SUMMARY OF ARTICLE 9 CLASS ACTIONS IN 1999

In 1999 the New York Court of Appeals addressed class certification under CPLR Article 9 and the viability of claims brought under General Business Law 349 [ GBL 349 ]. In Karlin v. IVF America, Inc.2, consumers charged the operators of an in vitro fertilization program [ IVF ] with disseminating false success rates and misrepresenting the health risks associated therewith. While refusing to review an interlocutory order denying class certification3, the Court of Appeals did reverse the Appellate Division's dismissal of the GBL 349 claim4 finding that GBL 349 " appl(ies) to virtually all economic activity and (its) application has been correspondingly broad... A blanket exemption for providers of medical services and products is contrary to the plain language of the statutes "5. In Small v. Lorillard Tobacco Company6, one million New York State consumers claimed that cigarette companies used deceptive commercial practices to sell cigarettes including misrepresenting the addictive nature of nicotine. The Court of Appeals affirmed (1) the denial of class certification on the grounds of unmanageability, predominating individual issues of reliance and damages and the inadequacy of representation7 and (2) the dismissal of the GBL 349 claim [ " fail(ed) to demonstrate that they were ' actually harmed ' or suffered pecuniary injury ( because of defendant's alleged deception ) within the meaning of ( GBL 349 ) " ] 8. Following the logic of the Court of Appeals, the Supreme Court in Geiger v. American Tobacco Company 9, in what may be the last smokers' mass tort class action brought in New York courts, denied class certification on the grounds that individual questions10 predominated over common questions and plaintiffs failed to demonstrate the superiority of class treatment.

Authors

In Banks v. Carroll & Graf Publishers, Inc.11 a class of

" authors of popular fiction " charged their publisher with fraud and breach of contract in failing to pay royalties, either on time or at all, and of using deceptive accounting practices. Notwithstanding individual contractual variations in " royalty rate provisions and other terms regarding payment," the trial court found sufficient commonality and granted class certification. The Appellate Division reversed and held that the plaintiffs failed to show that questions of law or fact predominate over individual issues. The Court explained, "each of the claims would require individualized proof concerning the various bases of liability and are subject to individualized defenses, commonality is lacking notwithstanding any pattern of conduct."

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Travel

In Liechtung v. Tower Air, Inc.12 a class of passengers aboard a scheduled " non-stop " flight from New York to Tel Aviv charged the airline with breach of contract and unjust enrichment for a two hour delay arising from an unscheduled stop in Paris. The Court granted class certification noting the airline's failure to " offer any explanation " for the delay. In Parra v. Tower Air, Inc.13 passengers challenged an air carrier's overbooking policy alleging (1) a violation of 14 CFR Part 250

[ DOT's overbooking rules14 ], (2) discrimination15 in deciding which passengers to bump and (3) fraud, breach of contract and unjust enrichment. The Court held that (1) all claims were preempted by the Airline Deregulation Act16, (2) there is no private right of action under 14 CFR Part 250 and (3), in dicta, that class certification would have been inappropriate given the predominance of individual factual issues. In Meachum v. Outdoor World Corporation17 and its companion class action, Colbert v. Rank America, Inc.18, consumers alleged fraud, unconscionability, breach of contract and violation of GBL 349 in the sale of campground membership contracts. In Meachum the Court denied class action treatment for failing to timely move for certification19 [ 18 month delay ], atypiClass Action Litigationty of claims and inadequacy of representation. In Colbert the Court sustained the GBL 350 [ false advertising ] claim but denied class certification for a variety of reasons including the existence of an arbitration procedure established by the Pennsylvania Attorney General to " resolve complaints against " the defendant. In Dunlevy v. New Hartford Central School, parents commenced a class action for the return of deposits paid for school trips which were canceled by the tour company. The Appellate Division granted summary judgment in favor of the school district, finding that there was no basis for plaintiffs' negligent misrepresentation claim.20

Diet Drugs

In Cunningham v. American Homes Products Corp.21 a class of users of the diet drugs pondimen, redux and phentermine sought establishment of " Court supervised medical monitoring...(to) obtain...medical testing, to evaluate the long term effects of

( diet drugs ) ". In a striking departure from the general reluctance of New York courts to certify mass tort class actions22, the court found that " All class members are threatened by...( The ) failure to test for and disclose adverse effects of ( diet drugs )...predominant common issue... establishing the fund for monitoring and surveillance ". The Court certified a class for medical monitoring excluding those who have already commenced a lawsuit for personal injuries.

