Bank increase, which was in fact just a CPAY

revenue enhancement, causing plaintiffs to have no basis at the

time to dispute the additional fees:

6

In response to upcoming modifications made by

industry card brands to interchange rates, merchants

boarded prior to January 1st, 2016 will see an eightbasis point increase to their gross processing volume

beginning April 1st, 2016.

Filing No. 134, SOF at ¶ 102 at Page ID # 3259.

And again, on the February 2016 Statement, Plaintiff Sandy was

given the following notice:

In order to help consolidate modifications from card

brands affecting interchange rates (Visa Base II Trans

Fees, International Acquirer Fee, API and LPA Fees,

Mastercard KB Trans Fees, International Service

Assessment Fees, Acquirer License Fee and more),

there will be a seven basis points ‘TSSNF Fee’ on all

gross card brand processing volume effective April 1st.

Id. Pl. SOF ¶ 128 at Page ID # 3264.

Major credit cards allow only the BANK to establish and

change fees. See Mastercard Rules, Filing No. 135-1, Exhibit 1;

Mastercard Rules, Ex. 1, 7.6.1 and 1.a,; VISA Visa Global

Acquirer Risk Standards, §4.10, Filing No. 135-Exhibit 2; Visa

Global Acquirer Risk Standards, §4.4 Merchant Agreement

Review, Exhibit 2; Visa Global Acquirer Risk Standards, §8.3

Acquirer Responsibilities When Using Agents, Exhibit 2.

7

8 Section 3.5 of Skip and Sandy’s Merchant Agreement (and all

other class members’ Merchant Agreement) states:

App-47

BANK’s rights regarding fees were limited to specific

circumstances. 9 Further, plaintiffs note that the

The FEES may be amended by BANK on thirty (30)

days written notice to MERCHANT unless provided

otherwise herein. (Terms and Conditions, Filing No.

106-1, p. 5, § 3.5).

9 Section 13.20 of Skip and Sandy’s Merchant Agreement (and

all other class members’ Merchant Agreement) states:

The CARD BRANDS require that the following be

disclosed to MERCHANT:

(i) if applicable, BANK is in control of Independent

Sales Organization’s (“ISO”) and/or Member Service

Provider’s

(“MSP”)

performance

under

this

AGREEMENT;

(ii) BANK must pre-approve all FEES;

(iii) the AGREEMENT may not be amended without

BANK’s express written consent;

(iv) if applicable, ISO and/or MSP may not have access

to MERCHANT’s funds; and

(v) BANK may not waive the foregoing requirements.

Terms and Conditions, Filing No. 106-1, p. 10, §13.20. Section 5.6

of FNBO and CPAY’s Third Party Organization Marketing and

Registration Agreement (“the CPAY/FNBO Agreement”) states:

The ASSOCIATIONS require that FNBO must control

the establishment of MERCHANT fees and has the

right to review and approve pricing of MERCHANTS

as required by ASSOCIATIONS to ensure compliance

with the RULES. MERCHANT pricing and

MERCHANT profitability are the sole responsibility of

COMPANY and will not be monitored or guaranteed

by FNBO. COMPANY shall report to FNBO all fees

charged to MERCHANTS. COMPANY agrees to notify

FNBO in a format reasonably acceptable to FNBO of

changes by COMPANY to all MERCHANTS’ charges

and fees or other maintenance changes with at least

thirty (30) days written notice prior to the effective

App-48

Merchant Agreement does not require written

challenges to fee disputes, and in any event, CPAY is

not listed in the notice provision as a party that would

be noticed. Plaintiffs contend that CPAY has offered

no evidence to rebut the overwhelming evidence of

deception. None of the other contract provisions in the

plaintiffs’ Merchant Agreement provide CPAY with

the ability to amend or change the stipulated fees. See,

Sandy’s Merchant Agreement, Filing No. 105-1. These

are all, argue plaintiffs, issues of material fact to be

decided at trial.

