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Current Developments in the Commercial Divisions of the
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Posted: August 30, 2016

GBL 349 Claim By Law Firm Against Lender Dismissed

On August 17, 2016, Justice Oing of the New York County Commercial Division issued a decision in City National Bank v. Morelli Ratner, P.C., 2016 NY Slip Op. 31578(U), dismissing a GBL 349 claim brought by a law firm against a lender, explaining:

GBL ยง 349 bars a business from engaging in deceptive acts or practices. To state a section 349 claim, a plaintiff must allege that: (1) the challenged act or practice was consumer-oriented; (2) the act or practice was misleading in a material way; and (3) the plaintiff suffered injury as a result of the deceptive act. Private contract disputes, unique to the parties do not fall within the ambit of the statute. In addition, section 349 is not intended to protect sophisticated parties with the power to negotiate. Accordingly, in determining whether a transaction is a private contract dispute, New York courts consider the sophistication of the parties and the amount of the transaction at issue — in other words, whether the parties need the protection of the consumer-protection law.

Consideration of these factors demonstrates that this transaction does not fall within the ambit of section 349. The remaining $3 million owed under the Loan — let alone the initial $10 million Loan — is far from the modest transaction section 349 is intended to cover. Furthermore, the Morelli Parties are sophisticated parties. Morelli is the founding partner of a preeminent law firm, and while the Morelli Parties argue that Morelli is a personal injury attorney and not an expert in commercial lending, sophistication rather than expertise is dispositive in this analysis.

Lastly, the fact that, even after their default, the Morelli Parties had extensive negotiations with CNB and, among other things, requested and received a lower rate of interest demonstrates that they are not the ordinary consumer that section 349 was designed to protect.

(Internal quotations and citations omitted) (emphasis added).

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