People v Northern Leasing Sys. Inc.

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People v Northern Leasing Sys. Inc. 2017 NY Slip Op 32496(U) November 17, 2017 Supreme Court, New York County Docket Number: 450460/2016 Judge: Lucy Billings Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. [*FILED: NEW YORK COUNTY CLERK 11/29/2017 11:50 AM 1] ' INDEX NO. 450460/2016 "I". . NYSCEF DOC. NO. 384 .. '·_ RECEIVED NYSCEF: 11/29/2017 ' ~. . '• SUPREME COURT OF THE STATE .•. OF NEW YO:RK COUNTY OF NEW. YORK:. . PART 4 6 --------~--~~---------~~~-~-----------x PEOPLE OF THE STATE OF NEW .YORK, by . ERIC T. ·SCHNEIDERMAN,·· Attorney General. ·of the State of New York, and FERN A. · FISHER, DEPUTY CHIEF ADMINISTRATIVE ' JUDGE FOR NEW YORK' CITY COURTS AND ADMINISTRATlVE AUTHORITY OF THE CIVIL COURT' OF THE CITY OF NEW YORK, ~~ndex No.' ~50460/2016 , .•1 ·Petiti.oners ..· · -'agairtst - DE.CIS:i:ON AND ORDER NORTHERN LEASING SYSTEMS I INC. I L,EASE FINANCE GROUP LLC, 'f.JIBF LEASING LLC, LEASE SOURCE.:.'.LsI I LLc:;>a/k/a' LEASE SOURCE, INC., GOLDEN EAGL;E LEASING LLC, PUSHPIN HOLDINGS -LLC, 'JAY COHEN a/k/a ARI JAY COHEN, individually, as principal of NORTHERN LEASING SYSTEMS, INC:, as.amerriber of LEASE FINANCE GROUP LLC, .·and as an officer of PUSHPIN HOLDING~-LLC, NEIL HERTZMAN.;. individually. and as an officer of NORTHE-RN LEASING.·SYSTEMS, INC. I JOSEPH -I. SUSSMAN I p. c ~ I JOSEPH I . SUSSMAN, . individually and as a principal.of JOSEPH~I. SUSSMAN, P.C., and ELIYAHU R .·. BABAD:, irtdi vidually and as a principal or associate of JOSEPH I--.. SU$SMAN I p '. c. I . . ' J .. ~ Respondents --~---~----~---------~-~---~----------x LUCY BILLINGS, J.S.C.: . '• I . . BACKGROuND · ,· '. . Petitioner Schneiderman, New York· Attorney Genera.l, . sues pursuant to New York Executi~e Law.§ 63(12) . arid "General. Business . ·'->11 .. Law (GBL) · § 349. .· for.· respondents' ·fraud and illegal conduGt ,i,ri . ' : . ' , leasing credit card equipmeht. The le:ssorsare respondents Northe:tn·'·Leasing.Systems,_ Inc., .Lease Finance.Group LLC, I nleasing.l90 1 l 2 of 27 MBF- ·CL. ·- .. 2' [*FILED: NEW YORK COUNTY. CLERK 11/29/2017 11:50 AM 2] .. . '~ ~ ~: . NYSCEF DOC. NO. 384 . INDEX NO. 450460/2016 ·.-<c RECEIVED NYSCEF: 11/29/2017 ., Leasing LLC, Lease Source,...LSI, LLC, Golden Eagle Leasing LLC, .and Pusl:lpin Holdings '(Northern Leasing respondents). Respondents Joseph I. Sussman, P. C., Sussman, and Babad (attorn~y· ·respondents~ erif6rced these leases throtigh litigation. Respondents Cohen and Hertzman are officers of the Northern Leasing respo·ndehts ·:· Pe.titioner Attorney Genera.l ·also seeks dissqlutioh of Northern Leasing illegal conduct. Irie·. I I based op its 'fraud and N.Y. Bus. Corp. Law (BCL)· § .1101(a) (2). Petitioner Judge Fisher seeks to vacate the default judgments · .. respondents obtained. C.P.L.R. § 5015(c) . . Respondents mo".e to dismiss the petition.base=d on documentary· evidence, .the applicable statutes of limitations; and the petitiori's failure to state a claim. (5), and (7). I C.P.L.R. § 3~ll(a) (1); At oral argument, responderits withdrew their motions insofar as they as sought disclosure. II. APPLICABL:E .STANDARDS When evaluating respondents' motion to dismiss the petition "' under C.P.L.R. ' §, 32ll(a) (7), the court must ac.cept petitioners' allegations as true, liberally construe them,_ and draw all. reasonable. {nferences in their favor. ·JF Capital Advisors, LLC v. Lightstone Group;.LLC, 25 N.Y.3d 759, ' 764 (2015); Miglino v. . Bally Total Fitness of Greater N.Y., Inc:, 20 N.Y.3d 342, 3~1 (2013); ABN AMRO Bank, N.V. v. MBIA Inc., 17 N.Y.3d 208, 227 (2011); Drug Policy Alliancev.New York City TaxComm'n, 131 A.D.3d ~15, 816 (l~t'Dep;t 2015). the petit~ori fails nleasing.190 to Dismi~sal is ~ar~anted only if allege facts· that .fit ·within any cognizable .... ·. ' 2 '• 3 of 27 ... [*FILED: NEW YORK COUNTY CLERK 11/29/2017 11:50 AM 3] NYSCEF DOC. NO. 384 INDEX NO. 450460/2016 RECEIVED NYSCEF: 11/29/2017 ; legal theory. ABN AMRO Bank, N.V. v. MBIA Inc.; 17.N.Y.3d at 227; Lawrence v. Graubard Miller, 11 N.Y.3d 588, 595 (2008); Nonnon v. City of.New York, 9 N.Y.3d 825, 827 (2007); Mill Financial, LLC v. Gillett, ~22 p~tition To dismiss the A.D~3d 98, 103 (1st Dep't 2014) pursuant to.C.P.L:R. § 3211(~) (1), the admissible documentary evidence must utterly refute or completely negate petitioners' allegations against respondents so as to eliminate all material disputes regarding those facts. Goshen v. Mutual Life Ins. Co. of N.Y., 98 N.Y.2d 314, 326 (2002); 511 W. 232nd Owners Corp. v. Jennifer Realty Co., 98 N.Y.2d 144, 152 (2002) A.D.3d at 103; Art & i Mill Financial, LLC v. Gillett, 122 Fashion Group CorR. v. Cyclops Prod,, Inc., 120 A.D.3d 436, 438 (1st Dep't 2014). The documentary evidence must plainly and flatly contradict the petition's claims. Maas v. Cornell Univ., 94 N.Y.2d 87,· 91 (1999);.Xi Mei Jia v. Intelli-Tec Sec. Servs., Inc., 114 A.D.3d 607, 608 (1st Dep't 2014); Cathy Daniels, Ltd. v. ·weingast, 91 A.D.3d 431, 433 (1st Dep't 2012); KSW Mech. Servs., Inc. v. Willis of N.Y.; Irie.,· 63 A.D.3d 411.(1st Dep't 2009). See Lopez v. Fenn, 90 A.D.3d 569, 572 (1st Dep't 2011). III. Respo~dents STATUTES OF LIMITATIONS contend that C.P.L.R. § 214(3) bars petitioners' claims for acts or omissions more than three yeais before the filing of the petition April 11, 2016. A limitations period of six years, however, applies to petitioners' claims'un,der Executive Law§ 63(12). C.P~L.R. § 213(1); State 0£ New York v. . nleasing.190 3 4 of 27 . :, [*FILED: NEW YORK COUNTY CLERK 11/29/2017 11:50 AM 4] INDEX NO. 450460/2016 NYSCEF DOC. NO. 384 RECEIVED NYSCEF: 11/29/2017 Cortelle Corp.; 38 N.Y:2d 83, 86-87 '(1975); 'People \r;·'.credit Suisse Sec. (USA) LLC, 145.A.D.3d 533, 535 (1st Dep't 2016); . . People v. Trump Entrepreneur Initiative LLC, 137 A.D:3d 4y9, 418 (1st Dep'.i ·. i616), ... . Petitiorters' claim under BCL · § .11.oJ..·(~) (2); based.on·fraud and sciehter, is similarly subject to a· . limitations.period of six years.