State by Lefkowitz v. Colorado State Christian College of Church of Inner Power, Inc.

• Decision Date: 05 June 1973
• Citation: 346 N.Y.S.2d 482,76 Misc.2d 50
• Parties: Application of the STATE of New York by Louis J. LEFKOWITZ, Attorney General of the State of New York, Plaintiff, For an Order enjoining and restraining COLORADO STATE CHRISTIAN COLLEGE OF the CHURCH OF the INNER POWER, INC., Defendant, Pursuant to Section 349 General Business Law.
• Court: New York Supreme Court

Page 482

346 N.Y.S.2d 482

76 Misc.2d 50

Application of the STATE of New York by Louis J. LEFKOWITZ,

Attorney General of the State of New York, Plaintiff, For an

Order enjoining and restraining COLORADO STATE CHRISTIAN

COLLEGE OF the CHURCH OF the INNER POWER, INC., Defendant,

Pursuant to Section 349 General Business Law.

Supreme Court, Special Term, New York County, Part I.

June 5, 1973.

Louis J. Lefkowitz, Atty. Gen. (Barnett Levy, Stephen E. Mindell, James W. Ryan, New York City, of counsel), for plaintiff.

Keller & Dunievitz, Denver, Colo. (Graubard, Moskovitz, McGoldrick, Dannet & Horowitz, New York City, of counsel), for defendant.

SIDNEY H. ASCH, Justice.

This action has been instituted pursuant to Section 349 of the General Business Law to enjoin, restrain and prohibit defendant from conferring or offering to confer upon any member of the public in the State of New York any academic or honorary degree; from directly or indirectly advertising, offering for sale or selling any academic or honorary degree to any member of the public in the State of New York; from representing itself as a 'college' in any letter, advertisement, brochure, degree or other writing addressed to any member of the public in the State of New York; and from further engaging in deceptive acts and practices.

This legal intervention represents a laudable effort by the Attorney General to protect the residents of this State. The uncontroverted facts are that the Colorado State Christian College (of the Church of The Inner Power, Inc.) has been busily engaged in offering for sale and selling Ph.D. degrees in sundry and sorted areas of specialization. Its recipients, including New Yorkers, were selected and recruited from such publications as 'Who's Who of American Women.'

Speaking of colleges, President James A. Garfield once said, 'My ideal would be a log with a student at one end of it and Mark Hopkins on the other end.' The Colorado State Christian College doesn't quite qualify. It does operate out of a log cabin with address, P. O. Drawer A.A., Evergreen, Colorado. But it does not qualify as a college or institution of higher learning. It has no formal entrance requirements except a contribution of $100 or more accompanying the application for the honorary degree (which is claimed to be tax deductible). It has no faculty members who are trained and competent to teach accredited and recognized academic courses, unless the activities described evidence an expertise in business administration. In the words of the immortal bard of Avon, 'its books are babbling brooks,' it supports no other library or educational facilities. It has no resident students, no curriculum accredited by any official or recognized agency.

In deciding whether or not the defendant has 'transacted business' within the meaning of Section 302, subd. (a) Par. (1) and so as to satisfy the requirements of the United States Constitution, a Court will consider the 'purposeful acts' of the defendant. The judicial application of the phrase '(transacting) any business within this state' under that provision has been explained by the Court in Lumbermens Mutual Casualty Company v. Borden, 265 F.Supp. 99 (1967 S.D.N.Y.) and Northland Paper Company v. Mohawk Tablet Company, 271 F.Supp. 763 (1967 S.D.N.Y.). As the Court stated in the latter case, the

'issue of jurisdiction should apparently be decided in terms of the totality of defendants' purposeful activity within the state which is related to the transaction of business in question.'

Looking at the totality of defendant's purposeful activities in New York, they include the following:

(a) defendant's sales solicitation by mail (consisting of a letter, application form and a brochure) addressed to members of the New York public over a continuous period of at least five months.

(b) defendant's shipment in the course and conduct of its business of at least one honorary doctorate degree to a purchaser in the State of New York who ordered such pursuant to the aforestated sales solicitation.

From the foregoing it appears clear that defendant is transacting business in this State within the meaning of CPLR § 302. Longines-Wittnauer v. Barnes & Reinecke and Singer v. Walker, 15 N.Y.2d 443, 261 N.Y.S.2d 8, 209 N.E.2d 68 (1965). See also cases cited in New York Court of Appeals decision Standard Wine & L Co. v. Bombay Spirits Co., 20 N.Y.2d 13, at 16, 281 N.Y.S.2d 299 at 301, 228 N.E.2d 367 at 369 (1967). See also Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958); Impex v. Oremet, 333 F.Supp. 771 (D.C.1971); In re State of N.Y. (Grossman), N.Y.L.J., June 6, 1968 (N.Y.Cty.Sup.Ct.).

