author: Chief Judge Lippman. Smith, J. (concurring).

text:
    [969 NE2d 187, 946 NYS2d 71]
    Global Reinsurance Corporation-U.S. Branch, Formerly Known as Gerling Global Reinsurance Corporation-U.S. Branch, Respondent, v Equitas Ltd. et al., Appellants.
    Argued February 15, 2012;
    decided March 27, 2012

      POINTS OF COUNSEL

      Simpson Thacher & Bartlett LLP, New York City (Kevin J. Arquit, Mary Kay Vyskocil and Summer Craig of counsel), and Simpson Thacher & Bartlett LLP, Washington, D.C. (Arman Y.

      Oruc of counsel), for appellants.
    I. Equitas Ltd.’s, Equitas Reinsurance Ltd.’s, and Equitas Policyholders Trustee Ltd.’s unilateral claims handling conduct cannot be challenged as an antitrust conspiracy without challenging its formation. (Texaco Inc. v Dagher, 547 US 1; Anheuser-Busch, Inc. v Abrams, 71 NY2d 327; Copperweld Corp. v Independence Tube Corp., 467 US 752; United States v Sealy, Inc., 388 US 350; United States v Topco Associates, Inc., 405 US 596; Arizona v Maricopa County Medical Soc., 457 US 332; Rothery Stor. & Van Co. v Atlas Van Lines, Inc., 792 F2d 210; USX Corp. v Adriatic Ins. Co., 64 F Supp 2d 469.) II. Global Reinsurance Corporation-U.S. Branch improperly challenges the formation of Equitas Ltd., Equitas Reinsurance Ltd. and Equitas Policyholders Trustee Ltd. under the Donnelly Act. (Padula v Lilarn Props. Corp., 84 NY2d 519; Goshen v Mutual Life Ins. Co. of NY., 286 AD2d 229; Board of Trustees of Univ. of Ill. v United States, 289 US 48; South-Central Timber Development, Inc. v Wunnicke, 467 US 82; Michelin Tire Corp. v Wages, 423 US 276.) III. The complaint should be dismissed as time-barred. (Zenith Radio Corp. v Hazeltine Research, Inc., 401 US 321; In re Buspirone Patent Litig., 185 F Supp 2d 363; In re Ciprofloxacin Hydrochloride Antitrust Litig., 261 F Supp 2d 188; Varner v Peterson Farms, 371 F3d 1011; Grand Rapids Plastics, Inc. v Lakian, 188 F3d 401.) IV Global Reinsurance Corporation-U.S. Branch fails to allege a submarket or restraint of trade in a worldwide market. (Creative Trading Co. v Larkin-Pluznick-Larkin, Inc., 136 AD2d 461; Capital Imaging Assoc., PC. v Mohawk Val. Med. Assoc., Inc., 996 F2d 537; CDC Tech., Inc. v IDEXX Labs., Inc., 186 F3d 74; Brown Shoe Co. v United States, 370 US 294; Geneva Pharms. Tech. Corp. v Barr Labs. Inc., 386 F3d 485; Newcal Indus., Inc. v Ikon Off. Solution, 513 F3d 1038.) V The Appellate Division erred in finding subject matter jurisdiction over Equitas Ltd.’s, Equitas Reinsurance Ltd.’s, and Equitas Policyholders Trustee Ltd.’s conduct. (South-Central Timber Development, Inc. v Wunnicke, 467 US 82; F. Hoffmann-La Roche Ltd v Empagran S. A., 542 US 155; Boyd v AWB Ltd., 544 F Supp 2d 236; Animal Science Prods., Inc. v China Natl. Metals & Mins. Import & Export Corp., 596 F Supp 2d 842; In re Intel Corp. Microprocessor Antitrust Litig., 452 F Supp 2d 555; Matter of Zurich Ins. Co. v New York State Tax Commn., 144 AD2d 202; Matter of 67 Vestry Tenants Assn. v Raab, 172 Misc 2d 214.)

      Cahill Gordon & Reindel LLP, New York City (Edward P. Krugman, S. Penny Windle and Lawrence A. Reicher of counsel), for respondent.
    I. Equitas Ltd.’s, Equitas Reinsurance Ltd.’s, and Equitas Policyholders Trustee Ltd.’s conduct is not unilateral but is the concerted action of the underwriting members of Lloyd’s, London through their common agent. (Texaco Inc. v Dagher, 547 US 1; United States v Masonite Corp., 316 US 265; New York ex rel. Spitzer v Saint Francis Hosp., 94 F Supp 2d 399; North Tex. Specialty Physicians v Federal Trade Commn., 528 F3d 346; North Jackson Pharm., Inc. v Express Scripts Inc., 345 F Supp 2d 1279; Life Partners, Inc. v Morrison, 484 F3d 284; Nestor v Britt, 270 AD2d 192; General Elec. Co. v Inter-America Mktg. Sys., 220 AD2d 307; National Collegiate Athletic Assn. v Board of Regents of Univ. of Okla., 468 US 85; United States v Sealy, Inc., 388 US 350.) II. The courts of New York have subject matter jurisdiction over this action. (California v ARC America Corp., 490 US 93; CSR Ltd. v CIGNA Corp., 405 F Supp 2d 526; CSR Ltd. v Federal Ins. Co., 40 F Supp 2d 559; Pillar Corp. v Enercon Indus. Corp., 694 F Supp 1353; In re Chocolate Confectionary Antitrust Litig., 602 F Supp 2d 538; Allstate Ins. Co. v Hague, 449 US 302; Sperry v Crompton Corp., 8 NY3d 204; Matter of Zurich Ins. Co. v New York State Tax Commn., 144 AD2d 202; Matter of People [Norwegian Receiver of Norske Lloyd Ins. Co.], 242 NY 148; Moscow Fire Ins. Co. v Bank of N.Y. & Trust Co., 280 NY 286.) III. Global Reinsurance Corporation-U.S. Branch’s claim is timely. (Hanover Shoe, Inc. v United Shoe Machinery Corp., 392 US 481; Klehr v A. O. Smith Corp., 521 US 179; Zenith Radio Corp. v Hazeltine Research, Inc., 401 US 321; In re Nine W. Shoes Antitrust Litig., 80 F Supp 2d 181; In re Ciprofloxacin Hydrochloride Antitrust Litig., 261 F Supp 2d 188; Imperial Point Colonnades Condominium, Inc. v Mangurian, 549 F2d 1029; Toledo Mack Sales & Serv., Inc. v Mack Trucks, Inc., 530 F3d 204; Champagne Metals v Ken-Mac Metals, Inc., 458 F3d 1073; Poster Exch., Inc. v National Screen Serv. Corp., 517 F2d 117; Varner v Peterson Farms, 371 F3d 1011.) IV The Appellate Division correctly upheld the pleading of a rule-of-reason violation. (Leon v Martinez, 84 NY2d 83; Guggenheimer v Ginzburg, 43 NY2d 268; Capitaland United Soccer Club v Capital Dist. Sports & Entertainment, 238 AD2d 777; Board of Trade of Chicago v United States, 246 US 231; People v Rattenni, 81 NY2d 166; Arizona v Maricopa County Medical Soc., 457 US 332; State Oil Co. v Khan, 522 US 3; United States v Visa U.S.A. Inc., 163 F Supp 2d 322; National Soc. of Professional Engineers v United States, 435 US 679; California Dental Assn. v FTC, 526 US 756.)

      Dewey & LeBoeuf LLP, New York City (John M. Nonna, Larry P. Schiffer and Daniel T. Stabile of counsel), for Society of Lloyd’s, amicus curiae.
    The formation of Equitas Ltd., Equitas Reinsurance Ltd. and Equitas Policyholders Trustee Ltd. was procompetitive.
   OPINION OF THE COURT

Chief Judge Lippman.

At issue is the sufficiency and extraterritorial reach of plaintiffs claim under New York State’s antitrust statute, commonly known as the Donnelly Act (General Business Law § 340 et seq.).

Plaintiff is a New York branch of a German reinsurance corporation. Defendants (hereinafter collectively referred to as Equitas) are London, England based entities engaged in the business of providing retrocessionary reinsurance. Retrocessionary reinsurers, or retrocessionaires as they are known, write coverage for risks ceded to them by reinsurers, in this transactional context referred to as “cedents.”

According to the complaint, this action arises from practices employed in connection with the handling of claims made under retrocessional reinsurance treaties providing what is known as “non-life” coverage. Among the risks insured under this heading are those of environmental, catastrophic and asbestos related origin. Liabilities under policies insuring such risks typically are of the “long tail” variety; they may surface long after the policy period and it is clear in retrospect that underwriters did not accurately appreciate the magnitude of “non-life” risks or the unusual persistence of the liability they would engender.

Over the years, Lloyd’s of London, an insurance marketplace composed of numerous competing insurance syndicates, themselves composed of individual underwriting participants (natural persons referred to as Names), issued, through its syndicates substantial non-life retrocessional coverage. By the early 1990s, it became evident that the liabilities arising under this coverage were mounting at an alarming rate and would soon outstrip the syndicates’ reserves.

The syndicates individually proved unable to respond to this impending crisis, in significant part because in competing with each other for prospective business it was their practice to pay retrocessionary claims without haggling and without imposing onerous administrative burdens on their cedents. It was thus proposed that, since individual action by the syndicates to limit liability by more closely scrutinizing claims would be commercially unviable, the Names should agree to repose decision making with respect to the handling of certain liabilities arising under pre-1993 Lloyd’s non-life retrocessionary coverage, in a newly created entity—a reinsurer that would, because it would be in perpetual “run-off’ (i.e., merely concluding obligations under existing coverage and not soliciting new business), be free to adopt a more aggressive approach to the handling of claims. This proposal, as set forth by the governing body of Lloyd’s in a “Reconstruction and Renewal Plan” (R&R plan), was approved by the Names and subsequently reviewed and found unobjectionable by United Kingdom and European Union antitrust regulatory authorities, i.e., the United Kingdom Department of Trade and Industry and the European Commission.

