Cohen v Nassau Educators Fed. Credit Union

[*1] Cohen v Nassau Educators Fed. Credit Union 2006 NY Slip Op 51056(U) [12 Misc 3d 1164(A)] Decided on May 10, 2006 Supreme Court, Nassau County Austin, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on May 10, 2006
Supreme Court, Nassau County

Shiela Cohen, on Behalf of Herself and All Others Similarly Situated, Plaintiff,

against

Nassau Educators Federal Credit Union, Defendant,



15094-05



Counsel for Plaintiff

Wolf Popper, LLP

845 Third Avenue

New York, New York 10022

Counsel for Defendant

O'Reilly, March & Corteselli, P.C.

1000 Franklin Avenue - 3rd Floor

Garden City, New York 11530

Leonard B. Austin, J.

Defendant Nassau Educators Federal Credit Union ("Credit Union") moves to dismiss this action on the grounds of documentary evidence and that the complaint fails to state a cause of action and, if it alleges a state law cause of action, the action is pre-empted by federal statute.

BACKGROUND

Credit Union is a federally chartered credit union owned by it members who are the individuals who have deposit accounts. Credit Union is controlled by a Board of Directors elected by its members.

Employees of the public schools, many private and parochial schools, students at many of the colleges and universities, members of the Nassau County Bar Association, Nassau County Medical Association, Nassau County Dental Association and retirees from these organizations and members of their immediate household are eligible to become members of the Credit Union. The Credit Union has more than 100,000 members.

Credit Union provides checking, savings and other accounts for its members, provides mortgages and personal loans to its members and provides other services generally provided by banks.

Until May 2005, Credit Union provided life insurance to depositors based upon the amount on deposit with Credit Union when the member reached 55 years of age, if the member maintained the account until his/her death. Depositors older than 55 were eligible to receive proportionately lower percentages of life insurance on deposits made between ages 55 and 70. The premiums on this life insurance were paid by Credit Union. The maximum available insurance was $2,000.

Plaintiff, Shiela Cohen ("Cohen") alleges that depositors who opened and maintained accounts which were eligible for the life insurance benefits received a lower rate of interest than they would have received had they deposited the same amount in a certificate of deposit or money market account.

In May 2005, Cohen, and presumably the other members of the purported class, received a letter from Credit Union indicating the life insurance benefits were being terminated.

Prior to termination, the life insurance was issued by CUNA Mutual by Certificate of Insurance issued to Credit Union. The Certificate of Insurance provides in relevant part: The Group Policy Can Be Changed The terms of the Group Policy can be changed without prior notice to you. No change, however, can take away any rights which arose prior to the time the change was made.The Group Policy can be stopped at any time by either CUNA Mutual or the Credit Union after prior notice is given, one to the other.

*** Right To Convert - If your insurance under the Group Policy: (A) stops because (1) you leave the Credit Union, or (2) the policy stops; or (B) is reduced...You may convert your insurance under the Group Policy to a new policy of life insurance only.

The policy could be converted without providing evidence of insurability provided the Credit Union member made application for the new policy within 31 days that the insurance under the policy was terminated or reduced and the member paid the premiums as required.Cohen became a member of Credit Union in 1976. She has continuously been a member [*2]since that time. Prior to her 55th birthday, Cohen deposited $2,000 into her account with Credit Union. She has maintained that account with at least $2,000 since that time.

When Cohen joined Credit Union's predecessor-in-interest, the Valley Stream Teachers Federal Credit Union, in 1976, she signed an agreement stating that she agreed to conform to the laws of the credit union and any amendments thereto.

In 2001, Cohen signed another signature card in which she "...accepts and agrees to the terms and conditions established by the Board of Director for the designated account(s) requested on this application and as stated in the Trust-in-Savings Disclosure..."

Cohen commenced this class action alleging causes of action for breach of contract, violation of General Business Law §349, breach of the duty of good faith and fair dealing and unjust enrichment. Plaintiff seeks a judgment requiring Credit Union to reinstate the life insurance and to give those who withdrew their funds from accounts with Credit Union after cancellation of their insurance the opportunity to reinstate their deposit and obtain life insurance coverage.

Credit Union moves to dismiss the complaint on the grounds that Plaintiffs state law claims are preempted by federal law and/or on the grounds that the complaint fails to state a cause of action or is barred by documentary evidence.

DISCUSSION

A.General Considerations

Since Defendant moved to dismiss the complaint and not each specific cause of action, the motion must be denied in its entirety if any of the causes of action is found to be legally sufficient. Anand v. Soni, 215 AD2d 420 (2nd Dept. 1995); and Maritarano Construction Corp. v. Briar Contracting Corp., 104 AD2d 1028 (2nd Dept. 1984).

