Cruz v. NYNEX INFORMATION

• Decision Date: 10 February 2000
• Citation: 263 A.D.2d 285,703 N.Y.S.2d 103
• Parties: MANUEL CRUZ, Doing Business as CRUZ AUTOMOTIVE SERVICE, et al., Respondents-Appellants,<BR>v.<BR>NYNEX INFORMATION RESOURCES et al., Appellants-Respondents.
• Court: New York Supreme Court — Appellate Division

263 A.D.2d 285

703 N.Y.S.2d 103

MANUEL CRUZ, Doing Business as CRUZ AUTOMOTIVE SERVICE, et al., Respondents-Appellants,

v.NYNEX INFORMATION RESOURCES et al., Appellants-Respondents.

WILLIAMS, J. P.

February 10, 2000.

Lawrence Greenapple of counsel, New York City (Gary C. Fischoff on the brief, Garden City; Cox Buchanan Padmore & Shakarchy, and Fischoff & Associates, attorneys), for respondents-appellants.

Guy Miller Struve of counsel, New York City (D. Scott Tucker and Lisa D. Reifenberg on the brief; Davis Polk & Wardwell, and Robert Ernst, attorneys), for NYNEX Information Resources and another, appellants-respondents.

Michael J. Templeton of counsel, New York City (Thomas E. Albright on the brief; Jones, Day, Reavis & Pogue, attorneys), for Reuben H. Donnelley, appellant-respondent

RUBIN, SAXE and FRIEDMAN, JJ., concur.

OPINION OF THE COURT

WILLIAMS, J. P.

This appeal raises the issue of whether, for purposes of General Business Law article 22-A (§ 349 et seq.) "Consumer Protection from Deceptive Acts and Practices," the term "consumer" encompasses small businesses which purchase a widely sold service that can only be used by businesses. We hold that it does not.

The facts are as follows. Plaintiffs are an automotive repair service, a video service and two small law firms that purchased advertisements in defendants Bell Atlantic's and NYNEX Information's^[1] (defendant publishers) "Yellow Pages" publications covering Albany, parts of New York City and parts of Long Island over the last three to six years.^[2] R.H. Donnelley, Inc. is a soliciting agent for advertisements in the Yellow Pages.^[3] The Yellow Pages is the well-known telephone directory that provides telephone listings of businesses; the advertisements at issue are in addition to the standard listings.

Directories are published in a series of successive issues for the various geographic regions of New York State. Each issue remains in circulation until it is replaced by its successor, typically, but not necessarily, at 12-month intervals. For instance, the current Manhattan Yellow Pages Directory is dated May 1999-April 2000; the previous one was dated May 1998-April 1999. Distribution of new issues of the directories may begin either before or after the first day of the first month of the issue period and is initially made to the homes and businesses in the relevant geographical area. This can take anywhere from several days to several weeks depending on the size of the area and of the directory. A secondary distribution of the issue is made to customers who move into the geographical area or who request a copy. This takes place until all copies of the current issue are distributed or the next issue is ready for distribution.

Businesses seeking to place advertisements in the directories submit a standard application to NYNEX Information that becomes a contract upon publication of the advertisement. The application includes preprinted terms and conditions which are applied to all applicants and apparently not subject to negotiation. The contract terms relevant to this appeal have been unchanged since 1991, and include:

Section 3, "Issue Period," which defines the normal "issue period" or life of a directory as 12 months subject to increase or decrease, at NYNEX's instance, by up to six months, reserves to NYNEX the decision whether to publish a directory, and states that "NYNEX will attempt to notify [applicants] if it decides to alter an issue period or not to publish a directory";

Section 5, "Payment for Advertising," which states that the advertiser will pay NYNEX the monthly rates listed on the application, that NYNEX will bill the advertiser monthly on its phone bill during the issue period of the directory containing its ad, that NYNEX may require full or partial payment prior to publication, and that the advertiser will pay all advertising bills by the due date on the bill; and

Section 8, "Limitation of Liability of NYNEX" "If there is an error or omission in any advertisement caused by NYNEX, an affiliate or an agent of NYNEX, NYNEX will reduce the charges to be paid for that advertisement during the issue period. The reduction in charges will be equal to the proportion by which the error or omission reduces the value of the advertisement as determined by NYNEX. The amount reduced will not be greater than the total of the charges to be paid for that advertisement during the issue period. I must make any claim of such an error or omission during the issue period for the advertisement."

Section 17, "Entire Agreement," a standard merger clause stating that the application is the entire agreement between NYNEX and the advertiser, superseding any other verbal or written agreement on the subject.

The agreement only specifies the first month and year of the issue period and does not specify when distribution of the directories will begin or how long initial distribution will last. It does not specify the manner of distribution.

Plaintiffs commenced this action in 1998 pleading two causes of action grounded in breach of contract and two others grounded in article 22-A of the General Business Law. Prior to answers being filed, defendant publishers and defendant Donnelley moved, in separate motions, to dismiss for failure to state a claim and on the basis of documentary evidence, i.e., the form agreements. Plaintiffs opposed the motions and crossmoved for summary judgment, submitting witness affidavits and supporting exhibits. Defendant publishers then submitted affidavits of fact.

The motion court upheld the General Business Law claims, rejecting the defense contention that the business-to-business transactions complained of were not within the statutory ambit. The court found that several of the indicia of a consumer transaction were present. As for the contractual claims, the court dismissed all such claims against Donnelley, reasoning that it was an agent for fully disclosed principals and had undertaken no personal liability. It also dismissed those contract claims against defendant publishers as to the method of distribution, the number of directories distributed, and the hiring and training of distributors, citing the merger clause as barring extrinsic evidence as to such issues. However, the court upheld the remaining contractual claims as to the untimeliness of distribution, the failure to attempt notice to the advertisers of a change in the issue period, and the applicability of the refund provision to errors and omissions in the distribution of directories. The motion court denied plaintiffs' cross motion for summary judgment as premature due to lack of class certification, without prejudice to renewal upon such certification (see, n 2, supra).

Article 22-A of the General Business Law, which includes section 350 et seq., is entitled "Consumer Protection from Deceptive Acts and Practices." The provisions relevant to this matter are as follows:

"§ 350. False advertising unlawful

"False advertising in the conduct of any business, trade or commerce or in the furnishing of any service in this state is hereby declared unlawful."

"§ 350-a. False advertising

"1. The term `false advertising' means advertising * * * if such advertising is misleading in a material respect. In determining whether any advertising is misleading, there shall be taken into account (among other things) not only representations made by statement * * * but also the extent to which the advertising fails to reveal facts material in the light of such representations."

"§ 350-e. Construction * * *

"3. Any person who has been injured by reason of any violation of section three hundred fifty or three hundred fifty-a of this article may bring an action in his own name to enjoin such unlawful act or practice, an action to recover his actual damages or fifty dollars, whichever is greater, or both such actions. The court may, in its discretion, increase the award of damages to an amount not to exceed three times the actual damages up to one thousand dollars, if the court finds the defendant willfully or knowingly violated this section. The court may award reasonable attorney's fees to a prevailing plaintiff."

In New York law, the term "consumer" is consistently associated with an individual or natural person who purchases goods, services or property primarily for "personal, family or household purposes" (see, e.g., General Business Law §§ 399-c, 399-p [1] [c]; General Obligations Law § 5-327 [1] [a]; CPLR 105 [f]; UCC 9-109 [1]). The Practice Commentaries accompanying General Business Law article 22-A leave no doubt as to the statute's primary concern with the consumer (see, Givens, Practice Commentaries, McKinney's Cons Laws of...