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Cars

In Gordon v. Ford Motor Company23, purchasers of 1988 and 1989 Lincoln Continentals claimed a variety of defects and sought certification of a class of 60,000 New Yorkers. In denying certification the Appellate Division noted the predominance of individual questions on the breach of implied warranty claim

[ " ( proof that the ) vehicles are not fit for their ordinary purpose...(requires) inquires directed to each member of the

class " ] and express warranty claim [ " different kinds of warranties covering various components...vehicles manifested various defects " ].

Tax Preparation

In Carnegie v. H&B Block, Inc.24, consumers charged H&R Block with "'lur(ing)' customers...with promises of a ' Rapid Refund ' obtainable through electronic filing of tax returns and then manipulat(ing) them...to take out loans...and pay finance charges ( which are ) then in part ' kicked-back' to Block ". After the action was commenced, but before certification, H&R Block inserted an arbitration clause in its loan applications barring disgruntled customers from participating in any class action. The Court first found that it had authority to control pre-certification contact between the defendant and potential class members. Next the Court held that enforcement of the arbitration clause would be conditioned on protecting the rights of potential class members to participate in the instant class action unless they chose not to.

Property Owners

In Godwin Realty Associates v. CATV Enterprises, Inc.25, building owners charged CATV with "' tapp(ing) in '" into the electric circuitry of the building, converting electric power without compensation and damaging the interior and exterior of the building by installing cable television. The Court denied defendant's motion for summary judgment and granted class certification to the conversion and property damage claims.

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Sewage Grinder Pumps

In Huff v. C.K. Sanitary Systems, Inc.26, homeowners sought a declaration that the company operating a " pressurized sewer system serving homes, owned ( the ) sewage grinder pumps in their homes and had a statutory duty to service and maintain ( these ) pumps ". When the grinder pumps, installed to " pulverize the waste ", became defective, the developer disclaimed ownership and denied any responsibility for repair. The Court granted class certification and summary judgment finding the defendant responsible for repair of the pumps.

Eye Care Products

In Kramer v. Bausch & Lomb, Inc.27, contact lens users charged the defendant with deceptive business practices in selling three chemically identical eye care products and charging different prices. Plaintiffs asserted that defendant's labeling disguised the " identiClass Action Litigationty and interchangeability of the ingredients...created the impression (they) should be used in conjunction with each other, notwithstanding the redundancy in ingredients ". In reinstating the complaint the Appellate Division held that plaintiffs' claims were not preempted by the Federal Food, Drug and Cosmetics Act.

The Racetrack Breaks

In Zoll v. Suffolk Regional Off-Track Betting Corp.28 a class of winning bettors charged O.T.B with failing to adhere to the Racing, Pari-Mutual Wagering and Breeding Law [ " the Bettors' Law " ]. Specifically, the Bettors' Law required OTB to cease using the " breaks " which " refers to the rounding down of winnings to be paid out to winning bettors ". The class sought to recover the difference between what was paid out to winning bettors and what should have been paid out under the Bettors' Law. The Court dismissed the Complaint for a lack of individual standing29 for failing to file a notice of claim with OTB.

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Tobacco Settlement

In State v. Philip Morris Inc.30 the Appellate Division approved a settlement by the Supreme Court31of an action brought by the Attorney General against the tobacco companies seeking reimbursement for Medicaid losses arising from tobacco-related illnesses. The Appellate Division found that the " intra-State allocation of the settlement funds " [ 60/40 population/Medicaid spending basis ] was not unfair and any procedural flaws in the settlement process were insufficient to justify reversal.

Insurance

In Makastchian v. Oxford Health Plans, Inc .32 a class action was previously certified on behalf of insureds challenging retroactive termination of " health care coverage without prior notification ". Subsequently, defendants moved to decertify those claims based upon a revised contract which " states explicitly that no notice will be given for termination due to non-payment of benefits ". The Court decertified a portion of the class ordering defendant to pay the cost of notice and granted plaintiffs summary judgment on the liability issue of the breach of contract and GBL 349 claims. In Della Rocco v. City of Schenectady33, retired firefighters and police officers brought separate class actions seeking a declaration that the city breached a collective bargaining agreement. The Court affirmed summary judgment and held that the classes were entitled to the same or equivalent health insurance coverage as that in effect when they retired.

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Shippers

In Strategic Risk Management, Inc. v. Federal Express Corp.34, a class of shippers sued Federal Express seeking a refund of " an improperly collected Federal tax ", the statutory authority for which had expired when Congress failed to extend the taxing statute. The Court held that because the action sought the refund of a tax it must be brought in Federal Court. In addition, plaintiffs' common law claims of breach of contract and fraud and violation of GBL 349 were preempted by the Airline Deregulation Act.35

Telephones

In Judicial Title Insurance Agency v. Bell Atlantic,36 a class telephone users sought refunds regarding " the use of 800 numbers assigned to plaintiff and the malfunction of these numbers ". The Court refused to dismiss the action on the grounds of the filed tariff doctrine or the alleged primary jurisdiction of the FCC. The granted class certification " for the limited purpose of ascertaining the names and addresses of ( class ) members " and found the gross negligence claim legally sufficient [ " prolonged duration of the problems...refusal ( of ) telephone company to take responsibility " ].

