Owner-Operator Ind. Drivers Assoc. v. Concord EFS

Citation: Not availableDocket: M1999-02560-COA-R3-CV

Court: Court of Appeals of Tennessee; February 28, 2000; Tennessee; State Appellate Court

Original Court Document: View Document

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In a breach of contract case involving independent truckers and truck stop owners, the Tennessee Court of Appeals addressed whether the truckers were third-party beneficiaries of contracts that prohibited surcharges for credit card purchases. The trial court initially ruled they were not beneficiaries and granted summary judgment to the defendants, including Flying J and Pilot Corporation, as well as EFS National Bank and Concord EFS, Inc. 

The plaintiffs, members of the Owner-Operator Independent Drivers Association (OOIDA), argued that as credit card holders with Visa and MasterCard, they were intended beneficiaries of the no-surcharge agreements. They faced a surcharge of at least three cents per gallon for diesel fuel despite these contracts. The plaintiffs sought to enjoin the surcharge practice and claimed damages, asserting their rights based on third-party beneficiary status.

The appellate court found the truckers to be intentional beneficiaries of the no-surcharge provisions, leading to the reversal of the trial court’s summary judgment for the truck stop operators. However, the appellate court upheld the dismissal of claims by the truckers’ organization. The case has been affirmed in part, reversed in part, and remanded for further proceedings.

Concord EFS, as a parent corporation, is not liable for the actions of its subsidiary, leading to the current appeal. The credit card system involves a complex arrangement between banks, merchants, and cardholders, structured like a pyramid. At the top are the credit card associations, Visa and MasterCard, which only allow banks and financial institutions as members. Below them are member banks that issue credit cards to consumers and process transactions for merchants. Retail merchants, numbering in the hundreds of thousands, interact with both issuing and acquiring banks when processing credit card sales. The process begins when a cardholder presents their card at a merchant, triggering an electronic transaction sequence involving multiple parties: the merchant bank, the Visa or MasterCard association, and the issuing bank. Merchants receive a discounted payment from their bank, which is reimbursed by the issuing bank, while the cardholder is billed the full transaction amount.

Four contracts are central to this case, specifically between Visa and the merchant bank EFSNB, and between MasterCard and EFSNB. Both associations prohibit surcharges, as detailed in MasterCard's Rule 9.04, which states that merchants cannot require cardholders to pay extra fees or finance charges when using a MasterCard. The rule mandates that merchant agreements reflect these prohibitions to ensure compliance. Additionally, MasterCard's rules specify that they serve the interests of the corporation and its members, with similar stipulations found in Visa's by-laws.

Both organizations informed consumers about the no-surcharge provision through various methods, including their websites. Contracts between EFSNB and the merchants, Pilot and Flying J, explicitly require compliance with Visa-EFSNB and MasterCard-EFSNB agreements, stating that merchants shall not impose surcharges on transactions. It is acknowledged that Pilot and Flying J charged more for fuel purchased with Visa and MasterCard compared to other payment methods. 

Regarding third-party beneficiaries, the law typically allows only parties to a contract to sue for breach, but non-parties can enforce contracts if they prove they are intended beneficiaries. The burden of proof lies with the non-party, who must demonstrate entitlement under either the "intent to benefit" test or the "duty owed" test. Courts face challenges in defining "intent to benefit," as it often leads to circular reasoning. The Restatement (Second) of Contracts outlines that an intended beneficiary is recognized if the right to performance aligns with the parties' intentions and either satisfies a promisee's obligation to pay the beneficiary or indicates an intention to benefit the beneficiary. While the court acknowledges these principles, it emphasizes that determinations must be made based on the specific facts and circumstances of each case.

Truckers are recognized as third-party beneficiaries of the contract between merchants (Pilot and Flying J) and the merchant bank, as the merchants explicitly promised not to impose surcharges on credit card purchases. The trial court's summary judgment in favor of Pilot and Flying J was deemed erroneous because the merchants' intent to benefit the truckers is clear. Conversely, the merchant bank (EFSNB) only made a general promise to Visa and MasterCard to use its best efforts to ensure merchant compliance, which does not confer direct rights to the cardholders. Therefore, the court correctly granted summary judgment to EFSNB and its parent company, Concord EFS.

Regarding the Owner-Operators Drivers Association (OOIDA), the trial court found that it lacked standing to pursue a class action on behalf of its members. While OOIDA satisfied the first two criteria for standing—its members could sue on their own and the interests sought are related to OOIDA's mission—it failed to meet the third requirement, which necessitates that individual member participation is not needed in the lawsuit. Unlike the homeowner’s association in Redbud Cooperative Corporation v. Clayton, OOIDA does not have a direct contractual relationship with the defendants and has not demonstrated any injury to itself apart from its members' injuries. As OOIDA is not a party to the contracts involved, it cannot claim third-party beneficiary status.

No allegations exist that OOIDA purchased gas from the defendants using Visa or MasterCard. Although OOIDA lacks certain requirements for standing, it can still assist its members in seeking redress. The ruling does not hinder individual plaintiffs from pursuing class certification on behalf of similarly situated individuals, whether or not they are OOIDA members, nor does it stop them from seeking an injunction alongside damages, similar to OOIDA's requests. The trial court’s summary judgment in favor of Flying J, Inc. and Pilot Corporation is reversed, and the claims of Harold Landry, Jimmy Hux, Richard Kershman, and Laurel Barrick against these entities are reinstated. Summary judgment for EFSNB and Concord EFS is affirmed. The case is remanded to the Chancery Court of Williamson County for further proceedings. Costs on appeal are divided equally between the Owner-Operator Independent Drivers Association and Flying J, Inc. and Pilot Corporation.