Court Opinion

ID: 2704886
Source: CourtListenerOpinion
Date Created: 2014-08-04 22:01:15.013662+00
Date Added: 2024-06-11T12:55:01.017632
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

COMERICA BANK, a Texas Banking             )
Association,                               )
                                           )
            Plaintiff,                     )
                                           )
      v.                                   )   C.A. No. 9707-CB
                                           )
GLOBAL PAYMENTS DIRECT, INC., a            )
New York Corporation,                      )
                                           )
            Defendant,                     )
                                           )
      and                                  )
                                           )
GLOBAL PAYMENTS COMERICA                   )
ALLIANCE, L.L.C., a Delaware Limited       )
Liability Company,                         )
                                           )
            Nominal Defendant.             )

                          MEMORANDUM OPINION

                          Date Submitted: July 18, 2014
                           Date Decided: July 21, 2014

Daniel A. Dreisbach, Thomas A. Uebler and Sarah A. Clark of Richards, Layton &
Finger, P.A., Wilmington, DE; Howard J. Roin and Laura R. Hammargren of Mayer
Brown LLP, Chicago, Illinois, Attorneys for Plaintiff.

Peter B. Ladig, Meghan A. Adams and Kyle E. Gay of Morris James LLP, Wilmington,
DE; John P. Brumbaugh and Claire Carothers Oates of King & Spalding LLP, Atlanta,
GA, Attorneys for Defendant.

BOUCHARD, C.
I.     INTRODUCTION

       This action involves a business divorce.       In 1996, predecessors of plaintiff

Comerica Bank (“Comerica”) and defendant Global Payment Direct, Inc. (“Global” or

“Global Direct”) established a Delaware limited liability company called Global

Payments Comerica Alliance, L.L.C. (“Alliance”) to process credit and debit card

transactions in a joint venture. Comerica, a financial institution and a member of the

Visa and MasterCard associations, agreed to refer merchants to Alliance exclusively.

Global, a payment processor, was to be the exclusive processor for Alliance. These

arrangements are reflected in a series of agreements the parties entered simultaneously

when the joint venture began.

       In October 2013, Comerica elected not to renew the parties’ Service Agreement,

which thus expired on January 31, 2014. On May 14, 2014, Comerica exercised its right

to dissolve Alliance. Now, the parties are embroiled in a series of disputes as they work

through the wind up of Alliance and Comerica seeks to transition its share of the

merchant portfolio to a new payment processor. Global asserts that Comerica remains

bound by certain exclusivity obligations during the transition period. Comerica seeks

declaratory relief that, among other things, it is no longer bound by these obligations. It

also seeks the appointment of a liquidating trustee. An expedited trial on these issues was

held on July 14-15, 2014.

       In this opinion, I conclude that the exclusivity and non-competition obligations in

the parties’ agreements, discussed in detail below, ended when the Service Agreement

                                            1
terminated on January 31, 2014. Comerica’s request for a liquidating trustee will be

addressed separately at a later date.

II.    BACKGROUND1

       A.     The Parties

       Plaintiff Comerica Bank is a Texas Banking Association with its principal place of

business in Dallas, Texas. It is a member of the Visa and MasterCard associations.

       Defendant Global Payments Direct, Inc. is a New York corporation with its

principal place of business in Atlanta, Georgia. It is a provider of payment processing

services.

       Electronic payment processing involves a consumer acquiring goods or services

from a merchant using an electronic method such as a credit card as the form of payment.

A payment processor is the intermediary between the merchant, the credit card networks,

and the banks that issue credit cards. Visa and MasterCard, which are the largest card

associations, require that a payment processor be sponsored by a member financial

institution. In this arrangement, a payment processor will route and clear transactions

under the member bank’s control through the Visa and MasterCard networks.

1
  The Pre-trial Stipulation and Order is cited as “PTO.” Joint trial exhibits are cited as
“JX.” The trial transcript is cited as “Trial Tr.”

                                            2
          B.         The Formation of Alliance and the Governing Agreements

          On March 31, 1996, Comerica2 and Global entered into a Limited Liability

Company Agreement (“LLC Agreement”) establishing Alliance as a joint venture to

process credit and debit card transactions and provide related services.3        Alliance

provides these services to merchants in its merchant portfolio with whom it has made

agreements.4 Alliance’s merchant customers are collectively referred to as the “Merchant

Portfolio.”

          Alliance is a Delaware limited liability company. Comerica and Global have been

its only two members during the time period relevant to this action, with Global holding a

51% membership interest and Comerica holding a 49% membership interest.5 Alliance is

managed by its two members, who act through designated Representatives. Global has

three Representatives and Comerica has two Representatives.6

          As part of their joint venture, Comerica and Global entered into additional

agreements on and after March 31, 1996, including (1) Asset Purchase and Contribution

2
 The named parties to the LLC Agreement were Comerica Bank-Texas and Comerica
Merchant Services, Inc., which are predecessors of Comerica, and National Data
Payments Systems, Inc., which is now known as Global. PTO § II, ¶ 6. I refer to them as
Comerica and Global, respectively, for simplicity.
3
    Id.
4
    JX 5 § 4.1.
5
    PTO § II, ¶ 4.
6
    Id. § II, ¶ 5.