· York v. Cortelle Corp., 38 claims under GBL three years. § N.Y.2~ C.P.L.R. at 88. § 213(1) ~ st&te of Ne~ Only petitioners' 349 are subject to a limitations period of C.P.L.R. § .214(2); Gaidon v. Guardian Life Ins. Co. of Am.,. 96 N:Y.2d 201, 209-10 (2001) ·.. · IV. CLAIMS UNDER GBL § . 34 9 "Deceptive acts or practices in the conduct bf any business, trade or commerce or in the furnishing of any service' state are hereby declared. unlawful." GBL § ~n t~is 349(a). 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 in .or is about to engage in any C?f the·. ~cts· or practices stated to be unlawful he may bring an actiqn.in the name ·and on .behalf of the people of th~ . st:~te' .9t New York to enjoin such unlawful acts or practices· and to obtain restitution of .any moneys or property obtained directly or indirectly by any such unlawful acts or practices. GBL § 349 (h)". This provision allows respondent Attorney General to commence an action on the people of New York's behalf to enjoin and ?btain restitution for deceptive acts or practices affecting consumers. ·:People v. Coventry First LLC, 13 N.Y~3d ,':.. 108, 114 , (20~9 ). . The. acts or practices violatlng GBL. § 349 must be consum~r-o'riented,.relating to purchases or leases for.' per~onal I nleasing.190 family I or household use. 4 5 of 27 Medical Socy. 'of State of [*FILED: NEW YORK COUNTY CLERK 11/29/2017 11:50 AM 5] .. NYSCEF DOC. NO. 384 - INDEX NO. 450460/2016 RECEIVED NYSCEF: 11/29/2017 ~ ~' N.Y. v. Oxford Healih Plans, Inc., 15 A.D.3d ?06, ·20~ (1st Dep't 2005); Sheth v. New York Life Ins. Co., 273 A.D.2d 72, Dep't 2000). I (1st _See City of New York v. Smokes-Spirits.Com,_ Inc., 12 N.Y.3d 616,. 621, 623 N. y. 2 d 2 4: 73 v. (2009); Stutman Chemical Bank; 95 2 9 ( 2 0 0 0 )- .. The petition. labels the lessees under the Northern Leasing · respondents'· leases for credit card equ:ipment -as . cons_umers, but also describes the lessees as small businesses and ~mall business ' - owners~ Sustainable .claims under GBL ' - 349 § are· limited both to transactions for personal, family, or household and not business uses arid to transactions in New York;. Goshen Mutual Life Ins. Co. of N. Y., 98 N. Y. 2d a·t 325; Egan v. Telomerase Activation (_1st Dep't 2015); Ovitz v. Sciences,· Inc: i 127 A.D.3d 653, 653 Bloomberg L.P. 1 77 A.D.3d 515, 516 (1st Dep't 2·0-10). Although in opposition to-respondents' motions petitioners suggest that enforcement of .the leases' guaranties against "the individual guarantors may impact_- their personal, fatnily, or householdfinances, the petition nowhere alleges that the guaranties are . . . ' entered, implemented, -or even enforced for personal; family, or household purposes. Be.cause petitioners do_not show that the lessees or guararitors are consumers under GBL § 349; petitioners fail to sustain their claim under that V. s~atlite~ CLAIMS UNDER EXECUTIVE-_ LAW § 63 ( 12) Whenever any person shall engage in r~peated fraudulent or illegal acts or otherwise demonstrate ~ersistent 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 c"ourt of the state of New York, on notice of five days, for an order nleasing.190 5 6 of 27 [*FILED: NEW YORK COUNTY CLERK 11/29/2017 11:50 AM 6] NYSCEF DOC. NO. 384 INDEX NO. 450460/2016 RECEIVED NYSCEF: 11/29/2017 enjoining the contimia;nce of such_business activity or of any fraudulent or ille9al acts, directing restitution and damages . · · N.Y. Exec. Law§ 63(12) This provision authorizes respondent Attorney General to c::ommence an action to enjoin ai:d seek . . . - . restitution for .fraudulent or illegal ·bu;:;i'i1ess activity~ . . -. . . . . .. People ' :' ~ v. Greenberg, 27 N.Y.3d 490, 497 (2016); People v. Sprint Nextel Corp., 26 N.Y ..3d 98·,,·108 (2015);.People v. ·Coventry First·LLC, 13 N.Y.3d.at 114. Fraud under this provisiori is "any device, scheme or artifice to defraud and any deception; misrepresentation, concealment,. ::;tippression, false. pretense i fal~e pr6i-t1ise or . unconscionable contractual provisions. " · N. Y. Exec. Law § 63 ( 12) See People ·v. Credit· Suisse Sec. (USA) LLC, 145 A. n."3d ·at 534. This provision.also defines "repeated" conduct as conduct affecting more· ·than one person· and "per.sis tent'' conduct as continuing conduct .. N.Y. Exec. Law§ 63(12). The test fbr fr~uci' under Executive Law § 63.(12) , is· whether the act tends to deceive or creates an atmosphere conducive to fraud.· People v. General Elec: Co.'· 302' A.D.2d 314, '314 Dep't 2003); bad faith, A ·claim under§ 63(12) d,oes not ·require evidence of ~cienter; People v. General ~lee. Co., 302 A.D.2d at 315, or· the eletne=nts. of . common ·law fraud. First LLC, (1st ·. People v ..·Coventry . : - . _, ~. 52 A.D.3d 345, 346 (1st Dep't 2008), aff'd, 13 N·.Y.3d 108. In sum, to maintain a claim of fraud under Executive Law § 63 ( 12) , the· petition inust allege enough fac_ts: t'6 ·allow· a nleasing.190 6 7 of 27 [*FILED: NEW YORK COUNTY CLERK 11/29/2017 11:50 AM 7] NYSCEF DOC. NO. 384 INDEX NO. 450460/2016 RECEIVED NYSCEF: 11/29/2017 •I .;,.,,. reasonable inference of fraud. Pludeman v. Northern Leasing Sys . , Inc . , 10 N. Y. 3 d 4 8 6, 4 9 2 ( 2 0 0 8) ; DDJ Mgt. , LLC v '. Rhone Group L.L.C., 78 A.D.3d 442, 443 'I.~ ~ I W~i .A (1st Dep't· 2010); Pramer S.C.A. v. Abaplusintl. Corp., 76A.D.3d89, 98 (lstDep't2010). . . -~ ' Through allegations that the Northern Leasing·respondents' - . salespersons.secure leases by misrepresenting .the lease i 4-.' .. ·~·.:·•!1 ··". -•· ~ provisions, giving lessees incomplete or unexecuted copies qf .r ... leases, materially altering leases. after their signature, and enforcing leases.with forged signatures, petitioners sufficiently plead, fraud under the statute. .·;, A. 'THE INDEPENDENT SALES. ORGANIZATIONS'·. CONDUCT ...,..,-, I •,I .'}· The Northern Leasing respondents contend that the .petition .. ..•. :""!' \ complains of acts by independent sales organizations (ISOs), which the Northern Leasing respondents are riot liable. "- ......