New York’s Highest Court Interprets “Consumer” Expansively Under Consumer Protection Statute – Consumer Protection

The situation: A recent trial in the New York Court of Appeals challenged long-standing restrictions on the application of major New York City consumer protection laws to goods or services purchased for personal, family, or household use.

The result: In Himmelstein, McConnell, Gribben, Donoghue & Joseph, LLP et al. v. Matthew Bender & Co. has ruled in the New York Court of Appeals that Section 349 of the New York General Business Law encompasses more than conventional consumer goods and extends to products typically used in business environments, protecting businesses and professionals, including lawyers fraudulent business practices.

Looking ahead: This decision expands the application of New York General Business Law Section 349, adding more exposure to consumer disputes for New York companies and entities doing business in New York.

On June 3, 2021, the appeals court cleared the scope of New York General Business Law Section 349, a frequently cited consumer protection provision. The court found that Section 349 protects consumers from fraudulent acts or practices by companies, regardless of the use of the products purchased. In doing so, the court specifically overruled the First Department’s decade-old precedent, widely cited in the federal and state jurisdictions of New York, which limited the provision’s application to goods or services purchased for personal, family, or household use.

First Department precedent based this limitation on the use of the word “consumer” in Section 349, which was narrowly construed in light of the use of the word elsewhere in New York law. The appellate court rejected this narrow interpretation because, in contrast to other provisions, Section 349 “[d]eceptive acts or practices in conducting any business, deal, or trade. “

background

In Himmelstein, McConnell, Gribben, Donoghue & Joseph, LLP et al. v. Matthew Bender & Co. lawyers filed an alleged class action lawsuit against the editor of an annual treatise – “New York Landlord-Tenant Law” – alleging that the editor misrepresented the size of the treatise. While the summary of the treatise included certain sections as “selected” laws and regulations, the summary indicated that the treatise included “the” rental stabilization and rental control laws and regulations for New York City and the state. The plaintiffs interpreted the latter as a complete reproduction of all relevant laws and regulations. Plaintiffs alleged that several provisions related to rental laws and regulations were missing or inaccurate and sued the publisher for violating Section 349 of the prohibition on fraudulent business practices.

To be successful in a Section 349 lawsuit, a plaintiff must assert that the defendant’s conduct (i) was consumer-oriented; (ii) was materially deceptive; and (iii) caused the claimant to be injured. Citing the Appeals Division’s precedent, the court of first instance ruled that plaintiffs failed to invoke the “consumer-facing” element because consumers are those who “buy goods and services for personal use, family or household” during the Plaintiffs bought the treatise in their capacity as lawyers. The court found that the distribution and marketing of the book was not aimed at the consumer in general and was therefore not sufficiently consumer-oriented. The court upheld the defendant’s motion to dismiss and the Appeals Division answered in the affirmative on other grounds.

The holding of the COA

The court of appeal dismissed the action. The court found that no reasonable consumer would have been misled about the content of the treatise because the sales contract expressly denies its “correctness, reliability”[, and]
Timeliness “and laws and regulations are always subject to revision. Plaintiffs also agreed to pay an additional fee for updates to the treatise between publications, thereby demonstrating that the treatise may not be a complete and accurate compilation of the law under a certain time.

More importantly, the court rejected the first instance court’s definition of “consumer”, which was derived from influential appeals chamber precedents. The court found that neither the wording nor the purpose of Section 349 supported the Appeals Chamber’s narrow interpretation of the term “consumer” based on the specific use of a product by the consumer. The Court found that legal professionals are a “subclass of consumers” and that conduct does not have to be directed at all members of the public in order to be consumer-oriented. In addition, the defendant’s behavior was aimed at a broad consumer base and not just at a “private contractual dispute that is reserved only for the parties”. The court found the defendant’s behavior to be sufficiently consumer-oriented and found that the plaintiffs had succeeded in asserting the first element of a claim under Section 349.

Effects

The Himmelstein Decision is a significant extension of Section 349, which is interpreted to include goods and services that are sold to businesses and professionals for commercial use, not just products or services that are sold for personal use. The court emphasized the intent of the New York legislature to protect the public from all forms of fraudulent business practices.

The ruling warns New York companies and others doing business in the state to review marketing materials and sales practices that target misleading messages. Disclaimers of liability, which, like the disclaimer in Himmelstein, specifically refer to such messages, can reduce or eliminate the potential for deception and thus reduce the liability risk according to § 349.

In addition, the ruling suggests that New York’s consumer protection law has not yet been fully resolved. Anyone doing business in New York should keep an eye on developments.

Stephanie Pryor in the New York office helped prepare this comment.

Two important takeaways

1. General Business Law Section 349 should now be understood to include even products that are only used in a business environment – not just goods or services purchased for personal, family, or household use – and to be used by businesses and professionals protect against fraudulent business practices in New York.

2. Individuals doing business in New York should ensure that their sales and marketing practices are appropriate in the context of Section 349. Targeted disclaimers can help them with this.

The content of this article is intended to provide general guidance on the subject. You should seek expert advice regarding your specific circumstances.