Merchant Account Underwriting Tools

AP Processing vs. Dermaktive

  • Case


(Jury Demand)






  • Plaintiff, ATLANTIC-PACIFIC PROCESSING  SYSTEMS,  , a Nevada Corporation (hereinafter “Plaintiff ‘ or “APPS”) hereby alleges for its complaint against
  • Defendants DERMAKTIVE,  LLC, and JORDAN  DUFNER  (herein  collectively “Defendants”)
  • as follows:                 1.


This Court has jurisdiction  over this matter under  28 U.S.C. Section  1332(a)(l)

  • on the basis of diversity of citizenship,  because the amount in controversy exceeds   $75,000.00,
  • the parties are citizens of different states, and there is an actual controversy between the
  • Venue in the District  of Nevada is proper  under  28 U.S .C. Section 1391(b)(2)
  • because a substantial part of the events or omissions giving rise to the claim  occurred   in the
  • Plaintiff  is, and at all relevant times was,  a corporation duly organized  and existing under and by virtue of the laws of the  State of Nevada with its principal  place  of business located  in Clark County,


  • Plaintiff  is informed  and believes  and, based thereon,  alleges that Defendant,
  • DERMAKTIVE, LLC (“Dermaktive”),  at all relevant  times was a limited liability   company duly organized and existing under and by virtue    of the laws of the State of Florida, with its principal place of business in Aventura,
  • Plaintiff  is informed  and believes, and based thereon, alleges that Defendant JORDAN DUFNER (“Dufner”), is an individual who at all relevant  times was residing    in Danbury, Connecticnt

– — ·- ——···- -·     ·····————1

  • Plaintiff  is informed  and believes,  and based thereon alleges, that there  exists,
  • and at all relevant times there  existed, a unity  of interest and ownership between  and among  the
  • individual defendant Dufner  and the corporate  defendant  Dermaktive  such that any individuality
  • and separateness between  and among the Dufner  and Dermaktive  have  ceased and Dermaktlve is the alter ego of Dufner in that Dermaktive  is, and at all relevant times was, used by Dufner    as a device to avoid individual liability; Dufner has completely  controlled, dominated,   managed, and operated Dermaktive for his own benefit and gain; and Dufner has    intermingled Dermaktive’s assets with his individual assets to suit his own
  • Plaintiffs  do not know the true names  and characters  of Doe Individuals I  through X and Roe Entities I through X, whether individual,  corporate, associate or  otherwise,   and




1    Plaintiffs therefore  sue these defendants by fictitious names.   Plaintiffs  are informed  and believe

2    and therefore  allege that each of the defendants  designated  as Doe Individuals  I through X or

  • Roe Entities I through X is responsible in some manner  for the events and happenings   this
  • complaint describes,  and Plaintiffs  will  ask leave ofthis court to amend this complaint to  insert
  • the true names and characters of Doe Individuals I through X and Roe Entities I through  X when
  • they learn of them and to join these defendants  in this action.
  • Tl Payments, LLC  (“Tl”) is a sub-ISO  accredited  by and under  contract with
  • APPS to process credit card transactions  with the card brands under APPS’ s  banking
  • Under  its agreement with APPS, Tl presents merchants  to APPS for credit   card

11    processing using APPS ‘ processing system. The agreement with APPS allowed Tl to market

12    credit card processing  services to merchants in its own  name.

13                9.         On or about April 9, 2014, Dermaktive  and Tl  entered into a written   Merchant

  • Application and Agreement (the “Agreement”). As part of the Agreement, Tl would provide
  • credit card processing services for Dermaktive,  as a merchant, for a term of 36    In
  • exchange, Tl would  receive  specified
  • The Agreement  contained  the following provision:  “The undersigned  has
  • —–1- .J-+€€i:vw-,-read,..aoo….under.siood,  the MerchantAgreement,  which is incorporated herein by tpis
  • reference, and agrees on behalf  of the Merchant to be bound by the terms of such   Merchant
  • Agreement as may be  amended  from time-to-time.”  Dermaktive  received the Merchant
  • Agreement and was aware of the incorporated  terms and  conditions.
  • The terms  and conditions  of the Agreement  limited the “chargebacks”
  • Dermaktive could  A chargeback  is a credit card transaction that is returned by the  issuer
  • of the credit card. If chargebacks  amounted to more than  1% of the total number  of transactions
  • in a 30-day period, then Dermaktive would be required to fund a Merchant Reserve Account    to
  • protect the other parties from
  • Tl  was  also allowed to terminate the Agreement  if: “At  any time during the  term
  • of this Agreement, Merchant has had a monthly ratio of Chargebacks to total   transactions




  • exceeding Card Association requirements  or  1%, or Chargebacks exceed 3% of any  monthly
  • dollar amount of total “
  • In the event of termination, the parties agreed Tl  could charge an    early
  • termination fee (“ETF”). In the case of a “high risk” merchant, the ETF would be equal to “the
  • average monthly processing fees charged to Merchant for the previous  12 months . . . multiplied
  • by the number of months remaining under the  “
  • 14. On or about October  24, 2014, Dermaktive  entered into a Reserve Addendum  to
  • the Agreement directly with APPS.   The Reserve Addendum  allowed APPS to create a  reserve
  • Therein, Dermaktive  also acknowledged  that it was a “High Risk  Merchant.”
  • 15. After  only a short time of providing  processing  services, Tl  and APPS observed
  • that there were more chargebacks than allowed under the Agreement.   APPS is informed   and
  • believes and on that basis alleges that  excessive  chargebacks  arose because  Dermaktive’ s
  • business turned out to be set up to defraud  consumers through its sales and advertising
  • 16. Because Dermaktive’s  chargebacks  continued  to be unacceptably  high and to
  • protect consumers from fraudulent practices, Tl terminated the Agreement effective December
  • 31, 2014 . In accordance with the Agreement,  Tl  calculated that the ETF was   $867,135.42.
  • APPS, on behalf  of Tl, collected  $336,198 . 16 of the ETF from the reserve
  • 17. Desp_i!:e its express ohligatiQn under the Agreemeµt Qe@ktiv h_,:tsJ?-il_  d_ t() pay
  • the $530,937.26 balance of the
  • 18. Dufuer personally  guaranteed  Dermaktive ‘s performance  of all terms and


  • conditions of the Agreement,  including the payment  of the ETF (the  “Guaranty”).


