which then resold it to ATIC. Therefore, according to defendant, CTC did have "rights in the collateral" to which the Bank's security interest could attach. In support of this position, the Bank offers the certification of the president of CTC, see Battat Cert. PP 2-4, as well as an L&K invoice referring to a "buyer-seller" agreement between L&K and CTC. Ex. C to LaCourte Aff. Dated June 23, 1994. It also offers an alleged contract between ATIC and CTC for the sale of coal, referring to ATIC as "buyer" and CTC as "seller." Ex. B to LaCourte Aff. Dated June 23, 1994.
Examining the evidence of both parties, we conclude that defendants have not met their burden of demonstrating a lack of factual questions as to whether CTC had "rights in the collateral." On the evidence presented so far, we believe that a rational jury could find either that CTC was plaintiff's agent without a substantial interest in the coal or that CTC was the seller of the coal with rights in the profits to which the Bank's security interest could attach. Because a genuine issue of material fact remains, we deny defendant's motion for summary judgment as to plaintiff's "Second Cause of Action."
B. Conspiracy to Defraud
Second, plaintiff alleges that defendant Bank's acceptance of the ATIC invoice from CTC as collateral under the Revolving Credit Agreement was part of a conspiracy between the Bank and CTC to perpetrate a fraud upon plaintiff. See Complaint PP 60-62 ("Sixth Cause of Action"). Defendant argues that plaintiff's allegations of conspiracy are "unsupported" and "conclusory" and that we should therefore dismiss plaintiff's claim. Def.'s Reply Mem. at 26. We reject defendant's argument.
In New York, the tort of fraud requires proof of five traditional elements: (1) a material fact; (2) misrepresentation of that material fact; (3) scienter; (4) reliance; and (5) damages. Mallis v. Bankers Trust Co., 615 F.2d 68, 80 (2nd Cir. 1980), cert. denied, 449 U.S. 1123, 67 L. Ed. 2d 109, 101 S. Ct. 938 (1981). Although "civil conspiracy" is itself not a substantive tort in New York, a claim of conspiracy can rest upon an independent underlying claim of fraud. See Demalco Ltd. v. Feltner, 588 F. Supp. 1277, 1278-79 (S.D.N.Y. 1984) ("the gravamen of a claim of conspiracy is the underlying independent tort"). "To establish a civil conspiracy in New York, the plaintiff must prove that the defendants intentionally participated in a common scheme with a view to its furtherance." Caballero v. Anselmo, 720 F. Supp. 1088, 1099 (S.D.N.Y. 1989). One party therefore can be liable for conspiracy to commit fraud by knowingly agreeing to cooperate in the fraudulent scheme of another party. See National Westminster Bank USA v. Weksel, 124 A.D.2d 144, 511 N.Y.S.2d 626, 628-29 (N.Y. App. Div.), appeal denied, 70 N.Y.2d 604, 519 N.Y.S.2d 1027, 513 N.E.2d 1307 (N.Y. 1987).
Plaintiff does not allege that defendant Bank satisfied the five elements of fraud directly, but rather alleges that the Bank knowingly cooperated in CTC's fraudulent acts. Pl's Mem. at 15. CTC committed fraud, argues plaintiff, by pledging its principal's property to the Bank as collateral and misrepresenting it as its own. Id. Plaintiff contends that the Bank was aware of these facts at the time it accepted the ATIC invoice as collateral and that it therefore should be liable for conspiracy to commit fraud. Id.
In support of these allegations, plaintiff argues that the Bank, as a lender of $ 3,000,000 to CTC, was likely to have acquainted itself with the business practices of its borrower and therefore should have known that CTC was only an agent of L&K. Meyer Aff. P 10. In addition, plaintiff offers evidence of a contemplated "intercreditor agreement" between defendant Bank and another French bank that allegedly owned part of or had "some kind of relationship" with CTC. Transcript Dated June 27, 1994 ("Tr.") at 22; Ex. A to LaCourte Aff. Dated Apr. 14, 1994. Plaintiff argues that this relationship raises an inference that defendant Bank was aware of the nature of CTC's business. Pl.'s Mem. at 3-4. Finally, plaintiff offers two balance sheets, which the Bank allegedly had in its possession at the time it extended credit to CTC, showing CTC's liabilities to exceed its assets for the years ending Decembers 1990 and 1991. Exs. E & F to Meyer Aff. The fact that defendant Bank extended a $ 3,000,000 line of credit to CTC notwithstanding CTC's "disastrous financial condition" indicates, plaintiff argues, a possible scheme by the Bank and CTC to "transfer the losses experienced by CTC's French owners" to American companies like L&K. Meyer Aff. P 8.
