# U ni te d S ta te s Co ur t of A pp ea ls

For the Eig hth Circu it

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No. 1 5- 38 04

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Sch nu ck Mark et s, In c.

ll ll ll ll ll ll ll ll ll ll l Pla in ti

ff - App el le e

v.

Fi rs t Dat a Me rch an t Se rv ic es Co rp .; Ci ti co rp Pay m en t Se rv ic es , Inc

.

ll ll ll ll ll ll ll ll ll ll l Defe nd

an ts - App el la nt

s

__ __ __ __ __ __
App eal fro m

Uni te d S ta te s Di st ric t Co ur t fo r th e Eas te rn Dis tri ct of M is so ur i - St . Lou is

__ __ __ __ __ __

Su bm it te d: Sep te m

be r 21 , 20 16
Fil ed : J an ua ry

13 , 20 16

__ __ __ __ __ __

Befo re WOL LMAN, ARNOLD, and KELLY , Cir cu it Ju dg es

.

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W OLLMAN, Circ ui t J ud ge

.

Gro ce r y s t o r e ch ai n Sch nu ck Mar ke ts

, In c. (Sch nu ck s) su ed it s cred it card

pr oc es so r, Fi rs t Data Mer ch an t Serv ic es Co rp or at io n (Fi rs t Data ), an d th e acq ui rin g
ba nk fo r it s cred it tra ns act io ns , Ci ti co rp Paym en t Serv ic es , In c. (Ci ti co rp ). Sch nu ck s

al le ge s th at Fi rs t Data an d Ci ti co rp (co ll ect iv el y , Defen da nt s) wit hh el d m or e m on ey

fro m Sch nu ck s fo ll owi ng a da ta br each at Sch nu ck s th an th ei r co nt r a c t a ll owe d.

Sc hn uc ks br ou gh t de cl arat or y jud gm en t an d br each of co nt ract cl ai m s, an dDefen da nt s br ou gh t a de cl arat or y jud gm en t co un t e r c l a i m

. Bo th pa rti es m ov ed fo r

ju d g m en t on th e pl ead in gs

. Defen da nt s ap pe al fro m th e di st ric t co ur t’s or de r 1

de nyin g th ei r m ot io n fo r jud gm en t on th e pl ead in gs an d gr an ti ng Sch nu ck s’s m ot io n

fo r jud gm en t on th e pl ead in gs

. Defen da nt s al so ap pe al fro m th e di st ric t co ur t’s or de r
de nyin g th ei r m ot io n fo r reco ns id erat io n, or in th e al te rn at iv e fo r le av e to am en d th ei r pl ead in gs . W e aff

irm.

I.

Fi rs t Data se rv ed as Sch nu ck s’s cred it ca r d p r o c e s so r. Ci ti co rp se rv ed as it s

acq ui rin g ba nk

. W he n a m erch an t su ch as Sch nu ck s m ak es a cred it card tra ns act io n,

th e acq ui rin g b an k p ay s t he m erch an t an d i s re im bu rs ed by the ba nk th at is su ed th e
cred it card (th e is su in g ba nk ). The acq ui rin g ba nk sp on so rs th e m erch an t in to cred it

card as so ci at io n ne two rk s, in th is cas e Vis a an d Mas te rCar d (th e Ass oc ia ti on s)

, an d

vo uc he s fo r th e m erch an t’s co m pl ia nc e wit h th e Ass oc ia ti on s’ ru le s. The

Ass oc ia ti on s’ ru le s pr ov i d e t h a t th e Ass oc ia ti on s m ay is su e fin es ag ai ns t th e

acq ui rin g ba nk in th e ev en t of a card ho ld er da ta br each an d as se ss ag ai ns t th e

acq ui rin g ba nk th e co st s of m on it or in g or can cel li ng at -ri sk card s an d th e am ou nt of

frau du le nt ch arg es on th e at -ri sk card s.

The co nt ract be twee n th e pa rti es co ns is ts of a Mas t e r Serv ic es Agr eem en t (MS A) be tw e e n S c h n uc ks an d Fi rs t Data an d a Ban kc ard Add en du m ex ecu te d by

Sch nu ck s, Fi rs t Data

, an d Ci ti co rp

. The Ban kc ard Add en du m in co rp or a t e s F i r st

Data ’s Ope rat in g Pro ced ur es , an d th e Ban kc ard Add en du m an d F i r s t Data ’s
Ope rat in g Pro ced ur es in co rp or at e th e ru le s an d reg ul at io ns of th e Ass oc ia ti on s. The 2

The Hon or ab le Jo hn A. Ro ss , Uni te d St at es Dis tri ct Ju dg e f or th e East ern 1

Dis tri ct of M is so ur i.

