Goshen v. Mut. Life Ins. Co.
| Citation | 774 N.E.2d 1190,746 N.Y.S.2d 858,98 N.Y.2d 314 |
| Parties | PAUL A. GOSHEN, on Behalf of Himself and All Others Similarly Situated, Appellant, v. MUTUAL LIFE INSURANCE COMPANY OF NEW YORK et al., Respondents. WALTER SCOTT et al., on Behalf of Themselves and All Others Similarly Situated, Appellants, v. BELL ATLANTIC CORPORATION et al., Respondents. |
| Decision Date | 02 July 2002 |
| Court | New York Court of Appeals Court of Appeals |
Milberg Weiss Bershad Hynes & Lerach LLP, New York City (Barry A. Weprin, Melvyn I. Weiss and Mark T. Millkey of counsel), James, Hoyer, Newcomer, Forizs & Smiljanich, P.A., Tampa, Florida, Bonnett, Fairbourn, Freidman & Balint, P.C., Phoenix, Arizona, Parry, Deering, Futscher & Sparks P.S.C., Covington, Kentucky, and Hubbard & Biederman, L.L.P., Dallas, Texas, for appellant in the first above-entitled action.
Dewey Ballantine LLP, New York City (Karvey Kurzweil, Richard W. Reinthaler, James P. Smith III and John E. Schreiber of counsel), and Michael C. Dorf for respondents in the first above-entitled action. Cleary, Gottlieb, Steen & Hamilton, New York City (Mitchell A. Lowenthal, Evan A. Davis and J.J. Gass of counsel), and Victoria E. Fimea, Washington D.C., for American Council of Life Insurers, amicus curiae in the first above-entitled action.
Stamell & Schager, LLP, New York City (Jason L. Solotaroff of counsel), Abbey Gardy, LLP (Joshua N. Rubin of counsel), and Law Offices of Mark S. Kaufman (Mark S. Kaufman of counsel), for appellants in the second above-entitled action. Davis Polk & Wardwell, New York City (Guy Miller Struve, Nancy B. Ludmerer, D. Scott Tucker, Amy V. Garcia and Edmund Polubinski III of counsel), Robert Ernst and Richard H. Wagner for respondents in the second above-entitled action.
Eliot Spitzer, Attorney General, New York City (Caitlin J. Halligan, Daniel Smirlock, Thomas G. Conway, Kenneth Dreifach, Jane M. Azia and Robert H. Easton of counsel), for Attorney General of the State of New York, amicus curiae in the first and second above-entitled actions.
O'Melveny & Myers LLP, Washington D.C. (Walter Dellinger, John H. Beisner and Marc E. Isserles of counsel), and National Chamber Litigation Center (Robin Conrad of counsel), for Chamber of Commerce of the United States of America, amicus curiae in the first and second above-entitled actions.
Rice & Justice, Albany (John Carter Rice, Lawrence P. Justice and Bradley F. Rice of counsel), for Business Council of New York State, Inc., amicus curiae in the first and second above-entitled actions.
On these appeals we are once again called upon to determine the applicability of New York's Consumer Protection Act. General Business Law § 349 (a) prohibits "[d]eceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in this state." An issue common to both appeals is whether an allegedly deceptive scheme that originates in New York, but injures a consumer in a transaction outside the state, constitutes an actionable deceptive act or practice under General Business Law § 349 (a). An additional issue in Scott is whether the New York plaintiffs have sufficiently stated a claim for deceptive acts and practices, or false advertising, under General Business Law § 349 (h) or § 350. In the circumstances presented, we answer the first question in the negative and the second in the affirmative.
Plaintiffs in this action are insurance policy purchasers who claim to be the victims of a deceptive scheme contrived and implemented by defendants Mutual Life Insurance Company of New York and its wholly owned subsidiary, MONY Life Insurance Company of America (MONY). Defendants have extensive ties to New York and conduct business in the state. Plaintiffs purchased "vanishing premium" policies from defendants at various times before starting this action. A "vanishing premium" would allegedly allow consumers to make periodic premium payments at a rate that would yield investment income to permit premium payments to decline until the obligation to make payments vanished entirely without affecting coverage (see Gaidon v Guardian Life Ins. Co. of Am., 94 NY2d 330 [1999]
). Plaintiffs claim that the vanishing premium is a deceptive scheme based on the artificial inflation of projected policy dividends.
