Citibank Wins Appeal in Airline Mile Class Action Lawsuit
By John Curan
The Second Circuit Court of Appeals has remanded a class action lawsuit regarding Citibank airline mile rewards back to U.S. District Court in New York, deciding that the lower court failed to properly decide two questions of fact when it ruled Citibank could not force customers into arbitration. The bank will now have the opportunity to convince the judge again that the plaintiffs should be forced into arbitration.
Plaintiffs Bertram Hirsch and Igor Romanov alleged in the Citibank class action lawsuit that the bank failed to advise consumers who signed up for new credit cards that the free airline miles they would receive as a perk would be taxed as income. Both received 1099 forms indicating they had received income of $1,000, or a cash value of 2.5 cents per airline mile. Citibank is fighting the allegations of incomplete disclosures and is asking the court to enforce an arbitration agreement included in the client manual for the Citibank signature credit cards.
The U.S. District Court judge that handled the class action lawsuit decided that the contracts for Citibank’s signature cards did not adequately inform customers that the client manual contained information regarding the taxable income or the arbitration clause.
The appeals court disagreed, finding that two questions of fact must be decided before the judge can determine if the case should go to arbitration or if the plaintiffs can continue their claims through a class action lawsuit.
To demonstrate the provision of a client manual indicating these two policies, Citibank will have to demonstrate that there is a corporate policy in place for providing that documentation to people like Hirsch and Romanov. It is unclear, however, whether there must be evidence that employees who helped the two open accounts actually followed this policy.
In addition, the judge will have to decide whether or not employees at the bank adequately informed the two men that the client manual included a contract that provided for arbitration rather than litigation. The Second Circuit Court of Appeals noted a precedential decision that stated ““[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.”
Finally, Citibank cannot seek to argue that the two are equitably estopped from alleging that they did not agree to arbitration based on their acceptance of airline miles as a benefit unless the company can demonstrate that the class action lawsuit plaintiffs accepted benefits that were tied to the manual, rather than the initial advertising of free airline miles. The judge that handled the case will need to decide on those three questions of fact to determine whether the case can go to arbitration.
The plaintiffs are represented by James Clayton Kelly.
The Citibank Airline Miles Class Action Lawsuit is Bertram Hirsch, et al. v. Citibank NA, Case No. 13-cv-1172, U.S. District Court, Southern District of New York.
UPDATE: September 2017, the Citibank American Airlines miles promotion class action settlement is now open. Click here to file a claim.
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