                                               3
Agreements dated March 31, 1996, December 31, 1996, and May 31, 2001

(“Contribution Agreements”) and (2) Merchant Alliance and Service Agreements dated

March 31, 1996 and May 31, 2001 (“Service Agreement”).7         In general terms, the

Contribution Agreements set forth the terms by which Comerica contributed its merchant

accounts to Alliance, and the Service Agreement sets forth specific services that

Comerica and Global each would provide to each other and Alliance in connection with

the joint venture. The Contribution Agreements and the Service Agreement are governed

by Delaware law.8

         C.      Key Provisions of the Service Agreement

         Section 2 of the Service Agreement sets forth the services that Global and

Comerica were obligated to provide to Alliance and each other.9 Under that section,

Global was obligated to furnish certain services listed in Exhibit A (“Global Direct

Services”), which generally consist of payment processing services, and Comerica was

obligated to furnish certain services listed in Exhibit C (“Comerica Services”), which

7
  The most recent comprehensive update of the Service Agreement is the Second
Amended and Restated Merchant Alliance and Service Agreement dated May 31, 2001.
JX 10. The parties agree that the language in Sections 15(a) and 15(d) of the Service
Agreement, which are at the heart of the present dispute, was the same in the original
March 31, 1996 version. PTO § II, ¶ 10.
8
 JX 11 § 13.9 (May 31, 2001 Contribution Agreement); JX 10 § 24(a) (May 31, 2001
Service Agreement).
9
    JX 10 § 2.

                                            4
generally consist of bank sponsorship and transaction clearing services.10 The Global

Direct Services and the Comerica Services, collectively, are defined in the Service

Agreement as the “Services.”11

         The Service Agreement contains certain exclusivity obligations. Section 2

provides, in relevant part, that “[d]uring the term of this Agreement, Alliance [and

Comerica] shall purchase all merchant processing services, including but not limited to

the Global Direct Services, exclusively from Global Direct.”12 Section 6(a) provides, in

relevant part, that “[d]uring the term of this Agreement, [Comerica] agrees[s] to refer to

Alliance, exclusively, potential merchants for Credit Card processing services.”13

         Section 15 of the Service Agreement is entitled “TERM, TERMINATION, AND

TRANSITION ASSISTANCE.” Section 15(a) provides for automatic termination of the

Service Agreement on January 31, 2014, unless the parties agree to a renewal:

         The parties agree that the term of [the Service Agreement] shall extend
         from the date hereof until [January 31, 2014]. The parties agree to enter
         into negotiations one year prior to termination regarding renewal but if the
         parties have not agreed to renew, this Agreement shall automatically
         terminate on the close of business on [January 31, 2014], subject to Section
         15.d. hereof.14

10
     See JX 10 Exs. A, C.
11
     JX 10 § 2.
12
     JX 10 § 2.
13
     JX 10 § 6(a).
14
   JX 10 § 15(a). The May 31, 2001 version of the Service Agreement automatically
terminated on March 31, 2008. Id. Pursuant to an amendment dated as of February 9,

                                              5
       Section 15(d) of the Service Agreement is at the core of the parties’ dispute in this

action over whether Comerica remains bound by the exclusivity obligations in Sections 2

and 6(a) after January 31, 2014 for up to one year until such time as both parties no

longer request Services from the other. It states as follows:

       In the event this Agreement terminates or otherwise expires, but a party
       hereto desires that either Global Direct or Comerica or their Affiliates
       continue to provide Services beyond the termination date, Global Direct
       and Comerica agree to extend this Agreement for a period of up to one (1)
       year on the same terms and conditions as expressed herein except that such
       party shall be obligated to purchase from Global Direct and/or Comerica or
       their Affiliates only such Services as such party shall specify from time to
       time. Global Direct or Comerica Bank, as applicable, shall have the right to
       adjust the fees set forth on Exhibit B or Exhibit D, as applicable, to reflect
       commercially reasonable market rates.

       D.     Key Provisions of the Contribution Agreements

       The Contribution Agreements provide that Comerica will not compete with

Alliance by soliciting processing business from the merchants in the Merchant

Portfolio.15 These non-competition obligations end (1) upon “the earlier of the date of

termination or expiration of the [LLC] Agreement” or “dissolution” of Alliance in the

2007, the parties extended the automatic termination date to January 31, 2014. JX 10 at
COMERICA000885.
15
  JX 7 § 13.9(a) (March 31, 1996 Contribution Agreement); JX 9 § 9.4 (December 31,
1996 Contribution Agreement) (providing that the covenants contained in § 13.9 of the
March 31, 1996 Contribution Agreement generally “shall remain in full force and effect
and are hereby incorporated by reference”); JX 11 § 9.5(a) (May 2001 Contribution
Agreement).

                                             6
case of the first two Contribution Agreements,16 and (2) “as of the earlier of the date of

termination or expiration of the . . . Service Agreement,” “the acquisition by one Member

of another Member’s Membership interest in Alliance,” or “the dissolution of Alliance”

in the case of the third Contribution Agreement.17

         E.      Key Provisions of the LLC Agreement

         Section 18.1.5 of the LLC Agreement defines an “Optional Sale Event” to mean,

among other things, the expiration or termination of the Service Agreement.18 When an

Optional Sale Event occurs, one member (denominated the “Purchasing Member”) has an

option to negotiate for the purchase of the other member’s interest in Alliance and, if that

option is not exercised, “the Purchasing Member shall have the right to elect to cause

[Alliance] to be dissolved and liquidated pursuant to Section 21.”19

         Section 18.4.4 of the LLC Agreement provides that in any Optional Sales Event,

“upon consummation of the sale or dissolution, as applicable, there shall be no

restrictions on the ability of either party to obtain processing services.”20

16
  JX 7 § 13.9(a) (March 31, 1996 Contribution Agreement); JX 9 § 9.4 (December 31,
1996 Contribution Agreement).
17
     JX 11 § 9.5(a) (May 31, 2001 Contribution Agreement).
18
     JX 5 § 18.1.5(c)-(d).
19
     JX 5 §§18.1.1, 18.1.2, 18.1.3; see also id. § 21.1.5.
20
  JX 5 § 18.4.4. This provision contains an exception for an Optional Sale Event
pursuant to Section 18.1.5(e). Global did not argue that this exception applies.