Plaintiffs also argue that “where a promisor

prevents, hinders, or renders impossible the

occurrence of a condition precedent to his or her

promise to perform, the promisor is not relieved of the

obligation to perform and may not invoke the other

party’s nonperformance as a defense when sued upon

the contract.” D&S Realty, Inc. v. Markel Ins. Co., 816

N.W.2d 1, 13 (Neb. 2012) (“In short, under the doctrine

of prevention, where a party to a contract is the cause

of the failure of the performance of the obligation due

him or her, that party cannot in any way take

advantage of that failure”).

date of the change. COMPANY may change charges

and fees to MERCHANTS and is responsible for

notifying MERCHANTS with thirty (30) days written

notice of such change. All changes in fees and charges

by COMPANY shall be effective on the first day of the

month following the thirty (30) day notice to FNBO or

after COMPANY makes the change on FNBO’s

system.

(CPAY/FNBO Agreement, Filing No. No. 101-4, p. 7, § 5.6).

App-49

The Court agrees that it should not expand the

definition of FEES or SALES. Davenport, 780 N.W. 2d

at 428 (“The expression of one thing implies the

exclusion of another, and in this case, the use of the

words ‘expiration’ and ‘termination’ together in

several places, but not in exhibit D, provides ample

support for the district court’s conclusion that the

expiration of the Ground Lease was not a ‘termination’

within the meaning of exhibit D”).

Under Nebraska law, Plaintiffs must demonstrate

both substantive and procedural unconscionability.

See Myers v. Neb. Inv. Council, 724 N.W.2d 776, 799

(Neb. 2006). Substantive unconscionability does not

exist “unless the terms are grossly unfair under the

circumstances that existed when the parties entered

into the contract.” Id. Similarly, procedural

unconscionability requires a “disparity in respective

bargaining positions of parties to a contract.” Id.

“‘Unconscionability is determined in light of all the

surrounding circumstances, including (1) the manner

in which the parties entered into the contract,

(2) whether the parties had a reasonable opportunity

to understand the terms of the contract, and

(3) whether the important terms were hidden in a

maze of fine print.’” Henggeler v. Brumbaugh &

Quandahl, P.C., LLO, 894 F. Supp. 2d 1180, 1187 (D.

Neb. 2012) (Bataillon, J.) (quoting Parizek v. Roncalli

Catholic High Sch., 655 N.W.2d 404, 408 (Neb. 2002)).

Based on the foregoing, the Court finds the

plaintiffs have made a prima facie evidentiary

showing of breach of contract. They have also shown

that the contract may be unconscionable, due to the

alleged fraud and misrepresentations. The plaintiffs

App-50

have in fact offered argument and evidence of

deception. These are fact issues. For the reasons set

forth herein, the Court will deny the motion for

summary judgment as it relates to the breach of

contract claim.

b. Breach of covenant of Good Faith and

Fair Dealing

Under Nebraska law, “[a] violation of the

covenant of good faith and fair dealing occurs only

when a party violates, nullifies, or significantly

impairs any benefit of the contract.” In re Application

of Ne. Pub. Power Dist., 912 N.W.2d 884, 896 (Neb.

2018); Spanish Oaks, Inc. v. Hy-Vee, Inc., 655 N.W.2d

390, 400 (Neb. 2003). Defendants contend that this

claim is the same as the breach of contract claim and

thus should be entitled to summary judgment. See

Spanish Oaks, Inc., 655 N.W.2d at 400.

Defendant argues that this theory is redundant of

the plaintiffs’ breach of contract claim. Plaintiff

disagrees contending that these are both separate

causes of action. As this Court has stated, the plaintiff

can plead alternative legal theories of recovery.

Corona v. First Nat’l Bank of Omaha, 2014 WL

2558327 *4 (D. Neb. 2014). Plaintiffs have clearly

articulated its alleged dishonest billing actions.

The Court agrees with the plaintiffs. For the same

reasons as discussed in the previous section, breach of

contract, the Court will likewise deny the motion for

summary judgment. The plaintiff has every right to

plead and prove alternative theories of recovery.

App-51

c. RICO claims

RICO is concerned with “eradicating organized,

long-term, habitual criminal Activity.” Crest Constr.

II, Inc. v. Doe, 660 F.3d 346, 353 (8th Cir. 2011).

