Law Firm of Larjack, PLLC v. Citibank

• Decision Date: 15 September 2021
• Docket Number: Civil Action 21-1592 (JDB)
• Parties: LAW FIRM OF LARJACK, PLLC, et al. Plaintiffs, v. CITIBANK, N.A., Defendant.
• Court: U.S. District Court — District of Columbia

LAW FIRM OF LARJACK, PLLC, et al. Plaintiffs, v. CITIBANK, N.A., Defendant.

Civil Action No. 21-1592 (JDB)

United States District Court, District of Columbia

September 15, 2021

MEMORANDUM OPINION

JOHN D. BATES United States District Judge

In this lawsuit, plaintiffs-Law Firm of LarJack, PLLC (“LarJack”) and Steve Larson-Jackson LarJack's namesake and sole member, Am. Compl. [ECF No 6] ¶¶ 3-4-seek a declaratory judgment as well as tort damages relating to an overdraft on LarJack's account with defendant Citibank, N.A. (“Citibank”). Pending before the Court is Citibank's motion to compel arbitration and to either dismiss or stay this action. Plaintiffs do not contest that an arbitration agreement was formed between the parties, and the Court finds that this agreement unmistakably delegates all questions of arbitrability to the arbitrator. Accordingly, for the reasons stated below, the Court will grant Citibank's motion to compel and will dismiss this action.

Background

On August 17, 2016, plaintiff Steve Larson-Jackson went to a Citibank branch to deposit a $187, 700 check from one Daniel Signori into the trust account of Law Firm of LarJack, PLLC Am. Compl. ¶ 7-9; Am. Compl. Ex. 3 [ECF No. 6]. This transaction, however, did not go smoothly. Shortly after Mr. Larson-Jackson made the deposit, Mr. Signori submitted an Affidavit of Forgery to Citibank to the effect that “he did not know Larson-Jackson or LarJack, that he did not authorize the issuance of the check[] that Larson-Jackson deposited, and that his signature was forged.” Am. Compl. ¶ 12; see also Mem. in Supp. of Def.'s Mot. to Compel Arbitration (“Def.'s Mot.”) [ECF No. 13-3] at 1. Accordingly, Citibank reversed Mr. Larson-Jackson's deposit, eventually resulting in an overdraft of $187, 052.08 on the LarJack account. See Def.'s Mot. at 1- 2; Am. Compl. Ex. 4 [ECF No. 6]. Citibank demanded that LarJack deposit funds to cover this deficit, but plaintiffs refused, contending that “neither [Mr. Larson-Jackson] [n]or LarJack did anything to cause an overdraft.” Am. Compl. ¶¶ 11-12; see also Def.'s Mot. at 2.

This stalemate persisted for more than three years. Eventually, Citibank “deem[ed] the Overdraft to be uncollectible, ” cancelled the debt, and filed an IRS Form 1099-C memorializing that cancellation. Def.'s Mot. at 2; see Am. Compl. Ex. 5 [ECF No. 6]. As required by law, Citibank also provided a copy of the Form 1099-C to plaintiffs. Am. Compl. ¶¶ 13-14; Def.'s Mot. at 2; see 26 C.F.R. § 1.6050P-1(f). Yet Citibank's decision was not an unmitigated boon for LarJack, as a cancelled debt is taxable as income. See generally Canceled Debt - Is it Taxable or Not?, Internal Revenue Serv., https://www.irs.gov/taxtopics/tc431 (last updated July 13, 2021). Thus, upon receiving the 1099-C, plaintiffs learned that they were liable for a substantial, unexpected tax burden for tax year 2020. See Am. Compl. ¶¶ 14-15.

In response, LarJack and Mr. Larson-Jackson filed the present lawsuit, asking for a declaratory judgment that the overdraft on the LarJack account “was due to [defendant] and its depositor's negligence, ” Am. Compl. ¶ 20; that defendant “filed the 1099 C Form[] as a possible means of retribution . . . because [plaintiffs] refused to reimburse [Citibank] for the [overdraft], ” id.; and that defendant's “filing of the 1099 C Form was done for an improper purpose and violates the requirements set forth in 26 [U.S.C.] § 108, ” id. ¶ 18. Plaintiffs also raise intentional and negligent infliction of emotional distress claims against Citibank, ^[1] seeking the full amount of the contested overdraft as well as a nearly equal amount of punitive damages, for a total of $374, 104.08. Id. at 8-9.

