1SUPREME 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. ________________________________________________

MEMORANDUM OF LAW IN REPLY TO OPPOSITION SUBMITTED BY RESPONDENTS

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

TABLE OF CONTENTS

PRELIMINARY STATEMENT……………….……………………………………1 STATEMENT OF FACTS…………………….……………………………………..1 ARGUMENT …………………………………………………………………………3 I RESPONDENT’S ACTS AND PRACTICES CONSTITUTE REPEATED ILLEGALITY AND FRAUD IN VIOLATION OF EXECUTIVE LAW § 63(12)…………………………………………………3

A: Repeated or Persistent Violation of Environmental Conservation Law § 11-0533 and Vehicle and Traffic Law § 509-b Constitute Violations of Executive Law § 63 (12) ..………………….3 B. Repeated or Persistent Fraud/Deception Constitutes Violation of Executive Law § 63 (12) …………………………………...5 II SINCE RESPONDENT HAS FAILED TO RAISE A TRIABLE ISSUE OF FACT, THE PETITION SHOULD BE GRANTED …………………………………………………….9 THE STATUTE OF LIMITATIONS DOES NOT LIMIT THE EVIDENCE THAT MAY BE SUBMITTED AND, CONTRARY TO RESPONDENTS’ ARGUMENT, IS SIX YEARS UNDER EXECUTIVE LAW § 63(12) ………………………..10 THE ATTORNEY GENERAL IS ENTITLED TO INJUNCTIVE RELIEF, AN ACCOUNTING, RESTITUTION AND PENALTIES ………………………………………..12

III

IV

A. Injunctive Relief……………………………………………………………………12 B. Restitution…………………………………………………………………………..13 C. Civil Penalties………………………………………………………………………17

CONCLUSION………………………………………………………………………....19

1SUPREME 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. ________________________________________________ MEMORANDUM OF LAW IN REPLY TO OPPOSITION SUBMITTED BY RESPONDENTS PRELIMINARY STATEMENT The Attorney General submits this memorandum of law in reply to the opposition to the State’s petition submitted by respondents and in further support of the petition. STATEMENT OF FACTS Patrick Cunningham has gone from pioneer to pariah over the course of three decades at the helm of Hudson River Rafting Company, Inc. (“HRRC”). In 1979 he was one the earliest persons to create a business guiding customers on white water rapids on the Adirondack rivers and many of the owners of such businesses today got their start guiding recreational rafters for HRRC. As shown in the State’s petition and exhibits Mr. Cunningham has fallen from grace in the industry due entirely to his cavalier disregard for safety. This is evident in the 1

repeated use of guides who are not licensed by the Department of Environmental Conservation (“DEC”)1, the use of bus drivers who are not licensed to drive busses2, the tolerance of drinking alcoholic beverages by his guides3, letting rafters and kayakers go unguided on rivers where the use of licensed guides is required by law4 , and failing to keep critical equipment, including the rafts, in safe and workable condition.5 Despite respondents’ utter disregard for safety in all aspects of the guide service that they provide, they continue to advertise “safe” or “the safest” rafting excursions available. See, Exhibit 2 to Affirmation. White water rafting is inherently dangerous, but with licensed guides, common sense precautions, proper instruction, and good equipment, the experience need not be harrowing. At a bare minimum to advertise “safe” or “the safest” rafting experience available, the advertiser should provide licensed guides and do everything within reason to make the experience safe. As demonstrated in the State’s petition and exhibits attached thereto, by that simple standard respondents fail miserably and seriously mislead the public by making such a claim. _______________________ 1. See, Exhibit 4 to Garin Affirmation in support of petition dated October 10, 2012 (“Affirmation”), Affidavit of NY Forest Ranger Bruce Lomnitzer sworn to October 10, 2012 and attached to Affirmation as part of Exhibit 5 (“Lomnitzer Aff.”); See also, Rader Affidavit Sworn to December 4, 2012 and attached as Exhibit 5 to Garin Reply Affirmation in further support of petition dated February 21, 2013 (“Reply Affirmation”), and Exhibit 6 to Reply Affirmation. 2. See, Exhibit 7 to Affirmation; See also, Fay Statement attached as Exhibit 1, p. 2, Ladd Statement attached as Exhibit 2, p. 3, Rader Affidavit attached as Exhibit 5 to Reply Affirmation, and Lomnitzer Affidavit attached to Affirmation as part of Exhibit 5. 3. See, Exhibit 6 to Affirmation; See also, Exhibit 1, Exhibit 2, and Exhibit 5 to Reply Affirmation. 2

