For Heartland Payment Systems, 2009
ended on a bad note.
The year-end setback for the fifth-largest
payments processor in the US came on 23 December when a US District
Judge, Mary Cooper, rejected its lawsuit aimed at preventing
payment systems vendor VeriFone from offering direct support to
Heartland’s merchant customers.
Hostility between Heartland and VeriFone dates
back to September 2009 when VeriFone filed a lawsuit against
Heartland in which it alleged that a POS terminal being developed
by Heartland infringes one of its patents.
Heartland stood its ground. VeriFone responded
by announcing termination of its support relationship with
Heartland for VeriFone payment systems from 31 December 2009.
Adding more fuel to the fire, VeriFone
announced free support to Heartland merchants, arguing that this
was to prevent the disruption litigation over the alleged patent
infringement would have on Heartland’s ability to maintain customer
VeriFone estimates that three-quarters of
Heartland’s customers rely upon VeriFone systems.
Retaliating, Heartland then launched a lawsuit
alleging that VeriFone was “engaged in an unlawful and tortuous
campaign to punish Heartland and injure any competition”.
Heartland also noted that “VeriFone is
critical in serving existing customers and troubleshooting for
problems with the POS terminals and credit card processing”.
However, in a seemingly contradictory
statement Heartland’s founder and CEO Bob Carr said in a statement:
“Heartland is fully capable, and will continue to be fully capable,
of servicing all of its customers. In fact, VeriFone is not able to
support our customers.”
Notably, in her ruling Cooper stated that
Heartland’s contentions “contradict its own claims in this
She added that Heartland’s own assertion
“suggests an ongoing dependence and foreseeable adverse
consequences upon withdrawal [by VeriFone] of such support.”
Commenting on Cooper’s ruling, VeriFone’s CEO
Douglas Bergeron said: “Despite Heartland’s considerable efforts we
believe the right thing to do is to ensure that those merchants do
not experience any disruption or degradation in the support they
receive for their VeriFone system.”
Adding further to Heartland’s
year-end woes were two multi-million dollar settlements relating to
the data breach revealed by the processor in January 2009.
The biggest in US history, the breach involved
theft of some 130 million payment card details from Heartland’s
In the first settlement, Heartland will pay a
minimum of $1 million, and up to a maximum of $2.4 million, to
settle a class action lawsuit brought against it as a result of
losses sustained due to the intrusion.
In addition, the processor will pay legal and
other costs totalling $2.26 million relating to the settlement
which could involve 2,500 or more members of the class action.
In the second settlement, Heartland agreed to
pay American Express (Amex) $3.6 million in full and final
settlement of claims relating to the intrusion.
The settlement with Amex was the first with a
A far more costly settlement followed at the
start of 2010, with an agreement with Visa to provide issuers of
Visa-branded credit and debit cards the opportunity to recover a
total of up to $60 million with respect to losses they incurred as
a result of the data breach.
Heartland will fund up to $59.22 million of
the settlement, with the balance covered by its sponsoring banks,
KeyBank National Association and Heartland Bank, and the
intrusion-related fines imposed by Visa on the sponsoring
Indicative of the impact of the settlements,
Heartland anticipates total revenue of about $425 million in 2009
while net profit in the first nine months of 2009, excluding
intrusion related losses, totalled $23.4 million.
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