Although the question whether plaintiff's allegations of conspiracy to commit fraud are pleaded with the level of detail required to withstand a motion of summary judgment is a close one, it seems that defendant Bank has exclusive knowledge as to whether it intentionally cooperated in any fraudulent activities undertaken by CTC. Plaintiff requests an opportunity for discovery, in order to investigate further the Bank's relationship to CTC and its knowledge of the nature of CTC's business. Pl.'s Mem. at 15; Tr. at 22. Under the circumstances, we find that plaintiff's failure to state in greater detail the circumstances constituting conspiracy to commit fraud is no basis for a grant of summary judgment in favor of defendant. Instead, plaintiff should be given the opportunity it requests to conduct further discovery. We therefore deny defendant's motion as to plaintiff's "Sixth Cause of Action."
C. New York General Business Law Section 349
Third, plaintiff alleges that defendant Bank's actions as alleged above constituted an actionable "deceptive act or practice" under section 349 of the New York General Business Law. See Complaint PP 57-59 ("Fifth Cause of Action"). Because we find that plaintiff fails to state a claim for which relief may be granted, we dismiss this claim pursuant to Rule 12(b)(6).
Section 349 provides a private right of action for "deceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in [New York]". N.Y. Gen. Bus. Law §§ 349(a) and (h) (McKinney 1988). As evidenced by its title ("Consumer Protection From Deceptive Acts and Practices"), this section was intended as a consumer protection law, and it has been construed by the courts to be inapplicable to "business-versus-business disputes . . . where the party asserting the claim is not acting in a consumer role." Richard A. Givens, Supplementary Practice Commentary, N.Y. Gen. Bus. Law §§ 349-350, at 129 (McKinney Supp. 1994). The leading opinion discussing the scope of this section is Genesco Entertainment v. Koch, 593 F. Supp. 743 (S.D.N.Y. 1984), in which Judge Weinfeld wrote:
The typical violation contemplated by the statute involves an individual consumer who falls victim to misrepresentations made by a seller of consumer goods unusually by way of false and misleading advertising. The consumer oriented nature of the statute is evidenced by the remedies it provides. . . . The New York cases where plaintiffs have recovered under section 349(h) further reflect its consumer orientation since they uniformly involve transactions where the amount in controversy is small. That the deceptive practices this statute seeks to combat involve recurring transactions of a consumer type is further supported by the origin of the statute. Section 349(h) is substantially modelled on the Federal Trade Commission Act [ 15 U.S.C. § 45].
Genesco, 593 F. Supp. at 751-52 (citations omitted). See Morris v. Gilbert, 649 F. Supp. 1491, 1496-97 (E.D.N.Y. 1986) (statute inapplicable to security buyer's claims against brokerage firm salesman); Quail Ridge Assocs. v. Chemical Bank, 162 A.D.2d 917, 558 N.Y.S.2d 655, 658 (N.Y. App. Div.) (statute inapplicable to "single shot" commercial transaction involving multimillion dollar loan to developer to finance development of condominium complex), appeal dismissed, 76 N.Y.2d 936, 564 N.E.2d 674, 563 N.Y.S.2d 64 (N.Y. 1990).
In this Court's opinion, the present case does not involve the sort of consumer deception that falls within the scope of section 349. Plaintiff does not allege false and misleading advertising, or "recurring transactions of a consumer type." Genesco, 593 F. Supp. at 752. On the contrary, plaintiff's claim involves "complex arrangements, knowledgeable and experienced parties and large sums of money." Id. Because we find that section 349 is inapplicable to the transactions alleged, we dismiss plaintiff's "Fifth Cause of Action" for failure to state a claim for which relief can be granted.
