## Facts

- Edward J. Minskoff Equities, Inc. opened an American Express corporate card account in 1988; a corporate card was issued in Edward Minskoff’s name, and he also maintained a personal American Express account.
- In 1991, Equities hired Susan Schrader Blumenfeld as an assistant/office manager with duties that included screening Minskoff’s mail, reviewing credit card statements and vendor invoices, and sending materials to bookkeepers for payment.
- Without actual authorization, Blumenfeld caused American Express to issue additional cards on the corporate account in her name and later obtained further cards tied to the same relationship, which she used for personal spending.
- Blumenfeld concealed the scheme by intercepting American Express billing statements and bank statements, and by paying American Express with forged checks drawn on Equities’ account.
- Over an extended period, American Express mailed numerous billing statements to Equities listing Blumenfeld as a cardholder and itemizing her charges; bank statements likewise showed checks payable to American Express.
- Equities paid $276,334.06 to American Express via forged checks for Blumenfeld’s charges, and an additional $51,657.71 remained unpaid when the fraud was discovered.

## Issues

1. Whether Blumenfeld’s transactions constituted “unauthorized use” under 15 U.S.C. § 1643 such that plaintiffs’ liability was limited to $50 per card.
2. Whether plaintiffs’ failure to review credit card and bank statements could constitute negligence that created apparent authority in Blumenfeld, making her use effectively “authorized” for purposes of § 1643.
3. Whether disputed facts about plaintiffs’ negligence, American Express’s reliance, and the scope of any apparent authority made summary judgment improper.

## Decision

- The Second Circuit vacated the district court’s summary judgment for American Express and remanded.
- The court held that a cardholder’s negligent failure to examine statements that would reveal fraudulent use can create apparent authority in the employee, defeating treatment of the transactions as “unauthorized use” under TILA.
- The court concluded that material fact disputes remained regarding the timing and extent of plaintiffs’ negligence, the reasonableness of American Express’s reliance, and whether all challenged charges fell within the scope of any apparent authority.

## Legal Principles

- “Unauthorized use” under TILA § 1643 is construed in light of agency law; apparent authority can render an employee’s use effectively authorized as to the issuer.
- A principal’s omissions, including a prolonged failure to review readily available billing and bank statements that disclose misuse, may constitute negligence that supplies the manifestations necessary for apparent authority.
- A cardholder cannot invoke TILA’s $50 limitation where the cardholder’s negligent inaction reasonably leads the issuer to believe the employee’s use is authorized.
- Summary judgment is inappropriate where the existence or scope of negligence-based apparent authority and the reasonableness of the issuer’s reliance depend on disputed facts.

## Conclusion

The Second Circuit ruled that prolonged inattention to statements revealing fraudulent activity may create apparent authority in an employee, preventing the cardholder from treating the charges as “unauthorized” under TILA’s liability cap, and it remanded because fact questions remained about negligence, reliance, and the scope of authority.


Minskoff v. Am. Express Travel Related Servs. Co., 98 F.3d 703 (2d Cir. 1996)