SUMMARY OF NEW YORK STATE CLASS ACTIONS IN 2001

In 2001 the Court of Appeals addressed the viability of three class actions brought under CPLR Article 9 involving the rights of insureds, lesbian medical students and aliens seeking Medicaid benefits.

In Gaidon v. Guardian Life Insurance Company[2] the Court of Appeals revisited " vanishing premium " life insurance policies where the premiums never seemed to vanish[3]. This time the Court held that General Business Law [GBL] 349 is broader than common law fraud [" encompasses a significantly wider range of deceptive business practices that were never previously condemned by decisional law "] and, hence, GBL 349 claims are governed by a three-year period of limitations [CPLR 214(2)]. In addition, the Court held that GBL 349 claims accrue when the consumer " has been injured by a deceptive act " which in this case meant when insureds "were first called upon to pay additional premiums beyond the date "they were to have vanished. In yet another " vanishing premium "class action, Goshen v. Mutual Life Insurance Company[4] , the Appellate Division held, among other things, that non-New York consumers who entered into insurance contracts outside New York State were beyond the coverage of GBL 349.

In  Levin v. Yeshiva University[5], a class action brought by lesbian medical students refused housing with their respective partners in school-owned residential facilities, the Court of Appeals held that the complaint stated a claim for  "disparate impact on plaintiffs on the basis of sexual orientation".

In Aliessa v. Novello [6], a class action brought by aliens challenging termination of Medicaid benefits, the Court of Appeals found the applicable statute unconstitutional and a violation of equal protection guarantees. In a similar dispute, Sharp v. DeBuono,[7] a class of Medicaid recipients challenged a determination "denying authorization for expenses for transportation to providers of medical services". The Appellate Division denied class certification ["(failure) to establish compliance with all the prerequisites in CPLR 901(a)"] but found " the determination of DSS arbitrary and capricious".

No Treble Damages Class Actions

In Consumer Class Actions in New York[8], an outstanding review of CPLR Article 9 class actions from 1975 to date, the Committee on Consumer Affairs of the Association of the Bar of the City of New York, noted that "several trial level courts[9] have denied class treatment to claims under the Donnelly Act [because] the treble damage remedy...is a penalty and [CPLR 901(b)] precludes certification of any action seeking a penalty". The Committee concluded that "the treble damage remedy is not a penalty "and recommended that treble damage class actions be certified. However, in Lennon v. Philip Morris Companies[10], a New York smokers' class action alleging price fixing, the Court not only found no Donnelly Act violations

["Parallel price increases, attendance at industry meetings, and the existence of a database, standing alone, are not sufficient to state a claim of conspiracy"]
but denied class certification on the now familiar grounds that treble damages class actions are prohibited by CPLR 901(b)
["Undoubtedly, a class action for treble damages will have punitive effect on any defendant. Even where treble damages are discretionary..."].

Of Computer Mice, Cartridges, Servers & Toys On-Line

In Ades v. Microsoft Corp.[11], a class of consumers who purchased Microsoft IntelliMouse Explorers claimed defective cables caused freezing, pausing, program crashes and slowed operation. While dismissing the misrepresentation claims the Court found viable the claims for breach of contract and injunctive relief requiring notice of any cable defect, how to recognize and identify it. In Strishak v. Hewlett-Packard Company[12], a class of consumers who purchased computers claimed that the manufacturer misrepresented the inclusive "smaller economy-size cartridges" as "large-size ink cartridges". The Court dismissed the complaint and sanctioned plaintiffs in the amount of $500

["this Court cannot recall a lawsuit so permeated with frivolousness...The courts are not a venue for trivial pursuits"].
In Scott v. Bell Atlantic Corp.[13], a class of consumers who purchased DSL service claimed misrepresentations in quality. The Appellate Division dismissed the GBL 349 and 350 claims of non-New York residents not receiving DSL services in New York State and then dismissed the remainder of the complaint enforcing a disclaimer and finding no "deceptive or misleading" misrepresentations. In Castellucci v. Toys "R" US, Inc.[14], a class of consumers who purchased toys online claimed the defendant's website misrepresented its willingness to ship toys for pre-Christmas delivery. Although "Toys "R" Us...publicly acknowledged that it failed to fulfill its guarantee obligations and deceptively...advertised a shipment deadline" the Court denied class certification finding that "individual issues as to misrepresentations and reliance would predominate", e.g., the class representative did not rely upon the website's "Christmas delivery" representations nor did she suffer any damages. In addition, the proposed class action was unmanageable" because of differing laws of multiple jurisdictions".