Defen da nt s arg ue th at th e Ass oc ia ti on s’ ru l es are no t in co rp or at ed in to th e 2

ag reem en t, or th at on ly th e ru le s ap pl ic ab le to th e rel at io ns hi p be twee n th e pa rti es are

-2

-co nt ract im po se s up on Sch nu ck s a b r o a d du ty to in de m ni fy Defen da nt s fo r
Sch nu ck s’s b reac h o f co nt ract . Und er § 4.9 of Fi rs t Data ’s Op erat in g Pro ced ur es , a
de te rm in at io n by th e Ass oc ia ti on s th at Sch nu ck s is r e s p on si bl e fo r a da ta br each

req ui res Sch nu ck s to pa y Defen da nt s fo r “ Data Co m pr om is e Los se s,” de fin ed as “ al l

rel at ed ex pe ns es , cl ai m s, as se ss m en ts

, f in es , lo ss es , co st s, an d pe na lt ie s an d Is su er
rei m bu rs em en ts ” th at th e Ass oc ia ti on s i m po se on Defen da nt s.

Und er § 5.4 of th e MSA, ho wev er, Sch nu ck s’s li ab il it y is li m it ed to $5 00 ,00 0,

wit h c ert ai n e xc ep ti on s:

Lim it at io n of Liab il it y

. Not wit hs ta nd in g an y th in g in th is MSA an d an y ad de nd a to th e co nt rary, Cu st om er [Sch nu ck s], FDMS [Fi rs t Data ] an d
it s affi li at es ’ c u m

ul at iv e li ab il it y

. . . fo r al l lo ss es , cl ai m s, su it s,

co nt ro ve rs ie s, br each es , or da m ag es fo r an y cau se wha ts oe ve r (in cl ud in g, bu t no t li m it ed to

, th os e ari si ng ou t of or rel at ed to th is MSA

an d a n y a d de nd a) an d reg ard le ss of th e fo rm of act io n or le ga l th eo ry sh al l no t ex ceed $5 00 ,00 0. Not wit hs ta nd in g th e fo reg oi ng , [Sch nu ck s], [Fi rs t Data ] an d it s affi li at es ’ cu m ul at iv e li ab il it y fo r it s b r e a c h un de r S e c ti on 25 (Dat a Secu rit y ) sh al l no t ex ceed $3 ,00 0,0 00

. . . . Th i s Sect io n 5.4 li m it at io n of li ab il it y sh al l no t ap pl y to [Sch nu ck s’s] li ab il it y f o r ch arg eb ack s, se rv ic ers ’ fees

, th ird pa rty fees

, an d fees

, fin es or

in c o r p o r a t ed

. W e di sa gr ee. Alt ho ug h § 4 of th e Ban kc ard Add en du m m erel y
req ui res Sch nu ck s to co m pl y wit h “ al l app li cab le Ass oc ia ti on Ru le s,” § 25 req ui res Sch nu ck s to “ f

o ll ow th e Ope rat in g Pro ced ur es an d co m pl y wit h Ass oc ia ti on Ru le s

as th ey m ay each be am en de d fro m ti m e to ti m e.” And § A of Fi rs t Data ’s Ope rat in g Pro ced ur es st at es th at Sch nu ck s “ sh ou ld co ns ul t th e Card Org an i zat io n Ru le s fo r

co m pl et e in fo rm at io n and to en su re ful l com pl ia nc e wit h th em .” Mo reo ve r, ¶ 17 of
Sch nu ck s’s Co m

pl ai nt al le ge d th at “ [t]he op erat in g reg ul at io ns of Vis a an d

Mas te rCar d are ex pr es sl y in co rp or at ed by refe ren ce as pa rt of th e Agr eem en t,” whi ch
Defen da nt s ad m it te d in ¶ 17 of th ei r Ans wer. The Ass oc i a t i o n s ’ ru le s are th us in co rp or at ed in to th e ag reem en t, ev en to th e ex te nt th at th ey do no t di rect ly g ov ern th e rel at io ns hi p b et ween Sch nu ck s an d Def en da nt s.

-3

-pe n a l i t ie s [s ic ] by th e Ass oc ia ti on or an y ot he r card or de bi t card

pr ov id ed un de r th is MSA o r an y ad de nd a.

