Two companion bills titled the “Consumer and Small Business Protection Act” have been introduced in the New York legislature would make sweeping changes to the provisions of the state’s general business law (Section 349) dealing with deceptive practices. In addition to creating a new private right of action, the bills would greatly expand the powers of the New York attorney general. The bills are currently pending in the Assembly Codes Committee and the Senate Consumer Affairs and Protection Committee.
The key changes that would be made by A. 7138 and S. 795 include the following:
- Currently, Section 349 only prohibits deceptive acts or practices. The bills would expand the prohibited conduct to include unfair or abusive acts or practices. (The federal Consumer Financial Protection Act gives authority to the New York attorney general and the New York Department of Financial Services to bring actions for violations of the CFPA’s prohibition of unfair, deceptive, or abusive acts or practices.)
- Judicial interpretations have limited the scope of Section 349 to “consumer-oriented conduct,” meaning acts or practices directed toward the public at large. The bills would eliminate this judicially-imposed requirement to provide that actions can be brought under Section 349 “regardless of whether or not the underlying violation is consumer-oriented [or] has a public impact.”
- Currently, private actions can only be brought under Section 349 for injunctive relief. The bills would allow statutory damages of $1000 plus actual damages to be awarded in private actions and make the award of reasonable attorneys’ fees and costs to a prevailing plaintiff mandatory rather than discretionary.
- The bills would allow private plaintiffs and the attorney general to bring actions under Section 349 “regardless of whether or not the underlying violation…involves goods, services, or property for personal, family, or household purposes.” Thus, this would expand the coverage of Section 349 to include businesses disputes, not just consumer disputes.
- The bills would define a “person” who can bring an action under Section 349 as “an individual, firm, corporation, partnership, cooperative, association, coalition or any other organization’s legal entity, or group of individuals however organized.”
- The bills provide that standing to bring an action under Section 349 “shall be liberally construed and shall be available to the fullest extent otherwise permitted by law.”
- The bills would allow any individual or non-profit organization entitled to bring an action under Section 349 “on behalf of himself or herself and such others to recover actual, statutory and/or punitive damages or obtain other relief as provided for in this article.” In such an action, statutory damages would be limited to $1,000 for each named plaintiff and “such amount as the court may allow for all other class members without regard to a minimum individual recovery, not to exceed the lesser of one million dollars or two per centum of the net worth of the business.”
- The bills include a provision intended to give non-profits “tester standing.” It would allow a non-profit organization to bring an action under Section 349 on behalf of itself or any of its members, or on behalf of members of the general public “who have been injured by reason of any violation of this section, including a violation involving goods or services that the non-profit organization purchased or received in order to test or evaluate qualities pertaining to use for personal, family, or household purposes.” Although additional analysis would need to be undertaken, this provision might run afoul of the Federal Arbitration Act (FAA) if the beneficiaries of a “tester” action were parties to an otherwise enforceable arbitration agreement that covered the claims asserted. Alternatively, any relief obtained in such a “tester” action might be limited to persons who are not parties to an arbitration agreement, even if the named plaintiff did not agree to arbitrate. As the U.S. Supreme Court has emphasized, “states [cannot take steps that] … conflict with the FAA or frustrate its purpose to ensure that private arbitration agreements are enforced according to their terms …. States cannot require a procedure that is inconsistent with the FAA, even if it is desirable for unrelated reasons …. [State law is preempted if it] “stands as an obstacle to the accomplishment and execution of the full purpose and objectives of Congress ….”