GBL 349 Claim Cannot be Based on Failure to Disclose Illegal Conduct

On April 2, 2020, the Court of Appeals issued a decision in Collazo v. Netherland Prop. Assets LLC, 2020 NY Slip Op. 02128, holding that a GBL 349 claim could not be based on the failure to disclose illegal activity, explaining:

Turning to plaintiff's General Business Law claim, section 349 prohibits deceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in this state. We have held that this statute cannot fairly be understood to mean that everyone who acts unlawfully, and does not admit the transgression, is being deceptive within the meaning of section 349. For purposes of this appeal, we assume without deciding that a claim may lie under General Business Law § 349 based upon a landlord's alleged misrepresentation to the public that an apartment was exempt from rent regulation following deregulation in violation of the Rent Stabilization Law. Here, however, plaintiffs alleged only that defendants failed to admit that they violated the Rent Stabilization Law in deregulating plaintiffs' apartments—three of which were, in fact, never deregulated—rather than any affirmative conduct that would tend to deceive consumers. Inasmuch as plaintiffs failed to allege more than bare legal conclusions regarding the existence of consumer-oriented, deceptive acts, their General Business Law claim was properly dismissed.

(Internal quotations and citations omitted).

Commercial litigation frequently involves fraud-based claims. This decision relates a statute-based fraud claim brought by under General Business Law Section 349. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have a question regarding a fraud-based claim, including one brought pursuant to a state or federal statute.