It was pursuant to the R&R plan that Equitas was created in 1996 to reinsure the otherwise uninsurable non-life retrocessionary obligations of the Lloyd’s syndicates. And, in accordance with a Reinsurance and Runoff Contract (RROC), the Names reinsured with Equitas their risks under the Lloyd’s syndicates’ pre-1993 non-life retrocessionary treaties. The consideration for this coverage was comprised of some £14.7 billion in assets (premiums paid for the subject coverage) held by the syndicates and significant additional contributions by the Names individually, and by Lloyd’s and its functionaries. Although subsequent to these transfers and until 2009 the Names remained severally liable under the coverage extended by the syndicates, pursuant to the RROC Equitas was given plenary power to manage claims arising under the subject pre-1993 coverage. The Names were concomitantly barred from reaching the funds transferred in exchange for the reinsurance provided by Equitas.

Plaintiff reinsurer purchased coverage for some of its non-life risks from Lloyd’s retrocessionaires. The risks ceded by it to Lloyd’s syndicates underwritten by pre-1993 retrocessionary coverage were, subsequent to the adoption of the R&R plan, in turn ceded by the Lloyd’s retrocessionaires to Equitas under the RROC. According to plaintiff, Equitas adopted a “hard-nosed” approach to the handling of its claims, involving among other practices, holding payments due hostage to concessions by plaintiff and imposing extraordinarily onerous documentation requirements. In addition to commencing arbitration proceedings against the underwriters in which it sought damages for these alleged abuses under the governing insurance treaties, plaintiff filed this action in March 2007, asserting in its original complaint a Donnelly Act claim as well as one sounding in tortious interference with contractual relations.

On a CPLR 3211 motion preceding the one now before us, the tortious interference claim was dismissed, upon the ground then urged by Equitas that the wrongful conduct attributed by plaintiff to it had not been performed by it as a stranger to the contracts said to have been interfered with, but in its capacity as the claims handling agent of the contractually bound Names (20 Misc 3d 1115[A], 2008 NY Slip Op 51362[U], *8 [2008]). The motion court, however, sustained plaintiffs Donnelly Act claim finding, as is here relevant, that plaintiff had adequately alleged in the claim’s support a geographical market for retrocessional non-life insurance limited to the Lloyd’s marketplace. The court nonetheless granted plaintiff’s request to amend its complaint to allege that the relevant market was global.

The resulting second amended complaint, the pleading now at issue, alleges in support of the Donnelly Act claim that prior to the R&R plan and the consequent creation of Equitas, retrocessional non-life claims handling with respect to pre-1993 Lloyd’s coverage was performed by the individual Lloyd’s syndicates which, because they competed with each other for new business and were thus anxious to curry favor with potential cedents, were disposed to settle claims expeditiously and fairly. Following the R&R plan and the centralizing of all decision making respecting the handling of the subject category of claims in Equitas pursuant to the RROC, there ceased to be any competitive disincentive to the adoption of sharp claims management practices—Equitas had no interest in attracting prospective business; its sole mission was to marshal its fund with the considerable amount of parsimony necessary to cover the avalanche of liabilities that had led to its existence. The complaint further alleged that Lloyd’s concentration of claims management decision making power in Equitas would operate to suppress competition in the delivery of a crucial component of the retrocessional non-life coverage product, namely, claims management, and that it would do so not only within the Lloyd’s marketplace, but in the world.

After the filing of the second amended complaint, Equitas again moved to dismiss pursuant to CPLR 3211. In deciding this motion, Supreme Court focused upon the circumstance that the complaint, while nominally alleging that the pertinent geographical market for the particular species of coverage at issue was global, actually seemed to continue to rely upon the existence of a cognizable submarket confined to the Lloyd’s marketplace. Given the new allegations that there was a worldwide market for retrocessional non-life coverage, and the absence of any allegation that the coverage available in the Lloyd’s marketplace could not be acquired elsewhere on competitive terms, the court concluded that Lloyd’s was not a viable submarket and on that ground dismissed the Donnelly Act claim, since an assertion of market power adequate to sustain a claim for restraint of trade may only be demonstrated within the context of an identified relevant market or submarket (24 Misc 3d 264, 273-274 [Sup Ct, NY County 2009]).

On plaintiffs appeal from the subsequently entered judgment dismissing the complaint, the Appellate Division, with one justice dissenting, reversed and reinstated the Donnelly Act claim. The Court found that the complaint adequately pleaded a worldwide market. And, while acknowledging that the crucial allegations contained in paragraph 36 of the amended pleading (n 5, supra), did not separately allege market power—i.e., that Lloyd’s was capable of unilaterally raising prices for retrocessional non-life coverage in the relevant market significantly without losing any business (see CDC Tech., Inc. v IDEXX Labs., Inc., 186 F3d 74, 81 [2d Cir 1999])—the allegations read together and liberally construed were, in the Court’s view, adequate to that purpose (82 AD3d 26, 35 [1st Dept 2011]). The Court rejected, either expressly or impliedly, defendants’ remaining contentions, among them that there was no actionable conspiracy because Equitas had at all relevant times acted unilaterally and pursuant to agreements (the R&R plan and the RROC) approved by the United Kingdom and European regulatory authorities; and that, even if a London-based conspiracy to restrain trade was adequately alleged, it could not be reached under a New York State antitrust statute presumptively without extraterritorial effect.

The Appellate Division granted Equitas leave to appeal, certifying to this Court the question of whether its order reversing the order of Supreme Court was properly made. We now reverse.

An antitrust claim under the Donnelly Act, or under its essentially similar federal progenitor, section 1 of the Sherman Act (15 USC § 1 et seq.; see Anheuser-Busch, Inc. v Abrams, 71 NY2d 327, 335 [1988]; Mobil Oil Corp., 38 NY2d at 463), must allege both concerted action by two or more entities and a consequent restraint of trade within an identified relevant product market (see e.g. Home Town Muffler v Cole Muffler, 202 AD2d 764, 765 [3d Dept 1994]; Creative Trading, 136 AD2d at 462; Capital Imaging Assoc., P.C. v Mohawk Val. Med. Assoc., Inc., 996 F2d 537, 542-543 [2d Cir 1993], cert denied 510 US 947 [1993]). Equitas argues that the second amended complaint fails sufficiently to allege either element.

For present purposes, we assume, without deciding, that a conspiracy is alleged. In favor of that assumption we note that, although the complaint contains allegations that Equitas acted independently of the syndicates in discharging its claims management function and was a legally and financially autonomous entity, it also alleges in substance that the collective assumption of the claims management function previously performed by the syndicates individually was Equitas’s raison d’étre under the RROC and that Equitas from its inception and at all relevant subsequent times acted, if not as an agent in the traditional sense, at least as a preprogrammed instrumentality of the Names. Indeed, it will be recalled that in obtaining the dismissal of plaintiffs tortious interference claim Equitas itself represented that it was the claims agent of the Names, and, according to the complaint the allegations of which we must at this juncture accept as true, Equitas had no other purpose but that of fixing and capping the Names’ liability under the subject pre-1993 coverage. Although there are situations in which a fully integrated entity that takes over and consolidates economic functions formerly performed competitively will be deemed sufficiently autonomous in its subsequent operations to preclude their characterization as conspiratorial within the meaning of the antitrust laws (see e.g. Texaco Inc. v Dagher, 547 US 1 [2006]), the pertinent inquiry in determining whether there is concerted or unilateral activity is one of substance and not form (American Needle, Inc. v National Football League, 560 US —, —, 130 S Ct 2201, 2211-2212 [2010]); what is important is how the parties to the alleged anticompetitive conduct actually operate (560 US at —, 130 S Ct at 2209). Here, there is discernible from the pleading a perhaps colorable claim that Equitas was engaged in concerted activity when it exercised in place of and on behalf of the coexisting Lloyd’s syndicates consolidated decision making authority over the management of the syndicates’ pre-1993 retrocessional non-life liabilities.

The substantive problem with this action is rather that although a worldwide market is nominally alleged, as is evidently essential since it is clear that the retrocessional non-life product is available globally and that there is no distinct legally cognizable submarket, there is no allegation of any anti-competitive effect attributable to the posited conspiracy beyond the Lloyd’s marketplace.

Ordinarily, a Donnelly or Sherman Act plaintiff, to survive a motion to dismiss in a rule of reason case, such as this one, must minimally allege that conspirators possessed power within the relevant market to produce a market-wide anticompetitive effect (see Capital Imaging, 996 F2d at 546). Defined in the context of sales, market power is the ability to raise prices significantly without losing business (see CDC Tech., 186 F3d at 81), but more generally may be understood as the capacity to impose onerous economic terms without suffering competitive detriment. Here, there is no allegation of any such power in the relevant worldwide market. While the Lloyd’s syndicates were capable of insulating themselves from each other’s competitive behavior in the area of claims management and could by that device attempt to cap their liabilities under certain previously issued coverage, there are no allegations from which it is possible to gather that they were capable of avoiding the business consequences of this approach in the global market.

Recognizing that on a CPLR 3211 motion to dismiss the allegations of the complaint must be accepted as true and construed liberally in the plaintiffs favor (Cron v Hargro Fabrics, 91 NY2d 362, 366 [1998]), and that in the antitrust context courts are “hesitant” to dismiss complaints on the pleadings based on the sufficiency of product market allegations (Todd, 275 F3d at 200), it is nonetheless the case that there is no per se rule barring dismissal where the complaint simply does not allege a conspirator’s basic capacity to inflict market-wide anti-competitive injury (see id.). Here, there is no dispute as to the relevant market and, accordingly, no need for factual development on that point. The pertinent analytic focus is instead upon whether the complaint alleges the requisite power within the relevant worldwide market on the part of the claimed conspirators. We cannot conclude that it does.

The allegations in paragraph 36 of the complaint do not singly or in combination allege market power as that term of art is defined in the antitrust lexicon. Lloyd’s may, as plaintiff alleges, be the single most significant vendor of retrocessional non-life coverage; it may set the benchmark for the terms of such coverage and its quotes may be viewed as essential by reinsurers and reinsurance brokers; there may in addition be lines of retrocessional coverage with respect to which price competition with Lloyd’s is considered more significant than competition in the world market. None of this, however, would justify the inference that Lloyd’s could at will generally engage in “run-off’ type claims management behavior and retain its business in a global market. Plaintiff was perhaps injured by an anticompetitive restraint in the Lloyd’s market, but that is not a circumstance from which it is possible to conclude that there was some broader anticompetitive effect, or even a capacity to produce such an effect, in the relevant world market. It is market-wide effect that is crucial to an antitrust claim under the Sherman Act or Donnelly Act (see CDC Tech., 186 F3d at 80-81), not the existence of otherwise compensable individual injury. Plaintiff is evidently pursuing contract claims against Lloyd’s underwriters in arbitration based on the same claims handling practices presently alleged. The question here is whether plaintiff may, premised on such allegations of localized individual harm, seek an award of treble damages for an antitrust violation. Inasmuch as it is the market-wide nature of the harm that would justify any such award, the answer, we believe, must be no.