~'"\~~~ft for The ·;• petiti.on alleges that the ISOs are respondents' agents and that .·, ,.,._,. •,•·fll,4·· Northern Leasing's agents or Northern Leasing itself committed. the deceptive and fraudulent conduct. See People v. Coventry J I First LLC, 52 A.D.3d ~t 346, aff'd, 13 N.Yr3d 108. Specifically, I -+• ~·· v ......... ~·... • '-'\.'!I .. the petition alleges .the Northern Leasing responden.ts' direction, i· supervision, and control of, support to, arid direct ·involvement in the ISOs' misconduct, thus establishing that.the Northern Leasing respqndent·s knew and approved o'f the IS()s; .· m.:l.scori~uct. ·---···. ......... . ! ·:, ...-,,....~ Since respondent Cohen's affidavit fails to authenticate or lay any foundation for the admissibility of the st.andard ISO ,..,;_ 'I! agreements upon which respondents rely to establish that the ISOs nleasing.190 7 8 of 27 [*FILED: NEW YORK COUNTY CLERK 11/29/2017 11:50 AM 8] INDEX NO. 450460/2016 NYSCEF DOC. NO. 384 RECEIVED NYSCEF: 11/29/2017 •, __. were not their agen.ts or employees, respondent~ ·fail t(J establish any documensary defense based on the standard agreements' contents.· AO Asset Mgt.. · . LLC v. Levine, 128- A.D:3ci . 620, . .621. (1st . . ' \ Dep' t 2015) ~-·Amsterdam Hospitality Grotlp, LLC v. Marshall-Alan . Assoc., Inc~, 120 A·oD.3d 431, 432-33 . . . (1st Dep't 2014); IRE-Brasil Resseguros S.A. v. Portobello Intl. Ltd., 84 A:D.3d ·637, 63?-'38 (1st Dep't.2011); Advanced Global Tech., LLc·v. Sirius Satellite . . Radio, Inc., I 4~ . . A.D;3d 317, 318 (1st Dep't 2007). Even if the court accepts the agreements as _admissible, they do not dispositively de~onstrate that the lSOs are not.respondents' agents because, by securing lessees for the Northerh Leas,ing respondents, the ISOs obtain Most. fundamentally, a benefit ... I for these respondents. standard agreements that ISOs will: not· make representations on the Northern Leasing re~pondents' behalf, will deliver the equipment and a copy of the lease to lessees, will comply with law, and will abide by-Northern Leasing respondents' policies' do not negate the petition's allegations .that these promises of futu:r:e conduct were not kept. . ·.~· The Northern Leasing respondents, after all, qwn the leased equipment and thus .retain responsibility when the equipment is not delivered, dOE7S not function, is Ilot. repair.~d, O·~ is not . replaced as prorriise'd and when. they alleged.ly respond to . ·.. I complaints of· undelivered or non-functioning. equipment by simply In all the~e wa~s, ·the petition insisting on continued payments. . .. ~ effectively 'pleads -'the Northern Leasing respondents'. direct ·.·.· conduct or.the ISOs' actual authority.as the Northern Leasing nleasing.190 8 9 of 27 ~ ........ .... ~_V:!-} [*FILED: NEW YORK COUNTY CLERK 11/29/2017 11:50 AM 9] INDEX NO. 450460/2016 NYSCEF DOC. NO. 384 RECEIVED NYSCEF: 11/29/2017 ... respondents~ :agents·,- which respondents. do riot refute. Whether the petition pleads· the~ ISOs ,· apparent authqr{ ty therefore is academic. · ·. B. .-••• •• <::_;. ,·~ PETITIONERS' . EVIDENCE Although respondents may not support their motions to dismiss the petiti6n with affi~avits, Serao.v. Bench-Ser~o: A.D.3d 645, '646 (1st Dep't 2017); Lowertsterri y; Sherman Sg:. Realty Corp.; 143 A.D.3d 562, 562 LLC v. Changing World T~ch., (1st Dep't 2016); GEM Holdco, L.P., 127 2015); Flowers v. 73rd ToWnhouse LLC, Dep' t A.D.3d~598, 599 (1st Dep't - . ·•. ,:i 99 A.D.3d 431, 431':(1st 2012) ,__ petitioners may rely Ori admis'sible affld?.vits to supplement the petition. New York, 366 149 C.P.L.R. § 403 (b); ~onnon v. City of 9 N.Y.3d at 827; Cron v. Hargro Fabrics, 91 N.Y.2d 362, (1998); Ray·v. Ray~· 1D8 A.D.3d 449, 452 J1st tiep't 2013); Thomas v. Thomas:, 70 A.D.3d 588, 591 (1st Dep;t. 2010). Northern Leasing respondents contend, however, ·The that the affidavits p_etiti9ners present to support. their :petitic;:>n are inadmissible~- First I the Nbrthern Leasing res.pohdents urge. that lessors or guarantors' affidavits are deficient because. they were not sworn coritempora~eously with their writing. No authori·ty, however, invalidates an.affidavit b~cau~e th~·witness wrote it first to memorialize events and later swore to.it for use in court. Second, the Northern Leasing respondents insist that· the affidavits include inadmissible hearsay where the.lessees attest to statements by Northern Leasing respondents' employees: The .. •til>i nleasing.1.9q 9 ......., 10 of 27 [*FILED: NEW YORK COUNTY CLERK 11/29/2017 11:50 AM 10] NYSCEF DOC. NO. 384 INDEX NO. 450460/2016 RECEIVED NYSCEF: 11/29/2017 lessees' accounts of what those.employees stated to the lessees, however, are not offered for the truth of those statements, but simply for what promises or misrepresentations the.employees made. Hinlicky v. Dreyfuss, 6 N.Y.3d 636, ·646-47 (2006); People v. Caban, 5 N.Y.3d 143, 149-50 (2005); People v. Davis, 58 N.Y.2d 1102, 110:3 (1983) ; Giardino v. Beranbaum, 279 A .D. 2d 282, 282 (1st Dep't 2001). See Bruckmann, Rosser, Sherrill & Co., L.P. v. Marsh, 87 A.D.3d 65, 68 n. (1st Dep't 2011). The Northern Leasing respondents next contend that the ~"' affidavits sworn outside New York lack a cert{f icate of conformity. C.P.L.R. § 2309(c). The Northern Leasing respondents waived.this defect when they failed to reject .the I :y.! affidavits within 15 days after their service or to indicate any prejudice from the defect. C.P.L.R. § 2101(f); Pion v. New York City Hous. Auth., i25 A.D.3q 462, 462 (1st Dep't 2015). ·• ,,._. Moreover, since the affidavits were duly notarized outside New York, the omission of a certificate of conformity is not a fatal defect, but i's a mere irregularity that petitioners inay remedy nunc pro tune. Indemnity Ins. Corp., Risk Retention Groupv. A 1 Entertainment LLC, 107 A.D.3d 562, 563 (1st Dep't 2013); Hall v. Elrac, Inc., ·79 A.D.3d 427, 427-28 {1st Dep't 2010); Matapos Tech. Ltd. v. Campania Andina de Comercio Ltda, ·68 A.D .. 