Hamrit v. Citigroup Global Markets, Inc.

Background

Houssam Eddine Hamrit, representing himself, sued Citigroup Global Markets, Inc., Citi Personal Wealth Management, and Citigroup, Inc. He alleged that an unknown malfunction caused an order for 7,650 shares of stock, costing $432,225, to be placed in his Citigroup brokerage account without his authorization. He sought the return of the purchase price, punitive damages, interest, costs, and expenses.

Citigroup moved to compel arbitration based on an arbitration provision in a client agreement and asked the court to stay the lawsuit while arbitration proceeded. In an earlier order, the court held the motion in abeyance and conducted a bench trial limited to whether the parties had entered into an arbitration agreement. The trial occurred on October 22, 23, and 25, 2024.

Findings of Fact

The court found that the C29 account was a digital, self-directed brokerage account that could be opened only by an existing Citigroup client who logged into the mobile application using existing credentials and completed the online application. Citigroup employees could not open a C29 account for a client.

The account-opening process required the user to review information, provide additional account details, reach a terms-and-conditions screen, and check a box stating, “By checking this box, I agree to the following.” The listed agreements included a client agreement containing an arbitration clause. The user also had to type a name as an electronic signature and submit the application.

The court credited Citigroup’s witnesses and largely credited Hamrit’s witness Larry Stewart, while excluding Stewart’s expert testimony as not relevant or reliable. The court did not credit Hamrit’s testimony denying that he electronically executed the arbitration agreement because it was contradicted by other evidence and his testimony on that issue was evasive and occasionally combative.

The court relied especially on Citigroup’s ThreatMetrix report and electronic signature record. The ThreatMetrix report showed a biometric login using Hamrit’s user ID on May 3, 2020, followed shortly afterward by the opening of an online brokerage account. The records showed the same session identifier, IP address, and username. The records also identified an iPhone, and Hamrit testified that he owned an iPhone and used it to access his Citigroup accounts. The court found no evidence that another person had access to the device or accounts.

The electronic signature record stated that Hamrit had read and understood the client agreement, accepted and agreed to its terms, and provided his electronic signature. It also acknowledged that the client agreement contained a pre-dispute arbitration clause. The court found, by a preponderance of the evidence, that Hamrit opened the C29 account, checked the terms-and-conditions box, electronically signed the application, and agreed to the arbitration provision on May 3, 2020.

The court rejected Hamrit’s arguments based on discrepancies in the application, including information about his immigration status, address, mother’s maiden name, income, and internet connection. The court found that much of the information had been automatically carried over from earlier Citigroup records or was otherwise explained by the evidence. It also found that the alleged discrepancies did not undermine the evidence that Hamrit opened the account and agreed to arbitration.

Conclusions of Law

The Federal Arbitration Act generally makes written arbitration agreements valid and enforceable, subject to ordinary contract defenses. It also requires a court to hold a trial when the making of an arbitration agreement is disputed. Applying New York contract law, the court explained that a binding contract requires a meeting of the minds and a clear expression of mutual agreement.

The court concluded that Hamrit’s use of the all-encompassing terms-and-conditions checkbox, followed by his electronic signature, showed agreement to the client agreement, including the arbitration clause. The court rejected Hamrit’s arguments that the clause was not separately checked, was too vague, or was hidden in fine print.

The court characterized the online agreement as a “clickwrap” agreement: a contract formed when a user must affirmatively indicate agreement to displayed or linked terms. It found that the arbitration terms were reasonably noticeable because the account application provided explicit hyperlinks to the agreements and the arbitration language was available through those links. The court concluded that the terms did not need to appear entirely on the same screen to be enforceable.

The arbitration clause required covered disputes to be resolved before the Financial Industry Regulatory Authority. It applied to claims concerning or arising from Hamrit’s Citigroup account and transactions involving Citigroup. The court held that Hamrit’s challenge to the allegedly unauthorized stock purchase arose from his brokerage account and transactions involving Citigroup, so the claim fell within the clause.

Disposition

The court granted Citigroup’s motion to compel arbitration. It stayed the action pending completion of the arbitration or further order of the court. The parties were ordered to begin arbitration before the Financial Industry Regulatory Authority within sixty days of the opinion and order and to file a joint status letter within two weeks after arbitration was completed. The court did not decide the underlying question whether the stock purchase was authorized.