4. See, Rowe Affidavit sworn to October 5, 2012, Savage Affidavit sworn to October 5, 2012, and Belson Affidavit sworn to October 8, 2012, and Lomnitzer Aff., all attached as part of Exhibit 5 to Affirmation, and Norton Affidavit sworn to November 29, 2012 attached to Reply Affirmation as Exhibit 3. 5. See, Fay Affidavit, Exhibit 1 to Reply Affirmation, and Rader Affidavit, Exhibit 5 to Reply Affirmation. ARGUMENT POINT I RESPONDENTS’ ACTS AND PRACTICES CONSTITUTE REPEATED ILLEGALITY AND FRAUD IN VIOLATION OF EXECUTIVE LAW § 63(12) A: Repeated or Persistent Violation of Environmental Conservation Law § 11-0533 and Vehicle and Traffic Law § 509-b Constitute Violations of Executive Law § 63 (12) Environmental Conservation Law (“ECL”) § 11-0533 requires that all white water rafting guides for hire be licensed. Those parts of the Adirondack rivers that require licensed guides are specified in 6 NYCRR § 197.2 (k) and include parts of the Moose, Black, Indian and Hudson Rivers for which respondents offer guides for hire. The purpose of this law is to provide a measure of safety for the public who engage in this recreational activity. The same is true of Vehicle and Traffic Law (“V & T”) § 509-b which requires enhanced testing for a special license to operate a bus. Executive Law § 63(12) empowers the Attorney General to bring a special proceeding for injunctive relief, restitution, damages, and costs whenever any person or business engages in repeated or persistent fraudulent or illegal conduct. Executive Law § 63(12) states, in pertinent part, “The term ‘repeated’ as used herein shall include repetition of any separate and distinct… illegal act or conduct that affects more than one person.” Repeated violations of ECL § 11-0533 3

and V & T Law § 509-b by respondents as shown in the State’s submissions constitute violations of Executive Law § 63(12). It is not necessary to establish a large percentage of

violations under § 63(12). State of New York v. Princess Prestige, 42 N.Y.2d 104 (1977) (16 illegal transactions out of 3,600 is sufficient). All the Attorney General is required to show “is any number of separate and distinct fraudulent or illegal acts which affect more than one individual.” Abrams v. 21st Cent. Leisure Spa Int’l Ltd., 153 Misc. 2d 938, 955 (Sup. Ct. N.Y. Co. 1991). Unlike the business cases cited above, even a single repetition for failing to follow the most fundamental safety practice in a business like respondents should be sufficient to ground the company. There is no room for misjudgment in such an inherently dangerous enterprise and there is no possibility that respondents were ignorant of the fact that their guides lacked licenses. Nor does it matter if the fraudulent or illegal conduct has been discontinued because such discontinuance is no guarantee that the conduct will not be resumed at a later date. People v. General Electric Co., 302 A.D. 2d 314, 316 (1st Dep’t 2003); State of New York v. Person, 75 Misc. 2d 252, 253 (Sup. Ct. N.Y. Co. 1973); Lefkowitz v. Hotel Waldorf-Astoria Corp., 67 Misc. 2d 90, 91-92 (Sup. Ct. N.Y. Co. 1971). Executive Law § 63(12) specifically authorizes the Attorney General to take proof and make factual determinations prior to filing the petition in order to facilitate the summary determination. The authorities are unanimous that once petitioners have made a sufficient submission in a special proceeding, the burden rests upon respondents to come forward with evidence sufficient to raise triable issues of fact. Answers which consist of only general denials or conclusory allegations do not meet this burden. As the Third Department has stated, in an Executive Law § 63(12) proceeding:

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[W]here, in a special proceeding as here, the petitioner and supporting papers contain sufficient allegations of fact to merit the relief requested and the respondents have raised no evidentiary showing, but only assert conclusory statements in a general denial, judgment without trial is proper....

