Nick's Garage, Inc. v. Progressive Casualty Insurance Company
Filing
22
MEMORANDUM-DECISION AND ORDER granting in part and denying in part 7 Motion to Dismiss for Failure to State a Claim: ORDERS that Defendant's motion to dismiss is GRANTED in part and DENIED in part; and the Court further ORDERS that Plaintiff& #039;s quantum meruit cause of action is DISMISSED; and the Courtfurther ORDERS that Plaintiff's GBL § 349 cause of action is DISMISSED in part as to those claims that are barred by the three-year statute of limitations; and the Court furth er ORDERS that Defendant's motion is DENIED in all other respects; and the Court further ORDERS that the Clerk of the Court shall serve a copy of this Memorandum-Decision and Order on all parties in accordance with the Local Rules. Signed by U.S. District Judge Mae A. D'Agostino on 2/27/13. (ban)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
____________________________________________
NICK'S GARAGE, INC.,
Plaintiff,
vs.
5:12-cv-777
(MAD/DEP)
PROGRESSIVE CASUALTY INSURANCE
COMPANY,
Defendant.
____________________________________________
APPEARANCES:
OF COUNSEL:
BOUSQUET HOLSTEIN PLLC
100 West Fayette Street, Suite 900
Syracuse, New York 13202
Attorneys for Plaintiff
CECELIA R. CANNON, ESQ.
LAWRENCE M. ORDWAY, JR., ESQ.
NELSON, LEVINE, DE LUCA &
HAMILTON
One Battery Park Plaza – 32nd Floor
New York, New York 10004
Attorneys for Defendant
KYMBERLY KOCHIS, ESQ
Mae A. D'Agostino, U.S. District Judge:
MEMORANDUM-DECISION AND ORDER
I. INTRODUCTION
On March 30, 2012, Plaintiff commenced this suit by filing a complaint in New York
State Supreme Court, in Onondaga County. See Dkt. No. 1. In the complaint, Plaintiff asserts
claims of breach of contract, quantum meruit, and violations of New York General Business Law
§ 349. See id. On May 10, 2012, Defendant removed the action to this Court based upon
diversity of citizenship. See id.
Currently before the Court is Defendant's motion to dismiss, brought pursuant to Rule
12(b)(6) of the Federal Rules of Civil Procedure.1
II. BACKGROUND
Plaintiff, a corporation with its principal place of business in New York, is an automobile
repair shop located in Syracuse, New York. See Dkt. No. 1-1 at ¶¶ 1, 10, 18. Defendant is an
insurance company organized under the laws of the state of Ohio, with its principal place of
business in Mayfield Village, Ohio. See id. at ¶ 2.
On a number of occasions between 2007 and 2011, Plaintiff repaired vehicles for
customers whose repairs were to be paid by Defendant. See id. at ¶¶ 7-9. According to Plaintiff,
these customers fall into two categories, the "First Party Assignors" and the "Third Party
Assignors" (collectively, the "Assignors"). Although the theories of recovery differ for these two
types of assignors, Plaintiff alleges that Defendant was obligated to repair the vehicles of all of
the Assignors to their pre-accident condition.
As to the First Party Assignors, Defendant was the insurer of the vehicles being repaired.
See id. at ¶ 7. In the complaint, Plaintiff identifies several of these First Party Assignors, who
were specifically identified by their unique claim number, policy number, and vehicle
identification number. See id. at ¶¶ 4, 6, 7. According to Plaintiff, these First Party Assignors
were in privity with Defendant and Defendant was required by the listed insurance policies "to
The Court notes that there are currently four other cases pending which share an identity
of issues to the present matter. See Jeffrey's Auto Body, Inc. v. State Farm Gen. Ins. Co., No.
5:12-cv-635 (MAD/DEP); Nick's Garage, Inc. v. Progressive Casualty Ins. Co., No. 5:12-cv-777
(MAD/DEP); Jeffrey's Auto Body, Inc. v. Progressive Casualty Ins. Co., No. 5:12-cv-776
(MAD/DEP); and Nick's Garage, Inc. v. Nationwide Mutual Ins. Co., No. 5:12-cv-868
(MAD/DEP).
1
2
provide enough coverage to restore the Vehicles to the same condition they were in immediately
prior to the Accidents." See id. at ¶¶ 9, 22. Plaintiff claims that the First Party Assignors
assigned their rights under the specified policies to Plaintiff, and that Defendant breached the
policies by providing an insufficient estimate to return the vehicles to their pre-accident
condition. See id. at ¶¶ 9, 14.
