New York v. Feldman

• Citation: 210 F.Supp.2d 294
• Decision Date: 15 February 2002
• Docket Number: No. 01 Civ. 6691(SAS).,01 Civ. 6691(SAS).
• Parties: State of NEW YORK, State of Maryland, and State of California, Plaintiffs, v. Anthony FELDMAN, John Apfelbaum, Earl P.I. Apfelbaum, Inc., Davitt Felder, Davitt Felder, Inc., Stephan Osborne, Dana Okey, Etience De Cherisey, Kees Quirijns, and Lewis Berg, Defendants.
• Court: U.S. District Court — Southern District of New York

210 F.Supp.2d 294

State of NEW YORK, State of Maryland, and State of California, Plaintiffs, v. Anthony FELDMAN, John Apfelbaum, Earl P.I. Apfelbaum, Inc., Davitt Felder, Davitt Felder, Inc., Stephan Osborne, Dana Okey, Etience De Cherisey, Kees Quirijns, and Lewis Berg, Defendants.

No. 01 Civ. 6691(SAS).

United States District Court, S.D. New York.

February 15, 2002.

COPYRIGHT MATERIAL OMITTED

David A. Weinstein, Jay L. Himes, Robert L. Hubbard, James Yoon, Assistant Attorneys General, Office of the New York Attorney General, New York, NY, for Plaintiff New York.

John R. Tennis, Assistant Attorney General, Office of the Maryland Attorney General, Baltimore, MD, for Plaintiff Maryland.

Lindsay Bower, Assistant Attorney General, Office of the California Attorney General, San Francisco, CA, for Plaintiff California.

James A. Mitchell, Paul L. Schechtman, Stillman & Friedman, P.C., New York NY, for Defendants John Apfelbaum and Earl P.L. Apfelbaum, Inc.

Gary J. Malone, Allen Dolberg, Constantine & Partners, P.C., New York, NY, for Defendants Davitt Felder and Davitt Felder, Inc.

Lawrence S. Goldman, Elizabeth Johnson, Law Offices of Lawrence S. Goldman, New York, NY, for Defendant Lewis Berg.

Stuart M. Manroel, Stuart M. Manroel, P.C., San Diego, CA, for Defendant Dana Okey.

OPINION AND ORDER

SCHEINDLIN, District Judge.

This action involves defendants' alleged scheme to rig the bidding process at public stamp auctions held in New York, Maryland and California (collectively, the "States"). The States, by their Attorneys General, claim that defendants' conduct deprived sellers, auction houses and others of the benefits of a competitive marketplace, thereby violating federal antitrust law as well as various state statutes. Defendants John Apfelbaum, Lewis Berg, Davitt Felder, Davitt Felder, Inc. and Earl P.L. Apfelbaum, Inc. (the "defendants") move pursuant to Rule 12(b) of the Federal Rules of Civil Procedure to dismiss certain claims brought by New York and Maryland for failure to state a claim upon which relief can be granted. For the reasons stated below, the motion is denied.

I. MOTION TO DISMISS STANDARD

Dismissal of a complaint for failure to state a claim pursuant to Rule 12(b)(6) is proper only where "`it appears beyond doubt that the plaintiff can prove no set of facts in support of [its] claim that would entitle [it] to relief.'" ICOM Holding, Inc. v. MCI Worldcom, Inc., 238 F.3d 219, 221 (2d Cir.2001) (quoting Harris v. City of New York, 186 F.3d 243, 247 (2d Cir. 1999)). "At the Rule 12(b)(6) stage, `[t]he issue is not whether a plaintiff is likely to prevail ultimately, but whether the claimant is entitled to offer evidence to support the claims. Indeed it may appear on the face of the pleading that a recovery is very remote and unlikely but that is not the test.'" Sims v. Artuz, 230 F.3d 14, 20 (2d Cir.2000) (quoting Chance v. Armstrong, 143 F.3d 698, 701 (2d Cir.1998) (quotation marks omitted)). The task of the court in ruling on a Rule 12(b)(6) motion is "merely to assess the legal feasibility of the complaint, not to assay the weight of the evidence which might be offered in support thereof." Sims, 230 F.3d at 20 (quoting Ryder Energy Distrib. Corp. v. Merrill Lynch Commodities, Inc., 748 F.2d 774, 779 (2d Cir.1984)).

In deciding a Rule 12(b)(6) motion, the court must accept as true all material facts alleged in the complaint and draw all reasonable inferences in the nonmoving party's favor.¹ See ICOM Holding, 238 F.3d at 221; Harris v. City of New York, 186 F.3d 243, 247 (2d Cir.1999). However, "bald assertions and conclusions of law will not suffice" to defeat even the liberal standard applied to a Rule 12(b)(6) motion. Tarshis v. Riese Org., 211 F.3d 30, 35 (2d Cir.2000).

I. BACKGROUND

Postage stamp dealing has become a profitable business in the United States.² See Amended Complaint ("Compl."), Ex. A to 12/14/01 Affirmation of James A. Mitchell, counsel for defendants John Apfelbaum and Earl P.L. Afpelbaum, Inc. ("Mitchell Aff."), ¶ 1. Many stamp dealers purchase their merchandise at auctions, which are held on a regular basis at auction houses in New York, Maryland, California and elsewhere throughout the United States, as well as abroad. See id. ¶ 2. At these auctions, sellers and auctioneers rely on the competitive bidding process to obtain the best prices for the stamps offered. See id. ¶ 4. A large majority of sellers at these auctions are individuals, many of whom are elderly or one time participants in the auction market and have neither the means nor the information to detect collusive bidding. See id. ¶ 3.

