Update #2 (May 18, 2012): The U.S. Court of Appeals agreed with Sr. U.S. District Court Judge David S. Doty (D. Minn.). Plaintiff E-Shop’s allegations against U.S. Bank were too much speculation and not enough factual allegation. So, the court held, plaintiff’s class action complaint was appropriately dismissed. U.S. Bank was represented by Dorsey & Whitney LLP lawyers Peter Carter, Brian Vander Pol, and Andrew Peters.
Update (March 15, 2012): James Noblin argued on behalf of the E-Shops appellant. Peter Carter, of Dorsey & Whitney, argued on behalf of U.S. Bank before Judges Bright, Murphy, and Gruender.
Original Post (June 10, 2011): Unless one is in the business, what happens in the credit card world when there has been credit card fraud is not widely known. How are these transactions “reversed” and who is ultimately left with an uncompensated debit?
In the case of E-Shops paint-ball internet commerce transactions where U.S. Bank cardholders complained of unauthorized charges on their credit cards, U.S. Bank refunded the money to these accounts and then satisfied that amount from E-Shop’s bank account at HSBC. E-Shops, however, claims that the fraudulent charges were the result of a U.S. Bank data breach, which should therefore bear responsibility for the loss.
Sr. U.S. District Court Judge David S. Doty (D. Minn.) dismissed E-Shops complaint, which had originally been filed in Minnesota state court and was removed by U.S. Bank to federal court.
The crux of Judge Doty’s decision was that E-Shop’s allegations of U.S. Bank’s role in the alleged fraud were entirely too sketchy and circumstantial. E-Shops had tried to argue (without any support in the case law, apparently) that this was not your ordinary fraud case and a looser pleading standard was warranted under the circumstances. Judge Doty rejected this argument. Whether this case might have survived before the boosted federal pleading standards of Iqbal/Twombly is academic, but it plainly fell short under the present pleading regime.