As to the second category of customers – i.e., the Third Party Assignors – Plaintiff
repaired vehicles which were not directly insured by Defendant. See id. at ¶ 8. Rather, these
vehicles were damaged by drivers who were insured by Defendant. Accordingly, Plaintiff alleges
that Defendant's contractual relationship was with its tort-feasor insured, not with the Third Party
Assignors, and that Defendant accepted liability on behalf of its insured for the repairs to the
Third Party Assignors' vehicles by making partial payment for the claimed repairs. See id. at ¶ 8.
Plaintiff claims that this assignment by the Third Party Assignors covered the Third Party
Assignors' right to bring claims under New York State General Business Law § 349 and quantum
meruit.
Specifically, Plaintiff contends that all of the Assignors brought their vehicles to Plaintiff
for repairs after being damaged during accidents. See id. at ¶¶ 6, 10. Each of the Assignors made
Plaintiff his or her "designated representative" pursuant to New York regulation. See id. at ¶ 11.
A designated representative is authorized to negotiate with an insurer on behalf of a customer for
repairs to a vehicle. See 11 N.Y.C.R.R. § 216.7(a)(2). In connection with each vehicle, Plaintiff
sent Defendant an estimate of the repairs necessary to return the vehicles to their pre-accident
condition. See Dkt. No. 1-1 at ¶ 12. Plaintiff alleges that Defendant then submitted estimates to
Plaintiff which were insufficient to restore the vehicles to their pre-accident condition. See id. at
¶¶ 13-14. Thereafter, Plaintiff contends that it served upon Defendant Notices of Deficiencies
3
informing Defendant "that there were open items and that an agreed upon amount had not been
reached for the repairs[.]" See id. at ¶ 15. Plaintiff alleges that, although it still completed the
repairs necessary to return the vehicles to their pre-accident condition, Defendant failed to fully
pay for those repairs, thereby violating its contractual and regulatory obligations to put the
vehicles in their pre-accident condition. See id. at ¶¶ 18-19, 22, 27.
The complaint contains three causes of action. Plaintiff's first cause of action seeks
$70,642.18 from Defendant for allegedly breaching the First Party Assignors' insurance policies
and for violating New York State Insurance Law and regulations. See id. at ¶¶ 21-23. Plaintiff's
second cause of action sounds in quantum meruit and seeks $94,135.05 based on Defendant's
alleged acceptance of the benefit of Plaintiff's services in fulfillment of Defendant's obligation to
return the vehicles to their pre-accident condition without adequately compensating Plaintiff. See
id. at ¶¶ 24-28. Plaintiff's third cause of action seeks $40,000 ($1,000 per violation) and
reasonable attorneys' fees for Defendant's alleged deceptive business practices in violation of
New York State General Business Law ("GBL") § 349. See id. at ¶¶ 29-36. In this claim,
Plaintiff alleges that Defendant's "failure to negotiate all elements of the claim" and pay the
amount necessary to restore the vehicles to their pre-accident condition constitutes a deceptive
business practice under GBL § 349. See id. at ¶¶ 32-34.
Currently before the Court is Defendant's motion to dismiss brought pursuant to Rule
12(b)(6) of the Federal Rules of Civil Procedure. See Dkt. No. 15.
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III. DISCUSSION
A.
Standard of review
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A motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6) of the Federal
Rules of Civil Procedure tests the legal sufficiency of the party's claim for relief. See Patane v.
Clark, 508 F.3d 106, 111-12 (2d Cir. 2007) (citation omitted). In considering the legal
sufficiency, a court must accept as true all well-pleaded facts in the pleading and draw all
reasonable inferences in the pleader's favor. See ATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 493
F.3d 87, 98 (2d Cir. 2007) (citation omitted). This presumption of truth, however, does not
extend to legal conclusions. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation omitted).
Although a court's review of a motion to dismiss is generally limited to the facts presented in the
pleading, the court may consider documents that are "integral" to that pleading, even if they are
neither physically attached to, nor incorporated by reference into, the pleading. See Mangiafico v.
Blumenthal, 471 F.3d 391, 398 (2d Cir. 2006) (quoting Chambers v. Time Warner, Inc., 282 F.3d
147, 152-53 (2d Cir. 2002)).
To survive a motion to dismiss, a party need only plead "a short and plain statement of the
claim," see Fed. R. Civ. P. 8(a)(2), with sufficient factual "heft to 'sho[w] that the pleader is
entitled to relief[,]'" Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557 (2007) (quotation omitted).
