Deceptive Business Practices

New York has a statute, General Business Law Section 349, barring deceptive business practices that is very favorable to an injured consumer. A common deceptive practice is a bait-and-switch, where the seller advertises a product for sale at a very attractive price; then when the purchaser tries to make the purchase, the seller says its out of that product, and offers an alternative at a standard market price. Similarly, a false description of the product could be a deceptive business practice.

The statute, has a safe harbor for prospective defendants. If the defendant's conduct complies with a regulation of the Federal Trade Commission, he has a complete defense.

Significantly, the statute permits recovery of as much as three times a plaintiff's actual damages. Thus a claim for a deceptive business practice can significantly increase a defendant's exposure and is worth bringing in conjunction with other claims.

And under the statute, the court may award attorneys fees to persons injured by deceptive trade practices. It can't be over emphasized that the economics of the litigation often determines the outcome. So if the plaintiff knows that he has a chance of being reimbursed for his attorneys fees, he can litigate longer and harder. By the same token, the defendant will know that he may have to pay for the plaintiff's attorneys fees. That significantly increases the defendant's exposure, and may tip the scales in favor of the creditor.

But plaintiff has to be a consumer. Being a consumer usually means someone who purchases the goods for home or personal use, rather than for a business. But Section 349 only requires that the conduct have a broad impact, even though the impact may be on persons purchasing the goods for a business use. So, for example, if a seller of Xerox paper is engaged in a deceptive practice that affects every purchaser of the paper, even if the paper is being purchased for a business purchase, the purchaser is a consumer. In other words, the statute means to exclude unique disputes between the seller and buyer, such as a dispute arising from a unique contract of sale.

At one point, the law was that the purchase of the goods or services had to have occurred in New York State. But later law held that, so long as a deceptive transaction occurred in New York State, the purchase itself need not take place here. In that way, the statute is said to have extraterritorial effect—that is, an effect outside of the territory of New York State.

The statute permits a consumer to seek an order from the court enjoining the continuation of the deceptive practice. Usually when a litigant seeks such an order, he has to show irreparable harm—that is, harm that can’t be compensated for by a money judgment. Typically, showing irreparable harm can be extremely difficult, and many motions for injunctions founder on the movant’s inability to make the showing. But with a deceptive business practice, because the statute itself permits the injunction, it isn’t necessary to show irreparable harm.

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