WASHINGTON (8/25/08)—Fifth Third Bank of Cincinnati is seeking a rehearing of a July court decision granting Pennsylvania State Employees CU (PSECU) and Sovereign Bank standing to sue BJ's Wholesale Club for the cost of replacing member credit cards after customer data was stolen from the retailer. The $3.13 billion Harrisburg, Penn.-based credit union had tried to recover the $98,000 from both the retailer and its merchant bank, which is Fifth Third Bank, through negotiations. More than 235,000 credit and debit cards total were reissued, and nearly 1,000 accounts were affected by illegal purchases made by thieves. Ultimately, PSECU filed suit against the retailer and bank in the U.S. District Court for the Middle District of Pennsylvania in 2004. In July, a U.S. court of appeals reversed the district court ' s ruling that the suing parties did not have standing, thereby clearing the way for the credit union plans to return to the District Court for a jury trial--which PSECU originally requested. The appellate court's reversal was based on a finding that PSECU was a third party beneficiary to the contract between Visa and Fifth Third Bank, and thus has standing to bring suit against Fifth Third. To block that occurrence, Fifth Third is asking for a rehearing on the standing issue, based on the following arguments:
* Classes of third party beneficiaries must be specific and narrow, and according to the appellate court's rationale, any issuing bank or Visa cardholder could be considered a third party beneficiary; and * That the Circuit Court used the wrong standard in overturning the District Court's ruling.
Fifth Third Bank asked for the rehearing because the appeal "involves a question of whether thousands of issuing banks--or even millions of retailers or consumers who are participating in the Visa system--should be able to sue for breach of contract as purported third-party beneficiaries of the contract between Visa and its acquiring banks.” The request further states that the previous discussion actually is contrary to the intent of Fifth Third Bank and Visa by allowing issuers to pursue breach of contract claims in court. Also, "by allowing issuing banks to pursue breach of contract claims in courts to be resolved outside the Visa regulatory system, the panel decision undercuts that central purpose of the contract, allows potentially differing and inconsistent results and eliminates Visa's control, contrary to the contract's stated intent," the request stated.