Even if this pleading deficiency could be cured—and we perceive no reason to suppose that the formidable hurdle of alleging market power could be surmounted by plaintiff—there would remain as an immovable obstacle to the action’s maintenance, the circumstance that the Donnelly Act cannot be understood to extend to the foreign conspiracy plaintiff purports to describe.

The complaint alleges, essentially, that a German reinsurer through its New York branch purchased retrocessional coverage in a London marketplace and consequently sustained economic injury when retrocessional claims management services were by agreement within that London marketplace consolidated so as to eliminate competition over their delivery. Injury so inflicted, attributable primarily to foreign, government approved transactions having no particular New York orientation and occasioning injury here only by reason of the circumstance that plaintiffs purchasing branch happens to be situated here, is not redressable under New York State’s antitrust statute. That this is so is demonstrable when the Donnelly Act is considered in the context of federal antitrust law.

Assuming that the extraterritorial reach of the Donnelly Act is as extensive as that of its federal counterpart, the Sherman Act—an assumption that we do not ultimately embrace—it seems fairly clear that the Sherman Act would not reach a competitive restraint, imposed by participants in a British marketplace, that only incidently affected commerce in this country.

The Sherman Act’s extraterritorial reach is limited under the Foreign Trade Antitrust Improvements Act (FTALA) of 1982 (15 USC § 6a), which provides that the Sherman Act “shall not apply to conduct involving [non-import] trade or commerce . . . with foreign nations.” The only ground for excepting to this general rule of inapplicability where imports are not involved is where the conduct has a “direct, substantial, and reasonably foreseeable effect” on domestic commerce, and “such effect gives rise to a [Sherman Act] claim” (15 USC § 6a [1] [A]; [2]; F. Hoffmann-La Roche Ltd v Empagran S. A., 542 US 155, 162 [2004]). The London conspiracy here alleged was, according to the complaint, worldwide in its orientation; there is nothing in the pleadings to justify an inference that it targeted United States commerce specially or that its effect upon commerce in this country was substantial. Even if there were, however, the viability of a Sherman Act claim would still finally depend upon whether the domestic effect of the foreign conspiracy would itself “give rise” to a claim under the Sherman Act (id.). Plaintiff, although alleging individual injury in New York, has not alleged harm to competition in this country (see E & L Consulting, Ltd. v Doman Indus. Ltd., 472 F3d 23, 28 n 3 [2d Cir 2006], cert denied 552 US 816 [2007] [“It should go without saying . . . that a party cannot establish antitrust injury without establishing a violation of the antitrust laws, which, under Section 1 (of the Sherman Act), must involve an injury to competition”]). The only harm to competition alleged is within a particular London reinsurance marketplace. It seems clear that even if plaintiff had an otherwise viable Sherman Act claim based on harm to competition in the relevant global market, which it does not, it still would not, premised on its allegations of domestic harm, have a jurisdictional predicate for that claim. It is not necessary to know precisely the extent of the Donnelly Act’s extraterritorial reach to understand that it cannot reach foreign conduct deliberately placed by Congress beyond the Sherman Act’s jurisdiction. The federal limitation upon the reach of the Sherman Act, predicated upon and an expression of the essentially federal power to regulate foreign commerce, would be undone if states remained free to authorize “little Sherman Act” claims that went beyond it. The established presumption is, of course, against the extraterritorial operation of New York law (see McKinney’s Consolidated Laws of NY, Book 1, Statutes § 149), and we do not see how it could be overcome in a situation where the analogue federal claim would be barred by congressional enactment.

It is not an answer to this analysis to observe, as plaintiff does, that under the McCarran-Ferguson Act (15 USC § 1011 et seq.) regulation of the “business of insurance” is committed to the states (15 USC § 1012 [b]). What is at issue here is not in the main the regulation of the “business of insurance,” a matter within the special competence and jurisdictional reach of domestic state regulators, but the address of a purported foreign conspiracy to restrain trade, a matter to be dealt with, if at all, under the significantly distinct antitrust rubric (see Group Life & Health Ins. Co. v Royal Drug Co., 440 US 205, 210-211 [1979]). The question now before us—as to the extraterritorial reach of our state antitrust law—is, then, not one as to which the McCarran-Ferguson Act commitment is relevant. What is instead highly relevant is that the Donnelly Act’s reach must be understood as part of a jurisdictional continuum whose outermost extension is defined by federal antitrust law. While it is true that the scope of federal subject matter jurisdiction under the Sherman Act, as limited by the FTAIA and federal decisions following Empagran (542 US 155 [2004], supra) is frequently far from obvious, we think it sufficiently evident that the Sherman Act would not reach the purely foreign conspiracy here claimed, the anticompetitive effect of which beyond the Lloyd’s marketplace is not made out.

Nonetheless, we do not ultimately ground our determination that the Donnelly Act does not reach the presently claimed conspiracy upon the FTAIA. Even if the Sherman Act could reach the purported conspiracy, it would not follow that the Donnelly Act should be viewed as coextensive. For a Donnelly Act claim to reach a purely extraterritorial conspiracy, there would, we think, have to be a very close nexus between the conspiracy and injury to competition in this state. That additional element is not discernible from the pleadings before us. It would be a very great, and we think unwarranted, supposition that the authors of the Donnelly Act intended to allow, on a predicate such as the one here alleged, the sort of highly intrusive international projection of state regulatory power now proposed.

Having said this, it should be emphasized that our decision should not be understood as placing some new limitation on the reach of the Donnelly Act. This is simply a rare instance in which a state antitrust action has tested the outer jurisdictional limits not only of state but federal antitrust law.

Accordingly, the order of the Appellate Division should be reversed, with costs, the judgment of Supreme Court reinstated and the certified question answered in the negative.

Smith, J. (concurring).

I agree with the result reached by the majority, and with most of the reasoning in the majority opinion. My only reservation is about the majority’s analysis (which, as it acknowledges, is not essential to its decision) of whether the allegations in the complaint would state a claim under the federal antitrust laws. The implications of the Foreign Trade Antitrust Improvements Act of 1982 (15 USC § 6a) for this case (and for many other cases) are, to me at least, far less than clear. I would prefer to express no opinion about them, and simply to rely on the state law grounds explained at page 736 of the majority opinion (and on the similar reasoning contained in the Appellate Division dissent [82 AD3d 26, 40-41 (2011)]), which sufficiently support the conclusion that the extraterritorial reach of the Donnelly Act does not extend to the transactions at issue here.

Judges Ciparick, Graffeo, Read and Jones concur with Chief Judge Lippman; Judge Smith concurs in a separate opinion, except insofar as Chief Judge Lippman’s opinion discusses whether the allegations of the complaint would state a claim under the federal antitrust laws, in which Judge Pigott concurs.

Order reversed, etc.

      . The R&R plan was also submitted for comment to various US government agencies, among them the New York State Department of Insurance, which registered no objection.

      . In 2009, Equitas, with the approval of the British High Court undertook finally to relieve the Names of their obligations under the retrocessional treaties at issue (see Matter of Names at Lloyd’s for the 1992 & Prior Years of Account, Represented by Equitas Ltd., [2009] EWHC 1595 [Ch], 2009 WL 1949482 [July 7, 2009]).

      . Under section 9.2 (a) of the RROC, Equitas was authorized “to adjust, handle, agree, settle, pay, compromise or repudiate any Claim, return premium, reinsurance premium or any other insurance or reinsurance liability on behalf of the Syndicate or Closed Year Syndicate.”

      . This amendment, as the parties then understood, would be essential to the action’s survival, since there was no factually plausible contention that the Lloyd’s marketplace was the relevant market in assessing whether Equitas’s claims handling practices had an anticompetitive effect upon the retrocessional non-life insurance market.

      . The relevant allegations are contained in paragraph 36 of the complaint: “36. In 1993, in 1996, at the time this action was commenced, and currently, the Lloyd’s syndicates collectively had market power in the worldwide market for retrocessional coverage.
      “(a) In 1993, in 1996, at the time this action was commenced, and currently, the Lloyd’s marketplace was the single most significant seller of most forms of non-life retrocessional coverage to reinsurers worldwide.
      “(b) In 1993, in 1996, at the time this action was commenced, and currently, the Lloyd’s marketplace provides the benchmark for prices, terms, and conditions for most forms of non-life retrocessional coverage.
      “(c) In 1993, in 1996, at the time this action was commenced, and currently, any reinsurer, and any reinsurance broker, wishing to purchase retrocessional coverage would have to at least consider approaching Lloyd’s for quotes and would have to take into account the terms and conditions offered by various Lloyd’s syndicates in determining what to purchase, and on what terms.
      “(d) For many Unes of retrocessional business, and in many years, competition within the Lloyd’s marketplace is more significant to prospective purchasers of retrocessional coverage than is competition between Lloyd’s as a whole and other sellers, because Lloyd’s is expected to, and does, set the lead in establishing coverage.”

      . Although there are Appellate Division decisions recognizing this basic requirement of a Donnelly Act claim (see e.g. Creative Trading Co. v Larkin-Pluznick-Larkin, Inc., 136 AD2d 461, 462 [1st Dept 1988]), there do not appear to be any cases from our Court. It does not seem, however, that there would be much room for doubt as to the requirement. It is logically necessary to a coherent allegation of a trade restraint and has been recognized by federal courts in assessing the adequacy of pleadings alleging violations under the Sherman Act (15 USC § 1 et seq.; see e.g. Newcal Indus., Inc. v Ikon Off. Solution, 513 F3d 1038, 1045 [9th Cir 2008], cert denied 557 US —, 129 S Ct 2788 [2009]), after which the Donnelly Act is modeled (see State of New York v Mobil Oil Corp., 38 NY2d 460, 463 [1976]).

