Minskoff v. American Express Travel Related Services Company

United States Court of Appeals for the Second Circuit · 1996 · Corporations

98 F.3d 703 (2d Cir. 1996)

Updated August 22, 2026

CorporationsAgencyCredit cardsTruth in Lending ActTILA15 U.S.C. § 164315 U.S.C. § 1602(o)apparent authority

Facts

Equities maintained an American Express corporate account for which Minskoff was the authorized cardholder, and Blumenfeld, an employee who handled Minskoff's mail and credit card statements, fraudulently applied for a supplemental corporate card in her own name and later obtained a platinum account and supplemental card through forgery and fraud. American Express sent monthly statements to Equities' business address listing both Minskoff and Blumenfeld as cardholders and separately itemizing Blumenfeld's charges, and bank statements also showed payments to American Express drawn on Minskoff's and Equities' accounts. Minskoff did not review any of the credit card or bank statements during the relevant period, and Blumenfeld used forged checks to pay the accounts while incurring substantial charges. After the fraud was discovered in November 1993, plaintiffs sought recovery of amounts paid to American Express and a declaration of nonliability for the remaining balances.

Issue

Whether charges made on credit cards fraudulently obtained by an employee are automatically treated as unauthorized under TILA with only $50 cardholder liability, or whether the cardholder's negligent failure to review credit card and bank statements can create apparent authority for the employee's subsequent use of the cards. Also, if negligence can create apparent authority, when that liability begins.

Rule

Under TILA, a use is unauthorized only if the user lacks actual, implied, or apparent authority and the cardholder receives no benefit. Although fraud or theft in obtaining a card makes the initial acquisition unauthorized, a cardholder's negligent acts or omissions, including failure to examine billing and bank statements that would reveal fraudulent charges, can create apparent authority for subsequent use of the card; that apparent authority does not retroactively validate charges incurred before the negligence created it. Liability runs from the time the cardholder receives the first statement containing the fraudulent charges plus a reasonable time to examine it, after which the cardholder is liable for the remaining fraudulent charges.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Phoenix, Nora Bennett owned a small architecture firm and had one authorized business charge card issued by Desert Line Card Services. Her office assistant secretly forged a request for an additional card in her own name, received it at the office, and made $4,800 in purchases before any monthly statement arrived.

If Nora immediately disputes the charges upon learning of them before receiving any statement showing the assistant's purchases, who is most likely liable for those pre-statement charges?

Explanation. Under the majority rule, fraudulent acquisition of a card does not itself create apparent authority. A cardholder is not accountable for the user's initial possession of a card obtained through fraud or theft. Apparent authority may arise later from the cardholder's negligent acts or omissions, but not before the cardholder receives a statement containing the fraudulent charges and has a reasonable time to examine it. Thus the pre-statement charges remain unauthorized.