This conclusion is rendered more compelling here in this proceeding by the State, as against a private citizen. In La Belle Creole v. Attorney General, 10 N.Y.2d 192, 197, 219 N.Y.S.2d 1, 5, 176 N.E.2d 705, 708, Chief Judge Fuld stated:

'What constitutes 'doing business' in order to render a foreign corporation amenable to process is not susceptible of exact delineation. Each case must be decided on its own facts having in mind the nature of the action or proceeding involved. To justify a civil suit against it and to satisfy due process requirements, the foreign corporation must process such 'minimum contacts' with the State that maintenance of the suit will not offend 'traditional notions of fair play and substantial justice': McGee v. International Life Ins. Co., 355 U.S. 220, 222, 78 S.Ct. 199, 2 N.E.2d 223, see also, International Shoe Co. v. State of Washington, 326 U.S. 310, 314, 66 S.Ct. 154, 90 L.Ed. 95; Miller v. Surf Properties, Inc., 4 N.Y.2d 475, 480, 176 N.Y.S.2d 318, 321, 151 N.E.2d 874; Sterling Novelty Corp. v. Frank & Hirsch Distributing Co., 299 N.Y. 208, 210, 86 N.E.2d 564, 565, 12 A.L.R.2d 1435. However, the right of a litigant to bring an action against a foreign corporation is not necessarily the measure of the State's power to regulate it. 'What is necessary to * * * maintain a suit by a creditor', it has been said, is not 'determinative when the state seeks to regulate solicitation within its borders'. Travelers Health Ass'n v. Commonwealth of Virginia, 339 U.S. 643, 653, 70 S.Ct. 927, 932, 94 L.Ed. 1154, per Douglas, J., concurring. Where the purpose of the proceeding is to protect the citizens of the State from potentially dangerous consequences, less is required than might otherwise be the case. See, e.g., Travelers Health Ass'n v. Commonwealth of Virginia, 339 U.S. 643, 70 S.Ct. 927, 94 L.Ed. 1154, supra.'

See also, State by Lefkowitz v. ITM, Inc., 275 N.Y.S.2d 303, 328--329 (1966). Margaret Weatherson Inc. v. Forman, N.Y.L.J., April 16, 1973, p. 2 (App.Term 1st Dept.).

The legislative purpose of Section 349, General Business Law supports the position that the State is entitled to the relief which it now seeks. Passed in 1970, the entire statute was authorized by the Antitrust Section of the New York State Bar Association. Accompanying this bill on the way through the Legislature, and on the Governor, was the Report of New York State Antitrust Law of the Antitrust Law Section of the New York State Bar Association. This Report purports to furnish a complete explanation of the purpose of each of the provisions of the bill.

It explains the purpose of § 349(d), which in pertinent substance provides that where the act or practice complained of by the Attorney General is subject to and complies with the standards set by rules, regulations or statutes of the Federal Trade Commission, or the interpretation thereof by the Commission or the federal courts, the putative defendant is exonerated. In so explaining, the Report at p. 8 states:

'The Committee believes such a provision is necessary in order to protect businessmen from conflicting standards . . . and to make federal law and its interpretation of deceptive acts and practices applicable to state enforcement. The words 'rules and regulations' are intended to be broadly construed to cover all official policies of the Federal Trade Commission, including policy statements, advisory opinions and guides.'

Earlier on the same page, the report states 'Section 349--d . . . was drawn from Section 350--b of the General Business Law', which latter also contains an exemption from prosecution for the false advertising outlawed by § 350 if the advertising complies with the 'rules and regulations of, and the statutes administered by the Federal Trade Commission.'

In Metropolitan Retail Assn. v. City of New York, 60 Misc.2d 805, at p. 807, 303 N.Y.S.2d 612, at p. 614, (Sup.Ct., N.Y.Co., 1969), the Court said:

'Section 350 of the General Business Law simply declares false advertising to be unlawful. It Appears that the State Legislature intended to adopt requirements identical to those established by the Federal Trade Commission and to apply them to intrastate transactions in New York.'

Since § 349(d) was 'drawn from' § 350(b), the same conclusion applied to § 350(b) by the Court in the Metropolitan Retail Assn. case, should be applied to § 349(d).

It is thus clear that the legislative purpose in enacting § 349 of the General Business Law was to follow in the steps of the Federal Trade Commission with respect to the interpretation of deceptive acts and practices outlawed in Section 5 of the Federal Trade Commission Act (15 U.S.C.A. § 45) supra, p. 22, which reads in pertinent part (not too much different from the substantively equivalent § 349(a) of our General Business Law, quoted immediately infra):

'(A)(1) Unfair methods of competition in commerce and unfair or deceptive practices in commerce are declared unlawful.'

The New York statute says:

' § 349(a) 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.'

Commenting on the language in General Business Alw § 349, the Report of the Committee on New York State Antitrust Law, supra, at p. 6 ...