Under this standard, the pleading's "[f]actual allegations must be enough to raise a right of relief
above the speculative level," see id. at 555 (citation omitted), and present claims that are
"plausible on [their] face," id. at 570. "The plausibility standard is not akin to a 'probability
requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully."
Iqbal, 556 U.S. at 678 (citation omitted). "Where a complaint pleads facts that are 'merely
consistent with' a defendant's liability, it 'stops short of the line between possibility and
plausibility of "entitlement to relief."'" Id. (quoting [Twombly, 550 U.S.] at 557, 127 S. Ct. 1955).
Ultimately, "when the allegations in a complaint, however true, could not raise a claim of
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entitlement to relief," Twombly, 550 U.S. at 558, or where a plaintiff has "not nudged [its] claims
across the line from conceivable to plausible, the[ ] complaint must be dismissed[,]" id. at 570.
B.
Relevant regulatory framework
Part 216 of the New York State Insurance Department Regulations ("Regulation 64"),
entitled "Unfair Claims Settlement Practices and Claim Cost Control Measures," governs an
insurer's conduct in the automobile repair process, and provides rules for the processing of first
party motor vehicle physical damage claims and third party property damage claims arising under
motor vehicle liability insurance contracts. See 11 N.Y.C.R.R. § 216.0(a). Section 216.7 sets
forth the "[s]tandards for prompt, fair and equitable settlement of motor vehicle physical damage
claims." 11 N.Y.C.R.R. § 216.7.
When an individual's car is involved in an accident and the person makes an insurance
claim, the person's insurer may inspect the car. See id. § 216.7(b)(1). When inspecting the car,
the insurer must negotiate with the insured or the insured's "designated representative," which
may include an automobile repair shop such as Plaintiff. See id. Negotiations must be conducted
in "good faith," id. § 216.7(b)(7), and the insurer must make "a good faith offer of settlement,
sufficient to repair the vehicle to its condition immediately prior to the loss." Id. § 216.7(b)(1).
After negotiations, if the parties cannot reach an "agreed price," which is defined as "the amount
agreed to by the insurer and the insured, or their representatives, as the reasonable cost to repair
damages to the motor vehicle resulting from the loss, without considering any deductible or other
deductions," id. § 216.7(a)(1), the insurer must furnish the insured with a prescribed notice of
rights letter. This notice of rights letter indicates the insurer's offer, and provides that, upon the
insured's request, the insurer can recommend a repair shop that will make the repairs at a cost
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equal to the insurer's estimate. See id. § 216.7(b)(14)(i); 11 N.Y.C.R.R. § 216.12. The notice of
rights letter further states that, if such request has not already been made, the insured must sign an
attached disclosure statement in order to enable the insurer to recommend a repair shop. See id. §
216.12. Further, the disclosure statement advises the insured that, pursuant to New York State
Insurance Law § 2610, the insurer cannot require that the repairs be made at a particular shop.
On July 16, 2008, the Superintendent of Insurance issued an opinion letter construing
what constitutes "good faith negotiation" under Regulation 64. Specifically, the opinion letter
provides that "a good faith negotiation need not result in an ultimate agreement on a settlement
amount provided that a repair shop, reasonably convenient to the claimant, is able to repair the
vehicle for the amount the insurer offers in settlement." Ops. Gen. Counsel N.Y.S. Ins. Dept. No.
08-07-09 (July 16, 2008), available at http://www.dfs.ny.gov/insurance/ogco2008/rg08070 9.htm.
This July 16, 2008 opinion letter also refers to an April 16, 2002 opinion letter which indicates
that, "if an insurer makes a good faith offer to the insured to pay for the cost of repair and
identifies a facility that will repair the damage at the cost estimated by the insurer, the insurer is
not obligated to pay for any repair cost that exceeds the amount of the good faith offer required
pursuant to 11 NYCRR § 216.7(b)(1)." Id. (citation omitted). Moreover, the letter opines that,
"[i]n such a circumstance, if the insured elects to repair the vehicle at another facility at a higher
repair cost, the insurer is not financially responsible for the excess cost above the amount of the
insurer’s offer." Id. (citation omitted). A December 31, 2008 opinion letter further states that
"there is no requirement that either side move off its respective initial position in a negotiation,
and an insurer is not required to alter its initial negotiating position on labor rates, or any other
negotiable issue, provided that its position is taken in good faith." Ops. Gen. Counsel N.Y.S. Ins.
