OPINION OF THE COURT
MARTIN SHULMAN, J.
Defendant Federated Department Stores, Inc. moves for summary judgment to dismiss the complaint alleging two causes of action for breach of contract and deceptive trade practices. Plaintiff Herbert Feinberg, as assignee of the claims of IA Alliance, Inc., formerly known as I. Appel Corp., opposes the motion. Federated also cross-moves to strike the affidavit of Donald Freeman annexed as exhibit I to plaintiff's counsel's affirmation in opposition or, alternatively, to reopen discovery to take Freeman's deposition. Plaintiff similarly opposes the cross-motion. The motion and cross-motion are consolidated for disposition.
Feinberg is the assignee of the claims of IA Alliance, Inc., formerly known as I. Appel Corp.
The first cause of action alleges that defendant's assessment of improper charge-backs breached the terms of the VSM
In support of its motion for summary judgment, Federated argues that the course of performance and dealing between the parties and trade usage in the industry demonstrate Alliance's agreement to Federated's charge-back policy. Defendant further contends that plaintiff's delay in objecting to the charge-backs operates as a waiver of its economic duress claims, and that any of Federated's alleged threats cannot be construed as economic duress since Federated always had the option not to do business with Alliance. Finally, Federated argues that since Feinberg cannot establish any harm to the public, he cannot maintain a cause of action under General Business Law § 349.
Plaintiff counters that: no agreement between the parties authorized any profit margin markdown penalty; the contractual terms are unambiguous, thus, extrinsic evidence of a course of performance and dealing between the parties and industry custom is inadmissible; issues of fact exist because Alliance did object to the charge-backs vitiating Federated's waiver defense; and the record contains several examples of Federated's deceptive conduct injurious to the public.
Breach of Contract
This action involves the sale of goods and is governed by the UCC. UCC 2-202 provides in relevant part:
Contrary to plaintiff's claims, the parties' written agreement(s), as embodied by the VSM and various purchase orders, may be explained or supplemented by course of dealing, usage of trade or course of performance. (See also, UCC 1-205 .) The statute's express language renders evidence of the parties' course of performance and dealing for more than a decade admissible. Such evidence is relevant to the interpretation of
With respect to course of performance, UCC 2-208 (1) further provides:
Concerning Alliance's alleged acquiescence to defendant's charge-backs, Federated points to deposition testimony for the proposition that neither plaintiff nor Alliance ever objected to the markdown allowances. Rather, Feinberg instructed Alliance's employees to negotiate with Federated to reduce the amount of profit margin markdowns taken.
Plaintiff disputes that it agreed to the profit margin markdowns and also points to deposition testimony of Alliance's alleged objections as well as its coerced acquiescence to the markdown allowances. (Exhibit K, Levin opposition affidavit, at 12-16; exhibit N, Levin opposition affidavit, at 18-23; exhibit J, Levin opposition affidavit, at 26-30, 39, lines 18-23; 41, lines 3-16; exhibit M, Levin opposition affidavit, at 14-18.) Federated argues that Alliance did not timely object and thus waived its claim that it consented to the charge-backs under duress.
Here, issues of fact exist as to: (1) whether Alliance objected to the markdown allowances during the relevant period and, if so, which ones; (2) the timeliness of Alliance's alleged objections; and (3) whether Alliance's ultimate acquiescence acted as a waiver of its claims in this action. (Great Am. Ins. Co. v M/V Handy Laker, 2002 WL 32191640, 2002 US Dist LEXIS 26378 [SD NY 2002], affd 348 F.3d 352 [2d Cir 2003] [whether waiver has been established by the conduct of the parties during the performance of the contract is a question of fact]; Cliffstar Corp.
Deceptive Trade Practices
General Business Law § 349 (a) prohibits "[d]eceptive acts or practices in the conduct of any business, trade or commerce." Under General Business Law § 349 (h), a person injured due to a violation of General Business Law § 349 "may bring an action in his own name to enjoin such unlawful act or practice, an action to recover his actual damages . . ., or both such actions." The court may award reasonable attorney's fees to a prevailing plaintiff. (Id.)