      . The Donnelly Act claim and the pendent claim for injunctive relief were all that remained of the complaint following the motion court’s earlier dismissal of plaintiffs tortious interference claim.

      . Although, as noted (see supra at 729), the second amended complaint, while alleging a worldwide product market, retained its claim of a distinct submarket confined to Lloyd’s, the latter is not a legally viable allegation. Product markets are defined for antitrust purposes by applying the rule of “reasonable interchangeability” (see Todd v Exxon Corp., 275 F3d 191, 201 [2d Cir 2001]) and, particularly in light of the second amended complaint’s allegation that the relevant market is global, i.e., that the subject Lloyd’s product is interchangeable with retrocessional reinsurance products available worldwide, there is no plausible explanation for the persisting submarket allegation (see id. at 200). Global, accordingly, appears to have abandoned its sub-market claim.

      . There is no contention in this case of a per se violation; whether any restraint on trade for which defendants are shown to have been responsible was unreasonable is a bona fide issue in this litigation. There is no dispute that the purported conspiracy arose as a response to the impending ruin of the Lloyd’s marketplace, an event that defendants contend would have significantly reduced competition in the world market for retrocessional non-life coverage.

      . There is no contention that the reinsurance product purchased by plaintiff at the Lloyd’s marketplace was an import. Nor are there allegations that the alleged conspiracy was directed at any defined import market in this country (see Animal Science Prods., Inc. v China Minmetals Corp., 654 F3d 462, 471 n 11 [3d Cir 2011]).


source: Caselaw Access Project

author: Graffeo, J. Chief Judge Lippman (dissenting).

license: Public Domain

text:
    [967 NE2d 1160, 944 NYS2d 715]
    The People of the State of New York, Respondent, v Samuel Jackson, Appellant.
    Argued February 16, 2012;
    decided March 27, 2012

      POINTS OF COUNSEL

      Legal Aid Society, New York City (Jonathan Garelick and Steven Banks of counsel), for appellant.
    Where a police officer saw marihuana in appellant’s hand after she pulled over his car for a traffic infraction, the information charging criminal possession of marihuana in the fifth degree failed to allege that appellant possessed the substance in a public place; the information also failed to sufficiently allege that the marihuana was in open view. (People v Alejandro, 70 NY2d 133; People v Jones, 9 NY3d 259; People v Hall, 48 NY2d 927; People v Case, 42 NY2d 98; People v Casey, 95 NY2d 354; People v Dumas, 68 NY2d 729; People v Dreyden, 15 NY3d 100; People v Kalin, 12 NY3d 225; People v Weinberg, 34 NY2d 429; People v McNamara, 78 NY2d 626.)

      Charles J. Hynes, District Attorney, Brooklyn (Shulamit Rosenblum Nemec and Leonard Joblove of counsel), for respondent.
    The accusatory instrument was facially sufficient. (People v Keizer, 100 NY2d 114; People v Kalin, 12 NY3d 225; People v Alejandro, 70 NY2d 133; People v Konieczny, 2 NY3d 569; People v Casey, 95 NY2d 354; Smith v County of Nassau, 34 NY2d 18; People v Coffey, 12 NY2d 443; People v Case, 42 NY2d 98; People v Hansen, 95 NY2d 227; People v Jones, 9 NY3d 259.)
   OPINION OF THE COURT

Graffeo, J.

After he was found with marihuana during a traffic stop, defendant Samuel Jackson pleaded guilty to criminal possession of marihuana in the fifth degree. On appeal, he argued that the accusatory instrument charging him with that crime was jurisdictionally deficient because it failed to adequately allege that he was in a “public place” and that the marihuana was “open to public view”—two elements of the fifth degree possession offense. Rejecting defendant’s argument, the Appellate Term affirmed defendant’s conviction (27 Misc 3d 5 [2010]) as do we.

While operating his vehicle on a public street in Brooklyn, defendant committed a traffic infraction that was witnessed by a police officer. When the officer pulled him over and approached his vehicle, she detected a strong odor of marihuana and saw defendant holding a ziplock bag of marihuana in his hand. Other items of contraband were subsequently discovered as a consequence of the motor vehicle stop, including more than a dozen bags of marihuana. Defendant was ultimately charged with one count of criminal possession of marihuana in the fifth degree, two counts of unlawful possession of marihuana and other offenses. He pleaded guilty to criminal possession of marihuana in the fifth degree in satisfaction of all the charges and was sentenced to five days in jail.

Despite the guilty plea, defendant appealed bis conviction to the Appellate Term, arguing that the accusatory instrument charging him with the fifth-degree possession offense was jurisdictionally deficient. Defendant contended that, because he was in a private vehicle, he was not in a public place when he was found in possession of marihuana. He further asserted that the police officer’s allegation that he was holding the marihuana in his hand exposed to public view was too conclusory to satisfy that element of the offense. The Appellate Term rejected these arguments and declined to disturb defendant’s conviction. A Judge of this Court granted defendant leave to appeal (16 NY3d 832 [2011]).

By pleading guilty, defendant forfeited most appellate claims but he retained the right to challenge the jurisdictional sufficiency of the accusatory instrument because “[a] valid and sufficient accusatory instrument is a nonwaivable jurisdictional prerequisite to a criminal prosecution” (People v Dreyden, 15 NY3d 100, 103 [2010], quoting People v Case, 42 NY2d 98, 99 [1977]). Since defendant did not waive the right to be tried for this misdemeanor offense by information, we must assess his claim based on the standards governing an information (see People v Kalin, 12 NY3d 225, 228 [2009]). An information is valid for jurisdictional purposes if it contains nonconclusory factual allegations that, if assumed to be true, address each element of the crime charged, thereby affording reasonable cause to believe that defendant committed that offense (People v Konieczny, 2 NY3d 569, 575 [2004]; see CPL 100.40 [1] [c]). Although an information should also be based on nonhearsay allegations, we have clarified that “a purported hearsay defect in an accusatory instrument is nonjurisdictional and, thus, forfeited by a guilty plea” (Konieczny at 575, quoting People v Keizer, 100 NY2d 114, 121 [2003]). Here, defendant does not rely on hearsay deficiencies, but argues that the accusatory instrument failed to include sufficient nonconclusory factual allegations relating to two elements of the charged offense. Thus, if meritorious, the claim he raises would be jurisdictional in nature, as the People concede.

To resolve defendant’s challenge to the accusatory instrument we must review the elements of criminal possession of marihuana in the fifth degree, which is defined in Penal Law § 221.10 (1). This offense was created in 1977 when the Legislature added article 221 to the Penal Law (L 1977, ch 360). The new article restructured marihuana possession offenses with the intent to reduce criminal culpability for the possession of a small quantity of marihuana for personal use in a private place (such as in the home), making such conduct a violation when it had previously been a misdemeanor (Mem of Assembly Comm on Codes, Bill Jacket, L 1977, ch 360). However, the Legislature did not alter its view that the possession or use of marihuana in public constituted a crime. Toward that end, Penal Law § 221.10 was enacted creating the misdemeanor offense of criminal possession of marihuana in the fifth degree. Under the subsection at issue in this case, “[a] person is guilty of criminal possession of marihuana in the fifth degree when he knowingly and unlawfully possesses . . . marihuana in a public place, as defined in section 240.00 of this chapter, and such marihuana is burning or open to public view” (Penal Law § 221.10 [1]). Defendant contends that the accusatory instrument was jurisdictionally deficient because it failed to allege that he was in a public place since he was in his vehicle when he was discovered with the marihuana and the allegations were too conclusory to support the inference that the marihuana was “open to public view.” We address each argument in turn.

Public Place

When the Legislature made possession in a “public place” an element of criminal possession of marihuana in the fifth degree, it did not assign that term a specific meaning that would be unique to that offense (see e.g. Penal Law § 240.37 [“Loitering for the purpose of engaging in a prostitution offense”]), nor did it leave the phrase undefined (see e.g. People v McNamara, 78 NY2d 626 [1991] [interpreting “public place” element in public lewdness statute where Legislature did not define that term or cross-reference a definition existing elsewhere in the Penal Law]). Instead, it incorporated by reference a preexisting definition of the phrase from article 240, a separate Penal Law article relating to a broad range of offenses against public order. Under Penal Law § 240.00 (1), a “public place” is

“a place to which the public or a substantial group of persons has access, and includes, but is not limited to, highways, transportation facilities, schools, places of amusement, parks, playgrounds, and hallways, lobbies and other portions of apartment houses and hotels not constituting rooms or apartments designed for actual residence.”

In this case, where defendant was found in possession of marihuana during a motor vehicle stop on a public street, the People alleged that defendant was in a “public place” because he was on a “highway”—a location that the Legislature specifically designated as a public place in Penal Law § 240.00 (1).

Defendant does not dispute that a public street is a highway within the meaning of Penal Law § 240.00 (1). Rather, he contends that he was not in a public place because he was situated inside his vehicle when the officer observed marihuana in his hand. Thus, defendant characterizes the issue as whether the interior of a car used for personal transportation is a “public place.” Although defendant acknowledges that a pedestrian walking on a public street would be in a “public place,” under his rationale a location would change from a public street to a private place if a person is in a private vehicle. We disagree.

With one exception, Penal Law § 240.00 (1) defines a “public place” in terms of fixed physical locations—highways, schools, parks and the like—declaring these spaces to be public no matter whether a person is standing still or moving through them and regardless of the particular means of locomotion in use, if any. Thus, though certainly relevant to the second issue we address (the “open to public view” element), for purposes of the Penal Law § 240.00 (1) definition of “public place,” the fact that defendant was in his personal automobile does not alter the fact that he was on a highway—and was therefore in a public place— when he was seen in possession of marihuana. Insofar as the “public place” element is concerned, his situation is no different than if he were riding a bicycle on a highway or walking on a public street.

