Federal Trade Commission et al v. Quincy Bioscience Holding Company, Inc. et al

Filing 491

ORDER: The jury's verdict, finding the Quincy defendants' Challenged Statements had the capacity or tendency to deceive under NY Exec. Law 63(12), is upheld. (Signed by Judge Louis L. Stanton on 8/20/2024) (ml)

OR\G\NAL
UN I TED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
FEDERAL TRADE COMMISSION and THE
PEOPLE OF THE STATE OF NEW YORK , by
LETITIA JAMES , Attorney General o f the
State of New York ,
17 Civ . 124

(LLS)

Plaintiffs ,
ORDER
- against QU I NCY BI OSCIENCE HOLDING
COMPANY , INC ., a corporation ; QUINCY
BIOSCIENCE , LLC , a limited
li abili t y company ; PREVAGEN , INC ., a
corporation d/b/a/ SUGAR RIVER
SUPPLEMENTS ; QUINCY BIOSCIENCE
MANUFACTURING , LLC , a limited
liability company ; and MARK
UND ERWOOD , individually and as
an off i cer of QUINCY BIOSCIENCE
HOLDING COMPANY , INC ., QUINCY
BIOSCIENCE , LLC , AND PREVAGEN , INC .,
Defendants.

Presently before this Court are plaintiff New York Attorney
General ' s and the Quincy defendants ' cross-motions regarding New
Yo r k Executive Law§ 63(12)

(" NY Exec . Law 63(12) " ) . The parties

dispute whether the New York Attorney General may bring a claim
for liability under NY Exec . Law 63(12) in the absence of
liability for a separate claim brought by the New York Attorney
Genera l. The New York Attorney General answers that question in
the affirmative and maintains that NY Exec . Law 63(12) is a
separate , independent cause of action . Quincy disagrees and
argues that NY Exec . Law 63(12) extends the remedies the New
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York Attorney General may pursue if a party is held liable under
another statute . After several arguments on that question and
recognizing the split of authority on the topic , this Court
solicited further briefing.
This Court thanks the parties for their thoughtful briefs
on the issue , which it has reviewed carefully and have aided
this Court ' s determination . This Court finds that NY Exec. Law
63(12) provides an independent cause of action that does not
depend on the Quincy defendants '

liability under other claims .

That conclusion is supported by an inquiry into the roots of NY
Exec . Law 63(12) , which coincides with a review of New York
Court of Appeals decision the State of New York v. Cortelle
Corp ., 38 N. Y. 2d 83

(1975), and is supported by New York caselaw

and the text of the statute itself .
The New York Court of Appeal ' s decision in Cortelle is
fundamental to the development of caselaw addressing the scope
of NY Exec . Law 63(12) . In Cortelle , the New York Court of
Appeals analyzed the statute of limitations applicable to NY
Exec. Law 63(12) , examining whether the NY Exec. Law 63(12) was
subject to CPLR 214(2) , which governed the statute of
limitations for " an action to recover upon a liability , penalty
or forfeiture created or imposed by statute ." Id . at 86 . The
Cortelle Court held that NY Exec Law 63(12) did not create or
impose a liability ; rather, causes of action under NY Exec Law
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63(12) " seek essentially to redress wrongs previously known to
the law, long before the enactment of the statutes discussed .
These causes of action , therefore , do not depend upon
liabilities , penalties , or forfeitures created or imposed by"
contemporary legislation . Id . at 89 . In reaching this conclusion ,
the Cortelle found that NY Exec Law 63(12) creates
no new claims but only provide[s] particular remedies
and standing in a public officer to seek redress on
behalf of the State and others. Moreover , the kind of
wrong the Attorney - General seeks to redress is not a
new one to the decisional law but a now rather old and
common type of fraud .
Id . at 86 , The People of the State of New York v . Trump
Entrepreneur Initiative LLC, 137 A . D. 3d 409 , 416 (1st Dept.
2016)