Generally, the purpose of RICO is not to convert

regular civil suits into RICO cases. Stonebridge

Collection, Inc. v. Carmichael, 791 F.3d 811, 822 (8th

Cir. 2015). Section 1962(c), prohibits “any person

employed by or associated with any enterprise

engaged in . . . interstate . . . commerce, to conduct or

participate, directly or indirectly, in the conduct of

such enterprise’s affairs through a pattern of

racketeering activity.” 18 U.S.C. § 1962(c). To succeed

on such a claim, plaintiffs must show “(1) conduct

(2) of an enterprise (3) through a pattern (4) of

racketeering activity.” H & Q Props., Inc. v. Doll, 793

F.3d 852, 856 (8th Cir. 2015); Crest Constr. II, Inc., 660

F.3d at 353.

Defendant argues that plaintiff is unable to show

racketeering activity and cannot show a scheme to

defraud, as discussed under the contract section,

because the terms were in the Merchant Agreement.

Plaintiffs agreed to these terms, argues defendant.

Plaintiffs argue that the racketeering activity

occurred because of numerous violations wire and

mail fraud statutes. CPAY created a scheme to have

the sellers to the merchants and thereafter increase

the rates and fees without consultation with FNBO.

No merchant, argues plaintiffs, agreed to pay these

fees. This plan, contends plaintiffs, were intended to

deceive the plaintiffs. They concealed, manipulated

and controlled information. These charges were not

pre-approved by FNBO. All of these material facts

App-52

were not disclosed to the merchants. The Eighth

Circuit held:

The crime of mail fraud is broad in scope and

its fraudulent aspect is measured by a nontechnical standard, condemning conduct

which fails to conform to standards of moral

uprightness, fundamental honesty, and fair

play. A plaintiff may, but need not, allege that

a defendant made misrepresentations of fact.

Because misrepresentations of fact are not

necessary to the offense, it follows that no

misrepresentations need be transmitted by

mail or wire: even routine business

communications in these media may suffice to

make a scheme of false dealing into a federal

offense.

Filing No. 87, Memorandum and Order at 8 (quoting

Abels v. Farmers Commodities Corp., 259 F.3d 910,

918-19 (8th Cir. 2001)).

For purposes of the motion for summary

judgment, the Court agrees that plaintiff has

sufficiently plead and offered evidence of each of the

required elements. The conduct is clearly outlined in

this Memorandum and Order. The allegations include

mail and wire fraud violations and evidence of the

same. The alleged scheme was massive, covering

numerous entities throughout the United States.

Deception and fraud are involved. These factual

questions will be decided at trial.

d. Fraudulent Concealment

Under Nebraska law, plaintiffs must prove that:

(1) CPAY had a duty to disclose a material fact;

(2) CPAY knowingly concealed that fact and the fact

App-53

was not within Plaintiffs’ reasonably diligent

attention,

observation,

and

judgment;

and

(3) Plaintiffs reasonably relied on the fact or facts as

they believed them to be as the result of CPAY’s

concealment. See Knights of Columbus Council 3152

v. KFS BD Inc., 791 N.W.2d 317, 334 (Neb. 2010). “In

order to state a claim for fraudulent concealment in

Nebraska, plaintiff must allege: [1] a duty to disclose

a material fact; [2] knowledge of the fact;

[3] concealment of the fact; [4] that the fact was not

within

the

plaintiff’s

reasonable

attention,

observation and judgment; [5] that defendant

concealed the fact intending that plaintiffs act or

refrain from acting; [6] and that plaintiffs reasonably

relied on those facts; and [7] that plaintiffs were

damaged by the action or inaction of the concealment.”

Custom Hair Designs by Sandy, LLC v. Cent. Payment

Co., LLC, No., 2019 WL 3342206, at *5 (D. Neb. July

25, 2019) (numbering in brackets added) citing

Knights of Columbus Council 3152 v. KFS BD, Inc.,

791 N.W.2d 317, 334 (Neb. 2010)).

Defendant first contends it had no duty to

disclose, as it is not a fiduciary. Nat’l Am. Ins. Co. v.