Focusing on the exception to the statute’s general rule that a “public place” is a fixed physical location, defendant notes that the provision also incorporates “transportation facilities” which are defined to include not only certain physical spaces (e.g. airports and train stations) but also vehicles used for public passenger transportation, such as “aircraft, watercraft, railroad cars, buses” and the like (see Penal Law § 240.00 [2]). By referencing certain types of public transit in the definition of “public place,” defendant argues that the Legislature must have intended to exclude privately-owned automobiles used exclusively for personal transportation, intending such vehicles to be private. Again, the question is not whether a person’s automobile is “public” or “private” but whether defendant was in a public place when he was in his car on the street. The People do not argue that a privately-owned vehicle used exclusively for personal transportation is a “public place” akin to a subway train or public bus. Rather, a driver of a personal automobile will be in a public place only when the vehicle is in a location that qualifies under the statute as a public place. In contrast, by defining certain vehicles used for public transportation—such as a bus—as themselves constituting “public places,” the Legislature made the location of those vehicles at the time of the crime irrelevant; they are “public places” whether they are being driven on a highway or are parked in a private parking lot. The Legislature’s decision to broadly incorporate public transit vehicles within the definition of “public place” regardless of their location in no way undermines our conclusion that a person is in a public place when located on a highway even if he or she is inside a personal automobile.

In fact, the contrary view of the statute propounded by defendant and the dissent would distinguish unfairly between those prosecuted for less serious violations and those subject to misdemeanor convictions. For example, under their rationale, because the “public place” element would be lacking, a person smoking marihuana while sitting in a parked personal vehicle on a public street with the windows open, readily observable to anyone passing by, would be guilty of nothing more than a violation (the same offense that would apply were the person at home)—while a person standing just outside the vehicle in the same location engaged in the same behavior would be guilty of misdemeanor possession under Penal Law § 221.10 (1). This would be true even though both hypothetical parties would have engaged in conduct that impacted the public in precisely the same manner. Although acknowledging that the marihuana possession offenses were restructured to reduce penalties for private marihuana possession or use in some circumstances, the dissent and defendant would extend the 1977 reforms well beyond the private conduct the Legislature intended to address, encompassing behavior that can fairly be described as occurring in public.

Moreover, given that the Penal Law § 240.00 (1) definition of “public place” applies to a wide variety of crimes, many involving conduct bearing little similarity to the marihuana possession offense to which defendant pleaded guilty, it would be imprudent to give the phrase the restricted reading urged by defendant and the dissent. A holding that a person in a private vehicle can never be in a public place could have a far-reaching impact on the scope of other offenses—leading to results likely never intended by the Legislature. For example, under Penal Law § 240.62, entitled “[p]lacing a false bomb or hazardous substance in the first degree,” it is a class D felony to position in a “public place any device or object that by its design, construction, content or characteristics appears to be . . . a bomb, destructive device, explosive or hazardous substance, but is, in fact, an inoperative facsimile or Imitation of such a bomb.” Were we to conclude that the interior of a private automobile is not a “public place” under the Penal Law § 240.00 (1) definition, then a person that put a convincing—though fake—bomb on the passenger seat of a private vehicle and parked it on the street in front of a government building would not be guilty of this offense, despite the significant public disruption, fear and even chaos that would likely ensue when the device was observed by the police or a passing civilian. Similarly, were we to conclude that a highway is not a public place as long as an individual remains inside a private vehicle, then someone who engaged in harassment by slowly traveling alongside a pedestrian walking on a secluded public street, thereby placing that person in reasonable fear of physical injury, might avoid prosecution for harassment in the first degree (Penal Law § 240.25). Under the theory suggested by defendant and the dissent, by electing to follow the victim in an automobile rather than on foot, the offender would have negated the “public place” element of that offense. Considered in this broader light, we are unpersuaded that the Legislature could have intended the definition of “public place” to have the narrow meaning they ascribe to it.

For all of these reasons, we reject defendant’s argument that the accusatory instrument was deficient because it failed to adequately allege that defendant—seen in possession of marihuana while in his vehicle on a public street—was in a public place within the meaning of Penal Law § 240.00 (1).

Open to Public View

Next, defendant contends that even if he was in a public place, the accusatory instrument was nonetheless deficient because the allegations that the marihuana was “open to public view” were too conclusory to establish a prima facie case. The requirement that an accusatory instrument contain nonconclusory allegations is part of the prima facie case requirement. We have explained that “[s]o long as the factual allegations of an information give an accused notice sufficient to prepare a defense and are adequately detailed to prevent a defendant from being tried twice for the same offense, they should be given a fair and not overly restrictive or technical reading” (Kalin, 12 NY3d at 230, quoting Konieczny, 2 NY3d at 575 [additional citation omitted]). That being said, we have stressed that when an allegation involves a conclusion drawn by a police officer that involves the exercise of professional skill or experience, some explanation concerning the basis for that conclusion must be evident from the accusatory instrument. Otherwise, the allegation will be deemed too conclusory to meet the reasonable cause requirement (see Kalin [where item that was observed by officer was described as a controlled substance without having been subjected to laboratory testing, officer was required to explain basis for that conclusion]; see also Dreyden [where officer identified a knife as a gravity knife without describing the knife’s characteristics or otherwise explaining how he reached that conclusion, allegation was too conclusory to meet prima facie case requirement]).

In this case, defendant’s claim of unduly conclusory allegations relates to the “open to public view” element, which is not defined either in Penal Law § 221.10 (1) or elsewhere. But in keeping with the policy underlying the 1977 restructuring of marihuana possession offenses, it is evident that the Legislature included this requirement to limit the criminal culpability of a party that possesses a small quantity of marihuana in a public place but does so in a manner that conceals the drug. In many respects, this element speaks more directly to the legislative concern for personal privacy—whether an individual is in a private automobile or elsewhere—than the “public place” element. That marihuana must be “open to public view” (or burning) to support prosecution under Penal Law § 221.10 (1) ensures that a pedestrian walking on a public street carrying an inconsequential amount of marihuana secreted in a bag or pocket would not be subject to misdemeanor prosecution. When considered in the context of this case, it is this element that recognizes that, although a vehicle may be located in a public place, this does not mean that its occupants and owners have relinquished privacy interests in items concealed inside. Thus, it is the “open to public view” requirement—rather than the “public place” provision—that addresses the concern expressed by the dissent that personal automobiles are, in some respects, private in the sense that certain areas within the interior of an automobile are hidden from view (see dissenting op at 749).

Defendant contends that the accusatory instrument in this case was too conclusory to provide reasonable cause to believe that the marihuana was open to public view. Although not a model of specificity, we conclude that the allegations were jurisdictionally sufficient. A determination that a particular item is “open to public view” does not require the exercise of professional skill or experience on the part of a police officer warranting a specialized explanation. Thus, in most cases the basis for such an allegation can be discerned by drawing reasonable inferences from all the facts set forth in the accusatory instrument. Here, the accusatory instrument alleges that, upon approaching the vehicle, the officer “smelled a strong odor of marihuana emanating from inside the . . . vehicle” and “observed the defendant holding a quantity of marihuana in [his] hand, open to public view.” Additional allegations—in which the officer explains the basis for her conclusion that the substance was marihuana (see Kalin, 12 NY3d 225 [2009])— indicate that the contraband was in a ziplock bag. Although the officer did not describe the precise location of defendant’s hand, since she was standing outside the vehicle when she saw the substance in the ziplock bag, these allegations support the inference that any other member of the public could also have seen the marihuana from the same vantage point—meaning that the marihuana was in an unconcealed area of the vehicle that would have been visible to a passerby or other motorist. Indeed, the statute does not require that a member of the public (other than a law enforcement officer) have actually seen the contraband—it requires only that the substance have been “open” or unconcealed in a manner rendering it susceptible to such viewing. The allegations were therefore sufficient to supply a jurisdictionally adequate accusatory instrument.

Accordingly, the order of the Appellate Term should be affirmed.

Chief Judge Lippman (dissenting).

Thirty-five years ago,

recognizing the dangers to society and individuals inherent in overcriminalization, the Legislature amended the Penal Law to lessen the burden on an already overtaxed justice system by decriminalizing private possession of small amounts of marihuana. The majority’s conclusion that a private car on a highway is a “public place” under Penal Law § 240.00 (1) and § 221.10 (1) is not only contrary to the plain meaning of the statutory language, but also fails to accord sufficient weight to the broader legislative intent. The purpose of the subject Penal Law amendments was to decrease the penalty for nonviolent private conduct that does not pose a threat to public safety, while making clear that such behavior was still illegal and not to be condoned or encouraged. For these reasons, I respectfully dissent.

A public place is defined in the statute as “a place to which the public or a substantial group of persons has access” (Penal Law § 240.00 [1]). The idea that the public or a substantial group of persons has access to the interior of a private car, whether traveling or parked, such that drivers and all passengers in private cars on public roads are in a “public place,” contravenes the plain meaning of the statute’s words. The majority claims that defendant’s “situation is no different than if he were riding a bicycle on a highway” (majority op at 744), but a car, unlike a bicycle which is clearly open and exposed to public access, is an enclosed private space. Based on the definition in the statute, the interior of a private car is a private place whether it is on a highway or in a privately owned driveway. The majority glosses over this key distinction by incorrectly characterizing the question in this case as “not whether a person’s automobile is ‘public’ or ‘private’ but whether defendant was in a public place when he was in his car on the street” (majority op at 744).

Criminal statutes must be interpreted in terms of their plain meaning (see Penal Law § 5.00 [providing that “the provisions (of this chapter) must be construed according to the fair import of their terms to promote justice and effect the objects of the law”]; see also People v Miller, 70 NY2d 903, 906 [1987] [recognizing that “(although criminal statutes are no longer to be strictly construed, they are to be construed ‘according to the fair import of their terms’ ” and that “(o)nly conduct that ‘falls within the plain, natural meaning of the language of a Penal Law provision may be punished as criminal’ ”] [citations omitted]). The majority broadens the scope of the statute beyond what the words of that provision reasonably convey. It is important to keep in mind that the underlying offense in this case is a low-level possessory violation, which under certain specific circumstances (namely when occurring in public)—and only under those circumstances—is transformed into a crime. The majority, in elevating a violation to a misdemeanor crime, without justification, has failed to adhere to the plain meaning of the statute.

