Journal of Business & Technology Law

Case	MoneyGram Payment Systems Inc. v. Citigroup Inc.
Court, State	Minnesota Court of Appeals, Minnesota
Date of Decision, Type of Case	2/11/2013, Arbitration
Case Number	A12-0786
Citation	2013 WL 494970 (B.N.A.)

Facts Of Case	MoneyGram Payment Systems, respondent, manages a multi-billion dollar investment portfolio that includes RMBSs and CDOs. Citigroup and its two subsidiaries, appellants, are separate legal entities that provide a range of global diversified financial services. Respondent purchased, from appellants, RMBSs and CDOs totaling over $180 million. In entering into and signing a client service agreement with appellants, respondent acknowledged that the Client Service Agreement contained a pre-dispute arbitration clause. After the value of the securities took a hit due to the declining market, respondent brought this action. Appellants attempted to move the matter into arbitration but the district court found for the respondent. Citigroup and its two subsidiaries appealed.

Holding	Citigroup and two of its subsidiaries will be permitted to arbitrate fraud and misrepresentation claims by a client that bought more than $180 million of complex mortgage-related products but lost value during the financial crisis because the claims fall within the scope of the arbitration provision in the parties’ client-services agreement.

Court Reasoning	The Minnesota Court of Appeals reversed the decision of the district court because the dispute clearly fell within the scope of the arbitration agreement in the client service agreement. The Court of Appeals found that a broad agreement to arbitrate creates a presumption of arbitrability. Since the dispute between the parties is a controversy that arose prior to the date of the agreement, the dispute clearly falls within the scope of the arbitration agreement as stated in the client service agreement.

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