Constructors Bonding Co., 719 N.W.2d 297, 303 (Neb.

2006). Further, defendant argues that its fees were

adequately disclosed to the plaintiffs and appropriate

notices of fee increases were also adequately disclosed.

Third, defendant contends that plaintiffs are unable to

show justifiable reliance. Plaintiffs, argue defendant,

admit they did not review their Merchant Applications

or the relevant Terms and Conditions. The plaintiffs,

state defendant, cannot both ignore the terms and also

claim that CPAY concealed them. See Knights of

Columbus Council 3152, 791 N.W.2d at 334; Lucky 7,

App-54

L.L.C. v. THT Realty, L.L.C., 775 N.W.2d 671, 677

(Neb. 2009).

Plaintiffs contend that the intentional fraud and

deceit committed by the defendant is sufficient to

create material facts for trial. These discount rate

increases on merchant accounts happened often and

material information was omitted. Nowhere, argues

plaintiffs, does it say that the discount rates can or

will be increased for CPAY’s business need. The

plaintiffs contend that defendant imposed fees, for

example the noncompliance fee, 10 with no service in

return. CPAY imposed a TSSNF Fee on 84,953

separate merchants from January 2012 to October

2018 and collected $18,565,125.28. (Arthur Olsen

Report, Filing No. 91-23, at ¶¶ 24-25. Merchants,

including

plaintiffs,

collectively

paid

CPAY

$36,969,924.00 for PCI Noncompliance Fees from

January 2012 through October 2018. Id. See e.g.,

Adams v. American Cyanamid Co., 498 N.W.2d 577,

591 (Neb. Ct. App. 1992) (finding provision

procedurally unconscionable because its importance

was not understandable to a layperson and would

“permit the defendant to escape all consequential

responsibility” and leave the plaintiff without

“substantial recourse for his loss”).

The Court agrees that CPAY had a duty to

disclose material facts to the merchants, even in the

absence of a fiduciary duty. Streeks, Inc. v. Diamond

Hill Farms, Inc., 605 N.W.2d 110 (Neb. 2000),

10 This fee was a penalty to the merchant for failing to “attest”

every year they are in compliance with all PCI (payment card

industry) standards. (Chang Dep. Tr. at 254:1-12, and 259:15-19,

No. 91-3).

App-55

overruled on other grounds by Knights of Columbus

Council 3152 v. KFS BD, Inc., 280 Neb. 904, 791

N.W.2d 317 (Neb. 2010); Cyclonaire Holding Corp. v.

Baker, 2017 WL 3206894, at *8 (D. Neb. Apr. 11, 2017)

(whether or not there was a fiduciary relationship

between the parties in this case is not dispositive of

the duty to disclose); see also Knights of Columbus, 791

N.W.2d at 331-32 (“When a party makes a partial or

fragmentary statement that is materially misleading

because of the party’s failure to state additional or

qualifying facts, the statement is fraudulent.”);

DeNourie & Yost Homes, LLC v. Frost, 854 N.W.2d

298, 312 (Neb. 2014) (“If a defendant’s partial or

ambiguous representation is materially misleading,

then ... the defendant has a duty to disclose known

facts that are necessary to prevent the representation

from being misleading”).

The Court also agrees that there is a genuine

issues of material fact for trial regarding fraudulent

concealment. See, e.g., TCF Nat. Bank v. Mkt.

Intelligence, Inc., 812 F.3d 701, 711 (8th Cir. 2016)

(“Generally, “fraudulent concealment and a plaintiff’s

due diligence are questions of fact unsuitable for

summary judgment”). Plaintiffs had every right to

justifiably rely on the billings, not knowing there was

a scheme to defraud or concealment of certain facts

and fees. “That is, if a defendant’s partial or

ambiguous representation is materially misleading,

then the defendant has a duty to disclose known facts

that are necessary to prevent the representation from

being misleading.” Knights of Columbus, 791 N.W.2d

at 332-33.

