New York Law Review

Tag: Private Right of Action

  • Cruz v. TD Bank, N.A., 22 N.Y.3d 61 (2013): No Private Right of Action for EIPA Violations

    Cruz v. TD Bank, N.A., 22 N.Y.3d 61 (2013)

    The Exempt Income Protection Act (EIPA) does not create a private right of action allowing judgment debtors to sue banks for failing to comply with its procedural requirements; relief is limited to special proceedings under CPLR Article 52.

    Summary

    The New York Court of Appeals addressed certified questions from the Second Circuit regarding whether judgment debtors have a private right of action against banks for violating the EIPA. The EIPA requires banks to provide judgment debtors with notices and forms regarding exempt income when their accounts are restrained. The Court held that the EIPA does not create a private right of action for money damages or injunctive relief. Instead, judgment debtors are limited to seeking relief through special proceedings under CPLR Article 52. The Court reasoned that the legislative scheme of Article 52 provides adequate remedies and that implying a private right of action would be inconsistent with the legislature’s intent.

    Facts

    Plaintiffs, judgment debtors, sued their banks (TD Bank and Capital One) in federal court, alleging that the banks violated the EIPA by failing to send them exemption notices and claim forms after their accounts were restrained by judgment creditors. Plaintiffs sought money damages and injunctive relief, claiming that the banks’ noncompliance resulted in improper restraint of exempt funds and assessment of bank fees. The banks moved to dismiss, arguing that the EIPA does not create a private right of action. The District Courts granted the motions to dismiss.

    Procedural History

    The United States District Courts for the Southern District of New York granted the banks’ motions to dismiss. Plaintiffs appealed to the Second Circuit Court of Appeals. The Second Circuit consolidated the cases and certified two questions to the New York Court of Appeals concerning the existence and exclusivity of remedies for EIPA violations. The New York Court of Appeals accepted the certified questions.

    Issue(s)

    1. Whether judgment debtors have a private right of action for money damages and injunctive relief against banks that violate EIPA’s procedural requirements.

    2. Whether judgment debtors can seek money damages and injunctive relief against banks that violate EIPA in special proceedings prescribed by CPLR Article 52 and, if so, whether those special proceedings are the exclusive mechanism for such relief or whether judgment debtors may also seek relief in a plenary action.

    Holding

    1. No, because the EIPA does not expressly or impliedly create a private right of action.

    2. Yes, judgment debtors can seek relief in special proceedings under CPLR Article 52, and these proceedings are the exclusive mechanism for such relief because the EIPA does not give rise to a private right of action.

    Court’s Reasoning

    The Court applied the three-part test for implying a private right of action: (1) whether the plaintiff is one of the class for whose particular benefit the statute was enacted; (2) whether recognition of a private right of action would promote the legislative purpose; and (3) whether creation of such a right would be consistent with the legislative scheme. The Court focused on the third factor, finding that the comprehensive enforcement mechanisms already present in CPLR Article 52 indicate the legislature did not intend to create a private right of action against banks.

    The Court rejected the argument that the safe harbor clause in CPLR 5222-a (b)(3), which exempts banks from liability for inadvertent failure to provide the required notices, implies a private right of action for other EIPA violations. The Court reasoned that such an interpretation would be an unusual application of the expressio unius est exclusio alterius doctrine. The Court noted that the EIPA was modeled on Connecticut legislation that explicitly imposes liability on banks, but the New York legislature chose not to include a similar provision.

    The Court also highlighted that CPLR 5222-a (g) explicitly provides for money damages against judgment creditors who dispute exemption claims in bad faith, further suggesting that the legislature’s silence regarding bank liability was intentional.

    The Court emphasized that CPLR Article 52 provides several mechanisms for enforcement, including CPLR 5239 and 5240, which allow “any interested person” (including judgment debtors) to seek remedies for wrongs arising under the statutory scheme. These special proceedings offer a means for judgment debtors to seek relief against banks for EIPA violations.

    The Court distinguished Aspen Indus. v Marine Midland Bank, 52 NY2d 575 (1981), noting that any right to bring a plenary action in the context of a bank’s failure to comply with a restraining notice arises from the fact that such noncompliance constitutes contempt of court under CPLR 5222 (a) and 5251.

