New York Law Review

Tag: Deceptive Trade Practices

  • Matter of Shoprite Supermarkets, Inc. v. Nassau County, 796 N.E.2d 569 (2003): Displaying Expired Products is Not Deceptive Trade Practice

    Matter of Shoprite Supermarkets, Inc. v. Nassau County, 796 N.E.2d 569 (2003)

    Displaying products with clearly marked, unaltered expiration dates does not constitute a deceptive trade practice under a law prohibiting misleading representations about goods.

    Summary

    Nassau County cited Shoprite for displaying 144 products with expired manufacturer’s dates, alleging it was a deceptive trade practice. The County argued that displaying expired products created an “implied representation” that they were unexpired. Shoprite challenged the citation, and the New York Court of Appeals held that merely displaying products with unaltered, unconcealed expiration dates does not constitute a deceptive trade practice under the Nassau County Administrative Code. The court reasoned that an implied representation could not contradict the explicit, unaltered expiration dates on the products.

    Facts

    The Nassau County Office of Consumer Affairs investigated Shoprite Supermarkets and found 144 products displayed for sale with expired manufacturer dates. These products included vitamins, baby formula, nasal decongestants, and tanning oil. The expiration dates were printed on the products by the manufacturers and were clearly visible.

    Procedural History

    The Nassau County Office of Consumer Affairs fined Shoprite $3,600. Shoprite initiated a CPLR article 78 proceeding to challenge the agency’s determination. The Supreme Court annulled the agency’s determination, finding no misrepresentation or deceptive act. The Appellate Division affirmed the Supreme Court’s decision, emphasizing that Shoprite did not misrepresent the quality of the goods and that the expiration dates were unaltered and unconcealed. The Court of Appeals then affirmed the Appellate Division’s order.

    Issue(s)

    Whether displaying products with clearly marked, unaltered expiration dates constitutes a “deceptive trade practice” within the meaning of the Nassau County Administrative Code, which prohibits misleading representations about goods.

    Holding

    No, because displaying products with unaltered and unconcealed expiration dates does not constitute a deceptive trade practice where the relevant law prohibits misleading representations but not explicitly the sale of expired goods.

    Court’s Reasoning

    The court reasoned that the Nassau County Administrative Code prohibits deceptive trade practices, defined as false or misleading representations about consumer goods. The agency argued that Shoprite made an “implied representation” that the expired products were unexpired. However, the court rejected this argument, stating that the explicit, unaltered expiration dates on the products negated any such implied representation. The court emphasized that the agency could not ascribe to Shoprite an implied representation at odds with what undisputedly appears in writing. The court distinguished the case from situations where expiration dates are obscured or altered, which would constitute a deceptive practice. The court also referenced New York General Business Law § 820, which specifically addresses the sale of expired over-the-counter drugs. Section 820(1) prohibits the knowing sale of expired drugs, while Section 820(2) prohibits altering or concealing expiration dates. The court noted that the Nassau County Act only prohibits misleading and deceptive practices, not the sale of expired goods itself. Therefore, because the expiration dates were clearly marked and unaltered, Shoprite’s actions did not violate the Nassau County Administrative Code. The court stated, “Here, there is no claim that the dates were in any way obscured, nor does the Nassau County Act prohibit the sale of expired over-the-counter drugs or any other products. It does prohibit misleading or deceptive sales or displays, but we are unable to conclude that the sale or display of an item plainly (out)dated is deceptive or misleading.”

  • Empire Blue Cross v. Philip Morris, 1 N.Y.3d 88 (2003): Limits on Third-Party Recovery Under NY General Business Law § 349

    1 N.Y.3d 88 (2003)

    A third-party payer of healthcare costs lacks standing to sue for deceptive business practices under New York General Business Law § 349 because its claims are derivative and too remote from the alleged deceptive conduct.

    Summary

    Empire Blue Cross sued tobacco companies, alleging deceptive practices regarding the dangers of smoking, which led to increased healthcare costs for its insureds. The Second Circuit certified questions to the New York Court of Appeals regarding whether Empire’s claims were too remote under General Business Law § 349 and whether individualized proof of harm to subscribers was required. The Court of Appeals held that Empire’s claims were indeed too remote, precluding the lawsuit. The court reasoned that allowing such derivative claims would circumvent the common-law remedy of equitable subrogation and potentially unleash a “tidal wave of litigation” unintended by the legislature.

    Facts

    Empire Blue Cross, a healthcare cost payer, claimed that tobacco companies engaged in deceptive practices by misrepresenting the dangers of smoking. These practices allegedly caused increased medical costs for Empire’s subscribers, which Empire bore. Empire sued the tobacco companies to recover these costs, alleging direct and subrogated claims under New York General Business Law § 349.

    Procedural History

    Empire initially filed suit in the U.S. District Court for the Eastern District of New York. The jury found in favor of Empire on its direct and subrogated claims under § 349. The District Court denied the defendant’s motion for judgment as a matter of law. The Second Circuit reversed the portion of the jury award related to the subrogation claim, finding a lack of individualized proof of harm. The Second Circuit then certified questions to the New York Court of Appeals regarding the remoteness of the claims and the need for individualized proof.