Citibank countered with the instant motion to compel arbitration. Specifically, Citibank contends that when Mr. Larson-Jackson opened the LarJack trust account, he signed a “Control Account Application” reflecting his consent “to be bound by any agreement governing any account and service for which I am applying . . . including the terms and conditions of the CitiBusiness® Client Manual, ” which includes a fulsome arbitration provision. See Def.'s Mot. Ex. 1 (“Guerrero Decl.”) Attach. A [ECF No. 13-5] at 11.^[2]

The CitiBusiness Client Manual (“the Client Manual”) stipulates that either party may unilaterally “require that any dispute between us, or concerning your Citibank deposit account . . . be resolved by binding arbitration.” Guerrero Decl. Attach. B (“Client Manual”) [ECF No. 13-6] at 11. This provision applies to “[a]ny claim or dispute relating to or arising out of [the] deposit [account], . . . this Agreement, or our relationship, ”^[3] with the sole exception of “[d]isputes filed . . . in a small claims court.” Id. The Client Manual's arbitration clauses also specify that “[d]isputes [subject to arbitration] also include claims relating to the enforceability or interpretation of any of these arbitration provisions.” Id. Finally, the Manual contains a survival clause, providing that the arbitration provisions “shall survive[] termination or changes to your deposit [account] . . . or any related services we provide.”^[4] Id. at 13; see also Def.'s Mot. at 3-5. Citibank thus argues that, by signing the Control Account Application, Mr. Larson-Jackson and LarJack agreed to the arbitration section of the Client Manual, creating a binding arbitration agreement. Def.'s Mot. at 2, 10-11.

Legal Standard

This case is governed by the Federal Arbitration Act (“FAA”), ^[5] which states that “[a] written provision in any . . . contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. The Act then provides that, “[i]f any suit or proceeding [is] brought in [federal court] upon any issue referable to arbitration under a [valid arbitration agreement], ” then “the court in which such suit is pending . . . shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement.” Id. § 3.

The Supreme Court has recognized that the FAA “create[s] a body of federal substantive law of arbitrability, applicable to any arbitration agreement within the coverage of the Act.” Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983). Moreover, the Act “reflect[s] both a liberal federal policy favoring arbitration[] and the fundamental principle that arbitration is a matter of contract, ” requiring that “courts place arbitration agreements on an equal footing with other contracts and enforce them according to their terms.” AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011) (internal quotation marks and citations omitted).

“A motion to compel arbitration is decided on a summary judgment standard.” Dist. No. 1, Pac. Coast Dist., Marine Eng'rs' Beneficial Ass'n, AFL-CIO v. Liberty Mar. Corp., 998 F.3d 449, 456 (D.C. Cir. 2021) (“MEBA”) (citing Aliron Int'l, Inc. v. Cherokee Nation Indus., Inc., 531 F.3d 863, 865 (D.C. Cir. 2008)). “The motion is treated ‘as if it were a request for summary disposition of . . . whether or not there had been a meeting of the minds on the agreement to arbitrate.'” Mobile Now, Inc. v. Sprint Corp., 393 F.Supp.3d 56, 63 (D.D.C. 2019) (quoting Aliron Int'l, 531 F.3d at 865). A motion to compel will thus be granted “only if ‘there is no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law.'” Slaughter v. Nat'l R.R. Passenger Corp., 460 F.Supp.3d 1, 6 (D.D.C. 2020) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986)).

The first step in deciding a motion to compel arbitration is determining whether a valid arbitration agreement has been created. See Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S.Ct. 524, 530 (2019) (“[B]efore referring a dispute to an arbitrator, the court determines whether a valid arbitration agreement exists.”). To determine if a valid arbitration agreement exists, courts utilize a simple burden-shifting framework. First, “the party seeking to enforce an arbitration agreement . . . ha[s] the burden of proving that [the non-moving party] agreed to arbitrate.” Camara v. Mastro's Restaurants LLC, 952 F.3d 372, 373 (D.C. Cir. 2020) (citation omitted). Citibank thus must “present evidence sufficient to demonstrate an enforceable agreement to arbitrate.” Ruiz v. Millennium Square Residential Ass'n, 466 F.Supp.3d 162, 168 (D.D.C. 2020). Then, the burden “shifts to the party opposing arbitration . . . to establish a genuine issue of material fact as to the making or validity of that agreement.” Mobile Now, 393 F.Supp.3d. at 63 (citing Skrynnikov v. Fed. Nat'l Mortg. Ass'n, 943 F.Supp.2d 172, 175 (D.D.C. 2013)).

After determining that an agreement was reached, courts must enforce that agreement by its terms, including by giving effect to any “additional, antecedent agreement” delegating threshold questions of arbitrability to the arbitrator rather than the court. See, e.g. Rent-A-Center., West, Inc. v. Jackson, 561 U.S. 63, 70 (2010). Although courts generally “presume that the parties intend courts, not arbitrators, to decide . . . . questions such as ‘whether the parties are bound by a given arbitration clause,' or ‘whether an arbitration clause in a concededly binding contract applies to a particular type of controversy, '” BG Grp., PLC v. Republic of Argentina, 572 U.S. 25, 34 (2014) (quoting Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 84 (2002)), the parties “‘may delegate [such questions] to the arbitrator' if their ...