Opinion
Case No. 6:00-cv-1703-Orl-31KRS
December 13, 2002
ORDER
This cause comes for consideration on:
1) Defendants', Greenwich Insurance Company ("Greenwich") and NAC Reinsurance Corporation ("NAC"), collectively "Defendants," Motion for Summary Judgment (Doc. 58) and Memorandum of Law in Support thereof (Doc. 59);
NAC Reinsurance Corporation is the parent of Greenwich.
2) Plaintiff Nova Information System's ("Nova") Cross-Motion for Partial Summary Judgment (Doc. 74), its attached transcripts and other materials, and Brief in Support thereof (Doc. 75);
3) Plaintiffs Response to Defendant's Motion for Summary Judgment (Doc. 93);
4) Defendants' Memorandum of Law in Opposition to Plaintiffs Motion for Partial Summary Judgment (Doc. 95); and
5) Defendants' Notice of Filing Supplemental Authority (Doc. 99).
The Court heard oral argument on December 2, 2002.
I. Background
Premier Operations, Ltd. d/b/a/ Premier Cruise Lines ("Premier") operated pleasure cruises out of Port Canaveral, Florida. Premier allowed passengers to pay for their cruises in advance inter alia by credit card. Premier had an agreement with First Union Bank ("First Union") for First Union to serve as Premier's merchant or acquiring bank, handling all of the passengers' VISA/MasterCard charges. With this arrangement, Premier accepted the VISA/MasterCard sales drafts (i.e., transaction receipts) of passengers but immediately forwarded the drafts to First Union, who then credited Premier's account with the charge amount, minus its merchant bank fee. First Union sent the charges to the appropriate card-issuing bank, i.e, the bank that issued the VISA/MasterCard to the passenger, and the card-issuing bank in turn billed the passenger. of course, the passenger then would pay the card-issuing bank directly.
A merchant bank in this circumstance is a member of the VISA/MasterCard system that agrees to process payments made to the merchant with those cards.
Pursuant to the Fair Credit Billing Act ("FCBA") and the VISA/MasterCard regulations, when a cardholder does not receive or accept the goods or services purchased from a merchant, hence resulting in a "billing error," the card-issuing bank must relieve the cardholder of her obligation to pay once the cardholder sends the proper documentation. 15 U.S.C. § 1666 (a) and (b); 12 C.F.R. § 226.13 (a). The card-issuing banks may in turn seek a "chargeback," i.e., a reimbursement, from the merchant bank. 15 U.S.C. § 1666 (a); see generally 12 C.F.R. § 226.13. Usually, the merchant bank passes the chargeback on to the merchant, unless of course the merchant has declared bankruptcy. If the merchant cannot cover the chargebacks, the merchant bank bears the loss. In re Thomas B. Hamilton Co., Inc., 969 F.2d 1013, 1017 (11th Cir. 1992).
Because Premier operated its cruise ships out of a U.S. port, federal law and the Federal Maritime Commission ("FMC") required Premier to maintain a surety bond in the form provided by the FMC's 1992 Regulations. 46 U.S.C. § 817 (e); 46 C.F.R. § 540. This type of bond protects passengers who make deposits with cruise lines in the event that the cruise fails to sail and thereafter fails to reimburse or credit the amount paid. 46 C.F.R. § 540. Amwest, a surety company, initially issued such a bond ("Amwest Bond") for the benefit of Premier "passengers," as that term is defined by the FMC's 1992 Regulations.
A passenger who paid by credit card could not seek double recovery, i.e., seek reimbursement both through her credit card company and under the surety bond. (Sisk Depo. at 71).
Meanwhile, Plaintiff acquired Premier as a customer from First Union, who had subcontracted all its credit card processing to Plaintiff. Around January 1996, Plaintiff began providing its services for a fee. In accepting this contract, Plaintiff assessed its risk of financial loss, and in doing so, required from Premier $250,000 in collateral. (Leahy Depo. at 27, 36, 44, 66). Pursuant to this agreement, Plaintiff promised to reimburse First Union for any chargebacks passed on to First Union by the card-issuing banks. (Sisk Depo. at 35-39).
Vadeene Sisk served as manager at Nova during the relevant time frame. As manager, she was responsible for the chargeback department at Nova. (Sisk Depo. at 5-6).
By 1998, Plaintiff began expressing concern about Premier's financial condition. (Leahy Depo. at 46-48). Plaintiff knew that if Premier could not fulfill its obligations to passengers, Plaintiff, as the processor of VISA/MasterCard charges, would "be exposed to substantial financial risk" (Compl. at ¶ 11) of passengers' chargebacks. Thus, Plaintiff started to look for avenues to ameliorate the increased risk imposed as a result of Premier's declining financial health and Plaintiffs continuing obligation to First Union. As one avenue, Plaintiff asked Premier to find a new credit card processor. By January 1999, Premier had not found an alternate processor but attempted to palliate Plaintiff's fear of exposure in part by "urg[ing] Nova to remember that it was protected from any `chargeback losses'" (Pl.'s Mem. for Summ. J. at 3) under the Amwest Bond. (Leahy Depo. at 156-160).
Plaintiff has filed four complaints in this case: an initial complaint and three amended complaints. When the Court discusses or cites the "Complaint" in this Order, it refers only to the Third Amended Complaint.
The other avenue would have been for Plaintiff to require additional collateral. (Leahy Depo. at 51).