    Issue(s)

    1. Are claims by a third-party payer of healthcare costs seeking to recover costs of services provided to subscribers as a result of those subscribers being harmed by a defendant’s violation of New York General Business Law § 349 too remote to permit suit under that statute?
    2. If such an action is not too remote, is individualized proof of harm to subscribers required when a third-party payer seeks to recover costs of services provided to subscribers due to harm from a § 349 violation?

    Holding

    1. Yes, because a third-party payer’s claims are derivative and too remote to permit a direct suit under General Business Law § 349.
    2. This question was not answered because the first question was answered in the affirmative, rendering it academic.

    Court’s Reasoning

    The Court emphasized that General Business Law § 349 is a consumer protection statute. While it allows “any person” injured by a deceptive practice to sue, the Court declined to interpret this broadly enough to encompass derivative injuries. The Court reasoned that such an interpretation would abrogate the common-law rule requiring equitable subrogation for insurers seeking to recover costs paid on behalf of their insureds. The Court stated, “It is axiomatic concerning legislative enactments in derogation of common law, and especially those creating liability where none previously existed, that they are deemed to abrogate the common law only to the extent required by the clear import of the statutory language.” The court warned against creating a “tidal wave of litigation” and emphasized the importance of standing, stating, “Properly framed, the issue is not whether the deceptive practice is a sufficient cause of the plaintiffs injury, but what types of injuries are cognizable under the statute. Plaintiffs injuries are not.” The Court clarified that its holding did not prevent actually injured parties from suing tortfeasors directly, but merely required the party directly injured to bring the suit. Empire’s remedy remains in equitable subrogation, requiring it to establish the elements of each subscriber’s claim individually. The court noted, “Insurers cannot sidestep their traditional remedy of subrogation and sue directly for derivative injuries using a statute that creates a cause of action for a person directly injured.”

  • Le Drugstore Etats Unis, Inc. v. New York State Bd. of Pharmacy, 33 N.Y.2d 266 (1973): Use of ‘Drugstore’ Name by Unlicensed Business

    Le Drugstore Etats Unis, Inc. v. New York State Bd. of Pharmacy, 33 N.Y.2d 266 (1973)

    An unlicensed business cannot use the term “drug store” in its name, even with a disclaimer, if state law prohibits such use by unlicensed entities.

    Summary

    Le Drugstore Etats Unis, Inc., an unlicensed retailer, sought a declaratory judgment to allow it to use the name “Le Drugstore,” despite not being a licensed pharmacy, arguing that a disclaimer stating “Not a Pharmacy” mitigated any potential public confusion. The New York Court of Appeals reversed the lower court’s decision, holding that Education Law § 6811(6) unambiguously prohibits unlicensed businesses from using the term “drug store,” regardless of disclaimers. The Court reasoned that allowing such use would debase the term’s significance and potentially confuse the public, thus warranting legislative action for any exceptions.

    Facts

    Le Drugstore Etats Unis, Inc. operated a retail business under the name “Le Drugstore” from October 1970 to February 1973. The business, modeled after a European merchandising concept, included boutiques, a restaurant, and other shops, but did not sell drugs. A sign outside the store stated “Not a Pharmacy.” The business never obtained a pharmacy license. Due to financial difficulties, the store closed in February 1973, and the corporation changed its name to Drop Kick, Inc. The State Board of Pharmacy challenged the use of the name “Le Drugstore”.

    Procedural History

    The plaintiff sought a declaratory judgment in Special Term, which granted summary judgment in their favor. The Appellate Division affirmed the Special Term’s decision, with two justices dissenting. The defendants appealed to the New York Court of Appeals based on the dissenting opinion. While the appeal was pending, the plaintiff closed its business and moved to dismiss the appeal as moot.

    Issue(s)

    1. Whether the appeal should be dismissed as moot due to the plaintiff closing its business.

    2. Whether an unlicensed retailer can use the name “drug store” if it does not sell drugs and posts a disclaimer stating “Not a Pharmacy.”

    Holding

    1. No, because a novel and important question of statutory construction is presented, which is likely to recur.

    2. No, because Education Law § 6811(6) expressly prohibits the use of the term “drug store” by other than a licensed pharmacy.

    Court’s Reasoning

    The Court of Appeals held that the appeal was not moot, emphasizing the novel and recurring nature of the statutory construction question regarding the use of the term “drug store” by unlicensed retailers. The Court then addressed the merits, focusing on the unambiguous language of Education Law § 6811(6), which prohibits any person from conducting business under a name containing the words “drug store” unless the place of business is a licensed pharmacy. The court rejected the argument that a disclaimer would prevent public deception, stating that the words “drug store” signify a place where drugs are dispensed by trained, licensed individuals, and allowing exceptions would debase the term’s significance and create unwarranted public confusion. The court distinguished People v. Bernstein, noting that the term “patent medicine” had a vastly different meaning to the public than “medicine,” and that patent medicines had been expressly excluded from regulation. The court stated, “To debase the significance of the term ‘drug store’, by implying exceptions in the statute, might create unwarranted confusion in the public…If that be true, it may not be said that application of the statute according to its terms is unreasonable or arbitrary, or is not within the legislative intent.” The Court concluded that any exceptions to the statutory prohibition were properly a matter for the Legislature to decide.