New York's Highest Court Interprets "Consumer" Expansively Under Consumer Protection Statute
The Situation: A recent case before the New York Court of Appeals challenged long-established limitations on the application of New York's main consumer protection provision to goods or services purchased for personal, family, or household use.
The Result: In Himmelstein, McConnell, Gribben, Donoghue & Joseph, LLP, et al. v. Matthew Bender & Co., the New York Court of Appeals determined that New York General Business Law Section 349 covers more than traditional consumer goods and extends to products typically used in business settings, thus protecting businesses and professionals—including legal professionals—from deceptive business practices.
Looking Ahead: This decision broadens the application of New York General Business Law Section 349, thereby leaving New York businesses and entities that do business in New York more exposed to consumer litigation.
On June 3, 2021, the Court of Appeals clarified the scope of New York General Business Law Section 349, a frequently invoked consumer protection provision. The Court held that Section 349 protects consumers from the deceptive acts or practices of businesses regardless of the use of the products purchased. In so doing, the Court expressly overruled decades-old First Department precedent, commonly cited across federal and New York State jurisdictions, that limited the provision's application to goods or services purchased for personal, family, or household use.
The First Department precedent based this limit on Section 349's use of the word "consumer," which was construed narrowly in light of the word's use elsewhere in New York statutes. The Court of Appeals rejected this narrow interpretation because, unlike other provisions, Section 349 broadly prohibits "[d]eceptive acts or practices in the conduct of any business, trade or commerce."
In Himmelstein, McConnell, Gribben, Donoghue & Joseph, LLP, et al. v. Matthew Bender & Co., legal professionals brought a putative class action against the publisher of an annual treatise—"New York Landlord-Tenant Law"—claiming that the publisher misrepresented the treatise's scope. While the treatise's overview described certain sections as containing "selected" laws and provisions, the overview indicated that the treatise contained "the" rent stabilization and rent control laws and regulations for New York City and State. The plaintiffs interpreted the latter to mean a complete reproduction of all relevant laws and regulations. The plaintiffs claimed that several provisions relating to rent laws and regulations were missing or inaccurate, and sued the publisher for violation of Section 349's prohibition on deceptive business practices.
To succeed on a Section 349 claim, a plaintiff must allege that the defendant's conduct (i) was consumer-oriented; (ii) was materially deceptive; and (iii) resulted in an injury to the plaintiff. Relying on Appellate Division precedent, the trial court ruled that the plaintiffs failed to plead the "consumer-oriented" element because consumers are those who "purchase goods and services for personal, family, or household use," whereas the plaintiffs had purchased the treatise in their capacity as legal professionals. The trial court found that the sale and marketing of the book was not directed at consumers at large and thus not sufficiently consumer-oriented. The trial court granted the defendant's motion to dismiss, and the Appellate Division affirmed on different grounds.
The COA's Holding
The Court of Appeals dismissed the complaint. The Court held that no reasonable consumer would have been misled as to the treatise's contents because the sales contract expressly disclaimed their "accuracy, reliability[, and] currentness" and statutes and regulations are always subject to revision. Further, the plaintiffs had agreed to pay an additional fee for updates to the treatise between publications, thereby demonstrating an awareness that the treatise may not be a complete and accurate compilation of the law at a particular time.
More significantly, the Court rejected the trial court's definition of "consumer," which had been drawn from influential Appellate Division precedent. The Court found that neither the text nor the purpose of Section 349 supported the Appellate Division's narrow reading of "consumer" based on a consumer's particular use of a product. The Court held that legal professionals are a "subclass of consumer" and that conduct need not be directed at all members of the public to be consumer-oriented. Further, the defendant's conduct was directed at a broad consumer base and not merely a "private contract dispute, unique to the parties." Finding the defendant's conduct sufficiently consumer-oriented, the Court held the plaintiffs succeeded in pleading the first element of a Section 349 claim.
The Himmelstein decision is a significant expansion of Section 349, interpreting it to include goods and services sold to businesses and professionals for use in business, not just products or services sold for personal use. The Court emphasized the New York legislature's intent to protect the public against all forms of deceptive business practices.
The ruling forewarns New York businesses, and others doing business in the state, to review marketing materials and sales practices targeting businesses for misleading messages. Disclaimers that, like the disclaimer in Himmelstein, specifically address such messages may mitigate or eliminate the potential for deception and thus reduce the risk of liability under Section 349.
Also, the ruling suggests that New York consumer protection law is less than settled. Those doing business in New York should monitor further developments.
Stephanie Pryor, in the New York Office, assisted in the preparation of this Commentary.
Two Key Takeaways
1. General Business Law Section 349 should now be understood to cover even products used only in a business setting—not just goods or services purchased for personal, family, or household use—and to protect businesses and professionals from deceptive business practices in New York.
2. Those doing business in New York should ensure that their sales and marketing practices are appropriate in the context of Section 349. Targeted disclaimers may help them do so.
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