LOS ANGELES — A federal judge has denied an effort by Fiserv to dismiss a lawsuit brought by POLAM Federal Credit Union, allowing all of the California credit union’s claims against the core processing giant to move forward.
In a June 18 order, U.S. District Judge John F. Walter of the Central District of California denied Fiserv’s motion to dismiss, ruling that the issues raised by the company are “more appropriately resolved on a motion for summary judgment.” The ruling leaves intact POLAM’s claims alleging breach of contract, fraud, unfair competition and violations of federal trade secret laws.
The $70-million POLAM FCU filed suit in March alleging that Fiserv misrepresented the cybersecurity protections surrounding systems used by the credit union and its members. The complaint alleges Fiserv failed to provide security controls it claimed to maintain, including certain multifactor authentication protections, while continuing to market its systems as secure.
As the CU Daily has reported, the lawsuit is one of several filed against Fiserv that make similar allegations. POLAM also alleges Fiserv imposes substantial fees on institutions seeking to move their data to competing providers. Fiserv has denied the allegations and argued the credit union failed to state valid legal claims.
In denying the motion, Walter did not rule on the merits of the allegations, but determined the case should proceed beyond the pleading stage and into discovery.
Win Against the ‘Big Guys’
“Our board of directors and I are extremely grateful for our legal representation and encouraged by this significant first win against the ‘big guys,'” POLAM CEO Jennifer Audette said in a statement. Audette added that smaller credit unions already face significant challenges and “fighting for our members’ right to a secure system should not be a battle we have to take on with a vendor who is supposed to be a partner.”
Charles Nerko of NERKO PLLC, one of the attorneys representing POLAM and who also represents other credit unions that have file similar suits, said the ruling allows the credit union and other plaintiffs to continue pursuing their claims. “We are very pleased by this significant victory,” Nerko said in a statement. “The legal process is a way credit unions can turn vendor frustrations into recoveries.”
The case now moves into the discovery phase, where the parties will exchange documents and other evidence as the litigation proceeds.
