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Patrick Cunningham Reply MOL[2]

Patrick Cunningham Reply MOL[2]

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Published by: Rick Karlin on Apr 26, 2013
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SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF HAMILTON ________________________________________________ PEOPLE OF THE STATE OF NEW YORK, by ERIC

T. SCHNEIDERMAN, Attorney General of the State of New York, Petitioner, Index No. 2012/6972 -againstHUDSON RIVER RAFTING COMPANY, INC. And PATRICK CUNNINGHAM, Respondents. ________________________________________________

SUR-REPLY MEMORANDUM OF LAW IN REBUTTAL TO RESPONDENTS’ ARGUMENTS

Eric T. Schneiderman, Attorney General Of the State of New York, Attorney For Petitioner G. Nicholas Garin, Of Counsel

SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF HAMILTON ________________________________________________ PEOPLE OF THE STATE OF NEW YORK, by ERIC T. SCHNEIDERMAN, Attorney General of the State of New York, Petitioner, Index No. 2012/6972 -againstHUDSON RIVER RAFTING COMPANY, INC. And PATRICK CUNNINGHAM, Respondents. ________________________________________________ Preliminary Statement This Memorandum of Law is submitted as rebuttal to arguments made by respondents in their Memorandum of Law dated March 7, 2013. Point 1 Petitioner is seeking Summary Judgment, Not a Preliminary Injunction Contrary to respondents’ first point, the State is not seeking a preliminary injunction. The Attorney General brought this proceeding pursuant to Executive Law ' 63(12), which authorizes the Attorney General to seek remedies for fraudulent or illegal business activities by initiating a special proceeding pursuant to Article 4 of the CPLR. A special proceeding is "plenary as an action, culminating in a judgment, but is brought on with the ease, speed and economy of a mere motion." Siegel, N.Y. Practice ' 547, at 904 (3d ed.). On the return date of a petition, Article 4 requires that "[t]he court shall make a summary determination upon the pleadings, papers and admissions to the extent that no triable issues of fact are raised." CPLR ' 409(b). The tests and standards applied to decide whether a

petition, answer and affidavits create triable issues of fact are the same as those applied on a motion for summary judgment pursuant to CPLR ' 3212. Lefkowitz v. McMillen, 57 A.D.2d 979 (3d Dep't 1977), lv denied 42 N.Y.2d 807 (1977); Matter of Javarone, 49 A.D.2d 788 (3d Dep't 1975); State v. Management Transition Resources, Inc., 115 Misc. 2d 489, 492 (N.Y. Sup. Ct., New York Cty. 1982); In the Matter of the Port of New York Authority, 18 N.Y.2d 250, 255 (1966), cert. denied, 385 U.S. 1006 (1966). Point 2 Repeated Illegality for Guiding Without a License and Driving Buses without a Proper License is Not in Dispute Respondents make no attempt to rebut the fact that guides of theirs guided rafts without a license and drivers of their buses drove the buses without a proper license. The State’s first and third causes of action are that repeated unlicensed guiding and unlicensed operation of buses is illegal and constitutes a violation of Executive Law § 63(12). Respondents are unable to rebut these causes of action, so, instead, they attempt to mislead the Court by arguing that “the absence of licenses does not [prove] unsafe procedures” and that the State “continues to conflate unlicensed guiding with unsafe guiding.” Respondents’ MOL, Point 1, p. 3 and p. 11. That is not the State’s case. The State’s case is that the practice is illegal and the Court should not be misled by this red herring of an argument. Of course, the inverse of respondents’ argument is

equally true – having a license is not evidence that an operator drove a bus safely or a guide provided a safe service. The facts in this case and in many other instances where tragic consequences have ensued from unsafe licensed operation of a raft or vehicle bears out this truism. Yet New York State and its sister states insist that certain operators obtain licenses as the bare minimum protection of the public safety for endeavors that carry inherent dangers. Businessmen like Mr. Cunningham, who treat such laws as a nuisance rather than with respect, should be barred from engaging in the business.

Point 3 False Advertising and Deceptive Practices Have Been Established

If you hold yourself out to the public as capable of providing a service which requires a license, it is deceptive and misleading if you repeatedly provide the service, unbeknownst to your customers, by employees with no license. That is the essence of false advertising and the broad definition of fraud under Executive Law § 63(12). Respondents concede that to establish a cause of action for deceptive practices and false advertising under General Business Law Article 22-A, the State need not show that any consumer relied on the false advertising. See, , Koch v. Acker, Merrall & Condit Co., 18 N.Y.3d 940, 941 (2012). It matters not whether the Court applies the more liberal standard (the law protects the ignorant, credulous and naïve) of what constitutes false advertising/fraud under Executive Law § 63(12) or the somewhat more restrictive standard (whether a reasonable consumer would be deceived) under General Business Law §§ 349 and 350, the result is the same. See, People v. General Electric Co., 302 A.D.2d 314 (1st Dept. 2003). As the Court of Appeals stated in Guggenheimer v. Ginzberg, 43 N.Y.2d 268 at 273 (1977), “To establish such a cause of action, it need not be shown that consumers are being or were actually deceived.” (citing NYC Admin. Code). While petitioner’s causes of action for fraud under Executive Law § 63(12) and General Business Law § 350 have conclusively been established, respondents are correct in their argument the State must show that that the deceptive act or advertising caused the consumer(s) harm to obtain restitution for them. That does not mean that the Attorney General and the Court are powerless to protect the public interest at stake in this case. As the Court noted in People v. Applied Card Systems, Inc., 11 N.Y.3d 105 at 125 (2008), a court of equity has an equitable

remedy available distinct from restitution – disgorgement of fraudulently obtained profits. While the consumers unknowingly guided by unlicensed guides may not have suffered a compensable injury, that does not mean that respondents should be allowed to profit from using unlicensed guides to guide their customers. To properly measure the civil penalty to assess, the Court, under it broad injunctive powers, can order respondents to account for all guided rafting tours by unlicensed guides. The practical difficulty facing the State and the Court is that the evidence of unguided tours may not exist since respondents paid those guides in cash, leaving no record. A simpler route to an appropriate remedy in this case is to assess a substantial penalty under General Business Law § 350. The penalty is in the discretion of the Court and may be up to $5,000 for each false ad or deceptive act. While the number of unlicensed guided rafting excursions may be unknown, the false ads ran daily which gives the Court ample room to impose an appropriate penalty. Conclusion For the reasons set forth above and in the State’s earlier Memorandum of Law, it is respectfully submitted that the Court should grant summary judgment in favor of the State enjoining respondents from continuing in business without posting a bond, enjoining them from the illegal and fraudulent practices shown in the State’s petition, and imposing a substantial penalty that will disgorge fraudulently obtained profits, punish respondents for their wrongdoing and deter others from similar illegal practices. Dated: Poughkeepsie, NY March 15, 2013

__________________________________ G. NICHOLAS GARIN Assistant Attorney General

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