Sect io n 1 3.3 of t he Ban kc ard Add en du m de fin es “ th ird pa rty fees ” as “ al l fe es an d

ch arg es

. . . wit ho ut li m it at io n, of an y Cred it Card Ass oc ia ti on , Netwo rk

, card -is su in g

or ga ni zat io n, te l e co m

m un ic at io ns pr ov id er, fed eral

, st at e, or lo cal go ve rn m en ta l

au th or it y (eac h a ‘T hi rd Part y ’) in cl ud in g, wit ho ut li m it at io n an y swi tc h fee, is su er[]

rei m bu rs em en t fee, ad

jus tm en t fee, in te rch an ge fee, as se ss m en t f e e o r acce ss fee[ ]
(co ll ect iv el y , [‘] Thi rd Part y Fees ’).” The co nt ract al so pe rm it s Defen da nt s to ret ai n

in a res erv e acc ou nt fun ds th at Sch nu ck s o wes th em

.

In Mar ch 20 13

, a cy

be r-at ta ck ag ai ns t Sch nu ck s co m pr om is ed card ho ld er da ta

. Mas te rCar d as se ss ed a cas e-m an ag em en t fee ag ai ns t Ci ti co rp , as well as co st s to

rei m bu rs e is su in g ba nk s fo r card mo n i t o r in g an d rep la cem en t an d fo r frau du le nt

ch arg es

. Ci ti co rp pr ojec te d th e to t a l a mo u n t of Vis a’s as se ss m en t ba se d on

Mas te rCar d’s as se ss m en t. Bas ed on th es e as se ss men t s a n d pr ojec ti on s, Fi rs t Data

e s t a b l is he d a res erv e acco un t, an d Defen da nt s ha ve wit hh el d m or e th an $5 00 ,00 0

fro m Sch nu ck s’s cr ed it tra ns act io ns

.

Sch nu ck s’s br each of co nt ract an d de cl arat or y jud gm en t act io n al le ge s th at th e

li m it at io n of li ab il it y pr ov is io n es ta bl is he s a $5 00 ,00 0 cap on it s li ab i l i t y f or th e

as se ss m en ts ag ai ns t Ci ti co rp

. Defen da nt s’ co un te rcl ai m se ek s a de cl arat io n th at th e

li m it at io n of li ab il it y pr ov is io n do es no t ap pl y to fees ch arg ed by th e Ass oc ia ti on s as

a res ul t of a cy

be r-at ta ck

, or fees

, fin es , or pe na lt ie s ch arg ed by th e Ass oc ia ti on s fo r

a m erch an t’s no n- co m

pl ia nc e wit h Paym en t Card In du st ry Data Secu rit y St an da rd s.

Defen da nt s m ov ed fo r jud gm en t on th e pl ead in gs

. Sch nu ck s fil ed a cro ss -m ot io n fo r

pa rti al jud gm en t on th e pl ead in gs , se ek in g jud gm en t on Sch nu ck s’s an d Defen da nt s’

de cl arat or y

jud gm en t cl ai m s b ut no t o n S ch nu ck s’s b reac h o f co nt ract cla im

.

-4

-The di st ric t co ur t gr an te d Sch nu ck s’s m ot io n an d de ni ed Defen da nt s’ m ot io n,

ho ld in g th at th e as se ss m en ts fo r is su in g ba nk s’ lo ss es were no t “ th ird pa rty fees ” or

“fe e s , f in es or pe na lt ie s,” an d th us di d no t fal l wit hi n th e ex cep ti on to li m it at io n o f

li ab il it y se t fo r t h i n t h e l as t se nt en ce of § 5.4 of th e MSA. The co ur t reas on ed th at

Defen da nt s wou ld ha ve us ed th e te rm “ Data Co m pr om i s e Lo s s es ” (o r si m il ar

la ng ua g e ) i n § 5.4 ha d th ey in te nd ed to ex cl ud e th es e lo ss es fro m th e li m it at io n of

li ab il it y . The co ur t ex pl ai ne d t ha t t he pl ai n m ean in g o f th e te rm “ fee” is a p ay m en t

fo r a se rv ic e, no t r e i mb u rs em en t fo r an ot he r’s lo ss es ; fu rth erm or e, th e co ur t no te d

th at th e po rti on s of th e co nt ract co nc ern in g fees do n o t men t io n rei m bu rs em en t fo r
da ta co m pr om is e ev en ts an d th at th e po rti on s co nc ern in g da ta co m pr om is e ev en ts do

no t re fer t o fe es . Th e co ur t ru le d t ha t t he ter m s “ fin e” an d “ pe na lt y ” d es cri be su m s

im po se d as a pu ni sh m en t an d d o n ot in cl ud e wit hi n t he ir p ur vi ew da ta co m pr om is e
lo ss es

. The co ur t co nc lu de d th at it wou l d b e un reas on ab le to im po se li ab il it y on
Sch nu ck s fo r al l of Defen da nt s’ lo ss es , fo r to d o s o wou ld ren de r th e li m it at io n of

li ab il it y pro vi si on m ean in gl es s.

