Chase Bank sues Landry’s for $20M over data breach
JP Morgan Chase Bank is suing Landry’s for $20 million in costs related to a 2015 credit card data breach affecting several of the Houston-based hospitality company’s restaurants and entertainment venues.
Chase and its credit card payment processor Paymentech filed a breach-of-contract lawsuit Thursday in federal court in Houston, claiming Landry’s failed to comply with credit card data security standards and is refusing to reimburse the Ohio-based financial institutions for assessments imposed by Visa and MasterCard in the wake of the data breach.
Hackers in 2014 and 2015 compromised point-of-sale systems at more than than 40 Landry’s properties, including Bubba Gump, McCormick & Schmick’s, Rainforest Cafe and Saltgrass restaurants. In response, Landry’s hired a cyber security firm to examine its payment-card systems and implemented enhanced security measures for processing credit cards, including end-to-end encryption.
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Credit card breaches have affected several major retailers in recent years, including Target, Home Depot and Chick-fil-A. Many credit card companies and retailers have switched to more secure chip-enabled credit card readers to combat data breaches.
Landry’s entered into a credit card processing agreement with Chase and Paymentech in 2008, according to Chase’s lawsuit. The agreement required merchants to comply with credit card security standards and reimburse Chase and Paymentech for any “assessments, fines and/or penalties” imposed by credit card companies for liabilities and the cost of reissuing new credit cards.
However, Landry’s refused to pay Chase and Paymentech for Visa’s nearly $12.7 million assessment and MasterCard’s nearly $7.4 million assessment, according to the lawsuit. The hospitality company argued in an April correspondence that it did not have any obligation to indemnify Chase and Paymentech for the assessments.
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Steve Scheinthal, Landry’s general counsel, sent the following statement to the Chronicle in response to Chase’s lawsuit:
“We deny the claims and do not believe that we have any liability to either Chase Paymentech or JP Morgan Chase. Visa and Master Card have wrongfully assessed Chase Paymentech who in turn is seeking reimbursement of these invalid assessments from us. Since Chase Paymentech’s business model relies entirely on those credit card brands, and since Chase Paymentech’s parent JP Morgan Chase would be the ultimate beneficiary of a substantial portion of the assessments if they are collected from Landry’s, Chase Paymentech would rather capitulate to the demands of the powerful credit card brands than stand up for its merchants by taking action to challenge Visa’s and MasterCard’s unlawful practice in imposing these assessments. We won’t stand for that and have retained the law firm of Ropes and Gray to defend Chase Paymentech’s claims against Landry’s and put a stop to this unlawful practice of Visa and Master Card.”
Chase and Paymentech are seeking more than $20 million in damages, including interest, as well as court costs and attorney’s fees.