Rhodes v. Herz

Decision Date22 March 2011
Citation84 A.D.3d 1,2011 N.Y. Slip Op. 02071,920 N.Y.S.2d 11
PartiesRandi RHODES, also known as Randi Robertson, Plaintiff–Appellant,v.Steven Edward HERZ, et al., Defendants–Respondents.
CourtNew York Supreme Court — Appellate Division


John R. Sachs, Jr., New York, and Gaulin Group PLLC, New York (Robert V. Gaulin of counsel), for appellant.LaRocca Hornik Rosen Greenberg & Blaha LLP, New York (Amy D. Carlin and Lawrence S. Rosen of counsel), for respondents.JOHN W. SWEENY, J.P., KARLA MOSKOWITZ, DIANNE T. RENWICK, LELAND G. DeGRASSE, NELSON S. ROMÁN, JJ.ROMÁN, J.

The issue before us is whether article 11 of the General Business Law, by its terms, provides an express private right of action and whether, in the absence of such an express right, one is nevertheless implied. We hold, and indeed not for the first time, that article 11 does not provide either an express or an implied private right of action against licensed or unlicensed employment agencies or their agents. Accordingly, plaintiff's first, fifth, sixth and seventh causes of action, premised on violations of article 11, were properly dismissed.

According to the complaint 1, plaintiff, a nationally syndicated radio talk show host, entered into a Comprehensive Employment Agent and Managerial Contract with defendant IF Management, Inc. Prior to the contract's execution, defendant Steven Edward Herz, an employee of IF Management, Inc., represented that he was an employment agent and that IF Management, Inc. could act as plaintiff's employment agent, manager and law firm. Carol Perry was also employed by IF Management, Inc. and, along with the other defendants, acted as plaintiff's employment agent. During the contract's term, defendants discussed and explored employment opportunities for plaintiff. In particular, defendants attempted to negotiate a publishing contract on plaintiff's behalf with Miramax, negotiated a salary increase with Air America Radio, and sought to obtain plaintiff employment with Westwood One, a radio network, and Sirius, a satellite radio network. Since defendants failed to perform their obligations under the contract, plaintiff timely sought to terminate it. Defendants, however, refused to accept the termination.

Plaintiff asserts several causes of action, but only four are relevant to this appeal. Plaintiff's first cause of action seeks to void the contract between her and the defendants and seeks to recover all monies paid by plaintiff to defendants during the contract's term. Plaintiff premises this relief on the ground that defendants acted as her employment agents without a license, thereby violating General Business Law § 172, and that by simultaneously acting as her employment agents, managers and attorneys, defendants also violated General Business Law § 187(8). Plaintiff's fifth cause of action seeks monetary damages on the ground that in failing to disclose that they were not licensed to act as her employment agents and in unlawfully engaging in prohibited employment procurement activities, defendants breached their fiduciary duty. Plaintiff's sixth and seventh causes of action, both for unjust enrichment, are virtually identical, and therein she seeks damages, equal to all fees plaintiff paid to the defendants, as well as an accounting of defendants' profits for the contract term. The unjust enrichment claim is premised on violation of General Business Law § 172, insofar as defendants were not licensed to act as plaintiff's employment agents, and on a violation of General Business Law § 185, to the extent that the fees charged by the defendants were unlawful.

Subsequent to the commencement of this action, defendants moved to dismiss plaintiff's first, fifth, sixth, and seventh causes of action pursuant to CPLR 3211(a)(2) (want of subject matter jurisdiction) and 3211(a)(7) (failure to state a cause of action). Defendants argued that insofar as article 11 provides for neither an express nor an implied private right of action, plaintiff's causes of action, to the extent premised on violations of article 11, merited dismissal. To the extent that defendants asserted a counterclaim against the plaintiff for breach of contract, they also sought an order enjoining plaintiff from asserting any affirmative defenses premised on defendants' alleged violation of article 11. The motion court granted defendants' motion, finding that while article 11 provides for a limited express right of action against a licensed employment agency, it provides no similar express private right of action here, where the defendants were unlicensed during the relevant period. The motion court further held that, given article 11's comprehensive enforcement mechanism, no private right of action against an unlicensed employment agency existed. The motion court denied the portion of defendants' application seeking to enjoin plaintiff from raising a violation of article 11 as an affirmative defense to defendants' counterclaims. Plaintiff appeals and we affirm.