    Ultimately, the Court concluded that implying a private right of action would be incompatible with the legislative scheme, which recognizes the bank’s limited role as a garnishee. The purpose of the EIPA was to streamline the process and help debtors notify banks of exempt funds, not to create new opportunities for litigation. The existing proceedings in CPLR Article 52 are adequate to afford judgment debtors appropriate relief.

  • Hammer v. American Kennel Club, 1 N.Y.3d 294 (2003): No Private Right of Action for Breed Standard Claims

    Hammer v. American Kennel Club, 1 N.Y.3d 294 (2003)

    A private right of action will not be implied under a penal statute if it is incompatible with the enforcement mechanism chosen by the legislature or with some other aspect of the overall statutory scheme.

    Summary

    Jon Hammer, a Brittany Spaniel owner, sued the American Kennel Club (AKC) and the American Brittany Club (ABC), arguing their breed standard penalizing tails longer than four inches encourages animal cruelty (tail docking) in violation of Agriculture and Markets Law § 353. Hammer sought declaratory and injunctive relief to prevent the defendants from using the standard. The New York Court of Appeals held that no private right of action exists under Agriculture and Markets Law § 353 for Hammer’s claim because the legislature established a specific enforcement scheme involving police and animal cruelty prevention societies, making a private right of action incompatible.

    Facts

    Jon Hammer owned a Brittany Spaniel with a natural 10-inch tail. The AKC, through its affiliated breed club ABC, uses a breed standard that penalizes Brittany Spaniels with tails longer than four inches. The ABC’s standard provides that dogs should be “[t]ailless to approximately four inches, natural or docked. The tail not to be so long as to affect the overall balance of the dog. . . . Any tail substantially more than four inches shall be severely penalized.” Hammer, unwilling to dock his dog’s tail, claimed this standard effectively excluded him from meaningful participation in AKC competitions.

    Procedural History

    Hammer sued the AKC and ABC for declaratory and injunctive relief in Supreme Court. The Supreme Court dismissed the complaint, finding Hammer lacked standing. The Appellate Division affirmed the dismissal. The New York Court of Appeals granted leave to appeal and affirmed the Appellate Division’s order.

    Issue(s)

    Whether Agriculture and Markets Law § 353 grants a private right of action to an individual seeking to preclude the AKC and ABC from using a breed standard that allegedly encourages animal cruelty (tail docking).

    Holding

    No, because implying a private right of action would be inconsistent with the legislative scheme for enforcing animal cruelty laws.

    Court’s Reasoning

    The Court of Appeals applied the three-part test established in Sheehy v. Big Flats Community Day to determine if a private right of action should be implied. The factors are: (1) whether the plaintiff is one of the class for whose particular benefit the statute was enacted; (2) whether recognition of a private right of action would promote the legislative purpose; and (3) whether creation of such a right would be consistent with the legislative scheme.

    The Court focused on the third factor, finding that the Legislature had already addressed enforcement of animal protection statutes in Agriculture and Markets Law §§ 371 and 372, granting enforcement authority to police officers and animal cruelty prevention societies through criminal proceedings. Specifically, Section 371 of the Agriculture and Markets Law requires police officers and constables to enforce violations of article 26 and further authorizes “any agent or officer of any duly incorporated society for the prevention of cruelty to animals” to initiate a criminal proceeding. The Court emphasized that the Legislature has the “right and the authority to select the methods to be used in effectuating its goals.”

    Because the Legislature created a specific enforcement mechanism, allowing a private right of action would be incompatible. The Court noted, “regardless of its consistency with the basic legislative goal, a private right of action should not be judicially sanctioned if it is incompatible with the enforcement mechanism chosen by the Legislature or with some other aspect of the over-all statutory scheme.” The Court also noted that the plaintiff had not alleged a violation of the statute because neither he nor the defendants had engaged in any conduct that violated the law.