                                                7
         Section 21 of the LLC Agreement governs dissolution. It provides that Alliance

“shall be dissolved and its affairs wound up . . . [u]pon the occurrence of a[n] . . .

Optional Sale Event pursuant to Article 18 and the decision of the Member entitled to

make the purchase to dissolve [Alliance].”21 Section 21 further provides that “[u]pon the

dissolution of [Alliance], the Members shall wind up [Alliance]’s affairs in accordance

with the Delaware Act” and that the “Members are authorized to take any and all actions

contemplated by the Delaware Act,” including, without limitation, to settle and close

Alliance’s business, distribute Alliance’s assets (in particular, the Merchant Portfolio)

and provide for Alliance’s liabilities.22 After payment of known liabilities and reserving

for contingent or unforeseen liabilities, any remaining proceedings are to be distributed to

the members in accordance with their respective percentages in Alliance.23

         The principal asset of Alliance is the Merchant Portfolio. During the wind up

process, the Merchant Portfolio is to be divided by “mutual decision” of the members or,

in the absence of agreement, pursuant to a stipulated formula and then distributed “in

kind” in accordance with the members’ 51/49 percent interests in Alliance.24

21
     JX 5 §§ 21.1, 21.1.5.
22
     JX 5 § 21.3.1.
23
     JX 5 § 15.4.
24
     JX 5 § 15.5.

                                             8
         F.     Events Leading to the Filing of the Complaint

         On October 22, 2013, Comerica advised Global in writing that it would not renew

the Service Agreement, but intended to assert its rights under Section 15(d) to request

that “certain provisional and other continuation services” be provided “for a yet to be

determined period of time not to exceed one year past the expiration date of the

agreement.”25 On November 8, 2013, Global responded, acknowledging the request for

continued services and taking the position that Comerica’s exclusivity obligations under

the Service Agreement “will continue to apply during any such transition period,

regardless of which party is requesting the transition services.”26

         On January 24, 2014, Global confirmed its understanding that the Service

Agreement “will terminate on January 31, 2014,” and that the parties would “enter a

transition period” for up to twelve months. Global also requested that Comerica continue

to provide Services, as defined in the Service Agreement, under Section 15(d) of the

Service Agreement.27          Global reiterated its position that Comerica’s exclusivity

obligations “will continue to apply for so long as either Global Direct . . . or Comerica

desires for the other to provide Services” under the Service Agreement.28

25
     PTO § II, ¶ 13; JX 13.
26
     JX 16.
27
     PTO § II, ¶ 14; JX 23.
28
     JX 23.

                                              9
          The parties have stipulated that an Optional Sale Event occurred under the LLC

Agreement on or before January 31, 2014.29 After January 31, 2014, Global increased

the fees it charges for the Global Direct Services significantly.30

          On May 14, 2014, Comerica informed Global in writing that “Comerica has

elected to dissolve the Alliance.”31     The parties have stipulated that “Alliance is in

dissolution, and the Members are now to wind up Alliance pursuant to the LLC

Agreement and the Delaware Act.”32

          On May 15, 2014, as part of a larger proposal, Global proposed a division of the

Merchant Portfolio for those merchants that were part of the Merchant Portfolio as of

April 30, 2014.33 On May 27, 2014, Comerica agreed to Global’s proposed division of

the Merchant Portfolio, but not the remaining parts of Global’s proposal.34

          On June 19, 2014, after the complaint in this action was filed and I granted

Comerica’s motion for expedition, Comerica sent a letter to Global delineating a series of

things it wanted Global to do as part of Alliance’s wind up to assist with the migration of

29
     PTO § II, ¶ 17.
30
     Trial Tr. at 61.
31
     JX 59; see also PTO § II, ¶ 18.
32
     PTO § II, ¶ 20.
33
     PTO § II, ¶ 22.
34
   PTO § II, ¶ 23. Comerica and Global stipulated, for purposes of trial, that the division
of the Merchant Portfolio set forth in Global’s May 15, 2014 letter “shall be the division
of the Merchant Portfolio.” Id. § II, ¶ 24.

                                             10
Comerica’s share of merchant accounts to a new processing entity.35 Comerica asserted

in that letter that Global was obligated to provide the assistance sought under Section

18.5 of the LLC Agreement. That provision provides, in relevant part, that to facilitate

the distribution of Alliance’s property, the members agreed to “execute and deliver such

assignments, instruments and documents as may be reasonably requested . . . to transfer

the merchant agreements (and the full benefit and burdens thereof)” to the other

member.36

         G.     Procedural History

         On May 28, 2014, Comerica filed its complaint in this action asserting five claims

for relief.    In Count I, Comerica seeks a judicial declaration that: (1) the Service

Agreement terminated on January 31, 2014; (2) the January 31, 2014 termination was an

“Optional Sales Event,” which entitled Comerica to dissolve Alliance; and (3) Comerica

properly dissolved Alliance on May 14, 2014. In Count II, Comerica seeks a judicial

declaration that:

         (1) All of Comerica’s exclusivity obligations in the Service Agreement to

              Alliance or Global ended upon termination of the Service Agreement, and

              Comerica may refer merchants to its new processing venture;

         (2) All non-competition obligations in the Contribution Agreements ended upon

              Alliance’s dissolution or the termination of the Service Agreement;

35
     JX 76.
36
     JX 5 § 18.5.

                                             11
         (3) There are no restrictions on Comerica’s ability to obtain processing services

              from entities other than Global; and

         (4) Comerica is entitled to establish its new processing venture and compete with

              Global and Alliance.

         In Count III, Comerica requests that the Court appoint a liquidating trustee under 6

Del. C. § 18-803(a) to divide Alliance’s Merchant Portfolio in an equitable manner as

required under Section 15.5 of the LLC Agreement. In Counts IV and V, Comerica seeks

damages against Global for allegedly unwarranted fee increases that Global imposed for

the Global Direct Services after the Service Agreement was terminated on January 31,

2014. Count IV is asserted as a direct claim for harm Comerica allegedly has suffered

and Count V is asserted derivatively on behalf of Alliance.