D. International Banking Act and Regulation K
Finally, plaintiff asserts an implied private right of action under the International Banking Act of 1978, 12 U.S.C. 3101 et seq. (the "IBA"), and Federal Reserve Board regulation K, 21 C.F.R. § 211, alleging that the Bank engaged in an "unsafe and unsound banking practice" causing injury to plaintiff. See Complaint P 43 ("Second Cause of Action"). Defendant seeks a dismissal of this cause of action on the ground that it fails to state a claim for which relief may be granted. We agree with defendant and therefore dismiss plaintiff's claim.
Federal courts are considerably less willing to imply private rights of action than they were several decades ago. In recent years, the Supreme Court has repeatedly emphasized that whether an implied right of action exists under a federal statute is "strictly a matter of Congressional intent." Chan v. City of New York, 1 F.3d 96, 101 (2nd Cir.) (citing Thompson v. Thompson, 484 U.S. 174, 179, 98 L. Ed. 2d 512, 108 S. Ct. 513 (1988); Northwest Airlines, Inc. v. Transport Workers, 451 U.S. 77, 94, 67 L. Ed. 2d 750, 101 S. Ct. 1571 (1981); Touche Ross & Co. v. Redington, 442 U.S. 560, 568, 61 L. Ed. 2d 82, 99 S. Ct. 2479 (1979)), cert. denied, 114 S. Ct. 472 (1993). When the statute is silent as to the existence of a private cause of action, courts normally consider the four factors set forth in Cort v. Ash, 422 U.S. 66, 45 L. Ed. 2d 26, 95 S. Ct. 2080 (1975): (1) whether the plaintiff is part of the class for whose "especial benefit" the statute was enacted; (2) whether the legislative history indicates a congressional intent to confer a private right of action; (3) whether a federal cause of action would further the underlying purpose of the legislative scheme; and (4) whether the cause of action is "one traditionally relegated to state law." Id. at 78; Chan, 1 F.3d at 102. All four of these factors are "guides to determining congressional intent." Chan, 1 F.3d at 102.
Applying the Cort factors to the IBA and Regulation K, we find no indication of an intended private right of action. The language of the statute and regulation does not purport to protect any particular class of persons, but merely provides that the Federal Reserve Board may terminate a foreign bank's right to operate in the United States if it determines that the bank has engaged in "unsafe or unsound banking practices." See 12 U.S.C. §§ 3105(e)(1)(B)(i), 3106(c); 21 C.F.R. § 211.25(a). Second, the legislative history does not indicate any intent to create a private cause of action. Third, it is unclear whether implying a private right of action would further or undermine the underlying purpose of the legislative scheme. While allowing private parties to sue under the statute and regulation would undoubtedly deter "unsafe or unsound banking practices," it might also expose banks to severe liability, to the detriment of their shareholders and depositors. Finally, as evidenced by the numerous state claims in plaintiff's complaint stemming from the same alleged actions, the wrongdoings alleged by plaintiff in this case are matters traditionally governed by state law. Together, these four factors suggest that Congress did not intend to create a private right of action.
In light of the foregoing, this Court concludes that neither an express nor an implied private cause of action exists under the International Banking Act and Federal Reserve Board regulation K. Accordingly, we dismiss plaintiff's "Second Cause of Action" insofar as it relies upon these federal banking laws.
For the reasons set forth above, defendant's motion to dismiss plaintiff's complaint pursuant to Rule 12(b)(6), or in the alternative, for summary judgment pursuant to Rule 56, is denied in part and granted in part. Since, as discussed above, there are genuine issues of material fact to be resolved, plaintiff's cross motion for summary judgment is also denied.
The parties are to confer and to advise the court in writing by December 5, 1994 when all discovery will be completed, a pretrial order submitted and the parties will be ready for trial.
Dated: November 10, 1994
New York, New York
Leonard B. Sand