App-56

THEREFORE, IT IS ORDERED THAT:

1. Plaintiffs’ motion for class certification, Filing

No. 89, is granted;

2. The Court certifies the following class:

All of CPAY’s customers that, from January 1,

2010, to the present (a) were assessed the TSSNF

Fee (a/k/a TSYS Network Fee); (b) were assessed

the PCI Noncompliance Fee; (c) had their

contractual credit card discount rates increased

above their contractual rate by CPAY; and/or

(d) had credit card transactions shifted by CPAY

from lower-cost rate tiers to higher-cost rate tiers.

3. The Court appoints the following attorney as

lead counsel for the proposed class:

Tyler W. Hudson

Wagstaff & Cartmell LLP

4740 Grand Avenue, Suite 300

Kansas City, MO 64112

4. Defendant’s motion to file a sur-reply brief

and/or strike evidence, Filing No. 129 with reference

to Filing No. 89, is denied.

5. Defendant’s motion to strike the testimony of

Karl J. Borden, Filing No. 99, is denied.

6. Defendant’s motion for summary judgment,

Filing No. 117, is denied.

Dated this 11th day of February, 2020.

BY THE COURT:

s/ Joseph F. Bataillon

Senior United States District Judge

App-57

Appendix C

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

________________

No. 20-1677

________________

CUSTOM HAIR DESIGNS BY SANDY, LLC, on behalf of

themselves and all others similarly situated and

SKIP’S PRECISION WELDING, LLC, on behalf of

themselves and all others similarly situated,

v.

Appellees,

CENTRAL PAYMENT CO., LLC,

Appellant.

----------------------------------------------MAIN STREET ALLIANCE,

Amicus on behalf of

Appellee(s).

________________

Appeal from the United States District Court

for the District of Nebraska – Omaha

(8:17-cv-00310-JFB)

Filed: February 11, 2021

________________

ORDER

________________

The petition for rehearing en banc is denied. The

petition for rehearing by the panel is also denied.

App-58

February 11, 2021

Order Entered at the Direction of the Court:

Clerk, U.S. Court of Appeals, Eighth Circuit.

___________________________________

/s/ Michael E. Gans

App-59

Appendix D

Fed. R. Civ. P. 23. Class Actions

(a) PREREQUISITES. One or more members of a class

may sue or be sued as representative parties on behalf

of all members only if:

(1) the class is so numerous that joinder of all

members is impracticable;

(2) there are questions of law or fact common to

the class;

(3) the claims or defenses of the representative

parties are typical of the claims or defenses of the

class; and

(4) the representative parties will fairly and

adequately protect the interests of the class.

(b) TYPES OF CLASS ACTIONS. A class action may be

maintained if Rule 23(a) is satisfied and if:

(1) prosecuting separate actions by or against

individual class members would create a risk of:

(A) inconsistent or varying adjudications

with respect to individual class members that

would establish incompatible standards of

conduct for the party opposing the class; or

(B) adjudications with respect to individual

class members that, as a practical matter,

would be dispositive of the interests of the

other members not parties to the individual

adjudications or would substantially impair

or impede their ability to protect their

interests;

App-60

(2) the party opposing the class has acted or

refused to act on grounds that apply generally to

the class, so that final injunctive relief or

corresponding declaratory relief is appropriate

respecting the class as a whole; or

(3) the court finds that the questions of law or

fact common to class members predominate over

any questions affecting only individual members,

and that a class action is superior to other

available methods for fairly and efficiently

adjudicating the controversy. The matters

pertinent to these findings include:

(A) the class members’ interests in

individually controlling the prosecution or

defense of separate actions;

(B) the extent and nature of any litigation

concerning the controversy already begun by

or against class members;

(C) the desirability or undesirability of

concentrating the litigation of the claims in

the particular forum; and

(D) the likely difficulties in managing a class

action.

(c) CERTIFICATION ORDER; NOTICE TO CLASS

MEMBERS; JUDGMENT; ISSUES CLASSES; SUBCLASSES.

(1) Certification Order.

(A) Time to Issue. At an early practicable

time after a person sues or is sued as a class

representative, the court must determine by

order whether to certify the action as a class

action.

App-61

(B) Defining the Class; Appointing Class

Counsel. An order that certifies a class action

must define the class and the class claims,

issues, or defenses, and must appoint class

counsel under Rule 23(g).

