Lonner v. Simon Prop. Group, Inc.
Decision Date | 14 October 2008 |
Docket Number | 2007-03430. |
Citation | 57 A.D.3d 100,2008 NY Slip Op 7877,866 N.Y.S.2d 239 |
Parties | CHRISTOPHER R. LONNER, Respondent, v. SIMON PROPERTY GROUP, INC., Appellant. |
Court | New York Supreme Court — Appellate Division |
Sills Cummis Epstein & Gross P.C., New York City (Jeffrey J. Greenbaum and James M. Hirschhorn of counsel), for appellant.
Sanford Wittels & Heisler, LLP, New York City (William R. Weinstein of counsel), for respondent.
We are asked on this appeal to determine whether, in the absence of clear and unambiguous disclosure, the imposition of dormancy and administrative fees decreasing the redeemable value of a gift card constitutes a sufficient predicate for causes of action to recover damages for breach of contract and deceptive business practices in violation of General Business Law § 349. We hold that it does.
On February 18, 2004, the plaintiff commenced this class action challenging, inter alia, a $2.50 monthly "dormancy fee"1 imposed by the defendant in connection with its promotion and sale of Simon Gift Cards, and the allegedly improper manner in which such fees were disclosed.2 The Simon Gift Card (hereinafter the card) is a prepaid, stored-value card, which is issued by Bank of America, N.A., pursuant to a license from Visa U.S.A., Inc., and may be used everywhere Visa is accepted. The card is programmed to hold a balance that is recorded on it at the time of purchase, and stored on it thereafter. Each time the card is used, the amount of the transaction is deducted from the available balance. The card is plastic and resembles a standard credit card. There is a magnetic strip on the back of the card, below which is recited, in relevant part, as follows: "An administrative fee of $2.50 per month will be deducted from your balance beginning with the seventh month from the month of card purchase." Once the card is activated, it is placed in a cardboard sleeve, which is styled as a cardboard folding "book" with the sleeve at the top, into which the card is inserted, along with five additional folding double-sided "pages" which are attached to the sleeve. On the front five "pages," general information about the card and its use is included, and on the back five "pages" the cardholder agreement and terms and conditions are articulated. The amended complaint alleges that the five "pages" on the back of the card sleeve that contain the terms and conditions of the card, including the dormancy fees, are in small print, in fonts materially less than that required pursuant to CPLR 4544, concealed, and in violation of General Business Law 396-i (3), which provides that "[t]he terms of a gift certificate or store credit shall be clearly and conspicuously stated thereon."3
New York courts have repeatedly held that the use of small print in commercial documents may undercut the enforceability of terms that are set forth in such print. Thus, in Pludeman v Northern Leasing Sys., Inc. (10 NY3d 486, 489-490 [2008]), the Court of Appeals addressed the sufficiency of a fraud cause of action asserted against individually-named corporate defendants. In Pludeman, a class of small business owners who had entered into lease agreements for point-of-service computer terminals asserted that defendant used
all of which were in "small print" or "microprint" (id. at 489-490).
In sustaining the fraud cause of action, the Court noted that
"it is the language, structure and format of the deceptive lease form and the systematic failure by the salespeople to provide each lessee a copy of the lease at the time of its execution that permits, at this early stage, an inference of fraud against the corporate officers in their individual capacity and not the sales agents" (id. at 493).
In Matter of People v Applied Card Sys., Inc. (27 AD3d 104, 107 [2005]), the Appellate Division, Third Department, in describing solicitations by credit card companies for new accounts based on allegedly "pre-approved" lines of credit, stated that "our review of the new disclosures found the correction to be embedded on the second page of the `Terms and Conditions of Offer,' in the same typeface as the rest of the paragraph." Similarly, in criticizing the manner in which credit-card companies framed their written solicitations, the Appellate Division, First Department, concluded that "[t]he language in the small print footnote to the solicitation offer, that defendant `may' allocate payments to the promotional balances first, is ambiguous" (Broder v MBNA Corp., 281 AD2d 369, 370 [2001]). That Court also criticized an insurance company for "relegating to small, inconspicuous print the precise terms of the coverage being extended" (Taylor v American Bankers Ins. Group, 267 AD2d 178, 178 [1999]).
Similarly, in Feldman v Quick Quality Rests., Inc. (NYLJ, July 22, 1983, at 12, col 5), the court criticized a fast-food chain for imposing a .075% cost-of-energy surcharge on a purchase that was revealed to customers only by means of an effectively invisible two-inch by four-inch sign affixed to the lower left of the main illuminated menu over the service counter that posted the base prices for the items.
A section on the back of the card sleeve, entitled "Do I ever expire?" provided: "An administrative fee of $2.50 per month will be deducted from your balance beginning in the seventh month from the month of card purchase." The actual card term regarding the dormancy fees is placed on the very last page on the back of the 10 folding "pages" of information included with the card sleeve. That section, entitled "Service Charges," provides, in relevant part, as follows:
The original complaint set forth causes of action to recover damages for breach of contract based upon a breach of the implied covenant of good faith and fair dealing, violation of General Business Law § 349, and unjust enrichment, and also sought injunctive and declaratory relief. By notice of motion dated April 30, 2004, the defendant moved pursuant to CPLR 3211 (a) (1) and (7) to dismiss the original complaint. In an order dated September 23, 2004, the Supreme Court granted that branch of the defendant's motion which was to dismiss the original complaint on the ground that the plaintiff's claims were preempted by the National Bank Act (12 USC § 21 et seq.) and the regulations promulgated thereunder by the Office of the Comptroller of the Currency (see 12 CFR 7.4002 [a]; 7.5002 [a] [3]), which regulate national banks. On appeal, this Court reversed, and remitted the matter to the Supreme Court for further proceedings in accordance with Goldman v Simon Prop. Group, Inc. (31 AD3d 382, 383 [2006]), which concluded "[t]he record indicates that the defendant and the national bank are separate entities [and] that it is the defendant, and not the bank, that sells and markets the card, and charges and collects the disputed fees" (Lonner v Simon Prop. Group, Inc., 31 AD3d 398, 398 [2006]; see SPGGC, LLC v Blumenthal, 505 F3d 183, 187, 191 [2007] []; Benson v Simon Prop. Group, Inc., 281 Ga 744, 744, 642 SE2d 687, 689 [2007] [...
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