3d 672, 673 (1st Dep' t 2009). .In any event, several affidavits sworn in New York,· which do not require any certificate of conformity, substantiate petitioners' claims. While the N.orthern Leasing respondents contend that respondent Attorney General presented nleasing. 190 ·- 10 11 of 27 :'·.· [*FILED: NEW YORK COUNTY CLERK 11/29/2017 11:50 AM 11] INDEX NO. 450460/2016 NYSCEF DOC. NO. 384 RECEIVED NYSCEF: 11/29/2017 : .:\-'" : .l!~'! only a few affidavits of the hundreds of thousands of ·. . ' transactions on which petitioners' claims are b~sed, the Attorney ~'\~ ..',l~;i '~ ~." General need not establish a claim under Executive Law§ 63(12) ;.._~,fl by any number or percentage of consumer complaints. State of New "··~~~-! York v. Princess Prestige Co., 42 N.Y.2d 104, 107 (1977), C. UNCONSCIONABILITY 1. ... .-. The Need for a Hearing The Northern Leasing respondents contend that the court must _: :.:!· . ::,~7.r:i conduct a hearing pursuant to the Uniform Commercial Code to determine whether to sustain the petition's claim that the le.ases comprise "unconscionable· contractual provisions." N.Y. Exec. Law ...... ,,. ~·At·J § 63(12). Uniform Commercial Code (UCC) Article 2-A "applies to any transaction, regardless of form, that U.C.C. § 2-A-102. cr~ate~ a lease." ·' N.Y. .' Therefore UCC § 2-A-108(1}·and (2), governing .~nd conduct us~d. ·t.o induce unconscionable lease. provisions ~ .. ' execution of leases or· to collect lease pa}rments; applies. Before making a finding of unconscionability under subsection (1) or (2), the court, on its own motion oi that of a party, shall afford the parties a reasonable opportunity to present evidence as to·the setting, purpose, and effect of the lease contract or claus~ ther~of, or of the conduct. . · · · N.Y. U.C.C. § 2-A-108(3) At this determining w?ether the petition sufficiently pleads unconscionability. , · See State of New York N.Y., 50 N.Y.2d 383, 390 (1980) i :~~(; ju~cture, howev~r~· th~ cciurt is not making a finding of unconscionability, but is merely I I ·~ • ,.jj .._;u_~ v .. ~ .-:.t:! , . ·.~ ....... No hearing is ·required 11 I .. '• 12 of 27 ~ .. ,, I before respondents answer the petition. nleasing.190 & Avco Fin .. Serv. of Green v. 119W. 138th St. LLC, 142 A.D.3d 805, 809 ·(1st Dep't 2016). •• ',...!!~\. ·\ ... [*FILED: NEW YORK COUNTY CLERK 11/29/2017 11:50 AM 12] NYSCEF DOC. NO. 384 INDEX NO. 450460/2016 RECEIVED NYSCEF: 11/29/2017 . 2. . ~ . Pi-ocedura1 ahd Substantive .unconscionability». By allegin~ that lessees lacked a meanirigful choi~e, the petition s~ts forth a cl~im of unconscionability. Gillman v. Chase Manhat'tan Bank, . 7''3 _N. Y. 2d. 1·, 10 ·. (1988); _State of New York ...,.J v.· Avco Fin. Serv. of N.Y., SO N.Y.2d at 389; Dabriei v.· First .. Paradise Theaters Corp., 99 A.D.3d S17, 520 (1st Dep't 2012). Procedurai~unconscionability '.~ relates_ to a contract's fOrmation and encompasses the use of high pressured tactics or d~ception; the contract's legibility; the education, experience, a~d language ability of the ·party claiming uriconscionabili.ty; and the .. disparity .a·~ bargaining power. . . Giilman v. Chase Manhattan Bank, 73 N.Y.2d at.·11; State v~ Avco Fin. Serv~ of N.Y., so N.Y.2d at . .I -~'' 390; Green v. · 119 W. 138th St. LLC, 142 A,p.3d at 809; Dabriel. Inc. v .. First Paradise Theaters Corp., 9·9 A.D.3dat S20_. ,: Substantive.unconsciori~biiity relCites to the contract's terms and analyzes whether they are unreasonably favora?le to one party. Gillman v. Chase Manhattan Bank, 73 N. Y ._2d at 12; Green v. 119 W. 138th St; LL~, 142 A.D.3d at 809; Dabriel, Irie .. v_ First Paradise Theaters Corp., 99 A.D.3d at S21. At oral argument the Northern Leasing respondents mainta_ined that procedural uncoriscionability . . . - applied to the ISOs, while substantive unconsciona:bilit:_y applied . ~- to respondents, as drafters of the leases. The petition pleads claims of procedural unconscionability through allegations both of the lessees' circum~tances.and,of respondents' .~o~duct. Petitioners allege t:.hat~lessees' education . . was limited and that lessees were immigrants nleasing.190 12 13 of 27 "with limited fluency [*FILED: NEW YORK COUNTY CLERK 11/29/2017 11:50 AM 13] NYSCEF DOC. NO. 384 INDEX NO. 450460/2016 RECEIVED NYSCEF: 11/29/2017 -~ in English, elderly, disabled, anO. thus vulnerable to aggressive, high pressured, and ~eceptive tactics. . '":-:" The petition allegei that Northern Leasing respondents' salespersons made-false promis~s .,~:.n to lessees, did not provide complete copies of the leases to i . ' ~ .-;..:;;. ·1essees, and then enforced unsigned and forged leases. Slibstantively, petitioners allege that the leases include unconscionable noncancellation, forum selection, "and service by mail provisions. Similarly to the "standa;r-d" ISO agreements, the . . . . ,, ..4. ,~~~,~JI . ~ Northern Leasing respondents rely only on unauthenticated, ..,._::~~! . . ··-· inadmissible, allegedly typical leases to rebut the petition's AO Asset Mgt ... LLC allegations of substantive unconscionabilir.y. -:'.:. ., >wV ll.1.!J .. : .. 1.. ~ v. Levine, 128 A.D.3d at 621; Amsterdam Hospita"iity·Group, LLC v. ~,_.~~\ , ~ ; Marshall-Alan Assoc., Inc., 120 A.D.3d at 432-33; IRE-Brasil. Resseguros S.A. v. Portobello Intl. Ltd., 84 A.D.3d at 637-38; ~ t • Advanced Global Tech., LLC v. Sirius Satellite Radi·o, Inc., 44 ' A.D.3d at 318. Even if the court considers the~e ~~1 leases, their ..., .... ,1 bold or enlarged print does not diminish their unconscionability for lessees who do not understand English or lack education. .4l•M -~;~·j See :.i.~~~ ·- ... \, Gillman v. Chase Manhattan Bank, 73 N. Y. 2d at 11; State ··of New Yorkv. Avco Fin. Serv. of·N.Y., 50 N.Y.2d at.390; Green v. 119 .~. ~'-'-'V ~ ... -v- ,_,~ .• ,· ...... ·, W. 138th St. LLC, 142 A.D.3d at 809; Dabriel·v. First Paradise· Theaters Corp., 99 A.D.3d at 520. 3. The Noncancellation Provision .; ... ~'. !':I •• ;' .. - ......... ~! ...... Nontancellation provisions are ordinarily enforceable. ·urn ) the case of a finance lease that is not a consumer lease·· the lessee's promises nleasing.190 u~der the lease contract become irrevocable and .. ~ -~ ..