People v. N. Leasing Sys., Inc.
| Decision Date | 17 November 2017 |
| Docket Number | 2016,450460 |
| Citation | 75 N.Y.S.3d 785 |
| Parties | PEOPLE of the State of New York, BY Eric T. SCHNEIDERMAN, Attorney General of the State of New York, and Fern A. Fisher, Deputy Chief Administrative Judge for New York City Courts and Administrative Authority of the Civil Court of the City of New York, Petitioners v. NORTHERN LEASING SYSTEMS, INC., Lease Finance Group LLC, MBF Leasing LLC, Lease Source–LSI, LLC a/k/a Lease Source, Inc., Golden Eagle Leasing LLC, Pushpin Holdings LLC, Jay Cohen a/k/a Ari Jay Cohen, individually, as principal of Northern Leasing Systems, Inc., as a member of Lease Finance Group LLC, and as an officer of Pushpin Holdings LLC, Neil Hertzman, individually and as an officer of Northern Leasing Systems, Inc., Joseph I. Sussman, P.C., Joseph I. Sussman, individually and as a principal of Joseph I. Sussman, P.C., and Eliyahu R. Babad, individually and as a principal or associate of Joseph I. Sussman, P.C., Respondents |
| Court | New York Supreme Court |
For Petitioners, Jane Azia Esq., Bureau Chief, Mary Alestra Esq., Special Counsel, Mark Ladov Esq., Assistant Attorney General, Office of Attorney General Eric T. Schneiderman, 120 Broadway, New York, NY 10271
For Respondents Northern Leasing Systems, Inc., Lease Finance Group LLC, MBF Leasing LLC, Lease Source–LSI, LLC, Golden Eagle Leasing LLC, Pushpin Holdings, Cohen, and Hertzman, Thomas J. Kavaler Esq., Cahill Gorden & Reindel LLP 80 Pine Street, New York, NY 10005, Robert Lillienstein Esq., Moses & Singer LLP, 405 Lexington Avenue, New York, NY 10174
For Respondents Joseph I. Sussman, P.C., Sussman, and Babad, Mark M. Rottenberg Esq., Rottenberg Lipman Rich, P.C., 369 Lexington Avenue, New York, NY 10017
Petitioner Schneiderman, New York Attorney General, sues pursuant to New York Executive Law § 63(12) and General Business Law (GBL) § 349 for respondents' fraud and illegal conduct in leasing credit card equipment. The lessors are respondents Northern Leasing Systems, Inc., Lease Finance Group LLC, MBF Leasing LLC, Lease Source–LSI, LLC, Golden Eagle Leasing LLC, and Pushpin Holdings (Northern Leasing respondents). Respondents Joseph I. Sussman, P.C., Sussman, and Babad (attorney respondents) enforced these leases through litigation. Respondents Cohen and Hertzman are officers of the Northern Leasing respondents. Petitioner Attorney General also seeks dissolution of Northern Leasing, Inc., based on its fraud and illegal conduct. NY Bus. Corp. Law (BCL) § 1101(a)(2). Petitioner Judge Fisher seeks to vacate the default judgments respondents obtained. C.P.L.R. § 5015(c).
Respondents move to dismiss the petition based on documentary evidence, the applicable statutes of limitations, and the petition's failure to state a claim. C.P.L.R. § 3211(a)(1), (5), and (7). At oral argument, respondents withdrew their motions insofar as they as sought disclosure.
When evaluating respondents' motion to dismiss the petition under C.P.L.R. § 3211(a)(7), the court must accept petitioners' allegations as true, liberally construe them, and draw all reasonable inferences in their favor. JF Capital Advisors, LLC v. Lightstone Group, LLC , 25 N.Y.3d 759, 764, 16 N.Y.S.3d 222, 37 N.E.3d 725 (2015) ; Miglino v. Bally Total Fitness of Greater N.Y., Inc. , 20 N.Y.3d 342, 351, 961 N.Y.S.2d 364, 985 N.E.2d 128 (2013) ; ABN AMRO Bank, N.V. v. MBIA Inc. , 17 N.Y.3d 208, 227, 928 N.Y.S.2d 647, 952 N.E.2d 463 (2011) ; Drug Policy Alliance v. New York City Tax Comm'n , 131 A.D.3d 815, 816, 15 N.Y.S.3d 784 (1st Dep't 2015). Dismissal is warranted only if the petition fails to allege facts that fit within any cognizable legal theory. ABN AMRO Bank, N.V. v. MBIA Inc. , 17 N.Y.3d at 227, 928 N.Y.S.2d 647, 952 N.E.2d 463 ; Lawrence v. Graubard Miller , 11 N.Y.3d 588, 595, 873 N.Y.S.2d 517, 901 N.E.2d 1268 (2008) ; Nonnon v. City of New York , 9 N.Y.3d 825, 827, 842 N.Y.S.2d 756, 874 N.E.2d 720 (2007) ; Mill Financial, LLC v. Gillett , 122 A.D.3d 98, 103, 992 N.Y.S.2d 20 (1st Dep't 2014).