We have recognized, in the context of determining whether a statute was unconstitutionally indefinite, that

“[statutes which create crimes must be definite in specifying conduct which is condemned or prohibited. They must afford some comprehensible guide, rule or information as to what must be done and what must be avoided, to the end that the ordinary member of society may know how to comply with its requirements” (People v Grogan, 260 NY 138, 145 [1932]).

Although this case presents a quite different question, as the statutory language here is clear and unambiguous and has not been challenged as void, our reasoning in Grogan demonstrates that one of the functions of a criminal statute is to notify the public what behavior constitutes criminal conduct.

The majority’s decision runs afoul of these fundamental principles and conflicts with the reasonable interpretation of the statute as written. Certainly, the Legislature could have included all motor vehicles within the definition of a “public place.” Had the Legislature intended such meaning, it would have used language to that effect, and indeed it has done just that in another context (see Penal Law § 240.37 [1] [prohibiting “(Loitering for the purpose of engaging in a prostitution offense,” and defining a “public place” as “any street, sidewalk, bridge, alley or alleyway, plaza, park, driveway, parking lot or transportation facility or the doorways and entrance ways to any building which fronts on any of the aforesaid places, or a motor vehicle in or on any such place”] [emphasis added]). If the Legislature desired to include private cars in the definition of “public place” prescribed by Penal Law § 240.00 (1), it seems rather odd that it did not include them in much the same way it did in Penal Law § 240.37 (1). The Legislature’s choice lends itself to only one logical conclusion—that it deliberately excluded private cars from the meaning of “public place” in this particular statute while reserving and exercising the right to classify such vehicles as public places in other contexts. This choice is- entirely rational and it is not for this Court to determine whether it represents an unwise policy decision. Moreover, this choice is consistent with the objectives underlying decriminalization of private possession of small amounts of marihuana.

Not every unlawful act is also criminal, and in decriminalizing certain conduct, the Legislature recognized a need to provide for “more lenient treatment of marihuana offenses, as opposed to those involving other drugs” (People v Finley, 10 NY3d 647, 658 [2008]; compare Penal Law § 221.05 [entitled “(u)nlawful possession of marihuana”] [emphasis added], with Penal Law § 221.10 [entitled “(p)riminal possession of marihuana in the fifth degree”] [emphasis added]). This distinction is more than a mere difference in wording and it is a significant one. It reflects the view that when people are needlessly “arrested and prosecuted for simply possessing marihuana,” lives are ruined, and police and judicial resources are wasted (Mem of Assembly Comm on Codes, Bill Jacket, L 1977, ch 360). The Legislature determined that decriminalization was necessary in order to conserve public resources and avoid the “staggering” costs to society caused by prosecution of possession of small amounts of marihuana, and that it was important that people who possess inconsequential amounts of the substance for personal, private use would no longer have to live in fear of criminal penalties (see id.). These changes made it extremely important for courts to properly distinguish between criminal possession and noncriminal (but unlawful) possession in order to avoid the adverse consequences of overcharging, including the stigmatization arising from a misdemeanor conviction resulting in a permanent criminal record.

In making the distinction between conduct that amounts to a violation and criminal behavior, the Legislature identified two key factors. In order for possession to qualify as a violation, warranting only a fine of up to $100, the amount possessed must be small (under 25 grams) and the possession must occur somewhere that is not designated as a “public place” within the meaning of Penal Law § 240.00. Here, these requirements were met.

Contrary to the majority’s contention, it is expanding the scope of Penal Law § 240.00 (1) to include private vehicles that may lead to absurd results. For example, a person in possession of a small quantity of marihuana while parked on a public street adjacent to his home would be guilty of a crime whereas if he moved the car by a matter of feet to his driveway, he would be responsible only for a violation; a recreational vehicle parked at an otherwise empty rest stop or a privately owned car on an isolated road would be deemed “public places” for purposes of Penal Law § 221.10 (1).

Because the possession did not occur in a “public place,” there is no need to reach the “public view” element of the crime. However, I find the majority’s analysis to be flawed with regard to that element as well. The majority correctly notes that the accusatory instrument was “not a model of specificity” (majority op at 747), but then goes on to conclude that it was nevertheless jurisdictionally sufficient. The police officer’s statement in the accusatory instrument with respect to this element is brief and conclusory. The accusatory instrument states that the police officer “conducted a car stop” after observing defendant make a turn without signaling and then that she “observed the defendant holding a quantity of marihuana in [his] hand, open to public view.” While it utilizes the phrase “open to public view” from the statute, it does so in a manner that makes it impossible to determine whether the marijuana was in a place that could have been seen by members of the public. Although a vast amount of detail need not be provided in order for an accusatory instrument to be considered jurisdictionally valid, the statement here provides no information about the officer’s vantage point or how she determined that the marihuana was open to public view. Rather, it simply concludes that it was.

The majority misapplies the applicable statutory provision in concluding that the possession of marihuana in this case occurred in a “public place.” The Court’s ruling criminalizes the private conduct in this case, contrary to the clear legislative intent of Penal Law article 221. The majority’s argument that the accusatory instrument provided reasonable cause to conclude that the marihuana was open to “public view,” thereby rendering the instrument jurisdictionally adequate, is unpersuasive. Accordingly, I respectfully dissent and would reverse the order of the Appellate Term.

Judges Ciparick, Read, Smith and Pigott concur with Judge Graffeo; Chief Judge Lippman dissents and votes to reverse in a separate opinion in which Judge Jones concurs.

Order affirmed.

       In concluding that defendant was not in a public place because he was in his car, the dissent relies exclusively on the first clause of Penal Law § 240.00 (1) which contains a general “catch-all” definition—“a place to which the public or a substantial group of persons has access.” Thus, the dissent overlooks the fact that the Legislature had previously determined that a highway is a public place, thereby obviating the need to resort to the catch-all provision. In any event, it can hardly be argued that a public street is not accessible to a substantial number of persons.

      . It is noteworthy that possession of alcohol in an open container in a motor vehicle on the highway is unlawful, but it is a traffic infraction, not a crime. Vehicle and Traffic Law § 1227 (1), provides, in relevant part, that “[t]he drinking of alcoholic beverages, or the possession of an open container containing an alcoholic beverage, in a motor vehicle located upon the public highways or right-of-way public highway is prohibited. Any operator or passenger violating this section shall be guilty of a traffic infraction.”

      . In a case in which a person’s possession of a small amount of marihuana in a private car is harmful to the public, such as where a driver’s abilities are impaired by the use of the substance, that person may be prosecuted under other statutes, but he or she would not be guilty of criminal possession of marihuana in the fifth degree.

      . The Marihuana Reform Act of 1977 (L 1977, ch 360) decriminalized possession of under 25 grams of marihuana (see also People v Finley, 10 NY3d at 658; Penal Law § 221.05 [providing that “(a) person is guilty of unlawful possession of marihuana when he knowingly and unlawfully possesses marihuana. Unlawful possession of marihuana is a violation punishable only by a fine of not more than one hundred dollars”]).


author: Jones, J. Pigott, J. (dissenting in part).

text:
    [967 NE2d 1170, 944 NYS2d 725]
    Bruce Ovitz, on Behalf of Himself and All Others Similarly Situated, Appellant, v Bloomberg L.P. et al., Respondents.
    Argued February 8, 2012;
    decided March 27, 2012

      POINTS OF COUNSEL

      Tannenbaum Helpern Syracuse & Hirschtritt LLP, New York City (Vincent J. Syracuse and Matthew J. Sinkman of counsel), and Sperling & Slater, P.C., Chicago Illinois (Bruce S. Sperling, Mitchell H. Macknin and Greg Shinall of counsel), for appellant.
    I. The applicable standard of review is de novo. (Leon v Martinez, 84 NY2d 83.) II. A private right of action is implied under the automatic renewal statutes. (Sheehy v Big Flats Community Day, 73 NY2d 629; Telephone Secretarial Serv. v Sherman, 28 AD2d 1010; Chotapeg, Inc. v Bullowa, 291 NY 70; Negrin v Norwest Mtge., 263 AD2d 39.) III. The Deceptive Practices Act applies to appellant’s claims because Bloomberg L.P.’s and Bloomberg Finance L.P.’s deceptive conduct occurred in New York. (Karlin v TVF Am., 93 NY2d 282; Oswego Laborers’ Local 214 Pension Fund v Marine Midland Bank, 85 NY2d 20; Matter of People v Telehublink Corp., 301 AD2d 1006; People v H&R Block, Inc., 16 Misc 3d 1124[A], 2007 NY Slip Op 51562[U]; People v Lipsitz, 174 Misc 2d 571.) IV Bloomberg L.P. and Bloomberg Finance L.P. cannot avoid declaratory and injunctive relief or frustrate a class action by unilaterally attempting to moot the claims of a named plaintiff. (James v Alderton Dock Yards, 256 NY 298; Deposit Guaranty Nat. Bank v Roper, 445 US 326; New York Foreign Trade Zone Operators, Inc. v State Liq. Auth., 285 NY 272; Klostermann v Cuomo, 61 NY2d 525; Andin Intl, v Matrix Funding Corp., 194 Misc 2d 719; Dime Laundry Serv. v 230 Apts. Corp., 120 Misc 2d 399; Kalisch-Jarcho, Inc. v City of New York, 72 NY2d 727; Four Times Sq. Assoc. v Cigna Invs., 306 AD2d 4; Board of Higher Educ. of City of N.Y. v Marcus, 63 Misc 2d 268.)