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Dept. No. 08-12-09 (Dec. 31, 2008), available at http://www.dfs.ny.gov/
insurance/ogco2008/rg081209.htm.
C.
Breach of contract2
Defendant contends that Plaintiff has failed to allege a plausible breach of contract claim.
See Dkt. No. 7-1 at 10-12. Specifically, Defendant asserts that Plaintiff admits that it has no
contract with Defendant and that this claim is based on assignments from Defendant's policy
holders. Defendant contends, however, that Plaintiff has failed to allege how or what provisions
of the contract were breached and simply parrots the language of the insurance regulations by
stating that Defendant was obligated to provide enough coverage to restore the Vehicles to the
same condition they were in immediately prior to the Accidents. See id. (citation omitted).
Under New York law, a plaintiff alleging a breach of contract claim must establish the
following elements: (i) the existence of a contract; (ii) adequate performance of the contract by
the plaintiff; (iii) breach by the other party; and (iv) damages suffered as a result of the breach.
See Harsco Corp. v. Segui, 91 F.3d 337, 348 (2d Cir. 1996) (citation omitted); see also Wolff v.
Rare Medium, Inc., 171 F. Supp. 2d 354, 357-58 (S.D.N.Y. 2001) (citation omitted). "When the
terms of a written contract are clear and unambiguous, the intent of the parties must be found
within the four corners of the contract, giving practical interpretation to the language employed
and the parties' reasonable expectations." 131 Heartland Blvd. Corp. v. C.J. Jon Corp., 82
A.D.3d 1188, 1189 (2d Dep't 2011) (citations omitted).
In its memorandum of law in opposition to Defendant's motion, Plaintiff clarifies that it
is not asserting a breach of contract claim as to the Third Party Assignors, but only the First Party
Assignors. See Dkt. No. 17-1 at 11 n.1.
2
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"In order to adequately allege the existence of an agreement, 'a plaintiff must "plead the
provisions of the contract upon which the claim is based."'" Howell v. American Airlines, Inc.,
No. 05-CV-3628, 2006 WL 3681144, *3 (E.D.N.Y. Dec. 11, 2006) (quoting Phoenix Four, Inc. v.
Strategic Res. Corp., No. 05 Civ. 4837(HB), 2006 WL 399396, at *10 (S.D.N.Y. Feb. 21, 2006)
(quoting Window Headquarters, Inc. v. MAI Basic Four, Inc., Nos. 91 Civ. 1816(MBM), 92 Civ.
5283(MBM), 1993 WL 312899, at *3 (S.D.N.Y. Aug. 12, 1993) (quoting Griffin Bros., Inc. v.
Yatto, 68 A.D.2d 1009, 1009, 415 N.Y.S.2d 114, 114 (App. Div. 3d Dep't 1979)))). "A plaintiff
need not attach a copy of the contract to the complaint or quote the contractual provisions
verbatim." Id. (citing Window Headquarters, 1993 WL 312899, at *3 (citing Mayes v. Local 106,
Int'l Union of Operating Eng'rs, 739 F. Supp. 744, 748 (N.D.N.Y. 1990))). "However, the
complaint must at least 'set forth the terms of the agreement upon which liability is predicated . . .
by express reference.'" Id. (quoting Phoenix Four, 2006 WL 399396, at *10; Chrysler Capital
Corp. v. Hilltop Egg Farms, Inc., 129 A.D.2d 927, 928, 514 N.Y.S.2d 1002, 1003 (App. Div. 3d
Dep't 1987)).
In the present matter, Plaintiff has adequately plead all of the elements of its breach of
contract claim. The complaint specifically identifies each insurance policy at issue and the
individual First Party Assignor for each policy. See Dkt. No. 1-1 at ¶¶ 4, 6, 20. As the assignee,
Plaintiff stands in the shoes of the First Party Assignor and has the same rights as the insured
under the policies. See Citibank N.A. v. Tele/Resources, Inc., 724 F.2d 266, 269 (2d Cir. 1983)
(citation omitted). Further, the complaint specifically states that Defendant was required by the
policies to provide coverage for repairing each vehicle to is pre-accident condition, yet failed to
do so. See Dkt. No. 1-1 at ¶¶ 9, 14, 18, 22; see also Trizzano v. Allstate Ins. Co., 7 A.D.3d 783,
785 (2d Dep't 2004) (holding that "[a]pplicable provisions of the Insurance Law are 'deemed to
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[be] part of [an] insurance contract as though written into it'") (quotation and other citations
omitted). Moreover, the complaint alleges damages in that it provides the monetary difference
between Defendant's offer to settle the claim and the amount Plaintiff claims was necessary to
restore the vehicle to its pre-accident condition. See id. at ¶ 20. Defendant was informed of this
amount when Plaintiff sent it the Notices of Deficiencies for each claim. See id. at ¶ 15. Finally,
the complaint alleges that the policies at issue were in effect at all relevant times and that Plaintiff
completed the repairs to the vehicles to restore them to their pre-accident condition. See id. at ¶¶
5, 18.