Plaintiff was not satisfied with Premier's representations and in effect asked Premier to serve as intermediary for obtaining more specific assurances of third-party beneficiary coverage under the Amwest Bond.Id. On June 29, 1999, Premier sought from the General Counsel of the FMC a legal interpretation of whether a credit card company could seek subrogation for the passenger reimbursements as provided by the surety bond. The FMC General Counsel responded in a July 8, 1999, letter ("FMC General Counsel Letter") that "the credit card company should be permitted to enjoy subrogation to the benefits the surety bond provides to passengers." (Compl., Ex. A). In that Letter, the General Counsel made it clear, however, that:
Carolyn Leahy, Vice President of Nova, testified that she never contacted the surety, Amwest, itself for such assurances. (Leahy Depo. at 158). Moreover, she says she talked to the FMC only once. (Id. at 151). Instead, Leahy — who was Plaintiffs primary contact with Premier — claims to have relied on what Alan Twaits, Premier's in-house attorney, represented to her about the FMC's confirmation of coverage. (Id. at 153). Nevertheless, Leahy still wanted assurance from Amwest. (Id. at 157).
there is no case law addressing this issue . . . [and thus] a conclusive determination of this issue would have to be made by a court of competent jurisdiction. . . . the opinion expressed herein is my own, rendered in my capacity as General Counsel for the Commission. It does not necessarily reflect the position of the Federal Maritime Commission itself nor should it be considered binding on the Commissioners should the issue be brought before them.
(Id.).
Premier forwarded this FMC General Counsel Letter to Plaintiff. Even with this Letter, Plaintiff wanted assurance from the surety (at that time, Amwest) that Plaintiff's chargeback claims would be covered under the Amwest Bond in the event of Premier's non-performance.
On July 15, 1999, Joe Cohane, Plaintiff's employee, wrote a reply e-mail to Leahy indicating that he did "not believe this [FMC General Counsel opinion] helps us." (Def.'s Mem. for Summ. J., Ex. C). Nevertheless, Plaintiff took "some comfort in the FMC letter." (Compl. at ¶ 13).
Plaintiff also took comfort in a second letter written by the FMC General Counsel on October 12, 1999, in response to a similar but unrelated inquiry about the coverage of credit card processors for Regency Cruise Line passengers. (Pl.'s Mem. for Summ. J., Ex. B). Plaintiff claims that Defendants and those "in the industry" knew about this letter too, because around November 5, 1999, George Freehill of the law firm Freehill, Hogan Mahar (the law firm for Defendants) became aware of this second letter. (Pl.'s Mem. for Summ. J. at 5; Freehill Depo. at 151-53, 158-59). Freehill testified that the FMC General Counsel opinion would mark a change in the industry's previous understanding that "these guarantees were posted purely for passengers." (Freehill Depo. at 152).
As further comfort, on November 16, 1999, Premier's surety bond broker Ed Van Name faxed to Twaits a "rough draft of a letter that is meant to comfort your credit card bank." (Adams Depo., Pl.'s Ex. 5). In the fax cover sheet, Van Name cited the FMC Regulations and stated: "I would think that the doctrine of unjust enrichment would apply [so that] . . . the credit card company would be entitled to any recovery under the bond." (Id.) Defendants knew of this letter because Defendants' agent, Scott Adams, was "made aware" of this letter in January 2000, when he was told "very generally, that this letter had been sought in the past with Amwest." (Adams Depo. at 57).
Amwest, however, declined to provide Plaintiff the assurance it sought. Thus, according to Plaintiff, Premier informed Plaintiff it would look for a new surety who could both assure bond coverage and not seek several million dollars in additional collateral, as Amwest had done. (Pl.'s Mem. for Summ. J. at 6). In January 2000, Premier — through its surety bond broker Ed Van Name — entered discussions with Defendants through Scott Adams. In these discussions, as well as in conversations preceding the negotiations, Plaintiff alleges that Premier indicated to Defendants its needs for FMC compliance as well as for a surety who could appease Plaintiff. (Compl. at ¶ 15). Adams said he had an "open mind" as to any issue Premier wanted to discuss. (Adams Depo. at 62). For example, when Twaits casually brought up the question of obtaining a comfort letter from Defendants because it would save Premier about $1 million per year, Adams agreed to look at the issue but remained non-committal. (Adams Depo. at 77-78, 108).
Adams testified that although he was not directly involved in the conversations, he recalls before he left Amwest, Premier tried to seek a comfort letter from Amwest, but that Amwest refused to do so because it would expand its liability under the bond. (Adams Depo. at 57, 60-61).
Scott Adams owns Avalon, a general agency representing only one company, Defendant Greenwich, whose business accounts for 100 percent of Avalon's business. (Adams Depo. at 9, 10). Prior to opening Avalon, Adams worked at Amwest. (Id. at 13-14). Hence, Plaintiff claims that while at Amwest, Adams worked on the Premier account and became familiar with Premier's surety bond needs. Adams had power of attorney from Defendants to execute bonds on their behalf. (Id. at 132).
Defendants agreed to become Premier's surety, and thus Premier filed an application with the FMC. The FMC determined, based upon this application and the amount of future bookings, that Defendants had to post $15 million, the maximum penal sum for an FMC bond. Therefore, on March 31, 2000, Defendants issued an FMC Passenger Vessel Surety Bond (the "Bond"), which claimed to "inure to the benefit of any and all passengers to whom the Principal [Premier] may be held legally liable for any of the damages herein described." (Compl., Ex. B.)
Shortly after Defendants issued the Bond, Plaintiff claims that Alan Twaits, Premier's inhouse attorney, called Plaintiff to report that Defendants had provided the specific assurance Plaintiff sought. (Leahy Depo. at 231-33). On April 26, 2000, Twaits informed Plaintiff that he would forward a copy of an April 25, 2000, draft letter (the "Draft Letter") written by Adams and addressed to Leahy. (Leahy Depo. at 224). The Draft Letter stated in relevant part:
Twaits thought "it was a good letter for Nova's purposes," and that "they could take comfort in it." (Twaits Depo. at 165).
Premier has asked for our position regarding any coverage that may be available to your firm for backcharges or other credits extended to Premier by NOVA under your credit card agreement with Premier. More specifically, the issue is whether NOVA would qualify as a claimant under our above referenced bond. . . .
Our position is that so long as NOVA was able to provide reasonable evidence that it had honored credits to passengers who would have, according to the terms of the FMC bond, been considered valid claimants to Greenwich for the non-performance by Premier, than NOVA would be considered a valid claimant as well under our bond.
I trust that this meets to your satisfaction and assists you in your negotiations with Premier concerning the agreement.