State v. Daro Chartours, 72 A.D.2d 872, 872 (3d Dept 1979) (emphasis added). See also, People v. Helena VIP Personal Introduction Service of New York, Inc., 199 A.D. 2d 186 (1st Dep’t 1993); Lefkowitz v. McMillen, 57 A.D.2d 979, 979 (3d Dep’t 1977) appeal denied, 42 N.Y.2d 807 (1977) (“The burden was on [respondent] to reveal his proofs and show that his defenses were real and capable of being established.”); Ehrlich v. American Moninger Greenhouse Mfg. Corp., 26 N.Y.2d 255, (1970); State v. Management Transition Resources, Inc., 115 Misc.2d 489, (Sup. Ct. N.Y. Co. 1982). In a § 63(12) proceeding “. . . . even affidavits submitted to the court are insufficient if they merely set forth conclusions or repeat the allegations contained in the pleading.” Bald, conclusory and self serving explanations, even if believable, are not enough. Ehrlich v. American Moninger Greenhouse Mfg. Co., 26 N.Y.2d 255 (1970). See also, Joint Venture Asset Acquisition v. Tufano, 203 A.D.2d 102 (1st Dept 1994); People v. Helena VIP Personal Introduction Service of New York, Inc., N.Y.L.J., 1/17/92, p.26 Col. 3 (Sup. Ct. N.Y. Co.), aff’d, 199 A.D.2d 186 (1st Dep’t 1993). Respondents must present facts having probative value sufficient to demonstrate an unresolved material issue. Id. B. Repeated or Persistent Fraud/Deception Constitutes Violation of Executive Law § 63 (12)

5

The term “fraud” has a special and broad meaning within the context of Executive Law § 63(12). That section provides: The word “fraud” or “fraudulent” as used herein shall include any device, scheme, or artifice to defraud and any deception, misrepresentation, concealment, suppression, false pretense, false promise or unconscionable contractual provisions. The judicial interpretation of statutory fraud is equally broad and goes well beyond that of common law fraud. The definition of statutory fraud was first enunciated by the Court of Appeals in People v. Federated Radio Corp., 244 N.Y. 33, 38-39 (1926), in connection with a proceeding under the Martin Act: In a broad sense the term [fraud ] includes all deceitful practices contrary to the plain rules of common honesty . . . The words ‘fraud’ or ‘fraudulent conduct’ in this connection should, therefore, be given a wide meaning so as to include all acts, although not originating in any actual evil design or contrivance to perpetrate fraud or injury upon others which do by their tendency to deceive or mislead the purchasing public come within the purpose of the law.

This broad view of fraud has been followed by New York courts at all levels in the more than seventy years since Federated Radio. Reliance, actual deception, knowledge of deception and intent to deceive, traditional elements of common law fraud, are not required to establish liability for statutory fraud. See, e.g., People v. Applied Card Systems, Inc., 27 A.D.3d 104 (3d Dep’t 2005); People v. General Electric Co., 302 A.D.2d 314 (1st Dep’t 2003); People v. Telehublink Corp., 301 A.D.2d 1006 (3rd Dep’t 2003); People v. Empyre Inground Pools, Inc., 227 A.D.2d 731, 722 (3d Dep’t 1996); People v. Apple Health and Sports Clubs, Ltd., Inc., 206 A.D.2d 266, 267 (1st Dep’t 1994), aff’d, 84 N.Y.2d 1004 (1994); State v. Ford Motor Co., 136

6

A.D.2d 154, 158 (3d Dep’t 1988), aff’d, 74 N.Y.2d 495 (1989); and Lefkowitz v. Bull Investment Group, 46 A.D.2d 25 (3d Dep’t 1974), appeal denied, 35 N.Y. 2d 647 (1975). Along with Executive Law § 63(12), GBL Article 22-A provides the other major source of the Attorney General’s authority to prosecute false advertising and deceptive conduct. GBL § 349(a) provides that “[d]eceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in this state are hereby declared unlawful.” GBL § 349(b) provides: Whenever the Attorney General shall believe from evidence satisfactory to him that any person, firm, corporation or association or agent or employee thereof has engaged or is about to engage in any of the acts or practices stated to be unlawful he may bring an action in the name and on behalf of the people of the state of New York to enjoin such unlawful acts or practices . . .

The definition of fraud under Executive Law § 63(12) parallels the meaning of deceptive acts and practices under GBL § 349. Colorado State Christian College, 79 Misc. 2d at 54. Intent, proof of actual deception and reliance are not elements of deception under the General Business Law. Id. Moreover, both Executive Law § 63(12) and GBL § 349 are meant to be construed liberally to effectuate their remedial purposes. See, e.g., State v. Princess Prestige Co.,supra, 42 N.Y. 2d at 108 (1977); State v. Mariano, 189 A.D.2d 766,767 (2d Dep’t 1993). GBL § 350 outlaws false advertising, the definition of which is found in GBL § 350-a(1). In New York, as in many other states, the test of whether advertising false or a practice is deceptive is whether it has the “capacity or tendency to deceive.” See., e.g., Empyre Inground Pools, 227 A.D.2d at 732; State v. Volkswagen of America., 47 A.D.2d 868 (1st Dep’t 1975); and Lefkowitz v. E.F.G. Baby Products, 40 A.D.2d 364, 368 (3d Dep’t 1973). 7