B.Legal Standard

In order to obtain a dismissal pursuant to CPLR 3211(a)(1), the defendant must establish that the documentary evidence conclusively establishes a defense to the action as a matter of law. Leon v. Martinez, 84 NY.2d 83 (1994). See also, 730 J & J LLC v. Fillmore Agency, Inc., 303 AD2d 486 (2nd Dept. 2003); and Berger v. Temple Beth-El of Great Neck, 303 AD2d 346 (2nd Dept. 2003).

When deciding a motion made pursuant to CPLR 3211(a)(7), the court must determine whether the pleader has a cognizable cause of action and not whether the action has been properly pled. Guggenheimer v. Ginzburg, 43 NY2d 268 (1977); Rovello v. Orofino Realty Co., 40 NY2d 633 (1976); and Well v. Yeshiva Rambam, 300 AD2d 580 (2nd Dept. 2002). If, from the facts alleged in the complaint and the inferences which can be drawn from those facts, the court determines that the pleader has a cognizable cause of action, the motion must be denied. Sokoloff v. Harriman Estates Development Corp., 96 NY2d 409 (2001); and Stucklen v. Kabro Assocs., 18 AD3d 461 (2nd Dept. 2005).

The court must accept as true all of the facts alleged in the complaint. 511 West 232rd Street Owners Corp. v. Jennifer Realty Co., 98 NY2d 144 (2002); and Sokoloff v. Harriman Estates Development Corp., 96 NY2d 409 (2001). The complaint must be liberally construed, and the Plaintiff must be given the benefit of every favorable inference which can be drawn from the complaint. Leon v. Martinez, 84 NY2d 83 (1994); and Paterno v. CYC, LLC, 8 AD3d 544 (2nd Dept. 2004). [*3]

C.First Cause of Action - Breach of Contract/Second Cause of Action - General Business Law § 349

The first cause of action alleges a cause of action for breach of contract. The elements of a cause of action for breach of contract are the existence of a contract between the plaintiff and defendant, consideration, performance by the plaintiff, breach by the defendant and damages resulting from the breach. Furia v. Furia, 116 AD2d 694 (2nd Dept. 1986). See also, 2 NY PJI 4:1, at p. 594 (2006). Plaintiff must establish the provisions of the contract the defendant is alleged to have breached. Sud v. Sud, 211 AD2d 423 (2nd Dept. 1995); and Atkinson v. Mobil Oil Corp., 205 AD2d 719 (2nd Dept. 1994).

This cause of action must fail on two bases; to wit: failure of consideration and the terms of the Certificate of Insurance permit the action taken by Credit Union.

Consideration is "...either a benefit to the promisor or a detriment to the promisee." Holt v. Feigenbaum, 52 NY2d 291, 299 (1981). See also, Weiner v. McGraw-Hill, Inc., 57 NY2d 458 (1982). In this case, the situation is reversed. The promisor, Credit Union, had a detriment in that it paid the premiums on the policy while the promisee, the depositors, received a benefit, life insurance without having to pay a direct premium.

Cohen asserts that by depositing money into the account which provided her with life insurance as opposed to an account that might grant higher interest rates without insurance constitutes consideration. This is not consideration; it is an investment decision. Cohen and the other members of class could have chosen to deposit their funds in an account paying a higher rate of interest.

A brief description of the life insurance was contained on the members quarterly account statement. The quarterly statement indicated that information contained therein was only a summary of the life insurance coverage. The quarterly statement specifically states, "Copies of the certificate of insurance are available at the Credit Union for specific policy conditions and limitations." See, Complaint ¶17.

The Certificate of Insurance specifically states that Credit Union or CUNA Mutual, the insurance company that issued the policy, could cancel the policy on notice at any time. The policy specifically provides that Cohen and other members of Credit Union could convert the policy upon termination of the policy provided that the member applied for the coverage within 31 days of the termination of the policy upon payment of the required premiums.

General Business Law §349 prohibits deceptive business practices. The statute makes actionable conduct which does not rise to the level of common law fraud. Gaidon v. Guardian Life Ins. Co. Of America, 94 NY2d 330 (1999). The statute provides a remedy to those who have been subject to deceptive or misleading acts or business practices that are consumer oriented. Oswego Laborers Local 214 Pension Fund v. Marine Midland Bank, N.A., 85 NY2d 20 (1995). A deceptive act or practice for the purposes of the statute is one which is likely to mislead a reasonably prudent consumer. Karlin v. IVF America, Inc., 93 NY2d 282 (1999).

The elements of a claim under General Business Law § 349 are "(1) a deceptive consumer-oriented act or practice which is misleading in a material respect, and (2) injury resulting from such act. (Citations omitted)" Andre Strishak & Assocs., P.C. v. Hewlett Packard Co., 300 AD2d 608, 609 (2nd Dept. 2002). See also, Solomon v. Bell Atlantic Corp., 9 AD3d 49 (1st Dept. 2004).

