P&T Multimedia Services LTD v. Rethink Financial Inc.

[7] 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA [10] 11 P&T MULTIMEDIA SERVICES, Case No. 2:24-cv-05038-FLA (AGRx) LTD, [12] ORDER TO SHOW CAUSE WHY Plaintiff, 13 ACTION SHOULD NOT BE v. DISMISSED [15] RETHINK FINANCIAL INC., et al., 16 Defendants. [18] 19 ORDER 20 In California, the elements of a contract are: “1. Parties capable of contracting; 21 2. Their consent; 3. A lawful object; and, 4. A sufficient cause or consideration.” Cal. 22 Civ. Code § 1550. A contract is unenforceable if it is “1. Contrary to an express 23 provision of law; 2. Contrary to the policy of express law, though not expressly 24 prohibited; or, 3. Otherwise contrary to good morals.” Id. § 1667. “Where a contract 25 has but a single object, and such object is unlawful, whether in whole or in part, … the 26 entire contract is void.” Id. § 1598. “No court will lend its aid to give effect to a 27 contract which is illegal, whether it violate the common or statute law, either 28 expressly or by implication.” Kreamer v. Earl, 91 Cal. 112, 117 (1891) (quoted in 1 Potvin v. Metro. Life Ins. Co., 22 Cal. 4th 1060, 1073 (2000)). 2 It is undisputed Plaintiff P&T Multimedia Services, LTD (“Plaintiff” or “P&T 3 Multimedia”) and Defendant ReThink Financial, Inc. (“ReThink”) signed a Merchant 4 Agreement (“Agreement”) on October 27, 2022. Dkt. 24-1; see also Dkt. 25 at 4.1 5 Defendants Cooraez Keshvani (“Keshvani”), Sean Caffey (“Caffey”), and Rudy Roma 6 (“Roma”) (collectively, with ReThink, “Defendants”) are allegedly owners, directors, 7 or operators of ReThink. Id. ¶¶ 3–5, 13. The Agreement underlies and is the basis for 8 all of Plaintiff’s causes of action against Defendants in this action. See Dkt. 24 9 (“FAC”) ¶¶ 54–128. 10 Plaintiff alleges it is a Cyprus corporation that provides online gaming services 11 in foreign countries, and that its customers pay for its services using credit cards. 12 FAC ¶¶ 1, 8, 18. Plaintiff further alleges certain banks in the United States are not 13 willing to handle credit card processing traffic for gaming merchants like P&T, due to 14 the greater risk involved in such transactions and concerns that the purchased services 15 violate United States state and federal laws prohibiting gambling. Id. ¶¶ 18–19. 16 According to Plaintiff, Defendants ReThink and Keshvani induced Plaintiff to enter 17 into the Agreement by “represent[ing] that ReThink’s processing method hid the type 18 of transaction being processed such as to hide the risk from the banks,” and that 19 “Plaintiff could expand its business geographically because [the processing method] 20 would not disclose that the funds being processed were higher risk gaming funds.” Id. 21 ¶ 23. Pursuant to the Agreement, Defendants allegedly facilitated payment 22 transactions with non-parties Evolve Bank (“Evolve”) and JP Morgan Chase Bank 23 (“Chase”). Id. ¶ 20. 24 Plaintiff additionally alleges facts suggesting the parties were aware neither 25 Evolve nor Chase would have accepted Plaintiff’s payment transactions had these [27] 1 The court cites documents by the page numbers added by the court’s CM/ECF 28 system, rather than any page numbers that appear within the documents natively. | | banks known of the nature and source of the funds. See id. §§ 27-43. For example, 2 | Plaintiff alleges it moved all of its transaction traffic to Chase after “Defendants told 3 | P&T that P&T’s funds at Evolve had been blocked because another merchant, not 4 | P&T[,] had received VISA fines for alleged violations....” Jd. □□ 29-30. Plaintiff 5 | further alleges it specifically and clearly instructed Defendants not to “rerun” credit 6 | card transactions that had not been processed due to bank error, “so as not to provoke 7 || the users and bring scrutiny from customers or Chase.” /d. J 35-39. According to 8 | Plaintiff, Defendants’ failure to comply with Plaintiff's instructions “brought scrutiny 9 | from Chase” and led to Chase freezing Plaintiffs funds.” Jd. {9 39-40, 43. 10 Based on the facts pleaded, Plaintiff and ReThink appear to have entered into 11 | the Agreement to, among other things, aid and abet illegal gambling, and to conceal or 12 | disguise the nature, location, source, ownership, or control of Plaintiffs credit card 13 | payment transactions from banks in the United States in violation of, at least, federal 14 | law. See, e.g., 18 U.S.C. §§ 1955-1957 ; 31 U.S.C. §§ 5361-5366 . 15 Accordingly, the parties are ORDERED TO SHOW CAUSE in writing, within 16 | twenty-one (21) days from the date of this Order, why this action should not be 17 | dismissed with prejudice because Plaintiff's claims, as pleaded, arise from and are 18 | dependent upon an agreement with an unlawful purpose. See, e.g., Potvin, 22 Cal. 4th 19 | at 1073. Responses shall be limited to ten (10) pages in length, excluding 20 | declarations, exhibits, and other evidence. [21] 22 IT IS SO ORDERED. [23] 24 | Dated: October 23, 2024 *6 FERNANDO'L. AENLLE-ROCHA 27 United States District Judge