Visa has now reacted, arguing to a federal judge that Genesco's complaint should be dismissed for three reasons. First, Visa said that Genesco cited the wrong California state law, one that cannot be used in cases where there is a contract dispute. Second, Genesco didn't claim sufficient facts to make its case. The third Visa argument was that one claim—that Visa had made fraudulent statements—wasn't valid as the statements didn't influence "consumers or the public," nor did even Genesco rely on them. (It's an interesting defense: Our lies didn't harm anyone because nobody ever believes us anyway. For the record, of course, Visa hasn't conceded that it lied, arguing that the law in question only envisioned lies that deceived the public.)
The core of the claim from Genesco—which has more than 2,455 retail stores throughout the U.S., Canada, the United Kingdom and Ireland—was that it had not violated any PCI rules. On that point, Visa said nothing.
But when it came to making as many references as possible to the original breach, that Visa found time for. "Following a massive data compromise event at Genesco in which millions of cardholders’ account data were put at risk, Visa exercised its contractual rights with respect to Genesco’s acquiring banks to collect from these banks money designed to be a partial reimbursement for losses suffered by the banks that had issued the Visa cards that were put at risk by the deficiencies in Genesco’s data security system."
Many of the details of this case revolve around the precise rules of PCI and the payment systems. Visa stresses that it would never fine a retailer and that it only fines the acquiring banks, knowing full well that the banks are going to pass along those fines. But the existence of the bank middleman was supposed to provide Visa legal protection. In this case, though, Genesco was using Fifth Third and Wells Fargo and Genesco had cut a very specific deal with Wells Fargo. The Wells Fargo deal had the bank signing over its right to sue Visa to Genesco.
Visa's filing said the fine was literally not a punishment for Genesco for being non-compliant as much as it was a punishment for the acquiring banks for not making sure that Genesco was PCI-compliant. In effect, had the acquirers sued, Visa simply would have had to prove that the banks hadn't tested and verified Genesco's compliance vigorously enough. Whether or not the chain was actually non-compliant wouldn't have mattered, as the obligation of the bank was supervision.
But given that Genesco has taken over the suing function, Visa may actually have to prove direct lack of PCI compliance. Hence, they really want to make this case go away.
That's part of the PCI ambience. Many of the long list of guidelines are subjective and interpretable.PCI QSAs can disagree among themselves, and when a retailer changes QSA firms, different interpretations often materialize. Therefore, after a breach has happened, it's easy to reinvestigate and to find something that could be interpreted differently. And then, presto, non-compliance.
Visa has proudly proclaimed—repeatedly—that no PCI-compliant retailer has ever been breached. That's true, but it's because every time a compliant retailer has been breached, Visa has them re-evaluated and suddenly finds that they hadn't really been compliant after all. George Orwell would have been proud.
Back to Visa's filing for dismissal. Visa gets precise about the pecking order: "Nor does Genesco allege that Visa’s contractual right to collect the assessments from the Acquiring Banks was contingent on Genesco agreeing to reimburse or indemnify the Acquiring Banks. In addition, Genesco does not allege that Visa directed, or even encouraged, the Acquiring Banks to seek reimbursement or indemnification from Genesco pursuant to the banks’ separate contracts with Genesco." Yeah, I'm sure that those banks had to have their arms twisted to seek reimbursement from a retailer.
"Genesco’s allegation is simply that Genesco’s separately negotiated contracts with Acquiring Banks resulted in Genesco having an indemnity obligation to the Acquiring Banks for the banks’ contractual obligations to Visa. Genesco’s contract-based claims are factually and legally flawed, but they will be challenged at a later time and not on this motion."
Visa also got into the issue of whether it had engaged in fraudulent conduct—given that it's a card brand, the filing meant that it had engaged in more fraudulent conduct than usual.
"Genesco fails to allege that Visa made any statements or representations that were allegedly fraudulent. Its sole, conclusory assertion of fraudulent conduct is the allegation that 'Visa misrepresented to the Acquiring Banks that [the disputed] amounts were due and owing to Visa under the VIOR and applicable law.' This allegation is no more than a thinly veiled claim that Visa breached its contracts with the Acquiring Banks in making the assessments. Even if accepted as true for purposes of this motion, the allegation does not establish any likelihood of consumer or public deception. Nor does Genesco even allege that it relied on the alleged misrepresentation. For these additional reasons, Genesco’s Complaint fails to state a claim under the 'fraudulent' prong of the (California Unfair Competition Law). Genesco does not allege facts demonstrating that it was inequitable for Visa to apply the relevant contractual procedures for collecting money from the Acquiring Banks to partially reimburse issuing banks for losses they suffered as a result of account data-security deficiencies at Genesco."