DOI - DECISION OF INTEREST

Bronx County Supreme Court

Injunction Granted; Defendant Must Retract Reports of Unsatisfied Claims to Credit Agencies

Justice Manzanet

Shaw v. American Honda Finance Corp. Upon the foregoing papers, plaintiffs' motion for a preliminary injunction and defendant's motion to dismiss the complaint are consolidated for purposes of this decision. For the reasons set forth herein, plaintiffs' motion for a preliminary injunction is granted and defendant's motion to dismiss the complaint is denied.

Plaintiffs' motion for a preliminary injunction seeks an Order that pending the hearing and final disposal of this action: a) the defendant be restrained from reporting any alleged unsatisfied claims for excess wear and damage to any credit reporting agency except upon strict compliance with N.Y. Motor Vehicle Retail Leasing Act, i.e., until: (i) the expiration of the time granted under Article 75 of the C.P.L.R. for the filing of a petition to vacate or modify an arbitrator's award; (ii) the issue has been a subject of a final judgment; or (iii) where the defendant and the lessee execute a settlement, 30 days after the date a payment is due under the settlement if no payment has been made; b) the defendant be ordered to retract any and every report of allegedly unsatisfied claim for excess wear and damage to credit reporting agencies as a derogatory item of information about Mr. Shaw; and, c) the defendant be ordered to retract any and every report of allegedly unsatisfied claim for excess wear and damage to credit reporting agencies as a derogatory item of information which has been made without strict compliance with the conditions of the N.Y. Motor Vehicle Retail Leasing Act.

In the within action, it is plaintiffs' contention that defendant failed to comply with the express provision of the Motor Vehicle Retail Leasing Act in reporting unsatisfied claims for alleged excess wear and damage of vehicles leased to plaintiffs. Specifically, plaintiff Robert A. Shaw provides that on or about May 9, 1997, he leased a car from the defendant for a 48 month term with a condition that the car could be driven 60,000 miles after which defendant could impose additional charges for excessive use. Mr. Shaw returned the car to defendant's dealer on or about May 2, 2001 and contends that the car was in perfect condition and without any damage. The car was accepted by the dealer. Thereafter, approximately one month later, in early June, 2001, he received an "Invoice and Lease Settlement" from defendant dated May 25, 2001 charging Mr. Shaw for alleged excess wear and damage to the vehicle in the amount of $2,059.46. An "Inspection Results" detailed several items of alleged exterior damage to the car. Mr. Shaw disputes the itemized appraisal and contends that those damages were not present when he returned the car. Moreover, he argues that defendant conducted the appraisal in Connecticut and, thus, in order for him to inspect the subject vehicle to verify the damages alleged, he would have to travel outside of the state with a licensed inspector from New York. In addition, he states that defendant fraudulently sought to charge him for an added 31 miles to the car prior to the purported appraisal and after he had returned it. In conversation with defendant's representative, Mr. Shaw was initially agreeable to pay some of the charges toward excess mileage but defendant refused to accept his proposal. When Mr. Shaw refused to pay the full sum demanded, defendant reported the alleged unsatisfied claim to credit reporting agencies.

Mr. Shaw claims that defendant's report to the credit agencies was in direct violation of the mandatory provision of §343(4)(c)) as no arbitration award had been rendered against him, the defendant had not even commenced a lawsuit, never obtained a final judgment, and no settlement had been entered with him. Mr. Shaw argues that the alleged illegal reporting of its "bogus" claims slandered his credit rating. In addition, he argues the adverse report remains in his credit records and will be continually disclosed to financial institutions and others every time that he seeks to enter into a financial transaction and, thus, it has caused and continues to cause grave harm and irreparable damage to him and his family. Therefore, he argues, it is necessary that defendant be required to stop this practice forthwith, and retract such alleged illegal reports already submitted.