~!/; 13 . ...,.r..·1 '. ,.;;,;;¥_ ~ 14 of 27 -~ ?·i~· ... ~~~ [*FILED: NEW YORK COUNTY CLERK 11/29/2017 11:50 AM 14] NYSCEF DOC. NO. 384 INDEX NO. 450460/2016 RECEIVED NYSCEF: 11/29/2017 . • ! ~~I, .....· ,\ 'P.~·· ;-·~, independent upon the lessee's acceptance of the goods." U.C.C. § 2-A-407(1). N:Y. . ..·: ... -,~~! This irrevocability doe·s hot apply, however, to the lessees who claim the credit card equipment was never delivered to them. The petition's allegations that ~·~ ': -~·/,<: .•: ·: ,..1J!' ! lessees' signatures were forged and that lessees did not receive ,:~. complet.e copies of their leases similarly negate the pro:positions that; as a matter of law; the lessees were bound.by the terms of .. ~~~~~: ~.- : ......................·i" ~~ .. l ' ,J.• the leases they signed, and their failure to read the leases before signing them ·is no defense. Arnav Indus., Inc. Retirement . ~~:· { ....~,.~: Trust v. Brown, Raysman, Millstein, Felder & Steiner, .96 N.Y.2d ' . 300, 304 (2001), overruled on other grounds; Oakes V. Patel, 20 N.Y.3d 633, 64~ (2013); Gillman Chase Manhattan Bank; 73 N.Y.2d ,.-~ ~; ........... _ at 11. 4. ~ . · The Forum Selection Provision Forum selection provisions also are enforceable, unless shown to be unreasonable. Bank Hapoalim· (Switzerland) Ltd~ .. Banca Intesa s.p.A.; 26 A.D.3d 286, 288 (1st Dep't 2006) .• -· ,. t ~!ff v. and unenforceable. s·ee Public Adm' r Bronx County v. Montefiore Med. Ctr., 93 A.D.3d 620, 621 (1st Dep't 2012). ... ~· ', Forum selection provisions that violate public policy are :unreasonable ~it/: ,.1 ~·(·•· ' The parties do ' .. .:·'/;I not dispute that a forum selection provision in the Northern I .., ... -~ ,. I _ _..,. , .. ~~¥! !, Leasing respondents' leases designates New York County as the exclusive forum for litigating claims under the leases. ., -The ' petition alleges that a majority of the lessees and guarantors -reside outside New York State and that the cost of appearing in court or retaining a New York attorney is burdensome, nleasing.190 I ! 14 --~--,' The ~. ·"':.:r,· ..•. . ....... 15 of 27 . ! ~:I. [*FILED: NEW YORK COUNTY CLERK 11/29/2017 11:50 AM 15] INDEX NO. 450460/2016 NYSCEF DOC. NO. 384 RECEIVED NYSCEF: 11/29/2017 petition further alleges that respondents obtained civer defaul_t j udgrrients in respondents I 1~ 1 ,--'~~ .,,- :Jt .: , : .~~·'·... ~ve"it· 000 actions against lessees or. guarantors to collect payments under their leases between 2010: . and2015. . .~fa-~t' - The petition's allegations thus support an inference ... ~.; .y,,_ ! ' ~l! that the trials in New York County were so impracticable and . ,.,f inconv_enient as to deprive the lessees of their i•day in court 11 selection provision. 22 A.D.3d 373, 373 -~ ~\-r.{ .,,~J.C•.""'~~ ..- ' • and compel the court to decline enforcement of the forum - :.cli;, - '--•- ' Yoshida v. PC Tech U.S.A. & You-Ri. Inc., (1st Dep't 2005). See Public Adm'r Bronx ' ... ~ ~ A' 'ro ~f4N ........ -·· .~_ County v. Montefiore Med. Ctr., 93 A.D ..3d at _621. ·~--·--i-· .: .. ~;, Respondenis' cbllection actions are not lawsuits where ) .''1 . r.: , plaintiffs, if they choose to sue, are limited to a particular forum. See British W. Indies Guar. Trust Co. v. Banque Internationale A Luxembourg, 172 A.D.2d-234, 234 -~~-i•• ..... (1st Dep't ~ ~ ~ . 1991); Harry Casper, Inc. v. Pines Assoc., L.P; 53 A;D.3.d 764 1 ...: __ f .......__,wJl.t~ 765 (3dDep't 2008); LSPA Enter., Inc. v. Jani.:.King of N.Y., Inc., 31 A.D.3d 394, 395 (2d Dep't 2006); Di Ruocco v. "Flamingo Beach Hotel & Casino, 163 A.D.3d 270, 271-72 (2d Dep't 1990) '.... ~..: They are faced with the choice only • 1 ' .·. f-/· ... ~ In ~· ·: ~~!\ ---·---- ' respondents' actions, defendants do not_choose to engage in litigation. ~;( bet~e~n ' ·~.: defending· far from their home and business or forgoing a defense. A forum selection provision is alsci unenforceable if it i s · part of an agreement permeated with fraud. .. .....___..~ ... - ··~ _Desola Group v .. Coors - Brewing Co., 199 A.D.2d 141, 141-42 (1st Dep't 1993). ' As set forth above, the petition alleges that leases were nleasing.190 15 16 of 27 _I .; Public Adm' r Bronx County v. Montefiore Med .. Ctr., 93 A.D. 3d at 621. ' ... ___ .... ··. ''-,·~~. [*FILED: NEW YORK COUNTY CLERK 11/29/2017 11:50 AM 16] 1'-. NYSCEF DOC. NO. 384 INDEX NO. 450460/2016 RECEIVED NYSCEF: 11/29/2017 not signed by t,he lessees, were materially altered,· or contained forged signatures and that lessees received an incomplete or no copy of ·the lea.se. These allegations, combined with· the ~ . petition's further allegations that the Nofthern Leasing ;u ' ; ~'k.1· respondents' salespersons falsely represented that the leased equipment was· free, a cost saving benefit, and c.ancelable and \ ~~~1 . '!&'./!( that lessees would acquire ownership.of the equipment at theend of the lease term, raise an inference that . .:the .leases'· formation is permeated with fraud. Desola Group v. Coors Brewing Co., 199. I . A.D.2d at 141. 5.· •\"-'.j ·" ~~(, ; ·~ 'The Alternative Service Provision Contracting parties may agree to means of s'ervice alternative to the statutorily required means. The typical .leases that the Northern Leasing respondents present I. on which petitioners may rely to oppose dismissal, see Mitchell v. Calle, ·.I 90 A.D. 3d 584, 585 (~st ~ flt. I ~ t 4 Dep' t 2011); Ayala v. Douglas, 57 A.D. 3d ' ' 266, 267 (1st Dep't 2008); Navedo v. Jaime, 32 A.D.3d:788, 789-90 (1st Dep't 2006); Thompson v. Abbasi, 15 A.D.3d 95, 97 (1st Dep't I .2005), permit service of process commencing.litigation of claims I .1\ih/· under the leases by mail to the mailing address in the lease or to the lessee's or guarantor's current or last known address· when the litigation is commenced. Alternative means· of service to which contracting parties freely agree are also enforceable. - . ~ ' .... " 't\."'.fi.'' ...... ..,,. Knopf v.