There's nothing in the terms of any card that prohibits cycling credit limits. How the card was used likely won't even come up in the arbitration, Trust me--paying the 250 arbitration fee (again, use the other arbitration organization, not the one Citi wants you to use) is a good bet. No guarantees, but it's a small risk to take.
Is there anything regarding the Citi 2% ca$h back about not earning the CB on Cash like products eg ca$h adv, gift cards, ATM withdrawls, do you think the $500 for opening up a savings and checking is due the OP? since Citi closed the accts before the min amount of time they needed to be open was reached (albeit it was Citi that closed them)