According to the Complaint, defendants conspired for at least seventeen years to rig bids at public stamp auctions. See id. ¶ 3; Plaintiff States' Memorandum in Opposition to Motion of Defendants John Appelbaum, Lewis Berg, Davitt Felder, Davitt Felder, Inc. and Earl P.L. Apfelbaum, Inc., to Dismiss the Third, Fourth and Fifth Claims for Relief in the Amended Complaint ("Pl.Opp.") at 2. Defendants, who referred to themselves as "the Ring", conducted their own secret bidding sessions prior to the actual public auctions. Id. ¶¶ 3-4. At the secret session, the highest bidder for a particular lot of stamps agreed to bid up to that price at the public auction and the losing bidders agreed to refrain from bidding on that particular lot. See id. ¶ 3. The losers were compensated for refraining based on an elaborate payoff scheme whereby the "winning" Ring member's profits were divided among the Ring. See id. ¶ 5. As a result of defendants' scheme, there was less competition at the public auction, sellers received lower prices, and auction houses received reduced commissions. See id. ¶ 3.

III. THE COMPLAINT

The States filed a complaint against defendants on July 23, 2001 and filed the Amended Complaint on August 21, 2001. See Memorandum of Law in Support of Defendants' Motion to Dismiss the Third, Fourth and Fifth Claims for Relief in the Amended Complaint ("Def.Mem.") at 2. The Complaint includes seven causes of action. In the first claim, the States allege that defendants violated section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1. See Compl. ¶¶ 75-78. In the second claim, New York alleges that defendants violated New York's antitrust statute, the Donnelly Act, N.Y. Gen. Bus. Law §§ 340 et seq. See Compl. ¶ 81. These first two claims seek recovery on behalf of stamp collectors residing in plaintiffs' respective states. See id. ¶¶ 79, 85. In the third and fourth claims, New York alleges that defendants engaged in fraudulent and illegal conduct in violation of N.Y. Exec. Law § 63(12) and engaged in deceptive acts and practices in violation of N.Y. Gen. Bus. Law § 349. See Compl. ¶¶ 86-88, 90-94. Under both of these claims, New York seeks to recover for all injuries caused by defendants' fraudulent and deceptive conduct. See id ¶¶ 89, 95. In the fifth claim, Maryland alleges that defendants violated the Maryland Antitrust Act, Md.Code Ann., Com. Law §§ 11-201 et seq., and seeks to recover losses suffered by all persons and entities injured by defendants' conduct as well as civil penalties pursuant to Md.Code Ann., Com. Law § 11-209. See Compl. ¶¶ 96-101. In the sixth and seventh claims, California alleges that defendants violated California's antitrust statute, Cal. Bus. & Prof.Code §§ 16720 et seq., and the California Unfair Competition Act., Cal. Bus. & Prof.Code § 17200 et seq. See Compl. ¶¶ 102-106, 108-110. California only seeks to recover damages for its own citizens. See 2/5/02 Letter from David Weinstein, Assistant Attorney General of New York ("2/5/02 Ltr.").

III. DISCUSSION

Defendants move pursuant to Rule 12(b)(6) to dismiss the third, fourth and fifth claims for relief.³ First, they argue that the third and fourth claims must be dismissed because the New York statutes upon which these claims are based were not intended to address antitrust violations. See Def. Mem. at 15. Second, defendants assert that the third claim must be dismissed because New York may not use N.Y. Exec. Law § 63(12) to seek damages not available under the Donnelly Act. See id. at 13-14. Third, they argue that the third and fifth claims must be dismissed because neither New York's nor Maryland's antitrust statute authorizes the Attorney General to bring a damages action on behalf of non-residents of the state. See id. at 12. Fourth, defendants contend that, even if state law permits the Attorney General to sue for antitrust injuries incurred by non-residents, these claims are preempted by federal law. See id. at 5.

A. May New York Rely on N.Y. Exec. Law § 63(12) and N.Y. Gen. Bus. Law § 349 to Address Antitrust Violations?

Defendants argue that neither N.Y. Exec. Law § 63(12) nor N.Y. Gen. Bus. Law § 439 were intended to address antitrust violations. See id. at 15. They claim that these provisions were enacted as "consumer protection legislation" focused on "the regulation of deceptive advertising and sales practices" that injure consumers. Id.

1. N.Y. Exec. Law § 63(12)

Section 63(12) of the Executive Law of New York provides, in pertinent part:

Whenever any person shall engage in repeated fraudulent or illegal acts or otherwise demonstrate persistent fraud or illegality in the carrying on, conducting or transaction of business, the attorney general may apply, in the name of the people of the state of New York, to the supreme court of the state of New York, on notice of five days, for an order enjoining the continuance of such business activity or of any fraudulent or illegal acts, directing restitution and damages....

N.Y. Exec. Law § 63(12). As an initial matter, defendants' claim that section 63(12) is limited to consumer protection actions is simply incorrect. The New York Attorney General has repeatedly used section 63(12) to secure relief for persons who are not consumers in cases that are not consumer protection actions. See, e.g., People by Vacco v. Mid Hudson Med....