| State of N.Y. Workers' Compensation Bd. v 26-28 Maple Ave.,Inc. |
| 2011 NY Slip Op 00475 [80 AD3d 1135] |
| January 27, 2011 |
| Appellate Division, Third Department |
| State of New York Workers' Compensation Board,Plaintiff, v 26-28 Maple Avenue, Inc., et al., Defendants, and Dan Hudon Sales, Inc., etal., Defendants and Third-Party Plaintiffs-Respondents. Scalzo, Zogby & Wittig, Inc.,Third-Party Defendant-Appellant. |
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Garry, J. Appeal from that part of an order of the Supreme Court (McDonough, J.), enteredOctober 26, 2009 in Albany County, which partially denied third-party defendant's motion todismiss the third-party complaint.
In 2004, 2005 and 2006, defendants Dan Hudon Sales, Inc. and Hudon's Sled Salvage, Inc.(hereinafter collectively referred to as Hudon) were members of the ManufacturingSelf-Insurance Trust (hereinafter MSIT), a workers' compensation group self-insured trust(see Workers' Compensation Law § 50 [3-a]; 12 NYCRR part 317). In 2006,plaintiff informed [*2]MSIT that the trust was operating with asignificant deficit, did not meet financial standards, and could not be restored to financialstability in a timely and appropriate manner. MSIT's trustees agreed to dissolve the trust, andplaintiff then assumed responsibility for its administration and dissolution. In May 2008, plaintiffcommenced this action to recover a multimillion dollar fund reserve deficit from numerousformer MSIT members, including Hudon. Based on its three-year participation in MSIT, Hudonwas alleged to be jointly and severally liable for a portion of the total sum claimed. Hudonthereafter commenced a third-party action against its insurance broker/agent, third-partydefendant, Scalzo, Zogby & Wittig, Inc. (hereinafter SZW), asserting, among other causes ofaction, the violation of General Business Law § 349. SZW answered and moved to dismissthe third-party complaint. Hudon did not oppose the motion. Supreme Court granted SZW'smotion except as to the General Business Law claim. SZW appeals.
General Business Law § 349 declares unlawful "[d]eceptive acts or practices in theconduct of any business, trade or commerce or in the furnishing of any service in this state"(General Business Law § 349 [a]) and grants a private right of action to any person injuredby such acts or practices (see General Business Law § 349 [h]). The party claiminga statutory violation must show that the conduct was consumer-oriented, "that is, an act havingthe potential to affect the public at large, as distinguished from merely a private contractualdispute" (Elacqua v Physicians'Reciprocal Insurers, 52 AD3d 886, 888 [2008]), that the act or practice is "deceptive ormisleading in a material way," and that the party claiming the violation was injured by theconduct (Oswego Laborers' Local 214 Pension Fund v Marine Midland Bank, 85 NY2d20, 25 [1995]; see Baron v Pfizer,Inc., 42 AD3d 627, 628 [2007]).
Defendants allege that SZW engaged in deceptive or misleading conduct by claiming thatmembership in MSIT would result in "significant savings" while failing to advise of the risk ofexposure to joint and several liability. Liberally construing this claim, as we must upon a motionto dismiss (see Leon v Martinez, 84 NY2d 83, 87-88 [1994]), we do not find that theconduct alleged is consumer-oriented within the meaning of General Business Law § 349.The challenged acts or practices need not be recurring or repetitive (see Oswego Laborers'Local 214 Pension Fund v Marine Midland Bank, 85 NY2d at 25), and conduct addressed tobusiness organizations, as opposed to individuals, may be found to be consumer-oriented (seeid. at 26-27), but the application of this provision does require a showing of some potentialthat the conduct will affect consumers at large. "In other words, the deceptive act or practice maynot be limited to just the parties" (Teller v Bill Hayes, Ltd., 213 AD2d 141, 145 [1995],lv dismissed and denied 87 NY2d 937 [1996]). Here, the third-party complaint includesno allegations from which a potential impact on other consumers may be found; it does not allegethat SZW is generally engaged in the business of brokering or selling workers' compensationcoverage, that it used standard documents or methods in selling coverage to Hudon that were orcould have been used to affect other similarly-situated employers, or even that SZW deals withother such employers at all (compareSkibinsky v State Farm Fire & Cas. Co., 6 AD3d 975, 976 [2004]). Instead, theallegations describe a private dispute limited to the methods SZW used to sell coverage to Hudonand demonstrate no means by which those methods could broadly impact any others (see Western Bldg. Restoration Co., Inc. vLovell Safety Mgt. Co., LLC, 61 AD3d 1095, 1102 [2009]).
Even had this "threshold requirement" (New York Univ. v Continental Ins. Co., 87NY2d 308, 321 [1995]) been met, the third-party complaint further failed to sufficiently allegethat SZW had committed a deceptive or misleading act. To meet this objective standard, arepresentation or omission must be "likely to mislead a reasonable consumer acting reasonably[*3]under the circumstances" (Oswego Laborers' Local 214Pension Fund v Marine Midland Bank, 85 NY2d at 26). The potential for joint and severalliability inherent in membership in a workers' compensation group self-insured trust is mandatedby statute (see Workers' Compensation Law § 50 [3-a]; Matter of Aides At Home, Inc. v State ofN.Y. Workers' Compensation Bd., 76 AD3d 727, 728 [2010]). Thus, Hudon couldreasonably have obtained this information from another source (compare Oswego Laborers'Local 214 Pension Fund v Marine Midland Bank, 85 NY2d at 27). Moreover, upon joiningMSIT, Hudon's officers executed participation agreements acknowledging, among other things,that Hudon would be jointly and severally liable for all participants' workers' compensationobligations during its membership and that it might be required to pay additional amounts tomeet these obligations.[FN*]Thus, affording a liberal construction to the third-party complaint, accepting its allegations astrue, and according the benefit of every favorable inference to Hudon (see Bordeleau v State of New York, 74AD3d 1688, 1688 [2010]), no claim pursuant to General Business Law § 349 wasstated, and SZW's motion to dismiss the claim pursuant to CPLR 3211 (a) (7) should have beengranted. This determination makes it unnecessary to address SZW's further argument that thecomplaint should have been dismissed based upon documentary evidence (see CPLR3211 [a] [1]).
Mercure, J.P., Rose, Lahtinen and Kavanagh, JJ., concur. Ordered that the order is modified,on the law, with costs to third-party defendant, by reversing so much thereof as partially deniedthird-party defendant's motion to dismiss the third-party complaint; motion granted in its entiretyand third-party complaint dismissed; and, as so modified, affirmed.
Footnote *: No representative of SZWsigned the participation agreements, and the record does not indicate whether the agreementswere furnished by SZW or by some other entity.