In rejecting a challenge to the recovery of an outstanding credit card debt, the South Dakota Supreme Court has refused to give credence to a "fake arbitration award" issued by sham administrator Dispute Resolution Arbitration Group.

In Citibank South Dakota, N.A. v. Schmidt, No. 24389, 2008 WL 58970 (S.D. Jan. 2, 2008), Schmidt attempted to purchased rare coins using a credit card account he held with Citibank. Schmidt later claimed he was defrauded during the coin transaction and contested the charges with Citibank. Citibank partially credited Schmidt's account for the transaction, but, unsatisfied, Schmidt completely stopped making payments on the account.

Upon Schmidt's default, Citibank brought suit to recover the entire balance of the account. After Citibank moved for summary judgment, Schmidt, proceeding pro se, opposed the motion by offering a Better Business Bureau report suggesting the coin company had engaged in fraud, and by submitting an alleged arbitration "award" against Citibank issued by Dispute Arbitration Resolution Group (DRAG). The trial court ruled in favor of Citibank, giving no credence to the "award."

On appeal, the South Dakota Supreme Court also held the "award" to be invalid and ineffective. It noted that DRAG only considered information Schmidt provided, did not allow Citibank to participate, and not only eliminated Schmidt's debt, but also granted him damages against Citibank. According to the Court, "to avoid his loss from one fraud, Schmidt fell into the clutch of another." Since the award was "procured by fraud" on the part of DRAG, and possibly Schmidt, the court vacated the award.

The Court also pointed out that DRAG had been enjoined by a federal district court in Nevada for civil conspiracy, intentional interference with contractual relations, and defamation, all in connection with the "fake arbitration awards." See Chase Bank USA, N.A. v. Dispute Resolution Arbitration Group, No. 02:05-CV-1208-LRH (LRL), 2007 WL 1577853 (D. Nev. May 31, 2007).

The Court also rejected Schmidt's "bizarre" claim that he was excused from repaying his entire debt "because Citibank 'monetized' his signature." The Court observed, "no matter what the term 'monetize' may mean in financial parlance, in the context of this case, it is utter gibberish."

While the members of the Court agreed that Schmidt had no defense for not paying most of the balance due Citibank, a majority of the Court did order the case remanded to determine what amount, if any, Schmidt owed Citibank on the allegedly fraudulent charges with the coin company. Two justices dissented from this part of the opinion, finding summary judgment for the entire balance in favor of Citibank proper on the evidence in the record.