New York Law Review

Tag: General Business Law

  • Ovitz v. Bloomberg L.P., 18 N.Y.3d 753 (2012): Injury Required for Claims Under General Obligations Law and General Business Law

    18 N.Y.3d 753 (2012)

    A plaintiff must demonstrate actual injury to sustain a claim under General Obligations Law §§ 5-901 and 5-903, and General Business Law § 349.

    Summary

    Bruce Ovitz, an Illinois resident, sued Bloomberg L.P. alleging violations of New York General Obligations Law and General Business Law, breach of contract, and other claims, stemming from an automatically renewing subscription agreement for Bloomberg’s financial information services. Ovitz claimed Bloomberg failed to provide advance notice of the automatic renewal, as required by statute. The New York Court of Appeals affirmed the dismissal of Ovitz’s complaint, holding that he failed to demonstrate any actual injury as a result of Bloomberg’s actions, a necessary element for maintaining claims under the relevant statutes. Bloomberg waived its claims for termination fees and arrears. The court emphasized that without a cognizable injury, Ovitz’s claims, including those for declaratory and injunctive relief, could not stand.

    Facts

    In 2000, Ovitz entered a two-year subscription agreement with Bloomberg for financial information services, containing an automatic renewal clause for successive two-year periods unless either party provided 60 days’ written notice of termination. After the initial term expired in 2002, Ovitz continued using Bloomberg’s services. In September 2008, Ovitz notified Bloomberg of his intent to terminate the agreement at the end of the month. Bloomberg informed him the agreement had automatically renewed until June 2010 and he was liable for payments through that date or an early termination fee. Bloomberg allegedly admitted it was their standard policy not to provide advance notice of automatic renewals. Ovitz sent written notice of termination in October 2008. Bloomberg continued to bill him. Bloomberg eventually waived the early termination fee and collection of fees.

    Procedural History

    Ovitz filed a class action lawsuit in December 2008. Supreme Court initially dismissed some claims but allowed claims under General Obligations Law and General Business Law to proceed. The Appellate Division reversed, dismissing the entire complaint. The Appellate Division reasoned that while Bloomberg’s failure to comply with the notice requirements of the General Obligations Law made the automatic renewal provision unenforceable, Ovitz hadn’t alleged he paid for services he didn’t receive. The Court of Appeals granted leave to appeal and affirmed the Appellate Division’s decision.

    Issue(s)

    Whether a plaintiff can sustain claims for violations of General Obligations Law §§ 5-901 and 5-903, General Business Law § 349, and for declaratory and injunctive relief, absent a showing of actual injury.

    Holding

    No, because a plaintiff must demonstrate actual injury to maintain a claim under General Obligations Law §§ 5-901 and 5-903, General Business Law § 349, and to obtain declaratory or injunctive relief.

    Court’s Reasoning

    The Court of Appeals held that even assuming a private right of action exists under General Obligations Law §§ 5-901 and 5-903, Ovitz’s claim failed because he did not suffer any harm. He did not pay service termination fees, nor did he pay for services he did not receive. His argument that he prepaid for services through the end of September 2008 was contradicted by his statement he wanted to terminate at the end of the month. Further, Bloomberg’s waiver of claims extinguished any threat of injury based on alleged credit rating impairment.

    Regarding the General Business Law § 349 claim, the court cited Oswego Laborers’ Local 214 Pension Fund v Marine Midland Bank, 85 NY2d 20, 25 (1995), emphasizing that a plaintiff must demonstrate that the defendant’s deceptive act or practice caused injury to the plaintiff. Since Ovitz demonstrated no injury, this claim also failed. As the court explained, a prima facie showing requires allegations that a “defendant is engaging in an act or practice that is deceptive or misleading in a material way and that plaintiff has been injured by reason thereof“

    Finally, the court concluded that absent actual injury and given Bloomberg’s waiver of its claims, there was no justiciable controversy to support declaratory relief, nor was there irreparable harm to warrant injunctive relief. As a result, the court affirmed the dismissal of the entire complaint.

  • Varela v. Investors Ins. Holding Corp., 81 N.Y.2d 958 (1993): Limits on Private Rights of Action Under Consumer Protection Laws

    Varela v. Investors Ins. Holding Corp., 81 N.Y.2d 958 (1993)

    New York’s General Business Law Article 29-H, regulating debt collection practices, does not create a private right of action; only the Attorney General or a District Attorney can bring such actions.

    Summary

    Varela sued Investors Insurance and their law firm after the firm initiated a collection action and obtained a default judgment based on the mistaken belief that Varela was delinquent on insurance premiums. Even after being informed of the error, the law firm refused to issue a satisfaction of judgment until Varela paid a $60 fee. Varela then sued, claiming damages and alleging violations of New York consumer protection statutes. The New York Court of Appeals held that Article 22-A of the General Business Law (deceptive acts) did not apply because the firm’s actions were not materially deceptive, and that Article 29-H (debt collection practices) does not provide for a private right of action. The court affirmed the dismissal of Varela’s claims.