No Mass Torts Redux

In Rivkin v. Kulzer[15] a class of New York dental patients who had "polymer dental restorations, bonded to metal, sold under the trade name 'Artglass' that had failed" asserted breach of warranty and strict products liability claims. After conducting a mini-hearing[16] to determine whether the claims were "actually based on a common problem that was neither spurious nor sham" the trial Court certified the class as against the manufacturer

["Plaintiffs have established, prima facie, that one or a set of common defects in the manufacturing methods and processes...have caused an inordinately high failure rate...that the failures ... were typical ... and the remedy, replacement, was identical"].
The Appellate Division reversed dismissing the strict products liability claim since only economic losses were sought and finding class certification inappropriate
["to allow (named) plaintiffs ... to maintain a class action in spite of their total lack of damages violates the requirement that class actions be brought (by named plaintiffs who have) a cause of action and (are) representative of the interests of the Class"].

Selling Customer Information

In Anonymous v. CVS Corporation[17] a class of pharmacy customers challenged

"the purchase and sale of (their) medical and prescription information without their knowledge or Consent".
Evidently CVS had acquired the customer files of some 350 independent pharmacies with no advance notice to the customers of the stores closing or the transfer of files. On a motion to dismiss the Court sustained the claims of breach of fiduciary duty ["The transactions between a pharmacist and customer involves the principal characteristics of a fiduciary relationship"], unjust enrichment and violation of GBL 349
["practice of intentionally declining to give customers notice of an impending transfer of their critical prescription information in order to increase the value of that information appears deceptive"].

Books, Books, Books

In Rice v. Penguin Putnam, Inc.[18] a class of consumers who purchased Chains of Command charged the publisher with misrepresenting on the front and back covers of the novel that William J. Caunitz, a retired New York police detective and best selling author, had written it when one half had been written by Christopher Newman, "a lesser-known author", a fact only disclosed on the inside copyright page. The Appellate Division dismissed the complaint since it failed to allege that the class "suffered actual injury as a result of (the allegedly) deceptive marketing of the novel". In Englade v. HarperCollins Publishers, Inc.[19] a class of novelists sought an accounting because defendant was

"essentially selling books to itself, at discounted rates, upon which it then calculates the author's royalty, and then...shares in the extra profit when the book is resold... without paying the author(s) any further royalty".
The Court granted class certification notwithstanding the apparent mootness of the class representative's claim whose "potential damages may not exceed the amount already paid to him as an advance".



Oil Changes, Cell Phones & Credit Cards

In Farino v. Jiffy Lube International, Inc.[20], a class of consumers who purchased oil changes claimed that defendant's $.80 environmental surcharge for the disposal of used oil violated GBL 349 and was deceptive since the charge violated Environmental Conservation Law Section 23-2307 requiring Jiffy Lube to "accept used motor oil at no charge". In denying a dismissal motion the Court rejected the defendant's argument that a GBL 349 claim "requires an underlying private right of action". In Naevus v. AT&T Corp.[21], four consolidated class actions claiming inadequate cell phone services ["involuntary disconnection of calls"], the Appellate Division held that those claims which challenged the quality of the service were, in actuality, attacks on the rates of mobile phone services and, hence, preempted by federal law. However, those claims for a failure to extend credit for making repeat calls necessitated by involuntary disconnections were not preempted. In Citipostal, Inc. v. Unistar Leasing[22], the class representative claimed overpayment of $10,233.72 on a  mobile communications equipment lease. The Appellate Division dismissed all causes of actions except unjust enrichment and permitted pre-class certification discovery. In Broder v. MBNA Corporation[23], the Appellate Division affirmed certification of a class action alleging breach of contract and violation of GBL 349 and challenging the

"practice of allocating credit card payments to cash advances...(depriving) credit cardholders of the full benefit of (a) promotional rate".