Internet Services

In Di Lorenzo v. America Online, Inc., 37fourteen New York class actions brought against AOL were stayed pending the outcome of a similar nationwide class action filed in the Illinois. All of the class actions charged AOL with deceptive business practices in changing its billing to an unlimited use plan without proper notice. Subsequent to the settlement of the Illinois class action, AOL moved to enforce a forum selection clause in its contracts requiring consumers to bring all lawsuits in Virginia. The Court granted this motion and dismissed all of the New York class actions.

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Social Services Recipients

In Marzec v. DeBuono, petitioner brought an Article 78 proceeding challenging the method used for determining financial eligibility to receive medical assistance benefits under Medicaid. The Appellate Division affirmed class certification finding that the governmental operations rule does not bar class action certification "where the [petitioner's] ability to commence individual suits is highly compromised, due to indigency or otherwise."38 In Alvarino v. Wing, individuals who were ineligible for food stamps brought an action challenging the statute which restricted their eligibility for benefits. The Court affirmed the trial court's denial of class certification finding that "[c]lass certification is unwarranted since 'governmental operations are involved, and . . . subsequent petitioners will be adequately protected under the principles of stare decisis'."39 In Mitchell v. Barrios-Paoli, disabled public assistance recipients brought an action against state and city officials alleging discrimination in the administration of the city's Work Experience Program. The Appellate Division decertified the class finding that plaintiffs were not similarly situated, individual issues predominated and to the extent that there were common questions, the governmental operations rule applied.40

Lien Law

In Development Team Inc. v. Promatech, Inc. 41A subcontractor filed a lien for $47,000 for services provided and commenced a class action seeking to impose a trust pursuant to Lien Law Section 77. The Court denied class certification because plaintiff failed " to identify even one other member of the proposed class ". In addition, " the project is substantially complete and ( no ) other liens ( have been ) filed against it ".

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FOOTNOTES

1 Thomas A. Dickerson is a Westchester County Court Judge and author of Class Actions: The Law of 50 States, Law Journal Press. Kenneth A. Manning is a partner in Phillips, Lytle, Hitchcock, Blaine & Huber in Buffalo.

2 Karlin v. IVF America, Inc., 93 N.Y.2d 282, 690 N.Y.S.2d 495, 712 N.E.2d 662 ( 1999 ).

3 Id. at 690 N.Y.S.2d 498 [ " order affirming the denial of... class action certification does not necessarily affect the final judgment " ].

4 Karlin v. IVF America, Inc., 239 A.D.2d 562, 657 N.Y.S.2d 460

(2nd Dept. 1997 ).

5 See N. 1 at 690 N.Y.S.2d 499.

6 Small v. Lorillard Tobacco Company, 94 N.Y.2d 43 ( 1999 ).

7 Id. [ " No cogent basis has been presented upon which this Court should disturb that court's decertification-of-classes ruling " ].

8 Id. [ " flawed ' deception as injury ' theory " ].

9 Geiger v. American Tobacco Company, 696 N.Y.S.2d 345

( Sup. Ct. Queens Co.,1999 ).

10 Id. at 696 N.Y.S.2d [ " which type of lung cancer he suffers from...issues of addiction and causation are individual in nature...Statute of limitations...comparative fault " ].

11 Banks v. Carroll & Graf Publishers, Inc., NYLJ March 26, 1999, p. 30, col. 4 ( Sup. Ct. N.Y. Co., 1999 ), reversed 1999 WL 1126501 (1st Dept. Dec. 9, 1999).

12 Liechtung v. Tower Air, Inc., NYLJ, January 11, 1999, p. 34, col. 3 ( Sup. Ct. Nassau Co., 1999 ).

13 Parra v. Tower Air, Inc., NYLJ, July 22, 1999, p. 30, col. 1 ( Sup. Ct. N.Y. Co., 1999 ).

14 See Dickerson, Travel Law, Law Journal Press, 1981-1999, at Section 2.05[4].

15 Id. at Section 2.05[5].

16 Id. at Section 2.02[1][d].

17 Meachum v. Outdoor World Corporation, No. 26917/94, N.Y. Sup., Queens County, Decision Dated April 7, 1999. See earlier decisions denying class certification [ Meachum v. Outdoor World Corporation, 171 Misc. 2d 354, 654 N.Y.S.2d 240 (Sup. Ct. Queens Co., 1996)] and sustaining the GBL 349 claims [ Meachum v. Outdoor World Corporation, 235 A.D.2d 462, 652 N.Y.S.2d 749 (2nd Dept. 1997 )].

