Weinberg v. Hertz Corp.

• Decision Date: 11 March 1986
• Citation: 499 N.Y.S.2d 693,116 A.D.2d 1
• Parties: Frederic E. WEINBERG, individually and on behalf of all others similarly situated, Plaintiff-Appellant, v. The HERTZ CORPORATION, Defendant-Respondent.
• Court: New York Supreme Court — Appellate Division

Page 693

499 N.Y.S.2d 693

116 A.D.2d 1

Frederic E. WEINBERG, individually and on behalf of all others similarly situated, Plaintiff-Appellant, v. The HERTZ CORPORATION, Defendant-Respondent.

Supreme Court, Appellate Division First Department.

March 11, 1986.

Sheldon Burman, P.C., New York City, for plaintiff-appellant.

Myron Kirschbaum, of counsel (Peter M. Fishbein, Donald Levinsohn, New York City, and Christine L. Andreoli, Flushing, with him on brief; Kaye, Scholer, Fierman, Hays & Handler, New York City), for defendant-respondent.

Andrea C. Levine, of counsel (Peter Bienstock and Mary Hilgeman with her on brief; Robert Abrams, Atty. Gen., New York City), for State of N.Y. as amicus curiae.

Before KUPFERMAN, J.P., and SULLIVAN, FEIN, KASSAL and ROSENBERGER, JJ.

FEIN, Justice.

This is an action seeking injunctive relief and damages against The Hertz Corporation (Hertz) for acts and practices in the automobile rental business, alleged to be unfair, deceptive and in breach of contract. The allegations before us relate to (1) defendant's service charges for refueling returned rental cars; (2) the daily charges for insurance coverage in the nature of collision damage waiver ("CDW") and personal accident insurance ("PAI"); and (3) the hourly charges added when a vehicle is returned in New York State beyond the contractual return date.

These charges were variously alleged to be unfair and deceptive, in violation of General Business Law § 349; unconscionably excessive and in bad faith, in violation of UCC §§ 2-302 and 1-201; and in breach of the Hertz rental agreements.

Specifically, plaintiff alleged that defendant's gasoline "refueling service charges" were grossly excessive, resulting in charges in the neighborhood of $1.85 per gallon, which were determined by procedures violative of standards for retail sale of gasoline, established by federal, state and city statutes and regulations.

The second area of complaint related to defendant's CDW charges. The insurance on a rented vehicle provided collision damage coverage with, in effect, a $1,000 deductible. The customer could obtain full coverage, and defendant would waive the deductible, for an additional charge which, at the commencement of this action, amounted to $6.00 per day. Extrapolating over an entire year, plaintiff alleged that $2,190 for $1,000 worth of collision damage insurance was an unconscionable premium.

A similar charge of unconscionability was made concerning the $2.25 daily charge for PAI coverage, which figured out to an annual premium of $821.15.

Finally, plaintiff alleged that the charges for returning a vehicle late were exorbitant, permitting defendant to make a full day's extra charge in the first three hours of overtime. Further, defendant's practice allegedly added a full day's CDW and PAI charges, rather than pro-rating them, for every vehicle returned more than one hour late.

Plaintiff brought this action on behalf of "all those who have rented automobiles from Hertz and were subject to, or had imposed upon them, the illegal charges described [above], within the State of New York." In March 1984, Special Term sustained six of the ten causes of action covering these charges, permitted class action certification with respect to actual damages sought under General Business Law § 349, and permitted limited discovery on the question of the numerosity of the class. We affirmed unanimously, without opinion (105 A.D.2d 1169, 484 N.Y.S.2d 390).

After discovery and the furnishing of certain documents and information by Hertz under a stipulation of confidentiality, plaintiff renewed his motion for class action certification. This appeal is from the denial of that motion.

A class action in this state must satisfy the prerequisites of numerosity, commonality, typicality, adequacy of representation and superiority (CPLR 901[a] ). Special Term based its denial of class action certification on the fifth criterion, which specifies that the class action must be "superior to other available methods for the fair and efficient adjudication of the controversy." (CPLR 901[a][5].) Special Term ruled that "economic impracticability renders this proposed class action an inferior form of adjudication." In doing so, the court accepted defendant's argument that a class action would impose an undue economic burden on it by requiring a search of millions of non-computerized rental agreements around the country for those with a New York connection, at an estimated cost of at least $30 million. It was asserted this would more than overshadow the average claim of $31 for each member of a class whose size plaintiff estimated in the tens or hundreds of thousands.

General Business Law § 349(h) affords a private right of action and treble damages for deception practiced against a consumer. Since such a statutory remedy does exist, potential class members must be given an opportunity to opt out of the class to pursue their private claims. Thus, identifying the members of the class becomes a necessity. According to Special Term, $30 million would be an unduly burdensome amount to expect defendant to expend, simply to reach the threshold determination of who should receive notice of this action.

On this record there is plainly inadequate substantiation for defendant's assertion that defining the class would cost $30 million. It is inconceivable that a nationwide company such as defendant would not be able to obtain the necessary data from its offices around the country or from its central processing center in Oklahoma City without the expenditure of millions of dollars. The bald assertions that defendant does not have a system in place to provide the data is especially surprising in light of the May 1983 decision of the California Court of Appeal in Lazar v. Hertz Corp., 143 Cal.App.3d 128, 191 Cal.Rptr. 849, in which virtually the same challenges were made in a class action suit against this defendant. The California court ruled that the benefits to the courts and the public in aggregating monetarily insignificant claims (estimated at an average $6) into a single, time-saving lawsuit outweighed any legal, administrative or economic burden on defendant in defining the class.

As the California court noted, the burden of searching out putative class members upon whom notice must be served is unpersuasive. In rejecting Hertz' economic burden argument it was concluded that the small recovery should not preclude class certification, despite the claim that the potential class might amount to five million individuals.

In accepting defendant's estimate of the $31 average claim, Special Term did not give adequate weight to the very point that impelled a class action here, namely, the unlikelihood of small claims being filed for what, cumulatively, might amount to overcharges in the millions of dollars, as alleged. The public benefit of the class action remedy has been described as "a means of inducing socially and ethically responsible behavior on the part of large and wealthy institutions which will be deterred from carrying out policies or engaging in activities harmful to large numbers of individuals", people who "frequently are damaged in a small sum (often less than $100) since, realistically speaking, our legal system inhibits the bringing of suits based upon small claims" (Friar v. Vanguard Holding Corp., 78 A.D.2d 83, 94, 434 N.Y.S.2d 698). Plainly, individual actions are not preferable to or the equivalent of class actions in such a context.

Indeed, the amount of the average claim for each member of the class is without real legal significance....