In exchange for this Draft Letter, Premier requested from Plaintiff a reduction in fee (Leahy Depo. of 214-15, 233; Twaits Depo. at 157-58, 169), but Plaintiff never agreed to the reduction. (Leahy Depo. at 214). Thus, the Draft Letter never was finalized, and the negotiations ended. (Twaits Depo. at 285, 292-94). Based on "such assurances, Nova felt that the Defendants had provided the specific confirmation that it sought" and thus continued to process credit card transactions. (Pl.'s Mem. for Summ. J. at 8; see also Leahy Depo. at 232, 236).
Twaits testified: "I think they [Plaintiff's agents] were willing to . . . take into consideration whatever we could give them to get them comfortable, but I don't remember them making any commitments to lower the fees." (Twaits Depo. at 158). He also said "I don't think they ever precluded it [a deal to reduce fees]. They just never agreed to it." (Id. at 292). If Plaintiff had agreed to the fee reduction, Twaits would have had to finalize the Draft Letter. Because no agreement was reached, he did not seek to finalize the Letter. (Id. at 294).
In addition, Adams claims he would not have finalized the Draft Letter without obtaining from Premier additional collateral and premium because Adams felt that expanding the liability in that manner would be akin to writing a new bond, and requiring additional premium and collateral would be common for such an expansion. (Adams Depo. at 139-46). According to Adams, he discussed the need for additional collateral and premium with Van Name (id. at 140-42), but did not memorialize these discussions because that was not usual business practice to do so until the deal became final. Here, "the deal never was consummated." (Id. at 142).
Twaits' testimony contradicts Adams' testimony. Twaits said: "I don't remember any discussion on premium, and the understanding with Avalon was that they would better the collateral situation for us than what we were being faced with Amwest." (Twaits Depo. at 160).
Adams testified that he believed the negotiations "just kind of died" because he never heard back from Premier as to Plaintiffs reaction to the Draft Letter. (Adams Depo. at 154-155). Leahy said, however, that she "had the impression it [the Draft Letter] was a done deal." (Leahy Depo. at 236). Leahy also said she never suggested that the Draft Letter needed changing nor that anyone would need to review it. (Id.)
As explained above, Twaits said that had he received a firm commitment from Plaintiff for a reduction in fees, he would have asked Defendants to finalize the Draft Letter. (Twaits Depo. at 294). Because Plaintiff made no such commitment, Twaits never sought a finalized letter from Defendants. Twaits also testified about a letter that he sent first to Plaintiff about finalizing the letter and second to another credit card processor, U.S. Bank, with whom Premier was trying to negotiate a processing deal. (Id. at 293-94). Because U.S. Bank also never made a final deal with Premier, Twaits never asked Defendants to finalize the Draft Letter for U.S. Bank. (Id. at 293).
Leahy admits, however, that she does not remember ever contacting Defendants directly about the Bond. (Leahy Depo. at 214, 230).
Specifically, Leahy claims that "the draft of the letter was adequate to meet what I needed, and I wouldn't have thought, when somebody sends something in draft, that they are going to retract the whole thing." (Leahy Depo. at 232).
On or about September 14, 2000, with assets seized, Premier ceased operating. By that time, passengers had deposited future travel payments with Premier totaling approximately $19.5 million. About 80 percent of the passengers who had made deposits did so with their credit cards, and out of those passengers, about half has used their VISA/MasterCards. (Twaits Depo. at 52).
Premier apparently has filed for insolvency in Bermuda as well as ancillary proceedings in the United States and therefore "cannot meet its obligations to indemnify NOVA for the Chargeback Losses that NOVA has incurred." (Compl. at ¶ 31).
Shortly after Premier ceased operating, Plaintiff claimed they contacted Defendants to confirm coverage under the Bond but that Defendants responded that Plaintiff was not covered because only individual "passengers" were covered. (Compl. at ¶ 32).
On September 15, 2000, the FMC issued a press release: "for passengers who purchased their cruise by credit card, we suggest contacting the credit card company and providing them with this information." (Def.'s Mem. for Summ. J., Ex. J). On September 22, 2000, the FMC issued a second press release stating: "Prior experience has shown that . . . credit card issuers may often provide speedier reimbursement to passengers than the claims process established to handle claims under bonds issued pursuant to [FMC] requirements." (Pl.'s Reply, Ex. F). On September 22, 2000, the law firm processing claims for Defendants, Freehill, Hogan Mahar (the "Freehill firm"), issued a press release notifying "all passengers, travel agents and newspaper reporters" that "Premier Cruise Lines has ceased operations." The press release informed:
In a September 21, 2000, fax to the FMC, the Freehill firm wrote that they had decided to revise the press release for Premier because:
the primary goal is to see as many passengers indemnified as soon as possible.
It was our experience in the Regency case, that we received hundreds of telephone calls from passengers who didn't know what their rights were under their credit cards, and were indeed fearful of asking for the appropriate credit. We also received thousands of duplicate claims. By taking the approach we are taking in our Press Release, I believe the vast bulk of the passengers will be promptly credited/indemnified. This will hopefully avoid both the FMC staff and our office being overwhelmed by needless claims — as was the case in the Regency debacle.
(Freehill Depo., Pl.'s Ex. 19).
based on our experience . . . we believe that any passenger who paid for their transportation by means of a credit card would be well advised to immediately request the card issuer to cancel any charges relating to any of the cancelled cruises. . . . By filing a claim with the credit card company . . . the passenger will avoid the delays that will inevitably occur in the investigation and claims settling process. All passengers who made payment for cruises that have been cancelled by cash or check may obtain a Claim Form [to submit to the Coordinating Center].
(Freehill Depo., Pl.'s Ex. 74) (emphasis in original).
In addition, the Freehill firm recorded an outgoing voicemail message for Premier passengers who phoned its Claims Coordinating Center. It said in relevant part:
If you paid by credit card . . . you should direct your claim to your credit card issuer. . . . The Fair Credit Act obligates the card issuer to rectify all charges relating to the cancelled cruises. By filing a claim with your credit card company . . . you will avoid the delays that will inevitably occur in the investigation and claims settling process.
If you paid by cash or check, you may obtain a claim form. . . .