         On May 28, 2014, Comerica moved for expedited proceedings and a trial by mid-

July 2014. In its motion, Comerica argued that, without expedited relief, it would be

irreversibly prevented from transitioning to a new competitive business venture to

process transactions during the governing agreements’ transition period. On June 5,

2014, I granted the motion for expedition and ordered that a trial be held on July 14-15,

2014, limited to Counts I-III.

         In their pre-trial stipulation, the parties agreed that no witness would be called to

testify concerning the negotiation of the LLC Agreement, the Contribution Agreements

and the Service Agreement.37 In that stipulation, Comerica requested that the Court

37
     PTO § VIII, ¶ 1.

                                              12
accelerate its consideration of the exclusivity issues, claiming that it was “being severely

prejudiced by its inability to use a different processor and to refer new customers to its

new competing business.”38

         Trial was held on July 14-15. After trial, the parties were permitted to make

additional submissions concerning the exclusivity issues underlying Counts I-II and oral

argument was held on those issues on July 18, 2014. This is my decision on Counts I-II.

Count III will be addressed separately at a later time.

III.     ANALYSIS

         Under the Delaware Declaratory Judgment Act, 10 Del. C. §6501, et seq.,

Delaware courts “have power to declare rights, status and other legal relations whether or

not further relief is or could be claimed.”39 In Counts I-II, Comerica seeks a series of

declarations concerning the meaning of the Service Agreement, LLC Agreement and

Contribution Agreement. For purposes of analysis, I organize these declarations into

three categories:     (1) the termination of the Service Agreement and dissolution of

Alliance, (2) Comerica’s exclusivity obligations under the Service Agreement and (3)

Comerica’s non-competition obligations under the Contribution Agreements.

38
     PTO § IX, ¶ A.
39
     10 Del. C. § 6501.

                                             13
         A.      The Termination of the Service Agreement and Dissolution of Alliance

         In Count I, Comerica seeks a declaration that the Service Agreement terminated

on January 31, 2014, and that Comerica properly dissolved Alliance on May 14, 2014.40

         Section 15(a) of the Service Agreement provides that it will “automatically

terminate” on January 31, 2014, “if the parties have not agreed to renew.”41 On October

22, 2013, Comerica advised Global in writing “that it would not renew the Service

Agreement.”42 On January 24, 2014, Global sent Comerica a letter acknowledging that

the Service Agreement “will terminate on January 31, 2014.”43 Thus, I find that the

Service Agreement terminated on January 31, 2014.

         In their pre-trial stipulation, the parties stipulated that “Comerica dissolved

Alliance” on May 14, 2014. Global reiterated in its pre-trial brief its agreement that

“Alliance is dissolved.”44 At trial, Global never contended that Comerica’s dissolution of

Alliance was improper. Thus, I find that Comerica properly dissolved Alliance on May

14, 2014.

40
  Count I also sought a declaration that the January 31, 2014 termination of the Service
Agreement was an “Optional Sales Event” entitling Comerica to dissolve Alliance.
Because Global did not contest this point at trial, Comerica dropped its request for such a
declaration. Thus, I do not decide this issue.
41
     JX 10 § 15(a).
42
     PTO § II, ¶ 13; JX 13.
43
     JX 23; PTO § II, ¶ 14.
44
     Def.’s Pre-Trial Br. 1.

                                            14
         Global argues Count I is moot because it has never disputed that “Alliance was

properly dissolved” and that “whether or not the Service Agreement terminated on

January 31, 2014, the parties do not dispute that the Service Agreement was extended

pursuant to Section 15(d), and the parties’ respective rights during the ‘extended’ period

are the subject of Count II.”45 Because Global’s position concerning the termination of

the Service Agreement on January 31, 2014 is stated equivocally, and because the

declarations sought in Count I are integral to Count II, I decline to dismiss Count I as

moot and will enter judgment providing the declarations sought in Count I.

         B.     Comerica’s Exclusivity Obligations

                1.      The Parties’ Contentions

         Sections 2 and 6(a) of the Service Agreement require Comerica to purchase all

merchant processing services exclusively from Global (Section 2) and to refer to

Alliance, exclusively, potential merchants for credit card processing services (Section

6(a)) “[d]uring the term” of the Service Agreement. These are the only exclusivity

obligations in the Service Agreement the parties have identified in this case.

         Section 15(d) of the Service Agreement, which is at the heart of the parties’

dispute concerning whether Comerica remains bound by any exclusivity obligations after

the termination of the Service Agreement, states as follows, with the key language in

dispute in bold:

         In the event this Agreement terminates or otherwise expires, but a party
         hereto desires that either Global Direct or Comerica or their Affiliates

45
     Def.’s Pre-Trial Br. 22.

                                            15
         continue to provide Services beyond the termination date, Global Direct
         and Comerica agree to extend this Agreement for a period of up to one (1)
         year on the same terms and conditions as expressed herein except that
         such party shall be obligated to purchase from Global Direct and/or
         Comerica or their Affiliates only such Services as such party shall specify
         from time to time. Global Direct or Comerica Bank, as applicable, shall
         have the right to adjust the fees set forth on Exhibit B or Exhibit D, as
         applicable, to reflect commercially reasonable market rates.46

         Relying on Section 15(d), Global argues that, if one party asks the other to

continue to provide Services after the termination of the Service Agreement, then the

Service Agreement is extended and all of its “terms and conditions” – including the

exclusivity obligations in Section 2 and 6(a) – continue to apply except for the two terms

specifically mentioned in Section 15(d), namely that (1) the parties no longer need to

purchase all Services from each other and instead can purchase them a la carte and (2)

the parties can raise their fees “to reflect commercially reasonable market rates.”