It has long been the law in New York that when a government agency brings an action pursuant to Executive Law § 63(12), on behalf of the public, it does so with a mandate to protect the vast multitude of consumers, including “the ignorant, the unthinking and the credulous,” and not only the reasonable consumer or even the average consumer. Guggenheimer v. Ginzburg, 43 N.Y. 2d 268, 273 (1977) (emphasis added). Consistently, actions brought by the Attorney General to enjoin fraudulent, deceptive and illegal business practices have been judged by the “credulous” consumer standard articulated in Ginzburg. See, e.g., People v. Applied Card Systems, Inc., supra 27 A.D.3d at 106; People v. General Elec. Co., 302 A.D.2d 314 (1st Dep’t 2003); State v. Volkswagon of America, Inc., supra 47 A.D.2d at 868; People v. Lipsitz,174 Misc. 2d 571, 583 ( Sup. Ct. N.Y. Co. 1997); State v. Terry Buick, Inc., 137 Misc. 2d 290, 294 (Sup. Ct. Dutchess Co. 1987). In recent decisions, the First and Third Departments of the Appellate Division re-iterated that in actions brought pursuant to Executive Law § 63(12) by the Attorney General the purpose of the law is to “protect not only the average consumer, but also ‘the ignorant, the unthinking and the credulous’” People v. General Elec. Co., supra 302 A.D.2d 314 (1st Dep’t 2003); and People v. Applied Card Systems, Inc., supra 27 A.D.3d 104, 106 (3rd Dep’t 2005)(quoting Guggenheimer v. Ginzburg). In this case, whether the Court applies the standard of a credulous consumer or the average consumer, the result is the same -- respondents’ advertising is patently misleading. The unique feature of this case is that the activity being promoted is inherently dangerous so the issue of safety is of paramount concern to potential recreational rafters. Just like a consumer shopping for auto repairs, a subject about which they know nothing or very little, a consumer shopping for a rafting guide knows practically nothing about the business or activity. When a business like respondents holds itself out to the public as capable of providing a service 8

requiring licensure, that business implies that its guides are licensed. In this case, that implicit representation was repeatedly false and deceptive. Whether it is an auto mechanic or a rafting guide, the consumer is at the mercy of the integrity of the person offering the service. The lack of integrity by a rafting guide when it comes to safety issues can have tragic consequences. To disregard basic safety measures that are within one’s control is unconscionable and to advertise by promoting the safety of your services when you disregard practically all elements of safety is undoubtedly false and deceptive. In this case the State has shown that respondents did not disregard safety in one instance. Rather, the evidence shows that over several years (possibly much longer), Patrick Cunningham has: a) treated the licensing laws as if they were a nuisance – breaking the laws whenever they seemed inconvenient and certainly getting away with it more times than getting caught, 2) abandoned rafters mid-trip himself as if guiding them was a bother instead of a duty, 3) cared not what state of intoxication, (hung over, or strung out) his guides were in, so long as the drinking or smoking marijuana was done out of sight of customers as that might have hurt business and 4) allowed his equipment, even his rafts to fall into disrepair as if the cost of keeping them in shape was too burdensome – even going so far as to paint over rips and tears in the fabric rather than repair them. Although it is unfortunate that it took the death of one of his customers to bring these issues to a head, the counter culture Mr. Cuningham has been fostering for years cannot be tolerated in an industry whose first responsibility is the safety of its customers. POINT II SINCE RESPONDENT HAS FAILED TO RAISE A TRIABLE ISSUE OF FACT, THE PETITION SHOULD BE GRANTED 9