·sanford, 150 A.D.3d 608, 610 (1st Dep't 2017); Alfred E. .\ Mann Living Trust v.. ETIRC Aviation S.A.R.L., 78 A;D.3d 137,1141 (1st Dep't 2010); Clovine Assoc. Ltd. v. Kindlundj 211 A.D.2d nleasing.190 16 17 of 27 ~ ~ ;' ~\~;· ........... ~.,.:· [*FILED: NEW YORK COUNTY CLERK 11/29/2017 11:50 AM 17] INDEX NO. 450460/2016 .. .; ,...... ~~~~.: RECEIVED NYSCEF: 11/29/2017 . NYSCEF DOC. NO. 384 -~ ~: -· 572, 573 (1st Dep't i995); Credit Card L~asing. Corp~ Group Corp., 185 A.D.2d 109, 109 (1st Dep't 1992). upon waivers of service are enforceable. . .... r;. v. Elan .~···r;i Even agreed ~,. '· ~~t~~- ' Alfred E; Mann Living Trust v. ETIRC Aviation S.A.R.L., .78 A.D.3d at 140. The only "mailing address" in the lease, however, is for the lessee. The guarantor's address in the lease is a "Home Address." AfL of Jay Cohen Ex. 1-1, at 2, Ex. 1-2, at i, Ex. 1- 3, at 1, Ex; 1-4, at 2, 1, Ex. 1-8, at 1, E~. E~. 1-5, at 2, Ex. at 1J Ex. 1-7, at 1~11, 1-9, at 1, Ex. 1-10,.at 2, Ex. .... J • • .. . - , • •.· 1~6, . l , ....... ,_·r-" J at 2, Ex. 1-12, at 2, Ex. 1-13, at 1, Ex. 1-15, at 2. Thus, since the lease permits service at the guarantor's current or ... ;r_. .. ., . last known· address or at the lessee's mailing address· in the lease, 1-t-• respondents may serve the guarantor at the latter address. . Moreover I ~-:fi...!J!· . even. if respondents were to serve guarc:tntors or lesse.es at their current or last known address, nothing in these: leases notifies guarantors or lessees to update their addresses in the lease if their addresses change-. Even if parties to a lease reasonably might do so while the lease is in effect, once it has expired, which is when respondents typically commence litigation under the lease, it is unreasonable to expect that ·parties would update the1r addresses for an entity with which they no'longer· conduct business. Even if leases do notify parties to update their address, such a notic~ is ineffectiv~ ifj as the petition alleges, the lessors and guarantors do ·not receive a copy of· that provision or, of course,· if they have never signed the le~se. For all these reasons, service by mail to the;~ailing address in nleasing.190 17 18 of 27 .~ ..• . .• \ . [*FILED: NEW YORK COUNTY CLERK 11/29/2017 11:50 AM 18] NYSCEF DOC. NO. 384 INDEX NO. 450460/2016 RECEIVED NYSCEF: 11/29/2017 the lease. and.not necessarily to the lessee's or guarantor's residence or place of business may be uncon~cionable beca~se the ...... •'f···· service is not reasonably calculated to provide. notice to t&e . . lessee or guarantor. § . U.S. Const. amend. XIV; N.Y. Const .. art. I, 6; Matter· of Orange County Commr. of Fin. (Helseth), 18 N .Y. 3d '··'.'!1 •IF:· . -'t'.t• 634, 639 (2012); Ruffin v. Lion Corp., 15 N.Y.3d 578, 582 (2010); Kennedy v. Mossafa, 100 N.Y.2d 1, 9-10 (2003)·. See California ! .:·.~!fl, Suites, Inc.· v. Russo·Demolition Inc., 98 A.D.3d 144; 150 (1st Dep't 2012); Reinhard v. City of New York, 34 A.D.3d 376, 377 ,·1;;:: I ..,,,~. I ,).l:J•, (1st Dep't 2006). ,The petition alleges further that t~e leases iriclude automatic renewal provisions, without agreement to renew the . ":hi; lease, and that respondents do not advise lessees of the end of their lease term, but continue deducting payments under the lease after the'lease term has ended: lease. e;ffectively,a never ending These facts and their absurd result raise a plausible claim that no agreed upon alternative service provision extends after the life of the lease, when respondents typically commence litigation under the lease. Respondents insist that the automatic renewal provisions were valid and ~hat respondents owed no duty to inform lessees of the end of their lease term. Accepting these propositions of law, however, does not overcome the petition's further allegations that the Northern Leasing respondents ob~tructe~ lessees' cancellation of their leases, whether before or after ' the lease term or any·renewal. According to petitioners, the nleasing.190 ~ '\ ··'-:~'f.! 18 ·.I 'I . ;· 19 of 27 I " ..;.' Y,~'(t!: ,!,;) [*FILED: NEW YORK COUNTY CLERK 11/29/2017 11:50 AM 19] INDEX NO. 450460/2016 NYSCEF DOC. NO. 384 RECEIVED NYSCEF: 11/29/2017 ·.·~. i . ;~ ,·~rr: ~ortherri .Leasing respondents failed to make their salespers~ns or ''!;"t other representatives available to lessees to·transact any furfher business after the leases' execution and failed to provide any address for lessees to return unwanted' equipment. In sum,, the petition's allegations and lessees' supporting affidavits set forth the lease provisions claimed to be '·' unconscionable and demonstrate deception, including withholding . ~·\,~ \ from lessees complete copies of their leases and forgery of their signatures, and other indicia that lessees did not freely give their consent to the leases' terms. knowi~glj and State-of New York v. Avco Fin. Serv. of N.Y., 50 N.Y.2d at 390: Petitioners : ! ••.. ~ "•/Jlfl . '· 1 thus sustain their claims of various categories of "unconscionable contractual provisions." .', . N.Y. Exec. Law§ 63(12). VI. CLAIM FOR DISSOLUTION UNDER BCL· §. 1101 Petitioner Attorney General seeks to dissolve Northern: Leasing systems, Inc., due to its fraudulent and illegal activity. I .\ The attorney-general may bring an action for the dissolution of a corporation upon bne or more of the following grounds: (2) That the corporation has exceeded the authority conferred upon it by law, or has violated any provision of law whereby it has· forfeited its charter, or carried on, conducted or transacted its business in a.persistently fraudulent or illegal.manner, or by the abuse of its powers qontrary to the public policy of the state has_beco~e liable to be dissolved. N.Y. Bus. Corp. _Law § llOl(a). ! .\ See State of New York v. Cortelle Corp., 38 N.Y.2d at 87; People v. Oliver Schools, 20·6 A.D.2d 143, nleasing.190 ". ·. 19 .. 20 of 27 \ 1,., ~::\;. [*FILED: NEW YORK COUNTY CLERK 11/29/2017 11:50 AM 20] NYSCEF DOC. NO. 384 INDEX NO. 450460/2016 RECEIVED NYSCEF: 11/29/2017 ' -~.r.iJ· _:.