  • Carrier v. Salvation Army, 88 N.Y.2d 298 (1996): No Private Right of Action for Receivership Under Social Services Law § 460-d

    Carrier v. Salvation Army, 88 N.Y.2d 298 (1996)

    Residents of an adult care facility do not have a private right of action under Social Services Law § 460-d to seek the appointment of a temporary receiver; this power is reserved to the Department of Social Services and the Attorney General.

    Summary

    Residents of Booth House II, an adult care facility, sued the operator, Salvation Army, seeking the appointment of a temporary receiver under Social Services Law § 460-d(5). Salvation Army had submitted a plan to voluntarily surrender its operating certificate, which the Department of Social Services approved. The residents alleged non-compliance with relocation and safety obligations. The Court of Appeals held that the statute does not grant residents a private right to seek a receivership, as the legislative intent was to vest enforcement power solely with the Department of Social Services and the Attorney General. Allowing a private right of action would be inconsistent with the comprehensive statutory enforcement scheme.

    Facts

    The Salvation Army operated Booth House II, an adult care facility. The Salvation Army submitted a plan to the Department of Social Services to voluntarily surrender its operating certificate and close the facility. The Department of Social Services approved the Salvation Army’s closure plan. Residents of Booth House II brought an action against the Salvation Army, alleging the Salvation Army was failing to comply with obligations to relocate residents to appropriate settings and maintain safety and health standards during the closure process.

    Procedural History

    The residents filed a complaint and an order to show cause, seeking the appointment of a temporary receiver and injunctive relief. The Salvation Army cross-moved to dismiss the complaint for failure to state a cause of action. The Supreme Court granted the Salvation Army’s motion, holding that Social Services Law § 460-d does not authorize facility residents to seek a temporary receivership. The Appellate Division affirmed, finding that an implied right of action would be inconsistent with the legislative and statutory enforcement scheme. The New York Court of Appeals granted leave to appeal.

    Issue(s)

    Whether Social Services Law § 460-d grants residents of an adult care facility a private right of action to seek the appointment of a temporary receiver.

    Holding

    No, because the legislative intent behind Social Services Law § 460-d does not fairly imply a private right of action for residents to seek the appointment of a temporary receiver; the statute vests enforcement power solely in the Department of Social Services and the Attorney General.

    Court’s Reasoning

    The Court of Appeals applied the three-factor test from Sheehy v. Big Flats Community Day to determine whether a private right of action should be implied: (1) whether the plaintiff is one of the class for whose particular benefit the statute was enacted; (2) whether recognition of a private right of action would promote the legislative purpose; and (3) whether creation of such a right would be consistent with the legislative scheme. The Court found that the third factor, consistency with the legislative scheme, was determinative. The Court emphasized that Article 7 of the Social Services Law gives the Department of Social Services comprehensive responsibility for supervising residential care facilities. Social Services Law § 460-d grants the Commissioner of Social Services broad enforcement powers, including the power to investigate facilities, issue orders to rectify violations, revoke operating certificates, and assess civil penalties. Subdivision (5) of § 460-d allows the Department access to court-ordered equitable remedies, including receivership appointments. The Court stated, “[T]he Legislature has both the right and the authority to select the methods to be used in effectuating its goals… thus… a private right of action should not be judicially sanctioned if it is incompatible with the enforcement mechanism chosen by the Legislature.” Recent amendments to the statute, which expressly authorized residents to bring private actions for breach of warranty of habitability and violations of admission agreements, further indicated that a private right of action for receivership was not intended. The Court reasoned that the creation of a specific civil remedy for residents implied the absence of a broader, unenumerated remedy like seeking a receivership. The court distinguished Henry v. Isaac, noting it did not address the specific remedy sought here and was undercut by later amendments creating specific private rights of action.

  • 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.

  • Burns Jackson Miller Summit & Spitzer v. Lindner, 59 N.Y.2d 314 (1983): Private Right of Action Under the Taylor Law

    59 N.Y.2d 314 (1983)

    The Taylor Law, which prohibits strikes by public employees, does not create a private right of action for damages resulting from illegal strikes, nor does it preempt existing common-law remedies, although the elements of those common law torts must still be proven independently.