Respondents have made no attempt to raise a triable issue of fact by challenging the evidence submitted in support of the State’s petition. Respondents’ opposition consists of general denials and a misguided legal argument as to the statute of limitations and admissiblility of evidence. See, Point III below. Should respondents’ allege that their intentions have been good, such protestations are irrelevant. Courts in New York have consistently held that intent to defraud is not an element of statutory fraud under Executive Law § 63 (12) or GBL § 349. See, e.g., People v. General Electric Co., supra 302 A.D.2d at 315; State v. Ford Motor Co., 136 A.D.2d 154 (3d Dep’t. 1988), affirmed, 74 N.Y.2d 495 (1989); Lefkowitz v. Bull Investment Group, 46 A.D.2d 25, 28 (3rd Dep’t 1974). It is even less so as to the cause of action under Executive Law § 63 (12) for repeated or persistent illegality. As the court stated in E.F.G. Baby Products, supra, 40 A.D.2d at 367, “Respondent’s defense that it acted in good faith, even if believable, is irrelevant as to the question of illegality….” Nor is it a defense that respondents have satisfied customers. See, State v. Midland Equities of New York, Inc., 117 Misc.2d 489 (Sup. Ct. N.Y.Co. 1982); See also, People v. Empyre Inground Pools, Inc., supra 227 A.D.2d at 732 (longevity in business does not mean GBL § 349 is not applicable as to acts and practices alleged). It would also be unbelievable should Mr. Cunningham allege he was ignorant of all that violations shown in the State’s petition. It is clear that he procured the illegal acts for which his employees were occasionally caught. The well documented facts put before the Court by the State establish the repeated or persistent fraud and illegality alleged in the petition. Respondents have not come forward with admissible evidence which raises a triable issue of fact. The petition should be granted. POINT III

10

THE STATUTE OF LIMITATIONS DOES NOT LIMIT THE EVIDENCE THAT MAY BE SUBMITTED AND, CONTRARY TO RESPONDENTS’ ARGUMENT, IS SIX YEARS UNDER EXECUTIVE LAW § 63(12) There is no such objection to admission of evidence on the grounds that it violates the statute of limitations. One will not find the statute of limitations mentioned in Article 45 of the CPLR. The only time the statute of limitations might be relevant is when a witness asserts his right against self-incrimination or, alternatively, when a witness’s testimony can be compelled because the statute of limitations against prosecution has expired. In this case, the State’s evidence of repeated and persistent disregard for ECL §11-0533 and V & T Law § 509-b since 2007, and possibly much earlier, establishes the causes of action under Executive Law § 63(12). The Court can weigh all of the evidence submitted and determine the appropriate remedy. As to respondents’ argument that the statute of limitaions in this case is three years, respondents are mistaken. The Court of Appeals has expressly held that proceedings pursuant to Executive Law § 63(12), whether for fraudulent or illegal conduct, are governed by the six year residual statute of limitations in CPLR § 213(1) applicable to equitable proceedings,1 and not the three year statute of limitations under CPLR § 214(2). State v. Cortelle, 38 N.Y.2d 83, 84, 88 (1975) (six year residual statute of limitations applies to 63(12) proceeding for repeated fraudulent conduct); State v. Princess Prestige, 42 N.Y.2d 104, 107-08 (1977) (six year residual statute of limitations applies to § 63(12) proceeding for violations of the Door-to- Door Sales Act, PPL Article 10-A). Accord, State v. County Bank of Rehoboth Beach, 45 A.D.3d 1136, 1138 (N.Y. 3d Dep't 2007) (six-year residual statute of limitations period applied to claims that
1

It is well settled that equitable causes of action are governed by the “residual statute of limitations” set forth in CPLR § 213(1), which provides a six-year statute of limitations for “an action for which no limitation is specifically prescribed by law.” Singleton v. City of New York, 632 F.2d 185, 190 (2d Cir. 1980); Buscarello v. Guglielmelli, 44 Misc.2d 1041, 1042-43 (Sup. Ct. N.Y. Co. 1964). In fact, Cortelle expressly rejected the application of the threeyear statute of limitations contained in CPLR § 214(2) to actions under Executive Law § 63(12) in favor of the sixyear residual statute of limitations.

11

respondents had engaged in illegal payday lending under Executive Law § 63(12), notwithstanding that the Attorney General had not alleged all of the elements to establish a common-law fraud claim, including scienter and reliance); Morelli v. Weider Nutrition Group, Inc., 275 A.D.2d 607, 608 (1st Dep't 2000) (“[C]laims . . . brought pursuant to Executive Law § 63(12) [are] governed by a six-year limitation period . . . .”); State of New York v. Boyajian Law Offices, 851 N.Y.S.2d 72 (Sup. Ct. N.Y. Co. 2007); cf. State v. Bronxville Glen I Assoc., 181 A.D.2d 516 (1st Dep't 1992) (Martin Act, upon which Executive Law § 63(12) was modeled, has six-year statute of limitations, even if it “expande[ed] the definition of fraud so as to create new liability in some instances.”) Thus, respondents completely misread Cortelle to require a common-law cause of action in order for the six year residual statute of limitations to apply. The only other Executive Law § 63(12) case they rely on, State v. Daicel Chemical Indus., Ltd., 840 N.Y.S.2d 8, 11-12 (N.Y. App. Div. 1st Dep't 2007), fails to even cite Cortelle and instead wrongfully incorporates the statute of limitations for private actions brought under GBL § 349(h).2 Even if common law fraud were required, the Attorney General’s Petition supports such a finding. Accordingly, Petitioner’s request for injunctive and other equitable relief pursuant to Executive Law § 63(12) is subject to the six-year statute of limitations applicable to claims in equity. POINT IV THE ATTORNEY GENERAL IS ENTITLED TO
2

