Millions of dollars in balance as Hilton, BMO Harris continue sparring over credit card processing contract

By Jonathan Bilyk | Nov 1, 2017

One of the world’s largest hoteliers and one of the Chicago region’s biggest banks are continuing their court fight over millions of dollars Hilton Hotels claims BMO Harris Bank wrongly withheld amid a tussle over a credit card processing deal and customer data breaches.

In October, Park Hotels & Resorts, the corporation formerly known as Hilton Worldwide, filed a motion in Cook County court asking the court to order BMO to pay $2.4 million more in damages, as it seeks “partial judgment” in the dispute that dates back to customer data breaches suffered by Hilton nearly three years ago.

The case landed in Cook County Circuit Court in July 2016, when Hilton first formally accused BMO Harris of “wrongful and extortionate diversion and retention of approximately $40 million” Hilton said it was due under a merchant services agreement, under which BMO and its agent, POST Integrations, would capture, process and settle credit card transactions for Hilton hotels.

Hilton, however, terminated that agreement in May 2016.

In response to Hilton’s suit, BMO countersued, alleging Hilton had itself reneged on the deal in an attempt to escape responsibility under the contract to cover BMO and POST for steep fines and sanctions they expected to incur from Visa and Mastercard as punishment for large data breaches suffered by Hilton in 2014 and 2015, in which “hundreds of thousands” of customers’ information was exposed.

BMO alleged the contract required Hilton to indemnify the bank against such actions and allowed the bank and its agents to set aside a pool of money from which to pay any fines or sanctions the credit card companies may bring in response to the breaches.

Hilton, however, has disputed that interpretation, and said BMO and POST were using the funds to leverage Hilton into again granting them their business.

After more than a year of proceedings, Cook County Circuit Judge James E. Snyder issued a ruling on Sept. 7, touching on many of the issues at play in the case.

Particularly, the judge said he did not believe the contract gave BMO or POST “the contractual authority to retain funds in anticipation” of fines from Visa and Mastercard. However, the judge said he believed the contract does still require Hilton to cover BMO and POST for fines the credit card companies may impose.

About a week after the ruling, court documents indicate BMO and Hilton reached an agreement over the $40 million at the heart of the complaint.

However, on Oct. 5, Hilton filed a motion asking the court to now order BMO to pay an additional $2.47 million in interest, asserting, under the judge’s ruling, BMO wrongly held the $40 million when they “were ‘otherwise due under the Agreement’ absent BMO’s now-debunked position regarding a purported right to withhold those funds.” Hilton asked the court to find BMO liable for withholding the “converted funds” for 16 months and order the bank to pay interest as “compensatory damages” under the state’s Interest Act.

On Oct. 19, BMO responded to Hilton’s request, asking the court to deny it. The bank argued the judge’s Sept. 7 ruling was not nearly as clear-cut as Hilton alleged.

Rather, BMO asserted, the case still contains “issues of fact that must be litigated,” including the scope of Hilton’s obligations under the contract to indemnify BMO over the data breaches.

And this, BMO said, means Hilton’s attempt to secure the additional interest comes too soon.

“… To date there has been no resolution of BMO Harris’ counterclaims and affirmative defenses, which are sufficiently pled and, if proved, would defeat Hilton’s breach of contract claim,” BMO wrote in its countermotion.

BMO is represented in the action by attorneys with the firms of Jenner & Block LLP, of Chicago, and Debevoise & Plimpton LLP, of New York and Washington, D.C.

Hilton is represented by the firm of Ropes & Gray LLP, of Chicago.

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Organizations in this Story

Hilton Hotels & Resorts Jenner & Block LLP Ropes & Gray LLP

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