(C) Altering or Amending the Order. An

order that grants or denies class certification

may be altered or amended before final

judgment.

(2) Notice.

(A) For (b)(1) or (b)(2) Classes. For any class

certified under Rule 23(b)(1) or (b)(2), the

court may direct appropriate notice to the

class.

(B) For (b)(3) Classes. For any class certified

under Rule 23(b)(3)—or upon ordering notice

under Rule 23(e)(1) to a class proposed to be

certified for purposes of settlement under

Rule 23(b)(3)—the court must direct to class

members the best notice that is practicable

under the circumstances, including individual

notice to all members who can be identified

through reasonable effort. The notice may be

by one or more of the following: United States

mail, electronic means, or other appropriate

means. The notice must clearly and concisely

state in plain, easily understood language:

(i) the nature of the action;

(ii) the definition of the class certified;

(iii) the class claims, issues, or defenses;

App-62

(iv) that a class member may enter an

appearance through an attorney if the

member so desires;

(v) that the court will exclude from the

class any member who requests exclusion;

(vi) the time and manner for requesting

exclusion; and

(vii) the binding effect of a class

judgment on members under Rule

23(c)(3).

(3) Judgment. Whether or not favorable to the

class, the judgment in a class action must:

(A) for any class certified under Rule

23(b)(1) or (b)(2), include and describe those

whom the court finds to be class members;

and

(B) for any class certified under Rule

23(b)(3), include and specify or describe those

to whom the Rule 23(c)(2) notice was directed,

who have not requested exclusion, and whom

the court finds to be class members.

(4) Particular Issues. When appropriate, an

action may be brought or maintained as a class

action with respect to particular issues.

(5) Subclasses. When appropriate, a class may

be divided into subclasses that are each treated as

a class under this rule.

(d) CONDUCTING THE ACTION.

(1) In General. In conducting an action under

this rule, the court may issue orders that:

App-63

(A) determine the course of proceedings or

prescribe measures to prevent undue

repetition or complication in presenting

evidence or argument;

(B) require—to protect class members and

fairly conduct the action—giving appropriate

notice to some or all class members of:

(i) any step in the action;

(ii) the proposed extent of the judgment;

or

(iii) the members’ opportunity to signify

whether they consider the representation

fair and adequate, to intervene and

present claims or defenses, or to otherwise

come into the action;

(C) impose conditions on the representative

parties or on intervenors;

(D) require that the pleadings be amended

to eliminate allegations about representation

of absent persons and that the action proceed

accordingly; or

(E) deal with similar procedural matters.

(2) Combining and Amending Orders. An order

under Rule 23(d)(1) may be altered or amended

from time to time and may be combined with an

order under Rule 16.

(e)

SETTLEMENT, VOLUNTARY DISMISSAL, OR

COMPROMISE. The claims, issues, or defenses of a

certified class—or a class proposed to be certified for

purposes of settlement—may be settled, voluntarily

dismissed, or compromised only with the court’s

App-64

approval. The following procedures apply to a

proposed settlement, voluntary dismissal, or

compromise:

(1) Notice to the Class.

(A) Information That Parties Must Provide

to the Court. The parties must provide the

court with information sufficient to enable it

to determine whether to give notice of the

proposal to the class.

(B) Grounds for a Decision to Give Notice.

The court must direct notice in a reasonable

manner to all class members who would be

bound by the proposal if giving notice is

justified by the parties’ showing that the court

will likely be able to:

(i) approve the proposal under Rule

23(e)(2); and

(ii) certify the class for purposes of

judgment on the proposal.

(2) Approval of the Proposal. If the proposal

would bind class members, the court may approve

it only after a hearing and only on finding that it

is fair, reasonable, and adequate after considering

whether:

(A) the class representatives and class

counsel have adequately represented the

class;

(B) the proposal was negotiated at arm’s

length;

(C) the relief provided for the class is

adequate, taking into account:

App-65

(i) the costs, risks, and delay of trial and

appeal;

(ii) the effectiveness of any proposed

method of distributing relief to the class,

including the method of processing classmember claims;

(iii) the terms of any proposed award of

attorney’s fees, including timing of

payment; and

(iv) any agreement required to be

identified under Rule 23(e)(3); and

(D) the proposal treats class members

equitably relative to each other.