Plaintiff Paul A. Goshen, a Florida resident, used the cash surrender proceeds of his MONY life insurance policy to purchase a vanishing premium policy. Plaintiff claims that a MONY sales agent induced him to surrender his prior policy in order to purchase the vanishing premium policy using a deceptive sales presentation to illustrate its potential economic benefits. Plaintiff, believing the sales information to be true, ultimately purchased a vanishing premium policy through a MONY representative in Florida.
Plaintiff's complaint alleged several causes of action, including "deceptive trade practices." Following commencement of the action, Supreme Court granted defendants' motion for summary judgment and dismissed the action in its entirety, and the Appellate Division affirmed. On appeal, this Court reinstated only plaintiff's General Business Law § 349 cause of action, holding that an issue of fact remained as to whether defendants' acts were misleading to a "reasonable consumer," and remitted the matter to Supreme Court (see Gaidon, 94 NY2d at 344
). On remittal, defendants sought dismissal as to plaintiff Goshen. Supreme Court granted the motion and dismissed Goshen's claim because he purchased his policy in Florida. The Appellate Division affirmed, and we granted plaintiff leave to appeal (97 NY2d 609 [2002]). We now affirm.
Plaintiffs here, as in Goshen, collectively seek relief for acts that they allege are deceptive. Plaintiffs are consumers who subscribed to defendants' Digital Subscriber Line (DSL) Internet service. Defendants are Delaware corporations with principal places of business in New York and Virginia. Plaintiffs Walter Scott, David Solomon and Eric Wu are New York residents. The remaining plaintiffs—Alvarez & Co., Inc., John F. Latuperissa, Andrew Boncek and Greg Howard—are out-of-state residents.
Defendants' Web site also made representations, in the form of a customer testimonial, about the quality of the technical support services. The DSL service had a 30-day money-back guarantee, and the Internet Access Service Agreement contained several disclaimers, including a representation that "the service is provided on an `as is' or `as available' basis."
Plaintiffs subscribed to defendants' DSL service and were dissatisfied with its performance. They allege that, contrary to defendants' representations, the service was slow and unreliable and that customer service was woefully inadequate. Plaintiffs claim that the DSL connection "rarely, if ever, approaches the high speed" expressly represented by defendants. Plaintiffs further maintain that the "set up in minutes" self-installation kits are actually unusable by a substantial number of purchasers who are forced to wait for weeks or months to be connected. Finally, plaintiffs contend that defendants' technical support service is inadequate to support DSL service and well below the quality represented by defendants. According to the complaint, these alleged deceptions injured plaintiffs by precipitating their purchase of a service that they are not receiving and causing them to spend inordinate time attempting to resolve problems with defendants' technical support personnel.
Plaintiffs commenced this action alleging, among other things, violations of General Business Law §§ 349 and 350. Defendants promptly moved to dismiss the complaint under CPLR 3211 (a) (1) and (7), and plaintiffs sought leave to amend their second amended complaint to add a claim for fraudulent inducement. Supreme Court denied defendants' motion and granted plaintiffs leave to amend, finding the pleadings sufficient to defeat defendants' CPLR 3211 motion. The Appellate Division reversed on the law, dismissing plaintiffs' complaint. We granted plaintiffs leave to appeal (97 NY2d 698 [2002]). On this appeal, plaintiffs seek reinstatement of their General Business Law §§ 349 and 350 claims. We now modify the order of the Appellate Division and reinstate these claims for only the New York plaintiffs.
New York's Consumer Protection Act—General Business Law article 22-A—was enacted to provide consumers with a means of redress for injuries caused by unlawfully deceptive acts and practices (see General Business Law §§ 349, 350; see also, Oswego Laborers' Local 214 Pension Fund v Marine Midland Bank, 85 NY2d 20 [1995]
). This legislation, much like its federal counterpart, the Federal Trade Commission Act (15 USC § 45), is intentionally broad, applying "to virtually all economic activity" (Karlin v IVF Am., 93 NY2d 282, 290 [1999]). The statute seeks to secure an "honest market place" where "trust," and not deception, prevails (Oswego, 85 NY2d at 25, quoting Mem of Governor Rockefeller, 1970 NY Legis Ann, at 472).
General Business Law § 349 provides that "[d]eceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in this state are hereby declared unlawful" (General Business Law § 349 [a]).1 The Attorney General is afforded broad enforcement powers under ...
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