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Goldman v. Simon Property Group

November 25, 2008

ALIZA GOLDMAN, ETC., APPELLANT-RESPONDENT,
v.
SIMON PROPERTY GROUP, INC., RESPONDENT-APPELLANT.



APPEAL by the plaintiff, as limited by her brief, in a class action to recover damages for breach of contract based upon a breach of the implied covenant of good faith and fair dealing, unjust enrichment, money had and received, and violations of General Business Law §§ 349 and 396-i, for injunctive relief, and for a judgment declaring, inter alia, that the provision in a customer agreement governing the use of a gift card that imposes dormancy and administrative fees for the nonuse of the card, thus decreasing the redeemable value thereof, is unenforceable, from so much of an order of the Supreme Court (Anthony L. Parga, J.), entered in Nassau County on June 27, 2007, as granted those branches of the defendant's motion which were pursuant to CPLR 3211(a)(1) and (7) to dismiss the cause of action of the amended complaint alleging violations of General Business Law §§ 349 and 396-i, and the claims for declaratory and injunctive relief, and CROSS APPEAL by the defendant, as limited by its brief, from so much of the same order as denied those branches of its motion which were pursuant to CPLR 3211(a)(1) and (7) to dismiss the causes of action to recover damages for breach of contract, unjust enrichment, and money had and received.

The opinion of the court was delivered by: Dickerson, J.

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

This opinion is uncorrected and subject to revision before publication in the Official Reports.

PETER B. SKELOS, J.P., DAVID S. RITTER, WILLIAM E. McCARTHY and THOMAS A. DICKERSON, JJ.

(Index No. 1899/05)

OPINION & ORDER

We have previously examined the phenomena of plastic gift cards*fn1 (see Lonner v Simon Prop. Group, Inc.,AD3d, 2008 NY Slip Op 07877 [2d Dept 2008]; Llanos v Shell Oil Co.,AD3d, 2008 NY Slip Op 08099 [2d Dept 2008]).

The instant action, like the Lonner action, challenges the imposition by the defendant Simon Property Group, Inc. (hereinafter Simon), of a dormancy fee in the sum of $2.50 per month and alleges, inter alia, that Simon "began to automatically deduct $2.50 per month as Dormancy Fees beginning the seventh month after the purchase of the Gift Card held by plaintiff without proper notice to plaintiff," that the card did not place the user on notice of the deduction of the dormancy fees, that the card "was deceptive in its failure to provide reasonable notice of the deductions of Dormancy Fees," and that the defendant's "sale, distribution, and marketing of the Gift Cards without providing proper notice of the deductions of Dormancy Fees was deceptive and materially misleading."

According to its terms, the Simon Gift Card (hereinafter the card) is "a prepaid, stored-value card," which may be used anywhere Visa cards are accepted. The card resembles a credit card and is programmed to hold a balance chosen by the purchaser. Each time the card is used, the amount of the transaction is deducted from the available balance of the card. There is a magnetic strip on the back of the card, below which it states, in pertinent part: "[a]n administrative fee of $2.50 per month will be deducted from your balance beginning with the seventh month from the month of card purchase."

Federal Preemption

Initially, the defendant moved to dismiss the complaint pursuant to, inter alia, CPLR 3211(a)(2). On appeal, this Court reversed the Supreme Court's determination that the plaintiff's claims were preempted by federal law, reasoning that "[t]he record indicates that the defendant and national bank are separate entities (and) that it is the defendant, and not the bank, that sells and markets the card, and charged and collects the disputed fees" (Goldman v Simon Prop. Group, Inc., 31 AD3d 382, 383; see Lonner v Simon Prop. Group, Inc., 31 AD3d 398; see also SPGGC, LLC v Blumenthal 505 F3d 183, 187, 191 ["The Connecticut Gift Card Law prohibits the sale of any 'gift certificate' subject to inactivity or dormancy fees or to an expiration date. . . Gift certificates are defined to include gift cards and other stored-value cards . . .We have no difficulty concluding . . . that SPGGC has failed to state a valid claim for preemption of the Connecticut Gift Card Law insofar as it prohibits SPGGC from imposing inactivity and certain other fees on consumers of the Simon Giftcard . . . SPGGC, however, does state a valid claim for preemption insofar as the Connecticut Gift Card Law prohibits expiration dates."]). Accordingly, this Court remitted the matter for a determination of the merits of each cause of action.

The Amended Complaint

The plaintiff filed an amended class action complaint, which identified the card as a gift certificate. The plaintiff alleged that she received the card from her employer in or about April 2003, that the card was sold at malls and through the internet, and that Simon's "wrongful acts" were consumer-oriented and affected thousands of its customers. The amended complaint set forth five causes of action, and sought to recover damages for breach of contract based upon a breach of the implied covenant of good faith and fair dealing, unjust enrichment, money had and received, and violations of General Business Law §§ 349 and 396-i, the amended complaint also sought declaratory relief and injunctive relief enjoining and restraining Simon from "further applying and implementing the policies and acts complained of."

Motion To Dismiss

Simon thereafter moved pursuant to CPLR 3211(a)(1) and (7) to dismiss the amended complaint. The Supreme Court granted those branches of the motion which were to dismiss the causes of action to recover damages for violations of General Business Law §§ 349 and 396-i, the former for the plaintiff's failure to articulate the necessary elements of such a claim and the latter because the statute, as amended (L 2004, ch 170, § 1), applied only to gift cards that were issued after October 18, 2004, and not to the plaintiff's card, which was issued in or about April 2003. The court noted that the amended complaint did not expressly assert that the card was a "gift certificate" or "store credit" within the meaning of General Business Law § 396-i, as that statute defined those terms prior to the 2004 amendment (L 1997, ch 126, § 1). Further, the court determined that the "cause of action seeking the ...


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