(3) Identifying Agreements. The parties seeking

approval must file a statement identifying any

agreement made in connection with the proposal.

(4) New Opportunity to Be Excluded. If the class

action was previously certified under Rule

23(b)(3), the court may refuse to approve a

settlement unless it affords a new opportunity to

request exclusion to individual class members

who had an earlier opportunity to request

exclusion but did not do so.

(5) Class-Member Objections.

(A) In General. Any class member may

object to the proposal if it requires court

approval under this subdivision (e). The

objection must state whether it applies only to

the objector, to a specific subset of the class,

or to the entire class, and also state with

specificity the grounds for the objection.

App-66

(B) Court Approval Required for Payment in

Connection with an Objection. Unless

approved by the court after a hearing, no

payment or other consideration may be

provided in connection with:

(i) forgoing or withdrawing an objection,

or

(ii) forgoing, dismissing, or abandoning

an appeal from a judgment approving the

proposal.

(C) Procedure for Approval After an Appeal.

If approval under Rule 23(e)(5)(B) has not

been obtained before an appeal is docketed in

the court of appeals, the procedure of Rule

62.1 applies while the appeal remains

pending.

(f) APPEALS. A court of appeals may permit an appeal

from an order granting or denying class-action

certification under this rule, but not from an order

under Rule 23(e)(1). A party must file a petition for

permission to appeal with the circuit clerk within 14

days after the order is entered, or within 45 days after

the order is entered if any party is the United States,

a United States agency, or a United States officer or

employee sued for an act or omission occurring in

connection with duties performed on the United

States’ behalf. An appeal does not stay proceedings in

the district court unless the district judge or the court

of appeals so orders.

(g) CLASS COUNSEL.

(1) Appointing Class Counsel. Unless a statute

provides otherwise, a court that certifies a class

App-67

must appoint class counsel. In appointing class

counsel, the court:

(A) must consider:

(i) the work counsel has done in

identifying or investigating potential

claims in the action;

(ii) counsel’s experience in handling

class actions, other complex litigation,

and the types of claims asserted in the

action;

(iii) counsel’s knowledge

applicable law; and

of

the

(iv) the resources that counsel will

commit to representing the class;

(B) may consider any other matter pertinent

to counsel’s ability to fairly and adequately

represent the interests of the class;

(C) may order potential class counsel to

provide information on any subject pertinent

to the appointment and to propose terms for

attorney’s fees and nontaxable costs;

(D) may include in the appointing order

provisions about the award of attorney’s fees

or nontaxable costs under Rule 23(h); and

(E) may make further orders in connection

with the appointment.

(2) Standard for Appointing Class Counsel.

When one applicant seeks appointment as class

counsel, the court may appoint that applicant only

if the applicant is adequate under Rule 23(g)(1)

and (4). If more than one adequate applicant seeks

App-68

appointment, the court must appoint the

applicant best able to represent the interests of

the class.

(3) Interim Counsel. The court may designate

interim counsel to act on behalf of a putative class

before determining whether to certify the action

as a class action.

(4) Duty of Class Counsel. Class counsel must

fairly and adequately represent the interests of

the class.

(h) ATTORNEY’S FEES AND NONTAXABLE COSTS. In a

certified class action, the court may award reasonable

attorney’s fees and nontaxable costs that are

authorized by law or by the parties’ agreement. The

following procedures apply:

(1) A claim for an award must be made by

motion under Rule 54(d)(2), subject to the

provisions of this subdivision (h), at a time the

court sets. Notice of the motion must be served on

all parties and, for motions by class counsel,

directed to class members in a reasonable

manner.

(2) A class member, or a party from whom

payment is sought, may object to the motion.

(3) The court may hold a hearing and must find

the facts and state its legal conclusions under

Rule 52(a).

(4) The court may refer issues related to the

amount of the award to a special master or a

magistrate judge, as provided in Rule 54(d)(2)(D).