On October 4, Judge Anne Thompson of the United States District Court for the District of New Jersey preliminarily approved a $2.5 million settlement agreement in a proposed class action suit against Heartland Payment Systems.
The agreement would settle a lawsuit, filed by plaintiff Rudel Corporation, which alleges that Heartland charged its customers unauthorized fees to process American Express card transactions and in so doing, breached the contract and an implied covenant of good faith and fair dealing between the parties.
Heartland processes credit, debit, and prepaid card payments for merchants. Rudel owns and operates Jacala Mexican Restaurant in San Antonio, Texas, and contracted with Heartland to process credit card transactions made at the restaurant.
According to the suit, in June 2014, Heartland contacted Jacala Restaurant and other merchants it processes payments for and advised the merchants that Heartland would charge the same fee to process American Express card payments as they would to process payments made by Visa or Mastercard. Merchants were charged the discounted fee for American Express payments from July to October 2014. Rudel alleges, however, that when they and other merchants received their October 2014 billing statement from Heartland, the statement included an additional charge called the “American Express Fee Adjustment.” Depending on the merchant, the charge ranged anywhere from tens to hundreds of dollars.
Heartland asserted that the fee adjustment was intended to correct miscalculated rates applicable to American Express transactions, but Rudel and other merchants believed that the charge was a processing fee for American Express transactions. As a processing fee, the charge not only contradicted the information that Heartland provided to merchants in June 2014, but also violated a provision in Heartland’s contract that required 15 days’ notice before any fee changes can be implemented.
The suit was filed in April 2016, and former U.S. District Court Judge William G. Bassler was appointed as a mediator the following month. After initial attempts to mediate were unsuccessful, counsel for Rudel moved to have a class certified, and both parties moved for summary judgment. Before those motions could be ruled upon, the parties notified Judge Thompson that a settlement agreement had been reached during a second round of mediation.
There will be a final hearing at a later date to determine if the settlement should be granted final approval.