As we have previously explored, litigation involving account takeovers (“ATOs”) and business email compromise (“BEC”) fraud have produced a muddled legal landscape. As between payors and intended payees, courts have tended to focus on which party was best positioned to prevent the loss, albeit with inconsistent results. But some litigants have attempted to pursue payment platforms, including processors and acquiring banks, hoping to foist blame for system compromises on their payments providers.
Pursuing a payments platform, as we have noted, is rarely the answer. A well-drafted merchant agreement can, and should, insulate payments providers from liability when their merchants are subject to an ATO or BEC event.
A recent win by AGG litigators Morgan Harrison and Edward Marshall underscores that reality. A merchant sued a processor, its acquiring bank, and a referral partner after a threat actor made multiple changes to the bank account into which the merchant’s transaction proceeds were to be deposited. All told, it claimed that the defendants’ perceived negligence and breaches of contract allowed the threat actor to make off with more than $1.5 million. It sought to recover those losses from AGG’s clients, asserting an array of legal theories.
Following argument on a motion to dismiss before the Georgia State-Wide Business Court, AGG secured a complete victory for its clients — the defendant processor and its sponsor bank. A well-written merchant agreement, and calibrated attacks on the plaintiff’s innovative legal theories, resulted in a swift and satisfying defense judgment.
If you would like to discuss the matter or to access the court’s decision, please contact Morgan Harrison and Edward Marshall.
Authors:
Morgan Harrison / morgan.harrison@agg.com
Ed Marshall / edward.marshall@agg.com