Scott Holland and Jonathan Bilyk Jul. 15, 2016, 5:13pm

A dispute between one of the world’s largest hoteliers and one of the region’s biggest banks has landed in Cook County court, where Hilton Hotels has accused BMO Harris Bank of attempting to withhold $40 million in an attempt to “extort” a new credit card processing agreement, and the bank has responded by accusing Hilton of trying to renege on its contractual obligations and of hanging BMO out to dry in the wake of data breaches that it believes will result in hefty fines assessed by Visa and Mastercard. 

On July 13, Park Hotels & Resorts, the corporate entity formerly known as Hilton Worldwide, and BMO Harris each filed suit against the other in Cook County Circuit Court. 

In its lawsuit, Hilton alleged BMO is guilty of “wrongful and extortionate diversion and retention of approximately $40 million” due as part of a merchant services agreement Hilton terminated on May 11. Under the contract, which dated to 2009, BMO and its agent, POST Integrations, would capture, process and settle credit card transactions for Hilton hotels. 

However, Hilton said, when it attempted to end the relationship, BMO, through POST, threatened to withhold payments unless Hilton agreed to rescind the termination and extend the agreement for three years. 

Hilton refused, and POST began withholding funds on May 16, Park Hotels said. The pool of diverted funds has since grown to exceed $40 million. Hilton said it tried to execute terms of the agreement outlining pre-litigation dispute resolution on May 20, but its complaint alleges BMO Harris refused to participate. 

In its lawsuit also filed July 13, BMO described the situation differently. 

According to the bank, Hilton is attempting to use litigation to avoid paying what it owes to BMO and POST to cover the cost of fines and other sanctions BMO expects to receive from Visa and Mastercard in the aftermath of data breaches suffered by Hilton in 2014 and 2015. 

BMO alleged the terms of its contract with Hilton required the hotelier to indemnify it against such actions brought by the two credit card companies and allowed the bank and its agents to set aside a pool of money it may need to satisfy the adverse actions the credit card companies may bring in response to the data breaches. 

“After its data security breach, Hilton terminated the Agreement to be effective June 15, 2016, and it prematurely and in violation of the Agreement abruptly diverted its payment card processing services to another company on May 14, 2016 in an effort to avoid its obligations and deprive POST and BMO Harris of the security they are entitled to under the Agreement,” BMO alleged in its complaint. 

BMO has asked the court to order Park Hotels to drop its litigation, and “engage in alternative dispute resolution processes, mediation and/or arbitration” to settle the dispute. 

Hilton has disputed BMO’s assertions concerning its obligations related to the data breaches. 

In its complaint, Park Hotels said BMO Harris issued an ultimatum May 11 calling on Hilton to “cause its new processor to enter into a multi-party agreement” under which the new processor would be liable for fines resulting from the data breach, and releasing POST from any liability. Hilton said BMO also wanted Hilton to deposit $120 million in a BMO account to cover estimated fines. An alternative option was to extend the then-existing agreement for another three years. 

Hilton says because it could not, even if it wanted to, compel its new processor to agree to such terms, the demand amounted to extortion forcing Hilton to accept the three-year extension. 

In addition to a jury trial, Hilton seeks injunctions ordering BMO Harris to release the withheld funds to the appropriate merchant accounts, compensatory damages and punitive damages several multiples larger than the disputed amounts, as well as interest and legal fees. 

Attorneys with the firm of Ropes & Gray, of Chicago, are representing Parks Hotels. 

BMO Harris is represented in the action by the firms of Jenner & Block, of Chicago, and Debevoise & Plimpton, of New York. POST Integrations is represented by the firms of Sidley Austin, of Chicago, and Lewis Roca Rothgerber Christie, of Phoenix.

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