      Willkie Farr & Gallagher LLP, New York City (Thomas H. Golden and Sameer Advani of counsel), for respondents.
    I. No implied private right of action exists under General Obligations Law §§ 5-901 and 5-903. (Sheehy v Big Flats Community Day, 73 NY2d 629; Kaminsky v Abrams, 51 Misc 2d 5; Super Glue Corp. v Avis Rent A Car Sys., 132 AD2d 604; Brian Hoxie’s Painting Co. v Cato-Meridian Cent. School Dist., 76 NY2d 207; Concourse Nursing Home v Axiom Funding Group, 279 AD2d 271; Ludl Elecs. Prods, v Wells Fargo Fin. Leasing, 6 AD3d 397; Telephone Secretarial Serv. v Sherman, 28 AD2d 1010; Negrin v Norwest Mtge., 263 AD2d 39; Andin Intl., v Matrix Funding Corp., 194 Misc 2d 719; Chotapeg, Inc. v Bullowa, 291 NY 70.) II. Bruce Ovitz fails to state a cause of action for violation of General Business Law § 349. (Scott v Bell Atl. Corp., 282 AD2d 180; Goshen v Mutual Life Ins. Co. of N.Y., 286 AD2d 229, 98 NY2d 314; People v Lipsitz, 174 Misc 2d 571; Morrissey v Nextel Partners, Inc., 72 AD3d 209; Drizin v Sprint Corp., 12 AD3d 245; Gavin v AT&T Corp., 543 F Supp 2d 885; Chiste v Hotels.com L.P., 756 F Supp 2d 382; SimplexGrinnell LP v Integrated Sys. & Power, Inc., 642 F Supp 2d 167; Kaufman v Sirius XM Radio, Inc., 751 F Supp 2d 681; Sheth v New York Life Ins. Co., 273 AD2d 72.) III. Bruce Ovitz has not alleged any injury resulting from Bloomberg L.P.’s and Bloomberg Finance L.P.’s alleged conduct. (Di Mascio v General Elec. Co., 27 AD3d 854; Concourse Nursing Home v Axiom Funding Group, 279 AD2d 271; Ludl Elecs. Prods, v Wells Fargo Fin. Leasing, 6 AD3d 397; Matter of Acme Bus Corp. v Board of Educ. of Roosevelt Union Free School Dist., 91 NY2d 51; Walker v City of New York, 46 AD3d 278; City of New York v Smokes-Spirits.Com, Inc., 12 NY3d 616; Medical Socy. of State of N.Y. v Oxford Health Plans, Inc., 15 AD3d 206; Cherny v Emigrant Bank, 604 F Supp 2d 605; Lincoln First Bank of Rochester v Barstro & Assoc. Contr., 49 AD2d 1025.) IV Declaratory and injunctive relief are not warranted in this case. (Rapp v Dime Sav. Bank of N.Y., 64 AD2d 964; Lewis v Hertz Corp., 212 AD2d 476; Deposit Guaranty

      Nat. Bank v Roper, 445 US 326; Murray v Empire Ins. Co., 175 AD2d 693; Lusardi v Xerox Corp., 975 F2d 964; Greif v Wilson, Elser, Moskowitz, Edelman & Dicker LLP, 258 F Supp 2d 157; James v Alderton Dock Yards, 256 NY 298; Spitzer v Schussel, 48 AD3d 233; Klostermann v Cuomo, 61 NY2d 525; Andin Intl, v Matrix Funding Corp., 194 Misc 2d 719.)

      Skadden, Alps, Slate, Meagher & Flom LLP, New York City (<Jeffrey A. Mishkin, Anthony J. Dreyer and Jamie Stockton of counsel), for Sirius XM Radio Inc., amicus curiae.
    I. Automatic renewal of subscriptions or service contracts is beneficial to consumers. II. General Obligations Law § 5-903 is merely a defense to continued enforcement of a contract, and does not support a claim for damages or an injunction. (Johnson v Uni-First Corp., 67 AD3d 1442; Ludl Elecs. Prods, v Wells Fargo Fin. Leasing, 6 AD3d 397; Concourse Nursing Home v Axiom Funding Group, 279 AD2d 271; Eurofactors Intl., Inc. v Jacobowitz, 21 AD3d 443; Holender v Cammann Prods., 78 AD2d 233; Kaminsky v Abrams, 51 Misc 2d 5; Hawa Const., LLC v Pollock, 674 F Supp 2d 256; Fortune Limousine Serv., Inc. v Nextel Communications, 35 AD3d 350; Enrico & Sons Contr. v Bridgemarket Assoc., 252 AD2d 429.)
   OPINION OF THE COURT

Jones, J.

In June 2000, plaintiff Bruce Ovitz, an Illinois resident, entered into a two-year subscription agreement with defendant Bloomberg L.P. (Bloomberg) to lease a desktop terminal, software and other equipment to access real-time financial information services offered by the company. The contract provided that it “shall be automatically renewed for successive two-year periods” unless either the lessee (plaintiff) or lessor (Bloomberg) decided to terminate prior to renewal “by giving not less than 60 days’ prior written notice to the other.”

After the term of the original agreement expired in June 2002, plaintiff continued to use the equipment and financial services, without complaint, until September 15, 2008 when he contacted a Bloomberg sales representative to apprise the company that he “no longer wished to subscribe to [Bloomberg’s] services, and wanted to terminate as of the end of the month.” According to plaintiffs complaint, he was informed by the Bloomberg representative that the agreement had automatically renewed until June 15, 2010 and plaintiff would be obligated to remit periodic payments through the termination date, or pay an early termination fee equivalent to a year’s worth of service ($18,720). Plaintiff also alleges that Bloomberg declared that it was their “standard policy not to give its subscribers any advance notice of the automatic renewal provision or deadline.”

Plaintiff sent written notice to Bloomberg on October 7, 2008, reiterating his desire to terminate the agreement. Bloomberg, in turn, did not terminate the subscription service or remove the equipment, but instead, reaffirmed its view that the agreement had automatically renewed and sent an invoice on October 23, 2008 requesting payment for the next three months of service.

In an ensuing exchange of e-mails, Bloomberg sent plaintiff an invoice for past due payments in the sum of $5,699.70. Plaintiff replied “as [I] have said repeatedly since [S]ept 08,[ I] no longer want to subscribe[ ] please disconnect my software and pick up your keyboard.” Bloomberg transmitted a subsequent e-mail demanding immediate payment for past due amounts, including an additional $16,470 charge for termination of the contract. Due to plaintiffs nonpayment, Bloomberg claimed that he had breached the terms of the contract and sent a notice of termination, advising that the nonpayment violated paragraph 3 (a) of the agreement and as such, “unless Bloomberg L.P. Accounting receives payment in full of all past due invoices by no later than 5:00 PM on 12/15/2008 the Agreement will be terminated and your Bloomberg equipment will be removed and returned.”

On December 16, 2008, plaintiff commenced the instant putative class action, alleging a violation of General Obligations Law §§ 5-901 and 5-903; breach of contract; unjust enrichment; negligent misrepresentation; violation of General Business Law § 349; and seeking declaratory and injunctive relief. Two weeks after plaintiff filed suit, Bloomberg “as an accommodation] . . . waive [d] the early termination buy-out” and “waiv[ed] collection of fees.”

Supreme Court granted, in part, Bloomberg’s pre-answer motion to dismiss pursuant to CPLR 3211 (a) (7), dismissing plaintiffs breach of contract, unjust enrichment and negligent misrepresentation claims (2009 NY Slip Op 32397[U] [2009]). The court, however, found an implied private right of action under General Obligations Law §§ 5-901 and 5-903 that “supported] a claim that the agreement was not properly renewed beyond the expiration date of the initial term, even if plaintiff accepted Bloomberg services” (id. at *11). Moreover, although acknowledging plaintiff’s out-of-state residence, the court permitted his General Business Law § 349 cause of action to survive on the ground that the complaint contained sufficient factual allegations to support a claim of deceptive business acts by Bloomberg within the State of New York. Finally, the court concluded that plaintiffs claims for declaratory judgment and a permanent injunction, enjoining Bloomberg from engaging in the alleged conduct, were supported by the existence of a justiciable controversy and irreparable harm, respectively.

The Appellate Division unanimously reversed, granting Bloomberg’s motion in its entirety and dismissing plaintiffs complaint (77 AD3d 515 [1st Dept 2010]). The court remarked that Bloomberg’s failure to comply with the mandates of sections 5-901 and 5-903 rendered its automatic renewal provision inoperative and unenforceable, but observed that this alone did not warrant the maintenance of plaintiffs complaint as he failed to allege “that he paid for services he did not receive” (id. at 516). Plaintiffs General Business Law § 349 claim was deemed meritless because he was not deceived in New York State and failed to plead actual injury suffered as a result of the alleged deceptive practices. Finally, as Bloomberg did not commence enforcement proceedings against plaintiff and waived its collection of payments and fees, there was no justiciable controversy or irreparable harm supporting equitable relief.

This Court granted plaintiff leave to appeal (16 NY3d 705 [2011]), and we now affirm.

In the context of a CPLR 3211 motion to dismiss, even affording plaintiff every favorable inference, as we must, when reviewing the pleadings and factual allegations of his complaint (see Mandarin Trading Ltd. v Wildenstein, 16 NY3d 173, 178 [2011]; Leon v Martinez, 84 NY2d 83, 87-88 [1994]; Morone v Morone, 50 NY2d 481, 484 [1980]), plaintiffs failure to identify a cognizable injury proves fatal to his action against Bloomberg.

Assuming, without deciding, that an implied private right of action lies pursuant to General Obligations Law §§ 5-901 and 5-903, plaintiffs claim was rightly dismissed because he has not suffered any harm as a result of Bloomberg’s alleged practices. Plaintiff did not pay any service termination fees and, as the Appellate Division noted, he did not pay for services he did not receive; thus, no monetary damages were incurred (see Ludl Elecs. Prods, v Wells Fargo Fin. Leasing, 6 AD3d 397 [2d Dept 2004]; Concourse Nursing Home v Axiom Funding Group, 279 AD2d 271 [1st Dept 2001]). Plaintiff contends that he suffered damages because he sought to cancel his agreement as of September 15, 2008, but had prepaid for services through September 30, 2008. However, his complaint belies this argument as it pleads that plaintiff had notified Bloomberg that he “wanted to terminate [services] as of the end of the month.” Further, despite the complaint’s allegation that plaintiff s credit rating was impaired, Bloomberg’s concession that the automatic renewal provision clause was rendered unenforceable and waiver of its claims to termination fees ceased any threat of injury.

Plaintiff’s General Business Law § 349 claim must be similarly dismissed for lack of injury. It is well settled that a prima facie showing requires allegations that a “defendant is engaging in an act or practice that is deceptive or misleading in a material way and that plaintiff has been injured by reason thereof (Oswego Laborers’ Local 214 Pension Fund v Marine Midland Bank, 85 NY2d 20, 25 [1995] [emphasis added]; see also City of New York v Smokes-Spirits.Com, Inc., 12 NY3d 616, 623 [2009]; Varela v Investors Ins. Holding Corp., 81 NY2d 958, 961 [1993]).

