FOLLOW US

Tennessee — In a significant development, Wells Fargo has achieved a partial early victory in a breach of contract lawsuit brought by independent sales organization TX Direct, involving processing services agreements. The case centers on allegations that TX Direct was improperly locked out of a merchant onboarding portal.

The dispute arose when TX Direct filed suit in October 2022 against Wells Fargo and First Data Merchant Services, claiming breach of contract after losing access to the First Data “boarding portal” used for setting up new merchants for credit card processing.

Wells Fargo, acting as assignee of BancorpSouth Bank, and First Data Merchant Services asserted that they fulfilled their contractual obligations by issuing TX Direct a written nonrenewal notice in January 2022, terminating the agreement effective April 30, 2022. A Tennessee federal judge agreed, finding that the nonrenewal notice was valid and that only First Data was required to send the notice.

Judge Thomas L. Parker granted summary judgment to Wells Fargo and First Data on TX Direct’s breach of contract claim, ruling that subsequent negotiations and temporary extensions to the agreement did not revive or imply a new contract after termination. The court noted that TX Direct’s continued onboarding of merchants during negotiations was permitted solely to avoid disruption but did not constitute ratification of the expired agreement.

The ruling also highlighted unresolved issues regarding claims for damages and the legal interpretation of provisions that may survive contract expiration. The judge expressed uncertainty about the defendants’ counterclaims and reserved judgment on certain contract provisions pending further argument.

This partial early win marks a pivotal step for Wells Fargo in the ongoing processing servicer suit, emphasizing contractual clarity and enforcement of termination provisions.

Representatives for Wells Fargo and First Data Merchant Services were not immediately available for comment.