In opposition, defendant contends that in February, 2003, it deleted all reports made to any credit reporting agencies concerning Mr. Shaw's alleged refusal to pay the excess wear and use charge assessed in the sum of $1,288.18. In addition, defendant argues that it deleted all reports made to any credit reporting agencies concerning any unsatisfied end of term excess wear and use charges assessed for all other New York lessees. Since that time, contends defendant, it has discontinued altogether the practice of reporting unsatisfied excess wear and use charges for all New York lessees including Mr. Shaw. It does still report an outstanding charge of $771.28 owed by Mr. Shaw under his lease for excess mileage and is reported as being disputed by Mr. Shaw.

Plaintiffs have moved for a preliminary injunction pursuant to C.P.L.R. §6301. In order to obtain a preliminary injunction, plaintiffs must demonstrate: 1) a probability of ultimate success on the substantive merits of the action; 2) irreparable harm will occur if the preliminary injunction is not granted; and, 3) a balancing of the equities in favor of plaintiffs' position. Aetna Insurance Co. v. Capasso, 75 N.Y.2d 860 (1990); U.S. Reinsurance Corp. v. Humphreys, 618 N.Y.S.2d 270, 273 (1st Dept. 1994). Evidence demonstrating a likelihood of success on the merits need not be conclusive. Terrell v. Terrell, 719 N.Y.S.2d 41 (1st Dept. 2001) citing Demartini v. Chatham Green, Inc. 565 N.Y.S.2d 712 (1st Dept. 1991). "As to the likelihood of success on the merits, a prima facie showing of a right to relief is sufficient; actual proof of the case should be left to further court proceedings." Terrell, supra, quoting McLaughlin, Piven, Vogel v. W.J. Nolan & Co., 498 N.Y.S.2d 146 (2d Dept. 1986). With respect to establishing irreparable harm, the plaintiff must show that the alleged harm is "imminent, not remote or speculative." Golden v. Steam Heat, Inc., 628 N.Y.S.2d 375, 377 (2d Dept. 1995).

In support of its motion, plaintiffs argue that they have met all three requirements and, therefore, are entitled to a preliminary injunction. Specifically, plaintiffs claim that they will be able to succeed on the merits because defendant failed to follow New York law which prohibits defendant from reporting adverse credit entries except upon compliance with §343(4)(c) and, thus, defendant is in clear violation of the statute. Defendant argues that plaintiffs have failed to come forward with the clear factual showing necessary as the allegations made by plaintiffs consist of supposition without any supporting evidence or personal knowledge. Furthermore, defendant contends that the statements made by plaintiff in his affidavit are false in that in February, 2003, defendant deleted any derogatory reports previously submitted to a credit reporting agency concerning Mr. Shaw's refusal to pay the Excess Wear and Use Charge, and did this for all lessees in New York whom defendant may have reported an unsatisfied Excess Wear and Use Charge. In addition, defendant argues that it has discontinued the practice altogether.

While it is true that Courts have denied motions for preliminary injunctions where the offending conduct has ceased and there is no proof that it was likely to occur again, the same cannot be said of the instant application. Defendant cites several cases where the Court have denied injunctive relief where there is no proof that the threatened harm was likely to occur again. See, Greenfield v. Schultz, 660 N.Y.S.2d 624, 628 (Sup. Ct. N.Y. Cty. 1997), aff'd in part, 673 N.Y.S.2d 684 (1st Dept. 1998); Greilsheimer v. Berber, Chan & Essner, 1998 WL 547092 (S.D.N.Y. 1998); People by Lefkowitz v. Alexanders Dept. Store, Inc., 344 N.Y.S.2d 719 (1st Dept. 1973).