Finally, the Appellate Division properly dismissed plaintiffs claims for equitable relief. In light of the absence of actual injury and Bloomberg’s waiver of its claims, there is neither a justiciable controversy upon which a declaratory judgment can be rendered, nor the irreparable harm necessary for injunctive relief (see American Ins. Assn. v Chu, 64 NY2d 379, 383 [1985]; Cuomo v Long Is. Light. Co., 71 NY2d 349, 354 [1988]; CPLR 6301; Kane v Walsh, 295 NY 198, 205-206 [1946]; Parry v Murphy, 79 AD3d 713, 715-716 [2d Dept 2010]).

Accordingly, the order of the Appellate Division should be affirmed, with costs.

Pigott, J. (dissenting in part).

Because, in my view, plaintiff has alleged sufficient facts to sustain his declaratory judgment action, I dissent from that part of the majority opinion affirming the Appellate Division’s dismissal of that cause of action. Since this case is before us on a motion to dismiss, the facts are drawn without contradiction from plaintiffs complaint.

On June 15, 2000, plaintiff entered into an agreement with Bloomberg L.P. and Bloomberg Finance L.P. (collectively, Bloomberg) to (1) lease certain equipment (a Bloomberg terminal) and services; and (2) subscribe to additional services (news and financial information). Paragraph 2 (b) of the Agreement contains an “automatic renewal provision” that states that said Agreement will be automatically renewed for successive two-year periods unless Bloomberg or plaintiff elected not to renew by giving not less than 60 days notice to the other. The provision states as follows:

“2. Term.
“(a) This agreement shall be effective from the date it is accepted by Lessor [Bloomberg] and shall remain in full force and effect thereafter until the date that is two years after the date that the Services are first provided (the ‘Term’), unless earlier terminated during the Term or any renewal thereof, as follows: (i) Lessee [Plaintiff] shall have the right to terminate this Agreement at any time upon not less than 60 days’ prior written notice to Lessor and upon payment of the charges set forth in paragraph 3 of this Agreement; and (ii) Lessor shall [sic] the right to terminate this Agreement at any time immediately upon written notice to Lessee in the event of a breach by Lessee of any of the provisions of this Agreement.
“(b) The Term shall be automatically renewed for successive two-year periods unless Lessee or Lessor elects not to renew by giving not less than 60 days’ prior written notice to the other. If this Agreement is so renewed for any additional period beyond the initial Term, the charges payable pursuant to paragraph 3(a) hereof for such renewal period shall be calculated at the prevailing rates then offered by Lessor, and the Schedule shall be considered to be amended accordingly.”

Although the Agreement expired on June 15, 2002, Bloomberg never sent a notice to plaintiff giving him advance notice of the automatic renewal as required by statute (see General Obligations Law §§ 5-901, 5-903), nor did plaintiff expressly renew the Agreement. Plaintiff thereafter continued making payments, and Bloomberg continued providing the equipment and services.

In September 2008, plaintiff contacted a Bloomberg representative and advised him that he no longer wished to subscribe to Bloomberg’s services, and that he wished to terminate the Agreement as of the end of September 2008. The representative directed plaintiff to the automatic renewal provision and told him that the Agreement was “operative and enforceable” and that he was obligated to fulfill its terms until June 15, 2010, admitting that it was Bloomberg’s “standard policy” not to give advance notice of the automatic renewal deadline, a policy having been in effect for the previous 10½ years. The representative also stated that Bloomberg would terminate the Agreement in exchange for nearly $20,000, approximately one year’s worth of payments under the Agreement.

In October 2008, plaintiff sent Bloomberg written notice stating that he wanted his subscription cancelled as of October 1, 2008. Notwithstanding this, on October 23, Bloomberg sent plaintiff a notice stating that his payment for the last quarter of 2008 was due, prompting plaintiff to e-mail Bloomberg that he had cancelled his subscription. Upon receiving a similar notice in November 2008, plaintiff demanded in writing that Bloomberg retrieve its equipment.

On December 9, 2008, Bloomberg sent plaintiff a letter that included all outstanding invoices on plaintiffs account, including $5,400 on an outstanding invoice for charges subsequent to plaintiffs termination of the Agreement. The letter stated that plaintiff was in breach of the Agreement and that, per the Agreement, Bloomberg would repossess the Bloomberg equipment and that plaintiff would be liable for a 50% termination charge covering the balance of the Agreement.

Plaintiff commenced this action seeking declaratory and injunctive relief on the ground that the Agreement is unenforceable. The action also alleged an as-of-yet uncertified “class action” against Bloomberg asserting, as relevant here, causes of action premised on alleged violations of General Obligations Law §§ 5-901 and 5-903 (the “automatic renewal” statutes) and General Business Law § 349 (“unfair and deceptive acts and practices” statute). Bloomberg moved to dismiss the complaint for failure to state a cause of action.

Supreme Court denied Bloomberg’s motion to dismiss the General Obligations Law §§ 5-901 and 5-903 and General Business Law § 349 causes of action, concluding that, as to the claim for a permanent injunction, the threat to plaintiffs creditworthiness was sufficient to establish irreparable injury, and that as to the declaratory judgment claim, there was a “justiciable controversy” (2009 NY Slip Op 32397[U], *13 [2009]).

The Appellate Division, in dismissing the complaint, concluded that the automatic renewal provision in the Agreement was “inoperative” and “unenforceable” because Bloomberg failed to give the requisite notice, but nevertheless found that dismissal was warranted because plaintiff failed to allege that he paid for services that he did not receive and, to the extent that plaintiff sought damages for the alleged breach of the “automatic renewal” statutes, a private right of action was not expressly created by their language, nor could it be fairly implied (77 AD3d 515, 515 [2010]).

In my view, the Appellate Division’s dismissal went well beyond its function at this stage of the proceeding. This is a declaratory judgment action and, as such, the court’s duty was to determine, upon an assumption that the allegations were true, whether Bloomberg violated the automatic renewal statutes—and it is clear that it did. The court’s further finding—that there is no private right of action for the violation of such statutes—goes beyond the purpose of a declaratory judgment action. Instead, it concluded that “declaratory and injunctive relief is unwarranted . . . since no justiciable controversy remains to support the claim for declaratory relief’ (id. at 516).

Plaintiffs cause of action for declaratory and injunctive relief states that there is an “actual and justiciable controversy” between plaintiff and Bloomberg relative to their rights and obligations under the Agreement, and that Bloomberg has “engaged in and continuéis] to engage in conduct that has a great probability of causing substantial and irreparable harm.” It is alleged that Bloomberg’s failure to provide plaintiff and the proposed class with notices of automatic renewal of the Agreement rendered the successive Agreements inoperative and unenforceable. As a result, according to plaintiff, he and members of the putative class are entitled to declaratory relief that the Agreements are unenforceable, and that its members are entitled to injunctive relief necessary to ensure that Bloomberg’s “illegal, unfair and deceptive conduct will not continue into the future.”

CPLR 3001 allows a court to render a declaratory judgment as to the rights of the parties when there is a justiciable controversy (i.e., one involving a present, rather than hypothetical, contingent or remote prejudice to the plaintiff) (see American Ins. Assn. v Chu, 64 NY2d 379, 383 [1985]). Plaintiff has alleged that notwithstanding the statutory protection given to consumers by these statutes, Bloomberg’s standard practice is to automatically renew its subscribers’ contracts without giving any advance notice of the automatic renewal provisions therein or the deadlines for terminating them. In other words, Bloomberg’s standard practice is to violate the automatic renewal statutes.

Plaintiff further alleges that despite the fact that Bloomberg’s renewals are both “inoperative” and “unenforceable” due to its failure to provide the statutorily-required notice, Bloomberg treats all of its subscriber contracts as having been automatically renewed. It sends bills and collects fees under the service contracts. When subscribers, like plaintiff, attempt to terminate the services, Bloomberg, in the words of plaintiff, “brazenly tells them that they cannot do so because their contracts were automatically renewed.” Bloomberg then falsely informs its subscribers that their only choices are to continue the service and pay for the remainder of the term, or discontinue the service and pay a termination fee equal to 50% of the charges for the remainder of the two-year “renewed” term. Moreover, plaintiff claims, if a subscriber refuses to pay fees under a “renewed” contract, Bloomberg “unleashes its bill collectors” from its New York headquarters, and bombards subscribers with dunning letters, e-mails, collection notices, and threats, misrepresenting that the subscribers are in breach of the contract; and if they do not pay, Bloomberg threatens to report them to the credit bureaus and refer them to collection agencies. This does not appear to me to warrant the “no harm, no foul” approach the courts have taken to this case.

Whether the case merits class action status is another matter and, in my view, should be left to the sound discretion of the trial court. But this seems to me like an appropriate use of our declaratory judgment jurisprudence, and I would reinstate that cause of action.

Chief Judge Lippman and Judges Ciparick, Graffeo, Read and Smith concur with Judge Jones; Judge Pigott dissents in part in a separate opinion.

Order affirmed, with costs.

      . General Obligations Law § 5-901 provides, in relevant part:
      “No provision of a lease of any personal property which states that the term thereof shall be deemed renewed for a specified additional period unless the lessee gives notice to the lessor of his intention to release the property at the expiration of such term, shall be operative unless the lessor, at least fifteen days and not more than thirty days previous to the time specified for the furnishing of such notice to him, shall give to the lessee written notice, served personally or by mail, calling the attention of the lessee to the existence of such provision in the lease.”
      General Obligations Law § 5-903 (2) similarly provides:
      “No provision of a contract for service, maintenance or repair to or for any real or personal property which states that the term of the contract shall be deemed renewed for a specified additional period unless the person receiving the service, maintenance or repair gives notice to the person furnishing such contract service, maintenance or repair of his intention to terminate the contract at the expiration of such term, shall be enforceable against the person receiving the service, maintenance or repair, unless the person furnishing the service, maintenance or repair, at least fifteen days and not more than thirty days previous to the time specified for serving such notice upon him, shall give to the person receiving the service, maintenance or repair written notice, served personally or by certified mail, calling the attention of that person to the existence of such provision in the contract.”

      . General Business Law § 349 (a) provides that “[deceptive 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.”