General Business Law § 349's applicability to this case requires some background discussion of the statute's purpose. The Court of Appeals summarized the legislative history of General Business Law § 349 in Oswego Laborers' Local 214 Pension Fund v Marine Midland Bank (85 N.Y.2d 20, 24-25 ):
As noted in Genesco Entertainment, a Div. of Lymutt Indus., Inc. v Koch (593 F.Supp. 743, 751 [SD NY 1984]), the "typical
"A defendant engages in `consumer-oriented' activity if his actions cause any `consumer injury or harm to the public interest.'" (New York v Feldman, 210 F.Supp.2d 294, 301 [SD NY 2002], citing Securitron Magnalock Corp. v Schnabolk, 65 F.3d 256, 264 [2d Cir 1995], cert denied 516 U.S. 1114 .) "The critical question . . . is whether the matter affects the public interest in New York, not whether the suit is brought by a consumer or a competitor." (Securitron Magnalock Corp. v Schnabolk, 65 F3d at 264 [2d Cir 1995].) In opposition to the motion, Feinberg notes the broad scope and applicability of General Business Law § 349.
This action is clearly atypical of the majority of cases brought under General Business Law § 349, as it is brought not by a purchaser against a seller, but by a manufacturer/wholesaler of consumer goods against the retail purchaser of its goods who ultimately sells such goods to the public. Plaintiff alleges injury in the form of reduced profits and injury to the public due to increased prices the retailer charged for lingerie, a consumer good. That this case involves a dispute between two business entities does not automatically preclude the applicability of General Business Law § 349 to this case. (Cruz v NYNEX Info.
The Court of Appeals has defined a "deceptive act or practice" as a representation or omission "likely to mislead a reasonable consumer acting reasonably under the circumstances." (Oswego Laborers' Local 214 Pension Fund v Marine Midland Bank, 85 NY2d at 26.) Such a question may be determined as a matter of law or fact as the individual case may require. (Id.) On this developed record, it is not necessary to determine if defendant's acts are consumer oriented because Federated's conduct is not a deceptive practice within the meaning of General Business Law § 349.
Defendant's actions upon which this case is based are distinguishable from other types of conduct found to be deceptive acts in violation of General Business Law § 349. By comparison, in Securitron Magnalock Corp. v Schnabolk (supra), the defendant intentionally made false statements regarding a competitor's product. Such statements were made to a regulatory agency and potentially affected public safety. Similarly, in Verizon Directories Corp. v Yellow Book USA, Inc. (338 F.Supp.2d 422 [ED NY 2004]), the defendant's deceptive conduct consisted of a false and/or misleading statewide and national advertising campaign directed at the public. (See also, Oswego Laborers' Local 214 Pension Fund v Marine Midland Bank, supra [question of fact existed as to whether the defendant bank's conduct constituted a deceptive act or practice under General Business Law § 349 where the bank alone possessed material information relevant to consumers and failed to provide such information]; Riordan v Nationwide Mut. Fire Ins. Co., 756 F.Supp. 732 [SD NY 1990], affd in part, question certified 977 F.2d 47 [2d Cir 1992], certified question withdrawn 984 F.2d 69 [2d Cir 1993] [defendant insurer's claims settlement policy violated provisions of Insurance Law].)
Even if Federated breached its contract(s) with Alliance by assessing charge-backs, such actions are markedly different from the previously discussed deceptive and misleading practices. General Business Law § 349 "was designed to protect `the little guy' from false advertising, pyramid schemes, bait-and-switch
The court's dismissal of the second cause of action moots defendant's cross motion to strike the Freeman affidavit submitted in support of plaintiff's second cause of action.
Accordingly, it is hereby ordered that defendant's motion for summary judgment is partially granted dismissing the second cause of action, and is otherwise denied; and it is further ordered that defendant's cross motion is denied as moot.