However, those cases are distinguishable from the instant application in that the violation involved one "single offense'. See, People by Lefkowitz, Id. ('The purported violation... sought to be enjoined is apparently a single offense unlikely to be repeated by the respondent.'); Greenfield, supra, (Plaintiff sought an injunction against defendant attorney to enjoin any future violation of C.P.L.R. §3120(b) requiring that third party subpoenas be made on notice. The Court found that there was no threat of repetition as it was a single occurrence, defendant attorney acknowledged his procedural mistake and assured the Court he would never violate §3120 again, and since he did not obtain the evidence sought, there was no prejudice to plaintiff in defendants' bypassing the procedural rules of discovery.) See, also, Polzer v. TRW, Inc., 682 N.Y.S.2d 194 (1st Dept.1998) ('Because the alleged offensive acts or omissions ceased several years before the commencement of this action, the motion court properly determined that there was no basis for an injunction. '); People by Lefkowitz v. Volkswagen of America, Inc., 366 N.Y.S.2d 157 (1st Dept. 1975) (Motion for preliminary injunction denied where the passage of time was almost three years without a repetition of the offense); American Express Travel Related Servs. Co., Inc. v. Mastercard Int'l Inc., 776 F.Supp. 787, 789 (S.D.N.Y.1991)(Plaintiff's application for an injunction prohibiting defendant from airing a particular television commercial denied where defendant had already withdrawn the commercial at issue and filmed and distributed a new commercial, thus indicating that it had no intention of airing the first commercial again and, therefore, there was no threat of future harm); Greilsheimer, supra, (Plaintiff sought an injunction to prevent defendants from using his name as an attorney in their law firm which he had left to form his own practice. The Court denied the motion because, prior to the initiation of the action, defendants agreed to cease using plaintiff's name when answering the phones and on all firm stationary and documents; new stationary had been ordered; plaintiff's name had been deleted from the sign in the Firm's reception area; and defendants have ceased answering the phone with plaintiff's name. The Court found it illogical to assume that defendants would go through the significant trouble and expense of having the Firm's sign or its stationary changed back to once again include plaintiff's name, and to assume that the Firm would answer phone calls with plaintiff's name at some future point.)

In the instant matter, plaintiffs have made a showing of likelihood of success on the merits in that defendant reported derogatory information to credit agencies without first following the protocols of §343(4)(c) as required. It is known that in reporting derogatory information, an individual's credit history will certainly be affected when seeking to enter into a financial transaction. In the cases cited by defendant, the Courts were willing to disregard or overlook a violation or offense where it was shown that it was a one time occurrence and/or there was clear evidence that it was unlikely to occur again. This matter is distinguishable in that here there is no clear evidence set forth by defendant that this will not occur again, other than a statement from an assistant manager of defendant that the practice has ceased since February, 2003. Furthermore, in the instant matter, defendant's violation of statutory mandates affects more than just plaintiff, but all of those individuals who were reported to the credit agencies while defendant engaged in this practice. See Defendant's Memorandum of Law at p. 6 ('...[I]n February 2003 AHFC deleted any derogatory reports previously submitted to a credit reporting agency concerning Mr. Shaw's refusal to pay the Excess Wear and Use Charge. Indeed, AHFC did this not only for Mr. Shaw, but for all lessees in New York regarding who AHFC may have reported an unsatisfied Excess Wear and Use.) Moreover, it is well settled that a likelihood of success on the merits may be sufficiently established even where the facts are in dispute and the evidence is inconclusive. Four Times Square Associates, L.L.C. v. Cigna Investments, Inc., 764 N.Y.S.2d 1 (1st Dept. 2003) citing Ma v. Lien, 604 N.Y.S.2d 84 (1st Dept. 1993). While not conclusive, there certainly is evidence, by defendant's own admission, that they engaged in the practice of reporting individuals to credit agencies without first complying with N.Y. Motor Vehicle Retail Leasing Act. In addition, the injunction at issue does not prevent defendant from collecting valid claims established in accordance with law, but seeks to require defendant to comply with mandatory provisions before reporting information that will undoubtedly cause harm to an individual's credit history.