According to Global, any other interpretation would read the phrase “on the same terms

and conditions” out of Section 15(d) and would leave “the parties in a state of uncertainty

as to which other provisions of the Service Agreement no longer apply.”47

          Comerica argues that the exclusivity obligations in Sections 2 and 6(a) of the

Service Agreement expired on January 31, 2014, when the Service Agreement was

terminated, because those provisions only apply “[d]uring the term of” the Service

Agreement. Regarding the language in Section 15(d) in bold above, Comerica argues

46
     JX 10 § 15(d) (emphasis added).
47
     Def.’s Pre-Trial Br. 24.

                                             16
that the January 31, 2014 expiration of Sections 2 and 6(a) are among the “terms” of the

Service Agreement and thus there is no inconsistency in finding that the exclusivity

obligations expired when the Service Agreement was terminated and the requirement in

Section 15(d) that the “same terms and conditions” in the Service Agreement remain in

place during the transition period that follows the expiration of the Service Agreement.

         Comerica further argues that its construction is consistent with other agreements

the parties entered as part of a single transaction and that Global’s construction is not.

Comerica focuses, in particular, on Section 21.3.1(b) of the LLC Agreement, which

provides for a wind up period upon dissolution that requires the “closing [of] the

company’s business,”48 and Section 18.4.4, which states explicitly that “upon

consummation of the sale or dissolution … there shall be no restrictions on the ability of

either party to obtain processing services.”49

                2.       Consideration of the Other Agreements

         A threshold issue presented by the need to interpret Section 15(d) is whether to

construe the Service Agreement in isolation or in the context of the parties’ larger

contractual relationship. Global argues that the Court should look at the terms of the

Service Agreement in isolation, based on an integration clause in Section 24(b) of the

Service Agreement, which states as follows:

48
     JX 5 § 21.3.1(b).
49
     JX 5 § 18.4.4.

                                             17
         This Agreement contains the full understanding of the parties with respect
         to the subject matter hereof, and no waiver, alteration or modification of
         any of the provisions hereof, shall be binding unless in writing and signed
         by officers of all parties.50

Comerica argues that the LLC Agreement and Service Agreement should be read

together and points out that the integration clause in the LLC Agreement acknowledges

the inter-relatedness of these two agreements (and other agreements) the parties entered

simultaneously. The integration clause in the LLC Agreement states, as follows:

         This Agreement, together with the Contribution Agreement, the Services
         Agreement, the Merchant Alliance Agreement (the “Other Agreements”)
         and any Exhibits to this Agreement or to any of the Other Agreements
         constitutes the entire agreement of the parties with respect to matters set
         forth in this Agreement and the Other Agreements ….51

         In my view, this is as an appropriate circumstance in which to apply the rule that

contemporaneous contracts between the same parties concerning the same subject matter

should be read together as one contract.52 The original version of the Service Agreement

50
     JX 10 § 24(b).
51
     JX 5 § 24.7.
52
   Ashall Homes Ltd. v. ROK Entm't Grp. Inc., 992 A.2d 1239, 1251 (Del. Ch. 2010)
(“Because the two agreements are intertwined, the wisdom of the rule that related
agreements are to be read together is apparent . . . .”); Simon v. Navellier Series Fund,
2000 WL 1597890, at *7 (Del. Ch. Oct. 19, 2000) (“Because the Indemnification
Agreement was entered into for all relevant purposes contemporaneously with the
Declaration of Trust, the two instruments in this case must be viewed together and in
their entirety when determining the scope and nature of the indemnification arrangements
between Simon and the Fund.”); Crown Books Corp. v. Bookstop Inc., 1990 WL 26166,
at *1 (Del.Ch. Feb. 28, 1990) (“[I]n construing the legal obligations created by [a]
document, it is appropriate for the court to consider not only the language of that
document but also the language of contracts among the same parties executed or
amended as of the same date that deal with related matters . . . .”); see also 17A C.J.S.

                                             18
was entered simultaneously with LLC Agreement, on or about March 31, 1996, and the

language in dispute in Section 15(d) was included in the original version of the Service

Agreement.53 Both of these agreements are inter-related and indisputably constitute parts

of an integrated transaction concerning the same overall subject matter along with other

contracts the parties entered simultaneously, including the Contribution Agreement. The

integration clause in the LLC Agreement reflects this reality.

         I also do not read the integration clause in the Service Agreement to negate the

wisdom of reading related agreements together in the present circumstances.             The

integration clause in the Service Agreement expresses that the Service Agreement

“contains the full understanding of the parties with respect to the subject matter hereof.”54

The subject matter of the Service Agreement, however, concerns one area of subject

matter that is part of the larger, overall relationship between the parties reflected in the

collection of agreements that Comerica and Global entered simultaneously.

         More specifically, the subject matter of the Service Agreement generally concerns

the terms under which each party will provide services to each other and to Alliance. The

Contracts § 401 (2014); 11 Richard A. Lord, Williston on Contracts § 30:26, at 239-42
(4th ed. 1999) (“[T]he principle that all writings which are part of the same transaction
are interpreted together also applies when incorporation by reference of another writing
may be inferred from the context surrounding the execution of the writings in question.”);
Restatement (Second) of Contracts § 202(2) (1981) (“A writing is interpreted as a whole,
and all writings that are part of the same transaction are interpreted together.”).
53
     PTO § II, ¶¶ 6, 9-10.
54
     JX 10 § 24(b) (emphasis added).