(Freehill Depo., Pl.'s Ex. 69).
Because Premier was bankrupt at the time the passengers sought chargebacks, First Union, as Premier's merchant bank, could not debit Premier's account according to the usual practice in the event of a billing error and chargeback. Plaintiff, however, reimbursed First Union for the chargebacks due to their contractual agreement. As of the date of the filing of the Complaint, the amount of chargebacks has exceeded $9 million. (Compl. at ¶¶ 25, 29). After receiving and paying the chargebacks, Plaintiff sent form assignments to those cardholders and card-issuing banks who had initiated said chargebacks. (Sisk Depo. at 75-77). These assignment forms asked the recipients to assign their rights to receive refunds from Premier and/or Defendants, but signature of the assignment did not affect a cardholder's right to reimbursement through the chargeback process. (Id. at 77-78).
Plaintiff admits it did not directly reimburse any of the credit card passengers. (Sisk Depo. at 39).
Plaintiff thus filed a Complaint against Defendants, alleging: 1) breach of contract, 2) promissory estoppel and equitable estoppel, 3) equitable subrogation, 4) contribution, 5) unjust enrichment, and 6) contractual subrogation. Defendants sought summary judgment as to all counts. Thereafter, Plaintiff sought partial summary judgment on all claims except promissory and equitable estoppel.
After the filing of Defendants' and Plaintiffs dispositive motions, the FMC issued a Notice of Proposed Rulemaking ("Proposed Rule"). Passenger Vessel Financial Responsibility, 67 Fed. Reg. 66352-01 (Oct. 31, 2002) (to be codified 46 C.F.R. pt. 540). The Proposed Rule noted:
Premier's $15 million surety bond did not cover the entire amount of its UPR [unearned passenger revenue], estimated to have been approximately $22 million. Only by reliance on the obligation of credit card issuers to reimburse those passengers who had charged their purchases will Premier's surety bond be sufficient to satisfy all passenger claims. . . . coverage of all passenger funds for voyages not yet performed be achieved in part by relying on the obligations of the credit card issuers under the Fair Credit Billing Act . . . thus reducing the amount of coverage that must be filed with the Commission. . . . [the new rule would not] create any right of subrogation to the UPR covered by the Commission's program by credit card issuers that have reimbursed passengers for transactions involving excepted passenger revenue. Whatever means credit card issuers use to cover risks posed by excepted passenger revenue or the FCBA is beyond the scope of this proceeding.
67 Fed. Reg. at 66353-54.
II. Standard of Review
A party is entitled to judgment as a matter of law when the party can show that there is no genuine issue as to any material fact. Fed.R.Civ.P. 56(c). The substantive law applicable to the case determines which facts are material. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Summary judgment is mandated "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case and on which that party will bear the burden of proof" Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The moving party bears the burden of proving that no genuine issue of material fact exists. Id. at 323. In determining whether the moving party has satisfied its burden, the court considers all inferences drawn from the underlying facts in a light most favorable to the party opposing the motion, and resolves all reasonable doubts against the moving party.Anderson, 477 U.S. at 255. If the record presents factual issues, the court must not decide them, but rather, must deny the motion and proceed to trial. Environmental Def. Fund v. Marsh, 651 F.2d 983, 991 (5th Cir. 1981).
All decisions of the Fifth Circuit prior to October 1, 1981 are binding precedent on this Court. Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc).
III. Analysis
A. Breach of Contract
Defendants assert that Plaintiff's breach of contract claim fails as a matter of law because Defendants have no contractual obligation to Plaintiff. Specifically, Defendants claim that: 1) Plaintiff is not a "passenger" within the meaning of the Bond nor is it entitled to assert the rights of passengers, 2) Plaintiff has not produced sufficient evidence to show that Defendants agreed to expand the Bond's coverage to include Plaintiff, and 3) Plaintiff is not a third party beneficiary because neither the contracting parties nor the "contract" expressed a clear intent to primarily and directly benefit Plaintiff as a third party. Plaintiff, of course, asserts the opposite. Plaintiff claims that the FMC Regulations' definition of "passenger" confirms the FMC's position that such bonds were intended to benefit all persons and companies sustaining a risk of loss, including processing companies like Plaintiff. It is true that Plaintiff may have failed to adequately plead a third party beneficiary theory, but to the extent that they did plead the theory, the Court will analyze it herein.
Under Cioffe v. Morris, 676 F.2d 539, 541 (11th Cir. 1982), a judgment maybe based on an implied issue only if the parties expressly or impliedly consent to treat the issue as if it was raised in the pleadings.
A third party becomes a beneficiary to a contract only when the contract or the contracting parties express intent "primarily and directly to benefit that third party." Vencor Hospitals v. Blue Cross Blue Shield of R.I., 169 F.3d 677, 680 (11th Cir. 1999); Florida Mun. Power Agency v. Fla. Power Light Co., 81 F. Supp.2d 1313, 1324 (M.D. Fla. 1999) ("A party is an intended beneficiary only if the parties to the contract clearly express, or the contract itself expresses, an intent to primarily and directly benefit the third party or a class of persons to which that party claims to belong."). If the contract itself does not manifest intent, the plaintiff must show that both contracting parties intended to benefit a third party. Caretta Trucking Inc. v. Cheoy Lee Shipyards, Ltd., 647 So.2d 1028, 1031 (Fla. 4th DCA 1994) ("It is insufficient to show that only one party unilaterally intended to benefit the third party."). Moreover, a third person cannot maintain an action on a contract if that third person only derives some "incidental or consequential benefit from its enforcement." Blu-J, Inc. v. Kemper C.P.A. Group, 916 F.2d 637, 640 (11th Cir. 1990) (quoting with approvalFlorida ex rel. Westinghouse Elec. Supply Co. v. Wesley Constr. Co., 316 F. Supp. 490, 495 (S.D. Fla. 1970); Florida Mun. Power Agency, 81 F. Supp.2d at 1324.
The Court finds that Plaintiff's claim of third-party beneficiary status fails as a matter of law. As discussed below, neither the contract itself nor the contracting parties expressed any intent to directly benefit Plaintiff as a third party.
