entertain plaintiffs request for a declaration that the Licensed
Defendants were sham shareholders, directors, and officers of
the PC Defendants, that the certificates of incorporation filed
by the PC Defendants with the Department of Education were
false, and that the certificates of authority obtained by the PC
Defendants were fraudulently and unlawfully obtained, because
such a declaration, if provided, would not "serve a useful
purpose in clarifying and settling the legal relations in issue,
[or] . . . terminate and afford relief from the uncertainty,
insecurity, and controversy giving rise to the proceeding."
Broadview Chem. Corp., 417 F.2d at 1001.
In claims two and four, plaintiff seeks compensatory damages
in the amount that it has paid to the PC Defendants for services
provided to its insureds and punitive damages. These claims fail
as a matter of law because, as set forth above, plaintiff has no
private right of action to enforce the relevant provisions of
the Business Corporations Law and because the PC Defendants'
alleged violations of those provisions do not relieve plaintiff
of its obligation to reimburse its insureds, or its insureds'
assignees who are "providers of services," for covered basic
In claim two, plaintiff asserts claims for common law fraud
and fraudulent concealment. The elements of a claim for actual
fraud "under New York law are a false representation, scienter,
materiality, expectation of reliance, justifiable reliance, and
damage." Congress Financial Corp. v. John Morrell & Co.,
790 F. Supp. 459, 469
(S.D.N.Y. 1992). The elements of fraudulent concealment are "a
relationship between contracting parties that creates a duty to
disclose, knowledge of material facts by a party bound to make
such disclosures, nondisclosure, scienter, reliance, and
damage." Id. at 471. These claims fail because the alleged
misrepresentations and concealed facts are not material to the
claims submitted to plaintiff. Moreover, plaintiff was not
damaged by its payment of claims that it was required to pay and
which, in any event, were for reasonable and necessary medical
expenses performed by licensed health professionals for covered
persons and arising out of covered accidents.*fn13
In claim four, plaintiff states a claim for unjust enrichment.
To succeed on a claim of unjust enrichment, "plaintiff must show
that (1) defendant was enriched (2) at plaintiffs expense, and
(3) that `it is against equity and good conscience to permit
. . . defendant to retain what is sought to be recovered.'"
Lake Minnewaska Mountain Houses Inc. v. Rekis, 259 A.D.2d 797,
798, 686 N.Y.S.2d 186 (N.Y.App.Div. 1999) (quoting Paramount
Film Distrib. Corp. v. State, 30 N.Y.2d 415, 421, 334 N.Y.S.2d 388,
285 N.E.2d 695 (1972)). Accepting plaintiffs allegations as
true, plaintiff has done no more than pay claims it was required
by law to pay. It is therefore, not against equity and good
conscience to permit the PC Defendants to retain the benefits
they received from plaintiff.
In any event, even if plaintiff were entitled to deny claims
submitted by the PC Defendants on the basis of the PC
Defendants' allegedly unlawfully obtained certificates of
authority, it would not be entitled to recoup payments already
made. New York courts are reticent to require the return of sums
previously paid, or even to void one party's duty to perform
under a contract, for lack of a statutorily required license.
See IHS Acquisition XV, Inc. v. Kings Harbor Care Center, 1999
WL 223152 (S.D.N.Y. 1999). This is especially true where the
contracting party is not validly licensed but the party who
actually provides services is so licensed. See, e.g.,
Charlebois v. J.M. Weller Assocs., Inc., 72 N.Y.2d 587, 593,
535 N.Y.S.2d 356, 531 N.E.2d 1288 (1988) (refusing to void
design-build contract even though the contracting party was not
licensed engineer where work was performed by licensed
engineer). As a "general rule . . ., forfeitures by operation of
law are disfavored, particularly where a . . . party seeks to
raise illegality as a sword for personal gain rather than a
shield for the public good," Lloyd Capital Corp. v. Pat
Henchar, Inc., 80 N.Y.2d 124, 128, 589 N.Y.S.2d 396,
603 N.E.2d 246 (1992), and "[a]llowing parties to avoid their contractual
obligation is especially inappropriate where there are
regulatory sanctions in place to redress violations of the law."
