Compact Electra Corp. v. Paul

• Decision Date: 31 January 1977
• Citation: 93 Misc.2d 807,403 N.Y.S.2d 611
• Parties: COMPACT ELECTRA CORP., Respondent, v. Veronica PAUL, Appellant, Hyman Sindelman, Respondent.
• Court: New York Supreme Court

Page 611

403 N.Y.S.2d 611

93 Misc.2d 807

COMPACT ELECTRA CORP., Respondent, v. Veronica PAUL, Appellant Hyman Sindelman, Respondent.

Supreme Court, Appellate Term, Second and Eleventh Judicial Districts.

Jan. 31, 1977.

As modified on Rehearing April 18, 1977.

Sheldon V. Burman, New York City, for appellant.

Irwin M. Berg, New York City, and Norman S. Langer, Brooklyn, for respondents.

Before PINO, P. J., and RINALDI and WEINSTEIN, JJ.

MEMORANDUM.

Orders dated October 27, 1975, November 17, 1975 and December 11, 1975 affirmed without costs.

Order dated July 19, 1976, modified to the extent of denying class action status regarding those counterclaims based upon the Truth-in-Lending Act and the Retail Instalment Sales Act, and setting the matter down for a hearing in accordance with the following memorandum regarding the remainder of the counterclaims; as so modified, affirmed with $10 costs.

The issues upon this appeal involve the right of the defendant to convert her counterclaims to a class action suit and the right of other defendants similarly situated to intervene.

The orders of the court below denying the applications made to intervene in the instant proceeding and issuing a conditional protective order regarding the interrogatories did not constitute an abuse of discretion (see CPLR 602(a); Compact Electra Corp. v. Belfon, NYLJ, December 21, 1972, App. Term, 2nd and 11th Jud. Dists.; 24 A.L.R.Fed. 872).

The counterclaims commenced pursuant to the Retail Instalment Sales Act (Personal Property Law §§ 401, et seq.) and Broad discretion is given the court below to determine not only whether class action status should be granted, but also whether the interest of the class will be adequately represented by the class representative (7 Wright & Miller, supra, § 1759). If the representation is inadequate, the court may dismiss, may allow it to proceed as an action solely for the benefit of defendant, may order a sub-class or may order that the representative group be augmented by other members to adequately protect the class (7 Wright & Miller, supra, § 1765; McLaughlin, supra, sup. 69).

the Truth-in-Lending Act (15 U.S.C. § 1601, et seq.) must be denied class action status because both statutes provide for penalties or minimum measure of recovery (CPLR 901(b), McLaughlin, Prac. Comm.; McKinney's Cons.Law of N. Y. Book 7B, sup. 69). The question of class action status concerning the remaining counterclaims, should be remanded to the court below for a hearing to determine whether the prerequisites of CPLR 901 are met. (See, also, CPLR 902.) The federal courts have defined the statutory prerequisite requirement of "questions of law or fact common to the class" as "common legal grievances" and common nucleus of operative facts (see 3B Moore's Federal Practice P 23.45(2)). As to the fraud question, federal and state courts have taken divergent views as to whether oral misrepresentations are sufficient to warrant class action status (e. g., Clark v. Watchie, 513 F.2d 994 (9th Cir., 1975) cert. den. 423 U.S. 841, 96 S.Ct. 72, 46 L.Ed.2d 60; Ingenito v. Bermac Corp., 376 F.Supp. 1154 (S.D.N.Y., 1974); Gatzke v. Owen, 69 F.R.D. 412 (N.D.Miss., 1975); Vasquez v. Superior Court of San Joaquin County, 4 Cal.3d 800, 94 Cal.Rptr. 796, 484 P.2d 964; see, generally, 53 A.L.R.3d 534; 7 A Wright & Miller, Federal Practice and Procedure: Civil §§ 1781, 1782). It is our opinion that the better view would be that a mere showing of oral misrepresentation by some individual salesman would be insufficient to establish class action status. However, if defendant could establish a common course of conduct by the salesmen pursuant to training or "canned" techniques taught by plaintiff corporation, that would be a "common strand of misrepresentation" running through all the sales sufficient to warrant the granting of class action status (see, Green v. Wolf Corp., 406 F.2d 291 (2nd Cir., 1967), cert. den. 395 U.S. 977, 89 S.Ct. 2131, 23 L.Ed.2d 766; Feldman v. Lifton, 64 F.R.D. 539 (S.D.N.Y., 1974); Vasquez v. Superior Court of San Joaquin County, supra). The injunctions and consent decrees obtained against plaintiff corporation in other actions would be highly relevant to this issue. The court below, at the hearing, can determine exactly what type of information it would...