Acevado v. Citibank, N.A.

Background

Celinda Acevado and Jacqueline Lopez, New York residents and Citibank account holders, alleged that Citibank violated New York’s Exempt Income Protection Act (EIPA). They claimed that Citibank restrained protected funds in their accounts and charged fees in connection with those restraints. They brought the case as a proposed class action under the Class Action Fairness Act, which requires, among other things, more than $5 million in controversy.

The plaintiffs’ second amended complaint asserted claims under New York Civil Practice Law and Rules §§ 5239 and 5240. They sought the release of unlawfully restrained funds, refunds of improperly charged fees, and related injunctive relief. Earlier in the case, the court had ruled that the EIPA did not create a private right to bring a general lawsuit for damages or an injunction, but the New York Court of Appeals later held that judgment debtors could seek specified relief through special proceedings under Article 52 of the Civil Practice Law and Rules.

After the case returned to the district court, the plaintiffs filed a revised second amended complaint and later proposed a third amended complaint. The proposed new complaint relied in part on a New York appellate decision concerning the alleged improper aggregation of funds in multiple accounts when calculating EIPA exemptions.

Earlier dismissal

On March 31, 2019, the court granted Citibank’s motion to dismiss for lack of subject-matter jurisdiction and denied the plaintiffs’ request to file the proposed third amended complaint. The court concluded that, without including certain claimed damages based on funds that had already been transferred to judgment creditors or returned to account holders, the plaintiffs did not come close to the $5 million jurisdictional threshold.

The court assumed for purposes of its analysis that the EIPA prohibited Citibank from aggregating accounts when calculating protected amounts. But it held that the plaintiffs had not shown that Citibank still held improperly aggregated funds that could be released. The court also found that the proposed amendment would be futile and that the late amendment would cause Citibank undue prejudice.

Reconsideration motion

The plaintiffs moved for reconsideration. They argued that the court had wrongly concluded that Citibank could not be liable for damages arising from improper account aggregation, including funds later turned over to a judgment creditor.

The court explained that its earlier opinion had not adopted that broad conclusion. Instead, it had assumed that Citibank could be liable for improper aggregation when the funds remained currently restrained. The court also ruled that the plaintiffs’ argument about recovering funds transferred to judgment creditors was not a proper basis for reconsideration because they had not presented that argument during the earlier briefing.

The court further held that the cited New York appellate decision did not clearly establish that funds transferred to a third-party judgment creditor could be recovered from a bank. The court relied on the New York Court of Appeals’ decision stating that the remedies available under Article 52 are exclusive. Under the court’s reading, Section 5239 addresses funds that have not yet been transferred, while Section 5240 allows a court to address a transfer by joining the judgment creditor and ordering appropriate relief. These provisions did not support recovering from Citibank funds that had already been transferred to a judgment creditor.

Ruling

Judge Gardephe denied the plaintiffs’ motion for reconsideration. The court concluded that the plaintiffs had not shown that it overlooked controlling decisions or factual matters that might have changed the earlier result. The clerk was directed to terminate the motion.