Small Pa. credit union claims partial victory in Fiserv lawsuit
Bessemer System Federal Credit Union of Greenville, Pa. saw a partial legal victory this week in a suit against its former vendor, Fiserv Solutions.
The $38 million-asset credit union filed a complaint against Fiserv in 2019 alleging its cybersecurity vendor was liable for misconduct. The suit refers to a number of cybersecurity issues at Fiserv, including a 2016 breach which led to confidential member information being shared with another financial institution.
The court this week partially denied Fiserv's motion to dismiss the suit, allowing some of Bessemer’s damage claims to proceed. Those involve stipulations around contracts, fraud, trade secrets, declaratory judgements and punitive damages.
Fiserv's motion to strike the credit union’s jury demand was also denied. The tech company’s request to avoid a jury stems from a previous master agreement between the two parties which stated both sides would “not seek or recover punitive damages for disputes arising from the agreement” and that both Fiserv and Bessemer System FCU had waived their right to a jury trial if any disputes arose from the agreement.
Bessemer claims there was a "gross disparity in bargaining power" with Fiserv, and that the CU did not have ample negotiation opportunities.
“Fiserv implemented lax and weak security controls to protect the accounts and valuable confidential information of Bessemer’s members, and Fiserv was put on notice on several occasions such that Fiserv knew that its security measures were insufficient,”the credit union argued, according to court documents.
Not all of the credit union’s claims were recognized, however. The court ruled in Fiserv’s favor to dismiss claims for breach of a purported replevin action settlement agreement. A replevin action allows a party to seek out and immediately recover property that was wrongfully taken away or withheld.
"The master agreement provides the parties’ responsibilities with respect to deconversion, and Bessemer has thus not set forth sufficient consideration with respect to the Replevin Action settlement agreement," Colville wrote.
The court also dismissed the credit union’s claims in regards to unfair and deceptive trade acts and practices in addition to negligence claims. The court also dismissed some, but not all, of the credit union's fraud claims.
“We will continue to take appropriate legal actions against the credit union’s former online banking vendor,” Charles J. Nerko, lead counsel to Bessemer System Federal Credit Union wrote in a statement.
Brookfield, Wis.-based Fiserv is one of the largest technology vendors for financial institutions across the country. The company continues to deny the credit union’s allegations.
"We believe the allegations have no merit and will respond to them as part of the legal process," Ann Cave, a Fiserv spokesperson, told Credit Union Journal.
Bessemer System Federal Credit Union did not respond to Credit Union Journal’s request for comment.