The co ur t al so de te rm in ed th at t h e p a r t ie s ha d no t rai se d as an is su e th e

Ban kc ard Add en du m ’s § 25 $3 ,00 0,0 00 li m it reg ard in g br each e s of da ta -s ecu rit y

st an da rd s. Acco rd in gl y , th e di st ric t co ur t e nt ered a de cl arat or y jud gm en t th at

Sch nu ck s’s li ab il it y fo r th e is su in g ba nk s’ lo ss e s i s cap pe d at $5 00 ,00 0, an d th at

Defen da nt s m

us t ret ur n th e fu nd s th at th ey ret ai ne d in ex ces s of $5 00 ,00 0, pl us th e

am ou nt of th e Vis a fin e an d Mas te rCar d cas e m an ag e ment fee. Defen da nt s m ov ed

fo r reco ns id erat io n, or in th e al te rn at iv e fo r le av e to am en d th ei r pl ead in gs , arg ui ng

in pa rt th at th e di st ric t co ur t ha d erred in ho ld in g th at Defen da nt s ha d fai le d to rai se

th e is su e of th e $3 ,00 0,0 00 li m it at io n of li ab il it y

. As st at ed earl ie r, Defen da nt s no w

ap pe al fro m th e gr an t of Sch nu ck s’s m ot io n fo r jud gm en t on th e pl e a d i n gs an d th e
de ni al of t he ir m ot io n fo r rec on si de rat io n o r le av e to am en d.

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-II.

A. Ju ris di ct io n

W e ha ve juri sd ic ti o n o ve r fin al de ci si on s of th e di st ric t co ur ts

. 28 U.S.C.
§ 12 91

. Sch nu ck s’s br each of co nt ract cl ai m is st il l pe nd in g be fo re th e di st ric t co ur t

an d ha s be en st ay ed du rin g th is ap pe al

, bu t t h e d i s t ric t co ur t cert ifi ed it s or de r

gr an ti ng Sch nu ck s’s m ot io n fo r jud gm en t on th e pl ead in gs as a fin al jud gm en t un de r
Fed eral Ru le of Ci vi l Pro ced ur e 54 (b ). W e co nc lu de th at it di d n o t a b us e it s
di sc ret io n in ru li ng th at th e or de r was fin al an d th at th ere was no jus t reas on fo r de la y

. See Jo ne s v. W

. Pl ai n s B a n k & Tr. Co

., 81 3 F.3 d 70 0, 70 3 (8 th Ci r. 20 15 ) (“ W e

rev ie w a di st ric t co ur t’s de ci si on t o g r a n t R u le 54 (b ) cert ifi cat io n fo r ab us e of

di sc ret io n.” ).

Defen da nt s’ m ot io n fo r cert ifi cat io n req ue st ed cert ifi cat io n of th e Ja nu ary 15

or de r reg ard in g jud gm en t on th e pl ead in gs , no t th e Ju ly 31 or de r de nyin g th ei r m ot io n

fo r reco ns id erat io n or le av e to am en d. Alt ho ug h th e di st ric t co ur t’s ju d gm en t

gr an ti ng cert ifi cat io n m en ti on s on ly th e Ja nu ary 15 or de r, it s m em or an du m an d or de r

pr eced in g th e jud gm en t st at ed : “ Defen da nt s no w m ov e fo r ce rt if ic at io n of th e Co ur t’s

Ja nu ary 15

, 20 15 Ord er

. . . al lo win g th em to fil e an in te rlo cu to ry ap pe al of bo th th e

Ja nu ary 15 an d Ju ly 31

, 20 15 Ord ers in th e Eig ht h Ci rcu it .” D. Ct

. Ord er of Nov

. 6,

20 15

, at 2. Defen da nt s’ no ti ce of ap pe al st at es th at th ey ap pe al fro m bo th or de rs

. W e

co nc lu de th at th e di st ric t cou rt in te nd ed to cert ify bo th th e Ja nu ary 15 or de r an d th e

Ju ly 31 o rd er an d t ha t we t hu s h av e juri sd ic ti on to rev ie w bo th ord ers

.

B. Ju dg m en t o n t he Ple ad in gs

“ W e rev ie w de n ov o th e di st ric t co ur t’s en try of jud gm en t o n t he pl ead in gs .”