                                             19
Service Agreement does not address a variety of other subject matters relevant to the

parties’ relationship, such as the terms and conditions for dissolving and winding up

Alliance,55 which is addressed in detail in the LLC Agreement. Nor does the Service

Agreement explicitly address the existence or lack of any restrictions on the parties’

ability to use other processors after their joint venture has ended,56 a subject which is

addressed explicitly in the LLC Agreement. Thus, I believe it is appropriate to consider

the terms of the LLC Agreement and other related agreements when construing Section

15(d) of the Service Agreement.

              3.     Construction of Section 15(d)

       “When interpreting a contract, the court's ultimate goal is to determine the shared

intent of the parties.”57 “In upholding the intentions of the parties, a court must construe
                                                                        58
the agreement as a whole, giving effect to all provisions therein,”          in order “not to

55
   Although the Service Agreement does not address the subject of Alliance’s dissolution,
it does contain two provisions concerning the division of the Merchant Portfolio that may
occur upon the dissolution of Alliance. See JX 10 §§ 18(p), 20(d).
56
  Global’s argument that the exclusivity provisions in Sections 2 and 6(a) of the Service
Agreement were extended is not based on any provision explicitly addressing the issue of
exclusivity. As explained above, Global’s argument is based instead on an inference that
the parties intended to extend such obligations through the operation of Section 15(d),
which speaks generally about extending the “same terms and conditions” of the Service
Agreement.
57
  Ruffalo v. Transtech Serv. P’rs Inc., 2010 WL 3307487, at *10 (Del. Ch. Aug. 23,
2010).
58
  In Re National Intergroup, Inc. Rights Plan Litigation, 1990 WL 92661, at *6 (Del.
Ch. July 3, 1990); see also Faw, Casson & Co. v. Cranston, 375 A.2d 463, 466 (Del. Ch.
1977); Stemerman v. Ackerman, 184 A.2d 28, 34 (Del. Ch. 1962).

                                            20
render any part of the contract mere surplusage,”59 and, “if possible, reconcile all the

provisions of the instrument.”60 In that regard, “[t]he meaning inferred from a particular

provision cannot control the meaning of the entire agreement if such an inference

conflicts with the agreement's overall scheme or plan.”61       Applying these principles, I

decline to adopt Global’s construction of Section 15(d) for three reasons.

         First, Global’s interpretation of Section 15(d) of the Service Agreement creates

irreconcilable conflicts with the parties’ other agreements. The plain import of Section

18.4.4 of the LLC Agreement, quoted above, is that Comerica not be restricted from

obtaining processing services from wherever it wanted to upon the dissolution of

Alliance.62      But, under Global’s interpretation of Section 15(d), the exclusivity

59
     Kuhn Const., Inc. v. Diamond State Port Corp., 990 A.2d 393, 397 (Del. 2010).
60
     Elliott Assocs., L.P. v. Avatex Corp., 715 A.2d 843, 854 (Del. 1998).
61
  GMG Capital Invs., LLC v. Athenian Venture P’rs I, L.P., 36 A.3d 776, 779 (Del.
2012).
62
  Global never disputed the import of Section 18.4.4 when opposing expedition or in any
of its pre-trial or post-trial submissions. During post-trial argument, Global argued for
the first time that Section 18.4.4 could be construed to apply only “upon consummation”
of the dissolution because the lack of processing restrictions in Section 18.4.4 is triggered
“upon consummation of the sale or dissolution.” JX 5 § 18.4.4. When questioned,
Global could not say whether (or not) the dissolution of Alliance already had been
“consummated.” Post-Trial Oral Argument Tr. at 26 (July 18, 2014). The text of Section
18.4.4 is ambiguous whether the phrase “upon consummation” was intended to apply to a
“sale” or to both a “sale” and “dissolution.” I find it significant that Section 18.4.4 does
not refer to a wind up period or condition its application “upon consummation” of the
wind up process even though both the LLC Agreement and the Delaware Limited
Liability Company Act carefully distinguish between an event of dissolution and the
wind up period. The LLC Agreement provides that, “[u]pon dissolution of [Alliance], the
Members shall wind up [Alliance]’s affairs in accordance with the Delaware Act.” JX 5

                                              21
obligations in Sections 2 and 6(a) would extend past the date of Alliance’s dissolution.

Similarly, Global’s interpretation is incompatible with Section 21.3.1(b) of the LLC

Agreement, which provides for a wind up period upon dissolution that requires the

“closing [of Alliance]’s business.”63 It is difficult to fathom how, as a practical matter,

one could close Alliance’s business while simultaneously being required to continue

referring merchants to Alliance and processing with Global exclusively until the very end

of the transition period contemplated by Section 15(d).

         Similarly, Global’s interpretation of Section 15(d) creates a conflict with the

provision of the Contribution Agreement permitting Comerica to compete with Alliance

and solicit business from the Merchant Portfolio upon the earlier of the termination of the

Service Agreement or dissolution of Alliance.64 This provision would be negated if

Section 6(a) of the Service Agreement was extended beyond January 31, 2014, when the

Service Agreement was terminated, because Section 6(a) generally requires Comerica to

refer potential merchants to Alliance exclusively for credit card processing services.

         Second, whether the Service Agreement is construed in isolation or in conjunction

with the parties’ other agreements, I do not believe that the language at issue in Section

15(d) is unambiguous. The phrase “same terms and conditions” in Section 15(d) would

§ 21.3.1. The Delaware Act sets forth the circumstances whereby “[a] limited liability
company is dissolved and its affairs shall be wound up.” 6 Del. C. § 18-802 (emphasis
added). Thus, I construe Section 18.4.4 to apply upon the event of dissolution, which
occurred here on May 14, 2014.
63
     JX 5 § 21.3.1(b).
64
     See supra. at 6-7.

