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Lysik v. Citibank, N.A.

United States District Court, N.D. Illinois, Eastern Division

September 20, 2017

CITIBANK, N.A., Defendant.



         Tomasz Lysik and Monika Ruzik-Klatka sued their former employer, Citibank, N.A., alleging that Citibank terminated their employment after they objected to sales practices that they believed to be fraudulent and reported the practices to law enforcement. The plaintiffs assert claims against Citibank under the Consumer Financial Protection Act (CFPA), the Illinois Whistleblower Act (IWA), and Illinois common law.

         Citibank argues that Lysik and Ruzik both signed employment agreements that require arbitration of employment-related disputes. It moves to compel arbitration and dismiss the plaintiffs' action under Federal Rule of Civil Procedure 12(b)(3). The plaintiffs argue, among other things, that the arbitration agreement is unenforceable under the CFPA, which prohibits agreements that compel arbitration of claims arising under the CFPA. The Court concludes that the CFPA bars enforcement of the arbitration agreement and therefore denies Citibank's motion.


         Lysik and Ruzik are former personal bankers at Citibank. A personal banker's responsibilities include marketing consumer financial products, such as bank accounts, and assisting customers with these products. As a condition of continued employment, Citibank employees must agree to the terms included in the "Citi Employee Handbook" whenever it is updated, including a term that requires employees to submit employment-related disputes to arbitration. Each signed the 2009, 2011, and 2013 Handbooks, and Ruzik, who was hired several years before Lysik, also signed the 2006 Handbook.

         Plaintiffs allege that Citibank required personal bankers to impose unwanted accounts and hidden fees upon unwitting customers. Both Lysik and Ruzik say they described their concerns about the practices to supervisors, who instructed them not to raise the issue again and subsequently harassed them for their complaints. After Lysik and Ruzik filed a complaint in May 2014 with the Occupational Safety and Health Administration (OSHA), the agency responsible for investigating whistleblower claims from employees at consumer financial institutions, they were confronted by supervisors. Citibank terminated Ruzik in February 2015 and Lysik in March 2015.


         Citibank asks the Court to dismiss plaintiffs' claims because they previously agreed to arbitrate employment-related disputes. Motions to compel arbitration and dismiss "concern venue and are brought properly under Federal Rule of Civil Procedure 12(b)(3)." Grasty v. Colo. Tech. Univ., 599 Fed.Appx. 596, 597 (7th Cir. 2015). A court ruling on a motion to compel arbitration may consider evidence beyond the pleadings. Faulkenberg v. CB Tax Franchise Sys., LP, 637 F.3d 801, 809-10 (7th Cir. 2011). The court "constru[es] all facts and draw[s] reasonable inferences in favor of the plaintiffs." Id. at 806.

         The Federal Arbitration Act requires a court to compel arbitration if a party can identify "a written agreement to arbitrate, a dispute within the scope of the arbitration agreement, and a refusal to arbitrate." Zurich Am. Ins. Co. v. Watts Indus., Inc., 417 F.3d 682, 687 (7th Cir. 2005). Written agreements to arbitrate "shall" be enforceable, "save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. Plaintiffs do not dispute that an arbitration agreement exists or that their claims are within the scope of the agreement. Rather, the question before the Court is whether there are grounds that render the arbitration agreement unenforceable.

         Lysik and Ruzik argue that the arbitration provision is unenforceable for three reasons: (1) the CFPA prohibits predispute arbitration requirements for claims arising under the statute; (2) the arbitration provision unfairly eliminates access to some of their potential statutory remedies; and (3) the arbitration prohibition impermissibly limits collective action.

         I. CFPA

         Lysik and Ruzik contend that they were terminated in retaliation for the statements they made to their supervisors and OSHA about fraudulent practices they claim to have witnessed at Citibank, including what they believed to be violations of the Truth in Lending Act, the Home Ownership Equity Protection Act, and the Real Estate and Settlement Procedures Act. Retaliatory termination for objecting to or reporting a violation of any of these statutes would give rise to a dispute actionable under the employee protection provision of the CFPA. See 12 U.S.C. § 5567(a)(1)-(4). The CFPA also provides that "no predispute arbitration agreement shall be valid or enforceable to the extent that it requires arbitration of a dispute arising under this section." Id. § 5567(d)(2).

         Citibank argues that the CFPA does not bar arbitration of the plaintiffs' action. It contends that plaintiffs are bound by an agreement to arbitrate that predates the CFPA's prohibition against arbitration. Application of the prohibition, Citibank argues, amounts to retroactive application of the CFPA to conduct predating its effective date. This is contrary to law, Citibank argues, because the statute does not expressly provide for retroactive application and applying it to bar the preexisting arbitration requirement would improperly impose a "retroactive consequence . . . affecting substantive rights, liabilities, or duties." Fernandez-Vargas v. Gonzales, 548 U.S. 30, 37 (2006).

         The plaintiffs contend that application of the CFPA's prohibition on arbitration is not inappropriate because the arbitration requirement is not a "substantive" right, liability, or duty that may not be impaired retroactively. Their primary contention, however, is that the applicable arbitration policy is the one in ...

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