Square ‘Bad List’ Class Action Lawsuit Gets Dismissed

A California federal judge has dismissed a proposed class action lawsuit against Square Inc. brought by a bankruptcy attorney who claims the mobile payment provider illegally discriminates against certain businesses.

U.S. District Court Judge Jon S. Tigar granted Square’s motion to toss the complaint, ruling that plaintiff Robert White can’t sue the merchant service aggregator because he was never a customer.

White, a California-based bankruptcy attorney, filed the proposed class action lawsuit against Square last October, claiming the company discriminates against certain businesses, including bankruptcy attorneys and debt collection services by placing them on a so-called “Bad List” and prohibiting them from using the mobile payment services.

White states he learned of Square’s “Bad List” through a personal friend and business colleague, Jeremy Katz, who himself sued Square in a similar case and was deterred from becoming a Square Credit Card customer because of inclusion of bankruptcy attorneys on the “Bad List.”

According to White, with the exception of one section on Square’s Seller Agreement (aka Bad List) which prohibits acceptance of payments in connection with any business or business activities involving illegal activity or illegal goods, each and every other category of business that the company deems “a business [that] is prohibited” is either described vaguely or is in actuality a lawful business.

He alleges Square is in violation of the California Unruh Law by prohibiting certain types of businesses from using its services.

The “Bad List” provision in Square’s terms and conditions asks that prospective users first to “confirm that [they] will not accept payments in connection with the following businesses or business activities,” going on to list nearly 30 terms such as “credit protection or identity theft protection services,” “inbound or outbound telemarketers” and “bankruptcy attorneys or collection agencies engaged in the collection of debt.”

Specifically, White takes issue with Square’s alleged off-putting “Bad List” because the majority of sections comprise of businesses that are not illegal services or goods.

In response to Square’s motion to dismiss, White argued that it would have been a “futile gesture” to sign-up as a Square customer because the company would have prohibited it under the terms of their “Bad List” anyways.

He further argued that a California Appeals Court decision in Hutson v. Owl provided support for holding that he has standing under the Unruh Act.

However, Judge Tigar disagreed, noting that “Hutson involved a black woman who was refused service as a soda fountain, called a racial epithet, and then physically assaulted.”

By contrast, the Judge stated that White has not even attempted to obtain services from Square.

“Because White did not ‘allege[] that he attempted to subscribe to Square’s services,’ but instead ‘merely allege[d] that became aware of Square’s policy and ‘was then dissuaded from seeking to become a [Square] customer,'” he does not have standing to sue Square under the Unruh Act, Judge Tigar stated in his dismissal order.

White is represented by William McGrane of McGrane LLP.

The Square Inc. Discriminatory Business Practices Class Action Lawsuit is White v. Square Inc., Case No. 3:15-cv-04539, in the U.S. District Court for the Northern District of California.