Court Opinion

ID: 1086320
Source: CourtListenerOpinion
Date Created: 2013-10-22 14:05:30.794714+00
Date Added: 2024-06-11T12:30:30.593348
License: Public Domain

13-1172-cv
Hirsch, et al., v. Citibank, N.A.

                                      UNITED STATES COURT OF APPEALS
                                         FOR THE SECOND CIRCUIT

                                                    SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY
ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE
OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY
ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL
APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY
CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY
COUNSEL.

        At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood
Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 22nd day of October,
two thousand thirteen.

PRESENT:

           BARRINGTON D. PARKER,
           PETER W. HALL,
           DEBRA ANN LIVINGSTON,
                                Circuit Judges.
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BERTRAM HIRSCH and IGOR ROMANOV,
on behalf of themselves and all others similarly situated,*

                     Plaintiffs-Appellees,

                               -v.-                                                             No. 13-1172-cv

CITIBANK, N.A.,

                     Defendant-Appellant.

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FOR APPELLANT:                                                            Julia B. Strickland, Stroock & Stroock & Lavan
                                                                          LLP, Los Angeles, CA, (Joseph E. Strauss, on
                                                                          the brief, Stroock & Stroock & Lavan LLP, New
                                                                          York, NY).

*The Clerk of Court is requested to amend the official caption in this case to conform to the listing of the
parties above.

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FOR APPELLEE:                                            James C. Kelly, The Law Offices of James C.
                                                         Kelly, New York, NY.

        Appeal from a judgment of the United States District Court for the Southern District of

New York (Batts, J.).

        UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED,

AND DECREED that the judgment of the district court is VACATED, and the case is

REMANDED to the district court for further proceedings.

        Defendant-Appellant Citibank, N.A. (“Citibank”) appeals from the district court’s decision

denying Citibank’s motion to compel arbitration after concluding that the agreement to arbitrate was

not binding on the parties as the signature cards signed by Appellees upon opening Citibank deposit

accounts failed sufficiently to reference the document containing the arbitration provision. We

assume the parties’ familiarity with the underlying facts, the procedural history, and the issues

presented for review.

        Citibank contends that the district court erred in relying solely on the incorporation by

reference doctrine as the basis for denying its motion and also in ignoring the evidence it introduced

concerning its established policy of providing each new customer with the agreement governing

deposit accounts1 at signing. We review de novo the district court’s determination that the arbitration

agreement was not binding, accepting the district court’s factual determinations unless clearly

erroneous. See Schnabel v. Trilegiant Corp., 697 F.3d 110, 118-19 (2d Cir. 2012). “[T]he ultimate

question of whether the parties agreed to arbitrate is determined by state law.” Bell v. Cendant Corp.,

293 F.3d 563, 566 (2d Cir. 2002). “If there is an issue of fact as to the making of the agreement for

1
  According to Citibank, deposit accounts opened in New York are subject to the terms and conditions of
the Client Manual. In California, these accounts are governed by the terms and conditions contained in the
Client Manual and the Citibank California & Nevada Marketplace Addendum. In this opinion, we will refer
solely to the Client Manual as it contains the arbitration provision at issue in this case.

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arbitration, then a trial is necessary.” Bensadoun v. Jobe-Riat, 316 F.3d 171, 175 (2d Cir. 2003) (citing 9

U.S.C. § 4).

        We hold that the district court erred in concluding that the Signature Cards did not

sufficiently incorporate by reference the Client Manual without deciding whether Citibank provided

Hirsh and Romanov with the Client Manuals when they opened their accounts. A complete analysis

of incorporation by reference considers the materials provided with the agreement. See, e.g., Samuel

L. Hogan II, P.C. v. J.P. Morgan Chase Bank, N.A., 939 N.Y.S. 2d 744 (Sup. Ct. 2011) (holding that the

underlying agreement was incorporated by reference because the incorporating contract both

referred to the underlying agreement by name and was annexed to the underlying agreement);

Chiacchia v. Nat’l Westminster Bank, 507 N.Y.S. 2d 888 (App. Div. 2d Dep’t 1986) (finding that the

rental agreement did not sufficiently incorporate by reference the underlying agreement both

because the rental agreement included sweeping language and the underlying agreement was not

provided to plaintiff.) On remand, the court should decide whether Citibank provided Appellants

with the Client Manuals. In deciding this factual issue the court should consider whether Citibank

fulfilled its burden of proof in demonstrating a corporate policy requiring the provision of the

Client Manual, see, e.g., Ma v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 597 F.3d 84, 92 (2d Cir. 2010)

(“[A] presumption of receipt arises where . . . the record establishes office procedures followed in

the regular course of business.”), and whether Appellants actually received a copy of the Client

Manual.

