Suit Aims at Processor’s ‘Prohibited’ List of Businesses

SAN FRANCISCO — Mobile payments company Square Inc. has been hit with a proposed class-action lawsuit alleging that it wrongfully terminates the accounts of customers for business that is supposedly "prohibited."

The lawsuit, according to plaintiffs attorney William McGrane, aims at the civil rights violations of 27 business categories that are being arbitrarily being discriminated against because of their lawful occupation.

McGrane, in his suit, notes that with the exception of the prohibition on accepting payment in connection with illegal business activity, each  other category of Square’s prohibited businesses is either entirely vague or constitutes a lawful occupation.

Square, according to the suit, prohibits the processing of numerous types of business transactions, including all adult entertainment-oriented products or services, "in any medium, whether it may be over the Internet, telephone or printed material."

McGrane, when reached Thursday, told XBIZ that those who work in the adult entertainment industry who accepted Square for payment processing and were similarly terminated from the service could be eligible to join the proposed class-action suit, which was filed this week.

McGrane filed the suit on behalf of the San Francisco bankruptcy law firm of Shierkatz RLLP after Square terminated its account it had used for two years because it practices in a category of prohibited companies — bankruptcy and debt collection.

According to the suit filed at San Francisco Superior Court, when Shierkatz opened its account, the only way to access the seller agreement was by clicking a hyperlink at the bottom of Square's website labeled "Legal.”

The law firm noted that clicking the link was not required to open an account, but Square allegedly changed its site later to require new customers to click on a hyperlink called "Seller's Agreement."

There is "absolutely nothing to suggest that whatever separate content may be viewed by clicking on 'Seller's Agreement' is at variance with the earlier written representations that 'Signing up for Square is fast and free — no commitments or long-term contracts,'" according to the suit.

In addition to unspecified damages, the class-action suit seeks an injunction against Square for violations of California's Unruh civil rights law and unfair competition law.

The suit estimates that Square has incurred not less than $100 million in liability to class members for sending out wrongful termination notices.

View lawsuit