Respondents also cite Gaidon v. Guardian Life Ins. Co. of Am, 96 N.Y.2d 201 (2001), which held that a three year statute of limitations applied to private actions brought under GBL § 349(h). Even assuming that the statute of limitation for a governmental enforcement action under GBL § 349(b) is three years, this limits the recovery of penalties only.

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INJUNCTIVE RELIEF, AN ACCOUNTING, RESTITUTION AND PENALTIES A. Injunctive Relief The court’s injunctive powers under § 63(12) are extremely broad. See, State of New York v. Princess Prestige Co., Inc., supra, 42 N.Y.2d 104 (1977); State of New York v. Management Transition Resources, Inc., supra, 115 Misc.2d 480 (Sup. Ct. N.Y. Co. 1982); State v. Daro Chartours, Inc., supra, 72 A.D.2d 872 (3rd Dep't. 1979); State of New York v. ScottishAmerican Association, supra, 52 A.D.2d 528 (1st Dep't. 1976), appeal dismissed, 39 N.Y.2d 1033 (1976); State of New York v. Midland Equities of New York, Inc., supra117 Misc.2d 203 (Sup. Ct. N.Y. Co. 1982); and State v. Hotel Waldorf-Astoria Corporation, supra. The Court should permanently enjoin respondents from engaging in the business of offering guided rafting excursions on any part of the rivers in New York where licensed guides are required. It would be totally inappropriate to treat this as a first offense and worthy of only a temporary suspension of the business of offering guides for rafting on such rivers. The evidence is compelling that turning respondents loose with an order that says no more than comply with the licensing laws in the future, or which only temporarily suspends their operation, would expose the public to a danger that is simply unacceptable. The mandate to provide licensed guides has existed for many years and respondents have blithely ignored it. Short of permanent ban and as an alternative, the Court could, as requested, permanently enjoin respondents from engaging the particular illegal and fraudulent practices proven by the State and from engaging in the business of offering white water rafting guide services in the State of New York until a performance bond of at least $100,000 is filed with the Attorney General by a surety or bonding company licensed and approved by the Superintendent of 13

Insurance of the State of New York. The posting of such a bond should be sufficient incentive for respondents to comply with any injunction this Court issues. The granting of a performance bond is within the broad remedial injunctive powers of the Court. People v. Allied Marketing Group, 220 A.D. 2d 170 (1st Dept. 1995) ( $500,000 bond ordered); People v. Helena VIP Personal Introduction Service of New York, Inc., N.Y.L.J., 1/17/92, p.26 Col. 3 (Sup. Ct. N.Y. Co.) affirmed 199 A.D.2d 186 (1st Dept. 1993) ($500,000 bond ordered); People v. Empyre Inground Pools, supra, 642 N.Y.S. 2d at 346 (3rd Dept. 1996) ($100,000 bond ordered); State v. Hotel Waldorf-Astoria Corporation, supra, 67 Misc.2d 70 (Sup. Ct. N.Y. Co. 1971) ($100,000 bond ordered). B. Restitution Courts routinely award restitution to consumer victims in Executive Law § 63(12), even where all of the victims may not be identified at the time of the order. See, e.g., State v. General Electric Co., supra, 302 A.D.2d at 316 (awarding restitution to all consumers who purchased dishwashers as a result of respondent’s deceptive statements); State v. Allied Marketing Group, supra, 220 A.D.2d 370 (awarding restitution to consumers injured by respondent’ fraudulent and deceptive sweepstakes scam); State v. Helena VIP Personal Introductions Services, supra, 199 A.D.2d 186 (directing respondent to refund charges to all injured consumers); State v. Ford Motor Co., supra, 136 A.D.2d at158 (awarding restitution to all consumers who paid an illegal $100 deductible as part of respondent’s extended warranty); State v. Scottish-American Association, supra, 52 A.D.2d at 528-529 (requiring respondent to make full restitution to known and unknown consumers for unrendered services); State v. Midland Equities, supra, 117 Misc.2d at 208 (ordering full restitution to all consumers defrauded by respondent's mortgage consulting