                                            22
be extraneous if it was intended to extend the Service Agreement (with the two

exceptions noted) in its entirety. That result could have been achieved simply by stating

that the parties “agree to extend this Agreement.” Thus, inclusion of the phrase “same

terms and conditions” in Section 15(d) may have been intended (as I believe it was) to

convey that some but not all of the terms and conditions of the Service Agreement would

be extended if either party sought Services from the other during the transition period.

         Moreover, as discussed further below, the purpose of Section 15(d) is to allow the

parties to provide each other Services – a defined term – during a transition period. It is

illogical that the parties would chose to extend obligations unrelated to the provision of

Services indirectly through the general language of Section 15(d), particularly when they

directly and expressly provided for the extension of other obligations of this nature

beyond the termination of the Service Agreement in other places of the agreement but did

not do so in Sections 2 or 6(a).

         For example, Sections 18(n) and (o), which generally prohibit either party from

recruiting the other party’s employees who provided services to Alliance, expressly state

that those obligations shall remain in force “[d]uring the term of this Agreement and for a

period of two (2) years thereafter.”65     Similarly, Section 20(d), which concerns the

ownership of Alliance’s proprietary and confidential information upon a division of the

Merchant Portfolio, states explicitly that “[t]he provisions of this section shall survive

65
     JX 10 §§ 18(n)-(o).

                                             23
termination of this Agreement for a period of three years.”66 These provisions directly

and clearly delineate the intended post-termination duration of obligations unrelated to

providing Services during the transition period and, in my view, undermine the notion

that the drafters of the Service Agreement intended to extend the exclusivity obligations

in Sections 2 and 6(a) by operation of Section 15(d), much less that they intended to do

so in such a peculiar way, i.e., that exclusivity would continue if, and only if, and only for

so long as, one party requests Services from the other during the transition period.

         Third, Global’s construction cannot be squared with the evident purpose of

Section 15(d), which is to afford the parties a period of time after termination of the

Service Agreement to provide each other “transition assistance” so that, in the case of

Comerica, it can move its share of the Merchant Portfolio to a new processor and, in the

case of Global, it can establish a relationship with a new financial institution to continue

processing its share of the Merchant Portfolio. I use the term “transition assistance”

advisedly. Section 15, which has eight subsections, is titled “TERM, TERMINATION,

AND TRANSITION ASSISTANCE.”67 Subsection 15(d) is the only part of Section 15

that addresses the issue of transition,68 which Global readily conceded.69

66
     JX 10 § 20(d).
67
  Unlike the LLC Agreement, see JX 5 § 24.3, the Service Agreement does not contain a
provision suggesting that captions may not be used for purposes of interpretation.
68
   The other seven subsections in Section 15 address the term of the Service Agreement
(subsection a), when either party can terminate the Service Agreement before the
expiration of its term (subsections b, c and g), certain obligations arising “prior to the
effective date of termination” (subsection e), certain automatic events of termination

                                             24
         Global’s interpretation of Section 15(d), in my view, would frustrate the

transitional purpose of Section 15(d). During trial, the parties testified that there are

essentially two methods by which Comerica can transition its share of the Merchant

Portfolio to a new processor, through a one-time, en masse migration of data (the

preferred method) or piecemeal (either merchant-by-merchant or in groups of

merchants).70 The continued operation of the exclusivity obligations, would impede both

of these methods because, among other things, the Merchant Portfolio must be divided

before Comerica’s share can be migrated to a new processor and because of the

technological complexities of migrating data between two different processors who may

be (and in this case are) using different systems.71

         In the case of an en masse migration, the trial testimony convinces me it would not

be feasible to instantaneously finalize the split of merchants and “flip the switch” to begin

processing with a new processor at the precise moment when the exclusivity obligations

would expire under Global’s interpretation of Section 15(d), i.e., the earlier of such time

that neither party is providing any Services or January 31, 2015. A piecemeal migration

is equally problematic. It necessarily contemplates having Comerica use two different

processors for some period of time but the continued application of the exclusivity

(subsection f) and certain rebate obligations for failing to meet performance standards
(subsection h).
69
     Post-Trial Oral Argument Tr. at 21 (July 18, 2014).
70
     Trial Tr. at 138, 152.
71
     Trial Tr. at 292–93.

                                              25
obligations in Sections 2 and 6(a) would prevent Comerica from do so during the

transition period. 72

         In opposing expedition, Global readily acknowledged that “requiring Comerica to

use Global as its exclusive processor frustrates a transition to Comerica’s new processing

venture” but claimed that this frustration would be “fully consistent with the parties’

intention.”73 If it really was the parties’ intention to frustrate Comerica’s ability to

transition to a new processor through the extension of the exclusivity obligations in

Sections 2 and 6(a), or otherwise, I would have expected to see some parol evidence from

the parties’ negotiations to support this assertion. 74 Global offered no such evidence at

trial.

         For all the foregoing reasons, I reject Global’s construction of Section 15(d). I

now turn to Comerica’s position.

         As explained above, Comerica argues that the exclusivity obligations in Sections 2

and 6(a) terminated on January 31, 2014, because those two provisions only apply

“[d]uring the term” of the Service Agreement, and that this condition was simply one of

the “terms and conditions” of the Service Agreement. The logical extension of this

72
  Trial Tr. at 138 (Chayt) (saying of a piecemeal migration “The [exclusivity] restrictions
haven’t enabled us to do that.”).
73
     Def.’s Opp’n to Mot. to Expedite at 19 (internal quotations omitted).
74
  Of course, if that really was the parties’ intention, it could have been achieved clearly
and directly by drafting Sections 2 and 6(a) to apply during the term of the Service
Agreement and for a period of X years thereafter. See supra. at 23-24.

                                              26
argument is that all of the provisions in the Service Agreement limited in duration to

apply “during the term of this Agreement” became automatically inoperative when the

Service Agreement was terminated on January 31, 2014, and were not extended during

the transition period.