Defendant also contends that plaintiffs have failed to sustain their burden of showing an imminent, irreparable harm since it has not made any reports to credit agencies since February 2003. Furthermore, defendant argues that Mr. Shaw does not allege a single specific instance of any actual harm such as denial of credit as a result of the report to the credit agencies. Notwithstanding defendant's arguments, the First Department has held that the threat of creditworthiness is sufficient to show irreparable harm. Four Times Square Associates, L.L.C. v. Cigna Investments, Inc., 764 N.Y.S.2d 1 (1st Dept. 2003). Accordingly, it is not a requisite per se that Mr. Shaw show instances of actual harm, only the threat of harm will suffice for purposes of a preliminary injunction. Here, clearly defendant's acts in reporting derogatory information before following specific statutory mandates qualifies as a threat to the creditworthiness of those individuals.

With respect to the balancing of the equities, the First Department has held that "[w]hile the existence of some wrongdoing may impel a result for one side, the "balancing of the equities" usually simply requires the court to look to the relative prejudice to each party accruing from a grant or a denial of the requested relief." Ma v. Lien, 604 N.Y.S.2d 84 (1st Dept. 1993). Here, plaintiffs and other individuals would suffer irreparable injury to their credit history absent the injunction. On the other hand, there would be no great harm to defendant if it is enjoined from performing a practice that it claims it no longer engages in, pending the resolution of this action. Plaintiffs as consumers stand in the shoes of the Attorney General, who is not required to post a bond and, thus, plaintiffs are not required to post a bond. Accordingly, for the reasons set forth herein, the motion for a preliminary injunction is granted.

Defendant has brought a motion to dismiss the instant action. When a defendant moves to dismiss the complaint based on legal insufficiency, plaintiff has no obligation to show evidentiary facts to support the allegations of the complaint. Generally, on a motion to dismiss made pursuant to C.P.L.R. §3211, the court must "accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit into any cognizable legal theory'. Leon v. Martinez, 84 N.Y.2d 83 (1994). However, "[i]n those circumstances where the legal conclusions and factual allegations are flatly contradicted by documentary evidence, they are not presumed to be true or accorded every favorable inference, Biondi v. Beekman Hill House Apt. Corp., 692 N.Y.S.2d 304 (1st Dept. 1999), affd. 94 N.Y.2d 659 (2000); Kliebert v. McKoan, 643 N.Y.S.2d 114 (1st Dept. 1996), lv. denied 89 N.Y.2d 802, the criterion becomes 'whether the proponent of the pleading has a cause of action, not whether he has stated one". Guggenheimer v. Ginzburg, 43 N.Y.2d 268 (1977); see also Leon, supra; Ark Bryant Park Corp. v. Bryant Park Restoration Corp., 730 N.Y.S.2d 48 (1st Dept. 2001).

Defendant here has moved pursuant to C.P.L.R.§3211(a)(1) and (7). On a motion to dismiss pursuant to C.P.L.R. §3211(a)(1), "a dismissal is warranted only if the documentary evidence submitted conclusively establishes a defense to the asserted claims as a matter of law'. Leon, supra; see also Teitler v. Max J. Pollack & Sons, 733 N.Y.S.2d 122 (2d Dept. 2001); Jaslow v. Pep Boys, 719 N.Y.S.2d 881 (2d Dept. 2001). On a motion to dismiss pursuant to C.P.L.R. §3211(a)(7), the complaint survives when it gives notice of what is intended to be proved and the material elements of each cause of action. Rovello v. Orofino Realty Co., Inc. 40 N.Y.2d 633 (1976); Underpinning & Foundation Construction v. Chase Manhattan Bank, 46 N.Y.2d 459 (1979). Furthermore, on a motion to dismiss for legal insufficiency, it is proper to consider the facts in plaintiff's affidavit for the limited purpose of sustaining the pleading. Ackerman v. Ackerman, 462 N.Y.S.2d 657 (1st Dept. 1983).