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firm); State v. Management Transition Resources, 115 Misc.2d at 492 (granting restitution to all consumers injured by respondent’s employment agency). The purpose of restitution is to restore the status quo and to return that which rightfully belongs to the defrauded purchaser. Porter v. Warner Holding Co., 328 U.S. 395, 402 (1946); Tull v. United States, 481 U.S. 412, 424 (1987). Since the primary aim of restitution is to restore the purchaser to the status quo, the basic rule is that the purchaser is entitled to recover that which he parted with, or, more specifically, that which the seller has received, including the money which the purchaser has paid. 66 Am. Jur. 2d, Restitution and Implied Contracts § 166; Sohns v Beavis, 200 NY 268 (1911); Motcum, S.A. v Bank of Western Hemisphere, Ltd., 78 AD2d 602 (1st Dep’t 1980). A person obtains restitution when he is restored to the position he formerly occupied either by the return of something which he formerly had or by the receipt of its equivalent in money. (Restatement [1st] of Restitution, § 1.) The Court’s equitable powers under Executive Law § 63(12) to restore the status quo by means of restitution for consumers who have been injured as a result of fraudulent or illegal conduct are extremely broad. Executive Law § 63(12) was amended in 1970 to provide for restitution (ch. 44, L. 1970). The purpose of the amendment, as stated in the Governor’s Memorandum, 1970 McKinney’s Session Law 3074, was to strengthen the consumer protection powers of the Attorney General by "clarifying his powers to obtain restitution for defrauded consumers in [63(12)] proceedings." That memorandum further noted that the power granted the Attorney General by the amendment "will provide a means to make the victims of past fraud whole again." (Emphasis supplied.) The scope of the relief granted "is addressed to the sound judicial discretion of the courts." State v. Princess Prestige Co., supra, 42 N.Y.2d at 108.

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Courts frequently order a restitution fund created and provide for the mechanics of identification, notification and distribution. State v. Princess Prestige, supra, 42 N.Y.2d at 108; State v. General Electric Co., supra, 302 A.D.2d at 316; State v. 21st Century Leisure Spa Int’l. Ltd., 153 Misc. 2d 938 (Sup. Ct. N.Y. Co. 1991); State v. Bevis Industries, Inc., 63 Misc. 2d 1088 (Sup. Ct. N.Y. Co. 1970); State v. Life Science Church, 113 Misc. 2d 952 (Sup. Ct. N.Y. Co. 1982), appeal dismissed, 93 A.D.2d 774 (1st Dep’t 1983), lv denied, 61 N.Y.2d 604, cert denied, 469 U.S. 822 (1984); State v. Midland Equities of New York, Inc., supra, 117 Misc. 2d at 208; State v. Hotel Waldorf Astoria Corp., 67 Misc. 2d 90 (Sup. Ct. N.Y. Co. 1971). It is well settled that courts do not need to know the exact figures to be refunded in order to award restitution to victims of consumer fraud. State v. Princess Prestige, 42 NY2d at 108; State v. Allied Marketing Group, supra, 220 A.D.2d at 370; State v. Helena VIP Personal Introductions Services, supra, 199 A.D.2d at 186; State v. Ford Motor Co., supra, 136 A.D.2d at 158; State of New York v. Scottish American Association, supra, 52 A.D.2d at 528-29; State v. Life Science Church, supra, 113 Misc.2d at 971; State v. Management Transition Resources, supra, 115 Misc.2d at 492; State v. Midland Equities, supra, 117 Misc.2d at 209. Proof of fraud, scienter or bad faith is not required for an award of restitution. State v. Ford Motor Co., supra, 136 A.D.2d at 158; State v. Bull Inv. Group, supra 46 A.D.2d 25, 28 (3d Dep't 1974), appeal denied, 35 N.Y.2d 647 (1975); State v. E.F.G. Baby Products, Inc., 40 A.D.2d 364 (3d Dep't 1973). Every consumer who contracted for respondents’ services and who did not get a licensed guide should get their money back, regardless of whether they completed the trip without physical injury. They did not get the service for which they paid and respondents profited

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unconscionably in each such sale. The public needs to be notified of that right both directly and through mass media notices since many consumers who contracted with respondents live outside the area. The cost of such notification should be born by respondents and all who come forward with bona fide claims requesting restitution for the failure to receive the services paid for should get it.