W al dr on v. Boei ng Co

., 38 8 F.3d 59 1, 5 93 (8t h C ir. 2 00 4) . A m ot io n for judg m en t

on th e pl ead in gs sh ou ld be gr an te d whe n, acce pt in g al l fact s pl ed by th e no nm ov in g

-6

-pa rty as tru e an d dr awin g al l reas on ab le in fere nc es fro m th e fact s in fav or of th e

no nm o v i n g pa rty, th e m ov an t ha s cl earl y es ta bl is he d th at no m at eri al is su e of fact

rem ai ns an d th at th e m ov an t is en ti tl ed to jud gm en t as a m at te r of la w. Id

. W e ap pl y

Mi ss ou ri su bs ta nt iv e la w in li gh t of th e pa rti es ’ ag reem en t th at th e MSA pr ov id es th at

Mi ss ou ri l aw sh al l g ov ern th e MSA a nd an y ad de nd a.

At th e ou ts et

, we reject Defen da nt s’ arg um en t th at th e li m it at io n of li ab i li ty

do es no t ap pl y to Sch nu ck s ’s i n de m ni ty ob li ga ti on fo r as se ss m en ts ag ai ns t

Defen da nt s by th e Ass oc ia ti on s. Defen da nt s fo rfei te d th is arg um en t be cau se th ey di d

no t rai se it in th e di st ric t co ur t, bu t it wou ld fai l ev en if it ha d be en pr es erv ed

. Und er § 5.4 of th e MSA, th e li m it at io n of li ab il it y ap pl ie s to “ al l lo ss es , cl ai m s, su i t s ,

co nt ro ve rs ie s, br each es , or da m ag es fo r an y cau se wha ts oe ve r (in cl ud in g , b u t n o t

li m it ed to

, th os e a r i s i n g o u t of or rel at ed to th is MSA an d an y ad de nd a) an d

reg ar d le ss of th e fo rm of act io n or le ga l th eo ry .” The as se ss m en ts in th is cas e no t

on ly fit wit hi n th is br oa d pr ov is io n, bu t wou ld al so qu al ify as “ ari si ng ou t of or
rel at ed to th is MSA an d an y ad de nd a,” be cau se Sch nu ck s’s in de m ni ty ob li ga ti on to

Defen da nt s fo r th e as se ss m en ts ari se s fr om th e co nt ract

.

Defen da nt s arg ue th at th e MSA do es no t li m it Sch nu ck ’s li ab il it y fo r th e

as se ss m en ts fo r is su in g ba nk s’ lo ss es

. As reco un te d ab ov e, § 4.9 of Fi rs t Data ’s
Ope rat in g Pro ced ur es req ui res Sch nu ck s to in de m ni f y Defen da nt s fo r “ Data

Co m pr om is e Los se s

. ” Sect io n 5.4 of th e MSA li m it s Sch nu ck s’s li ab il it y to
$5 00 ,00 0, bu t carv es ou t li ab il it y fo r “ th ird pa rty fees ” an d “ fees

, fin es or pe na lt ie s”

im po se d by th e Ass oc ia ti on s. D e f en da nt s arg ue th at th e as se ss m en ts fo r is su in g
ba nk s’ lo ss es fal l wi th in on e o r bo th of t he se carv e-o ut s.

“ The in te rp ret at io n of a co nt ract

, in cl ud in g whe th er it is a m bi gu ou s, is a

qu es ti on of la w.” Adb ar Co

., L.C. v. PCAA Mo

., LLC, No. 4: 06 -CV-1 68 9, 20 08 W L

68 85 8, at *4 (E.D. Mo. J an . 4, 2 00 8) (ci ti ng Helt erb ran d v. Fi ve St ar Mo bi le Hom e
Sal es , In c., 48 S.W .3d 64 9, 65 8 (Mo

. Ct

. App

. 20 01 )). “ W he n a co nt ract us es pl ai n

-7

-an d un eq ui vo cal la n g u a g e , it m us t be en fo rced as writ te n.” Deal v. Co ns um er

Pro gr am s, In c., 47 0 F.3 d 12 25

, 12 30 (8 th C i r

. 2 0 0 6) (q uo ti ng Lak e Cab le

, In c. v.
Trit tl er, 91 4 S.W .2d 43 1, 43 6 (Mo

. Ct

. App

. 19 96 )). “ To d e t e r m in e whe th er a

co nt ract is am

bi gu ou s, we co n s id er th e in st ru m en t as a who le

, gi vi ng th e wor ds

co nt ai ne d th erei n th ei r or di na ry m ean in g. A co nt ract is no t am bi gu ou s m erel y
be cau se th e pa rti es di sp ut e it s m ean in g.” Id

. (ci ta ti on s o mi t t e d ). Bec au se th e

co nt ract at i ss ue is un am

bi gu ou s, i t m

us t b e en fo rced as wri tt en

. 3

Defen da nt s arg ue th at th e te rm “ th ird pa rty fe es ” in cl ud es t he is su in g ba nk s’

lo ss e s be cau se § 13 .3 of th e Ban kc ard Add en du m ex pa ns iv el y de fin es “ th ird pa rty

fees ” as “ al l fees an d ch arg es

. . . wit ho ut li m it at io n” im po se d by a th ird pa rty.

