50 Below sues to keep processing credit-card payments

• Credit card payment

Without SecureNet Payment Systems, 50 Below wouldn’t be able to process credit and debit card transactions necessary to do business. (2005 file / News Tribune)

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Two weeks before Duluth-based 50 Below filed for bankruptcy in August, it signed an agreement with a Maryland-based company to process its credit and debit card transactions.

Now the company wants out. And 50 Below and its court-appointed trustee are suing the company to stop them.

50 Below, one of Duluth’s largest technology employers, is still operating as Chapter 11 proceedings move through U.S. Bankruptcy Court. But without SecureNet Payment Systems, 50 Below wouldn’t be able to process credit and debit card transactions necessary to do business. Only authorized credit card processors can do that, according to the complaint filed recently in federal court.

Losing SecureNet’s services also severely jeopardizes 50 Below’s ability to restructure under Chapter 11, the complaint says.

50 Below signed the agreement with SecureNet on Aug. 16. On Aug. 29, it filed for bankruptcy, claiming liabilities of about $12 million to 20 creditors. On Sept. 28, SecureNet sent 50 Below its 30-day notice of termination.

Although a termination requires stated reasons, no specific reasons were cited.

According to the agreement, reasons can include the client being financially insecure or having a high-risk industry profile, or SecureNet determining that continuing to serve the client exposes the company to an unacceptable risk.

50 Below, which has about 250 employees, designs, builds and maintains websites and offers Web-based marketing campaigns and sales. It also hosts retailer websites and e-commerce stores.

Ruben Aceves Jr., SecureNet’s senior risk analyst who signed the termination notice, on Monday deferred questions to the company’s marketing department, which did not get back to the News Tribune.

In the complaint, trustee Nauni Jo Manty contends that allowing SecureNet to terminate the agreement would be a violation of U.S. Bankruptcy Code. She asked the court to deem the agreement a contract that can’t be terminated because of a client’s financial condition, its filing for bankruptcy or the appointment of a trustee when a case is in bankruptcy.

The complaint’s filing follows Manty’s move to sell 50 Below’s assets to pay its debts. The deadline for sealed bids is Monday, with a Nov. 7 court hearing on the sale.

David Hogge, 50 Below’s CEO, declined comment on the latest court action.

“I know there’s a complaint filed, and that’s all I know,” he said.

Typically, a business gets out of Chapter 11 through an asset sale or reorganization, according to Michael McGrath, the Minneapolis attorney who filed the 50 Below bankruptcy case.

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