·~-1~· ;y: 145 (4th Dep't 1994). Business Corporation Law § llOl(a) thus I!:• grants petitioner Attorney General standing to vindicate the State's _right to remedy a corporation's fraudulent acts and dissolve a corporation that has abused the state's grant of corporate status. State of New York v. Cortelle Corp., 38 N.Y.2d ·u.r at 88; People v. Oliver Schools, 206. A.D.2d at 145-46. .. ;:t) The petition alleges that a Consent Order-and Judgment dated February 28, 2013, in a prior action, permanently enjoined Respondents from engaging in any deceptive, . fraudulent or illegal practices ·in viola ti.on of, inter alia, New York Executive Law§ 63(12) and New York General Business Law ("GBL") § 349 in connection with "any collection or attempted collection. of- taxes and/or related admini::?trative fee-s through any means froni lessees or former lessees. ."'' . .1 • V. Pet. , 15. As well as detailing, as discugsed above; the ' persistent fraudulent and illegal transaction of business to which the Northern Leasing respondents subjected innumerabie · lessee~ over a span of years through draftirig le~ses and s~curihg the lessees, the petition alleges that the Northern Leasing respondents disobeyed this order. Together, these allegations .. ; plead_a significant, seri0us, and continuing abuse of a public !• right justifying dissolution. People v. Oliver Schools, 206 A.D.2d 143, 147 (4th Dep't 1994). VII. CLAIMS AGAINST RESPONDENT HERTZMAN '., ~ f I Even if the court denies the motion to dismiss the claims against the Northern Leasing respondents, they independently seek . ~· . dismissal of the claims against respondent Hertzman. petition-alleges that Neil Hertzman is Northern nleasing.190 Ii; The Lea~ing's Vice 20 !' 21 of 27 [*FILED: NEW YORK COUNTY CLERK 11/29/2017 11:50 AM 21] INDEX NO. 450460/2016 NYSCEF DOC. NO. 384 RECEIVED NYSCEF: 11/29/2017 President of Customer Service and Collections. The.consent Order and Judgment designated Hertzman as the liaison for handling complaints and gave him authority to resolve them. The petition alleges that Hertzman participated in collection of lessees' debts under their leas~s and knew of Northern Leasing's 63(12)~ \· :'.I Petitioners' allegations of H~rtz~an's involvement and participation in the day-to-day oper?-tions bf ~ ··~ ...._"!, Northern Leasing's collections adequately plead fraud by Hertzman, as a corporate officer. ~ : ........ Pludeman v. Northern Lea'sing· . ' ' Sys.; ,..Inc., 10 N.Y.3d at 492-93; DDJ Mgt., .LLC v. Rhone.Group , L.L.C., 78 A.D.3d at 443. Hertzman's positibh also iaises a reasonable inference that he acted on North~rn Leasing's behalf. DDJ Mgt., LLC v. Rhone Group L.L.C., 78 A.D.3d at 444. ' ·Although Hertzman's affidavit is not documentary evidence under C.P.L.R. § 3211(a) (1), Serao v. Bench-Serao, 149 A.D.3d at 646; Lowenst:ern v. Sherman Sq. Realty Corp.,_ 143 A.D.3d '.3-t 562.; City of New York v. VJHC Dev. Corp., 125 A.D.3d 42S, 426. (1st Dep't 2015) ;,Art & Fashion Group Corp. v. Cyclops Prod~ .. Inc., 120 A. D. 3d at 43.8, his affidavit nonetheless describes· his position and how Northern Leasing h~ndles lessees' complaints. His affidavit describes how Northern Leasing·, s records contradict lessees' claims, but does not negate any of the petition'.s ' ' allegations establishing his individual liability. Instead, by '. \ confirming his employment with the Northern Leasing respondents, Hertzman underscores his association with their operations, nleasing.190 21 22 of 27 : ·' fraudulent and deceptive acts, as required for liability_ under Executive Law§ . ,..:.,. r.-· [*FILED: NEW YORK COUNTY CLERK 11/29/2017 11:50 AM 22] NYSCEF DOC. NO. 384 INDEX NO. 450460/2016 RECEIVED NYSCEF: 11/29/2017 ...! . ~ ;MI;: rather than dissociating himself from them. DDJ Mgt., LLC v. Rhone Group L.L.C., 78 A.D.3d at 444. VIII. CLAIMS AGAINST THE ATTORNEY RESPONDENTS i.: '"-;.;,I . ! I The attorney respondents move to dismiss the complaint against them on the ground that their representation of.the l~ases Northern Leasing respondents in their actions under the .. .a•1!•1 was constitutionally protected activity. The Noerr-Pennington doctrine, i,derived from Eastern Railroad Presidents Conference v. . ~ \,. '· ', Noerr Motor Freight, Inc., 365 U.S. 127 (1961), and Mine Workers v. Pennington, 381 U.S. 657 (1965), protects the right under the First Amendment to the United States Constitution to petition the government for governmental action, including through.litig~tion, 1·· Villanova Estates, Inc. v. Fields ton Prop. ·Owners Assn. , Inc'; , 23 I •I A.D.3d 160, 161 (1St Dep't 2005); I.G. Se66nd Generation Partners, L.P. v. Duane Reade, 17 A.D.3d 206, 208 (1St Dep't 2005); Singh v. Sukhram, 56 A.D.3d 187, 191 (2d Dep't.i008), and any incidental activity. Nineteen Eighty-Nine,.LLC v. Ichan Enters. L.P., 99.A.D.3d 546, 547 (1st Dep;t 2012). '. Lewis, 18 N.Y.3d 566, 572 (2012). See Posher v. . ~.!;~I· \ ·. r~f The attorney respondents bear the initial burden to demonstrate the doctrine's applicability so as to bar petitioners' claims. See Nineteen Eighty-Nine, ·LLC ':'· Ichan Enters. L.P., 99 A.D.3d at 547; Arts4All, Ltd. v. H~ncock, 25 A.D.3d 453, 454 (1st Dep't 2006). The sham exception to the Noerr-Pennington doctrine applies ·.1· to abuse of a governmental process, rather than its outcome. Singh v. Sukhram, 56 A.D.3d at 192. rileasing.190 To plead the sham exception 22 23 of 27 ·.· \ [*FILED: NEW YORK COUNTY CLERK 11/29/2017 11:50 AM 23] INDEX NO. 450460/2016 NYSCEF DOC. NO. 384 RECEIVED NYSCEF: 11/29/2017· ·• ' . 'I!': "~!\ . t n doctrine, the petition mus t allege facts to the Noerr Penning o 'ne interest allowing an inference that respondents lacked a genui in seeking governmental ·action, Villanova Estates, Inc.. v. . Fields ton Prop. owners Assn. , I nc · , 23 A.D.3d.·at 161;.Singh I I Y· Sukhram, 56 A.D.3d at 192, a nd that their use of the litigation process in that quest was objectively ·baseless.· V. Duane Reade ~G~e~n~e~r~aut~i~·o~n!.L~P~a~rh.b:tbn~e~r~s~........:!:L~.P!:......:..,~!.....!...