Citibank Suit Over Mistaken ID Revived

MANHATTAN (CN) - It is not too late for a man to sue after his Citibank account was frozen while the bank tried to collect another customer's debt, the Second Circuit ruled on Monday.

The case stems from a April 25, 2003, judgment that Citibank subsidiary New Century Financial Services landed against a man by the name of Andrew Benzemann.

Citibank used that Manhattan Supreme Court judgment a little more than five years later to justify freezing the account of Alexander Benzemann.

Oddly, the 2008 restraining notice botched Benzemann's first name but had his correct social security number and address, court papers say.

Though Benzemann had the 2008 restraining notice withdrawn once he retained a lawyer, the same mistaken information was used to freeze his account again "on or about" Dec. 14, 2011, his lawsuit says.

Exactly a year from that date, Alexander Benzemann filed a federal complaint against the bank, its subsidiary attorney Todd Houslanger and his debt-collection firm under the Fair Debt Collection Practices Act (FDCPA).

Ironically, another mix-up nearly scuttled the Manhattan lawsuit.

The FDCPA's statute of limitations mandates filing a complaint within a year of an alleged "violation."

A federal judge dismissed the case last year on the grounds that the alleged violation occurred when Citibank's lawyer Houslanger sent out his restraining notice a little more than a week before Benzemann's account was frozen.

Though it affirmed the dismissal against Citigroup, the Second Circuit revived claims against Houslanger and his firm on Monday. The federal appeals court called it "implausible" that Congress intended the clock to start running before Benzemann could have even learned about this event.

"Benzemann could not have known that Houslanger sent the allegedly unlawful notice until, at the earliest, his account was frozen," Judge Rosemary Pooler wrote for a three-person panel.

Houslanger still has another avenue to attack Benzemann's case as untimely.

During a hearing, Benzemann's lawyer acknowledged that his client's account may have been frozen on Dec. 13, 2011 - a day before the lawsuit estimates.

Judge Naomi Reice Buchwald must determine on remand whether Benzemann's literally filed his lawsuit a day late.

Andrew Tiajoloff, an attorney for the former Citibank customer, predicted that Benzemann's case will likely survive any remaining statute-of-limitations challenge.

"Applying the logic used by the Second Circuit, I can't see how the District Court could possibly find the filing untimely," Tiajoloff of the firm Tiajoloff & Kelly said in an email.

The attorney said Benzemann's case has "sinister" implications from a "social-policy standpoint" because the debt collector used Benzemann's Social Security number as his primary identifier.

Despite Monday's victory, Tiajoloff lamented that the Second Circuit missed an opportunity to set a precedent with this case.

"The unpublished order-opinion saddens us, however, because we took this pro bono case on, in part, to clarify the terrible case law on the subject," the attorney said. "By its unpublished order, the Second Circuit has ruled that an attorney issuing a restraining order as officer of the court is not subject to any due process constraints. In fact, it flies in the face of rational thought to say that a restraining notice, which is a state law injunction, can be issued without due process."

Citibank is "pleased" with the case's outcome, spokesman Andrew Brent said in an email.

Houslanger's attorney has not returned a voicemail seeking comment.

EDITOR'S NOTE: An earlier version of this article incorrectly reported on which claims the Second Circuit revived. Courthouse News regrets the error.

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