Court Opinion

ID: 5488110
Source: CourtListenerOpinion
Date Created: 2022-01-10 02:19:55.58105+00
Date Added: 2024-06-11T08:33:42.536252
License: Public Domain

Smith, J. (dissenting in part).
I agree that General Business Law § 395-a does not create a private right of action, and that for that reason we should answer no to the Second Circuit’s second question: Plaintiffs may not create a private right of action by repackaging a section 395-a violation as a violation of General Business Law § 349. However, I would answer yes to the first question, asking whether parties may seek to have provisions that violate the statute declared void as against public policy.
By the plain language of section 395-a (2)—“No maintenance agreement covering parts and/or service shall be terminated at the election of the party providing such parts and/or service during the term of the agreement”—certain termination clauses are made illegal. It is a corollary of the statute that such clauses may not be enforced, and that courts may declare them unenforceable. To permit a suit to obtain such a declaration is not to recognize a “private right of action” under the statute. As the Second Circuit explained in the opinion in which it certified its questions to us: “The usual implied private right of *174action case seeks to fashion a tort remedy from the violation of a statutory provision.” (Schlessinger v Valspar Corp., 686 F3d 81, 87 [2d Cir 2012].)
The first cause of action in the present complaint is not a tort claim arising out of a statute, but a contract claim arising out of a written agreement. Part of the relief sought on that claim is a declaration that the contract must be enforced without regard to a provision that the legislature has prohibited. If—as all assume for present purposes—the store closure provision has been prohibited by the legislature, the conclusion that it may not be enforced follows.
The Second Circuit, while recognizing the difference between plaintiffs’ contract claim and a “private right of action” as usually understood, questioned whether that distinction would be recognized by the New York courts. In the Second Circuit’s view, the Appellate Division’s decision in Rhodes v Herz (84 AD3d 1 [1st Dept 2011]) put the question in doubt (see Schlessinger, 686 F3d at 87). I would answer that the distinction between a statutory “private right of action” and a contract claim seeking to declare a prohibited clause to be void is indeed recognized by New York law. This does not necessarily mean that Rhodes was incorrectly decided; in that case the plaintiff sought not only a declaration of invalidity, but a refund of all money it had paid under an assertedly illegal contract—thus arguably coming closer than plaintiffs’ contract claim in this case does to asserting a claim for damages arising from the statute. However, to the extent that Rhodes may be read to suggest that, where a statute does not create a private right of action, a private party may not sue to have an illegal contract declared invalid, that suggestion is simply incorrect.
The majority here makes no mention of Rhodes but relies, as did the Federal District Court (Schlessinger v Valspar Corp., 817 F Supp 2d 100, 107-109 [ED NY 2011]), on Kerusa Co. LLC v W10Z/515 Real Estate Ltd. Partnership (12 NY3d 236 [2009]). Kerusa (a case the Second Circuit opinion does not cite) seems to me wholly unlike this case. In Kerusa, we dealt with a complex regulatory scheme designed by the legislature for the protection of purchasers in offerings of cooperative and condominium units. The statute—a section of the Martin Act— required the filing of an offering statement with the Attorney General; prescribed the contents of the offering statement in detail; provided for the Attorney General to review the statement and to require the correction of deficiencies in it; and *175authorized the Attorney General to adopt regulations to carry out its provisions (General Business Law § 352-e, described in Kerusa, 12 NY3d at 243-244). The Attorney General complied by issuing regulations that “fill more than 60 pages in the NYCRR” (id. at 244). We held in substance that the Martin Act’s comprehensive scheme, which conferred “broad regulatory and remedial powers” on the Attorney General (12 NY3d at 244, quoting CPC Intl. v McKesson Corp., 70 NY2d 268, 277 [1987]), preempted any common-law fraud cause of action based on the offering statement.
It is a major stretch, it seems to me, to attribute a similar preemptive intention to the legislature that passed the simple provisions of General Business Law § 395-a. That statute says that, with certain exceptions, termination of maintenance agreements at the election of the party providing parts or service is forbidden (General Business Law § 395-a [2]). It also says that a violation of its provisions “shall be punishable by a civil penalty of not more than three hundred dollars recoverable in an action by the attorney general” (General Business Law § 395-a [4]). Under the majority’s reading of the statute, the Attorney General’s suit for a penalty is an exclusive remedy; in other words, merchants are free to violate the statute as long as the Attorney General does not sue. A merchant may terminate an agreement in the teeth of the statutory words “no maintenance agreement . . . shall be terminated,” leaving the consumer without a remedy. I find it impossible to believe that that is what the legislature intended.
Chief Judge Lippman and Judges Graffeo, Pigott and Rivera concur; Judge Smith dissents in part in an opinion; Judge Abdus-Salaam taking no part.
Following certification of questions by the United States Court of Appeals for the Second Circuit and acceptance of the questions by this Court pursuant to section 500.27 of this Court’s Rules of Practice, and after hearing argument by counsel for the parties and consideration of the briefs and the record submitted, certified questions answered in the negative.