-==-===:c=-=-=-=~~ , . I.G. Second. 1 7 A. D . 3 d at 2 O8 ; Singh v. Sukhram, 56 A.D.3d at 192. Petitioners' allegations of respondent Sussman's-testimony that 90% of defendants sued by respondents defaulted; yet they al~ow, continue to serve defendants by mail as the leases fail to demonstrate that the attorney respondents' actions were baseless. The allegations that the attorney respondents shared off ice space with the Northern Leasing respondents, shared access to their comput.er database, and knew of lessees' corriplp.ints of misrepresenta.tion by salespersons and of forgery do not. allow an inference t~at the attorney respondents knew their litigation to enforce the leases was objectively .baseless, to establish the sham exception. I.G. Second Generation Partners, L.P. v. Duane ' Reade, 17 A.D.3d at 208. . ·~ .. See Singh v. Sukhram, 56 A.D._3d at ·192. Nor do the attorney respondents, as legal counsel retained by the Northern Leasing respondents, lack an interest in a favorable outcome of the actions under the leases. A.D.3d at 193. ··/j See PGsner v. Lewis, 80 A.D.3d 308, 316 Dep't 2010), aff'd, 18·N.Y.3d 566, •-' Singh v. Sukhram,· 56 (1st Any lack of due diligence-by I the attorney respondents in investigating their claims falls nleasing.190 23 24 of 27 I 1 [*FILED: NEW YORK COUNTY CLERK 11/29/2017 11:50 AM 24] NYSCEF DOC. NO. 384 INDEX NO. 450460/2016 RECEIVED NYSCEF: 11/29/2017 short of raising an inference that they knew the actions commen~ed on respondents' behalf were baseless. Petitioners thus fail to sustain their claims agai~st respondents Jciseph I. Sussman, P.C., Sussman, and-Babad. IX. JUDGE FISHER'S CLAIM SEEKING TO VACATE DEFAULT' JUDGMENTS '~.~ . . :\,;.. Petitioner Judge Fisher seeks to vacate default judgments respondents obtained in their actions to recover damages for breach of the leases. An administrative judge, upon a show.ing that default judgments were obtained by fraud, misrepresentation,. illegality, unconscionability, lack of due service, violations of law, or other illegalities or wh~re such default judgments· were obtained in cases in which those defendants would be uniformly entitled~to interpose a defense predicated upon but not limited to the foregoing defenses, ·and where such default judgments have been · obtained in a number deemed sufficient by, him to justify such actions set forth herein, and upon appropriate notic·e to counsel for the respective parties, or to the parties themselves, may bring a proceeding to relieve a party or parties from them upon such terms as may be just. C.P.L.R. § 50.15(c). At oral argument, Judge F:isher clarified that she did not collaterally attack prior court orders by seeking to vacate default judgments sustained upon denial of a defendant's motion to vacate a default judgment. The petition's allegations that lessees' consent to jurisdiction in New York county and to service by mail, in leases that lessees hav_e· not executed:or·of which they have not received complete copies, is ineffective, for the r~asons explained, plead claims that other default judgments were obtained by fraud, misrepresentation, unconscionability, or lack of due service. Id. Respondents contend that Judge Fisher has failed to comply nleasing.190 24 25 of 27 [*FILED: NEW YORK COUNTY CLERK 11/29/2017 11:50 AM 25] NYSCEF DOC. NO. 384 INDEX NO. 450460/2016 RECEIVED NYSCEF: 11/29/2017 with the statute's notice reqliirement, which, other than "appropriate 'notice to counsel for the respective parties, or to the parties themselves," is undefined. C.P.L,R. §'5015(c) ~ If filing and serving the petition commencing this proceeding .is not .:>"~~ •'"\-'~- "appropriate notice,,; the Consent Order and Judgment provided ,... . ,~ \ respondents additional prior notice. Respondents further contend that laches bar Judge Fi~her's claims. - Even if Judge Fisher delayed the institution of-her claims, respondents fail to identify any change _in their position during the lapse of time or other prejudice from it to support a defense of laches: EMF Gen. Contr. Corp. v. Bisbee;_ 6 A.b.3d ~5, -_ ! . -.~1o1~I .'-~\~~''1 ' I '~"''- 55 ·A.D.~d (1st Dep't 2004); Rosenthal v. City of New York,· 283 156, 161 (1st Dep't 2001); Cohen v. Krantz, 227 A.D.2d 582-83 5~31, (2d Dep't 1996). X. .>,.\.: CONCLUSION For the reasons explained above, the court·grants the.. •' Northern Leasing respondents' motion to the extent of di~missing petitioners' claims under GBL § 349 and claims under Executive Law§ 63(12) and C.P.L.R. § 5015(c) insofar as they are based on illegal conduct in violation of GBL § 349, but otherwi~e denies those respondents' motion. and (7). C.P.L.R. §§.404(a), 3211(a)(l), (5), ~~~l 't.\. ~ The court also grants the motioh by-respondents_ Joseph ~ I. Sussman, P.C., Sus~man, and Babad to dismiss against these attorney respondents. '. the'petitib~ C.P.L.R. §§ 404(a), ·~:U! ,·,,_, 3211 (a) (7). The Northern Leasing respondents shall· serve arid file an . !'!>.V.h!l · J \, nleasing.190 25 ~ ~ ~· ~ . . .. ...... _, .~:~ ~~{~:r 26 of 27 ...... [*FILED: NEW YORK COUNTY CLERK 11/29/2017 11:50 AM 26] .... - ... NYSCEF DOC. NO. 384 :, ~ INDEX NO. 450460/2016 , . ·. . ... RECEIVED NYSCEF: 11/29/2017 ' ~ ~ ~·,t •1:1~ it:t answer to the petition within five days after service of this I .. ' -~r, .• ::.~i·' •• ii'·.. . order with notice of entry unless petitioners agree to a longer period. C.P.L.R. § 404(a). Petitioners or the Northern respondents may re-notice the proceeding consistent with § 404(a). This decision constitutes th~ court's o~der L~asing '!•.; • ,t~-:i~ c~P.L.R~ and judgment dismissing the petition's claims under GEL§ 349, claims under Executive Law§ 63(12) and C.P.L.R. § 5015(<;) ins;ofar as they are based on illegal conduct in violation of GEL § 349, and claims against the attorney respondents. DATED: November 17, 2017 LUCY BILLINGS, J.S.C. LUCY BtLLJN~~ J.S.v. ·,. ·" nleasing.190 26 ·.-.'.~; . ,, .;· ! " ~ 27 of 27

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