Based on the foregoing, the Court finds that Plaintiff has adequately pleaded its breach of
contract claim; and, therefore, denies Defendant's motion to dismiss as to this claim.
D.
Quantum meruit
Defendant contends that, because the relationship between Plaintiff's assignors and State
Farm is defined by a written contract – particularly in the case of the first party assignments –
Plaintiff is precluded from maintaining a claim for quantum meruit. See Dkt. No. 14 at 10-11.
Alternatively, Defendant argues Plaintiff has not plausibly stated a claim for quantum meruit. See
id. at 11. Defendant claims that the services allegedly provided by Plaintiff were provided to
Plaintiff's customers, not to Defendant. See id. Further, Defendant asserts that there is no
allegation that it actually accepted the services Plaintiff provided. See id. Defendant claims that
the services were accepted by Plaintiff's assignors, who are primarily responsible for the charges.
See id.
"In order to recover in quantum meruit under New York law, a claimant must establish
'(1) the performance of services in good faith, (2) the acceptance of the services by the person to
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whom they are rendered, (3) an expectation of compensation therefor, and (4) the reasonable
value of the services.'" Mid–Hudson Catskill Rural Migrant Ministry, Inc. v. Fine Host Corp.,
418 F.3d 168, 175 (2d Cir. 2005) (quotation omitted). Quantum meruit is an "obligation imposed
by equity to prevent injustice[.]" ITD Corp. v. Morgan Stanley Dean Witter & Co., 12 N.Y.3d
132, 142 (2009). A party may not recover under a quantum meruit theory if a valid and
enforceable contract "governs the same subject matter as the quantum meruit claim." MidHudson Catskill Rural Migrant Ministry, Inc., 418 F.3d at 175 (citing Clark–Fitzpatrick, Inc. v.
Long Island R.R. Co., 70 N.Y.2d 382, 388, 521 N.Y.S.2d 653, 516 N.E.2d 190 (1987)) (other
citations omitted).
As Defendant correctly contends, Plaintiff's quantum meruit claim must fail because the
services Plaintiff provided were rendered at the behest of the vehicles owners and not Defendant.
See Pekler v. Health Ins. Plan of Greater N.Y., 67 A.D.3d 758, 760 (2d Dep't 2009) (citations
omitted); see also Prestige Caterers v. Kaufman, 290 A.D.2d 295, 295-96 (1st Dep't 2002).
"Under the theory of quantum meruit, if the services were performed at the behest of someone
other than the defendant, the plaintiff must look to that party for recovery." JLJ Recycling
Contrs. Corp. v. Town of Babylon, 302 A.D.2d 430, 431 (2d Dep't 2003) (citations omitted).
Moreover, the complaint makes clear that Plaintiff had no reasonable expectation of
compensation from Defendant above what was offered while the parties were negotiating the
claims. See Soumayah v. Minnelli, 41 A.D.3d 390, 391-92 (1st Dep't 2007) (holding that the
"plaintiff's allegations that he was informed that [defendant] could no longer afford to pay
plaintiff his full salary, that his pay was going to be halved and that two other individuals were
going to assume functions that he previously performed indicate that [defendant] did not accept
additional services and that plaintiff had no reasonable expectation of compensation for those
12
services"). Plaintiff's allegation to the contrary is undercut by its discussions with Defendant
during which Defendant only offered amounts less than what Plaintiff claimed was necessary to
repair each vehicle.
Based on the foregoing, the Court grants Defendant's motion to dismiss as to Plaintiff's
quantum meruit claim.
E.