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FOOTNOTES

[1]. Thomas A. Dickerson is a Westchester County Court Judge and author of Class Actions: The Law of 50 States,Law Journal Press, 1988-2002. Kenneth A. Manning is a partner in Phillips, Lytle, Hitchcock, Blaine & Huber in Buffalo, New York.

[2]. Gaidon v. Guardian Life Insurance Company of America, 96 N.Y. 2d 201, 727 N.Y.S. 2d 30, 750 N.E. 2d 1078 (2001).

[3]. Gaidon v. Guardian Life Insurance Company of America, 94 N.Y. 2d 330, 704 N.Y.S. 2d 177, 725 N.E. 2d 598 (1999).

[4]. Goshen v. Mutual Life Insurance Company of New York, 286 A.D. 2d 229, 730 N.Y.S. 2d 46(2001).

[5]. Levin v. Yeshiva University, 96 N.Y. 2d 484, 730 N.Y.S. 2d 15, 754 N.E. 2d 1099 (2001).

[6].  Aliessa v. Novello, 96 N.Y. 2d 418, 730 N.Y.S. 2d 1, 754 N.E. 2d 1085 (2001).

[7]. Sharp v. DeBuono, 278 A.D. 2d 794, 723 N.Y.S. 2d 279 (2000).

[8].  Consumer Class Actions In New York, Committee on Consumer Affairs, Association of the Bar of the City of New York, 2001 at http://www.abcny.org/pdf/report/CityBarFinal%20062001.pdf

[9]. See Rubin v. Nine West Group, Inc., 1999 WL 1425364 (West. Sup. 1999); Blumenthal v. American Society of Travel Agents, Inc., 1977 WL 18392 (N.Y. Sup. 1977); Russo v. Dubin v. Allied Maintenance Co., 95 Misc. 2d 344, 407 N.Y.S. 2d 617 (N.Y. Sup. 1978); Cox v. Microsoft, No. 1051931/2000 (N.Y. Sup. 2000); Asher v. Abbott Laboratories, No. 1233431/1999,(N.Y. Sup. 2000).

[10].  Lennon v. Philip Morris Companies, 2001 WL 1535877 (N.Y. Sup. 2001).

[11]. Ades v. Microsoft Corp., New York Law Journal, October 9, 2001, p. 27, col. 1 (Kings Sup.).

[12]. Strishak & Associates, P.C. v. Hewlett Packard Company, 2001 N.Y. Misc. LEXIS 350 (Kings Sup. 2001).

[13].  Scott v. Bell Atlantic Corporation, 282 A.D. 2d 180, 726 N.Y.S. 2d 60 (1st Dept. 2001).

[14].  Castellucci v. Toys "R" US, Inc., New York Law Journal, August 9, 2001, p. 21, col. 5 (West. Sup.).

[15]. Rivkin v. Kulzer, New York Law Journal, May 10, 2001, p. 20, col. 6 (N.Y. Sup.), rev'd 2001 WL 1557814 (First Dept. 2001).

[16]. For a discussion of pre-class certification mini-hearings see Cohen and Greenwood, "Procedures In Place On Certifying Class," New York Law Journal, October 29, 2001, p. 4, col. 3.

[17]. Anonymous v. CVS Corporation, 188 Misc. 2d 616, 728 N.Y.S. 2d 333 (2001).

[18]. Rice v. Penguin Putnam, Inc., 2001 WL 1606752 ( 2d Dept. 2001).

[19].  Englade v. Harpercollins Publishers, Inc., 2001 WL 1637491 (1st Dept. 2001).

[20].  Farino v. Jiffy Lube International, Inc., New York Law Journal,August 14, 2001, p. 22, col. 3 (Suff. Sup.).

[21].  Naevus International. Inc. v. AT&T Corp., 282 A.D. 2d 171, 724 N.Y.S. 2d 721 (2001).

[22]. Citipostal, Inc. v. Unistar Leasing,283 A.D. 2d 916, 724 N.Y.S. 2d 555 (2001).

[23]. Broder v. MBNA Corporation, 281 A.D. 2d 369, 722 N.Y.S. 2d 524 (2001).