C. Civil Penalties GBL Article 22-A, § 350-d provides for the assessment of a civil penalty of up to $5,000 for each deceptive act or false advertisement in violation of Article 22-A. Courts routinely award penalties in civil enforcement cases brought by the Attorney General. See, e.g., State v. Telehublink Corp, supra 301 A.D.2d 1006, 1008 (3rd Dep’t 2003); State v. Wilco Energy Corp., 284 A.D.2d 469, 473 (2nd Dep’t 2001); State v. Allied Marketing Group, supra, 220 A.D.2d 370. Since civil penalties are paid to the State, their purpose is to punish for unlawful conduct and deter future violations, not to compensate the injured party. Meyers Bros. Parking Sys. v. Sherman, 87 A.D.2d 562, 563 (1st Dep’t 1982 ) affirmed, 57 N.Y.2d 653 (1982); May Dep’t Stores Co. v. State ex rel. Woodard, 863 P.2d 967 (Colo App 1993). Courts have articulated three different approaches to measuring the number of violations in cases in which false advertising has been disseminated to a vast audience, using one of the following: 1. the number of individuals who received the false advertisement (U. S. v. Readers Digest Association, Inc., 662 F.2d 955, 956 (3d Cir. 1981) (upholding $1,750,000 penalty based on 17,000 misleading sweepstakes solicitations mailed); B.M.W. of North America v. Gore, 517 U.S. 559 (1996); United States v. Wilson Chemical Co., Inc., 1962 U.S. Dist. LEXIS 5522 (W.D. Pa. 1962), aff’d, 319 F.2d 133 (3d 17

Cir. 1963); United States v. Golden Fifty Pharmaceutical Co., Inc., 421 F. Supp. 1199, 1207 (N.D. Ill. 1976); People v. Superior Court (Jayhill Corp.), 9 Cal. 3d 283 (1973));

2.

the number of acts of publication that disseminated the advertisement (the appearance in one edition of a magazine or newspaper equals one violation) (United States v. J.B. Williams Co., Inc., 354 F. Supp. 521 (S.D.N.Y. 1973); May Dep’t Stores Co. v. State ex rel. Woodard, 863 P.2d 967; State of Wisconsin v. Menard, Inc., 121 Wis. 2d 199 (Wis. App. 1984); Williams’ North West Chrysler Plymouth, Inc., 87 Wash. 2d 298 (1976); People v. Superior Court of Orange County (Olson), 96 Cal. App. 3d 181 (1979)), or

3.

the number of individuals who received the false advertisement and who acted on it (May Dep’t Stores Co. v. State ex rel. Woodard, 863 P.2d 967; People v. Superior Court of Orange County (Olson), 96 Cal. App. 3d 181).

In this case, petitioner submits that the appropriate standard for determining the amount of civil penalties respondents should pay for their continuous false and deceptive claims on their web site is to treat each day the web site was up as a separate violation. The false and deceptive claims of safety or “the safest” excursions was repeated daily so the Court has the discretion to impose a substantial civil penalty that will appropriately punishe respondents and will deter others from making similar false and deceptive claims. An alternative would be to base the penalty on the number of consumers who were lured into purchasing guided rafting excursions from respondents and, unbeknownst to them, purchased unlicensed rafting excursions. That number is unknown, but can be calculated after an appropriate order from the Court requiring respondents to account to the Attorney General for all customers sold trips in the past three years and requiring respondents to notify the public through mass media announcements alerting consumers to make their claims with the Attorney General. Respondents can be given the opportunity to rebut any claim by proving that such consumer was actually guided by a licensed

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guide. This procedure is more cumbersome and much more time consuming, but using either method will surely result in such a high number of violations that the theoretical penalty available to the Court is astronomical. For that reason, and because the penalty is a matter of discretion for the Court, the State submits that a penalty of $100,000 should be sufficient to punish respondents for flouting the law so brazenly and should provide a strong deterrent for similar businesses.

CONCLUSION For the reasons set forth above, it is respectfully requested that the Court grant the State’s petition and grant such other and further relief as the Court deems just and appropriate, including issuance of an order permanently enjoining respondents from engaging in the business of offering guided rafting, canoeing or kayaking excursions on rivers in New York where licensed guides are required. Dated: Poughkeepsie, NY February 21, 2013 Respectfully submitted,

ERIC T. SCHNEIDERMAN Attorney General of the State of New York Attorney for Petitioner By: ___________________________ G. NICHOLAS GARIN Assistant Attorney General

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