General Business Law § 349
Defendant asserts that Plaintiff has failed to plead the requirements for stating a cause of
action pursuant to GBL § 349. See Dkt. No. 7-1 at 13-16. Specifically, Defendant contends as
follows: (1) Plaintiff does not allege harm to any consumer, much less the requisite widespread
public injury; to the contrary, the complaint alleges only an ordinary business-to-business
commercial dispute; (2) Plaintiff does not allege that Defendant committed any deceptive or
misleading acts; and (3) even assuming that the Complaint alleged some type of consumer harm,
it is clear that any suit by Plaintiff would be a forbidden derivative action seeking to recover
indirectly for injury to others. See id.
General Business Law § 349 declares unlawful all "[d]eceptive acts or practices in the
conduct of any business, trade or commerce or in the furnishing of any service in this state." N.Y.
Gen. Bus. Law § 349(a). "'Section 349 governs consumer-oriented conduct and, on its face,
applies to virtually all economic activity.'" North State Autobahn, Inc. v. Progressive Ins. Group
Co., 102 A.D.3d 5, 953 N.Y.S.2d 96, 100 (2d Dep't 2012) (quoting Small v. Lorillard Tobacco
Co., 94 N.Y.2d 43, 55, 698 N.Y.S.2d 615, 720 N.E.2d 892 (1999)) (other citations omitted).
To successfully assert a claim under General Business Law § 349(h), "a plaintiff must
allege that a defendant has engaged in (1) consumer-oriented conduct that is (2) materially
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misleading and that (3) plaintiff suffered injury as a result of the allegedly deceptive act or
practice." City of New York v. Smokes–Spirits.Com, Inc., 12 N.Y.3d 616, 621 (2009); see also
Cohen v. JP Morgan Chase & Co., 489 F.3d 111, 126 (2d Cir. 2007) (citation omitted).
1. Consumer or widespread public injury
Defendant contends that this claim should be dismissed because Plaintiff has failed to
allege any consumer harm, let alone the 'widespread' public injury required to state a claim under
GBL § 349. See Dkt. No. 7-1 at14-15. Further, Defendant asserts that, because Plaintiff is a
third-party business rather than a customer, its injuries are easily distinguished from consumer
harm and do not implicate the public interest. See id. Defendant claims that this case involves a
private contractual dispute between Defendant and an automobile repair shop over the rates
charged by Plaintiff and the coverage afforded under Defendant's policy; and, therefore, does not
satisfy the consumer-oriented prong of section 349. See id.
"[P]arties claiming the benefit of [General Business Law § 349(h) ] must, at the threshold,
charge conduct that is consumer oriented." New York Univ. v. Continental Ins. Co., 87 N.Y.2d
308, 320 (1995) (citation omitted); see also Gaidon v. Guardian Life Ins. Co. of Am., 94 N.Y.2d
330, 334 (1999) (citation omitted); Oswego Laborers' Local 214 Pension Fund v. Marine
Midland Bank, 85 N.Y.2d 20, 25 (1995). "Private contract disputes, unique to the parties . . . [do]
not fall within the ambit of the statute." Oswego Laborers' Local 214 Pension Fund, 85 N.Y.2d
at 25 (citation omitted); see also New York Univ., 87 N.Y.2d at 320. A "'single shot transaction,'"
Genesco Entertainment, Div. of Lymutt Indus., Inc. v. Koch, 593 F. Supp. 743, 752 (S.D.N.Y.
1984), which is "tailored to meet the purchaser's wishes and requirements," does not, without
more, constitute consumer-oriented conduct for the purposes of this statute. See New York Univ.,
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87 N.Y.2d at 321; see also Biancone v. Bossi, 24 A.D.3d 582, 583 (2d Dep't 2005) (citations
omitted).
"On the other hand, conduct has been held to be sufficiently consumer-oriented to satisfy
the statute where it involved 'an extensive marketing scheme' . . . , where it involved the
'multi-media dissemination of information to the public' . . . , and where it constituted a standard
or routine practice that was 'consumer-oriented in the sense that [it] potentially affect[ed]
similarly situated consumers.'" North State Autobahn, Inc. v. Progressive Ins. Group Co., 102
A.D.3d 5, 953 N.Y.S.2d 96, 101 (2d Dep't 2012) (internal and other quotations omitted). "Simply
put, '[the] defendant's acts or practices must have a broad impact on consumers at large.'" Id.
(quotation and other citations omitted).