  • Tl  thereafter  transferred  and assigned to APPS  any and all of its right, title,


  • interest and claims to the ETF arising under and in connection with the Agreement    with





  • (Breach of Contract against All Defendants)


  • Plaintiff refers  and incorporates by reference the allegations of paragraph    1


  • through 19 as though  set forth fully herein.








1                21.       On or about April 9, 2014, Dermaktive  and Tl  entered into the Agreement.    As

  • part of the agreement, Tl provided  credit card processing  services for Dermaktive  for an  agreed


  • term of 36 months . In exchange, Tl  received  specified fees. Dermaktive  also agreed to pay  the


4    ETF if the Agreement  was terminated prior to the 36-month term on account    of excessive

5    chargebacks.

6                22.       Dermaktive  violated  and breached the terms of the Agreement when it  allowed

  • its chargebacks to substantially exceed those allowed under  the Agreement.    As a result,  Tl
  • terminated the
  • 23. Tl  has performed  all of its obligations required  under the Agreement  excepting
  • only those obligations that were excused  by Dermaktive’s prior breach of the

11                24.       Pursuant to the terms of the Agreement,  Tl  was  allowed to charge  Dermaktive

  • the EFT for its violation and early termination of the
  • Dermaktive  further breached the Agreement by failing to pay the   entire ETF.
  • 26. Plaintiff  is the assignee  of all of Tl ‘s rights  and interests under the Agreement  to
  • the


  • 27. As a direct and proximate result  of Dermaktive’s breach of the Agreement,    APPS
  • has suffered damages in the amount of at least  $530,26.


  • -·- – — – 1-8.. – — – – – – —  .28…  _  Paragraph J.0_6  oftb  _ Ag;regigt  .)(pressly provide   for_ the recovery of _ _   _   _ _ _


  • attorneys ‘ fees and costs in any action brought to recover money from Dermaktive for its   failure


  • to pay money due.  It has been necessary for APPS to retain legal counsel to prosecute this


  • action. Pursuant to the Agreement , APPS is entitled  to recover its attorney’s fees and   costs


  • reasonably incurred in prosecuting  this




  • (Breach of Guaranty against Defendant Dufner)


  • Plaintiff refers  and incorporates by reference the allegations  of paragraph   1


  • through 28 as though set forth fully


  • 30. On or about April 9, 2014, Dufner personally  guaranteed the obligations   of


  • Dermaktive under the Agreement, including payment  of the








  • Plaintiff is the assignee of all of Tl ‘s rights under the Agreement to the payment
  • of the


  • Dufner breached the Guaranty by failing to pay the balance  of the   ETF that


  • Dermaktive failed to


  • 33. As a direct and proximate result  of Dufner’s  breach of the Agreement, APPS   has


  • suffered damages in the amount of at least  $530,26.


  • The Agreement  expressly provides  for the recovery  of attorneys’  fees and costs


  • in any action arising out of the Guaranty. Ithas been necessary  for APPS to retain    legal counsel


  • to prosecute this action.   Pursuant to the Agreement,  APPS is entitled to recover  its attorney ‘s


  • fees and costs reasonably incurred in prosecuting  this  action.




  • (Declaratory Relief  against All Defendants)


  • Plaintiff refers  and incorporates  by reference the allegations  of paragraph  1


  • through 28 as though set forth fully  herein.


  • Under the Agreement , Dermaktive  agreed to pay  specified fees and accept


  • liability for


  • 37. An actual controversy has arisen between the parties  in relation  to the amount   of


. . _LS     fees-and chargebacks thatDermaktive.. isJia_bleJor_._ Dermi,11ctiye   og_t°’illl t_haj:_i_t wa.s_c;lia]_ged_


  • $119,199.01 in chargebacks and fees on ACH transactions  that were not warranted  under  the


  • APPS contends that the charges were proper under    the Agreement.


  • 38. Plaintiff  seeks a determination  that Dermaktive  is liable for all chargebacks  and


  • fees as properly charged under the Agreement  and that the amount  of $119,01 was   correctly


  • charged to




  • Defendant hereby demands a jury trial as to all causes of actions  for which he has   a right


  • to trial by




  • WHEREFORE, APPS prays  for judgment  on its complaint  against Dermaktive and








1    Dufner as follows:



2      1.

3                2.

For general damages in the amount of  $530,937.26 ;


For a determination that Dermak:tive is liable for all chargebacks and fees   as



  • properly charged under the Agreement  and that the amount of $119,199.01 was  correctly


  • charged to Dermaktive;



6                3.


7                4.

For reasonable  attorneys’  fees and costs of suit incurred  herein;


For pre-judgment  and post-judgment  interest on the amount recovered  at the



  • highest legal rate from the earliest legal date;  and


  • For such other and further relief as the Court may deem just   and proper. 10

11    DATED:   April 4, 2016 12











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Dirk 0. Julander, Bar No. 132313

(Pro Hae Vice Application Pending) 9110 Irvine Center Drive

Irvine,  California 92618


Attorneys for Plaintiff, Atlantic-Pacific Processing Systems, Inc.
















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