(NY Exec Law 63(12) addresses a " wrong that had long been

actionable under the common law."). It held that NY Exec. Law
63(12) did not "make" any conduct unlawful that was previously
unknown-it instead codified the NY Attorney General ' s ability to
bring a claim for fraudulent practices already prohibited by
common law . Id . at 88 . NY Exec . Law 63(12) therefore was not
subject to the statute of limitations in CPLR 214(2) .
Quincy says that Cortelle is determinative and argues that ,
because NY Exec . Law 63(12) does not impose new liability , the
New York Attorney General is limited to seeking new remedies ,
rather than wrongs under that statute . Though the Court of
Appeals in Cortelle did not directly address the question , it

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did recognize that NY Exec . Law 63(12) " provided standing in the
New York Attorney General to seek redress and additional
remedies for recognized wrongs which pre - existed the statutes ."
Cortelle , 38 N . Y. 2d at 83 .
The First Department of New York, however , has directly
answered the question of whether NY Exec . Law 63(12) empowers
the New York Attorney General to bring a cause of action .
Relying on Cortelle , as this Court does , the First Department
held " that the Attorney General , is , in fact , authorized to
bring a cause of action for fraud under Executive Law§ 63(12)

"

Trump Entrepreneur , 137 A . D. 3d at 418 . 1 The First Department
recognized that " prevailing authority " in New York courts have
reached the same conclusion. Id . 2 This Court agrees .

In 20 1 3 the First Department reached the opposite conclusion in
People of New York v . Charles Schwab & Co ., Inc .. 109 A . D. 3d
445 , 449 . In Trump Entrepreneur , the First Department found that
case to be an "anomaly ," relied on an incorrect reasoning of
Cortelle , and was a " patent judicial mistake . " See 137 A.D.3d at
414 , 417 - 18 (internal citations and quotations omitted) . The
First Department noted that " New York courts have generally
allowed of independent causes of action for fraud under section
63 (12) ." Id. at 417 (collecting cases) .
2 This
Court notes that the Fourth Department of New York and
other lower courts have held or implied that a cause of action
under NY Exec . Law 63(12) exists only in connection with
liability under another statute . E . g ., People ex rel . Spitzer v .
Frink Am ., Inc ., 2 A . D. 3d 1379 , 1380 (4th Dept. 2003) (relying
on Cortelle) ; see also Defs . Memorandum of Law (0kt . No . 473) at
9- 10 (collecting cases).

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The Quincy defendants next argue that the text of NY Exec .
Law 63(12) limits the New York Attorney General to using the law
in a special proceeding in New York Supreme Court to enjoin
ongoing or imminent fraudulent or illegal acts. In relevant
part , NY Exec. Law 63(12) states ,
Whenever any person shall engage in repeated
fraudulent or illegal acts or otherwise demonstrate
persistent fraud or illegality in the carrying on ,
conducting or transaction of business , the attorney
general may apply , in the name of the people of the
state of New York , to the supreme court of the state
of New York , on notice of five days , for an order
e n joining the continuance of such business activity or
of any fraudulent or illegal acts , directing
restitution and damages and , in an appropriate case ,
cancelling any certificate filed under and by virtue
of the provisions of section four hundred forty of the
former penal law or section one hundred thirty of the
general business law , and the court may award the
relief applied for or so much thereof as it may deem
proper .

The Quincy defendants argue that the New York Attorney General
therefore may only issue "a five - day notice application for an
injunction ; the New York Attorney General may not allow for its
own cause of action to be litigated in the normal cause of
action ." Defs . Memo at 3 . However , that language is permissive ,
not exclusive , and the First Department ' s review of the text of
the statute found that the language supported the proposition
that the New York Attorney General is authorized to bring a
separate cause of action . It found that the text

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appears to authorize a cause of action ; like similar
statutes that authorize causes of action , section
63(12) defines the fraudulent conduct that it
prohibits , authorizes the Attorney General to commence
an action or proceeding to foreclose that conduct , and
specifies the relief , including equitable relief , that
the Attorney General may seek .
Trump Entrepreneur, 137 A. D. 3d at 418. This Court agrees that
the text supports that the conclusion that New York Attorney
General may bring a cause of action under NY Exec . Law 63(12) ,
as well as under the General Business Law and similar
traditional statutes and decrees .
The jury ' s verdict , finding the Quincy defendants '
Challenged Statements had the capacity or tendency to deceive
under NY Exec. Law 63(12) , is upheld .
So ordered .
Dated :

New York , New York
August z_n, 2 02 4

LOUIS L . STANTON
U. S . D. J .

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