To dismiss the petition pursuant to C.P.L.R. § 3211(a)(1), the admissible documentary evidence must utterly refute or completely negate petitioners' allegations against respondents so as to eliminate all material disputes regarding those facts. Goshen v. Mutual Life Ins. Co. of N.Y. , 98 N.Y.2d 314, 326, 746 N.Y.S.2d 858, 774 N.E.2d 1190 (2002) ; 511 W. 232nd Owners Corp. v. Jennifer Realty Co. , 98 N.Y.2d 144, 152, 746 N.Y.S.2d 131, 773 N.E.2d 496 (2002) ; Mill Financial, LLC v. Gillett , 122 A.D.3d at 103, 992 N.Y.S.2d 20 ; Art & Fashion Group Corp. v. Cyclops Prod., Inc. , 120 A.D.3d 436, 438, 992 N.Y.S.2d 7 (1st Dep't 2014). The documentary evidence must plainly and flatly contradict the petition's claims. Maas v. Cornell Univ. , 94 N.Y.2d 87, 91, 699 N.Y.S.2d 716, 721 N.E.2d 966 (1999) ; Xi Mei Jia v. Intelli–Tec Sec. Servs., Inc. , 114 A.D.3d 607, 608, 981 N.Y.S.2d 79 (1st Dep't 2014) ; Cathy Daniels, Ltd. v. Weingast , 91 A.D.3d 431, 433, 936 N.Y.S.2d 44 (1st Dep't 2012) ; KSW Mech. Servs., Inc. v. Willis of N.Y., Inc. , 63 A.D.3d 411, 879 N.Y.S.2d 328 (1st Dep't 2009). See Lopez v. Fenn , 90 A.D.3d 569, 572, 937 N.Y.S.2d 1 (1st Dep't 2011).
Respondents contend that C.P.L.R. § 214(3) bars petitioners' claims for acts or omissions more than three years before the filing of the petition April 11, 2016. A limitations period of six years, however, applies to petitioners' claims under Executive Law § 63(12). C.P.L.R. § 213(1) ; State of New York v. Cortelle Corp. , 38 N.Y.2d 83, 86–87, 378 N.Y.S.2d 654, 341 N.E.2d 223 (1975) ; People v. Credit Suisse Sec. (USA) LLC , 145 A.D.3d 533, 535, 47 N.Y.S.3d 236 (1st Dep't 2016) ; People v. Trump Entrepreneur Initiative LLC , 137 A.D.3d 409, 418, 26 N.Y.S.3d 66 (1st Dep't 2016). Petitioners' claim under BCL § 1101(a)(2), based on fraud and scienter, is similarly subject to a limitations period of six years. C.P.L.R. § 213(1) ; State of New York v. Cortelle Corp. , 38 N.Y.2d at 88, 378 N.Y.S.2d 654, 341 N.E.2d 223. Only petitioners' claims under GBL § 349 are subject to a limitations period of three years. C.P.L.R. § 214(2) ; Gaidon v. Guardian Life Ins. Co. of Am. , 96 N.Y.2d 201, 209–10, 727 N.Y.S.2d 30, 750 N.E.2d 1078 (2001).
"Deceptive 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." GBL § 349(a).
Whenever the attorney general shall believe from evidence satisfactory to him that any person, firm, corporation or association or agent or employee thereof has engaged in or is about to engage in any of the acts or practices stated to be unlawful he may bring an action in the name and on behalf of the people of the state of New York to enjoin such unlawful acts or practices and to obtain restitution of any moneys or property obtained directly or indirectly by any such unlawful acts or practices.
GBL § 349(b). This provision allows petitioner Attorney General to commence an action on the people of New York's behalf to enjoin and obtain restitution for deceptive acts or practices affecting consumers. People v. Coventry First LLC , 13 N.Y.3d 108, 114, 886 N.Y.S.2d 671, 915 N.E.2d 616 (2009). The acts or practices violating GBL § 349 must be consumer-oriented, relating to purchases or leases for personal, family, or household use. Medical Socy. of State of N.Y. v. Oxford Health Plans, Inc. , 15 A.D.3d 206, 207, 790 N.Y.S.2d 79 (1st Dep't 2005) ; Sheth v. New York Life Ins. Co. , 273 A.D.2d 72, 73, 709 N.Y.S.2d 74 (1st Dep't 2000). See City of New York v. Smokes–Spirits.Com, Inc. , 12 N.Y.3d 616, 621, 623, 883 N.Y.S.2d 772, 911 N.E.2d 834 (2009) ; Stutman v. Chemical Bank , 95 N.Y.2d 24, 29, 709 N.Y.S.2d 892, 731 N.E.2d 608 (2000).
The petition labels the lessees under the Northern Leasing respondents' leases for credit card equipment as consumers, but also describes the lessees as small businesses and small business owners. Sustainable claims under GBL § 349 are limited both to transactions for personal, family, or household and not business uses and to transactions in New York. Goshen v. Mutual Life Ins. Co. of N.Y. , 98 N.Y.2d at 325, 746 N.Y.S.2d 858, 774 N.E.2d 1190 ; Egan v. Telomerase Activation Sciences, Inc. , 127 A.D.3d 653, 653, 8 N.Y.S.3d 175 (1st Dep't 2015) ; Ovitz v. Bloomberg L.P. , 77 A.D.3d 515, 516, 909 N.Y.S.2d 710 (1st Dep't 2010). Although in opposition to respondents' motions petitioners suggest that enforcement of the leases' guaranties against the individual guarantors may impact their personal, family, or household finances, the petition nowhere alleges that the guaranties are entered, implemented, or even enforced for personal, family, or household purposes. Because petitioners do not show that the lessees or guarantors are consumers under GBL § 349, petitioners fail to sustain their claim under that statute.
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 ....
NY Exec. Law § 63(12). This provision authorizes respondent Attorney General to commence an action to enjoin and seek restitution for fraudulent or illegal business activity. People v. Greenberg , 27 N.Y.3d 490, 497, 34 N.Y.S.3d 402, 54 N.E.3d 74 (2016) ; People v. Sprint Nextel Corp. , 26 N.Y.3d 98, 108, 21 N.Y.S.3d 158, 42 N.E.3d 655 (2015) ; People v. Coventry First LLC , 13 N.Y.3d at 114, 886 N.Y.S.2d 671, 915 N.E.2d 616.
Fraud under this provision is "any device, scheme or artifice to defraud...
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