Defen da nt s co nt en d th at th e as se ss m en ts fo r is su er lo ss es are th us carv e d ou t of

Sch nu ck s’s li m it at io n of li ab il it y

. The Mi ss ou ri Co ur t of App eal s ha s de fin ed th e

te rm “ fee” as “ a su m pa id or ch arg ed fo r a se rv ic e.” St rad er v. Pro gr es si ve In s., 23 0

S.W .3d 62 1, 62 5 (Mo

. Ct

. App

. 20 07 ). Defen da nt s arg ue th at th e te rm s “ fees an d

ch arg es ” m ay be de fin ed mo r e br oa dl y as an am ou nt of m on ey th at m us t be pa id

. Rea di ng th e co nt ract as a who le

, ho wev er, it is ap pa ren t th at th e pa rti es in te nd ed th e

na rro wer de fin it io n. Sect io n 13 of th e Ban kc ard Add en du m r e f e r s to “ fees fo r

Serv ic es .” The li st of sp eci fic fees an d ch arg es in § 13 .3— “ an y swi tc h fee, is su er[]

rei m bu rs em en t fee, ad

jus tm en t fee, in te rch an ge fee, as se ss m en t fee or acce ss

fee” —m il it at es in fav or of co ns tru in g “ fees an d ch arg es ” a s p a ym en ts fo r se rv ic es

. The a s s e s s men ts im

po se d by th e Ass oc ia ti on s he re do no t qu al ify as pa y m en ts fo r

Defen da nt s arg ue th at th e di st ric t co ur t erro ne ou sl y ad op te d t h e pa rti es ’ 3

ag reem en t th at th e co nt ract was un am bi gu ou s, rat he r th an m ak in g th is de te rm in at io n fo r it se lf. See Sh aw Hof

st ra & Ass oc s. v. Lan dc o Dev

., In c., 67 3 F.3 d 81 9, 82 6 (8 th
Ci r. 20 12 ) (h ol di ng th at Mi ss ou ri la w req ui res th at “ th e co ur t m us t fir st de te rm in e as

a m at te r of la w whe th er a co nt ract is am bi gu ou s” ). W e d is ag ree. The di st ric t cou rt de te rm in ed th at th e pl ai n la ng ua ge of th e co nt ract de ci de d th e qu es ti on s pr es en te d in

t h i s cas e, whi ch to us in di cat es th at th e co ur t ha d de te rm in ed fo r it se lf th a t t h e

co nt ract was un am

bi gu ou s an d ha d no t rel ie d so le ly on th e pa rti es ’ ag reem en t to th at effe ct

.

-8

-se rv ic es , be cau se th ey are im po se d to co m

pe ns at e is su in g ba nk s f

o r l o s se s th ey

su st ai ne d as a res ul t of a da ta br each , n ot as co m pe ns at io n fo r pe rfo rm in g se rv ic es

. Mo reo ve r, th e as se ss m en ts do no t fal l wit hi n th e en u mer a t e d f e es an d ch arg es se t

fo rth in § 13 .3 of th e Ban kc ard Add en du m , in cl ud in g “ is su er rei m bu rs em en t fees .” 4

Acco rd in gl y , th e as se ss m en ts are no t carv ed ou t fro m Sch nu ck s’s li m it at io n of

li ab il it y as “ th ird pa rty fees .”