    Summary

    Two law firms sued unions for damages caused by an illegal transit strike, alleging causes of action including violation of the Taylor Law, prima facie tort, public nuisance, and interference with business. The New York Court of Appeals held that the Taylor Law does not create a private right of action, as the legislative intent was to provide public remedies and maintain labor peace, not to create new avenues for private lawsuits. However, the Court also determined that the Taylor Law did not preempt common-law tort claims, but the plaintiffs failed to adequately state claims for prima facie tort (lack of disinterested malevolence), public nuisance (damages not distinct from the public at large), and intentional interference with business (interference was incidental).

    Facts

    In April 1980, a transit strike occurred in New York City, violating the Taylor Law and a preliminary injunction. Two law firms, Burns Jackson Miller Summit & Spitzer (“Burns Jackson”) and Jackson, Lewis, Schnitzler and Krupman (“Jackson, Lewis”), separately sued the Transport Workers Union of America (TWU) and other related unions and officers, seeking damages for losses sustained due to the strike. Burns Jackson filed a class action seeking $50 million per day in damages, alleging prima facie tort and public nuisance. Jackson, Lewis sued TWU, seeking $25,000 in damages, alleging violation of the Taylor Law, prima facie tort, intentional interference with business, willful injury, conspiracy, and breach of contract as a third-party beneficiary.

    Procedural History

    The Jackson, Lewis action was moved to Queens County and consolidated with the Burns Jackson action. The defendants moved to dismiss both actions for failure to state a cause of action. Special Term denied the motions, except for the Jackson, Lewis contract claim. The Appellate Division modified the order, dismissing both complaints entirely. The plaintiffs appealed to the New York Court of Appeals.

    Issue(s)

    1. Whether the Taylor Law either preempts common-law private damage actions for injuries caused by public employee strikes or creates a new private right of action for such damages?

    2. Whether the complaints adequately state a cause of action for (a) prima facie tort, (b) public nuisance, (c) intentional interference with business, or (d) breach of plaintiffs’ rights as third-party beneficiary of defendants’ contracts with NYCTA or MABSTOA?

    Holding

    1. No, because the Taylor Law was intended to be cumulative, not exclusive, and it was not intended to establish a new private cause of action.

    2. No, because (a) the plaintiffs failed to allege disinterested malevolence for the prima facie tort claim, (b) the damages alleged for the public nuisance claim were not distinct from those suffered by the public at large, (c) the interference with business was merely incidental, and (d) the contracts had expired before the strike, and the plaintiffs were merely incidental beneficiaries.

    Court’s Reasoning

    The Court reasoned that legislative intent is paramount in determining whether a statute creates a private right of action or preempts existing remedies. The Court found no explicit statement in the Taylor Law regarding exclusivity or intent to create a private cause of action. Examining the legislative history, the Court concluded that the Taylor Law was intended to be cumulative, not exclusive, and was not meant to create a new cause of action. The Court emphasized that implying a private action would impose a crushing burden on unions and employees, undermining the legislative goal of defusing tensions in public employer-employee relations and maintaining labor peace. The Court noted that the elaborate enforcement provisions within the Taylor Law suggested that the Legislature provided precisely the remedies it considered appropriate.

    Regarding the common-law claims, the Court held that the prima facie tort claim failed because the plaintiffs did not allege that the defendants’ sole motivation was “disinterested malevolence.” The Court clarified that a malicious motive must be unmixed with any other and exclusively directed to the injury of another. The public nuisance claim failed because the damages alleged were not “of a different kind from that suffered by other persons exercising the same public right.” The injury was common to the entire community. The intentional interference with business claim failed because the interference was an incidental result of the strike, and the Court declined to recognize a common-law cause of action for such incidental interference where the Legislature has established a comprehensive labor plan. Finally, the third-party beneficiary claim failed because the underlying contracts had expired before the strike, and the plaintiffs were merely incidental beneficiaries of those contracts.

    The Court cited Wyandotte Co. v. United States, 389 U.S. 191, 204 for the principle of not permitting a wrongdoer to shift responsibility for their actions onto their victim, but distinguished that case as being predicated on a comprehensive legislative scheme for redressing labor disputes.