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Benzemann v. Citibank N.A.

United States District Court, S.D. New York.

June 27, 2014




Plaintiff Alexander Benzemann ("Benzemann" or "plaintiff") brings this action against Citibank N.A. ("Citibank"), as well as against Houslanger Associates PLLC ("H&A"), Todd E. Houslanger ("Houslanger"), and New Century Financial Services ("New Century") (collectively the "Houslanger defendants"). Plaintiff alleges violations of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq. (the "FDCPA"); the Electronic Fund Transfer Act, 15 U.S.C. § 1693 et seq. (the "EFTA"); 42 U.S.C. § 1983 ("§ 1983"); and the Due Process Clause of the Fourteenth Amendment. He further alleges ten causes of action under state law.

Presently before the Court are two motions. First, defendant Citibank has moved, pursuant to the Federal Arbitration Act, 9 U.S.C. § 1 et seq. (the "FAA"), to dismiss the complaint as against Citibank and to compel arbitration of plaintiff's claims. Second, the Houslanger defendants have moved to dismiss the complaint as against them based on plaintiff's failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). For the reasons stated herein, we grant both motions, although we dismiss plaintiff's state law claims against the Houslanger defendants without prejudice.


I. Factual Background

On April 25, 2003, a judgment was entered in the Civil Court of the City of New York in favor of New Century, an assignee of Citibank, and against Andrew Benzemann, plaintiff's brother, in the sum of $12, 942.01. Am. Compl. ¶ 11; Mem. of Law in Supp. of Def. Houslanger & Associates, PLLC & Todd E. Houslanger's Mot. to Dismiss ("Houslanger Mem.") at 3. At no point was plaintiff a party to that action, but he did maintain his own account at Citibank. Am. Compl. ¶ 12.

About five years later, on April 30, 2008, Citibank froze plaintiff's bank account and sent him a letter that referenced the judgment against his brother. Id . ¶ 13-14. Citibank also provided plaintiff with a copy of the restraining notice, which was executed by Houslanger as attorney for New Century, the judgment creditor. Id . ¶ 15. The restraining notice identified Andrew Benzemann as the judgment debtor, but the social security number and address were that of Alexander Benzemann, the plaintiff. Id . ¶ 17. Plaintiff claims to have contacted H&A and Citibank immediately after his account was frozen in an attempt to lift the restraint, but he alleges that they did not immediately retract the restraining notice. Id . ¶ 22-23. Plaintiff then retained counsel, and it was only when he threatened legal action that the restraining notice was withdrawn. Id . ¶ 24. Plaintiff maintains that as a result of his account being restrained, he suffered financial harm and severe emotional distress. Id . ¶ 26.

More than three-and-a-half years later, nearly the exact same events took place. On December 14, 2011, Citibank again froze plaintiff's account pursuant to a restraining notice issued by Houslanger on behalf of New Century based on the same judgment. Id . ¶ 27-29. Once again, Citibank provided plaintiff with a copy of the restraining notice, which was dated December 6, 2011. Id . The errors contained in the restraining notice were the same as they were in April 2008: the party named was Andrew Benzemann, the judgment debtor and plaintiff's brother, but the social security number and address provided to the bank were those of plaintiff Alexander Benzemann. Id . ¶ 31. The following day - December 15, 2011 - plaintiff's counsel spoke with defendants and the restraint on the account was lifted. Id . ¶ 35; see also Tr. of Oral Arg., June 5, 2014, 3:18-19. Plaintiff alleges that during the one-day freeze, Citibank failed to make three electronic funds transfer payments that had previously been directed. Am. Compl. ¶ 36. In addition, plaintiff claims that he incurred fees from both Citibank and a credit card company, had two credit cards canceled, sustained an injury to his credit score, and suffered severe emotional distress as a result of the restraint. Id . ¶ 37.

II. Procedural Posture

Plaintiff filed his initial complaint on December 14, 2012, and he filed an amended complaint on June 6, 2013. The amended complaint asserts fourteen claims for relief against Citibank and ten against the Houslanger defendants. See id. ¶¶ 38-87. Under federal law, plaintiff asserts FDCPA, § 1983, and due process claims against all defendants, and asserts a separate EFTA claim against Citibank.

Citibank moved to dismiss the amended complaint and to compel arbitration on September 20, 2013. H&A and Houslanger moved to dismiss the amended complaint on September 27, 2013, and this Court granted New Century's motion to join the H&A and Houslanger motion to dismiss on October 18, 2013. Both motions were fully briefed by December 13, 2013, and we conducted oral argument on both motions on June 5, 2014.


I. Citibank Motion to Compel Arbitration

Plaintiff does not dispute that, by virtue of opening an account at Citibank, he was subject to the arbitration agreement contained in the Citibank client manual. Benzemann's claims against Citibank arise out of both the April 2008 freeze of his bank account and the second restraint in December 2011. Although different client manuals were operative during each of these incidents, the language of the arbitration provisions contained in each of the relevant manuals are substantially similar, and plaintiff does not assert otherwise. The arbitration agreement (the "Agreement") reads as follows:

Agreement to Arbitrate Disputes: Either you or we may elect, without the other's consent, to require that any dispute between us, or concerning your... accounts, except those disputes specifically ...

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