Scott v. Bell Atl. Corp.

• Decision Date: 10 May 2001
• Citation: 726 N.Y.S.2d 60,282 A.D.2d 180
• Parties: WALTER SCOTT et al., on Behalf of Themselves and All Others Similarly Situated, Respondents,<BR>v.<BR>BELL ATLANTIC CORPORATION, Now Known as VERIZON COMMUNICATIONS, INC., et al., Appellants.
• Court: New York Supreme Court — Appellate Division

282 A.D.2d 180

726 N.Y.S.2d 60

WALTER SCOTT et al., on Behalf of Themselves and All Others Similarly Situated, Respondents,

v.BELL ATLANTIC CORPORATION, Now Known as VERIZON COMMUNICATIONS, INC., et al., Appellants.

WILLIAMS, J.

May 10, 2001.

Jason L. Solotaroff of counsel, New York City (Mark S. Kaufman and Joshua N. Rubin on the brief; Law Offices of Mark S. Kaufman, Stamell & Schager, L. L. P., and Abbey Gardy & Squitieri, L. L. P., attorneys), for respondents.

Guy Miller Struve of counsel, New York City (Sharon Katz, Nancy B. Ludmerer and D. Scott Tucker on the brief; Davis Polk & Wardwell, Robert Ernst and Richard H. Wagner, attorneys), for appellants.

NARDELLI, J. P., TOM, LERNER and RUBIN, JJ., concur.

OPINION OF THE COURT

WILLIAMS, J.

This appeal raises the issues of whether the motion court erred in not dismissing, on defendants' pre-answer motion to dismiss, plaintiffs' second amended complaint, which alleged causes of action for violations of General Business Law §§ 349 and 350, breach of warranty and breach of contract, and in granting plaintiffs' CPLR 3025 (b) motion to amend which interposed an additional cause of action for fraudulent inducement.

Plaintiffs in this pre-certification class action suit, brought pursuant to CPLR 901, are residents of New York, Maryland, and the District of Columbia, and a New Jersey corporate entity who are present or former subscribers to defendants' Digital Subscriber Line (DSL) service and seek for themselves, and those similarly situated, to hold defendants liable for allegedly misrepresenting the quality of their DSL service. Defendants Bell Atlantic Corporation and its subsidiary Bell Atlantic Internet Solutions are Delaware corporations, the former with its principal place of business in New York County, the latter in Virginia. Bell Atlantic is now known as Verizon Communications, Inc.

The representations at issue were allegedly made on defendants' Web site and stated, inter alia, as follows:

"FAST—High speed Internet access service up to 126x faster than your 56K modem.

DEDICATED—You're always connected—no dialing in and no busy signals, ever!

CONVENIENT—Allows you to talk on the phone and use the Internet simultaneously—on the same line!

SIMPLE—Works on your existing phone line and our self-installation kit can be set up in minutes."

"The quality of the technical support staff is unbelievable; never have I experienced such prompt and responsive support for Internet service since 1993 as one of the first DC-area residential customers Digital Express. As for the service itself, it has offered the full 640Kbps of promised bandwidth" (purported customer testimonial).

Plaintiffs also submitted a New York Times article which reported on consumer dissatisfaction with defendants' DSL service.

The Terms and Conditions of defendants' Internet Access Service Agreement (the Service Agreement), which is included on the installation CD-ROM, include the following provisions to which the subscriber must agree in order to complete installation and commence service:

"3.1 This Agreement goes into effect when you have completed your registration for the Service. The Agreement shall continue in full force and effect on a month-to-month basis until terminated by either party as permitted by this Agreement. * * *

"11.7 You understand and agree that [defendant] does not warrant the Service to be uninterrupted or error-free. You further understand and agree that [defendant] has no control over third party networks or web sites that you may access in the course of your use of the Service, and that delays and disruptions of other network transmissions are completely beyond the control of [defendant]. [Defendant] cannot and will not guarantee that the Service will provide Internet access that meets your needs. * * *

