Exhibit 5426: Search Term residuals." These are ongoing payments that Shift4 was obligated to pay Card Connect based on the transaction volume of the merchants Card Connect had referred. The MPPSA also contained provisions about how Card Connect could potentially "buy out

Document Type: residuals." These are ongoing payments that Shift4 was obligated to pay Card Connect based on the transaction volume

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Okay, let's break down the Card Connect, LLC v. Shift4 Payments, LLC case in excruciating detail. This is a complex, multi-layered commercial dispute involving multiple claims and counterclaims, so prepare for a deep dive. We will cover the background, the specific claims, the procedural history, key rulings, and the current status. Keep in mind that legal cases can be incredibly nuanced, and this is my interpretation of publicly available information; it is not legal advice.

I. Background and Parties

II. Claims and Counterclaims (The Legal Battle)

The case involved a complex web of claims and counterclaims. It's crucial to understand that each party accused the other of numerous breaches and wrongdoing. Here's a breakdown of the major allegations:

A. Card Connect's Claims Against Shift4 (Simplified for Clarity):

  1. Breach of Contract (MPPSA): This was the central claim. Card Connect argued that Shift4 breached the MPPSA in numerous ways, including:
    • Incorrect Calculation and Payment of Residuals: Card Connect claimed Shift4 systematically underpaid the residuals owed under the agreement. This involved disputes over how certain fees, interchange rates, and expenses were factored into the residual calculations.
    • Improper "Buyout" Calculation: Card Connect attempted to exercise its right to buy out its merchant portfolio, but alleged that Shift4 drastically undervalued the portfolio, making the buyout price unreasonably low. Disputes arose around the formula used, the inclusion of certain merchants, and adjustments for risks.
    • Improper Merchant Solicitation: Card Connect also alleged that Shift4 improperly solicited merchants in violation of the non-compete and non-solicitation provisions in the contract.
    • Other breaches: Including improper charges, failure to provide adequate reporting, and failure to act in good faith.
    • Failure to follow proper onboarding procedures for Referred Merchants
  2. Breach of the Implied Covenant of Good Faith and Fair Dealing: This claim is related to the breach of contract claim. Card Connect argued that even if Shift4's actions didn't technically violate the express terms of the contract, they still violated the implied duty of good faith and fair dealing that exists in every contract under Delaware law (which governed the MPPSA).
  3. Declaratory Judgment: Card Connect sought a court declaration clarifying the parties' rights and obligations under the MPPSA, particularly regarding the residual calculations and buyout provisions.
  4. Tortious Interference with a Contract: Card Connect alleged that Shift4 attempted to poach one of Card Connect's sub-ISOs.
  5. Unjust Enrichment: Card Connect alleged Shift4 was unjustly enriched for keeping and using confidential compensation information.

B. Shift4's Counterclaims Against Card Connect (Simplified for Clarity):

  1. Breach of Contract (MPPSA): Shift4, in turn, claimed that Card Connect breached the MPPSA, primarily alleging:
    • Breach of the Duty of Good Faith and Fair Dealing: This included actions taken regarding the buyout attempt and allegations of misusing residual information.
    • Failure to Properly Refer Merchants: Shift4 claimed that Card Connect submitted inaccurate or incomplete merchant applications, or referred merchants that did not meet Shift4's underwriting criteria.
    • Violations of Non-Compete: Shift4 claimed that Card Connect was referring merchants to other processors, in violation of exclusivity clauses.
    • Improper Termination.
    • Breach of Referral Agreement
  2. Defamation/Commercial Disparagement: Shift4 alleged that Card Connect made false and defamatory statements about Shift4 to merchants and other industry players, damaging Shift4's reputation.
  3. Tortious Interference with Business Relations: Shift4 claimed that Card Connect interfered with Shift4's relationships with merchants.
  4. Unjust Enrichment: Shift4 alleged Card Connect was unjustly enriched by retaining certain benefits from merchants that Shift4 claimed were improperly referred.
  5. Conversion: Shift4 claimed that Card Connect improperly retained funds that rightfully belonged to Shift4.
  6. Fraud: Related to merchant applications.

III. Procedural History (Key Stages of the Case)

  1. Complaint Filed (2018): Card Connect initiated the lawsuit in the Delaware Court of Chancery.
  2. Answer and Counterclaims (2018): Shift4 responded with its answer, denying Card Connect's claims and asserting its own counterclaims.
  3. Motion to Dismiss (Multiple Rounds): Both sides filed motions to dismiss various claims and counterclaims. The Court of Chancery issued several opinions ruling on these motions, narrowing the scope of the case. These rulings are crucial because they defined which claims would proceed to trial.
  4. Discovery: The parties engaged in extensive discovery, including exchanging documents, taking depositions, and issuing interrogatories. This phase is where each side gathers evidence to support its claims.
  5. Summary Judgement Motions(2021): The parties engaged in filling motions for summary judgement.
  6. Trial (2023): A multi-day bench trial (meaning a trial before a judge, not a jury) was held in the Delaware Court of Chancery before Vice Chancellor Lori W. Will.
  7. Post-Trial Briefing: After the trial, both sides submitted post-trial briefs, summarizing their arguments and evidence.
  8. Post-Trial Opinion (March 8, 2024): Vice Chancellor Will issued a lengthy and detailed Post-Trial Opinion, ruling on all of the remaining claims and counterclaims. This is the most crucial document for understanding the outcome.

IV. Key Rulings and Outcomes (The Post-Trial Opinion)

The Post-Trial Opinion (March 8, 2024) is the pivotal document. Here's a summary of the key rulings, greatly simplified:

V. Current Status (As of October 10, 2024)

The case is in the post-trial phase, likely focusing on determining damages. Here's what's likely happening, based on the nature of the Post-Trial Opinion:

  1. Damages Calculation Process: The parties are almost certainly engaged in a process, likely overseen by the Court, to calculate the damages owed to Card Connect for the residual underpayments and to Shift4 for the successful breach of contract counterclaims. This will involve applying the formulas and methodologies outlined in the Post-Trial Opinion, potentially with the assistance of experts.
  2. Potential Appeals: After the final damages are determined and a final judgment is entered, either party could appeal the Court of Chancery's rulings to the Delaware Supreme Court. This is a very real possibility, given the complexity of the case and the significant financial stakes.
  3. Final Judgement: On July, 8, 2024 The court of Chancery of delaware entered the final judgement. The court ordered
    • Shift4 to pay Card Connect $11,620,281.49 on the successful breach of contract claim in the Post-Trial Opinion, plus pre- and post-judgment interest
    • Card Connect to pay Shift4$4,876,251.10 on its successful counterclaims in the Post-Trial Opinion, plus pre- and post-judgment interest.
    • Card Connect to pay Shift4$5,075,706.63 for the legal fees.
  4. Appeal:
    • Both parties appealed to the supreme court of delaware
    • Card Connect, LLC's Opening Brief was filed on September, 25, 2024.
    • Shift4 Payments, LLC's response is due on or before November 12, 2024.

VI. Key Takeaways and Lessons

In summary, Card Connect, LLC v. Shift4 Payments, LLC is a complex legal battle with a mixed outcome. While Card Connect won on some of its core claims regarding residual underpayments, Shift4 successfully defended against the buyout claim and prevailed on some of its counterclaims. The case is now focused on finalizing damages and the potential for appeals. The appeal process is current underway. This detailed overview helps to clarify the many facets of this case.

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