Citibank’s arbitration clause challenged in Armenian bias case

A lawyer representing a putative class who accused Citibank of credit discrimination against Armenians told a federal judge on Monday that because the bank’s arbitration clause seeks to limit relief on an individual basis, it violates a Supreme Court decision, and the bank’s motion to compel arbitration should be rejected.

In McGill v. Citibank N.A. 2 Cal.5th 945 (2017), the U.S. Supreme Court held that an arbitration agreement that prohibits the possibility of granting general public injunctive relief violated public policy and was unenforceable.

The case before U.S. District Judge Michael W. Fitzgerald in Los Angeles on Monday was brought by San Mateo attorney Ara Jabagchourian on behalf of the named plaintiff and putative class members on claims that Citibank employees were trained to deny credit card applications and cancel active credit cards of those whose names suggested Armenian heritage. The complaint states the alleged discriminatory practices were implemented by employees who searched Citibank’s customer database for those with last names ending with ‘ian’ or ‘yan’ to reduce the risk. The alleged policy was said to be aimed at reducing credit card fraud. Marine Grigorian v. Citibank N.A., 2:23-cv-09519 (C.D. Cal., filed Nov. 10, 2023).

Fitzgerald took the matter under submission. However, he said the bank’s position on whether McGill applied to this case was an “interesting argument with the fact that this is presented as a putative class action as itself a reason to show that McGill doesn’t apply. … I think, ultimately, this is just a matter that’s determined by the case law so I will go back and look more closely.”

Citibank, represented by Troutman Pepper Hamilton Sanders LLP partner Kalama M. Lui-Kwan, denied the allegations and filed a motion to arbitrate the proceedings pursuant to the terms of an agreement that he said governed the named plaintiff’s bank account.

During the hearing Monday, Jabagchourian told Fitzgerald that discriminatory claims such as the ones brought by his client. Marine Grigorian served a substantial public benefit, and awarding private relief would violate public policy. “There is a huge public benefit to end discrimination on all fronts. When one group gets heard, all groups get heard. We’re talking about credit and financial ... Citibank is not some small-time entity, your honor, and the fact that this practice was long standing, the elimination of it is sufficient for the general public.”

Lui-Kwan, for Citibank, argued the bank’s arbitration agreement contains a severability provision that mandates the public injunctive relief aspect of the plaintiff’s claims remain in the court while her remaining requests for relief proceed to arbitration. He also argued the plaintiff was not attempting to bring the action on behalf of the general public, but a smaller group of people.

“In [Hodges v. Comcast Cable Comms LLC], the 9th Circuit said that the type of public injunction you would need to identify in the complaint is not an injunction that would be limited to a narrowly defined group,” Lui-Kwan said.

In Hodges, the circuit panel found the plaintiff’s putative class action that challenged Comcast’s privacy and data collection practices did not seek public injunctive relief and an arbitration agreement should have been enforced pursuant to the cable company’s subscriber agreements, nullifying the McGill rule.

“What the 9th Circuit said in Hodges was that those decisions where the state court had found that the plaintiffs were seeking a public injunction was not correct and that those courts were trying to articulate a broader rule. That broader rule was that any injunction against future illegal conduct would be a public injunction and that is essentially what Mrs. Grigorian is alleging in her complaint. … But what we suggested is that it’s inconsistent with the 9th Circuit’s analysis.”