NY Gen Bus L § 689 (2021)
2021 New York Laws GBS - General Business Article 33 - Franchises 689 - Action by the Department of Law.

§  689.  Action  by  the department of law. 1. Whenever the department shall believe from evidence satisfactory  to  it  that  any  person  has engaged  in  or  is  engaged in or is about to engage in any practice or transaction heretofore referred to as and declared to be an unlawful  or a  fraudulent practice, it may bring an action in the name and on behalf of the people of the state of New York against such person and any other person theretofore concerned in or in  any  way  participating  in  such unlawful  or  fraudulent practice, to enjoin such person or persons from continuing such unlawful and fraudulent practice or engaging therein  or doing  any  act  or  acts  in  furtherance thereof or, if the department should believe from such evidence that such person actually  has  or  is engaged  in  any such unlawful or fraudulent practice, it may include in such action an application to enjoin permanently such  person  and  such other  person  as  may  have been or may be concerned with or in any way participating in such unlawful or fraudulent practice, from  selling  or offering  for  sale  within  or from this state as franchisor, franchise sales agent, franchise salesman, or a principal thereof,  any  franchise offered  or to be offered or sold, or from continuing any such practice. In said action an order or a judgment may be entered awarding the relief applied for or so much thereof as the court  may  deem  proper.  Upon  a showing  by the department in its application for a permanent injunction hereunder that the defendant named in the action or an  officer  thereof has  refused  to  be  sworn  or  to  be examined or to answer a material question or to produce a book or paper relevant to the inquiry when duly ordered to do so by the officer or judge duly conducting an inquiry into the subject matter  forming  the  basis  of  the  application  for  such injunction,  such refusal shall be prima facie proof that such defendant is or has engaged in an unlawful or fraudulent practice as set forth  in such  application  and a permanent injunction may issue from the supreme court without further showing by the department. In  an  action  brought under  this  section  the  court may award to the plaintiff a sum not in excess of ten thousand dollars  for  each  defendant  as  an  additional allowance.   2.  Upon  a  showing  by  the  department,  in  an  application for an injunction, that any person engaged in the offer or sale of a  franchise in  this  state  has  ever  been  convicted  by  a  court  of  competent jurisdiction in any state or county  of  any  felony  or  of  any  other criminal  offense  by  any  such  court,  whether  or not constituting a felony, involving franchises, securities or subdivided land, the supreme court after a hearing may issue  a  permanent  injunction  awarding  the relief  applied  for,  or  so much thereof as the court may deem proper, against such person shown to have been so convicted,  in  the  form  and manner  provided  for  in subdivision one of this section in the case of one who actually has  or  is  engaged  in  any  unlawful  or  fraudulent practice.   3. If a franchise is offered or sold within the state of New York by a non-resident  person and such non-resident person has not filed pursuant to laws heretofore or hereafter existing the  designation  of  a  person upon  whom process against him or it may be served or the designation of the secretary of state as such  person,  pursuant  to  section  thirteen hundred four of the business corporation law or other laws heretofore or hereafter  existing,  or  in lieu thereof, an instrument in writing duly acknowledged  and  filed  in  the  office  of  the  secretary  of  state designating the secretary of state as the person upon whom may be served any  subpoena,  subpoena  duces  tecum or other process directed to such non-resident person and issued  in  any  investigation,  examination  or proceeding  pending  or about to be instituted under and pursuant to the provisions of this article, the department may serve a notice upon  such  non-resident  person  by  mailing the same in a securely sealed postpaid wrapper addressed to such non-resident person at its or his  last  known place of business or residence, and may in such notice require that such non-resident  person furnish a written statement under oath, as required in said notice, giving the information therein specified relating to the franchise offered, to be offered or sold in the state  of  New  York  by such  non-resident person or, in the alternative, that such non-resident person shall appear within a reasonable time from the  date  of  mailing such  notice at a designated place within this state for examination and shall produce at the time and place of such examination such  books  and papers of such non-resident person as may be designated in such notice.   If  such  non-resident person shall fail to appear pursuant thereto or to produce the books and papers required  thereby  to  be  produced,  or shall  refuse to submit to examination or to answer any proper question, the proof of such  failure  or  refusal  shall  constitute  prima  facie evidence  that  the  offer  or  sale of a franchise by such non-resident person constitutes a fraudulent practice and may in  the  discretion  of the  court  be  treated as a sufficient basis for a permanent injunction against the continuance of such fraudulent practice.   4. In any action  brought  by  the  department  as  provided  in  this article,  the  court  at  any  stage  of  the  proceedings may appoint a receiver of any and all property derived by the defendant or  defendants or  any  of  them  by means of any such unlawful or fraudulent practice, including also all property with which such property has been commingled if  such  property  cannot  be  identified  in  kind  because  of   such commingling,  together  with  any  or  all  books  of account and papers relating to the same. The judgment entered in such  action  may  provide that  such  receiver  shall  take  title to any or all such property and books of account and papers relating to  the  same  and  liquidate  such property  or any part thereof for the benefit of all persons intervening in the said action and establishing an interest in  such  property.  The judgment  may  also  provide  that  all  such  property, the title to or interest in which has not been established in such action by intervenors or otherwise by due process to be in a  person  or  persons  other  than defendant   or  defendants,  shall  be  returned  to  the  defendant  or defendants as their interest may appear. Such receiver shall be  subject to  all  the  duties of receivers in civil actions as far as practicable except that such provisions relating to commissions or  compensation  of receivers  shall  not  be  applicable to receivers appointed pursuant to this section, but such commissions or compensations shall  be  fixed  by the court in any amount which it may determine to be just and equitable. In  any action brought by the department as provided in this article the court may grant such other and further relief as may be proper.   