18 Colbert v. Rank America, Inc., No. 11140/98,( N.Y. Sup. Ct., Queens County, April 9, 1999.)

19 Class certification was also denied in Hernandez v. Gateway Demolition Corp., 691 N.Y.S.2d 915 (2d Dept. 1999 ) for moving for class certification " one year and three months after the time within which to move to certify a class had expired "

20 Dunlevy v. New Hartford Central School, 697 N.Y.S. 2d 446 ( 4th Dept. 1999 ).

21 Cunningham v. American Home Products Corp., NYLJ September 21, 1999, p. 26, col. 5( Sup. Ct. N.Y. Co., 1999 ).

22 See Ns. 1 & 5, supra. See also Aprea v. Hazeltine Corp., 247 A.D.2d 564, 669 N.Y.S.2d 61 (2d Dept., 1998 )( certification denied to toxic emissions mass tort ); Morgan v. A.O. Smith Corp., 233 A.D.2d 375, 650 N.Y.S.2d 748 ( 2d Dept., 1996 )( grain silos; certification denied ); Komonczi v. Gary Fields, 232 A.D.2d 374, 648 N.Y.S.2d 151 ( 2d Dept., 1996 )( improperly performed colonoscopies; certification denied ).

23 Gordon v. Ford Motor Company, 260 A.D.2d 164, 687 N.Y.S.2d 369 (1st Dept. 1999 ).

24 Carnegie v. H&R Block, Inc., 180 Misc.2d 67, 687 N.Y.S.2d 528 ( Sup. Ct. N.Y. Co., 1999 ).

25 Godwin Realty Associates v. CATV Enterprises, Inc., NYLJ July 14, 1999, p. 26, col. 5 ( Sup. Ct. Bronx Co., 1999 ).

26 Huff v. Sanitary Systems, Inc., 260 A.D.2d 892, 688 N.Y.S.2d 801 ( 3d Dept., 1999 ).

27 25. Kramer v. Bausch & Lomb, Inc., 695 N.Y.S.2d 553 (1st Dept., 1999 ).

28Zoll v. Suffolk Regional Off-Track Betting Corp., 259 A.D.2d 696, 686 N.Y.S.2d 858 ( 2d Dept., 1999 ).

29 Civil Service Employees Association, Inc. v. County of Nassau, 696 N.Y.S.2d 174 ( 2d Dept. 1999 ) dismissed a complaint, brought by a union asserting equivalency claims on behalf of members whose positions were abolished, for a lack of representative standing.

30 State v. Philip Morris Inc., 693 N.Y.S.2d 36 ( 1st Dept. 1999)

31 State v. Philip Morris Inc., 179 Misc.2d 435, 686 N.Y.S.2d 564 ( Sup. Ct. N.Y. Co., 1998 ).

32 Makastchian v. Oxford Health Plans, Inc., Index No. 603653/96, ( N.Y. Sup. 1999.)

33 Della Rocco v. City of Schenectady, 252 A.D.2d 82, 683 N.Y.S.2d 662 ( 3d Dept. 1998).

34 Strategic Risk Management, Inc. v. Federal Express Corp., 253 A.D.2d 167, 686 N.Y.S.2d 35 ( 1st Dept. 1999 ).

35 See N. 15, supra.

36 Judicial Title Insurance Agency, Inc. v. Bell Atlantic, NYLJ July 1, 1999, p. 35, col. 1 ( Sup. Ct. Westchester Co., 1999 ).

37 Di Lorenzo v. America Online, Inc., NYLJ, February 8, 1999, p. 28, col. 5 ( Sup. Ct. N.Y. Co., 1999 ).

38 Marzec v. DeBuono, 697 N.Y.S.2d 788 ( 4th Dept. 1999), citing New York Coalition to End Lead Poisoning v. Giuliani, 245 A.D.2d 49, 668 N.Y.S.2d 90 (1st Dept. 1997)

39Alvarino v. Wing, 690 N.Y.S.2d 262, 263 ( 1st Dept. 1999), citing Matter of Jones v. Berman, 37 N.Y.2d 42, 57, 371 N.Y.S.2d 422 (1975).

40 Mitchell v. Barrios-Paoli, 253 A.D.2d 281, 687 N.Y.S.2d 319 (1st Dept. 1999).

41 The Development Team, Inc. v. Promatech, Inc., New York Law Journal, December 23, 1999, p. 29, col. 3 ( N.Y. Sup. ).

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