Minskoff v. American Express Travel Related Services Co

Brief Fact Summary. Edward J. Minskoff and Edward J. Minskoff Equities, (Plaintiffs), brought suit against American Express Travel Related Services Co., (Defendant) for recovery of $276,334.06 that Plaintiffs’ employee paid to Defendant using forged checks drawn on Plaintiffs’ account for charges on credit cards fraudulently obtained and used. Plaintiffs appeal summary judgment in favor of Defendant.

Synopsis of Rule of Law. A cardholder’s failure to examine credit card statements that would reveal fraudulent use of the card constitutes a negligent omission that creates apparent authority for charges that would otherwise be considered unauthorized under the TILA.

Facts. Plaintiffs have a credit card account with Defendants. In October of 1991, Plaintiffs hired Susan Schrader Blumenfeld, (Blumenfeld) to serve as assistant to the president of the company. She was responsible for the personal and business affairs of Edward J. Minskoff. As part of her duties she reviewed all account invoices and statements. Defendant received an application for an additional credit card to issue from the Plaintiffs’ Corporate Account in Blumenfeld’s name. She charged a total of $28,213.88 on that card paying it with forged checks from Plaintiff’s Corporate Account with Manufacturers Hanover Trust.
Blumenfeld then applied for a platinum card and a supplemental car. Both cards arrived in Blumenfeld’s and Edward J. Minskoff’s name. Blumenfeld gave Edward J. Minskoff his card claiming it was an unsolicited upgrade. She continued to make fraudulent charges until Edward J. Minskoff discovered her fraud and notified Defendant.

Issue. Whether a cardholder could disregard both credit card and bank statements indefinitely and still limit his liability for an employee’s fraudulent purchases to $50.

Held. No. A cardholder cannot disregard both credit card and bank statements indefinitely and still limit his liability for an employee’s fraudulent purchases to $50.

Discussion. During the period between April of 1992 and November of 1993, Defendant mailed to Plaintiffs, at least 28 billing statements listing Blumenfeld as a cardholder and itemizing her charges. Also, MHT mailed to Plaintiffs’ numerous bank statements showing that checks made payable to Defendant had been drawn on Plaintiffs’ accounts. Even a cursory review of any of these statements would have disclosed the charges made by Blumenfeld with an unauthorized credit card. This is not an occasional transgression but a pattern of fraud.