    Facts

    Investors Insurance Company mistakenly believed that the Varelas were delinquent in paying their insurance premiums.

    The law firm representing Investors commenced a collection action against the Varelas and obtained a default judgment.

    Investors informed the law firm that the collection action was a mistake and that the Varelas did not owe the premium.

    The law firm refused to enter a satisfaction of judgment until the Varelas paid $60 for issuing and filing the satisfaction.

    The Varelas paid the $60 and then sued Investors and the law firm, alleging substantial damages and asserting claims under New York consumer protection statutes.

    Procedural History

    The lower courts dismissed Varela’s claims.

    The Appellate Division affirmed the dismissal.

    The New York Court of Appeals reviewed the Appellate Division’s decision.

    Issue(s)

    1. Whether the law firm’s actions constituted “deceptive acts” under Article 22-A of the General Business Law, thereby entitling plaintiffs to a private right of action?

    2. Whether Article 29-H of the General Business Law creates a private right of action for violations of its provisions?

    Holding

    1. No, because the law firm’s actions, even if improper, did not materially mislead the plaintiffs and thus did not constitute deceptive acts under Article 22-A.

    2. No, because Article 29-H authorizes only the Attorney General or a District Attorney to commence an action for violation of its provisions; it does not create a private right of action.

    Court’s Reasoning

    Regarding Article 22-A, the court reasoned that even if the law firm’s actions were improper, they did not materially mislead the Varelas. The statute prohibits “[deceptive acts or practices in the conduct of any business, trade or commerce” (General Business Law § 349). The court cited Genesco Entertainment v Koch, stating that the plaintiffs were not “injured by reason of any violation” of section 349 because the alleged misrepresentations did not constitute a deceptive practice within the meaning of the act.

    Regarding Article 29-H, the court emphasized the absence of an express provision for a private cause of action, contrasting this with Article 22-A (which was amended to expressly provide for one) and other sections of the General Business Law. The court stated, “Given the Legislature’s action in amending article 22-A to expressly provide for a private cause of action in that article… its provision for private causes of action in other portions of the General Business Law… and the absence of a similar provision for enforcing article 29-H, we conclude the Legislature did not intend to create a private cause of action for violations of article 29-H.” The court applied the principle that when a statute omits a specific remedy, particularly when other related statutes include it, the omission is intentional.

  • Attorney-General v. Katz, 55 N.Y.2d 1015 (1982): Duration of Martin Act Injunctions

    55 N.Y.2d 1015 (1982)

    An injunction order issued pursuant to Section 354 of the General Business Law (the Martin Act) does not automatically expire upon the commencement of a plenary action under Section 353 of the same law.

    Summary

    This case addresses whether a preliminary injunction issued under Section 354 of New York’s Martin Act automatically terminates when the Attorney General commences a plenary action under Section 353. The Court of Appeals held that the injunction does not expire automatically. While the Attorney General will generally seek a new injunction in the plenary action, terminating the initial injunction immediately could create a gap in protection. The court affirmed the Appellate Division’s order without prejudice to the respondents’ right to apply for vacatur of the initial injunction.

    Facts

    The Attorney General of New York obtained a preliminary injunction against Curtis Katz and others under Section 354 of the General Business Law (the Martin Act). This injunction was related to alleged fraudulent practices in the sale of securities or commodities. Subsequently, the Attorney General commenced a plenary action against the same parties under Section 353 of the Martin Act, seeking a permanent injunction and other relief based on the same alleged fraudulent practices.

    Procedural History

    The Attorney General obtained a preliminary injunction from the Special Term. The Appellate Division reviewed the Special Term’s decision and affirmed. The case then went to the Court of Appeals, which affirmed the Appellate Division’s order. The Court of Appeals ruling was without prejudice to the respondents’ right to apply to the Special Term to vacate the initial injunction.

    Issue(s)

    Whether an injunction order issued pursuant to Section 354 of the General Business Law automatically expires eo instanti upon the commencement of a Section 353 plenary action.

    Holding

    No, because automatically terminating the Section 354 injunction upon commencement of the Section 353 action would be inconsistent with the purpose of the statute and potentially leave investors unprotected during the period before a new injunction could be obtained in the plenary action.

    Court’s Reasoning

    The Court of Appeals reasoned that while it is typical to seek a new injunction within the plenary action, an automatic termination of the Section 354 injunction upon the commencement of the Section 353 action would be problematic. The court stated, “It would, however, be inconsistent with the purpose of the statute to terminate the section 354 injunction at the moment the plenary action papers are served.” The court acknowledged the potential for conflicting orders but noted that the defendants are protected by their right to move for dissolution of the initial injunction once the plenary action begins. The court emphasized the discretion of the Appellate Division, stating that its order was “a discretionary decision outside our power of review.” The court further observed, “Those against whom a plenary action is begun are sufficiently protected against being whipsawed between two overlapping and possibly not entirely consistent orders by the right to move for dissolution of the section 354 order once the section 353 action has been begun.”