Fully disclosed risks are not deceptive practice for the purposes of General Business Law §349. Citipostal, Inc. v. Unistar Leasing, 283 AD2d 916 (4th Dept. 2001); and Sands v. [*4]Ticketmaster-New York, Inc., 207 AD2d 687, (1st Dept. 1994), lv. den., 85 NY2d 904 (1995). One cannot claim to have been mislead when the misrepresentations consist of material which could have been discovered through the exercise of due diligence. See, Danann Realty Corp. v. Harris, 5 NY2d 317 (1959); Barrett v. Huff, 6 AD3d 1164 (4th Dept. 2004); Reale v. Sotheby's, Inc., 278 AD2d 119 (1st Dept. 2000); and Cohen v. Cerier, 243 AD2d 670 (2nd Dept. 1997).

Thus, Plaintiff has not pled sufficient facts to establish that Credit Union engaged in deceptive practices. Cohen and the other members of Credit Union could have determined that the life insurance policy and the benefits due to her pursuant to the policy could be cancelled at any time by reviewing the certificate of insurance which was available from Credit Union. Cohen does not allege that she was denied full information about or access to the terms of the certificate of insurance prior to its cancellation or that anyone from Credit Union ever mislead or deceived her about the terms of the policy. Thus, based upon the documentary evidence and the failure to plead prima facie claims for breach of contract or violation of General Business Law § 349, the first and second causes of action cannot be sustained.

D.Third Cause of Action - Implied Covenant of Good Faith & Fair Dealing

The third cause of action alleges a separate cause of action for breach of the implied covenant of good faith and fair dealing. The covenant of good faith and fair dealing is implied in every contract. Dalton v. Educational Testing Service, 87 NY2d 384 (1995); Rowe v. Great Atlantic & Pacific Tea Company, Inc., 46 NY2d 62 (1978); Skillgames, LLC v. Brody, 1 AD3d 247 (1st Dept. 2003); and 1-10 Industry Assocs, LLC v. Trim Corporation of America, 297 AD2d 630 (2nd Dept. 2002). New York does not recognize a separate cause of action for violation of the implied covenant of good faith and fair dealing. Jacobs Private Property, LLC v. 450 Park LLC, 22 AD3d 347 (1st Dept. 2005); Cerberus International, Ltd. v. Banctec, Inc., 16 AD3d 126 (1st Dept. 2005); and Parker East 67th Assocs. L.P. v. Ministers, Elders and Deacons of the Reformed Protestant Dutch Church of the City of New York, 301 AD2d 453 (1st Dept. 2003). Since the third cause of action is duplicative of the breach of contract action, the third cause of action fails to state a claim upon which relief can be granted and must be dismissed. Id.

E.Fourth Cause of Action - Unjust Enrichment

The fourth cause of action alleges unjust enrichment. Recovery for unjust enrichment is based upon quasi-contract. Recovery cannot be obtained for unjust enrichment unless the written agreement between the parties "has been rescinded, is unenforceable or abrogated." Waldman v. Englishtown Sportswear, Ltd., 92 AD2d 833, 836 (1st Dept. 1983). A contract will not be implied when there is a valid written agreement between the parties. Chadirjian v. Kanian, 123 AD2d 596 (2nd Dept. 1986).

In order to establish a prima facie case of unjust enrichment, the Plaintiff must prove that it performed services at the request or behest of the Defendant that resulted in the Defendant receiving an unjust benefit. See, Clark v. Daby, 300 AD2d 732 (3rd Dept. 2002); and Prestige Caterers v. Kaufman, 290 AD2d 295 (1st Dept. 2002).

Neither Cohen nor any of the other class members performed any services for the Defendant. The relationship between the Cohen and the class members and Credit Union is governed by statute, the charter and by-laws of Credit Union and deposit agreements. Thus, the agreement between Cohen and Credit Union is contractual and statutory. See, Brian Wallach Agency, Inc. v. Bank of New York, 75 AD2d 878 (1st Dept. 1980); and Krupp v. The Franklin [*5]Savings Bank in the City of New York, 255 App.Div. 15 (1st Dept. 1938). Since the fourth cause of action fails to state a claim upon which relief can be granted, it must be dismissed.

Since none of causes of action state a claim upon which relief can be granted, the Court need not reach the question of whether the federal statutes and regulations preempt Plaintiff's state law claims.

Since the complaint as pled does not allege any viable cause of action, the complaint in its entirety must be dismissed.

Accordingly, it is,

ORDERED, that Defendant's motion to dismiss the complaint pursuant to CPLR 3211(a)(1) and (7) is granted and the complaint is hereby dismissed; and it is further,

ORDERED, that Defendant's motion to dismiss this action on the ground that it is preempted is denied as academic

This constitutes the decision and Order of the Court.

Dated: Mineola, NY _____________________________

May 10, 2006 Hon. LEONARD B. AUSTIN, J.S.C.