5. Whenever the department has determined to commence an action  under this article, it may present to any justice of the supreme court, before beginning  such action, an application in writing for an order directing the person or persons mentioned in the application to appear before  the justice  of  the  supreme  court or referee designated in such order and answer such questions as may be put to them or to any  of  them,  or  to produce such papers, documents and books concerning the alleged unlawful or  fraudulent  practices  to  which the action which the department has determined to bring relates, and it shall be the duty of the justice  of the  supreme  court  to  whom  such application for the order is made to grant such application. The application for such order may  simply  show upon information and belief that the testimony of such person or persons is  material and necessary. The provisions of the civil practice law and rules, relating to an application for an order for  the  examination  of witnesses  before  the  commencement  of  an  action  and  the method of  proceeding on  such  examination,  shall  not  apply  except  as  herein prescribed.  The  order  shall  be granted by the justice of the supreme court to whom the  application  has  been  made  with  such  preliminary injunction  or  stay  as  may  appear  to  such justice to be proper and expedient and shall specify the time when and place where the  witnesses are  required  to  appear.  The  justice  or  referee  may  adjourn such examination from time to time and witnesses must attend accordingly. The testimony of each witness must be subscribed by him and must be filed in the office  of  the  clerk  of  the  county  in  which  such  order  for examination is filed.   6. The order for such examination must be signed by the justice making it,  and service of a copy thereof with an endorsement by the department to the effect that the person named therein is required to appear and be examined at the time and place before the justice and referee  specified in  such  endorsement,  shall be sufficient notice for the attendance of witnesses. Such endorsement may contain a clause requiring  such  person to  produce  at  such examination all books, papers and documents in his possession or  under  his  control  relating  to  the  subject  of  such examination.    The  order  shall be served upon the person named in the endorsement aforesaid by delivering to and leaving  with  it  or  him  a certified  copy  thereof,  endorsed  as  above  provided, subject to the payment of witness fees and mileage as and when provided to be  paid  by paragraph (b) of subdivision four of section six hundred eighty-eight of this  article  in  connection  with  attendance  pursuant  to  subpoenas authorized to be issued under said section. Service of such an order may also be served under section six hundred eighty-six of this  article  in cases falling thereunder.   7. The referee appointed as provided in this article possesses all the powers  and  is  subject  to  all the duties of a referee appointed in a civil action, so far as practicable,  and  may  punish  for  contempt  a witness  duly  served  with the papers as prescribed in this article for non-attendance or refusal to be sworn or to testify or to produce books, papers and documents according  to  the  direction  of  the  endorsement aforesaid  in  the  same  manner  and to the same extent as a referee to hear, try and determine an issue of fact or law.   8. Any person against whom a permanent  injunction  has  been  granted under  the  provisions of this article may apply to the supreme court at any time upon at least sixty days notice to the department for an  order dissolving  such  injunction  or  modifying the same upon such terms and conditions as the court deems necessary or desirable.  Such  application for  dissolution  or  modification  of  such  injunction shall contain a recitation of the facts and circumstances which caused the  granting  of the  injunction;  the occupation and employment of the person making the application and his financial remuneration therefrom since the time  the injunction was granted; his net worth at the time of the application and the  source  thereof;  together  with  any  other facts bearing upon the reasonableness of the application and the character of the applicant  as may  enable  the  court  to issue an order that will properly dispose of such application in the interest of justice. A copy of such  application together  with  copies  of  any other papers in support thereof shall be served upon the department at least sixty days prior to the return  date thereof.  In  addition thereto the applicant shall file with the court a good and sufficient surety bond in  the  sum  of  one  thousand  dollars guaranteeing that he will pay all costs and expenses of an investigation by  the  department  of  such  applicant  and  the statements and claims alleged in the application together with any further investigation which the department may deem necessary or desirable to determine  whether  it should  consent  to the application, oppose the same, or make such other  recommendations to the court as in  its  opinion  are  desirable  to  be included in any modification of such injunction. Should it appear in the course  of  such  investigation  by  the department that said sum is not sufficient,  the  department  may  apply to the court by usual notice of motion or order to show cause for an increase in the amount of  security or  further  surety  bond necessary to fully pay all of the costs of the investigation and the  court  may  require  such  further  bond  as  the situation   requires  to  fully  pay  the  costs  and  expenses  of  the investigation. Upon the completion of such investigation, the department may file an answer to such application setting forth such facts  as  are pertinent  to the determination by the court of the matter before it and whether said injunction should be dissolved, modified  or  continued  in whole  or  in part and what conditions, if any, shall be attached to any dissolution or modification of said injunction.  After  a  hearing  upon such application and after any further investigation, proof or testimony which  the  court may desire has been offered, or at any adjourned dates thereof, the court may make  a  final  order  dissolving  the  permanent injunction  or  modifying  the same upon such terms and conditions as in its opinion are just and desirable, or in its discretion  may  deny  the application. Such order shall contain a direction that the applicant pay to  the  department  the  costs  and  expenses  of  the investigation in connection with the proceeding, and any judgment entered thereon may  be enforced  directly against the surety on the bond. The court shall grant no temporary or other relief from the  injunction  in  force  pending  a final  determination  of  such  application.  No  application under this subdivision shall be entertained:  (a) in any case where the applicant has been convicted of a felony  or a  crime  that  would  be a felony if committed in the state of New York since the issuance of the injunction, nor  (b) in any case where the injunction was granted incident to a felony, or the applicant has been convicted at any time of any felony  involving franchises  which  are  the  subject  matter  of this article. Nor shall anything contained in this  subdivision  be  construed  to  deny  to  or interfere  with the power of the department to bring any other action or proceeding, civil or criminal, against the applicant at any time.   9. The provisions of the civil practice law and rules shall  apply  to all  actions  brought  under  this  article  except  as herein otherwise provided.