1. The "Contract"
The FMC Proposed Rulemaking clarifies that an FMC bond such as the one at issue here is not intended to cover third-party credit card processors like Plaintiff. 67 Fed. Reg. 66352. This Proposed Rule puts to rest any argument by Plaintiff based on the 1992 FMC Regulations.
Even prior to this Proposed Rule, however, the unambiguous 1992 FMC Regulations did not indicate any intention to include a credit card processor such as Plaintiff as a bond claimant. As Plaintiff correctly notes, under Chevron U.S.A., Inc. v. Natural Resource Defense Council, Inc., 467 U.S. 837, 844 (1984), an agency's construction of a statute controls unless the construction is arbitrary, capricious, or manifestly contrary to the statute. Here, the FMC has construed the Bond to provide for payment only to "passengers," who are defined as: "any person who is to embark on a vessel at any U.S. port and who has paid any amount for a ticket contract entitling him to water transportation." 46 C.F.R. § 540.2 (g). "Person" includes "individuals, corporations, partnerships, associations, and other legal entities. . . ."Id. at § 540.2(a). Although Plaintiff argues that by including "corporations" in its definition of "person," the FMC expressed an intent to include credit card companies in the bond's coverage, the discussion in the FMC Regulations belies Plaintiffs argument. Indeed, the Regulations state: The Commission finds that the existing definition of `passenger' appropriately extends beyond individuals to include corporate charterers of passenger vessels. . . . 57 Fed. Reg. 417887, 41889-90 (emphasis added). Based on this language, the FMC did not intend to cover all corporations in the definitions of "person" and "passenger," but rather only those corporations who paid for passengers' transport in advance of the cruise. Id. at 41889 ("If a corporation purchases all the available berths for a particular voyage, that corporation or its designated beneficiaries/assignees are entitled to the benefits afforded by the ticket contract. . . . We find no reason to differentiate between passengers whose tickets were purchased and offered by a corporate employer, vis-a-vis persons whose tickets were purchased and conveyed by a friend or family member."). Even under the broadest possible reading, Plaintiff cannot be considered a "passenger" because the legislature intended to cover purchasers of passenger fares in advance of the cruise, not third-party processors who honored chargebacks after the fact of non-performance.
The Proposed Rule does not alter in any way the definitions of "passenger" or "person."
2. The Contracting Parties
Further, there is no evidence in the record to show that the contracting parties — Premier and Defendants — promised or intended to cover Plaintiff under the Bond. First, the Draft Letter and related conversations provide evidence only that the parties negotiated about expanding the Bond's coverage. Neither the Letter nor the conversations provide evidence that Defendants specifically promised or confirmed that Plaintiff would be covered. Even if Premier, as one of the contracting parties, made representations to Plaintiff of its understanding that the Bond covered Plaintiff, nothing in the record indicates an intent by Defendants, the other contracting party, to include Plaintiff as a bond claimant. Evidence of the unilateral intent of one contracting party is insufficient to show intent for conferring third party beneficiary status. Caretta Trucking, 647 So.2d at 1031.
The record reveals that Plaintiff did not directly speak or negotiate with Defendants at all.
This situation therefore contrasts with the situation in Vencor, where the Eleventh Circuit held that a hospital was a third-party beneficiary because the medical policy at issue overtly stated that payments could be made to the doctor, the hospital, or the policyholders. "By providing for payment directly to the hospital, the contracting parties showed a clear intent to provide a direct benefit to Vencor. . . ." Vencor, 169 F.3d at 680. Plaintiff cannot show such direct intent here, and hence the Court will not consider it a third-party beneficiary of the Bond. Plaintiff has no standing to assert a breach of contract claim.
Even though Plaintiff may derive some incidental or consequential benefit from enforcement of the Bond, that benefit is insufficient to confer standing as a third-party beneficiary to the Bond. Blu-J, 916 F.2d at 640. Plaintiff would derive a benefit from enforcement of the Bond because a passenger who paid in advance with her credit card can receive reimbursement from only one source. If she pursued her rights for reimbursement under the Bond, Plaintiff would be relieved of having to reimburse her under its agreement with First Union.
The Court finds it irrelevant to a breach of contract claim whether Defendants knew or should have known that Premier believed its credit card processors were covered by the Bond. Plaintiff is neither a party to nor a beneficiary of the contract at issue — which is a form FMC bond — and hence any knowledge on Defendants' part about Premier's beliefs does not bear on whether Defendants intended to include Plaintiff, a third party, in its coverage. The Court's decision also does not change even if Defendants made no attempt to dissuade Premier of its understanding.
Further, the Court notes that Plaintiff has put forth no evidence that it relied on coverage under the FMC bond when it contracted with First Union and acquired Premier's account. Indeed, Plaintiff began attaching importance to coverage under the FMC bond only when Premier reminded Plaintiff of the bond in an effort to appease Plaintiffs fears of increased risk.
B. Promissory and Equitable Estoppel
Defendants seek summary judgment on the count of estoppel because: 1) they made no affirmative misrepresentations that Plaintiff qualified as a claimant under the Bond, and 2) any reliance by Plaintiff on Defendants' representations was not reasonable because the Draft Letter was unsigned, labeled "draft," and not finalized.
Equitable estoppel requires reliance on a representation of fact whereas promissory estoppel requires reliance on a promise. Pinnacle Port Cmty. Ass'n v. Orenstein, 872 F.2d 1536, 1542-43 (11th Cir. 1989). Because this distinction is irrelevant to the case at bar, the Court will discuss the estoppel claims generally.
In its opposition documents, Plaintiff claims that Defendants are barred from disputing its status as a Bond claimant because the evidence reveals that Defendants made representations and/or promises to Premier upon which Plaintiff reasonably relied.
Plaintiff has not sought summary judgment on this claim.
