In a February 12, 2021 Decision issued by the United States District Court for the Southern District of Texas in Houston, Golenbock Eiseman Assor Bell & Peskoe LLP secured the dismissal in its entirety of the six-count Third-Party Complaint brought by Landry’s, Inc., the national hospitality, entertainment and gaming corporation, against Mastercard International Incorporated. The case arose from a 2015 data breach at Landry’s. Pursuant to Mastercard’s rules, it imposed assessments on JPMorgan Chase Bank – Landry’s’ acquiring bank – for amounts to partially reimburse the banks that issued the payments cards that were put at risk by the breach for fraud losses and operational costs. Visa, Inc. separately assessed Chase under Visa’s own data breach rules. Chase invoked an indemnification clause in its merchant agreement with Landry’s to recover the amount of the assessments, but Landry’s refused. After Chase sued Landry’s, Landry’s asserted Third-Party Complaints against Mastercard and Visa (represented by separate counsel), arguing that the card brands breached their respective contracts and associated rules with Chase and that the card brand rules designed to promote the security of the payment networks and assign responsibility for data breach losses (pursuant to which cardholders are held harmless for fraud on their accounts) are unenforceable. Landry’s argued that it should be permitted to “stand in the shoes” of Chase as an “equitable subrogee” to assert these claims against the card brands. In dismissing these claims, the Court held that Landry’s did not have a contractual relationship with Mastercard or Visa and was without standing, as an equitable subrogee or otherwise, to challenge the contractual relationships between the card brands and Chase.
Martin S. Hyman and Matthew C. Daly of GEAB&P represented Mastercard in this matter. The case is Paymentech, LLC v. Landry’s, Inc., Civil Action H-18-1622 (S.D. Tex.). This is the second case in which a court has dismissed a breached merchant’s claims against Mastercard for lack of standing. Messrs. Hyman and Daly obtained the dismissal of similar claims brought against Mastercard by Jetro Holdings, LLC in New York state court, which was unanimously affirmed by the Appellate Division, Second Department, in Jetro Holdings, LLC v. Mastercard International, Inc., 166 A.D.3d 594 (2d Dep’t 2018).