"11.9 No warranty is given that the Service is error-free. [Defendant] makes no warranty regarding any transactions executed through the Service. * * *

"12.1 THE SERVICE IS PROVIDED ON AN `AS IS' OR `AS AVAILABLE' BASIS. DO NOT USE THE SERVICE IN ANY HIGH RISK ACTIVITIES WHERE DAMAGE OR INJURY TO PERSON, PROPERTY, ENVIRONMENT OR BUSINESS MAY RESULT IF AN ERROR OCCURS. YOU EXPRESSLY ASSUME ALL RISK FOR SUCH USE.

"12.2 EXCEPT AS OTHERWISE SPECIFICALLY SET FORTH IN THIS AGREEMENT, [DEFENDANT], ITS THIRD PARTY LICENSORS AND THIRD PARTY SERVICE PROVIDERS DISCLAIM ANY AND ALL WARRANTIES FOR THE SERVICE

WHETHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANT[IES] OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. * * *

"14.9 This Agreement, including all Attachments hereto, which are fully incorporated into this Agreement, constitutes the entire agreement between you and [defendant] with respect to the subject matter hereto and supersedes any and all prior or contemporaneous agreements whether written or oral."

As part of the installation/registration process, the new subscriber is informed that he or she is allowed a 30-day trial period, from the date of registration, within which he or she may cancel the service, if he or she is dissatisfied, and receive a "full refund for all one-time and first month charges." Beyond that, the Service Agreement is on a month-to-month basis until terminated by either party as permitted by its terms, and may be terminated by a subscriber at any time "without cause."

In general, on a CPLR 3211 motion to dismiss, the pleading should be construed liberally, and the facts as alleged in the complaint are presumed to be true and are accorded the benefit of every possible favorable inference (CPLR 3026; Rovello v Orofino Realty Co., 40 NY2d 633, 634). Where documentary evidence flatly contradicts the factual claims, the entitlement to the presumption of truth and the favorable inference is rebutted (Ullmann v Norma Kamali, Inc., 207 AD2d 691, 692). The applicable standard for determining a CPLR 3211 (a) (7) motion is whether, within the four corners of the complaint, any cognizable cause of action has been stated (Guggenheimer v Ginzburg, 43 NY2d 268, 275; Morone v Morone, 50 NY2d 481). The test on a CPLR 3211 (a) (1) motion is whether the documentary evidence submitted "conclusively establishes a defense to the asserted claims as a matter of law" (Leon v Martinez, 84 NY2d 83, 88; IMO Indus. v Anderson Kill & Olick, 267 AD2d 10, 11).

General Business Law §§ 349 and 350 are consumer protection statutes that prohibit deceptive acts and practices and false advertising, respectively, "in the conduct of any business, trade or commerce or in the furnishing of any service in this state" and, inter alia, afford consumers a private right of action to redress such misconduct (Givens, Practice Commentaries, McKinney's Cons Laws of NY, Book 19, General Business Law § 349, at 565; Gaidon v Guardian Life Ins. Co., 94 NY2d 330, 344). Such acts, practices or advertising must have an impact on consumers at large, and must be shown to be deceptive or misleading in a material way and to have injured the plaintiff as a result (Oswego Laborers' Local 214 Pension Fund v Marine Midland Bank, 85 NY2d 20, 25-26; St. Patrick's Home for Aged & Infirm v Laticrete Intl., 264 AD2d 652, 655). The test is whether the false or deceptive acts or practices are "likely to mislead a reasonable consumer acting reasonably under the circumstances" (Oswego at 26).

Here the General Business Law claims should have been dismissed. In the first place, as noted above, sections 349 and 350 expressly proscribe specified conduct that takes place "in this state"; thus, such claims by the non-New York residents should be dismissed, since they do not allege that they received defendants' DSL services within New York State (see, ...