The conduct alleged by Plaintiff in this case relates to a number of policyholders who
either are or were Plaintiff's customers, and all of whom are subject to Defendant's standard form
insurance policy. Therefore, this dispute is not "limited to a challenge regarding coverage made
on the basis of facts unique to [a single insured], but relate to consumer-oriented conduct
affecting the public at large." Shebar v. Metro. Life Ins., 25 A.D.3d 858, 859 (3d Dep't 2006)
(citations omitted). Where, as here, a defendant enters into "contractual relationship[s] with
customers nationwide" via a form contract and has allegedly committed the challenged actions in
its dealings with multiple insureds, courts have held that such behavior affects the public
generally and, therefore, satisfies the requirement of "consumer-oriented" conduct within the
meaning of Section 349. See, e.g., Riordan v. Nationwide Mut. Fire Ins. Co., 977 F.2d 47, 51-53
(2d Cir. 1992) (holding that section 349 was applicable to insurers where the plaintiffs
demonstrated that similar practices had been employed by the defendant against multiple
insureds); Joannou v. Blue Ridge Ins. Co., 289 A.D.2d 531, 531 (2d Dep't 2001) (holding that
15
"[a]n insurance carrier's failure to pay benefits allegedly due its insured under the terms of a
standard insurance policy can constitute a violation of General Business Law § 349") (citations
omitted).
Based on the foregoing, the Court declines to dismiss Plaintiff's section 349 claim
pursuant to the consumer-oriented prong of the statute.
2. Deceptive or misleading practice
The New York Court of Appeals has held that, under Section 349, "[w]hether a
representation or an omission, the deceptive practice must be 'likely to mislead a reasonable
consumer acting reasonably under the circumstances.'" Stutman v. Chemical Bank, 95 N.Y.2d 24,
29 (2000) (quotation and other citations omitted). A deceptive practice, however, "need not reach
the level of common-law fraud to be actionable under section 349," and reliance is not an element
of a section 349 claim. See id. (citations omitted). "The plaintiff, however, must show that the
defendant's 'material deceptive act' caused the injury." Id. (quotation omitted).
In its complaint, Plaintiff alleges that, "[w]ith respect to each of the Assignors and
Accidents . . . , Defendant limited the costs it would cover to repair the Vehicles to less than the
full amount necessary to repair the Vehicles to their pre-accident condition." See Dkt. No. 1-1 at
¶ 32. Further, Plaintiff claims that "Defendant impeded and delayed fair settlement by, among
other things, dictating and allocating price allowances, setting arbitrary price caps, refusing to
negotiate labor rates, refusing to pay proper amounts for paint and parts invoices, and in many
cases by failing to inspect or re-inspect the Vehicles within the time frames specified by
regulation." See id. at ¶ 16. Finally, Plaintiff alleges that, "[a]s a result of Defendant's actions
16
and/or inaction . . . , Defendant failed to negotiate in good faith pursuant to 11 NYCRR Part 216
('Regulation 64')." See id. at ¶ 17.3
In the present matter, the Court finds that Plaintiff has sufficiently pleaded that Defendant
engaged in deceptive acts that caused injury. Although Plaintiff may not be able to support its
claim against a properly brought motion for summary judgment, Plaintiff's allegations are
sufficient to overcome Defendant's motion to dismiss. See Joannou v. Blue Ridge Ins. Co., 289
A.D.2d 531, 532 (2d Dep't 2001) (holding that "[a]n insurance carrier's failure to pay benefits
allegedly due its insured under the terms of a standard insurance policy can constitute a violation
of General Business Law § 349") (citations omitted).
Moreover, the Court finds that, at this stage, that Plaintiff has adequately pleaded that its
injury caused by the deceptive act is independent of the loss caused by the alleged breach of
contract. See Spagnola v. Chubb Corp., 574 F.3d 64, 74 (2d Cir. 2009). Again, however, the
Court takes no position as to Plaintiff's ability to prove an injury independent of the loss caused
by the alleged breach of contract as to the First Party Assignors should Defendant move for
summary judgment. Further, contrary to Defendant's position, Plaintiff's GBL § 349 is not a
"derivative" action, in which the loss arises solely as a result of injuries to another party. See Dkt.
In its memorandum of law in opposition to Defendant's motion, Plaintiff asserts
additional facts it would include if the Court decides to dismiss this claim. Specifically, Plaintiff
provides as follows: "To the extent that this Court feels this element has not been adequately
pleaded, Plaintiff seeks leave to replead with additional facts. For example, Defendant was
required by regulation to send out a Notice of Rights letter to the customers informing them that
Defendant had been unable to reach an agreed price with Plaintiff and, upon request, give them
the name of a shop which would perform the repairs at the price Defendant was willing to pay.
