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STAND-ALONE EXECUTIVE LAW 63 (12) CAUSE OF ACTION FOR FRAUD REINSTATED AGAINST DONALD TRUMP ET AL.

In an action by the Attorney General against Donald Trump, alleging fraud in connection with the operation of Trump University, the First Department, overruling its own precedent, determined Executive law 63 (12) authorized a stand-alone fraud cause of action. The court further held that the three-year statute of imitations for causes of action created by statute did not apply because Executive Law 63 (12) did not create a cause of action which did not exist at common law, rather it merely authorized the Attorney General to bring a fraud cause of action. Applying the six-year statute of limitations, the First Department reinstated the Executive Law 63 (12) cause of action, and concluded questions of fact precluded summary judgment on both the statutory and common law fraud claims:

… [L]ike similar statutes that authorize causes of action, § 63(12) defines the fraudulent conduct that it prohibits, authorizes the Attorney General to commence an action or proceeding to foreclose that conduct, and specifies the relief, including equitable relief, that the Attorney General may seek. Indeed, the language of § 63(12) parallels the language of the Martin Act, under which the Attorney General is undisputedly authorized to bring a standalone cause of action for fraudulent conduct in the securities context … . * * *

… [W]e find … that the fraud claim under § 63(12) is not subject to the three-year statute of limitations imposed by CPLR 214(2), but rather, is subject to the residual six-year statute of limitations in CPLR 213(1) … . … § 63(12) does not create any liability nonexistent at common law, at least under the court’s equitable powers. … § 63(12) does not encompass a significantly wider range of fraudulent activities than were legally cognizable before the section’s enactment … .

Nevertheless, petitioner is not entitled to summary determination of its fraud claims, under either the common law or the statute, because material issues of fact exist as to those claims. Matter of People of the State of N.Y. by Eric T. Schneiderman v Trump Entrepreneur Initiative LLC, 2016 NY Slip Op 01430, 1st Dept 3-1-16

 

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