August 3, 2021

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New York’s Highest Court Interprets “Consumer” Expansively Under Consumer Protection Statute | Jones Day

5 min read
New York's Highest Court Interprets "Consumer" Expansively Under Consumer Protection Statute | Jones Day

The Condition: A new scenario right before the New York Court of Appeals challenged very long-proven limits on the software of New York’s key shopper protection provision to products or expert services acquired for personalized, relatives, or household use.

The Result: In Himmelstein, McConnell, Gribben, Donoghue & Joseph, LLP, et al. v. Matthew Bender & Co., the New York Court of Appeals identified that New York Basic Business enterprise Law Segment 349 handles additional than classic buyer merchandise and extends to products and solutions ordinarily applied in organization options, hence shielding companies and professionals—including authorized professionals—from misleading company techniques.

Looking Ahead: This final decision broadens the application of New York Common Small business Regulation Portion 349, therefore leaving New York businesses and entities that do small business in New York far more uncovered to purchaser litigation.

On June 3, 2021, the Courtroom of Appeals clarified the scope of New York General Company Law Portion 349, a commonly invoked consumer protection provision. The Courtroom held that Segment 349 guards buyers from the deceptive acts or methods of enterprises regardless of the use of the products obtained. In so undertaking, the Court docket expressly overruled many years-old First Division precedent, commonly cited throughout federal and New York State jurisdictions, that constrained the provision’s application to products or providers purchased for own, relatives, or domestic use.

The Initial Department precedent dependent this limit on Area 349’s use of the word “purchaser,” which was construed narrowly in light of the word’s use in other places in New York statutes. The Courtroom of Appeals turned down this slim interpretation mainly because, compared with other provisions, Portion 349 broadly prohibits “[d]eceptive functions or methods in the carry out of any company, trade or commerce.”

Background

In Himmelstein, McConnell, Gribben, Donoghue & Joseph, LLP, et al. v. Matthew Bender & Co., legal industry experts brought a putative class motion against the publisher of an once-a-year treatise—”New York Landlord-Tenant Legislation”—claiming that the publisher misrepresented the treatise’s scope. Though the treatise’s overview explained specified sections as containing “selected” rules and provisions, the overview indicated that the treatise contained “the” rent stabilization and hire manage regulations and polices for New York City and Condition. The plaintiffs interpreted the latter to signify a complete copy of all relevant laws and restrictions. The plaintiffs claimed that quite a few provisions relating to lease legislation and polices ended up lacking or inaccurate, and sued the publisher for violation of Area 349’s prohibition on deceptive company methods.

To be successful on a Portion 349 claim, a plaintiff ought to allege that the defendant’s conduct (i) was client-oriented (ii) was materially misleading and (iii) resulted in an damage to the plaintiff. Relying on Appellate Division precedent, the trial court dominated that the plaintiffs unsuccessful to plead the “purchaser-oriented” aspect because individuals are individuals who “purchase goods and products and services for particular, loved ones, or domestic use,” while the plaintiffs experienced procured the treatise in their ability as authorized specialists. The trial court docket observed that the sale and marketing of the guide was not directed at shoppers at large and thus not adequately buyer-oriented. The demo court docket granted the defendant’s motion to dismiss, and the Appellate Division affirmed on distinctive grounds.

The COA’s Keeping

The Court docket of Appeals dismissed the grievance. The Courtroom held that no reasonable purchaser would have been misled as to the treatise’s contents simply because the profits agreement expressly disclaimed their “accuracy, trustworthiness[, and] currentness” and statutes and polices are often matter to revision. Additional, the plaintiffs had agreed to pay an extra cost for updates to the treatise between publications, thereby demonstrating an consciousness that the treatise may possibly not be a total and exact compilation of the legislation at a unique time.

Much more substantially, the Court docket rejected the demo court’s definition of “customer,” which experienced been drawn from influential Appellate Division precedent. The Court docket found that neither the text nor the function of Segment 349 supported the Appellate Division’s slender reading through of “shopper” centered on a consumer’s unique use of a merchandise. The Court held that lawful specialists are a “subclass of buyer” and that carry out have to have not be directed at all customers of the community to be consumer-oriented. Further more, the defendant’s perform was directed at a wide customer base and not merely a “private agreement dispute, exceptional to the get-togethers.” Acquiring the defendant’s carry out sufficiently purchaser-oriented, the Court docket held the plaintiffs succeeded in pleading the to start with ingredient of a Portion 349 claim.

Implications

The Himmelstein determination is a sizeable growth of Segment 349, decoding it to include merchandise and solutions offered to businesses and pros for use in company, not just products and solutions or products and services offered for individual use. The Court docket emphasized the New York legislature’s intent to secure the public towards all kinds of deceptive business enterprise procedures.

The ruling forewarns New York businesses, and others executing business in the point out, to assessment advertising and marketing products and gross sales practices focusing on enterprises for misleading messages. Disclaimers that, like the disclaimer in Himmelstein, especially handle these kinds of messages may well mitigate or get rid of the possible for deception and therefore cut down the hazard of liability less than Segment 349.

Also, the ruling suggests that New York shopper security legislation is fewer than settled. Those people performing business enterprise in New York must watch further more developments.

Stephanie Pryor, in the New York Workplace, assisted in the preparation of this Commentary.

Two Crucial Takeaways

1. General Organization Legislation Part 349 ought to now be recognized to deal with even goods made use of only in a business enterprise setting—not just merchandise or solutions purchased for individual, family members, or family use—and to secure corporations and experts from misleading small business tactics in New York.

2. These doing enterprise in New York need to make sure that their profits and advertising procedures are suitable in the context of Area 349. Targeted disclaimers may enable them do so.

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