State v. Abortion Information Agency, Inc.

• Decision Date: 13 May 1971
• Citation: 69 Misc.2d 825,323 N.Y.S.2d 597
• Parties: STATE of New York, Plaintiff, v. The ABORTION INFORMATION AGENCY, INC., et al., Defendants. Pursuant to Article 11 of the Business Corporation Law and Section 63, Subdivision 12 of the Executive Law.
• Court: New York Supreme Court

Page 597

323 N.Y.S.2d 597

69 Misc.2d 825

STATE of New York, Plaintiff, v. The ABORTION INFORMATION AGENCY, INC., et al., Defendants Pursuant to Article 11 of the Business Corporation Law and Section 63, Subdivision 12 of the Executive Law.

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

May 13, 1971.

Louis J. Lefkowitz, Atty. Gen. of the State of New York, Samuel A. Hirshowitz, First Asst. Atty. Gen., Barnett Levy, Asst. Atty. Gen. in Charge of Bureau of Consumer Frauds and Protection, Stephen Mindell, William F. Jerome, Asst. Attys. Gen., of counsel, for plaintiff.

Kimmelman, Sexter & Sobel, New York City, for defendants; Kenneth J. Rome, New York City, of counsel.

SIDNEY H. ASCH, Justice.

This is an application by the Attorney General for an order enjoining defendants during the pendency of the action from conducting business as an abortion referral agency, engaging in certain fraudulent practices and otherwise transferring property of the defendant corporation and for a further order appointing a temporary receiver.

Simultaneously with the making of this application the Attorney General has commenced an action for a permanent injunction, to judicially dissolve the corporate defendant and in connection therewith the appointment of a receiver to liquidate the assets of the corporate defendant and make restitution to clients who have utilized defendants' services.

Defendant, Abortion Information Agency (hereinafter called A.I.A.) is a domestic corporation engaged in the business of providing counseling and information to women regarding abortions and acts as a referral agency providing hospital and medical services for same.

In substance, the Attorney General contends that the corporate defendant acts as a commercial broker in the sale of medical and hospital abortion services, that such activity contravenes the public policy of this state, that such business activity exceeds A.I.A.'s corporate powers, that the defendants arranged with various hospitals and doctors a fee schedule for the admission of patients seeking abortions referred by the defendant corporation; that A.I.A. is engaged in the practice of medicine in violation of section 6514(2)(b) of the Education Law, that the corporate defendant is engaged in fee splitting in violation of the Education Law, and that the corporate defendant's activities violate section 40 of the Insurance Law. In addition, defendants are accused of false advertising and otherwise misrepresenting the nature of services offered and the fees charged.

In opposition defendant admits that it is in the business of counseling women and providing information with regard to obtaining abortions, and that ib also acts as a referral agency. However, defendants claim that the characterization by the Attorney General of its business activities is a distortion since information is also supplied to women offering alternatives to abortions, such as prenatal clinics, adoption agencies, psychiatric and religious counseling services.

If a woman does seek an abortion defendants claim that they then refer the individual to duly accredited and licensed hospital facilities where abortions are performed by accredited obstetricians and gynecologists, and that a flat fee is charged according to the type of abortion performed and the available hospital facility. Defendants further contend that the type of procedure to be performed is determined by a physician and that the fee charged is not unconscionable in view of the fact that any additional expenses incurred by the patient, such as laboratory tests, in the course of her hospital stay are absorbed by the corporation. In this connection defendants argue that no evidence is presented which demonstrates that the total fees charged by the defendant are higher than the cost or charges made by any hospital facility in New York City or other profit or non-profit organizations providing the same service.

With respect to alleged deceptive advertising practices defendant contends that clients are informed as to the basis of the referral fee and registration fees charged, that an itemization of expenses is given on request to clients after defendant has received billing from the hospital and doctor, and that the comprehensive fee complained of has since been reduced. Moreover, defendants contend that the comprehensive fee including all referral charges is no more than a client would have to pay if she went directly to the hospital. Defendants also deny the existence of any agreement with physicians or hospitals regarding their respective fees.

With respect to the charge of unlawfully practicing medicine, defendants assert that the questions they ask clients are the same inquiry that would be made by any hospital admitting clerk.

It is not disputed that section 63, subdivision 12, of the Executive Law prohibits 'repeated fraudulent or illegal acts' and 'persistent fraud or illegality in the carrying on, conducting or transaction of business.' Both the Executive Law and the Business Corporation Law empower the Attorney General to apply for an injunction restraining continuance of the proscribed business activity, and in this connection, specific authority is provided for the judicial dissolution of a corporation where the corporation procures its information through fraud, has exceeded its authority, conducted business in a fraudulent manner or abuses its powers in contravention of the public policy of this State (B.C.L. § 1101).

Essentially, the central issue involved in this proceeding is not whether the transgressions complained of constitute a failure to perform obligations to individuals, but whether the wrong herein charged appears to be done to the people of this State (People v. Albany & Susquehanna R.R. Co., 57 N.Y. pp. 161, 167). In this regard a corporation charter will be subject to forfeiture whenever its transgressions threaten the welfare of the people (19 C.J.S. Corporations § 1663).

As to the charge of deceptive advertising practices under the circumstances presented, the court feels that there has been an inadequate showing made to warrant the drastic relief sought. Whether the corporate defendant does in fact provide counseling services or has created fictitious departments are issues of fact which cannot be resolved on the basis of conflicting affidavits. Nor can the charges of concealing information from customers as to the extent of defendants' referrals' fee be sustained on the papers now before the court. It therefore follows that the charge of misrepresentation as to the fee charged for the services offered cannot at this juncture form a basis for affording the drastic provisional relief sought by the Attorney General.

However, apart from the alleged charge of unconscionability of the referral fees and the possible illegal engagement by the corporate defendant in an insurance business, defendants are engaged in activities which in the final analysis requires judicial condemnation.

The Attorney General argues that the maintenance of this referral agency for abortions is in itself against public policy. Defendants, feebly meet this argument contending that there is nothing inherently wrong with acting as commercial agency for the purpose of referring patients to hospitals. At best this is an oversimplification of the nature and extent of business activity engaged in by defendant A.I.A.

If the defendant was simply engaged in dispensing information as to available facilities in this state of obtaining abortions such activity would not be violative of our public policy. Indeed, such would be in accord with the pronounced liberalized abortion policy of this state (Penal Law 125.05, sub. div. 3). However, it is not denied that defendants in fact contracted the doctor and the hospital facility for the specific purpose of performing abortions. In this arrangement the corporate defendant charges a comprehensive fee out of which A.I.A. pays the doctor and the hospital.

Generally, a broker is defined as one who is engaged by others for a commission to negotiate contracts relative to property with the custody of which he has no concern (12 C.J.S. Brokers § 1). The defendant here acts on a middleman commission basis, bringing together the women seeking an abortion and the instrumentality through which such is effectuated. In this regard the public policy of the State is opposed to the practice of acting as an intermediary or broker in the sale of professional services' (1946 Atty.Gen. 314, 315). In Matter of Co-operative Law Co., 198 N.Y. 479, at page 484, 92 N.E. 15, at page 16, the court stated, 'A corporation can neither practice law nor hire lawyers to carry on the business...