Defen da nt s al so arg ue th at the as se ss m en ts fo r is su er lo ss es are carv ed ou t fro m

th e li m it at i o n o f l i a bi li ty b ecau se th ey co ns ti tu te “ fees , f in es or pe na lt ie s” im

po se d
by t he Ass oc ia t i o n s. W e di sa gr ee. Hav in g al read y co nc lu de d th at th e as se ss m en ts

fo r is su er lo ss es are no t “ fees ,” we co nc lu de th at th ey al so do no t qu al ify as “ fin es or

pe na lt ie s.” “ The or di na ry m ean in g of a ‘fine ’ or ‘pen al ty’ is no t co m pe ns a t i o n or

rep arat io n fo r an in

jury; rat he r, it is a su m im

po se d as pu ni sh m en t.” Farm la nd In du s.,

In c. v. Rep ub li c In s. Co

., 94 1 S .W .2d 50 5, 51 1 (Mo

. 19 97 ) (en ba nc ). The

as se ss m e n t s fo r is su er lo ss es are m or e accu rat el y de fin ed as “ co m pe ns at io n or

rep arat io n fo r an in

jury” and no t as “ a su m im po se d as pu ni sh m en t.” In ad di ti on to

th e pl ai n m ean i ng of th e te rm s “ fin es ” an d “ pe na lt ie s,” th e Ass oc ia ti on s’ r ul es al so

in di cat e th at th e as se ss m en ts fo r is su er lo ss es are no t “ fin es ” or “ pe na lt ie s.” The ru le s

al lo w th e Ass oc ia ti on s to im po se fin es fo r vi ol at io ns of da ta -s ecu rit y st an da rd s, bu t

de sc rib e th ei r pr og ram s to co m pe ns at e is su in g ba nk s fo r da ta co m pr om is e ev en t

lo ss es as m et ho ds of rei m bu rs em e n t

, n o t fin es or pe na lt ie s. Thu s, in read in g th e

co nt ract as a who le an d in li gh t of th e pl ai n m ean i n g of th e te rm s “ fin e” an d

“ pe na lt y ,” th e di st ric t co ur t di d no t err in ho ld in g th at t h e a s s e ss m en ts fo r is su in g
ba nk s’ lo ss es do no t co ns ti tu te “ fin es or p en al ti es .”

The di st ric t co ur t no te d th at th e te rm “ is su er rei m bu rs em en t fees ” ap pe ars in 4

Mas te rCar d’s ru le s, bu t on ly in th e li m it ed co nt ex t of an ex ces si ve ch arg eb ack

. Defen da nt s ar gu e th at th e d is tri ct co ur t “ ch erry pi ck ed ” fro m Mas te rCar d’s rul es in

co ns id eri ng th e us e of th e te rm “ is su er rei m bu rs em en t fees ” an d di d no t lo ok at Vis a’s

ru le s. Defen da nt s do no t po in t to an y us e of th is te rm in Vis a’s ru le s, ho wev er, and
we ha ve fou nd no ne

.

-9

-Eve n if th e te xt of th e carv e-o ut s in § 5.4 of th e MSA di d no t de ci de th e m at te r,

th e us e of br oa de r la ng ua ge el se whe re in th e co nt ract wou ld in di cat e th at th e carv eou ts sh ou ld be read na rro wly. F o r e xa m pl e, as se t fo rth in § 4.9 of Fi rs t Data ’s
Ope rat in g Pro ced ur es , Sch nu ck s m us t in de m ni fy Defen da nt s fo r “ Data Co m pr om is e

Los se s,” whi ch in cl ud es “ al l rel at ed ex pe ns es , cl ai m s, as se ss m en ts

, fin es , lo ss es ,

co st s, an d pe na lt ie s an d Is su er rei m bu rs em en ts .” Si m il arl y , § 5.4 of th e MSA li m it s

li ab il it y “ fo r al l lo ss es , cl ai m s, su it s, co nt ro ve rs ie s, br each es , or da m ag es fo r an y

c a u s e wha ts oe ve r.” Had th e pa rti es in te nd ed to in cl ud e rei m bu rs em en ts to is s u i n g
ba nk s wit hi n th e carv e-o ut s fro m Sch nu ck s’s li m it at io n of li ab il it y , th ey wou ld ha ve

us ed m or e ex pa ns iv e la ng ua ge th an si m pl y “ fees , fin es or p en al ti es .”

Defen da nt s arg ue th at t h e co nt ract is am bi gu ou s be cau se Sch nu ck s’s

in te rp ret at io n le ad s to th e co m m erci al ly un reas on ab le res ul t of req ui rin g Defen da nt s

to act as Sch nu ck s’s in su rer. The pa rti es di sa gr ee whe t h e r a c om m erci al ly

un reas on ab le res ul t ren de rs a co nt ract am bi gu ou s or whe th er co m mer ci al

un reas on ab le ne ss be co m es rel ev an t on ly aft er th e co ur t de te rm in es th at th e co nt ract

is am bi gu ou s. W e ne ed no t de ci de th is qu es ti o n , be cau se th e un de rlyin g bu si ne ss

arra ng em en t, whi ch rep res en ts Defen da nt s’ c h o i ce to vo uc h fo r Sch nu ck s’s

co m pl ia nc e wit h da ta -s ecu rit y st an da rd s, is no t ren de red co m m erci al ly un reas on ab le

m erel y be cau se th e li m it at io n on Sch nu ck s’s li ab il it y is br oa de r th an Defen da nt s no w
wis h i t t o b e.