Id. Unless the violation at issue is malum in se, or evil in
itself, and unless public policy mandates otherwise, a contract
in violation of a statute should be enforced. See id.; see also
Benjamin v. Koeppel, 85 N.Y.2d 549, 626 N.Y.S.2d 982,
650 N.E.2d 829 (1995) (holding legal services contract not void for
failure of attorney to satisfy registration requirements).
The violation at issue here is not evil in itself and
plaintiff plainly seeks to use the PC Defendants' violations as
a sword for personal gain in order to recoup payments that it
would, but for the alleged violations of the Business
indisputably have been required to pay. Regulatory sanctions
that are available to the state "quite complementarily and
proportionately protect the underlying public policy,"
especially since licensed health professionals performed all
services. Lloyd Capital, 80 N.Y.2d at 129, 589 N.Y.S.2d 396,
603 N.E.2d 246.
Moreover, even if a party who has violated a licensing statute
is unable to sue for enforcement of a contract, the party
generally need not return compensation already paid. As Justice
If the defendant were suing the plaintiffs for the
price, and the court were to deny him relief, its
refusal would not rest upon the ground that it would
be against good conscience for him to have the money.
The basis of its refusal would rather be that because
of his illegal acts the law would leave him where it
found him. In this case it finds him in a situation
altogether different. He has received the money and
the plaintiffs are trying to take it away from him.
The law may at times refuse to aid a wrongdoer in
getting that which good conscience permits him to
receive; it will not for that reason aid another in
taking away from him that which good conscience
entitles him to retain.
Schank v. Schuchman, 212 N.Y. 352, 359, 106 N.E. 127 (1914)
(citations omitted); see also Goldman v. Garofalo, 71 A.D.2d 650,
418 N.Y.S.2d 803 (N.Y.App.Div. 1979) (denying plaintiff
recovery of fees paid to defendant medical laboratory where
defendant lacked requisite license and holding that "the
parties, in these circumstances, should be left as they are,"
since plaintiff obtained benefit of work and there was no
evidence that work was defective). Because the Moving Defendants
likely could successfully sue for payment of unpaid claims, good
conscience clearly entitles them to retain payments already
In claim three, plaintiff states a claim for deceptive
practices in violation of New York's General Business Law § 349.
Section 349 makes unlawful "[d]eceptive acts and practices in
the conduct of any business, trade or commerce or in the
furnishing of any service in this state." N.Y.Gen.Bus.Law § 349.
To state a claim under § 349, a plaintiff must make a prima
facie showing that the "defendant is engaging in an act or
practice that is deceptive or misleading in a material way,
. . . that plaintiff has been injured by reason thereof, . . .
and that the acts [the plaintiff] complain[s] of are
consumer-oriented in the sense that they potentially affect
similarly situated consumers." Oswego Laborers' Local 214
Pension Fund v. Marine Midland Bank, 85 N.Y.2d 20, 25, 27,
623 N.Y.S.2d 529, 647 N.E.2d 741 (1995); see also S.Q.K.F.C., Inc.
v. Bell Atlantic
Tri-Con Leasing Corp., 84 F.3d 629, 636 (2d Cir. 1996)
("`[C]onsumer-oriented' [is] defined as conduct that
`potentially affect[s] similarly situated consumers.'"). Section
349 was not intended to be a "sword to be wielded in
business-versus-business disputes . . . where the party
asserting the claim is not acting in a consumer role." Richard
E. Givens, Overall Scope of General Business Law §§ 349-350,
Supplementary Practice Commentaries 166, 167 (McKinney Supp.
