Global Payments Direct, Inc. v. Frontline Processing Corp.

CourtCourt of Appeals of Georgia
DecidedJune 30, 2021
DocketA21A0394
StatusPublished

This text of Global Payments Direct, Inc. v. Frontline Processing Corp. (Global Payments Direct, Inc. v. Frontline Processing Corp.) is published on Counsel Stack Legal Research, covering Court of Appeals of Georgia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Global Payments Direct, Inc. v. Frontline Processing Corp., (Ga. Ct. App. 2021).

Opinion

FIRST DIVISION BARNES, P. J., GOBEIL and MARKLE, JJ.

NOTICE: Motions for reconsideration must be physically received in our clerk’s office within ten days of the date of decision to be deemed timely filed. https://www.gaappeals.us/rules

DEADLINES ARE NO LONGER TOLLED IN THIS COURT. ALL FILINGS MUST BE SUBMITTED WITHIN THE TIMES SET BY OUR COURT RULES.

June 30, 2021

In the Court of Appeals of Georgia A21A0394. GLOBAL PAYMENTS DIRECT, INC. v. FRONTLINE PROCESSING CORP.

BARNES, Presiding Judge.

After the termination of fee agreements between Frontline Processing

Corporation and Global Payments Direct, Frontline filed suit in Dekalb County

alleging, among other things, breach of the agreements. A Dekalb County jury

returned a verdict of $135,200,191.29 to Frontline against Global Payments Direct,

Inc. The award represented $109.8 million in consequential damages, $24.3 million

in direct damages, and $1,071,923.43 in attorney fees pursuant to OCGA § 13-6-11.

Global now appeals from that judgment and contends that the consequential and

direct damages awards should be vacated and that the trial court erred in denying its

directed verdict motions on several breach of contract claims, specifically breach of the non-solicitation, confidentiality and coordination provisions. For the reasons

discussed below, we reverse.

On appeal, we examine the record in the light most favorable to the verdict and

judgment. Horan v. Pirkle, 197 Ga. App. 151, 153 (2) (397 SE2d 734) (1990). A jury

verdict, after approval by the trial court, will not be disturbed on appeal if it is

supported by any evidence. Id.

Viewed in that light, the record reveals that from 2001 until 2015, Global, an

electronic payment processing company,1 and Frontline, an independent sales

organization (“ISO”), had a contractual relationship under which Frontline solicited,

prescreened, and referred merchants to Global for use of Global’s electronic payment

processing services. If accepted by Global, the merchants would enter into a Card

Services Agreement with Global, and Frontline would receive residual payments from

the merchants. Global and Frontline’s relationship was established and controlled by

the Merchant Service Agreement (“MSA”) and the Referral Agreement (“RA”) (this

agreement included the two companies and a third-party bank – HBSC and later

Wells Fargo).

1 Global was formerly known as National Data Payment Systems, and the contract between Frontline and Global was amended in 2003 to reflect the corporate name change.

2 In 2013, VISA excluded debt collectors from its credit criteria, and thus those

merchants could no longer process debt payments with VISA. That same year,

Frontline referred two debt collectors to Global– Credit Power and UDPS. According

to Frontline, although required by the terms of the MSA, Global withheld the

information about VISA’s policy, and Frontline was unaware of the debt collectors

prohibition when it screened Credit Power and UDPS and submitted the underwriting

and relevant documentation to Global for the company’s approval. Despite the

restrictions, Global accepted the merchants.

In 2015, the Consumer Financial Protection Bureau (“CFPB”) commenced a

regulatory action against several defendants in federal court, including Global and

Frontline for violations of the Consumer Financial Protection Act. Frontline contends

that Global’s acceptance of the debt collectors as merchants resulted in Frontline and

Global’s involvement in the CFPB action. The federal court ultimately dismissed the

CFPB’s claims against Frontline with prejudice.

Claiming that it had a right to indemnification under the MSA, Global withheld

its litigation fees associated with the federal action from sales fees owed to Frontline.

Frontline’s lawsuit was filed in early June of 2015, and initially only disputed

3 Global’s withholding of the sales fees.2 But in late June of 2015, Global informed

Frontline that it was terminating the Agreements between the two companies,

effective October 2015. Subsequently, Frontline amended its complaint to allege

additional claims including that Global breached the MSA. .

At trial, Frontline presented evidence of a deteriorating relationship between

the two companies, including that Global locked Frontline out of its vendor system,

which prevented Frontline from working with its referred merchants, and that Global

also refused to assign Frontline’s rights under the Agreements so that Frontline could

move to another credit processing company. Frontline’s CEO, Christopher Kittler,

testified that Global refused to cooperate with the assignment of its merchants to

prevent Frontline from servicing its merchants because by “blocking the transfer

[and] the merchant reserves[,] [t]he merchants aren’t going to move anywhere without

the reserves.” Kittler attributed the strained relationship to Global’s changing

business model in which it shifted from a credit card processor to a competitor, as it

purchased companies that offered the same services as its referral partners like

Frontline. He also recalled a shifting attitude as Global “wouldn’t resolve issues.

2 Global asserted counterclaims for breach of contract, indemnification, and attorneys’ fees.

4 They wouldn’t provide training. They wouldn’t cooperate.” Kittler testified that the

lack of revenue and operating capital caused by Global’s actions resulted in

Frontline’s near financial collapse as the company experienced “enormous layoffs,”

lost sales, decreased revenue, and the inability to partner with new credit processing

companies. The result, Kittler testified, was that Global destroyed Frontline’s

credibility and “wiped out the value of [Frontline].”

At trial, as to damages, Frontline’s expert, Jonathon January, calculated that

Frontline had actual or direct damages of $23.4 million dollars which reflected the

company’s lost income from December 31, 2014 – the starting point of the company’s

decline – through January 2019.3 January testified that to select a starting date for the

calculation of Frontline’s actual damages he “looked at the company from the

beginning and kind of the process period. And then based on the facts as presented

in the case to determine when did things begin to change. And that date was

determined to be . . . December 31st, 2014, which is the end of the accounting

cycle[.]” He testified that the company was doing “quite well” in the period before

2014 and had an “excellent operating history.” In the four-year period prior to 2014,

3 January was permitted to reference the Frontline damages analysis he prepared prior to trial. The report was not allowed to go out with the jury in its deliberations.

5 Frontline had “achieved approximately 21 percent compounded growth rate in its

gross profit during that time.” January explained that he had used Frontline’s net

income of $2,661,000, $2,494,000, and $2,607,000, respectively for the years 2012-

2014 and calculated that if the company had continued experiencing growth at the

same rate, its earnings would have increased each year, with total lost profits of $23.4

million, given an interest rate of 7 percent.

In regard to the consequential damages, to calculate the value of Frontline as

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