Article 11 applies to all employment agencies within the state ( General Business Law § 170), and defines an employment agency as any person, who, for a fee, procures or attempts to procure employment for persons seeking employment or engagements (General Business Law § 171[2][a][1] ). The statute imposes a licensing requirement and as such, no person may “maintain, own, operate or carry on any employment agency” (General Business Law § 172) without a license obtained from the state's Commissioner of Labor, or if within New York City, the Commissioner of the Department of Consumer Affairs ( id.). Additionally, anyone operating an employment agency is required to file a bond in the sum of five thousand dollars (General Business Law § 177 [1] ), payable to the people of the State of New York or the City of New York (General Business Law § 177[2] ), and the bond

“shall be conditioned that the person applying for the [employment agency] license will comply with this article, and shall pay all damages occasioned to any person by reason of any misstatement, misrepresentation, fraud or deceit, or any unlawful act or omission of any licensed person ... committed or omitted in the business conducted under such license or caused by any other violation of this article ...” ( id.).

Claims or suits upon the bond “may be brought in the name of the person damaged” and [t]he commissioner may institute a suit against the bond on behalf of any person damaged” (General Business Law § 178). Fees chargeable by an employment agency are limited to those within article 11 (General Business Law § 185), and an employment agency which collects fees in contravention of the article's provisions is required to return the excess portions thereof within seven days after a demand is made (General Business Law § 186).

Enforcement of article 11 is statutorily delegated to the State Commissioner of Labor, except that in New York City, it is enforced by the Commissioner of Consumer Affairs (General Business Law § 189[1] ). Commensurate with his enforcement powers, the Commissioner, upon reasonable grounds to believe that an employment agency is violating article 11, has the authority to subpoena the records of the employment agency, subpoena witnesses, and conduct an investigation (General Business Law § 189[2] ). As against a licensed person, complaints shall be made orally or in writing to the commissioner, who may then investigate, hold a hearing, take testimony, subpoena witnesses and direct production of documents (General Business Law § 189[4] ). If after a hearing it is determined that the licensed agency has violated article 11, the commissioner may suspend or revoke the agency or person's license and/or levy a fine (General Business Law § 189[5] ). Additionally, most violations of article 11, including the operation of an employment agency without a license, are misdemeanors, punishable by a fine of up to one thousand dollars and by imprisonment not to exceed one year (General Business Law § 190). Other violations, such as the failure to conspicuously post certain sections of article 11 (General Business Law § 188), are punishable by a fine of no more than one hundred dollars or imprisonment not to exceed thirty days (General Business Law § 190). The Commissioner in New York City is also vested with additional powers, authorizing him to bring proceedings against anyone operating a business without a license where the same is required (Administrative Code of the City of New York § 20–105). Pursuant to the Administrative Code, it is unlawful to engage in the unlicensed operation of any business requiring a license and such conduct is punishable by imposition of a one hundred dollar fine for each day the person operates without a license ( id.). The Commissioner can also order that an unlicensed person cease operation of any business for which a license is required, can order the sealing of the premises where such unlicensed business is taking place, and can order the removal of any items utilized in connection with the unlicensed business ( id.).

As will be discussed in detail below, plaintiff's first, fifth, sixth and seventh causes of action, premised upon defendants' violation of article 11, were properly dismissed.

Preliminarily, we affirm because we have previously determined that article 11 provides no private right of action 2 ( Morin v. Curtis Assoc. Personnel, 56 A.D.2d 817, 817 [1977]; Greater N.Y. Mut. Ins. Co. v. Wehinger Serv., N.Y.L.J., May 14, 1974, at 2, col. 2, [Sup Ct., N.Y. County, May 7, 1974, Frank, J.], affd. 47 A.D.2d 604, 365 N.Y.S.2d 994 [1975], lv. denied 36 N.Y.2d 643, 368 N.Y.S.2d 1026, 329 N.E.2d 677 [1975] ). In Greater N.Y. and then again in Morin, we held that a violation of General Business Law § 187 could not be litigated in a plenary action and could only be litigated administratively. In Greater N.Y., plaintiff sued defendant, an employment agency,...

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