Key to this discussion is the tenet that "estoppel may not be invoked to enlarge or extend the coverage specified in an [insurance] contract."Kane v. Aetna Life Ins., 893 F.2d 1283, 1285 n. 3 (11th Cir. 1990) (citing 18 M. Rhodes, Couch Cyclopedia of Insurance Law § 71:40 (rev. ed. 1983). In Kane, for example, the court held that estoppel was available to the plaintiff because the insurance company's oral representations about the contract's coverage amounted to mere interpretations of ambiguous contract terms, not modifications of the contract. Id. at 1285 n. 3. Unlike in Kane, the Bond provisions here are not "clearly subject to varying interpretations," id. at 1286. Because the Bond's terms are not ambiguous, any agreement to include Plaintiff as a Bond claimant would not have been a mere interpretation of the existing Bond, but rather a major alteration of the Bond's terms. Estoppel is not available to enlarge or modify coverage of this Bond.
The Bond's terms are not ambiguous because the Bond is based on a form produced by the FMC, and the FMC has defined with specificity the relevant terms of "passenger" and "person."
As mentioned above, the "contract" at issue here was a form FMC Bond. Hence, just as in Nachwalter v. Christie, 805 F.2d 956, 960 (11th Cir. 1986), where the court held, "it would be inconsistent with the statutory requirement that ERISA plans be `maintained' in writing," so too would it be inconsistent with the FMC regulations and congressional requirements to allow oral modifications to this written form Bond. Id. at 960 ("We agree with the district court that this requirement that ERISA plans be `maintained' in writing precludes oral modifications of the Plans; the common law doctrine of estoppel cannot be used to alter this result.").
Moreover, allowance of such modification would undermine the FMC's goal of protecting passengers. The Bond's maximum penal sum is $15 million. If Plaintiff could seek reimbursement — which could amount to more than the $15 million cap — based on an oral or side agreement, passengers would have no notice that their claims might be precluded due to lack of funds. This logic is supported by the Proposed Rule, which notes that the surety bond becomes sufficient only "by reliance on the obligation of credit card issuers to reimburse those passengers who had charged back their purchases. . . ." 67 Fed. Reg. at 66353.
The exception to the rule that estoppel cannot enlarge or modify a contract is where a plaintiff can show detrimental reliance. Emmanuel v. U.S. Fid. Guar. Co., 583 So.2d 1092, 1093 (Fla. 3d DCA 1991) (citing Crown Life Ins. Co. v. McBride, 517 So.2d 660 (Fla. 1987), for the well-established rule in Florida that "promissory estoppel may be utilized to create insurance coverage where to refuse to do so would sanction fraud or other injustice."). Under this exception, a plaintiff must show that: 1) the representer/promissor reasonably expected to induce the relying party's action or forbearance, and 2) the representee/promisee detrimentally relied so as to adversely change its position. Pinnacle Port Cmty. Ass'n v. Orenstein, 872 F.2d 1536, 1543 (11th Cir. 1989).
The Court finds that no genuine issue of material fact exists as to whether Defendants reasonably could expect their representations to induce Plaintiff's detrimental reliance. Indeed, no promisor/representor could reasonably expect that an unsigned draft letter would induce the promisee into action or forebearance, especially where the promisee did not respond to or officially accept the letter.
Plaintiff correctly cites Masonry v. Miller Constr., 558 So.2d 433, 434 (Fla. 1st DCA 1990), for the proposition that "it is analytically irrelevant" that Defendants made the alleged misrepresentations/promises to Premier rather than directly to Plaintiff. "A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forebearance is binding if injustice can be avoided only by enforcement of the promise." Id. at 434. However, even if Defendants held discussions with Premier regarding bond coverage for Plaintiff, no reasonable person could find that Defendants' negotiations or Draft Letter would induce Plaintiff to take resolute action. Indeed, the Court does not understand how Plaintiff could have ceased processing transactions for Premier without breaching its contract with First Union. The Court surmises, therefore, that Plaintiff was not induced to continue processing credit card transactions merely by Defendants' Draft Letter and surrounding discussions.
In fact, the record shows that Plaintiff continued to reimburse chargebacks to First Union in spite of the associated risk because it was earning profits. Leahy testified that Plaintiff increased Premier's fee, thereby resulting in Plaintiffs profits increasing "significantly." (Leahy Depo. at 176). Whether the increased fee was merely an incentive for Premier to obtain another credit card processor is irrelevant to Plaintiffs claims.
The Court notes that both Plaintiff and Defendants incorrectly characterized the test for estoppel. Defendants indicate that because the record presents "no evidence upon which a fact finder could conclude . . . that Nova reasonably relied upon any such representation" that Plaintiffs estoppel claim fails as a matter of law. (Def.'s Mem. for Summ. J. at 9). Plaintiff argues that there is evidence in the record of its reasonable reliance sufficient to create a fact dispute. (Pl.'s Opp'n at 9). The test is not whether the promisee reasonably relied, but rather whether the promisor reasonably could expect its representations to induce promisee to act or forebear acting. Pinnacle Port, 872 F.2d at 1542.
Plaintiff's footnote argument that there is an issue of fact precluding summary judgment because Defendants never informed Premier that they were not affording Plaintiff protection also must fail. Plaintiff here citesEmmco Insurance Co. v. Marshall Flying Service, Inc., 325 So.2d 453 (Fla. 2d DCA 1976), in which the insured submitted an application for insurance coverage of chemical damage to his crop duster. The court said the insurance agent who received the application knew or should have known of the request for chemical coverage. Because there was no dispute that the insurance company failed to provide the requested coverage and failed to notify the insured of the excluded coverage, the court granted summary judgment for the insured. The instant case is distinguishable. Here, Plaintiff inquired of Premier whether the FMC Bond included Plaintiff as a claimant. Defendants entered negotiations on this topic, but the negotiations were never concluded. Although Defendants offered to modify the Bond's terms, Plaintiff did not accept that offer. Accordingly, principles of estoppel will not support Plaintiffs claims.
C. Equitable Subrogation
Defendants claim they are entitled to summary judgment because Plaintiff did not reimburse any credit card passengers but rather only First Union pursuant to its contractual obligation. Because Plaintiff satisfied an independent obligation rather than a "debt of another," Defendants contend that Plaintiff cannot step in the shoes of the credit card passengers.