          Global points out that a number of provisions containing the “during the term of

this Agreement” limitation are “necessary to perform Services during the transition

period,” including provisions governing the parties’ use of each other’s names and logos

on various documents (Sections 7(a)-(b)), clearing arrangements with Card associations

(Section 13), cash advances (Section 14), insurance (Section 17) and access to debit card

settlement systems (Section 18(k)). 75 According to Global, “both parties have continued

to perform under and with the benefit of these terms” and the “ability of the parties to

provide Services in the transition period depends on the continued efficacy of these

provisions.”76

          Global raises a valid point. Absent anything indicating a contrary intent, the same

phrase should be given the same meaning when it is used in different places in the same

contract.77 Thus, I do not agree with Comerica’s construction of the Service Agreement

75
     Def.’s Pre-Trial Br. 26.
76
     Id. 27.
77
   Wilmington Trust Co. v. Pryor, 25 A.2d 685, 686 (Del. Ch. 1942) (“In the absence of
other explanatory language, the natural inference, therefore, is that that word has the
same meaning throughout the sentence.”); 28 Richard A. Lord, Williston on Contracts §
32:6 (“Generally, a word used by the parties in one sense will be given the same meaning
throughout the contract in the absence of countervailing reasons.”); see also Medicis

                                              27
because it would lead to the illogical result that certain provisions of the Service

Agreement necessary to perform Services during the transition period would have

expired on January 31, 2014, and become inoperative during the transition period.

         In my opinion, based on all the considerations discussed above, the most

reasonable and logical construction of Section 15(d) is that the parties intended when

they used the phrase “same terms and conditions” in Section 15(d) to extend beyond the

termination of the Service Agreement those terms and conditions of the Service

Agreement necessary to perform the Services, if any, that either party requests from the

other during the transition period, with the further understanding that either party could

request Services a la carte and raise the fees they charge “to reflect commercially

reasonable market rates.”78 Applying this construction, the exclusivity obligations in

Section 2 and 6(a) expired on January 31, 2014, the end of the term of the Service

Agreement, and were not extended by operation of Section 15(d), because those

obligations are not necessary to providing Services during the transition period and

because Sections 2 and 6(a) expressly state that those obligations apply only “[d]uring the

Pharm. Corp. v. Anacor Pharm., Inc., 2013 WL 4509652, at *7 (Del. Ch. Aug. 12, 2013)
(“In the absence of anything indicating a contrary intent, it is a general rule of
construction that where the same word or phrase is used on more than one occasion in the
same instrument, and in one instance its meaning is definite and clear and in another
instance it is susceptible of two meanings, there is a presumption that the same meaning
was intended throughout such instrument.”) (citation omitted); In re Mobilactive Media,
LLC, 2013 WL 297950, at *19 & n.211 (Del. Ch. Jan. 25, 2013) reargument denied,
2013 WL 1900997 (Del. Ch. May 8, 2013) (same).
78
     JX 10 § 15(d).

                                            28
term” of the Service Agreement. By contrast, those provisions of the Service Agreement

that are necessary to a party’s ability to perform any of the Services that the other party

has requested for the transition period were extended and remain in place until the

transition period ends. This is the case even if a provision contains the “during the term

of this Agreement” limitation, such as the ones Global has identified, where such

provision is necessary to perform Services during the transition period.

         The foregoing construction is consistent, in my view, with the context and purpose

of Section 15(d), which is to afford both parties the opportunity to receive assistance

from the other in the form of Services for a limited period of time so that they each can

transition out of the joint venture to new processing arrangements.          Comerica can

transition its share of the Merchant Portfolio to a new processor while Global can

establish a relationship with a new financial institution to continue to process its share of

the Merchant Portfolio. Equally significant, the foregoing construction reconciles the

Service Agreement with each of the provisions in the LLC Agreement and the

Contribution Agreements, discussed above.79 Because Sections 2 and 6(a) of the Service

Agreement terminated on January 31, 2014, there is no conflict with Sections 18.4.4 or

21.3.1(b) of the LLC Agreement or the provision of the Contribution Agreements

terminating the non-competition obligations therein.

         Based on the foregoing, Comerica has established that the exclusivity obligations

in Sections 2 and 6(a) terminated on January 31, 2014, and that there are no restrictions in

79
     See supra. at 22-23.

                                             29
the Service Agreement on Comerica’s ability to obtain processing services from entities

other than Global. Judgment will be entered providing these declarations.80

         C.     Comerica’s Non-Competition Obligations

         As part of Count II, Comerica seeks a declaration that “[a]ll non-competition

obligations in the Contribution Agreements ended on May 14, 2014, due to Alliance’s

dissolution, and/or on January 31, 2014, with the termination of the Service

Agreement.”81 As discussed above, although the various Contribution Agreements

contain slightly different phrasing, they each provide that Comerica’s obligations not to

compete end upon the earlier of the date of termination of the LLC Agreement or the

dissolution of Alliance.82 Global has not specifically opposed Comerica’s request for

declaratory relief concerning the Contribution Agreements. Because I have found that

the Service Agreement was terminated on January 31, 2014, I will enter judgment

declaring that the non-competition obligations in the Contribution Agreements ended on

that date.

80
    The declarations contained in the implementing Order accompanying this
Memorandum Opinion address the parties’ contractual relationship, which was the
subject of Counts I-II. These declarations do not address issues outside of the parties’
contractual relationship, such as fiduciary obligations that may be owed to Alliance,
which have not been presented to the Court and on which I express no views.
81
   This is the manner in which Comerica phrased this declaration after trial in its
proposed form of order.
82
     See supra. at 6-7.

                                           30
IV.   CONCLUSION

      For the foregoing reasons, judgment is entered in Comerica’s favor on Counts I

and II of the Verified Complaint.      An implementing Order accompanies this

Memorandum Opinion.

                                        31