Hiteks Solutions, Inc. v. Citibank, N.A., et al.

Background

Hiteks Solutions, Inc. sued Citibank, N.A., and various unidentified defendants, which the opinion collectively calls “Citibank.” Hiteks alleged conversion, fraud, commercial bad faith, breach of contract, negligence, violations of the Uniform Commercial Code, and violations of New York General Business Law Sections 349 and 350.

The claims arose from three wire transfers of approximately $50,000 each that Citibank processed between November 6 and November 8, 2023. The transfers went to individuals in three states who were not affiliated with Hiteks or its chief executive officer, Gerasimos Petratos. Hiteks alleged that Citibank failed to secure the account and failed to detect or verify the transfers through commercially reasonable methods, including two-factor authentication.

Before the transfers, Petratos had opened three Citibank accounts. In April 2021, he opened a third account by signing a Business Deposit Account Application to update Hiteks’s federal tax identification number. The application stated that the accounts would be governed by Citibank’s rules and regulations, including the CitiBusiness Client Manual. The Client Manual stated that opening and maintaining an account constituted agreement to its terms and included an arbitration provision.

Citibank’s Motion

Citibank moved under the Federal Arbitration Act to compel arbitration and stay the court case. Hiteks did not dispute that the Client Manual contained an arbitration provision. Instead, Hiteks argued that Citibank had not adequately notified it of the provision because the provision appeared in a separate document incorporated by reference into the signed application. Hiteks also argued that the provision did not cover its false-advertising and deceptive-business-practices claims because some of the underlying conduct occurred before the April 2021 account application.

Hiteks separately sought permission to file a surreply. The court denied that request because Citibank had raised the argument at issue in its main brief rather than for the first time in its reply.

Validity of the Arbitration Agreement

The court applied New York law because the parties agreed that New York law governed. Under that law, an arbitration agreement requires sufficiently definite mutual assent—a showing that the parties objectively agreed to arbitrate.

The court held that Hiteks had adequate notice of the arbitration terms. Petratos signed a physical contract in person at a Citibank branch. The application clearly referred to and incorporated the Client Manual, and that reference appeared immediately before the line where Petratos signed. The court stated that Hiteks offered no support for the argument that this language was too inconspicuous to create assent.

The court also rejected Hiteks’s argument that the application had to specifically state that the incorporated Client Manual contained an arbitration provision. It explained that courts have enforced arbitration provisions incorporated by reference even when the incorporating contract did not mention arbitration. The court further stated that, under New York law, a person who signs a written contract is generally presumed to know and accept its contents unless fraud, duress, or another wrongful act is shown. Hiteks did not identify fraud or overreach by Citibank that prevented Petratos from freely agreeing to the terms.

The court therefore held that the Client Manual’s arbitration provision was valid and enforceable.

Scope of the Arbitration Agreement

The court held that the provision covered Hiteks’s claims. The provision applied to any claim or dispute relating to or arising from Hiteks’s deposit account, the Client Manual, the agreement, or Hiteks’s relationship or dealings with Citibank. It also covered claims based on any legal theory, including contract, statute, regulation, tort, fraud, or other legal or equitable grounds. The provision contained no discernible time limitation and directed that questions about arbitrability be interpreted as broadly as legally permitted.

The court concluded that Hiteks’s false-advertising and deceptive-business-practices claims were covered because they arose from Hiteks’s relationship or dealings with Citibank. The court rejected Hiteks’s argument that the claims fell outside the provision merely because some underlying conduct occurred before the provision was signed.

Disposition

Judge Oetken granted Citibank’s motion to compel arbitration. The court stayed the case pending arbitration. The Clerk of Court was directed to close the motions at Docket Numbers 16, 25, and 33 and mark the case as stayed.