        We note that, in signing the signature cards, Appellees agreed to be bound by “any

agreement governing” their accounts. Even assuming that Appellees received the Client Manual

upon opening their accounts, which they deny, the Client Manual on its face does not state that it is

an agreement or that it contains terms and conditions governing these accounts.                 Moreover,

although Citibank has provided a declaration according to which its practice and procedure is to

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provide the Client Manual to new customers opening deposit accounts, there is no evidence to

indicate whether new customers are alerted to the fact that their accounts are governed by the terms

and conditions included in the Client Manual or that the Client Manual contains an arbitration

clause. We have held that “receipt of a physical document containing contract terms or notice

thereof is frequently deemed, in the world of paper transactions, a sufficient circumstance to place

the offeree on inquiry notice of those terms.” Specht v. Netscape Commc’ns Corp., 306 F.3d 17, 31 (2d

Cir. 2002). While “[i]t is true that a party cannot avoid the terms of a contract on the ground that

he or she failed to read it before signing[,]. . . [a]n exception to this general rule exists when the

writing does not appear to be a contract and the terms are not called to the attention of the

recipient. In such a case no contract is formed with respect to the undisclosed term.” Id. at 30

(citation and internal quotation marks omitted). This presents an issue of fact that has yet to be

determined.

        Alternatively, Citibank contends that Appellees are equitably estopped from arguing that they

did not agree to arbitrate as they derived benefits from their deposit accounts, which are governed

by the terms and conditions of the Client Manual, and therefore, are bound by the arbitration

provision included therein.2 We have previously held that a party may be bound by an arbitration

clause when he has “knowingly accepted the benefits of an agreement with an arbitration clause,

even without signing the agreement.” MAG Portfolio Consultant, GmbH v. Merlin Biomed Grp. LLC,

268 F.3d 58, 61 (2d Cir. 2001) (internal quotation marks omitted). Mere acceptance of a benefit can

constitute assent, but only where the “offeree makes a decision to take the benefit with knowledge

2 Although in general “an appellate court will not consider an issue raised for the first time on appeal,” In re
Nortel Networks Corp. Sec. Litig., 539 F.3d 129, 132 (2d Cir. 2008) (internal quotation marks omitted), it has
discretion to consider waived arguments where “necessary to avoid a manifest injustice or where the
argument presents a question of law and there is no need for additional fact-finding,” Bogle-Assegai v.
Connecticut, 470 F.3d 498, 504 (2d Cir. 2006) (internal quotation marks omitted). We consider Citibank’s
argument, here, in light of the long established “liberal federal policy favoring arbitration agreements.”
CompuCredit Corp. v. Greenwood, ___ U.S. ____, 132 S.Ct. 665, 669 (2012).

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[actual or constructive] of the terms of the offer.” Register.com, Inc. v. Verio, Inc., 356 F.3d 393, 403

(2d Cir. 2004). In sum, estoppel “requires a showing . . . that [a party] ‘knowingly exploited’ the

benefits of an agreement with an arbitration clause and derived a ‘direct benefit’ from the

agreement.” AICO Int’l, E.C. v. Merrill Lynch & Co., Inc., 98 F. App’x 44, 46 (2d Cir. 2004) (summary

order) (quoting MAG Portfolio, 268 F.3d at 61-62). Although Citibank contends that Appellees

obtained benefits under the Client Manual, namely account management services and interest,

Appellees argue that they did not receive any benefits stemming from the Client Manual, and that all

benefits they received, i.e., the airline miles, were associated with the offer of miles they accepted by

opening their accounts. As the evidence available on the record fails sufficiently to substantiate

either position, this creates another issue of fact.

        Because issues of fact exist “as to the making of the agreement for arbitration, . . . a trial is

necessary.” Bensadoun, 316 F.3d at 175 (citing 9 U.S.C. § 4).

        For the foregoing reasons, the judgment of the district court is VACATED, and the case is

REMANDED to the district court for further proceedings consistent with this Order. We express

no view as to how the district court should, in the first instance, resolve these factual disputes on

remand. Nor by this order, do we intend to limit the evidence that the district court may consider,

but leave such decisions to its sound discretion.

                                                 FOR THE COURT,
                                                 Catherine O’Hagan Wolfe, Clerk of Court

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