W e fu rth er ho ld th at th e di st ric t c o u r t d i d no t m is ap pl y th e st an da rd fo r jud gm en t on th e pl ead in gs in co nc lu di ng th at Defen da nt s ha d no t rai se d th e is su e of

th e se pa rat e $3 ,00 0,0 00 li m it at io n of l i a b i li ty. Defen da nt s’ br ie fin g on th e cro ss

m ot io ns fo r jud gm en t o n t he pl ead in gs di d no t arg ue th at th e $3 ,00 0,0 00 li m it at io n

of li ab il it y fo r br each of § 25 of th e Ban kc ard Add en du m ap pl ie d. In an y ev en t, § 25

of th e Ban kc ard Add en du m co nc ern s “ fin es ” fo r vi ol at io ns of da ta se cu rit y st an da rd s

an d, as di sc us se d a bo ve , th e as se ss m en ts in qu es ti on were n ot “ fin es .”

-1 0-C. Rec on si de rat io n o r Leav e to Am en d P le ad in gs

W e rev ie w fo r ab us e of di sc ret io n a d i s t r i c t co ur t’s de ci si on on a m ot io n fo r

reco ns id erat io n or le av e to am en d un de r R u l e 5 4 ( b )

. See K.C. 19 86 Ltd

. P’sh ip v.

Rea de Mfg

., 47 2 F.3 d 10 09

, 10 17 (8 th Ci r. 20 07 ). A p a rty th at m ov es fo r le av e to

am en d aft er th e de ad li ne in a sc he du li ng or de r ha s pa ss ed mu s t sh ow go od cau se

un de r Ru le 1 6 ( b )

, t h e pr im ary m eas ur e of whi ch is th e m ov an t’s di li ge nc e in

at te m pt in g to co m

pl y wit h th e sc he du li ng or de r. Sh erm an v. W in co Fi rewo rk s, In c.,

53 2 F.3 d 70 9, 71 6 (8 th Ci r. 20 08 ). Dis tri ct co ur ts “ ha ve co ns id erab le di sc ret io n to

de ny a po s t

-

ju d g men t m ot io n fo r le av e to am en d be cau se su ch m ot io ns are
di sf av or ed .” Uni te d St at es ex rel

. Ro op v. Hy po gu ard USA, In c., 55 9 F.3 d 81 8, 82 4
(8 th Cir . 20 09 ).

W e co nc l u de th at th e di st ric t co ur t di d no t ab us e it s di sc ret io n in de nyin g

Defen da nt s’ m ot io n fo r reco ns id erat io n or le av e to am en d, whi ch es se nt ia ll y res ta te d

th ei r as se rti on s of erro r reg ard in g jud gm en t on th e pl ead i n g s

. Fu rth er, Defen da nt s

ha ve no t sh own go od cau se fo r le av e to am en d. Defe nd an ts arg ue th at “ th e ne ed to

am en d was on ly br ou gh t to li gh t by th e Di s t r i ct Co ur t’s co nc lu si on th at

,
not w ith sta ndi ng the al le ga ti on s in Defen dants ’ A nsw er an d Co unt er cl ai m , D ef en da nts

‘did no t al le ge th at Sch nu ck s was e i th er ne gl ig en t or PCI DSS no n- co m pl ia nt .’ ”
App el la nt s’ Br. 47

. As th e di st ric t co ur t st at ed

, “ Defe n d a n ts are res po ns ib le fo r pl ead in g th ei r cas e wit ho ut th e Co ur t’s as si st an ce.” D. Ct

. Ord er of Ju ly 31

, 20 15

, at

9.

III.

Neit he r carv e-o ut fro m th e li m it at io n of li ab il it y ap pl ie s to th e as se ss m en ts th at

th e Ass oc ia ti on s i m

po se d o n Def

en da nt s. Th e d is tri ct co ur t d id no t m is ap pl y th e

-1 1-s t a nd ard fo r jud gm en t on th e pl ead in gs an d di d no t ab us e it s di sc ret io n in de nyi n g

Defen da nt s’ m ot io n fo r rec on si de rat io n o r le av e to am en d.

The jud gm en t i s af

fir m ed

.

__ __ __ __ __ __ __ __ __ __ __ __ __ _

-1 2-