1996). State Farm cannot establish that it was injured by the
Moving Defendants' allegedly deceptive acts and practices nor
that the acts complained of are "consumer-oriented" as defined
by the Court of Appeals. See Progressive Northeastern, Index
No. 60111200, at 6 ("[T]he plaintiff insurers, who were the
sellers of policies, were clearly not `consumers' as
contemplated by [§ 349]."). Its § 349 claims must, therefore, be
Plaintiff moves to dismiss the Counterclaimants' claims based
on General Business Law § 349, arguing that the Counterclaimants
have not alleged acts or practices engaged in by State Farm that
have a broad impact on consumers at large, i.e., that are
consumer-oriented. As set forth above, consumer-oriented means,
in the context of § 349, acts or practices that "potentially
affect similarly situated consumers" vis à vis the claimant.
Oswego Laborers' Local 214 Pension Fund, 85 N.Y.2d at 27,
623 N.Y.S.2d 529, 647 N.E.2d 741. Consumer-oriented conduct "does
not require a repetition or a pattern of deceptive behavior,
. . . but instead [the claimant] must demonstrate that the acts
or practices have a broader impact on consumers at large." Id.
at 25, 623 N.Y.S.2d 529, 647 N.E.2d 741. "Private contract
disputes, unique to the parties, for example, would not fall
within the ambit of the statute." Id.
In the context of insurance claim disputes specifically,
courts consider the amount of the claim, the sophistication of
the parties, and the uniqueness of the coverage contract in
determining whether an insurer's allegedly deceptive conduct
falls within § 349's scope. See New York University v.
Continental Ins. Co., 87 N.Y.2d 308, 320, 639 N.Y.S.2d 283,
662 N.E.2d 763 (1995); Greenspan, M.D. v. Allstate Ins. Co.,
937 F. Supp. 288, 293 (S.D.N.Y. 1996). In New York University, the
Court of Appeals dismissed the plaintiff's § 349 claim against
because the contract that gave rise to the dispute was
negotiated and unique, because the parties on each side were
sophisticated, and because the coverage was for $10 million. The
court held that, under such circumstances, the contract dispute
was essentially private, not one that affected the consuming
public at large. 87 N.Y.2d at 321, 639 N.Y.S.2d 283,
662 N.E.2d 763. In Greenspan, on the other hand, the court held that,
while a detrimental effect on health care providers alone would
not bring a claim within § 349's purview, the "[d]eliberate
erecti[on] of barriers to reimbursement and imposi[tion] [of]
additional costs may frustrate [the No-fault Law's objective of
efficient and inexpensive compensation of accident victims] and
harm the public." 937 F. Supp. at 294. Likewise, in Riordan v.
Nationwide Mutual Ins. Co., 756 F. Supp. 732 (S.D.N.Y. 1990),
the court held that the plaintiffs'
allegations that their injury resulted from [the
insurer's] claim settlement practice and policy
violative of the New York Insurance Law easily
satisfies the elements of a claim under Section 349
since plaintiffs allege deceptive practices expressly
proscribed by the Insurance Law. . . . [P]laintiffs
expressly allege the existence of a claim settlement
policy designed to deceive certain categories of
policyholders; in other words, the public at large.
Id. at 738-39.
In the light of the foregoing, the Counterclaimants' claims do
not satisfy § 349's essential elements. Under Oswego, conduct
is "consumer-oriented" only if it affects consumers who are
similarly situated to the claimant. In Greenspan, the court
held that detrimental effects on health care providers alone do
not bring a claim within § 349's purview. 937 F. Supp. at 294;
see also Four Winds of Saratoga, Inc. v. Blue Cross and Blue
Shield of Central New York, 241 A.D.2d 906, 660 N.Y.S.2d 236
(N.Y.App.Div. 1997) (holding that service provider may not bring
action against insurer due to lack of impact on consumers at
large). The consumers of State Farm's services are its insureds,
see Riordan, 756 F. Supp. at 739 (refusing to dismiss insureds'
action under § 349), and the Counterclaimants are not such
consumers, nor are they similarly situated to State Farm's