Insurance Dispute Lawyer Blog
Imagine, for a moment, you’re organizing a large-scale event with a long checklist of details to manage. Now imagine missing one tiny detail and having it cost you a whopping quarter-million dollars! That’s precisely the scenario that unfolded for Star Financial Services, Inc., a prominent ATM operator, in their dealings with Cardtronics, USA, Inc. The United States Court of Appeals for the Fifth Circuit reversed the District Court’s grant of summary judgment in favor of Cardtronics.
Star Financial operates a vast network of ATMs across Maryland, the District of Columbia, and Virginia. They signed a contract with Cardtronics to handle the electronic transfer of funds associated with their ATMs to keep the wheels turning. The setup process for this arrangement required Star Financial to provide Cardtronics with specific account details. A system that worked smoothly until it didn’t.
In 2015, Star Financial submitted the setup forms for three new ATMs. However, they mistakenly provided an account number belonging to a third-party merchant instead of their Settlement Account. Realizing their mistake, they sent a correction the next day, but Cardtronics only corrected one of the three ATMs. This discrepancy led to $250,000 being directed to the wrong account.
When Star Financial noticed the significant shortfall, they took Cardtronics to court, alleging breach of contract. In Louisiana, a breach of contract occurs when a party fails to perform an obligation under the terms of a contract which results in damages to the other party. St. Landry Homestead Fed. Sav. Bank v. Vidrine.
Star Financial’s argument was straightforward: Cardtronics had failed in its contractual duty to correct the account information for the two terminals, leading to the misdirected funds. Under Louisiana law, the plaintiff must prove the obligor’s undertaking an obligation to perform. Favrot v. Favrot. As such, the District Court favored Cardtronics, arguing the responsibility of ensuring the terminal information’s correctness rested on Star Financial.
The District Court’s verdict led Star Financial to appeal to the Court of Appeals. Here, the Court looked at the facts and the contract rules differently. In Louisiana, interpretation of a contract is made through the determination of the parties’ intent. Amend v. McCabe. Here, the Court acknowledged Star Financial had an obligation to provide correct Terminal Set-up Forms. However, the Court held Cardtronics, after receiving corrected forms, was also obliged to ensure the correct account information was used.
This is because under La. Civ. Code art. 2046, when the contract terms are clear and explicit, no further interpretation may be made in search of the parties intent. La. Civ. Code art. 2046. The Court held the District Court concluding the Contract not imposing an obligation upon Cardtronics to use correct account information after receiving updated Terminal Set-up Forms led to an absurd consequence in which Star Financial can never make effective changes to the form despite an explicit provision to the contrary. Amend. As such, the Court overruled the District Court’s decision.
This case underscores the importance of paying attention to every detail, especially in business arrangements. Additionally, it highlights how both parties share the responsibility to ensure everything runs smoothly. It is recommended to approach a good lawyer or an excellent attorney who understands the nuances of such contractual relationships and ensures all parties interests are protected.
Additional Sources: Star Financial Services, Inc. v. Cardtronics USA, Inc.
Written by Brian Nguyen
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