Defendants assert that Plaintiff is precluded from claiming subrogation because, in the underlying bankruptcy proceeding, Plaintiff claimed it was not subrogated to the passengers' rights. Because these positions are exact opposites and inconsistent, Defendants claim Plaintiff is judicially estopped from seeking equitable subrogation. The Court need not rule on this argument.
Plaintiff also seeks summary judgment on this claim, asserting that: 1) it non-voluntarily sustained a financial loss for which Defendants primarily were liable, 2) no injustice would be worked upon Defendants because they specifically assumed the liability at issue, 3) Defendants would receive a windfall in the event subrogation is not allowed because Defendants "would be able to shed millions of dollars of liability they specifically assumed," (Pl.'s Mem. for Summ. J. at 17), and 4) Defendants would be unjustly enriched by their campaign to mislead credit card passengers into seeking reimbursement from Plaintiff rather than from Defendants.
In support, Plaintiff cites the FMC General Counsel Letters as well-reasoned and well-known in the industry, and hence subject to respect and "certain judicial deference. (Pl.'s Mem. for Summ. J. at 17). Defendants argue that because of the FMC Proposed Rule, Plaintiff has been deprived of its primary authority — the FMC General Counsel Letters.
A claim for equitable subrogation flows from the legal consequences of the acts and relationships of the parties. Dade County Sch. Bd. v. Radio Station WQBA, 731 So.2d 638, 646 (Fla. 1999). The party who invokes this doctrine must show: 1) he has paid the entire debt to protect his own interest, 2) he had a liability, right, or fiduciary relationship which conferred upon him a direct interest in discharging the debt (i.e., he did not voluntarily pay the debt), 3) he was not primarily liable for the debt, and 4) no other party would suffer an injustice by application of the subrogation. In re Munzenrieder Corp., 58 B.R. 228, 231 (M.D. Fla. 1986); Dade County Sch. Bd., 731 So.2d at 646. Where a party simply pays his own debt rather than the debt of another, however, that party has no standing to bring an equitable subrogation claim. In re Munzenrieder Corp., 58 B.R. at 231.
The FMC itself has stated in its recent Proposed Rule that credit card companies are not subrogees under FMC Passenger Bonds, 67 Fed. Reg. at 66354 n. 8. For this reason alone, Plaintiff has no claim of subrogation, and summary judgment is appropriate.
The Proposed Rule also destroys Plaintiff's argument that the Court must give "respect" and certain judicial deference to the FMC General Counsel letters. Because the FMC's Proposed Rule directly contradicts the FMC General Counsel's position, the Court need not give the FMC General Counsel letter any "respect." This Proposed Rule moots any analysis regarding whether the letters were "well-reasoned."
Even without the Proposed Rule, the Court would not have given the FMC General Counsel letters "certain judicial deference." At most, underChristensen v. Harris County, 529 U.S. 576 (2000), the letters offer a non-binding opinion of the General Counsel. Id. at 587 (holding that interpretations contained in agency opinion letters "do not warrant Chevron-style deference . . . [but rather] are entitled to respect . . . but only to the extent that those interpretations have the power to persuade.") (internal citations and quotations removed).
The Defendants argue that a July 15, 1999, e-mail between two of Plaintiff's employees, Joe Cohane and Leahy, supports their position that Plaintiff did not in fact rely on the first FMC General Counsel letter as comfort. In this e-mail, Cohane stated in response to Leahy informing him of the General Counsel Letter, "[I] do not believe this helps us." (Def.'s Mem. for Summ. J., Ex. C). It is irrelevant to the Court's decision that Cohane or any other employee of Plaintiff said the FMC General Counsel's opinion helped or hurt Plaintiffs position.
The Court further finds it irrelevant whether the "industry" knew about the position of the FMC General Counsel. Knowledge of a non-binding opinion letter does not magically convert that opinion into a binding one.
Even prior to the Proposed Rule, Plaintiff had no claim for equitable subrogation. Plaintiff's and Defendants' obligations are separate and distinct. Like the bank in Munzenrieder who "merely honored the standby irrevocable letter of credit . . . according to its terms," 58 B.R. at 231, Plaintiff here merely honored its contracts to First Union and Premier according to their terms. Thus, Plaintiff paid its own debt; it did not pay any debt belonging to Defendants.
The Court sees no merit in Plaintiffs argument that Defendants had primary liability for claims arising under Premier's non-performance while Plaintiff enjoyed secondary liability as a guarantor. The two parties had separate liability and distinct obligations running to different parties. The fact that passengers could make a claim under the Bond or through their credit card company does not render Defendants primarily or secondarily liable to anyone. Rather, it reinforces the fact that the liabilities ran side by side, not vertically.
Nor will Defendants receive a windfall if subrogation is disallowed. While Defendants may have encouraged certain passengers to pursue reimbursement through their credit card companies, Defendants are not liable for such conduct. Indeed, not only did Defendants' agents issue a press release and voicemail message suggesting credit card passengers should pursue their rights under their credit cards, where reimbursement would be more complete and quicker, but the FMC also published almost identical press releases. It would be speculative to infer that the credit card passengers relied on Defendants' press release and voicemail as opposed to the FMC's press releases. Even if the passengers did rely solely on Defendants' press release and voicemail, Plaintiff has not met the other elements to sustain a claim of equitable subrogation, and thus summary judgment is appropriate.
Freehill testified that in hindsight, he "probably would have modified that [voicemail] to say you would be best advised, not you should." (Freehill Depo. at 97). In addition, he admitted that "looking at it now" he could see how someone could infer they were accepting only cash and check passengers. (Id.). Although Freehill admits the press release does not indicate that credit card passengers have an option with regard to seeking reimbursement (id. at 89), Freehill also testified that it was "in their [the passengers'] best interest" (id. at 87) to contact their credit companies, and that the goal was to avoid confusing the passengers. (Id. at 89). Twaits also admitted to a meeting in which encouragement of passengers to charge back against their credit cards was discussed (Twaits Depo. at 206), but Twaits said the encouragement discussed was not intended to mislead. (Id. at 201).