In the instant matter, the complaint alleges nine causes of action. It alleges that defendant willfully and knowingly made false representations regarding the condition of the returned leased vehicle (First Cause of Action); that defendant knew or should have known that the falsity or misleading nature of the representations (Second Cause of Action); that defendant's deceptive practices violated §349 of the New York General Business Law (Third Cause of Action); that defendant unlawfully billed and collected money that it was not entitled to under New York law (Fourth Cause of Action); that by collecting the alleged excessive and unlawful charges in violation of New York law, defendant benefitted at the expense of plaintiffs (Fifth Cause of Action); that defendant's failure to properly mail a specific notice of rights to the plaintiffs immediately prior to the scheduled termination of the leases violates §343 of New York Motor Vehicle Retail Leasing Act (Sixth Cause of Action): that defendant's failure to send a specific notice after termination before claiming or seeking to collect any charges towards excess wear and damage violates §343 of New York's Motor Vehicle Retail Leasing Act (Seventh Cause of Action); that defendant's failure to send a specific itemized appraisal by a New York licensed appraiser, duly dated and signed by defendant or its agent, violates §343 of New York's Motor Vehicle Retail Leasing Act (Eighth Cause of Action); and, that defendant's unilateral reporting of unpaid or disputed charges for excess wear and damage without initially complying with the requirements of §343 of New York's Motor Vehicle Retail Leasing Act violated said Act.

In the within action, it cannot be said that the legal conclusions and factual allegations are flatly contradicted by the documentary evidence. None of the nine exhibits submitted by defendant in support of its motion to dismiss pursuant to §3211(a)(1) flatly contradict the legal conclusions and factual allegations of the complaint; not even the check dated November 5, 2001 from plaintiff Speigler. The legal significance of this check is at issue. In connection with that part of the motion which seeks to dismiss the complaint under §3211(a)(7), i.e., failure to state of cause of action, defendant also falls short. A plaintiff sufficiently states a cause of action where (1) the pleading states any cause of action (and not whether there is evidentiary support of the complaint) Guggenheimer, Rovello, supra; (2) the complaint must be liberally construed in the light most favorable to the plaintiffs; and, (3) all factual allegations must be accepted as true. Guggenheimer. It is not the function of the court to evaluate the merits of the case on a motion to dismiss for legal insufficiency. 219 Broadway Corp. v. Alexander's Inc., 46 N.Y.2d 506 (1979).

Plaintiff's second cause of action alleges fraud as against all defendants. Defendant contends that plaintiff fails to incorporate any detailed allegations of fraud. To support a claim for fraudulent misrepresentation, a plaintiff must allege that the defendant made a material false representation, defendant intended to defraud the plaintiff thereby, plaintiff reasonably relied upon the representation and plaintiff suffered damage as a result of their reliance. Swersky v. Dreyer and Traub, 643 N.Y.S.2d 33 (1st Dept. 1996). A prima facie cause of action for fraud requires a showing of a representation of a material existing fact, falsity, scienter, deception and injury. Channel Master Corp. v. Aluminum Ltd. Sales, 4 N.Y.2d 403(1958). Additionally, in an action based on fraud, each theory of fraud requires pleading with particularity so that "the circumstances constituting the wrong shall be stated in detail." Swersky quoting Ambassador Factors, et al. v. Kandel & Co., 626 N.Y.S.2d 803 (1st Dept. 1995). It is mandated by C.P.L.R. 3016(b). Lanzi v. Brooks, 388 N.Y.S.2d 946 (3rd Dept. 1976), aff'd, 43 N.Y.2d 778 (1977); Fink v. Citizens Mortgage Banking Ltd., 539 N.Y.S.2d 45 (2d Dept. 1989).

In the case at bar, plaintiffs have alleged that defendant made willful and knowing affirmative misrepresentations of material facts regarding the condition of the returned vehicles; that it knew that it was false; and, that plaintiffs relied on these misrepresentation to their detriment and that they have suffered injuries. These allegations are sufficient to withstand an attack on the grounds of failure to state a cause of action on the fraud claim. Morever, none of the other causes of actions alleged in the complaint are facially deficient. Defendant has failed to establish through documentary evidence the legal insufficient of the pleadings.

Accordingly, defendant's motion to dismiss the complaint is denied.

This constitutes the decision and order of this Court.

10/28/2004 NYLJ 23, (col. 1)

END OF DOCUMENT