11 N.Y.C.R.R. §§ 216.12, 216.14, 216.7. Defendant did not always provide this letter. In many
of the cases where Defendant did provide the letter, Plaintiff contacted the repair shop to confirm
the willingness to do the work at the agreed upon price and the replacement shop was unwilling to
commit to doing it at that price."
3
17
No. 7-1 at 16. Plaintiff has specifically alleged that it sustained direct injury as a result of
Defendant's deceptive and misleading practices.
Based on the foregoing, the Court finds that Plaintiff has sufficiently pleaded its GBL §
349 claim.
3. Statute of limitations
In a letter filed on February 20, 2013, Defendant contends that eight of Plaintiff's GBL §
349 claims are barred by the applicable statute of limitations. See Dkt. No. 21. Therefore, in the
event that the Court does not dismiss Plaintiff's GBL § 349 claim in its entirety, Defendant asks
that the Court dismiss these eight claims. See id.
A claim brought pursuant to GBL § 349 is governed by a three-year statute of limitations.
See Gaidon v. Guardian Life Ins. Co. of Am., 96 N.Y.2d 201, 209-210 (2001). The claim accrues
when the plaintiff first suffers injury as a result of the deceptive act or practice. See id.; see also
Okocha v. HSBC Bank USA, N.A., 700 F. Supp. 2d 369, 375 (S.D.N.Y. 2010).
In the present matter, the date of loss for determining when Plaintiff's GBL § 349 claims
accrued is the date when Plaintiff served upon Defendant "Notices of Deficiencies" informing
Defendant that there were open items and that an agreed upon amount had not been reached for
the necessary repairs. As such, the Court finds that the following eight claims are barred by the
three-year statute of limitations:
18
Assignor
Expiration
date of statute
of limitations
1
Michael Angelo
3/24/2008
3/24/2011
2
Daniel Christy
9/24/2008
9/24/2011
3
Michael Cohen
12/4/2008
12/4/2011
4
Eamon Coogan
10/2/2008
10/2/2011
5
Diane Delpha
12/10/2007
12/10/2010
6
Christopher Hart
2/27/2008
2/27/2011
7
Christine Reschke
4/10/2008
4/10/2011
8
F.
Date of
Notice of
Deficiency
Neil Warner
6/24/2008
6/24/2011
New York Insurance Law § 3420
Defendant argues that N.Y. Ins. Law § 3420 precludes Plaintiff's claims relating to the
Third Party Assignors.
"Under Insurance Law § 3420(a)(2), a declaratory judgment action seeking a judgment
declaring that the at-fault party's insurance company was obligated to defend and indemnify its
insured can only be commenced after the third party seeking the declaration obtains a judgment
against the at-fault insured, and it has gone unpaid for 30 days." Symonds v. Progressive Ins. Co.,
80 A.D.3d 1046, 1047 (3d Dep't 2011) (citations omitted).
Contrary to Defendant's contention, N.Y. Ins. Law § 3420 does not preclude Plaintiff's
Third Party Assignor claims. Section 3420 provides that, without first meeting the conditions
precedent set forth above, no action may "be maintained against the insurer under the terms of
the policy or contract for the amount of such judgment not exceeding the amount of the
applicable limit of coverage under such policy or contract." N.Y. Ins. Law § 3420(a)(2)
19
(emphasis added). Plaintiff's Third Party Assignor claims are not brought "under the terms of [a]
policy or contract," but are claims asserting deceptive practices or acts in settling claims for
which Defendant has already admitted the liability of its insured.
Based on the foregoing, the Court finds that Plaintiff's Third Party Assignor claims
alleging violations of GBL § 349 are not precluded by N.Y. Ins. Law § 3420; and, therefore,
denies this portion of Defendant's motion to dismiss.
IV. CONCLUSION
After carefully reviewing the entire record in this matter, the parties' submissions and the
applicable law, and for the above-stated reasons, the Court hereby
ORDERS that Defendant's motion to dismiss is GRANTED in part and DENIED in
part; and the Court further
ORDERS that Plaintiff's quantum meruit cause of action is DISMISSED; and the Court
further
ORDERS that Plaintiff's GBL § 349 cause of action is DISMISSED in part as to those
claims that are barred by the three-year statute of limitations; and the Court further
ORDERS that Defendant's motion is DENIED in all other respects; and the Court further
ORDERS that the Clerk of the Court shall serve a copy of this Memorandum-Decision
and Order on all parties in accordance with the Local Rules.
IT IS SO ORDERED.
Dated: February 27, 2013
Albany, New York
20
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