D. Contribution
Plaintiff alleges that it had a common obligation with Defendants to reimburse payments made by credit card passengers and that because Plaintiff has incurred losses in connection with the chargebacks, Plaintiff is entitled to contribution from Defendants. On the other hand, Defendants argue that its burden is not common to Plaintiffs obligation. Plaintiff's obligations ran only to First Union and Premier, while Defendants' obligation ran only to qualified "passengers" of Premier cruises.
Under the "traditional view," no claim for contribution will lie where concurrent tortfeasors do not share a "common legal liability" toward the plaintiff Columbus-McKinnon Corp. v. Ocean Prod. Research, Inc., 792 F. Supp. 786, 789 (M.D. Fla. 1992) (citing Simeon v. T. Smith Son, 852 F.2d 1421, 1434 (5th Cir. 1988)); Schrank v. Pearlman, 683 So.2d 559, 561 (Fla. 3d DCA 1996) (noting that equitable contribution "attempts to distribute equally among those who have a common obligation, the burden of performing that obligation.") (emphasis added). A claim for contribution cannot lie here because Defendants' liability to the passengers was not common to Plaintiff's liability to First Union and Premier. Defendants' and Plaintiffs liabilities are both in form and substance separate and distinct, and summary judgment in favor of Defendant is thus appropriate.
Because Plaintiff cannot establish its claim for contribution, the Court need not discuss Defendants' argument that the remedy of contribution is not available in this case.
E. Unjust Enrichment
Defendants claim that Plaintiff has not conferred any benefit on Defendants, as required for unjust enrichment, but rather that Plaintiff made payments only to First Union, not to passengers. For this reason, Defendants claim Plaintiff has not discharged any liability running to Defendants and thus conferred no benefit onto Defendants.
To succeed on a claim of unjust enrichment, Plaintiff must show: 1) it conferred a benefit on Defendants of which Defendants are aware, 2) Defendants voluntarily accepted and retained the benefit conferred, and 3) the circumstances are such that it is inequitable for Defendants to retain the benefit without paying Plaintiff for it. Shibata v. Lim, 133 F. Supp.2d 1311, 1316 (M.D. Fla. 2000); Huntsman Packaging Corp. v. Kerry Packaging Corp., 992 F. Supp. 1439, (M.D. Fla. 1998); Coffee Pot Plaza P'ship v. Arrow Air Conditioning and Refrigeration, Inc., 412 So.2d 883, 884 (Fla. 2d DCA 1982) ("Where unjust enrichment is asserted, a party is liable for services rendered only when he requests other party to perform the services or knowingly and voluntarily accepts their benefits."). Before an unjust enrichment claim may lie, however, Plaintiff must show that some benefit flowed to Defendants. Coffee Pot Plaza P'ship, 412 So.2d at 884.
Plaintiff's claim of unjust enrichment fails because Plaintiff did not confer any direct benefit upon Defendants. Plaintiff was obligated pursuant to its contract with First Union, the VISA/MasterCard regulations, and the FCBA, to reimburse First Union, who honored chargebacks to VISA/Mastercard-paying passengers. The fact that Plaintiff paid First Union, as they were required to do, does not in any way suggest that Plaintiff conferred a benefit onto Defendants. If any one conferred a benefit onto Defendants, it was the card-issuing banks, who, pursuant to the FCBA, credited passengers with valid billing errors. To the extent one could argue that an indirect benefit was conferred, principles of equity would not support shifting the risk from Plaintiff to Defendants for the same reasons stated above.
Accordingly, summary judgment is proper, and the Court need not analyze whether Plaintiff met any of the other elements of unjust enrichment.
F. Conventional Subrogation
In its Complaint, Plaintiff alleged that certain card-issuing banks and credit card passengers assigned their claims under the Bond to Plaintiff, and that these assignments entitle Plaintiff to assert any right of those passengers. Defendants urge summary judgment because Plaintiff sought the assignments only after Plaintiff honored the chargebacks.
Conventional subrogation, as opposed to equitable subrogation, does not flow from the legal consequences of parties' acts and relations, but rather flows from a contract between parties who agreed that the party paying the debt will have the same rights and remedies as the original creditor. Dade County School Bd., 731 So.2d at 646; Wolf v. Spariosu, 706 So.2d 881, 883 (Fla. 3d DCA 1998) (noting that conventional subrogation arises from an express or implied agreement that a third person or one having no previous interest in the matter shall, upon discharging an obligation or paying a debt, be substituted in the place of the creditor with respect to such rights as the creditor had against the debtor).
Plaintiff claims that the assignments mark express agreements that Plaintiff, as a third party having discharged an obligation, should be substituted in the place of the creditor for the creditor's rights. An assignee's rights, however, are only as great as the rights of the assignor. Pulte Home Corp., Inc. v. Ply Gem Indus., Inc., 804 F. Supp. 1471, 1481 (M.D. Fla. 1992) ("It is axiomatic that an assignee can acquire no greater rights than those possessed by the assignor himself.") (citation omitted). Hence, where an assignor has nothing to assign, the assignee gains nothing, and the assignment loses validity. United States v. 11,580 Dollars in U.S. Currency, 454 F. Supp. 376, 381 (M.D. Fla. 1978) (no valid assignment where the assignor had nothing to assign).
In this case, the undisputed facts show that the assignments occurred after Plaintiff had honored all chargebacks. Having received their chargebacks or reimbursements, passengers and card issuers had nothing to assign. Double recovery being prohibited, Defendants could not charge back passengers or reimburse card issuers who already had been reimbursed or charged back by Plaintiff. Without any rights to assign, Plaintiff received nothing by obtaining the assignments. Plaintiff's claim of conventional subrogation therefore fails.
IV. Conclusion
Based on the foregoing, it is therefore
ORDERED and ADJUDGED that Defendant's Motion for Summary Judgment (Doc. 58) is GRANTED, and Plaintiffs Motion for Partial Summary Judgment (Doc. 74) is DENIED.
DONE and ORDERED.